As filed with the Securities and Exchange Commission on January 28, 2000
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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PSEG Energy Holdings Inc.
(Exact name of registrant as specified in its charter)
New Jersey 6719 22-2983750
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of incorporation Industrial Classification Identification
or organization) Code Number) Number)
80 Park Plaza-T22
Newark, New Jersey 07102-4194
(973) 456-3581
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
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Bruce E. Walenczyk
Vice President-Finance
80 Park Plaza-T22
Newark, New Jersey 07102-4194
(973) 456-3581
(Name, address, including zip code and telephone number, including area code, of
agent for service)
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Copies to:
James T. Foran, Esquire
Associate General Counsel
Public Service Enterprise Group Incorporated
80 Park Plaza
P.O. Box 1171
Newark, New Jersey 07101-1171
(973) 430-7000
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462 (b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462 (c)
under the Securities Act, please check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. [ ]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount of
Class of Securities to be Price Per Offering Registration
to be Registered Registered Unit Price Fee (1)
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10% Senior Notes due 2009 ... $400,000,000 100% $400,000,000 $105,600
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(1) The registration fee has been calculated pursuant to rule 457(f)(2) under
the Securities Act. The proposed maximum aggregate offering price
represents the total value of the bonds being exchanged under this
registration statement.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8 (a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8 (a),
may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not an offer to buy these securities in any
state where the offer or sale is not permitted.
Subject to completion, dated January 28, 2000.
PROSPECTUS
[PSEG ENERGY HOLDINGS LOGO]
$400,000,000
PSEG Energy Holdings Inc.
Offer to Exchange
10% Senior Notes due 2009
Which have been registered under the Securities Act
For Any and All Outstanding
10% Senior Notes due 2009
Which have not been so registered
THE EXCHANGE OFFER
We previously issued $400,000,000 aggregate principal amount of our 10%
Senior Notes due 2009. These original notes were not registered under the
Securities Act of 1933. We are now offering you the opportunity to exchange
these original notes for an equal amount of our 10% senior notes due 2009, which
are registered under the Securities Act of 1933.
TERMS OF THE EXCHANGE OFFER
o The exchange offer expires at _____ p.m., Eastern Standard Time, on
______________, unless extended.
o The terms of the exchange notes are substantially identical to the
original notes, except that the exchange notes are registered under the
Securities Act and the transfer restrictions and registration rights
applicable to the original notes do not apply to the exchange notes. When
we talk about notes, we mean original notes and exchange notes.
o All original notes that are validly tendered and not validly withdrawn
will be exchanged.
o Tenders of original notes may be withdrawn at any time prior to expiration
of the exchange offer.
o Holders of original notes do not have any appraisal or dissenters' rights
in connection with the exchange offer. Original notes not exchanged in the
exchange offer will remain outstanding and will continue to be entitled to
the benefits of the indenture. Upon consummation of the exchange offer,
holders of the original notes, except under limited circumstances, will
have no further exchange or registration rights under the registration
rights agreement.
o We do not intend to apply for listing of the exchange notes on any
securities exchange or to arrange for them to be quoted on any quotation
system.
o The only conditions to completing the exchange offer are that the exchange
offer does not violate applicable law or any applicable interpretation of
the staff of the Securities and Exchange Commission and no injunction,
order or decree has been issued which would prohibit, prevent or
materially impair our ability to proceed with the exchange offer.
o We will not receive any proceeds from the exchange offer.
o We do not believe that the exchange of the original notes will be a
taxable event for U.S. federal income tax purposes but you should see
"Certain Federal Income Tax Considerations" on page 80 for more
information.
Please see "Risk Factors" beginning on page 13 for a discussion of factors
you should consider in connection with the exchange offer.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the exchange notes, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We may amend or supplement this prospectus from time to time by filing
amendments or supplements as required. You should read this entire prospectus
(and accompanying letter of transmittal and related documents) and any
amendments or supplements carefully before deciding to exchange your securities.
The date of this prospectus is _______, 2000.
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TABLE OF CONTENTS
Page
----
Where to Find More Information ............................................ 3
Forward-Looking Statements ................................................ 4
Prospectus Summary ........................................................ 5
Risk Factors .............................................................. 13
Use of Proceeds ........................................................... 18
Capitalization ............................................................ 18
Selected Consolidated Financial Data ...................................... 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................... 20
Business .................................................................. 34
Management ................................................................ 56
The Exchange Offer ........................................................ 58
Description of Exchange Notes ............................................. 66
Certain Federal Income Tax Considerations ................................. 80
Plan of Distribution ...................................................... 82
Legal Opinions ............................................................ 83
Experts ................................................................... 83
Independent Auditors' Report .............................................. F-1
Consolidated Financial Statements ......................................... F-2
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to exchange only the notes offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
2
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WHERE TO FIND MORE INFORMATION
In connection with the exchange offer, we have filed with the Securities
and Exchange Commission a registration statement under the Securities Act,
relating to the exchange notes to be issued in the exchange offer. As permitted
by SEC rules, this prospectus omits information included in the registration
statement. For a more complete understanding of this exchange offer, you should
refer to the registration statement, including its exhibits.
The public may read and copy any reports or other information that we file
with the SEC at the SEC's public reference room, Room 1024 at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, or at the SEC's regional offices
located at 7 World Trade Center, 13th Floor, New York, New York 10048, and Suite
1400, 500 West Madison Street, Chicago, Illinois 60661. The public may obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. Our SEC filings are also available to the public from commercial
document retrieval services and at the web site maintained by the SEC at
http://www.sec.gov. You may also obtain a copy of the exchange offer
registration statement at no cost by writing or telephoning us at the following
address:
PSEG Energy Holdings Inc.
80 Park Plaza-T22
Newark, New Jersey 07102-4194
(973) 456-3581
Attention: Treasurer
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information that is different
from this information.
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FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, certain of the
matters discussed in this prospectus constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties which could
cause actual results to differ materially from those anticipated. Such
statements are based on management's beliefs as well as assumptions made by and
information currently available to management. When used herein, the words
"will", "anticipate", "intend", "estimate", "believe", "expect", "plan",
"hypothetical", "potential", variations of such words and similar expressions
are intended to identify forward-looking statements. PSEG Energy Holdings Inc.
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In addition to any assumptions and other factors referred to specifically
in connection with such forward-looking statements, factors that could cause
actual results to differ materially from those contemplated in any
forward-looking statements include, among others, the following, some of which
relate to PSEG Energy Holdings Inc. indirectly as a result of their potential
impact upon Public Service Enterprise Group Incorporated (PSEG) or Public
Service Electric and Gas Company: deregulation and the unbundling of energy
supplies and services and the establishment of a competitive energy marketplace
for products and services; managing rapidly changing wholesale energy trading
operations in conjunction with electricity and gas production, transmission and
distribution systems; managing foreign investments and electric generation and
distribution operations in locations outside of the traditional utility service
territory; political and foreign currency risks; an increasingly competitive
energy marketplace; sales retention and growth potential in a mature Public
Service Electric and Gas Company service territory; ability to complete
development or acquisition of current and future investments; partner and
counterparty risk; exposure to market price fluctuations and volatility of fuel
and power supply, power output and marketable securities, among others; ability
to obtain adequate and timely rate relief, cost recovery, and other necessary
regulatory approvals; ability of Public Service Electric and Gas Company to
obtain securitization proceeds; federal, state and foreign regulatory actions;
regulatory oversight with respect to utility and non-utility affiliate relations
and activities; Year 2000 issues; operating restrictions, increased costs and
construction delays attributable to environmental regulations; nuclear
decommissioning and the availability of reprocessing and storage facilities for
spent nuclear fuel; licensing and regulatory approvals necessary for nuclear and
other operating stations; the ability to economically and safely operate nuclear
facilities in which PSEG has an interest in accordance with regulatory
requirements; environmental concerns; and market risk and debt and equity market
concerns associated with these issues.
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PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this prospectus.
The Company
PSEG Energy Holdings Inc. (Energy Holdings) participates in three
energy-related lines of business through its wholly-owned subsidiaries: PSEG
Global Inc. (Global), PSEG Resources Inc. (Resources) and PSEG Energy
Technologies Inc. (Energy Technologies). Our objective is to pursue investment
opportunities in the rapidly changing worldwide energy markets where our
technical, market and regulatory expertise can be applied to create economic
value.
We focus on (i) supplying reliable, competitively priced energy in high
growth markets, (ii) providing capital to finance energy-related assets and
(iii) supplying products and services designed to assist customers in efficient
energy utilization.
o Global develops, acquires, owns and operates electric generation and
distribution facilities and engages in power production and distribution,
including wholesale and retail sales of electricity, in selected domestic
and international markets. Global has ownership interests in 19 operating
generation projects totaling 2,002 megawatts (MW) (535 MW net) located in
the United States, Argentina, China and Venezuela. Global has ownership
interests in eighteen projects totaling 4,832 MW (2,252 MW net) in
construction or advanced development that are located in the United
States, Argentina, Venezuela, India, Tunisia, China, Italy and Poland. Of
Global's generation projects in operation, construction or advanced
development, 1,292 MW net, or 46%, are located in the United States.
Global is actively involved, through its joint ventures, in managing the
operations of eight operating generation projects and will be actively
involved in managing the operations of five of the projects in
construction or advanced development. Global owns interests in six
distribution companies, which as of September 30, 1999, totaled
approximately 70% of Global's assets, providing electricity to
approximately 2.7 million customers in Argentina, Brazil, Chile and Peru.
Global is actively involved in managing the operations of these
distribution companies. Global was established in 1984 and as of September
30, 1999 had assets of approximately $1.7 billion.
Deregulation and privatization of energy markets, as well as growth in
electricity demand throughout the world, have provided the opportunity for
Global to expand the scope of its operations. Global has concentrated its
development activities in markets in which it believes most of the new
worldwide electric generating capacity will be installed in the next five
years: China, India, the Middle East, Latin America and selected regions
in the United States. Global has established a presence in these high
growth markets which allows it to access and better evaluate potential
investment opportunities. Prior to proceeding with a particular
investment, Global's strategy is to conduct a multi-faceted analysis of
the resident country, potential partners and transaction economics.
Initially, countries are evaluated to assess the social, political,
economic and regulatory environment. To mitigate certain risks, Global
next seeks to identify partners with complementary skills and
capabilities. Global then focuses on projects which may present potential
synergies with existing projects or future investments. As a result,
Global has developed or acquired interests in electric generation and/or
distribution facilities in the United States, Argentina, Brazil, Chile,
Peru, Venezuela, and China.
o Resources provides energy infrastructure financing in developed countries.
Resources invests in energy-related financial transactions and manages a
diversified portfolio of more than 60 investments including leveraged
leases, leveraged buyout (LBO) funds, limited partnerships and marketable
securities. As of September 30, 1999, Resources had approximately $1.6
billion invested in leveraged leases representing approximately 84% of
Resources' assets. Approximately 79% of these leveraged leases are with
lessees that have investment grade
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credit ratings. Leveraged leases of energy-related plant and equipment
totaled approximately $1.1 billion or 70% of the lease portfolio and 59%
of Resources' assets. The remainder of Resources' portfolio is further
diversified across a wide spectrum of asset types and business sectors,
including leveraged leases of aircraft, railcars, real estate and
industrial equipment, limited partnership interests in project finance
transactions, LBO and venture funds and marketable securities. All of
Resources' investments since 1992 have been energy-related. Resources was
established in 1985 and as of September 30, 1999 had assets of
approximately $1.9 billion.
Worldwide deregulation of energy markets is also creating investment
opportunities for Resources. As energy assets are privatized or sold,
purchasers require significant amounts of acquisition capital. In addition
to traditional bank and debt financing, leveraged leases provide
purchasers with a source of funding for such acquisitions. Resources, as
an experienced participant in the leveraged lease financing market for
energy assets, is actively pursuing domestic and international
opportunities to invest in these highly structured transactions. Resources
has invested in 15 energy-related leveraged lease transactions since 1997.
When evaluating leveraged lease investments, Resources focuses on
mitigating credit risk and eliminating operating and currency risk.
Resources seeks to invest in transactions where its expertise and
understanding of the inherent risks and operating characteristics of
energy assets provide a competitive advantage. Resources expects to
continue to concentrate its investment activity on energy-related
financial transactions.
o Energy Technologies is an energy management company that constructs,
operates and maintains heating, ventilating and air conditioning (HVAC)
systems for, and provides energy-related engineering, consulting and
mechanical contracting services to, industrial and commercial customers in
the Northeastern and Middle Atlantic United States. Energy Technologies
also supplies electricity and gas to industrial, commercial and
residential customers. Energy Technologies was established in 1997 and as
of September 30, 1999 had assets of approximately $232 million.
Deregulation of the domestic electric and gas utility industries is
presenting opportunities for Energy Technologies in the energy services
business in the Northeastern and Middle Atlantic United States. Since its
formation in 1997, Energy Technologies has acquired seven companies
involved in the engineering, construction, installation, operation and
maintenance of energy equipment and HVAC systems. Energy Technologies
plans to grow its existing operations and utilize the recently acquired
companies to deliver expanded energy-related services and products,
including gas and electricity, to existing and new customers. We will
assess the growth prospects and opportunities for Energy Technologies'
business before committing additional capital.
We are a direct, wholly-owned subsidiary of Public Service Enterprise
Group Incorporated (PSEG) and an affiliate of Public Service Electric and Gas
Company, a public utility operating in New Jersey, which is also a wholly-owned
subsidiary of PSEG. We provide administrative support for our subsidiaries and
financing on the basis of a combined credit profile. In addition, PSEG Capital
Corporation (PSEG Capital), our subsidiary, has provided debt financing in the
form of Medium-Term Notes (MTNs), with maturities ranging from 2000 to 2003, in
an aggregate principal amount of $650 million to our subsidiaries on the basis
of a net worth maintenance agreement with PSEG. As of September 30, 1999, PSEG
had approximately $1.6 billion of equity (including retained earnings of
approximately $258 million) invested in our company.
Recent Activities
Energy Holdings
o In October 1999, we issued $400 million of 10% senior notes due 2009.
These are the original notes being offered for exchange. Interest is
payable semi-annually on April 1 and October 1,
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commencing April 1, 2000. The net proceeds from the sale were used for the
repayment of short-term debt outstanding under our revolving credit
facilities.
o In June 1999, PSEG invested approximately $200 million in additional
equity in our company, which we used to repay short-term debt incurred in
connection with recent investment activity.
Global
o In November 1999, Global announced that it plans to build a combined heat
and power plant of 220 MW of electricity and 500 MW of thermal energy
capacity utilizing circulating fluidized bed technology in Poland. Total
project cost is estimated at $320 million with commercial operation
targeted for late 2002.
o In October 1999, Global closed on the acquisition of a 70% interest in
Prisma 2000, a power project development company in Italy specializing in
renewable energy. Prisma 2000 currently has approximately 550 MW of power
projects either in development or under construction consisting of
biomass, hydro and gas powered production. Global's investment
requirements over the next two years are expected to be approximately $80
million.
o In October 1999, Global and its 50% partner completed a $312 million
project financing of a 1,000 MW gas-fired combined-cycle electric
generation facility in Guadalupe County in south central Texas. The plant
is under construction and commercial operation is expected to commence in
late 2000. Global's equity investment, including loans and guarantees, for
its 50% interest is expected to be approximately $193 million.
o In September 1999, Global and a partner closed on a tender offer for
outstanding publicly traded shares of Luz del Sur, a Peruvian distribution
company. The number of shares tendered constitutes 22.5% of the shares of
Luz del Sur. At the time of the tender, Global and its partner already
owned 37% of Luz del Sur which was acquired in June 1999 as part of the
acquisition of Chilquinta Energia, S.A. discussed below. The tender was
offered exclusively in Peru. Global and its partner also purchased an
additional 25% of Luz del Sur upon closing of the tender offer. Global's
investment in connection with these transactions was approximately $108
million.
o In August 1999, Global sold its 50% partnership interest in the Newark Bay
cogeneration facility, a 137 MW gas-fired combined-cycle plant in Newark,
NJ. Global recognized an after-tax gain of approximately $40 million as a
result of this transaction.
o In August 1999, Global and its partners closed project financing for the
Rades facility, a 471 MW gas-fired combined-cycle electric generation
facility in Rades, Tunisia. Construction of the facility began in August
1999 and is expected to be completed in the summer of 2001. Total cost is
anticipated to be approximately $261 million. Global's equity investment,
including contingencies, for its 35% interest is expected to be
approximately $27 million.
o As part of a comprehensive review of assets and development activities,
Global recognized an after-tax write-down in the third quarter of 1999 of
$27 million, related to equity investments in generation facilities in
California and in development companies in Thailand and the Philippines.
o In June 1999, Global and a partner acquired 90.23% of Chilquinta Energia,
S.A., a distribution company providing electric and gas service to more
than one million customers in Chile and Peru. In January 2000, Global and
its partner completed the purchase of an additional 9.75% of the shares of
Chilquinta Energia, S.A., increasing their total holdings to 99.98%.
Global's 50% share of the acquisition was funded with approximately $268
million of equity and $160 million of debt that is non-recourse to Global
and to us.
o In June 1999, Global and a partner closed project financing for Parana, an
830 MW gas-fired combined-cycle electric generation facility to be
constructed in San Nicolas, Argentina. The new facility is adjacent to the
Central Termica San Nicolas (CTSN) power plant, a 650 MW facility also
owned by Global and its partner. Construction began in August 1999 and is
expected to be
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completed by 2001 at a total cost of approximately $448 million. Global's
equity investment for its 33% interest is expected to be approximately $86
million, including contingencies.
o In May 1999, Global acquired a 63% interest in Tri-Sakthi Energy Private
Limited, a company which is developing and will own a 525 MW coal-fired
electric generation facility to be constructed in Ennore, Tamil Nadu,
India. Upon scheduled completion in 2003, Global will be the operator of
the plant. The total project cost is expected to be approximately $630
million. Global's equity investment, including contingencies, is expected
to be approximately $180 million.
o In April 1999, Global announced the formation of a joint venture which
plans to construct and operate three gas-fired electric generation
facilities, the Turboven project, with total installed capacity of 200 MW
and associated distribution systems to serve, under contract, industrial
customers in Venezuela. Global expects the first two facilities, which are
in construction, to be operational in early 2000 with the third facility
in service in late 2001. Total cost is estimated to be approximately $140
million. Global's equity investment, including contingencies, for its 50%
interest is expected to be approximately $70 million.
o In December 1998, Global and its partners closed project financing for the
PPN project, a 330 MW gas-fired combined-cycle electric generation
facility currently in construction and located in Pillaiperumanallur,
Tamil Nadu, India. Upon scheduled completion in 2001, Global will be the
operator of the plant. Total project cost is estimated to be approximately
$328 million. Global holds a 20% equity interest in the project and its
equity investment, including contingencies, is expected to be
approximately $32 million.
Resources
o In November 1999, Resources sold its interest in a limited partnership and
received cash proceeds of $11 million and recognized an after-tax gain of
approximately $1 million.
o In 1999, Resources negotiated the early termination of three leveraged
leases and received cash proceeds of $125 million and recognized an
after-tax gain of approximately $14 million.
o In 1999, Resources invested approximately $379 million in six leveraged
lease transactions of energy-related assets, including gas distribution
networks in the Netherlands, cogeneration plants in Germany, a generation
facility in the United States and a liquefied natural gas storage facility
in the United States.
o In 1999, Resources, through its investment in an LBO fund, received cash
distributions of approximately $99 million resulting in an after-tax gain
of approximately $23 million from the fund's sale of a portion of its
equity interests.
Energy Technologies
o In 1999, Energy Technologies acquired six mechanical, HVAC and building
service contractors in New Jersey, Rhode Island and Virginia for a total
cost of approximately $62 million. The latest acquisition was completed in
December 1999.
o In January 1999, PSEG contributed the capital stock of Public Service
Conservation Resources Corporation (PSCRC), an energy management
contractor with a book value of $57 million, to Energy Technologies.
We are incorporated under the laws of the State of New Jersey. Our
headquarters and principal executive offices are located at 80 Park Plaza,
Newark, NJ 07102 and our telephone number is (973) 456-3581.
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Summary of the Exchange Offer
The Exchange Offer ............. We are offering to exchange an aggregate of
$400,000,000 principal amount of exchange
notes for $400,000,000 of original notes. The
original notes may be exchanged only in
multiples of $1,000.
Issuance of the Original Notes . The original notes were issued and sold on
October 8, 1999 in a transaction not requiring
registration under the Securities Act.
Exchange and Registration
Rights ....................... At the time we issued the original notes, we
entered into an exchange and registration
rights agreement which obligates us to make
this exchange offer.
Required Representations ....... In order to participate in the exchange offer,
you will be required to make some
representations in a letter of transmittal,
including (1) that you are not affiliated with
us, (2) that you are not a broker-dealer who
bought your original notes directly from us,
(3) that you will acquire the exchange notes
in the ordinary course of business, and (4)
that you have not agreed with anyone to
distribute the exchange notes. If you are a
broker-dealer that purchased original notes
for your own account as part of market-making
or trading activities, you may represent to us
that you have not agreed with us or our
affiliates to distribute the exchange notes.
If you make this representation, you need not
make the representation provided for in clause
(4) above.
Resale of the Exchange Notes ... We believe that the exchange notes acquired in
this exchange offer may be freely traded
without compliance with the provisions of the
Securities Act that call for registration and
delivery of a prospectus, except as described
in the following paragraph.
If you are a broker-dealer that purchased
original notes for your own account as part of
market-making or trading activities, you must
deliver a prospectus when you sell exchange
notes. We have agreed in the exchange and
registration rights agreement relating to the
original notes to allow you to use this
prospectus for this purpose during the 180-day
period following completion of the exchange
offer (subject to our right under some
circumstances to restrict your use of this
prospectus).
Accrued Interest on the
Original Notes ............... The exchange notes will bear interest at an
annual rate of 10%. Any interest that has
accrued on the original notes before their
exchange in this exchange offer will be
payable on the exchange notes on the first
interest payment date after the conclusion of
this exchange offer.
Procedures for Exchanging
Notes ........................ The procedures for exchanging original notes
involve notifying the exchange agent before
the expiration date of the exchange offer of
your intention to do so. The procedures for
properly making notification are described in
this prospectus under the heading "The
Exchange Offer - Procedures for Tendering
Original Notes".
Expiration Date ................ ____ p.m., Eastern Standard Time, on
_____________, 2000, unless the exchange offer
is extended.
Exchange Date .................. We will notify the exchange agent of the date
of acceptance of the original notes for
exchange.
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Withdrawal Rights .............. If you tender your original notes for exchange
in this exchange offer and later wish to
withdraw them, you may do so at any time
before ____ p.m., Eastern Standard Time, on
the day this exchange offer expires.
Acceptance of Original
Notes and Delivery of
Exchange Notes .............. We will accept any original notes that are
properly tendered for exchange before ____
p.m., Eastern Standard Time, on the day this
exchange offer expires. The exchange notes
will be delivered promptly after expiration of
this exchange offer.
Tax Consequences ............... You should not incur any material federal
income tax consequences from your
participation in this exchange offer.
Use of Proceeds ................ We will not receive any cash proceeds from
this exchange offer.
Exchange Agent ................. First Union National Bank is serving as the
exchange agent. Its address and telephone
number are provided in this prospectus under
the heading "The Exchange Offer -- Exchange
Agent".
Effect on Holders of
Original Notes ............... Any original notes that remain outstanding
after this exchange offer will continue to be
subject to restrictions on their transfer.
After this exchange offer, holders of original
notes will not (with limited exceptions) have
any further rights under the exchange and
registration rights agreement. Any market for
original notes that are not exchanged could be
adversely affected by the conclusion of this
exchange offer.
Summary of the Exchange Notes
This exchange offer applies to $400,000,000 aggregate principal amount of
the original notes. The terms of the exchange notes will be essentially the same
as the original notes, except that the exchange notes will not contain language
restricting their transfer, and holders of the exchange notes generally will not
be entitled to further registration rights under the exchange and registration
rights agreement. The exchange notes issued in the exchange offer will evidence
the same debt as the outstanding original notes, which they will replace, and
both the original notes and the exchange notes are governed by the same
indenture.
Securities Offered ............. $400,000,000 principal amount of 10% Senior
Notes due 2009 which have been registered
under the Securities Act.
Interest Payment Dates ......... April 1 and October 1, commencing April 1,
2000.
Stated Maturity Date ........... October 1, 2009
Optional Redemption ............ The exchange notes will be redeemable at our
option in whole or in part at any time, at a
redemption price equal to the greater of (i)
100% of the principal amount of the exchange
notes to be redeemed, and (ii) the sum of the
present values of the principal amount and the
remaining scheduled payments of interest on
the exchange notes to be redeemed from the
redemption date to October 1, 2009 discounted
on a semiannual basis (assuming a 360-day year
consisting of 30-day months) at a specified
Treasury Rate plus 40 basis points, plus, in
either case, accrued interest thereon to the
date of redemption. See "Description of
Exchange Notes -- Optional Redemption".
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Ranking ........................ The exchange notes will be senior unsecured
obligations and will rank equally with our
senior unsecured indebtedness. See "Selected
Consolidated Financial Data". Since we are a
holding company, the exchange notes will be
structurally subordinated to any indebtedness
and other liabilities of our subsidiaries.
Cross Acceleration ............. The exchange notes will be subject to the
acceleration of their maturity in the event of
the acceleration of the indebtedness under our
revolving credit facilities and certain other
indebtedness as described under "Description
of Exchange Notes -- Events of Default and
Remedies".
Ratings ........................ The exchange notes have been assigned ratings
of "BBB-" by Standard & Poor's Ratings Group
and "Ba1" by Moody's Investors Service, Inc.
A security rating is not a recommendation to
buy, sell or hold securities and may be
subject to revision or withdrawal at any time
by the assigning rating agency. Each rating
should be evaluated independently of any other
rating.
Sinking Fund ................... None.
Limitation on Liens ............ Energy Holdings and its subsidiaries may not
incur any liens to secure indebtedness without
providing that the exchange notes will be
equally and ratably secured with such
indebtedness. These restrictions do not apply
to liens granted by subsidiaries (other than
"Material Subsidiaries" as defined on page 69)
in connection with project financings, liens
securing indebtedness not exceeding 10% of
Consolidated Net Tangible Assets (as defined
on page 69) and other specified liens.
Limitation on Sale and
Leasebacks ................... Energy Holdings and its subsidiaries may not
enter into sale and leaseback transactions
unless it would be permissible to incur
indebtedness secured by a lien under the
foregoing Limitation on Liens covenant in the
amount of the indebtedness associated with
that sale and leaseback transaction or unless
the proceeds of that sale and leaseback were
applied to the reduction of indebtedness. Also
not restricted is indebtedness associated with
sale and leaseback transactions not exceeding
10% of Consolidated Net Tangible Assets.
Change of Control .............. Upon a "Change of Control" (as defined on page
68), a holder of exchange notes may require us
to repurchase that holder's exchange notes, in
whole or in part, at 101% of the principal
amount of the exchange notes, plus accrued
interest. A Change of Control will not be
deemed to have occurred if, after giving
effect to circumstances otherwise constituting
a Change of Control, the exchange notes are
rated "BBB-" or better by Standard & Poor's
Ratings Group and "Ba1" or better by Moody's
Investors Service, Inc.
Form ........................... The exchange notes will be represented by one
or more permanent global exchange notes in
fully registered form without interest
coupons, deposited with the Trustee as
custodian for, and registered in the name of,
a nominee of DTC, except in certain limited
circumstances described in this prospectus.
11
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth a summary of our consolidated financial
data for the periods indicated. The summary consolidated financial data for the
nine months ended September 30, 1999 and 1998 was derived from the unaudited
financial statements of Energy Holdings and its consolidated subsidiaries which,
in the opinion of management, have been prepared in a manner consistent with the
audited financial statements for the three years ended December 31, 1998.
Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of results which may be expected for the full year. The
summary consolidated financial data for the years ended December 31, 1998, 1997
and 1996 was derived from the audited consolidated financial statements of
Energy Holdings and its consolidated subsidiaries. This summary data is
qualified in its entirety by the more detailed information and financial
statements, including the notes thereto. The consolidated financial data for the
years ended December 31, 1995 and 1994 was derived from financial statements
originally audited by our independent auditors. These statements were restated
to conform with audited financial statements for the three years ended December
31, 1998 for certain transactions, but have not been re-audited by our
independent auditors.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Thousands of Dollars except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Total Revenues .......................... $ 416,323 $ 283,622 $ 439,524 $ 341,590 $ 302,800 $ 250,100 $ 197,829
Total Operating Expenses ................ 253,814 179,987 248,702 196,462 171,169 122,520 67,388
Earnings Before Interest and
Taxes (EBIT) ......................... 190,994 109,769 189,547 145,813 131,631 127,540 130,441
Interest, Net of Capitalized
Interest ............................. 65,517 67,930 91,987 72,363 58,261 56,894 61,799
Taxes ................................... 44,427 16,407 30,160 25,816 24,968 23,594 20,608
Income from Discontinued
Operations (A) ....................... -- -- -- -- 24,238 35,036 12,512
Net Income .............................. 81,653 26,961 69,204 47,873 72,662 82,401 60,923
Preferred Stock Dividends (B) ........... 18,755 11,226 17,478 598 -- -- --
Earnings Available for
Common Stock ......................... $ 62,898 $ 15,735 $ 51,726 $ 47,275 $ 72,662 $ 82,401 $ 60,923
<CAPTION>
As of September 30, As of December 31,
------------------- --------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total Assets ............................ $3,878,460 $3,168,530 $3,022,956 $2,122,413 $2,295,803 $2,114,100
Total Liabilities ....................... 1,052,456 958,528 962,954 817,889 634,502 526,770
Total Capitalization:
Debt (F) ............................. 1,471,544 967,673 1,275,103 627,381 707,819 624,935
Common Equity (B) .................... 845,260 733,129 709,899 677,143 953,482 962,395
Preferred Equity (B) ................. 509,200 509,200 75,000 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Stockholder's Equity ........... 1,354,460 1,242,329 784,899 677,143 953,482 962,395
---------- ---------- ---------- ---------- ---------- ----------
Total Capitalization .................... $2,826,004 $2,210,002 $2,060,002 $1,304,524 $1,661,301 $1,587,330
<CAPTION>
Nine Months
Ended September 30, Years Ended December 31,
------------------- ------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Earnings to Fixed Charges (C) ......................... 2.8x 1.7x 2.1x 1.4x 3.0x 2.4x 2.3x
EBIT to Interest Expense (D) (H) ..................... 2.9x 1.6x 2.1x 2.0x 2.3x 2.2x 2.1x
EBITDA to Interest Expense (E) (H) ................... 3.1x 2.0x 2.4x 2.2x 2.5x 2.5x 2.4x
Consolidated Debt to Capitalization (F) ............... 52% 41% 44% 62% 48% 43% 39%
Consolidated Recourse Debt to Recourse
Capitalization (G) ................................ 45% 33% 38% 57% 48% 43% 39%
</TABLE>
- ----------
(A) For a discussion of discontinued operations, see Note 19 in Notes to
Consolidated Financial Statements.
(B) All outstanding preferred and common stock is owned by PSEG.
(C) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this ratio, earnings include net income before income
taxes and all fixed charges (net of capitalized interest) and exclude
non-distributed income from investments in which Energy Holdings'
subsidiaries have less than a 50% interest. Fixed charges include interest
expense, expensed or capitalized, amortization of premiums, discounts or
capitalized expenses related to indebtedness and an estimate of interest
expense included in rental expense.
(D) EBIT is defined as operating income plus other income. For this ratio,
interest expense is net of capitalized interest of $2.5 million and $0.8
million for the nine months ended September 30, 1999 and 1998,
respectively, and $1.2 million, $5.1 million, $1.3 million, $1.9 million
and $4.5 million for the years ended December 31, 1998, 1997, 1996, 1995
and 1994, respectively.
(E) EBITDA is defined as operating income plus other income plus depreciation
and amortization. For this ratio, interest expense is net of capitalized
interest as noted above.
(F) Includes all recourse debt and debt that is non-recourse to Global and
Energy Holdings which is consolidated on the balance sheet.
(G) Excludes consolidated debt that is non-recourse to Global and Energy
Holdings of $343 million, $228 million, $220 million and $232 million as
of September 30, 1999, September 30, 1998, December 31, 1998 and December
31, 1997, respectively. There was no consolidated non-recourse debt
outstanding prior to 1997.
(H) Information concerning EBIT and EBITDA is presented here not as a measure
of operating results, but rather as a measure of ability to service debt.
EBITDA should not be construed as an alternative to operating income or
cash flow from operating activities, each as determined according to
generally accepted accounting principles.
- --------------------------------------------------------------------------------
12
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making a
decision to tender original notes for exchange notes. Each of the
following factors could have a material adverse effect on our business,
financial condition, results of operations, net cash flows and/or our
ability to service our outstanding indebtedness, including the notes.
Holding company structure could affect our ability to service debt
The notes will be our exclusive obligations and not the obligations of any
of our subsidiaries or affiliates. Our obligations with respect to the notes
will not be supported by PSEG.
We are a holding company with no material assets other than the stock of
our subsidiaries and project affiliates. Accordingly, all of our operations are
conducted by our subsidiaries and project affiliates which are separate and
distinct legal entities that have no obligation, contingent or otherwise, to pay
any amounts when due on the notes or to make any funds available to us to pay
such amounts. As a result, the notes will effectively be subordinated to all
existing and future debt, trade creditors, and other liabilities of our
subsidiaries and project affiliates and our rights of and hence the rights of
our creditors (including holders of the notes) to participate in any
distribution of assets of any such subsidiary or project affiliate upon its
liquidation or reorganization or otherwise would be subject to the prior claims
of such subsidiary's or project affiliate's creditors, except to the extent that
our claims as a creditor of such subsidiary or project affiliate may be
recognized.
We depend on our subsidiaries' and project affiliates' cash flow and our
access to capital in order to service our indebtedness, including the notes. The
project-related debt agreements of subsidiaries and project affiliates generally
restrict their ability to pay dividends, make cash distributions or otherwise
transfer funds to us. Such restrictions may include achieving and maintaining
certain financial performance or debt coverage ratios, absence of events of
default, or priority in payment of other current or prospective obligations.
Global has financed certain of its generation and distribution facilities
using non-recourse project financing. Each non-recourse project financing is
structured to be repaid out of cash flow provided by the facility or facilities.
In the event of a default under a financing agreement which is not cured, the
lenders would generally have rights to the facility and any related assets. In
the event of foreclosure after a default, Global may lose its equity in the
facility or may not be entitled to any cash that the facility may generate.
Although such a default will not cause a default with respect to the exchange
notes, it may materially affect our ability to service our outstanding
indebtedness, including the exchange notes.
Our control of our minority investments is limited
Our ability to control our minority investments is limited. As such, we
and Global are unable unilaterally to cause dividends or distributions to be
made to us or Global from these operations.
Minority investments may involve risks not otherwise present for
investments made solely by us and our subsidiaries, including the possibility
that a partner, majority investor or co-venturer might become bankrupt, may have
different interests or goals, and may take action contrary to our instructions,
requests, policies or business objectives. Also, if no party has full control,
there could be an impasse on decisions. In addition, certain investments of
Resources are managed by unaffiliated entities which limits Resources' ability
to control the activities or performance of such investments and managers.
We may not have access to sufficient capital in the amounts and at the times
needed
Equity capital for our subsidiaries' projects and our investments have
been provided by equity contributions from PSEG, internally-generated cash flow
and borrowings by ourselves and PSEG Capital. We require continued access to
debt capital from outside sources in order to assure the success of our future
projects and acquisitions. Our ability to arrange financing on a non-recourse
basis
13
<PAGE>
and the costs of capital depend on numerous factors including, among other
things, general economic and market conditions, the availability of credit from
banks and other financial institutions, investor confidence, the success of
current projects and the quality of new projects.
We can give no assurances that our current and future capital structure or
financial condition will permit access to bank and debt capital markets. We also
will require capital from PSEG, the availability of which is not assured since
it is dependent upon our performance and that of PSEG's other subsidiaries. As a
result, there is no assurance that we will be successful in obtaining financing
for our projects and acquisitions or funding the equity commitments required for
such projects and acquisitions in the future.
We cannot assure sufficient cash flow to service the notes
As of September 30, 1999, we had total debt of $1.1 billion, excluding
consolidated non-recourse debt appearing on our balance sheet. We can give no
assurances that our projects and investments will generate sufficient cash to
service our outstanding indebtedness, including the notes.
Under the existing instruments governing our debt, including the Indenture
and our bank credit agreements, as well as the agreement governing debt of PSEG
Capital, debt may be accelerated or otherwise be subject to repayment upon
certain events of default or if we undergo a change of control. If any such
event were to occur, we may not have sufficient capital to pay holders of the
Notes in full the amounts due under the notes or to repay any notes tendered
pursuant to the Change of Control Offer described under "Description of Exchange
Notes -- Certain Covenants -- Repayment of Notes Upon a Change of Control".
A substantial amount of our business is conducted outside the United States
A key component of our business strategy is the development, acquisition
and operation of projects outside the United States. The economic and political
conditions in certain countries where Global has interests or in which Global is
or could be exploring development or acquisition opportunities present risks
that may be different than those found in the United States including: delays in
permitting and licensing, construction delays and interruption of business, as
well as risks of war, expropriation, nationalization, renegotiation or
nullification of existing contracts and changes in law or tax policy. Changes in
the legal environment in foreign countries in which Global may develop or
acquire projects could make it more difficult to obtain non-recourse project
refinancing on suitable terms and could impair Global's ability to enforce its
rights under agreements relating to such projects.
Operations in foreign countries also present risks associated with
currency exchange and convertibility, inflation, and repatriation of earnings.
In certain countries in which Global may develop or acquire projects in the
future, economic and monetary conditions and other factors could affect Global's
ability to convert its cash distributions to United States Dollars or other
freely convertible currencies or to move funds offshore from such countries.
Furthermore, the central bank of any such country may have the authority in
certain circumstances to suspend, restrict or otherwise impose conditions on
foreign exchange transactions or to approve distributions to foreign investors.
Although Global generally seeks to structure power purchase contracts and other
project revenue agreements to provide for payments to be made in, or indexed to,
United States Dollars or a currency freely convertible into United States
Dollars, its ability to do so in all cases may be limited. See "-- Credit,
currency, commodity and financial market risks may have an adverse impact".
Our project development, construction and acquisition activities may not be
successful
Our project development and acquisition activities require significant
expenditures for evaluation, engineering, permitting, legal and financial
advisory services, some of which may not result in increased revenues. For
example, we may choose not to proceed with development or may not be successful
in competitive bids despite having incurred significant expenses in connection
with potential investments.
The construction, expansion or refurbishment of a power generation or
distribution facility may involve equipment and material supply interruptions,
labor disputes, unforeseen engineering,
14
<PAGE>
environmental and geological problems and unanticipated cost overruns. The
proceeds of any insurance, vendor warranties or performance guarantees may not
be adequate to cover lost revenues, increased expenses or payments of liquidated
damages. In addition, some power purchase contracts permit the customer to
terminate the related contract, retain security posted by the developer as
liquidated damages or change the payments to be made to the subsidiary or the
project affiliate in the event certain milestones, such as commencing commercial
operation of the project, are not met by specified dates. If project start-up is
delayed and the customer exercises these rights, the project may be unable to
fund principal and interest payments under its project financing agreements.
Our operating performance may fall below projected levels
The risks associated with operating power generation facilities include
the breakdown or failure of equipment or processes, labor disputes and fuel
supply interruption, each of which could result in performance below expected
capacity levels. Operation below expected capacity levels may result in lost
revenues, increased expenses, higher maintenance costs and penalties, in which
case there may not be sufficient cash available to service project debt. In
addition, many of Global's generation projects rely on a single fuel supplier
and a single customer for the purchase of the facility's output under a long
term contract. While Global generally has liquidated damage provisions in its
contracts, the default by a supplier under a fuel contract or a customer under a
power purchase contract could adversely affect the facility's cash generation
and ability to service project debt.
Countries in which Global owns and operates electric and gas distribution
facilities may impose financial penalties if reliability performance standards
are not met. In addition, inefficient operation of the facilities may cause lost
revenue and higher maintenance expenses, in which case there may not be
sufficient cash available to service project debt.
Credit, currency, commodity and financial market risks may have an adverse
impact
Adverse changes in commodity prices, equity security prices, interest
rates and foreign currency exchange rates and non-performance or non-payment by
counterparties could lower revenues, raise costs and adversely affect our
financial condition, results of operations and net cash flows and our ability to
service our outstanding indebtedness, including the notes.
We seek to manage risk consistent with our business plans and prudent
practices. For further discussion of financial risk, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Qualitative and Quantitative Disclosures About Market Risk".
We and our subsidiaries are subject to substantial competition
We and our subsidiaries are subject to substantial competition in the
United States and in international markets from independent power producers,
domestic and multi-national utility generators, fuel supply companies,
engineering companies, equipment manufacturers and affiliates of other
industrial companies. Restructuring of worldwide energy markets, including the
privatization of government-owned utilities and the sale of utility-owned
assets, is creating opportunities for and substantial competition from
well-capitalized entities which may adversely affect our ability to make
investments on favorable terms and achieve our growth objectives. Increased
competition could contribute to a reduction in prices offered for power and
could result in lower returns which may affect our ability to service our
outstanding indebtedness, including the notes.
Deregulation may continue to accelerate the current trend toward
consolidation among domestic utilities and could also result in the splitting of
vertically-integrated utilities into separate generation, transmission and
distribution businesses. As a result, additional significant competitors could
become active in the independent power industry. Resources faces competition
from numerous well-capitalized investment and finance company affiliates of
banks, utilities and industrial companies. Energy Technologies faces substantial
competition from energy marketers, utilities and their affiliates, and HVAC and
mechanical contractors.
15
<PAGE>
Governmental regulation affects many of our operations
We and the projects in which we invest are subject to a number of complex
and stringent environmental and other laws and regulations, including those
which regulate the construction or permitting of new facilities and operation of
existing facilities. Compliance is costly and could delay project operation and
the receipt of revenues.
The Public Utility Holding Company Act of 1935 (PUHCA) regulates public
utility holding companies and their subsidiaries. PSEG has claimed an exemption
from regulation by the SEC as a registered holding company under PUHCA, except
for the provision which relates to the acquisition of 5% or more of the voting
securities of an electric or gas utility company. Actions of PSEG and its
subsidiaries could cause PSEG and its subsidiaries to no longer be exempt from
regulation under PUHCA. If PSEG were no longer exempt from PUHCA, PSEG and its
subsidiaries would be subject to additional regulation by the SEC with respect
to financing and investing activities, including the amount and type of
non-utility investments.
Global's electric and gas distribution facilities are rate-regulated
enterprises. Rates charged to customers are established by governmental
authorities and are currently sufficient to cover all operating costs and
provide a return. We can give no assurances that future rates will be
established at levels sufficient to cover such costs and provide a return on our
investment. In addition, future rates may not be adequate to provide cash flow
to pay principal and interest on our subsidiaries' and affiliates' debt and to
enable such subsidiaries and affiliates to comply with the terms of debt
agreements.
We are subject to control by PSEG
As our sole stockholder, PSEG has the power to control the election of the
directors and all other matters submitted for stockholder approval and has
control over our management and affairs. In circumstances involving a conflict
of interest between PSEG, as the sole stockholder, on the one hand, and our
creditors, on the other, we can give no assurances that PSEG would not exercise
its power to control us in a manner that would benefit PSEG to the detriment of
the holders of the notes. PSEG's subsidiary, Public Service Electric and Gas
Company, has policies in place, pursuant to applicable law, to ensure that its
ratepayers are protected from affiliate transactions that may be adverse to the
ratepayers' interests.
The indenture imposes no limitations on our ability to pay dividends or to
make other payments to PSEG or on our ability to enter into transactions with
PSEG or our other affiliates. PSEG could decide to no longer continue to hold
our stock, although failure to maintain ownership of a majority of the common
stock could trigger the change of control repurchase provisions in the
Indenture.
As a wholly-owned subsidiary of PSEG, we and our subsidiaries are included
in PSEG's consolidated tax filing for federal income tax purposes. Generally,
the leveraged lease transactions in which Resources invests provide tax losses
in the early years of their term that offset taxable income from other PSEG
subsidiaries. We and our subsidiaries are parties to a tax allocation agreement
with PSEG under which we and each of our subsidiaries is responsible to pay its
share of taxes due or entitled to receive tax benefits earned. If PSEG were to
modify the tax allocation agreement, our future investment strategy might
change, including Resources' possible curtailment of new leveraged lease
investments. However, we do not believe that our ability to service our debt,
including the notes, would be impaired if a modification to the tax allocation
agreement were to occur, although no assurances can be given. For additional
discussion, see "Business -- Regulation".
United States utility industry is undergoing fundamental change
The electric and gas utility industries in the United States are
undergoing major transformations and are experiencing competitive pressures.
Regulatory changes, including the unbundling of energy supply and services and
the establishment of a competitive energy marketplace for products and services
are affecting our company, PSEG and Public Service Electric and Gas Company.
The New Jersey Board of Public Utilities (BPU) has been conducting
proceedings pursuant to the New Jersey Energy Master Plan (Energy Master Plan)
and the New Jersey Electric Discount and
16
<PAGE>
Energy Competition Act (Energy Competition Act), and is expected to issue a
series of orders that will decide both generic issues for the energy industry,
including affiliate standards (including fair competition and affiliate
transactions), and company specific matters for utilities under its
jurisdiction, including Public Service Electric and Gas Company. On August 24,
1999, the BPU issued its Final Decision and Order (Final Order) in the matter of
Public Service Electric and Gas Company's rate unbundling, stranded costs and
restructuring filings. Appeals filed on behalf of several Public Service
Electric and Gas Company customers are pending at the Appellate Division of the
New Jersey Superior Court.
As a result of the 1992 focused audit of PSEG's non-utility businesses
(Focused Audit), PSEG agreed, among other things, that it would not permit its
non-utility assets to exceed 20% of PSEG's consolidated assets without prior
notice to the BPU and that it would make a good faith effort to eliminate its
net worth maintenance agreement with PSEG Capital by 2003. At September 30,
1999, such assets were approximately 21% of consolidated assets and PSEG
Capital's outstanding debt was $650 million, with maturities in 2003 or sooner.
Regulatory oversight by the BPU to assure that there is no harm to utility
ratepayers from PSEG's non-utility assets is expected to continue. As a result
of the final outcome of the Energy Master Plan proceedings and accounting
impacts resulting from the deregulation of the generation of electricity and the
unbundling of the utility business, we do not believe that the Focused Audit
provision regarding BPU notification if PSEG's non-utility assets exceed 20% of
its consolidated assets remains appropriate and believe that modifications will
be required.
The Final Order noted that PSEG's non-regulated assets would likely exceed
20% of total PSEG assets once the utility's generating assets were transferred
to a non-regulated subsidiary, as provided in the Final Order. The Final Order
also noted that, due to significant changes in the industry and, in particular,
PSEG's corporate structure as a result of the Final Order, modifications to or
relief from the Focused Audit order might be warranted. Further, Public Service
Electric and Gas Company was directed to file a petition with the BPU to
maintain the existing regulatory parameters or to propose modifications to the
Focused Audit order no later than the end of the first quarter of 2000.
We believe that these issues will be satisfactorily resolved, although no
assurances can be given. We also believe that if still required, we are capable
of eliminating PSEG support of PSEG Capital debt within the time period set
forth in the Focused Audit. Inability to achieve satisfactory resolution of
these matters could impact our future relative size and financing and,
accordingly, future prospects, including financial condition, results of
operations and cash flows. See "Business -- Regulation".
There is no public market for the exchange notes
There is currently no trading market for the exchange notes and we do not
intend to list the exchange notes on any securities exchange or to arrange for
them to be quoted on any quotation system. We can give no assurances as to the
liquidity of any market that may develop for the exchange notes, the ability of
investors to sell the exchange notes or the price at which investors would be
able to sell their exchange notes.
Consequences of failure to exchange original notes -- original notes remain
subject to transfer restrictions
Any original notes that remain outstanding after this exchange offer will
continue to be subject to restrictions on their transfer. After this exchange
offer, holders of original notes will not (with limited exceptions) have any
further rights under the exchange and registration rights agreement. Any market
for original notes that are not exchanged could be adversely affected by the
conclusion of this exchange offer.
17
<PAGE>
Exchange offer procedures--late deliveries of notes and other required documents
could prevent a holder from exchanging Its notes
Holders are responsible for complying with all exchange offer procedures.
Issuance of exchange notes in exchange for original notes will only occur upon
completion of the procedures described in this prospectus under the heading "The
Exchange Offer--Procedures for Tendering Original Notes". Therefore, holders of
original notes who wish to exchange them for exchange notes should allow
sufficient time for timely completion of the exchange procedure. We are not
obligated to notify you of any failure to follow the proper procedure.
Restrictions applicable to participating broker-dealers--if you are a
broker-dealer, your ability to transfer the notes may be restricted
A broker-dealer that purchased original notes for its own account as part
of market-making or trading activities must deliver a prospectus when it sells
the exchange notes. Our obligation to make this prospectus available to
broker-dealers is limited. Consequently, we cannot guarantee that a proper
prospectus will be available to broker-dealers wishing to resell their exchange
notes.
USE OF PROCEEDS
The exchange offer is intended to satisfy some of our obligations under
the exchange and registration rights agreement. We will not receive any cash
proceeds from the issuance of the exchange notes in the exchange offer. In
exchange for issuing the exchange notes as described in this prospectus, we will
receive an equal principal amount of original notes, which will be canceled.
The net proceeds from the sale of the original notes were used for the
repayment of short-term debt outstanding under revolving credit facilities.
Borrowings under the revolving credit facilities were used to refinance
investments and acquisitions and for general corporate purposes. The applicable
per annum interest rate on these facilities is LIBOR plus 1.375%.
CAPITALIZATION
The following table sets forth Energy Holdings' consolidated
capitalization as of September 30, 1999 and as adjusted to reflect the sale of
the original notes.
As of September 30, 1999
---------------------------
Actual As Adjusted
---------- -----------
(Thousands of Dollars)
Short-term debt (A) ................ $ 597,639 $ 197,639
Long-term debt ..................... 873,905 1,273,905
---------- ----------
Total debt ......................... 1,471,544 1,471,544
---------- ----------
Total common equity (B) ............ 845,260 845,260
Total preferred equity (B) ......... 509,200 509,200
---------- ----------
Total stockholder's equity ......... 1,354,460 1,354,460
---------- ----------
Total capitalization ............... $2,826,004 $2,826,004
========== ==========
- ----------
(A) Short-term debt includes the portion of long-term debt due within one
year.
(B) Owned by PSEG.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial data
for the periods indicated. The selected consolidated financial data for the nine
months ended September 30, 1999 and 1998 was derived from the unaudited
financial statements of Energy Holdings and its consolidated subsidiaries which,
in the opinion of management, have been prepared in a manner consistent with the
audited financial statements for the three years ended December 31, 1998.
Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of results which may be expected for the full year. The
selected consolidated financial data for the years ended December 31, 1998, 1997
and 1996 was derived from the audited consolidated financial statements of
Energy Holdings and its consolidated subsidiaries. This selected data is
qualified in its entirety by the more detailed information and financial
statements, including the notes thereto. The consolidated financial data for the
years ended December 31, 1995 and 1994 was derived from financial statements
originally audited by our independent auditors. These statements were restated
to conform with audited financial statements for the three years ended December
31, 1998 for certain transactions, but have not been re-audited by our
independent auditors.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
-------------------- --------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(Thousands of Dollars except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Total Revenues ................................. $416,323 $283,622 $439,524 $341,590 $302,800 $250,100 $197,829
Total Operating Expenses ....................... 253,814 179,987 248,702 196,462 171,169 122,520 67,388
Earnings Before Interest and
Taxes (EBIT) ................................ 190,994 109,769 189,547 145,813 131,631 127,540 130,441
Interest, Net of Capitalized
Interest .................................... 65,517 67,930 91,987 72,363 58,261 56,894 61,799
Taxes .......................................... 44,427 16,407 30,160 25,816 24,968 23,594 20,608
Income from Discontinued
Operations (A) .............................. -- -- -- -- 24,238 35,036 12,512
Net Income ..................................... 81,653 26,961 69,204 47,873 72,662 82,401 60,923
Preferred Stock Dividends (B) .................. 18,755 11,226 17,478 598 -- -- --
Earnings Available for
Common Stock ................................ $ 62,898 $ 15,735 $ 51,726 $ 47,275 $ 72,662 $ 82,401 $ 60,923
<CAPTION>
As of September 30, As of December 31,
------------------- ----------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total Assets ............................. $3,878,460 $3,168,530 $3,022,956 $2,122,413 $2,295,803 $2,114,100
Total Liabilities ........................ 1,052,456 958,528 962,954 817,889 634,502 526,770
Total Capitalization:
Debt (F) .............................. 1,471,544 967,673 1,275,103 627,381 707,819 624,935
Common Equity (B) ..................... 845,260 733,129 709,899 677,143 953,482 962,395
Preferred Equity (B) .................. 509,200 509,200 75,000 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Stockholder's Equity ............ 1,354,460 1,242,329 784,899 677,143 953,482 962,395
---------- ---------- ---------- ---------- ---------- ----------
Total Capitalization ..................... $2,826,004 $2,210,002 $2,060,002 $1,304,524 $1,661,301 $1,587,330
<CAPTION>
Nine Months
Ended September 30, Years Ended December 31,
------------------- ----------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Earnings to Fixed Charges (C) ....................................... 2.8x 1.7x 2.1x 1.4x 3.0x 2.4x 2.3x
EBIT to Interest Expense (D) (H) .................................... 2.9x 1.6x 2.1x 2.0x 2.3x 2.2x 2.1x
EBITDA to Interest Expense (E) (H) .................................. 3.1x 2.0x 2.4x 2.2x 2.5x 2.5x 2.4x
Consolidated Debt to Capitalization (F) ............................. 52% 41% 44% 62% 48% 43% 39%
Consolidated Recourse Debt to Recourse
Capitalization (G) .............................................. 45% 33% 38% 57% 48% 43% 39%
</TABLE>
- ----------
(A) For a discussion of discontinued operations, see Note 19 in Notes to
Consolidated Financial Statements.
(B) All outstanding preferred and common stock is owned by PSEG.
(C) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this ratio, earnings include net income before income
taxes and all fixed charges (net of capitalized interest) and exclude
non-distributed income from investments in which Energy Holdings'
subsidiaries have less than a 50% interest. Fixed charges include interest
expense, expensed or capitalized, amortization of premiums, discounts or
capitalized expenses related to indebtedness and an estimate of interest
expense included in rental expense.
(D) EBIT is defined as operating income plus other income. For this ratio,
interest expense is net of capitalized interest of $2.5 million and $0.8
million for the nine months ended September 30, 1999 and 1998,
respectively, and $1.2 million, $5.1 million, $1.3 million, $1.9 million
and $4.5 million for the years ended December 31, 1998, 1997, 1996, 1995
and 1994, respectively.
(E) EBITDA is defined as operating income plus other income plus depreciation
and amortization. For this ratio, interest expense is net of capitalized
interest as noted above.
(F) Includes all recourse debt and debt that is non-recourse to Global and
Energy Holdings which is consolidated on the balance sheet.
(G) Excludes consolidated debt that is non-recourse to Global and Energy
Holdings of $343 million, $228 million, $220 million and $232 million as
of September 30, 1999, September 30, 1998, December 31, 1998 and December
31, 1997, respectively. There was no consolidated non-recourse debt
outstanding prior to 1997.
(H) Information concerning EBIT and EBITDA is presented here not as a measure
of operating results, but rather as a measure of ability to service debt.
EBITDA should not be construed as an alternative to operating income or
cash flow from operating activities, each as determined according to
generally accepted accounting principles.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview and Future Outlook
The electric and gas utility industries in the United States and around
the world continue to experience significant change. Deregulation,
restructuring, privatization and consolidation are creating opportunities for
Energy Holdings. At the same time, competitive pressures are increasing.
PSEG has positioned Energy Holdings as a major part of its planned growth
strategy. In order to achieve this strategy, Global will focus on generation and
distribution investments within targeted high-growth regions. A significant
portion of Global's growth is expected to occur internationally due to the
current and anticipated growth in electric capacity required in certain regions
of the world. Resources will utilize its market access, industry knowledge and
transaction structuring capabilities to expand its energy-related financial
investment portfolio. Energy Technologies will continue to provide HVAC
contracting and other energy-related services to industrial and commercial
customers in the Northeastern and Middle Atlantic United States. However, Energy
Holdings will assess the growth prospects and opportunities for Energy
Technologies' business before committing additional capital.
Global derives its revenues and earnings from independent power production
and the distribution of electricity. Earnings will, therefore, be impacted by
the ability of Global and its partners to successfully manage the generation and
distribution facilities now in operation and to bring those projects in
construction and development into operation. The acquisition of additional
facilities and projects will be another important factor for future earnings
growth at Global. Future revenue growth will be partially offset by the
reduction of revenue, beginning in 2000, from certain generation facilities in
California due to lower energy prices to be paid by the purchaser under the
energy contracts associated with the plants. Two-thirds of such California
facilities in which Global has an interest will change from fixed energy pricing
by December 31, 2000, with the remainder changing in 2001. Based on current
energy prices, Global's share of annual income before income taxes from these
facilities is projected to decrease by approximately $30 million to $35 million
when all such contracts reflect the lower energy pricing. Actual revenues over
the remaining contract terms, which begin to expire in 2011, will depend on a
number of factors, including the actual energy prices in effect in the
applicable future periods. As a result of the projected revenue loss, Global
recognized an after-tax write down of $27 million in its equity investment in
these facilities in the third quarter of 1999. Energy Holdings expects revenue
from projects in operation, construction and development to offset this revenue
shortfall, however, no assurances can be given. Since Global operates in foreign
countries, it may also be affected by changes in foreign currency exchange rates
versus the United States Dollar. Generally, revenues associated with rate
regulated distribution assets in relatively limited competitive environments are
more stable and predictable than revenues from generation assets.
Revenues from Resources' existing leveraged lease investments are based
upon fixed rates of return. Generally, the leveraged lease transactions in which
Resources invests provide tax losses in the early years of their term that
offset taxable income from other PSEG subsidiaries. As a wholly-owned subsidiary
of PSEG, Energy Holdings and its subsidiaries are included in PSEG's
consolidated tax filing group for federal income tax purposes. Energy Holdings
and its subsidiaries are parties to a tax allocation agreement with PSEG under
which each of Energy Holdings and its subsidiaries is responsible to pay its
share of taxes due or entitled to receive tax benefits earned. If PSEG were to
modify the tax allocation agreement, Energy Holdings' future investment strategy
might change, including Resources' possible curtailment of new leveraged lease
investments. Energy Holdings does not believe that its ability to service its
debt, including the Notes, would be impaired if a modification to the tax
allocation agreement were to occur, although no assurances can be given.
Resources' revenues in the future are expected to be derived primarily from
energy-related leveraged leases with a decrease in contribution from LBO funds,
other partnership investments and non-energy-related leveraged leases. Revenues
from Resources' investments in LBO funds are subject to the share price
performance and dividend income of the securities held by these funds.
20
<PAGE>
Having acquired seven companies involved in the installation and
maintenance of energy equipment and HVAC services for a total of $73 million
since its formation in 1997, Energy Technologies' present strategic focus is to
consolidate its position as an energy services, electricity and gas supplier in
the Northeastern and Middle Atlantic United States. Earnings at Energy
Technologies are expected to be modest as it grows existing operations and
integrates recent acquisitions.
Access to sufficient capital from external sources and from PSEG as well
as the availability of cash flow and earnings from Global and Resources will be
essential to fund future investments. Energy Holdings continuously evaluates its
plans and capital structure in light of available investment opportunities and
seeks to maintain the flexibility to pursue strategic growth investments.
Depending upon the level of investment activity, Energy Holdings anticipates
obtaining additional equity contributions from PSEG as necessary to maintain its
growth objectives and targeted capital structure. The availability of equity
capital from PSEG cannot be assured since it is dependent upon the performance
and needs of Energy Holdings and PSEG's other subsidiaries.
Results of Operations
Energy Holdings' earnings for the nine months ended September 30, 1999 and
1998 were $63 million and $16 million, respectively. The increases in Energy
Holdings' earnings were primarily due to the better overall performance of
Resources, Global and Energy Technologies. The improvements were attributable
largely to Resources which benefited from an upturn in the equities markets as
compared to the same period in 1998. In addition, Energy Holdings' results
reflect Global's gain from the sale of its interest in a Newark, New Jersey
cogeneration facility, partially offset by write-downs on other investments in
Global's portfolio.
Additionally, higher earnings for the nine months ended September 30, 1999
were primarily due to investment gains in Resources' financial investment
portfolio and income from new capital leases. Improved revenue at Global was
partially offset by higher expenses associated with project development. Energy
Technologies' results improved due to higher revenues from recent acquisition
activities partially offset by higher operating expenses.
Energy Holdings' earnings for the years ended December 31, 1998 and 1997
were $52 million and $47 million, respectively. The increase in Energy Holdings'
earnings was primarily due to an increase in Global's revenues resulting from
the performance of the 1997 investments in three distribution companies in Latin
America. In addition, Energy Technologies' performance improved in 1998 as a
result of increased revenue and improved operating margins resulting from the
acquisition of a mechanical contracting firm in January 1998 and overall
improvement in cost management. The increase in revenues was partially offset by
a foreign currency loss of $3 million for the year ended December 31, 1998 as
compared to a $1 million gain for the same period in 1997. The higher EBIT
contributions from the subsidiaries were offset, however, by higher interest
expense incurred by Global for consolidated debt that is non-recourse to Global
and Energy Holdings, and higher financing costs incurred by Energy Holdings as a
result of increased investment activity. Energy Holdings' earnings for the year
ended December 31, 1997 also included a $10 million pre-tax charge recognized by
Enterprise Group Development Corporation (EGDC), a real estate subsidiary
conducting a controlled exit from the business, to reflect a decline in market
values of certain properties in the portfolio. While Resources' contribution to
Energy Holdings' earnings was relatively constant from 1997 to 1998, significant
gains from the LBO funds recognized in the first six months of 1998 were
partially reversed in the second half as share prices of companies in the LBO
funds declined.
Energy Holdings' earnings for the years ended December 31, 1997 and 1996
were $47 million and $73 million, respectively. Earnings for the year ended 1996
included income from discontinued operations of $24 million associated with
Energy Development Corporation (EDC), an oil and gas subsidiary, which was sold
in July 1996. Earnings from continuing operations in 1996 were $48 million.
Energy Holdings' earnings from continuing operations decreased to $47 million in
1997 primarily due to the recognition of a $10 million pre-tax charge by EGDC in
1997, and overall higher financing costs incurred by Energy Holdings resulting
from the 1997 investments in three distribution companies in Latin America.
Higher expenses were partially offset by higher revenues at Global from United
States
21
<PAGE>
generation assets and the addition of revenues from the distribution
investments. Energy Technologies' revenues improved from 1996 to 1997; however,
this was more than offset by higher start-up expenses incurred in 1997.
The results of operations for each of Energy Holdings' business segments
are explained with reference to the EBIT contribution. Energy Holdings borrows
on the basis of a combined credit profile to finance the activities of its
subsidiaries. As such, the capital structure of each of the businesses is
managed by Energy Holdings. Debt at each subsidiary is evidenced by demand notes
with Energy Holdings and PSEG Capital.
EBIT Contribution -
Energy Holdings' Nine Months
Subsidiaries Ended September 30, Years Ended December 31,
- ------------------- ------------------- --------------------------
1999 1998 1998 1997 1996
----- ----- ----- ----- -----
(Millions of Dollars)
Global ....................... $ 85 $ 55 $ 72 $ 46 $ 21
Resources .................... 111 67 135 134 128
Energy Technologies .......... (6) (12) (15) (25) (18)
Other ........................ 1 -- (2) (9) 1
----- ----- ----- ----- -----
Total Consolidated EBIT ...... $ 191 $ 110 $ 190 $ 146 $ 132
===== ===== ===== ===== =====
Global
Global's investments consist of minority ownership positions in projects
and joint ventures, none of which it consolidates. Other than fees collected for
providing operations and maintenance services, Global's revenues represent its
pro-rata ownership share of net income generated by project affiliates which is
accounted for by the equity method of accounting. The expenses in the table
below are those required to develop projects and general and administrative
expenses required to operate the business as a whole. Project operating expenses
are not reported as direct expenses of Global but are deducted to arrive at net
income of project affiliates, a pro-rata share of which is reported as revenues
by Global.
In the third quarter of 1999, Global completed a comprehensive review of
its existing assets and development activities focusing on rationalizing the
portfolio to ensure efficient capital deployment. Global's management has
decided that Global will not commit additional resources to its investments in
Thailand and the Philippines and will focus its current Asian development
activities in China. As a result, Global recognized an $8 million after-tax
write-down in the third quarter of 1999 to adjust the carrying value of these
assets to net realizable value. In addition, the substantial decline in revenue
related to energy contracts for six generation facilities in California resulted
in a third quarter after-tax write-down of Global's equity investment in such
facilities of $19 million.
Summary Results - Nine Months
Global Ended September 30, Years Ended December 31,
- ----------------- ------------------- -------------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
(Millions of Dollars)
Revenues ..................... $102 $85 $ 124 $91 $60
Expenses ..................... 45 36 51 46 39
---- --- ----- --- ---
Operating Income ............. 57 49 73 45 21
Other Income/(Loss) .......... 27 6 (1) 1 --
---- --- ----- --- ---
EBIT ......................... $ 85 $55 $ 72 $46 $21
==== === ===== === ===
Global's EBIT contribution increased $30 million for the nine months ended
September 30, 1999 as compared to the same period in 1998. The higher
contribution was due to an increase in revenues of $17 million primarily due to
higher income from the electric distribution companies in Brazil and Argentina.
This increase was augmented by additional revenues from investments made in
energy distribution companies in Chile and Peru in June 1999. The revenue growth
was partially offset by higher expenses associated with the development of
projects that are expected to provide revenue in future periods. Over the next
few years, it is anticipated that development expenses at Global will remain
relatively constant, while revenue is expected to trend higher as the
distribution companies
22
<PAGE>
increase the number of customers and the amount of energy sold and generation
projects in construction and advanced development become operational. Other
income/(loss) increased from $6 million to $27 million. This increase was
primarily due to the sale of a cogeneration facility in New Jersey which
resulted in a $69 million pre-tax gain. This gain was partially offset by a $44
million pre-tax write down of the equity investments mentioned above.
Global's EBIT contribution increased $26 million for the year ended
December 31, 1998 as compared to 1997, primarily due to increased revenues of
$33 million. Revenue improvement was primarily due to the additional revenue
from investments made in three Latin American distribution companies in 1997.
The increase in operating expenses from $46 million to $51 million was primarily
caused by higher expenses associated with the development of projects. Other
income/(loss) decreased from income of $1 million to a loss of $1 million
primarily due to a foreign currency gain of $1 million recorded in 1997 as
compared to a loss of $3 million recorded in 1998 related to the consolidated
non-recourse debt noted above. In addition, 1998 included a net pre-tax gain of
$2 million from the sale of partnership interests in four generation facilities.
Global's EBIT contribution increased $25 million for the year ended
December 31, 1997 as compared to 1996 primarily due to increased revenues of $31
million. Revenue improvement was primarily due to increased revenues of $14
million from Global's United States generation facilities resulting from higher
sales volume and lower operating costs, and the addition of $8 million in
revenues from investments made in three Latin American distribution companies in
1997. The higher revenues were partially offset by higher expenses associated
with the development of projects.
Resources
Resources derives its leveraged lease revenues primarily from rental
payments and tax benefits associated with such transactions. As a passive
investor in limited partnership project financing transactions, Resources
recognizes revenue from its pro-rata share of the income generated by these
investments. As an owner of beneficial interests in two LBO funds, Resources
recognizes revenue as the share prices of public companies in the LBO funds
fluctuate. In addition, revenue is recognized as companies in the fund
distribute dividend income through the fund to the investors and as the fund
liquidates its holdings.
Summary Results - Nine Months
Resources Ended September 30, Years Ended December 31,
- ----------------- ------------------- ------------------------
1999 1998 1998 1997 1996
---- --- ---- ---- ----
(Millions of Dollars)
Revenues ...................... $118 $75 $145 $144 $143
Expenses ...................... 7 8 10 10 15
---- --- ---- ---- ----
Operating Income .............. 111 67 135 134 128
Other Income .................. -- -- -- -- --
---- --- ---- ---- ----
EBIT .......................... $111 $67 $135 $134 $128
==== === ==== ==== ====
Resources' EBIT contribution increased $44 million for the nine month
period ended September 30, 1999 as compared to the same period in 1998 primarily
due to an increase in revenues. The increase in revenues was the result of
higher realized gains of $23 million from the sale of securities in an LBO fund
and the early termination of two leveraged lease assets. These realized gains
were partially offset by a $17 million decrease in unrealized gains recognized
from Resources' interest in LBO funds. Capital lease revenues increased by $21
million due to the addition of leveraged lease investments to the portfolio made
in the latter part of 1998. The increase in revenues was also offset by a
decrease in limited partnership revenues of $9 million. In addition, the nine
month period ended September 30, 1998 included a pre-tax, non-recurring
restructuring charge of $26 million related to two leveraged lease investments
in real estate.
Resources' EBIT contribution increased $1 million for the year ended
December 31, 1998 as compared to 1997 due to an increase in revenues. Resources'
revenues increased $1 million primarily due to an increase of $19 million in
lease revenues from the addition of leveraged lease investments to
23
<PAGE>
the portfolio and the sale of an asset subject to a leveraged lease resulting in
an $8 million gain. This increase was offset by lower revenues of $26 million
from the restructuring of two leveraged lease investments in real estate
recognized in 1998. Revenues from investments in limited partnership interests
in LBO funds and other limited partnership interests in project financing
transactions remained constant over the period.
Resources' EBIT contribution increased $6 million for the year ended
December 31, 1997 as compared to 1996 due to a reduction in operating expenses.
Expenses in 1996 included one-time marketing costs associated with the sale of
two airplanes from the leveraged lease portfolio. Resources' revenues increased
$1 million primarily due to an increase of $20 million in revenues from the
addition of leveraged lease investments to the portfolio. Revenues from a
limited partnership interest in LBO funds and other limited partnership
interests in project financing transactions decreased $19 million. In 1996,
Resources recognized higher revenue from LBO funds due to the funds' sale of
several securities in the portfolio at gains that were recognized in 1996.
Energy Technologies
Energy Technologies was formed in January 1997 from the combination of
three existing companies formerly consolidated within Resources. Financial
statements for 1996 were restated for Resources and Energy Technologies for
comparative purposes. Energy Technologies derives its revenues from the sale of
natural gas and electricity and the sale of energy related equipment and
services.
Summary Results - Nine Months
Energy Technologies Ended September 30, Years Ended December 31,
- ------------------- -------------------- --------------------------
1999 1998 1998 1997 1996
----- ----- ----- ----- -----
(Millions of Dollars)
Revenues ..................... $ 195 $ 125 $ 171 $ 104 $ 95
Expenses ..................... 201 137 186 129 113
----- ----- ----- ----- -----
Operating Loss ............... (6) (12) (15) (25) (18)
Other Income (Loss) .......... -- -- -- -- --
----- ----- ----- ----- -----
EBIT ......................... $ (6) $ (12) $ (15) $ (25) $ (18)
===== ===== ===== ===== =====
Energy Technologies' EBIT contribution improved by $6 million for the nine
months ended September 30, 1999 as compared to the same period in 1998. The
improvement was primarily due to the addition of EBIT contribution from recent
acquisitions made by Energy Technologies. Revenues increased $70 million while
related operating expenses increased $64 million primarily due to the addition
of revenue and expenses from six new mechanical, HVAC and service contracting
firms acquired in 1999.
Energy Technologies' EBIT contribution increased $10 million for the year
ended December 31, 1998 as compared to 1997 primarily due to improved operating
results of $7 million in the existing businesses. The improvement was also due
to the addition of EBIT contribution from the January 1998 acquisition of a
mechanical contracting firm that added $58 million in revenue and $55 million in
expenses.
Energy Technologies' EBIT contribution decreased $7 million for the year
ended December 31, 1997 as compared to 1996. The lower EBIT contribution was
primarily caused by higher start-up and formation expenses incurred in 1997 as
compared to 1996. Energy Technologies' revenues increased $9 million primarily
due to increased revenues from natural gas sales. Operating expenses increased
$16 million primarily due to increased cost of sales associated with natural gas
of approximately $9 million and an increase in operating expenses of $22 million
associated with formation and start-up activities. 1996 expenses included a
one-time charge of $15 million to write down a non-performing loan in the PSCRC
portfolio.
24
<PAGE>
Other
Other includes primarily EBIT from EGDC. 1998 EBIT reflects a
non-recurring charge at Energy Holdings related to taxes incurred as a result of
Energy Holdings' previous interest in EDC. In 1997, EGDC recognized a one-time
pre-tax charge of $10 million to reflect a decline in market values of certain
properties in the portfolio. See Note 19 in Notes to Consolidated Financial
Statements.
Net Financing Expenses
Overall net financing costs have increased over the reported financial
statement period primarily due to higher debt levels associated with investing
activities. While Energy Holdings increased the amounts of debt outstanding,
some benefit was derived from declining interest rates over the reported period,
reducing Energy Holdings' embedded cost of debt. Future net financing costs will
be dependent upon the level of PSEG equity investments in Energy Holdings and
the timing and extent of investment by our subsidiaries. See "-- External
Financings" for a discussion of Energy Holdings' embedded cost of debt.
Interest expense decreased $2 million for the nine months ended September
30, 1999 as compared to the same period in 1998 due to the refinancing of debt
with preferred stock during the first half of 1998. In January, June and July of
1998, Energy Holdings issued a total of $509 million of cumulative preferred
stock to PSEG, the proceeds of which were used to reduce short-term debt and
retire $75 million of preferred stock held by PSEG. As a result, preferred stock
dividends increased $8 million for the nine months ended September 30, 1999 as
compared to the same period in 1998.
Interest expense increased $20 million for the year ended December 31,
1998 as compared to 1997 primarily due to debt financing associated with
Global's acquisition of three Latin American distribution companies in 1997.
While the debt is non-recourse to Global and Energy Holdings, it is consolidated
on the balance sheet since it was issued by acquisition entities which are
majority or wholly-owned by Global. The interest expense associated with such
debt increased $16 million from 1997 to 1998. Interest expense associated with
financing activities at Energy Holdings, other than non-recourse financing,
increased $4 million from 1997 to 1998 primarily due to higher debt levels from
the 1997 investment activity. Preferred stock dividends to PSEG increased $17
million in 1998 as compared to 1997 due to the issuance of the preferred stock
noted above.
Interest expense increased $14 million for the year ended December 31,
1997 as compared to 1996 primarily due to the consolidated project financings
for Global's investments in three Latin American distribution companies in 1997.
The interest expense associated with such debt was $8 million in 1997. Interest
expense associated with financing activities at Energy Holdings, other than
non-recourse financing, increased $6 million from 1996 to 1997 primarily due to
higher debt levels associated with the above-mentioned 1997 investment activity.
Discontinued Operations
EDC was sold on July 31, 1996. Income related to EDC operations was $11
million in 1996. Additionally, a gain of $13 million was recorded on the sale.
For a discussion of discontinued operations, see Note 19 in Notes to
Consolidated Financial Statements.
Liquidity and Capital Resources
It is intended that Global and Resources provide earnings and cash flow
for long-term growth for Energy Holdings. Resources' investments are designed to
produce immediate cash flow and earnings that enable Global and Energy
Technologies to focus on longer investment horizons. During the next five years,
Energy Holdings will need significant capital to fund its planned growth.
Capital is expected to be provided from additional debt financing, equity from
PSEG and operating cash flows.
