<PAGE> 1
File No. 70-8597
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3 TO
FORM U-1 APPLICATION-DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_________________________
CENTRAL POWER AND LIGHT COMPANY
539 North Carancahua Street
Corpus Christi, Texas 78401
(Name of company filing this statement and address
of principal executive office)
_________________________
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
_________________________
Shirley S. Briones, Treasurer
Central Power and Light Company
539 North Carancahua Street
Corpus Christi, Texas 78401
Stephen J. McDonnell, Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75266-0164
Joris M. Hogan, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
(Names and addresses of agents for service)
<PAGE> 2
Central Power and Light Company (the "Company"), a Texas corporation
and a wholly-owned electric public utility subsidiary of Central and South
West Corporation ("CSW"), a Delaware corporation and a registered holding
company under the Public Utility Holding Company Act of 1935, as amended (the
"Act"), hereby files this Amendment No. 3 to the Form U-1 Application-
Declaration in File No. 70-8597 for the purpose of amending Items 1 and 4
thereof in the following respects and filing exhibits 1, 2, 3, 4 and 5
thereto. In all other respects, the Application-Declaration as previously
filed and amended will remain the same.
The second sentence of the eighth paragraph of Item 1 under the
heading Terms of the New Bonds is hereby amended to add the phrase "or other
entities" after the phrase "investment banking firms".
The third sentence of the eighth paragraph of Item 1 under the
heading Terms of the New Bonds is hereby amended to delete the comma after
the phrase "(each a "Supplemental Indenture")" and delete the phrase "in the
case of the New Money Bonds)," after the phrase "(each a "Supplemental
Indenture") or".
Item 1 is hereby amended to add the following paragraph after the
thirty-first paragraph under the heading Managing Interest Rates:
"The Company requests that the Commission reserve jurisdiction over
the Company's ability to enter into swaps and other hedging products as
discussed above."
Item 4 is hereby amended to add the following paragraph:
"The Company believes (based on review of applicable state laws) that
no state approvals are required in connection with the entering into by the
Company of one or more hedging products, including interest rate swaps,
forward swaps, caps, collars and floors, and forward transactions (the
<PAGE> 3
"Instruments") to manage interest rate risk or effectively lower the Company's
interest cost on one or more series of Old Bonds and/or New Bonds. The
Company will, however, prior to entering into any such Instrument, provide
information on the Instruments to members of the staff of the Public Utility
Commission of Texas."
Item 1. Description of Proposed Transaction.
Item 1 is hereby amended in its entirety to read as follows:
The Company is seeking authority through December 31, 1997, to incur
obligations in connection with the proposed issuance by Matagorda County
Navigation District Number One (Texas) (the "District") in one or more series
of up to $475,000,000 aggregate principal amount of Pollution Control Revenue
Bonds of which (i) up to $325,000,000 aggregate principal amount may be
Pollution Control Revenue Refunding Bonds (Central Power and Light Company
Project) (the "Refunding Bonds"), and (ii) up to $150,000,000 aggregate
principal amount may be Pollution Control Revenue Bonds and/or Solid Waste
Revenue Bonds (Central Power and Light Company Project) (the "New Money Bonds"
and, together with the Refunding Bonds, the "New Bonds"). The issuance of New
Money Bonds may be combined with the issuance of Refunding Bonds.
The purpose of the issuance of the Refunding Bonds is to reacquire
all or a portion of the District's (i) $68,870,000 of outstanding 10-1/8%
Pollution Control Revenue Bonds (Central Power and Light Company Project)
Series 1984 (the "Series 1984 Bonds"), (ii) $111,700,000 of outstanding 7-1/2%
Collateralized Pollution Control Revenue Bonds (Central Power and Light
Company Project) Series 1984A (the "Series 1984A Bonds"), (iii) $31,765,000 of
outstanding 9-3/4% Collateralized Pollution Control Revenue Bonds (Central
Power and Light Company Project) Series 1985A (the "Series 1985A Bonds"),
(iv) $60,000,000 of outstanding 7-7/8% Pollution Control Revenue Bonds
<PAGE> 4
(Central Power and Light Company Project) Series 1986 (the "Series 1986
Bonds") and (v) $50,000,000 of outstanding 7-1/2% Collateralized Pollution
Control Revenue Bonds (Central Power and Light Company Project) Series 1990
(the "Series 1990 Bonds" and, together with the Series 1984, Series 1984A,
Series 1985A and Series 1986 Bonds, the "Old Bonds"). The purpose of the
issuance of the New Money Bonds is to reimburse the Company's treasury for any
expenditures made that qualify for tax-exempt financing or to provide for
current solid waste expenditures. See "Use of Proceeds" below.
As discussed below under the headings "Managing Interest Rates" and
"Forward Underwritings", the Company also seeks authorization to manage
interest rate risk or lower its interest rate costs through the use of forward
refinancing techniques, and through the use of interest rate swaps, including
forward swaps, caps and floors through the life of the corresponding Old Bonds
and/or New Bonds.
The Old Bonds
In October 1984, December 1984 and July 1985, the District issued the
Series 1984 Bonds, Series 1984A Bonds and the Series 1985A Bonds,
respectively, pursuant to Indentures of Trust between the District and
NationsBank of Texas, N.A., Dallas, Texas (successor to RepublicBank Dallas,
National Association), as Trustee. In December 1986, the District issued the
Series 1986 Bonds pursuant to the Indenture of Trust between the District and
The Bank of New York, as Trustee. In March 1990 the District issued the
Series 1990 Bonds pursuant to the Indenture of Trust between the District and
Texas Commerce Bank - Dallas, N.A., Dallas, Texas (successor to Ameritrust
Texas National Association), as Trustee. The Indentures of Trust for the Old
Bonds are referred to collectively herein as the "Indentures". NationsBank of
Texas, N.A., Dallas, Texas, The Bank of New York and Texas Commerce Bank -
Dallas, N.A. are referred to collectively herein as the "Trustees".
<PAGE> 5
Certain terms of the Indentures include the following:
Interest
Series Rate Maturity Date First Redemption Date (1)
(per annum)
1984 10-1/8% October 15, 2014 October 15, 1995
1984A 7-1/2% December 15, 2014 December 15, 1999
1985A 9-3/4% July 1, 2015 July 1, 1995
1986 7-7/8% December 1, 2016 December 1, 1996
1990 7-1/2% March 1, 2020 March 1, 2000
(1) The Indentures provide that the bonds of each series may not be redeemed
prior to its First Redemption Date and thereafter may be redeemed at the
then applicable redemption price plus accrued interest to the redemption
date.
The Company and the District entered into Installment Sale Agreements
(the "Sale Agreements") between the District and the Company to provide for
the issuance of the Old Bonds. In connection with the issuance of the New
Bonds, the Company will (i) amend the Sale Agreements, (ii) enter into
agreements with substantially the same terms as the Sale Agreements and/or
(iii) enter into new installment sale agreements (each, an "Amended Sale
Agreement").
The Old Bonds were originally issued to finance the cost of the
acquisition of certain pollution control and solid waste disposal facilities
(the "Facilities") at the South Texas Project Electric Generating Station (the
"Plant") between Bay City and Palacios, Texas. The Plant consists of two
nuclear generating units each with the capability of generating 1250 megawatts
of power. Unit 1 began commercial operation in August 1988 and Unit 2 began
commercial operation in June 1989. The Company owns a 25.2% undivided
interest in the Plant. Except where the context otherwise indicates, the term
"Facilities" herein refers to the Company's portion of the pollution control
and solid waste disposal facilities at the Plant.
<PAGE> 6
Terms of the New Bonds
The New Bonds will bear interest at a fixed or floating rate, may
or may not be secured with First Mortgage Bonds and will mature in not less
than one nor more than forty years. The interest rate, redemption provisions
and other terms and conditions applicable to the New Bonds will be determined
by negotiations between the Company and one or more investment banking firms
or other entities that will purchase or underwrite the New Bonds (the
"Purchasers"). It is anticipated that (i) the New Bonds will be redeemable at
any time in whole at the option of the Company at the principal amount thereof
plus accrued interest, upon the occurrence of various extraordinary events
specified in the Amended Sale Agreements, as supplemented, or similar
documents utilized in connection with the issuance of the New Bonds, and the
Indentures as amended by one or more supplements (each a "Supplemental
Indenture") or a new indenture (the "New Indenture"), relating generally to
(a) destruction or condemnation of the Facilities or the Plant, (b) conditions
rendering operation of the Facilities or the Plant infeasible, (c) the
imposition on the Company or the District of unreasonable burdens or excessive
liabilities with respect to the Facilities or the Plant, or (d) if a
constitutional amendment or legislative, administrative or judicial action
causes the obligations of the Company under the Sale Agreements to become
unenforceable or impossible of performance in any material respect with the
expressed intention of the parties; (ii) the New Bonds will be subject to
optional redemption in whole or in part at times and with premiums to be
determined by negotiations between the Company and the Purchaser(s); and (iii)
the New Bonds will be subject to special mandatory redemption, in whole or in
part, at the principal amount thereof plus accrued interest, in the event the
interest on the New Bonds becomes subject to federal income tax.
<PAGE> 7
Pursuant to the Sale Agreements, the Company transferred the
Facilities to the District, which financed the acquisition and related costs
thereof with the proceeds of the Old Bonds. The Sale Agreements contain
commitments by the Company to pay to the District at specified times amounts
sufficient to enable the District to pay debt service on the Old Bonds,
including principal, interest and redemption premium, if any.
The Company may obtain credit enhancement for the New Bonds, which
could include bond insurance, a letter of credit or a liquidity facility. Due
to heightened credit sensitivity in the short-term tax-exempt market, the
Company anticipates it may be required to provide credit enhancement if it
were to issue floating rate bonds, whereas credit enhancement would be a
purely economic decision for the Company if it were to issue fixed rate bonds.
The Company anticipates that even though it would be required to pay a premium
or fee to obtain the credit enhancement, it would realize a net benefit
through a reduced interest rate on the New Bonds. The Company would obtain
credit enhancement only if it determines it would be economically beneficial
to do so.
If bond insurance is obtained, the Company may be required to enter
into an agreement with the insurer and an escrow agent pursuant to which the
Company would be obligated to make payments of certain amounts into an escrow
fund upon the Company's failure to maintain certain financial ratios and on
the occurrence of certain other events. Amounts held in such an escrow fund
would be payable to the insurer as an indemnity for any amounts paid by the
insurer with respect to principal or interest on the New Bonds. The New Bonds
may also contain other terms and conditions deemed necessary or desirable to
take maximum advantage of the then current market conditions.
<PAGE> 8
The Company also requests authority to issue First Mortgage Bonds
as security for the payment of the New Bonds, at its option, depending upon
market conditions at the time of issuance of the New Bonds. The Company will
issue First Mortgage Bonds, subject to applicable indenture restrictions upon
the issuance thereof, by executing a Supplemental Indenture to its Mortgage
Indenture dated November 1, 1943 to the First National Bank of Chicago and
A.H. Bohm (the "Mortgage Indenture"). Such First Mortgage Bonds will be
issued to the Trustee for the New Bonds pursuant to the Mortgage Indenture.
The First Mortgage Bonds will be held by the Trustee solely for the benefit of
the holders of the New Bonds and will not be transferable except to a
successor Trustee. The First Mortgage Bonds will be issued in the exact
amount and have substantially the same terms as the New Bonds. To the extent
payments in respect of the New Bonds are made in accordance with their terms,
corresponding payment obligations under the First Mortgage Bonds will be
deemed satisfied.
As applied to any First Mortgage Bonds that may be issued as
collateral for the New Bonds, the optional redemption provisions described
herein may deviate from the Securities and Exchange Commission's (the
"Commission") Statement of Policy Regarding First Mortgage Bonds Subject to
the Public Utility Holding Company Act of 1935, Release No. 35-13105, 21 Fed.
Reg. 1286 (1956), as supplemented by Commission Release No. 35-16369, 34 Fed.
Reg. 9553 (1969) (together, the "Statement of Policy"), in that the First
Mortgage Bonds may be subject to a redemption limitation of up to fifteen
years while the Statement of Policy requires that first mortgage bonds be
subject to redemption at any time upon reasonable notice and with reasonable
redemption premiums, if any. The Company has been advised by several
investment banks that purchasers of fixed-rate, tax-exempt bonds generally
<PAGE> 9
expect a ten year redemption limitation and that failure to include such a
limitation may cause the New Bonds to be unmarketable to a large pool of such
purchasers, and may result in an increase in the effective interest cost to
the Company. In consideration of current and future market expectations with
regard to redemption limitations, the Company hereby requests that the
Commission approve the above-described deviation from the Statement of Policy
so that the First Mortgage Bonds, and therefore the New Bonds, may contain up
to a 15 year optional redemption limitation. As applied to the First Mortgage
Bonds, the sinking fund provisions described herein may also deviate from the
Statement of Policy, in that the First Mortgage Bonds will not have sinking
fund provisions unless the New Bonds have sinking fund provisions. The
Statement of Policy requires the Company to deposit annually with the trustee
for the First Mortgage Bonds an amount of cash equal to not less than
one percent of the aggregate principal amount of Bonds of all series
authenticated under the First Mortgage Bond indenture. The Company has been
advised by several investment bankers that purchasers of private activity
bonds generally do not expect sinking fund provisions. In light of market
expectations, the Company hereby requests that the Commission approve the
above-described deviation from the Statement of Policy so that the First
Mortgage Bonds, and therefore the New Bonds, may omit sinking fund provisions.
The Company also requests a waiver from the requirement in the Statement of
Policy for a limitation on dividends. The Company believes that dividend
limitations, if any, are a matter best left to the financial marketplace and
the state regulatory commissions. The limitation on dividends provision in
the Statement of Policy was adopted when accounting standards and ratemaking
practices were very different from today. For example, ratemaking
disallowances on grounds of alleged lack of prudence or alleged excess
<PAGE> 10
capacity have become more prevalent today. Under today's accounting
requirements, disallowances might result in charges to the income statement
and current retained earnings, which could preclude the payment of dividends
on common stock.
All of the Company's bonds of Series AA and prior contain dividend
restrictions in the supplemental indentures which will continue to limit the
Company's dividend payments until all such bonds mature or are retired. In
light of these dividend restrictions and provisions in the Company's Articles
of Incorporation restricting the payment of dividends to a percentage of net
income available for dividends on common stock if the Company's common stock
equity is not maintained at a certain percentage of total capitalization, the
Company believes that the omission of the limitation on dividends as
contemplated by the Statement of Policy will not materially and adversely
affect the holders of the New Bonds. The terms and provisions of the First
Mortgage Bonds will not otherwise materially deviate from the Statement of
Policy.
Messrs. McCall, Parkhurst & Horton, who are anticipated to act as
Bond Counsel, have informed the Company that they will be prepared to give a
legal opinion that interest on the New Bonds will be excluded from gross
income for federal income tax purposes.
The Company anticipates that the New Bonds will be sold by the
District pursuant to a Bond Purchase Agreement (the "Purchase Agreement")
between the District and one or more Purchasers. The Company may or may not
be a party to the Purchase Agreement, but if it is not a party, the Purchase
Agreement will be subject to approval by the Company and the Company will
enter into a letter of representation with the Purchasers, containing various
warranties, representations and indemnities upon which the Purchasers will
rely in entering into the Purchase Agreement.
<PAGE> 11
The Company requests authority to enter into negotiations with
Purchasers with respect to the interest rate, redemption provisions and other
terms and conditions applicable to the New Bonds and to set the terms of the
New Bonds subject to the receipt of an order under the Act if an order has not
been issued when the Company enters into the Purchase Agreement.
