As filed with the Securities and Exchange Commission on June 21, 2002
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
[ ] |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
or | ||
[X] |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2002 |
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or | ||
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to |
1-4315
(Commission file number)
NATIONAL GRID GROUP plc
(Exact name of registrant as specified in its charter)
England and Wales
(Jurisdiction of incorporation or organization)
15 Marylebone Road
London NW1 5JD
England
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class
on which registered
American Depositary Shares
The New York Stock Exchange
Ordinary Shares of 10 p each
The New York Stock Exchange*
* | Not for trading, but only in connection with the registration of American Depositary Shares representing Ordinary Shares pursuant to the requirements of the Securities and Exchange Commission. |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Outstanding shares of each of the issuers classes of capital or common stock as of March 31, 2002:
Ordinary Shares of 10p each
|
1,776,932,870 | |||
Special Rights Redeemable Preference Shares of £1
|
1 |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 [ ] | Item 18 [X] |
National Grid Annual Report and Form 20-F 2001/02
Contents
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National Grid Group plc is an international networks business.
Our principal activities are in the regulated electricity industry, where we own and operate the transmission network in England and Wales, and transmission and distribution networks in the north-eastern US. We are one of the top ten electricity companies in the US and have the largest transmission and distribution network in the New England/ New York market, serving 3.2 million customers in Massachusetts, Rhode Island, New Hampshire and upstate New York. Other electricity interests include operating and developing transmission interconnectors in the UK and US, Europe and Australia and joint venture transmission networks in Argentina and Zambia. We also operate a gas distribution network, serving over 500,000 New York customers.
We have transferred our network skills to the telecoms market with interests including wholly-owned infrastructure businesses in the UK and US.
Forward-looking statements
This document contains certain statements that are neither reported financial
results nor other historic information. These statements are forward-looking
statements within the meaning of section 27A of the US Securities Act of 1933,
as amended, and section 21E of the US Securities Exchange Act of 1934, as
amended. These forward-looking statements rely on a number of assumptions
concerning future events and are subject to a number of risks and
uncertainties, many of which are outside of the control of National Grid, that
could cause actual results to differ materially from those expressed in or
implied by such statements. For a more detailed description of these
assumptions, risks and uncertainties, please see the Risk factors and
Operating and financial review sections of this document and the other
filings by National Grid with the United States Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this document.
National Grid has no intention and undertakes no obligation to update or revise
any forward-looking statements in light of new information, future events or
circumstances after the date of this document.
Definitions
References to National Grid, the Group or the Company in this Annual
Report are to National Grid Group plc and its subsidiaries, or to any of them
as the context may require.
The terms shares and ordinary shares refer to National Grid ordinary shares
of 10 pence each. References to ADSs are to American Depositary Shares, each
of which represents the right to receive five ordinary shares.
References to pound(s) sterling, £, pence or p are to United Kingdom
(UK) currency. References to US$, $, US dollars or dollars are to
United States (US) dollars. References to financial years refer to National
Grids financial years ending on 31 March of the year
indicated.
National Grid publishes its accounts in pounds sterling. Unless otherwise
specified, pound sterling amounts in this Annual Report have been translated
into US dollars at: for balance sheet items, the closing rate of £1.00 = $1.42,
and for profit and loss account items, the average rate of £1.00 = $1.44. These
translations do not mean that the pound sterling amounts have been, could have
been or could be converted into US dollars at the rates indicated or at any
other rate.
National Grid Annual Report and Form 20-F 2001/02
Highlights of the year
1
National Grids core businesses, its regulated energy delivery companies in the UK and the US, performed extremely well during the year. Our growth continued with the acquisition of Niagara Mohawk and will be further enhanced by our proposed merger with Lattice.
(1) | Before exceptional items and goodwill amortisation. | |
(2) | Restated to reflect the adoption of FRS 19 Deferred Tax from a partial to a full provision basis. | |
(3) | Restated to reflect a revised presentation of minority interests share of associated undertakings. |
|
||||
Group turnover
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£4,401.0m | $6,337.4m | ||
Operating profit
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£874.7m | $1,259.6m | ||
Basic earnings per share
|
32.1p | 46.22¢ | ||
Ordinary dividends
|
16.04p | 23.10¢ | ||
|
Niagara Mohawk
January 2002
The Niagara Mohawk acquisition completed in January, more than doubling the size of our US business. It was immediately earnings enhancing with a contribution of £83.1 million to Group operating profit, before exceptional items and goodwill amortisation, from the end of January to the end of March.
Earnings per share
2001/02
Basic earnings per share, excluding exceptional items and goodwill amortisation, increased 12.1 pence to 32.1 pence. As a result of exceptional items, basic earnings per share fell 77.3 pence to a loss of 32.3 pence.
Dividends
As announced on 22 April 2002, the Board is recommending a final dividend of 9.58 pence per ordinary share to be paid on 15 August 2002 to shareholders on the register on 7 June 2002. This brings the total dividend for the year to 16.04 pence per ordinary share, a 6.4 per cent increase compared with last year, in line with our target to increase dividends per share (as expressed in pounds sterling) by 5 per cent real in each of the years to March 2006. This dividend per share is covered 2.0 times (2001: 1.3 times) by earnings per share excluding exceptional items and goodwill amortisation.
National Grid Annual Report and Form 20-F 2001/02
Chairmans statement
2
It has been a year of great change, growth and promise for National Grid. I would like at the outset to thank all National Grid employees for their contribution, hard work and willingness to embrace change.
The high point of the year was the completion of our $3.1 billion (£2.2 billion) acquisition of Niagara Mohawk on 31 January 2002. It confirms National Grid as a major player in the US, the worlds largest electricity market. Our US presence has more than doubled, creating the largest transmission and distribution network business in the northeastern US and the ninth largest electricity utility in the US.
This has been another year of strong operating performance. Operating profit has increased by 18 per cent and earnings per share, before exceptional items and goodwill amortisation, increased by 61 per cent. The total dividend, of 16.04 pence per share, represents an increase of 6.4 per cent compared with last year. This is in line with our target to increase dividends per share (as expressed in pounds sterling) by 5 per cent real in each of the years to March 2006.
We have continued to improve both the electricity transmission and distribution operations in the US. The addition of Niagara Mohawk, the New York business, for the last two months of the year included contributions to operating profit, before exceptional costs and goodwill amortisation, of £66.8 million for electricity transmission and distribution and £17.0 million for gas distribution. We look forward to a full years contribution in 2002/03, when operating profit, before exceptional items and goodwill amortisation, from the US is expected to represent some 60 per cent of our profits from the transmission and distribution of electricity.
The UK business demonstrated continued strength this year. We recently announced that we would increase our target for reduction in controllable costs from 20 per cent to 30 per cent, representing further cost savings of £80.0 million during the remainder of the period until March 2006.
We have re-evaluated our telecoms investments and have written-down our Latin American telecoms ventures and more recently the carrying value of our stake in Energis and our investment and associated liabilities in Energis Polska. We are pursuing the sale of Intelig, Silica Networks and Manquehue net and are exploring options for Energis Polska. Despite this our overall investment in this sector has generated over £1 billion of net value for our shareholders.
On the other hand, we continue to develop GridCom, our wholly-owned infrastructure services business. GridCom provides services, principally the siting of aerials for mobile phone operators on National Grid towers. During the year, GridCom signed a significant contract with Hutchison 3G for services in the UK. We also intend to establish a similar business in the US. Our focus on GridCom should reap positive returns at low risk as this business is closely related to our core infrastructure assets and capabilities.
During the year, energy policy has featured high on the agenda in the UK, Europe and in the US. Security and diversity of supply, together with protection of the environment, continue to be major policy issues. Going forward, the central role of independent transmission as an enabler of competition, diversity of supply and security, remains key.
On 22 April 2002, we announced a recommended merger of equals with Lattice Group plc to create a leading international energy delivery company. Following completion of the proposed merger, National Grid Group plc, which will be the holding company of the merged group, will be re-named National Grid Transco plc. The combined management team has a proven track record of successfully improving the operational efficiency of UK regulated energy delivery businesses. The proposed merger is subject to regulatory and shareholder approvals and is expected to complete in autumn 2002.
National Grid Transco will be the UKs largest utility and will provide a strong platform for future growth in gas and electricity delivery.
As the Group has changed so has the Board. During this year we have welcomed three new directors, firstly Edward Astle as Group Director, Telecommunications, and, following the acquisition of Niagara Mohawk, William Davis and Bonnie Hill joined as Executive and Non-executive Directors respectively. Stephen Box has recently announced his intention to retire as Finance Director of National Grid through reasons of ill health. He will remain on the Board until the completion of the proposed merger between National Grid and Lattice. I would like to thank Stephen on behalf of everyone at National Grid for his outstanding contribution to the Groups success and we wish him and his family all good fortune on his retirement.
So one era is drawing to a close, that of the extraordinarily successful privatisation of the electricity industry in the UK including the creation of National Grid as a separate entity. And another era is beginning, that of the evolution of the energy markets internationally, in which National Grid Transco intends to play a pivotal role in the UK and overseas.
James Ross
Chairman
National Grid Annual Report and Form 20-F 2001/02
Group Chief Executives review
3
Strategy
Our core skills lie in the design, construction, system operation, regulatory management and customer service activities associated with operating complex networks.
We create value for shareholders and benefits for customers by exploiting our assets and skills through achieving performance improvements and cost savings within a framework of incentive-based regulatory environments and competitive markets.
Our primary focus on regulated electricity networks provides a stable base, capable of generating cash for investments and earnings to support our progressive dividend policy. This year, the addition of gas distribution, through the acquisition of Niagara Mohawk, has expanded our breadth within the regulated environment. Having reviewed our telecoms strategy during the year, going forward we will concentrate on opportunities which leverage our infrastructure skills and assets.
Following our proposed merger with Lattice, National Grid Transco will take advantage of the enlarged groups combined expertise to improve returns and exploit growth opportunities.
Electricity and gas networks US
National Grid USA, including Niagara Mohawk, operates a network of approximately 12,000 miles of transmission lines and 72,000 miles of distribution lines, within a distribution service territory of almost 30,000 square miles. National Grid is now the ninth largest US utility with over 3.2 million electricity distribution customers. We also serve over 500,000 gas customers in upstate New York.
On completion of the Niagara Mohawk acquisition, we implemented a ground-breaking rate plan agreed with the New York Public Service Commission. Electricity customers received an immediate rate decrease of 8 per cent with delivery rates then effectively frozen for the full ten years of the plan. Gas delivery rates will remain frozen until the end of 2004. The rate plan also allows returns for shareholders to increase as we improve efficiency.
The debate around the creation of Regional Transmission Organisations continues to evolve, led by the Federal Energy Regulatory Commission. We continue to evaluate how best to participate in the development of the transmission sector in the US.
The total operating profit, before exceptional costs and goodwill amortisation, of National Grid USA in 2001/02 was £378.3 million, representing very strong performance. Continued attention to cost-cutting efforts and out-performance of regulatory targets places us well on track to deliver 10.5 per cent pre-tax nominal return on our investment by March 2005.
Electricity networks UK
Our performance this year since the implementation of New Electricity Trading Arrangements in March 2001 underlines our ability to operate and manage complex transmission networks within an incentive based regulatory environment.
In our Transmission Asset Owner business, we have launched further initiatives to deliver efficiency levels over and above the 20 per cent we announced last year. In January 2002, we introduced a strategy entitled Staying Ahead, to ensure our business achieves ever higher standards in a move that will bring long-term growth and ensure security for all stakeholder groups. The aim is for National Grid to maintain its position as a world-class company with processes and techniques that are in demand worldwide. In April of this year, we announced that we had identified an additional 10 per cent (amounting to £80 million) of savings for the remainder of the price control period to March 2006.
In this, the first year of the Balancing Services Incentive Scheme, we excelled in controlling costs and achieving savings for customers enabling us to reach the maximum return allowable.
As a result of regulatory requirements, new contractual arrangements for the French interconnector came into effect on 1 April 2001. These new arrangements provide for the auctioning of blocks of interconnector capacity on timescales ranging from three years to one day. With low UK wholesale electricity prices these auctions have led to reduced profit.
Total operating profit for transmission and interconnectors, before exceptional costs, in the UK during 2001/02 was £544.5 million.
Telecoms infrastructure services
GridCom GridCom was launched in spring 2001 to install and maintain telecoms equipment on National Grids electricity transmission network and provide a range of managed infrastructure services targeted particularly at the mobile telecoms industry. Gridcom is using National Grids project management skills and electricity infrastructure to capitalise on demand for new base station sites by mobile phone operators. This demand is principally driven by the need of these operators to install new infrastructure and the sensitivity of the public to new masts. During the year, we have contracted with Hutchison 3G to provide up to 1,000 sites and we are actively looking for opportunities to build on this success. The business operating start-up losses were £4.6 million this year.
NEESCom NEESCom, our wholly-owned telecoms business in the north-eastern US, has recently extended its network to Albany in upstate New York. NEESCom intends to capitalise on its success by seeking new opportunities in the US telecoms market. The operating profit before goodwill amortisation was £3.0 million during 2001/02.
National Grid Annual Report and Form 20-F 2001/02
Group Chief Executives review continued
4
Telecoms networks
Energis Energis, along with other major telecoms companies, is facing a challenging period as a result of the decline in the global telecoms market. It is in discussion with its lenders and bond holders with the aim of restructuring its businesses and debt obligations. This could result in significant dilution of National Grids shareholding in Energis. In light of this we have taken the decision to write-down all of the £392.1 million carrying value of our stake in Energis.
Energis Polska The difficulties faced by Energis have impacted on our investment in Energis Polska and we have provided for the investment and associated liabilities of £109.8 million.
Latin America In November 2001, we announced our intention to withdraw from our telecoms investments in Latin America, principally due to the global decline in the telecoms market and regional economic difficulties. Through the exceptional charge reported in November 2001 of £290.4 million, we have fully written-down the carrying value of our Latin American telecoms investments and provided for certain associated liabilities. Our share of operating losses this year from Intelig in Brazil is significantly reduced to £35.5 million from £118.0 million last year.
Other
National Grid also has interests in electricity transmission joint ventures in Argentina and Zambia. These contributed £24.8 million and £4.4 million, respectively, to Group operating profit this year. Over the past year both have performed well. However, they both face local challenges which are particularly severe for our Argentine operation.
Framework for a responsible business
An important aim for us is to be a long-term and successful business. This will ensure we are able to reward our shareholders by ever-increasing the value of their investment. To achieve this aim, we will ensure that, whatever commercial path is taken in the future, our business is sustainable and managed in a responsible manner.
We have put in place a framework for our activities in the future. By focusing our efforts on delivering sustainable growth, and profits with responsibility, while investing for the future, we believe we will continue to be a long-term and successful business.
Our standards of business conduct encompass open and constructive dialogue with all of our stakeholders and the maintenance of high standards of integrity and professionalism.
To protect the future of our business we take a proactive approach to the management of both existing and future environmental risks. We aim to clean-up contaminated land to enable it to be put back into productive use. We seek to be efficient in our use of natural resources and to keep our waste to a minimum, thus increasing our productivity as well as benefiting the environment. Wherever practicable, we also take steps to reduce emissions of greenhouse gases, again making us more productive whilst also playing an important part in helping to minimise climate change.
A healthy and injury-free workplace is an important feature in a responsible business, and makes an important contribution to maximising productivity. Our objective is to safeguard each other and those who work with us and to achieve our goals of no work-related injuries, no occupationalillness and no harm to others in the community.
Our long-term success will depend on having a talented and diverse workforce with the right skills for the work we do. Accordingly, we seek to recognise and reward our employees for the contribution they make to the success of the business and to develop them so that they can add value to the company, themselves and society.
We believe we make a significant contribution to the economic wellbeing of communities and society by offering high quality, reliable services at reasonable cost. We therefore aim to improve the efficiency of the business without compromising quality and reliability.
Our business relies on working in partnership with others. Through our own financial contributions and the activities of our staff, we support projects that help improve the quality of life for many communities.
Outlook
Our tasks for 2002/03 include:
| continuing the integration process in the US; | |
| continuing the UK efficiency drive; | |
| completing the proposed merger with Lattice and successfully integrating the businesses; | |
| developing our infrastructure services business; and | |
| developing further growth opportunities. |
These proposals emphasise our commitment to creating shareholder value and providing benefits to customers.
Roger Urwin
Group Chief Executive
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Business review
5
Overview of National Grid
National Grid Group plc is an international networks business.
Its principal activities are the ownership, operation and development of the high-voltage electricity transmission network in England and Wales and electricity transmission and distribution networks and gas distribution networks which serve approximately 3.2 million and 500,000 customers respectively in the north-eastern US. It also operates electricity interconnectors between England and Wales and each of France and Scotland and between the US and Canada. National Grid is also developing an electricity interconnector in Australia and has interests in electricity transmission networks in Argentina and Zambia with joint venture partners.
National Grid has transferred its networks skills to the telecoms market. Its interests include wholly-owned infrastructure businesses in the UK and US.
Business strategy
The Groups core skills lie in the design, construction, system operation, regulatory management and customer service activities associated with operating complex networks. Its strategy is to exploit its assets and skills to create value for shareholders and benefits for customers by achieving performance improvements and cost savings within a framework of incentive-based regulatory environments and competitive markets.
The Group has historically focused on regulated electricity networks which are stable businesses, generating cash and earnings to support the Groups investment strategy and progressive dividend policy. The Directors believe that they can continue to create shareholder value from investment in electricity transmission and distribution through progressive efficiency improvements. The Directors also believe that the Group can create additional value in distribution by offering high-quality customer service and in transmission by facilitating the development of competitive energy markets while preserving system security and reducing user costs.
Gas distribution businesses generally have similar characteristics to those of electricity network businesses and, in the US particularly, are often combined under common ownership.
Following National Grids proposed merger with Lattice, the combined group will take advantage of its electricity and gas networks expertise and financial capacity to:
| create the opportunity to share a complementary set of core skills and to integrate certain activities of the electricity and gas transmission businesses; | |
| generate annual savings of at least £100 million by the end of the first full financial year; | |
| create a combined group with significant balance sheet strength and strong operational cash flows; and | |
| allow National Grid Transco to extend National Grids successful US strategy and take advantage of liberalising energy markets abroad. |
National Grid is in the process of withdrawing from its investments in alternative telecoms networks. However, the Directors believe that there are attractive opportunities to leverage the Groups infrastructure skills and assets in the UK and US to provide sites and related infrastructure services to the wireless communications industry.
This strategy is shared with Lattice. The merged group will be the third largest independent infrastructure services provider to mobile telecoms operators in the UK.
History and development of the business
On the restructuring of the electricity industry in England and Wales in 1990, The National Grid Company plc assumed ownership and control of the transmission network and certain parts of the interconnectors with Scotland and France from the Central Electricity Generating Board. National Grid Company became a wholly-owned subsidiary of National Grid Holding plc, the predominant shareholders in which were the 12 Regional Electricity Companies (RECs) which owned and operated the local distribution systems. Each REC disposed of substantially all of its holding in National Grid Holding plc in 1995 or 1996. National Grid Holding plc was re-named The National Grid Group plc in 1995 and in July 2000 was re-named National Grid Group plc. In January 2002, a new holding company for the Group was introduced via a scheme of arrangement. Immediately after the scheme became effective, the new holding company, New National Grid plc, was re-named National Grid Group plc.
National Grids initial investments in electricity activities outside the UK were in Argentina and Zambia in 1994 and 1997 respectively.
National Grid entered the US electricity market in 2000 with its acquisitions of New England Electric System (NEES) and Eastern Utilities Associates (EUA). National Grid further expanded its operations in the US with the completion of its acquisition of Niagara Mohawk in January 2002. All of these companies now form part of National Grid USA.
National Grids involvement in telecoms activities began in 1993 with the establishment of Energis. Subsequently, on the basis of this experience, the Group expanded its telecoms activities to include joint ventures in Poland and Latin America. In addition, the Group has wholly-owned infrastructure services businesses in the UK and the US, GridCom and NEESCom respectively.
On 30 May 2002, National Grid announced its decision to withdraw from its existing investments in alternative telecoms network operators. National Grid has fully written-down the carrying value of telecoms investments and has provided for all expected related liabilities.
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Business review continued
6
Electricity networks England and Wales
Total operating profit, before exceptional reorganisation costs, for transmission and interconnectors in the UK during 2001/02 was £544.5 million. This comprised:
| £524.7 million from Transmission; and | |
| £19.8 million from Interconnectors. |
National Grid owns and operates the electricity transmission network in England and Wales, consisting of approximately 4,500 miles of overhead line, approximately 400 miles of underground cable and some 340 substations at around 230 separate sites.
Day-to-day operation of the transmission system involves the continuous matching of generation output with demand for electricity, ensuring the stability and security of the power system and the maintenance of satisfactory voltage and frequency. These activities are undertaken from the National Grid control centre in Berkshire, with safety management of the transmission system co-ordinated from the network operations centre in the Midlands.
Operating environment
The introduction of the New Electricity Trading Arrangements (NETA) on 27 March 2001 fundamentally changed the way in which electricity is traded in England and Wales. The new arrangements are largely based on bilateral contracts between market participants and represent a decisive shift towards commodity trading in electricity. National Grid retains responsibility for the essential task of balancing generation and demand for electricity in real time, but our commercial incentives and contractual relationships have changed significantly.
As National Grid both owns the high-voltage electricity transmission grid in England and Wales and operates it to ensure that, subject to generation being available, all reasonable demands for electricity are met, it performs the roles of both Transmission Asset Owner (TO) and System Operator (SO). The TO function relates to the management of transmission assets, in particular, the maintenance and longer-term development of our investment in the transmission system, while the SO function covers all the short-term operational activities required to keep the system balanced and operating within safe limits.
From 1 April 2001 National Grid Internal TO and SO costs became separately regulated. TO costs continue to be covered by an RPI-X price control (described later) and new incentive scheme targets were defined for the SO. Despite the separate regulatory treatment of the TO and SO activities, consumers continue to benefit from National Grid retaining responsibility for both activities, particularly in the areas of efficient operation and asset investment decisions.
External SO costs associated with the post-NETA Balancing Services Incentive Scheme (BSIS) are dealt with in a bundled scheme aimed at incentivising us to minimise overall balancing costs. These costs include the cost of all purchases we make in the balancing mechanism, the costs of our forward energy trades, ancillary services costs and an allowance for transmission losses. The scheme target for Incentivised Balancing Costs (IBC) for 2001/02 was £484.6 million. Where costs are managed below this target 40 per cent of the savings may be retained, up to a cap of £46.3 million.
National Grid has agreed a roll-over of the 2001/02 incentive scheme with Ofgem for 2002/03. The target has been reduced to £460 million representing a challenging target in the light of market developments. The new scheme enables 60 per cent of the profit up to a maximum of £60 million to be shared. However, if IBC are above £460 million National Grid must bear 50 per cent of the loss, up to a maximum of £45 million.
Ofgem has conducted a review of the current arrangements for access to and pricing of our high-voltage electricity transmission system. They have set out their preferences for new access arrangements to facilitate discussion with the industry. It is not intended that implementation of the current proposals will have a significant impact on revenues.
Transmission
Financial performance UK transmission turnover was £1,241.8 million, compared with £1,315.6 million in 2000/01 and £1,319.7 million in 1999/2000.
UK transmission operating profit, before exceptional reorganisation costs was £524.7 million, compared with £486.3 million in 2000/01 and £523.1 million in 1999/2000.
The £38.4 million increase in operating profit in 2001/02 was mainly as a result of the following:
BSIS profit: National Grid delivered excellent performance under the BSIS scheme covering the first year of NETA operation through to the end of March 2002. Costs were £118.8 million below the regulatory target, delivering £46.3 million profit for the Group.
Reduction in TO controllable costs: Following a fundamental review of the way our UK functions are managed, we have started a series of initiatives to deliver significant savings across the UK transmission operations. In 2001/02 these initiatives resulted in a real reduction in TO controllable costs of 8 per cent.
Operating performance 3 January 2002, saw the highest demand for electricity ever recorded on the transmission network in England and Wales: at 51,548 MW, this compared with the previous peak recorded on 16 January 2001 of 51,012 MW.
System availability at winter peak demand was 98.3 per cent, compared with 98.8 per cent in 2000/01.
Regulation National Grid is the sole holder of an electricity transmission licence for England and Wales and is the owner and operator of the transmission system. We are required, under the terms of the transmission licence, to develop and maintain an efficient, co-ordinated and economical system of electricity transmission and to facilitate competition in the supply and generation of electricity. National Grid recovers costs, including a return on capital employed, through charges to generators, distributors, suppliers and directly-connected customers for use of and connection to the transmission system for TO activities and through charges for the provision of balancing services for the SO.
TO: Revenue from transmission network use of system charges and charges for connections made before March 1990 is controlled by a revenue restriction condition set out in the transmission licence. The current regulatory price control was introduced on 1 April 2001 and is expected to remain in force until 31 March 2006. National Grid is permitted to set
National Grid Annual Report and Form 20-F 2001/02
7
charges for connections to the transmission system made since March 1990 to recover the costs directly or indirectly incurred in providing connections, together with a reasonable rate of return on such costs.
SO: As system operator, National Grid is responsible for the operation of the transmission system including the procurement and use of balancing services. Revenue from charges for provision of balancing services is regulated by BSIS.
Investment in the transmission network Capital expenditure on the renewal, reinforcement and extension of the transmission network in 2001/02 was £370.6 million including interest capitalised, compared with £361.2 million in 2000/01.
New connections were commissioned during the year for a 215 MW combined heat and power plant cycle gas turbine (CHPCGT) at Shotton near Deeside. This project brings the total of new generating capacity connected to the network since March 1990 to 25.3 GW. In the same period, some 17.3 GW of generation has closed.
Interconnectors
UK interconnectors operating profit was £19.8 million in 2001/02, compared with £42.8 million in 2000/01 and £46.6 million in 1999/2000.
France New contractual arrangements for the use of the French interconnector came into effect on 1 April 2001. Prior to this the French interconnector was exclusively contracted to Electricité de France (EDF). Income was largely based on MWh charges with additional income being derived from 50 per cent of the capacity payments received by EDF being rebated to National Grid.
The new arrangements coincided with the introduction of NETA and provide for the auctioning (jointly with RTE the transmission division of EDF) of blocks of interconnector capacity, on timescales ranging from three years to one day. These new arrangements have been well received by the EU, Regulators and the market. The reduction in operating profit for interconnectors is directly attributable to the fall in wholesale electricity prices in England and Wales, limiting the value of capacity to users.
Availability of the French interconnector was 97.9 per cent, compared with 96.6 per cent in 2000/01 and 95.5 per cent in 1999/2000.
Scotland National Grids transmission network is interconnected with that of Scottish Power plc, which in turn is interconnected with that of Scottish and Southern Energy plc. The interconnector has a nominal transfer capability of 1,600 MW, but can be limited by system conditions to lower levels. Work is in progress to increase the capability of the interconnector to 2,200 MW, but full availability of this depends on the completion of the new transmission line in North Yorkshire.
Availability of the Scottish interconnector was 97.2 per cent in 2001/02, compared with 99.8 per cent in 2000/01 and 99.9 per cent in 1999/2000. This reduction in availability was due to planned outages in connection with certain advanced works associated with the upgrade.
Isle of Man National Grids interest in the Isle of Man interconnector was sold for a profit of £10.6 million in December 2001. This was the first project financed interconnector in the world, and provided the learning base upon which all our current schemes are now being developed.
Interconnector business development Where there is potential for trading between electricity markets, National Grid has an opportunity to extract value from its interconnector skills by designing, building and operating new interconnectors.
National Grids involvement in the Basslink interconnector project in Australia is described on page 12.
Fixed assets in the UK
Agreements with landowners or occupiers are required for the overhead lines and underground cables which make up our network in England and Wales. Approximately 80 per cent of agreements are in the form of terminable wayleaves. The remaining 20 per cent are in the form of perpetual easements under which rights have been granted in perpetuity in return for a lump sum payment.
The sites at which we have substations are split between freehold and leasehold. Of the leasehold sites, the large majority are substations located on the premises of generators andare held on very long-term leases for nominal rental payments. Of the remaining sites, the majority are held as ground rents (market price payable for land only) from the respective landlords, who include electricity distribution companies.
National Grid owns the freehold of its control centre in Berkshire, the engineering research establishment at Leatherhead in Surrey, the national stores building at Didcot in Oxfordshire and the learning and development centre at Eakring in Nottinghamshire. National Grid hasmajor offices in Coventry (125-year ground lease from 1990), London (13-year lease from 2000), Leeds (freehold) and Birmingham (freehold).
During the year, National Grid sold the freehold of its other office in London.
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Electricity and gas networks US
In the following section, operating profit is defined as operating profit before exceptional integration costs and amortisation of goodwill unless otherwise stated.
The total operating profit, before exceptional costs and goodwill amortisation, of National Grid USA in 2001/02 was £378.3 million.
The New England business included:
| £165.6 million profit from Distribution; | |
| £60.3 million from Transmission; | |
| £17.3 million from the US-Canada interconnector; | |
| £44.3 million from stranded cost recovery and generation; and | |
| £5.1 million from nuclear generation joint ventures. |
The New York business included (for two months):
| £66.8 million profit from Electricity; and | |
| £17.0 million from Gas. |
On 31 January 2002, National Grid acquired Niagara Mohawk, at a cost of £2.2 billion. The acquisition was earnings enhancing, after goodwill amortisation but before exceptional items in 2001/02.
National Grid USA, including Niagara Mohawk, operates a network of approximately 12,000 miles of transmission lines and 72,000 miles of distribution lines, within a distribution service territory of almost 30,000 square miles. The merger with Niagara Mohawk results in National Grid having the largest transmission and distribution network in the northeastern US, and the ninth largest utility in the US, with over 3.2 million electricity distribution customers.
New England Power Company (NEP) operates National Grids transmission network in New England and delivers power in bulk to our four New England distribution companies:
| Massachusetts Electric Company serves approximately 1.2 million customers in Massachusetts; | |
| Narragansett Electric Company serves approximately 470,000 customers in Rhode Island; | |
| Granite State Electric Company serves approximately 39,000 customers in New Hampshire; and | |
| Nantucket Electric Company serves approximately 11,000 customers on Nantucket Island, off the coast of Massachusetts. |
Niagara Mohawk Power Corporation provides distribution and transmission services for about 1.5 million electricity customers, as well as over 500,000 gas customers in upstate New York. The natural gas delivery system is comprised of over 8,000 miles of pipelines and mains.
National Grid USA has minority interests in two operating nuclear generating units, which it is in the process of divesting.
Operating environment
Beginning in about 1998, the electricity industry in Massachusetts, Rhode Island, New York and New Hampshire was restructured which resulted in comprehensive regulatory settlements in each state. The retail electricity supply market was opened to competition, giving all electricity delivery customers a choice of supplier. At the same time, National Grid USA was required by the regulatory authorities in these states to divest its generating capacity.
These New England regulatory settlements permit the recovery from customers of 100 per cent of NEPs investment in generation-related assets, fossil and nuclear, along with any generation-related regulatory assets. These amounts known as stranded costs are made up of the unamortised generation investments, net of proceeds and related contractual commitments. These stranded costs are passed on to wholesale customers, including the New England distribution companies, through a contract termination charge (CTC). The New England distribution companies in turn are allowed to recover these costs through delivery charges to all retail customers.
In 1998, Niagara Mohawk entered into a Master Restructuring Agreement (MRA) and a Power Choice Rate Agreement. The combination of the two rate agreements improved Niagara Mohawks financial condition and prepared it to operate in a restructured environment. The objective of the MRA was to convert a large and growing off-balance sheet obligation for above market power purchase agreements into a manageable capital obligation. The Power Choice Agreement made retail access available to all customers in 1999 and allowed for the recovery of stranded costs including costs incurred under the MRA. The Power Choice Agreement has been superceded by the merger rate filing approved by the New York Public Service Commission and also reaffirmed the recovery of the stranded costs.
System development
We continue to experience load growth, especially in the commercial sectors, but growth has been adversely affected by a general slowdown in the US economy and unseasonable weather in the region.
New England Distribution
Financial performance New England distribution operating profit for 2001/02 amounted to £165.6 million.
Operating performance Sales increased by 0.7 per cent actual and 0.3 per cent adjusted for weather in 2001/02.
Massachusetts Electric and Rhode Island Electric are subject to service quality monitoring programmes with state regulators which compare actual performance to historical results and encourage continued improvements in the areas of reliability, customer service, safety and line losses. Performance in these areas during 2001/02 was less than satisfactory and resulted in penalties of £4.6 million. Facilities and procedures have been and are continuing to be reviewed with the objective of significant improvements in the area of safety and operations.
Regulation of distribution rates There are long-term incentive rate programmes in place in each of the states which have brought significant savings for customers and provides us the opportunity to earn fair returns, based on efficiencies and performance for customers.
Massachusetts Electric: Under the Massachusetts Electric distribution rate plan approved by the Massachusetts Department of Telecommunications and Energy (MDTE), distribution rates were reduced by $10 million in May 2000
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and will remain frozen until the end of February 2005. From March 2005 to the end of December 2009, changes in distribution rates will be linked to changes in the regional average of distribution rates of similarly unbundled investor-owned utilities in New England, New York, New Jersey and Pennsylvania. Based on a pre-determined formula, annual merger-related savings achieved up to the end of 2009 will be calculated and shared between customers and Massachusetts Electric in 2010 to 2019. The rate plan also includes annual service quality incentives or penalties of up to 2 per cent of annual distribution and transmission revenues, which is approximately $13 million, based on performance in areas including reliability and customer satisfaction.
Narragansett Electric: Under the rate plan for Narragansett Electric approved by the Rhode Island Public Utilities Commission (RIPUC), distribution rates were reduced by approximately $13 million in May 2000 and will remain frozen until 2004. During the rate freeze, Narragansett is permitted to retain earnings up to 12 per cent return on equity. Any earnings between 12 per cent and 13 per cent will be shared equally with customers. If earnings exceed 13 per cent, the excess will be divided between customers and the company, with customers receiving 75 per cent. After 2004, distribution rates will be set by the RIPUC in accordance with Narragansetts cost of service. The company will be able to include its share of the efficiency savings produced by the merger of Blackstone Valley and Newport Electric into Narragansett in its cost of service. The savings will be determined in a proceeding before the RIPUC in either 2002 or 2003. Narragansett will be permitted to include 50 per cent of the savings as an expense in its cost of service from 2004 until 2019, subject to verification in 2007.
The Narragansett rate plan also contains service quality provisions based on penalties for poor performance in areas including reliability and customer satisfaction. Good performance in one category can generally be used to offset penalties in other categories. The service quality provisions include penalties of up to $2.4 million in any year for poor performance.
Granite State Electric and Nantucket Electric: The current rates for Granite State Electric became effective in July 1998. Nantucket Electrics distribution rates are linked to Massachusetts Electrics rates and became effective in May 2000.
Standard offer and default service obligations Under the New England restructuring arrangements, the distribution companies are obliged to sell electricity through a standard offer service to retail customers who have chosen not to select an alternative supplier. In 2001/02, two-thirds of electricity supplied by the distribution companies was on standard offer terms. In addition, the distribution companies are required to provide a default service to customers who have not selected a power supplier and are not eligible for standard offer service, including customers who initially selected an alternative supplier but now wish to be supplied by their local distribution company and, in Massachusetts, new customers.
In New England almost all of the electricity required to supply standard offer customers is purchased under long-term contracts. Electricity to meet the requirements of default service customers is purchased in the short-term wholesale market. Under regulatory orders, electricity purchase costs for the default service are passed on to customers. The standard offer terms provide for adjustment in response to fuel prices, subject to regulatory approval. NEPs obligation to provide a transitional electricity supply to new customers in Rhode Island ended in December 2001.
Investment in distribution network Capital expenditure on the distribution system was £120.0 million during 2001/02.
To meet customer demand, a need for 12 new substations over the next few years was identified, of which six are already in service and two are under construction.
An automated meter-reading project to enable the retrieval of monthly usage information electronically is currently in progress. Approximately 1,100,000 residential customer meters have been converted in Rhode Island and Massachusetts. The remaining 500,000 meters are expected to be converted by the end of 2002/03.
Stranded cost recovery
Under settlement agreements reached with its regulators as part of industry restructuring, NEP is allowed to recover its costs (net of sales proceeds) and, where applicable, a return on those costs, associated with its efforts to exit the generation business. The return on our stranded cost recovery and generation segment contributed £44.3 million to Group operating profits in 2001/02. As stranded costs are collected, the future contribution of this segment to Group operating profits will decrease.
New England Transmission
Financial performance New England Transmission contributed £60.3 million to total operating profit in 2001/02.
Transmission rates NEPs rates are subject to regulation by the Federal Energy Regulatory Commission (FERC). For the most part NEPs current unbundled rates consist of CTCs and transmission charges. NEPs transmission charge of approximately 0.5 cents per kWh is determined by a formula designed to enable NEP to recover its actual costs, including a return on actual capital employed.
Investment in transmission network Capital expenditure on the transmission system was £35.7 million during 2001/02.
Transmission business development The despatch of generation and transmission across New England is performed under the authority of an independent system operator, ISO New England.
FERC has indicated that it wants Regional Transmission Organisations (RTOs) to have substantial geographic scope within the US. It has not yet been determined which RTO will cover the New England and New York region.
National Grid continues to evaluate how best to participate in the development of the transmission sector in the US which is undergoing fundamental structural change. Within New England and New York, National Grid is discussing with a number of other transmission owners the possible formation of an independent transmission company (ITC) within an RTO. In other regions of the US, National Grids participation may involve the acquisition and operation of transmission assets of participants in RTOs.
In November 2001, National Grid USA announced that it had entered into an agreement with the proposed Alliance RTO. Since the original agreement, the Alliance concept has undergone change in response to orders issued by FERC. Under December 2001 and April 2002 orders, the Alliance
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Business review continued
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would be allowed to function as an ITC under the umbrella of another organisation acting as RTO. In May 2002, discussions began among Alliance members, National Grid USA, and two RTOs as to whether Alliance should be split and operate under two RTOs. The ultimate shape and operation of the Alliance are both uncertain and would be subject to further agreements among these parties. Any such agreements would also be subject to further FERC approval.
Interconnectors
Financial performance US Interconnectors contributed £17.3 million to total operating profit in 2001/02.
Hydro Quebec interconnector The electricity networks in New England are interconnected with that of Hydro Quebec in Canada by means of a 450 kV DC interconnection. The nominal transfer capability is currently 2,000 MW, but operational capacity can be restricted by operating limitations in neighbouring power pools. Part of this interconnector, located in New Hampshire, is owned and operated by a wholly-owned subsidiary of National Grid USA. Through two other subsidiary companies, we have an ownership interest of some 54 per cent in the expanded second phase of the interconnector, consisting of approximately 133 miles of high-voltage DC transmission line, an alternating current terminal and related facilities in New Hampshire and Massachusetts.
With other NEPOOL participants, NEP has entered into support agreements which guarantee its share of debt financing for the second phase of the interconnector. At 31 March 2002 NEP had guaranteed approximately $20.0 million of project debt with terms until 2015. NEPs rights and obligations under its support agreements were transferred to the purchaser of its non-nuclear generation. NEP remains a guarantor under the support agreement until 2020.
New York Electricity
Financial performance New York electricity distribution and transmission operating profit for two months of 2001/02 amounted to £66.8 million.
Regulation of rates Under the rate plan approved by the New York Public Service Commission (NYPSC), Niagara Mohawk reduced rates by approximately $152 million on 31 January 2002. During the ten year rate plan, delivery charges are frozen, except for exogenous events, and there is a sharing mechanism for earnings in excess of 11.75 12 per cent between customers and investors. The merger rate plan also contains service quality provisions based on penalties of up to $24 million annually if defined customer service goals are not achieved.
Transmission business The transmission regulatory structures which relate to transmission are in a period of change and uncertainty. The despatch of generation and transmission across New York is performed under the authority of an independent system operator, New York ISO. For a description of the development of RTOs, see New England Transmission Transmission business.
Standard offer and default service obligations Niagara Mohawk is the provider of last resort for its customers who do not exercise their right to choose a new supplier. As of 31 March 2002, Niagara Mohawk provides electricity supply to 85 per cent of its customer load. Niagara Mohawk no longer owns any electric generation facilities and meets its electric supply requirements through purchased power agreements and open market purchases. These costs are passed on to customers.
Stranded cost recovery As part of the rate plan, the company agreed to forgo the collection of approximately $850 million in nuclear-related costs. Under the Niagara Mohawk rate plan Niagara Mohawk will recover, a return on equity of 10.6 per cent on the remaining regulatory assets of $3.3 billion associated with Niagara Mohawks stranded generation costs. These costs will be fully recovered during the rate plan. In addition, any variable stranded costs associated with above market purchased power contracts will also be fully recovered, whether they occur during or after the rate plan period.
New York Gas
Financial performance US gas distribution operating profit for two months of 2001/02 amounted to £17.0 million.
Regulation of rates Under the rate plan, gas delivery rates are frozen through December 2004. Commodity costs are passed through to customers. There is a rate of return on common equity cap of 10 per cent with a 50/50 sharing with customers of earnings above the cap.
US Generation
Generation investments Sales are pending of the two operating nuclear generating units in which NEP has an interest. Net proceeds from the sales will be credited to customers through the CTC. Approvals for the transactions are needed from federal and state regulatory agencies, including public utility commissions in the sellers states as well as the Nuclear Regulatory Commission, the New Hampshire Nuclear Decommissioning Financing Committee, the Federal Energy Regulatory Commission, and the Department of Justice or the Federal Trade Commission.
On 15 August 2001, Vermont Yankee announced that it had reached an agreement to sell the Vermont Yankee nuclear power plant to Entergy Corporation (Entergy) for $180 million. NEP has a 24 per cent ownership interest in Vermont Yankee. NEPs portion of the sale price would be $40.5 million ($32.6 million for the plant and related assets and $7.9 million for nuclear fuel). The plants decommissioning trust fund would be transferred to Entergy, and Entergy would assume decommissioning liability for the plant. As part of the transaction, Vermont Yankee owners, including NEP, would purchase power from the plant through 2012. To date, the FERC has approved the sale and the Vermont Department of Public Service, an intervener in the Vermont Public Service Board proceeding, signed a settlement agreement in March 2002 with Entergy and Vermont Yankee.
On 15 April 2002, eight of the 11 joint owners of the Seabrook Nuclear Power Station (Seabrook) announced that they had reached an agreement to sell an 88.2 per cent interest in Seabrook to FPL Group for $836.6 million. NEP has a 10 per cent ownership interest in Seabrook. NEPs portion of the gross sales proceeds would be approximately $94.1 million. FPL Group will assume responsibility for ultimate decommissioning of Seabrook and will receive the Seabrook decommissioning funds, including a top-off payment by NEP and other sellers. Pursuant to pre-existing agreements with the non-selling owners of Seabrook (Massachusetts Municipal Wholesale Electric Company, the Taunton Municipal Lighting Plant, and the Hudson Light and Power
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Department (together the Municipals)), NEP will first offer its interest in Seabrook to the Municipals on equivalent terms offered by FPL Group. The Municipals will then have two months to notify NEP if they will purchase NEPs interest in Seabrook. The sale is expected to be completed by the end of 2002.
In November 2001, Niagara Mohawk sold its ownership interest in the two nuclear units located at Nine Mile Point to Constellation Nuclear. The agreement provided for a partial payment at closing and then five annual principal and interest payments. Constellation Nuclear elected to prepay the annual payments in April 2002 of $261.5 million, which included interest of $11.7 million. Niagara Mohawk received $167 million at closing for its 41 per cent ownership of Nine Mile 2 and $104 million at closing for its 100 per cent ownership of Nine Mile 1. The transaction includes two purchase power agreements under which Constellation Nuclear will provide electricity to Niagara Mohawk at what are currently believed to be competitive prices for approximately eight years (Unit 1) and ten years (Unit 2). After the completion of the Unit 2 purchase power agreement, a revenue sharing agreement begins, which will provide a hedge against electricity price increases and could provide Niagara Mohawk additional future revenue through to 2021.
Until the sales of the Vermont Yankee and Seabrook units are completed, we will share with customers, through CTCs, 80 per cent of the revenue and operating cost relating to our interest in these units, with the remaining 20 per cent going to our operating profit or loss.
Nuclear units permanently shut down National Grid USA owns minority interests in three nuclear generating units which are permanently shut down. These are Yankee Atomic (of which we own 34.5 per cent); Maine Yankee (of which we own 24.0 per cent); and Connecticut Yankee (of which we own 19.5 per cent). In each case, National Grid USA pays an amount equal to its ownership share of the costs of the plant, including unfunded decommissioning costs, and a return on equity. National Grid USA is permitted under regulatory agreements entered into at the time of electricity industry restructuring to recover all of these costs from wholesale customers.
Nuclear decommissioning National Grid USA is liable for its share of the decommissioning costs of all the nuclear generating units in which it retains an interest. These include the estimated costs of decontaminating the units and dismantling the uncontaminated portions. National Grid USAs share of the projected decommissioning costs for Seabrook 1 is recovered through depreciation expense. National Grid USA is also paying its share of the projected decommissioning costs of Vermont Yankee, Maine Yankee and Connecticut Yankee through power purchase agreements with the operators.
For each remaining nuclear unit in which National Grid USA has an ownership interest, a decommissioning trust fund has been established into which payments are being made to meet the estimated costs of decommissioning. However, actual decommissioning costs may exceed the estimated amounts. Decommissioning costs will be recovered through CTCs and, as National Grid USA disposes of its remaining interests in operating nuclear units, it will seek to transfer to the purchaser liability for decommissioning, together with the relevant share of the decommissioning trust fund.
Disposal of spent nuclear fuel The US Department of Energy is responsible for the disposal of spent nuclear fuel. National Grid USA pays fees to the Federal Government based on its share of the net generation of Seabrook 1 and Vermont Yankee, recovering substantially all of these costs from customers through CTCs. However, the Department of Energy is not expected to have a temporary or permanent repository for spent nuclear fuel before 2010 at the earliest. Many utilities, including Yankee Atomic, Connecticut Yankee and Maine Yankee, are plaintiffs in ongoing litigation related to the Department of Energys failure to accept spent nuclear fuel and any recovery from the proceedings, after litigation expenses and taxes, will be returned to customers.
Sale of Canadian Niagara interest Niagara Mohawk has a 50 per cent interest in Canadian Niagara Power Company Limited. In March 2002, an agreement was announced to sell the interest to the remaining owner, Fortis Inc., for $49 million (Canadian), including $35 million cash and $14 million of assumed debt. The sale is subject to Canadian regulatory approval.
Fixed assets in the US
Substantially all of the properties and franchises of Massachusetts Electric, Narragansett Electric, and Niagara Mohawk are subject to the liens of indentures under which mortgage bonds have been issued. The majority of transmission lines are located upon rights of way that the National Grid USA companies maintain under perpetual easements or fee ownership (freehold). Substations are principally located on properties owned in fee. Subsidiaries of National Grid USA own in fee the offices located in Westborough and Northborough, Massachusetts and Syracuse and Albany, New York.
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Business review continued
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Other electricity businesses and projects
Transener
National Grids share of Transeners operating profit was £24.8 million, compared with £14.3 million in 2000/01 and £10.4 million in 1999/2000.
Despite Transener performing well in local terms, it has experienced a significant reduction in revenues in US dollar terms as a result of the devaluation of the Argentine peso coupled with the introduction of new legislation which invalidated the clauses of Transeners licence which effectively fixed tariffs in US dollar terms. As a result, on 22 April 2002, Transener announced that it had suspended principal and interest payments on its financial indebtedness of $466 million, which is wholly denominated in US dollars. Transener has retained a financial adviser to assist in the restructuring of all of its financial indebtedness and is renegotiating its concession contract with the Argentine Government, in parallel with other privatised utilities. National Grid has accounted for its share of Transeners non-cash exceptional foreign exchange losses of £92.5 million in its results for the year ended 31 March 2002.
National Grids stake in Transener is held through our 42.5 per cent interest in its holding company Citelec, which has a 65 per cent interest in Transener. The other shareholders in Citelec are Perez Companc with 42.5 per cent; Taico with 7.5 per cent; and Inter Rio Holdings with 7.5 per cent.
Copperbelt Energy Corporation
National Grids joint venture company Copperbelt Energy Corporation (CEC) has performed well. National Grids share of operating profit was £4.4 million, compared with £4.3 million in 2000/01 and £4.0 million in 1999/2000.
CEC owns and operates an electricity transmission network of some 500 miles supplying electricity to the mines of the Zambian Copperbelt. The privatisation of the copper mines was completed in March 2000 allowing CEC to benefit from increased mining activity and hence demand for electricity.
National Grid has a 38.5 per cent interest in CEC, with the remaining interests being split between Cinergy (38.5 per cent), the Zambian government (20 per cent) and the directors of CEC (3.0 per cent).
Anglo American has recently announced that it intends to withdraw from its investment in Konkola Copper Mines, a major customer of CEC. A working party involving Anglo American, the Zambian Government and the World Bank is examining options for keeping the Konkola Mines operational.
Basslink
In February 2000, National Grid was selected by the Basslink Development Board to design, construct, operate and maintain the Basslink a 600 MW interconnector linking the electricity network on the island of Tasmania to the transmission network in the state of Victoria on the Australian mainland.
The Joint Advisory Panel, on behalf of the federal government of Australia and the state governments of Victoria and Tasmania, has been considering the social, environmental and economic impacts of the Basslink interconnector project. Their draft report recommending approval of the project, subject to a number of anticipated conditions, was received on 12 March 2002. A final advisory panel report is expected by the end of June 2002. A political decision will then follow. It is anticipated that notice to proceed on the project will be granted in September 2002.
National Grid Annual Report and Form 20-F 2001/02
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Telecoms
Overview
National Grid intends to concentrate on telecoms opportunities that leverage the Groups existing electricity infrastructure assets and skills in the longer term. The risk profile of such opportunities is more closely aligned with the Groups core businesses. Today the Groups interests comprise wholly-owned infrastructure businesses in the UK and in the US, its 32.5 per cent economic interest in Energis and joint ventures in Poland and Latin America. National Grids share of the annual operating losses of our telecoms joint ventures and associate was £54.5 million before goodwill amortisation, of which £35.5 million was attributable to Intelig.
In November 2001, the Group announced its intention to substantially withdraw from its telecoms investments in Latin America, principally due to the global decline in the telecoms market in the region. In the meantime, the Group has taken a conservative view and has fully written-down the carrying value of the Latin American telecoms investment totalling £290.4 million.
With the difficulties faced by Energis, which have also impacted on National Gridsinvestment in Energis Polska, the decision has been taken to write-down our investment in Energis and fully provide for our investment and associated liabilities in Poland.
Ongoing growth with infrastructure services businesses
GridCom GridCom was launched in spring 2001, to provide communications infrastructure solutions to fibre and wireless network operators.
GridCom is using National Grids project management skills and electricity infrastructure (National Grid has a network of 22,000 transmission towers across England and Wales) to capitalise on demand for new base station sites by mobile phone operators. This demand is principally driven by the need of 2G and 3G operators to install new infrastructure and the sensitivity of the public to new masts. The combination of these factors makes National Grids transmission network valuable for mobile phone operators, such as Hutchison 3G, with whom we have a contract to provide up to 1,000 sites. The Group is actively looking at further opportunities to build on this success. GridComs annual operating losses were £4.6 million.
GridCom USA In the US, National Grid is developing the capability to offer similar services to those offered by GridCom in the UK. GridCom USA will leverage National Grid USAs infrastructure assetsto provide services to mobile phone operators.
NEES Communications NEES Communications (NEESCom), is a wholly-owned telecoms infrastructure business in the north-eastern US which provides dark fibre optic strands as well as building space to its customers. NEESComs network is principally located in New England, but extends to Albany in New York State. The downturn in the United States telecoms industry has had a negative impact on NEESComs customers which in turn has impacted NEESCom. NEESCom will continue to conservatively grow its network as well as reviewing new opportunities in the market place. The annual operating profit before goodwill amortisation was £3.0 million.
Telecoms investments being divested or restructured
Energis Energis, the business telecoms and internet services company created by National Grid in 1993 is, along with other major telecoms companies, facing a challenging period as a result of the decline in the global telecoms market. Energis is in discussion with both its lenders and bond holders with the aim of restructuring its obligations to those parties. Such a restructuring could result in significant dilution to National Grids shareholding in Energis. The Group has therefore taken the decision to write-down £392.1 million relating to its 32.5 per cent stake in Energis. As at the date of the accounts, there is no publicly available information relating to Energis for the year to 31 March 2002 and, accordingly, the accounts incorporate the Groups share of Energis results as disclosed in its interim announcement. The Groups share of Energis operating losses for the six months to 30 September 2001 was £3.7 million, before exceptional items and goodwill amortisation.
Energis Polska Following the Energis UK model of high-margin, high-value added services for the corporate market, Energis Polska was launched in July 2001. Energis Polskas network offers services to business and carrier customers in Poland. The Group is providing active support to Energis Polska, which has made an encouraging start. Energis, as part of its announced strategy to exit its European operations, is seeking a buyer for its stake in the joint venture. National Grid is also evaluating its options regarding the company. The Groups share of the annual operating loss of Energis Polska was £6.6 million.
Latin America In November 2001, the Group completed its review of the Latin American telecoms businesses. In Brazil, despite Intelig making good operational progress, this investment does not fit with our revised strategy for telecoms. The general economic conditions in the region are also not helpful, particularly for Silica Networks in Argentina.
In view of this, the Group is now seeking new strategic investors for Intelig and are pursuing a sale of Silica and Manquehue net. In the meantime, the Group has taken the conservative view and has fully written-down the carrying value of its Latin American telecoms investments totalling £290.4 million including provision for related liabilities.
Intelig Intelig is National Grids joint venture with Sprint and France Telecom. We are pursuing the sale of Intelig. The Groups share of Inteligs annual operating losses for the year was £35.5 million, compared with £118.0 million last year.
Silica Networks Silica Networks has been considerably affected by the general telecoms market downturn and the severe economic difficulties in Argentina. Its shareholders, including National Grid,have cut costs, suspended any further investment and are seeking a purchaser for the business. The Groups share of the annual operating losses for the year was £5.1 million.
Manquehue net Manquehue net based in Santiago, Chile, is a local fixed line operator providing services to the business and residential sectors. Ithas also been affectedby the local economic climate and strong management actions have now been taken to reduce costs and to seek a purchaser for the business. The Groups share of Manquehue nets annual operating losses was £3.6 million.
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Business review continued
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Our framework for a responsible business
Our objective
National Grids objective is to be a long-term business which can continue to reward its shareholders by increasing the value of their investment. To achieve this aim, we need to ensure that whatever commercial direction is taken in the future our business is sustainable and we act in a responsible manner.
Our strategic framework
In April 2002, we adopted a broad-based framework designed to help us to achieve the right balance between economic, environmental, employee and social factors, and thus to give us the best possible chance of remaining a successful business for the long term. The framework is focused on what we believe to be relevant and right for our business. Its aim is to ensure that we can maximise shareholder value as our business develops, by operating successfully in different countries and societies across the world, by protecting our business from known and future risks and by building a wide range of issues into our decision-making processes.
The framework is not a new policy initiative which is divorced from our day-to-day activities. Instead, it seeks to build on existing good practice in order to provide a context for our work, by helping us to ensure that future developments are sound and that economic, environmental, employee and social issues are integrated into our business objectives.
The integration of economic, environmental, employee and social considerations into the way we do business is already helping us to achieve our goals. Our clear commitment to economic development, the environment, protecting the interests of current and retired employees and providing low-cost and reliable services for customers won us the support of a wide range of stakeholders in New York State, from unions to regulators, and helped us to gain approval for our merger with Niagara Mohawk |
Our framework is based on three goals, each of which is clearly aligned to the achievement of business objectives:
| sustainable growth: as we seek to expand and grow our business by transferring our skills to new markets, we recognise that for our growth to bring long-term value to our shareholders and others, it must be achieved in a responsible manner. | |
| profits with responsibility: for our business to be sustainable, it must be profitable, but increasing our profitability at any cost will be neither sustainable nor acceptable to society. We must therefore be responsible in the way we generate our profits. | |
| investing in the future: the physical presence of our lines, poles and pipes means that we are closely linked with the communities we serve and in which we operate. We therefore play a wider role in society than just the provision of our services. Commercial success will enable us to continue to invest in the future in ways that benefit our shareholders, the environment, our employees and society, and our willingness to do so reflects our desire to be a long-term business. |
The integration of these goals into our activities is intended to give us a framework for assessing the appropriateness of future opportunities for expansion and growth, as well as a set of core values for the way we conduct our business. Beyond our wholly-owned businesses, we will be seeking to encourage our joint venture partners to work with us in implementing the framework in our joint operations. We will also work with our suppliers to ensure that all of our activities are responsible and sustainable, even where we have contracted the supply of products and services to third parties.
Implementing the framework
To be fully effective, our framework must be embedded in the day-to-day activities of everyone within the organisation and influence virtually everything we do. This section looks at our approach to our business conduct, our impact on the environment, our responsibilities to employees and our relationship with the wider community and gives practical examples of how we are implementing our framework.
Business conduct Our standards of business conduct encompass open and constructive dialogue with all of our stakeholders and the maintenance of high standards of integrity and professionalism. We are also sensitive to local customs and traditions as we operate around the world.
The development of our framework exemplifies our commitment to open and constructive dialogue with all of our stakeholders. The strategy was developed and refined with the help of many people in the UK and the US, including: | ||
over 2,000 employees, who provided their views
on issues ranging from the reliability of our
services, through human rights, to the use of
renewable energy.
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more than 1,800 retail customers in the US who
participated in a wider survey of customer
opinion.
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||
over 70 external stakeholders, including
institutional investors, private shareholders,
media and government representatives, pressure
groups, recruitment agencies and grantors.
|
||
These parties helped to confirm that the issues we wanted to address were indeed important, and that a statement of our strategy and intentions would be widely welcomed. |
National Grid Annual Report and Form 20-F 2001/02
15
The environment To protect the future of our business, we take a proactive approach to the management of both existing and future environmental risks.
The cornerstone of our programme is the implementation of environmental management systems (EMSs) compliant with the international standard ISO 14001 to help us eliminate unnecessary environmental impacts. EMSs are now in place in our businesses in the UK, the US and Argentina, and an EMS will be implemented in Australia once the Basslink project receives the appropriate approvals.
We seek to be efficient in our use of natural resources and to keep our waste to a minimum, thus increasing our productivity as well as benefiting the environment. Wherever possible, we also take steps to reduce emissions of greenhouse gases, an important part of helping to minimise climate change.
Helping our customers reduce CO 2 emissions: | ||
In the US, our electricity and gas distribution businesses help their industrial, commercial and residential customers to use energy more efficiently, saving them money and producing environmental benefits through reduced fuel consumption and lower emissions of greenhouse gases and acid rain precursors. Demand-side management initiatives include energy use analysis and audit services, technical assistance and financial incentives to encourage the use of energy-efficient design features and equipment in new buildings and refurbishment projects and help for domestic customers in replacing existing appliances with energy-efficient alternatives. In 2000, participating customers cut their electricity consumption by more than 180,000 MWh, reducing associated CO 2 emissions by an estimated 140,000 tonnes. |
Employees Our long-term success will depend on having a talented and diverse workforce with the right skills for the work we do. Accordingly, we seek to recognise and reward our employees for the contribution they make to the success of the business and to develop them so that they can add value to the company, themselves and society.
A healthy and injury-free workplace is an important feature of a responsible business, and makes an important contribution to maximising productivity. Our objective is to safeguard each other and those who work with us and to achieve our goals of no work-related injuries, no occupational illnesses and no harm to others in the community.
A safe working environment for our employees: | ||
National Grid has always placed emphasis on safety, with the result that incidents that lead to staff taking time off work have typically been few in number. We recognised, however, that without decisive action to improve our performance, our goals of eliminating injuries and occupational illnesses would continue to elude us. | ||
National Grid takes safety very seriously. We have a responsibility to all the people who are engaged in our business to continually improve our safety performance. We have recently been given a four-star safety rating among FTSE 100 companies by an independent study. | ||
The Board accepted all of the recommendations made by an external consultant and we have been working to increase visibility of management commitment to safety as a business priority. Safety, Health and Environment Committees, chaired by Executive Directors and supported by specialist implementation teams, have been established within our UK and US businesses. These are driving forward a programme of improvements encompassing training, reporting, information sharing and performance management, based on the belief that all work-related incidents and illnesses are preventable and that we are all responsible for our own safety and that of our fellow workers. |
The community By providing high-quality, dependable services at reasonable cost we make a significant contribution to the economic growth of the countries in which we operate. We therefore aim to manage our assets so as to maximise the availability of our system, to improve the efficiency of the business without compromising quality and reliability. Through our own financial contributions, and by encouraging the involvement of our employees, we support community investment programmes which focus on our key stakeholders and customers, with emphasis on building long-term partnerships.
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Business review continued
16
Environmental education in the UK: | ||
In the UK, our twelve environmental education centres based on substation sites are centres of excellence for environmental education. Each centre is run in partnership with a public or charitable organisation, including local education authorities, Wildlife Trusts, Groundwork, the British Trust for Conservation Volunteers and the Field Studies Council. The centres receive over 90,000 visitors a year, many of them schoolchildren who use the centres to learn about their local environment and wider sustainability issues. Thousands more people benefit from a variety of outreach programmes in schools and local community groups. | ||
Closely linked to the environmental education centres is National Grids environmental placement programme, which supports twelve graduates and undergraduates each year. Since 1996, more than 70 young people have gained valuable experience through the programme, going on to careers in local authorities, English Nature, the Forestry Authority, environmental consultancy, environmental charities and teaching. | ||
Working in partnership to roll-back malaria: | ||
Malaria is the worlds number one killer disease. In Africa, the WHO has reported that 700,000 of the 960,000 malaria-related deaths each year are children. This disease has a devastating effect on families, and is also a brake on economic development within the region. | ||
In Zambia, we are playing an important role in the Rolling Back Malaria campaign which is supported by Governments, non-governmental organisations (NGOs), and other commercial companies. We are spraying our employees housing, our offices and operations sites with Fendona. We are also managing the drainage areas around our sites to reduce swampy areas in which mosquitoes can breed. In addition to improving the quality of life for our employees and their families, it also ensures that our staff can play a full role in our company. Malaria eradication will provide a better economic climate in which National Grid and Zambia can prosper. |
Accounting for our performance
The safety, health and environmental performance of our businesses is already the subject of a Group-wide audit programme, the results of which are reported to the Audit Committee as an integral part of the internal control and risk management arrangements described on page 33. In addition, safety, health and environmental matters are reported to the Group Board every month, discussed at every meeting of the Group Executive Committee and Safety, Health and Environment committees have been established within our UK and US businesses.
We collect significant information on all aspects of our performance to enable us to manage our activities properly: in many cases, this same information can also help us to assess the sustainability of the business. Where additional performance indicators can enhance our ability to measure the sustainability and success of the business, we will develop such indicators and where appropriate integrate them with financial indicators such as turnover and profit. This approach reflects our desire to integrate sustainable development principles into our business. Our Group-wide report is supported by more detailed information from our main businesses in the UK and the US which already report externally on their social and environmental performance.
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Financial review
17
Five year financial summary
The financial summary set out below has been derived from the audited
consolidated accounts of National Grid for the five financial years ended 31
March 2002. It should be read in conjunction with the Group accounts and
related notes, together with the Operating and Financial Review.
2002
2001
2000
1999
1998
(restated)
(i)(ii)
(restated)
(i)(ii)
(restated)
(i)
(restated)
(i)
Summary Group profit and loss account
£m
£m
£m
£m
£m
3,921.9
3,799.7
1,614.7
1,514.2
1,519.3
479.1
90.1
4,401.0
3,799.7
1,614.7
1,514.2
1,609.4
(3,893.6
)
(3,094.2
)
(1,042.9
)
(937.5
)
(1,074.9
)
505.7
705.5
571.8
576.7
562.9
1.7
(28.4
)
507.4
705.5
571.8
576.7
534.5
(636.8
)
(96.0
)
(26.0
)
0.7
1.3
874.7
739.4
554.0
579.9
535.8
(121.4
)
(45.3
)
(792.3
)
(90.4
)
(84.6
)
(8.2
)
(2.5
)
(129.4
)
609.5
545.8
577.4
535.8
20.1
243.3
1,029.6
899.1
115.3
10.6
20.1
22.0
(292.5
)
(255.1
)
(67.5
)
(118.5
)
(61.7
)
(92.5
)
(52.6
)
(385.0
)
(255.1
)
(67.5
)
(171.1
)
(61.7
)
(461.7
)
617.8
1,507.9
1,305.4
589.4
(85.4
)
(182.1
)
(152.8
)
(157.2
)
(121.1
)
60.1
235.4
(229.5
)
(162.8
)
(25.3
)
53.3
(382.3
)
(320.0
)
(121.1
)
(487.0
)
671.1
1,125.6
985.4
468.3
(6.3
)
(6.9
)
(3.6
)
(493.3
)
664.2
1,122.0
985.4
468.3
(264.6
)
(223.0
)
(205.5
)
(192.0
)
(189.2
)
(768.6
)
(264.6
)
(223.0
)
(205.5
)
(192.0
)
(957.8
)
(757.9
)
441.2
916.5
793.4
(489.5
)
(32.3
)p
45.0
p
76.2
p
67.2
p
27.7
p
32.1
p
20.0
p
22.5
p
20.7
p
20.9
p
(32.3
)p
43.0
p
71.7
p
63.3
p
27.5
p
32.1
p
19.8
p
22.0
p
20.4
p
20.8
p
16.04
p
15.08
p
13.94
p
13.07
p
12.07
p
3.0
2.9
8.2
4.9
8.7
2.0
1.3
1.6
1.6
1.7
(i) | Restated for the impact of the adoption of Financial Reporting Standard 19 Deferred Tax. | |
(ii) | Restated for a revised presentation of the minority interests share of the results of associated undertakings. | |
(iii) | Excluding exceptional items and goodwill amortisation. |
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Financial review
continued
18
Five year financial summary
continued
National Grid Annual Report and Form 20-F 2001/02
19
Unless otherwise indicated, operating profit is stated before exceptional items
and goodwill amortisation.
As a result of the adoption of Financial Reporting Standard 19 Deferred Tax
and the revised presentation of the minority interests share of the results of
associated undertakings, prior year comparatives for 2000/01 and 1999/2000 have
been restated in the following commentary, except where indicated otherwise.
The effect of this restatement is explained in note 1 to the accounts.
Financial year ended 31 March 2002 (2001/02) compared with financial year
ended 31 March 2001 (2000/01)
Acquisition of Niagara Mohawk Holdings, Inc.
On 31 January 2002, National Grid successfully completed the acquisition of
Niagara Mohawk, for consideration of £2,186.5 million satisfied by the issue of
shares amounting to £1,269.9 million and cash of £916.6 million, including
£44.9 million relating to the costs of acquisition. The net assets acquired had
a provisional fair value of £1,376.4 million, resulting in goodwill of £810.1
million being recognised, that is being amortised over 20 years. Details of the
acquisition are contained in note 27 to the accounts on page 71.
Niagara Mohawk has contributed £83.1 million to operating profit for the period
from the date of acquisition to 31 March 2002.
Group turnover
Group turnover increased from £3,799.7 million in 2000/01 to £4,401.0 million
in 2001/02, substantially reflecting the acquisition of Niagara Mohawk, which
accounted for 80 per cent of the increase. The remaining increases reflect
higher distribution turnover for National Grid USA as a result of higher energy
prices, which are substantially passed through to customers, higher turnover
for EnMO, partially offset by reduced turnover from UK transmission and
stranded costs and generation.
Group total operating profit
Total operating profit rose by £135.3 million to £874.7 million reflecting
higher contributions from:
These increased contributions were partially offset by lower contributions
from:
Note 2 to the accounts contains a segmental analysis of the Groups results. A
review of the businesses is set out on pages 5 to 16.
Goodwill amortisation
Goodwill amortisation for 2001/02 rose from £84.6 million to £90.4 million.
This increase reflects the amortisation of goodwill relating to the acquisition
of Niagara Mohawk since
31 January 2002, and a full years amortisation of goodwill relating to the
acquisition of EUA.
Exceptional items
The results for 2001/02 include net exceptional pre-tax losses of £953.5
million (£893.4 million post-tax), reflecting losses arising from:
These exceptional losses were partially offset by:
Interest
Net interest, excluding exceptional items, rose from £255.1 million to £292.5
million for 2001/02. This increase is explained by the acquisition of Niagara
Mohawk and an increase in the Groups share of associated undertakings net
interest charge, partially offset by interest rate reductions, principally on
US dollar borrowings.
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Financial review
continued
20
Taxation
The net tax charge of £25.3 million for 2001/02, includes a net credit relating
to exceptional items amounting to £60.1 million. If these exceptional items are
excluded, then the tax charge for 2001/02 is £85.4 million, including a £73.0
million tax credit arising from adjustments to prior years tax. The effective
tax rate for 2001/02 excluding the impact of exceptional items is 17.4 per
cent. The effective tax rate for 2000/01, excluding the impact of exceptional
items, was 45.6 per cent. A reconciliation of the effective tax rate from the
UK Corporation tax rate is shown in note 9 to the accounts on page 55.
Exchange rates
Exchange rate movements have had a beneficial effect on the translation of US
dollar operating profits for 2001/02 as compared with 2000/01. US dollar
operating profits were translated at a weighted average rate of £1.00 = $1.44
during 2001/02 as compared with £1.00 = $1.483 for 2000/01. If the rate that
applied during 2000/01 had been used, then sterling operating profits for
2001/02 would have been lower by approximately £9 million.
The increased operating profit is largely offset by the increased sterling cost
of US dollar debt taken out to finance US dollar denominated investments and
the increased sterling cost of US taxes. As a result, the impact of the lower
US dollar rate on National Grid USAs profits has not had a significant effect
on earnings per share.
Exchange rate movements have favourably impacted on National Grids share of
operating losses in Intelig, the Brazilian telecoms operator, as sterling has
strengthened against the Brazilian currency during 2001/02. We estimate that,
as compared with the average exchange rate for 2000/01, this has reduced our
share of operating losses by approximately £10 million.
The effect of the devaluation of the Argentine peso has resulted in the Group
reflecting its share of an exceptional foreign exchange financing charge
relating to a joint venture amounting to £92.5 million, as referred to on page
19.
Change in UK GAAP accounting policies
As described in the Accounting policies basis of preparation of accounts on
page 42, National Grid has adopted Financial Reporting Standard (FRS) 18
Accounting Policies and FRS 19 Deferred Tax during the year and has
provided the disclosures required relating to the transitional arrangements of
FRS 17 Retirement Benefits.
The adoption of FRS 18 has had no material impact on the Group, whilst the
adoption of FRS 19, full details of which are contained in note 1 to the
accounts on page 47, has resulted in a reduction in shareholders funds at 1
April 2001 of £802.3 million. It has been impractical to determine the impact
on the current years results of the adoption of FRS 19 because of the
acquisition of Niagara Mohawk. The impact of the adoption of FRS 19 on the
results for 2000/01 and 1999/2000 was to reduce profit after taxation by £104.8
million and £26.4 million respectively.
(Loss)/earnings per share
The basic loss per share for 2001/02 was 32.3 pence compared with basic
earnings per share of 45.0 pence in 2000/01, reflecting the very significant
level of net exceptional losses in 2001/02. Excluding exceptional items and
goodwill amortisation, basic earnings per share increased by 12.1 pence to 32.1
pence. A reconciliation of the movement from basic earnings per share to basic
earnings per share excluding exceptional items and goodwill amortisation is
shown in note 11 to the accounts on page 56.
Ordinary dividends
The total ordinary dividend for 2001/02 amounted to 16.04 pence per ordinary
share. This represents an increase of 6.4 per cent over the previous year. The
total dividend is covered 2.0 times (2000/01: 1.3 times) by earnings per
ordinary share, excluding exceptional items and goodwill amortisation, and
amounted to £264.6 million.
Dividends
The table below shows the amounts of cash dividends in respect of each of the
five most recent financial years. These dividends do not include any associated
UK tax credit in respect of all such dividends.
As dividends paid by National Grid are in pounds sterling, exchange rate
fluctuations will affect the US dollar amounts received by holders of ADSs on
conversion by The Bank of New York, the Depositary, of such cash dividends.
Dividend policy
National Grid is committed to delivering sustained real dividend growth.
Confidence in the Groups future financial strength and in the prospects for
growth and greater diversity of earnings has increased. Consequently, the Board
announced on 21 November 2000 its aim to increase dividends per share (as
expressed in pounds sterling) by 5 per cent real in each of the five years to
March 2006.
National Grid Annual Report and Form 20-F 2001/02
21
Financial year ended 31 March 2001 (2000/01) compared with financial year ended 31 March 2000 (1999/2000)
Acquisition of Eastern Utilities Associates (EUA)
The acquisition of EUA was completed on 19 April 2000 at a cost of £414.0
million. The net assets acquired had a fair value of £189.0 million, resulting
in goodwill of £225.0 million which has been capitalised and is being amortised
over 20 years. The transmission and distribution operations of NEES (acquired
22 March 2000) and EUA were integrated on 1 May 2000. It is therefore not
possible to provide an indication of EUAs contribution to Group results for
the year ended 31 March 2001.
Group turnover
Group turnover from continuing operations increased from £1,614.7 million in
1999/2000 to £3,799.7 million in 2000/01, substantially reflecting the first
full-year contribution from National Grid USA.
Group total operating profit
Total operating profit rose by £185.4 million to £739.4 million, reflecting
higher contributions from:
These increased contributions were partially offset by lower contributions
from:
Note 2 to the accounts contains a segmental analysis of the Groups results. A
review of the businesses is set out on pages 5 to 16.
Goodwill amortisation
Goodwill amortisation for 2000/01 rose from £8.2 million to £84.6 million. This
increase reflects a full years amortisation of goodwill relating to the
acquisition of NEES and the amortisation of goodwill arising from the
acquisition of EUA on 19 April 2000.
Exceptional items
The results for 2000/01 include exceptional pre-tax profits of £218.1 million
(£453.5 million post-tax), comprising:
Interest
Net interest rose from £67.5 million to £255.1 million for 2000/01. This
increase is largely attributable to the acquisitions of NEES and EUA, which
were paid for out of cash balances and new borrowings. The net interest charge
for 2000/01 also includes:
Taxation
The net tax charge of £53.3 million for 2000/01 includes a net credit of £235.4
million relating to exceptional items. If these exceptional items are excluded,
the tax charge for 2000/01 is £182.1 million, including a £2.0 million tax
credit arising from an adjustment to prior years tax. After adjusting for
exceptional items, the effective tax rate for 2000/01 was 45.6 per cent. The
effective tax rate for 1999/2000, excluding the impact of exceptional items,
was 31.9 per cent.
A reconciliation of the effective tax rate from the UK Corporation tax rate is
shown in note 9 to the accounts on page 55.
Exchange rates
Exchange rate movements during 2000/01 have had a beneficial effect on the
operating profit contribution from National Grid USA. Sterling weakened during
2000/01 such that National Grid USAs operating profit has been translated into
a higher sterling operating profit than would otherwise have been expected. The
results for 2000/01 have been translated at a weighted average rate for the
year of £1.00 = $1.483 as compared with the rate of £1.00 = $1.60 which applied
at 31 March 2000. If the 31 March 2000 rate had been used, operating profit
would have been lower by approximately £20 million.
The increased operating profit is largely offset by the increased sterling
interest cost of US dollar debt taken on to finance the cost of the investment
in National Grid USA and the increased sterling cost of US taxes. As a result,
the impact of the stronger US dollar has not had a significant effect on
earnings per share.
Exchange rate movements during the year have adversely affected National Grids
share of operating losses in Intelig, the Brazilian telecoms operator, as
sterling has weakened against the Brazilian currency during 2000/01. We
estimate that, as compared with the average exchange rate for 1999/2000, this
increased our share of operating loss by approximately £5.0 million.
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Financial review
continued
22
Earnings per share
Basic earnings per share fell by 31.2 pence to 45.0 pence, reflecting the very
significant level of exceptional profits in 1999/2000. Excluding exceptional
items and goodwill amortisation, basic earnings per share fell 2.5 pence to
20.0 pence. A reconciliation of the movement from basic earnings per share to
basic earnings per share excluding exceptional items and goodwill amortisation
is shown in note 11 to the accounts on page 56.
Ordinary dividends
The total ordinary dividend for 2000/01 amounted to 15.08 pence per ordinary
share, an increase of 8.2 per cent over the previous year. The total dividend
was covered 1.3 times (1999/2000: 1.6 times) by earnings per ordinary share,
excluding exceptional items and goodwill amortisation, and amounted to £223.0
million.
Liquidity and capital resources
Cash flow
Net cash inflow from operations was £1,255.4 million in 2001/02 compared with
£810.6 million in 2000/01 and £682.0 million in 1999/2000. The 2001/02 increase
in net cash flow from operations primarily reflects the collection of under
recovered power costs relating to 2000/01 in the US, the recovery of costs
incurred in 2000/01 in respect of the development of NETA in the UK and the
first contribution from Niagara Mohawk, partially offset by cash outflows in
respect of exceptional items. The increase in net cash inflow from operations
in 2000/01 as compared with 1999/2000 has arisen from the impact of National
Grid USAs contribution to cash inflow.
Details of the components of net cash inflow from operations are set out in
note 26 to the accounts on page 69.
Payments to the providers of finance, in the form of dividends and interest,
totalled £587.0 million (net) in 2001/02, compared with £519.4 million in
2000/01 and £262.3 million in 1999/2000. Net interest cash outflows increased
from £64.7 million and £303.4 million in 1999/2000 and 2000/01 respectively to
£349.0 million in 2001/02. The increase between 1999/2000 and 2000/01 primarily
reflects the additional net interest expense incurred following the acquisition
of NEES and EUA, and the increase to 2001/02 reflects the additional net
interest expense associated with the acquisition of Niagara Mohawk.
Net corporate tax payments amounted to £7.3 million in 2001/02 compared with
£137.2 million in 2000/01 and £274.3 million in 1999/2000. Net corporate tax
payments in 2001/02 were lower than in 2000/01, for two main reasons:
Notwithstanding additional corporate tax payments in respect of National Grid
USA, corporate tax payments in 2000/01 were lower than 1999/2000 for two main
reasons:
Net purchases of tangible fixed assets absorbed cash of £464.4 million in
2001/02, compared with £457.6 million in 2000/01 and £279.2 million in
1999/2000. Net purchases of tangible fixed assets in 2001/02 include amounts
paid in respect of National Grid USA and Niagara Mohawk amounting to £199.3
million, compared with £154.2 million for 2000/01 and £4.3 million for
1999/2000.
Cash outflow in 2001/02 relating to the acquisition of Group undertakings and
other investments amounted to £983.2 million, of which £931.9 million
(including overdrafts acquired) related to the acquisition of Niagara Mohawk.
This compares with cash outflows relating to the acquisition of Group
undertakings and other investments amounting to £778.1 million in 2000/01 and
£2,189.6 million in 1999/2000. The 2000/01 cash outflows substantially related
to the acquisition of EUA and an additional investment in Intelig, whilst of
the 1999/2000 cash outflow of £2,189.6 million, £2,045.1 million related to the
acquisition of NEES.
In 1999/2000, the sale of 28.9 million ordinary shares in Energis contributed
£952.9 million to the inflow of cash.
During 2001/02, National Grid raised finance through Eurobonds, other bond
issues and the use of a multi currency revolving credit facility for the
purpose of financing the acquisition of Niagara Mohawk and repaying other forms
of borrowings.
Equity shareholders funds
Equity shareholders funds increased from £2,673.5 million at 31 March 2001 to
£3,196.6 million at 31 March 2002. This increase is primarily explained by the
issue of shares in connection with the acquisition of Niagara Mohawk amounting
to £1,269.9 million, partially offset by the retained loss for the year of
£757.9 million.
Net debt
Net debt increased from £3,918.2 million at 31 March 2001 to £8,240.7 million
at 31 March 2002, primarily as a result of the acquisition of Niagara Mohawk.
Gearing at 31 March 2002 was 250 per cent, up from 144 per cent at the start of
the year. Interest cover (the number of times the net interest charge is
covered by total operating profit excluding goodwill amortisation and
exceptional items), which is considered a more relevant indicator of the
Groups borrowing capacity, was 3.0 times (compared with 2.9 times in 2000/01
and 8.2 times in 1999/2000).
Following the acquisition of Niagara Mohawk, the composition as well as the
amount of group debt has changed significantly. Other specific refinancings
have been the issue by The National Grid Company plc of a £600 million bond
with an RPI indexed tranche, a fixed rate tranche and a limited
National Grid Annual Report and Form 20-F 2001/02
23
indexed tranche maturing in 2020, 2028, 2030 respectively; and a
2 billion
bond guaranteed by the Group, maturing
1.25 billion in 2006 and
0.75 billion in 2011. These euro amounts borrowed
have been swapped into US dollars and into sterling. A full analysis of debt is
provided in note 19 to the accounts, and a reconciliation of the movement in
net debt from 1 April 2001 to 31 March 2002 is provided in note 26 to the
accounts.
Capital expenditure
Capital expenditure, including interest capitalised, was £593.3 million in
2001/02, compared with £535.8 million in 2000/01 and £316.1 million in
1999/2000. The higher level of capital expenditure for 2000/01 as compared with
1999/2000 reflects a higher level of capital expenditure relating to National
Grid USA and UK transmission. In 2000/01, National Grid USA capital expenditure
was £154.2 million as compared with £4.3 million for 1999/2000 (which related
to the period 22 March to 31 March 2001) and UK transmission capital
expenditure rose £74.7 million to £361.2 million.
Credit facilities
The remaining portion of the credit facility provided to National Grid by a
syndicate of banks, primarily in connection with the acquisition of NEES in
2001, was repaid and cancelled and replaced by a new committed credit facility
of $2.3 billion which was used to finance the cash element of the Niagara
Mohawk acquisition price and to provide general funding and liquidity. The
facility is capable of running with $1.7 billion maturing in November 2004 and
$0.6 billion in November 2006. At March 2002, the full $2.3 billion was undrawn
but was being used to provide back-up support to a $2 billion US dollar
commercial paper programme which was launched in March 2002. At 31 March 2002
commercial paper outstandings were £634.3 million.
Companies within the original National Grid USA group have committed facilities
of $527 million (£371 million), all of which were undrawn at 31 March 2002.
Companies within the Niagara Mohawk sub-group have committed bank facilities of
$848 million (£597 million) which were also all undrawn at the year-end. Of
these undrawn amounts, £439 million was providing back-up support to commercial
paper and note issuance programmes within the enlarged US group.
A full analysis of the Groups committed credit facilities at
31 March 2002 is provided at note 20 to the accounts on page 64.
Treasury policy
The funding and treasury risk management of the Group is carried out by a
central department operating under policies and guidelines approved by the
Directors. Acting within these policies, certain treasury management activities
are delegated to regional treasury centres. The Treasury Policy Committee, a
committee of the Group Board, is responsible for regular review and monitoring
of treasury activity and for approval of specific transactions.
Treasury-related risks faced by the Group include interest rate risk, currency
risk, credit risk, liquidity risk and funding risk, and the policies applicable
are described below.
The treasury department is not operated as a profit centre. Debt and treasury
positions are managed in a non-speculative manner, such that all transactions
in financial instruments or products are matched to an underlying current or
anticipated business requirement. Derivative financial instruments
(derivatives), including swaps and options, are used principally for reducing
interest rate and currency risk. Derivatives are not held for trading purposes.
Derivatives entered into in respect of gas and electricity commodities are used
in support of the business operational requirements and the policy regarding
their use is explained below.
As a registered holding company, under the US Public Utility Company Holding
Act of 1935, National Grid has to operate under certain regulatory restrictions
applied by the US Securities and Exchange Commission. As a result, the scope of
the financing activity of National Grid is limited to specific areas which are
authorised from time to time, such authorisation being set sufficient to cover
all normal requirements. In addition National Grid is required to maintain its
common stock equity as a percentage of it total capitalisation (defined as
common stock equity plus preferred stock plus gross debt) measured on a book
value US GAAP basis at 30 per cent or above.
Interest rate risk
To provide protection against adverse interest rate movements, the interest
rate on the debt portfolio is managed through the use of fixed-rate debt,
combined with the use of interest rate swaps, options and option-related
instruments with a view to maintaining a significant proportion of the debt
portfolio at fixed rates over the medium term. To date, the policy objective
has been to achieve 50 per cent to 85 per cent of debt at fixed rates depending
on debt projections and market levels of interest rates. Following a recent
reappraisal of the interest rate risk exposures of the wider group, the
guidelines have been adjusted so that the target percentage of debt that is at
a fixed rate is near the lower end of the previous range, with an additional
objective that for sterling debt there should be up to 30 per cent in index
linked form, namely linked to the UK Retail Price Index.
The interest rate composition of the Groups financial liabilities at 31 March
2002 is shown in note 20 to the accounts. Based on the level and composition of
net borrowings at 31 March 2002, an increase in average interest rates of 1 per
cent per annum would result in a decrease in profit before taxation of £24.7
million.
The table on page 24 provides information about the Groups financial
instruments including borrowings, interest rate swaps, cross currency swaps and
other derivative instruments. For borrowings, the table presents principal cash
flows and related weighted average interest rates by expected maturity dates.
The analysis is before taking into account interest rate and currency swaps and
does not include unamortised issue costs. As a result, it differs from the
analysis of borrowings contained in note 19 to the accounts.
For interest rate swaps and cross currency swaps, the table presents notional
amounts and weighted average interest rates by expected (contractual) maturity
dates. For foreign exchange deals, the table presents the value of currency in
the relevant contracts. The information is presented in sterling equivalents
which is the Groups reporting currency. Substantially all of the variable rate
borrowings and the floating legs of swaps are subject to interest rates which
fluctuate with the London Inter-Bank Offered Rate (LIBOR) for the appropriate
currency at differing premiums or, in the case of certain US-based companies,
are based on the market rates for tax-exempt commercial paper. Cash and
deposits earn interest at local
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Financial review
continued
24
National Grid Annual Report and Form 20-F 2001/02
25
prevailing rates for the appropriate currency and comprise £89.8 million of
sterling deposits, £120.3 million, of US dollar deposits and £2.5 million of
other currencies.
In determining maturity dates, swaps that are cancellable at the option of the
swap provider are taken to have a maturity based on the earliest date at which
they can be cancelled. Debt that is callable by the issuer is taken to have a
maturity based on the earliest date on which the issuer is obliged to make
repayment.
Currency risk
Although foreign currency transaction exposures relating to cross-border
trading activity remain very limited, the policy of the Group is to hedge all
exposures exceeding $500,000 through the use of forward foreign exchange
contracts. The principal currency risk to which the Group is exposed arises
from the translation of assets and liabilities not denominated in sterling. In
general, the policy has been to hedge the balance sheet exposure through
currency borrowings, currency swaps or forward foreign exchange deals to the
extent of the original cost of the investment, or carrying value if lower,
where this is material and where it is practical to do so in the light of costs
and availability of suitable financial instruments for the currency concerned.
The acquisition of Niagara Mohawk has increased the balance sheet exposure to
US dollar denominated assets. In view of the increased materiality of the US
dollar to the Group the policy has been reviewed and the objective since the
acquisition is to match the US dollar proportion of the Groups financial
liabilities to the proportion of its cash flow that arises in dollars and is
available to service those liabilities. This rebalancing was completed at the
time of the acquisition by closing existing cross-currency swaps and through
financing the cash portion of the acquisition price with a mixture of dollar
and sterling borrowings.
Currency fluctuations will affect the translated value of overseas earnings.
This translation has no impact on the cash flow of the Group, and accordingly
is not hedged other than indirectly through the natural hedge of having foreign
currency interest expense arising on currency denominated liabilities. Dividend
flows may be hedged through matching with interest flows or by forward foreign
exchange deals and options.
The currency composition of the Groups financial assets and liabilities is
shown in note 20 to the accounts.
Liquidity risk
National Grid seeks to ensure that substantially all of its forecast funding
needs for a period of at least 12 months ahead are fully covered by term loans
drawn or committed bank facilities. Beyond this time, a prudent level of
committed availability is maintained. Longer-term refinancing risk is
controlled by ensuring that the amount of loans maturing in any year is not
excessive, compared with the Groups borrowing capacity.
In recent months, participants within the financial markets generally have
taken a keen interest in the risk of a sudden change in circumstances for
companies that could trigger a withdrawal of liquidity and access to funding.
The Group has reviewed all its borrowing and critical commercial contracts and
concluded that there is no risk of unintended trigger events. The Groups bank
facilities contain financial covenants appropriate to the size and nature of
the business and within which it will be able to operate. National Grids
capital markets bond issues contain no financial covenants and minimal
conditions that could trigger an early repayment.
Following the acquisition of Niagara Mohawk, the long term credit ratings of
National Grid were adjusted down one notch to stand at A from Standard &
Poors and A2 from Moodys. Its short term ratings are A1/P1. After the
announcement of the proposed merger with Lattice, Moodys have placed the
ratings on review for a possible downgrade. Standard & Poors have confirmed
their ratings. Certain other entities within the US and UK parts of the Group
are also rated. These ratings mean that the principal borrowing entities in the
Group should have ready access to the capital and bank markets for future
funding when necessary.
National Grid Group plc is a registered holding company under the Public
Utility Holding Company Act of 1935 in the US. Arising from this and other
regulatory limits applicable to certain Group companies, the freedom of
companies to provide financing between themselves is restricted.
Notwithstanding this, external financings or other arrangements are in place to
ensure that Group companies have adequate access to short-term liquidity.
Credit risk
At 31 March 2002, National Grid had £212.6 million of cash and deposits. The
Group is exposed to the credit risk of counterparties to these investments and
to counterparties credit risk in respect of off-balance sheet derivative
financial instruments. The Groups policy is to select only counterparties with
high-quality credit ratings (namely long-term ratings of at least A/A3 or
short-term ratings of A1/P1 from Standard & Poors or Moodys respectively) and
to avoid excessive concentration of risk. It does not expect any counterparties
to fail to meet their obligations.
Commodity hedging
In the normal course of business, National Grid is party to derivatives
including indexed swap contracts, gas futures, electricity swaps, options and
oil commodity swaps that are principally used to manage commodity prices
associated with its natural gas and electricity delivery operations. These
financial exposures are monitored and managed as an integral part of National
Grids financial risk-management policy. At the core of this policy is a
condition that National Grid will engage in activities at risk only to the
extent that those activities fall within commodities and financial markets to
which it has a physical market exposure in terms and volumes consistent with
its core business. National Grid does not issue or intend to hold derivative
instruments for trading purposes.
As a result of the restructuring of the electricity industry in New York State
during 1999, Niagara Mohawk, which was acquired by National Grid on 31 January
2002, entered into indexed swap contracts that expire in June 2008, and a
further three swap contracts that expire in June and September 2003. These
contracts replaced the existing power purchase arrangements on terms and
conditions that were more favourable to Niagara Mohawk than that allowed under
the existing arrangements. These derivatives are not designated as hedging
instruments but are the subject of regulatory rulings that allow the gains and
losses to be passed on to customers.
National Grid Annual Report and Form 20-F 2001/02
Operating and financial review Financial review
continued
26
At 31 March 2002 National Grid has recorded liabilities of £407.9 million in
respect of these contracts and has recorded a corresponding regulatory asset.
The asset and liability will be amortised over the remaining term of the swaps
as nominal energy quantities are settled and will be adjusted as periodic
reassessments are made of energy prices. The expected maturity of these swap
contracts is shown in the table on page 24.
National Grid, through its acquisition of Niagara Mohawk, acquired New York
Mercantile Exchange (NYMEX) gas futures and fixed for floating electric swaps
that were considered hedges for accounting purposes. The level of activity in
these derivatives has been immaterial, and all of these contracts expired by 31
March 2002. However, National Grid may enter into such contracts, as necessary,
in the future.
National Grid, through its UK transmission operation, has entered into
electricity put options during 2001/02, pursuant to its requirement to
stabilise the electricity market in England and Wales through the operation of
NETA. The options are for varying terms but generally can be exercised
throughout the summer of 2002. National Grid has entered into these options so
that it has the ability to physically deliver electricity as required to meet
its obligations under the Transmission Licence. National Grid has not and does
not expect to enter into any significant derivatives in connection with its
NETA role.
Commitments and contingencies
National Grids commitments and contingencies outstanding at 31 March are
summarised in the table below:
It is expected that National Grids commitments will be met from the Groups
operating cash flows and from existing credit facilities as necessary. Details
of the nature of the commitments and contingencies, including an analysis of
the ageing of commitments, is shown in note 29 to the accounts on page 73. Note
29 to the accounts also gives additional information regarding the Groups
share of the future capital expenditure contracted for but not provided of an
associate and joint ventures.
In addition to the above, regulatory authorities from Rhode Island, New
Hampshire and Massachusetts have expressed an intent to challenge the
reasonableness of a transaction entered into by National Grid, in connection
with the sale of its interest in the Millstone 3 nuclear unit. Further details
of the nature of this intent are contained in note 29 to the accounts on page
73.
The Group has also received notification of an air pollution violation
regarding the operation of two coal-fired generation plants, formerly owned by
Niagara Mohawk. As a consequence, the Group has been notified that regulatory
authorities are seeking substantial fines against the Group and the current
owners of these generation plants. It is the Groups position that pollution
control equipment costs should be borne by the current operator of these
plants. Further details of this litigation are contained within note 29 to the
accounts on page 74.
Critical accounting policies
The Group accounts are prepared in accordance with UK GAAP, which are described
on pages 42 and 43 to the accounts. Management are required to make estimates
and assumptions that may affect the reported amounts of assets, liabilities,
revenue, expenses and the disclosure of contingent assets and liabilities in
the accounts. The following matters are considered to have a critical impact on
the accounting policies adopted by the Group.
Estimated asset economic lives
The adoption of particular asset economic lives
in respect of goodwill and tangible fixed assets can materially affect the
reported amounts for goodwill amortisation and depreciation of tangible fixed
assets.
Impairment of fixed assets
Goodwill, fixed asset investments and tangible fixed
assets are reviewed for impairment in accordance with UK GAAP. Future events
could cause these assets to be impaired, resulting in an adverse affect on the
future results of the Group.
Regulatory assets
Regulatory assets are recorded in the accounts in accordance
with the principles of SFAS 71 Accounting for the Effects of Certain Types of
Regulation. If the principles of SFAS 71 were not applicable, this would
result in the non-recognition of these assets, and thereby materially alter the
view given by the accounts.
Turnover
Turnover includes an assessment of energy supplied to customers
between the date of the last meter reading and the year-end. Changes to the
estimate of the energy supplied during this period would have an impact on the
reported results of the Group.
Pensions and other post-retirement benefits
The cost of providing pensions and
other post-retirement benefits is charged to the profit and loss account on a
systematic basis over the service lives of the employees in the scheme in
accordance with current UK GAAP.As explained in note 7 to the accounts on page
53, a new UK accounting standard will replace existing GAAP and significantly
change the measurement and disclosure of pension and other post retirement
costs in the Group accounts.
Related party transactions
National Grid provides services to and receives services from its associate and
joint ventures. In the year ended 31 March 2002, National Grid charged £41.6
million and received charges of £57.8 million from its associate and joint
ventures. Amounts charged to and by the associate, Energis, amounted to £38.1
million and £17.8 million respectively. Amounts charged to Energis were
primarily in respect of enhancements to and maintenance of the Energis telecoms
infrastructure, whilst amounts charged by Energis relate to telecoms services
provided. Amounts charged to Energis also include £9.0 million in respect of a
finance lease.
At 31 March 2002, investments in the associate and certain joint ventures were
impaired. As a result, the investments in
National Grid Annual Report and Form 20-F 2001/02
27
Energis plc, Energis Polska Sp. z.o.o., JVCO Participacoes Ltda (the holding
company for Intelig), Manquehue net S.A. and Silica Networks S.A. now have a
carrying value of £nil. In addition, the Group has recognised obligations
related to the impairment of these investments amounting to £186.0 million.
Details of the exceptional charges arising from these impairments is shown in
note 4 to the accounts on page 51.
Amounts due to and from the associate and joint ventures are shown in notes 15
and 17 to the accounts on pages 59 and 60 respectively.
Changes and developments
The acquisition of Niagara Mohawk has given rise to a major change in overall
Group debt and in the currency mix of the Groups businesses. During the year
there has been a significant lengthening of the maturity profile of the Groups
borrowing portfolio, in part due to the inclusion of Niagara Mohawks existing
debt. In addition, short term bank borrowings were replaced by longer-term
funding from the bond markets with a £600 million issue by The National Grid
Company plc,
2,000 million issue by NGG Finance plc, guaranteed by National
Grid, and a $300 million issue by Niagara Mohawk Power Corporation prior to it
joining the Group. A new $2,300 million syndicated bank facility was
established for National Grid, maturing in 2004 and 2006, and a $2,000 million
US dollar commercial paper was launched. Immediately prior to the year end,
Niagara Mohawk effected early redemption of $393 million of its preferred stock
and $119 million of its first mortgage bonds using the strong cash position of
National Grid USA to finance this.
Any significant changes and developments that have occurred since 31 March
2002, have been noted within this Annual Report and Form 20-F 2001/02.
Otherwise there have been no significant changes or developments since 31 March
2002.
Going concern
Having made enquiries, the Directors consider that the Company and the Group
have adequate resources to continue in business for the foreseeable future and
that it is therefore appropriate to adopt the going concern basis in preparing
the accounts.
US GAAP
The accounts have been prepared in accordance with UK GAAP which differ in
certain significant respects to US GAAP. The US accounting information in note
32 on page 75 gives a summary of the principal differences between the amounts
determined in accordance with National Grids accounting policies (based on UK
GAAP) and those determined in accordance with US GAAP together with
reconciliations of net income and equity shareholders funds from a UK GAAP
basis to a US GAAP basis.
Net loss for 2001/02 under US GAAP was £163.1 million (2000/01: £810.3 million
(net profit); 1999/2000 £1,009.8 million (net profit)) compared with a net loss
of £493.3 million (2000/01: £664.2 million (net profit); 1999/2000: £1,122.0
million (net profit)) under UK GAAP. Equity shareholders funds under US GAAP
at 31 March 2002 were £3,759.0 million (31 March 2001: £2,920.0 million)
compared with £3,196.6 million (31 March 2001: £2,673.5 million) under UK GAAP.
The differences primarily result from the differing accounting treatments in
respect of goodwill, severance and integration costs, pensions, recognition of
income, financial instruments and the carrying value of the EPICs liability.
During 2001/02 National Grid adopted the following US GAAP accounting
standards:
Details of the effect of adopting these accounting standards can be seen in
note 32 to the accounts on page 82.
Inflation
In the UK, National Grids operating costs may be affected by inflation both in
terms of potential cost increases and in terms of the regulatory revenue
control, which is influenced by, amongst other things, movements in the UK
Retail Price Index. While higher inflation would tend to increase National
Grids cost base, this impact would be more than offset by increased revenue
allowed under the regulatory revenue control.
Higher inflation would increase National Grid USAs cost base. However, if the
rate of inflation, as measured by the change in the Gross Domestic Product
Implicit Price Deflator, exceeds 4 per cent, the regulatory settlements in
Massachusetts and Rhode Island allow for additional distribution revenue to be
recovered from customers.
In recent years, inflation in the UK and US has been relatively stable and has
not significantly affected the period under review.
Seasonality
Although demand for electricity can vary on a seasonal basis, National Grids
UK turnover and earnings are not, generally speaking, subject to substantial
seasonal variations, as the largest elements of UK turnover relate to
customers use of the transmission system. Customers are charged for these
services on the basis of a regulatory formula which provides for a relatively
constant revenue stream over the course of a financial year.
In respect of National Grid USA, some 53 per cent of the annual revenues of the
transmission and distribution businesses arise in the periods July-September
and December-February inclusive, reflecting seasonal peaks in demand for
electricity.
Euro
The single European currency (the euro) came into existence on 1 January
1999. The impact on National Grid to date has been minimal, but facilities have
been established to enable euro dealings where necessary. Internally, an
analysis of the impact on National Grid of adopting the euro as a replacement
for sterling has been undertaken.
National Grid Annual Report and Form 20-F 2001/02
Board of Directors
28
James Ross
Roger Urwin
Stephen Box
Rick Sergel
William Davis
Steven Holliday
Edward Astle
National Grid Annual Report and Form 20-F 2001/02
29
Bob Faircloth
John Grant
Bonnie Hill
Fiona Smith
Paul Joskow
Richard Reynolds
National Grid Annual Report and Form 20-F 2001/02
Directors report
30
The Directors of National Grid Group plc present their report and accounts for
the financial year ended 31 March 2002.
Incorporation of the Company
Ordinary shares in the original holding company were admitted to the Official
List of the London Stock Exchange in December 1995. Ordinary shares in the new
holding company were admitted to trading on 1 February 2002. The Secretary of
State for Trade and Industry holds a Special Share in National Grid, further
details of which are given in note 22 to the accounts.
National Grids American Depositary Shares were listed on the New York Stock
Exchange on 7 October 1999. In March 2000, National Grid was registered as a
holding company under the US Public Utility Holding Company Act of 1935.
The Companys agent in the US is Lawrence J. Reilly, National Grid USA, 25
Research Drive, Westborough, MA 01582.
Financial results
The financial results of the Group are set out on pages 17 to 27 of this
document.
Dividends
An interim dividend of 6.46 pence net per ordinary share was paid on 15 January
2002 to shareholders who were on the share register on 30 November 2001. The
Directors are recommending a final dividend for 2001/02 of 9.58 pence net per
ordinary share. Subject to approval by shareholders at the Annual General
Meeting, the final dividend will be paid on 15 August 2002 to shareholders on
the share register on 7 June 2002 and will bring the total ordinary dividend
for the year to 16.04 pence net per ordinary share.
Share capital
Changes in National Grids share capital during the year are set out in note 22
to the accounts.
Substantial shareholdings
As at 29 May 2002, National Grid had been notified of the following interests
in 3 per cent or more of its issued share capital:
No further notifications have been received.
Directors
The names of the Directors of National Grid, with brief biographical details,
are given on pages 28 and 29. At no time during the year has any Director had
any material interest in a contract within the Group, being a contract of any
significance in relation to the Groups business. Details of the Directors
remuneration, terms and conditions of service and interests in National Grid
shares are given on pages 34 to 38 of this document.
Employment policies
National Grid has well-established arrangements, through team briefing,
electronic mail and in-house newspapers, for communicating effectively with
staff on matters of concern to them as employees. Regular consultation with UK
staff and their trades union representatives takes place through the Company
Council and local workplace councils.
All operating companies within the Group are required to build and maintain
good standards of employment practice appropriate to the culture and
legislative requirements in each country of operation.
In the UK, applications for employment from disabled people are welcomed and
given full and fair consideration. If any employee becomes disabled, every
effort is made to continue their employment, including retraining.
In the US, National Grid is committed to making reasonable accommodation for
known physical or mental limitations of qualified individuals with
disabilities. Reasonable accommodation is based on various factors including,
but not limited to, the nature and cost of the accommodation and the impact of
the accommodation on the operation of the facility, including its impact on the
ability to conduct business.
Investors in People accreditation for the Groups UK operations was received in
November 2000.
National Grid operates equity participation arrangements for employees,
including Sharesave in the UK. Almost all US employees are investors in
National Grid through the employee incentive thrift plans.
National Grid Annual Report and Form 20-F 2001/02
31
Pensions litigation
On 4 April 2001, the House of Lords delivered its decision on an appeal brought
by National Grid concerning the use of the surplus in its section of the
Electricity Supply Pension Scheme (ESPS). The House of Lords found in favour of
National Grid and confirmed that its use of the surplus was entirely lawful and
proper. The House of Lords decision concluded this extended litigation, which
arose from complaints made by two pensioners in 1995 about National Grids
actions in relation to the 1992 surplus. International Power (formerly National
Power) was also successful in a parallel case.
Research and development
Expenditure on research and development in 2001/02 was £6.2 million compared
with £8.1 million 2000/01 and £7.8 million in 1999/2000.
Payments to suppliers
National Grid is a signatory to the CBI Code of Prompt Payment and has
procedures to ensure the payment of bills in accordance with contract terms.
Copies of the CBI Code of Prompt Payment may be obtained from the CBI, Centre
Point, 183 New Oxford Street, London WC1A 1DU.
The average creditor payment period at 31 March 2002 for The National Grid
Company plc, the principal UK operating company within the Group, was 35 days
(at 31 March 2001: 28 days).
Donations
In the UK, charitable donations of £179,300 were made in 2001/02. In addition
to this contribution to charitable organisations via the Charities Aid
Foundation, National Grid provides financial and in-kind support to many other
organisations through its community involvement programme.
In the US, charitable donations of $3,153,505 were made in 2001/02.
No donations were made in the UK and EU for the purposes of the Political
Parties, Elections and Referendums Act 2000.
Auditors
The auditors of National Grid, PricewaterhouseCoopers, have expressed their
willingness to remain in office. A resolution for their reappointment will be
proposed at the Annual General Meeting.
Annual General Meeting
National Grids Annual General Meeting will be held on Tuesday 23 July 2002.
Details are set out in a separate Notice of Annual General Meeting.
On behalf of the Board
Fiona B Smith
Registered Office: 15 Marylebone Road, London NW1 5JD
National Grid Annual Report and Form 20-F 2001/02
Directors report Corporate governance
32
Corporate governance is the system by which companies are directed and
controlled.
UK listed companies are required to include a statement on corporate governance
in their annual reports. This statement must include a narrative statement on
how the principles of the Combined Code have been applied and whether or not
the company has complied throughout the year with all of the provisions set out
in the Combined Code. The Combined Code is appended to the Listing Rules of the
UK Listing Authority.
The following statement sets out how National Grid approaches the issue of
corporate governance.
Code of Business Practice
To ensure effective corporate governance within National Grid a Code of
Business Practice was established. This Code was constructed around the
Principles of Good Governance contained in the Combined Code. To help ensure
consistent practice Group Wide Policy Statements were also introduced. These
provide guidance for management and staff throughout the Group on the
principles, controls and codes of conduct that have been established.
Compliance with the Principles
UK listed companies are also required to state in their annual report if they
have complied throughout the year with all of the detailed provisions of the
Combined Code. If they have not they must explain why.
National Grid has complied with all of the provisions of the Combined Code
throughout the year except for that requiring the appointment of a senior
non-executive director. National Grid considers that the independent
Non-executive Chairman is the appropriate point of contact for shareholders
with concerns about the management of the Group, and for this reason does not
think it necessary to appoint a separate senior non-executive director.
Directors
National Grid has a separate independent Non-executive Chairman. The Group
Board consists of the Chairman, the Group Chief Executive and also includes
five other Executive Directors and five independent Non-executive Directors.
The Board meets at least eight times a year, holding additional meetings when
necessary. The Board must approve certain decisions such as the start-uporthe
acquisition of a new company or any activity in a new territory. The Board also
monitors environmental and safety matters throughout the Group.
Board members each receive regular and ad hoc reports about Group activities
and have the right and duty to make further enquiries if they think it
necessary.
The Board has established a Nominations Committee which recommends the
reappointment of existing directors and selects and proposes the appointment of
new directors to the Board.
Any new Director to the Board must retire at the first AGM following their
appointment and seek reappointment by the shareholders. National Grids
Articles of Association also require that each Director must retire and seek
reappointment by shareholders at least once every three years.
Directors remuneration
National Grid has a Remuneration Committee comprising three independent
Non-executive Directors. Their aim is to design packages to attract, retain and
motivate high calibre directors. The Committee understands it is important both
to link reward to performance and to use a range of incentives. The Directors
report on Remuneration on pages 34 to 38 includes National Grids policy on
remuneration and the details of the remuneration of each Director.
Relations with shareholders
National Grid has regular meetings with institutional investors, fund managers
and financial analysts to ensure that its aims are understood. National Grid is
also seeking discussions with its investors on topics such as corporate
governance and sustainability.
National Grids AGM each year includes a presentation of the years financial
results and allows time for questions from shareholders. Directors also discuss
relevant matters with shareholders both before and after the meeting.
Accountability and audit
The Directors are responsible for making sure that the annual report and the
accounts give a balanced and understandable presentation of the Groups
position and prospects.
The Audit Committee considers the scope and extent of internal audit and
reports annually to the Board on this function. The Audit Committee meets at
least four times a year and the Group Chief Executive and Group Finance
Director are invited to attend. The Committee has at least one private meeting
with the external auditors with management excluded. The Committee also
considers the re-appointment of the auditors each year.
The Audit Committee has the specific task of keeping under review the nature
and extent of non-audit services provided by the external auditors in order to
ensure that a proper balance is maintained between objectivity and value for
money. The Audit Committee has reviewed the auditors remuneration set out in
note 3 to the accounts on page 51 and is satisfied that it is proper and
reasonable, having regard to the following considerations:
National Grid Annual Report and Form 20-F 2001/02
33
Internal control
National Grids system of internal control helps to safeguard shareholders
investment and the Groups assets and is designed to manage, rather than to
eliminate, material risks to the achievement of business objectives. The Board
is responsible for the Groups system of internal control and for reviewing its
effectiveness, recognising that any such system can provide only reasonable,
and not absolute, assurance against material misstatement or loss.
The Board confirms that there is an ongoing process for identifying, evaluating
and managing the significant risks faced by the Group and that it has been in
place throughout the year and continues in operation to date. This process
accords with the Turnbull working party guidance (published September 1999) and
with the ABI Disclosure Guidelines on Socially Responsible Investment
(published October 2001) which focus on Social, Ethical and Environmental
risks.
Energis, being a separately listed company, is independent from National Grid
and must comply with reporting requirements in its own right.
The ongoing process for identifying, evaluating and managing significant risks
promotes, where practicable, both a top-down and bottom-up assessment of risk.
Subsequently, both elements have been pulled together through the production of
a Schedule of Board-level risks. This Schedule has been considered and endorsed
by the Audit Committee.
Any material changes to the risks and associated actions contained in the
Schedule of Board-level risks and business risk registers are reported through
the periodic reporting process. In addition, quarterly meetings are held with
Executive Directors specifically to review and discuss key changes in risk
profiles.
Recognising that the implementation of risk management is an iterative process
and subject to continuing improvement, we continue to raise risk and control
awareness and embed good risk management principles throughout the expanding
Group. In December 2001, a dedicated risk management intranet site was rolled
out within the UK. This site will soon be housed on a Group extranet, thereby
making it accessible to the rest of the organisation. Throughout the year,
contact was made with a number of UK listed companies in order to share best
practices and challenge our understanding of concepts such as risk bearing
capacity and tolerance. Progress has continued to be monitored by a risk
steering group chaired by the Group General Counsel and Company Secretary.
Our plans for the year ahead are being formed. Two key actions are noted below.
The Board, through the Group Executive Committee and Audit Committee, regularly
reviews the effectiveness of internal control, including the process for
identifying, evaluating and managing significant risks, through the assurance
mechanisms shown below. Any material matters arising are reported to the Board.
Throughout the year
Group Executive Committee considers:
Audit Committee considers:
At the end of each financial year
Group Executive Committee considers:
Audit Committee considers:
National Grid Annual Report and Form 20-F 2001/02
Directors report Remuneration
34
Composition and role of the Remuneration Committee
The Remuneration Committee consists exclusively of independent Non-executive
Directors. It is chaired by Bob Faircloth, and its other members are John Grant
and Richard Reynolds.
The Remuneration Committee is responsible for determining all aspects of
Executive Directors compensation, drawing on advice from both external
independent remuneration consultants (New Bridge Street Consultants and Towers
Perrin) and internal expertise. The Non-executive Chairman and the Group Chief
Executive are invited to attend meetings to provide strategic advice on the
impact of remuneration policies, but neither participate in any discussion on
their own remuneration.
The Board has accepted all of the Remuneration Committees recommendations made
throughout the year.
The Remuneration Committee has decided, with the approval of the Board, to put
the Remuneration Committee Statement to a shareholder vote at the Annual
General Meeting.
At the Extraordinary General Meeting on 23 July 2002 shareholders will be asked
to approve a new Performance Share Plan which may form part of National Grid
Transcos senior level remuneration strategy going forwards. The new Plan,
combined with National Grids existing incentive plans, will provide the new
Remuneration Committee with the flexibility to incentivise Executive Directors
and other senior executives to deliver exceptional company results through a
range of stretching performance-related plans. Further details of the proposed
National Grid Lattice Performance Share Plan 2002 are included in the Notice of
Extraordinary General Meeting.
Remuneration policy
The Remuneration Committee designs remuneration packages with the aim of
attracting, motivating and retaining high-calibre Directors who will deliver
success for shareholders and high levels of customer service, safety and
environmental standards while having due regard to the markets in which the
Group operates.
Executive Directors remuneration
Remuneration packages for Executive Directors consist of the following
elements:
Base salary
Base salaries are reviewed annually taking account of the median
market position (against businesses of a similar size and complexity) and
business and personal performance. Account is also taken of salary increases
and employment conditions across the Group.
Incentives
The Remuneration Committee recognises the importance of linking
rewards to business and personal performance and considers that the following
incentive arrangements provide a balance between short and long term incentives
for National Grid:
National Grid Annual Report and Form 20-F 2001/02
35
Pensions
UK-based Executive Directors are members of the National Grid section
of the Electricity Supply Pension Scheme (ESPS), to which they currently
contribute 3 per cent of base salary per annum up to the Inland Revenue limits.
The normal employee contribution is 6 per cent of salary but all employees
currently benefit from a reduction in contributions. The Pension Schemes main
features in respect of Executive Directors are: normal retirement at age 60;
pension at normal retirement age of two-thirds final salary subject to
completion of 20 years service (although Directors may retire early from age
55 with a reduction in pension); death-in-service payment of four times
pensionable salary; spouses pension of two-thirds Directors pension on death;
discretionary payment of dependants pension if there is no surviving spouse;
pension increased by inflation by up to 5 percent per annum and, for Directors
affected by the earnings cap, the Company may provide benefits on salary
above the cap on a partially funded basis.
Rick Sergel and William Davis participate in a qualified pension plan and an
executive supplemental retirement plan provided through National Grid USA.
These plans are non-contributory defined benefit arrangements. Rick Sergels
benefit is calculated using formulae based upon years of service and highest
average compensation over five consecutive years. William Daviss benefit is
under a cash balance arrangement that credits employer contributions during
each year of employment in an amount based upon service time and compensation.
In addition, cash balances receive annual earnings credits. William Davis is
entitled to a minimum benefit which is calculated using a formula based upon
years of service and highest average compensation over five consecutive years.
In line with many US plans, the calculation of benefits under the arrangements
applicable to Rick Sergel and William Davis generally take into account salary,
bonuses and incentive share awards, but not share options. Normal retirement
age is 65. Pursuant to the executive supplemental plan, however, unreduced
benefits may be payable at age 55. The plans also provide for a spouses
pension, the value of which is based upon the participants benefit at death.
Benefits under these arrangements do not increase after commencement upon
retirement.
Directors remuneration
The remuneration of individual Directors for the year ended 31 March 2002 is
set out below:
The total remuneration of Roger Urwin, the highest-paid Director during the
year, was £794,195 (2001: David Jones, £665,440).
National Grid Annual Report and Form 20-F 2001/02
Directors report Remuneration
continued
36
Pension benefits earned by individual Executive Directors in 2001/02 were as
follows:
Non-cash benefits
The Company provides competitive benefits such as a fully
expensed car or cash alternative in lieu of car, chauffeur, private medical
insurance, life assurance and long term ill-health insurance to the Executive
Directors.
US Executive Directors also receive financial counselling. Taxable benefits,
such as hotel expenses, have also been incurred by certain Executive
Directors
directly in relation to the relocation of the Groups head office.
Service contracts
Service contracts for Executive Directors are set at one
years notice. The application of longer contract periods at appointment,
reducing after an initial period, is considered appropriate by the Board to
recruit and retain key executives. In this regard, the initial periods of Rick
Sergels, Steven Hollidays and Edward Astles contracts were for fixed periods
of three, two and two years respectively. These terms reduce to one year
rolling from March 2002 for Rick Sergel and Steven Holliday, and from September
2002 for Edward Astle. William Davis contract is for a fixed period of two
years.
Share ownership guidelines
Executive Directors are encouraged to build up and
retain a shareholding of one times annual base salary and that, as a minimum,
this should be achieved by retaining 50 per cent of the after tax gain on any
options exercised through the executive share plans.
Non-executive Directors remuneration
Non-executive Directors receive an annual fee of £30,000 with an additional
£5,000 payable for committee chairmanship. Richard Reynolds receives a fee of
£25,000 in respect of additional duties as a member of the Supervisory Board of
Intelig and Paul Joskow receives a fee of $30,000 in respect of strategic
advice he provides on regulatory issues to National Grid USA. A fee of £1,000
is paid for each Board meeting that Non-executive Directors attend outside of
their country of residence.
The Non-executive Chairman receives an annual fee of £175,000.
Non-executive fees are determined by the Board, or by a Committee authorised by
the Board, subject to the limits applied by National Grids Articles of
Association.
National Grid Annual Report and Form 20-F 2001/02
37
Directors interests in share options
Directors interests in share options over the ordinary shares of National Grid
are as follows:
National Grid Annual Report and Form 20-F 2001/02
Directors report Remuneration
continued
38
At the completion of the Niagara Mohawk acquisition William Davis held Stock
Appreciation Rights (SARs) over Niagara Mohawk shares which he chose to
roll-over into SARs over National Grid American Depositary Shares (ADSs). Each
SAR ADS constitutes a notional right over 5 National Grid shares. At exercise a
cash payment equivalent to the growth in value of the SAR over the exercise
price will be paid.
Directors beneficial interests
The Directors beneficial interests (which include those of their families) in
the ordinary shares of National Grid are shown below: (All interests at 1 April
2001 were in National Grid Group plc ordinary shares of
11
13
/
17
pence each. Following the Scheme of Arrangement on 31 January 2002 all interests are in
National Grid Group plc ordinary shares of 10 pence each.)
National Grid Annual Report and Form 20-F 2001/02
39
National Grid Annual Report and Form 20-F 2001/02
Directors responsibilities
40
Directors responsibilities for the preparation of the Group accounts
The Directors are required to prepare Group accounts for each fiscal year,
which present fairly, in all material respects, the consolidated financial
position of the Group at the fiscal year end and the consolidated results of
operations and cash flows of the Group for that period.
The Directors are also required to consider whether, in preparing the Group
accounts for the fiscal years shown on pages 42 to 82 the Company has used
appropriate accounting policies, consistently applied and supported by
reasonable and prudent judgements and estimates. They also consider whether all
accounting principles which they consider to be applicable have been followed
and ascertain whether it is appropriate for the Group accounts to be prepared
on the going concern basis.
The Directors are responsible for ensuring that the Company keeps accounting
records which disclose with reasonable accuracy the financial position of the
Company and which enable them to ensure that the Group accounts comply with the
UK Companies Act 1985. They are also responsible for taking such steps that are
reasonably open to them to safeguard the assets of the Group and to prevent and
detect fraud and other irregularities.
National Grid Annual Report and Form 20-F 2001/02
Independent auditors report to the shareholders of National Grid Group plc
41
Independent auditors report to the members of National Grid Group plc
Respective responsibilities of Directors and auditors
Our responsibility is to audit the accounts in accordance with relevant legal
and regulatory requirements, United Kingdom Auditing Standards issued by the
Auditing Practices Board (APB), and the Listing Rules of the United Kingdom
Financial Services Authority.
We report to you our opinion as to whether the accounts give a true and fair
view and are properly prepared in accordance with the United Kingdom Companies
Act 1985. We also report to you if, in our opinion, the Directors report is
not consistent with the accounts, if the Company has not kept proper accounting
records, if we have not received all the information and explanations we
require for our audit, or if information specified by law or the Listing Rules
regarding Directors remuneration and transactions is not disclosed.
We read the other information contained in the Annual Report and consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the accounts. The other information comprises
only the Directors report, the Chairmans statement, the Operating and
financial review and the Corporate governance statement.
We review whether the Corporate governance statement reflects the Companys
compliance with the seven provisions of the Combined Code specified for our
review by the Listing Rules, and we report if it does not. We are not required
to consider whether the Boards statements on internal control cover all risks
and controls, or to form an opinion on the effectiveness of the Groups
corporate governance procedures or its risk and control procedures.
Basis of audit opinion
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts are free
from material misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the accounts.
United Kingdom Opinion
United States Opinion
As discussed in note 1 to the accounts, during the year ended 31 March 2002 the
Group adopted Financial Reporting Standard 19 Deferred tax and has also
adopted a revised presentation of the minority interests share of the results
of associated undertakings. Prior year numbers have been restated.
Accounting principles generally accepted in the United Kingdom differ in
certain significant respects from accounting principles generally accepted in
the United States. The application of the latter would have affected the
determination of the net income for the years ended 31 March 2002, 31 March
2001 and 31 March 2000, and consolidated shareholders equity at 31 March 2002
and 2001, all expressed in pounds sterling, as shown in the summary of
differences between United Kingdom and United States generally accepted
accounting principles set out in note 32 to the accounts.
PricewaterhouseCoopers
National Grid Annual Report and Form 20-F 2001/02
Accounting policies
42
a Basis of preparation of accounts
The accounts have been prepared in accordance with UK GAAP, which differs in
certain significant respects to US GAAP. A summary of the main differences
between UK and US GAAP is set out in note 32.
The preparation of accounts in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the accounts and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from these estimates.
During the year, the Group has adopted FRS 18 Accounting Policies and FRS 19
Deferred Tax. There has been no material impact to the Group of adopting FRS
18. The impact of adopting FRS 19 is shown in note 1.
The Group is following the transitional arrangements of FRS 17 Retirement
Benefits. The required disclosures are shown in note 7. Full adoption of the
standard is required by the year ended 31 March 2004.
b Basis of consolidation
The accounts of Group and associated undertakings used for consolidation are
generally made up to 31 March. However, where this has not been practical, the
results of certain Group undertakings and joint ventures have been based on
their accounts to 31 December.
The results of newly acquired Group and associated undertakings are included in
the Group accounts from the date the Group acquires control or, in respect of
associated undertakings, an equity interest which enables it to exercise a
significant influence. The results of Group businesses and associated
undertakings are included in the Group accounts up to the date that control or
the exercise of significant influence, as appropriate, is relinquished.
In respect of the results included in the Group accounts for the year ended 31
March 2002 for the associate (Energis), the Group accounts only include the
Groups share of the unaudited results for the six month period ended 30
September 2001. The results of Energis for the year ended 31 March 2002 were
not available at the date the Group accounts were signed.
During the year National Grid Group plc (formerly New National Grid plc) was
introduced as the new holding company of the National Grid Group by way of a
Scheme of Arrangement under section 425 of the Companies Act 1985. This has
been accounted for as a group reconstruction and merger accounting principles
have been applied, as if the company had always been the holding company of the
Group.
c Goodwill
d Foreign currencies
Exchange differences arising on the translation of the opening net assets of
overseas operations, the re-translation of the retained earnings of overseas
operations from average to closing rates of exchange and the translation of
foreign currency borrowings or derivatives taken to hedge overseas assets are
taken directly to reserves. Tax charges or credits arising on such items are
also taken to reserves.
All other exchange differences and related tax charges or credits are taken to
the profit and loss account and disclosed separately where deemed exceptional.
e Deferred taxation
Deferred tax assets are only recognised to the extent that their recovery is
considered more likely than not.
Deferred tax balances have not been discounted.
National Grid Annual Report and Form 20-F 2001/02
43
f Tangible fixed assets and depreciation
No depreciation is provided on freehold land and assets in the course of
construction. Other tangible fixed assets are depreciated, principally on a
straight line basis, at rates estimated to write off their book values over
their estimated useful economic lives. In assessing estimated useful economic
lives, which are reviewed on an annual basis, consideration is given to any
contractual arrangements and operational requirements relating to particular
assets. Unless otherwise determined by operational requirements, the
depreciation periods for the principal categories of tangible fixed assets are,
in general, as follows:
g Stocks
h Regulatory assets
i Decommissioning
j Turnover
k Pensions and other post-retirement benefits
l Leases
Operating lease payments are charged to the profit and loss account on a
straight line basis over the term of the lease.
m Financial instruments
All transactions are undertaken or maintained to provide a commercial hedge of
the interest, currency or commodity price risks associated with the Groups
underlying business activities and the financing of those activities. Amounts
payable or receivable in respect of interest rate swaps are recognised in the
profit and loss account over the economic lives of the agreements or underlying
position being hedged, either within net interest or disclosed separately where
deemed exceptional.
Currency swaps and forward currency agreements are translated at the rate of
exchange prevailing at the balance sheet date with the corresponding exchange
adjustment being dealt with in reserves or the profit and loss account as
appropriate.
Those derivatives, relating both to interest rates and/or currency exchange,
that are directly associated with a specific transaction and exactly match the
underlying cash flows relating to the transaction are accounted for on the
basis of the combined economic result of the transaction including the related
derivative.
Indexed linked swap contracts relating to the purchase of energy are marked to
market and a corresponding movement in the value of a related regulatory asset
is also recognised.
National Grid Annual Report and Form 20-F 2001/02
The accounts
44
National Grid Annual Report and Form 20-F 2001/02
45
There are no comparatives shown for the 2001 Company balance sheet. The Company
was in existence at 31 March 2001 but all balances were less than £0.1m.
The accounts on pages 42 to 82 inclusive were approved by the Board of
Directors on 29 May 2002 and were signed on its behalf by:
J H Ross
Chairman
National Grid Annual Report and Form 20-F 2001/02
The accounts
46
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
47
1 Prior year adjustments
a Deferred tax
Profit after taxation for the year ended 31 March 2001 has been reduced by
£104.8m (2000: £26.4m).
b Minority interests
2 Segmental analysis
Notes to the accounts
continued
48
2 Segmental analysis
continued
a Turnover continued
In 2002, an exceptional charge relating to the impairment of investments in
joint ventures and associate of £792.3m, as explained in note 4b, has been
reflected in the segmental analysis of operating profit shown above. Included
within this amount is £186.0m that relates to the recognition of related
liabilities attributable to group undertakings.
It is not practical to allocate the 2002 exceptional costs of £74.8m (see note
4a) relating to the acquisition of Niagara Mohawk over the Niagara Mohawk
segments, as a consequence of the ongoing reorganisation of its activities with
those of National Grid USA.
It is not practical to allocate the 2001 exceptional costs (see note 4a) over
the above segments, as a consequence of the integration of the operations of
NEES and EUA.
National Grid Annual Report and Form 20-F 2001/02
49
2 Segmental analysis
continued
The analysis of total assets and net assets by business segment includes all
attributable goodwill and excludes inter-business balances. Unallocated total
assets include investment in own shares, assets held for exchange, investment
held for resale, cash and deposits and taxation related regulatory assets.
Unallocated net liabilities include net borrowings, taxation, interest,
dividends, investment in own shares, assets held for exchange, financial
instruments, investment held for resale and taxation related regulatory assets.
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
50
2 Segmental analysis
continued
Stranded costs recovery
National Grid Annual Report and Form 20-F 2001/02
51
3 Operating costs
In addition to the non-audit fees of £4.6m (2001: £5.1m; 2000: £3.0m), fees of:
a) £1.8m (2001: £1.5m; 2000: £1.2m), incurred in respect of acquisitions, have
been capitalised and; b) £nil (2001: £0.5m; 2000: £nil), incurred in respect of
disposals, have been charged in arriving at the profit on disposal of
investments. Fees of £nil (2001: £4.3m; 2000: £nil) relating to the development
and implementation of the new electricity trading arrangements, which are fully
recoverable, have also been paid to PricewaterhouseCoopers.
Amounts charged in respect of other major accounting firms during 2002 amounted to £1.1m (2001: £1.7m; 2000: £0.7m).
4 Exceptional items
a Exceptional costs
The 2001 exceptional integration costs of £45.3m (£39.4m after tax) principally
comprise early retirement costs arising on the integration of the operations of
NEES and EUA.
b Impairment of investments in joint ventures and associate
c Exceptional profit relating to partial disposal of Energis
The 2001 exceptional profit of £243.3m (restated) (£243.3m (restated) after
tax) arises from reductions in the Groups interest in Energis primarily as a
consequence of the placing of shares by Energis in September 2000 and the
acquisition by Energis of a majority stake in Ision in January 2001.
The 2000 exceptional profit of £1,029.6m (restated) relating to the partial
disposal of the Groups shareholding in Energis comprises a profit of £896.9m
(restated) (£667.4m (restated) after tax) resulting from the sale of 28.9m
shares in Energis; and a profit of £132.7m (restated) (£132.7m (restated) after
tax) resulting from reductions in the Groups interest in Energis, primarily as
a consequence of the placing by Energis of 14.8m of its shares.
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
52
4 Exceptional items
continued
d Profit on disposal of investments
The 2001 exceptional profit of £20.1m (£20.1m after tax) relates to the net
gain on the disposal of market services businesses. The operating results of
these businesses up to the date of disposal are included within other
activities.
e Financing
f Exceptional tax credit
5 Payroll costs and employees
The vast majority of employees in:
Europe are either directly or indirectly employed in the transmission of
electricity in the UK.
(iii)
Each ADS represents five ordinary shares.
Table of Contents
Niagara Mohawk amounting to £83.1 million following
the acquisition of this business on 31 January;
UK transmission, which increased its contribution
to £524.7 million from £486.3 million in 2000/01;
Intelig reflecting an operating loss of £35.5 million
as compared with losses of £118.0 million for 2000/01; and
US distribution and transmission totalling £225.9 million
compared with £204.4 million for 2000/01.
UK Interconnectors amounting to £19.8 million compared
with £42.8 million for 2000/01;
Stranded costs recovery and generation amounting to
£44.3 million compared with £61.7 million for 2000/01;
Telecoms activities, with losses of £17.2 million compared
with £3.0 million for 2000/01;
Energis, with losses of £3.7 million compared with an
operating profit of £4.4 million for 2000/01;
Other telecoms joint ventures that generated losses of
£15.3million compared with losses of £3.4 million for
2000/01; and
Other activities that absorbed £4.8 million compared with
an operating profit of £6.7 million in 2000/01, primarily
as a result of profits on the disposal of fixed assets in
2001/02 being recorded as part of exceptional items.
an impairment of the Groups Latin American telecoms
investments amounting to £290.4 million pre-tax
(£272.7 million post-tax);
an impairment of the Groups investment in Energis
amounting to £392.1 million (£392.1 million post-tax);
an impairment of the Groups investment in Energis
Polska, a telecoms joint venture in Poland, amounting
to £109.8 million (£109.8 million post-tax);
restructuring and integration costs associated with a
reorganisation within the UK and the integration of
Niagara Mohawk, amounting to £115.3 million pre-tax
(£72.9 million post-tax);
the Groups share of a joint ventures foreign exchange
financing charge amounting to £92.5 million
(£92.5 million post-tax) relating to the devaluation
of the Argentine peso; and
other exceptional costs amounting to £6.1 million
(£6.1 million post-tax).
pre-tax profits amounting to £22.0 million (£22.0 million
post-tax) relating to the sale of tangible fixed assets;
an exceptional pre and post-tax profit relating to the gain
on a disposal of a joint venture of £10.6 million; and
profits of £20.1 million pre and post-tax arising from
reductions in the Groups interest in Energis during 2001/02.
Table of Contents
2001
2000
1999
1998
1997
/02
/01
/2000
/99
/98
p
p
p
p
p
6.46
6.05
5.59
5.25
4.83
9.58
9.03
8.35
7.82
7.24
16.04
15.08
13.94
13.07
12.07
44.70
16.04
15.08
13.94
13.07
56.77
2001
2000
1999
1998
1997
/02
/01
/2000
/99
/98
$
$
$
$
$
0.46
0.44
0.46
0.43
0.41
0.69
0.64
0.63
0.61
0.63
1.15
1.08
1.09
1.04
1.04
3.87
1.15
1.08
1.09
1.04
4.91
Table of Contents
National Grid USA (£293.6 million, compared with
£3.7million in 1999/2000, which related to the period
22 March to 31 March 2000);
Energis (£4.4 million, compared with £1.9 million in
1999/2000); and
electricity transmission joint ventures (£35.3 million,
compared with £21.5 million in 1999/2000).
Intelig (losses of £118.0 million, compared with losses
of £44.1 million in 1999/2000);
UK Transmission (£486.3 million, compared with
£523.1 million in 1999/2000);
UK Interconnectors (£42.8 million, compared with
£46.6 million in 1999/2000); and
other telecoms joint ventures (losses of £3.4 million,
compared with losses of £nil in 1999/2000).
profits of £243.3 million, before and after tax, arising from
reductions in the Groups interest in Energis, primarily as
a result of a placing of shares by Energis in September 2000
and the acquisition by Energis of a majority stake in Ision
in January 2001;
net profits of £20.1 million, before and after tax, on the
disposal of market services businesses;
US integration costs of £45.3 million (£39.4 million post-
tax); and
a tax credit of £229.5 million arising from the realisation
of capital losses for tax purposes as a result of Group
restructurings.
a £17.4 million gain on closing out sterling fixed-interest
rate swaps originally entered into as hedges for sterling
borrowings; and
£21.0 million of losses arising from the valuation at
maturity of dollar interest rate swaptions which provided
an economic hedge of dollar borrowings but do not qualify
as hedges for accounting purposes.
Table of Contents
as a result of the realisation for tax purposes of capital
losses arising from Group restructurings, UK corporation
tax repayments of approximately £65.0 million were
received in respect of payments previously made in
1999/2000 on the partial disposal of Energis in that year;
and
UK corporation tax payments in 2000/01 included amounts
relating to the previous year of £61 million. No UK tax
payments relating to 2000/01 have been made in 2001/02.
UK corporate tax payments on account were lower in
2000/01, primarily as a result of tax relief on exchange
adjustments; and
corporate tax payments in respect of partial disposals of
Energis in 1998/99 and 1999/2000 were lower as a result
of the realisation for tax purposes of capital losses arising
from Group restructurings.
Table of Contents
Table of Contents
Expected maturity
At
financial year ending
31 Mar
31 Mar
31 Mar
31 Mar
31 Mar
31 Mar
Thereafter
Fair
2002
2003
2004
2005
2006
2007
value
£m
£m
£m
£m
£m
£m
£m
£m
819.5
129.5
690.0
819.5
1,220.6
615.0
3.9
3.2
2.2
595.1
1,220.6
192.0
192.0
192.0
2,232.1
744.5
195.9
3.2
2.2
1.2
1,285.1
2,232.1
1,328.6
268.8
240.0
819.8
1,237.4
6.1
%
8.0
%
6.5
%
3,453.2
441.3
462.4
415.1
408.9
212.9
1,512.6
3,616.5
6.7
%
7.3
%
6.7
%
7.9
%
7.7
%
7.9
%
1,225.3
765.8
459.5
1,212.9
5.3
%
6.1
%
6,007.1
710.1
462.4
415.1
648.9
978.7
2,791.9
6,066.8
8,239.2
1,454.6
658.3
418.3
651.1
979.9
4,077.0
8,298.7
212.6
212.6
212.6
476.2
26.2
450.0
10.9
6.6
%
5.9
%
390.0
100.0
290.0
(5.1
)
5.7
%
5.3
%
1,225.3
765.8
459.5
(24.0
)
5.3
%
6.1
%
1,257.1
528.2
352.1
376.8
(51.2
)
6.6
%
6.7
%
6.5
%
3,348.6
654.4
450.0
352.1
765.8
1,126.3
(69.4
)
257.7
257.7
(66.8
)
7.9
%
1,225.3
658.6
566.7
(21.8
)
1,564.5
436.6
664.6
463.3
(37.4
)
3,047.5
436.6
257.7
1,323.2
1,030.0
(126.0
)
300.0
300.0
(18.7
)
8.3
%
300.0
300.0
(2.1
)
5.5
%
436.6
436.6
(4.7
)
10.4
10.4
(0.3
)
407.9
79.6
78.0
78.0
77.2
95.1
407.9
Table of Contents
Table of Contents
2002
2001
£m
£m
360.8
396.8
289.3
77.5
7,312.0
4,414.2
7,962.1
4,888.5
54.7
102.2
Table of Contents
SFAS 133 Accounting for Derivative Instruments and
Hedging Activities;
SFAS 141 Business Combinations; and
SFAS 142 Accounting for Goodwill and Other Intangible
Assets.
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Chairman and a member of the Nominations Committee
Appointed as a Director and Chairman of National Grid in 1999. He was chairman
of Littlewoods plc from 1996 until April 2002 and chief executive of Cable &
Wireless plc from 1992 to 1995. Prior to this he was a managing director of the
British Petroleum Company plc and chairman and chief executive officer of BP
America. He is a non-executive director of McGraw Hill and of Datacard; both
based in the United States, and of Schneider Electric based in France. Age 63.
Group Chief Executive
Appointed as a Director of National Grid and of National
Grid Company in 1995. Roger Urwin later became Chief Executive of National Grid
Company and was then appointed Group Chief Executive in 2001. Prior to this he
was chief executive of London Electricity plc, director of Engineering for
Midlands Electricity Board and also held a number of appointments within the
Central Electricity Generating Board. He is a non-executive director of The
Special Utilities Investment Trust PLC and TotalFinaElf Exploration UK plc and
is a fellow of the Royal Academy of Engineering. Age 56.
Group Finance Director
Appointed as a Director of National Grid and of National
Grid Company in August 1997. He was formerly with Coopers & Lybrand, where he
was a partner specialising in corporate finance. He is a non-executive director
of Energis plc and of Michael Page International PLC and a member of the
Financial Reporting Review Panel. Age 51.
Group Director, North America
Appointed as a Director of National Grid in 2000,
Rick Sergel is President, Chief Executive Officer and a Director of National
Grid USA. Prior to this he was president and chief executive officer of New
England Electric System (NEES) from 1998 until its acquisition by National
Grid. His previous positions with NEES include senior vice president in charge
of retail operations and unregulated ventures, vice president and treasurer. He
serves as chairman of the board of the distribution companies owned by National
Grid USA and is also a non-executive director of State Street Corporation. Age
52.
Group Director and Chairman, National Grid USA
Appointed as a Director of
National Grid and Chairman of National Grid USA in 2002. Prior to this, he was
chairman and chief executive of Niagara Mohawk from 1999 until its acquisition
by National Grid. William Davis joined Niagara Mohawk in 1990 and became
chairman and chief executive of Niagara Power Corporation in 1993. He was
previously an executive deputy commissioner with the New York State Energy
Office. He is a member of a number of boards and committees including The
Business Council of New York State, Inc., Edison Electric Institute, Energy
Association of New York, Utilities Mutual Insurance, Inc. and Syracuse
University. Age 60.
Group Director, UK and Europe
Appointed as a Director of National Grid and
Chief Executive of National Grid Company in 2001. Steven Holliday was formerly
an executive director of British Borneo Oil and Gas. Prior to this he spent 19
years with the Exxon Group, where he held senior positions in the operations
and business development areas. Age 45.
Group Director, Telecommunications
Appointed as a Director of National Grid in
2001. Edward Astle was managing director of BICC Communications from 1997 to
1999. Prior to this he spent eight years with Cable & Wireless, the last two on
the main board responsible for their international businesses. He is
non-executive chairman of 3G Lab Ltd and a nonexecutive director of Energis plc
andIntec TelecomSystems plc. Age 48.
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Non-executive Director, Chairman of the Remuneration Committee and a member of
the Audit and Nominations Committees
Appointed as a Director of National Grid in 1995, Bob Faircloth was chief
operating officer and an executive director of BTR until 1995 and a
non-executive director until May 1998. Before joining BTR in 1980, Bob
Faircloth held technical and management posts, mainly in petrochemicals and
paper industries in Canada and Europe. He is engaged in international
management consulting with involvement with international banks, industrial
companies and government agencies. Age 65.
Non-executive Director, Chairman of the Audit Committee and a member of the
Nominations and Remuneration Committees
Appointed as a Director of National Grid in 1995, John Grant is executive
chairman of Hasgo Group Limited and of Peter Stubs Limited. He was chief
executive of Ascot Plc from 1997 to June 2000, finance director of Lucas
Industries plc (subsequently Lucas Varity plc) from 1992 to 1996 and held a
number of senior executive positions during 25 years with Ford Motor Company,
including vice president, Ford of Europe, director of corporate strategy, Ford
USA and executive deputy chairman of Jaguar. He is also non-executive chairman
of Cordex Plc and a non-executive director of Torotrak plc and Corac Group Plc.
Age 56.
Non-executive Director
Appointed as a Director of National Grid in 2002. Prior
to this, she was a non-executive director of Niagara Mohawk from 1991 until its
acquisition by National Grid. Bonnie Hill is chair of the committee of
corporate public policy and environmental affairs and a member of both the
executive and compensation & succession committees. Prior to 2001, she was
president and chief executive officer of The Times Mirror Foundation and was
also senior vice president of the Los Angeles Times newspaper. She is involved
in a variety of civic, educational and community bodies and serves on the
boards of AK Steel Corporation, Hershey Foods Corporation and The Home Depot,
Inc. She is president of B.Hill Enterprises, LLC, a consulting firm, and chief
operating officer of Icon Blue, a brand marketing company. Age 60.
Company Secretary and General Counsel
Appointed in 1996, Fiona Smith has been
with National Grid since 1990 holding a number of positions within the legal
team. Prior to this, she was a solicitor working both in private practice and
then for South of Scotland Electricity Board. Age 43.
Non-executive Director and a member of the Audit Committee
Appointed as a Director of National Grid in 2000, Paul Joskow was a director of
New England Electric System (NEES) from 1987 until its acquisition by National
Grid. He is a Professor of Economics and Management at the Massachusetts
Institute of Technology (MIT), director of the MIT Centre for Energy and
Environmental Policy Research, research associate of the US National Bureau of
Economic Research and a fellow of the Econometric Society and of the American
Academy of Arts and Sciences. He is also a trustee of the Putman Mutual Funds
and a director of the Whitehead Institute of Biomedical Research. Age 54.
Non-executive Director and a member of the Audit and Remuneration Committees
Appointed as a Director of National Grid in 1998, Richard Reynolds was a
director of GEC from 1986 to 1995, responsible for their telecommunications
interests. He is currently chairman of Wavionix Software Limited and is also a
non-executive director of G.B. Group plc. Age 63.
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Original holding
New holding
company
company
April 1990
originally incorporated under
the name The National Grid
Holding plc
November 1995
re-named The National Grid
Group plc
11 July 2000
company incorporated as
Intercede 1610 Limited
27 July 2000
re-named National
Grid Group plc
30 August 2000
changed its name
to New National
Grid Limited
29 November 2000
became New National
Grid plc
31 January 2002
following a Scheme of
Arrangement became a
subsidiary within the Group
and re-named National
Grid Holdings One plc
31 January 2002
following a Scheme of
Arrangement became the new
holding company for the
Group and changed its name
to National Grid Group plc
8.10
3.17
3.15
3.10
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Group General Counsel and Company Secretary
29 May 2002
Registered in England and Wales No. 4031152
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substantial non-audit expenditure is associated with work
incremental to the statutory audit or with accounting,
taxation and regulatory issues which are so closely allied to
the mainstream audit that, in the Audit Committees view,
it would be contrary to National Grids strategic and
financial interests to seek advice from sources other than
the external auditors;
other consultancy work is awarded on the basis of the skills
and value for money offered by advisers, including the
external auditors, and all costs are subject to close scrutiny;
and
the objectivity and independence of the external auditors
is ensured by their compliance with their own professional
codes of conduct and by their internal procedures,
including Chinese Wall arrangements and the regular
rotation of key audit staff.
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The top-down assessment has involved the Executive
Directors and has resulted in a balanced and robust
identification and consideration of cross-organisation
risk themes.
The bottom-up assessment has been undertaken as part
of the business planning cycle and has resulted in a
detailed analysis of specific risk areas captured in the
form of a risk register.
We will integrate the process for identifying, evaluating
and managing risk within the US business we acquired
in January 2002 (Niagara Mohawk in New York).
We are taking steps to raise the visibility around our
existing compliance activities and to report material
compliance obligations and associated management
controls to the Executive Directors and the Audit
Committee.
periodic business reports from all operating companies
the top-down strategic plan for the Group and the bottom-
up business plans of the operating companies
all proposals for material capital and revenue spend,
including new business development
reports from management on key risk areas including,
where appropriate, any material control weaknesses and
failings and actions taken to address them.
external and internal audit work plans
audit work plans for health, safety and environmental
management
summary reports from external and internal assurance
providers on significant matters arising
specific reports from management on the actions taken to
manage key risk areas and, if applicable, to address material
control weaknesses and failings
the performance of the external auditors and external audit.
Annual statements on risk management and internal control provided by all
operating companies that highlight:
how risk management has been made more viable in
the business
how management has addressed key risks and any
significant control issues in the course of the year
the key changes in risk profile since the start of the year.
Specific reports on:
significant corporate governance and legal matters
risk management
health, safety and environmental management
internal audit issues and the effectiveness of the risk
management process
external audit issues.
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annual bonus:
a non-pensionable annual cash bonus of
up to a maximum of 60 per cent of base salary can be paid
to UK-based Executive Directors for the achievement
of demanding financial, personal and quality of service
targets. Rick Sergel and William Davis have a lower
annual cash bonus maximum payment of 50 per cent of
salary. Rick Sergel also participates in the National Grid
USA Goals Program, an all-employee bonus plan that can
pay up to 4.5 per cent of base salary on the achievement of
certain earnings and performance targets. In line with US
market practice, Rick Sergels and William Davis cash
bonuses are pensionable.
share matching plan:
UK-based Executive Directors can
invest a pre-determined part of any bonus in National Grid
shares in return for receiving a matching award under this
plan. Currently, UK-based Executive Directors are required
to invest one-third of any annual cash bonus into this plan.
At the end of three years (provided the Director is still
employed and has retained the shares purchased from
bonus) additional shares equal in number to the pre-tax
value of the invested shares will be released to the
individual. The participant will also receive a cash
payment equal to the dividends that have been paid on the
shares over the three year holding period. US executives,
including Rick Sergel and William Davis, participate in
this plan on a slightly different basis, in that an award
calculated as a proportion of their cash annual bonus
(60 per cent in the case of Rick Sergel and William Davis)
is paid under this plan in National Grid shares or
American Depositary Shares (ADSs) subject to a minimum
three-year vesting period. For both UK and US based
Directors, the combination of annual cash bonus payments
and deferred Share Match awards is an effective annual
bonus maximum payment of 80 per cent of base salary.
executive share options:
the National Grid Executive Share
Option Plan 2002 permits market value executive share
options to be granted to a maximum value of 3 times base
salary per annum. Grants of a greater value may be made in
exceptional circumstances such as the appointment of a
new Executive Director. At this time, the Remuneration
Committee considers that the maximum market value of
shares which will normally be placed under option to any
UK-based individual in any 12 month period will be 1.5
times the individuals base salary. The exercise of executive
share options granted during the year is subject to National
Grids total shareholder return (TSR) relative to that of a
group of approximately 20 UK and US utility companies,
over a period of at least three years. Options up to the
value of an individuals base salary become exercisable in
full if National Grids TSR is at least median. Options in
excess of one times base salary are exercisable on a sliding
scale and are only exercisable in full if National Grids
TSR is in the upper quartile of the comparator group.
If not fully satisfied on the third anniversary, the condition
may be retested, from the same base, on the fourth and
fifth anniversaries of grant.
Sharesave:
Executive Directors resident in the UK are
eligible to participate in all-employee Sharesave schemes
(subject to eligibility based on service).
US Incentive Thrift Plan:
Rick Sergel and William Davis
participate in a tax-advantaged savings plan (commonly
referred to as a 401(k) plan) provided for employees of
National Grid USA. Employees who contribute 6 per cent
or more of their base salary are provided with an employer
matching contribution based upon fixed formulae. The
formulae vary between certain employee groups. Rick
Sergel is eligible to receive an employer match of 5 per
cent of his base salary and William Davis is eligible to
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receive an employer match of 3 per cent of his base salary under the plan.
There are Federal limits on the amount of pre-tax contributions an employee
can make into the plan as well as the amount of compensation that can be used
to calculate benefits under the plan.
Base
Total emoluments
salary
Annual
(excluding pension)
and fees
bonus
1
Benefits
2001/02
2000/01
£000
£000
£000
£000
£000
143
22
165
120
500
267
27
794
436
181
94
9
284
350
155
27
532
455
83
54
2
139
259
270
146
28
444
1
35
35
665
486
224
18
728
620
42
42
30
35
35
30
4
4
57
57
45
55
55
50
2,206
975
133
3,314
2,711
1
Total cash bonus paid includes amounts invested by Directors in the Share Match Scheme and in the case of Stephen Box,
an ex-gratia payment of £1,107 in respect of dividends on Matching Shares. For US Directors, the total cash paid does not include deferred share awards.
2
Appointed to the Board on 1 September 2001.
3
Appointed to the Board on 11 February 2002.
4
Died on 19 October 2000.
5
Appointed to the Board on 30 March 2001.
6
Resigned from the Board on 31 March 2001. During the year David Jones received ex-gratia payments of £35,353 in respect of dividends on
Matching Shares exercised.
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Increase
to accrued
pension
Age at
Directors'
during year
Accrued pension
31 March
contributions
(net of
as at 31 March
2002
during year
inflation)
2002
1
2001
£000
£000
£000
£000
56
15
137
300
160
48
5
6
6
51
11
17
54
36
60
458
45
8
9
9
52
77
347
270
1
Accrued pension represents the pension that would be paid annually at age
60 if the Director resigned on 31 March 2002.
2
Edward Astle was appointed to the Board in September 2001.
3
William Davis was appointed to the Board in February 2002. As part of the
Niagara Mohawk acquisition, a lump sum of £6,265,202 was paid into the
Niagara Mohawks Supplemental Executive Retirement Plan, any future
pension benefits payable by National Grid shall be offset by the annuity
value of this lump sum payment.
4
Rick Sergels entitlement to accrued pension as at 31 March 2001 was
previously understated as £229,234. This error was due to not correctly
factoring in pensionable bonus payments.
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Options
Options
Options
Options
Exercise
held at
exercised
granted
held at
price per
1 April
during
during
31 March
share
2001
the year
the year
2002
(pence)
Normal Exercise period
169,340
169,340
280.50
Sep 2000
Sep 2007
91,656
91,656
375.75
June 2001
June 2008
22,098
22,098
455.25
June 2002
June 2009
33,867
33,867
531.50
June 2003
June 2010
133,214
133,214
563.00
June 2004
June 2011
4,047
4,047
All-100.0
June 2001
June 2005
3,884
3,884
in total
Jan 2002
June 2006
3,859
3,859
Jan 2002
June 2007
5,635
5,635
June 2004
June 2008
3,692
3,692
457.00
Sep 2006
Feb 2007
328,751
142,541
471,292
193,952
193,952
479.50
Sep 2004
Sep 2011
193,952
193,952
160,427
160,427
280.50
Sep 2000
Sep 2007
93,147
93,147
375.75
June 2001
June 2008
43,931
43,931
455.25
June 2002
June 2009
37,630
37,630
531.50
June 2003
June 2010
93,250
93,250
563.00
June 2004
June 2011
2,955
2,955
2
All-100.0
June 2001
June 2005
3,844
3,844
in total
Jan 2002
June 2006
4,122
4,122
Jan 2002
June 2007
6,134
6,134
June 2004
June 2008
3,125
3,125
3
312.00
Sep 2001
Feb 2002
349,181
6,080
99,384
442,485
150,000
150,000
540.00
Mar 2004
Mar 2011
71,936
71,936
563.00
June 2004
June 2011
3,692
3,692
457.00
Sep 2006
Feb 2007
150,000
75,628
225,628
201,845
201,845
566,50
Mar 2003
Mar 2010
134,321
134,321
563.00
June 2004
June 2011
201,845
134,321
336,166
1,029,777
6,080
645,826
1,669,523
1
Share Match options granted during the year relate to the annual bonus paid for the financial year ended 31 March 2001. As a result of the Scheme of
Arrangement, Share Match Options awarded in 1999 and 2000 became exercisable on 31 January 2002.
2
The closing mid-market price of an ordinary share in National Grid on 30 July 2001, the date on which Stephen Box exercised his Share Match grant,
was 464.0 pence. Stephen Box retained his residue of the shares after payment of tax.
3
The closing mid-market price of an ordinary share in National Grid on 3 September 2001, the date on which Stephen Box exercised his Sharesave options,
was 475.5 pence. Stephen Box retained the shares.
4
The aggregate gain on the exercise of share options by Directors during the year was £19,162.
5
The closing mid-market price of an ordinary share in National Grid on 28 March 2002, the last day of trading in the 2001/02 financial year, was 463.3 pence. The
range during the period 1 April 2001 to 31 March 2002 was 581.0 pence (high) and 417.3 pence (low).
Table of Contents
Options
Options
Options
Options
held at
exercised
granted
held at
Exercise
1 April
during
during
31 March
price per
2001
the year
the year
2002
SAR$
Normal Exercise period
58,629
58,629
26.20
Aug 1998
Dec 2008
58,629
58,629
26.20
Aug 1998
Dec 2008
52,766
52,766
23.04
Jan 2000
Dec 2010
170,024
170,024
Options over
Options over
Ordinary shares at
Ordinary shares at
ordinary shares at
ordinary shares at
31 March 2002
1 April 2001
31 March 2002
at 1 April 2001
19,000
19,000
147,920
144,539
471,292
328,751
193,952
18,459
6,552
442,485
349,181
11,520
10,000
10,000
225,628
150,000
5,000
5,000
10,000
10,000
2,763
1,257
336,166
201,845
There has been no other change in the beneficial interests of the Directors in
the ordinary shares of National Grid between 1 April 2002 and 29 May 2002. Each
of the Executive Directors (Roger Urwin, Edward Astle, Stephen Box, Steven
Holliday, and Rick Sergel), excepting William Davis, was, for Companies Act
1985 purposes, deemed to be a potential beneficiary under the National Grid
Qualifying Employee Share Ownership Trust (QUEST) and the National Grid 1996
Employee Benefit Trust and thereby to have an interest in the 12,484,040
National Grid ordinary shares held by the QUEST and the 745,327 National Grid
ordinary shares held by the 1996 Employee Benefit Trust as at 31 March 2002.
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40
41
42
44
45
46
47
83
Table of Contents
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We have audited the accounts which comprise the profit and loss account, the
balance sheet, the cash flow statement, the statement of total recognised gains
and losses, the related notes on pages 42 to 82, and the Directors
remuneration disclosures on pages 34 to 38.
The Directors responsibilities for preparing the Annual Report, the Report on
Form 20-F and the accounts in accordance with applicable United Kingdom and
United States laws and Accounting Standards are set out in the statement of
Directors responsibilities.
We conducted our audit in accordance with Auditing Standards issued by the
United Kingdom Auditing Practices Board and with Auditing Standards generally
accepted in the United States. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgements made by the
Directors in the preparation of the accounts, and of whether the accounting
policies are appropriate to the Companys circumstances, consistently applied
and adequately disclosed.
In our opinion the accounts give a true and fair view of the state of affairs
of the Company and the Group at 31 March 2002 and the loss and cash flows of
the Group for the year then ended and have been properly prepared in accordance
with the Companies Act 1985.
In our opinion the accounts present fairly, in all material respects, the
consolidated financial position of the Group at 31 March 2002 and 2001 and the
results of its operations and its cash flows for the years ended 31 March 2002,
31 March 2001 and 31 March 2000 all expressed in pounds sterling in conformity
with accounting principles generally accepted in the United Kingdom.
Chartered Accountants and Registered Auditors
London
29 May 2002
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The accounts are prepared under the historical cost convention and in
accordance with applicable UK accounting and financial reporting standards.
The Group accounts include the accounts of the Company and all its subsidiary
undertakings, (Group undertakings), together with the Groups share of the
results and net assets or liabilities of its associate and joint ventures
(associated undertakings), less any provision for impairment. An associated
undertaking is an entity in which the Group has a participating interest and
over which it exercises a significant influence.
Goodwill, representing the excess of the fair value of the consideration given
over the fair value of the identifiable net assets acquired, is capitalised and
amortised through the profit and loss account over its estimated useful
economic life up to 20 years.
The results of the Groups overseas operations are translated into sterling at
weighted average rates of exchange. Assets and liabilities in foreign
currencies are generally translated at the rates of exchange ruling at the
balance sheet date. In respect of certain assets or liabilities that are
matched by an exact and directly related forward exchange derivative, the
relevant asset or liability is translated at the rate of exchange under the
related derivative.
Deferred taxation is provided in full on all material timing differences, with
certain exceptions. No provision for deferred taxation is made for any timing
differences on non-monetary assets arising from fair value adjustments, except
where there is a binding agreement to sell the assets concerned. However, no
provision is made where it is more likely than not that any taxable gain will
be rolled over into replacement assets.
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Tangible fixed assets are included in the balance sheet at their cost less
accumulated depreciation. Costs include payroll and finance costs incurred
which are directly attributable to the construction of tangible fixed assets.
Years
15 to 60
15 to 60
15 to 25
45 to 65
33 to 40
up to 65
3 to 5
Regulatory assets established in accordance with the principles of SFAS 71
Accounting for the Effects of Certain Types of Regulation are recorded as
debtors, if they comprise rights or other access to future economic benefits
which arise as a result of past transactions or events which have created an
obligation to a third party (note 15).
Decommissioning liabilities, based on discounted future estimated expenditures
expected to be incurred, are provided for in full and a corresponding tangible
fixed asset or regulatory asset is also recognised.
Turnover primarily represents the amounts derived from the supply and
generation of energy and the provision of related services, including the
recovery of stranded costs (note 2). Turnover includes an assessment of energy
supplied to customers between the date of the last meter reading and the year
end, excludes inter-business and inter-company transactions, and is stated net
of value added tax and similar sales-based taxes.
The cost of providing pensions and other post-retirement benefits is charged to
the profit and loss account on a systematic basis over the service lives of the
employees in the schemes. Variations from the regular cost are allocated over
the estimated average remaining service lives of current employees.
Finance lease income is allocated to accounting periods so as to give a
constant rate of return on the net investment in the lease. The net investment
in a finance lease is included in debtors and represents the total rentals
receivable, net of finance charges, relating to future periods.
Derivative financial instruments (derivatives) are used by the Group mainly
for the management of its interest rate and foreign currency exposures and
commodity price risks in respect of expected energy usage. The principal
derivatives used include interest rate swaps, currency swaps, forward foreign
currency agreements and indexed swap contracts relating to the purchase of
energy.
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Group profit and loss account
2002
2001
2000
for the years ended 31 March
(restated)
(restated)
notes
£m
£m
£m
4,660.3
4,004.1
1,677.5
(259.3
)
(204.4
)
(62.8
)
3,921.9
3,799.7
1,614.7
479.1
2a
4,401.0
3,799.7
1,614.7
3
(3,893.6
)
(3,094.2
)
(1,042.9
)
505.7
705.5
571.8
1.7
2b
507.4
705.5
571.8
2b
(636.8
)
(96.0
)
(26.0
)
2b
874.7
739.4
554.0
4a
(121.4
)
(45.3
)
4b
(792.3
)
(90.4
)
(84.6
)
(8.2
)
2b
(129.4
)
609.5
545.8
4c
20.1
243.3
1,029.6
4d
10.6
20.1
22.0
8
(292.5
)
(255.1
)
(67.5
)
8
(92.5
)
8
(385.0
)
(255.1
)
(67.5
)
(461.7
)
617.8
1,507.9
9
(85.4
)
(182.1
)
(152.8
)
9
60.1
235.4
(229.5
)
9
(25.3
)
53.3
(382.3
)
(487.0
)
671.1
1,125.6
(5.2
)
(5.1
)
(3.6
)
(1.1
)
(1.8
)
(6.3
)
(6.9
)
(3.6
)
(493.3
)
664.2
1,122.0
10
(264.6
)
(223.0
)
(205.5
)
23
(757.9
)
441.2
916.5
11
(32.3
)p
45.0
p
76.2
p
11
32.1
p
20.0
p
22.5
p
11
(32.3
)p
43.0
p
71.7
p
11
32.1
p
19.8
p
22.0
p
10
16.04
p
15.08
p
13.94
p
Group statement of total recognised gains and losses
2002
2001
2000
for the years ended 31 March
(restated)
(restated)
note
£m
£m
£m
(493.3
)
664.2
1,122.0
(58.3
)
(14.7
)
3.1
21.6
31.9
(530.0
)
681.4
1,125.1
1
(802.3
)
(1,332.3
)
Table of Contents
Balance sheets
Group
Group
Company
at 31 March
2002
2001
2002
(restated)
notes
£m
£m
£m
12
2,113.0
1,386.2
13
9,121.7
5,617.3
876.1
1,133.6
(675.9
)
(799.7
)
200.2
333.9
86.8
64.9
(230.0
)
57.0
398.8
401.9
241.3
145.1
2,080.0
14
298.3
945.8
2,080.0
11,533.0
7,949.3
2,080.0
56.1
34.1
15
1,527.9
880.4
2,029.1
15
4,054.4
1,053.9
16
16.6
16.6
27
15.4
212.6
271.2
3.7
5,883.0
2,256.2
2,032.8
(1,451.9
)
(1,008.7
)
(604.4
)
(1,517.4
)
(1,205.0
)
(1,513.2
)
17
(2,969.3
)
(2,213.7
)
(2,117.6
)
2,913.7
42.5
(84.8
)
14,446.7
7,991.8
1,995.2
(491.3
)
(480.3
)
(6,510.1
)
(2,700.4
)
(1,116.6
)
(574.8
)
18
(8,118.0
)
(3,755.5
)
296.3
(333.6
)
(37.3
)
(2,997.0
)
(1,521.0
)
(76.6
)
21
(3,034.3
)
(1,521.0
)
(76.6
)
3,294.4
2,715.3
1,918.6
22
177.7
148.5
177.7
23
1,243.4
1,243.4
23
359.5
303.1
23
1,416.0
2,221.9
497.5
3,196.6
2,673.5
1,918.6
19.1
21.8
24
78.7
20.0
97.8
41.8
3,294.4
2,715.3
1,918.6
S J Box
Finance Director
Table of Contents
Group cash flow statement
2002
2001
2000
for the years ended 31 March
notes
£m
£m
£m
26a
1,255.4
810.6
682.0
12.8
20.3
4.5
56.3
94.8
92.0
(405.3
)
(398.2
)
(156.7
)
(8.5
)
(3.5
)
(357.5
)
(306.9
)
(64.7
)
(7.3
)
(137.2
)
(274.3
)
(500.0
)
(471.6
)
(292.2
)
7.8
2.2
7.6
27.8
11.8
5.4
(464.4
)
(457.6
)
(279.2
)
(49.7
)
(337.2
)
(144.5
)
26b
36.5
195.9
26c
(933.5
)
(440.9
)
(2,045.1
)
952.9
(946.7
)
(582.2
)
(1,236.7
)
(229.5
)
(212.5
)
(197.6
)
(737.2
)
(865.5
)
(1,366.0
)
336.2
775.2
618.8
26d,e
336.2
775.2
618.8
12.2
7.0
5.5
(1.1
)
3,414.4
1,015.4
1,029.3
(2,972.0
)
(934.0
)
(260.1
)
26d,e
442.4
81.4
769.2
454.6
88.4
773.6
26d,e
53.6
(1.9
)
26.4
Table of Contents
The adoption of FRS 19 Deferred Tax has resulted in a change in the method of
accounting for deferred tax, from a partial to a full provision basis. This
change in accounting policy has been reflected in the accounts as a prior year
adjustment in accordance with FRS 3. The effect on the Group balance sheet at
31 March 2001 and 31 March 2000 is shown below.
31 March 2001
31 March 2000
As
Deferred
As
Deferred
previously
tax
previously
tax
reported
adjustments
Restated
reported
adjustments
Restated
£m
£m
£m
£m
£m
£m
1,186.2
200.0
1,386.2
844.7
210.5
1,055.2
400.3
(1.5
)
398.8
205.9
(1.6
)
204.3
414.9
(13.0
)
401.9
205.8
(4.9
)
200.9
1,016.5
37.4
1,053.9
798.3
798.3
(495.8
)
(1,025.2
)
(1,521.0
)
(461.4
)
(898.8
)
(1,360.2
)
(802.3
)
(694.8
)
It is impractical to determine the effect on the current year results of
adopting FRS 19, due to the acquisition of Niagara Mohawk Holdings Inc during
the year.
Prior year numbers have also been restated to reflect a revised presentation of
the minority interests share of the results of associated undertakings. The
minority interests, which were previously reported within operating profit, net
interest and taxation are now included within minority interests.
a Turnover
Turnover
Sales
Sales
Sales
Sales
Sales
Sales
Total
between
to third
Total
between
to third
Total
between
to third
sales
businesses
parties
sales
businesses
parties
sales
businesses
parties
2002
2002
2002
2001
2001
2001
2000
2000
2000
£m
£m
£m
£m
£m
£m
£m
£m
£m
of joint ventures
4,715.0
54.7
4,660.3
4,049.3
45.2
4,004.1
1,715.3
37.8
1,677.5
turnover
(259.3
)
(259.3
)
(204.4
)
(204.4
)
(62.8
)
(62.8
)
4,455.7
54.7
4,401.0
3,844.9
45.2
3,799.7
1,652.5
37.8
1,614.7
1,241.8
22.7
1,219.1
1,315.6
16.8
1,298.8
1,319.7
16.9
1,302.8
208.2
3.7
204.5
194.7
3.4
191.3
3.4
0.6
2.8
1,678.5
0.9
1,677.6
1,519.0
0.6
1,518.4
25.8
25.8
generation USA
251.5
0.1
251.4
334.9
0.1
334.8
6.1
6.1
63.1
0.2
62.9
83.6
83.6
86.6
86.6
45.5
0.9
44.6
47.9
47.9
1.3
1.3
30.3
2.1
28.2
43.3
43.3
27.6
27.6
457.7
24.1
433.6
305.9
24.3
281.6
182.0
20.3
161.7
3,976.6
54.7
3,921.9
3,844.9
45.2
3,799.7
1,652.5
37.8
1,614.7
375.0
375.0
104.1
104.1
479.1
479.1
4,455.7
54.7
4,401.0
3,844.9
45.2
3,799.7
1,652.5
37.8
1,614.7
1,729.3
1,696.6
1,576.1
2,671.7
2,103.1
38.6
4,401.0
3,799.7
1,614.7
Table of Contents
The analysis of turnover by geographical area is on the basis of origin.
Turnover on a destination basis would not be materially different.