25
<PAGE>
Energy Holdings' cash provided by (used in) operating, investing and
financing activities was as follows:
Nine Months
Ended September 30, Years Ended December 31,
------------------- -------------------------
1999 1998 1998 1997 1996
----- ----- ----- ----- -----
(Millions of Dollars)
Operating Activities
Normal ........................... $ 104 $ 43 $ 50 $ 70 $ 134
Non-recurring (A) ................ -- -- -- 67 98
Discontinued Operations (B) ...... -- -- -- -- 78
----- ----- ----- ----- -----
Total Operating Activities ..... $ 104 $ 43 $ 50 $ 137 $ 310
===== ===== ===== ===== =====
Investing Activities
Normal ........................... $(783) $ (33) $(157) $(998) $ (92)
Discontinued Operations (B) .... -- -- -- -- 653
----- ----- ----- ----- -----
Total Investing Activities ... $(783) $ (33) $(157) $(998) $ 561
===== ===== ===== ===== =====
Financing Activities
Debt ........................... $ 504 $(434) $(311) $ 648 $(377)
Equity ......................... 180 419 416 75 (349)
----- ----- ----- ----- -----
Total Financing Activities ... $ 684 $ (15) $ 105 $ 723 $(726)
===== ===== ===== ===== =====
- ----------
(A) In 1997 and 1996 Resources received additional cash from income tax
benefits related to tax deductions deferred in earlier years as a result
of PSEG previously paying Alternative Minimum Tax. These benefits had been
deferred by Resources due to the overall consolidated position of the PSEG
tax filing group which did not permit the full recognition of the tax
deductions associated with the leases in the tax return. The aggregate
amount of cash received related to such deferrals that is included in the
operating cash flow noted above was approximately $67 million and $98
million in 1997 and 1996, respectively. Energy Holdings does not
anticipate that this situation will occur in the future.
(B) See Note 19 in Notes to Consolidated Financial Statements.
Operating Activities
Cash flow from operations increased $61 million for the nine months ended
September 30, 1999 as compared to the same period in 1998 due to improved cash
generation at Resources. Approximately $14 million was due to increased cash
generation from existing investments as well as the addition of cash generation
from new investments. Approximately $38 million resulted from an improvement in
cash flow from income taxes primarily caused by the termination of a leveraged
lease in the Resources portfolio in early 1998 at a taxable gain causing higher
cash payments for income taxes in 1998. Cash paid for interest expense decreased
$2 million due to the refinancing of debt with preferred stock in 1998.
Cash flow from operations decreased $87 million in 1998 as compared to
1997 primarily due to a reduction in Resources' cash flow from the leveraged
lease portfolio of $67 million related to the previous deferral of tax
deductions as a result of PSEG's consolidated tax position noted above. In
addition, cash generation at Resources was affected by the termination of a
leveraged lease at a taxable gain resulting in an increase in the current income
tax liability of approximately $38 million as noted above. Cash paid for
interest expense increased by $24 million in 1998 due to higher average debt
outstanding resulting from 1997 and 1998 investing activity partially offset by
lower interest rates. The above reductions were partially offset by overall net
improvement in cash generation by Energy Holdings' subsidiaries aggregating
approximately $38 million primarily from improvement in the cash generation of
existing investments as well as the addition of cash generation from new
investments.
Cash flow from operations decreased by $173 million in 1997 as compared to
1996. The decrease was caused by lower cash generation of $64 million from
Energy Holdings' subsidiaries primarily due to lower cash distributions realized
by Resources from limited partnership interests in LBO funds and other limited
partnership interests in financing transactions. Cash flow related to
non-recurring tax benefits described above decreased by $31 million in 1997.
Also in 1996, Energy Holdings' operating cash flow included $78 million from EDC
which was sold in July 1996.
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Investing Activities
In the nine months ended September 30, 1999, Global invested approximately
$536 million to acquire an interest in two energy distribution companies in
Chile and Peru. Of the total invested capital $160 million was financed with
project debt consolidated on the balance sheet which is non-recourse to Global
and Energy Holdings. Global also invested approximately $171 million for
construction of generation projects in the United States, Venezuela, China,
Tunisia and India. Resources invested approximately $244 million in five
leveraged leases of energy facilities: two gas distribution networks in the
Netherlands, three cogeneration plants in Germany, a generation facility in the
United States and a liquefied natural gas plant in the United States. Energy
Technologies acquired five mechanical and HVAC service contractors for a total
cost of approximately $44 million.
In 1998, Global invested approximately $74 million to acquire a 30%
interest in an electric distribution system in Argentina and a 20% interest in a
generation project in India. In addition, Global sold its partnership interests
in four generation facilities for approximately $137 million. Resources invested
approximately $251 million in five leveraged leases of energy-related assets and
received proceeds of $59 million from the exercise of an early buyout option by
the lessee in a leveraged lease. Energy Technologies acquired one mechanical
service contracting firm at a total cost of $10 million.
In 1997, Global invested in two electric distribution companies in
Argentina and one in Brazil at a total cost of approximately $721 million, of
which approximately $233 million was financed with debt consolidated on the
balance sheet which is non-recourse to Global and Energy Holdings. In addition,
Global invested approximately $133 million in generation projects primarily
located in China, Colombia and the United States. The investment in Colombia was
subsequently sold in 1998 for $55 million, which was equal to Global's equity
invested in the project. In 1997, Resources entered into four leveraged lease
transactions of power plants, one located in the United Kingdom and three in the
Netherlands, for a total cost of approximately $145 million.
In 1996, Energy Holdings sold EDC for gross proceeds of approximately $779
million. The cash was used to retire short-term debt, pay dividends to PSEG and
make additional investments.
Financing Activities
During 1999, PSEG contributed approximately $200 million of additional
equity to Energy Holdings, the proceeds of which were used to pay down
short-term debt. At September 30, 1999, Energy Holdings' consolidated capital
structure consisted of 30% common equity, 18% preferred stock and 52% debt.
Approximately $343 million, or 12%, of Energy Holdings' total invested capital
represented debt consolidated on the balance sheet that is non-recourse to
Global and Energy Holdings.
In January, June and July 1998, PSEG invested $217 million, $147 million
and $145 million, respectively, in Energy Holdings which issued to PSEG like
amounts of its 5.01%, 4.80% and 4.875% Cumulative Preferred Stock. The proceeds
were used primarily to retire debt of Energy Holdings, and to retire all of the
$75 million of 4.10% Cumulative Preferred Stock issued to PSEG in October 1997.
The average dividend rate of all Cumulative Preferred Stock is 4.9%.
In 1997, Energy Holdings, through PSEG Capital and another financing
subsidiary, Enterprise Capital Funding Corporation (Funding), issued net new
debt of $650 million primarily to fund new investment activity by Global and
Resources. In October 1997, Energy Holdings received approximately $75 million
from the issuance of 4.10% Cumulative Preferred Stock to PSEG. The proceeds were
used to partially fund Global's investment in a Brazilian distribution company.
In 1996, Energy Holdings retired $379 million of debt of PSEG Capital and
Funding and paid dividends totaling $369 million to PSEG as a result of cash
generated by the sale of EDC in July 1996. In addition, PSCRC received $20
million of equity which was used to pay down short-term debt. Due to the growth
in Energy Holdings' investment activities, no dividends on Energy Holdings'
common equity were paid in 1998 and 1997.
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Capital Requirements
Energy Holdings plans to continue the growth of Global and Resources.
Energy Holdings will assess the growth prospects and opportunities for Energy
Technologies' business before committing substantial amounts of additional
capital. From December 31, 1998 through September 30, 1999, Energy Holdings'
subsidiaries made investments totaling approximately $931 million. These
investments included leveraged lease investments totalling $244 million by
Resources and the acquisition by Global of interests in distribution companies
in Chile and Peru. Global's investment in such assets totaled $536 million,
including fees and closing costs and $160 million of debt consolidated on Energy
Holdings' balance sheet that is non-recourse to Global and Energy Holdings.
Investment expenditures for 2000 are expected to be approximately 700 million,
comprised of investments in generation and distribution facilities and projects
and leveraged lease transactions. Investment activity in 2000 will be subject to
periodic review and revision and may vary significantly depending upon the
opportunities presented. Factors affecting actual expenditures and investments
include availability of capital and suitable investment opportunities, market
volatility and local economic trends. The anticipated sources of funds for such
growth opportunities are additional equity from PSEG, cash flow from operations
and external financings, including the Original Notes.
In August 1999, Global sold its interest in the Newark Bay cogeneration
facility and received net cash proceeds of approximately $70 million. In
addition, in the third quarter of 1999, Resources received approximately $40
million from the sale of equity interests held by an LBO fund. Also in the third
quarter of 1999, Resources received net cash proceeds of approximately $76
million from early buy-outs of leveraged leases of a generation station and an
office building.
Over the next several years, Energy Holdings, certain of its project
affiliates and PSEG Capital will be required to refinance maturing debt, incur
additional debt and provide equity to fund investment activity. Any inability to
obtain required additional external capital or to extend or replace maturing
debt and/or existing agreements at current levels and reasonable interest rates
may affect Energy Holdings' financial condition, results of operations and net
cash flows.
Capital resources and investment requirements may be affected by the
outcome of the proceedings being conducted by the BPU pursuant to the Energy
Master Plan and Energy Competition Act and the requirements of the Focused
Audit. As a result of the final outcome of such proceedings and accounting
impacts resulting from the deregulation of the generation of electricity and the
unbundling of the utility business in New Jersey, Energy Holdings does not
believe that the Focused Audit provision requiring notification of the BPU if
PSEG's non-utility assets exceed 20% of its consolidated assets remains
appropriate and believes that modifications will be required. On August 24,
1999, the BPU issued its Final Order in the matter of Public Service Electric
and Gas Company's rate unbundling, stranded costs and restructuring filings.
Appeals filed on behalf of several Public Service Electric and Gas Company
customers are pending at the Appellate Division of the New Jersey Superior
Court. The Final Order directed Public Service Electric and Gas Company to file
a petition with the BPU to maintain the existing regulatory parameters or to
propose modifications to the Focused Audit order no later than the end of the
first quarter of 2000. Regulatory oversight by the BPU to ensure that there is
no harm to utility ratepayers from PSEG's non-utility investments is expected to
continue. Energy Holdings believes that these issues will be satisfactorily
resolved, although no assurances can be given. In addition, if PSEG were no
longer to be exempt under PUHCA, PSEG and its subsidiaries would be subject to
additional regulation by the SEC with respect to financing and investing
activities, including the amount and type of non-utility investments. Inability
to achieve satisfactory resolution of these matters could impact the future size
and financing activities of Energy Holdings and, accordingly, Energy Holdings'
future prospects, including financial condition, results of operations and net
cash flows. Energy Holdings does not believe that its ability to service its
debt, including the Exchange Notes, would be impaired in such circumstances,
although no assurances can be given. See "Business -- Regulation".
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External Financings
In May 1999, Energy Holdings closed on two separate senior revolving
credit facilities, with a syndicate of banks, a $495 million, five year
revolving credit and letter of credit facility and a $165 million, 364 day
revolving credit facility. These facilities replaced revolving credit facilities
totaling $450 million at Funding, a financing subsidiary of Energy Holdings
which is not expected to be active in the future.
Financial covenants contained in the new facilities include the ratio of
cash flow available for debt service (CFADS) to fixed charges. At the end of any
quarterly financial period such ratio shall not be less than 1.50x for the
12-month period then ending. As a condition of borrowing, the pro-forma CFADS to
fixed charges ratio shall not be less than 1.75x as of the quarterly financial
period ending immediately following the first anniversary of each borrowing or
letter of credit issuance. CFADS includes, but is not limited to, operating cash
before interest and taxes, pre-tax cash distributions from all asset
liquidations and equity capital contributions from PSEG to the extent not used
to fund investing activity. In addition, the ratio of consolidated recourse
indebtedness to recourse capitalization, as at the end of any quarterly
financial period, shall not be greater than 0.60 to 1.00. This ratio is
calculated by dividing the total recourse indebtedness of Energy Holdings by the
total recourse capitalization. This ratio excludes the debt of PSEG Capital
which is supported by PSEG. As of September 30, 1999, the latest 12 months CFADS
coverage ratio was 10.9x, and the ratio of recourse indebtedness to recourse
capitalization was 0.25 to 1.00.
Compliance with applicable financial covenants will depend upon Energy
Holdings' future financial position and the level of earnings and cash flow, as
to which no assurances can be given. In addition, Energy Holdings' ability to
continue to grow its business will depend to a significant degree on PSEG's
ability to access capital and Energy Holdings' ability to obtain additional
financing beyond current levels. At September 30, 1999, Energy Holdings had $481
million outstanding under existing revolving credit facilities.
In October 1999, Energy Holdings, in a private placement, issued $400
million of its 10% senior notes due 2009. These are the original notes for which
the exchange notes are being offered for the exchange by means of this
prospectus. Interest is payable semi-annually on April 1 and October 1,
commencing April 1, 2000. The net proceeds from the sale were used for the
repayment of short-term debt outstanding under Energy Holdings' revolving credit
facitlities.
The availability and cost of external capital could be affected by the
performance of Energy Holdings and PSEG's other subsidiaries and by any actions
ultimately taken by the BPU and PSEG in response to the proceedings discussed
above. They could also be affected by rating agencies' views of such matters,
including the degree of structural or regulatory separation between Public
Service Electric and Gas Company and its non-utility affiliates and the
potential impact of affiliate ratings on the consolidated credit quality of PSEG
and other rated affiliates.
The minimum net worth maintenance agreement between PSEG Capital and PSEG
provides, among other things, that PSEG (1) maintain its ownership, directly or
indirectly, of all outstanding common stock of PSEG Capital, (2) cause PSEG
Capital to have at all times a positive tangible net worth of at least $100,000
and (3) make sufficient contributions of liquid assets to PSEG Capital in order
to permit it to pay its debt obligations. In 1993, in connection with the
Focused Audit, PSEG agreed with the BPU to make a good faith effort to eliminate
such PSEG support within six to ten years. Effective January 31, 1995, PSEG
Capital notified the BPU of its intention not to have more than $650 million of
debt outstanding at any time. PSEG Capital has a $650 million MTN program which
provides for the private placement of MTNs.
PSEG Capital's assets consist principally of demand notes of Global and
Resources. Intercompany borrowing rates are established based upon PSEG
Capital's cost of funds. At December 31, 1998, PSEG Capital had total debt
outstanding of $498 million, all of which was comprised of MTNs. In March and
June 1999, PSEG Capital issued $252 million of 6.25% MTNs due May 2003 and $35
million of 6.73% MTNs due June 2001, respectively. The proceeds were used to
repay $100 million of PSEG Capital MTNs which matured in February 1999 and $35
million which matured in May 1999 and to
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reduce Energy Holdings' short-term debt. At September 30, 1999, total debt
outstanding under the MTN program was $650 million, maturing from 1999 to 2003.
Energy Holdings believes it is capable of eliminating PSEG support of PSEG
Capital debt within the time period set forth in the Focused Audit.
For a discussion of non-recourse debt of Global, See Note 9 in Notes to
Consolidated Financial Statements.
Qualitative and Quantitative Disclosures About Market Risk
The risk inherent in Energy Holdings' market risk sensitive instruments
and positions is the potential loss arising from adverse changes in commodity
prices, equity security prices, interest rates and foreign currency exchange
rates as discussed below. Energy Holdings' policy is to use financial
instruments to manage risk consistent with its business plans and prudent
practices. PSEG has a Risk Management Committee comprised of executive officers,
which utilizes an independent risk oversight function to ensure compliance with
corporate policies and prudent risk management practices for all of its
subsidiaries, including Energy Holdings and its subsidiaries.
Energy Holdings is exposed to credit losses in the event of nonperformance
or nonpayment by counterparties. Energy Holdings has a credit management process
which is used to assess, monitor and mitigate counterparty exposure. In the
event of nonperformance or nonpayment by a major counterparty, there may be a
material adverse impact on Energy Holdings' financial condition, results of
operations and net cash flows.
Commodities
Energy Technologies' policy is to enter into natural gas and electricity
futures contracts and forward purchases to lock in prices related to future
fixed sales commitments. Whenever possible, Energy Technologies attempts to be
100% covered on its electric and gas sales positions during periods of peak
volatility.
During the nine months ended September 30, 1999, Energy Technologies
entered into futures contracts to buy natural gas and electricity related to
fixed-price sales commitments. Such contracts hedged approximately 97% and 100%
of its fixed price natural gas and electric sales commitments, respectively at
September 30, 1999. As of September 30, 1999 and December 31, 1998, Energy
Technologies had a net unrealized hedge gain of $3 million and a net unrealized
hedge loss of $5 million, respectively, related to its electric and gas hedges.
Energy Technologies uses a value-at-risk model to assess the market risk
of its commodity business. This model includes fixed price sales commitments and
financial derivative instruments. Value-at-risk represents the potential gains
or losses for the portfolio due to changes in market factors, for a specific
time period and a given confidence level. The methodology used to measure the
value-at-risk is the variance/co-variance model based on historical volatility
and correlation, a 95% confidence level and a one-week holding period. The
measured value-at-risk was approximately $400,000 at December 31, 1998 compared
to the December 31, 1997 level of approximately $45,000 due primarily to higher
natural gas price volatility and greater sales volume. As of September 30, 1999,
the value-at-risk was approximately $710,000. Energy Technologies' calculated
value-at-risk exposure represents an estimate of potential net losses that could
be recognized on its portfolio of physical and financial derivative instruments
assuming historical movements in future market rates. These estimates, however,
are not necessarily indicative of actual results which may occur, since actual
future gains and losses will differ from those historical estimates based upon
actual fluctuations in market rates, operating exposures, and the timing
thereof, and changes in Energy Technologies' portfolio of hedging instruments
during the year.
Equity Securities
Resources has investments in equity securities and limited partnerships
which invest in equity securities. Resources carries its investments in equity
securities at their approximate fair value as of the reporting date.
Consequently, the carrying value of these investments is affected by changes in
the fair value of the underlying securities. Fair value is determined by
adjusting the market value of the
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securities for liquidity and market volatility factors, where appropriate. The
aggregate fair values of such investments which had available market prices at
September 30, 1999 and December 31, 1998 and 1997 were $118 million, $204
million and $185 million, respectively. A sensitivity analysis has been prepared
to estimate Energy Holdings' exposure to market volatility of these investments.
The potential change in fair value resulting from a hypothetical 10% change in
quoted market prices of these investments amounted to $11 million as of
September 30, 1999.
Interest Rates
Energy Holdings is subject to the risk of fluctuating interest rates in
the normal course of business. Energy Holdings' policy is to manage interest
rates through the use of fixed rate debt, floating rate debt and interest rate
swaps. As of September 30, 1999, a hypothetical 10% change in market interest
rates would result in a $3 million change in interest costs related to
short-term and floating rate debt.
Global has $67 million of consolidated project debt associated with the
investment in two Argentine distribution companies that is non-recourse to
Global and Energy Holdings. The debt was refinanced in June 1999 for a term of
one year. An interest rate swap was entered into which effectively converts a
portion of the floating rate obligation into a fixed rate obligation. The
interest rate differential to be received or paid under the agreement is
recorded over the life of the agreement as an adjustment to interest expense.
See Note 9 of Notes to Consolidated Financial Statements.
Foreign Operations
In accordance with their growth strategies, Global and Resources have
approximately $1.4 billion and $1.0 billion, respectively, of international
investments as of September 30, 1999. These investments represented 61% of
Energy Holdings' consolidated assets. Resources' international investments are
primarily leveraged leases of assets located in the Netherlands, Germany,
Australia and the United Kingdom with associated revenues denominated in United
States Dollars and, therefore not subject to foreign currency risk.
Global's international investments are primarily in projects that
currently, or upon completion will, distribute or generate electricity in
Argentina, Brazil, Chile, China, India, Italy, Peru, Poland, Tunisia and
Venezuela. Investing in foreign countries involves certain risks. Economic
conditions that result in higher comparative rates of inflation in foreign
countries likely result in declining values in such countries' currencies. As
currencies fluctuate against the United States Dollar, there is a corresponding
change in Global's investment value in terms of the United States Dollar. Such
change is reflected as an increase or decrease in comprehensive income, a
separate component of stockholder's equity. Net foreign currency devaluations
have reduced the reported amount of Global's total stockholder's equity by $202
million, $186 million of which was caused by the devaluation of the Brazilian
Real, as of September 30, 1999. In January 1999, Brazil abandoned its managed
devaluation strategy and allowed its currency, the Real, to float against other
currencies. As of September 30, 1999, the Real had devalued approximately 37%
against the United States Dollar since December 31, 1998, affecting the carrying
value of Global's investment in a Brazilian distribution company. For additional
information, see Note 16 in Notes to Consolidated Financial Statements.
Higher comparative rates of inflation in foreign economies also means that
borrowing costs in local currency will be higher than in the United States. When
warranted, Global has financed certain foreign investments with United States
Dollar denominated debt. While less costly to service in terms of United States
Dollars, such debt is exposed to currency risk because a devaluation would cause
repayment to be more expensive in local currency terms since more units of local
currency would be required to repay the debt. United States Dollar denominated
debt was incurred by Global in Argentina, Chile and Peru to finance the
acquisition of interests in rate regulated distribution entities. These entities
may be able to recover higher costs incurred as a result of a devaluation
specifically through the terms of the concession agreement, or as a pass through
of higher inflation costs in rates over time although no assurances can be given
that this will occur. In evaluating its investment decisions, Global considers
the social, economic, political and currency risks associated with each
potential project and, if warranted, assumes a certain level of currency
devaluation when making its investment decisions. In Argentina, the currency is
pegged 1:1 with the United States Dollar, and a legislative act is required to
de-couple the currency from the Dollar.
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Global had consolidated debt totaling $106 million as of September 30,
1999 that is non-recourse to Global and Energy Holdings associated with an
investment in the Brazilian distribution company noted above. The debt is
denominated in the Brazilian Real and is indexed to a basket of currencies,
approximately 50% of which is the United States Dollar. As a result, Global is
subject to foreign currency exchange rate risk which would result from exchange
rate movements between the indexed foreign currencies and the United States
Dollar. Exchange rate changes ultimately impact the debt level outstanding in
the reporting currency and result in foreign currency gains or losses in
accordance with generally accepted accounting principles (GAAP). Any related
gains or (losses) resulting from such exchange rate movements are included in
net income for the period, and amounted to $2 million, $(3) million and $1
million for the nine months ended September 30, 1999 and the years ended
December 31, 1998 and 1997, respectively.
Energy Holdings cannot predict foreign currency exchange rate movements
and, therefore, cannot predict the impact of such movements on Energy Holdings'
financial condition, results of operations and net cash flows.
Year 2000 Disclosure
Many of Energy Holdings' systems, which include information technology
applications, plant control and telecommunications infrastructure systems, were
modified due to computer program limitations in recognizing dates beyond 1999.
Energy Holdings has had a formal project in place since 1997 to address Year
2000 issues. All mission critical systems were ready before January 1, 2000.
Energy Holdings' and its subsidiaries did not experience any major problems or
Year 2000-related service interruptions as their systems rolled over from 1999
to 2000. Energy Holdings' and its subsidiaries expect most material Year 2000
compliance problems would have arisen on or shortly after January 1, 2000. To
date, Energy Holdings' and its subsidiaries are not aware of any material Year
2000-related problems associated with their internal systems or software or with
the software and systems of their vendors, distributors or suppliers. Although
not expected by Energy Holdings and its subsidiaries, it is possible that Year
2000-related problems may arise.
Energy Holdings has no outstanding litigation relating to Year 2000
issues. The likelihood of future Year 2000 related liabilities cannot be
determined at this time.
Energy Holdings estimates the total cost related to Year 2000 readiness
will approximate $5.3 million, to be incurred through 2001, of which $150,000
was incurred in 1997, $1.1 million was incurred in 1998 and approximately $3.7
million was incurred in 1999. For the nine months ended September 30, 1999,
approximately $3.2 million was incurred. A portion of these costs is not likely
to be incremental to Energy Holdings, but rather, represents a redeployment of
existing personnel/resources and its share of partnership assets. Energy
Holdings' and its subsidiaries expect that expenses related to remediating any
remaining noncompliant non-critical systems will not be material.
Environmental Matters
Global has ownership interests in facilities, including operating power
plants and distribution companies and power plants under construction or in
development, in numerous countries. These include the United States (California,
Hawaii, Maine, New Hampshire, New Jersey, Pennsylvania and Texas), Argentina,
Brazil, Chile, China, India, Italy, Peru, Poland, Tunisia and Venezuela. These
operations are subject to compliance with environmental laws and regulations by
relevant authorities at each location, which may include air and water quality
control, land use, disposal of wastes, aesthetics and other matters. In order to
achieve compliance, expenditures may be needed for construction, continued
operation or remediation of new and existing facilities and sites. As Global and
Energy Technologies pursue new opportunities, they will be required to comply
with applicable environmental laws and regulations.
Global and Energy Technologies attempt to take such expenditures into
consideration when considering an investment; however, there can be no assurance
that environmental laws and regulations will not change. If environmental laws
or regulations change in the future, there can be no
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assurance that Energy Holdings and its subsidiaries would be able to recover all
or any increased costs from their customers or that Energy Holdings' financial
condition, results of operations and net cash flows would not be materially and
adversely affected. Energy Holdings is committed to operating its businesses
cleanly, safely and reliably and strives to comply with all environmental laws,
regulations, permits, and licenses. However, despite such efforts, there have
been instances of non-compliance, although no such instance resulted in
revocation of any permit or license or caused a materially adverse effect on
Energy Holdings' financial condition, results of operations and net cash flows.
Accounting Issues
For a discussion of significant accounting matters, see Notes 2 and 17 in
Notes to Consolidated Financial Statements.
Impact of New Accounting Pronouncements
For a discussion of the impact of new accounting pronouncements including
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
(SFAS 133), SOP 98-5, "Reporting on the Costs of Start-Up Activities" (SOP
98-5), SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities Deferral of the Effective Date of FASB Statement No. 133" (SFAS 137),
see Note 17 in Notes to Consolidated Financial Statements.
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BUSINESS
ENERGY HOLDINGS
We participate in three energy-related lines of business through our
wholly-owned subsidiaries: Global, Resources and Energy Technologies. Together,
these operating subsidiaries have more than 90 financial and operating
investments. We seek to pursue investment opportunities in the rapidly changing
global energy markets, with Global and Energy Technologies focusing on the
operating segments of the electric and gas industries and Resources seeking to
make financial investments in these industries.
We have developed a portfolio of investments which supports long-term
growth with near-term earnings. We balance risk, return, timing of cash flow and
growth objectives in creating a complementary blend of investments. Resources'
investments generate cash flow and earnings in the near term, while investments
at Global and Energy Technologies generally have a longer time horizon prior to
achieving expected cash flow and earnings. Also, Resources' passive lower-risk
investments balance the higher risk associated with operating investments at
Global and Energy Technologies.
Our portfolio is diversified by number, type and geographic location of
investments. As of September 30, 1999, our assets were comprised of the
following types of investments.
Assets
------
Leveraged Leases .......................................... 42%
Other Passive Financial Investments ....................... 8%
Domestic Generation Plants ................................ 5%
International Distribution Facilities ..................... 30%
International Generation Plants ........................... 6%
Energy Services ........................................... 6%
Other ..................................................... 3%
The characteristics of each of these investment types are described in
more detail below.
We are a direct, wholly-owned subsidiary of PSEG and an affiliate of
Public Service Electric and Gas Company, a public utility operating in New
Jersey, which is also a wholly-owned subsidiary of PSEG. As of September 30,
1999, PSEG had approximately $1.6 billion of equity (including retained earnings
of approximately $258 million) invested in our company.
GLOBAL
Strategic Overview
Global's goal is to develop, own and operate electric generation and
distribution facilities in selected high-growth areas of the worldwide energy
market. In carrying out its strategy, Global's assessment of potential
opportunities includes a multi-faceted analysis of the resident country,
potential partners and transaction economics. Global identifies target markets
based on economic fundamentals, including expected growth of electricity
consumption, evaluation of the social, political and regulatory climate, and the
opportunities for participation by private power developers. Following the
identification of target market prospects, Global evaluates the possibility of
utilizing partners with local contacts and complementary expertise. Global will
consider investments or projects in which it is the sole or a majority owner if
justified by strategic considerations, anticipated returns and other factors.
Global then focuses on projects which meet or exceed its specified risk-adjusted
rate of return and which present potential synergies with existing projects or
anticipated future investments. As a result of the implementation of this
analytical approach, Global has developed or acquired interests in electric
generation and/or distribution facilities in the United States, Argentina,
Brazil, Chile, Peru, Venezuela and China. In addition, projects are in
construction or advanced development in the United States, Argentina, Venezuela,
India, Tunisia, China, Italy and Poland.
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Business Description
Global, formed in 1984 as an independent power producer and developer of
qualifying facilities (QFs) under the Public Utility Regulatory Policies Act of
1978 (PURPA), now develops, acquires, owns and operates electric generation and
distribution facilities and is engaged in power production and distribution,
including wholesale and retail sales of electricity, in selected domestic and
international markets.
Deregulation and privatization of energy markets, as well as growth in
electricity demand throughout the world, have provided the opportunity for
Global to expand the scope of its operations. Global has concentrated its
development activities on markets in which it believes most of the new worldwide
electric generating capacity will be installed in the next five years: China,
India, the Middle East, Latin America and selected regions in the United States.
Global has established a presence in these high growth markets in order to
access and better evaluate potential investment opportunities.
Global has ownership interests in 19 operating generation projects
totaling 2,002 megawatts (MW) (535 MW net) and 21 projects totaling 4,832 MW
(2,252 MW net) in construction or advanced development. Of Global's generation
projects in operation, construction or advanced development, 1,292 MW net or 46%
are located in the United States. Global is actively involved, through its joint
ventures, in managing the operations of eight operating generation projects and
will be actively involved in managing the operations of five of the projects in
construction or advanced development. Global owns interests in six distribution
companies providing electricity to over 2.7 million customers in Argentina,
Brazil, Chile and Peru. Global is actively involved in managing the operations
of these distribution companies in accordance with shareholder agreements and/or
operating contracts. As of September 30, 1999, Global had assets of
approximately $1.7 billion.
Global focuses on multiple project acquisitions or development in a
particular geographic area in order to minimize development and operating costs
and maximize the value of existing and planned investments. By investing in both
generation and distribution facilities, Global seeks to balance revenue and cost
volatility associated with generation plants with the stability of
rate-regulated revenues from distribution facilities. Global will seek
opportunities to divest assets which are no longer strategically important or do
not achieve profitability objectives.
Generation
When assessing generation development and acquisition opportunities,
Global identifies regions that demonstrate a need for energy infrastructure and
prospects for incremental growth that Global believes will withstand potential
short-term economic turbulence. Global expects that most of its new generation
investments will be in international markets due to the current and anticipated
growth in required electric generating capacity in the regions in which it
maintains a presence.
Global seeks to minimize risk in the development and operation of its
projects by selecting partners with complementary skills, structuring long-term
power purchase contracts, arranging financing prior to the commencement of
construction and contracting for adequate fuel supply. Historically, Global's
operating affiliates have entered into long-term power purchase contracts,
selling the electricity produced for the majority of the project life.
Fuel supply arrangements are designed to balance long-term supply needs
with price considerations. Global's project affiliates utilize long-term
contracts and spot market purchases. Global believes that there are adequate
fuel supplies for the anticipated needs of its generating projects. Global also
believes that transmission access and capacity are sufficient at this time for
its generation projects.
It is Global's policy to limit its financial exposure to each project and
to mitigate development and operating risk, including fuel and foreign currency
exposure, through contracts. In addition, the project loan agreements are
structured on a non-recourse basis. Further, Global structures project financing
so that a default under one project's loan agreement will have no effect on the
loan agreements of other projects or the debt of Energy Holdings.
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GENERATION FACILITIES
<TABLE>
<CAPTION>
Global's
Net Equity
Global's Interest in
Total Ownership Total
Location Primary Fuel MW Interest MW
-------- ------------ ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating Power Plants
United States
Eagle Point ........................ NJ Natural gas 225 50% 113
Kalaeloa ........................... HI Oil 180 49% 88
GWF
Bay Area I .................... CA Petroleum coke 21 50% 10
Bay Area II ................... CA Petroleum coke 21 50% 10
Bay Area III .................. CA Petroleum coke 21 50% 10
Bay Area IV ................... CA Petroleum coke 21 50% 10
Bay Area V .................... CA Petroleum coke 21 50% 10
Hanford ............................ CA Petroleum coke 27 50% 14
Tracy .............................. CA Biomass 21 35% 7
Bridgewater ........................ NH Biomass 16 40% 7
SEGS III ........................... CA Solar 30 9% 3
Kennebec ........................... ME Hydro 15 16% 2
Conemaugh .......................... PA Hydro 15 50% 8
--------- ---------
Sub-Total United States 634 292
International
CTSN ArgentinaCoal/Natural gas/Oil 650 19% 124
MPC
Jingyuan - Units 5 and 6 ... China Coal 600 15% 90
Jinqiao (Thermal Energy) ... China Coal/Oil N/A 30% N/A
Tongzhou ................... China Coal 30 40% 12
Zuojiang - Units 1 and 2 ... China Hydro 48 30% 14
TGM ............................. Venezuela Natural gas 40 9% 3
--------- ---------
Sub-Total International 1,368 243
--------- ---------
Sub-Total Operating Power Plants 2,002 535
--------- ---------
<CAPTION>
In Service
Date
---------
<S> <C> <C> <C> <C> <C> <C>
Power Plants in Construction or Advanced Development
Turboven
Maracay .................... Venezuela Natural gas 60 50% 30 2000
Cagua ...................... Venezuela Natural gas 60 50% 30 2000
Valencia ................... Venezuela Natural gas 80 50% 40 2001
MPC
Zuojiang - Unit 3 .......... China Hydro 24 30% 7 2000
Shanghai BFG ............... China Blast furnace gas 50 16% 8 2000
Fushi ...................... China Hydro 54 35% 19 2000
Nantong .................... China Coal 24 46% 11 2000
Texas Independent Energy, L.P.
Guadalupe .................. Texas Natural gas 1,000 50% 500 2000
Odessa ..................... Texas Natural gas 1,000 50% 500 2001
Prisma 2000
Crotone .................... Italy Biomass 20 70% 14 2001
Bando ...................... Italy Biomass 20 70% 14 2001
Strongoli .................. Italy Biomass 40 70% 28 2002
Porto Empedocle ............ Italy Biomass 24 70% 17 2002
Parana .......................... Argentina Natural gas 830 33% 274 2001
Rades ........................... Tunisia Natural gas 471 35% 165 2001
PPN ............................. India Naptha/Natural gas 330 20% 66 2001
Tri-Sakthi ...................... India Coal 525 63% 331 2003
Chorzow ......................... Poland Coal 220 90% 198 2003
--------- ---------
Sub-Total Construction or Advanced Development 4,832 2,252
--------- ---------
TOTAL 6,834 2,787
========= =========
</TABLE>
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<PAGE>
Domestic Generation in Operation
All of Global's domestic operating generation facilities were developed as
QFs under PURPA and have power purchase contracts for their output with the
local utility companies. As a result of QF requirements, Global is limited to
50% ownership or less of these facilities.
Eagle Point
The Eagle Point Power Plant is a 225 MW gas-fired combined-cycle facility
located in West Deptford, New Jersey. Approximately 90% of the electricity
generated by the Eagle Point Power Plant is sold to Public Service Electric and
Gas Company under a 25-year power purchase contract terminating in May 2016. The
balance of the electricity generated is sold to Coastal Eagle Point Oil Company
along with approximately 575,000 lbs./hr of steam under a 20-year contract
terminating in May 2011. Global and its partner, ANR Venture Eagle Point
Company, a subsidiary of The Coastal Corporation, each own 50% of the facility.
The plant has been in commercial operation since May 1991. In 1998, the Eagle
Point Power Plant generated approximately 1,775 gigawatt hours (GWH) of electric
energy and approximately $125 million of gross revenue. The plant availability
factor for 1998 was 97%.
Kalaeloa
The Kalaeloa Power Plant is a 180 MW oil-fired cogeneration plant located
at Barbers Point, Oahu, Hawaii, which began operating in April 1990. Global
purchased a 49% interest in the facility in 1997. Global's partners are Harbert
Power which owns 50% and Asea Brown Boveri which owns 1%. All of the electricity
generated by the Kalaeloa Power Plant is sold to Hawaiian Electric Company under
a 25-year power purchase contract terminating in May 2016. Under a steam
purchase and sale agreement expiring in May 2016, the Kalaeloa Power Plant will
supply approximately 121,000 lbs./hr. of steam to Hawaiian Independent Refinery,
Inc. In 1998, the plant generated approximately 1,362 GWH of electric energy for
sale to Hawaiian Electric Company and approximately $84 million of gross
revenue. The plant availability factor in 1998 was 94%.
GWF and Hanford
Global and Harbert Power each own 50% of GWF, which owns and operates five
petroleum coke-fired power plants totaling 102.5 MW in the San Francisco Bay
area in California. Power purchase contracts for the plants' net output are in
place with Pacific Gas and Electric Company ending in 2020 and 2021. In 1998,
the plants generated 649 GWH of electric energy for sale to Pacific Gas and
Electric Company and approximately $117 million of gross revenue. The plants
went into service between October 1989 and December 1990. The average
availability factor of the five plants in 1998 was 81%.
Global and Harbert Power each own 50% of Hanford, which owns and operates
a 27 MW petroleum coke-fired facility in Hanford, California. A power purchase
contract for the plant's net output is in place with Pacific Gas and Electric
Company through 2011. In 1998, the Hanford plant generated 155 GWH of electric
energy for sale to Pacific Gas and Electric Company and steam which was sold to
Pirelli-Armstrong Tire Corp. pursuant to a 20-year contract expiring in 2010.
The Hanford plant generated approximately $29 million of gross revenue in 1998
and had an availability factor of 79%.
Power from the California facilities is sold pursuant to Pacific Gas and
Electric's Standard Long-Term Energy and Capacity Power Purchase Agreements
(SO4). Power has been sold at fixed rates for energy and capacity. Beginning in
2000, energy prices under such contracts will be reduced from the current fixed
rates to short-run avoided costs energy prices approved by the California Public
Utilities Commission. As a result, Global's revenues from its investments in
California are expected to decrease. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Overview and Future
Outlook".
Other minority investments held by Global in five domestic generation
facilities totaled 27 MW net and generated less than 3% of Global's total
revenues in 1998.
37
<PAGE>
International Generation in Operation
Global owns interests in operating generation facilities in Argentina,
China and Venezuela. Over the next five years, Global anticipates pursuing
additional opportunities resulting from its presence in these countries, as
warranted by local market considerations.
Argentina
CTSN
Central Termica San Nicolas (CTSN) is a 650 MW electric generation
facility located near the city of San Nicolas, Argentina that is 19% owned by
Global and 69% by The AES Corporation (AES), with the remaining 12% owned by
CTSN's employees. CTSN was acquired in 1993 in conjunction with the initial
Argentine privatization process, and is the third largest thermal power plant in
Argentina, consisting of one 350 MW and four 75 MW steam turbines. CTSN, as the
only multi-fuel generation facility in Argentina, is capable of operating on
natural gas, oil or coal. At the time of privatization, CTSN's availability was
below 45%. The plant availability factor in 1998 was 72%.
The facility sells its output through a combination of spot market sales,
contracts with distributors and contracts with a wide variety of large or medium
sized industrial users. Approximately half of the output is sold pursuant to
power purchase contracts that expire in 2001. Upon expiration of its power
purchase contracts, Global expects that CTSN's output will be sold into the
merchant market. Although CTSN is an older facility and will face substantial
competition from more efficient plants, the facility has direct access by vessel
to its own port, rail and motorway, and is located in Argentina's industrial
belt on the Parana River. It is also situated near the Argentine natural gas
transportation system and is connected to the regional transmission lines which
provide access to the wholesale electricity market. In 1998, CTSN generated
2,005 GWH of electric energy. Experience gained through this investment led to
Global's subsequent investments in Argentine electric distribution systems and
the development of a new power plant adjacent to CTSN, as described below. See
"-- Power Plants in Construction or Advanced Development -- Argentina -- Parana"
and "--Distribution -- Argentina -- EDEN, EDES, EDELAP".
China
Global's activities in China are exclusively conducted through Meiya Power
Company Limited (MPC), a joint venture with the Asian Infrastructure Fund (AIF)
and Hydro Quebec International (HQI). Global owns 50% of MPC, while AIF and HQI
own 30% and 20%, respectively. AIF is a private equity fund whose sponsors and
investors include Frank Russell Company, International Finance Corporation,
Asian Development Bank and Asian Infrastructure Development Fund.
As the result of its existing investments in China, MPC has established
relationships and partnerships with local authorities. Its focus has been on
investment opportunities in eastern China, where power demand is high and
cogeneration opportunities exist, central China, where heavy industry is located
and there are abundant supplies of coal, and northwest China, where power
shortages prevail and central government policy continues to support growth in
designated areas. MPC's strategy is to identify projects that are consistent
with central government policies, to pursue negotiated investment opportunities
rather than competitive bid situations and to seek projects with demonstrated
expansion possibilities.
MPC is focused on developing, acquiring, owning and operating electric
generation facilities in China. MPC seeks to structure long-term power purchase
contracts with its customers and to incorporate take-or-pay and minimum take
provisions to support debt service and a specified equity return. Pricing terms
for energy from its facilities generally include a base price and indexed
adjustments to compensate for changes in inflation, foreign currency exchange
rates up to the minimum equity return and laws affecting taxes, fees and
required reserves. MPC's projects, either under construction or in operation,
have obtained all required approvals to enable issuance of a business license in
their respective localities. As legal business entities, these projects
generally have access to foreign currency swap markets.
38
<PAGE>
Jingyuan
MPC through a wholly-owned subsidiary owns a 30% interest in Jingyuan
Units 5 and 6, two 300 MW mine-mouth coal-fired power plants located in Gansu
Province, China. The plants are 50% owned by the State Development Investment
Corporation, 15% by the Gansu Electric Power Construction Investment and
Development Co. and 5% by the Gansu Electric Power Company (GEPC), which is the
operator. GEPC has a take-or-pay power purchase contract for 22 years, ending in
2017. The power purchase contract provides for a minimum take of 5,500 hours,
supporting the debt service and a specified equity return. The contract provides
incentives for power taken above the minimum level. The minimum level was not
met in 1998 and 1999. Payment terms are being discussed between MPC and GEPC. In
addition, MPC is seeking final tariff approval for 1999 from the Provincial
Government. EnergyHoldings believes the impact of these matters will not have a
material adverse effect on it. The power contract provides for a pass through of
foreign currency debt service payments. Foreign currency protection of the
equity return resulting from the minimum take is covered under a separate
agreement with MPC's partner, the Gansu Electric Power Construction Investment
and Development Co. Equity return beyond the minimum take is exposed to foreign
currency fluctuations. MPC's investment consists of direct equity and
shareholder loans to the Jingyuan project. The shareholder loans were provided
in part by a non-recourse loan from international banks to a wholly-owned
subsidiary of MPC. This non-recourse loan totaled approximately $50 million and
will mature in 2006. The balance of the project debt was provided in local
currency by Chinese banks. The Jingyuan units have been in commercial operation
since October 1996 and October 1997, respectively. In 1998, the Jingyuan units
generated 2,829 GWH of electric energy and had an availability factor of 79%.
Jinqiao
MPC is a partner in the Meiya Jinqiao Energy Project, a thermal
distribution system located in Shanghai, China. Jinqiao is owned 60% by MPC and
40% by the Shanghai Jinqiao Heat Power Corporation. Fuel is supplied by Shanghai
General Fuel Corporation, which has a 60% ownership interest in Shanghai Jingiao
Heat Power Corporation. The plant's output is sold under approximately 60 steam
purchase agreements in place with commercial tenants of the Jinqiao Export
Processing Zone (Zone). Most of the tenants are foreign multinationals and large
Chinese firms. Approximately 25% of the contracted capacity is sold to General
Motors and NEC Electronics pursuant to contracts that expire in 2025. Financing
for the project was provided by local banks. MPC is evaluating the possibility
of constructing a cogeneration facility within the Zone.
Tongzhou
MPC owns 80% of the Tongzhou facility, which is a 30 MW coal-fired
cogeneration plant consisting of two 15 MW units located at Tongzhou in Jiangsu
Province. MPC's 20% partner is the Tongzhou Municipal Government through Jiangsu
Tongzhou Co-Generation Plant, a company established to hold its interest in the
project. The two units began operating in July and August 1999. The plant is
located within the Tongzhou Development Zone on the outskirts of the city. Based
on a governmental restructuring of the electric power distribution system in
Jiangsu Province, responsibility for electric sales and distribution has been
removed from the municipal authority with whom MPC had originally entered into a
25 year take-or-pay power purchase agreement. Electric output is now sold to the
Jiangsu Provincial Power Bureau, which has assumed responsibility for electric
sales and distribution, on a merchant basis at prices established by the Jiangsu
Provincial Pricing Bureau. Steam is sold directly to customers and fuel is
purchased on the spot market. As a result, MPC and its partners have recently
reached an agreement on a restructuring of the partnership agreement and MPC
will receive 100% of the partnership cash distributions. Energy Holdings
believes that the restructuring will not have a material adverse effect on it.
39
<PAGE>
Zuojiang
MPC owns 60% of the Zuojiang facility, which is a 72 MW run-of-the-river
hydroelectric station comprised of three 24 MW units located near Nanning, the
capital of Guangxi Province in Southwest China. The first 24 MW unit began
operating in July 1999 and the second unit began operating in October 1999. The
third unit is in construction and is expected to be completed in the first
quarter of 2000. MPC's investment, through a combination of equity and
shareholder loans, is expected to total approximately $39 million. MPC's 40%
partner is Nanning Regional Power Company, the original developer of the project
and a state enterprise owned by the Nanning government. The joint venture will
build, own, operate and eventually transfer the facility to its partner, Nanning
Regional Power Company. Power from the facility will be sold to the Guangxi
Electric Power Bureau pursuant to a 23-year power purchase contract that commits
the Guangxi Electric Power Bureau to take-or-pay for an annual minimum amount of
power that is equal to approximately 80% of the total average annual electricity
expected to be produced by the facility. The price of power will be comprised of
a base price and formula adjustments to compensate for changes in inflation and
laws regarding taxes, fees and required reserves. In addition, approximately 50%
of the tariff is indexed to United States Dollars.
Venezuela
TGM
Global, in partnership with Corporacion Industrial de Energia (CIE), owns
Turbogeneradores de Maracay (TGM), a 40 MW natural gas-fired plant in Venezuela.
TGM sells all of the energy produced under contract to Manufacturas del Papel
(MANPA), a paper manufacturing concern located in Maracay. MANPA and CIE have
common controlling shareholders. Through its 9% ownership interest in TGM, which
has been held since 1995, and its relationship with CIE and MANPA, Global has
obtained an understanding of the power requirements of potential customers in
the north-central industrial region of Venezuela and the supply dynamics of the
existing system. This has created additional opportunities to develop new
generating projects and provide electricity to industrial customers in
Venezuela. See "-- Power Plants in Construction or Advanced Development --
Venezuela -- Turboven".
Other
Global currently holds a minority interest in a project development
company located in the Philippines. The total investment in this company
represented less than 1% of Global's assets as of September 30, 1999. As part of
a comprehensive review of existing assets and development activities, Global's
management has decided that it will not commit additional resources to its
investment in the Philippines and will focus its current Asian development
activities in China. For further discussion, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations -- Global".
Power Plants in Construction or Advanced Development
Global has eighteen projects in construction or advanced development
totaling 4,832 MW (2,252 MW net) located in Venezuela, China, the United States,
Argentina, India, Italy, Poland and Tunisia. Global seeks to obtain power
purchase contracts for the output of its plants. Global has obtained long-term
power purchase contracts for the output of its plants in China, India, Italy,
Poland, Tunisia and Venezuela. Conditions in certain markets, including the
United States, dictate that Global's generation projects will be merchant
facilities that sell their output under short-term contracts or into the open
market. Global's assessment of investments in merchant generation facilities is
based on an underlying analysis of the wholesale power market in the relevant
geographic area. This analysis includes models which simulate the market and the
dispatch order of existing and planned power facilities. These models form the
basis for the economic evaluation of projects and their expected performance.
40
<PAGE>
Venezuela
Turboven
In April 1999, Global and CIE, its partner in the TGM facility, announced
plans to construct and operate three gas-fired simple cycle electric generation
facilities with total installed capacity of 200 MW and associated distribution
systems to serve industrial customers in Maracay (60 MW), Cagua (60 MW) and
Valencia (80 MW), Venezuela. The facilities will be owned and operated by
Turboven, an entity which is jointly owned by Global and CIE. The facilities
will utilize 10 refurbished General Electric turbines and local fuel. Through
its previous investment in Venezuela, Global determined that industrial users
were dissatisfied with the quality of service from the existing power grid. To
date, power purchase contracts have been entered into for the sale of
approximately 50% of the output of the first two plants, Maracay and Cagua, to
various industrial customers, approximately 33% of whom are subsidiaries or
affiliates of multinational companies. The power purchase contracts are
structured to provide energy only with minimum take provisions. Fuel costs will
be passed through directly to customers and the energy tariffs will be
calculated in United States Dollars and paid in local currency. The first two
facilities are scheduled to be in operation by early 2000. Global and its
partner will secure power contracts with additional customers before proceeding
with construction of the third facility which is currently scheduled to be
completed in late 2001. Global's investment for all three units is not expected
to exceed approximately $70 million.
China
MPC is a partner in several projects under construction in China. These
projects described below are expected to require a total investment by Global of
approximately $40 million.
Shanghai BFG
Shanghai BFG is a 50 MW blast furnace gas-fired facility located at the
Shanghai No. 1 Iron and Steel Company (No. 1 Steel). MPC and Westcoast Energy
Inc. each own 50% of Can Am China Holding LLC which in turn owns 65% of the
facility. No. 1 Steel, which owns the remaining 35%, will provide blast furnace
gas and heavy fuel oil to fuel the power plant and is expected to purchase all
of the electricity generated pursuant to a 25-year power purchase contract. The
power purchase contract requires No. 1 Steel to take or pay for the full plant
output at an annual operating factor of approximately 80%. Pricing will be the
same as or less than published retail grid prices for industrial customers with
escalation clauses and protection against inflation. In addition, approximately
28% of the tariff is indexed to United States Dollars. The total cost of the
facility is expected to be approximately $52 million with MPC's investment
expected to be approximately $17 million. The facility is expected to be
operational in the first quarter of 2000. This project has received government
support due to its favorable environmental impact stemming from the use of blast
furnace gas as fuel.
Nantong
The Nantong project is located in Nantong Development zone located
approximately 15 miles from MPC's Tongzhou project in Jiangsu. The facility
consists of 3 x 75 T/H coal-fired boilers, 2 x 12 MW extracting
turbine-generating units and a 4 kilometer steam pipeline network. The project
has a power purchase contract and interconnection and dispatch agreement with
the Jiangsu Power Company and will sell power to the Jiangsu power grid. Steam
and soft water will be sold to industrial users in the Development Zone.
Completion of both 12 MW units is scheduled for the third quarter of 2000.
Fushi
The Fushi Hydropower Project, currently under construction, is a 3 x 18 MW
run-of-river, hydroelectric station located along the Rongjiang River in
Guangxi. MPC owns 70% of the project with the remaining 30% owned by Liuzhou
Development, formed under two 23-year cooperative joint-ventures. MPC's
investment, through a combination of equity and shareholder loans, is expected
to total approximately $21 million. Power from the facility will be sold to the
Guangxi Electric Power Bureau pursuant to a 23-year power purchase contract that
commits the Guangxi Electric Power Bureau to
41
<PAGE>
take-or-pay for an annual minimum amount of power that is equal to approximately
80% of the total average annual electricity expected to be produced by the
facility. The price of power will be comprised of a base price and formula
adjustments to compensate for changes in inflation and laws regarding taxes,
fees and required reserves. In addition, approximately 50% of the tariff is
indexed to UnitedStates Dollars. Completion of the first 18 MW unit is scheduled
for the second quarter of 2000 with the second and third units scheduled for
completion later in the year.
Italy
Prisma 2000
Global acquired 70% Prisma 2000 (Prisma) in November 1999. Global's 30%
partner is Sucietive Financiere Cremonese, a project development company. Prisma
is an Italian power project development company with four biomass projects in
construction or advanced development totaling 104 MW with commercial operation
scheduled for 2001 and 2002. These projects' capacity will be sold to ENEL, the
Italian Government owned electric company. Prisma is also actively pursuing
other development opportunities in Italy. Global's investment is not expected to
exceed $80 million over the next two years.
United States
Guadalupe
In April 1999, Global and its partner, Panda Energy International, Inc.
(Panda), established Texas Independent Energy, L.P. (TIE), a 50/50 joint
venture, to develop, construct, own, and operate electric generation facilities
in Texas. The first TIE facility, a 1,000 MW gas-fired combined-cycle electric
generation facility in Guadalupe County in south central Texas is currently
under construction. The first 500 MW phase of this merchant plant is expected to
be operational in late 2000. It is anticipated that approximately 50% of the
plant's output will be sold into the Texas spot market and the remaining 50%
will be sold under various bi-lateral power purchase and tolling agreements with
terms of one to five years. Global believes that relatively low capital costs
resulting from long standing equipment orders will provide the facility with a
competitive advantage in selling its output into the Texas grid. Global believes
that the Texas market provides particularly favorable merchant plant
opportunities due to its low reserve margins and relative isolation. The total
cost of this facility is estimated to be approximately $460 million. Global's
investment, including loans and guarantees, is expected to be approximately $193
million. Construction began on the Guadalupe facility in August 1999. Global and
Panda have announced plans to develop two additional projects in Texas under the
TIE joint venture, including the Odessa facility discussed below.
Odessa
TIE is developing and will construct, own and operate a 1,000 MW gas-fired
combined-cycle electric generation facility to be located near Odessa, Texas.
The first block of 500 MW is expected to be operational in June 2001. It is
anticipated that approximately 50% of the output of the facility will be sold
through various bi-lateral power purchase and tolling agreements with terms of
one to five years. The balance of the output will be sold on a spot or
short-term basis into the Texas market. The total cost of the facility is
estimated to be approximately $528 million. Global's investment, including loans
and guarantees, is expected to be approximately $195 million. Non recourse
project financing relative to the Odessa facility is expected to close in
February 2000.
Argentina
Parana
In June 1999, Global and AES closed on the non-recourse project financing
of the Parana facility, an 830 MW natural gas-fired combined-cycle electric
generation facility to be constructed on land to be purchased from CTSN and
adjacent to the CTSN facility in San Nicolas. Global has a 33% ownership share
in AES Parana, S.A., the joint venture entity that is constructing and will
operate the Parana project. AES owns the remaining 67%. The Parana facility will
utilize infrastructure and services provided under contract from CTSN and is
expected to be completed in 2001 at a total cost of
42
<PAGE>
approximately $448 million. Global's equity investment in Parana, including
contingencies, is expected to be approximately $86 million. Global expects that
this facility's design technology, along with construction and operating
efficiencies derived from the proximity to CTSN, will enable it to compete
effectively. Parana has been designed to serve as a base load generator and will
operate as a merchant plant selling into the wholesale power market.
Tunisia
Rades
Global and its partners, Sithe Energies, Inc. (Sithe) and Marubeni
Corporation (Marubeni), closed project financing for a 471 MW gas-fired
combined-cycle electric generation facility in Rades, Tunisia, in August 1999.
Global will own 35% of the facility, with Sithe and Marubeni each owning 32.5%.
Sithe will be the operator. A 20-year power purchase contract has been entered
into for the sale of 100% of the output to Societe Tunisienne d'Electricite et
du Gaz (STEG), the national utility. The power purchase contract tariff consists
of a fixed capacity charge to cover debt and equity return as well as fixed and
variable charges to cover fuel, operations and maintenance costs. Each tariff
component will be paid in local currency (dinars) and indexed to actual costs or
a combination of United States Dollars and Euros. The facility is expected to be
completed in the summer of 2001 at a total cost of approximately $261 million.
Global's equity investment is expected to be approximately $27 million,
including contingencies.
India
PPN
Global owns a 20% interest in PPN Power Generating Company Limited (PPN),
which has a 330 MW gas-fired combined-cycle facility under construction in the
State of Tamil Nadu, India. Global's partners include Marubeni, with a 26%
interest, El Paso Energy Corporation, with a 26% interest and the Reddy Group,
with a 28% interest. Upon completion, scheduled for January 2001, Global will be
the operator. A take-or-pay power purchase contract has been entered into for
the sale of 100% of the output to the State Electricity Board of Tamil Nadu for
30 years. The contract is supported by letters of credit, a State guarantee and
an escrow arrangement. Foreign currency exposure has been minimized by utilizing
local currency (rupee) financing and providing for devaluation protection, up to
a base return, in the power purchase contract. The total project cost is
estimated to be approximately $328 million. Global's equity investment,
including contingencies, is not expected to exceed $32 million.
Tri-Sakthi
In May 1999, Global acquired an interest in Tri-Sakthi Energy Private
Limited, a company which is developing and will own a 525 MW coal-fired electric
generation facility to be constructed in Ennore, Tamil Nadu, India. Upon
scheduled completion in 2003, Global will be the operator of the plant. Global's
partner is Pembinaan Redzai Bhd Sdn (PR Group) of Malaysia. A take-or-pay power
purchase contract has been entered into for the sale of 100% of the output to
the State Electricity Board of Tamil Nadu for 30 years. The contract is
supported by letters of credit, an escrow arrangement and a State guarantee. The
total project cost is approximately $633 million. Project financing negotiations
are underway with local Indian institutions and international banks. Foreign
currency exposure will be minimized by utilizing rupee financing and as a result
of devaluation protection, up to a base return, in the power purchase contract.
The cost of fuel is a pass through to the State Electricity Board. Global plans
to close financing for this project and commence construction in the second
quarter of 2000. Global's equity investment, including contingencies, for its
63% interest is expected to be approximately $180 million.
Poland
Chorzow
In November 1999, Global announced that, through its majority shareholding
in Elektrocieplownia Chorzow ELCHO Sp zo.o (ELCHO), it plans to construct a
combined heat and power plant in Poland.
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The capacity of the facility which will be located in Chorzow, near Katowice in
upper Silesia, is planned to be 220 MW (electrical) and 500 MW (thermal). Global
will hold a 90% interest in ELCHO with the balance held by local Polish
companies. Total project cost is estimated at $320 million with Global's
investment totaling approximately $94 million. The plant has a targeted
commercial operation date in the first quarter of 2003. Polskie Sieci
Elektroenergetyczne SA, the Polish power grid company, has entered into a 20
year power purchase agreement with ELCHO for 100% of the electrical output. All
of the thermal energy will be sold to Przedsiebiorstwo Energetyki Cieplnej
(PEC), the district heating company serving the city of Katowice and its
surrounding communities, for a term of 20 years.
Distribution
Global has expanded its business to include electric distribution where it
can be linked to existing or prospective generation opportunities. Since 1997,
Global has invested in six distribution companies which serve approximately 2.7
million customers and a population of 10 million in Argentina, Brazil, Chile and
Peru. Investments in these rate-regulated distribution companies represented 30%
of Energy Holdings' assets, or $1.2 billion, as of September 30, 1999. Global is
actively involved in managing the operations of these distribution companies in
accordance with shareholder agreements and/or operating contracts.
Global's analysis of distribution investments is based on an in-depth
assessment of the regulatory environment, expected growth in the service area
and related generation opportunities. Global's experience in the technical and
operating aspects of electric distribution systems enables it to identify and
correct operational deficiencies and thereby enhance efficiency and
profitability. Global's approach to management of its distribution investments
is to appoint a transition team, which includes its own experts and local
representatives, with appropriate experience to assess operational activities
and implement improvements as required. The team then recruits local managers to
assume operational responsibility ultimately. When required, Global has
contracted with its affiliate, Public Service Electric and Gas Company, to
assist in investment evaluation and project assessment and provide facility
management and operation services.
DISTRIBUTION OPERATIONS
Number of Global's
Location Customers Ownership Interest
-------- ---------- ----------------
EDEN ............................ Argentina 270,000 30%
EDES ............................ Argentina 130,000 30%
EDELAP .......................... Argentina 290,000 30%
Rio Grande Energia .............. Brazil 940,000 31%
Chilquinta Energia .............. Chile 410,000 50%
Luz del Sur ..................... Peru 690,000 43%
---------
Total ..................... 2,730,000
=========
Argentina
EDEN, EDES and EDELAP
In 1997, Global and its partner, AES, acquired Empresa Distribuidora de
Energia Norte S.A. (EDEN) and Empresa Distribuidora de Energia Sur S.A. (EDES)
which distribute electricity to areas within the Province of Buenos Aires.
Global has a 30% ownership interest in each of EDEN and EDES. EDEN and EDES each
have a 95-year exclusive territorial franchise concession and collectively serve
a total of approximately 400,000 customers. In 1998, Global purchased from AES a
30% interest in Empresa Distribuidora La Plata S.A. (EDELAP) which distributes
electricity predominantly in the provincial capital, La Plata. EDELAP has a
95-year exclusive territorial franchise concession, granted in 1992, and serves
a total of approximately 290,000 customers. EDEN, EDES and EDELAP purchase
electric power from the spot market and pursuant to contracts with CTSN, which
is partially owned by Global and AES. The CTSN power purchase contracts expire
in May 2001.
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Pursuant to contracts and operating practices, Global has significant
operating responsibilities with respect to these three distribution systems.
Shareholder agreements specify corporate governance, voting rights and key
financial elements. Global has veto power over major decisions including, among
other things, material contracts, indebtedness, bankruptcy, sale of assets,
operating and capital budgets and dividend policy. In order to satisfy the
requirements of the EDEN and EDES privatization process with respect to
experience managing distribution systems, Global was identified as the named
operator.
In its first year of ownership, the following technical improvements were
achieved at EDEN and EDES: outage duration decreased 2%; outage frequency
decreased 43%; line losses were reduced from 15% to 13%; and staff was reduced
from 2,000 to 1,206. The costs associated with achieving these improvements were
funded by internally generated cash flow and did not require any additional
investment by Global. With regard to EDELAP, many of the operational
improvements expected in privatization had already been achieved by the previous
owners. Global and AES have combined certain EDELAP operations with the nearby
EDEN and EDES distribution systems operations to provide opportunities for cost
savings and efficiencies.
EDELAP's tariffs are regulated by the national agency, Ente Nacional
Regulador de la Electricidad (ENRE), while EDEN and EDES are regulated by the
provincial authority, Ente Provincial Regulador de la Electricidad (EPRE). Each
privatized system was granted rate certainty for the ten year period following
privatization, which occurred in 1997 in the case of EDEN and EDES and 1992 in
the case of EDELAP. Although regulated by different authorities, ratemaking
principles adopted under Argentine national law and provincial law are similar
and can be characterized as "price-cap with periodic review" methodology, a type
of incentive regulation which allows regulated companies to retain a portion of
the economic benefits arising from efficiency gains. As a general matter, the
tariff is intended to allow distribution companies to recover the cost of
electricity and to earn a margin for distribution services. Large industrial
users may purchase electricity from distributors or directly from generators
with the local distributor collecting a toll. Any loss of such customers is not
expected to have a material impact on the profitability of the distribution
system.
Rate cases are held every five years with periodic adjustments as follows:
changes in the United States Producer Price Index (PPI) and Consumer Price Index
(CPI) -- every 12 months; changes in cost of electricity -- every six months;
and efficiency factor -- 1% annual reduction in margin starting January 31,
2002. The tariffs are denominated in United States Dollars and converted to
pesos when billed to customers.
Semi-annually, the quality of service of each distribution system is
measured against established standards and penalties may be imposed and paid to
compensate customers if such standards are not achieved. Global intends to
implement capital improvement budgets which will attempt to meet quality of
service standards. Failure to meet required standards would result in penalties
which are not expected to have a material impact on the distribution system,
although no assurances can be given.
With the combined EDEN, EDES and EDELAP systems, Global, along with its
partner AES, is the third largest power distributor in Argentina. Global's
electric distribution facilities in Argentina now provide over 6,200 GWH per
annum to a population of nearly two million within the Province of Buenos Aires.
Brazil
Rio Grande Energia
Together with VBC Energia, a consortium of Brazilian companies formed to
invest in electric privatization, and Previ, the largest pension fund in Brazil,
Global acquired Rio Grande Energia (RGE), a Brazilian distribution company
privatized in 1997. Global's ownership interest in RGE is approximately 31%. Due
to Global's distribution experience, it was designated as and remains the named
operator for the system in order to satisfy requirements of the privatization
process. A shareholder's agreement establishes corporate governance, voting
rights and key financial provisions. Global has veto rights over certain
actions, including approval of the annual budget and financing plan, executive
officers, significant investments or acquisitions, sale or encumbrance of
assets,
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establishment of guarantees, amendment of the concession agreement and dividend
policies. Day-to-day operations are the responsibility of RGE, subject to
partnership oversight.
RGE serves approximately 940,000 customers in the state of Rio Grande do
Sul in Southern Brazil and operates under a 30-year non-exclusive territorial
concession agreement ending in 2027. The concession is non-exclusive in that the
distribution system must provide large consumers the right to choose another
provider of energy or to self-generate. Global does not believe this represents
a substantial threat to the profitability of the distribution system in Brazil
since the tariff structure provides the distribution system the opportunity to
recover all costs associated with distribution service plus a return. RGE
secures its energy supply through contractual agreements expiring between 2007
and 2020. RGE also purchases 20% of its requirements through 2013 pursuant to
United States Dollar denominated contracts.
Since the acquisition in 1997, RGE has achieved the following technical
improvements: outage duration has been reduced by 45% and frequency of
interruption has dropped by 39%; line losses were reduced from 15% to 9%, while
during the same time period costs were lowered by reducing staff from 2,092 to
1,470 employees.
RGE is regulated by Agencia Nacional de Energia Eletrica (ANEEL), the
national regulatory authority. ANEEL's functions include granting and
supervising electric utility concessions, approving electricity tariffs, issuing
regulations and auditing distribution systems' performance. The rate setting
process for Brazilian distribution companies has two components, an annual
adjustment for which RGE applies every April and is embedded in the concession
contract, and a rate revision which will be calculated for RGE in 2003 and every
fifth year thereafter.
The annual adjustment is designed to permit the distribution system to
recover inflationary cost increases as well as to pass through to consumers
increases in energy purchase costs, subject to timing differences. The rate
calculation formula also includes an "X" factor which permits ANEEL to adjust
for productivity. ANEEL has set the "X" factor at zero for the first five-year
period.
RGE has filed for and been granted two annual adjustments per the
specified formula. In 1998, RGE received a 4% increase and in April 1999, RGE
was awarded a 10.9% increase based on its annual review. RGE was also granted a
special adjustment of 2.6% in May 1999 to account for increased costs related to
United States Dollar denominated energy supply contracts during the January to
April 1999 time period prior to the annual review. This special adjustment was
granted as a result of the devaluation of the Brazilian Real and it is not
expected to reoccur.
The second component of the rate setting process is the tariff review
conducted every five years by ANEEL. The tariff setting considers changes in the
structure of costs and in the market of the distribution system, the tariffs
charged by similar companies and efficiency factors. RGE's first rate review is
scheduled to be performed in 2003. During this rate revision, ANEEL can revise
the "X" factor which would be in place for the following five year period.
ANEEL also monitors service quality by auditing duration and frequency of
outages as well as several other performance measures. Global intends to
implement capital improvement budgets which will attempt to meet quality of
service standards. Failure to meet required standards would result in penalties
which are not expected to have a material negative impact on the distribution
system, although no assurances can be given.
Chile and Peru
Chilquinta Energia
In June 1999, Global together with its partner, Sempra, jointly acquired
(90.23%) of the shares of Chilquinta Energia, S.A. (Chilquinta), an energy
distribution company with numerous energy holdings, based in Valparaiso, Chile.
In January 2000, Global and Sempra jointly acquired an additional 9.75%,
increasing their total share holding to 99.98% of the company. Funding for the
purchase of the incremental shares was provided at the time of the initial
investment. Chilquinta provides growth opportunities and enhances Global's
market position in the region by adding electric and gas
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distribution facilities in Chile. Gas distribution is provided through Energas,
a start-up company that provides service to more than 18,000 natural gas
customers in Chile as of December 1999. The Chilquinta acquisition also included
a 37% interest in Luz del Sur which owns electric distribution facilities in
Peru. Simultaneous with the closing of this acquisition, Global and its partner
sold Chilquinta's 32% interest in Central Puerto, S.A., an Argentine thermal
electric generator. In September 1999, Global and Sempra closed on a tender
offer for outstanding publicly traded shares of Luz del Sur. The number of
shares tendered constitutes 22.5% of the shares of Luz del Sur. The tender was
offered exclusively in Peru. Global and Sempra also purchased an additional 25%
of Luz del Sur upon closing of the tender offer, which gives them approximately
85% control of Luz del Sur. Global's investment in connection with these
transactions was approximately $108 million.
As equal partners in the acquisition, Global and Sempra share in the
management of Chilquinta, however, Sempra has assumed lead operational
responsibilities in Chile, while Global has assumed lead operational
responsibilities in Peru. The shareholders' agreement gives Global important
veto rights over major partnership decisions including dividend policy, budget
approvals, management appointments and indebtedness.
Chilquinta sells approximately 4,500 GWH per year to approximately 410,000
customers in Chile. Chilquinta operates under a non-exclusive perpetual
franchise within Chile's Region V which is located just north and west of
Santiago. Global believes that direct competition for distribution customers
would be uneconomic for potential competitors. Luz del Sur operates under an
exclusive, perpetual franchise in the southern portion of the city of Lima and
in an area just south of the city along the coast serving approximately 690,000
customers. Both Chilquinta and Luz del Sur purchase energy for distribution from
generators in their respective markets on a contract basis.
Distribution companies in Chile are subject to rate regulation by the
Comision Nacional de Energia, a national governmental regulatory authority. The
Chilean regulatory framework has been in existence since 1982, with rates set
every four years based on a model company. The tariff which distribution
companies charge to regulated customers consists of two components: the actual
cost of energy purchased plus an additional amount to compensate for the value
added in distribution (DVA tariff). The DVA tariff considers allowed losses
incurred in the distribution of electricity, administrative costs of providing
service to customers, costs of maintaining and operating the distribution
systems, and an annual real return on investment of 8% to 12% based on the new
replacement cost of distribution assets. Changes in electricity distribution
companies' cost of energy are passed through to customers, with no impact on the
distributors' margins (equal to the DVA tariff). Therefore, distributors,
including Chilquinta, are not affected by changes in the generation sector which
affect prices. The next setting of tariff levels based on the model company is
scheduled to take place in November 2000. The DVA tariff index provides for
monthly adjustments based on variations in certain economic indicators whenever
the component costs increase by more than 3% over prior levels. This index
provides inflation adjustments and indirect devaluation protection.
Distribution companies in Peru are subject to rate regulation by the
Comision de Tarifas Electricas, a national governmental regulatory authority.
The Peruvian rate setting mechanism was established in 1992 and is similar to
the Chilean system described above. Rates are set every four years. The next
regularly scheduled rate setting for Luz del Sur will be in November 2001.
In April 1999, Chile implemented service quality standards and penalties,
however, specific regulations have not yet been published. Quality of service
limits have been published in Peru in November 1999 and distribution companies
will be subject to penalties if the standards are not met. Requirements in Chile
and Peru are expected to be consistent with those established in Argentina and
Brazil. Global intends to implement capital improvement budgets which will
attempt to meet quality of service standards. Failure to meet required standards
would result in penalties which are not expected to have a material impact on
the distribution system, although no assurances can be given.
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RESOURCES
Strategic Overview
Resources focuses on providing energy infrastructure financing in
developed countries. Resources invests in energy-related financial transactions
and manages a diversified portfolio of investments, including leveraged leases,
leveraged buyout funds, limited partnerships and marketable securities.
Resources seeks to invest in transactions where its expertise and understanding
of the inherent risks and operating characteristics of energy-related assets
provide a competitive advantage. Resources currently expects to concentrate its
future investment activity on energy-related financial transactions. Since it
was established in 1985, Resources has grown its portfolio to include more than
60 separate investments.
Worldwide deregulation of energy markets is creating new investment
opportunities for Resources. As energy assets are privatized or sold, purchasers
require significant amounts of acquisition capital. In addition to traditional
bank and debt financing, leveraged leases provide purchasers with a source of
funding for such acquisitions. Resources, as an experienced participant in the
leveraged lease financing market for energy assets, is actively pursuing
domestic and international opportunities to invest in these highly structured
transactions.
Recently, Resources has entered into leveraged lease transactions of
electric generation plants and electric and gas distribution networks with
utilities located in Western Europe. In addition, Resources acquired investments
in lease transactions of utility assets in the United States nearing the end of
their initial lease term. Resources has invested in 15 energy-related leases
since 1997.
As of September 30, 1999, Resources had approximately $1.6 billion
invested in leveraged lease transactions which represented approximately 84% of
Resources' total assets of $1.9 billion. Leveraged leases of energy-related
plant and equipment totaled approximately $1.1 billion or 70% of the lease
portfolio and 59% of Resources' assets. The remainder of Resources' portfolio is
further diversified across a wide spectrum of asset types and business sectors
including leveraged leases of aircraft, railcars and real estate, limited
partnership interests in project finance transactions, and leveraged buyout and
venture funds. Approximately 95% of the lease investments in Resources'
portfolio are with lessees that have investment grade credit ratings.
Portfolio Segments
The major components of Resources' investment portfolio as a percent of
its total assets as of September 30, 1999 were:
Leveraged Lease Investments
Energy-Related ........................................... 59%
Real Estate .............................................. 10%
Aircraft ................................................. 10%
Railcars and Industrial Equipment ........................ 5%
Leveraged Buyout Funds ..................................... 11%
Other Limited Partnerships and Venture Funds ............... 4%
Marketable Securities and other ............................ 1%
As of September 30, 1999, no single investment represented more than 7% of
Resources' total assets.
Leveraged Lease Investments
Resources' equity investments in leveraged leases help to diversify Energy
Holdings' portfolio. In addition, they provide a fixed rate of return,
predictable income and cash flow, and depreciation and amortization deductions
for federal income tax purposes.
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Leveraged lease investments are complex transactions that are carefully
structured to achieve specific tax and accounting results. In a leveraged lease,
the lessor acquires an asset by investing equity representing approximately 15%
to 20% of the cost and incurring non-recourse lease debt for the balance. The
lessor acquires economic and tax ownership of the asset and then leases it to
the lessee for a period of time no greater than 80% of its remaining useful
life. As the owner, the lessor is entitled to depreciate the asset under
applicable federal tax guidelines. In addition, the lessor receives income from
lease payments made by the lessee during the term of the lease and interest
deductions associated with the lease debt. Lease rental payments are
unconditional obligations of the lessee and are always set at levels at least
sufficient to service the non-recourse lease debt. The lessor is also entitled
to any residual value associated with the leased asset at the end of the lease
term. An evaluation of the after-tax cash flows to the lessor determines the
return on the investment. Under GAAP, the lease investment is recorded on a net
basis and income is recorded periodically as a constant return on the net
unrecovered investment.
Resources evaluates lease investment opportunities with respect to
specific risk factors. The assumed residual value risk, if any, is analyzed and
verified by third-party experts at the time the investment is made. Credit risk
is assessed and, if necessary, mitigated or eliminated through various
structuring techniques, such as defeasance mechanisms and letters of credit.
Resources does not take currency risk in its cross-border lease investments.
Transactions are therefore structured with rental payments denominated and
payable in United States Dollars. Resources, as a passive lessor or investor,
does not take operating risk with respect to the assets it owns, so leases are
structured with the lessee having an absolute obligation to make rental payments
whether or not the assets operate. The assets subject to lease are an integral
element in Resources' overall security and collateral position. If such assets
were to be impaired, the rate of return on a particular transaction could be
affected. The operating characteristics and the business environment in which
the assets operate are, therefore, important and must be understood and
periodically evaluated. For this reason, Resources retains experts to conduct
regular appraisals on the assets it owns and leases.
As an equity investor in leveraged leases since 1985, Resources has
developed significant expertise in evaluating leveraged lease opportunities,
structuring transactions to satisfy its investment criteria and the requirements
of lessees and completing transactions in a timely manner. Resources' market
presence, reputation and access to capital are expected to provide opportunities
to invest in future transactions.
Energy-Related Leases
The Resources' portfolio contains twenty separate leveraged leases of
energy-related assets. The total amount invested in such transactions was
approximately $1.1 billion, or 59%, of Resources' assets. This portion of the
portfolio, along with anticipated new investments of this type, is expected to
contribute approximately 78% to 87% of Resources' revenues over the next five
years. Over 95% of this portion of the lease portfolio represents investment
grade credit risk. The energy-related sector is expected to be the primary focus
of Resources' future investment activity.
Included in Resources' energy-related leveraged lease portfolio are
transactions with United States utilities for peaking plants, combined-cycle
facilities, nuclear power plants, a cogeneration facility and a reservoir
storage facility. Resources has also structured leveraged lease investments for
electric generation plants, electric and gas distribution networks and a
waste-to-energy facility for lessees in the Netherlands, the United Kingdom and
New Zealand. Resources currently retains undivided interests in approximately
1,625 MW of generation capacity, of which approximately 8% is nuclear.