Use of Proceeds
The proceeds of the offering of the New Bonds will be used to
(i) redeem the Old Bonds pursuant to the terms of the Indentures or reacquire
all or a portion of the Old Bonds through open market and negotiated
transactions or pursuant to one or more tender offers (the "Reacquisition")
and (ii) reimburse the Company's treasury for any expenditures made that
qualify for tax-exempt financing or to provide for current solid waste
expenditures. The proceeds of any offering may also be used to reimburse the
Company's treasury for Old Bonds previously acquired. The Company may be
required to deposit the proceeds of the New Bonds with the Trustee in
connection with the Reacquisition of the Old Bonds. Any additional funds
required to pay for the Reacquisition of Old Bonds and the costs of issuance
of the New Bonds will be provided by the Company from internally generated
funds and short-term borrowings pursuant to orders of the Commission dated
March 31, 1993 (HCAR No. 35-25777), September 28, 1993 (HCAR No. 35-25897),
March 18, 1994 (HCAR No. 35-26007) and June 15, 1994 (HCAR No. 35-26066), or
subsequent orders (the "Short-Term Borrowing Orders").
Since the Old Bonds were issued, there has been a reduction in
long-term interest rates. The Company believes that the Reacquisition of the
Old Bonds and the issuance of the Refunding Bonds would result in substantial
savings to the Company and benefit the Company's ratepayers. Based on current
market conditions, it is estimated that the District could issue the Refunding
<PAGE> 12
Bonds with up to a 40 year maturity at an interest rate of approximately
6.90%, depending on market conditions and maturity. As set forth in Exhibit
11 hereto, the acquisition of the Old Bonds and the issuance of the Refunding
Bonds would result in an estimated annual aggregate reduction in interest
costs to the Company of $3,805,000, if all of the Old Bonds were reacquired,
including the amortization of the premium to be paid on the Old Bonds over a
30 year life of the New Bonds. Total interest savings to the Company over the
remaining life of the Old Bonds would aggregate $75,532,000. The Company will
not permit the issuance of the Refunding Bonds unless the estimated net
present value savings (derived from the net difference between interest
payments on any Refunding Bonds and the Old Bonds) is, on an after-tax basis,
greater than the present value of all costs to acquire the Old Bonds and issue
the Refunding Bonds, assuming an appropriate discount rate. Such discount
rate would be based on the estimated after-tax interest rate on the Refunding
Bonds.
Neither CSW, CPL nor any subsidiary thereof has a direct or
indirect ownership interest in an "exempt wholesale generator" ("EWG") or
"foreign utility company" ("FUCO") as defined in Sections 32 and 33 of the Act
and none of the proceeds from the sale of New Bonds will be used by CSW or any
subsidiary thereof for the direct or indirect acquisition of an interest in an
EWG or FUCO. Further, neither CSW, CPL nor any subsidiary thereof, now or as
a consequence of the transactions proposed herein, is or will be a party to,
or has or will have any rights under a service, sales or construction
agreement with an EWG or a FUCO. Therefore, Rule 54 does not apply.
<PAGE> 13
Repurchase of Old Bonds
The Company is also seeking authority to acquire any or all of one or
more series of the Old Bonds from time to time through December 31, 1997 in
open market and negotiated transactions. Any such acquisitions will be made
with internally generated funds or short-term borrowings pursuant to the
Short-Term Borrowing Orders. Acquisitions would only be made if the Company
determined that it would be in the best interest of the Company to do so based
on, among other things, the interest rate of the securities, the Company's
financing plans and capital structure and the Company's then current cash
position. The Company is seeking authority to make purchases of Old Bonds in
light of opportunities which arise to make such purchases at a time when the
Company is not engaged in a refinancing or to purchase Old Bonds which are not
redeemable pursuant to terms of its Indenture. The Company will not acquire
Old Bonds unless it believes that net present value savings, on an after-tax
basis, greater than the present value of all costs to acquire such securities,
assuming an appropriate discount rate, could be generated based on then
current interest rates if the Company were to finance the purchase of the Old
Bonds.
Tender Offer
If the Company determines to acquire the Old Bonds, it may do so
through a tender offer (the "Tender Offer") to the holders of the Old Bonds
("the "Old Bondholders") to purchase all or a portion of one or more series of
the Old Bonds for cash. The Tender Offer may be conditioned upon receipt of a
certain percentage of the outstanding Old Bonds. The Tender Offer price would
be based on a number of factors, including the coupon rate of the Old Bonds,
the date of expiration of the refunding protection of the Old Bonds (on which
<PAGE> 14
date the Company, depending on the prevailing interest rates, may be presumed
to redeem the Old Bonds), the redemption price on such expiration date and the
then current market rates for similar bonds, all of which are relevant to the
decision of an informed Old Bondholder as to whether to hold or sell the Old
Bonds. Old Bondholders may be offered a fixed price for their Old Bonds, or
the Tender Offer may be a "fixed spread" offer pursuant to which the Company
will offer a price based upon a fixed spread over comparable treasuries. The
Tender Offer will be conducted in accordance with standard market practice,
i.e., the length of time the offer will be held open, the method of
solicitation, etc., at the time of the Tender Offer. The Company requests
authority to commence a Tender Offer to Old Bondholders prior to receipt of an
order under the Act, provided that completion of the Tender Offer is subject
to receipt of an order.
The Company proposes to retain an investment banking firm (to be
chosen) experienced in such matters to act as the Company's tender agent and
dealer-manager for any Tender Offer. The dealer-manager will act as the
Company's agent in disseminating the Tender Offer and receiving responses
thereto. As a dealer-manager, the investment banking firm will not itself
become obligated to purchase or sell any of the Old Bonds. The dealer-
manager's fee will be determined following negotiation and investigation of
fees in similar transactions and will include reasonable out-of-pocket
expenses and attorneys' fees. It is anticipated that the Company will be
required, as is customary, to indemnify the dealer-manager for certain
liabilities. The Company may also retain a depositary to hold the tendered
Old Bonds pending the purchase thereof and/or an information agent to assist
<PAGE> 15
in the Tender Offer. In the event that an agreement with any of the
aforementioned parties is negotiated, the Company will file by amendment
drafts of the dealer-manager agreement, depositary agreement and/or
information agent agreement.
Managing Interest Rates
The Company proposes to manage interest rate risk, as appropriate,
through the use of hedging products, including interest rate swaps, forward
swaps, caps, collars and floors, and through forward transactions as described
under the heading "Forward Underwritings" below. The Company may also use
interest rate swaps for the purpose of effectively lowering its interest costs
on one of more series of Old Bonds and/or New Bonds. The Company requests
authority to enter into the foregoing types of transactions from time to time
either in connection with the issuance of New Bonds or otherwise.
The Company could use the interest rate swap market to hedge against
changes in the interest rates of variable rate securities by entering into a
fixed-for-floating swap arrangement (the Company pays a fixed rate to a
counterparty and receives, in return, a floating rate). In addition, the
Company may be able to realize a lower all-in rate in the synthetic fixed
market than in the natural cash fixed market. A synthetic fixed rate issuance
is achieved by issuing variable rate securities and simultaneously entering
into a fixed-for-floating interest rate swap. The variable rate amounts
received by the Company on the swap are used to pay the variable rate interest
on the bonds, thereby leaving the Company with a net fixed rate payment. A
notional cash fixed rate issuance is achieved by simply issuing fixed rate
securities. Currently, a synthetic fixed rate for a 30 year maturity is
approximately 50 basis points less than the natural cash fixed market. This
spread between synthetic and natural fixed will vary with conditions in the
municipal, treasury, and interest rate swap markets.
<PAGE> 16
The Company may also issue fixed rate New Bonds and then seek to
effectively lower its interest costs on such New Bonds by entering into a
floating-for-fixed interest rate swap arrangement (the Company pays a floating
rate to a counterparty and receives, in return, a fixed rate). In this
manner, the Company would hope to take advantage of interest cost savings
associated with short-term interest rates. The floating rate payable by the
Company would be based upon a market index, such as LIBOR (London Interbank
Deposit Offered Rate), Federal Funds, reserve-adjusted certificate of deposit
or commercial paper rates or the J.J. Kenny or PSA tax-exempt indices. The
Company may be required to pay a margin in addition to such floating rate,
which margin shall not be greater than 5%. In such event, the fixed interest
rate payable by the counterparty would include the amount of such margin.
None of the interest rate swaps would be "leveraged." This means
that changes in interest payments or receipts under any interest rate swap due
to changes in the floating rate index used in the swap will not exceed the
product of the change in such index and the notional amount of that swap. In
no event would the aggregate notional amount of the interest rate swaps, at
any one time, exceed $475,000,000.
The interest rate swaps mentioned above may also be forward swaps,
whereby a swap agreement is entered into but the exchange of fixed and
floating payments does not begin until a future date, which is generally the
call date on outstanding bonds.
It is anticipated that any interest rate swap agreement entered into
would provide that redemption, reacquisition or maturation of the
corresponding Old Bonds and/or New Bonds would terminate the Company's
obligations to the counterparty under the swap agreement for a corresponding
notional amount. If an interest rate swap with automatic termination is not
<PAGE> 17
available or economically appropriate, the Company will enter into a swap
permitting termination at the option of the Company and the Company would
exercise such option for a corresponding notional amount upon the redemption,
reacquisition or maturation of the corresponding Old Bonds and/or New Bonds
The Company's termination of its obligations under the interest rate swap
agreement may require the Company to pay an additional amount under the terms
of the swap agreement, which may be substantial depending upon market
conditions at the time of the termination.
In order to obtain flexibility in the event that market conditions
with respect to interest rates change after the Company has entered into an
interest rate swap agreement as described herein, the Company also requests
authorization to enter into reverse (or offsetting) interest rate swap
agreements, or other contractual arrangements, in order to limit the impact of
anticipated movements in interest rates or offset the effect of existing
interest rate swap agreements.
If the Company issues variable rate New Bonds, it may elect to
purchase an interest rate cap to limit its exposure to rising interest rates.
The Company may additionally sell an interest rate floor to either lower the
cost of variable rate debt, or in conjunction with an interest rate cap, to
reduce the cost of the cap.
The Company requests that the Commission reserve jurisdiction over
the Company's ability to enter into swaps and other hedging products as
discussed above.
Forward Underwritings
Under a forward underwriting, the Company would price the New Bonds
based upon then current rates. The settlement date, however, would not occur
until 90 days or less prior to the date at which the Old Bonds become
<PAGE> 18
refundable pursuant to terms of the Indenture. A forward underwriting locks
in refunding savings with no incremental market risk to the Company until such
Old Bonds become refundable. The Company would eliminate all exposure to
future movements in its tax-exempt refunding rates. Although the Company may
elect a different term, historical forward commitment underwriting premiums
indicate the Company will have to pay up to approximately 25, 35, or 60 basis
points on a 6, 12, or 18 month forward transaction, respectively, subject to
changes in market conditions. The Company would only enter into a forward
transaction if it appears attractive rates will not be available once the Old
Bonds become refundable pursuant to their terms.
Conclusion
The Company believes that the consummation of the transactions
proposed herein will be in the best interests of its consumers and investors
and consistent with sound and prudent financial policy.
Item 4. Regulatory Approval.
Item 4 is hereby restated in its entirety to read as follows:
No state regulatory authority and no federal regulatory authority,
other than the Commission under the Act, has jurisdiction over the proposed
transaction.
The Company believes (based on review of applicable state laws) that
no state approvals are required in connection with the entering into by the
Company of one or more hedging products, including interest rate swaps,
forward swaps, caps, collars and floors, and forward transactions (the
"Instruments") to manage interest rate risk or effectively lower the Company's
interest cost on one or more series of Old Bonds and/or New Bonds. The
Company will, however, prior to entry into any such Instrument, provide
information on the Instruments to members of the staff of the Public Utility
Commission of Texas.
<PAGE> 19
Item 6. Exhibits and Financial Statements.
Items 6 is hereby amended to file the following exhibits:
Exhibit 1 - Form of Installment Sale Agreement between the Company
and the District.
Exhibit 2 - Form of Indenture of Trust between the District and
the Trustee.
Exhibit 3 - Form of Bond Purchase Agreement between the District
and the Purchasers.
Exhibit 4 - Form of Letter of Representation from the Company to
the Purchasers.
Exhibit 5 - Preliminary Official Statement relating to the Bonds.
<PAGE> 20
S I G N A T U R E
- - - - - - - - -
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, as amended, the undersigned Company has duly caused this document
to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: June 12, 1995
CENTRAL POWER AND LIGHT COMPANY
By: /s/ SHIRLEY S. BRIONES
Shirley S. Briones
Treasurer
<PAGE> 1
INDEX OF EXHIBITS
EXHIBIT TRANSMISSION
NUMBER EXHIBITS METHOD
- ------- -------- ------------
1 Form of Installment Sale Agreement Electronic
between the Company and the District.
2 Form of Indenture of Trust between the Electronic
District and the Trustee.
3 Form of Bond Purchase Agreement between Electronic
the District and the Underwriters.
4 Form of Letter of Representation from Electronic
the Company to the Purchasers.
5 Preliminary Official Statement relating Electronic
to the Bonds.
<PAGE> 1
EXHIBIT 1
---------
D R A F T
INSTALLMENT PAYMENT AGREEMENT
BETWEEN
MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE
AND
CENTRAL POWER AND LIGHT COMPANY
____________________
Dated as of July 1, 1995
Relating to
Pollution Control Revenue Refunding Bonds
(Central Power and Light Company Project)
SERIES 1995
<PAGE> 2
INSTALLMENT PAYMENT AGREEMENT
TABLE OF CONTENTS
(This Table of Contents is not a part of this Agreement
and is only for convenience of reference)
PAGE
Parties 1
Recitals 1
ARTICLE I
Section 1.01. Definitions 1
Section 1.02. Certain Rules of Interpretation 5
ARTICLE II
Representations
Section 2.01. Representations by Issuer 6
Section 2.02. Representations by Company 7
ARTICLE III
The Bonds and the Company's Payments
Section 3.01. Issuance of the Bonds 8
Section 3.02. Refunding of Bonds 9
Section 3.03. Redemption of Bonds 9
Section 3.04. Installment Payments 10
Section 3.05. Issuer's Rights Assigned to Trustee 10
ARTICLE IV
Other Payments
Section 4.01. Intentionally Omitted 11
Section 4.02. Intentionally Omitted 11
Section 4.03. Trustee Expenses 11
Section 4.04. Issuer Expenses 11
Section 4.05. Taxes and Other Governmental Charges and
Utility Charges 11
Section 4.06. Payment to Special Rebate Fund 12
i
<PAGE> 3
ARTICLE V
Special Covenants
PAGE
Section 5.01. Intentionally Omitted 12
Section 5.02. Intentionally Omitted 12
Section 5.03. Indemnities 12
Section 5.04. Facilities to be Used for Pollution Abatement 13
Section 5.05. Intentionally Omitted 13
Section 5.06. Intentionally Omitted 13
Section 5.07. Company to Maintain Corporate Existence; 13
Conditions Under Which Exceptions Permitted 13
Section 5.08. Qualification in Texas 13
Section 5.09. Permits or Licenses 13
Section 5.10. Preservation of Existence of Issuer; Obligations
Underthe Indenture 14
Section 5.11. No Personal Liability 14
Section 5.12. Tax Exempt Status of the Bonds 14
Section 5.13. Arbitrage Covenants 15
Section 5.14. Annual Report 15
ARTICLE VI
Events of Default and Remedies
Section 6.01. Event of Default 16
Section 6.02. Remedies on Default 18
Section 6.03. No Remedy Exclusive 18
Section 6.04. Agreement to Pay Attorneys' Fees and Expenses 19
Section 6.05. No Additional Waiver Implied by One Waiver 19
Section 6.06. Notice to Bond Insurer 19
ARTICLE VII
Prepayments
Section 7.01. Prepayments 19
Section 7.02. Amount of Prepayments When Bonds to be
Redeemed 19
Section 7.03. Notice of Prepayment 20
Section 7.04. Time of Prepayments 20
ii
<PAGE> 4
ARTICLE VIII
Miscellaneous
PAGE
Section 8.01. Disposition of Bond Fund Upon Termination 20
Section 8.02. Notices 20
Section 8.03. Unconditional Obligation 21
Section 8.04. Assignment of the Agreement by Company 21
Section 8.05. Assignment to Trustee by Issuer 21
Section 8.06. Binding Effect 21
Section 8.07. Amendments, Changes, Modifications and
Financed Interest 22
Section 8.08. Execution in Counterparts 22
Section 8.09. Severability 22
Section 8.10. Laws Governing 23
Section 8.11. Section Headings 23
Section 8.12. Entire Agreement 23
ARTICLE IX
Term of Agreement
Section 9.01. Term of Agreement 23
EXECUTION
Execution by Issuer 24
Execution by Company 24
iii
<PAGE> 5
INSTALLMENT PAYMENT AGREEMENT
THE STATE OF TEXAS :
MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE :
THIS AGREEMENT is made and entered into as of July 1, 1995, by
and between MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE ("Issuer"), a
governmental agency and body politic and corporate of the State of Texas,
operating as a conservation and reclamation district pursuant to Article
XVI, Section 59 of the Texas Constitution and the general laws of the
State of Texas, and CENTRAL POWER AND LIGHT COMPANY ("Company").