Continuing operations Other activities turnover primarily comprises market
services, including EnMO which provides the On-the-day Commodity Market for gas
trading in Great Britain, and contracting activities.
b Operating profit/(loss)
Operating profit/(loss)
Before exceptional items
After exceptional items
and goodwill amortisation
and goodwill amortisation
2002
2001
2000
2002
2001
2000
(restated)
(restated)
(restated)
(restated)
£m
£m
£m
£m
£m
£m
524.7
486.3
523.1
484.9
486.3
523.1
60.3
49.6
1.3
48.0
37.6
0.9
165.6
154.8
1.7
110.5
101.8
0.7
44.3
61.7
0.2
44.3
61.7
0.2
19.8
42.8
46.6
19.8
42.8
46.6
17.3
22.3
0.6
17.3
22.3
0.6
(0.1
)
(0.9
)
(0.1
)
(0.9
)
(
17.2
)
(3.0
)
(1.1
)
(21.6
)
(7.3
)
(1.3
)
(4.8
)
6.7
3.2
(11.5
)
5.7
1.9
(186.0
)
(45.3
)
810.0
821.1
574.7
505.7
705.5
571.8
66.8
61.4
17.0
15.8
(0.7
)
(0.7
)
(74.8
)
83.1
1.7
893.1
821.1
574.7
507.4
705.5
571.8
(3.7
)
4.4
1.9
(407.5
)
(9.4
)
(3.4
)
(35.5
)
(118.0
)
(44.1
)
(151.7
)
(118.0
)
(44.1
)
(15.3
)
(3.4
)
(113.7
)
(3.9
)
36.1
35.3
21.5
36.1
35.3
21.5
(18.4
)
(81.7
)
(20.7
)
(636.8
)
(96.0
)
(26.0
)
874.7
739.4
554.0
(129.4
)
609.5
545.8
511.3
545.0
577.6
(48.8
)
531.2
572.3
378.3
288.0
(1.4
)
225.1
172.4
(4.3
)
(19.3
)
(97.8
)
(26.2
)
(310.1
)
(98.3
)
(26.2
)
4.4
4.2
4.0
4.4
4.2
4.0
874.7
739.4
554.0
(129.4
)
609.5
545.8
931.2
860.4
598.1
811.9
749.1
595.4
15.2
(1.0
)
(0.8
)
14.0
(1.0
)
(0.8
)
(71.7
)
(120.0
)
(43.3
)
(880.5
)
(138.6
)
(48.8
)
(74.8
)
874.7
739.4
554.0
(129.4
)
609.5
545.8
Table of Contents
c Total and net assets
Total assets
Net assets
2002
2001
2002
2001
(restated)
(restated)
£m
£m
£m
£m
3,537.7
3,426.2
3,141.9
3,055.9
748.1
796.1
733.6
753.4
2,747.6
2,872.1
2,502.1
2,587.8
945.1
1,078.6
319.8
344.6
157.1
154.9
150.9
152.1
172.2
191.2
169.9
190.6
17.6
11.0
16.8
9.8
175.0
153.7
(18.2
)
148.5
372.2
377.1
83.4
184.9
8,872.6
9,060.9
7,100.2
7,427.6
6,771.8
5,372.0
972.5
844.5
331.6
328.0
8,075.9
6,544.5
16,948.5
9,060.9
13,644.7
7,427.6
401.9
401.9
164.8
164.8
0.2
110.5
0.2
110.5
28.4
32.8
28.4
32.8
28.4
90.7
(8.8
)
90.7
57.0
800.7
19.8
800.7
410.5
343.9
(10,370.1
)
(5,513.0
)
17,416.0
10,205.5
3,294.4
2,715.3
3,942.3
4,247.3
3,205.3
3,821.9
13,031.0
5,270.2
10,465.1
4,063.5
317.7
(37.3
)
317.7
32.2
26.4
31.4
25.2
410.5
343.9
(10,370.1
)
(5,513.0
)
17,416.0
10,205.5
3,294.4
2,715.3
Table of Contents
Under settlement agreements reached as part of industry restructuring, National
Grid USA is allowed to recover its costs (net of sales proceeds) and, where
applicable, a return on those costs, associated with its ongoing efforts to
exit the generation business.
Table of Contents
Continuing
operations
Acquisition
Total
2002
2002
2002
2001
2000
(restated)
(restated)
£m
£m
£m
£m
£m
296.2
23.0
319.2
276.5
154.9
304.5
60.8
365.3
302.7
127.5
1,249.3
160.9
1,410.2
1,247.9
124.8
58.0
58.0
171.1
25.5
196.6
176.5
103.7
203.8
203.8
219.6
212.6
394.9
394.9
201.2
70.7
796.4
149.2
945.6
669.8
248.7
3,416.2
477.4
3,893.6
3,094.2
1,042.9
6.2
8.1
7.8
7.6
4.2
0.1
19.3
15.1
3.3
78.4
70.3
2.9
34.9
33.2
0.8
4.4
1.9
1.0
0.5
4.0
3.6
1.4
0.3
0.1
0.4
0.2
0.8
0.9
0.1
0.6
0.3
4.6
5.1
3.0
6.5
6.1
3.5
(ii)
Excludes goodwill of £12.0m (2001: £14.3m; 2000: £5.3m) relating to
joint ventures and associate.
The 2002 exceptional costs of £121.4m (£79.0m after tax) comprise restructuring
costs incurred as a result of the acquisition of Niagara Mohawk amounting to
£74.8m (£44.5m after tax), a business reorganisation within the UK amounting to
£40.5m (£28.4m after tax) and other exceptional costs of £6.1m (£6.1m after
tax).
The exceptional charge of £792.3m (£774.6m after tax) relates to the write-down
of the Groups investment in its joint ventures and associate. The exceptional
charge comprises a write-down of the carrying value of these investments of
£606.3m (£588.6m after tax) to their estimated recoverable amounts, and the
recognition of related liabilities of £186.0m (£186.0m after tax).
The 2002 exceptional profit of £20.1m (£20.1m after tax) relates to the partial
disposal of Energis arising from a reduction in the Groups interest in Energis
plc, an associated undertaking, as a result of the issue of shares by Energis
relating to the acquisition by Energis of further shares in Ision.
Table of Contents
The 2002 exceptional profit of £10.6m (£10.6m after tax) relates to the net
gain on the disposal of a joint venture. The results of the joint venture up to
the date of disposal are included within the Groups share of joint ventures
results.
The 2002 exceptional net interest charge of £92.5m (£92.5m after tax) relates
to the Groups share of a joint ventures exceptional net interest charge. The
exceptional charge arises as a result of the devaluation of the Argentine peso,
resulting in the joint venture reflecting an exceptional foreign exchange
financing related devaluation charge in its profit and loss account.
The 2001 exceptional tax credit of £229.5m represents a reversal of the 2000
exceptional tax charge relating to the exceptional profit on the partial
disposal of Energis, arising from the realisation of capital losses for tax
purposes as a result of Group restructurings.
31 March
Average
Average
Average
2002
2002
2001
2000
Number
Number
Number
Number
3,082
3,296
3,662
3,651
3,846
3,874
3,836
140
14
17
17
13
7
8
8
6
6,949
7,195
7,523
3,810
6,287
1,048
13,236
8,243
7,523
3,810
North America (excluding Niagara Mohawk) are either directly or indirectly employed in the transmission, distribution and generation of electricity in the USA.
North America (Niagara Mohawk) are either directly or indirectly employed in the transmission and distribution of electricity and gas supply in the USA.
6 Directors emoluments and interests in shares
Details of Directors emoluments and interests in shares are contained on pages 34 to 38.
National Grid Annual Report and Form 20-F 2001/02
53
7 Pension and post-retirement benefits
Substantially all of the Groups UK employees are members of the Electricity Supply Pension Scheme (the Scheme), a defined benefit funded scheme. The assets of the Scheme are held in a separate trustee administered fund. The Scheme is divided into sections, one of which is the Groups section. The latest full actuarial valuation of the Groups section of the Scheme was carried out by Bacon & Woodrow, Consulting Actuaries, as at 31 March 2001. The results of this actuarial valuation have been used as the basis for assessing pension cost.
The projected unit method was used for the last valuation and the principal actuarial assumptions adopted were that the real rates of return would be 4.5% on investments held in respect of members before they reach retirement and 3.5% on investments held in respect of members after they reach retirement; that the annual rate of inflation would average 2.3%; that the real annual increase in salary would average 1.0%; and that pensions would increase at a real annual rate of 0.2%. The total market value of the assets relating to the Groups section of the Scheme at 31 March 2001 was £1,336.3m and the actuarial value of the assets represented approximately 118.3% of the actuarial value of the benefits that had accrued to members measured on a past service basis. The agreed contribution rate for the forthcoming year is 6%.
Substantially all of the Groups USA employees are members of defined benefit plans. The assets of the plans are held in separate trustee administered funds. The latest full actuarial valuations were carried out as at 31 January 2002 for the Niagara Mohawk plans (for the purpose of determining the fair value of the net assets acquired on the acquisition of Niagara Mohawk (note 27)) and at 1 April 2001 for the remainder of the USA plans. The projected unit method was used for the latest valuations and the principal actuarial assumptions adopted were that the real annual rate of return on investments would average 5.7% for Niagara Mohawk schemes and 4.7% for other USA schemes; that real annual increases in salary would average 0.25% for Niagara Mohawk schemes and 0.5% for other USA schemes; that inflation would average 3.0% for Niagara Mohawk schemes and 4.0% for other USAschemes; and that nominal increases in pensions would be nil. The market value of the assets relating to the Groups USA defined benefit plans at 1 April 2001 and 31 January 2002 (Niagara Mohawk) total US dollar 2,126m and the actuarial value of the assets represented 91% of the actuarial value of the benefits that had accrued to members, after allowing for future salary increases. There is no formally agreed contribution rate for the USA plans.
The pension cost for the year ended 31 March 2002 charged to operating profit of £21.6m (2001: £18.9m; 2000: £10.4m) represents the regular pension cost of £18.5m (2001: £21.2m; 2000: £13.0m) plus a variation from the regular pension cost totalling £3.1m (2001: £2.3m (net credit); 2000: £2.6m (net credit)), which includes a credit of £1.5m; (2001: £1.5m; 2000: £1.5m) relating to the partial release of a pension provision. In addition, net interest includes a credit of £8.1m (2001: £15.7m; 2000: £3.5m) in respect of the notional interest element of the variation from the regular pension cost.
Included in debtors is a pension prepayment of £34.6m (2001: £28.2m).
In the USA, the Group provides health care and life insurance to eligible retired USA employees. Eligibility is based on certain age and length of service requirements and in some cases retirees must contribute to the cost of their coverage. The latest actuarial valuations were carried out as at 31 January 2002 for the Niagara Mohawk plans (for the purpose of determining the fair value of net assets acquired on the acquisition of Niagara Mohawk (note 27)) and at 1 April 2001 for the remainder of the USA plans. The principal assumptions adopted were a discount rate of 7.50% and that medical costs would increase by 10% per annum, decreasing to 5% by 2007 and remain at this rate thereafter.
The cost of providing health care and life insurance to retired USA employees for the year ended 31 March 2002 amounted to £9.4m (2001: £7.3m; 2000, for the period 22 March 2000 to 31 March 2000: £0.2m).
FRS 17 Retirement benefits
On 20 November 2000, the Accounting Standards Board introduced a new accounting
standard, FRS 17 Retirement Benefits, replacing SSAP 24 Accounting for
Pension Costs. FRS 17 is fully effective for periods ending on or after 22
June 2003, though disclosures are required in the transitional period
commencing with the year ended 31 March 2002. Initial disclosures showing the
assets and liabilities of the major plans are set out below. In respect of the
USA pension and other post-retirement plans, information relating to these has
been aggregated. The disclosures have been calculated using the projected unit
method of valuation on the basis of the following assumptions:
USA
Other post-
UK
USA
retirement
Pensions
Pensions
benefits
%
%
%
3.8
*
4.0
2.9
6.0
7.5
7.5
2.8
3.5
10.0
5.0
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts continued
54
7 Pensions and post-retirement benefits continued
FRS 17 Retirement benefits continued
An analysis of the assets held in the various pension and other post-retirement
benefit schemes and the expected rates of return at 31 March 2002 were as
follows:
USA - Other
UK - Pensions
USA - Pensions
post-retirement benefits
Long term
Long term
Long term
rate of return
rate of return
rate of return
expected at
Value at
expected at
Value at
expected at
Value at
31 March
31 March
31 March
31 March
31 March
31 March
2002
2002
2002
2002
2002
2002
%
£m
%
£m
%
£m
7.8
848.9
10.2
902.2
10.3
236.4
5.3
290.0
6.4
475.7
5.9
159.7
6.3
82.9
8.0
11.2
3.8
38.9
5.6
48.4
5.9
0.6
1,260.7
1,437.5
396.
7
(1,312.2
)
(1,623.1
)
(884.0
)
(51.5
)
(185.6
)
(487.3
)
15.5
73.9
193.3
(36.0
)
(111.7
)
(294.0
)
The net pension liability for USA-Pensions comprises net pension assets relating to funded schemes in surplus of £30.7m, net pension liabilities relating to funded schemes in deficit of £98.1m and net pension liabilities relating to unfunded schemes of £44.3m.
If the above amounts had been recognised in the financial statements, the
Groups net assets employed at 31 March 2002 would be as follows:
The impact of the implementation of FRS 17 on net assets employed, as shown
above, would be reflected within the profit and loss account reserve.
8 Net interest
£m
3,649.6
(441.7
)
(89.3
)
3,118.6
2002
2001
2000
(restated)
(restated)
£m
£m
£m
120.5
118.0
12.4
225.9
232.1
146.0
346.4
350.1
158.4
(25.7
)
(20.7
)
(20.4
)
320.7
329.4
138.0
(72.6
)
(112.9
)
(95.0
)
248.1
216.5
43.0
120.5
12.8
8.9
16.4
25.8
15.6
385.0
255.1
67.5
292.5
255.1
67.5
92.5
385.0
255.1
67.5
Interest on the funding attributable to assets in the course of construction was capitalised during the year at a rate of 6.2% (2001: 6.7%; 2000: 6.7%).
Interest payable and similar charges for 2001 included £21.0m of losses arising from the valuation at maturity of US dollar interest rate swaptions that provided an economic hedge against dollar borrowings, but which did not qualify as hedges for accounting purposes. Interest receivable and similar income for 2001 included a £17.4m gain on closing out sterling fixed interest rate swaps that were originally entered into as hedges for sterling borrowings.
National Grid Annual Report and Form 20-F 2001/02
55
9 Taxation
2002
2001
2000
(restated)
(restated)
£m
£m
£m
39.5
(153.2
)
347.4
(78.1
)
(20.0
)
27.9
18.6
18.5
3.7
18.0
17.0
(7.0
)
(136.6
)
382.9
73.3
26.7
2.8
1.4
(
48.4
)
44.1
26.3
70.8
2.8
19.3
(65.8
)
385.7
6.2
4.2
2.9
(0.2
)
8.3
(6.3
)
25.3
(53.3
)
382.3
85.4
182.1
152.8
(229.5
)
(60.1
)
(5.9
)
229.5
(60.1
)
(235.4
)
229.5
25.3
(53.3
)
382.3
A reconciliation of the UK corporation tax rate to the effective tax rate of
the Group is as follows:
2002
2001
2000
(restated)
(restated)
(% of profit before taxation)
30.0
30.0
30.0
7.4
8.6
0.1
5.9
11.9
(10.7
)
(7.4
)
(0.4
)
3.0
(1.5
)
32.2
46.1
28.6
(14.8
)
(0.5
)
3.3
17.4
45.6
31.9
(22.9
)
(54.2
)
(6.5
)
(5.5
)
(8.6
)
25.4
10 Dividends
2002
2001
2000
Per ordinary
Per ordinary
Per ordinary
share
share
share
2002
2001
2000
pence
pence
pence
£m
£m
£m
6.46
6.05
5.59
95.6
89.5
82.5
9.58
9.03
8.35
169.0
133.5
123.0
16.04
15.08
13.94
264.6
223.0
205.5
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
56
11 Earnings per share
(Loss)/
Weighted
Weighted
Weighted
Earnings
profit
average
Earnings
Profit
average
Earnings
Profit
average
per
for the
number
per
for the
number
per
for the
number
share
year
of shares
share
year
of shares
share
year
of shares
2002
2002
2002
2001
2001
2001
2000
2000
2000
(restated)
(restated)
(restated)
(restated)
pence
£m
million
pence
£m
million
pence
£m
million
(32.3
)
(493.3
)
1,526.8
45.0
664.2
1,475.8
76.2
1,122.0
1,472.9
5.2
79.0
2.7
39.4
50.6
774.6
(note 4c)
(1.3
)
(20.1
)
(16.5
)
(243.3
)
(54.3
)
(800.1
)
(0.7
)
(10.6
)
(1.3
)
(20.1
)
6.1
92.5
(1.4
)
(22.0
)
(15.6
)
(229.5
)
5.9
90.4
5.7
84.6
0.6
8.2
32.1
490.5
1,526.8
20.0
295.3
1,475.8
22.5
330.1
1,472.9
(0.1
)
9.9
(0.2
)
10.1
(0.1
)
21.2
110.3
(0.3
)
20.9
110.3
19.8
316.5
1,596.0
22.0
351.0
1,593.3
(2.5
)
(39.4
)
(note 4c)
15.2
243.3
50.2
800.1
1.3
20.1
14.4
229.5
(5.2
)
(84.6
)
(0.5
)
(8.2
)
43.0
685.4
1,596.0
71.7
1,142.9
1,593.3
The weighted average number of shares in issue excludes the shares held by employee share trusts.
Earnings per ordinary share, excluding exceptional items and goodwill amortisation, are provided in order to reflect the underlying performance of the Group.
There is no difference between basic and diluted earnings per share for the year ended 31 March 2002.
National Grid Annual Report and Form 20-F 2001/02
57
12 Intangible fixed assets goodwill
13 Tangible fixed assets
Net book
Cost
Amortisation
value
Group
£m
£m
£m
1,248.6
(62.4
)
1,186.2
211.2
(11.2
)
200.0
1,459.8
(73.6
)
1,386.2
(3.8
)
(1.1
)
(4.9
)
810.1
810.1
(78.4
)
(78.4
)
2,266.1
(153.1
)
2,113.0
Assets
Motor
Plant
in the
vehicles
Land and
and
course of
and office
buildings
machinery
construction
equipment
Total
Group
£m
£m
£m
£m
£m
446.6
7,889.6
409.7
146.4
8,892.3
(1.4
)
(17.2
)
(1.3
)
(0.4
)
(20.3
)
331.9
4,282.3
140.0
73.8
4,828.0
2.8
7.0
575.3
8.2
593.3
(10.3
)
(72.3
)
(23.0
)
(105.6
)
17.4
489.7
(489.6
)
(17.5
)
787.0
12,579.1
634.1
187.5
14,187.7
148.0
3,044.0
83.0
3,275.0
(0.2
)
(5.4
)
(0.2
)
(5.8
)
45.0
1,477.9
40.5
1,563.4
7.8
288.6
22.8
319.2
(6.5
)
(64.1
)
(15.2
)
(85.8
)
0.3
5.5
(5.8
)
194.4
4,746.5
125.1
5,066.0
592.6
7,832.6
634.1
62.4
9,121.7
298.6
4,845.6
409.7
63.4
5,617.3
21.6
26.0
2.5
The cost of tangible fixed assets at 31 March 2002 includes £306.2m (2001: £280.5m) relating to interest capitalised.
The net book value of land and buildings comprises:
2002
2001
£m
£m
557.8
262.5
28.9
30.0
5.9
6.1
592.6
298.6
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
58
14 Fixed asset investments
Group
Company
Listed
Own
Other
Group
Unlisted joint ventures
associate
shares
investments
Total
undertakings
Share of net
Loans
Share of net
assets
assets
£m
£m
£m
£m
£m
£m
£m
335.4
64.9
414.9
10.2
134.9
960.3
(1.5
)
(13.0
)
(14.5
)
333.9
64.9
401.9
10.2
134.9
945.8
(34.1
)
(0.1
)
(34.2
)
(note 27)
13.2
50.9
64.1
6.1
32.3
47.8
11.8
98.0
5,634.6
10.4
(10.4
)
(8.3
)
(12.3
)
(1.9
)
(22.5
)
(3,554.6
)
(158.3
)
(31.3
)
(189.6
)
37.3
37.3
21.5
21.5
200.2
86.8
392.1
45.7
195.6
920.4
2,080.0
129.3
84.9
392.1
606.3
13.9
1.9
15.8
143.2
86.8
392.1
622.1
57.0
45.7
195.6
298.3
2,080.0
333.9
64.9
401.9
10.2
134.9
945.8
The market value of the investment in the listed associate (Energis) at 31 March 2002 was £15.6m (2001: £1,579.4m).
The share of retained loss relating to joint ventures includes an exceptional interest charge of £92.5m as described in note 4e.
During the year the Company acquired all of the ordinary shares in National Grid Holdings One plc as part of the Scheme of Arrangement described in note 22. On 31 January 2002, the Company acquired the entire issued share capital of Niagara Mohawk Holdings, Inc. and subsequently disposed of this investment to another group undertaking.
Own shares at 31 March 2002 relate to 13.2m 10p ordinary shares in the Company, held by employee share trusts for the purpose of satisfying certain obligations under the various share option schemes operated by the Group. Own shares at 31 March 2001 relate to 5.9m 11 13/17 p ordinary shares in National Grid Holdings One plc (formerly National Grid Group plc), held by employee share trusts for similar purposes. The carrying value of £45.7m (market value £61.3m (2001: £31.9m)) represents the exercise amounts receivable in respect of those shares which were issued at market value by the Company and cost in respect of those shares purchased in the open market. Funding is provided to the trusts by Group undertakings.
The names of the principal Group and associated undertakings are included in note 30.
National Grid Annual Report and Form 20-F 2001/02
59
15 Debtors
Group
Group
Company
2002
2001
2002
(restated)
£m
£m
£m
707.4
379.9
2,023.2
21.9
10.5
0.1
23.3
443.9
255.1
136.9
115.8
217.7
95.8
5.9
1,527.9
880.4
2,029.1
40.3
45.1
3,969.9
978.8
44.2
30.0
4,054.4
1,053.9
5,582.3
1,934.3
2,029.1
Trade debtors are stated net of provisions for doubtful debts of £63.2m (2001:
£15.4m), as shown by the following table.
Group
2002
Provision for doubtful debts
£m
15.4
42.0
26.4
(20.6
)
63.2
1 | Uncollectable accounts written off net of recoveries |
The amounts owed by an associate include a net investment in a finance lease amounting to £44.6m (2001: £48.9m) comprising total rentals receivable of £65.2m (2001: £74.2m) less unearned income of £20.6m (2001: £25.3m), of which £4.3m (2001: £3.8m) falls due within one year and £40.3m (2001: £45.1m) falls due after more than one year. Rentals received and receivable in the year amounted to £9.0m (2001: £11.3m). At 31 March 2002, the minimum lease payments for each of the five years ending 31 March 2007 are £9.0m.
Regulatory assets
SFAS 71 establishes US GAAP for utilities whose regulators have the power to
approve and/or regulate prices that may be charged to customers. Provided that
through the regulatory process, the utility is substantially assured of
recovering its allowable costs by the collection of revenue from its customers,
such costs not yet recovered are deferred as regulatory assets. Due to the
different regulatory environment, no equivalent accounting standard applies in
the UK.
Under UK GAAP, regulatory assets established in accordance with the principles of SFAS 71 are recognised where they comprise rights or other access to future economic benefits which arise as a result of past transactions or events which have created an obligation to transfer economic benefit to a third party. Measurement of the past transaction or event and hence of the regulatory asset is determined in accordance with UK GAAP.
Regulatory assets primarily relate to the right to recover from customers the liabilities recognised in respect of purchased power obligations (note 18), the decommissioning provision (note 21) and the under-recovery of power costs incurred. Regulatory assets outstanding at 31 March 2002 are expected to be substantially recovered over a period through to 2010.
16 Assets held for exchange
The assets held for exchange of £16.6m (2001: £16.6m) represent the carrying value of 73.5m (2001: 73.5m) shares in Energis plc which are held to satisfy obligations under the 6% mandatorily exchangeable bonds 2003, as explained in note 19. The voting rights in respect of 61.0m (2001: 61.0m) of these shares are vested in the bondholders.
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
60
17 Creditors (amounts falling due within one year)
18 Creditors (amounts falling due after more than one year)
Group
Group
Company
2002
2001
2002
£m
£m
£m
1,451.9
1,008.7
604.4
769.8
648.9
1,340.4
5.2
10.6
2.1
102.4
105.0
29.8
16.2
25.8
14.1
169.0
133.5
169.0
415.4
274.6
3.8
2,969.3
2,213.7
2,117.6
Group
Group
2002
2001
£m
£m
7,001.4
3,180.7
361.7
448.5
407.9
347.0
126.3
8,118.0
3,755.5
Purchased power obligations
As part of the sale of substantially all of its non-nuclear generating
business, National Grid USA entered into purchased power transfer agreements
with the purchasers whereby the purchasers took over a number of long term
contracts between National Grid USA and owners of various generating units. In
exchange, National Grid USA committed to make fixed monthly payments to the
purchasers towards the above-market cost of the contracts. The creditor
relating to purchased power obligations, which is also reflected in regulatory
assets (note 15), represents the net present value of these monthly payments
discounted at 5.41%. At 31 March 2002, amounts falling due after five years
totalled £65.4m (2001: £131.6m).
Liability for swap contracts
Niagara Mohawk has entered into indexed swap contracts that expire in 2008 and
a further three swap contracts that expire in June and September 2003. Niagara
Mohawk has recorded a liability in respect of these contractual obligations and
recorded a corresponding regulatory asset as losses on these instruments may be
recovered from customers. The amount of the liability and regulatory asset will
fluctuate over the remaining terms of the swaps as nominal energy quantities
are settled and will be adjusted as periodic assessments are made of energy
prices.
National Grid Annual Report and Form 20-F 2001/02
61
19 Borrowings
Group
Group
Company
2002
2001
2002
£m
£m
£m
36.6
627.5
26.2
242.6
242.6
634.3
107.3
604.4
259.5
13.8
160.4
92.3
17.5
1,451.9
1,008.7
604.4
65.5
74.8
245.8
237.0
772.4
239.3
239.1
491.3
480.3
463.3
315.1
315.0
200.9
443.9
443.6
357.6
40.2
1,846.3
327.8
1,185.0
303.7
16.7
31.1
24.7
995.5
26.2
7,001.4
3,180.7
8,453.3
4,189.4
604.4
1,451.9
1,008.7
604.4
720.3
85.8
436.8
1,262.0
674.2
47.1
1,005.1
252.6
56.1
61.7
4,108.9
1,471.5
8,453.3
4,189.4
604.4
At 31 March 2002, borrowings totalling £1,889.4m (2001: £348.6m) were secured by charges over property, plant and other assets of the Group.
The interest rates shown above are those contracted on the underlying borrowing before taking into account interest rate and currency swaps.
In February 1999, National Grid Holdings One plc (formerly National Grid Group plc) issued 14.7m Equity Plus Income Convertible Securities (EPICs) in the form of 6% mandatorily exchangeable bonds 2003 (exchangeable bonds) in the aggregate principal amount of US dollar 401.2m. The EPICs are exchangeable, subject to certain exceptions, on or prior to 26 April 2003 at the option of the holder of the bonds (bondholders) into ordinary shares of Energis plc, an associated undertaking (note 16). If the EPICs are redeemed at the option of the bondholders prior to 3 May 2003, the Group will deliver 4.1665 Energis plc shares per EPICs. On 3 May 2003, the number of Energis plc shares to be delivered by the Group in respect of each EPICs is dependent upon the Energis plc share price at that date and ranges from a maximum of five, if the share price is £3.30 or less, to a minimum of 4.1665 if the share price is £3.96 or more.
The 4.25% exchangeable bonds 2008 (the Bonds) are exchangeable on or prior to 8 February 2008 at the option of the holder, into ordinary shares of the Company at the exchange price of 417p per ordinary share. After 17 February 2003, the Group has the right to redeem the Bonds at any time in whole (but not in part) at the principal amount outstanding, including any redemption premium. Unless earlier redeemed, exchanged or purchased, the Bonds will be redeemed on 17 February 2008 at their principal amount plus a premium (together the Redemption Price, being £1,209.31 per £1,000 principal amount of Bonds). When a bondholder elects to exchange bonds for ordinary shares, the Group has the option to pay an amount equal to the cash value of the ordinary shares that would otherwise have been issued by the Company. For the purposes of the maturity analysis of borrowings shown above, early exchange of the Bonds has not been anticipated and the Bonds have been classified as repayable in more than five years.
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts continued
62
20 Financial instruments
The Groups treasury policy, including details of the nature, terms and credit
risk associated with financial instruments with off-balance sheet risk is
described on pages 23 to 25. Short term debtors and creditors, where permitted
by the financial reporting standard on derivatives and other financial
instruments (FRS 13), have been excluded from the following disclosures, which
are after taking account of interest rate and currency swaps where applicable.
It is assumed that because of short maturities, the fair value of short term
debtors and creditors approximates to their book values.
Currency and interest rate composition of financial liabilities
Fixed rate liabilities
Weighted
average
Weighted
period
average
for which
Total
Variable rate
Fixed rate
interest rate
rate is fixed
At 31 March 2002
£m
£m
£m
%
Years
2,530.0
563.4
1,966.6
6.61
10.8
5,923.3
1,081.4
4,841.9
7.33
6.1
8,453.3
1,644.8
6,808.5
7.12
7.5
28.2
4.7
23.5
5.34
3.6
893.6
814.9
78.7
5.80
0.3
0.3
9,375.4
2,464.7
6,910.7
7.10
7.4
539.6
(759.4
)
1,299.0
6.92
4.6
3,647.3
1,239.5
2,407.8
6.86
3.4
2.5
2.5
4,189.4
482.6
3,706.8
6.94
4.8
30.4
30.4
5.34
4.6
662.2
621.2
41.0
6.22
10.0
*
4,882.0
1,103.8
3,778.2
6.92
4.8
* | Excludes non-equity minority interests of £78.7m (2001: £20.0m) with no final repayment date. |
At 31 March 2002, the weighted average interest rate on short term borrowings of £1,451.9m (2001: £1,008.7m) was 4.3% (2001: 5.9%).
Foreign exchange forward deals taken out in 2001/2002 to manage the currency mix of the Groups borrowing portfolio comprising £190.4m forward sale of US dollars and a £10.4m forward sale of Australian dollars have not been adjusted in the table above.
Other US dollar financial liabilities predominantly relate to indexed linked energy swap contracts of £407.9m (2001: £nil), purchased power obligations due after more than one year of £361.7m (2001: £448.5m), exchange translation of cross currency swaps of £45.3m (2001: £166.4m) and non-equity minority interests of £78.7m (2001: £20.0m).
Substantially all of the variable rate borrowings are subject to interest rates which fluctuate with LIBOR for the appropriate currency at differing premiums or, in the case of certain USA based companies, are based on the market rate for tax exempt commercial paper.
In calculating the weighted average number of years for which interest rates
are fixed, swaps which are cancellable at the option of the swap provider are
taken to have a life based on the earliest date at which they can be cancelled.
2002
2001
Maturity of financial liabilities at 31 March
£m
£m
1,502.3
1,181.4
887.1
191.6
598.0
1,348.9
832.5
130.4
1,151.4
333.3
4,404.1
1,696.4
9,375.4
4,882.0
National Grid Annual Report and Form 20-F 2001/02
63
20 Financial
instruments
continued
Currency and interest rate composition of financial assets
Fixed rate assets
Weighted
average
Weighted
period
Non-interest
average
for which
Total
bearing
Variable rate
Fixed rate
interest rate
rate is fixed
At 31 March 2002
£m
£m
£m
£m
%
Years
89.8
89.8
120.3
120.3
2.5
2.5
212.6
212.6
61.2
16.6
44.6
11.50
4.1
59.1
16.8
14.0
28.3
4.72
9.2
332.9
33.4
226.6
72.9
8.87
6.1
136.9
136.9
131.6
131.6
2.7
2.7
271.2
271.2
65.5
16.6
48.9
11.50
4.8
38.6
11.9
26.7
5.37
9.8
4.9
4.9
380.2
16.6
288.0
75.6
9.34
6.6
Other financial assets at 31 March 2002 predominantly relate to assets held for
exchange of £16.6m (2001: £16.6m), a net investment in a finance lease of
£44.6m (2001: £48.9m), fixed asset investment of £40.3m (2001: £38.6m), and
investment held for resale of £15.4m (2001: £nil). Cash and deposits earn
interest at local prevailing rates for maturity periods generally not exceeding
12 months. The non-interest bearing assets held for exchange are expected to be
realised on redemption of the 6% mandatorily exchangeable bonds 2003, as
described in note 19.
2002
2001
Maturity of financial assets at 31 March
£m
£m
259.1
316.2
6.1
6.2
22.0
6.5
6.6
6.2
6.6
7.0
32.5
38.1
332.9
380.2
National Grid Annual Report and Form 20-F 2001/02
64
20 Financial instruments
continued
Fair values of financial instruments at 31 March
2002
2001
Book value
Fair value
Book value
Fair value
£m
£m
£m
£m
(242.6
)
(18.1
)
(242.6
)
(196.7
)
(1,209.3
)
(1,231.9
)
(766.1
)
(768.7
)
(491.3
)
(543.3
)
(480.3
)
(627.7
)
(6,510.1
)
(6,505.4
)
(2,700.4
)
(2,704.8
)
(8,453.3
)
(8,298.7
)
(4,189.4
)
(4,297.9
)
212.6
212.
6
271.2
271.2
(8,240.7
)
(8,086.1
)
(3,918.2
)
(4,026.7
)
(871.8
)
(867.6
)
(519.9
)
(516.3
)
44.6
46.2
48.9
56.0
16.6
16.6
16.6
205.1
59.1
57.2
43.5
44.8
(8,992.2
)
(8,833.7
)
(4,329.1
)
(4,237.1
)
(69.4
)
(2.9
)
(40.4
)
(50.3
)
(131.0
)
(169.8
)
(250.1
)
* | Excluding interest rate swaps £nil (2001: £2.9m), forward currency contracts £5.0m (2001: £3.4m), cross currency swaps £45.3m (2001: £166.4m). |
Market values, where available, have been used to determine fair values. Where market values are not available, fair values have been calculated by discounting cash flows at prevailing interest rates.
The notional principal amounts relating to financial instruments held to manage interest rate and currency profile for interest rate swaps, foreign currency contracts and cross currency swaps amounted to £3,348.4m (2001: £2,534.9m) and £2,213.5m (2001: £2,118.0m) respectively.
Gains and losses on hedges
Net
Gains
Losses
gain/(loss)
£m
£m
£m
10.7
(128.5
)
(117.8
)
38.8
38.8
10.7
(89.7
)
(79.0
)
4.9
(76.0
)
(71.1
)
15.6
(165.7
)
(150.1
)
12.6
12.6
3.0
(165.7
)
(162.7
)
At 31 March 2002, within the £165.7m unrecognised loss there is an unrecognised loss of £94.0m for which there are offsetting gains of £73.8m on the related borrowings.
Borrowing facilities
At 31 March 2002, the Group had committed credit facilities from syndicates of
banks of £2,687.5m (2001: £2,510.5m) of which £2,687.5m (2001: £1,120.7m) was
undrawn and of which £698.5m expires within one year, £298.9m expires after
more than one year but less than two years, and £1,690.1m expires after more
than two years. Of the unused facilities £1,073.7m (2001: £255.2m) are being
held as backup to commercial paper and similar borrowings and the remainder are
available to support further acquisitions and other general corporate purposes.
At 31 March 2002 a further facility amounting to £211.3m (2001: £nil) existed
for the purpose of factoring trade debtors, this facility was undrawn and
expires within one year.
National Grid Annual Report and Form 20-F 2001/02
65
21 Provisions for liabilities and charges
Group
Company
Post-
Decommis-
retirement
Environ-
Deferred
Associated
Total
Related
sioning
benefits
mental
taxation
undertakings
Other
provisions
undertaking
£m
£m
£m
£m
£m
£m
£m
£m
146.1
149.7
52.4
147.3
0.3
495.8
1,025.2
1,025.2
146.1
149.7
52.4
1,172.5
0.3
1,521.0
(0.3
)
(1.9
)
(1.0
)
(4.0
)
(7.2
)
477.5
166.3
673.9
1,317.7
11.4
54.2
8.2
186.0
18.9
278.7
76.6
(19.1
)
(13.2
)
(16.8
)
(0.4
)
(49.5
)
(16.7
)
(24.1
)
(8.8
)
(49.6
)
37.3
37.3
(14.1
)
(14.1
)
121.4
655.4
203.9
1,811.5
223.3
18.8
3,034.3
76.6
The decommissioning provision of £121.4m at 31 March 2002, represents the net present value of the estimated expenditure (discounted at rates up to 7.75%) expected to be incurred in respect of the decommissioning of certain nuclear generating units and other related provisions. A related regulatory asset is also recognised (note 15). Expenditure is expected to be incurred between 2002 and 2042. Additions in the year include £7.9m and £(2.6)m in respect of changes in the discounted amount arising from the passage of time and the effect of a change in the discount rate respectively.
The post-retirement benefits provision is in respect of pensions £259.0m (2001: £76.1m) and other post-retirement benefits (health care and life insurance) £396.4m (2001: £73.6m).
The environmental provision represents the estimated environmental restoration and remediation costs relating to a number of sites. At 31 March 2002, £189.2m of this provision represents the net present value of the estimated expenditure (discounted at 7.5%) expected to be incurred between 2002 and 2045. Substantially all of the remainder of this provision is expected to be utilised within the next five years.
The associated undertakings provision of £223.3m (2001: £nil) represents the recognition of obligations associated with the impairment of investments in joint ventures and associate amounting to £186.0m (2001: £nil) and the recognition of the net liabilities of a joint venture amounting to £37.3m (2001: £nil).
The related undertaking provision of £76.6m (2001: £nil) represents the
recognition of obligations associated with the impairment of an investment in a
joint venture held by a Group undertaking.
2002
2001
(restated)
£m
£m
1,682.7
1,124.4
128.8
48.1
1,811.5
1,172.5
A deferred tax asset in respect of substantial capital losses has not been recognised because their future recovery is uncertain. The exact amount of these losses not recognised at 31 March 2002 is not yet quantified pending agreement of the amount with the relevant tax authorities.
22 Share capital
One £1 special rights redeemable preference share (at 31 March 2002, 31 March
2001 and 31 March 2000).
(i)
In accordance with merger accounting principles, the shares issued in
connection with the Scheme of Arrangement (described on page 66) have been
treated as if these shares were in issue throughout the year and comparative
periods.
Group
Allotted, called up and fully paid
millions
£m
1,477.9
173.9
(26.1
)
1,477.9
147.8
6.9
0.7
(0.2
)
1,484.6
148.5
1,484.6
148.5
292.3
29.2
1,776.9
177.7
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts continued
66
22 Share capital continued
Group continued
On 31 January 2002 under a Scheme of Arrangement between National Grid Group
plc (now renamed National Grid Holdings One plc), the former holding company of
the Group, and its shareholders under section 425 of the Companies Act 1985,
and sanctioned by the High Court on 25 January 2002, all of the issued shares
in that company, including the special share as defined below, were cancelled.
Following the cancellation, the share capital of National Grid Holdings One plc
was restored to its former nominal amount by applying the reserve arising as a
result of the cancellation to pay up in full new shares equal in nominal value
to the shares cancelled. One of the new National Grid Holdings One plc shares
was issued to National Grid Nominees Limited as nominees on behalf of National
Grid Group. The remaining shares were issued to New National Grid plc (now
renamed National Grid Group plc) which, as a result, became the new holding
company of the National Grid Group.
At 31 March 2001 and 31 March 2000 the authorised share capital of National Grid Holdings One plc, the former holding company of the Group, was £250.0m, comprising 2,125m shares of 11 13 / 17 pence each.
The total consideration received by the Group in respect of shares issued
during the year ended 31 March 2002 was £1,329.0m, of which £59.1m was received
from employee share trusts, which represented contributions from Group
undertakings. The remainder of the shares were issued on acquisition of Niagara
Mohawk, for a total consideration of £1,269.9m as explained in note 27.
Company
Allotted and issued
Called up and partly paid
Called up and fully paid
number
£
number
£
millions
£m
ordinary shares of £1
1
1
1
9
9
ordinary shares of 10 pence
10
1
10
499,990
49,999
499,990
12,500
500,000
50,000
500,000
12,500
(500,000
)
(50,000
)
(500,000
)
(12,500
)
1,776,932,805
177,693,281
23,365
(ii)
2,337
1,776.9
177.7
1,776,932,805
177,693,281
23,365
2,337
1,776.9
177.7
One £1 special rights non-voting redeemable preference share (at 31 March 2001 and 31 March 2000: nil).
(ii) These shares are nil paid at 31 March 2002. They represent shares issued to financial institutions in order to acquire Niagara Mohawk which were not required to form part of the final consideration and will be sold on the open market in the forthcoming period.
The Company was incorporated on 11 July 2000 with authorised share capital of 100 £1 ordinary shares. On 28 November 2000 the ordinary shares of £1 each were subdivided into ordinary shares of 10 pence each in a 10:1 share split and the authorised share capital was increased to 2,500m ordinary shares of 10 pence each. At 31 March 2001, the authorised share capital of the Company was £250m and the allotted and issued share capital of the Company was £50,000 (500,000 ordinary shares of 10 pence each), of which £12,500 had been called up and paid.
At 31 March 2002, the authorised share capital of the Company is £250m (2,500m ordinary shares of 10 pence each and one £1 special rights non-voting redeemable preference share).
The total consideration received by the Company in respect of shares issued during the year ended 31 March 2002 was £1,421.1m, of which £1.3m was received from employee share trusts, which represented contributions from Group undertakings. £149.9m of share capital was issued as part of the Scheme of Arrangement described above. The remaining shares were issued on acquisition of Niagara Mohawk, for a total consideration of £1,269.9m as explained in note 27.
The special rights non-voting redeemable preference share of £1 in National Grid Group (the Special Share), held on behalf of the Crown, was issued to the Secretary of State for Trade and Industry on 31 January 2002 as part of the Scheme of Arrangement. It is redeemable at any time at par at the option of the holder, after consulting the Company. The Special Share does not carry any rights to vote at general meetings but entitles the holder to receive notice of and to attend and speak at such meetings. Certain matters, in particular the alteration of certain Articles of Association of the Company, require the prior written consent of the holder of the Special Share. The Special Share confers no right to participate in the capital or profits of the Company, except that on a winding-up the Special Shareholder is entitled to repayment of £1 in priority to other shareholders. Prior to 31 January 2002, the Secretary of State for Trade and Industry held a Special Share with equivalent rights in National Grid Holdings One plc (formerly National Grid Group plc).
Share option schemes
The Group operates two principal forms of share option plans. They are a Sharesave Plan and an Executive Share Option Plan (the Executive Plan).
The Sharesave Plan is savings related where, under normal circumstances, share options are exercisable on completion of a three or a five year save-as-you-earn contract. The exercise price of options granted represents 80% of the market price at the date the option was granted.
The Executive Plan applies to senior executives, including Executive Directors. Options granted for the 1999/2000, 2000/01 and 2001/02 financial years are subject to the achievement of performance targets related to total shareholder returns over a three year period. The share options are generally exercisable between the third and tenth anniversaries of the date of grant if the relevant performance target is achieved.
National Grid Annual Report and Form 20-F 2001/02
67
22 Share capital continued
Share option schemes continued
In any ten year period, the maximum number of shares that may be issued or
issuable pursuant to the exercise of options under all of the Groups share
option plans may not exceed the number of shares representing 10% of the issued
ordinary share capital from time to time.
Movement in options to subscribe for ordinary shares under the Groups various
options schemes for the three years ended 31 March 2002 are shown below and
include those options related to shares issued to employee benefit trusts.
Sharesave
Executive
scheme
share scheme
Total
millions
millions
millions
16.3
4.7
21.0
3.5
2.3
5.8
(0.5
)
(0.2
)
(0.7
)
(3.1
)
(0.8
)
(3.9
)
16.2
6.0
22.2
1.4
1.6
3.0
(0.4
)
(0.4
)
(4.1
)
(0.7
)
(4.8
)
13.1
6.9
20.0
2.4
2.6
5.0
(0.7
)
(0.1
)
(0.8
)
(5.0
)
(0.9
)
(5.9
)
9.8
8.5
18.3
Options outstanding in respect of the Sharesave scheme at 31 March 2002 and 31
March 2001, together with their exercise prices and dates were as follows:
Exercise price
Normal dates
2002
2001
per share
of exercise
millions
millions
pence
years
0.2
162.0
2001
3.9
146.0
2001
0.6
312.0
2001
2.2
2.4
171.0
2002
0.9
1.1
337.0
2002
1.3
1.4
312.0
2003
0.5
0.6
416.0
2003
1.9
2.1
337.0
2004
0.7
457.0
2004
0.7
0.8
416.0
2005
1.6
457.0
2006
9.8
13.1
Options outstanding in respect of the Executive scheme at 31 March 2002 and 31
March 2001, together with their exercise prices and dates were as follows:
0.1
64.6
1994-2001
0.2
0.3
205.5
2001-2007
0.2
0.2
258.0
2001-2007
0.7
0.9
280.5
2001-2007
1.0
1.3
375.8
2001-2008
0.3
0.3
455.3
2002-2009
0.3
0.4
435.8
2002-2009
0.1
0.1
424.0
2002-2009
1.5
1.5
566.5
2003-2010
0.4
0.5
531.5
2003-2010
0.9
1.0
526.5
2003-2010
0.1
0.1
535.0
2003-2010
0.1
0.1
623.0
2004-2011
0.1
0.1
540.0
2004-2011
1.9
563.0
2004-2011
0.5
527.0
2004-2011
0.2
479.5
2004-2011
8.5
6.9
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
68
23 Reserves
Group
Company
Share
Profit
Merger
Share
Profit
premium
and loss
reserve
premium
and loss
account
account
account
account
£m
£m
£m
£m
£m
246.5
1,532.1
(668.4
)
246.5
863.7
(246.5
)
246.5
26.1
863.7
272.6
3.1
10.8
(1.1
)
17.4
(17.4
)
916.5
0.1
(28.2
)
28.2
1,764.8
300.9
(14.7
)
0.9
31.9
1.3
(1.3
)
441.2
(2.2
)
2.2
2,221.9
303.1
(58.3
)
46.2
1.3
1,242.1
1,242.1
21.6
11.3
(11.3
)
(757.9
)
497.5
0.2
(56.2
)
56.2
1,243.4
1,416.0
359.5
1,243.4
497.5
The Company has not presented its own profit and loss account as permitted by section 230 of the Companies Act 1985. Of the Groups loss after taxation, a profit of £666.5m (2001: £nil) is attributable to the Company.
* In the year to 31 March 2002, the application of merger accounting principles to the Group reconstruction which involved the creation of a new holding company (see Accounting Policies Basis of consolidation) gave rise to a difference which falls to be accounted for as a merger difference and included within merger reserve. In accordance with merger accounting principles, the shares issued in connection with the Scheme of Arrangement to acquire National Grid Holdings One plc, have been treated as if they were in issue throughout the year and comparative period.
The balance on the merger reserve at 31 March 2002 represents the difference between the called up share capital of the Company and the called up share capital, share premium and capital redemption reserve of the former holding company (now renamed National Grid Holdings One plc) at 31 January 2002, the date of the capital reorganisation.
24 Minority interests: non-equity
The non-equity minority interests of £78.7m (2001: £20.0m) comprise cumulative preference stock issued by Group undertakings.
National Grid Annual Report and Form 20-F 2001/02
69
25 Reconciliation of movement in equity shareholders funds
2002
2001
2000
(restated)
(restated)
£m
£m
£m
(493.3
)
664.2
1,122.0
(264.6
)
(223.0
)
(205.5
)
(757.9
)
441.2
916.5
1,317.7
0.9
11.6
(1.1
)
(58.3
)
(14.7
)
3.1
21.6
31.9
523.1
459.3
930.1
2,673.5
*
2,214.2
*
1,284.1
*
3,196.6
2,673.5
2,214.2
*Originally £3,475.8m (2001: £2,909.0m, 2000: £1,952.5m) before deducting prior year adjustment of £802.3m (2001: £694.8m, 2000: £668.4m).
26 Group cash flow statement
a Reconciliation of operating profit to net cash inflow from operating activities
2002
2001
2000
(restated)
(restated)
£m
£m
£m
507.4
705.5
571.8
436.9
380.0
158.6
186.0
(6.6
)
(4.3
)
14.0
(7.9
)
(0.4
)
203.0
(189.8
)
(22.7
)
(108.6
)
(55.3
)
(11.5
)
10.5
(11.7
)
(6.8
)
6.2
(3.6
)
(2.7
)
1,255.4
810.6
682.0
The net cash inflow of Niagara Mohawk acquired during 2002 was approximately
£18.0m, after exceptional integration cash costs incurred of £21.0m.
Liquid resources comprise short term deposits.
b Disposal of investments
2002
2001
2000
£m
£m
£m
36.5
204.7
(8.8
)
36.5
195.9
c Acquisition of Group undertakings
2002
2001
2000
£m
£m
£m
(918.2
)
(442.5
)
(2,049.2
)
(15.3
)
1.6
4.1
(933.5
)
(440.9
)
(2,045.1
)
d Reconciliation of net cash flow to movement in net debt
2002
2001
2000
£m
£m
£m
53.6
(1.9
)
26.4
(336.2
)
(775.2
)
(618.8
)
(442.4
)
(81.4
)
(769.2
)
(725.0
)
(858.5
)
(1,361.6
)
(3,621.3
)
(162.2
)
(611.7
)
(3.6
)
(5.9
)
19.9
(218.0
)
29.9
3.9
(12.3
)
(10.9
)
(4,322.5
)
(1,254.6
)
(1,960.2
)
(3,918.2
)
(2,663.6
)
(703.4
)
(8,240.7
)
(3,918.2
)
(2,663.6
)
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
70
26 Group cash flow statement
continued
e Analysis of changes in net debt
Acquisition
At 1 April
Cash
of Group
Non-cash
Exchange
Other
At 31 March
1999
flow
undertaking
*
movements
adjustments
movements
2000
£m
£m
£m
£m
£m
£m
£m
1.6
6.2
7.8
(24.2
)
20.2
(4.0
)
26.4
1,522.9
(618.8
)
107.7
(2.1
)
(5.9
)
1,003.8
(1,637.3
)
(924.0
)
(663.3
)
197.6
31.7
(10.9
)
(3,006.2
)
(566.4
)
154.8
(56.1
)
(197.6
)
0.3
(665.0
)
(769.2
)
(703.4
)
(1,361.6
)
(611.7
)
29.9
(16.8
)
(2,663.6
)
Acquisition
At 1 April
Cash
of Group
Non-cash
Exchange
Other
At 31 March
2000
flow
undertaking
*
movements
adjustments
movements
2001
£m
£m
£m
£m
£m
£m
£m
7.8
17.4
0.1
25.3
(4.0
)
(19.3
)
(23.3
)
(1.9
)
1,003.8
(775.2
)
20.9
(3.6
)
245.9
(3,006.2
)
60.6
(50.0
)
32.1
(204.9
)
(12.3
)
(3,180.7
)
(665.0
)
(142.0
)
(112.2
)
(32.1
)
(34.1
)
(985.4
)
(81.4
)
(2,663.6
)
(858.5
)
(162.2
)
(218.0
)
(15.9
)
(3,918.2
)
Acquisition
At 1 April
Cash
of Group
Non-cash
Exchange
Other
At 31 March
2001
flow
undertaking
*
movements
adjustments
movements
2002
£m
£m
£m
£m
£m
£m
£m
25.3
66.9
92.2
(23.3
)
(13.3
)
(36.6
)
53.6
245.9
(336.2
)
215.1
(4.6
)
0.2
120.4
(3,180.7
)
(752.3
)
(3,188.5
)
107.1
10.7
2.3
(7,001.4
)
(985.4
)
309.9
(647.9
)
(107.1
)
13.8
1.4
(1,415.3
)
(442.4
)
(3,918.2
)
(725.0
)
(3,621.3
)
19.9
3.9
(8,240.7
)
*
Excluding cash and bank overdrafts.
**
Cash and deposits per the balance sheet £212.6m (2001: £271.2m; 2000: £1,011.6m).
National Grid Annual Report and Form 20-F 2001/02
71
27 Acquisition
On 31 January 2002, the Group acquired the entire issued share capital of
Niagara Mohawk Holdings Inc., for a total consideration of £2,186.5m including
acquisition costs of £44.9m. The acquisition has been accounted for by using
the acquisition method of accounting. Because the acquisition occurred late in
the financial year, fair values and goodwill arising on the acquisition are
provisional and may be subject to revision during the current financial year.
Goodwill arising on acquisition is being amortised over 20 years, being its
estimated useful economic life.
Fair value adjustments
Book value
Revaluations
Accounting
Provisional
at acquisition
policy alignment
fair value
£m
£m
£m
£m
3,264.6
266.8
(ix)(x)
(266.8
)
(ix)(x)
3,264.6
96.5
(32.4
)
(i)
64.1
37.8
(1.6
)
36.2
4,295.3
(193.4
)
(ii)(iii)(vii)
(146.8
)
(xi)(xii)(xiv)
3,955.1
15.4
(v)
15.4
237.0
(21.9
)
(xiii)
215.1
(950.8
)
(27.1
)
(vi)
38.9
(xiii)
(939.0
)
(3,382.6
)
(453.8
)
(iv)(vii)
(15.3
)
(xiii)
(3,851.7
)
(1,437.1
)
(32.6
)
(iii)(viii)
152.0
(xi)(xii)(xiv)
(1,317.7
)
(347.2
)
281.5
(iv)
(65.7
)
1,813.5
(175.6
)
(261.5
)
1,376.4
810.1
2,186.5
1,269.9
916.6
2,186.5
Investment held for resale of £15.4m relates to an associated undertaking of Niagara Mohawk Holdings Inc. which is held exclusively with a view to resale. The book and fair value of this business represents the anticipated net sale proceeds.
Fair value adjustments primarily comprise:
Revaluation adjustments relating to:
(i) | Revaluation of investments to market value (£32.4m); | |
(ii) | Write-down of regulatory assets related to nuclear activities (£669.4m); | |
(iii) | Recognition of pension fund liabilities, assets and other related regulatory assets (£290.6m); | |
(iv) | Revaluation and reclassification of preferred stock of a subsidiary undertaking (minority interest) to borrowings (£281.5m); | |
(v) | Revaluation and reclassification of investment held for resale (£15.4m); | |
(vi) | Recognition of current tax and other liabilities (£22.7m); | |
(vii) | Revaluation of long-term debt and recognition of related regulatory assets (£184.7m); | |
(viii) | Deferred tax on certain fair value adjustments (£258.0m). |
Accounting policy alignment relating to:
(ix) | Accounting for allowance for equity funds used during construction (£75.6m); | |
(x) | Accounting for costs incurred on the disposal of tangible fixed assets (£191.2m); | |
(xi) | Discounting of provisions and recognition of effect on related regulatory assets (£57.3m); | |
(xii) | Non-recognition of certain regulatory assets under UK GAAP (£46.9m); | |
(xiii) | Reclassification of unpresented cheques (£37.2m); | |
(xiv) | Non-recognition of pension provision and related regulatory assets under UK GAAP (£45.7m). |
Adjustments (ix) and (x) have also resulted in corresponding revaluation adjustments.
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts continued
72
27 Acquisition continued
The results of Niagara Mohawk Holdings Inc., prepared on the basis of its
pre-acquisition accounting policies under US GAAP, for the period 1 January
2002 to 31 January 2002 and for its preceding financial year ended 31 December
2001 are set out below:
Period 1 January
Year
ended
to 31 January
31 December
2002
2001
£m
£m
255.4
3,269.2
(251.1
)
(3,078.0
)
4.3
308.8
(117.6
)
4.3
191.2
0.2
2.5
(18.7
)
(264.0
)
(14.2
)
(70.3
)
(0.6
)
57.9
(5.4
)
(21.7
)
(20.2
)
(34.1
)
The following unaudited proforma summary gives effect to the acquisition of
Niagara Mohawk Holdings, Inc., as if the acquisition had taken place on 1 April
1999, on 1 April 2000 and on 1 April 2001. In addition, in respect of the year
ended 31 March 2000 only, the proforma summary gives effect to the acquisition
of New England Electric System (NEES), as if the acquisition of NEES had taken
place on 1 April 1999. The proforma summary combines the actual consolidated
results of the Group (excluding the effect of the acquisition in the actual
period that it took place) and the results of Niagara Mohawk Holdings Inc. and
NEES after giving effect to certain adjustments. These adjustments include
estimates of the effect of adopting the provisional or final fair value
adjustments as appropriate, and the increased net interest expense, together
with the associated tax effects, as a result of financing the acquisitions. In
addition, the earnings per share calculation has been adjusted as if the shares
issued to acquire Niagara Mohawk Inc. were issued on the assumed date of
acquisition for the purposes of preparing the proforma summary. The proforma
summary does not necessarily reflect the results of operations as they would
have been if the Group (excluding the acquisitions) and the acquisitions had
constituted a single entity during the periods presented.
Year ended 31 March
2002
2001
2000
£m
£m
£m
6,973.1
7,117.9
6,197.7
(519.6
)
588.6
930.1
464.1
259.8
190.1
(29.5
)p
33.5
p
53.0
p
26.4
p
14.8
p
10.8
p
28 Related party transactions
Transactions with an associate and joint ventures, which were in the normal
course of business, were as follows:
2002
2001
2000
£m
£m
£m
32.6
46.5
35.0
9.0
11.3
6.7
55.1
26.3
16.7
2.7
5.6
Amounts owed by and owed to an associate and joint ventures are given in notes 15 and 17 respectively.
National Grid Annual Report and Form 20-F 2001/02
73
29 Commitments and contingencies
Information in respect of the associates future capital expenditure
contracted for but not provided was not available at 31 March 2002. As a
consequence, in respect of the position at 31 March 2002 only, the information
provided above in respect of the share of associate and joint ventures future
capital expenditure contracted for but not provided solely relates to joint
ventures.
b Lease commitments
Total commitments under non-cancellable operating leases were as follows:
c Power commitments
d Guarantees and performance bonds
e Sale of Millstone 3
Regulatory authorities from Rhode Island, New Hampshire and Massachusetts have
expressed an intent to challenge the reasonableness of the settlement agreement
as NEP would have received approximately US dollar 140.0 million (£100.0m) of
sale proceeds without the agreement. The dispute will be resolved by the
Federal Energy Regulatory Commission (FERC). National Grid believes it has a
strong argument that it acted prudently since the amount received under the
settlement agreement was the highest sale price for a nuclear unit at the time
the agreement was reached.
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
74
f Environmental related litigation
In May 2001, the New York State Attorney General advised Niagara Mohawk and NRG
of its intent to file suit alleging that the plants are in violation of the
federal Clean Air Act. On 13 July 2001, Niagara Mohawk filed a declaratory
judgement action against NRG in New York State Supreme Court. Niagara Mohawk is
seeking a declaratory judgement that NRG is responsible for any control
upgrades and mitigation resulting from the above-referenced enforcement action.
This litigation is in the discovery phase. On 10 January 2002, New York State
filed suit against Niagara Mohawk and NRG in US District Court for alleged
violations of the Clean Air Act. Niagara Mohawk has filed a motion to dismiss.
30 Group undertakings, joint ventures and associate
Principal Group undertakings
(a) Issued ordinary share capital held by National Grid Group plc
Principal joint ventures and associate
*
JVCO Participacoes Ltda is Inteligs ultimate parent undertaking.
The investments in the joint ventures (c) and associate (d) are held by Group
undertakings.
The Group holding of shares in Energis recorded in the table above represents
the Energis shares held within fixed asset investments (note 14), but not those
included within assets held for exchange (note 16). At 31 March 2002, 29.9m
(2001: 29.9m) Energis shares (book value: £nil; market value £0.8m), (2001:
book value: £21.9m; market value: £83.5m) included within fixed asset
investments, had been loaned to a financial institution under the terms of a
stock lending agreement. This agreement provides for a fee to be paid to the
Group and the loan of shares is secured by an equivalent value of readily
marketable securities.
A full list of all Group and associated undertakings is attached to the
Companys Annual Return filed with the Registrar of Companies.
National Grid Annual Report and Form 20-F 2001/02
75
31 Post balance sheet event
On 22 April 2002 the Boards of National Grid Group plc and Lattice Group plc
(Lattice) unanimously agreed and announced the terms of a recommended merger.
Under the terms of the merger, National Grid shareholders will retain their
shares in National Grid (to be renamed National Grid Transco) and Lattice
shareholders will receive 0.375 National Grid Transco shares for each Lattice
share. Upon completion of the merger, National Grid shareholders will hold
approximately 57.3 per cent and Lattice shareholders will hold approximately
42.7 per cent of the issued share capital of National Grid Transco, based on
the issued share capital of the two companies at the date of the announcement.
It is intended to account for the merger in accordance with merger accounting principles.
32 Differences between UK and US accounting principles
The Group prepares its consolidated accounts in accordance with UK GAAP, which
differ in certain significant respects from US GAAP. The significant
differences between UK GAAP and US GAAP are set out below.
Deferred taxation
The deferred tax liability under US GAAP is analysed as follows:
Pensions
Under US GAAP, pension costs are determined in accordance with the requirements
of SFAS 87 and 88 and pension disclosures are presented in accordance with SFAS
132. Differences between UK GAAP and US GAAP figures arise from the requirement
to use different actuarial methods and assumptions and a different method of
amortising certain surpluses and deficits. Under US GAAP, the Company has
estimated the effect on net income and shareholders equity assuming the
adoption and application of SFAS 87 Employers Accounting for Pensions as of
1 April 1996, as the adoption of SFAS 87 on the actual effective date of 1
April 1989 was not feasible. The unrecognised transition asset at 1 April 1989,
using the financial assumptions at 1 April 1996, amounted to £171.5m and is
being amortised over 15 years commencing 1 April 1989.
Under UK GAAP, as explained in note 7, net interest includes a credit of £8.1m
(2001: £15.7m; 2000: £3.5m) in respect of the notional interest element of the
variation from the regular pension cost. Under US GAAP, this credit is not
recognised.
The net periodic (credit)/cost for pensions and other post-retirement benefits
are as follows:
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
76
32 Differences between UK and US accounting principles
continued
Pensions
continued
The additional cost incurred in respect of severance cases computed in
accordance with SFAS 88 Employers Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits is as follows:
The principal financial assumptions used for the SFAS 87 calculations in
respect of the UK and USA defined benefit schemes are shown below.
The assumptions used for other post-retirement costs relate solely to USA
schemes. These assumptions were that the discount rate used would be 7.5% and
that medical costs would increase by 10.0%, decreasing to 5.0% in 2007 and
remain at 5.0% thereafter.
A reconciliation of the funded status of the Group pension and other
post-retirement schemes to the prepaid/(accrued) cost that would appear in the
Groups balance sheet if prepared under US GAAP is as follows:
National Grid Annual Report and Form 20-F 2001/02
77
32 Differences between UK and US accounting principles
continued
Pensions
continued
It is estimated that a one per cent change in the assumed health care cost
trends would increase or decrease the accumulated post-retirement benefit
obligation as at 31 March 2002 by £90.9m (2001: £53.9m) and £82.3m (2001:
£48.2m) respectively. There would be an immaterial effect on the net periodic
cost for the year ended 31 March 2002.
Shares held by employee share trusts
Share option schemes
The average fair value of the options granted during each of the three
financial years ended 31 March 2002 are estimated as follows:
The fair value of the options granted are estimated using the Black-Scholes
European option pricing model using the following principal assumptions:
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
78
32 Differences between UK and US accounting principles
continued
Ordinary dividends
Tangible fixed assets
Financial instruments
Under US GAAP, as required by SFAS 133 Accounting for Derivative Instruments
and Hedging Activities, all derivative financial instruments including
derivatives embedded within other contracts, are required to be recognised in
the balance sheet as either assets or liabilities and measured at fair value.
SFAS 133 only permits hedge accounting in specific circumstances, where the
hedge is identified as one of three types: fair value; cash flow or foreign
currency exposures of net investments in foreign operations. Provided that it
can be demonstrated that the hedge is highly effective and the relevant hedging
criteria have been met, then in respect of fair value hedges, both the change
in fair value of the derivative and hedged item are reflected in net income in
the period of the change; for cash flow hedges and hedges of foreign currency
exposures of net investments in foreign operations, changes in fair value are
reflected through other comprehensive income. In the event that the conditions
for hedge accounting are not met, then changes in the fair value of a
derivative is reflected in net income.
The primary differences that arise between UK GAAP and US GAAP result from the
different criteria that are applied under UK GAAP and US GAAP to permit the use
of hedge accounting, and the application of different measurement criteria.
Equity Plus Income Convertible Securities (EPICs)
US GAAP requires the carrying value of the EPICs to be adjusted to the
settlement amount of the debt, which is linked to the Energis plc share price
as described in note 19.
Regulatory assets
Under UK GAAP, regulatory assets established in accordance with the principles
of SFAS 71 are recognised where they comprise rights or other access to future
economic benefits which arise as a result of past transactions or events which
have created an obligation to transfer economic benefit to a third party.
Measurement of the past transaction or event and hence of the regulatory asset
is determined in accordance with UK GAAP. Where the application of UK GAAP
results in the non or partial recognition of an obligation compared with US
GAAP, any related regulatory asset is either not or partially recognised. In
certain circumstances, regulatory assets may be reported net of related
regulatory liabilities.
Recognition of income
Severance and integration costs
Under US GAAP, certain reorganisation costs relating to an acquired entity are
included in liabilities in determining the fair value of net assets acquired.
Under UK GAAP such costs are not recognised as liabilities of the acquired
entity at the date of acquisition and are treated as post acquisition costs.
National Grid Annual Report and Form 20-F 2001/02
79
32 Differences between UK and US accounting principles
continued
Goodwill
Under UK GAAP, goodwill is amortised over its expected useful economic life of
up to 20 years. Under US GAAP, National Grid, with the exception of its
associated undertaking, has adopted SFAS 142 Accounting for Goodwill and Other
Intangible Assets with effect from 1 April 2001. SFAS 142 requires that
amortisation of goodwill should be replaced by periodic reviews for impairment.
Share of joint ventures and associates adjustments to conform with US GAAP
Reconciliation of net (loss)/income to US GAAP
Net (loss)/income under US GAAP includes net losses of £892.9m (2001: net gains
£527.9m; 2000: net gains £795.7m) which are treated as exceptional items under
UK GAAP.
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
80
32 Differences between UK and US accounting principles
continued
Reconciliation of equity shareholders funds to US GAAP
Reconciliation of US GAAP to UK GAAP cash flow headings
Under US GAAP, in contrast to UK GAAP, cash and cash equivalents do not include
bank overdrafts but do include deposits and investments with original
maturities of three months or less.
Set out below is a summary of the Group cash flow statement under US GAAP:
(i) Net cash provided by operating activities comprises net cash inflow from
operating activities, dividends from joint ventures, returns on investments and
servicing of finance, excluding costs relating to the issue of debt and
taxation.
(ii) Net cash used in investing activities comprises capital expenditure,
acquisitions and disposals and the component of management of liquid resources
which comprises deposits with an original maturity of more than three months.
(iii) Net cash provided by/(used in) financing activities comprises equity
dividends paid, financing, including costs relating to the issue of debt, and
movements in bank overdrafts.
National Grid Annual Report and Form 20-F 2001/02
81
32 Differences between UK and US accounting principles
continued
Comprehensive (loss)/income
Cumulative foreign exchange losses recognised in other comprehensive income at
31 March 2002 under US GAAP were £30.9m (2001: £22.0m; 2000: £18.9m).
Other differences between UK and US GAAP
UK GAAP requires the investors share of operating profit or loss, interest and
taxation relating to associates and joint ventures to be accounted for and
disclosed separately from those of Group undertakings. Under US GAAP, the
investors share of the after tax profits and losses of joint ventures and
associates is included within the income statement as a single line item. UK
GAAP requires the investors share of gross assets and gross liabilities of
joint ventures to be shown on the face of the balance sheet. Under US GAAP, the
net investment in joint ventures is shown as a single line item.
The Group reviews all long-lived assets for potential impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Under UK GAAP, recognition and measurement of
impairment is determined on the basis of discounted cash flows attributable to
income generating units. Under US GAAP, impairments on long-lived assets are
determined in accordance with SFAS 121 Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and are
recognised on the basis of undiscounted future cash flows and measured on the
basis of discounted future cash flows. This difference has no effect on the
Group accounts for the three years ended 31 March 2002.
Under UK GAAP, assets in the balance sheet are presented in ascending order of
liquidity and the balance sheet is analysed between net assets and
shareholders funds. Under US GAAP, assets are presented in descending order of
liquidity and the balance sheet is analysed between total assets and
liabilities and shareholders funds.
Under US GAAP, debtors falling due after more than one year of £4,054.4m (2001:
£1,053.9m (restated)) and provisions for liabilities and charges of £3,034.3m
(2001: £1,521.0m (restated)) as measured under UK GAAP would be classified as
non-current assets and non-current liabilities respectively.
Under UK GAAP, the assets held for exchange are included in current assets.
Under US GAAP, the assets held for exchange are classified as part of the
investment in an associate and are equity accounted.
Under UK GAAP, fixed rate long-term debt acquired as part of the acquisition of
Niagara Mohawk has been included in the balance sheet at 31 March 2002 at the
fair value of that debt at the date of acquisition, with a corresponding
regulatory asset for the difference between the book value and fair value being
recognised, amounting to £165.4m. Both the fair value adjustment to long-term
debt and regulatory asset are being amortised over the remaining term of the
debt. Under US GAAP, this fixed rate debt is carried at book value, as the book
value of debt reflects the regulatory value of the debt, and the Group will be
recovering financing costs from customers based on this book value.
National Grid Annual Report and Form 20-F 2001/02
Notes to the accounts
continued
82
32 Differences between UK and US accounting principles
continued
New US Accounting Standards adopted during 2001/2002
SFAS 133, as amended by SFAS 137 and SFAS 138, establishes accounting and
reporting standards for derivative financial instruments and hedging
activities. The effect of adopting SFAS 133 at 1 April 2001 has been to reduce
US GAAP net income and equity shareholders funds by £13.9m (net of tax).
SFAS 141 requires that the purchase method of accounting be used for all
business combinations initiated after 30 June 2001. The requirements of SFAS
141 have been applied in accounting for the acquisition of Niagara Mohawk.
SFAS 142 requires that goodwill should no longer be amortised and that it must
be reviewed for impairment (transitional goodwill impairment test) within six
months of adoption, and annually thereafter. The transitional goodwill
impairment test, conducted at 1 April 2001 and the annual impairment test
carried out at 31 March 2002, revealed that National Grid had no impairment to
recognise. If SFAS 142 had been in effect for the years ending 31 March 2001
and 31 March 2000, reported income under US GAAP would have been higher by
£70.9m and £1.3m respectively.
New US Accounting Standards and pronouncements not yet effective
In August 2001, FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets which supersedes SFAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
Whilst SFAS 141 retains many of the recognition and measurement provisions of
SFAS 121, it excludes goodwill not being amortised from its impairment
provisions and significantly changes the criteria that have to be met in order
to classify long-lived assets as held-for-sale. SFAS 144 also supersedes
the provisions of APB 30 Reporting the Results of Operations Reporting the
Effects of Disposal of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions. SFAS 144 requires that expected future
operating losses from discontinued operations be reported in the periods the
losses are incurred rather than as of the measurement date. The provisions of
SFAS 144 are effective for National Grid with effect from 1 April 2003. As the
provisions of SFAS 144 are to be applied prospectively, the impact on National
Grid, if any, will depend upon the circumstances existing at that time.
National Grid Annual Report and Form 20-F 2001/02
Glossary of terms
83
National Grid Annual Report and Form 20-F 2001/02
Risk factors
84
Proposed Lattice merger
The proposed merger with Lattice is subject to the approval of the shareholders
of both National Grid and Lattice, satisfaction of certain regulatory
conditions, and sanction of the Lattice Scheme by the Court. It is expected
that the regulatory approvals will be received so that completion of merger can
occur in the autumn of 2002.
There is also the risk that the merger will not generate the savings and
benefits as expected. The Chairmans statement on page 2 notes that the
combined management team have a proven track record, demonstrating that the
Group has the abilities required.
Business performance
Earnings maintenance and growth from the UK regulated electricity industry is
dependent upon outperforming regulatory efficiency targets set by Ofgem.
Generally, over time, the continued ability to make efficiency improvements
will decline. National Grid has published cost and efficiency saving targets
for its UK regulated business. To meet these targets National Grid must
continue to improve management and operational performance. Earnings are
increasingly dependent on the performance of the US regulated businesses. Under
the state rate plans, the ability to deliver integration savings will affect
earnings. To meet National Grids announced savings targets for its acquisition
of Niagara Mohawk, National Grid must improve efficiency and reduce costs. US
earnings are also dependent on meeting service quality standards set by state
regulators. In order to meet such standards, National Grid must improve service
reliability and customer service.
National Grids core skills are the design, construction, system operation,
regulatory management and customer service activities associated with operating
complex networks. National Grid aims to continually improve these skills. These
skills allow National Grid to address these and other business performance
risks. For more information see Outlook on page 4 and Operating and
financial review starting on page 5.
Regulation
Most of National Grids businesses are utilities that are subject to regulation
by authorities of the UK, the US, the EU or other jurisdictions. Decisions by
regulators concerning permitted revenues and rates of return, market trading
arrangements, the facilitation of competition in markets in which National Grid
operates and proposed acquisitions or mergers could have an adverse impact on
National Grids business, including its results of operations, cash flow,
financial condition and ability to develop its business in the future. For
instance, National Grid believes it is positioned in the US market to take
advantage of the development of RTOs. Whilst National Grid is in discussion
with a number of parties, further agreements among the parties and FERC are
required. Adverse decisions by FERC would affect National Grids ability to
become an independent transmission company.
National Grids core skills are the design, construction, system operation,
regulatory management and customer service activities associated with operating
complex networks. These skills allow National Grid to address
these and other regulatory risks. For more information see Transmission
business development on page 9. For a description of current UK regulation see
Electricity networks England and Wales on pages 6 and 7. For a description
of current US regulation see Electricity and gas networks US on pages 8 to
11.
Commodity risk
The costs incurred by National Grid in purchasing electricity are subject to
movements in underlying commodity prices, particularly of oil and gas.
Regulatory arrangements in the UK and US provide some ability to pass through
higher prices. For more information see Electricity networks England and
Wales on pages 6 and 7 and Electricity and gas networks US on pages 8 to
11.
Operational performance
Electricity and gas utilities are subject to certain risks mainly outside of
their control such as weather or possible security breaches. Unusually hot or
cold weather will affect revenues, particularly in the US. Severe weather that
causes outages or damages infrastructure will adversely affect revenues. The
Group has security protocols and business continuity plans in place to manage
these types of risks but cannot ensure they are adequate for all risks.
Joint ventures
National Grids investments in joint ventures are subject to risks normally
associated with ventures that are not majority owned. National Grid is not able
to exercise complete control over the joint venture operations and may be
dependent on the actions of the other joint owners regarding decisions such as
continued funding or interest in the business. The health of the joint venture
is also dependent upon the financial health of the other owners. The problems
associated with National Grids joint venture telecoms highlight these risks.
Following a review of National Grids telecoms investments, the Group has
decided to concentrate on its wholly-owned infrastructure businesses. For more
information see Other electricity businesses and projects on page 12 and
Telecoms on page 13.
Safety and environmental
Aspects of the Groups business are inherently dangerous, such as the operation
and maintenance of high voltage transmission lines and the transmission and
distribution of natural gas. Electricity and gas utilities typically utilise
and generate in their operations a range of potentially hazardous products and
by-products. The Group is subject to numerous laws and regulations in each of
the jurisdictions in which it operates relating to pollution, the protection of
the environment, the generation, storage, handling, transportation, treatment,
disposal and remediation of hazardous substances and waste materials, and the
health and safety of employees and the general public. National Grid requires
all operating companies to comply fully with all relevant laws and regulations.
For a description of National Grids approach to business responsibility see
Our framework for a responsible business on page 14.
National Grid Annual Report and Form 20-F 2001/02
85
Financial measures
National Grid is subject to certain covenants and limits in relation to listed
debt and bank lending facilities. Such limits may hinder National Grid in the
servicing of current businesses or the financing of new businesses. National
Grids debt is rated by credit rating agencies and these ratings may impact the
borrowing capacity of the Group.
In order to take advantage of National Grids current financing authority under
the Public Utility Holding Company Act of 1935, National Grid must maintain an
equity capitalisation ratio calculated on a US GAAP basis of at least 30 per
cent. A large deterioration in the equity base through, for example, the write
down in the value of assets, or a large increase in debt through, for example,
business expansion, currency or fair value adjustments could cause National
Grid to not meet this requirement.
The Group manages these risks in part through the operations of its Treasury
Policy Committee, a committee of the Board, which is responsible for the
regular review and monitoring of treasury activity. For further information see
Treasury policy on page 23.
Interest rates
A proportion of National Grids borrowings are subject to interest rates that
may fluctuate with certain prevailing interest rates. Increases in these
prevailing interest rates would result in increased costs for the Group.
Interest rates are among the items regularly reviewed by the Treasury Policy
Committee, a committee of the Board. For further information see Interest rate
risk on page 23.
Foreign currency exchange/Foreign operations
National Grid has significant international operations and conducts business in
many currencies. These operations are subject to the risks normally associated
with international operations, including the need to translate foreign currency
denominated assets and profits into National Grids reporting currency.
Other risks of international operations include trade barriers, tariffs,
exchange controls, national and regional labour strikes, social and political
risks, general economic risks, required compliance with a variety of foreign
laws, including tax laws, and the need to enforce agreements and collect
receivables through foreign legal systems. For example, National Grids
investment in Transener has been impacted by the devaluation of the Argentine
peso. Transener could default on its debt obligations without government
intervention. Currency risk is among the items regularly reviewed by the
Treasury Policy Committee, a committee of the Board. For further information
see Currency risk on page 25.
Technological change
National Grids principal business is the transmission and distribution of
electricity via lines and cables. It is therefore vulnerable to certain types
of technological changes. Examples of possible changes are growth in
distributed generation, renewable energy sources, fuel cells and the
introduction of an alternative power carrier. Directors are briefed on
technology issues and the Group invests each year in research and development.
For more information see Research and development on page 31.
Business development
The Group is subject to the risk that any business development will be based on
incorrect assumptions or conclusions or that substantial liabilities will be
overlooked. The Group has a business development process in place and ultimate
responsibility for certain decisions falls to the Directors. For further
information see Directors on page 32.
Internal controls
There is a risk that, with the rate of organisational change and development,
management may become distracted from the core business of the Group with
adverse consequences. To ensure that the business remains focused the Group has
in place an established a system of internal control. For more information see
Internal control on page 33.
National Grid Annual Report and Form 20-F 2001/02
Investor information
86
Exchange rates
The following tables set out, for the periods indicated, certain information
concerning the noon buying rate in New York City for cable transfers in pounds
sterling, as certified for customs purposes by the Federal Reserve Bank of New
York (the Noon Buying Rate) expressed in US dollars per £1.00.
Market prices
The following tables set out for the
periods indicated the highest and lowest
closing middle-market quotations for
ordinary shares, as derived from the
Official List, and the ADS equivalent of
such prices, or where available the
actual ADS price. Prices for periods up
to 9 February 1998 are adjusted to take
account of the share consolidation and
special dividend.
Trading markets for ordinary shares
National Grids ordinary shares have been listed on the London Stock Exchange
since 11 December 1995. National Grids ADSs have had a full listing on the New
York Stock Exchange since 7 October 1999.
Defaults, dividend arrearages and delinquencies
There has been no material default in the payment of principal, interest, a
sinking or purchase fund instalment or any other material default with respect
to any indebtedness for or in respect of monies borrowed or raised by whatever
means of the Company or any of its significant subsidiaries. There have been no
arrears in the payment of dividends on, and no material delinquency with
respect to, any class of preferred stock of any significant subsidiary of the
Company.
Exchange controls
There are currently no UK laws, decrees or regulations that restrict the export
or import of capital, including, but not limited to, foreign exchange control
restrictions, or that affect the remittance of dividends or other payments to
non-UK resident holders of ordinary shares except as otherwise set out in
Taxation below and except in respect of the governments of and/or certain
citizens, residents or bodies of Iraq, the Federal Republic of Yugoslavia,
Serbia, Burma and Afghanistan (in each case as more particularly described in
applicable Bank of England Notices or European Union Council Regulations in
force as at the date of this document).
Taxation
The following summary describes the principal US Federal income and UK tax
consequences to beneficial owners of ADSs or ordinary shares who are residents
of the United States. The summary is not a complete analysis or listing of all
of the possible tax consequences of ownership and does not discuss special tax
rules that may be applicable to certain classes of investors, including banks,
insurance companies, securities dealers, investors with a functional currency
other than the US dollar and any corporation which, alone or together with one
or more corporations which are treated as associated for the purposes of the
US/UK taxation convention relating to income and capital gains (the Income Tax
Convention), directly or indirectly controls 10 per cent or more of the voting
share capital of National Grid. The statements regarding US Federal tax laws
set out below are based (i) on the US Internal Revenue Code of 1986, as amended
(the Code) and regulations issued thereunder, all of which are subject to
change, possibly with retroactive effect and (ii) in part on representations of
The Bank of New York as depositary (the Depositary) and assume that each
obligation provided for in or otherwise contemplated by the deposit agreement
entered into by and among National Grid, the Depositary and the registered
holders of ADRs pursuant to
National Grid Annual Report and Form 20-F 2001/02
87
which ADRs have been issued dated as of 21 November 1995 and amended and
restated as of 31 January 2002 (the Deposit Agreement) and any related
agreement will be performed in accordance with its terms. The statements
regarding UK tax set out below are based on UK domestic law and the Income Tax
Convention as in force on the date of this document and on what is understood
to be the practice of the UK Inland Revenue as at such date and are subject to
any change therein (including any change having retroactive effect). Beneficial
owners of the ADSs who are residents or citizens of the United States will be
treated as the owners of the underlying ordinary shares for the purposes of the
Code.
For the purposes of this discussion, the term US Holder refers to a
beneficial owner of ADSs or ordinary shares who is a resident of the United
States for US Federal income tax purposes and, as to the description under
Taxation of dividends and Taxation of capital gains below, is also a
resident of the United States for the purposes of the Income Tax Convention.
Taxation of dividends
The tax credit to which UK resident individual shareholders are generally
entitled in respect of any dividend on their ordinary shares and which they can
set against their total income tax liability is equal to one-ninth of the cash
dividend (10 per cent of the aggregate of the tax credit and the cash
dividend). Under the terms of the Income Tax Convention, US residents and
corporations controlling less than 10 per cent of the voting share capital of
National Grid are technically entitled to a refund (the Tax Treaty Payment)
in respect of dividends paid by National Grid calculated by reference to the
amount of the tax credit available to a UK individual, less a withholding.
However, the combination of the reduction in the value of the tax credit on
dividends paid to UK individuals to one-ninth of the cash dividend and the
withholding means that no Tax Treaty Payments will be made to those US Holders
holding less than 10 per cent of the voting share capital of National Grid.
Taxation of capital gains
A US Holder who is not resident or ordinarily resident for UK tax purposes in
the UK will not be liable for UK taxation on capital gains realised or accrued
on the sale or other disposal of ADSs or ordinary shares unless the US Holder
carries on a trade, profession or vocation in the UK through a branch or agency
and such ADSs or ordinary shares are or have been used, held or acquired for
the purposes of such trade, profession or vocation or such branch or agency. A
US Holder will be liable for US Federal income tax on gains on the sale of ADSs
or ordinary shares to the same extent as on any other gains from sales of
stock. Gain, if any, will generally be US source.
A US citizen who is resident or ordinarily resident in the UK, a US corporation
which is resident in the UK by reason of its business being managed and
controlled in the UK or a US citizen who, or US corporation which, is trading
or carrying on a profession or vocation in the UK through a branch or agency
and has used, held or acquired ADSs or ordinary shares for the purpose of such
trade, profession or vocation or such branch or agency, may be liable for both
UK and US tax on a capital gain recognised on the disposal of ADSs or ordinary
shares. Such holder, however, will generally be entitled to foreign tax credit,
subject to certain limitations, against any
US Federal tax liability for the amount of any UK tax (namely capital gains tax
in the case of an individual and corporation tax on chargeable gains in the
case of a corporation) which is paid in respect of such gain.
A US Holder who becomes resident in the UK after a period of temporary
non-residence (of up to five years) following an earlier period of residence in
the UK may also be liable to UK capital gains tax.
UK stamp duty and stamp duty reserve tax (SDRT)
Transfers of ordinary shares
Generally speaking SDRT at the rate of 0.5 per cent of the amount or value of
the consideration paid is payable where an agreement, to transfer ordinary
shares is not completed by a duly stamped transfer to the transferee. Where an
instrument of transfer is executed and duly stamped before the expiry of the
period of six years beginning with such date, the SDRT liability will be
cancelled, and any SDRT which has been paid will be refunded. SDRT is due
whether or not the agreement or transfer of such chargeable securities is made
or carried out in the UK and whether or not any party to that agreement or
transfer is a UK resident.
Purchases of ordinary shares completed by execution of a stock transfer form
will generally give rise to a liability to UK stamp duty at the rate of 0.5 per
cent (rounded up to the nearest £5) of the actual consideration paid.
Paperless transfers under the CREST paperless settlement system will generally
be liable to SDRT at the rate of 0.5 per cent, and not stamp duty.
The transfer of ordinary shares where there is no change of beneficial
ownership will generally attract fixed rate stamp duty of £5 per transfer.
SDRT is generally the liability of the purchaser and UK stamp duty is usually
paid by the purchaser or transferee.
Transfer of ADSs
No UK stamp duty will be payable on the acquisition or
transfer of existing ADSs or beneficial ownership of ADSs, provided that any
instrument of transfer or written agreement to transfer is executed outside the
UK and remains at all times outside the UK. An agreement for the transfer of
ADSs in the form of American Depositary Receipts (ADRs) will not give rise to a
liability for SDRT. On a transfer of ordinary shares from the London, England
office of The Bank of New York as agent of the Depositary (the Custodian) to
a holder of ADSs upon cancellation of the ADSs, only a fixed stamp duty fee of
£5 per instrument of transfer will be payable. Any transfer for value of the
underlying ordinary shares represented by ADSs may give rise to a liability on
the transferee to UK stamp duty or SDRT.
A charge to stamp duty or SDRT may arise on the issue or transfer of ordinary
shares to the Depositary or the Custodian. The rate of stamp duty or SDRT will
generally be 1.5 per cent of either (i) in the case of an issue of ordinary
shares, the issue price of the ordinary shares concerned, or (ii) in the case
of a transfer of ordinary shares, the value of the consideration or, in some
circumstances, the value of the ordinary shares concerned. The Depositary will
generally be liable for the stamp duty or SDRT. In accordance with the terms of
the Depositary Agreement, the Depositary will charge any tax payable by the
Depositary or the Custodian (or their nominees) on the deposit of ordinary
shares to the party to whom the ADSs are delivered against such deposits.
National Grid Annual Report and Form 20-F 2001/02
Investor information
continued
88
If the stamp duty is not already a multiple of £5, the duty will be rounded up
to the nearest multiple of £5.
US information reporting and backup withholding
A US resident Holder who holds ADSs may in certain circumstances be subject to
information reporting to the IRS and possible US backup withholding at a rate
of 30 per cent with respect to dividends on ADSs and proceeds from the sale or
other disposition of ADSs unless such holder furnishes a correct taxpayer
identification number or is otherwise exempt.
UK inheritance tax
An individual who is domiciled in the US for the purposes of the convention
between the US and the UK for the avoidance of double taxation with respect to
estate and gift taxes (the Estate Tax Convention) and who is not a national
of the UK for the purposes of the Estate Tax Convention will generally not be
subject to UK inheritance tax in respect of the ADSs on the individuals death
or on a gift of the ADSs during the individuals lifetime, unless the ADSs are
part of the business property of a permanent establishment of the individual in
the UK or pertain to a fixed base in the UK of an individual who performs
independent personal services. Special rules apply to ADSs held in trust. In
the exceptional case where the shares are subject both to UK inheritance tax
and to US Federal gift or estate tax, the Estate Tax Convention generally
provides for the tax paid in the UK to be credited against tax paid in the US.
Memorandum and Articles of Association
The following description is a summary of the material terms of National Grids
share capital and material provisions of the Memorandum and Articles of
Association of National Grid (the Articles) and English law. The following
description is a summary only and is qualified in its entirety by reference to
the Articles, which have been filed with the US Securities and Exchange
Commission, and the Companies Act 1985, as amended (the Companies Act).
National Grids authorised share capital is 2,500,000,000 ordinary shares of 10
pence each and one special rights non-voting redeemable preference share of £1.
All of the outstanding shares are fully paid. Accordingly, no further
contribution of capital may be required by National Grid from the holders of
such shares.
General
National Grid is incorporated under the name National Grid Group plc
and is registered in England and Wales with registered number 4031152. The
Companys objects are set forth in the fourth clause of its Memorandum of
Association and cover a wide range of activities, including the following:
The Memorandum of Association grants National Grid a broad range of corporate
powers to effect these objectives.
Directors
The Articles provide that unless otherwise determined by an ordinary
resolution of the Companys shareholders, the number of Directors shall not be
less than two but shall not be subject to any maximum number. Under the
Articles, a Director may not vote in respect of any contract in which the
Director, directly or indirectly, has an interest. This is subject to certain
exemptions relating to (a) giving the Director any guarantee, security or
indemnity in respect of obligations incurred at the request of or for the
benefit of National Grid, (b) giving any guarantee, security or indemnity to a
third party in respect of obligations of National Grid for which the Director
has assumed responsibility under an indemnity or guarantee, (c) an offer of
securities of National Grid in which the Director may be entitled to
participate or will be interested as an underwriter, (d) any contract
concerning any other company in which the Director is beneficially interested
in less than one per cent of that other company, (e) any arrangement for the
benefit of employees of National Grid under which he benefits in a similar
manner as the employees and (f) any contract concerning any insurance that
National Grid is empowered to purchase or maintain for its Directors.
The compensation awarded to Executive Directors is decided by a remuneration
committee, which consists exclusively of Non-executive Directors.
The Directors are empowered to exercise all the powers of National Grid to
borrow money, subject to the limitation that the aggregate principal amount
outstanding of all borrowings shall not exceed an amount equal to four times
National Grids share capital and aggregate reserves, calculated in the manner
described in the Articles, unless sanctioned by an ordinary resolution of the
Companys shareholders.
Any Director not otherwise required to retire at an annual general meeting of
shareholders shall do so unless he was appointed or re-appointed as a Director
at either of the last two annual general meetings before that meeting. At each
annual general meeting at least one-third of the Directors (or, if their number
is not a multiple of three, the number nearest to but not greater than
one-third) shall retire from office by rotation. A retiring Director shall be
eligible for re-election. No Director shall be required to retire by reason
only of the fact that he has attained the age of 70 or any other age.
A Director is not required to hold shares of National Grid in order to qualify
as a Director.
The Special Share
Any one of Her Majestys Secretaries of State, another
Minister of the Crown, the Solicitor for the affairs of HM Treasury or any
other person acting on behalf of the Crown may hold the special share. The
registered holder of the special share may, after consulting National Grid and
subject to the provisions of the Companies Act, require National Grid to redeem
the special share at par at any time. The holder of the special share has the
right to receive notice of, and to attend and speak at, any general meeting or
any separate meeting of the holders of any class of shares, but the special
share confers no right to vote nor any other rights at any shareholders
meeting. The special share confers no right to participate in National Grids
capital or profits except that, on a distribution of capital in a winding-up,
the holder of the special share is entitled to repayment of £1 in priority to
other shareholders.
National Grid Annual Report and Form 20-F 2001/02
89
Each of the following actions is effective only with the written consent of the
holder of the special share:
Ordinary Shares
Dividends and Other Distributions:
National Grid may not pay
any dividend otherwise than out of profits available for distribution under the
Companies Act and the other applicable provisions of English law. In addition,
as a public company, National Grid may make a distribution only if and to the
extent that, at the time of the distribution, the amount of its net assets is
not less than the aggregate of its called-up share capital and undistributable
reserves (as defined in the Companies Act). Subject to the foregoing,
National Grid may, by ordinary resolution, declare dividends in accordance with the
respective rights of the shareholders but not exceeding the amount recommended
by the Board of Directors. The Board of Directors may pay interim dividends if
the Board of Directors considers that National Grids financial position
justifies the payment.
Except insofar as the rights attaching to any share otherwise provide, all
dividends will be apportioned and paid proportionately to the amounts paid up
(otherwise than in advance of calls) on the shares.
A general meeting declaring a dividend may, upon the recommendation of the
Board of Directors, direct that the dividend be satisfied wholly or partly by
the distribution of assets and may be declared or paid in any currency. The
Board of Directors may, if authorised by a shareholders ordinary resolution,
offer the holders of ordinary shares the right to elect to receive new ordinary
shares credited as fully paid, instead of cash for all or part of the dividend
specified by that ordinary resolution.
National Grid may stop paying dividends or other monies payable in respect of a
share to a shareholder if in respect of at least two consecutive dividend
payments, through no fault of National Grid, has not been effected (or,
following one such occasion, reasonable enquiries have failed to establish any
new address of the holder or appropriate details for effecting payment by other
means). National Grid must resume payment of dividends or other monies payable
in respect of a share if the shareholder or person entitled by transmission
claims the arrears of dividend.
All dividends or other sums payable unclaimed for one year after having been
declared may be invested or otherwise made use of by the Board of Directors for
the benefit of National Grid until claimed. Any dividend or interest unclaimed
for 12 years from the date when it was declared or became due for payment will
be forfeited and revert to National Grid.
In a winding-up, a liquidator may, with the sanction of a special resolution of
National Grid and any other sanction required by applicable provisions of
English law, (a) divide among the shareholders the whole or any part of
National Grids assets (whether the assets are of the same kind or not) and may
for this purpose value any assets and determine how the division should be
carried out as between different shareholders or different classes of
shareholders or otherwise as the resolution may provide, or (b) vest the whole
or any part of the assets in trustees upon such trusts for the benefit of the
contributories as the liquidator, with the sanction of a special resolution,
determines, but in neither case will a shareholder be compelled to accept
assets upon which there is a liability.
Unless the Board of Directors determines otherwise, no shareholder holding
shares representing 0.25 per cent or more of any class of National Grids
shares will be entitled to receive payment of any dividend or other
distribution if he or any person appearing to be interested in those shares has
been given a notice under section 212 of the Companies Act and has failed to
give National Grid the information required by the notice within 14 days from
the date of service of the notice.
Voting rights:
Subject to any rights or restrictions attached to any shares and
to any other provisions of the Articles, at any general meeting on a show of
hands every shareholder who
National Grid Annual Report and Form 20-F 2001/02
Investor information
continued
90
is present in person will have one vote and on a poll every shareholder will
have one vote for every share which he holds. On a poll, shareholders may cast
votes either personally or by proxy and a proxy need not be a shareholder.
Under the Articles all special and extraordinary resolutions must be decided on
a poll.
In the case of joint holders of a share, the vote of the senior who tenders a
vote, whether in person or by proxy, will be accepted to the exclusion of the
votes of the other joint holders. Seniority will be determined by the order in
which the names of the holders appear in the register of shareholders.
Unless the Board of Directors otherwise determines, no shareholder, or person
to whom any of that shareholders holding is transferred other than by a
transfer approved under the Articles, can vote at any general meeting either in
person or by proxy in respect of any share in National Grid held by him:
Variation of Rights:
Subject to applicable provisions of English law and the
rights attached to any specific class of shares, the rights attached to any
class of shares of National Grid may be varied with the written consent of the
holders of three-fourths in nominal value of the issued shares of that class,
or with the sanction of an extraordinary resolution passed at a separate
meeting of the holders of the shares of that class. The applicable provisions
of English law and the Articles relating to general meetings will generally
apply to any such separate meeting except that:
Alteration of Capital
National Grid may by ordinary resolution increase,
consolidate and divide and sub-divide its share capital. Subject to applicable
provisions of English law, National Grid may by special resolution reduce its
share capital, any capital redemption reserve and any share premium account or
other undistributable reserve in any manner. Subject to applicable provisions
of English law and to any rights conferred on the holder of any class of
shares, National Grid may purchase all or any of its shares of any class
(including any redeemable shares).
General Limitations on Shareholdings
The Articles contain provisions which
limit interests in voting shares. These provisions are described briefly below:
There are limited exceptions to these restrictions relating principally to
holdings of a trustee or fiduciary nature and market clearing arrangements.
These restrictions do not apply to the Depositary acting in its capacity as
such.
National Grid Annual Report and Form 20-F 2001/02
91
Shareholding Restrictions on Persons who are bound by the Balancing and
Settlement Code or Licence Holders
The Articles contain additional restrictions
which are intended to prevent any person who is bound by the Balancing and
Settlement Code by virtue of being a party to the BSC Framework Agreement dated
14 August 2000, a holder of a licence under the Electricity Act 1989, or in
either case, any affiliate thereof, from having an interest in shares which
carry one per cent or more of the total votes attaching to the relevant share
capital of National Grid and capable of being cast on a poll.
The Board of Directors has the same rights as those set out under General Limitations on
Shareholdings above to require the sale or to sell sufficient numbers of
shares to bring the relevant interest within the permitted limit where these
provisions are breached.
Obligations Relating to the Transmission Licence Holder
The Articles provide
that National Grid must provide that, without the consent in writing of the
holder of the special share:
The restrictions set out in this sub-paragraph (e) would not prevent the
acquisition of any share capital by the transmission licence holder in any
company (subject to sub-paragraph (c)).
Annual General Meetings and Extraordinary General Meetings
Annual General Meetings must be convened upon advance written notice of 21
days. An Extraordinary General Meeting must be convened upon advance written
notice of 21 days for the passing of a special resolution and 14 days for any
other resolution, depending on the nature of the business to be transacted. The
notice must specify the nature of the business to be transacted. The notice
must also specify the place, the day and the time of the meeting.
Rights of Non-Residents
There are no restrictions under National Grids
Memorandum and Articles of Association that would limit the rights of persons
not resident in the UK, as such, to vote ordinary shares.
Disclosure of Interests
For purposes of the notification obligation, the interest of a person in shares
means any kind of interest in shares including interests in any shares (a) in
which a spouse, or child or stepchild under the age of 18 is interested, (b) in
which a corporate body is interested and either (1) that corporate body or its
directors generally act in accordance with that persons directions or
instructions or (2) that person controls one-third or more of the voting power
of that corporate body or (c) in which another party is interested and the
person and that other party are parties to a concert party agreement. A
concert party agreement is one which provides for one or more parties to
acquire interests in shares of a particular company and imposes obligations or
restrictions on any one of the parties as to the use, retention or disposal of
such interests acquired under the agreement, and any interest in the companys
shares is in fact acquired by any of the parties under the agreement. Some of
the interests (e.g. those held by certain investment fund managers) may be
disregarded for the purposes of calculating the three per cent threshold,
National Grid Annual Report and Form 20-F 2001/02
Investor information
continued
92
but the obligations of disclosure will still apply where those interests exceed
10 per cent or more of any class of the companys relevant share capital and to
increases or decreases of one per cent or more thereafter.
In addition, section 212 of the Companies Act provides that a public company
may send a written notice to a person whom the company knows or has reasonable
cause to believe to be, or to have been at any time during the three years
immediately preceding the date on which the notice is issued, interested in
shares constituting the companys relevant share capital. The notice will
require that person to state whether he has an interest in the shares, and in
case that person holds or had held an interest in those shares, to give
additional information relating to that interest and any other interest in the
shares of which that person is aware.
Where a company serves notice under the provisions described above on a person
who is or was interested in shares of the company and that person fails to give
the company any information required by the notice within the time specified in
the notice, the company may apply to an English court for an order directing
that the shares in question be subject to restrictions prohibiting, among other
things, any transfer of those shares, the taking up of rights in respect of
those shares and, other than in a liquidation, payments in respect of those
shares.
A person who fails to fulfill the obligations imposed by those provisions of
the Companies Act described above is subject to criminal penalties.
Material contracts
A summary of material contracts found in Part IX, Section 17.1 of the National
Grid Transco plc Listing Particulars is incorporated by reference herein.
Proposed Lattice Merger
A summary of terms for the proposed merger with Lattice found in Part I,
Section 1 and Sections 2.8-2.11 of the National Grid Transco plc Listing
Particulars is incorporated by reference herein.
Subsidiaries
Note 29 to the accounts (Group undertakings, joint ventures and associate) sets
out in respect of National Grids principal subsidiaries, its principal joint
ventures and the associate company Energis details including jurisdiction of
incorporation or formation and National Grids ownership interest.
Documents on display
National Grid is subject to the filing requirements of the US Securities
Exchange Act of 1934. In accordance with these requirements, National Grid
files reports and other information with the US Securities and Exchange
Commission (SEC). These materials, including this document, may be inspected
during normal business hours at National Grids registered office at 15
Marylebone Road, London NW1 5JD or at the SECs Public Reference Room at 450
Fifth Street, NW, Washington, DC 20549. For further information about the
Public Reference Room, please call the SEC on 1-800-SEC-0330. Some of National
Grids filings are also available on the SECs website at
www.sec.gov
.
National Grid Annual Report and Form 20-F 2001/02
93
Exhibits
The following have been filed with the
Securities and Exchange Commission or
will so be filed with the 2001/02
Annual Report and Form 20-F:
National Grid Annual Report and Form 20-F 2001/02
Cross reference to Form 20-F
94
National Grid Annual Report and Form 20-F 2001/02
95
National Grid Annual Report and Form 20-F 2001/02
Shareholder information
96
Analyses of shareholdings as at 29 May 2002:
Distribution of shares by type of shareholder
Distribution of shares by size of holding
In addition to the number of registered shareholders shown, there are
approximately 31,000 beneficial and 30,000 registered holders of ADSs.
Financial calendar
Shareholder queries
Queries from shareholders should be addressed to the Registrar, Lloyds TSB
Registrars, The Causeway, Worthing, West Sussex BN99 6DA (telephone 0870 600
3969, fax 0870 600 3980,
www.shareview.co.uk
).
Queries from holders of American Depositary Shares (ADSs) should be addressed
to the depositary, The Bank of New York, Shareholders Correspondence, PO Box
11258, New York, NY 10286-1258 (for calls inside the US, telephone
1-800-466-7215, for international calls telephone +1-610-312-5315, e-mail
shareowner-svcs@bankofny.com,
www.adrbny.com
).
Other documents available from National Grid
We send a copy of the Annual Review to all of our shareholders each year.
For the assistance of visually impaired shareholders, an audio tape version of
the Annual Review is produced and may be obtained free of charge by contacting
the Registrar, Lloyds TSB Registrars.
Shareholders may opt to receive copies of our Annual Report and Form 20-F which
contains the full accounts and additional information required by the
Securities and Exchange Commission in the US.
National Grids principal UK subsidiary, The National Grid Company plc, is the
holder of the electricity licence for England and Wales. Under the terms of
this licence it is required to provide to the regulator an accounting statement
for its licenced businesses. Copies of these statements are available from the
Registrar, Lloyds TSB Registrars.
National Grid has published the first Group-wide responsible business website
Connecting with the Future which can be found on our website at
www.nationalgrid.com
.
Other information about National Grid is also available on our website at
www.nationalgrid.com
.
Electronic communication
Information about National Grid is available via the internet on
www.nationalgrid.com
. Share price information, annual reports and shareholder
FAQs can be found in the Investors section.
Shareholders may elect to receive all shareholder communications, such as the
Annual Review and Notice of AGM by electronic means. Shareholders who wish to
take advantage of this service can register on our Registrars website
www.shareview.co.uk
. Registration is free. Once registered, shareholders will
receive notification by e-mail, when documentation is available with
instructions on how to view it. There are no particular software requirements
to view the documents, other than those described and available on our website,
www.nationalgrid.com
.
Shareholders who register to receive electronic notification but decide at any
time in the future that they would prefer to receive paper copies, may register
this preference on the website,
www.shareview.co.uk
, or by contacting the
Registrar at the address above.
Holders of ADSs may elect to receive some documents electronically by checking
the appropriate box on the reverse side of their voting instruction card.
Alternatively, they may call The Bank of New York at 1-800-466-7215.
Prior to general meetings of National Grid, ADS holders will be mailed a notice
of meeting with instructions on how to electronically access the Annual Review.
Shareholders or ADS holders who wish to continue to receive all communications
in paper form need take no action.
Contacts and Advisers
Principal offices
Principal advisers
Registered in England and Wales
EXHIBIT INDEX
a Future capital expenditure
Associate and
Group
joint ventures
2002
2001
2002
2001
£m
£m
£m
£m
360.8
396.8
26.2
90.1
At 31 March 2002, the Groups operating lease commitments for the financial
year ending 31 March 2003 amounted to £33.2m (2001: £11.9m) and are analysed by
lease expiry date as follows:
Land and buildings
Other
Total
2002
2001
2002
2001
2002
2001
£m
£m
£m
£m
£m
£m
0.8
0.1
2.2
1.1
3.0
1.2
1.9
1.3
11.7
4.5
13.6
5.8
7.3
2.6
9.3
2.3
16.6
4.9
10.0
4.0
23.2
7.9
33.2
11.9
2002
2001
£m
£m
33.2
11.9
28.7
10.7
25.9
8.4
23.9
6.4
18.6
5.5
159.0
34.6
289.3
77.5
2002
2001
£m
£m
1,340.1
1,037.3
1,188.9
670.8
1,057.1
644.9
684.3
545.2
691.5
277.4
2,350.1
1,238.6
7,312.0
4,414.2
In November 1999, New England Power (NEP), a National Grid subsidiary, entered
into an agreement with Northeast Utilities (NU) to settle claims made by NEP in
relation to the operation of the Millstone 3 nuclear unit. As part of this
agreement, NU agreed to include NEPs 16.2 per cent share in an auction of NUs
share in that unit, at a guaranteed price, irrespective of the price actually
received at auction. On 31 March 2001 the Millstone 3 sale was completed and
proceeds of US dollar 27.9m (£19.6m) were received by NEP. Millstone 3 was
subsequently sold to Dominion Resources Inc. for a total of approximately US
dollar 855.0m (£602.0m).
Table of Contents
On 25 May 2000, the New York State Department of Environmental Conservation
(DEC) issued an air pollution notice of violation to Niagara Mohawk regarding
the operation of its two formerly owned coal-fired generation plants (Huntley
and Dunkirk). The notice of violation was also issued to NRG Energy, Inc.
(NRG), the current owner and operator of both plants. While no specific relief
was sought in the notice of violation, the DEC and the New York State Attorney
General have indicated in meetings with Niagara Mohawk and NRG that they will
be seeking substantial fines against Niagara Mohawk and NRG as well as the
imposition of pollution controls. It is Niagara Mohawks position that the cost
of pollution controls should be borne by NRG.
The principal Group undertakings included in the Group accounts at 31 March
2002 are listed below. These undertakings are wholly-owned and, unless
otherwise indicated, are incorporated in Great Britain.
Principal activity
Holding company
Holding company
Holding company
Transmission of electricity in England and Wales
Holding company
Holding company
Investment company
Distribution of electricity
Distribution and transmission of electricity
Distribution of electricity
Transmission and generation of electricity
Distribution and transmission of electricity and gas
Holding company
(b) Issued ordinary share capital held by Group undertakings
at 31 March 2002
Country of
incorporation
Group holding
and operation
Principal activity
42.5% ordinary shares
Argentina
Transmission of electricity
38.5% ordinary shares
Zambia
Transmission, distribution and supply of electricity
50.0% ordinary shares
Brazil
Telecommunications
30.0% ordinary shares
Chile
Telecommunications
50.0% ordinary shares
Chile
Telecommunications
48.75% ordinary shares
Poland
Telecommunications
32.5% ordinary shares
Great Britain
Telecommunications
Table of Contents
Under UK GAAP, deferred taxation is provided in full on all material timing
differences with certain exceptions, as outlined in the Accounting
policies Deferred taxation. Under US GAAP, deferred tax is provided in full, using the
liability method, and requires the recognition of deferred taxation on all
timing differences except for non tax deductible goodwill.
2002
2001
£m
£m
1,713.9
1,124.4
1,376.4
222.7
3,090.3
1,347.1
(1,161.5
)
(126.5
)
1,928.8
1,220.6
12.2
11.3
1,916.6
1,209.3
1,928.8
1,220.6
Under UK GAAP, pension costs have been accounted for in accordance with SSAP 24
and disclosures have been provided in accordance with SSAP 24 and FRS 17.
Other post-retirement
Pensions
benefits
2002
2001
2000
2002
2001
£m
£m
£m
£m
£m
29.6
25.1
19.7
5.1
3.6
125.0
110.7
63.7
28.8
20.7
(11.6
)
(159.5
)
(141.7
)
(72.9
)
(20.8
)
(17.2
)
3.7
2.6
2.6
0.9
0.3
0.2
(11.4
)
(11.4
)
(11.4
)
(24.2
)
(14.7
)
2.6
13.4
7.3
(1.5
)
(1.5
)
(1.5
)
(25.7
)
(16.2
)
1.1
13.4
7.3
Table of Contents
The cost of providing other post-retirement benefits for the year ended 31
March 2000, which related to the period 22 March 2000 to 31 March 2000,
amounted to £0.2m.
2002
2001
2000
£m
£m
£m
46.3
4.1
10.3
USA
UK
2002
2001
2000
2002
2001
2000
%
%
%
%
%
%
7.5
7.3
7.8
6.0
5.5
5.5
7.5 9.0
8.8
8.5
7.0
5.8
6.0
3.25 4.5
4.0
5.1
3.8
3.3
4.0
nil
nil
nil
2.9
2.5
3.0
Other
Pensions
post-retirement benefits
2002
2001
2002
2001
£m
£m
£m
£m
(2,953.5
)
(1,906.5
)
(884.0
)
(316.2
)
2,698.2
2,095.8
396.8
202.3
(255.3
)
189.3
(487.2
)
(113.9
)
(23.1
)
(34.5
)
417.2
157.5
83.0
47.6
65.2
44.9
(1.6
)
204.0
357.2
(405.8
)
(66.3
)
Other
Pensions
post-retirement benefits
2002
2001
2002
2001
Changes in the projected benefit obligation are shown below:
£m
£m
£m
£m
1,906.5
1,655.5
316.2
228.8
5.3
(16.4
)
29.6
25.1
5.1
3.9
125.0
110.7
28.8
20.7
4.7
4.5
23.4
13.3
(1.6
)
39.7
4.1
6.6
0.2
118.0
12.2
24.7
15.2
(140.1
)
(121.8
)
(26.3
)
(17.5
)
900.6
119.7
532.5
51.2
(51.0
)
1.5
(4.4
)
77.9
(2.0
)
30.1
2,953.5
1,906.5
884.0
316.2
Table of Contents
Other
Pensions
post-retirement benefits
2002
2001
2002
2001
£m
£m
£m
£m
2,095.8
2,110.7
202.3
178.9
18.8
(150.0
)
10.3
(13.2
)
23.6
14.7
16.1
6.0
4.7
4.5
(140.1
)
(121.8
)
(20.2
)
(16.7
)
738.6
147.8
189.0
23.3
(40.6
)
1.5
(4.1
)
89.9
(0.7
)
24.0
2,698.2
2,095.8
396.8
202.3
Under UK GAAP, shares in the Company held by employee share trusts are recorded
as fixed asset investments at cost less amounts written off. Under US GAAP,
those shares not fully vested are regarded as treasury stock and recorded as a
deduction from shareholders equity.
As permitted under UK GAAP, no cost is accrued for share options awarded under
the Sharesave scheme where the exercise price of the options is below the
market value at the date of grant. In respect of the grant of options under the
Executive scheme, no cost is accrued under UK GAAP as the exercise price is
equivalent to the market value at the date of grant. As permitted by SFAS 123,
Accounting for Stock-Based Compensation, the Group has accounted for
compensatory share option schemes under APB 25 Accounting for Stock Issued to
Employees. Under the requirements of APB 25, the compensation costs relating
to the Sharesave and Executive schemes are amortised over the period from the
date of grant of options to the date those options are first exercisable. SFAS
123 prescribes a fair value method of recognising share option compensation
costs, the application of which would have no material effect on the Groups
reported net income or earnings per ordinary share.
2002
2001
2000
158.0
p
155.0
p
134.2
p
62.0
p
68.0
p
129.0
p
65.0
p
2002
2001
2000
3.5
2.7
4.1
30.0
30.0
33.0
5.4
5.9
5.8
4.2
4.0
4.2
Table of Contents
Under UK GAAP, final ordinary dividends are provided for in the year in respect
of which they are proposed by the Board of Directors for approval by the
shareholders. Under US GAAP, dividends are not provided until declared.
During the financial year ended 31 March 1990, an impairment provision was
recorded in respect of certain tangible fixed assets. Part of this impairment
provision was subsequently released and shareholders equity credited. Under US
GAAP this partial release would not be permitted.
Under UK GAAP, derivative financial instruments that qualify for hedge
accounting are recorded at their historical cost, if any, and are not
re-measured. Any related monetary assets or liabilities, including foreign
currency borrowings are translated at the hedged rate. In addition, under UK
GAAP, it is permissible to hedge account for the net assets of overseas
operations with hedging instruments denominated in currencies other than the
functional currencies of the overseas operations.
Under UK GAAP, EPICs are carried in the balance sheet at the gross proceeds of
the issue and the related issue costs were written-off in the year of issue.
Under US GAAP, the issue costs are deferred and written-off over the period to
the expected date of redemption of the EPICs on 3 May 2003.
SFAS 71 Accounting for Certain Types of Regulation establishes US GAAP for
utilities whose regulators have the power to approve and/or regulate rates that
may be charged to customers. Provided that through the regulatory process, the
utility is substantially assured of recovering its allowable costs by the
collection of revenue from its customers, such costs not yet recovered are
deferred as regulatory assets. Due to the different regulatory environment, no
equivalent accounting standard applies in the United Kingdom.
Under US GAAP, income is recognised in the period that the service is provided
up to the maximum revenue allowed under the terms of the relevant regulatory
regime. Under UK GAAP, any income received or receivable in excess of the
maximum revenue allowed for the period, under the terms of the relevant
regulatory regime, is recognised as income.
Under UK GAAP, severance costs are provided for in the accounts if it is
determined that a constructive or legal obligation has arisen from a
restructuring programme where it is probable that it will result in the outflow
of economic benefits and the costs involved can be estimated with reasonable
accuracy. Under US GAAP, severance costs are recognised when the employees
accept the severance offer. In addition, where the number of employees leaving
results in a significant reduction in the accrual of pension benefits for
employees future service (a curtailment under US GAAP), the effects are
reflected as part of the cost of such termination benefits. Accordingly, timing
differences between UK GAAP and US GAAP arise on the recognition of such costs.
Table of Contents
Under US GAAP, the fair value of net assets acquired is calculated in
accordance with US GAAP principles which differ in certain respects from UK
GAAP principles. As a result, the US GAAP fair value of net assets of Group
undertakings acquired differ from the fair value of net assets as determined
under UK GAAP principles.
The Groups share of the associated undertakings results and net assets, which
also impact on the exceptional profit relating to Energis and assets held for
exchange, have been adjusted to conform with US GAAP.
The following is a summary of the material adjustments to net (loss)/income
which would have been required if US GAAP had been applied instead of UK GAAP.
2002
2001
2000
(restated)
(restated)
£m
£m
£m
400.1
210.7
321.9
(893.4
)
453.5
800.1
(493.3
)
664.2
1,122.0
6.7
(27.2
)
34.8
29.4
18.9
5.7
(1.6
)
(5.3
)
(5.4
)
3.4
3.4
3.4
(82.8
)
(55.4
)
27.9
(1.8
)
(1.8
)
(1.8
)
203.1
152.5
(115.0
)
67.4
23.6
(11.3
)
(4.7
)
(17.0
)
78.4
(1.6
)
0.1
37.0
56.0
(50.6
)
(4.3
)
330.2
146.1
(112.2
)
(163.1
)
810.3
1,009.8
2002
2001
2000
£m
£m
£m
(163.1
)
810.3
1,009.8
21.2
20.9
(163.1
)
831.5
1,030.7
Number
Number
Number
million
million
million
1,526.8
1,475.8
1,472.9
1,526.8
1,596.0
1,593.3
(10.7
)p
54.9
p
68.6
p
(10.7
)p
52.1
p
64.7
p
Table of Contents
The following is a summary of the material adjustments to equity shareholders
funds which would have been required if US GAAP had been applied instead of UK
GAAP.
2002
2001
(restated)
£m
£m
3,196.6
2,673.5
(51.7
)
(47.2
)
216.5
178.7
(45.7
)
(10.2
)
169.0
133.5
(38.2
)
(41.6
)
(81.5
)
(45.5
)
1.9
3.7
240.6
37.5
14.8
(21.7
)
(17.0
)
34.4
105.1
34.1
20.7
21.3
(1.8
)
(0.8
)
562.4
246.5
3,759.0
2,920.0
The Group accounts include a cash flow statement prepared in accordance with
FRS 1 (Revised 1996) Cash Flow Statements (FRS 1 (revised)), the objectives
and principles of which are substantially the same as SFAS 95 Statement of
Cash Flows under US GAAP. The principal differences between FRS 1 (revised)
and SFAS 95 relate to the classification of items within the cash flow
statement and the definition of cash and cash equivalents. Under UK GAAP cash
flows are classified under eight standard headings whereas US GAAP only
requires presentation of cash flows from three activities, being operating
activities, investing activities and financing activities.
2002
2001
2000
£m
£m
£m
902.1
425.5
347.5
(1,199.7
)
(1,059.8
)
(736.2
)
221.5
(104.7
)
596.2
(76.1
)
(739.0
)
207.5
259.0
977.3
769.8
(4.6
)
20.7
178.3
259.0
977.3
212.6
271.2
1,011.6
(34.3
)
(12.2
)
(34.3
)
178.3
259.0
977.3
Table of Contents
Comprehensive (loss)/income under US GAAP is as follows:
2002
2001
2000
£m
£m
£m
(163.1
)
810.3
1,009.8
(5.0
)
(47.5
)
57.5
(8.9
)
(3.1
)
(18.1
)
7.6
31.9
(4.7
)
2.8
(174.1
)
794.4
1,049.2
Under US GAAP, turnover attributable to the country of domicile is required to
be identified. With minor exceptions, the vast majority of turnover
attributable to Europe identified in note 2a is in respect of sales made in
the United Kingdom.
Table of Contents
National Grid has adopted SFAS 133 Accounting for Derivative Instruments and
Hedging Activities, SFAS 141 Business Combinations and SFAS 142 Accounting
for Goodwill and Other Intangible Assets with effect from 1 April 2001.
However, the associate has not applied SFAS 142 with effect from this date and
consequently the US GAAP results reflect National Grids share of the
associates goodwill amortisation.
In June 2001, FASB issued SFAS 143, Accounting for Asset Retirement
Obligations. This standard requires entities to record the fair value of an
asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the disposal of tangible fixed assets. This
standard is mandatorily effective for National Grid with effect from 1 April
2003. National Grid has not yet evaluated the likely impact of SFAS 143 on its
accounts. Upon initial recognition of such a liability entities should
capitalise the cost by recognising an increase in the carrying value of the
related tangible fixed asset.
Table of Contents
Term used in annual report
US equivalent or brief description
Financial statements
Purchase accounting
Issued
Accounting Principles Board (US)
Equity investment
Common stock issued and fully paid
Tax term equivalent to US tax depreciation allowances
Accounts payable (or payables)
Accounts receivable (or receivables)
Shareholders' equity
Financial Accounting Standards Board (US)
Capital lease
Fiscal year
Non-current investments
Ownership with absolute rights in perpetuity
Financial Reporting Standard (UK)
Consolidated financial statements
Interest income
Interest expense
Equity investment
Book value
Net operating income
Treasury stock
Pension plan
Income (or earnings)
Retained earnings
Income statement
Net income
Allowance for bad and doubtful accounts receivable
Long-term liabilities other than debt and specific accounts payable
Statement of changes in stockholders' equity
Stockholders' equity other than common stock
Statement of Financial Accounting Standards (US)
Ordinary shares, capital stock or common stock issued and fully paid
Additional paid-in capital relating to proceeds of sale of stock in excess of par value or paid-in surplus (not distributable)
Statement of Standard Accounting Practice (UK)
Inventories
Property, plant and equipment
Revenues (or sales)
United Kingdom generally accepted accounting principles
United States generally accepted accounting principles
Table of Contents
Table of Contents
Table of Contents
Financial year
Period end
Average
High
Low
1.68
1.65
1.70
1.58
1.61
1.65
1.72
1.60
1.59
1.61
1.68
1.55
1.42
1.47
1.60
1.40
1.42
1.44
1.48
1.37
High
Low
1.46
1.42
1.45
1.41
1.43
1.41
1.43
1.41
1.46
1.43
1.47
1.45
Ordinary shares
ADS
Financial year
High(p)
Low(p)
High($)
Low($)
355.0
208.5
30.73
20.44
552.5
353.0
45.62
29.75
597.0
388.5
48.12
31.87
646.0
479.5
47.87
37.00
581.0
417.2
41.75
30.40
Ordinary shares
ADS
Financial period
High(p)
Low(p)
High($)
Low($)
573.0
479.5
45.75
37.50
597.0
517.5
43.25
37.75
646.0
568.0
47.87
40.75
638.0
518.0
47.00
37.00
581.0
518.0
41.75
36.90
536.0
424.5
37.50
31.64
502.0
417.2
36.04
30.04
471.5
434.5
33.61
31.11
Ordinary shares
ADS
High(p)
Low(p)
High($)
Low($)
438.0
420.5
31.95
30.40
461.0
434.5
33.06
31.11
471.5
451.7
33.61
32.17
468.0
447.5
33.18
31.74
505.0
460.7
36.65
32.87
511.5
492.0
37.40
35.90
Table of Contents
Table of Contents
carrying on the business of a holding company;
employing the funds of the Company to develop and
expand its business; and
carrying on any other activity supplemental to the
foregoing or capable of enhancing the Companys
profitability.
Table of Contents
(a)
the amendment, removal or alteration of the effect of
(including the ratification of any breach of) specified
provisions of the Articles, including the Article relating
to the special share, the Article on general limitations on
shareholdings, the Article on shareholding restrictions on
Pool members or licence holders and the Article relating
to the disclosure of interests in shares under section 212
of the Companies Act (each as described under General
Limitations on Shareholdings and Shareholding
Restrictions on Persons who are bound by the Balancing
and Settlement Code or Licence Holders below) except
to the extent that any amendment, removal or alteration
of the Article relating to the disclosure of interests in
shares is required to comply with the Listing Rules of the
UK Listing Authority;
(b)
the creation or issue of any shares in National Grid
carrying voting rights other than (1) shares carrying
voting rights in all circumstances at general meetings and
(2) shares which do not constitute equity share capital
(as defined in the Companies Act) and which, when
aggregated with all other similar shares, carry the right to
cast less than 15 per cent of the votes capable of being
cast on a poll on any resolution at any general meeting;
(c)
the variation of any rights (save for dividend rights and
rights to repayment of capital) attached to any shares in
National Grid;
(d)
the disposal by National Grid of any shares in
The National Grid Company plc to any person which
is not a wholly-owned subsidiary;
(e)
any scheme or arrangement which, if put into effect,
would relieve The National Grid Company plc or any of
National Grids affiliates of, or otherwise modify, the
obligations which National Grid must impose on them by
virtue of the provisions described under Obligations
Relating to the Transmission Licence Holder below;
(f)
the voluntary winding-up of National Grid, a special
resolution to the effect that National Grid should be
wound up by the court, the presentation by National
Grid or by the Board of Directors of a petition for the
winding-up of National Grid by the court, or any
proposal for any of the foregoing;
(g)
the presentation by National Grid or by the Board of
Directors of a petition applying for an administration
order or a proposal by the Board of Directors for a
voluntary arrangement, in each case pursuant to the
Insolvency Act 1986; or
(h)
the establishment of a holding company for
National Grid.
Table of Contents
(1)
if all monies presently payable by him in respect of that
share have not been paid;
(2)
if he or any other person appearing to be interested in the
share has been given a notice under section 212 of the
Companies Act and has failed to provide the information
required by the notice within 14 days from the date of
service of the notice (or in the case of shares representing
less than 0.25 per cent of their class, within 28 days of
service of the notice); or
(3)
in the circumstances referred to under General
Limitations on Shareholdings and Shareholding
Restrictions on Persons who are bound by the Balancing
and Settlement Code or Licence Holders below.
(1)
the necessary quorum will be two persons between them
Holding or representing by proxy not less than one-third
in nominal amount of the issued shares of that class or, at
any adjourned meeting of holders of shares of that class at
which that quorum is not present, will be any holder of
shares of that class who is present in person or by proxy
whatever the number of shares held by him;
(2)
any holder of shares of that class present in person or by
proxy may demand a poll; and
(3)
every holder of shares of that class will, on a poll,
have one vote in respect of every share of that class
held by him.
(a)
If any person has, or appears to the Board of Directors to
have, an interest in shares which carry 15 per cent or
more of the total votes attaching to the relevant share
capital (as defined in the Companies Act) of National
Grid and capable of being cast on a poll or is deemed so
to have such an interest, the Board of Directors must take
the following actions. The Board must give notice to all
persons who appear to the Board of Directors to have
interests in the shares concerned and, if different, to the
registered holders of those shares. The notice will require
that the interest concerned be reduced to less than
15 per cent by selling shares within 2 days of the notice
(or a longer period that the Board of Directors considers
reasonable). No transfer of the shares to which the
interest relates may then be registered except for the
purpose of reducing the interest to less than 15 per cent
or until the notice has been withdrawn.
(b)
If a person receiving a notice described in paragraph
(a) does not comply with it, the Board of Directors will,
so far as it is able, sell the shares on appropriate terms, as
it determines. The proceeds of that sale will be received
by National Grid and paid (without interest and after
deduction of any expenses of sale) to the former
registered holder.
(c)
A registered holder receiving a notice described in
paragraph (a) is not entitled, until he has complied with
the notice, to attend or vote at any general meeting of
National Grid or of any class of shares. Likewise, the
holder will not be able to exercise any other of the rights
of a shareholder in relation to that meeting, and those
rights will vest in the chairman of that meeting who will
have discretion to exercise them or not.
(d)
Any resolution or determination of, or decision or
exercise of any discretion or power by, the Board of
Directors or any Director or the chairman of any meeting
under the relevant Article will be final and conclusive.
Any disposal or transfer made by or on behalf of or on
the authority of the Board of Directors or any Director
pursuant to the relevant Article will be conclusive and
binding on all persons concerned and will not be open to
challenge. The Board of Directors is not required to give
any reasons for any decision, determination or declaration
taken or made in accordance with the relevant Article.
Table of Contents
(a)
the transmission licence (as subsequently amended)
which was granted by the then Secretary of State for
Energy may not be held by any person which is not
National Grid or a wholly-owned subsidiary of
National Grid;
(b)
National Grid and its wholly-owned subsidiaries may not
cease to carry on, or dispose of or relinquish operational
control over any asset required to carry on, the
transmission business or the interconnectors business
(as defined in the transmission licence in place at
11 December 1995) except if that cessation, disposal or
relinquishment is required by law or is permitted pursuant
to or by virtue of the terms of the transmission licence;
(c)
neither National Grid nor any affiliate of National Grid
is permitted to carry on in the United Kingdom any
activity which requires a generation or supply licence or
which is exempted from such requirement, save where
that activity is expressly permitted under the terms of the
transmission licence in place at 11 December 1995 and
neither National Grid nor any affiliate of National Grid
is permitted to engage outside the United Kingdom in
the generation of electricity to be imported into the
United Kingdom;
(d)
no employee or director of any person who is bound by
the Balancing and Settlement Code by virtue of being a
party to the BSC Framework Agreement dated 14 August
2000 or the holder of a licence under the Electricity Act
1989 or, in either case, any affiliate thereof (other than
National Grid or any wholly-owned subsidiary of
National Grid) is permitted to be a director of National
Grid or the transmission licence holder; and
(e)
the transmission licence holder is not permitted to carry
on activities other than:
(i)
those required or contemplated on the part of the
transmission licence holder (in its capacity as the
holder of the transmission licence) by the
transmission licence or the Electricity Act 1989
or related to those requirements; or
(ii)
those carried on by The National Grid Company plc
at or prior to 11 December 1995.
(a)
A shareholder may lose the right to vote his shares if he
or any other person appearing to be interested in those
shares fails to comply within a prescribed period of time
with a request by National Grid under the Companies
Act to give the required information with respect to past
or present ownership or interests in those shares. In the
case of holders of more than 0.25 per cent in nominal
amount of the share capital of National Grid or any class
of the share capital, in addition to disenfranchisement,
the sanctions that may be applied by National Grid
include withholding of the right to receive payment of
dividends and other monies payable on shares, and
restrictions on transfers of the shares.
(b)
The Companies Act provides that a person (including a
company and other legal entities) that acquires an
interest of three per cent or more in any class of shares
constituting an English public companys relevant share
capital (i.e. National Grids issued share capital carrying
the right to vote in all circumstances at a general meeting
of National Grid) is required to notify the company of its
interest within two business days following the day on
which the obligation arises. After the 3 per cent level is
exceeded, similar notifications must be made in respect of
increases or decreases of one per cent or more.
Table of Contents
Table of Contents
1
Memorandum and Articles of Association of National
Grid Group plc
2(a)
Amended and restated Deposit Agreement dated as of
31 January 2002
2(b)
(i) Offering circular issued by NGG Finance plc on
20 August 2001 summarising the trust deeds,
subscription agreements and paying agency agreements
relating to the
1,250,000,000 5.25 per cent guaranteed
bonds due 2006 and the
750,000,000 6.125 per cent
guaranteed bonds due 2001 issued by NGG Finance plc
and guaranteed by National Grid
(ii) Offering circular issued by National Grid Company
on 23 July 2001 summarising the trust deeds,
subscription agreements and paying agency agreements
relating to the £200,000,000 3.806 per cent Retail Price
Index-linked bonds due 2020, the £40,000,000 3.589
per cent limited Retail Price Index-linked bonds due
2030 and the £360,000,000 6.50 per cent bonds due
2028 issued by National Grid Company
(iii) Credit agreement dated 22 November 2001
between National Grid Group plc (as guarantor and
borrower); NGG Finance plc (as borrower); HSBC
Investment Bank plc (the agent); HSBC (USA) Inc.
(the swingline agent); and certain banks and financial
institutions (the banks) which provides a $1.7 billion
364 day multicurrency revolving credit facility and
$600 million five year multicurrency revolving facility
with a $300 million swingline facility
4(a)
(i)
Supplemental Trust Deed dated 10 December 2001
between National Grid Company, National Grid,
National Grid Holdings One plc and The Law
Debenture Trust Company p.l.c. relating to
£460 million 4.25 per cent unsecured
exchangeable bonds
(ii)
Letter Agreement dated 20 November 2001
between National Grid, National Grid Company,
National Grid Holdings One plc and the European
Investment Bank relating to a guarantee given by
National Grid
(iii)
Agreement and Plan of Merger and Scheme of
Arrangement, dated as of 4 September 2000, as
amended 1 December 2000, entered into between
National Grid, National Grid Holdings One plc,
Grid Delaware, Inc. and Niagara Mohawk
(iv)
Asset Purchase Agreement dated as of
11 December 2000 and made between Niagara
Mohawk Power Corporation, Constellation
Nuclear and Constellation Energy Group, Inc.
regarding the sale of the Nine Mile Point No. 1
nuclear generating facilities
(v)
Asset Purchase Agreement dated as of
11 December 2000 and made between Niagara
Mohawk Power Corporation, RG&E, Central
Hudson, NYSEG, Constellation Nuclear and
Constellation Energy Group, Inc. regarding the
sale of the Nine Mile Point No. 2 nuclear
generating facilities
(vi)
Purchase and Sale Agreement dated as of 13 April
2002 and made by and among North Atlantic
Energy Corporation, The United Illuminating
Company, Great Bay Power Corporation, New
England Power Company, The Connecticut Light
and Power Company, Canal Electric Company,
Little Bay Power Corporation, New Hampshire
Electric Cooperative, Inc., North Atlantic
Energy Service Corporation, and FPL Energy
Seabrook, LLC regarding the sale of Seabrook
Nuclear Station
Table of Contents
Item
Page
Identity of Directors, Senior Management and Advisers
n/a
Offer Statistics and expected timetable
n/a
Key Information
A. Selected financial data
Five-year financial summary
18
Dividends
20
B. Capitalisation and indebtedness
n/a
C. Reasons for and use of proceeds
n/a
D. Risk factors
Risk factors
84
Information on the Company
A. History and development of the Company
Overview of National Grid
5
History and development of the business
5
Incorporation of the Company
30
Proposed Lattice Merger
92
B. Business overview
Overview of National Grid
5
Business strategy
5
Electricity networks England and Wales
6
Electricity and gas networks US
8
Other electricity businesses and projects
12
Telecoms
13
Financial review
17
Seasonality
27
Note 2 to the accounts: Segmental analysis
47
C. Organisational structure
Note 30 to the accounts: Group undertakings, joint ventures and associate
74
D. Property, plants and equipment
Electricity networks England and Wales
6
Fixed assets in the UK
7
Electricity and gas networks US
8
Fixed assets in the US
11
Operating and financial review
A. Operating results
Business review
5
Financial review
17
B. Liquidity and capital resources
Liquidity and capital resources
22
Going concern
27
Note 29 to the
accounts: Commitments and contingencies, (a) Future capex expenditure
73
C. Research and development, patents and licences, etc.
Research and development
31
D. Trend information
Electricity networks England and Wales
6
Electricity and gas networks US
8
Other electricity businesses and projects
12
Telecoms
13
Changes and developments
27
Risk factors
84
Directors, senior management and employees
A. Directors and senior management
Board of Directors
28
B. Compensation
Directors' report Remuneration
34
Note 7 to the accounts: Pensions and post-retirement benefits
53
C. Board practices
Service contracts
36
Directors' report Corporate governance
32
D. Employees
Note 5 to the accounts: Payroll costs and employees
52
E. Share ownership
Directors' interests in share options
37
Directors' beneficial interests
38
Employment policies
30
Major shareholders and related party transactions
A. Major shareholders
Substantial shareholdings
30
Analyses of shareholdings at 29 May 2002
96
B. Related party transactions
Related party transactions
26
Note 28 to the accounts: Related party transactions
72
C. Interests of experts and counsel
n/a
Financial Information
A. Consolidated statements and other financial information
Directors' responsibilities
40
Independent auditors' report
41
Accounting policies
42
Group profit and loss account
44
Balance sheets
45
Group cash flow statement
46
Notes to the accounts
47
Note 22 to the accounts: Share capital
65
Note 29 to the accounts: Commitments and contingencies
73
Dividends
30
Dividend policy
20
B. Significant changes
Changes and developments
27
The offer and listing
A. Offer and listing details
Market prices
86
B. Plan of distribution
n/a
C. Markets
Incorporation of the Company
30
D. Selling shareholders
n/a
E. Dilution
n/a
F. Expenses of the issue
n/a
Table of Contents
Item
Page
Additional information
A. Share capital
Note 22 to the accounts: Share capital
65
B. Memorandum and articles of association
Memorandum and Articles of Association
88
C. Material contracts
Material contracts
92
D. Exchange controls
Exchange controls
86
E. Taxation
Taxation
86
F. Dividends and paying agents
n/a
G. Statement by experts
n/a
H. Documents on display
Documents on display
92
I. Subsidiary information
Note 30 to the accounts: Group undertakings, joint ventures and associate
Quantitative
and qualitative disclosures about market risk
Interest rate risk
23
Currency risk
25
Liquidity risk
25
Credit risk
25
Description of securities other than equity securities
n/a
Defaults, dividend arrearages and delinquencies
Defaults, dividend arrearages and delinquencies
86
Material modifications to the rights of security holders and use of proceeds
n/a
[Reserved]
n/a
[Reserved]
n/a
Financial statements
See Item 18
Financial statements
Independent auditors' report
41
Accounting policies
42
Group profit and loss account
44
Balance sheets
45
Group cash flow statement
46
Notes to the accounts
47
Note 11 to the accounts: Earnings per share
56
Exhibits
Exhibits
93
Table of Contents
Number of
% of issued
shareholders
Shares
share capital
1
109,992,348
6.19
22
2,293,027
0.13
7
277,666
0.02
616,122
153,620,369
8.65
12
13,355,730
0.75
10,026
1,324,600,277
74.54
363
60,218,961
3.39
25
81,740
1,301
112,538,555
6.33
627,879
1,776,978,673
100.00
Number of
% of issued
shareholders
Shares
share capital
368,803
25,775,725
1.45
193,417
40,642,442
2.29
34,360
23,376,394
1.32
26,675
51,945,541
2.92
2,111
14,222,617
0.80
1,331
26,882,324
1.51
282
20,361,827
1.15
540
122,173,840
6.87
130
89,915,806
5.06
230
1,361,682,157
76.63
627,879
1,776,978,673
100.00
2
In accordance with National Grids Articles of Association, no holder of
a licence under the Electricity Act 1989 and no affiliate of such licence
holder, has an interest of 1 per cent or more in the voting share capital
of National Grid.
3
Nominee companies typically hold shares on behalf of banks, insurance
companies, investment trusts, pension funds and PEP and ISA investors.
Table of Contents
National Grid Group plc
National Grid UK
National Grid USA
15 Marylebone Road
London
NW1 5JD
National Grid House
Kirby Corner Road
Coventry
CV4 8JY
25 Research Drive
Westborough
Massachusetts
MA 01582
300 Erie Boulevard West
Syracuse
New York
NY 13202
Auditors and Reporting Accountants
PricewaterhouseCoopers
1 Embankment Place
London
WC2N 6RH
Depositary
The Bank of New York
101 Barclay Street
22nd Floor West
New York
NY10286
Legal Advisers
CMS Cameron McKenna
Mitre House
160 Aldersgate Street
London
EC1A 4DD
Bankers
Barclays Bank plc
54 Lombard Street
London
EC3P 3AH
Financial Advisers
N M Rothschild & Sons Limited
New Court
St Swithins Lane
London
EC4P 4DU
Registrar
Lloyds TSB Registrars
The Causeway
Worthing
West Sussex
BN99 6DA
Joint Brokers
Credit Suisse First Boston (Europe) Limited
One Cabot Square
London
E14 4QJ
Dresdner Kleinwort Wasserstein
20 Fenchurch Street
London
EC3P 3DB
Merrill Lynch International
2 King Edward Street
London
EC1A 1HQ
No. 4031152
Registered office
15 Marylebone Road
London
NW1 5JD
Designed and produced by Timothy Guy Design
Photography by Mike Abrahams
Typeset by New Leaf
Printed in England by Hyway Printing Group
The paper used in the production of this report is
elemental chlorine free (ECF)
Table of Contents
Table of Contents
EXHIBIT
DESCRIPTION
PAGE
1
Memorandum and Articles of
Association of National Grid
Group plc
Filed herewith
2(a)
Amended and restated Deposit
Agreement dated as of 31
January 2002
Filed herewith
2(b)(i)
Offering circular issued by NGG
Finance plc on 20 August 2001
summarising the trust deeds,
subscription agreements and paying
agency agreements relating to the
1,250,000,000 5.25 per cent
guaranteed bonds due 2006 and the
750,000,000 6.125 per cent
guaranteed bonds due 2001 issued by
NGG Finance plc and guaranteed by
National Grid
Filed herewith
2(b)(ii)
Offering circular issued by National
Grid Company on 23 July 2001 summari-
sing the trust deeds, subscription
agreements and paying agency agreement
relating to the £200,000,000 3.806 per
cent Retail Price Index-linked bonds due
2020, the £40,000,000 3.89 per cent
limited Retail Price Index linked bonds
due 2030 and the £360,000,000 6.50 per
cent bonds due 2028 issued by National
Grid Company
Filed herewith
2(b)(iii)
Credit agreement dated 22 November
2001 between National Grid Group plc
(as guarantor and borrower); NGG Finance plc
(as borrower); HSBC Investment Bank plc
(the agent); HSBC (USA) Inc. (the swing-line agent); and certain banks and
financial institutions (the banks) which
provides a $1.7 billion 364 day multi-currency revolving credit facility and
$600 million five year multicurrency
revolving facility with a $300 million
swingline facility
Filed herewith
Table of Contents
EXHIBIT
DESCRIPTION
PAGE
4(a)(i)
Supplemental Trust Deed dated
10 December 2001 between National
Grid Company, National Grid,
National Grid Holdings One plc and
The Law Debenture Trust Company
p.l.c. relating to £460 million 4.25
per cent unsecured exchangeable bonds
Filed herewith
4(a)(ii)
Letter Agreement dated 20 November
2001 between National Grid, National
Grid Company, National Grid Holdings
One plc and the European Investment
Bank relating to a guarantee given by
National Grid
Filed herewith
4(a)(iii)
Agreement and Plan of Merger and Scheme
of Arrangement, dated as of 4 September
2000, as amended 1 December 2000, entered
into between National Grid, National Grid
Holdings One plc, Grid Delaware, Inc. and
Niagara Mohawk (Annex A to National Grid
Form F-4 filed December 4, 2000 File No.
1-4315)
Incorporated
by reference
4(a)(iv)
Asset Purchase Agreement dated as of
11 December 2000 and made between Niagara
Mohawk Power Corporation, Constellation
Nuclear and Constellation Energy Group,
Inc. regarding the sale of the Nine Mile
Point No. 1 nuclear generating facilities
(Exhibit 10-42a to Niagara Mohawk Form 10-K
filed February 16, 2001 File No. 1-2987)
Incorporated
by reference
4(a)(v)
Asset Purchase Agreement dated as of 11
December 2000 and made between Niagara
Mohawk Power Corporation, RG&E, Central
Hudson, NYSEG, Constellation Nuclear and
Constellation Energy Group, Inc. regarding
the sale of the Nine Mile Point No. 2
Nuclear generating facilities (Exhibit 10-42b
to Niagara Mohawk Form 10-K filed February 16,
2001 File No. 1-2987)
Incorporated
by reference
4(a)(vi)
Purchase and Sale Agreement dated as
of 13 April 2002 and made by and among
North Atlantic Energy Corporation, The
United Illuminating Company, Great Bay
Power Corporation, New England Power Company,
The Connecticut Light and Power Company,
Canal Electric Company, Little Bay Power
Incorporated
by reference
Table of Contents
EXHIBIT
DESCRIPTION
PAGE
Corporation, New Hampshire Electric Cooperative, Inc., North Atlantic Energy
Service Corporation, and FPL Energy
Seabrook, LLC regarding the sale of
Seabrook Nuclear Station (Exhibit 99(a) to
New England Power Company Form 8-K filed
April 23, 2002 File No. 7-1337)
4(b)(i)
Service Agreement Edward Astle
Filed herewith
4(b)(ii)
Service Agreement Stephen Box
(Exhibit 3(ii)(a) to National Grid Form
20-F dated October 1999 File No. 1-4315)
Incorporated
by reference
4(b)(iii)
Employment Agreement William E. Davis
Filed herewith
4(b)(iv)
Service Agreement Steven Holliday
(Exhibit 3(b)(iv) to National Grid Form
20-F dated June 2001 File No. 1-4315)
Incorporate
by reference
4(b)(v)
Employment Agreement Richard P. Sergel
(Exhibit 2 to National Grid Form 20-F
dated June 2000 File No. 1-4315)
Incorporated
by reference
4(b)(vi)
Service Agreement Roger Urwin
(Exhibit 3(ii)(d) to National Grid Form
20-F dated October 1999 File No. 1-4315)
Incorporated
by reference
4(c)
National Grid Executive Share Option
Plan 2002 and National Grid Share
Matching Plan 2002
Filed herewith
8
List of subsidiaries
Filed herewith
10(b)(i)
Details of proposed merger with Lattice
Group plc
Filed herewith
10(b)(ii)
Summaries of material contracts
Filed herewith
EXHIBIT 1
Registered No. 4031152
THE COMPANIES ACTS
PUBLIC COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
of
NATIONAL GRID GROUP PLC
1. (1)The Company's name is "National Grid Group plc".
2. (2)The Company is to be a public company.
3. The Company's registered office is to be situated in England and Wales.
4. The objects for which the Company is established are:-
4.1 to carry on the business of a holding company and to acquire by purchase, exchange, subscription or otherwise and to hold the whole or any part of the shares, stocks, debentures and other securities and interests of and in any corporations, companies, associations or firms for the time being engaged, concerned or interested in any industry, trade or business and to promote the beneficial co-operation of any such corporations, companies, associations or firms as well with one another as with the Company and to exercise in respect of such investments and holdings all the rights, powers and privileges of ownership including the right to vote thereon;
4.2 to employ the funds of the Company in the development and expansion of the business of the Company and all or any of its subsidiary or associated companies and in any other company whether now existing or hereafter to be formed and engaged in any like business of the Company or any of its subsidiary or associated companies or in any other industry ancillary thereto or in any business which can conveniently be carried on in connection therewith;
companies or group of companies now or hereafter formed or incorporated or acquired which may be or may become related or associated in any way with the Company or with any company related or associated therewith and either without remuneration or on such terms as to remuneration as may be agreed;
4.4 to advance and lend money with or without security and to guarantee the performance of the contracts or obligations or the repayment of capital, principal, dividends, interest or premiums payable on any stock, shares, securities or debentures of, or other investments in, any company or person and in particular (but without limiting the generality of the foregoing) of any company which is for the time being the Company's holding company (as defined by section 736 Companies Act 1985) or another subsidiary (as defined by that section) of the Company's holding company and to give all kinds of indemnities;
4.5 to organise, incorporate, reorganise, finance, aid and assist, financially or otherwise, companies, corporations, syndicates, partnerships, associations and firms of all kinds and to underwrite or guarantee the subscription of, shares, stocks, debentures, debenture stock, bonds, loans, obligations, securities or notes of any kind, and to make and carry into effect arrangements for the issue, underwriting, resale, exchange or distribution thereof;
4.6 to carry on the business of land and property developers of every and any description and to acquire by purchase, lease, concession, grant, licence or otherwise such lands, buildings, leases, underleases, rights, privileges, stocks, shares and debentures in public or private companies, corporate or unincorporate, policies of insurance and other such property as the Company may deem fit and shall acquire the same for the purposes of investment and development and with a view to receiving the income therefrom; and to enter into any contracts and other arrangements of all kinds with persons having dealings with the Company on such terms and for such periods of time as the Company may from time to time determine, on a commission or fee basis or otherwise, and to carry on any other trade or business, whatever, of a like and similar nature;
4.7 to carry on all kinds of promotion business and, in particular, to form, constitute, float, lend money to, assist, manage and control any companies, associations or undertakings whatsoever and to market, advertise or promote goods, services, material (tangible or intangible) or any other thing whatsoever;
4.8 to vary the investments and holdings of the Company as may from time to time be deemed desirable;
4.9 to act as trustee of any kind including trustee of any deeds constituting or securing any debentures, debenture stock or other securities or obligations and to undertake and execute any trust or trust business (including the business of acting as trustee under wills and settlements), and to do anything that may be necessary or assist in the obtaining of any benefit under the estate of an individual, and also to undertake the office of executor, administrator, secretary, treasurer or registrar or to become manager of any business, and to keep any register or undertake any registration duties, whether in relation to securities or otherwise;
4.10 to provide technical, cultural, artistic, educational, entertainment or business material, facilities, information or services and to carry on any business involving any such provision; 4.11 to carry on the business of commission agents, factors, general merchants and dealers in every description of goods, exporters and importers, concessionaires, wholesale and retail traders, carriers, warehousemen, designers, advertising contractors or agents, or trustees, brokers or agents for any company; 4.12 to manufacture, develop, process, refine, repair, purchase, sell, export, import, deal in or let on hire all kinds of goods, substances, articles, services and material (tangible or intangible) of any kind which may be advantageous to the Company or which any of the customers or other companies having dealings with the Company may from time to time require; 4.13 to provide services of any kind including the carrying on of advisory, consultancy, brokerage and agency business of any kind; 4.14 to acquire and carry on any business carried on by a subsidiary or a holding company of the Company or another subsidiary of a holding company of the Company; 4.15 to enter into any arrangements with any government or authority or person and to obtain from any such government or authority or person any legislation, orders, rights, privileges, franchises and concessions and to carry out, exercise and comply with the same; 4.16 to purchase, take on lease or in exchange, hire, renew, or otherwise acquire and hold for any estate or interest, and to sell, let, grant licences, easements, options and other rights over or otherwise deal with or dispose of, in whole or in part, any lands, buildings, machinery, rights, stock-in-trade, business concerns, choses in action, and any other real and personal property of any kind including all of the assets of the Company and to perform any services or render any consideration and to construct, equip, alter and maintain any buildings, works and machinery necessary or convenient for the Company's business and in each case for any consideration (including in particular but without detracting from the generality of the foregoing for any securities or for a share of profit or a royalty or other periodical or deferred payment); 4.17 to enter into partnership or any other arrangement for sharing profits or joint venture or co-operation with any company carrying on, engaged in or about to carry on or engage in any business or transaction capable of being conducted so as directly or indirectly to benefit the Company, and to subsidise or otherwise assist any such company; 4.18 to invest money of the Company (or any of its subsidiaries) in any investments and to hold, sell or otherwise deal with investments or currencies or other financial assets and to carry on the business of an investment company; 4.19 to lend or advance money or otherwise give credit or provide financial accommodation to any company with or without security and to deposit money |
with any company and to carry on the business of a banking, finance or insurance company; 4.20 for any reason whatsoever to mortgage, charge, pledge or otherwise secure, either with or without the Company receiving any consideration or advantage, all or any part of the undertaking, property, assets, rights and revenues present and future and uncalled capital of the Company and to guarantee, indemnify or otherwise support or secure, either with or without the Company receiving any consideration or advantage and whether by personal covenant or by mortgaging, charging, pledging or otherwise securing all or any part of the undertaking, property, assets, rights and revenues present and future and uncalled capital of the Company or by any or all such methods or by any other means whatsoever, the liabilities and obligations of any person, firm or company including but not limited to any company which is for the time being the holding company or a subsidiary undertaking (both as defined in the Companies Act 1985 as amended) of the Company or of the Company's holding company as so defined; 4.21 to borrow and raise money and accept money on deposit and to secure or discharge any debt or obligation of or binding on the Company or any other company and in particular by mortgaging or charging all or any part of the undertaking, property and assets (present or future) and the uncalled capital of the Company, or by the creation and issue, on such terms as may be thought expedient, of securities of any description; 4.22 to undertake interest rate and currency swaps, options, swap option contracts, forward exchange contracts, forward rate agreements, futures contracts or other financial instruments including hedging agreements and derivatives of any kind and all or any of which may be on a fixed and/or floating rate basis and/or in respect of Sterling, any other currencies, basket of currencies including but not limited to European Currency Units (as the same may from time to time be designated or constituted) or commodities of any kind and in the case of such swaps, options, swap option contracts, forward exchange contracts, forward rate agreements, futures contracts or other financial instruments including hedging agreements and derivatives of any kind that may be undertaken by the Company on a speculative basis or otherwise; 4.23 to undertake any transaction which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or combination of these transactions and whether for the purposes of risk management, on a speculative basis or otherwise; 4.24 to draw, make, accept, indorse, discount, execute, issue, negotiate and deal in promissory notes, bills of exchange, shipping documents and other instruments and securities (whether negotiable, transferable or otherwise) and to buy, sell and deal in foreign currencies; |
4.25 to buy, sell, export, manufacture and deal in all kinds of goods, stores and equipment whether in connection with any of the above activities or otherwise and to act as agents for all purposes; 4.26 to apply for, purchase or otherwise acquire any patents, licences, concessions, privileges and like rights, conferring a non-exclusive or exclusive or limited right to use, or any secret or other information as to any invention which is capable of being used for any of the purposes of the Company, or the acquisition of which may seem calculated directly or indirectly to benefit the Company and to use, exercise, develop, grant licences in respect of, or otherwise turn to account, the rights and information so acquired; 4.27 to apply for and take out, purchase or otherwise acquire, sell, licence, transfer, deal or trade in any way in trade marks and names, service marks and names, designs, patents, patent rights, inventions, secret processes, know-how and information and any form of intellectual property and to carry on the business of an inventor, designer or research organisation; 4.28 to sell, improve, manage, develop, lease, mortgage, let, charge, dispose of, turn to account, or otherwise deal with all or any part of the undertaking or property or rights of the Company, and to sell the undertaking of the Company, or any part thereof for such consideration as the Company may think fit, and in particular for cash, shares, debentures or debenture stock or other obligations, whether fully paid or otherwise, of any other company; 4.29 to issue and allot securities of the Company for cash or in payment or part payment for any real or personal property purchased or otherwise acquired by the Company or any services rendered to the Company or as security for any obligation or amount (even if less than the nominal amount of such securities) or for any other purpose; 4.30 to give any remuneration or other compensation or reward for services rendered or to be rendered in placing or procuring subscriptions of, or otherwise assisting in the issue of, any securities of the Company or in or about the formation of the Company or the conduct or course of its business, and to establish or promote, or concur or participate in establishing or promoting, any company, fund or trust and to subscribe for, underwrite, purchase or otherwise acquire securities of any company, fund or trust and to carry on the business of company, fund, trust or business promoters or managers and of underwriters or dealers in securities, and to act as director of, and as secretary, manager, registrar or transfer agent for, any other company; 4.31 to grant or procure the grant of donations, gratuities, pensions, annuities, allowances, or other benefits, including benefits on death, to any directors, officers or employees or former directors, officers or employees of the Company or any company which at any time is or was a subsidiary or a holding company of the Company or another subsidiary of a holding company of the Company or otherwise associated with the Company or of any predecessor in business of any of them, and to the relations, connections or dependants of any such persons, and to other persons whose service or services have directly or indirectly been of benefit to the Company or whom the board of directors of the Company |
considers have any moral claim on the Company or to their relations, connections or dependants, and to establish or support any funds, trusts, insurances or schemes (including in particular but without detracting from the generality of the foregoing any trust or scheme relating to the grant of any option over, or other interest in, any share in the capital of the Company or of any other company, or in any debenture or security of any corporation or company, including the Company) or any associations, institutions, clubs or schools, or to do any other thing likely to benefit any such persons or otherwise to advance the interests of such persons or the Company or its members, and to subscribe, guarantee or pay money for any purpose likely, directly or indirectly, to further the interests of such persons or the Company or its members or for any national, charitable, benevolent, educational, social, public, general or useful object; 4.32 to promote or assist in promoting any company or companies in any part of the world and to subscribe shares therein or other securities thereof for the purpose of carrying on any business which the Company is authorised to carry on, or for any other purpose which may seem directly or indirectly calculated to benefit the Company; 4.33 to amalgamate with any other company in any manner whatsoever (whether with or without a liquidation of the Company); 4.34 to procure the Company to be registered or recognised in any country or place in any part of the world; 4.35 to cease carrying on or wind-up any business or activity of the Company, and to cancel any registration of and to wind-up or procure the dissolution of the Company in any state or territory; 4.36 to compensate for loss of office any directors or other officers of the Company and to make payments to any persons whose office, employment or duties may be terminated by virtue of any transaction in which the Company is engaged; 4.37 to pay out of the funds of the Company the costs, charges and expenses of and incidental to the formation and registration of the Company, and any company promoted by the Company, and the issue of the capital of the Company and any such other company and of and incidental to the negotiations between the promoters preliminary to the formation of the Company, and also all costs and expenses of and incidental to the acquisition by the Company of any property or assets and of and incidental to the accomplishment of all or any formalities which the Company may think necessary or proper in connection with any of the matters aforesaid; 4.38 to effect insurances against losses, damages, risks and liabilities of all kinds which may affect the Company or any subsidiary of it or company associated with it or in which it is or may be interested; 4.39 to purchase and maintain insurance for or for the benefit of any persons who are or were at any time directors, officers, employees or auditors of the Company, or of any other company which is its holding company or in which the Company or such holding company has any interest whether direct or indirect or which is in |
any way allied to or associated with the Company or of any subsidiary undertaking of the Company or of any such other company, or who are or were at any time trustees of any pension fund in which any employees of the Company or of any such other company or subsidiary undertaking are interested, including (without prejudice to the generality of the foregoing) insurance against any liability incurred by such persons in respect of any act or omission in the actual or purported execution and/or discharge of their powers and/or otherwise in relation to their duties, powers or offices in relation to the Company or any such other company, subsidiary undertaking or pension fund and to such extent as may be permitted by law otherwise to indemnify or to exempt any such person against or from any such liability. For the purposes of this clause "holding company" and "subsidiary undertaking" shall have the same meanings as in the Companies Act 1985 (as amended); 4.40 to act as directors or managers of or to appoint directors or managers of any subsidiary company or of any other company in which the Company is or may be interested; 4.41 to contribute by donation, subscription, guarantee or otherwise to any public, general, charitable, political or useful object whatsoever; 4.42 to distribute among the members in cash, specie or kind any property of the Company, or any proceeds of sale or disposal of any property of the Company, but so that no distribution amounting to a reduction of capital be made except with the sanction (if any) for the time being required by law; 4.43 to do all or any of the above things in any part of the world, and either as principals, agents, trustees, contractors or otherwise and either alone or in conjunction with others, and either by or through agents, sub-contractors, trustees, subsidiaries or otherwise; 4.44 to carry on any other activity and do anything of any nature which in the opinion of the board of directors of the Company is or may be capable of being conveniently carried on or done by the Company in connection with the above, or may seem to the Company calculated directly or indirectly to enhance the value of or render more profitable all or any part of the Company's undertaking, property or assets or otherwise to advance the interests of the Company or any of its members; and 4.45 to do all such things as in the opinion of the board of directors of the Company are or may be incidental or conducive to the above objects or any of them. And it is hereby declared that for the purposes of this clause:- (a) the word "company" shall (except where referring to this Company) be deemed to include any person or partnership or other body of persons, whether incorporated or not incorporated, and whether formed, incorporated, resident or domiciled in the United Kingdom or elsewhere; |
(b) "associated companies" shall mean any two or more companies if one has control of the other or others, or any person has control of both or all of them;
(c) "securities" shall include any fully, partly or nil paid or no par value share, stock, unit, debenture or loan stock, deposit receipt, bill, note, warrant, coupon, right to subscribe or convert, or similar right or obligation;
(d) "and" and "or" shall mean "and/or";
(e) "other" and "otherwise" shall not be construed ejusdem generis where a wider construction is possible; and
(f) the objects specified in each paragraph of this clause shall, except if at all where otherwise expressed, be in no way limited or restricted by reference to or inference from the terms of any other paragraph or the name of the Company or the nature of any business carried on by the Company or the order in which such objects are stated, but may be carried out in as full and ample a manner and shall be construed in as wide a sense as if each of the said paragraphs defined the objects of a separate, distinct and independent company.
5. The liability of the members is limited.
6. (3)The capital of the Company was, by virtue of a Special Resolution
of the Company and with the sanction of an Order of the High Court of
Justice dated 25 January 2002, reduced from (pound)250,000,001 divided
into 2,500,000,000 ordinary shares of 10 pence each and the special
rights non-voting redeemable preference share of (pound)1 to
(pound)249,950,001 divided into 2,499,500,000 ordinary shares of 10
pence each and the special rights non-voting redeemable preference
share of (pound)1 by the cancellation and extinguishment of the
500,000 issued ordinary shares of 10 pence each.
shares of 10 pence each to take effect upon the reduction of capital taking effect. Accordingly, by virtue of the said Special Resolution, the share capital is (pound)250,000,001, divided into 2,500,000,000 ordinary shares of 10 pence each and one special rights non-voting redeemable preference share of (pound)1. Forthwith upon the Scheme of Arrangement between National Grid Group plc (now named National Grid Holdings One plc) and its shareholders dated 10 December 2001 becoming effective, 1,498,036,707 ordinary shares of 10 pence each were issued and were deemed to be fully paid up and the remainder are unissued and the special rights non-voting redeemable preference share of (pound)1 was issued and was fully paid up.
The person whose name and address is subscribed wishes to form a Company pursuant to this Memorandum of Association, and agrees to take the number of shares in the capital of the Company set opposite its name.
NAME, ADDRESS AND NUMBER OF SHARES TAKEN BY SUBSCRIBER
One
Mitre House Nominees Limited
Mitre House
160 Aldersgate Street
London EC1A 4DD
Dated this 11th day of August 2000.