Real Estate Leases
The real estate leveraged lease portion of the portfolio is expected to
generate revenue of approximately $10 million per annum on average over the next
five years. This represents approximately 5% of Resources' average annual
revenue. Real estate leveraged leases represented approximately 10% of
Resources' assets at September 30, 1999 and totaled approximately $200 million.
The portfolio consists of separate leases on 49 properties with seven lessees.
Resources is not currently planning to invest in any new leveraged leases of
real property.
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Aircraft Leases
The aircraft leveraged lease portion of the portfolio totaled
approximately $200 million as of September 30, 1999. This represented
approximately 10% of Resources' assets. Revenue associated with these
investments is expected to be less than 1% of Resources' revenue or
approximately $1 million per annum on average over the next five years. The
current portfolio contains sixteen aircraft leased to six separate lessees.
Resources believes that the lessees in this portion of the portfolio represent
acceptable credit risk except in one situation where United States Treasuries
have been provided as additional collateral. Resources is not currently planning
to invest in any new aircraft leveraged lease transactions.
Railcars and Industrial Equipment Leases
The remaining portion of the leveraged lease portfolio totaling
approximately $90 million is expected to contribute revenue of approximately $2
million per annum on average over the next five years.
LBO Funds/Limited Partnerships
As of September 30, 1999, approximately 11% of Resources' assets were
invested in LBO funds and 4% in other limited partnerships and venture funds.
Approximately $292 million was invested in this segment of the portfolio as of
September 30, 1999. Approximately $221 million included in the LBO funds
represents the fair value of Resources' share of publicly traded common stock in
six companies. The LBO funds and limited partnership investments in Resources'
portfolio are expected to contribute, excluding distributions associated with
asset sales, approximately 14% of total revenue in 2000 and diminish to
approximately 7% in 2004 as they mature. Resources is not currently planning to
make investments of this nature in the future.
Resources does not manage any fund or partnership in this portfolio. The
timing of distributions from these investments is not within Resources' control.
For more information on Resources' operations and investments, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
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SCHEDULE OF ASSETS AS OF SEPTEMBER 30, 1999
(Thousands of Dollars)
% of Resources'
Amount Total Assets
--------- ------------
Leveraged Leases
Energy-Related
Foreign .................................... $ 739,539 38.0%
Domestic ................................... 407,107 20.9%
Real Estate
Foreign .................................... -- --
Domestic ................................... 192,741 9.9%
Aircraft
Foreign .................................... 131,953 6.8%
Domestic ................................... 68,038 3.5%
Commuter Railcars
Foreign .................................... 80,378 4.1%
Domestic ................................... -- --
Industrial
Foreign .................................... -- --
Domestic ................................... 9,244 0.5%
---------- -----
Total Leveraged Leases, Net .............. 1,629,001 83.7%
Limited Partnerships
LBO Funds ..................................... 221,186 11.4%
Other ......................................... 70,476 3.6%
---------- -----
Total Limited Partnerships ............... 291,662 15.0%
Marketable Securities ............................ 12,707 0.7%
Owned Property and Equipment ..................... 7,907 0.4%
Current Assets ................................... 3,441 0.2%
---------- -----
Total Resources' Assets .......................... $1,944,718 100.0%
========== =====
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ENERGY TECHNOLOGIES
Energy Technologies is an energy management company that provides
energy-related engineering, consulting and mechanical contracting services to
and constructs, operates and maintains heating, ventilating and air conditioning
(HVAC) systems for industrial and commercial customers in the Northeastern and
Middle Atlantic United States. Energy Technologies also supplies electricity and
gas to industrial, commercial and residential customers. Energy Technologies
currently provides such services to 13,000 customers. As of September 30, 1999,
Energy Technologies had assets of $232 million. Energy Holdings will assess the
growth prospects and opportunities for Energy Technologies' business before
committing additional capital.
Since its formation in 1997, Energy Technologies has established a
presence in the energy services business through the acquisition of seven
companies involved in the engineering, construction, installation, operation and
maintenance of energy equipment and HVAC systems. In January 1998, Energy
Technologies acquired Fluidics, Inc., a diversified mechanical and building
services contractor with operations from Pennsylvania and New Jersey to
Virginia. During 1999, Energy Technologies acquired six mechanical and building
service companies headquartered in New Jersey, Rhode Island and Virginia. The
combination of these companies created a regional energy service capability from
New England to Virginia. In addition, PSEG transferred one of its subsidiaries,
Public Service Conservation Resources Corporation (PSCRC), an energy management
contractor, to Energy Technologies effective January 1, 1999. Energy
Technologies plans to grow existing operations and utilize the recently acquired
companies to deliver expanded energy-related services and products, including
gas and electricity, to new and existing customers.
Energy Technologies supplies natural gas and electricity to industrial and
commercial customers. Energy Technologies' policy is to enter into natural gas
and electricity futures contracts and forward purchases to lock in prices
related to future sales commitments. Whenever possible, Energy Technologies
attempts to be 100% covered on its electric and gas sales positions with respect
to supply during periods of peak price volatility.
OTHER SUBSIDIARIES
EGDC, a nonresidential real estate property management business, has been
conducting a controlled exit from the real estate business since 1993. EGDC has
investments in eight commercial real estate properties (one of which is
developed) in several states. EGDC's strategy is to preserve the value of its
assets to allow for the controlled disposition of its properties as favorable
sales opportunities arise. As of September 30, 1999, December 31, 1998 and 1997,
EGDC's consolidated assets aggregated $75 million, $75 million and $83 million,
respectively.
PSEG Capital has served as our financing vehicle, borrowing on the basis
of a minimum net worth maintenance agreement with PSEG. As of September 30, 1999
and December 31, 1998, PSEG Capital had debt outstanding of $650 million and
$498 million, respectively. Existing debt matures from 1999 to 2003. For
additional information including certain restrictions relating to the BPU
Focused Audit, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources -- External
Financings".
Funding formerly served as our financing vehicle on the basis of our
consolidated financial position. At December 31, 1998, Funding had debt
outstanding of $251 million. At September 30, 1999, Funding had no debt
outstanding.
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COMPETITIVE ENVIRONMENT
Our businesses face increasing competition from numerous well-capitalized
competitors. See "Risk Factors -- We and our subsidiaries are subject to
substantial competition".
REGULATION
We are not subject to direct regulation by the BPU, except potentially
with respect to certain transfers of control and reporting requirements.
Our parent, PSEG, is also the parent of Public Service Electric and Gas
Company, an operating public utility company engaged principally in the
generation, transmission, distribution and sale of electric energy service and
in the transmission, distribution and sale of gas service in New Jersey. Public
Service Electric and Gas Company is subject to regulation by the BPU.
As a result of the 1992 Focused Audit of PSEG's non-utility businesses,
the BPU approved a plan which, among other things, provides that: (1) PSEG will
not permit Energy Holdings' non-utility investments to exceed 20% of PSEG's
consolidated assets without prior notice to the BPU; (2) the Public Service
Electric and Gas Company Board of Directors will provide an annual certification
that the business and financing plans of Energy Holdings will not adversely
affect Public Service Electric and Gas Company; (3) PSEG will (a) limit debt
supported by the minimum net worth maintenance agreement between PSEG and PSEG
Capital to $650 million and (b) make a good-faith effort to eliminate such
support over a six to ten year period from May 1993; and (4) Energy Holdings
will pay Public Service Electric and Gas Company an affiliation fee of up to $2
million a year. PSEG and Energy Holdings and its subsidiaries continue to
reimburse Public Service Electric and Gas Company for the costs of all services
provided to them by employees of Public Service Electric and Gas Company.
Pursuant to the Energy Competition Act, the BPU may impose certain
requirements with respect to affiliate transactions between and among Public
Service Electric and Gas Company, PSEG and Energy Holdings. The BPU has been
conducting proceedings pursuant to the Energy Master Plan and the Energy
Competition Act and is expected to issue a series of orders that will decide
both generic issues for the energy industry, including affiliate standards
(including fair competition and affiliate transactions), and company specific
matters for each utility, including Public Service Electric and Gas Company.
As a result of the final outcome of the BPU's proceedings in connection
with the Energy Master Plan and Energy Competition Act and accounting impacts
resulting from deregulation of the generation of electricity and the unbundling
of the utility business, we do not believe that the Focused Audit provision
requiring notification to the BPU that PSEG's non-utility assets exceed 20%
remains appropriate and believes that modifications will be required. On August
24, 1999, the BPU issued its Final Order in the matter of Public Service
Electric and Gas Company's rate unbundling, stranded costs and restructuring
filings. Appeals filed on behalf of several Public Service Electric & Gas
Company customers are pending at the Appellate Division of the New Jersey
Superior Court. The Final Order noted that PSEG's non-regulated assets would
likely exceed 20% of total PSEG assets once the utility's generating assets were
transferred to a non-regulated subsidiary, as provided in the Final Order. The
Final Order also noted that, due to significant changes in the industry and, in
particular, PSEG's corporate structure as a result of the Final Order,
modifications to or relief from the Focused Audit order might be warranted. The
Final Order directed Public Service Electric and Gas Company to file a petition
with the BPU to maintain the existing regulatory parameters or to propose
modifications to the Focused Audit order no later than the end of the first
quarter of 2000. Regulatory oversight by the BPU to assure that there is no harm
to utility ratepayers from PSEG's non-utility investments is expected to
continue. Such assets were approximately 20% of PSEG's consolidated assets at
September 30, 1999. We believe that if still required, we are capable of
eliminating PSEG support of PSEG Capital debt within the time period set forth
in the Focused Audit. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources --
External Financings".
PSEG has claimed an exemption from regulation by the SEC as a registered
holding company under PUHCA, except for the provision which relates to the
acquisition of 5% or more of the voting
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securities of an electric or gas utility company. PUHCA regulates public utility
holding companies and their subsidiaries. Global's investments include exempt
wholesale generators (EWGs) and foreign utility companies (FUCOs) under PUHCA.
Failure to maintain status of these plants as EWGs or FUCOs could subject PSEG
and its subsidiaries to regulation under PUHCA.
PURPA provides to QFs certain exemptions from Federal and state laws and
regulations, including organizational, rate and financial regulation. Global's
investments include QFs under PURPA. If any of the plants in which Global has an
interest lose their QF status or if amendments to PURPA are enacted that
substantially reduce the benefits currently afforded QFs, PSEG could lose its
exemption under PUHCA unless such generation plant was able to qualify for EWG
status.
In addition, actions of PSEG, Public Service Electric and Gas Company,
Resources or Energy Technologies could cause PSEG, and therefore its
subsidiaries, including us and our subsidiaries, to be no longer exempt from
regulation under PUHCA. If PSEG were no longer exempt from PUHCA, PSEG and its
subsidiaries would be subject to additional regulation by the SEC with respect
to their financing and investing activities, including the amount and type of
non-utility investments. We believe that this would not have a material adverse
effect on our company.
Global's electric and gas distribution facilities in Latin America are
rate-regulated enterprises. Rates charged to customers are established by
governmental authorities, and are currently sufficient to cover all operating
costs and provide a fair return. We can give no assurances that future rates
will be established at levels sufficient to cover such costs, provide a return
on our investment or generate adequate cash flow to pay principal and interest
on its debt or to enable us to comply with the terms of our debt agreements.
Global and Energy Technologies are subject to regulation by the Federal
Energy Regulatory Commission with respect to certain matters, including
interstate sales and exchanges of electric transmission, capacity and energy.
Additionally, Global is subject to the rules and regulations of the United
States Environmental Protection Agency, Department of Transportation and
Department of Energy and state and foreign environmental rules and regulations.
INCOME TAXES
Energy Holdings and its subsidiaries file a consolidated federal income
tax return with PSEG. Energy Holdings and its subsidiaries have entered into tax
allocation agreements with PSEG which provide that Energy Holdings and its
subsidiaries will record their tax liabilities as though they were filing
separate returns and will record tax benefits to the extent that PSEG is able to
receive those benefits.
In a case affecting another utility in which PSEG, we and Public Service
Electric and Gas Company were not parties, the BPU considered the extent to
which tax savings generated by non-utility affiliates included in the
consolidated tax return of that utility's holding company should be considered
in setting that utility's rates. The issue of PSEG sharing the benefits of
consolidated tax savings with Public Service Electric and Gas Company or its
ratepayers was addressed by the BPU in a July 28, 1995 letter which informed
Public Service Electric and Gas Company that the issue of consolidated tax
savings can be discussed in the context of Public Service Electric and Gas
Company's next base rate case or plan for an alternative form of regulation.
While PSEG continues to account for its two wholly-owned subsidiaries on a
stand-alone basis, resulting in a realization of tax benefits by the entity
assuming the risk and generating the benefit, an ultimate unfavorable resolution
of the consolidated tax issue could reduce Public Service Electric and Gas
Company's and PSEG's revenues, net income or net cash flows. In addition, an
unfavorable resolution may adversely impact PSEG's non-utility investment
strategy. In such event, Resources would consider curtailing new leveraged lease
investments. PSEG believes that Public Service Electric and Gas Company's taxes
should be treated on a stand-alone basis for rate-making purposes, based on the
separate nature of the utility and non-utility businesses and on the fact that
shareholders, not utility customers, assume the risk of the investments.
However, neither we nor PSEG are able to predict what action, if any, the BPU
may take concerning consolidation of tax benefits in future proceedings.
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EMPLOYEES
At September 30, 1999, we and our majority owned subsidiaries had 1,875
employees. We believe that we and our subsidiaries maintain satisfactory
relationships with employees.
ENVIRONMENTAL MATTERS
For a discussion of applicable environmental laws and regulations, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Environmental Matters".
PROPERTIES
Energy Holdings owns no real property. Energy Holdings subleases office
space for its corporate headquarters at 80 Park Plaza, Newark, New Jersey from
Public Service Electric and Gas Company. Our subsidiaries also lease office
space at various locations throughout the world to support business activities.
We maintain adequate insurance coverage for properties in which our subsidiaries
have an equity interest, subject to certain exceptions, to the extent such
property is usually insured and insurance is available at a reasonable cost.
Global, a New Jersey corporation, has its principal executive offices at
35 Waterview Boulevard, Parsippany, New Jersey 07054. Resources, a New Jersey
corporation, has its principal executive offices at 80 Park Plaza, Newark, New
Jersey 07102. Energy Technologies, a New Jersey corporation, has its principal
executive offices at 499 Thornall Street, Edison, New Jersey 08837. EGDC, a New
Jersey corporation, has its principal executive offices at 80 Park Plaza,
Newark, New Jersey 07102. PSEG Capital, a New Jersey corporation, has its
principal executive offices at 80 Park Plaza, Newark, New Jersey 07102.
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MANAGEMENT
As our sole stockholder, PSEG has the power to control the election of the
directors and all other matters submitted for stockholder approval and has
control over our management and affairs. Mr. E. James Ferland is a director of
Public Service Electric and Gas Company.
Following are our executive officers and directors of Energy Holdings:
Executive Officers
E. JAMES FERLAND has been a Director since June 1989 and was elected
Chairman of the Board and Chief Executive Officer of Energy Holdings in June
1989. Age 57. He was elected a Director of Global in 1986 and of Resources in
1985. Mr. Ferland has also been Chairman of the Board, President and Chief
Executive Officer of PSEG since July 1986 and Chairman of the Board and Chief
Executive Officer of Public Service Electric and Gas Company since September
1991.
ROBERT J. DOUGHERTY, JR. has been a Director since January 1997 and was
elected President and Chief Operating Officer of Energy Holdings in January
1997. Age 48. He was also elected Chairman of the Board of Energy Technologies
in 1997. Mr. Dougherty joined Public Service Electric and Gas Company in 1973
and was President of Enterprise Ventures and Services Corporation from February
1995 to December 1996. He was Senior Vice President -- Electric of Public
Service Electric and Gas Company from September 1991 to February 1995.
MICHAEL J. THOMSON was named President and Chief Executive Officer of
Global in January 1997. Age 40. Mr. Thomson had served as a Senior Vice
President for Global from July 1993 to February 1994 and was Chief Operating
Officer from February 1994 to December 1996. Before coming to Global, Mr.
Thomson was employed by Energy Holdings beginning in 1990, where he served as
Business Strategy Manager and then as Vice President of Business Development and
Planning.
EILEEN A. MORAN was elected President and Chief Executive Officer of
Resources in May 1990. Age 44. She also was elected President and Chief
Executive Officer of EGDC in January 1997. Prior to that, Ms. Moran had served
as Vice President -- Investments of Resources from 1986. Ms. Moran joined Public
Service Electric and Gas Company in 1977.
STANLEY M. KOSIEROWSKI was named President and Chief Executive Officer of
Energy Technologies in June 1999. Age 47. Previously he had been Executive Vice
President and Chief Operating Officer of Energy Technologies from February 1999
to June 1999. He had been Vice President -- Customer Operations of Public
Service Electric and Gas Company from January 1997 to February 1999. Mr.
Kosierowski joined Public Service Electric and Gas Company in 1974 and has held
a number of senior management positions.
BRUCE E. WALENCZYK was elected Vice President -- Finance of Energy
Holdings in March 1998. Age 48. He is also a Director and Vice President of PSEG
Capital. Prior to joining Energy Holdings, Mr. Walenczyk served as a Managing
Director at Paine Webber and Kidder, Peabody & Co., Inc., beginning in January
1991. He had been with Kidder, Peabody since 1983 and was primarily engaged in
capital raising and other financial advisory services for a variety of entities
including major electric and gas utilities and energy companies.
DEREK M. DIRISIO was elected Vice President and Controller of Energy
Holdings in June 1998. Age 35. He had been Director -- Accounting Services for
Energy Holdings since November 1997. Mr. DiRisio joined Public Service Electric
and Gas Company in September 1991, where he served in a number of positions in
corporate planning and accounting.
Directors
FRANK CASSIDY has been a Director since January 2000. Age 52. He has been
President of PSEG Power LLC, a subsidiary of PSEG, since July 1999. Previously
he had been President of Energy Technologies from November 1996 to July 1999,
Senior Vice President--Fossil Generation of Public Service Electric and Gas
Company from February 1995 to November 1996 and Vice President--
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Transmission Systems of Public Service Electric And Gas Company from November
1989 to February 1995.
ROBERT C. MURRAY has been a Director since January 2000. Age 54. He has
been Vice President and Chief Financial Officer of PSEG since January 1992 and
Executive Vice President--Finance of Public Service Electric and Gas Company
since June 1997. He had been Senior Vice President and Chief Financial Officer
of Public Service Electric and Gas Company from January 1992 to June 1997.
R. EDWIN SELOVER has been a Director since January 2000. Age 54. He has
been Vice President and General Counsel of PSEG since April 1988 and Senior Vice
President and General Counsel of Public Service Electric and Gas Company since
January 1988.
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THE EXCHANGE OFFER
Purpose of the Exchange Offer
In connection with the sale of the original notes, we entered into an
exchange and registration rights agreement with the initial purchasers. Under
the exchange and registration rights agreement, we agreed to use our reasonable
best efforts to effect the exchange offer and to file and cause to become
effective with the SEC a registration statement with respect to the exchange of
the original notes for exchange notes.
The form and terms of the exchange notes are the same as the form and
terms of the original notes except that the exchange notes have been registered
under the Securities Act and will not be subject to some restrictions on
transfer applicable to the original notes. In that regard, the original notes
provide, among other things, that if a registration statement relating to the
exchange offer has not been filed and declared effective within certain
specified periods, the interest rate on the original notes will increase by
0.25% per annum each 90-day period that such additional interest rate continues
to accrue under any such circumstance, up to an aggregate maximum increase equal
to 1% per annum, until the registration statement is filed or declared
effective, as the case may be.
Upon completion of the exchange offer, holders of original notes will not
be entitled to any further registration rights under the exchange and
registration rights agreement, except under limited circumstances. See "Risk
Factors -- Consequences of failure to exchange original notes" and "Description
of Exchange Notes". The exchange offer is not being made to holders of original
notes in any jurisdiction in which the exchange offer or the acceptance of the
notes would not be in compliance with the securities or blue sky laws of such
jurisdiction. Unless the context requires otherwise, the term "holder" with
respect to the exchange offer means any person who has obtained a properly
completed bond power from the registered holder, or any person whose original
notes are held of record by The Depository Trust Company (DTC) who desires to
deliver such original notes by book-entry transfer at DTC. We will exchange as
soon as practicable after the expiration date of the exchange offer the original
notes for a like aggregate principal amount of the exchange notes.
Terms of the Exchange Offer
We hereby offer, upon the terms and subject to the conditions described in
this prospectus and in the accompanying letter of transmittal, to exchange up to
$400,000,000 aggregate principal amount of exchange notes for a like aggregate
principal amount of original notes properly tendered on or before the expiration
date of the exchange offer and not properly withdrawn in accordance with the
procedures described below. We will issue, promptly after the expiration date of
the exchange offer, an aggregate principal amount of up to $400,000,000 of
exchange notes in exchange for a like principal amount of outstanding original
notes tendered and accepted in connection with the exchange offer. We will pay
all charges and expenses, other than certain applicable taxes described below,
in connection with the exchange offer. See "-- Fees and Expenses".
Holders may tender their original notes in whole or in part in any
integral multiple of $1,000 principal amount. The exchange offer is not
conditioned upon any minimum principal amount of original notes being tendered.
As of the date of this prospectus, $400,000,000 aggregate principal amount of
the original notes is outstanding. Holders of original notes do not have any
appraisal or dissenters' rights in connection with the exchange offer. Original
notes which are not tendered for or are tendered but not accepted in connection
with the exchange offer will remain outstanding and be entitled to the benefits
of the indenture, but will not be entitled to any further registration rights
under the exchange and registration rights agreement, except under limited
circumstances. See "Risk Factors -- Consequences of failure to exchange original
notes" and "Description of exchange notes". If any tendered original notes are
not accepted for exchange because of an invalid tender, the occurrence of
certain other events set forth herein or otherwise, appropriate book-entry
transfer will be made, without expense, to the tendering holder of the notes
promptly after the expiration date of the exchange offer. Holders who tender
original notes in connection with the exchange offer will not be required to pay
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brokerage commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes with respect to the exchange of original notes in
connection with the exchange offer.
Neither Energy Holdings nor the Board of Directors of Energy Holdings
makes any recommendation to holders of original notes as to whether to tender or
refrain from tendering all or any portion of their original notes pursuant to
the exchange offer. In addition, no one has been authorized to make any such
recommendation. Holders of original notes must make their own decisions whether
to tender pursuant to the exchange offer and, if so, the aggregate amount of
original notes to tender based on such holders' own financial positions and
requirements.
Expiration Date; Extensions; Amendments
The term "expiration date" means p.m., Eastern Standard Time, on , 2000.
However, if the exchange offer is extended by us, the term "expiration date"
shall mean the latest date and time to which the exchange offer is extended.
We expressly reserve the right in our sole and absolute discretion,
subject to applicable law, at any time and from time to time:
- to delay the acceptance of the original notes for exchange,
- to extend the expiration date of the exchange offer and retain all
original notes tendered pursuant to the exchange offer, subject, however,
to the right of holders of original notes to withdraw their tendered
original notes as described under "--Withdrawal Rights", and
- to waive any condition or otherwise amend the terms of the exchange
offer in any respect.
If the exchange offer is amended in a manner determined by us to
constitute a material change, we will promptly disclose such amendment by means
of a prospectus supplement that will be distributed to the registered holders of
the original notes, and we will extend the exchange offer to the extent required
by Rule 14e-1 under the Exchange Act.
We will promptly notify the exchange agent by making an oral or written
public announcement of any delay in acceptance, extension, termination or
amendment. This announcement in the case of an extension will be made no later
than a.m., Eastern Standard Time, on the next business day after the previously
scheduled expiration date. Without limiting the manner in which we may choose to
make any public announcement and, subject to applicable law, we will have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to an appropriate news agency.
Acceptance for Exchange and Issuance of Exchange Notes
Upon the terms and subject to the conditions of the exchange offer, we
will exchange and issue to the exchange agent, exchange notes for original notes
validly tendered and not withdrawn promptly after the expiration date. In all
cases, delivery of exchange notes in exchange for original notes tendered and
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of:
- original notes or a book-entry confirmation of a book-entry transfer of
original notes into the exchange agent's account at DTC, including an
agent's message (as defined below) if the tendering holder has not
delivered a letter of transmittal,
- the letter of transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees or (in the case of a
book-entry transfer) an agent's message instead of the letter of
transmittal, and
- any other documents required by the letter of transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of original notes into the exchange agent's account at DTC.
The term "agent's message" means a message,
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transmitted by DTC to and received by the exchange agent and forming a part of a
book-entry confirmation, which states that DTC has received an express
acknowledgment from the tendering DTC participant, which acknowledgment states
that such participant has received and agrees to be bound by the letter of
transmittal and that Energy Holdings may enforce the letter of transmittal
against such participant.
Subject to the terms and conditions of the exchange offer, we will be
deemed to have accepted for exchange, and thereby exchanged, original notes
validly tendered and not withdrawn as, if and when we give oral or written
notice to the exchange agent of our acceptance of such original notes for
exchange pursuant to the exchange offer. The exchange agent will act as agent
for us for the purpose of receiving tenders of original notes, letters of
transmittal and related documents, and as agent for tendering holders for the
purpose of receiving original notes, letters of transmittal and related
documents and transmitting exchange notes to validly tendering holders Such
exchange will be made promptly after the expiration date.
If, for any reason whatsoever, acceptance for exchange or the exchange of
any original notes tendered pursuant to the exchange offer is delayed (whether
before or after our acceptance for exchange of original notes) or we extend the
exchange offer or are unable to accept for exchange or exchange original notes
tendered pursuant to the exchange offer, then, without prejudice to our rights
set forth herein, the exchange agent may, nevertheless, on our behalf and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered original notes
and such original notes may not be withdrawn except to the extent tendering
holders are entitled to withdrawal rights as described under " Withdrawal
Rights".
Pursuant to the letter of transmittal or agent's message in lieu thereof,
a holder of original notes will warrant and agree in the letter of transmittal
that it has full power and authority to tender, exchange, sell, assign and
transfer original notes, that we will acquire good, marketable and unencumbered
title to the tendered original notes, free and clear of all liens, restrictions,
charges and encumbrances, and the original notes tendered for exchange are not
subject to any adverse claims or proxies. The holder also will warrant and agree
that it will, upon request, execute and deliver any additional documents deemed
by us or the exchange agent to be necessary or desirable to complete the
exchange, sale, assignment, and transfer of the original notes tendered pursuant
to the exchange offer.
Procedures for Tendering Original Notes
Valid Tender. Except as set forth below, in order for original notes to be
validly tendered pursuant to the exchange offer, a properly completed and duly
executed letter of transmittal (or facsimile thereof), with any required
signature guarantees, or (in the case of a book-entry tender) an agent's message
instead of the letter of transmittal, and any other required documents, must be
received by the exchange agent at one of its addresses set forth under "--
Exchange Agent". In addition, either:
- tendered original notes must be received by the exchange agent,
- such original notes must be tendered pursuant to the procedures for
book-entry transfer set forth below and a book-entry confirmation,
including an agent's message if the tendering holder has not delivered a
letter of transmittal, must be received by the exchange agent, in each
case on or before the expiration date, or
- the guaranteed delivery procedures set forth below must be complied with.
If less than all of the original notes are tendered, a tendering holder
should fill in the amount of original notes being tendered in the appropriate
box on the letter of transmittal. The entire amount of original notes delivered
to the exchange agent will be deemed to have been tendered unless otherwise
indicated.
The method of delivery of certificates, the letter of transmittal and all
other required documents is at the option and sole risk of the tendering holder,
and delivery will be deemed made only when actually received by the exchange
agent. If delivery is by mail, registered mail,
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return receipt requested, properly insured or an overnight delivery service is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
Book-Entry Transfer. The exchange agent will establish an account with
respect to the original notes at DTC for purposes of the exchange offer within
two business days after the date of this prospectus. Any financial institution
that is a participant in DTC's book-entry transfer facility system may make a
book-entry delivery of the original notes by causing DTC to transfer such
Original Notes into the exchange agent's account at DTC in accordance with DTC's
procedures for transfers. However, although delivery of original notes may be
effected through book-entry transfer into the exchange agent's account at DTC,
the letter of transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an agent's message instead
of the letter of transmittal, and any other required documents, must in any case
be delivered to and received by the exchange agent at its address set forth
under "-- Exchange Agent" on or before the expiration date, or the guaranteed
delivery procedure set forth below must be complied with.
Delivery of documents to DTC in accordance with DTC's procedures does not
constitute delivery to the exchange agent.
Signature Guarantees. Certificates for the original notes need not be
endorsed and signature guarantees on the letter of transmittal are unnecessary
unless (1) a certificate for the original notes is registered in a name other
than that of the person surrendering the certificate or (2) such holder
completes the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the letter of transmittal. In the case of (1) or (2) above,
such certificates for original notes must be duly endorsed or accompanied by a
properly executed bond power, with the endorsement or signature on the bond
power and on the letter of transmittal guaranteed by a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor
institution," including (as such terms are defined therein):
- a bank;
- a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer;
- a credit union;
- a national securities exchange, registered securities association or
clearing agency; or
- a savings association that is a participant in a Securities Transfer
Association (an "Eligible Institution"), unless surrendered on behalf of
that Eligible Institution. See Instruction 1 to the letter of transmittal.
Guaranteed Delivery. If a holder desires to tender original notes pursuant
to the exchange offer and the certificates for such original notes are not
immediately available or time will not permit all required documents to reach
the exchange agent on or before the expiration date, or the procedures for
book-entry transfer cannot be completed on a timely basis, these original notes
may nevertheless be tendered, provided that all of the following guaranteed
delivery procedures are complied with:
(1) the tenders are made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the letter of transmittal, is received by
the exchange agent, as provided below, on or before the expiration date; and
(3) the certificates (or a book-entry confirmation) representing all
tendered original notes, in proper form for transfer, together with a properly
completed and duly executed letter of transmittal (or facsimile thereof), with
any required signature guarantees, or an agent's message instead of the letter
of transmittal, and any other documents required by the letter of transmittal,
are received by the exchange agent within three New York Stock Exchange trading
days after the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the exchange agent and must include a guarantee by an
Eligible Institution in the form shown in such
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notice. Notwithstanding any other provision hereof, the delivery of exchange
notes in exchange for original notes tendered and accepted for exchange pursuant
to the exchange offer will in all cases be made only after timely receipt by the
exchange agent of original notes, or of a book-entry confirmation with respect
to such original notes, and a properly completed and duly executed letter of
transmittal (or facsimile thereof), together with any required signature
guarantees, or an agent's message instead of the letter of transmittal, and any
other documents required by the letter of transmittal. Accordingly, the delivery
of exchange notes might not be made to all tendering holders at the same time,
and will depend upon when original notes, book-entry confirmations with respect
to original notes and other required documents are received by the exchange
agent. Our acceptance for exchange of original notes tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering holder and us upon the terms and subject to the conditions of the
exchange offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered original notes will be determined by us, in our sole discretion.
The interpretation by us of the terms and conditions of the exchange offer,
including the letter of transmittal and the instructions thereto, will be final
and binding.
We reserve the absolute right, in our sole and absolute discretion, to
reject any and all tenders determined by us not to be in proper form or the
acceptance of which, or exchange for, may, in the opinion of our counsel, be
unlawful. We also reserve the absolute right, subject to applicable law, to
waive any condition or irregularity in any tender of original notes of any
particular holder whether or not similar conditions or irregularities are waived
in the case of other holders. No tender of original notes will be deemed to have
been validly made until all irregularities with respect to such tender have been
cured or waived. Neither we, any of our affiliates or assigns, the exchange
agent nor any other person will be under any duty to give any notification of
any irregularities in tenders or incur any liability for failure to give any
such notification.
If any letter of transmittal, endorsement, bond power, power of attorney,
or any other document required by the letter of transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by us, proper
evidence satisfactory to us, in our sole discretion, of such person's authority
to so act must be submitted. A beneficial owner of original notes that are held
by or registered in the name of a broker, dealer, commercial bank, trust company
or other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the exchange offer.
Resales of Exchange Notes
We are making the exchange offer for the exchange notes in reliance on the
position of the staff of the Division of Corporation Finance of the SEC as
defined in certain interpretive letters addressed to third parties in other
transactions. However, we did not seek our own interpretive letter and there can
be no assurance that the staff of the Division of Corporation Finance of the SEC
would make a similar determination with respect to the exchange offer as it has
in such interpretive letters to third parties. Based on these interpretations by
the staff of the Division of Corporation Finance of the SEC, and subject to the
two immediately following sentences, we believe that exchange notes issued
pursuant to this exchange offer in exchange for original notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
exchange notes are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such exchange notes.
However, any holder of original notes who is an "affiliate" of ours or who
intends to participate in the exchange offer for the purpose of distributing
exchange notes, or any broker-dealer who purchased original notes from us to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act, (a) will not be able to rely on the interpretations of the staff
of the Division of Corporation Finance of the SEC defined in the above-mentioned
interpretive letters, (b) will not be permitted or
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entitled to tender such original notes in the exchange offer and (c) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any sale or other transfer of such original notes unless such
sale is made pursuant to an exemption from such requirements.
In addition, as described below, if any broker-dealer holds original notes
acquired for its own account as a result of market-making or other trading
activities and exchanges such original notes for exchange notes, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such exchange notes. Each
holder of original notes who wishes to exchange original notes for exchange
notes in the exchange offer will be required to represent that:
- it is not an "affiliate" of Energy Holdings,
- any exchange notes to be received by it are being acquired in the
ordinary course of its business,
- it has no arrangement or understanding with any person to participate in a
distribution (within the meaning of the Securities Act) of such exchange
notes, and
- if the tendering holder is not a broker-dealer, that holder is not engaged
in, and does not intend to engage in, a distribution (within the meaning
of the Securities Act) of its exchange notes.
In addition, we may require the holder, as a condition to that holder's
eligibility to participate in the exchange offer, to furnish to us (or an agent
of ours) in writing, information as to the number of "beneficial owners" (within
the meaning of Rule 13d-3 under the Exchange Act) on behalf of whom such holder
holds the original notes to be exchanged in the exchange offer.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it acquired the original
notes for its own account as the result of market-making activities or other
trading activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
exchange notes. The letter of transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. Based on the position
taken by the staff of the Division of Corporation Finance of the SEC in the
interpretive letters referred to above, we believe that participating
broker-dealers who acquired original notes for their own accounts as a result of
market-making activities or other trading activities may fulfill their
prospectus delivery requirements with respect to the exchange notes received
upon exchange of such original notes (other than original notes which represent
an unsold allotment from the initial sale of the original notes) with a
prospectus meeting the requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as it contains a description
of the plan of distribution with respect to the resale of such exchange notes.
Accordingly, this prospectus, as it may be amended or supplemented from
time to time, may be used by a participating broker-dealer in connection with
resales of exchange notes received in exchange for original notes where such
original notes were acquired by such participating broker-dealer for its own
account as a result of market-making or other trading activities. See "Plan of
Distribution". Subject to certain provisions contained in the exchange and
registration rights agreement, we have agreed that this prospectus, as it may be
amended or supplemented from time to time, may be used by a participating
broker-dealer in connection with resales of such exchange notes for a period not
exceeding 180 days after the expiration date. However, a participating
broker-dealer who intends to use this prospectus in connection with the resale
of exchange notes received in exchange for original notes pursuant to the
exchange offer must notify us, or cause us to be notified, on or before the
expiration date, that it is a participating broker-dealer. Such notice may be
given in the space provided for that purpose in the letter of transmittal or may
be delivered to the exchange agent at one of the addresses set forth herein
under "-- Exchange Agent".
Any participating broker-dealer who is an "affiliate" of Energy Holdings
may not rely on such interpretive letters and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction. In that regard, each participating broker-dealer who
surrenders original notes pursuant to the exchange offer will be deemed to have
agreed, by
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execution of the letter of transmittal or delivery of an agent's message in lieu
thereof, that upon receipt of notice from Energy Holdings of the occurrence of
any event or the discovery of:
(1) any fact which makes any statement contained or incorporated by
reference in this prospectus untrue in any material respect or
(2) any fact which causes this prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not
misleading, or
(3) the occurrence of certain other events specified in the exchange and
registration rights agreement, such participating broker-dealer will suspend the
sale of exchange notes pursuant to this prospectus until we have amended or
supplemented this prospectus to correct such misstatement or omission and have
furnished copies of the amended or supplemented prospectus to such participating
broker-dealer, or we have given notice that the sale of the exchange notes may
be resumed, as the case may be.
Withdrawal Rights
Except as otherwise provided herein, tenders of original notes may be
withdrawn at any time on or before the expiration date. In order for a
withdrawal to be effective a written, telegraphic, telex or facsimile
transmission of such notice of withdrawal must be timely received by the
exchange agent at its address set forth under "-- Exchange Agent" on or before
the expiration date. Any such notice of withdrawal must specify the name of the
person who tendered the original notes to be withdrawn, the aggregate principal
amount of original notes to be withdrawn, and, if certificates for such original
notes have been tendered, the name of the registered holder of the original
notes as set forth on the original notes, if different from that of the person
who tendered such original notes.
If original notes have been delivered or otherwise identified to the
exchange agent, then before the physical release of such original notes, the
tendering holder must submit the serial numbers shown on the particular original
notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of original notes
tendered for the account of an Eligible Institution. For original notes tendered
pursuant to the procedures for book-entry transfer described in "-- Procedures
for Tendering Original Notes", the notice of withdrawal must specify the name
and number of the account at DTC to be credited with the withdrawal of original
notes, in which case a notice of withdrawal will be effective if delivered to
the exchange agent by written, telegraphic, telex or facsimile transmission.
Withdrawals of tenders of original notes may not be rescinded. Original notes
properly withdrawn will not be deemed validly tendered for purposes of the
exchange offer, but may be retendered at any subsequent time on or before the
expiration date by following any of the procedures described above under "--
Procedures for Tendering Original Notes". All questions as to the validity, form
and eligibility (including time of receipt) of such withdrawal notices will be
determined by us, in our sole discretion, whose determination shall be final and
binding on all parties. Neither we, any of our affiliates or assigns, the
exchange agent nor any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any original notes which
have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
Interest on Exchange Notes
Interest on the notes is payable semi-annually on April 1 and October 1 of
each year, commencing on April 1, 2000, at the rate of 10% per annum. The
exchange notes will bear interest from and including the last interest payment
date on the original notes (or if none, has yet occurred, the date of issuance
of such original notes). Accordingly, holders of original notes that are
accepted for exchange will not receive accrued but unpaid interest on such
original notes at the time of tender, but such interest will be payable in
respect of such exchange notes delivered in exchange for such original notes on
the first interest payment date after the expiration date.
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Accounting Treatment
The exchange notes will be recorded at the same carrying value as the
original notes for which they are exchanged, which is the aggregate principal
amount of the original notes, as reflected in our accounting records on the date
of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized in connection with the exchange offer. The cost of the exchange offer
will be amortized over the term of the exchange notes.
Exchange Agent
First Union National Bank has been appointed as exchange agent for the
exchange offer. Delivery of the letters of transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this prospectus or of the letter of transmittal should be directed to
the exchange agent as follows:
By Registered or Certified Mail:
First Union National Bank of North Carolina
First Union Customer Information Center
1525 West W.T. Harris Blvd.-3C3
Reorganization Department
Charlotte, North Carolina 28288
Attention: Michael Klotz (6110)
By Hand or Overnight Delivery Service:
First Union National Bank of North Carolina
First Union Customer Information Center
1525 West W.T. Harris Blvd.-3C3
Reorganization Department
Charlotte, North Carolina 28288
Attention: Michael Klotz (6110)
By Facsimile Transmission (for Eligible Institutions only):
(704) 590-7619
Confirm by Telephone:
(800) 829-8432 or (704) 590-7408
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
Fees and Expenses
We have agreed to pay the exchange agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket expenses. We
will also pay brokerage houses and other custodians, nominees and fiduciaries
the reasonable out-of-pocket expenses incurred by them in forwarding copies of
this prospectus and related documents to the beneficial owners of original
notes, and in handling or tendering for their customers. Holders who tender
their original notes for exchange will not be obligated to pay any transfer
taxes in connection with the transfer. If, however, exchange notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the original notes tendered, or if a transfer tax is
imposed for any reason other than the exchange of original notes in connection
with the exchange offer, then the amount of any such transfer taxes, whether
imposed on the registered holder or any other persons, will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder. We will not
make any payment to brokers, dealers or other nominees soliciting acceptances of
the exchange offer.
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DESCRIPTION OF EXCHANGE NOTES
Holders can find the definitions of certain terms used in this description
under the subheading "Certain Definitions".
The terms of the exchange notes to be issued in the exchange offer are
identical in all material respects to the terms of the original notes, except
for the transfer restrictions relating to the original notes. The exchange notes
will be issued, and the original notes were issued, under an indenture dated
October 8, 1999, between Energy Holdings and First Union National Bank, as
trustee. The exchange notes will evidence the same debt as the original notes,
and both series of notes will be entitled to the benefits of the indenture and
will be treated as a single class of debt securities. When we refer to the term
"note" or "notes", we are referring to both the original notes and the exchange
notes to be issued in the exchange offer. When we refer to "holders" of the
notes, we are referring to those persons who are the registered holders of notes
on the books of the registrar appointed under the indenture. Upon effectiveness
of the registration statement of which this prospectus is a part, the indenture
will be subject to and governed by the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of the
notes, the indenture and the exchange and registration rights agreement relating
to the notes (registration rights agreement). It does not restate those
documents in their entirety. We urge holders to read the notes, the indenture
and the registration rights agreement because they, and not this description,
define your rights as holders of the notes. Copies of the indenture, including a
form of the notes, and the registration rights agreement are available as set
forth below under "--Additional Information".
Brief Description of the Notes
The notes are general senior unsecured obligations of Energy Holdings and
rank pari passu in right of payment with all of the other unsecured and
unsubordinated indebtedness of Energy Holdings.
Because Energy Holdings is a holding company that conducts all of its
operations through its subsidiaries, holders of the notes will generally have a
junior position to claims of creditors of those subsidiaries, including trade
creditors, debtholders, secured creditors and taxing authorities.
Principal, Maturity and Interest
The indenture does not limit the aggregate principal amount of debt
securities which may be issued under it. The exchange notes will initially be
limited to $400,000,000 and will be issued in registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Energy
Holdings may "reopen" any series of debt securities and issue additional debt
securities of that series. The notes will mature on October 1, 2009 (stated
maturity date) unless redeemed or repurchased prior to such date.
Interest on the notes accrues at the rate of 10% per annum and is payable
semi-annually in arrears on April 1 and October 1 of each year (each, an
Interest Payment Date), commencing April 1, 2000. Energy Holdings will make each
interest payment to the persons in whose names the notes are registered at the
close of business on the March 15 and September 15 immediately preceding any
interest payment date.
Interest on the exchange notes will accrue from the date of original
issuance or, if interest has already been paid, from the most recent interest
payment date to which interest was paid or duly provided for. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months. If
any interest payment date or the stated maturity date or date of earlier
redemption or repurchase is not a business day, the required payment shall be
made on the next succeeding day which is a business day, without any interest or
other payment in respect of the payment subject to delay, with the same force
and effect as if made on the interest payment date or stated maturity date or
date of earlier redemption or repurchase.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in Newark, New Jersey and The
City of New York are authorized or obligated by law or executive order to close.
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Payment and Paying Agents
Interest on the notes is payable at any office or agency to be maintained
by Energy Holdings in Newark, New Jersey and The City of New York. At the option
of Energy Holdings, however, interest may be paid (i) by check mailed to the
address of the person entitled to the interest payment at the address that
appears in the "security register" maintained by Energy Holdings or (ii) by wire
transfer to an account maintained by the person entitled to the interest payment
as specified in the security register. (Sections 301, 1001 and 1002 of the
Indenture).
Transfer and Exchange
Under the indenture, debt securities of any series, including the notes,
may be presented for registration of transfer and may be presented for exchange
(i) at each office or agency required to be maintained by Energy Holdings for
payment of such series as described in "--Payment and Paying Agents", and (ii)
at each other office or agency that Energy Holdings may designate from time to
time for such purposes. No service charge will be made for any transfer or
exchange of debt securities, including the notes, but Energy Holdings may
require payment of any tax or other governmental charge payable in connection
with the transfer or exchange. (Section 305 of the indenture).
The indenture does not require Energy Holdings to (i) issue, register the
transfer of or exchange debt securities during a period beginning at the opening
of business 15 days before any selection of debt securities of that series to be
redeemed and ending at the close of business on (A) if debt securities of the
series are issuable only in registered form, the day of mailing of the relevant
notice of redemption and (B) if debt securities of the series are issuable in
bearer form, the day of the first publication of the relevant notice of
redemption, or, if debt securities of the series are also issuable in registered
form and there is no publication, the day of mailing of the relevant notice of
redemption; (ii) register the transfer of or exchange any debt security in
registered form, or portion thereof, called for redemption, except the
unredeemed portion of any debt security in registered form being redeemed in
part; (iii) exchange any debt security in bearer form called for redemption,
except to exchange such debt security in bearer form for a debt security in
registered form of that series and like tenor that is simultaneously surrendered
for redemption; or (iv) issue, register the transfer of or exchange any debt
security which has been surrendered for repayment at the option of the holder,
except the portion, if any, of such debt security not to be so repaid. (Section
305 of the Indenture).
The registered holder of a note will be treated as the owner of it for all
purposes.
Optional Redemption
The notes will be redeemable at the option of Energy Holdings, in whole or
in part at any time, on at least 30 days but not more than 60 days prior written
notice mailed to the registered holders thereof, at a redemption price equal to
the greater of (i) 100% of the principal amount of the notes to be redeemed, and
(ii) the sum, as determined by the Quotation Agent (as defined below), of the
present values of the principal amount of the notes to be redeemed and the
remaining scheduled payments of interest thereon from the redemption date to
October 1, 2009 (remaining life), discounted from their respective payment dates
to the date of redemption on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate (as defined herein)
plus 40 basis points plus, in either case, accrued interest thereon to the date
of redemption.
If money sufficient to pay the redemption price of and accrued interest on
all of the Notes (or portions thereof) to be redeemed on the redemption date is
deposited with the trustee or paying agent on or before the redemption date and
certain other conditions are satisfied, then on and after such redemption date,
interest will cease to accrue on such notes (or such portion thereof) called for
redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
life that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity with the remaining life of the notes to be redeemed.
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"Comparable Treasury Price" means, with respect to any redemption date,
the average of four Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or, if the trustee obtains fewer than four such Reference Treasury
Dealer Quotations, the average of all such quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by Energy
Holdings. "Reference Treasury Dealer" means (i) Goldman, Sachs & Co., Banc of
America Securities LLC, Lehman Brothers Inc., and Merrill Lynch Government
Securities, Inc. and their respective successors; provided, however, that if the
foregoing shall cease to be primary United States Government securities dealers
in New York City (Primary Treasury Dealer), Energy Holdings shall substitute
therefor another Primary Treasury Dealer, and (ii) any other Primary Treasury
Dealer selected by Energy Holdings.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding such redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual yield to maturity of the Comparable Treasury
Issue, calculated on the third business day preceding such redemption date using
a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such redemption
date.
Energy Holdings may at any time, and from time to time, purchase the notes
at any price or prices in the open market or otherwise.
Mandatory Redemption
Energy Holdings is not required to make mandatory redemption or sinking
fund payments with respect to the notes.
Certain Definitions
The following is a summary of certain defined terms used in the indenture.
Article One of the indenture contains the full definition of all such terms.
"Attributable Debt" in respect of a Sale and Leaseback Transaction means,
as at the time of determination, the present value (discounted at a rate per
annum equal to the weighted average interest rate of all outstanding debt
securities, compounded semi-annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such Sale and
Leaseback Transaction (including any period for which such lease has been
extended).
"Capitalized Lease Obligations" means all rental obligations as lessee
which, under GAAP, are or will be required to be capitalized on the books of
Energy Holdings or any of its Subsidiaries, in each case taken at the amount
thereof accounted for as indebtedness in accordance with such principles.
"Change of Control" means the occurrence of one or more of the following
events: (i) PSEG (or its successors) shall cease to own a majority of the
outstanding voting stock of Energy Holdings, (ii) at any time following the
occurrence of the event described in clause (i), a person or group (as that term
is used in Section 13(d)(3) of the Securities Exchange Act of 1934) of persons
(other than PSEG) shall have become, directly or indirectly, the beneficial
owner or shall have acquired the absolute power to direct the vote, of more than
35% of the outstanding voting stock of Energy Holdings or (iii) during any
twelve-month period, individuals who at the beginning of such period constitute
the Board of Directors of Energy Holdings (together with any new directors whose
election or nomination was approved by a majority of the directors then in
office who were either directors at the beginning of such period or who were
previously so approved) shall cease for any reason to constitute a majority of
the Board of Directors of Energy Holdings, unless approved by a majority of the
Board of Directors in office at the beginning of such period (including such new
directors), or (iv) Energy Holdings shall have merged or consolidated with any
other corporation or the properties and assets of Energy Holdings shall have
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been conveyed or transferred substantially as an entirety to any Person in
accordance with Section 801 of the indenture as described under "-- Merger or
Consolidation". Notwithstanding the foregoing, a Change of Control shall be
deemed not to have occurred if one or more of the above events occurs or
circumstances exist and, after giving effect thereto, the debt securities,
including the notes, are rated no less than "BBB-" by Standard & Poor's Ratings
Group and "Ba1" by Moody's Investors Service.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the total amount of assets (less accumulated depreciation or amortization,
valuation allowances, other applicable reserves and other properly deductible
items in accordance with GAAP) which would appear on a consolidated balance
sheet of Energy Holdings and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, after giving effect to purchase
accounting and after deduction therefrom, to the extent otherwise included, the
amounts of (i) consolidated current liabilities; (ii) deferred income taxes;
(iii) minority interests in consolidated Subsidiaries held by persons other than
Energy Holdings or a Subsidiary; (iv) excess of cost over fair value of assets
of businesses acquired, as determined by the Board of Directors; and (v)
unamortized debt discount and expense and other unamortized deferred changes,
goodwill (including the amounts of investments in affiliates that consist of
goodwill), patents, trademarks, service names, trade names, copyrights,
licenses, deferred project costs, organizational or other development expenses
and other intangible items.
"Indebtedness" of any person means (i) all indebtedness of such person for
borrowed money, whether or not represented by bonds, debentures, notes or other
securities, (ii) the deferred purchase price of assets or services which in
accordance with GAAP would be shown on the liability side of the balance sheet
of such person, (iii) all Indebtedness of another person secured by any Lien on
any property owned by such person, whether or not such Indebtedness has been
assumed, (iv) all obligations of such person to pay a specified purchase price
for goods or services whether or not delivered, i.e., take-or-pay and similar
obligations; (v) all Capitalized Lease Obligations of such person; and (vi) all
obligations of such person guaranteeing any Indebtedness, lease, dividend or
other obligation of any other person, directly or indirectly, whether contingent
or otherwise.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any lease having substantially the same
effect as any of the foregoing).
"Material Subsidiary" means any Subsidiary of Energy Holdings the
consolidated assets of which, as of the date of any determination thereof,
constitute at least 10% of the consolidated assets of Energy Holdings and its
Subsidiaries, or the consolidated earnings before taxes of which constituted at
least 10% of the consolidated earnings before taxes of Energy Holdings and its
Subsidiaries for the most recently completed fiscal year, provided, however,
that no Subsidiary of a Material Subsidiary shall be a Material Subsidiary, and
provided further, notwithstanding the foregoing, in all instances each of
Global, Resources and PSEG Capital shall be a Material Subsidiary.
"Sale and Leaseback Transaction" means an arrangement relating to property
or assets now owned or acquired after the date of the Indenture whereby Energy
Holdings or a Subsidiary transfers such property or assets to a person and
leases it back from such person, other than leases for a term of not more than
36 months or between Energy Holdings and a wholly-owned Subsidiary or between
wholly-owned Subsidiaries.
Certain Covenants
The notes and other series of debt securities issuable under the indenture
will have the benefit of the following covenants.
Limitation on Liens
Energy Holdings covenants in the indenture that it will not, and will not
permit any of its Subsidiaries to create, incur, assume or suffer to exist any
Lien upon or with respect to any property or assets (real or personal, tangible
or intangible) of Energy Holdings or any of its Subsidiaries, whether now owned
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or acquired after the date of the indenture, to secure any Indebtedness that is
incurred, issued, assumed or guaranteed by Energy Holdings or any of its
Subsidiaries without in any such case effectively providing, concurrently with
the incurrence, issuance, assumption or guaranty of any such Indebtedness, that
the debt securities shall be equally and ratably secured with any and all such
Indebtedness; provided, however, that the foregoing restrictions shall not apply
to or prevent the creation, incurrence, assumption or existence of:
o Liens existing on the date of the indenture;
o Liens to secure or provide for the payment of all or any part of the
purchase price of any such property or assets or the cost of construction
or improvement thereof; provided that no such Lien shall extend to or
cover any other property or assets of Energy Holdings or such Subsidiary
of Energy Holdings;
o Liens granted or assumed by Subsidiaries (other than Material
Subsidiaries) in connection with project financings or other Indebtedness
that is not guaranteed by or otherwise an obligation of a Material
Subsidiary;
o Liens on the equity interest of any Subsidiary that is not a Material
Subsidiary in connection with project financings;
o Liens for taxes not yet due, or Liens for taxes being contested in good
faith and by appropriate proceedings for which adequate reserves have been
established;
o Liens incidental to the conduct of the business of or the ownership of
property by Energy Holdings or any of its Subsidiaries which were not
incurred in connection with the borrowing of money or the obtaining of
advances of credit and which do not in the aggregate materially detract
from the value of its property or assets or materially impair the use
thereof in the operation of its business;
o Liens created in connection with worker's compensation, unemployment
insurance and other social security legislation;
o the replacement, extension or renewal (or successive replacements,
extensions or renewals), as a whole or in part, of any Lien, or of any
agreement, referred to above, or the replacement, extension or renewal
(not exceeding the principal amount of Indebtedness secured thereby
together with any premium, interest, fee or expense payable in connection
with any such replacement, extension or renewal) of the Indebtedness
secured thereby; provided that such replacement, extension or renewal is
limited to all or a part of the same property that secured the Lien
replaced, extended or renewed (plus improvements thereon or additions or
accessions thereto); or
o any other Lien not excepted by the foregoing clauses; provided that,
immediately after the creation or assumption of such Lien, the sum of (x)
the amount of outstanding Indebtedness of Energy Holdings secured by all
Liens created or assumed under the provisions of this clause plus (y) the
Attributable Debt with respect to all outstanding leases in connection
with Sale and Leaseback transactions entered into pursuant to the proviso
under "--Limitation on Sale and Leaseback Transactions" does not exceed an
amount equal to 10% of Consolidated Net Tangible Assets, as shown on the
consolidated balance sheet of Energy Holdings and its Subsidiaries as of
the end of the most recent fiscal quarter for which financial statements
are available. (Section 1005 of the indenture).
Limitation on Sale and Leaseback Transactions
Energy Holdings covenants in the indenture that it will not, and will not
permit any Subsidiary to, enter into any Sale and Leaseback Transaction unless
(i) Energy Holdings or such Subsidiary would be entitled to create a Lien on
such property or assets securing Indebtedness in an amount equal to the
Attributable Debt with respect to such transaction without equally and ratably
securing the debt securities as described under the preceding subsection
"--Limitation on Liens" or (ii) the net proceeds of such sale are at least equal
to the fair value (as determined by the Board of Directors) of such property and
Energy Holdings or such Subsidiary shall apply or cause to be applied an amount
in cash
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equal to the net proceeds of such sale to the retirement, within 90 days of the
effective date of any such arrangement, of debt securities or Indebtedness of
Energy Holdings which ranks senior or pari passu with the debt securities or
with Indebtedness of a Subsidiary (other than Indebtedness owed to Energy
Holdings or a Subsidiary or to PSEG); provided, however, that in addition to the
transactions permitted as described in the foregoing clauses (i) and (ii),
Energy Holdings or any Subsidiary may enter into a Sale and Leaseback
Transaction as long as the sum of (x) the Attributable Debt with respect to such
Sale and Leaseback Transaction and all other Sale and Leaseback Transactions
entered into as described in this proviso, plus (y) the amount of outstanding
Indebtedness secured by Liens incurred as described in the last bullet paragraph
of the preceding subsection "Limitation on Liens", does not exceed an amount
equal to 10% of Consolidated Net Tangible Assets, as shown on the consolidated
balance sheet of Energy Holdings and its Subsidiaries as of the end of the most
recent fiscal quarter for which financial statements are available. (Section
1006 of the indenture).
Repayment of Notes Upon a Change of Control
Upon a Change of Control, holders of the notes shall have the right to
require Energy Holdings to repurchase their notes, in whole or in part, at a
repayment price of 101% of their principal amount plus accrued interest to the
repayment date. The holder of debt securities of each other series to be issued
under the indenture shall have the right to require that Energy Holdings
repurchase such holder's debt securities at a repayment price in cash equal to a
specified percentage of the principal amount thereof established for such series
plus accrued interest, if any, to the date of repayment, in accordance with the
terms set forth below and in Article 13 of the indenture.
Within 30 days following any Change of Control, Energy Holdings shall mail
a notice to each holder of debt securities of each series (with a copy to the
trustee) stating:
o that a Change of Control has occurred and that such holder has the right
to require Energy Holdings to repay such holder's debt securities, in
whole or in part, in not less than the minimum denomination required for
debt securities of such series, at a repayment price in cash equal to the
percentage of the principal amount thereof established for such series
plus accrued interest, if any, to the date of repayment (Change of Control
Offer);
o the circumstances and relevant facts regarding such Change of Control
(including information with respect to pro forma historical income, cash
flow and capitalization of Energy Holdings after giving effect to such
Change of Control);
o the repayment date (which shall be a Business Day and be not earlier than
45 days or later than 60 days from the date such notice is mailed)
(repayment date);
o that any debt security of the series not tendered for purchase will
continue to accrue interest;
o that interest on any debt security of the series accepted for repayment
pursuant to the Change of Control Offer shall cease to accrue after the
repayment of such debt security on the repayment date;
o that holders electing to have any debt security repaid pursuant to a
Change of Control Offer will be required to surrender such debt security,
with the form entitled "Option to Elect Repayment" on the reverse of the
debt security completed, to the trustee at the address specified in the
notice not earlier than 45 days and not later than 30 days prior to the
repayment date;
o that holders will be entitled to withdraw their election if the paying
agent receives, not later than the close of business on the third business
day (or such shorter period as may be required by applicable law)
preceding the repayment date, a telegram, telex, facsimile transmission or
letter setting forth the name of the holder, the principal amount of debt
securities the holder delivered for repayment, and a statement that such
holder is withdrawing its election to have such debt securities repaid;
and
o that holders of the series that elect to have their debt securities
purchased only in part will be issued new debt securities of the series in
a principal amount equal to then unpurchased portion of the debt
securities surrendered.
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Energy Holdings has covenanted to comply with the tender offer provisions
of Rule 14e-1 under the Securities Exchange Act of 1934 and any other applicable
laws and regulations in the event that a Change of Control occurs and Energy
Holdings is required to make a Change of Control Offer. (Section 1007 of the
indenture).
Events of Default and Remedies
The following will constitute events of default under the indenture:
o default in the payment of any interest upon any debt security, any coupon
appertaining thereto or any "additional amounts" (which, if the terms of
the particular series of debt securities so specify, will be payable upon
the occurrence of certain events of tax, assessment or governmental charge
with respect to payments on the debt securities) payable in respect of any
debt security of that series when such interest, coupon or additional
amounts become due and payable, and the continuance of such default for a
period of 30 days;
o default in the payment of the principal of (or premium, if any, on) any
debt security of that series, when the same becomes due and payable at
maturity, upon redemption;
o default in the deposit of any sinking fund payment when due by the terms
of any debt security of that series;
o default in the performance, or breach, of any covenant or agreement of
Energy Holdings in the Indenture with respect to any debt security of that
series, and the continuance of such default for 60 days after written
notice of such default to Energy Holdings;
o acceleration of any bond, debenture, note or other evidence of
Indebtedness or under any mortgage, indenture (including the indenture) or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness by Energy Holdings or any Subsidiary
in excess of $25,000,000 in the aggregate (other than (i) any Indebtedness
arising from the obligation to make an equity investment in a Subsidiary
or (ii) Indebtedness which is payable solely out of the property or assets
of a partnership, joint venture or similar entity of which Energy Holdings
or any such Subsidiary is a participant, or which is secured by a Lien on
the property or assets owned or held by such entity, without further
recourse to or liability of Energy Holdings or any such Subsidiary),
whether such Indebtedness now exists or shall hereafter be created;
o certain events in bankruptcy, insolvency or reorganization affecting
Energy Holdings; and
o any other event of default provided with respect to debt securities of
that series. (Section 501 of the indenture).
Energy Holdings is required to file with the trustee, annually, an
officer's certificate as to Energy Holdings' compliance with all conditions and
covenants under the indenture. (Section 1008 of the indenture). The indenture
provides that the trustee may withhold notice to the holders of debt securities
of a series, including the notes, of any default (except payment defaults on the
debt securities of that series) if it considers it in the interest of the
holders of debt securities of the series to do so. (Section 601 of the
indenture).
If an event of default with respect to debt securities of a series,
including the notes, has occurred and is continuing, the trustee or the holders
of not less than 25% in principal amount of outstanding debt securities of that
series may declare the principal (or, if the debt securities of that series are
issued with original issue discount or are "indexed debt securities" (i.e., debt
securities, the interest and principal payments on which are determined by
reference to a particular index, such as a foreign currency or commodity), such
portion of the principal as may be specified in the terms of those debt
securities) of all of the debt securities of that series to be due and payable
immediately, by a notice in writing to Energy Holdings. (Section 502 of the
indenture).
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an event of default with respect to debt securities of any
series, including the Notes, has occurred and is continuing, the trustee is
under no obligation to exercise any of its rights or powers under the indenture
at the
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request, order or direction of the holders of debt securities of that series,
unless those holders have offered the trustee reasonable indemnity against the
expenses and liabilities which might be incurred by it in compliance with such
request. (Section 507 of the indenture).
Subject to such provisions for the indemnification of the trustee, the
holders of a majority in principal amount of the outstanding debt securities of
any series of debt securities, including the notes, will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee, or exercising any trust or power conferred on the
trustee with respect to the debt securities of that series. (Section 512 of the
indenture).
The holders of a majority in principal amount of the outstanding debt
securities of a series, including the notes, may, on behalf of the holders of
all debt securities of such series and any related coupons, waive any past
default under the indenture with respect to such series and its consequences,
except a default (i) in the payment of the principal of (or premium, if any) or
interest, if any, on or additional amounts payable in respect of any debt
security of such series or any related coupons or (ii) in respect of a covenant
or provision that cannot be modified or amended without the consent of the
holder of each outstanding debt security of such series affected thereby.
(Section 513 of the indenture).
Repayment of Notes Upon Certain Events Involving Resources
If (i) Energy Holdings shall no longer own 100% of the equity ownership
interest in Resources, or (ii) (a) a transaction or series of related
transactions (a "Resources Transaction") causes the assets of Resources
immediately after such Resources Transaction to be at least 20% less than the
assets of Resources immediately prior to such Resources Transaction (as measured
from the end of the month immediately preceding the Resources Transaction (or in
the case of a Resources Transaction involving a series of transactions, the
month immediately preceding the first of such transactions)) and (b) as a direct
result of such Resources Transaction, either of Standard & Poor's Ratings Group
or Moody's Investors Service, Inc. shall downgrade its respective rating of
Energy Holdings below BBB- or Ba1 (or if either of such ratings immediately
preceding the Resources Transaction is lower than BBB- or Ba1, such rating shall
as a direct result of such Resources Transaction be downgraded), then the
holders of the notes shall have the right to require Energy Holdings to
repurchase their notes, in whole or in part, at a repayment price equal to the
greater of (i) 100% of the principal amount of the notes to be repurchased, and
(ii) the sum, as determined by the Quotation Agent (as defined on page 68), of
the present values of the principal amount of the notes to be repurchased and
the remaining scheduled payments of interest thereon from the repayment date to
October 1, 2009 discounted from their respective payment dates to the date of
repayment on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Rate (as defined on page 68), plus 40 basis
points plus, in either case, accrued interest thereon to the date of repayment.
Merger or Consolidation
The indenture provides that Energy Holdings may not consolidate with or
merge with or into any other corporation or convey or transfer its properties
and assets substantially as an entirety to any person, unless either Energy
Holdings is the continuing corporation or such corporation or person assumes by
supplemental indenture all the obligations of Energy Holdings under such
indenture and the debt securities issued thereunder and immediately after the
transaction no default shall exist. (Section 801 of the indenture).
No Personal Liability of Directors, Officers, Employees and Stockholders
No past, present or future director, officer, employee, incorporator or
stockholder of Energy Holdings, as such, shall have any liability for any
obligations of Energy Holdings under the notes and the indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of notes by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the notes. The waiver may not be effective to waive liabilities under the
federal securities laws. (Section 113 of the indenture).
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Satisfaction and Discharge, Defeasance and Covenant Defeasance
According to the terms of the indenture, Energy Holdings may discharge
certain obligations to holders of any series of debt securities, including the
notes, that have not already been delivered to the trustee for cancellation and
that either have become due and payable or are by their terms due and payable
within one year (or scheduled for redemption within one year) by irrevocably
depositing with the trustee, in trust, funds in an amount sufficient to pay the
entire indebtedness on such debt securities for principal (and premium, if any)
and interest, if any, and any additional amounts with respect thereto, to the
date of such deposit (if the debt securities have become due and payable) or to
the maturity date or redemption date, as the case may be. (Section 401 of the
indenture).
The indenture provides that, if the provisions of Article Fourteen of the
indenture are made applicable to the debt securities of or within any series,
including the notes, and any related coupons pursuant to Section 301 thereunder,
Energy Holdings may elect either (a) to defease and be discharged from any and
all obligations with respect to such debt securities and any related coupons
(except for the obligations to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such debt securities and the obligations to register the
transfer or exchange of such debt securities and any related coupons, to replace
temporary or mutilated, destroyed, lost or stolen debt securities and any
related coupons, to maintain an office or agency in respect of such debt
securities and any related coupons, and to hold moneys for payment in trust)
(defeasance) (Section 1402 of the indenture) or (b) to be released from its
obligations under any covenant specified pursuant to Section 301 with respect to
such debt securities and any related coupons, and any omission to comply with
such obligations shall not constitute a default or an event of default with
respect to such debt securities and any related coupons (covenant defeasance)
(Section 1403 of the indenture), in either case upon the irrevocable deposit by
Energy Holdings with the trustee (or other qualifying trustee), in trust, of (i)
an amount in United States Dollars, (ii) Government Obligations (as defined
below) applicable to such debt securities and coupons that through the payment
of principal and interest in accordance with their terms will provide money in
an amount, or (iii) a combination thereof in an amount, sufficient to pay the
principal of (and premium, if any) and interest, if any, on such debt securities
and any related coupons, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, Energy
Holdings has delivered to the trustee an opinion of counsel to the effect that
the holders of such debt securities and any related coupons will not recognize
income, gain or loss for United States federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to United States
Federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance or covenant defeasance had not
occurred. The opinion of counsel, in the case of defeasance under clause (a)
above, must refer to and be based upon a ruling of the Internal Revenue Service
or a change in applicable United States federal income tax law occurring after
the date of the indenture. (Section 1404 of the indenture).
"Government Obligations" means securities which are (i) direct obligations
of the United States or (ii) obligations of a person controlled or supervised by
and acting as an agency or instrumentality of the United States, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States, which are not callable or redeemable at the option of the issuer
of that obligation. Government Obligations also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of any
such Government Obligation held by such custodian for the account of the holder
of a depository receipt; provided that, except as required by law, such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from the amount received by the custodian in
respect of the Government Obligation or the specific payment of interest on or
principal of the Government Obligation evidenced by such depository receipt.
(Section 101 of the indenture).
In the event Energy Holdings effects covenant defeasance with respect to
any debt securities and any related coupons and such debt securities and coupons
are declared due and payable because of
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the occurrence of any event of default (other than the events of default
described in clauses (4) or (8) of Section 501 of the indenture) with respect to
any covenant to which there has been defeasance, the amount of Government
Obligations and funds on deposit with the trustee will be sufficient to pay
amounts due on such debt securities and coupons at the time of their stated
maturity but may not be sufficient to pay amounts due on such debt securities
and coupons at the time of the acceleration resulting from such event of
default. In such case, Energy Holdings would remain liable to make payment of
such amounts due at the time of acceleration. (Section 501 of the indenture).
If the trustee or any paying agent is unable to apply any money in
accordance with the Indenture by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then Energy Holdings' obligations under the indenture and such debt
securities and any related coupons shall be revived and reinstated as though no
deposit had occurred pursuant to the indenture, until such time as such trustee
or paying agent is permitted to apply all such money in accordance with the
indenture; provided, however, that if Energy Holdings makes any payment of
principal of (or premium, if any) or interest, if any, on any such debt security
or any related coupon following the reinstatement of its obligations, Energy
Holdings shall be subrogated to the rights of the holders of such debt
securities and any related coupons to receive such payment from the money held
by such trustee or paying agent.
Amendment, Supplement and Waiver
Energy Holdings and the trustee may modify and amend the indenture with
the consent of the holders of a majority in principal amount of all outstanding
debt securities that are affected by the modification or amendment; provided
that no modification or amendment may, without the consent of the holder of each
outstanding debt security affected thereby, among other things:
o change the stated maturity date of the principal of (or premium, if any,
on) or any installment of principal of or interest on any debt security;
o reduce the principal amount of, or the rate or amount of interest in
respect of, or any premium payable upon the redemption of, any debt
security;
o change the manner of calculating the rate of interest;
o change any obligation of Energy Holdings to pay additional amounts in
respect of any debt security;
o reduce the portion of the principal of a debt security issued with the
original issue discount or an indexed debt security that would be due and
payable upon a declaration of acceleration of the maturity of the debt
security or provable in bankruptcy;
o adversely affect any right of repayment at the option of the holder of any
such debt security;
o change the place of payment of principal of, or any premium or interest
on, the debt security;
o impair the right to institute suit for the enforcement of any payment on
or after the stated maturity date of the debt security or on or after any
redemption date or repayment date for the debt security;
o adversely affect any right to convert or exchange any debt security;
o reduce the percentage in principal amount of such outstanding debt
securities, the consent of whose holders is required to amend or waive
compliance with certain provisions of the indenture or to waive certain
defaults under the Indenture;
o reduce the requirements for voting or quorum described below; or
o modify any of the foregoing requirements or any of the provisions relating
to waiving past defaults or compliance with certain restrictive
provisions, except to increase the percentage of holders required to
effect waiver or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the holder of each
debt security affected by the modification or waiver. (Section 902 of the
indenture).
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Energy Holdings and the trustee may modify and amend the indenture without
the consent of any holder, for any of the following purposes:
o to evidence the succession of another person to Energy Holdings and the
assumption by any successor of the covenants of Energy Holdings under the
indenture and the debt securities;
o to add to the covenants of Energy Holdings for the benefit of the holders
of all or any series of debt securities issued under the indenture,
including the notes, and any related coupons or to surrender any right or
power conferred upon Energy Holdings by the indenture;
o to add events of default for the benefit of the holders of all or any
series of debt securities, including the notes, issued under the
indenture;
o to add to or change any provisions of the indenture to facilitate the
issuance of, or to liberalize the terms of, debt securities issued in
bearer form or to permit or facilitate the issuance of debt securities in
uncertificated form, provided that any such actions do not adversely
affect the interests of the holders of the debt securities issued under
the Indenture or any related coupons in any material respect;
o to change or eliminate any provisions of the indenture, provided that any
change or elimination of this nature will become effective only when there
are no debt securities outstanding of any series created prior to the
change or elimination of the provision which are entitled to the benefit
of the provisions;
o to secure the debt securities, including the notes, under the indenture
pursuant to the requirements of Section 1005 of the indenture, or
otherwise;
o to establish the form or terms of debt securities of any series and any
related coupons;
o to evidence and provide for the acceptance of appointment by a successor
trustee or facilitate the administration of the trusts under the Indenture
by more than one trustee;
o to cure any ambiguity, defect or inconsistency in the indenture, provided
such action does not adversely affect the interests of holders of debt
securities of a series, including the notes, issued under the indenture or
any related coupons in any material way; or
o to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series
of debt securities issued under the indenture, including the notes,
provided that the action does not adversely affect the interests of the
holders of the debt securities of that series, including the notes, and
any related coupons in any material way. (Section 901 of the indenture).
In determining whether the holders of the requisite principal amount of
outstanding debt securities have given any request, demand, authorization,
direction, notice, consent or waiver under the indenture or whether a quorum is
present at a meeting of holders of debt securities thereunder,
o the principal amount of a debt security issued with original issue
discount that will be deemed to be outstanding will be the amount of the
principal thereof that would be due and payable as of the date of such
determination upon acceleration of the maturity of the debt security,
o the principal amount of an indexed debt security that may be counted in
making the determination or calculation and that will be deemed
outstanding will be equal to the principal face amount of the indexed debt
security at original issuance, unless otherwise provided pursuant to
Section 301 of the indenture, and
o Debt securities owned by Energy Holdings or any other obligor upon the
debt securities or any affiliate of Energy Holdings or of such other
obligor shall be disregarded. (Section 101 of the indenture).
The indenture contains provisions for convening meetings of the holders of
debt securities of a series if debt securities of that series are issuable in
bearer form. (Section 1501 of the indenture) A meeting may be called at any time
by the trustee, and also, upon request, by Energy Holdings or the
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holders of at least 10% in principal amount of the outstanding debt securities
of that series, in any such case upon notice given as provided in the Indenture.
(Section 1502 of the indenture) Except for any consent that must be given by the
holder of each debt security, as described above, any resolution presented at a
meeting (or an adjourned meeting duly reconvened) at which a quorum is present
may be adopted by the affirmative vote of the holders of a majority in principal
amount of outstanding debt securities of that series; provided, however, that
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage which is less than a majority in principal
amount of outstanding debt securities of a series may be adopted at a meeting
(or an adjourned meeting duly reconvened) at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the outstanding debt securities of that series. Any resolution passed or
decision taken at any meeting of holders of debt securities of a series duly
held in accordance with the indenture will be binding on all holders of debt
securities of that series and any related coupons. The quorum at any meeting
called to adopt a resolution will be persons holding or representing a majority
in principal amount of the outstanding debt securities of a series; provided,
however, that, if any action is to be taken at a meeting with respect to a
consent or waiver which may be given by the holders of not less than a specified
percentage in principal amount of the outstanding debt securities of a series,
the persons holding or representing the specified percentage in principal amount
of the outstanding debt securities of that series will constitute a quorum.
(Section 1504 of the indenture).
Notwithstanding the foregoing provisions, if any action is to be taken at
a meeting of holders of debt securities of a series, including the notes, with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that the indenture expressly provides may be made, given
or taken by the holders of a specified percentage in principal amount of all
outstanding debt securities affected by the action or of the holders of that
series and one or more additional series:
o there shall be no minimum quorum requirement for that meeting and
o the principal amount of the outstanding debt securities of the series that
vote in favor of request, demand, authorization, direction, notice,
consent, waiver or other action will be taken into account in determining
whether such request, demand, authorization, direction, notice, consent,
waiver or other action has been made, given or taken under the indenture.
(Section 1504 of the indenture).
Additional Information
Anyone who receives this prospectus may obtain a copy of the indenture
without charge by writing to Energy Holdings at 80 Park Plaza, T-22, Newark, NJ
07102, Attention: Treasurer.
Reports
Following the consummation of the exchange offer, to the extent required
by the SEC, Energy Holdings will file a copy of all of the information and
reports referred to in clauses (1) and (2) below with the SEC for public
availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to holders of the notes upon request:
(1) all quarterly and annual financial information required to be
contained in a filing with the SEC on Forms 10-Q and 10-K and, with respect to
the annual information only, a report on the annual financial statements
certified by Energy Holdings' independent auditors; and
(2) all information of the type contained in current reports required to
be filed with the SEC on Form 8-K.