W I T N E S S E T H:
WHEREAS, this Agreement is authorized and executed pursuant to
applicable Texas laws, including the Regional Waste Disposal Act, Chapter
30, Texas Water Code ("Chapter 30"), the Clean Air Financing Act, Chapter
383, Texas Health and Safety Code (the "Air Act"), and Article 717q
V.A.T.C.S. ("Art. 717q", which together with Chapter 30 and the Air Act
are sometimes hereinafter collectively referred to as the "Acts"); and
WHEREAS, Issuer and Company have previously entered into an
Installment Sale Agreement dated as of October 15, 1984 (the "1984
Agreement") pursuant to which Issuer issued its Matagorda County
Navigation District Number One Adjustable Rate Pollution Control Revenue
Bonds (Central Power and Light Company Project) Series 1984 (the "1984
Bonds") and used the proceeds to finance the costs of certain eligible
projects and Company agreed to make payments to NationsBank of Texas,
National Association (successor to RepublicBank Dallas, National
Association), as Trustee (the "Prior Trustee") on behalf of the owners of
the 1984 Bonds under an Indenture of Trust with Issuer dated as of October
15, 1984 (the "1984 Indenture"), in amounts sufficient to pay the
principal of, premium, if any, and interest on and all other charges in
connection with the 1984 Bonds; and
WHEREAS, Issuer and Company have previously entered into an
Installment Sale Agreement dated as of July 1, 1985 (the "1985A
Agreement") pursuant to which Issuer issued its Matagorda County
Navigation District Number One Collateralized Pollution Control Revenue
Bonds (Central Power and Light Company Project) Series 1985A (the "1985A
Bonds") and used the proceeds to finance the costs of certain eligible
projects and Company agreed to make payments to the Prior Trustee on
behalf of the owners of the 1985A Bonds under an Indenture of Trust with
Issuer dated as of July 1, 1985 (the "1985A Indenture"), in amounts
sufficient to pay the principal of, premium, if any, and interest on and
all other charges in connection with the 1985A Bonds; and
WHEREAS, the 1984 Agreement and 1985A Agreement are sometimes
hereinafter referred to collectively as the Prior Agreements, the 1984
Bonds and the 1985A Bonds are sometimes hereinafter referred to
collectively as the Prior Bonds, and the 1984 Indenture and the 1985A
Indenture are sometimes hereinafter referred to as the Prior Indentures;
and
<PAGE> 6
WHEREAS, pursuant to the terms of the Prior Agreements and the
Prior Indentures, Company is obligated to make installment payments, which
installment payments shall be made to the Prior Trustee in amounts which,
together with other moneys available therefor, will be sufficient to pay
the principal of, premium, if any, and interest on the Prior Bonds as the
same come due, with such installment payments to be made in funds which
will be immediately available on the date such principal, premium, if any,
and interest is due on the Prior Bonds; and
WHEREAS, Company has requested that Issuer issue its refunding
bonds for the purpose of refunding and retiring all of the Outstanding
Prior Bonds; and
WHEREAS, Company has agreed to make payments hereunder in lieu
of its obligations under the Prior Agreements relating to the refunded
Prior Bonds.
NOW, THEREFORE, for and in consideration of the covenants
herein made, and subject to the conditions herein set forth, the parties
hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Unless a different meaning clearly
appears from the context, the following words and terms shall have the
following meanings, respectively:
Acts - Chapter 30, the Air Act and Art. 717q.
Agreement - this Installment Payment Agreement dated as of July
1, 1995, between Issuer and Company, as from time to time modified,
altered, amended, and supplemented.
Agreement to Issue Bonds - the resolution of the Board adopted
on March 2, 1974 taking "some other similar official action" toward the
issuance of the Bonds.
Air Act - the Clean Air Financing Act, Chapter 383, Texas
Health and Safety Code.
Art. 717q - Article 717q, Vernon's Annotated Texas Civil
Statutes, as amended.
Authorized Company Officer - the President, any Vice President
or the Treasurer of the Company and the Treasurer and Director of Finance
of Central and South West Corporation.
Authorized Company Representative - any person or persons
designated to act on behalf of Company in matters relating to this
Agreement by written certificate furnished to Issuer and Trustee
<PAGE> 7
containing the specimen signature of any such person or persons and signed
on behalf of Company by the Chairman of the Board of Directors, the
President, or any Vice President of Company.
Board - the lawfully qualified Board of Navigation and Canal
Commissioners of Issuer.
Bonds - Matagorda County Navigation District Number One
Pollution Control Revenue Refunding Bonds (Central Power and Light Company
Project) Series 1995 issued in the aggregate principal amount of
$100,635,000 pursuant to the Indenture.
Bond Counsel - an attorney or firm of attorneys of recognized
standing in the field of law relating to revenue bonds, selected by Issuer
and satisfactory to Trustee and Company.
Bond Fund - the fund by that name created and established in
the Indenture.
Bond Insurer - MBIA Insurance Corporation and its successors
and assigns.
Bond Resolution - each resolution of the Board authorizing the
issuance, execution, and delivery of the Bonds.
Bond Registrar - the registrar of Bonds named in the Indenture
and any successors or assigns.
Chapter 30 - the Regional Waste Disposal Act, Chapter 30, Texas
Water Code.
Closing Date - the date the Bonds are delivered to the original
purchaser or purchasers thereof and payment is made therefor.
Code - the Internal Revenue Code of 1986, as amended.
Company - Central Power and Light Company and its successors
and assigns as permitted by Sections 5.07 and 8.04.
Costs of Issuance - All costs and expenses incurred by Issuer
or Company in connection with the issuance and sale of the Bonds,
including, without limitation (i) fees and expenses of accountants,
attorneys, engineers, financial advisors and underwriters, (ii) materials,
supplies and printing and engraving costs, (iii) recording and filing
fees, (iv) rating agency fees, (v) initial fees and expenses of Trustee,
(vi) underwriter's discount and (vii) Issuer's administrative and overhead
expenses as provided in Section 4.04 of this Agreement.
Event of Default - any event of default specified in Section
6.01.
<PAGE> 8
Facilities - the Facilities as defined in the Prior Agreements.
Indenture - the Indenture of Trust dated as of July 1, 1995,
between Issuer and Trustee, securing the Bonds, as from time to time
amended and supplemented in accordance with its terms.
Installment Payment - as defined in Section 3.01.
Issuer - Matagorda County Navigation District Number One, or
its lawful successors or assigns.
Issuer Expenses - all direct fees, costs, and reasonable
expenses of Issuer incurred in connection with the issuance of the Bonds
and the administration of this Agreement and the Indenture. Such fees,
costs, and expenses shall include those amounts specified in the Agreement
to Issue Bonds and the letter agreement between Issuer and Company, dated
as of September 5, 1984, and all direct payments of Issuer for reasonable
fees of accountants, attorneys, engineers, and fiscal agents and other
direct payments for services of third parties, and for materials and
supplies.
1985A Bonds - the Matagorda County Navigation District Number
One Collateralized Pollution Control Revenue Bonds (Central Power and
Light Company Project) Series 1985A.
1985A Indenture - the Indenture of Trust dated as of July 1,
1985 between Prior Trustee and Issuer.
1984 Bonds - the Matagorda County Navigation District Number
One Adjustable Rate Pollution Control Revenue Bonds (Central Power and
Light Company Project) Series 1984.
1984 Indenture - the Indenture of Trust dated as of October 15,
1984 between Prior Trustee and Issuer.
1954 Code - the Internal Revenue Code of 1954, as amended prior
to enactment of the Tax Reform Act of 1986.
Outstanding under the Indenture or Outstanding thereunder or
Outstanding - when used with reference to Bonds, at any date as of which
the amount of Outstanding Bonds is to be determined, the aggregate of all
Bonds authorized, issued, authenticated, and delivered under the
Indenture, except:
(a) Bonds cancelled on or prior to such date, and Bonds
for which other Bonds have been issued in lieu of and in
exchange or substitution for other Bonds pursuant to the terms
of Sections 2.07 and 2.10 of the Indenture; and
(b) Bonds which shall be deemed to have been paid and
discharged pursuant to the terms of Section 9.02 of the
Indenture.
<PAGE> 9
In determining whether the owners of the requisite aggregate
principal amount of Bonds Outstanding have consented under the Indenture,
Bonds which are owned by either Company or Issuer or any person
controlling, controlled by, or under common control with either of them
shall be disregarded and not deemed to be Outstanding for the purpose of
any such determination.
Plant - the South Texas Nuclear Generating Plant located in
Matagorda County, Texas and wholly within the boundaries of Issuer.
Pollution Control Facilities - the facilities acquired,
constructed, and improved at the Plant which either are certified to be
water pollution control facilities designed in furtherance of the purpose
of abating or controlling water pollution by the Nuclear Regulatory
Commission or other federal or state agency or agencies or constitute
"solid waste disposal facilities" within the meaning of Section
103(b)(4)(E) of the 1954 Code, and for which the Prior Bonds were issued.
Prior Agreements - collectively, the Installment Sale Agreement
dated as of October 15, 1984 between Issuer and Company, and the
Installment Sale Agreement dated as of July 1, 1985 between Issuer and
Company.
Prior Indentures - collectively, the 1984 Indenture and 1985A
Indenture.
Prior Trustee - NationsBank of Texas, National Association
(successor to RepublicBank Dallas, National Association), as trustee under
the Prior Indentures.
Qualifying Facilities - "air or water pollution control
facilities" or "solid waste disposal facilities" as such phrases are used
in Section 103(b)(4)(E) and (F) of the 1954 Code and the regulations
issued thereunder.
Redemption Price - the principal of a Bond plus the applicable
premium, if any, payable upon redemption thereof pursuant to the Indenture
prior to the stated maturity date of the Bond.
Regulations - any regulations promulgated by the U.S.
Department of Treasury with respect to the provisions of the Code.
Trustee - the banking corporation or association designated as
trustee in the Indenture, and its successors as such trustee.
Trustee Expenses - the compensation and expenses payable to
Trustee and any paying agent pursuant to this Agreement or the Indenture.
Section 1.02. Certain Rules of Interpretation. Except where
the context otherwise requires, the definitions set forth in Section 1.01
shall be equally applicable to both the singular and plural forms of the
words and terms therein defined and shall cover all genders.
<PAGE> 10
"Herein", "hereby", "hereunder", "hereof", "hereinbefore",
"hereinafter" and other equivalent words refer to this Agreement and not
solely to the particular Article, Section, or subdivision hereof in which
such word is used.
Reference herein to an Article number or a Section number shall
be construed to be a reference to the designated Article number or Section
number hereof unless the text or use clearly indicates another or
different meaning or intent.
In addition, unless the context clearly indicates to the
contrary, capitalized words and terms used herein and not otherwise
defined shall have the meaning given in the Indenture.
ARTICLE II
Representations
Section 2.01. Representations by Issuer. Issuer makes the
following representations as the basis for the undertakings on its part
herein contained:
(a) Issuer is a governmental agency, body politic and
corporate of the State of Texas, and a "district" within the definition
set forth in the Acts.
(b) Issuer has the legal power under the Acts to enter into the
transactions contemplated by this Agreement, the Indenture and the Bond
Resolution and to carry out its obligations hereunder and thereunder,
including the issuance and delivery of the Bonds, and to adopt and perform
the Bond Resolution; and each such instrument is a legal, valid, and
binding obligation of the Issuer enforceable in accordance with its terms,
except to the extent that the enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, or other laws now or
hereafter in effect relating to or affecting creditors' rights generally,
and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity). The
Issuer has been duly authorized to execute, deliver and perform its
obligations under this Agreement and the Indenture, and to adopt and
perform the Bond Resolution by proper action of the Board.
(c) Issuer, by carrying out the purposes of the Acts as
provided in this Agreement, will be performing an essential public
function under the Texas Constitution.
(d) Issuer is not in default under any of the provisions of the
laws of Texas which would impair, interfere with, or otherwise adversely
affect the ability of Issuer to make and perform the provisions of this
Agreement, the Indenture, or the Bonds.
<PAGE> 11
(e) There is no litigation pending, or to the knowledge of
Issuer threatened, in any court, either state or federal, calling into
question the creation, organization or existence of Issuer, the validity
or enforceability of this Agreement or the authority of Issuer to refund
the Prior Bonds or to make or perform this Agreement or the Indenture or
to issue the Bonds or to adopt or perform the Bond Resolution.
(f) The execution and delivery of this Agreement, the Indenture
and the Bonds, the adoption of the Bond Resolution and the performance of
the transactions contemplated hereby and thereby, will not violate any
provision of law or regulation, or of any decree, writ, order or
injunction or the organic documents of Issuer, and will not contravene the
provisions of or constitute a default under any agreement, indenture, bond
resolution or other instrument to which Issuer is a party or by which
Issuer is bound.
(g) All consents, authorizations, and approvals of governmental
bodies or agencies, including the Attorney General of Texas, required in
connection with the execution and delivery of this Agreement, the
Indenture, and the Bonds or the adoption of the Bond Resolution or in
connection with the carrying out by Issuer of its obligations under this
Agreement, the Indenture, the Bonds, and the Bond Resolution will be duly
obtained or waived prior to the initial delivery of the Bonds to the
purchasers thereof.
(h) All requirements and conditions specified in the Acts and
all other laws and regulations applicable to the adoption of the Bond
Resolution, the execution and delivery of this Agreement, the Indenture,
and the issuance and delivery of the Bonds will be fulfilled prior to the
initial delivery of the Bonds to the purchasers thereof.
Section 2.02. Representations by Company. Company makes the
following representations as the basis for the undertakings on its part
herein contained:
(a) Company is a corporation duly organized and in good
standing under the laws of the State of Texas; Company is not in violation
of any provisions of the laws of the State of Texas in a manner which
materially impairs the Company's ability to perform its obligations
hereunder; Company is fully empowered to enter into and perform all
agreements on its part herein contained; Company has been authorized to
enter into and deliver this Agreement and perform all its obligations
hereunder by all necessary and proper corporate action; and the execution
and delivery by Company of this Agreement and the agreements herein
contained do not contravene any provision of its charter or by-laws or
other requirements of law or constitute a default under any existing
agreement, indenture, mortgage, loan agreement, commitment, or any other
existing agreement of any kind to which it is a party or by which it is or
may be bound.
(b) Company has full legal right, power, and authority to
execute and deliver this Agreement and this Agreement is a legal, valid,
and binding obligation of Company enforceable in accordance with its
<PAGE> 12
terms, except to the extent that the enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium, or other laws now
or hereafter in effect relating to or affecting creditors' rights
generally, and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(c) There is no litigation pending, or to the knowledge of
Company threatened, in any court, either state or federal, calling into
question the creation, organization or existence of Company, the validity
or enforceability of this Agreement or the authority of Company to refund
the Prior Bonds or to make or perform this Agreement.