Witness to the above signature:
Andrew Boden
Mitre House
160 Aldersgate Street
London EC1A 4DD
Registered No. 4031152
THE COMPANIES ACTS
PUBLIC COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
of
NATIONAL GRID GROUP PLC
CMS CAMERON MCKENNA
MITRE HOUSE
160 ALDERSGATE STREET
LONDON EC1A 4DD
T +44(0)207 367 3000
F +44(0)207 367 2000
Registered No. 4031152
THE COMPANIES ACTS
PUBLIC COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
NATIONAL GRID GROUP PLC
(Adopted by a special resolution
passed on 7 December 2001)
Incorporated on 11 July 2000
CMS Cameron McKenna
Mitre House
160 Aldersgate Street
London EC1A 4DD
T +44(0)20 7367 3000
F +44(0)20 7367 2000
File Ref: IAS/037459.00578
Doc Ref: (52102221)
TABLE OF CONTENTS
DEFINITIONS AND INTERPRETATION.................................................1
1 Definitions and interpretation............................................1 2. Table A excluded..........................................................5 3. Form of resolutions.......................................................5 SHARE CAPITAL........................................................5 4. Share capital.............................................................5 5. Rights attached to shares.................................................5 6. Redeemable shares.........................................................5 7. Unissued shares...........................................................5 8. Payment of commissions....................................................6 9. Trusts not recognised.....................................................6 10. Variation of rights.......................................................6 11. Matters not constituting a variation of rights............................7 CERTIFICATES.........................................................7 12. Right to certificates.....................................................7 13. Execution of certificates.................................................7 14. Replacement certificates..................................................8 15. Uncertificated securities.................................................8 LIEN.................................................................9 16. Company's lien............................................................9 17. Enforcing lien by sale after notice.......................................9 18. Manner of sale............................................................9 19. Application of sale proceeds..............................................9 CALLS ON SHARES.....................................................10 20. Calls....................................................................10 21. Time of call.............................................................10 22. Liability of joint shareholders..........................................10 23. Interest.................................................................10 24. Sums due on allotment or by way of instalment treated as calls...........10 25. Power to differentiate...................................................11 26. Advance payment of calls.................................................11 FORFEITURE OF SHARES................................................11 27. Notice if call not paid..................................................11 28. Forfeiture if notice not complied with...................................11 29. Notice of forfeiture.....................................................11 30. Sale of forfeited share..................................................12 31. Arrears to be paid notwithstanding forfeiture............................12 |
32. Statutory declaration and validity of sale...............................12 UNTRACED SHAREHOLDERS...............................................13 33. Power to sell shares of untraced shareholders............................13 34. Manner of sale and creation of debt in respect of net proceeds...........13 TRANSFER OF SHARES..................................................14 35. Form and execution of transfer...........................................14 36. Right to refuse registration of partly paid share........................14 37. Other rights to refuse registration......................................15 38. Notice of refusal........................................................15 39. Suspension of registration...............................................15 40. No fee for registration..................................................15 41. Retention of documents...................................................16 42. Other Registers..........................................................16 TRANSMISSION OF SHARES..............................................16 43. Transmission on death....................................................16 44. Election by person entitled by transmission..............................16 45. Rights in respect of the share...........................................17 ALTERATION OF CAPITAL...............................................17 46. Increase, consolidation, sub-division and cancellation...................17 47. Fractions................................................................17 48. Reduction of capital.....................................................18 STOCK...............................................................18 49. Articles applicable to stock.............................................18 50. Conversion of shares into stock..........................................18 51. Transfer of stock........................................................18 52. Rights attaching to stock................................................18 PURCHASE OF OWN SHARES..............................................19 53. Purchase of own shares...................................................19 SPECIAL PROVISIONS RELATING TO SHARES...............................19 54. The Special Share........................................................19 55. Disclosure of Interests..................................................21 56. Limitations on Shareholdings.............................................24 57. Obligations relating to the Transmission Licence Holder..................30 GENERAL MEETINGS....................................................31 58. Annual general meetings..................................................31 59. Extraordinary general meetings...........................................31 60. Convening an extraordinary general meeting...............................31 NOTICE OF GENERAL MEETINGS..........................................32 61. Length of notice period..................................................32 62. Contents of notices......................................................32 |
63. Omission or non-receipt of notice........................................32 64. Change of date, time or place of meeting.................................33 PROCEEDINGS AT GENERAL MEETINGS.....................................33 65. Quorum...................................................................33 66. Procedure if quorum not present..........................................33 67. Chairman of general meeting..............................................33 68. Directors' right to attend and speak.....................................34 69. Meeting at more than one place and/or in a series of rooms...............34 70. Security arrangements....................................................34 71. Adjournments.............................................................35 72. Notice of adjourned meeting..............................................35 VOTES OF SHAREHOLDERS...............................................36 73. Method of voting.........................................................36 74. Votes of shareholders....................................................36 75. Votes of joint holders...................................................37 76. Corporations acting by representatives...................................37 77. Votes of shareholder suffering incapacity................................37 78. No right to vote where sums overdue on shares............................37 79. Votes on a poll..........................................................37 80. Right to withdraw demand for a poll......................................38 81. Procedure if poll demanded...............................................38 82. When poll to be taken....................................................38 83. Continuance of other business after poll demanded........................38 84. Chairman's casting vote..................................................38 85. Proposal or amendment of resolution......................................38 86. Amendment of resolution ruled out of order...............................39 87. Objections or errors in voting...........................................39 PROXIES.............................................................39 88. Execution of an appointment of proxy.....................................39 89. Times for delivery of an appointment of proxy............................40 90. Form of appointment of proxy.............................................41 91. Validity of proxy........................................................41 92. Maximum validity of proxy................................................42 DIRECTORS...........................................................42 93. Number of Directors......................................................42 94. No shareholding qualification for Directors..............................42 REMUNERATION OF DIRECTORS...........................................42 95. Ordinary remuneration....................................................42 96. Expenses.................................................................42 97. Extra remuneration.......................................................43 |
ALTERNATE DIRECTORS.................................................43 98. Appointment, removal and resignation.....................................43 99. Alternate to be responsible for his own acts and remuneration of alternate.............................................................44 EXECUTIVE DIRECTORS.................................................44 100. Executive Directors......................................................44 POWERS AND DUTIES OF DIRECTORS......................................45 101. General powers of the Company vested in the Board........................45 DELEGATION OF DIRECTORS' POWERS.....................................45 102. Agents...................................................................45 103. Delegation to individual Directors.......................................45 104. Delegation to committees.................................................45 105. Power to establish local boards etc. ....................................46 SPECIFIC POWERS.....................................................47 106. Provision for employees..................................................47 107. Borrowing Powers.........................................................47 APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS....................52 108. Number to retire by rotation.............................................52 109. Position of Retiring Director............................................53 110. Eligibility for appointment as a Director................................53 111. Power of the Company to appoint Directors................................53 112. Power of the Board to appoint Directors..................................53 113. Company's power to remove a Director and appoint another in his place....54 114. Vacation of office by Directors..........................................54 115. Director not to retire on account of age.................................54 DIRECTORS' INTERESTS................................................55 116. Contracts between a Director and the Company or a company in which the Company is interested................................................55 DIRECTORS' GRATUITIES AND PENSIONS..................................58 117. Directors' gratuities and pensions.......................................58 PROCEEDINGS OF THE BOARD............................................59 118. Board meetings...........................................................59 119. Notice of Board meetings.................................................59 120. Voting...................................................................59 121. Quorum...................................................................59 122. Number of Directors below minimum number.................................59 123. Appointment of chairman..................................................60 124. Competence of the Board..................................................60 125. Participation in meetings by telephone...................................60 126. Written resolutions......................................................60 127. Company books............................................................60 128. Validity of acts of the Board or a committee.............................61 |
SECRETARY...........................................................61 129. Appointment and removal of Company Secretary.............................61 THE SEAL............................................................61 130. Use of seal..............................................................61 131. Execution as a deed without sealing......................................62 132. Official seal............................................................62 DIVIDENDS...........................................................62 133. Company may declare dividends............................................62 134. Board may pay interim dividends and fixed dividends......................62 135. Calculation and currency of dividends....................................62 136. Waiver of dividends......................................................63 137. Non-cash dividends.......................................................63 138. Scrip dividends..........................................................63 139. Enhanced scrip dividends.................................................65 140. Right to deduct amounts due on shares from dividends.....................65 141. No interest on dividends.................................................66 142. Payment procedure........................................................66 143. Receipt by joint shareholders............................................67 144. Where payment of dividends need not be made..............................67 145. Unclaimed dividends......................................................67 CAPITALISATION OF PROFITS...........................................67 146. Capitalisation of profits................................................67 AUTHENTICATION OF DOCUMENTS.........................................69 147. Authentication of documents..............................................69 RECORD DATES........................................................69 148. Power to choose record date..............................................69 ACCOUNTS AND OTHER RECORDS..........................................69 149. Records to be kept.......................................................69 150. Copy of accounts to be sent to shareholders..............................69 151. Inspection of records....................................................70 152. Destruction of documents.................................................70 NOTICES.............................................................71 153. Form of notices..........................................................71 154. Service of notice........................................................71 155. When notice deemed served................................................72 156. Service of notice on person entitled by transmission.....................73 157. Record date for service..................................................73 158. Loss of entitlement to receive notices...................................73 159. Notice when post not available...........................................73 WINDING-UP..........................................................74 |
160. Distribution in kind.....................................................74 161. Power of sale............................................................74 INDEMNITY...........................................................74 162. Officer's indemnity......................................................74 163. Power to insure..........................................................75 ADR DEPOSITARIES....................................................75 164. ADR Depositaries.........................................................75 |
Registered No. 4031152
THE COMPANIES ACTS
PUBLIC COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
of
NATIONAL GRID GROUP PLC
(the "Company")
(Adopted in substitution for and to the exclusion of all existing articles of association by a special resolution passed on 7 December 2001)
DEFINITIONS AND INTERPRETATION
1. DEFINITIONS AND INTERPRETATION
1.1 In these Articles, the following words and expressions have the meanings indicated below:
"ACT": the Companies Act 1985
"ADR DEPOSITARY": a custodian or depositary or his nominee, approved by the Board, under contractual arrangements with the Company by which he or that nominee holds shares in the Company and he or another person issues American Depositary Receipts evidencing rights in relation to those shares or a right to receive them
"ADR HOLDER": a person who has an interest in shares of the Company evidenced by an American Depositary Receipt
"ADDRESS": includes (but only in relation to electronic communications) any number or address used for the purposes of such communications
"AFFILIATE": in respect of any company, means every associated company, subsidiary, subsidiary undertaking, holding company or associated company, subsidiary or subsidiary undertaking of a holding company, of such company
"THESE ARTICLES": these articles of association as originally adopted or as altered from time
to time
"ASSOCIATED COMPANY": an undertaking in which a company has a participating interest (as defined in section 260 of the Act) which is not a subsidiary of such company
"AUDITORS": the auditors of the Company for the time being or, in the case of joint auditors, any one of them
"BOARD": the board of Directors from time to time of the Company or those Directors present at a duly convened meeting of the Directors at which a quorum is present
"BUSINESS DAY": a day (excluding Saturdays, Sundays and public holidays) on which banks are open for business in the City of London
"CASH MEMORANDUM ACCOUNT": an account so designated by the Operator
"CLEAR DAYS": in relation to the period of a notice, that period excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect (and "clear business days" shall be construed accordingly)
"COMMUNICATION": as defined in the Electronic Communications Act 2000
"CREST MEMBER": a person who has been admitted by the Operator as a system-member
"DIRECTOR": a director for the time being of the Company
"ELECTRONIC COMMUNICATION": as defined in the Electronic Communications Act 2000
"LONDON STOCK EXCHANGE": London Stock Exchange plc
"NATIONAL GRID GROUP": the Company and each of its wholly owned subsidiaries from time to time
"OFFICE": the registered office of the Company
"OPERATOR": CRESTCO Limited or such other person as may for the time being be approved by Her Majesty's Treasury as Operator under the Regulations
"PAID UP": paid up or credited as paid up
"PERSON ENTITLED BY TRANSMISSION": a person entitled to a share in consequence of the death or bankruptcy of a shareholder or of any other event giving rise to its transmission by operation of law and whose name is entered in the Register in respect of the share
"RECOGNISED CLEARING HOUSE": a recognised clearing house within the meaning of the Financial Services and Markets Act 2000 acting in relation to a recognised investment exchange
"RECOGNISED INVESTMENT EXCHANGE": a recognised investment exchange within the
meaning of the Financial Services and Markets Act 2000
"REGISTER": the register of shareholders of the Company
"REGULATIONS": the Uncertificated Securities Regulations 2001
"RELEVANT SYSTEM": the computer-based system, and procedures, which enable title to units of a security to be evidenced and transferred without a written instrument, and which facilitate supplementary and incidental matters in accordance with the Regulations
"RESTRICTED PERSON": any person who is bound by the Balancing and Settlement Code by virtue of being a party to the BSC Framework Agreement dated 14 August 2000 or the holder of a licence under the Electricity Act 1989, any Affiliate thereof or the trustees (acting in that capacity) of any trust established by such person or Affiliate thereof
"SEAL": the common seal of the Company or any official seal kept by the Company pursuant to the Statutes
"SECRETARY": the secretary of the Company or any other person appointed to perform the duties of the secretary of the Company, including a joint, assistant or deputy secretary and any person appointed to perform the duties of secretary temporarily or in any particular case
"SHAREHOLDER" or "HOLDER": in relation to shares, the person whose name is entered in the Register as the holder of the shares
"SPECIAL SHARE": the one special rights redeemable preference share of(pound)1
"SPECIAL SHAREHOLDER": the person whose name is entered in the Register as the holder of the Special Share
"STATUTES": every statute (including any statutory instrument, order, regulation or subordinate legislation made under it) for the time being in force concerning companies and affecting the Company, including the Regulations
"SYSTEM'S RULES": the rules, regulations, procedures, facilities and requirements of the relevant system concerned
"TRANSFER INSTRUCTION": a properly authenticated dematerialised instruction on a relevant system in accordance with the Regulations in such form, in such manner and from such person as the Board may determine
"TRANSMISSION LICENCE": the licence to transmit electricity for the purpose of enabling a supply to be given to any premises or enabling a supply to be so given in England (other than the Scilly Isles) and Wales, which was granted to The National Grid Company plc on 26 March 1990 pursuant to section 6(1)(b) of the Electricity Act 1989, as amended from time to time, or any licence which succeeds or replaces all or part of such licence
"TRANSMISSION LICENCE HOLDER": the holder from time to time of the Transmission
Licence (at the date of adoption of these Articles being The National Grid Company plc)
"UK LISTING AUTHORITY": the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000
"UNITED KINGDOM": Great Britain and Northern Ireland
1.2 The expressions "DEBENTURE" and "DEBENTURE HOLDER" include "DEBENTURE STOCK" and "DEBENTURE STOCKHOLDER".
References to writing include any method of reproducing or representing words in a legible and non-transitory form.
References to the execution of a document include references to its being executed under hand or under seal or by any other method.
References to the execution of an electronic communication include references to its being executed by such means as the Board may from time to time approve (including for the purpose of establishing the authenticity or integrity of the communication). Except insofar as these Articles expressly require a communication to be in writing, any electronic communication purporting to contain a copy of a document need not be in writing provided that it faithfully and intelligibly reproduces all the relevant information given in writing in the document. References to anything given, sent or received by, or contained in, an electronic communication include references to its being published on a web site and such publication being notified (by electronic communication or otherwise) to the relevant person in such manner that, where relevant, that person would be deemed to have notice of it, and access on that web site to it, for at least the duration of any relevant period of notice or availability prescribed by these Articles or by the Statutes.
Unless the context otherwise requires, any words or expressions defined in the Statutes bear the same meaning in these Articles (or any part of these Articles) as the meaning in force at the date of the adoption of these Articles (or that part), save that the word "COMPANY" shall include any body corporate.
Except where the contrary is stated, a reference to a statute or a statutory provision includes any amendment or re-enactment of it.
Words importing the singular number only include the plural and vice versa. Words importing the masculine gender include the feminine and neuter gender. Words importing persons include corporations.
References to a meeting shall not be taken as requiring more than one person to be present if any quorum requirement can be satisfied by one person.
References to any security as being in certificated form or uncertificated form refer, respectively, to that security being a certificated unit of a security or an uncertificated unit of a security for the purposes of the Regulations.
Headings are inserted for convenience only and shall not affect the construction of these Articles.
2. TABLE A EXCLUDED
None of the regulations contained in Table A in the Schedule to the Companies (Tables A to F) Regulations 1985 or any other Statute shall apply as regulations or articles of the Company.
3. FORM OF RESOLUTIONS
A special or extraordinary resolution shall be effective for any purpose for which an ordinary resolution is expressed to be required under the Statutes or these Articles and a special resolution shall be effective for any purpose for which an extraordinary resolution is expressed to be required.
SHARE CAPITAL
4. SHARE CAPITAL
At the date of adoption of these Articles, the authorised share capital of the Company is (pound)250,000,001 divided into 2,500,000,000 ordinary shares of ten pence each and one special rights redeemable preference share of (pound)1.
5. RIGHTS ATTACHED TO SHARES
Subject to the Statutes and without prejudice to any rights attached to any existing shares, any share may be issued with such rights or restrictions as the Company may by ordinary resolution determine (or, in the absence of any such determination or in so far as such ordinary resolution does not make specific provision, as the Board may determine).
6. REDEEMABLE SHARES
Subject to the Statutes and without prejudice to any rights attached to any existing shares, shares may be issued which are to be redeemed or which are liable to be redeemed at the option of the Company or of the relevant shareholder on such terms and in such manner as may be provided for by these Articles.
7. UNISSUED SHARES
Subject to the Statutes and these Articles, the Board may offer, allot, grant options over, or otherwise dispose of unissued shares or rights to subscribe for, or to convert any security
into, such shares to such persons and on such terms as they think fit.
8. PAYMENT OF COMMISSIONS
The Company may exercise the powers of paying commissions and brokerage conferred or permitted by the Statutes. Subject to the Statutes, any such commission may be satisfied by the payment of cash or by the allotment (or an option to call for the allotment) of fully or partly paid shares or partly in one way and partly the other.
9. TRUSTS NOT RECOGNISED
Except as required by law, no person shall be recognised by the Company as holding any share upon any trust and the Company shall not be bound by or recognise (except as otherwise provided by these Articles or by law or under an order of a court of competent jurisdiction) any interest in any share except an absolute right to the whole of the share in the shareholder.
10. VARIATION OF RIGHTS
10.1 Subject to the Statutes, all or any of the rights attached to any class may (unless otherwise provided by the terms of issue of the shares of that class) be varied or abrogated with the written consent (including by electronic communication) of the holders of three-fourths in nominal value of the issued shares of that class, or with the sanction of an extraordinary resolution passed at a separate meeting of the holders of the shares of that class. The provisions of the Statutes and of these Articles relating to general meetings shall mutatis mutandis apply to any such separate meeting and to any meeting of the holders of shares of a class held otherwise than in connection with the variation or abrogation of the rights attached to shares of that class, except that: 10.1.1 the necessary quorum shall be two persons between them holding or representing by proxy not less than one-third in nominal amount of the issued shares of that class or, at any adjourned meeting of holders of shares of that class at which such a quorum is not present, shall be any holder of shares of that class who is present in person or by proxy whatever the number of shares held by him; 10.1.2 any holder of shares of that class present in person or by proxy may demand a poll; and 10.1.3 every holder of shares of that class shall on a poll have one vote in respect of every share of that class held by him. 10.2 The provisions of this Article shall apply to the variation or abrogation of the special rights attached to some only of the shares of any class (and to any meeting of the holders of such shares held otherwise than in connection with the variation or abrogation of those rights) as if each group of shares of the class differently treated formed a separate class. |
11. MATTERS NOT CONSTITUTING A VARIATION OF RIGHTS
The rights attached to any share or class of shares shall not, unless otherwise expressly provided by its terms of issue, be deemed to be varied, abrogated or breached by:
11.1.1 the creation or issue of further shares ranking pari passu with it; or 11.1.2 the purchase or redemption by the Company of any of its own shares (whether of that or any other class). |
CERTIFICATES
12. RIGHT TO CERTIFICATES
12.1 Except as otherwise provided in these Articles, every person whose name is entered in the Register as a shareholder in the Company shall be entitled, within the time specified by the Statutes and without payment, to one certificate for all the shares of each class registered in his name. Upon a transfer of part of the shares of any class registered in his name, every shareholder shall be entitled without payment to one certificate for the balance of his shareholding in certificated form. Upon request and upon payment, for every certificate after the first, of such reasonable sum (if any) as the Board may determine, every shareholder shall be entitled to receive several certificates for shares in certificated form of one class registered in his name (subject to surrender for cancellation of any existing certificate representing such shares). Every shareholder shall be entitled to receive one certificate in substitution for several certificates for shares in certificated form of one class registered in his name upon surrender to the Company of all the share certificates representing such shares. 12.2 Subject as provided in the preceding part of this Article, the Company shall not be bound to issue more than one certificate in respect of certificated shares registered in the names of two or more persons and delivery of a certificate to one joint shareholder shall be a sufficient delivery to all of them. 13. EXECUTION OF CERTIFICATES Every certificate for share or loan capital or other securities of the Company (other than letters of allotment, scrip certificates or similar documents) shall be issued under the Seal (or in such other manner as the Board, having regard to the terms of issue, the Statutes and the regulations of the UK Listing Authority, may authorise) and each share certificate shall specify the shares to which it relates, the distinguishing number (if any) of the shares and the amount paid up on the shares. The Board may determine, either generally or in relation to any particular case, that any signature on any certificate need not be autographic but may be applied by some mechanical or other means, or printed on the certificate, or that certificates need not be signed. |
14. REPLACEMENT CERTIFICATES
If a share certificate for certificated shares is worn out, defaced or damaged then, upon its surrender to the Company, it shall be replaced free of charge. If a share certificate for certificated shares is or is alleged to have been lost or destroyed it may be replaced without fee but on such terms (if any) as to evidence and indemnity and to payment of any exceptional out-of-pocket expenses of the Company in investigating such evidence and preparing such indemnity as the Board thinks fit. The Company shall be entitled to treat an application for a replacement certificate made by one of joint shareholders as being made on behalf of all the shareholders concerned.
15. UNCERTIFICATED SECURITIES
15.1 Unless otherwise determined by the Board and permitted by the Regulations, the Company shall not issue and no person shall be entitled to receive a certificate in respect of any share or other security issued by the Company for so long as it is in uncertificated form. 15.2 Conversion of securities in certificated form into uncertificated form, and vice versa, may be made in such manner as the Board may, in its absolute discretion, think fit (subject always to the Statutes, the Regulations and the facilities and requirements of the relevant system). 15.3 All registers of holders relating to securities issued by the Company will be maintained as required by the Regulations and by the rules of the relevant system and will distinguish between securities held in uncertificated form and securities held in certificated form. Unless the Board shall otherwise determine, holdings of the same holder or joint holders in certificated form shall be treated as separate from the same person or persons' holdings in uncertificated form, but a class of securities shall not be treated as two classes by virtue only of the fact that it comprises securities in certificated form and securities in uncertificated form (even if, as a result of any provision of these Articles or the Regulations, securities are treated differently according to whether they are in certificated or uncertificated form). 15.4 No certificate will normally be issued in respect of securities held by a recognised clearing house or a nominee of a recognised clearing house or of a recognised investment exchange. 15.5 The provisions of these Articles shall not apply to shares of any class which are in uncertificated form to the extent that such Articles are inconsistent with: 15.5.1 the holding of shares of that class in uncertificated form; 15.5.2 the transfer of title to shares of that class by means of a relevant system; or 15.5.3 any provision of the Regulations. |
LIEN
16. COMPANY'S LIEN
The Company shall have a first and paramount lien on every share (not being a fully paid share) for all monies (whether presently payable or not) called or payable at a fixed time in respect of that share. The Company's lien on a share shall extend to any amount payable in respect of it. The Board may at any time resolve that any share shall be wholly or in part exempt from this Article.
17. ENFORCING LIEN BY SALE AFTER NOTICE
The Company may sell, in such manner as the Board determines, any shares on which the Company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within 14 clear days after a notice has been given to the holder of the share or the person entitled by transmission to his share, demanding payment and indicating that if the notice is not complied with the shares will be sold.
18. MANNER OF SALE
To give effect to a sale, the Board may authorise and instruct some person (which may include the shareholder concerned):
18.1.1 in the case of shares held in certificated form to execute an instrument of transfer of the shares sold; and 18.1.2 in the case of shares held in uncertificated form, subject to the system's rules, to send a transfer instruction, and/or to take other steps as may be necessary, to give effect to such a sale in accordance with the Regulations; |
in each case to, or in accordance with the directions of, the purchaser and a transfer of certificated shares in this way will be valid even if in respect of any of the shares no certificate accompanies the instrument of transfer. The transferee shall not be bound to see to the application of the purchase money and his title to the shares shall not be affected by any irregularity or invalidity of the proceedings in reference to the sale.
19. APPLICATION OF SALE PROCEEDS
The net proceeds of the sale, after payment of the costs, shall be applied in or towards payment of so much of the sum for which the lien exists as is presently payable, and any residue shall (in the case of shares held in certificated form, upon surrender to the Company for cancellation of the certificate for the shares sold and in the case of shares held in uncertificated form, within a reasonable time following receipt by the Company of the net proceeds of sale and subject in each such case to a like lien for any monies not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares immediately before the sale.
CALLS ON SHARES
20. CALLS
Subject to the terms of issue, the Board may from time to time make calls upon the shareholders in respect of any money unpaid on their shares (whether in respect of the nominal amount or by way of premium). Each shareholder shall (subject to receiving at least 14 clear days' notice specifying when and where payment is to be made) pay to the Company as required by the notice the amount called on his shares. A call may be made payable by instalments. A call may, at any time before receipt by the Company of any sum due under the call, be revoked in whole or in part and payment of a call may be postponed in whole or in part, as the Board may determine. A person upon whom a call is made shall remain liable for all calls made upon him notwithstanding the subsequent transfer of the shares in respect of which the call was made.
21. TIME OF CALL
A call shall be deemed to have been made at the time when the resolution of the Board authorising the call was passed.
22. LIABILITY OF JOINT SHAREHOLDERS
The joint holders of a share shall be jointly and severally liable to pay all calls in respect of the share.
23. INTEREST
If a call remains unpaid after it has become due and payable, the person from whom it is due and payable shall pay all costs, charges and expenses that the Company may have incurred by reason of such non-payment, together with interest on the amount unpaid from the day it became due and payable until the day it is paid at the rate fixed by the terms of issue of the share or in the notice of the call or, if no rate is fixed, at the appropriate rate (as defined by the Act) but the Board may waive payment of the interest wholly or in part.
24. SUMS DUE ON ALLOTMENT OR BY WAY OF INSTALMENT TREATED AS CALLS
An amount payable in respect of a share on allotment or at any fixed date, whether in respect of the nominal amount of the share or by way of premium or as an instalment of a call, shall be deemed to be a call and, if it is not paid these Articles shall apply as if that amount had become due and payable by virtue of a call.
25. POWER TO DIFFERENTIATE
Subject to the terms of issue, the Board may, on the issue of shares, differentiate between the allottees or shareholders in the amount of calls to be paid and the times of payment.
26. ADVANCE PAYMENT OF CALLS
The Board may, if it thinks fit, receive from any shareholder willing to advance them all or any part of the monies unpaid and uncalled upon the shares held by him and may pay interest upon the monies so advanced (to the extent such monies exceed the amount of the calls due and payable upon the shares in respect of which they have been advanced) at such rate (not exceeding 15 per cent. per annum unless the Company by ordinary resolution otherwise directs) as the Board may determine. A payment in advance of calls shall extinguish, to the extent of it, the liability upon the shares in respect of which it is advanced.
FORFEITURE OF SHARES
27. NOTICE IF CALL NOT PAID
If a call or instalment of a call remains unpaid after it has become due and payable, the Board may at any time serve a notice on the shareholder requiring payment of so much of the call or instalment as remains unpaid together with any interest which may have accrued thereon and any costs, charges and expenses incurred by the Company by reason of such non-payment. The notice shall specify a further day (not being less than 14 clear days from the date of the notice) on or before which, and the place where, the payment required by the notice is to be made and shall indicate that if the notice is not complied with the shares in respect of which the call was made or instalment is payable will be liable to be forfeited. The Board may accept the surrender of any share liable to be forfeited and, in such case, references in these Articles to forfeiture shall include surrender.
28. FORFEITURE IF NOTICE NOT COMPLIED WITH
If any notice served under the immediately preceding Article is not complied with, any share in respect of which the notice was given may, before payment of all calls or instalments and interest due in respect of it is made, be forfeited by (and with effect from the time of the passing of) a resolution of the Board that such share be forfeited. The forfeiture shall include all dividends declared and other monies payable in respect of the forfeited shares and not paid before the forfeiture.
29. NOTICE OF FORFEITURE
When any share has been forfeited, notice of the forfeiture shall be served upon the person who was, before the forfeiture, the holder, but a forfeiture shall not be invalidated by any failure to give such notice. An entry of such notice and an entry of the forfeiture with the
date thereof shall forthwith be made in the Register in respect of such share. However, no forfeiture shall be invalidated by any omission to make such entries as aforesaid.
30. SALE OF FORFEITED SHARE
Until cancelled in accordance with the Statutes, a forfeited share shall be deemed to be the property of the Company and may be sold, re-allotted or otherwise disposed of either to the person who was the holder before the forfeiture or to any other person upon such terms and in such manner as the Board thinks fit. To give effect to a sale or other disposal, the Board may:
30.1.1 in the case of shares held in certificated form, authorise a person to execute an instrument of transfer; and 30.1.2 in the case of shares held in uncertificated form, authorise and instruct a person (which may include the person who was the holder prior to the forfeiture of the shares concerned), subject to the relevant system's rules, to send a transfer instruction, and/or take other such steps as may be necessary, to give effect to such a sale or other disposal in accordance with the Regulations, |
to the designated transferee (and a transfer of certificated shares in this way will be valid even if in respect of any of the shares no certificate accompanies the instrument of transfer). The Company may receive any consideration given for the share on its disposal and may register the transferee as holder of the share. At any time before a sale, re-allotment or other disposition, the forfeiture may be cancelled on such terms as the Board thinks fit.
31. ARREARS TO BE PAID NOTWITHSTANDING FORFEITURE
A person whose shares have been forfeited shall cease to be a shareholder in respect of the forfeited shares and, in the case of shares held in certificated form, shall surrender to the Company for cancellation the certificate for the forfeited shares but in all cases shall remain liable to the Company for all monies which at the date of forfeiture were presently payable by him to the Company in respect of those shares with interest thereon from the date of forfeiture until payment at such rate (not exceeding 15 per cent. per annum) as the Board may determine. The Board may waive payment wholly or in part and the Board may enforce payment without any allowance for the value of the shares at the time of forfeiture or for any consideration received on their disposal.
32. STATUTORY DECLARATION AND VALIDITY OF SALE
A statutory declaration by a Director or the Secretary that a share has been forfeited on a specified date shall be conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share. The declaration shall (subject to the completion of any formalities necessary to effect a transfer) constitute a good title to the share and the person to whom the share is disposed of shall be registered as the holder and shall be discharged
from all calls made prior to such disposition and shall not be bound to see to the application of the consideration (if any), nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings in reference to the forfeiture, sale, re-allotment or other disposal of the share.
UNTRACED SHAREHOLDERS
33. POWER TO SELL SHARES OF UNTRACED SHAREHOLDERS
Subject to the Regulations, the Company shall be entitled to sell at the best price reasonably obtainable any shares of a shareholder or any shares to which a person is entitled by transmission if in respect of those shares: 33.1 for a period of at least 12 years (the "QUALIFYING PERIOD"), no cheque, warrant or other financial instrument or payment sent by the Company in the manner authorised by these Articles has been cashed; the Company has paid at least three dividends; and no dividend has been claimed; 33.2 the Company has at the expiration of the qualifying period given notice of its intention to sell such shares by two advertisements, one in a national newspaper published in the United Kingdom and the other in a newspaper circulating in the area in which the last known address of the shareholder or the address at which service of notices may be effected in the manner authorised by these Articles is located; and 33.3 so far as the Board is aware, the Company has not during the qualifying period or the period of three months after the date of such advertisements (or the later of the two dates if they are published on different dates) and prior to the exercise of the power of sale received any communication from the shareholder or person entitled by transmission. 34. MANNER OF SALE AND CREATION OF DEBT IN RESPECT OF NET PROCEEDS 34.1 To give effect to any such sale (as referred to in Article 33), the Board may authorise and instruct a person: 34.1.1 in the case of shares held in certificated form, to execute an instrument of transfer of the shares; and 34.1.2 in the case of shares held in uncertificated form, subject to the relevant system's rules, to send a transfer instruction, and take such other steps as may be necessary, to give effect to such a transfer in accordance with the Regulations, and such instrument of transfer or transfer instruction and the taking of other steps as may be necessary in accordance with the Regulations as aforesaid shall be as effective as if they had been executed by the holder of, or the person entitled by transmission to, the shares. The transfer of certificated shares in this way will be valid even if in respect of any of the shares no certificate accompanies the instrument of transfer. The transferee shall not be bound to see to the application of the purchase money and his title shall not be affected by |
any irregularity in, or invalidity of, the proceedings relating to the sale. 34.2 The net proceeds of sale shall belong to the Company which shall be indebted to the former shareholder or person entitled by transmission for an amount equal to such proceeds and shall enter the name of such former shareholder or other person in the books of the Company as a creditor for such amount. No trust shall be created in respect of the debt, no interest shall be payable in respect of it and the Company shall not be required to account for any monies earned on the net proceeds, which may be employed in the business of the Company or otherwise invested as the Board thinks fit. |
TRANSFER OF SHARES
35. FORM AND EXECUTION OF TRANSFER
35.1 Subject to such of the restrictions of these Articles as may be applicable, a shareholder may transfer all or any of his shares, in the case of shares held in certificated form, by an instrument of transfer in any usual form or in any other form which the Board may approve or, in the case of shares held in uncertificated form, in accordance with the Regulations and the system's rules and otherwise in such manner as the Board in its absolute discretion shall determine. An instrument of transfer shall be executed by or on behalf of the transferor and (unless the share is fully paid) by or on behalf of the transferee. Subject to the Statutes, the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect of it. 35.2 Subject to the Statutes and notwithstanding any other provisions of these Articles, the Board shall have power to implement any arrangements it may think fit to enable: 35.2.1 title to any securities of the Company to be evidenced and transferred without a written instrument in accordance with the Regulations and the facilities and requirements of the relevant system concerned; and 35.2.2 rights attaching to such securities to be exercised notwithstanding that such securities are held in uncertificated form where, in the Board's opinion, these Articles do not otherwise allow or provide for such exercise. 36. RIGHT TO REFUSE REGISTRATION OF PARTLY PAID SHARE Subject to the Statutes, the Board may refuse to register the transfer of a share which is not fully paid without giving any reason for so doing provided that, where any such shares are admitted to the Official List of the UK Listing Authority, such discretion may not be exercised in such a way as to prevent dealings in the shares of that class from taking place on an open and proper basis. |
37. OTHER RIGHTS TO REFUSE REGISTRATION
Subject to the Statutes, the Board may also refuse to register the transfer of a share: 37.1 in the case of shares held in certificated form, if it is not lodged, duly stamped (if necessary), at the Office or at such other place as the Board may appoint and accompanied by the certificate for the shares to which it relates (where a certificate has been issued in respect of the shares and these Articles do not provide for such a transfer to be valid without production of the certificate) and/or such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer (and, if the instrument of transfer is executed by some other person on his behalf, the authority of that person to do so); 37.2 if it is not in respect of one class of share only; 37.3 if it is in favour of more than four transferees jointly; 37.4 if it is in favour of a minor, bankrupt or person of mental ill health; 37.5 without prejudice to the foregoing, in the case of shares held in uncertificated form, in any other circumstances permitted by the Regulations and/or the relevant system's rules; 37.6 where the Board is obliged or entitled to refuse to do so as a result of any failure to comply with a notice under section 212 of the Act; or 37.7 to the extent it is obliged to refuse to do so in accordance with Article 56.6. 38. NOTICE OF REFUSAL If the Board refuses to register a transfer it shall, in the case of shares held in certificated form, within two months after the date on which the transfer was lodged and in the case of shares held in uncertificated form, within two months after the date on which the relevant transfer instruction was received by or on behalf of the Company, send to the transferee notice of the refusal. 39. SUSPENSION OF REGISTRATION The registration of transfers may be suspended at such times and for such periods (not exceeding 30 days in any calendar year) as the Board may determine but if the Company is a participating issuer within the meaning of the Regulations the Register will not be closed without the prior consent of the Operator. 40. NO FEE FOR REGISTRATION No fee shall be charged for the registration of any instrument of transfer or document relating to or affecting the title to any share. |
41. RETENTION OF DOCUMENTS
Any instrument of transfer which is registered may be retained by the Company, but any instrument of transfer which the Board refuses to register shall be returned to the person lodging it when notice of the refusal is given.
42. OTHER REGISTERS
Subject to the Statutes, the Company may keep an overseas, local or other register in any place, and the Board may make and vary such regulations as it may think fit concerning the keeping of that register.
TRANSMISSION OF SHARES
43. TRANSMISSION ON DEATH
If a shareholder dies, the survivor or survivors where he was a joint shareholder, and his personal representatives where he was a sole shareholder or the only survivor of joint shareholders shall be the only persons recognised by the Company as having any title to his shares; but nothing contained in this Article shall release the estate of a deceased shareholder from any liability in respect of any share solely or jointly held by him.
44. ELECTION BY PERSON ENTITLED BY TRANSMISSION
Any person becoming entitled to a share in consequence of the death or bankruptcy of a shareholder or of any other event giving rise to its transmission by operation of law may, upon such evidence being produced as the Board may require and subject (where relevant) to the system's rules, elect either to become the holder of the share or to have some person nominated by him registered as the transferee. If he elects to become the shareholder, he shall give notice to the Company to that effect. If he elects to have another person registered, he shall, subject (where relevant) to the system's rules, effect or procure a transfer of the share in favour of that person. All the provisions of these Articles relating to the transfer of shares shall apply to the notice or instrument of transfer as if the death or bankruptcy of the shareholder or other event giving rise to the transmission had not occurred and the notice or instrument of transfer was an instrument of transfer executed by the shareholder.
45. RIGHTS IN RESPECT OF THE SHARE
A person becoming entitled to a share in consequence of the death or bankruptcy of a shareholder or of any other event giving rise to its transmission by operation of law shall have the same rights to which he would be entitled if he were the shareholder of that share, except that he shall not be entitled in respect of it to attend or vote at any general meeting of the Company or at any separate meeting of the holders of any class of shares in the Company until he is registered as the holder of the share. The Board may at any time give notice to such person requiring him to elect either to become the holder of the share or to transfer the share and if the notice is not complied with within 60 clear days from the date of the notice, the Board may withhold payment of all dividends and other monies payable in respect of the share until he complies with the notice.
ALTERATION OF CAPITAL
46. INCREASE, CONSOLIDATION, SUB-DIVISION AND CANCELLATION
The Company may by ordinary resolution:
46.1 increase its share capital by new shares of such amount as the resolution prescribes; 46.2 consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; 46.3 subject to the Statutes, sub-divide its shares, or any of them, into shares of smaller amount and the resolution may determine that, as between the shares resulting from the sub-division, any of them may have any preference or advantage or have such qualified or deferred rights or be subject to any restrictions as compared with the others; and 46.4 cancel any shares which, at the date of the passing of the resolution, have not been taken, or agreed to be taken, by any person and diminish the amount of its share capital by the amount of the shares so cancelled. 47. FRACTIONS Whenever as a result of a consolidation, division or sub-division of shares any shareholder would become entitled to fractions of a share, the Board may deal with the fractions as it thinks fit and, in particular, may sell the shares representing the fractions to any person (including, subject to the Statutes, the Company) and may distribute the net proceeds of sale in due proportion among those shareholders save for amounts of (pound)3.00 or less, which shall be retained for the benefit of the Company. To give effect to any such sale, the Board may authorise and instruct a person to take such steps as may be necessary (subject, in the case of shares held in uncertificated form, to the system's rules) to transfer or deliver the shares to, or in accordance with the directions of, the purchaser. Subject to the Statutes, where a shareholder holds shares in both certificated and uncertificated form, the Board may for these purposes treat them as separate holdings, and may at its discretion arrange |
for any shares representing fractions to be entered in the Register as held in certificated or uncertificated form in order to facilitate their sale under this Article. The transferee shall not be bound to see to the application of the purchase money and his title shall not be affected by any irregularity in, or invalidity of, the proceedings relating to the sale.
48. REDUCTION OF CAPITAL
Subject to the Statutes, the Company may by special resolution reduce its share capital, any capital redemption reserve and any share premium account or other undistributable reserve in any manner.
STOCK
49. ARTICLES APPLICABLE TO STOCK
In these Articles, "STOCK" means a unit or units comprising paid up shares (of the same or different denominations) in any combination which have been converted in accordance with the next following Article. The provisions of these Articles applicable to paid up shares shall apply to stock, and the word "SHARE" shall include "STOCK", and "SHAREHOLDER" and "HOLDER" (where it relates to shares) shall include "STOCKHOLDER".
50. CONVERSION OF SHARES INTO STOCK
50.1 The Company may by ordinary resolution convert any fully paid up shares into stock and re-convert any stock into fully paid up shares of any denomination. 50.2 Any such resolution to convert shares of a particular class into stock which does not expressly disapply this paragraph of this Article shall (notwithstanding any other terms of the resolution) operate automatically to convert shares of that class which subsequently become fully paid into stock on the same basis, but not if the stock initially created by the resolution has been re-converted into shares of any denomination. 51. TRANSFER OF STOCK Stock may be transferred in accordance with these Articles which, prior to conversion, applied to the shares from which the stock arose or as near thereto as circumstances allow, but the Board may from time to time fix the minimum amount of stock which is transferable (which minimum amount shall not exceed the nominal amount of the shares from which the stock arose), in which case stock may be transferred in the sum of the minimum amount or a multiple of it. 52. RIGHTS ATTACHING TO STOCK A holder of stock shall, according to the amount of the stock held by him, have the same rights (including voting rights) as if he held the shares from which the stock arose, but no |
such rights (except participation in dividends and in assets on a winding-up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred those rights.
PURCHASE OF OWN SHARES
53. PURCHASE OF OWN SHARES
Subject to the Statutes and to any rights conferred on the holders of any class of shares, the Company may purchase all or any of its shares of any class (including any redeemable shares). The Company may not purchase any of its shares unless the purchase has been sanctioned (at the time that authority for a market purchase is given or an off-market purchase contract is approved) by such resolution of the Company as may be required by the Statutes and by an extraordinary resolution passed at a separate general meeting (or meetings if there is more than one class) of the holders of any securities which entitle the holders to convert them into equity share capital of the Company. Neither the Company nor the Board shall be required to select the shares to be purchased rateably or in any particular manner as between the holders of shares of the same class or as between them and the holders of shares of any other class or in accordance with the rights as to dividends or capital attached to any class of shares.
SPECIAL PROVISIONS RELATING TO SHARES
54. THE SPECIAL SHARE
54.1 The Special Share may only be issued to, held by and transferred to one of Her Majesty's Secretaries of State, another Minister of the Crown, the Solicitor for the affairs of Her Majesty's Treasury or any other person acting on behalf of the Crown. 54.2 Notwithstanding any provision in these Articles to the contrary, each of the following matters shall be deemed to be a variation of the rights attaching to the Special Share and shall accordingly be effective only with the consent in writing of the Special Shareholder and without such consent shall not be done or caused to be done: 54.2.1 the amendment, or removal, or the alteration of the effect of (which, for the avoidance of doubt, shall be taken to include the ratification of any breach of) all or any of the following: (a) in Article 1, the definitions of "Act", "Affiliate", "associated company", "Board", "National Grid Group", "recognised clearing house", "recognised investment exchange", "Restricted Person", "Special Share", "Special Shareholder", "Transmission Licence" and "Transmission Licence Holder"; (b) this Article; (c) Article 55 (save to the extent that any amendment, removal or alteration |
thereof is required to comply with the Listing Rules of the UK Listing Authority, as amended from time to time); and (d) Articles 56 and 57; 54.2.2 the creation or issue of any shares in the Company with voting rights attached, not being: (a) shares comprised or shares which would, following issue, be comprised in the relevant share capital (as defined in section 198(2) of the Act) of the Company; or (b) shares which do not or shares which, following issue, would not constitute equity share capital (as defined in section 744 of the Act) and which, when aggregated with all other such shares, carry (or would, if in issue, carry) the right to cast less than 15 per cent. of the maximum number of votes capable of being cast on a poll on any resolution at any general meeting of the Company (whether or not the votes could be cast on a poll in relation to all resolutions at all general meetings); 54.2.3 the variation of any rights (save for dividend rights and rights to repayment of capital) attached to any shares in the Company (and, for the avoidance of doubt, the creation or issue of shares falling within paragraphs 54.2.2(a) or (b) above shall not be regarded as a variation for the purposes of this paragraph); 54.2.4 the disposal by the Company or the disposal by any other member of the National Grid Group, to any person who is not a member of the National Grid Group, of all or any of the shares or of any rights or interests therein held by such company in the Transmission Licence Holder or in any company which directly or indirectly holds shares therein, or the entering into by the Company or any other member of the National Grid Group of any agreement or arrangement with any person who is not a member of the National Grid Group with respect to, or to the exercise of any rights attaching to, such shares; 54.2.5 any scheme or arrangement which if put into effect would relieve the Transmission Licence Holder or any other Affiliate of the Company of, or otherwise modify, the obligations required to be imposed on such person by the Company by virtue of the provisions of Article 57; 54.2.6 the voluntary winding-up of the Company, a special resolution to the effect that the Company should be wound up by the court, the presentation by the Company or by the Directors (whether solely or jointly with each other or with any other person) of a petition for the winding-up of the Company by the court or any proposal for any of the foregoing; 54.2.7 the presentation by the Company (whether solely or jointly with any other person) of a petition to the court for, or the exercise by the Company of any rights in support of, the winding-up of the Transmission Licence Holder or any proposal for either of the foregoing; |
54.2.8 the presentation by the Company or by the Directors (whether solely or jointly with each other or with any other person) of a petition applying for an administration order pursuant to section 9 of the Insolvency Act 1986 or any proposal therefor; 54.2.9 the proposal by the Board of a voluntary arrangement pursuant to section 1 of the Insolvency Act 1986; and 54.2.10 the establishment of a holding company for the Company. 54.3 For the purposes of: 54.3.1 paragraph 54.2.4 of this Article: (a) "DISPOSAL" shall include any sale, exchange, gift, lease, licence, mortgage, charge or the grant of any other encumbrance or the permitting of any encumbrance to subsist or any other disposition to a third party; and (b) "AGREEMENTS OR ARRANGEMENTS" shall include all agreements or arrangements of the type contemplated by section 204(2)(a) of the Act (as if that section extended to all shares in the relevant company howsoever acquired). 54.3.2 paragraph 54.2.10 of this Article, the term "HOLDING COMPANY" shall have the meaning given to it in sections 736, 736A and 736B of the Act as substituted by section 144 of the Companies Act 1989. 54.4 The Special Shareholder shall be entitled to receive notice of, and to attend and speak at, any general meeting or any separate meeting of the holders of any class of shares, but the Special Share shall carry no right to vote nor any other rights at any such meeting. 54.5 In a distribution of capital in the winding-up of the Company, the Special Shareholder shall be entitled to repayment of the capital paid up or treated for the purposes of the Act as paid up on the Special Share in priority to any repayment of capital to any other shareholder. The Special Share shall confer no other right to participate in the capital, and no right to participate in the profits, of the Company. 54.6 The Special Shareholder may, after consulting the Company and subject to the provisions of the Act, require the Company to redeem the Special Share at par at any time by giving notice to the Company and delivering to it the relevant share certificate. 55. DISCLOSURE OF INTERESTS 55.1 If a shareholder, or any other person appearing to be interested in shares held by that shareholder, has been given notice under section 212 of the Act, he shall, if requested, also be obliged, in addition to giving the Company the information thereby required, to notify the Company if he is a Relevant Person (as defined in Article 56.2.7 below) or a Restricted Person. If he has failed in relation to any shares (the "DEFAULT SHARES") to give the |
Company the information required from him under the notice within the prescribed period from the date of the notice, the following sanctions shall apply (subject to paragraph 55.6 below), unless the Board otherwise determines:
55.1.1 the shareholder shall not be entitled in respect of the default shares to attend or vote (either in person or by representative or proxy) at any general meeting or at any separate meeting of the holders of any class of shares; and 55.1.2 where the default shares represent 0.25 per cent. or more of their class: (a) any dividend (including any non-cash dividend) or money payable in respect of the shares shall be withheld by the Company, which shall not have any obligation to pay interest on it, and the shareholder shall not be entitled to elect, pursuant to Article 139 below, to receive shares instead of that dividend; and (b) no transfer, other than an approved transfer, of any shares held by the shareholder shall be registered unless: (i) the shareholder is not himself in default as regards supplying the information required; and (ii) the shareholder provides evidence to the satisfaction of the Board that no person in default as regards supplying such information is interested in any of the shares the subject of the transfer provided that, in the case of shares in uncertificated form, the Directors may only exercise their discretion not to register a transfer if permitted to do so by the Regulations. 55.2 Where the sanctions under paragraph 55.1 above apply in relation to any shares, they shall cease to have effect - 55.2.1 if the shares are transferred by means of an approved transfer; or 55.2.2 when the Board is satisfied that the information required by the notice mentioned in that paragraph has been received in writing by the Company. 55.3 For the purposes of this Article - 55.3.1 a person other than the shareholder holding a share shall be treated as appearing to be interested in that share if the shareholder has informed the Company that the person is, or may be, so interested, or if the Company (after taking account of any information obtained from the shareholder or, pursuant to a section 212 notice, from anyone else) knows or has reasonable cause to believe that the person is, or may be, so interested; 55.3.2 "INTERESTED" shall be construed as it is for the purpose of section 212 of the Act; |
55.3.3 reference to a person having failed to give the Company the information required by a notice, or being in default as regards supplying such information, includes (i) reference to his having failed or refused to give all or any part of it and (ii) reference to his having given information which he knows to be false in a material particular or having recklessly given information which is false in a material particular; 55.3.4 "THE PRESCRIBED PERIOD" means - (a) in a case where the default shares represent at least 0.25 per cent. of their class, fourteen days; and (b) in any other case, twenty-eight days; 55.3.5 an "APPROVED TRANSFER" means, in relation to any shares held by a shareholder:- (a) a transfer pursuant to acceptance of an offer made to all the holders (or all the holders other than the person making the offer and his associates (as such term is defined in section 430E of the Act)) of the shares in the Company to acquire those shares or a specified proportion of them, or to all the holders (or all the holders other than the person making the offer and his associates (as such term is defined in Section 430E of the Act)) of a particular class of those shares to acquire the shares of that class or a specified proportion of them; or (b) a transfer in consequence of a sale made through a recognised clearing house, a recognised investment exchange or other stock exchange outside the United Kingdom on which the Company's shares are normally traded; or (c) a transfer which is shown to the satisfaction of the Board to be made in consequence of a sale of the whole of the beneficial interest in the shares to a person who is unconnected with the shareholder and with any other person appearing to be interested in the shares. 55.4 Where, on the basis of information obtained from a shareholder in respect of any share held by him, the Company gives a notice under section 212 of the Act to any other person, it shall at the same time send a copy of the notice to the shareholder, but the accidental omission to do so, or the non-receipt by the shareholder of the copy, shall not invalidate or otherwise affect the application of paragraph 55.1.1 above. 55.5 Where the shareholder on whom the notice under section 212 of the Act is served is the ADR Depositary acting in its capacity as such, the obligations of the ADR Depositary as a shareholder pursuant to the preceding provisions of this Article shall be limited to disclosing to the Company such information relating to the shares in question as has been recorded pursuant to the terms entered into between the ADR Depositary and the Company provided that nothing in this paragraph 55.5 shall in any other way restrict the powers of the Board under this Article. |
55.6 Where a notice under section 212 of the Act is served upon the ADR Depositary acting in its capacity as such, or upon any other person appearing to be interested in shares held by the ADR Depositary, the sanctions under paragraph 55.1.1 shall not be effective unless the Company serves upon the ADR Depositary a notice stating that a specified ADR Holder or ADR Holders is or are believed to be interested in a specified number of shares, and that those shares are default shares (as defined in paragraph 55.1). 56. LIMITATIONS ON SHAREHOLDINGS 56.1 The purpose of this Article is to prevent: 56.1.1 any person (other than a Permitted Person as defined below) directly or indirectly having or controlling the right to cast on a poll 15 per cent. or more of the votes at general meetings of the Company; and 56.1.2 Restricted Persons directly or indirectly having or controlling the right to cast on a poll at general meetings of the Company percentages equal to or in excess of such lower percentages of the votes as are set out in paragraph 56.2.5 below. 56.2 In this Article: 56.2.1 "ADDITIONAL INTEREST" means any such interest as is referred to in paragraph 56.2.2 (b) below; 56.2.2 "INTEREST", in relation to shares, means: (a) any interest which would be taken into account in determining for the purposes of Part VI of the Original Act whether a person has a notifiable interest (including any interest which he would be taken as having for those purposes); and (b) any interest (an "ADDITIONAL INTEREST") mentioned in section 209(1)(a), (b), (d), (e), (g) or (h) of the Original Act (except that of a bare or custodian trustee under the laws of England and Wales and of a simple trustee under the laws of Scotland) or mentioned in section 208(4)(b) of the Original Act (but on the basis that the entitlement there referred to could arise under an agreement within the meaning in section 204(5) and (6) of the Act), and "INTERESTED" shall be construed accordingly; 56.2.3 the "ORIGINAL ACT" means the Companies Act 1985 as in force at 11 December 1995 and notwithstanding any repeal, modification or re-enactment thereof after that date (including for the avoidance of doubt, any amendment, replacement or repeal by regulations made by the Secretary of State pursuant to section 210A of the Act to the definition of relevant share capital in section 198(2) or to the provisions as to what is taken to be an interest in shares in section 208 or as to what interests are to be disregarded in section 209 or the percentage giving rise to |
a notifiable interest in section 199(2)); 56.2.4 "PERMITTED PERSON" means: (a) an ADR Depositary, acting in its capacity as such; (b) a recognised clearing house or a nominee of a recognised clearing house or of a recognised investment exchange, in each case acting in its capacity as such; (c) the chairman of a meeting of the Company or of a meeting of the holders of Relevant Share Capital or of any class thereof when exercising the voting rights conferred on him under paragraph 56.9 below; (d) a trustee (acting in that capacity) of any employees' share scheme of the Company; (e) any person who has an interest but who, if the incidents of his interest were governed by the laws of England and Wales, would in the opinion of the Board be regarded as a bare trustee of that interest, in respect of that interest only; (f) an underwriter or sub-underwriter in respect of interests in shares which exist only by virtue of a contingent obligation to purchase or subscribe for such shares pursuant to an underwriting or sub-underwriting agreement approved by the Board or in respect of interests in shares purchased or subscribed for by it pursuant to such an obligation; (g) any other person who under arrangements approved by the Board subscribes or otherwise acquires Relevant Share Capital (or interests therein) which has been allotted or issued with a view to that person (or purchasers from that person) offering the same to the public, for a period not exceeding three months from the date of the relevant allotment or issue (and in respect only of the shares so subscribed or otherwise acquired); (h) Japan Securities Clearing Corporation and/or its nominee acting in its capacity as a clearing house in respect of dealings on the Tokyo Stock Exchange; (i) The Depository Trust Company and/or its nominee acting in the capacity of a clearing agency in respect of dealings in American Depositary Receipts; (j) any person who has an interest, and who shows to the satisfaction of the Board that he has it by virtue only of being entitled to exercise or control the exercise (within the meaning of section 203(4) of the Original Act) of one-third or more of the voting power at general meetings of a company which is a Permitted Person within (a) to (i) above; or |
(k) a CREST member acting as trustee of shares in respect of which no other person (other than a Permitted Person) is or becomes a Relevant Person (including, without limitation, by virtue of being deemed to be one); 56.2.5 "RELEVANT PERSON" means: (a) any person (whether or not identified and regardless of whether he in addition falls within paragraph 56.2.5 (b) below) who has, or who appears to the Board to have, an interest in shares which carry the right to cast 15 per cent. or more of the total votes attaching to Relevant Share Capital of all classes (taken as a whole) and capable of being cast on a poll, or who is deemed for the purposes of this Article to be a Relevant Person; or (b) any person (whether or not identified) who is, or who appears to the Board to be, a Restricted Person having an interest in shares which carry the right to cast 1 per cent. or more of the total votes attaching to Relevant Share Capital of all classes (taken as a whole) and capable of being cast on a poll; 56.2.6 "RELEVANT SHARE CAPITAL" means the relevant share capital (as defined in section 198(2) of the Original Act), and references therein to the temporary suspension of voting rights shall for the purposes of this Article include shares subject to the provisions of Article 56.4; 56.2.7 "RELEVANT SHARES" means all shares comprised in the Relevant Share Capital in which a Relevant Person has, or appears to the Board to have, an interest or which are deemed for the purposes of this Article to be Relevant Shares; and 56.2.8 "REQUIRED DISPOSAL" means a disposal or disposals of such a number of Relevant Shares (or interests therein) as will cause a Relevant Person to cease to be a Relevant Person, not being a disposal to another Relevant Person (other than a Permitted Person) or a disposal which constitutes any other person (other than a Permitted Person) becoming a Relevant Person; and, for the purposes of this Article, where the Board resolves that it has made reasonable enquiries and that it is unable to determine: (a) whether or not a particular person has an interest in any particular shares comprised in Relevant Share Capital, or (b) who is interested in any particular shares so comprised, the shares concerned shall be deemed to be Relevant Shares and all persons interested in them to be Relevant Persons. 56.3 No Restricted Person shall be entitled in any circumstances, in respect of any part of its interest in the Company's shares which carries the right to cast in excess of 1 per cent. of the total votes attaching to the Relevant Share Capital of all classes (taken as a whole) and |
capable of being cast on a poll, to vote (either in person or by representative or proxy) at any general meeting or at any separate meeting of the holders of any class of shares. 56.4 Subject to paragraphs 56.5, 56.15 and 56.16 below and without prejudice to Article 55 above, the provisions of Part VI of the Original Act shall apply in relation to the Company as if those provisions extended to Additional Interests and accordingly the rights and obligations arising under that Part shall apply in relation to the Company, its shareholders and all persons interested in Relevant Share Capital, as extended by this paragraph; but so that Additional Interests shall, when disclosed to the Company, be entered in a separate register kept by the Company for that purpose. The rights and obligations created by this paragraph in respect of interests in shares (including, but not limited to, Additional Interests) are in addition to and separate from those arising under Part VI of the Act. 56.5 Sections 210(3) to (6) inclusive, 211(10), 213(3) (so far as it relates to section 211(10)), 214(5), 215(8), 216(1) to (4) inclusive, 217(7), 218(3), 219(3) and (4), 454, 455, 732 and 733 of the Original Act shall not apply in respect of Additional Interests. 56.6 If, to the knowledge of the Board, any person other than a Permitted Person is or becomes a Relevant Person (including, without limitation, by virtue of being deemed to be one), the Board shall give notice to all persons (other than persons referred to in paragraph 56.11 below) who appear to the Board to have interests in the Relevant Shares and, if different, to the registered holders of those shares. The notice shall set out the restrictions referred to in paragraph 56.9 below and call for a Required Disposal to be made within 21 days of the giving of the notice to the holder or such longer period as the Board considers reasonable. If the Relevant Shares are held by an ADR Depositary, the notice shall state that: 56.6.1 a specified ADR Holder or ADR Holders (the "RELEVANT ADR HOLDER(S)"), as the case may be, is or are believed or deemed to be ADR Holders through which a Relevant Person or Persons have interests in either case as specified in the notice; and 56.6.2 the Board believes that each Relevant ADR Holder or the Relevant Person or Persons believed or deemed to have interests through such Relevant ADR Holder, is or are deemed to be interested in a specific number of shares. The Board may extend the period in which any such notice is required to be complied with and may withdraw any such notice (whether before or after the expiration of the period referred to) if it appears to it that there is no Relevant Person in relation to the shares concerned. After the giving of such a notice, and save for the purpose of a Required Disposal under this or the following paragraph, no transfer of any of the Relevant Shares may be registered until either the notice is withdrawn or a Required Disposal has been made to the satisfaction of the Board and registered. 56.7 If a notice given under paragraph 56.6 above has not been complied with in all respects to the satisfaction of the Board and has not been withdrawn, the Board shall so far as it is able, make a Required Disposal (or procure that a Required Disposal is made) and shall give written notice of the disposal to those persons on whom the notice was served. The Relevant Person(s) and the registered holder(s) of the shares duly disposed of shall be deemed to have irrevocably and unconditionally authorised the Board to make such |
Required Disposal. The manner, timing and terms of any such Required Disposal made or sought to be made by the Board (including but not limited to the price or prices at which the same is made and the extent to which assurance is obtained that no transferee, except a Permitted Person, is or would become a Relevant Person) shall be such as the Board determines, based on advice from bankers, brokers, or other appropriate persons consulted by it for the purpose, to be reasonably practicable having regard to all the circumstances, including but not limited to the number of shares to be disposed of and the requirement that the disposal be made without delay; and the Board shall not be liable to any person for any of the consequences of reliance on such advice. If, in relation to the Required Disposal to be made by the Board, Relevant Shares are held by more than one holder (treating joint holders of any Relevant Shares as a single holder) the Board shall cause as nearly as practicable the same proportion of each holding (so far as known to them) of the Relevant Shares to be sold. 56.8 For the purposes of effecting any Required Disposal of shares in certificated form, the Board may authorise in writing any officer or employee of the Company to execute any necessary transfer on behalf of any shareholder and may enter the name of the transferee in the Register in respect of the transferred shares notwithstanding the absence of any share certificate and may issue a new certificate to the transferee and an instrument of transfer executed by such person shall be as effective as if it had been executed by the registered holder of the transferred shares and the title of the transferee shall not be affected by any irregularity or invalidity in the proceedings relating thereto. A Required Disposal of shares in uncertificated form can be made by a relevant system, to the extent allowed by the Regulations and the Board shall be entitled to require the holder of that uncertificated share by notice to give any instructions necessary or to take any action (including appointing any person to take any step) to transfer title to that share by means of a relevant system. The net proceeds of the disposal shall be received by the Company whose receipt shall be a good discharge for the purchase money, and shall be paid (without any interest being payable in respect of it and after deduction of any expenses incurred by the Board in the sale) to the former holder (or in the case of joint holders, the first of them named in the register): 56.8.1 in the case of shares in certificated form, together with, if appropriate, a new certificate in respect of the balance of the Relevant Shares to which he is entitled upon surrender by him or on his behalf of any certificate in respect of the Relevant Shares sold and formerly held by him; or 56.8.2 in the case of shares in uncertificated form, when the disposal has been made using a relevant system. 56.9 A holder of a Relevant Share on whom a notice has been given under (and complying with) paragraph 56.6 above shall not in respect of that share be entitled, until such time as the notice has been complied with to the satisfaction of the Board or withdrawn, to attend or vote at any general meeting of the Company or meeting of the holders of Relevant Share Capital or of any class thereof, or to exercise any other right as a shareholder in relation to any such meeting; and the rights to attend (whether in person or by representative or proxy), to speak and to demand and vote on a poll which would have attached to the Relevant Share had it not been a Relevant Share shall vest in the chairman of any such |
meeting. The manner in which the chairman exercises or refrains from exercising any such rights shall be entirely at his discretion. The chairman of any such meeting shall be informed by the Board of any share becoming or being deemed to be a Relevant Share. 56.10 Without prejudice to the provisions of the Act and subject to paragraph 56.2.4 above, the Board may assume without enquiry that a person is not a Relevant Person unless the information contained in the registers kept by the Company under Part VI of the Act or under Part VI of the Original Act (as applied and extended by this Article), including the separate register to be kept under paragraph 56.4 above, appears to the Board to indicate to the contrary or the Board has reason to believe otherwise, in which circumstances the Board shall make reasonable enquiries to discover whether any person is a Relevant Person. 56.11 The Board shall not be obliged to give any notice required under this Article to be given to any person if they do not know either his identity or his address. The absence of such a notice in those circumstances and any accidental error in or failure to give any notice to any person to whom notice is required to be given under this Article shall not prevent the implementation of, or invalidate, any procedure under this Article. 56.12 If any Director has reason to believe that a person (not being a Permitted Person) is a Relevant Person, he shall inform the other Directors. 56.13 Save as otherwise provided in this paragraph, the provisions of these Articles applying to the giving of notice of meetings to shareholders shall apply to the giving to a shareholder of any notice required by this Article. Any notice required by this Article to be given to a person who is not a shareholder, or who is a shareholder whose registered address is not within the United Kingdom and who has not given to the Company an address within the United Kingdom at which notices may be given to him, shall be deemed validly served if it is delivered by hand or sent by post in a prepaid envelope addressed or by other prepaid delivery service to that person at the address (or if more than one, at one of the addresses), if any, at which the Board believes him to be resident or carrying on business or to his last known address as shown on any of the Register and the list of ADR Holders maintained by an ADR Depositary. If the notice is delivered by hand, it shall be treated as being delivered at the time it is handed to or left for such person. If the notice is sent by prepaid post or other delivery service it shall be deemed to have been given on the day following that on which the envelope containing the same is posted or given to a delivery agent, unless it was sent by second class post or there is only one class of post, in which case it shall be deemed to have been given on the day next but one after it was posted. Proof that the envelope containing the notice was properly addressed, prepaid and posted or given to delivery agents with postage or delivery prepaid shall be conclusive evidence that the notice was given. 56.14 Any resolution or determination of, or decision or exercise of any discretion or power by, the Board or any Director or by the chairman of any meeting under or pursuant to the provisions of this Article (including without prejudice to the generality of the foregoing as to what constitutes reasonable enquiry or as to the manner, timing and terms of any Required Disposal made by the Board under paragraph 56.7 above) shall be final and conclusive. Any disposal or transfer made, or other thing done, by or on behalf of, or on the authority of, the Board or any Director pursuant to the foregoing provisions of this |
Article shall be conclusive and binding on all persons concerned and shall not be open to challenge, whether as to its validity or otherwise on any ground whatsoever. The Board shall not be required to give any reasons for any decision, determination or declaration taken or made in accordance with this Article. 56.15 Paragraph 56.4 of this Article shall not apply to an ADR Depositary in its capacity as such. An ADR Holder shall be deemed for the purposes of this Article to have an interest in the number of shares in the Company held by the ADR Depositary and represented by the relevant American Depositary Receipt and not (in the absence of any other reason why he should be so treated) in the remainder of the shares in the Company held by the ADR Depositary. 56.16 Paragraph 56.4 of this Article shall not apply to a recognised clearing house or a nominee of a recognised clearing house or of a recognised investment exchange, in each case acting in its capacity as such, nor shall it apply to a CREST member acting as trustee. Where in that capacity interests in shares in the Company are held by a recognised clearing house or a nominee of a recognised clearing house or of a recognised investment exchange or a CREST member acting as trustee under arrangements recognised by the Company for the purposes of this Article any person who has rights in relation to shares in the Company in which such a recognised clearing house or a nominee of a recognised clearing house or of a recognised investment exchange or a CREST member acting as trustee has an interest shall be deemed to be interested in the number of shares in the Company for which such a recognised clearing house or a nominee of a recognised clearing house or of a recognised investment exchange or a CREST member acting as trustee is or may become liable to account to him and any interest which (by virtue of his being a tenant in common in relation to interests in shares in the Company so held by such a recognised clearing house or a nominee of a recognised clearing house or of a recognised investment exchange or a CREST member acting as trustee) he would otherwise be treated for the purposes of this Article as having in a larger number of shares in the Company shall (in the absence of any other reason why he should be so treated) be disregarded. 56.17 This Article shall apply notwithstanding any provision in any other of these Articles which is inconsistent with or contrary to it. 57. OBLIGATIONS RELATING TO THE TRANSMISSION LICENCE HOLDER The Company shall procure that, without the consent in writing of the Special Shareholder: 57.1 the Transmission Licence shall not be held by any person outside the National Grid Group; 57.2 the National Grid Group shall not cease to carry on, or dispose of or relinquish operational control over any asset required to carry on, the Transmission Business or the Interconnectors Business (as defined in the Transmission Licence as at 11 December 1995), save where such cessation, disposal or relinquishment is required by law or is permitted pursuant to or by virtue of the terms of the Transmission Licence (and the term "DISPOSE" shall be construed in accordance with the definition of "disposal" in Condition 16 of the Transmission Licence as at 11 December 1995); |
57.3 neither the Company nor any Affiliate of the Company shall carry on in the United Kingdom any activity which requires a generation or supply licence or which is exempted from such requirement under or by virtue of the Electricity Act 1989, save where such activity is expressly permitted under the terms of the Transmission Licence and that neither the Company nor any Affiliate of the Company shall be engaged outside the United Kingdom in the generation of electricity to be imported into the United Kingdom; 57.4 no employee or director of a Restricted Person which is neither the Company nor any other member of the National Grid Group shall be a director of the Company, the Transmission Licence Holder or of any holding company thereof (which term shall have the meaning ascribed to it in Article 54.3.2 of these Articles); and 57.5 the Transmission Licence Holder shall not carry on activities other than: 57.5.1 those required or contemplated on the part of the Transmission Licence Holder (in its capacity as the holder of the Transmission Licence) by the Transmission Licence or the Electricity Act 1989 or connected therewith or consequential thereto; or 57.5.2 those carried on by The National Grid Company plc at or prior to 11 December 1995, Provided that (but subject to paragraph 57.3 above) nothing in this paragraph 57.5 shall prevent the acquisition of any share capital by the Transmission Licence Holder in any company. |
GENERAL MEETINGS
58. ANNUAL GENERAL MEETINGS
Subject to the requirements of the Statutes, annual general meetings shall be held at such time and place as the Board may determine.
59. EXTRAORDINARY GENERAL MEETINGS
Any general meeting of the Company other than an annual general meeting shall be called an extraordinary general meeting.
60. CONVENING AN EXTRAORDINARY GENERAL MEETING
The Board may convene an extraordinary general meeting whenever it thinks fit and shall do so on requisition in accordance with the Statutes.
NOTICE OF GENERAL MEETINGS
61. LENGTH OF NOTICE PERIOD
An annual general meeting and an extraordinary general meeting convened for the passing of a special resolution or a resolution appointing a person as a director shall be convened by at least 21 clear days' notice. All other extraordinary general meetings shall be convened by at least 14 clear days' notice. Notwithstanding that a meeting of the Company is convened by shorter notice than that specified in this Article, it shall be deemed to have been properly convened if it is so agreed:
61.1.1 in the case of an annual general meeting, by all the shareholders entitled to attend and vote at the meeting; and 61.1.2 in the case of any other meeting, by a majority in number of the shareholders having a right to attend and vote at the meeting, being a majority together holding not less than 95 per cent. in nominal value of the shares giving that right. |
Subject to these Articles and to any restrictions imposed on any shares, the notice shall be given to all the shareholders, to all persons entitled by transmission and to the Directors and Auditors. The Board may determine that shareholders entitled to receive such notices are those shareholders entered on the Register at the close of business on a day determined by the Board (provided that it is not more than 21 days before the day that the notices are sent).
62. CONTENTS OF NOTICES
Every notice calling a general meeting shall specify the place, the day and the time of the meeting and the general nature of the business to be transacted. In the case of an annual general meeting, the notice shall also specify the meeting as such. A notice convening a meeting to pass a special or extraordinary resolution shall contain a statement to that effect. Every notice calling a meeting of the Company shall specify with reasonable prominence that a shareholder entitled to attend and vote is entitled to appoint one or more proxies to attend and vote in his place and that a proxy need not be a shareholder. Every such notice shall also specify the address or addresses where appointments of proxy are to be deposited, delivered or received if the Board determines any such address to be other than the Office.
63. OMISSION OR NON-RECEIPT OF NOTICE
No proceedings at any meeting shall be invalidated by any accidental omission to give notice of the meeting, or to send an instrument of proxy, to any person entitled to receive it or, in the case of notice by electronic communication, to invite any such person to appoint a proxy in that communication, or by reason of any such person not receiving such any such notice, instrument or invitation.
64. CHANGE OF DATE, TIME OR PLACE OF MEETING
If for any reason the Board considers it impractical or undesirable to hold a meeting on the day, at the time or in the place specified in the notice calling the meeting it can change the date, time and place of the meeting (or whichever it requires), and may do so more than once in relation to the same meeting. References in these Articles to the time of the holding of the meeting shall be construed accordingly. The Board will, insofar as it is practicable, announce by advertisement in at least one newspaper with a national circulation the date, time and place of the meeting as changed, but it shall not be necessary to restate the business of the meeting in that announcement.
PROCEEDINGS AT GENERAL MEETINGS
65. QUORUM
No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the choice or appointment of a chairman of the meeting, which shall not be treated as part of the business of the meeting. Save as otherwise provided by these Articles, two shareholders present in person or by proxy and entitled to vote shall be a quorum for all purposes.
66. PROCEDURE IF QUORUM NOT PRESENT
If within five minutes (or such longer time not exceeding one hour as the chairman of the meeting may decide to wait) after the time appointed for the commencement of the meeting a quorum is not present, the meeting shall (if requisitioned in accordance with the Statutes) be dissolved or (in any other case) stand adjourned to such other day (not being less than ten nor more than 28 days later) and at such time and place as the chairman of the meeting may decide and at such adjourned meeting one shareholder present in person or by proxy (whatever the number of shares held by him) shall be a quorum. The Company shall give not less than seven clear days' notice of any meeting adjourned through want of a quorum and the notice shall specify that one shareholder present in person or by proxy (whatever the number of shares held by him) shall be a quorum.
67. CHAIRMAN OF GENERAL MEETING
67.1 The chairman (if any) of the Board or, in his absence, the deputy chairman (if any) shall preside as chairman at every general meeting. If there is no such chairman or deputy chairman, or if at any meeting neither the chairman nor a deputy chairman is present within five minutes after the time appointed for the commencement of the meeting, or if neither of them is willing to act as chairman, the Directors present shall choose one of their number to act, or if one Director only is present he shall preside as chairman, if willing to act. If no Director is present, or if each of the Directors present declines to take the chair, the persons present and entitled to vote shall elect one of their number to be chairman. 67.2 The chairman of the meeting may invite any person to attend and speak at any general |
meeting of the Company whom he considers to be equipped by knowledge or experience of the Company's business to assist in the deliberations of the meeting. 67.3 The decision of the Chairman of the meeting as to points of order, matters of procedure or arising incidentally out of the business of a general meeting shall be conclusive, as shall be his decision, acting in good faith, on whether a point or matter is of this nature. 68. DIRECTORS' RIGHT TO ATTEND AND SPEAK Each Director shall be entitled to attend and to speak at any general meeting of the Company and at any separate general meeting of the holders of any class of shares or debentures in the Company. 69. MEETING AT MORE THAN ONE PLACE AND/OR IN A SERIES OF ROOMS 69.1 A general meeting or adjourned meeting may be held at more than one place. The notice of meeting will specify the place at which the chairman will be present (the "PRINCIPAL PLACE") and a letter accompanying the notice will specify any other place(s) at which the meeting will be held simultaneously (but any failure to do this will not invalidate the notice of meeting). 69.2 A general meeting or adjourned meeting will be held in one room or a series of rooms at the place specified in the notice of meeting or any other place at which the meeting is to be held simultaneously. 69.3 If the meeting is held in more than one place and/or in a series of rooms, it will not be validly held unless all persons entitled to attend and speak at the meeting are able: 69.3.1 if excluded from the Principal Place or the room in which the chairman is present, to attend at one of the other places or rooms; and 69.3.2 to communicate with one another audio visually throughout the meeting. The Board may make such arrangements as it thinks fit for simultaneous attendance and participation at the meeting and may vary any such arrangements or make new arrangements. Arrangements may be notified in advance or at the meeting by whatever means the Board thinks appropriate to the circumstances. Each person entitled to attend the meeting will be bound by the arrangements made by the Board. 69.4 Where a meeting is held in more than one place and/or a series of rooms, then for the purpose of these Articles the meeting shall consist of all those persons entitled to attend and participate in the meeting who attend at any of the places or rooms. 70. SECURITY ARRANGEMENTS The Board may direct that shareholders or proxies wishing to attend any general meeting should submit to such searches or other security arrangements or restrictions as the Board |
shall consider appropriate in the circumstances and shall be entitled in its absolute discretion to refuse entry to such general meeting to any shareholder or proxy who fails to submit to such searches or to otherwise comply with such security arrangements or restrictions. If a shareholder or proxy has gained entry to a general meeting and refuses to comply with any such security arrangements or restrictions or disrupts the proper and orderly conduct of the general meeting, the chairman of the meeting may at any time without the consent of the general meeting require such shareholder or proxy to leave or be removed from the meeting.
71. ADJOURNMENTS
71.1 The chairman of the meeting may at any time without the consent of the meeting adjourn any meeting (whether or not it has commenced or a quorum is present) either indefinitely or to such time and place as he may decide if it appears to him that: 71.1.1 the shareholders wishing to attend cannot be conveniently accommodated in the place appointed for the meeting; 71.1.2 the conduct of persons present prevents, or is likely to prevent, the orderly continuation of business; or 71.1.3 an adjournment is otherwise necessary so that the business of the meeting may be properly conducted. 71.2 In addition, the chairman of the meeting may at any time with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting) adjourn the meeting either indefinitely or to such time and place as he may decide. When a meeting is adjourned indefinitely the time and place for the adjourned meeting shall be fixed by the Board. 71.3 No business shall be transacted at any adjourned meeting except business which might properly have been transacted at the meeting had the adjournment not taken place. 72. NOTICE OF ADJOURNED MEETING If a meeting is adjourned indefinitely or for 30 days or more or for lack of a quorum, at least seven clear days' notice specifying the place, the day and the time of the adjourned meeting shall be given, but it shall not be necessary to specify in the notice the nature of the business to be transacted at the adjourned meeting. Otherwise, it shall not be necessary to give notice of an adjourned meeting. |
VOTES OF SHAREHOLDERS
73. METHOD OF VOTING
73.1 While any of the shares are admitted to the Official List of the UK Listing Authority, special and extraordinary resolutions shall in all cases be decided only on a poll (whether or not one is demanded). Otherwise, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll a poll is duly demanded. Subject to the Statutes, a poll may be demanded by: 73.1.1 the chairman of the meeting; 73.1.2 at least five shareholders present in person or by proxy and entitled to vote at the meeting; 73.1.3 any shareholder or shareholders present in person or by proxy and representing in aggregate at least one-tenth of the total voting rights of all the shareholders having the right to attend and vote at the meeting; or 73.1.4 any shareholder or shareholders present in person or by proxy and holding shares conferring a right to attend and vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. 73.2 Unless a poll is so demanded and the demand is not withdrawn, a declaration by the chairman of the meeting that a resolution (which is not a special or extraordinary resolution) has been carried or carried unanimously or by a particular majority or not carried by a particular majority or lost and an entry to that effect in the minutes of the meeting shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution. 74. VOTES OF SHAREHOLDERS 74.1 Subject to any rights or restrictions attached to any shares and to any other provisions of these Articles, on a show of hands every shareholder who is present in person shall have one vote and on a poll every shareholder shall have one vote for every share of which he is the holder. 74.2 If the notice of the meeting has specified a time (which is not more than 48 hours before the time fixed for the meeting) by which a person must be entered on the Register in order to have the right to attend and vote at the meeting, no person registered after that time shall be eligible to attend and vote at the meeting by right of that registration, even if present at the meeting. References in these Articles to shareholders present in person shall be construed accordingly. |
75. VOTES OF JOINT HOLDERS
In the case of joint holders of a share the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and seniority shall be determined by the order in which the names of the holders stand in the Register.
76. CORPORATIONS ACTING BY REPRESENTATIVES
A corporation which is a shareholder may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any general meeting of the Company or of any class of shareholders of the Company. The person so authorised shall be entitled to exercise the same powers (other than the power to appoint a proxy) on behalf of the corporation which he represents as that corporation could exercise if it were an individual shareholder of the Company and such corporation shall for the purposes of these Articles be deemed to be present in person at any such meeting if a person so authorised is present at that meeting.
77. VOTES OF SHAREHOLDER SUFFERING INCAPACITY
A shareholder in respect of whom an order has been made by any competent court or official on the ground that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs may vote, whether on a show of hands or on a poll, by any person authorised in such circumstances to do so on his behalf and that person may vote on a poll by proxy. The vote of such shareholder shall not be valid unless evidence to the satisfaction of the Board of the authority of the person claiming to exercise the right to vote is deposited at the Office, or at such other place as is specified in accordance with these Articles for the deposit of appointments of proxy otherwise than by electronic communication, not later than the last time at which an appointment of proxy should have been delivered in order to be valid for use at that meeting or on the holding of that poll.
78. NO RIGHT TO VOTE WHERE SUMS OVERDUE ON SHARES
No shareholder shall, unless the Board otherwise decides, vote at any general meeting or at any separate meeting of holders of any class of shares in the Company, either in person or by proxy, or exercise any other right or privilege as a shareholder in respect of any share in the Company held by him unless all monies presently payable by him in respect of that share have been paid.
79. VOTES ON A POLL
On a poll votes may be given either personally or by proxy. A shareholder may appoint more than one proxy to attend on the same occasion. A shareholder entitled to more than one vote on a poll need not use all his votes or cast all the votes he uses in the same way.
80. RIGHT TO WITHDRAW DEMAND FOR A POLL
The demand for a poll may, before the earlier of the close of the meeting and the taking of the poll, be withdrawn but only with the consent of the chairman of the meeting and, if a demand is withdrawn, any other shareholders entitled to demand a poll may do so. If a demand is withdrawn, it shall not be taken to have invalidated the result of a show of hands declared before the demand was made. If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn, the chairman of the meeting may give whatever directions he considers necessary to ensure that the business of the meeting proceeds as it would have if the demand had not been made.
81. PROCEDURE IF POLL DEMANDED
If a poll is duly demanded, it shall be taken in such manner as the chairman of the meeting directs and he may appoint scrutineers (who need not be shareholders) and fix a time and place for declaring the result of the poll. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.
82. WHEN POLL TO BE TAKEN
A poll demanded on the election of a chairman of the meeting or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken either forthwith or on such date (being not more than 30 days after the poll is demanded) and at such time and place and in such manner or by such means as the chairman of the meeting directs. No notice need be given of a poll not taken immediately if the time and place at which it is to be taken are announced at the meeting at which it is demanded. In any other case, at least seven clear days' notice shall be given specifying the time and place at which the poll is to be taken. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded.
83. CONTINUANCE OF OTHER BUSINESS AFTER POLL DEMANDED
The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which the poll was demanded.
84. CHAIRMAN'S CASTING VOTE
In the case of an equality of votes at a general meeting, whether on a show of hands or on a poll, the chairman of the meeting shall be entitled to a casting vote in addition to any other vote he may have.
85. PROPOSAL OR AMENDMENT OF RESOLUTION
A resolution proposed by the chairman of the meeting does not need to be seconded. In the case of a resolution duly proposed as an extraordinary or special resolution, no
amendment to that resolution (other than an amendment to correct a patent error) may be considered or voted upon. In the case of a resolution duly proposed as an ordinary resolution no amendment to that resolution (other than an amendment to correct a patent error) may be considered or voted upon unless at least two clear business days prior to the time appointed for holding the meeting or adjourned meeting at which such ordinary resolution is to be proposed, notice of the terms of the amendment and of the intention to move the amendment has been (i) lodged in writing at the Office or (ii) received by electronic communication at the address specified for the purpose of receiving electronic communications in an electronic communication containing the notice of meeting, or the chairman of the meeting in his absolute discretion decides in good faith that it may be considered and voted upon.
86. AMENDMENT OF RESOLUTION RULED OUT OF ORDER
If an amendment is proposed to any resolution under consideration which the chairman of the meeting rules out of order, the proceedings on the substantive resolution shall not be invalidated by any error in such ruling.
87. OBJECTIONS OR ERRORS IN VOTING
If: 87.1.1 any objection shall be raised to the qualification of any voter; 87.1.2 any votes have been counted which ought not to have been counted or which might have been rejected; or 87.1.3 any votes are not counted which ought to have been counted |
the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any resolution unless it is raised or pointed out at the meeting or, as the case may be, the adjourned meeting at which the vote objected to is given or tendered or at which the error occurs. Any objection or error shall be referred to the chairman of the meeting and shall only vitiate the decision of the meeting on any resolution if the chairman of the meeting decides that the same may have affected the decision of the meeting. The decision of the chairman of the meeting on such matters shall be conclusive.
PROXIES
88. EXECUTION OF AN APPOINTMENT OF PROXY
88.1 If the appointment of a proxy is: 88.1.1 an instrument not contained in an electronic communication, it shall be executed under the hand of the appointor or of his attorney authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign it; |
88.1.2 contained in an electronic communication, it shall be
executed by or on behalf of the appointor. Subject as provided in this Article, in the case of an appointment of proxy purporting to be executed on behalf of a corporation by an officer of that corporation it shall be assumed, unless the contrary is shown, that such officer was duly authorised to do so on behalf of that corporation without further evidence of that authorisation. 88.2 The Board may (but need not) allow proxies to be appointed by means of electronic communication, and if it does it may make such appointments subject to such stipulations, conditions or restrictions, and require such evidence of valid execution, as the Board thinks fit. 88.3 A proxy need not be a shareholder. 89. TIMES FOR DELIVERY OF AN APPOINTMENT OF PROXY 89.1 The appointment of a proxy and (if required under these Articles) the power of attorney or other authority under which it is signed, or a copy of such authority certified notarially or in some other way approved by the Board, shall: 89.1.1 in the case of an instrument not contained in an electronic communication, be deposited at the Office (or at such other place within the United Kingdom as is specified for the purpose in the notice convening the meeting or in the instrument) not less than 48 hours before the time of the holding of the meeting or adjourned meeting at which the person named in the appointment proposes to vote; or 89.1.2 in the case of an appointment contained in an electronic communication, where an address has been specified for the purpose of receiving electronic communications: (a) in the notice convening the meeting, or (b) in any instrument of proxy sent out by the Company in relation to the meeting, or (c) in any invitation contained in an electronic communication to appoint a proxy issued by the Company in relation to the meeting, be received at such address (or, where the thing in question is not contained in an electronic communication, at the Office or at such other place as may be specified for the purpose) not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote; |
89.1.3 in the case of a poll taken more than 48 hours after it is demanded, be deposited or received as aforesaid after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll; or 89.1.4 where the poll is not taken forthwith but is taken not more than 48 hours after it was demanded, be delivered at the meeting at which the poll was demanded to the chairman of the meeting or to any Director, and an appointment of proxy which is not deposited, delivered or received in a manner so permitted shall be invalid. 89.2 When two or more valid but differing appointments of proxy are deposited, delivered or received in respect of the same share for use at the same meeting, the one which is last deposited, delivered or received (regardless of its date or of the date of execution) shall be treated as replacing the others as regards that share; if the Company is unable to determine which was last deposited, delivered or received, none of them shall be treated as valid in respect of that share. The deposit, delivery or receipt of an appointment of a proxy shall not preclude a shareholder from attending and voting in person at the meeting or poll concerned. 90. FORM OF APPOINTMENT OF PROXY 90.1 The appointment of a proxy shall be in any usual form or any other form which the Board may approve and may relate to more than one meeting. The Board may, if it thinks fit but subject to the Statutes, include with the notice of any meeting forms of appointment of proxy for use at the meeting. 90.2 The appointment of a proxy shall be deemed to include the right: 90.2.1 to demand or join in demanding a poll; 90.2.2 to speak at the meeting to the same extent as his appointor would be entitled to if present in person; and 90.2.3 (except to the extent that the appointment comprises instructions to vote in a particular way) to vote or abstain as the proxy thinks fit on any business properly dealt with at the meeting, including a vote on any amendment of a resolution put to the meeting or on any motion to adjourn. 90.3 The appointment shall, unless the contrary is stated in it, be as valid for any adjournment of the meeting as for the meeting to which it relates (regardless of any change of date, time or place effected in accordance with these Articles). 91. VALIDITY OF PROXY A vote given or poll demanded by proxy or by the duly authorised representative of a corporation shall be valid, notwithstanding the previous determination of the authority of |
the person voting or demanding a poll unless notice of such determination was received by the Company at the Office (or at such other place at which the instrument of proxy was duly deposited or, where the appointment of the proxy was contained in an electronic communication, at the address at which such appointment was duly received) not later than the last time at which an appointment of proxy should have been deposited, delivered or received in order to be valid for use at the meeting or on the holding of the poll at which the vote was given or the poll demanded.
92. MAXIMUM VALIDITY OF PROXY
An appointment of proxy shall cease to be valid after the expiration of 12 months from the date of its execution except that it will remain valid after that for the purposes of a poll or an adjourned meeting if the meeting at which the poll was demanded or the adjournment moved was held within the 12 month period.
DIRECTORS
93. NUMBER OF DIRECTORS
Unless otherwise determined by ordinary resolution of the Company, the number of Directors (disregarding alternate directors) shall not be less than two but shall not be subject to any maximum number.
94. NO SHAREHOLDING QUALIFICATION FOR DIRECTORS
No shareholding qualification for Directors shall be required.
REMUNERATION OF DIRECTORS
95. ORDINARY REMUNERATION
Each of the Directors (other than any Director who for the time being holds an executive office or employment with the Company or a subsidiary of the Company) shall be paid a fee for his services at such rate as may from time to time be determined by the Board or by a committee authorised by the Board provided that the aggregate of such fees (excluding any amounts payable under any other provision of these Articles) shall not exceed (pound)500,000 per annum or such higher amount as the Company by ordinary resolution may determine from time to time. Such fee shall be deemed to accrue from day to day.
96. EXPENSES
The Directors may be paid all travelling, hotel and other expenses properly incurred by them in the conduct of the Company's business performing their duties as Directors
including all such expenses incurred in connection with attending and returning from meetings of the Board or any committee of the Board or general meetings or separate meetings of the holders of any class of shares or debentures of the Company or otherwise in connection with the business of the Company.
97. EXTRA REMUNERATION
Any Director who is appointed to any executive office or who serves on any committee or who devotes special attention to the business of the Company or goes or resides abroad for any purposes of the Company shall receive such remuneration or extra remuneration by way of salary, commission, participation in profits or otherwise as the Board or any committee authorised by the Board may determine in addition to or in lieu of any remuneration paid to, or provided for, such Director by or pursuant to any other of these Articles.
ALTERNATE DIRECTORS
98. APPOINTMENT, REMOVAL AND RESIGNATION
98.1 Any Director (other than an alternate Director) may, by notice in writing which is delivered to the Secretary at the Office or delivered in any other manner (including by electronic communication) approved by the Board, appoint any person to be his alternate and may revoke any such appointment. If the alternate Director is not already a Director, the appointment, unless previously approved by the Board, shall have effect only upon and subject to its being so approved. Any appointment of an alternate will only have effect once the person who is to be appointed has consented to act. If his appointor so requests, an alternate Director shall (subject to his giving to the Company an address for service within the United Kingdom) be entitled to receive notice of all meetings of the Board or of committees of the Board of which his appointor is a member, to attend and vote and be counted in the quorum as a Director at any such meeting at which his appointor is not personally present, and generally, in the absence of his appointor, at the meeting to exercise and discharge all the functions, powers and duties of his appointor as a Director and for the purposes of the proceedings at the meeting, these Articles shall apply as if he were a Director. 98.2 A Director present at a meeting of the Board or committee of the Board and appointed alternate for another Director shall have an additional vote for each of his appointors absent from such meeting (but shall count as one only for the purpose of determining whether a quorum is present). 98.3 Execution by an alternate Director of any document (including, without limitation, any deed) on behalf of the Company or any resolution in writing of the Board or a committee of the Board shall, unless the notice of his appointment provides to the contrary, be as effective as execution by his appointor. 98.4 An alternate Director shall cease to be an alternate Director if he resigns or if for any |
reason his appointment is revoked or if his appointor ceases to be a Director; but, if a Director retires by rotation or otherwise but is reappointed or deemed to have been reappointed at the meeting at which he retires, any appointment of an alternate Director made by him which was in force immediately prior to his retirement shall continue after his reappointment as if he had not retired. The appointment of an alternate Director shall be revoked on the happening of any event which, if he were a Director, would cause him to vacate such office under these Articles. All appointments and revocations of appointments and resignations of alternate Directors shall be in writing and left at the Office or delivered at a meeting of the Board, or in any other manner approved by the Board.
99. ALTERNATE TO BE RESPONSIBLE FOR HIS OWN ACTS AND REMUNERATION OF ALTERNATE
An alternate Director shall be deemed an officer of the Company and shall be subject to these Articles relating to Directors (except as regards power to appoint an alternate and remuneration) and an alternate Director shall not be deemed the agent of his appointor and shall alone be responsible to the Company for his acts and defaults. An alternate Director may contract and be interested in and benefit from contracts or arrangements or transactions and be paid expenses and indemnified to the same extent as if he were a Director but, save to the extent that his appointor directs the payment to him of part or all of the remuneration which would otherwise be payable to his appointor, he shall not be entitled to any remuneration from the Company for acting in that capacity.
EXECUTIVE DIRECTORS
100. EXECUTIVE DIRECTORS
100.1 The Board or any committee authorised by the Board may from time to time appoint one or more of its body to hold any employment or executive office with the Company for such period (subject to the Statutes) and on such other terms as the Board or any committee authorised by the Board may decide and may revoke or terminate any appointment so made. Any revocation or termination of the appointment shall be without prejudice to any claim for damages that the Director may have against the Company or that the Company may have against the Director for any breach of any contract of service between him and the Company. A Director so appointed may be paid such remuneration (whether by way of salary, commission, participation in profits or otherwise) in such manner as the Board or any committee authorised by the Board may decide and either in addition to or in place of his ordinary remuneration as a Director. 100.2 The Board may from time to time appoint any person to any office or employment having a descriptive designation or title including the word "director" or attach to any existing office or employment with the Company such a designation or title and may at any time determine any such appointment or the use of any such designation or title. The inclusion of the word "director" in the designation or title of any such office or employment with the Company shall not imply that the holder of the office is a director of the Company nor shall such holder thereby be empowered in any respect to act as a director of the Company or be deemed to be a director for any of the purposes of the Statutes or these Articles. |
POWERS AND DUTIES OF DIRECTORS
101. GENERAL POWERS OF THE COMPANY VESTED IN THE BOARD
Subject to the Statutes, the Memorandum of Association of the Company and these Articles and to any directions given by the Company in general meeting by special resolution, the business of the Company shall be managed by the Board which may exercise all the powers of the Company. No alteration of the Memorandum of Association or these Articles and no such special resolution shall invalidate any prior act of the Board which would have been valid if that alteration had not been made or that resolution had not been passed. The powers given by this Article shall not be limited by any special power given to the Board by any other Article.
DELEGATION OF DIRECTORS' POWERS
102. AGENTS
The Board may, by power of attorney or otherwise, appoint any person to be the agent of the Company on such terms (including terms as to remuneration) and subject to such conditions as it may decide and may delegate to any person so appointed any of its powers, authorities and discretions (with power to sub-delegate). The Board may remove any person so appointed and may revoke or vary the delegation but no person dealing in good faith and without notice of the revocation or variation shall be affected by it. The power to delegate contained in this Article shall be effective in relation to the powers, authorities and discretions of the Board generally and shall not be limited by the fact that in certain Articles, but not in others, express reference is made to particular powers, authorities or discretions being exercised by the Board or by committee authorised by the Board.
103. DELEGATION TO INDIVIDUAL DIRECTORS
The Board may entrust to and confer upon a Director any of its powers, authorities and discretions (with power to sub-delegate) upon such terms (subject to the Statutes) and subject to such conditions and with such restrictions as it may decide and either collaterally with or to the exclusion of its own powers, authorities and discretions. The Board may from time to time revoke or vary all or any of them but no person dealing in good faith and without notice of the revocation or variation shall be affected by it. The power to delegate contained in this Article shall be effective in relation to the powers, authorities and discretions of the Board generally and shall not be limited by the fact that in certain Articles, but not in others, express reference is made to particular powers, authorities or discretions being exercised by the Board or by a committee authorised by the Board.
104. DELEGATION TO COMMITTEES
104.1 The Board may delegate any of its powers, authorities and discretions (with power to sub-
delegate) to any committee consisting of such person or persons as it thinks fit (whether a member or members of its body or not) provided that the majority of the members of the committee are Directors. Subject to any restriction on sub-delegation imposed by the Board, any committee so formed may exercise its power to sub-delegate by sub-delegating to any person or persons (whether or not a member or members of the Board or of the committee). Subject to any regulations imposed on it by the Board, the proceedings of any committee consisting of two or more members shall be governed by the provisions in these Articles for regulating proceedings of the Board so far as applicable except that no meeting of that committee shall be quorate for the purpose of exercising any of its powers, authorities or discretions unless a majority of the committee present at the meeting are Directors. A member of a committee shall be paid such remuneration (if any) in such manner as the Board may decide, and, in the case of a Director, either in addition to or in place of his ordinary remuneration as a Director. 104.2 The power to delegate contained in this Article shall be effective in relation to the powers, authorities and discretions of the Board generally and shall not be limited by the fact that in certain Articles, but not in others, express reference is made to particular powers, authorities or discretions being exercised by the Board or by a committee authorised by the Board. 105. POWER TO ESTABLISH LOCAL BOARDS ETC. The Board may: 105.1 establish any divisional, departmental, regional, local or area boards, divisions or managing agencies for introducing, conducting or managing all or any of the business or affairs of the Company, either in the United Kingdom or elsewhere; 105.2 make regulations for the proceedings and activities of any such establishment (but so that otherwise its proceedings shall be governed by those of these Articles which regulate proceedings of the Board to the extent that they are capable of applying to it); 105.3 appoint any persons (whether Directors or not) as regional directors, local directors, divisional directors, area directors, advisory directors, managers or agents or to serve in any other capacity in connection with any such establishment, and may fix their remuneration; 105.4 delegate to any such establishment and to any such appointee (including anyone appointed before this Article was adopted) any of the powers, authorities and discretions vested in the Board, with power to sub-delegate; 105.5 authorise any such appointees to fill any vacancies in any such establishment and to act notwithstanding vacancies, provided that any such appointment or delegation shall be made upon such terms and subject to such conditions as the Board may think fit, and the Board may remove any persons so appointed, and may revoke, suspend or vary any such delegation but this shall not affect the position of any person dealing in good faith who has not had notice that the |
Board has done so. No such appointee shall be a Director as such or be entitled to be present at any meeting of the Board (except at the request of the Board and, if present at such request, he shall not be entitled to vote at that meeting) or have power under the terms of this Article to enter into any contract or transact any business on behalf of the Company except to the extent (if any) specifically authorised by the Board.
SPECIFIC POWERS
106. PROVISION FOR EMPLOYEES
The Board may exercise any power conferred by the Statutes to make provision for the benefit of persons employed or formerly employed by the Company or any of its subsidiaries in connection with the cessation or the transfer to any person of the whole or part of the undertaking of the Company or that subsidiary.
107. BORROWING POWERS
107.1 The Board may exercise all the powers of the Company to borrow money and to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and, subject to the Statutes, to issue debentures and other securities, whether outright or as collateral security, for any debt, liability or obligation of the Company or of any third party. 107.2 The Board shall restrict the borrowings of the Company and exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary undertakings (if any) so as to secure (but as regards subsidiary undertakings only in so far as by the exercise of such rights or powers of control the Board can secure) that the aggregate principal amount from time to time outstanding of all borrowings by the Group (exclusive of borrowings owing by one member of the Group to another member of the Group) shall not at any time without the previous sanction of an ordinary resolution of the Company exceed an amount equal to four times the Adjusted Capital and Reserves. 107.3 For the purposes of this Article: 107.3.1 the "ADJUSTED CAPITAL AND RESERVES" means the aggregate of: (a) the amount paid up on the issued share capital of the Company; (b) the amounts standing to the credit of the capital and revenue reserves of the Company and its subsidiary undertakings (including any share premium account, capital redemption reserve, reserves arising on a revaluation of fixed assets or on consolidation and any credit balance on profit and loss account); (c) the amounts, so far as attributable to the Company or a subsidiary undertaking, standing to the credit of investment grants equalisation |
account, deferred regional development grants equalisation account or any other equalisation account of a similar nature; and (d) the amounts, so far as attributable to the Company or a subsidiary undertaking, set aside for the purpose of deferred tax or any other account of a similar nature; as shown by the then latest audited balance sheet but after: (e) making such adjustments as may be appropriate to reflect any variation in the amount of the paid up share capital or reserves since the date of the relevant audited balance sheet and any variation in the amounts attributable to the interest of the Company in the share capital of any subsidiary undertaking and so that for this purpose if any issue or proposed issue of shares by a member of the Group for cash has been underwritten then such shares shall be deemed to have been issued and the amount (including any premium) of the subscription monies payable in respect thereof (not being monies payable later than six months after the date of allotment) shall to the extent so underwritten be deemed to have been paid up on the date when the issue of such shares was underwritten (or, if such underwriting was conditional, on the date when it became unconditional); (f) making such adjustments as may be appropriate in respect of any distribution declared, recommended or made by any member of the Group (otherwise than to a member of the Group) out of profits earned up to and including the date of the audited balance sheet of the Group to the extent that such distribution is not provided for in such balance sheet; (g) deducting the amount of any debit balance on profit and loss account existing at the date of the relevant audited balance sheet to the extent that a deduction has not already been made on that account; (h) adding back sums equivalent to the amount of goodwill arising on acquisitions of companies and businesses remaining part of the Group at the date of calculation and which, at that date, had been written off against share capital and reserves in accordance with United Kingdom accounting practice; and (i) making such other (if any) adjustments as the Auditors after consultation with the Board may consider appropriate. 107.3.2 "BORROWINGS" include not only items referred to as borrowings in the audited balance sheet but also the following, except in so far as otherwise taken into account: (a) the nominal amount of any issued share capital and the principal amount of any debentures or borrowed monies of any person, the beneficial |
interest in which is not for the time being owned by a member of the Group, and the payment or repayment of which is the subject of a guarantee or indemnity by a member of the Group or is secured on the assets of any member of the Group;
(b) the outstanding amount raised by acceptances by any bank or accepting house under any acceptance credit opened on behalf of and in favour of any member of the Group, not being acceptances of trade bills for the purchase of goods or services in the ordinary course of business;
(c) the principal amount of any debenture (whether secured or unsecured) of a member of the Group, which debenture is owned otherwise than by another member of the Group Provided that where the amount raised by the Company or any of its subsidiary undertakings by the issue of any debentures, debenture stocks, loan stocks, bonds, notes or other indebtedness is less than the nominal or principal amount thereof (including for these purposes any fixed or minimum premium payable on final redemption or repayment but disregarding the expenses of any such issue) the amount to be treated as monies borrowed for the purpose of this Article shall, so long as the nominal or principal amount of such monies borrowed is not presently due and payable, be the nominal or principal amount thereof (together with any fixed or minimum premium payable on final redemption or repayment) but after deducting therefrom the unexpired portion of any discount applied to such amount in the audited balance sheet of the Group. Any references in this Article to debentures or monies borrowed or the nominal or principal amount thereof shall, accordingly, be read subject to this Article 107.3.2(c);
(d) the principal amount of any preference share capital of any subsidiary undertaking owned otherwise than by a member of the Group;
(e) any fixed or minimum premium payable on the repayment of any borrowing or deemed borrowing; and
(f) the capital value of any financial lease required to be capitalised and treated as a liability in the audited balance sheet by any applicable accounting standard (as defined in section 256 of the Act) from time to time in force;
but do not include:
(g) monies borrowed by a member of the Group for the purpose of repaying the whole or any part of any borrowings of such member of the Group or any other member of the Group for the time being outstanding and so to be applied within six months of being so borrowed, pending their application for such purpose within such period;
(h) monies borrowed by a member of the Group for the purpose of financing any contract in respect of which any part of the price receivable
by that member or any other member of the Group is guaranteed or insured by the Export Credits Guarantee Department, or by any other governmental department or agency fulfilling a similar function, up to an amount equal to that part of the price receivable under the contract which is so guaranteed or insured;
(i) for a period of twelve months from the date upon which
a company becomes a member of the Group, an amount
equal to the monies borrowed by such company
outstanding at the date when it becomes such a member
provided always that monies borrowed by the Group
(including monies otherwise excluded by the application
of this sub-paragraph) must not exceed an amount equal
to five times the Adjusted Capital and Reserves; and
(j) an amount equal to the minority proportion of
monies borrowed by a partly owned subsidiary of the
Group (after excluding any monies borrowed owing
between members of the Group) except to the extent that
such monies borrowed are guaranteed by the Company or
any wholly owned subsidiary undertaking of the Company.
For these purposes the minority proportion shall be the
proportion of the issued equity share capital of such
partly owned subsidiary which is not for the time being
beneficially owned within the Group. Monies borrowed by
a member of the Group from a partly owned subsidiary of
the Group which would fall to be excluded as being
monies borrowed owing between members of the Group
shall nevertheless be included to the extent of an
amount equal to such minority proportion of such monies
borrowed; and
(k) sums advanced or paid to any member of the Group (or its agents or nominee) by customers of any member of the Group as unexpended customer receipts or progress payments pursuant to any contract between such customer and a member of the Group in relation thereto;
provided that, in calculating borrowings under this Article there shall be credited (subject, in the case of any item held or deposited by a partly owned subsidiary undertaking, to the exclusion of a proportion thereof equal to the proportion of the issued equity share capital of the partly owned subsidiary undertaking which is not attributable to the Company or any subsidiary undertaking of the Company) against the amount of any monies borrowed the aggregate of:
(i) cash in hand of the Group; and
(ii) cash deposits and the balance on each current account of the Group with banks in the United Kingdom and/or elsewhere if the remittance of the cash to the United Kingdom is not prohibited by any law, regulation, treaty or official directive; and
(iii) the amount of all assets ("SHORT TERM ASSETS") as might be included in "Investments - short term loans and deposits" in a
consolidated balance sheet of the Group prepared as at the date of the relevant calculation in accordance with the principles with which the then latest audited balance sheet was produced; and (iv) the amount of any cash or short term assets securing the repayment by the Group of any amount borrowed by the Group deposited or otherwise placed with the trustee or similar entity in respect of the relevant borrowing; and 107.3.3 where the aggregate principal amount of borrowings required to be taken into account for the purposes of this Article on any particular date is being ascertained: (a) monies borrowed by the Company or any subsidiary undertaking expressed in or calculated by reference to a currency other than sterling shall be converted into sterling by reference to the rate of exchange used for the conversion of such currency in preparation of the audited balance sheet which forms the basis of the calculation of the Adjusted Capital and Reserves or, if such calculation did not involve the relevant currency, by reference to the rate of exchange or approximate rate of exchange ruling as at the date of the aforesaid audited balance sheet as the Auditors may consider appropriate for this purpose; and (b) if under the terms of any borrowing, the amount of money that would be required to discharge the principal amount of such borrowing in full if it fell to be repaid (at the option of the Company or by reason of default) on such date is less than the amount that would otherwise be taken into account in respect of such borrowing for the purpose of this Article, the amount of such borrowing to be taken into account for the purpose of this Article shall be such lesser amount; 107.3.4 "AUDITED BALANCE SHEET" means the audited balance sheet of the Company prepared for the purposes of the Statutes or, if an audited consolidated balance sheet of the Company and its subsidiary undertakings (with such exceptions as may be permitted in the case of a consolidated balance sheet prepared for the purposes of the Statutes) has been prepared for those purposes for the same financial year, means that audited consolidated balance sheet in which event all references to reserves and profit and loss account shall be deemed to be references to consolidated reserves and consolidated profit and loss account respectively and there shall be excluded any amounts attributable to outside interests in subsidiary undertakings; 107.3.5 the Company may from time to time change the accounting convention on which the audited balance sheet is based, provided that any new convention adopted complies with the requirements of the Statutes; if the Company should prepare its main audited balance sheet on the basis of one such convention, but a supplementary audited balance sheet or statement on the basis of another, the main audited balance sheet shall be taken as the audited balance sheet for the purposes of this Article; |
107.3.6 no amount shall be taken into account more than once in the same calculation; and 107.3.7 the "GROUP" means the Company and its subsidiary undertakings (if any) other than those subsidiary undertakings authorised or required to be excluded from consolidation in the Company's group accounts pursuant to section 229 of the Act. 107.4 The report or opinion of the Auditors as to the amount of the Adjusted Capital and Reserves at any time shall be conclusive and binding on all concerned. Nevertheless the Board may act in reliance on a bona fide estimate of the amount of the Adjusted Capital and Reserves at any time and if in consequence the limit contained in this Article is inadvertently exceeded an amount of borrowings equal to the excess may be disregarded until the expiration of three months after the date on which by reason of a report or opinion of the Auditors or otherwise the Board became aware that such a situation has or may have arisen. 107.5 Notwithstanding the foregoing, no lender or other person dealing with the Company shall be concerned to see or inquire whether the limit imposed by this Article is observed and no borrowing incurred or security given in excess of such limit shall be invalid or ineffectual, except in the case of express notice to the lender or the recipient of the security at the time when the borrowing was incurred or the security given that the limit imposed by this Article had been or was thereby exceeded. |
APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS
108. NUMBER TO RETIRE BY ROTATION
108.1 Any Director not otherwise required to retire at an annual general meeting shall do so unless he was appointed or re-appointed as a Director at either of the last two annual general meetings before that meeting. 108.2 At every annual general meeting one-third of the Directors or, if their number is not three or a multiple of three, the number which is nearest to but not greater than one-third (unless there are fewer than three Directors, in which case one of those Directors) shall retire. Subject to the Statutes and these Articles, the Directors to retire by rotation on each occasion (both as to number and identity) shall be determined by the composition of the Board at start of business on the date of the notice convening the annual general meeting and shall comprise: first, any Director who wishes to retire and not to offer himself for re-election; and secondly, those who have been longest in office since their last appointment or reappointment (but as between persons who became or were last reappointed Directors on the same day, those to retire shall be determined by lot or as the Directors concerned may agree among themselves). No Director shall be required to retire or be relieved from retiring by reason of any change in the number or identity of the Directors after that time on the date of the notice but before the close of the meeting. |
109. POSITION OF RETIRING DIRECTOR
Subject to these Articles, the Company at the meeting at which a Director retires may fill the vacated office and, in default, the retiring Director shall, if willing to act, be deemed to have been reappointed unless at the meeting it is resolved not to fill the vacancy or unless a resolution for the reappointment of the Director is put to the meeting and lost. If he is not reappointed or deemed to be reappointed, he shall retain office until the meeting appoints someone in his place or, if it does not do so, until the end of the meeting.
110. ELIGIBILITY FOR APPOINTMENT AS A DIRECTOR
No person other than a Director retiring, whether by rotation or otherwise, shall be appointed or reappointed a Director at any general meeting unless: 110.1 he is recommended by the Board; or 110.2 not less than seven nor more than 42 clear days before the day appointed for the meeting, notice executed by a shareholder qualified to vote at the meeting (not being the person to be proposed) has been delivered to the Office (or received by electronic communication at the address specified for the purpose of receiving electronic communications in an electronic communication containing the notice of meeting) of the intention to propose that person for appointment or reappointment stating the particulars which would, if he were so appointed or reappointed, be required to be included in the Company's register of Directors together with notice executed by that person of his willingness to be appointed or reappointed. 111. POWER OF THE COMPANY TO APPOINT DIRECTORS Subject to these Articles, the Company may by ordinary resolution appoint any person who is willing to act to be a Director, either to fill a vacancy on or as an addition to the existing Board, but so that the total number of Directors shall not at any time exceed any maximum number fixed by or in accordance with these Articles. A resolution for the appointment of two or more persons as Directors by a single resolution shall be void unless a resolution that it shall be so proposed has first been agreed to by the meeting without any vote being given against it. 112. POWER OF THE BOARD TO APPOINT DIRECTORS Without prejudice to the power of the Company in general meeting under these Articles to appoint any person to be a Director, the Board may appoint a person who is willing to act to be a Director, either to fill a vacancy or as an addition to the existing Board, but so that the total number of Directors shall not at any time exceed any maximum number fixed by or in accordance with these Articles. Any Director so appointed shall hold office only until the next following annual general meeting and shall not be taken into account in determining the Directors or the number of Directors who are to retire by rotation at the meeting. If not reappointed at such annual general meeting, he shall vacate office at the |
conclusion of the meeting.
113. COMPANY'S POWER TO REMOVE A DIRECTOR AND APPOINT ANOTHER IN HIS PLACE
In addition to any power conferred by the Statutes, the Company may by an ordinary resolution remove any Director before the expiration of his period of office and may, subject to these Articles, by ordinary resolution appoint another person who is willing to act to be a Director in his place. Any person so appointed shall be treated, for the purposes of determining the time at which he or any other Director is to retire, as if he had become a Director on the day on which the person in whose place he is appointed was last appointed or reappointed a Director.
114. VACATION OF OFFICE BY DIRECTORS
Without prejudice to the provisions for retirement by rotation or otherwise contained in these Articles, the office of a Director shall be vacated if: 114.1 he resigns his office by notice delivered to the Office or tendered at a meeting of the Board; 114.2 he becomes bankrupt or makes any arrangement or composition with his creditors generally; 114.3 he is or has been suffering from mental ill health or becomes a patient for any purpose of any statute relating to mental health and the Board resolves that his office is vacated; 114.4 without the permission of the Board, he is absent from meetings of the Board for six consecutive months (whether or not an alternate appointed by him attends) and the Board resolves that his office is vacated; 114.5 he ceases to be a Director by virtue of the Statutes or is prohibited by law from being a Director or is removed from office under these Articles; 114.6 his resignation is requested by all other Directors (provided those Directors are not less than three in number) by notice delivered to the Office or tendered at a meeting of the Board and, for this purpose, like notices each signed by a Director shall be as effective as a single notice signed by all the Directors; or 114.7 his contract of service as a Director expires or is terminated without being renewed within 14 days. 115. DIRECTOR NOT TO RETIRE ON ACCOUNT OF AGE No person shall be disqualified from being appointed a Director, and no Director shall be required to vacate that office, by reason only of the fact that he has attained the age of 70 years or any other age nor shall it be necessary by reason of his age to give special notice under the Statutes of any resolution. Where the Board convenes any general meeting of the Company at which (to the knowledge of the Board) a Director will be proposed for |
appointment or reappointment who will have attained the age of 70 years or more at the date for which the meeting is convened, the Board shall give notice of his age in years in the notice convening the meeting or in any document accompanying the notice, but the accidental omission to do so shall not invalidate any proceedings, or any appointment or reappointment of that Director, at that meeting.
DIRECTORS' INTERESTS
116. CONTRACTS BETWEEN A DIRECTOR AND THE COMPANY OR A COMPANY IN WHICH THE COMPANY IS INTERESTED
116.1 A Director who, to his knowledge, is in any way, whether directly or indirectly, interested in a contract with the Company shall declare the nature of his interest at the meeting of the Board at which the question of entering into the contract is first taken into consideration if he knows his interest then exists or, in any other case, at the first meeting of the Board after he knows that he is or has become so interested. A general notice to the Board by a Director to the effect that: 116.1.1 he is a member of a specified company or firm and is to be regarded as interested in any contract which may after the date of the notice be made with that company or firm; or 116.1.2 he is to be regarded as interested in any contract which may after the date of the notice be made with a specified person who is connected with him, shall be deemed to be a sufficient declaration of interest under this Article in relation to any such contract. For the purposes of this Article 116: 116.1.3 a general notice given to the Board that a Director is to be regarded as having an interest of the nature and extent specified in the notice in any contract in which a specified person or class of persons is interested shall be deemed to be a disclosure that the Director has an interest in any such contract of the nature and extent so specified; and 116.1.4 an interest of which a Director has no knowledge and of which it is unreasonable to expect him to have knowledge shall not be treated as his interest. 116.2 Subject to the Statutes, and provided that a Director has disclosed to the Board the nature and extent of his material interest, that Director notwithstanding his office: 116.2.1 may hold any other office or place of profit with the Company (except that of Auditor) in conjunction with the office of Director and may act by himself or through his firm in a professional capacity for the Company (otherwise than as Auditor) and in either such case on such terms as to remuneration (whether by way of salary, commission, participation in profits or otherwise) and otherwise as |
the Board may determine; any such remuneration shall be either in addition to or in lieu of any remuneration provided for, by or pursuant to any other Article; 116.2.2 may be a party to, or otherwise interested in, any contract with the Company or in which the Company is otherwise interested; 116.2.3 may be a director or other officer of, or employed by, or a party to any contract with, or otherwise interested in, any body corporate promoted by the Company or in which the Company is otherwise interested or as regards which the Company has any powers of appointment; and 116.2.4 shall not, by reason of his office, be accountable to the Company for any remuneration or benefit which he derives from any such office or employment or from any such contract or from any interest in such body corporate and no such office, employment or contract shall be liable to be avoided on the ground of any such interest or benefit. 116.3 The Board may cause any voting power conferred by the shares in any other company held or owned by the Company or any power of appointment to be exercised in such manner in all respects as it thinks fit, including the exercise of either of such powers in favour of a resolution appointing the Directors, or any of them, to be directors or officers of the other company, or in favour of the payment of remuneration to the directors or officers of the other company. 116.4 Save as otherwise provided by these Articles, a Director shall not vote on, or be counted in the quorum in relation to, any resolution of the Board or of a committee of the Board concerning any matter in which he has to his knowledge, directly or indirectly, an interest (other than his interest in shares or debentures or other securities of, or otherwise in or through, the Company) or duty which (together with any interest of a person connected with him within the meaning of section 346 of the Act) is material and, if he shall do so, his vote shall not be counted. A Director shall be entitled to vote on and be counted in the quorum in respect of any resolution concerning any of the following matters: 116.4.1 the giving to him of any guarantee, security or indemnity in respect of money lent or obligations incurred by him or by any other person at the request of or for the benefit of, the Company or any of its subsidiary undertakings; 116.4.2 the giving by the Company of any guarantee, security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part and whether alone or jointly with others under a guarantee or indemnity or by the giving of security; 116.4.3 his subscribing or agreeing to subscribe for, or purchasing or agreeing to purchase, any shares, debentures or other securities of the Company or any of its subsidiary undertakings as a holder of securities, or his being, or intending to become, a participant in the underwriting or sub-underwriting of an offer of any such shares, debentures, or other securities by the Company or any of its subsidiary undertakings for subscription, purchase or exchange; |
116.4.4 any contract concerning any company not being a company in which the Director owns one per cent. or more (as defined in this Article), or in which he is interested, directly or indirectly, and whether through holding shares in that company or as an officer, creditor or otherwise; 116.4.5 any arrangement for the benefit of employees of the Company or any of its subsidiary undertakings under which he benefits in a similar manner as the employees and which does not accord to any Director as such any privilege or advantage not accorded to the employees to whom the arrangement relates; and 116.4.6 any contract concerning any insurance which the Company is empowered to purchase or maintain for, or for the benefit of, any Directors or for persons who include Directors. 116.5 A Director shall not vote on, or be counted in the quorum in relation to, any resolution of the Board concerning his own appointment, or the settlement or variation of the terms or the termination of his own appointment, as the holder of any office or place of profit with the Company or any company in which the Company is interested but, where proposals are under consideration concerning the appointment, or the settlement or variation of the terms or the termination of the appointment, of two or more Directors to offices or places of profit with the Company or any company in which the Company is interested, a separate resolution may be put in relation to each Director and in that case each of the Directors concerned shall be entitled to vote on and be counted in the quorum in relation to each resolution which does not concern either: (a) his own appointment or the settlement or variation of the terms or the termination of his own appointment; or (b) the appointment of another Director to an office or place of profit with a company in which the Company is interested and in which the Director seeking to vote or be counted in the quorum is interested by virtue of owning of one per cent. or more (as defined in this Article). 116.6 A company shall be deemed to be a company in which a Director owns one per cent. or more if and so long as he is directly or indirectly the holder of or beneficially interested in one per cent. or more of any class of the equity share capital of such company or of the voting rights available to members of such company. For this purpose, there shall be disregarded any shares held by a Director as bare or custodian trustee and in which he has no beneficial interest, any shares comprised in a trust in which the Director's interest is in reversion or remainder (if and so long as some other person is entitled to receive the income from such trust) and any shares comprised in an authorised unit trust scheme in which the Director is interested only as a unit holder. 116.7 Where a company in which a Director owns one per cent. or more is materially interested in a contract, he shall also be deemed to be materially interested in that contract. 116.8 For the purposes of this Article, an interest of a person who is, for any purpose of the Statutes (excluding any statutory modification thereof not in force when this Article becomes binding on the Company), connected (which word shall have the meaning given to it by section 346 of the Act) with a Director shall be treated as an interest of the Director and, in relation to an alternate director, an interest of his appointor shall be treated as an interest of the alternate director without prejudice to any interest which the alternate director has otherwise. |
116.9 References in this Article to a contract include references to any proposed contract and to any transaction or arrangement whether or not constituting a contract. 116.10 If any question shall arise at any meeting of the Board as to the materiality of the interest of a Director (other than the chairman of the meeting) or as to the entitlement of any Director (other than the chairman of the meeting) to vote or be counted in the quorum and the question is not resolved by his voluntarily agreeing to abstain from voting or not to be counted in the quorum, the question shall be referred to the chairman of the meeting and his ruling in relation to the Director concerned shall be conclusive except in a case where the nature or extent of his interest (so far as it is known to the Director) has not been fairly disclosed to the Board. If any question shall arise in respect of the chairman of the meeting, the question shall be decided by resolution of the Board (for which purpose the chairman shall be counted in the quorum but shall not vote on the matter) and the resolution shall be conclusive except in a case where the nature or extent of the interest of the chairman of the meeting (so far as it is known to him) has not been fairly disclosed to the Board. 116.11 Subject to the Statutes and the Listing Rules (as they may be amended from time to time) of the UK Listing Authority, the Company may by ordinary resolution suspend or relax the provisions of this Article to any extent or ratify any contract not properly authorised by reason of a contravention of this Article. |
DIRECTORS' GRATUITIES AND PENSIONS
117. DIRECTORS' GRATUITIES AND PENSIONS
The Board or any committee authorised by the Board may exercise all the powers of the Company to provide benefits, whether by the payment of gratuities, pensions, annuities, allowances, bonuses or by insurance or otherwise, for any Director or former Director who holds or who has held but no longer holds any executive office, other office, place of profit or employment with the Company or with any body corporate which is or has been a subsidiary undertaking of the Company or a predecessor in business of the Company or of any such subsidiary undertaking, and for any member of his family (including a spouse and a former spouse) or any person who is or was dependent on him, and may (as well before as after he ceases to hold such office, place of profit or employment) establish, maintain, support, subscribe to and contribute to any scheme, trust or fund for the benefit of all or any such persons and pay premiums for the purchase or provision of any such benefits. The Board or any committee authorised by the Board may procure any of these matters to be done by the Company either alone or in conjunction with any other person. No Director or former Director shall be accountable to the Company or the shareholders for any benefit provided pursuant to this Article and the receipt of any such benefit shall not disqualify any person from being or becoming a Director.
PROCEEDINGS OF THE BOARD
118. BOARD MEETINGS
The Board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it thinks fit. A Director may, and the Secretary on the requisition of a Director shall, convene a meeting of the Board.
119. NOTICE OF BOARD MEETINGS
Notice of a Board meeting shall be deemed to be properly given to a Director if it is given to him personally or by word of mouth or sent in writing to him or transmitted to him by electronic communication at his last known address or any other address given by him to the Company for this purpose. A Director absent or intending to be absent from the United Kingdom may request the Board that notices of Board meetings shall during his absence be sent to him at an address given by him to the Company for this purpose, but such notices need not be given any earlier than notices given to Directors not so absent and in the absence of any such request it shall not be necessary to give notice of a Board meeting to any Director who is for the time being absent from the United Kingdom. A Director may waive notice of any meeting either before or after the meeting.
120. VOTING
Questions arising at a meeting shall be decided by a majority of votes. In the case of an equality of votes, the chairman shall have a second or casting vote.
121. QUORUM
The quorum necessary for the transaction of the business of the Board may be fixed by the Board and unless so fixed at any other number shall be two. Subject to these Articles, any Director who ceases to be a Director at a Board meeting may continue to be present and to act as a Director and be counted in the quorum until the termination of the Board meeting if no other Director objects and if otherwise a quorum of Directors would not be present.
122. NUMBER OF DIRECTORS BELOW MINIMUM NUMBER
The continuing Directors or a sole continuing Director may act notwithstanding any vacancies on the Board, but, if the number of Directors is less than the minimum number fixed by or in accordance with these Articles, the continuing Directors or Director may act only for the purpose of filling vacancies on the Board or of convening a general meeting of the Company. If there are no Directors or Director able or willing to act, then any two shareholders may call a general meeting of the Company for the purpose of appointing Director(s).
123. APPOINTMENT OF CHAIRMAN
The Board may appoint a Director to be the chairman of the Board and may at any time remove him from that office. Unless he is unwilling to do so, the Director so appointed shall preside at every meeting of the Board at which he is present. But if there is no Director holding that office, or if the Director holding it is unwilling to preside or is not present within five minutes after the time appointed for the meeting, the Directors present may appoint one of their number to be chairman of the meeting.
124. COMPETENCE OF THE BOARD
A meeting of the Board at which a quorum is present shall be competent to exercise all powers, authorities and discretions for the time being vested in or exercisable by the Board.
125. PARTICIPATION IN MEETINGS BY TELEPHONE
All or any of the members of the Board or of any committee of the Board may participate in a meeting of the Board or that committee by means of a video conference or conference telephone or any other communication equipment which allows all persons participating in the meeting to hear and speak to each other. A person so participating shall be deemed to be present in person at the meeting and shall be entitled to vote or be counted in a quorum accordingly. Such a meeting shall be deemed to take place where the largest group of those participating is assembled, or, if there is no such group, where the chairman of the meeting is and shall be deemed to be a meeting even if there is only one person physically present where it is deemed to take place.
126. WRITTEN RESOLUTIONS
A resolution in writing signed by all the Directors entitled to receive notice of a meeting of the Board (if that number is sufficient to constitute a quorum) or by all the members of a committee of the Board shall be as valid and effectual as if it had been passed at a meeting of the Board or that committee duly convened and held and may be contained in one document (or in several documents in all substantial respects in like form) each signed by one or more of the Directors or members of that committee. Any such document may be constituted by letter or (provided it is in writing) by electronic communication or otherwise as the Board may from time to time approve.
127. COMPANY BOOKS
The Board shall cause minutes to be made in books kept for the purpose of recording:
127.1.1 all appointments of officers made by the Board; 127.1.2 all proceedings at meetings of the Company, of the holders of any class of shares in the Company and of the Board and of committees of the Board, including the names of the Directors or members of a committee of the Board present at each |
such meeting.
Subject to the Statutes, any such minutes if purporting to be signed by the chairman of the meeting at which the appointments were made or proceedings held or by the chairman of the next succeeding meeting, shall be sufficient evidence of the facts therein stated without any further proof.
128. VALIDITY OF ACTS OF THE BOARD OR A COMMITTEE
All acts done by the Board or by a committee of the Board, or by a person acting as a Director or member of a committee of the Board shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any Director, member of a committee of the Board, or person acting as a Director, or that any of them were disqualified from holding office, or had vacated office, or were not entitled to vote, be as valid as if each such person had been duly appointed and was qualified and had continued to be a Director or member of the committee and had been entitled to vote.
SECRETARY
129. APPOINTMENT AND REMOVAL OF COMPANY SECRETARY
Subject to the Statutes, the Secretary shall be appointed by the Board at such remuneration and upon such terms as it thinks fit and any Secretary so appointed may be removed by the Board.
THE SEAL
130. USE OF SEAL
130.1 The Seal shall only be used by the authority of the Board or of a committee authorised by the Board in that behalf. The Board or any such committee may determine who shall sign any instrument to which the Seal is affixed and unless otherwise so determined it shall be signed by one Director and the Secretary or by two Directors, and any instrument to which an official seal is applied need not, unless the Board for the time being otherwise decides or the law otherwise requires, be signed by any person. 130.2 Notwithstanding the provisions of Article 104, a committee authorised by the Board for the purposes of Article 130.1 may consist entirely or in any proportion of persons other than Directors. Except in relation to the provisions covering the proportion of members of a committee who must be Directors and the related quorum restrictions, the provisions of Article 104 shall apply to such a committee. |
131. EXECUTION AS A DEED WITHOUT SEALING
Where the Statutes so permit, any instrument signed by one Director and the Secretary or by two Directors and expressed to be executed by the Company shall have the same effect as if executed under the Seal, provided that no instrument shall be so signed which makes it clear on its face that it is intended by the person or persons making it to have effect as a deed without the authority of the Board or of a committee authorised by the Board in that behalf.
132. OFFICIAL SEAL
The Company may exercise the powers conferred by the Statutes with regard to having an official seal for use abroad, and such powers shall be vested in the Board.
DIVIDENDS
133. COMPANY MAY DECLARE DIVIDENDS
Subject to the Statutes, the Company may by ordinary resolution declare dividends in accordance with the respective rights of the shareholders, but no dividend shall exceed the amount recommended by the Board. Subject to the Statutes, any determination by the Board of the amount of profits at any time available for distribution shall be conclusive.
134. BOARD MAY PAY INTERIM DIVIDENDS AND FIXED DIVIDENDS
Subject to the Statutes, the Board may pay interim dividends if it appears to the Board that they are justified by the financial position of the Company. If the share capital of the Company is divided into different classes, the Board may pay interim dividends on shares which confer deferred or non-preferred rights to dividends as well as on shares which confer preferential or special rights to dividends, but no interim dividend shall be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrears. The Board may also pay at intervals settled by it any dividend payable at a fixed date if it appears to the Board that the financial position of the Company justifies the payment. If the Board acts in good faith, it shall not incur any liability to the holders of shares conferring preferred rights for any loss which they may suffer by reason of the lawful payment of an interim dividend on any shares having deferred or non-preferred rights.
135. CALCULATION AND CURRENCY OF DIVIDENDS
Except in so far as the rights attaching to any share otherwise provide, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid, but (for the purposes of this Article only) no amount paid up on a share in advance of calls shall be treated as paid up on the share. All dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the
period in respect of which the dividend is paid; but, if any share is issued on terms providing that it shall rank for dividend as from a particular date, that share shall rank for dividend accordingly. Dividends may be declared or paid in any currency and the Board may agree with any shareholder that dividends which may at any time or from time to time be declared or become due on his shares in one currency shall be paid or satisfied in another and may agree the basis of conversion to be applied, and how and when the amount to be paid in the other currency shall be calculated and paid, and for the Company or any other person to bear any costs involved.
136. WAIVER OF DIVIDENDS
The waiver in whole or in part of any dividend on any share by any document (whether or not under seal) shall be effective only if such document is signed by the holder (or the person becoming entitled by transmission to the share) and delivered to the Company and if or to the extent that it is accepted as such or acted upon by the Company.
137. NON-CASH DIVIDENDS
A general meeting declaring a dividend may, upon the recommendation of the Board, by ordinary resolution direct that it shall be satisfied wholly or partly by the distribution of assets and, in particular, of paid-up shares or debentures of any other company and, where any difficulty arises concerning such distribution, the Board may settle it as the Board thinks expedient and in particular may issue fractional certificates or, subject to the Statutes and, in the case of shares held in uncertificated form, the system's rules, authorise and instruct any person to sell and transfer any fractions or may ignore fractions altogether, and may fix the value for distribution of any assets and may determine that cash shall be paid to any shareholder upon the basis of the value so fixed in order to secure equality of distribution and may vest any assets to be distributed in trustees as the Board may consider expedient.
138. SCRIP DIVIDENDS
Subject to the Statutes, the Board may, if authorised by an ordinary resolution of the Company, offer the holders of ordinary shares (subject to such exclusions or other arrangements as the Board may consider necessary or expedient in relation to any legal or practical problems under the laws of any overseas territory or the requirements of any regulatory body or stock exchange) the right to elect to receive new ordinary shares, credited as fully paid, instead of cash for all or part (as determined by the Board) of the dividend specified by the ordinary resolution. The following provisions shall apply: 138.1 an ordinary resolution may specify a particular dividend or dividends (whether or not already declared), or may specify all or any dividends declared within a specified period, but such period may not end later than the fifth anniversary of the date of the meeting at which the ordinary resolution is passed; 138.2 the basis of allotment to each holder of ordinary shares shall be such number of new ordinary shares credited as fully paid as have a value as nearly as possible equal to (but not |
greater than) the amount of the dividend (disregarding any tax credit) which he has elected to forego. For this purpose, the "VALUE" of an ordinary share shall be deemed to be whichever is the greater of its nominal value and the average of the middle market quotations for the Company's ordinary shares on the London Stock Exchange as derived from the Daily Official List on the day on which the shares are first quoted "ex" the relevant dividend and the four subsequent dealing days or in such other manner as may be determined by or in accordance with the ordinary resolution. An opinion or report by the Auditors as to the amount of the value in respect of any dividend shall be conclusive evidence of that amount; 138.3 no fraction of an ordinary share shall be allotted and if any holder of ordinary shares would otherwise be entitled to fractions of a share, the Board may deal with the fractions as it thinks fit; 138.4 the Board shall not proceed with any election unless the Company has sufficient unissued shares authorised for issue and sufficient reserves or funds which may be capitalised to give effect to the election following the Board's determination of the basis of allotment; 138.5 on or as soon as practicable after announcing that the Board is to declare or recommend any dividend, the Board, if it intends to offer an election for that dividend, shall also announce that intention and having determined the basis of allotment, shall notify the holders of ordinary shares (other than any in relation to whom an election mandate in accordance with this Article is subsisting) of the right of election offered to them, and shall send with, or following, such notification, forms of election and shall specify the procedure to be followed and place at which, and the latest date and time by which, duly completed forms of election must be received in order to be effective; 138.6 the dividend (or that part of the dividend in respect of which a right of election has been offered) shall not be payable on ordinary shares in respect of which an election has been duly made (the "ELECTED SHARES") and instead additional ordinary shares shall be allotted to the holders of elected shares on the basis of allotment so determined. For such purpose, the Board shall capitalise, out of any amount standing to the credit of any reserve or fund (including the profit and loss account), whether or not the same is available for distribution, as the Board may determine, a sum equal to the aggregate nominal amount of the additional ordinary shares to be allotted on that basis and apply it in paying up in full the appropriate number of unissued ordinary shares for allotment and distribution to the holders of elected shares on that basis; 138.7 the additional ordinary shares so allotted shall be allotted as of the record date for the dividend for which the right of election has been offered and shall rank pari passu in all respects with the fully paid ordinary shares then in issue except that they will not rank for the dividend or other distribution entitlement in respect of which they have been issued. Unless the Board otherwise determines (and subject always to the Regulations and the relevant system's rules), the ordinary shares so allotted shall be issued as shares in certificated form (where the ordinary shares in respect of which they have been allotted were in certificated form at the Scrip Record Time) or as shares in uncertificated form (where the ordinary shares in respect of which they have been allotted were in uncertificated form at the Scrip Record Time) provided that if the Company is unable |
under the relevant system's rules to issue ordinary shares in uncertificated form to any person, such shares shall be issued as shares in certificated form. For these purposes, the "SCRIP RECORD TIME" means such time on the record date for determining the entitlements of shareholders to make elections as described in this Article, or on such other date as the Board may in its absolute discretion determine. 138.8 The Board may establish or vary a procedure for election mandates whereby a holder of ordinary shares may elect concerning future rights of election offered to that shareholder under this Article until the election mandate is revoked following that procedure. 138.9 The Board may exclude from any offer any holders of ordinary shares if it believes that it is necessary or expedient to do so in relation to any legal or practical problems under the laws of, or the requirements of any regulatory body or stock exchange or other authority in, any territory or that for any other reason the offer should not be made to them. 139. ENHANCED SCRIP DIVIDENDS 139.1 Without prejudice to the generality of the immediately preceding Article, the Board may, in respect of any cash dividend or other distribution (or any part thereof) declared or payable in relation to any financial year or period of the Company, offer to each holder of ordinary shares the right to elect to receive new ordinary shares, credited as fully paid, in respect of the whole or part of the ordinary shares held by them instead of such cash dividend, on any basis described in that Article but so that the entitlement of each holder of ordinary shares to such new ordinary shares shall be determined by the Board such that the value (determined on the basis decided on by the Board) of the new ordinary shares concerned may exceed the cash amount that such holders of ordinary shares would otherwise have received by way of dividend and, in respect of such offer, that Article shall take effect subject to this Article. Any offer made under this Article shall be an alternative to any offer made under that Article in respect of a particular cash dividend (but shall form part of any plan which is in operation thereunder). 139.2 Any exercise by the Board of the powers granted to the Board by this Article shall be subject to a special resolution approving the exercise of such powers in respect of the dividend in question or in respect of any dividends or other distributions declared or payable in respect of a specified financial year or period of the Company which include the dividend in question but such year or period may not end later than the conclusion of the annual general meeting next following the date of the meeting at which such resolution is passed. No further sanction shall be required under the immediately preceding Article in respect of an exercise of powers by the Board under this Article and any authority granted under this Article shall not preclude the granting to the Board of a separate authority under that Article. 140. RIGHT TO DEDUCT AMOUNTS DUE ON SHARES FROM DIVIDENDS The Board may deduct from any dividend or other monies payable in respect of a share to a shareholder all sums of money (if any) presently payable by him to the Company on account of calls or otherwise in respect of shares of the Company. |
141. NO INTEREST ON DIVIDENDS
No dividend or other monies payable in respect of a share shall bear interest against the Company unless otherwise provided by the rights attached to the share.
142. PAYMENT PROCEDURE
142.1 All dividends and interest shall belong and be paid (subject to any lien of the Company) to those shareholders whose names shall be on the Register at the date at which such dividend shall be declared or at the date on which such interest shall be payable respectively, or at such other date as the Company by ordinary resolution or the Board may determine notwithstanding any subsequent transfer or transmission of shares. 142.2 The Company may pay any dividend, interest or other monies payable in cash in respect of shares by direct debit, bank transfer, cheque, dividend warrant, money order or by any other method (including by electronic communication) as the Board may consider appropriate. 142.3 Every such cheque, warrant or order shall be made payable to the person to whom it is sent, or to such other person as the relevant shareholder or joint shareholders may in writing direct, and may be sent by post or equivalent means of delivery directed to the registered address of the relevant shareholder or, in the case of joint shareholders, to the registered address of the joint shareholder whose name stands first in the Register, or to such person and to such address as the relevant shareholder or joint shareholders may in writing direct. 142.4 Every such payment made by direct debit or bank transfer shall be made to the relevant shareholder or joint shareholders or to or through such other person as the shareholder or joint shareholders may in writing direct. 142.5 In respect of shares in uncertificated form, where the Company is authorised to do so by or on behalf of the relevant shareholder or joint shareholders in such manner as the Board shall from time to time consider sufficient, the Company may pay any such dividend, interest or other monies by means of the relevant system. Every such payment shall be made in such manner as may be consistent with the system's rules and, without prejudice to the generality of the foregoing, may include the sending by the Company or by any person on its behalf of an instruction to the Operator to credit the cash memorandum account of the relevant shareholder or joint shareholders or, if permitted by the Company, of such person as the shareholder or joint shareholders may in writing direct. 142.6 The Company shall not be responsible for any loss of any such cheque, warrant or order and any payment made in any manner permitted by these Articles shall be at the sole risk of the relevant shareholder or joint shareholders. Without prejudice to the generality of the foregoing, if any such cheque, warrant or order has been, or is alleged to have been, lost, stolen or destroyed, the Board may, on request of the person entitled thereto, issue a replacement cheque, warrant or order subject to compliance with such conditions as to evidence and indemnity and the payment of out of pocket expenses of the Company in connection with the request as the Board may think fit. |
142.7 The issue of such cheque, warrant or order, the collection of funds from or transfer of funds by a bank in accordance with such direct debit or bank transfer or, in respect of shares in uncertificated form, the making of payment in accordance with the system's rules, shall be a good discharge to the Company. 143. RECEIPT BY JOINT SHAREHOLDERS If several persons are registered as joint shareholders of any share, any one of them may give effectual receipts for any dividend or other monies payable in respect of the share. 144. WHERE PAYMENT OF DIVIDENDS NEED NOT BE MADE The Company may cease to send any cheque or warrant through the post or by a delivery agent or to effect payment by any other means for any dividend or other monies payable in respect of a share which is normally paid in that manner on that share if in respect of at least two consecutive dividends payable on that share payment, through no fault of the Company, has not been effected (or, following one such occasion, reasonable enquiries have failed to establish any new postal or delivery address of the shareholder or appropriate details for effecting payment by other means) but, subject to these Articles, the Company shall recommence payments in respect of dividends or other monies payable on that share by that means (or by such other appropriate means as the shareholder or person shall notify to the Company) if the shareholder or person entitled by transmission claims the arrears of dividend. 145. UNCLAIMED DIVIDENDS All dividends, interest or other sums payable unclaimed for one year after having been declared may be invested or otherwise made use of by the Board for the benefit of the Company until claimed. The retention by the Company of, or payment into a separate account of, any unclaimed dividend or other monies payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect of it. Any dividend or interest unclaimed after a period of 12 years from the date when it was declared or became due for payment shall be forfeited and shall revert to the Company. |
CAPITALISATION OF PROFITS
146. CAPITALISATION OF PROFITS
146.1 Upon the recommendation of the Board, the Company may pass an ordinary resolution to the effect that it is desirable to capitalise all or any part of any undivided profits of the Company not required for paying any preferential dividend (whether or not they are available for distribution) or all or any part of any sum standing to the credit of any reserve or fund (whether or not available for distribution). 146.2 The Board may appropriate the sum resolved to be capitalised to the shareholders who |
would have been entitled to it if it were distributed by way of dividend and in the same proportions and apply such sum on their behalf either in or towards paying up the amounts, if any, for the time being unpaid on any shares held by them respectively, or (subject to approval by ordinary resolution and to any subsisting special rights previously conferred on any shares or class of shares) in paying up in full unissued shares of any class (but not redeemable shares) or debentures of the Company of a nominal amount equal to that sum, and allot the shares or debentures credited as fully paid to those shareholders, or as they may direct, in those proportions, or partly in one way and partly in the other; but for the purposes of this Article the share premium account, the capital redemption reserve, and any reserve or fund representing profits which are not available for distribution may only be applied in paying up in full unissued shares of the Company. 146.3 The Board may authorise any person to enter on behalf of all the shareholders concerned into an agreement with the Company providing for the allotment to them respectively, credited as fully paid, of any shares or debentures to which they are entitled upon such capitalisation and any matters incidental thereto, any agreement made under such authority being binding on all such shareholders. 146.4 If any difficulty arises concerning any distribution of any capitalised reserve or fund, the Board may subject to the Statutes and, in the case of shares held in uncertificated form, the system's rules, settle it as the Board considers expedient and in particular may issue fractional certificates, authorise any person to sell and transfer any fractions or resolve that the distribution should be made as nearly as practicable in the correct proportion or may ignore fractions altogether, and may determine that cash payments shall be made to any shareholders in order to adjust the rights of all parties as the Board considers expedient. 146.5 Where, pursuant to an employees' share scheme, the Company has granted options to subscribe for shares on terms which provide (inter alia) for adjustments to the subscription price payable on the exercise of such options or to the number of shares to be allotted upon such exercise in the event of any increase or reduction in, or other reorganisation of, the Company's issued share capital and an otherwise appropriate adjustment would result in the subscription price for any share being less than its nominal value, then, subject to and in accordance with the provisions of the Statutes, the Board may, on the exercise of any of the options concerned and payment of the subscription which would have applied had such adjustment been made, capitalise any such profits or other sum as is mentioned in Article 146.1 to the extent necessary to pay up the unpaid balance of the nominal value of the shares which fall to be allotted on the exercise of such options and apply such amount in paying up such balance and allot shares fully paid accordingly. The other provisions of this Article 146 shall apply mutatis mutandis to any such capitalisation except that the authority of an ordinary resolution of the Company shall not be required. |
AUTHENTICATION OF DOCUMENTS
147. AUTHENTICATION OF DOCUMENTS
Any director or the Secretary or any person appointed by the Board for the purpose shall have power to authenticate any documents or other communications affecting the constitution of the Company and any resolutions passed by the Company or the Board or any committee and any books, records, accounts, documents and other communications relating to the business of the Company and to certify copies or extracts as true copies or extracts. A document or other communication purporting to be a copy of a resolution, or an extract from the minutes of a meeting, of the Company, the Board or any committee which is certified as such in accordance with this Article shall be conclusive evidence in favour of all persons dealing with the Company upon the faith of such document or communication that such resolution has been duly passed or, as the case may be, that such minute or extract is a true and accurate record of proceedings at a duly constituted meeting.
RECORD DATES
148. POWER TO CHOOSE RECORD DATE
Subject to the Statutes and Regulations but notwithstanding any other provision of these Articles, the Company or the Board may by resolution specify any date and time as the date and time on which persons registered as the holders of shares or other securities shall be entitled to receipt of any dividend, distribution, interest, allotment or issue, and any such date may be on, or at any time before, the date on which it is paid, made or despatched or at any time after it is recommended, resolved, declared or announced, but without prejudice to the rights inter se of transferors and transferees of any such shares or other securities in relation to any such thing.
ACCOUNTS AND OTHER RECORDS
149. RECORDS TO BE KEPT
The Board shall cause accounting records to be kept sufficient to give a true and fair view of the Company's state of affairs and to comply with the Statutes.
150. COPY OF ACCOUNTS TO BE SENT TO SHAREHOLDERS
A copy of every profit and loss account and balance sheet, including all documents required by law to be annexed to the balance sheet which is to be laid before the Company in general meeting, together with copies of the Directors' and of the Auditors' reports (or such other documents which may be required or permitted by law to be sent in their place) shall not less than 21 clear days before the date of the meeting be sent to every shareholder (whether or not he is entitled to receive notices of general meetings of the Company), and to every holder of debentures of the Company (whether or not he is so entitled), and to the
Auditors provided that if the Company is permitted by law to send to any shareholder, to any holder of debentures of the Company or to the Auditors any summary financial statement in place of all or any of such profit and loss account and balance sheet or other documents, this Article shall impose no greater obligation on the Company than that imposed by law; but this Article shall not require a copy of those documents to be sent to any shareholder or holder of debentures of whose address the Company is unaware or to more than one of any joint shareholders or joint holders of debentures.
151. INSPECTION OF RECORDS
No person in his capacity as a shareholder, or by right of any interest in shares (whether under these Articles or otherwise), shall have any right of inspecting any record, book or document of any description belonging to the Company except as conferred by the Statutes or authorised by the Board or by ordinary resolution of the Company.
152. DESTRUCTION OF DOCUMENTS
152.1 Subject to compliance with the rules (as defined in the Regulations) applicable to shares of the Company in uncertificated form, the Company may destroy: 152.1.1 any instrument of transfer of shares and any other document on the basis of which an entry is made in the Register, at any time after the expiration of six years from the date of registration; 152.1.2 any instruction concerning the payment of dividends or other monies in respect of any share or any notification of change of name or address, at any time after the expiration of two years from the date the instruction or notification was recorded; and 152.1.3 any share certificate which has been cancelled, at any time after the expiration of one year from the date of cancellation; provided that the Company may destroy any such type of document after such shorter period as the Board may determine if a copy of such document is retained on microfilm or by other similar means and is not destroyed earlier than the original might otherwise have been destroyed in accordance with this Article. 152.2 It shall conclusively be presumed in favour of the Company that every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and that every share certificate so destroyed was a valid and effective document duly and properly cancelled and that every other document so destroyed was a valid and effective document in accordance with its particulars recorded in the books or records of the Company provided that: 152.2.1 this Article shall apply only to the destruction of a document in good faith and without express notice that its retention was relevant to any claim (regardless of the parties to the claim); |
152.2.2 nothing contained in this Article shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than the times referred to in this Article or in any case where the conditions of this Article are not fulfilled; and 152.2.3 references in this Article to the destruction of any document or thing include references to its disposal in any manner. |
NOTICES
153. FORM OF NOTICES
Any notice, document or other communication (including copies of accounts or summary financial statements) to be given to or by any person pursuant to these Articles (other than a notice calling a meeting of directors) shall be in writing except that, if it is given using electronic communications, it need not be in writing unless these Articles specifically require it to be.
154. SERVICE OF NOTICE
154.1 Any notice, document or other communication may (to the extent compatible with the nature of the thing served) be sent by electronic communication to an address for the time being notified (by the person wishing to receive the electronic communication) for that purpose to the person sending the communication. Except insofar as the Statutes otherwise require, for electronic communications given by the Company to any shareholder (but not vice versa) the Company may treat an address notified for the purpose of any electronic communication as that shareholder's address for all electronic communications, whatever their content, until the shareholder notifies the Company otherwise. 154.2 Otherwise, any notice, document (including a share certificate) or other communication may, to the extent compatible with the nature of the thing served, be served on or delivered to a shareholder by the Company: 154.2.1 personally; 154.2.2 by sending it by prepaid post or other prepaid delivery service in an envelope or other cover addressed to the shareholder at the address recorded for the shareholder on the Register or by so addressing the envelope or other cover and leaving it at that address; 154.2.3 by the relevant system; or 154.2.4 by any other means authorised in writing by the shareholder concerned. 154.3 In the case of joint shareholders, all notices, documents or other communications, however sent, shall be served on or delivered to the joint shareholder whose name stands first in the Register in respect of the joint shareholding and such service or delivery shall for all |
purposes be deemed sufficient service on or delivery to all the relevant joint shareholders. 154.4 A shareholder whose registered address is not within the United Kingdom and who notifies the Company of an address within the United Kingdom at which notices, documents or other communications may be served on or delivered to him shall be entitled to have notices or other communications served on or delivered to him at that address (in the manner referred to above), but otherwise no such shareholder shall be entitled to receive any notice, document or other communications from the Company. Such address may, at the Board's discretion, be an address for the purposes of electronic communications. 154.5 The Board may at any time without prior notice (and whether or not the Company has previously sent electronic communications to that address) refuse to send electronic communications to any address notified to the Company for the purposes of electronic communications if it believes that its refusal is necessary or expedient in relation to any legal or practical problems under the laws of, or the requirements of any regulatory body or stock exchange or other authority in, any territory, or that for any other reason it should not send electronic communications to that address. 154.6 Subject to the Statutes, the Board may from time to time issue, endorse or adopt terms and conditions relating to the use of electronic communications under these Articles. 155. WHEN NOTICE DEEMED SERVED 155.1 Any notice, document or other communication: 155.1.1 if sent by the Company by post or other delivery service shall be deemed to have been served or delivered on the day following that on which it was put in the post or given to the delivery agent and, in proving service or delivery, it shall be sufficient to prove that the notice, document or communication was properly addressed, prepaid and put in the post or duly given to the delivery agent; 155.1.2 if sent by the Company by way of an electronic communication shall be deemed to have been served or delivered on the day following the day on which it was sent, and proof that the notice or communication was sent in accordance with guidance issued by the Institute of Chartered Secretaries and Administrators shall be conclusive evidence that it was served or delivered; 155.1.3 not sent by post or other delivery service but served or delivered personally or left by the Company at a the address for that shareholder on the Register shall be deemed to have been served or delivered on the day and at the time it was so left; 155.1.4 sent or delivered by a relevant system shall be deemed to have been served or delivered when the Company (or a sponsoring system-participant acting on its behalf) sends the issuer instructions relating to the notice or document; 155.1.5 sent or delivered by the Company by any other means authorised in writing by the shareholder concerned shall be deemed to have been served when the Company has carried out the action it has been authorised to take for that purpose; and |
155.1.6 to be given by the Company by advertisement shall be deemed to have been served on the day on which the advertisement appears. |
156. SERVICE OF NOTICE ON PERSON ENTITLED BY TRANSMISSION
Where a person is entitled by transmission to a share, any notice, document or other communication shall be served upon or delivered to him by the Company, as if he were the relevant shareholder and his address were that noted in the Register as the registered address or (to the extent compatible with the nature of the thing served, and subject to the Board's discretion) that given by the relevant shareholder for the purposes of electronic communications. Otherwise, any notice, document or other communication served on or delivered to any shareholder pursuant to these Articles shall, notwithstanding that the shareholder is then dead or bankrupt or that any other event giving rise to the transmission of the share by operation of law has occurred and whether or not the Company has notice of the death, bankruptcy or other event, be deemed to have been properly served or delivered in respect of any share registered in the name of that shareholder as sole or joint shareholder.
157. RECORD DATE FOR SERVICE
Any notice, document or other communication may be served on or delivered to shareholders by the Company by reference to the Register as it stands at any time not more than 15 days before the date of service or delivery. No change in the Register after that time shall invalidate that service or delivery. Where any notice, document or other communication is served on or delivered to any person in respect of a share in accordance with these Articles, no person deriving any title or interest in that share shall be entitled to any further service or delivery of that notice, document or communication.
158. LOSS OF ENTITLEMENT TO RECEIVE NOTICES
It on two consecutive occasions notices, documents or other communications have been sent to any shareholder at his registered address or his address for the service of notices (including any address provided by him for the purposes of electronic communications) but, through no fault of the Company, have been undelivered, such shareholder shall not from then on be entitled to receive notices, documents or other communications from the Company or to provide an address for the purposes of electronic communications until he has notified to the Company in writing a new address within the United Kingdom to be either his registered address or his address for the service of notices.
159. NOTICE WHEN POST NOT AVAILABLE
159.1 If at any time postal services within the United Kingdom are suspended or curtailed so that the Company is unable effectively to convene a general meeting or a meeting of the shareholders of any class of shares in its capital by notice sent through the post, any such meeting may be convened by a notice advertised in at least one newspaper with a national circulation and in that event the notice shall be deemed to have been served on all shareholders and persons entitled by transmission who are entitled to have notice of the |
meeting served upon them, on the day when the advertisement has appeared in at least one such paper. If at least six clear days prior to the meeting the giving of notices by post to addresses throughout the United Kingdom has, in the Board's opinion, become practicable, the Company shall send confirmatory copies of the notice by post (or, where an address for the purposes of electronic communications has been provided, by electronic communication) to the persons entitled to receive them. 159.2 At any time that postal services within the United Kingdom are suspended or curtailed, any other communication considered by the Board to be capable of being communicated by advertisement shall, if advertised in at least one such newspaper, be deemed to have been notified to all shareholders and persons entitled by transmission. |
WINDING-UP
160. DISTRIBUTION IN KIND
If the Company commences liquidation, the liquidator may, with the sanction of a special resolution of the Company and any other sanction required by the Statutes: 160.1 divide among the shareholders in kind the whole or any part of the assets of the Company (whether the assets are of the same kind or not) and may, for that purpose, value any assets and determine how the division shall be carried out as between the shareholders or different classes of shareholders or otherwise as the resolution may provide; or 160.2 vest the whole or any part of the assets in trustees upon such trusts for the benefit of the contributories as the liquidator, with the like sanction, shall determine, but no shareholder shall be compelled to accept any assets upon which there is a liability. Any such resolution may provide for and sanction a distribution of any specific assets amongst different classes of shareholders otherwise than in accordance with their existing rights, but each shareholder shall in that event have a right of dissent and other ancillary rights in the same way as if the resolution were a special resolution passed in accordance with the Insolvency Act 1986. 161. POWER OF SALE The power of sale of the liquidator shall include a power to sell wholly or partly for shares or debentures or other obligations of another company, either then already constituted or about to be constituted, for the purpose of carrying out the sale. |
INDEMNITY
162. OFFICER'S INDEMNITY
Subject to the Statutes, the Company may indemnify any Director or other officer against
any liability. Subject to those provisions, but without prejudice to any indemnity to which the person concerned may otherwise be entitled, every Director or other officer of the Company and the Auditors shall be indemnified out of the assets of the Company against any liability incurred by him as a Director, other officer of the Company or as Auditor in defending any proceedings (whether civil or criminal) in which judgment is given in his favour or he is acquitted or which are otherwise disposed of without any finding or admission of any material breach of duty or breach of trust on his part or in connection with any application under the Statutes in which relief is granted to him by the court.
163. POWER TO INSURE
Subject to the Statutes, the Board may purchase and maintain insurance at the expense of the Company for the benefit of any person who is or was at any time a Director or other officer or employee of the Company or of any subsidiary undertaking of the Company or in which the Company has an interest (whether direct or indirect) or who is or was at any time a trustee of any pension fund or employee benefits trust in which any employee of the Company or of any such subsidiary undertaking is or has been interested, indemnifying such person against any liability which may attach to him or loss or expenditure which he may incur in relation to anything done or alleged to have been done or omitted to be done as a Director, officer, employee or trustee.
ADR DEPOSITARIES
164. ADR DEPOSITARIES
164.1 In this Article: 164.1.1 "ADR PROXY" means an ADR Holder who is for the time being appointed as proxy by an ADR Depositary pursuant to Article 164.2; 164.1.2 "APPOINTED NUMBER" means, in relation to an ADR Proxy, the number of Depositary Shares in respect of which the ADR Proxy's appointment subsists; 164.1.3 "DEPOSITARY SHARES" means shares from time to time registered in the name of an ADR Depositary or its nominee; and 164.1.4 "PROXY REGISTER" means the register or system(s) maintained by the ADR Depositary pursuant to Article 164.3. 164.2 Without prejudice to the right of an ADR Depositary to exercise any other rights conferred in these Articles, an ADR Depositary may appoint as its proxy or proxies ADR Holders registered on the books of the ADR Depositary and may determine the method by which, and the terms on which, such appointments are made, except that: 164.2.1 each such appointment shall identify the number of Depositary Shares in respect of which the appointment is made; |
164.2.2 the aggregate number of Depositary Shares in respect of which appointments subsist at any one time shall not exceed the aggregate number of Depositary Shares at that time; 164.2.3 each such appointment shall be deemed to constitute the ADR Proxy as the ADR Depositary's agent for the purposes of Article 164.4.2; and 164.2.4 (without prejudice to Article 164.4.2) the provisions of Articles 88 to 92 (inclusive) shall not apply to any such appointment in itself. 164.3 The ADR Depositary shall maintain a register or system(s) in which shall be recorded such details as the Board may determine to identify each ADR Proxy and that ADR Proxy's Appointed Number of Depositary Shares from time to time. The Proxy Register shall be open to inspection by any person authorised by the Company during usual business hours and the ADR Depositary shall furnish to the Company or its agents upon demand all such information as to the contents of the Proxy Register, or any part of it, as may be requested. Except as required by law, no ADR Proxy shall be recognised by the Company as holding any interest in shares upon any trust and the Company shall be entitled to treat any person entered in the Proxy Register as an ADR Proxy as the only person (other than the ADR Depositary) who has any interest in the shares in respect of which the ADR Proxy has been appointed. 164.4 Subject to the Statutes and provided there are sufficient Depositary Shares to satisfy his Appointed Number, an ADR Proxy shall, in relation to proceedings at any general meeting: 164.4.1 upon production to the Company at a general meeting of written evidence of his appointment (which shall be in such form as the Company and the ADR Depositary shall determine from time to time) be entitled to the following rights in relation to his Appointed Number of Depositary Shares: (a) to attend the meeting, form part of the quorum for the purposes of Articles 65 and 66, and have access to all documents made available there; (b) to speak at the meeting; (c) to vote on a show of hands and on a poll; and (d) to demand or join in demanding, or withdraw his demand for, a poll subject to the terms of Articles 73 and 80; in each case as though he were the shareholder attending in person (and in place of the representative (if any) of the ADR Depositary) in respect of his Appointed Number of Depositary Shares, but so that he is subject to the same restrictions (other than under Article 74.2) as would apply if he were a shareholder; and 164.4.2 be entitled as the agent of the ADR Depositary and in its name (but not otherwise, and so that his authority in that capacity shall be no greater than is necessary to give due effect to this Article 164.4.2) to appoint any person or persons notified as |
such to the ADR Depositary before or at the meeting as a proxy or proxies in relation to his Appointed Number of Depositary Shares. The provisions of Articles 88 to 92 (inclusive) shall apply in relation to any such appointment except that: (a) while it shall not be necessary to produce to the Company any evidence of the ADR Proxy's authority to execute the appointment of proxy as agent of the ADR Depositary, the Board may require evidence establishing to its satisfaction the authenticity of any signature or other means of execution purporting to have been effected by the ADR Proxy; (b) the ADR Proxy shall be entitled to serve notice pursuant to Article 91 that any such appointment of proxy is no longer valid; (c) the deposit, delivery or receipt of any such appointment of proxy shall not preclude the ADR Proxy from attending and voting in person at the meeting or on a poll pursuant to Article 164.4.1 except to the extent that the representative of the ADR Depositary attends and votes in person in respect of any of the Appointed Number of Depositary Shares; and (d) the Company shall be entitled to assume for all purposes that any person so appointed has been duly notified to the ADR Depositary except to the extent that the ADR Depositary notifies the Company to the contrary before that person has exercised any rights by virtue of that appointment. 164.5 The Company may send to the ADR Proxies as appearing in the Proxy Register at their addresses as so appearing all notices, documents and other communications which are sent to shareholders. For these purposes, Articles 153, 154, 155, 156, 158 and 159 shall apply (mutatis mutandis) as if the ADR Proxies were shareholders in respect of their respective Appointed Numbers of Depositary Shares and the Proxy Register were the Register, and no person deriving any title or interest in any such Depositary Share shall be entitled to any further service or delivery of that notice, document or communication. 164.6 Subject to the Statutes and Regulations but notwithstanding any other provision of these Articles, the Company or the Board may by resolution specify any date and time as the date and time on which persons registered as ADR Proxies shall be entitled to attend at any general meeting and/or to exercise voting rights in respect of which their appointment as ADR Proxies subsists as identified by the Proxy Register and any such date may be on, or at any time before, the date on which the general meeting is held. When the date is determined for any purpose: 164.6.1 the number of Depositary Shares in respect of which a person entered in the Proxy Register as an ADR Proxy is to be treated as having been appointed for the purpose shall be the number in respect of which his appointment as an ADR Proxy subsists as identified by the Proxy Register as at that date; and 164.6.2 changes to entries in the Proxy Register after that date shall be disregarded in determining the entitlement of any person for the purpose concerned. |
164.7 If any question shall arise as to whether any particular person or persons has or have been validly appointed to vote (or exercise any other right) in respect of any Depositary Shares (whether by reason of the aggregate number of shares in respect of which appointments are identified in the Proxy Register exceeding the aggregate number of Depositary Shares or for any other reason) such question shall if arising at or in relation to a general meeting be determined by the chairman of the meeting (and if arising in any other circumstances shall be determined by the Board) whose determination (which may include declining to recognise a particular appointment or appointments as valid) shall, if made in good faith, be conclusive and binding on all persons interested. 164.8 Without prejudice to Article 135, the Board may at its discretion make provisions to enable an ADR Depositary to receive dividends duly payable in a currency or currencies other than the lawful currency of the United Kingdom. For the purpose of the calculation of the amount payable in respect of any such dividend, the rate of exchange to be used to determine the relevant currency equivalent of any sum payable as a dividend shall be such market rate (whether spot or forward) selected by the Board as it shall consider appropriate (subject to such adjustments as the Board may determine) ruling in London on the date which is the business day last preceding: 164.8.1 in the case of a dividend to be declared by the Company in general meeting, the date on which the Board publicly announces its intention to recommend that specific dividend; and 164.8.2 in the case of any other dividend, the date on which the Board publicly announces its intention to pay that specific dividend provided that where the Board considers the circumstances to be appropriate it shall determine such relevant currency equivalent of any sums payable as a dividend by reference to such market rate or rates or the mean of such market rates prevailing at such time or times or on such other date or dates, in each case falling before the time of the relevant announcement, as the Board may in its discretion select. The decision of the Board regarding the exchange rate shall be conclusive and binding. |
EXHIBIT 2(a)
NEW NATIONAL GRID PLC
(TO BE RENAMED NATIONAL GRID GROUP PLC)
AND
NATIONAL GRID GROUP PLC
(TO BE RENAMED NATIONAL GRID HOLDINGS ONE PLC)
AND
THE BANK OF NEW YORK
AS DEPOSITARY
AND
OWNERS AND BENEFICIAL OWNERS OF AMERICAN DEPOSITARY RECEIPTS
AMENDED AND RESTATED DEPOSIT AGREEMENT
DATED AS JANUARY 31, 2002
AMENDED AND RESTATED DEPOSIT AGREEMENT
AMENDED AND RESTATED DEPOSIT AGREEMENT dated as of January 31, 2002, among NATIONAL GRID GROUP PLC, a public limited company incorporated under the laws of England and Wales, with company number 2367004, to be renamed National Grid Holdings One plc ("National Grid", herein called the Issuer until the Effective Time), NEW NATIONAL GRID PLC, a public limited company incorporated under the laws of England and Wales, with company number 4031152, to be renamed National Grid Group plc, (herein called the Issuer after the Effective Time), THE BANK OF NEW YORK, a New York banking corporation (herein called the Depositary), and all Owners and Beneficial Owners from time to time of American Depositary Receipts issued hereunder.
W I T N E S S E T H :
WHEREAS, National Grid and The Bank of New York are parties to a deposit agreement dated as of November 21, 1995, as amended and restated as of October 6, 1999 (the "Original Deposit Agreement"), among National Grid, The Bank of New York, as Depositary, and Owners and Beneficial Owners from time to time of American depositary receipts issued thereunder;
WHEREAS, in connection with the acquisition of National Grid by the Issuer by means of a Scheme of Arrangement under Section 425 of the Companies Act of 1985 (the "Scheme of Arrangement") pursuant to which each ordinary share of National Grid will be cancelled, and each former shareholder of National Grid is entitled to receive one ordinary share of the Issuer for each ordinary share of National Grid previously owned, and each former American depositary receipt holder of National Grid is entitled to receive one American Depositary Share of the Issuer for each one American Depositary Share of National Grid previously owned, National Grid and the Issuer now desire to amend and restate the Original Deposit Agreement to provide, as hereinafter set forth in this amended and restated Deposit Agreement (the "Deposit Agreement"), for the deposit of Shares (as hereinafter defined) of the Issuer, from time to time with the Depositary or the
Custodian, for the creation of American Depositary Shares representing the Shares (as hereinafter defined) so deposited (subject to the terms and conditions of this Deposit Agreement) and for the execution and delivery of American Depositary Receipts evidencing the American Depositary Shares;
WHEREAS, the American Depositary Receipts are to be substantially in the form of Exhibit A annexed hereto, and after the Effective Time, substantially in the form of Exhibit B annexed hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this Deposit Agreement;
WHEREAS, National Grid wishes no longer to remain a party to this Deposit Agreement;
NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties hereto that, pursuant to Section 6.1 of the Original Deposit Agreement, the Original Deposit Agreement shall be amended and restated in its entirety as follows:
ARTICLE 1. DEFINITIONS.
The following definitions shall for all purposes, unless otherwise clearly indicated, apply to the respective terms used in this Deposit Agreement:
SECTION 1.1. American Depositary Shares.
The term "American Depositary Shares" shall mean the securities representing the interests in the Deposited Securities and evidenced by the Receipts issued hereunder. Each American Depositary Share shall represent the number of Shares specified in the form of Receipt annexed hereto, until there shall occur a distribution upon Deposited Securities covered by Section 4.3 or a change in Deposited Securities covered by Section 4.8 with respect to which additional Receipts are not executed and delivered,
and thereafter American Depositary Shares shall evidence the amount of Shares or Deposited Securities specified in such Sections.
SECTION 1.2. Article; Section.
Wherever references are made in this Deposit Agreement to an "Article" or "Articles" or to a "Section" or "Sections", such references shall mean an article or articles or a section or sections of this Deposit Agreement, unless otherwise required by the context.
SECTION 1.3. Beneficial Owner.
The term "Beneficial Owner" shall mean each person owning from time to time any beneficial interest in the American Depositary Shares evidenced by any Receipt.
SECTION 1.4. Commission.
The term "Commission" shall mean the Securities and Exchange Commission of the United States or any successor governmental agency in the United States.
SECTION 1.5. Consultation.
The term "consultation" shall include within its meaning the good faith attempt by the Depositary to discuss, if practicable, the relevant issue in a timely manner with a person employed by the Issuer reasonably believed by the Depositary to be empowered by the Issuer to engage in such discussion on behalf of the Issuer.
SECTION 1.6. Custodian.
The term "Custodian" shall mean the London, England office of The Bank of New York, as agent of the Depositary for the purposes of this Deposit Agreement, and any other firm or corporation which may hereafter be appointed by the Depositary pursuant to the terms of Section 5.5, as substitute or additional custodian or custodians hereunder, as the context shall require and shall also mean all of them collectively.
SECTION 1.7. Deposit Agreement.
The term "Deposit Agreement" shall mean this amended and restated Deposit Agreement, as the same may be amended from time to time in accordance with the provisions hereof and all instruments supplemental thereto.
SECTION 1.8. Depositary; Corporate Trust Office.
The term "Depositary" shall mean The Bank of New York, a New York banking corporation and any successor as depositary hereunder. The term "Corporate Trust Office", when used with respect to the Depositary, shall mean the office of the Depositary which at the date of this Agreement is 101 Barclay Street, New York, New York, 10286.
SECTION 1.9. Deposited Securities.
The term "Deposited Securities" as of any time shall mean Shares at such time deposited or deemed to be deposited under this Deposit Agreement and any and all other securities, property and cash received by the Depositary or the Custodian in respect thereof and at such time held hereunder, subject as to cash to the provisions of Section 4.5.
SECTION 1.10. Dollars; Pounds; Pence.
The term "Dollars" or the symbol "$" shall mean United States dollars. The term "Pounds" or the symbol "(pound)" shall mean British pounds sterling and the term "pence" or "p" shall mean British pence.
SECTION 1.11. Effective Time.
The term "Effective Time" shall mean the time when an office copy of the order of the High Court of Justice in London, England sanctioning the Scheme of Arrangement ("Scheme") has been duly delivered to the Registrar of Companies for registration and the order and relative minutes have been registered by him.
SECTION 1.12. Foreign Registrar.
The term "Foreign Registrar" shall mean the entity that presently carries out the duties of registrar for the Shares or any successor as registrar for the Shares and any other appointed agent of the Issuer for the transfer and registration of Shares.
SECTION 1.13. Issuer.
The term "Issuer" shall mean National Grid Group plc, a public limited company incorporated under the laws of England and Wales, with company number
2367004, and its successors, until the Effective Time, after which time, the term "Issuer" shall thereafter mean New National Grid plc, incorporated under the laws of England and Wales, with company number 4031152, to be renamed National Grid Group plc, and its successors.
SECTION 1.14. Owner.
The term "Owner" shall mean the person in whose name a Receipt is registered on the books of the Depositary maintained for such purpose.
SECTION 1.15. Receipts.
The term "Receipts" shall mean the American Depositary Receipts issued hereunder evidencing American Depositary Shares.
SECTION 1.16. Registrar.
The term "Registrar" shall mean any bank or trust company having an office in the Borough of Manhattan, The City of New York, which shall be appointed to register Receipts and transfers of Receipts as herein provided.
SECTION 1.17. Restricted Securities.
The term "Restricted Securities" shall mean Shares, or Receipts representing such Shares, which are acquired directly or indirectly from the Issuer or its affiliates (as defined in Rule 144 under the Securities Act of 1933) in a transaction or chain of transactions not involving any public offering or which are subject to resale limitations under Regulation D under that Act or both, or which are held by an officer, director (or persons performing similar functions) or other affiliate of the Issuer, or which are subject to other restrictions on sale or deposit under the laws of the United States or of England and Wales, or under a shareholder agreement or the Memorandum and Articles of Association of the Issuer.
SECTION 1.18. Securities Act of 1933.
The term "Securities Act of 1933" shall mean the United States Securities Act of 1933, as from time to time amended.
SECTION 1.19. Shares.