The indenture requires Energy Holdings to file the documents referred to
in clauses (1) and (2) above with the trustee within 15 days of the filing of
those documents with the SEC. So long as any notes are outstanding, Energy
Holdings will furnish to the holders of notes the documents referred to in
clauses (1) and (2) above in the manner and to the extent required by the Trust
Indenture Act within 30 days of the filing of those documents with the SEC.
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In addition, Energy Holdings has agreed that, for so long as any original
notes remain outstanding, it will furnish upon request to holders of the
original notes and prospective purchasers the information required to be
delivered pursuant to Rule 144A(d) (4) under the Securities Act.
Book-Entry, Delivery and Form
The exchange notes initially will be represented by one or more notes in
registered, global form without interest coupons (collectively, global notes).
Except as set forth below, the global notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for notes
in certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Notes for Certificated Notes". Except in the limited
circumstances described below, owners of beneficial interests in the global
notes will not be entitled to receive physical delivery of certificated notes
(as defined below).
Initially, the trustee will act as paying agent and registrar. The notes
may be presented for registration of transfer and exchange at the offices of the
registrar.
Depository Procedures
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them from time to time. Energy Holdings takes no responsibility
for these operations and procedures and urges investors to contact the system or
their participants directly to discuss these matters.
DTC has advised Energy Holdings that DTC is a limited-purpose trust
company created to hold securities for its participating organizations
(collectively, participants) and to facilitate the clearance and settlement of
transactions in those securities between participants through electronic
book-entry changes in accounts of its participants. The participants include
securities brokers and dealers (including the initial purchasers of the original
notes), banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
(collectively, indirect participants). Persons who are not participants may
beneficially own securities held by or on behalf of DTC only through the
participants or the indirect participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the participants and indirect participants.
DTC has also advised Energy Holdings that, pursuant to procedures
established by it, (i) upon deposit of the global notes, DTC will credit the
accounts of participants designated by the Initial Purchasers of the original
notes with portions of the principal amount of the global notes and (ii)
ownership of such interests in the global notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the participants) or by the participants and the
indirect participants (with respect to other owners of beneficial interest in
the global notes).
Investors in the global notes may hold their interests therein directly
through DTC, if they are participants in such system, or indirectly through
organizations which are participants in such system. All interests in a global
note may be subject to the procedures and requirements of DTC. Those interests
held through Euroclear or Cedel may also be subject to the procedures and
requirements of such systems. The laws of some states require that certain
persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a global note to
such persons will be limited to that extent. Because DTC can act only on behalf
of participants, which in turn act on behalf of indirect participants and
certain banks, the ability of a person having beneficial interests in a global
note to pledge such interests to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.
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Except as described below, owners of interest in the global notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
"holders" thereof under the indenture for any purpose.
Payments in respect of the principal of, premium, if any, and interest on
a global note registered in the name of DTC or its nominee will be payable to
DTC in its capacity as the registered holder under the Indenture. Under the
terms of the indenture, Energy Holdings and the trustee will treat the persons
in whose names the notes, including the global notes, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, neither Energy Holdings, the trustee
nor any agent of Energy Holdings or the trustee has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
participant's or indirect participant's records relating to or payments made on
account of beneficial ownership interest in the global notes, or for
maintaining, supervising or reviewing any of DTC's records or any participant's
or indirect participant's records relating to the beneficial ownership interests
in the global notes or (ii) any other matter relating to the actions and
practices of DTC or any of its participants or indirect participants. DTC has
advised Energy Holdings that its current practice, upon receipt of any payment
in respect of securities such as the notes (including principal and interest),
is to credit the accounts of the relevant participants with the payment on the
payment date, in amounts proportionate to their respective holdings in the
principal amount of beneficial interest in the relevant security as shown on the
records of DTC unless DTC has reason to believe it will not receive payment on
such payment date. Payments by the participants and the indirect participants to
the beneficial owners of notes will be governed by standing instructions and
customary practices and will be the responsibility of the participants or the
indirect participants and will not be the responsibility of DTC, the trustee or
Energy Holdings. Neither Energy Holdings nor the trustee will be liable for any
delay by DTC or any of its participants in identifying the beneficial owners of
the notes, and Energy Holdings and the Trustee may conclusively rely on and will
be protected in relying on instructions from DTC or its nominee for all
purposes.
Interest in the global notes are expected to be eligible to trade in DTC's
same-day funds settlement system and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants.
DTC has advised Energy Holdings that it will take any action permitted to
be taken by a holder of notes only at the direction of one or more participants
to whose account DTC has credited the interests in the global notes and only in
respect of such portion of the aggregate principal amount of the notes as to
which such participant or participants has or have given such direction.
However, if there is an event of default under the notes, DTC reserves the right
to exchange the global notes for legended notes in certificated form, and to
distribute such notes to its participants.
Exchange of Book-Entry Notes for Certificated Notes
If (i) DTC is at any time unwilling, unable or ineligible to continue as
depository and a successor depository is not appointed by Energy Holdings within
90 days following notice to Energy Holdings; (ii) DTC determines, in its sole
discretion, not to have any of the notes represented by one or more global
notes, or (iii) an event of default under the Indenture has occurred and is
continuing, then Energy Holdings will issue individual notes in certificated
form in exchange for the relevant global notes. In any such instance, an owner
of a beneficial interest in a global note will be entitled to physical delivery
of individual notes in certificated form of like tenor and rank, equal in
principal amount to such beneficial interest and to have such notes in
certificated form registered in its name. In all cases, notes in certificated
form delivered in exchange for any global note or beneficial interests therein
will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
General
The following is a summary of the material United States federal income
tax consequences resulting from the exchange offer and from the ownership of the
exchange notes. It deals only with exchange notes held as capital assets and not
with special classes of noteholders, such as dealers in securities or
currencies, life insurance companies, tax exempt entities, and persons that hold
an exchange note in connection with an arrangement that completely or partially
hedges the exchange note. The discussion is based upon the Internal Revenue Code
of 1986, as amended, and regulations, rulings and judicial decisions thereunder
as of the date hereof. Such authorities may be repealed, revoked or modified so
as to produce federal income tax consequences different from those discussed
below.
Noteholders tendering their original notes or prospective purchasers of
exchange notes should consult their own tax advisors concerning the United
States federal income tax and any state or local income or franchise tax
consequences in their particular situations and any consequences under the laws
of any other taxing jurisdiction.
Consequences of Tendering Original Notes
The exchange of original notes for the exchange notes pursuant to the
exchange offer will not be treated as an "exchange" for United States federal
income tax purposes because the exchange notes will not be considered to differ
materially in kind or extent from the original notes. Rather, the exchange notes
received by a noteholder will be treated as a continuation of the original notes
in the hands of such noteholder. As a result, there will be no United States
federal income tax consequences to noteholders exchanging the original notes for
the exchange notes pursuant to the exchange offer. The noteholder must continue
to include stated interest in income as if the exchange had not occurred. The
adjusted basis and holding period of the exchange notes for any noteholder will
be the same as the adjusted basis and holding period of the original notes.
Similarly, there would be no United States federal income tax consequences to a
holder of original notes that does not participate in the exchange offer.
United States Holders
For purposes of this discussion, a "United States Holder" means:
(1) a citizen or resident of the United States;
(2) a partnership, corporation or other entity treated as a corporation or
partnership for United States federal income tax purposes, created or organized
in or under the law of the United States or of any State of the United States
including the District of Columbia;
(3) an estate the income of which is subject to United States federal
income tax regardless of its source;
(4) a trust, if either:
(a) a court within the United States is able to exercise primary
supervision over the administration of the trust, and one or more United
States persons have the authority to control all substantial decisions of
the trust; or
(b) the trust was in exis tence on August 20, 1996 and elected to be
treated as a United States person at all times thereafter;
(5) any other person that is subject to United States federal income tax
on interest income derived from a note as a result of such income being
effectively connected with the conduct by such person of a trade or business
within the United States; or
(6) certain former citizens of the United States whose income and gain on
the exchange notes will be subject to U.S. income tax.
80
<PAGE>
Payments of Interest
Interest on an exchange note will be taxable to a United States Holder as
ordinary interest income at the time it is received or accrued, depending on the
noteholder's method of accounting for tax purposes.
Disposition of an Exchange Note
Upon the sale, exchange or retirement of an exchange note, a United States
Holder generally will recognize taxable gain or loss equal to the difference
between the amount realized on the sale, exchange or retirement (other than
amounts representing accrued and unpaid interest, which will be treated as
ordinary income) and such holder's adjusted basis in the exchange note. Such
gain or loss generally will be long-term capital gain or loss if the holder's
holding period in the exchange note was more than one year at the time of
disposition.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply with respect to
non-corporate United States Holders to payments of principal and interest on an
exchange note and the proceeds of the sale of an exchange note before maturity.
A 31% "backup withholding" tax will apply to such payments if the United States
Holder fails to provide an accurate taxpayer identification number or to report
all interest and dividends required to be shown on its federal income tax
returns.
Payments to United States Aliens
As used herein, a "United States Alien" is a person or entity that, for
United States federal income tax purposes, is not a United States Holder (as
defined above).
Under current United States federal income and estate tax law:
(1) payments of principal and interest on an exchange note by us or any
paying agent to a noteholder that is a United States Alien will not be subject
to withholding of United States federal income tax, provided that the
noteholder:
(a) does not actually or constructively own 10% or more of the combined
voting power of our stock;
(b) is not a controlled foreign corporation related to us through stock
ownership;
(c) is not a bank receiving interest described in Section 881(c)(3)(A) of
the Internal Revenue Code; and
(d) provides a statement, under penalties of perjury (such as Form
W-8BEN), to us that the holder is a United States Alien and provides its
name and address;
(2) a noteholder that is a United States Alien will not be subject to
United States federal income tax on gain realized on the sale, exchange or
redemption of such note, unless:
(a) the gain is effectively connected with the conduct of a trade or
business within the United States by the United States Alien; or
(b) in the case of a United States Alien who is a nonresident alien
individual and holds the exchange note as a capital asset, such holder is
present in the United States for 183 or more days in the taxable year and
certain other requirements are met; and
(3) an exchange note will not be subject to United States federal estate
tax as a result of the death of a noteholder who is not a citizen or resident of
the United States at the time of death, provided that:
(a) such noteholder did not at the time of death actually or
constructively own 10% or more of the combined voting power of all classes
of our stock; and,
(b) at the time of such noteholder's death, payments of interest on
such exchange note would not have been effectively connected with the
conduct by such noteholder of a trade or business in the United States.
81
<PAGE>
United States information reporting requirements and backup withholding
tax will not apply to payments on an exchange note made outside the United
States by us or any paying agent (acting in its capacity as such) to a
noteholder that is a United States Alien provided that a statement described
in(1)(c) above has been received and neither we nor our paying agent has actual
knowledge that the payee is not a United States Alien.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of an exchange note effected
outside the United States by a foreign office of a "broker" (as defined in
applicable Treasury regulations), provided that such broker:
(1) is a United States Alien;
(2) derives less than 50% of its gross income for certain periods from the
conduct of a trade or business in the United States; and
(3) is not a controlled foreign corporation as to the United States (a
person described in (1), (2) and (3) above being hereinafter referred to as a
"foreign controlled person"). Payment of the proceeds of the sale of an exchange
note effected outside the United States by a foreign office of any broker that
is not a foreign controlled person will not be subject to backup withholding
tax, but will be subject to information reporting requirements unless such
broker has documentary evidence in its records that the beneficial owner is a
United States Alien and certain other conditions are met, or the beneficial
owner otherwise establishes an exemption. New regulations governing backup
withholding and information reporting are generally scheduled to become
effective for payments made after December 31, 2000. Rules under these
regulations will have essentially the same substantive effect, but will unify
current certification procedures and forms.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for original notes where
such original notes were acquired as a result of market-making activities or
other trading activities. We have agreed that, for a period not to exceed 180
days after the exchange offer has been completed, we will make this prospectus,
as amended or supplemented, available to any broker-dealer that reasonably
requests such document for use in connection with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of exchange notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the exchange offer has been completed, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such document
in the letter of transmittal. We have agreed to pay certain expenses incident to
the exchange offer, other than commission or concessions of any brokers or
dealers, and will indemnify the holders of the exchange notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
82
<PAGE>
By acceptance of this exchange offer, each broker-dealer that receives
exchange notes for its own account pursuant to the exchange offer agrees that,
upon receipt of notice from Energy Holdings of the happening of any event which
makes any statement in the prospectus untrue in any material respect or requires
the making of any changes in the prospectus in order to make the statements
therein not misleading (which notice we agree to deliver promptly to such
broker-dealer), such broker-dealer will suspend use of the prospectus until we
have amended or supplemented the prospectus to correct such misstatement or
omission and have furnished copies of the amended or supplemental prospectus to
such broker-dealer.
LEGAL OPINIONS
The validity of the notes will be passed upon for Energy Holdings by James
T. Foran, Esquire, Associate General Counsel of PSEG or R. Edwin Selover,
Esquire, Vice President and General Counsel of PSEG.
EXPERTS
The consolidated balance sheets as of December 31, 1998 and 1997 and the
related consolidated statements of income, stockholder's equity, and cash flows
for each of the three years in the period ended December 31, 1998 included in
this prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and elsewhere in the
Registration Statement, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
83
<PAGE>
(This page intentionally left blank)
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
PSEG Energy Holdings Inc.:
We have audited the accompanying consolidated balance sheets of PSEG
Energy Holdings Inc. and its subsidiaries (the "Company") as of December 31,
1998 and 1997, and the related consolidated statements of income, stockholder's
equity, and cash flows for each of the three years in the period ended December
31, 1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We did not audit the
financial statements of certain general and limited partnership and joint
venture investments of the Company, which are accounted for by use of the equity
method. The Company's equity investment of $655,107,000 and $697,956,000 in the
general and limited partnerships' and joint ventures' net assets at December 31,
1998 and 1997, respectively, and its $88,336,000, $71,872,000 and $46,046,000
share of such general and limited partnerships' and joint ventures' net income
for the respective three years in the period ended December 31, 1998, are
included in the accompanying consolidated financial statements. The financial
statements of these general and limited partnerships and joint ventures were
audited by other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for such partnership and
joint venture interests, is based solely on the reports of such auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors,
such consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Parsippany, New Jersey
August 16, 1999
F-1
<PAGE>
PSEG ENERGY HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
------------------------- ----------------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES
Income from partnerships and
joint ventures ..................................... $ 96,487 $ 91,087 $132,257 $107,566 $ 64,715
Energy service revenues .............................. 124,520 54,087 74,107 21,071 22,493
Energy supply revenues ............................... 61,081 57,625 81,905 77,485 67,220
Income from capital leases ........................... 81,761 51,634 75,801 65,443 44,924
Investment gains ..................................... 30,661 6,936 41,098 46,331 69,103
Other revenues ....................................... 21,813 22,253 34,356 23,694 34,345
-------- -------- -------- -------- --------
Total Revenues ..................................... 416,323 283,622 439,524 341,590 302,800
-------- -------- -------- -------- --------
OPERATING EXPENSES
Cost of energy sales ................................. 58,867 56,153 79,058 76,374 65,682
Operation and maintenance ............................ 189,934 120,197 164,230 115,917 102,304
Depreciation and amortization ........................ 5,013 3,637 5,414 4,171 3,183
-------- -------- -------- -------- --------
Total Operating Expenses ........................... 253,814 179,987 248,702 196,462 171,169
-------- -------- -------- -------- --------
OPERATING INCOME ....................................... 162,509 103,635 190,822 145,128 131,631
OTHER INCOME (LOSS) .................................... 28,485 6,134 (1,275) 685 --
INTEREST EXPENSE-NET ................................... 65,517 67,930 91,987 72,363 58,261
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES ............................. 125,477 41,839 97,560 73,450 73,370
-------- -------- -------- -------- --------
INCOME TAXES
Current .............................................. 5,465 29,214 (1,480) (103,636) (118,233)
Deferred ............................................. 39,648 (11,838) 32,760 130,540 145,890
Investment and energy tax
credits-net ........................................ (686) (969) (1,120) (1,088) (2,689)
-------- -------- -------- -------- --------
Total Income Taxes ................................. 44,427 16,407 30,160 25,816 24,968
MINORITY INTERESTS ..................................... (603) (1,529) (1,804) (239) (22)
-------- -------- -------- -------- --------
INCOME FROM CONTINUING
OPERATIONS ........................................... 81,653 26,961 69,204 47,873 48,424
-------- -------- -------- -------- --------
DISCONTINUED OPERATIONS
Income from operations ............................... -- -- -- -- 10,746
Gain on sale ......................................... -- -- -- -- 13,492
-------- -------- -------- -------- --------
Total Income From Discontinued
Operations, Net of Income Taxes .................. -- -- -- -- 24,238
-------- -------- -------- -------- --------
NET INCOME ............................................. 81,653 26,961 69,204 47,873 72,662
Preferred Stock Dividends ............................ 18,755 11,226 17,478 598 --
-------- -------- -------- -------- --------
EARNINGS AVAILABLE TO
COMMON STOCKHOLDER ................................... $ 62,898 $ 15,735 $ 51,726 $ 47,275 $ 72,662
======== ======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
PSEG ENERGY HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
September 30, December 31,
------------- --------------------------------
1999 1998 1997
------------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and temporary cash investments ................................... $ 13,244 $ 8,961 $ 11,182
Accounts Receivable:
Trade (less allowance for doubtful accounts of
$5,816, $6,091 and $2,685, respectively) .......................... 104,912 47,923 50,457
Other ............................................................... 21,451 13,094 33,760
Affiliated companies ................................................ -- 7,557 --
Notes receivable ...................................................... 19,788 -- 3,277
Inventory ............................................................. 2,746 1,656 --
Prepayments ........................................................... 4,622 8,555 5,297
---------- ---------- ----------
Total Current Assets .............................................. 166,763 87,746 103,973
---------- ---------- ----------
PROPERTY AND EQUIPMENT
Real estate (net of valuation allowances of
$10,318, $10,318 and $11,079, respectively) ......................... 54,039 53,844 60,531
Property and equipment ................................................ 41,956 25,753 13,944
Accumulated depreciation and amortization ............................. (32,383) (20,459) (13,251)
---------- ---------- ----------
Property and Equipment - net ...................................... 63,612 59,138 61,224
---------- ---------- ----------
INVESTMENTS
Capital leases (net of valuation allowances of
$6,973, $6,973 and $4,000, respectively) ............................ 1,629,001 1,388,871 1,147,326
Corporate joint ventures .............................................. 1,366,652 874,286 884,898
Partnership interests ................................................. 522,766 602,710 680,652
Other investments ..................................................... 77,561 97,948 117,588
---------- ---------- ----------
Total Investments ................................................. 3,595,980 2,963,815 2,830,464
---------- ---------- ----------
OTHER ASSETS ............................................................ 52,105 57,831 27,295
---------- ---------- ----------
TOTAL ASSETS ...................................................... $3,878,460 $3,168,530 $3,022,956
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
PSEG ENERGY HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDER'S EQUITY
(Thousands of Dollars)
<TABLE>
<CAPTION>
September 30, December 31,
------------- --------------------------------
1999 1998 1997
------------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts Payable:
Trade .............................................................. $ 31,299 $ 26,879 $ 28,493
Other .............................................................. 87,004 50,044 51,455
Affiliated companies ............................................... 15,156 -- 26,974
Notes payable ........................................................ 481,000 206,000 306,400
Other current liabilities ............................................ 14,362 3,886 598
Current portion of long-term debt .................................... 116,639 317,725 210,459
---------- ---------- ----------
Total Current Liabilities ........................................ 745,460 604,534 624,379
---------- ---------- ----------
LONG-TERM DEBT ......................................................... 873,905 443,948 758,244
---------- ---------- ----------
DEFERRED TAXES AND OTHER LIABILITIES
Deferred income taxes ................................................ 869,315 846,302 818,843
Deferred investment and energy tax credits ........................... 9,088 9,394 9,656
Other long-term liabilities .......................................... 24,510 20,685 21,955
---------- ---------- ----------
Total Deferred Taxes and Other Liabilities ....................... 902,913 876,381 850,454
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES .......................................... -- -- --
MINORITY INTERESTS ..................................................... 1,724 1,338 4,980
---------- ---------- ----------
STOCKHOLDER'S EQUITY
Common stock ......................................................... 100 100 100
Preferred stock ...................................................... 509,200 509,200 75,000
Additional paid-in capital ........................................... 789,608 579,070 579,070
Retained earnings .................................................... 258,030 196,974 145,248
Accumulated other comprehensive loss ................................. (202,480) (43,015) (14,519)
---------- ---------- ----------
Total Stockholder's Equity ....................................... 1,354,458 1,242,329 784,899
---------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY ................................................. $3,878,460 $3,168,530 $3,022,956
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
PSEG ENERGY HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
------------------------ -------------------------------------
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................. $ 81,653 $ 26,961 $ 69,204 $ 47,873 $ 48,424
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................. 12,876 24,910 28,107 13,782 11,532
Deferred income taxes (other than leases) ................. (17,442) (11,078) (9,588) 6,204 7,642
(Payments of) proceeds from leasing activities ............ (2,310) (39,215) (19,726) 68,061 107,381
Investment distributions .................................. 124,180 78,827 88,592 82,028 134,483
Equity income from partnerships ........................... (50,335) (55,648) (43,198) (33,290) (2,019)
Gains on investments ...................................... (53,106) (10,593) (44,867) (29,861) (61,225)
Other ..................................................... (758) (5,010) 736 (587) (4,427)
(Increase) decrease in current assets ..................... (76,088) 5,977 13,993 (27,718) (4,115)
Increase (decrease) in current liabilities ................ 85,154 27,759 (33,377) 10,565 (5,265)
--------- --------- --------- --------- ---------
Net cash provided by continuing operations ................ 103,824 42,890 49,876 137,057 232,411
--------- --------- --------- --------- ---------
Net cash provided by discontinued operations .............. -- -- -- -- 77,860
--------- --------- --------- --------- ---------
Net Cash Provided By Operating Activities ................... 103,824 42,890 49,876 137,057 310,271
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in partnerships and joint ventures ............... (709,439) (1,221) (82,779) (849,779) (66,606)
Investments in capital leases ............................. (235,891) (219,799) (253,417) (156,006) (49,816)
Proceeds from sales of capital leases ..................... 76,748 66,163 71,253 22,883 --
(Additions) reductions to property and
equipment ............................................... (5,209) (6,114) (9,865) (6,166) 10,559
Proceeds from sales of real estate and
equity investments ...................................... 71,431 145,062 145,449 269 12,142
Reductions of (Additions to) deferred project costs ....... 15,189 (10,827) (13,641) (7,028) (10,454)
Change in net assets-discontinued operations .............. -- -- -- -- (51,568)
Proceeds from sale of discontinued operations ............. -- -- -- -- 704,252
Return of capital from partnerships ....................... 26,744 5,183 5,183 325 31,735
Additions to other assets ................................. (22,697) (11,597) (19,413) (2,922) (19,279)
--------- --------- --------- --------- ---------
Net Cash (Used In) Provided By Investing
Activities ................................................ (783,124) (33,150) (157,230) (998,424) 560,965
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from additional paid-in capital .................. 199,700 -- -- -- 20,000
Proceeds from sale of preferred stock ..................... -- 434,200 509,200 75,000 --
Redemption of preferred stock ............................. -- -- (75,000) -- --
Dividends paid ............................................ (20,597) (11,824) (18,076) -- (369,000)
Repayment of borrowings ................................... (180,000) (434,200) (310,991) (124,500) (379,440)
Proceeds from borrowings .................................. 687,627 -- -- 774,013 2,540
Other ..................................................... (3,147) (3,366) -- (1,681) (542)
--------- --------- --------- --------- ---------
Net Cash Provided By (Used In) Financing
Activities ................................................ 683,583 (15,190) 105,133 722,832 (726,442)
--------- --------- --------- --------- ---------
Net Increase (Decrease) In Cash And Temporary
Cash Investments ............................................ 4,283 (5,450) (2,221) (138,535) 144,794
--------- --------- --------- --------- ---------
Cash And Temporary Cash Investments,
Beginning Of Year ............................................ 8,961 11,182 11,182 149,717 4,923
--------- --------- --------- --------- ---------
Cash And Temporary Cash Investments,
End Of Year .................................................. $ 13,244 $ 5,732 $ 8,961 $ 11,182 $ 149,717
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid (received) for:
Interest expense ............................................ $ 34,364 $ 44,998 $ 83,334 $ 59,206 $ 72,866
======== ======== ======== ========= =========
Income taxes from continuing operations ..................... $(12,173) $ 6,528 $ 7,396 $(129,310) $ (48,540)
Income taxes from discontinued operations ................... -- -- -- -- $ (1,573)
======== ======== ======== ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
PSEG ENERGY HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(Thousands of Dollars)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Preferred Paid-in Retained Comprehensive
Stock Stock Capital Earnings Income Total
------- --------- ---------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1997 ..................... $100 $ -- $579,070 $ 97,973 $ -- $ 677,143
---- -------- -------- -------- --------- ----------
Net income ...................................... -- -- -- 47,873 -- 47,873
Other comprehensive income,
net of tax:
Foreign currency translation
adjustment (net of tax
of $1,613) .................................. -- -- -- -- (14,519) (14,519)
---- -------- -------- -------- --------- ----------
Comprehensive income (loss) ..................... -- -- -- 47,873 (14,519) 33,354
---- -------- -------- -------- --------- ----------
Issuance of cumulative
preferred stock ............................... -- 75,000 -- -- -- 75,000
Preferred stock dividends ....................... -- -- -- (598) -- (598)
---- -------- -------- -------- --------- ----------
Balance as of December 31, 1997 ................... 100 75,000 579,070 145,248 (14,519) 784,899
---- -------- -------- -------- --------- ----------
Net income ...................................... -- -- -- 69,204 -- 69,204
Other comprehensive income,
net of tax:
Foreign currency translation
adjustment (net of tax
of $3,166) .................................. -- -- -- -- (28,496) (28,496)
---- -------- -------- -------- --------- ----------
Comprehensive income (loss) ..................... -- -- -- 69,204 (28,496) 40,708
---- -------- -------- -------- --------- ----------
Issuance of cumulative
preferred stock ............................... -- 509,200 -- -- -- 509,200
Redemption of preferred stock ................... -- (75,000) -- -- -- (75,000)
Preferred stock dividends ....................... -- -- -- (17,478) -- (17,478)
---- -------- -------- -------- --------- ----------
Balance as of December 31, 1998 ................... 100 509,200 579,070 196,974 (43,015) 1,242,329
---- -------- -------- -------- --------- ----------
<CAPTION>
(UNAUDITED)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1999 ..................... 100 509,200 579,070 196,974 (43,015) 1,242,329
---- -------- -------- -------- --------- ----------
Net income ...................................... -- -- -- 81,653 -- 81,653
Other comprehensive income,
net of tax:
Foreign currency translation
adjustment (net of tax
of $17,718) ................................. -- -- -- -- (159,465) (159,465)
---- -------- -------- -------- --------- ----------
Comprehensive income (loss) ..................... -- -- -- 81,653 (159,465) (77,812)
---- -------- -------- -------- --------- ----------
Capital contribution ............................ -- -- 210,538 -- -- 210,538
Preferred stock dividends (18,755) (18,755)
Common stock dividends .......................... -- -- -- ( 1,842) -- ( 1,842)
---- -------- -------- -------- --------- ----------
Balance as of September 30, 1999 .................. $100 $509,200 $789,608 $258,030 $(202,480) $1,354,458
==== ======== ======== ======== ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
PSEG Energy Holdings Inc. (Energy Holdings), formerly Enterprise
Diversified Holdings Incorporated, a wholly-owned subsidiary of Public Service
Enterprise Group Incorporated (PSEG), is the parent of PSEG Global Inc.
(Global), formerly Community Energy Alternatives Incorporated, which invests and
participates in the development and operation of projects in the generation and
distribution of energy, which include cogeneration and independent power
production facilities and electric distribution companies; PSEG Resources Inc.
(Resources), formerly Public Service Resources Corporation, which makes
primarily passive investments in assets that can provide funds for future growth
as well as provide incremental earnings for Energy Holdings; PSEG Energy
Technologies Inc. (Energy Technologies), formerly Energis Resources
Incorporated, which provides energy and a variety of energy related services to
industrial and commercial customers; Enterprise Group Development Corporation
(EGDC), a non-residential real estate development and investment business; PSEG
Capital Corporation (PSEG Capital), which serves as a financing vehicle for
Energy Holdings' subsidiaries (excluding Energy Technologies and EGDC), borrows
on the basis of a minimum net worth maintenance agreement with PSEG; and
Enterprise Capital Funding Corporation (Funding), which serves as a financing
vehicle for Resources, Global and their subsidiaries, borrowing on their behalf
by issuing debt which is guaranteed by Energy Holdings, as well as investing
their short-term funds. EGDC has been conducting a controlled exit from the real
estate business since 1993.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of Energy
Holdings and all direct and indirect subsidiaries in which Energy Holdings has a
controlling interest. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Cash and Temporary Cash Investments
Energy Holdings classifies cash and investments, with maturities of three
months or less, as cash and temporary cash investments.
Property and Equipment
The estimated useful lives for purposes of computing depreciation, on a
straight-line basis are from 3 to 12 years for furniture and equipment and 13
years for buildings. Equipment used by Public Service Conservation Resources
Corporation (PSCRC) is depreciated on a straight line basis over 10 to 15 years
and is included in Cost of Energy Sales in the Consolidated Statements of
Income. Maintenance and repairs are expensed when incurred.
Security Investments
Resources carries its security investments and interests in limited
partnerships investing in securities at fair value. Fair value is determined
based upon a review of the underlying investment data performed in accordance
with established guidelines. Security investments are presented on the
consolidated balance sheets as non-current assets since Energy Holdings
presently intends to maintain such funds as a long-term investment vehicle.
Investments in Partnerships and Corporate Joint Ventures
Energy Holdings' investments in projects and partnerships are primarily
accounted for under the equity method of accounting. For investments in which
significant influence does not exist, the cost method of accounting is applied.
Interest is capitalized on investments in projects engaged in the construction
of qualifying assets. The capitalized interest is amortized over the operating
lives of the projects upon the date of commercial operation.
F-7
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Income Taxes
Energy Holdings and its subsidiaries file a consolidated Federal income tax
return with PSEG. Energy Holdings and its subsidiaries have entered into tax
allocation agreements with PSEG which provide that Energy Holdings and its
subsidiaries will record their tax liabilities as though they were filing
separate returns and will record tax benefits to the extent that PSEG is able to
receive those benefits. Deferred income taxes are provided for the temporary
differences between book and taxable income, resulting primarily from the use of
revenue recognition under the equity method of accounting for book purposes, as
well as the use of accelerated depreciation for tax purposes and the recognition
of fair value accounting for book purposes. Energy Holdings defers and amortizes
investment and energy tax credits over the lives of the related properties.
Public Service Electric and Gas Company is an operating public utility
providing electric and gas service in certain areas in the State of New Jersey
and is subject to regulation by the BPU. In a case affecting another utility in
which Public Service Electric and Gas Company was not a party, the BPU approved
an order treating certain consolidated tax savings generated after June 30, 1990
by that utility's nonutility affiliates as a reduction of that utility's rate
base. In 1992, the BPU issued an order resolving Public Service Electric and Gas
Company's 1992 base rate proceeding without separate quantification of the
consolidated tax issue. Such order did not provide final resolution of the
consolidated tax issue for any subsequent base rate filing. The issue of PSEG
sharing the benefits of consolidated tax savings with Public Service Electric
and Gas Company or its ratepayers was addressed by the BPU in its July 28, 1995
letter which informed Public Service Electric and Gas Company that the issue of
consolidated tax savings can be discussed in the context of Public Service
Electric and Gas Company's next base rate case or plan for an alternate form of
regulation. Energy Holdings is not able to predict what action, if any, the BPU
may take concerning consolidation of tax benefits in future rate proceedings. An
unfavorable resolution may adversely impact Resources' investment strategy.
Use of Derivative Financial Instruments
The market risk inherent in Energy Holdings' market risk sensitive
instruments and positions relate to potential losses arising from adverse
changes in interest rates and foreign currency exchange rates. Energy Holdings'
policy is to use derivatives to manage these risks consistent with its business
plans and prudent practices. PSEG has a Risk Management Committee comprised of
executive officers and an independent risk oversight function to ensure
compliance with corporate policies and prudent risk management practices by all
of the PSEG subsidiaries, including Energy Holdings.
Gains and losses on hedges of existing assets or liabilities are included
in the carrying amounts of those assets and liabilities and are ultimately
recognized in income as part of those carrying amounts. Gains and losses related
to qualifying hedges of firm commitments are deferred and recognized in income
when the hedged transaction occurs.
Foreign Currency
Energy Holdings' financial statements are prepared using the United States
Dollar as the reporting currency. For foreign operations whose functional
currency is deemed to be the local (foreign) currency, asset and liability
accounts are translated into United States Dollars at current exchange rates and
revenues and expenses are translated at average exchange rates prevailing during
the period. Translation gains and losses (net of applicable deferred taxes) are
not included in determining net income but are reported in other comprehensive
income (see the Consolidated Statements of Stockholder's Equity).
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency,
except those transactions which operate as a hedge of an identifiable foreign
currency commitment, a hedge of a foreign currency investment
F-8
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
position, or when the entities involved in the transactions are consolidated or
accounted for by the equity method, are included in the results of operations as
incurred.
Revenue and Cost Recognition on Contracts
Energy Technologies' revenues from fixed price and other long-term
construction contracts are recognized on the percentage-of-completion method of
accounting determined by the ratio of costs incurred to management's estimates
of final total anticipated costs. Revenues from cost-plus-fee and time and
material contracts are recognized on the basis of costs incurred during the
period plus the fee earned, measured by the cost-to-cost method. Contract costs
include all direct labor and benefits, material purchased for or installed in
the project, subcontract costs and allocations of indirect construction costs.
As contracts extend over one or more years, revisions in cost and profit
estimates during the course of the work are reflected in the accounting period
in which the facts that require the revisions become known. Amounts representing
contract change orders, customer approved claims or other items are included in
revenue only when they can be reasonably estimated and realization is probable.
When it is indicated that a contract will result in an ultimate loss, the entire
loss is recognized in the financial statements during the period in which such
loss becomes known.
Gas and Electric Purchase Imbalances
Energy Technologies may receive different quantities of gas and electricity
from suppliers than the volumes sold to its customers. This results in imbalance
receivables and payables to the local distribution company which delivers the
gas and electricity to the customer. Such imbalances are valued at the lower of
cost or market and accounted for on the first-in first-out basis and are
included in accounts receivable-other or accounts payable-other on the balance
sheets.
Deferred Transportation Costs
Energy Technologies enters into long-term fixed price natural gas sales
contracts. Energy Technologies also enters into long-term transportation
agreements as required to serve such contracts. The costs of transportation vary
based upon seasonality. In order to properly match revenues with expenses,
Energy Technologies records transportation costs related to the fixed price
contracts based on average unit transportation costs. As a result,
transportation costs of $124,000 and $1,110,000 have been deferred as of
December 31, 1998 and 1997, respectively.
Deferred Project Costs
Development costs are deferred and ultimately capitalized as a component of
Global's investment account upon initial capital contributions to the project.
These costs are amortized on a straight-line basis over the lives of the related
project assets to the extent not recovered from Global's partners or the
projects' external financing proceeds. Such amortization commences upon the date
of commercial operation. Development costs related to unsuccessful projects are
charged to expense.
Deferred Debt Issuance Costs
Deferred debt issuance costs are amortized over the term of the related
indebtedness using the interest method.
Use of Estimates
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
F-9
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3. SECURITY INVESTMENTS
Security investments of $25,146,000 and $27,755,000 as of December 31,
1998 and 1997, respectively, represent the fair value of such investments. Fair
value is determined based upon a review of the underlying investment data
performed in accordance with established guidelines.
NOTE 4. LEASES
Energy Holdings' investments in capital lease agreements include the
following:
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
---------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Leveraged leases ................................................ $1,635,974,000 $1,395,844,000 $1,146,789,000
Direct finance leases ........................................... -- -- 2,348,000
Tax benefit transfers ........................................... -- -- 2,189,000
-------------- -------------- --------------
$1,635,974,000 $1,395,844,000 $1,151,326,000
-------------- -------------- --------------
</TABLE>
Energy Holdings' net investment in leveraged leases is composed of the
following elements:
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
---------------------------------------
1999 1998 1997
------------- ---------------------------------------
<S> <C> <C> <C>
Lease rents receivable .......................................... $2,417,055,000 $1,924,212,000 $1,501,555,000
Estimated residual value of leased assets ....................... 592,234,000 665,039,000 635,274,000
-------------- -------------- --------------
3,009,289,000 2,589,251,000 2,136,829,000
Less - unearned and deferred income ............................. (1,373,315,000) 1,193,407,000 990,040,000
-------------- -------------- --------------
Investment in leveraged leases .................................. 1,635,974,000 1,395,844,000 1,146,789,000
Less - valuation allowances ..................................... 6,973,000 6,973,000 4,000,000
Less - deferred taxes arising from leveraged
leases ........................................................ 806,832,000 731,109,000 670,110,000
-------------- -------------- --------------
Net investment in leveraged leases .............................. $ 822,169,000 $ 657,762,000 $ 472,679,000
============== ============== ==============
</TABLE>
Energy Holdings leases property and equipment, through leveraged leases,
with terms ranging from 8 to 45 years. The types of property placed under
leveraged leases consisted of:
<TABLE>
<CAPTION>
(Unaudited) December 31,
September 30, ----------------------
1999 1998 1997
------------- ---- ----------
<S> <C> <C> <C>
Energy-related ......................................................... 59% 64% 52%
Aircraft ............................................................... 10% 18% 21%
Real Estate ............................................................ 10% 12% 15%
Commuter rail cars ..................................................... 4% 5% 7%
Industrial ............................................................. 1% 1% 5%
</TABLE>
The initial investment in leveraged leases represents approximately 20% of
the purchase price of the leveraged leased property; the balance is provided by
third-party financing in the form of non-recourse long-term debt which is
secured by the property.
NOTE 5. INVESTMENTS IN PARTNERSHIPS AND CORPORATE JOINT VENTURES
Resources
Resources has limited partnership investments in securities, an ethylene
production facility, a clean air facility, natural gas storage and solar
electric generating systems. Resources' total investment in limited partnerships
was $291,662,000 (unaudited), $383,284,000 and $407,166,000 at September 30,
1999, December 31, 1998 and 1997, respectively.
F-10
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Global
Global's investments include domestic qualifying facilities (QFs) under the
Public Utility Regulatory Policies Act of 1978, foreign exempt wholesale
generators (EWGs) under the 1992 amendments to the Public Utility Holding
Company Act of 1935 and foreign utility companies (FUCOs). Global's investments
are diversified geographically and technologically and are generally financed
through debt that is non-recourse to Global. Global's investments in QF projects
have been undertaken with other participants because Global, together with other
utility affiliates, may not own more than 50% of a QF subsequent to its
in-service date. Projects involving EWGs or FUCOs are not restricted to a 50%
investment limitation. Global's share of income and cash flow distribution
percentages currently range from 4.78% to 50%. Interest is earned on loans made
to various projects. Such loans earned rates of interest ranging from 7.5% to
15% during 1998.
During 1998, Global expanded operations in South America, the Asian
sub-continent and Asia. Global's 1998 investment activities included:
o Acquiring a 30% equity interest in an Argentine electric distribution
company, serving customers in the northeast corner of the Province of Buenos
Aires for approximately $60,000,000.
o Acquiring a 20% equity interest of a 330-megawatt power plant to be
constructed in India, for which Global will be the operations and maintenance
contractor. Global's total investment is expected to be approximately
$32,000,000, including contingencies, of which $14,000,000 was funded as of
December 31, 1998.
o Exercising a put option related to its 50% interest in a natural
gas-fired generating station in Colombia for proceeds of approximately
$55,000,000. In addition, Global sold its 50% interest in two domestic
cogeneration plants and its 5% interest in another domestic cogeneration plant
for aggregate proceeds of approximately $82,000,000. The aggregate gain on the
disposition of these investments was $1,948,000.
As of December 31, 1998, Global's portfolio consisted of investments in 25
cogeneration or independent power projects (including four under construction)
which range in gross production capacities from 15 to 650 MWs of electricity,
and four electric distribution ventures. As of December 31, 1998 and 1997,
Global's net investment and share of project MWs by region were as follows:
<TABLE>
<CAPTION>
1998 MW 1997 MW
-------------- -- -------------- --
<S> <C> <C> <C> <C>
Generation
North America ............................................... $ 185,203,000 367 $ 239,645,000 448
Latin America ............................................... 20,914,000 128 84,121,000 236
Asia Pacific ................................................ 79,380,000 149 80,083,000 124
India ....................................................... 14,038,000 66 -- --
Distribution
Latin America ............................................... 764,733,000 N/A 720,694,000 N/A
--------------- --- --------------- ---
Total Investment ............................................ $1,064,268,000 710 $1,124,543,000 808
</TABLE>
Investments in net assets of affiliated companies accounted for under the
equity method of accounting by Global amounted to $1,557,448,000 (unaudited),
$1,058,688,000 and $1,118,642,000 at September 30, 1999, December 31, 1998 and
1997, respectively.
F-11
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Summarized results of operations and financial position of 100% of all
affiliates in which Global uses the equity method of accounting are presented
below:
<TABLE>
<CAPTION>
Foreign Domestic Total
--------- ---------------------- ----------
(Thousands of Dollars)
<S> <C> <C> <C>
December 31, 1998
Condensed Income Statement Information
Revenues ......................................................... $ 959,691 $ 440,485 $1,400,176
Net Income ....................................................... 172,587 134,679 307,266
Condensed Balance Sheet Information
Property, Plant & Equipment ...................................... 1,779,120 701,878 2,480,998
Other Assets ..................................................... 1,571,659 241,265 1,812,924
Long-Term Debt (*) ............................................... 347,252 538,803 886,055
Other Liabilities ................................................ 789,171 46,944 836,115
Equity ........................................................... 2,214,356 357,396 2,571,752
December 31, 1997
Condensed Income Statement Information
Revenues ......................................................... $ 508,907 $ 637,646 $1,146,553
Net Income ....................................................... 69,739 145,112 214,851
Condensed Balance Sheet Information
Property, Plant & Equipment ...................................... 1,480,675 1,182,569 2,663,244
Other Assets ..................................................... 1,636,996 335,569 1,972,565
Long-Term Debt (*) ............................................... 278,405 977,738 1,256,143
Other Liabilities ................................................ 395,023 96,658 491,681
Equity ........................................................... 2,444,243 $ 443,742 2,887,985
</TABLE>
(*)Long-Term Debt is non-recourse to Global and Energy Holdings.
- --------------------------------------------------------------------------------
Global's investments in Rio Grande Energia (RGE), Empresa Distribuidora de
Energia Norte S.A. (EDEN), Empresa Distribuidora de Energia Sur S.A. (EDES), GWF
Power Systems Company Inc., GWF Power Systems, L.P. and Hanford L.P. comprised
77% and 73% of Global's total investment balance as of December 31, 1998 and
1997, respectively.
F-12
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Summarized results of operations and financial position of 100% of these
companies are presented below:
<TABLE>
<CAPTION>
%
Ownership 1998 1997
--------- ------------- -----------
(Thousands of Dollars)
<S> <C> <C> <C>
Investments
FOREIGN
RGE - Brazil (A) ................................................. 31%
Condensed Income Statement Information
Revenues ......................................................... $ 443,626 $ 204,008
Net Income ....................................................... 109,619 34,205
Condensed Balance Sheet Information
Property, Plant & Equipment ...................................... 815,371 817,387
Other Assets (B) ................................................. 1,001,251 1,123,347
Long-Term Debt (C) ............................................... 87,265 98,832
Other Liabilities ................................................ 589,504 274,452
Equity ........................................................... 1,139,853 1,567,450
EDEN/EDES (Combined) - Argentina (D) ............................. 30%
Condensed Income Statement Information
Revenues ......................................................... $ 285,018 $ 166,596
Net Income ....................................................... 35,927 15,985
Condensed Balance Sheet Information
Property, Plant & Equipment ...................................... 431,415 383,971
Other Assets (B) ................................................. 355,662 348,950
Long-Term Debt (C) ............................................... 101,428 98,185
Other Liabilities ................................................ 86,608 53,688
Equity ........................................................... 599,041 581,048
DOMESTIC
GWF Power Systems Company Inc. ................................... 50%
Condensed Income Statement Information
Revenues ......................................................... $ 1,941 $ 1,868
Net Income ....................................................... 1,026 1,219
Condensed Balance Sheet Information
Property, Plant & Equipment ...................................... 261 74
Other Assets ..................................................... 18,499 19,404
Other Liabilities ................................................ 4,799 4,843
Equity ........................................................... 13,961 14,635
GWF Power Systems, L.P. .......................................... 49%
Condensed Income Statement Information
Revenues ......................................................... $ 118,796 $ 118,477
Net Income ....................................................... 64,386 57,827
Condensed Balance Sheet Information
Property, Plant & Equipment ...................................... 211,543 219,254
Other Assets ..................................................... 56,308 54,369
Long-Term Debt (C) ............................................... 75,847 115,848
Other Liabilities ................................................ 4,951 5,507
Equity ........................................................... 187,053 152,268
</TABLE>
F-13
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
%
Ownership 1998 1997
--------- ----------- ----------
(Thousands of Dollars)
<S> <C> <C> <C>
Investments (Continued)
Hanford L.P. ..................................................... 49%
Condensed Income Statement Information
Revenues ......................................................... $ 29,628 $ 30,159
Net Income ....................................................... 12,398 12,963
Condensed Balance Sheet Information
Property, Plant & Equipment ...................................... 56,769 60,480
Other Assets ..................................................... 13,808 15,003
Long-Term Debt (C) ............................................... 15,691 23,000
Other Liabilities ................................................ 872 1,067
Equity ........................................................... 54,014 51,416
</TABLE>
(A) The 1997 results of operations of RGE represent the period from July 28,
1997 (the date of incorporation) through December 31, 1997. Global acquired
its interest in RGE in October 1997, effective August 11, 1997.
(B) Other Assets is primarily goodwill.
(C) Long-Term Debt is non-recourse to Global and Energy Holdings.
(D) The 1997 results of operations of EDEN/EDES represent the period from
February 17, 1997 (the date of incorporation) through December 31, 1997.
Global acquired its interest in EDEN/EDES in May 1997.
EGDC
EGDC has partnership investments in developed commercial real estate and in
land held for development.
NOTE 6. FOREIGN OPERATIONS
As of September 30, 1999, Global has approximately $1,383,661,000
(unaudited), including deferred project costs, of international investments in
projects that generate or distribute energy primarily in Brazil, Argentina,
Chile, Peru and China. Global is expected to continue to make international
investments. Where possible, Global structures its investments to manage the
risk associated with project development, including foreign currency devaluation
and fluctuations.
Net foreign currency devaluation, caused primarily by the Brazilian Real,
have reduced Stockholder's Equity by $202,480,000 (unaudited) and $43,015,000 as
of September 30, 1999 and December 31, 1998, respectively (see Consolidated
Statements of Stockholder's Equity).
In January 1999, Brazil abandoned its managed devaluation strategy and
allowed the Real to float against other currencies. As of September 30, 1999,
the Real has devalued approximately 37% against the United States Dollar since
December 31, 1998. For the nine months ended September 30, 1999 the devaluation
has resulted in a charge of $146,954,000 (unaudited) to other comprehensive
income, a separate component of Stockholder's Equity. Energy Holdings cannot
predict to what extent, if any, further devaluation may occur, and therefore,
cannot predict the impact of potential devaluation of currencies on Energy
Holdings' results of operations, financial condition and net cash flows.
F-14
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Energy Holdings' foreign investments were comprised of leveraged leases in
aircraft, utility facilities and commuter rail cars, a note receivable, electric
distribution facilities, exempt wholesale generators and foreign utility
companies. Foreign revenues and foreign assets, as a percent of total revenues
and total assets, is as follows:
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
-------------------------------------------
1999 % 1998 % 1997 %
-------------- --- -------------- --- -------------- ---
<S> <C> <C> <C> <C> <C> <C>
Income from capital leases ......... $ 63,492,000 $ 58,518,000 $ 33,943,000
Income from joint ventures ......... 33,559,000 46,617,000 13,949,000
Interest and dividends ............. 305,000 411,000 404,000
Operator/Management fees ........... 5,959,000 3,676,000 2,820,000
-------------- -------------- --------------
Total foreign revenues ............. $ 103,315,000 25% $ 109,222,000 25% $ 51,116,000 15%
-------------- -------------- --------------
Foreign assets (A) ................. $2,323,521,000 60% $1,602,790,000 51% $1,327,828,000 44%
============== ============== ==============
</TABLE>
(A) Amount is net of pre-tax foreign currency translation adjustment of
$224,298,000 (unaudited), $47,794,000 and $16,132,000 as of September 30,
1999, December 31, 1998 and 1997, respectively.
IPE Energia (IPE), a subsidiary of Global, whose functional currency is the
United States Dollar, has non-recourse debt of $105,706,000 (unaudited) and
$122,834,000 as of September 30, 1999 and December 31, 1998, respectively (see
Note 9. Long-Term Debt), denominated in Brazilian Reals, which is indexed to a
basket of currencies including United States Dollars. As a result, the debt is
subject to foreign currency exchange rate risk due to the effect of exchange
rate movements between the indexed foreign currencies and the Brazilian Real and
between the Brazilian Real and the United States Dollar. Exchange rate changes
ultimately impact the debt level outstanding in the denominated currency and
result in foreign currency transaction gains or losses, which are included in
net income. The net foreign currency transaction gains (losses) for the nine
months ended September 30, 1999 and the years ended December 31, 1998 and 1997
were $2,373,000 (unaudited), $(3,031,000) and $685,000, respectively, and are
recorded in Other Income (Loss) in the Consolidated Statements of Income.
NOTE 7. INCOME TAXES
A reconciliation of income taxes calculated at the Federal statutory rate
of 35% of income before income taxes and the income tax provision is as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Federal income tax expense at statutory rate ............................................. $ 34,146,000 $ 25,708,000
State income taxes, net of Federal income tax benefit .................................... 4,470,000 3,110,000
Amortization of investment and energy tax credits ........................................ (1,105,000) (1,251,000)
Dividends received deduction ............................................................. (755,000) (651,000)
Tight sands credit ....................................................................... (3,529,000) --
Tax effect of tax benefit transfer expense ............................................... 878,000 505,000
Tax effects attributable to foreign operations ........................................... (1,120,000) (68,000)
Rouse rehabilitation credit .............................................................. (3,394,000) --
Other .................................................................................... 569,000 (1,537,000)
------------ ------------
Income tax expense ....................................................................... $ 30,160,000 $ 25,816,000
============ ============
</TABLE>
F-15
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is an analysis of Accumulated Deferred Income Taxes:
<TABLE>
<CAPTION>
1998 1997
------------ -------------
<S> <C> <C>
Assets - non-current:
Development expenses $ 14,786,000 $ 13,553,000
Discontinued operations 5,277,000 5,526,000
Foreign currency translation 4,779,000 --
Bad debt reserve 4,813,000 4,813,000
Other 2,737,000 3,533,000
------------ ------------
Total Assets 32,392,000 27,425,000
============ ============
Liabilities - non-current:
Leasing activities 702,258,000 667,631,000
Partnership activities 154,411,000 160,418,000
Income from foreign operations 3,008,000 1,329,000
State income tax deferrals 19,017,000 16,890,000
------------ ------------
Total Liabilities 878,694,000 846,268,000
------------ ------------
Net Liabilities $846,302,000 $818,843,000
============ ============
</TABLE>
NOTE 8. NOTES PAYABLE
As of December 31, 1998, Funding had in place a $300,000,000 and a
$150,000,000 revolving credit and reimbursement agreement. On May 12, 1999,
Energy Holdings closed on two separate senior revolving credit facilities, with
a syndicate of banks, a $165,000,000, 364 day revolving credit facility and a
$495,000,000, five year revolving credit and letter of credit facility. These
facilities, totaling $660,000,000 replaced the Funding facilities totaling
$450,000,000.
As of September 30, 1999, December 31, 1998 and 1997, borrowings
outstanding under the revolving credit and reimbursement agreements were
$481,000,000, $206,000,000 and $267,000,000, respectively. The effective
interest rates on the September 30, 1999 and December 31, 1998 and 1997
revolving credit facility borrowings were 6.40%, 6.70% and 6.61%, respectively,
plus related fees. The interest expense incurred related to short-term
borrowings amounted to $7,878,000, $8,060,000 and $9,826,000 as of September 30,
1999 and December 31, 1998 and 1997, respectively. Due to the short-term nature
of this debt and the related interest rates, the recorded amounts are a
reasonable estimate of fair value as of December 31, 1998 and 1997.
F-16
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9. LONG-TERM DEBT
Long-Term Debt was comprised of the following:
<TABLE>
<CAPTION>
(Unaudited) December 31,
September 30, ---------------------------------
Year Due 1999 1998 1997
-------- ------------ ---------------------------------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
PSEG Capital
Senior Notes
9.875% ....................................... 1998 $ -- $ -- $ 15,000
10.05% ....................................... 1998 -- -- 22,500
-------- -------- --------
-- -- 37,500
-------- -------- --------
Medium-Term Notes (MTNs)
9.00% ........................................ 1998 -- -- 75,000
8.95% - 9.93% ................................ 1999 20,000 155,000 155,000
6.54% ........................................ 2000 78,000 78,000 78,000
6.73% - 6.74% ................................ 2001 170,000 135,000 135,000
6.80% - 7.00% ................................ 2002 130,000 130,000 130,000
6.25% ........................................ 2003 252,000 -- --
-------- -------- --------
650,000 498,000 573,000
-------- -------- --------
Principal amount outstanding ................. 650,000 498,000 610,500
Amounts due in one year ...................... 20,000 (154,973) (112,471)
Net unamortized discount ..................... (2,047) (1,195) (1,726)
-------- -------- --------
Total long-term debt of PSEG Capital ......... 627,953 341,832 496,303
-------- -------- --------
Funding
Senior Notes
9.95% - Series E ............................. 1998 -- -- 83,000
7.58% - Series G ............................. 1999 -- 45,000 45,000
-------- -------- --------
Principal amount outstanding ................. -- 45,000 128,000
Amounts due in one year ...................... -- (45,000) (83,000)
-------- -------- --------
Total long-term debt of Funding .............. -- -- 45,000
-------- -------- --------
Global
Non-recourse Debt
7.721% - Bank Loan ....................... 1999 -- 87,044 87,044
11.08% - Bank Loan ........................ 2000 66,895 -- --
9.04% - Bank Loan ........................... 2001 85,000 -- --
13.95% - Bank Loan ........................ 2002 105,706 122,834 134,895
9.42% - Bank Loan ........................... 2003 28,000 -- --
9.42% - Bank Loan ........................... 2004 47,000 -- --
14.00% - Minority Interest Loan .............. 2027 9,990 9,990 9,990
-------- -------- --------
Principal amount outstanding ................. 342,591 219,868 231,929
Amounts due in one year ...................... (96,639) (117,752) (14,988)
-------- -------- --------
Total long-term debt of Global ............... 245,952 102,116 216,941
-------- -------- --------
Total long-term debt ......................... $873,905 $443,948 $758,244
======== ======== ========
</TABLE>
PSEG Capital's MTN program permits borrowings up to $750,000,000.
Effective January 31, 1995, PSEG Capital determined that it will not have more
than $650,000,000 of debt outstanding at any time (see Note 14. Commitments and
Contingencies).
F-17
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Based on the borrowing rates currently available to Energy Holdings for
debt with similar terms and remaining maturities, the fair value of Energy
Holdings' long-term debt was as follows:
(Unaudited) December 31,
September 30, ---------------------
1999 1998 1997
-------- ------- --------
(Thousands of Dollars)
Senior Notes - PSEG Capital .......... $ -- $ -- $ 37,500
MTNs - PSEG Capital .................. 637,247 503,830 581,754
Senior Notes - Funding ............... -- 45,000 129,000
Non-recourse debt - Global ........... 342,591 219,868 231,929
Financial Covenants
The terms of the agreement supporting PSEG Capital's long-term borrowings
require PSEG to cause PSEG Capital to have a minimum tangible net worth of
$100,000 and to make sufficient contributions to PSEG Capital in order to permit
PSEG Capital to pay its debts as they become due. PSEG is in compliance with all
requirements of the agreement at December 31, 1998 and 1997.
Bank Loan - ING
In May 1997, PSEG Americas Operating Company (PSEG Americas), a subsidiary
of Global, and ING Bank and ING Capital Corporation (collectively, ING), as
lender and as agent for a consortium of lenders, entered into a credit agreement
(the ING Agreement) which matured May 30, 1999. The loan proceeds were used to
partially fund the acquisition of EDEN/EDES in Argentina in 1997 by PSEG
Americas (see Note 5. Investments in Partnerships and Corporate Joint Ventures).
Amounts borrowed under the ING Agreement are non-recourse to PSEG Americas and
affiliated companies.
Pursuant to the terms of the ING Agreement, the principal payment is due
in full on the maturity date. At December 31, 1998 and 1997, the outstanding
principal balance was $87,044,000. Interest is payable quarterly and accrues at
LIBOR plus 1.875%. Interest expense incurred during 1998 and 1997 related to
such borrowings amounted to $7,042,000 and $4,003,000, respectively.
Under the terms of the ING Agreement, PSEG Americas must maintain an
interest reserve for a minimum amount equal to six months of projected interest
payments. Additionally, a receipts account must be maintained into which all
revenues and other payments are deposited. Both accounts are administered by ING
and are restricted as to their use and disbursements in accordance with the
provisions of the ING Agreement. As of December 31, 1998, restricted cash of
$3,387,000 and $369,000 was included in the interest reserve and receipts
accounts, respectively.
In June 1997, PSEG Americas entered into an interest rate swap agreement,
which effectively converts a portion of the floating rate obligations under the
ING Agreement into fixed rate obligations. The interest differential to be
received or paid under the interest rate swap agreement is recorded over the
life of the agreement as an adjustment to interest expense. See Note 18.
Subsequent Events for description of the refinancing of the ING loan.
Minority Interest Loan
PSEG Americas also entered into a $9,990,000 minority shareholder loan
(Shareholder Loan) in May 1997, which matures on May 29, 2027. The loan proceeds
were used to partially fund the acquisition of EDEN/EDES in Argentina in 1997 by
PSEG Americas (see Note 5. Investments in Partnerships and Corporate Joint
Ventures). Amounts borrowed under the Shareholder Loan are unsecured and
subordinated to amounts borrowed under the ING Agreement.
In accordance with the Shareholder Loan, the principal is due in one lump
sum on the maturity date. Interest accrues at 14% and is payable semi-annually.
However, failure to pay interest does not constitute an event of default, but
results in an increase in the principal amount due upon maturity. In 1998 and
1997, interest expense related to such borrowings totaled $1,418,000 and
$839,000, respectively.
F-18
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Bank Loan - BNDES
In October 1997, IPE and The National Economic and Social Development Bank
(BNDES), entered into a credit agreement (the BNDES Loan) which matures on
November 15, 2002. The loan proceeds are denominated in Brazilian Reals which
are indexed to a basket of currencies, including United States Dollars. In
total, IPE received the United States Dollar equivalent of approximately
$135,580,000, which was used to partially finance Global's acquisition of RGE in
1997.
Under the terms of the BNDES Loan, the outstanding principal is reset on a
daily basis based on exchange rate movements between the indexed foreign
currencies and the Brazilian Real and between the Brazilian Real and the United
States Dollar. The loan balance is subject to a base variable interest rate plus
4.5%. The variable interest rate reflects the BNDES borrowing rate and is
adjusted on a quarterly basis. The interest rate in effect as of December 31,
1998 was 13.23%. Interest incurred during 1998 and 1997 was approximately
$17,246,000 and $3,223,000, respectively. Both principal and interest are
payable over a five year period in nine equal installments, beginning in
November 1998. As of September 30, 1999, December 31, 1998 and December 31,
1997, the outstanding principal balances amounted to $105,706,000(unaudited),
$122,834,000 and $134,895,000, respectively. To the extent that dividends from
RGE are insufficient to fund the principal and interest payments, Global intends
to fund those payments either through an intercompany loan or an additional
equity investment. The devaluation of the Brazilian Real against other
currencies may require additional funding from Global to fully satisfy the 1999
requirement of $30,709,000 plus interest. However, Energy Holdings cannot
predict the amount, if any, of such additional funding requirements (see Note 6.
Foreign Operations).
Annual Principal Requirements
The scheduled principal maturities during the years following December 31,
1998 are as follows:
PSEG Capital Funding Global Total
------------ ------------ ------------ ------------
1999 ............ $155,000,000 $ 45,000,000 $117,752,000 $317,752,000
2000 ............ 78,000,000 -- 30,709,000 108,709,000
2001 ............ 135,000,000 -- 30,709,000 165,709,000
2002 ............ 130,000,000 -- 30,708,000 160,708,000
Thereafter ...... -- -- 9,990,000 9,990,000
------------ ------------ ------------ ------------
$498,000,000 $ 45,000,000 $219,868,000 $762,868,000
============ ============ ============ ============
NOTE 10. STOCKHOLDER'S EQUITY
Common Stock
Energy Holdings had 100 shares of no-par common stock issued and
outstanding as of December 31, 1998 and 1997, all of which was held by PSEG. The
total authorized amount as of December 31, 1998 and 1997 was 1,000,000 shares.
Preferred Stock
Energy Holdings has authorized 1,000,000 shares of preferred stock. The
issuance of preferred stock is as follows:
<TABLE>
<CAPTION>
Number
Par value of December 31,
Date Description per share shares 1998 1997
- -------- ------------ ------------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
October 1997 4.10% Cumulative $ 1,000,000 75 $ -- $ 75,000,000
January 1998 5.01% Cumulative 500,000 435 217,500,000 --
June 1998 4.80% Series B Cumulative 100,000 1,467 146,700,000 --
July 1998 4.875% Series C Cumulative 100,000 1,450 145,000,000 --
------------ ------------
Total ................................................... $509,200,000 $ 75,000,000
============ ============
</TABLE>
F-19
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A portion of the proceeds from the 5.01% Cumulative Preferred Stock was
used to retire the $75,000,000 of 4.10% Cumulative Preferred Stock issued in
1997.
During 1998, Energy Holdings paid preferred dividends from retained
earnings of $18,076,000 to PSEG. During 1997, Energy Holdings paid no preferred
dividends to PSEG.
Additional Paid-in Capital
No capital contributions were made by or returned to PSEG during 1998 and
1997.
In June 1999, PSEG invested approximately $200 million (unaudited) of
equity in Energy Holdings. See Note 18. Subsequent Events for additional
information.
Dividends on Common Stock
Energy Holdings paid no common stock dividends to PSEG during 1998 and
1997.
Subscription Agreement
Global and PSEG have entered into a subscription agreement (the Agreement)
pursuant to which a subscription was outstanding as of December 31, 1998 for
PSEG to purchase up to 333 shares of Global's capital stock at a purchase price
of $10,000 per share, or an aggregate purchase price of $3,330,000. Excluding
financial obligations which have been recorded, funded or otherwise fulfilled,
the remaining obligations under existing subscription agreements as of December
31, 1998 were approximately $3,330,000 (see Note 14. Commitments and
Contingencies).
The Agreement supports the financial obligation of Global relative to a
specific project. In December 1996, the investment value of this project was
reduced to zero. In addition, Global recorded a $3,330,000 provision for the
aforementioned financial obligation. The Agreement has been assigned to an
outside party who has the right to require PSEG to perform thereunder and make
direct payments to the assignee in the event of default (see Note 14.
Commitments and Contingencies).
NOTE 11. RELATED PARTY TRANSACTIONS
Operation and Maintenance and Development Fees
Global provides operating, maintenance and other services to and receives
management and guaranty fees from various partnerships and joint ventures in
which it is an investor. Fees related to the development and construction of
certain projects are deferred and recognized when earned. Income from these
services of $8,653,000 and $12,072,000 were included in Revenues - Other
Revenues in the Consolidated Statements of Income for the years ended December
31, 1998 and 1997, respectively.
Administrative Costs
Payroll and related fringe benefit costs and other expenses are incurred
by Public Service Electric and Gas Company on behalf of Energy Holdings and are
billed on a monthly basis. Such costs amounted to approximately $13,146,000 and
$13,023,000 for 1998 and 1997, respectively. In addition, Energy Holdings was
billed administrative overheads of $2,554,000 and $2,524,000 by PSEG during 1998
and 1997, respectively.
Employees of Energy Holdings and its subsidiaries are participants in a
non-contributory pension plan administered by Public Service Electric and Gas
Company and costs related to such employees are billed on a monthly basis. Such
costs amounted to approximately $3,622,000, $3,442,000 and $938,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
F-20
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12. MINIMUM LEASE PAYMENTS
Energy Holdings and its subsidiaries lease administrative office space and
equipment under operating leases, which expire prior to the end of 2003. Total
future minimum lease payments as of December 31, 1998 are:
1999 ................................ $ 5,929,000
2000 ................................ 4,247,000
2001 ................................ 3,862,000
2002 ................................ 3,773,000
2003 ................................ 2,271,000
-----------
Total minimum lease payments ........ $20,082,000
===========
Rent expense for 1998, 1997 and 1996 was approximately $5,971,000,
$4,808,000 and $2,879,000, respectively.
NOTE 13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Energy Holdings' operations give rise to exposure to market risks from
changes in natural gas prices, interest rates, foreign exchange rates and
security prices of investments recorded at fair value. Energy Holdings' policy
is to use derivatives for the purpose of managing market risk consistent with
its business plans and prudent practices. Energy Holdings does not hold or issue
financial instruments for trading purposes.
The notional amounts of derivatives do not represent amounts exchanged by
the parties and, thus, are not a measure of the exposure of Energy Holdings
through its use of derivatives. The amounts exchanged, under the terms of the
derivatives, are calculated on the basis of the notional amounts. Energy
Holdings limits its exposure to credit-related losses in the event of
nonperformance by counterparties by limiting its counterparties to those with
high credit ratings.
Hedging
In order to limit Energy Technologies' exposure to price fluctuations
related to fixed price sales commitments, Energy Technologies, pursuant to its
internal trading policy, may not have an outstanding net balance of unhedged
fixed price sales commitments in excess of levels established by management.
Energy Technologies purchases futures contracts in addition to physical purchase
commitments, to ensure compliance with the trading policy. The futures contracts
are accounted for as hedges for book purposes and, accordingly, gains and losses
are deferred until the related sales are made.
During 1998 and 1997, Energy Technologies entered into futures contracts
to buy natural gas related to fixed price sales commitments. Such contracts,
together with physical purchase contracts, hedged approximately 90% and 96% of
Energy Technologies' fixed price sales commitments at December 31, 1998 and
1997, respectively. Energy Technologies had a net deferred unrealized hedge loss
of $(5,160,000) and $(1,681,000) at those respective dates.
During 1998 and 1997, Energy Technologies entered into fixed price
electricity sales commitments. Physical purchase contracts hedged approximately
63% and 10% of such fixed price sales commitments at December 31, 1998 and 1997,
respectively.
Resources has investments in equity securities and partnerships, in which
Resources is a limited partner, which invest in equity securities. Resources
carries its investments in equity securities at their
F-21
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
approximate fair value as of the reporting date. Consequently, the carrying
value of these investments is affected by changes in the market prices of the
underlying securities. Fair value is determined by adjusting the market value of
the securities for liquidation and market volatility factors, where appropriate.
The aggregate amount of such investments which have available market prices at
September 30, 1999, December 31, 1998 and December 31, 1997 was $117,792,000
(unaudited), $204,303,000 and $184,861,000, respectively. The portfolio has
exposure to market price risk. As such, a sensitivity analysis has been prepared
to estimate Energy Holdings' exposure to market volatility of these investments.
The potential change in fair value resulting from a hypothetical 10% change in
quoted market prices of these investments amounted to $11,300,000 (unaudited) at
September 30, 1999 and $17,000,000 at December 31, 1998.
NOTE 14. COMMITMENTS AND CONTINGENCIES
Energy Holdings and/or Global have guaranteed certain obligations of
Global's affiliates, including the successful completion, performance or other
obligations related to certain of the projects in an aggregate amount of
approximately $327,639,000 (unaudited), $86,565,000 and $73,874,000 as of
September 30, 1999, December 31, 1998 and 1997, respectively. A substantial
portion of such guarantees is eliminated upon successful completion, performance
and/or refinancing of construction debt with non-recourse project term debt. A
subscription agreement for PSEG to purchase Global's capital stock secures
$3,330,000 of such obligations (see Note 10. Stockholder's Equity).
Global's 1999 principal payments, referred to in Note 9. Long-Term Debt,
are related to the non-recourse ING and BNDES bank loans. In addition, certain
project financing related to Global's 30% equity investment in the Argentine
electric distribution company in the Province of Buenos Aires matures in 1999.
See Note 18. "Subsequent Events" for information concerning the refinancing of
these loans. Cash proceeds from the refinancing would be used to service the
debt payments. To the extent there is a shortfall in cash, Global intends to
fund the difference either through an intercompany loan or an additional equity
investment. Global's 1999 possible exposure resulting from a potential cash
shortfall related to these projects is approximately $40,000,000. Any debt
shortfall would be funded through additional external debt or equity from Energy
Holdings. See Note 18. Subsequent Events for information concerning the
refinancing of non-recourse debt.
In May 1993, following a 1992 audit of Energy Holdings, which concluded
that Energy Holdings' businesses had not harmed PSEG's wholly-owned, operating
public utility subsidiary, Public Service Electric and Gas Company, the New
Jersey Board of Public Utilities (BPU) accepted a Focused Audit Implementation
Plan in which PSEG agreed, among other things, that it will not permit Energy
Holdings assets, as defined in the agreement, to exceed 20% of its consolidated
assets without prior notice to the BPU, and that debt supported by a support
agreement between PSEG and PSEG Capital will be limited to $750,000,000, with a
good faith effort to eliminate such support within six to ten years. Effective
January 31, 1995, PSEG Capital determined that it will not have more than
$650,000,000 of debt outstanding at any time. At September 30, 1999 and December
31, 1998 Energy Holdings' assets represented 21% (unaudited) and 17% of PSEG's
consolidated assets and PSEG Capital's debt outstanding was $650,000,000
(unaudited) and $498,000,000, respectively.
NOTE 15. PENSION AND OTHER POSTRETIREMENT BENEFIT AND SAVINGS PLANS
Employees of Energy Holdings and its subsidiaries are participants in a
non-contributory pension plan administered by Public Service Electric and Gas
Company. See Note 11. Related Party Transactions for Energy Holdings' pension
costs for the years 1998, 1997 and 1996.
In addition, Public Service Electric and Gas Company sponsors two defined
contribution plans. Represented employees of Energy Holdings are eligible for
participation in the Public Service Electric and Gas Company's Employee Savings
Plan while all other employees of Energy Holdings are eligible
F-22
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
for participation in the Public Service Electric and Gas Company's Tax-Deferred
Savings Plan. The two principal defined contribution plans are sponsored 401(k)
plans to which eligible employees may contribute up to 25% of their
compensation. Employee contributions up to 8% for all employees are matched with
employer contributions of cash or PSEG common stock equal to 50% of such
employee contributions. Employer contributions in excess of 6% and up to 8% are
made in shares of PSEG common stock for all employees. Public Service Electric
and Gas Company billed Energy Holdings for its portion of employer
contributions. The amount expensed for the matching provision of the plans was
approximately $803,000, $573,000 and $297,000 in 1998, 1997 and 1996,
respectively.
NOTE 16. FINANCIAL INFORMATION BY BUSINESS SEGMENTS
Basis of Organization
The reportable segments disclosed herein were determined based on a
variety of factors including the way management organizes the segments within
Energy Holdings for making operating decisions and assessing performance.
Global
Global receives its revenues from its investment in and operation of
projects in the generation and distribution of energy, both domestically and
internationally.
Resources
Resources receives revenues from its passive investments in leveraged
leases, limited partnerships, leveraged buyout funds and marketable securities.
Energy Technologies
Energy Technologies receives revenues from energy sales and a variety of
energy related services to industrial and commercial customers to reduce costs
and improve related energy efficiencies.
F-23
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Activities
Other Activities include amounts applicable to Energy Holdings (the
parent), EGDC and intercompany eliminations.
Information related to the segments of Energy Holdings' business is
detailed below:
<TABLE>
<CAPTION>
Energy Other Consolidated
Global Resources Technologies Activities (A) Total
------ --------- ------------ -------------- -----
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1998:
Total Revenues .................... $ 123,935 $ 145,115 $ 170,840 $ (366) $ 439,524
Depreciation and Amortization ..... 1,416 1,612 2,138 248 5,414
Interest Income ................... 569 9,350 1,010 986 11,915
Interest Expense-- Net ............ 40,672 48,727 1,620 968 91,987
Income Taxes ...................... 12,296 26,624 (5,193) (3,567) 30,160
Net income from equity investments 113,900 34,537 -- 297 148,734
Operating Income Before Income
Taxes ........................... 31,246 86,364 (16,364) (3,686) 97,560
EBIT(B) ........................... 71,918 135,091 (14,744) (2,718) 189,547
Segment Net Income (Loss) ......... $ 7,477 $ 55,523 $ (11,171) $ (103) $ 51,726
========== ========== ========== ========== ==========
As of December 31, 1998:
Total Assets ...................... $1,124,160 $1,809,295 $ 196,610 $ 38,465 $3,168,530
Investments in equity method
affiliates ..................... $1,058,688 $ 383,284 -- $ 34,223 $1,476,195
========== ========== ========== ========== ==========
For the Year Ended December 31, 1997:
Total Revenues .................... $ 90,886 $ 144,334 $ 104,076 $ 2,294 $ 341,590
Depreciation and Amortization ..... 1,597 1,327 960 287 4,171
Interest Income ................... -- 4,226 299 2,768 7,293
Interest Expense-- Net ............ 21,926 45,921 2,846 1,670 72,363
Income Taxes ...................... 10,276 28,998 (9,783) (3,675) 25,816
Net income from equity investments 77,986 48,929 -- 165 127,080
Operating Income Before Income
Taxes .......................... 23,794 88,140 (27,984) (10,500) 73,450
EBIT(B) ........................... 45,720 134,061 (25,138) (8,830) 145,813
Segment Net Income (Loss) ......... $ 13,733 $ 59,142 $ (18,201) $ (7,399) $ 47,275
========== ========== ========== ========== ==========
As of December 31, 1997:
Total Assets ...................... $1,169,948 $1,616,122 $ 177,361 $ 59,525 $3,022,956
Investments in equity method
affiliates ..................... $1,118,642 $ 407,166 -- $ 33,841 $1,559,649
========== ========== ========== ========== ==========
For the Year Ended December 31, 1996:
Total Revenues .................... $ 60,142 $ 142,546 $ 95,219 $ 4,893 $ 302,800
Depreciation and Amortization ..... 732 1,560 512 379 3,183
Interest Income ................... 102 11,224 3,872 3,902 19,100
Interest Expense-- Net ............ 5,512 43,341 5,159 4,249 58,261
Income Taxes ...................... 6,258 28,057 (8,285) (1,062) 24,968
Net income from equity investments ... 45,623 72,838 -- 778 119,239
Operating Income Before Income
Taxes ........................... 15,516 84,548 (23,564) (3,130) 73,370
Income from Discontinued operations -- -- -- 24,238 24,238
EBIT(B) ........................... 21,028 127,889 (18,405) 1,119 131,631
Segment Net Income (Loss) ......... $ 9,258 $ 56,491 $ (15,279) $ 22,192 $ 72,662
========== ========== ========== ========== ==========
As of December 31, 1996:
Total Assets ...................... $ 286,350 $1,442,569 $ 174,222 $ 219,272 $2,122,413
Investments in equity method
affiliates ..................... $ 258,654 $ 407,994 -- $ 34,891 $ 701,539
========== ========== ========== ========== ==========
</TABLE>
F-24
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
(Unaudited)
----------------------------------------------------------------
Energy Other Consolidated
Global Resources Technologies Activities (A) Total
------ --------- ------------ -------------- -----
Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
For the Nine Months Ended
September 30, 1999:
Total Revenues ........................ $ 102,008 $ 118,669 $ 195,465 $ 181 $ 416,323
Segment Net Income (Loss) ............. $ 20,701 $ 46,451 $ (4,733) $ 479 $ 62,898
========== ========== ========== ========== ==========
For the Nine Months Ended
September 30, 1998:
Total Revenues ........................ $ 84,564 $ 74,819 $ 124,582 $ (343) $ 283,622
Segment Net Income (Loss) ............. $ 5,239 $ 19,914 $ (9,303) $ (115) $ 15,735
========== ========== ========== ========== ==========
As of September 30, 1999:
Total Assets .......................... $1,658,458 $1,944,718 $ 232,468 $ 42,816 $3,878,460
========== ========== ========== ========== ==========
As of September 30, 1998:
Total Assets .......................... $1,063,852 $1,727,861 $ 178,043 $ 47,013 $3,016,769
========== ========== ========== ========== ==========
</TABLE>
(A) Other Activities include amounts applicable to Energy Holdings (the
parent), EGDC and intercompany eliminations.
