APPENDIX I
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
File No. 971-0091
AGREEMENT TO HOLD SEPARATE
This Agreement to Hold Separate ("Hold Separate Agreement") is by and
between PacifiCorp, a corporation organized, existing, and doing business under and by
virtue of the laws of Oregon, with its office and principal place of business located at
700 N.E. Multnomah, Suite 1600, Portland, Oregon, 97232-4116; and the Federal Trade
Commission (the "Commission"), an independent agency of the United States
Government, established under the Federal Trade Commission Act of 1914, 15 U.S.C. § 41, et
seq. (collectively, the "Parties").
PREMISES
WHEREAS, on February 3, 1998, PacifiCorp announced a cash tender offer
to acquire all of the outstanding shares of The Energy Group PLC (the
"Acquisition"); and
WHEREAS, PacifiCorp is engaged in the generation of electricity, the
transmission of electricity, wholesale electricity sales, and retail electricity sale, and
WHEREAS, The Energy Group PLC ("TEG"), through its
subsidiary Peabody Holding Company, Inc. ("Peabody") owns all of the voting
securities of Peabody Western Coal Company ("PWCC");
WHEREAS, the Commission is now investigating the Acquisition to
determine whether it would violate any of the statutes enforced by the Commission; and
WHEREAS, if the Commission accepts the attached Agreement Containing
Consent Order, which would require the divestiture of PWCC, and Respondents to cease and
desist from certain conduct, the Commission must place the Consent Order on the public
record for a period of at least sixty (60) days and may subsequently withdraw such
acceptance pursuant to the provisions of Section 2.34 of the Commission's Rules; and
WHEREAS, the Commission is concerned that if an understanding is not
reached, preserving the status quo ante of PWCC as defined in Paragraph I.D. of
the Consent Order during the period prior to the final acceptance and issuance of the
Consent Order by the Commission (after the 60-day public comment period), divestiture
resulting from any proceeding challenging the legality of the Acquisition might not be
possible, or might be less than an effective remedy; and
WHEREAS, the Commission is concerned that if the Acquisition is
consummated, it will be necessary to preserve the Commission's ability to require the
divestiture of PWCC, as described in Paragraph I.D. of the Consent Order, and the
Commission's right to have PWCC continue as a viable competitor independent of PacifiCorp
; and
WHEREAS, if the Commission determines to finally accept the consent
Order, it is necessary to hold separate PWCC to protect interim competition pending
divestiture or other relief; and
WHEREAS, the purpose of the Hold Separate Agreement and the Consent
Order is:
1. to preserve PWCC as a viable and competitive, independent business pending the
divestiture required by the Consent Order;
2. to remedy any anticompetitive effects of the Acquisition; and
3. to preserve PWCC as an ongoing and competitive entity engaged in the same business
in which it is presently engaged until divestiture is achieved; and
WHEREAS, PacifiCorp's entering into this Hold Separate Agreement shall
in no way be construed as an admission by PacifiCorp that the Acquisition is illegal; and
WHEREAS, PacifiCorp understands that no act or transaction
contemplated by this Hold Separate Agreement shall be deemed immune or exempt from the
provisions of the antitrust laws or the Federal Trade Commission Act by reason of anything
contained in this Hold Separate Agreement.
NOW, THEREFORE, upon understanding that the Commission has not yet
determined whether the Acquisition will be challenged, and in consideration of the
Commission's agreement that at the time it accepts the Consent Order for public comment it
will grant early termination of the Hart-Scott-Rodino waiting period, the Parties agree as
follows:
1. PacifiCorp agrees that from the date PacifiCorp acquires control of TEG
("Control Date") until the earliest of the dates listed in Paragraphs 1.a, 1.b
or 1.c, PacifiCorp, then including TEG, Peabody and PWCC, each will comply with the
provisions of this Agreement:
a. ten (10) days after the Commission withdraws its acceptance of the Consent Order
pursuant to the provisions of Section 2.34 of the Commission's Rules; or
b. the day after the divestiture required by the Consent Order has been completed; or
c. Expiration of the Consent Order.
2. PacifiCorp agrees to execute and be bound by the attached Consent Order and to
comply, from the date this Hold Separate Agreement is accepted by the Commission for
public comment, with the provisions of the Consent Order as if it were final.
3. The terms capitalized herein shall have the same definitions as in the Consent
Order.