(d) The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby, will not violate any
provision of law or regulation, or of any decree, writ, order or
injunction or the organic documents of Company, and will not contravene
the provisions of or constitute a default under any agreement, indenture,
bond resolution or other instrument to which Company is a party or by
which Company is bound.
(e) Company has obtained or will obtain all necessary licenses
and permits to enter into and perform this Agreement and the other
documents executed by it in connection with the issuance of the Bonds and
the refunding of the Prior Bonds.
(f) The statements, information, descriptions, estimates, and
assumptions of Company contained in the Tax Letter of Representation are
true and correct in all material respects, and are based upon the best
information available to Company.
ARTICLE III
The Bonds and the Company's Payments
Section 3.01. Issuance of the Bonds. (a) In order to provide
funds to finance the refunding of all of the Outstanding Prior Bonds,
Issuer agrees that it will issue under the Indenture, sell and cause to be
delivered, the Bonds, bearing interest, maturing on the dates and subject
to redemption prior to maturity as set forth in the Indenture. In
consideration of the covenants and agreements set forth in this Agreement,
and to enable Issuer to issue the Bonds to carry out the intents and
purposes hereof, this Agreement is executed to assure the issuance of the
Bonds, and to provide for and guarantee the due and punctual payment by
Company to Issuer, or to the Trustee under the Indenture securing the
Bonds, of amounts not less than those required to pay, as and when due
(whether at stated maturity, upon redemption, acceleration of maturity, or
otherwise), all of the principal of, premium, if any, and interest on the
Bonds, and all other payments required in connection with such Bonds and
the Bond Resolution or Indenture. Each such payment is hereby designated
as an "Installment Payment", and collectively such payments are hereby
designated as "Installment Payments". Company hereby agrees to make, or
<PAGE> 13
cause to be made, each Installment Payment, as and when due, for the
benefit of the owners of the Bonds into the Bond Fund, as provided in the
Bond Resolution and the Indenture.
(b) By execution and delivery of this Agreement by the Company,
the Bond Resolution and the Indenture are hereby approved by Company. It
is hereby agreed that such approval constitutes the acknowledgment and
agreement of Company that the Bonds, when issued, sold, and delivered as
provided in the Indenture, will be issued in accordance with and in
compliance with this Agreement. Any Bondholder is entitled to rely fully
and unconditionally on any such approval. All covenants and provisions in
the Bond Resolution and Indenture affecting, or purporting to bind,
Company shall, upon the delivery of the Bonds and Indenture, become
absolute, unconditional, valid and binding covenants and obligations of
Company so long as said Bonds and interest thereon are outstanding and
unpaid, and may be enforced as provided in the Bond Resolution and the
Indenture.
(c) Issuer shall cause to be deposited into a separate account
within the bond fund established pursuant to the 1984 Indenture proceeds
from the sale of the Bonds equal to $68,870,000, and Company shall cause
to be deposited into such separate account the amount of $_____________,
which together shall be sufficient to pay the redemption price of and
redeem $68,870,000 in aggregate principal amount of the 1984 Bonds on
October 15, 1995.
(d) Issuer shall cause to be deposited into a separate account
within the bond fund established pursuant to the 1985A Indenture proceeds
from the sale of the Bonds equal to $31,765,000, and Company shall cause
to be deposited into such separate account the amount of $____________,
which together shall be sufficient to pay the redemption price of and
redeem $31,765,000 in aggregate principal amount of the 1985A Bonds on
July 18, 1995
Section 3.02. Refunding of Bonds. After the issuance of the
Bonds, Issuer shall not refund the Bonds or change or modify the Bonds in
any way without the prior written approval of the Authorized Company
Representative; nor shall Issuer redeem the Bonds prior to their scheduled
maturities, or change or modify the Bond Resolution or the Indenture,
without the prior written approval of the Authorized Company
Representative, unless such redemption is required by the Bond Resolution
or the Indenture.
Section 3.03. Redemption of Bonds. Issuer, upon the written
request of Company (and provided that the Bonds are subject to redemption
or prepayment prior to maturity at the option of Issuer or Company, and
provided that, as provided in the Indenture, such request is received in
sufficient time prior to the date upon which such redemption or prepayment
is proposed), forthwith shall take or cause to be taken all action that
may be necessary under the applicable redemption or prepayment provisions
to effect such redemption or prepayment prior to maturity, as set forth in
Sections 4.05(a) or (b) of the Indenture. Issuer shall also take or cause
to be taken all action that may be necessary on its part to effect the
<PAGE> 14
redemption of Bonds on a date on which such Bonds are subject to mandatory
redemption pursuant to the terms of Section 4.05(c) of the Indenture. In
its written request to Issuer, Company shall designate the redemption date
for the Bonds to be redeemed. The redemption or prepayment of any Bonds
prior to maturity at any time shall not relieve Company of its absolute
and unconditional obligation to pay, or cause to be paid, each remaining
Installment Payment, with respect to the Outstanding Bonds except as
provided in this Agreement and the Bond Resolution and Indenture.
Section 3.04. Installment Payments. Payment of all
Installment Payments shall be made and deposited so as to fund payment on
the Bonds as required by the Indenture, including all such payments which
may come due because of the acceleration of the maturity or maturities of
the Bonds upon default, call for redemption, or otherwise, under the
provisions of the Indenture. If any available funds in excess of current
requirements are held on deposit in the Bond Fund at the time payment of
any Installment Payment is due, such funds shall be applied to the
Installment Payments then due and the obligation of Company to make such
Installment Payment shall be reduced by the amount of the available funds
so applied. The Installment Payments, together with available funds held
on deposit in the Bond Fund, except funds held therein for payment of
matured installments of principal of, premium, if any, and interest on the
Bonds or interest payable thereon, shall be sufficient to pay when due all
principal of, premium, if any, and interest on the Bonds, and if at any
time that any payment of principal, premium or interest on the Bonds is
due (whether at maturity, upon acceleration or upon mandatory redemption)
the available amounts on deposit in the Bond Fund are insufficient to make
such payment in full, Company will immediately pay to the Trustee in
immediately available funds an amount equal to such deficiency. Company
shall have the right to prepay or cause to be prepaid all or a portion of
each Installment Payment at any time, and shall be obligated to do so in a
timely manner if and to the extent Company requests redemption or
prepayment of the Bonds. Any such prepayment by the Company shall not
relieve it of liability for each remaining Installment Payment except as
provided in this Agreement and the Bond Resolution and Indenture.
Section 3.05. Issuer's Rights Assigned to Trustee. Company is
advised and recognizes that as security for the payment of the Bonds,
Issuer will assign to the Trustee, pursuant to the Indenture, Issuer's
rights under this Agreement, including the right to receive payments
hereunder (except the rights reserved to Issuer under Section 8.05
hereof), and hereby directs Company to make said payments directly to the
Trustee. Company herewith assents to such assignment and will make such
payments directly to the Trustee without defense or set-off by reason of
any dispute between Company and Issuer or the Trustee. All rights against
Company arising under this Agreement or the Bond Resolution or Indenture
and assigned to the Trustee under the Indenture may be enforced by the
Trustee, or the owners of the Bonds, to the extent provided in the Bond
Resolution or Indenture, and the Trustee, or the owners of the Bonds,
shall be entitled to bring any suit, action, or proceeding against
Company, to the extent provided in the Bond Resolution or Indenture, for
the enforcement of this Agreement, and it shall not be necessary in any
such suit, action, or proceeding to make Issuer a party thereto.
<PAGE> 15
ARTICLE IV
Other Payments
Section 4.01. Intentionally Omitted.
Section 4.02. Intentionally Omitted.
Section 4.03. Trustee Expenses. Company shall pay Trustee
until the principal of, premium, if any, and interest on the Bonds shall
have been fully paid or provision for the payment thereof shall have been
made in accordance with provisions of the Indenture:
(a) the annual fees of Trustee for the ordinary services
of Trustee rendered and its ordinary expenses incurred,
including reasonable counsel fees;
(b) the reasonable fees and charges of Trustee, as Bond
Registrar and Paying Agent, as provided in the Indenture, as
and when the same become due; and
(c) the reasonable fees and charges of Trustee for
necessary extraordinary services rendered by it and
extraordinary expenses incurred by it under the Indenture;
provided, that Company may, without creating a default
hereunder, contest in good faith the necessity for any such
extraordinary services and extraordinary expenses and the
reasonableness of any such fees, charges, or expenses. Company
shall pay the reasonable fees and charges of any paying agent
for the Bonds named pursuant to the terms of the Indenture.
Section 4.04. Issuer Expenses. Company agrees to pay directly
to Issuer, all Issuer Expenses and to pay the amount of any extraordinary
expenses incurred by Issuer in the administration of this Agreement or the
Indenture as such expenses are agreed to by Issuer and Company. All such
extraordinary expenses shall be paid within a reasonable time after
receipt by Company of the bills with respect to each. Issuer shall bill
Company from time to time as convenient to Issuer and the bill will
contain reasonable itemization.
Section 4.05. Taxes and Other Governmental Charges and Utility
Charges. Company will pay, as the same respectively become due, all
taxes, assessments, whether general or special, and governmental charges
of any kind whatsoever that may at any time be lawfully assessed or levied
against or with respect to the Facilities or any machinery, equipment, or
other property installed or brought by Company therein or thereon, and all
utility and other charges incurred in the operation, maintenance, use,
occupancy, and upkeep of such Facilities; provided, however, that Company
may, at its expense and in its own name and behalf, or if permitted in
writing by Issuer, in the name and on behalf of Issuer, in good faith
contest the validity of any such taxes, assessments, and other charges,
<PAGE> 16
and, in the event of any such contest, may permit the taxes, assessments,
or other charges so contested to remain unpaid during the period of such
contest and any appeal therefrom. Issuer will cooperate fully with
Company in any such contest.
Section 4.06. Payment to Special Rebate Fund. Company hereby
covenants and agrees to make the determinations and to pay any deficiency
in the Special Rebate Fund, at the times and as described in Section 5.09
of the Indenture. In any event, if the amount of cash held in the Special
Rebate Fund shall be insufficient to permit Trustee to make payment to the
United States of any amount due under Section 148 of the Code, Company
forthwith shall pay the amount of such insufficiency on such date to
Trustee in immediately available funds. The obligations of Company under
this Section 4.06 are direct obligations of Company, acting under the
authorization of, and on behalf of, Issuer and Issuer shall have no
further obligation or duty with respect to the Special Rebate Fund.
ARTICLE V
Special Covenants
Section 5.01. Intentionally Omitted.
Section 5.02. Intentionally Omitted.
Section 5.03. Indemnities. Company releases Issuer, its
officers, directors, employees, agents, and attorneys (collectively, the
"Indemnified Parties") from, and the Indemnified Parties shall not be
liable for, and Company agrees, and shall be liable to protect, indemnify,
defend, and hold the Indemnified Parties harmless from any and all
liability, cost, expense, damage, or loss of whatever nature (including,
but not limited to, attorneys' fees, litigation and court costs, amounts
paid in settlement, and amounts paid to discharge judgments) directly or
indirectly resulting from, arising out of, in connection with, or related
to (i) the issuance, offering, sale or delivery of the Bonds, the
Indenture, this Agreement, and the obligations imposed on Issuer hereby
and thereby; or the design, construction, installation, operation, use,
occupancy, maintenance, or ownership of the Facilities; (ii) any written
statements or representations made or given by Company, or any of its
officers or employees, to the Indemnified Parties, Trustee, or any
underwriters or purchasers of any of the Bonds, with respect to Issuer,
Company, the Facilities, or the Bonds, including, but not limited to,
statements or representations of facts, financial information, or
corporate affairs; (iii) damage to property or any injury to or death of
any person that may be occasioned by any cause whatsoever pertaining to
the Facilities; and (iv) any loss or damage incurred by Issuer as a result
of violation by Company of the provisions of the Prior Agreements or
Section 5.12 or 5.13 hereof. The provisions of the preceding sentence
shall remain and be in full force and effect even if any such liability,
cost, expense, damage, or loss or claim therefor by any person, directly
or indirectly results from, arises out of, or relates to or is asserted to
have resulted from, arisen out of, or related to, in whole or in part, one
<PAGE> 17
or more negligent acts or omissions of Issuer or its officers, directors,
employees, agents, servants, or any other party acting for or on behalf of
Issuer in connection with the matters set forth in clauses (i) through
(iv) of said sentence. Company also agrees to indemnify and hold Trustee
harmless from any loss or damage incurred by Trustee as a result of a
violation by Company or Issuer of the provisions of Section 5.12 or 5.13
hereof, or the provisions of Section 5.08 or 9.02(b) of the Indenture.
Section 5.04. Facilities to be Used for Pollution Abatement.
So long as Company is operating the Pollution Control Facilities, or
causing them to be operated, Company will continue, or cause to be
continued, the operation of the Pollution Control Facilities for the
purposes of pollution control and solid waste disposal and Company will
not discontinue the operation of the Pollution Control Facilities so long
as the operation thereof is required to comply with applicable laws and
regulations relating to pollution control; however, this in no way
requires Company to operate the Pollution Control Facilities or any part
thereof for any period after the useful life thereof.
Section 5.05. Intentionally Omitted.
Section 5.06. Intentionally Omitted.
Section 5.07. Company to Maintain Corporate Existence;
Conditions Under Which Exceptions Permitted. Company agrees that it will
not dispose of all or substantially all of its assets as an entirety
(whether by liquidation, dissolution, or otherwise) and will not
consolidate with or merge into another corporation, or permit one or more
corporations to consolidate with or merge into it, unless the resulting,
surviving, or transferee corporation, as the case may be, if other than
Company, irrevocably and unconditionally assumes, in an instrument deliv-
ered to Issuer and to Trustee, the due and punctual performance of the
obligations of Company under this Agreement. Upon the delivery of such
instrument, Company shall thereupon be relieved of any further obligation
or liability under this Agreement or with respect to the Bonds; and the
resulting, surviving, or transferee corporation, as the case may be, shall
succeed to and be substituted for Company under this Agreement with the
same effect as if such resulting or surviving corporation or transferee
had been named herein as Company. If consolidation, merger, or sale, or
other transfer is made as provided in this Section 5.07, the provisions of
this Section 5.07 shall continue in full force and effect and no further
consolidation, merger, or sale or other transfer shall be made except in
compliance with the provisions of this Section 5.07.
Section 5.08. Qualification in Texas. Company warrants that
it is and throughout the term of this Agreement it will continue to be a
corporation duly qualified to do business in the State of Texas.
Section 5.09. Permits or Licenses. In the event it may be
necessary for the proper performance of this Agreement on the part of
Issuer or Company that any application or applications for any permit or
license to do or perform certain things be made to any governmental or
other agency by Company or Issuer, Company and Issuer shall execute
promptly upon the request of the other such application or applications.
<PAGE> 18
Section 5.10. Preservation of Existence of Issuer; Obligations
under the Indenture. Issuer agrees that it will do or cause to be done
all things necessary within its powers to preserve and keep in full force
and effect its existence. Issuer hereby agrees to duly and punctually
perform and observe all of the covenants, terms, conditions, and
agreements on its part contained in the Bonds and the Indenture.
Section 5.11. No Personal Liability. No officer, employee,
representative, or agent of Issuer, and no officer, employee,
representative, or agent of Company shall be personally liable on this
Agreement.