(B) EBIT is defined as Operating Income plus Other Income (Loss).
Geographic Information for Energy Holdings is disclosed below.
<TABLE>
<CAPTION>
Revenues(1)
-----------------------------------------------------------------
Nine Months Ended September 30, Years Ended December 31,
------------------------------- ------------------------
1999 1998 1998 1997
---- ---- ---- ----
(Unaudited)
(Thousands of Dollars)
<S> <C> <C> <C> <C>
United States ............. $ 313,008 $ 211,011 $ 330,302 $ 290,474
Foreign Countries:
Argentina .............. 12,721 12,151 16,407 7,464
Brazil ................. 15,314 16,277 30,669 3,500
Netherlands ............ 45,912 26,924 38,718 19,716
Other .................. 29,368 17,258 23,428 20,436
--------- --------- --------- ---------
Total Foreign ............. 103,315 72,611 109,222 51,116
--------- --------- --------- ---------
Total ............... $ 416,323 $ 283,622 $ 439,524 $ 341,590
========= ========= ========= =========
</TABLE>
(1) Revenues are attributed to countries based on the locations of the
investments.
<TABLE>
<CAPTION>
Identifiable Assets
---------------------------------------------------------------------
September 30, December 31,
------------------------- ---------------------------
1999 1998 1998 1997
---- ---- ---- ----
(Unaudited)
(Thousands of Dollars)
<S> <C> <C> <C> <C>
United States ......... $ 1,554,939 $ 1,554,921 $ 1,565,740 $ 1,695,128
Foreign Countries:
Chile and Peru ..... 528,229 -- -- --
Argentina .......... 355,432 241,348 306,724 239,411
Brazil(1) .......... 321,960 501,465 480,411 505,010
Netherlands ........ 607,521 354,008 399,655 192,827
Other .............. 510,379 365,027 416,000 390,580
----------- ----------- ----------- -----------
Total Foreign ...... 2,323,521 1,461,848 1,602,790 1,327,828
----------- ----------- ----------- -----------
Total ........... $ 3,878,460 $ 3,016,769 $ 3,168,530 $ 3,022,956
=========== =========== =========== ===========
</TABLE>
(1) Amount is net of foreign currency translation adjustment of $206,304,000
(unaudited), $31,870,000 (unaudited), $43,022,000 and $6,862,000 for the
periods ended September 30, 1999, September 30, 1998, December 31, 1998
and December 31, 1997, respectively.
F-25
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17. ACCOUNTING MATTERS
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities" (SOP 98-5), which is effective for financial statements for fiscal
years beginning after December 15, 1998. SOP 98-5 requires the expensing of the
costs of start-up activities as incurred. Additionally, previously capitalized
start-up costs must be written off as a Cumulative Effect of a Change in
Accounting Principle. The adoption of SOP 98-5 did not have a material adverse
impact on the financial condition, results of operations and net cash flows of
Energy Holdings.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), which is effective for financial
statements for all fiscal quarters of fiscal years beginning after June 15, 1999
(see below). SFAS 133 establishes accounting and reporting standards for
derivative instruments and hedging activities. It requires an entity to
recognize all derivatives, within the scope of this statement, as assets or
liabilities on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If a derivative is a hedge,
changes in the fair value of the derivative will either be offset against the
change in fair value of the hedged asset, liability or firm commitment through
earnings or be recognized in other comprehensive income until the hedged item is
recognized in earnings, depending on the nature of the hedge. The ineffective
portion of a derivative's change in fair value will be immediately recognized in
earnings. Energy Holdings is currently evaluating the impact of SFAS 133.
In June 1999, the FASB issued SFAS No. 137 (SFAS 137), "Accounting for
Derivative Instruments and Hedging Activities, Deferral of the Effective Date of
FASB Statement No.133", an amendment of FASB Statement No. 133 which defers the
effective date of SFAS 133 for one year. SFAS 133 will now be effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 137 also
defers by one year the transition date regarding embedded derivatives in SFAS
133.
NOTE 18. SUBSEQUENT EVENTS
In January 1999, PSEG contributed its equity investment in the capital
stock of PSCRC, formerly a wholly-owned subsidiary of Public Service Electric
and Gas Company, through Energy Holdings into Energy Technologies. The aggregate
book value of the stock contributed was $57,000,000. PSCRC is a Demand Side
Management energy consulting company with total assets as of December 31, 1998
of $85,000,000 and earnings of $2,300,000 for the fiscal year ended December 31,
1998.
In February 1999, PSEG Capital issued $252,000,000 of 6.25% MTNs due May
2003. The proceeds were used to repay $100,000,000 of PSEG Capital's MTNs, which
matured in February 1999, and to reduce Energy Holdings' short-term debt. In
June 1999, PSEG Capital issued $35,000,000 of 6.73% MTNs due June 2001. The
proceeds were used to pay down short-term debt.
In April 1999, Global and a partner entered into a joint venture agreement
to develop a 1,000-megawatt combined-cycle gas plant in Guadalupe County in
south central Texas. Global's equity investment is expected to be approximately
$193,000,000, including loans and guarantees.
In April 1999, Global and a partner, through their joint ownership in
Turboven, a Venezuelan company, announced an investment of $140,000,000 to
construct three electric generation plants and associated distribution systems
serving industrial clients in Maracay, Cagua and Valencia, Venezuela. Global's
equity investment, including contingencies, is expected to be approximately
$70,000,000.
In May 1999, Global acquired a 63 percent stake in Tri-Sakthi Energy
Company Ltd., a 525 MW coal-fired project in North Chennai, India. The project
is in an advanced stage of development with all major project contracts
completed or substantially negotiated and ready for execution. Total project
costs are approximately $633,000,000. Global will invest, including
contingencies, approximately $180 million in equity in the project, which is
expected to reach financial closure in the fall of 1999. The project should
begin construction by the end of the year and Global will be the plant's
operator.
In June 1999, Global and a partner, entered into an agreement to jointly
acquire 90 percent of the shares of Chilquinta Energia S.A. (Chilquinta), a
power distribution company based in Valparaiso, Chile
F-26
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
under a 50/50 partnership. Global paid approximately $268,000,000, including
fees and closing costs. Global's investment was also financed with acquisition
debt totaling $160,000,000 that is non-recourse to Global and Energy Holdings.
In June 1999, non-recourse project financing for Global's equity
investment in EDEN/EDES was refinanced. Approximately $66,894,000 of the
$87,044,000 loan was refinanced for a total of 364 days maturing in June 2000.
The remaining $20,150,000 from the original loan was paid down with
approximately $11,250,000 from EDEN/EDES and approximately $8,900,000 from
Global. The pricing on the loan is indexed to LIBOR and 50% of the amount was
swapped from a floating rate to a fixed rate as follows:
Notional Amount ........................................ $33,447,000
Pay Rate ............................................... 5.79%
Average Receive Rate ................................... 5.33%
In June 1999, PSEG invested approximately $200,000,000 of additional
equity in Energy Holdings to repay short-term debt.
In June 1999, Global and a partner closed the project financing for
Parana, an 830 MW gas-fired combined-cycle electric generating facility to be
constructed in San Nicolas, Argentina. The new facility is adjacent to the
existing Central Termica San Nicolas (CTSN), a 650 MW facility also owned by
Global and its partner. Global expects construction to begin in August 1999 and
to be completed by 2001 at a total cost of approximately $448,000,000. Global's
equity investment, including contingencies, is expected to be $86,000,000.
In June 1999, Resources sold its interest in a generating station that was
subject to a leveraged lease for approximately $83,000,000, and recorded an
after-tax gain of $9,000,000. After repayment of the debt, Resources received
approximately $58,000,000 on July 1, 1999 related to this sale.
In July 1999, EDELAP, a distribution company in which Global has a 33%
interest, refinanced a portion of non-recourse debt. The arrangement required
Global to make an additional equity investment of approximately $25,000,000 to
repay a portion of the original loan. The loan is indexed to LIBOR and the term
is 3 years.
In August 1999, Global sold its 50% partnership interest in the Newark Bay
cogeneration facility, a 137 MW gas-fired combined-cycle plant in Newark, NJ.
Global received approximately $70,000,000 from the sale and recognized an
after-tax gain of approximately $40,000,000.
In August 1999, Global and its partners closed project financing for the
Rades facility, a 471 MW gas-fired combined-cycle electric generating facility
in Rades, Tunisia. Construction of the facility began in August 1999 and is
expected to be completed in the summer of 2001 for a total cost of approximately
$261,000,000. Global's equity investment is expected to be approximately
$27,000,000 including contingencies.
In 1999, Energy Technologies purchased five HVAC and mechanical
contracting companies for a total purchase price of approximately $43,400,000
including assumed debt.
In 1999, Resources, through its investment in an LBO Fund, has received
cash distributions of approximately $88,000,000 resulting in an after-tax gain
of approximately $22,000,000 from the fund's sale of a portion of its equity
interests.
In 1999, Resources invested approximately $137,000,000 in three leveraged
lease transactions of energy-related assets: two gas distribution networks in
the Netherlands and a liquefied natural gas facility in the United States.
F-27
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SUBSEQUENT EVENTS--UNAUDITED
In August 1999, the BPU issued its Final Decision and Order (Final Order)
in the matter of Public Service Electric and Gas Company's rate unbundling,
stranded costs and restructuring filings. The Final Order addressed the 1992
Focused Audit of PSEG's non-utility businesses and noted that PSEG's
non-regulated assets would likely exceed 20% of total PSEG assets once the
utility's generating assets were transferred to a non-regulated subsidiary. It
was also recognized in the Final Order that, due to significant changes in the
industry and, in particular, PSEG's corporate structure as a result of the Final
Order, modifications to or relief from the Focused Audit might be warranted.
In September and December 1999, Resources invested approximately
$242,000,000 in leveraged lease transactions of a natural gas distribution
network in the Netherlands, cogeneration plants in Germany and a generation
plant in the United States.
In September 1999, Resources, through its investment in an LBO fund,
received a cash distribution of approximately $11,500,000 resulting in an
after-tax gain of approximately $1,500,000 from the fund's sale of a portion of
its equity interests.
In September 1999, Global completed a comprehensive review of its existing
assets and development activities focusing on rationalizing the portfolio to
ensure efficient capital deployment. Global's management has decided to refocus
on its current Asian development activities in China. As a result, Global
recognized an $8 million after-tax write-down in the third quarter of 1999 to
adjust the carrying value of these assets to net realizable value. In December
1999, Global sold its Thai investment for its adjusted carrying value. In
addition, the projected substantial decline in revenue related to energy
contracts for six generation facilities in California resulted in a third
quarter $ 19 million after-tax write-down of Global's equity investment in such
facilities.
In September 1999, Global and its partner completed a tender offer for
outstanding publicly traded shares of Luz del Sur. The number of shares tendered
constitutes 22.5% of the shares of Luz del Sur. Global and its partner also
purchased an additional 25% of Luz del Sur upon closing of the tender offer.
Global's investment in connection with these transactions was approximately $108
million.
In October 1999, Energy Holdings issued $400 million of 10% senior notes
due 2009. These are the Original Notes being offered for exchange. Interest is
payable semi-annually on April 1 and October 1, commencing April 1, 2000. The
net proceeds from the sale were used for the repayment of short-term debt
outstanding under our revolving credit facilities.
In October 1999, Global closed on the acquisition of a 70% interest in
Prisma 2000, a power project development company in Italy specializing in
renewable energy. Prisma 2000 currently has approximately 550 MW of power
projects either in development or under construction consisting of biomass,
hydro and gas powered production. Global's acquisition and equity investment
requirements over the next two years are expected to be approximately $80
million.
In October 1999, Global and its 50% partner completed a $312 million
project financing, a 1,000 MW gas-fired combined-cycle electric generation
facility in Guadalupe County in south central Texas, for their power plant. The
plant is under construction and commercial operation is expected to commence in
late 2000. Global's equity investment, including loans and guarantees, for its
50% interest is expected to be approximately $193 million.
In November 1999, Global announced that it plans to build a combined heat
and power plant of 220 MW of electricity and 500 MW of thermal energy capacity
utilizing circulating fluidized bed technology in Poland. Total project cost is
estimated at $320 million with commercial operation targeted for late 2002.
In November 1999, Resources sold its interest in a limited partnership and
received cash proceeds of $11 million and recognized an after-tax gain of
approximately $1 million.
F-28
<PAGE>
PSEG ENERGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In November 1999, Resources negotiated the early termination of a
leveraged lease of an interest in a nuclear generating station and received cash
proceeds of $48.8 million including a premium of $7.3 million.
NOTE 19. DISCONTINUED OPERATIONS
In 1996, EDC was sold for an aggregate price of $779,000,000. This sale
resulted in an after-tax gain of $13,492,000.
<PAGE>
================================================================================
$400,000,000
PSEG Energy Holdings Inc.
Offer to Exchange
10% Senior Notes due 2009
which have been registered
under the Securities Act
For Any and All Outstanding
10% Senior Notes due 2009
which have not been so registered
[PSEG ENERGY HOLDINGS LOGO]
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification Of Directors And Officers
Article 6 of Energy Holdings' Certificate of Incorporation provides
as follows:
To the full extent from time to time permitted by law, directors and
officers of the corporation shall not be personally liable to the
corporation or its shareholders for damages for breach of any duty owed to
the corporation or its shareholders. No amendment or repeal of this
provision shall adversely affect any right or protection of a director or
officer of the corporation existing at the time of such amendment or
repeal.
Section 24 of Energy Holdings' By-Laws provides as follows:
The corporation shall indemnify to the full extent from time to time
permitted by law any person made, or threatened to be made, a party to any
pending, threatened or completed civil, criminal, administrative or
arbitrative action, suit or proceeding and any appeal therein (and any
inquiry or investigation which could lead to such action, suit or
proceedings) by reason of the fact that he is or was a director, officer
or employee of the corporation or serves or served any other enterprise as
a director, officer or employee at the request of the corporation. Such
right of indemnification shall inure to the benefit of the legal
representative of any such person.
The directors and officers of Energy Holdings are insured under policies
of insurance, within the limits and subject to the limitations of the policies,
against claims made against them for acts in the discharge of their duties, and
Energy Holdings is insured to the extent that it is required or permitted by law
to indemnify the directors and officers for such loss. The premiums for such
insurance are paid by Energy Holdings.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits.
Exhibit
Number Description
- ------- -----------
3.1 -- Certificate of Incorporation, as amended.
3.2 -- By-Laws.
4.1 -- Indenture dated October 8, 1999 between Energy Holdings and First Union
National Bank.
4.2 -- Exchange and Registration Rights Agreement dated October 8, 1999
between Energy Holdings and the purchasers named in Schedule I of the
purchase agreement.
4.3 -- Form of Exchange Note.
5 -- Opinion of James T. Foran, Esquire.*
8 -- Opinion of James T. Foran, Esquire regarding tax matters.*
12 -- Statement regarding computation of ratios of earnings.
21 -- Subsidiaries of the Registrant.
23.1 -- Consent of James T. Foran, Esquire (contained in Exhibits 5 and 8).
23.2 -- Independent Auditors' Consent.
24 -- Power of attorney (included in the signature page to the registration
statement).
25 -- Statement of Eligibility of Trustee on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
- ----------
* To be filed by amendement.
II-1
<PAGE>
Item 22. Undertakings
The undersigned registrant hereby undertakes (a):
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section l0(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change in such information in the
registration statement; provided, however, that the registrant
need not file a post-effective amendment to include the
information required to be included by subsection (a)(1)(i) or
(a)(l)(ii) if such information is contained in periodic
reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act that are
incorporated by reference in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, PSEG Energy Holdings Inc., certifies that it has reasonable grounds
to believe it meets all of the requirements for filing on Form S-4 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newark, State of New
Jersey, on this 28th day of January, 2000.
PSEG ENERGY HOLDINGS INC.
By: /s/ ROBERT J. DOUGHERTY
-------------------------------------
Robert J. Dougherty, Jr
President and Chief Operating Officer
II-3
<PAGE>
POWER OF ATTORNEY
Each Director of PSEG Energy Holdings Inc. whose signature appears below
hereby appoints Bruce E. Walenczyk the agent for service named in this
Registration Statement, and James T. Foran, Esq. as attorney-in-fact, to execute
in the name of each such person and to file with the Securities and Exchange
Commission this Registration Statement and any and all additional amendments,
including post-effective amendments to this Registration Statement.
Signature Title Date
--------- ----- ----
/s/ FRANK CASSIDY Director January 26, 2000
- ----------------------------
Frank Cassidy
/s/ ROBERT J. DOUGHERTY, JR. Director January 26, 2000
- ----------------------------
Robert J. Dougherty
/s/ E. JAMES FERLAND Director January 26, 2000
- ----------------------------
E. James Ferland
/s/ ROBERT C. MURRAY Director January 26, 2000
- ----------------------------
Robert C. Murray
/s/ R. EDWIN SELOVER Director January 26, 2000
- ----------------------------
R. Edwin Selover
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ E. James Ferland Principal Executive January 28, 2000
- ----------------------- Officer and Director
E. James Ferland
/s/ Bruce E. Walenczyk Principal Financial Officer January 28, 2000
- -----------------------
Bruce E. Walenczyk
/s/ Derek M. DiRisio Principal Accounting Officer January 28, 2000
- -----------------------
Derek M. DiRisio
This Registration Statement has also been signed by Bruce E. Walenczyk,
Attorney-in-Fact, on behalf of the following Directors on January 28, 2000.
Frank Cassidy
Robert J. Dougherty
Robert C. Murray
R. Edwin Selover
By: /s/ BRUCE E. WALENCZYK
------------------------------
Bruce E. Walenczyk
Attorney-in-Fact
II-5
<PAGE>
Exhibit Index
Exhibit
Number Description
- ------- -----------
3.1 -- Certificate of Incorporation, as amended.
3.2 -- By-Laws.
4.1 -- Indenture dated October 8, 1999 between Energy Holdings and First Union
National Bank.
4.2 -- Exchange and Registration Rights Agreement dated October 8, 1999
between Energy Holdings and the purchasers named in Schedule I of the
purchase agreement.
4.3 -- Form of Exchange Note.
5 -- Opinion of James T. Foran, Esquire.*
8 -- Opinion of James T. Foran, Esquire regarding tax matters.*
12 -- Statement regarding computation of ratios of earnings.
21 -- Subsidiaries of the Registrant.
23.1 -- Consent of James T. Foran, Esquire (contained in Exhibits 5 and 8).
23.2 -- Independent Auditors' Consent.
24 -- Power of attorney (included in the signature page to the registration
statement).
25 -- Statement of Eligibility of Trustee on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
- ----------
* To be filed by amendement.
Exhibit 3.1
Certificate of Incorporation
of
Enterprise Diversified Holdings Incorporated
The undersigned, a corporation of the State of New Jersey, for the purpose
of forming a corporation pursuant to the provisions of the New Jersey Business
Corporation Act, does hereby certify as fellows:
1. The name of the corporation is Enterprise Diversified Holdings
Incorporated.
2. The purpose for which the corporation is organized is to engage in
any activity within the purposes for which corporations may be
organized under the New Jersey Business Corporation Act.
3. The aggregate number of shares which the corporation shall have
authority to issue is 1,000,000 shares of Capital Stock, without par
value.
4. The number of directors of the corporation at any time may be
increased or (in the event of an existing vacancy) diminished by
vote of the Board of Directors, and in case of any such increase the
Board of Directors shall have power to elect each such additional
director to hold office until the next
<PAGE>
3
succeeding annual meeting of stockholders and until his successor
shall have been elected and qualified.
5. The shareholders of the corporation, by the affirmative vote of the
majority of the votes cast by the holders of shares entitled to vote
for the election of directors, may remove one or more or all of the
directors without cause. The Board of Directors, by the affirmative
vote of a majority of the directors in office, may remove a director
or directors for cause where, in the judgment of such majority, the
continuation of the director or directors in office would be harmful
to the corporation and may suspend the director or directors for a
reasonable period pending final determination that cause exists for
such removal.
6. To the full extent from time to time permitted by law, directors and
officers of the corporation shall not be personally liable to the
corporation or its shareholders for damages for breach of any duty
owed to the corporation or its shareholders. No amendment or repeal
of this provision shall adversely affect any right or protection of
a director or officer of the corporation
<PAGE>
4
existing at the time of such amendment or repeal.
7. The address of the corporation's initial registered office is 80
Park Plaza, Newark, New Jersey 07101, and the name of the
corporation's initial registered agent at such address is Robert S.
Smith.
8. The number of directors constituting the first Board of Directors of
the corporation is seven, and the names and addresses of the
persons who are to serve as such directors are as follows:
E. James Ferland 80 Park Plaza
Newark, NJ 07101
William E. Marfuggi 80 Park Plaza
Newark, NJ 07101
T.J. Dermot Dunphy 80 Park Plaza
Newark, NJ 07101
Shirley A. Jackson 80 Park Plaza
Newark, NJ 07101
Marilyn M. Pfaltz 80 Park Plaza
Newark, NJ 07101
Harold W. Sonn 80 Park Plaza
Newark, NJ 07101
Josh S. Weston 80 Park Plaza
Newark, NJ 07101
<PAGE>
5
9. The name and address of the incorporator is Public Service
Enterprise Group Incorporated, 80 Park Plaza, Newark, New Jersey
07101.
In Witness Whereof, the undersigned, the incorporator of the above-named
corporation, has caused this Certificate of Incorporation to be executed this
20th day of June, 1989.
PUBLIC SERVICE ENTERPRISE
GROUP INCORPORATED
By: /s/ E. James Ferland
--------------------------
E. James Ferland
Chairman of the Board,
President and Chief
Executive Officer
Attest:
/s/ Robert S. Smith
- -----------------------
Robert S. Smith
Secretary
<PAGE>
Certificate of Amendment
of
CERTIFICATE OF INCORPORATION
of
ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED
---------------------
Authorizing 1,000,000 Shares of Preferred Stock
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
Enterprise Diversified Holdings Incorporated
-----------------------
Enterprise Diversified Holdings Incorporated, a New Jersey corporation,
does hereby certify, pursuant to subsection 14A:9-4(3) of the New Jersey
Business Corporation Act, that:
(a) The name of this corporation is "Enterprise Diversified Holdings
Incorporated".
(b) The following is a copy of resolutions of the Board of Directors of
said corporation, amending the Certificate of Incorporation of said corporation
dated June 20, 1989, as amended, pursuant to subsection 14A:9-2(4) of the New
Jersey Business Corporation Act:
"Resolved, that Section 3 of this corporation's Certificate of
Incorporation dated June 20, 1989 is hereby amended by deleting said
Section in its entirety and inserting the following:
3. The corporation shall have the authority to issue 1,000,000
shares of Common Stock, without par value, and 1,000,000 shares of
Preferred Stock. The Board of Directors shall have authority to issue the
shares of Preferred Stock from time to time on such terms as it may
determine, and to divide the Preferred Stock into one or more classes or
series and in connection with the creation of any such class or series to
fix, by resolution or resolutions providing for the issue thereof, the
designation, the number of shares, and the relative rights, preferences
and limitations thereof, to the full extent now or hereafter permitted by
law."
<PAGE>
-2-
(c) The foregoing resolutions were duly adopted by the Board of Directors
of said corporation at a meeting duly called and held on October 21, 1997, at
which a quorum was present and acting throughout and by written consent of its
sole shareholder, Public Service Enterprise Group Incorporated, on October 21,
1997.
(d) The number of shares entitled to vote is 100.
(e) The number of shares voted for the amendment is 100; the number of
shares voted against the amendment is 0.
(f) The amendment is not intended to provide for an exchange,
reclassification or cancellation of issued shares.
(g) The amendment shall be effective at the time of filing of this
Certificate.
IN WITNESS WHEREOF, said Enterprise Diversified Holdings Incorporated has
made this Certificate this 21st day of October, 1997.
ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED
By /s/ E. James Ferland
------------------------------------------
E. James Ferland
Chairman of the Board and
Chief Executive Officer
[CORPORATE SEAL]
Attest:
By /s/ Edward J. Biggins, Jr.
-----------------------------
Edward J. Biggins, Jr.
Secretary
<PAGE>
Certificate of Amendment
of
CERTIFICATE OF INCORPORATION
of
ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED
-----------------
Establishing the 4.10% Cumulative Preferred Stock
as a series of the Preferred Stock.
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
Enterprise Diversified Holdings Incorporated
-----------------
Enterprise Diversified Holdings Incorporated, a New Jersey corporation,
does hereby certify, pursuant to subsection 14A:7-2(4) of the New Jersey
Business Corporation Act, that:
(a) The name of this corporation is "Enterprise Diversified Holdings
Incorporated".
(b) The following is a copy of resolutions of the Board of Directors
of said corporation, amending the Certificate of Incorporation of said
corporation dated June 20, 1989, as amended, pursuant to subsections
14A:7-2(2) and 14A:7-2(3) of the New Jersey Business Corporation Act and
Section 3 of said Certificate of Incorporation:
RESOLVED, that a series of Preferred Stock of this Corporation, designated
"4.10% Cumulative Preferred Stock" (hereinafter in these resolutions sometimes
referred to as the "4.10% Preferred Stock"), and consisting of 75 shares of the
par value of $1,000,000 each, be and the same is hereby created and established
as a series within the 1,000,000 shares of Preferred Stock of this Corporation
upon the effectiveness of the Certificate of Amendment of the Certificate of
Incorporation of this Corporation to authorize the issuance of 1,000,000 shares
of Preferred Stock;
FURTHER RESOLVED, that the relative rights, preferences and limitations of
the shares of the 4.10% Preferred Stock are hereby determined to be as follows:
<PAGE>
-2-
(a) Dividends. The holder of shares of the 4.10% Preferred Stock shall
be entitled to receive, and the corporation shall be obliged to pay, but
only when and as declared by the Board of Directors, and only out of its
earned surplus, cash dividends thereon, at the rate per share per annum of
4.10%, and no more, payable quarterly, with respect to each calendar
quarterly period, on or prior to the last day of each such calendar
quarterly period, to wit, the last day of each January, April, July and
October. Dividends on each share of such series of the 4.10% Preferred
Stock shall be cumulative from date of issuance.
Subject to the provisions contained herein, all additional earned
surplus of the corporation may be divided among and paid to the holders of
Common Stock.
(b) Restrictions on Dividends on and Purchase of Junior Stock. So long
as any of 4.10% Preferred Stock shall remain outstanding, no dividend
(other than dividends payable in shares of Common Stock) shall be paid on
or set apart for the Common Stock, nor shall any shares thereof be
purchased, redeemed, or otherwise acquired by the corporation or any
subsidiary thereof (other than shares acquired without cost to the
corporation or such subsidiary) unless
(i) all dividends on all outstanding shares of the 4.10%
Preferred Stock for all past quarterly dividend periods shall have been
paid and full dividends thereon for the then current quarterly dividend
period declared and a sum sufficient for the payment thereof set apart;
<PAGE>
-3-
(ii) after giving effect to the payment of such dividend or such
purchase, redemption, or other acquisition, the capital of the corporation
represented by its Common Stock, together with its surplus as then stated
on its books of account, shall in the aggregate exceed the aggregate of the
amounts payable on involuntary liquidation or dissolution of the
corporation in respect of all shares of the 4.10% Preferred Stock then
outstanding.
(c) Voting Rights. All voting rights in the corporation shall be
vested exclusively in the holders of Common Stock.
(d) Redemption. The shares of the 4.10% Preferred Stock may be
redeemed at the option of the Board of Directors of the corporation at any
time at par plus an amount equal to all accumulated and unpaid dividends
thereon to the date of redemption, whether or not such dividends have been
earned or declared.
All shares of 4.10% Preferred Stock redeemed by the corporation shall
be cancelled and upon such cancellation shall be restored to the status of
authorized but unissued shares, not classified as to series.
(e) Liquidation or Dissolution. On liquidation or dissolution of the
corporation, before any payment or distribution shall be made to the
holders of Common Stock, if such liquidation or dissolution be involuntary,
the holder of the 4.10% Preferred Stock shall be entitled to be paid the
sum of $1,000,000 per share, of, if such liquidation or dissolution be
voluntary, the holder of the shares of 4.10% Preferred Stock shall be
<PAGE>
-4-
entitled to be paid the amount established by the Board of Directors, plus
an amount equal to all accumulated and unpaid dividends thereon to the date
of such payment, whether or not such dividends shall have been earned or
declared. After such payments shall have been made in full to the holder of
4.10% Preferred Stock, it shall be entitled to no further payment or
distribution.
A consolidation or merger to which the corporation shall be a party
shall not be deemed a liquidation or dissolution of the corporation within
the meaning of this subdivision.
(f) The shares of the 4.10% Preferred Stock are not transferable.
FURTHER RESOLVED, that the Certificate of Incorporation of this Corporation
dated June 20, 1989, as amended, be and it hereby is further amended so that the
designation and number of shares of such series and the relative rights,
preferences and limitations of such series are as stated in these resolutions;
FURTHER RESOLVED, that the proper officers of this Corporation be and they
hereby are authorized and directed to execute on behalf of this Corporation and
to file in the office of the Secretary of State of the State of New Jersey a
certificate of amendment to the Certificate of Incorporation of this
Corporation, as amended, setting forth a copy of these resolutions, as required
by subsection 14A:7-2(4) of the New Jersey Business Corporation Act".
<PAGE>
-5-
(c) The foregoing resolutions were duly adopted by the Board of
Directors of said Corporation at a meeting duly called and held on October
21, 1997, at which a quorum was present and acting throughout.
(d) The Certificate of Incorporation of this corporation dated June
20, 1989, as amended, is further amended so that the designation and number
of shares of the 4.10% Cumulative Preferred Stock of said corporation, and
the relative rights, preferences and limitations of such series are as
stated in said resolutions.
IN WITNESS WHEREOF, said Enterprise Diversified Holdings Incorporated has
made this Certificate this 21st day of October, 1997.
ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED
By: /s/ E. James Ferland
---------------------------------------
E. James Ferland
Chairman of the Board
[CORPORATE SEAL]
Attest:
By: /s/ Edward J. Biggins, Jr.
----------------------------
Edward J. Biggins, Jr.
Secretary
<PAGE>
Certificate of Amendment
of
CERTIFICATE OF INCORPORATION
of
ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED
----------------
Establishing the 5.01% Cumulative Preferred Stock
as a series of the Preferred Stock.
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
Enterprise Diversified Holdings Incorporated
----------------
Enterprise Diversified Holdings Incorporated, a New Jersey corporation,
does hereby certify, pursuant to subsection 14A:7-2(4) of the New Jersey
Business Corporation Act, that:
(a) The name of this corporation is "Enterprise Diversified Holdings
Incorporated".
(b) The following is a copy of resolutions of the Board of Directors of
said corporation, amending the Certificate of Incorporation of said corporation
dated June 20, 1989, as amended, pursuant to subsections 14A:7-2(2) and
14A:7-2(3) of the New Jersey Business Corporation Act and Section 3 of said
Certificate of Incorporation:
RESOLVED, that a series of Preferred Stock of this Corporation,
designated "5.01% Cumulative Preferred Stock" (hereinafter in these
resolutions sometimes referred to as the "5.01% Preferred Stock"), and
consisting of 435 shares of the par value of $500,000 each, be and the same
is hereby created and established as a series of Preferred Stock of this
Corporation;
FURTHER RESOLVED, that the relative rights, preferences and
limitations of the shares of the 5.01% Preferred Stock are hereby
determined to be as follows:
<PAGE>
-2-
(a) Dividends. The holder of shares of the 5.01% Preferred Stock shall
be entitled to receive, and the corporation shall be obliged to pay, but
only when and as declared by the Board of Directors, and only out of its
earned surplus, cash dividends thereon, at the rate per share per annum of
5.01%, and no more, payable quarterly, with respect to each calendar
quarterly period, on or prior to the last day of each such calendar
quarterly period, to wit, the last day of each March, June, September and
December. Dividends on each share of such series of the 5.01% Preferred
Stock shall be cumulative from date of issuance.
Subject to the provisions contained herein, all additional earned
surplus of the corporation may be divided among and paid to the holders of
Common Stock.
(b) Restrictions on Dividends on and Purchase of Junior Stock. So long
as any of 5.01% Preferred Stock shall remain outstanding, no dividend
(other than dividends payable in shares of Common Stock) shall be paid on
or set apart for the Common Stock, nor shall any shares thereof be
purchased, redeemed, or otherwise acquired by the corporation or any
subsidiary thereof (other than shares acquired without cost to the
corporation or such subsidiary) unless:
<PAGE>
-3-
(i) all dividends on all outstanding shares of the 5.01% Preferred
Stock for all past quarterly dividend periods shall have been paid and full
dividends thereon for the then current quarterly dividend period declared
and a sum sufficient for the payment thereof set apart;
(ii) after giving effect to the payment of such dividend or such
purchase, redemption, or other acquisition, the capital of the corporation
represented by its Common Stock, together with its surplus as then stated
on its books of account, shall in the aggregate exceed the aggregate of the
amounts payable on involuntary liquidation or dissolution of the
corporation in respect of all shares of the 5.01% Preferred Stock then
outstanding.
(c) Voting Rights. All voting rights in the corporation shall be
vested exclusively in the holders of Common Stock.
(d) Redemption. The shares of the 5.01% Preferred Stock may be
redeemed at the option of the Board of Directors of the corporation at any
time at par plus an amount equal to all accumulated and unpaid dividends
thereon to the date of redemption, whether or not such dividends have been
earned or declared.
<PAGE>
-4-
All shares of 5.01% Preferred Stock redeemed by the corporation shall
be canceled and upon such cancellation shall be restored to the status of
authorized but unissued shares, not classified as to series.
(e) Liquidation or Dissolution. On liquidation or dissolution of the
corporation, before any payment or distribution shall be made to the
holders of Common Stock, if such liquidation or dissolution be involuntary,
the holder of the 5.01% Preferred Stock shall be entitled to be paid the
sum of $500,000 per share, or, if such liquidation or dissolution be
voluntary, the holder of the shares of 5.01% Preferred Stock shall be
entitled to be paid the amount established by the Board of Directors, plus
an amount equal to all accumulated and unpaid dividends thereon to the date
of such payment, whether or not such dividends shall have been earned or
declared. After such payments shall have been made in full to the holder of
5.01% Preferred Stock, it shall be entitled to no further payment or
distribution.
A consolidation or merger to which the corporation shall be a party
shall not be deemed a liquidation or dissolution of the corporation within
the meaning of this subdivision.
<PAGE>
-5-
(f) The shares of the 5.01% Preferred Stock are not transferable.
FURTHER RESOLVED, that the Certificate of Incorporation of this
Corporation dated June 20, 1989, as amended, be, and it hereby is, further
amended so that the designation and number of shares of such series and the
relative rights, preferences and limitations of such series are as stated
in these resolutions;
FURTHER RESOLVED, that the proper officers of this Corporation be, and
they hereby are, authorized and directed to execute on behalf of this
Corporation and to file in the office of the Secretary of State of the
State of New Jersey a certificate of amendment to the Certificate of
Incorporation of this Corporation, as amended, setting forth a copy of
these resolutions, as required by subsection 14A:7-2(4) of the New Jersey
Business Corporation Act;
FURTHER RESOLVED, that this Corporation issue and sell 435 shares of
its 5.01% Preferred Stock to its sole shareholder, Public Service
Enterprise Group Incorporated, for the sum of $217,500,000; and
FURTHER RESOLVED, that the officers of this Corporation be, and they
hereby are, authorized and directed to take such other and further action
as they shall
<PAGE>
-6-
deem necessary or advisable to carry out the intent and purposes of these
resolutions.
(c) The foregoing resolutions were duly adopted by the Board of
Directors of said Corporation at a meeting duly called and held on January
20, 1998, at which a quorum was present and acting throughout.
(d) The Certificate of Incorporation of this corporation dated June
20, 1989, as amended, is further amended so that the designation and number
of shares of the 5.01% Cumulative Preferred Stock of said corporation, and
the relative rights, preferences and limitations of such series are as
stated in said resolutions.
IN WITNESS WHEREOF, said Enterprise Diversified Holdings Incorporated has
made this Certificate this 20st day of January, 1998.
ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED
By: /s/ E. James Ferland
-----------------------------------
E. James Ferland
Chairman of the Board
[CORPORATE SEAL]
Attest:
By: /s/ Edward J. Biggins, Jr.
----------------------------
Edward J. Biggins, Jr.
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED
Enterprise Diversified Holdings Incorporated, a New Jersey corporation,
does hereby certify, pursuant to subsection 14A:9-4(3) of the New Jersey
Business Corporation Act, as follows:
1. The name of the corporation is "Enterprise Diversified Holdings
Incorporated".
2. The following resolution was adopted by the sole shareholder of said
corporation, amending the corporation's Certificate of Incorporation
dated June 20, 1989, pursuant to subsections 14A:9-1(2) and 14A:9-2(4)
of the New Jersey Business Corporation Act:
RESOLVED, that the Certificate of Incorporation of this Corporation
be amended by substituting the name "PSEG Energy Holdings Inc." for
the name "Enterprise Diversified Holdings Incorporated".
3. The date of the adoption of such amendment by the sole shareholder of
said Corporation is June 8, 1998.
4. The number of shares of each class and series of the stock of the
corporation entitled to vote thereon are as follows:
Designation Number
----------- ------
Common 100
5. The number of shares of each class and series of the stock of the
corporation voting for and against such amendment is as follows:
Designation Number For Number Against
----------- ---------- --------------
Common 100 -0-
6. No exchange, reclassification or cancellation of issued shares is
affected as a result of such amendment.
7. This amendment shall become effective upon filing.
IN WITNESS WHEREOF, Enterprise Diversified Holdings Incorporated has made
this Certificate this 10th day of June, 1998.
Enterprise Diversified Holdings
Incorporated
Attest:
/s/ Patrick M. Burke By: /s/ Robert J. Dougherty, Jr.
- -------------------------------- ------------------------------
Patrick M. Burke Robert J. Dougherty, Jr.
Assistant Secretary President
<PAGE>
Certificate of Amendment
of
CERTIFICATE OF INCORPORATION
of
PSEG ENERGY HOLDINGS INC.
-----------------
Establishing the Series B Cumulative Preferred Stock
as a series of the Preferred Stock.
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
PSEG Energy Holdings Inc.
------------------
PSEG Energy Holdings Inc., a New Jersey corporation, does hereby certify,
pursuant to subsection 14A:7-2(4) of the New Jersey Business Corporation Act,
that:
(a) The name of this corporation is "PSEG Energy Holdings Inc.".
(b) The following is a copy of resolutions of the Preferred Stock Pricing
Committee of the Board of Directors of said corporation, acting pursuant to
authority granted to it by the Board of Directors of said corporation, amending
the Certificate of Incorporation of said corporation dated June 20, 1989, as
amended, pursuant to subsections 14A:7-2(2) and 14A:7-2(3) of the New Jersey
Business Corporation Act and Section 3 of said Certificate of Incorporation:
RESOLVED, that a series of Preferred Stock of this Corporation,
designated "Series B Cumulative Preferred Stock" (hereinafter in these
resolutions sometimes referred to as the "Series B Preferred Stock"), and
consisting of 1,467 shares of the par value of $100,000 each, be and the
same is hereby created and established as a series of Preferred Stock of
this Corporation;
<PAGE>
-2-
FURTHER RESOLVED, that the relative rights, preferences and
limitations of the shares of the Series B Preferred Stock are hereby
determined to be as follows:
(a) Dividends. The holder of shares of the Series B Preferred Stock
shall be entitled to receive, and the corporation shall be obliged to pay,
but only when and as declared by the Board of Directors, and only out of
its earned surplus, cash dividends thereon, for all periods through June
30, 2008, at the rate per share per annum of 4.80%, and no more, and,
thereafter, dividends shall be paid at such rate as shall be established by
the Board of Directors of this Corporation, payable quarterly, with respect
to each calendar quarterly period, on or prior to the last day of each such
calendar quarterly period, to wit, the last day of each March, June,
September and December, commencing September 30, 1998. Dividends on each
share of such series of the Series B Preferred Stock shall be cumulative
from date of issuance.
Subject to the provisions contained herein, all additional earned
surplus of the corporation may be divided among and paid to the holders of
Common Stock.
(b) Restrictions on Dividends on and Purchase of Junior Stock. So long
as any of Series B Preferred Stock
<PAGE>
-3-
shall remain outstanding, no dividend (other than dividends payable in
shares of Common Stock) shall be paid on or set apart for the Common Stock,
nor shall any shares thereof be purchased, redeemed, or otherwise acquired
by the corporation or any subsidiary thereof (other than shares acquired
without cost to the corporation or such subsidiary) unless:
(i) all dividends on all outstanding shares of the Series B Preferred
Stock for all past quarterly dividend periods shall have been paid and full
dividends thereon for the then current quarterly dividend period declared
and a sum sufficient for the payment thereof set apart;
(ii) after giving effect to the payment of such dividend or such
purchase, redemption, or other acquisition, the capital of the corporation
represented by its Common Stock, together with its surplus as then stated
on its books of account, shall in the aggregate exceed the aggregate of the
amounts payable on involuntary liquidation or dissolution of the
corporation in respect of all shares of the Series B Preferred Stock then
outstanding.
(c) Voting Rights. All voting rights in the corporation shall be
vested exclusively in the holders of Common Stock.
<PAGE>
-4-
(d) Redemption. The shares of the Series B Preferred Stock may be
redeemed at the option of the Board of Directors of the corporation at any
time at par plus an amount equal to all accumulated and unpaid dividends
thereon to the date of redemption, whether or not such dividends have been
earned or declared.
All shares of Series B Preferred Stock redeemed by the corporation
shall be canceled and upon such cancellation shall be restored to the
status of authorized but unissued shares, not classified as to series.
(e) Liquidation or Dissolution. On liquidation or dissolution of the
corporation, before any payment or distribution shall be made to the
holders of Common Stock, if such liquidation or dissolution be involuntary,
the holder of the Series B Preferred Stock shall be entitled to be paid the
sum of $100,000 per share, or, if such liquidation or dissolution be
voluntary, the holder of the shares of Series B Preferred Stock shall be
entitled to be paid the amount established by the Board of Directors, plus
an amount equal to all accumulated and unpaid dividends thereon to the date
of such payment, whether or not such dividends shall have been earned or
declared. After such payments shall have
<PAGE>
-5-
been made in full to the holder of Series B Preferred Stock, it shall be
entitled to no further payment or distribution.
A consolidation or merger to which the corporation shall be a party
shall not be deemed a liquidation or dissolution of the corporation within
the meaning of this subdivision.
(f) The shares of the Series B Preferred Stock are not transferable.
FURTHER RESOLVED, that the Certificate of Incorporation of this
Corporation dated June 20, 1989, as amended, be, and it hereby is, further
amended so that the designation and number of shares of such series and the
relative rights, preferences and limitations of such series are as stated
in these resolutions;
FURTHER RESOLVED, that the proper officers of this Corporation be, and
they hereby are, authorized and directed to execute on behalf of this
Corporation and to file in the office of the Secretary of State of the
State of New Jersey a certificate of amendment to the Certificate of
Incorporation of this Corporation, as amended, setting forth a copy of
these resolutions, as required by subsection 14A:7-2(4) of the New Jersey
Business Corporation Act;
<PAGE>
-6-
FURTHER RESOLVED, that this Corporation issue and sell 1,467 shares of
its Series B Preferred Stock to its sole shareholder, Public Service
Enterprise Group Incorporated, for the sum of $146,700,000; and
FURTHER RESOLVED, that the officers of this Corporation be, and they
hereby are, authorized and directed to take such other and further action
as they shall deem necessary or advisable to carry out the intent and
purposes of these resolutions.
(c) The foregoing resolutions were duly adopted by the Preferred Stock
Pricing Committee of the Board of Directors of said Corporation at a meeting
duly called and held on June 25, 1998, at which a quorum was present and acting
throughout.
(d) The Certificate of Incorporation of this corporation dated June 20,
1989, as amended, is further amended so that the designation and number of
shares of the Series B Cumulative Preferred Stock of said corporation, and the
relative rights, preferences and limitations of such series are as stated in
said resolutions.
<PAGE>
-7-
IN WITNESS WHEREOF, said PSEG Energy Holdings Inc. has made this
Certificate this 25th day of June, 1998.
PSEG ENERGY HOLDINGS INC.
By: /s/ E. James Ferland
-----------------------------------
E. James Ferland
Chairman of the Board
[CORPORATE SEAL]
Attest:
By: /s/ Edward J. Biggins, Jr.
----------------------------
Edward J. Biggins, Jr.
Secretary
<PAGE>
Certificate of Amendment
of
CERTIFICATE OF INCORPORATION
of
PSEG ENERGY HOLDINGS INC.
-----------------
Establishing the Series C Cumulative Preferred Stock
as a series of the Preferred Stock.
<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
PSEG Energy Holdings Inc.
-----------------
PSEG Energy Holdings Inc., a New Jersey corporation, does hereby certify,
pursuant to subsection 14A:7-2(4) of the New Jersey Business Corporation Act,
that:
(a) The name of this corporation is "PSEG Energy Holdings Inc.".
(b) The following is a copy of resolutions of the Preferred Stock Pricing
Committee of the Board of Directors of said corporation, acting pursuant to
authority granted to it by the Board of Directors of said corporation, amending
the Certificate of Incorporation of said corporation dated June 20, 1989, as
amended, pursuant to subsections 14A:7-2(2) and 14A:7-2(3) of the New Jersey
Business Corporation Act and Section 3 of said Certificate of Incorporation:
RESOLVED, that a series of Preferred Stock of this Corporation,
designated "Series C Cumulative Preferred Stock" (hereinafter in these
resolutions sometimes referred to as the "Series C Preferred Stock"), and
consisting of 1,450 shares of the par value of $100,000 each, be and the
same is hereby created and established as a series of Preferred Stock of
this Corporation;
<PAGE>
-2-
FURTHER RESOLVED, that the relative rights, preferences and
limitations of the shares of the Series C Preferred Stock are hereby
determined to be as follows:
(a) Dividends. The holder of shares of the Series C Preferred Stock
shall be entitled to receive, and the corporation shall be obliged to pay,
but only when and as declared by the Board of Directors, and only out of
its earned surplus, cash dividends thereon, at the rate per share per annum
of 4.875%, and no more, payable quarterly, with respect to each calendar
quarterly period, on or prior to the last day of each such calendar
quarterly period, to wit, the last day of each March, June, September and
December, commencing September 30, 1998. Dividends on each share of such
series of the Series C Preferred Stock shall be cumulative from date of
issuance.
Subject to the provisions contained herein, all additional earned
surplus of the corporation may be divided among and paid to the holders of
Common Stock.
(b) Restrictions on Dividends on and Purchase of Junior Stock. So long
as any of Series C Preferred Stock shall remain outstanding, no dividend
(other than dividends payable in shares of Common Stock) shall be paid on
or set apart for the Common Stock, nor shall any shares thereof be
<PAGE>
-3-
purchased, redeemed, or otherwise acquired by the corporation or any
subsidiary thereof (other than shares acquired without cost to the
corporation or such subsidiary) unless:
(i) all dividends on all outstanding shares of the Series C Preferred
Stock for all past quarterly dividend periods shall have been paid and full
dividends thereon for the then current quarterly dividend period declared
and a sum sufficient for the payment thereof set apart;
(ii) after giving effect to the payment of such dividend or such
purchase, redemption, or other acquisition, the capital of the corporation
represented by its Common Stock, together with its surplus as then stated
on its books of account, shall in the aggregate exceed the aggregate of the
amounts payable on involuntary liquidation or dissolution of the
corporation in respect of all shares of the Series C Preferred Stock then
outstanding.
(c) Voting Rights. All voting rights in the corporation shall be
vested exclusively in the holders of Common Stock.
(d) Redemption. The shares of the Series C Preferred Stock may be
redeemed at the option of the Board of Directors of the corporation at any
time at par
<PAGE>
-4-
plus an amount equal to all accumulated and unpaid dividends thereon to the
date of redemption, whether or not such dividends have been earned or
declared.
All shares of Series C Preferred Stock redeemed by the corporation
shall be canceled and upon such cancellation shall be restored to the
status of authorized but unissued shares, not classified as to series.
(e) Liquidation or Dissolution. On liquidation or dissolution of the
corporation, before any payment or distribution shall be made to the
holders of Common Stock, if such liquidation or dissolution be involuntary,
the holder of the Series C Preferred Stock shall be entitled to be paid the
sum of $100,000 per share, or, if such liquidation or dissolution be
voluntary, the holder of the shares of Series C Preferred Stock shall be
entitled to be paid the amount established by the Board of Directors, plus
an amount equal to all accumulated and unpaid dividends thereon to the date
of such payment, whether or not such dividends shall have been earned or
declared. After such payments shall have been made in full to the holder of
Series C Preferred Stock, it shall be entitled to no further payment or
distribution.
A consolidation or merger to which the corporation shall be a party
shall not be deemed a liquidation or
<PAGE>
-5-
dissolution of the corporation within the meaning of this subdivision.
(f) The shares of the Series C Preferred Stock are not transferable.
FURTHER RESOLVED, that the Certificate of Incorporation of this
Corporation dated June 20, 1989, as amended, be, and it hereby is, further
amended so that the designation and number of shares of such series and the
relative rights, preferences and limitations of such series are as stated
in these resolutions;
FURTHER RESOLVED, that the proper officers of this Corporation be, and
they hereby are, authorized and directed to execute on behalf of this
Corporation and to file in the office of the Secretary of State of the
State of New Jersey a certificate of amendment to the Certificate of
Incorporation of this Corporation, as amended, setting forth a copy of
these resolutions, as required by subsection 14A:7-2(4) of the New Jersey
Business Corporation Act;
FURTHER RESOLVED, that this Corporation issue and sell 1,450 shares of
its Series C Preferred Stock to its sole shareholder, Public Service
Enterprise Group Incorporated, for the sum of $145,000,000; and
<PAGE>
-6-
FURTHER RESOLVED, that the officers of this Corporation be, and they
hereby are, authorized and directed to take such other and further action
as they shall deem necessary or advisable to carry out the intent and
purposes of these resolutions.
(c) The foregoing resolutions were duly adopted by the Preferred Stock
Pricing Committee of the Board of Directors of said Corporation at a meeting
duly called and held on July 1, 1998, at which a quorum was present and acting
throughout.
(d) The Certificate of Incorporation of this corporation dated June 20,
1989, as amended, is further amended so that the designation and number of
shares of the Series C Cumulative Preferred Stock of said corporation, and the
relative rights, preferences and limitations of such series are as stated in
said resolutions.
<PAGE>
-7-
IN WITNESS WHEREOF, said PSEG Energy Holdings Inc. has made this
Certificate this 1st day of July, 1998.
PSEG ENERGY HOLDINGS INC.
By: /s/ Bruce E. Walenczyk
-------------------------------------
Bruce E. Walenczyk
Vice President - Finance
[CORPORATE SEAL]
Attest:
By: /s/ Edward J. Biggins, Jr.
----------------------------
Edward J. Biggins, Jr.
Secretary
EXHIBIT 3.2
BY-LAWS
OF
ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED
----------
As in effect
December 20, 1994
<PAGE>
By-Laws
of
Enterprise Diversified Holdings Incorporated
Section 1. Directors. The Board of Directors shall consist of such number
of directors, not less than 3 nor more than 12, as shall be fixed from time to
time by the Board of Directors. The directors shall be elected annually at the
annual meeting of the shareholders. As used in these By-Laws, the tern "entire
Board" means the total number of directors which the corporation would have if
there were no vacancies. Directors shall hold office for one year and until
their successors are duly elected and qualified. If the office of any director
becomes vacant, the remaining directors, by a majority vote, may elect a
successor, who shall hold office for the unexpired term, and until his successor
is duly elected and qualified.
Section 2. Officers. The elective officers of the corporation shall
include a President, one or more Vice Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, and one or more Assistant Treasurers, and
may also include a Chairman of the Board, one or more Executive Vice Presidents,
and one or more Senior Vice Presidents. The Chairman of the Board and the
President shall be members of the Board of Directors. All elective officers of
the corporation shall be elected by the Board of
<PAGE>
- 2 -
Directors at the first meeting thereof after the annual election of directors.
The Board of Directors shall also have power, at any time, to elect additional
Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The Board of Directors may appoint such
other officers as it shall from time to time deem necessary, who shall have such
powers and perform such duties as may be assigned to them by the Board of
Directors, or the person exercising the authority of chief executive officer of
the corporation. Any two or more offices may be held by the same person, unless
otherwise specified in these By-Laws.
The Board of Directors shall have power to fill any vacancy in any
existing office or to fill any newly created office, at any time.
The Chairman of the Board, the President, each Executive Vice President,
each Senior Vice President, and each Vice President, severally, shall have power
to sign deeds, contracts and other instruments. Each elective officer shall have
such powers and perform such duties as may be assigned to him by the Board of
Directors, or the chief executive officer, in addition to any powers and duties
that are assigned to him specifically by these By-Laws.
The term of office of each officer shall be from time of his election or
appointment and qualification until the first meeting of the Board of Directors
after the last annual election of
<PAGE>
- 3 -
Directors, or such other term of office as shall be provided in the resolution
of election or appointment, and until the election or appointment and
qualification of his successor, subject to earlier termination by removal or
resignation.
Section 3. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the shareholders and of the Board of Directors, and shall
have such other powers and perform such other duties as may be assigned to him
by the Board of Directors.
Section 4. Chief Executive Officer. If there be a Chairman of the Board,
the Board of Directors shall designate either the Chairman of the Board or the
President as the chief executive officer of the corporation with plenary powers
of supervision and direction of the business and affairs of the corporation
unless such offices are occupied by the same person. If there be no Chairman of
the Board, the President shall be the chief executive officer.
Section 5. President. If there be a Chairman of the Board and if he be
designated as the chief executive officer of the corporation, the President
shall have charge of the coordination and supervision of all matters of
operation of the corporation. In the absence of the Chairman of the Board, the
Presi4ent shall have the powers and perform the duties of the Chairman of the
Board.
Section 6. Executive Vice Presidents. The Executive Vice Presidents,
severally, in the order designated by the chief
<PAGE>
- 4 -
executive officer, shall, in the absence of the president, have the powers and
perform the duties of the President, and if there be a chairman of the Board,
they shall, in the absence of the Chairman of the Board and the President have
the powers and perform the duties of the Chairman of the Board.
Section 7. Senior Vice Presidents. The Senior Vice Presidents, severally,
in the order designated by the chief executive officer, shall, in the absence of
the President and the Executive Vice Presidents, have the powers and perform the
duties of the President, and if there be a Chairman of the Board, they shall, in
the absence of the Chairman of the Board, the President, and the Executive Vice
Presidents, have the powers and perform the duties of the Chairman of the Board.
Section 8. Vice Presidents. The Vice Presidents, severally, in the order
designated by the chief executive officer, shall in the absence of the
President, the Executive Vice Presidents and the Senior Vice Presidents, have
the powers and perform the duties of the President, and if there be a Chairman
of the Board, they shall, in the absence of the Chairman of the Board, the
President, the Executive Vice Presidents and the Senior Vice Presidents, have
the powers and perform the duties of the Chairman of the Board.
Section 9. Secretary. The Secretary shall keep minutes of all meetings of
the shareholders and of the Board of Directors and shall give all notices of
meetings of the shareholders and of
<PAGE>
- 5 -
the Board of Directors. He shall have custody of all deeds, contracts, and other
instruments, documents, and records, except as otherwise provided in these
By-Laws, or by the Board of Directors, and shall attend to such correspondence
of the corporation as the Board of Directors or the President shall direct. He
shall be the custodian of the seal of the corporation and shall affix it to any
instrument requiring the same, except as otherwise provided herein or by the
Board of Directors.
Section 10. Assistant Secretaries. Each Assistant Secretary shall have
such powers and perform such duties as may be assigned to him by the Secretary.
In the absence of the Secretary, the Assistant Secretaries, in the order
designated by the Secretary, shall have the powers and perform the duties of the
Secretary.
Section 11. Treasurer. The Treasurer shall have charge of all receipts and
disbursements of the corporation and shall be the custodian of the corporation's
funds. He shall have full authority to receive and give receipts for all moneys
due and payable to the corporation from any source whatever, and to endorse or
cause to be endorsed checks, drafts, warrants, and other instruments for the
payment of money in its name and on its behalf, and full discharge for the same
to give. The funds of the corporation shall be deposited in its name in such
depositories as may be designated from time to time by the Board of Directors,
or by the Treasurer if the Board of Directors shall authorize him to
<PAGE>
- 6 -
do so. All checks, drafts and other instruments for the payment of money, and
all notes and other evidences of indebtedness, issued in the name of the
corporation, shall be signed by such officer or officers, employee or employees,
agent or agents, of the corporation, and in such manner, including the use of
facsimile signatures, as shall be determined from time to time by the Board of
Directors, or by the Treasurer if the Board of Directors shall authorize him to
make such determination. A report of the financial condition of the corporation
shall be made by the Treasurer whenever requested by the chief executive
officer. If required by the Board of Directors he shall give bond for the
faithful performance of his duties, in such sum and with such surety or sureties
as the Board of Directors may determine.
Section 12. Assistant Treasurers. Each Assistant Treasurer shall have such
powers and perform such duties as may be assigned to him by the Treasurer. In
the absence of the Treasurer, the Assistant Treasurers, in the order designated
by the Treasurer, shall have the powers and perform the duties of the Treasurer.
Section 13. Meetings of Shareholders. The meetings of the shareholders
shall, unless otherwise provided by law, be held at such place, within or
without the State of New Jersey, as may be fixed by the Board of Directors and
stated in the notice of the meeting. Each annual meeting of the shareholders for
the election of directors for the ensuing year, and for the transaction of such
other business as may be brought before the meeting, shall be held
<PAGE>
- 7 -
at such time, not more than 13 months after the last annual meeting, as may be
fixed by the Board of Directors.
Section 14. Meetings of Directors. Regular meetings of the Board of
Directors shall be held quarterly unless otherwise determined by resolution of
the Board. Special meetings of the Board of Directors may be called at any time
by the Chairman of the Board, or by the President if he be the chief executive
officer. The Secretary shall also call such meetings on the written request of a
majority of the directors.
Section 15. Notice of Meetings of Directors. No notice shall be required
for regular meetings of the Board of Directors. The meeting for organization may
be held on the day of and after the annual meeting of shareholders. At least two
days' notice of a special meeting of the Board of Directors shall be given, but
this notice may be waived in writing or by telegraph, either before or after the
meeting. A meeting may be held at any time when all the directors are present.
Section 16. Quorum. At all meetings of the Board of Directors a majority
of the directors in office, or one-third of the entire Board, whichever is
greater, shall constitute a quorum for the transaction of business. A less
number than a quorum, however, may meet and adjourn to any day.
Section 17. Committees of the Board. The Board of Directors, by resolution
adopted by a majority of the entire Board, may appoint from among its members
one or more committees. Each
<PAGE>
- 8 -
such committee of the Board shall have and may exercise the authority of the
Board to the extent provided in the resolution of appointment.
The Board of Directors, by resolution adopted by a majority of the entire
Board, may (a) fill any vacancy in any committee of the Board, (b) appoint one
or more directors to serve as alternate members of any such committee, to act in
absence or disability of members of any such committee with all the powers of
such absent or disabled members, (c) abolish any such committee at its pleasure,
and (d) remove any director from membership on such committee at any time, with
or without cause.
Actions taken at a meeting of any committee of the Board of Directors
shall be reported to the Board at its next meeting following such committee
meeting; except that, when the meeting of the Board is held within two days
after the committee meeting, such report shall, if not made at the first
meeting, be made to the Board at its second meeting following such committee
meeting.
Section 18. Other Committees. The Board of Directors may appoint and
prescribe the duties of other committees, the members of which may be but need
not be directors and shall serve at the pleasure of the Board.
Section 19. Committees - Quorum. One-third of the entire committee, or two
members, whichever is greater, shall constitute a quorum for the transaction of
business.
<PAGE>
- 9 -
Section 20. Committees - General. Each Committee shall fix its own rules
of procedure, shall meet where and as provided by such rules of procedure or by
resolution of the Board of Directors, shall keep full records of its
proceedings, and shall report from time to time to the Board, as called upon by
the Board.
Section 21. Voting Upon Stocks Owned by the Corporation. Unless otherwise
ordered by the Board of Directors, the Chairman of the Board, the President, the
Executive Vice Presidents, the Senior Vice Presidents, and the Vice Presidents,
severally, shall each have full power and authority on behalf of the corporation
to attend, act, and vote at any meeting of the shareholders of any corporation
in which this corporation may hold stock, and to appoint one or more other
persons as proxy or proxies to attend, act, and vote at any such meeting, and
such officer or such proxy or proxies shall possess and may exercise on behalf
of this corporation any and all rights and powers incident to its ownership of
such stock. The Board of Directors or the Executive Committee from time to time
by resolution may confer like powers upon any other person or persons.
Section 22. Certificates for Shares. The certificates which shall be
issued for shares of this corporation shall be signed by the Chairman of the
Board, the President, or a Vice President, and either the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary.
<PAGE>
- 10 -
Section 23. Transfer of Shares. The shares issued by this corporation
shall be transferable only on the books of the corporation by the holder or
owner thereof in person or by power of attorney, on surrender of the certificate
therefor.
Section 24. Indemnification of Directors, Officers and Employees. The
corporation shall indemnify to the full extent from time to time permitted by
law any person made, or threatened to be made, a party to any pending,
threatened or completed civil, criminal, administrative or arbitrative action,
suit or proceeding and any appeal therein (and any inquiry or investigation
which could lead to such action, suit or proceeding) by reason of the fact that
he is or was a director, officer or employee of the corporation or serves or
served any other enterprise as a director, officer or employee at the request of
the corporation. Such right of indemnification shall inure to the benefit of the
legal representative of any such person.
Section 25. Fiscal Year. The fiscal year of the corporation shall begin on
January 1 of each year.
Section 26. Sea1. The seal of the corporation shall be circular in form,
and shall have inscribed thereon the following words and figures: "ENTERPRISE
DIVERSIFIED HOLDINGS INCORPORATED 1989".
Section 27. Force and Effect of By-Laws. These By-Laws are subject to the
provisions of the New Jersey Business Corporation Act and of the certificate of
incorporation of the corporation, as
<PAGE>
- 11 -
it may be amended from time to time. If any provision in these By-Laws is
inconsistent with a provision in said act or in the certificate of
incorporation, the provision in said act or in the certificate of incorporation
shall govern.
Section 28. Amendments. Except as otherwise provided by law, the Board of
Directors shall have power to make, alter or repeal any by-laws. By-Laws made by
the Board may be altered or repealed and new by-laws made, by the shareholders.
Section 29. Advancement of Expenses. Expenses incurred by any person made,
or threatened to be made, a party to any pending, threatened or completed civil,
criminal, administrative or arbitrative action, suit or proceeding and any
appeal therein (and any inquiry or investigation which could lead to such
action, suit or proceeding) by reason of the fact that he is or was a director,
officer or employee of the corporation or serves or served any other enterprise
as a director, officer or employee at the request of the corporation, shall be
paid by the corporation in advance of the final disposition of the action, suit
or proceeding promptly upon receipt of an undertaking by or on behalf of such
person to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation.
EXHIBIT 4.1
--------------------------------------------------
PSEG Energy Holdings Inc.
To
First Union National Bank,
Trustee
Indenture
Dated as of October 8, 1999
----------------
Providing for the Issuance
of
Senior Debt Securities
--------------------------------------------------
<PAGE>
PSEG ENERGY HOLDINGS INC.
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of October 8, 1999
Trust Indenture
Indenture Act Section Section
ss.310(a)(1)...................................... 607
(a)(2)............................................ 607
(b)............................................... 608
ss.312(c)......................................... 701
ss.314(a)......................................... 703
(a)(4)............................................ 1005
(c)(1)............................................ 102
(c)(2)............................................ 102
(e)............................................... 102
ss.315(b)......................................... 601
ss.316(a) (last sentence)......................... 101
(a)(1)(A)......................................... 502, 512
(a)(1)(B)......................................... 513
(b)............................................... 508
ss.317(a)(1)...................................... 503
(a)(2)............................................ 504
ss.318(a)......................................... 111
(c)............................................... 111
- ---------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
Table of Contents
Page
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.............................................1
SECTION 102. Compliance Certificates and Opinions...................11
SECTION 103. Form of Documents Delivered to Trustee.................11
SECTION 104. Acts of Holders........................................12
SECTION 105. Notices, etc., to Trustee and Company..................13
SECTION 106. Notice to Holders; Waiver..............................14
SECTION 107. Effect of Headings and Table of Contents...............15
SECTION 108. Successors and Assigns.................................15
SECTION 109. Separability Clause....................................15
SECTION 110. Benefits of Indenture..................................15
SECTION 111. Governing Law..........................................15
SECTION 112. Legal Holidays.........................................15
SECTION 113. No Personal Liability..................................16
ARTICLE TWO
SECURITIES FORMS
SECTION 201. Forms of Securities....................................16
SECTION 202. Form of Trustee's Certificate of Authentication........16
SECTION 203. Securities Issuable in Global Form.....................16
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series...................17
SECTION 302. Denominations..........................................21
SECTION 303. Execution, Authentication, Delivery and Dating.........21
SECTION 304. Temporary Securities...................................23
SECTION 305. Registration, Registration of Transfer and Exchange....25
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.......29
SECTION 307. Payment of Interest; Interest Rights Preserved;
Optional Interest Reset................................30
SECTION 308. Optional Extension of Maturity.........................33
SECTION 309. Persons Deemed Owners..................................34
SECTION 310. Cancellation...........................................35
SECTION 311. Computation of Interest................................35
SECTION 312. CUSIP Numbers..........................................35
(i)
<PAGE>
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture................35
SECTION 402. Application of Trust Funds.............................37
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default......................................37
SECTION 502. Acceleration of Maturity; Rescission and Annulment.....39
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee................................................40
SECTION 504. Trustee May File Proofs of Claim.......................41
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities or Coupons..................................41
SECTION 506. Application of Money Collected.........................42
SECTION 507. Limitation on Suits....................................42
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest...................................43
SECTION 509. Restoration of Rights and Remedies.....................43
SECTION 510. Rights and Remedies Cumulative.........................43
SECTION 511. Delay or Omission Not Waiver...........................43
SECTION 512. Control by Holders of Securities.......................43
SECTION 513. Waiver of Past Defaults................................44
SECTION 514. Waiver of Stay or Extension Laws.......................44
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.....................................44
SECTION 602. Certain Rights of Trustee..............................45
SECTION 603. Not Responsible for Recitals or Issuance of Securities.46
SECTION 604. May Hold Securities....................................46
SECTION 605. Money Held in Trust....................................46
SECTION 606. Compensation and Reimbursement.........................47
SECTION 607. Corporate Trustee Required; Eligibility................47
SECTION 608. Resignation and Removal; Appointment of Successor......47
SECTION 609. Acceptance of Appointment by Successor.................49
SECTION 610. Merger, Conversion, Consolidation or Succession to
Business...............................................50
SECTION 611. Appointment of Authenticating Agent....................50
(ii)
<PAGE>
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders...........52
SECTION 702. Reports by Trustee.....................................52
SECTION 703. Reports by Company.....................................52
SECTION 704. Calculation of Original Issue Discount.................53
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 801. Company May Consolidate, etc., Only on Certain Terms...53
SECTION 802. Successor Person Substituted...........................54
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.....54
SECTION 902. Supplemental Indentures With Consent of Holders........56
SECTION 903. Execution of Supplemental Indentures...................57
SECTION 904. Effect of Supplemental Indentures......................57
SECTION 905. Conformity With Trust Indenture Act....................57
SECTION 906. Reference in Securities to Supplemental Indentures.....57
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest....58
SECTION 1002. Maintenance of Office or Agency........................58
SECTION 1003. Money for Securities Payments to be Held in Trust......59
SECTION 1004. Additional Amounts.....................................60
SECTION 1005. Limitation on Liens....................................61
SECTION 1006. Limitation on Sale and Leaseback Transactions..........63
SECTION 1007. Repayment of Securities Upon a Change of Control.......63
SECTION 1008. Statement as to Compliance.............................65
SECTION 1009. Waiver of Certain Covenants............................65
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article...............................65
SECTION 1102. Election to Redeem; Notice to Trustee..................65
SECTION 1103. Selection by Trustee of Securities to be Redeemed......65
SECTION 1104. Notice of Redemption...................................66
SECTION 1105. Deposit of Redemption Price............................67
(iii)
<PAGE>
SECTION 1106. Securities Payable on Redemption Date..................67
SECTION 1107. Securities Redeemed in Part.............................68
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article...............................69
SECTION 1202. Satisfaction of Sinking Fund Payments With Securities..69
SECTION 1203. Redemption of Securities for Sinking Fund..............69
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. Applicability of Article...............................70
SECTION 1302. Repayment of Securities................................70
SECTION 1303. Exercise of Option.....................................70
SECTION 1304. When Securities Presented for Repayment Become Due and
Payable................................................71
SECTION 1305. Securities Repaid in Part..............................71
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Applicability of Article; Company's Option to Effect
Defeasance or Covenant Defeasance......................72
SECTION 1402. Defeasance and Discharge...............................72
SECTION 1403. Covenant Defeasance....................................73
SECTION 1404. Conditions to Defeasance or Covenant Defeasance........73
SECTION 1405. Deposited Money and Government Obligations to be Held
in Trust; Other Miscellaneous Provisions...............74
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May be Called..............75
SECTION 1502. Call, Notice and Place of Meetings.....................75
SECTION 1503. Persons Entitled to Vote at Meetings...................76
SECTION 1504. Quorum; Action.........................................76
SECTION 1505. Determination of Voting Rights; Conduct and Adjournment
of Meetings............................................77
SECTION 1506. Counting Votes and Recording Action of Meetings........78
ACKNOWLEDGEMENTS
EXHIBIT A - FORMS OF CERTIFICATION
(iv)
<PAGE>
INDENTURE, dated as of October 8, 1999, between PSEG ENERGY HOLDINGS INC.,
a New Jersey corporation (hereinafter called the "Company"), having its
principal office at 80 Park Plaza, Newark, NJ 07102, and FIRST UNION NATIONAL
BANK, a national banking association organized and existing under the laws of
the United States of America, as Trustee (hereinafter called the "Trustee"),
having a Corporate Trust Office at 21 South Street, Morristown, NJ 07960.
RECITALS OF THE COMPANY
The Company deems it necessary to issue from time to time for its lawful
purposes senior debt securities (hereinafter called the "Securities") evidencing
its unsecured and unsubordinated indebtedness, which may or may not be
convertible into or exchangeable for any securities of any Person (including the
Company), and has duly authorized the execution and delivery of this Indenture
to provide for the issuance from time to time of the Securities, unlimited as to
principal amount, to bear such rates of interest, to mature at such times and to
have such other provisions as shall be fixed as hereinafter provided.
This Indenture is subject to the provisions of the Trust Indenture Act of
1939, as amended, that are required to be part of this Indenture and shall, to
the extent applicable, be governed by such provisions.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as defined herein) thereof, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Securities and any coupons, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions. For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall
<PAGE>
have the meanings assigned to them in the rules of the Commission adopted
under the Trust Indenture Act;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with Generally Accepted Accounting
Principles (as defined herein); and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms used principally in certain Articles hereof, are defined in
those Articles.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Additional Amounts" means any additional amounts which are required by a
Security or by or pursuant to a Board Resolution, under circumstances specified
therein, to be paid by the Company in respect of certain taxes imposed on
certain Holders specified therein and which are owing to such Holders.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Attributable Debt" in respect of a Sale and Leaseback Transaction means,
as at the time of determination, the present value (discounted at a rate per
annum equal to the weighted average interest rate of all Outstanding Securities
compounded semi-annually) of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such Sale and
Leaseback Transaction (including any period for which such lease has been
extended).
"Authenticating Agent" means any authenticating agent appointed by the
Trustee pursuant to Section 611.
"Authorized Newspaper" means a newspaper, in the English language or in an
official language of the country of publication, customarily published on each
Business Day, whether or not published on Saturdays, Sundays or holidays, and of
general circulation in each place in connection with which the term is used or
in the financial community of each such place. Where successive publications are
required to be made in Authorized Newspapers, the successive publications may be
made in the same or in different newspapers in the same city meeting the
foregoing requirements and in each case on any Business Day.
2
<PAGE>
"Bearer Security" means any Security established pursuant to Section 201
which is payable to bearer.
"Board of Directors" means the board of directors of the Company, the
executive committee or any committee of that board duly authorized to act on
behalf of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment or any
other particular location referred to in this Indenture or in the Securities,
means, unless otherwise specified with respect to any Securities pursuant to
Section 301, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in that Place of Payment or particular
location are authorized or obligated by law or executive order to close.
"Capital" means PSEG Capital Corporation, a corporation organized and
existing under the laws of the State of New Jersey.
"Capitalized Lease Obligations" means, as to any Person, all rental
obligations as lessee which, under Generally Accepted Accounting Principles, are
or will be required to be capitalized on the books of such Person or any of its
Subsidiaries, in each case taken at the amount thereof accounted for as
indebtedness in accordance with such principles.
"CEDEL" means Cedelbank or its successor.
"Change of Control" means the occurrence of one or more of the following
events: (i) PSEG (or its successors) shall cease to own a majority of the
outstanding Voting Stock of the Company, (ii) at any time following the
occurrence of the event described in clause (i), a Person or group (as that term
is used in Section 13(d)(3) of the Exchange Act) of Persons (other than PSEG)
shall have become, directly or indirectly, the beneficial owner, or shall have
acquired the absolute power to direct the vote, of more than 35% of the
outstanding Voting Stock of the Company, (iii) during any twelve-month period,
individuals who at the beginning of such period constitute the Board of
Directors (together with any new directors whose election or nomination was
approved by a majority of the directors then in office who were either directors
at the beginning of such period or who were previously so approved) shall cease
for any reason to constitute a majority of the Board of Directors, unless
approved by a majority of such Board of Directors in office at the beginning of
such period (including such new directors) or (iv) the Company shall have
consolidated with or merged with or into another Corporation or the properties
and assets of the Company shall have been conveyed or transferred substantially
as an entirety to any Person in accordance with Section 801 hereof.
Notwithstanding the foregoing, a Change of Control shall be deemed not to have
occurred if one or more of the above events occurs or circumstances exist and,
after giving effect thereto, the Securities are rated no less than "BBB-" by
Standard & Poor's Ratings Group and "Ba1" by Moody's Investors Service Inc.
3
<PAGE>
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if at
any time after execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties on such date.
"Company" means the Person named as the "Company" in the first paragraph
of this Indenture until a successor Corporation shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor Corporation.
"Company Request" and "Company Order" mean, respectively, a written
request or order signed in the name of the Company by the Chairman, the
President or a Vice President, the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary, of
the Company, and delivered to the Trustee.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the total amount of assets (less accumulated depreciation or amortization,
valuation allowances, other applicable reserves and other properly deductible
items in accordance with Generally Accepted Accounting Principles) which would
appear on a consolidated balance sheet of the Company and its consolidated
Subsidiaries, determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles, after giving effect to purchase accounting and
after deducting therefrom, to the extent otherwise included, the amounts of: (i)
consolidated current liabilities; (ii) deferred income taxes; (iii) minority
interests in consolidated Subsidiaries held by Persons other than the Company or
a Subsidiary; (iv) excess of cost over fair value of assets of businesses
acquired, as determined by the Board of Directors; and (v) unamortized debt
discount and expense and other unamortized deferred charges, goodwill (including
the amounts of investments in affiliates that consist of goodwill), patents,
trademarks, service names, trade names, copyrights, licenses, deferred project
costs, organizational or other development expenses and other intangible items.
"Corporate Trust Office" means the office of the Trustee at which, at any
particular time, its corporate trust business shall be administered, which
office at the date hereof is located at 21 South Street, Morristown, NJ 07960.
"Corporation" includes corporations, associations, companies, limited
liability companies and business trusts.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Dollar", "Dollars" or "$" means a dollar or other equivalent unit in such
coin or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts.