The term "Shares" shall mean ordinary shares in registered form of the Issuer, heretofore validly issued and outstanding and fully paid, nonassessable or hereafter validly issued and outstanding and fully paid and nonassessable or interim certificates representing such Shares.
ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND DELIVERY,
TRANSFER AND SURRENDER OF RECEIPTS.
SECTION 2.1. Form and Transferability of Receipts.
Definitive Receipts shall be substantially in the form set forth in Exhibit A, and after the Effective Time substantially in the form set forth in Exhibit B, annexed to this Deposit Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose, unless such Receipt shall have been executed by the Depositary by the manual or facsimile signature of a duly authorized signatory of the Depositary and, if a Registrar for the Receipts shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized officer of the Registrar. The Depositary shall maintain books on which each Receipt so executed and delivered as hereinafter provided and the transfer of each such Receipt shall be registered. Receipts bearing the manual or facsimile signature of a duly authorized signatory of the Depositary who was at any time a proper signatory of the Depositary shall bind the Depositary, notwithstanding that such signatory has ceased to hold such office prior to the execution and delivery of such Receipts by the Registrar or did not hold such office on the date of issuance of such Receipts.
The Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or modifications not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary or required to comply with any applicable law or regulations thereunder or with the rules and regulations of any securities exchange upon which American Depositary Shares may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject by reason of the date of issuance of the underlying Deposited Securities or otherwise.
Title to a Receipt (and to the American Depositary Shares evidenced thereby), when properly endorsed or accompanied by proper instruments of transfer, shall be transferable in accordance with the terms of this Deposit Agreement by delivery with the same effect as in the case of a negotiable instrument under the laws of the State of New York; provided, however, that the Depositary, notwithstanding any notice to the contrary, may treat the Owner thereof as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all other purposes and neither the Depositary nor the Issuer shall have any obligation or be subject to any liability under this Deposit Agreement to any Beneficial Owner of a Receipt unless such Beneficial Owner is the Owner thereof.
SECTION 2.2. Deposit of Shares.
Subject to the terms and conditions of this Deposit Agreement, Shares or evidence of the right to receive Shares may be deposited by delivery thereof to any Custodian hereunder, accompanied by any appropriate instrument or instruments of transfer, or endorsement, in form satisfactory to the Custodian, together with all such certifications as may be required by the Depositary or the Custodian in accordance with the provisions of this Deposit Agreement, and, if the Depositary requires, together with a written order directing the Depositary to execute and deliver to, or upon the written order of, the person or persons stated in such order, a Receipt or Receipts for the number of American Depositary Shares representing such deposit. No Share shall be accepted for deposit unless accompanied by evidence satisfactory to the Depositary that any necessary approval has been granted by any governmental body in England and Wales which is then performing the function of the regulation of currency exchange. If required by the Depositary, Shares presented for deposit at any time, whether or not the transfer books of the Issuer or the Foreign Registrar, if applicable, are closed, shall also be accompanied by an agreement or assignment, or other instrument satisfactory to the Depositary, which will provide for the prompt transfer to the Custodian of any dividend, or right to subscribe for additional Shares or to receive other property which any person in whose name the Shares are or have been recorded may thereafter receive upon or in respect of such deposited Shares, or in lieu thereof, such agreement of indemnity or other agreement as shall be satisfactory to the Depositary.
At the request and risk and expense of any person proposing to deposit Shares, and for the account of such person, the Depositary may receive certificates for Shares to be deposited, together with the other instruments herein specified, for the purpose of forwarding such Share certificates to the Custodian for deposit hereunder.
Upon each delivery to a Custodian of a certificate or certificates for Shares to be deposited hereunder, together with the other documents above specified, such Custodian shall, as soon as transfer and recordation can be accomplished, present such certificate or certificates to the Issuer or the Foreign Registrar, if applicable, for transfer and recordation of the Shares being deposited in the name of the Depositary or its nominee or such Custodian or its nominee.
Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of the Depositary or at such other place or places as the Depositary shall determine.
SECTION 2.3. Execution and Delivery of Receipts.
Upon receipt by any Custodian of any deposit pursuant to Section 2.2 hereunder (and in addition, if the transfer books of the Issuer or the Foreign Registrar, if applicable, are open, the Depositary may in its sole discretion require a proper acknowledgment or other evidence from the Issuer or the Foreign Registrar, if applicable that any Deposited Securities have been recorded upon the books of the Issuer or the Foreign Registrar, as the case may be, in the name of the Depositary or its nominee or such Custodian or its nominee), together with the other documents required as above specified, such Custodian shall notify the Depositary of such deposit and the person or persons to whom or upon whose written order a Receipt or Receipts are deliverable in respect thereof and the number of American Depositary Shares to be evidenced thereby. Such notification shall be made by letter, first class airmail postage prepaid, or, at the request, risk and expense of the person making the deposit, by air courier, cable, telex or facsimile transmission. Upon receiving such notice from such Custodian, or upon the receipt of Shares by the Depositary, the Depositary, subject to the terms and conditions of this Deposit Agreement, shall execute and deliver at its Corporate Trust Office, to or upon the order of the person or persons entitled thereto, a Receipt or Receipts, registered in the name or names and evidencing any authorized number of American Depositary Shares requested by such person or persons, but only upon payment to the Depositary of
the fees of the Depositary for the execution and delivery of such Receipt or Receipts as provided in Section 5.9, and of all taxes and governmental charges and fees payable in connection with such deposit and the transfer of the Deposited Securities.
SECTION 2.4. Transfer of Receipts; Combination and Split-up of Receipts.
The Depositary, subject to the terms and conditions of this Deposit Agreement, shall, without unreasonable delay, register transfers of Receipts on its transfer books from time to time, upon any surrender of a Receipt, by the Owner in person or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer, and duly stamped as may be required by the laws of the State of New York and of the United States of America. Thereupon the Depositary shall execute a new Receipt or Receipts and deliver the same to or upon the order of the person entitled thereto.
The Depositary, subject to the terms and conditions of this Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of American Depositary Shares requested, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered.
The Depositary may appoint one or more co-transfer agents, and shall provide notice to the Company of such appointment, for the purpose of effecting transfers, combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Owners or persons entitled to Receipts and will be entitled to protection and indemnity to the same extent as the Depositary.
SECTION 2.5. Surrender of Receipts and Withdrawal of Shares.
Upon surrender at the Corporate Trust Office of the Depositary of a Receipt for the purpose of withdrawal of the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, and upon payment of the fee of the Depositary for the surrender of Receipts as provided in Section 5.9 and payment of all taxes and governmental charges payable in connection with such surrender and
withdrawal of the Deposited Securities, and subject to the terms and conditions of this Deposit Agreement, the Owner of such Receipt shall be entitled to delivery, to him or upon his order, of the amount of Deposited Securities at the time represented by the American Depositary Shares evidenced by such Receipt. Delivery of such Deposited Securities may be made by the delivery of (a) certificates in the name of such Owner or as ordered by him or by certificates properly endorsed or accompanied by proper instruments of transfer to such Owner or as ordered by him and (b) any other securities, property and cash to which such Owner is then entitled in respect of such Receipts to such Owner or as ordered by him. Such delivery shall be made, as hereinafter provided, without unreasonable delay.
A Receipt surrendered for such purposes may be required by the Depositary to be properly endorsed in blank or accompanied by proper instruments of transfer in blank, and if the Depositary so requires, the Owner thereof shall execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be delivered to or upon the written order of a person or persons designated in such order. Thereupon the Depositary shall direct the Custodian to deliver at the London, England office of such Custodian, subject to Sections 2.6, 3.1 and 3.2 and to the other terms and conditions of this Deposit Agreement, to or upon the written order of the person or persons designated in the order delivered to the Depositary as above provided, the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, except that the Depositary may make delivery to such person or persons at the Corporate Trust Office of the Depositary of any dividends or distributions with respect to the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, or of any proceeds of sale of any dividends, distributions or rights, which may at the time be held by the Depositary.
At the request, risk and expense of any Owner so surrendering a Receipt, and for the account of such Owner, the Depositary shall direct the Custodian to forward any cash or other property (other than rights) comprising, and forward a certificate or certificates and other proper documents of title for, the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt to the Depositary for delivery at the Corporate Trust Office of the Depositary. Such direction shall be given by letter, first class airmail postage prepaid, or, at the request, risk and expense of such Owner, by air courier, cable, telex or facsimile transmission.
SECTION 2.6. Limitations on Execution and Delivery, Transfer and Surrender of Receipts.
As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any Receipt or withdrawal of any Deposited Securities, the Depositary, Custodian or Registrar may require payment from the depositor of Shares or the presentor of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as herein provided, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of this Deposit Agreement, including, without limitation, this Section 2.6.
The delivery of Receipts against deposits of Shares generally or
against deposits of particular Shares may be suspended, or the transfer of
Receipts in particular instances may be refused, or the registration of transfer
of outstanding Receipts generally may be suspended, during any period when the
transfer books of the Depositary, the Issuer or the Foreign Registrar are
closed, or if any such action is deemed necessary or advisable by the Depositary
or the Issuer at any time or from time to time because of any requirement of law
or of any government or governmental body or commission, or under any provision
of this Deposit Agreement, or for any other reason, subject to the provisions of
Section 7.7 hereof. Notwithstanding any other provision of this Deposit
Agreement or the Receipts, the surrender of outstanding Receipts and withdrawal
of Deposited Securities may not be suspended subject only to (i) temporary
delays caused by closing the transfer books of the Depositary, the Issuer or the
Foreign Registrar or the deposit of Shares in connection with voting at a
shareholders' meeting, or the payment of dividends, (ii) the payment of fees,
taxes and similar charges, and (iii) compliance with any U.S. or foreign laws or
governmental regulations relating to the Receipts or to the withdrawal of the
Deposited Securities. Without limitation of the foregoing, the Depositary shall
not knowingly accept for deposit under this Deposit Agreement any Shares
required to be registered under the provisions of the Securities Act of 1933,
unless a registration statement is in effect as to such Shares.
SECTION 2.7. Lost Receipts, etc.
In case any Receipt shall be mutilated, destroyed, lost or stolen, the Depositary shall execute and deliver a new Receipt of like tenor in exchange and substitution for such mutilated Receipt upon cancellation thereof, or in lieu of and in substitution for such destroyed, lost or stolen Receipt. Before the Depositary shall execute and deliver a new Receipt in substitution for a destroyed, lost or stolen Receipt, the Owner thereof shall have (a) filed with the Depositary (i) a request for such execution and delivery before the Depositary has notice that the Receipt has been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond and (b) satisfied any other reasonable requirements imposed by the Depositary.
SECTION 2.8. Cancellation and Destruction of Surrendered Receipts.
All Receipts surrendered to the Depositary shall be cancelled by the Depositary. The Depositary is authorized to destroy Receipts so cancelled.
SECTION 2.9. Pre-Release of Receipts.
The Depositary may issue Receipts against the delivery by the Issuer (or any agent of the Issuer recording Share ownership) of rights to receive Shares from the Issuer (or any such agent). No such issue of Receipts will be deemed a "Pre-Release" that is subject to the restrictions of the following paragraph.
Unless requested in writing by the Issuer to cease doing so, the Depositary may, notwithstanding Section 2.3 hereof, execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.2 ("Pre-Release"). The Depositary may, pursuant to Section 2.5, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such Receipt has been Pre- Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation and agreement from the person to whom Receipts are to be delivered (the "Pre-Releasee") that the Pre- Releasee, or its customer, (i) owns the shares or Receipts to be remitted, as the case may be, (ii) assigns all beneficial rights, title and interest in such Shares or Receipts, as the case may be, to the Depositary in its capacity as such and for the benefit of the Owners, and (iii) will not take any action with respect to such Shares or Receipts, as the
case may be, that is inconsistent with the transfer of beneficial ownership
(including, without the consent of the Depositary, disposing of such Shares or
Receipts, as the case may be), other than in satisfaction of such Pre-Release,
(b) at all times fully collateralized with cash, U.S. government securities or
such other collateral as the Depositary determines, in good faith, will provide
substantially similar liquidity and security, (c) terminable by the Depositary
on not more than five (5) business days notice, and (d) subject to such further
indemnities and credit regulations as the Depositary deems appropriate. The
number of Shares not deposited but represented by American Depositary Shares
outstanding at any time as a result of Pre-Releases will not normally exceed
thirty percent (30%) of the Shares deposited hereunder; provided, however, that
the Depositary reserves the right to disregard such limit from time to time as
it deems reasonably appropriate, and may, with the prior written consent of the
Issuer, change such limit for purposes of general application. The Depositary
will also set Dollar limits with respect to Pre-Release transactions to be
entered into hereunder with any particular Pre-Releasee on a case-by-case basis
as the Depositary deems appropriate. For purposes of enabling the Depositary to
fulfill its obligations to the Owners under the Deposit Agreement, the
collateral referred to in clause (b) above shall be held by the Depositary as
security for the performance of the Pre-Releasee's obligations to the Depositary
in connection with a Pre-Release transaction, including the Pre-Releasee's
obligation to deliver Shares or Receipts upon termination of a Pre-Release
transaction (and shall not, for the avoidance of doubt, constitute Deposited
Securities hereunder).
The Depositary may retain for its own account any compensation received by it in connection with the foregoing.
SECTION 2.10. Direct Registration System.
(a) ADSs may be maintained by the Depositary in book-entry form known as the "Direct Registration System" ("DRS"). Upon issuance of ADSs, the ADSs of each Owner will be credited to the DRS account of each such Owner and in each such Owner's name. Each Owner will be given the option of (i) receiving a certificate representing its ADSs, (ii) transfering such ADSs to a broker designated by each and every person or entity in whose name such ADSs are registered on the books of the Depositary or (iii) maintaining their ADSs in DRS.
(b) The Issuer understands that Profile is a required feature of DRS. Profile allows a participant of The Depository Trust Company ("DTC") claiming to act on behalf of the Owner of ADSs, to direct the Depositary to transfer to such DTC participant the ADSs designated by such DTC participant without receipt by the Depositary of such prior written authorization from the Owner to transfer such ADSs.
(c) The Issuer understands the Depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on behalf of an Owner is, in fact, authorized to act on behalf of such Owner. The Issuer and each Owner agree that the Depositary shall have no liability for relying upon and complying with directions from a DTC participant as set forth above; and the Issuer shall indemnify and hold harmless the Depositary from and against any liability, expense, damage, loss and judgment arising from or related to the foregoing (including reasonable attorneys fees and expenses and expenses arising from or connected with the enforcement of this provision). For the avoidance of doubt, (i) the Depositary shall be fully protected by the foregoing limitation of liability and indemnification with respect to reliance upon and compliance with instructions from the DTC participant even if the Depositary's reliance on, and compliance with, such instructions is determined by a final, non-appealable order or judgment of a court of competent jurisdiction to constitute negligence, willful misconduct, breach of any duty owed by the Depositary to such Owner or violation of any law and (ii) the forgoing shall not apply to the manner in which the Depositary carries out actual transfer of the ADSs which are the subject of the DTC participant's instruction, which transfer shall continue to be governed by the other applicable terms of this Deposit Agreement. By way of example and not by way of limitation, if a court determines that the transfer of ADSs pursuant to a DTC participant's instruction without obtaining prior authorization from the Owner constitutes negligence, the Depositary will nevertheless be protected under this subparagraph (c); on the other hand, in carrying out such instructions, if the Depositary transfers ADSs from the wrong account or to the wrong DTC
participant, the obligation to indemnify the Depositary shall be determined in accordance with Sections 5.3 and 5.8 hereof.
ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS.
SECTION 3.1. Filing Proofs, Certificates and Other Information.
Any person presenting Shares for deposit or any Owner or Beneficial Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, proof of the nature of such person's interest, proof of compliance with all applicable laws and regulations and with the provisions of or governing the Deposited Securities and the terms of this Deposit Agreement or such information relating to the registration on the books of the Issuer or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Issuer or the Depositary may deem necessary or proper or as the Issuer may reasonably require by written request to the Depositary or any Custodian. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. Each Owner and Beneficial Owner agrees to provide any information requested by the Issuer or the Depositary pursuant to this Section 3.1.
The Depositary shall provide the Issuer, upon the Issuer's request and in a timely manner, with copies of any information or other material which it receives pursuant to this Section 3.1.
SECTION 3.2. Liability of Owner for Taxes.
If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited Securities represented by any Receipt, such tax or other governmental charge shall be payable by the Owner or Beneficial Owner of such Receipt to the Depositary. The Depositary may refuse to effect any transfer of such Receipt or any withdrawal of Deposited Securities represented by American Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner or Beneficial Owner
thereof any part or all of the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge and the Owner or Beneficial Owner of such Receipt shall remain liable for any deficiency.
SECTION 3.3. Warranties on Deposit of Shares.
Every person depositing Shares under this Deposit Agreement shall be deemed thereby to represent and warrant that such Shares and each certificate therefor are validly issued, fully paid and nonassessable and that the person making such deposit is duly authorized so to do. Every such person shall also be deemed to represent that the deposit of such Shares and the sale of Receipts evidencing American Depositary Shares representing such Shares by that person are not restricted under the Securities Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.
SECTION 3.4. Disclosure of Interests.
Notwithstanding any other provision of this Deposit Agreement, the Memorandum and Articles of Association of the Issuer or applicable English law, each Owner and Beneficial Owner agrees to be bound by and subject to applicable provisions of the U.K. Companies Act, 1985 and the Memorandum and Articles of Association of the Issuer, summarized below, to the same extent as if such Owner and Beneficial Owner held Shares directly. The Issuer has informed the Depositary that the following information is accurate as the Depositary has made no independent investigation regarding such information.
(a) A holder of Shares in the Issuer may lose the right to vote its Shares if it or any other person appearing to be interested in shares held by it fails to comply within a prescribed period of time with a request by the Issuer under the U.K. Companies Act, 1985 to give certain information with respect to past or present ownership or interests in such Shares. In the case of holders of more than 0.25% in nominal amount of the share capital of the Issuer (or any class thereof), in addition to disenfranchisement, the sanctions that may be applied by the Issuer include withholding of the right to receive payment of dividends and other monies payable on, and restrictions on transfers of the relevant Shares.
(b) Section 198 of the U.K. Companies Act, 1985 provides that a person (including a company and other legal entities) that acquires an interest of 3 percent or more of any class of shares (including through American Depositary Receipts) comprised in an English public company's "relevant share capital" (i.e., the Issuer's issued share capital carrying the right to vote in all circumstances at a general meeting of the Issuer) is required to notify the company of its interest within two business days following the day on which the obligation arises. After the 3 percent level is exceeded, similar notifications must be made in respect of increases or decreases through a whole percentage point.
For purposes of such notification obligation, the interest of a person
in shares means any kind of interest in shares including interests in any shares
(a) in which a spouse, or child or stepchild under the age of 18, is interested,
(b) in which a corporate body is interested and either (i) that corporate body
or its directors generally act in accordance with that person's directions or
instructions or (ii) that person controls one-third or more of the voting power
of that corporate body or (c) in which another party is interested and the
person and that other party are parties to a "concert party" agreement under
Section 204 of the U.K. Companies Act, 1985. A concert party agreement is one
which provides for one or more parties to acquire interests in shares of a
particular company and imposes obligations or restrictions on any one of the
parties as to the use, retention or disposal of such interests acquired pursuant
to such agreement and any interest in the company's shares is in fact acquired
by any of the parties pursuant to the agreement. Certain interests (e.g., those
held by certain investment fund managers) may be disregarded for the purposes of
calculating the 3 percent threshold, but the obligations of disclosure will
still apply where such interests exceed 10 percent or more of any class of the
company's relevant share capital and to increases or decreases through a whole
percentage point thereafter.
In addition, Section 212 of the U.K. Companies Act, 1985 provides that a public company may by written notice require a person whom the company knows or has reasonable cause to believe to be, or to have been at any time during the three years immediately preceding the date on which the notice is issued, interested in shares consisting of the company's "relevant share capital" to confirm that fact or to indicate whether or not that is the case, and where such person holds or during the relevant time
had held an interest in such shares, to give such further information as may be required relating to such interest and any other interest in the shares of which such person is aware.
Where notice is served by a company under the foregoing provisions on a person who is or was interested in shares of the company and that person fails to give the company any information required by the notice within the time specified in the notice, the company may apply to the English court for an order directing that the shares in question be subject to restrictions prohibiting, among other things, any transfer of those shares, the taking up of rights in respect of such shares and, other than on liquidation, payments in respect of such shares.
A person who fails to fulfill the obligations imposed by Sections 198 and 212 of the U.K. Companies Act, 1985 described above is subject to criminal penalties.
(c) The Depositary agrees to use reasonable efforts to forward to any Owners at the request of the Issuer and at the Issuer's expense, any request by the Issuer for information and to comply with any instructions of the Issuer, to the extent reasonably practicable, given to effectuate the foregoing restrictions. If the Issuer requests information from the Depositary or the Custodian, as the registered owners of Shares, pursuant to the Memorandum and Articles of Association of the Issuer or the U.K. Companies Act, 1985, the obligations of the Depositary or the Custodian, as the case may be, shall be limited to disclosing to the Issuer such information relating to the Shares in question as has in each case been recorded by it pursuant to the terms of this Deposit Agreement.
ARTICLE 4. THE DEPOSITED SECURITIES.
SECTION 4.1. Cash Distributions.
Whenever the Depositary shall receive any cash dividend or other cash distribution on any Deposited Securities, the Depositary shall, subject to the provisions of Section 4.5, convert such dividend or distribution into Dollars, if applicable, and shall distribute the amount thus received (net of the fees of the Depositary as provided in Section 5.9 hereof, if applicable) to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by them respectively; provided, however, that in the event that the Issuer or the Depositary shall be required to withhold and does withhold from such cash dividend or such other
cash distribution an amount on account of taxes or other governmental charges, the amount distributed to the Owner of the Receipts evidencing American Depositary Shares representing such Deposited Securities shall be reduced accordingly. The Depositary shall distribute only such amount, however, as can be distributed without attributing to any Owner a fraction of one cent. Any such fractional amounts shall be rounded to the nearest whole cent and so distributed to Owners entitled thereto. The Issuer or its agent will remit to the appropriate governmental agency in England and Wales all amounts withheld and owing to such agency. The Depositary will forward to the Issuer or its agent such information from its records as the Issuer may reasonably request to enable the Issuer or its agent to file necessary reports with governmental agencies, and the Depositary or the Issuer or its agent may file any such reports necessary to obtain benefits under the applicable tax treaties for the Owners of Receipts.
SECTION 4.2. Distributions Other Than Cash, Shares or Rights.
Subject to the provisions of Sections 4.11 and 5.9, whenever the Depositary shall receive any distribution other than a distribution described in Sections 4.1, 4.3 or 4.4, the Depositary shall cause the securities or property received by it to be distributed to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by them respectively, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, however, that if in the reasonable opinion of the Depositary such distribution cannot be made proportionately among the Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Issuer or the Depositary withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act of 1933 in order to be distributed to Owners or Beneficial Owners) the Depositary deems such distribution not to be feasible, the Depositary may, after notice to the Issuer adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees of the Depositary as provided in Section 5.9) shall be distributed by the Depositary to the Owners entitled thereto as in the case of a distribution received in cash pursuant to Section 4.1.
SECTION 4.3. Distributions in Shares.
If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Depositary may, and shall if the Issuer shall so request, distribute to the Owners of outstanding Receipts entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by them respectively, additional Receipts evidencing an aggregate number of American Depositary Shares representing the amount of Shares received as such dividend or free distribution, subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and the issuance of American Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 and the payment of fees of the Depositary as provided in Section 5.9. In lieu of delivering Receipts for fractional American Depositary Shares in any such case, the Depositary shall sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.1. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities represented thereby.
SECTION 4.4. Rights.
In the event that the Issuer shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary, after consultation with the Issuer, shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available to such Owners or, if by the terms of such rights offering or for any other reason, the Depositary may not either make such rights available to any Owners or dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines in its discretion, after consultation with the Issuer, that it is lawful and feasible to make such rights available to all Owners or to certain Owners but not to other Owners, the Depositary may distribute to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it, after consultation with the Issuer, deems appropriate.
In circumstances in which rights would otherwise not be distributed, if an Owner of Receipts requests the distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such Owner hereunder, the Depositary will make such rights available to such Owner upon written notice from the Issuer to the Depositary that (a) the Issuer has elected in its sole discretion to permit such rights to be exercised and (b) such Owner has executed such documents as the Issuer has determined in its sole discretion are reasonably required under applicable law.
If the Depositary has distributed warrants or other instruments for
rights to all or certain Owners, then upon instruction from such an Owner
pursuant to such warrants or other instruments to the Depositary from such Owner
to exercise such rights, upon payment by such Owner to the Depositary for the
account of such Owner of an amount equal to the purchase price of the Shares to
be received upon the exercise of the rights, and upon payment of the fees of the
Depositary and any other charges as set forth in such warrants or other
instruments, the Depositary shall, on behalf of such Owner, exercise the rights
and purchase the Shares, and the Issuer shall cause the Shares so purchased to
be delivered to the Depositary on behalf of such Owner. As agent for such Owner,
the Depositary will cause the Shares so purchased to be deposited pursuant to
Section 2.2 of this Deposit Agreement, and shall, pursuant to Section 2.3 of
this Deposit Agreement, execute and deliver Receipts to such Owner. In the case
of a distribution pursuant to the second paragraph of this section, such
Receipts shall be legended in accordance with applicable U.S. laws, and shall be
subject to the appropriate restrictions on sale, deposit, cancellation, and
transfer under such laws.
If the Depositary determines in its discretion, after consultation with the Issuer, that it is not lawful and feasible to make such rights available to all or certain Owners, it may sell the rights, warrants or other instruments in proportion to the number of American Depositary Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees of the Depositary as provided in Section 5.9 and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of this Deposit Agreement) for the account of such Owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise.
The Depositary will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to Owners or are registered under the provisions of such Act. Nothing in this Deposit Agreement shall create, or be construed to create, any obligation on the part of the Issuer to file a registration statement with respect to such rights or underlying securities or to endeavor to have a registration statement declared effective. If an Owner of Receipts requests distribution of warrants or other instruments, notwithstanding that there has been no such registration under such Act, the Depositary shall not effect such distribution unless it has received an opinion from recognized counsel in the United States for the Issuer upon which the Depositary may rely that such distribution to such Owner is exempt from such registration.
The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.
SECTION 4.5. Conversion of Foreign Currency.
Whenever the Depositary or the Custodian shall receive foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted, by sale or in any other manner that it may determine, such foreign currency into Dollars, and such Dollars shall be distributed to the Owners entitled thereto or, if the Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such warrants and/or instruments upon surrender thereof for cancellation in whole or in part depending on the terms of such warrants or other instruments. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.9.
If such conversion or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary shall file such application for
approval or license, if any, as it may deem desirable; provided, however, that the Issuer shall not be obligated to make any such filings.
If at any time the Depositary shall determine that in its judgment any foreign currency received by the Depositary or the Custodian is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the reasonable opinion of the Depositary is not obtainable, or if any such approval or license is not obtained within a reasonable period as determined by the Depositary, the Depositary, after consultation with the Issuer, may distribute the foreign currency (or an appropriate document evidencing the right to receive such foreign currency) received by the Depositary to, or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.
If any such conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in Dollars to the extent permissible to the Owners entitled thereto and may distribute the balance of the foreign currency received by the Depositary to, or hold such balance uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled thereto.
SECTION 4.6. Fixing of Record Date.
Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, the Depositary shall fix a record date, which shall be as close as practicable to the date corresponding to the record date fixed by the Issuer in respect of the Shares or other Deposited Securities, (a) for the determination of the Owners who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, or (b) on or after which each American Depositary Share will represent the changed number of Shares. Subject to
the provisions of Sections 4.1 through 4.5 and to the other terms and conditions of this Deposit Agreement, the Owners on such record date shall be entitled, as the case may be, to receive the amount distributable by the Depositary with respect to such dividend or other distribution or such rights or the net proceeds of sale thereof in proportion to the number of American Depositary Shares held by them respectively and to give voting instructions and to act in respect of any other such matter.
SECTION 4.7. Voting of Deposited Securities.
Subject to and in accordance with the Articles of Association of the Issuer, the Depositary hereby irrevocably appoints (or, if the Deposited Securities are registered in the name of or held by its nominee, shall procure that its nominee shall irrevocably appoint) each Owner for the time being on the record date (the "Voting Record Date") fixed by the Depositary in accordance with Section 4.06 in respect of any meeting (including any adjourned meeting) at which holders of Deposited Securities are entitled to vote as its proxy to attend, vote and speak at the relevant meeting (or any adjournment thereof) as provided in the Articles of Association of the Issuer in respect of the Deposited Securities represented by the American Depositary Shares evidenced by the Receipts held by such Owner on the Voting Record Date, and by reason of that appointment in respect of any such meeting each such Owner shall be constituted the agent of the Depositary to appoint (in relation to those Deposited Securities) in the name of the Depositary either a person nominated by the Depositary or any other person as proxy to attend, vote and speak as the Owner may instruct, subject to and in accordance with the provisions of this Section and the Articles of Association of the Issuer (and if the Deposited Securities are registered in the name of or held by the nominee of the Depositary, the Depositary shall procure that the nominee duly constitutes each such Owner as its agent for that purpose). As soon as practicable after receipt of notice of any meeting at which the holders of Deposited Securities are entitled to vote, or of solicitation of consents or proxies from holders of Deposited Securities, the Depositary shall, in accordance with Section 4.06, fix the Voting Record Date in respect of such meeting or solicitation. The Depositary or, if the Issuer so determines, the Issuer shall mail to
Owners of record on such Voting Record Date: (a) such information as is
contained in such notice of meeting or in the solicitation materials, (b) a
Receipt proxy card in a form prepared by the Depositary, after consultation with
the Issuer, (c) a statement that each Owner of Record at the close of business
on the Voting Record Date will be entitled, subject to any applicable law, the
Issuer's Articles of Association and the provisions of or governing the
Deposited Securities, either (i) to use such Receipt proxy card at that meeting
as written evidence of the appointment of that Owner in accordance with this
Section in order to attend, vote and speak at such meeting solely with respect
to the Shares or other Deposited Securities represented by American Depositary
Shares evidenced by such Owner's Receipts or (ii) as the agent of the Depositary
(or its nominee) to appoint any other person as proxy solely with respect to the
Shares or other Deposited Securities represented by American Depositary Shares
evidenced by such Owner's Receipts and (if the Owner wishes) to instruct such
person as to the exercise of the voting rights pertaining to them, and (d) if
the person nominated by the Depositary is to be appointed in that manner as
proxy, a brief statement as to the manner in which the Owner may give voting
instructions to the person nominated by the Depositary. Upon the written request
of an Owner of record on the Voting Record Date received on or before the date
established by the Depositary for such purpose (the "Instruction Date"), the
Depositary shall endeavor, insofar as practicable and permitted under applicable
law, the provisions of the Issuer's Articles of Association and the provisions
of the Deposited Securities, to cause to be voted the Deposited Securities in
accordance with the instructions set forth in such request.
Neither the Depositary nor the Custodian nor the nominee of either of them shall exercise any discretion as to voting and neither the Depositary nor the Custodian nor the nominee of either of them shall vote or attempt to exercise the right to vote the Shares or other Deposited Securities represented by American Depositary Shares except pursuant to and in accordance with such written instructions from Owners given in accordance with this Section 4.07. Shares or other Deposited Securities represented by
American Depositary Shares for which no specific voting instructions are received by the Depositary from the Owner shall not be voted by the Depositary or its nominee but may be directly voted by Owners in attendance at meetings of shareholders, subject to, and in accordance with, the provisions of this Section and the Issuer's Articles of Association.
For the avoidance of doubt, the appointment pursuant to this Section of a proxy by an Owner acting as agent of the Depositary (or its nominee) shall constitute the appointed person as a proxy for the purposes of section 372 of the UK Companies Act 1985 and of the Articles of Association of the Issuer; whereas the appointment pursuant to this Section of an Owner as a proxy by the Depositary (or its nominee) shall not constitute that Owner as such a proxy but shall instead confer on that Owner the special rights and privileges accorded under the Issuer's Articles of Association to ADR Proxies (as defined in those Articles of Association).
Notwithstanding anything in this Section 4.7 or in Section 6.1 to the contrary, the Depositary and the Issuer may modify, amend or adopt additional voting procedures at any time or from time to time as they determine may be necessary or appropriate.
There can be no assurance that Owners generally or any Owner in particular will receive the notice described in this Section 4.7 sufficiently prior to the Instruction Date to ensure that the Depositary will vote the Shares or Deposited Securities in accordance with the provisions set forth in this Section.
SECTION 4.8. Changes Affecting Deposited Securities.
In circumstances where the provisions of Section 4.3 do not apply, upon any change in nominal value, change in par value, split-up, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the Issuer or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities, shall be treated as new Deposited
Securities under this Deposit Agreement, and American Depositary Shares shall thenceforth represent, in addition to the existing Deposited Securities, the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, and shall if the Issuer shall so request, execute and deliver additional Receipts as in the case of a dividend in Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities.
SECTION 4.9. Reports.
The Depositary shall make available for inspection by Owners at its Corporate Trust Office any reports and communications, including any proxy soliciting material, received from the Issuer which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Issuer. The Depositary shall also, upon written request, send to the Owners copies of such reports furnished by the Issuer pursuant to Section 5.6.
SECTION 4.10. Lists of Owners.
Promptly upon request by the Issuer, the Depositary shall, at the expense of the Issuer, furnish to it a list, as of a recent date, of the names, addresses and holdings of American Depositary Shares by all persons in whose names Receipts are registered on the books of the Depositary.
SECTION 4.11. Withholding.
In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems necessary and practicable to pay any such taxes or charges and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners entitled thereto in proportion to the number of American Depositary Shares held by them respectively.
ARTICLE 5. THE DEPOSITARY, THE CUSTODIANS AND THE ISSUER.
SECTION 5.1. Maintenance of Office and Transfer Books by the Depositary.
Until termination of this Deposit Agreement in accordance with its terms, the Depositary shall maintain in the Borough of Manhattan, The City of New York, facilities for the execution and delivery, registration, registration of transfers and surrender of Receipts in accordance with the provisions of this Deposit Agreement.
The Depositary shall keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners, provided that such inspection shall not be for the purpose of communicating with Owners in the interest of a business or object other than the business of the Issuer or a matter related to this Deposit Agreement or the Receipts.
The Depositary may close the transfer books, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties hereunder after consultation with to the extent practicable or at the request of the Issuer.
If any Receipts or the American Depositary Shares evidenced thereby are listed on one or more stock exchanges in the United States, the Depositary shall act as Registrar or appoint a Registrar or one or more co-registrars for registry of such Receipts in accordance with any requirements of such exchange or exchanges.
SECTION 5.2. Prevention or Delay in Performance by the Depositary or the Issuer.
Neither the Depositary nor the Issuer nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Beneficial Owner of any Receipt, if by reason of any provision of any present or future law or regulation of the United States or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of the Memorandum and Articles of Association of the Issuer, or by reason of any act of God or war or other circumstances beyond its control, the Depositary or the Issuer or any of their respective directors, employees, agents or affiliates shall be prevented or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of this Deposit Agreement it is provided shall be done or
performed; nor shall the Depositary or the Issuer or any of their respective directors, employees, agents or affiliates incur any liability to any Owner or Beneficial Owner of any Receipt by reason of any non- performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of this Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement. Where, by the terms of a distribution pursuant to Sections 4.1, 4.2, or 4.3 of the Deposit Agreement, or an offering or distribution pursuant to Section 4.4 of the Deposit Agreement, or for any other reason, such distribution or offering may not be made available to Owners, and the Depositary may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Depositary shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse.
SECTION 5.3. Obligations of the Depositary, the Custodian and the Issuer.
Neither the Issuer nor any of its directors, employees, agents or affiliates assume any obligation nor shall any of them be subject to any liability under this Deposit Agreement to Owners or Beneficial Owners of Receipts, except that the Issuer agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.
The Depositary assumes no obligation nor shall it be subject to any liability under this Deposit Agreement to any Owner or Beneficial Owners of any Receipt (including, without limitation, liability with respect to the validity or worth of the Deposited Securities), except that it agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.
Neither the Depositary nor the Issuer nor any of their respective directors, employees, agents or affiliates shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in their respective reasonable opinions may involve them in expense or liability, unless indemnity satisfactory to them against all expense and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary.
Neither the Depositary nor the Issuer nor any of their respective directors, employees, agents or affiliates shall be liable for any action or nonaction by any of them in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or any other person believed by any of them in good faith to be competent to give such advice or information. Each of the Depositary, the Issuer and their respective directors, employees, agents and affiliates may rely and shall be protected in acting upon any written notice, request or direction or other document believed by such person to be genuine and to have been signed or presented by the proper party or parties.
The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.
The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or nonaction is in good faith.
No disclaimer of liability under the Securities Act of 1933 is intended by any provision of this Deposit Agreement.
SECTION 5.4. Resignation and Removal of the Depositary.
The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Issuer, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided.
The Depositary may at any time be removed by the Issuer by written notice of such removal effective upon the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided.
In case at any time the Depositary acting hereunder shall resign or be removed, the Issuer shall use its best efforts to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, The City of New York. Every successor depositary shall execute and deliver to its predecessor and to the Issuer an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and on the written request of the Issuer shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Deposited Securities to such successor, and shall deliver to such successor a list of the Owners of all outstanding Receipts. Any such successor depositary shall promptly mail notice of its appointment to the Owners.
Any corporation into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.
SECTION 5.5. The Custodians.
The Custodian shall be subject at all times and in all respects to the directions of the Depositary and shall be responsible solely to it. Any Custodian may resign and be discharged from its duties hereunder by notice of such resignation delivered to the Depositary at least 30 days prior to the date on which such resignation is to become effective. If upon such resignation there shall be no Custodian acting hereunder, the Depositary shall, promptly after receiving such notice, appoint a substitute custodian or custodians, each of which shall thereafter be a Custodian hereunder. Whenever the Depositary in its discretion determines that it is in the best interest of the Owners to do so, it may appoint substitute or additional custodian or custodians, which shall thereafter be one of the Custodians hereunder. Upon demand of the Depositary any Custodian shall deliver such of the Deposited Securities held by it as are requested of it to any other Custodian or such substitute or additional custodian or custodians. Each such substitute or additional custodian shall deliver to the Depositary, forthwith upon its appointment, an acceptance of such appointment satisfactory in form and substance to the Depositary.
Upon the appointment of any successor depositary hereunder, each Custodian then acting hereunder shall forthwith become, without any further act or writing, the agent hereunder of such successor depositary and the appointment of such successor depositary shall in no way impair the authority of each Custodian hereunder; but the successor depositary so appointed shall, nevertheless, on the written request of any Custodian or as required by the laws of England and Wales, execute and deliver to such Custodian all such instruments as may be proper to give to such Custodian full and complete power and authority as agent hereunder of such successor depositary.
SECTION 5.6. Notices and Reports.
On or before the first date on which the Issuer gives notice, by publication or otherwise, of any meeting of holders of Shares or other Deposited Securities, or of any adjourned meeting of such holders, or of the taking of any action in respect of any cash or other distributions or the offering of any rights, the Issuer agrees to transmit to the Depositary and the Custodian a copy of the notice thereof in the form given or to be given to holders of Shares or other Deposited Securities.
The Issuer will arrange for the prompt transmittal by the Issuer to the Depositary and the Custodian of such notices and any other reports and communications which are made generally available by the Issuer to holders of its Shares. If requested in writing by the Issuer, the Depositary will arrange for the mailing, at the Issuer's expense, of copies of such notices, reports and communications to all Owners. The Issuer will timely provide the Depositary with the quantity of such notices, reports, and communications, as requested by the Depositary from time to time, in order for the Depositary to effect such mailings.
SECTION 5.7. Distribution of Additional Shares, Rights, etc.
The Issuer agrees that in the event of any issuance or distribution of
(1) additional Shares, (2) rights to subscribe for Shares, (3) securities
convertible into Shares, or (4) rights to subscribe for such securities, (each a
"Distribution") the Issuer will promptly furnish to the Depositary a written
opinion from U.S. counsel for the Issuer, which counsel shall be satisfactory to
the Depositary, stating whether or not the Distribution requires a Registration
Statement under the Securities Act of 1933 to be in effect prior to making such
Distribution available to Owners entitled thereto. If in the opinion of such
counsel a Registration Statement is required, such counsel shall furnish to
the Depositary a written opinion as to whether or not there is a Registration Statement in effect which will cover such Distribution. Nothing in this Section 5.7 or elsewhere in this Deposit Agreement shall create any obligation on the part of the Issuer to file a Registration Statement in respect of any such securities or rights.
The Issuer agrees with the Depositary that neither the Issuer nor any company controlled by, controlling or under common control with the Issuer will at any time deposit any Shares, either originally issued or previously issued and reacquired by the Issuer or any such affiliate, unless a Registration Statement is in effect as to such Shares under the Securities Act of 1933. The Depositary will comply with the reasonable instructions of the Issuer not to accept knowingly for deposit hereunder any Shares identified in such instructions at such times and under such circumstances as may be specified in such instructions in order to facilitate the Issuer's compliance with the securities laws of the United States.
SECTION 5.8. Indemnification.
The Issuer agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of this Deposit Agreement and of the Receipts, as the same may be amended, modified or supplemented from time to time, (i) by either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Issuer or any of its directors, employees, agents and affiliates.
The indemnities contained in the preceding paragraph shall not extend to any liability or expense which may arise out of any Pre-Release (as defined in Section 2.9) but only to the extent that any such liability or expense arises in connection with (a) any United States Federal, state or local income tax laws, or (b) the failure of the Depositary to deliver Deposited Securities when required under the terms of Section 2.5 hereof. However, the indemnities contained in the preceding paragraph shall apply to any liability or expense which may arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration statement, proxy statement, prospectus (or placement memorandum), or preliminary prospectus (or preliminary placement
memorandum) relating to the offer of sale of American Depositary Shares, except to the extent any such liability or expense arises out of (i) information relating to the Depositary or any Custodian (other than the Issuer), as applicable, furnished in writing and not materially changed or altered by the Issuer expressly for use in any of the foregoing documents, or, (ii) if such information is provided, the failure to state a material fact necessary to make the information provided not misleading.
The Depositary agrees to indemnify the Issuer, its directors, employees, agents and affiliates and hold them harmless from any liability or expense which may arise out of acts performed or omitted by the Depositary or its Custodian or their respective directors, employees, agents and affiliates due to their negligence or bad faith.
If an action, proceeding (including, but not limited to, any governmental investigation, claim or dispute (collectively, a "Proceeding") in respect of which indemnity may be sought by either party is brought or asserted against the other party, the party seeking indemnification (the "Indemnitee") shall promptly (and in any event more than ten (10) days after receipt of notice of such Proceeding) notify the party obligated to provide such indemnification (the "Indemnitor") of such Proceeding. The failure of the Indemnitee to so notify the Indemnitor shall not impair the Indemnitee's ability to seek indemnification from the Indemnitor (but only for costs, expenses and liabilities incurred after such notice) unless such failure adversely effects the Indemnitor's ability to adequately oppose or defend such Proceeding. Upon receipt of such notice from the Indemnitee, the Indemnitor shall be entitled to participate in such Proceeding and, to the extent that it shall so desire and provided no conflict of interest exists as specified in subparagraph (b) below, to assume the defense thereof with counsel reasonably satisfactory to the Indemnitee which may be counsel to the Indemnitor (in which case all attorney's fees and expenses shall be borne by the Indemnitor and the Indemnitor shall in good faith defend the Indemnitee). The Indemnitee shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be borne by the Indemnitee unless (a) the Indemnitor agrees in writing to pay such fees and expenses, (b) the Indemnitee shall have reasonably and in good faith concluded that there is a conflict of interest between the Indemnitor and the Indemnitee in the conduct of the defense of such action or (c) the Indemnitor fails, within ten (10) days prior to the date the first response or appearance is required to be made in such Proceeding, to assume the defense of such Proceeding with
counsel reasonably satisfactory to the Indemnitee. No compromise or settlement of such Proceeding may be effected by either party without the other party's consent unless (i) there is no finding or admission of any violation of law and no effect on any other claims that may be made against such other party and (ii) the sole relief provided is monetary damages that are paid in full by the party seeking the settlement. Neither party shall have any liability or obligation with respect to any compromise or settlement effected without its consent, which shall not be unreasonably withheld. The Indemnitor shall have no obligation to indemnify and hold harmless the Indemnitee from any loss, expense or liability incurred by the Indemnitee as a result of a default judgment entered against the Indemnitee unless such judgment was entered after the Indemnitor agreed, in writing, to assume the defense of such Proceeding.
The obligations set forth in the Section 5.8 shall survive the termination of this Deposit Agreement and the succession or substitution of any indemnified person.
SECTION 5.9. Charges of Depositary.
The Issuer agrees to pay the fees, reasonable expenses and out-of-pocket charges of the Depositary and those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the Issuer from time to time. Any written agreement signed by the Issuer and the Depositary relating to the Depositary's fees and expenses under this Deposit Agreement shall be binding on the Issuer and the Depositary until it is expressly amended or superseded by a subsequent written agreement, irrespective of whether such agreement was entered into prior to, simultaneously with or subsequent to this Deposit Agreement, and notwithstanding any provision of this Deposit Agreement that might be construed to be inconsistent with such agreement. The Depositary shall present its statement for such charges and expenses to the Issuer once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.
The following charges shall be incurred by any party depositing or
withdrawing Shares or by any party surrendering Receipts or to whom Receipts are
issued (including, without limitation, issuance pursuant to a stock dividend or
stock split declared by the Issuer or an exchange of stock regarding the
Receipts or Deposited Securities or a distribution of Receipts pursuant to
Section 4.3), whichever applicable: (1) taxes and other governmental charges,
(2) such registration fees as may from time to time
be in effect for the registration of transfers of Shares generally on the Share register of the Issuer or Foreign Registrar and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable, telex and facsimile transmission expenses as are expressly provided in this Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.5 (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the execution and delivery of Receipts pursuant to Section 2.3, 4.3 or 4.4, and the surrender of Receipts pursuant to Section 2.5 or 6.2, (6) a fee of $.02 or less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to the Deposit Agreement including, but not limited to, Sections 4.1 through 4.4 hereof, except for distributions of cash dividends, and (7) a fee for the distribution of securities pursuant to Section 4.2, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause (7) treating all such securities as if they were Shares), but which securities are instead distributed by the Depositary to Owners.
The Depositary, subject to Section 2.9 hereof, may own and deal in any class of securities of the Issuer and its affiliates and in Receipts.
SECTION 5.10. Retention of Depositary Documents.
The Depositary is authorized to destroy those documents, records, bills and other data compiled during the term of this Deposit Agreement at the times permitted by the laws or regulations governing the Depositary unless the Issuer requests that such papers be retained for a longer period or turned over to the Issuer or to a successor depositary.
SECTION 5.11. Exclusivity.
The Issuer agrees not to appoint any other depositary for issuance of American Depositary Receipts so long as The Bank of New York is acting as Depositary hereunder.
SECTION 5.12. List of Restricted Securities Owners.
From time to time, the Issuer shall provide to the Depositary a list setting forth, to the actual knowledge of the Issuer, those persons or entities who beneficially own Restricted Securities and the Issuer shall update that list on a regular basis. The Issuer agrees to advise in writing each of the persons or entities so listed that such Restricted Securities are ineligible for deposit hereunder. The Depositary may rely on such a list or update but shall not be liable for any action or omission made in reliance thereon.
ARTICLE 6. AMENDMENT AND TERMINATION.
SECTION 6.1. Amendment.
The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to time be amended by agreement between the Issuer and the Depositary without the consent of Owners or Beneficial Owners of Receipts in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or which shall otherwise prejudice any substantial existing right of Owners (other than the modification of voting procedures as provided in Section 4.7 hereof), shall, however, not become effective as to outstanding Receipts until the expiration of thirty days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner at the time any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.
SECTION 6.2. Termination.
The Depositary shall at any time at the direction of the Issuer terminate this Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate this Deposit Agreement by mailing
notice of such termination to the Issuer and the Owners of all Receipts then outstanding if at any time 90 days shall have expired after the Depositary shall have delivered to the Issuer a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.4. On and after the date of termination, the Owner of a Receipt will, upon (a) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.5, and (c) payment of any applicable taxes or governmental charges, be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the Owners thereof, and shall not give any further notices or perform any further acts under this Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in this Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of this Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the Depositary shall be discharged from all obligations under this Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of this Deposit Agreement, and any applicable taxes or governmental charges). Upon the termination of this Deposit Agreement, the Issuer shall be discharged from all obligations
under this Deposit Agreement except for its obligations to the Depositary under Sections 5.8 and 5.9 hereof.
ARTICLE 7. MISCELLANEOUS.
SECTION 7.1. Counterparts.
This Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts shall constitute one and the same instrument. Copies of this Deposit Agreement shall be filed with the Depositary and the Custodians and shall be open to inspection by any Beneficial Owner or Owner of a Receipt during business hours.
SECTION 7.2. No Third Party Beneficiaries.
This Deposit Agreement is for the exclusive benefit of the parties hereto and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person.
SECTION 7.3. Severability.
In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.
SECTION 7.4. Owners and Beneficial Owners as Parties; Binding Effect.
The Owners and Beneficial Owners of Receipts from time to time shall be parties to this Deposit Agreement and shall be bound by all of the terms and conditions hereof and of the Receipts by acceptance thereof.
SECTION 7.5. Notices.
Any and all notices to be given to the Issuer shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to National Grid Group, 15 Marylebone Road, London NW1 5JD, United Kingdom, Attention: Company Secretary or any other place to which the Issuer may have transferred its principal office.
Any and all notices to be given to the Depositary shall be deemed to
have been duly given if in English and personally delivered or sent by mail or
cable, telex or facsimile transmission confirmed by letter, addressed to The
Bank of New York, 101 Barclay Street, New York, New York 10286, Attention:
American Depositary Receipt Administration, or any other place to which the
Depositary may have transferred its Corporate Trust Office.
Any and all notices to be given to any Owner shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to such Owner at the address of such Owner as it appears on the transfer books for Receipts of the Depositary, or, if such Owner shall have filed with the Depositary a written request that notices intended for such Owner be mailed to some other address, at the address designated in such request.
Delivery of a notice sent by mail or cable, telex or facsimile transmission shall be deemed to be effected at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex or facsimile transmission) is deposited, postage prepaid, in a post-office letter box. The Depositary or the Issuer may, however, act upon any cable, telex or facsimile transmission received by it, notwithstanding that such cable, telex or facsimile transmission shall not subsequently be confirmed by letter as aforesaid.
SECTION 7.6. Governing Law.
This Deposit Agreement and the Receipts shall be interpreted and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the laws of the State of New York. It is understood that, notwithstanding any present or future provision of the laws of the State of New York, the rights of holders of Shares and other Deposited Securities and the obligations and duties of the Issuer in respect of such holders, as such, shall be governed by the laws of England and Wales (or, if applicable, such other law as may govern Deposited Securities).
SECTION 7.7. Compliance with U.S. Securities Laws.
Notwithstanding anything in this Deposit Agreement to the contrary, the Issuer and the Depositary each agrees that it will not exercise any rights it has under this Deposit Agreement to prevent the withdrawal or delivery of Deposited Securities in a
manner which would violate the U.S. securities laws, including, but not limited to, Section I.A.(1) of the General Instructions to the Form F-6 Registration Statement, as amended from time to time, under the Securities Act of 1933.
SECTION 7.8. National Grid Group plc as a Party to the Deposit Agreement.
Upon the Effective Time of this amended and restated Deposit Agreement as provided in Section 1.11, National Grid shall cease to be a party to this Deposit Agreement.
IN WITNESS WHEREOF, NEW NATIONAL GRID PLC (to be renamed NATIONAL GRID GROUP PLC), NATIONAL GRID GROUP PLC and THE BANK OF NEW YORK have duly executed this agreement as of the day and year first set forth above and all Owners and Beneficial Owners shall become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof.
NEW NATIONAL GRID PLC
Title:
NATIONAL GRID GROUP PLC
Title:
THE BANK OF NEW YORK,
as Depositary
Title:
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS............................................................................2 SECTION 1.1. AMERICAN DEPOSITARY SHARES..........................................................2 SECTION 1.2. ARTICLE; SECTION....................................................................3 SECTION 1.3. BENEFICIAL OWNER....................................................................3 SECTION 1.4. COMMISSION..........................................................................3 SECTION 1.5. CONSULTATION........................................................................3 SECTION 1.6. CUSTODIAN...........................................................................3 SECTION 1.7. DEPOSIT AGREEMENT...................................................................3 SECTION 1.8. DEPOSITARY; CORPORATE TRUST OFFICE..................................................4 SECTION 1.9. DEPOSITED SECURITIES................................................................4 SECTION 1.10. DOLLARS; POUNDS; PENCE...........................................................4 SECTION 1.11. EFFECTIVE TIME...................................................................4 SECTION 1.12. FOREIGN REGISTRAR................................................................4 SECTION 1.13. ISSUER...........................................................................4 SECTION 1.14. OWNER............................................................................5 SECTION 1.15. RECEIPTS.........................................................................5 SECTION 1.16. REGISTRAR........................................................................5 SECTION 1.17. RESTRICTED SECURITIES............................................................5 SECTION 1.18. SECURITIES ACT OF 1933...........................................................5 SECTION 1.19. SHARES...........................................................................6 ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS..................................................................6 SECTION 2.1. FORM AND TRANSFERABILITY OF RECEIPTS................................................6 SECTION 2.2. DEPOSIT OF SHARES...................................................................7 SECTION 2.3. EXECUTION AND DELIVERY OF RECEIPTS..................................................8 SECTION 2.4. TRANSFER OF RECEIPTS; COMBINATION AND SPLIT-UP OF RECEIPTS..........................9 SECTION 2.5. SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES......................................9 SECTION 2.6. LIMITATIONS ON EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS..........11 SECTION 2.7. LOST RECEIPTS, ETC.................................................................12 SECTION 2.8. CANCELLATION AND DESTRUCTION OF SURRENDERED RECEIPTS...............................12 SECTION 2.9. PRE-RELEASE OF RECEIPTS............................................................12 SECTION 2.10. DIRECT REGISTRATION SYSTEM......................................................13 ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS.............................................15 SECTION 3.1. FILING PROOFS, CERTIFICATES AND OTHER INFORMATION..................................15 SECTION 3.2. LIABILITY OF OWNER FOR TAXES.......................................................15 SECTION 3.3. WARRANTIES ON DEPOSIT OF SHARES....................................................16 SECTION 3.4. DISCLOSURE OF INTERESTS............................................................16 ARTICLE 4. THE DEPOSITED SECURITIES..............................................................18 SECTION 4.1. CASH DISTRIBUTIONS.................................................................18 SECTION 4.2. DISTRIBUTIONS OTHER THAN CASH, SHARES OR RIGHTS....................................19 SECTION 4.3. DISTRIBUTIONS IN SHARES............................................................20 SECTION 4.4. RIGHTS.............................................................................20 SECTION 4.5. CONVERSION OF FOREIGN CURRENCY.....................................................22 |
SECTION 4.6. FIXING OF RECORD DATE..............................................................23 SECTION 4.7. VOTING OF DEPOSITED SECURITIES.....................................................24 SECTION 4.8. CHANGES AFFECTING DEPOSITED SECURITIES.............................................26 SECTION 4.9. REPORTS............................................................................27 SECTION 4.10. LISTS OF OWNERS.................................................................27 SECTION 4.11. WITHHOLDING.....................................................................27 ARTICLE 5. THE DEPOSITARY, THE CUSTODIANS AND THE ISSUER.........................................28 SECTION 5.1. MAINTENANCE OF OFFICE AND TRANSFER BOOKS BY THE DEPOSITARY.........................28 SECTION 5.2. PREVENTION OR DELAY IN PERFORMANCE BY THE DEPOSITARY OR THE ISSUER.................28 SECTION 5.3. OBLIGATIONS OF THE DEPOSITARY, THE CUSTODIAN AND THE ISSUER........................29 SECTION 5.4. RESIGNATION AND REMOVAL OF THE DEPOSITARY..........................................30 SECTION 5.5. THE CUSTODIANS.....................................................................31 SECTION 5.6. NOTICES AND REPORTS................................................................32 SECTION 5.7. DISTRIBUTION OF ADDITIONAL SHARES, RIGHTS, ETC.....................................32 SECTION 5.8. INDEMNIFICATION....................................................................33 SECTION 5.9. CHARGES OF DEPOSITARY..............................................................35 SECTION 5.10. RETENTION OF DEPOSITARY DOCUMENTS...............................................36 SECTION 5.11. EXCLUSIVITY.....................................................................36 SECTION 5.12. LIST OF RESTRICTED SECURITIES OWNERS............................................37 ARTICLE 6. AMENDMENT AND TERMINATION.............................................................37 SECTION 6.1. AMENDMENT..........................................................................37 SECTION 6.2. TERMINATION........................................................................37 ARTICLE 7. MISCELLANEOUS.........................................................................39 SECTION 7.1. COUNTERPARTS.......................................................................39 SECTION 7.2. NO THIRD PARTY BENEFICIARIES.......................................................39 SECTION 7.3. SEVERABILITY.......................................................................39 SECTION 7.4. OWNERS AND BENEFICIAL OWNERS AS PARTIES; BINDING EFFECT............................39 SECTION 7.5. NOTICES............................................................................39 SECTION 7.6. GOVERNING LAW......................................................................40 SECTION 7.7. COMPLIANCE WITH U.S. SECURITIES LAWS...............................................40 SECTION 7.8. NATIONAL GRID GROUP PLC AS A PARTY TO THE DEPOSIT AGREEMENT........................41 |
Exhibit A to Deposit Agreement
No.
AMERICAN DEPOSITARY SHARES
(Each American Depositary Share represents five (5) deposited Shares)
THE BANK OF NEW YORK
AMERICAN DEPOSITARY RECEIPT
FOR ORDINARY SHARES OF THE
PAR VALUE OF 11 13/17 PENCE EACH OF
NATIONAL GRID GROUP PLC
(INCORPORATED UNDER THE LAWS OF ENGLAND AND WALES)
The Bank of New York as depositary (hereinafter called the "Depositary"), hereby certifies that ______________________________________, or registered assigns IS THE OWNER OF
AMERICAN DEPOSITARY SHARES
representing deposited Ordinary Shares (herein called "Shares") of National Grid Group plc, (to be renamed National Grid Holdings One plc) a public limited company incorporated under the laws of England and Wales (herein called the "Company" until the Effective Time). At the date hereof, each American Depositary Share represents five (5) Shares which are either deposited or subject to deposit under the deposit agreement at the London, England office of The Bank of New York (herein called the "Custodian"). The Depositary's Corporate Trust Office is located at a different address than its principal executive office. Its Corporate Trust Office is located at 101 Barclay Street, New York, N.Y. 10286, and its principal executive office is located at One Wall Street, New York, N.Y. 10286.
THE DEPOSITARY'S CORPORATE TRUST OFFICE ADDRESS IS
101 BARCLAY STREET, NEW YORK, N.Y. 10286
ARTICLE 8. THE DEPOSIT AGREEMENT.
This American Depositary Receipt is one of an issue (herein called "Receipts"), all issued and to be issued upon the terms and conditions set forth in the amended and restated deposit agreement, dated as January 31, 2002, (herein called the "Deposit Agreement"), by and among the Company, New National Grid plc (to be renamed National Grid Group plc after the Effective Time), the Depositary, and all Owners and Beneficial Owners from time to time of Receipts issued thereunder, each of whom by accepting a Receipt agrees to become a party thereto and become bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of Owners and Beneficial Owners of the Receipts and the rights and duties of the Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash from time to time received in respect of such Shares and held thereunder (such Shares, securities, property, and cash are herein called "Deposited Securities"). Copies of the Deposit Agreement are on file at the Depositary's Corporate Trust Office in New York City and at the office of the Custodian.
The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to which reference is hereby made. Capitalized terms not defined herein shall have the meanings set forth in the Deposit Agreement.
ARTICLE 9. SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES.
Upon surrender at the Corporate Trust Office of the Depositary of this Receipt, and upon payment of the fee of the Depositary provided in this Receipt and payment of all taxes and governmental charges payable in connection with such surrender and the withdrawal of Deposited Securities, and subject to the terms and conditions of the Deposit Agreement, the Owner hereof is entitled to delivery, to him or upon his order, of the amount of Deposited Securities at the time represented by the American Depositary Shares for which this Receipt is issued. Delivery of such Deposited Securities may be made by the delivery of (a) certificates in the name of the Owner hereof or as ordered by him or by the delivery of certificates properly endorsed or accompanied by proper instruments of transfer and (b) any other securities, property and cash to which such Owner is then entitled in respect of this Receipt. Such delivery will be made without unreasonable delay, at the option of the Owner hereof, either at the office of the Custodian or at the Corporate Trust Office of the Depositary, provided that the forwarding of certificates for Shares or other Deposited Securities for such delivery at the Corporate Trust Office of the Depositary shall be at the risk and expense of the Owner hereof. Such direction shall be given by letter, first class airmail postage prepaid, or, at the request, risk and expense of such Owner, by air courier, cable, telex or facsimile transmission. Notwithstanding any other provision of the Deposit Agreement or this
Receipt, the surrender of outstanding Receipts and withdrawal of Deposited Securities may not be suspended subject only to (i) temporary delays caused by closing the transfer books of the Depositary the Company or the Foreign Registrar or the deposit of Shares in connection with voting at a shareholders' meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities.
ARTICLE 10. TRANSFERS, SPLIT-UPS, AND COMBINATIONS OF RECEIPTS.
The transfer of this Receipt is registrable, without unreasonable delay, on the books of the Depositary at its Corporate Trust Office by the Owner hereof in person or by a duly authorized attorney, upon surrender of this Receipt properly endorsed for transfer or accompanied by proper instruments of transfer and funds sufficient to pay any applicable transfer taxes and the expenses of the Depositary and upon compliance with such regulations, if any, as the Depositary may establish for such purpose. This Receipt may be split into other such Receipts, or may be combined with other such Receipts into one Receipt, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination, or surrender of any Receipt or withdrawal of any Deposited Securities, the Depositary, the Custodian or Registrar may require payment from the presentor of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in this Receipt, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of the Deposit Agreement or this Receipt.
The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts generally may be suspended, during any period when the transfer books of the Depositary, the Company or the Foreign Registrar are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of the Deposit Agreement or this Receipt, or for any other reason, subject to Article (22) hereof. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under the Deposit Agreement any Shares required to be registered under the provisions of the Securities Act of 1933, unless a registration statement is in effect as to such Shares.
ARTICLE 11. LIABILITY OF OWNER FOR TAXES.
If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited Securities represented hereby, such tax or other governmental charge shall be payable by the Owner or Beneficial Owner hereof to the Depositary. The Depositary may refuse to effect any transfer of this Receipt or any withdrawal of Deposited Securities represented by American Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner or Beneficial Owner hereof any part or all of the Deposited Securities represented by the American Depositary Shares evidenced by this Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge and the Owner or Beneficial Owner hereof shall remain liable for any deficiency.
ARTICLE 12. WARRANTIES OF DEPOSITORS.
Every person depositing Shares hereunder shall be deemed thereby to represent and warrant that such Shares and each certificate therefor are validly issued, fully paid and nonassessable, and that the person making such deposit is duly authorized so to do. Every such person shall also be deemed to represent that the deposit of such Shares and the sale of Receipts evidencing American Depositary Shares representing such Shares by that person are not restricted under the Securities Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.
ARTICLE 13. FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION.
Any person presenting Shares for deposit or any Owner or Beneficial Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, proof of the nature of such person's interest, proof of compliance with all applicable laws and regulations and with the provisions of or governing the Deposited Securities and the terms of the Deposit Agreement or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Company or the Depositary may deem necessary or proper or as the Company may reasonably require by written request to the Depositary or any Custodian. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. Each Owner and Beneficial Owner agrees to provide any information requested by the Company or the Depositary pursuant to Section 3.1 of the Deposit Agreement. No Share shall be accepted for deposit unless accompanied by evidence
satisfactory to the Depositary that any necessary approval has been granted by any governmental body in England and Wales which is then performing the function of the regulation of currency exchange.
ARTICLE 14. CHARGES OF DEPOSITARY.
The Company agrees to pay the fees, reasonable expenses and out-of-pocket charges of the Depositary and those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the Company from time to time. Any written agreement signed by the Company and the Depositary relating to the Depositary's fees and expenses under the Deposit Agreement shall be binding on the Company and the Depositary until it is expressly amended or superseded by a subsequent written agreement, irrespective of whether such agreement was entered into prior to, simultaneously with or subsequent to the Deposit Agreement, and notwithstanding any provision of the Deposit Agreement that might be construed to be inconsistent with such agreement. The Depositary shall present its statement for such charges and expenses to the Company once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.
The following charges shall be incurred by any party depositing or
withdrawing Shares or by any party surrendering Receipts or to whom Receipts are
issued (including, without limitation, issuance pursuant to a stock dividend or
stock split declared by the Company or an exchange of stock regarding the
Receipts or Deposited Securities or a distribution of Receipts pursuant to
Section 4.3 of the Deposit Agreement), whichever applicable: (1) taxes and other
governmental charges, (2) such registration fees as may from time to time be in
effect for the registration of transfers of Shares generally on the Share
register of the Company or Foreign Registrar and applicable to transfers of
Shares to the name of the Depositary or its nominee or the Custodian or its
nominee on the making of deposits or withdrawals hereunder, (3) such cable,
telex and facsimile transmission expenses as are expressly provided in the
Deposit Agreement, (4) such expenses as are incurred by the Depositary in the
conversion of foreign currency pursuant to Section 4.5 of the Deposit Agreement,
(5) a fee of $5.00 or less per 100 American Depositary Shares (or portion
thereof) for the execution and delivery of Receipts pursuant to Section 2.3, 4.3
or 4.4, and the surrender of Receipts pursuant to Section 2.5 or 6.2 of the
Deposit Agreement, (6) a fee of $.02 or less per American Depositary Share (or
portion thereof) for any cash distribution made pursuant to the Deposit
Agreement including, but not limited to Sections 4.1 through 4.4 thereof, except
for distributions of cash dividends, and (7) a fee for the distribution of
securities pursuant to Section 4.2 of the Deposit Agreement, such fee being in
an amount equal to the fee for the execution and delivery of American Depositary
Shares referred to above which would have been charged as a result of the
deposit of such securities (for purposes of this clause (7) treating all such
securities as if they were Shares), but which securities are instead distributed
by the Depositary to Owners.
The Depositary, subject to Article (8) hereof, may own and deal in any class of securities of the Company and its affiliates and in Receipts.
ARTICLE 15. LOANS AND PRE-RELEASE OF SHARES AND RECEIPTS.
The Depositary may issue Receipts against the delivery by the Company
(or any agent of the Company recording Share ownership) of rights to receive
Shares from the Company (or any such agent). No such issue of Receipts will be
deemed a "Pre-Release". Unless requested in writing by the Company to cease
doing so, the Depositary may, notwithstanding Section 2.3 of the Deposit
Agreement, execute and deliver Receipts prior to the receipt of Shares pursuant
to Section 2.2 of the Deposit Agreement ("Pre-Release"). The Depositary may,
pursuant to Section 2.5 of the Deposit Agreement, deliver Shares upon the
receipt and cancellation of Receipts which have been Pre-Released, whether or
not such cancellation is prior to the termination of such Pre-Release or the
Depositary knows that such Receipt has been Pre-Released. The Depositary may
receive Receipts in lieu of Shares in satisfactory of a Pre-Release. Each
Pre-Release will be (a) preceded or accompanied by a written representation and
agreement from the person to whom Receipts are to be delivered (the
"Pre-Releasee") that the Pre-Releasee, or its customer, (i) owns the shares or
Receipts to be remitted, as the case may be, (ii) assigns all beneficial rights,
title and interest in such Shares or Receipts, as the case may be, to the
Depositary in its capacity as such and for the benefit of the Owners, and (iii)
will not take any action with respect to such Shares or Receipts, as the case
may be, that is inconsistent with the transfer of beneficial ownership
(including, without the consent of the Depositary, disposing of such Shares or
Receipts, as the case may be), other than in satisfaction of such Pre-Release,
(b) at all times fully collateralized with cash, U.S. government securities or
such other collateral as the Depositary determines, in good faith, will provide
substantially similar liquidity and security, (c) terminable by the Depositary
on not more than five (5) business days notice, and (d) subject to such further
indemnities and credit regulations as the Depositary deems appropriate. The
number of Shares not deposited but represented by American Depositary Shares
outstanding at any time as a result of Pre-Releases will not normally exceed
thirty percent (30%) of the Shares deposited under the Deposit Agreement;
provided, however, that the Depositary reserves the right to disregard such
limit from time to time as it deems reasonably appropriate, and may, with the
prior written consent of the Company, change such limit for purposes of general
application. The Depositary will also set Dollar limits with respect to
Pre-Release transactions to be entered into under the Deposit Agreement with any
particular Pre-Releasee on a case-by-case basis as the Depositary deems
appropriate. For purposes of enabling the Depositary to fulfill its obligations
to the Owners under the Deposit Agreement, the collateral referred to in clause
(b) above shall be held by the Depositary as security for the performance of the
Pre-Releasee's obligations to the Depositary in connection with a Pre-Release
transaction, including the Pre-Releasee's obligation to deliver Shares or
Receipts upon termination of a Pre-Release transaction (and shall not, for the
avoidance of doubt, constitute Deposited Securities hereunder).
The Depositary may retain for its own account any compensation received by it in connection with the foregoing.
ARTICLE 16. TITLE TO RECEIPTS.
It is a condition of this Receipt and every successive Beneficial Owner and Owner of this Receipt by accepting or holding the same consents and agrees, that title to this Receipt when properly endorsed or accompanied by proper instruments of transfer, is transferable in accordance with the terms and conditions of the Deposit Agreement by delivery with the same effect as in the case of a negotiable instrument under the laws of the State of New York, provided, however, that the Depositary, notwithstanding any notice to the contrary, may treat the person in whose name this Receipt is registered on the books of the Depositary as the absolute owner hereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Deposit Agreement or for all other purposes and neither the Depositary nor the Company shall have any obligation or be subject to any liability under the Deposit Agreement to any Beneficial Owner of a Receipt unless such Beneficial Owner is the Owner thereof.
ARTICLE 17. VALIDITY OF RECEIPT.
This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for any purpose, unless this Receipt shall have been executed by the Depositary by the manual or facsimile signature of a duly authorized signatory of the Depositary and, if a Registrar for the Receipts shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized officer of the Registrar.
ARTICLE 18. REPORTS; INSPECTION OF TRANSFER BOOKS.
The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and, accordingly, files certain reports with the Securities and Exchange Commission (hereinafter called the "Commission").
Such reports and communications will be available for inspection and copying by Beneficial Owners and Owners at the public reference facilities maintained by the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Depositary will make available for inspection by Owners of Receipts at its Corporate Trust Office any reports and communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary will also, upon written request, send to Owners of Receipts copies of such reports when furnished by the Company pursuant to the Deposit Agreement.
The Depositary will keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners of Receipts provided that such inspection shall not be for the purpose of communicating with Owners of Receipts in the interest of a business or object other than the business of the Company or a matter related to the Deposit Agreement or the Receipts.
ARTICLE 19. DIVIDENDS AND DISTRIBUTIONS.
Whenever the Depositary receives any cash dividend or other cash
distribution on any Deposited Securities, the Depositary will, if at the time of
receipt thereof any amounts received in a foreign currency can in the judgment
of the Depositary be converted on a reasonable basis into United States dollars
transferable to the United States, and subject to the Deposit Agreement, convert
such dividend or distribution into dollars and, if applicable, will distribute
the amount thus received (net of the fees of the Depositary as provided in
Section 5.9 of the Deposit Agreement) to the Owners of Receipts entitled
thereto, provided, however, that in the event that the Company or the Depositary
is required to withhold and does withhold from any cash dividend or other cash
distribution in respect of any Deposited Securities an amount on account of
taxes or other governmental charges, the amount distributed to the Owners of the
Receipts evidencing American Depositary Shares representing such Deposited
Securities shall be reduced accordingly.
Subject to the provisions of Sections 4.11 and 5.9 of the Deposit Agreement, whenever the Depositary receives any distribution other than a distribution described in Sections 4.1, 4.3 or 4.4 of the Deposit Agreement, the Depositary will cause the securities or property received by it to be distributed to the Owners of Receipts entitled thereto, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, however, that if in the reasonable opinion of the Depositary such distribution cannot be made proportionately among the Owners of Receipts entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Company or the Depositary withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act of 1933 in order to be distributed to Owners or Beneficial Owners) the Depositary deems such distribution not to be feasible, the Depositary may, after notice to the Company, adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement) shall be distributed by the Depositary to the Owners of Receipts entitled thereto as in the case of a distribution received in cash pursuant to Section 4.1 of the Deposit Agreement.
If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Depositary may, and shall if the Company shall so request,
distribute to the Owners of outstanding Receipts entitled thereto, additional Receipts evidencing an aggregate number of American Depositary Shares representing the amount of Shares received as such dividend or free distribution subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and the issuance of American Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 of the Deposit Agreement and the payment of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement. In lieu of delivering Receipts for fractional American Depositary Shares in any such case, the Depositary will sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions set forth in the Deposit Agreement. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities represented thereby.
In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems necessary and practicable to pay any such taxes or charges, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners of Receipts entitled thereto.
ARTICLE 20. CONVERSION OF FOREIGN CURRENCY.
Whenever the Depositary or the Custodian shall receive foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted, by sale or in any other manner that it may determine, such foreign currency into Dollars, and such Dollars shall be distributed to the Owners entitled thereto or, if the Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such warrants and/or instruments upon surrender thereof for cancellation in whole or in part depending on the terms of such warrants or other instruments. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.9 of the Deposit Agreement.
If such conversion or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary shall file such application for approval or license, if any, as it may deem desirable; provided, however, that the Company shall not be obligated to make any such filings.
If at any time the Depositary shall determine that in its judgment any foreign currency received by the Depositary or the Custodian is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the reasonable opinion of the Depositary is not obtainable, or if any such approval or license is not obtained within a reasonable period as determined by the Depositary, the Depositary, after consultation with the Company, may distribute the foreign currency (or an appropriate document evidencing the right to receive such foreign currency) received by the Depositary to, or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.
If any such conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in Dollars to the extent permissible to the Owners entitled thereto and may distribute the balance of the foreign currency received by the Depositary to, or hold such balance uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled thereto.
ARTICLE 21. RIGHTS.
In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary, after consultation with the Company, shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available in Dollars to such Owners or, if by the terms of such rights offering or, for any other reason, the Depositary may not either make such rights available to any Owners or dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines in its discretion, after consultation with the Company, that it is lawful and feasible to make such rights available to all Owners or to certain Owners but not to other Owners, the Depositary may distribute, to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it, after consultation with the Company, deems appropriate. The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.
In circumstances in which rights would otherwise not be distributed, if an Owner of Receipts requests the distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such Owner hereunder, the Depositary will make such rights available to such Owner upon written notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such rights to be exercised and (b) such Owner has executed such documents as the Company has determined in its sole discretion are reasonably required under applicable law.
If the Depositary has distributed warrants or other instruments for
rights to all or certain Owners, then upon instruction from such an Owner
pursuant to such warrants or other instruments to the Depositary from such Owner
to exercise such rights, upon payment by such Owner to the Depositary for the
account of such Owner of an amount equal to the purchase price of the Shares to
be received upon the exercise of the rights, and upon payment of the fees of the
Depositary and any other charges as set forth in such warrants or other
instruments, the Depositary shall, on behalf of such Owner, exercise the rights
and purchase the Shares, and the Company shall cause the Shares so purchased to
be delivered to the Depositary on behalf of such Owner. As agent for such Owner,
the Depositary will cause the Shares so purchased to be deposited pursuant to
Section 2.2 of the Deposit Agreement, and shall, pursuant to Section 2.3 of the
Deposit Agreement, execute and deliver Receipts to such Owner. In the case of a
distribution pursuant to the second paragraph of this Article, such Receipts
shall be legended in accordance with applicable U.S. laws, and shall be subject
to the appropriate restrictions on sale, deposit, cancellation, and transfer
under such laws.
If the Depositary determines in its discretion, after consultation with the Company, that it is not lawful and feasible to make such rights available to all or certain Owners, it may sell the rights, warrants or other instruments in proportion to the number of American Depositary Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of this Deposit Agreement) for the account of such Owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise.
The Depositary will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to Owners or are registered under the provisions of such Act. Nothing in the Deposit Agreement shall create, or be construed to create, any obligation on the part of the Company to file a registration statement with respect to such rights or underlying securities or to endeavor to have a registration
statement declared effective. If an Owner of Receipts requests distribution of warrants or other instruments, notwithstanding that there has been no such registration under such Act, the Depositary shall not effect such distribution unless it has received an opinion from recognized counsel in the United States for the Company upon which the Depositary may rely that such distribution to such Owner is exempt from such registration.
The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.
ARTICLE 22. RECORD DATES.
Whenever any cash dividend or other cash distribution shall become
payable or any distribution other than cash shall be made, or whenever rights
shall be issued with respect to the Deposited Securities, or whenever for any
reason the Depositary causes a change in the number of Shares that are
represented by each American Depositary Share, or whenever the Depositary shall
receive notice of any meeting of holders of Shares or other Deposited
Securities, the Depositary shall fix a record date, which shall be as close as
practicable to the date corresponding to the record date fixed by the Company in
respect of the Shares or other Deposited Securities, (a) for the determination
of the Owners of Receipts who shall be (i) entitled to receive such dividend,
distribution or rights or the net proceeds of the sale thereof or (ii) entitled
to give instructions for the exercise of voting rights at any such meeting, or
(b) on or after which each American Depositary Share will represent the changed
number of Shares, subject to the provisions of the Deposit Agreement.
ARTICLE 23. VOTING OF DEPOSITED SECURITIES.
Upon receipt of notice of any meeting of holders of Shares or other Deposited Securities, the Depositary shall, as soon as practicable thereafter, mail to the Owners of Receipts a notice, the form of which notice shall be in the sole discretion of the Depositary, which shall contain (a) such information as is contained in such notice of meeting, and (b) a statement that the Owners of Receipts as of the close of business on a specified record date will be entitled, subject to any applicable provision of the laws of England and Wales, of the Memorandum and Articles of Association of the Company and of the Shares or other Deposited Securities, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective American Depositary Shares. Upon the written request of an Owner of a Receipt on such record date, received on or before the date established by the Depositary for such purpose (the "Instruction Date"), the Depositary shall vote or cause to be voted the amount of Shares or other Deposited Securities represented by such American Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. The Depositary shall not vote or attempt to exercise
the right to vote that attaches to the Shares or other Deposited Securities, other than in accordance with such instructions.
Notwithstanding anything in Sections 4.7 or 6.1 of the Deposit Agreement to the contrary, the Depositary and the Company may modify, amend or adopt additional voting procedures at any time or from time to time as they determine may be necessary or appropriate.
There can be no assurance that Owners generally or any Owner in particular will receive the notice described in Section 4.7 of the Deposit Agreement sufficiently prior to the Instruction Date to ensure that the Depositary will vote the Shares or Deposited Securities in accordance with the provisions set forth in Section 4.7 of the Deposit Agreement.
ARTICLE 24. CHANGES AFFECTING DEPOSITED SECURITIES.
In circumstances where the provisions of Section 4.3 of the Deposit Agreement do not apply, upon any change in nominal value, change in par value, split-up, consolidation, or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation, or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities shall be treated as new Deposited Securities under the Deposit Agreement, and American Depositary Shares shall thenceforth represent, in addition to the existing Deposited Securities, the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, and shall if the Company shall so request, execute and deliver additional Receipts as in the case of a dividend on the Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities.
ARTICLE 25. LIABILITY OF THE COMPANY AND DEPOSITARY.
Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Beneficial Owner of any Receipt, if by reason of any provision of any present or future law of the United States or any other country, or of any other governmental or regulatory authority, or by reason of any provision, present or future, of the Memorandum and Articles of Association of the Company, or by reason of any act of God or war or other circumstances beyond its control, the Depositary or the Company or any of their respective directors, employees, agents or affiliates shall be prevented or forbidden from or be subject to any civil or criminal penalty on account of doing or performing any act or thing which by the terms of the Deposit Agreement it is provided shall be done or performed; nor shall the Depositary, the Company or any of their respective directors,
employees, agents or affiliates incur any liability to any Owner or Beneficial Owner of a Receipt by reason of any non- performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement. Where, by the terms of a distribution pursuant to Sections 4.1, 4.2, or 4.3 of the Deposit Agreement, or an offering or distribution pursuant to Section 4.4 of the Deposit Agreement, such distribution or offering may not be made available to Owners of Receipts, and the Depositary may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Depositary shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse. Neither the Company nor the Depositary, nor any of their respective directors, employees, agents or affiliates assume any obligation nor shall any of them be subject to any liability under the Deposit Agreement to Owners or Beneficial Owners of Receipts, except that they agree to perform their obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositary shall not be subject to any liability with respect to the validity or worth of the Deposited Securities. Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall be under any obligation to appear in, prosecute or defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in their respective reasonable opinions may involve them in expense or liability, unless indemnity satisfactory to it against all expense and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary. Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall be liable for any action or nonaction by any of them in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or Beneficial Owner of a Receipt, or any other person believed by any of them in good faith to be competent to give such advice or information. Each of the Depositary, the Company and their respective directors, employees, agents and affiliates may rely and shall be protected in acting upon any written notice, request or direction or other document believed by such person to be genuine and to have been signed or presented by the proper party or parties. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with a matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary. The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or nonaction is in good faith. The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or
expense (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of the Deposit Agreement and of the Receipts, as the same may be amended, modified, or supplemented from time to time, (i) by either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Company or any of its directors, employees, agents and affiliates. No disclaimer of liability under the Securities Act of 1933 is intended by any provision of the Deposit Agreement.
ARTICLE 26. RESIGNATION AND REMOVAL OF THE DEPOSITARY.
The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at any time be removed by the Company by written notice of such removal, effective upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. Whenever the Depositary in its discretion determines that it is in the best interest of the Owners of Receipts to do so, it may appoint a substitute or additional custodian or custodians.
ARTICLE 27. AMENDMENT.
The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary without the consent of Owners or Beneficial Owners of Receipts in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or which shall otherwise prejudice any substantial existing right of Owners (other than the modification of voting procedures as provided in paragraph 16 hereof) of Receipts, shall, however, not become effective as to outstanding Receipts until the expiration of thirty days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner of a Receipt at the time any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities represented thereby except in order to comply with mandatory provisions of applicable law.
ARTICLE 28. TERMINATION OF DEPOSIT AGREEMENT.
The Depositary shall at any time at the direction of the Company terminate the Deposit Agreement by mailing notice of such termination to the Owners of all Receipts
then outstanding at least 30 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate the Deposit Agreement by mailing notice of such termination to the Company and the Owners of all Receipts then outstanding if at any time 30 days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in the Deposit Agreement. On and after the date of termination, the Owner of a Receipt, will upon (a) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.5 of the Deposit Agreement, and (c) payment of any applicable taxes or governmental charges, will be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the Owners thereof, and shall not give any further notices or perform any further acts under the Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in the Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held under the Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it thereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges). Upon the termination of the Deposit Agreement, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary with respect to indemnification, charges, and expenses.
ARTICLE 29. DISCLOSURE OF INTERESTS.
Notwithstanding any other provision of the Deposit Agreement, the Memorandum and Articles of Association of the Company or applicable English law, each Owner and Beneficial Owner agrees to be bound by and subject to applicable provisions of the U.K. Companies Act, 1985 and the Memorandum and Articles of Association of the Company, summarized below, to the same extent as if such Owner and Beneficial Owner held Shares directly. The Company has informed the Depositary that the following information is accurate as the Depositary has made no independent investigation regarding such information.
(a) A holder of Shares in the Company may lose the right to vote its Shares if it or any other person appearing to be interested in shares held by it fails to comply within a prescribed period of time with a request by the Company under the U.K. Companies Act, 1985 to give certain information with respect to past or present ownership or interests in such Shares. In the case of holders of more than 0.25% in nominal amount of the share capital of the Company (or any class thereof), in addition of disenfranchisement, the sanctions that may be applied by the Company include withholding of the right to receive payment of dividends and other monies payable on, and restrictions on transfers of the relevant Shares.
(b) Section 198 of the U.K. Companies Act, 1985 provides that a person (including a company and other legal entities) that acquires an interest of 3 percent or more of any class of shares (including through American Depositary Receipts) comprised in an English public company's "relevant share capital" (i.e., the Company's issued share capital carrying the right to vote in all circumstances at a general meeting of the Company) is required to notify the company of its interest within two business days following the day on which the obligation arises. After the 3 percent level is exceeded, similar notifications must be made in respect of increases or decreases through a whole percentage point.
For purposes of such notification obligation, the interest of a person
in shares means any kind of interest in shares including interests in any shares
(a) in which a spouse, or child or stepchild under the age of 18, is interested,
(b) in which a corporate body is interested and either (i) that corporate body
or its directors generally act in accordance with that person's directions or
instructions or (ii) that person controls one-third or more of the voting power
of that corporate body or (c) in which another party is interested and the
person and that other party are parties to a "concert party" agreement under
Section 204 of the U.K. Companies Act, 1985. A concert party agreement is one
which provides for one or more parties to acquire interests in shares of a
particular company and imposes obligations or restrictions on any one of the
parties as to the use,
retention or disposal of such interests acquired pursuant to such agreement and any interest in the company's shares is in fact acquired by any of the parties pursuant to the agreement. Certain interests (e.g., those held by certain investment fund managers) may be disregarded for the purposes of calculating the 3 percent threshold, but the obligations of disclosure will still apply where such interests exceed 10 percent or more of any class of the company's relevant share capital and to increases or decreases through a whole percentage point thereafter.
In addition, Section 212 of the U.K. Companies Act, 1985 provides that a public company may by written notice require a person whom the company knows or has reasonable cause to believe to be, or to have been at any time during the three years immediately preceding the date on which the notice is issued, interested in shares consisting of the company's "relevant share capital" to confirm that fact or to indicate whether or not that is the case, and where such person holds or during the relevant time had held an interest in such shares, to give such further information as may be required relating to such interest and any other interest in the shares of which such person is aware.
Where notice is served by a company under the foregoing provisions on a person who is or was interested in shares of the company and that person fails to give the company any information required by the notice within the time specified in the notice, the company may apply to the English court for an order directing that the shares in question be subject to restrictions prohibiting, among other things, any transfer of those shares, the taking up of rights in respect of such shares and, other than on liquidation, payments in respect of such shares.
A person who fails to fulfill the obligations imposed by Sections 198 and 212 of the Companies Act described above is subject to criminal penalties.
(c) The Depositary agrees to use reasonable efforts to forward to any Owners at the request of the Company and at the Company's expense, any request by the Company for information and to comply with any instructions of the Company, to the extent reasonably practicable, given to effectuate the foregoing restrictions. If the Company requests information from the Depositary or the Custodian, as the registered owners of Shares, pursuant to the Memorandum and Articles of Association of the Company or the U.K. Companies Act, 1985, the obligations of the Depositary or the Custodian, as the case may be, shall be limited to disclosing to the Company such information relating to the Shares in question as has in each case been recorded by it pursuant to the terms of the Deposit Agreement.
ARTICLE 30. COMPLIANCE WITH U.S. SECURITIES LAWS.
Notwithstanding anything in the Deposit Agreement or this Receipt to the contrary, the Company and the Depositary each agrees that it will not exercise any rights it has under the Deposit Agreement to prevent the withdrawal or delivery of Deposited
Securities in a manner which would violate the U.S. securities laws, including, but not limited to, Section I.A.(1) of the General Instructions to the Form F-6 Registration Statement, as amended from time to time, under the Securities Act of 1933.
Exhibit B to Deposit Agreement
No.
AMERICAN DEPOSITARY SHARES
(Each American Depositary Share represents five (5) deposited Shares)
THE BANK OF NEW YORK
AMERICAN DEPOSITARY RECEIPT
FOR ORDINARY SHARES OF THE
PAR VALUE OF 10 PENCE EACH OF
NATIONAL GRID GROUP PLC
(INCORPORATED UNDER THE LAWS OF ENGLAND AND WALES)
The Bank of New York as depositary (hereinafter called the "Depositary"), hereby certifies that ___________________________________, or registered assigns IS THE OWNER OF
AMERICAN DEPOSITARY SHARES
representing deposited Ordinary Shares (herein called "Shares") of New National Grid plc (to be renamed National Grid Group plc after the Effective Time), a public limited company incorporated under the laws of England and Wales (herein called the "Company"). At the date hereof, each American Depositary Share represents five (5) Shares which are either deposited or subject to deposit under the deposit agreement at the London, England office of The Bank of New York (herein called the "Custodian"). The Depositary's Corporate Trust Office is located at a different address than its principal executive office. Its Corporate Trust Office is located at 101 Barclay Street, New York, N.Y. 10286, and its principal executive office is located at One Wall Street, New York, N.Y. 10286.
THE DEPOSITARY'S CORPORATE TRUST OFFICE ADDRESS IS
101 BARCLAY STREET, NEW YORK, N.Y. 10286
ARTICLE 31. THE DEPOSIT AGREEMENT.
This American Depositary Receipt is one of an issue (herein called "Receipts"), all issued and to be issued upon the terms and conditions set forth in the deposit agreement, dated as January 31, 2002, (herein called the "Deposit Agreement"), by and among the Company, National Grid Group plc (to be renamed National Grid Holdings One plc after the Effective Time), the Depositary, and all Owners and Beneficial Owners from time to time of Receipts issued thereunder, each of whom by accepting a Receipt agrees to become a party thereto and become bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of Owners and Beneficial Owners of the Receipts and the rights and duties of the Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash from time to time received in respect of such Shares and held thereunder (such Shares, securities, property, and cash are herein called "Deposited Securities"). Copies of the Deposit Agreement are on file at the Depositary's Corporate Trust Office in New York City and at the office of the Custodian.
The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to which reference is hereby made. Capitalized terms not defined herein shall have the meanings set forth in the Deposit Agreement.
ARTICLE 32. SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES.
Upon surrender at the Corporate Trust Office of the Depositary of this Receipt, and upon payment of the fee of the Depositary provided in this Receipt and payment of all taxes and governmental charges payable in connection with such surrender and the withdrawal of Deposited Securities, and subject to the terms and conditions of the Deposit Agreement, the Owner hereof is entitled to delivery, to him or upon his order, of the amount of Deposited Securities at the time represented by the American Depositary Shares for which this Receipt is issued. Delivery of such Deposited Securities may be made by the delivery of (a) certificates in the name of the Owner hereof or as ordered by him or by the delivery of certificates properly endorsed or accompanied by proper instruments of transfer and (b) any other securities, property and cash to which such Owner is then entitled in respect of this Receipt. Such delivery will be made without unreasonable delay, at the option of the Owner hereof, either at the office of the Custodian or at the Corporate Trust Office of the Depositary, provided that the forwarding of certificates for Shares or other Deposited Securities for such delivery at the Corporate Trust Office of the Depositary shall be at the risk and expense of the Owner hereof. Such direction shall be given by letter, first class airmail postage prepaid, or, at the request, risk and expense of such Owner, by air courier, cable, telex or facsimile
transmission. Notwithstanding any other provision of the Deposit Agreement or this Receipt, the surrender of outstanding Receipts and withdrawal of Deposited Securities may not be suspended subject only to (i) temporary delays caused by closing the transfer books of the Depositary the Company or the Foreign Registrar or the deposit of Shares in connection with voting at a shareholders' meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities.
ARTICLE 33. TRANSFERS, SPLIT-UPS, AND COMBINATIONS OF RECEIPTS.
The transfer of this Receipt is registrable, without unreasonable delay, on the books of the Depositary at its Corporate Trust Office by the Owner hereof in person or by a duly authorized attorney, upon surrender of this Receipt properly endorsed for transfer or accompanied by proper instruments of transfer and funds sufficient to pay any applicable transfer taxes and the expenses of the Depositary and upon compliance with such regulations, if any, as the Depositary may establish for such purpose. This Receipt may be split into other such Receipts, or may be combined with other such Receipts into one Receipt, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination, or surrender of any Receipt or withdrawal of any Deposited Securities, the Depositary, the Custodian or Registrar may require payment from the presentor of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in this Receipt, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of the Deposit Agreement or this Receipt.
The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts generally may be suspended, during any period when the transfer books of the Depositary, the Company or the Foreign Registrar are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of the Deposit Agreement or this Receipt, or for any other reason, subject to Article (22) hereof. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under the Deposit Agreement any Shares required to be registered under the provisions of the Securities Act of 1933, unless a registration statement is in effect as to such Shares.
ARTICLE 34. LIABILITY OF OWNER FOR TAXES.
If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited Securities represented hereby, such tax or other governmental charge shall be payable by the Owner or Beneficial Owner hereof to the Depositary. The Depositary may refuse to effect any transfer of this Receipt or any withdrawal of Deposited Securities represented by American Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner or Beneficial Owner hereof any part or all of the Deposited Securities represented by the American Depositary Shares evidenced by this Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge and the Owner or Beneficial Owner hereof shall remain liable for any deficiency.
ARTICLE 35. WARRANTIES OF DEPOSITORS.
Every person depositing Shares hereunder shall be deemed thereby to represent and warrant that such Shares and each certificate therefor are validly issued, fully paid and nonassessable, and that the person making such deposit is duly authorized so to do. Every such person shall also be deemed to represent that the deposit of such Shares and the sale of Receipts evidencing American Depositary Shares representing such Shares by that person are not restricted under the Securities Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.
ARTICLE 36. FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION.
Any person presenting Shares for deposit or any Owner or Beneficial Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, proof of the nature of such person's interest, proof of compliance with all applicable laws and regulations and with the provisions of or governing the Deposited Securities and the terms of the Deposit Agreement or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Company or the Depositary may deem necessary or proper or as the Company may reasonably require by written request to the Depositary or any Custodian. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. Each Owner and Beneficial Owner agrees to provide any information requested by the Company or the Depositary pursuant to Section 3.1 of the Deposit Agreement. No Share shall be accepted for deposit unless accompanied by evidence
satisfactory to the Depositary that any necessary approval has been granted by any governmental body in England and Wales which is then performing the function of the regulation of currency exchange.
ARTICLE 37. CHARGES OF DEPOSITARY.
The Company agrees to pay the fees, reasonable expenses and out-of-pocket charges of the Depositary and those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the Company from time to time. Any written agreement signed by the Company and the Depositary relating to the Depositary's fees and expenses under the Deposit Agreement shall be binding on the Company and the Depositary until it is expressly amended or superseded by a subsequent written agreement, irrespective of whether such agreement was entered into prior to, simultaneously with or subsequent to the Deposit Agreement, and notwithstanding any provision of the Deposit Agreement that might be construed to be inconsistent with such agreement. The Depositary shall present its statement for such charges and expenses to the Company once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.
The following charges shall be incurred by any party depositing or
withdrawing Shares or by any party surrendering Receipts or to whom Receipts are
issued (including, without limitation, issuance pursuant to a stock dividend or
stock split declared by the Company or an exchange of stock regarding the
Receipts or Deposited Securities or a distribution of Receipts pursuant to
Section 4.3 of the Deposit Agreement), whichever applicable: (1) taxes and other
governmental charges, (2) such registration fees as may from time to time be in
effect for the registration of transfers of Shares generally on the Share
register of the Company or Foreign Registrar and applicable to transfers of
Shares to the name of the Depositary or its nominee or the Custodian or its
nominee on the making of deposits or withdrawals hereunder, (3) such cable,
telex and facsimile transmission expenses as are expressly provided in the
Deposit Agreement, (4) such expenses as are incurred by the Depositary in the
conversion of foreign currency pursuant to Section 4.5 of the Deposit Agreement,
(5) a fee of $5.00 or less per 100 American Depositary Shares (or portion
thereof) for the execution and delivery of Receipts pursuant to Section 2.3, 4.3
or 4.4, and the surrender of Receipts pursuant to Section 2.5 or 6.2 of the
Deposit Agreement, (6) a fee of $.02 or less per American Depositary Share (or
portion thereof) for any cash distribution made pursuant to the Deposit
Agreement including, but not limited to Sections 4.1 through 4.4 thereof, except
for distributions of cash dividends, and (7) a fee for the distribution of
securities pursuant to Section 4.2 of the Deposit Agreement, such fee being in
an amount equal to the fee for the execution and delivery of American Depositary
Shares referred to above which would have been charged as a result of the
deposit of such securities (for purposes of this clause (7) treating all such
securities as if they were Shares), but which securities are instead distributed
by the Depositary to Owners.
The Depositary, subject to Article (8) hereof, may own and deal in any class of securities of the Company and its affiliates and in Receipts.
ARTICLE 38. LOANS AND PRE-RELEASE OF SHARES AND RECEIPTS.
The Depositary may issue Receipts against the delivery by the Company
(or any agent of the Company recording Share ownership) of rights to receive
Shares from the Company (or any such agent). No such issue of Receipts will be
deemed a "Pre-Release". Unless requested in writing by the Company to cease
doing so, the Depositary may, notwithstanding Section 2.3 of the Deposit
Agreement, execute and deliver Receipts prior to the receipt of Shares pursuant
to Section 2.2 of the Deposit Agreement ("Pre-Release"). The Depositary may,
pursuant to Section 2.5 of the Deposit Agreement, deliver Shares upon the
receipt and cancellation of Receipts which have been Pre-Released, whether or
not such cancellation is prior to the termination of such Pre-Release or the
Depositary knows that such Receipt has been Pre-Released. The Depositary may
receive Receipts in lieu of Shares in satisfactory of a Pre-Release. Each
Pre-Release will be (a) preceded or accompanied by a written representation and
agreement from the person to whom Receipts are to be delivered (the
"Pre-Releasee") that the Pre-Releasee, or its customer, (i) owns the shares or
Receipts to be remitted, as the case may be, (ii) assigns all beneficial rights,
title and interest in such Shares or Receipts, as the case may be, to the
Depositary in its capacity as such and for the benefit of the Owners, and (iii)
will not take any action with respect to such Shares or Receipts, as the case
may be, that is inconsistent with the transfer of beneficial ownership
(including, without the consent of the Depositary, disposing of such Shares or
Receipts, as the case may be), other than in satisfaction of such Pre-Release,
(b) at all times fully collateralized with cash, U.S. government securities or
such other collateral as the Depositary determines, in good faith, will provide
substantially similar liquidity and security, (c) terminable by the Depositary
on not more than five (5) business days notice, and (d) subject to such further
indemnities and credit regulations as the Depositary deems appropriate. The
number of Shares not deposited but represented by American Depositary Shares
outstanding at any time as a result of Pre-Releases will not normally exceed
thirty percent (30%) of the Shares deposited under the Deposit Agreement;
provided, however, that the Depositary reserves the right to disregard such
limit from time to time as it deems reasonably appropriate, and may, with the
prior written consent of the Company, change such limit for purposes of general
application. The Depositary will also set Dollar limits with respect to
Pre-Release transactions to be entered into under the Deposit Agreement with any
particular Pre-Releasee on a case-by-case basis as the Depositary deems
appropriate. For purposes of enabling the Depositary to fulfill its obligations
to the Owners under the Deposit Agreement, the collateral referred to in clause
(b) above shall be held by the Depositary as security for the performance of the
Pre-Releasee's obligations to the Depositary in connection with a Pre-Release
transaction, including the Pre-Releasee's obligation to deliver Shares or
Receipts upon termination of a Pre-Release transaction (and shall not, for the
avoidance of doubt, constitute Deposited Securities hereunder).
The Depositary may retain for its own account any compensation received by it in connection with the foregoing.
ARTICLE 39. TITLE TO RECEIPTS.
It is a condition of this Receipt and every successive Beneficial Owner and Owner of this Receipt by accepting or holding the same consents and agrees, that title to this Receipt when properly endorsed or accompanied by proper instruments of transfer, is transferable in accordance with the terms and conditions of the Deposit Agreement by delivery with the same effect as in the case of a negotiable instrument under the laws of the State of New York, provided, however, that the Depositary, notwithstanding any notice to the contrary, may treat the person in whose name this Receipt is registered on the books of the Depositary as the absolute owner hereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Deposit Agreement or for all other purposes and neither the Depositary nor the Company shall have any obligation or be subject to any liability under the Deposit Agreement to any Beneficial Owner of a Receipt unless such Beneficial Owner is the Owner thereof.
ARTICLE 40. VALIDITY OF RECEIPT.
This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for any purpose, unless this Receipt shall have been executed by the Depositary by the manual or facsimile signature of a duly authorized signatory of the Depositary and, if a Registrar for the Receipts shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized officer of the Registrar.
ARTICLE 41. REPORTS; INSPECTION OF TRANSFER BOOKS.
The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and, accordingly, files certain reports with the Securities and Exchange Commission (hereinafter called the "Commission").
Such reports and communications will be available for inspection and copying by Beneficial Owners and Owners at the public reference facilities maintained by the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Depositary will make available for inspection by Owners of Receipts at its Corporate Trust Office any reports and communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary will also, upon written request, send to Owners of Receipts copies of such reports when furnished by the Company pursuant to the Deposit Agreement.
The Depositary will keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners of Receipts provided that such inspection shall not be for the purpose of communicating with Owners of Receipts in the interest of a business or object other than the business of the Company or a matter related to the Deposit Agreement or the Receipts.
ARTICLE 42. DIVIDENDS AND DISTRIBUTIONS.
Whenever the Depositary receives any cash dividend or other cash
distribution on any Deposited Securities, the Depositary will, if at the time of
receipt thereof any amounts received in a foreign currency can in the judgment
of the Depositary be converted on a reasonable basis into United States dollars
transferable to the United States, and subject to the Deposit Agreement, convert
such dividend or distribution into dollars and, if applicable, will distribute
the amount thus received (net of the fees of the Depositary as provided in
Section 5.9 of the Deposit Agreement) to the Owners of Receipts entitled
thereto, provided, however, that in the event that the Company or the Depositary
is required to withhold and does withhold from any cash dividend or other cash
distribution in respect of any Deposited Securities an amount on account of
taxes or other governmental charges, the amount distributed to the Owners of the
Receipts evidencing American Depositary Shares representing such Deposited
Securities shall be reduced accordingly.
Subject to the provisions of Sections 4.11 and 5.9 of the Deposit Agreement, whenever the Depositary receives any distribution other than a distribution described in Sections 4.1, 4.3 or 4.4 of the Deposit Agreement, the Depositary will cause the securities or property received by it to be distributed to the Owners of Receipts entitled thereto, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, however, that if in the reasonable opinion of the Depositary such distribution cannot be made proportionately among the Owners of Receipts entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Company or the Depositary withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act of 1933 in order to be distributed to Owners or Beneficial Owners) the Depositary deems such distribution not to be feasible, the Depositary may, after notice to the Company, adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement) shall be distributed by the Depositary to the Owners of Receipts entitled thereto as in the case of a distribution received in cash pursuant to Section 4.1 of the Deposit Agreement.
If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Depositary may, and shall if the Company shall so request,
distribute to the Owners of outstanding Receipts entitled thereto, additional Receipts evidencing an aggregate number of American Depositary Shares representing the amount of Shares received as such dividend or free distribution subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and the issuance of American Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 of the Deposit Agreement and the payment of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement. In lieu of delivering Receipts for fractional American Depositary Shares in any such case, the Depositary will sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions set forth in the Deposit Agreement. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities represented thereby.
In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems necessary and practicable to pay any such taxes or charges, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners of Receipts entitled thereto.
ARTICLE 43. CONVERSION OF FOREIGN CURRENCY.
Whenever the Depositary or the Custodian shall receive foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted, by sale or in any other manner that it may determine, such foreign currency into Dollars, and such Dollars shall be distributed to the Owners entitled thereto or, if the Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such warrants and/or instruments upon surrender thereof for cancellation in whole or in part depending on the terms of such warrants or other instruments. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.9 of the Deposit Agreement.
If such conversion or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary shall file such application for approval or license, if any, as it may deem desirable; provided, however, that the Company shall not be obligated to make any such filings.
If at any time the Depositary shall determine that in its judgment any foreign currency received by the Depositary or the Custodian is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the reasonable opinion of the Depositary is not obtainable, or if any such approval or license is not obtained within a reasonable period as determined by the Depositary, the Depositary, after consultation with the Company, may distribute the foreign currency (or an appropriate document evidencing the right to receive such foreign currency) received by the Depositary to, or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.
If any such conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in Dollars to the extent permissible to the Owners entitled thereto and may distribute the balance of the foreign currency received by the Depositary to, or hold such balance uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled thereto.
ARTICLE 44. RIGHTS.
In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary, after consultation with the Company, shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available in Dollars to such Owners or, if by the terms of such rights offering or, for any other reason, the Depositary may not either make such rights available to any Owners or dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines in its discretion, after consultation with the Company, that it is lawful and feasible to make such rights available to all Owners or to certain Owners but not to other Owners, the Depositary may distribute, to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it, after consultation with the Company, deems appropriate. The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.
In circumstances in which rights would otherwise not be distributed, if an Owner of Receipts requests the distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such Owner hereunder, the Depositary will make such rights available to such Owner upon written notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such rights to be exercised and (b) such Owner has executed such documents as the Company has determined in its sole discretion are reasonably required under applicable law.
If the Depositary has distributed warrants or other instruments for
rights to all or certain Owners, then upon instruction from such an Owner
pursuant to such warrants or other instruments to the Depositary from such Owner
to exercise such rights, upon payment by such Owner to the Depositary for the
account of such Owner of an amount equal to the purchase price of the Shares to
be received upon the exercise of the rights, and upon payment of the fees of the
Depositary and any other charges as set forth in such warrants or other
instruments, the Depositary shall, on behalf of such Owner, exercise the rights
and purchase the Shares, and the Company shall cause the Shares so purchased to
be delivered to the Depositary on behalf of such Owner. As agent for such Owner,
the Depositary will cause the Shares so purchased to be deposited pursuant to
Section 2.2 of the Deposit Agreement, and shall, pursuant to Section 2.3 of the
Deposit Agreement, execute and deliver Receipts to such Owner. In the case of a
distribution pursuant to the second paragraph of this Article, such Receipts
shall be legended in accordance with applicable U.S. laws, and shall be subject
to the appropriate restrictions on sale, deposit, cancellation, and transfer
under such laws.
If the Depositary determines in its discretion, after consultation with the Company, that it is not lawful and feasible to make such rights available to all or certain Owners, it may sell the rights, warrants or other instruments in proportion to the number of American Depositary Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of this Deposit Agreement) for the account of such Owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise.
The Depositary will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to Owners or are registered under the provisions of such Act. Nothing in the Deposit Agreement shall create, or be construed to create, any obligation on the part of the Company to file a registration statement with respect to such rights or underlying securities or to endeavor to have a registration
statement declared effective. If an Owner of Receipts requests distribution of warrants or other instruments, notwithstanding that there has been no such registration under such Act, the Depositary shall not effect such distribution unless it has received an opinion from recognized counsel in the United States for the Company upon which the Depositary may rely that such distribution to such Owner is exempt from such registration.
The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.
ARTICLE 45. RECORD DATES.
Whenever any cash dividend or other cash distribution shall become
payable or any distribution other than cash shall be made, or whenever rights
shall be issued with respect to the Deposited Securities, or whenever for any
reason the Depositary causes a change in the number of Shares that are
represented by each American Depositary Share, or whenever the Depositary shall
receive notice of any meeting of holders of Shares or other Deposited
Securities, the Depositary shall fix a record date, which shall be as close as
practicable to the date corresponding to the record date fixed by the Company in
respect of the Shares or other Deposited Securities, (a) for the determination
of the Owners of Receipts who shall be (i) entitled to receive such dividend,
distribution or rights or the net proceeds of the sale thereof or (ii) entitled
to give instructions for the exercise of voting rights at any such meeting, or
(b) on or after which each American Depositary Share will represent the changed
number of Shares, subject to the provisions of the Deposit Agreement.
ARTICLE 46. VOTING OF DEPOSITED SECURITIES.
Subject to and in accordance with the Articles of Association of the Company, the Depositary hereby irrevocably appoints (or, if the Deposited Securities are registered in the name of or held by its nominee, shall procure that its nominee shall irrevocably appoint) each Owner for the time being on the record date (the "Voting Record Date") fixed by the Depositary in accordance with Section 4.06 of the Deposit Agreement in respect of any meeting (including any adjourned meeting) at which holders of Deposited Securities are entitled to vote as its proxy to attend, vote and speak at the relevant meeting (or any adjournment thereof) as provided in the Articles of Association of the Company in respect of the Deposited Securities represented by the American Depositary Shares evidenced by the Receipts held by such Owner on the Voting Record Date, and by reason of that appointment in respect of any such meeting each such Owner shall be constituted the agent of the Depositary to appoint (in relation to those Deposited Securities) in the name of the Depositary either a person nominated by the Depositary or any other person as proxy to attend, vote and speak as the Owner may instruct, subject to and in accordance with the provisions of Section 4.7 of the Deposit Agreement and the Articles
of Association of the Company (and if the Deposited Securities are registered in
the name of or held by the nominee of the Depositary, the Depositary shall
procure that the nominee duly constitutes each such Owner as its agent for that
purpose). As soon as practicable after receipt of notice of any meeting at which
the holders of Deposited Securities are entitled to vote, or of solicitation of
consents or proxies from holders of Deposited Securities, the Depositary shall,
in accordance with Section 4.06 of the Deposit Agreement, fix the Voting Record
Date in respect of such meeting or solicitation. The Depositary or, if the
Company so determines, the Company shall mail to Owners of record on such Voting
Record Date: (a) such information as is contained in such notice of meeting or
in the solicitation materials, (b) a Receipt proxy card in a form prepared by
the Depositary, after consultation with the Company, (c) a statement that each
Owner of Record at the close of business on the Voting Record Date will be
entitled, subject to any applicable law, the Company's Articles of Association
and the provisions of or governing the Deposited Securities, either (i) to use
such Receipt proxy card at that meeting as written evidence of the appointment
of that Owner in accordance with this Section in order to attend, vote and speak
at such meeting solely with respect to the Shares or other Deposited Securities
represented by American Depositary Shares evidenced by such Owner's Receipts or
(ii) as the agent of the Depositary (or its nominee) to appoint any other person
as proxy solely with respect to the Shares or other Deposited Securities
represented by American Depositary Shares evidenced by such Owner's Receipts and
(if the Owner wishes) to instruct such person as to the exercise of the voting
rights pertaining to them, and (d) if the person nominated by the Depositary is
to be appointed in that manner as proxy, a brief statement as to the manner in
which the Owner may give voting instructions to the person nominated by the
Depositary. Upon the written request of an Owner of record on the Voting Record
Date received on or before the date established by the Depositary for such
purpose (the "Instruction Date"), the Depositary shall endeavor, insofar as
practicable and permitted under applicable law, the provisions of the Company's
Articles of Association and the provisions of the Deposited Securities, to cause
to be voted the Deposited Securities in accordance with the instructions set
forth in such request.
Neither the Depositary nor the Custodian nor the nominee of either of them shall exercise any discretion as to voting and neither the Depositary nor the Custodian nor the nominee of either of them shall vote or attempt to exercise the right to vote the Shares or other Deposited Securities represented by American Depositary Shares except pursuant to and in accordance with such written instructions from Owners given in accordance with Section 4.07 of the Deposit Agreement. Shares or other Deposited Securities represented by American Depositary Shares for which no specific voting instructions are received by the Depositary from the Owner shall not be voted by the Depositary or its nominee but may be directly voted by Owners in attendance at meetings of shareholders, subject to, and in accordance with, the provisions of Section 4.7 of the Deposit Agreement and the Company's Articles of Association.
For the avoidance of doubt, the appointment pursuant to Section 4.7 of the Deposit Agreement of a proxy by an Owner acting as agent of the Depositary (or its nominee) shall constitute the appointed person as a proxy for the purposes of section 372 of the UK Companies Act 1985 and of the Articles of Association of the Company; whereas the appointment pursuant to Section 4.7 of the Deposit Agreement of an Owner as a proxy by the Depositary (or its nominee) shall not constitute that Owner as such a proxy but shall instead confer on that Owner the special rights and privileges accorded under the Company's Articles of Association to ADR Proxies (as defined in those Articles of Association).
Notwithstanding anything in Section 4.7 or in Section 6.1 of the Deposit Agreement to the contrary, the Depositary and the Company may modify, amend or adopt additional voting procedures at any time or from time to time as they determine may be necessary or appropriate.
There can be no assurance that Owners generally or any Owner in particular will receive the notice described in Section 4.7 of the Deposit Agreement sufficiently prior to the Instruction Date to ensure that the Depositary will vote the Shares or Deposited Securities in accordance with the provisions set forth in Section 4.7 of the Deposit Agreement.
ARTICLE 47. CHANGES AFFECTING DEPOSITED SECURITIES.
In circumstances where the provisions of Section 4.3 of the Deposit Agreement do not apply, upon any change in nominal value, change in par value, split-up, consolidation, or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation, or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities shall be treated as new Deposited Securities under the Deposit Agreement, and American Depositary Shares shall thenceforth represent, in addition to the existing Deposited Securities, the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, and shall if the Company shall so request, execute and deliver additional Receipts as in the case of a dividend on the Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities.
ARTICLE 48. LIABILITY OF THE COMPANY AND DEPOSITARY.
Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Beneficial Owner of any Receipt, if by reason of any provision of any present or future law of the United States or any other country, or of any other governmental or regulatory authority, or by
reason of any provision, present or future, of the Memorandum and Articles of Association of the Company, or by reason of any act of God or war or other circumstances beyond its control, the Depositary or the Company or any of their respective directors, employees, agents or affiliates shall be prevented or forbidden from or be subject to any civil or criminal penalty on account of doing or performing any act or thing which by the terms of the Deposit Agreement it is provided shall be done or performed; nor shall the Depositary, the Company or any of their respective directors, employees, agents or affiliates incur any liability to any Owner or Beneficial Owner of a Receipt by reason of any non- performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement. Where, by the terms of a distribution pursuant to Sections 4.1, 4.2, or 4.3 of the Deposit Agreement, or an offering or distribution pursuant to Section 4.4 of the Deposit Agreement, such distribution or offering may not be made available to Owners of Receipts, and the Depositary may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Depositary shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse. Neither the Company nor the Depositary, nor any of their respective directors, employees, agents or affiliates assume any obligation nor shall any of them be subject to any liability under the Deposit Agreement to Owners or Beneficial Owners of Receipts, except that they agree to perform their obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositary shall not be subject to any liability with respect to the validity or worth of the Deposited Securities. Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall be under any obligation to appear in, prosecute or defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in their respective reasonable opinions may involve them in expense or liability, unless indemnity satisfactory to it against all expense and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary. Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall be liable for any action or nonaction by any of them in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or Beneficial Owner of a Receipt, or any other person believed by any of them in good faith to be competent to give such advice or information. Each of the Depositary, the Company and their respective directors, employees, agents and affiliates may rely and shall be protected in acting upon any written notice, request or direction or other document believed by such person to be genuine and to have been signed or presented by the proper party or parties. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with a matter arising wholly after the removal or resignation of the Depositary, provided
that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary. The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or nonaction is in good faith. The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of the Deposit Agreement and of the Receipts, as the same may be amended, modified, or supplemented from time to time, (i) by either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Company or any of its directors, employees, agents and affiliates. No disclaimer of liability under the Securities Act of 1933 is intended by any provision of the Deposit Agreement.
ARTICLE 49. RESIGNATION AND REMOVAL OF THE DEPOSITARY.
The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at any time be removed by the Company by written notice of such removal, effective upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. Whenever the Depositary in its discretion determines that it is in the best interest of the Owners of Receipts to do so, it may appoint a substitute or additional custodian or custodians.
ARTICLE 50. AMENDMENT.
The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary without the consent of Owners or Beneficial Owners of Receipts in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or which shall otherwise prejudice any substantial existing right of Owners (other than the modification of voting procedures as provided in paragraph 16 hereof) of Receipts, shall, however, not become effective as to outstanding Receipts until the expiration of thirty days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner of a Receipt at the time any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby.
In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities represented thereby except in order to comply with mandatory provisions of applicable law.
ARTICLE 51. TERMINATION OF DEPOSIT AGREEMENT.
The Depositary shall at any time at the direction of the Company terminate the Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate the Deposit Agreement by mailing notice of such termination to the Company and the Owners of all Receipts then outstanding if at any time 30 days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in the Deposit Agreement. On and after the date of termination, the Owner of a Receipt, will upon (a) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.5 of the Deposit Agreement, and (c) payment of any applicable taxes or governmental charges, will be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the Owners thereof, and shall not give any further notices or perform any further acts under the Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in the Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held under the Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it thereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges). Upon the
termination of the Deposit Agreement, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary with respect to indemnification, charges, and expenses.
ARTICLE 52. DISCLOSURE OF INTERESTS.
Notwithstanding any other provision of the Deposit Agreement, the Memorandum and Articles of Association of the Company or applicable English law, each Owner and Beneficial Owner agrees to be bound by and subject to applicable provisions of the U.K. Companies Act, 1985 and the Memorandum and Articles of Association of the Company, summarized below, to the same extent as if such Owner and Beneficial Owner held Shares directly. The Company has informed the Depositary that the following information is accurate as the Depositary has made no independent investigation regarding such information.
(a) A holder of Shares in the Company may lose the right to vote its Shares if it or any other person appearing to be interested in shares held by it fails to comply within a prescribed period of time with a request by the Company under the U.K. Companies Act, 1985 to give certain information with respect to past or present ownership or interests in such Shares. In the case of holders of more than 0.25% in nominal amount of the share capital of the Company (or any class thereof), in addition of disenfranchisement, the sanctions that may be applied by the Company include withholding of the right to receive payment of dividends and other monies payable on, and restrictions on transfers of the relevant Shares.
(b) Section 198 of the U.K. Companies Act, 1985 provides that a person (including a company and other legal entities) that acquires an interest of 3 percent or more of any class of shares (including through American Depositary Receipts) comprised in an English public company's "relevant share capital" (i.e., the Company's issued share capital carrying the right to vote in all circumstances at a general meeting of the Company) is required to notify the company of its interest within two business days following the day on which the obligation arises. After the 3 percent level is exceeded, similar notifications must be made in respect of increases or decreases through a whole percentage point.
For purposes of such notification obligation, the interest of a person
in shares means any kind of interest in shares including interests in any shares
(a) in which a spouse, or child or stepchild under the age of 18, is interested,
(b) in which a corporate body is interested and either (i) that corporate body
or its directors generally act in accordance with that person's directions or
instructions or (ii) that person controls one-third or more of the voting power
of that corporate body or (c) in which another party is
interested and the person and that other party are parties to a "concert party" agreement under Section 204 of the U.K. Companies Act, 1985. A concert party agreement is one which provides for one or more parties to acquire interests in shares of a particular company and imposes obligations or restrictions on any one of the parties as to the use, retention or disposal of such interests acquired pursuant to such agreement and any interest in the company's shares is in fact acquired by any of the parties pursuant to the agreement. Certain interests (e.g., those held by certain investment fund managers) may be disregarded for the purposes of calculating the 3 percent threshold, but the obligations of disclosure will still apply where such interests exceed 10 percent or more of any class of the company's relevant share capital and to increases or decreases through a whole percentage point thereafter.
In addition, Section 212 of the U.K. Companies Act, 1985 provides that a public company may by written notice require a person whom the company knows or has reasonable cause to believe to be, or to have been at any time during the three years immediately preceding the date on which the notice is issued, interested in shares consisting of the company's "relevant share capital" to confirm that fact or to indicate whether or not that is the case, and where such person holds or during the relevant time had held an interest in such shares, to give such further information as may be required relating to such interest and any other interest in the shares of which such person is aware.
Where notice is served by a company under the foregoing provisions on a person who is or was interested in shares of the company and that person fails to give the company any information required by the notice within the time specified in the notice, the company may apply to the English court for an order directing that the shares in question be subject to restrictions prohibiting, among other things, any transfer of those shares, the taking up of rights in respect of such shares and, other than on liquidation, payments in respect of such shares.
A person who fails to fulfill the obligations imposed by Sections 198 and 212 of the Companies Act described above is subject to criminal penalties.
(c) The Depositary agrees to use reasonable efforts to forward to any Owners at the request of the Company and at the Company's expense, any request by the Company for information and to comply with any instructions of the Company, to the extent reasonably practicable, given to effectuate the foregoing restrictions. If the Company requests information from the Depositary or the Custodian, as the registered owners of Shares, pursuant to the Memorandum and Articles of Association of the Company or the U.K. Companies Act, 1985, the obligations of the Depositary or the Custodian, as the case may be, shall be limited to disclosing to the Company such information relating to the Shares in question as has in each case been recorded by it pursuant to the terms of the Deposit Agreement.
ARTICLE 53. COMPLIANCE WITH U.S. SECURITIES LAWS.
Notwithstanding anything in the Deposit Agreement or this Receipt to the contrary, the Company and the Depositary each agrees that it will not exercise any rights it has under the Deposit Agreement to prevent the withdrawal or delivery of Deposited Securities in a manner which would violate the U.S. securities laws, including, but not limited to, Section I.A.(1) of the General Instructions to the Form F-6 Registration Statement, as amended from time to time, under the Securities Act of 1933.
ARTICLE 54. DIRECT REGISTRATION SYSTEM.
(a) ADSs may be maintained by the Depositary in book-entry form known as the "Direct Registration System" ("DRS"). Upon issuance of ADSs, the ADSs of each Owner will be credited to the DRS account of each such Owner and in each such Owner's name. Each Owner will be given the option of (i) receiving a certificate representing its ADSs, (ii) transfering such ADSs to a broker designated by each and every person or entity in whose name such ADSs are registered on the books of the Depositary or (iii) maintaining their ADSs in DRS.
(b) The Company understands that Profile is a required feature of DRS. Profile allows a participant of The Depository Trust Company ("DTC") claiming to act on behalf of the Owner of ADSs, to direct the Depositary to transfer to such DTC participant the ADSs designated by such DTC participant without receipt by the Depositary of such prior written authorization from the Owner to transfer such ADSs.
(c) The Company understands the Depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on behalf of an Owner is, in fact, authorized to act on behalf of such Owner. The Company and each Owner agree that the Depositary shall have no liability for relying upon and complying with directions from a DTC participant as set forth above; and the Company shall indemnify and hold harmless the Depositary from and against any liability, expense, damage, loss and judgment arising from or related to the foregoing (including reasonable attorneys fees and expenses and expenses arising from or connected with the enforcement of this provision). For the avoidance of doubt, (i) the Depositary shall be fully protected by the foregoing limitation of liability and indemnification with respect to reliance upon and compliance with instructions from the DTC participant even if the Depositary's reliance on, and compliance with, such instructions is determined by a final, non-appealable order or judgment of a court of competent jurisdiction to constitute negligence, willful misconduct, breach of any duty owed by the Depositary to such Owner or violation of any law and (ii) the forgoing shall not apply to the manner in which the Depositary carries out actual transfer of the ADSs which are the subject of the DTC participant's instruction, which transfer shall continue to be governed by the other applicable terms of this Deposit Agreement. By way of example and not by way of limitation, if a court determines that
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the transfer of ADSs pursuant to a DTC participant's instruction without obtaining prior authorization from the Owner constitutes negligence, the Depositary will nevertheless be protected under this subparagraph (c); on the other hand, in carrying out such instructions, if the Depositary transfers ADSs from the wrong account or to the wrong DTC participant, the obligation to indemnify the Depositary shall be determined in accordance with Sections 5.3 and 5.8 of the Deposit Agreement.
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OFFERING CIRCULAR
EXHIBIT 2(b)(i)
[NATIONAL GRID LOGO]
NGG Finance plc
(incorporated in England and Wales with
limited liability under Registered Number 4220381)
euro 1,250,000,000 5.25 PER CENT. GUARANTEED BONDS DUE 2006
ISSUE PRICE: 99.71 PER CENT.
euro 750,000,000 6.125 PER CENT. GUARANTEED BONDS DUE 2011
ISSUE PRICE: 99.635 PER CENT.
GUARANTEED BY
National Grid Group plc
(incorporated in England and Wales with
limited liability under Registered Number 2367004)
Application has been made to the Financial Services Authority in its capacity as the competent authority under the Financial Services Act 1986 (in such capacity, the "UK LISTING AUTHORITY") for the euro 1,250,000,000 5.25 per cent. Guaranteed Bonds due 2006 (the "2006 BONDS") of NGG Finance plc (the "ISSUER") and the euro 750,000,000 6.125 per cent. Guaranteed Bonds due 2011 of the Issuer (the "2011 BONDS" and together with the 2006 Bonds, the "Bonds") to be admitted to the Official List maintained by the UK Listing Authority (the "OFFICIAL LIST") and to the London Stock Exchange plc (the "LONDON STOCK EXCHANGE") for the Bonds to be admitted to trading on the London Stock Exchange's market for listed securities which, together, will constitute official listing on the London Stock Exchange. Copies of this document, which comprises listing particulars prepared in compliance with the listing rules made under Section 142 of the Financial Services Act 1986, have been delivered to the Registrar of Companies in England and Wales for registration in accordance with Section 149 of that Act.
Payments on the Bonds will be made without deduction for or on account of taxes of the United Kingdom to the extent described under "Conditions of the Bonds -- Taxation". Interest on the 2006 Bonds is payable annually in arrear at the rate of 5.25 per cent. per annum on 23 August in each year, the first payment to be made on 23 August 2002. Interest on the 2011 Bonds is payable annually in arrear at the rate of 6.125 per cent. per annum on 23 August in each year, the first payment of interest to be made on 23 August 2002.
The 2006 Bonds mature on 23 August 2006 and the 2011 Bonds mature on 23 August 2011. Each tranche of Bonds may be redeemed before then at the option of the Issuer in whole, but not in part, at their principal amount together with accrued interest if, at any time, the principal amount of the relevant tranche of Bonds is 10 per cent. or less of the original principal amount of such tranche of Bonds and may be redeemed before then at the option of the relevant holder on the occurrence of a Restructuring Event resulting in a Rating Downgrade or Negative Rating Event at their principal amount together with accrued interest. Each tranche of Bonds is subject to redemption in whole, but not in part, at their principal amount together with accrued interest, at the option of the Issuer at any time in the event of certain changes affecting taxes of the United Kingdom. See "Terms and Conditions of the 2006 Bonds -- Redemption and Purchase".
Each tranche of Bonds will initially be represented by a temporary global bond in bearer form without interest coupons (a "TEMPORARY GLOBAL BOND") which will be deposited with a common depositary for Euroclear Bank S.A./N.V., as operator of the Euroclear System ("EUROCLEAR") and Clearstream Banking, societe anonyme ("CLEARSTREAM, LUXEMBOURG") on or about 23 August 2001. Interests in each Temporary Global Bond will be exchangeable for interests in a permanent global bond in bearer form without interest coupons (a "PERMANENT GLOBAL BOND") on or after a date which is expected to be 3 October 2001 (the "EXCHANGE DATE"), upon certification as to non-U.S. beneficial ownership. Each Permanent Global Bond will be exchangeable for definitive Bonds in bearer form (the "DEFINITIVE BONDS") in the circumstances set out in it. See "Summary of Provisions relating to the Bonds while in Global Form".
BARCLAYS CAPITAL DEUTSCHE BANK JPMORGAN
CREDIT SUISSE FIRST BOSTON MERRILL LYNCH INTERNATIONAL MORGAN STANLEY
20 AUGUST 2001
This Offering Circular comprises listing particulars given in compliance with the listing rules made under Section 142 of the Financial Services Act 1986 by the UK Listing Authority (the "LISTING RULES") for the purpose of giving information with regard to the Issuer and National Grid Group plc (the "GUARANTOR"), the Guarantor and its subsidiaries taken as a whole (the "GROUP") and the Bonds. The Issuer and the Guarantor accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Issuer and the Guarantor (each of which has taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
This Offering Circular does not constitute an offer of, or an invitation by or on behalf of, the Issuer, the Guarantor or the Managers (as defined in "Subscription and Sale" below) to subscribe or purchase, any of the Bonds. The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by the Issuer, the Guarantor and the Managers to inform themselves about and to observe any such restrictions. For a description of certain further restrictions on offers and sales of Bonds and distribution of this Offering Circular, see "Selling Restrictions" below.
No person is authorised to give any information or to make any representation not contained in this Offering Circular and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of the Issuer, the Guarantor or the Managers. The delivery of this Offering Circular at any time does not imply that the information contained in it is correct as at any time subsequent to its date.
The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "SECURITIES ACT"), and are subject to U.S. tax law requirements. Subject to certain exceptions, Bonds may not be offered, sold or delivered within the United States or to U.S. persons.
Unless otherwise specified or the context requires, references to "pounds ", "pounds sterling", "sterling", "(pound)", and "p" are to the currency of the United Kingdom, references to "euro" and "euro" are to the lawful currency of the member states of the European Union that adopt the single currency in accordance with the Treaty Establishing the European Community, as amended by the Treaty on European Union and references to "U.S.$" are to the currency of the United States of America.
In connection with the issue of each tranche of Bonds, Barclays Bank PLC may over-allot or effect transactions which stabilise or maintain the market price of the Bonds at a level which might not otherwise prevail. Such stabilising, if commenced, may be discontinued at any time.
TABLE OF CONTENTS
PAGE ---- TERMS AND CONDITIONS OF THE 2006 BONDS .................................... 4 TERMS AND CONDITIONS PECULIAR TO THE 2011 BONDS ........................... 15 USE OF PROCEEDS ........................................................... 16 SUMMARY OF PROVISIONS RELATING TO THE BONDS WHILE IN GLOBAL FORM .......... 17 NGG FINANCE plc ........................................................... 19 CAPITALISATION OF THE ISSUER .............................................. 20 THE NATIONAL GRID GROUP plc ............................................... 21 CAPITALISATION OF THE GROUP ............................................... 28 TAXATION .................................................................. 29 SUBSCRIPTION AND SALE ..................................................... 31 GENERAL INFORMATION ....................................................... 33 ACCOUNTANT'S REPORT ....................................................... 35 |
TERMS AND CONDITIONS OF THE 2006 BONDS
The following, subject to alteration and amendment and save for the paragraphs in italics, are the terms and conditions of the Bonds substantially in the form which will appear on the Bonds in definitive form:
The issue of the euro 1,250,000,000 5.25 per cent. Guaranteed Bonds due 2006 (the "BONDS", which expression shall, in these Conditions, unless the context requires otherwise, include any other Bonds issued pursuant to Condition 16 and forming a single series therewith) was authorised pursuant to resolutions of the Board of Directors of NGG Finance plc (the "ISSUER") passed on 30 July 2001 and resolutions of a duly authorised committee of the Board of Directors of the Issuer passed on 15 August 2001. The giving of a guarantee in respect of the Bonds was authorised by a resolution of a duly authorised committee of the Board of Directors of National Grid Group plc ("NGG") passed on 26 July 2001. The Bonds are constituted by the trust deed dated 23 August 2001 (the "TRUST DEED") between the Issuer, NGG and The Law Debenture Trust Corporation p.l.c. (the "TRUSTEE", which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Bonds (the "BONDHOLDERS"). The statements in these Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed. The Bondholders and the holders (the "COUPONHOLDERS") of the interest coupons relating to the Bonds (the "COUPONS") (whether or not attached to the Bonds) are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions applicable to them of the paying agency agreement dated 23 August 2001 (the "PAYING AGENCY AGREEMENT") relating to the Bonds between the Issuer, NGG, the Trustee, Deutsche Bank AG London (the "PRINCIPAL PAYING AGENT", which expression shall include any successor as principal paying agent under the Paying Agency Agreement) and the paying agents referred to below (such persons being referred to together with the Principal Paying Agent as the "PAYING AGENTS", which expression shall include their successors as paying agents under the Paying Agency Agreement), copies of each of which are available for inspection during normal office hours at the registered office for the time being of the Trustee (being at the date hereof at Fifth Floor, 100 Wood Street, London EC2V 7EX) and at the specified office of each of the Paying Agents.
1. FORM, DENOMINATION AND TITLE
The Bonds are serially numbered and in bearer form in the denominations of euro 1,000, euro 10,000 and euro 100,000 each with Coupons attached on issue. Bonds of one denomination may not be exchanged for Bonds of another denomination.
Title to the Bonds and the Coupons will pass by delivery. In these Conditions, "BONDHOLDER" and (in relation to a Bond or Coupon) "HOLDER" mean the bearer of any Bond or Coupon, as the case may be. The holder of any Bond or Coupon will (except as otherwise required by law or as ordered by a court of competent jurisdiction) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating the holder, and the Issuer, any Guarantor, the Trustee and the Paying Agents shall not be required to obtain any proof thereof or as to the identity of such holder.
The Bonds will be represented initially by a Temporary Global Bond. The
Temporary Global Bond will be issued on 23 August 2001 and will be held by a
common depositary for Euroclear Bank S.A./N.V., as operator of the Euroclear
System ("EUROCLEAR") and Clearstream Banking, societe anonyme ("CLEARSTREAM,
LUXEMBOURG") for credit, against payment, to the accounts designated by the
relevant purchasers with Euroclear and Clearstream, Luxembourg. Interests in the
Temporary Global Bond will be exchangeable on or after a date which is expected
to be 3 October 2001 for interests in a Permanent Global Bond upon certification
that the beneficial owners of the Bonds are not (i) United States persons or
(ii) persons who have acquired such Bonds for resale to or for the account of
any United States person.
The Permanent Global Bond will be exchangeable for Definitive Bonds in bearer form in the circumstances set out in it. See "Summary of Provisions relating to the Bonds while in Global Form".
Definitive Bonds and Coupons will bear the following legend: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code".
2. GUARANTEE AND STATUS
(a) GUARANTEE NGG has irrevocably and unconditionally guaranteed the due payment of all sums expressed to be payable by the Issuer under the Trust Deed, the Bonds and the Coupons and the due and punctual performance by the Issuer of all its other obligations under the Trust Deed and the Bonds. Its obligations in that respect (the "GUARANTEE") are contained in the Trust Deed. Where there is more than one Guarantor, the obligations of each Guarantor shall be joint and several.
(b) STATUS The Bonds and the Coupons constitute (subject to Condition 4) direct, unconditional and unsecured obligations of the Issuer and rank and will rank pari passu without any preference among themselves and (save for such exceptions as are from time to time applicable under the laws of England and Wales) at least equally with all other present and future unsecured and unsubordinated obligations of the Issuer. The obligations of any Guarantor under the Guarantee will (save for such exceptions as are from time to time applicable under the laws of England and Wales) rank at least equally with all other present and future unsecured and unsubordinated obligations of such Guarantor.
(c) ADDITIONAL GUARANTOR NGG will procure that within 60 days of the Scheme Effective Date (as defined below), the Holding Company (as defined below) shall enter into a deed supplemental to the Trust Deed, in a form set out in the Trust Deed, pursuant to which it will assume all the rights and obligations of a Guarantor under these Conditions and the Trust Deed, jointly and severally with NGG as if originally named in these conditions and the Trust Deed as a Guarantor.
NGG will give notice to Bondholders in accordance with Condition 13 of the Scheme Effective Date and of the date on which the Holding Company shall become a Guarantor not later than 30 days after each of those events.
3. DEFINITIONS
"BUSINESS DAY" means any day on which banks are open for general business in London and in the place of the specified office of the Paying Agent at which the Bond or Coupon is presented for payment.
"GROUP" means, prior to the Scheme Effective Date, NGG and its Subsidiaries, and on and after the Scheme Effective Date, the Holding Company and its Subsidiaries, and "MEMBER OF THE GROUP" shall be construed accordingly.
"GUARANTOR" means each of NGG and, upon becoming a Guarantor pursuant to Condition 2(c), the Holding Company.
"HOLDING COMPANY" means New National Grid plc, which will be the holding company of NGG after the Scheme Effective Date.
"PARENT" means, prior to the Scheme Effective Date, NGG, and on and after the Scheme Effective Date, the Holding Company.
"PRINCIPAL SUBSIDIARY" means The National Grid Company plc and National Grid USA, and includes any successor entity thereto or any other member of the Group to which, in the opinion of the Trustee, all or substantially all of the assets of a Principal Subsidiary are transferred.
"RELEVANT DATE" in respect of any payment means the date on which the payment becomes due but, if the full amount of the moneys payable has not been received by the Principal Paying Agent or by the Trustee on or prior to such due date, it means the date on which the full amount of such moneys has been so received and notice to that effect has been given to the Bondholders in accordance with Condition 13.
"RELEVANT ENTITY" means, (i) prior to the Scheme Effective Date, NGG, (ii) on and after the Scheme Effective Date and prior to the first date on which, following the Scheme Effective Date, annual consolidated financial accounts of the Holding Company and its subsidiaries are published (the "Accounts Date"), NGG and the Holding Company, and (iii) on or after the Accounts Date, the Holding Company.
"SCHEME" means the scheme of arrangement pursuant to Section 425 of the Companies Act 1985 between NGG and its shareholders under which NGG would become a wholly-owned subsidiary of the Holding Company.
"SCHEME EFFECTIVE DATE" means the date the Scheme takes effect.
"SUBSIDIARY" means a subsidiary within the meaning of Section 736 of the Companies Act 1985 and "Subsidiaries" shall be construed accordingly.
"TARGET BUSINESS DAY" means a day on which the TARGET System is operating and banks are open for general business in London.
"TARGET SYSTEM" means the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System.
4. NEGATIVE PLEDGE
(a) RESTRICTION
So long as any Bond or Coupon remains outstanding (as defined in the Trust Deed) neither the Issuer nor any Guarantor will create or permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest ("SECURITY") upon the whole or any part of its undertaking, assets or revenues present or future to secure any Relevant Debt, or any guarantee of or indemnity in respect of any Relevant Debt unless, at the same time or prior thereto, the Issuer's obligations under the Bonds, the Coupons and the Trust Deed or, as the case may be, any Guarantor's obligations under the Trust Deed (aa) are secured equally and rateably therewith or benefit from a guarantee or indemnity in substantially identical terms thereto, as the case may be, in each case to the satisfaction of the Trustee, or (bb) have the benefit of such other security, guarantee, indemnity or other arrangement as the Trustee in its absolute discretion shall deem to be not materially less beneficial to the Bondholders or as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders.
(b) RELEVANT DEBT
For the purposes of this Condition, "RELEVANT DEBT" means any present or future indebtedness in the form of, or represented by, bonds, notes, debentures, loan stock or other securities which are for the time being, or are capable of being, quoted, listed or ordinarily dealt in on any stock exchange.
5. INTEREST
The Bonds bear interest on their principal amount outstanding from, and including, 23 August 2001 (the "CLOSING DATE") at the rate of 5.25 per cent. per annum payable annually in arrear on 23 August in each year (each an "INTEREST PAYMENT DATE"). Each Bond will cease to bear interest from the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused. In such event, it shall continue to bear interest at the aforesaid rate (both before and after judgment) until, but excluding, whichever is the earlier of (i) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant holder and (ii) the seventh day after the Trustee or the Principal Paying Agent has notified Bondholders in accordance with Condition 13 of receipt of all sums due in respect of all the Bonds up to that day (except to the extent that there is a failure in the subsequent payment to the relevant holders as provided in these Conditions). Where interest is to be calculated in respect of a period which is shorter than an Interest Period it shall be calculated on the basis of the actual number of days in the relevant period from (and including) the first day of such period to (but excluding) the last day of such period, divided by the number of days in the Interest Period in which the relevant period falls (including the first such day but excluding the last). The period beginning on the Closing Date and ending on the first Interest Payment Date and each successive period beginning on an Interest Payment Date and ending on the next succeeding Interest Payment Date is called an "INTEREST PERIOD".
6. REDEMPTION AND PURCHASE
(a) FINAL REDEMPTION Unless previously redeemed or purchased and cancelled, the Bonds will be redeemed at their principal amount on 23 August 2006.
(b) REDEMPTION FOR TAXATION REASONS
If, immediately prior to the giving of the notice referred to below,
the Issuer satisfies the Trustee that, as a result of any amendment to
or change in the laws or regulations of the United Kingdom or of any
political subdivision thereof or any authority therein or thereof
having power to tax or any change in the official or generally accepted
interpretation or application of such laws or regulations in each case
which becomes effective on or after the Closing Date, the Issuer (or if
the Guarantee were called, a Guarantor) has or will on the next
Interest Payment Date become obliged to pay any additional amounts in
accordance with Condition 8 (and such amendment or change has been
evidenced by the delivery by the Issuer to the Trustee (who shall, in
the absence of manifest error, accept such certificate and opinion as
sufficient evidence thereof) of (i) a certificate signed by two
directors or one director and one responsible officer of the Issuer on
behalf of the Issuer (or two directors or one director and one
responsible officer of a Guarantor on behalf of a Guarantor, as the
case may be) stating that such amendment or change has occurred
(irrespective of whether such amendment or change is then effective)
and describing the facts leading thereto and stating that such
obligation cannot be avoided by the Issuer (or a Guarantor, as the case
may be) taking reasonable
measures available to it and (ii) an opinion in a form satisfactory to the Trustee of independent legal advisers of recognised standing to the effect that such amendment or change has occurred (irrespective of whether such amendment or change is then effective)), the Issuer may (having given not less than 30 and not more than 90 days' notice to the Trustee and to the Bondholders in accordance with Condition 13) redeem all, but not some only, of the Bonds at their principal amount, together with interest accrued up to, but excluding, the date fixed for such redemption, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be required to pay such additional amounts were a payment in respect of the Bonds then due.
(c) REDEMPTION AT THE OPTION OF THE ISSUER If, at any time, the principal amount outstanding of the Bonds is 10 per cent. or less of the original principal amount of the Bonds, the Issuer may (having given not less than 30 and not more than 90 days' notice to the Trustee and to the Bondholders in accordance with Condition 13) redeem all, but not some only, of the Bonds at their principal amount, together with interest accrued up to, but excluding, the date fixed for such redemption.
(d) REDEMPTION AT THE OPTION OF THE BONDHOLDERS
(i) If at any time whilst any Bonds are outstanding there occurs a
Restructuring Event a Public Announcement (as defined below)
shall be made and if within the Restructuring Period either
(i) (if at the time that Restructuring Event occurs there are
Rated Securities) a Rating Downgrade in respect of that
Restructuring Event occurs or (ii) (if at such time there are
no Rated Securities) a Negative Rating Event in respect of
that Restructuring Event occurs (that Restructuring Event and
Rating Downgrade or Negative Rating Event, as the case may be,
occurring within the Restructuring Period, together called a
"PUT EVENT"), the holder of each Bond will have the option
upon the giving of a Put Notice (as defined below) to require
the Issuer to redeem or, at the option of the Issuer, purchase
(or procure the purchase of) that Bond on the Put Date (as
defined in Condition 6(d)(iv) below) at its principal amount
together with accrued interest to the Put Date.
Promptly upon the Issuer becoming aware that a Put Event has occurred, the Issuer shall, or at any time upon the Trustee becoming similarly so aware the Trustee may, and if so requested by the holders of at least one-quarter in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution of the Bondholders, the Trustee shall give notice (a "PUT EVENT NOTICE") to the Bondholders in accordance with Condition 13 specifying the nature of the Put Event and the procedure (as set out in Condition 6(d)(iv) below) for exercising the option contained in this Condition 6(d).
(ii) For the purposes of these Conditions:
"ACCOUNTANTS' REPORT" means a report of the Reporting Accountants stating whether the amounts included in the calculation of the Operating Profit and the amount for Consolidated Operating Profit as included in the Directors' Report have been accurately extracted from the accounting records of the Relevant Entity and its Subsidiaries and whether the Disposal Percentage included in the Directors' Report has been correctly calculated which will be prepared pursuant to an engagement letter to be entered into by the Reporting Accountants, the Relevant Entity and the Trustee.
The Relevant Entity shall use reasonable endeavours to procure that there shall at the relevant time be Reporting Accountants who have (a) entered into an engagement letter with the Issuer and the Trustee which shall (i) not limit the liability of the Reporting Accountants to the Trustee by reference to a monetary cap and (ii) be available for inspection by Bondholders at the principal office of the Trustee or (b) agreed to provide Accountants' Reports on such other terms as the Issuer and the Trustee shall approve. If the Relevant Entity, having used reasonable endeavours, is unable to procure that there shall at the relevant time be Reporting Accountants who have entered into an engagement letter complying with (i) above, the Trustee may rely on an Accountants' Report which contains a limit on the liability of the Reporting Accountants by reference to a monetary cap or otherwise.
Investors should be aware that the engagement letter may contain a limit on the liability of the Reporting Accountants which may impact on the interests of Bondholders.
The Issuer shall give notice to the Trustee of the identity of the Reporting Accountants.
"CONSOLIDATED OPERATING PROFIT" means the consolidated operating profits on ordinary activities before tax and interest and before taking account of depreciation and amortisation of goodwill and regulatory assets (for the avoidance of doubt, exceptional items, as reflected in the Relevant Accounts and defined in Financial Reporting Standard 3 "REPORTING FINANCIAL PERFORMANCE" ("FRS 3") or any successor or any equivalent accounting standard used in preparing the Relevant Accounts ("EXCEPTIONAL ITEMS") shall not be included) of the Relevant Entity (including any share of operating profit of associates and joint ventures) determined in accordance with United Kingdom generally accepted accounting principles ("UK GAAP") by reference to the Relevant Accounts, and, if the Relevant Entity is the Holding Company and Relevant Accounts do not yet exist, determined in a manner consistent with the assumptions upon which the Directors' Report is to be based;
"Directors' Report" means a report prepared and signed by two directors of the Relevant Entity addressed to the Trustee setting out the Operating Profit, the Consolidated Operating Profit and the Disposal Percentage stating any assumptions which the Directors of the Relevant Entity have employed in determining the Operating Profit, and which (for the avoidance of doubt) shall include an assumption for accounting purposes, where the Relevant Entity is the Holding Company, that the acquisition (the "ACQUISITION") of Niagara Mohawk Holdings Inc. ("NIAGARA MOHAWK") pursuant to a merger agreement dated as of 4 September 2000 between, amongst others, NGG and Niagara Mohawk and the Scheme were completed (so long as completion shall actually have occurred) as of the financial year ended 31 March 2001, but with appropriate adjustments to exclude any undertaking, property or assets which Niagara Mohawk or any of its Subsidiaries sells, transfers, leases or otherwise disposes of or is dispossessed of by any means prior to completion of the Acquisition.
"DISPOSED ASSETS" means, where any Relevant Entity and/or any of its Subsidiaries sells, transfers, leases or otherwise disposes of or is dispossessed by any means (but excluding sales, transfers, leases, disposals or dispossessions which, when taken together with related lease back or similar arrangements entered into in the ordinary course of business, have the result that Operating Profit directly attributable to any such undertaking, property or assets continues to accrue to such Relevant Entity or, as the case may be, such Subsidiary), otherwise than to a wholly-owned Subsidiary of such Relevant Entity or to the Issuer, of the whole or any part (whether by a single transaction or by a number of transactions whether related or not) of its undertaking or (except in the ordinary course of business of the Relevant Entity or any such Subsidiary) property or assets, the undertaking, property or assets sold, transferred, leased or otherwise disposed of or of which it is so dispossessed;
"DISPOSAL PERCENTAGE" means, in relation to a sale, transfer, lease or
other disposal or dispossession of any Disposed Assets, the ratio of
(i) the aggregate Operating Profit to (ii) the Consolidated Operating
Profit, expressed as a percentage;
A "NEGATIVE RATING EVENT" shall be deemed to have occurred if either
(i) the Issuer does not, either prior to or not later than 21 days
after the relevant Restructuring Event, seek, and thereupon use all
reasonable endeavours to obtain, a rating of the Bonds or any other
unsecured and unsubordinated debt of the Issuer or the Parent (or of
any Subsidiary of the Parent which is guaranteed on an unsecured and
unsubordinated basis by the Parent) having an initial maturity of five
years or more ("RATEABLE DEBT") from a Rating Agency or (ii) if the
Issuer does so seek and use such endeavours, it is unable, as a result
of such Restructuring Event, to obtain such a rating of at least
investment grade (BBB- or Baa3 or their respective equivalents for the
time being), provided that a Negative Rating Event shall not be deemed
to have occurred in respect of a particular Restructuring Event if the
Rating Agency declining to assign a rating of at least investment grade
(as described above) does not announce or publicly confirm that its
declining to assign a rating of at least investment grade was the
result, in whole or in part, of any event or circumstance comprised in
or arising as a result of, or in respect of, the applicable
Restructuring Event (whether or not the Restructuring Event shall have
occurred at the time such investment grade rating is declined);
"OPERATING PROFIT", in relation to any Disposed Assets, means the operating profits on ordinary activities before tax and interest and before taking account of depreciation and amortisation of goodwill and regulatory assets (for the avoidance of doubt, exceptional items, as reflected in the Relevant Accounts shall not be included) of the Relevant Entity and its Subsidiaries directly attributable to such Disposed Assets as determined in accordance with UK GAAP by reference to the Relevant Accounts, and, if the Relevant Entity is the Holding Company and Relevant
Accounts do not yet exist, determined in a manner consistent with the assumptions upon which the Directors' Report is to be based. Where the Directors of the Relevant Entity have employed assumptions in determining the Operating Profit, those assumptions should be clearly stated in the Directors' Report;
"PUBLIC ANNOUNCEMENT" means an announcement by the Issuer or, in accordance with Condition 6(d)(i), the Trustee of the occurrence of a Restructuring Event published in a leading national newspaper having general circulation in the United Kingdom (which is expected to be the Financial Times);
"RATED SECURITIES" means the Bonds, if and for so long as they shall have an effective rating from a Rating Agency and otherwise any Rateable Debt which is rated by a Rating Agency; provided that if there shall be no such Rateable Debt outstanding prior to the maturity of the Bonds, the holders of not less than one-quarter in principal amount of outstanding Bonds may require the Issuer to obtain and thereafter update on an annual basis a rating of the Bonds from a Rating Agency. In addition, the Issuer may at any time obtain and thereafter update on an annual basis a rating of the Bonds from a Rating Agency, provided that, except as provided above, the Issuer shall not have any obligation to obtain such a rating of the Bonds;
"RATING AGENCY" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and its successors or Moody's Investors Service, Inc. and its successors or any rating agency substituted for either of them (or any permitted substitute of them) by the Issuer from time to time with the prior written approval of the Trustee;
A "RATING DOWNGRADE" shall be deemed to have occurred in respect of a Restructuring Event if the then current rating whether provided by a Rating Agency at the invitation of the Issuer or any Guarantor or by its own volition assigned to the Rated Securities by any Rating Agency is withdrawn or reduced from an investment grade rating (BBB- or Baa3 or their respective equivalents for the time being) or better to a non-investment grade rating (BB+ or Ba1 or their respective equivalents for the time being) or worse or, if a Rating Agency shall already have rated the Rated Securities below investment grade (as described above), the rating is lowered one full rating category; provided that a Rating Downgrade otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Restructuring Event if the Rating Agency making the reduction in rating to which this definition would otherwise apply does not announce or publicly confirm that the reduction was the result, in whole or part, of any event or circumstance comprised in or arising as a result of, or in respect of, the applicable Restructuring Event (whether or not the applicable Restructuring Event shall have occurred at the time of the Rating Downgrade);
"RELEVANT ACCOUNTS" means the most recent annual audited consolidated financial accounts of the Relevant Entity and its Subsidiaries preceding the relevant sale, transfer, lease or other disposal or dispossession of any Disposed Asset;
"REPORTING ACCOUNTANTS" means the auditors of the Relevant Entity (but not acting in their capacity as auditors) or such other firm of accountants as may be nominated by the Relevant Entity and approved in writing by the Trustee for the purpose, or, failing which, as may be selected by the Trustee for the purpose;
A "RESTRUCTURING EVENT" shall be deemed to have occurred at any time (whether or not approved by the Board of Directors of the Relevant Entity) that the sum of Disposal Percentages for the Relevant Entity(ies) within any period of 36 months commencing on or after the date hereof is greater than 50 per cent.;
"RESTRUCTURING PERIOD" means the period ending 90 days after the Public Announcement of the Restructuring Event having occurred (or such longer period in which the Rated Securities or Rateable Debt, as the case may be, is or are under consideration (announced publicly within the first mentioned period) for rating review or, as the case may be, rating by a Rating Agency); and
(iii) The Relevant Entity shall forthwith upon becoming aware of the occurrence of a Restructuring Event (a) provide the Trustee with the relevant Directors' Report and (b) provide or procure that the Reporting Accountants provide the Trustee with the Accountants' Report.
The Directors' Report and the Accountants' Report shall, in the absence of manifest error, be conclusive and binding on all concerned, including the Trustee and the Bondholders.
The Trustee shall not be responsible for ascertaining whether or not a Restructuring Event, a Negative Rating Event or Rating Downgrade has occurred and, unless and until it has actual knowledge to the contrary, shall be entitled to assume that no such event has occurred.
The Trustee shall be entitled to act, or not act, and rely on (and shall have no liability to Bondholders for doing so) any Directors' Report and/or any Accountants' Report (whether or not addressed to it).
(iv) To exercise the option of redemption of a Bond under this Condition 6(d) the holder of the Bond must deliver such Bond accompanied by a duly signed and completed notice of exercise in the form (for the time being current) obtainable from the specified office of any Paying Agent (a "PUT NOTICE"), and in which the Bondholder may specify an account to which payment is to be made under this Condition 6(d) to the specified office of any Paying Agent on any business day (as defined in Condition 7(c)) falling within the period (the "PUT PERIOD") of 45 days after a Put Event Notice is given. The Bond should be delivered together with all Coupons appertaining thereto maturing after the date (the "PUT DATE") falling seven days after the expiry of the Put Period, failing which the Paying Agent will require payment of an amount equal to the face value of any such missing Coupon. Any amount so paid will be reimbursed in the manner provided in Condition 7 against presentation and surrender of the relevant missing Coupon, subject to Condition 9. The Paying Agent to which such Bond and Put Notice are delivered will issue to the Bondholder concerned a non-transferable receipt in respect of the Bond so delivered. Payment in respect of any Bond so delivered will be made, if the Bondholder duly specified a bank account in the Put Notice to which payment is to be made, on the Put Date by transfer to that bank account and, in every other case, on or after the Put Date in the manner provided in Condition 7 against presentation and surrender (or, in the case of part payment, endorsement) of such receipt at the specified office of any Paying Agent. A Put Notice, once given, shall be irrevocable. For the purposes of the Conditions and the Trust Deed, receipts issued pursuant to this Condition 6(d) shall be treated as if they were Bonds. The Issuer shall redeem the relevant Bonds on the Put Date unless previously redeemed or purchased.
(e) PURCHASE The Issuer and any Guarantor or any of their respective Subsidiaries may, subject to any relevant laws or regulations, at any time purchase the Bonds (with or without all unmatured Coupons relating thereto being surrendered therewith) at any price in the open market or by private treaty. If purchases are made by tender, tenders must be available to all Bondholders alike.
(f) CANCELLATION All Bonds redeemed pursuant to any of the foregoing provisions will be cancelled forthwith together with all unmatured Coupons attached thereto or surrendered therewith and may not be reissued or resold. Any Bonds purchased pursuant to Conditions 6(d) or 6(e) may, at the option of the Issuer or any Guarantor, as the case may be, be held or may be surrendered to a Paying Agent for cancellation, but may not be resold and when held by the Issuer or any Guarantor or any of their respective Subsidiaries shall not entitle the holder to vote at any meeting of Bondholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of Bondholders or for the purposes of Condition 14.
7. PAYMENTS
(a) PRINCIPAL AND INTEREST IN RESPECT OF THE BONDS Payments of principal and interest in respect of the Bonds will be made against presentation and surrender (or, in the case of a partial payment, endorsement) of Bonds or (as the case may be) the appropriate Coupons save that if the due date for redemption of a Bond is not an Interest Payment Date, accrued interest will be paid against presentation of the relevant Bond at the specified office of any Paying Agent by euro cheque drawn on, or by transfer to a euro account maintained by the payee with, a bank in a city in which banks have access to the TARGET System. Payments of interest due in respect of any Bond other than on presentation and surrender of matured Coupons shall be made only against presentation and either surrender or endorsement (as appropriate) of the relevant Bond.
(b) PAYMENT SUBJECT TO FISCAL LAWS All payments are subject in all cases to any applicable fiscal or other laws and regulations, but without prejudice to the provisions of Condition 8. No commissions or expenses shall be charged to the Bondholders or Couponholders in respect of such payments.
(c) PAYMENTS ON BUSINESS DAYS If the due date for payment of any amount on any Bond or Coupon is not a Target Business Day, then the holder thereof will not be entitled to payment of such amount until the next following Target Business Day and will not be entitled to any further interest or other payment in respect of such postponement.
(d) PAYING AGENTS The initial Principal Paying Agent is Deutsche Bank AG London and the other initial Paying Agents and their respective initial specified offices are set out at the end of these Conditions. The Issuer and the Guarantor may at any time (subject to the prior approval of the Trustee) vary or terminate the appointment of any Paying Agent and appoint additional or other Paying Agents, provided that they will at all times maintain (i) a Principal Paying Agent, (ii) Paying Agents having specified offices in at least two major European cities approved by the Trustee (including London, so long as the Notes are listed on the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange's market for listed securities) and (iii) a Paying Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive. Notice of any such termination or appointment and of any change in the specified office through which any Paying Agent acts will be given in accordance with Condition 13.
(e) SURRENDER OF UNMATURED COUPONS Each Bond should be presented for redemption (including exercise of the Bondholders' option pursuant to Condition 6) together with all unmatured Coupons, failing which the full amount of any missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the full amount of the missing unmatured Coupon which the amount so paid bears to the total amount due) will be deducted from the amount due for payment. Each amount so deducted will be paid in the manner mentioned above against presentation and surrender (or, in the case of part payment only, endorsement) of the missing Coupon at any time before the expiry of 12 years after the Relevant Date in respect of the relevant Bond but not thereafter.
8. TAXATION
All payments by or on behalf of the Issuer in respect of the Bonds or by or on behalf of any Guarantor in respect of the Guarantee shall be made without deduction or withholding for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the United Kingdom or any political subdivision or authority thereof or therein having power to tax, unless such deduction or withholding is required by law. In such event the Issuer or, as the case may be, any Guarantor shall pay such additional amounts as may be necessary in order that the net amounts received by the holders of Bonds or Coupons after such deduction or withholding shall equal the amounts which would have been receivable by them had no such deduction or withholding been required, except that no additional amounts shall be payable in respect of any Bond or Coupon presented for payment:
(a) by or on behalf of a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond or Coupon by reason of his being connected with the United Kingdom otherwise than merely by the holding of the Bond or Coupon; or
(b) by or on behalf of a holder who would not be liable or subject to deduction or withholding by making a declaration of beneficial ownership of the Bond or Coupon and of non-residence or other similar claim for exemption to the relevant tax authority or to any relevant person; or
(c) more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on the last day of such period of 30 days on the assumption, if such is not the case, that such last day was a Business Day; or
(d) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive; or
(e) by or on behalf of a Bondholder or a Couponholder who would have been able to avoid such withholding or deduction by presenting the relevant Bond or Coupon to another Paying Agent in a Member State of the European Union.
Any reference herein to the principal of and/or interest on the Bonds shall be deemed to include any additional amounts which may be payable under this Condition or under any obligations undertaken in addition hereto or in substitution herefor pursuant to the Trust Deed.
9. PRESCRIPTION Claims in respect of principal and interest shall be prescribed unless presentation for payment is made as required by Condition 7 within a period of 12 years in the case of principal and six years in the case of interest from the appropriate Relevant Date.
10. EVENTS OF DEFAULT
The Trustee at its discretion may, and if so requested in writing by the holders of at least one-quarter in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution of the Bondholders shall subject in each case to its being indemnified to its satisfaction (but, in the case of the happening of any of the events mentioned in sub-paragraphs (d) to (i) inclusive, other than default in the performance or observance of any of the provisions of Conditions 6 and 7 or the appointment of an administrative or other receiver of the whole of the undertaking or assets of the Issuer, only if the Trustee shall have certified in writing to the Issuer that such event is, in its opinion, materially prejudicial to the interests of the Bondholders) give notice to the Issuer that the Bonds are, and they shall accordingly thereby become, immediately due and repayable at their principal amount, together with accrued interest (as provided in the Trust Deed), if any of the following events shall occur:
(a) if default is made in the payment of any principal or interest in respect of the Bonds or any of them and such default continues for 15 days or more; or
(b) if an order is made or an effective resolution passed for the winding-up of, or an administration order is made in relation to, the Issuer, any Guarantor or any Principal Subsidiary (except for the purposes of a reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(c) if (i) any other present or future Relevant Indebtedness of the Issuer or any Guarantor or any Principal Subsidiary for or in respect of moneys borrowed or raised becomes due and payable prior to its stated maturity by reason of any actual default, event of default or the like (howsoever described), or (ii) any amount in respect of such Relevant Indebtedness is not paid when due or, as the case may be, within any applicable grace period, or (iii) the Issuer or any Guarantor or any Principal Subsidiary fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, such Relevant Indebtedness provided that the aggregate amount of the Relevant Indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this paragraph (c) have occurred equals or exceeds (pound)40,000,000 or its equivalent in any other currency (as reasonably determined by the Trustee); or
For the purposes of this Condition, "RELEVANT INDEBTEDNESS" means any present or future indebtedness in the form of, or represented by, bonds, notes, debentures, loan stock or other securities which are for the time being, or are capable of being, quoted, listed or ordinarily dealt in on any stock exchange.
(d) if the Issuer, any Guarantor or any Principal Subsidiary stops or threatens to stop payment (except for the purposes of a reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(e) if an encumbrancer takes possession or an administrative or other receiver is appointed of the whole or any part which in the opinion of the Trustee is material of the undertaking or assets of the Issuer, any Guarantor or any Principal Subsidiary or if a distress, execution or any similar proceeding is levied or enforced upon or sued out against, in the opinion of the Trustee, a substantial part of the
chattels or property of the Issuer, any Guarantor or any Principal Subsidiary and in any such case is not removed, paid out or discharged within 21 days (or such longer period as the Trustee may approve); or
(f) if the Issuer, any Guarantor or any Principal Subsidiary is unable to pay its debts as they fall due or has any voluntary arrangement proposed in relation to it under Section 1 of the Insolvency Act 1986 or enters into any scheme of arrangement with its creditors (other than for the purpose of reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(g) if default is made by the Issuer or any Guarantor in the performance or observance of any obligation, covenant, condition or provision binding on it under the Bonds or the Trust Deed (other than any obligation for the payment of any principal or interest in respect of the Bonds) and, except where, in the opinion of the Trustee, such default is not capable of remedy (in which case the Bonds will become due and repayable subject to, and immediately upon, the Trustee certifying and giving notice as aforesaid), such default continues for 45 days (or such longer period as the Trustee may approve) after written notice by the Trustee to the Issuer and any Guarantor specifying such default and requiring the same to be remedied; or
(h) if the Guarantee is not (or is claimed by any Guarantor not to be) in full force and effect; or
(i) if anything analogous or having a substantially similar effect to any of the events specified above happens under the law of any applicable jurisdiction.
11. ENFORCEMENT At any time after the Bonds become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer and/or any Guarantor as it may think fit to enforce the provisions of the Trust Deed, the Bonds and the Coupons, but it shall not be bound to take any such proceedings unless (i) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holding at least one-quarter in principal amount of the Bonds then outstanding and (ii) it shall have been indemnified to its satisfaction. No Bondholder or Couponholder may proceed directly against the Issuer or any Guarantor unless the Trustee, having become bound so to proceed, fails to do so within a reasonable period and such failure shall be continuing.
12. REPLACEMENT OF BONDS AND COUPONS
If any Bond or Coupon is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Paying Agent in London, subject to all applicable laws and the requirements of any applicable stock exchange or other relevant authority, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence and indemnity as the Issuer and any Guarantor may reasonably require. Mutilated or defaced Bonds or Coupons must be surrendered before replacements will be issued.
13. NOTICES
Notices to holders of Bonds will be valid if published in an English language leading daily newspaper having general circulation in the United Kingdom (which is expected to be the Financial Times) or if in the opinion of the Trustee such publication is not practicable, in another English language leading daily newspaper having general circulation in Europe. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the first date on which publication is made. Couponholders will be deemed for all purposes to have notice of the contents of any notice given to Bondholders in accordance with this Condition.
14. MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER AND SUBSTITUTION
The Trust Deed contains provisions for convening meetings of Bondholders to consider matters affecting their interests, including the modification of any of these Conditions or any provisions of the Trust Deed. Any such modification may be made if sanctioned by an Extraordinary Resolution. The quorum for any meeting convened to consider an Extraordinary Resolution will be one or more persons present holding or representing a clear majority in principal amount of the Bonds for the time being outstanding or, at any adjourned meeting, one or more persons present being or representing Bondholders whatever the principal amount of the Bonds held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to postpone the dates for payment of principal on the Bonds or the dates on which interest is payable in respect of Bonds, (ii) to reduce or cancel the principal amount of, or interest on, the
Bonds, (iii) to change the currency of payment of the Bonds or the Coupons, (iv) to modify the provisions concerning the quorum required at any meeting of Bondholders or the majority required to pass an Extraordinary Resolution or (v) to modify or cancel the Guarantee, in which case the necessary quorum will be one or more persons present holding or representing not less than two-thirds, or at any adjourned meeting not less than one-third, in principal amount of the Bonds for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on all Bondholders (whether or not they were present at the meeting at which such resolution was passed) and on all Couponholders.
The Trustee may agree, without the consent of the Bondholders or Couponholders, to (i) any modification of any of these Conditions or any provisions of the Trust Deed which is of a formal, minor or technical nature or is made to correct a manifest error and (ii) any other modification (except as mentioned in the Trust Deed) of, and any waiver or authorisation of any breach or proposed breach of, any of these Conditions or any provisions of the Trust Deed which is, in the opinion of the Trustee, not materially prejudicial to the interests of the Bondholders. Any such modification, authorisation or waiver shall be binding on the Bondholders and the Couponholders and, if the Trustee so requires, any modification referred to above shall be notified by the Issuer to the Bondholders as soon as practicable in accordance with Condition 13.