Section 5.12. Tax Exempt Status of the Bonds. Company and
Issuer (to the extent reasonably within the control of Issuer) covenant to
refrain from any action which would adversely affect, or to take such
action to assure, the treatment of the Bonds as obligations described in
Section 103 of the Code or Section 1313 of the Tax Reform Act of 1986, the
interest on which is not includable in the "gross income" of the owner or
beneficial owner (other than the income of a "substantial user" of the
Facilities or a "related person" within the meaning of Section 103(b)(13)
of the 1954 Code) for purposes of federal income taxation. In particular,
but not by way of limitation thereof, Company covenants as follows:
(a) to use all of the proceeds of the Bonds for the
payment of principal on all of the outstanding Prior Bonds;
(b) to refrain from taking any action that would result in
the Bonds being "federally guaranteed" within the meaning of
Section 149(b) of the Code;
(c) to refrain from using any portion of the proceeds of
the Bonds, directly or indirectly, to acquire investment
property or to replace funds which were used, directly or
indirectly, to acquire investment property (as defined in
Section 148(b)(2) of the Code) which produces a materially
higher yield over the term of the Bonds, other than investment
property acquired with --
(1) proceeds of the Bonds invested for a period the
lesser of 90 days or until such proceeds are needed for the
purpose for which the Bonds are issued,
(2) amounts invested in a bona fide debt service
fund, within the meaning of Section 1.148-1(b) of the
Regulations, and
(3) amounts deposited in any reasonably required
reserve or replacement fund to the extent such amounts do
not exceed 10 percent of the proceeds of the Bonds and to
the extent that at no time during any Bond Year will the
aggregate amount so invested exceed 150 percent of debt
service on the Bonds for such year;
<PAGE> 19
(d) to otherwise restrict the use of the proceeds of the
Bonds or amounts treated as proceeds of the Bonds, as may be
necessary, to satisfy the requirements of Section 148 of the
Code (relating to arbitrage);
(e) to pay to the United States of America at least once
during each five-year period (beginning on the date of delivery
of the Bonds) the amount, if any, deposited to the Special
Rebate Fund as set forth in Section 5.09 of the Indenture that
is at least equal to 90 percent of the "Excess Earnings,"
within the meaning of Section 148(f) of the Code and to pay to
the United States of America, not later than 60 days after the
Bonds have been actually paid in full, 100 percent of the
amount, if any, then required to be paid as a result of Excess
Earnings under Section 148(f) of the Code; and
(f) to maintain such records as will enable Company to
fulfill its responsibilities under this section and Section 148
of the Code and to retain such records for at least six years
following the actual final payment of principal and interest on
the Bonds.
It is the understanding of Issuer and Company that the covenants contained
herein are intended to assure compliance with the Code and any regulations
or rulings promulgated by the U.S. Department of the Treasury pursuant
thereto. In the event that regulations or rulings are hereafter
promulgated which modify or expand provisions of the Code, as applicable
to the Bonds, Company will not be required to comply with any covenant
contained herein to the extent that such modification or expansion, in the
opinion of Bond Counsel, will cause noncompliance with such covenant to
not adversely affect the exemption from federal income taxation of
interest on the Bonds under Section 103 of the Code. In the event that
regulations or rulings are hereafter promulgated which impose additional
requirements which are applicable to the Bonds, Company agrees to comply
with the additional requirements to the extent necessary, in the opinion
of Bond Counsel, to preserve the exemption from federal income taxation of
interest on the Bonds under Section 103 of the Code.
Section 5.13. Arbitrage Covenants. Issuer and Company
covenant and agree, for the benefit of the Trustee and the owners of the
Bonds, that they will not knowingly take any action or omit from taking
any action, which would result in a loss of the exemption from federal
income taxation of interest on the Bonds by virtue of the Bonds being
considered "arbitrage bonds" within the meaning of section 148 of the
Code.
Section 5.14. Annual Report. Company shall have an annual audit
made by its regular independent certified public accountants and promptly
furnish Trustee and Issuer either a copy of its audited financial
statements or a copy of Company's annual report to its shareholders if
such annual report shall contain financial statements of substantially
similar detail and similarly prepared and certified. Such financial
<PAGE> 20
statements and reports shall be furnished to Trustee and Issuer by Company
at the same time as such financial statements are furnished to its
preferred shareholders.
ARTICLE VI
Events of Default and Remedies
Section 6.01. Event of Default. The following shall be "events
of default" under this Agreement and the terms "Event of Default" or
"default" shall mean, whenever they are used in this Agreement, any one or
more of the following events:
(a) Failure by Company to pay the Installment Payments at
or prior to the time at which payment is required to be made
and which failure, if with respect to the payment of interest
on the Bonds, shall continue for a period of sixty (60) days.
(b) Failure by Company to observe or perform or the breach
by Company of any representation, covenant, or agreement in
this Agreement on its part to be observed or performed, other
than as referred to in paragraph (a) of this Section 6.01, for
a period of ninety (90) days after written notice, specifying
such and requesting that it be remedied, shall be given to Com-
pany by Issuer or Trustee, unless Issuer and Trustee shall
agree in writing to an extension of such time prior to its
expiration; provided, however, if the failure stated in the
notice can, in the reasonable judgment of Company, be
corrected, but not within the applicable period, such failure
shall not constitute an Event of Default or default if
corrective action is instituted by Company within the
applicable period and Company notifies Issuer and Trustee of
such corrective action and undertakes to diligently pursue and
shall pursue the corrective action until the failure is
corrected.
(c) Dissolution or liquidation of Company. However, the
term "dissolution or liquidation of the Company", as used in
this paragraph, shall not be construed to include the cessation
of the corporate existence of Company resulting either from a
merger or consolidation of Company into or with another
corporation or a dissolution or liquidation of Company follow-
ing a transfer of all or substantially all of its assets as an
entirety under the conditions permitting such actions contained
in Section 5.07.
(d) Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization, or other relief
with respect to itself or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official of it or any substantial
<PAGE> 21
part of its property, or shall consent to any such relief or to
the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any
of the foregoing.
(e) An involuntary case or other proceeding shall be
commenced against Company seeking liquidation, reorganization,
or other relief with respect to it or its debts under any
bankruptcy, insolvency, or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian, or other similar official of it or any
substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a
period of sixty (60) days.
The provisions of paragraph (b) of this Section 6.01 are subject to the
following limitations: If by reason of acts of God, strikes, lockouts or
other industrial disturbances; acts of public enemies; orders or
regulations of any kind of the government of the United States of America
or of the State of Texas or any of their departments, agencies, political
subdivisions, or officials, or any civil or military authority;
insurrections; riots; epidemics; landslides; lightning; earthquakes; tidal
waves; fires; hurricanes; tornadoes; blue northers; other storms; floods;
washouts; droughts; arrests; restraint of government and people; civil
disturbances; explosions; breakage or accident to machinery, transmission
pipes, transmission facilities or canals; partial or entire failure of
utilities; shortages of labor, material, supplies or transportation; or
any other cause or event not reasonably within the control of Company
(collectively, "events of force majeure"), Company is unable in whole or
in part to carry out the agreements on Company's part herein contained,
Company shall not be deemed in default during the continuance of such
inability. Company, however, will use its best efforts to remedy with all
reasonable dispatch the cause or causes preventing Company from carrying
out such agreements; provided, that the settlement of strikes, lockouts
and other industrial disturbances shall be entirely within the discretion
of Company, and Company shall not be required to make settlement of
strikes, lockouts, and other industrial disturbances by acceding to the
demands of the opposing party or parties when such course is, in the
judgment of Company, unfavorable to Company. The occurrence of any event
of force majeure shall not suspend or otherwise abate, and Company shall
not be relieved from, any obligation under this Agreement to the extent
that the failure of Company to observe or perform any such obligation
would result in the failure to pay when due the principal of, premium, if
any, and interest on the Bonds or would result in the interest on any
Bonds becoming includable in the gross income of the owners thereof for
federal income tax purposes.
<PAGE> 22
The above provisions, however, are subject to the condition
that, after any such Event of Default, subject to and as provided in
Article VIII of the Indenture, Trustee may waive such Event of Default and
rescind and annul any remedial step theretofore taken by it or by Issuer
with respect to such default and its consequences; but no such waiver,
rescission or annulment shall extend to or affect any subsequent default
or impair any right or remedy consequent thereon.
In the event that Trustee fails to receive any Installment
Payments when due under this Agreement, Trustee has agreed in the
Indenture to give immediate telephonic or laserphonic notice, confirmed in
writing, to Issuer and Company specifying such failure.
Section 6.02. Remedies on Default. Whenever an Event of Default
hereunder shall have happened and be continuing the following remedial
steps may be taken:
(a) Trustee, as provided in the Indenture, may at its
option declare all amounts payable under Section 3.04 for the
remainder of the term of this Agreement to be immediately due
and payable, and such amounts shall thereupon become due and
payable.
(b) Trustee or Issuer, subject to the provisions of
Section 8.05, at the option of either, may take whatever action
at law or in equity may appear necessary or desirable to
collect the payments then due and thereafter to become due, or
to enforce performance and observance of any representation,
agreement, or covenant of Company under this Agreement.
In the event Company fails to make any of the payments required
by this Agreement, the item or installment so in default shall continue as
an obligation of Company until the amount in default shall have been fully
paid, and Company shall pay the same with interest thereon, to the extent
legally permissible, from the due date until paid at the highest rate
borne by any Outstanding Bonds.
Any amounts collected pursuant to action taken under this
Section 6.02 shall be paid into the Bond Fund and applied in accordance
with the provisions of the Indenture.
Section 6.03. No Remedy Exclusive. No remedy conferred upon
or reserved to Issuer or Trustee by this Agreement is intended to be
exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other
remedy given under this Agreement or now or hereafter existing at law or
in equity or by statute. No delay or omission to exercise any right or
power accruing upon any default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed
expedient. To entitle Issuer or Trustee to exercise any remedy reserved
to it in this Article, it shall not be necessary to give any notice, other
<PAGE> 23
than such notice as may be herein expressly required. Issuer acknowledges
that Company's obligations hereunder are not secured by any lien or other
interest whatsoever in the Facilities or Plant and hereby waives any such
lien or interest including, but not limited to, vendor's liens.
Section 6.04. Agreement to Pay Attorneys' Fees and Expenses.
In the event that Company should default under any of the provisions of
this Agreement, and as a consequence Issuer or Trustee should employ
attorneys or incur other expenses or charges, legal or otherwise, for the
collection of payments or the enforcement of performance or observance of
any obligation or agreement on the part of Company contained in this
Agreement, Company agrees that it will, on demand therefor, reimburse
Issuer and Trustee for such reasonable fees, charges, and other expenses
so incurred; provided, however, that Company, without creating a default
hereunder or under the Indenture, may contest in good faith the necessity
for and the reasonableness of any such expenses, charges, or fees.
Section 6.05. No Additional Waiver Implied By One Waiver. In
the event an agreement contained in this Agreement is breached by either
party hereto and such breach is thereafter waived by the other party, such
waiver shall be limited to the particular breach so waived and shall not
be deemed as a waiver of any other breach hereunder.
Section 6.06. Notice to Bond Insurer. Company agrees to give
written notice to Bond Insurer not less than two days prior to any
regularly scheduled payment date for principal of or interest on the Bonds
if Company does not intend or will be unable to make the corresponding
payment to the Trustee hereunder.
ARTICLE VII
Prepayments
Section 7.01. Prepayments. At the option of Company, the
Installment Payments shall be subject to prepayment, in whole or in part,
at any time, and such prepayments shall be deposited in the Bond Fund. At
Company's option such prepayments shall be used to redeem Bonds pursuant
to the optional redemption provisions of the Indenture or credited against
payments required under Section 3.04. Whenever Bonds are redeemable at
the option of Issuer in whole or in part, Issuer shall redeem the same
upon request of Company and not otherwise, and Company will pay the amount
required under Section 7.02. Whenever Bonds are subject to mandatory
redemption according to the provisions thereof, Issuer will redeem the
same upon notice from Trustee, and Company will pay the amount required
under Section 7.02.
Section 7.02. Amount of Prepayments when Bonds to be Redeemed.
In the event Company elects or is required to make prepayments of all or
part of the Installment Payments and Bonds are to be redeemed with such
prepayments in accordance with the terms of this Agreement and the
Indenture, the amount of such prepayments will be equal to the applicable
Redemption Price and interest to accrue on the Bonds in respect of which
<PAGE> 24
the prepayments are made until the applicable redemption date. Such
prepayments shall not in any other way alter or suspend any obligations of
Company under the terms of this Agreement and Company shall continue to
perform and be responsible for its performance of all other terms and
provisions of this Agreement.
Section 7.03. Notice of Prepayment. In case Bonds are to be
redeemed prior to maturity at the option of Issuer (on request of
Company), Company shall give written notice to Issuer and Trustee at least
forty-five (45) days before the date of redemption. In the case of the
exercise of an option granted by Section 4.05(b) of the Indenture, Company
shall give written notice to Issuer and Trustee of the event authorizing
the exercise of the option within one hundred twenty (120) days after such
event, and shall specify therein the date of redemption, which date shall
be not less than forty-five (45) days nor more than one hundred twenty
(120) days from the date the notice is given. Upon the happening of an
event requiring the redemption of part or all of the Outstanding Bonds,
Trustee shall determine a date (not later than one hundred eighty (180)
days from the date of such event) for redemption. Trustee shall give
Issuer and Company not less than forty-five (45) days written notice of
such date. Trustee shall give notice of redemption as provided in the
Indenture.
Section 7.04. Time of Prepayments. In the event Company
exercises a prepayment option or is required to make prepayments, Company
shall pay to Trustee the amounts due and payable pursuant to Section 7.02,
on or before the date of redemption in funds which will be immediately
available on such redemption date except as otherwise may be required or
permitted by Article IX of the Indenture.
ARTICLE VIII
Miscellaneous
Section 8.01. Disposition of Bond Fund Upon Termination. It
is agreed by the parties hereto that any amounts remaining in the Bond
Fund upon expiration of this Agreement, after payment in full of the Bonds
(including interest and premium, if any, thereon), or provision for
payment thereof having been made in accordance with the provisions of the
Indenture, and payment of the Issuer Expenses and other payments required
to be made to Issuer hereunder, shall belong to and be paid to Company by
Trustee.
Section 8.02. Notices. All notices, certificates, requests,
or other communications hereunder shall be sufficiently given and shall be
deemed given when mailed by registered mail, postage prepaid, addressed as
follows: if to Issuer, Matagorda County Navigation District Number One,
209 Fifth Street, Palacios, Texas 77465, attention: Eli Mayfield, General
Counsel and Manager; if to Company, Central and South West Corporation as
agent for the Company, 1616 Woodall Rodgers Freeway, Dallas, Texas 75202,
attention: Director of Finance; and if to Trustee, The Bank of New York,
101 Barclay Street, 21st Floor, New York, New York 10286, attention:
<PAGE> 25
Corporate Trust Department. A duplicate copy of each notice, certificate,
request, or other communication given hereunder by or to Issuer, Company,
or Trustee shall also be given by the sender to the others. Company,
Issuer, and Trustee may, by written notice given hereunder, designate any
further or different addresses to which subsequent notices, certificates,
requests, or other communications shall be sent.
Section 8.03. Unconditional Obligation. (a) The payment
obligations of Company under Sections 3.04, 4.03, 4.04, and 4.06 and
covenants of Company under Section 5.12 shall be deemed and construed to
be absolute and unconditional, and Company shall make the payments
required hereunder, free of any deductions, and without abatement or
set-off.
(b) All other obligations of Company under this Agreement
shall remain in full force and effect until the entire principal of,
premium, if any, and interest on the Bonds have been paid or provided for,
and all other payments to be made to Issuer and to Trustee have been paid
or provided for.
(c) Company further unconditionally agrees, subject to
Company's rights specified in Section 6.04, to pay all expenses and
charges, legal or otherwise (including court costs and attorneys' fees),
paid or incurred by Issuer and/or Trustee, their successors or assigns, in
realizing upon any of said payments to be made by Company or in enforcing
the provisions of this Agreement.