4
<PAGE>
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
Office, or its successor as operator of the Euroclear System.
"Event of Default" has the meaning specified in Article Five.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Generally Accepted Accounting Principles" means the generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board.
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank or trust company as custodian with respect
to any such Government Obligation or a specific payment of interest on or
principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt; provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
"Holder" means, in the case of a Registered Security, the Person in whose
name a Security is registered in the Security Register and, in the case of a
Bearer Security, the bearer thereof and, when used with respect to any coupon,
shall mean the bearer thereof.
"Indebtedness" of any Person means (i) all indebtedness of such Person for
borrowed money, whether or not represented by bonds, debentures, notes or other
securities, (ii) the deferred purchase price of assets or services which in
accordance with Generally Accepted Accounting Principles would be shown on the
liability side of the balance sheet of such Person, (iii) all Indebtedness of
another Person secured by any Lien on any property owned by such Person, whether
or not such Indebtedness has been assumed, (iv) all obligations of such Person
to pay a specified purchase price for goods or services whether or not
delivered, i.e., take-or-pay and similar obligations; (v) all Capitalized Lease
Obligations of such Person; and (vi) all obligations of such Person guaranteeing
any Indebtedness, lease, dividend or other obligation of any other Person,
directly or indirectly, whether contingent or otherwise.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including the
provisions of the TIA that are deemed to be a part hereof, and shall include the
terms of particular series of Securities established as contemplated by Section
301; provided, however, that, if at any time more than one Person is
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acting as Trustee under this instrument, "Indenture" shall mean, with respect to
any one or more series of Securities for which such Person is Trustee, this
instrument as originally executed or as it may from time to time be supplemented
or amended by one or more indentures supplemental hereto entered into pursuant
to the applicable provisions hereof and shall include the terms of the or those
particular series of Securities for which such Person is Trustee established as
contemplated by Section 301, exclusive, however, of any provisions or terms
which relate solely to other series of Securities for which such Person is not
Trustee, regardless of when such terms or provisions were adopted, and exclusive
of any provisions or terms adopted by means of one or more indentures
supplemental hereto executed and delivered after such Person had become such
Trustee but to which such Person, as such Trustee, was not a party.
"Indexed Security" means a Security as to which all or certain interest
payments and/or the principal amount payable at Maturity are determined by
reference to prices, changes in prices, or differences between prices, of other
securities, currencies, intangibles, goods, articles or commodities or by such
other objective price, economic or other measures as are specified in Section
301 hereof.
"Interest" means, when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, interest payable
after Maturity, and, when used with respect to a Security which provides for the
payment of Additional Amounts pursuant to Section 1004, includes such Additional
Amounts.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Issue Date", when used with respect to any Security, means the date on
which the Security is originally issued.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any lease having substantially the same
effect as any of the foregoing).
"Material Subsidiary" means any Subsidiary of the Company the consolidated
assets of which, as of the date of any determination thereof, constitute at
least 10% of the consolidated assets of the Company and its Subsidiaries, or the
consolidated earnings before taxes of which constituted at least 10% of the
consolidated earnings before taxes of the Company and its Subsidiaries for the
most recently completed fiscal year, provided, however, that no Subsidiary of a
Material Subsidiary shall be a Material Subsidiary, and provided further,
notwithstanding the foregoing, in all instances, each of PSEG Global, Resources
and Capital shall be a Material Subsidiary.
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"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption, notice of option to elect
repayment, notice of exchange or conversion or otherwise.
"Officer" means the Chairman, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Controller, any Assistant Controller,
the Secretary or any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed on behalf of the
Company by any one of its Officers and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company or who may be an employee of or other counsel for the
Company.
"Original Issue Discount Security" means any Security which provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(1) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(2) Securities, or portions thereof, for whose payment or redemption
or repayment at the option of the Holder money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent (other
than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders
of such Securities and any coupons appertaining thereto, provided that, if
such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor satisfactory
to the Trustee has been made;
(3) Securities, except to the extent provided in Sections 1402 and
1403, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Fourteen; and
(4) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities
in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice,
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consent or waiver hereunder or are present at a meeting of Holders for quorum
purposes, and for the purpose of making the calculations required by TIA Section
313, (i) the principal amount of an Original Issue Discount Security that may be
counted in making such determination or calculation and that shall be deemed to
be Outstanding for such purpose shall be equal to the amount of principal
thereof that would be (or shall have been declared to be) due and payable, at
the time of such determination, upon a declaration of acceleration of the
Maturity thereof pursuant to Section 502, (ii) the principal amount of any
Indexed Security that may be counted in making such determination or calculation
and that shall be deemed outstanding for such purpose shall be equal to the
principal face amount of such Indexed Security at original issuance, unless
otherwise provided with respect to such Security pursuant to Section 301 and
(iii) Securities owned by the Company or any other obligor upon the Securities
or any Affiliate of the Company or of such other obligor shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in making such calculation or in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee actually knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (or premium, if any) or interest, if any, on any Securities or
coupons on behalf of the Company.
"Person" means any individual, Corporation, partnership, limited
partnership, joint venture, association, joint-stock company, trust, limited
liability company, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment", when used with respect to the Securities of or within
any series, means the place or places where the principal of (and premium, if
any) and interest, if any, on such Securities are payable as specified and as
contemplated by Sections 301 and 1002.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security or a Security to which a
mutilated, destroyed, lost or stolen coupon appertains shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security or
the Security to which the mutilated, destroyed, lost or stolen coupon
appertains.
"PSEG" means Public Service Enterprise Group Incorporated, a corporation
organized and existing under the laws of the State of New Jersey.
"PSEG Global" means PSEG Global Inc., a corporation organized and existing
under the laws of the State of New Jersey.
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"Record Date" means, when used with respect to any Security, the Regular
Record Date, the Special Record Date or any date set to determine the Holders of
such Security entitled to vote, make a request, consent, receive a payment or
exercise any other right with respect to such Security.
"Redemption Date" means, when used with respect to any Security to be
redeemed, in whole or in part, the date specified for such redemption in
accordance with the terms thereof or by or pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Security to be
redeemed, the price at which it is to be redeemed pursuant to the terms thereof
and this Indenture.
"Registered Security" means any Security which is registered in the
Security Register.
"Regular Record Date" for the interest payable on any Interest Payment
Date for the Registered Securities of or within any series means the date
specified for that purpose as contemplated by Section 301, whether or not a
Business Day.
"Repayment Date" means, when used with respect to any Security to be
repaid at the option of the Holder, the date fixed for such repayment by or
pursuant to this Indenture.
"Repayment Price" means, when used with respect to any Security to be
repaid at the option of the Holder, the price at which it is to be repaid by or
pursuant to this Indenture.
"Resources" means PSEG Resources Inc., a corporation organized and
existing under the laws of the State of New Jersey.
"Responsible Officer" means, when used with respect to the Trustee, any
officer of the Trustee assigned by the Trustee to administer its corporate trust
matters.
"Sale and Leaseback Transaction" means an arrangement relating to property
or assets now owned or hereafter acquired whereby the Company or a Subsidiary
transfers such property or assets to a Person and leases it back from such
Person, other than leases for a term of not more than 36 months or between the
Company and a wholly-owned Subsidiary or between wholly-owned Subsidiaries.
"Security" or "Securities" has the meaning stated in the first recital of
this Indenture and, more particularly, means any Security or Securities
authenticated and delivered under this Indenture; provided, however, that, if at
any time there is more than one Person acting as Trustee under this Indenture,
"Securities" with respect to the Indenture as to which such Person is Trustee
shall have the meaning stated in the first recital of this Indenture and shall
more particularly mean Securities authenticated and delivered under this
Indenture, exclusive, however, of Securities of any series as to which such
Person is not Trustee.
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"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest on the
Registered Securities of or within any series means a date fixed by the Trustee
pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security or a coupon representing such installment of interest as the
fixed date on which the principal of such Security or such installment of
principal or interest is due and payable, as such date may be extended pursuant
to the provisions of Section 308.
"Subsidiary" means any Corporation a majority of the outstanding Voting
Stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries of the Company.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
amended, and any reference herein to the Trust Indenture Act or a particular
provision thereof means such Act or provision, as the case may be, as amended or
replaced from time to time or as supplemented from time to time by rules or
regulations adopted by the Commission under or in furtherance of the purposes of
such Act or provision, as the case may be.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
or include each Person who is then a Trustee hereunder; provided, however, that
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean only the Trustee with respect
to Securities of that series.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the relevant jurisdiction.
"United States" means, unless otherwise specified with respect to any
Securities pursuant to Section 301, the United States of America (including the
states and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
"United States person" means, unless otherwise specified with respect to
any Securities pursuant to Section 301, an individual who is a citizen or
resident of the United States, a Corporation, partnership or other entity
created or organized in or under the laws of the United States or an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source.
"Voting Stock" means stock (or other interests) of a Corporation having
voting power for the election of directors, managers or trustees thereof,
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency.
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"Yield to Maturity" means the yield to maturity, computed at the time of
issuance of a Security (or, if applicable, at the most recent redetermination of
interest on such Security) and as set forth in such Security in accordance with
generally accepted United States bond yield computation principles.
SECTION 102. Compliance Certificates and Opinions. Upon any application or
request by the Company to the Trustee to take any action under any provision of
this Indenture, the Company shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than pursuant to Section 1008)
shall include:
(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such condition or
covenant has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion as to some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as to such matters
in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon an Opinion of Counsel, or a
certificate or representations by counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the opinion, certificate or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such Opinion of Counsel or certificate or
representations may be
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based, insofar as it relates to factual matters, upon a certificate or opinion
of, or representations by, an officer or officers of the Company stating that
the information as to such factual matters is in the possession of the Company,
unless such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations as to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders of the Outstanding Securities of all series or one
or more series, as the case may be, may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Holders in person
or by agents duly appointed in writing. If Securities of a series are issuable
as Bearer Securities, any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders of Securities of such series may, alternatively, be embodied in and
evidenced by the record of Holders of Securities of such series voting in favor
thereof, either in person or by proxies duly appointed in writing, at any
meeting of Holders of Securities of such series duly called and held in
accordance with the provisions of Article Fifteen, or a combination of such
instruments and any such record. Except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments or record
or both are delivered to the Trustee and, where it is hereby expressly required,
to the Company. Such instrument or instruments and any such record (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments or so voting
at any such meeting. Proof of execution of any such instrument or of a writing
appointing any such agent, or of the holding by any Person of a Security, shall
be sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company and any agent of the Trustee or the Company, if made in
the manner provided in this Section. The record of any meeting of Holders of
Securities shall be proved in the manner provided in Section 1506.
(b) The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may be proved in any manner
that the Trustee deems reasonably sufficient.
(c) The ownership of Registered Securities shall be proved by the Security
Register.
(d) The ownership of Bearer Securities may be proved by the production of
such Bearer Securities or by a certificate executed, as depository, by any trust
company, bank, banker or other depository, wherever situated, if such
certificate shall be deemed by the Trustee to be satisfactory, showing that at
the date therein mentioned such Person had on deposit with such depository, or
exhibited to it, the Bearer Securities therein described; or such facts may be
proved by the certificate or affidavit of the Person holding such Bearer
Securities, if such certificate or affidavit is deemed by the Trustee to be
satisfactory. The Trustee and the Company
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may assume that such ownership of any Bearer Security continues until (1)
another certificate or affidavit bearing a later date issued in respect of the
same Bearer Security is produced, or (2) such Bearer Security is produced to the
Trustee by some other Person, or (3) such Bearer Security is surrendered in
exchange for a Registered Security, or (4) such Bearer Security is no longer
Outstanding. The ownership of Bearer Securities may also be proved in any other
manner that the Trustee deems sufficient.
(e) If the Company shall solicit from the Holders of Registered Securities
any request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, in or pursuant to a Board Resolution, fix
in advance a Record Date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such Record Date shall be the Record Date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a Record Date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such Record Date, but only the Holders
of record at the close of business on such Record Date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such Record Date; provided that no such authorization, agreement or consent by
the Holders on such Record Date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the Record Date.
(f) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee, any Security
Registrar, any Paying Agent, any Authenticating Agent or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
SECTION 105.Notices, etc., to Trustee and Company. Any notice, request or
other communication required or permitted to be given hereunder shall be in
writing and delivered, telecopied or mailed by first-class mail, postage
prepaid, addressed as follows:
if to the Company:
PSEG Energy Holdings Inc.
80 Park Plaza, T-22
P.O. Box 1171
Newark, New Jersey 07101
Facsimile No.: (973) 456-3589
Attention: Treasurer
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if to the Trustee:
First Union National Bank
21 South Street, 3rd Floor
Morristown, New Jersey 07960
Facsimile No.: (973) 682-4531
Attention: Corporate Trust Bond Administration
The Company or the Trustee, by giving notice to the other, may designate
additional or different addresses for subsequent notices or communications. The
Company shall notify the Holders of any such additional or different addresses
of which the Company receives notice from the Trustee.
SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for
notice of any event to Holders of Registered Securities by the Company or the
Trustee, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each such Holder affected by such event, at his address as it appears in the
Security Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders of Registered Securities is given by mail, neither the failure
to mail such notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect to other Holders
of Registered Securities or the sufficiency of any notice to Holders of Bearer
Securities given as provided herein. Any notice mailed to a Holder in the manner
herein prescribed shall be conclusively deemed to have been received by such
Holder, whether or not such Holder actually receives such notice.
If by reason of the suspension of or irregularities in regular mail
service or by reason of any other cause it shall be impracticable to give such
notice by mail, then such notification to Holders of Registered Securities as
shall be made with the approval of the Trustee shall constitute a sufficient
notification to such Holders for every purpose hereunder.
Except as otherwise expressly provided herein or otherwise specified with
respect to any Securities pursuant to Section 301, where this Indenture provides
for notice to Holders of Bearer Securities of any event, such notice shall be
sufficiently given if published in an Authorized Newspaper in The City of New
York and in such other city or cities as may be specified in such Securities on
a Business Day, such publication to be not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. Any
such notice shall be deemed to have been given on the date of such publication
or, if published more than once, on the date of the first such publication. If
by reason of the suspension of publication of any Authorized Newspaper or
Authorized Newspapers or by reason of any other cause it shall be impracticable
to publish any notice to Holders of Bearer Securities as provided above, then
such notification to Holders of Bearer Securities as shall be given with the
approval of the Trustee shall constitute sufficient notice to such Holders for
every purpose hereunder. Neither the failure to give notice by publication to
Holders of Bearer Securities as provided above, nor any defect in any notice so
published, shall affect the sufficiency of such notice with respect to other
Holders of Bearer
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Securities or the sufficiency of any notice to Holders of Registered Securities
given as provided herein.
Any request, demand, authorization, direction, notice, consent or waiver
required or permitted under this Indenture shall be in the English language,
except that any published notice may be in an official language of the country
of publication.
If the Company mails a notice or communication to the Holders, it shall
mail a copy to the Trustee and each Registrar, Paying Agent or co-Registrar.
Holders may communicate, pursuant to TIA Section 312(b), with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar, the Paying Agent and anyone else shall have
the protection of TIA Section 312(c).
SECTION 107. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 108. Successors and Assigns. All covenants and agreements in this
Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 109. Separability Clause. In case any provision in this Indenture
or in any Security or coupon shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture. Nothing in this Indenture or in the
Securities or coupons, express or implied, shall give to any Person, other than
the parties hereto, any Security Registrar, any Paying Agent, any Authenticating
Agent and their successors hereunder and the Holders any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law. This Indenture and the Securities and coupons
shall be governed by and construed in accordance with the laws of the State of
New Jersey without regard to principles of conflicts of laws. This Indenture is
subject to the provisions of the Trust Indenture Act that are required to be
part of this Indenture and shall, to the extent applicable, be governed by such
provisions.
SECTION 112. Legal Holidays. In any case where any Interest Payment Date,
Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or any Security or
coupon other than a provision in the Securities of any series which specifically
states that such provision shall apply in lieu of this Section), payment of
principal (or premium, if any) or interest, if any, need not be made at such
Place of Payment on such date, but may be made on the next succeeding Business
Day at such Place of Payment with the same force and effect as if made on the
Interest Payment Date, Redemption Date, Repayment Date or sinking fund payment
date, or at the Stated Maturity or
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Maturity; provided that no interest shall accrue on the amount so payable for
the period from and after such Interest Payment Date, Redemption Date, Repayment
Date, sinking fund payment date, Stated Maturity or Maturity, as the case may
be.
SECTION 113. No Personal Liability. No recourse under or upon any
obligation, covenant or agreement contained in this Indenture, in any Security
or coupon appertaining thereto, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such or, against any past,
present or future stockholder, officer or director as such, of the Company or of
any successor, either directly or though the Company or any successor under any
rule of law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of the
Securities by the Holders thereof and as part of the consideration for the issue
of the Securities.
ARTICLE TWO
SECURITIES FORMS
SECTION 201. Forms of Securities. The Registered Securities, if any, of
each series and the Bearer Securities, if any, of each series and related
coupons shall be in substantially the forms as shall be established in one or
more indentures supplemental hereto or approved from time to time by or pursuant
to a Board Resolution in accordance with Section 301, shall have such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture or any indenture supplemental hereto,
and may have such letters, numbers or other marks of identification or
designation and such legends or endorsements placed thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Securities may be listed, or to conform to usage.
Unless otherwise specified as contemplated by Section 301, Bearer
Securities shall have interest coupons attached.
The definitive Securities and coupons shall be printed, lithographed or
engraved or produced by any combination of these methods on a steel engraved
border or steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities or coupons, as evidenced by
their execution of such Securities or coupons.
SECTION 202. Form of Trustee's Certificate of Authentication. Subject to
Section 611, the Trustee's certificate of authentication shall be in
substantially the following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
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FIRST UNION NATIONAL BANK,
as Trustee
By _______________________________________
Authorized Signatory
SECTION 203. Securities Issuable in Global Form. If Securities of or
within a series are issuable in global form, as specified as contemplated by
Section 301, then, notwithstanding clause (8) of Section 301 and the provisions
of Section 302, any such Security shall represent such of the Outstanding
Securities of such series as shall be specified therein and may provide that it
shall represent the aggregate amount of Outstanding Securities of such series
from time to time endorsed thereon and that the aggregate amount of Outstanding
Securities of such series represented thereby may from time to time be increased
or decreased to reflect exchanges. Any endorsement of a Security in global form
to reflect the amount, or any increase or decrease in the amount, of Outstanding
Securities represented thereby shall be made by the Trustee in such manner and
upon instructions given by such Person or Persons as shall be specified therein
or in the Company Order to be delivered to the Trustee pursuant to Section 303
or 304. Subject to the provisions of Section 303 and, if applicable, Section
304, the Trustee shall deliver and redeliver any Security in permanent global
form in the manner and upon instructions given by the Person or Persons
specified therein or in the applicable Company Order. If a Company Order
pursuant to Section 303 or 304 has been, or simultaneously is, delivered, any
instructions by the Company with respect to endorsement, delivery or redelivery
of a Security in global form shall be in writing but need not comply with
Section 102 and need not be accompanied by an Opinion of Counsel.
The provisions of the last sentence of Section 303 shall apply to any
Security represented by a Security in global form if such Security was never
issued and sold by the Company and the Company delivers to the Trustee the
Security in global form together with written instructions (which need not
comply with Section 102 and need not be accompanied by an Opinion of Counsel)
with regard to the reduction in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of Section 303.
Notwithstanding the provisions of Section 307, unless otherwise specified
as contemplated by Section 301, payment of principal of (and premium, if any)
and interest, if any, on any Security in permanent global form shall be made to
the Person or Persons specified therein.
Notwithstanding the provisions of Section 309 and except as provided in
the preceding paragraph, the Company, the Trustee and any agent of the Company
and the Trustee shall treat as the Holder of such principal amount of
Outstanding Securities represented by a permanent global Security (i) in the
case of a permanent global Security in registered form, the Holder of such
permanent global Security in registered form, or (ii) in the case of a permanent
global Security in bearer form, Euroclear or CEDEL.
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ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is unlimited.
The Securities shall rank equally and pari passu and may be issued in one
or more series. There shall be established in one or more Board Resolutions or
pursuant to authority granted by one or more Board Resolutions and, subject to
Section 303, set forth, or determined in the manner provided, in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series, any or all of the following, as
applicable (each of which (except for the matters set forth in clauses (1), (2)
and (13) below), if so provided, may be determined from time to time by the
Company with respect to unissued Securities of the series when issued from time
to time):
(1) the title of the Securities of the series (which shall
distinguish the Securities of such series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the Securities
of the series that may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 304, 305, 306, 906, 1107 or 1305);
(3) the date or dates, or the method by which such date or dates
will be determined or extended, on which the principal of the Securities
of the series shall be payable;
(4) the rate or rates at which the Securities of the series shall
bear interest, if any, or the method by which such rate or rates shall be
determined, the date or dates from which such interest shall accrue or the
method by which such date or dates shall be determined, the Interest
Payment Dates on which such interest will be payable and the Regular
Record Date, if any, for the interest payable on any Registered Security
on any Interest Payment Date, or the method by which such date shall be
determined, and the basis upon which such interest shall be calculated if
other than that of a 360-day year of twelve 30-day months;
(5) the place or places, if any, other than or in addition to the
Borough of Manhattan, The City of New York, where the principal of (and
premium, if any) and interest, if any, on Securities of the series shall
be payable, any Registered Securities of the series may be surrendered for
registration of transfer, Securities of the series may be surrendered for
exchange, where Securities of any series that are convertible or
exchangeable may be surrendered for conversion or exchange, as applicable,
and where
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notices or demands to or upon the Company in respect of the Securities of
the series and this Indenture may be served;
(6) the period or periods within which, or the date or dates on
which, the price or prices at which and other terms and conditions upon
which Securities of the series may be redeemed, in whole or in part, at
the option of the Company, if the Company is to have the option;
(7) the obligation, if any, of the Company to redeem, repay or
purchase Securities of the series pursuant to any sinking fund or
analogous provision or at the option of a Holder thereof, and the period
or periods within which or the date or dates on which, the price or prices
at which and other terms and conditions upon which Securities of the
series shall be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denomination or denominations in which any Registered
Securities of the series shall be issuable and, if other than
denominations of $5,000, the denomination or denominations in which any
Bearer Securities of the series shall be issuable;
(9) if other than the Trustee, the identity of each Security
Registrar and/or Paying Agent;
(10) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series that shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section
502 or the method by which such portion shall be determined;
(11) whether the amount of payments of principal of (or premium, if
any) or interest, if any, on the Securities of the series may be
determined with reference to an index, formula or other method (which
index, formula or method may be based, without limitation, on one or more
currencies, currency units, composite currencies, commodities, equity
indices or other indices), and the manner in which such amounts shall be
determined;
(12) provisions, if any, granting special rights to the Holders of
Securities of the series upon the occurrence of such events as may be
specified;
(13) any deletions from, modifications of or additions to the Events
of Default or covenants (including any deletions from, modifications of or
additions to any of the provisions of Section 1009) of the Company with
respect to Securities of the series, whether or not such Events of Default
or covenants are consistent with the Events of Default or covenants set
forth herein;
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(14) whether Securities of the series are to be issuable as
Registered Securities, Bearer Securities (with or without coupons) or
both, any restrictions applicable to the offer, sale or delivery of Bearer
Securities and the terms upon which Bearer Securities of the series may be
exchanged for Registered Securities of the series and vice versa (if
permitted by applicable laws and regulations), whether any Securities of
the series are to be issuable initially in temporary global form and
whether any Securities of the series are to be issuable in permanent
global form with or without coupons and, if so, whether beneficial owners
of interests in any such permanent global Security may exchange such
interests for Securities of such series in certificated form and of like
tenor of any authorized form and denomination and the circumstances under
which any such exchanges may occur, if other than in the manner provided
in Section 305, and, if Registered Securities of the series are to be
issuable as a global Security, the identity of the depository for such
series;
(15) the date as of which any Bearer Securities of the series and
any temporary global Security representing Outstanding Securities of the
series shall be dated if other than the date of original issuance of the
first Security of the series to be issued;
(16) the Person to whom any interest on any Registered Security of
the series shall be payable, if other than the Person in whose name such
Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, the manner
in which, or the Person to whom, any interest on any Bearer Security of
the series shall be payable, if otherwise than upon presentation and
surrender of the coupons appertaining thereto as they severally mature,
and the extent to which, or the manner in which, any interest payable on a
temporary global Security on an Interest Payment Date will be paid if
other than in the manner provided in Section 304;
(17) the applicability, if any, of Sections 1402 and/or 1403 to the
Securities of the series and any provisions in modification of, in
addition to or in lieu of any of the provisions of Article Fourteen;
(18) if the Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions, then
the form and/or terms of such certificates, documents or conditions;
(19) whether, and under what circumstances, the Company will pay
Additional Amounts as contemplated by Section 1004 on the Securities of
the series to any Holder who is not a United States person (including any
modification to the definition of such term) in respect of any tax,
assessment or governmental charge and, if so, whether the Company will
have the option to redeem such Securities rather than pay such Additional
Amounts (and the terms of any such option);
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(20) if the Securities of the series are to be convertible into or
exchangeable for any securities of any Person (including the Company), the
terms and conditions upon which such Securities will be so convertible or
exchangeable; and
(21) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture or the requirements of
the Trust Indenture Act).
All Securities of any one series and the coupons appertaining to any
Bearer Securities of such series shall be substantially identical except, in the
case of Registered Securities, as to denomination and except as may otherwise be
provided in or pursuant to such Board Resolution (subject to Section 303) and
set forth in such Officers' Certificate or in any such indenture supplemental
hereto. All Securities of any one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the Holders, for issuances of additional Securities of such series.
If any of the terms of the Securities of any series are established by
action taken pursuant to one or more Board Resolutions, a copy of an appropriate
record of such action(s) shall be certified by the Secretary or an Assistant
Secretary of the Company and delivered to the Trustee at or prior to the
delivery of the Officers' Certificate setting forth the terms of the Securities
of such series.
SECTION 302. Denominations. The Securities of each series shall be
issuable in such denominations as shall be specified as contemplated by Section
301. With respect to Securities of any series denominated in Dollars, in the
absence of any such provisions with respect to the Securities of any series, the
Registered Securities of such series, other than Registered Securities issued in
global form (which may be of any denomination) shall be issuable in
denominations of $1,000 and any integral multiple thereof, and the Bearer
Securities of such series, other than Bearer Securities issued in global form
(which may be of any denomination), shall be issuable in a denomination of
$5,000.
SECTION 303. Execution, Authentication, Delivery and Dating. The
Securities and any coupons appertaining thereto shall be executed on behalf of
the Company by its Chairman, its President, one of its Vice Presidents or by its
Treasurer, under its corporate seal reproduced thereon, and attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities and coupons may be manual or facsimile signatures of
the present or any future such authorized officer and may be imprinted or
otherwise reproduced on the Securities.
Securities or coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities or coupons.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series, together with any
coupon appertaining thereto,
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executed by the Company, to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Securities, and the
Trustee in accordance with the Company Order shall authenticate and deliver such
Securities; provided, however, that, in connection with its original issuance,
no Bearer Security shall be mailed or otherwise delivered to any location in the
United States; and provided further that, unless otherwise specified with
respect to any series of Securities pursuant to Section 301, a Bearer Security
may be delivered in connection with its original issuance only if the Person
entitled to receive such Bearer Security shall have furnished a certificate in
the form set forth in Exhibit A-1 to this Indenture or such other certificate as
may be specified with respect to any series of Securities pursuant to Section
301, dated no earlier than 15 days prior to the earlier of the date on which
such Bearer Security is delivered and the date on which any temporary Security
first becomes exchangeable for such Bearer Security in accordance with the terms
of such temporary Security and this Indenture. If any Security shall be
represented by a permanent global Bearer Security, then, for purposes of this
Section and Section 304, the notation of a beneficial owner's interest therein
upon original issuance of such Security or upon exchange of a portion of a
temporary global Security shall be deemed to be delivery in connection with its
original issuance of such beneficial owner's interest in such permanent global
Security. Except as permitted by Section 306, the Trustee shall not authenticate
and deliver any Bearer Security unless all appurtenant coupons for interest then
matured have been detached and canceled. If all the Securities of any series are
not to be issued at one time and if the Board Resolution or supplemental
indenture establishing such series shall so permit, such Company Order may set
forth procedures acceptable to the Trustee for the issuance of such Securities
and determining the terms of particular Securities of such series, such as
interest rate, maturity date, date of issuance and date from which interest
shall accrue. In authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to TIA Section 315(a) through
315(d)) shall be fully protected in relying upon,
(i) an Opinion of Counsel stating,
(a) that the form or forms of such Securities and any coupons have
been established in conformity with the provisions of this Indenture;
(b) that the terms of such Securities and any coupons have been
established in conformity with the provisions of this Indenture; and
(c) that such Securities, together with any coupons appertaining
thereto, when completed by appropriate insertions and executed and
delivered by the Company to the Trustee for authentication in accordance
with this Indenture, authenticated and delivered by the Trustee in
accordance with this Indenture and issued by the Company in the manner and
subject to any conditions specified in such Opinion of Counsel, will
constitute legal, valid and binding obligations of the Company,
enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting the enforcement of creditors'
rights, to general equitable principles and to such other qualifications
as such counsel
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shall conclude do not materially affect the rights of Holders of such
Securities and any coupons; and
(ii) an Officers' Certificate stating, to the best of the knowledge of the
signers of such certificate, that no Event of Default with respect to any of
the Securities shall have occurred and be continuing.
Notwithstanding the provisions of Section 301 and of this Section 303, if
all the Securities of any series are not to be issued at one time, it shall not
be necessary to deliver an Officers' Certificate otherwise required pursuant to
Section 301 or the Company Order, Opinion of Counsel or Officers' Certificate
otherwise required pursuant to the preceding paragraph at the time of issuance
of each Security of such series, but such order, opinion and certificates, with
appropriate modifications to cover such future issuances, shall be delivered at
or before the time of issuance of the first Security of such series.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties,
obligations or immunities under the Securities and this Indenture or otherwise
in a manner which is not reasonably acceptable to the Trustee.
Each Registered Security shall be dated the date of its authentication and
each Bearer Security shall be dated as of the date specified as contemplated by
Section 301.
No Security or coupon shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security or Security to which such coupon appertains a certificate of
authentication substantially in the form provided for herein duly executed by
the Trustee or an Authenticating Agent by manual signature of an authorized
signatory, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
Notwithstanding the foregoing, if any Security shall have been authenticated and
delivered hereunder but never issued and sold by the Company, and the Company
shall deliver such Security to the Trustee for cancellation as provided in
Section 310 together with a written statement (which need not comply with
Section 102 and need not be accompanied by an Opinion of Counsel) stating that
such Security has never been issued and sold by the Company, for all purposes of
this Indenture such Security shall be deemed never to have been authenticated
and delivered hereunder and shall never be entitled to the benefits of this
Indenture.
SECTION 304. Temporary Securities. (a) Pending the preparation of
definitive Securities of any series, the Company may execute, and upon Company
Order the Trustee shall authenticate and deliver, temporary Securities which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Securities
in lieu of which they are issued, in registered form, or, if authorized, in
bearer form with one or more coupons or without coupons, and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities
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may determine, as conclusively evidenced by their execution of such Securities.
In the case of Securities of any series, such temporary Securities may be in
global form.
Except in the case of temporary Securities in global form (which shall be
exchanged in accordance with Section 304(b) or as otherwise provided in or
pursuant to a Board Resolution), if temporary Securities of any series are
issued, the Company will cause definitive Securities of that series to be
prepared without unreasonable delay. After the preparation of definitive
Securities of such series, the temporary Securities of such series shall be
exchangeable for definitive Securities of such series upon surrender of the
temporary Securities of such series at the office or agency of the Company in a
Place of Payment for that series, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities of any series
(accompanied by any non-matured coupons appertaining thereto), the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of the same series of authorized
denominations; provided, however, that no definitive Bearer Security shall be
delivered in exchange for a temporary Registered Security; and provided further
that a definitive Bearer Security shall be delivered in exchange for a temporary
Bearer Security only in compliance with the conditions set forth in Section 303.
Until so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.
(b) Unless otherwise provided in or pursuant to a Board Resolution, this
Section 304(b) shall govern the exchange of temporary Securities issued in
global form. If temporary Securities of any series are issued in global form,
any such temporary global Security shall, unless otherwise provided therein, be
delivered to the London office of a depository or common depository (the "Common
Depository"), for the benefit of Euroclear and CEDEL, for credit to the
respective accounts of the beneficial owners of such Securities (or to such
other accounts as they may direct).
Without unnecessary delay but in any event not later than the date
specified in, or determined pursuant to the terms of, any such temporary global
Security (the "Exchange Date"), the Company shall deliver to the Trustee
definitive Securities, in aggregate principal amount equal to the principal
amount of such temporary global Security, executed by the Company. On or after
the Exchange Date, such temporary global Security shall be surrendered by the
Common Depository to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or from time to time in part, for definitive Securities
without charge, and the Trustee shall authenticate and deliver, in exchange for
each portion of such temporary global Security, an equal aggregate principal
amount of definitive Securities of the same series of authorized denominations
and of like tenor as the portion of such temporary global Security to be
exchanged. The definitive Securities to be delivered in exchange for any such
temporary global Security shall be in bearer form, registered form, permanent
global bearer form or permanent global registered form, or any combination
thereof, as specified as contemplated by Section 301, and, if any combination
thereof is so specified, as requested by the beneficial owner thereof; provided,
however, that, unless otherwise specified in such temporary global Security,
upon such presentation by the Common Depository, such temporary global Security
is accompanied by a
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certificate dated the Exchange Date or a subsequent date and signed by Euroclear
as to the portion of such temporary global Security held for its account then to
be exchanged and a certificate dated the Exchange Date or a subsequent date and
signed by CEDEL as to the portion of such temporary global Security held for its
account then to be exchanged, each in the form set forth in Exhibit A-2 to this
Indenture or in such other form as may be established pursuant to Section 301;
and provided further that definitive Bearer Securities shall be delivered in
exchange for a portion of a temporary global Security only in compliance with
the requirements of Section 303.
Unless otherwise specified in such temporary global Security, the interest
of a beneficial owner of Securities of a series in a temporary global Security
shall be exchanged for definitive Securities of the same series and of like
tenor following the Exchange Date when the account holder instructs Euroclear or
CEDEL, as the case may be, to request such exchange on his behalf and delivers
to Euroclear or CEDEL, as the case may be, a certificate in the form set forth
in Exhibit A-1 to this Indenture (or in such other form as may be established
pursuant to Section 301), dated no earlier than 15 days prior to the Exchange
Date, copies of which certificate shall be available from the offices of
Euroclear and CEDEL, the Trustee, any Authenticating Agent appointed for such
series of Securities and each Paying Agent. Unless otherwise specified in such
temporary global Security, any such exchange shall be made free of charge to the
beneficial owners of such temporary global Security, except that a Person
receiving definitive Securities must bear the cost of insurance, postage,
transportation and the like unless such Person takes delivery of such definitive
Securities in person at the offices of Euroclear or CEDEL. Definitive Securities
in bearer form to be delivered in exchange for any portion of a temporary global
Security shall be delivered only outside the United States.
Until exchanged in full as hereinabove provided, the temporary Securities
of any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of the same series and of like tenor
authenticated and delivered hereunder, except that, unless otherwise specified
as contemplated by Section 301, interest payable on a temporary global Security
on an Interest Payment Date for Securities of such series occurring prior to the
applicable Exchange Date shall be payable to Euroclear and CEDEL on such
Interest Payment Date upon delivery by Euroclear and CEDEL to the Trustee of a
certificate or certificates in the form set forth in Exhibit A-2 to this
Indenture (or in such other form as may be established pursuant to Section 301),
for credit without further interest on or after such Interest Payment Date to
the respective accounts of Persons who are the beneficial owners of such
temporary global Security on such Interest Payment Date and who have each
delivered to Euroclear or CEDEL, as the case may be, a certificate dated no
earlier than 15 days prior to the Interest Payment Date occurring prior to such
Exchange Date in the form set forth as Exhibit A-1 to this Indenture (or in such
other forms as may be established pursuant to Section 301). Notwithstanding
anything to the contrary herein contained, the certifications made pursuant to
this paragraph shall satisfy the certification requirements of the preceding two
paragraphs of this Section 304(b) and of the third paragraph of Section 303 of
this Indenture and the interests of the Persons who are the beneficial owners of
the temporary global Security with respect to which such certification was made
will be exchanged for definitive Securities of the same series and of
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like tenor on the Exchange Date or the date of certification if such date occurs
after the Exchange Date, without further act or deed by such beneficial owners.
Except as otherwise provided in this paragraph, no payments of principal (or
premium, if any) or interest, if any, owing with respect to a beneficial
interest in a temporary global Security will be made unless and until such
interest in such temporary global Security shall have been exchanged for an
interest in a definitive Security. Any interest so received by Euroclear and
CEDEL and not paid as herein provided shall be returned to the Trustee prior to
the expiration of two years after such Interest Payment Date in order to be
repaid to the Company.
SECTION 305. Registration, Registration of Transfer and Exchange. The
Company shall cause to be kept at the Corporate Trust Office of the Trustee or
in any office or agency of the Company in a Place of Payment a register for each
series of Securities (the registers maintained in such office or in any such
office or agency of the Company in a Place of Payment being herein sometimes
referred to collectively as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Registered Securities and of transfers of Registered Securities.
The Security Register shall be in written form or any other form capable of
being converted into written form within a reasonable time. The Trustee, at its
Corporate Trust Office, is hereby initially appointed "Security Registrar" for
the purpose of registering Registered Securities and transfers of Registered
Securities on such Security Register as herein provided. In the event that the
Trustee shall cease to be Security Registrar, it shall have the right to examine
the Security Register at all reasonable times.
Upon surrender for registration of transfer of any Registered Security of
any series at any office or agency of the Company in a Place of Payment for that
series, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Registered Securities of the same series, of any authorized denominations
and of a like aggregate principal amount, bearing a number not contemporaneously
outstanding and containing identical terms and provisions.
At the option of the Holder, Registered Securities of any series may be
exchanged for other Registered Securities of the same series, of any authorized
denomination or denominations and of a like aggregate principal amount,
containing identical terms and provisions, upon surrender of the Registered
Securities to be exchanged at any such office or agency. Whenever any Registered
Securities are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Registered Securities which the
Holder making the exchange is entitled to receive. Unless otherwise specified
with respect to any series of Securities as contemplated by Section 301, Bearer
Securities may not be issued in exchange for Registered Securities.
If (but only if) permitted by the applicable Board Resolution and (subject
to Section 303) set forth in the applicable Officers' Certificate, or in any
indenture supplemental hereto, delivered as contemplated by Section 301, at the
option of the Holder, Bearer Securities of any series may be exchanged for
Registered Securities of the same series of any authorized denominations and
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of a like aggregate principal amount and tenor, upon surrender of the Bearer
Securities to be exchanged at any such office or agency, with all unmatured
coupons and all matured coupons in default thereto appertaining. If the Holder
of a Bearer Security is unable to produce any such unmatured coupon or coupons
or matured coupon or coupons in default, any such permitted exchange may be
effected if the Bearer Securities are accompanied by payment in funds acceptable
to the Company in an amount equal to the face amount of such missing coupon or
coupons, or the surrender of such missing coupon or coupons may be waived by the
Company and the Trustee if there is furnished to them such security or indemnity
as they may require to save each of them and any Paying Agent harmless. If
thereafter the Holder of such Security shall surrender to any Paying Agent any
such missing coupon in respect of which such a payment shall have been made,
such Holder shall be entitled to receive the amount of such payment; provided,
however, that, except as otherwise provided in Section 1002, interest
represented by coupons shall be payable only upon presentation and surrender of
those coupons at an office or agency located outside the United States.
Notwithstanding the foregoing, in case a Bearer Security of any series is
surrendered at any such office or agency in a permitted exchange for a
Registered Security of the same series and like tenor after the close of
business at such office or agency on (i) any Regular Record Date and before the
opening of business at such office or agency on the relevant Interest Payment
Date, or (ii) any Special Record Date and before the opening of business at such
office or agency on the related proposed date for payment of Defaulted Interest,
such Bearer Security shall be surrendered without the coupon relating to such
Interest Payment Date or proposed date for payment, as the case may be, and
interest or Defaulted Interest, as the case may be, will not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of the Registered Security issued in exchange for such Bearer Security,
but will be payable only to the Holder of such coupon when due in accordance
with the provisions of this Indenture.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any permanent global Security shall be exchangeable
only as provided in this and the next succeeding paragraph. If any beneficial
owner of an interest in a permanent global Security is entitled to exchange such
interest for Securities of such series and of like tenor and principal amount of
another authorized form and denomination, as specified as contemplated by
Section 301 and provided that any applicable notice provided in the permanent
global Security shall have been given, then without unnecessary delay but in any
event not later than the earliest date on which such interest may be so
exchanged, the Company shall deliver to the Trustee definitive Securities in
aggregate principal amount equal to the principal amount of such beneficial
owner's interest in such permanent global Security, executed by the Company. On
or after the earliest date on which such interests may be so exchanged, such
permanent global Security shall be surrendered by the Common Depository or such
other depository as shall be specified in the Company Order with respect thereto
to the Trustee, as the Company's agent for such purpose, to be exchanged, in
whole or from time to time in part, for definitive Securities without charge and
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the Trustee shall authenticate and deliver, in exchange for each portion of such
permanent global Security, an equal aggregate principal amount of definitive
Securities of the same series of authorized denominations and of like tenor as
the portion of such permanent global Security to be exchanged which, unless the
Securities of the series are not issuable both as Bearer Securities and as
Registered Securities, as specified as contemplated by Section 301, shall be in
the form of Bearer Securities or Registered Securities, or any combination
thereof, as shall be specified by the beneficial owner thereof; provided,
however, that no such exchanges may occur during a period beginning at the
opening of business 15 days before any selection of Securities to be redeemed
and ending on the relevant Redemption Date if the Security for which exchange is
requested may be among those selected for redemption; and provided further that
no Bearer Security delivered in exchange for a portion of a permanent global
Security shall be mailed or otherwise delivered to any location in the United
States. If a Registered Security is issued in exchange for any portion of a
permanent global Security after the close of business at the office or agency
where such exchange occurs on (i) any Regular Record Date and before the opening
of business at such office or agency on the relevant Interest Payment Date, or
(ii) any Special Record Date and before the opening of business at such office
or agency on the related proposed date for payment of Defaulted Interest,
interest or Defaulted Interest, as the case may be, will not be payable on such
Interest Payment Date or proposed date for payment, as the case may be, in
respect of such Registered Security, but will be payable on such Interest
Payment Date or proposed date for payment, as the case may be, only to the
Person to whom interest in respect of such portion of such permanent global
Security is payable in accordance with the provisions of this Indenture.
If at any time the depository for the Securities of a series issued in
global form notifies the Company that it is unwilling or unable to continue as
depository for the Securities of such series or if at any time the depository
for Securities of a series shall no longer be a clearing agency registered and
in good standing under the Exchange Act or other applicable statute or
regulation, the Company shall appoint a successor depository with respect to the
Securities of such series. If a successor depository for the Securities of such
series is not appointed by the Company within 90 days after the Company receives
such notice or becomes aware of such condition, the Company will execute, and
the Trustee, upon receipt of a Company Order for the authentication and delivery
of definitive Securities of such series, will authenticate and deliver,
Registered Securities of such series in definitive form in an aggregate
principal amount equal to the principal amount of such global Security
representing such series in exchange for such global Security. In addition, if
the Registered Securities of any series shall have been issued in global form
and if an Event of Default with respect to the Securities of such series shall
have occurred and be continuing, the Company will promptly execute, and the
Trustee, upon receipt of a Company Order for the authentication and delivery of
definitive Securities of such series, will authenticate and deliver, Registered
Securities of such series in definitive form and in an aggregate principal
amount equal to the principal amount of the global Security representing such
series in exchange for such global Security.
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All Securities issued upon any registration of transfer or exchange of
Securities shall be valid obligations of the Company, evidencing the same debt
and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of
or exchange any Security if such Security may be among those selected for
redemption during a period beginning at the opening of business 15 days before
selection of the Securities to be redeemed under Section 1103 and ending at the
close of business on (A) if such Securities are issuable only as Registered
Securities, the day of the mailing of the relevant notice of redemption and (B)
if such Securities are issuable as Bearer Securities, the day of the first
publication of the relevant notice of redemption or, if such Securities are also
issuable as Registered Securities and there is no publication, the mailing of
the relevant notice of redemption, or (ii) to register the transfer of or
exchange any Registered Security so selected for redemption in whole or in part,
except, in the case of any Registered Security to be redeemed in part, the
portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so
selected for redemption except that such a Bearer Security may be exchanged for
a Registered Security of that series and like tenor, provided that such
Registered Security shall be simultaneously surrendered for redemption, or (iv)
to issue, register the transfer of or exchange any Security which has been
surrendered for repayment at the option of the Holder, except the portion, if
any, of such Security not to be so repaid.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any
mutilated Security or a Security with a mutilated coupon appertaining to it is
surrendered to the Trustee or the Company, together with, in proper cases, such
security or indemnity as may be required by the Company or the Trustee to save
each of them or any agent of either of them harmless, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a new
Security of the same series and principal amount, containing identical terms and
provisions and bearing a number not contemporaneously outstanding, with coupons
corresponding to the coupons, if any, appertaining to the surrendered Security.
If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security or
coupon, and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security or
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coupon has been acquired by a bona fide purchaser, the Company shall execute and
upon its request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security or in exchange for the Security to which a
destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
destroyed, lost or stolen), a new Security of the same series and principal
amount, containing identical terms and provisions and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the Security
to which such destroyed, lost or stolen coupon appertains.
Notwithstanding the provisions of the previous two paragraphs, in case any
such mutilated, destroyed, lost or stolen Security or coupon has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a new Security, pay such Security or coupon; provided, however, that
payment of principal of (and premium, if any) and interest, if any, on Bearer
Securities shall, except as otherwise provided in Section 1002, be payable only
at an office or agency located outside the United States and, unless otherwise
specified as contemplated by Section 301, any interest on Bearer Securities
shall be payable only upon presentation and surrender of the coupons
appertaining thereto.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any series with its coupons, if any, issued pursuant
to this Section in lieu of any destroyed, lost or stolen Security, or in
exchange for a Security to which a destroyed, lost or stolen coupon appertains,
shall constitute an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security and its coupons, if any,
or the destroyed, lost or stolen coupon shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that series and their
coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities or coupons.
SECTION 307. Payment of Interest; Interest Rights Preserved; Optional
Interest Reset. (a) Except as otherwise specified with respect to a series of
Securities in accordance with the provisions of Section 301, interest, if any,
on any Registered Security that is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of the Company maintained for such purpose pursuant to Section 1002;
provided, however, that each installment of interest, if any, on any Registered
Security may at the Company's option be paid by (i) mailing a check for such
interest, payable to or upon the written order of the Person entitled thereto
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pursuant to Section 309, to the address of such Person as it appears on the
Security Register or (ii) transfer to an account maintained by the payee inside
the United States.
Unless otherwise provided as contemplated by Section 301 with respect to
the Securities of any series, payment of interest, if any, may be made, in the
case of a Bearer Security, by transfer to an account maintained by the payee
with a bank located outside the United States.
Unless otherwise provided as contemplated by Section 301, every permanent
global Security will provide that interest, if any, payable on any Interest
Payment Date will be paid to each of Euroclear and CEDEL with respect to that
portion of such permanent global Security held for its account by the Common
Depository, for the purpose of permitting each of Euroclear and CEDEL to credit
the interest, if any, received by it in respect of such permanent global
Security to the accounts of the beneficial owners thereof.
In case a Bearer Security of any series is surrendered in exchange for a
Registered Security of such series after the close of business (at an office or
agency in a Place of Payment for such series) on any Regular Record Date and
before the opening of business (at such office or agency) on the next succeeding
Interest Payment Date, such Bearer Security shall be surrendered without the
coupon relating to such Interest Payment Date and interest will not be payable
on such Interest Payment Date in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the provisions of this Indenture.
Except as otherwise specified with respect to a series of Securities in
accordance with the provisions of Section 301, any interest on any Registered
Security of any series that is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date (herein called "Defaulted Interest")
shall forthwith cease to be payable to the registered Holder thereof on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Registered Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each Registered Security of such series and the date of the
proposed payment (which shall not be less than 20 days after such notice
is received by the Trustee), and at the same time the Company shall
deposit with the Trustee an amount of money in Dollars equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit on
or prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10
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days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid, to
each Holder of Registered Securities of such series at his address as it
appears in the Security Register not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose
names the Registered Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2). In case a Bearer Security of any series is
surrendered at the office or agency in a Place of Payment for such series
in exchange for a Registered Security of such series after the close of
business at such office or agency on any Special Record Date and before
the opening of business at such office or agency on the related proposed
date for payment of Defaulted Interest, such Bearer Security shall be
surrendered without the coupon relating to such proposed date of payment
and Defaulted Interest will not be payable on such proposed date of
payment in respect of the Registered Security issued in exchange for such
Bearer Security, but will be payable only to the Holder of such coupon
when due in accordance with the provisions of this Indenture.
(2) The Company may make payment of any Defaulted Interest on the
Registered Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
such Securities may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
(b) The provisions of this Section 307(b) may be made applicable to any
series of Securities pursuant to Section 301 (with such modifications, additions
or substitutions as may be specified pursuant to such Section 301). The interest
rate (or the spread or spread multiplier used to calculate such interest rate,
if applicable) on any Security of such series may be reset by the Company on the
date or dates specified on the face of such Security (each an "Optional Reset
Date"). The Company may exercise such option with respect to such Security by
notifying the Trustee of such exercise at least 45 but not more than 60 days
prior to an Optional Reset Date for such Security. Not later than 35 days prior
to each Optional Reset Date, the Trustee shall transmit, in the manner provided
for in Section 106, to the Holder of any such Security a notice (the "Reset
Notice") indicating whether the Company has elected to reset the interest rate
(or the spread or spread multiplier used to calculate such interest rate, if
applicable), and if so (i) such new interest rate (or such new spread or spread
multiplier, if applicable) and (ii) the provisions, if any, for redemption
during the period from such Optional Reset Date to the next Optional Reset Date
or if there is no such next Optional Reset Date, to the Stated Maturity of such
Security (each such period a "Subsequent Interest Period"), including the date
or dates on which or the
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period or periods during which and the price or prices at which such redemption
may occur during the Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 days prior to the
Optional Reset Date, the Company may, at its option, revoke the interest rate
(or the spread or spread multiplier used to calculate such interest rate, if
applicable) provided for in the Reset Notice and establish a higher interest
rate (or a spread or spread multiplier providing for a higher interest rate, if
applicable) for the Subsequent Interest Period by causing the Trustee to
transmit, in the manner provided for in Section 106, notice of such higher
interest rate (or such spread or spread multiplier providing for a higher
interest rate, if applicable) to the Holder of such Security. Such notice shall
be irrevocable. All Securities with respect to which the interest rate (or the
spread or spread multiplier used to calculate such interest rate, if applicable)
is reset on an Optional Reset Date, and with respect to which the Holders of
such Securities have not tendered such Securities for repayment (or have validly
revoked any such tender) pursuant to the next succeeding paragraph, will bear
such higher interest rate (or such spread or spread multiplier providing for a
higher interest rate, if applicable).
The Holder of any such Security may have the option to elect repayment by
the Company of the principal of such Security on each Optional Reset Date at a
price equal to the principal amount thereof plus interest accrued to such
Optional Reset Date. In order to obtain repayment on an Optional Reset Date, the
Holder must follow the procedures set forth in Article Thirteen for repayment at
the option of Holders except that the period for delivery or notification to the
Trustee shall be at least 25 but not more than 30 days prior to such Optional
Reset Date and except that, if the Holder has tendered any Security for
repayment pursuant to the Reset Notice, the Holder may, by written notice to the
Trustee, revoke such tender or repayment until the close of business on the
tenth day before such Optional Reset Date.
Subject to the foregoing provisions of this Section and Section 305, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Optional Extension of Maturity. The provisions of this
Section 308 may be made applicable to any series of Securities pursuant to
Section 301 (with such modifications, additions or substitutions as may be
specified pursuant to such Section 301). The Stated Maturity of any Security of
such series may be extended at the option of the Company for the period or
periods specified on the face of such Security (each an "Extension Period") up
to but not beyond the date (the "Final Maturity") set forth on the face of such
Security. The Company may exercise such option with respect to any Security by
notifying the Trustee of such exercise at least 45 but not more than 60 days
prior to the Stated Maturity of such Security in effect prior to the exercise of
such option (the "Original Stated Maturity"). If the Company exercises such
option, the Trustee shall transmit, in the manner provided for in Section 106,
to the Holder of such Security not later than 35 days prior to the Original
Stated Maturity a notice (the "Extension Notice") indicating (i) the election of
the Company to extend the Stated
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Maturity, (ii) the new Stated Maturity, (iii) the interest rate (or spread,
spread multiplier or other formula to calculate such interest rate, if
applicable), if any, applicable to the Extension Period and (iv) the provisions,
if any, for redemption during such Extension Period. Upon the Trustee's
transmittal of the Extension Notice, the Stated Maturity of such Security shall
be extended automatically and, except as modified by the Extension Notice and as
described in the next paragraph, such Security will have the same terms as prior
to the transmittal of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days before the Original
Stated Maturity of such Security, the Company may, at its option, revoke the
interest rate (or spread, spread multiplier or other formula used to calculate
such interest rate, if applicable) provided for in the Extension Notice and
establish a higher interest rate (or spread, spread multiplier or other formula
used to calculate such higher interest rate, if applicable) for the Extension
Period by causing the Trustee to transmit, in the manner provided for in Section
106, notice of such higher interest rate (or spread, spread multiplier or other
formula used to calculate such interest rate, if applicable) to the Holder of
such Security. Such notice shall be irrevocable. All Securities with respect to
which the Stated Maturity is extended will bear such higher interest rate.
If the Company extends the Stated Maturity of any Security, the Holder
will have the option to elect repayment of such Security by the Company on the
Original Stated Maturity at a price equal to the principal amount thereof, plus
interest accrued to such date. In order to obtain repayment on the Original
Stated Maturity once the Company has extended the Stated Maturity thereof, the
Holder must follow the procedures set forth in Article Thirteen for repayment at
the option of Holders, except that the period for delivery or notification to
the Trustee shall be at least 25 but not more than 30 days prior to the Original
Stated Maturity and except that, if the Holder has tendered any Security for
repayment pursuant to an Extension Notice, the Holder may by written notice to
the Trustee revoke such tender for repayment until the close of business on the
tenth day before the Original Stated Maturity.
SECTION 309. Persons Deemed Owners. Prior to due presentment of a
Registered Security for registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name such
Registered Security is registered as the owner of such Security for the purpose
of receiving payment of principal of (and premium, if any) and (subject to
Sections 305 and 307) interest, if any, on such Registered Security and for all
other purposes whatsoever, whether or not such Registered Security be overdue,
and neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Title to any Bearer Security and any coupons appertaining thereto shall
pass by delivery. The Company, the Trustee and any agent of the Company or the
Trustee may treat the bearer of any Bearer Security and the bearer of any coupon
as the absolute owner of such Security or coupon for the purpose of receiving
payment thereof or on account thereof and for all other purposes whatsoever,
whether or not such Security or coupon be overdue, and neither the
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Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Security in global form or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any global Security,
nothing herein shall prevent the Company, the Trustee, or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by any depository, as a Holder, with respect to
such global Security or impair, as between such depository and owners of
beneficial interests in such global Security, the operation of customary
practices governing the exercise of the rights of such depository (or its
nominee) as Holder of such global Security.
SECTION 310. Cancellation. All Securities and coupons surrendered for
payment, redemption, repayment at the option of the Holder, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee,
and any such Securities and coupons surrendered directly to the Trustee for any
such purpose shall be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly canceled by the Trustee. If the Company shall so
acquire any of the Securities, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section, except as expressly permitted by this
Indenture. Canceled Securities and coupons held by the Trustee shall be
destroyed by the Trustee and the Trustee shall deliver a certificate of such
destruction to the Company, unless by a Company Order the Company directs their
return to it.
SECTION 311. Computation of Interest. Except as otherwise specified as
contemplated by Section 301 with respect to Securities of any series, interest,
if any, on the Securities of each series shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
SECTION 312. CUSIP Numbers. The Company in issuing the Securities may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
indicate the "CUSIP" numbers of the Securities in notices of redemption as a
convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption and that reliance
may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall
upon Company Request cease to be of further effect with respect to any series of
Securities specified in such Company Request (except as to any surviving rights
of registration of transfer or exchange of Securities of such series expressly
provided for herein or pursuant hereto and any right to receive Additional
Amounts, as provided in Section 1004), and the Trustee, upon receipt of a
Company Order, and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture as to
such series when
(1) either
(A) all Securities of such series theretofore authenticated
and delivered and all coupons, if any, appertaining thereto (other
than (i) coupons appertaining to Bearer Securities surrendered for
exchange for Registered Securities and maturing after such exchange,
whose surrender is not required or has been waived as provided in
Section 305, (ii) Securities and coupons of such series which have
been destroyed, lost or stolen and which have been replaced or paid
as provided in Section 306, (iii) coupons appertaining to Securities
called for redemption and maturing after the relevant Redemption
Date, whose surrender has been waived as provided in Section 1106,
and (iv) Securities and coupons of such series for whose payment
money has theretofore been deposited in trust or segregated and held
in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(B) all Securities of such series and, in the case of (i) or
(ii) below, any coupons appertaining thereto not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii)if redeemable at the option of the Company, are to be
called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense,
of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for such purpose an amount in Dollars
sufficient to pay and discharge the entire indebtedness on such
Securities and such coupons not theretofore delivered to the Trustee
for
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cancellation, for principal (and premium, if any) and interest, if
any, to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture as to such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee and any predecessor Trustee under
Section 606, the obligations of the Company to any Authenticating Agent under
Section 611 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Funds. Subject to the provisions of the
last paragraph of Section 1003, all money deposited with the Trustee pursuant to
Section 401 shall be held in trust and applied by it, in accordance with the
provisions of the Securities, the coupons and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Persons entitled thereto,
of the principal (and premium, if any) and interest, if any, for whose payment
such money has been deposited with or received by the Trustee, but such money
need not be segregated from other funds except to the extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default. "Event of Default", wherever used herein
with respect to any particular series of Securities, means any one of the
following events (whatever the reason for such Event of Default and whether or
not it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series or of any coupon appertaining thereto or any Additional Amounts
payable in respect of any Security of that series, when such interest or
coupon or Additional Amounts become due and payable, and continuance of
such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series when it becomes due and payable at its
Maturity; or
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(3) default in the deposit of any sinking fund payment, when and as
due by the terms of any Security of that series; or
(4) default in the performance, or breach, of any covenant or
agreement of the Company in this Indenture with respect to any Security of
that series (other than a covenant or agreement a default in whose
performance or whose breach is elsewhere in this Section specifically
dealt with), and continuance of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of
at least 25% in principal amount of the Outstanding Securities of that
series a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(5) a default under any bond, debenture, note or other evidence of
Indebtedness (including a default with respect to Securities of any series
other than that series) or under any mortgage, indenture (including this
Indenture) or instrument under which there may be issued or by which there
may be secured or evidenced any Indebtedness by the Company or any
Subsidiary in excess of $25,000,000 in the aggregate (other than (i) any
Indebtedness arising from the obligation to make an equity investment in a
Subsidiary or (ii) Indebtedness which is payable solely out of the
property of assets of a partnership, joint venture or similar entity of
which the Company or any such Subsidiary is a participant, or which is
secured by a Lien on the property or assets owned or held by such entity,
without further recourse to or liability of the Company or any such
Subsidiary), whether such Indebtedness now exists or shall hereafter be
created, which default shall have resulted in such Indebtedness becoming
or being declared due and payable prior to the date on which it would
otherwise have become due and payable, without such acceleration having
been rescinded or annulled within a period of 30 days after there shall
have been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of not less than
25% in principal amount of the Outstanding Securities of that series a
written notice specifying such default and requiring the Company to cause
such acceleration to be rescinded or annulled and stating that such notice
is a "Notice of Default" hereunder; provided, however, that if such
default shall be remedied or cured by the Company or waived by the holders
of such Indebtedness, then the Event of Default hereunder by reason
thereof shall be deemed likewise to have been thereupon remedied, cured or
waived without any action on the part of the Trustee or any of the
Holders; or
(6) the Company pursuant to or within the meaning of any Bankruptcy
Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
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(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property and such Custodian is not
discharged within 60 days, or
(D) makes a general assignment for the benefit of its
creditors; or
(7) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case,
(B) appoints a Custodian of the Company or for all or
substantially all of its property, or
(C) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90 days; or
(8) any other Event of Default provided with respect to Securities
of that series.
The term "Bankruptcy Law" means title 11, U.S. Code or any similar Federal
or State law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or other similar official under any Bankruptcy
Law.
SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal (or, if any Securities are
Original Issue Discount Securities or Indexed Securities, such portion of the
principal as may be specified in the terms thereof) of all the Securities of
that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by the Holders), and upon any such
declaration such principal or specified portion thereof shall become immediately
due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter
provided in this Article, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay in Dollars (except as otherwise specified pursuant to
Section 301 for the Securities of such series):
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(A) all overdue installments of interest, if any, on all
Outstanding Securities of that series and any related coupons,
(B) the principal of (and premium, if any, on) all Outstanding
Securities of that series which have become due otherwise than by
such declaration of acceleration and interest thereon at the rate or
rates borne by or provided for in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate or rates
borne by or provided for in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series,
other than the nonpayment of the principal of (or premium, if any) or
interest on Securities of that series which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if:
(1) default is made in the payment of any installment of interest on
any Security of any series and any related coupon when such interest
becomes due and payable and such default continues for a period of 30
days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security of any series at its Maturity,
then the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of Securities of such series and coupons, the whole
amount then due and payable on such Securities and coupons for principal (and
premium, if any) and interest, if any, with interest upon any overdue principal
(and premium, if any) and, to the extent that payment of such interest shall be
legally enforceable, upon any overdue installments of interest, if any, at the
rate or rates borne by or provided for in such Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection
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of the sums so due and unpaid, and may prosecute such proceeding to judgment or
final decree, and may enforce the same against the Company or any other obligor
upon Securities of such series and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the property of the Company or any
other obligor upon such Securities of such series, wherever situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series and any
related coupons by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504.Trustee May File Proofs of Claim. In case of the pendency of
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the principal of the Securities of any series shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Company for the payment of
any overdue principal, premium or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of principal (or
in the case of Original Issue Discount Securities or Indexed Securities,
such portion of the principal as may be provided for in the terms thereof)
(and premium, if any) and interest, if any, owing and unpaid in respect of
the Securities and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby authorized by
each Holder of Securities of such series and coupons to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee and any predecessor Trustee, their agents and counsel, and any other
amounts due the Trustee or any predecessor Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
or coupon any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or coupons or the rights of any
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Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Holder of a Security or coupon in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities
or Coupons. All rights of action and claims under this Indenture or any of the
Securities or coupons may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or coupons or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities and
coupons in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, if any, upon
presentation of the Securities or coupons, or both, as the case may be, and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities and coupons for principal (and premium, if any) and
interest, if any, in respect of which or for the benefit of
which such money has been collected, ratably, without
preference or priority of any kind, according to the aggregate
amounts due and payable on such Securities and coupons for
principal (and premium, if any) and interest, if any,
respectively; and
THIRD: To the payment of the remainder, if any, to the Company or any
other Person or Persons entitled thereto.
SECTION 507. Limitation on Suits. No Holder of any Security of any series
or any related coupon shall have any right to institute any proceeding, judicial
or otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
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(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest. Notwithstanding any other provision in this Indenture, the Holder
of any Security or coupon shall have the right which is absolute and
unconditional to receive payment of the principal of (and premium, if any) and
(subject to Sections 305 and 307) interest, if any, on such Security or payment
of such coupon on the respective due dates expressed in such Security or coupon
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies. If the Trustee or any
Holder of a Security or coupon has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case the Company, the Trustee and the
Holders of Securities and coupons shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided
with respect to the replacement or payment of mutilated, destroyed, lost or
stolen Securities or coupons in the last paragraph of Section 306, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders of
Securities or coupons is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
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SECTION 511. Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any Holder of any Security or coupon to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders of Securities or coupons, as the
case may be.
SECTION 512. Control by Holders of Securities. The Holders of a majority
in principal amount of the Outstanding Securities of any series shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders of Securities
of such series not consenting.
SECTION 513. Waiver of Past Defaults. The Holders of not less than a
majority in principal amount of the Outstanding Securities of any series may on
behalf of the Holders of all the Securities of such series and any related
coupons waive any past default hereunder with respect to such series and its
consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest, if any, on any Security of such series or any related coupons,
or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws. The Company covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby
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expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults. Within 90 days after the occurrence of
any Default hereunder with respect to the Securities of any series, the Trustee
shall transmit in the manner and to the extent provided in TIA Section 313(c),
notice of such Default hereunder known to the Trustee, unless such Default shall
have been cured or waived; provided, however, that, except in the case of a
Default in the payment of the principal of (or premium, if any) or interest, if
any, on any Security of such series, or in the payment of any sinking or
purchase fund installment with respect to the Securities of such series, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of the Securities
and coupons of such series; and provided further that in the case of any Default
or breach of the character specified in Section 501(4) with respect to the
Securities and coupons of such series, no such notice to Holders shall be given
until at least 60 days after the occurrence thereof.
SECTION 602. Certain Rights of Trustee. Subject to the provisions of TIA
Section 315(a) through 315(d):
(1) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or
parties.
(2) Any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order (other
than delivery of any Security, together with any coupons appertaining
thereto, to the Trustee for authentication and delivery pursuant to
Section 303 which shall be sufficiently evidenced as provided therein) and
any resolution of the Board of Directors may be sufficiently evidenced by
a Board Resolution.
(3) Whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon a Board Resolution, an Opinion of Counsel
or an Officers' Certificate.
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(4) The Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(5) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders of Securities of any series or any related
coupons pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with
such request or direction.
(6) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.
(7) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
(8) The Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 603. Not Responsible for Recitals or Issuance of Securities. The
recitals contained herein and in the Securities, except the Trustee's
certificate of authentication, and in any coupons shall be taken as the
statements of the Company, and neither the Trustee nor any Authenticating Agent
assumes any responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities or coupons, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder and that the statements made by it in a
Statement of Eligibility on Form T-1 supplied to the Company are true and
accurate, subject to the qualifications set forth therein. Neither the Trustee
nor any Authenticating Agent shall be accountable for the use or application by
the Company of Securities or the proceeds thereof.
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SECTION 604. May Hold Securities. The Trustee, any Paying Agent, Security
Registrar, Authenticating Agent or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee of Securities
and coupons and, subject to TIA Sections 310(b) and 311, may otherwise deal with
the Company with the same rights it would have if it were not Trustee, Paying
Agent, Security Registrar, Authenticating Agent or such other agent.
SECTION 605. Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.
SECTION 606.Compensation and Reimbursement. The Company agrees:
(1) To pay to the Trustee from time to time such compensation for
all services rendered by it hereunder as has been agreed upon in writing
(which compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust).
(2) Except as otherwise expressly provided herein, to reimburse each
of the Trustee and any predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith.
(3) To indemnify each of the Trustee and any predecessor Trustee
for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its own part, arising out of
or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company under
this Section, the Trustee shall have a claim prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (or premium, if any) or interest, if
any, on particular Securities or any coupons.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 501(6) or (7) occurs, the expenses and compensation
for the services are intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 607. Corporate Trustee Required; Eligibility. There shall at all
times be a Trustee hereunder which shall be eligible to act as Trustee under TIA
Section 310(a)(1) and shall have a combined capital and surplus of at least
$50,000,000. If such Corporation publishes
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reports of condition at least annually, pursuant to law or the requirements of
Federal, State, Territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 609.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder of a Security who has been a bona fide Holder of a Security for at
least six months, or
(2) the Trustee shall cease to be eligible under Section 607 and
shall fail to resign after written request therefor by the Company or by
any Holder of a Security who has been a bona fide Holder of a Security for
at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by or pursuant to a Board Resolution may
remove the Trustee and appoint a successor Trustee with respect to all
Securities, or (ii) subject to TIA Section 315(e), any Holder of a Security who
has been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all Securities and
the appointment of a successor Trustee or Trustees.
(e) If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of a notice of
resignation or the delivery of an Act of removal, the Trustee resigning or being
removed may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
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(f) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause with respect
to the Securities of one or more series, the Company, by or pursuant to a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series). If, within one year after
such resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the successor Trustee with respect to the Securities
of such series and to that extent supersede the successor Trustee appointed by
the Company. If no successor Trustee with respect to the Securities of any
series shall have been so appointed by the Company or the Holders of Securities
and accepted appointment in the manner hereinafter provided, any Holder of a
Security who has been a bona fide Holder of a Security of such series for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to Securities of such series.
(g) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series in the manner
provided for notices to the Holders of Securities in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor. (a) In case of the
appointment hereunder of a successor Trustee with respect to all Securities,
every such successor Trustee shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder, subject nevertheless to its claim, if any, provided for in
Section 606.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such
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successor Trustee relates, (2) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
as to which the retiring Trustee is not retiring shall continue to be vested in
the retiring Trustee, and (3) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to Business.
Any Corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any Corporation resulting from any merger, conversion
or consolidation to which the Trustee shall be a party, or any Corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
Corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities or coupons shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities or coupons so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities or coupons. In case any Securities or coupons shall not have been
authenticated by such predecessor Trustee, any such successor Trustee may
authenticate and deliver such Securities or coupons, in either its own name or
that of its predecessor Trustee, with the full force and effect which this
Indenture provides for the certificate of authentication of the Trustee.
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SECTION 611. Appointment of Authenticating Agent. At any time when any of
the Securities remain Outstanding, the Trustee may appoint an Authenticating
Agent or Agents with respect to one or more series of Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities of such
series issued upon exchange, registration of transfer or partial redemption
thereof, and Securities so authenticated shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Any such appointment shall be evidenced
by an instrument in writing signed by a Responsible Officer of the Trustee, a
copy of which instrument shall be promptly furnished to the Company. Wherever
reference is made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication and delivery on behalf of
the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and, except as may
otherwise be provided pursuant to Section 301, shall at all times be a bank or
trust company or Corporation organized and doing business and in good standing
under the laws of the United States of America or of any State or the District
of Columbia, authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of not less than $1,500,000 and subject to
supervision or examination by Federal or State authorities. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or the requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. In case at any
time an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any Corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any Corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such Corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or further act
on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at any time
resign by giving written notice of resignation to the Trustee for such series
and to the Company. The Trustee for any series of Securities may at any time
terminate the agency of an Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve in the manner set forth in
Section 106. Any successor Authenticating Agent upon acceptance of its
appointment
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hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation including reimbursement of its reasonable expenses for
its services under this Section.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to or in lieu of the Trustee's certificate of authentication, an
alternate certificate of authentication substantially in the following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
By _______________________________________
as Authenticating Agent
By _______________________________________
Authorized Signatory
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders. Every Holder of
Securities or coupons, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any
Authenticating Agent nor any Paying Agent nor any Security Registrar shall be
held accountable by reason of the disclosure of any information as to the names
and addresses of the Holders of Securities in accordance with TIA Section 312,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under TIA Section 312(b).
SECTION 702. Reports by Trustee. Within 60 days after May 15 of each year
commencing with the first May 15 after the first issuance of Securities pursuant
to this Indenture,
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the Trustee shall transmit by mail to all Holders of Securities as provided in
TIA Section 313(c) a brief report dated as of such May 15 if required by TIA
Section 313(a).
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange, if any, upon which
the Securities are listed, with the Commission and with the Company. The Company
will promptly notify the Trustee of the listing of the Securities on any stock
exchange.
SECTION 703. Reports by Company. The Company will:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual
reports and of the information, documents, and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) which the Company may be required
to file with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to
file information, documents or reports pursuant to either of such
Sections, then it will file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents
and reports which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and registered on a
national securities exchange as may be prescribed from time to time in
such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance
by the Company with the conditions and covenants of this Indenture as may
be required from time to time by such rules and regulations; and
(3) transmit by mail to the Holders of Securities, within 30 days
after the filing thereof with the Trustee, in the manner and to the extent
provided in TIA Section 313(c), such summaries of any information,
documents and reports required to be filed by the Company pursuant to
paragraphs (1) and (2) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission.
SECTION 704. Calculation of Original Issue Discount. Upon request of the
Trustee, the Company shall file with the Trustee promptly at the end of each
calendar year a written notice specifying the amount of original issue discount
(including daily rates and accrual periods), if any, accrued on Outstanding
Securities as of the end of such year.
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ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 801. Company May Consolidate, etc., Only on Certain Terms. The
Company shall not consolidate with or merge with or into any other Corporation
or convey or transfer its properties and assets substantially as an entirety to
any Person, unless:
(1) either the Company shall be the continuing Corporation, or the
Corporation (if other than the Company) formed by such consolidation or
into which the Company is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Company
substantially as an entirety shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal
of (and premium, if any) and interest, if any, on all the Securities and
the performance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Default
or Event of Default shall have happened and be continuing; and
(3) the Company and the successor Person have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel each stating
that such consolidation, merger, conveyance or transfer and such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with.
SECTION 802. Successor Person Substituted. Upon any consolidation or
merger, or any conveyance or transfer of the properties and assets of the
Company substantially as an entirety in accordance with Section 801, the
successor Corporation formed by such consolidation or into which the Company is
merged or the successor Person to which such conveyance or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
had been named as the Company herein; and in the event of any such conveyance or
transfer, the Company shall be discharged from all obligations and covenants
under this Indenture and the Securities and coupons and may be dissolved and
liquidated.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901.Supplemental Indentures Without Consent of Holders. Without
the consent of any Holders of Securities or coupons, the Company, when
authorized by or pursuant to a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or
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more indentures supplemental hereto, in form satisfactory to the Trustee, for
any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
herein and in the Securities contained; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to
be for the benefit of less than all series of Securities, stating that
such covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such Events of Default
are to be for the benefit of less than all series of Securities, stating
that such Events of Default are expressly being included solely for the
benefit of such series); provided, however, that in respect of any such
additional Events of Default such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide for
an immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default or may limit the right of the
Holders of a majority in aggregate principal amount of that or those
series of Securities to which such additional Events of Default apply to
waive such default; or
(4) to add to or change any of the provisions of this Indenture to
provide that Bearer Securities may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of or any
premium or interest on Bearer Securities, to permit Bearer Securities to
be issued in exchange for Registered Securities, to permit Bearer
Securities to be issued in exchange for Bearer Securities of other
authorized denominations or to permit or facilitate the issuance of
Securities in uncertificated form; provided that any such action shall not
adversely affect the interests of the Holders of Securities of any series
or any related coupons in any material respect; or
(5) to change or eliminate any of the provisions of this Indenture;
provided that any such change or elimination shall become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision; or
(6) to secure the Securities pursuant to the requirements of Section
1005, or otherwise; or
(7) to establish the form or terms of Securities of any series and
any related coupons as permitted by Sections 201 and 301, including the
provisions and procedures
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relating to Securities convertible into or exchangeable for any securities
of any Person (including the Company); or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee; or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture; provided that such action shall not adversely affect
the interests of the Holders of Securities of any series or any related
coupons in any material respect; or
(10) to supplement any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the defeasance and
discharge of any series of Securities pursuant to Sections 401, 1402 and
1403; provided that any such action shall not adversely affect the
interests of the Holders of Securities of such series and any related
coupons or any other series of Securities in any material respect.
SECTION 902. Supplemental Indentures With Consent of Holders. With the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Securities affected by such supplemental indenture, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by or pursuant to a Board Resolution, and the Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities and any related coupons under this Indenture; provided, however, that
no such supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of (or premium, if
any, on) or any installment of principal of or interest on, any Security;
or reduce the principal amount thereof or the rate of interest (or change
the manner of calculating the rate of interest, thereon, or any premium
payable upon the redemption thereof, or change any obligation of the
Company to pay Additional Amounts pursuant to Section 1004 (except as
contemplated by Section 801(1) and permitted by Section 901(1))), or
reduce the portion of the principal of an Original Issue Discount Security
or Indexed Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 502 or the amount
thereof provable in bankruptcy pursuant to Section 504, or adversely
affect any right of repayment at the option of the Holder of any Security,
or change any Place of Payment where any Security or any premium or
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption or repayment at the option of the Holder,
on or after the Redemption Date or the
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Repayment Date, as the case may be), or adversely affect any right to
convert or exchange any Security as may be provided pursuant to Section
301 herein, or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver with respect to such series (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or reduce the requirements
of Section 1504 for quorum or voting, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1009, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
The Company may, but shall not be obligated to, fix a Record Date for the
purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a Record Date is fixed, the Holders on such Record Date,
or their duly designated proxies, and only such Persons, shall be entitled to
consent to such supplemental indenture, whether or not such Holders remain
Holders after such Record Date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been obtained
prior to the date which is 90 days after such Record Date, any such consent
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.