4. To ensure the complete independence and viability of PWCC and to ensure that no
competitive information is exchanged between PWCC and PacifiCorp or Peabody and
PacifiCorp, PacifiCorp agrees that from the Control Date until the earliest of the dates
listed in Paragraphs 1.a, 1.b, or 1.c, PacifiCorp, then including TEG and Peabody, shall
hold PWCC as it is constituted separate and apart on the following conditions:
a. PWCC shall be held separate and apart and shall be operated independently of
PacifiCorp, TEG and Peabody (meaning here and hereinafter, PacifiCorp, TEG and Peabody
excluding PWCC and excluding all personnel connected with PWCC as of the date this Hold
Separate Agreement was signed) except to the extent that PacifiCorp, TEG and Peabody must
exercise direction and control over PWCC to assure compliance with this Hold Separate
Agreement or the Consent Order and except as otherwise permitted by this Agreement.
b. PacifiCorp, TEG and Peabody shall maintain the marketability, viability, and
competitiveness of PWCC and shall not cause or permit the destruction, removal, wasting,
deterioration, or impairment of PWCC except in the ordinary course of business and except
for ordinary wear and tear, and it shall not sell, transfer, encumber (other than in the
normal course of business), or otherwise impair the marketability, viability or
competitiveness of PWCC.
c. PacifiCorp shall appoint a knowledgeable person from among the top management of
PWCC to manage and maintain PWCC on a day to day basis during the term of the Hold
Separate Agreement. The manager shall have exclusive management and control of PWCC, and
shall manage PWCC independently of PacifiCorp's other businesses.
d. PacifiCorp shall elect a new five-person board of directors of PWCC ("New
Board") prior to, or concurrently with, transfer of the TEG shares to PacifiCorp.
PacifiCorp may elect the directors to the New Board; provided, however, that such New
Board shall consist of at least two outside directors neither previously nor currently
employed by PacifiCorp; one officer of PWCC; and a maximum of two PacifiCorp financial
officers or comparable knowledgeable persons who have no direct involvement with
PacifiCorp's electric operations. Except for the PacifiCorp directors, PacifiCorp shall
not permit any officer, employee, or agent of PacifiCorp, TEG or Peabody also to be an
officer, employee or agent of PWCC. Each director shall enter into a confidentiality
agreement agreeing to be bound by the terms and conditions set forth in Attachment A,
appended to this Hold Separate Agreement. The Board shall meet monthly during the course
of the Hold Separate Agreement, and as otherwise necessary. Meetings of the Board during
the term of the Hold Separate Agreement shall be audio recorded, and the recording shall
be retained for two (2) years after the termination of the Hold Separate Agreement.
e. All material transactions, out of the ordinary course of business and not precluded
by Paragraph 4 hereof, shall be subject to a majority vote of the PWCC Board of Directors.
f. PacifiCorp, TEG and Peabody shall not exercise direction or control over, or
influence directly or indirectly, PWCC; provided, however, that PacifiCorp may exercise
such direction and control over PWCC as is necessary to assure compliance with this Hold
Separate Agreement, the Consent Order and with all applicable laws and as otherwise
provided in this Hold Separate Agreement.
g. Except as required by law, and except to the extent that necessary information is
exchanged in the course of defending investigations or litigation, obtaining legal advice,
complying with this Hold Separate Agreement or the Consent Order or negotiating agreements
to divest assets, PacifiCorp, TEG and Peabody shall not receive or have access to, or the
use of, any material confidential information of PWCC, nor shall PWCC receive or have
access to, or the use of, any material confidential information about PacifiCorp. Peabody
may receive on a regular basis from PWCC aggregate financial information necessary and
essential to allow PacifiCorp to file financial reports, tax returns, and personnel
reports. Any such information that is obtained pursuant to this subparagraph shall be used
only for the purposes set forth in this subparagraph. ("Material confidential
information," as used herein, means competitively sensitive or proprietary
information, including, but not limited to, information concerning sales of coal to PWCC
customers, not independently known to:
1. PacifiCorp, with regard to PWCC from sources other than PWCC or its employees or
Directors; or
2. The Directors or PWCC or its employees, with regard to PacifiCorp, from sources
other than PacifiCorp.)