Section 8.04. Assignment of the Agreement by Company. This
Agreement may be assigned in whole or in part by Company without the
necessity of obtaining the consent of either Issuer or Trustee, subject,
however, to each of the following conditions:
(a) the assignees shall assume the obligations of Company
hereunder;
(b) no assignment (other than pursuant to Section 5.07)
shall relieve Company from primary liability for any of its
obligations hereunder, and in the event of any such assignment
Company shall continue to remain liable for the payments
specified in Articles III and IV hereof and for performance and
observance of the other agreements on its part herein provided;
and
(c) Company shall, within thirty (30) days after the
delivery thereof, furnish or cause to be furnished to Issuer
and Trustee a true and complete copy of each such assignment.
Section 8.05. Assignment to Trustee by Issuer. All rights and
interests of Issuer in and to this Agreement (other than the rights of
Issuer under Sections 4.04, 5.03 and 6.04) are assigned to Trustee under
the terms of the Indenture. Although such assignment confers on Trustee
full right and authority to enforce all of the terms of this Agreement,
such assignment shall not preclude Issuer from bringing an action to
<PAGE> 26
require Company to carry out its agreements hereunder or to recover any
damages incurred by Issuer as a result of Company's failure to perform
such agreements. As provided in the Indenture, prior to bringing any such
action to enforce this Agreement, Issuer will give reasonable notice to
Trustee and Trustee shall participate in and, if it so desires, control
such action. Company assents to such assignment, and Company's
obligations to make payments directly to Trustee under this Agreement
shall be absolute and shall not be subject to any defense or any right of
set-off, counterclaim, or recoupment arising out of any breach by Issuer
of any obligation to Company, whether singularly or collectively or
hereunder or otherwise, or out of any indebtedness or liability at any
time owing to Company by Issuer.
Section 8.06. Binding Effect. This Agreement shall inure to
the benefit of and shall be binding upon Issuer, Company, and its
respective successors or assigns, subject to the limitation that any
obligations or liabilities of Issuer created by or arising out of this
Agreement shall not be a general debt of Issuer, but shall be payable
solely out of the proceeds derived from this Agreement or the sale of the
Bonds. This Agreement shall not be deemed to create any right in any
person who is not a party (other than the permitted successors or assigns
of a party) and shall not be construed in any respect to be a contract in
whole or in part for the benefit of any third party (other than the
permitted successors or assigns of a party hereto), except in each case
the owners from time to time of the Bonds and Trustee.
Section 8.07. Amendments, Changes, Modifications, and Financed
Interest. Subsequent to the initial issuance of the Bonds and prior to
payment or provision for the payment of the Bonds in full (including
interest and premium, if any, thereon), in accordance with the provisions
of the Indenture, and payment or provision for the payment of Trustee
Expenses and Issuer Expenses, this Agreement may not be effectively
amended, changed, modified, or altered so as to reduce or postpone the
payments herein required to be made by Company to Issuer, and it shall not
otherwise be amended, changed, modified, or altered without the prior
written consent of Trustee.
Section 8.08. Execution in Counterparts. This Agreement may
be executed in any number of counterparts, each of which when so executed
and delivered, shall be an original; but such counterparts shall together
constitute but one and the same Agreement.
Section 8.09. Severability. If any clause, provision,
Section, or Article of this Agreement is held illegal or invalid by any
court, the invalidity of such clause, provision, Section, or Article shall
not affect any of the remaining clauses, provisions, Sections, or Articles
and this Agreement shall be construed and enforced as if such illegal or
invalid clause, provision, Section, or Article had not been contained
herein. In case any agreement or obligation contained in this Agreement
is held to be in violation of law, then such agreement or obligation shall
be deemed to be the agreement or obligation of Issuer or Company, as the
case may be, to the full extent permitted by law.
<PAGE> 27
Section 8.10. Laws Governing. The laws of the State of Texas
shall govern the construction of this Agreement. This Agreement is made
and is to be performed in Matagorda County, Texas.
Section 8.11. Section Headings. All section headings
contained herein are for convenience of reference and are not intended to
define or limit the scope of any provision of this Agreement.
Section 8.12. Entire Agreement. Any inconsistencies between
the provisions of this Agreement and any prior agreements between Issuer
and Company shall be controlled by this Agreement.
ARTICLE IX
Term of Agreement
Section 9.01. Term of Agreement. This Agreement shall remain
in full force and effect from the date hereof until such time as the
Indenture has been discharged in accordance with its terms.
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this
Installment Payment Agreement to be duly executed as of the day and year
first above written.
MATAGORDA COUNTY NAVIGATION DISTRICT
NUMBER ONE
ATTEST:
By__________________________________
Chairman, Board of Navigation
and Canal Commissioners
By _______________________________
Secretary
(SEAL)
CENTRAL POWER AND LIGHT COMPANY
ATTEST:
By___________________________
Vice President
By __________________________
Secretary
(SEAL)
<PAGE> 1
EXHIBIT 2
---------
D R A F T
INDENTURE OF TRUST
Between
MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE
and
THE BANK OF NEW YORK
Trustee
____________________
Dated as of July 1, 1995
Relating to
Pollution Control Revenue Refunding Bonds
(Central Power and Light Company Project)
SERIES 1995
<PAGE> 2
INDENTURE OF TRUST
TABLE OF CONTENTS
(The Table of Contents is not a part of the
Indenture of Trust
but for convenience of reference only)
PAGE
Parties 1
Recitals 1
ARTICLE I
Definition of Terms
Section 1.01. Definitions 4
Section 1.02. Certain Rules of Interpretation 8
ARTICLE II
General Terms and Provisions of the Bonds
Section 2.01. Payment of Bonds 8
Section 2.02. (a) Lien, Parity, Designation of Series
(b) Title, Execution, and Effect of Certificate of
Trustee
8
Section 2.03. Authentication and Delivery of Bonds After Officers
Signing the Bonds Cease to be Officers 9
Section 2.04. The Text of the Bonds and Certificates 9
Section 2.05. Required Certificate by State Comptroller 18
Section 2.06. Registrar 18
Section 2.07. Title and Negotiability of Bonds 18
Section 2.08. Payment of Bonds 19
Section 2.09. Temporary Bonds 19
Section 2.10. Loss, Theft, Destruction, or Mutilation of Bonds 20
Section 2.11. Cancellation and Destruction 20
Section 2.12. Book-Entry Only System 20
Section 2.13. Successor Securities Depository; Transfers Outside
Book-Entry Only System 21
Section 2.14. Payments to Cede & Co. 22
i
<PAGE> 3
ARTICLE III
Authorization and Issuance of Bonds
PAGE
Section 3.01. Limitation on Issuance of Bonds 22
Section 3.02. Principal Amount, Interest Rate, Interest Payment
Dates, and Maturity Dates of the Bonds 22
Section 3.03. Interest Rate 23
Section 3.04. Execution and Delivery of Bonds 23
Section 3.05. No Additional Bonds 23
Section 3.06. No Limitation on Issuer 23
ARTICLE IV
Redemption of Bonds
Section 4.01. Redemption in Accordance with Indenture 23
Section 4.02. Selection by Lot 23
Section 4.03. Notice of Redemption 24
Section 4.04. Proceedings for Redemption 24
Section 4.05. Redemption of Bonds 25
Section 4.06. Trustee to Call Bonds 28
ARTICLE V
Bond Fund
Section 5.01. The Bond Fund 28
Section 5.02. Payment from Bond Fund 28
Section 5.03. (a) Bond Fund Requirement 28
(b) Disposition of Prepayments 28
Section 5.04. (a) Funds Held in Trust 28
(b) Nonpresentment of Bonds 28
Section 5.05. Investment of Moneys in Certain Funds 29
Section 5.06. Moneys Secured 30
Section 5.07. Bond Fund Balance 30
Section 5.08. Exemption from Federal Income Taxation 30
Section 5.09. Special Rebate Fund 31
ARTICLE VI
Application of Proceeds
Section 6.01. Application of Original Proceeds of Bonds 32
Section 6.02. Consideration for Refunding 32
ii
<PAGE> 4
ARTICLE VII
General Covenants
PAGE
Section 7.01. Intentionally Omitted 33
Section 7.02. Payment of Principal and Interest 33
Section 7.03. Authority of Issuer and Preservation of Rights 33
Section 7.04. Installment Payment Agreement 33
Section 7.05. Further Assurances 33
Section 7.06. Extension of Bonds 34
Section 7.07. Reports 34
Section 7.08. Further Actions by Issuer and Trustee 34
Section 7.09. Paying Agents 34
ARTICLE VIII
Defaults and Remedies
Section 8.01. Definition of "Event of Default" 34
Section 8.02. Declaration of Principal and Interest Due 36
Section 8.03. Enforcement of Indenture and Bonds 36
Section 8.04. Restoration 37
Section 8.05. Direction by Majority in Principal Amount of
Bondholders 37
Section 8.06. Rights by Owner 37
Section 8.07. Enforcement of Remedies without Possession of
Bonds 38
Section 8.08. Remedies Not Exclusive 38
Section 8.09. Delay by Trustee 38
Section 8.10. Application of Moneys 38
Section 8.11. Unlawful Grants of Power 39
Section 8.12. Payments under Municipal Bond Insurance Policy 39
ARTICLE IX
Defeasance
Section 9.01. Release of Indenture 41
Section 9.02. (a) Satisfaction of Indenture 41
(b) No Arbitrage 41
(c) Advance Funding and Defeasance 41
Section 9.03. Reliance on Discharge 43
Section 9.04. Defeasance 43
iii
<PAGE> 5
ARTICLE X
Concerning the Trustee
PAGE
Section 10.01. Acceptance of Trusts and Conditions of
Acceptance 43
Section 10.02. Recitals Not Trustee's 44
Section 10.03. Advice 44
Section 10.04. Fees 44
Section 10.05. Insurance 44
Section 10.06. Notice 45
Section 10.07. Request; Indemnity 45
Section 10.08. Reliance by Trustee 45
Section 10.09. Ownership of Bonds 45
Section 10.10. Interest on Moneys Held 46
Section 10.11. Construction 46
Section 10.12. Resignation of Trustee 46
Section 10.13. Removal of Trustee 46
Section 10.14. Appointment of Successor Trustee 47
Section 10.15. Qualification of Successor Trustee 47
Section 10.16. Court Appointment 47
Section 10.17. Transfer to Successor Trustee 47
Section 10.18. Merger or Consolidation of the Trustee 47
Section 10.19. Prudent Man Rule 48
Section 10.20. Notice of Default to Registered Owners 48
Section 10.21. Judicial Proceedings 48
Section 10.22. Trustee's Performance 48
Section 10.23. Trustee to Record 48
ARTICLE XI
Modification of This Indenture and
Supplemental Indenture
Section 11.01. Modification by Issuer and Trustee 49
Section 11.02. Consent by Bondholders 50
Section 11.03. Bond Insurer to be Deemed Bondowner; Rights of
Bond Insurer; Payments by Bond Insurer in
Advance of Scheduled Maturity Dates; Notices 51
iv
<PAGE> 6
ARTICLE XII
Miscellaneous
PAGE
Section 12.01. Successors and Assigns 52
Section 12.02. Parties, the Company and Bondholders Alone
Have Rights Under Indenture 52
Section 12.03. Survival of Valid Bonds 52
Section 12.04. Personal Liability 53
Section 12.05. Notices 53
Section 12.06. Counterparts 53
Section 12.07. Construction 53
Section 12.08. Holidays 53
Section 12.09. Instruments by Bondholders and Proof of Ownership
of Bonds 53
Section 12.10. Alternative Notice to Bondholders 54
Execution by Issuer 55
Execution by Trustee 55
v
<PAGE> 7
INDENTURE OF TRUST
THE STATE OF TEXAS :
MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE :
THIS INDENTURE OF TRUST, dated as of July 1, 1995 made by and
between MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE ("Issuer"), a
governmental agency and body politic and corporate of the State of Texas
operating as a conservation and reclamation district pursuant to Article
XVI, Section 59, of the Texas Constitution and the general laws of the
State of Texas, and THE BANK OF NEW YORK, as Trustee ("Trustee"), a bank
duly organized and existing under the laws of the State of New York and
having its principal corporate trust office in New York, New York.
W I T N E S S E T H:
WHEREAS, pursuant to the Regional Waste Disposal Act, as
amended (codified as Chapter 30, Texas Water Code, and hereinafter
referred to as "Chapter 30") and the Clean Air Financing Act (codified as
Chapter 383, Texas Health and Safety Code, and hereinafter referred to as
the "Air Act"), the Issuer is authorized to issue revenue bonds to finance
the acquisition, construction and improvement, enlargement, extension or
repair of "disposal systems" and "control facilities" as those terms are
defined and described in Chapter 30 and the Air Act, respectively
(hereinafter referred to as "eligible projects"); and
WHEREAS, Article 717q, V.A.T.C.S. (hereinafter referred to as
"Art. 717q"), together with Article 717k, V.A.T.C.S., authorizes the
Issuer to issue bonds to refund obligations issued by it to finance
eligible projects and to enter into agreements in relation thereto; and
WHEREAS, Issuer and Central Power and Light Company ("Company")
have previously entered into an Installment Sale Agreement dated as of
October 15, 1984 (the "1984 Agreement") pursuant to which Issuer issued
its Matagorda County Navigation District Number One Adjustable Rate
Pollution Control Revenue Bonds (Central Power and Light Company Project)
Series 1984 (the "1984 Bonds") and used the proceeds to finance the costs
of certain eligible projects and Company agreed to make payments to
NationsBank of Texas, National Association (successor to RepublicBank
Dallas, National Association), as Trustee on behalf of the owners of the
1984 Bonds under an Indenture of Trust with Issuer dated as of October 15,
1984 (the "1984 Indenture"), in amounts sufficient to pay the principal
of, premium, if any, and interest on and all other charges in connection
with the 1984 Bonds; and
WHEREAS, Issuer and Company have previously entered into an
Installment Sale Agreement dated as of July 1, 1985 (the "1985A
Agreement") pursuant to which Issuer issued its Matagorda County
Navigation District Number One Collateralized Pollution Control Revenue
Bonds (Central Power and Light Company Project) Series 1985A (the "1985A
Bonds") and used the proceeds to finance the costs of certain eligible
projects and Company agreed to make payments to NationsBank of Texas,
National Association (successor to RepublicBank Dallas, National
<PAGE> 8
Association), as Trustee on behalf of the owners of the 1985A Bonds under
an Indenture of Trust with Issuer dated as of July 1, 1985 (the "1985A
Indenture"), in amounts sufficient to pay the principal of, premium, if
any, and interest on and all other charges in connection with the 1985A
Bonds; and
WHEREAS, the 1984 Agreement and 1985A Agreement are sometimes
hereinafter referred to collectively as the Prior Agreements, the 1984
Bonds and the 1985A Bonds are sometimes hereinafter referred to
collectively as the Prior Bonds, and the 1984 Indenture and the 1985A
Indenture are sometimes hereinafter referred to as the Prior Indentures;
and
WHEREAS, the Board of Navigation and Canal Commissioners of
Issuer duly adopted a "RESOLUTION AUTHORIZING MATAGORDA COUNTY NAVIGATION
DISTRICT NUMBER ONE POLLUTION CONTROL REVENUE REFUNDING BONDS (CENTRAL
POWER AND LIGHT COMPANY PROJECT) SERIES 1995; THE EXECUTION OF AN
INDENTURE OF TRUST, AN INSTALLMENT PAYMENT AGREEMENT, AND A BOND PURCHASE
AGREEMENT; APPROVAL OF AN OFFICIAL STATEMENT; AND OTHER MATTERS IN
CONNECTION THEREWITH" (together with any amendment or supplement to such
resolution as authorized therein, hereinafter called the "Bond
Resolution"); and
WHEREAS, Issuer desires to issue and sell its Bonds (as
hereinafter defined) in order to provide funds for the refunding of all of
the outstanding Prior Bonds; and
WHEREAS, the Bond Resolution authorized the issuance of
Matagorda County Navigation District Number One Pollution Control Revenue
Refunding Bonds (Central Power and Light Company Project) Series 1995, in
the aggregate principal amount of $100,635,000 (hereinafter called the
"Bonds"); and
WHEREAS, the Bonds, and the interest thereon, are and shall be
payable from and secured by a first and superior lien on and pledge of the
payments designated as "Installment Payments" to be made by Company
pursuant to the Installment Payment Agreement dated as of July 1, 1995
(the "Agreement") between Issuer and Company in amounts sufficient to
provide for the payment of the principal of, premium, if any, and interest
on the Bonds, when due, and the fees and expenses of the Trustee and any
paying agent for the Bonds; and
WHEREAS, certified copies of the Bond Resolution have been duly
filed with the Trustee; and
WHEREAS, the Trustee has agreed to accept the trusts herein
created upon the terms and subject to the conditions herein set forth; and
WHEREAS, all things necessary to make the Bonds, when issued as
provided in this Indenture, the valid, binding and legal special
obligations of the Issuer according to the import thereof, and to
constitute this Indenture a valid assignment of the amounts pledged to the
payment of the principal of, premium, if any, and interest on the Bonds
and a valid assignment of certain rights of the Issuer under the Agreement
<PAGE> 9
have been done and performed, and the creation, execution and delivery of
this Indenture and the execution and issuance of the Bonds, subject to the
terms hereof, in all respects have been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That, in consideration of the premises, of the mutual covenants
herein contained, of the purchase and acceptance of Bonds by the owners
thereof, and of the sum of One Dollar ($1.00) to Issuer duly paid by
Trustee at or before the execution and delivery of this Indenture of
Trust, the receipt of which is hereby acknowledged, and for the purpose of
fixing and declaring the terms and conditions upon which the Bonds are to
be issued, authenticated, delivered, secured, and accepted by all persons
who shall from time to time be or become owners thereof, and in order to
secure the payment of the principal of, premium, if any, and interest on
all the Bonds at any time issued and outstanding under this Indenture of
Trust, according to their tenor, purport, and effect, and in order to
secure the performance and observance of all of the covenants, agreements,
and conditions in the Bonds and in this Indenture of Trust contained
Issuer has pledged, assigned, set over, and confirmed, and does hereby
pledge, assign, set over, and confirm unto Trustee all of the right,
title, and interest of Issuer in and to (i) the Agreement, together with
all moneys payable thereunder (other than the rights reserved to Issuer as
set forth in Section 8.05 of the Agreement) and (ii) all moneys which are
deposited or required to be deposited with Trustee pursuant thereto or
pursuant to this Indenture of Trust (other than any moneys deposited to
the Special Rebate Fund) (the "Trust Estate") for the payment of the
principal of, premium, if any, and interest on such Bonds, all subject to
the provisions and conditions hereof; provided, however, that no lien or
other interest whatsoever in the Facilities or the Plant arising under the
Agreement or otherwise shall be a part of the Trust Estate.