SECTION 903. Execution of Supplemental Indentures. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modification thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures. Upon the execution of any
supplemental indenture under this Article, this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes;
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and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder and of any coupon appertaining thereto shall be bound
thereby.
SECTION 905. Conformity With Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall, if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest. The
Company covenants and agrees for the benefit of the Holders of each series of
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest, if any, on the Securities of that series in accordance
with the terms of such series of Securities, any coupons appertaining thereto
and this Indenture. Any interest due on Bearer Securities on or before Maturity,
other than Additional Amounts, if any, payable as provided in Section 1004 in
respect of principal of (or premium, if any, on) such a Security, shall be
payable only upon presentation and surrender of the several coupons for such
interest installments as are evidenced thereby as they severally mature. Unless
otherwise specified with respect to Securities of any series pursuant to Section
301, at the option of the Company, all payments of principal may be paid by
check to the registered Holder of the Registered Security or other person
entitled thereto against surrender of such Security. Unless otherwise specified
as contemplated by Section 301 with respect to any series of Securities, any
interest due on Bearer Securities on or before Maturity shall be payable only
upon presentation and surrender of the several coupons for such interest
installments as are evidenced thereby as they severally mature.
SECTION 1002. Maintenance of Office or Agency. If Securities of a series
are issuable only as Registered Securities, the Company shall maintain in each
Place of Payment for any series of Securities an office or agency where
Securities of that series may be presented or surrendered for payment, where
Securities of that series may be surrendered for registration of transfer or
exchange, where Securities of that series that are convertible or exchangeable
may be surrendered for conversion or exchange, as applicable, and where notices
and demands to or upon the Company in respect of the Securities of that series
and this Indenture may be served. If Securities of a series are issuable as
Bearer Securities, the Company will maintain (A) in the
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Borough of Manhattan, The City of New York, an office or agency where any
Registered Securities of that series may be presented or surrendered for
payment, where any Registered Securities of that series may be surrendered for
registration of transfer, where Securities of that series may be surrendered for
exchange, where Securities of that series that are convertible or exchangeable
may be surrendered for conversion or exchange, as applicable, and where notices
and demands to or upon the Company in respect of the Securities of that series
and this Indenture may be served and where Bearer Securities of that series and
related coupons may be presented or surrendered for payment in the circumstances
described in the following paragraph (and not otherwise), (B) subject to any
laws or regulations applicable thereto, in a Place of Payment for that series
which is located outside the United States, an office or agency where Securities
of that series and related coupons may be presented and surrendered for payment;
provided, however, that if the Securities of that series are listed on the
Luxembourg Stock Exchange or any other stock exchange located outside the United
States and such stock exchange shall so require, the Company will maintain a
Paying Agent for the Securities of that series in Luxembourg or any other
required city located outside the United States, as the case may be, so long as
the Securities of that series are listed on such exchange, and (C) subject to
any laws or regulations applicable thereto, in a Place of Payment for that
series located outside the United States an office or agency where any
Registered Securities of that series may be surrendered for registration of
transfer, where Securities of that series may be surrendered for exchange, where
Securities of that series that are convertible or exchangeable may be
surrendered for conversion or exchange, as applicable and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of each such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, except that Bearer Securities of that
series and the related coupons may be presented and surrendered for payment at
the offices specified in the Security, in London, England, and the Company
hereby appoints the same as its agent to receive such respective presentations,
surrenders, notices and demands, and the Company hereby appoints the Trustee its
agent to receive all such presentations, surrenders, notices and demands.
Unless otherwise specified with respect to any Securities pursuant to
Section 301, no payment of principal, premium or interest on Bearer Securities
shall be made at any office or agency of the Company in the United States or by
check mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States; provided, however, that, if
the Securities of a series are payable in Dollars, payment of principal of (and
premium, if any) and interest, if any, on any Bearer Security shall be made at
the office of the Company's Paying Agent in the Borough of Manhattan, The City
of New York, if (but only if) payment in Dollars of the full amount of such
principal, premium or interest, as the case may be, at all offices or agencies
outside the United States maintained for such purpose by the Company in
accordance with this Indenture, is illegal or effectively precluded by exchange
controls or other similar restrictions.
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The Company may from time to time designate one or more other offices or
agencies where the Securities of one or more series may be presented or
surrendered for any or all of such purposes, and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in accordance with the requirements set forth above for Securities of
any series for such purposes. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location
of any such other office or agency. Unless otherwise specified with respect to
any Securities pursuant to Section 301 with respect to a series of Securities,
the Company hereby designates as Places of Payment for each series of Securities
the office or agency of the Company in the Borough of Manhattan, The City of New
York, and initially appoints the Trustee at its Corporate Trust Office as Paying
Agent in such city and as its agent to receive all such presentations,
surrenders, notices and demands.
SECTION 1003. Money for Securities Payments to be Held in Trust. If the
Company shall at any time act as its own Paying Agent with respect to any series
of any Securities and any related coupons, it will, on or before each due date
of the principal of (or premium, if any) or interest, if any, on any of the
Securities of that series, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum in Dollars (except as otherwise specified
pursuant to Section 301 for the Securities of such series) sufficient to pay the
principal (and premium, if any) and interest, if any, on Securities of such
series so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series
of Securities and any related coupons, it will, on or before each due date of
the principal of (or premium, if any) or interest, if any, on any Securities of
that series, deposit with a Paying Agent a sum (in Dollars, as described in the
preceding paragraph) sufficient to pay the principal (or premium, if any) or
interest, if any, so becoming due, such sum to be held in trust for the benefit
of the Persons entitled to such principal, premium or interest and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
sums.
Except as otherwise provided in the Securities of any series, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of (or premium, if any) or interest, if
any, on any Security of any series and remaining unclaimed for two years after
such principal, premium or interest has become due and payable shall be paid to
the Company upon Company Request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured
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general creditor, look only to the Company for payment of such principal,
premium or interest on any Security, without interest thereon, and all liability
of the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in an Authorized Newspaper, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 1004. Additional Amounts. If the Securities of a series provide
for the payment of Additional Amounts, the Company will pay to the Holder of a
Security of such series or any coupon appertaining thereto Additional Amounts as
may be specified as contemplated by Section 301. Whenever in this Indenture
there is mentioned, in any context, the payment of the principal of (or premium,
if any) or interest, if any, on any Security of any series or payment of any
related coupon or the net proceeds received on the sale or exchange of any
Security of any series, such mention shall be deemed to include mention of the
payment of Additional Amounts provided by the terms of such series established
pursuant to Section 301 to the extent that, in such context, Additional Amounts
are, were or would be payable in respect thereof pursuant to such terms; express
mention of the payment of Additional Amounts (if applicable) in any provisions
hereof shall not be construed as excluding Additional Amounts (where applicable)
in those provisions hereof where such express mention is not made.
Except as otherwise specified as contemplated by Section 301, if the
Securities of a series provide for the payment of Additional Amounts, at least
10 days prior to the first Interest Payment Date with respect to that series of
Securities (or if the Securities of that series will not bear interest prior to
Maturity, the first day on which a payment of principal or premium, if any, is
made), and at least 10 days prior to each date of payment of principal, premium,
if any, or interest if there has been any change with respect to the matters set
forth in the below-mentioned Officers' Certificate, the Company will furnish the
Trustee and the Company's Paying Agent or Paying Agents, if other than the
Trustee, with an Officers' Certificate instructing the Trustee and such Paying
Agent or Paying Agents whether such payment of principal, premium or interest on
the Securities of that series shall be made to Holders of Securities of that
series or any related coupons who are not United States persons without
withholding for or on account of any tax, assessment or other governmental
charge described in the Securities of the series. If any such withholding shall
be required, then such Officers' Certificate shall specify by country the
amount, if any, required to be withheld on such payments to such Holders of
Securities of that series or related coupons and the Company will pay to the
Trustee or such Paying Agent the Additional Amounts required by the terms of
such Securities. In the event that the Trustee or any Paying Agent, as the case
may be, shall not so receive the above-mentioned certificate, then the Trustee
or such Paying Agent shall be entitled (i) to assume that no such withholding or
deduction is required with respect to any payment of principal, premium, if any,
or interest with respect to any Securities of a series or related coupons until
it shall have received a certificate advising otherwise and (ii) to make all
payments of principal and interest with respect to the Securities of a series or
related coupons without withholding or deductions until otherwise
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advised. The Company agrees to indemnify the Trustee and any Paying Agent for,
and to hold them harmless against, any loss, liability or expense reasonably
incurred without negligence or bad faith on their part arising out of or in
connection with actions taken or omitted by any of them in reliance on any
Officers' Certificate furnished pursuant to this Section or in reliance on the
Company's not furnishing such an Officers' Certificate.
SECTION 1005. Limitation on Liens. The Company will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon or with respect to any property or assets (real or personal, tangible
or intangible) of the Company or any of its Subsidiaries, whether now owned or
hereafter acquired, to secure any Indebtedness that is incurred, issued, assumed
or guaranteed by the Company or any of its Subsidiaries without in any such case
effectively providing, concurrently with the incurrence, issuance, assumption or
guaranty of any such Indebtedness, that the Securities shall be equally and
ratably secured with any and all such Indebtedness; provided, however, that the
foregoing restrictions shall not apply to or prevent the creation, incurrence,
assumption or existence of:
(1) Liens existing on the date of this Indenture;
(2) Liens to secure or provide for the payment of all or any part of
the purchase price of any such property or assets or the cost of
construction or improvement thereof; provided that no such Lien shall
extend to or cover any other property or assets of the Company or such
Subsidiary of the Company;
(3) Liens granted or assumed by Subsidiaries (other than Material
Subsidiaries) in connection with project financings or other Indebtedness
that is not guaranteed by or otherwise an obligation of a Material
Subsidiary;
(4) Liens on the equity interest of any Subsidiary that is not a
Material Subsidiary in connection with project financings;
(5) Liens for taxes not yet due, or Liens for taxes being contested
in good faith and by appropriate proceedings for which adequate reserves
have been established;
(6) Liens incidental to the conduct of the business of or the
ownership of property by the Company or any of its Subsidiaries which were
not incurred in connection with the borrowing of money or the obtaining of
advances of credit and which do not in the aggregate materially detract
from the value of its property or assets or materially impair the use
thereof in the operation of its business;
(7) Liens created in connection with worker's compensation,
unemployment insurance and other social security legislation;
(8) the replacement, extension or renewal (or successive
replacements, extensions or renewals), as a whole or in part, of any Lien,
or of any agreement, referred to above in clauses (1) through (7)
inclusive, or the replacement, extension or renewal (not
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exceeding the principal amount of Indebtedness secured thereby together
with any premium, interest, fee or expense payable in connection with any
such replacement, extension or renewal) of the Indebtedness secured
thereby; provided that such replacement, extension or renewal is limited
to all or a part of the same property that secured the Lien replaced,
extended or renewed (plus improvements thereon or additions or accessions
thereto); or
(9) any other Lien not excepted by the foregoing clauses (1) through
(8); provided that, immediately after the creation or assumption of such
Lien, the sum of (x) the amount of outstanding Indebtedness of the Company
and its Subsidiaries secured by all Liens created or assumed under the
provisions of this clause (9) plus (y) the Attributable Debt with respect
to all outstanding leases in connection with Sale and Leaseback
Transactions entered into pursuant to the proviso to Section 1006 shall
not exceed an amount equal to 10% of Consolidated Net Tangible Assets, as
shown on the consolidated balance sheet of the Company as of the end of
the most recent fiscal quarter for which financial statements are
available.
SECTION 1006. Limitation on Sale and Leaseback Transactions. The Company
will not, and will not permit any Subsidiary to, enter into any Sale and
Leaseback Transaction unless (i) the Company or such Subsidiary would be
entitled to create a Lien on such property or assets securing Indebtedness in an
amount equal to the Attributable Debt with respect to such transaction without
equally and ratably securing the Securities pursuant to clauses (1) through (8)
of Section 1005 or (ii) the net proceeds of such sale are at least equal to the
fair value (as determined by the Board of Directors) of such property and the
Company or such Subsidiary shall apply or cause to be applied an amount in cash
equal to the net proceeds of such sale to the retirement, within 90 days of the
effective date of any such arrangement, of Securities, of Indebtedness of the
Company which ranks senior or pari passu with the Securities or of Indebtedness
of a Subsidiary (other than Indebtedness owed to the Company or a Subsidiary or
to PSEG); provided, however, that in addition to the transactions permitted
pursuant to the foregoing clauses (i) and (ii), the Company or any Subsidiary
may enter into a Sale and Leaseback Transaction as long as the sum of (x) the
Attributable Debt with respect to such Sale and Leaseback Transaction and all
other Sale and Leaseback Transactions entered into pursuant to this proviso,
plus (y) the amount of outstanding Indebtedness secured by Liens incurred
pursuant to clause (9) of Section 1005, does not exceed an amount equal to 10%
of Consolidated Net Tangible Assets, as shown on the consolidated balance sheet
of the Company as of the end of the most recent fiscal quarter for which
financial statements are available.
SECTION 1007. Repayment of Securities Upon a Change of Control. (a) Upon a
Change of Control, Holders of the Securities of each series shall have the right
to require that the Company repay such Holder's Securities, in whole or in part,
at a Repayment Price in cash equal to a specified percentage of the principal
amount thereof established for such series plus accrued interest, if any, to the
date of repayment, in accordance with the terms set forth in subsection (b)
below and Article 13 hereof.
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(b) Within 30 days following any Change of Control, the Company shall mail
a notice to each Holder of Securities of each series (with a copy to the
Trustee) stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to repay such Holder's Securities, in
whole or in part (in not less than a minimum denomination required for the
Securities of that series), at a Repayment Price in cash equal to the
percentage of the principal amount thereof established for such series
plus accrued interest, if any, to the date of repayment (the "Change of
Control Offer");
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical
income, cash flow and capitalization of the Company after giving effect to
such Change of Control);
(3) the Repayment Date (which shall be a Business Day and be not
earlier than 45 days nor later than 60 days from the date such notice is
mailed) (the "Repayment Date");
(4) that any Security of the series not tendered for purchase will
continue to accrue interest;
(5) that interest on any Security of the series accepted for
repayment pursuant to the Change of Control Offer shall cease to accrue
after the repayment of such Security on the Repayment Date;
(6) that Holders electing to have any Security repaid pursuant to a
Change of Control Offer will be required to surrender such Security, with
the form entitled "Option to Elect Repayment" on the reverse of the
Security completed, to the Trustee at the address specified in the notice
not earlier than 45 days and not later than 30 days prior to the Repayment
Date;
(7) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day (or such shorter period as may be required by applicable law)
preceding the Repayment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
Securities the Holder delivered for repayment, and a statement that such
Holder is withdrawing its election to have such Securities repaid; and
(8) that Holders of the series that elect to have their Securities
repaid only in part will be issued new Securities of the series in a
principal amount equal to then unrepaid portion of the Securities
surrendered.
(c) Notwithstanding the foregoing, for so long as the Securities are in
the form of global Securities, the Company shall deliver to any depository
within the time periods specified above, for retransmittal to its participants,
a notice substantially to the effect specified in clauses (1) through (5) and
(7) above, which notice shall also specify the required procedures (furnished by
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such depository) for holders of interests in the global Securities to tender and
receive payment of the Repayment Price for such interests (including such
depository's "Repayment Option Procedures," to the extent applicable), all in
accordance with such depository's rules, regulations and practices.
(d) On the Repayment Date, the Company shall deposit with the Trustee
money sufficient without reinvestment to pay the Repayment Price of all
Securities of any series or portions thereof so tendered. The Trustee shall as
soon as practicable promptly mail to the Holders of the Securities so accepted
payment in an amount equal to the Repayment Price and as soon as practicable
authenticate and mail to such Holders a new Security of such series in a
principal amount equal to any unrepaid portion of the Security surrendered.
(e) The Company shall comply with Rule 14e-1 under the Exchange Act and
any other applicable laws and regulations in the event that a Change of Control
occurs and the Company is required to make a Change of Control Offer.
SECTION 1008. Statement as to Compliance. The Company will deliver to the
Trustee, within 120 days after the end of each fiscal year, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his or her knowledge of the Company's compliance with
all conditions and covenants under this Indenture. For purposes of this Section
1008, such compliance shall be determined without regard to any period of grace
or requirement of notice under this Indenture.
SECTION 1009. Waiver of Certain Covenants. The Company may omit in any
particular instance to comply with any term, provision or condition, and as
specified pursuant to Section 301(13) for Securities of any series, in any
covenants of the Company added to Article Ten pursuant to Section 301(12) or
Section 301(13) in connection with the Securities of a series, if before or
after the time for such compliance, except as otherwise contemplated in clause
(3) of Section 902 hereof, the Holders of at least a majority in principal
amount of all outstanding Securities, by Act of such Holders, waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article. Securities of any series which are
redeemable before their Stated Maturity shall be redeemable in accordance with
their terms and
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SECTION 1102. (except as otherwise specified as contemplated by Section
301 for Securities of any series) in accordance with this Article.
SECTION 1103. Election to Redeem; Notice to Trustee. The election of the
Company to redeem any Securities shall be evidenced by or pursuant to a Board
Resolution. In case of any redemption at the election of the Company of less
than all of the Securities of any series, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee in writing of such
Redemption Date and of the principal amount of Securities of such series to be
redeemed. In the case of any redemption of Securities prior to the expiration of
any restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.
SECTION 1104. Selection by Trustee of Securities to be Redeemed. If less
than all the Securities of any series issued on the same date with the same
terms are to be redeemed, the particular Securities to be redeemed shall be
selected not more than 60 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities of such series issued on such date with the same
terms not previously called for redemption, by such method as the Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to the minimum authorized denomination for Securities of that
series or any integral multiple thereof) of the principal amount of Securities
of such series of a denomination larger than the minimum authorized denomination
for Securities of that series.
The Trustee shall promptly notify the Company and the Security Registrar
(if other than itself) in writing of the Securities selected for redemption and,
in the case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Security redeemed or to be redeemed only in part, to the portion of
the principal amount of such Security which has been or is to be redeemed.
SECTION 1105. Notice of Redemption. Notice of redemption shall be given in
the manner provided in Section 106, not less than 30 days nor more than 60 days
prior to the Redemption Date, unless a shorter period is specified by the terms
of such series established pursuant to Section 301, to each Holder of Securities
to be redeemed, but failure to give such notice in the manner herein provided to
the Holder of any Security designated for redemption as a whole or in part, or
any defect in the notice to any such Holder, shall not affect the validity of
the proceedings for the redemption of any other such Security or portion
thereof.
Any notice that is mailed to the Holders of Registered Securities in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the Holder receives the notice.
All notices of redemption shall state:
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(1) the Redemption Date,
(2) the Redemption Price and accrued interest, if any, to the
Redemption Date payable as provided in Section 1106,
(3) if less than all Outstanding Securities of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amount) of the particular Security or Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice
which relates to such Security shall state that on and after the
Redemption Date, upon surrender of such Security, the Holder will receive,
without a charge, a new Security or Securities of authorized denominations
for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date, the Redemption Price and accrued
interest, if any, to the Redemption Date payable as provided in Section
1106 will become due and payable upon each such Security, or the portion
thereof, to be redeemed and, if applicable, that interest thereon shall
cease to accrue on and after said date,
(6) the Place or Places of Payment where such Securities, together
in the case of Bearer Securities with all coupons appertaining thereto, if
any, maturing after the Redemption Date, are to be surrendered for payment
of the Redemption Price and accrued interest, if any,
(7) that the redemption is for a sinking fund, if such is the case,
(8) that, unless otherwise specified in such notice, Bearer
Securities of any series, if any, surrendered for redemption must be
accompanied by all coupons maturing subsequent to the date fixed for
redemption or the amount of any such missing coupon or coupons will be
deducted from the Redemption Price, unless security or indemnity
satisfactory to the Company, the Trustee for such series and any Paying
Agent is furnished,
(9) if Bearer Securities of any series are to be redeemed and any
Registered Securities of such series are not to be redeemed, and if such
Bearer Securities may be exchanged for Registered Securities not subject
to redemption on this Redemption Date pursuant to Section 305 or
otherwise, the last date, as determined by the Company, on which such
exchanges may be made, and
(10) the CUSIP number of such Security, if any.
Notice of redemption of Securities to be redeemed shall be given by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company.
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SECTION 1106. Deposit of Redemption Price. On or prior to any Redemption
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, which it may not do in the case
of a sinking fund payment under Article Twelve, segregate and hold in trust as
provided in Section 1003) an amount of money in Dollars (except as otherwise
specified pursuant to Section 301 for the Securities of such series) sufficient
to pay on the Redemption Date the Redemption Price of, and (unless otherwise
specified pursuant to Section 301) accrued interest on, all the Securities or
portions thereof which are to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date. Notice of redemption
having been given as aforesaid, the Securities so to be redeemed shall, on the
Redemption Date, become due and payable at the Redemption Price therein
specified in Dollars (except as otherwise specified pursuant to Section 301 for
the Securities of such series) (together with accrued interest, if any, to the
Redemption Date), and from and after such date (unless the Company shall default
in the payment of the Redemption Price and accrued interest, if any) such
Securities shall if the same were interest-bearing cease to bear interest and
the coupons for such interest appertaining to any Bearer Securities so to be
redeemed, except to the extent provided below, shall be void. Upon surrender of
any such Security for redemption in accordance with said notice, together with
all coupons, if any, appertaining thereto maturing after the Redemption Date,
such Security shall be paid by the Company at the Redemption Price, together
with accrued interest, if any, to the Redemption Date; provided, however, that
installments of interest on Bearer Securities whose Stated Maturity is on or
prior to the Redemption Date shall be payable only at an office or agency
located outside the United States (except as otherwise provided in Section 1002)
and, unless otherwise specified as contemplated by Section 301, only upon
presentation and surrender of coupons for such interest; and provided further
that installments of interest on Registered Securities whose Stated Maturity is
prior to (or, if specified pursuant to Section 301, on) the Redemption Date
shall be payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 307.
If any Bearer Security surrendered for redemption shall not be accompanied
by all appurtenant coupons maturing after the Redemption Date, such Security may
be paid after deducting from the Redemption Price an amount equal to the face
amount of all such missing coupons, or the surrender of such missing coupon or
coupons may be waived by the Company and the Trustee if there be furnished to
them such security or indemnity as they may require to save each of them and any
Paying Agent harmless. If thereafter the Holder of such Security shall surrender
to the Trustee or any Paying Agent any such missing coupon in respect of which a
deduction shall have been made from the Redemption Price, such Holder shall be
entitled to receive the amount so deducted; provided, however, that interest
represented by coupons shall be payable only at an office or agency located
outside the United States (except as otherwise provided in Section 1002) and,
unless otherwise specified as contemplated by Section 301, only upon
presentation and surrender of those coupons.
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If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the Redemption Price shall, until paid, bear interest
from the Redemption Date at the rate of interest set forth in such Security or,
in the case of an Original Issue Discount Security, at the Yield to Maturity of
such Security.
SECTION 1108. Securities Redeemed in Part. Any Registered Security which
is to be redeemed only in part (pursuant to the provisions of this Article or of
Article Twelve) shall be surrendered at a Place of Payment therefor (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing) and
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge a new Registered Security or
Securities of the same series, of any authorized denomination as requested by
such Holder in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered. If a
Security for any series in global form is so surrendered, the Company shall
execute, and the Trustee shall authenticate and deliver to the depository for
such Security in global form as shall be specified in the Company Order with
respect thereto to the Trustee, without service charge, a new Security for such
series in global form in a denomination equal to and in exchange for, the
unredeemed portion of the principal of the Security in global form so
surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Securities of a
series except as otherwise specified as contemplated by Section 301 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms
of Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of such Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of any Securities of any
series, the cash amount of any mandatory sinking fund payment may be subject to
reduction as provided in Section 1202. Each sinking fund payment shall be
applied to the redemption of Securities of any series as provided for by the
terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments With Securities. The
Company may, in satisfaction of all or any part of any mandatory sinking fund
payment with respect to the Securities of a series, (1) deliver Outstanding
Securities of such series (other than any previously called for redemption)
together in the case of any Bearer Securities of such series with all unmatured
coupons appertaining thereto and (2) apply as a credit Securities of such series
which have been redeemed either at the election of the Company pursuant to the
terms of such Securities or through the application of permitted optional
sinking fund payments pursuant
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to the terms of such Securities, as provided for by the terms of such
Securities; provided that such Securities so delivered or applied as a credit
have not been previously so credited. Such Securities shall be received and
credited for such purpose by the Trustee at the applicable Redemption Price
specified in such Securities for redemption through operation of the sinking
fund and the amount of such mandatory sinking fund payment shall be reduced
accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund. Not less than 60
days prior to each sinking fund payment date for Securities of any series, the
Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing mandatory sinking fund payment for that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash in Dollars (except as otherwise specified
pursuant to Section 301 for the Securities of such series) and the portion
thereof, if any, which is to be satisfied by delivering and crediting Securities
of that series pursuant to Section 1202, and the optional amount, if any, to be
added in cash to the next ensuing mandatory sinking fund payment, and will also
deliver to the Trustee any Securities to be so delivered and credited. If such
Officers' Certificate shall specify an optional amount to be added in cash to
the next ensuing mandatory sinking fund payment, the Company shall thereupon be
obligated to pay the amount therein specified. Not less than 30 days before each
such sinking fund payment date the Trustee shall select the Securities to be
redeemed upon such sinking fund payment date in the manner specified in Section
1103 and cause notice of the redemption thereof to be given in the name of and
at the expense of the Company in the manner provided in Section 1104. Such
notice having been duly given, the redemption of such Securities shall be made
upon the terms and in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1301. Applicability of Article. Repayment of Securities of any
series before their Stated Maturity at the option of Holders thereof shall be
made in accordance with the terms of such Securities and (except as otherwise
specified by the terms of such series established pursuant to Section 301) in
accordance with this Article.
SECTION 1302. Repayment of Securities. Securities of any series subject to
repayment in whole or in part at the option of the Holders thereof will, unless
otherwise provided in the terms of such Securities, be repaid at the Repayment
Price thereof, together with interest, if any, thereon accrued to the Repayment
Date specified in or pursuant to the terms of such Securities. The Company
covenants that on or before the Repayment Date it will deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money in
Dollars (except as otherwise specified pursuant to Section 301 for the
Securities of such series) sufficient to pay the Repayment Price of, and (unless
otherwise specified pursuant to Section 301) accrued interest on, all the
Securities or portions thereof, as the case may be, to be repaid on such date.
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SECTION 1303. Exercise of Option. Securities of any series subject to
repayment at the option of the Holders thereof will contain an "Option to Elect
Repayment" form on the reverse of such Securities. To be repaid at the option of
the Holder, any Security so providing for such repayment, with the "Option to
Elect Repayment" form on the reverse of such Security duly completed by the
Holder (or by the Holder's attorney duly authorized in writing), must be
received by the Trustee at the Place of Payment therefor specified in the terms
of such Security (or at such other place or places of which the Company shall
from time to time notify the Holders of such Securities) not earlier than 45
days nor later than 30 days prior to the Repayment Date. If less than the entire
Repayment Price of such Security is to be repaid in accordance with the terms of
such Security, the portion of the Repayment Price of such Security to be repaid,
in increments of the minimum denomination for Securities of such series, and the
denomination or denominations of the Security or Securities to be issued to the
Holder for the portion of such Security surrendered that is not to be repaid,
must be specified. Any Security providing for repayment at the option of the
Holder thereof may not be repaid in part if, following such repayment, the
unpaid principal amount of such Security would be less than the minimum
authorized denomination of Securities of the series of which such Security to be
repaid is a part. Except as provided in Section 1007 and except as otherwise may
be provided by the terms of any Security providing for repayment at the option
of the Holder thereof, exercise of the repayment option by the Holder shall be
irrevocable unless waived by the Company.
SECTION 1304. When Securities Presented for Repayment Become Due and
Payable. If Securities of any series providing for repayment at the option of
the Holders thereof shall have been surrendered as provided in this Article and
as provided by or pursuant to the terms of such Securities, such Securities or
the portions thereof, as the case may be, to be repaid shall become due and
payable and shall be paid by the Company on the Repayment Date therein
specified, and on and after such Repayment Date (unless the Company shall
default in the payment of such Securities on such Repayment Date) such
Securities shall, if the same were interest-bearing, cease to bear interest and
the coupons for such interest appertaining to any Bearer Securities so to be
repaid, except to the extent provided below, shall be void. Upon surrender of
any such Security for repayment in accordance with such provisions, together
with all coupons, if any, appertaining thereto maturing after the Repayment
Date, the Repayment Price of such Security so to be repaid shall be paid by the
Company, together with accrued interest, if any, to the Repayment Date;
provided, however, that coupons whose Stated Maturity is on or prior to the
Repayment Date shall be payable only at an office or agency located outside the
United States (except as otherwise provided in Section 1002) and, unless
otherwise specified pursuant to Section 301, only upon presentation and
surrender of such coupons; and provided further that installments of interest on
Registered Securities, whose Stated Maturity is prior to (or, if specified
pursuant to Section 301, on) the Repayment Date shall be payable (but without
interest thereon, unless the Company shall default in the payment thereof) to
the Holders of such Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307.
If any Bearer Security surrendered for repayment shall not be accompanied
by all appurtenant coupons maturing after the Repayment Date, such Security may
be paid after
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deducting from the amount payable therefor as provided in Section 1302 an amount
equal to the face amount of all such missing coupons, or the surrender of such
missing coupon or coupons may be waived by the Company and the Trustee if there
be furnished to them such security or indemnity as they may require to save each
of them and any Paying Agent harmless. If thereafter the Holder of such Security
shall surrender to the Trustee or any Paying Agent any such missing coupon in
respect of which a deduction shall have been made as provided in the preceding
sentence, such Holder shall be entitled to receive the amount so deducted;
provided, however, that interest represented by coupons shall be payable only at
an office or agency located outside the United States (except as otherwise
provided in Section 1002) and, unless otherwise specified as contemplated by
Section 301, only upon presentation and surrender of those coupons.
If any Security surrendered for repayment shall not be so repaid upon
surrender thereof, the Repayment Price shall, until paid, bear interest from the
Repayment Date at the rate of interest set forth in such Security or, in the
case of an Original Issue Discount Security, at the Yield to Maturity of such
Security.
SECTION 1305. Securities Repaid in Part. Upon surrender of any Registered
Security which is to be repaid in part only, the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security, without
service charge and at the expense of the Company, a new Registered Security or
Securities of the same series, of any authorized denomination specified by the
Holder, in an aggregate principal amount equal to and in exchange for the
portion of the principal of such Security so surrendered which is not to be
repaid.
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Applicability of Article; Company's Option to Effect
Defeasance or Covenant Defeasance. If pursuant to Section 301 provision is made
for either or both of (a) defeasance of the Securities of or within a series
under Section 1402 or (b) covenant defeasance of the Securities of or within a
series under Section 1403, then the provisions of such Section or Sections, as
the case may be, together with the other provisions of this Article (with such
modifications thereto as may be specified pursuant to Section 301 with respect
to any Securities), shall be applicable to such Securities and any coupons
appertaining thereto, and the Company may at its option by Board Resolution, at
any time, with respect to such Securities and any coupons appertaining thereto,
elect to have Section 1402 (if applicable) or Section 1403 (if applicable) be
applied to such Outstanding Securities and any coupons appertaining thereto upon
compliance with the conditions set forth below in this Article.
SECTION 1402. Defeasance and Discharge. Upon the Company's exercise of the
above option applicable to this Section with respect to any Securities of or
within a series, the Company shall be deemed to have been discharged from its
obligations with respect to such Outstanding Securities and any coupons
appertaining thereto on the date the conditions set forth in Section 1404 are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance
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means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such Outstanding Securities and any coupons
appertaining thereto, which shall thereafter be deemed to be "Outstanding" only
for the purposes of Section 1405 and the other Sections of this Indenture
referred to in clauses (A) and (B) of this Section, and to have satisfied all
its other obligations under such Securities and any coupons appertaining thereto
and this Indenture insofar as such Securities and any coupons appertaining
thereto are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder: (A) the
rights of Holders of such Outstanding Securities and any coupons appertaining
thereto to receive, solely from the trust fund described in Section 1404 and as
more fully set forth in such Section, payments in respect of the principal of
(and premium, if any) and interest, if any, on such Securities and any coupons
appertaining thereto when such payments are due, (B) the Company's obligations
with respect to such Securities under Sections 305, 306, 1002 and 1003 and with
respect to the payment of Additional Amounts, if any, on such Securities as
contemplated by Section 1004, (C) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and (D) this Article. Subject to compliance
with this Article Fourteen, the Company may exercise its option under this
Section notwithstanding the prior exercise of its option under Section 1403 with
respect to such Securities and any coupons appertaining thereto.
SECTION 1403. Covenant Defeasance. Upon the Company's exercise of the
above option applicable to this Section with respect to any Securities of or
within a series, the Company shall be released from any obligations under any
covenant specified pursuant to Section 301, with respect to such Outstanding
Securities and any coupons appertaining thereto on and after the date the
conditions set forth in Section 1404 are satisfied (hereinafter, "covenant
defeasance"), and such Securities and any coupons appertaining thereto shall
thereafter be deemed to be not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with such covenant, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to such Outstanding Securities and any
coupons appertaining thereto, the Company may omit to comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such Section or such other covenant, whether directly or indirectly, by reason
of any reference elsewhere herein to any such Section or such other covenant or
by reason of reference in any such Section or such other covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 501(4) or 501(8) or
otherwise, as the case may be, but, except as specified above, the remainder of
this Indenture and such Securities and any coupons appertaining thereto shall be
unaffected thereby.
SECTION 1404. Conditions to Defeasance or Covenant Defeasance. The
following shall be the conditions to application of Section 1402 or Section 1403
to any Outstanding Securities of or within a series and any coupons appertaining
thereto:
(a) The Company shall irrevocably have deposited or caused to be deposited
with the Trustee as trust funds in trust for the purpose of making the following
payments, specifically
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pledged as security for, and dedicated solely to, the benefit of the Holders of
such Securities and any coupons appertaining thereto, (1) an amount in Dollars,
or (2) Government Obligations applicable to such Securities and coupons
appertaining thereto which, through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment of principal of (and
premium, if any) and interest, if any, on such Securities and any coupons
appertaining thereto, money in an amount, or (3) a combination thereof in an
amount, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee to pay and discharge, (i) the principal of (and premium, if any) and
interest, if any, on such Outstanding Securities and any coupons appertaining
thereto on the Stated Maturity of such principal or installment of principal or
interest and (ii) any mandatory sinking fund payments or analogous payments
applicable to such Outstanding Securities and any coupons appertaining thereto
on the day on which such payments are due and payable in accordance with the
terms of this Indenture and of such Securities and any coupons appertaining
thereto.
(b) Such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, this Indenture or any other
material agreement or instrument to which the Company is a party or by which it
is bound.
(c) No Default or Event of Default with respect to such Securities and any
coupons appertaining thereto shall have occurred and be continuing on the date
of such deposit or, insofar as Sections 501(6) and 501(7) are concerned, at any
time during the period ending on the 91st day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied until the
expiration of such period).
(d) In the case of an election under Section 1402, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of execution of this Indenture, there has been a
change in the applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of such
Outstanding Securities and any coupons appertaining thereto will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
had not occurred.
(e) In the case of an election under Section 1403, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders of
such Outstanding Securities and any coupons appertaining thereto will not
recognize income, gain or loss for Federal income tax purposes as a result of
such covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred.
(f) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance under Section
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1402 or the covenant defeasance under Section 1403 (as the case may be) have
been complied with and an Opinion of Counsel to the effect that either (i) as a
result of a deposit pursuant to subsection (a) above and the related exercise of
the Company's option under Section 1402 or Section 1403 (as the case may be),
registration is not required under the Investment Company Act of 1940, as
amended, by the Company, with respect to the trust funds representing such
deposit or by the trustee for such trust funds or (ii) all necessary
registrations under said Act have been effected.
(g) Notwithstanding any other provisions of this Section, such defeasance
or covenant defeasance shall be effected in compliance with any additional or
substitute terms, conditions or limitations which may be imposed on the Company
in connection therewith pursuant to Section 301.
SECTION 1405. Deposited Money and Government Obligations to be Held in
Trust; Other Miscellaneous Provisions. Subject to the provisions of the last
paragraph of Section 1003, all money and Government Obligations (or other
property as may be provided pursuant to Section 301) (including the proceeds
thereof) deposited with the Trustee pursuant to Section 1404 in respect of any
Outstanding Securities of any series and any coupons appertaining thereto shall
be held in trust and applied by the Trustee, in accordance with the provisions
of such Securities and any coupons appertaining thereto and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities and any coupons appertaining thereto of all sums due and to
become due thereon in respect of principal (and premium, if any) and interest,
if any, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Government Obligations deposited
pursuant to Section 1404 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of such Outstanding Securities and any coupons
appertaining thereto.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or Government Obligations (or other property and any proceeds therefrom)
held by it as provided in Section 1404 which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect a defeasance or
covenant defeasance, as applicable, in accordance with this Article.
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ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May be Called. If Securities of
a series are issuable as Bearer Securities, a meeting of Holders of Securities
of such series may be called at any time and from time to time pursuant to this
Article to make, give or take any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be made,
given or taken by Holders of Securities of such series.
SECTION 1502. Call, Notice and Place of Meetings. (a) The Trustee may at
any time call a meeting of Holders of Securities of any series for any purpose
specified in Section 1501, to be held at such time and at such place in the
Borough of Manhattan, The City of New York or in London as the Trustee shall
determine. Notice of every meeting of Holders of Securities of any series,
setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be given, in the manner
provided in Section 106, not less than 21 nor more than 180 days prior to the
date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board Resolution, or
the Holders of at least 10% in principal amount of the Outstanding Securities of
any series shall have requested the Trustee to call a meeting of the Holders of
Securities of such series for any purpose specified in Section 1501, by written
request setting forth in reasonable detail the action proposed to be taken at
the meeting, and the Trustee shall not have made the first publication of the
notice of such meeting within 21 days after receipt of such request or shall not
thereafter proceed to cause the meeting to be held as provided herein, then the
Company or the Holders of Securities of such series in the amount above
specified, as the case may be, may determine the time and the place in the
Borough of Manhattan, The City of New York or in London for such meeting and may
call such meeting for such purposes by giving notice thereof as provided in
subsection (a) of this Section.
SECTION 1503. Persons Entitled to Vote at Meetings. To be entitled to vote
at any meeting of Holders of Securities of any series, a Person shall be (1) a
Holder of one or more Outstanding Securities of such series, or (2) a Person
appointed by an instrument in writing as proxy for a Holder or Holders of one or
more Outstanding Securities of such series by such Holder or Holders. The only
Persons who shall be entitled to be present or to speak at any meeting of
Holders of Securities of any series shall be the Persons entitled to vote at
such meeting and their counsel, any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
SECTION 1504. Quorum; Action. The Persons entitled to vote a majority in
principal amount of the Outstanding Securities of a series shall constitute a
quorum for a meeting of Holders of Securities of such series; provided, however,
that if any action is to be taken at such meeting with respect to a consent or
waiver which this Indenture expressly provides may be given by the Holders of
not less than a specified percentage in principal amount of the Outstanding
Securities of a series, the Persons entitled to vote such specified percentage
in
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principal amount of the Outstanding Securities of such series shall constitute a
quorum. In the absence of a quorum within 30 minutes of the time appointed for
any such meeting, the meeting shall, if convened at the request of Holders of
Securities of such series, be dissolved. In any other case the meeting may be
adjourned for a period of not less than 10 days as determined by the chairman of
the meeting prior to the adjournment of such meeting. In the absence of a quorum
at any such adjourned meeting, such adjourned meeting may be further adjourned
for a period of not less than 10 days as determined by the chairman of the
meeting prior to the adjournment of such adjourned meeting. Notice of the
reconvening of any adjourned meeting shall be given as provided in Section
1502(a), except that such notice need be given only once not less than five days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of any adjourned meeting shall state expressly the percentage,
as provided above, of the principal amount of the Outstanding Securities of such
series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution presented
to a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted by the affirmative vote of the Holders of a majority
in principal amount of the Outstanding Securities of that series; provided,
however, that, except as limited by the proviso to Section 902, any resolution
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action which this Indenture expressly provides may be made,
given or taken by the Holders of a specified percentage, which is less than a
majority, in principal amount of the Outstanding Securities of a series may be
adopted at a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid by the affirmative vote of the Holders of such
specified percentage in principal amount of the Outstanding Securities of that
series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the related coupons,
whether or not present or represented at the meeting.
Notwithstanding the foregoing provisions of this Section 1504, if any
action is to be taken at a meeting of Holders of Securities of any series with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that this Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage in principal amount of all
Outstanding Securities affected thereby, or of the Holders of such series and
one or more additional series:
(i) there shall be no minimum quorum requirement for such meeting;
and
(ii) the principal amount of the Outstanding Securities of such
series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into
account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given or
taken under this Indenture.
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SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of
Meetings. (a) Notwithstanding any provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Holders of Securities of a series in regard to proof of the holding of
Securities of such series and of the appointment of proxies and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem appropriate.
Except as otherwise permitted or required by any such regulations, the
holding of Securities shall be proved in the manner specified in Section 104 and
the appointment of any proxy shall be proved in the manner specified in Section
104 or by having the signature of the Person executing the proxy witnessed or
guaranteed by any trust company, bank or banker authorized by Section 104 to
certify to the holding of Bearer Securities. Such regulations may provide that
written instruments appointing proxies, regular on their face, may be presumed
valid and genuine without the proof specified in Section 104 or other proof.
(b) The Trustee shall, by an instrument in writing appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders of Securities as provided in Section 1502(b), in which
case the Company or the Holders of Securities of the series calling the meeting,
as the case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or proxy shall
be entitled to one vote for each $1,000 principal amount of the Outstanding
Securities of such series held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Security
challenged as not Outstanding and ruled by the chairman of the meeting to be not
Outstanding. The chairman of the meeting shall have no right to vote, except as
a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1502 at which a quorum is present may be adjourned from time
to time by Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting, and the
meeting may be held as so adjourned without further notice.
SECTION 1506. Counting Votes and Recording Action of Meetings. The vote
upon any resolution submitted to any meeting of Holders of Securities of any
series shall be by written ballots on which shall be subscribed the signatures
of the Holders of Securities of such series or of their representatives by proxy
and the principal amounts and serial numbers of the Outstanding Securities of
such series held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record, at least in duplicate, of the proceedings
of each meeting of Holders of Securities of any Series shall be
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prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
fact, setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 1502 and, if applicable, Section 1504.
Each copy shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one such copy shall be delivered to
the Company and another to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.
* * * * * *
This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
PSEG ENERGY HOLDINGS INC.
By: /s/ Bruce E. Walenczyk
----------------------------------
Name: Bruce E. Walenczyk
Title: Vice President-Finance
FIRST UNION NATIONAL BANK,
as Trustee
By: /s/ Melissa Matthews
----------------------------------
Vice President
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EXHIBIT A
FORMS OF CERTIFICATION
EXHIBIT A-1
FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED
TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST
PAYABLE PRIOR TO THE EXCHANGE DATE
CERTIFICATE
[Insert title or sufficient description of Securities
to be delivered]
This is to certify that, as of the date hereof, and except as set forth
below, the above-captioned Securities held by you for our account (i) are owned
by person(s) that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States federal income taxation regardless of its source
("United States person(s)"), (ii) are owned by United States person(s) that are
(a) foreign branches of United States financial institutions (financial
institutions, as defined in United States Treasury Regulations Section
1.165-12(c)(1)(v) are herein referred to as "financial institutions") purchasing
for their own account or for resale, or (b) United States person(s) who acquired
the Securities through foreign branches of United States financial institutions
and who hold the Securities through such United States financial institutions on
the date hereof (and in either case (a) or (b), each such United States
financial institution hereby agrees, on its own behalf or through its agent,
that you may advise PSEG Energy Holdings Inc. or its agent that such financial
institution will comply with the requirements of Section 165(j)(3)(A), (B) or
(C) of the United States Internal Revenue Code of 1986, as amended, and the
regulations thereunder), or (iii) are owned by United States or foreign
financial institution(s) for purposes of resale during the restricted period (as
defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)),
and, in addition, if the owner is a United States or foreign financial
institution described in clause (iii) above (whether or not also described in
clause (i) or (ii)), this is to further certify that such financial institution
has not acquired the Securities for purposes of resale directly or indirectly to
a United States person or to a person within the United States or its
possessions.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
A-1-1
<PAGE>
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the
above-captioned Securities held by you for our account in accordance with your
Operating Procedures if any applicable statement herein is not correct on such
date, and in the absence of any such notification it may be assumed that this
certification applies as of such date.
This certificate excepts and does not relate to [U.S.$] ____________of
such interest in the above-captioned Securities in respect of which we are not
able to certify and as to which we understand an exchange for an interest in a
Permanent Global Security or an exchange for and delivery of definitive
Securities (or, if relevant, collection of any interest) cannot be made until we
do so certify.
We understand that this certificate may be required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Dated: ________________, 19__
[To be dated no earlier than the 15th day prior to (i) the Exchange Date or (ii)
the relevant Interest Payment Date occurring prior to the Exchange Date, as
applicable]
[Name of Person Making Certification]
-------------------------------------
(Authorized Signatory)
Name:
Title:
A-1-2
<PAGE>
EXHIBIT A-2
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR AND
CEDEL BANK IN CONNECTION WITH THE EXCHANGE OF
A PORTION OF A TEMPORARY GLOBAL SECURITY
OR TO OBTAIN INTEREST PAYABLE PRIOR
TO THE EXCHANGE DATE
CERTIFICATE
[Insert title or sufficient description of Securities
to be delivered]
This is to certify that, based solely on written certifications that we
have received in writing, by tested telex or by electronic transmission from
each of the persons appearing in our records as persons entitled to a portion of
the principal amount set forth below (our "Member Organizations") substantially
in the form attached hereto, as of the date hereof, [U.S.$] ______________
principal amount of the above-captioned Securities (i) is owned by person(s)
that are not citizens or residents of the United States, domestic partnerships,
domestic corporations or any estate or trust the income of which is subject to
United States Federal income taxation regardless of its source ("United States
person(s)"), (ii) is owned by United States person(s) that are (a) foreign
branches of United States financial institutions (financial institutions, as
defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v) are herein
referred to as "financial institutions") purchasing for their own account or for
resale, or (b) United States person(s) who acquired the Securities through
foreign branches of United States financial institutions and who hold the
Securities through such United States financial institutions on the date hereof
(and in either case (a) or (b), each such financial institution has agreed, on
its own behalf or through its agent, that we may advise PSEG Energy Holdings
Inc. or its agent that such financial institution will comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder), or (iii) is owned by United
States or foreign financial institution(s) for purposes of resale during the
restricted period (as defined in United States Treasury Regulations Section
1.163-5(c)(2)(i)(D)(7)), and, to the further effect, that financial institutions
described in clause (iii) above (whether or not also described in clause (i) or
(ii)) have certified that they have not acquired the Securities for purposes of
resale directly or indirectly to a United States person or to a person within
the United States or its possessions.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
A-2-1
<PAGE>
We further certify that (i) we are not making available herewith for
exchange (or, if relevant, collection of any interest) any portion of the
temporary global Security representing the above-captioned Securities excepted
in the above-referenced certificates of Member Organizations and (ii) as of the
date hereof we have not received any notification from any of our Member
Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the part submitted herewith for
exchange (or, if relevant, collection of any interest) are no longer true and
cannot be relied upon as of the date hereof.
We understand that this certification is required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Dated: _______________, 19__
[To be dated no earlier than the Exchange Date or the relevant Interest Payment
Date occurring prior to the Exchange Date, as applicable]
[Morgan Guaranty Trust Company of New
York, Brussels Office,] as Operator
of the Euroclear System
[Cedelbank]
By___________________________
A-2-2
EXHIBIT 4.2
PSEG Energy Holdings Inc.
10% Senior Notes due 2009
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Exchange and Registration Rights Agreement
October 8, 1999
Goldman, Sachs & Co.
Banc of America Securities LLC
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
PSEG Energy Holdings Inc., a New Jersey corporation (the "Company"),
proposes to issue and sell to the Purchasers (as defined herein) upon the terms
set forth in the Purchase Agreement (as defined herein) its 10% Senior Notes due
2009. As an inducement to the Purchasers to enter into the Purchase Agreement
and in satisfaction of a condition to the obligations of the Purchasers
thereunder, the Company agrees with the Purchasers for the benefit of holders
(as defined herein) from time to time of the Registrable Securities (as defined
herein) as follows:
1. Certain Definitions. For purposes of this Exchange and Registration
Rights Agreement, the following terms shall have the following respective
meanings:
"Base Interest" shall mean the interest that would otherwise accrue on the
Securities under the terms thereof and the Indenture, without giving effect
to the provisions of this Agreement.
The term "broker-dealer" shall mean any broker or dealer registered with
the Commission under the Exchange Act.
"Closing Date" shall mean the date on which the Securities are
initially issued.
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"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for the
particular purpose.
"Effective Time," in the case of (i) an Exchange Registration, shall mean
the time and date as of which the Commission declares the Exchange
Registration Statement effective or as of which the Exchange Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall
mean the time and date as of which the Commission declares the Shelf
Registration Statement effective or as of which the Shelf Registration
Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Securities that has
returned a completed and signed Notice and Questionnaire to the Company in
accordance with Section 3(d)(ii) or 3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
"Exchange Offer" shall have the meaning assigned thereto in Section 2(a)
hereof.
"Exchange Registration" shall have the meaning assigned thereto in Section
3(c) hereof.
"Exchange Registration Statement" shall have the meaning assigned thereto
in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto in Section
2(a) hereof.
The term "holder" shall mean each of the Purchasers and other persons who
acquire Registrable Securities from time to time (including any successors or
assigns), in each case for so long as such person owns any Registrable
Securities.
"Indenture" shall mean the Indenture, dated as of o, 1999, between the
Company and First Union National Bank, as Trustee, as the same shall be
amended from time to time.
"Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Exhibit A
hereto.
The term "person" shall mean a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
[date], between the Purchasers and the Company relating to the Securities.
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"Purchasers" shall mean the Purchasers named in Schedule I to the
Purchase Agreement.
"Registrable Securities" shall mean the Securities; provided, however,
that a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, the Security has been
exchanged for an Exchange Security in an Exchange Offer as contemplated in
Section 2(a) hereof (provided that any Exchange Security that, pursuant to
the last two sentences of Section 2(a), is included in a prospectus for use
in connection with resales by broker-dealers shall be deemed to be a
Registrable Security with respect to Sections 5, 6 and 9 until resale of such
Registrable Security has been effected within the 180-day period referred to
in Section 2(a)); (ii) in the circumstances contemplated by Section 2(b)
hereof, a Shelf Registration Statement registering such Security under the
Securities Act has been declared or becomes effective and such Security has
been sold or otherwise transferred by the holder thereof pursuant to and in a
manner contemplated by such effective Shelf Registration Statement; (iii)
such Security is sold pursuant to Rule 144 under circumstances in which any
legend borne by such Security relating to restrictions on transferability
thereof, under the Securities Act or otherwise, is removed by the Company or
pursuant to the Indenture; (iv) such Security is eligible to be sold pursuant
to paragraph (k) of Rule 144; or (v) such Security shall cease to be
outstanding.
"Registration Default" shall have the meaning assigned thereto in Section
2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in Section
4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section 2(a)
hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of the
Company within the meaning of Rule 405, (ii) a holder who acquires Exchange
Securities outside the ordinary course of such holder's business, (iii) a
holder who has arrangements or understandings with any person to participate
in the Exchange Offer for the purpose of distributing Exchange Securities and
(iv) a holder that is a broker-dealer, but only with respect to Exchange
Securities received by such broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Securities acquired by the broker-dealer directly
from the Company.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such rule
promulgated under the Securities Act (or any successor provision), as the
same shall be amended from time to time.
"Securities" shall mean, collectively, the 10% Senior Notes due 2009 of
the Company to be issued and sold to the Purchasers, and securities issued in
exchange therefor or in lieu thereof pursuant to the Indenture.
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"Securities Act" shall mean the Securities Act of 1933, or any successor
thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in Section
2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in Section 2(c)
hereof.
"Subsidiary" shall mean a "significant subsidiary" as such term is defined
in Rule 1-02 of Regulation S-X.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or any
successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause, as the case may be, of this Exchange
and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Exchange and
Registration Rights Agreement as a whole and not to any particular Section or
other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to file
under the Securities Act, as soon as practicable, but no later than 240 days
after the Closing Date, a registration statement relating to an offer to
exchange (such registration statement, the "Exchange Registration Statement",
and such offer, the "Exchange Offer") any and all of the Securities for a like
aggregate principal amount of debt securities issued by the Company, which debt
securities are substantially identical to the Securities (and are entitled to
the benefits of a trust indenture which is substantially identical to the
Indenture or is the Indenture and which has been qualified under the Trust
Indenture Act), except that they have been registered pursuant to an effective
registration statement under the Securities Act and do not contain provisions
for the additional interest contemplated in Section 2(c) below (such new debt
securities hereinafter called "Exchange Securities"). The Company agrees to use
its reasonable best efforts to cause the Exchange Registration Statement to
become effective under the Securities Act as soon as practicable, but no later
than 270 days after the Closing Date. The Exchange Offer will be registered
under the Securities Act on the appropriate form and will comply with all
applicable tender offer rules and regulations under the Exchange Act. The
Company further agrees to use its best efforts to commence and complete the
Exchange Offer promptly, but no later than 45 days after such registration
statement has become effective, hold the Exchange Offer open for at least 30
days and exchange Exchange Securities for all Registrable Securities that have
been properly tendered and not withdrawn on or prior to the expiration of the
Exchange Offer. The
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Exchange Offer will be deemed to have been "completed" only if the debt
securities received by holders other than Restricted Holders in the Exchange
Offer for Registrable Securities are, upon receipt, transferable by each such
holder without restriction under the Securities Act and the Exchange Act and
without material restrictions under the blue sky or securities laws of a
substantial majority of the States of the United States of America. The Exchange
Offer shall be deemed to have been completed upon the earlier to occur of (i)
the Company having exchanged the Exchange Securities for all outstanding
Registrable Securities pursuant to the Exchange Offer and (ii) the Company
having exchanged, pursuant to the Exchange Offer, Exchange Securities for all
Registrable Securities that have been properly tendered and not withdrawn before
the expiration of the Exchange Offer, which shall be on a date that is at least
30 days following the commencement of the Exchange Offer. The Company agrees (x)
to include in the Exchange Registration Statement a prospectus for use in any
resales by any holder of Exchange Securities that is a broker-dealer and (y) to
keep such Exchange Registration Statement effective for a period (the "Resale
Period") beginning when Exchange Securities are first issued in the Exchange
Offer and ending upon the earlier of the expiration of the 180th day after the
Exchange Offer has been completed or such time as such broker-dealers no longer
own any Registrable Securities. With respect to such Exchange Registration
Statement, such holders shall have the benefit of the rights of indemnification
and contribution set forth in Sections 6(a), (c), (d) and (e) hereof.
(b) If (i) on or prior to the time the Exchange Offer is completed
existing Commission interpretations are changed such that the debt securities
received by holders other than Restricted Holders in the Exchange Offer for
Registrable Securities are not or would not be, upon receipt, transferable by
each such holder without restriction under the Securities Act, (ii) the Exchange
Offer has not been completed within 315 days following the Closing Date or (iii)
the Exchange Offer is not available to any holder of the Securities, the Company
shall, in lieu of (or, in the case of clause (iii), in addition to) conducting
the Exchange Offer contemplated by Section 2(a), file under the Securities Act
as soon as practicable, but no later than the later of 30 days after the time
such obligation to file arises, a "shelf" registration statement providing for
the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities, pursuant to Rule 415 or any
similar rule that may be adopted by the Commission (such filing, the "Shelf
Registration" and such registration statement, the "Shelf Registration
Statement"). The Company agrees to use its reasonable best efforts (x) to cause
the Shelf Registration Statement to become or be declared effective no later
than 30 days after such Shelf Registration Statement is filed and to keep such
Shelf Registration Statement continuously effective for a period ending on the
earlier of the second anniversary of the Effective Time or such time as there
are no longer any Registrable Securities outstanding, provided, however, that no
holder shall be entitled to be named as a selling securityholder in the Shelf
Registration Statement or to use the prospectus forming a part thereof for
resales of Registrable Securities unless such holder is an Electing Holder, and
(y) after the Effective Time of the Shelf Registration Statement, promptly upon
the request of any holder of Registrable Securities that is not then an Electing
Holder, to take any action reasonably necessary to enable such holder to use the
prospectus forming a part thereof for resales of Registrable Securities,
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including, without limitation, any action necessary to identify such holder as a
selling securityholder in the Shelf Registration Statement, provided, however,
that nothing in this Clause (y) shall relieve any such holder of the obligation
to return a completed and signed Notice and Questionnaire to the Company in
accordance with Section 3(d)(iii) hereof. The Company further agrees to
supplement or make amendments to the Shelf Registration Statement, as and when
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Securities Act or rules and regulations thereunder for shelf
registration, and the Company agrees to furnish to each Electing Holder copies
of any such supplement or amendment prior to its being used or promptly
following its filing with the Commission.
(c) In the event that (i) the Company has not filed the Exchange
Registration Statement or Shelf Registration Statement on or before the date on
which such registration statement is required to be filed pursuant to Section
2(a) or 2(b), respectively, or (ii) such Exchange Registration Statement or
Shelf Registration Statement has not become effective or been declared effective
by the Commission on or before the date on which such registration statement is
required to become or be declared effective pursuant to Section 2(a) or 2(b),
respectively, or (iii) the Exchange Offer has not been completed within 45 days
after the initial effective date of the Exchange Registration Statement relating
to the Exchange Offer (if the Exchange Offer is then required to be made) or
(iv) any Exchange Registration Statement or Shelf Registration Statement
required by Section 2(a) or 2(b) hereof is filed and declared effective but
shall thereafter either be withdrawn by the Company or shall become subject to
an effective stop order issued pursuant to Section 8(d) of the Securities Act
suspending the effectiveness of such registration statement (except as
specifically permitted herein) without being succeeded immediately by an
additional registration statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default" and each
period during which a Registration Default has occurred and is continuing, a
"Registration Default Period"), then, as liquidated damages for such
Registration Default, subject to the provisions of Section 9(b), special
interest ("Special Interest"), in addition to the Base Interest, shall accrue at
a per annum rate of 0.25% for the first 90 days of the Registration Default
Period, at a per annum rate of 0.50% for the second 90 days of the Registration
Default Period, at a per annum rate of 0.75% for the third 90 days of the
Registration Default Period and at a per annum rate of 1.0% thereafter for the
remaining portion of the Registration Default Period.
(d) The Company shall take all actions necessary or advisable to be taken
by it to ensure that the transactions contemplated herein are effected as so
contemplated.
(e) Any reference herein to a registration statement as of any time shall
be deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time and any reference herein to any
post-effective amendment to a registration statement as of any time shall be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
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3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Registration or the
Shelf Registration, as the case may be, the Company shall qualify the Indenture
under the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment of
a new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but
no later than 240 days after the Closing Date, an Exchange Registration
Statement on any form which may be utilized by the Company and which shall
permit the Exchange Offer and resales of Exchange Securities by
broker-dealers during the Resale Period to be effected as contemplated by
Section 2(a), and use its reasonable best efforts to cause such Exchange
Registration Statement to become effective as soon as practicable
thereafter, but no later than 270 days after the Closing Date;
(ii) as soon as practicable prepare and file with the Commission
such amendments and supplements to such Exchange Registration Statement
and the prospectus included therein as may be necessary to effect and
maintain the effectiveness of such Exchange Registration Statement for the
periods and purposes contemplated in Section 2(a) hereof and as may be
required by the applicable rules and regulations of the Commission and the
instructions applicable to the form of such Exchange Registration
Statement, and promptly provide each broker-dealer holding Exchange
Securities with such number of copies of the prospectus included therein
(as then amended or supplemented), in conformity in all material respects
with the requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder, as such
broker-dealer reasonably may request prior to the expiration of the Resale
Period, for use in connection with resales of Exchange Securities;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such registration statement,
and confirm such advice in writing, (A) when such Exchange Registration
Statement or the prospectus included therein or any prospectus amendment
or supplement or post-effective amendment has been filed, and, with
respect to such Exchange Registration Statement or any post-effective
amendment, when the same has become effective, (B) of any comments by the
Commission and by the blue sky
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or securities commissioner or regulator of any state with respect thereto
or any request by the Commission for amendments or supplements to such
Exchange Registration Statement or prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such Exchange Registration Statement or
the initiation or threatening of any proceedings for that purpose, (D) if
at any time the representations and warranties of the Company contemplated
by Section 5 cease to be true and correct in all material respects, (E) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, or (F) at any time during the Resale Period when a prospectus is
required to be delivered under the Securities Act, that such Exchange
Registration Statement, prospectus, prospectus amendment or supplement or
post-effective amendment does not conform in all material respects to the
applicable requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder or contains an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(iv) in the event that the Company would be required, pursuant to
Section 3(c)(iii)(F) above, to notify any broker-dealers holding Exchange
Securities, without delay prepare and furnish to each such holder a
reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of such Exchange Securities
during the Resale Period, such prospectus shall conform in all material
respects to the applicable requirements of the Securities Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder and shall not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances then existing;
(v) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such Exchange Registration Statement or
any post-effective amendment thereto at the earliest practicable date;
(vi) use its reasonable best efforts to (A) register or qualify the
Exchange Securities under the securities laws or blue sky laws of such
jurisdictions as are contemplated by Section 2(a) no later than the
commencement of the Exchange Offer, (B) keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers, sales and dealings therein in such jurisdictions
until the expiration of the Resale Period and (C) take any and all other
actions as may be reasonably necessary or advisable to enable each
broker-dealer holding Exchange Securities to consummate the disposition
thereof in such jurisdictions; provided, however, that the Company shall
not be required for any such purpose to (1) qualify as a foreign
corporation in any jurisdiction wherein it would not otherwise be required
to qualify but for the
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requirements of this Section 3(c)(vi), (2) consent to general service of
process in any such jurisdiction or (3) make any changes to its
certificate of incorporation or by-laws or any agreement between it and
its stockholders;
(vii) use its reasonable best efforts to obtain the consent or
approval of each governmental agency or authority, whether federal, state
or local, which may be required to effect the Exchange Registration, the
Exchange Offer and the offering and sale of Exchange Securities by
broker-dealers during the Resale Period;
(viii)provide a CUSIP number for all Exchange Securities, not later
than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but no later than eighteen months after the effective date of
such Exchange Registration Statement, an earning statement of the Company
and its subsidiaries complying with Section 11(a) of the Securities Act
(including, at the option of the Company, Rule 158 thereunder).
(d) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall, as soon as practicable (or as
otherwise specified):
(i) prepare and file with the Commission, as soon as practicable but
in any case within the time periods specified in Section 2(b), a Shelf
Registration Statement on any form which may be utilized by the Company
and which shall register all of the Registrable Securities for resale by
the holders thereof in accordance with such method or methods of
disposition as may be specified by such of the holders as, from time to
time, may be Electing Holders and use its best efforts to cause such Shelf
Registration Statement to become effective as soon as practicable but in
any case within the time periods specified in Section 2(b);
(ii) not less than 30 calendar days prior to the Effective Time of
the Shelf Registration Statement, mail the Notice and Questionnaire to the
holders of Registrable Securities; no holder shall be entitled to be named
as a selling securityholder in the Shelf Registration Statement as of the
Effective Time, and no holder shall be entitled to use the prospectus
forming a part thereof for resales of Registrable Securities at any time,
unless such holder has returned a completed and signed Notice and
Questionnaire to the Company by the deadline for response set forth
therein; provided, however, holders of Registrable Securities shall have
at least 28 calendar days from the date on which the Notice and
Questionnaire is first mailed to such holders to return a completed and
signed Notice and Questionnaire to the Company;
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(iii) after the Effective Time of the Shelf Registration Statement,
upon the request of any holder of Registrable Securities that is not then
an Electing Holder, promptly send a Notice and Questionnaire to such
holder; provided that the Company shall not be required to take any action
to name such holder as a selling securityholder in the Shelf Registration
Statement or to enable such holder to use the prospectus forming a part
thereof for resales of Registrable Securities until such holder has
returned a completed and signed Notice and Questionnaire to the Company;
(iv) as soon as practicable prepare and file with the Commission
such amendments and supplements to such Shelf Registration Statement and
the prospectus included therein as may be necessary to effect and maintain
the effectiveness of such Shelf Registration Statement for the period
specified in Section 2(b) hereof and as may be required by the applicable
rules and regulations of the Commission and the instructions applicable to
the form of such Shelf Registration Statement, and furnish to the Electing
Holders copies of any such supplement or amendment simultaneously with or
prior to its being used or filed with the Commission;
(v) comply with the provisions of the Securities Act with respect to
the disposition of all of the Registrable Securities covered by such Shelf
Registration Statement in accordance with the intended methods of
disposition by the Electing Holders provided for in such Shelf
Registration Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters (which
term, for purposes of this Exchange and Registration Rights Agreement,
shall include a person deemed to be an underwriter within the meaning of
Section 2(a)(11) of the Securities Act), if any, thereof, (C) any sales or
placement agent therefor, (D) counsel for any such underwriter or agent
and (E) not more than one counsel for all the Electing Holders the
opportunity to participate in the preparation of such Shelf Registration
Statement, each prospectus included therein or filed with the Commission
and each amendment or supplement thereto;
(vii) for a reasonable period prior to the filing of such Shelf
Registration Statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Company's principal place
of business or such other reasonable place for inspection by the persons
referred to in Section 3(d)(vi) who shall certify to the Company that they
have a current intention to sell the Registrable Securities pursuant to
the Shelf Registration such financial and other information and books and
records of the Company, and cause the officers, employees, counsel and
independent certified public accountants of the Company to respond to such
inquiries, as shall be reasonably necessary, in the judgment of the
respective counsel referred to in such Section, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that each such party shall be required to maintain in
confidence and not to disclose to any other person any information or
records reasonably designated by the Company as being confidential, until
such time as
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(A) such information becomes a matter of public record (whether by virtue
of its inclusion in such registration statement or otherwise), or (B) such
person shall be required so to disclose such information pursuant to a
subpoena or order of any court or other governmental agency or body having
jurisdiction over the matter (subject to the requirements of such order,
and only after such person shall have given the Company prompt prior
written notice of such requirement), or (C) such information is required
to be set forth in such Shelf Registration Statement or the prospectus
included therein or in an amendment to such Shelf Registration Statement
or an amendment or supplement to such prospectus in order that such Shelf
Registration Statement, prospectus, amendment or supplement, as the case
may be, complies with applicable requirements of the federal securities
laws and the rules and regulations of the Commission and does not contain
an untrue statement of a material fact or omit to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(viii)promptly notify each of the Electing Holders, any sales or
placement agent therefor and any underwriter thereof (which notification
may be made through any managing underwriter that is a representative of
such underwriter for such purpose) and confirm such advice in writing, (A)
when such Shelf Registration Statement or the prospectus included therein
or any prospectus amendment or supplement or post-effective amendment has
been filed, and, with respect to such Shelf Registration Statement or any
post-effective amendment, when the same has become effective, (B) of any
comments by the Commission and by the blue sky or securities commissioner
or regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such Shelf Registration
Statement or prospectus or for additional information, (C) of the issuance
by the Commission of any stop order suspending the effectiveness of such
Shelf Registration Statement or the initiation or threatening of any
proceedings for that purpose, (D) if at any time the representations and
warranties of the Company contemplated by Section 3(d)(xvii) or Section 5
cease to be true and correct in all material respects, (E) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose, or
(F) if at any time when a prospectus is required to be delivered under the
Securities Act, that such Shelf Registration Statement, prospectus,
prospectus amendment or supplement or post-effective amendment does not
conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations
of the Commission thereunder or contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(ix) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
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(x) if requested by any managing underwriter or underwriters, any
placement or sales agent or any Electing Holder, promptly incorporate in a
prospectus supplement or post-effective amendment such information as is
required by the applicable rules and regulations of the Commission and as
such managing underwriter or underwriters, such agent or such Electing
Holder specifies should be included therein relating to the terms of the
sale of such Registrable Securities, including information with respect to
the principal amount of Registrable Securities being sold by such Electing
Holder or agent or to any underwriters, the name and description of such
Electing Holder, agent or underwriter, the offering price of such
Registrable Securities and any discount, commission or other compensation
payable in respect thereof, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the offering of the
Registrable Securities to be sold by such Electing Holder or agent or to
such underwriters; and make all required filings of such prospectus
supplement or post-effective amendment promptly after notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment;
(xi) furnish to each Electing Holder, each placement or sales agent,
if any, therefor, each underwriter, if any, thereof and the respective
counsel referred to in Section 3(d)(vi) an executed copy (or, in the case
of an Electing Holder, a conformed copy) of such Shelf Registration
Statement, each such amendment and supplement thereto (in each case
including all exhibits thereto (in the case of an Electing Holder of
Registrable Securities, upon request) and documents incorporated by
reference therein) and such number of copies of such Shelf Registration
Statement (excluding exhibits thereto and documents incorporated by
reference therein unless specifically so requested by such Electing
Holder, agent or underwriter, as the case may be) and of the prospectus
included in such Shelf Registration Statement (including each preliminary
prospectus and any summary prospectus), in conformity in all material
respects with the applicable requirements of the Securities Act and the
Trust Indenture Act and the rules and regulations of the Commission
thereunder, and such other documents, as such Electing Holder, agent, if
any, and underwriter, if any, may reasonably request in order to
facilitate the offering and disposition of the Registrable Securities
owned by such Electing Holder, offered or sold by such agent or
underwritten by such underwriter and to permit such Electing Holder, agent
and underwriter to satisfy the prospectus delivery requirements of the
Securities Act; and the Company hereby consents to the use of such
prospectus (including such preliminary and summary prospectus) and any
amendment or supplement thereto by each such Electing Holder and by any
such agent and underwriter, in each case in the form most recently
provided to such person by the Company, in connection with the offering
and sale of the Registrable Securities covered by the prospectus
(including such preliminary and summary prospectus) or any supplement or
amendment thereto;
(xii) use reasonable best efforts to (A) register or qualify the
Registrable Securities to be included in such Shelf Registration Statement
under such
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securities laws or blue sky laws of such jurisdictions as any Electing
Holder and each placement or sales agent, if any, therefor and
underwriter, if any, thereof shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the period the Shelf Registration is required to
remain effective under Section 2(b) above and for so long as may be
necessary to enable any such Electing Holder, agent or underwriter to
complete its distribution of Securities pursuant to such Shelf
Registration Statement and (C) take any and all other actions as may be
reasonably necessary or advisable to enable each such Electing Holder,
agent, if any, and underwriter, if any, to consummate the disposition in
such jurisdictions of such Registrable Securities; provided, however, that
the Company shall not be required for any such purpose to (1) qualify as a
foreign corporation in any jurisdiction wherein it would not otherwise be
required to qualify but for the requirements of this Section 3(d)(xii),
(2) consent to general service of process in any such jurisdiction or (3)
make any changes to its certificate of incorporation or by-laws or any
agreement between it and its stockholders;
(xiii)use its reasonable best efforts to obtain the consent or
approval of each governmental agency or authority, whether federal, state
or local, which may be required to effect the Shelf Registration or the
offering or sale in connection therewith or to enable the selling holder
or holders to offer, or to consummate the disposition of, their
Registrable Securities;
(xiv) unless any Registrable Securities shall be in book-entry only
form, cooperate with the Electing Holders and the managing underwriters,
if any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates, if so
required by any securities exchange upon which any Registrable Securities
are listed, shall be penned, lithographed or engraved, or produced by any
combination of such methods, on steel engraved borders, and which
certificates shall not bear any restrictive legends; and, in the case of
an underwritten offering, enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters
may request at least two business days prior to any sale of the
Registrable Securities;
(xv) provide a CUSIP number for all Registrable Securities, not
later than the applicable Effective Time;
(xvi) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions
relating to indemnification and contribution, and take such other actions
in connection therewith as any Electing Holders aggregating at least 20%
in aggregate principal amount of the Registrable Securities at the time
outstanding shall request in order to expedite or facilitate the
disposition of such Registrable Securities;
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(xvii)whether or not an agreement of the type referred to in Section
3(d)(xvi) hereof is entered into and whether or not any portion of the
offering contemplated by the Shelf Registration is an underwritten
offering or is made through a placement or sales agent or any other
entity, (A) make such representations and warranties to the Electing
Holders and the placement or sales agent, if any, therefor and the
underwriters, if any, thereof in form, substance and scope as are
customarily made in connection with an offering of debt securities
pursuant to any appropriate agreement or to a registration statement filed
on the form applicable to the Shelf Registration; (B) obtain an opinion of
counsel to the Company in customary form and covering such matters, of the
type customarily covered by such an opinion, as the managing underwriters,
if any, or as any Electing Holders of at least 20% in aggregate principal
amount of the Registrable Securities at the time outstanding may
reasonably request, addressed to such Electing Holder or Electing Holders
and the placement or sales agent, if any, therefor and the underwriters,
if any, thereof and dated the effective date of such Shelf Registration
Statement (and if such Shelf Registration Statement contemplates an
underwritten offering of a part or all of the Registrable Securities,
dated the date of the closing under the underwriting agreement relating
thereto) (it being agreed that the matters to be covered by such opinion
shall include the due incorporation and good standing of the Company and
its Subsidiaries; the qualification of the Company and its Subsidiaries to
transact business as foreign corporations; the due authorization,
execution and delivery of the relevant agreement of the type referred to
in Section 3(d)(xvi) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
Securities; the absence of material legal or governmental proceedings
involving the Company; the absence of a breach by the Company or any of
its Subsidiaries of, or a default under, material agreements binding upon
the Company or any Subsidiary of the Company; the absence of governmental
approvals required to be obtained in connection with the Shelf
Registration, the offering and sale of the Registrable Securities, this
Exchange and Registration Rights Agreement or any agreement of the type
referred to in Section 3(d)(xvi) hereof, except such approvals as may be
required under state securities or blue sky laws; the material compliance
as to form of such Shelf Registration Statement and any documents
incorporated by reference therein and of the Indenture with the
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, respectively; and, as
of the date of the opinion and of the Shelf Registration Statement or most
recent post-effective amendment thereto, as the case may be, the absence
from such Shelf Registration Statement and the prospectus included
therein, as then amended or supplemented, and from the documents
incorporated by reference therein (in each case other than the financial
statements and other financial information contained therein) of an untrue
statement of a material fact or the omission to state therein a material
fact necessary to make the statements therein not misleading (in the case
of such documents, in the light of the circumstances existing at the time
that such documents were filed with the Commission under the Exchange
Act)); (C) obtain a "cold comfort" letter or
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letters from the independent certified public accountants of the Company
addressed to the selling Electing Holders, the placement or sales agent,
if any, therefor or the underwriters, if any, thereof, dated (i) the
effective date of such Shelf Registration Statement and (ii) the effective
date of any prospectus supplement to the prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the latest
such statements included in such prospectus (and, if such Shelf
Registration Statement contemplates an underwritten offering pursuant to
any prospectus supplement to the prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the latest
such statements included in such prospectus, dated the date of the closing
under the underwriting agreement relating thereto), such letter or letters
to be in customary form and covering such matters of the type customarily
covered by letters of such type; (D) deliver such documents and
certificates, including officers' certificates, as may be reasonably
requested by any Electing Holders of at least 20% in aggregate principal
amount of the Registrable Securities at the time outstanding or the
placement or sales agent, if any, therefor and the managing underwriters,
if any, thereof to evidence the accuracy of the representations and
warranties made pursuant to clause (A) above or those contained in Section
5(a) hereof and the compliance with or satisfaction of any agreements or
conditions contained in the underwriting agreement or other agreement
entered into by the Company; and (E) undertake such obligations relating
to expense reimbursement, indemnification and contribution as are provided
in Section 6 hereof;
(xviii) notify in writing each holder of Registrable Securities of
any proposal by the Company to amend or waive any provision of this
Exchange and Registration Rights Agreement pursuant to Section 9(h) hereof
and of any amendment or waiver effected pursuant thereto, each of which
notices shall contain the text of the amendment or waiver proposed or
effected, as the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as
a member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Conduct Rules (the "Conduct
Rules) of the National Association of Securities Dealers, Inc. ("NASD") or
any successor thereto, as amended from time to time) thereof, whether as a
holder of such Registrable Securities or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such Conduct
Rules, including by (A) if such Conduct Rules shall so require, engaging a
"qualified independent underwriter" (as defined in such Conduct Rules) to
participate in the preparation of the Shelf Registration Statement
relating to such Registrable Securities, to exercise usual standards of
due diligence in respect thereto and, if any portion of the offering
contemplated by
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such Shelf Registration Statement is an underwritten offering or is made
through a placement or sales agent, to recommend the yield of such
Registrable Securities, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters provided
in Section 6 hereof (or to such other customary extent as may be
reasonably requested by such underwriter), and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Conduct Rules; and
(xx) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but in any event not later than eighteen months after the
effective date of such Shelf Registration Statement, an earning statement
of the Company and its subsidiaries complying with Section 11(a) of the
Securities Act (including, at the option of the Company, Rule 158
thereunder).