The Trustee may, without the consent of the Bondholders or Couponholders, agree with the Issuer and the Guarantor to the substitution in place of the Issuer or any Guarantor (or any previous substitute under this Condition) as the principal debtor or a guarantor under the Bonds, the Coupons and the Trust Deed of any Subsidiary or any holding company of the Issuer, subject to (a) in the case of a substitution of the Issuer, the Bonds being unconditionally and irrevocably guaranteed by the Guarantor (except to the extent that a Guarantor shall itself become the Issuer by such substitution), (b) the Trustee being satisfied that the interests of the Bondholders will not be materially prejudiced by the substitution and (c) certain other conditions set out in the Trust Deed being complied with.
In connection with the exercise of its functions (including but not limited to those in relation to any proposed modification, waiver, authorisation or substitution) the Trustee shall not have regard to the consequences of such exercise for individual Bondholders or Couponholders and the Trustee shall not be entitled to require, nor shall any Bondholder or Couponholder be entitled to claim, from the Issuer or any other person, any indemnification or payment in respect of any tax consequences of any such exercise upon individual Bondholders or Couponholders.
15. INDEMNIFICATION OF THE TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee will be entitled to enter into business transactions with the Issuer, any Guarantor and any of their respective Subsidiaries without accounting for any profit resulting therefrom.
16. FURTHER ISSUES
The Issuer may from time to time without the consent of the Bondholders or Couponholders create and issue further bonds or notes either having the same Conditions as the Bonds in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with the outstanding bonds or notes of any series (including the Bonds) or upon such terms as to interest, premium, redemption, ranking and otherwise as the Issuer may determine at the time of their issue. Any further bonds or notes forming a single series with the outstanding bonds or notes of any series (including the Bonds) constituted by the Trust Deed or any deed supplemental to it shall, and any other bonds or notes may (with the consent of the Trustee), be constituted by a deed supplemental to the Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Bondholders and the holders of bonds or notes of other series in certain circumstances where the Trustee so decides. In these Conditions, unless the context otherwise requires and subject to any provision to the contrary in the Trust Deed, the expression "BONDS" shall include any further bonds issued in accordance with this Condition and forming a single series with the Bonds.
17. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of the Bonds under the Contracts (Rights of Third Parties) Act 1999.
18. GOVERNING LAW
The Trust Deed, the Bonds and the Coupons are governed by, and will be construed in accordance with, English law.
TERMS AND CONDITIONS PECULIAR TO THE 2011 BONDS
The Conditions to be endorsed on each of the 2011 Bonds will be the same as those to be endorsed on each of the 2006 Bonds with the following changes and shall be deemed to be set out hereunder in full with such changes:
(i) references to the 2006 Bonds in the introductory paragraph to the numbered conditions shall be replaced by the 2011 Bonds;
(ii) "5.25 per cent." shall be deleted from Condition 5 and replaced with "6.125 per cent. "; and
(iii) "23 August 2006" shall be deleted from Condition 6(a) and replaced with "23 August 2011".
USE OF PROCEEDS
The net proceeds of the issue of the 2006 Bonds and the 2011 Bonds, which are expected to amount to approximately euro 1,986,262,500, in aggregate, will be used for general corporate purposes.
SUMMARY OF PROVISIONS RELATING TO
THE BONDS WHILE IN GLOBAL FORM
Each Temporary Global Bond and each Permanent Global Bond contain provisions which apply to the Bonds while they are in global form, some of which modify the effect of the terms and conditions of the Bonds set out in this document. The following is a summary of certain of those provisions.
1. EXCHANGE
Each Temporary Global Bond is exchangeable in whole or in part (free of charge to the holder) for interests in a Permanent Global Bond on or after a date which is expected to be 3 October 2001 upon certification as to non-U.S. beneficial ownership in the form set out in such Temporary Global Bond. Each Permanent Global Bond is exchangeable in whole but not in part (free of charge to the holder) for the Definitive Bonds described below (i) if such a Permanent Global Bond is held on behalf of Euroclear or Clearstream, Luxembourg or an alternative approved clearing system and such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so by such holder giving notice to the Principal Paying Agent or (ii) if the Issuer would suffer a disadvantage in respect of the Bonds as a result of a change in laws or regulations (taxation or otherwise) of any jurisdiction referred to in Condition 8 of the Bonds or as a result of a change in the practice of Euroclear or Clearstream, Luxembourg or an alternative approved clearing system which would not be suffered were the Bonds represented by such Permanent Global Bond in definitive form and a certificate to such effect signed by two Directors of the Issuer is delivered to the Trustee by the Issuer giving notice to the Principal Paying Agent and the Bondholders of its intention to exchange such Permanent Global Bond for Definitive Bonds on or after the Exchange Date specified in the notice.
On or after the Exchange Date (as defined below) relating to a Permanent Global Bond the holder of such Permanent Global Bond may (in the case of (i) above) and shall (in the case of (ii) above) surrender such Permanent Global Bond to or to the order of the Principal Paying Agent. In exchange for such Permanent Global Bond, the Issuer will deliver, or procure the delivery of, an equal aggregate principal amount of duly executed and authenticated Definitive Bonds (having attached to them all Coupons in respect of interest which has not already been paid on such Permanent Global Bond), security printed in accordance with any applicable legal and stock exchange or other relevant authority requirements and in or substantially in the form set out in Schedule 3 to the relevant Trust Deed.
"EXCHANGE DATE" means a day falling not less than 60 days after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Principal Paying Agent is located and, except in the case of exchange pursuant to (i) above, in the cities in which the relevant clearing system is located.
2. PAYMENTS
No payment will be made on a Temporary Global Bond unless exchange for an interest in the relevant Permanent Global Bond is improperly withheld or refused by or on behalf of the Issuer. Payments of principal and interest in respect of Bonds represented by a Permanent Global Bond will be made against presentation for endorsement and, if no further payment falls to be made in respect of such Bonds, surrender of such Permanent Global Bond to or to the order of the Principal Paying Agent or such other Paying Agent as shall have been notified to Bondholders for such purpose. A record of each payment so made will be endorsed in the appropriate schedule to such Permanent Global Bond, which endorsement will be prima facie evidence that such payment has been made in respect of the Bonds represented by such Permanent Global Bond. No person shall be entitled to receive any payment on a Permanent Global Bond falling due after the Exchange Date in respect thereof unless exchange of such Permanent Global Bond for Definitive Bonds is improperly withheld or refused by or on behalf of the Issuer. Condition 8(e) of the Bonds will apply to Definitive Bonds only.
3. NOTICES
So long as Bonds are represented by a Permanent Global Bond and such Permanent Global Bond is held on behalf of Euroclear or Clearstream, Luxembourg or an alternative approved clearing system, notices to Bondholders may be given by delivery of the relevant notice to that clearing system for communication by it to entitled accountholders in substitution for notification as required by the Conditions; except that so long as the Bonds are listed on the Official List of the UK Listing Authority and are admitted to trading on the London Stock Exchange's market for listed securities and the rules of the UK Listing Authority or the
London Stock Exchange, as the case may be, requires notices shall be published in a leading English language daily newspaper having general circulation in the United Kingdom (which is expected to be the Financial Times) any such Notice given only by delivery as aforesaid shall be deemed to have been given on the seventh day after that on which such notice is delivered to Clearstream, Luxembourg and/or Euroclear, as the case may be, as aforesaid.
4. PRESCRIPTION
Any claims against the Issuer in respect of principal and interest on Bonds represented by a Permanent Global Bond will become void unless it is presented for payment within a period of 12 years (in the case of principal) and six years (in the case of interest) from the appropriate Relevant Date (as defined in Condition 3).
5. MEETINGS
The holder of a Permanent Global Bond will be treated as being one person for the purposes of any quorum requirements of, or the right to demand a poll at, a meeting of Bondholders and, at any such meeting, as having one vote in respect of each euro 1,000 principal amount of Bonds for which such Permanent Global Bond may be exchanged.
6. CANCELLATION
Cancellation of any Bond represented by a Permanent Global Bond required by the Conditions to be cancelled following its redemption or purchase will be effected by reduction in the principal amount of such Permanent Global Bond.
7. TRUSTEE'S POWERS
In considering the interests of Bondholders while a Permanent Global Bond is held on behalf of Euroclear or Clearstream, Luxembourg and/or an alternative approved clearing system the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Bonds represented by such Permanent Global Bond and may consider such interests as if such accountholders were the holder of such Permanent Global Bond.
8. PUT OPTION
The Bondholders' put option in Condition 6 may be exercised by the holder of a Permanent Global Bond giving notice to the Principal Paying Agent of the principal amount of Bonds represented by such Permanent Global Bond in respect of which the option is exercised and presenting the Permanent Global Bond for endorsement of exercise within the time limits specified in Condition 6(d).
NGG FINANCE plc
The Issuer is a finance vehicle, and a member of the Group. It was incorporated on 21 May 2001 in England and Wales as a company with limited liability under Registered Number 4220381 and is a wholly-owned subsidiary of the Guarantor.
The authorised and issued share capital of the Issuer comprises 50,000 ordinary shares of (pound)1 each of which 49,999 are held by the Guarantor and 1 is held by National Grid Nominees Limited on trust for the Guarantor.
DIRECTORS
The Directors of the Issuer and their respective business addresses and occupations are:
NAME BUSINESS OCCUPATIONS WITHIN NATIONAL GRID GROUP PLC ---- --------------------------------------------------- Charles Carter Director of Corporate Finance Martin O'Donovan Treasurer Mark Flawn Assistant Treasurer Paul Phillips Assistant Treasurer Fiona Smith Group General Counsel and Company Secretary |
The business address of each of the above is 15 Marylebone Road, London, NW1 5JD.
The principal activities of the Directors performed by them outside the Group are directorships of the companies or institutions set out below: None
The joint company secretaries of the Issuer are David Forward and Fiona Smith. The registered office of the Issuer is at 15 Marylebone Road, London, NW1 5JD.
CAPITALISATION OF THE ISSUER
The following is a summary of the historic cost capital and reserves as at 27 July 2001 and indebtedness as at 27 July 2001 of the Issuer:
CAPITAL AND RESERVES AT 27 JULY 2001
(pound)
------- Authorised 50,000 ordinary shares of (pound)1 each 50,000.00 Issued, allotted, called-up and partly paid 50,000 ordinary shares 12,500.00 --------- TOTAL CAPITAL & Reserves 12,500.00 ========= |
Notes
1. At 27 July 2001, the issuer had cash and deposits amounting
to (pound)12,500, and no indebtedness, contingent liabilities or
guarantees.
2. The table does not include indebtedness in respect of the Bonds now
being issued.
3. There has been no change in the authorised and issued share capital of
the Issuer since 27 July 2001.
4. Save for the bonds now being issued, there has been no material change
in the indebtedness or contingent liabilities and guarantees of the
Issuer since 27 July 2001.
NATIONAL GRID GROUP plc
The Guarantor is the holding company for a group of companies (herein referred to as the Group), which is an international provider of electricity and telecommunications networks. It is a company incorporated in England and Wales with limited liability under Registered Number 2367004.
The Group's principal electricity businesses are the transmission of electricity in England and Wales and the transmission and distribution of electricity in north-eastern United States. The Group operates interconnections between its network in England and Wales and each of France, Scotland and the Isle of Man and is developing an interconnector in Australia. In addition, the Group, with joint venture partners, operates transmission networks in Argentina and Zambia.
The Guarantor's telecommunications network activities include its 32.7 per cent. economic interest in Energis plc and its involvement, with joint venture partners, in telecommunications projects in Argentina, Brazil, Chile and Poland.
The Guarantor's shares were admitted to the Official List of the London Stock Exchange on 11 December 1995 and its American Depositary Shares were listed on the New York Stock Exchange on 7 October 1999.
In connection with the acquisition of Niagara Mohawk (as described in International Business below), later this year the Guarantor intends to enter into a scheme of arrangement (the "SCHEME") pursuant to section 425 of the Companies Act 1985. Under the Scheme, a new holding company, New National Grid plc ("NNG") will be put in place. The Guarantor will then become a wholly-owned subsidiary of NNG, and within a certain period of time after the Scheme has become effective, NNG will become an additional guarantor of the Bonds, jointly and severally with the Guarantor. The shares of the Issuer will be transferred from the Guarantor to NNG when the Scheme becomes effective, and the Issuer will then become a wholly owned direct subsidiary of NNG.
UK BUSINESS
TRANSMISSION BUSINESS
GENERAL
The Guarantor's subsidiary company, The National Grid Company plc ("NGC") is the owner and operator of the electricity transmission system (the "TRANSMISSION SYSTEM") in England and Wales and is the sole holder of a transmission licence (the "TRANSMISSION LICENCE") in England and Wales. The Transmission Licence came into effect in March 1990 and, unless revoked, will continue in force until determined by not less than 25 years notice by the Secretary of State. NGC is required by the Electricity Act 1989 (the "ELECTRICITY ACT") to develop and maintain an efficient, co-ordinated and economical system of electricity transmission and to facilitate competition in the supply and generation of electricity. NGC is also responsible for reinforcing, renewing and maintaining the Transmission System to meet the requirements of customers and to ensure continued compliance with the security standards set out in the Transmission Licence. Since the introduction of the new electricity trading arrangements ("NETA") on 27 March 2001, under the Electricity Act, NGC is also obliged to operate an efficient co-ordinated market and an economical transmission system.
NGC derives the vast majority of its turnover and profits from charges for services provided by its transmission business (the "TRANSMISSION BUSINESS") to, inter alia, generators, interconnector users, distributors, suppliers and directly-connected customers.
PHYSICAL ASSETS
The Transmission Business comprises the planning, development, construction, maintenance and operation of the Transmission System in England and Wales, operating predominantly at voltages of 400kV and 275kV and includes the provision of connections to the Transmission System. The Transmission System consists of approximately 4,500 miles of overhead lines and approximately 400 miles of underground cable, together with substations at over 300 sites.
OPERATION OF THE TRANSMISSION SYSTEM
NETA
The Department of Trade and Industry ("DTI") and the Office of Gas and Electricity Markets ("OFGEM") undertook an extensive review of, and wide-ranging consultation on, the proposed arrangements for a new wholesale electricity market for England and Wales to replace the Electricity Pool of England and Wales. Details of NETA were published jointly by the DTI and Ofgem in a document dated 21 October 1999 and
the document formed the basis of the new arrangements to be implemented by participants across the electricity industry. NETA was introduced on 27 March 2001. Certain aspects of NETA are now dealt with in the Utilities Act 2000.
NGC made a considerable contribution to the development of NETA and played a major role in its implementation. NETA represents a fundamental shift to trading arrangements based on bilateral contracts, similar to other commodity markets. NETA has had significant implications for NGC's operations and for the manner in which it contracts for the provision of ancillary services, which form part of balancing services. However, NETA has not had significant financial implications for NGC.
TRANSMISSION REVENUE
Revenue-controlled charges
As transmission asset owner, NGC is responsible for the development, operation and maintenance of the transmission network and recovers its costs, including a return on capital employed, through charges to generators, distributors and suppliers of electricity for use of and connection to the Transmission System.
Under the revenue restriction condition set out in the Transmission Licence, NGC's revenue from charges for use of the Transmission System and for connections made before March 1990 is permitted to increase each year in line with the Retail Price Index ("RPI"), minus an efficiency factor X. In the current revenue restriction, which was introduced on 1 April 2001, X has been set at 1.5 from April 2002. The revenue restriction is reviewed from time to time by Ofgem, typically at intervals of four to five years. The current revenue restriction is expected to remain in force until March 2006.
In determining the above price controls applicable to NGC, Ofgem assumes an allowed rate of return on equity and an efficient capital structure as to the levels of debt and equity. NGC intends to match the gearing levels assumed by Ofgem by increasing its borrowings and making dividend distributions and reorganising its share capital and reserves as necessary. The Transmission Licence contains certain regulatory constraints which must be complied with prior to the declaration of dividends.
Post-1990 connection charges
NGC is permitted by the Transmission Licence to set charges for connections to the Transmission System made since March 1990 to recover the cost directly or indirectly incurred in providing connection, together with a reasonable rate of return on such costs.
Balancing services use of systems charges
As system operator, NGC is responsible for the control of the transmission system, including:
o the procurement of the ancillary services required to ensure network stability and security; and
o the provision of balancing services, comprising the acceptance by NGC of "bids" (proposed trades to decrease generation or increase demand) or "offers" (proposed trades to increase generation or decrease demand) as necessary to enable it to balance generation and demand for electricity in real time throughout the day.
NGC is permitted by the Transmission Licence to recover the internal costs it incurs in fulfilling its responsibility as system operator together with a small profit margin.
NGC recovers the costs incurred in the balancing services activities, including
the procurement of ancillary services, through balancing services use of system
charges. Its revenue from these charges is regulated by means of a Balancing
Services Incentive Scheme ("BSIS") set out the Transmission Licence. The BSIS
was introduced on 27 March 2001 and sets a target for the costs incurred by NGC
in balancing the system in the period up to March 2002. If costs are below
(pound)471 million, NGC will retain 40 per cent. of the savings up to a maximum
potential income of (pound)45 million. If costs are more than (pound)500
million, NGC will bear 12 per cent. of the excess up to a maximum potential
liability of (pound)15 million.
INTERCONNECTORS
NGC derives income from charges for the use of its interconnectors with Scotland, France and the Isle of Man. Under the terms of the Transmission Licence, NGC is at present required to set its charges for the use of its interconnectors with Scotland and France at a level designated to recover no more than a reasonable rate of return on the capital represented by the interconnectors. The interconnector with the Isle of Man is unlicensed and not subject to this restriction.
In February 2000, the Guarantor was selected by the Basslink Development Board in Australia to build, own and operate an interconnector between the island of Tasmania and the State of Victoria on the Australian mainland, across the Bass Strait. Construction is expected to commence at the end of 2001 and the project is expected to be completed by the end of 2003.
ENVIRONMENTAL LAW AND REGULATION
In the United Kingdom, NGC is subject to environmental legislation and regulation. The Water Resources Act 1991 and the Environmental Protection Act 1990, as amended by the Environment Act 1995, constitute the primary environmental legislation affecting the activities of NGC. Under these statutes, it is an offence to pollute the environment.
Electric and magnetic fields ("EMFs") arise from, among other sources, the transmission, distribution and use of electricity. Concerns have been raised about the possible health effects of EMFs and research into this issue has been in progress in many countries for several years. NGC carries out its operations in line with guidance on EMFs issued by the National Radiological Protection Board, an independent statutory body, which has stated that it does not consider that the results of published studies provide a basis for any additional restriction on human exposure to EMFs. This position is supported by the results of the United Kingdom Childhood Cancer study published in December 1999.
A European Union recommendation (the "RECOMMENDATION") on limitation of exposure of the general public to EMFs has been adopted by the European Union's Council of Ministers. The Recommendation is addressed to European Union member governments and not to individual companies. The United Kingdom government is considering how the qualifications should be interpreted and therefore how the Recommendation should be implemented in the United Kingdom.
ENERGIS
In 1993, the Guarantor group established Energis plc ("ENERGIS"), at that time a subsidiary of the Guarantor which was granted a public telecommunications operator's licence to provide telecoms services using a long-distance telecommunications network constructed predominantly on the electricity transmission network. By 1997, the business of Energis had grown significantly, and application was made for its shares to be admitted to the official list of the London Stock Exchange, which was effected in December 1997. As part of this process, the Guarantor disposed of just over 25 per cent. of its shareholding in Energis by way of a placing with institutional investors.
On 22 January 1999, the Guarantor offered for sale 60 million ordinary shares in Energis in an offering of ordinary shares and simultaneously offered Equity Plus Income Convertible Securities which were mandatorily exchangeable into up to 14.7 million Energis shares. The value of the combined offerings was approximately (pound)1.2 billion. On 9 February 2000, the Guarantor disposed of a further 28.9 million ordinary shares of Energis for (pound)0.95 billion. As at 31 March 2001, the Guarantor retains an economic interest over 32.7 per cent. of the total Energis shares in issue. The Guarantor has indicated that it intends to dispose of its remaining interests as suitable opportunities arise.
INTERNATIONAL BUSINESS
The Guarantor is actively developing new businesses, alone or in conjunction with suitably experienced partners, in operations where it can exploit its proven skills in building and operating complex networks and in managing sophisticated software systems in real time.
USA
NATIONAL GRID USA
Background
The Guarantor acquired New England Electric System ("NEES"), now renamed National Grid USA, in March 2000 at a cost of approximately (pound)2 billion. National Grid USA acquired Eastern Utilities Associated ("EUA") in April 2000 at a cost of approximately (pound)0.4 billion. The companies were integrated on 1 May 2000 and operate as National Grid USA.
National Grid USA operates a network of approximately 3,000 miles of transmission lines and 31,000 miles of distribution network and serves approximately 1.7 million customers in Massachusetts, Rhode Island and New Hampshire. Its subsidiary company New England Power ("NEP") is responsible for the operation of the transmission network and delivery of electricity in bulk to National Grid USA's four electricity distribution companies, Massachusetts Electric, Narragansett Electric, Granite State Electric and Nantucket Electric.
National Grid USA has minority interests in two operating nuclear generating units which it is seeking to divest and in three nuclear generating units which are permanently shut down.
Operating environment
Until 1998, National Grid USA's distribution companies supplied electricity to all retail customers in their respective service territories. NEP met all the electricity requirements of the distribution companies from a combination of operating its own generating capacity and purchasing electricity under long-term contracts.
From 1998 onwards, the electricity industry in Massachusetts, Rhode Island and New Hampshire was restructured. The retail electricity supply markets in these states were opened to competition, giving all electricity delivery customers a choice of supplier. At the same time, National Grid USA was required by the state regulatory authorities to divest its generating capacity.
Regulatory settlements
Generation
Under settlement agreements reached with its regulators as part of industry restructuring, National Grid USA is able to recover all of NEP's investment in fossil and nuclear generation, including any generation-related regulatory assets. The unrecovered amount -- known as stranded costs -- is made up of the unamortised generation investments, net of proceeds and related contractual commitments. These stranded costs are passed on to wholesale customers, including the distribution companies, through a contract termination charge (CTC). The distribution companies in turn are permitted to recover these costs through delivery charges to all retail customers.
Distribution
Under the Massachusetts Electric distribution rate plan (which regulates its income) distribution rates were reduced by $10.0 million on 1 May 2000 and will remain frozen until the end of February 2005. From March 2005 to the end of December 2009, changes in distribution rates will be linked to changes in the regional average of distribution rates of similarly unbundled investor-owned utilities in New England, New York, New Jersey and Pennsylvania. Based on a predetermined formula, annual merger-related savings achieved up to the end of 2009 will be calculated and shared between customers and Massachusetts Electric in 2010 to 2019. The rate plan also includes service quality incentives and penalties based on performance in areas including reliability and customer satisfaction.
Under the Narrangansett Electric rate plan (which regulates its income), distribution rates were reduced by approximately $13.0 million on 1 May 2000 and will remain frozen until 2004. During the rate freeze, Narrangansett Electric is permitted to retain earnings up to 12.0 per cent. return on equity. Any earnings between 12.0 per cent. and 13.0 per cent. will be shared equally with customers. If earnings exceed 13.0 per cent., the excess will be divided between customers and the company, with customers receiving 75.0 per cent. After 2004, Narrangansett Electric's distribution rates will be set in accordance with its cost of service, in which it will be permitted to include its share of the efficiency savings produced by its integration with former EUA distribution companies. The merger savings will be determined in regulatory proceedings in 2002 or 2003 and Narrangansett Electric will be permitted to include 50.0 per cent. of the savings as an expense in its cost of service from 2004 until 2019, subject to verification in 2007.
The current rates for Granite State Electric became effective in July 1998. Nantucket Electric's distribution rates are linked to those of Massachusetts Electric and became effective on 1 May 2000.
The distribution companies are obliged to sell electricity through a standard offer service to retail customers who have chosen not to select an alternative supplier and to provide a default service to customers who have not selected a power supplier but are not eligible for standard offer service. The regulatory settlements permit the distribution companies to pass through to customers the costs of purchasing electricity to meet their default obligations and, subject to regulatory approval, to adjust their standard offer terms in order to re-align revenues with the costs of purchasing electricity.
Transmission
NEP's rates are subject to regulation by the Federal Energy Regulatory Commission (FERC) and consist, for the most part, of CTCs and transmission charges. NEP's transmission charge is determined by a formula designed to enable it to recover its actual costs, together with a return on capital employed.
ENVIRONMENTAL LAW AND REGULATION
The Group is subject to various environmental laws and regulations in the U.S. It has implemented an Environmental Management System across US transmission and distribution operations and carries out an environmental audit programme to check that its environmental policies, procedures, operating practices and assets are sound.
The Group is currently aware of 51 manufactured gas sites, mainly in Massachusetts, associated with past activities of predecessor companies of National Grid USA, and is currently engaged in investigation and remediation at approximately 22 of these sites. There are regulatory agreements in place which provide for recovery from customers of the remediation costs of such sites. Further such sites may be identified in the future.
ACQUISITION OF NIAGARA MOHAWK
Terms and expected timetable
On 5 September 2000, the Guarantor announced that it had agreed to acquire Niagara Mohawk (the "ACQUISITION"). The shareholders of Niagara Mohawk and of the Guarantor voted in favour of the Acquisition at shareholder meetings held on 19 January 2001 and 29 January 2001 respectively. The Acquisition is subject to a number of further conditions, including regulatory and other consents and approvals in the U.S., the majority of which have been received. The principal regulatory approvals still outstanding are those required from the New York Public Services Commission and the Securities and Exchange Commission. The Acquisition is expected to be completed around the end of 2001. The terms of the Acquisition value the equity of Niagara Mohawk at approximately U.S.$3.0 billion and the enterprise value at approximately U.S.$8.9 billion. The shareholders of Niagara Mohawk will receive consideration of U.S.$19.00 per Niagara Mohawk share, subject to adjustment. Niagara Mohawk shareholders will be able to elect to receive their consideration in cash, shares in NNG (represented by American Depositary Shares), or a combination thereof, with the aggregate cash consideration offered to all Niagara Mohawk shareholders being $1.015 billion. If cash elections received from all Niagara Mohawk shareholders exceed $1.015 billion, the Guarantor may, at its sole discretion, reduce the total number of American Depositary Shares to be issued and increase the cash component of the consideration. The Guarantor currently expects to increase the cash component of the consideration for Niagara Mohawk to at least 50 per cent. if sufficient cash elections are received.
Prior to completion, the Guarantor will carry out a corporate restructuring by way of a scheme of arrangements, pursuant to which NNG, will become the holding company of the Guarantor. The Guarantor expects to meet approximately half of the acquisition cost in cash.
Niagara Mohawk's activities
Niagara Mohawk is an electricity and natural gas utility serving over 1.5 million electricity customers and 0.5 million retail gas customers in central, northern and western New York State. Its electricity system is interconnected with that of National Grid USA and consists of over 9,000 miles of transmission lines and 118,000 miles of distribution network.
Niagara Mohawk has opened its market to retail competition under agreements with the New York Public Services Commission which provide for reductions in residential, commercial and industrial rates. Since September 2000, Niagara Mohawk has been allowed to recover the vast majority of its stranded costs and, from September 2001, will be able to pass through to customers the commodity costs of power.
Discussions are in progress with the New York Public Services Commission (NYPSC) on a proposed ten-year rate plan, to come into effect on completion of the Acquisition, which will include provisions for the recovery of wholesale power costs similar to those in the existing rate agreements.
Auction of Niagara Mohawk's nuclear assets
On 12 December 2000, Niagara Mohawk announced an agreement to sell its nuclear assets, comprising 100 per cent. of Nine Mile Point Nuclear Station Unit No. 1 and 41 per cent. of Nine Mile Point Nuclear Station No. 2 to Constellation Nuclear, a wholly-owned subsidiary of Constellation Energy Group Inc., for a total consideration of U.S.$610 million (subject to adjustment). On completion of the sale, Niagara Mohawk will transfer to Constellation Nuclear its existing decommissioning funding and Niagara Mohawk will have no further obligation relating to decommissioning. The asset sale agreement is subject to various regulatory approvals including those of the Nuclear Regulatory Commission, FERC and NYPSC. The sale is expected to complete in 2001.
OTHER COUNTRIES
Transener
In the year ended 31 March 1994, as part of a consortium, the Guarantor made an initial investment in Transener which was subsequently increased in June 1997, bringing the economic interest to 27.6 per cent. Transener holds an exclusive concession to operate the principal national electricity transmission system in Argentina and the regional system in the province of Buenos Aires.
Copperbelt Energy Corporation
In November 1997, a joint venture including the Guarantor completed the purchase of the Power Division of Zambia Consolidated Copper Mines Limited (now renamed Copperbelt Energy Corporation), which supplies electricity to the mines of the Copperbelt in Zambia. The cash consideration was approximately (pound)30 million, contributed equally by the Guarantor and its main partner, MPI International Limited.
Intelig
The Guarantor has a 50 per cent. shareholding in JVCO ParticpacEoAes Limitada, the ultimate parent undertaking of Interlig TelecommunicacEoAes. Its partners in the joint venture are Sprint and France Telecom, each of which has an interest of 25 per cent. Intelig provides long-distance telephone services, including inter-regional and international services to customers in Brazil.
The Guarantor also has investments in telecommunications ventures in Argentina, Chile and Poland.
RELATIONSHIP WITH UK GOVERNMENT
The Secretary of State retains a special share in the Guarantor, which is a special rights non-voting redeemable preference share of (pound)1. Certain provisions in the articles of association of the Guarantor cannot be altered or removed without the prior written consent of the holder of the Special Share. One such provision prevents any person, with limited exceptions, from having an interest in 15 per cent. or more in the voting share capital of the Guarantor. In addition, the Guarantor may not dispose of the business holding the Transmission Licence without the consent of the special shareholder. Upon the effective date of the Scheme (as described above), the Special Share in the Guarantor shall be cancelled and the Secretary of State will have issued to him a special share in New National Grid. This is expected to confer substantially the same rights as those described above, in relation to New National Grid.
DIRECTORS
The Directors of the Guarantor and their respective business addresses and occupations are:
NAME BUSINESS OCCUPATION ---- ------------------- James Ross Chairman Roger Urwin Chief Executive Rick Sergel Group Director, North America Stephen Box Group Finance Director Steven Holliday Group Director, Europe Edward Astle Group Director, Telecommunications John Grant Non-Executive Director Richard Reynolds Non-Executive Director Paul Joskow Non-Executive Director Bob Faircloth Non-Executive Director |
The business address of each of the above is 15, Marylebone Road, London, NW1 5JD, except:
Rick Sergal - 25 Research Drive, Westborough, MA 01582, USA
The principal activities of the Directors performed by them outside the Group are directorships of the companies or institutions set out below:
NAME COMPANY/INSTITUTIONS ---- -------------------- James Ross The Littlewoods Organisation plc, McGraw Hill, Datacard, Schneider Electric, Northwest Business Leadership Team Ltd. Roger Urwin Energis plc, The Special Utilities Investment Trust plc, TotalFinalElf Exploration UK plc Rick Sergel State Street Bank & Trust Stephen Box Energis plc, Michael Page International plc John Grant Hasgo Group Ltd, Peter Stubs Ltd, Torotrak plc, Corac group plc, Cordax plc Richard Reynolds Prospect Industries plc, Protobition Group plc, Wavionix Software Ltd, Telme.com plc, Warwick Art Society Ltd, E-Granite Ltd, Phonelink plc. Paul Joskow MIT Center for Energy and Environmental Policy Research, State Farm Indemnity Company, Whitehead Institute for Biomedical Research Edward Astle Dataflex Holdings, 3G Lab Ltd, Intect Telecom Systemsplc |
The company secretary of the Guarantor is Fiona Smith.
The registered office of the Guarantor is at 15, Marylebone Road, London, NW1 5JD.
CAPITALISATION OF THE GROUP
The following is a summary of the historic cost capital and reserves as at 31 March 2001 and indebtedness as at 31 March 2001 of National Grid Group plc and its subsidiaries:
CAPITAL AND RESERVES AT 31 MARCH 2001
(pound) millions ---------------- Authorised 2,125.0 million ordinary shares of 11 13/17 pence each 250.0 Issued, allotted, called-up and fully paid 1,484.6 million ordinary shares 174.7 Share premium account 276.9 Profit and loss account 3,024.2 Minority interests 41.8 ------- TOTAL CAPITAL & RESERVES 3,517.6 ======= INDEBTEDNESS AT 31 MARCH 2001 Amounts due within one year Bank loans and overdrafts 627.5 Current portion of long term loans 381.2 Amounts due after more than one year Repayable wholly within five years 1,647.5 Repayable after five years 1,533.2 ------- TOTAL INDEBTEDNESS 4,189.4 ======= CONTINGENT LIABILITIES AND GUARANTEES AT 31 MARCH 2001 Performance bonds and guarantees 102.2 |
Notes
1. The table does not include indebtedness in respect of the Bonds now
being issued.
2. National Grid Group plc's distributable reserves at 31 March 2001 amounted to (pound)1,160.0 million.
3. Since 31 March 2001 the number of Issued, allotted, called-up and fully paid ordinary shares of National Grid Group plc has increased by 857,278 and there has been no material adverse change in the reserves of the Guarantor.
4. On 27 July The National Grid Company plc, a subsidiary of National Grid Group plc, issued (pound)600 million of sterling bonds with an average maturity of 25.5 years. The proceeds were used to repay short term borrowings in the Group and to the extent that appropriate maturities were not immediately available the balance was placed on short term deposit.
5. Since 31 March 2001 the guarantees given by National Grid Group plc in respect of the obligations of its associated companies have increased by $74.8 million (approximately (pound)52.6 million).
6. Save for the bonds now being issued and the note above, there has been no material change in the indebtedness or contingent liabilities and guarantees of National Grid Group plc since 31 March 2001.
7. None of the indebtedness shown in the table has the benefit of guarantees given by persons who are not in the Group save for an amount of (pound)17.5 million.
8. At 31 March 2001, National Grid Group plc had cash and deposits amounting to (pound)271.2 million.
9. The information contained in this Statement is extracted from the Company's audited consolidated financial statements as at 31 March 2001 (except for the information contained in notes 5 and 7 above).
10. At 31 March 2001, borrowings totalling (pound)348.6 million were secured by charges over property, plant and other assets of the Group.
TAXATION
The comments below are of a general nature based on the Issuer's understanding of current United Kingdom law and practice. They do not necessarily apply where the income is deemed for tax purposes to be the income of any other person. They relate only to the position of persons who are the absolute beneficial owners of their Bonds and Coupons and may not apply to certain classes of persons such as dealers or certain professional investors. Any holders of Bonds or Coupons who are in doubt as to their own tax position should consult their professional advisers.
1. INTEREST
While the Bonds continue to be listed on a recognised stock exchange within the meaning of section 841 Income and Corporation Taxes Act 1988, payments of interest may be made without withholding or deduction for or on account of income tax.
Persons in the United Kingdom paying interest to or receiving interest on behalf of another person may be required to provide certain information to the United Kingdom Inland Revenue regarding the identity of the payee or person entitled to the interest and, in certain circumstances, such information may be exchanged with tax authorities in other countries.
If the Bonds cease to be listed interest will generally be paid under deduction of income tax at the lower rate (currently 20 per cent.) subject to any direction to the contrary from the Inland Revenue in respect of such relief as may be available pursuant to the provisions of any applicable double taxation treaty.
The interest has a United Kingdom source and accordingly may be chargeable to United Kingdom tax by direct assessment. Where the interest is paid without withholding or deduction, the interest will not be assessed to United Kingdom tax in the hands of holders of the Bonds who are not resident in the United Kingdom, except where such persons carry on a trade, profession or vocation in the United Kingdom through a United Kingdom branch or agency in connection with which the interest is received or to which the Bonds are attributable, in which case (subject to exemptions for interest received by certain categories of agent) tax may be levied on the United Kingdom branch or agency.
If interest were paid under deduction of United Kingdom income tax (e.g. if the Bonds lost their listing), Bondholders who are not resident in the United Kingdom may be able to recover all or part of the tax deducted if there is an appropriate provision in an applicable double taxation treaty.
Bondholders should note that the provisions relating to additional amounts referred to in "TERMS AND CONDITIONS OF THE 2006 BONDS -- TAXATION" would not apply if the Inland Revenue sought to assess directly the person entitled to the relevant interest to United Kingdom tax. However exemption from, or reduction of, such United Kingdom tax liability might be available under an applicable double taxation treaty.
2. PROPOSED EU DIRECTIVE ON THE TAXATION OF SAVINGS INCOME
The European Union is currently considering proposals for a new directive regarding the taxation of savings income. Subject to a number of important conditions being met, it is proposed that Member States will be required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident in that other Member State, subject to the right of certain Member States to opt instead for a withholding system for a transitional period in relation to such payments.
3. DISPOSAL (INCLUDING REDEMPTION)
3.1 Corporate Bondholders
Bondholders within the charge to United Kingdom corporation tax will be subject to tax as income on all profits and gains arising from, and from fluctuations in the value of, the Bonds broadly in accordance with their statutory accounting treatment. Such holders will generally be charged in each accounting period by reference to interest and any profit or loss which in accordance with such Bondholder's authorised accounting method, is applicable to that period. Fluctuations in value relating to foreign exchange gains and losses in respect of the Bonds will be brought into account as income.
3.2 Other Bondholders
A disposal of a Bond by a Bondholder resident or ordinarily resident for tax purposes in the United Kingdom or who carries on a trade, profession or vocation in the United Kingdom through a branch or agency to which the Bond is attributable may give rise to a chargeable gain or allowable loss on
disposal of a Bond. Sterling values are compared at acquisition and transfer. Accordingly, a taxable profit can arise even where the foreign currency amount received on a disposal is less than or the same as the amount paid for the Bond. Any accrued interest at the date of disposal will be taxed under the provisions of the Accrued Income Scheme.
A transfer of a Bond by a holder resident or ordinarily resident for tax purposes in the United Kingdom or who carries on a trade in the United Kingdom through a branch or agency to which the Bond is attributable may give rise to a charge to tax on income in respect of an amount representing interest on the Bond which has accrued since the preceding interest payment date.
SUBSCRIPTION AND SALE
Barclays Bank PLC, Deutsche Bank AG London, J.P. Morgan Securities Ltd., Credit Suisse First Boston (Europe) Limited, Merrill Lynch International and Morgan Stanley & Co. International Limited (together, the "MANAGERS") have, (a) pursuant to a subscription agreement dated 20 August 2001 (the "2006 BOND SUBSCRIPTION AGREEMENT"), jointly and severally agreed with the Issuer and the Guarantor, subject to the satisfaction of certain conditions, to subscribe and pay for the 2006 Bonds at 99.71 per cent. of their principal amount less a combined management and underwriting commission of 0.35 per cent. of their principal amount; and (b) pursuant to a subscription agreement dated 20 August 2001 (the "2011 BOND SUBSCRIPTION AGREEMENT" and together with the 2006 Bond Subscription Agreement, the "SUBSCRIPTION AGREEMENTS"), jointly and severally agreed with the Issuer, subject to the satisfaction of certain conditions, to subscribe and pay for the 2011 Bonds at 99.635 per cent. of their principal amount less a combined management and underwriting commission of 0.40 per cent. of their principal amount. In addition the Issuer has agreed to reimburse the Managers for certain expenses incurred by them in connection with the issue of the Bonds. The Subscription Agreements entitle the Managers to be released and discharged from their obligations in respect of the subscription of the Bonds to which they relate in certain circumstances prior to the payment to the Issuer.
SELLING RESTRICTIONS
UNITED STATES
The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended, (the "SECURITIES ACT") and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.
Each Manager has agreed that, except as permitted by the Subscription Agreements, it will not offer, sell or deliver the Bonds (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, within the United States or to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it sells Bonds during the restricted period a confirmation or other notice setting forth the restrictions on offers and sales of the Bonds within the United States or to, or for the account or benefit of, U.S. persons.
The Bonds are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code and regulations thereunder.
In addition, until 40 days after the commencement of the offering, an offer or sale of Bonds within the United States by a dealer that is not participating in the offering may violate the registration requirements of the Securities Act.
UNITED KINGDOM
Each Manager has represented and agreed that (i) it has not offered or sold and
will not offer or sell any Bonds to persons in the United Kingdom prior to
admission of the Bonds to listing in accordance with Part IV of the Financial
Services Act 1986 (the "ACT") except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995 or the Act, (ii) it has complied and will comply
with all applicable provisions of the Act with respect to anything done by it in
relation to the Bonds in, from or otherwise involving the United Kingdom and
(iii) it has only issued or passed on, and will only issue or pass on, in the
United Kingdom any document received by it in connection with the issue of the
Bonds, other than any document which consists of or any part of listing
particulars, supplementary listing particulars or any other document required or
permitted to be published by listing rules under Part IV of the Act, to a person
who is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the
document may otherwise lawfully be issued or passed on.
GENERAL
Neither the Issuer, the Guarantor nor any Manager represent that the Bonds may at any time lawfully be sold in or from any jurisdiction (other than in or from Great Britain) in compliance with any applicable registration requirements pursuant to an exemption available thereunder or assumes any responsibility for facilitating such sales.
GENERAL INFORMATION
LISTING
The listing of the Bonds on the Official List will be expressed as a percentage of their principal amount. Transactions will be effected for settlement in euro, and under current practice, for delivery on the third business day in London after the date of the transaction. It is expected that listing of the Bonds on the Official List and admission to trading of the Bonds on the London Stock Exchange's Market for Listed Securities will be granted on 23 August 2000 subject only to the issue of the relevant Temporary Global Bonds. Prior to official listing, however, dealings in the Bonds will be permitted by the London Stock Exchange in accordance with its rules.
CLEARING SYSTEMS
The 2006 Bonds and the 2011 Bonds have each been accepted for clearance through Euroclear and Clearstream, Luxembourg under Common Code 13372942 and 13372977, respectively. The ISINs for the 2006 Bonds and the 2011 Bonds are XS0133729425, and XS0133729771, respectively.
The Bonds will bear a legend as follows: "Any United States person who holds this obligation will be subject to limitations under the United States income tax law, including the limitations provided in Section 165(j)) and 1287(a) of the Internal Revenue Code".
INCORPORATION
The Issuer was incorporated in England and Wales on 21 May 2001 under the Companies Act 1985 as a public limited company on 27 July 2001 with registered number 4220381.
The Guarantor was incorporated in England and Wales on 1 April 1989 under the Companies Act 1985 as a public limited company with registered number 2367004.
ANNUAL ACCOUNTS
Audited annual consolidated accounts have been prepared in respect of the Guarantor's three financial years ended on 31 March 2001. No audited financial statements have been prepared for any period subsequent to 31 March 2001.
Audited annual accounts in respect of the Issuer are expected to be prepared on or about 31 March 2002.
AUDITORS
PricewaterhouseCoopers (Chartered Accountants and Registered Auditors) have audited and rendered unqualified audit reports on the consolidated accounts of the Guarantor for the three years ended 31 March 2001.
PricewaterhouseCoopers are auditors to the Issuer.
FINANCIAL AND TRADING POSITION AND PROSPECTS
There has been no significant change in the financial or trading position of the Issuer since 21 May 2001, being its date of incorporation nor of the Guarantor nor of the Group since 31 March 2001, and no material adverse change in the financial position or prospects of the Issuer, the Guarantor or the Group, since 21 May 2001 in the case of the Issuer and 31 March 2001 in the case of the Guarantor or the Group.
LITIGATION
There are no, nor have there been any legal or arbitration proceedings (including any such proceedings which are pending or threatened of which either the Issuer or the Guarantor is aware) which may have or have had during the 12 months preceding the date of this document a significant effect on the Issuer's, the Guarantor's or the Group's financial position.
APPROVALS AND AUTHORISATIONS
The issue of the Bonds was authorised by resolutions of the Board of Directors of the Issuer passed on 30 July 2001 and resolutions of a duly authorised committee of the Board of Directors of the Issuer passed on 15 August 2001.
The giving of the Guarantee was authorised by a resolution of a duly authorised Committee of the Board of Directors of the Guarantor passed on 26 July 2001.
The Bonds constitute longer term debt securities issued in accordance with
regulations made under Section 4 of the Banking Act 1987. Neither the Issuer nor
the Guarantor is an authorised institution or a European authorised institution
(as such terms are defined in the Banking Act 1987 (Exempt Transactions)
Regulations 1997).
CONSENT
PricewaterhouseCoopers has given and has not withdrawn its consent to the issue of this document with the inclusion herein of its report on the Issuer dated 20 August 2001.
DOCUMENTS ON DISPLAY
Copies of the following documents may be inspected at the offices of CMS Cameron McKenna, Mitre House, 160 Aldersgate Street, London EC1A 4DD, during usual business hours on any weekday (Saturdays and public holidays excepted) for 14 days from the date of this document:
(i) the Memorandum and Articles of Association of each of the Issuer and the Guarantor;
(ii) the Subscription Agreements and drafts (subject to modification) of the Trust Deeds constituting the Bonds (incorporating the form of the Bonds) and the Paying Agency Agreements, relating to the Bonds;
(iii) Agreement, Plan of Merger and Scheme of Arrangement dated as of 4 September 2000 between the Guarantor, Niagara Mohawk, NNG and Grid Delaware Inc.;
(iv) Accountant's Report of PricewaterhouseCoopers on the Issuer dated 20 August 2001; and
(v) the audited accounts of the Guarantor for the three financial years ended 31 March 2001.
ACCOUNTANT'S REPORT
[PricewaterhouseCoopers LOGO]
PricewaterhouseCoopers
1 Embankment Place
London
WC2N 6RH
The Directors
NGG Finance Plc
15 Marylebone Road
London
NW1 5JD
Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London E14 4BB
Deutsche Bank AG London
Winchester House
1 Great Winchester Street
London EC2N 2DB
J.P. Morgan Securities Ltd.
60 Victoria Embankment
London EC4P 0JF
(and the other Managers as defined in Appendix 1)
20 August 2001
Dear Sirs
NGG FINANCE PLC
INTRODUCTION
We report on the financial information set out below. This financial information has been prepared for inclusion in the offering circular dated 20 August 2001 (the "Offering Circular") of NGG Finance Plc (the "Company").
The Company was incorporated as NGG Finance Limited on 21 May 2001, and was re-registered as a public limited company on 27 July 2001. The Company has not yet commenced to trade, has made up no financial statements for presentation to its members and has not declared or paid a dividend.
BASIS OF PREPARATION
The financial information set out below is based on the financial records of the Company, to which no adjustment was considered necessary.
RESPONSIBILITY
The financial records are the responsibility of the directors of the Company.
The directors of the Company are responsible for the contents of the Offering Circular in which this report is included.
PricewaterhouseCoopers is the successor partnership to the UK firms of Price Waterhouse and Coopers & Lybrand. The principal place of business of PricewaterhouseCoopers and its associate partnerships, and of Coopers & Lybrand, is 1 Embankment Place, London WC2N 6RH. The principal place of business of Price Waterhouse is Southwark Towers, 32 London Bridge Street, London SE1 9SY. Lists of the partners names are available for inspection at those places.
All partners in the associate partnerships are authorised to conduct business as agents of, and all contracts for services to clients are with, PricewaterhouseCoopers. PricewaterhouseCoopers is authorised by the Institute of Chartered Accountants in England and Wales to carry on investment business.
It is our responsibility to compile the financial information set out in our report from the financial records, to form an opinion on the financial information and to report our opinion to you.
BASIS OF OPINION
We conducted our work in accordance with the Statements of Investment Circular Reporting Standards issued by the Auditing Practices Board. Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. Our work also included an assessment of significant estimates and judgements made by those responsible for the preparation of the financial records underlying the financial information and whether the accounting polices are appropriate to the circumstances of the Company and adequately disclosed.
We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial information is free from material misstatement, whether caused by fraud or other irregularity or error.
OPINION
In our opinion, the financial information gives, for the purposes of the Offering Circular, a true and fair view of the state of affairs of the Company as at the date stated.
FINANCIAL INFORMATION
The balance sheet of the Company at 27 July 2001 is as follows:
NOTES (pound) ----- ------- CURRENT ASSETS Cash at bank and in hand 12,500 ------ NET ASSETS 12,500 ====== Represented by: SHARE CAPITAL 3 12,500 ====== |
Cash flow statement for the period ended 27 July 2001 is as follows:
(pound) ------- Issue of ordinary share capital 12,500 ------ INCREASE IN NET CASH 12,500 ====== |
NOTES TO THE FINANCIAL INFORMATION
1. ACCOUNTING POLICIES
The balance sheet has been prepared in accordance with the historical cost convention.
2. TRADING ACTIVITY
The Company was incorporated on 21 May 2001 and has not traded in the period from its date of incorporation to date, nor did it receive any income, incur any expenses or pay any dividends. Consequently, no profit and loss account has been prepared.
3. SHARE CAPITAL
The Company was incorporated with an authorised share capital of (pound) 100,
comprising 100 Ordinary shares of (pound) 1 each. The authorised share capital
was increased on 27 July 2001 to (pound) 50,000 by the creation of 49,900
additional Ordinary shares. 50,000 Ordinary shares were allotted for cash, and
partly called and paid at a rate of 25p per share (total payment received
(pound) 12,500). The balance remains uncalled and unpaid.
4. POST BALANCE SHEET EVENTS
On 20 August 2001 the Company published an Offering Circular for the issue of euro 1,250,000,000 5.25% Bonds due 2006 and euro 750,000,000 6.125% Bonds due 2011 guaranteed by National Grid Group plc (the parent company), which are expected to be issued on 23 August 2001.
5. IMMEDIATE AND ULTIMATE HOLDING COMPANY
The immediate and ultimate parent undertaking is National Grid Group plc.
Yours faithfully
PricewaterhouseCoopers
Chartered Accountants
APPENDIX 1 THE MANAGERS
Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London
E14 4BB
Deutsche Bank AG London
Winchester House
1 Great Winchester Street
London
EC2N 2DB
J.P. Morgan Securities Ltd.
60 Victoria Embankment
London
EC4P 0JP
Credit Suisse First Boston (Europe) Limited
One Cabot Square
Canary Wharf
London
E14 4QJ
Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London
E14 4WA
REGISTERED OFFICE OF THE ISSUER
15 Marylebone Road
London NW1 5JD
REGISTERED OFFICE OF THE GUARANTOR
15 Marylebone Road
London NW1 5JD
TRUSTEE FOR THE BONDHOLDERS
THE LAW DEBENTURE TRUST CORPORATION p.l.c.
Fifth Floor
100 Wood Street
London EC2V 7EX
LEGAL ADVISERS
To the Issuer To the Managers and the Trustee CMS CAMERON MCKENNA LINKLATERS 160 Aldersgate Street LINKLATERS & Alliance London EC1A 4DD One Silk Street London EC2Y 8HQ |
AUDITORS TO THE ISSUER
PRICEWATERHOUSECOOPERS
Chartered Accountants and Registered Auditors 1 Embankment Place London WC2N 6NN
PRINCIPAL PAYING AGENT
DEUTSCHE BANK AG LONDON
Winchester House
One Great Winchester Street
London EC2N 2DB
PAYING AGENT
DEUTSCHE BANK LUXEMBOURG S.A.
2 Boulevard Konrad Adenauer
L-1115 Luxembourg
LISTING AGENT
BARCLAYS BANK PLC
5 North Colonnade
Canary Wharf
London E14 4BB
EXHIBIT 2(b)(ii)
OFFERING CIRCULAR
[NATIONAL GRID LOGO]
The National Grid Company plc
(incorporated in England and Wales with limited liability under Registered Number 2366977)
(POUND)200,000,000 3.806 PER CENT. RETAIL PRICE INDEX-LINKED BONDS DUE 2020
Issue Price: 100 per cent.
Application has been made to the Financial Services Authority in its capacity as
the competent authority under the Financial Services Act 1986 (in such capacity,
the "UK Listing Authority") for the (pound)200,000,000 3.806 per cent. Retail
Price Index-Linked Bonds due 2020 of The National Grid Company plc (the "RPI
Bonds" and the "Issuer", respectively), the (pound)40,000,000 3.589 per
cent. Limited Retail Price Index-Linked Bonds due 2030 of the Issuer (the "LPI
Bonds"), and the (pound)360,000,000 6.50 per cent. Bonds due 2028 of the Issuer
(the "Fixed Rate Bonds" and together with the RPI Bonds and the LPI Bonds, the
"Bonds") to be admitted to the Official List maintained by the UK Listing
Authority (the "Official List") and to the London Stock Exchange plc (the
"London Stock Exchange") for the Bonds to be admitted to trading on the London
Stock Exchange's market for listed securities which, together, will constitute
official listing on the London Stock Exchange. Copies of this document, which
comprises listing particulars prepared in compliance with the listing rules made
under Section 142 of the Financial Services Act 1986, have been delivered to the
Registrar of Companies in England and Wales for registration in accordance with
Section 149 of that Act.
Payments on the Bonds will be made without deduction for or on account of taxes of the United Kingdom to the extent described under "Conditions of the Bonds - Taxation". Interest on the RPI Bonds is payable semi-annually in arrear at the rate of 3.806 per cent. (adjusted for indexation) per annum on 27 January and 27 July in each year, the first payment to be made on 27 January 2002. Interest on the LPI Bonds is payable semi-annually in arrear at the rate of 3.589 per cent. (adjusted for indexation) per annum on 27 January and 27 July in each year, the first payment to be made on 27 January 2002. Interest on the Fixed Rate Bonds is payable annually in arrear at the rate of 6.50 per cent. per annum on 27 July in each year, the first payment of interest to be made on 27 July 2002.
The RPI Bonds mature on 27 July 2020, the LPI Bonds mature on 27 July 2030 and the Fixed Rate Bonds mature on 27 July 2028. Each tranche of Bonds may be redeemed before then at the option of the Issuer in whole, but not in part, at their principal amount together with accrued interest (adjusted, in the case of the RPI Bonds and the LPI Bonds, for indexation) if, at any time, the principal amount of the relevant tranche of Bonds is 10 per cent. or less of the original principal amount of such tranche of Bonds and may be redeemed before then at the option of the relevant holder or (at the option of the Issuer) repurchased by the Issuer on the occurrence of a Restructuring Event (as defined in each tranche of Bonds) at their principal amount together with accrued interest (as adjusted, in the case of the RPI Bonds and the LPI Bonds, for indexation). Each tranche of Bonds is subject to redemption in whole, but not in part, at their principal amount together with accrued interest (in each case as adjusted, in the case of the RPI Bonds and the LPI Bonds, for indexation), at the option of the Issuer at any time in the event of certain changes affecting taxes of the United Kingdom. See "Conditions of the Bonds - Redemption and Purchase". The RPI Bonds and the LPI Bonds are subject to redemption in whole, but not in part, at their principal amount together with accrued interest (each as adjusted for indexation) on the occurrence of certain matters relating to the Index (as set out in the RPI Bond Conditions and the LPI Bond Conditions).
Each tranche of Bonds will initially be represented by a temporary global bond in bearer form without interest coupons (a "Temporary Global Bond") which will be deposited with a common depositary for Euroclear Bank S.A./N.V., as operator of the Euroclear System ("Euroclear") and Clearstream Banking, societe anonyme ("Clearstream, Luxembourg) on or about 27 July 2001. Interests in each Temporary Global Bond will be exchangeable for interests in a permanent global bond in bearer form without interest coupons (a "Permanent Global Bond") on or after a date which is expected to be 4 September 2001 (the "Exchange Date"), upon certification as to non-US beneficial ownership. Each Permanent Global Bond will be exchangeable for definitive Bonds in bearer form (the "Definitive Bonds") in the circumstances set out in it. See "Summary of Provisions relating to the Bonds while in Global Form".
MORGAN STANLEY THE ROYAL BANK OF SCOTLAND
The date of this Offering Circular is 23 July 2001.
THIS OFFERING CIRCULAR COMPRISES LISTING PARTICULARS GIVEN IN COMPLIANCE WITH THE LISTING RULES MADE UNDER SECTION 142 OF THE FINANCIAL SERVICES ACT 1986 BY THE UK LISTING AUTHORITY (THE "LISTING RULES") FOR THE PURPOSE OF GIVING INFORMATION WITH REGARD TO THE ISSUER AND THE ISSUER AND ITS SUBSIDIARIES TAKEN AS A WHOLE (THE "GROUP"), THE RPI BONDS, THE LPI BONDS AND THE FIXED RATE BONDS. THE ISSUER ACCEPTS RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS DOCUMENT. TO THE BEST OF THE KNOWLEDGE AND BELIEF OF THE ISSUER (WHICH HAS TAKEN ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE), THE INFORMATION CONTAINED IN THIS DOCUMENT IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO AFFECT THE IMPORT OF SUCH INFORMATION. ANY REFERENCE IN THIS DOCUMENT TO LISTING PARTICULARS MEANS THIS DOCUMENT EXCLUDING ALL INFORMATION INCORPORATED BY REFERENCE. THE ISSUER HAS CONFIRMED THAT ANY INFORMATION INCORPORATED BY REFERENCE, INCLUDING ANY SUCH INFORMATION TO WHICH READERS OF THIS DOCUMENT ARE EXPRESSLY REFERRED, HAS NOT BEEN AND DOES NOT NEED TO BE INCLUDED IN THE LISTING PARTICULARS TO SATISFY THE REQUIREMENTS OF THE FINANCIAL SERVICES ACT 1986 OR THE LISTING RULES. THE ISSUER BELIEVES THAT NONE OF THE INFORMATION INCORPORATED THEREIN BY REFERENCE CONFLICTS IN ANY MATERIAL RESPECT WITH THE INFORMATION INCLUDED IN THE LISTING PARTICULARS.
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER OF, OR AN INVITATION BY OR ON BEHALF OF, THE ISSUER OR THE MANAGERS (AS DEFINED IN "SUBSCRIPTION AND SALE" BELOW) TO SUBSCRIBE OR PURCHASE, ANY OF THE BONDS. THE DISTRIBUTION OF THIS OFFERING CIRCULAR AND THE OFFERING OF THE BONDS IN CERTAIN JURISDICTIONS MAY BE RESTRICTED BY LAW. PERSONS INTO WHOSE POSSESSION THIS OFFERING CIRCULAR COMES ARE REQUIRED BY THE ISSUER AND THE MANAGERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY SUCH RESTRICTIONS. FOR A DESCRIPTION OF CERTAIN FURTHER RESTRICTIONS ON OFFERS AND SALES OF BONDS AND DISTRIBUTION OF THIS OFFERING CIRCULAR, SEE "SELLING RESTRICTIONS" BELOW.
NO PERSON IS AUTHORISED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS OFFERING CIRCULAR AND ANY INFORMATION OR REPRESENTATION NOT SO CONTAINED MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORISED BY OR ON BEHALF OF THE ISSUER OR THE MANAGERS. THE DELIVERY OF THIS OFFERING CIRCULAR AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED IN IT IS CORRECT AS AT ANY TIME SUBSEQUENT TO ITS DATE.
THE BONDS HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ARE SUBJECT TO U.S. TAX LAW REQUIREMENTS. SUBJECT TO CERTAIN EXCEPTIONS, BONDS MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO US. PERSONS.
UNLESS OTHERWISE SPECIFIED OR THE CONTEXT REQUIRES, REFERENCES TO "POUNDS", "POUNDS STERLING", "STERLING", "L", AND "P" ARE TO THE CURRENCY OF THE UNITED KINGDOM AND TO "US.$" ARE TO THE CURRENCY OF THE UNITED STATES OF AMERICA.
IN CONNECTION WITH THE ISSUE OF EACH TRANCHE OF BONDS, THE ROYAL BANK OF SCOTLAND PLC MAY OVER- ALLOT OR EFFECT TRANSACTIONS WHICH STABILISE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL WHICH MIGHT NOT OTHERWISE PREVAIL. SUCH STABILISING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
TABLE OF CONTENTS
Page ---- RPI Bond Conditions............................................................................... 3 Use of Proceeds................................................................................... 15 LPI Bond Conditions............................................................................... 16 Use of Proceeds................................................................................... 28 Fixed Rate Bond Conditions........................................................................ 29 Use of Proceeds................................................................................... 37 Summary of Provisions Relating to the Bonds while in Global Form.................................. 38 Capitalisation of the Group....................................................................... 40 The National Grid Company plc..................................................................... 41 United Kingdom Taxation........................................................................... 46 Subscription and Sale............................................................................. 48 Selling Restrictions.............................................................................. 48 General Information............................................................................... 50 |
RPI BOND CONDITIONS
The following, subject to alteration and amendment and save for the paragraphs in italics, are the terms and conditions of the RPI Bonds substantially in the form which will appear on the RPI Bonds in definitive form:
The issue of the (pound) 200,000,000 3.806 per cent. Retail Price Index-Linked Bonds due 2020 (the "Bonds") was authorised pursuant to resolutions of the Board of Directors of The National Grid Company plc (the "Issuer") passed on 11 June 2001 and resolutions of a duly authorised committee of the Board of Directors of the Issuer passed on 18 July 2001. The Bonds are constituted by the trust deed dated 27 July 2001 (the "Trust Deed") between the Issuer and The Law Debenture Trust Corporation p.l.c. (the "Trustee", which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Bonds (the "Bondholders"). The statements in these Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed. The Bondholders and the holders (the "Couponholders") of the interest coupons relating to the Bonds (the "Coupons") (whether or not attached to the Bonds) are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions applicable to them of the paying agency agreement dated 27 July 2001 (the "Paying Agency Agreement") relating to the Bonds between the Issuer, the Trustee, Citibank, N.A. (the "Principal Paying Agent", which expression shall include any successor as principal paying agent under the Paying Agency Agreement) and the paying agent referred to below (such person being referred to together with the Principal Paying Agent as the "Paying Agents", which expression shall include their successors as paying agents under the Paying Agency Agreement), copies of each of which are available for inspection during normal office hours at the registered office for the time being of the Trustee (being at the date hereof at Filth Floor, 100 Wood Street, London EC2V 7EX) and at the specified office of each of the Paying Agents.
1 FORM, DENOMINATION AND TITLE
The Bonds are serially numbered and in bearer form in the denominations of
(pound) 1,000, (pound) 10,000 and (pound) 100,000 each with Coupons attached on
issue. Bonds of one denomination may not be exchanged for Bonds of another
denomination.
Title to the Bonds and the Coupons will pass by delivery. In these Conditions, "Bondholder" and (in relation to a Bond or Coupon) "holder" mean the bearer of any Bond or Coupon, as the case may be. The holder of any Bond or Coupon will (except as otherwise required by law or as ordered by a court of competent jurisdiction) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating the holder, and the Issuer, the Trustee and the Paying Agents shall not be required to obtain any proof thereof or as to the identity of such holder.
The Bonds will be represented initially by a Temporary Global Bond. The Temporary Global Bond will be issued on 27 July 2001 and will be held by a common depositary for Euroclear Bank S.A./N.V.,as operator of the Euroclear System ("Euroclear") and Clearstream Banking, societe anonyme ("Clearstream, Luxembourg") for credit, against payment, to the accounts designated by the relevant purchasers with Euroclear and Clearstream, Luxembourg. Interests in the Temporary Global Bond will be exchangeable on or after a date which is expected to be 4 September 2001 for interests in a Permanent Global Bond upon certification that the beneficial owners of the relevant Bonds are not (i) United States persons or (ii) persons who have acquired such Bonds for resale to or for the account of any United States person.
The Permanent Global Bond will be exchangeable for Definitive Bonds in bearer form in the circumstances set out in it. See "Summary of Provisions relating to the Bonds while in Global Form".
Definitive Bonds and Coupons will bear the following legend: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code".
2 STATUS
The Bonds and the Coupons constitute direct, unconditional and unsecured obligations of the Issuer and rank and will rank pari passu without any preference among themselves and (save for such exceptions
as are from time to time applicable under the laws of England and Wales) at least equally with all other Present and future unsecured and unsubordinated obligations of the Issuer.
3 DEFINITIONS
"Base Index Figure" means (subject to Condition 8(a)(ii)) 172.1.
"Electricity Act" means the Electricity Act 1989 as amended or re-enacted from time to time and all subordinate legislation made pursuant thereto.
"Electricity Transmission Licence" means the transmission licence, as subsequently amended from time to time, originally granted by the Secretary of State for Energy to the Issuer under the Electricity Act.
"Group" means the Issuer and its Subsidiaries and "member of the Group" shall be construed Accordingly.
"Index" or "Index Figure" means, subject as provided in Conditions 5(d) and 8, the United Kingdom All Items RPI as published by the Office for National Statistics (January 1987 = 100) contained in the Monthly Digest of Statistics (or contained in any official publication substituted therefor) or any Comparable index which may replace the Index for the purpose of calculating the amount payable on Repayment of the Reference Gilt.
Any reference to the Index Figure applicable to a particular month shall, subject as provided in Condition 8, be construed as a reference to the Index Figure published in the Monthly Digest of Statistics in the seventh month prior to that particular month and relating to the month before that of publication.
"Index Ratio" means the Index Figure applicable to any month divided by the Base Index Figure.
"Rated Securities" means (a) the Bonds or (b) such other comparable unsecured and unsubordinated debt of the Issuer (or of any Subsidiary of the Issuer and which is guaranteed on an unsecured and unsubordinated basis by the Issuer) having an initial maturity of five years or more selected by the Issuer from time to time for the purpose of this definition with the approval of the Trustee and which possesses an investment grade rating (BBB-/ Baa3, or their respective equivalents for the time being, or better) by any Rating Agency (whether at the invitation of the Issuer or by its own volition).
"Rating Agency" means Standard and Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any of its Subsidiaries and their successors or Moody's Investors Service, Inc. or any of its Subsidiaries and their successors or any rating agency substituted for either of them (or any permitted substitute of them) by the Issuer from time to time with the prior written approval of the Trustee.
A "Rating Downgrading" shall, subject as provided in Condition 6@), be deemed to have occurred in respect of a Restructuring Event if the rating assigned to the Rated Securities by any Rating Agency which is current immediately prior to the occurrence of the Restructuring Event (whether provided by a Rating Agency at the invitation of the Issuer or by its own volition) is withdrawn or reduced from an investment grade rating (BBB-/Baa3, or their respective equivalents for the time being, or better) to a non-investment grade rating (BB+/Ba1, or their respective equivalents for the time being, or worse) or, if the Rating Agency shall have already rated the Rated Securities below investment grade (as described above), the rating is lowered one full rating category (from BB+/Ba1 to BB/Ba2 or such similar lowering).
"Reference Gilt" means the 2.50 per cent. Index-Linked Treasury Stock due 2020 for so long as such stock is in issue, and thereafter such Sterling obligation of the United Kingdom Government listed on the Official List maintained by the Financial Services Authority in its capacity as the UK Listing Authority and traded on the London Stock Exchange's market for listed securities whose duration most closely matches that of the Bonds on the date which is two business days prior to the date specified for Redemption in any notice given by the Issuer as the Trustee may from time to time determine to be appropriate on the advice of a gilt-edged market maker or other adviser selected by the Issuer and approved by the Trustee or, in the event that the Issuer fails to appoint such person within a reasonable period of time, such person as the Trustee in its sole discretion may determine to be the most appropriate (an "Indexation Adviser"), and for which purpose duration is calculated on the basis of the formula set out on page 119 of The Handbook of Fixed Income Securities Second Edition 1987, published by Dow Jones-Irwin.
"Relevant Date" in respect of any payment means the date on which the payment becomes due but, if the full amount of the moneys payable has not been received by the Principal Paying Agent or by the
Trustee on or prior to such due date, it means the date on which the full amount of such moneys has been so received and notice to that effect has been given to the Bondholders in accordance with Condition 15.
"Restructuring Event" means the occurrence of any one or more of the following events:
(a) (i) the Secretary of State for Trade and Industry or any official succeeding to his functions gives the Issuer written notice of revocation of the Electricity Transmission Licence in accordance with the terms as to revocation set out in Schedule 2 of the Electricity Transmission Licence, such revocation to become effective not later than 27 July 2020 or (ii) the Issuer agrees in writing with the Secretary of State for Trade and Industry or any official succeeding to his functions to any revocation or surrender of the Electricity Transmission Licence or (iii) any legislation (whether primary or subordinate) is enacted terminating or revoking the Electricity Transmission Licence; or
(b) any modification is made to the terms and conditions of the Electricity Transmission Licence other than such a modification which the Trustee, in its opinion, considers to be not materially prejudicial to the interests of the Bondholders and has so confirmed in writing to the Issuer; or
(c) any legislation (whether primary or subordinate) is enacted removing, reducing or qualifying the duties or powers of the Secretary of State for Trade and Industry or any official succeeding to his functions and/or the Gas and Electricity Markets Authority under Section 3A of the Electricity Act as compared with those in effect on 27 July 2001 other than such legislation which the Trustee, in its opinion, considers to be not materially prejudicial to the interests of the Bondholders and has so confirmed in writing to the Issuer.
"Restructuring Period" means
(a) if at the time at which the Restructuring Event occurs there are Rated Securities, the period of 90 days starting from and including the day on which a Restructuring Event occurs or such longer period in which the Rated Securities are under consideration (announced publicly within such 90 day period) for rating review by a Rating Agency; or
(b) if at the time at which a Restructuring Event occurs there are no Rated Securities, the period starting from and including the day on which a Restructuring Event occurs and ending on the day 90 days following the date on which a Negative Certification (as defined in Condition 6(a)) shall have been given to the Issuer in respect of that Restructuring Event.
"Subsidiary," means a subsidiary within the meaning of Section 736 of the Companies Act 1985 and "Subsidiaries" shall be construed accordingly.
4 INTEREST
The Bonds bear interest (calculated in accordance with the Actual/Actual
ISMA Day Count Convention) (adjusted for indexation in accordance with Condition
7) on their principal amount outstanding from, and including, 27 July 2001 (the
"Closing Date") at the rate of 3.806 per cent. per annum payable semi-annually
in arrear on 27 January and 27 July in each year (each an "Interest Payment
Date"). Each Bond will cease to bear interest from the due date for redemption
unless, upon due presentation, payment of principal is improperly withheld or
refused. In such event, it shall continue to bear interest at the aforesaid rate
(both before and after judgment) until, but excluding, whichever is the earlier
of (i) the day on which all sums due in respect of such Bond up to that day are
received by or on behalf of the relevant holder and (ii) the seventh day after
the Trustee or the Principal Paying Agent has notified Bondholders in accordance
with Condition 15 of receipt of all sums due in respect of all the Bonds up to
that day (except to the extent that there is a failure in the subsequent payment
to the relevant holders as provided in these Conditions). Where interest is to
be calculated in respect of a period which is shorter than an Interest Period it
shall be calculated on the basis of the actual number of days in the relevant
period from (and including) the first day of such period to (but excluding) the
last day of such period, divided by the number of days in the Interest Period in
which the relevant period falls (including the first such day but excluding the
last). The period beginning on the Closing Date and ending on the first Interest
Payment Date and each successive period beginning on an Interest Payment Date
and ending on the next succeeding Interest Payment Date is called an "Interest
Period".
5 REDEMPTION AND PURCHASE
(a) Final Redemption
Unless previously redeemed or purchased and cancelled, the Bonds will be redeemed at their principal amount (adjusted for indexation in accordance with Condition 7) on 27 July 2020.
(b) Redemption for Taxation Reasons
If, immediately prior to the giving of the notice referred to below, the Issuer satisfies the Trustee that, as a result of any amendment to or change in the laws or regulations of the United Kingdom or of any political subdivision thereof or any authority therein or thereof having power to tax or any change in the official or generally accepted interpretation or application of such laws or regulations in each case which becomes effective on or after the Closing Date, the Issuer has or will on the next Interest Payment Date become obliged to pay any additional amounts in accordance with Condition 10 (and such amendment or change has been evidenced by the delivery by the Issuer to the Trustee (who shall, in the absence of manifest error, accept such certificate and opinion as sufficient evidence thereof) of (i) a certificate signed by two directors of the Issuer on behalf of the Issuer stating that such amendment or change has occurred (irrespective of whether such amendment or change is then effective) and describing the facts leading thereto and stating that such obligation cannot be avoided by the Issuer taking reasonable measures available to it and (ii) an opinion in a form satisfactory to the Trustee of independent legal advisers of recognised standing to the effect that such amendment or change has occurred (irrespective of whether such amendment or change is then effective)), the Issuer may (having given not less than 30 and not more than 90 days' notice to the Trustee and to the Bondholders in accordance with Condition 15) redeem all, but not some only, of the Bonds at their principal amount, together with interest accrued (each as adjusted for indexation as provided in Condition 7) up to, but excluding, the date fixed for such redemption, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be required to pay such additional amounts were a payment in respect of the Bonds then due.
(c) Redemption at the Option of the Issuer
If, at any time, the principal amount outstanding of the Bonds is 10 per cent. or less of the original principal amount of the Bonds, the Issuer may (having given not less than 30 and not more than 90 days' notice to the Trustee and to the Bondholders in accordance with Condition 15) redeem all, but not some only, of the Bonds at their principal amount, together with interest accrued (in each case adjusted for indexation as provided in Condition 7) up to, but excluding, the date fixed for such redemption.
(d) Redemption for Index Reasons
If either (i) the Index Figure for three consecutive months is required to be determined on the basis of an Index Figure previously published as provided in Condition 8(b)(ii) and the Trustee has been notified by the Principal Paying Agent that publication of the Index has ceased or (ii) notice is published by Her Majesty's Treasury, or on its behalf, following a change in relation to the Index, offering a right of redemption to holders of the Reference Gilt, and (in either case) no amendment or substitution of the Index shall have been advised by the Indexation Adviser (as defined above) to the Issuer and such circumstances are continuing, having given not more than 60 nor less than 30 days' notice to Bondholders in accordance with Condition 15, the Issuer may redeem all, but not some only, of the Bonds at their principal amount together with interest accrued up to and including the date of redemption (in each case adjusted for indexation as provided in Condition 7), the Index Ratio for this purpose being that applicable to the month in which redemption takes place.
(e) Purchase
The Issuer or any of its Subsidiaries may, subject to any relevant laws or regulations, at any time purchase Bonds (with or without all unmatured Coupons relating thereto being surrendered therewith) at any price in the open market or by private treaty. If purchases are made by tender, tenders must be available to all Bondholders alike.
(f) Cancellation
All Bonds redeemed pursuant to any of the foregoing provisions will be cancelled forthwith together with all unmatured Coupons attached thereto or surrendered therewith and may not be reissued or resold. Any Bonds purchased pursuant to Condition 5(e) or Condition 6 may, at the option of the Issuer, be held or may be surrendered to a Paying Agent for cancellation, but may not be resold.
6 REDEMPTION AT THE OPTION OF THE BONDHOLDERS
(a) Redemption following a Restructuring Event
If, at any time while any of the Bonds remains outstanding, a Restructuring Event occurs and, within the Restructuring Period, either:
(i) if at the time at which the relevant Restructuring Event occurs there are Rated Securities, a Rating Downgrading in respect of that Restructuring Event also occurs; or
(ii) if at such time there are no Rated Securities, the Issuer is unable as a result of such Restructuring Event to obtain a rating of the Bonds or of any other comparable unsecured and unsubordinated debt of the Issuer (or of any Subsidiary of the Issuer and which is guaranteed on an unsecured and unsubordinated basis by the Issuer) having an initial maturity of five years or more from a Rating Agency of at least investment grade (BBB-/Baa3, or their respective equivalents for the time being) (a "Negative Rating Event"), which rating the Issuer shall use all reasonable endeavours to obtain,
and in any such case such Restructuring Event is certified in writing by an independent financial adviser appointed by the Issuer and approved by the Trustee (or, if the Issuer shall not have appointed such an adviser within 21 days after becoming aware of the occurrence of such Restructuring Event, appointed by the Trustee (following consultation with the Issuer)) as being in its opinion materially prejudicial to the interests of the Bondholders (a "Negative Certification") (that Restructuring Event and the relevant Rating Downgrading or, as the case may be, Negative Rating Event and, in each case, the Negative Certification together constituting a "Put Event"), then (unless at any time the Issuer shall have given a notice under Condition 5(b)) or 5(c) or 5(d)) the holder of each Bond will have the right, upon the giving of a Put Event Notice (as defined below), to require the Issuer to redeem or, at the option of the Issuer, purchase (or procure the purchase of) that Bond on the Put Date (as defined below) at its principal amount together with interest (if any) accrued up to, but excluding, the Put Date (in each case adjusted for indexation as provided in Condition 7). Any certification by an independent financial adviser as aforesaid as to whether or not, in its opinion, any Restructuring Event is materially prejudicial to the interests of the Bondholders shall, in the absence of manifest error, be conclusive and binding upon the Issuer, the Trustee, the Bondholders and the Couponholders.
(b) Rating Downgrading or Negative Rating Event
A Rating Downgrading or a Negative Rating Event shall be deemed not to have occurred in respect of or as a result of a Restructuring Event if the Rating Agency making the relevant reduction in rating or declining to assign a rating of at least investment grade as provided in these Conditions does not announce or publicly confirm or otherwise inform the Trustee that the reduction or declining was the result, in whole or in part, of any event or circumstance comprised in or arising as a result of the applicable Restructuring Event.
(c) Put Event Notice
Promptly upon the Issuer becoming aware that a Put Event has occurred, and in any event not later than 14 days after the occurrence of a Put Event, the Issuer shall, and at any time upon the Trustee becoming similarly so aware the Trustee may, and if so requested by the holders of at least one- quarter in principal amount of the Bonds then outstanding shall, give notice (a "Put Event Notice") to the Bondholders in accordance with Condition 15 specifying the nature of the Put Event and the procedure for exercising the right described herein.
(d) Procedure
To exercise the right to require redemption or, as the case may be, purchase by the Issuer or by a purchaser procured by it of a Bond under this Condition, the Bondholder must deliver such Bond on any business day (as defined in Condition 9) falling within the period (the "Put Period") of 45 days after the date of a Put Event Notice at the specified office of any Paying Agent, accompanied by a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent (a "Put Notice") and in which the holder may specify a bank account with a bank in London to which payment is to be made under this Condition. The Paying Agent to which such Bond and Put Notice are delivered shall issue to the Bondholder concerned a non-transferable receipt in respect of the Bond so delivered. Payment in respect of any Bond so delivered shall be made, if the holder duly specified a bank account in the Put Notice to which payment is to be made, on the day (the "Put Date") being the fourteenth day after the date of expiry of the Put Period by transfer to that bank account and in every other case on or after the Put Date against presentation and surrender or (as the case may be) endorsement of such receipt at any specified office of any Paying Agent. A Put Notice, once delivered, shall be irrevocable and the Issuer shall redeem or, as the case may be, purchase (or procure the purchase
of) all Bonds delivered on the applicable Put Date. For the purposes of the Terms and Conditions and the Trust Deed, receipts issued pursuant to this Condition shall be treated as if they were Bonds.
(e) Trustee
The Trust Deed provides that the Trustee will not be bound to take any steps to ascertain whether a Restructuring Event or a Put Event or any event which could lead to the occurrence of or, together with other events, constitute a Restructuring Event or a Put Event has occurred and that, until it shall have express notice to the contrary, the Trustee will be entitled to assume that no Restructuring Event or Put Event and no such other event has occurred.
7 INDEXATION
Each payment of principal and interest in respect of the Bonds shall be the amount provided in or determined in accordance with the foregoing Conditions, multiplied by the Index Ratio applicable to the month in which such payment falls to be made and rounded to four decimal places (0.00005 being rounded upwards).
8 CHANGES IN CIRCUMSTANCES AFFECTING THE INDEX
(a) Change in base
If at any time and from time to time the Index shall be changed by the substitution of a new base therefor, then with effect from the calendar month from and including that in which such substitution takes effect:
(i) the definition of Index and Index Figure in Condition 3 shall be deemed to refer to the new date or month in substitution for January 1987 (or, as the case may be, to such other date or month as may have been substituted therefor); and
(ii) the new Base Index Figure shall be the product of the existing Base Index Figure (being at the Closing Date 172.1) and the Index Figure immediately following such substitution, divided by the Index Figure immediately prior to such substitution.
(b) Delay in publication of Index
If and other than in circumstances which then appear to fall within Condition 8(c), the Index Figure which is normally published in the Monthly Digest of Statistics in the seventh month and which relates to the eighth month (the "relevant month") before the month in which a payment is due to be made in respect of the Bonds is not published on or before the fourteenth business day before the date (the "date for payment") on which such payment is due, the Index Figure applicable to the month in which the date of payment falls shall be:
(i) such substitute index figure (if any) as the Trustee considers to have been published by the Bank of England for the purposes of indexation of payments on the Reference Gilt or, failing such publication, on any one or more issues of index-linked Treasury Stock selected by an Indexation Adviser; or
(ii) if a determination of the Index Figure is not determined pursuant to Condition 8(b)(i), the Index Figure last published (or, if later, the substitute index figure last determined pursuant to Condition 8(b)(i)) before the date for payment.
Where the above provisions of this Condition 8(b) apply, any determination as to the Index Figure applicable to the month in which the date for payment falls made in accordance with such provisions and any selection by an Indexation Adviser pursuant to Condition 8(b)(i) shall be conclusive and binding on the Issuer, the Trustee, the Bondholders and the Couponholders. If, an Index Figure having been determined pursuant to Condition 8(b)(i) and applied to the month in which the date of payment falls, the Index Figure relating to the relevant month is subsequently published while a Bond is still outstanding, then:
(i) in relation to a payment of interest in respect of such Bond other than upon redemption of such Bond the interest next payable after the date of such subsequent publication shall be increased or reduced by an amount equal to (respectively) the shortfall or excess of the amount of the relevant payment made on the basis of the Index Figure applicable by virtue of Condition 8(b)(ii), below or above the amount of the relevant payment that
would have been due if the Index Figure subsequently published had been published on or before the fourteenth business day before the date for payment; and
(ii) in relation to a payment of principal or interest upon redemption of such Bond, no subsequent adjustment to amounts paid will be made.
(c) Cessation of or fundamental changes to the Index
(i) If the Trustee has been notified by the Principal Paying Agent that (a) the Index has ceased to be published or (b) any change is made to the coverage or the basic calculation of the Index which constitutes a fundamental change which would, in the opinion of the Trustee acting solely on the advice of an Indexation Adviser, be materially prejudicial to the interests of the Bondholders, the Trustee will give written notice of such occurrence to the Issuer, and the Issuer and the Trustee together shall seek to agree for the purpose of the Bonds one or more adjustments to the Index or a substitute index (with or without adjustments) with the intention that the same should leave the Issuer and the Bondholders in no better and no worse a position than they would have been had the Index not ceased to be published or the relevant fundamental change not been made.
(ii) If the Issuer and the Trustee fail to reach agreement as mentioned above within 20 business days following the giving of notice as mentioned in paragraph (c)(i)(a), a bank or other person in London shall be appointed by the Issuer with the approval of the Trustee, or, failing agreement on and the making of such appointment within 20 business days following the expiry of the 20 business day period referred to above, by the Trustee (in each case, such bank or other person so appointed being referred to as the "Expert"), to determine for the purpose of the Bonds one or more adjustments to the Index or a substitute index (with or without adjustments) with the intention that the same should leave the Issuer and the Bondholders in no better and no worse a position than they would have been had the Index not ceased to be published or the relevant fundamental change not been made. Any Expert so appointed shall act as an expert and not as an arbitrator and all fees, costs and expenses of the Expert and of any Indexation Adviser and of the Issuer and the Trustee in connection with such appointment shall be borne by the Issuer. In this Condition 8 business day means any day on which commercial banks and foreign exchange markets are open for business in London.
(iii) The Index shall be adjusted or replaced by a substitute index as agreed by the Issuer and the Trustee or as determined by the Expert pursuant to the foregoing paragraphs, as the case may be, and references in these Conditions to the Index and to any Index Figure shall be deemed amended in such manner as the Issuer and the Trustee agree. Such amendments shall be effective from the date of such notification and shall be binding upon the Issuer, the Trustee, the Bondholders and the Couponholders, and the Issuer shall give notice to the Bondholders in accordance with Condition 15 of such amendments as promptly as practicable following such notification.
9 PAYMENTS
(a) Principal and Interest in Respect of the Bonds
Payments of principal and interest in respect of the Bonds will be made against presentation and surrender (or, in the case of a partial payment, endorsement) of Bonds or (as the case may be) the appropriate Coupons save that if the due date for redemption of a Bond is not an Interest Payment Date, accrued interest will be paid against presentation of the relevant Bond at the specified office of any Paying Agent by sterling cheque drawn on, or by transfer to a sterling account maintained by the payee with, a bank in London. Payments of interest due in respect of any Bond other than on presentation and surrender of matured Coupons shall be made only against presentation and either surrender or endorsement (as appropriate) of the relevant Bond.
(b) Payment Subject to Fiscal Laws
All payments are subject in all cases to any applicable fiscal or other
laws and regulations, but without prejudice to the provisions of Condition
10. No commissions or expenses shall be charged to the Bondholders or
Couponholders in respect of such payments.
(c) Payments on Business Days
If the due date for payment of any amount on any Bond or Coupon is not a business day (as defined below), then the holder thereof will not be entitled to payment of such amount until the next following business day and will not be entitled to any further interest or other payment in respect of such postponement. In these Conditions, "business day" means any day on which banks are open for business in London and in the place of the specified office of the Paying Agent at which the Bond or Coupon is presented for payment.
(d) Paying Agents
The initial Principal Paying Agent is Citibank, N.A. and the other initial Paying Agent and their respective initial specified offices are set out at the end of these Conditions. The Issuer may at any time (subject to the prior approval of the Trustee) vary or terminate the appointment of any Paying Agent and appoint additional or other Paying Agents, provided that it will at all times maintain (i) a Principal Paying Agent, (ii) Paying Agents having specified offices in at least two major European cities approved by the Trustee (including London, so long as the Notes are listed on the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange's market for listed securities) and (iii) a Paying Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to such Directive. Notice of any such termination or appointment and of any change in the specified office through which any Paying Agent acts will be given in accordance with Condition 15.
(e) Surrender of Unmatured Coupons
Each Bond should be presented for redemption (including exercise of the Bondholders' option pursuant to Condition 6) together with all relative unmatured Coupons (being Coupons which would otherwise fall due for payment after the relevant due date for redemption or, as the case may be, the Put Date) failing which, all unmatured Coupons shall become void.
10 TAXATION
All payments by or on behalf of the Issuer in respect of the Bonds shall be made without deduction or withholding for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the United Kingdom or any political subdivision or authority thereof or therein having power to tax, unless such deduction or withholding is required by law. In such event the Issuer shall pay such additional amounts as may be necessary in order that the net amounts received by the holders of Bonds or Coupons after such deduction or withholding shall equal the amounts which would have been receivable by them had no such deduction or withholding been required, except that no additional amounts shall be payable in respect of any Bond or Coupon presented for payment:
(a) by or on behalf of a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond or Coupon by reason of his being connected with the United Kingdom otherwise than merely by the holding of the Bond or Coupon; or
(b) by or on behalf of a holder who would not be liable or subject to deduction or withholding by making a declaration of beneficial ownership of the Bond or Coupon and of non-residence or other similar claim for exemption to the relevant tax authority or to any relevant person; or
(c) more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on the last day of such period of 30 days on the assumption, if such is not the case, that such last day was a business day; or
(d) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26 - 27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive; or
(e) by or on behalf of a Bondholder or a Couponholder who would have been able to avoid such withholding or deduction by presenting the relevant Bond or Coupon to another Paying Agent in a Member State of the European Union.
Any reference herein to the principal of and/or interest on the Bonds shall be deemed to include any additional amounts which may be payable under this Condition or under any obligations undertaken in addition hereto or in substitution herefor pursuant to the Trust Deed.
11 PRESCRIPTION
Claims in respect of principal and interest shall be prescribed unless presentation for payment is made as required by Condition 9 within a period of 12 years in the case of principal and six years in the case of interest from the appropriate Relevant Date.
12 EVENTS OF DEFAULT
The Trustee at its discretion may, and if so requested in writing by the holders of at least one-quarter in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders shall, subject in each case to its being indemnified to its satisfaction, (but, in the case of the happening of any of the events mentioned in sub-paragraphs (e) to (g) inclusive, other than default in the performance or observance of any of the provisions of Conditions 5, 6 and 9 or the appointment of an administrative or other receiver of the whole of the undertaking or assets of the Issuer, only if the Trustee shall have certified in writing to the Issuer that such event is, in its opinion, materially prejudicial to the interests of the Bondholders) give notice to the Issuer that the Bonds are, and they shall accordingly thereby become, immediately due and repayable at their principal amount, together with accrued interest (in each case adjusted for indexation in accordance with Condition 7), the Index Ratio for such purpose being that applicable to the month in which the Bonds become due and repayable takes place (as provided in the Trust Deed), if any of the following events shall occur:
(a) if default is made in the payment of any principal or interest in respect of the Bonds or any of them and such default continues for 15 days or more; or
(b) if an order is made or an effective resolution passed for the winding-up of, or an administration order is made in relation to, the Issuer (except for the purposes of a reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(c) if the Issuer stops or threatens to stop payment (except for the purposes of a reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(d) if (i) any other present or future Relevant Indebtedness of the Issuer becomes due and payable prior to its stated maturity by reason of any actual event of default, or (ii) any such Relevant Indebtedness is not paid when due or, as the case may be, within any applicable grace period, provided that the aggregate amount of the Relevant Indebtedness in respect of which one or more of the events mentioned above in this paragraph (d) have occurred equals or exceeds (pound)40,000,000.
For the purposes of this Condition, "Relevant Indebtedness" means any present or future indebtedness in the form of, or represented by, bonds, notes, debentures, loan stock or other securities which are for the time being, or are capable of being, quoted, listed or ordinarily dealt in on any stock exchange.
(e) if an encumbrancer takes possession or an administrative or other receiver is appointed of the whole or any part which in the opinion of the Trustee is material of the undertaking or assets of the Issuer or if a distress, execution or any similar proceeding is levied or enforced upon or sued out against, in the opinion of the Trustee, a substantial part of the chattels or property of the Issuer and in any such case is not removed, paid out or discharged within 21 days (or such longer period as the Trustee may approve); or
(f) if the Issuer is unable to pay its debts as they fall due or has any voluntary arrangement proposed in relation to it under Section 1 of the Insolvency Act 1986 or enters into any scheme of arrangement with its creditors (other than for the purpose of reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(g) if default is made by the Issuer in the performance or observance of any obligation, covenant, condition or provision binding on it under the Bonds or the Trust Deed (other than any obligation for the payment of any principal or interest in respect of the Bonds) and, except where, in the opinion of the Trustee, such default is not capable of remedy (in which case the Bonds will become
due and repayable subject to, and immediately upon, the Trustee certifying and giving notice as aforesaid), such default continues for 45 days (or such longer period as the Trustee may approve) after written notice by the Trustee to the Issuer specifying such default and requiring the same to be remedied.
13 ENFORCEMENT
At any time after the Bonds become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer as it may think fit to enforce the provisions of the Trust Deed, the Bonds and the Coupons, but it shall not be bound to take any such proceedings unless (i) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holding at least one-quarter in principal amount of the Bonds then outstanding and (ii) it shall have been indemnified to its satisfaction. No Bondholder or Couponholder may proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable period and such failure shall be continuing.
14 REPLACEMENT OF BONDS AND COUPONS
If any Bond or Coupon is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Paying Agent in London, subject to all applicable laws and the requirements of any applicable stock exchange or other relevant authority, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Bonds or Coupons must be surrendered before replacements will be issued.
15 NOTICES
Notices to holders of Bonds will be valid if published in an English language leading daily newspaper having general circulation in the United Kingdom (which is expected to be the Financial Times) or, if in the opinion of the Trustee such publication is not practicable, in another English language leading daily newspaper having general circulation in Europe. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the first date on which publication is made. Couponholders will be deemed for all purposes to have notice of the contents of any notice given to Bondholders in accordance with this Condition.
16 TRANSFER OF ELECTRICITY TRANSMISSION LICENCE
The Issuer has covenanted in the Trust Deed that it will not transfer or consent to the transfer of its rights as holder of the Electricity Transmission Licence to any other person unless (i) that other person guarantees all amounts payable under the Bonds, the Coupons and the Trust Deed or a trust deed is executed or some other form of undertaking is given by such other person in form and manner satisfactory to the Trustee agreeing to be bound by the Bonds, the Coupons and the Trust Deed; (ii) consequential amendments are made to Conditions 6 and 12 so that the events referred to therein are applicable to such other person as well as, in the case of Condition 12, to the Issuer; and (iii) the Trustee is satisfied that the interests of the Bondholders will not be materially prejudiced thereby.
17 MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER, REDENOMINATION AND SUBSTITUTION
The Trust Deed contains provisions for convening meetings of Bondholders to consider matters affecting their interests, including the modification of any of these Conditions or any provisions of the Trust Deed. Any such modification may be made if sanctioned by an Extraordinary Resolution. The quorum for any meeting convened to consider an Extraordinary Resolution will be one or more persons present holding or representing a clear majority in principal amount of the Bonds for the time being outstanding or, at any adjourned meeting, one or more persons present being or representing Bondholders whatever the principal amount of the Bonds held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to postpone the dates for payment of principal on the Bonds or the dates on which interest is payable in respect of Bonds, (ii) to reduce or cancel the principal amount of, or interest on, the Bonds or to alter the method of calculating the amount of any payment in respect of the Bonds, (iii) to change the currency of payment of the Bonds or the Coupons (except where the Trustee is exercising its power to facilitate payment in Euro as set out in the paragraph below) or (iv) to modify the provisions concerning the quorum required at any meeting of Bondholders or the majority required to pass an Extraordinary Resolution, in which case the necessary quorum will be
one or more persons present holding or representing not less than two-thirds, or at any adjourned meeting not less than one-third, in principal amount of the Bonds for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on all Bondholders (whether or not they were present at the meeting at which such resolution was passed) and on all Couponholders.
The Trustee may agree, without the consent of the Bondholders or Couponholders, to (i) any modification of any of these Conditions or any provisions of the Trust Deed which is of a formal, minor or technical nature or is made to correct a manifest error and (ii) any other modification (except as mentioned in the Trust Deed) of, and any waiver or authorisation of any breach or proposed breach of, any of these Conditions or any provisions of the Trust Deed which is in the opinion of the Trustee not materially prejudicial to the interests of the Bondholders. The Trustee may agree, without the consent of the Bondholders or Couponholders, on or after the Specified Date (as defined below), to such modifications to the Bonds and the Trust Deed in order to facilitate payment of interest in euro and redemption at the euro equivalent of the sterling principal amount of the Bonds (including indexation in respect thereof) and associated reconventioning, renominalisation and related matters as may be proposed by the Issuer (and confirmed by an independent financial institution approved by the Trustee to be in conformity with then applicable market conventions) provided that the Issuer shall be under no obligation to make any such proposals. For these purposes, "Specified Date" means the date on which the United Kingdom participates in the third stage of European Economic and Monetary Union pursuant to the Treaty establishing the European Community or otherwise participates in European Economic and Monetary Union in a similar manner. Any such modification, authorisation or waiver shall be binding on the Bondholders and the Couponholders and, if the Trustee so requires, any modification referred to above shall be notified by the Issuer to the Bondholders as soon as practicable in accordance with Condition 15.
The Trustee may, without the consent of the Bondholders or Couponholders, agree with the Issuer to the substitution in place of the Issuer (or any previous substitute under this Condition) as the principal debtor under the Bonds, the Coupons and the Trust Deed of any Subsidiary or any holding company of the Issuer, subject to (a) the Bonds being unconditionally and irrevocably guaranteed by the Issuer, (b) the Trustee being satisfied that the interests of the Bondholders will not be materially prejudiced by the substitution and (c) certain other conditions set out in the Trust Deed being complied with.
In connection with the exercise of its functions (including but not limited to those in relation to any proposed modification, waiver, authorisation or substitution) the Trustee shall not have regard to the consequences of such exercise for individual Bondholders or Couponholders and the Trustee shall not be entitled to require, nor shall any Bondholder or Couponholder be entitled to claim, from the Issuer or any other person, any indemnification or payment in respect of any tax consequences of any such exercise upon individual Bondholders or Couponholders.
18 INDEMNIFICATION OF THC TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee will be entitled to enter into business transactions with the Issuer and any of its Subsidiaries without accounting for any profit resulting therefrom.
19 FURTHER ISSUES
The Issuer may from time to time without the consent of the Bondholders or Couponholders create and issue further bonds or notes either having the same Conditions as the Bonds in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with the outstanding bonds or notes of any series (including the Bonds) or upon such terms as to interest, premium, redemption, ranking and otherwise as the Issuer may determine at the time of their issue. Any further bonds or notes forming a single series with the outstanding bonds or notes of any series (including the Bonds) constituted by the Trust Deed or any deed supplemental to it shall, and any other bonds or notes may (with the consent of the Trustee), be constituted by a deed supplemental to the Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Bondholders and the holders of bonds or notes of other series in certain circumstances where the Trustee so decides. In these Conditions, unless the context otherwise requires and subject to any provision to the contrary in the Trust Deed, the expression "Bonds" shall include any further bonds issued in accordance with this Condition and forming a single series with the Bonds.
20 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of the Bonds under the Contracts (Rights of Third Parties) Act 1999.
21 GOVERNING LAW
The Trust Deed, the Bonds and the Coupons are governed by, and will be construed in accordance with, English law.
USE OF PROCEEDS
The net proceeds of the issue of the RPI Bonds, which are expected to amount to approximately (pound)198,680,000, will be used for general corporate purposes.
LPI BOND CONDITIONS
The following, subject to alteration and amendment and save for the paragraphs in italics, are the terms and conditions of the LPI Bonds substantially in the form which will appear on the LPI Bonds in definitive form:
The issue of the (pound)40,000,000 3.589 per cent. Limited Retail Price Index-Linked Bonds due 2030 (the "Bonds") was authorised pursuant to resolutions of the Board of Directors of The National Grid Company plc (the "Issuer") passed on 11 June 2001 and resolutions of a duly authorised committee of the Board of Directors of the Issuer passed on 18 July 2001. The Bonds are constituted by the trust deed dated 27 July 2001 (the "Trust Deed") between the Issuer and The Law Debenture Trust Corporation p.l.c. (the "Trustee", which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Bonds (the "Bondholders"). The statements in these Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed. The Bondholders and the holders (the "Couponholders") of the interest coupons relating to the Bonds (the "Coupons") (whether or not attached to the Bonds) are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions applicable to them of the paying agency agreement dated 27 July 2001 (the "Paying Agency Agreement") relating to the Bonds between the Issuer, the Trustee, Citibank, N.A. (the "Principal Paying Agent", which expression shall include any successor as principal paying agent under the Paying Agency Agreement) and the paying agent referred to below (such person being referred to together with the Principal Paying Agent as the "Paying Agents", which expression shall include their successors as paying agents under the Paying Agency Agreement), copies of each of which are available for inspection during normal office hours at the registered office for the time being of the Trustee (being at the date hereof at Fifth Floor, 100 Wood Street, London EC2V 7EX) and at the specified office of each of the Paying Agents.
1 FORM, DENOMINATION AND TITLE
The Bonds are serially numbered and in bearer form in the denominations of
(pound)1,000, (pound)10,000 and (pound)100,000 each with Coupons attached on
issue. Bonds of one denomination may not be exchanged for Bonds of another
denomination.
Title to the Bonds and the Coupons will pass by delivery. In these Conditions, "Bondholder" and (in relation to a Bond or Coupon) "holder" mean the bearer of any Bond or Coupon, as the case may be. The holder of any Bond or Coupon will (except as otherwise required by law or as ordered by a court of competent jurisdiction) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it, or its theft or loss) and no person will be liable for so treating the holder, and the Issuer, the Trustee and the Paying Agents shall not be required to obtain any proof thereof or as to the identity of such holder.
The Bonds will be represented initially by a Temporary Global Bond. The Temporary Global Bond will be issued on 27 July 2001 and will be held by a common depositary for Euroclear Bank S.A./N.V. as operator of the Euroclear System ("Euroclear" ) and Clearstream Banking, societe anonyme ("Clearstream Luxembourg") for credit, against payment, to the accounts designated by the relevant purchasers with Euroclear and Clearstream, Luxembourg. Interests in the Temporary Global Bond will be exchangeable on or after a date which is expected to be 4 September 2001 for interests in a Permanent Global Bond upon certification that the beneficial owners of the relevant Bonds are not (i) United States persons or (ii) persons who have acquired such Bonds for resale to or for the account of any United States person.
The Permanent Global Bond will be exchangeable for Definitive Bonds in bearer form in the circumstances set out in it. See "Summary of Provisions relating to the Bonds while in Global Form".
Definitive Bonds and Coupons will bear the following legend: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code".
2 STATUS
The Bonds and the Coupons constitute direct, unconditional and unsecured obligations of the Issuer and rank and will rank pari passu without any preference among themselves and (save for such exceptions as are from time to time applicable under the laws of England and Wales) at least equally with all other present and future unsecured and unsubordinated obligations of the Issuer.
3 DEFINITIONS
"Base Index Figure" means (subject to Condition 8(a)(ii)) 172.1.
"Electricity Act" means the Electricity Act 1989 as amended or re-enacted from time to time and all subordinate legislation made pursuant thereto.
"Electricity Transmission Licence" means the transmission licence, as subsequently amended from time to time, originally granted by the Secretary of State for Energy to the Issuer under the Electricity Act.
"Group" means the Issuer and its Subsidiaries and "member of the Group" shall be construed accordingly.
"Index" or "Index Figure" means, subject as provided in Conditions 5(d) and 8, the United Kingdom All Items RPI as published by the Office for National Statistics (January 1987 = 100) contained in the Monthly Digest of Statistics (or contained in any official publication substituted therefor) or any comparable index which may replace the Index for the purpose of calculating the amount payable on repayment of the Reference Gilt.
Any reference to the Index Figure applicable to a particular month shall, subject as provided in Condition 8, be construed as a reference to the Index Figure published in the Monthly Digest of Statistics in the seventh month prior to that particular month and relating to the month before that of publication.
"Index Ratio" means the Index Figure applicable to any month divided by the Base Index Figure provided that (i) if such ratio is greater than the Maximum Index Ratio, it shall be deemed to be equal to the Maximum Index Ratio and (ii) if such ratio is less than the Minimum Index Ratio, it shall be equal to the Minimum Index Ratio.
"Maximum Index Ratio" means 5%.
"Minimum Index Ratio" means 0%.
"Rated Securities" means (a) the Bonds or (b) such other comparable unsecured and unsubordinated debt of the Issuer (or of any Subsidiary of the Issuer and which is guaranteed on an unsecured and unsubordinated basis by the Issuer) having an initial maturity of five years or more selected by the Issuer from time to time for the purpose of this definition with the approval of the Trustee and which possesses an investment grade rating (BBB-/Baa3, or their respective equivalents for the time being, or better) by any Rating Agency (whether at the invitation of the Issuer or by its own volition).
"Rating Agency" means Standard and Poor's Ratings Services, a division of The McGraw-Hill Companies Inc., or any of its Subsidiaries and their successors or Moody's Investors Service, Inc. or any of its Subsidiaries and their successors or any rating agency substituted for either of them (or any permitted substitute of them) by the Issuer from time to time with the prior written approval of the Trustee.
A "Rating Downgrading" shall, subject as provided in Condition 6(b), be deemed to have occurred in respect of a Restructuring Event if the rating assigned to the Rated Securities by any Rating Agency which is current immediately prior to the occurrence of the Restructuring Event (whether provided by a Rating Agency at the invitation of the Issuer or by its own volition) is withdrawn or reduced from an investment grade rating (BBB-/Baa3, or their respective equivalents for the time being, or better) to a non-investment grade rating (BB+/Ba1, or their respective equivalents for the time being, or worse) or, if the Rating Agency shall have already rated the Rated Securities below investment grade (as described above), the rating is lowered one full rating category (from BB+/Ba1 to BB/Ba2 or such similar lowering).
"Reference Gilt" means the 4.125 per cent. Index-Linked Treasury Stock due 2030 for so long as such stock is in issue, and thereafter such Sterling obligation of the United Kingdom Government listed on the Official List maintained by the Financial Services Authority in its capacity as the UK Listing Authority and traded on the London Stock Exchange's market for listed securities whose duration most closely matches that of the Bonds on the date which is two business days prior to the date specified for redemption in any notice given by the Issuer as the Trustee may from time to time determine to be appropriate on the advice of a gilt-edged market maker or other adviser selected by the Issuer and approved by the Trustee or, in the event that the Issuer fails to appoint such person within a reasonable period of time, such person as the Trustee in its sole discretion may determine to be the most appropriate (an "Indexation Adviser"), and for which purpose duration is calculated on the basis of the formula set out on page 119 of The Handbook of Fixed Income Securities Second Edition 1987, published by Dow Jones-Irwin.
"Relevant Date" in respect of any payment means the date on which the payment becomes due but, if the full amount of the moneys payable has not been received by the Principal Paying Agent or by the Trustee on or prior to such due date, it means the date on which the full amount of such moneys has been so received and notice to that effect has been given to the Bondholders in accordance with Condition 15.
"Restructuring Event" means the occurrence of any one or more of the following events:
(a) (i) the Secretary of State for Trade and Industry or any official succeeding to his functions gives the Issuer written notice of revocation of the Electricity Transmission Licence in accordance with the terms as to revocation set out in Schedule 2 of the Electricity Transmission Licence, such revocation to become effective not later than 27 July 2030 or (ii) the Issuer agrees in writing with the Secretary of State for Trade and Industry or any official succeeding to his functions to any revocation or surrender of the Electricity Transmission Licence or (iii) any legislation (whether primary or subordinate) is enacted terminating or revoking the Electricity Transmission Licence; or
(b) any modification is made to the terms and conditions of the Electricity Transmission Licence other than such a modification which the Trustee, in its opinion, considers to be not materially prejudicial to the interests of the Bondholders and has so confirmed in writing to the Issuer; or
(c) any legislation (whether primary or subordinate) is enacted removing, reducing or qualifying the duties or powers of the Secretary of State for Trade and Industry or any official succeeding to his functions and/or the Gas and Electricity Markets Authority under Section 3A of the Electricity Act as compared with those in effect on 27 July 2001 other than such legislation which the Trustee, in its opinion, considers to be not materially prejudicial to the interests of the Bondholders and has so confirmed in writing to the Issuer.
"Restructuring Period" means
(a) if at the time at which the Restructuring Event occurs there are Rated Securities, the period of 90 days starting from and including the day on which a Restructuring Event occurs or such longer period in which the Rated Securities are under consideration (announced publicly within such 90 day period) for rating review by a Rating Agency; or
(b) if at the time at which a Restructuring Event occurs there are no Rated Securities, the period starting from and including the day on which a Restructuring Event occurs and ending on the day 90 days following the date on which a Negative Certification (as defined in Condition 6(a)) shall have been given to the Issuer in respect of that Restructuring Event.
"Subsidiary," means a subsidiary within the meaning of Section 736 of the Companies Act 1985 and "Subsidiaries" shall be construed accordingly.
4 INTEREST
The Bonds bear interest (calculated in accordance with the Actual/Actual ISMA Day Count Convention) (adjusted for indexation in accordance with Condition 7) on their principal amount outstanding from, and including, 27 July 2001 (the "Closing Date") at the rate of 3.589 per cent. per annum payable semi-annually in arrear on 27 January and 27 July in each year (each an "Interest Payment Date"). Each Bond will cease to bear interest from the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused. In such event, it shall continue to bear interest at the aforesaid rate (both before and after judgment) until, but excluding, whichever is the earlier of (i) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant holder and (ii) the seventh day after the Trustee or the Principal Paying Agent has notified Bondholders in accordance with Condition 15 of receipt of all sums due in respect of all the Bonds up to that day (except to the extent that there is a failure in the subsequent payment to the relevant holders as provided in these Conditions). Where interest is to be calculated in respect of a period which is shorter than an Interest Period it shall be calculated on the basis of the actual number of days in the relevant period from (and including) the first day of such period to (but excluding) the last day of such period, divided by the number of days in the Interest Period in which the relevant period falls (including the first such day but excluding the last). The period beginning on the Closing Date and ending on the first Interest Payment Date and each successive period beginning on an Interest Payment Date and ending on the next succeeding Interest Payment Date is called an "Interest Period".
5 REDEMPTION AND PURCHASE
(a) Final Redemption
Unless previously redeemed or purchased and cancelled, the Bonds will be redeemed at their principal amount (adjusted for indexation in accordance with Condition 7) on 27 July 2030.
(b) Redemption for Taxation Reasons
If, immediately prior to the giving of the notice referred to below, the Issuer satisfies the Trustee that, as a result of any amendment to or change in the laws or regulations of the United Kingdom or of any political subdivision thereof or any authority therein or thereof having power to tax or any change in the official or generally accepted interpretation or application of such laws or regulations in each case which becomes effective on or after the Closing Date, the Issuer has or will on the next Interest Payment Date become obliged to pay any additional amounts in accordance with Condition 10 (and such amendment or change has been evidenced by the delivery by the Issuer to the Trustee (who shall, in the absence of manifest error, accept such certificate and opinion as sufficient evidence thereof) of (i) a certificate signed by two directors of the Issuer on behalf of the Issuer stating that such amendment or change has occurred (irrespective of whether such amendment or change is then effective) and describing the facts leading thereto and stating that such obligation cannot be avoided by the Issuer taking reasonable measures available to it and (ii) an opinion in a form satisfactory to the Trustee of independent legal advisers of recognised standing to the effect that such amendment or change has occurred (irrespective of whether such amendment or change is then effective)), the Issuer may (having given not less than 30 and not more than 90 days' notice to the Trustee and to the Bondholders in accordance with Condition 15) redeem all, but not some only, of the Bonds at their principal amount, together with interest accrued (adjusted for indexation as provided in Condition 7) up to, but excluding, the date fixed for such redemption, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be required to pay such additional amounts were a payment in respect of the Bonds then due.
(c) Redemption at the Option of the Issuer
If, at any time, the principal amount outstanding of the Bonds is 10 per cent. or less of the original principal amount of the Bonds, the Issuer may (having given not less than 30 and not more than 90 days' notice to the Trustee and to the Bondholders in accordance with Condition 15) redeem all, but not some only, of the Bonds at their principal amount, together with interest accrued (in each case adjusted for indexation as provided in Condition 7) up to, but excluding, the date fixed for such redemption.
(d) Redemption for Index Reasons
If either (i) the Index Figure for three consecutive months is required to be determined on the basis of an Index Figure previously published as provided in Condition 8(b)(ii) and the Trustee has been notified by the Principal Paying Agent that publication of the Index has ceased or (ii) notice is published by Her Majesty's Treasury, or on its behalf, following a change in relation to the Index, offering a right of redemption to holders of the Reference Gilt, and (in either case) no amendment or substitution of the Index shall have been advised by the Indexation Adviser (as defined above) to the Issuer and such circumstances are continuing, having given not more than 60 nor less than 30 days' notice to Bondholders in accordance with Condition 15 the Issuer may redeem all, but not some only, of the Bonds at their principal amount together with interest accrued up to and including the date of redemption (in each case adjusted for indexation as provided in Condition 7), the Index Ratio for this purpose being that applicable to the month in which redemption takes place.
(e) Purchase
The Issuer or any of its Subsidiaries may, subject to any relevant laws or regulations, at any time purchase Bonds (with or without all unmatured Coupons relating thereto being surrendered therewith) at any price in the open market or by private treaty. If purchases are made by tender, tenders must be available to all Bondholders alike.
(f) Cancellation
All Bonds redeemed pursuant to any of the foregoing provisions will be cancelled forthwith together with all unmatured Coupons attached thereto or surrendered therewith and may not be reissued or resold. Any Bonds purchased pursuant to Condition 5(e) or Condition 6 may, at the option of the Issuer, be held or may be surrendered to a Paying Agent for cancellation, but may not be resold.
6 REDEMPTION AT THE OPTION OF THE BONDHOLDERS
(a) Redemption following a Restructuring Event
If, at any time while any of the Bonds remains outstanding, a Restructuring Event occurs and, within the Restructuring Period, either:
(i) if at the time at which the relevant Restructuring Event occurs there are Rated Securities, a Rating Downgrading in respect of that Restructuring Event also occurs; or
(ii) if at such time there are no Rated Securities, the Issuer is unable as a result of such Restructuring Event to obtain a rating of the Bonds or of any other comparable unsecured and unsubordinated debt of the Issuer (or of any Subsidiary of the Issuer and which is guaranteed on an unsecured and unsubordinated basis by the Issuer) having an initial maturity of five years or more from a Rating Agency of at least investment grade (BBB-/Baa3, or their respective equivalents for the time being) (a "Negative Rating Event"), which rating the Issuer shall use all reasonable endeavours to obtain,
and in any such case such Restructuring Event is certified in writing by an independent financial adviser appointed by the Issuer and approved by the Trustee (or, if the Issuer shall not have appointed such an adviser within 21 days after becoming aware of the occurrence of such Restructuring Event, appointed by the Trustee (following consultation with the Issuer)) as being in its opinion materially prejudicial to the interests of the Bondholders (a "Negative Certification") (that Restructuring Event and the relevant Rating Downgrading or, as the case may be, Negative Rating Event and, in each case, the Negative Certification together constituting a "Put Event"), then (unless at any time the Issuer shall have given a notice under Condition 5(h) or 5(c) or 5(d)) the holder of each Bond will have the right, upon the giving of a Put Event Notice (as defined below), to require the Issuer to redeem or, at the option of the Issuer, purchase (or procure the purchase of) that Bond on the Put Date (as defined below) at its principal amount together with interest (if any) accrued up to, but excluding, the Put Date (in each case adjusted for indexation as provided in Condition 7). Any certification by an independent financial adviser as aforesaid as to whether or not, in its opinion, any Restructuring Event is materially prejudicial to the interests of the Bondholders shall, in the absence of manifest error, be conclusive and binding upon the Issuer, the Trustee, the Bondholders and the Couponholders.
(b) Rating Downgrading or Negative Rating Event
A Rating Downgrading or a Negative Rating Event shall be deemed not to have occurred in respect of or as a result of a Restructuring Event if the Rating Agency making the relevant reduction in Rating or declining to assign a rating of at least investment grade as provided in these Conditions does not announce or publicly confirm or otherwise inform the Trustee that the reduction or Declining was the result, in whole or in part, of any event or circumstance comprised in or arising as a result of the applicable Restructuring Event.
(c) Put Event Notice
Promptly upon the Issuer becoming aware that a Put Event has occurred, and in any event not later than 14 days after the occurrence of a Put Event, the Issuer shall, and at any time upon the Trustee becoming similarly so aware the Trustee may, and if so requested by the holders of at least one- quarter in principal amount of the Bonds then outstanding shall, give notice (a "Put Event Notice") to the Bondholders in accordance with Condition 15 specifying the nature of the Put Event and the Procedure for exercising the right described herein.
(d) Procedure
To exercise the right to require redemption or, as the case may be, purchase by the Issuer or by a Purchaser procured by it of a Bond under this Condition the Bondholder must deliver such Bond on any business day (as defined in Condition 9) falling within the period (the "Put Period") of 45 days after the date of a Put Event Notice at the specified office of any Paying Agent, accompanied by a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent (a "Put Notice") and in which the holder may specify a bank account with a bank in London to which payment is to be made under this Condition. The Paying Agent to which such Bond and Put Notice are delivered shall issue to the Bondholder concerned a non-transferable receipt in respect of the Bond so delivered. Payment in respect of any
Bond so delivered shall be made, if the holder duly specified a bank account in the Put Notice to which payment is to be made, on the day (the "Put Date") being the fourteenth day after the date of expiry of the Put Period by transfer to that bank account and in every other case on or after the Put Date against presentation and surrender or (as the case may be) endorsement of such receipt at any specified office of any Paying Agent. A Put Notice, once delivered, shall be irrevocable and the Issuer shall redeem or, as the case may be, purchase (or procure the purchase of) all Bonds delivered on the applicable Put Date. For the purposes of the Terms and Conditions and the Trust Deed, receipts issued pursuant to this Condition shall be treated as if they were Bonds.
(e) Trustee
The Trust Deed provides that the Trustee will not be bound to take any steps to ascertain whether a Restructuring Event or a Put Event or any event which could lead to the occurrence of or, together with other events, constitute a Restructuring Event or a Put Event has occurred and that, until it Shall have express notice to the contrary, the Trustee will be entitled to assume that no Restructuring Event or Put Event and no such other event has occurred.
7 INDEXATION
Each payment of principal and interest in respect of the Bonds shall be the amount provided in or determined in accordance with the foregoing Conditions, multiplied by the Index Ratio applicable to the month in which such payment falls to be made and rounded to four decimal places (0.00005 being rounded upwards).
8 CHANGES IN CIRCUMSTANCES AFFECTING THE INDEX
(a) Change in base
If at any time and from time to time the Index shall be changed by the substitution of a new base therefor, then with effect from the calendar month from and including that in which such substitution takes effect:
(i) the definition of Index and Index Figure in Condition 3 shall be deemed to refer to the new date or month in substitution for January 1987 (or, as the case may be, to such other date or month as may have been substituted therefor); and
(ii) the new Base Index Figure shall be the product of the existing Base Index Figure (being at the Closing Date 172.1) and the Index Figure immediately following such substitution, divided by the Index Figure immediately prior to such substitution.
(b) Delay in publication of Index
If and other than in circumstances which then appear to fall within Condition 8(c), the Index Figure which is normally published in the Monthly Digest of Statistics in the seventh month and which relates to the eighth month (the "relevant month") before the month in which a payment is due to be made in respect of the Bonds is not published on or before the fourteenth business day before the date (the "date for payment") on which such payment is due, the Index Figure applicable to the month in which the date of payment falls shall be:
(i) such substitute index figure (if any) as the Trustee considers to have been published by the Bank of England for the purposes of indexation of payments on the Reference Gilt or, failing such publication, on any one or more issues of index-linked Treasury Stock selected by an Indexation Adviser; or
(ii) if a determination of the Index Figure is not determined pursuant to Condition 8(b)(i), the Index Figure last published (or, if later, the substitute index figure last determined pursuant to Condition 8(b)(i)) before the date for payment.
Where the above provisions of this Condition 8(b) apply, any determination as to the Index Figure applicable to the month in which the date for payment falls made in accordance with such provisions and any selection by an Indexation Adviser pursuant to Condition 8(b)(i) shall be conclusive and binding on the Issuer, the Trustee, the Bondholders and the Couponholders. If, an Index Figure having been determined pursuant to Condition 8(b)(i) and applied to the month in which the date of payment falls, the Index Figure relating to the relevant month is subsequently published while a Bond is still outstanding, then:
(i) in relation to a payment of interest in respect of such Bond other than upon redemption of such Bond the interest next payable after the date of such subsequent publication shall be increased or reduced by an amount equal to (respectively) the shortfall or excess of the amount of the relevant payment made on the basis of the Index Figure applicable by virtue of Condition 8(b)(ii), below or above the amount of the relevant payment that would have been due if the Index Figure subsequently published had been published on or before the fourteenth business day before the date for payment; and
(ii) in relation to a payment of principal or interest upon redemption of such Bond, no subsequent adjustment to amounts paid will be made.
(c) Cessation of or fundamental changes to the Index
(i) If the Trustee has been notified by the Principal Paying Agent that (a) the Index has ceased to be published or (b) any change is made to the coverage or the basic calculation of the Index which constitutes a fundamental change which would, in the opinion of the Trustee acting solely on the advice of an Indexation Adviser, be materially prejudicial to the interests of the Bondholders, the Trustee will give written notice of such occurrence to the Issuer, and the Issuer and the Trustee together shall seek to agree for the purpose of the Bonds one or more adjustments to the Index or a substitute index (with or without adjustments) with the intention that the same should leave the Issuer and the Bondholders in no better and no worse a position than they would have been had the Index not ceased to be published or the relevant fundamental change not been made.
(ii) If the Issuer and the Trustee fail to reach agreement as mentioned above within 20 business days following the giving of notice as mentioned in paragraph (c)(i)(a), a bank or other person in London shall be appointed by the Issuer with the approval of the Trustee, or, failing agreement on and the making of such appointment within 20 business days following the expiry of the 20 business day period referred to above, by the Trustee (in each case, such bank or other person so appointed being referred to as the "Expert"), to determine for the purpose of the Bonds one or more adjustments to the Index or a substitute index (with or without adjustments) with the intention that the same should leave the Issuer and the Bondholders in no better and no worse a position than they would have been had the Index not ceased to be published or the relevant fundamental change not been made. Any Expert so appointed shall act as an expert and not as an arbitrator and all fees, costs and expenses of the Expert and of any Indexation Adviser and of the Issuer and the Trustee in connection with such appointment shall be borne by the Issuer. In this Condition 8 business day means any day on which commercial banks and foreign exchange markets are open for business in London.
(iii) The Index shall be adjusted or replaced by a substitute index as agreed by the Issuer and the Trustee or as determined by the Expert pursuant to the foregoing paragraphs, as the case may be, and references in these Conditions to the Index and to any Index Figure shall be deemed amended in such manner as the Issuer and the Trustee agree. Such amendments shall be effective from the date of such notification and shall be binding upon the Issuer, the Trustee, the Bondholders and the Couponholders, and the Issuer shall give notice to the Bondholders in accordance with Condition 15 of such amendments as promptly as practicable following such notification.
9 PAYMENTS
(a) Principal and Interest in Respect of the Bonds
Payments of principal and interest in respect of the Bonds will be made against presentation and surrender (or, in the case of a partial payment, endorsement) of Bonds or (as the case may be) the appropriate Coupons save that if the due date for redemption of a Bond is not an Interest Payment Date, accrued interest will be paid against presentation of the relevant Bond) at the specified office of any Paying Agent by sterling cheque drawn on, or by transfer to a sterling account maintained by the payee with, a bank in London. Payments of interest due in respect of any Bond other than on presentation and surrender of matured Coupons shall be made only against presentation and either surrender or endorsement (as appropriate) of the relevant Bond.
(b) Payment Subject to Fiscal Laws
All payments are subject in all cases to any applicable fiscal or other
laws and regulations, but without prejudice to the provisions of Condition
10. No commissions or expenses shall be charged to the Bondholders or
Couponholders in respect of such payments.
(c) Payments on Business Days
If the due date for payment of any amount on any Bond or Coupon is not a business day (as defined below), then the holder thereof will not be entitled to payment of such amount until the next following business day and will not be entitled to any further interest or other payment in respect of such postponement. In these Conditions, "business day" means any day on which banks are open for business in London and in the place of the specified office of the Paying Agent at which the Bond or Coupon is presented for payment.
(d) Paying Agents
The initial Principal Paying Agent is Citibank, N.A. and the other initial Paying Agent and their respective initial specified offices are set out at the end of these Conditions. The Issuer may at any time (subject to the prior approval of the Trustee) vary or terminate the appointment of any Paying Agent and appoint additional or other Paying Agents, provided that it will at all times maintain (i) a Principal Paying Agent, (ii) Paying Agents having specified offices in at least two major European cities approved by the Trustee (including London, so long as the Notes are listed on the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange's market for listed securities) and (iii) a Paying Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26 - 27 November 2000 or any law implementing or complying with, or introduced in order to conform to such Directive. Notice of any such termination or appointment and of any change in the specified office through which any Paying Agent acts will be given in accordance with Condition 15.
(e) Surrender of Unmatured Coupons
Each Bond should be presented for redemption (including exercise of the Bondholders' option pursuant to Condition 6) together with all relative unmatured Coupons (being Coupons which would otherwise fall due for payment after the relevant due date for redemption or, as the case may be, the Put Date) failing which, all unmatured Coupons shall become void.
10 TAXATION
All payments by or on behalf of the Issuer in respect of the Bonds shall be made without deduction or withholding for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the United Kingdom or any political subdivision or authority thereof or therein having power to tax, unless such deduction or withholding is required by law. In such event the Issuer shall pay such additional amounts as may be necessary in order that the net amounts received by the holders of Bonds or Coupons after such deduction or withholding shall equal the amounts which would have been receivable by them had no such deduction or withholding been required, except that no additional amounts shall be payable in respect of any Bond or Coupon presented for payment:
(a) by or on behalf of a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond or Coupon by reason of his being connected with the United Kingdom otherwise than merely by the holding of the Bond or Coupon; or
(b) by or on behalf of a holder who would not be liable or subject to deduction or withholding by making a declaration of beneficial ownership of the Bond or Coupon and of non-residence or other similar claim for exemption to the relevant tax authority or to any relevant person; or
(c) more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on the last day of such period of 30 days on the assumption, if such is not the case, that such last day was a business day; or
(d) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to any European Union Directive on the taxation of savings implementing the
conclusions of the ECOFIN Council meeting of 26 - 27 November 2000 or any law implementing or complying with, or introduced in order to conform to such Directive; or
(e) by or on behalf of a Bondholder or a Couponholder who would have been able to avoid such withholding or deduction by presenting the relevant Bond or Coupon to another Paying Agent in a Member State of the European Union.
Any reference herein to the principal of and/or interest on the Bonds shall be deemed to include any additional amounts which may be payable under this Condition or under any obligations undertaken in addition hereto or in substitution herefor pursuant to the Trust Deed.
11 PRESCRIPTION
Claims in respect of principal and interest shall be prescribed unless presentation for payment is made as required by Condition 9 within a period of 12 years in the case of principal and six years in the case of interest from the appropriate Relevant Date.
12 EVENTS OF DEFAULT
The Trustee at its discretion may, and if so requested in writing by the holders of at least one-quarter in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders shall, subject in each case to its being Indemnified to its satisfaction, (but, in the case of the happening of any of the events mentioned in sub-paragraphs (e) to (g) inclusive, other than default in the performance or observance of any of the Provisions of Conditions 5, 6 and 9 or the appointment of an administrative or other receiver of the whole of the undertaking or assets of the Issuer, only if the Trustee shall have certified in writing to the Issuer that such event is, in its opinion, materially prejudicial to the interests of the Bondholders) give notice to the Issuer that the Bonds are, and they shall accordingly thereby become, immediately due and repayable at their principal amount, together with accrued interest (in each case adjusted for indexation in accordance with Condition 7), and the Index Ratio for such purpose being that applicable to the month in which the Bonds become due and repayable takes place (as provided in the Trust Deed), if any of the following events shall occur:
(a) if default is made in the payment of any principal or interest in respect of the Bonds or any of them and such default continues for 15 days or more; or
(b) if an order is made or an effective resolution passed for the winding-up of, or an administration order is made in relation to, the Issuer (except for the purposes of a reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(c) if the Issuer stops or threatens to stop payment (except for the purposes of a reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(d) if (i) any other present or future Relevant Indebtedness of the Issuer becomes due and payable prior to its stated maturity by reason of any actual event of default, or (ii) any such Relevant Indebtedness is not paid when due or, as the case may be, within any applicable grace period, provided that the aggregate amount of the Relevant Indebtedness in respect of which one or more of the events mentioned above in this paragraph (d) have occurred equals or exceeds (pound)40,000,000.
For the purposes of this Condition, "Relevant Indebtedness" means any present or future indebtedness in the form of, or represented by, bonds, notes, debentures, loan stock or other securities which are for the time being, or are capable of being, quoted, listed or ordinarily dealt in on any stock exchange.
(e) if an encumbrancer takes possession or an administrative or other receiver is appointed of the whole or any part which in the opinion of the Trustee is material of the undertaking or assets of the Issuer or if a distress, execution or any similar proceeding is levied or enforced upon or sued out against, in the opinion of the Trustee, a substantial part of the chattels or property of the Issuer and in any such case is not removed, paid out or discharged within 21 days (or such longer period as the Trustee may approve); or
(f) if the Issuer is unable to pay its debts as they fall due or has any voluntary arrangement proposed in relation to it under Section 1 of the Insolvency Act 1986 or enters into any scheme of arrangement
with its creditors (other than for the purpose of reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(g) if default is made by the Issuer in the performance or observance of any obligation, covenant, condition or provision binding on it under the Bonds or the Trust Deed (other than any obligation for the payment of any principal or interest in respect of the Bonds) and, except where, in the opinion of the Trustee, such default is not capable of remedy (in which case the Bonds will become due and repayable subject to, and immediately upon, the Trustee certifying and giving notice as aforesaid), such default continues for 45 days (or such longer period as the Trustee may approve) after written notice by the Trustee to the Issuer specifying such default and requiring the same to be remedied.
13 ENFORCEMENT
At any time after the Bonds become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer as it may think fit to enforce the provisions of the Trust Deed, the Bonds and the Coupons, but it shall not be bound to take any such proceedings unless (i) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holding at least one-quarter in principal amount of the Bonds then outstanding and (ii) it shall have been indemnified to its satisfaction. No Bondholder or Couponholder may proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable period and such failure shall be continuing.
14 REPLACEMENT OF BONDS AND COUPONS
If any Bond or Coupon is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Paying Agent in London, subject to all applicable laws and the requirements of any applicable stock exchange or other relevant authority, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Bonds or Coupons must be surrendered before replacements will be issued.
15 NOTICES
Notices to holders of Bonds will be valid if published in an English language leading daily newspaper having general circulation in the United Kingdom (which is expected to be the Financial Times) or, if in the opinion of the Trustee such publication is not practicable, in another English language leading daily newspaper having general circulation in Europe. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the first date on which publication is made. Couponholders will be deemed for all purposes to have notice of the contents of any notice given to Bondholders in accordance with this Condition.
16 TRANSFER OF ELECTRICITY TRANSMISSION LICENCE
The Issuer has covenanted in the Trust Deed that it will not transfer or consent to the transfer of its rights as holder of the Electricity Transmission Licence to any other person unless (i) that other person guarantees all amounts payable under the Bonds, the Coupons and the Trust Deed or a trust deed is executed or some other form of undertaking is given by such other person in form and manner satisfactory to the Trustee agreeing to be bound by the Bonds, the Coupons and the Trust Deed; (ii) consequential amendments are made to Conditions 6 and 12 so that the events referred to therein are applicable to such other person as well as, in the case of Condition 12, to the Issuer; and (iii) the Trustee is satisfied that the interests of the Bondholders will not be materially prejudiced thereby.
17 MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER RE-DENOMINATION AND SUBSTITUTION
The Trust Deed contains provisions for convening meetings of Bondholders to consider matters affecting their interests, including the modification of any of these Conditions or any provisions of the Trust Deed. Any such modification may be made if sanctioned by an Extraordinary Resolution. The quorum for any meeting convened to consider an Extraordinary Resolution will be one or more persons present holding or representing a clear majority in principal amount of the Bonds for the time being outstanding or, at any adjourned meeting, one or more persons present being or representing Bondholders whatever the principal amount of the Bonds held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to postpone the dates for payment of principal on the Bonds or the dates on which interest is payable in respect of Bonds, (ii) to reduce or cancel the
principal amount of, or interest on, the Bonds or to alter the method of calculating the amount of any payment in respect of the Bonds, (iii) to change the currency of payment of the Bonds or the Coupons (except where the Trustee is exercising its power to facilitate payment in Euro as set out in the paragraph below) or (iv) to modify the provisions concerning the quorum required at any meeting of Bondholders or the majority required to pass an Extraordinary Resolution, in which case the necessary quorum will be one or more persons present holding or representing not less than two-thirds, or at any adjourned meeting not less than one-third, in principal amount of the Bonds for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on all Bondholders (whether or not they were present at the meeting at which such resolution was passed) and on all Couponholders.
The Trustee may agree, without the consent of the Bondholders or Couponholders, to (i) any modification of any of these Conditions or any provisions of the Trust Deed which is of a formal, minor or technical nature or is made to correct a manifest error and (ii) any other modification (except as mentioned in the Trust Deed) of, and any waiver or authorisation of any breach or proposed breach of, any of these Conditions or any provisions of the Trust Deed which is in the opinion of the Trustee not materially prejudicial to the interests of the Bondholders. The Trustee may agree, without the consent of the Bondholders or Couponholders, on or after the Specified Date (as defined below), to such modifications to the Bonds and the Trust Deed in order to facilitate payment of interest in euro and redemption at the euro equivalent of the sterling principal amount of the Bonds (including indexation in respect thereof) and associated reconventioning, renominalisation and related matters as may be proposed by the Issuer (and confirmed by an independent financial institution approved by the Trustee to be in conformity with then applicable market conventions) provided that the Issuer shall be under no obligation to make any such proposals. For these purposes, "Specified Date" means the date on which the United Kingdom participates in the third stage of European Economic and Monetary Union pursuant to the Treaty establishing the European Community or otherwise participates in European Economic and Monetary Union in a similar manner. Any such modification, authorisation or waiver shall be binding on the Bondholders and the Couponholders and, if the Trustee so requires, any modification referred to above shall be notified by the Issuer to the Bondholders as soon as practicable in accordance with Condition 15.
The Trustee may, without the consent of the Bondholders or Couponholders, agree with the Issuer to the substitution in place of the Issuer (or any previous substitute under this Condition) as the principal debtor under the Bonds, the Coupons and the Trust Deed of any Subsidiary or any holding company of the Issuer, subject to (a) the Bonds being unconditionally and irrevocably guaranteed by the Issuer, (b) the Trustee being satisfied that the interests of the Bondholders will not be materially prejudiced by the substitution and (c) certain other conditions set out in the Trust Deed being complied with. In connection with the exercise of its functions (including but not limited to those in relation to any proposed modification, waiver, authorisation or substitution) the Trustee shall not have regard to the consequences of such exercise for individual Bondholders or Couponholders and the Trustee shall not be entitled to require, nor shall any Bondholder or Couponholder be entitled to claim, from the Issuer or any other person, any indemnification or payment in respect of any tax consequences of any such exercise upon individual Bondholders or Couponholders.
18 INDEMNIFICATION OF THE TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee will be entitled to enter into business transactions with the Issuer and any of its Subsidiaries without accounting for any profit resulting therefrom.
19 FURTHER ISSUES
The Issuer may from time to time without the consent of the Bondholders or Couponholders create and issue further bonds or notes either having the same Conditions as the Bonds in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with the outstanding bonds or notes of any series (including the Bonds) or upon such terms as to interest, premium, redemption, ranking and otherwise as the Issuer may determine at the time of their issue. Any further bonds or notes forming a single series with the outstanding bonds or notes of any series (including the Bonds) constituted by the Trust Deed or any deed supplemental to it shall, and any other bonds or notes may (with the consent of the Trustee), be constituted by a deed supplemental to the Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Bondholders and the holders of bonds or notes of other series in certain circumstances where the Trustee so decides. In these Conditions, unless the context otherwise requires
and subject to any provision to the contrary in the Trust Deed, the expression "Bonds" shall include any further bonds issued in accordance with this Condition and forming a single series with the Bonds.
20 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of the Bonds under the Contracts (Rights of Third Parties) Act 1999.
21 GOVERNING LAW
The Trust Deed, the Bonds and the Coupons are governed by, and will be construed in accordance with, English law.
USE OF PROCEEDS
The net proceeds of the issue of the LPI Bonds, which are expected to amount to approximately (pound)39,750,000, will be used for general corporate purposes.
FIXED RATE BOND CONDITIONS
The following, subject to alteration and amendment and save for the paragraphs in italics, are the terms and conditions of the Fixed Rate Bonds substantially in the form which will appear on the Fixed Rate Bonds in definitive form:
The issue of the (pound)360,000,0006.50 per cent. Bonds due 2028 (the
"Bonds") was authorised pursuant to resolutions of the Board of Directors of The
National Grid Company plc (the "Issuer") passed on 11 June 2001 and resolutions
of a duly authorised committee of the Board of Directors of the Issuer passed on
18 July 2001. The Bonds are constituted by the trust deed dated 27 July 2001
(the "Trust Deed") between the Issuer and The Law Debenture Trust Corporation
p.1.c. (the "Trustee", which expression shall include all persons for the time
being the trustee or trustees under the Trust Deed) as trustee for the holders
of the Bonds (the "Bondholders"). The statements in these Conditions include
summaries of, and are subject to, the detailed provisions of the Trust Deed. The
Bondholders and the holders (the "Couponholders") of the interest coupons
relating to the Bonds (the "Coupons") (whether or not attached to the Bonds) are
entitled to the benefit of, are bound by, and are deemed to have notice of, all
the provisions of the Trust Deed and are deemed to have notice of those
provisions applicable to them of the paying agency agreement dated 27 July 2001
(the "Paying Agency Agreement") relating to the Bonds between the Issuer, the
Trustee, Citibank, N.A. (the "Principal Paying Agent", which expression shall
include any successor as principal paying agent under the Paying Agency
Agreement) and the paying agent referred to below (such person being referred to
together with the Principal Paying Agent as the "Paying Agents", which
expression shall include their successors as paying agents under the Paying
Agency Agreement), copies of each of which are available for inspection during
normal office hours at the registered office for the time being of the Trustee
(being at the date hereof at Fifth Floor, 100 Wood Street, London EC2V 7EX) and
at the specified office of each of the Paying Agents.
1 FORM, DENOMINATION AND TITLE
The Bonds are serially numbered and in bearer form in the denominations of
(pound)1,000,(pound)10,000 and (pound)100,000 each with Coupons attached on
issue. Bonds of one denomination may not be exchanged for Bonds of another
denomination. Title to the Bonds and the Coupons will pass by delivery. In these
Conditions, "Bondholder" and (in relation to a Bond or Coupon) "holder" mean the
bearer of any Bond or Coupon, as the case may be. The holder of any Bond or
Coupon will (except as otherwise required by law or as ordered by a court of
competent jurisdiction) be treated as its absolute owner for all purposes
(whether or not it is overdue and regardless of any notice of ownership, trust
or any interest in it, any writing on it, or its theft or loss) and no person
will be liable for so treating the holder, and the Issuer, the Trustee and the
Paying Agents shall not be required to obtain any proof thereof or as to the
identity of such holder.
The Bonds will be represented initially by a Temporary Global Bond. The Temporary Global Bond will be issued on 27 July 2001 and will be held by a common depositary for Euroclear Bank S.A./N. V., as operator of the Euroclear System ("Euroclear") and Clearstream Banking, societe anonyme ("Clearstream Luxembourg") for credit, against payment, to the accounts designated by the relevant purchasers with Euroclear and Clearstream, Luxembourg. Interests in the Temporary Global Bond will be exchangeable on or after a date which is expected to be 4 September 2001 for interests in a Permanent Global Bond upon certification that the beneficial owners of the relevant Bonds are not (i) United States persons or (ii) persons who have acquired such Bonds for resale to or for the account of any United States person. The Permanent Global Bond will be exchangeable for Definitive Bonds in bearer form in the circumstances set out in it. See "Summary of Provisions relating to the Bonds while in Global Form". Definitive Bonds and Coupons will bear the following legend: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code".
2 STATUS
The Bonds and the Coupons constitute direct, unconditional and unsecured obligations of the Issuer and rank and will rank pari passu without any preference among themselves and (save for such exceptions as are from time to time applicable under the laws of England and Wales) at least equally with all other present and future unsecured and unsubordinated obligations of the Issuer.
3 DEFINITIONS
"Electricity Act" means the Electricity Act 1989 as amended or re-enacted from time to time and all subordinate legislation made pursuant thereto.
"Electricity Transmission Licence" means the transmission licence, as subsequently amended from time to time, originally granted by the Secretary of State for Energy to the Issuer under the Electricity Act.
"Group" means the Issuer and its Subsidiaries and "member of the Group" shall be construed accordingly.
"Rated Securities" means (a) the Bonds or (b) such other comparable unsecured and unsubordinated debt of the Issuer (or of any Subsidiary of the Issuer and which is guaranteed on an unsecured and unsubordinated basis by the Issuer) having an initial maturity of five years or more selected by the Issuer from time to time for the purpose of this definition with the approval of the Trustee and which possesses an investment grade rating (BBB-/ Baa3, or their respective equivalents for the time being, or better) by any Rating Agency (whether at the invitation of the Issuer or by its own volition).
"Rating Agency" means Standard and Poor's Ratings Services, a division of The McGraw-Hill Companies Inc., or any of its Subsidiaries and their successors or Moody's Investors Service, Inc. or any of its Subsidiaries and their successors or any rating agency substituted for either of them (or any permitted substitute of them) by the Issuer from time to time with the prior written approval of the Trustee.
A "Rating Downgrading" shall, subject as provided in Condition 6(b), be deemed to have occurred in respect of a Restructuring Event if the rating assigned to the Rated Securities by any Rating Agency which is current immediately prior to the occurrence of the Restructuring Event (whether provided by a Rating Agency at the invitation of the Issuer or by its own volition) is withdrawn or reduced from an investment grade rating (BBB-/Baa3, or their respective equivalents for the time being, or better) to a non-investment grade rating (BB+/ Bal, or their respective equivalents for the time being, or worse) or, if the Rating Agency shall have already rated the Rated Securities below investment grade (as described above), the rating is lowered one full rating category (from BB+/Bal to BB/Ba2 or such similar lowering).
"Relevant Date" in respect of any payment means the date on which the payment becomes due but, if the full amount of the moneys payable has not been received by the Principal Paying Agent or by the Trustee on or prior to such due date, it means the date on which the full amount of such moneys has been so received and notice to that effect has been given to the Bondholders in accordance with Condition 13.
"Restructuring Event" means the occurrence of any one or more of the following events:
(a) (i) the Secretary of State for Trade and Industry or any official succeeding to his functions gives the Issuer written notice of revocation of the Electricity Transmission Licence in accordance with the terms as to revocation set out in Schedule 2 of the Electricity Transmission Licence, such revocation to become effective not later than 27 July 2028 or (ii) the Issuer agrees in writing with the Secretary of State for Trade and Industry or any official succeeding to his functions to any revocation or surrender of the Electricity Transmission Licence or (iii) any legislation (whether primary or subordinate) is enacted terminating or revoking the Electricity Transmission Licence; or
(b) any modification is made to the terms and conditions of the Electricity Transmission Licence other than such a modification which the Trustee, in its opinion, considers to be not materially prejudicial to the interests of the Bondholders and has so confirmed in writing to the Issuer; or
(c) any legislation (whether primary or subordinate) is enacted removing, reducing or qualifying the duties or powers of the Secretary of State for Trade and Industry or any official succeeding to his functions and/or the Gas and Electricity Markets Authority under Section 3A of the Electricity Act as compared with those in effect on 27 July 2001 other than such legislation which the Trustee, in its opinion, considers to be not materially prejudicial to the interests of the Bondholders and has so confirmed in writing to the Issuer.
"Restructuring Period" means
(a) if at the time at which the Restructuring Event occurs there are Rated Securities, the period of 90 days starting from and including the day on which a Restructuring Event occurs or such longer period in which the Rated Securities are under consideration (announced publicly within such 90 day period) for rating review by a Rating Agency; or
(b) if at the time at which a Restructuring Event occurs there are no Rated Securities, the period starting from and including the day on which a Restructuring Event occurs and ending on the day 90 days following the date on which a Negative Certification (as defined in Condition 6(a)) shall have been given to the Issuer in respect of that Restructuring Event.
"Subsidiary," means a subsidiary within the meaning of Section 736 of the Companies Act 1985 and "Subsidiaries" shall be construed accordingly.
4 INTEREST
The Bonds bear interest (calculated in accordance with the Actual/Actual ISMA Day Count Convention) on their principal amount outstanding from, and including, 27 July 2001 (the "Closing Date") at the rate of 6.50 per cent. per annum payable annually in arrear on 27 July in each year (each an "Interest Payment Date"). Each Bond will cease to bear interest from the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused. In such event, it shall continue to bear interest at the aforesaid rate (both before and after judgment) until, but excluding, whichever is the earlier of (i) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant holder and (ii) the seventh day after the Trustee or the Principal Paying Agent has notified Bondholders in accordance with Condition 13 of receipt of all sums due in respect of all the Bonds up to that day (except to the extent that there is a failure in the subsequent payment to the relevant holders as provided in these Conditions). Where interest is to be calculated in respect of a period which is shorter than an Interest Period it shall be calculated on the basis of the actual number of days in the relevant period from (and including) the first day of such period to (but excluding) the last day of such period, divided by the number of days in the Interest Period in which the relevant period falls (including the first such day but excluding the last). The period beginning on the Closing Date and ending on the first Interest Payment Date and each successive period beginning on an Interest Payment Date and ending on the next succeeding Interest Payment Date is called an "Interest Period".
5 REDEMPTION AND PURCHASE
(a) Final Redemption
Unless previously redeemed or purchased and cancelled, the Bonds will be redeemed at their principal amount on 27 July 2028.
(b) Redemption for Taxation Reasons
If, immediately prior to the giving of the notice referred to below, the Issuer satisfies the Trustee that, as a result of any amendment to or change in the laws or regulations of the United Kingdom or of any political subdivision thereof or any authority therein or thereof having power to tax or any change in the official or generally accepted interpretation or application of such laws or regulations in each case which becomes effective on or after the Closing Date, the Issuer has or will on the next Interest Payment Date become obliged to pay any additional amounts in accordance with Condition 8 (and such amendment or change has been evidenced by the delivery by the Issuer to the Trustee (who shall, in the absence of manifest error, accept such certificate and opinion as sufficient evidence thereof) of (i) a certificate signed by two directors of the Issuer on behalf of the Issuer stating that such amendment or change has occurred (irrespective of whether such amendment or change is then effective) and describing the facts leading thereto and stating that such obligation cannot be avoided by the Issuer taking reasonable measures available to it and (ii) an opinion in a form satisfactory to the Trustee of independent legal advisers of recognised standing to the effect that such amendment or change has occurred (irrespective of whether such amendment or change is then effective)), the Issuer may (having given not less than 30 and not more than 90 days' notice to the Trustee and to the Bondholders in accordance with Condition 13) redeem all, but not some only, of the Bonds at their principal amount, together with interest accrued up to, but excluding, the date fixed for such redemption, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be required to pay such additional amounts were a payment in respect of the Bonds then due.
(c) Redemption at the Option of the Issuer
If, at any time, the principal amount outstanding of the Bonds is 10 per cent. or less of the original principal amount of the Bonds, the Issuer may (having given not less than 30 and not more than 90 days' notice to the Trustee and to the Bondholders in accordance with Condition 13) redeem all, but not some only, of the Bonds at their principal amount, together with interest accrued up to, but excluding, the date fixed for such redemption.
(d) Purchase
The Issuer or any of its Subsidiaries may, subject to any relevant laws or regulations, at any time Purchase Bonds (with or without all unmatured Coupons relating thereto being surrendered therewith) at Any price in the open market or by private treaty. If purchases are made by tender, tenders must be available to all Bondholders alike.
(e) Cancellation
All Bonds redeemed pursuant to any of the foregoing provisions will be cancelled forthwith together with all unmatured Coupons attached thereto or surrendered therewith and may not be reissued or resold. Any Bonds purchased pursuant to Condition 5(d) or Condition 6 may, at the option of the Issuer, be held or may be surrendered to a Paying Agent for cancellation, but may not be resold.
6 REDEMPTION AT THE OPTION OF THE BONDHOLDERS
(a) Redemption following a Restructuring Event
If, at any time while any of the Bonds remains outstanding, a Restructuring Event occurs and, within the Restructuring Period, either:
(i) if at the time at which the relevant Restructuring Event occurs there are Rated Securities, a Rating Downgrading in respect of that Restructuring Event also occurs; or
(ii) if at such time there are no Rated Securities, the Issuer is unable as a result of such Restructuring Event to obtain a rating of the Bonds or of any other comparable unsecured and unsubordinated debt of the Issuer (or of any Subsidiary of the Issuer and which is guaranteed on an unsecured and unsubordinated basis by the Issuer) having an initial maturity of five years or more from a Rating Agency of at least investment grade (BBB-/Baa3, or their respective equivalents for the time being) (a "Negative Rating Event"), which rating the Issuer shall use all reasonable endeavours to obtain,
and in any such case such Restructuring Event is certified in writing by an independent financial adviser appointed by the Issuer and approved by the Trustee (or, if the Issuer shall not have appointed such an adviser within 21 days after becoming aware of the occurrence of such Restructuring Event, appointed by the Trustee (following consultation with the Issuer)) as being in its opinion materially prejudicial to the interests of the Bondholders (a "Negative Certification") (that Restructuring Event and the relevant Rating Downgrading or, as the case may be, Negative Rating Event and, in each case, the Negative Certification together constituting a "Put Event"), then (unless at any time the Issuer shall have given a notice under Condition 5(b)) or 5(c)) the holder of each Bond will have the right, upon the giving of a Put Event Notice (as defined below), to require the Issuer to redeem or, at the option of the Issuer, purchase (or procure the purchase of) that Bond on the Put Date (as defined below) at its principal amount together with interest (if any) accrued up to, but excluding, the Put Date. Any certification by an independent financial adviser as aforesaid as to whether or not, in its opinion, any Restructuring Event is materially prejudicial to the interests of the Bondholders shall, in the absence of manifest error, be conclusive and binding upon the Issuer, the Trustee, the Bondholders and the Couponholders.
(b) Rating Downgrading or Negative Rating Event
A Rating Downgrading or a Negative Rating Event shall be deemed not to have occurred in respect of or as a result of a Restructuring Event if the Rating Agency making the relevant reduction in rating or declining to assign a rating of at least investment grade as provided in these Conditions does not announce or publicly confirm or otherwise inform the Trustee that the reduction or declining was the result, in whole or in part, of any event or circumstance comprised in or arising as a result of the applicable Restructuring Event.
(c) Put Event Notice
Promptly upon the Issuer becoming aware that a Put Event has occurred, and in any event not later than 14 days after the occurrence of a Put Event, the Issuer shall, and at any time upon the Trustee becoming similarly so aware the Trustee may, and if so requested by the holders of at least one- quarter in principal amount of the Bonds then outstanding shall, give notice (a "Put Event Notice") to the Bondholders in accordance with Condition 13 specifying the nature of the Put Event and the procedure for exercising the right described herein.
(d) Procedure
To exercise the right to require redemption or, as the case may be, purchase by the Issuer or by a purchaser procured by it of a Bond under this Condition the Bondholder must deliver such Bond on any business day (as defined in Condition 7) falling within the period (the "Put Period") of 45 days after the date of a Put Event Notice at the specified office of any Paying Agent, accompanied by a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent (a "Put Notice") and in which the holder may specify a bank account with a bank in London to which payment is to be made under this Condition. The Paying Agent to which such Bond and Put Notice are delivered shall issue to the Bondholder concerned a non-transferable receipt in respect of the Bond so delivered. Payment in respect of any Bond so delivered shall be made, if the holder duly specified a bank account in the Put Notice to which payment is to be made, on the day (the "Put Date") being the fourteenth day after the date of expiry of the Put Period by transfer to that bank account and in every other case on or after the Put Date against presentation and surrender or (as the case may be) endorsement of such receipt at any specified office of any Paying Agent. A Put Notice, once delivered, shall be irrevocable and the Issuer shall redeem or, as the case may be, purchase (or procure the purchase of) all Bonds delivered on the applicable Put Date. For the purposes of the Terms and Conditions and the Trust Deed, receipts issued pursuant to this Condition shall be treated as if they were Bonds.
(e) Trustee
The Trust Deed provides that the Trustee will not be bound to take any steps to ascertain whether a Restructuring Event or a Put Event or any event which could lead to the occurrence of or, together with other events, constitute a Restructuring Event or a Put Event has occurred and that, until it shall have express notice to the contrary, the Trustee will be entitled to assume that no Restructuring Event or Put Event and no such other event has occurred.
7 PAYMENTS
(a) Principal and Interest in Respect of the Bonds
Payments of principal and interest in respect of the Bonds will be made against presentation and surrender (or, in the case of a partial payment, endorsement) of Bonds or (as the case may be) the appropriate Coupons save that if the due date for redemption of a Bond is not an Interest Payment Date, accrued interest will be paid against presentation of the relevant Bond at the specified office of any Paying Agent by sterling cheque drawn on, or by transfer to a sterling account maintained by the payee with, a bank in London. Payments of interest due in respect of any Bond other than on presentation and surrender of matured Coupons shall be made only against presentation and either surrender or endorsement (as appropriate) of the relevant Bond.
(b) Payment Subject to Fiscal Laws
All payments are subject in all cases to any applicable fiscal or other
laws and regulations, but without prejudice to the provisions of Condition
8. No commissions or expenses shall be charged to the Bondholders or
Couponholders in respect of such payments.
(c) Payments on Business Days
If the due date for payment of any amount on any Bond or Coupon is not a business day (as defined below), then the holder thereof will not be entitled to payment of such amount until the next following business day and will not be entitled to any further interest or other payment in respect of such postponement. In these Conditions, "business day" means any day on which banks are open for business in London and in the place of the specified office of the Paying Agent at which the Bond or Coupon is presented for payment.
(d) Paying Agents
The initial Principal Paying Agent is Citibank, N.A. and the other initial Paying Agent and their respective initial specified offices are set out at the end of these Conditions. The Issuer may at any time (subject to the prior approval of the Trustee) vary or terminate the appointment of any Paying Agent and appoint additional or other Paying Agents, provided that it will at all times maintain (i) a Principal Paying Agent, (ii) Paying Agents having specified offices in at least two major European cities approved by the Trustee (including London, so long as the Notes are listed on the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange's market for
listed securities) and (iii) a Paying Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive. Notice of any such termination or appointment and of any change in the specified office through which any Paying Agent acts will be given in accordance with Condition 13.
(e) Surrender of Unmatured Coupons
Each Bond should be presented for redemption (including exercise of the Bondholders' option pursuant to Condition 6) together with all relative unmatured Coupons (being Coupons which would otherwise fall due for payment after the relevant due date for redemption or, as the case may be, the Put Date), failing which all unmatured Coupons shall become void.
8 TAXATION
All payments by or on behalf of the Issuer in respect of the Bonds shall be made without deduction or withholding for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the United Kingdom or any political subdivision or authority thereof or therein having power to tax, unless such deduction or withholding is required by law. In such event the Issuer shall pay such additional amounts as may be necessary in order that the net amounts received by the holders of Bonds or Coupons after such deduction or withholding shall equal the amounts which would have been receivable by them had no such deduction or withholding been required, except that no additional amounts shall be payable in respect of any Bond or Coupon presented for payment:
(a) by or on behalf of a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond or Coupon by reason of his being connected with the United Kingdom otherwise than merely by the holding of the Bond or Coupon; or
(b) by or on behalf of a holder who would not be liable or subject to deduction or withholding by making a declaration of beneficial ownership of the Bond or Coupon and of non-residence or other similar claim for exemption to the relevant tax authority or to any relevant person; or
(c) more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on the last day of such period of 30 days on the assumption, if such is not the case, that such last day was a business day; or
(d) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26 - 27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive; or
(e) by or on behalf of a Bondholder or a Couponholder who would have been able to avoid such withholding or deduction by presenting the relevant Bond or Coupon to another Paying Agent in a Member State of the European Union.
Any reference herein to the principal of and/or interest on the Bonds shall be deemed to include any additional amounts which may be payable under this Condition or under any obligations undertaken in addition hereto or in substitution herefor pursuant to the Trust Deed.
9 PRESCRIPTION
Claims in respect of principal and interest shall be prescribed unless presentation for payment is made as required by Condition 7 within a period of 12 years in the case of principal and six years in the case of interest from the appropriate Relevant Date.
10 EVENTS OF DEFAULT
The Trustee at its discretion may, and if so requested in writing by the holders of at least one-quarter in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders shall, subject in each case to its being indemnified to its satisfaction, (but, in the case of the happening of any of the events mentioned in sub- paragraphs (e) to (g) inclusive, other than default in the performance or observance of any of the provisions of Conditions 5,6 and 7 or the appointment of an administrative or other receiver of the whole of the undertaking or assets of the Issuer, only if the Trustee shall have certified in writing to the Issuer
that such event is, in its opinion, materially prejudicial to the interests of the Bondholders) give notice to the Issuer that the Bonds are, and they shall accordingly thereby become, immediately due and repayable at their principal amount, together with accrued interest (as provided in the Trust Deed), if any of the following events shall occur:
(a) if default is made in the payment of any principal or interest in respect of the Bonds or any of them and such default continues for 1.5 days or more; or
(b) if an order is made or an effective resolution passed for the winding-up of, or an administration Order is made in relation to, the Issuer (except for the purposes of a reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(c) if the Issuer stops or threatens to stop payment (except for the purposes of a reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(d) if (i) any other present or future Relevant Indebtedness of the Issuer becomes due and payable prior to Its stated maturity by reason of any actual event of default, or (ii) any such Relevant Indebtedness is not paid when due or, as the case may be, within any applicable grace period, provided that the aggregate amount of the Relevant indebtedness in respect of which one or more of the events mentioned above in this paragraph (d) have occurred equals or exceeds (pound)40,000,000.
For the purposes of this Condition, "Relevant Indebtedness" means any present or future indebtedness in the form of, or represented by, bonds, notes, debentures, loan stock or other securities which are for the time being, or are capable of being, quoted, listed or ordinarily dealt in on any stock exchange.
(e) if an encumbrancer takes possession or an administrative or other receiver is appointed of the whole or any part which in the opinion of the Trustee is material of the undertaking or assets of the Issuer or if a distress, execution or any similar proceeding is levied or enforced upon or sued out against, in the opinion of the Trustee, a substantial part of the chattels or property of the Issuer and in any such case is not removed, paid out or discharged within 21 days (or such longer period as the Trustee may approve); or
(f) if the Issuer is unable to pay its debts as they fall due or has any voluntary arrangement proposed in relation to it under Section 1 of the Insolvency Act 1986 or enters into any scheme of arrangement with its creditors (other than for the purpose of reconstruction or amalgamation upon terms and within such a period as may previously have been approved in writing by the Trustee); or
(g) if default is made by the Issuer in the performance or observance of any obligation, covenant, condition or provision binding on it under the Bonds or the Trust Deed (other than any obligation for the payment of any principal or interest in respect of the Bonds) and, except where, in the opinion of the Trustee, such default is not capable of remedy (in which case the Bonds will become due and repayable subject to, and immediately upon, the Trustee certifying and giving notice as aforesaid), such default continues for 4.5 days (or such longer period as the Trustee may approve) after written notice by the Trustee to the Issuer specifying such default and requiring the same to be remedied.
11 ENFORCEMENT
At any time after the Bonds become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer as it may think fit to enforce the provisions of The Trust Deed, the Bonds and the Coupons, but it shall not be bound to take any such proceedings unless (i) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holding at least one-quarter in principal amount of the Bonds then outstanding and (ii) it shall have been indemnified to its satisfaction. No Bondholder or Couponholder may proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable period and such failure shall be continuing.
12 REPLACEMENT OF BONDS AND COUPONS
If any Bond or Coupon is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Paying Agent in London, subject to all applicable laws and the requirements of any applicable stock exchange or other relevant authority, upon payment by the claimant of the expenses
incurred in connection with such replacement and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Bonds or Coupons must be surrendered before replacements will be issued.
13 NOTICES
Notices to holders of Bonds will be valid if published in an English language leading daily newspaper having general circulation in the United Kingdom (which is expected to be the Financial Times) or, if in the opinion of the Trustee such publication is not practicable, in another English language leading daily newspaper having general circulation in Europe. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the first date on which publication is made. Couponholders will be deemed for all purposes to have notice of the contents of any notice given to Bondholders in accordance with this Condition.
14 TRANSFER OF ELECTRICITY TRANSMISSION LICENCE
The Issuer has covenanted in the Trust Deed that it will not transfer or consent to the transfer of its Rights as holder of the Electricity Transmission Licence to any other person unless (i) that other person guarantees all amounts payable under the Bonds, the Coupons and the Trust Deed or a trust deed is executed or some other form of undertaking is given by such other person in form and manner satisfactory to the Trustee agreeing to be bound by the Bonds, the Coupons and the Trust Deed; (ii) consequential amendments are made to Conditions 6 and 10 so that the events referred to therein are applicable to such other person as well as, in the case of Condition 10,to the Issuer; and (iii) the Trustee is satisfied that the interests of the Bondholders will not be materially prejudiced thereby.
15 MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER, REDENOMINATION AND SUBSTITUTION
The Trust Deed contains provisions for convening meetings of Bondholders to consider matters affecting their interests, including the modification of any of these Conditions or any provisions of the Trust Deed. Any such modification may be made if sanctioned by an Extraordinary Resolution. The quorum for any meeting convened to consider an Extraordinary Resolution will be one or more persons present holding or representing a clear majority in principal amount of the Bonds for the time being outstanding or, at any adjourned meeting, one or more persons present being or representing Bondholders whatever the principal amount of the Bonds held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to postpone the dates for payment of principal On the Bonds or the dates on which interest is payable in respect of Bonds, (ii) to reduce or cancel the principal amount of, or interest on, the Bonds, (iii) to change the currency of payment of the Bonds or the Coupons (except where the Trustee is exercising its power to facilitate payment in Euro as set out in the paragraph below) or (iv) to modify the provisions concerning the quorum required at any meeting of Bondholders or the majority required to pass an Extraordinary Resolution, in which case the necessary quorum will be one or more persons present holding or representing not less than two-thirds, or at any adjourned meeting not less than one-third, in principal amount of the Bonds for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on all Bondholders (whether or not they were present at the meeting at which such resolution was passed) and on all Couponholders.
The Trustee may agree, without the consent of the Bondholders or Couponholders, to (i) any modification of any of these Conditions or any provisions of the Trust Deed which is of a formal, minor or technical nature or is made to correct a manifest error and (ii) any other modification (except as mentioned in the Trust Deed) of, and any waiver or authorisation of any breach or proposed breach of, any of these Conditions or any provisions of the Trust Deed which is in the opinion of the Trustee not materially prejudicial to the interests of the Bondholders. The Trustee may agree, without the consent of The Bondholders or Couponholders, on or after the Specified Date (as defined below), to such modifications to the Bonds and the Trust Deed in order to facilitate payment of interest in euro and Redemption at the euro equivalent of the sterling principal amount of the Bonds (including indexation in respect thereof) and associated reconventioning, renominalisation and related matters as may be proposed by the Issuer (and confirmed by an independent financial institution approved by the Trustee to be in conformity with then applicable market conventions) provided that the Issuer shall be under no obligation to make any such proposals. For these purposes, "Specified Date" means the date on which The United Kingdom participates in the third stage of European Economic and Monetary Union pursuant to the Treaty establishing the European Community or otherwise participates in European Economic and Monetary Union in a similar manner. Any such modification, authorisation or waiver shall be binding on The Bondholders and the Couponholders and, if the Trustee so requires, any modification referred to
above shall be notified by the Issuer to the Bondholders as soon as practicable in accordance with Condition 13.
The Trustee may, without the consent of the Bondholders or Couponholders, agree with the Issuer To the substitution in place of the Issuer (or any previous substitute under this Condition) as the principal debtor under the Bonds, the Coupons and the Trust Deed of any Subsidiary or any holding company of the Issuer, subject to (a) the Bonds being unconditionally and irrevocably guaranteed by the Issuer, (b) the Trustee being satisfied that the interests of the Bondholders will not be materially prejudiced by the substitution and (c) certain other conditions set out in the Trust Deed being complied with.
In connection with the exercise of its functions (including but not limited to those in relation to any proposed modification, waiver, authorisation or substitution) the Trustee shall not have regard to the consequences of such exercise for individual Bondholders or Couponholders and the Trustee shall not be entitled to require, nor shall any Bondholder or Couponholder be entitled to claim, from the Issuer or any other person, any indemnification or payment in respect of any tax consequences of any such exercise upon individual Bondholders or Couponholders.
16 INDEMNIFICATION OF THE TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee will be entitled to enter into business transactions with the Issuer and any of its Subsidiaries without accounting for any profit resulting therefrom.
17 FURTHER ISSUES
The Issuer may from time to time without the consent of the Bondholders or Couponholders create and issue further bonds or notes either having the same Conditions as the Bonds in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with the outstanding bonds or notes of any series (including the Bonds) or upon such terms as to interest, premium, redemption, ranking and otherwise as the Issuer may determine at the time of their issue. Any further bonds or notes forming a single series with the outstanding bonds or notes of any series (including the Bonds) constituted by the Trust Deed or any deed supplemental to it shall, and any other bonds or notes may (with the consent of the Trustee), be constituted by a deed supplemental to the Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Bondholders and the holders of bonds or notes of other series in certain circumstances where the Trustee so decides. In these Conditions, unless the context otherwise requires and subject to any provision to the contrary in the Trust Deed, the expression "Bonds" shall include any further bonds issued in accordance with this Condition and forming a single series with the Bonds.
18 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of the Bonds under the Contracts (Rights of Third Parties) Act 1999.
19 GOVERNING LAW
The Trust Deed, the Bonds and the Coupons are governed by, and will be construed in accordance with, English law.
USE OF PROCEEDS
The net proceeds of the issue of the Fixed Rate Bonds, which are expected to amount to approximately (pound)3,57,501,600, will be used for general corporate purposes.
SUMMARY OF PROVISIONS RELATING TO THE
BONDS WHILE IN GLOBAL FORM
Each Temporary Global Bond and each Permanent Global Bond contain provisions which apply to the Bonds while they are in global form, some of which modify the effect of the terms and conditions of the Bonds set out in this document. The following is a summary of certain of those provisions. References to a particular Condition are to a Condition of the relevant Bonds.
1 EXCHANGE
Each Temporary Global Bond is exchangeable in whole or in part (free of charge to the holder) for interests in a Permanent Global Bond on or after a date which is expected to be 4 September 2001 upon certification as to non-U.S. beneficial ownership in the form set out in such Temporary Global Bond. Each Permanent Global Bond is exchangeable in whole but not in part (free of charge to the holder) for The Definitive Bonds described below (i) if such a Permanent Global Bond is held on behalf of Euroclear Or Clearstream, Luxembourg or an alternative approved clearing system and such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so by such holder giving notice to the Principal Paying Agent or (ii) if the Issuer would suffer a disadvantage in respect of the Bonds as a result of a change in laws or regulations (taxation or otherwise) of any jurisdiction referred to in Condition 10 of the RPI Bonds and the LPI Bonds and Condition 8 of the Fixed Rate Bonds or as a result of a change in the practice of Euroclear or Clearstream, Luxembourg or an alternative approved clearing system which would not be suffered were the Bonds represented by such Permanent Global Bond in definitive form and a certificate to such effect signed by two Directors of the Issuer is delivered to the Trustee by the Issuer giving notice to the Principal Paying Agent and the Bondholders of its intention to exchange such Permanent Global Bond for Definitive Bonds on or after the Exchange Date specified in the notice.
On or after the Exchange Date (as defined below) relating to a Permanent Global Bond the holder of such Permanent Global Bond may (in the case of (i) above) and shall (in the case of (ii) above) surrender such Permanent Global Bond to or to the order of the Principal Paying Agent. In exchange for such Permanent Global Bond, the Issuer will deliver, or procure the delivery of, an equal aggregate principal amount of duly executed and authenticated Definitive Bonds (having attached to them all Coupons in respect of interest which has not already been paid on such Permanent Global Bond), security printed in accordance with any applicable legal and stock exchange or other relevant authority requirements and in or substantially in the form set out in Schedule 3 to the relevant Trust Deed.