h. Except as is permitted by this Hold Separate Agreement, the PacifiCorp Directors
shall not receive any PWCC material confidential information and shall not disclose any
such information obtained through their involvement with PWCC to PacifiCorp or use it to
obtain any advantage for PacifiCorp. The PacifiCorp Directors shall participate in matters
that come before the Board only for the limited purpose of considering any capital
investment of over $500,000, approving any proposed budget and operating plans,
authorizing dividends and repayment of loans consistent with the provisions hereof,
reviewing material transactions, and carrying out PacifiCorp's responsibilities under the
Hold Separate Agreement and the Consent Agreement. Except as permitted by the Hold
Separate Agreement, the PacifiCorp Directors shall not participate in any matter, or
attempt to influence the votes of the other directors on the PWCC Board with respect to
matters that would involve a conflict of interest between PacifiCorp and PWCC.
i. PacifiCorp shall not remove members of the PWCC Board except for cause. PacifiCorp
shall not change the composition of the management of PWCC, except that the Board of
Directors shall have the power to remove management employees for unsatisfactory
performance or for cause.
j. PacifiCorp and Peabody shall take such actions as are reasonably necessary to
provide tax, accounting, data processing and other support services to PWCC as are
provided by Peabody as of the date of this Hold Separate Agreement. Such PacifiCorp or
Peabody personnel must retain and maintain all material confidential information relating
to PWCC on a confidential basis and, except as is permitted by this Hold Separate
Agreement, such persons shall be prohibited from providing, discussing, exchanging,
circulating, or otherwise furnishing any such information to or with any other person
whose employment involves any other PacifiCorp business. Such PacifiCorp or Peabody
personnel shall also execute a confidentiality agreement prohibiting the disclosure of any
material confidential information concerning PWCC.
k. PWCC shall be staffed with sufficient employees to maintain the viability and
competitiveness of PWCC, which employees shall be PWCC employees and may also be hired
from sources other than PacifiCorp. Each management employee of PWCC shall execute a
confidentiality agreement prohibiting the disclosure of any material confidential
information concerning PWCC. During the period of this Hold Separate Agreement,
PacifiCorp, TEG and Peabody shall not make offers of employment to, or transfer the
position of, any person employed by PWCC or Peabody in connection with PWCC or whose
principal duties, during the year prior to the date of the signing of this Hold Separate
Agreement, related to the management or operation of PWCC (except for any employee of PWCC
whose employment by PWCC is terminated without such employee's consent). Nothing in this
agreement shall be construed to prevent any employee of TEG or Peabody whose principal
duties, during the year prior to the date of the signing of this Hold Separate Agreement,
related to the management or operation of PWCC, from continuing in such a position during
the period of the Hold Separate Agreement. PacifiCorp and Peabody shall encourage and
facilitate employment by PWCC of such employees; shall not offer any incentive to such
employees to decline employment with PWCC or accept other employment in PacifiCorp, or
Peabody; and shall remove any impediments that may deter such employees from accepting
employment with PWCC.
l. PacifiCorp shall circulate to the management employees of PWCC and appropriately
display a notice of this Hold Separate Agreement and Consent Order in the form attached
hereto as Attachment A.
m. PacifiCorp shall ensure that PWCC has sufficient working capital to operate at a
level not less than one hundred twenty percent (120%) of the rate of operation in effect
during the twelve (12) months preceding the date of this Hold Separate Agreement. Peabody
shall have the right to cause PWCC to declare dividends on a monthly basis equal to PWCC's
excess cash not required for such working capital.
n. The PWCC Directors shall serve at the cost and expense of PacifiCorp. PacifiCorp
shall indemnify the PWCC Directors against any losses or claims of any kind that might
arise out of their involvement under this Hold Separate Agreement, except to the extent
that such losses or claims result from misfeasance, gross negligence, willful or wanton
acts, or bad faith by the PWCC Directors.
o. The PWCC Directors shall have access to and be informed about all companies who
inquire about, seek or propose to buy PWCC.
p. Notwithstanding the provisions of Paragraph 4.g., companies who undertake a due
diligence process in the course of negotiations to purchase PWCC, or any part thereof, may
be accompanied and assisted by either or both of the PacifiCorp Directors, in addition to
appropriate PWCC employees selected by the PWCC Board of Directors. The PacifiCorp
Directors may delegate tasks relating to such due diligence to attorneys, accountants
and/or other financial employees of PacifiCorp who are not directly engaged in the
PacifiCorp electric generation operations; provided, however, that such PacifiCorp
employees, accountants and attorneys shall execute a confidentiality agreement prohibiting
the disclosure of any PWCC material confidential information.