(e) In the event that the Company would be required, pursuant to Section
3(d)(viii)(F) above, to notify the Electing Holders, the placement or sales
agent, if any, therefor and the managing underwriters, if any, thereof, the
Company shall without delay prepare and furnish to each of the Electing Holders,
to each placement or sales agent, if any, and to each such underwriter, if any,
a reasonable number of copies of a prospectus supplemented or amended so that,
as thereafter delivered to purchasers of Registrable Securities, such prospectus
shall conform in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing. Each Electing Holder agrees that upon receipt of any notice from the
Company pursuant to Section 3(d)(viii)(F) hereof, such Electing Holder shall
forthwith discontinue the disposition of Registrable Securities pursuant to the
Shelf Registration Statement applicable to such Registrable Securities until
such Electing Holder shall have received copies of such amended or supplemented
prospectus, and if so directed by the Company, such Electing Holder shall
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Electing Holder's possession of the
prospectus covering such Registrable Securities at the time of receipt of such
notice.
(f) In the event of a Shelf Registration, in addition to the information
required to be provided by each Electing Holder in its Notice Questionnaire, the
Company may require such Electing Holder to furnish to the Company such
additional information regarding such Electing Holder and such Electing Holder's
intended method of distribution of Registrable Securities as may be required in
order to comply with the Securities Act. Each such Electing Holder agrees to
notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Electing Holder to the Company or of
the occurrence of any event in either case as a result of which any prospectus
relating to such Shelf Registration contains or would contain an untrue
statement of a material fact regarding such Electing Holder or such
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Electing Holder's intended method of disposition of such Registrable Securities
or omits to state any material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Registrable Securities
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and promptly to furnish
to the Company any additional information required to correct and update any
previously furnished information or required so that such prospectus shall not
contain, with respect to such Electing Holder or the disposition of such
Registrable Securities, an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
(g) Until the expiration of two years after the Closing Date, the Company
will not, and will not permit any of its "affiliates" (as defined in Rule 144)
to, resell any of the Securities that have been reacquired by any of them except
pursuant to an effective registration statement under the Securities Act.
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly all
expenses incident to the Company's performance of or compliance with this
Exchange and Registration Rights Agreement, including (a) all Commission and any
NASD registration, filing and review fees and expenses including fees and
disbursements of counsel for the placement or sales agent or underwriters in
connection with such registration, filing and review, (b) all fees and expenses
in connection with the qualification of the Securities for offering and sale
under the State securities and blue sky laws referred to in Section 3(d)(xii)
hereof and determination of their eligibility for investment under the laws of
such jurisdictions as any managing underwriters or the Electing Holders may
designate, including any fees and disbursements of counsel for the Electing
Holders or underwriters in connection with such qualification and determination,
(c) all expenses relating to the preparation, printing, production, distribution
and reproduction of each registration statement required to be filed hereunder,
each prospectus included therein or prepared for distribution pursuant hereto,
each amendment or supplement to the foregoing, the expenses of preparing the
Securities for delivery and the expenses of printing or producing any
underwriting agreements, agreements among underwriters, selling agreements and
blue sky or legal investment memoranda and all other documents in connection
with the offering, sale or delivery of Securities to be disposed of (including
certificates representing the Securities), (d) messenger, telephone and delivery
expenses relating to the offering, sale or delivery of Securities and the
preparation of documents referred in clause (c) above, (e) fees and expenses of
the Trustee under the Indenture, any agent of the Trustee and any counsel for
the Trustee and of any collateral agent or custodian, (f) internal expenses
(including all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), (g) fees, disbursements and expenses of
counsel and independent certified public accountants of the Company (including
the expenses of any opinions or "cold comfort" letters required by or incident
to such performance and compliance), (h) fees, disbursements and expenses of any
"qualified independent underwriter" engaged pursuant to Section 3(d)(xix)
hereof, (i)
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fees, disbursements and expenses of one counsel for the Electing Holders
retained in connection with a Shelf Registration, as selected by the Electing
Holders of at least a majority in aggregate principal amount of the Registrable
Securities held by Electing Holders (which counsel shall be reasonably
satisfactory to the Company), (j) any fees charged by securities rating services
for rating the Securities, and (k) fees, expenses and disbursements of any other
persons, including special experts, retained by the Company in connection with
such registration (collectively, the "Registration Expenses"). To the extent
that any Registration Expenses are incurred, assumed or paid by any holder of
Registrable Securities or any placement or sales agent therefor or underwriter
thereof, the Company shall reimburse such person for the full amount of the
Registration Expenses so incurred, assumed or paid promptly after receipt of a
request therefor. Notwithstanding the foregoing, the holders of the Registrable
Securities being registered shall pay all agency fees and commissions and
underwriting discounts and commissions attributable to the sale of such
Registrable Securities and the fees and disbursements of any counsel or other
advisors or experts retained by such holders (severally or jointly), other than
the counsel and experts specifically referred to above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each Purchaser
and each of the holders from time to time of Registrable Securities that:
(a) Each registration statement covering Registrable Securities and each
prospectus (including any preliminary or summary prospectus) contained therein
or furnished pursuant to Section 3(d) or Section 3(c) hereof and any further
amendments or supplements to any such registration statement or prospectus, when
it becomes effective or is filed with the Commission, as the case may be, and,
in the case of an underwritten offering of Registrable Securities, at the time
of the closing under the underwriting agreement relating thereto, will conform
in all material respects to the requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and at all times subsequent to the Effective Time when a
prospectus would be required to be delivered under the Securities Act, other
than from (i) such time as a notice has been given to holders of Registrable
Securities pursuant to Section 3(d)(viii)(F) or Section 3(c)(iii)(F) hereof
until (ii) such time as the Company furnishes an amended or supplemented
prospectus pursuant to Section 3(e) or Section 3(c)(iv) hereof, each such
registration statement, and each prospectus (including any summary prospectus)
contained therein or furnished pursuant to Section 3(d) or Section 3(c) hereof,
as then amended or supplemented, will conform in all material respects to the
requirements of the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity
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with information furnished in writing to the Company by a holder of Registrable
Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred to
in Section 5(a) hereof, when they become or became effective or are or were
filed with the Commission, as the case may be, will conform or conformed in all
material respects to the requirements of the Securities Act or the Exchange Act,
as applicable, and none of such documents will contain or contained an untrue
statement of a material fact or will omit or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by a holder of Registrable
Securities expressly for use therein.
(c) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which the Company or any Subsidiary of the Company is a party or
by which the Company or any Subsidiary of the Company is bound or to which any
of the property or assets of the Company or any Subsidiary of the Company is
subject, nor will such action result in any violation of the provisions of the
certificate of incorporation, as amended, or the by-laws of the Company or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any subsidiary of the Company or
any of their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body is required for the consummation by the Company of the transactions
contemplated by this Exchange and Registration Rights Agreement, except the
registration under the Securities Act of the Securities, qualification of the
Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under State
securities or blue sky laws in connection with the offering and distribution of
the Securities.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company. The Company will indemnify and hold
harmless each of the holders of Registrable Securities included in an Exchange
Registration Statement, each of the Electing Holders of Registrable Securities
included in a Shelf Registration Statement and each person who participates as a
placement or sales agent or as an underwriter in any offering or sale of such
Registrable Securities against any losses, claims, damages or liabilities, joint
or several, to which such holder, agent or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of
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or are based upon an untrue statement or alleged untrue statement of a material
fact contained in any Exchange Registration Statement or Shelf Registration
Statement, as the case may be, under which such Registrable Securities were
registered under the Securities Act, or any preliminary, final or summary
prospectus contained therein or furnished by the Company to any such holder,
Electing Holder, agent or underwriter, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse such holder, such Electing
Holder, such agent and such underwriter for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that the
Company shall not be liable to any such person in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, or preliminary, final or summary
prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by such person
expressly for use therein.
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any registration statement filed pursuant to Section 2(b) hereof and to entering
into any underwriting agreement with respect thereto, that the Company shall
have received an undertaking reasonably satisfactory to it from the Electing
Holder of such Registrable Securities and from each underwriter named in any
such underwriting agreement, severally and not jointly, to (i) indemnify and
hold harmless the Company, and all other holders of Registrable Securities,
against any losses, claims, damages or liabilities to which the Company or such
other holders of Registrable Securities may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to any such Electing Holder, agent or underwriter, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Electing Holder or underwriter expressly for use therein, and (ii) reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that no such Electing Holder shall be
required to undertake liability to any person under this Section 6(b) for any
amounts in excess of the dollar amount of the proceeds to be received by such
Electing Holder from the sale of such Electing Holder's Registrable Securities
pursuant to such registration.
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(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party otherwise than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party for any legal expenses of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. In no event shall an indemnifying party be liable for fees and
expenses of more than one counsel (in addition to local counsel) separate from
their own counsel for all indemnified parties in connection with any one action
or separate but similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances. No indemnifying party shall,
without the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree
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that it would not be just and equitable if contributions pursuant to this
Section 6(d) were determined by pro rata allocation (even if the holders or any
agents or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6(d), no holder shall
be required to contribute any amount in excess of the amount by which the dollar
amount of the proceeds received by such holder from the sale of any Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) exceeds the amount of any damages which such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director and partner of
each holder, agent and underwriter and each person, if any, who controls any
holder, agent or underwriter within the meaning of the Securities Act; and the
obligations of the holders and any agents or underwriters contemplated by this
Section 6 shall be in addition to any liability which the respective holder,
agent or underwriter may otherwise have and shall extend, upon the same terms
and conditions, to each officer and director of the Company (including any
person who, with his consent, is named in any registration statement as about to
become a director of the Company) and to each person, if any, who controls the
Company within the meaning of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by the Shelf Registration are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be designated
by Electing Holders holding at least a majority in aggregate principal amount of
the Registrable Securities to be included in such offering, provided that such
designated managing underwriter or underwriters is or are reasonably acceptable
to the Company.
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(b) Participation by Holders. Each holder of Registrable Securities hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including the reports under Section 13 and 15(d) of the Exchange
Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission
under the Securities Act) and the rules and regulations adopted by the
Commission thereunder, and shall take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar or successor rule or regulation hereafter adopted
by the Commission. Upon the request of any holder of Registrable Securities in
connection with that holder's sale pursuant to Rule 144, the Company shall
deliver to such holder a written statement as to whether it has complied with
such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant, registration
rights with respect to Registrable Securities or any other securities which
would be inconsistent with the terms contained in this Exchange and Registration
Rights Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if the Company fails to perform any of its
obligations hereunder and that the Purchasers and the holders from time to time
of the Registrable Securities may be irreparably harmed by any such failure, and
accordingly agree that the Purchasers and such holders, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
compel specific performance of the obligations of the Company under this
Exchange and Registration Rights Agreement in accordance with the terms and
conditions of this Exchange and Registration Rights Agreement, in any court of
the United States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt
23
<PAGE>
requested) as follows: If to the Company, to it at 80 Park Plaza, Newark, NJ
07102, and if to a holder, to the address of such holder set forth in the
security register or other records of the Company, or to such other address as
the Company or any such holder may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and the holders from time to
time of the Registrable Securities and the respective successors and assigns of
the parties hereto and such holders. In the event that any transferee of any
holder of Registrable Securities shall acquire Registrable Securities, in any
manner, whether by gift, bequest, purchase, operation of law or otherwise, such
transferee shall, without any further writing or action of any kind, be deemed a
beneficiary hereof for all purposes and such Registrable Securities shall be
held subject to all of the terms of this Exchange and Registration Rights
Agreement, and by taking and holding such Registrable Securities such transferee
shall be entitled to receive the benefits of, and be conclusively deemed to have
agreed to be bound by all of the applicable terms and provisions of this
Exchange and Registration Rights Agreement. If the Company shall so request, any
such successor, assign or transferee shall agree in writing to acquire and hold
the Registrable Securities subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Registrable Securities, any director, officer or
partner of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and shall
survive delivery of and payment for the Registrable Securities pursuant to the
Purchase Agreement and the transfer and registration of Registrable Securities
by such holder and the consummation of an Exchange Offer.
(f) Governing Law. This Exchange and Registration Rights Agreement shall
be governed by and construed in accordance with the laws of the State of New
York.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings
24
<PAGE>
between the parties with respect to its subject matter. This Exchange and
Registration Rights Agreement may be amended and the observance of any term of
this Exchange and Registration Rights Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only by a
written instrument duly executed by the Company and the holders of at least a
majority in aggregate principal amount of the Registrable Securities at the time
outstanding. Each holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any amendment or waiver effected pursuant to this
Section 9(h), whether or not any notice, writing or marking indicating such
amendment or waiver appears on such Registrable Securities or is delivered to
such holder.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying on any business
day by any holder of Registrable Securities for proper purposes only (which
shall include any purpose related to the rights of the holders of Registrable
Securities under the Securities, the Indenture and this Agreement) at the
offices of the Company at the address thereof set forth in Section 9(c) above
and at the office of the Trustee under the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
25
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Purchasers, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Purchasers and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Purchasers is pursuant to the authority set forth in a form of Agreement among
Purchasers, the form of which shall be submitted to the Company for examination
upon request, but without warranty on your part as to the authority of the
signers thereof.
Very truly yours,
PSEG Energy Holdings Inc.
By: /s/ Bruce E. Walenczyk
----------------------------------
Name: Bruce E. Walenczyk
Title: Vice President-Finance
Accepted as of the date hereof:
Goldman, Sachs & Co.
Banc of America Securities LLC
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: Goldman, Sachs & Co.
/s/ Goldman, Sachs & Co.
------------------------------
(Goldman, Sachs & Co.)
26
<PAGE>
Exhibit A
PSEG Energy Holdings Inc.
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE] *
The Depository Trust Company ("DTC") has identified you as a DTC Participant
through which beneficial interests in the PSEG Energy Holdings Inc. (the
"Company") 10% Senior Notes due 2009 (the "Securities") are held.
The Company is in the process of registering the Securities under the Securities
Act of 1933 for resale by the beneficial owners thereof. In order to have their
Securities included in the registration statement, beneficial owners must
complete and return the enclosed Notice of Registration Statement and Selling
Securityholder Questionnaire.
It is important that beneficial owners of the Securities receive a copy of the
enclosed materials as soon as possible as their rights to have the Securities
included in the registration statement depend upon their returning the Notice
and Questionnaire by [Deadline For Response]. Please forward a copy of the
enclosed documents to each beneficial owner that holds interests in the
Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact PSEG Energy
Holdings Inc. in writing at 80 Park Plaza, Newark, NJ 07102 or by telephone at
(973) 456-3581.
- -------------------------
*Not less than 28 calendar days from date of mailing.
A-1
<PAGE>
PSEG Energy Holdings Inc.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
Reference is hereby made to the Exchange and Registration Rights Agreement (the
"Exchange and Registration Rights Agreement") between PSEG Energy Holdings Inc.
(the "Company") and the Purchasers named therein. Pursuant to the Exchange and
Registration Rights Agreement, the Company has filed with the United States
Securities and Exchange Commission (the "Commission") a registration statement
on Form S-3 (the "Shelf Registration Statement") for the registration and resale
under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"),
of the Company's 10% Senior Notes due 2009 (the "Securities"). A copy of the
Exchange and Registration Rights Agreement is attached hereto. All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined below) is entitled
to have the Registrable Securities beneficially owned by it included in the
Shelf Registration Statement. In order to have Registrable Securities included
in the Shelf Registration Statement, this Notice of Registration Statement and
Selling Securityholder Questionnaire ("Notice and Questionnaire") must be
completed, executed and delivered to the Company at the address set forth herein
for receipt ON OR BEFORE [Deadline for Response]. Beneficial owners of
Registrable Securities who do not complete, execute and return this Notice and
Questionnaire by such date (i) will not be named as selling securityholders in
the Shelf Registration Statement and (ii) may not use the Prospectus forming a
part thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration Statement and related Prospectus. Accordingly, holders
and beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Shelf Registration Statement and
related Prospectus.
The term "Registrable Securities" is defined in the Exchange and Registration
Rights Agreement.
A-2
<PAGE>
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable Securities
hereby elects to include in the Shelf Registration Statement the Registrable
Securities beneficially owned by it and listed below in Item (3). The
undersigned, by signing and returning this Notice and Questionnaire, agrees to
be bound with respect to such Registrable Securities by the terms and conditions
of this Notice and Questionnaire and the Exchange and Registration Rights
Agreement, including, without limitation, Section 6 of the Exchange and
Registration Rights Agreement, as if the undersigned Selling Securityholder were
an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Company
and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and
as Exhibit B to the Exchange and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Company and represents and warrants that such information is accurate and
complete:
A-3
<PAGE>
QUESTIONNAIRE
(1)(a) Full Legal Name of Selling Securityholder:
----------------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as in (a) above)
of Registrable Securities Listed in Item (3) below:
----------------------------------------------------------------------
(c) Full Legal Name of DTC Participant (if applicable and if not the same
as (b) above) Through Which Registrable Securities Listed in Item (3)
below are Held:
----------------------------------------------------------------------
(2) Address for Notices to Selling Securityholder:
___________________________
___________________________
___________________________
Telephone: ___________________________
Fax: ___________________________
Contact Person: ___________________________
(3) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities.
(a) Principal amount of Registrable Securities beneficially owned:________
CUSIP No(s). of such Registrable Securities:__________________________
(b) Principal amount of Securities other than Registrable Securities
beneficially owned:
----------------------------------------------------------------------
CUSIP No(s). of such other Securities:________________________________
(c) Principal amount of Registrable Securities which the undersigned wishes
to be included in the Shelf Registration Statement: ________________
CUSIP No(s). of such Registrable Securities to be included in the
Shelf Registration Statement:________________________________________
(4) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other
securities of the Company, other than the Securities listed above in
Item (3).
State any exceptions here:
A-4
<PAGE>
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any
of its affiliates, officers, directors or principal equity holders (5%
or more) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates)
during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item
(3) only as follows (if at all): Such Registrable Securities may be
sold from time to time directly by the undersigned Selling
Securityholder or, alternatively, through underwriters, broker-dealers
or agents. Such Registrable Securities may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time
of sale, at varying prices determined at the time of sale, or at
negotiated prices. Such sales may be effected in transactions (which
may involve crosses or block transactions) (i) on any national
securities exchange or quotation service on which the Registered
Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv)
through the writing of options. In connection with sales of the
Registrable Securities or otherwise, the Selling Securityholder may
enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the Registrable Securities in the course of
hedging the positions they assume. The Selling Securityholder may also
sell Registrable Securities short and deliver Registrable Securities to
close out such short positions, or loan or pledge Registrable
Securities to broker-dealers that in turn may sell such securities.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it understands
its obligation to comply, and agrees that it will comply, with the provisions of
the Exchange Act and the rules and regulations thereunder, particularly
Regulation M.
In the event that the Selling Securityholder transfers all or any portion of the
Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Company, the Selling Securityholder agrees to
notify the transferee(s) at the time
A-5
<PAGE>
of the transfer of its rights and obligations under this Notice and
Questionnaire and the Exchange and Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such information
will be relied upon by the Company in connection with the preparation of the
Shelf Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section 3(d) of
the Exchange and Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Shelf Registration Statement, the
Selling Securityholder agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Exchange and Registration
Rights Agreement shall be made in writing, by hand-delivery, first-class mail,
or air courier guaranteeing overnight delivery as follows:
To the Company:
PSEG Energy Holdings Inc.
80 Park Plaza, T-22
P.O. Box 1171
Newark, New Jersey 07101
Attention: Treasurer
Once this Notice and Questionnaire is executed by the Selling Securityholder and
received by the Company, the terms of this Notice and Questionnaire, and the
representations and warranties contained herein, shall be binding on, shall
inure to the benefit of and shall be enforceable by the respective successors,
heirs, personal representatives, and assigns of the Company and the Selling
Securityholder (with respect to the Registrable Securities beneficially owned by
such Selling Securityholder and listed in Item (3) above. This Agreement shall
be governed in all respects by the laws of the State of New York.
A-6
<PAGE>
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
Dated:__________________
__________________________________________________________________
Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable
Securities)
By:_______________________________________________________________
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY AT:
PSEG Energy Holdings Inc.
80 Park Plaza, T-22
P.O. Box 1171
Newark, New Jersey 07101
Attention: Treasurer
A-7
<PAGE>
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
First Union National Bank
PSEG Energy Holdings Inc.
c/o First Union National Bank
21 South Street, 3rd Floor
Morristown, New Jersey 07960
Attention: Trust Officer
Re: PSEG Energy Holdings Inc. (the "Company")
10% Senior Notes due 2009
Dear Sirs:
Please be advised that _____________________ has transferred $____________
aggregate principal amount of the above-referenced Notes pursuant to an
effective Registration Statement on Form S-3 (File No. 333-____ ) filed by
the Company.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus
dated [date] or in supplements thereto, and that the aggregate principal amount
of the Notes transferred are the Notes listed in such Prospectus opposite such
owner's name.
Dated: Very truly yours,
______________________
(Name)
By: ______________________
(Authorized Signature)
B-1
Exhibit 4.3
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITORY") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.,
OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR
ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A
SUCCESSOR OF THE DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR.
<PAGE>
2
CUSIP NO. $400,000,000
No. R-1
PSEG ENERGY HOLDINGS INC.
10% Senior Note due 2009
PSEG ENERGY HOLDINGS INC., a New Jersey corporation (herein referred
to as the "Company," which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of $400,000,000 on
October 1, 2009 (the "Stated Maturity Date") and to pay interest thereon from
October 8, 1999 or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually on April 1 and October 1 in
each year (each, an "Interest Payment Date"), commencing April 1, 2000 at 10%
per annum until the principal hereof is paid or duly provided for.
Any payment of principal or interest required to be made on a day
that is not a Business Day need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on such
day and no interest shall accrue as a result of such delayed payment. Interest
payable on each Interest Payment Date will include interest accrued from and
including October 8, 1999 or from and including the most recent Interest Payment
Date to which interest has been paid or duly provided for, as the case may be,
to but excluding such Interest Payment Date.
The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in the Indenture, be paid to the
person (the "Holder") in whose name this Note (or one or more Predecessor Notes)
is registered at the close of business on the March 15 and September 15 (whether
or not a Business Day) next preceding such Interest Payment Date (a "Regular
Record Date"). Any such interest not so punctually paid or duly provided for
("Defaulted Interest") will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the person in whose name this Note
(or one or more Predecessor Notes) is registered at the close of business on a
special record date (the "Special Record Date") for the payment of such
Defaulted Interest to be fixed by the Trustee (referred to herein), notice
whereof shall be given to the Holder of this Note not less than ten
<PAGE>
3
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner, all as more fully provided in the Indenture.
For purposes of this Note, "Business Day" means each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in Newark New Jersey and The City of New York are authorized or
obligated by law or executive order to close.
Payment of the principal of this Note on the Stated Maturity Date or
date of earlier redemption or repurchase will be made against presentation of
this Note at the office of agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York, in such coin or currency of the
United States of America as at the time of payment is legal tender for the
payment of public and private debts. So long as this Note remains in book-entry
form, all payments of principal and interest will be made by the Company in
immediately available funds.
General. This Note is one of a duly authorized issue of securities
(herein called the "Notes") of the Company, issued and to be issued in one or
more series under an indenture, dated as of October 8, 1999, as it may be
supplemented from time to time (herein called the "Indenture"), between the
Company and First Union National Bank, as Trustee (herein called the "Trustee,"
which term includes any successor trustee under the Indenture with respect to a
series of which this Note is a part), to which indenture and all indentures
supplemental thereto, reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee and the Holders of the Notes, and of the terms upon which the Notes
are, and are to be, authenticated and delivered. This Note is one of a duly
authorized series of Notes designated as "10% Senior Notes due 2009"
(collectively, the "Notes").
Events of Default. If an Event of Default with respect to the Notes
shall have occurred and be continuing, the principal of the Notes may be
declared due and payable in the manner and with the effect provided in the
Indenture.
Redemption. The Notes will be redeemable at the option of the
Company, in whole or in part at any time, on at least 30 days but not more than
60 days prior written notice mailed to the registered Holders thereof, at a
Redemption Price equal to the greater of (i) 100% of the principal amount of the
Notes to be redeemed, and (ii) the sum, as determined by the Quotation Agent (as
defined herein), of the present values of the principal amount of the Notes to
be redeemed and the remaining scheduled payments of interest thereon from the
Redemption Date to October 8, 2009 (the "Remaining Life"), discounted from their
respective payment dates to the date of redemption on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate (as defined herein) plus 40 basis points plus, in either case, accrued
interest thereon to the date of redemption.
<PAGE>
4
If money sufficient to pay the Redemption Price of and accrued
interest on all of the Notes (or portions thereof) to be redeemed on the
Redemption Date is deposited with the Trustee or a Paying Agent on or before the
Redemption Date and certain other conditions are satisfied, then on and after
such Redemption Date, interest will cease to accrue on such Notes (or such
portion thereof) called for redemption.
The Notes are not subject to the operation of any sinking fund.
Option to Elect Repayment Upon Certain Events Involving PSEG
Resources Inc. If (1) the Company shall no longer own 100% of the equity
ownership interest in PSEG Resources Inc. (herein referred to as "Resources"),
or (ii)(a) a transaction or series of related transactions (a "Resources
Transaction") causes the assets of Resources immediately after such Resources
Transaction to be 20% less than the assets of Resources immediately prior to
such Resources Transaction (as measured from the end of the month immediately
preceding the Resources Transaction (or in the case of a Resources Transaction
involving a series of transactions, the month immediately preceding the first of
such transactions)) and (b) as a direct result of such Resources Transaction,
either of Standard & Poor's Ratings Group or Moody's Investors Service, Inc.
shall downgrade its respective rating of Energy Holdings below "BBB-" or "Ba1"
(or if either of such ratings immediately preceding the Resources Transaction is
lower than "BBB-" or "Ba1" respectively, such rating shall as a direct result of
such Resources Transaction be downgraded), then holders of the Notes shall, in
accordance with the provisions hereof and subject to Article 13 of the
Indenture, have the right to require Energy Holdings to repurchase their Notes,
in whole or in part, at a Repayment Price (the "Resources Repayment Price")
equal to the greater of (i) 100% of the principal amount of the Notes to be
repurchased, and (ii) the sum, as determined by the Quotation Agent, of the
present values of the principal amount of the Notes to be repurchased and the
remaining scheduled payments of interest thereon from the Repayment Date to
October 1, 2009, discounted from their respective payment dates to the Repayment
Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate plus 40 basis points plus, in either case, accrued
interest thereon to the Repayment Date.
Within 30 days following any Resources Transaction, the Company
shall mail a notice to the Depository (with a copy to the Trustee) stating:
1. that a Resources Transaction has occurred and that such Holder
has the right to require the Company to repay such Holder's
Notes, in whole or in part, at the Resources Repayment Price
in cash (the "Resources Offer");
2. the circumstances and relevant facts regarding such Resources
Transaction (including information with respect to balance
sheet data of Resources immediately following the Resources
Transaction and in the month immediately preceding the
Resources Transaction);
<PAGE>
5
3. the Repayment Date (which shall be a Business Day and be not
earlier than 45 days nor later than 60 days from the date of
the delivery of such notice to the depository);
4. that any Notes not tendered for purchase will continue to
accrue interest;
5. that interest on any Notes accepted for repayment pursuant to
the Resources Offer shall cease to accrue after repayment on
the Repayment Date;
6. that Holders electing to have Notes repaid pursuant to a
Resources Offer will be required to surrender their Notes,
with the form entitled "Option to Elect Repayment" on the
reverse of the Security completed, to the Trustee at the
address specified in the notice not earlier than 45 days and
not later than 30 days prior to the Repayment Date;
7. that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of
business on the third Business Day (or such shorter period as
may be required by applicable law) preceding the Repayment
Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of
Notes the Holder delivered for repayment, and a statement that
such holder is withdrawing its election to have such Notes
repaid; and
8. that Holders of the series that elect to have their Notes
repaid only in part will be issued new Notes of the series in
a principal amount equal to then unrepaid portion of the Notes
surrendered.
In addition to the foregoing, the Company shall also deliver to the
Depository within the time periods specified above, for retransmittal to its
participants, a notice substantially to the effect specified in clauses (1)
through (5) and (7) above, which notice shall also specify the required
procedures (furnished by the Depository) for holders of interests in this global
Note to tender and receive payment of the Resources Repayment Price for such
interests (including the Depository's "Repayment Option Procedures," to the
extent applicable), all in accordance with the Depository's rules, regulations
and practices.
On the Repayment Date, the Company shall deposit with the Trustee
money sufficient without reinvestment to pay the Resources Repayment Price of
the Notes or portions thereof so tendered. The Trustee shall as soon as
practicable promptly mail to the Holders of the Notes so accepted payment in an
amount equal to the Resources Repayment Price and as soon as practicable
authenticate and mail to such Holders a new Note in a principal amount equal to
any
<PAGE>
6
unrepaid portion of the Note surrendered. The Company will publicly announce the
results of the Resources Offer on or as soon as practicable after the Repayment
Date.
The Company shall comply with Rule 14e-1 under the Securities Act of
1934, as amended (the "Exchange Act"), and any other applicable laws and
regulations in the event that a Resources Transaction occurs and the Company is
required to make a Resources Offer.
Certain Definitions Relating to Optional Redemption or Repurchase
Upon Certain Events Involving PSEG Resources Inc. The following are certain
defined terms used herein under the headings "Redemption" and "Option to Elect
Repayment Upon Certain Events Involving PSEG Resources Inc.":
"Comparable Treasury Issue" means the United States Treasury
security selected by the Quotation Agent as having a maturity comparable to the
Remaining Life that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity with the Remaining Life of the Notes to
be redeemed or repurchased, as the case may be.
"Comparable Treasury Price" means, with respect to any Redemption
Date or a Repayment Date in respect of the provisions set forth herein under
"Repurchase Upon Certain Events Involving PSEG Resources Inc.," the average of
five Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest of such Reference Treasury Dealer Quotations,
or, if the Trustee obtains fewer than three such Reference Treasury Dealer
Quotations, the average of all such quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by
the Company. "Reference Treasury Dealer" means (i) Goldman, Sachs & Co., Banc of
America Securities LLC, Lehman Brothers Inc. and Merrill Lynch Government
Securities, Inc. and their respective successors; provided, however, that if the
foregoing shall cease to be primary United States Government securities dealers
in New York City (a "Primary Treasury Dealer"), the Company shall substitute
therefor another Primary Treasury Dealer, and (ii) any other Primary Treasury
Dealer selected by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date or Repayment Date in respect
of the provisions set forth herein under "Repurchase Upon Certain Events
Involving PSEG Resources Inc.," the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
Business Day preceding such Redemption Date or Repayment Date, as the case may
be.
<PAGE>
7
"Treasury Rate" means, with respect to any Redemption Date or
Repayment Date in respect of the provisions set forth herein under "Repurchase
Upon Certain Events Involving PSEG Resources Inc.," the rate per annum equal to
the semi-annual yield to maturity of the Comparable Treasury Issue, calculated
on the third Business Day preceding such Redemption Date or Repayment Date, as
the case may be, using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date or Repayment Date, as the case may be.
Option to Elect Repayment Upon a Change of Control. In the event of
a Change of Control (as defined in the Indenture), the Company has the
obligation, subject to certain conditions, to offer to repay the Notes at 101%
of the principal amount thereof plus accrued interest to the date of repayment
in accordance with the procedures set forth in the Indenture. As further
described in the Indenture, a Change of Control will not be deemed to have
occurred if, after giving effect thereto, the Notes are rated no less than
"BBB-" by Standard & Poor's Ratings Group and "Ba1" by Moody's Investors Service
Inc.
Reports Upon Request of Holders. During any Registration Default
Period (as such term is defined in the Exchange and Registration Rights
Agreement, dated October 8, 1999, among the Company and Goldman, Sachs & Co.,
Banc of America Securities LLC, Lehman Brothers Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated), the Company will make available to Holders of the
Notes, upon request, copies of annual reports and of the information, documents,
and other reports that the Company would be required to file with the Securities
and Exchange Commission (the "SEC") pursuant to Section 13 or Section 15(d)
("Periodic Reports") of the Exchange Act if the Company was subject to the
reporting obligations of such Sections. The Company shall make such Periodic
Reports available to the Holders of the Notes within the respective time periods
mandated by the Exchange Act for the filing of such Periodic Reports with the
SEC for issuers subject to Sections 13 or 15(d) of the Exchange Act.
Modification and Waivers; Obligations of the Company Absolute. The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the Holders of the Securities of each series. Such amendment may
be effected under the Indenture at any time by the Company and the Trustee with
the consent of the Holders of not less than a majority in aggregate principal
amount of all Securities issued under the Indenture at the time Outstanding and
affected thereby. The Indenture also contains provisions permitting the Holders
of not less than a majority in aggregate principal amount of the Securities at
the time Outstanding, on behalf of the Holders of all Outstanding Securities, to
waive compliance by the Company with certain provisions of the Indenture.
Furthermore, provisions in the Indenture permit the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities of
individual series to waive on behalf of all of the Holders of Securities of such
individual series certain past defaults under the Indenture and their
consequences. Any such consent or waiver shall be conclusive and binding upon
the Holder of this Note and upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Note.
<PAGE>
8
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Note at the times, place and rate, and in the coin or currency
herein prescribed.
Defeasance and Covenant Defeasance. The Indenture contains
provisions for defeasance at any time of (a) the entire indebtedness of the
Company on this Note and (b) certain restrictive covenants and the related
defaults and Events of Default, upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.
Authorized Denominations. The Notes are issuable only in registered
form without coupons in denominations of $1,000 and integral multiples thereof.
Registration of Transfer or Exchange. As provided in the Indenture
and subject to certain limitations herein and therein set forth, the transfer of
this Note is registrable in the Security Register upon surrender of this Note
for registration of transfer at the office or agency of the Company in any place
where the principal of and interest on this Note are payable, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations
herein and therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of different authorized denominations, as requested by
the Holders surrendering the same.
This Note is a Global Security. If the Depository is at any time
unwilling, unable or ineligible to continue as depository and a successor
depository is not appointed by the Company within 90 days or an Event of Default
under the Indenture has occurred and is continuing, the Company will issue
Securities in certificated form in exchange for each Global Security. In
addition, the Company may at any time determine not to have Securities
represented by a Global Security and, in such event, will issue Securities in
certificated form in exchange in whole for the Global Security representing such
Security. In any such instance, an owner of a beneficial interest in a Global
Security will be entitled to physical delivery in certificated form of
Securities equal in principal amount to such beneficial interest and to have
such Securities registered in its name. Securities so issued in certificated
form will be issued in denominations of $1,000 and integral multiples thereof
and will be issued in registered form only, without coupons.
<PAGE>
9
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Holder as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
Defined Terms. All terms used in this Note which are defined in the
Indenture and are not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
Governing Law. This Note shall be governed by and construed in
accordance with the law of the State of New Jersey.
<PAGE>
10
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its facsimile corporate seal.
Dated: October 8, 1999
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities of the series
designated therein referred to in the
within-mentioned Indenture PSEG ENERGY HOLDINGS INC.
FIRST UNION NATIONAL BANK,
as Trustee
By:
----------------------------
President
By: Attest:
------------------------- ------------------------
Authorized Signatory Secretary
<PAGE>
11
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Insert assignee's soc. sec. or tax I.D. No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
Dated: Signed:
------------------- ----------------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee:
------------------------------------------------------------
<PAGE>
12
OPTION TO ELECT REPAYMENT FORM
If you wish to elect to have this Security repaid by the Company pursuant
to Section 1007 of the Indenture, check this box:[ ]
If you wish to elect to have only part of this Security repaid by the
Company pursuant to Section 1007 of the Indenture, state the amount: $
If you wish to elect to have this Security repaid by the Company pursuant
to the provisions set forth in this Security under the heading "Option to Elect
Repayment Upon Certain Events Involving PSEG Resources Inc.," check this box:
[ ]
If you wish to elect to have only part of this Security repaid by the
Company pursuant to the provisions set forth in this Security under the heading
"Option to Elect Repayment Upon Certain Events Involving PSEG Resources Inc.,"
state the amount: $
Dated: Signed:
------------------- ----------------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee:
------------------------------------------------------------
EXHIBIT 12
PSEG ENERGY HOLDINGS INC.
Computation of Ratios of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Nine Months
Ended Years Ended December 31,
September 30, ---------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings as Defined in
Regulation S--K (A):
Pre-tax income from Continuing
Operations ............................. $ 125,477 $ 97,560 $ 73,450 $ 73,370 $ 70,646 $ 68,642
(Income)/Loss from equity
investees net of distributions ......... 2,543 7,796 (35,318) 49,718 13,107 21,968
Fixed Charges ............................ 69,949 95,556 79,351 60,714 60,761 67,983
Amortization of capitalized
interest ................................. 1,587 2,049 1,990 1,737 1,672 1,577
Capitalized interest ..................... (2,547) (1,181) (5,065) (1,301) (1,896) (4,480)
--------- --------- --------- --------- --------- ---------
Earnings ................................. $ 197,009 $ 201,780 $ 114,408 $ 184,238 $ 144,290 $ 155,690
========= ========= ========= ========= ========= =========
Fixed Charges as Defined in
Regulation S--K (B):
Total interest expensed and
capitalized ............................ $ 68,064 $ 93,168 $ 77,428 $ 59,562 $ 58,790 $ 66,279
Interest in rental expense ............... 1,885 2,388 1,923 1,152 1,971 1,704
--------- --------- --------- --------- --------- ---------
Total Fixed Charges ...................... $ 69,949 $ 95,556 $ 79,351 $ 60,714 $ 60,761 $ 67,983
========= ========= ========= ========= ========= =========
Ratio of Earnings to Fixed
Charges ................................ 2.82 2.11 1.44 3.03 2.37 2.29
========= ========= ========= ========= ========= =========
</TABLE>
(A) The term "earnings" shall be defined as pre-tax income from continuing
operations before adjustment for minority interests or income or loss from
equity investees. Add fixed charges adjusted to exclude and (a) the amount
of any interest capitalized during the period, (b) amortization of
capitalized interest and (c) distributed income of equity investees. From
the total, subtract interest capitalized.
(B) Fixed Charges represent (a) interest, whether expensed or capitalized, (b)
amortization of debt discount, premium and expense, and (c) an estimate of
interest implicit in rentals.
Exhibit 21
Significant Subsidiaries of PSEG Energy Holdings Inc.
Subsidiary Jurisdiction of Incorporation or Organization
- ---------- ---------------------------------------------
PSEG Resources Inc. New Jersey
RCMC Inc. New Jersey
PSRC II, Inc. Delaware
PSEG Global Inc. New Jersey
PSEG Global USA Inc. New Jersey
PSEG International Inc. Delaware
PSEG Americas Inc. Delaware
PSEG Americas Ltd. Bermuda
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of PSEG Energy Holdings
Inc. on Form S-4 of our report dated August 16, 1999 appearing in this
Prospectus, which is a part of this Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
January 28, 2000
SECURITIES AND EXCHANGE COMMISION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
TO SECTION 305(b)(2)
FIRST UNION NATIONAL BANK
(Exact Name of Trustee as Specified in its Charter)
22-1147033
(I.R.S. Employer Identification No.)
2 FIRST UNION CENTER, CHARLOTTE, NORTH CAROLINA
(Address of Principal Executive Offices)
28288-0201
(Zip Code)
FIRST UNION NATIONAL BANK
21 SOUTH STREET
MORRISTOWN, NJ 07960
ATTENTION: CORPORATE TRUST ADMINISTRATION
(973) 898-7166
(Name, address and telephone number of Agent for Service)
PSEG ENERGY HOLDING INC.
(Exact Name of Obligor as Specified in its Charter)
NEW JERSEY
(State or other jurisdiction of Incorporation or Organization)
22-2625848
(I.R.S. Employer Identification No.)
80 PARK PLAZA, NEWARK, NEW JERSEY
(Address of Principal Executive Offices)
07101
(Zip Code)
10% SENIOR NOTES DUE 2009
(Title of Indenture Securities)
<PAGE>
1. General information.
Furnish the following information as to the trustee:
a) Name and address of each examining or supervisory authority to which it is
subject:
Comptroller of the Currency
United States Department of the Treasury
Washington, D.C. 20219
Federal Reserve Bank
Richmond, Virginia 23219
Federal Deposit Insurance Corporation
Washington, D.C. 20429
b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3. Voting securities of the trustee.
Furnish the following information as to each class of voting securities of
the trustee:
As of December 31, 1999
- --------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
- --------------------------------------------------------------------------------
Title of Class Amount Outstanding
- --------------------------------------------------------------------------------
Not Applicable
4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each such other indenture.
Not Applicable
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interest within the meaning of Section 310(b)(1) of the Act
arises as a result of the trusteeship under any
<PAGE>
such other indenture, including a statement as to how the indenture, including a
statement as to how the indenture securities will rank as compared with the
securities issued under such other indenture.
Not Applicable
5. Interlocking directorates and similar relationships with the obligor or
underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or representative
of the obligor or of any underwriter for the obligor, identify each such person
having any such connection and state the nature of each such connection.
Not applicable
6. Voting securities of the trustee owned by the obligor or its officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner, and
executive officer of the obligor:
As of December 31, 1999
- --------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
- --------------------------------------------------------------------------------
Name of Owner Title of Class Amount owned Percentage of Voting
Beneficially Securities represented
by amount given in Col. C
- --------------------------------------------------------------------------------
Not Applicable
7. Voting securities of the trustee owned by underwriters or their officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner, and executive officer of each such underwriter:
As of December 31, 1999
- --------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
- --------------------------------------------------------------------------------
Name of Owner Title of Class Amount owned Percentage of Voting
Beneficially Securities represented
by amount given in Col. C
- --------------------------------------------------------------------------------
Not Applicable
8. Securities of the obligor owned or held by the trustee.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by the
trustee:
<PAGE>
As of December 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Title of Class Whether the securities Amount owned beneficially Percentage of class
Are voting or or held as collateral represented by
nonvoting Securities Security for oblications amount given in
In default by Trustee Col. C
- ---------------------------------------------------------------------------------------------
</TABLE>
Not Applicable
9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor, furnish
the following information as to each class of securities of such underwriter any
of which are so owned or held by the trustee:
As of December 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name of Issuer Amount Outstanding Amount owned beneficially Percentage of class
And Title of or held as collateral represented by
Class security for oblications amount given in
In default by Trustee Col. C
- --------------------------------------------------------------------------------------------
</TABLE>
Not Applicable
10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the knowledge of
the trustee (1) owns 10 percent or more of the voting stock of the obligor or
(2) is an affiliate, other than a subsidiary, of the obligor, furnish the
following information as to the voting securities of such person:
As of December 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name of Issuer Amount Outstanding Amount owned beneficially Percentage of class
And Title of or held as collateral represented by
Class security for oblications amount given in
In default by Trustee Col. C
- ---------------------------------------------------------------------------------------
</TABLE>
Not Applicable
11. Ownership or holdings by the trustee of any securities of a person owning
50 percent or more of the voting securities of the obligor.
<PAGE>
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge of the
trustee, owns 50 percent or more of the voting securities of the obligor,
furnish the following information as to each class of securities of such person
any of which are so owned or held by the trustee:
As of December 31, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name of Issuer Amount Outstanding Amount owned beneficially Percentage of class
And Title of or held as collateral represented by
Class security for oblications amount given in
In default by Trustee Col. C
- ----------------------------------------------------------------------------------------
</TABLE>
Not Applicable
12. Indebtedness of the obligor to the trustee.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
As of December 31, 1999
- --------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
- --------------------------------------------------------------------------------
Nature of Amount Outstanding Date due
indebtedness
- --------------------------------------------------------------------------------
Not Applicable
13. Defaults by the obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such default.
None.
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
None
<PAGE>
14. Affiliations with the underwriters.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable
15. Foreign trustee.
Identify the order or rule pursuant to which the trustee is authorized to
act as sole trustee under indentures qualified or to be qualified under the Act.
Not applicable - trustee is a national banking association organized under
the laws of the United States.
16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
__ 1. Copy of Articles of Association of the trustee as now in effect.*
__ 2. Copy of the Certificate of the Comptroller of the Currency dated March
4, 1998, evidencing the authority of the trustee to transact
business.**
__ 3. Copy of the Certification of Fiduciary Powers of the trustee by the
Office of the Comptroller of the Currency dated April 7, 1999.***
__ 4. Copy of existing by-laws of the trustee.***
__ 5. -Not Applicable.
X 6. Consent of the trustee required by Section 321(b) of the Act.
X 7. Copy of report of condition of the trustee at the close of business on
September 30, 1999, published pursuant to the requirements of its
supervising authority.
__ 8. Copy of any order pursuant to which the foreign trustee is authorized
to act as sole trustee under indentures qualified or to be qualified
under the Act.
- Not Applicable
__ 9. Consent to service of process required of foreign trustees pursuant to
Rule 10a-4 under the Act.
- Not Applicable
- -----------------
* Previously filed with the Securities and Exchange Commission on March 16,
1998 as an Exhibit to Form T-1 in connection with Registration Statement
Number 333-47985,
** and filed with the
<PAGE>
Securities and Exchange Commission on July 15, 1998 as an Exhibit to Form
T-1 in connection with Registration Statement Number 333-59145,
*** and filed with the Securities and Exchange Commission on May 20, 1999 in
connection with Registration Statement Number 333-78927 and incorporated
herein by reference.
NOTE
The trustee disclaims responsibility for the accuracy or
completeness of information contained in this Statement of Eligibility and
Qualification not known to the trustee and not obtainable by it through
reasonable investigation and as to which information it has obtained from
the obligor and has had to rely or will obtain from the principal
underwriters and will have to rely.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, First Union National Bank, a national banking association
organized and existing under the laws of the United States of America, has
duly caused this Statement of Eligibility and Qualification to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the
Town of Morristown and State of New Jersey, on the 10th day of January,
2000.
FIRST UNION NATIONAL BANK
(Corporate Seal) By: /s/ Frank Gallagher
----------------------
Frank Gallagher
Vice President
<PAGE>
EXHIBIT T-6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, and in connection with the proposed issue of PSEG Energy Holdings Inc.
Debt Securities, First Union National Bank, hereby consents that reports of
examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
FIRST UNION NATIONAL BANK
By: /s/ Frank Gallagher
------------------------
Frank Gallagher
Vice President
Morristown, N.J.
January 10, 2000
<PAGE>
REPORT OF CONDITION EXHIBIT 7
Consolidating domestic and foreign subsidiaries of the First Union National
Bank, Charlotte, North Carolina, at the close of business on September 30, 1999
published in response to call made by Comptroller of the Currency, under title
12, United States Code, Section 161. Charter Number 22693 Comptroller of the
Currency.
Statement of Resources and Liabilities
ASSETS
Thousand of Dollars
-------------------
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin ......... 8,946,000
Interest-bearing balances .................................. 266,000
Securities ................................................... //////////
Held-to-maturity securities ................................ 1,644,000
Available-for-sale securities .............................. 47,356,000
Federal funds sold and securities purchases to resell ........ 2,856,000
Loans and lease financing receivables:
Loans and leases, net of unearned income.................... 132,839,000
LESS: Allowance for loan and lease losses .................. 1,743,000
LESS: Allocated transfer risk reserve ...................... 0
Loans and leases, net of unearned income, allowance, and
reserve .................................................... 131,096,000
Trading assets ............................................... 8,333,000
Premises and fixed assets (including capitalized leases) ..... 3,070,000
Other real estate owned ...................................... 134,000
Investment in unconsolidated subsidiaries and associated ..... //////////
companies .................................................... 262,000
Customer's liability to this bank on acceptances outstanding.. 807,000
Intangible assets ............................................ 5,115,000
Other assets ................................................. 10,789,000
Total assets ................................................. 220,674,000
LIABILITIES
Deposits:
In domestic offices ..................................... 129,621,000
Noninterest-bearing ................................... 21,341,000
Interest-bearing ...................................... 108,280,000
In foreign offices, Edge and Agreement subsidiaries,
and IBFs ................................................ 9,838,000
Noninterest-bearing ................................... 466,000
Interest-bearing ...................................... 9,372,000
Federal funds purchased and securities sold under agreements
to repurchase ............................................... 23,796,000
Demand notes issued to the U.S. Treasury ..................... 782,000
Trading liabilities .......................................... 4,984,000
Other borrowed money ......................................... //////////
With a remaining maturity of one year or less ............ 14,643,000
With a remaining maturity of more than 1 year thru 3 yrs . 5,639,000
With a maturity of more than three years ................. 2,872,000
Not applicable ............................................... /////////
Bank's liability on acceptances executed and outstanding ..... 807,000
Subordinated notes and debentures ............................ 4,269,000
Other liabilities ............................................ 6,515,000
Total liabilities ............................................ 203,766,000
Not applicable ............................................... ///////////
<PAGE>
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................ 161,000
Common Stock ................................................. 455,000
Surplus ...................................................... 13,306,000
Undivided profits and capital reserves ....................... 3,553,000
Net unrealized holding gains (losses) on available-for-sale
securities .................................................. (562,000)
Accumulated net gains (loses on cash flow hedges ............. 0
Cumulative foreign currency translation adjustments .......... (5,000)
Total equity capital ......................................... 16,908,000
Total liabilities and equity capital ......................... 220,674,000
EXHIBIT 99.1
LETTER OF TRANSMITTAL
PSEG ENERGY HOLDINGS INC.
OFFER TO EXCHANGE ITS 10% SENIOR NOTES DUE 2009, WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OUTSTANDING 10% SENIOR
NOTES DUE 2009, WHICH HAVE NOT BEEN SO REGISTERED.
PURSUANT TO THE PROSPECTUS DATED ____________________, 2000
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT ____
P.M., EASTERN STANDARD TIME, ON ____________________,
2000, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To: FIRST UNION NATIONAL BANK, Exchange Agent
<TABLE>
<S> <C> <C>
By Hand Or Overnight Delivery: Facsimile Transmissions: By Registered Or Certified Mail:
(Eligible Institutions Only)
First Union National Bank First Union National Bank
To Confirm by Telephone
or for Information Call: Attention:
Attention:
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Original Notes
(as defined below) either if Original Notes are to be forwarded herewith or if
tenders of Original Notes are to be made by book-entry transfer to an account
maintained by First Union National Bank (the "Exchange Agent") at The Depository
Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange
Offer -- Procedures for Tendering Original Notes" in the Prospectus.
Holders of Original Notes whose certificates (the "Certificates") for such
Original Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis must tender their Original
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Procedures for Tendering Original Notes" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX: DESCRIPTION OF ORIGINAL NOTES
<TABLE>
<CAPTION>
- -------------------------------- ------------------------ ------------------- -------------------- -------------------
Please print Name and Address Please Show Principal Amount Principal Amount Beneficial
of Registered Holder Certificate Number(s) of of Original Notes Holders and Names
(Need not be Original Notes Tendered (if in which such
Completed by Tendered Principal Amount Securities are
Book-Entry Holders) (Attach of Original Notes held
additional list is Less than All)*
if needed)
<S> <C> <C> <C> <C>
- -------------------------------- ------------------------ ------------------- -------------------- -------------------
- -------------------------------- ------------------------ ------------------- -------------------- -------------------
- -------------------------------- ------------------------ ------------------- -------------------- -------------------
- -------------------------------- ------------------------ ------------------- -------------------- -------------------
- -------------------------------- ------------------------ ------------------- -------------------- -------------------
- -------------------------------- ------------------------ ------------------- -------------------- -------------------
TOTAL
- -------------------------------- ------------------------ ------------------- -------------------- -------------------
</TABLE>
* All Original Notes held shall be deemed tendered unless a lesser number is
specified in this column.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
----------------------------------------------
DTC Account Number:
---------------------------------------------------------
Transaction Code Number:
----------------------------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED
DELIVERY IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holders(s):
----------------------------------------------
Window Ticket Number (if any):
----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-------------------------
Name of Institution which Guaranteed Delivery:
------------------------------
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution:
----------------------------------------------
DTC Account Number:
---------------------------------------------------------
Transaction Code Number:
----------------------------------------------------
2
<PAGE>
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED
ORIGINAL NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER
SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE ORIGINAL NOTES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
-----------------------------------------------------------------
Address:
--------------------------------------------------------------
3
<PAGE>
To: First Union National Bank
Ladies and Gentlemen:
The undersigned hereby tenders to PSEG Energy Holdings Inc., a corporation
formed under the laws of the State of New Jersey ("Energy Holdings"), the above
described aggregate principal amount of Energy Holdings' 10% Senior Notes due
2009 (the "Original Notes") in exchange for a like aggregate principal amount of
Energy Holdings' 10% Senior Notes due 2009 (the "Exchange Notes") which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), upon the terms and subject to the conditions set forth in the Prospectus
dated _______________, 2000 (as the same may be amended or supplemented from
time to time, the "Prospectus"), receipt of which is acknowledged, and in this
Letter of Transmittal (which, together with the Prospectus, constitute the
"Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Original Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of Energy
Holdings all right, title and interest in and to such Original Notes as are
being tendered herewith. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent as its agent and attorney-in-fact (with full
knowledge that the Exchange Agent is also acting as agent of Energy Holdings in
connection with the Exchange Offer) with respect to the tendered Original Notes,
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), subject only to the right of
withdrawal described in the Prospectus, to (i) deliver Certificates for Original
Notes to Energy Holdings together with all accompanying evidences of transfer
and authenticity to, or upon the order of, Energy Holdings, upon receipt by the
Exchange Agent, as the undersigned's agent, of the Exchange Notes to be issued
in exchange for such Original Notes, (ii) present Certificates for such Original
Notes for transfer, and to transfer the Original Notes on the books of Energy
Holdings, and (iii) receive for the account of Energy Holdings all benefits and
otherwise exercise all rights of beneficial ownership of such Original Notes,
all in accordance with the terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENT(S) AND WARRANT(S) THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
ORIGINAL NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR
EXCHANGE, ENERGY HOLDINGS WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE ORIGINAL NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE
CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY
ADDITIONAL DOCUMENTS DEEMED BY ENERGY HOLDINGS OR THE EXCHANGE AGENT TO BE
NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE
ORIGINAL NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS
OBLIGATIONS UNDER THE EXCHANGE AND REGISTRATION
4
<PAGE>
RIGHTS AGREEMENT DATED OCTOBER 8, 1999 (THE "REGISTRATION RIGHTS AGREEMENT").
THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE
OFFER.
The name(s) and address(es) of the registered holder(s) of the Original
Notes tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Original Notes. The
Certificate number(s) and the Original Notes that the undersigned wishes to
tender should be indicated in the appropriate boxes above.
If any tendered Original Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Original Notes
than are tendered or accepted for exchange, Certificates for such nonexchanged
or nontendered Original Notes will be returned (or, in the case of Original
Notes tendered by book-entry transfer, such Original Notes will be credited to
an account maintained at DTC), without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Original Notes pursuant to any
one of the procedures described in "The Exchange Offer -- Procedures for
Tendering Original Notes" in the Prospectus and in the instructions hereto will,
upon Energy Holdings' acceptance for exchange of such tendered Original Notes,
constitute a binding agreement among the undersigned and Energy Holdings upon
the terms and subject to the conditions of the Exchange Offer. The undersigned
recognizes that, under certain circumstances set forth in the Prospectus, Energy
Holdings may not be required to accept for exchange any of the Original Notes
tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions," below, the undersigned hereby directs that the Exchange Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Original Notes, that such Exchange Notes be credited to the account
indicated above maintained at DTC. If applicable, substitute Certificates
representing Original Notes not exchanged or not accepted for exchange will be
issued to the undersigned or, in the case of a book-entry transfer of Original
Notes, will be credited to the account indicated above maintained at DTC.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please deliver Exchange Notes to the undersigned at the address shown below the
undersigned's signature.
BY TENDERING ORIGINAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR BY
DELIVERING AN AGENT'S MESSAGE IN LIEU THEREOF, THE UNDERSIGNED HEREBY REPRESENTS
AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN "AFFILIATE" OF ENERGY HOLDINGS
WITHIN THE MEANING OF RULE 405 UNDER THE SECURITIES ACT, (II) ANY EXCHANGE NOTES
TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF
ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY
PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES
ACT) OF SUCH EXCHANGE NOTES, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER,
THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A
DISTRIBUTION (WITHIN THE
5
<PAGE>
MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE NOTES. BY TENDERING ORIGINAL
NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A
HOLDER OF ORIGINAL NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES,
CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION
OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD
PARTIES, THAT (A) SUCH ORIGINAL NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS
A NOMINEE, OR (B) SUCH ORIGINAL NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING
ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM
TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH
ANY RESALE OF SUCH EXCHANGE NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY
DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT
IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
ENERGY HOLDINGS HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE
REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS
DEFINED BELOW) IN CONNECTION WITH RESALES OF EXCHANGE NOTES RECEIVED IN EXCHANGE
FOR ORIGINAL NOTES, WHERE SUCH ORIGINAL NOTES WERE ACQUIRED BY SUCH
PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING
ACTIVITIES OR OTHER TRADING ACTIVITIES. IN THAT REGARD, EACH BROKER-DEALER WHO
ACQUIRED ORIGINAL NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR
OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH
ORIGINAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR BY DELIVERING AN
AGENT'S MESSAGE IN LIEU THEREOF, AGREES THAT, UPON RECEIPT OF NOTICE FROM ENERGY
HOLDINGS OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF (I) ANY FACT WHICH
MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS
UNTRUE IN ANY MATERIAL RESPECT OR (II) ANY FACT WHICH CAUSES THE PROSPECTUS TO
OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS
CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES
UNDER WHICH THEY WERE MADE, NOT MISLEADING OR (III) OF THE OCCURRENCE OF CERTAIN
OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING
BROKER-DEALER WILL SUSPEND THE SALE OF EXCHANGE NOTES PURSUANT TO THE PROSPECTUS
UNTIL ENERGY HOLDINGS HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH
MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED
PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR ENERGY HOLDINGS HAS GIVEN
NOTICE THAT THE SALE OF THE EXCHANGE NOTES MAY BE RESUMED, AS THE CASE MAY BE.
6
<PAGE>
Holders of Original Notes whose Original Notes are accepted for exchange
will not receive accrued interest on such Original Notes for any period from and
after the last Interest Payment Date to which interest has been paid or duly
provided for on such Original Notes prior to the original issue date of the
Exchange Notes or, if no such interest has been paid or duly provided for, will
not receive any accrued interest on such Original Notes, and the undersigned
waives the right to receive any interest on such Original Notes accrued from and
after such Interest Payment Date or, if no such interest has been paid or duly
provided for, from and after October 8, 1999.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
Please be advised that Energy Holdings is making the Exchange Offer in
reliance on the position of the staff of the Division of Corporation Finance of
the Securities and Exchange Commission set forth in certain interpretive letters
addressed to third parties in other transactions. In addition, Energy Holdings
has authorized us to inform you as follows: Energy Holdings has not entered into
any arrangement or understanding with any person to distribute the Exchange
Notes to be received in the Exchange Offer and, to the best of its information
and belief, each person participating in the Exchange Offer is acquiring the
Exchange Notes in its ordinary course of business and has no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes to be received in the Exchange Offer. In this regard, Energy Holdings will
make each person participating in the Exchange Offer aware that if such person
is participating in the Exchange Offer for the purpose of distributing the
Exchange Notes to be acquired in the Exchange Offer, such person (a) could not
rely on the Staff position enunciated in the interpretative letters referred to
above and (b) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Energy Holdings acknowledges that such a secondary resale
transaction by such person participating in the Exchange Offer for the purpose
of distributing the Exchange Notes should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or 508, as applicable, of Regulation S-K. Furthermore,
Energy Holdings will include in the transmittal letter to be executed by an
exchange offeree in order to participate in the Exchange Offer (x) an
acknowledgment that if such exchange offeree is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original Notes that
were acquired as a result of market-making activities or other trading
activities, it will deliver a prospectus in connection with any resale of such
Exchange Notes and (y) a statement that by so acknowledging and by delivering a
prospectus, such exchange offeree will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
ORIGINAL NOTES AS SET FORTH IN SUCH BOX.
7
<PAGE>
- --------------------------------------------------------------------------------
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
--------------------------------------
--------------------------------------
(SIGNATURE(S) OF HOLDER(S)
Dated: _____________, 2000. Must be signed by registered holder(s) exactly as
name(s) appear(s) on Certificate(s) for the Original Notes hereby tendered or on
a security position listing, or by any person(s) authorized to become the
registered holder(s) by endorsements and documents transmitted herewith
(including such opinions of counsel, certifications and other information as may
be required by Energy Holdings for the Original Notes to comply with the
restrictions on transfer applicable to the Original Notes). If signature is by
an attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
Name(s):
---------------------------------------------------------
---------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------
Address:
---------------------------------------------------------
---------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-------------------
Tax ID Number:
---------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
-----------------------------------
AUTHORIZED SIGNATURE
Date: , 2000
-------------
Name of Firm:
-----------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
---------------------------------------------
Address:
---------------------------------------------------------
---------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
----------------------
- --------------------------------------------------------------------------------
8
<PAGE>
- ---------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, AND 6)
To be completed ONLY if the Exchange Notes or
Original Notes not tendered are to be issued in the
name of someone other than the registered holder of
the Original Notes whose name(s) appear(s) above.
Issue
[ ] Original Notes not tendered to:
[ ] Exchange Notes to:
Name(s)
- ---------------------------------------------------
Address
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- ---------------------------------------------------
Tax ID Number
- ---------------------------------------------------
- ---------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, AND 6)
To be completed ONLY if the Exchange Notes or
Original Notes not tendered are to be sent to someone
other not than the registered holder of the Original Notes
whose name(s) appear(s) above.
Mail
[ ] Original Notes not tendered to:
[ ] Exchange Notes to:
Name(s)
- ---------------------------------------------------
Address
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- ---------------------------------------------------
Tax ID Number
- ---------------------------------------------------
9
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES.
This Letter of Transmittal is to be completed either if (a) Certificates
are to be forwarded herewith or (b) tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth in "The Exchange Offer --
Procedures for Tendering Original Notes" in the Prospectus and an Agent's
Message is not delivered. Certificates, or timely confirmation of a book-entry
transfer of such Original Notes into the Exchange Agent's account at DTC, as
well as this Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date. Tenders by book-entry transfer may also be made by delivering
an Agent's Message in lieu of this Letter of Transmittal. The term "Agent's
Message" means a message, transmitted by DTC to and received by the Exchange
Agent and forming a part of a book-entry confirmation, which states that DTC has
received an express acknowledgment from the DTC participant, which
acknowledgment states that such participant has received and agrees to be bound
by the Letter of Transmittal (including the representations contained herein)
and that Energy Holdings may enforce the Letter of Transmittal against such
participant. Original Notes may be tendered in whole or in part in integral
multiples of $1,000.
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available or (ii) who cannot deliver their Original
Notes, this Letter of Transmittal and all other required documents to the
Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete
the procedures for delivery by book-entry transfer on a timely basis, may tender
their Original Notes by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in
"The Exchange Offer -- Procedures for Tendering Original Notes" in the
Prospectus. Pursuant to such procedures: (A) such tender must be made by or
through an Eligible Institution (as defined below); (B) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form made
available by Energy Holdings, must be received by the Exchange Agent on or prior
to the Expiration Date; and (C) the Certificates (or a book-entry confirmation
(as defined in the Prospectus)) representing all tendered Original Notes, in
proper form for transfer, together with a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent within three New York Stock Exchange trading
days after the date of execution of such Notice of Guaranteed Delivery, all as
provided in "The Exchange Offer -- Procedures for Tendering Original Notes" in
the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Original Notes to
be properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible
10
<PAGE>
Institution" means a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "Eligible Guarantor Institution," including (as such terms
are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Energy Holdings will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES.
No signature guarantee on this Letter of Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing
as the owner of the Original Notes) of Original Notes tendered
herewith, unless such holder(s) has completed either the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" above, or
(ii) such Original Notes are tendered for the account of a firm
that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE.
If the space provided in the box captioned "Description of Original Notes"
is inadequate, the Certificate number(s) and/or the principal amount of Original
Notes and any other required information should be listed on a separate signed
schedule which is attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS.
If less than all the Original Notes evidenced by any Certificate submitted
are to be tendered, fill in the principal amount of Original Notes which are to
be tendered in the box entitled "Principal Amount of Original Notes Tendered (if
Principal Amount of Original Notes is Less than All)." In such case, new
Certificate(s) for the remainder of the Original Notes that were evidenced by
your old Certificate(s) will be sent in accordance with the issuance and
11
<PAGE>
delivery instructions received promptly after the Expiration Date. All Original
Notes represented by Certificates delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at any of its addresses set forth above or in the
Prospectus on or prior to the Expiration Date. Any such notice of withdrawal
must specify the name of the person who tendered the Original Notes to be
withdrawn, the aggregate principal amount of Original Notes to be withdrawn, and
(if Certificates for Original Notes have been tendered) the name of the
registered holder of the Original Notes as set forth on the Certificate for the
Original Notes, if different from that of the person who tendered such Original
Notes. If Certificates for the Original Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Certificates for the Original Notes, the tendering holder must submit the serial
numbers shown on the particular Certificates for the Original Notes to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Original Notes tendered for the
account of an Eligible Institution. If Original Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in the Prospectus
under "The Exchange Offer -- Procedures for Tendering Original Notes," the
notice of withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawal of Original Notes, in which case a notice of
withdrawal will be effective if delivered to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. Withdrawals of tenders of Original
Notes may not be rescinded. Original Notes properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer -- Procedures
for Tendering Original Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by Energy Holdings, in
its sole discretion, whose determination shall be final and binding on all
parties. Energy Holdings, any affiliates or assigns of Energy Holdings, the
Exchange Agent or any other person shall not be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Original Notes which
have been tendered but which are withdrawn will be returned to the holder
thereof without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
Original Notes tendered hereby, the signature(s) must correspond exactly with
the name(s) as written on the face of the Certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Original Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
12
<PAGE>
If any tendered Original Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and must submit proper evidence
satisfactory to Energy Holdings, in its sole discretion, of such persons'
authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Original Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless Exchange Notes are
to be issued in the name of a person other than the registered holder(s).
Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Original Notes listed, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the name
or names of the registered owner(s) appear(s) on the Certificates, and also must
be accompanied by such opinions of counsel, certifications and other information
as Energy Holdings may require in accordance with the restrictions on transfer
applicable to the Original Notes. Signatures on such Certificates or bond powers
must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
If Exchange Notes are to be issued in the name of a person other than the
signer of this Letter of Transmittal, or if Exchange Notes are to be sent to
someone other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed. Certificates for Original Notes not exchanged will be
returned by mail or, if tendered by book-entry transfer, by crediting the
account indicated above maintained at DTC. See Instruction 4.
7. IRREGULARITIES.
Energy Holdings will determine, in its sole discretion, all questions as to
the form of documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tender of Original Notes, which determination
shall be final and binding on all parties. Energy Holdings reserves the absolute
right to reject any and all tenders determined by either of them not to be in
proper form or the acceptance of which, or exchange for, may, in the view of
counsel to Energy Holdings, be unlawful, and Energy Holdings also reserves the
right to waive any conditions or irregularities in any tender of Original Notes
of any particular holder whether or not similar conditions or irregularities are
waived in the case of other holders. Energy Holdings' interpretation of the
terms and conditions of the Exchange Offer (including this Letter of Transmittal
and the instructions hereto) will be final and binding. No tender of Original
Notes will be deemed to have been validly made until all irregularities with
respect to such tender have been cured or waived. Energy Holdings, any
affiliates or assigns of Energy Holdings, the
13
<PAGE>
Exchange Agent, or any other person shall not be under any duty to give
notification of any irregularities in tenders or incur any liability for failure
to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Exchange Agent
at any of its addresses and telephone number set forth on the front of this
Letter of Transmittal. Additional copies of the Prospectus, the Notice of
Guaranteed Delivery and the Letter of Transmittal may be obtained from the
Exchange Agent or from your broker, dealer, commercial bank, trust company or
other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9.
Under U.S. Federal income tax law, a holder whose tendered Original Notes
are accepted for exchange is required to provide the Exchange Agent with such
holder's correct taxpayer identification number ("TIN") on Substitute Form W-9
below. If the Exchange Agent is not provided with the correct TIN, the Internal
Revenue Service (the "IRS") may subject the holder or other payee to a $50
penalty. In addition, payments to such holders or other payees with respect to
Original Notes exchanged pursuant to the Exchange Offer may be subject to 31%
backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Original Notes or of the last transferee appearing on the transfers attached
to, or endorsed on, the Original Notes. If the Original Notes are registered in
more than one name or are not in the name of the actual owner, consult the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write
14
<PAGE>
"exempt" on the face thereof, to avoid possible erroneous backup withholding. A
foreign person may qualify as an exempt recipient by submitting a properly
completed IRS Form W-8, signed under penalties of perjury, attesting to that
holder's exempt status. Please consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Original Notes, by execution of this Letter
of Transmittal, shall waive any right to receive notice of the acceptance of
Original Notes for exchange.
Neither Energy Holdings, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Original Notes nor shall any of them incur any liability for failure
to give any such notice.
11. LOST, DESTROYED OR STOLEN CERTIFICATES.
If any Certificate(s) representing Original Notes have been lost, destroyed
or stolen, the holder should promptly notify the Exchange Agent. The holder will
then be instructed as to the steps that must be taken in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificate(s) have been followed.
12. SECURITY TRANSFER TAXES.
Holders who tender their Original Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, Exchange Notes
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the Original Notes tendered, or if a transfer tax
is imposed for any reason other than the exchange of Original Notes in
connection with the Exchange Offer, then the amount of any such transfer tax
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT
ON OR PRIOR TO THE EXPIRATION DATE.
15
<PAGE>
(TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS)
(SEE INSTRUCTION 9)
PAYOR'S NAME: FIRST UNION NATIONAL BANK
<TABLE>
<S> <C> <C>
- ------------------------------------------ -------------------------------------- ------------------------------------
SUBSTITUTE FORM W-9 PART 1-- PLEASE PROVIDE TIN:
YOUR TIN IN THE BOX AT -----------------------------
Department of the Treasury Internal RIGHT AND CERTIFY BY
Revenue Service SIGNING AND DATING BELOW
Social Security Number or
Payor's Request for Taxpayer Employer Identification Number
Identification Number (TIN)
and Certification
-------------------------------------- ------------------------------------
PART 2
Awaiting TIN [ ]
---------------------------------------------------------------------------
PART 3 - CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY
THAT (1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
IDENTIFICATION NUMBER (OR I AM WAITING FOR A NUMBER TO BE ISSUED TO
ME), (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE (I) I
AM EXEMPT FROM BACKUP WITHHOLDING, (II) I HAVE NOT BEEN NOTIFIED BY
THE INTERNAL REVENUE SERVICE ("IRS") THAT I AM SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR
DIVIDENDS, OR (III) THE IRS HAS NOTIFIED ME THAT II AM NO LONGER
SUBJECT TO BACKUP WITHHOLDING, AND (3) ANY OTHER INFORMATION PROVIDED
ON THIS FORM IS TRUE AND CORRECT.
SIGNATURE
-----------------------------------------------
DATE
----------------------------------------------------
- ------------------------------------------ -------------------------------------- ------------------------------------
</TABLE>
You must cross out item (2) in Part (3) above if you have been notified by the
IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return and you have not been notified by the
IRS that you are no longer subject to backup withholding.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
16
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments made to me on account of the Exchange Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature Date: , 2000
---------------------------- ---------------
- --------------------------------------------------------------------------------
17
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
PSEG ENERGY HOLDINGS INC.
OFFER TO EXCHANGE ITS 10% SENIOR NOTES DUE 2009, WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OUTSTANDING 10% SENIOR
NOTES DUE 2009, WHICH HAVE NOT BEEN SO REGISTERED.
PURSUANT TO THE PROSPECTUS DATED ____________________, 2000
As set forth in the Exchange Offer (as described in the Prospectus (as
defined below)), this form or one substantially equivalent hereto must be used
to accept the Exchange Offer if certificates for unregistered 10% Senior Notes
due 2009 (the "Original Notes"), of PSEG Energy Holdings Inc. ("Energy
Holdings"), are not immediately available or time will not permit a holder's
Original Notes or other required documents to reach the Exchange Agent on or
prior to the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis. This form may be delivered by facsimile
transmission, by registered or certified mail, by hand, or by overnight delivery
service to the Exchange Agent. See "The Exchange Offer - Procedures for
Tendering Original Notes" in the Prospectus.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT ____ P.M., EASTERN
STANDARD TIME, ON [_______________], 2000 (THE "EXPIRATION DATE"), UNLESS THE
EXCHANGE OFFER IS EXTENDED BY ENERGY HOLDINGS.
- --------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
FIRST UNION NATIONAL BANK
<TABLE>
<S> <C> <C>
Facsimile Transmissions:
By Registered or Certified Mail: (Eligible Institutions Only) By Hand or Overnight Delivery:
First Union National Bank First Union National Bank
Confirm by Telephone:
Attention:
For Information Call: Attention:
</TABLE>
(Originals of all documents sent by facsimile should be sent promptly
by registered or certified mail, by hand, or by overnight delivery service.)
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to PSEG Energy Holdings Inc., a New
Jersey corporation ("Energy Holdings"), in accordance with Energy Holdings'
offer, upon the terms and subject to the conditions set forth in the prospectus
dated _______________, 2000 (the "Prospectus"), and in the accompanying Letter
of Transmittal, receipt of which is hereby acknowledged, $____________ in the
aggregate principal amount of Original Notes pursuant to the guaranteed delivery
procedures described in the Prospectus.
- --------------------------------------------------------------------------------
Name(s) of Registered Holder(s):
-----------------------------------------------
(Please Type or Print)
Address:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
Area Code and Telephone Number:
------------------------------------------------
Certificate Number(s) for Original Notes (if available):
----------------------
Total Principal Amount Tendered and
Represented by Certificate(s): $
-----------------------------------------------
Signature of Registered Holder(s):
---------------------------------------------
Date:
------------------------------------
[ ] The Depository Trust Company
(check if Original Notes will be tendered by book-entry transfer)
Account Number
---------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE>
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
[Not to be used for signature guarantee]
The undersigned, being a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office in the United States, hereby
guarantees (a) that the above-named person(s) "own(s)" the Original Notes
tendered hereby within the meaning of Rule 14e-4 ("Rule 14e-4") under the
Securities Exchange Act of 1934, as amended, (b) that the tender of such
Original Notes complies with Rule 14e-4, and (c) to deliver to the Exchange
Agent the certificates representing the Original Notes tendered hereby or
confirmation of book-entry transfer of such Original Notes into the Exchange
Agent's account at The Depository Trust Company, in proper form for transfer,
together with the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees and any
other required documents, within three New York Stock Exchange trading days
after the Expiration Date.
================================================================================
Name of Firm:
------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
Area Code and Telephone Number:
------------------------------------------------
Authorized Signature:
----------------------------------------------------------
Name:
--------------------------------------------------------------------------
Title:
------------------------------
Date:
-------------------------------
================================================================================
NOTE: DO NOT SEND CERTIFICATES OF ORIGINAL NOTES WITH THIS FORM. CERTIFICATES
FOR ORIGINAL NOTES SHOULD BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL.
3