"Exchange Date" means a day falling not less than 60 days after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Principal Paying Agent is located and, except in the case of exchange pursuant to (i) above, in the cities in which the relevant clearing system is located.
2 PAYMENTS
No payment will be made on a Temporary Global Bond unless exchange for an interest in the relevant Permanent Global Bond is improperly withheld or refused by or on behalf of the Issuer. Payments of principal and interest in respect of Bonds represented by a Permanent Global Bond will be made against presentation for endorsement and, if no further payment falls to be made in respect of such Bonds, surrender of such Permanent Global Bond to or to the order of the Principal Paying Agent or such other Paying Agent as shall have been notified to Bondholders for such purpose. A record of each payment so made will be endorsed in the appropriate schedule to such Permanent Global Bond, which endorsement will be prima facie evidence that such payment has been made in respect of the Bonds represented by such Permanent Global Bond. No person shall be entitled to receive any payment on a Permanent Global Bond falling due after the Exchange Date in respect thereof unless exchange of such Permanent Global Bond for Definitive Bonds is improperly withheld or refused by or on behalf of the Issuer. Condition l0(e) of the RPI Bonds and the LPI Bonds and Condition 8(e) of the Fixed Rate Bonds will apply to Definitive Bonds only.
3 NOTICES
So long as Bonds are represented by a Permanent Global Bond and such Permanent Global Bond is held on behalf of Euroclear or Clearstream, Luxembourg or an alternative approved clearing system, notices to Bondholders may be given by delivery of the relevant notice to that clearing system for communication by it to entitled accountholders in substitution for notification as required by the
Conditions; except that so long as the Bonds are listed on the Official List of the UK Listing Authority and are admitted to trading on the London Stock Exchange's market for listed securities and the rules of the UK Listing Authority or the London Stock Exchange, as the case may be, so requires notices shall be published in a leading English language daily newspaper having general circulation in the United Kingdom (which is expected to be the Financial Times) any such Notice given only by delivery as aforesaid shall be deemed to have been given on the seventh day after that on which such notice is delivered to Clearstream, Luxembourg and/or Euroclear, as the case may be, as aforesaid.
4 PRESCRIPTION
Any claims against the Issuer in respect of principal and interest on Bonds represented by a Permanent Global Bond will become void unless it is presented for payment within a period of 12 years (in the case of principal) and six years (in the case of interest) from the appropriate Relevant Date (as defined in Condition 3).
5 MEETINGS
The holder of a Permanent Global Bond will be treated as being one person for the purposes of any quorum requirements of, or the right to demand a poll at, a meeting of Bondholders and, at any such meeting, as having one vote in respect of each (pound)1,000 principal amount of Bonds for which such Permanent Global Bond may be exchanged.
6 CANCELLATION
Cancellation of any Bond represented by a Permanent Global Bond required by the Conditions to be cancelled following its redemption or purchase will be effected by reduction in the principal amount of such Permanent Global Bond.
7 TRUSTEE'S POWERS
In considering the interests of Bondholders while a Permanent Global Bond is held on behalf of Euroclear or Clearstream, Luxembourg and/or an alternative approved clearing system the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Bonds represented by such Permanent Global Bond and may consider such interests as if such accountholders were the holder of such Permanent Global Bond.
8 PUT OPTION
The Bondholders' put option in Condition 6 may be exercised by the holder of a Permanent Global Bond giving notice to the Principal Paying Agent of the principal amount of Bonds represented by such Permanent Global Bond in respect of which the option is exercised and presenting the Permanent Global Bond for endorsement of exercise within the time limits specified in Condition 6.
CAPITALISATION OF THE GROUP
The following is a summary of the historic cost capital and reserves as at 31 March 2001 and indebtedness as at 31 March 2001 of the Issuer and its subsidiaries:
CAPITAL AND RESERVES AT 31 MARCH 2001
(POUND) MILLION ------- Authorised 200,000,000 ordinary shares of (pound)l each ............... 200.0 Authorised 74,803,600 preference shares of (pound)1 each .............. 74.8 ------- Issued, allotted, called up and fully paid 6,374 ordinary shares ...... -- Issued, allotted, called up and fully paid 43,406,000 preference shares 43.4 Share premium account ................................................. 454.1 Capital redemption reserve ............................................ 0.1 Profit and loss account ............................................... 638.1 ------- 1,135.7 ======= INDEBTEDNESS AT 31 MARCH 2001 Amounts due within one year Bank loans and overdrafts ............................................. 69.9 Commercial paper ...................................................... 107.3 Current portion of long term loans .................................... -- Amounts due after more than one year Repayable wholly within five years .................................... 663.6 Repayable after five years ............................................ 923.9 ------- Total Indebtedness .................................................... 1,764.7 ======= CONTINGENT LIABILITIES AND GUARANTEES AT 31 MARCH 2001 ------- Performance bonds and guarantees ...................................... 36.2 ======= |
1 The table does not include indebtedness in respect of the Bonds now being issued.
2 The Issuer's distributable reserves at 31 March 2001 amounted to (pound)4.7 million.
3 The preference shares are held by the immediate parent undertaking, The National Grid Holdings Limited.
4 There has been no change in the authorised and issued share capital of the Issuer and no material adverse change in the reserves of the Issuer.
5 Save for the Bonds now being issued, there has been no material change in the indebtedness or contingent liabilities and guarantees of the Issuer since 31 March 2001.
6 At 31 March 2001, the Issuer had cash and deposits amounting to (pound)29.3 million and net receivables due from other companies within the National Grid Group plc group of companies of (pound)145.5 million.
7 The information contained in this Statement is extracted from the Issuer's audited consolidated financial statements as at 31 March 2001.
8 All of the indebtedness in the above table is unsecured and unguaranteed.
THE NATIONAL GRID COMPANY PLC
GENERAL
The Issuer is the owner and operator of the electricity transmission system (the "Transmission System") in England and Wales and is the sole holder of a transmission licence (the "Transmission Licence") in England and Wales. The Issuer is required by the Electricity Act 1989 (the "Electricity Act") to develop and maintain an efficient, co-ordinated and economical system of electricity transmission and to facilitate competition in the supply and generation of electricity. Since the introduction of the new electricity trading arrangements ("NETA") on 27 March 2001, under the Electricity Act, the Issuer is also obliged to operate an efficient co-ordinated market and an economical transmission system. The Issuer is also responsible for reinforcing, renewing and maintaining the Transmission System to meet the requirements of customers and to ensure continued compliance with the security standards set out in the Transmission Licence. The Issuer derives the vast majority of its turnover and profits from charges for services provided by its transmission business (the "Transmission Business") to, inter alia, generators, interconnected parties, distributors, suppliers and directly-connected customers. Its other businesses include the procurement of balancing services and the operation of the interconnectors with Scotland, France and the Isle of Man. The Issuer is a wholly-owned subsidiary of National Grid Group plc ("NGG"). NGG's shares were admitted to the Official List of the London Stock Exchange on 11 December 1995 and its American Depositary Shares were listed on the New York Stock Exchange on 7 October 1999. The Issuer has three wholly-owned trading subsidiaries, Elexon Limited, NGC Leasing Limited and NGC Properties Limited.
THE BUSINESS OF THE ISSUER
TRANSMISSION BUSINESS
PHYSICAL ASSETS
The Transmission Business comprises the planning, development, construction, maintenance and operation of the Transmission System in England and Wales, operating predominantly at voltages of 400kV and 275kV and includes the provision of connections to the Transmission System. The Issuer owns and operates the Transmission System which consists of approximately 4,400 miles of overhead lines and approximately 400 miles of underground cable, together with substations at over 300 sites.
OPERATIONS OF THE TRANSMISSION SYSTEM
NETA
The Department of Trade and Industry ("DTI") and the Office of the Gas and Electricity Markets Authority ("Ofgem") undertook an extensive review of, and wide-ranging consultation on, the proposed arrangements for a new wholesale electricity market for England and Wales to replace the Electricity Pool of England and Wales. Details of NETA were published jointly by the DTI and Ofgem in a document dated 21 October 1999 and the document formed the basis of the new arrangements to be implemented by participants across the electricity industry. NETA was introduced on 27 March 2001. Certain aspects of NETA are now dealt with in the Utilities Act 2000.
The Issuer made a considerable contribution to the development of NETA and played a significant role in its implementation. NETA has had significant operational implications for the Issuer and implications for the manner in which it contracts for the provision of ancillary services, which form part of balancing services. NETA represents a fundamental shift to trading arrangements based on bilateral contracts, similar to other commodity markets. However, NETA has not had significant financial implications for the Issuer.
TRANSMISSION REVENUE
Amongst its other provisions, the Transmission Licence separates the Issuer's Transmission Business activities into the two distinct roles of transmission asset owner ("TO") and system operator ("SO") and sets limits on its annual revenue from each of these.
Transmission asset owner activity
As TO, the Issuer is responsible for the development, operation and maintenance of the transmission network and recovers its costs, including a return on capital employed, through charges to generators, distributors and suppliers of electricity for use of and connection to the Transmission System.
Under the revenue restriction condition set out in the Transmission Licence, the Issuer's revenue from charges for use of the Transmission System and for connections made before March 1990 is permitted to increase each year in line with the Retail Price Index ("RPI"), minus an efficiency factor, X. In the current revenue restriction, which was introduced on 1 April 2001, X has been set at 1.5 from April 2002. The revenue restriction is revenue from time to time by the Gas and Electricity Markets Authority. The current revenue restriction is expected to remain in force until March 2006.
The Issuer is permitted by the Transmission Licence to set charges for connections to the Transmission System made since March 2000 to recover the cost directly or indirectly incurred in providing connection, together with a reasonable rate of return on such costs.
System operator activity
As SO, the Issuer is responsible for the control of the transmission system, including:
-- the procurement of the ancillary services required to ensure network stability and security; and
-- the provision of balancing services, comprising the acceptance by the Issuer of "bids" (proposed trades to decrease generation or increase demand) or "offers" (proposed trades to increase generation or decrease demand) as necessary to enable it to balance generation and demand for electricity in real time throughout the day.
The Issuer is permitted by the Transmission Licence to recover the costs it incurs in procuring ancillary services, together with a small profit margin.
The Issuer recovers the costs incurred in the balancing services activity through balancing services use of system charges. Its revenue from these charges is regulated by means of a Balancing Services Incentive Scheme ("BSIS") set out in the Transmission Licence. The BSIS was introduced on 27 March 2001 and sets a target for the costs incurred by the Issuer in balancing the system in the period up to March 2002. If costs are below (pound)471 million, the Issuer will retain 40 per cent. of the savings up to a maximum potential income of 545 million. If costs are more than 5500 million, the Issuer will bear 12 per cent. of the excess up to a maximum potential liability of 525 million.
INTERCONNECTORS
The Issuer derives income from charges for the use of its interconnectors with Scotland, France and the Isle of Man. Under the terms of the Transmission Licence, the Issuer is at present required to set its charges for the use of its interconnectors with Scotland and France at a level designed to recover no more than a reasonable rate of return on the capital represented by the interconnectors. The interconnector with the Isle of Man is unlicensed and not subject to this restriction.
In February 2000, NGG was selected by the Basslink Development Board in Australia to build, own and operate an interconnector between the island of Tasmania and the State of Victoria on the Australian mainland, across the Bass Strait. Construction is expected to commence at the end of 2001 and the project is expected to be completed by the end of 2003.
REGULATION
The Electricity Act makes it an offence to generate, transmit or supply electricity unless authorised to do so by licence or exemption. Other principal regulatory provisions relating to electricity transmission are set out in the Electricity Act, in regulations or orders made under or pursuant to the Electricity Act and in the Transmission Licence. The Electricity Act is being amended by the Utilities Act 2000, with the amendments being introduced over a period of time. Once the Utilities Act is fully in force, distribution will also become a licensable activity. Other changes introduced by the Utilities Act include standard conditions being introduced in the Issuer's Transmission Licence, new duties for Ofgem and new powers regarding the enforcement of licences, together with the establishment of Ofgem.
The Secretary of State and Ofgem each have a principal statutory objective under the Electricity Act to carry out their functions to protect the interest of consumers of electricity (where appropriate by promoting competition in the electricity industry) having regard to the need to ensure that all reasonable demands for electricity are met and the need to ensure that licence holders are able to finance activities which are the subject of obligations imposed by Part I of the Electricity Act or the Utilities Act 2000.
The Transmission Licence came into effect on vesting and, unless revoked, will continue in force until determined by not less than 25 years' notice by the Secretary of State. The Transmission Licence may be revoked by the Secretary of State in specified circumstances, including non-payment of fees,
insolvency, change in the control of the Issuer, cessation of the Transmission Business and non-compliance with enforcement orders made by Ofgem and non-compliance with orders issued by the Secretary of State under certain provisions of general competition legislation.
The Issuer is prohibited by the Transmission Licence from purchasing or otherwise acquiring electricity on its own account for the purpose of sale to third parties. Since the introduction of NETA, the exceptions to the prohibition will change to except the procurement or use of balancing services or the purchase or acquisition where such purchase or acquisition is with the consent of Ofgem.
The Transmission Licence contains restrictions on the Issuer's total revenue derived from its transmission network services and its transmission services activities. The Issuer is required to use its best endeavours to ensure that its total revenue from these sources in any one year does not exceed the aggregate of its permitted maximum revenue from these activities under the Transmission Licence.
ENVIRONMENTAL LAW AND REGULATION
In the United Kingdom, the Issuer is subject to environmental legislation and regulation. The Water Resources Act 1991 and the Environmental Protection Act 1990, as amended by the Environment Act 1995, constitute the primary environmental legislation affecting the activities of the Issuer. Under these statutes, it is an offence to pollute the environment.
Electric and magnetic fields ("EMFs") arise from, among other sources, the transmission, distribution and use of electricity. Concerns have been raised about the possible health effects of EMFs and research into this issue has been in progress in many countries for several years. The Issuer carries out its operations in line with guidance on EMFs issued by the National Radiological Protection Board, an independent statutory body, which has stated that it does not consider that the results of published studies provide a basis for any additional restriction on human exposure to EMFs. This position is supported by the results of the United Kingdom Childhood Cancer study published in December 1999.
A European Union recommendation (the "Recommendation") on limitation of exposure of the general public to EMFs has been adopted by the European Union's Council of Ministers. The Recommendation is based on guidelines issued in 1998 by the International Commission on Non-Ionising Radiation Protection and recommends certain public exposure levels subject to qualifications contained in the Recommendation. The Recommendation is addressed to European Union member governments and not to individual companies. The United Kingdom Government is considering how the qualifications should be interpreted and therefore how the Recommendation should be implemented in the United Kingdom and it is not yet possible to assess the cost (if any) to the Issuer of compliance with the Recommendation.
PRICE CONTROLS
In determining the price controls applicable to the Issuer, Ofgem assumes an allowed rate of return on equity and an efficient capital structure as to the levels of debt and equity. The Issuer intends to match the gearing levels assumed by Ofgem by increasing its borrowings and making dividend distributions and reorganising its share capital and reserves as necessary. The Transmission Licence contains certain regulatory constraints which must be complied with prior to the declaration of dividends.
THE NGG GROUP
In April 1990, the Issuer became a wholly-owned subsidiary of NGG (then named "The National Grid Holding plc"). NGGs shares were admitted to the Official List of the London Stock Exchange on 11 December 1995 and its American Depositary Shares were listed on the New York Stock Exchange on 7 October 1999.
ENERGIS
In 1993, the NGG group established Energis plc ("Energis"), a subsidiary of NGG which was granted a public telecommunications operator's licence to provide telecoms services using a long-distance telecommunications network constructed predominantly on the electricity transmission network. By 1997, the business of Energis had grown significantly, and application was made for its shares to be admitted to the official list of the London Stock Exchange, which was effected in December 1997. As part of this process, NGG disposed of just over 25 per cent. of its shareholding in Energis by way of a placing to institutional investors.
On 22 January 1999, NGG offered for sale 60 million ordinary shares in Energis in an offering of ordinary shares and simultaneously offered Equity Plus Income Convertible Securities which were
mandatorily exchangeable into up to 14.7 million Energis shares. The value of
the combined offerings was approximately (pound)1.2 billion. On 9 February 2000,
NGG disposed of a further 28.9 million ordinary shares of Energis for
(pound)0.95 billion. As at 31 March 2001, NGG retains voting rights over 32.8
per cent. of the total Energis shares in issue. NGG has indicated that it
intends to sell its stake in Energis in the short to medium term.
NEES AND EUA
On 22 March 2000, NGG acquired New England Electricity System ("NEES"), an electricity transmission and distribution business operating in north-eastern USA at a cost of US$3,217 million. NEES, renamed National Grid USA is now a wholly-owned subsidiary of NGG. On 19 April 2000, National Grid USA acquired Eastern Utilities Associates, an electricity transmission and distribution business operating in Massachusetts and Rhode Island, adjacent to National Grid USA's existing service territories, at a cost of US$520 million.
ACQUISITION OF NIAGARA MOHAWK
On 5 September 2000, NGG and Niagara Mohawk Holdings, Inc. ("Niagara Mohawk"), the second largest combined electricity and gas utility in New York State (by customer numbers), announced that NGG had agreed to acquire Niagara Mohawk (the "Acquisition"). The shareholders of Niagara Mohawk and of NGG voted in favour of the Acquisition at shareholder meetings held on 19 January 2001 and 29 January 2001 respectively. The expected acquisition cost at the time of announcement was US$3.0 billion. The shareholders of Niagara Mohawk will receive consideration of US$19.00 per Niagara Mohawk share, subject to adjustment to reflect the price of NGG's shares during a specified period shortly before completion of the Acquisition and will be able to elect to receive their consideration in cash, shares in a new holding company of NGG or a combination thereof. NGG expects to meet approximately half of the acquisition cost in cash. The Acquisition is subject to a number of conditions, including regulatory and other consents and approvals in the U.S. and is expected to be completed by late 2001.
AUCTION OF NIAGARA MOHAWK'S NUCLEAR ASSETS
On 12 December 2000, Niagara Mohawk announced an agreement to sell its nuclear assets, comprising 100 per cent. of Nine Mile Point Nuclear Station Unit No. 1 and 41 per cent. of Nine Mile Point Nuclear Station Unit No. 2, to Constellation Nuclear, a wholly-owned subsidiary of Constellation Energy Group Inc., for a total consideration of U.S.$610 million (subject to adjustment). In addition, Niagara Mohawk will transfer to Constellation Nuclear its existing decommissioning funding and Niagara Mohawk will have no further funding obligation relating to decommissioning. The asset sale agreement is subject to various regulatory approvals including those of the Nuclear Regulatory Commission, FERC and the NYPSC. The sale is targeted to close in mid 2001.
RECENT DEVELOPMENTS
DISPOSAL OF ESIS, EPFAL AND DATUM
On 1 February 2001, NGG completed the sale of two of its subsidiary companies, Energy Settlements and Information Services Limited ("ESIS") and Energy Pool Funds Administration Limited ("EPFAL") for an aggregate net consideration of approximately (pound)38 million in cash. ESIS ran the former settlement system of the Electricity Pool of England and Wales and provided consultancy services for customers in the electricity market. EPFAL acted as the financial clearing house for the wholesale trading of electricity in England and Wales. On 7 February 2001, NGG completed the sale of another of its subsidiaries, Datum Solutions Limited ("Datum"), to Siemens Metering Limited, for approximately (pound)3 million in cash plus further consideration payable in accordance with the terms of an earn-out. Datum had operated NGG's metering business. These disposals are in accordance with NGG's strategy of focusing on electricity and telecoms networks.
RELATIONSHIP WITH UK GOVERNMENT
The Secretary of State retains a special share in NGG, which is a special rights non-voting redeemable preference share of (pound)l. Certain provisions in the articles of association of NGG cannot be altered or removed without the prior written consent of the holder of the Special Share. One such provision prevents any person, with limited exceptions, from having an interest in 15 per cent. or more, and the holder of a licence under the Electricity Act (or any affiliate) or any group of companies of which
a Regional Electricity Company ("REC") is a member, from having an interest of 1 per cent. or more, in the voting share capital of NGG. In accordance with the articles of association of NGG, none of the RECs now has an interest of 1 per cent. or more of the voting share capital of NGG.
DIRECTORS
The Directors of the Issuer, their functions and principal directorships outside the NGG group, are as follows:
Roger Urwin Chairman Non-executive Director of Energis, The Special Utilities Investment Trust PLC and TotalFinaElf Exploration UK plc Steven Holliday Chief Executive Stephen Box Non-Executive Director Non-executive Director of Energis and Michael Page International PLC Charles Davies Commercial Director Colin Buck Finance Director |
The business address of each of the above is National Grid House, Kirby Corner Road, Coventry CV4 8JY.
UNITED KINGDOM TAXATION
The comments below are of a general nature based on the Issuer's understanding of current United Kingdom law and practice. They do not necessarily apply where the income is deemed for tax purposes to be the income of any other person. They relate only to the position of persons who are the absolute beneficial owners of their Bonds and Coupons and may not apply to certain classes of persons such as dealers or certain professional investors. Any holders of Bonds or Coupons who are in doubt as to their own tax position should consult their professional advisers.
1. INTEREST
While the Bonds continue to be listed on a recognised stock exchange within the meaning of section 841 Income and Corporation Taxes Act 1988, payments of interest may be made without withholding or deduction for or on account of income tax.
Persons in the United Kingdom paying interest to or receiving interest on behalf of another person may be required to provide certain information to the United Kingdom Inland Revenue regarding the identity of the payee or person entitled to the interest and, in certain circumstances, such information may be exchanged with tax authorities in other countries.
If the Bonds cease to be listed interest will generally be paid under deduction of income tax at the lower rate (currently 20 per cent.) subject to any direction to the contrary from the Inland Revenue in respect of such relief as may be available pursuant to the provisions of any applicable double taxation treaty.
The interest has a United Kingdom source and accordingly may be chargeable to United Kingdom tax by direct assessment. Where the interest is paid without withholding or deduction, the interest will not be assessed to United Kingdom tax in the hands of holders of the Bonds who are not resident in the United Kingdom, except where such persons carry on a trade, profession or vocation in the United Kingdom through a United Kingdom branch or agency in connection with which the interest is received or to which the Bonds are attributable, in which case (subject to exemptions for interest received by certain categories of agent) tax may be levied on the United Kingdom branch or agency.
If interest were paid under deduction of United Kingdom income tax (e.g. if the Bonds lost their listing), Bondholders who are not resident in the United Kingdom may be able to recover all or part of the tax deducted if there is an appropriate provision in an applicable double taxation treaty.
Bondholders should note that the provisions relating to additional amounts referred to in "RPI Bond Conditions-taxation", "LPI Bond Conditions- taxation", "Fixed Rate Bond Conditions-taxation", as the case may be, above would not apply if the Inland Revenue sought to assess directly the person entitled to the relevant interest to United Kingdom tax. However exemption from, or reduction of, such United Kingdom tax liability might be available under an applicable double taxation treaty.
2. PROPOSED EU DIRECTIVE ON THE TAXATION OF SAVINGS INCOME
The European Union is currently considering proposals for a new directive regarding the taxation of savings income. Subject to a number of important conditions being met, it is proposed that Member States will be required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident in that other Member State, subject to the right of certain Member States to opt instead for a withholding system for a transitional period in relation to such payments.
3. DISPOSAL (INCLUDING REDEMPTION)
3.1 Corporate Bondholders
Bondholders within the charge to United Kingdom corporation tax will be subject to tax as income on all profits and gains arising from, and from fluctuations in the value of, the Bonds broadly in accordance with their statutory accounting treatment. Such holders will generally be charged in each accounting period by reference to interest and any profit or loss which in accordance with such Bondholder's authorised accounting method, is applicable to that period. Fluctuations in value relating to foreign exchange gains and losses in respect of the Bonds will be brought into account as income.
3.2 Other Bondholders
The Bonds should constitute "qualifying corporate bonds" within the meaning of Section 117 of the Taxation of Chargeable Gains Act 1992 (although, because the Trustee has the power to consent to payment of interest and redemption in euro on or after the date on which the United Kingdom participates in the third stage of European economic and monetary union, the Inland Revenue have indicated that this is not correct in their view). Accordingly, a disposal by a Bondholder (or a redemption of the Bonds) will not give rise to a chargeable gain or an allowable loss for the purposes of the UK taxation of chargeable gains. (If the Inland Revenue's view is correct, disposals of the Bonds could give rise to chargeable gains or allowable losses for the purposes of the UK taxation of chargeable gains).
A transfer of a RPI Bond or Fixed Rate Bond by a holder resident or ordinarily resident for tax purposes in the United Kingdom or who carries on a trade in the United Kingdom through a branch or agency to which the RPI or Fixed Rate Bond is attributable may give rise to a charge to tax on income in respect of an amount representing interest on the RPI Bond or Fixed Rate Bond which has accrued since the preceding interest payment date.
The LPI Bonds are likely to be regarded by the Inland Revenue as "variable rate securities". Accordingly, a transfer of a LPI Bond by a holder resident or ordinarily resident in the United Kingdom or a holder who carries on a trade in the United Kingdom through a branch or agency to which the LPI Bond is attributable, may give rise to a charge to tax on income in respect of interest on the LPI Bond which has accrued since the preceding interest payment date in such an amount as the Inland Revenue deem just and reasonable. A transferee of LPI Bonds with accrued interest will not be entitled to any corresponding allowance under the Accrued Income Scheme.
SUBSCRIPTION AND SALE
The Royal Bank of Scotland plc and Morgan Stanley & Co. International Limited (together, the "Managers") have, (a) pursuant to a subscription agreement dated 23 July 2001 (the "RPI Subscription Agreement"), jointly and severally agreed with the Issuer, subject to the satisfaction of certain conditions, to subscribe and pay for the RPI Bonds at 100 per cent. of their principal amount less a combined management and underwriting commission of 0.625 per cent. of their principal amount; (b) pursuant to a subscription agreement dated 23 July 2001 (the "LPI Subscription Agreement"), jointly and severally agreed with the Issuer, subject to the satisfaction of certain conditions, to subscribe and pay for the LPI Bonds at 100 per cent. of their principal amount less a combined management and underwriting commission of 0.625 per cent. of their principal amount; and (c) pursuant to a subscription agreement dated 23 July 2001 (the "Fixed Rate Bonds Subscription Agreement"), jointly and severally agreed with the Issuer, subject to the satisfaction of certain conditions, to subscribe and pay for the Fixed Rate Bonds at 99.931 per cent. of their principal amount less a combined management and underwriting commission of 0.625 per cent. of their principal amount. In addition the Issuer has agreed to reimburse the Managers for certain expenses incurred by them in connection with the issue of the Bonds. Each of the RPI Subscription Agreement, the LPI Subscription Agreement and the Fixed Rate Bonds Subscription Agreement entitles the Managers to be released and discharged from their obligations in respect of the subscription of the RPI Bonds, the LPI Bonds or the Fixed Rate Bonds, as the case may be in certain circumstances prior to the payment to the Issuer.
SELLING RESTRICTIONS
1 UNITED STATES
The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended, (the "Securities Act") and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.
Each Manager has agreed that, except as permitted by the Subscription Agreement, it will not offer, sell or deliver the Bonds (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, within the United States or to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it sells Bonds during the restricted period a confirmation or other notice setting forth the restrictions on offers and sales of the Bonds within the United States or to, or for the account or benefit of, U.S. persons.
The Bonds are subject to US. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by US. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code and regulations thereunder.
In addition, until 40 days after the commencement of the offering, an offer or sale of Bonds within the United States by a dealer that is not participating in the offering may violate the registration requirements of the Securities Act.
2 UNITED KINGDOM
Each Manager has represented and agreed that (i) it has not offered or sold
and will not offer or sell any Bonds to persons in the United Kingdom prior to
admission of the Bonds to listing in accordance with Part IV of the Financial
Services Act 1986 (the "Act") except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995 or the Act, (ii) it has complied and will comply
with all applicable provisions of the Act with respect to anything done by it in
relation to the Bonds in, from or otherwise involving the United Kingdom and
(iii) it has only issued or passed on, and will only issue or pass on, in the
United Kingdom any document received by it in connection with the issue of the
Bonds, other than any document which consists of or any part of listing
particulars, supplementary listing particulars or any other document required or
permitted to be published by listing rules under Part IV of the Act, to a person
who is of a kind described in Article ll (3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the
document may otherwise lawfully be issued or passed on.
3 GENERAL
Neither the Issuer nor any Manager represent that the Bonds may at any time lawfully be sold in or horn any jurisdiction (other than in or from Great Britain) in compliance with any applicable registration requirements pursuant to an exemption available thereunder or assumes any responsibility for facilitating such sales.
GENERAL INFORMATION
LISTING
The listing of the Bonds on the Official List will be expressed as a percentage of their principal amount. Transactions will be effected for settlement in sterling, and under current practice, for delivery on the third business day in London after the date of the transaction. It is expected that listing of the Bonds on the Official List and admission to trading of the Bonds on the London Stock Exchange's Market for Listed Securities will be granted on 27 July 2001 subject only to the issue of the relevant Temporary Global Bonds. Prior to official listing, however, dealings in the Bonds will be permitted by the London Stock Exchange in accordance with its rules.
CLEARING SYSTEMS
The RPI Bonds, the LPI Bonds and the Fixed Rate Bonds have each been accepted for clearance through Euroclear and Clearstream, Luxembourg under Common Code 13273502, 13273448 and 13273537, respectively. The ISIN for the RPI Bonds, the LPI Bonds and the Fixed Rate Bonds is XS0132735027, XS0132734483, and XS0132735373, respectively.
The Bonds will bear a legend as follows: "Any United States person who holds this obligation will be subject to limitations under the United States income tax law, including the limitations provided in Section 165(j) and 1287(a) of the Internal Revenue Code".
INCORPORATION
The Issuer was incorporated in England and Wales on 1 April 1989 under the Companies Act 1985 as a public limited company with registered number 2366977.
ANNUAL ACCOUNTS
Audited annual consolidated accounts have been prepared in respect of the Issuer's three financial years ended on 31 March 2001. No audited financial statements have been prepared for any period subsequent to 31 March 2001.
AUDITORS
Coopers & Lybrand (Chartered Accountants and Registered Auditors) have audited and rendered unqualified audit reports on the consolidated accounts of the Issuer for the year ended 31 March 1998. PricewaterhouseCoopers, have audited and rendered unqualified audit reports on the consolidated accounts of the Issuer for the three years ended 31 March 2001.
FINANCIAL AND TRADING POSITION AND PROSPECTS
There has been no significant change in the financial or trading position of the issuer or the Group, and no material adverse change in the financial position or prospects of the Issuer or the Group, since 31 March 2001.
LITIGATION
There are no, nor have there been any legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) which may have or have had during the 12 months preceding the date of this document a significant effect on the Group's financial position.
APPROVALS AND AUTHORISATIONS
The issue of the Bonds was authorised by resolutions of the Board of Directors of the Issuer passed on 11 June 2001 and resolutions of a duly authorised committee of the Board of Directors of the Issuer passed on 18 July 2001.
The Bonds constitute longer term debt securities issued in accordance with regulations made under Section 4 of the Banking Act 1987. The Issuer is not an authorised institution or a European authorised institution (as such terms are defined in the Banking Act 1987 (Exempt Transactions) Regulations 1997).
EXHIBIT 2(b)(iii)
THIS AGREEMENT is made on 22nd November, 2001
BETWEEN:
(1) NEW NATIONAL GRID PLC (a company incorporated in England and Wales with registered number 4031152) ("NEW NG") as a guarantor and as a borrower;
(2) NATIONAL GRID GROUP PLC (a company incorporated in England and Wales with registered number 2367004) ("EXISTING NGG") as a guarantor and as a borrower;
(3) NGG FINANCE PLC (a company incorporated in England and Wales with registered number 4220381) ("NGGF") as a borrower;
(4) ABN AMRO BANK N.V., BANC OF AMERICA SECURITIES LIMITED, THE BANK OF TOKYO-MITSUBISHI, LTD., BARCLAYS CAPITAL, BAYERISCHE LANDESBANK GIROZENTRALE, LONDON BRANCH, CITIBANK, N.A., DRESDNER KLEINWORT WASSERSTEIN LIMITED, HSBC INVESTMENT BANK PLC, J. P. MORGAN PLC and TD BANK EUROPE LIMITED as joint arrangers (the "ARRANGERS");
(5) HSBC INVESTMENT BANK PLC as facility agent (the "FACILITY AGENT");
(6) HSBC BANK (USA) INC as swingline agent (the "SWINGLINE AGENT"); and
(7) THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1 (The Banks) as Banks.
IT IS AGREED as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement:
"1999 FACILITY AGREEMENT"
means the syndicated revolving credit and term loan facility agreement dated 5th March, 1999 between (amongst others) Existing NGG, the NG Company and HSBC Investment Bank plc as Agent;
"ACQUISITION"
means the acquisition by New NG (or one of its wholly-owned Subsidiaries) of all the issued shares of common stock in Niagara Mohawk as contemplated in the Niagara Mohawk Merger Agreement;
"ACQUISITION ADVANCE"
means an Advance in Dollars or Sterling drawn under Facility A on or before the 3rd Business Day after the Registration Date for the purpose of the acquisition by New NG (or
one of its wholly-owned Subsidiaries) of all the issued shares of common stock in Niagara Mohawk as contemplated in the Niagara Mohawk Merger Agreement.
"ADDITIONAL BORROWER"
means:
(i) a wholly owned Subsidiary of New NG (other than NG Company) incorporated in the United Kingdom; or
(ii) any other Subsidiary of New NG approved in writing by all of the Banks,
which, in each case, becomes a Borrower in accordance with Clause 28.4 (Additional Borrowers);
"ADVANCE"
means a Facility A Advance or a Facility B Advance;
"AFFILIATE"
means a Subsidiary or a Holding Company (as defined in Section 736 of the Companies Act 1985) of a person and any other Subsidiary of that Holding Company;
"AFFILIATED BANK"
means a Bank which is an Affiliate of another Bank.
"AGENT"
means the Facility Agent or the Swingline Agent and the term "RELEVANT AGENT" shall be construed accordingly.
"AGREED PERCENTAGE"
means in relation to a Revolving Facility Bank and a Swingline Advance, the amount of its Facility B Commitment expressed as a percentage of the Facility B Total Commitments.
"ANNIVERSARY"
means an anniversary of the Signing Date.
"APPLICABLE MARGIN"
means the percentage rate per annum determined from time to time to be the Applicable Margin in accordance with Clause 9.6 (Applicable Margin).
"ASSET DISPOSAL"
means any single disposal of any assets (including but not limited to a disposal of any Subsidiary or Affiliate, any disposal to facilitate or as part of a securitisation and any issue by
a member of the Group of any debt instrument convertible into all or
any part of the equity share capital owned by it in another member of
the Group) by any member of the Group after the Signing Date other than
a disposal of assets permitted under paragraphs (i) to (ix) of Clause
19.9(b) (Disposals).
"AUTHORITY"
means:
(i) until both section 1(1) and section 3(1) of the Utilities Act are brought into force, the Director General of Electricity Supply; and
(ii) thereafter, the Gas and Electricity Markets Authority established by section 1(1) of the Utilities Act.
"BALANCE SHEET"
means, at any time, the latest published audited consolidated balance sheet of the Group;
"BALANCING AND SETTLEMENT CODE" or "BSC"
means the balancing and settlement code required to be adopted by NG Company under the terms of its Transmission Licence.
"BANKS"
means the Revolving Facility Banks and the Swingline Banks.
"BONDS"
means:
(i) the mandatorily exchangeable bonds due 2003, exchangeable into ordinary shares of Energis and issued by NGG;
(ii) the exchangeable bonds due 2008, exchangeable into ordinary shares of NGG and issued by NG Company; and
(iii) other similar debt instruments issued or to be issued by NGG or any company in the Group and exchangeable into share capital.
"BORROWER"
means each of:
(i) Existing NGG and NGGF; and
(ii) on or after the Registration Date, New NG and any Additional Borrower;
"BORROWER ACCESSION AGREEMENT"
means an agreement substantially in the form set out in Schedule 6 (Borrower Accession Agreement) with such amendments as the Facility Agent may approve or reasonably require;
"BUSINESS DAY"
means:
(a) a day (other than a Saturday or a Sunday) on which banks are open for general interbank business in:
(i) London and, in relation to a transaction involving Dollars, New York; and
(ii) in relation to a transaction involving an Optional Currency (other than Euros), the principal financial centre of the country of that Optional Currency; and
(b) in relation to a rate fixing for, or payment in, Euros, a TARGET Day;
"COMMITMENT"
means, in relation to a Revolving Facility Bank, its Facility A Commitment, its Facility B Commitment or, as the context requires, the aggregate of such Commitments;
"COMPANIES ACT SUBSIDIARY"
means a subsidiary within the meaning of Section 736 of the Companies Act 1985, as amended by Section 144 of the Companies Act 1989;
"CONTROLLED GROUP"
means all members of a controlled group of corporations and all trades
or businesses (whether or not incorporated) under common control which,
together with any Obligor, are treated as a single employer under
Section 414 of the U.S. Code;
"CUSC"
means the connecting and use of system code required to be adopted by NG Company under the terms of its Transmission Licence.
"DANGEROUS SUBSTANCE"
means any radioactive emissions and any natural or artificial substance
(whether in solid or liquid form or in the form of a gas or vapour)
which (whether alone or in conjunction with any other substance) gives
rise to a risk of causing harm to man or any other living organism or
causing damage to the Environment or public health or welfare and
includes but is not limited to any controlled, special, hazardous,
toxic, radioactive or dangerous waste;
"DEFAULT"
means an Event of Default or any event which, with the giving of notice, expiry of any applicable grace period, determination of materiality or fulfilment of any other applicable condition (or any combination of the foregoing) in each case as specified in Clause 20 (Default), would constitute an Event of Default;
"DISPOSAL PROCEEDS"
means in relation to any Asset Disposal, the value of all the consideration received or receivable by members of the Group in relation to that Asset Disposal whether at the time of the Asset Disposal or on a deferred basis and for this purpose:
(a) counting as part of the consideration the aggregate principal amount of any Financial Indebtedness in the entity disposed of and which remains in that entity immediately after the Asset Disposal;
(b) taking the value of any deferred consideration as an amount determined by the auditors of NGG to represent its net present value as at the time the Asset Disposal is substantially completed; and
(c) taking non-cash proceeds at their fair value as at the time the Asset Disposal is substantially completed;
"DOUBLE TAXATION TREATY"
means any convention between the government of the United Kingdom or the United States of America, as applicable, and any other government for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains.
"ELECTRICITY ACT"
means the UK Electricity Act 1989 as amended from time to time and all subordinate legislation made under it;
"EMU"
means Economic and Monetary Union as contemplated by the Treaty establishing the European Community;
"EMU LEGISLATION"
means legislative measures of the European Union in relation to EMU;
"ENERGIS"
means Energis plc;
"ENERGY AND NETWORK BUSINESS"
means the business of generation, operation, maintenance, development and exploitation of a transmission or distribution network, metering, trading or supply of electricity or other sources of energy, the undertaking of an energy and telecoms business generally and any businesses ancillary or incidental to any of those businesses;
"ENERGY LAWS"
means the Electricity Act and all other laws, regulations or requirements of any relevant authority (in so far as such regulations or requirements have the force of law) relating to the generation, operation, maintenance, development and exploitation of a transmission or distribution network, metering, trading or supply of electricity or other sources of energy in each jurisdiction in which NGG or any of its Subsidiaries carries on business at any time;
"ENVIRONMENT"
means the media of air, water and land (wherever occurring) and in relation to the media of air and water includes, without limitation, the air and water within buildings and the air and water within other natural or man-made structures above or below ground and any water contained in any underground strata;
"ENVIRONMENTAL APPROVALS"
means all authorisations of any kind required under Environmental Laws to which any member of the Group is subject at any time;
"ENVIRONMENTAL LAW"
means all legislation, regulations or orders (insofar as such regulations or orders have the force of law) to the extent that they relate to the protection or impairment of the Environment or the control of Dangerous Substances to which any member of the Group is subject at any relevant time;
"ERISA"
means the U.S. Employee Retirement Income Security Act of 1974 and any rule or regulation issued thereunder from time to time in effect;
"EURIBOR"
means in relation to any Advance in Euros:
(a) the applicable Screen Rate; or
(b) (if no Screen Rate is available for the period of that Advance) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request, quoted by the Reference Banks to leading banks in the European interbank market
at or about 11.00 a.m. Brussels time on the applicable Rate Fixing Day for the offering of deposits in Euros for the applicable Interest Period for a Term-out Advance or the Term of a Facility A Advance (other than a Term-out Advance) or of a Facility B Advance;
"EURO, EUROS, E"
means the single currency of the Participating Member States and excludes all Euro Sub-Denominations;
"EURO SUB-DENOMINATION"
means the national currency (other than the Euro) of any Participating Member State;
"EURO UNIT"
means a unit of the Euro as defined in EMU legislation;
"EVENT OF DEFAULT"
means an event specified as such in Clause 20.1 (Events of Default);
"FACILITIES"
means Facility A and Facility B;
"FACILITY A"
means the facility referred to in Clause 2.1(a) (The Facilities);
"FACILITY A ADVANCE"
means a Revolving Facility Advance or a Term-out Advance made or to be made by a Revolving Facility Bank under Facility A;
"FACILITY A AVAILABILITY PERIOD"
means the period from the Signing Date to the date which is 364 days after the Signing Date or, in relation to any Bank, such later date as that Bank may have agreed under Clause 5.7 (Extension of Facility A Availability Period);
"FACILITY A COMMITMENT"
means in relation to a Bank:
(a) the amount in Dollars set opposite its name in Part I of Schedule 1 (The Banks); or
(b) the amount of that Commitment acquired by such Bank pursuant to Clause 28.2 (New Banks) and/or Clause 28.3 (Procedure for transfers),
less in each case the amount of that Commitment cancelled, reduced or transferred by that Bank pursuant to this Agreement;
"FACILITY A TOTAL COMMITMENTS"
means the aggregate for the time being of the Facility A Commitments, being US$1,700,000,000 at the date of this Agreement;
"FACILITY AGENT'S SPOT RATE OF EXCHANGE"
means the spot rate of exchange as determined by the Facility Agent for the purchase of the relevant Optional Currency in the London foreign exchange market with Dollars at or about 11.00 a.m. on a particular day;
"FACILITY B"
means the facility referred to in Clause 2.1(b) (The Facilities);
"FACILITY B ADVANCE"
means a Revolving Facility Advance made or to be made by a Revolving Facility Bank (or a Swingline Advance made or to be made by a Swingline Bank) under Facility B;
"FACILITY B AVAILABILITY PERIOD"
means the period from and including the Signing Date to and including the date one month before the Final Maturity Date;
"FACILITY B COMMITMENT"
means in relation to a Bank:
(a) the amount in Dollars set opposite its name in Part II of Schedule 1; or
(b) the amount of that Commitment acquired by such Bank pursuant to Clause 28.2 (New Banks) and/or Clause 28.3 (Procedure for transfers),
less in each case the amount of that Commitment cancelled, reduced or transferred by that Bank pursuant to this Agreement;
"FACILITY B TOTAL COMMITMENTS"
means the aggregate for the time being of the Facility B Commitments, being US$600,000,000 at the date of this Agreement;
"FACILITY OFFICE"
means, in relation to any Bank, the office(s) through which it will perform all or any of its obligations under this Agreement being those office(s) identified with its signature below (or, in the case of any New Bank, the office(s) specified in the relevant Transfer Certificate) or such other office(s) as it may from time to time select by not less than five Business Days' notice to the relevant Agent;
"FEDERAL FUNDS RATE"
means, in relation to any day, the rate per annum equal to:
(a) the weighted average of the rates on overnight Federal funds transactions with members of the US Federal Reserve System arranged by Federal funds brokers, as published for that day (or, if that day is not a New York Business Day, for the immediately preceding New York Business Day) by the Federal Reserve Bank of New York; or
(b) if a rate is not published for that day or preceding day, the average of the quotations for that day on those transactions received by the Swingline Agent from three Federal funds brokers of recognised standing selected by the Swingline Agent.
"FEE LETTER"
means each of:
(i) the Underwriting and Mandate Letter from the Arrangers to the Borrowers dated 10th October, 2001 setting out the amount of fees referred to in Clause 22.1 (Front-end fees); and
(ii) the Agency Fee Letter from the Facility Agent to Existing NGG, New NG and NGGF dated on or around the Signing Date setting out the amount of fees referred to in Clause 22.4 (Agency fee).
"FINAL MATURITY DATE"
means, subject to Clause 8 (Prepayment and Cancellation):
(a) in relation to Facility A:
(i) the date falling 364 days after the Signing Date; or
(ii) where any Revolving Facility Banks agree to extend
the Facility A Availability Period pursuant to Clause
5.7 (Extension of Facility A Availability Period)
then, with respect to Revolving Facility Advances
made under Facility A by those Revolving Facility
Banks only, the date that is 364 days after the date
in paragraph (a)(i) above; or
(iii) in the case of a Term-out Advance, the date specified as such in the Utilisation request for that Term-out Advance,
(b) in relation to Facility B, the fifth Anniversary;
"FINANCE DOCUMENT"
means this Agreement, a Fee Letter, a Transfer Certificate, a Borrower Accession Agreement and any other document designated in writing as such by an Agent and NGG;
"FINANCE PARTY"
means each of the Arrangers, the Banks and the Agents (as the context requires);
"FINANCIAL INDEBTEDNESS"
means (without double counting) any indebtedness in respect of:
(a) moneys borrowed or debit balances at banks and other financial institutions;
(b) any debenture, bond, note, commercial paper, loan stock or other debt instrument;
(c) any acceptance or documentary credit facilities, bill discounting or factoring facilities;
(d) receivables sold or discounted (otherwise than on a non-recourse basis);
(e) the acquisition cost of any asset to the extent payable before or after the time of acquisition or possession by the party liable where the advance or deferred payment is arranged primarily as a method of raising finance or financing the acquisition of that asset;
(f) leases (whether in respect of land, machinery, equipment or otherwise) entered into primarily as a method of raising finance or financing the acquisition of the asset leased;
(g) currency or interest swap, cap or collar arrangements or any other derivative instrument;
(h) amounts raised under any other transaction having the commercial effect of a borrowing or raising of money; and
(i) any guarantee, indemnity or similar assurance in respect of
indebtedness of any person falling within any of paragraphs
(a) to (h) (both inclusive) above;
"FINANCIAL INDEBTEDNESS LIMIT"
means each of the limits placed on the amount of permitted Financial
Indebtedness of Subsidiaries set out in paragraph (a)(iii) of Clause
19.15 (Restriction on Subsidiary Financial Indebtedness);
"GRID CODE"
means the Grid Code drawn up pursuant to the Transmission Licence(s), as from time to time revised in accordance with the Transmission Licence(s);
"GROUP"
means NGG and its Subsidiaries from time to time and including, after the Niagara Mohawk Acquisition Completion Date, the Niagara Mohawk Group, but if at any time a Project
Finance Company is a Subsidiary Undertaking but not a Companies Act Subsidiary, then, for so long as it shall be a Subsidiary Undertaking but not a Companies Act Subsidiary, it shall be deemed for the purposes of the Finance Documents (unless the contrary is specified) not to be a member of the Group;
"GUARANTOR"
means NGG.
"INFORMATION MEMORANDUM"
means the Information Memorandum to be prepared and delivered to potential lenders in connection with primary syndication of the Facilities (including any supplements);
"INTEREST DATE"
means the last day of an Interest Period;
"INTEREST PERIOD"
means, in relation to a Term-out Advance, each period determined in accordance with Clause 9.1 (Selection of Interest Periods for Term-out Advances) or, in relation to overdue amounts, Clause 9.4 (Default interest);
"INTEREST PERIOD SELECTION NOTICE"
means a notice substantially in the form set out in Schedule 4 (Form of Utilisation Request/Interest Period Selection Notice);
"LIBOR"
means in relation to any Advance (other than a Swingline Advance):
(a) the applicable Screen Rate; or
(b) (if no Screen Rate is available for the currency or period of that Advance) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request, quoted by the Reference Banks to leading banks in the London interbank market
at or about 11.00 a.m. London time on the applicable Rate Fixing Day for the offering of deposits in the currency of the relevant Advance for the applicable Interest Period for a Term-out Advance or the Term of a Facility A Advance (other than a Term-out Advance) or of a Facility B Advance;
"LICENCE"
means each of:
(a) the Transmission Licences granted by the Secretary of State to a member of the Group under section 6(1)(b) of the Electricity Act; and
(b) each other licence or other similar authorisation granted by any relevant authority in any applicable jurisdiction to a member of the Group pursuant to an Energy Law or otherwise to permit it to carry out generation, transmission, distribution or supply of electricity;
"MCUSA"
means the master connection and use of systems agreement, as defined in the BSC.
"MAJORITY BANKS"
means, at any time, Revolving Facility Banks the sum of the aggregate Original Dollar Amount of whose Utilisations and undrawn Commitments at that time aggregate at least 66 2/3 per cent. of the sum of the aggregate Original Dollar Amount of all Utilisations then outstanding and the then undrawn Total Commitments (or if the Total Commitments have been reduced to zero and there are no Utilisations then outstanding, whose Commitments aggregate at least 66 2/3 per cent. of the Total Commitments immediately before the reduction);
"MANDATORY COST"
means:
(a) the cash ratio and special deposit requirements of the Bank of England and/or the banking supervision or other costs imposed by the Financial Services Authority, as determined in accordance with Schedule 3 (Calculation of the Mandatory Cost);
(b) in relation to an Advance denominated in dollars to a US Subsidiary made available by a US incorporated Bank or a US branch of a non-US incorporated Bank, the cost (if any) certified by that Bank as being the cost to it of complying with Regulation D of the Board of Governors of the Federal Reserve System of the United States (or any successor) attributable to such Advance; and
(c) in relation to an Advance denominated in any other currency, the cost (if any) certified by any relevant Bank as being the cost to it of complying with any applicable regulatory or central bank requirement relating to Advances in that currency made through a branch in the jurisdiction of the relevant currency (including, for the avoidance of doubt, any reserve asset requirements of the European Central Bank);
"MATURITY DATE"
means the last day of the Term of a Facility A Advance (other than a Term-out Advance) or a Facility B Advance;
"MOODY'S"
means Moody's Investors Services, Inc.;
"MULTI EMPLOYER PLAN"
means a "multi employer plan" as defined in Section 4001(a)(3) of ERISA to which any Obligor or any member of the Controlled Group has an obligation to contribute;
"NEW YORK BUSINESS DAY"
means a day (other than a Saturday or a Sunday) on which banks are open for business in New York.
"NGG"
means:
(a) prior to, but not after, the Registration Date, Existing NGG; and
(b) on or after the Registration Date, New NG.
"NG COMPANY"
means The National Grid Company plc;
"NIAGARA MOHAWK"
means Niagara Mohawk Holdings, Inc.
"NIAGARA MOHAWK ACQUISITION COMPLETION DATE"
means the date specified as such in the certificate in relation to the
Acquisition delivered to the Facility Agent as referred to in paragraph
(e) of Part II of Schedule 2 (Conditions Precedent Documents);
"NIAGARA MOHAWK GROUP"
means Niagara Mohawk and its Subsidiaries;
"NIAGARA MOHAWK MERGER AGREEMENT"
means the Agreement and Plan of Merger and Scheme of Arrangement dated as of 4th September, 2000 by and among Existing NGG and Niagara Mohawk, amongst others;
"OFFEROR"
means NGG or a wholly owned subsidiary of NGG;
"OBLIGOR"
means each of the Borrowers and/or the Guarantor as the context requires;
"OPTIONAL CURRENCY"
means Sterling, Euros and any other currency (excluding any Euro Sub-Denominations) which is for the time being freely transferable and convertible into Dollars and deposits of which are readily available in the London interbank market;
"ORIGINAL DOLLAR AMOUNT"
means in relation to Utilisations under Facility A or Facility B or the aggregate of all Utilisations under both Facilities:
(a) if a Utilisation is denominated in Dollars, the principal amount of that Utilisation; or
(b) if a Utilisation is denominated in any other currency, the principal amount of that Utilisation notionally converted into Dollars on the basis of the Facility Agent's Spot Rate of Exchange on the date of receipt by the Facility Agent of the Utilisation Request for, or Interest Period Selection Notice in relation to, that Utilisation;
"ORIGINAL GROUP ACCOUNTS"
means the audited consolidated accounts of the Group for the year ended 31st March, 2001 prepared in accordance with the historic cost convention;
"PARTICIPATING MEMBER STATE"
means a member state of the European Union that, at the relevant time, has adopted the Euro as its currency in accordance with EMU legislation;
"PARTY"
means a party to this Agreement;
"PBGC"
means the Pension Benefit Guaranty Corporation;
"PLAN"
means an "employee benefit plan" (as defined in Section 3(3) of ERISA);
"PUHCA"
means the United States of America Public Utility Holding Company Act of 1935, as amended;
"PRIMARY SYNDICATION PERIOD"
means the period ending on the earlier of the date the Facility Agent notifies NGG that primary syndication of the Facilities is completed and 31st March, 2002 (or such other date as NGG and the Arrangers may agree);
"PRIME RATE"
means, on any day, the prime commercial lending rate from time to time publicly announced by the Swingline Agent, which rate may not be the lowest rate charged to its borrowers. Each change in the interest rate on a Swingline Advance which results from a change in the Prime Rate becomes effective on the day on which the change in the Prime Rate becomes effective.
"PRINCIPAL SUBSIDIARY"
means:
(i) an Obligor (other than NGG); or
(ii) any other member of the Group whose tangible net worth or net pre-taxation profits at any time equal or exceed five per cent. (5%) of the Tangible Consolidated Net Worth or net pre-taxation profits of the Group at that time, and for the purposes of the above:
(a) the net pre-taxation profits of the Subsidiary shall be ascertained by reference to:
(i) the accounts (consolidated in the case of a company which itself has Subsidiaries and which, in the normal course, prepares consolidated accounts) of the Subsidiary based upon which the latest audited consolidated accounts of the Group have been made up; or
(ii) if the company becomes a Subsidiary of NGG after the end of the financial period to which the latest audited consolidated accounts of the Group relate, the latest accounts (consolidated in the case of a company which itself has Subsidiaries and which, in the normal course, prepares consolidated accounts) of the Subsidiary; and
(b) tangible net worth of the Subsidiary shall be ascertained by reference to the Tangible Consolidated Net Worth definition contained in this Clause, changed where necessary and as if references therein to NGG were references to such Subsidiary, and references therein to the relevant period were references to the financial year of such Subsidiary and on the basis that all intra-Group items and investments shall be excluded; and
(c) the net pre-taxation profits of the Group shall be ascertained by reference to the latest audited consolidated accounts of the Group, adjusted (where appropriate) to reflect the net pre-taxation profits of any company subsequently acquired or disposed of,
PROVIDED ALWAYS that if the whole or substantially the whole of the assets of a Principal Subsidiary is transferred by that Principal Subsidiary (the "DISPOSING SUBSIDIARY") to another Subsidiary of NGG (the "RECEIVING SUBSIDIARY") or a number of Subsidiaries of NGG, the disposing Subsidiary shall forthwith upon the transfer cease to be a Principal Subsidiary and the receiving Subsidiary shall forthwith upon the transfer become a Principal Subsidiary;
"PROJECT FINANCE BORROWING"
means any Financial Indebtedness to finance a project:
(a) which is borrowed by a single purpose company, partnership or other legal person (whether or not a member of the Group) where its or one or more of its subsidiaries, principal assets and business are constituted by that project and whose liabilities in respect of the Financial Indebtedness concerned are not directly or indirectly the subject of a guarantee, indemnity or other form of assurance, undertaking or support from any member of the Group (except as expressly referred to in paragraph (b)(iii) below or as a result of the making of acceptances or endorsements of bills in the ordinary course of trading or payment netting arrangements and other usual course of business banking arrangements); or
(b) in respect of which the person or persons making that Financial Indebtedness available to the relevant borrower (whether or not a member of the Group) have no recourse whatsoever to any member of the Group for the repayment of or payment of any sum relating to that Financial Indebtedness other than:
(i) recourse to the borrower or one or more of its subsidiaries, for amounts limited to the aggregate cash flow or net cash flow (other than historic cash flow or historic net cash flow) from the project; and/or
(ii) recourse to the borrower, or one or more of its subsidiaries or any shareholder of the borrower for the purpose only of enabling amounts to be claimed in respect of that Financial Indebtedness in an enforcement of any Security Interest permitted pursuant to Clause 19.8 (Negative pledge) given by the borrower or one or more of its subsidiaries over the assets comprised in the project (or given by any shareholder of the borrower over its shares in the borrower together with, in the case of a UK incorporated shareholder whose only material assets are those shares in the borrower, a supporting floating charge over all or substantially all of its assets, to secure that Financial Indebtedness or any recourse referred to in (iii) below or as a result of the making of acceptances or endorsements of bills in the ordinary course of trading or payment netting arrangements and other usual course of business banking arrangements, provided that (A) the extent of the recourse to the borrower or one or more of its subsidiaries or shareholder is limited solely to the amount of any recoveries made on any such enforcement, and (B) the person or persons are not entitled, by virtue of any right to claim arising out of or in connection with the Financial Indebtedness, to commence proceedings for the winding up or dissolution of the borrower or shareholder or to appoint or procure the appointment of any receiver, trustee or similar person or official in respect of the borrower or shareholder or any of its assets (save for the assets the subject of the relevant Security Interest); and/or
(iii) recourse to such borrower generally, or directly or indirectly to a member of the Group under any form of assurance or undertaking, which recourse is limited to a claim for damages (other than liquidated damages and damages required to be calculated in a specified way) for breach of an obligation (not
(c) which the Majority Banks shall have agreed in writing to treat as Project Finance Borrowing for the purposes of the Finance Documents.
If at any time any Financial Indebtedness is made to finance a project and that Financial Indebtedness does not qualify as a Project Finance Borrowing pursuant to the above paragraphs (b)(i), (ii) or (iii) but would so qualify if there were not recourse to a member of the Group which is either (i) limited as to the period during which it is in force (for example, during the period up to completion of the project) or (ii) limited as to the obligations of the borrower to which it applies, then, in any such case, the Financial Indebtedness shall be regarded as a Project Finance Borrowing for the purposes of this definition to the extent that, and during the period that, there is no such recourse to a member of the Group;
"PROJECT FINANCE COMPANY"
means any company, partnership or other legal person falling within the scope of paragraph (a) of the definition of Project Finance Borrowing or which the Majority Banks have agreed shall be treated as a Project Finance Company for the purposes of the Finance Documents;
"QUALIFYING BANK"
means a Bank which is:
(a) for an Advance to a Borrower incorporated in the United Kingdom, either:
(i) a UK Bank; or
(ii) a Treaty Bank; or
(b) for an Advance to a U.S. Borrower, either:
(i) not a foreign person for U.S. federal income tax purposes or a person whose payments of principal, interest, fees and other amounts under the Finance Documents are effectively connected with the conduct of a trade or business in the United States of America; or
(ii) a Treaty Bank.
"RATE FIXING DAY"
means:
(a) in relation to any Advance (other than a Swingline Advance or an Acquisition Advance):
(i) the second Business Day before the first day of an Interest Period or the Term of an Advance (other than an Advance in Sterling or Euros); or
(ii) in the case of an Advance in Sterling, the first day of the Term of that Advance; or
(iii) in the case of an Advance in Euros, the second TARGET Day before the first day of an Interest Period or the Term of that Advance,
or such other day on which it is market practice in the relevant interbank market for leading banks to give quotations for deposits in the relevant currency for delivery on the first day of the relevant Interest Period or Term, as determined by the Facility Agent; and
(b) in relation to an Acquisition Advance:
(i) the Business Day before the first day of an Interest Period or the Term of an Advance in Dollars; or
(ii) in the case of an Advance in Sterling, the first day of the Term of that Advance.
"REFERENCE BANKS"
means, subject to Clause 28.5 (Reference Banks), the principal London offices of Dresdner Bank AG London Branch, The Chase Manhattan Bank and HSBC Bank plc;
"REGISTRATION DATE"
means the date upon which an office copy of the order of the High Court of Justice sanctioning the Scheme of Arrangement under Section 425 of the Companies Act 1985 is registered with the Registrar of Companies pursuant to sub-section 3 of Section 425 of the Companies Act 1985.
"REGULATED HOLDING COMPANY"
means, in respect of any Bank, any person which is a Holding Company (as defined in section 736 of the Companies Act 1985) of that Bank and is regulated as a bank or other financial institution;
"REGULATED UK SUBSIDIARY"
means, at any time, any member of the Group (other than NG Company) which operates any part of the Transmission Business carried on, as at the date of this Agreement, by NG Company pursuant to its Transmission Licence;
"REGULATED U.S. SUBSIDIARY"
means any Subsidiary of NGG including, after the Niagara Mohawk Acquisition Completion Date, Niagara Mohawk, and any Subsidiary of Niagara Mohawk which operates any electricity generation, transmission, distribution or supply business pursuant to any Energy
Laws of the United States or of any State of the United States or pursuant to a Licence issued pursuant to such Energy Laws;
"REGULATIONS T, U AND X"
means, respectively, regulations T, U and X of the Board of Governors of the Federal Reserve System of the United States (or any successor);
"RELEVANT TIME"
means the applicable time set opposite a Clause number in Schedule 7 (Timetables);
"REPORTABLE EVENT"
means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the U.S. Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the U.S. Code;
"REQUESTED AMOUNT"
means the requested amount of a Utilisation as set out in a Utilisation Request;
"REVOLVING FACILITY ADVANCES"
means any Advances under the Facilities except Term-out Advances and Swingline Advances;
"REVOLVING FACILITY BANKS"
means each of the banks and financial institutions listed in Parts I and II of Schedule 1 (The Banks), their respective successors in title and any other bank or financial institution which becomes a Party pursuant to Clause 28.3 (Procedure for transfers);
"SCHEME OF ARRANGEMENT"
means the scheme of arrangement to be implemented under Section 425 of the Companies Act 1985 prior to the Acquisition pursuant to which New NG shall become the listed Group holding company and shall own (i) 100% of the ordinary shares in Existing NGG and (ii) by virtue of its ownership of National Grid (US) Holdings Limited, 100% of Niagara Mohawk;
"SCREEN RATE" means:
(a) in relation to LIBOR, the British Bankers Association Interest Settlement Rate for the relevant currency and period; and
(b) in relation to EURIBOR, the percentage rate per annum determined by the Banking Federation of the European Union for the relevant period
displayed on the appropriate page of the Telerate screen. If the agreed page is replaced or service ceases to be available, the Facility Agent may specify another page or service displaying the appropriate rate after consultation with NGG and the Banks.
"SECURITY INTEREST"
means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security;
"SIGNING DATE"
means the date of this Agreement;
"S&P"
means Standard & Poor's Corporation;
"SUBSIDIARIES"
means Companies Act Subsidiaries and Subsidiary Undertakings (and "SUBSIDIARY" shall be construed accordingly);
"SUBSIDIARY UNDERTAKING"
means a subsidiary undertaking within the meaning of Section 258 of the Companies Act 1985 (as inserted by Section 21 of the Companies Act 1989);
"SWINGLINE ADVANCE"
means a Facility B Advance made or to be made by a Swingline Bank under the Swingline Advance Facility and drawn under Clause 6.1 (Receipt of Utilisation Requests);
"SWINGLINE ADVANCE FACILITY"
means the facility referred to in Clause 2.1(b)(ii) (The Facilities), which comprises a subset of Facility B;
"SWINGLINE BANKS"
means each of the banks and financial institutions (being, in each case, a Revolving Facility Bank or a Revolving Facility Bank's Affiliated Bank) listed in Part III of Schedule 1 (The Banks), their respective successors in title and any other bank or financial institution which becomes a Party pursuant to Clause 28.3 (Procedure for transfers);
"SWINGLINE COMMITMENT"
means in relation to a Swingline Bank:
(a) the amount in Dollars set opposite its name in Part III of Schedule 1 (The Banks); or
(b) the amount of that Commitment acquired by such Bank pursuant to Clause 28.2 (New Banks) and/or Clause 28.3 (Procedure for transfers),
less in each case the amount of that Commitment cancelled, reduced or transferred by that Bank pursuant to this Agreement;
"SWINGLINE RATE"
means, on any day, the higher of:
(a) the US Dollar Prime Rate, and
(b) the aggregate of the Federal Funds Rate plus 0.50 per cent. per annum
on that day;
"TANGIBLE CONSOLIDATED NET WORTH"
means at any time the aggregate of:
(i) the amount paid up or credited as paid up on the issued share capital of NGG; and
(ii) the amount standing to the credit of the consolidated capital and revenue reserves of the Group,
based on the Balance Sheet but adjusted by (without double counting):
(A) adding any amount standing to the credit of the profit and
loss account for the Group for the period ending on the date
of the Balance Sheet, to the extent not included in paragraph
(ii) above and to the extent the amount is not attributable to
any dividend or other distribution declared, recommended or
made by NGG or any other member of the Group to the extent of
any minority interests therein;
(B) deducting any amount standing to the debit of the profit and loss account for the Group for the period ending on the date of the Balance Sheet;
(C) reflecting any variation in the amount of the issued share capital of NGG and the consolidated capital and revenue reserves of the Group after the date of the Balance Sheet;
(D) reflecting any variation in the interest of NGG in any other member of the Group since the date of the Balance Sheet;
(E) excluding any amount attributable to deferred taxation to the extent included in paragraphs (i) and (ii) above; and
(F) excluding any amount attributable to minority interests to the extent included in paragraphs (i) and (ii) above;
"TARGET DAY"
means a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open;
"TERM"
means, in relation to any Advance (other than a Term-out Advance) the period selected by a Borrower for which the relevant Advance is to be outstanding, as specified in the Utilisation Request;
"TERM-OUT ADVANCE"
means a Facility A Advance drawn under paragraph (b) of Clause 7.1 (Repayment of Facility A Advances);
"TOTAL COMMITMENTS"
means, on any day and from time to time, the aggregate of the Facility A Total Commitments and the Facility B Total Commitments;
"TOTAL SWINGLINE COMMITMENTS"
means, on any day and from time to time, the aggregate of the Swingline Commitments;
"TRANSFER CERTIFICATE"
has the meaning given to it in Clause 28.3 (Procedure for transfers);
"TRANSMISSION BUSINESS"
has the meaning given to it in the relevant Transmission Licence;
"TRANSMISSION LICENCE"
means a licence granted under Section 6(l)(b) of the Electricity Act;
"TREATY BANK"
means an institution which is resident (as such term is defined in the appropriate Double Taxation Treaty) in a country with which the United Kingdom or the United States of America, as appropriate, has an appropriate Double Taxation Treaty giving residents of that country exemption from UK or U.S., as applicable, taxation on interest and does not carry on business in the United Kingdom or the United States of America, as appropriate, through a permanent establishment with which the Facilities are effectively connected.
"UK BANK"
means a Bank which is within the charge to UK corporation tax in respect of, and is beneficially entitled to, a payment of interest on a Facility made by a person that was a bank for the purposes of Section 349 of the Income and Corporation Taxes Act 1988 (as currently defined in Section 840A of the Income and Corporation Taxes Act 1988) at the time a Facility was made available.
"UNITED KINGDOM"
means the United Kingdom of Great Britain and Northern Ireland;
"UNITED STATES"
means the United States of America;
"U.S. BORROWER"
means a Borrower incorporated in the United States;
"U.S. CODE"
means the United States Internal Revenue Code of 1986, as amended and any rule or regulation issued thereunder from time to time in effect;
"UTILISATION"
means a utilisation of any of the Facilities pursuant to the terms of this Agreement and includes all the Advances made or to be made therein;
"UTILISATION DATE"
means in the case of any Utilisation, the date for the making of the relevant Advances;
"UTILISATION REQUEST"
means a notice substantially in the form set out in Schedule 4 (Form of Utilisation Request/Interest Period Selection Notice);
"UTILITIES ACT"
means the Utilities Act 2000 as amended from time to time and all subordinate legislation made under it;
1.2 CONSTRUCTION
(a) In this Agreement, unless the contrary intention appears, any reference to:
(i) an "AMENDMENT" includes a supplement, variation, novation, re-enactment or a waiver;
"ASSETS" includes present and future properties, revenues and rights of every description;
an "AUTHORISATION" includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration and notarisation;
"BARCLAYS CAPITAL" is a reference to Barclays Capital, the investment banking division of Barclays Bank PLC;
"INDEBTEDNESS" shall be construed so as to include any obligation for the payment or repayment of money, whether present or future, actual or contingent and whether incurred as principal or surety;
a "MONTH" is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:
(1) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not); or
(2) if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that calendar month;
a "PERSON" includes any individual, company, unincorporated association or body or persons (including a partnership, joint venture or consortium), government, state, agency, international organisation or other entity;
a "REGULATION" includes any regulation, rule, official directive, request or guideline (whether or not having the force of law, but, if not having the force of law, being one with which the relevant Party is accustomed to comply) of any governmental body, agency, department or regulatory, self-regulatory or other authority or organisation;
(ii) a provision of a law is a reference to that provision as amended or re-enacted;
(iii) the term "SECRETARY OF STATE" shall be construed as a reference to that term as used in the Electricity Act;
(iv) a Clause or a Schedule is a reference to a clause of or a schedule to this Agreement;
(v) a person includes its successors, transferees and assigns;
(vi) a Finance Document or another document is a reference to that Finance Document or that other document as amended;
(vii) a time of day is a reference to London time; and
(viii) "STERLING" and "(POUND)" and "DOLLARS" and "US$" denote the lawful currencies for the time being of the United Kingdom of Great Britain and Northern Ireland and the United States of America respectively.
(b) Unless the contrary intention appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.
(c) The index and headings in this Agreement are for convenience only and are to be ignored in construing this Agreement.
2. THE FACILITIES
2.1 THE FACILITIES
Subject to the terms and conditions hereof, the Banks grant to the Borrowers the following facilities:
(a) a committed 364 day Dollar denominated multi-currency revolving credit facility, with an option to draw Term-out Advances, to be designated as Facility A, under which the Revolving Facility Banks shall, when requested by any Borrower, make cash advances in Dollars or in Optional Currencies to that Borrower on a revolving basis during the Facility A Availability Period; and
(b) a committed 5 year Dollar denominated multi-currency revolving credit facility under which
(i) the Revolving Facility Banks will, when requested by any Borrower, make cash advances in Dollars or Optional Currencies to that Borrower on a revolving basis during the Facility B Availability Period, and
(ii) the Swingline Banks shall, when requested by any Borrower, make to that Borrower Swingline Advances in Dollars to that Borrower on a revolving basis during the Facility B Availability Period.
2.2 OVERALL FACILITIES LIMIT AND SUB-LIMIT
(a) No Utilisation shall be made if it would cause the aggregate Original Dollar Amount of all outstanding Advances:
(i) under Facility A, to exceed the Facility A Total Commitments; or
(ii) under Facility B, to exceed the Facility B Total Commitments.
(b) No Utilisation shall be made if it would cause the aggregate Original Dollar Amount of all outstanding Utilisations under the Swingline Advance Facility to exceed the Total Swingline Commitments.
2.3 BANK LIMITS
(a) No Facility A Advance shall be made by any Revolving Facility Bank if the operation of Clause 5.3 (Amount of each Revolving Facility Bank's Advance) would cause the total amount outstanding and owing to that Bank (the "AFFECTED BANK") to exceed its Facility A Commitment.
(b) No Facility B Advance shall be made by any Revolving Facility Bank if the operation of Clause 5.3 (Amount of each Revolving Facility Bank's Advance) would cause the total amount outstanding and owing to the affected Bank to exceed its Facility B Commitment.
(c) No Swingline Advance shall be made by any Swingline Bank if the operation of Clause 6.3 (Amount of each Swingline Bank's Advance) would cause the total amount outstanding and owing to the affected Bank to exceed its Swingline Commitment or its Facility B Commitment.
(d) No Facility B Advance shall be made by any Revolving Facility Bank or its Affiliated Bank if it would cause the aggregate amount outstanding and owing to both the Revolving Facility Bank and its Affiliated Bank under Facility B to exceed the aggregate of that Revolving Facility Bank's and its Affiliated Bank's Facility B Commitment.
(e) For the purposes of this Clause 2.3, the "TOTAL AMOUNT OUTSTANDING" of a Bank under any Facility on any Utilisation Date is the aggregate Original Dollar Amount of all Advances made by that Bank under that Facility which would be outstanding on that Utilisation Date if:
(i) all outstanding Utilisations having Maturity Dates or Final Maturity Dates which fall on or before that Utilisation Date are repaid; and
(ii) all Utilisations to be made on or before that Utilisation Date and in respect of which a Utilisation Request has been received by the relevant Agent are made.
2.4 AVAILABILITY, NUMBER OF UTILISATION REQUESTS AND UTILISATIONS
(a) No Utilisation may be made at any time after the date one month prior to the applicable Final Maturity Date.
(b) No Utilisation Request may specify a Utilisation Date which is within three Business Days of another Utilisation Date (unless the Utilisation the subject of that Utilisation Request is to refinance an existing Utilisation).
(c) No more than one Utilisation Request may be delivered on any one day but that Utilisation Request may subject to Clause 5 (Availability of Revolving Facility Advances and Term-out Advances) and Clause 6 (The Swingline Advance Facility) specify any number and type of Utilisations from Facility A or Facility B or both of them.
(d) Unless the Facility Agent agrees otherwise, no more than 20 Utilisations may be outstanding at any one time (taking all Facilities together for this purpose) save that no Utilisations under the Swingline Advance Facility are to be counted for the purposes of this provision.
2.5 PRIMARY SYNDICATION PERIOD
(a) Subject to paragraph (b) below, but otherwise notwithstanding any provision of this Agreement, no Borrower will deliver a Utilisation Request or Interest Period Selection Notice during the Primary Syndication Period specifying a Term or an Interest Period other than one, two or three weeks or one month.
(b) Except as the Facility Agent (after consultation with the Arrangers) and NGG may otherwise agree, each Interest Period Selection Notice or Utilisation Request delivered during the Primary Syndication Period shall specify an Interest Period or Term ending on the same date as each other Advance to be drawn or rolled over on the same date and, if there are Advances then outstanding, ending on the same date as such other Advances.
2.6 NATURE OF EACH FINANCE PARTY'S RIGHTS AND OBLIGATIONS
(a) The obligations of each Finance Party under the Finance Documents are several.
(b) The failure of a Finance Party to carry out those obligations does not relieve any other Party of its obligations under the Finance Documents and no Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
(c) The rights of a Finance Party under the Finance Documents are divided rights and a Finance Party may, except as otherwise stated in the Finance Documents, separately enforce those rights.
2.7 BORROWERS' AGENT
Each Obligor irrevocably authorises and instructs NGG as the Borrowers' agent to give and receive as agent on its behalf all notices (including Utilisation Requests) and sign all documents in connection with the Finance Documents on its behalf and take such other action as may be necessary or desirable under or in connection with the Finance Documents and confirms that it will be bound by any action taken by NGG as the Borrowers' agent under or in connection with the Finance Documents.
2.8 ACTIONS OF BORROWERS' AGENT
The respective liabilities of each of the Obligors under the Finance Documents shall not be in any way affected by:
(a) any irregularity (or purported irregularity) in any act done by or any failure (or purported failure) by NGG;
(b) NGG acting (or purporting to act) in any respect outside any authority conferred upon it by any Obligor; or
(c) the failure (or purported failure) by or inability (or purported inability) of NGG to inform any Obligor of receipt by it of any notification under this Agreement.
3. PURPOSE
3.1 USE OF PROCEEDS
Each Borrower shall apply each Utilisation made by it:
(a) under Facility A, in or towards financing or refinancing the Acquisition (plus related fees, costs and expenses) and/or refinancing existing borrowings of Niagara Mohawk and its Subsidiaries and/or financing any working capital requirements of the Borrowers consequent upon the Acquisition or any interest payable on funds used to finance the Acquisition; and/or
(b) under Facility B, to meet the general corporate purposes of the Group,
but no Borrower shall apply the proceeds of a Swingline Advance towards the repayment of an outstanding Swingline Advance.
3.2 NO ENQUIRY
Without affecting the obligations of any Obligor in any way no Finance Party is bound to monitor or verify the application of the proceeds of any Utilisation.
4. CONDITIONS PRECEDENT
4.1 DOCUMENTARY CONDITIONS PRECEDENT
The obligations of each Finance Party to any Obligor under this Agreement are subject to the condition precedent that the Facility Agent has notified NGG and the Banks that it has received all of the documents set out in Part I of Schedule 2 (Conditions Precedent Documents) in form and substance satisfactory to that Agent.
4.2 FURTHER CONDITIONS PRECEDENT
The obligations of each Finance Party to participate in any Utilisation of Facility A are subject to the further condition precedent that the Facility Agent has notified NGG and the Revolving Facility Banks that it has received all of the documents set out in Part II to Schedule 2 (Conditions Precedent Documents) in form and substance satisfactory to the Facility Agent.
4.3 FURTHER CONDITIONS PRECEDENT GENERALLY
The obligations of each Bank to participate in a Utilisation are subject to the further conditions precedent that on both the relevant date of the Utilisation Request and the Utilisation Date:
(a) the representations and warranties in Clause 18 (Representations and Warranties) to be repeated on those dates are correct and will be correct in all material respects immediately after the Utilisation; and
(b) no Default is outstanding or would result from the Utilisation (provided that where no notice has been given pursuant to Clause 20.18 (Acceleration) but where a Default
is outstanding each Bank shall be obliged to participate in a Utilisation, to the extent required by the terms hereof, where such Utilisation is in the same currency as and is in an amount equal to or less than an outstanding Utilisation which is to mature on the Utilisation Date for the proposed Utilisation and is to be applied on such Utilisation Date in repaying such outstanding Utilisation).
5. AVAILABILITY OF REVOLVING FACILITY ADVANCES AND TERM-OUT ADVANCES
5.1 RECEIPT OF UTILISATION REQUESTS
The Borrowers may borrow Revolving Facility Advances and Term-out Advances if the Facility Agent receives, not later than the Relevant Time, a duly completed Utilisation Request. Each such Utilisation Request shall be copied to the Swingline Agent.
5.2 FORM OF UTILISATION REQUEST
A Utilisation Request for a Revolving Facility Advance or a Term-out Advance will not be regarded as having been duly completed unless:
(a) the proposed Utilisation Date is a Business Day during the applicable Facility A Availability Period or Facility B Availability Period;
(b) in the case of a Term-out Advance under Facility A, the Utilisation Request requests Advances from all those Revolving Facility Banks (but not some only) with a Facility A Availability Period expiring on the same day;
(c) the Requested Amount for each separate Utilisation comprising a Revolving Facility Advance or a Term-out Advance is in a minimum Original Dollar Amount of US$50,000,000 and an integral multiple of US$10,000,000, (or such other amount as the relevant Borrower and the Facility Agent may agree before the delivery of that Utilisation Request) or an integral multiple of the amounts in the relevant Optional Currency agreed between the relevant Borrower and the Facility Agent before the delivery of the relevant Utilisation Request;
(d) only one Term or, in the case of Term-out Advances under Facility A, one Interest Period and Final Maturity Date, for each separate Utilisation is specified which:
(i) in the case of a Utilisation under Facility A, does not extend beyond the then applicable Facility A Availability Period (other than in the case of Term-out Advances); and
(ii) in the case of a Utilisation under Facility B, does not extend beyond the Final Maturity Date; and
(iii) subject to Clause 2.5 (Primary Syndication Period), is a period of
(A) 1, 2, 3 or 6 months for any Advance which is not an Acquisition Advance (or, in any case, such other period as all the Revolving Facility Banks may previously have agreed for the purposes of such Advances); or
(B) 1, 2, 3, or 4 weeks, or 2, 3 or 6 months for any Acquisition Advance;
(e) the payment instructions comply with Clause 11 (Payments); and
(f) in the case of a Term-out Advance under Facility A, the proposed Final Maturity Date (which must be the same date for all Term-out Advances drawn on the same date) is a date after the applicable Facility A Availability Period but no later than the third Anniversary.
Each Utilisation Request, once delivered, shall be irrevocable.
5.3 AMOUNT OF EACH REVOLVING FACILITY BANK'S ADVANCE
The amount of each Revolving Facility Bank's Advance will be the proportion of the Requested Amount which its Commitment in respect of the relevant Facility bears to the aggregate Commitments of all Revolving Facility Banks in respect of that Facility on the date of receipt of the relevant Utilisation Request, adjusted, if necessary, to reflect the operation of Clause 2.3 (Bank limits).
5.4 NOTIFICATION TO REVOLVING FACILITY BANKS
The Facility Agent shall, not later than the Relevant Time, notify each Revolving Facility Bank of the details of the requested Advances and the aggregate amount of those Advances to be made by that Revolving Facility Bank.
5.5 SELECTION OF AN OPTIONAL DURATION
(a) If a Borrower requests an Interest Period or a Term in a Utilisation Request other than 1, 2, 3 or 6 months, it may also select in the relevant Utilisation Request an alternative Interest Period or Term of 1, 2, 3 or 6 months to apply and paragraph (b) below shall apply.
(b) If:
(i) a Borrower requests an Interest Period or a Term other than 1, 2, 3 or 6 months; and
(ii) the Facility Agent receives notice from a Revolving Facility Bank not later than the Relevant Time stating that it does not agree to such request,
then the Interest Period or Term for the proposed Utilisation shall instead be the alternative period specified in the relevant Utilisation Request or, in the absence of any alternative selection, 3 months.
(c) If the Facility Agent receives a notice from a Revolving Facility Bank under paragraph (b)(ii) above it shall notify the relevant Borrower and the Revolving Facility Banks of the revised Interest Period or Term for the proposed Advances not later than the Relevant Time.
(d) A Borrower may not request a Term or Interest Period other than 1, 2, 3, or 4 weeks, or 2, 3 or 6 months in respect of an Acquisition Advance.
5.6 PAYMENT OF PROCEEDS
Subject to the terms of this Agreement, each Revolving Facility Bank shall make its Advance available to the Facility Agent for the relevant Borrower for value on the relevant Utilisation Date.
5.7 EXTENSION OF FACILITY A AVAILABILITY PERIOD
NGG may, not earlier than 60 days nor later than 30 days prior to the original expiry date of the Facility A Availability Period, request by notice to the Facility Agent (who will promptly notify the Revolving Facility Banks) that the Facility A Availability Period be extended to a date which is not later than 364 days after the original expiry date (the "EXTENDED DATE"). If any Revolving Facility Bank notifies the Facility Agent that it agrees to extend the Facility A Availability Period, then the Facility A Availability Period will be extended in relation to that Revolving Facility Bank accordingly, whether or not any other Revolving Facility Bank extends. No Revolving Facility Bank is under any obligation of any kind to agree to NGG's request to extend and any Revolving Facility Bank which fails to respond or reply within the required period will be deemed to have declined to extend.
6. THE SWINGLINE ADVANCE FACILITY
6.1 RECEIPT OF UTILISATION REQUESTS
The Borrowers may borrow Swingline Advances if the Swingline Agent receives, not later than the Relevant Time, a duly completed Utilisation Request. Each such Utilisation Request shall be copied at the same time to the Facility Agent.
6.2 FORM OF UTILISATION REQUESTS
A Utilisation Request for a Swingline Advance will not be regarded as having been duly completed unless:
(a) the proposed Utilisation Date is a Business Day during the Facility B Availability Period;
(b) the Requested Amount for each separate Utilisation is in a minimum Original Dollar Amount of US$25,000,000 and an integral multiple of US$5,000,000 or such other amount as the relevant Borrower and the Swingline Agent may agree before the delivery of that Utilisation Request;
(c) only one Utilisation is specified, the Term of which:
(i) does not extend beyond the then applicable Facility B Availability Period; and
(ii) is a period not exceeding 5 Business Days;
(d) it specifies that it is a utilisation of the Swingline Advance Facility and designates the Utilisation as a Facility B Utilisation; and
(e) the payment instructions comply with Clause 11 (Payments).
Each Utilisation Request, once delivered, shall be irrevocable.
6.3 AMOUNT OF EACH SWINGLINE BANK'S ADVANCE
The amount of each Swingline Bank's Advance will be the proportion of the Requested Amount which its Swingline Commitment bears to the aggregate Swingline Commitments of all Swingline Banks on the date of receipt of the relevant Utilisation Request, adjusted, if necessary, to reflect the operation of Clause 2.3 (Bank limits).
6.4 NOTIFICATION TO SWINGLINE BANKS
The Swingline Agent shall promptly notify each Swingline Bank of the details of the requested Swingline Advances and the aggregate amount of those Swingline Advances to be made by that Swingline Bank.
6.5 PAYMENT OF PROCEEDS
Subject to the terms of this Agreement, each Swingline Bank shall make its Swingline Advance available to the Swingline Agent for the relevant Borrower for value on the relevant Utilisation Date.
7. REPAYMENT
7.1 REPAYMENT OF FACILITY A ADVANCES
(a) Each Borrower will repay each Facility A Advance made to it in full on its Maturity Date or, in the case of a Term-out Advance, its Final Maturity Date, by payment to the Facility Agent for the relevant Revolving Facility Bank. As Facility A is available on a revolving basis during the Facility A Availability Period, amounts repaid to a Revolving Facility Bank may be reborrowed from that Revolving Facility Bank during the Facility A Availability Period applicable to that Revolving Facility Bank subject to the terms of this Agreement.
(b) At any time prior to the expiry of the Facility A Availability Period applicable to any Revolving Facility Bank, any Borrower under Facility A may, by delivery of a duly completed Utilisation Request to the Facility Agent (who shall send a copy to the Revolving Facility Banks) elect to draw Term-out Advances under Facility A from all those Revolving Facility Banks (but not some only) with a Facility A Availability Period expiring on the same date (pro rata to their Facility A Commitments) with a Final Maturity Date after the applicable Facility A Availability Period but no later than the third Anniversary, provided that if, following a request from NGG under Clause 5.7 (Extension of Facility A Availability Period), a Revolving Facility Bank does not agree to extend its Facility A Availability Period, that Borrower may not elect to draw a Term-out Advance from that Revolving Facility Bank unless it simultaneously elects to draw Term-out Advances from every Revolving Facility Bank. No Term-out Advance, once repaid or prepaid, may be reborrowed. Only one Term-out Advance can be borrowed from each Revolving Facility Bank and, upon drawdown, the undrawn Facility A Commitment for that Revolving Facility Bank (if any) will automatically be cancelled.
(c) No Facility A Advance, other than a Term-out Advance, may be outstanding to a Revolving Facility Bank after expiry of the Facility A Availability Period then applicable to that Revolving Facility Bank. No Term-out Advance may be outstanding after the third Anniversary.
7.2 REPAYMENT OF FACILITY B ADVANCE
(a) Each relevant Borrower will repay each Facility B Advance made to it in full on its Maturity Date by payment to the Facility Agent for the relevant Revolving Facility Bank or to the Swingline Agent for the relevant Swingline Bank. As Facility B is available on a revolving basis, amounts repaid may be reborrowed subject to the terms of this Agreement. No Facility B Advance may be outstanding after the Final Maturity Date.
(b) In the event that a Swingline Advance is not repaid in accordance with the provisions of paragraph (a) above each Revolving Facility Bank will within four Business Days of a request to that effect from the Facility Agent, pursuant to a demand from the Swingline Agent, pay to the Swingline Agent for the Swingline Banks an amount equal to its Agreed Percentage of the principal of such Swingline Advance, less the amount of its participation in such Swingline Advance, and accrued interest (including default interest) thereon to the date of actual payment by such Revolving Facility Bank. If this produces a negative figure for a Bank, no amount need be paid by that Bank.
(c) Each Revolving Facility Bank which makes a payment under paragraph (b) above will be subrogated to the rights of the Swingline Banks which share in the payment received.
(d) If and to the extent that any Revolving Facility Bank is not able to rely on its rights under paragraph (c) above, any Borrower whose default has resulted in a payment being made under paragraph (b) above will be liable to each Revolving Facility Bank which makes such a payment for a debt equal to that payment made by that Revolving Facility Bank.
(e) Any payment under paragraph (b) above does not reduce the obligations in aggregate of any Obligor.
(f) Any Revolving Facility Bank which makes a claim against a Borrower under either paragraph (c) or paragraph (d) above shall be entitled also to claim from that Borrower, and that Borrower shall be liable to pay to it, interest on the sum paid by it to the Swingline Agent under paragraph (b) above, from the date on which it paid that sum until the date on which the relevant Borrower reimburses that sum (together with such interest), at the rate set out for Advances (other than Swingline Advances) in Clause 9.4(a) (Default Interest).
8. PREPAYMENT AND CANCELLATION
8.1 AUTOMATIC CANCELLATION OF COMMITMENTS AND SWINGLINE COMMITMENTS
(a) The Facility A Commitment of each Revolving Facility Bank shall be automatically cancelled on the last day of the Facility A Availability Period then applicable to that Bank.
(b) The Facility B Commitment of each Revolving Facility Bank shall be automatically cancelled at close of business on the last day of the Facility B Availability Period then applicable to that Bank.
(c) The Swingline Commitment of each Swingline Bank shall be automatically cancelled at close of business on the last day of the Facility B Availability Period then applicable to that Swingline Bank.
8.2 VOLUNTARY CANCELLATION
(a) NGG may, by giving not less than five Business Days' prior notice to the Facility Agent, cancel the unutilised portion of either Facility A or Facility B in whole or in part (but, if in part, in a minimum amount of US$50,000,000 and an integral multiple of US$10,000,000). Any cancellation in part of Facility A shall be applied against the Facility A Commitment of each Revolving Facility Bank pro rata and any cancellation in part of Facility B shall be applied against the Facility B Commitment of each Revolving Facility Bank pro rata.
(b) NGG may, by giving not less than five Business Days' prior notice to the Swingline Agent, cancel the unutilised portion of the Swingline Total Commitments in whole or in part (but, if in part, in a minimum amount of US$50,000,000 and an integral multiple of US$10,000,000). Any cancellation in part shall be applied against the Swingline Commitment of each Swingline Bank pro rata.
(c) NGG may not cancel any part of the Facility B Total Commitment if it would result in the Total Swingline Commitments exceeding the Facility B Total Commitment at that time.
8.3 PREPAYMENT OF ADVANCES
(a) Subject to Clause 25.2 (Other Indemnities), a Borrower may, by giving not less than five Business Days' notice to the relevant Agent, prepay at any time the Advances comprised in any Utilisation made to it under either Facility in whole or in part (but, if in part, in a minimum Original Dollar Amount of US$50,000,000 and an integral multiple of US$10,000,000 (or such other amount as the relevant Borrower and the Facility Agent, or Swingline Agent, where relevant, may agree before the delivery of the relevant notice of prepayment).
(b) Any voluntary prepayment made under paragraph (a) above will be applied against all the Advances comprised in the relevant Utilisation(s).
8.4 ADDITIONAL RIGHT OF PREPAYMENT AND CANCELLATION
Subject to Clause 25.2 (Other Indemnities), if any Obligor (the "AFFECTED OBLIGOR") is required to pay any amount to a Bank under Clause 12 (Taxes) or Clause 14 (Increased Costs), NGG may, whilst the circumstances giving rise to the requirement continue, serve a notice of prepayment and cancellation on that Bank through the relevant Agent. On the date falling five Business Days after the date of service of the notice:
(a) the affected Obligor shall prepay any Advances made to it by that Bank (together with all other amounts payable by it to that Bank under this Agreement); and
(b) if NGG has so elected in the notice delivered pursuant to this Clause 8.4, that Bank's Commitment or Swingline Commitment, where relevant, shall be cancelled in full on the date of service of the notice.
8.5 MANDATORY PREPAYMENT AND CANCELLATION ON CHANGE OF CONTROL
If any single person, or group of persons acting in concert (as defined in the City Code on Take-Overs and Mergers) acquires control (as defined in Section 416 of the Income and Corporation Taxes Act 1988) of New NG or Existing NGG (and in the latter case prior to, and save for that resulting from, the implementation of the Scheme of Arrangement), then the
Facility Agent may, and shall if so directed by the Majority Banks, within 90 days after the occurrence of such event by notice in writing to New NG or Existing NGG, where relevant:
(a) reduce the Total Commitments and Total Swingline Commitments to the aggregate Original Dollar Amount of all outstanding Utilisations under those Facilities at the date of such notice; and/or
(b) declare that:
(i) the Final Maturity Date for all Facilities shall be brought forward to the date falling 30 days after the date of such notice whereupon each reference in this Agreement to the Final Maturity Date (and each such period) shall be amended and construed accordingly;
(ii) each Borrower's obligations under Clause 7 (Repayment) in respect of Advances outstanding on the date of such notice with Maturity Dates falling after the Final Maturity Date (as amended) shall be due and payable on the Final Maturity Date (as amended); and
(iii) on the Final Maturity Date (as amended) the Total Commitments and Total Swingline Commitments shall be cancelled and all other amounts accrued or otherwise outstanding under this Agreement shall be due and payable.
8.6 MANDATORY CANCELLATION AND PREPAYMENT ON TERMINATION OF NIAGARA MOHAWK MERGER AGREEMENT
If the Niagara Mohawk Merger Agreement is terminated for any reason prior to the Niagara Mohawk Acquisition Completion Date Facility A will be deemed to be cancelled in full and permanently on the date of termination of the Niagara Mohawk Merger Agreement and any Borrower which has drawn any Advances under Facility A shall prepay any and all such Facility A Advances within 30 days of that date.
8.7 MANDATORY PREPAYMENT AND CANCELLATION FOR SUBSIDIARY FINANCIAL INDEBTEDNESS
If, at any time after the date falling six months after the Niagara Mohawk Acquisition Completion Date the level of Financial Indebtedness to which paragraph (a)(iii) of Clause 19.15 (Restriction on Subsidiary Financial Indebtedness) applies incurred by any Subsidiaries to which sub-paragraph (ii) of that Clause applies, exceeds the Financial Indebtedness Limit applicable from time to time to those Subsidiaries then the Facility Agent may, and will if so directed by the Majority Banks, by notice in writing to NGG:
(a) permanently cancel and reduce the Total Commitments by an amount equal to the amount by which the Financial Indebtedness of those Subsidiaries exceeds the then applicable Financial Indebtedness Limit; and
(b) to the extent necessary to ensure that outstandings do not exceed the relevant Commitments as so reduced, require the relevant Borrower to prepay Advances made under Facility A within 90 days of the date of that notice.
8.8 MISCELLANEOUS PROVISIONS
(a) Any notice of cancellation and/or prepayment under this Agreement shall be irrevocable and an Agent shall notify the Banks promptly of receipt of any such notice.
(b) All prepayments under this Agreement shall be made together with accrued interest up to and including the date of prepayment on the amount prepaid and any other amounts due under this Agreement in respect of that prepayment (including, but not limited to, any amounts payable under Clause 25.2 (Other Indemnities) if not made on an Interest Date or Maturity Date (as appropriate) in respect of the relevant Advance(s).
(c) No cancellation or prepayment is permitted except in accordance with the express terms of this Agreement.
(d) Amounts prepaid under this Agreement in respect of Term-out Advances may not subsequently be re-borrowed. Subject thereto and to the terms of this Agreement, any amount prepaid under Clause 8.3 (Prepayment of Advances) but not under any other provision of this Agreement may be reborrowed under any other provision of this Agreement. Any Commitment or Swingline Commitment cancelled may not subsequently be reinstated.
9. INTEREST
9.1 SELECTION OF INTEREST PERIODS FOR TERM-OUT ADVANCES
The life of each Term-out Advance is divided into successive periods (each an "INTEREST PERIOD") for the calculation of interest. The first Interest Period of each such Advance will be the period selected in the Utilisation Request for that Advance. Each subsequent Interest Period will be the period selected by the relevant Borrower in an Interest Period Selection Notice received by the Facility Agent not later than 4.30 p.m. on the third Business Day before the end of the then current Interest Period being, subject to Clause 2.5 (Primary Syndication Period), 1, 2, 3, or 6 months or, in any case, such other period as the relevant Borrower and all the Revolving Facility Banks may agree from time to time or, if no notice from the relevant Borrower (or NGG) is received by the Facility Agent, one month.
9.2 INTEREST RATES
(a) The rate of interest applicable to each Term-out Advance for each of their Interest Periods and to each Facility A Advance (other than a Term-out Advance) and Facility B Advance (other than a Swingline Advance) for each of their Terms is the rate per annum determined by the Facility Agent to be the aggregate of:
(i) the Applicable Margin;
(ii) LIBOR (or EURIBOR in the case of Advances made in Euros); and
(iii) the Mandatory Costs.
(b) The rate of interest applicable to each Swingline Advance for its Term is the rate per annum calculated by the Swingline Agent to be the Swingline Rate for each day during its Term save that, if any day during a Term is not a New York Business Day, the rate of interest on that day shall be the rate applicable on the immediately preceding New York Business Day.
9.3 DUE DATES
Except as otherwise provided in this Agreement, accrued interest on each Advance is payable by the relevant Borrower:
(a) in the case of a Term-out Advance, on each Interest Date applicable to that Advance; and
(b) in the case of an Advance (other than a Term-out Advance) on its Maturity Date,
and also, in the case of an Advance with an Interest Period or a Term longer than 6 months, at 6 monthly intervals after its Utilisation Date (or the start of the relevant Interest Period or Term) for so long as the Interest Period or Term is outstanding.
9.4 DEFAULT INTEREST
(a) If an Obligor fails to pay any amount payable by it under this Agreement (an "OVERDUE AMOUNT"), it shall forthwith on demand by an Agent pay default interest on the overdue amount from the due date until the date of actual payment, as well after as before judgment, at a rate (the "DEFAULT RATE") determined by that Agent to be 1 per cent. per annum above
(i) if the overdue amount relates to a Swingline Advance, the Swingline Rate; or
(ii) in all other cases, the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted an Advance (other than a Swingline Advance)
in the currency of the overdue amount for such successive Interest Periods or Terms of such duration as that Agent may determine (each a "DEFAULT TERM").
(b) The default rate will be determined:
(i) if calculated by reference to the Swingline Rate, on each day; or
(ii) on the first day of, or two Business Days before the first day of, the relevant Default Term, as appropriate.
(c) If an Agent determines that deposits in the currency of the overdue amount are not at the relevant time being made available by the Reference Banks to leading banks in the London interbank market, the default rate will be determined by reference to the cost of funds to that Agent from such sources as it reasonably may select.
(d) Default interest will be compounded monthly (if calculated by reference to the Swingline Rate) or at the end of each Default Term (if calculated by reference to the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted an Advance (other than a Swingline Advance)).
9.5 NOTIFICATION OF RATES OF INTEREST
(a) The Facility Agent shall promptly notify each relevant Party of the determination by it of a rate of interest under this Agreement.
(b) The Swingline Agent shall notify each relevant Party of the determination of a rate of interest by it on a Swingline Advance on the first and last days of its Term. In the notification on the last day of that Term, the Swingline Agent shall include details of the applicable rate of interest for each day of that Term.
9.6 APPLICABLE MARGIN
(a) The Applicable Margin for a Facility A Advance will be 0.375 per cent. per annum, unless adjusted in accordance with this Clause 9.6.
(b) The Applicable Margin for a Facility B Advance (other than a Swingline Advance) will be 0.425 per cent. per annum, unless adjusted in accordance with this Clause 9.6.
(c) If at close of business on the first day of an Interest Period or Term the uncancelled Total Commitments fall within the thresholds in Column 1 of the table below, then the Applicable Margins for each relevant Facility will be those listed in Columns 2 and 3.
COLUMN 1 COLUMN 2 COLUMN 3 UNCANCELLED TOTAL FACILITY A FACILITY B (OTHER COMMITMENTS THAN THE SWINGLINE ADVANCE FACILITY) APPLICABLE MARGIN APPLICABLE MARGIN Less than or equal to 0.375 per cent. 0.425 per cent. US$2,300,000,000 (but greater than US$1,500,000,000) Less than or equal to 0.375 per cent. 0.40 per cent. US$1,500,000,000 (but more than US$750,000,000) Less than or equal to US$750,000,000 0.35 per cent. 0.375 per cent. |
(d) In addition to the provisions of (c) above, if at close of business on the first day of an Interest Period or Term the aggregate Original Dollar Amount of all Advances under the Facilities exceeds 50 per cent. of the uncancelled Total Commitments, the Applicable Margin for that Interest Period or Term shall be increased by 0.05 per cent. per annum.
10. OPTIONAL CURRENCIES 10.1 SELECTION (a) A Borrower shall select the currency of an Advance (other than a Swingline Advance): (i) (in the case of a Revolving Facility Advance) in a Utilisation Request; and (ii) (in relation to a Term-out Advance) in an Interest Period Selection Notice. (b) No Borrower may request an Advance denominated in an Optional Currency (other than Sterling or Euros) unless the Facility Agent has confirmed to the Borrower that the Optional Currency is readily available and freely transferable in the London foreign exchange market. (c) If a Borrower fails to issue an Interest Period Selection Notice in relation to a Term-out Advance, that Advance will remain denominated for its next Interest Period in the same currency in which it is then outstanding. (d) If a Borrower issues an Interest Period Selection Notice in relation to a Term-out Advance requesting a change of currency and the first day of the requested Interest Period is not a Business Day for the new currency, the Facility Agent shall promptly notify the relevant Borrower and the Revolving Facility Banks and that Advance will remain in the existing currency (with Interest Periods running from one Business Day until the next Business Day) until the next day which is a Business Day for both currencies, on which day the requested Interest Period will begin. 10.2 NON-AVAILABILITY OF CURRENCY If: (a) before 9.00 a.m. on any Rate Fixing Day for any Advance to be denominated in an Optional Currency, the Facility Agent receives notice from a Revolving Facility Bank that it is impracticable for that Revolving Facility Bank to fund its required Advance in that Optional Currency for its requested Term or Interest Period in the ordinary course of business in the relevant interbank market; or (b) the use of the proposed Optional Currency would or might contravene any law or regulation, then: (i) the Facility Agent shall promptly (and in any event before 10.00 a.m. on that Rate Fixing Day) notify the relevant Borrower and the Revolving Facility Banks; and (ii) unless NGG and the Facility Agent otherwise agree, the Advance requested from the Revolving Facility Bank referred to in (a) above will be denominated instead in Dollars, in an amount equal to the Original Dollar Amount of the requested Advance in the Optional Currency. |
10.3 CHANGE OF CURRENCY (a) If a Term-out Advance is to be denominated in different currencies during two successive Interest Periods: (i) if the currency for the second Interest Period is an Optional Currency the amount of the Advance in that Optional Currency will be calculated by the Facility Agent as the Original Dollar Amount of that Term-out Advance; (ii) if the currency for the second Interest Period is Dollars, the amount of the Advance will be equal to the Original Dollar Amount; (iii) (unless the Facility Agent and the relevant Borrower agree otherwise in accordance with paragraph (b) below) the Borrower that has borrowed the Advance shall repay it on the last day of the first Interest Period in the currency in which it was denominated for that Interest Period; and (iv) (subject to Clause 4.2 (Further conditions precedent) the Revolving Facility Banks shall re-advance the Advance in the new currency in accordance with Clause 10.5(d) and (e), below. (b) If the Facility Agent and the Borrower that has borrowed the Term-out Advance agree, the Facility Agent shall: (i) apply the amount paid to it by the Revolving Facility Banks pursuant to paragraph (a)(iv) above (or so much of that amount as is necessary) in or towards purchase of an amount in the currency in which the Term-out Advance is outstanding for the first Interest Period; and (ii) use the amount it purchases in or towards the satisfaction of the relevant Borrower's obligations under paragraph (a)(iii) above. (c) If the amount purchased by the Facility Agent pursuant to paragraph (b)(i) above is less than the amount required to be repaid by the relevant Borrower, the Facility Agent shall promptly notify that Borrower and that Borrower shall, on the last day of the first Interest Period, pay an amount to the Facility Agent (in the currency of the outstanding Term-out Advance for the first Interest Period) equal to the difference. (d) If any part of the amount paid to the Facility Agent by the Revolving Facility Banks pursuant to paragraph (a)(iv) above is not needed to purchase the amount required to be repaid by the relevant Borrower, the Facility Agent shall promptly notify that Borrower and pay that Borrower, on the last day of the first Interest Period, that part of that amount (in the new currency). 10.4. SAME OPTIONAL CURRENCY DURING SUCCESSIVE INTEREST PERIODS (a) If a Term-out Advance is to be denominated in the same Optional Currency during two successive Interest Periods, the Facility Agent shall calculate the amount of the Term-out Advance in the Optional Currency for the second of those Interest Periods (by calculating the amount of Optional Currency equal to the Original Dollar Amount of that |
Term-out Advance) and (subject to paragraph (b) below):
(i) if the amount calculated is less than the existing amount of that Term-out Advance in the Optional Currency during the first Interest Period, promptly notify the Borrower that has borrowed that Term-out Advance and that Borrower shall pay, on the last day of the first Interest Period, an amount equal to the difference; or (ii) if the amount calculated is more than the existing amount of that Term-out Advance in the Optional Currency during the first Interest Period, promptly notify each Revolving Facility Bank which participated in the Advance and, if no Event of Default is continuing, each such Revolving Facility Bank shall, on the last day of the first Interest Period, pay its participation in amount equal to the difference. (b) If the calculation made by the Facility Agent pursuant to paragraph (a) above shows that the amount of the Term-out Advance in the Optional Currency has increased or decreased by less than the lower of US$40,000,000 and 5 per cent. compared to its Original Dollar Amount, no notification shall be made by the Facility Agent and no payment shall be required under paragraph (a) above. 10.5 NOTIFICATION OF RATES AND AMOUNTS (a) If an Advance is to be drawn down in an Optional Currency, the amount thereof shall be determined by converting the Original Dollar Amount thereof into that Optional Currency on the basis of the Facility Agent's Spot Rate of Exchange on the date of receipt by the Facility Agent of the Utilisation Request for that Advance. (b) If any Advance (save for any Term-out Advance) is to be repaid or prepaid by reference to an Original Dollar Amount, the amount of Optional Currency to be repaid or prepaid shall be determined by reference to the Facility Agent's Spot Rate of Exchange last used for determining the Optional Currency amount of that Advance under paragraph (a) above. (c) If any Term-out Advance is to be repaid or prepaid by reference to an Original Dollar Amount, the amount of Optional Currency to be repaid or prepaid shall be determined by reference to the Facility Agent's Spot Rate of Exchange used for determining the Optional Currency amount of that Term-out Advance when first drawn down or, if applicable, by reference to the Facility Agent's Spot Rate of Exchange by reference to which the most recent adjusted payment has been made under Clause 10.4(a) (Same Optional Currency during successive Interest Periods) in respect of that Term-out Advance. (d) The Facility Agent shall notify each relevant Party of any applicable Facility Agent's Spot Rate of Exchange or Original Dollar Amount, as applicable, promptly after it has ascertained the same. (e) All calculations made by the Facility Agent pursuant to this Clause 10 will take into account any repayment, prepayment, consolidation or division of Term-out Advances to be made on the last day of the first Interest Period. (f) Each Bank's participation in a Term-out Advance will, subject to paragraph (a) above, be determined in accordance with paragraph (b) of Clause 7.1 (Repayment of Facility A Advances). |
11. PAYMENTS 11.1 PLACE Except where expressly provided to the contrary, all payments by an Obligor or a Bank under this Agreement shall be made to the relevant Agent to its account at such office or bank in the principal financial centre of the country of the relevant currency (or, in the case of Euros, the principal financial centre of a Participating Member State or London) as it may notify to that Obligor or Bank for this purpose. 11.2 FUNDS Payments under this Agreement to an Agent shall be made for value on the due date at such times and in such funds as that Agent may specify to the Party concerned as being customary at the time for the settlement of transactions in the relevant currency in the place for payment. 11.3 DISTRIBUTION (a) Each payment received by an Agent under this Agreement for another Party shall, subject to paragraphs (b) and (c) below, be made available by that Agent to that Party by payment (on the date and in the currency and funds of receipt) to its account with such bank in the principal financial centre of the country of the relevant currency (or, in the case of Euros, the principal financial centre of a Participating Member State or London) as it may notify to that Agent for this purpose by not less than 5 Business Days' prior notice or, in the case of a Borrower, in the relevant Utilisation Request. (b) An Agent may apply any amount received by it for an Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from an Obligor under this Agreement or in or towards the purchase of any amount of any currency to be so applied. (c) Where a sum is to be paid under this Agreement to an Agent for the account of another Party, that Agent is not obliged to pay that sum to that Party until it has established that it has actually received that sum. Unless an Agent receives not less than one Business Day's written notice that a sum to be paid under this Agreement will not be paid, it may assume that the sum has been paid to it in accordance with this Agreement and, in reliance on that assumption, make available to that Party a corresponding amount. If the sum has not been made available, but an Agent has paid a corresponding amount to another Party, that Party shall forthwith on demand refund the corresponding amount to that Agent together with interest on that amount from the date of payment to the date of receipt, calculated at a rate determined by that Agent to reflect its cost of funds. (d) If on any Utilisation Date: (i) a Revolving Facility Bank is required to participate in an Advance pursuant to Clause 5 (Availability of Revolving Facility Advances and Term-out Advances); and (ii) a payment is due to that Revolving Facility Bank pursuant to Clause 8 (Repayment), then the Facility Agent shall (without prejudice to the obligations of the relevant Borrower under Clause 7 (Repayment)) apply the amount payable by such Revolving Facility Bank to the Facility Agent for the account of the relevant Borrower on that Utilisation Date in or towards satisfaction of the amount payable by the relevant Borrower to such Bank on such |
Utilisation Date pursuant to Clause 7 (Repayment). The Facility Agent shall advise NGG, the relevant Borrower and each such Revolving Facility Bank of the net amount, if any, due from one party to the other after the application of funds as aforesaid and such net amount due shall be paid by the relevant Borrower or the relevant Revolving Facility Bank(s), as the case may be, on such date.
11.4 CURRENCY (a) (i) A repayment or prepayment of an Advance is payable in the currency in which the Advance is denominated. (ii) Interest is payable in the currency in which the relevant amount in respect of which it is payable is denominated. (iii) Amounts payable in respect of costs, expenses, taxes and the like are payable in the currency in which they are incurred. (iv) Any other amount payable under this Agreement is, except as otherwise provided in this Agreement, payable in Sterling. (v) Any amount payable under this Agreement in the currency of a Participating Member State will be paid in Euros. (b) If a change in any currency of a country occurs in a manner different to that expressly contemplated in this Agreement, this Agreement will be amended to the extent the Agents and NGG agree (such agreement not to be unreasonably withheld) to be necessary to reflect the change in currency and to put the Banks and the Obligors in the same position, as far as possible, that they would have been in if no change in currency had occurred. 11.5 SET-OFF AND COUNTERCLAIM All payments made by an Obligor under this Agreement shall be made without set-off or counterclaim. 11.6 NON-BUSINESS DAYS (a) If a payment under this Agreement is due on a day which is not a Business Day, the due date for that payment shall instead be the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not). (b) During any extension of the due date for payment of any principal under this Agreement interest is payable on the principal at the rate payable on the original due date. 11.7 PARTIAL PAYMENTS (a) If an Agent receives a payment insufficient to discharge all the amounts then due and payable by the Obligors under the Finance Documents that Agent shall apply that payment towards the obligations of the Obligors under the Finance Documents in the following order: (i) FIRST, in or towards payment pro rata of any unpaid costs, fees and expenses of the relevant Agent or the Agents under this Agreement; |
(ii) SECONDLY, in or towards payment pro rata of any accrued fees due but unpaid under Clauses 22.1 (Front-end fees), 22.2 (Commitment fee), and 22.3 (Term-out Fee and Facility A Availability Extension Fee);
(iii) THIRDLY, in or towards payment pro rata of any accrued
interest due but unpaid under this Agreement; (iv) FOURTHLY, in or towards payment pro rata of any principal due but unpaid under this Agreement; and (v) FIFTHLY, in or towards payment pro rata of any other sum due but unpaid under this Agreement. (b) The Agents shall, if so directed by all the Banks, vary the order set out in paragraphs (a)(ii) to (v) inclusive above. (c) Paragraphs (a) and (b) above shall override any appropriation made by an Obligor. 12. TAXES 12.1 GROSS-UP (a) For the purposes of this Clause 12, "TAX" and "TAXES" in relation to any payment to be made by an Obligor under the Finance Documents means any present or future taxes of any nature now or subsequently imposed |
by the laws of:
(i) the United Kingdom;
(ii) any other jurisdiction from which, or through which, such payment is made or to the taxation laws of which the relevant Obligor is at the time of such payment subject;
(iii) any political sub-division of the United Kingdom or any such
other jurisdiction; or (iv) any federation or association of states of which the United Kingdom or any such other jurisdiction is, at the time of such payment, a member. (b) All payments by an Obligor under the Finance Documents to a Finance Party shall be made without any deduction, and free and clear of and without deduction or withholding for or on account of any taxes, except to the extent that the Obligor is required by law to deduct or withhold taxes from any amounts payable or paid or to make payment subject to any taxes. If any tax or amounts in respect of tax must be deducted, or any other deductions must be made, from any amounts payable or paid by an Obligor, or paid or payable by an Agent to a Bank, under the Finance Documents, the Obligor shall pay such additional amounts as may be necessary to ensure that the relevant Bank receives a net amount equal to the full amount which it would have received had payment not been made subject to tax or other deduction. 12.2 TAX RECEIPTS All taxes required by law to be deducted or withheld by an Obligor from any amounts paid or payable under the Finance Documents shall be paid by the relevant Obligor when due (unless the obligation to pay any such tax is being disputed in good faith) and the Obligor shall, |
within 15 days of the payment being made, deliver to the relevant Agent for the relevant Bank evidence satisfactory to that Bank (including all relevant tax receipts) that the payment has been duly remitted to the appropriate authority. 12.3 QUALIFYING BANK (a) In respect of amounts payable by an Obligor, if otherwise than as a result of the introduction of, change in, or change in the interpretation, administration or application of, any law or regulation or any practice or concession of the United Kingdom Inland Revenue occurring after the date of this Agreement, a Bank is not or ceases to be a Qualifying Bank, no Obligor is liable to pay to that Bank under Clause 12.1 (Gross-up) any amount in respect of taxes levied or imposed by the United Kingdom or any taxing authority of or in the United Kingdom in excess of the amount it would have been obliged to pay if that Bank was or had not ceased to be a Qualifying Bank. (b) If for whatever reason a Bank ceases to be a Qualifying Bank it shall immediately notify the relevant Agent and NGG in writing. (c) Each Bank undertakes, as soon as reasonably practicable after the Signing Date or, as applicable, the date upon which it becomes a Party to this Agreement, where requested in writing by an Obligor to do so, to complete and file, or to provide such information as NGG reasonably requests in order to complete and file, any declaration, claim, exemption or other form, which it is able to complete and file or, in the case of information, to provide, as may be required to ensure that an Obligor is not required to pay any additional amount pursuant to paragraph (b) of Clause 12.1 (Gross-up). 12.4 TAX CREDITS (a) If an Obligor pays any additional amount (a "Tax Payment") under Clause 12.1 (Gross-up) and a Bank effectively obtains a refund of tax, or relief or credit against tax, by reason of that Tax Payment (a "Tax Credit") and is able to identify the Tax Credit as being attributable to the Tax Payment, then it shall reimburse to the relevant Obligor such amount as the Bank reasonably determines (in its absolute discretion) to be the proportion of the Tax Credit as will leave it, after that reimbursement, in no better or worse position than it would have been in if the Tax Payment had not been required. Each Bank shall have an absolute discretion as to whether to claim any Tax Credit and, if it does so claim, the extent, order and manner in which it does so. No Bank shall be obliged to disclose any information regarding its tax affairs or computations to any Obligor in respect of any provision of this Agreement or otherwise. (b) If any Bank makes any payment to an Obligor pursuant to paragraph (a) above and that Bank subsequently determines that the credit, relief, remission or repayment in respect of which such payment was made was not available to it or has been withdrawn from it or that it was unable to use such credit, relief, remission or repayment in full, the Obligor shall reimburse that Bank to the extent (but not exceeding the relevant payment by that Bank under paragraph (a) above) that it determines to have been required to place it in the same after-tax position as it would have been in if such credit, relief, remission or repayment had been obtained and fully used and retained by that Bank. |
12.5 U.S. TAXES (a) No U.S. Borrower shall be required to pay any additional amount pursuant to Clause 12.1 (Gross-up) in respect of United States taxes (including, without limitation, federal, state, local or other income taxes), branch profits or franchise taxes with respect to a sum payable by it pursuant to this Agreement to a Finance Party if: (i) on the date such Bank becomes a Party to this Agreement or has designated a new Facility Office: (1) in the case of a Bank which is not a United States person (as such term is defined in Section 7701(a)(30) of the U.S. Code), such Bank is not entitled to submit a United States Internal Revenue Service Form W-8BEN (relating to such Bank and entitling it to a complete exemption from withholding on all interest payable to it pursuant to this Agreement) or a Form W-8ECI (relating to interest payable to such Bank pursuant to this Agreement) (or any successor forms) with respect to interest payable pursuant to this Agreement; or (2) in the case of a Bank which is a United States person (as such term is defined in Section 7701(a)(30) of the U.S. Code), Clause 12.1 (Gross-up) would apply (other than as a result of the introduction of, suspension, withdrawal or cancellation of, or change in the official interpretation, administration or official application of, any law, regulation having the force of law, tax treaty or any published practice or published concession of the United States Internal Revenue Service or any other relevant taxing or fiscal authority in any jurisdiction with which the relevant Bank has a connection, occurring after the date the Bank becomes a Party to this Agreement or has designated a new Facility Office); or (ii) such Bank has failed to provide the Borrower with the appropriate form, certificate or other information with respect to such sum payable that it was required to provide pursuant to paragraph (b) or (c) below and is entitled to file under applicable law; or (iii) such Bank is subject to such tax by reason of any connection between the jurisdiction imposing such tax and the Bank or its Facility Office other than a connection arising solely from this Agreement or any transaction contemplated hereby. (b) If a Bank is not a United States person (as such term is defined in Section 7701(a)(30) of the U.S. Code) it shall (if and to the extent that it is entitled to do so under applicable law) submit, as soon as reasonably practicable after a U.S. Borrower becomes a Party to this Agreement or designated a new Facility Office, in duplicate to each U.S. Borrower duly completed and signed copies of either United States Internal Revenue Service Form W-8BEN (or, such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) (relating to such Bank and entitling it to a complete exemption from withholding on all amounts (to which such withholding would otherwise apply) to be received by such Bank, including fees, pursuant to this Agreement in connection with any borrowing by such U.S. Borrower) as a result of a tax treaty concluded with the United States or United States Internal Revenue Service Form W-8ECI (relating to all amounts (to which such withholding would otherwise apply) to be received by such Bank, including fees, pursuant to this Agreement in connection with any borrowing by such U.S. Borrower). |
Thereafter and from time to time upon the reasonable request of a U.S. Borrower, such Bank shall (if and to the extent that it is entitled to do so under applicable law) submit to such U.S. Borrower such additional duly completed and signed copies of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxation authorities) or any additional information, in each case as may be required under then current United States law or regulations to claim the inapplicability of or exemption from United States withholding taxes on payments in respect of all amounts (to which such withholding would otherwise apply) to be received by such Bank, including fees, pursuant to this Agreement in connection with any borrowing by such U.S. Borrower.
(c) If a Bank is a United States person (as such term is defined in Section 7701(a)(30) of the U.S. Code) it shall, as soon as reasonably practicable after a U.S. Borrower becomes a Party to this Agreement or designates a new Facility Office, and thereafter upon the reasonable request of a U.S. Borrower, submit in duplicate to such U.S. Borrower a certificate to the effect that it is such a United States person and shall (if and to the extent that it is entitled to do so under applicable law) upon the reasonable request of a U.S. Borrower submit any additional information that may be necessary to avoid United States withholding taxes on all payments, including fees, (to which such withholding would otherwise apply) to be received pursuant to this Agreement in connection with any borrowing by such U.S. Borrower.
13. MARKET DISRUPTION
(a) If LIBOR or EURIBOR is to be determined by reference to Reference Banks but a Reference Bank does not supply an offered rate by 12 noon on a Rate Fixing Day, the applicable LIBOR or EURIBOR, where relevant, shall, subject to paragraph (b) below, be determined on the basis of the quotations of the remaining Reference Banks.
(b) If, in relation to any proposed Utilisation (save for Utilisations comprising Swingline Advances):
(i) LIBOR or EURIBOR are to be determined by reference to Reference Banks but no, or only one, Reference Bank supplies a rate for the purposes of determining the applicable LIBOR or EURIBOR or the Facility Agent otherwise determines that adequate and fair means do not exist for ascertaining the applicable LIBOR or EURIBOR; or
(ii) the Facility Agent receives notification from Revolving Facility Banks participating in more than 50 per cent. in value of the proposed Revolving Facility Advances that, in their opinion:
(A) matching deposits may not be available to them in the London interbank market in the ordinary course of business to fund their Revolving Facility Advances for the relevant Interest Period or Term; or
(B) the cost to them of matching deposits in the London interbank market would be in excess of LIBOR or EURIBOR, where relevant, for the relevant Interest Period or Term,
then the Facility Agent shall promptly notify NGG, any other relevant Borrower and the relevant Revolving Facility Banks of the fact and that this Clause 13.1 is in operation.
(c) After any notification under paragraph (b) above: (i) the relevant Borrower and the Revolving Facility Banks may (through the Facility Agent) agree that the relevant Advances comprised in the Utilisation shall not be made; or (ii) in the absence of such agreement: (A) the relevant Advances shall still be made; (B) the Interest Period or Term of each relevant Advance shall be one week during the Primary Syndication Period and thereafter one month; (C) during the Interest Period or Term of each relevant Advance the rate of interest applicable to that Advance shall be the Applicable Margin plus the applicable Mandatory Costs plus the rate per annum notified by the relevant Revolving Facility Bank to the Facility Agent before the last day of that Interest Period or Term to be that which expresses as a percentage rate per annum the cost to the Revolving Facility Bank of funding its relevant Advance from whatever sources it may reasonably select; (D) during the relevant Interest Period or Term of each relevant Advance, NGG, any other relevant Borrower and the Facility Agent shall enter into negotiations for a period of not more than 30 days with a view to agreeing a substitute basis for determining the rate of interest and/or funding applicable to any such future Advances to be denominated in the currency of the affected Advances for the duration agreed at the time of determining the substitute basis; and (E) any substitute basis agreed under paragraph (D) above shall be, with the prior consent of all the Revolving Facility Banks, binding on all the Parties. 14. INCREASED COSTS 14.1 INCREASED COSTS (a) Subject to Clause 14.2 (Exceptions), NGG shall forthwith on demand by a Finance Party pay that Finance Party the amount of any increased cost incurred by it as a result of: (i) the introduction of, or any change in, or any change in the interpretation or application of, any law or regulation after the date of this Agreement; (ii) compliance with any regulation made after the date of this Agreement, (including any law or regulation relating to taxation or reserve asset, special deposit, cash ratio, liquidity or capital adequacy requirements or any other form of banking or monetary control). |
(b) In this Agreement, "INCREASED COST" means:
(i) an additional cost incurred by a Finance Party or its Regulated Holding Company as a result of that Finance Party having entered into, or performing, maintaining or funding its obligations under, any Finance Document; or
(ii) that portion of an additional cost incurred by a Finance Party or its Regulated Holding Company in making, funding or maintaining all or any advances comprised in a class of advances formed by or including the Advances made or to be made by it under this Agreement as is attributable to it making, funding or maintaining its Advances; or
(iii) a reduction in any amount payable to a Finance Party or its Regulated Holding Company or the effective return to a Finance Party under this Agreement or on its capital; or
(iv) the amount of any payment made by a Finance Party or its Regulated Holding Company, or the amount of interest or other return foregone by a Finance Party or its Regulated Holding Company, calculated by reference to any amount received or receivable by a Finance Party or any of its Regulated Holding Company from any other Party under this Agreement.
14.2 EXCEPTIONS
Clause 14.1 (Increased costs) does not apply to any increased cost:
(a) compensated for by the payment of the Mandatory Costs; or
(b) compensated for by the operation of Clause 12 (Taxes); or
(c) attributable to any change in the rate of tax on the overall net income of a Finance Party or its Regulated Holding Company (or the overall net income of a division or branch of the Finance Party on its Regulated Holding Company) imposed in the jurisdiction in which its principal office or Facility Office is situated; or
(d) incurred as a consequence of the implementation in whole or in part of the International Convergence of Capital Measurement and Capital Standards dated July 1988 and published by The Basle Committee on Banking Regulations and Supervisory Practices in the United Kingdom by notices issued by the Bank of England on or before the date of this Agreement; or
(e) attributable to any implementation by any authority having jurisdiction over any of the Revolving Facility Banks of the proposals contained in the matters set out in the EC Directive 93/6/EEC of 15th March, 1993, on the capital adequacy of investment firms and credit institutions.
15. MITIGATION
If any circumstances arise in relation to any Bank which would, or would upon the giving of notice, result in:
(a) a demand for payment pursuant to Clause 14.1 (Increased costs) or the provisions of Clause 13 (Market Disruption) applying;
(b) a cancellation of its Commitment or Swingline Commitment, where relevant, pursuant to paragraph (b)(ii) of Clause 16 (Illegality); or
(c) an increase in the amount of any payment to be made to it or for its account pursuant to Clause 12.1 (Gross-up),
then, without in any way limiting, reducing or otherwise qualifying any relevant Obligor's obligations under any of the provisions referred to in paragraphs (a) to (c) above, the Bank will promptly upon becoming aware of the same notify the relevant Agent thereof and, in consultation with that Agent, NGG and any other relevant Obligor, use reasonable endeavours to transfer its participation in the Facilities and its rights and obligations under this Agreement to another financial institution or Facility Office acceptable to that Agent, NGG and any other relevant Obligor and willing to participate as a Bank under this Agreement and otherwise take such steps as it considers reasonably open to it for a period not exceeding 30 days to mitigate the effects of those circumstances, unless, in the reasonable opinion of that Bank, such steps might have a material adverse effect upon the tax position, business, operations or financial condition, or be contrary to the banking policy, of that Bank. Nothing in this provision shall require a Bank to disclose any information as to its banking policy or any other matters which it regards as confidential or commercially sensitive.
16. ILLEGALITY
If it is or becomes unlawful in any jurisdiction for a Bank to give effect to any of its obligations as contemplated by this Agreement or to fund or maintain any Advance, then: (a) the Bank may notify NGG (through the relevant Agent) accordingly; and (b) (i) each Borrower shall forthwith prepay or repay any Advances made to it by that Bank together with all other amounts payable by it to that Bank under this Agreement on or before the last day permitted by the relevant law being, if possible, the Maturity Date for any Facility A Advance (other than a Term-out Advance) or Facility B Advance or the next Interest Date for a Term-out Advance; (ii) that Bank's Commitment or Swingline Commitment (or both of them, where the Bank is both a Revolving Facility Bank and a Swingline Bank) shall be cancelled in full with effect from the date of the notification made under paragraph (a) above. 17. GUARANTEE 17.1 GUARANTEE The Guarantor irrevocably and unconditionally: (i) as principal obligor, guarantees to each Finance Party prompt performance by each Borrower (other than itself) (each such Borrower, a "GUARANTEED PARTY") of all its respective obligations under the Finance Documents; |
(ii) undertakes with each Finance Party that whenever a guaranteed party does not pay an amount when due under or in connection with any Finance Document, it shall forthwith on demand by the relevant Agent pay that amount as if it instead of the relevant guaranteed party were expressed to be the principal obligor; and
(iii) indemnifies each Finance Party on demand against any loss or
liability suffered by it if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. 17.2 CONTINUING GUARANTEE This guarantee is a continuing guarantee and will extend to the ultimate balance of all sums payable by each guaranteed party under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part. 17.3 REINSTATEMENT (a) Where any discharge (whether in respect of the obligations of any guaranteed party or any security for those obligations or otherwise) is made in whole or in part or any arrangement is made on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise without limitation, the liability of the Guarantor under this Clause 17 shall continue as if the discharge or arrangement had not occurred. (b) An Agent may, on behalf of each other Finance Party, concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration. 17.4 WAIVER OF DEFENCES The obligations of the Guarantor under this Clause 17 will not be affected by any act, omission, matter or thing which, but for this provision, would reduce, release or prejudice any of its obligations under this Clause 17 or prejudice or diminish those obligations in whole or in part, including (whether or not known to it or any Finance Party): (a) any time or waiver granted to, or composition with, any Obligor or other person; (b) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security; (c) any incapacity or lack of powers, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person; (d) any variation (however fundamental) or replacement of a Finance Document or any other document or security so that references to that Finance Document in this Clause 17 shall include each variation or replacement; (e) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security, to the intent that the |
Guarantor's obligations under this Clause 17 shall remain in full force and its guarantee be construed accordingly, as if there were no unenforceability, illegality or invalidity; or (f) any postponement, discharge, reduction, non-provability or other similar circumstance affecting any obligation of any Obligor under a Finance Document resulting from any insolvency, liquidation or dissolution proceedings or from any law, regulation or order so that each such obligation shall for the purposes of the Guarantor's obligations under this Clause 17 shall be construed as if there were no such circumstance. 17.5 IMMEDIATE RECOURSE The Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from it under this Clause 17. 17.6 APPROPRIATIONS Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may: (a) refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and the Guarantor shall not be entitled to the benefit of the same; and (b) hold in a suspense account (bearing interest at a normal commercial rate as determined by the relevant Agent) any moneys received from the Guarantor or on account of the Guarantor's liability under this Clause 17. 17.7 NON-COMPETITION Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, the Guarantor shall not, after a claim has been made under this Clause 17 or by virtue of any payment or performance by it under this Clause 17: (a) be subrogated to any rights, security or moneys held, received or receivable by any Finance Party (or any trustee or agent on its behalf) or be entitled to any right of contribution or indemnity in respect of any payment made or moneys received on account of the Guarantor's liability under this Clause 17; (b) claim, rank, prove or vote as a creditor of any guaranteed party or its estate in competition with any Finance Party (or any trustee or agent on its behalf); or (c) receive, claim or have the benefit of any payment, distribution or security from or on account of any guaranteed party, or exercise any right of set-off as against any guaranteed party. |
Unless the relevant Agent otherwise directs, the Guarantor shall hold in trust for and forthwith pay or transfer to that Agent for the Finance Parties any payment or distribution or benefit of security received by it contrary to this Clause 17.7. 17.8 ADDITIONAL SECURITY This guarantee is in addition to and is not in any way prejudiced by any other security now or hereafter held by any Finance Party. 17.9 ACKNOWLEDGMENT (a) Both New NG and Existing NGG acknowledge that on and from the Registration Date New NG shall be subject to the obligations under this Clause 17 and that on and from the Registration Date Existing NGG shall be released from its obligations under this Clause 17. (b) All of the parties hereto acknowledge that the transfer and release of obligations under this Clause 17 referred to in (a) above shall take place automatically and shall require no action either by any of the parties hereto or by any third parties. 18. REPRESENTATIONS AND WARRANTIES 18.1 REPRESENTATIONS AND WARRANTIES Subject to Clause 18.17 (Times for making representations and warranties), each Obligor makes the representations and warranties set out in this Clause 18 to each Finance Party. 18.2 STATUS (a) It is a limited liability company, duly incorporated and validly existing under the laws of the jurisdiction of its incorporation; and (b) each member of the Group has the power to own its assets and carry on its business as it is being conducted. 18.3 POWER AND AUTHORITY It has the power to enter into and perform, and has taken all necessary action to authorise the entry into, performance and delivery of, the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents. 18.4 LEGAL VALIDITY Each Finance Document to which it is or will be a party constitutes, or when executed in accordance with its terms will constitute, its legal, valid and binding obligation in accordance with its terms. 18.5 NON-CONFLICT The entry into and performance by it of, and the transactions |
contemplated by, the Finance Documents do not and will not:
(a) conflict with any applicable law or regulation or judicial or official orders; (b) conflict with its constitutional documents; (c) conflict with any document which is binding upon it or any of its assets; or (d) result in the creation or imposition of any Security Interest on the assets of any member of the Group. 18.6 NO DEFAULT (a) No Event of Default is outstanding or would result from any Utilisation. (b) No other event is outstanding which constitutes (or, with the giving of notice, expiry of any applicable grace period, lapse of time, determination of materiality or the fulfilment of any other applicable condition or any combination of the foregoing, is reasonably likely to constitute) a default under any document which is binding on any member of the Group or any asset of any member of the Group to an extent or in a manner which is reasonably likely to have a material adverse effect on the financial condition of the Obligors (taken as a whole) or on the ability of the Obligors (taken as a whole) to perform their obligations under the Finance Documents (including, without limitation, the obligations under Clause 19.18 (Group Financial covenants) and the obligations of the Guarantor under Clause 17 (Guarantee)). 18.7 LICENCES Each Obligor, NG Company and each Principal Subsidiary is duly licensed by: (a) the Secretary of State under Section 6(1)(b) of the Electricity Act; or (b) the relevant authorities under any other applicable Energy Laws, to the extent that such licences are required for that Group member's business at the time. 18.8 COMPLIANCE WITH LICENCES AND REGULATIONS Each Obligor, NG Company and each Principal Subsidiary has complied with and is not in breach of any of its obligations (if any) under its Licences, the Electricity Act (save with the consent of the Authority), the Grid Code, the BSC, MCUSA, CUSC, the Utilities Act, any regulation or other requirement of the Authority or any other Energy Law in any such case applicable to it to an extent or in a manner which is reasonably likely materially and adversely to affect the ability of the Obligors (taken as a whole) to perform their obligations under the Finance Documents (including, without limitation, the obligations under Clause 19.18 (Group Financial covenants) and the obligations of the Guarantor under Clause 17 (Guarantee)). 18.9 ENVIRONMENTAL MATTERS Each Obligor, NG Company and each Principal Subsidiary has or will at the relevant times have obtained all Environmental Approvals required in connection with its business and has at all times complied in all material respects with the terms of those Environmental Approvals and all other applicable Environmental Laws in each case where failure to do so is |
reasonably likely materially and adversely to affect the ability of the Obligors (taken as a whole) to perform their obligations under the Finance Documents (including, without limitation, the obligations) under Clause 19.18 (Group Financial covenants) and the obligations of the Guarantor under Clause 17 (Guarantee)). 18.10 AUTHORISATIONS All authorisations required in connection with the entry into, performance and validity of, and the transactions contemplated by the Finance Documents have been obtained or effected (as appropriate) and are in full force and effect. 18.11 ACCOUNTS (a) In the case of NGG, the audited consolidated accounts of the Group most recently delivered to the Agents (which, at the date of this Agreement, are the Original Group Accounts): (i) save as specified therein, have been prepared in accordance with accounting principles and practices generally accepted in the United Kingdom consistently applied; and (ii) give a true and fair view of the consolidated financial condition of the Group as at the date to which they were drawn up, and there has been no material adverse change in the consolidated financial condition of the Group since the date to which those accounts were drawn up. (b) In the case of each Obligor (other than NGG), its audited accounts most recently delivered to the Agents: (i) save as specified therein, have been prepared in accordance with accounting principles and practices generally accepted in the jurisdiction in which it is incorporated consistently applied; and (ii) give a true and fair view of its financial condition as at the date to which they were drawn up, and there has been no material adverse change in the financial condition of that Obligor since the date to which those accounts were drawn up. 18.12 LITIGATION No litigation, arbitration or administrative proceedings are current or, to its knowledge, pending or threatened, which are reasonably likely, if adversely determined, to have a material adverse effect on the financial condition of the Group or the ability of the Obligors (taken as a whole) to perform their obligations under the Finance Documents (including, without limitation, the obligations under Clause 19.18 (Group Financial covenants) and the obligations of the Guarantor under Clause 17 (Guarantee)). 18.13 INFORMATION PACKAGE (a) The factual information contained in the Information Package is to the best of NGG's knowledge and belief true and accurate in all material respects as at its date, opinions |
expressed about the Group in the Information Package were honestly held and all projections in the Information Package were based on assumptions considered to be reasonable in each case as at the date of which the Information Package speaks and all such information, opinions and assumptions were provided in good faith. (b) The Information Package did not omit at its date any information which made misleading in any material respect any factual information in the Information Package. (c) Nothing has occurred since the date of the Information Memorandum which renders the information contained in it untrue, or misleading in any material respect and which, if disclosed, could reasonably be expected to adversely affect the decision of a person considering whether to enter into this Agreement. (d) In this Clause 18.13 "INFORMATION PACKAGE" means: (i) the Information Memorandum; and (ii) the financial model in relation to the Group and the Niagara Mohawk Group prepared by NGG (and including the assumptions on which such model was based). 18.14 BORROWING LIMITS The borrowing of Advances under this Agreement up to and including the maximum amount available to it under this Agreement will not, when borrowed, cause any limit on borrowings or, as the case may be, on the giving of guarantees (whether imposed by statute, regulation or agreement) or on the powers of its board of directors, applicable to it, to be exceeded. 18.15 ERISA (a) Each member of the Controlled Group has fulfilled its obligations under the minimum funding standards of ERISA and the U.S. Code with respect to each Plan maintained by such member or any member of the Controlled Group to which such minimum funding standards apply. (b) Each member of the Controlled Group is in compliance with the material applicable provisions of ERISA, the U.S. Code and any other applicable United States Federal or State law with respect to each Plan. (c) No Reportable Event has occurred with respect to any Plan maintained by the Obligors or any member of the Controlled Group, and no steps have been taken to reorganise or terminate any such Plan or by the Obligors or any member of the Controlled Group to effect a complete or partial withdrawal from any Multi-Employer Plan. (d) No member of the Controlled Group has: (i) sought a waiver of the minimum funding standard under Section 412 of the U.S. Code in respect of any Plan; (ii) failed to make any contribution or payment to any Plan, or made any amendment to any Plan, and no other event, transaction or condition has occurred which has |
resulted or could result in the imposition of a lien or the posting of a bond or other security under ERISA or the U.S. Code; or
(iii) incurred any material, actual liability under Title I or Title
IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. 18.16 CERTAIN U.S. REGULATIONS (a) Each U.S. Borrower is not an investment company required to be registered, and not a company controlled by an investment company required to be registered, under the United States Investment Company Act of 1940, as amended. (b) None of the proceeds of any Advance will be used, directly or indirectly, and whether immediately, ultimately or incidentally, for any purpose which results in a violation of the provisions of Regulations T, U or X. (c) None of the Obligors nor any of their respective Subsidiaries are engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying "margin stock" within the meaning of such Regulation U. (d) None of New NG nor any of its Subsidiaries is at the date of this Agreement subject to regulation as a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of PUHCA. Existing NGG is and, following the Niagara Mohawk Acquisition Completion Date, NGG will be a "holding company" and each of its Subsidiaries will be "subsidiary companies" within the meaning of PUHCA. Without limiting Clause 18.10 (Authorisations), NGG and each of its Subsidiaries will be at all relevant times in compliance in all material respects with all applicable provisions of PUHCA and the rules, regulations and orders issued thereunder, all requisite declarations and applications to be made under PUHCA in respect of each Utilisation shall have been made and all notices, approvals and orders issued or given pursuant to PUHCA shall have been obtained and remain in effect, and no Utilisation will result in any breach or failure to comply with the applicable provisions of PUHCA and any applicable rules, regulations and orders issued thereunder. (e) No Finance Party will by reason of (i) the ownership or operation by any Obligor of any Energy and Network Business or any Transmission Business, (ii) any Advance, (iii) any Security Interest which may be given under or in respect of the Facilities or (iv) any other transaction or relationship contemplated by any Finance Document, be deemed by any governmental or quasi-governmental authority, instrumentality or regulatory body, to be, or to be subject to regulation as, an "electric utility", "electric utility company", "electric corporation", "electrical company", "public utility", "natural gas company" (transporting gas in interstate commerce), "gas utility", "public service company", "public utility holding company", "electric utility holding company", "holding company" or "subsidiary company" of a holding company, or other similar entity, or a subsidiary or affiliate of any of the foregoing, under any applicable law. 18.17 TIMES FOR MAKING REPRESENTATIONS AND WARRANTIES The representations and warranties set out in this Clause 18 |
(Representations and Warranties):
(a) in the case of an Obligor: (i) which is a Party on the date of this Agreement, are made by that Obligor on that date and, in the case of Clause 18.13 (Information Package), on the last day of the Primary Syndication Period; and (ii) which becomes a Party after the date of this Agreement, will, except in the case of Clause 18.13 (Information Package) be deemed to be made by that Obligor on the date it executes a Borrower Accession Agreement; and (b) (except in the case of Clause 18.13 (Information Package)) are deemed to be repeated by the relevant Borrower and the Guarantor on the date of each Utilisation Request, on each Utilisation Date and on the first day of each Interest Period or Term, as the case may be, with reference to the facts and circumstances then existing. 19. COVENANTS 19.1 DURATION AND SCOPE The undertakings in this Clause 19 remain in force from the date of this Agreement for so long as any amount is or may be outstanding under this Agreement or any Commitment or Swingline Commitment is in force. 19.2 FINANCIAL INFORMATION NGG shall supply to the Agents in sufficient copies for all the Banks: (a) as soon as the same are available (and in any event within 180 days of the end of each of its financial years): (i) the audited consolidated accounts of the Group for that financial year; and (ii) the audited accounts of each Obligor (other than NGG) for that financial year; (b) as soon as the same are available (and in any event within 120 days of the end of the first half-year of each of its financial years), the unaudited consolidated profit and loss account or the interim statement of the Group for that half-year; (c) together with the accounts specified in paragraphs (a)(i), (a)(ii) and (b) above, a certificate signed by one of its directors and one of its senior officers (and if reasonably requested by an Agent in the case of those accounts specified in paragraph (a) above only, confirmed by NGG's Company auditors) setting out in reasonable detail: (i) computations establishing compliance or non-compliance (as the case may be) with Clauses 19.15 (Restriction on Subsidiary Financial Indebtedness) and 19.18 (Group Financial covenants); and (ii) at any time on request by an Agent, a list of the then current Principal Subsidiaries; and |
(iii) on request by an Agent, the annual published audited
accounts of any other member of the Group. 19.3 INFORMATION - MISCELLANEOUS Each Obligor shall supply to the Agents: (a) promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending (and which in the reasonable opinion of the Obligor, after taking any appropriate legal advice, there is a reasonable prospect of a determination adverse to the interests of the relevant member of the Group) which are reasonably likely to have a material adverse effect on the financial condition of the Group or on the ability of the Obligors (taken as a whole) to perform their obligations under the Finance Documents (including, without limitation, the obligations under Clause 19.18 (Group Financial covenants) and the obligations of the Guarantor under Clause 17 (Guarantee)); (b) promptly, details of all amendments to each Licence (if any) held by an Obligor, NG Company or a Principal Subsidiary and all material notices received by an Obligor, NG Company or a Principal Subsidiary from the Authority or any other relevant authority in any applicable jurisdiction in relation to its Licence; (c) in the case of NGG only, at the same time as they are despatched, all documents despatched by NGG to its shareholders generally (or any class of them) or its creditors generally in their respective capacities as such; (d) as soon as reasonably practicable, such further information in the possession or control of any member of the Group regarding its financial condition as any Finance Party through either Agent may reasonably request and which such member of the Group may reasonably provide having regard to its existing legal obligations from time to time; (e) within 10 days of the date on which they are filed with the Securities and Exchange Commission, the Group's quarterly return (if any) with the Securities and Exchange Commission; and (f) promptly, details of all declarations and applications made by it and all relevant notices, approvals and orders issued to it or received by it under PUHCA in relation to this Agreement or any Utilisation hereunder; each in sufficient copies for all of the Banks, if an Agent so requests. 19.4 NOTIFICATION OF DEFAULT OR MANDATORY PREPAYMENT OR CANCELLATION EVENT (a) Each Obligor shall notify the Agents of any Default (and the steps, if any, being taken to remedy it) or any event specified in Clause 8.5 (Mandatory Prepayment and Cancellation on Change of Control) promptly upon its becoming aware of the same; and |
(b) each Obligor shall notify the Agents immediately it receives an enforcement order made in relation to it under Section 25 of the Electricity Act or under any similar provisions of any applicable Energy Laws. 19.5 COMPLIANCE CERTIFICATES NGG shall supply to an Agent promptly upon request by that Agent at any time, if that Agent reasonably believes a Default may have occurred, a certificate signed by two of its senior officers on its behalf certifying that no Default is outstanding or, if a Default is outstanding, specifying the Default and the steps, if any, being taken to remedy it. 19.6 AUTHORISATIONS |
Each Obligor shall at all relevant times promptly:
(a) obtain, maintain and comply with the terms of; and (b) on reasonable request by an Agent, supply certified copies to that Agent of, any authorisation, approval or order required under any law or regulation including, without limitation, under any law (including, for the avoidance of doubt, the Electricity Act, the Utilities Act and PUHCA) to enable it to perform its obligations under, or for the validity of, any Finance Document. 19.7 PARI PASSU RANKING Each Obligor shall procure that its obligations under the Finance Documents do and will rank at least pari passu with all its other present and future unsecured obligations (subject to the preference of certain obligations in the liquidation, bankruptcy or other analogous proceedings in respect of it by operation of applicable law). 19.8 NEGATIVE PLEDGE (a) No Obligor shall, and NGG shall procure that no other member of the Group will, create or permit to subsist any Security Interest on any of its assets. (b) Paragraph (a) above does not apply to: (i) any Security Interest created with the prior written consent of the Majority Banks; (ii) any Security Interest granted prior to the date of this Agreement and disclosed to an Agent in writing but only if the maximum principal amount secured thereby is not subsequently increased; (iii) any Security Interest by way of title retention entered into in the ordinary course of business; (iv) any lien arising by operation of law in the ordinary course of business; (v) any banker's lien or right of set-off arising by operation of law in the ordinary course of commercial banking transactions or any contractual set-off arrangements in the ordinary course of commercial banking transactions; |
(vi) any Security Interest existing over assets acquired after the date of this Agreement and existing on the date of acquisition, provided that:
(A) the Security Interest is not created in contemplation of the acquisition of the same; and
(B) the maximum principal amount secured thereby or the maturity of those obligations is not thereafter increased;
(vii) any Security Interest over the assets of any company which becomes a Subsidiary of NGG after the date of this Agreement and which exist at the date on which it becomes a Subsidiary of NGG, but only:
(A) to the extent of the principal amount secured by the Security Interest at the date it becomes a Subsidiary of NGG; and
(B) if the Security Interest is not created in contemplation of it becoming a Subsidiary of NGG;
(viii) any Security Interest over goods and/or documents of title, or insurance policies and sale contracts in relation to such goods, arising in the ordinary course of trading in connection with letters of credit and similar transactions where such Security Interest secures only so much of the acquisition cost of such goods which is required to be paid within 180 days after the date upon which the same was first incurred;
(ix) any Security Interest created in substitution for any Security Interest permitted pursuant to this Clause 19.8 provided that the substituted Security Interest is over the same asset and the principal amount secured does not exceed the principal amount secured on such asset prior to the substitution;
(x) any Security Interest created or granted from time to time in respect of any Project Finance Borrowing including, for the avoidance of doubt, any Security Interest created or granted by a member of the Group in its capacity as a shareholder of a company making a Project Finance Borrowing over its shareholding in that company (including, in the case of a member of the Group whose only material assets are shares in the company incurring the Project Finance Borrowing, a supporting floating charge over all or substantially all of that member's assets) as security for such Project Finance Borrowing, provided that the right of recourse against such shareholder is limited to the realisation of the shareholding in that company;
(xi) any Security Interest created by a Project Finance Company;
(xii) any Security Interest created or granted from time to time by a member of the Group in its capacity as a shareholder of a Project Finance Company over its shareholding in that Project Finance Company as security for the obligations of such Project Finance Company;
(xiii) any Security Interest, whether granted prior to or after the date of this Agreement, which is granted by a Subsidiary of NGG incorporated in, or which has its principal
place of business in, the United States to secure Financial Indebtedness of up to US$4,200,000,000 in aggregate outstanding at any time;
(xiv) any Security Interest created by a special purpose
securitisation vehicle over its assets where substantially all of those assets were acquired by that vehicle from a member of the Group as part of or to facilitate a securitisation and where the disposal of those assets to the securitisation vehicle constitutes a disposal of assets on arm's length terms, the consideration for which is substantially all cash or cash equivalent consideration, after the Signing Date, so long as the aggregate outstanding principal amount of Financial Indebtedness secured by all the Security Interests permitted under this paragraph (xiv) by all members of the Group (including NG Company) does not exceed US$1,000,000,000 or its equivalent in other currencies at any time; and (xv) in addition to each of the Security Interests permitted under paragraphs (i) through (xiv) above any other Security Interest whether granted prior to or after the date of this Agreement so long as the aggregate outstanding principal amount of Financial Indebtedness secured by all the Security Interests permitted under this paragraph (xv) by all members of the Group (including NG Company) does not exceed (pound)80,000,000 or its equivalent in other currencies. 19.9 DISPOSALS (a) No Obligor shall and NGG shall procure that no other member of the Group will, either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily sell, transfer, grant or lease or otherwise dispose (each a "DISPOSAL") of all of any part of its assets. (b) Paragraph (a) above does not apply to: (i) disposals to a wholly owned member of the Group not being a Project Finance Company or from a member of the Group to an Obligor; (ii) disposals made in the ordinary course of trading of the disposing entity; or (iii) disposals of assets in exchange for other assets to the extent that the assets acquired are comparable or superior as to value, type and quality or earnings generation; or |
(iv) disposals of obsolete assets; or
(v) the payment of cash dividends or distributions of any kind to NGG shareholders in accordance with the Companies Act 1985 or any other relevant law; or
(vi) disposals to which the Majority Banks have agreed in writing; or
(vii) disposals by way of factoring or discounting of receivables to the extent such factoring or discounting is carried out in the ordinary course of business or for administrative purposes and, in either case, the primary purpose is not the raising of finance; or
(viii) disposals of assets on arm's length terms; or
(ix) any other disposals not otherwise permitted under paragraphs (b)(i) to (viii) above, including disposals to non-Group companies for the purposes of securitisations, where the aggregate Disposal Proceeds received or receivable by the Group (including NG Company) for all such disposals in aggregate over the life of the Facilities does not exceed US$2,000,000,000 or its equivalent. 19.10 INSURANCE (a) Each Obligor shall ensure and shall procure that NG Company ensures that all its property and assets of an insurable nature are kept insured against loss or damage by fire and other risks normally insured in a sum or sums which that Obligor, or NG Company, where relevant, considers prudent having regard to the nature and extent of the assets to be insured. (b) Each Obligor shall promptly pay all premiums and do all other things and shall procure that NG Company promptly pays and does all other things necessary to maintain in place the insurance required to be taken out by it pursuant to paragraph (a) above. 19.11 COMPLIANCE WITH LAW Each Obligor will and will procure that each of its Subsidiaries will comply with, or take all reasonable practical and available steps to comply with, the requirements of all rules, regulations and orders for the time being of the Secretary of State and the Authority and any relevant authority in any applicable jurisdiction relating to the Energy and Network Business, applicable to that Obligor or its Subsidiaries. 19.12 LICENCE (a) NGG shall procure that NG Company, each Regulated UK Subsidiary and each Regulated U.S. Subsidiary shall comply, or shall take all reasonable practicable and available steps to comply (or, as the case may be, take all reasonable practicable and available steps to procure compliance) in all material respects with the terms of its Licence (if any) provided that, in the case of a Regulated U.S. Subsidiary, such Licence is material in the context of that entity's business taken as a whole. NGG shall procure that neither NG Company, nor any Regulated UK Subsidiary, nor any Regulated U.S. Subsidiary shall act outside the scope of its authority thereunder (if any) or consent, without the prior written consent of the Majority Banks, to any revocation of its Licence (if any). (b) No Obligor shall, and NGG shall procure that neither NG Company, nor any Regulated UK Subsidiary, nor any Regulated U.S. Subsidiary shall, consent to any material modification of the terms of its Licence (if any) if such modification would have (whether immediately or in the course of time) a material adverse effect on the ability of the Obligors (taken as a whole) to perform their obligations under this Agreement following such modification. 19.13 CHANGE OF BUSINESS Except with the prior consent of the Majority Banks, NGG shall procure that no substantial change is made to the general nature of the businesses of the Group (taken as a whole) from that carried on at the date of this Agreement outside the Energy and Network Businesses and other infrastructure network businesses of the Group from time to time. |
19.14 MAINTENANCE OF STATUS Each Obligor shall, except as otherwise permitted in this Agreement, in all material respects do all such things as are necessary to maintain its corporate existence. 19.15 RESTRICTION ON SUBSIDIARY FINANCIAL INDEBTEDNESS (a) NGG shall procure that no other member of the Group shall create, assume, incur, guarantee or otherwise be liable in respect of or have |
outstanding any Financial Indebtedness other than:
(i) any Financial Indebtedness under this Agreement;
(ii) any Financial Indebtedness owing by one member of the Group to another member of the Group, or any guarantee, indemnity or similar assurance issued by any Subsidiary in connection with the Financial Indebtedness of another Subsidiary that is permitted under this Clause 19.15;
(iii) any other Financial Indebtedness (whether or not secured under
sub-paragraph (b) of Clause 19.8 (Negative Pledge)) incurred by any Subsidiary provided that the aggregate outstanding principal amount of such Financial Indebtedness (but less Cash or Cash Equivalents (as defined in Clause 19.18 (Group Financial Covenants)) held by the relevant Subsidiary): (A) of all Subsidiaries (including NG Company) other than Subsidiaries incorporated or whose principal place of business is in the United States does not exceed (pound)4,000,000,000 in aggregate; and (B) of all Subsidiaries incorporated or whose principal place of business is in the United States, does not exceed US$7,000,000,000 in aggregate, or, in each case, its equivalent in other currencies converted into Dollars or Sterling as applicable at the time of calculation at the Facility Agent's Spot Rate of Exchange. (b) For the purposes of paragraph (iii) above, the amount of any Financial Indebtedness which is constituted by currency or interest swaps, cap or collar arrangements or any other derivative instruments shall be calculated by aggregating the mark-to-market values of any such currency or interest swaps, cap or collar arrangements or other derivative instruments, and the determination of such amount shall (within the bounds of ordinary market practice) be in the Facility Agent's sole discretion and shall, in the absence of manifest error, be conclusive and shall not be open to dispute by any party to this Agreement or any third party. 19.16 ENVIRONMENTAL UNDERTAKINGS Each Obligor will, and NGG will procure that each other member of the |
Group will, comply in all respects with:
(a) all applicable Environmental Laws; and
(b) the terms and conditions of all Environmental Approvals applicable to it,
where failure to do so could reasonably be expected to have a material adverse effect on the ability of the Obligors taken together to perform their obligations under the Finance Documents and for this purpose will implement procedures to monitor compliance and contain liability under Environmental Laws. 19.17 REPAYMENT OF 1999 FACILITY AGREEMENT NGG shall ensure that: (a) the proceeds of any Utilisation are first applied in repayment or prepayment of any amounts outstanding under the 1999 Facility Agreement to the extent not otherwise repaid; (b) from the first Utilisation Date under this Agreement no further drawings are made under the 1999 Facility Agreement; and (c) all undrawn commitments thereunder are cancelled with effect from a date no later than the first Utilisation Date under this Agreement. 19.18 GROUP FINANCIAL COVENANTS (a) In this Clause: "CASH AND CASH EQUIVALENTS" means: (i) cash in hand and deposits with any bank or other financial institution (including cash in hand and deposits denominated in freely convertible foreign currencies); (ii) securities issued or guaranteed by the UK government or the United States Government; (iii) participations in open-ended mutual funds which invest in commercial paper, banker's acceptances, repurchase agreements, government securities, certificates of deposit, and other highly liquid and safe securities, and pay money market rates of interest, which are rated at least AA by S&P and which are immediately convertible into cash; (iv) (A) debt securities rated at least A1 by Moody's or A+ by S & P; and (B) commercial paper rated at least A-1 by Moody's and P-1 by S & P; and (v) any other instrument, security or investment approved in writing by the Majority Banks, to the extent beneficially owned by a member of the Group free of restrictions (other than exchange control requirements) on withdrawal or transfer (in the case of cash) and (in all cases) unencumbered by any Security Interests other than Security Interests permitted under paragraph (b) of Clause 19.8 (Negative Pledge); |
"CONSOLIDATED EBITDA"
means in respect of any period, Consolidated Profits Before Interest and Tax for that period after adding back depreciation and amortisation of goodwill;
"CONSOLIDATED PROFITS BEFORE INTEREST AND TAX"
means, in respect of any period, the consolidated net pre-taxation profits on operating activities (after adding back Net Interest Payable and excluding any Exceptional Items and after adding back restructuring costs incurred as a result of the Acquisition) of the Group for that period based on the latest accounts supplied to the Agents under paragraphs (a) or (b) of Clause 19.2 (Financial Information), as the case may be;
"CONSOLIDATED TOTAL NET DEBT"
means the aggregate principal amount (or amounts equivalent to principal, howsoever described) comprised in the Financial Indebtedness of the Group (excluding amounts referred to in paragraph (g) and paragraph (i) (insofar as those amounts in paragraph (i) relate to amounts referred to in paragraph (g)) of the definition of Financial Indebtedness) at the time calculated on a consolidated basis LESS Cash and Cash Equivalents held by any member of the Group;
"EXCEPTIONAL ITEMS"
has the meaning given to it in FRS3 issued by the Accounting Standards Board; and
"NET INTEREST PAYABLE"
means, in relation to any period, all interest and all other continuing, regular or periodic costs, charges and expenses in the nature of interest (whether paid, payable or capitalised) incurred by the Group in effecting, servicing or maintaining all Financial Indebtedness of the Group EXCLUDING any premia payable which arise on and solely as a result of the redemption of any Bonds or the purchase of any Bonds with a view to cancellation where such premia are defined by formulae and/or market price mechanisms so that their quanta cannot be determined prior to the time at which they are to be calculated LESS all interest and other similar income receivable by members of the Group during that period (but only to the extent the same accrue and are receivable by the Group in a freely convertible and transferable currency) in each case as determined from the consolidated financial statements relating to that period delivered under Clause 19.2 (Financial Information);
and for the purposes of this Clause 20.19 only, the definition of "GROUP" shall include all Subsidiaries of NGG (whose accounts are ordinarily consolidated with the accounts of NGG in accordance with accounting principles generally accepted and applied in the United Kingdom which are Subsidiaries of NGG on the last day of each period of 12 months ending on an End Date provided that if any Subsidiary has joined the Group during such 12 month period Consolidated Profits Before Interest and Tax and Net Interest Payable shall be adjusted as appropriate to include the Profits Before Interest and Tax and Net Interest Payable for such Subsidiary for the full 12 month period and if any other Subsidiary has left the Group during such 12 month period Consolidated Profits Before Interest and Tax and Net Interest Payable shall be adjusted to exclude the Profits Before Interest and Tax and Net Interest Payable for such Subsidiary) and shall exclude any associated companies.