5. Except as otherwise provided in the Consent Order or this Hold Separate Agreement,
as required for the purpose of tax return preparation, compliance with any law or request
from a revenue authority, or to the extent that necessary information is exchanged in the
course of evaluating and consummating the Acquisition, defending government investigations
or litigation, or negotiating to dispose of assets, PacifiCorp shall ensure that from and
after the Control Date, PWCC shall not provide, disclose or otherwise make available to
PacifiCorp, TEG or Peabody any material confidential information. Provided, however, that
nothing in this Agreement shall limit or prohibit PacifiCorp and PWCC from doing business
on a nondiscriminatory basis with each other or with any entity in which PacifiCorp or
PWCC has an interest.
6. To the extent that this Hold Separate Agreement or the Consent Order requires
PacifiCorp to take, or prohibits PacifiCorp from taking, certain actions that otherwise
may be required or prohibited by contract, PacifiCorp shall abide by the terms of this
Hold Separate Agreement and the Consent Order and shall not assert as a defense such
contract rights in a civil penalty action brought by the Commission to enforce the terms
of this Hold Separate Agreement or the Consent Order.
7. Should the Federal Trade Commission seek in any proceeding to compel PacifiCorp
(meaning here and hereinafter PacifiCorp including PWCC) to divest itself of PWCC or to
seek any other injunctive or equitable relief for any failure to comply with the Consent
Order or this Hold Separate Agreement, or in any way relating to the Acquisition,
PacifiCorp shall not raise any objection based upon the expiration of the applicable
Hart-Scott-Rodino Antitrust Improvements Act waiting period or the fact that the
Commission has permitted the Acquisition. PacifiCorp also waives all rights to contest the
validity of this Agreement.
8. For the purpose of determining or securing compliance with this Agreement, subject
to any legally recognized privilege, and upon written request with reasonable notice to
PacifiCorp made to its principal office, PacifiCorp (and after the Control Date,
PacifiCorp including TEG and Peabody) shall permit any duly authorized representative or
representatives of the Commission:
a. During the office hours of PacifiCorp, and in the presence of counsel, access to all
facilities and access to inspect and copy all books, ledgers, accounts, correspondence,
memoranda, and other records and documents in the possession or under the control of
PacifiCorp relating to compliance with this Agreement; and
b. Upon five (5) days notice to PacifiCorp and without restraint or interference from
it, to interview officers or employees of PacifiCorp who may have counsel present,
regarding any such matters.
9. This Hold Separate Agreement shall terminate and shall have no further effect thirty
(30) days after PacifiCorp gives the Commission written notification that it has abandoned
the Acquisition and withdraws its notification under 16 C.F.R. § 803.1 with respect
to the Acquisition.
10. This Hold Separate Agreement shall not be binding on the Commission until it is
approved by the Commission.
Dated: February __, 1998
PACIFICORP
By:
FEDERAL TRADE COMMISSION
By:
Debra A. Valentine
General Counsel
ATTACHMENT A
NOTICE OF DIVESTITURE AND
REOUIREMENT FOR CONFIDENTIALITY
PacifiCorp and The Energy Group PLC ("TEG") have entered into a Consent
Agreement and Agreement to Hold Separate with the Federal Trade Commission
("Commission") relating to the divestiture of the Peabody Western Coal Company
("PWCC"). Until after the Commission's Order becomes final and PWCC is divested,
PWCC must be managed and maintained as a separate, ongoing business, independent of all
other TEG businesses. All competitive information relating to PWCC must be retained and
maintained by the persons involved in PWCC on a confidential basis and such persons shall
be prohibited from providing, discussing, exchanging, circulating, or otherwise furnishing
any such information to or with any other person whose employment or agency involves any
other TEG business. Similarly, all such persons involved in any other TEG business shall
be prohibited from providing, discussing, exchanging, circulating or otherwise furnishing
competitive information about such business to or with any person whose employment or
agency involves PWCC.
Any violation of the Consent Agreement or the Agreement to Hold Separate, incorporated
by reference as part of the Consent Order, may subject TEG to civil penalties and other
relief as provided by law. |