PROVIDED, FURTHER, that (a) although the foregoing assignment
shall confer on Trustee the full right and authority to enforce the rights
of Issuer under the Agreement assigned hereby, such assignment shall not
preclude Issuer from enforcing the Agreement in accordance with Section
8.05 thereof, and (b) if Issuer or its successors or assigns shall well
and truly pay or cause to be paid the principal of the Bonds, the premium,
if any, and the interest due or to become due thereon, at the times and in
the manner provided in the Bonds, according to the true intent and meaning
thereof, and shall well and truly keep, perform, and observe all the
covenants and conditions in this Indenture of Trust expressed to be kept,
performed, and observed by it, and shall pay to Trustee all sums of money
due or to become due to it in accordance with the terms and provisions
hereof, then this Indenture of Trust and the rights hereby granted shall
cease, terminate, and be void, and Trustee in such case, on demand of
Issuer, shall execute and deliver to Issuer such assignments, discharges,
or satisfactions as shall be requisite to discharge the lien hereof and
reconvey to or to revest in Issuer the rights hereby conveyed or intended
to be conveyed; otherwise, this Indenture of Trust shall be and remain in
full force and effect.
<PAGE> 10
THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is expressly
declared, that all Bonds issued and secured hereunder are to be issued,
authenticated, and delivered and the Trust Estate hereby pledged is to be
dealt with and disposed of under, upon, and subject to the terms, condi-
tions, stipulations, covenants, agreements, trusts, uses, and purposes
hereinafter expressed; and Issuer has agreed and covenanted and does
hereby agree and covenant with Trustee and with the respective owners,
from time to time, of the Bonds or any part thereof, as follows:
ARTICLE I
Definitions of Terms
Section 1.01. Definitions. In each place throughout this
Indenture wherein the following terms, or any of them, are used, the same,
unless the context shall indicate another or different meaning or intent,
shall be construed and intended to have meanings as follows:
"Acts" - Chapter 30, the Air Act, Article 717k, Vernon's
Annotated Texas Civil Statutes, as amended, and Art. 717q.
"Agreement" - the Installment Payment Agreement dated as of
July 1, 1995, between Issuer and Company, as from time to time modified,
altered, amended, and supplemented.
"Agreement to Issue Bonds" - the resolution of the Board
adopted on March 2, 1974 taking "some other similar official action"
toward the issuance of the Bonds.
"Air Act" - the Clean Air Financing Act, Chapter 383, Texas
Health and Safety Code.
"Art. 717q" - Article 717q, Vernon's Annotated Texas Civil
Statutes, as amended.
"Authorized Company Officer" - the President, any Vice
President, or the Treasurer of the Company and the Treasurer and Director
of Finance of Central and South West Corporation.
"Authorized Company Representative" - any person or persons
designated to act on behalf of Company in matters relating to this
Indenture by written certificate furnished to Trustee containing the
specimen signature of any such person or persons and signed on behalf of
Company by the Chairman of the Board of Directors, the President, any Vice
President or any other authorized officer of Company.
"Board" - the lawfully qualified Board of Navigation and Canal
Commissioners of Issuer.
"Bonds" - Matagorda County Navigation District Number One
Pollution Control Revenue Refunding Bonds (Central Power and Light Company
Project) Series 1995 issued in the aggregate principal amount of
$100,635,000 pursuant to this Indenture.
<PAGE> 11
"Bondholder or Bondholders or owner of the Bonds or owner or
registered owner" - the registered owner of any Bond as shown on the
registration books kept by Trustee as Bond Registrar.
"Bond Counsel" - an attorney or firm of attorneys of recognized
standing in the field of law relating to revenue bonds, selected by Issuer
and satisfactory to Trustee and Company.
"Bond Fund" - the fund by that name created in Section 5.01.
"Bond Insurer" - MBIA Insurance Corporation and its successors
and assigns.
"Bond Registrar" - the registrar of Bonds named herein and any
successors or assigns.
"Bond Resolution" - shall have the meaning given such term in
the recitals hereto.
"Business Day" - any day which is not a Sunday or a legal
holiday or a day (including Saturday) on which banking institutions either
in The City of New York, New York or in the state where the principal
corporate trust office of Trustee is located are authorized by law or
executive order to close.
"Chapter 30" - the Regional Waste Disposal Act, Chapter 30,
Texas Water Code.
"Closing Date" - the date on which the Bonds are delivered to
the original purchaser or purchasers thereof and payment is made therefor.
"Code" - the Internal Revenue Code of 1986, as amended.
"Company" - Central Power and Light Company and its successors
and assigns as permitted by Section 5.07 and 8.04 of the Agreement.
"DTC" - The Depository Trust Company.
"Eastern Time" - time as measured and used by banking
institutions in The City of New York, New York.
"Event of Default" - any event of default specified in Section
8.01.
"Facilities" - the Facilities as defined in the Prior
Agreements.
"Indenture" - this Indenture of Trust and any indenture
supplemental hereto or amendatory hereof.
"Interest Payment Date" - with respect to the Bonds, each
January 1 and July 1, commencing January 1, 1996.
<PAGE> 12
"Issuer" - Matagorda County Navigation District Number One, or
its lawful successors or assigns.
"Issuer Expenses" - all direct fees, costs, and reasonable
expenses of Issuer incurred in connection with the issuance of the Bonds
and the administration of the Agreement and this Indenture. Such fees,
costs, and expenses shall include those amounts specified in the Agreement
to Issue Bonds and the letter agreement between Issuer and Company, dated
as of September 5, 1984, and all direct payments of Issuer for reasonable
fees of accountants, attorneys, engineers, and fiscal agents and other
direct payments for services of third parties, and for materials and
supplies.
"Municipal Bond Insurance Policy" means the municipal bond
insurance policy issued by Bond Insurer insuring the payment when due of
the principal of and interest on the Bonds as provided therein.
1985A Bonds - the Matagorda County Navigation District Number
One Collateralized Pollution Control Revenue Bonds (Central Power and
Light Company Project) Series 1985A.
1985A Indenture - the Indenture of Trust dated as of July 1,
1985 between Prior Trustee and Issuer.
1984 Bonds - the Matagorda County Navigation District Number
One Adjustable Rate Pollution Control Revenue Bonds (Central Power and
Light Company Project) Series 1984.
1984 Indenture - the Indenture of Trust dated as of October 15,
1984 between Prior Trustee and Issuer.
1954 Code - the Internal Revenue Code of 1954, as amended prior
to the enactment of the Tax Reform Act of 1986.
"Officers' Certificate" - a certificate signed by the Chairman
or Vice Chairman and the Secretary or Treasurer of Issuer.
"Outstanding under this Indenture or Outstanding hereunder or
Outstanding" - when used with reference to Bonds, at any date as of which
the amount of Outstanding Bonds is to be determined, the aggregate of all
Bonds authorized, issued, authenticated, and delivered under this
Indenture, except:
(a) Bonds cancelled on or prior to such date, and Bonds
for which other Bonds have been issued in lieu of and in
exchange or substitution for other Bonds pursuant to the terms
of Section 2.07 and 2.10;
(b) Bonds which shall be deemed to have been paid and
discharged pursuant to the terms of Section 9.02.
<PAGE> 13
In determining whether the owners of the requisite principal
amount of Bonds Outstanding have consented under the Indenture, Bonds
which are owned by Company or Issuer or any person controlling, controlled
by, or under common control with either of them shall be disregarded and
not deemed to be Outstanding for the purpose of any such determination.
"Paying Agent, Paying Agents" - any paying agent or paying
agents for the Bonds named by Issuer pursuant to Section 7.09.
"Plant" - the South Texas Nuclear Generating Plant located in
Matagorda County, Texas and wholly within the boundaries of Issuer.
"Pollution Control Facilities" - the facilities acquired,
constructed, and improved at the Plant which either are certified to be
water pollution control facilities designed in furtherance of the purpose
of abating or controlling water pollution by the Nuclear Regulatory
Commission or other federal or state agency or agencies or constitute
"solid waste disposal facilities" within the meaning of Section
103(b)(4)(E) of the 1954 Code, and for which the Prior Bonds were issued.
Prior Agreements - collectively, the Installment Sale Agreement
dated as of October 15, 1984 between Issuer and Company, and the
Installment Sale Agreement dated as of July 1, 1985 between Issuer and
Company.
"Prior Bonds" - the $68,870,000 in aggregate principal amount
of 1984 Bonds and $31,765,000 in aggregate principal amount of 1985A Bonds
to be refunded in connection with the issuance of the Bonds.
Prior Indentures - collectively, the 1984 Indenture and 1985A
Indenture.
Prior Trustee - NationsBank of Texas, National Association
(successor to RepublicBank Dallas, National Association), as trustee under
the Prior Indentures.
"Record Date" - with respect to the Bonds, the fifteenth day of
the calendar month next preceding each Interest Payment Date.
"Redemption Price" - the principal of a Bond plus the
applicable premium, if any, payable upon redemption thereof pursuant to
this Indenture prior to the stated maturity date of the Bond.
"Special Payment Date" - shall have the meaning given in
Section 2.07.
"Special Rebate Fund" - the fund by that name created in
Section 5.09.
"Special Record Date" - shall have the meaning given in Section
2.07.
"Trust Estate" - as defined in the granting clause hereof.
<PAGE> 14
"Trustee" - The Bank of New York having its principal office
and place of business and its principal corporate trust office in New
York, New York, and its successors as Trustee hereunder.
"Trustee Expenses" - the compensation and expenses payable to
Trustee and any Paying Agent pursuant to this Indenture or the Agreement.
"Written Order" - an order signed in the name of Issuer by the
President or Secretary of the Board and delivered to Trustee.
Section 1.02. Certain Rules of Interpretation. Except where
the context otherwise requires, the definitions set forth in Section 1.01
shall be equally applicable to both the singular and plural forms of the
words and terms therein defined and shall cover all genders.
"Herein", "hereby", "hereunder", "hereof", "hereinbefore",
"hereinafter" and other equivalent words refer to this Indenture and not
solely to the particular Article, Section, or subdivision hereof in which
such word is used.
Reference herein to an Article number or a Section number shall
be construed to be a reference to the designated Article number or Section
number hereof unless the context or use clearly indicates another or
different meaning or intent.
In addition, unless the context clearly indicates to the
contrary, capitalized words and terms used herein and not otherwise
defined shall have the meaning given such term in the Agreement.
ARTICLE II
General Terms and Provisions of the Bonds
Section 2.01. Payment of Bonds. The Bonds issued under this
Indenture shall be payable, with respect to principal, premium, if any,
and interest, in lawful money of the United States of America. The
principal of all Bonds shall be payable only at the principal corporate
trust office of Trustee. The payment of interest on Bonds shall be made
on each Interest Payment Date by Trustee as herein provided to the
registered owner appearing on the registration books of Issuer on the
Record Date by check mailed to such registered owner at his address as it
appears on such registration books.
Section 2.02. (a) Lien, Parity, Designation of Series. This
Indenture shall be a continuing lien to secure the full payment of the
principal of, premium, if any, and interest on the Bonds executed, authen-
ticated, and delivered pursuant to the terms hereof, without priority as
to security afforded by this Indenture of any Bond over any other Bond by
reason of date of issue, date of maturity, date of delivery, or otherwise,
except as otherwise provided or permitted in this Indenture. The Bonds
shall have a first lien upon the Trust Estate. The forms of Bonds issued
hereunder, Trustee's certificate of authentication, and the registration
forms shall be substantially as herein set forth. The Bonds shall be
lettered "R" and numbered separately from one upward.
<PAGE> 15
(b) Title, Execution, and Effect of Certificate of Trustee.
The Bonds issued under this Indenture shall be issued in one series and
shall be designated "Matagorda County Navigation District Number One
Pollution Control Revenue Refunding Bonds (Central Power and Light Company
Project) Series 1995"; shall be in fully registered form in the
denomination of $5,000 or any integral multiple thereof; shall be executed
on behalf of Issuer by the facsimile signature of the Chairman of the
Board under its corporate seal or a facsimile thereof and attested by the
facsimile signature of its Secretary; and shall be delivered to Trustee,
who shall deliver the same upon the Written Order of Issuer. Only such
Bonds as shall (i) be the Bonds initially delivered to the purchasers
thereof and have attached thereto a manually signed Comptroller's
Registration Certificate or (ii) be issued in exchange, transfer or
substitution for such initial Bonds and bear endorsed thereon a
certificate of authentication substantially in the form herein recited and
executed by Trustee shall be valid or obligatory for any purpose or be
secured by this Indenture or be entitled to any right or benefit
hereunder. Such registration by the Comptroller of Public Accounts of the
State of Texas or authentication by Trustee upon any such Bonds shall be
conclusive evidence (and the only evidence) that the Bond so registered or
authenticated has been duly issued hereunder and that the owner thereof is
entitled to the benefit of the trusts hereby created.