(b) NGG shall procure that: (i) the ratio of Consolidated EBITDA to Net Interest Payable is not, for each period of 12 months ending on the last day of each financial year and each financial half year of the Group (an "END DATE") less than 3:1; (ii) the ratio of the Consolidated Total Net Debt on each End Date to Consolidated EBITDA for each period of 12 months ending on that End Date does not exceed 5:1; (c) In the event of any material change in law or in generally accepted United Kingdom accounting principles, standards and practices as applied to the Original Group Accounts, NGG and the Agents shall, at the request of the Agents, negotiate in good faith in order to arrive at such amendments to this Clause as are necessary to give the Banks equivalent but no greater protection to that contained in this Clause prior to the relevant change. (d) If NGG and the Agents are unable to agree in writing on those amendments, then such amendments shall be made as a firm of chartered accountants acceptable to, and instructed by (after consultation with NGG ) the Agents shall certify as being necessary to give the Banks equivalent but no greater protection to that contained in this Clause prior to the relevant change. Any such firm of chartered accountants shall act in this capacity as an expert, not an arbitrator, and its decision shall be binding on all the Parties. 19.19 USE OF WEBSITES (a) Except as provided below, a Borrower may deliver any information under Clause 19 (Covenants) of this Agreement by any electronic means, or on an electronic website if, in respect of the latter: (i) the Borrower and the Facility Agent designate an electronic website for this purpose; (ii) the Borrower notifies the Facility Agent of the address of and password for the website; and (iii) the information posted is in a format agreed between the Borrower and the Facility Agent. The Facility Agent must supply each relevant Bank with the address of and password for the website. (b) Notwithstanding the above, the Borrower must supply to the Facility Agent in paper form a copy of any information posted on a website together with sufficient copies for: (i) any Bank not agreeing to receive information via the website; and (ii) any other Bank, if that Bank so requests, within ten Business Days of such request. (c) The Borrower must promptly upon becoming aware of its occurrence, notify the Facility Agent if: (i) a designated website cannot be accessed; |
(ii) the website or any information on the website is infected by any electronic virus or similar software;
(iii) the password for the website is changed; or
(iv) any information to be supplied under this Agreement is posted on the website or amended after being posted. If the circumstances in paragraphs (i) or (ii) above occur, the Borrower must supply any information required under this Agreement in paper form. 20. DEFAULT 20.1 EVENTS OF DEFAULT Each of the events set out in Clauses 20.2 (Non-payment) to 20.17 (Material Adverse Change) (both inclusive) is an Event of Default (whether or not caused by any reason whatsoever outside the control of any Obligor or any other person). 20.2 NON-PAYMENT An Obligor does not pay within three Business Days of the due date any amount payable by it under the Finance Documents at the place at and in the currency in which it is expressed to be payable. 20.3 BREACH OF OTHER OBLIGATIONS (a) An Obligor does not comply with Clause 19.18 (Group Financial covenants). (b) An Obligor does not comply with any provision of the Finance Documents applicable to it (other than those referred to in paragraph (a) above or in Clause 20.2 (Non-payment)) and such failure (if capable of remedy before the expiry of such period) continues unremedied for a period of thirty (30) days from the date on which the relevant Agent gives notice to NGG requiring the same to be remedied. 20.4 MISREPRESENTATION A representation, warranty or statement made or repeated by any Obligor in or in connection with any Finance Document or in any document delivered by or on behalf of any Obligor under or in connection with any Finance Document is incorrect in any material respect when made or deemed to be made or repeated. 20.5 CROSS-DEFAULT (a) Subject to paragraph (b) below: (i) any Financial Indebtedness of a member of the Group is not paid when due or within any originally applicable grace period; (ii) an event of default howsoever described occurs under any document relating to Financial Indebtedness of a member of the Group; |
(iii) any Financial Indebtedness of a member of the Group becomes
prematurely due and payable or is placed on demand as a result of an event of default (howsoever described); (iv) any commitment for, or underwriting of, any Financial Indebtedness of a member of the Group is cancelled or suspended as a result of an event of default howsoever described) under the document relating to that Financial Indebtedness; or (v) any Security Interest securing Financial Indebtedness over any asset of a member of the Group becomes enforceable by reason of an event of default howsoever described, so long as the principal amount of any single instance of such Financial Indebtedness equals or exceeds (pound)50,000,000 or the aggregate principal amount of any such Financial Indebtedness incurred by any member of the Group (including NG Company) is equal to or exceeds (pound)100,000,000 or its equivalent in other currencies. (b) For the purposes of this Clause 20.5 the definition of Financial Indebtedness shall exclude: (i) Project Finance Borrowings; and (ii) Until the date falling six months after the Niagara Mohawk Acquisition Completion Date, Financial Indebtedness of any member of the Niagara Mohawk Group outstanding as at the date it became a member of the Group. (c) For the purposes of paragraph (a) above, the amount of any Financial Indebtedness which is constituted by currency or interest swaps, cap or collar arrangements or any other derivative instruments shall be calculated by aggregating the mark-to-market values of any such currency or interest swaps, cap or collar arrangements or other derivative instruments, and the determination of such amount shall (within the bounds of ordinary market practice) be in the Facility Agent's sole discretion and shall, in the absence of manifest error, be conclusive and shall not be open to dispute by any party to this Agreement or any third party. 20.6 INSOLVENCY (a) NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary (other than a Project Finance Company) is, or is deemed for the purposes of any law to be unable to pay its debts as they fall due or to be insolvent, or admits inability to pay its debts as they fall due; or (b) NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary (other than a Project Finance Company) suspends making payments on all or any class of its debts or announces an intention to do so or a moratorium is declared in respect of any of its indebtedness; or (c) NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary (other than a Project Finance Company) by reason of financial difficulties generally begins negotiations with one or more of its creditors with a view to the readjustment or rescheduling of any of its indebtedness. |
20.7 INSOLVENCY PROCEEDINGS (a) Any step (including petition, proposal or convening a meeting) is taken, by reason of financial difficulties, with a view to a composition, assignment or scheme of arrangement with any creditors of NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary; or (b) a meeting of NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary is convened for the purpose of considering any resolution for (or to petition for) its winding-up or its administration or any such resolution is passed; or (c) any person presents a petition for the winding-up or for the administration of NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary other than a petition which is frivolous and vexatious and which is not struck out within 14 days of its presentation; or (d) any order for the winding-up or administration of NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary is made; or (e) any other step (including petition, proposal or convening a meeting) is taken with a view to the rehabilitation, administration, custodianship, liquidation, winding-up or dissolution of or any other insolvency proceedings involving NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary. 20.8 APPOINTMENT OF RECEIVERS AND MANAGERS (a) Any liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or the like is appointed in respect of NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary or any part of its assets; or (b) the directors of NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary requests the appointment of a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or the like; or (c) any other steps are taken to enforce any Security Interest over any part of the assets of NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary. 20.9 CREDITORS' PROCESS Any attachment, sequestration, distress or execution affects any asset of NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary and is not discharged within 21 days. 20.10 ANALOGOUS PROCEEDINGS There occurs, in relation to NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary, any event anywhere which, in the opinion of the Majority Banks, is analogous to any of those mentioned in Clauses 20.6 (Insolvency) to 20.9 (Creditors' process) (both inclusive). |
20.11 CESSATION OF BUSINESS NG Company (or a Regulated UK Subsidiary) ceases to carry on its Transmission Business pursuant to its Transmission Licence (if any), unless its Transmission Licence (or the relevant part thereof) is granted or transferred to another member of the Group. 20.12 UNLAWFULNESS It is or becomes unlawful for any Obligor to perform any of its obligations under the Finance Documents. 20.13 GUARANTEE The guarantee under Clause 17 (Guarantee) is not effective or is alleged by an Obligor to be ineffective for any reason. 20.14 OWNERSHIP OF THE OBLIGORS Any Obligor (other than NGG) is not or ceases to be a Subsidiary of NGG, or NG Company or, after the Niagara Mohawk Acquisition Completion Date, Niagara Mohawk, is not or ceases to be a wholly-owned Subsidiary of NGG. 20.15 COMPLIANCE WITH LAWS AND REGULATIONS An Obligor, NG Company or a Regulated U.S. Subsidiary fails to comply in all material respects with all applicable provisions of any Energy Law applicable to it or with its Licence (if any) and such failure to comply is reasonably likely to have a material adverse effect on the ability of the Obligors (as a whole) to perform their obligations under the Finance Documents (including, without limitation, the obligations under Clause 19.18 (Group Financial covenants) and the obligations of the Guarantor under Clause 17 (Guarantee)). 20.16 REVOCATION AND MODIFICATION OF LICENCES NG Company's Licence or the Licence of a Regulated U.S. Subsidiary is: (a) revoked or surrendered other than where the revocation or surrender is effected in relation to a transfer to another member of the Group (or any notice of revocation is issued by the Secretary of State or other relevant authority under the applicable Energy Laws) and, in the case of a Regulated U.S. Subsidiary such revocation or surrender (or notice of revocation) is reasonably likely to have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their obligations under the Finance Documents (including, without limitation, the obligations of NGG under Clause 19.18 (Group Financial covenants) and the obligations of the Guarantor under Clause 17 (Guarantee)); or (b) modified, other than where the modification is effected in relation to a transfer to another member of the Group, in any manner which is reasonably likely to have a material adverse effect on the ability of the Obligors (taken as a whole) to perform their obligations under the Finance Documents (including, without limitation, the obligations of NGG under Clause 19.18 (Group Financial covenants) and the obligations of the Guarantor under Clause 17 (Guarantee)). |
20.17 MATERIAL ADVERSE CHANGE Any event occurs in relation to the Group (taken as a whole) which is likely to have a material adverse effect on the ability of the Obligors (taken as a whole), to comply with their obligations under the Finance Documents. 20.18 ACCELERATION On and at any time after the occurrence of an Event of Default an Agent may, and will if so directed by the Majority Banks, by notice to NGG: (i) cancel the Total Commitments and Total Swingline Commitments; and/or (ii) demand that all the Advances, together with accrued interest, and all other amounts accrued under this Agreement be immediately due and payable, whereupon they will become immediately due and payable; and/or (iii) demand that all the Advances be payable on demand, whereupon they will immediately become payable on demand. 21. THE AGENTS AND THE ARRANGERS 21.1 APPOINTMENT AND DUTIES OF THE AGENTS (a) Subject to paragraph (f) of Clause 21.15 (Resignation of an Agent), each Finance Party (other than the Facility Agent) irrevocably appoints the Facility Agent to act as its agent under and in connection with the Finance Documents; and (b) each Swingline Bank irrevocably appoints the Swingline Agent to act as its agent under and in relation to the Swingline Advance Facility, and in each case authorises that Agent on its behalf to: (i) perform the duties and to exercise the rights, powers and discretions that are specifically delegated to it under or in connection with the Finance Documents, together with all other incidental rights, powers and discretions; and (ii) execute as agent for that Finance Party each Finance Document to which that Agent is a party. (c) An Agent shall have only those duties which are expressly specified in this Agreement. Those duties are solely of a mechanical and administrative nature. 21.2 ROLE OF THE ARRANGER Except as otherwise specifically provided in this Agreement, no Arranger has any obligations of any kind to any other Party under or in connection with any Finance Document. 21.3 RELATIONSHIP The relationship between an Agent and the other Finance Parties is that of agent and principal only. Nothing in this Agreement constitutes an Agent as trustee or fiduciary for any |
other Party or any other person and an Agent need not hold in trust any moneys paid to it for a Party or be liable to account for interest on those moneys. 21.4 MAJORITY BANKS' DIRECTIONS An Agent will be fully protected if it acts in accordance with the instructions of the Majority Banks in connection with the exercise of any right, power or discretion or any matter not expressly provided for in the Finance Documents. Any such instructions given by the Majority Banks will be binding on all the Banks. In the absence of such instructions an Agent may act as it considers to be in the best interests of all the Banks. 21.5 DELEGATION An Agent may act under the Finance Documents through its personnel and agents. 21.6 RESPONSIBILITY FOR DOCUMENTATION Neither an Agent nor any Arranger is responsible to any other Party for: (a) the execution, genuineness, validity, enforceability or sufficiency of any Finance Document or any other document; (b) the collectability of amounts payable under any Finance Document; or (c) the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document. 21.7 DEFAULT (a) An Agent is not obliged to monitor or enquire as to whether or not a Default has occurred and an Agent will not be deemed to have knowledge of the occurrence of a Default. However, if an Agent receives notice from a Party referring to this Agreement, describing the alleged Default and stating that it believes the event is a Default, that Agent shall promptly notify the Banks. (b) An Agent may require the receipt of security satisfactory to it, whether by way of payment in advance or otherwise, against any liability or loss which it will or may incur in taking any proceedings or action arising out of or in connection with any Finance Document before it commences those proceedings or takes that action. 21.8 EXONERATION (a) Without limiting paragraph (b) below, an Agent will not be liable to any other Party for any action taken or not taken by it under or in connection with any Finance Document, unless directly caused by that Agent's gross negligence or wilful misconduct. (b) No Party may take any proceedings against any officer, employee or agent of an Agent in respect of any claim it might have against that Agent or in respect of any act or omission of any kind (including negligence or wilful misconduct) by that officer, employee or agent in relation to any Finance Document. |
21.9 RELIANCE An Agent may: (a) rely on any notice or document believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person; (b) rely on any statement made by a director or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify; and (c) engage, pay for and rely on legal or other professional advisers selected by it (including those in that Agent's employment and those representing a Party other than that Agent. 21.10 CREDIT APPROVAL AND APPRAISAL Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Bank confirms that it: (a) has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by an Agent or an Arranger in connection with any Finance Document; and (b) will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under the Finance Documents or any Commitment or Swingline Commitment is in force. 21.11 INFORMATION (a) Each Agent shall promptly forward to the person concerned the original or a copy of any document which is delivered to that Agent by a Party for that person. (b) Each Agent shall promptly supply a Bank with a copy of each document received by that Agent under Clauses 4 (Conditions Precedent), 28.4 (Additional Borrowers) upon the request of that Bank. (c) Except where this Agreement specifically provides otherwise, an Agent is not obliged to review or check the accuracy or completeness of any document it forwards to another Party. (d) Except as provided above, an Agent has no duty: (i) either initially or on a continuing basis to provide any Bank with any credit or other information concerning the financial condition or affairs of any Obligor or any related entity of any Obligor, whether coming into its possession or that of any of its related entities before, on or after the date of this Agreement; or (ii) unless specifically requested to do so by a Bank in accordance with this Agreement, to request any certificates or other documents from any Obligor. |
21.12 THE AGENT AND THE ARRANGERS INDIVIDUALLY (a) If it is a Bank, each of the Agents and any Arranger has the same rights and powers under this Agreement as any other Bank and may exercise those rights and powers as though it were not an Agent or an Arranger. |
(b) Each of the Agents, and any Arranger may:
(i) carry on any business with an Obligor or its related entities;
(ii) act as agent or trustee for, or in relation to any financing involving, an Obligor or its related entities; and
(iii) retain any profits or remuneration in connection with its
activities under this Agreement or in relation to any of the foregoing. (c) Each Obligor irrevocably authorises each of the Agents to disclose to the other Finance Parties any information which, in the reasonable opinion of that Agent, is received by it in its capacity as Agent. 21.13 INDEMNITIES (a) Without limiting the liability of any Obligor under the Finance Documents, each Revolving Facility Bank or (in the case of the Swingline Agent) each Swingline Bank shall forthwith on demand indemnify each Agent for its proportion of any liability or loss incurred by that Agent in any way relating to or arising out of it acting as an agent, except to the extent that the liability or loss arises directly from that Agent's gross negligence or wilful misconduct. (b) A Revolving Facility Bank's proportion of the liability or loss set out in paragraph (a) above is the proportion which the Original Dollar Amount of its Advances bears to the Original Dollar Amount, as the case may be, of all Advances (other than Swingline Advances) outstanding on the date of the demand. If, however, no such Advances are outstanding on the date of demand, then the proportion will be that which each Revolving Facility Bank's Commitment bears to the Total Commitments at the date of demand or, if the Total Commitments have been cancelled, bore to the Total Commitments immediately before being cancelled. (c) A Swingline Bank's proportion of the liability or loss set out in paragraph (a) above is the proportion which the Original Dollar Amount of its Swingline Advances bears to the Original Dollar Amount, as the case may be, of all Swingline Advances outstanding on the date of the demand. If, however, no Swingline Advances are outstanding on the date of demand, then the proportion will be that which each Swingline Bank's Commitment bears to the Total Swingline Commitments at the date of demand or, if the Total Swingline Commitments have been cancelled, bore to the Total Swingline Commitments immediately before being cancelled. (d) NGG shall forthwith on demand reimburse each Bank for any payment made by it under paragraphs (b) and (c) above. |
21.14 COMPLIANCE (a) An Agent may refrain from doing anything which might, in its opinion, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its opinion, is necessary or desirable to comply with any law or regulation of any jurisdiction. (b) Without limiting paragraph (a) above, an Agent need not disclose any information relating to any Obligor or any of its related entities if the disclosure might, in the opinion of that Agent constitute a breach of any law or regulation or any duty of secrecy or confidentiality or be otherwise actionable at the suit of any person. 21.15 RESIGNATION OF AN AGENT (a) Notwithstanding its irrevocable appointment, an Agent may resign by giving notice to the Banks and NGG, in which case that Agent may forthwith appoint one of its Affiliates as successor Agent or, failing that, the Majority Banks may appoint a successor Agent. (b) If the appointment of a successor Agent is to be made by the Majority Banks but they have not, within 30 days after notice of resignation, appointed a successor Agent which accepts the appointment, a retiring Agent may, after prior consultation with NGG, appoint a successor Agent. (c) The resignation of a retiring Agent and the appointment of any successor Agent will both become effective only upon the successor Agent notifying all the Parties that it accepts the appointment. On giving the notification, the successor Agent will succeed to the position of the retiring Agent and the term "FACILITY AGENT" or "SWINGLINE AGENT" will mean the successor Agent, where appropriate. (d) The retiring Agent shall, at its own cost, make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as the relevant Agent under this Agreement. (e) Upon its resignation becoming effective, this Clause 21 shall continue to benefit the retiring Agent in respect of any action taken or not taken by it under or in connection with the Finance Documents while it was an Agent and, subject to paragraph (d) above, it shall have no further obligation under any Finance Document. (f) An Agent shall, forthwith upon being requested to do so by the Majority Banks, resign in accordance with paragraph (a) above. However, in this event, an Agent may not appoint one of its Affiliates as successor Agent as contemplated by paragraph (a) above and the Majority Banks shall appoint a successor Agent. 21.16 BANKS (a) An Agent may treat each Bank as a Bank and entitled to payments under this Agreement and as acting through its Facility Office(s) until it has received notice from the Bank to the contrary not less than five Business Days prior to any relevant payment. |
(b) An Agent may at any time, and shall if requested to do so by the Majority Banks, convene a meeting of the Banks. 21.17 CHINESE WALL In acting as an Agent or as an Arranger, the agency and syndications division of each of an Agent and the Arrangers shall be treated as a separate entity from its other divisions and departments. Any information acquired at any time by an Agent, or any Arranger otherwise than in the capacity of Agent or Arranger through its agency and syndications division (whether as financial advisor to any member of the Group or otherwise) may be treated as confidential by that Agent or Arranger and shall not be deemed to be information possessed by that Agent or Arranger in their capacity as such. Each Finance Party acknowledges that an Agent and the Arrangers may, now or in the future, be in possession of, or provided with, information relating to the Group which has not or will not be provided to the other Finance Parties. Each Finance Party agrees that, except as expressly provided in this Agreement, neither any Agent nor any Arranger will be under any obligation to provide, or under any liability for failure to provide, any such information. 22. FEES 22.1 FRONT-END FEES NGG shall pay to the Agents on behalf of the Arrangers fees with respect to each Facility on their final allocation in accordance with the Fee Letter between the Arrangers and NGG. 22.2 COMMITMENT FEE (a) NGG shall pay to the Facility Agent for each Bank commitment fees in |
the following amounts:
(i) with respect to Facility A:
(A) during the period prior to the Niagara Mohawk Acquisition Completion Date 0.125 per cent. per annum; and
(B) thereafter, the amount per annum that is the lesser
of 0.15 per cent. per annum and 40 per cent. of the
lowest Applicable Margin then in effect for Facility
A Advances as calculated in accordance with Clause
9.6 (Applicable Margin);
(ii) with respect to Facility B:
(A) during the period prior to the Niagara Mohawk Acquisition Completion Date 0.20 per cent. per annum;
(B) thereafter, 0.20 per cent. per annum when the uncancelled amount of the Facilities is more than US$1,500,000,000, otherwise 45 per cent. of the Applicable Margin as calculated in accordance with Clause 9.6 (Applicable Margin);
(b) Accrued commitment fees are payable quarterly in arrears on the daily undrawn, uncancelled amount of the relevant Facility A Commitment and Facility B Commitment on each day from
the Signing Date until the Final Maturity Date of the relevant Facility A Availability Period and Facility B Availability Period (inclusive) with the first payment due three months after the Signing Date. Accrued commitment fee is also payable to the Facility Agent for the relevant Bank(s) on the cancelled amount of its Facility A Commitment or Facility B Commitment as the case may be at the time the cancellation takes effect. Accrued commitment fees are payable in Dollars. 22.3 TERM-OUT FEE AND FACILITY A AVAILABILITY EXTENSION FEE On the day on which a Term-out Advance is made pursuant to paragraph (b) of Clause 7.1 (Repayment of Facility A Advances) and on the first day of any extended Facility A Availability Period under Clause 5.10 (Extension of Facility A Availability Period) (as applicable), NGG shall pay the Facility Agent for distribution pro rata to the Revolving Facility Banks which participate in the relevant Term-out Advance or which consent to the extension of the Facility A Availability Period (as applicable) a fee or fees calculated as follows: (a) (i) in the case of Term-out Advances with a term equal to or less than one year, a fee of 0.05 per cent. flat on the aggregate Original Dollar Amount of all Term-out Advances made on that date; or (ii) in the case of Term-out Advances with a term greater than one year, a fee of 0.10 per cent. flat on the aggregate Original Dollar Amount of all Term-out Advances made on that date; and (b) in the case of an extension of the Facility A Availability Period, a fee of 0.05 per cent. flat on the aggregate Original Dollar Amount of the Facility A Commitments of those Banks which have agreed to extend the Facility A Availability Period. 22.4 AGENCY FEE NGG shall pay to the Facility Agent for its own and for the Swingline Agent's account agency fees in the amounts agreed in the Agency Fee Letter between Existing NGG, New NG, NGGF and the Facility Agent. 22.5 VAT Any fee referred to in this Clause 22 is exclusive of any value added tax or any other tax which might be chargeable in connection with that fee. If any value added tax or other tax is so chargeable, it shall be paid by NGG at the same time as it pays the relevant fee. 23. EXPENSES 23.1 INITIAL AND SPECIAL COSTS NGG shall forthwith on demand pay the Facility Agent and the Arrangers the amount of all reasonable costs and expenses (including legal fees) incurred by any of them in connection with: (a) the arranging, underwriting and primary syndication of the Facilities; |
(b) the negotiation, preparation, printing and execution of:
(i) this Agreement and any other documents referred to in this Agreement; (ii) any other Finance Document (other than a Transfer Certificate) executed after the date of this Agreement; and (c) any amendment, waiver, consent or suspension of rights (or any proposal for any of the foregoing) requested by or on behalf of an Obligor and relating to a Finance Document or a document referred to in any Finance Document. 23.2 ENFORCEMENT COSTS NGG shall forthwith on demand pay to each Agent the amount of all reasonable costs and expenses (including legal fees) incurred by it in connection with the enforcement of, or the preservation of any rights under, any Finance Document. 24. STAMP DUTIES NGG shall pay and forthwith on demand indemnify each Finance Party against any liability it incurs in respect of any stamp, registration and similar tax which is or becomes payable in connection with the entry into, performance or enforcement of any Finance Document. 25. INDEMNITIES 25.1 CURRENCY INDEMNITY (a) If a Finance Party receives an amount in respect of an Obligor's liability under the Finance Documents or if that liability is converted into a claim, proof, judgement or order in a currency other than the currency (the "CONTRACTUAL CURRENCY") in which the amount is expressed to be payable under the relevant Finance Document: (i) that Obligor shall indemnify that Finance Party as an independent obligation against any loss or liability arising out of or as a result of the conversion; (ii) if the amount received by the Finance Party, when converted into the contractual currency at a market rate in the usual course of its business, is less than the amount owed in the contractual currency, the Obligor concerned shall forthwith on demand pay to that Finance Party an amount in the contractual currency equal to the deficit; and (iii) the Obligor shall pay to the Finance Party concerned on demand any exchange costs and taxes payable in connection with any such conversion. (b) Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable. 25.2 OTHER INDEMNITIES The Obligors shall forthwith on demand indemnify each Finance Party against any loss or liability which that Finance Party incurs as a |
consequence of:
(a) the occurrence of any Default;
(b) the operation of Clause 20.18 (Acceleration) or Clause 31 (Redistributions); (c) any payment of principal or an overdue amount being received from any source otherwise than on its Maturity Date or the last day of its Interest Period and, for the purposes of this paragraph (c), the Maturity Date of an overdue amount is the last day of each Default Term (as defined in Clause 9.4 (Default interest)); or (d) (other than by reason of negligence or default by a Finance Party) a Utilisation not being effected after a Borrower has delivered a Utilisation Request for that Utilisation. The Obligors' liability in each case includes any loss of margin or other loss or expense on account of funds borrowed, contracted for or utilised to fund any amount payable under any Finance Document, any amount repaid or prepaid or any Advance. 25.3 ACQUISITION INDEMNITY NGG will indemnify each Finance Party and each of their respective Affiliates and directors, officers, agents and employees (each, an "INDEMNIFIED PERSON") against all losses, claims, damages, liabilities, charges and related expenses which such Indemnified Person may incur or may be or may become subject to as a result of or in any way related to the making available of credit facilities under this Agreement or making Advances hereunder in connection with the implementation of the Acquisition or the making of the related offer for the stock of Niagara Mohawk (whether or not such acquisition is completed) except to the extent that the same results from the Indemnified Person's negligence or wilful default. If for any reason the foregoing indemnification provisions are unavailable to or insufficient to hold harmless an Indemnified Person in respect of any such losses, claims, damages, liabilities, charges or related expenses (or actions in respect thereof), then NGG shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages, liabilities, charges or related expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of NGG and its Affiliates, on the one hand, and the Indemnified Person, on the other hand, in connection with the implementation of the Acquisition or the making of the related offer for the stock of Niagara Mohawk, as well as any other relevant equitable considerations. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages, liabilities, charges or related expenses (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this paragraph, no Indemnified Person shall be required to contribute any amount in excess of the fees, if any, received by such Indemnified Person under or pursuant to this Agreement. 25.4 INDEMNITY TO THE AGENT NGG shall promptly indemnify any Agent against any cost, loss or liability incurred by that Agent (acting reasonably) as a result of: (a) entering into or performing any foreign exchange contract for the purposes of Clause 10 (Optional Currencies); or |
(b) acting or relying on any notice, request or instruction from any of the Obligors which it reasonably believes to be genuine, correct and appropriately authorised. 26. CALCULATIONS AND EVIDENCE OF DEBT 26.1 ACCOUNTS Accounts maintained by a Finance Party in connection with this Agreement are prima facie evidence of the matters to which they relate. 26.2 CERTIFICATES AND DETERMINATION (a) Any certification or determination by a Finance Party of a rate or amount under this Agreement shall be supported (other than in relation to any calculation of interest) by reasonable evidence of how the calculation has been made and, if so supported, shall be, in the absence of manifest error, conclusive evidence of the matters to which it relates. (b) Any determination by an Agent of a rate of interest shall be, in the absence of manifest error, conclusive. (c) Nothing in this Clause obliges any Finance Party to disclose any confidential information. 26.3 CALCULATIONS (a) Interest payable on an amount denominated in Sterling or payable in respect of the Swingline Advance Facility and any applicable Mandatory Cost) accrue from day to day and are calculated on the basis of the actual number of days elapsed and a year of 365 days; and (b) interest payable on an amount denominated in Dollars or an Optional Currency (other than a Swingline Advance or where market practice otherwise dictates) and the fees payable under Clause 22 (Fees) accrue from day to day and are calculated on the basis of the actual number of days elapsed and a year of 360 days, (or, in either case, as otherwise agreed between the Facility Agent and NGG in accordance with usual market practice). 27. AMENDMENTS AND WAIVERS 27.1 PROCEDURE (a) Subject to Clause 27.2 (Exceptions), any term of the Finance Documents may be amended or waived with the agreement of NGG and the Majority Banks and (in so far as its position as an Agent is affected) an Agent. The Facility Agent may effect, on behalf of the Majority Banks, an amendment to which they have agreed. (b) The Facility Agent shall promptly notify the other Parties of any amendment or waiver effected under paragraph (a) above, and any such amendment or waiver shall be binding on all the Parties. |
27.2 EXCEPTIONS (a) An amendment or waiver which relates to: (i) the definition of "Majority Banks" in Clause 1.1 (Definitions); (ii) an extension of the date for, or a decrease in an amount (including any fees payable or the Applicable Margin) or a change in the currency of, any payment under the Finance Documents; (iii) an increase in a Bank's Commitment or Swingline Commitment, where relevant; (iv) a term of a Finance Document which expressly requires the consent of each Bank; (v) the incorporation of Additional Borrowers otherwise than in accordance with Clause 28.4 (Additional Borrowers); or (vi) Clause 17 (Guarantee), Clause 31 (Redistributions) or this Clause 27, may not be effected without the consent of each Bank. (b) An amendment or waiver which relates to an Agent may not be effected without the consent of that Agent, not to be unreasonably withheld or delayed. 27.3 WAIVER AND REMEDIES CUMULATIVE |
The rights of each Finance Party under the Finance Documents:
(a) may be exercised as often as necessary; (b) are cumulative and not exclusive of its rights under the general law; and (c) may be waived only in writing and specifically. Delay in exercising or non-exercise of any such right is not a waiver of that right. 28. CHANGES TO THE PARTIES 28.1 TRANSFERS BY OBLIGORS No Obligor may assign, transfer, novate or dispose of any of, or any interest in, its rights and/or obligations under the Finance Documents. 28.2 NEW BANKS (a) A Bank (the "EXISTING BANK") may, at any time, assign, transfer or novate any of its rights and/or obligations under this Agreement to another person (the "NEW BANK") without the prior consent of or notice to any Obligor except that: (i) prior to completion of the Primary Syndication Period, the Existing Bank may only assign, transfer or novate (or seek to assign, transfer or novate) its rights and/or |
obligations in accordance with the syndication strategy agreed between the Arrangers and NGG;
(ii) the prior written consent of NGG (such consent not to be unreasonably withheld or delayed) is required for any such assignment, transfer or novation after completion of the Primary Syndication Period and prior to the Niagara Mohawk Acquisition Completion Date and such consent will be deemed to have been given if, within fourteen days of receipt by NGG of an application for consent, it has not been expressly refused;
(iii) after completion of the Primary Syndication Period (but subject to (ii), above) without restriction, save that in the case of a partial assignment, transfer or novation of its rights and/or obligations under any Facility a minimum amount of US$10,000,000 (or its equivalent) in aggregate and a minimum of US$1,000,000 (or its equivalent) per Facility (unless to an Affiliate of a Bank or to another Bank or the relevant Agent agrees otherwise) must be assigned, transferred or novated; and
(iv) no assignment, novation or transfer of all or any part of a Swingline Commitment or Facility B Commitment shall be made by that Existing Bank unless simultaneously therewith a pro rata amount of the Facility B Commitment or Swingline Commitment of that Existing Bank (or its Affiliated Bank) and a pro rata amount of each of that Existing Bank's (or its Affiliated Bank's) outstanding Swingline Advances or, as the case may be, Facility B Advances (which are not Swingline Advances) are also assigned, novated or transferred (where relevant) to the New Bank (or its Affiliated Bank), provided that no such pro rata assignment, novation or transfer of a Facility B Commitment or outstanding Facility B Advances (which are not Swingline Advances) shall be required to be made by a Revolving Facility Bank which is also a Swingline Bank if it assigns, novates or transfers a Swingline Commitment to its Affiliated Bank.
(b) A transfer of obligations will be effective only if either:
(i) the obligations are transferred by way of novation in accordance with Clause 28.3 (Procedure for transfers); or
(ii) the New Bank confirms to the relevant Agent and NGG that it undertakes to be bound by the terms of this Agreement as a Bank in form and substance satisfactory to that Agent. On the transfer becoming effective in this manner the Existing Bank shall be relieved of its obligations under this Agreement to the extent that they are transferred to the New Bank.
(c) Nothing in this Agreement restricts the ability of a Bank to sub-contract an obligation if that Bank remains liable under this Agreement for that obligation.
(d) On each occasion that an Existing Bank assigns, transfers or novates any of its rights and/or obligations under this Agreement after completion of the Primary Syndication Period (other than to an Affiliate), the New Bank shall, on the date the assignment, transfer and/or novation takes effect, pay to the relevant Agent for its own account a fee of US$1,500.
(e) An Existing Bank is not responsible to a New Bank for:
(i) the execution, genuineness, validity, enforceability or sufficiency of any Finance Document or any other document;
(ii) the collectability of amounts payable under any Finance Document; or
(iii) the accuracy of any statements (whether written or oral) made
in or in connection with any Finance Document. (f) Each New Bank confirms to the Existing Bank and the other Finance Parties that it: (i) has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Bank in connection with any Finance Document; and (ii) will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under this Agreement or any Commitment or Swingline Commitment, where relevant, is in force. (i) Nothing in any Finance Document obliges an Existing Bank to: (i) accept a re-transfer from a New Bank of any of the rights and/or obligations assigned or transferred or novated under this Clause; or (ii) support any losses incurred by the New Bank by reason of the non-performance by any Obligor of its obligations under this Agreement or otherwise. (j) Any reference in this Agreement to a Bank includes a New Bank but excludes a Bank if no amount is or may be owed to or by that Bank under this Agreement and its Commitment has been cancelled or reduced to nil. 28.3 PROCEDURE FOR TRANSFERS (a) A transfer by way of novation is effected if: (i) the Existing Bank and the New Bank deliver to the relevant Agent a duly completed certificate substantially in the form set out in Schedule 5 (a "TRANSFER CERTIFICATE") with such changes as that Agent approves to achieve a substantially similar effect (which may be delivered by fax and confirmed by delivery of a hard copy original but the fax will be effective irrespective of whether confirmation is received; and (ii) the Facility Agent executes it. (b) Each Party (other than the Existing Bank and the New Bank) irrevocably authorises the relevant Agent to execute any duly completed Transfer Certificate on its behalf and that Agent agrees promptly to provide a copy of the Transfer Certificate to NGG after it has executed it. |
(c) To the extent that they are expressed to be the subject of the transfer in the Transfer Certificate) on the date of execution of the Transfer Certificate by the Facility Agent (or the date specified in the Transfer Certificate if later):
(i) the Existing Bank and the other Parties (the "EXISTING PARTIES") will be released from their obligations to each other (the "DISCHARGED OBLIGATIONS");
(ii) the New Bank and the existing Parties will assume obligations towards each other which differ from the discharged obligations only in so far as they are owed to or assumed by the New Bank instead of the Existing Bank;
(iii) the rights of the Existing Bank against the existing Parties
and vice versa (the "DISCHARGED RIGHTS") will be cancelled; and (iv) the New Bank and the existing Parties will acquire rights against each other which differ from the discharged rights only in so far as they are exercisable by or against the New Bank instead of the Existing Bank, all on the date of execution of the Transfer Certificate by the relevant Agent or, if later, the date specified in the Transfer Certificate. (d) If the effective date of a novation is after the date a Utilisation Request is received by an Agent but before the date a requested Advance is disbursed to for the relevant Borrower, the Existing Bank shall be obliged to participate in that Advance in respect of its discharged obligations notwithstanding that novation and the New Bank shall reimburse the Existing Bank for its participation in that Advance and all interest and fees thereon up to the date of reimbursement (in each case to the extent attributable to the discharged obligations) within three Business Days of the Utilisation Date of that Advance. 28.4 ADDITIONAL BORROWERS (a) If New NG wishes one of its wholly-owned Subsidiaries to become an Additional Borrower, then it may (after prior consultation with the Agents and, if it is incorporated outside of the United Kingdom, with the prior consent of all the Banks not to be unreasonably withheld or delayed) deliver to the Agents, the documents listed in Part III of Schedule 2 (Conditions Precedent Documents). (b) On delivery of a Borrower Accession Agreement, executed by the relevant Subsidiary and New NG, the Subsidiary will, subject to the restrictions set out in Clause 5.1 (Receipt of Utilisation Requests), become an Additional Borrower (provided that, where that Subsidiary is not incorporated in the United Kingdom, the prior written consent of all Banks shall be required not to be unreasonably withheld or delayed). However, it may not utilise any of the Facilities until the Agents confirm to the other Finance Parties and New NG that it has received all the documents referred to in paragraph (a) above in form and substance satisfactory to it. (c) Delivery of a Borrower Accession Agreement, executed by the Subsidiary and New NG, constitutes confirmation by that Subsidiary and New NG that the representations and warranties set out in Clause 18 (Representations and Warranties) and to be made by them on the date of the Borrower Accession Agreement are correct, as if made with reference to the facts and circumstances then existing. |
28.5 REFERENCE BANKS If a Reference Bank (or, if a Reference Bank is not a Bank, the Bank of which it is an Affiliate) ceases to be one of the Banks, the Facility Agent shall (in consultation with NGG) appoint another Bank to replace the Reference Bank. 28.6 ADDITIONAL PAYMENTS If following: (a) any assignment, transfer or novation of all or any part of the rights or obligations of a Bank to a New Bank under Clause 28.2 (New Banks); or (b) any change in a Bank's Facility Office, any additional amount is required to be paid to the New Bank or that Bank (as the case may be) by any Obligor under Clause 12 (Taxes) or Clause 14 (Increased Costs) of this Agreement as a result of laws, regulations or requirements of any central bank or other fiscal monetary or competent authority (whether or not having the force of law) or other circumstances in each case in force at the time of that assignment, transfer, novation or change, then the New Bank or Bank (acting through its new Facility Office) will be entitled to receive any such amount only to the extent that the Existing Bank or Bank (acting through its old Facility Office) would have been so entitled had there been no assignment, transfer, novation or change in Facility Office (as the case may be). 28.7 REGISTER Each Agent shall keep a register of all the Parties and shall supply any other Party (at that Party's expense) with a copy of the register on request. 28.8 RELEASE OF BORROWERS Any Borrower (other than Existing NGG, New NG and NGGF) may cease to be a Borrower if at any time, whilst there are no sums which are or may be outstanding from that Borrower under the Finance Documents and there is no outstanding Utilisation Request in relation to that Borrower, it delivers a notice to that effect to the Agents. Upon delivery of any such notice the relevant Borrower shall cease to be a Borrower and shall, subject as provided in this Clause, cease to have any obligations under the Finance Documents in its capacity (only) as a Borrower but without affecting any obligations it may have as Guarantor or in any other capacity. 29. DISCLOSURE OF INFORMATION A Bank may disclose to its professional advisers, to any of its Affiliates or any other person with whom it is proposing to enter, or has entered into, any kind of transfer, participation or other |
agreement in relation to this Agreement:
(a) a copy of any Finance Document;
(b) a copy of the Information Memorandum; and
(c) any information which that Bank has acquired under or in connection with any Finance Document,
provided that a Bank shall not disclose any such information to a person other than one of its Affiliates unless that person has provided to that Bank a confidentiality undertaking addressed to that Bank and NGG, substantially in the form set out in Schedule 8 (Form of Confidentiality Undertakings) or such other form as NGG may approve.
30. SET-OFF
A Finance Party may set off any matured obligation owed by an Obligor under this Agreement (to the extent beneficially owned by that Finance Party) against any obligation (whether or not matured) owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off. If either obligation is unliquidated or unascertained, the Finance Party may set off in an amount estimated by it in good faith to be the amount of that obligation. 31. REDISTRIBUTIONS 31.1 REDISTRIBUTION If any amount owing by an Obligor under this Agreement to a Finance Party (the "RECOVERING FINANCE PARTY") is discharged by payment, set-off or any other manner other than through the Facility Agent or the Swingline Agent in accordance with Clause 11 (Payments) (a "RECOVERY"), then: (a) the recovering Finance Party shall, within 3 Business Days, notify details of the recovery to the relevant Agent; (b) that Agent shall determine whether the recovery is in excess of the amount which the recovering Finance Party would have received had the recovery been received by that Agent and distributed in accordance with Clause 11 (Payments); (c) subject to Clause 31.3 (Exceptions), the recovering Finance Party shall, within 3 Business Days of demand by the relevant Agent, pay to that Agent an amount (the "REDISTRIBUTION") equal to the excess; (d) the relevant Agent shall treat the redistribution as if it were a payment by the Obligor concerned under Clause 11 (Payments) and shall pay the redistribution to the Finance Parties (other than the recovering Finance Party) in accordance with Clause 11.7 (Partial payments); and (e) after payment of the full redistribution, the recovering Finance Party will be subrogated to the portion of the claims paid under paragraph (d) above, and that Obligor will owe the recovering Finance Party a debt which is equal to the redistribution, immediately payable and of the type originally discharged. |
31.2 REVERSAL OF REDISTRIBUTION If under Clause 31.1 (Redistribution): (a) a recovering Finance Party must subsequently return a recovery, or an amount measured by reference to a recovery, to an Obligor; and (b) the recovering Finance Party has paid a redistribution in relation to that recovery, each Finance Party shall, within 3 Business Days of demand by the recovering Finance Party through the relevant Agent, reimburse the recovering Finance Party all or the appropriate portion of the redistribution paid to that Finance Party. Thereupon the subrogation in paragraph (e) of Clause 31.1 (Redistribution) will operate in reverse to the extent of the reimbursement. 31.3 EXCEPTIONS (a) A recovering Finance Party need not pay a redistribution to the extent that it would not, after the payment, have a valid claim against the Obligor concerned in the amount of the redistribution pursuant to paragraph (e) of Clause 31.1 (Redistribution). (b) Where a recovering Finance Party has received a recovery as a consequence of the satisfaction or enforcement of a judgment obtained in any legal action or proceedings to which it is a party it need not pay a redistribution to any Finance Party which (being entitled to do so) did not join in with the recovering Finance Party in the legal action or proceedings, unless the recovering Finance Party did not give prior notice of its involvement in the legal action or proceedings to the relevant Agent for disclosure to all the Banks. 32. SEVERABILITY If a provision of any Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect: (a) the legality, validity or enforceability in that jurisdiction of any other provision of the Finance Documents; or (b) the legality, validity or enforceability in other jurisdictions of that or any other provision of the Finance Documents. 33. COUNTERPARTS This Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement 34. NOTICES 34.1 GIVING OF NOTICES All notices or other communications under or in connection with this Agreement shall be given in writing or facsimile. Any such notice will be deemed to be given as follows: (a) if in writing, when delivered; |
(b) if by facsimile, when received. However, a notice given in accordance with the above but received other than on a Business Day or after business hours in the place of receipt will only be deemed to be given on the next Business Day in that place. Facsimile notices to the relevant Agent must be confirmed in writing (but non-receipt of that confirmation will not affect the validity of the original facsimile notice). 34.2 NOTICES The address, facsimile and telephone numbers and contact details of each Party for all notices and other matters under or in connection with this Agreement are: (i) identified with its signature below (or, in the case of any Bank that becomes a Party pursuant to a Transfer Certificate, set out in the relevant Transfer Certificate); or (ii) as otherwise notified by that Party for this purpose to the relevant Agent by not less than five Business Days' notice. 35. GOVERNING LAW AND JURISDICTION 35.1 GOVERNING LAW This Agreement is governed by English law. 35.2 SUBMISSION TO JURISDICTION (a) The Obligors irrevocably agree for the benefit of each of the Finance Parties that the Courts of England shall have exclusive jurisdiction in relation to any claim, dispute or difference concerning a Finance Document and in relation to, or in relation to the enforcement of, any judgment relating to any such claim, dispute or difference and accordingly submits to the jurisdiction of the English Courts. (b) Each Obligor irrevocably waives any right that it may have to object to an action being brought in the Courts of England, to claim that the action has been brought in an inconvenient forum or to claim that the Courts of England do not have jurisdiction. (c) Nothing in this Clause shall (or be construed so as to) limit the right of any Finance Party to bring legal proceedings in any other court of competent jurisdiction (including, without limitation the courts have jurisdiction by reason of an Obligor's place of incorporation) or concurrently on more than one jurisdiction), whether by way of substantive action, ancillary relief, enforcement or otherwise. 35.3 SERVICE OF PROCESS Without prejudice to any other mode of service, each Obligor: (a) irrevocably appoints NGG as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; |
(b) agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned; (c) consents to the service of process relating to any such proceedings by prepaid posting of a copy of the process to its address for the time being applying under Clause 34.2 (Notices); and (d) agrees that if the appointment of any person mentioned in paragraph (a) above ceases to be effective, the relevant Obligor shall immediately appoint a further person in England to accept service of process on its behalf in England and, failing such appointment within 15 days, the Facility Agent is entitled to appoint such a person by notice to the Obligors. 35.4 FORUM CONVENIENCE AND ENFORCEMENT ABROAD Each Obligor agrees that a judgment or order of a court of England in connection with a Finance Document is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction. 35.5 NO THIRD PARTY RELIANCE A person who is not a party to this Agreement may not enforce its terms under the Contracts (Rights of Third Parties) Act 1999. |
IN WITNESS whereof this Agreement has been entered into on the date set out above.
SCHEDULE 1
THE BANKS
PART I
FACILITY A BANKS AND COMMITMENTS
BANKS COMMITMENTS US$ ----- ------------- ABN AMRO Bank N.V. 85,000,000.00 Bank of America, N.A. 85,000,000.00 The Bank of Tokyo-Mitsubishi, Ltd. 85,000,000.00 Barclays Bank PLC 85,000,000.00 Bayerische Landesbank Girozentrale, London Branch 85,000,000.00 Citibank, N.A. 85,000,000.00 Dresdner Bank AG London Branch 85,000,000.00 HSBC Bank plc 85,000,000.00 JPMorgan Chase Bank 85,000,000.00 TD Bank Europe Limited 85,000,000.00 BBVA Ireland Plc 49,373,913.04 The Bank of New York 49,373,913.04 Commerzbank Aktiengesellschaft, London Branch 49,373,913.04 Deutsche Bank AG London 49,373,913.04 Fleet National Bank 49,373,913.04 Landesbank Hessen-Thuringen Girozentrale, Irish Branch 49,373,913.04 ING Bank N.V., London Branch 49,373,913.04 Landesbank Baden-Wurttemberg, London Branch 49,373,913.04 National Australia Bank Limited (ABN 12 004 044 937) 49,373,913.04 Royal Bank of Canada Europe Limited 49,373,913.04 The Royal Bank of Scotland plc 49,373,913.04 Scotiabank Europe plc 49,373,913.04 Societe Generale 49,373,913.04 Westdeutsche Landesbank Girozentrale 49,373,913.04 Australia and New Zealand Banking Group Limited 27,347,826.09 Banco Santander Central Hispano, S.A. 27,347,826.09 Mellon Bank, N.A. 27,347,826.09 Sumitomo Mitsui Banking Corporation (SMBC) 27,347,826.09 The Dai-Ichi Kangyo Bank, Limited 24,686,956.54 The Fuji Bank, Limited 24,686,956.54 ================ Facility A Total Commitments 1,700,000,000.00 ================ |
PART II
FACILITY B BANKS AND COMMITMENTS
BANKS COMMITMENTS US$ ----- ------------- ABN AMRO Bank N.V. 30,000,000.00 Bank of America, N.A. 30,000,000.00 The Bank of Tokyo-Mitsubishi, Ltd. 30,000,000.00 Barclays Bank PLC 30,000,000.00 Bayerische Landesbank Girozentrale, London Branch 30,000,000.00 Citibank, N.A. 30,000,000.00 Dresdner Bank AG London Branch 30,000,000.00 HSBC Bank plc 30,000,000.00 JPMorgan Chase Bank 30,000,000.00 TD Bank Europe Limited 30,000,000.00 BBVA Ireland Plc 17,426,086.96 The Bank of New York 17,426,086.96 Commerzbank Aktiengesellschaft, London Branch 17,426,086.96 Deutsche Bank International Limited 17,426,086.96 Fleet National Bank 17,426,086.96 Landesbank Hessen-Thuringen Girozentrale, Irish Branch 17,426,086.96 ING Bank N.V., London Branch 17,426,086.96 Landesbank Baden-Wurttemberg, London Branch 17,426,086.96 National Australia Bank Limited (ABN 12 004 044 937) 17,426,086.96 Royal Bank of Canada Europe Limited 17,426,086.96 The Royal Bank of Scotland plc 17,426,086.96 Scotiabank Europe plc 17,426,086.96 Societe Generale 17,426,086.96 Westdeutsche Landesbank Girozentrale 17,426,086.96 Australia and New Zealand Banking Group Limited 9,652,173.90 Banco Santander Central Hispano, S.A. 9,652,173.90 Mellon Bank, N.A. 9,652,173.90 Sumitomo Mitsui Banking Corporation (SMBC) 9,652,173.90 The Dai-Ichi Kangyo Bank, Limited 8,713,043.48 The Fuji Bank, Limited 8,713,043.48 ============== Facility B Total Commitments 600,000,000.00 ============== |
PART III
SWINGLINE BANKS AND SWINGLINE COMMITMENTS
BANKS COMMITMENTS US$ ----- ------------- ABN AMRO Bank N.V. 30,000,000 Bank of America, N.A. 30,000,000 The Bank of Tokyo-Mitsubishi, Ltd. 30,000,000 Barclays Bank PLC 30,000,000 Bayerische Landesbank New York Branch 30,000,000 Citibank, N.A. 30,000,000 Dresdner Bank AG London Branch 30,000,000 HSBC Bank plc 30,000,000 JPMorgan Chase Bank 30,000,000 Toronto Dominion (Texas) Inc. 30,000,000 =========== Swingline Total Commitments 300,000,000 =========== |
CONDITIONS PRECEDENT DOCUMENTS
PART I
TO BE DELIVERED BEFORE THE FIRST UTILISATION
(a) A copy of the memorandum and articles of association and certificate of incorporation of the Borrowers;
(b) a copy of a resolution of the board of directors (or a duly constituted committee of the board of directors and of the board of directors establishing such committee) of each Borrower:
(i) approving the terms of, and the transactions contemplated by, the Finance Documents and resolving that it execute the Finance Documents;
(ii) authorising a specified person or persons to execute and, where applicable, deliver the Finance Documents to which it is a party on its behalf; and
(iii) authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices (including but not limited to Utilisation Requests) to be signed and/or despatched by it under or in connection with the Finance Documents;
(c) specimens of the signatures of each person authorised by the resolutions referred to in paragraph (b) above;
(d) a copy of NG Company's Transmission Licence and the Licences (if any) of each Borrower;
(e) a certificate of a director of each of the Borrowers on its behalf confirming that utilisation of the Facilities in full would not, when utilised, cause any borrowing limit binding on it to be exceeded;
(f) a certificate of an authorised signatory of each of the Borrowers certifying that each copy document specified in Part I of this Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement;
(g) a legal opinion of Allen & Overy addressed to the Finance Parties; and
(h) a notice of cancellation of the undrawn commitment (if any) under the 1999 Facility Agreement such cancellation to be effective no later than the first Utilisation Date.
TO BE DELIVERED BEFORE THE FIRST ADVANCE UNDER FACILITY A
(a) a certified copy of the Niagara Mohawk Merger Agreement;
(b) a certified copy of the circular to the shareholders of Existing NGG to be distributed in connection with the Acquisition;
(c) a certified copy of the resolution passed by the shareholders of Existing NGG approving the Acquisition;
(d) a certified copy of a resolution passed by the shareholders of Niagara Mohawk approving the Acquisition;
(e) a certificate from two directors of New NG dated no earlier than five Business Days before the Niagara Mohawk Acquisition Completion Date (and no later than the date of the first Utilisation Request under Facility A) to the effect that:
(i) the Offeror is to complete such acquisition on a specified date (being a date on or prior to the first Advance under Facility A); and
(ii) the Acquisition is being completed substantially in accordance with the terms contemplated in the Niagara Mohawk Merger Agreement and upon completion the Offeror will have acquired 100 per cent. of Niagara Mohawk; and
(iii) completion of the Acquisition (taking into account any governmental or other conditions affecting the Acquisition after completion and the aggregate cash receivable by Niagara Mohawk shareholders in connection with the Acquisition) will not, in the opinion of the directors of New NG, materially and adversely impact on the ability of the enlarged Group to comply with the financial covenants set out in Clause 19.18 (Group Financial Covenants) or otherwise on the operation of the business of the enlarged Group (taken as a whole);
(f) evidence in form and substance satisfactory to the Facility Agent that all other existing credit agreements (if any) of any Obligor or of NG Company have been cancelled and prepaid in full or where necessary have been renegotiated so as to ensure that neither the Acquisition nor any Utilisation under this Agreement will constitute an event of default (however defined) under any such credit agreement (such cancellation or renegotiation to be effective prior to the first Utilisation Date under Facility A);
(g) evidence in form and substance satisfactory to the Facility Agent that NGG and each other relevant member of the Group will as at the Niagara Mohawk Acquisition Completion Date, be in compliance with all applicable provisions of PUHCA and will have made all necessary applications and declarations under, and obtained all necessary orders, approvals and consents under, PUHCA in relation to this Agreement and each Advance hereunder;
(h) a copy of the memorandum and articles of association and certificate of incorporation of Existing NGG and New NG;
(j) a certificate of a director of each of Existing NGG and New NG on its behalf confirming that utilisation of the Facilities in full would not, when utilised, cause any borrowing limit binding on it to be exceeded; and
(k) a certified copy of the order of the High Court of Justice sanctioning the Scheme of Arrangement under Section 425 of the Companies Act 1985 which was registered with the Registrar of Companies pursuant to sub-section 3 of Section 425 of the Companies Act 1985 on the Registration Date.
PART III
TO BE DELIVERED BY AN ADDITIONAL BORROWER
(a) A Borrower Accession Agreement, duly executed by the Additional Borrower and NGG;
(b) a copy of the memorandum and articles of association and certificate of incorporation or equivalent constitutional documents of the Additional Borrower;
(c) a copy of a resolution of the board of directors or equivalent of the Additional Borrower:
(i) approving the terms of, and the transactions contemplated by, the Borrower Accession Agreement and resolving that it execute the Borrower Accession Agreement;
(ii) authorising a specified person or persons to execute the Borrower Accession Agreement on its behalf; and
(iii) authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices including but not limited to Utilisation Requests to be signed and/or despatched by it under or in connection with this Agreement;
(d) a certificate of a director of the Additional Borrower on its behalf confirming that utilisation of the Facilities in full would not, when utilised, cause any borrowing limit binding on it to be exceeded;
(e) a copy of any other authorisation or other document, opinion or assurance which the relevant Agent considers to be necessary in connection with the entry into and performance of, and the transactions contemplated by, the Borrower Accession Agreement or for the validity of any Finance Document;
(f) specimens of the signatures of each person authorised by the resolution referred to in paragraph (c) above;
(g) the latest audited accounts of the Additional Borrower;
(h) a certificate of an authorised signatory of the Additional Borrower certifying that each copy document specified in this Part III of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Borrower Accession Agreement; and
(i) a legal opinion from the relevant jurisdiction addressed to the Finance Parties.
SCHEDULE 3
CALCULATION OF THE MANDATORY COST
(a) The Mandatory Cost for an Advance for its Term or Interest Period is the rate determined by the Facility Agent to be equal to the arithmetic mean (rounded upward, if necessary, to four decimal places) of the respective rates notified by each of the Reference Banks to the Facility Agent and calculated in accordance with the following formulae:
in relation to an Advance denominated in Sterling:
in relation to any other Advance:
where on the day of application of a formula:
B is the percentage of the Reference Bank's eligible liabilities (in excess of any stated minimum) which the Bank of England requires the Reference Bank to hold on a non-interest-bearing deposit account in accordance with its cash ratio requirements;
Y is LIBOR at or about 11.00 a.m. on that day for the Term or Interest Period;
S is the percentage of the Reference Bank's eligible liabilities which the Bank of England requires the Reference Bank to place as a special deposit;
Z is the interest rate per annum allowed by the Bank of England on special deposits; and
F is the charge payable by the Reference Bank to the Financial Services Authority under paragraph 2.02 or 2.03 (as appropriate) of the Fees Regulations (but where for this purpose, the figure in paragraph 2.02b and 2.03b will be deemed to be zero) expressed in pounds per (pound)1,000,000 of the fee base of the Bank.
(b) For the purposes of this Schedule 3:
(i) "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the meanings given to them at the time of application of the formula by the Bank of England; and
(ii) "FEE BASE" has the meaning given to it in the Fees Regulations;
(iii) "FEES REGULATIONS" means the Banking Supervision (Fees) Regulations 2001, and/or any other regulations governing the payment of fees for banking supervision.
(c) In the application of the formula, B, Y, S and Z are included in the formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY is calculated as 0.5 x 15.
(d) If a Reference Bank does not supply a rate to the Facility Agent, the applicable Mandatory Cost will be determined on the basis of the rate(s) supplied by the remaining Reference Banks.
(e) (i) The formula is applied on the first day of the Term or Interest Period of the relevant Advance.
(ii) Each rate calculated in accordance with the formula is, if necessary, rounded upward to four decimal places.
(f) If the Facility Agent determines that a change in circumstances has rendered, or will render, the formula inappropriate, the Facility Agent (after consultation with the Banks) shall notify NGG of the manner in which the Mandatory Cost will subsequently be calculated. The manner of calculation so notified by the Facility Agent shall, in the absence of manifest error, be binding on all the Parties.
EXHIBIT 4(a)(i)
DATED DECEMBER, 2001
THE NATIONAL GRID COMPANY PLC (1)
NATIONAL GRID GROUP PLC (2)
NEW NATIONAL GRID PLC (3)
And
THE LAW DEBENTURE TRUST CORPORATION p.l.c. (4)
FIRST SUPPLEMENTAL TRUST DEED
modifying the Trust Deed
dated 17th February, 1998
constituting up to (pound sterling)460,000,000
4.25 per cent Unsecured Exchangeable Bond due 2008
ALLEN & OVERY
One New Change
London, EC4M 9QQ
THIS FIRST SUPPLEMENTAL TRUST DEED is made on DECEMBER, 2001 BETWEEN:
(1) THE NATIONAL GRID COMPANY plc, a company incorporated under the laws of England and Wales, whose registered office is at National Grid House, Kirby Corner Road, Coventry, CV4 8JY, England (the "ISSUER");
(2) NATIONAL GRID GROUP PLC, a company incorporated under the laws of England and Wales, whose registered office is at 15 Marylebone Road, London NW1 5JD, England ("NGG");
(3) NEW NATIONAL GRID PLC, a company incorporated under the laws of England and Wales, whose registered office is at 15 Marylebone Road, London NW1 5JD, England (the "SUBSTITUTED OBLIGOR"); and
(4) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company incorporated under the laws of England and Wales, whose registered office is at Fifth Floor, 100 Wood Street, London EC2V 7EX, England (the "TRUSTEE", which expression shall, wherever the context so admits, include such company and all other persons or companies for the time being the trustee or trustees of these presents) as trustee for the Bondholders.
WHEREAS:
(A) This First Supplemental Trust Deed is supplemental to the Trust Deed dated 17th February, 1998 (hereinafter called the "PRINCIPAL TRUST DEED") made between the Issuer, NGG and the Trustee and constituting an issue of up to (pound sterling)460,000,000 4.25 per cent, Unsecured Exchangeable Bonds due 2008 of the Issuer (the "BONDS"). The Principal Trust Deed provides that the Bonds are exchangeable into Shares of NGG.
(B) NGG published a Scheme of Arrangement dated on or about 10th December, 2001 (the "SCHEME") which provides for the establishment of a new holding company for the National Grid Group, being the Substituted Obligor. Further to the Scheme, NGG has asked the Trustee for its consent to the substitution in place of NGG as issuer of the Shares under the Bonds of the Substituted Obligor (the "SUBSTITUTION").
(C) By virtue of Clause 13.1 of the Principal Trust Deed, the Trustee may agree (subject as therein provided) without the consent of the Bondholders, to any modification to the Principal Trust Deed which is of a formal, minor or technical nature or to correct a manifest error or which is in its opinion not materially prejudicial to the interests of the Bondholders and by virtue of Clause 13.2(A)(a)(ii) may agree with the Issuer to the substitution in place of NGG as the issuer of the Shares under the Bonds and the Principal Trust Deed of any subsidiary or holding company of NGG. Any such modification and substitution shall be binding on the Bondholders and shall be notified by the Issuer to the Bondholders within 14 days of the Effective Date.
(D) The Issuer, NGG and the Substituted Obligor have requested the Trustee to agree to certain modifications contained hereinafter in order to reflect the Substitution.
(E) The Trustee, being of the opinion that the modifications and Substitution referred to in Recital (D) above are of a formal, minor or technical nature and/or to correct a manifest error and/or will not be materially prejudicial to the interests of the Bondholders, has agreed to such modifications and the Substitution.
NOW THIS FIRST SUPPLEMENTAL TRUST DEED WITNESSES AND IT IS AGREED AND DECLARED
as follows:
1. DEFINITIONS
SUBJECT as otherwise provided in this First Supplemental Trust Deed and unless there is anything in the subject or context inconsistent therewith, all words and expressions defined or construed in the Principal Trust Deed shall have the same meanings or constructions in this First Supplemental Trust Deed.
2. SUBSTITUTION
2.1 THE Trustee, the Issuer, NGG and the Substituted Obligor hereby agree pursuant to Clause 13.2(A)(a)(ii) of the Principal Trust Deed that with effect from the Effective Date (as defined in Clause 4 below) the Substituted Obligor shall be substituted in place of NGG as the issuer of the Shares under the Exchange Right and the Principal Trust Deed and accordingly shall assume all of the obligations and liabilities expressed therein to attach to NGG.
2.2 Consequent upon Clause 2.1 and in accordance with Clause 13.2(B) of the Principal Trust Deed, the parties hereto acknowledge that NGG shall automatically with effect from the Effective Date be released from all of its obligations under the Principal Trust Deed and the Bonds.
3. MODIFICATIONS
3.1 The provisions of the Principal Trust Deed are modified as from the Effective Date as follows:
(i) All references to NGG shall become references to the Substituted Obligor;
(ii) By the deletion in Clause 16(a) thereof of the words and numbers:
(a) "or NGG";
and
(b) "185 Park Street London SE1 9DY Fax No: 0171 620 8714 Attention: Treasurer"
and the substitution therefor in the case of (b) of the words and numbers:
"National Grid Group PLC
15 Marylebone Road
London NW1 5JD
Fax No: 020 7312 5651
Attention: Treasury Department";
(iii) By the deletion in Clause 16(b) thereof of the words and numbers:
"Princes House
95 Gresham Street
London EC2V 7LY
Fax No: 0171 696 5261"
and the substitution therefor of the words and numbers:
"Fifth Floor
100 Wood Street
London EC2V 7EX
Fax No: 020 7696 5261";
(iv) by the insertion in Clause 16, of a new 16(c)
"in the case of the Substituted Obligor, to it at:-
15 Marylebone Road
London
NW1 5JD
Fax No: 020 7312 5651
Attention: Treasury Department"
3.2 The Conditions set out in Schedule thereto are hereby modified as from the Effective Date as follows:
(i) all references to NGG shall become references to the Substituted Obligor;
(ii) by the deletion of the first paragraph of the Conditions and the substitution in place therefor of the following:
"The (pound sterling) 460,000,000 4.25 per cent. Unsecured Exchangeable Bonds due 2008 (the "Bonds, which expression shall in these Terms and Conditions (the "Conditions"), unless the context otherwise requires, include any Bonds issued pursuant to the over-allotment option and any further bonds issued pursuant to Clause 19 and forming a single series with the Bonds) of The National Grid Company plc (the "Issuer") constituted by a trust deed dated 17 February 1998 (the "Principal Trust Deed") made between the Issuer, The National Grid Group plc ("NGG") and The Law Debenture Trust Corporation p.l.c. (the "Trustee", which expression shall include all persons of the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Bonds as supplemented by a supplemental trust deed dated on or about 10th December, 2001 between the Issuer, NGG, New National Grid plc ("Substituted Obligor") and the Trustee (the "First Supplemental Trust Deed", together with the Principal Trust Deed, the "Trust Deed", which expression shall wherever the context so admits include any deed supplemental thereto). The issue of the Bonds was authorised by a resolution of the board of directors of the Issuer passed on 8 January 1998 and by a committee of the board passed on 5 February 1998. The exchange of the Bonds into Shares (as defined in Condition 6(a)(v)) was authorised by a resolution of the board of directors of NGG passed on 8 January 1998 and by a committee of the board passed on 5 February 1998. The substitution of the Substituted Obligor in place of NGG as issuer of Shares under the Trust Deed was authorised by a resolution of the board of directors of the Substituted Obligor and of NGG on 7th December, 2001. The Bonds are expected to be listed on London Stock
Exchange plc (the "London Stock Exchange"). The statements in these Conditions include summaries of, and are subject to, the detailed provisions of, and definitions in, the Trust Deed, the Agency Agreement (as defined below) and a deposit and custody agreement dated 17 February 1998 made between the Issuer, Marine Midland Bank as custodian (in such capacity, the "Custodian"), Marine Midland Bank as depositary (in such capacity the "Depositary"), the Registrar and the Principal Paying, Transfer and Exchange Agent (each as defined below) and the Holders and Beneficial Owners of the Global Receipts (as defined therein)(the "Deposit and Custody Agreement"). Copies of the Trust Deed, the Deposit and Custody Agreement and an agency agreement dated 17 February 1998 (the "Principal Agency Agreement") made between the Issuer, NGG, Midland Bank plc, as principal paying, transfer and exchange agent (the "Principal Paying, Transfer and Exchange Agent", which expression shall include any successor principal paying, transfer and exchange agent under the Agency Agreement), the other paying, transfer and exchange agent named therein (together with the Principal Paying, Transfer and Exchange Agent, the "Agents", which expression shall include any additional or successor paying, transfer or exchange agents under the Agency Agreement), Lloyds Bank Registrars as registrar (the "Registrar", which expression shall include any successor registrar under the Agency Agreement) and the Trustee as supplemented by a supplemental paying, transfer and exchange agency agreement dated on or about 10th December, 2001 between the Issuer, NGG, the Substituted Obligor, the Trustee, the Agents and the Registrar (the "First Supplemental Paying, Transfer and Exchange Agency Agreement", together with the Principal Agency Agreement, the "Agency Agreement") are available for inspection during normal business hours by the Bondholders at the registered office for the time being of the Trustee, which at the date hereof is at Fifth Floor, 100 Wood Street, London EC2V 7EX and at the specified office of each of the Agents. The Bondholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed, the Agency Agreement and the Deposit and Custody Agreement.";
(iii) by the deletion in Condition 6(b)(ii) of the words "National Grid House, Kirby Corner Road, Coventry CV4 8JY" and the substitution therefor of the words "15 Marylebone Road, London NW1 5JD";
(iv) by the deletion of all words in italics within the Conditions.
4. EFFECTIVE DATE
This First Supplemental Trust Deed shall become effective on the date upon which an office copy of the order of the High Court of Justice sanctioning the Scheme is registered with the Registrar of Companies pursuant to sub-section (3) of section 425 of the Companies Act 1985. The Issuer will notify the Trustee at least two business days prior to the date it proposes to register the said office copy of the order.
5. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
A person who is not a party to this First Supplemental Trust Deed has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this First Supplemental Trust Deed, but this does not affect any right or remedy of a third party which exists or is available apart from that Act.
6. NOTICE TO BONDHOLDERS
THE Issuer covenants with the Trustee that not later than 14 days after the Effective Date it will give notice to the Bondholders of the modifications and the Substitution provided for herein in a form previously approved by the Trustee.
7. GENERAL
(A) THE Principal Trust Deed shall with effect from the Effective Date be read and construed in conjunction with this First Supplemental Trust Deed as one document.
(B) A memorandum of this First Supplemental Trust Deed shall be endorsed by the Trustee on the Principal Trust Deed and by each of the Issuer, NGG and the Substituted Obligor on its duplicate thereof.
(C) This First Supplemental Trust Deed may be executed in counterparts, each of which, taken together, shall constitute one and the same First Supplemental Trust Deed and any party may enter into this First Supplemental Trust Deed by executing a counterpart.
IN WITNESS whereof this First Supplemental Trust Deed has been executed as a deed by the Issuer, NGG, the Substituted Obligor and the Trustee and delivered on the date stated on page 1.
SIGNATORIES
THE COMMON SEAL of ) [GOLD SEAL] THE NATIONAL GRID ) COMPANY PLC ) was affixed to this deed ) in the presence of: ) Director [SIGNATURE ILLEGIBLE] Director [SIGNATURE ILLEGIBLE] THE COMMON SEAL of ) [GOLD SEAL] NATIONAL GRID GROUP ) PLC was affixed to this ) deed in the presence of: ) Director [SIGNATURE ILLEGIBLE] Secretary [SIGNATURE ILLEGIBLE] EXECUTED as a deed ) by NEW NATIONAL GRID PLC ) acting by and ) under the authority of that company ) Director [SIGNATURE ILLEGIBLE] Director/Secretary [SIGNATURE ILLEGIBLE] THE COMMON SEAL of ) THE LAW DEBENTURE TRUST ) CORPORATION p.l.c, was affixed ) to this deed in the presence of: ) |
Director
Authorised Signatory
EXHIBIT 4(a)(ii)
[LOGO]
[NATIONAL GRID COMPANY LETTERHEAD]
TNT
For the attention of Mr. Martin O'Donovan
Luxembourg. 20th November 2001 JU/SES/mts
Dear Sirs,
We refer to recent discussions concerning amendments to the Finance Contract and replacement of the existing guarantee given by National Grid Group plc (the "Existing Guarantor") by a guarantee from New National Grid plc (the "Replacement Guarantor").
We propose amending the Finance Contract so as to take effect in the form of Annex 1 to this letter. This amendment will be subject to and only take effect on the occurrence of the following conditions to be satisfied on or prior to 31 March 2002:
1. receipt by the Bank of evidence acceptable to it that the Companies Act scheme of arrangement as described to the Bank in the note received on 16 November 2001 entitled "Mechanics of the Scheme" has come into effect;
2. receipt by the Bank of a guarantee in the form of Annex 2 to this letter duly executed by the Replacement Guarantor together with the Annexes referred to therein; and
3. receipt by the Bank of the restructuring fee of EUR 25,000.
Upon the date of satisfaction of the above conditions, the Existing Guarantor shall be released from its obligations under the Guarantee (as such term is defined in the Finance Contract).
We should be grateful if you would kindly acknowledge and agree the terms of this letter by countersigning the 4 enclosed copies and by returning 2 of them to us.
Yours faithfully,
EUROPEAN INVESTMENT BANK
/s/ K.J. Andreopoulos /s/ P. Jedefors K.J. Andreopoulos P. Jedefors Deputy General Counsel Director |
Agreed and accepted for and on behalf of
THE NATIONAL GRID COMPANY PLC
Agreed and accepted for and on behalf of
NATIONAL GRID GROUP PLC
Agreed and accepted for and on behalf of
NEW NATIONAL GRID PLC
ANNEX 1 E U R O P E A N I N V E S T M E N T B A N K FI No 0.9200 GB |
NATIONAL GRID (UK) PROJECT
FINANCE CONTRACT
between
EUROPEAN INVESTMENT BANK
and
THE NATIONAL GRID COMPANY PLC
London, 2001
THIS CONTRACT IS MADE BETWEEN:
European Investment Bank having its Head Office at 100 boulevard Konrad Adenauer, Luxembourg-Kirchberg, Grand Duchy of Luxembourg, represented by
hereinafter called: "THE BANK"
of the first part, and
The National Grid Company plc, a public company incorporated with limited liability in England, and having its registered office at National Grid House, Kirby Corner Road, Coventry CV4 8JY, and represented by
hereinafter called: "THE BORROWER"
of the second part.
WHEREAS:
1. THE BORROWER is undertaking a project (hereinafter called "THE PROJECT") comprising the reinforcement and enhancement of the existing electricity transmission grid (275kV - 400kV) throughout England and Wales, and consolidating the load dispatch from five to one control centre, as more particularly described in the technical description set out in Schedule A hereto as the same may be amended from time to time with the consent of THE BANK (hereinafter called the "TECHNICAL DESCRIPTION").
2. The estimated total cost of THE PROJECT is GBP 443 million (four hundred and forty-three million pounds sterling) including price and technical contingencies.
3. The cost of THE PROJECT is to be financed as follows: GBP million ----------- Own funds 243 4. In order to complete the financing THE BORROWERS has requested from THE BANK a credit in an amount equivalent to GBP million 200 ------------ Total 443 |
5. Since part of the credit granted under this Contract may be disbursed in ecus, for the purposes of this Contract the term "currency" includes the ecu as defined in Schedule B. The European Council took decisions at the Madrid Summit of 15th and 16th December 1995 relating to the change of name of the European monetary unit from "ecu" to "Euro" with effect from the start of the third stage of European economic and monetary union (EMU).
6. THE BORROWER is a wholly-owned subsidiary of National Grid Group plc which in turn is a wholly-owned subsidiary of New National Grid plc (hereinafter called the "GUARANTOR") which has agreed to execute a guarantee (hereinafter called the "GUARANTEE") in respect to THE BORROWER's financial obligations hereunder.
7. THE BANK, being satisfied that the financing of THE PROJECT comes within the scope of its functions and having regard to the matters recited above, has decided to give effect to THE BORROWER's request by granting to THE BORROWER under this Finance Contract (hereinafter called the "CONTRACT") a loan in an amount equivalent to GBP 200 million (two hundred million pounds sterling).
8. The board of directors of THE BORROWER has authorised the borrowing provided for hereunder by resolution in the terms set out in Annex 1 by which THE BORROWER's signatories are duly authorised to sign this Contract on its behalf; and it has been duly certified in the form set out in Annex II that such borrowing is within the corporate powers of THE BORROWER.
9. References herein to Articles, Recitals, Schedules and Annexes are references respectively to articles of, and recitals, schedules and annexes to, this Contract and the following terms have the respective meanings assigned to them in the following Recitals and Articles:
Term Article ---- ------- Accounting Date 6.01(f) Authority 7.07(1)B Business Day 5.03(3) Companies Act Subsidiary 8.05 Contract seventh Recital Conversion 3.01C(2)(i) Conversion Date 3.01C(2)(ii) Conversion Option Date 3.01C(2)(i) Conversion Request 3.01C(2)(i) Conversion Year 3.01C(2)(i) Converted Fixed-Rate Tranche 3.01C(2)(ii) Credit 1.01 Disbursement Notice 1.02(3) Electricity Act 7.07(1)B Environmental Laws 7.07(2) Financial Indebtedness 8.05 Fixed-Margin Convertible Tranche 1.02(2)(c) Fixed-Margin Interest Rate 3.01C Fixed-Margin Non-Convertible Interest Rate 3.01D Fixed-Margin Non-Convertible Tranche 1.02(2)(c) Fixed-Rate Tranche 1.02(2)(c) Group 8.05 Guarantee sixth Recital Guarantor sixth Recital LIBOR Schedule C Loan 2.01 Material Adverse Change 1.04B(b) Maturity Date 3.01B(2)(ii) Moody's 8.05 NG Group 8.05 Notice Day 3.01B(3)(ii)(a) Notice Period 3.01B(3)(ii)(a) Payment Date 4.02(1)(A) Pre-disbursement Date 1.04B(b) Prepayment Amount 4.02(1)(A) Prepayment Date 4.02(1)(A) Prepayment Notice 4.02(1)(A) Project first Recital Project Finance Borrowing 8.05 Project Finance Company 8.05 Proposal 3.01C(2)(i) Quarter Date 3.01C(1) Reference Period 3.01C(1) Reference Rate 4.02(1)(B)(2) Relevant Assets 8.05 Request 1.02(2) Review Date 4.01(B)(2) Revisable Fixed-Rate Tranche 1.02(2)(c) Revisable Reference Period 3.01B(2) Revisable Test Date 4.01B Revision Date 3.01B(3)(ii)(a) Revision Notice 3.01B(3)(ii)(a) Security Interest 8.05 Subsidiaries 8.05 Subsidiary Undertaking 8.05 Standard & Poors 8.05 Technical Description first Recital Test Date 4.01(B)(2) Tranche 1.02(1) |
Transmission Business 8.05
Transmission License 8.05
NOW THEREFORE it is hereby agreed as follows:
ARTICLE 1 DISBURSEMENT 1.01 AMOUNT OF CREDIT By this Contract THE BANK establishes in favour of THE BORROWER, and THE BORROWER accepts, a credit (hereinafter called the "CREDIT") in an amount equivalent to GBP 200 million (two hundred million pounds sterling), to be used for the purpose of the financing of THE PROJECT. 1.02 DISBURSEMENT PROCEDURES (1) Subject to the provisions of Articles 1.04 and 1.07, the Credit shall be disbursed in up to a maximum of eight tranches (each being referred to individually as a "TRANCHE") which shall each be in a minimum amount equivalent to GBP 25,000,000 and in an amount which is a multiple of GBP 5,000,000 or the equivalent thereof. (2) Disbursement of each Tranche shall be subject to receipt by THE BANK of a written request (a "REQUEST") from THE BORROWER specifying: (a) the amount (expressed in GBP) of the Tranche; (b) the currency in which THE BORROWER prefers the Tranche to be disbursed, being a currency referred to in Article 1.03; (c) the interest rate basis selected under Article 3.01 specifying whether the Tranche is to bear a fixed rate of interest (such Tranche being referred to as a "FIXED-RATE TRANCHE") or a revisable rate of interest (such Tranche being referred to as a "REVISABLE FIXED-RATE TRANCHE") or a convertible interest rate basis (such Tranche being referred to as a "FIXED-MARGIN CONVERTIBLE TRANCHE") or a fixed margin to LIBOR rate of interest (such Tranche being referred to as a "FIXED-MARGIN NON-CONVERTIBLE TRANCHE"); (d) THE BORROWER's preferred payment schedule, chosen in accordance with Article 4.01A; and (e) the preferred date for disbursement, it being understood that THE BANK may disburse the Tranche up to four calendar months from the date of the Request. |
THE BORROWER may also at its discretion specify in the Request (a) the applicable interest rate, if any, previously indicated by THE BANK without commitment to be applicable to the currency of the Tranche during its lifetime or, in the case of a Revisable Fixed-Rate Tranche, for its initial Revisable Reference Period or, in the case of a Fixed-Margin Convertible Tranche or a Fixed-Margin Non-Convertible Tranche, for the first Reference Period; and/or (b) the fixed margin to LIBOR previously indicated by THE BANK as applicable to the Tranche and/or (c) the Conversion Year preferred by it.
No Request may be made before the elapse of one month from the immediately preceding Request nor may any Request be made later than 31st December 1999. Subject to the proviso to Article 1.02(3) each Request is irrevocable.
(3) THE BANK shall, as soon as practicable and in any event no later
than a date falling between 10 and 15 days before the proposed date of
disbursement, if the Request conforms to Article 1.02(2) and subject
to Articles 1.03 and 1.07, deliver to THE BORROWER a notice
(hereinafter a "DISBURSEMENT NOTICE") which shall: (i) confirm the
amount and currency composition of the Tranche specified in the
Request; (ii) specify the interest rate or rates applicable during the
Tranche's lifetime pursuant to Article 3.01A or confirm or specify the
interest rate or rates applicable during the first Revisable Reference
Period pursuant to Article 3.01B, or, if calculated, the variable
interest rate as determined pursuant to Article 3.01C or 3.01D, as the
case may be; (iii) specify the repayment terms applicable thereto;
(iv) specify the date of disbursement of the Tranche; and (v) specify,
where relevant, the fixed margin to LIBOR applicable to the Tranche
and the Conversion Year or the expiry date of the first Revisable
Reference Period; Provided that if one or more of the elements
specified in the Disbursement Notice does not conform to the
corresponding element in the Request THE BORROWER may within three
London business days following receipt of the Disbursement Notice
revoke the Request by notice to THE BANK and thereupon the Request and
the Disbursement Notice shall be of no effect.
(4) THE BANK shall in any event not be obliged to issue a Disbursement Notice unless it is reasonably satisfied that funds in the currency and for maturities such as to enable THE BANK to fund the Tranche contemplated in the Request are readily available to it upon satisfactory terms and conditions, having regard among other matters to administrative consents of the relevant monetary authorities; for this purpose, whether terms and conditions are satisfactory shall be determined on the basis of THE BANK's reasonable opinion as to whether or not the terms and conditions relating to the procurement of such funds are such that acceptance thereof would adversely affect THE BANK's position or operations in any significant financial market. Provided that if THE BANK is unable to fund any Tranche in application of the provisions of this paragraph (4), THE BANK shall, after consultation with THE BORROWER, extend the period for disbursement of the Credit for such period as THE BANK shall decide in agreement with THE BORROWER.
(5) Disbursement shall be made to such bank account of THE BORROWER as it shall notify to THE BANK not less than ten days before the date of disbursement. 1.03 CURRENCY OF DISBURSEMENT Subject to availability, THE BANK shall disburse each Tranche in the currency for which THE BORROWER has expressed a preference; provided that Fixed-Margin Convertible Tranches and Fixed-Margin Non-Convertible Tranches shall, unless otherwise agreed by THE BANK, be available in GBP, in Japanese Yen or Swiss Francs. Each currency of disbursement shall be the ecu, a currency of one of the Member States of THE BANK or any other currency (including Japanese Yen, Swiss francs and US Dollars) which is widely traded on the principal foreign exchange market. |
-6- For the calculation of the sums to be disbursed in currencies other than GBP, THE BANK shall apply the middle-market exchange rate prevailing on the London foreign exchange market or, failing which, any other major internationally recognised market chosen by THE BANK, on such date (being days on which banks are open for business in London, Luxembourg and the relevant other market) before disbursement as THE BANK shall decide. |
1.04 CONDITIONS OF DISBURSEMENT
A. Disbursement of the first Tranche under Article 1.02 is subject to fulfilment of each of the following conditions to the satisfaction of THE BANK before the date fixed for disbursement:
(a) the condition mentioned in Article 8.01 shall have been satisfied;
(b) all material approvals and consents necessary to proceed with the implementation of THE PROJECT shall have been received by THE BORROWER; and
(c) that insurances in accordance with the requirements of Article 7.05 shall be in place.
B. Disbursement of each Tranche under Article 1.02 is subject to fulfilment of each of the following conditions to the satisfaction of THE BANK before the date fixed for disbursement:
(a) following drawdown of the relevant Tranche the aggregate amount of the Credit drawdown will not exceed the aggregate expenditure incurred or contractually committed by THE BORROWER in respect of THE PROJECT up to the date of the relevant Request;
(b) at the latest two Business Days prior to the date of disbursement (the "PRE-DISBURSEMENT DATE"), there shall not have occurred any Material Adverse Change in relation to THE BORROWER or the Guarantor since the date of this Contract; provided THE BANK shall act reasonably in determining the occurrence or non-occurrence of a Material Adverse Change; for the purpose of this subparagraph (b), "MATERIAL ADVERSE CHANGE" means, in relation to THE BORROWER, any event or condition which materially impairs the ability of THE BORROWER to perform its financial and other obligations under this Finance Contract; or (ii) in relation to the Guarantor an event or condition which materially impairs its ability to perform its financial obligations under the Guarantee; and
(c) receipt by THE BANK of a certificate from THE BORROWER in the form of Annex III.
1.05 DEFERMENT COMMISSION
If any disbursement of any Tranche under Article 1.02 is deferred at the request of THE BORROWER, with the consent of THE BANK, or by reason of non-fulfilment of the conditions of disbursement, THE BORROWER shall pay deferment commission on the amount of which disbursement is deferred at an annual rate of 1% calculated from the original specified disbursement date to the actual disbursement date or, if the Tranche is not wholly disbursed, to the date of annulment or cancellation of the Tranche. The request for deferral must be received by THE BANK at least seven days before the original disbursement date. Such commission shall accrue from day to day and shall be payable on each date specified in Article 5.03(1).
1.06 ANNULMENT OF CREDIT
If the cost of THE PROJECT should fall short of the figure stated in the Recitals, THE BANK may, by notice to THE BORROWER, annul the Credit in proportion to the amount of the shortfall and in an amount such as to ensure that the Credit (including any amount disbursed hereunder) does not exceed 50% of such cost.
THE BORROWER may at any time, by notice to THE BANK, in whole or in part annual any undisbursed portion of the Credit.
If THE BORROWER annuls any undisbursed Tranche for which the relevant Request has not been revoked pursuant to the proviso to Article 1.02(3), it shall pay a flat commission calculated on the amount annulled at half the rate of interest applied by THE BANK at the date of annulment to loans made by it in the European Union in the same proportions between currencies and for the same maturities as the Tranche in question. Such commission shall be payable in addition to any commission payable under Article 1.05.
1.07 CANCELLATION OF CREDIT
THE BANK may, by notice to THE BORROWER, cancel the undisbursed portion of the Credit at any time and with immediate effect:
(a) following the occurrence of any event mentioned in Article 11.01(A) or (B); or
(b) if exceptional circumstances shall arise which adversely and materially affect THE BANK's access to national or relevant international capital markets;
provided that THE BANK shall not be entitled to cancel, on grounds of case
(b), any Tranche which has been the subject of a Disbursement Notice.
Alternatively, if THE BANK is of the opinion that a situation described in case (a) or (b) has arisen and is temporary, it may by notice to THE BORROWER suspend the undisbursed portion of the Credit. In such case, the suspension shall continue until THE BANK notifies THE BORROWER (which it shall do as soon as reasonably possible) that it is again in a position to issue a Disbursement Notice.
The Credit shall be considered as cancelled if THE BANK demands repayment under Article 11.
If the Credit is cancelled by reason of the circumstances mentioned under case (a) above, THE BORROWER shall pay commission on the cancelled amount in respect of which a Disbursement Notice has been issued at an annual rate of 0.75% calculated from the date of the relevant Request to the date of cancellation.
Such commission shall be payable in addition to any commission payable under Article 1.05 or 1.06.
1.08 CURRENCY OF SUMS DUE UNDER ARTICLE 1
Commission due from THE BORROWER to THE BANK under this Article 1 shall be calculated and payable in pounds sterling.
ARTICLE 2
THE LOAN
2.01 AMOUNT OF LOAN The loan (herein called the "LOAN") shall comprise the aggregate of the amounts in the currencies disbursed by THE BANK, as notified by THE BANK upon the occasion of the disbursement of each Tranche. 2.02 CURRENCY OF REPAYMENTS Without prejudice to the terms of Article 4.02, each repayment under Article 4 or, as the case may be, Article 11 shall be effected in the currencies disbursed. The amount to be repaid on each repayment date in each currency in respect of each Tranche shall be proportional to the amount of the Tranche outstanding in that currency. 2.03 CURRENCY OF INTEREST AND OTHER CHARGES Interest and other charges payable under Articles 3, 4 and 11 shall be calculated and be payable in respect of each Tranche in each currency in which the Tranche is repayable. Subject to Article 1.08, any other payment shall be made in the currency specified by THE BANK having regard to the currency of the expenditure to be reimbursed by means of that payment. 2.04 NOTIFICATION BY THE BANK After disbursement of a Tranche, THE BANK shall deliver to THE BORROWER a summary statement showing the disbursement date, amount, repayment terms and the fixed or prevailing variable interest rate of and for that Tranche. Such confirmation shall include the relevant amortisation table referred to in Article 4.01A. |
ARTICLE 3
INTEREST
3.01 RATE OF INTEREST 3.01A FIXED-RATE TRANCHES The outstanding balance of each Tranche which is a Fixed-Rate Tranche shall bear interest at the rate or rates specified in the Disbursement Notice, each of which rates shall be the interest rate offered by THE BANK at the date of issue of the relevant Disbursement Notice in respect of loans to be made in the relevant currency and granted by THE BANK to borrowers in the EU on the same repayment terms and on the same terms for the payment of interest as the Tranche in question. THE BORROWER shall pay interest on Fixed-Rate Tranches semi-annually in arrears on the payment dates specified in Article 5.03(2) or in the relevant Disbursement Notice. |
3.01B REVISABLE FIXED-RATE TRANCHES (1) Interest shall accrue on the principal amount of Revisable Fixed-Rate Tranches outstanding at nominal fixed interest rates applicable to successive Revisable Reference Periods as determined pursuant to Article 3.01B(3). (2) "REVISABLE REFERENCE PERIOD" means, subject to Article 3.01B(4), a period commencing on the date of disbursement of the relevant Tranche or the date of expiry of the immediately preceding relevant Revisable Reference Period and expiring as follows: (i) the first Revisable Reference Period shall expire on such date as is specified in the relevant Disbursement Notice being no earlier than the fourth anniversary of the date if drawdown of such Tranche and being a payment date specified in Article 5.03(2) or the relevant Disbursement Notice and being no later than such date falling in the tenth year after such drawdown; and (ii) each subsequent Revisable Reference Period shall expire on the date specified in the relevant notice of acceptance given by THE BORROWER pursuant to Article 3.01B(3)(ii)(b) below, being a date falling at least four years after the date of expiry of the first Revisable Reference Period and being a date falling at least four years after the expiry of the preceding Revisable Reference Period and being a date falling no later than the most recent date specified in Article 5.03(2) or the relevant Disbursement Notice prior to the twentieth anniversary of the date of drawdown of such Tranche (such date being hereinafter referred as the "MATURITY DATE" for such Tranche). (3) (i) Interest on the relevant Tranche shall be payable at a fixed rate determined by THE BANK for each successive Revisable Reference Period to be the rate applicable to its customers in the EU in respect of loans denominated in the currency of the Tranche, having the same maturity and the same interest payment basis as the relevant Tranche. The rate of interest for the first Revisable Reference Period shall be specified in the relevant Disbursement Notice. (ii) For each subsequent Revisable Reference Period the interest rate applicable to the relevant Tranche shall be determined as follows: (a) before 12 noon (Luxembourg time) on any Business Day (the "NOTICE DAY") falling in the interval between 60 and 30 days (the "NOTICE PERIOD") prior to the commencement of each subsequent Revisable Reference Period (the "REVISION DATE") and, where reasonably practicable, after prior consultation with THE BORROWER, THE BANK shall, subject to Article 4.01B, indicate by irrevocable notice (the "REVISION NOTICE") the interest rate which shall apply to the Tranche for each choice of duration of the Revisable Reference Period as permitted by Article 3.01B(2)(ii), to the extent that funding is available to THE BANK for each duration; (b) by not later than 17:00 Luxembourg time on the Notice Day THE BORROWER shall indicate to THE BANK by irrevocable notice its acceptance or rejection of the rate indicated by THE BANK for one of the permitted durations; upon delivery of such notice of acceptance, THE BORROWER shall be obliged to pay interest at the specified rate for a revisable reference period of the specified duration, failing delivery of an acceptance by THE BORROWER in due time; if THE BORROWER rejects the indicated rate, THE BORROWER shall be obliged to prepay the Tranche on the Revision Date in question. |
(4) If so requested by THE BORROWER prior to the Notice Day, and provided relevant funding in the currency of the relevant Tranche is available to THE BANK, THE BANK may propose a modification of the duration of the relevant Revisable Reference Period in accordance with THE BORROWER's request provided that the modified Revisable Reference Period has (a) a minimum duration of four years, and (b) has an expiry date falling on a date mentioned in Article 5.03(2) or the relevant Disbursement Notice falling no later than the relevant Maturity Date. THE BANK shall notify the modified Revisable Reference Period in the relevant Revision Notice and THE BORROWER may accept the proposal by the notice mentioned in Article 3.01B(3)(ii)(b).
(5) THE BORROWER shall pay interest in Revisable Fixed-Rate Tranches semi-annually in arrears on the payment dates specified in Article 5.03(2) or in the relevant Disbursement Notice commencing on the first such date following the date of disbursement of the Tranche.
3.01C FIXED-MARGIN CONVERTIBLE TRANCHES
(1) The daily outstanding balance of each Tranche which is a Fixed-Margin Convertible Tranche shall bear interest at the Fixed-Margin Interest Rate.
"FIXED-MARGIN INTEREST RATE" means an annual percentage rate of interest equal to LIBOR (as defined in Schedule C) adjusted by Y, calculated by THE BANK for each successive Reference Period. The Fixed-Margin Interest Rate for each Reference Period shall be the rate so notified by THE BANK to THE BORROWER within 10 days of commencement of the Reference Period to which such rate applies;
where
"Y" means such fixed margin to LIBOR (being either plus or minus) determined by THE BANK and notified to THE BORROWER in the relevant Disbursement Notice in respect of the period from the date of drawdown up to 15th December of the year of conversion specified in the relevant Disbursement Notice and thereafter such fixed margin shall be plus 15 basis points;
"QUARTER DATE" means each 5th February, 5th May, 5th August and 5th November (or if any such day is not a Business Day, the next following day which is a Business Day); and
"REFERENCE PERIOD" means each period from, and including, one Quarter Date to, but excluding, the next following Quarter Date, except that the initial Reference Period shall commence on the date of disbursement of the Tranche and the final Reference Period shall end on, but exclude, the final repayment date of the Tranche.
THE BORROWER shall pay interest on Fixed-Margin Convertible-Rate Tranches quarterly in arrears on each date specified in Article 5.03(1), commencing on the first such date following the date of disbursement of the Tranche.
(2) The Fixed-Margin Interest Rate basis as specified in Article 3.01C(1) shall be modified at the request of THE BORROWER on the following conditions:
(i) upon receipt by THE BANK of a Conversion Request from THE BORROWER on any Business Day falling between 60 and 30 days prior to the a Conversion Option Date and after prior consultation with THE BORROWER, and on condition that the necessary funds are available to THE BANK for this purpose. THE BANK shall, upon giving THE BORROWER notice at least 2 Business Days prior to making such proposal, propose to THE BORROWER the fixed rate of interest to be applicable to the specified Fixed-Margin Convertible-Rate Tranche for its remaining term and shall propose that this rate shall apply as from the Conversion Option Date, with interest to be payable semi-annually in arrears on the date(s) specified in Article 5.03(2) or in the relevant Disbursement Notice (such change of interest rate basis being referred to as "CONVERSION"); and such rate shall be the rate of interest applicable to loans denominated in the respective currencies of the Tranches concerned and granted by THE BANK to borrowers in the EU on the same repayment terms and on the same terms for the payment of interest as the Tranche in question; provided that THE BANK shall not be obliged to make more than one such proposal per Tranche.
For the purposes of this Article 3.01C, "CONVERSION OPTION DATE" means each Quarter Date in the year (the "CONVERSION YEAR") specified by THE BANK in the relevant Disbursement Notice being a year falling not earlier than two years from the date of disbursement of the relevant Tranche and not later than four years before the relevant Maturity Date; and "CONVERSION REQUEST" means a written notice from THE BORROWER requesting THE BANK to submit to them a proposal for converting the basis of the whole but not part only of a specified Fixed-Margin Convertible Tranche to a fixed-rate basis.
Any such proposal (the "PROPOSAL") shall include any proposal for modifications to this Contract which THE BANK in its discretion considers reasonably necessary for the purpose of amending the applicable interest rate basis or causing the financial terms of the Contract to conform to THE BANK's standard terms of lending for fixed-rate loans at the date of the Proposal;
(ii) any notice by THE BORROWER accepting the Proposal in respect of any Fixed-Margin Convertible-Rate Tranche shall be served in writing on THE BANK by 5 p.m. (Luxembourg time) on the same day as THE BORROWER's receipt of the Proposal; provided that, if the Proposal is delivered after 12 noon Luxembourg time on any Business Day, and THE BORROWER does not accept the Proposal by the time specified, THE BANK, at the written request of THE BORROWER made on the day of receipt of the Proposal, shall on the next following Business Day submit to THE BORROWER a further Proposal that is open for acceptance on the same basis as the first Proposal; the Conversion Option Date in respect of which a Proposal is accepted is hereinafter referred to as the "CONVERSION DATE" and a Fixed-Margin Convertible-Rate Tranche subject to Conversion hereunder is hereinafter referred to as a "CONVERTED FIXED-RATE TRANCHE"; the notice shall specify the Tranches to which it applies;
(iii) in the event of THE BORROWER's acceptance of the Proposal, (a) any modifications to this Contract shall be effected by an agreement between THE BANK and THE BORROWER and the Guarantor; (b) any accrued interest shall be payable on the Conversion Date; and (c) interest on the Converted Fixed-Rate Tranches shall thereafter be payable annually on the payment date(s) mentioned in Article 5.03(2) or in the relevant Disbursement Notice;
(iv) in the event of THE BORROWER's refusal or non-acceptance of a Proposal or of THE BORROWER failing to make a written request under paragraph (i) above or of a failure by the relevant parties to reach the agreement mentioned in item (a) of subparagraph (iii) above, the Fixed-Margin Interest Rate basis as specified in Article 3.01C(1) shall remain in full force and effect in respect of the balance of the Tranche outstanding. 3.01D FIXED-MARGIN NON-CONVERTIBLE TRANCHES Interest shall accrue on the daily outstanding balance of each Fixed-Margin Non-Convertible Tranche at the Fixed-Margin Non-Convertible Interest Rate. For the purpose of this Article 3.01D: "FIXED-MARGIN NON-CONVERTIBLE INTEREST RATE" means an annual percentage rate equal to LIBOR (as defined in Schedule C) adjusted by X, calculated by THE BANK for each successive Reference Period (as defined in 3.01C). The rate of interest for each Reference Period shall be the rate so notified by THE BANK to THE BORROWER within 10 days of commencement of the Reference Period to which such rate applies; provided that in the event of a Tranche being drawn down on a date other than on a Quarter Date the Fixed-Margin Non-Convertible Interest Rate for the initial Reference Period shall be LIBOR; where "X" means such fixed margin to LIBOR (being either plus or minus) determined by THE BANK and notified to THE BORROWER in the relevant Disbursement Notice; provided that, if THE BANK is unable to offer a Fixed-Margin Non-Convertible Interest Rate for the full duration of the Tranche but is able to do so for a lesser period, THE BANK shall make an offer in respect of such lesser period and, provided THE BORROWER shall have promptly in writing accepted, the Fixed-Margin Non-Convertible Interest Rate shall thereafter be LIBOR plus 15 basis points from the date of termination of such period until the final repayment date of the Tranche. THE BORROWER shall pay interest on Fixed-Margin Non-Convertible Tranches quarterly in arrears on each date specified in Article 5.03(1), commencing on the first such date following the date of disbursement. 3.02 INTEREST ON OVERDUE SUMS Without prejudice to Article 11 and by exception to Article 3.01, interest shall accrue on any overdue sum from the due date to the actual date of payment at an annual rate calculated as follows: (a) for an amount due under any Tranche, at a rate equal to the sum of (i) 2.5% and (ii) the relevant rate from time to time applicable thereto pursuant to Article 3.01; and (b) for any other amount, at a rate equal to the sum of (i) 2.5% and (ii) the rate of interest charged by THE BANK on the due date for loans made in the currency in question for a term of up to 20 years. Such interest is payable in the same currency as the overdue sum on which it accrues. |
ARTICLE 4
REPAYMENT
4.01 NORMAL REPAYMENT
A. Scheduled Repayment
THE BORROWER shall repay each Tranche by semi-annual instalments on the dates specified in Article 5.03(2) (or, if different, in the relevant Disbursement Notice) in accordance with the terms of the amortisation table specified in the relevant notice mentioned in Article 2.04 and providing (1) in the case of Fixed-Rate Tranches only, for repayment on a constant annuity basis so that the aggregate of principal and interest payable in respect of the Tranche shall be nearly as possible the same on each repayment date or for repayment by equal instalments of principal or (2) in the case of Revisable Fixed-Rate Tranches, Fixed-Margin Non-Convertible Tranches and Fixed-Margin Convertible Tranches for repayment by equal instalments of principal.
Each amortisation table shall be drawn up on the basis that repayment of each Tranche shall begin not later than the first semi-annual payment date mentioned in Article 5.03(2) (or, if different, in the relevant Disbursement Notice) falling after the fourth anniversary of disbursement and shall end on a semi-annual payment date mentioned in Article 5.03(2) (or, if different, in the relevant Disbursement Notice) falling after the elapse of not less than four years and not more than twenty years from the date of disbursement; provided that, if so requested by THE BORROWER, THE BANK may agree that a Tranche shall be repayable in a single instalment on a date mentioned in Article 5.03(2) or a date specified in the Disbursement Notice falling not more than ten years from the date of disbursement.
B. Exceptional Circumstances
(1) If on or before a date (hereinafter a "REVISABLE TEST DATE") falling three months prior to any Revision Date THE BANK shall determine that appropriate counterpart funds are not available to it in national or international finance markets by reason of exceptional circumstances which adversely affect such markets or its access to such markets, THE BANK may on or before the Revisable Test Date give notice to THE BORROWER to repay on such Revision Date the full outstanding amount of the relevant Revisable Fixed-Rate Tranche, and THE BORROWER shall comply with such notice.
If THE BANK shall exercise its right under this Article 4.01B, it may at its discretion offer to fund the outstanding amount of the Revisable Fixed-Rate Tranche, in any other currency available to THE BANK, for the outstanding period of the Tranche or, if shorter, for the longest maturity at which counterpart funds are available to THE BANK, subject to acceptance by THE BORROWER and to the execution, at least 45 days before the Revision Date concerned, of such further contract and guarantee, conforming so far as practicable to the terms of the present Contract and the Guarantee, as THE BANK shall require.
(2) If on or before the date (hereinafter a "TEST DATE") falling three months prior to the date (the "REVIEW DATE") mentioned in Article 5.03(1) next preceding the tenth anniversary of the date of disbursement of any Fixed-Margin Non-Convertible Tranches or Fixed-Margin Convertible Tranche THE BANK shall determine that appropriate counterpart funds are not available to it in national or international finance markets by reason of exceptional circumstances which materially and adversely affect its access to such markets. THE BANK may on or before the Test Date give notice to THE BORROWER to prepay on such Review Date the full outstanding amount of each such Fixed-Margin Non-Convertible Tranches and Fixed-Margin Convertible Tranche and THE BORROWER shall comply with such notice.
If THE BANK shall exercise its right under this Article 4.01B(2), it may at its discretion offer to fund the outstanding amount of the Fixed-Margin Non-Convertible or Fixed-Margin Convertible Tranche, in any other currency available to THE BANK, or on another interest rate basis, for the outstanding period of the Fixed-Margin Non-Convertible or Fixed-Margin Convertible Tranche or, if shorter, for the longest maturity at which counterpart funds are available to THE BANK, subject to acceptance by THE BORROWER and to the execution, at least 45 days before the Review Date concerned, of such further contract and guarantee, conforming so far as practicable to the terms of the present Contract and the Guarantee, as THE BANK shall require. The procedure for the determination of the rate of interest shall conform to the practice of THE BANK prevailing at the time of the Test Date. 4.02 VOLUNTARY PREPAYMENT 1. FIXED- AND REVISABLE-RATE TRANCHES A. THE BORROWER may prepay all or part of any Fixed-Rate Tranche, Revisable Fixed-Rate Tranche, or Converted Fixed-Rate Tranche upon giving written notice (hereinafter a "PREPAYMENT NOTICE") specifying the Tranche and the amount (the "PREPAYMENT AMOUNT") to be prepaid and the proposed date of prepayment (the "PREPAYMENT DATE"), which shall be a payment date specified in Article 5.03(2) or in the relevant Disbursement Notice (each a "PAYMENT DATE"). The Prepayment Notice shall be delivered to THE BANK at least one month prior to the Prepayment Date. Save in the case of prepayment of a Revisable-Rate Tranche on the last day of a Revisable Reference Period, prepayment shall be subject to the payment by the BORROWER of the compensation, if any, due to THE BANK in accordance with the provisions of paragraphs B and C below. B. The amount of compensation due on the Tranche prepaid shall be the amount of the shortfall in interest incurred by THE BANK in respect of each half-year ending on successive Payment Dates falling after the Prepayment Date (but, in the case of a Revisable-Rate Tranche, falling on or before the date of expiry of the current Revisable Reference Period) calculated in the manner stated in the following subparagraph and discounted in accordance with last sentence of this paragraph B. The amount of the shortfall shall be calculated as the amount by which: (x) the interest that would have been payable during that half-year on the prepaid part of the Tranche exceeds (y) the interest which would have been so payable during that half-year if calculated at the Reference Rate; for which purpose the "REFERENCE RATE" means the rate (reduced in each case by 15 (fifteen) basis points) which THE BANK determines on the date falling one month prior to the Prepayment Date to be either (i) the rate for a loan quoted by THE BANK in the relevant currency, having the same financial characteristics as the Tranche, in particular the same period for the payment of interest, the same remaining life to maturity and the same type of repayment profile or in the case of a Revisable-Rate Tranche, if less, the remaining duration of the current Revisable Reference Period, or (ii) if the Bank does not quote such a rate, the rate for a loan or available money market placement for the period most closely corresponding to that maturity or to that remaining duration of the Revisable-Rate Tranche as aforesaid. The interest rate which THE BANK, following the procedures laid down by the Board of Directors of THE BANK, quotes for a loan is, in accordance with the Statute of THE BANK, determined on the basis of conditions prevailing on the capital markets. |
Each amount so calculated shall be discounted to the Prepayment Date by applying a discount rate equal to the rate determined pursuant to indent (y) of this paragraph B.
C. On the date falling on or before 30 days prior to the proposed Prepayment Notice THE BANK shall give notice to THE BORROWER of the amount of compensation due or, as the case may be, the absence of compensation. If by 5 PM Luxembourg time on the same date THE BORROWER fails to confirm its intention to effect prepayment on the terms notified by THE BANK, the proposed prepayment shall not take place.
Save as aforesaid, THE BORROWER shall be obliged to effect payment in accordance with the Prepayment Notice, together with accrued interest on the Prepayment Amount as well as any sum due under this Article 4.02.
2. FIXED-MARGIN NON-CONVERTIBLE TRANCHES AND FIXED-MARGIN CONVERTIBLE TRANCHES
THE BORROWER may prepay any Non-Convertible Tranche or Convertible-Rate Tranche (prior to Conversion), together with accrued interest, on the date of expiry of any Reference Period. Prepayment may be effected without penalty and subject to thirty days' prior written notice. The notice shall be irrevocable. Sums prepaid under Article 4.02.1 or 4.02.2 shall not be available to be re-borrowed. 4.03 COMPULSORY PREPAYMENT A. If the total cost of THE PROJECT should fall significantly short of the figure stated in the Recitals, THE BORROWER shall upon demand of THE BANK prepay the required amount of the Loan, together with interest and related sums accrued thereon, on the date indicated by THE BANK. For this purpose, the required amount of the Loan shall be the minimum amount such as to ensure that the outstanding principal amount of the Loan shall not exceed 50% of the total cost of THE PROJECT. B. If, without the prior written contact of THE BANK, the BORROWER ceases to be a Subsidiary which is wholly-owned by the Guarantor, THE BANK may require that THE BORROWER consult with it. Such consultation shall take place within 30 days from the date of THE BANK's request. If after 30 days from the date of such a request THE BANK is of the opinion that such event has, or is likely to have, a material adverse effect on the future servicing of the Loan or on the solvency of THE BORROWER then THE BANK may require THE BORROWER to prepay the Loan, together with accrued interest and a premium calculated on the amount to be prepaid in accordance with Article 4.02. THE BORROWER shall effect payment of the amount demanded on the date specified by THE BANK, such date being a date falling not less than 30 days from the date of the demand. C. If at any time while the Loan is outstanding a Loss-of-Rating Event shall occur, THE BORROWER shall so inform THE BANK and THE BANK may demand that THE BORROWER consult with it with regard to the implications of the Loss-of-Rating Event on THE BORROWER's obligations and on the possible provision of additional security in support thereof. Such consultation shall take place within 30 days from the date of THE BANK's request. If, after the elapse of 30 days from the date of such request, THE BANK is of the reasonable opinion that the Loss-of-Rating Event has, or is likely to have, a material adverse effect on the future servicing of the Loan or on the financial stability of THE BORROWER, it may request THE BORROWER to provide additional security for the Loan in the form of a guarantee in terms and from a bank acceptable to THE BANK or of other security acceptable to THE BANK. If within a further period of 30 days the additional security has not been executed in manner, form and substance satisfactory to THE BANK, THE BANK may forthwith request THE BORROWER to prepay the Loan, together with accrued interest and a premium calculated on the amount to be prepaid in accordance with Article 4.02B. THE BORROWER shall effect payment of the amount demanded on the date specified by THE BANK, such date being a date falling not less than 30 days from the date of the demand. If |
-16- such date should not coincide with an interest payment date, for the purposes of calculation of premium under Article 4.02B, the broken period until the ensuing interest payment date shall itself be treated in like manner as per Article 4.02B. Provided that for the purposes of this Contract a "LOSS-OF-RATING EVENT" means any change in the rating awarded to any unsecured unsubordinated long or medium debt of THE BORROWER by any |
internationally recognised credit rating agency, such that:
a. if the rating is given by Moody's, it falls below A3; or
b. if the rating is given by Standard & Poor's, it falls below
A-.
For the purposes of this Article THE BORROWER undertakes to procure that at all times it shall maintain a rating with each of the agencies referred to at a. and b. above. D. (1) If the transmission of electricity ceases to be the principal business of THE BORROWER whether as a result of the cessation of any business or activity or of the disposal or transfer of any business or activity, THE BORROWER shall consult with THE BANK within thirty days after such cessation. For the purposes of this paragraph (1) the "principal business of THE BORROWER" shall mean a business that from time to time exploits at least 90% of net tangible fixed assets or generates at least 90% of operating profit of THE BORROWER as reported in THE BORROWER's most recent consolidated accounts. (2) In the event that any licence of THE BORROWER associated with the transmission of electricity is or revoked, modified or surrendered then, THE BORROWER shall consult with THE BANK within thirty days after such or revocation, modification or surrender. (3) If, in the circumstances referred to in paragraph (1) above, THE BANK is of the reasonable opinion that such cessation taken as a whole has a material adverse effect on the future servicing of the Loan, or if, in the circumstances referred to in paragraph (2) above, THE BANK is of the reasonable opinion that such revocation, modification or surrender taken as a whole has a material adverse effect on the future servicing of the Loan, the following shall take place: (i) THE BANK shall notify THE BORROWER if it requires a bank or other financial institution acceptable to THE BANK to be appointed (at the expense of THE BORROWER) as a guarantor of THE BORROWER's financial obligations hereunder on terms and conditions reasonably acceptable to THE BANK; and (ii) if THE BORROWER fails to implement any such requirement under (i) above or declare its unwillingness or inability to comply with THE BANK's requirement, it shall, within 30 days from notification to it of THE BANK's requirement, give notice of prepayment of the whole outstanding balance of the Loan on a date falling not later than sixty days after such notification, (together with accrued interest thereon and a premium calculated in accordance with Article 4.02), and shall prepay in accordance with such notice. E. In case of any partial prepayment due under this Article 4.03, THE BORROWER may select which Tranche or Tranches are to be prepaid. 4.04 GENERAL PROVISIONS REGARDING PREPAYMENT UNDER ARTICLE 4 Prepayment shall be made in all currencies of the Tranche in question in proportion to the respective amounts outstanding, save that THE BORROWER may elect instead to prepay under Article 4.02 the whole amount outstanding in one or more currencies under the Tranche. In case of partial prepayment in all currencies, each amount prepaid shall be applied in reduction of outstanding instalments in inverse order of maturity. |
This Article 4 shall not prejudice Article 11.
ARTICLE 5 PAYMENTS 5.01 PLACE OF PAYMENT Each sum payable by THE BORROWER under this Contract shall be paid to the respective account notified by THE BANK to THE BORROWER. THE BANK shall indicate the account not less than fifteen days before the due date for the first payment by THE BORROWER and shall notify any change of account not less than fifteen days before the date of the first payment to which the change applies, save that this period of notice does not apply in the case of payment under Article 11 but THE BANK shall indicate the account in its demand for payment thereunder. 5.02 CALCULATION OF PAYMENTS RELATING TO A FRACTION OF A YEAR Any amount due in respect of any Tranche by way of interest, commission or otherwise hereunder, and calculated in respect of a fraction of a year, shall be calculated on the basis of: (a) in respect of Fixed-Rate Tranches, Revisable Fixed-Rate Tranches, or Converted Fixed-Rate Tranches a year of three hundred and sixty days and a month of thirty days; and (b) in respect of Fixed-Margin Non-Convertible Tranches and Fixed-Margin Convertible Tranches a year of three hundred and sixty-five days (or, in case of a currency other than GBP, three hundred and sixty days) and the number of days elapsed. 5.03 DATES OF PAYMENT (1) Sums due quarterly hereunder are payable to THE BANK on 5th February, 5th May, 5th August, and 5th November in each year. (2) Sums due semi-annually hereunder are payable to THE BANK on 5th February and 5th August. (3) If any payment date specified in Article 5.03(1) or (2) or in the relevant Disbursement Notice falls on a day which is not a Business Day the payment shall be effected on the next following day which is a Business Day or on the immediately preceding day which is a Business Day in the case of payments due in respect of a Fixed-Margin Non-Convertible Tranche or a Fixed-Margin Convertible Tranche. A Business Day means a day (other than a Saturday or Sunday) on which banks are open for business in Luxembourg and London (or, if the currency of disbursement is a currency other than GBP, the relevant principal banking centre for such currency) (herein called a "BUSINESS DAY"). (4) Other sums due hereunder are payable within seven days of receipt by THE BORROWER of the demand made by THE BANK. (5) A sum due from THE BORROWER shall be deemed paid when it is received by THE BANK. |
ARTICLE 6 REPRESENTATION AND WARRANTIES 6.01 THE BORROWER REPRESENTS AND WARRANTS TO THE BANK THAT: (a) it is duly incorporated and validly existing as a public company with limited liability under the laws of England and it has power to carry on its business as it is now being conducted and to own its property and other assets; (b) it has the power to execute, deliver and perform its obligations under this Contract and all necessary corporate, shareholder and other action has been taken to authorise the execution, delivery and performance of the same by it; (c) this Contract constitutes its valid and legally binding obligations; (d) the execution and delivery of, the performance of its obligations under, and compliance with the provisions of, this Contract do not and will not: (i) contravene any existing applicable law, statute, rule or regulation, or any judgement, decree or permit to which it is subject; (ii) conflict with, or result in any material breach of any of the terms of, or constitute a material default under, any other agreement or other instrument to which it is a party or is subject or by which either of them or its property is bound which might reasonably be expected to have a material adverse effect on its ability to perform its material obligations under this Contract; or (iii) contravene or conflict with any provision of its Memorandum and Articles of Association; (e) every material consent, authorisation, licence or approval of, or registration with, or declaration to, governmental or public bodies or authorities or courts required by it to authorise, or required by it in connection with the execution, delivery, validity, enforceability or admissibility in evidence of this Contract or the performance by it of its material obligations under this Contract has been obtained or made and is in full force and effect, and there has been no material default in the observance of the conditions or restrictions (if any) imposed in, or in connection with, any of the same; (f) the consolidated audited accounts of THE BORROWER for the year ended 31st March 2001 (the "ACCOUNTING DATE") have been prepared on a basis consistent with previous years and have been approved by its auditors as representing a true and fair view of the results of its operations for that year and accurately disclose or reserve against all the liabilities (actual or contingent) of THE BORROWER; (g) there has been no Material Adverse Change in relation to THE BORROWER since the Accounting Date and no event or circumstance which constitutes or would with the passage of time constitute an event of default under Article 10.01 has occurred and is continuing; (h) no litigation, arbitration or regulatory proceedings or investigations for which process has been served on it or any of its relevant subsidiaries are current and which, if adversely determined, should result in a material adverse change in relation to THE BORROWER; and (i) THE BORROWER has obtained all necessary consents, authorisations, licences or approvals of governmental or public bodies or authorities in connection with THE PROJECT and all such consents, authorisations, licences or approvals are in full force and effect. |
The representations and warranties contained in this Article 6.01 shall be treated as being made on the date on which this Contract is amended and restated. ARTICLE 7 PARTICULAR UNDERTAKINGS 7.01 USE OF LOAN AND OTHER FUNDS THE BORROWER shall use the proceeds of the Loan for the execution of THE PROJECT. 7.02 COMPLETION OF THE PROJECT THE BORROWER undertakes to carry out THE PROJECT in accordance with the Technical Description (as amended from time to time with the agreement of THE BANK) and use its best efforts to complete it by the final date specified in the Technical Description or by such later date as THE BANK may agree. 7.03 INCREASED COST OF THE PROJECT If the cost of THE PROJECT exceeds the estimated figure set out in the second Recital, THE BORROWER shall obtain the finance to fund the excess cost without recourse to THE BANK, so as to enable THE BORROWER to complete THE PROJECT in accordance with the Technical Description. 7.04 TENDERING PROCEDURE THE BORROWER shall, so far as appropriate and possible and in manner satisfactory to THE BANK, purchase goods, secure services and order works for THE PROJECT by international tender open at least to nationals of all countries which are signatories of the Agreement on the European Economic Area and in accordance with each Directive of the European Union applicable to THE PROJECT. 7.05 INSURANCE So long as the Loan is outstanding, THE BORROWER shall ensure that all works and property forming part of THE PROJECT are insured (whether by third parties or by self insurance) in conformity with good industry practice. 7.06 MAINTENANCE So long as the Loan is outstanding, THE BORROWER shall maintain, repair, overhaul and renew all property (excluding obsolete property and/or property which has reached the end of its useful life) forming part of THE PROJECT as required to keep it in repair and in good working order. 7.07 OPERATIONAL AND ENVIRONMENTAL COVENANTS (1) So long as the Loan is outstanding, THE BORROWER shall: A. unless, save as contemplated by Article 4.03D, THE BANK shall have consented otherwise in writing, retain title to and possession of the assets which comprise THE |
PROJECT or, as appropriate, replace and renew such assets (excluding obsolete assets and/or assets which have reached the end of their useful life) and shall operate THE PROJECT in accordance with its original purpose. THE BANK may withhold its consent only where the proposed action would prejudice THE BANK's interests as lender to THE BORROWER or would render THE PROJECT ineligible for financing by THE BANK under Article 198e of the Treaty of Rome; and
B. comply, or shall ensure compliance, in all material respects with the conditions and restrictions (if any) imposed in, or in connection with, every consent, authorisation, licence or approval of governmental or public bodies or authorities or courts or the Gas and Electricity Markets Authority (the "AUTHORITY") from time to time appointed under Section 1 of the Electricity Act 1989 and any replacement legislation including, to the extend applicable, the Utilities Act 2000 (the "ELECTRICITY ACT") (including the transmission licence (the "TRANSMISSION LICENCE") granted to it under Section 6 of the Electricity Act required in connection with THE PROJECT and do, or cause to be done, all other acts and things which may from time to time be necessary under applicable law (including Environmental Laws), the Grid Code, the Distribution Code and the Fuel Security Code (each as defined in the Transmission Licence) for the continued due compliance therewith.
(2) For the purposes of this Article 7.07:
"ENVIRONMENTAL LAWS" means, in relation to environmental matters, all or any relevant statutes, rules, regulations, statutory instruments, treaties, directives, directions, by-laws, codes of practice, circulars, guidance notes, orders, notices, demands, injunctions, statute law or common law, statutory or common law duty of care, of any governmental authority or agency or any regulatory body in any jurisdiction or the European Union which in any such case is directly binding on and enforceable against THE BORROWER (or, where relevant to another person, that other person).
7.08 PARI PASSU UNDERTAKING
THE BORROWER undertakes that its obligations under this Contract are direct and unconditional obligations of THE BORROWER and rank and will rank at least pari passu with all other unsecured and unsubordinated obligations (including contingent obligations) of THE BORROWER other than those obligations of THE BORROWER to its unsecured creditors which would, on a winding-up of THE BORROWER, be preferred by operation of law.
ARTICLE 8
SECURITY
8.01 GUARANTEE
The obligations of THE BANK under this Contract are conditional upon the execution and delivery to it of the duly executed Guarantee in form and substance approved by THE BANK, whereby the Guarantor unconditionally guarantees the due performance of THE BORROWER's financial obligations under this Contract. THE BORROWER hereby acknowledges and consents to the terms of the Guarantee.
8.02 NEGATIVE PLEDGE
Subject to Article 8.03, so long as any part of the Loan remains outstanding, THE BORROWER shall not, and it shall procure that no other member of the Group will, create or permit to subsist any Security Interest on, or with respect to, any of its present or future business, undertaking, assets or revenues (including any uncalled capital).
8.03 Subject to Article 8.04, Article 8.02 does not apply to:-
(A) any Security Interest created with the prior written consent of THE
BANK;
(B) Security Interests granted prior to the date of this Agreement and disclosed to THE BANK in writing but only if the maximum principal amount secured thereby is not subsequently increased;
(C) any Security Interest by way of title retention entered into in the ordinary course of business;
(D) any lien arising by operation of law in ordinary course of business;
(E) any banker's lien or right of set-off arising by operation of law in the ordinary course of commercial banking transactions or any contractual set-off arrangements in the ordinary course of commercial banking transactions;
(F) any Security Interest existing over assets acquired after the date of this Agreement and existing on the date of acquisition, provided that:-
(1) the Security Interest is not created in contemplation of the acquisition of the same; and
(2) the maximum principal amount secured thereby or the maturity of those obligations is not thereafter increased;
(G) any Security Interest over the assets of any company which becomes a Subsidiary of THE BORROWER after the date of this Agreement and which exist at the date on which it becomes a Subsidiary of THE BORROWER, but only if:-
(1) the principal amount secured by the Security Interest is not increased after the date it becomes a Subsidiary of THE BORROWER; and
(2) the Security Interest is not created in contemplation of it becoming a Subsidiary of THE BORROWER;
(H) any Security Interest over goods and/or documents of title, or insurance policies and sale contracts in relation to such goods, arising in the ordinary course of trading in connection with letters of credit and similar transactions where such Security Interest secures only so much of the acquisition cost of such goods which is required to be paid within 180 days after the date upon which the same was first incurred;
(I) any Security Interest created in substitution for any Security Interest permitted pursuant to this Article (other than Security Interests initially permitted pursuant to paragraph (H) above), provided that the substituted Security Interest is over the same asset and the principal amount secured does not exceed the principal amount secured on such asset prior to the substitution;
(J) any other Security Interest so long as the aggregate outstanding principal amount of indebtedness secured by all the Security Interests permitted under this Article (with the exception of amounts secured by Security Interests referred to in paragraphs (A) to (E) and
(M) below) does not exceed, when combined with all Security Interests of the NG Group, GBP 80 million;
(K) any Security Interest created or granted from time to time in respect of any Project Finance Borrowing including, for the avoidance of doubt, any Security Interest created or granted by a member of the Group in its capacity as a shareholder of a company making a Project Finance Borrowing over its shareholding in that company (including, in the case of a member of the Group whose only material assets are shares in the company incurring the Project Finance Borrowing, a supporting floating charge over all or substantially all of that member's assets) as security for such Project Finance Borrowing, provided that the right of recourse against such shareholder is limited to the realisation of the shareholding in that company;
(L) any Security Interest created by a Project Finance Company; and
(M) any Security Interest created or granted from time to time by a member of the Group in its capacity as a shareholder of a Project Finance Company over its shareholding in that Project Finance Company as security for the obligations of such Project Finance Company.
8.04 Notwithstanding anything in Article 8.03 above, none of THE BORROWER or any of its Subsidiaries will create or permit to subsist any Security Interest over:
(A) Relevant Assets used in the Transmission Business carried out pursuant to any Transmission Licence; or
(B) any shareholding in any Subsidiary of THE BORROWER which is the legal and/or beneficial owner of Relevant Assets used in the Transmission Business carried out pursuant to any Transmission Licence.
8.05 The following terms used in this Article 8 and, where relevant, in Article 11 shall bear the following meaning:
"COMPANIES ACT SUBSIDIARY" means a subsidiary within the meaning of Section 736 of the Companies Act 1985, as amended by Section 144 of the Companies Act 1989.
"FINANCIAL INDEBTEDNESS" means (without double-counting) any indebtedness
of the Group in respect of (a) moneys borrowed or debit balances at banks
and other financial institutions; (b) any debenture, bond, note, commercial
paper, loan stock or other debt instrument; (c) any acceptance or
documentary credit facilities, bill discounting or factoring facilities;
(d) receivables sold or discounted (otherwise than on a non-recourse
basis); (e) the acquisition cost of any asset to the extent payable before
or after the time of acquisition or possession by the party liable where
the advance or deferred payment is arranged primarily as a method of
raising finance or financing the acquisition of that asset; (f) leases
(whether in respect of land, machinery, equipment or otherwise) entered
into primarily as a method of raising finance or financing the acquisition
of that asset; (g) currency or interest swap, cap or collar arrangements or
any other derivative instrument; (h) amounts raised under any other
transaction having the commercial effect of a borrowing or raising of
money; (i) any guarantee, indemnity or similar assurance in respect of
indebtedness of any person falling within any of paragraphs (a) to (h)
(both inclusive) above.
"GROUP" means THE BORROWER and its Subsidiaries from time to time but if at any time a Project Finance Company, is a Subsidiary Undertaking but not a Companies Act Subsidiary then, for so long as it shall be a Subsidiary Undertaking but not a Companies Act Subsidiary, it shall be deemed (unless the contrary is specified) not to be a member of the Group.
"MOODY'S" means Moody's Investors Services Inc.
"NG GROUP" means for the purposes of this Article 8 the Guarantor and its Subsidiaries from time to time but for the purposes of Articles 8.02, 9.02 and 11 if at any time a Project Finance Company is a Subsidiary Undertaking but not a Companies Act Subsidiary, then, for so long as it shall be a Subsidiary Undertaking but not a Companies Act Subsidiary, it shall be deemed (unless the contrary is specified) not to be a member of the NG GROUP.
"PROJECT FINANCE BORROWING" means any Financial Indebtedness to finance a project: --
(a) which is made by a single purpose company, partnership or other legal person (whether or not a member of the NG Group) whose principal assets and business are constituted by that project and whose liabilities in respect of the Financial Indebtedness concerned are not directly or indirectly the subject of a guarantee, indemnity or other form of assurance, undertaking or support from any member of the NG Group (except as expressly referred to in paragraph (b)(iii) below or as a result of the making of acceptances or endorsements of bills in the ordinary course of trading or payment netting arrangements and other usual course of business banking arrangements); or
(b) in respect of which the person or persons making that Financial Indebtedness available to the relevant borrower (whether or not a member of the NG Group) have no recourse whatsoever to any member of the NG Group for the repayment of or payment of any sum relating to that Financial Indebtedness other than:--
(i) recourse to the borrower or one or more of its subsidiaries, for amounts limited to the aggregate cash flow or net cash flow (other than historic cash flow or historic net cash flow) from the project; and/or
(ii) recourse to the borrower or one or more of its subsidiaries or any shareholder of the borrower for the purpose only of enabling amounts to be claimed in respect of that Financial Indebtedness in any enforcement of any Security Interest permitted pursuant to Article 8.02 given by the borrower or one or more of its subsidiaries over the assets comprised in the project (or given by any shareholder of the borrower over its shares in the borrower together with, in the case of a UK-incorporated shareholder whose only material assets are those shares in the borrower, a supporting floating charge over all or substantially all of its assets to secure that Financial Indebtedness or any recourse referred to in (iii) below or as a result of the making of acceptances or endorsements of bills in the ordinary course of trading or payment netting arrangements and other usual course of business banking arrangements, provided that (A) the extent of the recourse to the borrower or one or more of its subsidiaries or shareholder is limited solely to the amount of any recoveries made on any such enforcement, and (B) the person or persons are not entitled, by virtue of any right to claim arising out of or in connection with the Financial Indebtedness, to commence proceedings for the winding up or dissolution of the borrower, the subsidiary or shareholder or to appoint or procure the appointment of any receiver, trustee or similar person or official in respect of the borrower, the subsidiary or shareholder or any of its assets (save for the assets the subject of the relevant Security Interest); and/or
(iii) recourse to such borrower generally, or directly or indirectly to a member of the NG Group under any form of assurance or undertaking, which recourse is limited to a claim for damages (other than liquidated damages and damages required to be calculated in a specified way) for breach of an obligation (not being a payment obligation or an obligation to procure payment by another or an obligation to comply or to procure compliance by another with any financial ratios or other tests of financial condition) by the person against whom such recourse is available; or
(c) which THE BANK shall have agreed in writing to treat as Project Finance Borrowing for the purposes of this Article 8.
If at any time any Financial Indebtedness is made to finance a project and
that Financial Indebtedness does not qualify as a "Project Finance
Borrowing" pursuant to the above subparagraphs (b)(i), (ii) or (iii) but
would so qualify if there were not recourse to a member of the NG Group
which is either (i) limited as to the period during which it is in force
(for example, during the period up to completion of the project) or (ii)
limited as to the obligations of the borrower to which it applies, then, in
any such case, the Financial Indebtedness shall be regarded as a "Project
Finance Borrowing" for the purposes of this definition to the extent that,
and during the period that, there is no such recourse to a member of the NG
Group.
"PROJECT FINANCE COMPANY" means any company, partnership or other legal person falling within the scope of paragraph (a) of the definition of Project Finance Borrowing or which THE BANK has agreed shall be treated as a Project Finance Company for the purposes of this Article 8.
"RELEVANT ASSETS" has the meaning given to it in the relevant Transmission Licence.
"SECURITY INTEREST" means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security.
"STANDARD AND POORS" means Standard & Poor's Corporation.
"SUBSIDIARIES" means Companies Act Subsidiaries and Subsidiary Undertakings (and "SUBSIDIARY" shall be construed accordingly).
"SUBSIDIARY UNDERTAKING" means a subsidiary undertaking within the meaning of Section 285 of the Companies Act 1985, as inserted by Section 21 of the Companies Act 1989.
"TRANSMISSION BUSINESS" has the meaning given to it in the relevant Transmission Licence.
"TRANSMISSION LICENCE" means a licence granted under Section 6(1)(b) of the Electricity Act.
ARTICLE 9
INFORMATION AND VISITS
9.01 INFORMATION CONCERNING THE PROJECT
THE BORROWER shall:
(a) deliver to THE BANK, (i) by 30th March 1997 and on each anniversary of that date until THE PROJECT is completed, a report on the implementation of THE PROJECT substantially in the form set out in Schedule D; and (ii) from time to time, any such further document or information concerning the financing, implementation and operation of THE PROJECT as THE BANK in its capacity as a lender to THE BORROWER may reasonably require;
(b) submit for the approval of THE BANK as soon as is reasonably practicable any material change to the general plans, timetable or expenditure programme for THE PROJECT, by relation to the disclosures made to THE BANK prior to the signing of this Contract; and
(c) generally inform THE BANK of any fact or event known to THE BORROWER which might substantially prejudice or affect the conditions of execution or operation of THE PROJECT.
9.02 INFORMATION CONCERNING THE BORROWER
A. THE BORROWER shall:
(a) deliver to THE BANK (i) each year, as soon as the same are available and in any event within 180 days after the end of each of its financial years, its audited consolidated financial statements (including balance sheet, profit and loss account and cash flow statement); and (ii) from time to time all financial information from time to time delivered by THE BORROWER to its creditors generally, such information to be delivered to THE BANK promptly following delivery of the same to its creditors;
(b) ensure that its accounting records clearly show the operations relating to the financing and execution of THE PROJECT to the extent required by law;
(c) immediately inform THE BANK;
(i) of any material change in its Memorandum or Articles of Association;
(ii) any modification of the provisions in Article 54 of the Articles of Association of the Guarantor relating to the Special Share;
(iii) of the occurrence of the event referred to in Article 4.03B or of its belief or, as the case may be, reasonable grounds for belief that such an event has occurred;
(iv) immediately, of any fact which obliges it, the Guarantor or any member of the NG Group or of any demand made to it, the Guarantor or any such member of the NG Group to prepay in advance of maturity by reason of declared event of default in relation thereto any Financial Indebtedness (but excluding any Project Finance Borrowings);
(v) immediately of any intention on its part, the Guarantor or any other member of the NG Group to grant any Security Interest over any of its assets in favour of a third party other than any Security Interest permitted by Article 8.03;
(v) generally of any fact or event known to THE BORROWER which would reasonably prevent the fulfilment of any material obligation of THE BORROWER under this Contract; and
(d) immediately inform THE BANK of any modification of the terms of the Transmission Licence.
9.03 VISITS
THE BORROWER shall use reasonable endeavours to permit upon reasonable notice and at all reasonable times, or to ensure such permission is granted to, persons designated by THE BANK to visit the sites, installations and works comprising THE PROJECT and to conduct such checks as they may wish, and to provide them, or ensure that they are provided, with all necessary assistance for this purpose.
10.01 TAXES, DUTIES AND FEES
THE BORROWER shall pay all taxes, duties, fees and other impositions of whatsoever nature, including stamp duty and registration fees, arising out of the execution or implementation of this Contract or any related document and in the creation of any security for the Loan.
THE BORROWER shall pay all principal, interest, commission and other amounts due under this Contract gross without deduction of any national or local impositions whatsoever; Provided that, if THE BORROWER is obliged to make any such deduction, it will gross up the payment to THE BANK so that after deduction, the net amount received by THE BANK is equivalent to the sum due. If THE BORROWER are obliged to deduct any amounts under this Article and THE BANK subsequently becomes entitled to recover any sum or to claim a credit against any tax payable by it in respect of the resulting grossed-up payment which is in excess of the amount originally due to THE BANK, THE BANK shall promptly upon receiving such sum or credit pay such excess amounts to THE BORROWER.
If for whatever reason THE BANK's ability to receive interest payments gross from UK borrowers generally ceases, THE BANK shall notify THE BORROWER.
10.02 OTHER CHARGES
THE BORROWER shall bear any professional, banking, transfer or exchange costs reasonably incurred in the execution or implementation of this Contract or related document, and in the creation of any security for the Loan.
ARTICLE 11
PREPAYMENT UPON AN EVENT OF DEFAULT
11.01 RIGHT TO DEMAND REPAYMENT
THE BORROWER shall repay the Loan or any part thereof, together with accrued interest and other accrued sums, forthwith upon demand being made therefor by THE BANK:
(A) immediately:
(a) if any representation or statement made by or on behalf of THE BORROWER or the Guarantor upon which THE BANK has relied in connection with the negotiation of this Contract or during its lifetime proves to have been incorrect in any material particular when made:
(b) if THE BORROWER fails on due date to repay any part of the Loan or to pay interest thereon, or to make any other payment to THE BANK as herein provided;
(c) if (i) any Financial indebtedness of a member of the Group is not
paid when due or within any originally applicable grace period; or
(ii) an event of default (howsoever described) occurs under any
document relating to Financial Indebtedness of Group; or (iii) any
Financial Indebtedness of a member of the Group becomes prematurely
due and payable or is placed on demand as a result of an event of
default (howsoever described); or (iv) any commitment for, or
underwriting of, any Financial Indebtedness of a member of the Group
is cancelled or suspended as a result of an event of default
howsoever described) under the document relating to that Financial
Indebtedness; or (v) any Security Interest securing Financial Indebtedness over an asset of a member of the Group becomes enforceable by reason of an event of default howsoever described, so long as the aggregate amount of Financial Indebtedness in sub-paragraphs (i) to (v) above exceeds an amount equal to GBP 20 million at that time (or its equivalent in any other currency); and provided that for the purposes of this paragraph (c) the definition of Financial Indebtedness shall exclude Project Finance Borrowing;
(d) if THE BORROWER or any of its Subsidiaries is deemed unable to pay its debts within the meaning of Section 123(1)(a), (b), (c) or (e) or 123(2) of the insolvency Act 1985 or any statutory modification or re-enactment thereof, whether or not a court of justice has so determined, or shall make or seek to make a composition with its creditors generally;
(e) if an order is made or an effective resolution is passed for the winding up of THE BORROWER or if THE BORROWER ceases to carry on the whole or substantially the whole of its business or activities, save in the course of a reconstruction, merger, consolidation, reorganisation or amalgamation or other similar arrangement on terms previously consented to by THE BANK (such consent not to be unreasonably withheld or delayed); or
(f) (i) if an encumbrancer takes possession of, or a receiver, liquidator, administrative receiver or administrator is appointed over, any substantial part of the business or assets of THE BORROWER or any substantial part of the property forming part of THE PROJECT, and such appointment is not discharged within 21 days of being made; (ii) if THE BORROWER petitions for the appointment of an administrator over its affairs; or (iii) if any distress, execution, sequestration or other process is levied or enforced upon the whole or any material part of the property of THE BORROWER or any substantial part of the property forming part of THE PROJECT and is not discharged or stayed within 21 days; or
(g) if any event occurs in relation to THE BORROWER, any Subsidiary of THE BORROWER, which is likely to have a material adverse effect on the ability of THE BORROWER to comply with its obligations under this Contract; and
(B) Upon expiry of a reasonable period of time specified in a notice served by THE BANK on THE BORROWER, without the matter being remedied to the reasonable satisfaction of THE BANK:
(a) if THE BORROWER fails in a material respect to comply with any obligation under this Contract other than one mentioned in Article 11.01(A)(b);
(b) if any material fact stated in the Recitals substantially alters and if the alteration either materially prejudices the interests of THE BANK as lender to THE BORROWER or materially and adversely affects the implementation or operation of THE PROJECT;
(c) THE BORROWER or any Subsidiary of THE BORROWER fails to comply in all material respects with all applicable provisions of the Electricity Act or its Transmission Licence (if any) and such failure to comply is reasonably likely to have a material adverse effect on the ability of THE BORROWER to perform its obligations under the Contract; or
(d) Any Transmission Licence held by THE BORROWER is:
(i) revoked or surrendered or any notice of revocation is issued by the Secretary of State and the notice is to take effect prior to the final repayment date (disregarding any acceleration of such date pursuant to this Article 11) of any Tranche of the Loan; or
(ii) modified in any manner which is reasonably likely to have a material adverse effect on the ability of THE BORROWER to perform its obligations under this Contract.
11.02 OTHER RIGHTS AT LAW
Article 11.01 shall not restrict any other right of THE BANK at law to require prepayment of the Loan.
11.03 DAMAGES
Where demand for prepayment is made under Article 11.01 THE BORROWER shall pay to THE BANK on the amount of each instalment, as set out in any amortisation table drawn up pursuant to Article 4.01A, a sum calculated at an annual rate of 0.25% from the date of the demand to the respective original due date of the instalment, as set out in the applicable amortisation table.
In case of demand under Article 11.01 for prepayment of a Fixed-Rate Tranche, Converted Fixed-Rate Tranche or Revisable Fixed-Rate Tranche, THE BORROWER shall pay to THE BANK an amount calculated as at the date of demand, as the greater of:
(a) The amount calculated according to the provisions of Articles 4.02 applied to the sum which has become immediately due and payable, and with effect from the date of declaration to that effect; and
(b) an amount calculated at an annual rate of 0.25% from the date of the demand to the respective date on which each instalment of the Tranche demanded would have been repayable but for the making of the demand.
In case of demand under Article 11.01 for prepayment of a Fixed-Margin Non-Convertible Tranche or unconverted Fixed-Margin Convertible Tranche, THE BORROWER shall pay to THE BANK a sum calculated as at the date of the demand at an annual rate of 0.25% from the date of the demand to the respective date on which each instalment of the amount demanded would have been repayable but for the making of the demand.
11.04 NON-WAIVER
No failure or delay by THE BANK in exercising any of its rights under this Article 11 shall be construed as a waiver of such right.
11.05 APPLICATION OF SUMS RECEIVED
Sums received following a demand under Article 11 shall be applied first in payment of damages, commission and interest in that order and secondly in reduction of outstanding instalments in inverse order of maturity. They shall be applied between Tranches at the discretion of THE BANK acting reasonably.
ARTICLE 12
LAW AND JURISDICTION
12.01 LAW
This Contract and its formation, construction and validity shall be governed by English Law.
12.02 JURISDICTION
All disputes concerning this Contract shall be submitted to the jurisdiction of the Courts of England: THE BANK appoints The Securities Management Trust Limited whose present address is 19 Old Jewry, London EC2 to be its agent for the purpose of accepting service of legal process.
ARTICLE 13
FINAL CLAUSES
13.01 NOTICES
Save as provided in Article 12.02, notices and other communications given hereunder by one party to this Contract to the other shall be sent to its respective address set out below, or to such other address as it shall have previously notified to the former in writing as its new address for such purpose:
- FOR THE BANK : 100 boulevard Konrad Adenauer L-2950 Luxembourg-Kirchberg Attention: Credit Risk Department Tel: (-352) 43 79-1 Fax: (-352) 43 77 04 - FOR THE BORROWER : 15 Marylebone Road London NW1 5JD Attention: Martin O'Donovan /Paul Phillips Tel: (44) 20 7312 5600 Fax: (44) 20 7312 5651 |
13.02 FORM OF NOTICE
Notices and other communications, for which fixed periods are laid down in this Contract or which themselves fix periods binding on the addressee, shall be served by hand delivery, registered letter, telegram, telex or other means of transmission which affords evidence of receipt by the addressee. The date of registration or, as the case may be, the stated date of receipt of transmission shall be conclusive for the determination of a period.
13.03 RECITALS, SCHEDULES AND ANNEXES
The Recitals and following Schedules form part of this Contract:
- Schedule A Technical Description - Schedule B Definition of ecu - Schedule C Definition of LIBOR - Schedule D Project Reporting Form |
The following Annexes are attached hereto:
- Annex I Resolution of Board of Directors of THE BORROWER incorporating Authority of Signatory - Annex II Certificate of Borrowing Powers of THE BORROWER - Annex III Drawdown Certificate |
IN WITNESS WHEREOF the parties hereto have caused this Contract to be executed in four originals in the English language, each page having been initialled by Mr. S.E. Sturmer on behalf of THE BANK.
Signed for and on behalf of Signed for and on behalf of EUROPEAN INVESTMENT BANK THE NATIONAL GRID COMPANY PLC this day of 2001, at London |
SCHEDULE A 1 of 2 |
PROJECT: NATIONAL GRID TRANSMISSION (UK)
The project consists of the study, design, implementation, commissioning (including acceptance tests) and operation of about 32 electricity schemes dispersed through the Promoter's transmission network (400kV - 275 kV) in England and Wales. The main data is summarised on the attached schedule.
The project is conceived in such a way that all schemes will comply with the relevant national legislation and EC Directives in particular, with those relating to the protection of the environment (79/409/EEC and 85/411/EEC on wild birds, 85/338/EEC on the CORINE Programme). The sub-projects will avoid sites of particular or special interest.
All equipment will be free of PCB or other toxic agents capable of being released into the atmosphere.
Procurement of goods and services will comply with the Procurement Directive (93/38/EEC) and its transposition in English law. This includes advertising for a range of equipment/materials in the Official Journal of the EU.
These schemes will be commissioned progressively by the end of 1999.
SCHEDULE A
PROJECT: NATIONAL GRID TRANSMISSION (UK)
Project Category Promoter's Project Description Reference Number (PIMS) Operational Control NGB631 Vision 2000 to consolidate Despatch control to one centre at Wokingham Reactive Power 5554 7126 Installation of 1745 MVAr of Reactive Compensation 5744 7352 Compensation throughout England 6045 7353 and Wales 6261 7354 7009 7437 Switchgear Replacement 2481 Replacement of 80 x 400 kV and 2482 73 x 275 kV switchgears in 2483 accordance with Promoters Policy 4321 [Ref: TR1248]. Infrastructure 3861,5595, 5717 Modification to existing networks to 4349,5471, 5864 increase throughout capacities 4341,5558, 7071 in accordance with Promoters 4344,8074, 7072 PIMS Approval codes involving 29 5559,8129, 4754 400kV switchgears, 3840 MVA 8437,8438 transformer capacity and 1km of 400 kV oil-filled cable. |
SCHEDULE B
THE ecu
The ecu is the same as the ecu that is used as the unit of account of the European Communities, and which is at present comprised of the specific amounts of the currencies of 12 of the Member States of the European Community shown below.
Pursuant to Council Regulation (EC) No. 3320/94 of 22nd December 1994, the composition of the ecu basket is as follows:
German mark : 0.6242 pound Sterling : 0.08784 French franc : 1.332 Italian lira : 151.8 Dutch guilder : 0.2198 Belgian franc : 3.301 Luxembourg franc : 0.130 Danish krone : 0.1976 Irish pound : 0.008552 Greek drachma : 1.440 Spanish peseta : 6.885 Portuguese escudo : 1.393 |
Changes to the ecu may be made by the European Communities, in which event references to the ecu shall be read accordingly (see Information).
If THE BANK should consider that the ecu (see Payment in Euros and Information, hereafter) has ceased to be used as the unit of account of the European Communities and as the single currency of the European Union, it shall so notify THE BORROWER. As from the date of such notification, the ecu shall be replaced by the currencies of which it was comprised - or their countervalue in one or more of those currencies - as at the time of its most recent use as the unit of account of the European Communities.
PAYMENT IN EUROS
Upon substitution of the ecu by the Euro, all payments due in ecus under this Contract shall be made in Euros at the rate of one Euro for one ecu. The substitution of the ecu by the Euro shall not have the effect of bringing about the payment in component currencies referred to in the preceding paragraph.
INFORMATION
Article 109G of the EC Treaty, as introduced by the Treaty on European Union, provides that the currency composition of the ecu basket shall not be changed. From the start of the third stage of European economic and monetary union, the value of the ecu as against the currencies of the Member States participating in the third stage will be irrevocably fixed and the ecu will become a currency in its own right.
The European Council at the Madrid Summit in December 1995 decided that the name of that new currency will be the Euro. Consequently, references to the ecu shall apply to the Euro. In the case of contracts denominated by reference to the official ecu basket of the European Community, in accordance with the Treaty as confirmed by the European Council at the Madrid Summit in December 1995, substitution of the ecu by the Euro will be made at the rate of one to one.
SCHEDULE C
DEFINITION OF LIBOR
"LIBOR" means
(i) in respect of any Reference Period of one month or more, the rate for deposits for a period being the number of whole months most closely corresponding to the duration of the Reference Period (for which purpose a fraction of fifteen days or less shall be disregarded), and,
(ii) in respect of a Reference Period of less than a month, the rate for deposits for a period of one month,
which appears on Telerate p. 3750 against the currency of the Tranche as of 11:00 a.m. London time, in the case of GBP on the day (the "Reset Date") on which the Reference Period starts or, if that day is not a London Business Day, on the next following day which is such a Business Day, determined in each case in the currency of the relevant Tranche (the period for which the rate is taken being hereinafter called the "Representative Period").
If such rate does not appear on Telerate p. 3750, THE BANK shall request the principal London offices of four major banks in the London interbank market, selected by THE BANK (the "Reference Banks"), to quote the rate at which deposits in the currency and amount of the relevant Tranche are offered by each of them at approximately 11:00 a.m. London time on the relevant London Business Day, to prime banks in the London interbank market for a period equal to the Representative Period. If at least two such quotations are provided, the rate will be the arithmetic mean of the quotations provided.
If fewer than two quotations are provided as requested, the rate will be the arithmetic mean of the rates quoted at approximately 11:00 a.m. London time on the Reset Date by major banks in London (selected by THE BANK) for loans in the currency and amount of the relevant Tranche to leading European banks for a period equal to the Representative Period.
All percentages resulting from any arithmetic mean calculations referred to in this Schedule will be rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point.
THE BANK shall inform THE BORROWER without delay of the quotations received by
THE BANK.
In the case of currencies other than GBP, the Reset Date shall be determined by reference to the banking convention for such currency on the London market.
PROJECT: NATIONAL GRID TRANSMISSION (UK) ------- ------------------------------------------------------------------------------- Project Category Implementation Progress % Cost ---------------------------------- (MGBP) 1996 1997 1998 1999 ------------------------------------------------------------------------------- Operational Control Reactive Power Compensation Switchgear Replacement Infrastructure ------------------------------------------------------------------------------- CAPACITY ADDED BY PROJECT YEAR: ------------------------- ------------------------------------------------------------------------------- Project Components Cost/Unit Units ------------------------------------------------------------------------------- Reactive Compensation MVAr 400 kV Switchgears Units 275 kV Switchgears Units Transformer Capacity MVA 400 kV Line Length km 275 kV Line Length km 400 kV Cable Length km 275 kV Cable Length km ------------------------------------------------------------------------------- |
ANNEX III --------- |
TO: EIB FROM: THE NATIONAL GRID COMPANY PLC AND THE NATIONAL GRID GROUP PLC [Date] |
Dear Sirs,
RE: Finance Contract between the National Grid Company plc and yourselves dated [ - ] (hereinafter referred to as the "Finance Contract")
Terms defined in the Finance Contract have the same meaning when used in this letter.
For the purposes of Article 1.04(b) we hereby certify to you as follows:
(1) that no event mentioned in Article 11.01, nor any event which, with the giving of notice and/or the expiry of any grace, remedy or similar period would constitute any event as mentioned in Article 11.01, has occurred and is continuing;
(2) the representations and warranties set out in Article 6.01 are true and fulfilled as at the date of this certificate; and
(3) the terms of Article 8.02 have been complied with as of the date hereof.
Yours faithfully,
for and on behalf of
THE NATIONAL GRID COMPANY PLC
and
THE NATIONAL GRID GROUP PLC
[Authorised Signatories]
ANNEX 2
E U R O P E A N I N V E S T M E N T B A N K
FI NO. 0.9200 GB
NATIONAL GRID (UK) PROJECT
GUARANTEE AND INDEMNITY AGREEMENT
between
EUROPEAN INVESTMENT BANK
and
NEW NATIONAL GRID PLC
London, [ ] 2001
MADE BETWEEN:
European Investment Bank having its Head Office at 100, boulevard Konrad
Adenauer, Luxembourg-Kirchberg, Grand Duchy of Luxembourg, represented by
[ ]
hereinafter called: "THE BANK"
of the first part, and
New National Grid plc, a public company incorporated with limited liability in England and having its registered office at 15 Marylebone Road, London NW1 5JD England, represented by [ ]
hereinafter called: "THE GUARANTOR"
of the second part.
WHEREAS:
- By an agreement, dated 5th December 1996 as amended and supplemented by letter agreements dated 3 February 1997, 12 November 1998, 29 March 1999 and the date hereof (hereinafter called "THE FINANCE CONTRACT") made between THE BANK, on the one hand, and The National Grid Company plc on the other hand (hereinafter called "THE BORROWER"), THE BANK established in favour of THE BORROWER a credit equivalent to GBP 200,000,000 (two hundred million pounds sterling) which has been fully drawn;
- The Borrower is a wholly owned subsidiary of National Grid Group plc which in turn become a wholly owned subsidiary of THE GUARANTOR;
- The obligations of THE BANK under THE FINANCE CONTRACT are conditional upon the execution and delivery by THE GUARANTOR of a guarantee of performance by THE BORROWER of THE BORROWER's financial obligations under THE FINANCE CONTRACT;
- Execution of this Guarantee and Indemnity Agreement by THE GUARANTOR has been authorised by the Board of Directors of THE GUARANTOR (Annexure I); and it has been duly certified in the form set out in Annexure II that the issue of this Guarantee and Indemnity is within the corporate powers of THE GUARANTOR.
NOW THEREFORE it is hereby agreed as follows:
ARTICLE 1
FINANCE CONTRACT
1.01 THE GUARANTOR acknowledges notice of the provisions of THE FINANCE CONTRACT, an original copy of which has been delivered to it. Unless otherwise defined herein terms defined in THE FINANCE CONTRACT shall have the same meaning.
ARTICLE 2
GUARANTEE
2.01 In consideration of the credit established by THE BANK under THE FINANCE CONTRACT, THE GUARANTOR hereby guarantees the payment of all principal monies, interest, commission, liquidated damages, charges, expenses and other monies (each such sum being hereinafter referred to as a "Guaranteed Sum") which may from time to time become payable by THE BORROWER under THE FINANCE CONTRACT. THE GUARANTOR undertakes that, if THE BORROWER should default in the payment of any Guaranteed Sum, THE GUARANTOR shall pay the sum in default to THE BANK on demand, in the currencies specified in THE FINANCE CONTRACT and to the accounts specified in the demand.
2.02 The obligations of THE GUARANTOR hereunder are those of a primary obligor and not merely those of a surety. They shall not be impaired or discharged by reason of:
(a) illegality, invalidity, or unenforceability in or of the terms of THE FINANCE CONTRACT or any other guarantee or security for THE BORROWER'S obligations thereunder;
(b) disability, incapacity or change in status or constitution of THE BORROWER, THE BANK, any other guarantor or any other person;
(c) liquidation or insolvency of THE BORROWER, any other guarantor or any other person;
(d) any time or other indulgence granted by THE BANK or any arrangement entered into or composition accepted by THE BANK, varying the rights of THE BANK under THE FINANCE CONTRACT or any other guarantee or security arrangement granted in connection therewith;
(e) any forbearance or delay on the part of THE BANK in asserting any of its rights against THE BORROWER under THE FINANCE CONTRACT; or
(f) any circumstance, other than performance, which might otherwise discharge the obligations of THE GUARANTOR.
2.03 This Guarantee and Indemnity is a continuing security and shall endure until all Guaranteed Sums shall have been fully paid or discharged. No payment or discharge which may be avoided under any enactment relating to insolvency, no payment or discharge made or given which is subsequently avoided and no release, return, cancellation or any such discharge of this Guarantee and Indemnity given or made on the faith of any such payment or discharge aforesaid shall constitute discharge of THE GUARANTOR under this Guarantee and Indemnity or prejudice or affect THE BANK's right to recover from THE GUARANTOR to the full extent of this Guarantee and Indemnity.
2.04 Any money received in connection with this Guarantee and Indemnity may be placed by THE BANK to the credit of a suspense account with a view to preserving the right of THE BANK to prove for the whole of the claims against THE BORROWER or may be applied by THE BANK in or towards satisfaction of such of the Guaranteed Sums as THE BANK in its absolute discretion may from time to time determine; provided, however, THE GUARANTOR's responsibility in respect of the Guaranteed Sums shall be discharged to the extent of payment made by THE GUARANTOR under this Guarantee and Indemnity.
2.05 THE GUARANTOR agrees that until all the Guaranteed Sums have been fully paid or discharged:
(a) it shall not seek to enforce any obligation owned to THE GUARANTOR by THE BORROWER which arises by virtue of the discharge by THE GUARANTOR of its obligations hereunder;
(b) it shall pay to THE BANK all dividends in liquidation or otherwise received by it from or for the account of THE BORROWER in respect of any obligation referred to in indent (a) above; THE BANK shall apply such sums to reduce the outstanding Guaranteed Sums in such sequence as it may decide; and
(c) it shall have no right of subrogation to the rights of THE BANK under THE FINANCE CONTRACT or any security arrangement granted in connection therewith. 2.06 THE GUARANTOR acknowledges: (i) that it has entered into this Guarantee and Indemnity Agreement on the basis of its own assessment of THE BORROWER and any security provided, and (ii) that it has not been induced to enter into this Guarantee and Indemnity Agreement by any representation made by THE BANK. THE BANK is not obliged to report to THE GUARANTOR on the financial position of THE BORROWER or of any other guarantor or on any security provided. THE BANK shall have no liability to THE GUARANTOR for granting or disbursing the Loan, for cancelling or not cancelling the credit or for demanding or not demanding prepayment under THE FINANCE CONTRACT. 2.07 As a continuing obligation additional to and separate from those set out in Articles 2.01 and 2.02, and without prejudice to the validity or enforceability of those obligations, THE GUARANTOR unconditionally and irrevocably undertakes that, if any Guaranteed Sum should not be recoverable from THE GUARANTOR under Article 2.01 for whatsoever reason, and whether or not the reason may have been known to THE BANK at any material time, THE GUARANTOR shall, upon first written demand by THE BANK, and as if it were a sole and independent obligor, compensate THE BANK by way of a full indemnity for all loss resulting from the failure of THE BORROWER to make payment of any Guaranteed Sum in the amount and currency provided for by or pursuant to THE FINANCE CONTRACT, whether upon the normal due date, upon acceleration or otherwise. |
ARTICLE 3
ENFORCEMENT OF GUARANTEE
3.01 A certificate of THE BANK as to any default by THE BORROWER in the payment of any Guaranteed Sum shall, in the absence of manifest error, be conclusive against THE GUARANTOR. 3.02 THE GUARANTOR undertakes to pay all sums due hereunder in full, free of set-off or counterclaim. This Guarantee and Indemnity may be enforced by THE BANK upon provision of a statement of the reason for the demand. THE BANK shall not be obliged to take any action against THE BORROWER or to have recourse to any other guarantee. 3.03 Where THE BANK makes any demand hereunder, THE GUARANTOR may pay to THE BANK all outstanding Guaranteed Sums, including sums arising under Article 3.02 of THE FINANCE CONTRACT, in settlement of its obligations hereunder. If THE GUARANTOR makes such payment, THE BANK shall, upon the request and at the expense of THE GUARANTOR, assign to THE GUARANTOR the corresponding rights of THE BANK relating thereto under THE FINANCE CONTRACT and under any security therefor. |
ARTICLE 4
UNDERTAKINGS
4.01 THE GUARANTOR shall deliver to THE BANK each year, as soon as the same are available and in any event within 180 days after the end of each of its financial years, a |
-5- copy of its annual report, containing its audited, consolidated financial statements, together with all other such information as THE BANK may reasonably require of THE GUARANTOR from time to time in writing as to THE GUARANTOR's financial situation and shall inform THE BANK as soon as is reasonably practicable of any material change in its Memorandum or Articles of Association, but in the event of any modification or formal proposal for the modification of the provisions in Article 54 of its Articles of Association relating to the Special Share only at the same time as Shareholders generally are informed of such modification. 4.02 THE GUARANTOR shall ensure that the obligations of THE BORROWER set out in Article 8.02 to 8.05 of THE FINANCE CONTRACT are complied with. 4.03 NEGATIVE PLEDGE Subject to Article 4.04, so long as any part of the Loan remains outstanding, THE GUARANTOR shall not, and it shall procure that no other member of the NG Group will create or permit to subsist any Security Interest on, or with respect to, any of its present or future business, undertaking, assets or revenues (including any uncalled capital). 4.04 Subject to Article 4.05, Article 4.03 does not apply to:- (A) any Security Interest created with the prior written consent of THE BANK; (B) Security Interests granted prior to the date of this Agreement and disclosed to THE BANK in writing but only if the maximum principal amount secured thereby is not subsequently increased; (C) any Security Interest by way of title retention entered into the ordinary course of business; (D) any lien arising by operation of law in ordinary course of business; (E) any banker's lien or right of set-off arising by operation of law in the ordinary course of commercial banking transactions or any contractual set-off arrangements in the ordinary course of commercial banking transactions; (F) any Security Interest existing over assets acquired after the date of this Agreement and existing on the date of acquisition, provided that:- (1) the Security Interest is not created in contemplation of the acquisition of the same; and (2) the maximum principal amount secured thereby or the maturity of those obligations is not thereafter increased; (G) any Security Interest over the assets of any company which becomes a Subsidiary of THE GUARANTOR after the date of this Agreement and which exist at the date on which it becomes a Subsidiary of THE GUARANTOR, but only if:- (1) the principal amount secured by the Security Interest is not increased after the date it becomes a Subsidiary of THE GUARANTOR; and (2) the Security Interest is not created in contemplation of it becoming a Subsidiary of THE GUARANTOR; |
(H) any Security Interest over goods and/or documents of title, or insurance policies and sale contracts in relation to such goods, arising in the ordinary course of trading in connection with letters of credit and similar transactions where such Security Interest secures only so much of the acquisition cost of such goods which is required to be paid within 180 days after the date upon which the same was first incurred;
(I) any Security Interest created in substitution for any Security Interest permitted pursuant to this Article, provided that the substituted Security Interest is over the same asset and the principal amount secured does not exceed the principal amount secured on such asset prior to the substitution;
(J) any other Security Interest so long as the aggregate outstanding principal amount of indebtedness secured by all the Security Interests permitted under this Clause does not exceed, when combined with all Security Interests of the NG Group, GBP 80 million;
(K) any Security Interest created or granted from time to time in respect of any Project Finance Borrowing including, for the avoidance of doubt, any Security Interest created or granted by a member of the NG Group in its capacity as a shareholder of a company making a Project Finance Borrowing over its shareholding in that company (including, in the case of a member of the NG Group whose only material assets are shares in the company incurring the Project Finance Borrowing, a supporting floating charge over all or substantially all of that member's assets) as security for such Project Finance Borrowing, provided that the right of recourse against such shareholder is limited to the realisation of the shareholding in that company;
(L) any Security Interest created by a Project Finance Company;
(M) any Security Interest created or granted from time to time by a member of the NG Group in its capacity as a shareholder of a Project Finance Company over its shareholding in that Project Finance Company as security for the obligations of such Project Finance Company;
(N) any Security Interest whether granted prior to or after the date of this Agreement which is granted by a Subsidiary of the Guarantor incorporated in, or which has its principal place of business in, the United States to secure Financial Indebtedness up to US$4,200,000,000 in aggregate outstanding; and
(O) any Security Interest created by a special purpose securitisation vehicle over its assets where substantially all of those assets were acquired by that vehicle from a member of the NG Group as part of or to facilitate a securitisation and where the disposal of those assets to the securitisation vehicle constitutes a disposal of assets on arm's length terms, the consideration for which is substantially all cash or cash equivalent consideration, after the date hereof, so long as the aggregate outstanding principal amount of Financial Indebtedness secured by all the Security Interests permitted under this paragraph (O) by all members of the NG Group does not exceed US$1,000,000,000 or its equivalent in other currencies at any time.
4.05 Notwithstanding anything in Article 4.03 above, none of THE GUARANTOR or any of its Subsidiaries will create or permit to subsist any Security Interest over;
(A) Relevant Assets used in the Transmission Business carried out pursuant to any Transmission Licence; or
(B) any shareholding in any Subsidiary of THE GUARANTOR which is the legal and/or beneficial owner of Relevant Assets used in the Transmission Business carried out pursuant to any Transmission Licence.
4.06 The following terms used in this Article 4 shall bear the following meaning:
"COMPANIES ACT SUBSIDIARY" means a subsidiary within the meaning of
Section 736 of the Companies Act 1985, as amended by Section 144 of
the Companies Act 1989.
"NG GROUP" means THE GUARANTOR and its Subsidiaries from time to time but for the purposes of this Article 4 if at any time a Project Finance Company is a Subsidiary Undertaking but not a Companies Act Subsidiary, then, for so long as it shall be a Subsidiary Undertaking but not a Companies Act Subsidiary, it shall be deemed (unless the contrary is specified) not to be a member of the NG Group.
"PROJECT FINANCE BORROWING" means any Financial Indebtedness to finance a project:-
(a) which is made by a single purpose company, partnership or other legal person (whether or not a member of the NG Group) whose principal assets and business are constituted by that project and whose liabilities in respect of the Financial Indebtedness concerned are not directly or indirectly the subject of a guarantee, indemnity or other form of assurance, undertaking or support from any member of the NG Group (except as expressly referred to in paragraph (b)(iii) below or as a result of the making of acceptances or endorsements of bills in the ordinary course of trading or payment netting arrangements and other usual course of business banking arrangements); or
(b) in respect of which the person or persons making that Financial Indebtedness available to the relevant borrower (whether or not a member of the NG Group) have no recourse whatsoever to any member of the NG Group for the repayment of or payment of any sum relating to that Financial Indebtedness other than:-
(i) recourse to the borrower or one or more of its subsidiaries for amounts limited to the aggregate cash flow or net cash flow (other than historic cash flow or historic net cash flow) from the project; and/or
(ii) recourse to the borrower or one or more of its subsidiaries or any shareholder of the borrower for the purpose only of enabling amounts to be claimed in respect of that Financial Indebtedness in an enforcement of any Security Interest permitted pursuant to Article 8.02 of THE FINANCE CONTRACT given by the borrower or one or more of its subsidiaries over the assets comprised in the project (or given by any shareholder of the borrower over its shares in the borrower together with, in the case of a UK incorporated shareholder whose only material assets are those shares in the borrower, a supporting floating charge over all or substantially all of its assets) to secure that Financial Indebtedness or any recourse referred to in (iii) below or as a result of the making of acceptances or endorsements or bills in the ordinary course of trading or payment netting arrangements and other usual course of business banking arrangements, provided that (A) the extent of the recourse to the borrower or one or more of its subsidiaries or shareholder is limited solely to the amount of any recoveries made on any such enforcement, and (B) the person or persons are not entitled, by virtue of any right to claim arising out of or in connection with the Financial Indebtedness, to commence proceedings for the winding up or dissolution of the borrower the subsidiary or shareholder or to appoint or procure the appointment of any receiver, trustee or similar person or official in respect of the borrower the subsidiary or shareholder or any of its assets (save for the assets the subject of the relevant Security Interest); and/or
(iii) recourse to such borrower generally, or directly or indirectly to a member of the NG Group under any form of assurance or undertaking, which recourse is limited to a claim for damages (other than liquidated damages and damages required to be calculated in a specified way) for breach of an obligation (not being a payment obligation or an obligation to procure payment by another or an obligation to comply or to procure compliance by another with any financial ratios or other tests of financial condition) by the person against whom such recourse is available; or
(c) which THE BANK shall have agreed in writing to treat as Project Finance Borrowing for the purposes of this Article 4.
If at any time any Financial Indebtedness is made to finance a project and that Financial Indebtedness does not qualify as a "Project Finance Borrowing" pursuant to the above sub-paragraphs (b)(i), (ii) or (iii) but would so qualify if there were not recourse to a member of the NG Group which is either (i) limited as to the period during which it is in force (for example, during the period up to completion of the project) or (ii) limited as to the obligations of the borrower to which it applies, then, in any such case, the Financial Indebtedness shall be regarded as a "Project Finance Borrowing" for the purposes of this definition to the extent that, and during the period that, there is no such recourse to a member of the NG Group.
"PROJECT FINANCE COMPANY" means any company, partnership or other legal person falling within the scope of paragraph (a) of the definition of Project Finance Borrowing or which THE BANK has agreed shall be treated as a Project Finance Company for the purposes of this Article 4.
"RELEVANT ASSETS" has the meaning given to it in the relevant Transmission Licence.
"SECURITY INTEREST" means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security.
"SUBSIDIARIES" means Companies Act Subsidiaries and Subsidiary Undertakings (and "Subsidiary" shall be construed accordingly).
"SUBSIDIARY UNDERTAKING" means a subsidiary undertaking within the meaning of Section 21 of the Companies Act 1989.
"TRANSMISSION BUSINESS" has the meaning given to it in the relevant Transmission Licence.
"TRANSMISSION LICENCE" means a licence granted under Section 6(1)(b) of the Electricity Act.
4.07 PARI PASSU RANKING
THE GUARANTOR undertakes that the obligations under this Guarantee Agreement are direct and unconditional obligations of THE GUARANTOR and rank and will rank at least pari passu with all other unsecured and unsubordinated contingent obligations of THE GUARANTOR other than those obligations of THE GUARANTOR to its unsecured creditors which would, on a winding-up of THE GUARANTOR, be preferred by operation of law.
4.08 FINANCIAL UNDERTAKINGS
THE GUARANTOR undertakes:
(A) that for each period of 12 months ending on the last day of each financial year and each financial half-year of the NG Group (an "End Date") EBITDA shall exceed Net Interest Payable by not less than 3.0 times;
(B) that for each period of 12 months ending on the last day of each financial year and each financial half-year of the NG Group (an "End Date") Net Debt shall not exceed EBITDA by more than: 5.00 times;
(C) that NG Group members other than itself shall not incur Financial
Indebtedness other than: (1) under the Finance Facility; (2)
Financial Indebtedness which is secured by a Security Interest
which has been created with prior written consent of THE BANK;
(3) any Financial Indebtedness owing by one member of the NG
Group to another member of the NG Group, or any guarantee,
indemnity or similar assurance issued by any Subsidiary in
connection with the Financial Indebtedness of another Subsidiary
that is permitted under this Article 4.08(C); (4) in the case of
Subsidiaries (including THE BORROWER) incorporated or established
outside the United States of America, Financial Indebtedness in
an aggregate amount not exceeding (when aggregated with Financial
Indebtedness of such Subsidiaries which is permitted under (3)
above) GBP 4 000 000 000; (5) in the case of Subsidiaries
incorporated or established within the United States of America,
Financial Indebtedness in an aggregate amount not exceeding (when
aggregated with Financial Indebtedness of such Subsidiaries which
is permitted under (3) above) USD 7 000 000 000;
provided that in the case of (4) and (5) above the monetary limits
referred to shall be reduced to the extent the equivalent limits in
Clause 19.15(a) of the Finance Facility are reduced by the operation
of clause 8.7 of the Finance Facility; and in the case only of (4) and
(5) above the amount of any Cash or Cash Equivalent held by a
Subsidiary may be set off against the amount of its Financial
Indebtedness; and the GBP or USD equivalent of any Financial
Indebtedness in any other currency shall be converted at the spot rate
of exchange determined pursuant to the Finance Facility;
For the purposes of paragraph (c) above, the amount of any Financial Indebtedness which is constituted by currency or interest swaps, cap or collar arrangements or any other derivative instruments shall be calculated by aggregating the mark-to-market values of any such currency or interest swaps, cap or collar arrangements or other derivative instruments, and the determination of such amount shall (within the bounds of ordinary market practice) be in THE BANK'S sole discretion and shall, in the absence of manifest error, be conclusive and shall not be open to dispute by THE GUARANTOR or any third party.
(D) that, subject to the exceptions listed in cl.19.9(b), subparagraphs (i) to (ix), of the Finance Facility, it shall not and undertakes that no other member of the NG Group shall make any voluntary or involuntary disposal of any of its assets whether by a single transaction or a series of them;
(E) that THE BORROWER shall comply with the Negative Pledge contained in Article 8.02 of the Finance Contract and the financial covenants contained in Article 7.08 of THE FINANCE CONTRACT and shall direct or assist companies forming part of the NG Group so as to enable THE BORROWER to comply with such covenants.
For the purposes of this Guarantee Agreement and of THE FINANCE CONTRACT, terms defined in the Finance Facility and which are not otherwise defined in this Agreement shall, unless otherwise agreed by THE BANK, have the meaning attributed to them in that
document as at the date hereof and the financial results to which the definitions below refer shall unless otherwise stated be the consolidated financial accounts of THE GUARANTOR to be delivered pursuant to Article 4.01 and such results shall be measured twice yearly as indicated in such Article:
"Bonds"
means:
(a) the mandatorily exchangeable bonds due 2003, exchangeable into ordinary shares of Energis Plc and issued by the National Grid Group plc ("NGG");
(b) the exchangeable bonds due 2008, exchangeable into ordinary shares of NGG and issued by NGG; and
(c) other similar debt instruments issued or to be issued by NGG or any company in the Group and exchangeable into share capital.
"CONSOLIDATED PROFITS BEFORE INTEREST AND TAX" shall mean in respect of any period, the consolidated net pre-taxation profits on operating activities (after adding back Net Interest Payable and excluding any Exceptional Items and after adding back restructuring costs incurred as a result of the Acquisition) of the NG Group for that period based on the latest accounts supplied pursuant to Article 9.02A of THE FINANCE CONTRACT.
"EBITDA" shall mean in respect of any period, Consolidated Profits before Interest and Tax for that period, after adding back depreciation and amortisation of goodwill.
"EXCEPTIONAL ITEMS" has the meaning given to it in FRS 3 issued by the Accounting Standards Board.
"FINANCIAL INDEBTEDNESS" means (without double-counting) any indebtedness of the NG Group in respect of (a) moneys borrowed or debit balances at banks and other financial institutions; (b) any debenture, bond, note, commercial paper, loan stock or other debt instrument; (c) any acceptance or documentary credit facilities, bill discounting or factoring facilities; (d) receivables sold or discounted (otherwise than on a non-recourse basis); (e) the acquisition cost of any asset to the extent payable before or after the time of acquisition or possession by the party liable where the advance or deferred payment is arranged primarily as a method of raising finance or financing the acquisition of that asset; (f) leases (whether in respect of land, machinery, equipment or otherwise) entered into primarily as a method of raising finance or financing the acquisition of that asset; (g) currency or interest swap, cap or collar arrangements or any other derivative instrument; (h) amounts raised under any other transaction having the commercial effect of a borrowing or raising of money; (i) any guarantee, indemnity or similar assurance in respect of indebtedness of any person falling within any of paragraphs (a) to (h) (both inclusive) above.
"FINANCE FACILITY" shall mean a bank facility agreement entered into on or about the date hereof, in replacement of such a facility dated 5th March 1999, between THE GUARANTOR, NGG, National Grid Group Finance plc and the parties named therein as Agent, Banks and Arrangers, providing facilities in an aggregate value of USD 2,300,000,000.
"NET DEBT" shall mean the aggregate principal amount (or amounts equivalent to principal, howsoever described) comprised in the Financial Indebtedness of the NG Group (excluding amounts referred to in paragraph (g) and paragraph (i) (in so far as those amounts referred to in paragraph (i) relate to amounts referred to in paragraph (g)) of the definition of Financial Indebtedness) at the time calculated on a consolidated basis less Cash and Cash Equivalents held by any member of the NG Group.
"NET INTEREST PAYABLE" shall mean in respect of any period, all interest and all other continuing, regular or periodic costs, charges and expenses in the nature of interest (whether paid, payable or capitalised) incurred by the NG Group in effecting, servicing or maintaining all Financial Indebtedness of the NG Group, excluding any premia payable which arise on or solely as a result of the redemption of any Bonds or the purchase of any Bonds with a view to cancellation where such premia are defined by formulae and/or market price mechanisms so that their quanta cannot be determined prior to the time at which they are to be calculated, less all interest and similar income receivable by the NG Group during that period (but only to the extent the same accrue and are receivable by the NG Group in a freely convertible and transferable currency) in each case as determined from the financial statements relating to that period delivered under Article 9.02A(a).
4.09 CHANGE OF BUSINESS
THE GUARANTOR undertakes that save with the prior written consent of THE BANK no substantial change shall be made to the general nature of the business of the NG Group, taken as a whole, such business to be treated as including electricity generation, transmission, distribution, or metering or supply and the provision of telecommunications services and the acquisition and operation of the National Air Traffic Control System.
ARTICLE 5
AMENDMENT TO THE FINANCE CONTRACT
5.01 Subject to Article 5.02, THE BANK may agree to any amendment to THE FINANCE CONTRACT which does not increase the amounts payable by THE BORROWER thereunder or THE GUARANTOR hereunder or permit THE BANK more easily to make a claim against THE GUARANTOR hereunder. THE BANK shall notify THE GUARANTOR of each such amendment.
5.02 THE BANK may not amend or vary the terms of THE FINANCE CONTRACT save as provided in Article 5.01 or save with the prior written consent of THE GUARANTOR, which consent shall not be unreasonably withheld.
ARTICLE 6
TAXES, CHARGES AND EXPENSES
6.01 Taxes or fiscal charges, legal costs and other expenses incurred in the execution or implementation of this Guarantee and Indemnity Agreement shall be borne by THE GUARANTOR. THE GUARANTOR shall make payments hereunder without withholding or deduction on account of tax or fiscal charges.
ARTICLE 7
Law and Jurisdiction 7.01 Law This Guarantee and Indemnity Agreement, its formation, construction and its validity shall be governed by and construed in all respects in accordance with the laws of England. 7.02 Jurisdiction The parties hereto submit to the exclusive jurisdiction of the Courts of England and all disputes concerning this Guarantee and Indemnity Agreement shall be submitted to such court. THE BANK appoints The Securities Management Trust Limited of 19 Old Jewry, London EC2 to be its attorney for the purpose of accepting service on its behalf of any writ, notice, order, judgement or other legal process. Any such service against THE GUARANTOR shall be sent by registered mail to the address of THE GUARANTOR under Article 8.01 hereof. 7.03 Invalidity If any provision hereof is invalid, such invalidity shall not prejudice any other provision hereof. ARTICLE 8 Final Clauses 8.01 Notices Notices and other communications given hereunder (other than such as arise out of litigation) to THE GUARANTOR or to THE BANK shall be sent out by telex, telegram, registered letter or letter with recorded delivery addressed to it at its address set out below or at such other address as it shall have previously notified to the other in writing as its new address for such purpose: - FOR THE BANK : 100, boulevard Konrad Adenauer L-2950 Luxembourg Attn: Credit Risk Department Telex: 3530 BNKEU LU Fax: 00-352-437704 - FOR THE GUARANTOR : 15 Marylebone Road London NW1 5JD England Attn. Martin O'Donovan/Paul Phillips Fax: (0044171) 620 87 14 |
-13- 8.02 RECITALS AND ANNEXURES The Recitals form part of this Guarantee and Indemnity Agreement. The following Annexures are attached hereto: Annexure I - Resolution of the Board of Directors of THE GUARANTOR and Authority of Signatory Annexure II - Certificate of Guarantee Powers IN WITNESS WHEREOF the parties hereto have caused this Guarantee and Indemnity Agreement to be executed in four originals in the English language, each page having been initialled by Mr. S.E. Sturmer on behalf of THE BANK. Signed for and on behalf of Signed for and on behalf of EUROPEAN INVESTMENT BANK NEW NATIONAL GRID PLC |
this [ ] day of [ ] 2001, at London
[THE NATIONAL GRID COMPANY PLC LETTERHEAD]
Luxembourg, 20th November 2001 JU/SES/mts
Dear Sirs,
We write to you with reference to certain provisions of the Finance Contract. Terms defined in the Finance Contract have the same meaning where used in this letter.
ARTICLE 4.03D
With reference to Article 4.03D and for the avoidance of doubt we confirm that should at any time during the 30 day consultation period referred to therein the Loss-of-Rating Event cease to be continuing then THE BORROWER shall have no further obligations under Article 4.03B with respect to that particular Loss-of-Rating Event.
ARTICLE 11.01A(b)
With regard to Article 11.01A(b), we would inform you that it is not the policy of THE BANK to exercise its rights under that subparagraph without having regard to the fact that clerical and administrative errors can occur in any organisation.
Yours faithfully,
EUROPEAN INVESTMENT BANK
/s/ K.J. Andreopoulos /s/ P. Jedefors K.J. Andreopoulos P. Jedefors Deputy General Counsel Director |
EXHIBIT 4(b)(i)
THE NATIONAL GRID GROUP PLC AND NATIONAL GRID COMPANY PLC
AND
EDWARD ASTLE
DATED 27 JULY 2001
INDEX TO CLAUSES
CLAUSE NO TITLE PAGE NO 1. Appointment and Term 3 2. Duties 3 3. Salary 4 4. Pension 5 5. Insurance Benefits 5 6. Professional Fees 5 7. Car 5 8. Expenses 6 9. Holidays 6 10. Sickness and Injury 6 11. Code of Corporate Governance 7 12. Interests in other Businesses 7 13. Confidentiality 8 14. Protection of Interests of Company 9 15. Termination 10 16. Waiver of Rights 12 17. Discipline and Grievances 12 18. Inventions 12 19. Interpretation 13 20. Entire Contract Continuity and Conditionality 14 21. Notices 14 22. Jurisdiction 14 |
THIS SERVICE AGREEMENT DATED 27 JULY 2001 IS BETWEEN:-
THE NATIONAL GRID GROUP PLC (THE "COMPANY") AND THE NATIONAL GRID COMPANY PLC whose registered offices are at 15 Marylebone Road, London NW1 5JD and National Grid House, Kirby Corner Road, Coventry, CV4 8JY respectively (the "Companies") AND MR. EDWARD ASTLE, Bailey's Farmhouse, Chatham Green, Essex CM3 3LE.
1. APPOINTMENT AND TERM
1.1 You will be employed by the Company as a Director and will perform such duties as may be assigned to you from time to time in accordance with Clause 2. Your current job title is Group Director, Telecommunications, National Grid Group and you will report to the Group Chief Executive.
1.2 Your appointment to this post will be effective from 1st September 2001 and will continue, subject to and in accordance with the provisions of this contract, until terminated:-
(a) by the Companies in accordance with Clause 15;
(b) by the Companies giving you not less than twelve months' notice (24 months for the first year, declining on a straight line basis in the second year to 12 months);
(c) by you giving the Companies not less than twelve months' notice.
1.3 In accordance with the Company's Articles of Association, your appointment is subject to ratification by shareholders in General Meeting.
2. DUTIES
2.1 During the continuance of your employment, you will:-
(a) perform such duties as may from time to time be reasonably assigned to you whether those duties relate to the business of the Company or to the business of any of its Subsidiaries or Associates (including the holding of offices therein);
(b) in all respects comply with all lawful directions given by or under the authority of the Company;
(c) use your best endeavours to promote, develop and extend the business and the interests of the Company and any of its subsidiaries;
(d) unless prevented by sickness or injury and except during holidays, devote the whole of your time, attention and ability during your hours of work to
the performance of your duties under this Contract;
(e) act only in accordance with the Memorandum and Articles of Association of the Company or of the relevant Associate or Subsidiary in the Company; and
(f) keep the board of directors of the Company (and, where applicable of the relevant Group company) promptly and fully informed (in writing if so requested) of your conduct of the business or affairs of the Company and provide such explanations as they may require.
2.2 Your normal hours of work total 37 hours per week. However, you will be expected to work such other hours as may reasonably be required for the proper performance of your duties and you will not be entitled to receive additional remuneration for work over and above normal hours. In line with the Working Time Regulations, you will not be required to work more than an average of 48 hours per week.
2.3 You will be based at the Group Headquarters at 15 Marylebone Road, London
NW1 5JD.
2.4 The Company reserves the right (as far as it is reasonable to do so and after giving you reasonable notice of the change) to relocate your main place of work to (or to require you to perform some of your duties from or to post you temporarily to) any of its UK offices.
3. SALARY
3.1 During the continuance of your employment (subject to Clause 10.2), you will be entitled to a salary at the rate of L10,000 per annum (or such higher rate as may from time to time be agreed between the parties).
3.2 Your salary will accrue from day to day, be payable by equal monthly instalments on or before the last day of each month, and be inclusive of any remuneration to which you may be, or become entitled as a holder of any office in the Company or any other company for the time being in the Company.
3.3 The salary referred to in Clause 3.1 above shall be reviewed annually. The current review date is 1 April and your salary will be reviewed for the first time in April 2002.
3.4 The remuneration of senior staff is linked to the Company's and their own performance and you will be covered by these arrangements. This includes performance management principles and clear and agreed performance targets and objectives for each year which will be discussed and agreed with you by the Group Chief Executive. Following assessment of performance against these targets an annual bonus, currently of up to 60% may be payable in June following the relevant year end. The performance year is 1 April to 31 March
and your first participation in this bonus will commence 1st September 2001 and will be pro-rated for the period to 31 March 2002. From 1st September 2001 until 31 March 2002 you will also be covered by a special bonus. Details of this, together with the fundamental considerations underpinning the subsequent special bonus plans, are set out in Schedule 1.
4. PENSION
4.1 In this Clause the "ESPS" means the Electricity Supply Pension Scheme and words used in this Clause have the same meaning as they have under the provisions of the ESPS.
4.2 Subject to the terms and conditions (both statutory and non-statutory) in force from time to time in respect of the ESPS Group in which the Companies participate or of which it is Principal Employer, you will be eligible (but not obliged) to be a Member of the ESPS. You will also be entitled to enhanced pension arrangements as set out in Schedule 2 to this contract.
4.3 As a member of the ESPS a Contracting-out certificate is in force in respect of your employment.
5. INSURANCE BENEFITS
5.1 The Company will, during your employment, provide you and, if appropriate, your partner and dependent children with cover under a private medical expenses insurance scheme. This scheme is maintained from time to time by the Company for its employees, and cover is subject to and in accordance with the rules of such scheme which may be reviewed from time to time.
5.2 The Company will, during your employment, provide you with personal accident insurance cover, subject to and in accordance with the rules from time to time of the relevant scheme, current details of which are available from Group Human Resources.
5.3 The Company will provide Permanent Health Insurance to you whilst you are employed under this Contract until 1 September 2006, subject to underwriting by our insurers. At that time you will be eligible for ill health provisions of ESPS.
6. PROFESSIONAL FEES
6.1 The Company will reimburse you in full for subscriptions for any professional memberships which, in its opinion, are relevant to your employment.
7. CAR
7.1 You will be provided with a car allowance OR a car of suitable age, make, model and specification during the continuance of your employment in accordance with the policy laid down by the Company from time to time and the Company shall
pay all standing and running costs relating to it (including the cost of fuel for private mileage) but NOT any taxable benefit arising. You shall comply with all rules laid down by the Company in relation to Company vehicles, notify the Company immediately of any accident involving your car and of any charge brought against you for a motoring offence and, unless otherwise agreed, shall return the car to your place of work forthwith on termination of your employment.
8. EXPENSES
8.1 You will be reimbursed with all reasonable travelling, hotel and other expenses properly incurred by you in the performance of your duties under this Contract, subject to you providing the Company with receipts or other evidence as shall be required, of payment of the said expenses. The Company will also, during your employment, reimburse line rental and cost of business calls in respect of your home telephone.
9. HOLIDAYS
9.1 You will be entitled, on a pro-rata monthly basis, to 31 working days' holiday without loss of pay in each Holiday Year to be taken at such times as may be approved in advance by the Group Chief Executive. Holidays may not be carried forward from one Holiday Year to the next. No payment will be made by the Company during the continuance of this Contract in lieu of holidays not taken.
9.2 Upon termination of this Contract, if (in the opinion of the Company) its business needs have prevented you from taking your holiday entitlement, you shall be entitled to payment (at the rate of 1/260th of your annual salary for each day) in lieu on a pro rata basis for any holidays not taken which have accrued in the Holiday Year up to the Date of Termination. However, if appropriate, the Company shall be entitled to deduct from your final salary instalment an amount equal to 1/260th of your salary for each day's holiday taken prior to the Date of Termination in excess of your proportionate entitlement.
10. SICKNESS AND INJURY
10.1 If you are absent from work as a result of sickness or injury you will:- (a) notify the Company by telephone on the first day of your absence or in the event of being unable to do so, as soon as practicable thereafter; (b) if the period of absence is less than 8 consecutive calendar days, submit to the Company on your return a certificate of sickness completed by yourself; (c) if it is 8 consecutive calendar days or more, submit to the Company without delay a medical certificate signed by a practising medical practitioner in respect of each week of absence after the first; |
(d) you will, on request by the Company, allow yourself to be examined by the Company doctor who shall report to the Group Chief Executive as appropriate.
10.2 You will, subject to compliance with sub-clause 10.1 above and to Clause 15 below, be entitled to:-
(a) payment of salary at the full basic rate and maintenance of other contributions and benefits contractually provided by the Company (less any social security or other benefits payable to you) during any period of absence from work as a result of sickness or injury up to a maximum of a continuous period of 180 days or for an aggregate of 130 working days in any 12 consecutive months;
(b) payment of salary at half the full basic rate in addition to other contributions and benefits (less any social security or other benefits payable to you) during any such periods of absence in excess of a continuous period of 180 days or for an aggregate of 130 working days in any 12 consecutive months;
but you will not be entitled to any payment of salary or maintenance of benefits during any absence in excess of 12 months.
10.3 The Company will pay statutory sick pay, where appropriate, in accordance with the legislation in force at the time of absence, and any payment of salary in accordance with Clause 10.2 will go towards discharging its liability to pay statutory sick pay.
11. CODE OF CORPORATE GOVERNANCE
11.1 The National Grid Group plc's Code of Corporate Governance provides for you, in furtherance of your duties as a Director of the Company, to take independent professional advice, if necessary, at the Company's expense. The Chairman or the Group Company Secretary should be notified if this step is taken, which should only be taken in the best interests of the Company.
11.2 As a Director of the Company you are, of course, bound by the provisions of the Companies Act and the Stock Exchange Listing Requirements, the details of which are available from the Group General Counsel and Company Secretary. If at any point you are uncertain as to the interpretation of such provisions you must seek the advice of the Group Chief Executive.
12. INTERESTS IN OTHER BUSINESSES
12.1 You shall disclose promptly in writing to the Company all your interests and those of your spouse and dependent children, in any business other than the business of the Company and its Subsidiaries and Associates and, save with the written consent of the Company (such consent not to be unreasonably withheld), you
will not during the continuance of your employment accept any public office nor will you hold any directorship nor will you be engaged or interested (except as the holder for passive investment purposes of any shares or other securities quoted or dealt in on a recognised stock exchange not exceeding, in any case, 3 per cent of the class of securities of the company concerned) either directly or indirectly in any business or commercial occupation other than the business of the Company and its Subsidiaries and Associates.
12.2 You shall comply where relevant with every rule of law, every regulation of The Stock Exchange and every regulation of the Company from time to time in force including compliance with the spirit as well as the letter of the rules for the time being applicable to the relevant stock exchanges on which shares of the Company are for the time being listed or traded. In relation to overseas dealings, you will also comply with all laws of the state and all regulations of the stock exchange, market or dealing system in which such dealings take place; and you will not (and will procure so far as you are able that your spouse and children do not) deal or become or cease to be interested (within the meaning of Part 1 of Schedule XIII to the Companies Act 1985) in any securities of the Company except in accordance with any rules or guidelines from time to time relating to securities transactions by senior executives of the Company.
13. CONFIDENTIALITY
13.1 You will not during the continuance of your employment or afterwards (unless authorised to do so by the Company or by a court of competent jurisdiction) directly or indirectly:-
(a) use for your own benefit or the benefit of any other person; or
(b) disclose to any person,
any trade secrets or other confidential information relating to the business, affairs, finances, products or processes of the Company and/or any of its Subsidiaries or Associates ("Confidential Information").
13.2 The restriction in this Clause will not prevent you after the Date of Termination, from using for your own or another's benefit, any Confidential Information which:-
(a) by virtue of your employment, becomes part of your own skill and knowledge; and
(b) apart from the provisions of this Contract, could lawfully be used by you for that purpose, and in this respect you acknowledge without limitation the restrictions in Section 57 of the Electricity Act 1989.
13.3 During your employment, you will not:-
(a) directly or indirectly solicit, receive or obtain any discount, rebate, commission or other inducement (whether in cash or in kind) which is not authorised by regulations or guidelines from time to time governing dealings by executives on behalf of the Company, or, if you do, you will account immediately to the Company for the amount so received;
(b) except in the proper course of your duties under this Agreement remove from Company premises or copy or allow others to copy (or transmit by fax, e-mail or other means) the contents of any document, computer disk, tape or other tangible item which contains any Confidential Information or which belongs to the Company; or
(c) at any time make any untrue or misleading statement relating to the Company, or any of its Subsidiaries or Associates.
14. PROTECTION OF INTERESTS OF COMPANY
14.1 During the period of 12 months after the Date of Termination, you will not directly or indirectly offer employment to or solicit or entice away or endeavour to entice away from the Company, or any of its Subsidiaries or Associates, any person who is and was, at any time during the period of two years prior to the Date of Termination, employed or engaged by the Company or any of its Subsidiaries or Associates in a senior management, senior technical or senior sales position and who, by reason of such position, possesses any Confidential Information or is likely to be able to solicit the custom of any customer of the Company, or its Subsidiaries or Associates. 14.2 After the Date of Termination you will not represent yourself or permit yourself to be held out as being in any way connected with or interested in the business of the Company; and after such date you will not represent yourself or permit yourself to be held out as being in any way connected with the business of any of the Subsidiaries or Associates of the Company, except if and for so long as you remain an employee of that Subsidiary or Associate. 14.3 It is your obligation to ensure you take no action and make no statement (or omit to take any action or make any statement) which constitutes unlawful discrimination whether under the Equal Pay Act 1970, the Sex Discrimination Act 1975, the Race Relations Act 1976, the Trade Union and Labour Relations (Consolidation) Act 1992, the Disability Discrimination Act 1995 or otherwise. 14.4 You are required to comply with the provisions of the legislation on health and safety and working conditions. You are further required to do your utmost to ensure that the Company, and any of its Subsidiaries or Associates, comply with such health and safety legislation, all legislation concerning their areas of activity and generally with all legal obligations affecting the Company, or any of its Subsidiaries or Associates. 14.5 In this Clause references to acting directly or indirectly include (without prejudice 9 |
to the generality of that expression) references to acting alone or jointly with or by means of any other person, firm or company. 15. TERMINATION 15.1 At any time after notice to terminate your employment has been served or received by the Company, the Company may:- (a) require you to return to the Company any documents, computer disks and tapes and other tangible items in your possession or under your control which belong to the Company or which contain |
or refer to any Confidential Information; and/or
(b) require you to delete all Confidential Information from any computer disks, tapes or other re-usable material in your possession or under your control and destroy all other documents and tangible items in your possession or under your control which contain or refer to any Confidential Information; and/or
(c) for such period as it considers reasonable ending no later than the expiry of such notice suspend you from the performance of all or any of your duties under this Agreement; and/or (d) appoint a replacement to hold the same or similar job title as you and/or to carry out all or any of your duties instead of you; and/or (e) for such period as it considers reasonable ending not later than the expiry of such notice exclude you from all or any premises of the Company or its Subsidiaries or Associates; and/or (f) for such period as it considers reasonable ending no later than the expiry of such notice require you not, without its prior consent, to engage in any contact (whether or not at your own instance) with any customer, supplier, employee, director, officer or agent of any company in the Company which touches and concerns any of the business affairs of the Company. 15.2 Without prejudice to the Company's right to summarily dismiss you for gross misconduct, the Company will be entitled to terminate your employment without notice if you:- (a) commit a serious or persistent breach of any term of this Contract; (b) commit any act of dishonesty or engage in any conduct (in either case whether or not in the course of your employment) which, in the opinion of the Company, causes or is likely to cause your continued employment to be detrimental to the interests or reputation of the Company, or any of its Subsidiaries or Associates; 10 |
(c) become bankrupt or compound with your creditors; or (d) are convicted of any arrestable criminal offence (other than an offence under road traffic legislation in the United Kingdom or elsewhere for which a fine or non-custodial penalty is imposed). 15.3 If you are incapacitated by sickness (including mental disorder) or injury from carrying out your duties under this Contract for a continuous period of 180 days or for an aggregate of 130 working days in any 12 consecutive months, the Company will be entitled, notwithstanding Clause 10.2 or your entitlement at that time to sick pay or benefits under the Company's permanent health insurance scheme, to terminate this Contract by not less than 6 months' written notice given within 6 months after the end of the 180 or (as the case may be) 130 working days. 15.4 When requested to do so during the currency of any notice to terminate your employment given or received by you and, in any event, on the Date of Termination you will promptly: (a) resign (if you have not already done so) from all offices held by you in the Company and its Subsidiaries and Associates; (b) deliver up (if you have not already done so) to the Company all lists of customers, correspondence, documents, discs, tapes, data listing, codes, designs, drawings and all other materials and property belonging to the Company or any of its Subsidiaries or Associates which may be in your possession or under your control, including any copies; (c) confirm in writing that you no longer have in your possession, custody or power any property of or relating to the business of the Company and that you have not retained or made any unauthorised copy (whether in documentary or electronic form) of any data which contains or refers to any Confidential information; and (d) deliver up to the company forthwith any car provided under this Contract; and you hereby irrevocably authorise the Company to appoint someone as your attorney to act in your name and on your behalf to execute all documents and do all things necessary to effect the resignations referred to above, in the event of your failure to do so within 7 days of your being so requested or of the Termination Date (as the case may be). 15.5 On serving or receiving notice to terminate this Contract or at any time thereafter during the currency of such notice the Company reserves the right in its absolute discretion to pay to you your salary (at the rate then payable under Clause 3.1 hereof) in lieu of your entitlement to notice. 15.6 Any termination of your employment will be without prejudice to your continuing obligations under this Agreement. |
16. WAIVER OF RIGHTS
16.1 If: (a) your employment is terminated: i by reason of the liquidation of the Company for the purpose of amalgamation or reconstruction; or ii as part of any arrangement for the amalgamation of the undertaking of the Company not involving liquidation or for the transfer of the whole or part of the undertaking of the Company to any of its Subsidiaries or Associates, and (b) you are offered employment of a similar nature with the amalgamated or reconstructed or transferee company on terms not generally less favourable to you than the terms of this Contract; |
you will have no claim against the Company under this Contract in respect of that termination.
17. DISCIPLINE AND GRIEVANCES
17.1 As a Director of the Company, you are expected to conduct yourself in a thoroughly professional manner at all times. A copy of the Employee Rules of the Company for the time being in force, which apply to you by virtue of your employment hereunder but which do not form part of your terms and conditions of employment, can be obtained from Group Human Resources. 18. INVENTIONS 18.1 If at any time during the continuance of your employment you, whether alone or with any other person, make, discover or produce any invention, process, development or design which relates to, or affects, or in the opinion of the Company is capable of being used or adapted for use in or in connection with, the business or any product, process or intellectual property right of the Company or any of its Subsidiaries or Associates: (a) the invention, process, development or design will be the absolute property of the Company (except to the extent, if any, provided otherwise by Section 39 of the Patents Act 1977); and (b) you will immediately disclose it to the Company in writing. 18.2 You will, if and when required to do so by the Company (whether during |
the continuance of your employment or afterwards), and at its expense:
(a) apply, or join with the Company, or any of its Subsidiaries or Associates in applying for letters patent or other protection in any part of the world for any invention, process, development or design to which Clause 18.1 above applies;
(b) execute or procure to be executed all instruments, and do or procure to be done all things, which are necessary for vesting such letters patent or other protection in the Company or any other company, or subsequently for renewing and maintaining the same in the name of the Company or its nominee; and
(c) assist in defending any proceedings relating to, or to any application for, such letters patent or other protection.
18.3 In relation to each and every copyright work or design which relates either directly or indirectly to the business of the Company, or any of its Subsidiaries or Associates (a "Group Work") which you (jointly or alone) originate, conceive, write or make at any time during the period of your employment:- (a) you will promptly disclose such Group Work to the Company. Group Works made wholly outside your normal working hours which are wholly unconnected with your employment are not Group Works; (b) you hereby assign to the Company by way of future assignment all copyright, design right and other proprietary rights (if any) throughout the world in such Group Work; (c) you hereby irrevocably and unconditionally waive in favour of the Company any and all moral rights conferred on you by Part 1 of the Copyright Designs and Patents Act 1988 in relation to any such Group Works; (c) you acknowledge that, for the purposes of the proviso to Section 2(1) of the Registered Designs Act 1949 (as amended by the Copyright Designs and Patents Act 1988), the covenants on the part of you and the Company will be treated as good consideration and, for the purposes of that Act, the Company will be the proprietor of any design which forms part of the Group Works. 19. INTERPRETATION In this Contract:- 19.1 "Associate" means a body corporate which for the time being has not less than 20 per cent of its equity share capital beneficially owned by the Company; |
19.2 "Date of Termination" means the date upon which your employment under this Agreement terminates or, where so notified by the Company, the date with effect from which the Company exercises its right to suspend you under Clause 15.1(c); 19.3 "Holiday Year" means each 12 month period commencing 1st February and ending 31st January; 19.4 "Subsidiary" has the meaning attributed to it by Section 736 of the Companies Act 1985 and "equity share capital" has the meaning attributed to it by Section 744 of the Companies Act 1985; 19.5 unless otherwise stated and except in Clause 20 below, a reference to "your employment" is to your employment by the Companies under this Contract; 19.6 unless the context otherwise requires, words in the singular include the plural and vice versa, and a reference to a person includes a reference to a body corporate and to an unincorporated body of persons; 19.7 a reference to a statute or statutory provisions includes a reference to that statute or provision as from time to time modified or re-enacted. 20. ENTIRE CONTRACT CONTINUITY AND CONDITIONALITY 20.1 Except as otherwise expressly provided by its terms and for any detailed rules (not being inconsistent with the express terms hereof) from time to time laid down by the Company, this Contract, together with its two Schedules and the covering letter dated 27 July 2001, represents the entire understanding, and supercedes any previous agreement between the parties in relation to your employment by the Company, its Subsidiaries or Associates. 21. NOTICES 21.1 Any notice to be given under this Contract will be in writing and will be deemed to be sufficiently served by one party on the other if it is either delivered personally or is sent by prepaid first class post and addressed to the party to whom it is to be given, in the case of yourself, at your last known residence and in the case of the Company, at its registered office, and any such notice if so posted will be deemed to have been served on the day (excluding Sundays and public holidays) following that on which it was posted. 22. JURISDICTION 22.1 This Contract shall be governed by and interpreted in accordance with the laws of England and Wales and each of the parties submits to the jurisdiction of the English and Welsh courts as regards any claim or matter arising under this Contract or as a direct result of your employment by the Company. |
Signed for and on behalf of
The National Grid Group plc and The National Grid Company plc
Signed /s/ [Illegible] ------------------ Date 27/7/01 ------------------ |
I accept employment with the National Grid Group plc and The National Grid Company plc on the terms and conditions contained in this Service Agreement.
Signed /s/ [Illegible] ------------------ Date 27/7/01 ------------------ |
SCHEDULE 1
THE NATIONAL GRID GROUP PLC AND THE NATIONAL GRID COMPANY PLC
SPECIAL BONUS PLAN ARRANGEMENTS AND OTHER ITEMS
EDWARD ASTLE
This Schedule, should be read in conjunction with the Service Agreement between the National Grid Group plc and National Grid Company plc ("the Company") and Edward Astle.
1. SPECIAL BONUS SCHEME:
You will participate in a special bonus scheme that will cover an initial Review period followed by the ongoing Delivery period.
a) TO 31 MARCH 2002: REVIEW PERIOD:
In addition to the annual performance bonus that applies to all Executive Directors, there will be an enhanced bonus delivering Pound Sterling 100,000 covering the period ending 31 March 2002. This bonus will be contingent on completing the telecommunications strategic review and gaining Board approval both for the review and for the business plans that result from the review.
b) POST 31 MARCH 2002: DELIVERY PERIOD:
When the strategy and business plans have been agreed, the Company will be in a much better position to set out a specific structure regarding incentives that reflect achievement and the realities of the telecommunications market.
There are certain fundamental considerations that will underpin whatever structures are put in place.
i) The special scheme will be in addition to the various incentive schemes that apply to the other Group Executive Directors.
ii) Maximum achievement will deliver 100% of base salary on an annualised basis.
iii) Target achievement will deliver about 66% of base salary on an annualised basis.
iv) Assessment of achievement against targets will be determined by the Remuneration Committee.
v) The special scheme will be structured in the way that best supports the achievement of whatever business objectives are agreed. The special scheme might be structured as an annual or
as a long-term plan (which may be a phantom option plan). If a long-term plan is set up, shareholder approval would need to be sought.
If we are unable to draw up a mutually acceptable special scheme then the Company would recognise the importance of the telecommunications portfolio to enhancing NGG shareholder value by granting an increased multiple of share options for an additional two years after the initial grant. This multiple would be 3 times annual base salary.
2. IPO/DIVESTMENT
An additional special bonus, recognising your personal contribution, will be paid in the event of an IPO or any divestment - subject to the transaction(s) significantly enhancing shareholder value. The Remuneration Committee will decide on the exact level of bonus - but an award of up to two times base salary would be envisaged for a successful and significant transaction. Corporate Finance will develop a method of calculating potential awards up to this level.
3. TERMINATION OF SERVICES, BY THE COMPANY, FOR REASONS UNRELATED TO YOUR PERFORMANCE AND OUTSIDE YOUR CONTROL
i) In the event of termination you would have contractual notice which initially is for two years.
ii) The special bonus (1(a) above) would still be paid in the event of termination on or before 31 March 2002.
iii) For a termination after 31 March 2002 the Company would recommend to the Remuneration Committee that the
a) Annual Bonus be paid in line with actual achievement against objectives for the pro-rated period to actual date of departure PLUS an amount equal to 50% of the outstanding notice period assessed at target achievement.
b) Special Bonus (see 1(b) above) be paid in line with actual achievement against objectives for the pro-rated period to actual date of departure.
iv) Notwithstanding 3 (iii)(a) and (b) above, the Remuneration Committee will be able, at its discretion, to determine whether any additional payment should be made, having regard to the circumstances prevailing at the time.
v) The Remuneration Committee would have the discretion to grant a period of time wherein you could exercise National Grid Group Executive Share Options.
vi) The above terms regarding termination of services will remain in force for the first three years of your employment. Thereafter termination terms will revert to those applicable to the other Executive Directors.
SCHEDULE 2
THE NATIONAL GRID GROUP plc and THE NATIONAL GRID COMPANY plc
SUMMARY OF ENHANCED PENSION AND LIFE ASSURANCE ARRANGEMENTS
EDWARD ASTLE
This summary, which should be read in conjunction with the National Grid Company plc ("the Company") section of the ESPS booklet, notifies you of your entitlement to additional benefits to those provided by the ESPS. The additions are as follows:
1. Your Normal Pension Age is age 60.
2. Your pension will accrue at a rate of 1/30th of your Pensionable Salary for each year of Pensionable Service from 1st September 2001 (complete days will count) or such higher amount as may be advised by the Actuary to the Scheme, subject to pension payable, including any retained benefits, not exceeding Inland Revenue limits (but see 12 below). You will be able to exchange part of your pension for a tax free lump sum up to the maximum permitted by the Inland Revenue. The provisions of paragraph 12 of this Schedule shall apply in respect of any pension benefits which cannot be provided under the ESPS due to Inland Revenue limits.
3. (a) You may retire WITH the consent of the Companies at any time on or after your 55th birthday and receive an immediate pension. Under these circumstances, the immediate unreduced pension will be based on your Pensionable Service and your Pensionable Salary at the date of termination.
(b) You may retire WITHOUT the consent of the Companies at any time on or after your 55th birthday and receive an immediate pension. Under these circumstances, the immediate pension will be based on your Pensionable Service and your Pensionable Salary at the date of termination, and will be reduced for early payment by an amount determined by the Remuneration Committee on the advice of the Actuary, having regard to the actuarial factors prevailing at that time within the ESPS.
4. Should your employment be terminated as a result of redundancy, and the termination is with the consent of the Companies, you will be entitled to the greater of:
(a) the severance terms of The National Grid Group, as amended from time to time, which currently include payment of a pension under standard ESPS terms only, (i.e. not a pension based on the enhanced accrual rate set out in this summary) at age 50, or immediately if aged over 50, or;
(b) a deferred pension (and lump sum) payable at your request from age 50, or such later date as you may choose but no later than 60. The pension (and lump sum) will be calculated on your Pensionable Service and your Pensionable Salary at the date of termination. Should such a termination occur after your 50th birthday you will be entitled to an immediate unreduced pension (and lump sum) calculated on your Pensionable Service and your Pensionable Salary at the date of termination.
5. In the event that it is agreed with the Companies that you should continue in service beyond age 60, there will be an appropriate adjustment to your benefits. The exact terms of the adjustment will be determined by the Companies and notified to you, upon advice received from the Actuary, when you reach age 60.
6. On death in service before the Normal Pension Age a lump sum is available for your beneficiaries equal to four times your annual rate of basic salary at death, plus the total amount of contributions with interest paid by you into the National Grid Company plc Section of the ESPS.
7. The pension payable to a spouse on death in service before Normal Pension Age is calculated as 2/3 of the pension you would have received at Normal Pension Age based on your Pensionable Salary at death.
8. The pension payable to a spouse on death after retirement is calculated as 2/3 of your pension. The calculation will assume you chose to exchange no pension for cash at retirement and will be increased at the same rate as your pension has increased between retirement and death.
9. In the event of a transfer in of accrued pension benefits from another pension provider, any Back Service Credit will be calculated on standard ESPS benefits.
10. Your contributions will be normally be 6% of your Salary. However, this may be reduced from time to time based on actuarial advice. In this respect, you will benefit from a reduction in your contribution to 3% of your salary until March 2002 or such later time as notified.
11. In this schedule "Salary" means the annual amount of salary payable by the Companies as stipulated in your Agreement as increased from time to time but excluding any bonus, allowance or emoluments in kind appertaining to your employment, unless otherwise determined by the Companies.
"Pensionable Salary" means the greater of
(a) the Salary paid or payable in the highest paid year in the last five years of Pensionable Service, or if Pensionable Service is for a shorter period than five years in respect of such shorter period, or;
(b) the average annual Salary paid in the three highest paid consecutive years in the last ten of Pensionable Service, or if your Pensionable Service is for a shorter period, in respect to such shorter period.
Where a year other than the last one is used, such Salary to be increased in line with RPI.
"Pensionable Service" means service whilst a contributing member of the ESPS. It is calculated in complete years but with each day completed in excess of a complete year calculated as 1/365 of a year and may include a Back Service Credit or Added year.
12. You should note that the Inland Revenue have placed a restriction (the "earnings cap") on the amount of pay on which benefits may be calculated in an approved arrangement (L95,400 for the 2001/2002 Tax Year). Your pension at Normal Pension Age will be augmented under the National Grid Company plc Section of the ESPS, if necessary, up to the maximum allowable at that date. If your full pension promise, as set out in paragraph 2 of this Schedule, cannot be met from the National Grid Company plc Section of the ESPS, you will be provided with additional benefits of equivalent value under a separate agreement. For the avoidance of doubt, if your Pensionable Service is terminated (for any reason) prior to your Normal Pension Age you will be entitled at Normal Pension Age to pension benefits which give effect to your full pension promise as set out in paragraph 2 of this Schedule, but only in respect of your Pensionable Service up to the date of termination of your Pensionable Service, and this will apply mutatis mutandis to the provisions of paragraphs 3 and 4(b). With the exception of the earnings cap restriction, all other limits imposed by the Inland Revenue on approved arrangements will apply to the benefits referred to in this summary.
13. In all other respects the provisions of ESPS will apply to you.
EXHIBIT 4(b)(iii)
12/4/01
FORM OF
EMPLOYMENT AGREEMENT
WILLIAM E. DAVIS
TABLE OF CONTENTS
1.0 Employment Period.............................. 2 2.0 Position and Duties............................ 2 3.0 Compensation................................... 4 4.0 Termination of Employment,..................... 7 5.0 Termination Procedures......................... 12 6.0 Non-Exclusivity of Rights...................... 13 7.0 Full Settlement................................ 13 8.0 Non-Competition Provision and Confidential Information.................................. 14 9.0 Certain Additional Payments by the Company..... 16 10.0 Attorneys' Fees................................ 21 11.0 Successors..................................... 22 12.0 Ownership of Work Product...................... 23 13.0 Miscellaneous.................................. 24 |
PRIVILEGED AND CONFIDENTIAL
EMPLOYMENT AGREEMENT
This Agreement by and between, NATIONAL GRID GROUP PLC, a public limited company incorporated under the laws of England and Wales with registration number 4031152 (National Grid), by NATIONAL GRID USA, a Delaware Corporation ("Company") and William E. Davis (the "Executive"), dated as of the _______ day of ________.
WITNESSETH THAT
WHEREAS, the Executive is currently employed by Niagara Mohawk Holdings, Inc. (Niagara Mohawk) and is a party to an employment agreement between Niagara Mohawk and the Executive dated March 17, 1999 (Employment Agreement).
WHEREAS, Niagara Mohawk and National Grid have entered into an Agreement and Plan of Merger and Scheme of Arrangement by and among National Grid, Niagara Mohawk, New National Grid Limited and Grid Delaware, Inc. dated September 4, 2000 (the Merger).
WHEREAS, a result of the Merger, Niagara Mohawk will become a subsidiary of the Company.
WHEREAS, the Company desires to foster the continuous employment of key management personnel and to provide for orderly succession of management following the effective date of the Merger (the "Effective Time"); and
WHEREAS, the Company further wishes to provide for the employment by the Company of the Executive and the Executive wishes to serve National Grid, the Company, and its
affiliates in the capacity and according to the terms and conditions set forth in this Agreement, and
WHEREAS, this Agreement is the entire agreement amongst the parties concerning the subject matter hereof and subject to Section 1.2 below, supersedes all prior agreements concerning the same subject, including the Employment Agreement.
NOW THEREFORE in consideration of the premises, mutual rights and obligations of the parties, the parties hereby agree as follows:
1.0 Employment Period.
1.1 The Company shall employ the Executive, and the Executive shall serve
the Company according to the terms and conditions set forth in this
Agreement, for a period commencing as of the Effective Time as described in
Section 1.2 of the Merger and ending twenty four (24) months thereafter (the
Employment Period), unless terminated earlier at the Executive's sole
discretion, provided the Executive provides the Company with three (3) months
prior written notice.
1.2 This Agreement shall not be effective prior to the Effective Time. For all periods prior to, but not including, the Effective Time, the Executive's Employment Agreement shall remain in full force and effect.
2.0 Position and Duties.
2.1 During the Employment Period, the Executive shall serve as Chairman of National Grid USA. The Executive's responsibilities as Chairman of National Grid USA shall include all aspects of the Company's and its subsidiaries' businesses. The Executive shall serve
as an employee of the Company with such duties and responsibilities as are customarily assigned to such a position, and such other duties and responsibilities not inconsistent therewith as may from time to time be assigned to him by the Board of Directors of National Grid Group, PLC (Board). As Chairman of National Grid USA, the Executive shall report only to the Board. The Executive shall be a member of the Board on the first day of the Employment Period, and the Board shall propose the Executive for re-election to the Board throughout the Employment Period. In addition, and without further compensation, the Executive shall serve as an Executive Director of National Grid, subject to ratification of National Grid's shareholders, and shall serve as a director and/or officer of one or more of the Company's other affiliates if so elected or appointed from time to time.
2.2 During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote reasonable attention and time during normal business hours to the business and affairs of National Grid, the Company and its affiliates, as directed by the Board, and, to the extent necessary to discharge the responsibilities assigned to the Executive under this Agreement, use the Executive's reasonable best efforts to carry out such responsibilities faithfully and efficiently. It shall not be considered a violation of the foregoing for the Executive to serve on corporate, industry, civic, or charitable boards or committees or to pursue the Executive's personal, legal and/or financial affairs, so long as such activities do not materially interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement.
2.3 If at any time during the Employment Period, the Executive believes in furtherance of his duties as a Director of National Grid, that it is necessary and in the best
interests of the Company to seek independent financial and/or legal advice pertaining to a Company matter, the Executive may do so at National Grid's expense. The Executive shall notify the Chairman or Secretary of National Grid at the time of taking such action.
2.4 The Executive's principal place of business shall be located in Syracuse, New York. If the Company requires the Executive to relocate during the Employment Period to a location more than fifty (50) miles from Syracuse, New York, the Executive may terminate his employment with ten (10) days advance written notice to the Company and receive the benefits set forth in Section 4.3.4 of this Agreement.
3.0 Compensation.
3.1 The Executive's compensation during the Employment Period, shall be determined by, and in the sole discretion of National Grid or any successor thereto, subject to this Article 3.0, Sections 4.3.1 and 4.3.2 and Article 9.0 below.
3.2 If the Executive has not received a lump sum payment, taxes withheld,
equal to four times his annual base salary in effect immediately before the
Effective Time; the Company shall pay the Executive, said payment within ten
(10) business days following the Effective Time.
3.3 Base Salary. During the Employment Period, the Executive shall receive an annual base salary of no less than Eight Hundred Twenty Thousand Dollars ($820,000), payable in accordance with the Company's regular payroll practices as in effect, from time to time, for senior officers. During the Employment Period, the annual base salary shall be reviewed on an annual basis according to the practices in effect at the time for the Company's senior officers.
3.4 Incentive Compensation.
3.4.1 The Executive shall be deemed a participant in National Grid USA Companies' Incentive Compensation Plan Level I for purposes of incentive compensation. During the Employment Period, the Executive shall participate in annual bonus arrangements which shall be prorated, if applicable, the maximum opportunity for which shall comprise: (A) 50% of annual base salary, payable in cash (the "Annual Cash Bonus") and (B) 60% of the Annual Cash Bonus, payable in phantom or similar shares of National Grid stock and subject to a three year vesting requirement and such other terms and conditions as such incentive plan may provide, based on Company performance goals and standards as determined by National Grid. The Executive shall be eligible to participate in the above arrangements at a level (in terms of the amount and types of compensation that the Executive has the opportunity to receive and the terms thereof) no less favorable in the aggregate than those arrangements which are provided to National Grid USA's Chief Executive Officer (CEO).
3.4.2 In addition, at the discretion of the National Grid Group Remuneration Committee, the Executive will participate in National Grid's Executive Stock Option Plan or any successor plan or scheme thereto at a level similar to that provided to the CEO.
3.5 Retirement Benefits. During the Employment Period, the Executive shall participate in National Grid USA Companies executive supplemental retirement plan; provided however, as the Company will be paying the Executive a lump sum payment as a result of the Merger under Niagara Mohawk's Supplemental Executive Retirement Plan, Amended and
Restated as of January 1, 1999, any future pension benefits from the Company will be offset by the annuity value of such lump sum payment, determined in accordance with the actuarial equivalence factors defined in the Company's pension plan.
3.6 Welfare Benefit Plans. During the Employment Period, the Executive, the Executive's spouse, and their eligible dependants, if any, shall be eligible for participation in, and be covered by all welfare benefit plans and programs, provided by the Company in accordance with the terms and conditions of said programs, including without limitation the medical, hospitalization, prescription, disability, dental, sick leave, Life Insurance Program for Executives II (value will be 4x base salary), accidental death and travel accident insurance plans and programs, to the same extent as other senior officers of the Company. Notwithstanding the above, if the Executive's employment is terminated by the Company for any reason other than Cause, as defined in Section 4.3.3 below, or by the Executive with proper notice as required under Sections 1.1 or 2.4 of this Agreement; or upon termination of his employment at the conclusion of the Employment Period, then (i) the Executive and his eligible dependents shall be entitled to continue participation (the premiums for which will be paid by the Company) in the employee benefit plans of the Company providing medical, prescription, dental, and hospitalization benefits for the remainder of the Executive's or eligible dependent's life at a level at least equal to those provided by Niagara Mohawk to executives on March 26, 1997, (ii) the Executive shall be entitled to be covered by a life insurance policy providing a death benefit equal to 2.5x his base salary at the rate in effect at the time of termination, payable to a beneficiary or beneficiaries designated by the Executive (or if none, to his estate), the premium for which will be paid by the Company for the balance of the Executive's life, (iii) except for the
continuation of SERP and any qualified pension plan coverage under Section 3.5 above which shall not be required, the Executive shall be entitled to continue participation (the premiums for which will be paid by the Company) in the other employee benefit plans of the Company for a four (4) year period from his date of termination; provided, however, that if the Executive cannot continue to participate in any of the Company's benefit plans, the Company shall otherwise provide equivalent benefits to the Executive and his dependents on the same after-tax basis as if continued participation had been permitted. Notwithstanding the foregoing, in the event the Executive becomes employed by another employer and becomes eligible to participate in an employee benefit plan of such employer, the benefits described herein shall be secondary to such benefits during the period of Executive's eligibility, but only to the extent that the Company reimburses the Executive for any increased cost and provides any additional benefits necessary to give the Executive the benefits provided hereunder.
3.7 Vacation and Fringe Benefits. During the Employment Period, the Executive shall be entitled to six weeks vacation, plus twelve paid holidays per calendar year. In addition, the Executive shall be entitled to receive the financial consulting services of AYCO.
4.0 Termination of Employment.
4.1 The Company shall continue to employ the Executive and the Executive shall continue to work for the Company during the Employment Period, unless this Agreement is terminated in accordance with Sections 1.1, 2.4 or one of the following provisions of Section 4.3 below.
4.2 If the Executive continues to work for the Company through the 24 month Employment Period or terminates his employment in accord with Section 1.1 above, upon conclusion of the Employment Period the Company shall pay the Executive the following Accrued Obligations.
A. In a lump sum cash payment with appropriate taxes withheld, within thirty (30) days after the date of termination, the sum of the following:
(i) any portion of the Executive's annual base salary through the date of termination that has not yet been paid;
(ii) in respect to incentives awarded under Section 3.4 of this Agreement, an amount representing the target incentive compensation for the year that would otherwise vest and/or become payable within the year in which the date of termination occurs, computed by assuming that the amount of all such target incentive compensation would be equal to the amount of such target incentive compensation that the Executive would have been eligible to earn for such period, and multiplying that amount by a fraction the numerator of which is the number of days in such period through the date of termination, and the denominator of which is the total number of days in the relevant period;
(iii) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) that has not yet been paid; and
(iv) any accrued but unpaid incentive compensation and/or vacation pay, and,
(B) According to the terms of the applicable plan, at the times and in the manner set forth in the plan, the following:
(i) any amounts owing under any deferred compensation or stock option plan,
(ii) any benefits required to be provided under Sections 3.5 and/or 3.6 of this Agreement; and
(iii) any Excise Tax Payments required under Article 9.0 of this Agreement.
4.3.1 Termination Due to Death. The Executive's employment shall terminate automatically upon the Executive's death during the term of this Agreement. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, the Company shall pay to the Executive's designated beneficiaries (or, if there is no such beneficiary, to the Executive's estate or legal representative) the Accrued Obligations set forth in Section 4.2 above.
4.3.2 Termination Due to Disability. By notice to the Executive, the Company may terminate this Agreement upon the "Disability" of the Executive. The Executive shall be deemed to incur a Disability when (i) the Company's Medical Department or its representative who shall be a licensed physician, advises the Company that the Executive's physical or mental condition has rendered the Executive unable to perform the essential functions of the Executive's position in a reasonable manner, with or without reasonable accommodation and will continue to render him unable to perform the essential functions of the Executive's position in such manner, for a period exceeding twelve (12) consecutive months, or (ii) due to a physical or mental condition, the Executive has not performed the essential functions of the Executive's position in a
reasonable manner, with or without reasonable accommodation, for a period of twelve (12) consecutive months. Following termination of this Agreement pursuant to clause (i) of the preceding sentence of this Section 4.3.2, the Executive shall continue to receive his base salary under Section 3.3 of this Agreement for a period of twelve (12) months from the date of his Disability, reduced by any benefits payable during such period under the short-term disability plan and/or long-term disability plan in which the Executive is enrolled. Thereafter, or in the event of termination of this Agreement pursuant to clause (ii) of the preceding sentence, the Executive shall receive benefits under the applicable long-term disability plan in lieu of any further base salary under Section 3.3 of this Agreement and shall receive the benefits set forth in Section 4.2 B of this Agreement.
4.3.3 Termination for Cause. The Company may only terminate the Executive's employment during the Employment Period for "Cause". For purposes of this Agreement "Cause" shall mean (i) the Executive is convicted of, or has pled guilty or nolo contendere to, a felony; (ii) the willful and continued failure by the Executive to perform substantially his duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness) after a demand for substantial performance is delivered to the Executive by the Company which specifically identifies the manner in which the Company believes the Executive has not substantially performed his duties; (iii) the Executive engages in conduct that constitutes gross neglect or willful misconduct in carrying out his duties under this Agreement involving material economic harm to National Grid, the Company or any of its affiliates; or (iv) the Executive has engaged in a material breach of Article 8.0 of this Agreement.
If the Executive's employment is terminated by the Company for Cause during the Employment Period, the Company shall only pay the Executive (i) his annual base salary through the date of termination, (ii) and the amount of any compensation previously deferred by the Executive and (iii) any accrued vacation, in each case to the extent not yet paid, and the Company shall have no further obligations under this Agreement, except as specified in Article 6.0 below.
4.3.4 Termination Without Cause. If the Executive terminates his employment during the Employment Period in accord with Section 2.4 above or the Company terminates his employment without cause during the Employment Period, as defined in Section 4.3.3 above, the Company shall pay the Executive:
(a) in a lump sum payment with appropriate taxes withheld, within thirty
(30) days after the date of termination, the sum of:
(i) the Accrued Obligations set forth in Section 4.2 above,
(ii) that portion of the Executive's salary which he would have
earned had he continued to be employed throughout the Employment
Period, based upon his annual salary in effect at the time of his
termination; and
(iii) in respect to incentives awarded under Section 3.4.1, an amount
which covers any incentive compensation payment not yet paid for
the existing plan year and/or any incentive compensation payment
for the remainder of the twenty four (24) month Employment
Period, based upon the target incentive compensation for the Plan Year in which the Executive's employment is terminated.
(b) all reasonable fees and expenses of any executive recruiting or placement firm selected by the Executive for the purpose of seeking new employment until the Executive obtains outside employment or for a period of 24 months whichever comes first;
5.0 Termination Procedures.
5.1 Notice of Termination. Any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 13.3 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable details the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated.
5.2 Termination for Cause. In order for termination to be effective under
Section 4.3.3 above, the Executive must be notified in writing of any
termination of his employment for "Cause," which writing shall set
forth in reasonable detail the facts and circumstances relied upon
therefor. Said notice must be delivered to the Executive within ninety
(90) days after the Board both (1) has or should have knowledge of
conduct of an event which allegedly constitutes "Cause" and (2) has
reason to believe such conduct or event could be grounds for "Cause".
In the event of such a termination notice, the Executive shall have ten
(10) business days following
receipt of said notice to cure his conduct, to the extent such cure is possible. If the Executive does not cure within the ten (10) business day period, his termination of employment shall be deemed to be for "Cause". Notwithstanding the foregoing, any determination of "Cause" must be made by the Board at a meeting called for the purpose of determining whether the Executive has engaged in conduct constituting "Cause", at which meeting the Executive will have a reasonable opportunity to be represented by counsel. A termination for "Cause" may be upheld only upon resolution approved by a majority vote of the members of the Board. If the Board does not make such determination, the termination shall be treated as a termination by the Company "without cause" and the Executive shall be entitled to the compensation set forth in Section 4.3.4 above.
6.0 Non-Exclusivity of Rights. Except as provided in Articles 1.0, 3.0 and 4.0 of this Agreement, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies for which the Executive may qualify. Vested benefits and other amounts that the Executive is otherwise entitled to receive under any other plan, policy, practice, or program of, National Grid, the Company or any of their affiliated companies on or after the date of termination shall be payable in accordance with the terms of each such plan, policy, practice, or program, as the case may be, except as explicitly modified by this Agreement.
7.0 Full Settlement. Except as set forth in Article 10.0, the Company's obligation to make the payments provided for in, and otherwise to perform its obligations under this Agreement shall
not be affected by any set-off, recoupment, defense or other claim, right or action that the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.
8.0 Non-Competition Provision and Confidential Information.
8.1 Non-Competition. The Executive agrees that without the prior written consent of the Board, during the Employment Period and for two (2) years thereafter, the Executive shall not, for himself or on behalf of any other party, partnership, corporation or company as a shareholder, officer, director, partner, consultant, or otherwise, engage directly or indirectly, or acquire any financial or beneficial interest in (except as provided in the next sentence), or provide consulting services to, be employed by, or own, manage, operate or control any business which is in competition with a business engaged in by National Grid, the Company or any of their subsidiaries or affiliates in any state of the United States in which any of them are engaged in business at the time of such termination of employment for as long as they carry on a business therein. Notwithstanding the preceding sentence, the Executive shall not be prohibited from owning less than five (5%) percent of any publicly traded corporation, whether or not such corporation is in competition with National Grid, or the Company or any of their subsidiaries or affiliates.
The Executive hereby covenants and agrees that, at all times during the period of his employment and for a period of two (2) years immediately following the termination thereof, for any reason, the Executive shall not employ or seek to employ any person employed at that time by National Grid, the Company or any of their subsidiaries or affiliates, or otherwise encourage or entice such person or entity to leave such employment.
8.2 Confidential Information. The Executive agrees to keep secret and retain in the strictest confidence all confidential matters which relate to National Grid, the Company and their subsidiaries and affiliates, including, without limitation, customer lists, client lists, trade secrets, pricing policies and other business affairs of National Grid, the Company, their subsidiaries and affiliates and their predecessors and their subsidiaries and affiliates, learned by him from National Grid, the Company, their subsidiaries or affiliates, their predecessors and their subsidiaries and affiliates, or otherwise, before or after the date of this Agreement, and shall not disclose any such confidential matters to anyone outside National Grid, the Company, or any of their subsidiaries or affiliates, whether during or after his period Employment Period, except (i) as such disclosure may be required or appropriate in connection with his work as an employee of the Company, its parent or their affiliates or subsidiaries or (ii) when required to do so by a court of law, by any governmental agency having supervisory authority over the business of National Grid, the Company or their subsidiaries or affiliates or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order him to divulge, disclose or make accessible such information. The Executive agrees to give the Company advance written notice of any disclosure pursuant to clause (ii) of the preceding sentence and to cooperate with any efforts by the Company to limit the extent of such disclosure. Upon request by the
Company, the Executive agrees to deliver promptly to the Company upon termination of his services for the Company or National Grid, or at any time thereafter, as the Company may request, all Company, National Grid and their subsidiaries and affiliates and their predecessors property, memoranda, notes, records, reports, manuals, drawings, designs, or computer files in any media and any other documents (and all copies thereof) relating to the business of National Grid, the Company, their predecessors or any of their subsidiaries or affiliates which he may then possess or have under his direct control, other than personal notes, diaries, correspondence or rolodexes.
8.3 It is the intention of the parties hereto that the restrictions contained in this Article 8.0 be enforceable to the fullest extent permitted by applicable law. Therefore, to the extent any court of competent jurisdiction shall determine that any portion of the foregoing restrictions is excessive, such provision shall not be entirely void, but rather shall be limited or revised only to the extent necessary to make it enforceable. Moreover, if any court of competent jurisdiction should hold that any portion of the foregoing descriptions is overly broad in time, scope, or area, it is expressly agreed that such provision shall be reformed to the maximum degree that would not render it unenforceable.
9.0 Certain Additional Payments by the Company.
9.1 Excise Tax Payment by the Company. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company or any of its affiliates to or for the benefit of the Executive, whether pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9.1 (the "Payments") would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall pay to the Executive (or to the Internal
Revenue Service on behalf of the Executive) an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any Excise Tax) imposed upon the Gross-Up Payment, the Executive
retains (or has had paid to the Internal Revenue Service on his behalf) an
amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed
upon the Payments and (y) the product of any deductions disallowed because of
the inclusion of the Gross-Up Payment in the Executive's adjusted gross income
and the highest applicable marginal rate of federal income taxation for the
calendar year in which the Gross-Up Payment is to be made. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed
to (i) pay federal income taxes at the highest marginal rates of federal income
taxation for the calendar year in which the Gross-Up Payment is to be made,
(ii) pay applicable state and local income taxes at the highest marginal rate
of taxation for the calendar year in which the Gross-Up Payment is to be made,
net of the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes and (iii) have otherwise allowable
deductions for federal income tax purposes at least equal to the Gross-Up
Payment.
9.1.1 All determinations required to be made under Section 9.1 above, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determinations, shall be made by a PricewaterhouseCoopers (PWC) (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Company that there has been a Payment, or such earlier time as is requested by the Company (collectively, the "Determination"). All fees and expenses of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Accounting Firm in connection with the performance of the services hereunder. The Gross-Up Payment under Section 9.1 above with respect to any Payments shall be made no later than thirty (30) days following such Payment. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on the Executive's applicable federal income tax return will not result in the imposition of a negligence or similar penalty. The Determination by the Accounting Firm shall be binding upon the Company and the Executive.
As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment") or Gross-Up Payments are made by the Company which should not have been made ("Overpayment"), consistent with the calculations required to be made hereunder. In the event that the Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment
(together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the benefit of the Executive. In the event the amount of Gross-Up Payment exceeds the amount necessary to reimburse the Executive for his Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by the Executive (to the extent he has received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of the Company. The Executive shall cooperate, to the extent the Company reimburses his expenses, with any reasonable requests by the Company in connection with any contests or disputes with the Internal Revenue Service in connection with the Excise Tax.
9.1.2 The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Underpayment. Such notification shall be given as soon as practicable but no later than fifteen (15) business days after the Executive knows of such claim, and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the period ending on the date that any payment of taxes with respect to such claim is due or the thirty (30) day period following the date on which the Executive gives such notice to the Company, whichever occurs first. If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall (i) give the Company any information reasonably requested by the Company relating to
such claim, (ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company, (iii)
cooperate with the Company in good faith in order to effectively contest
such claim, and (iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that (a) the Company shall bear
and pay directly all costs and expenses (including attorneys fees and any
additional interest and penalties) incurred in connection with such contest
and shall indemnify and hold the Executive harmless, on an after-tax basis,
upon demand for any reasonable and verifiable incidental costs and expenses
incurred by the Executive in connection with such contest, and for any
Excise Tax or income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and payment of costs
and expenses, (b) the Executive shall not be required to continue such
contest if the Company fails to timely pay amounts due under (a) above of,
if the Executive is advised in writing by counsel, and provides the Company
with a copy of such advice, that any position or action taken by the
Company in connection with the contest may result in civil or criminal
liability to the Executive other than for the amount of Underpayment,
expenses, civil penalties, and/or interest, reimbursed by the Company under
(a) above; and (c) any information provided to the Company or its counsel
hereunder shall be treated as confidential and shall not be used for any
purpose than pursuit of the contest hereunder. Subject to the foregoing
provisions of this Section 9.1.2, the Company shall control all
proceedings taken in connection with such contest and, at its sole option,
may pursue or
forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect to such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax and income tax, including interest and/or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other authority.
10.0 Attorneys' Fees. The Company shall pay to the Executive, within thirty
(30) days following submission of a written statement of the expenditure, and
to the fullest extent permitted by law, (i) all legal fees, court costs and
litigation expenses reasonably incurred by the
Executive as a result of any contest by the Company, the Executive, or others regarding the validity or enforceability of or liability under, or otherwise involving, any provision of this Agreement or (ii) any counsel fees incurred by the Executive seeking counsel for the purpose set forth in Section 9.1.2 (b) above (except to the extent it is determined by a final and non-appealable order of court of competent jurisdiction, mediator or arbitrator, as the case may be, that the Executive's claim is, or claims are, frivolous or without merit, in which case the Executive shall bear all such fees and expenses), together with interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code. If the court, mediator, or arbitrator determines that the Executive' claim(s) is frivolous or advanced in bad faith, the Executive shall reimburse the Company for all such fees and expenses previously paid by the Company within fifteen (15) days of the court, mediator, or arbitrator's decision. Provided further, if the Executive fails to reimburse the Company as set forth herein, the Company may offset said amount against any payment due the Executive.
11.0 Successors.
11.1 This Agreement is personal to the Executive and, without the prior written consent of the Chief Executive Officer of National Grid, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of the Executive's estate.
11.2 This Agreement shall inure to the benefit of and be binding upon National Grid, the Company and their successors and assigns.
11.3 National Grid and/or the Company shall require any successor
(whether direct or indirect by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company or
National Grid, as applicable, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that National Grid and/or
the Company would have been required to perform it if no such succession had
taken place.
12.0 Ownership of Work Product.
12.1 Any and all improvements, inventions, discoveries, formulae, processes, methods, know-how, confidential data, trade secrets and other proprietary information (collectively, "Work Product") within the scope of any business of the Company, National Grid or any of their affiliates or subsidiaries which the Executive may conceive or make or have conceived or made during the Executive's employment with the Company or a Niagara Mohawk company, shall be and are the sole and exclusive property of the Company, and that the Executive, whenever requested to do so by the Company, at the Company's expense, shall execute and sign any and all applications, assignments or other instruments and do all other things which the Company may deem necessary or appropriate (i) to apply for, obtain, maintain, enforce, or defend in the United States or any foreign country, or (ii) to assign, transfer, convey or otherwise make available to the Company the sole and exclusive right, title and interest in and to any Work Product.
13.0 Miscellaneous.
13.1 Waiver and Election of Remedies. Waiver by a party of any term, condition or provision of this Agreement shall not be considered a waiver of that term, condition or provision in the future or of any other term, condition, or provision, and any provision hereof may be waived only by an instrument in writing signed by the party against whom or which enforcement of such waiver is sought. The failure of a party, at anytime, to require the performance by the another party of any provision hereof, shall in no way affect the full right to require such performance at anytime thereafter.
13.2 Severability. In the event that any portion or part of this Agreement is deemed invalid, against public policy, void or otherwise unenforceable by a court of law, the parties shall negotiate an equitable adjustment in the affected provision of this Agreement; however, the validity and enforceability of the remaining portions hereof shall otherwise be fully enforceable.
13.3 Notice. All notices and other communications required or desired under this Agreement shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, or by overnight delivery addressed as follows:
If to the Executive: William E. Davis
If to the Company: National Grid USA
25 Research Drive Westborough, MA 01582 Attention: General Counsel With copy to: The National Grid Group PLC National Grid House Kirby Corner Road Coventry CV4 8JY United Kingdom Attention: General Counsel If to National Grid: _____________________ The National Grid Group PLC National Grid House Kirby Corner Road Coventry CV4 8JY United Kingdom Attention: General Counsel With copy to: General Counsel |
or to such other address as either party furnishes to the other in writing in accordance with this Section 13.3. Notices and communications shall be effective when actually received by the addressee.
13.4 Captions and Paragraph Headings. The captions and paragraph headings used in this Agreement are for convenience only and are not to be construed as a part of this Agreement.
13.5 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. The Executive agrees to submit to the personal jurisdiction of the Massachusetts courts in respect to any matter or dispute arising out of this Agreement.
13.6 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.
13.7 Performance Covenant. The Executive represents and warrants to the Company that the Executive is not party to any agreement which would prohibit the Executive from entering into this Agreement or performing fully the Executive's obligations hereunder.
13.8 Survival of Covenants. The obligations of the Executive set forth in Article 8.0 herein, are independent covenants by which the Executive is and will remain bound notwithstanding any breach by the Company, and shall survive the termination of this Agreement.
13.9 Taxes. Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement all federal, state, local and foreign taxes that are required to be withheld by applicable laws or regulations. All cash amounts required to be paid hereunder shall be paid in United States dollars.
13.10 Entire Agreement. This Agreement constitutes the entire Agreement between the Company and the Executive and all previous representations or agreements, whether written or oral; including the Employment Agreement, are hereby annulled and superseded. No change, modification or alteration of any of the provisions of this Agreement shall be binding except by a written agreement executed by the parties hereto or their respective successors and legal representatives. Any action by the Company to amend or modify this Agreement must be approved by the Company's Board of Directors.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization of their respective Boards of Directors, the Company and National
Grid have caused this Agreement to be executed in their name on their behalf, all as of the day and year set forth below.
William E. Davis
/s/ William E. Davis --------------------------- Date: 5 December 2001 |
National Grid USA
By: /s/ [ILLEGIBLE] ------------------------ Its Date: |
THE NATIONAL GRID GROUP PLC
By: /s/ [ILLEGIBLE] ------------------------ Its Date: 7.12.01 |
Exhibit 4(c)
NATIONAL GRID GROUP PLC
NATIONAL GRID
EXECUTIVE SHARE OPTION PLAN 2002
New Bridge Street Consultants
20 Little Britain London EC1A 7DH |
||
Ref: N\3061\02 Exec Plan
Inland Revenue Ref: X21918\RF Dated approved by Inland Revenue: 24 April 2002 |
CONTENTS
Page | ||||||||
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PART A: INLAND REVENUE APPROVED
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1 | |||||||
1
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DEFINITIONS AND INTERPRETATION | 1 | ||||||
2
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ELIGIBILITY | 2 | ||||||
3
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GRANT OF OPTIONS | 2 | ||||||
4
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LIMITS | 3 | ||||||
5
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EXERCISE OF OPTIONS | 5 | ||||||
6
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TAKEOVER, RECONSTRUCTION AND WINDING-UP | 6 | ||||||
7
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VARIATION OF CAPITAL | 8 | ||||||
8
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ALTERATIONS | 9 | ||||||
9
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MISCELLANEOUS | 9 | ||||||
PART B: UNAPPROVED
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11 | |||||||
1
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INTERACTION WITH PART A | 11 | ||||||
2
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ELIGIBILITY | 11 | ||||||
3
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LIMITS | 11 | ||||||
4
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EXERCISE OF OPTIONS | 11 | ||||||
5
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CASH EQUIVALENT | 11 | ||||||
6
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PROVISIONS REFERRING TO INLAND REVENUE APPROVAL | 12 | ||||||
7
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TAKEOVER, RECONSTRUCTION AND WINDING-UP | 12 | ||||||
8
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VARIATION OF CAPITAL | 12 | ||||||
9
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EXTENSION OF PLAN OVERSEAS | 12 | ||||||
PART C: US OPTIONS
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13 | |||||||
1
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INTERACTION WITH PART A | 13 | ||||||
2
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DESIGNATION OF OPTIONS | 13 | ||||||
3
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ELIGIBILITY | 13 | ||||||
4
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GRANT OF OPTIONS | 13 | ||||||
5
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LIMITS | 13 | ||||||
6
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EXERCISE OF OPTIONS | 13 |
Page | ||||||||
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7
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CASH EQUIVALENT | 14 | ||||||
8
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PROVISIONS REFERRING TO INLAND REVENUE APPROVAL | 14 | ||||||
9
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TAKEOVER, RECONSTRUCTION AND WINDING-UP | 15 | ||||||
10
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VARIATION OF CAPITAL | 15 | ||||||
11
|
MISCELLANEOUS | 15 |
PART A: INLAND REVENUE APPROVED
1. DEFINITIONS AND INTERPRETATION
(1) | In this Plan, unless the context otherwise requires:- |
Committee means the Remuneration Committee of the board of directors of the Company, consisting exclusively of non-executive directors of the Company or if any of the events envisaged in Rules 6(1), 6(3) or 6(4) occurs then, except where a new option is granted under Rule 6(7), the Remuneration Committee as constituted immediately before such event occurred; | |
the Company means National Grid Group plc (registered in England and Wales No. 4031152); | |
the Grant Date in relation to an Option means the date on which the Option was granted; | |
Group Member means:- |
(a) | a Participating Company or a body corporate which is (within the meaning of section 736 of the Companies Act 1985) the Companys holding company or a subsidiary of the Companys holding company; or | ||
(b) | a body corporate which is (within the meaning of section 258 of that Act) a subsidiary undertaking of a body corporate within paragraph (a) above and has been designated by the Board for this purpose; |
Option means an option to acquire (whether by subscription or purchase) shares in the Company granted under the Plan; | |
Participant means a person who holds an Option or in the event of his death, his personal representatives; | |
Participating Company means the Company or any Subsidiary or any company which is not under the control of any single person, but is under the control of two persons (within the meaning of section 840 of the Taxes Act 1988), one of them being the Company, and to which the Committee has with the prior approval of the Inland Revenue resolved that this Plan shall for the time being extend; | |
the Plan means National Grid Executive Share Option Plan 2002 (Part A) as herein set out but subject to any alterations or additions made under Rule 8 below; | |
Schedule 9 means Schedule 9 to the Taxes Act 1988; | |
Subsidiary means a body corporate which is a subsidiary of the Company (within the meaning of section 736 of the Companies Act 1985) and of which the Company has control (within the meaning of section 840 of the Taxes Act 1988); | |
the Taxes Act 1988 means the Income and Corporation Taxes Act 1988; | |
the Trustees means the trustee or trustees for the time being of any trust established for the benefit of all or most of the employees of the Company and/or its Subsidiaries; | |
UKLA means the UK Listing Authority; |
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and expressions not otherwise defined in this Plan have the same meanings as they have in Schedule 9. |
(2) | Any reference in this Plan to any enactment includes a reference to that enactment as from time to time modified, extended or re-enacted. | |
(3) | Expressions in italics are for guidance only and do not form part of this Plan. |
2. ELIGIBILITY
(1) | Subject to Rule 2(3), a person is eligible to be granted an Option if (and only if) he is a full-time director or qualifying employee of a Participating Company. | |
(2) | For the purposes of Rule 2(1) above:- |
(a) | a person shall be treated as a full-time director of a Participating Company if he is obliged to devote to the performance of the duties of his office or employment with that and any other Participating Company not less than 25 hours a week excluding meal breaks; | ||
(b) | a qualifying employee , in relation to a Participating Company, is an employee of the Participating Company (other than one who is a director of a Participating Company). |
(3) | A person is not eligible to be granted an option at any time:- |
(a) | within the one year immediately preceding the date on which he is bound to retire in accordance with the terms of his contract of employment; or | ||
(b) | when he is not eligible to participate in this Plan by virtue of paragraph 8 of Schedule 9 ( material interest in close company) . |
3. GRANT OF OPTIONS
(1) | Subject to Rule 4 below, the Committee or the Trustees may by deed (but, in the case of the Trustees, only following a recommendation of the Committee) grant an Option to acquire shares in the Company which satisfy the requirements of paragraphs 10 to 14 of Schedule 9 ( fully paid up, unrestricted, ordinary share capital ) on the Grant Date and (subject to Rule 7(5)) at the date of exercise of the Option, upon the terms set out in this Plan and upon such other objective terms as the person granting the Option may specify, to any person who is eligible to be granted an Option in accordance with Rule 2 above. | |
(2) | If, after the Committee or the Trustees (as the case may be) have imposed a condition pursuant to Rule 3(1) ( performance condition ), events happen which cause them to consider that it is no longer appropriate they may vary such condition provided always that any such amendment may only be one which the Committee reasonably considers will result in a fairer measure of the performance, will ensure that this Plan operates more effectively in the achievement of its purpose of providing share benefits for employees who contribute to the prosperity of the Company and its shareholders, and will be neither substantially more nor less difficult to satisfy than the original condition was intended to be at the time of its grant. | |
(3) | The price at which shares may be acquired by the exercise of an Option shall be determined by the Committee before its grant, but shall not be less than: |
(a) | if shares of the same class as those shares are quoted in the Official List of the UKLA: |
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(i) | the middle-market quotation of shares of that class (as derived from the Daily Official List of the London Stock Exchange) on the dealing day before the Grant Date; or | ||
(ii) | if the Committee so determines, the average of the middle-market quotations for the three dealing days ending on the dealing day last preceding the Grant Date; or | ||
(iii) | such other dealing day(s) as may be agreed in advance with the Inland Revenue |
provided that no such dealing day shall be before the day on which the Company last announced its results for any period; |
(b) | if paragraph (a) above does not apply, the market value (within the meaning of Part VIII of the Taxation of Chargeable Gains Act 1992) of shares of that class, as agreed in advance for the purposes of this Plan with the Shares Valuation Division of the Inland Revenue, on the Grant Date or such other day as may be agreed with the Inland Revenue; and |
(c) | in the case of an Option to acquire shares by subscription, the nominal value of those shares. |
(4) | An Option may only be granted after the Plan has been approved by the Inland Revenue and:- |
(a) | within the period of 6 weeks beginning with:- |
(i) | the date on which this Plan is approved by the Inland Revenue under Schedule 9; or | ||
(ii) | the dealing day next following the date on which the Company announces its results for any period; or |
(b) | at any other time when the circumstances are considered by the Committee to be sufficiently exceptional to justify its grant; and | ||
(c) | within the period of 10 years beginning with 15 December 2001, being the date on which this Plan is approved by the shareholders of National Grid Holdings One plc in general meeting. |
(5) | An Option granted to any person:- |
(a) | shall not, except to a Participants personal representatives in the event of his death, be capable of being transferred by him; and | ||
(b) | shall lapse forthwith if he is adjudged bankrupt. |
4. LIMITS
(1) | No Options shall be granted in any year which would, at the time they are granted, cause the number of shares in the Company which shall have been or may be issued in pursuance of options granted in the period of 10 calendar years ending with that year, or been issued in that period otherwise than in pursuance of options, under this Plan or under any other executive share scheme adopted by the Company or a Subsidiary to exceed such number as represents 5 per cent. of the ordinary share capital of the Company in issue at that time. |
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(2) | No Options shall be granted in any year which would, at the time they are granted, cause the number of shares in the Company which shall have been or may be issued in pursuance of options granted in the period of 10 calendar years ending with that year, or been issued in that period otherwise than in pursuance of options, under this Plan or under any other employees share scheme adopted by the Company or a Subsidiary to exceed such number as represents 10 per cent. of the ordinary share capital of the Company in issue at that time. | |
(3) | No person shall be granted Options which would, at the time they are granted, cause the aggregate market value of the shares which he may acquire in pursuance of options granted to him under this Plan or under any other share option plan, not being a savings-related share option plan, approved under Schedule 9 and established by the Company or by any associated company of the Company, to exceed or further exceed £30,000 (or such other limit imposed from time to time under paragraph 28(1) of Schedule 9) and to the extent that the grant of any Option would otherwise exceed this limit such grant shall be void ab initio as to such excess. | |
(4) | Except where the Committee determines otherwise, no person shall be granted Options which would, at the time they are granted, cause the aggregate market value of the shares which he may acquire in pursuance of options granted to him under Parts A, B or C of this Plan in any financial year of the Company to exceed 300% of the annual base salary of such person, and for the purposes of this sub-rule: |
(a) | a persons base salary shall be taken to be his current base salary (excluding benefits in kind) expressed as an annual rate in respect of the financial year of the Company in which the Grant Date falls; and | ||
(b) | where a payment of remuneration is made otherwise than in sterling, the payment shall be treated as being of the amount of sterling ascertained by applying such rate of exchange as published in a national newspaper on the Grant Date as the Committee shall reasonably determine. |
(5) | For the purposes of this Rule, the market value of the shares in relation to which an option was granted shall be calculated:- |
(a) | in the case of an Option granted under this Plan, as on the day (or days) by reference to which the price at which shares may be acquired by the exercise thereof was determined in accordance with Rule 3(3) above; and | ||
(b) | in the case of an option granted under any other approved scheme, as on the day or days by reference to which the price at which shares may be acquired by the exercise thereof was determined. |
(6) | References in this Rule 4 to shares being issued pursuant to the exercise of options shall include any shares issued for the purpose of satisfying any such option. | |
(7) | For the purposes of Rules 4(1) and 4(2), any shares in National Grid Holdings One plc (company number 2367004) which have been issued (or remain issuable) under any executive or employees share scheme (as the case may be) shall be treated as shares in the Company, subject to the proviso that: |
(a) | any shares issued or issuable pursuant to any options granted as Replacement Options under paragraph (f) of the Unapproved Appendix to the National Grid Executive Share Option Scheme (1990) shall be regarded as having been granted on the date that the 1998 Option (as that term is defined in such paragraph) to which they relate was granted; and |
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(b) | any shares issued or issuable pursuant to any option granted under The National Grid Company PLCs 1995 Unapproved Savings Related Share Option Scheme and any corresponding option granted under The National Grid Company PLCs Savings Related Share Option Scheme established in 1990 shall be treated as a single option in recognition that only one or other, but not both, of such options may be exercised. |
5. EXERCISE OF OPTIONS
(1) | The exercise of any Option shall be effected in the form and manner prescribed by the Committee. | |
(2) | Subject to Rules 5(4) and 5(5) and to Rules 6(1) and 6(3) to 6(5), an Option may not be exercised before the third anniversary of the Grant Date. | |
(3) | Subject to Rule 3(2), Rule 5(4) and paragraphs (a) and (c) of Rule 5(5) and to Rule 6(6) below, an Option may not be exercised if the relevant condition is not satisfied; and in this Rule 5(3), Rule 6(6) and Rule 8(1) the relevant condition is a condition related to performance which is specified by the Committee under Rule 3(1) above. | |
(4) | If any Participant dies, any Option granted to him may (and must, if at all) be exercised by his personal representatives within 12 months after the date of his death, provided that his death occurs at a time when either he is a director or employee of a Group Member or he is or would be entitled to exercise the option by virtue of Rule 5(5). | |
(5) | If any Participant ceases to be a director or employee of a Group Member (otherwise than by reason of his death), the following provisions apply in relation to any Option granted to him:- |
(a) | if he so ceases by reason of injury, disability, pregnancy or redundancy (within the meaning of the Employment Rights Act 1996), or by reason only that his office or employment is in a company which ceases to be a Group Member, or relates to a business or part of a business which is transferred to a person who is not a Group Member, the Option may (and subject to Rule 5(4) must, if at all) be exercised within the exercise period; | ||
(b) | if he so ceases by reason of retirement on reaching the age at which he is bound to retire in accordance with the terms of his contract of employment, the Option may (and subject to Rule 5(4) must, if at all) be exercised subject to Rule 5(3) within the exercise period; | ||
(c) | if he so ceases for any other reason, the Option may not be exercised at all unless the Committee shall so permit, in which event it may (and subject to Rule 5(4) must, if at all) be exercised to the extent permitted by the Committee within the exercise period; |
and in this sub-rule the exercise period is the period which shall expire 12 months in the cases where sub-rules (a) or (c) apply or six months in cases where sub-rule (b) applies after his so ceasing, or such later date as the Committee may determine, but such date shall not be later than 42 months after the later of the Grant Date and the last time when the Participant exercised an Option with income tax relief. |
(6) | A Participant shall not be treated for the purposes of Rule 5(5) as ceasing to be a director or employee of a Group Member until such time as he is no longer a director or employee of any Group Member. |
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(7) | Notwithstanding any other provision of this Plan, an Option may not be exercised after the expiration of the period of 10 years (or such shorter period as the Committee may have determined before its grant) beginning with the Grant Date. | |
(8) | A Participant shall not be eligible to exercise an Option at any time when he is not eligible to participate in this Plan by virtue of paragraph 8 of Schedule 9 ( material interest in close company) . | |
(9) | An Option may not be exercised unless: |
(a) | the Committee considers that the issue or transfer of the shares subject to the Option would be lawful in all relevant jurisdictions; and | ||
(b) | in a case where a company which is or was a Group Member or the Trustees are obliged to (or would suffer a disadvantage if it were not to) account for any tax (in any jurisdiction) for which the person in question is liable by virtue of the exercise of the Option and/or for any social security contributions for which the person in question is liable (including but not limited to, primary National Insurance contributions in the UK) (together, the Tax Liability), that person has either: |
(i) | made a payment to the Group Member (or former Group Member) or the Trustees of an amount equal to the Tax Liability; or | ||
(ii) | entered into arrangements acceptable to that person or another Group Member to secure that such a payment is made (whether by authorising the sale of some or all of the shares on his behalf and the payment to the relevant person of the relevant amount out of the proceeds of sale or otherwise). |
(10) | Within 30 days after an Option has been exercised by any person, the grantor of the Option shall procure the allotment or transfer to him (or a nominee for him) of the number of shares in respect of which the Option has been exercised. | |
(11) | All shares allotted under this Plan shall rank equally in all respects with shares of the same class then in issue except for any rights attaching to those shares by reference to a record date prior to the date of allotment. |
6. TAKEOVER, RECONSTRUCTION AND WINDING-UP
(1) | Subject to Rule 6(9), if any person obtains control of the Company (within the meaning of section 840 of the Taxes Act 1988) as a result of making a general offer to acquire shares in the Company, or having obtained control makes such an offer, the Committee shall within 7 days of becoming aware thereof notify every Participant thereof and, subject to earlier lapse under Rules 5(4), 5(5) and 5(7), any Option may be exercised within one month (or such longer period up to a maximum of six months as the Committee may permit) of the notification, but to the extent that it is not exercised within that period shall lapse on the expiry of that period. | |
(2) | For the purposes of Rule 6(1), a person shall be deemed to have obtained control of the Company if he and others acting in concert with him have together obtained control of it. | |
(3) | Subject to Rule 6(9), if any person becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of the Companies Act 1985, or if the Company passes a resolution for voluntary winding up, or if an order is made for the compulsory winding up of the Company, the Committee shall forthwith notify every Participant thereof and, subject to earlier lapse under Rules 5(4), 5(5) and 5(7), any Option may be exercised within one month of |
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such notification, but to the extent that it is not exercised within that period shall lapse on the expiration of that period. | ||
(4) | Subject to Rule 6(9), if a scheme of arrangement or compromise under section 425 of the Companies Act 1985 is proposed, the Committee shall forthwith notify every Participant that, subject to earlier lapse under Rules 5(4), 5(5) and 5(7), any Option may be conditionally exercised within the period commencing from the date of notification and ending on the day immediately preceding the date scheduled for the Court hearing or such later date up to a maximum of six months from the date scheduled for the Court hearing, as the Committee may determine. If the Court sanctions the scheme of arrangement or compromise: |
(a) | any Option so conditionally exercised shall immediately become unconditionally exercised by the Participant; and | ||
(b) | any Option not so conditionally exercised shall lapse on the expiration of that period. |
However, if the Court declines to sanction the scheme of arrangement or compromise, the conditional exercise shall not be effective and the Options shall continue to subsist. |
(5) | If a demerger, special dividend or other event which, in the opinion of the Committee would affect the share price to a material extent, is proposed then the Committee acting fairly and reasonably may at its discretion forthwith notify every Participant that, subject to earlier lapse under Rule 5 or the other provisions of this Rule 6, an Option may be exercised on such terms and during such period preceding or following such event as may be determined by the Committee provided that if an Option is exercised in advance of and conditional upon such event and such event shall not occur then the conditional exercise shall not be effective and the Option shall continue to subsist. | |
(6) | In relation to an Option which would, but for Rule 5(3) ( Performance Condition ) above, be exercisable by virtue of an event mentioned in Rule 6(1), 6(3), 6(4) or 6(5), the Committee shall acting fairly and reasonably determine the extent (if any) to which the performance condition has been satisfied at the date on which such event occurs (as if that date were the end of the relevant performance period) and the Option shall become exercisable to that extent. | |
(7) | If any company (the acquiring company):- |
(a) | obtains control of the Company as a result of making - |
(i) | a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the person making the offer will have control of the Company, or | ||
(ii) | a general offer to acquire all the shares in the Company which are of the same class as the shares which may be acquired by the exercise of options granted under this Plan, or |
(b) | obtains control of the Company in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the Companies Act 1985 or Article 418 of the Companies (Northern Ireland) Order 1986, or | ||
(c) | becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of that Act or Articles 421 to 423 of that Order, |
any Participant may at any time within the appropriate period (which expression shall be construed in accordance with paragraph 15(2) of Schedule 9), by agreement with the acquiring |
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company, release any Option which has not lapsed (the old option) in consideration of the grant to him of an option (the new option) which (for the purposes of that paragraph) is equivalent to the old option but relates to shares in a different company (whether the acquiring company itself or some other company falling within paragraph 10(b) or (c) of Schedule 9). |
(8) | The new option shall not be regarded for the purposes of Rule 6(7) as equivalent to the old option unless the conditions set out in paragraph 15(3) of Schedule 9 are satisfied, but so that the provisions of this Plan shall for this purpose be construed as if:- |
(a) | the new option were an option granted under this Plan at the same time as the old option; | ||
(b) | except for the purposes of the definitions of Group Member, Participating Company and Subsidiary in Rule 1(1) and the reference to the Committee in Rule 5(7), the expression the Company were defined as a company whose shares may be acquired by the exercise of options granted under this Plan; and | ||
(c) | Rule 8(2) below were omitted. |
(9) | If:- |
(a) | the events referred to in this Rule 6 are part of an arrangement which will mean that the Company will be under the control of another company (within the meaning of Section 840 of the Taxes Act 1988) or the business of the Company is carried on by another company, and the persons who owned the shares in the Company immediately before the change of control will immediately afterwards own more than 50% of the shares in that other company (a Reorganisation); and | ||
(b) | an equivalent option is offered to the Participant pursuant to Rule 6(7) above, | ||
then an Option shall not become exercisable as a result of the Reorganisation and, subject to earlier lapse under Rules 5(4), 5(5) and 5(7), shall lapse three months following the notification of the Reorganisation to every Participant. Notwithstanding that an Option does not become exercisable, nothing in this Rule 6(9) shall prevent the provisions of Rule 6(7) from applying. Where Rule 6(7) is applied in these circumstances, the provisions of Rule 6(8) will also apply but with the omission of paragraph (c) of Rule 6(8). |
7. VARIATION OF CAPITAL
(1) | Subject to Rule 7(3), in the event of any variation of the share capital of the Company, the Committee may make such adjustments as it considers appropriate under Rule 7(2). | |
(2) | An adjustment made under this sub-rule shall be to one or more of the following:- |
(a) | the number of shares in respect of which any option may be exercised; | ||
(b) | the price at which shares may be acquired by the exercise of any option; | ||
(c) | where any option has been exercised but no shares have been allotted or transferred pursuant to the exercise, the number of shares which may be so allotted or transferred and the price at which they may be acquired. |
(3) | At a time when this Plan is approved by the Inland Revenue under Schedule 9, no adjustment under Rule 7(2) shall be made without the prior approval of the Inland Revenue. |
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(4) | An adjustment under Rule 7(2) may have the effect of reducing the price at which shares may be acquired by the exercise of an Option to less than their nominal value, but only if and to the extent that the Committee shall be authorised to and shall determine that it shall capitalise from the reserves of the Company a sum equal to the amount by which the nominal value of the shares in respect of which the Option is exercised and which are to be allotted pursuant to the exercise exceeds the price at which the shares may be subscribed for and to apply that sum in paying up that amount on the shares; and so that on the exercise of any Option in respect of which such a reduction shall have been made the Committee shall capitalise that sum (if any) and apply it in paying up that amount. | |
(5) | If the shares subject to any Option cease to satisfy the requirements of paragraphs 10 to 14 of Schedule 9 at any time after the Grant Date then:- |
(a) | the Board shall as soon as practicable notify the Inland Revenue of this; | ||
(b) | the grantor of the Option will not be required to allot, transfer or procure the allotment or transfer of shares which satisfy those requirements upon the exercise of any Option; | ||
(c) | for the avoidance of doubt, all unexercised Options shall continue to exist; and | ||
(d) | the Plan shall continue to exist but if the Inland Revenue withdraw their approval of the Plan under Schedule 9, it shall continue to exist as an unapproved share option plan. |
8. ALTERATIONS
(1) | Subject to Rules 8(2) and 8(4), the Committee may at any time alter this Plan. When doing so, they shall have regard to the fact that, if an alteration (other than an alteration to a relevant condition) is made at a time when this Plan is approved by the Inland Revenue under Schedule 9, the alteration will not thereafter have effect unless the Inland Revenue have approved the alteration. The Company shall notify the Inland Revenue of any alteration under this Rule 8 or any variation under Rule 7 which could cause the Plan to cease to be approved by the Inland Revenue under Schedule 9. | |
(2) | Subject to Rule 8(3), no alteration to the advantage of the persons to whom Options have been or may be granted shall be made under Rule 2, Rules 3(2), 3(3), 3(4) and 3(5), Rule 4, Rules 5(2) to 5(5) and Rules 5(7) to 5(11), Rules 6(1) to 6(6), Rule 6(9) and Rules 7(1) and 7(2) without the prior approval by ordinary resolution of the members of the Company in general meeting. | |
(3) | Rule 8(2) shall not apply to any minor alteration to benefit the administration of this Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Participants or any Group Member. | |
(4) | No alteration to the disadvantage of any Participant shall be made under Rule 8(1) above unless:- |
(a) | the Committee shall have invited every relevant Participant to give an indication as to whether or not he approves the alteration; and | ||
(b) | the alteration is approved by a majority of those Participants who have given such an indication. |
9. MISCELLANEOUS
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(1) | The rights and obligations of any individual under the terms of his office or employment with any Group Member shall not be affected by his participation in this Plan or any right which he may have to participate in it, and an individual who participates in it and does not renounce an option within 30 days of its grant, shall and does by participating in this Plan waive any and all rights to compensation or damages in consequence of the termination of his office or employment for any reason whatsoever insofar as those rights arise or may arise from his ceasing to have rights under or be entitled to exercise any Option as a result of such termination. | |
(2) | In the event of any dispute or disagreement as to the interpretation of this Plan, or as to any question or right arising from or related to this Plan, the decision of the Committee shall be final and binding upon all persons. | |
(3) | Any notice or other communication under or in connection with this Plan may be given by personal delivery or by sending it by post, in the case of a company to its registered office, and in the case of an individual to his last known address, or, where he is a director or employee of a Group Member, either to his last known address or to the address of the place of business at which he performs the whole or substantially the whole of the duties of his office or employment employment or in the absence of their being such a place, the place of business to which regular correspondence in connection with his employment is sent; and where a notice or other communication is given by first class post it shall be deemed to have been received 48 hours after it was put into the post properly addresses and stamped. | |
(4) | The Company and any Subsidiary may provide money to the trustees of any trust or any other person to enable them or him to acquire shares to be held for the purpose of the Plan or enter into any guarantee or indemnity for these purposes, to the extent permitted by the Companies Act 1985. | |
(5) | The Plan and all options granted under it shall be governed and construed in accordance with English law. |
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PART B: UNAPPROVED
1. INTERACTION WITH PART A
The provisions of Part A shall, save where otherwise specified below, apply in relation to the grant and exercise of Options under Part B, and all references to the Plan shall include this Part B. |
2. ELIGIBILITY
A person is eligible to be granted an Option under Part B if (and only if) he is an executive director or employee of a Participating Company and is not within the one year immediately preceding the date on which he is bound to retire in accordance with the terms of his contract of employment. |
3. LIMITS
Rule 4(3) of Part A shall not apply to any Option granted under Part B. |
4. EXERCISE OF OPTIONS
(1) | In Rule 5(5) of Part A, for Options granted under Part B the wording from but such date to the end of that rule shall be omitted. | |
(2) | For Options granted under Part B, the Tax Liability as defined in Rule 5(9) of Part A shall extend to any tax and any social security (in any jurisdiction) liability associated with the grant, vesting or exercise of an Option (including but not limited to, secondary National Insurance contributions in the UK if the grantor of the Option so determines at the Grant Date). |
5. CASH EQUIVALENT
(1) | Where an Option granted under Part B to which this Rule applies has been exercised by any person in respect of any number of shares, and those shares have not yet been issued or transferred to him in accordance with Rule 5(10) of Part A, the Committee (but only with the prior consent of the board of directors of the Company) may determine that, in substitution for his right to acquire such number of those shares as the Committee may decide (but in full and final satisfaction of his said right), he shall be paid by way of additional emoluments a sum equal to the cash equivalent of that number of shares. | |
(2) | For the purposes of this Rule, the cash equivalent of any shares is the amount by which the Committees opinion of the market value of those shares on the day last preceding the date on which the Option was exercised (or, if at the relevant time shares of the same class as those shares were listed in the Official List of the UKLA, the middle-market quotation of shares of that class, as derived from the Daily Official List of the London Stock Exchange, on the dealing day last preceding that date) exceeds the price at which those shares may be acquired by the exercise of the Option. | |
(3) | As soon as reasonably practicable after a determination has been made under Rule 5(1) of this Part B that a person shall be paid a sum in substitution for his right to acquire any number of shares:- |
(a) | the Company shall pay to him or procure the payment to him of that sum in cash; and | ||
(b) | if he has already paid the Company for those shares, the Company shall return to him the amount so paid by him. |
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(4) | There shall be made from any payment under this Rule such deductions (on account of tax or similar liabilities) as may be required by law or as the Committee may reasonably consider to be necessary or desirable. |
6. PROVISIONS REFERRING TO INLAND REVENUE APPROVAL
(1) | Rules 2(3)(b), 3(3)(b), 5(8), 7(3) and 7(5) of Part A shall not apply to Options granted under Part B of this Plan. In Rule 3(1) the words which satisfy the requirements of paragraphs 10 to 14 of Schedule 9 on the Grant Date and (subject to Rule 7(5)) at the date of exercise of the Option shall be deleted. | |
(2) | Rule 3(3)(a)(iii) shall be replaced by such other dealing day or days falling within the period of 30 days ending with the Grant Date as the Committee may determine. | |
(3) | Rule 3(4)(a)(i) shall operate by reference to the approval of the Plan by National Grid Holdings Onle plc in general meeting. | |
(4) | There shall be no need to seek Inland Revenue approval or agreement for anything done under Part B of this Plan and references to events occurring by reference to Inland Revenue approval shall be ignored. |
7. TAKEOVER, RECONSTRUCTION AND WINDING-UP
(1) | Rule 6(6) of Part A shall be subject to the proviso that the Committee may (in exceptional circumstances) determine that the Option should become exercisable on a different basis if they consider that such a curtailment of the performance period does not properly reflect the performance of the Company over the relevant period. | |
(2) | In the event of a Reorganisation as defined in Rule 6(9) of Part A, and with the agreement of the acquiring company, the Board in its absolute discretion may require that the relevant Participants release their Options in consideration of the grant to them of new options over shares in the relevant acquiring company, provided that the new options meet the conditions of paragraphs 15(3)(b) to (d) of Schedule 9. Rule 6(8) shall be construed accordingly. |
8. VARIATION OF CAPITAL
The Committee may make such adjustments to any subsisting Options as it considers appropriate following a demerger involving the Company or any subsidiary or of a capital or other dividend or distribution which is of an unusual nature and which, in the opinion of the Committee, has a material impact on the value of a share in the Company. |
9. EXTENSION OF PLAN OVERSEAS
Notwithstanding any other provision of this Plan, the Committee may in respect of Participants who are or who may become subject to taxation outside the United Kingdom on their remuneration amend or add to the provisions of the Plan as it considers necessary or desirable to take account of or to mitigate or to comply with the relevant overseas taxation, securities or exchange control laws provided that the terms of options granted to such participants are not overall more favourable than the terms of options granted to other participants. |
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PART C: US OPTIONS
1. INTERACTION WITH PART A
The provisions of Part A shall, save where otherwise specified below, apply in relation to the grant and exercise of Options under Part C, and all references to the Plan shall include this Part C. |
2. DESIGNATION OF OPTIONS
Options granted under Part C may be designated as incentive stock options (ISOs) within the meaning of section 422 of the United States Internal Revenue Code of 1986, as amended (the US Tax Code). Any options not granted under Part C as ISOs shall be granted as nonqualified stock options for purposes of the US Tax Code. |
3. ELIGIBILITY
(1) | Rule 2(3)(a) shall not apply to any person to the extent that the application of such rule would violate applicable U.S. federal or State law. | |
(2) | The class of person who may be granted ISOs under this Part C shall, in addition to the limitations otherwise imposed by the Plan, be limited to those persons who are employees of the Company or its parent or subsidiary corporations within the meaning of section 424(e) and (f), respectively, of the US Tax Code. |
4. GRANT OF OPTIONS
No Option may be granted as an ISO under this Part C after 6 December 2011, being the tenth anniversary of the date of approval of the Plan by the Company. |
5. LIMITS
(1) | Rules 4(3) and 4(4) of Part A shall not apply to any Options granted under Part C. | |
(2) | The exercise price of any Option granted as an ISO shall not be less than the fair market value of the shares at the time such Option is granted (determined in accordance with Section 422(c)(1) of the U.S. Tax Code and any regulations promulgated thereunder). | |
(3) | The aggregate number of shares for which ISOs may be granted under Part C to all option holders during the term of the Plan shall not exceed 200,000,000 ( being 10% of the expected issued share capital on the adoption of the Plan) , subject to adjustment if any of the events envisaged in Rule 7 of Part A occur. | |
(4) | To the extent that the aggregate fair market value of shares with respect to which ISOs are exercisable for the first time by an option holder during any calendar year (under all plans or schemes of the Company or its parent or subsidiary corporations within the meaning of sections 424(e) and (f), respectively, of the US Tax Code) exceeds US$100,000, such Options shall be treated, to the extent of the excess, as nonqualified stock options. |
6. EXERCISE OF OPTIONS
(1) | If any Option is exercised in accordance with Rule 5 of the Plan more than three (3) months after the date that the option holder was last employed by the Company (or by its parent or a subsidiary as defined in this Part C), or in the case of total disability (as defined by section 422(c)(6) of the US Tax Code) more than twelve (12) months after the date that the option |
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holder was last employed by the Company (or by its parent or a subsidiary as defined in this Part C), then such option shall be treated as a nonqualified stock option for purposes of the US Tax Code. | ||
(2) | The Grantor may satisfy its obligations under this Part C of the Plan by delivering American Depository Shares representing Shares in the Company. |
7. CASH EQUIVALENT
(1) | Where an Option granted under Part C to which this Rule applies has been exercised by any person in respect of any number of shares, and those shares have not yet been issued or transferred to him in accordance with Rule 5(10) of Part A, the Committee (but only with the prior consent of the board of directors of the Company) may determine that, in substitution for his right to acquire such number of those shares as the Committee may decide (but in full and final satisfaction of his said right), he shall be paid by way of additional emoluments a sum equal to the cash equivalent of that number of shares. | |
(2) | For the purposes of this Rule, the cash equivalent of any shares is the amount by which the Committees opinion of the market value of those shares on the day last preceding the date on which the Option was exercised (or, if at the relevant time shares of the same class as those shares were listed in the Official List of the UKLA, the middle-market quotation of shares of that class, as derived from the Daily Official List of the London Stock Exchange, on the dealing day last preceding that date) exceeds the price at which those shares may be acquired by the exercise of the Option. | |
(3) | As soon as reasonably practicable after a determination has been made under Rule 7(1) of this Part C that a person shall be paid a sum in substitution for his right to acquire any number of shares: |
(a) | the Company shall pay to him or procure the payment to him of that sum in cash; and | ||
(b) | if he has already paid the Company for those shares, the Company shall return to him the amount so paid by him. |
(4) | There shall be made from any payment under this Rule such deductions (on account of tax or similar liabilities) as may be required by law or as the Committee may reasonably consider to be necessary or desirable. |
8. PROVISIONS REFERRING TO INLAND REVENUE APPROVAL
(1) | Rules 2(3)(b), 3(3)(b), 5(8), 7(3) and 7(5) of Part A shall not apply to Options granted under Part C of this Plan. | |
(2) | In Rule 3(1) the words which satisfy the requirements of paragraphs 10 to 14 of Schedule 9 on the Grant Date and (subject to Rule 7(5)) at the date of exercise of the Option shall be deleted. | |
(3) | Subject to Rule 5(2) of Part C, Rule 3(3)(a)(iii) shall be replaced by such other dealing day or days falling within the period of 30 days ending with the Grant Date as the Committee may determine. | |
(4) | Rule 3(4)(a)(i) shall operate by reference to the adoption of the Plan by the Company. |
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(5) | There shall be no need to seek Inland Revenue approval or agreement for anything done under Part C of this Plan and references to events occurring by reference to Inland Revenue approval shall be ignored. |
9. TAKEOVER, RECONSTRUCTION AND WINDING-UP
(1) | Rule 6(6) of Part A shall be subject to the proviso that the Committee may (in exceptional circumstances) determine that the Option should become exercisable on a different basis if they consider that such a curtailment of the performance period does not properly reflect the performance of the Company over the relevant period. | |
(2) | In the event of a Reorganisation as defined in Rule 6(9) of Part A, and with the agreement of the acquiring company, the Board in its absolute discretion may require that the relevant Participants release their Options in consideration of the grant to them of new options over shares in the relevant acquiring company, provided that the new options meet the conditions of paragraphs 15(3)(b) to (d) of Schedule 9. Rule 6(8) shall be construed accordingly. |
10. VARIATION OF CAPITAL
The Committee may make such adjustments to any subsisting Options as it considers appropriate following a demerger involving the Company or any subsidiary or of a capital or other dividend or distribution which is of an unusual nature and which, in the opinion of the Committee, has a material impact on the value of a share in the Company. |
11. MISCELLANEOUS
(1) | Shares shall not be issued pursuant to the exercise of any Option granted under this Part C unless the exercise of the Option and the issuance and delivery of such shares shall comply with all relevant provisions of law, involving, without limitation, the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended, applicable State securities laws, and the requirements of any stock exchange upon which shares or American Depository Shares may then be listed, and, at the discretion of the Company, shall be further subject to approval of counsel for the Company with respect to such compliance. None of the Company or any of its subsidiaries or affiliates shall have any obligation to register any shares under the Securities Act or any applicable State law. Any stock certificates evidencing any share issued pursuant to the Plan may bear a legend indicating that the transferability of the certificate and the shares are restricted and subject to terms and conditions contained in the Plan or otherwise. | |
(2) | Rules 3(5)(b), 8(4)(b), and 9(1) shall not apply to this Part C to the extent prohibited by US federal or applicable State law. |
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NATIONAL GRID GROUP PLC
SHARE MATCHING PLAN 2002
New Bridge Street Consultants
20 Little Britain London EC1A 7DH |
||
Ref: N\3061\02 Matching Plan |
CONTENTS
Page | ||||||||
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PART A: UK MATCHING AWARDS
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1 | |||||||
1
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DEFINITIONS AND INTERPRETATION | 1 | ||||||
2
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GRANT OF AWARDS | 2 | ||||||
3
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LIMITS | 3 | ||||||
4
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EXERCISE OF MATCHING AWARDS | 4 | ||||||
5
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TAKEOVER, RECONSTRUCTION AND WINDING-UP | 5 | ||||||
6
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VARIATION OF CAPITAL | 6 | ||||||
7
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ADMINISTRATION AND AMENDMENT OF THIS PLAN | 6 | ||||||
8
|
MISCELLANEOUS | 7 | ||||||
PART B: US BONUS AWARDS
|
9 | |||||||
1
|
INTERACTION WITH PART A | 9 | ||||||
2
|
DEFINITIONS | 9 | ||||||
3
|
GRANT OF AWARDS | 9 | ||||||
4
|
MISCELLANEOUS | 9 |
PART A: UK MATCHING AWARDS
1. DEFINITIONS AND INTERPRETATION
(1) | In this Plan, unless the context otherwise requires:- |
Announcement Date means the date on which the Company announces its annual results to the London Stock Exchange in any year while this Plan subsists; | |
the Approval Date means 15 December 2001, being the date on which this Plan was approved by the shareholders of National Grid Holdings One plc in general meeting; | |
the Board means the Remuneration Committee of the board of directors of the Company, a duly authorised committee thereof, or if any of the events envisaged in Rules 5(1), 5(3) or 5(4) occurs then, except where a new option is granted under Rule 5(7), the Remuneration Committee as constituted immediately before such event occurred; | |
Bonus means the annual cash bonus payable to the Eligible Executive under the Companys senior executive bonus scheme or such other annual bonus scheme applying to him from time to time as may be approved for the purposes of this Plan by the Directors; | |
the Company means National Grid Group plc (registered in England and Wales number 4031152); | |
Control means control as prescribed by section 840 of the Income and Corporation Taxes Act 1988; | |
Date of Grant means the date on which a Matching Award is granted by deed pursuant to Rule 2 of this Plan; | |
Eligible Executive means any person who is an executive director or employee of a Participating Company and, at the time a Bonus is due to be paid, is not within one year of his Normal Retirement Date; | |
Financial Year means a financial year of the Company within the meaning of Section 742 of the Companies Act 1985; | |
Group Member means: |
(a) | a Participating Company or a body corporate which is (within the meaning of section 736 of the Companies Act 1985) the Companys holding company or a subsidiary of the Companys holding company; or | ||
(b) | a body corporate which is (within the meaning of section 258 of that Act) a subsidiary undertaking of a body corporate within paragraph (a) above and has been designated by the Board for this purpose; |
Qualifying Shares means shares purchased by an Eligible Executive with part of his Bonus, pursuant to Rule 2 of this Plan; | |
Matching Award means a right to acquire Shares granted or the acquisition of Shares pursuant to Rule 2 of this Plan; | |
Normal Retirement Date means the date on which an Eligible Executive reaches age 65 or, if earlier, any other date on which he is bound to retire in accordance with the terms of his contract of employment; |
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Participant means a person to whom a Matching Award has been granted under the Plan pursuant to Rule 2; | |
Participating Company means the Company and its Subsidiaries and any company which is not under the Control of any single person, but is under the Control of two persons, one of them being the Company, and to which the Directors have resolved that this Plan shall for the time being extend; | |
the Plan means the National Grid Share Matching Plan 2002 as herein set out but subject to any amendments or additions made under Rule 7 below; | |
Retention Period means in relation to Qualifying Shares means the period ending on the third anniversary of the Date of Grant of the Matching Award to which the Qualifying Shares relate or, if earlier, the date on which the Matching Award becomes exercisable under Rule 4 or Rule 5 of this Plan; | |
Shares means fully paid ordinary shares in the capital of the Company; | |
Subsidiary means a company which for the time being is a subsidiary of the Company within the meaning of Section 736 of the Companies Act 1985; | |
Trustee means the trustee or trustees for the time being of any employee trust established by the Company from time to time for the benefit of (inter alia) employees of Participating Companies and which is operated in conjunction with this Plan; |
(2) | Any reference in this Plan to any enactment includes a reference to that enactment as from time to time modified, extended or re-enacted. | |
(3) | Expressions in italics are for guidance only and do not form part of this Plan. |
2. GRANT OF AWARDS
(1) | An Eligible Executive may, if invited to do so by the Board in respect of any Financial Year, make arrangements with the Company to apply up to such maximum percentage of his Bonus as the Board may from time to time decide and in such increments as the Board may decide, net of any deductions required by law, in the purchase of Shares and payment of associated expenses as soon as reasonably practicable after the Bonus is payable. | |
(2) | The Qualifying Shares so acquired shall either be held by the Trustee as nominee for the Eligible Executive or the share certificate relating to the Qualifying Shares shall be deposited with the Trustee, as the Board may determine. | |
(3) | Subject to Rules 2(4), 2(9) and Rule 3, the Board shall recommend to the Trustee that it grants to the Eligible Executive a Matching Award over such number of Shares (or one half thereof in the case of an Eligible Executive who, at the time a Bonus is due to be paid, is within two years of his Normal Retirement Date) as does not exceed the number found by dividing the amount of the Bonus invested in Shares (before any deductions required by law) by the market value of a Share, such value to be reasonably determined by the Trustee, on a dealing day (or the average of three dealing days) within the period of 7 days prior to the Date of Grant relating to the Matching Award (rounded down to the nearest whole number of Shares), upon the terms set out in this Plan and upon such other objective terms ( performance conditions ) as the Trustee may specify. | |
(4) | A Matching Award may only be granted within the period of six weeks beginning with the Approval Date or within the period of six weeks after any Announcement Date or any other |
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time when the circumstances are considered by the Board to be sufficiently exceptional to justify recommending to the Trustee that a grant should be made at that time. | ||
(5) | The Eligible Executive shall not pay any monetary consideration for the grant of a Matching Award, which shall be granted by deed as an option with a nominal exercise price or be in such other form as the Trustee shall determine from time to time. | |
(6) | The grant of a Matching Award shall be evidenced by the issue to the Participant of a written notice stating the number of shares subject to the Matching Award, the Date of Grant, the number of Qualifying Shares acquired by him, the Retention Period and, if applicable, the performance condition applying to them. | |
(7) | For the purposes of Rules 2(1) and 2(3), where an Eligible Executive is paid a Bonus otherwise than in sterling, any conversion into sterling for the calculations above shall be at such exchange rate as reasonably determined by the Board or Trustee. | |
(8) | A Matching Award shall be personal to the Participant to whom it is granted and shall not be transferable or assignable except to his personal representatives in the event of his death. If a Participant does or suffers any act or thing whereby he would or might be deprived of the legal or beneficial ownership of a Matching Award, that Matching Award shall forthwith lapse. | |
(9) | No Matching Award may be granted under this Plan after the tenth anniversary of the Approval Date. |
3. LIMITS
(1) | No Matching Award shall be granted in any year which would, at the time it is granted, cause the number of shares in the Company which shall have been or may be issued in pursuance of Matching Awards or options granted in the period of 10 calendar years ending with that year, or been issued in that period otherwise than in pursuance of Matching Awards or options, under this Plan or under any other employee share scheme adopted by the Company or a Subsidiary to exceed such number as represents 10 per cent. of the ordinary share capital of the Company in issue at that time. | |
(2) | No Matching Award shall be granted in any year which would, at the time it is granted, cause the number of shares in the Company which shall have been or may be issued in pursuance of Matching Awards or options granted in the period of 10 calendar years ending with that year, or been issued in that period otherwise than in pursuance of Matching Awards or options, under this Plan or under any other executive share scheme adopted by the Company or a Subsidiary to exceed such number as represents 5 per cent. of the ordinary share capital of the Company in issue at that time. | |
(3) | References in this Rule to shares being issued pursuant to the exercise of Matching Awards or options shall include any shares issued for the purpose of satisfying any such Matching Award or option. | |
(4) | For the purposes of Rule 3(1), any shares in National Grid Holdings One plc (company number 2367004) which have been issued (or remain issuable) under any executive or employees share scheme (as the case may be) shall be treated as shares in the Company, subject to the provisio that: |
(a) | any shares issued or issuable pursuant to any options granted as Replacement Options under paragraph (f) of the Unapproved Appendix to the National Grid Executive Share Option Scheme (1990) shall be regarded as having been granted on the date that the |
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1998 Option (as that term is defined in such paragraph) to which they relate was granted; and | |||
(b) | any shares issued or issuable pursuant to any option granted under The National Grid Company PLCs 1995 Unapproved Savings Related Share Option Scheme and any corresponding option granted under The National Grid Company PLCs Savings Related Share Option Scheme established in 1990 shall be treated as a single option in recognition that only one or other, but not both, of such options may be exercised. |
4. EXERCISE OF MATCHING AWARDS
(1) | A Matching Award shall: |
(a) | not be capable of exercise or release prior to the expiry of the Retention Period; | ||
(b) | unless exercised or released in accordance with the Rules of this Plan, lapse upon the expiry of ten years from its Date of Grant or any earlier date specified by the Trustee when making the Matching Award or, if earlier, the date on which the Participant sells, transfers or pledges the Qualifying Shares to which the Matching Award relates if such date is prior to the end of the Retention Period, pro rata to the number of Qualifying Shares being so sold, transferred or pledged; | ||
(c) | be exercised or released only when such performance condition (if any) as has been set by the Trustee on its Date of Grant is satisfied, unless upon the Boards recommendation, the Trustee determines otherwise; | ||
(d) | be exercised or released by a Participant giving notice in writing to the Trustee in the form prescribed by the Board together with the written notice of that Matching Award referred to in Rule 2(6), and paying the Matching Awards exercise price (if any); and | ||
(e) | lapse forthwith on the Participant ceasing to be employed by a Group Member, unless the Board determines otherwise, in which case the Board shall specify the extent to which the Matching Award can be exercised, the exercise price to be paid, whether the performance target (if any) has to be satisfied, and the period of time during which the Matching Award may be exercised. |
(2) | For the purposes of Rule 4(1)(e), no Participant shall be treated as ceasing to be employed by a Group Member until he ceases to hold an office or employment in any Group Member. | |
(3) | Notwithstanding any other Rule of this Plan, the exercise or release of Matching Awards will be subject to such additional conditions and procedures as the Trustee and/or Board may determine are necessary or desirable for the time being in order to comply with or take into account any legal or taxation obligations of, or implications for, a Group Member in respect of such exercise or release. For the avoidance of doubt, and without limiting any of the foregoing, the Trustee and/or Board may require that in a case where a Group Member is obliged to account for or could suffer a disadvantage should it not account for any tax (in any jurisdiction) for which the person in question is liable by virtue of the exercise or release of the Matching Award and/or for any social security contributions recoverable from the person in question (together, the Tax Liability ) that person has either: |
(a) | made a payment to the relevant Group Member or Trustee of an amount equal to the Tax Liability; or | ||
(b) | entered into arrangements with the relevant Group Member, the Trustee or another company to secure that such a payment is made (whether by authorising any person to |
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procure the sale on his behalf of some or all of the shares subject to the Matching Award and authorising the payment to the relevant Group Member or Trustee of the appropriate amount out of the proceeds of sale, or otherwise). |
(4) | The Trustee shall (subject to any necessary consent) transfer the Shares in respect of which a Matching Award within 30 days after such exercise or release. | |
(5) | Where Shares are issued to or transferred to a participant following the exercise of an option, the participant shall not be entitled to any rights, attaching to such shares by reference to a record date before the date on which the shares are so issued or transferred. |
5. TAKEOVER, RECONSTRUCTION AND WINDING-UP
(1) | Subject to Rule 5(8), if any person obtains Control of the Company as a result of making a general offer to acquire shares in the Company, or having obtained Control makes such an offer, the Board shall within 7 days of becoming aware thereof notify every Participant thereof and, subject to earlier lapse under Rule 4, any Matching Award may be exercised or released within one month (or such longer period as the Board may permit) of the notification, but to the extent that it is not exercised or released within that period shall lapse on the expiry of that period. | |
(2) | For the purposes of Rule 5(1), a person shall be deemed to have obtained Control of the Company if he and others acting in concert with him have together obtained Control of it. | |
(3) | Subject to Rule 5(8), if any person becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of the Companies Act 1985, or if the Company passes a resolution for voluntary winding up, or if an order is made for the compulsory winding up of the Company, the Board shall forthwith notify every Participant thereof and, subject to earlier lapse under Rule 4, any Matching Award may be exercised or released within one month of such notification, but to the extent that it is not exercised or released within that period shall lapse on the expiration of that period. | |
(4) | Subject to Rule 5(8), if a scheme of arrangement or compromise under section 425 of the Companies Act 1985 is proposed, the Board shall forthwith notify every Participant that, subject to earlier lapse under Rule 4, any Matching Award may be conditionally exercised or released within the period commencing from the date of notification and ending on the day immediately preceding the date scheduled for the Court hearing or such other date as the Board may determine. If the Court sanctions the scheme of arrangement or compromise, any Matching Award not so conditionally exercised or released shall lapse on the expiration of that period. However, if the Court declines to sanction the scheme of arrangement or compromise, the conditional exercise or release shall not be effective and the Matching Award shall continue to subsist. | |
(5) | If a demerger, special dividend or other event which, in the opinion of the Board would affect the share price to a material extent, is proposed then the Board may at its discretion forthwith notify every Participant that, subject to earlier lapse under Rule 4 or this Rule 5, a Matching Award may be conditionally exercised or released during such period preceding such event as may be determined by the Board provided that if such event shall not occur then the conditional exercise or release shall not be effective and the Matching Award shall continue to subsist. | |
(6) | In relation to a Matching Award which would, but for Rule 4(1)(c), be exercisable or releasable by virtue of an event mentioned in Rule 5(1), 5(3) or 5(4), the Board shall determine the extent |
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(if any) to which the performance condition has been satisfied at the date on which such event occurs and the Matching Award shall become exercisable or releasable to that extent. | ||
(7) | If any company (the acquiring company): |
(a) | obtains Control of the Company as a result of making: |
(i) | a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the person making the offer will have control of the Company; or | ||
(ii) | a general offer to acquire all the shares in the Company which are of the same class as the shares which may be acquired by the exercise of options granted under this Plan, or |
(b) | obtains control of the Company in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the Companies Act 1985 or Article 418 of the Companies (Northern Ireland) Order 1986; or | ||
(c) | becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of that Act or Articles 421 to 423 of that Order, | ||
any Participant may at any time by agreement with the acquiring company, release any Matching Award which has not lapsed (the old award) in consideration of the grant to him of an award (the new award) relating to shares in a different company (whether the acquiring company itself or some other company) subject to any applicable laws. |
(8) | If:- |
(a) | the events referred to in this Rule 5 are part of an arrangement (a Reorganisation) which will mean that the Company will be under the Control of another company or the business of the Company is carried on by another company; | ||
(b) | the persons who owned the shares in the Company immediately before the change of Control will immediately afterwards own more than 50% of the shares in that other company; and | ||
(c) | a new award is offered to the Participant pursuant to Rule 5(7), | ||
then a Matching Award shall not become exercisable as a result of the Reorganisation but, instead the provisions of Rule 5(7) will automatically apply to all Matching Awards as at the date of the Reorganisation without the need for the Participants agreement at that time. |
6. VARIATION OF CAPITAL
In the event of any variation of the share capital of the Company, a demerger involving the Company or any Subsidiary, or the payment of a capital or other dividend or distribution which is of an unusual nature and which, in the opinion of the Board, has a material impact on the value of a Share, the Board (with the consent of the Trustee) may make such adjustment to the number of Shares subject to a Matching Award as it considers appropriate. |
7. ADMINISTRATION AND AMENDMENT OF THIS PLAN
(1) | Subject to Rules 7(2) and 7(4), the Board may at any time alter this Plan. |
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(2) | Subject to Rule 7(3), no alteration to the advantage of the persons to whom Matching Awards have been or may be granted shall be made under the definition of Eligible Executive and Rules 2, 3, 4(1) to 4(3) and 6 without the prior approval by ordinary resolution of the members of the Company in general meeting. | |
(3) | Rule 7(2) shall not apply to any minor alteration to benefit the administration of this Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Participants or any Group Member. | |
(4) | No alteration to the disadvantage of any Participant shall be made under Rule 7(1) above unless:- |
(a) | the Board shall have invited every relevant Participant to give an indication as to whether or not he approves the alteration; and | ||
(b) | the alteration is approved by a majority of those Participants who have given such an indication. |
(5) | Notwithstanding any other provision of this Plan, the Board may in respect of Participants who are or who may become subject to taxation outside the United Kingdom on their remuneration amend or add to the provisions of the Plan as it considers necessary or desirable to take account of or to mitigate or to comply with the relevant overseas taxation, securities or exchange control laws provided that the terms of matching awards granted to such participants are not overall more favourable than the terms of matching awards granted to other participant. | |
(6) | If, after the Trustee has imposed a condition pursuant to Rule 2(3) ( performance condition ), events happen which cause them to consider that it is no longer appropriate they may vary such condition provided always that any such amendment may only be one which the Board reasonably considers will result in a fairer measure of the performance, will ensure that this Plan operates more effectively in the achievement of its purpose of providing share benefits for employees who contribute to the prosperity of the Company and its shareholders, and will be neither substantially more nor less difficult to satisfy than the original condition was intended to be at the time of its grant. |
8. MISCELLANEOUS
(1) | The rights and obligations of any individual under the terms of his office or employment, including but not limited to an employment contract, with any Group Member shall not be affected by this Plan. An individual who participates in the Plan shall by participating in this Plan waive any and all rights to compensation or damages in consequence of the termination of his office or employment for any reason whatsoever insofar as those rights arise or may arise from his ceasing to have rights under or be entitled to exercise any Matching Award as a result of such termination. | |
(2) | In the event of any dispute or disagreement as to the interpretation of this Plan, or as to any question or right arising from or related to this Plan, the decision of the Board shall be final and binding upon all persons. |
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(3) | Any notice or other communication under or in connection with this Plan may be given by personal delivery or by sending it by post, in the case of a company to its registered office, and in the case of an individual to his last known address, or, where he is a director or employee of a Group Member, either to his last known address or to the address of the place of business at which he performs the whole or substantially the whole of the duties of his office or employment, or in the absence of their being such a place, the place of business to which regular correspondence in connection with his employment is sent; and where a notice or other communication is given by first class post it shall be deemed to have been received 48 hours after it was put into the post properly addresses and stamped. | |
(4) | The Company and any Subsidiary may provide money to the Trustees or any other person to enable them or him to acquire shares to be held for the purpose of the Plan or enter into any guarantee or indemnity for these purposes, to the extent permitted by the Companies Act 1985. | |
(5) | A Participant shall be entitled to receive a cash payment on the expiry of the Retention Period as determined by the Trustee and calculated by reference to the dividends (if any) paid in respect of any Shares constituting a Matching Award during the Retention Period. | |
(6) | The Plan and all Matching Awards granted under it shall be governed and construed in accordance with English law. |
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PART B: US INCENTIVE SHARE AWARDS
1. INTERACTION WITH PART A
The provisions of Part A shall, save where disapplied in this Part B, apply in relation to the grant and exercise of Matching Awards under Part B. In addition, the Company may approve supplementary guidance provisions to assist in the practical implementation and administration of this Part B of the Plan. |
2. DEFINITIONS
Retention Period means such period of time specified by the Board or Trustee when making a Matching Award, which in default shall be the period of five years from the Date of Grant, subject to earlier curtailment by the operation of Rule 4 or Rule 5 of Part A of the Plan. |
Shares means fully paid ordinary shares in the capital of the Company and/or American Depository Receipts representing the right to receive fully paid ordinary shares in the capital of the Company. |
References to Qualifying Shares shall be ignored for the purposes of Matching Awards granted under this Part B. |
3. GRANT OF AWARDS
The grant of a Matching Award under this Part B shall not be linked to the purchase or continuing ownership of Qualifying Shares and may be vested on award. |
4. MISCELLANEOUS
(1) | Shares shall not be issued pursuant to the exercise of any Matching Award granted under this Part B unless the exercise of the Matching Award and the issuance and delivery of such shares shall comply with all relevant provisions of law, involving, without limitation, the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended, applicable State securities laws, and the requirements of any stock exchange upon which shares or American Depository Receipts may then be listed, and, at the discretion of the Company, shall be further subject to approval of counsel for the Company with respect to such compliance. None of the Company or any of its subsidiaries or affiliates shall have any obligation to register any shares under the Securities Act or any applicable State law. Any stock certificates evidencing any share issued pursuant to the Plan may bear a legend indicating that the transferability of the certificate and the shares are restricted and subject to terms and conditions contained in the Plan or otherwise. | |
(2) | The reference to is not within one year of his Normal Retirement Age in the definition of Eligible Executive in Rule 1(1), Rules 2(1) to 2(3), Rules 2(5) to 2(7) and Rule 7(4) shall not apply to this Part B. |
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Exhibit 8
Description of New National Grid plc
As of March 31, 2002
and Its Subsidiary Companies
L.L.C.
Delaware
Inactive
Corporation
Delaware
Intermediate Holding Company
Priv. Ltd Co.
England & Wales
Special-Purpose Financing Vehicle
Limited Liability Corporation ("L.L.C.")
Delaware
Special-Purpose Financing Vehicle
Corporation
Delaware
Intermediate Holding Company
Corporation
New Hampshire
Electric Public Utility
Corporation
Massachusetts
Electric Public Utility
Corporation
Massachusetts
Electric Public Utility
Corporation
Massachusetts
Electric Public Utility
Corporation
Connecticut
Nuclear Plant Owner
Corporation
Maine
Nuclear Plant Owner
Corporation
Vermont
Nuclear Plant Owner
Corporation
Massachusetts
Nuclear Plant Owner
Corporation
Massachusetts
Electric Transmission Utility
Corporation
New Hampshire
Electric Transmission Utility
Corporation
Massachusetts
Finance Company
Corporation
New Hampshire
Electric Transmission Utility
Corporation
Rhode Island
Public Utility Company
Corporation
Massachusetts
Utility Consulting, Energy-Related Company, Nonutility Holding Company
Corporation
Massachusetts
Inactive
Corporation
Delaware
Component Wear Technology Design and Manufacture
Corporation
Massachusetts
Software/Marketing
Corporation
Delaware
Ash Processing Equipment
Corporation
Massachusetts
Marketing
L.L.C.
Delaware
Inactive
L.L.C.
Maine
Inactive
Corporation
Massachusetts
Energy-Related Company, Nonutility Holding Company
Corporation
Massachusetts
Inactive
Corporation
Massachusetts
Inactive
Corporation
Massachusetts
Utility Consulting Services
Corporation
Massachusetts
Service Company
Corporation
Massachusetts
Telecommunications Company
L.L.C.
Delaware
Telecommunications Company
Corporation
Massachusetts
Inactive
L.L.C.
Delaware
Real Estate Investment Company
Corporation
Massachusetts
Inactive
Corporation
Massachusetts
Inactive
Corporation
New York
Intermediate Holding Company
Corporation
New York
Electric & Gas Public Utility
Corporation
New York
Real Property Management
Corporation
New York
Real Estate Development Company
Corporation
New York
Real Estate Development Company
LLC
New York
Real Estate Development Company
Corporation
New York
Real Estate Development Company
Corporation
New York
Real Estate Development Company
Corporation
New York
Real Estate Development Company
Corporation
New York
Real Estate Development Company
Corporation
New York
Real Estate Development Company
Corporation
New York
Real Estate Development Company
LLC
New York
Real Estate Development Company
LLC
New York
Invests in Ski Resorts
Partnership
New York
Real Estate Development Company
LLC
New York
Real Estate Development Company
Corporation
Texas
Holds Investment in Uranium Mining
Corporation
New York
Inactive
Corporation
New York
Management Company for NM Receivables, L.L.C.
L.L.C.
New York
Financing Subsidiary
Corporation
Delaware
Intermediate Holding Company
Corporation
Canada
Intermediate Holding Company
Corporation
Ontario, Canada
Foreign Utility Company
Corporation
Ontario, Canada
Electric Utility
Corporation
Ontario, Canada
Nonutility Holding Company
Corporation
Ontario, Canada
Electric Distribution Utility
Corporation
Ontario, Canada
Energy Related Marketing Company
Corporation
Ontario, Canada
Nonutility Holding Company
Priv. Ltd Co.
England & Wales
Electric Transmission Company
Priv. Ltd Co.
England & Wales
Leasing Company
Priv. Ltd Co.
England & Wales
Non-profit Company required under the U.K. Electricity Regulatory Regime
Priv. Ltd Co.
England & Wales
Real Estate Development
Priv. Ltd Co.
England & Wales
Holding Company
Priv. Ltd Co.
Jersey
Holding Company
Priv. Ltd Co.
England & Wales
Intermediate Holding Company
Priv. Ltd Co.
England & Wales
Intermediate Holding Company
plc
England & Wales
Telecommunications Holding Company
Priv. Ltd Co.
England & Wales
Holding Company
Priv. Ltd Co.
Jersey
Holding Company
Priv. Ltd Co.
England & Wales
Telecommunications Company
Priv. Ltd Co.
Jersey
Holding Company
Priv. Ltd Co.
England & Wales
Intermediate Holding Company
Priv. Ltd Co.
Isle of Man (resident in England)
Holding Company
Priv. Ltd Co.
England & Wales
Intermediate Holding Company
Priv. Ltd Co.
Netherlands
Holding Company
Priv. Ltd Co.
Netherlands
Holding Company
Priv. Ltd Co.
Chile
Holding Company
Priv. Ltd Co.
Chile
Holding Company
Priv. Ltd Co.
Chile
Intermediate Holding Company
Priv. Ltd Co.
Chile
Telecommunications Company
Priv. Ltd Co.
England & Wales
Holding Company
Priv. Ltd Co.
Netherlands
Holding Company
Priv. Ltd Co.
Chile
Holding Company
Priv. Ltd Co.
Chile
Investment Company
Priv. Ltd Co.
Argentina
Telecommunications Company
Priv. Ltd Co.
Netherlands
Holding Company
Priv. Ltd Co.
Argentina
Holding Company
Priv. Ltd Co.
Argentina
Electric Transmission Company
Priv. Ltd Co.
Argentina
Electric Transmission Company
Unlimited liability company
England & Wales
Investment Company
Priv. Ltd Co.
Netherlands
Business Development Vehicle
Priv. Ltd Co.
Netherlands
Holding Company
Priv. Ltd Co.
Brazil
Telecommunications Company
Priv. Ltd Co.
Brazil
Holding Company
Priv. Ltd Co.
Brazil
Telecommunications Company
Priv. Ltd Co.
Netherlands
Holding Company
Plc
Zambia
Electricity Transmission Company
Priv. Ltd Co.
Australia
Developing Interconnector in Australia
Priv. Ltd Co.
England & Wales
Interconnection Development
Priv. Ltd Co.
England & Wales
Aerial Line Surveying
Priv. Ltd Co.
England & Wales
Investment Company
Priv. Ltd Co.
England & Wales
Gas Market Administrator
Priv. Ltd Co.
England & Wales
Intermediate Holding Company
Priv. Ltd Co.
Luxembourg (Irish incorporated)
Intermediate Holding Company
Priv. Ltd Co.
Luxembourg (Irish incorporated)
Intermediate Holding Company
Priv. Ltd Co.
England & Wales
Investment Company
Plc
England & Wales
Special Purpose Financing Company
EXHIBIT 10(b)(i)
PART I
INFORMATION ON THE MERGER AND NATIONAL GRID TRANSCO
1. INTRODUCTION
On 22 April 2002, the directors of National Grid and Lattice announced that they had unanimously agreed the terms of a recommended merger of equals to create a leading international energy delivery company with a combined market capitalisation of approximately (pound) 15.1 billion (based on the National Grid Closing Price and the Lattice Closing Price). Upon completion of the Merger, National Grid, which will be the holding company of the Merged Group, will be renamed National Grid Transco.
National Grid Group is an international networks business. Its principal activities are the ownership, operation and development of the high-voltage electricity transmission network in England and Wales and electricity transmission and distribution and gas distribution networks in the north-eastern US. Lattice is the holding company of Transco, which is the owner, operator and developer of the substantial majority of Britain's natural gas transportation system. Further information on National Grid Group and Lattice Group can be found in Parts II and III of this document, respectively.
The terms of the Merger are based on the relative equity market capitalisations of the two companies in the period immediately preceding the announcement of the Merger. Under the terms of the Merger, National Grid Shareholders will retain their shares in National Grid and Lattice Shareholders will receive 0.375 of a New National Grid Transco Share for each Lattice Share held at the Lattice Scheme Record Time. Based on the National Grid Closing Price of 492 pence, this values one Lattice Share at 184.5 pence. Upon completion of the Merger, National Grid Shareholders will hold approximately 57.3 per cent. and Lattice Shareholders will hold approximately 42.7 per cent. of the issued share capital of National Grid Transco, based on the issued share capital of the two companies as at 12 June 2002 (being the latest practicable date prior to the publication of this document) and assuming no issue of National Grid Shares or Lattice Shares between that date and completion of the Merger.
The Merger is to be implemented by way of a scheme of arrangement between Lattice and its shareholders under section 425 of the Companies Act. The Merger is subject to a number of conditions, including regulatory consents and approvals in the UK and the US, the sanction of the Court and the approval of the shareholders of both National Grid and Lattice. The Merger is expected to complete during autumn 2002.
2. OVERVIEW OF NATIONAL GRID TRANSCO
National Grid Transco will own, operate and develop the high-voltage electricity transmission network in England and Wales and Britain's principal natural gas transportation system. The Merged Group's UK electricity transmission network will consist of approximately 4,900 miles of overhead lines and underground cables, whilst its natural gas network in Britain will comprise approximately 4,100 miles of high pressure pipelines and around 170,300 miles of lower pressure local transmission and distribution pipelines. In addition, National Grid Transco will own and operate all of the liquefied natural gas storage facilities in Britain, located at strategic positions on the National Transmission System.
In the US, National Grid Transco will own, operate and develop electricity transmission and distribution assets with a total length of approximately 84,000 miles, serving over 3.2 million electricity customers in New England and New York State. It will also own a gas distribution network comprising over 8,000 miles of pipelines and mains, serving over 500,000 customers in New York State.
In addition, the Merged Group will provide infrastructure services in the UK, targeted particularly at the mobile telecommunications industry, with a portfolio of approximately 9,740 towers and other sites generating revenue and/or available for marketing. National Grid Transco will also have interests in a number of other telecommunications businesses and energy-related and infrastructure services companies.
3. BUSINESS STRATEGY
The core skills of National Grid Transco will lie in the design, construction, system operation and maintenance, regulatory management and customer service activities associated with operating complex networks. The Merged Group will utilise the complementary assets and skills of the combined businesses of National Grid Group and Lattice Group to create value for shareholders and benefits for customers within the framework of incentive-based regulatory environments and competitive markets. National Grid Transco will be primarily focused on regulated electricity and gas networks. These are stable businesses, capable of generating cash and earnings to
support the Merged Group's investment strategy and its progressive dividend policy, described in section 12 below.
The National Grid Transco Directors believe that they can create shareholder value from continued efficiency improvements arising from cost savings and the use of new technology. The Merger will generate savings in the UK from the elimination of duplicate head office costs and other central costs and from combining the support services provided to the regulated electricity and gas businesses. Prospects for future outperformance of regulatory targets and improving returns will be enhanced by additional savings generated from the progressive combination of certain activities of the two UK transmission businesses, sharing of best practice and financial synergies.
Significant synergies are also expected to be available over time by the sharing of best practice between the UK and the US businesses.
The National Grid Transco Directors intend to utilise the increased financial capacity of the Merged Group and its combined expertise in operating both gas and electricity networks to exploit growth opportunities, primarily both in the US and those which are expected to emerge in continental Europe. The National Grid Transco Directors believe that, outside the UK, National Grid Transco can create additional value in electricity and gas distribution by offering high-quality customer service and in electricity and gas transmission by facilitating the development of competitive energy markets while preserving system security and reducing user costs.
National Grid Transco intends to withdraw from its existing investments in alternative telecommunications network operators and related businesses. However, the National Grid Transco Directors believe that there are attractive opportunities to leverage the Merged Group's infrastructure skills and assets in the UK and the US to provide towers and other sites and related infrastructure services to the mobile telecommunications industry.
4. BENEFITS ARISING FROM THE MERGER
The directors of National Grid and Lattice believe that the Merger will create a business which is able to generate significant benefits for shareholders from opportunities in a number of areas:
4.1 UTILISATION OF COMPLEMENTARY SKILLS TO MAXIMISE VALUE FOR SHAREHOLDERS AND CUSTOMERS
Since the respective privatisations of National Grid and, in the case of Lattice, British Gas, both National Grid and Lattice have proven their ability to improve the operating efficiency of their UK regulated businesses. The directors of National Grid and Lattice are confident of exceeding their current regulatory efficiency targets, which took effect from April 2001 for National Grid and April 2002 for Transco.
National Grid Group and Lattice Group share a complementary set of core skills and the Merger will provide an opportunity to improve the co-ordination of the operations of their respective electricity and gas delivery businesses.
The Merger will generate pre-tax financial benefits that are expected to reach an annualised rate of at least (pound) 100 million by the end of the first full financial year following the completion of the Merger. The directors of National Grid and Lattice believe that these financial benefits will arise principally from the elimination of duplicate head office costs, other central cost savings and from combining the support services provided to the UK regulated electricity and gas businesses. Additional savings are expected to be achievable from the progressive combination of certain activities of the two UK transmission businesses, further sharing of best practice and further financial synergies.
4.2 FINANCIAL IMPACT
The Merger is expected to enhance earnings per share (before exceptional items) for both National Grid Shareholders and Lattice Shareholders in the first full financial year following completion of the Merger(1). The Merged Group will seek to maintain a single A credit rating.
National Grid Transco will have the balance sheet strength and cashflows to facilitate its future growth strategy and underpin its dividend policy which aims to increase dividends per share (expressed in sterling) by 5 per cent. per annum in real terms for each year to 31 March 2006. This will be based on National Grid's full year dividend of 16.04 pence per National Grid Share for the financial year ended 31 March 2002.
(1) The statement that the Merger will be earnings per share enhancing for National Grid Shareholders and Lattice Shareholders should not, however, be interpreted to mean that earnings per share in the first full financial year following completion of the Merger, or in any subsequent period, will necessarily be greater than those for the relevant preceding financial period.
PART I-- INFORMATION ON THE MERGER AND NATIONAL GRID TRANSCO
National Grid Transco will continue to evaluate opportunities to release capital throughout the Merged Group for redeployment in higher growth opportunities, particularly in the US.
Pro forma financial information for the Merged Group can be found in Part VI of this document.
4.3 ENHANCED GROWTH OPPORTUNITIES
National Grid has a proven track record in creating significant value for shareholders through expansion in the US and, following recent acquisitions, including that of Niagara Mohawk which was completed earlier this year, is one of the largest energy delivery companies in the north-eastern US.
The US is the world's largest energy market and has proved attractive for expansion due to its fragmented nature and the ability to earn attractive returns within long-term regulatory frameworks. The increased financial capacity of the Merged Group, combined with expertise in managing both gas and electricity networks, should enable it to continue to exploit growth opportunities, primarily both in the US and those which are expected to emerge in continental Europe as markets are liberalised and structural reforms are implemented.
National Grid Group and Lattice Group utilise their skills and assets to provide infrastructure services to the mobile telecommunications industry in the UK. Combining the two companies' activities in this area will create the third largest independent provider of towers and other sites to the mobile telecommunications industry in the UK. The complementary geographic fit of these businesses is expected to enhance growth opportunities by offering broader coverage. National Grid Transco will continue National Grid Group's development of a similar business in the US.
5. CURRENT TRADING AND PROSPECTS
5.1 NATIONAL GRID
On 30 May 2002, National Grid announced its preliminary results for the year ended 31 March 2002.
In the UK, National Grid continues to demonstrate its expertise in the operation of complex regulated networks. This core business made excellent progress during the financial year ended 31 March 2002 and will continue to add shareholder value and generate strong positive cashflows in the future.
In the US, the acquisition of Niagara Mohawk represented an important step in the continuing development of National Grid's US business. National Grid will continue to take advantage of opportunities provided by its rate plans and integration synergies to improve performance and to achieve its target returns.
Since 31 March 2002, National Grid has continued to perform well. On 13 June 2002, National Grid Company announced the issue of RPI-linked bonds in an aggregate amount of (pound) 400 million with maturities between 2018 and 2032. The net proceeds of the issue will be used for general corporate purposes. The National Grid Directors' confidence in the strength and prospects of the business allows them to confirm their aim to deliver sustained growth in dividends per share (expressed in sterling) of 5 per cent. per annum in real terms for each year to 31 March 2006.
5.2 LATTICE
Lattice's over-riding strategic priority is to outperform Transco's new regulatory targets, whilst maintaining the drive for continuous improvement in safety, reliability and service.
To meet its new price control targets, Transco has embarked on an extensive restructuring programme. This restructuring programme is based on eight Regional Networks plus National Transmission and Trading. Some activities, such as the emergency service, shipper services and support services will be operated on a national basis to maximise economies of scale.
Over the duration of the new price control period, Transco is expected to generate at least (pound) 230 million of outperformance against its regulatory targets, which recovers its associated restructuring costs. The Lattice Directors remain confident that further outperformance should be achievable.
With regard to telecommunication interests, SST is expected to generate a positive operating cash flow during the course of the financial year ended 31 March 2003. In light of the deteriorating market conditions, the strategic options for 186k are currently being reviewed.
The Lattice Enterprises' portfolio will continue to be actively managed, nurturing those growth opportunities complementary to energy delivery.
Since 31 March 2002, Lattice has continued to perform well.
5.3 NATIONAL GRID TRANSCO
Based on the current performance of both National Grid and Lattice (which, following completion of the Merger, will form National Grid Transco), combined with the expected benefits of the Merger, the National Grid Transco Directors have confidence in the prospects for the Merged Group.
6. BOARD OF DIRECTORS
The Board of National Grid Transco will be drawn from the Boards of both National Grid and Lattice. The proposed members of the National Grid Transco Board are:
Chairman (Non-executive) Sir John Parker* Deputy Chairman (Non-executive) James Ross Group Chief Executive Roger Urwin Group Finance Director Steve Lucas* Group Director Edward Astle Group Director Steven Holliday Group Director Colin Matthews* Group Director Rick Sergel Group Corporate Affairs Director John Wybrew* Non-executive Director John Grant Non-executive Director Kenneth Harvey* Non-executive Director Bonnie Hill Non-executive Director Paul Joskow Non-executive Director Stephen Pettit* Non-executive Director George Rose* |
It is anticipated that the Group Directors of National Grid Transco will have the following roles and responsibilities:
- Edward Astle will be responsible for all of the Merged Group's infrastructure services, the majority of the businesses currently forming Lattice Enterprises and the Merged Group's remaining telecommunications businesses;
- Steven Holliday will be responsible for National Grid Group's UK electricity transmission business and for bringing this together with Transco's National Transmission and Trading;
- Colin Matthews will be responsible for Transco's distribution networks and Metering and Meter Reading services; and
- Rick Sergel will be responsible for National Grid Group's US utility businesses.
7. CORPORATE GOVERNANCE
Following the Merger, National Grid Transco will continue to maintain the Code of Business Practice established by National Grid, constructed around the Principles of Good Governance contained in the Combined Code appended to the Listing Rules. The Audit, Remuneration and Nominations Committees of National Grid, as described in section 7 of Part II of this document, will also be maintained, with appropriate alterations to the composition of these committees to reflect the membership of the Board of National Grid Transco. It is intended that the committee structure of National Grid Transco will be reviewed following completion of the Merger.
8. EMPLOYEES
National Grid Group and Lattice Group attach great importance to retaining the skills and expertise of their management and employees. The Boards of National Grid and Lattice believe that, although the combination of similar functions will necessarily lead to some staff reductions, the greater strength, market position and growth prospects for the Merged Group will generally enhance the career prospects of its employees. As far as possible, job losses will be achieved by normal staff turnover, voluntary redundancy and early retirement.
The existing employment rights of employees of both National Grid Group and Lattice Group will be fully safeguarded.
PART I-- INFORMATION ON THE MERGER AND NATIONAL GRID TRANSCO
9. SUMMARY OF THE TERMS OF THE MERGER
The terms of the Merger are based on the relative equity market capitalisations of the two companies in the period immediately preceding the announcement of the Merger on 22 April 2002.
The Merger is to be implemented by way of the Lattice Scheme. Under the terms of the Lattice Scheme, National Grid will issue New National Grid Transco Shares to Lattice Shareholders and their existing Lattice Shares will be cancelled. Lattice Shareholders will exchange their Lattice Shares for New National Grid Transco Shares on the basis of 0.375 of a New National Grid Transco Share for each Lattice Share held at the Lattice Scheme Record Time, and so in proportion for any other number of Lattice Shares held at the Lattice Scheme Record Time.
Upon completion of the Merger, Lattice will become a wholly-owned subsidiary of National Grid. National Grid will change its name to National Grid Transco and will retain its listings on both the London Stock Exchange and the New York Stock Exchange. The Special Shareholder will retain the National Grid Special Share, the rights of which will be amended, principally to reflect National Grid Transco's ownership of Transco. Under the terms of the Lattice Scheme, the capital paid up on the Lattice Special Share will be repaid to the Special Shareholder and the Lattice Special Share will be cancelled.
Upon completion of the Merger, the issued share capital of National Grid Transco will be approximately 3,100 million National Grid Transco Shares of which National Grid Shareholders and Lattice Shareholders will hold approximately 57.3 per cent. and 42.7 per cent. respectively, based on the issued share capital of the two companies as at 12 June 2002 (being the latest practicable date prior to the publication of this document) and assuming no issue of National Grid Shares or Lattice Shares between that date and completion of the Merger.
The New National Grid Transco Shares to be issued pursuant to the Lattice Scheme will be credited as fully paid.
Fractional entitlements to a New National Grid Transco Share will not be issued to Lattice Shareholders but will be aggregated and sold in the market and the relevant share of the proceeds returned by cheque to the relevant Lattice Shareholders.
The holdings and rights of holders of existing National Grid Shares and of National Grid ADSs will not be affected by the Merger. However, following the issue of the New National Grid Transco Shares, these holdings, as a percentage of the issued share capital of National Grid Transco, will decrease.
10. INDUCEMENT FEE
As an inducement to both National Grid and Lattice to enter into and implement the Merger, National Grid and Lattice have entered into an inducement fee agreement under which each party agrees to pay the other a fee of (pound) 60 million if certain events occur which result in the Merger not completing in accordance with its terms. Further details on the inducement fee agreement are set out in section 19.1.2(a) of Part IX of this document.
11. CONDITIONS, CONSENTS AND TIMING
The Merger is subject to the conditions and further terms set out in Part VIII of this document, including the approval of the Merger and related matters by shareholders of both National Grid and Lattice, sanction of the Lattice Scheme by the Court and satisfaction of certain regulatory conditions, as described below.
The Merger will require approval by an ordinary resolution of National Grid Shareholders to be proposed at the National Grid EGM. Special resolutions to change the name of National Grid to National Grid Transco and to adopt the National Grid Transco Articles will also be proposed at the National Grid EGM. The National Grid Transco Articles incorporate changes to the rights of the Special Shareholder, principally to reflect National Grid Transco's ownership of Transco. In addition, adoption of the National Grid Transco Articles will increase the maximum aggregate amount of fees which can be paid to non-executive directors from (pound) 500,000 to (pound) 1,000,000. This reflects the change in the composition of the Board of National Grid and the increase in the number of its non-executive directors. At the National Grid EGM, an ordinary resolution will also be proposed to approve the 2002 Share Plan.
The implementation of the Lattice Scheme will require the approval of Lattice Shareholders at each of the Lattice Court Meeting and the Lattice EGM. The statutory majority required to approve the Lattice Scheme at the Lattice Court Meeting is a simple majority in number of the Lattice Shareholders present and voting (either in person or by proxy), representing not less than 75 per cent. of the number of Lattice Shares held by Lattice Shareholders who vote at the Lattice Court Meeting. The Lattice Court Hearing is expected to be held in autumn 2002. Lattice Shareholders will have the opportunity to attend the Lattice Court Hearing, to support or oppose the Lattice
Scheme and to appear in person or be represented by Counsel. At the Lattice EGM, a special resolution will be proposed to approve the implementation of the Lattice Scheme. In order to pass the special resolution, not less than 75 per cent. of the votes cast by Lattice Shareholders must be in favour of the resolution.
The Lattice Scheme can only become effective if all the conditions to which the Lattice Scheme is subject have been satisfied or waived by no later than 31 March 2003, or such later date, if any, as National Grid and Lattice may agree and the Court may allow. The Lattice Scheme will become effective upon a copy of the Order being registered by the Registrar of Companies. Once the Lattice Scheme becomes effective, the terms will be binding on all Lattice Shareholders irrespective of whether they attended the Lattice Court Meeting and irrespective of the manner in which they voted.
In addition, the Merger cannot be completed until National Grid and Lattice have received to their satisfaction, acting reasonably, certain regulatory and other consents and approvals in the UK and the US. In the UK, the required regulatory approvals include the Secretary of State not referring the Merger or any matter arising therefrom or related thereto to the Competition Commission. A decision by the Secretary of State is expected during July 2002. A further condition of the Merger is that any modification sought by the Authority to the licences held by National Grid Company and Transco is on terms satisfactory to both National Grid and Lattice, acting reasonably. The Authority has undertaken an initial consultation about regulatory issues arising from the Merger and this may, in time, lead to further consultation about licence modifications. The Secretary of State has given her written consent to the Lattice Scheme in her capacity as the holder of the Lattice Special Share and to the requisite changes to the National Grid Articles in her capacity as the holder of the National Grid Special Share, in each case without prejudice to her separate rights under the Fair Trading Act to refer the Merger or any matter arising therefrom or related thereto to the Competition Commission. In addition the Secretary of State has given these consents without prejudice to her rights under a licence granted to 186k under the Telecommunications Act 1984. Notice has been given to the Secretary of State of the proposed change of control of Lattice, as required by that licence.
The only regulatory approval outstanding in the US is authorisation from the SEC under the Public Utility Holding Company Act of 1935 in respect of the amount that National Grid may invest in utility companies outside the US and the financing arrangements for such investments. In reviewing National Grid's application, the SEC will consider whether the financing arrangements would have an adverse impact on the financial integrity of National Grid, any US utility subsidiary of National Grid, such subsidiary's customers, and the ability of US state regulatory commissions to protect such utility subsidiaries and customers. The SEC will also consider the financial performance of National Grid's UK utility operations and its telecommunications investments. National Grid believes that the SEC will authorise the financing of the Merger, although there can be no assurance that this authorisation will be granted. National Grid believes that the SEC will issue its authorisation during autumn 2002, but there is no statutory deadline by which the SEC must act on National Grid's application.
It is expected that the Lattice Scheme will become effective and that the Merger will complete during autumn 2002.
12. YEAR END AND DIVIDENDS
Following completion of the Merger, it is intended that the accounting reference date for National Grid Transco will remain as 31 March.
Lattice Shareholders who were entitled to receive Lattice's second interim dividend of 5.4 pence per Lattice Share received this dividend on 14 June 2002. As has been previously announced, Lattice will not pay a final dividend in respect of the 15 month period ended 31 March 2002. National Grid Shareholders will have the right to receive the National Grid Final Dividend to be paid on 15 August 2002. New National Grid Transco Shares, issued pursuant to the Lattice Scheme, will rank pari passu with the existing National Grid Shares, save that they will not be entitled to receive the National Grid Final Dividend expected to be paid on 15 August 2002.
Following completion of the Merger, National Grid Transco intends to pay dividends which reflect National Grid's progressive dividend policy, which aims to increase dividends per share (expressed in sterling) by 5 per cent. per annum in real terms for each year to 31 March 2006. This will be based on National Grid's full year dividend of 16.04 pence per National Grid Share for the year ended 31 March 2002.
It is expected that the first dividend paid by National Grid Transco will be the interim dividend in respect of the financial year ending 31 March 2003, expected to be announced at the time of its interim results for the six months ending 30 September 2002.
PART I-- INFORMATION ON THE MERGER AND NATIONAL GRID TRANSCO
If the Merger is approved by National Grid Shareholders and Lattice Shareholders but does not become effective prior to the announcement of National Grid's interim results for the six months ending 30 September 2002, it is intended that both companies will announce their interim results and interim dividends on the same day. Lattice Shareholders will receive an interim dividend from Lattice on the basis that each Lattice Share will be entitled to an amount equal to 37.5 per cent. of the dividend declared per National Grid Share for the period. The amount of this dividend is consistent with the exchange ratio under the Merger and will reflect National Grid's current dividend policy.
13. NATIONAL GRID TRANSCO SHARE PLANS
13.1 PROPOSED NATIONAL GRID TRANSCO PERFORMANCE SHARE PLAN 2002
The remuneration committee of National Grid is seeking shareholder approval at the National Grid EGM for the 2002 Share Plan in order to ensure that it will have sufficient flexibility to set and operate an appropriate remuneration policy for senior executives within the Merged Group. The 2002 Share Plan will replace a similar Lattice share scheme in respect of which no awards will be made after completion of the Merger.
No awards will be made under the 2002 Share Plan prior to completion of the Merger. The remuneration committee of National Grid Transco will consider whether, and if so how, to operate the 2002 Share Plan in conjunction with the existing National Grid Share Plans. It will do so in the context of ensuring that senior executives of the Merged Group continue to receive competitive, but not excessive, levels of remuneration which provide an appropriate balance between fixed and incentive pay and between short-term and long-term incentives and which, in its view, are in the overall best interests of all shareholders.
The remuneration committee's policy as regards long-term incentives will be clearly stated for shareholders each year in the Annual Report and Accounts of National Grid Transco and shareholders will be given an opportunity to vote on that policy as part of the Directors' remuneration report at future Annual General Meetings of National Grid Transco.
The key feature of the 2002 Share Plan is that recipients may receive an award of National Grid Transco Shares at the discretion of the remuneration committee of National Grid Transco worth up to 1.25 x base salary each year. In determining the actual level of awards, the remuneration committee of National Grid Transco will have regard both to external market practice and the level of awards (if any) under the National Grid Share Plans. Awards will not be made to the same participants in the same financial year under all three of National Grid Transco's discretionary share incentive plans. Any awards under the 2002 Share Plan will normally only vest if challenging performance criteria (set at the date of award) are satisfied and the participant remains employed by the Merged Group for a period of at least three years. While it is for the remuneration committee to determine appropriate performance criteria, it is not currently envisaged that awards will normally vest at all unless National Grid Transco's total shareholder return is at least at the median of an appropriate comparator group and will not fully vest unless its total shareholder return is at least in the upper quartile. The remuneration committee will not operate the 2002 Share Plan without first consulting the Association of British Insurers and National Grid Transco's principal shareholders regarding the terms of its operation.
A summary of the 2002 Share Plan is set out in section 10 of Part IX of this document.
13.2 NATIONAL GRID SHARE PLANS
Completion of the Merger will not affect the National Grid Share Plans.
13.3 LATTICE SHARE SCHEMES
Following completion of the Merger, no further awards will be made under the Lattice Share Schemes except in respect of the Lattice Group All Employee Share Ownership Plan under which further awards may be made. Any such further awards will be over National Grid Transco Shares.
A summary of the Lattice Group All Employee Share Ownership Plan is set out in section 11.2.4 of Part IX of this document.
14. LISTINGS, DEALINGS AND SETTLEMENT INFORMATION
National Grid Transco will have its primary listing on the London Stock Exchange. Applications have been made to the UK Listing Authority for the New National Grid Transco Shares to be admitted to the Official List and to the London Stock Exchange for such shares to be admitted to trading on the London Stock Exchange's market for listed securities. The expected timetable will be finalised following satisfaction or waiver of the final regulatory condition to the Merger and upon agreement with the Court. National Grid Shareholders and Lattice Shareholders will be notified of the finalised timetable by announcement via the Regulatory News Service of the London Stock
Exchange. It is expected that Admission will become effective and that dealings for normal settlement in the New National Grid Transco Shares will commence on the Lattice Scheme Effective Date (which is expected to be during autumn 2002). National Grid Transco will maintain National Grid's listing of ADSs on the New York Stock Exchange.
On the Lattice Scheme Effective Date, Lattice Shares will cease to be listed on the Official List. The last day of dealings in Lattice Shares on the London Stock Exchange will be the last business day before the Lattice Scheme Effective Date.
National Grid Shareholders who hold their shares in certificated form will retain their existing certificates, which will remain valid. New certificates in the name of National Grid Transco will be issued when transfers to persons who wish to hold their National Grid Transco Shares in certificated form are lodged for registration. National Grid ADS holders who hold their ADSs in certificated form through ADR certificates will also retain their ADR certificates, which will remain valid as ADSs of National Grid Transco. National Grid intends to amend its existing deposit agreement such that, following completion of the Merger, any new certificated ADRs issued and any previously outstanding ADR certificates presented for registration of transfer will be issued in the name of National Grid Transco.
For Lattice Shareholders who hold their Lattice Shares in a CREST account, New National Grid Transco Shares are expected to be credited to the relevant CREST account at 8.00 a.m. on the Lattice Scheme Effective Date. For those Lattice Shareholders holding Lattice Shares in certified form, definitive share certificates for the New National Grid Transco Shares are expected to be despatched no later than 14 days after the Lattice Scheme Effective Date.
It is expected that, shortly following completion of the Merger, details will be sent to National Grid Transco Shareholders of a share dealing facility.
15. OVERSEAS SHAREHOLDERS
The implications of the Lattice Scheme for persons resident in, or citizens or nationals of, jurisdictions outside the UK (each an "overseas shareholder") may be affected by the laws of the relevant jurisdictions. Such overseas shareholders should inform themselves about and observe all applicable legal requirements. It is the responsibility of each overseas shareholder to satisfy himself as to the full observance of the laws of the relevant jurisdiction in connection with the Lattice Scheme, including the obtaining of any governmental, exchange control or other consents which may be required and/or compliance with other necessary formalities which are required to be observed and the payment of any issue, transfer or other taxes due in such jurisdiction.
In any case where the issue of New National Grid Transco Shares to any overseas shareholder would infringe the laws of any jurisdiction outside the UK, or would require National Grid to observe any governmental or other consent or any registration, filing or other formality, the Lattice Scheme provides that such New National Grid Transco Shares to which such overseas shareholder would otherwise be entitled shall either (i) be issued to a nominee for such shareholder appointed by National Grid on terms that such nominee shall, as soon as practicable, sell the shares so issued or (ii) be issued to the overseas shareholder and then sold on his behalf. In either case, the net proceeds of sale will be remitted to the relevant overseas shareholder.
Overseas holders of Lattice Shares should refer to section 18 of Part IX of this document, which contains important information relevant to securities law in certain overseas jurisdictions.
Overseas shareholders should consult their own legal and tax advisers with respect to the legal and tax consequences of the Lattice Scheme. For summaries of the UK and overseas taxation consequences of holding New National Grid Transco Shares, see sections 16 and 17, respectively, of Part IX of this document.
16. MEETINGS
The Lattice Court Meeting has been convened for 2.30 p.m. on Monday, 15 July 2002 (the same date as the Lattice AGM) or, if later, immediately after the conclusion or adjournment of the Lattice AGM, pursuant to an order of the Court. At the Lattice Court Meeting, or at any adjournment thereof, Lattice Shareholders will consider and, if thought fit, approve the Lattice Scheme.
The Lattice EGM has been convened for 2.45 p.m. on Monday, 15 July 2002 (the same date as the Lattice AGM and the Lattice Court Meeting) or, if later, immediately after the conclusion or adjournment of the Lattice Court Meeting. At the Lattice EGM, or at any adjournment thereof, Lattice Shareholders will consider and, if thought fit, pass the resolutions necessary to implement the Lattice Scheme and the Merger.
The National Grid EGM has been convened for 11.30 a.m. on Tuesday, 23 July 2002 (or, if later, immediately after the conclusion or adjournment of the National Grid AGM convened for 11.00 a.m. that day). At the National
PART I-- INFORMATION ON THE MERGER AND NATIONAL GRID TRANSCO
Grid EGM, or at any adjournment thereof, National Grid Shareholders will consider and, if thought fit, pass, inter alia, the resolutions necessary to approve and implement the Merger.
17. LISTING PARTICULARS
A copy of these Listing Particulars is available on the National Grid website at www.nationalgrid.com. Copies are also available, free of charge, by application to Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA or by calling the shareholder helpline on 0800 035 2778 (or, from outside the UK, +44 20 7864 9093) between 8.00 a.m. and 6.00 p.m. Monday to Fridays, at any time prior to completion of the Merger. A copy of the Listing Particulars may also be obtained from the registered office of National Grid Group plc, 15 Marylebone Road, London NW1 5JD, the registered office of Lattice Group plc, 130 Jermyn Street, London SW1Y 4UR, or the offices of N M Rothschild & Sons Limited, New Court, St. Swithin's Lane, London EC4P 4DU during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) until completion of the Merger. In addition, a copy of this document may be inspected at the offices of CMS Cameron McKenna, Mitre House, 160 Aldersgate Street, London EC1A 4DD, at the offices of Linklaters, One Silk Street, London EC2Y 8HQ, and at the Document Viewing Facility, UK Listing Authority, Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) until completion of the Merger. A copy will also be available for inspection at the National Grid EGM and the Lattice EGM. Holders of National Grid ADSs may obtain a copy of the Listing Particulars free of charge by contacting the ADS holder helpline on 1-800-466-7215 in the US (or, from outside the US, 1-610-312-5315).
EXHIBIT 10(b)(ii)
PART IX -- ADDITIONAL INFORMATION
18.7 AVAILABLE INFORMATION
National Grid is (and following the Merger, New National Grid Transco will
continue to be) subject to the information requirements of the US Exchange Act
applicable to foreign private issuers having securities registered under section
12 thereof and in accordance therewith, file annual reports and other
information with the SEC. The annual reports and other information filed by
National Grid (and following the Merger, by National Grid Transco) can be
inspected and copied at the public reference rooms maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC located in Chicago, Illinois and New York, New York.
Copies of such material are also available by mail from the public reference
room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Members of the public may obtain information on the operation of the
public reference rooms by calling the SEC at 800-732-0330 (within the US) or
+1-202-942-8090 (outside the US). In addition, such material may also be
inspected and copied at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
19. MATERIAL CONTRACTS 19.1 NATIONAL GRID GROUP 19.1.1 Save for the contracts described in section 19.1.2 below, the consent and undertaking described in section 19.2.2 below and the contracts which have been made available for inspection in the last two years described in section 19.1.3 below, no contracts (other than contracts entered into in the ordinary course of business) have been entered into by any member of National Grid Group: (a) within the two years immediately preceding the date of this document which are, or may be, material; or (b) which contain any provision under which any member of National Grid Group has any obligation or entitlement which is material to National Grid Group as at the date of this document. 19.1.2 (a) An inducement fee agreement dated 22 April 2002 between (1) National Grid and (2) Lattice entered into in connection with the Merger (the "Inducement Fee Agreement"). The Inducement Fee Agreement provides for either party to pay the other a fee of (pound) 60 million if: (i) an announcement is made during the offer period by a third party indicating an intention to make an offer for, or proposal relating to the change of control of, either party, as a result of which either: (a) the shareholders of such party do not pass the necessary resolutions approving the Merger; or (b) such party terminates discussions with the other party; or (ii) either party notifies or indicates to the other party that its directors will not unanimously recommend its shareholders to vote in favour of the Merger or the directors of such party do not make such recommendation or withdraw their recommendation or recommend an alternative offer or transaction involving a change of control; or (iii) either party takes any action or omits to take any action (other than as a consequence of a third party regulatory body failing to approve the Merger or placing unacceptable conditions on the Merger in the reasonable opinion of either party) which is reasonably likely to cause the Merger to not become effective, and in each case the Merger does not become effective in accordance with its terms; (b) a sale and purchase agreement dated as of 13 April 2002 and made by and among North Atlantic Energy Corporation, The United Illuminating Company, Great Bay Power Corporation, NEP, The Connecticut Light and Power Company, Canal Electric Company, Little Bay Power Corporation, New Hampshire Electric Cooperative, Inc., North Atlantic Energy Service Corporation, and FPL Energy Seabrook LLC whereby: (i) FPL Energy Seabrook LLC agreed to purchase NEP's approximate 9.96 per cent. interest in the Seabrook Nuclear Power Station, together with the interests of the sellers listed above (a total of approximately 88.23 per cent. of the interests in Seabrook); (ii) FPL Energy Seabrook LLC agreed to pay an aggregate of $836.6 million (subject to adjustment) to NEP and the other sellers for the assets acquired under the sale and purchase agreement and NEP's share of such proceeds is estimated with known purchase price adjustments to be approximately $94.1 million; (iii) FPL Energy Seabrook LLC assumed most of the sellers' obligations as related to the Seabrook Nuclear Power Station, including responsibility for all liabilities and obligations of NEP under contractual obligations relating to the assets, certain liabilities and |
obligations with respect to the employees employed at the facilities, and responsibility for environmental liabilities at the facilities except for pre-closing violations and off-site disposal of, and responsibility for decommissioning Seabrook;
(iv) FPL Group Capital Inc. agreed to guarantee the FPL Energy Seabrook LLC's payment of the purchase price and provide funding assurance for FPL Energy Seabrook LLC's funding obligations as required by the New Hampshire Nuclear Decommissioning Financing Committee; and
(v) NEP is required under pre-existing agreements to first offer its interests in Seabrook to the non-selling owners on equivalent terms. The non-selling owners have until late June 2002 to notify NEP if they will purchase NEP's interest; and
(c) a guarantee and indemnity given to EIB by National Grid dated 11 February 2002 under which National Grid guarantees the financial obligations of Energis Polska to EIB in relation to a Euro 125 million loan facility granted to Energis Polska by EIB.
19.1.3 (a) The consent to the National Grid Scheme and the undertaking to be bound by its terms executed by National Grid in favour of National Grid Holdings One plc and dated 10 December 2001; (b) a sponsor's agreement dated 10 December 2001 between National Grid, National Grid Holdings One plc and Rothschild; (c) a supplemental trust deed dated 10 December 2001 between National Grid Company, National Grid, National Grid Holdings One plc and The Law Debenture Trust Corporation p.l.c.; (d) a credit agreement dated 22 November 2001 between (1) National Grid (as guarantor and borrower); (2) NGGF (as borrower); (3) National Grid Holdings One plc (as guarantor and borrower); (4) Dresdner Kleinwort Wasserstein Limited, J.P. Morgan plc, ABN AMRO Bank N.V., Bank of America Securities, The Bank of Tokyo-Mitsubishi Ltd, Barclays Capital, Bayerische Landesbank Girozentrale London Branch, Citibank N.A., HSBC Investment Bank plc and TD Bank Europe Limited; (5) HSBC Investment Bank plc; (6) HSBC (USA) Inc.; and (7) certain banks and financial institutions; (e) a letter agreement dated 20 November 2001 between National Grid, National Grid Company, National Grid Holdings One plc and EIB; (f) the trust deeds, subscription agreements and paying agency agreements relating to the Euro 1,250,000,000 5.25 per cent. guaranteed bonds due 2006 and the Euro 750,000,000 6.125 per cent. guaranteed bonds due 2011 issued by NGGF and guaranteed by National Grid and National Grid Holdings One plc, which were summarised in the offering circular issued by NGGF on 20 August 2001; (g) the trust deeds, subscription agreements and paying agency agreements relating to the (pound) 200,000,000 3.806 per cent. Retail Price Index-linked bonds due 2020, the (pound) 40,000,000 3.589 per cent. limited Retail Price Index-linked bonds due 2030 and the (pound) 360,000,000 6.50 per cent. bonds due 2028 issued by National Grid Company, which were summarised in the offering circular issued by National Grid Company on 23 July 2001; (h) an asset purchase agreement dated as of 11 December 2000 and made between Niagara Mohawk Power, Constellation Nuclear LLC ("Constellation Nuclear") and Constellation Energy Group, Inc., as guarantor of Constellation Nuclear; (i) an asset purchase agreement dated as of 11 December 2000 and made between Niagara Mohawk Power, Rochester Gas and Electric Corporation, Central Hudson Gas and Electric Corporation, New York State Electric and Gas Corporation, Constellation Nuclear and Constellation Energy Group, Inc., as guarantor of Constellation Nuclear; and (j) the Niagara Mohawk Merger Agreement. |