Section 2.03. Authentication and Delivery of Bonds After
Officers Signing the Bonds Cease to be Officers. In the event that any
person who shall have signed or signed and sealed any Bond issuable under
this Indenture as an officer of Issuer shall have ceased to be such
officer before the Bond so signed or signed and sealed shall have been
actually authenticated and delivered by Trustee, such Bond, nevertheless,
may be authenticated and delivered and issued as though the person who
signed or signed and sealed such Bond had not ceased to be such officer of
Issuer. Any Bonds issuable hereunder may be signed and sealed on behalf
of Issuer by such persons as at the actual date of the execution of such
Bonds shall be the proper officers of Issuer although at the date of such
Bonds any such person shall not have been an officer of Issuer. Issuer
may adopt or use the facsimile signature of any person who shall have been
an officer notwithstanding the fact that he may have ceased to be such
officer at the time when such Bonds shall have been actually authenticated
and delivered.
Section 2.04. The Text of the Bonds and Certificates. The
text of the Bonds, the certificate of Trustee for all Bonds, the
certificate of the Comptroller of Public Accounts of the State of Texas
which shall appear on the Bonds upon initial issue, and the form of
assignment (with such variations, omissions, or insertions as are required
or permitted hereby or as set forth in the Bond Resolution relating to the
Bonds) shall be substantially in the following forms, to-wit:
[The following legend shall appear so long as the
Book-Entry System described in Section 2.12 of the
Indenture has not been discontinued; provided that
such legend shall not appear on the Bond initially
delivered under this Indenture.]
<PAGE> 16
THE ISSUER HAS ESTABLISHED A BOOK ENTRY SYSTEM OF REGISTRATION FOR THIS
BOND. EXCEPT AS SPECIFICALLY PROVIDED OTHERWISE IN THE INDENTURE, CEDE &
CO., AS NOMINEE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), WILL BE THE REGISTERED OWNER AND WILL HOLD THIS BOND ON BEHALF OF
EACH BENEFICIAL OWNER HEREOF. BY ACCEPTANCE OF A CONFIRMATION OF
PURCHASE, DELIVERY OR TRANSFER, EACH BENEFICIAL OWNER OF THIS BOND SHALL
BE DEEMED TO HAVE AGREED TO SUCH ARRANGEMENT. CEDE & CO., AS REGISTERED
OWNER OF THIS BOND, MAY BE TREATED AS THE OWNER OF IT FOR ALL PURPOSES.
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO
THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NO. R _______
$___________
UNITED STATES OF AMERICA
STATE OF TEXAS
MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE
POLLUTION CONTROL REVENUE REFUNDING BONDS
(CENTRAL POWER AND LIGHT COMPANY PROJECT)
SERIES 1995
Maturity Date: Interest Rate: Bond Date: Cusip:
July 1, 2028 ________% July 1,1995
Registered Owner:
Principal Amount: Dollars
ON THE MATURITY DATE SPECIFIED ABOVE, Matagorda County
Navigation District Number One ("Issuer"), a governmental agency and a
body politic and corporate of the State of Texas, for value received
hereby promises to pay to the Registered Owner set forth above, or to the
registered assigns (hereinafter called the registered owner), the
Principal Amount set forth above upon presentation and surrender of this
bond at the principal corporate trust office of The Bank of New York
("Trustee") or its successor trustee appointed under the Indenture (as
hereinafter defined), and to pay interest thereon at the Interest Rate set
forth above as herein provided to the registered owner, by check mailed to
the registered owner at his address as it appears on the bond registration
books of Issuer on the Record Date, on each January 1 and July 1,
commencing January 1, 1996 (the "Interest Payment Dates") to the Maturity
Date set forth above or the date of redemption prior to maturity, pursuant
to the Indenture of Trust between Issuer and Trustee dated as of July 1,
1995 (the "Indenture"). The Principal Amount hereof shall bear interest
(i) in the case of the initial bond or bonds delivered pursuant to the
<PAGE> 17
Indenture, from July 1, 1995, and (ii) in the case of all other bonds
delivered thereafter, from the Interest Payment Date next preceding the
date of authentication (unless such date of authentication is after any
Record Date but on or before the next following Interest Payment Date in
which case the Principal Amount shall bear interest from such next
following Interest Payment Date, or if this bond shall be authenticated on
or prior to the Record Date for the January 1, 1996 Interest Payment Date,
it shall bear interest from July 1, 1995).
UNLESS SPECIFIED OTHERWISE, CAPITALIZED WORDS AND TERMS
APPEARING IN THIS BOND SHALL HAVE THE MEANINGS SET FORTH IN THE INDENTURE.
This bond is one of a series of bonds entitled Matagorda County
Navigation District Number One Pollution Control Revenue Refunding Bonds
(Central Power and Light Company Project) Series 1995 (the "bonds") issued
in the aggregate principal amount of $100,635,000, pursuant to a
resolution of the Board of Navigation and Canal Commissioners of Issuer
(the "Bond Resolution"), in accordance with the terms of the Indenture.
The bonds are issued by Issuer for the purpose of providing certain of the
funds for the refunding of all of the outstanding of Matagorda County
Navigation District Number One Adjustable Rate Pollution Control Revenue
Bonds (Central Power and Light Company Project) Series 1984 and Matagorda
County Navigation District Number One Collateralized Pollution Control
Revenue Bonds (Central Power and Light Company Project) Series 1985A.
This bond is one of the duly authorized bonds issued pursuant
to the Indenture as authorized by the Regional Waste Disposal Act, Chapter
30, Texas Water Code, the Clean Air Financing Act, Chapter 383, Texas
Health and Safety Code, and Articles 717k and 717q, V.A.T.C.S.
Said Indenture, including any amendment or modification thereof
or supplement thereto, pledges to the Trustee all of the right, title, and
interest of Issuer in and to the Installment Payment Agreement dated as of
July 1, 1995 (the "Agreement"), between Issuer and Central Power and Light
Company ("Company") together with all moneys payable thereunder (excluding
certain rights reserved to Issuer as set forth in Section 8.05 of the
Agreement), and all moneys which are deposited or required to be deposited
with Trustee pursuant thereto or pursuant to the Indenture. Company is
unconditionally obligated (subject only to the provisions of Sections 5.07
and 8.04 of the Agreement relating to merger, consolidation, transfer of
assets, and assignment) to Issuer and Trustee to make or pay, or cause to
be made or paid, to Trustee each Installment Payment, as defined in the
Agreement, for deposit into the Bond Fund created for the benefit of the
bonds in the Indenture, in aggregate amounts sufficient to pay, and
provide for the payment of the principal of, premium, if any, and interest
on the bonds, when due, subject to and as required by the provisions of
the Agreement, the Bond Resolution, and the Indenture.
The Indenture is on file with Trustee and reference is hereby
made to the Indenture and to all indentures supplemental thereto or
amendatory thereof for a full and complete statement of the provisions
with respect to the custody and application of the proceeds of the bonds,
the collection and disposition of pledged revenues, the nature and extent
of the security, and the rights of the owners of the bonds, the terms and
<PAGE> 18
conditions on which, and the purposes for which, bonds are or may be
issued, and the rights, duties, and obligations of Issuer and Trustee
thereunder, to all of which the owner hereof, by acceptance of this bond,
assents.
Neither the credit nor the taxing power of the State of Texas
or the Matagorda County Navigation District Number One, or any other
political subdivision of the State of Texas is pledged for the payment of
the principal of, the interest on, or the premium, if any, on this bond;
nor shall this bond be deemed a general obligation of said State, Issuer,
or any other political subdivision of said State; nor shall said State,
Issuer, the Board of Navigation and Canal Commissioners of Issuer, or any
other political subdivision of said State be liable for the payment of the
principal of, the interest on, or the premium, if any, on this bond except
from those revenues to be derived by Issuer pursuant to the Agreement.
The owner of this bond shall never have the right to demand payment from
moneys derived by taxation or any revenues of Issuer except the funds
pledged to the payment of said bond.
The bonds are subject to redemption on July 1, ____ or any date
thereafter, in whole or in part (and if in part as specified in the
Indenture) at the option of Issuer, to be exercised at the direction of
Company, upon acceleration of the payments by Company in accordance with
the Agreement, upon payment of the applicable redemption price, expressed
as a percentage of the principal amount of the bonds set forth in the
schedule below, together with unpaid interest accrued to date of
redemption, to-wit:
Redemption Date Redemption Price
The bonds are also subject to redemption prior to maturity at
the option of Issuer, to be exercised at the direction of Company, at any
time, in whole, on acceleration of the payments by Company in accordance
with the Agreement, at a redemption price equal to the principal amount of
the Outstanding bonds, plus accrued interest thereon to date of
redemption, without premium, upon the occurrence of any of the following
events:
(i) in the reasonable judgment of Company unreasonable
burdens or excessive liabilities shall have been imposed upon
Issuer or Company with respect to the Facilities (as defined in
the Agreement) or the Plant (as defined in the Agreement),
including without limitation (A) the imposition of any income
or other taxes not being imposed on July 1, 1995 or (B) the
imposition of any ad valorem property or other taxes (other
than ad valorem property or other taxes being imposed on July
1, 1995 upon similarly assessed property within the same taxing
jurisdiction);
<PAGE> 19
(ii) the Facilities or the Plant shall have been damaged
or destroyed to such extent that, in the opinion of Company (A)
within a period of six consecutive months following such damage
or destruction, it is not practicable or desirable to rebuild,
repair, or restore the same, (B) Company will be thereby
prevented from carrying on its normal operations of the
Facilities or the Plant for a period of six consecutive months,
or (C) the cost of restoration would exceed by $1,500,000 or
more the net proceeds of insurance thereon;
(iii) title to, or temporary use of, all or substantially
all of the Facilities or the Plant shall have been taken under
the exercise of the power of eminent domain;
(iv) changes in the economic availability of materials,
labor, services, supplies (including fuel), equipment, or other
property, facilities, or things necessary for the operation of
the Facilities or the Plant shall have occurred, or
technological, regulatory, or other changes shall have occurred
which, in the opinion of Company, render the continued
operation of the Facilities or the Plant uneconomic;
(v) any court or administrative body shall enter a
judgment, order, or decree requiring Company to cease, or
dispose of, all or any substantial part of its operations of
the Facilities or the Plant to such extent that, in the opinion
of Company, it is or will be thereby prevented from carrying on
its normal operations of the Facilities or the Plant for a
period of six or more consecutive months; or
(vi) as a result of any change in the Constitution of the
State of Texas or the Constitution of the United States of
America or of any legislative or administrative action (whether
state or federal) or of any final decree, judgment, or order of
any court or administrative body (whether state or federal),
the obligations of Company under the Agreement shall have
become unenforceable or impossible of performance in any
material respect in accordance with the intent and purpose of
the parties as expressed in the Agreement.
The exercise of any such option shall be at the direction of Company which
shall give written notice to Issuer and Trustee within one hundred twenty
(120) days after the occurrence of any event described in clause (i),
(ii), (iii), (iv), (v) or (vi) above, which notice shall specify that, as
determined by Company, one or more of such events has occurred or one or
more of such conditions is continuing and also shall specify a date for
redemption not less than 45 nor more than 120 days after the date such
notice is given.
The bonds are subject to mandatory redemption in whole or in
part at any time (and if in part, as specified in the Indenture) if such
partial redemption will preserve the exemption from federal income
taxation of interest on the remaining bonds outstanding, at a redemption
price equal to the principal amount thereof together with unpaid interest
<PAGE> 20
accrued to the date fixed for redemption, and without premium, if (i) a
final decree or judgment of any federal court in which Company
participates to the extent it deems sufficient, or (ii) a final action by
the Internal Revenue Service, in proceedings in which Company participates
to the extent it deems sufficient, determines that the interest paid or
payable on any such bonds to other than, as provided in the Code or the
1954 Code, a "substantial user" of the Facilities or a "related person",
is or was includable in the gross income of the owner thereof for federal
income tax purposes under the Code, as a result of the failure by Company
to observe or perform any covenant, condition or agreement on its part to
be observed or performed under the Agreement or the inaccuracy of any
representation by Company under the Agreement; provided, however, that no
decree or judgment by any court or action by the Internal Revenue Service
shall be considered final unless the bondholder involved in such
proceeding or action (y) gives Company and Trustee prompt notice of the
commencement thereof and (z) if Company agrees to pay all expenses in
connection therewith and to indemnify such bondholder against all
liabilities in connection therewith, offers Company the opportunity to
control the defense thereof. Any such redemption shall be made on a date
determined by the Trustee not more than 180 days after the time of such
final decree, judgment, or action.
If any bonds or portions thereof shall be called for
redemption, notice thereof shall be given by mailing the same by first-
class mail, postage prepaid, addressed to each registered owner of bonds
at his address recorded on the registration books, unless waived by the
owners of all bonds called for redemption, such notice to be so mailed not
more than 60 nor less than 30 days prior to the date fixed for redemption;
provided, however, the failure so to give such notice or any defect
therein with respect to any particular bond will not affect the validity
of any call for redemption of any other bonds.
If such notice of redemption has been duly mailed to or waived
by the owners of all bonds called for redemption, then the bonds or
portions thereof called for redemption shall be due and payable on the
redemption date at the redemption price. Payment of the redemption price,
together with accrued interest, shall be made by Trustee to or upon the
order of the owners of the bonds called for redemption upon surrender of
such bonds. From and after the redemption date designated in such notice
or waiver, deposit of redemption moneys, or to the extent permitted in
Article IX of the Indenture, "Governmental Obligations", as defined
therein, having been made and notice given or waived as aforesaid, no
further interest shall accrue upon the principal of any of the bonds, or
portions thereof, so called for redemption. If the notice of redemption
has been made or waived, and if due provision for payment is made, all as
provided above, such bonds, or portions thereof, shall not be regarded as
being outstanding and shall cease to be entitled to any lien, benefit, or
security under the Indenture, and the owners thereof shall have no rights
in respect of such bonds, or portions thereof, except to receive payment
of the redemption price thereof and unpaid interest accrued to the date
fixed for redemption.
<PAGE> 21
In case an "Event of Default", as defined in the Indenture,
shall occur, the principal of all bonds then outstanding under the
Indenture may be declared or become due and payable upon the conditions
and in the manner and with the effect provided in the Indenture. Upon the
curing of any default, Trustee, and, in certain cases, the owners of the
majority in principal amount of the bonds then outstanding, may waive such
default and its consequences as permitted by the terms of the Indenture,
and such waiver shall be binding upon Trustee and upon all owners of the
bonds.
The owner of this bond shall have no right to enforce the
provisions of the Indenture, or to institute action to enforce the
covenants therein, or to take any action with respect to any default under
the Indenture, or to institute, appear in, or defend any suit or other
proceeding with respect thereto, except as provided in the Indenture.
The bonds are issuable in fully registered form in the
denomination of $5,000 or any integral multiple thereof. Subject to the
conditions provided in the Indenture, any bonds, upon payment of the
charges specified in the Indenture and upon surrender at the principal
corporate trust office of Trustee, may be exchanged for an equal aggregate
principal amount of bonds in fully registered form of any authorized
denominations.
This bond shall be transferable on the books of Issuer to be
kept for that purpose at the principal corporate trust office of Trustee
upon surrender hereof at said office by the registered owner in person or
by duly authorized attorney for cancellation and upon presentation of a
written instrument of transfer duly executed, and thereupon Issuer shall
issue to the transferee and Trustee shall authenticate and deliver a new
bond or bonds in authorized form or forms and denomination or
denominations of like aggregate principal amount. Such transfers shall be
without expense to the owner hereof, but any taxes or other governmental
charges required to be paid with respect to the same shall be paid by the
owner requesting such transfer as a condition precedent to the exercise of
such privilege.
Whenever in this bond or the Indenture a duty or payment is
required to be performed or paid or a notice given on a given day of the
month, and such day is not a Business Day, the required duty, payment, or
notice shall be performed or paid, or notice given on the next succeeding
day which is a Business Day.
IT IS HEREBY CERTIFIED AND RECITED that all acts and things
required by the Constitution and laws of the State of Texas to happen,
exist, and be performed precedent to and in the issuance of this series of
bonds and in the execution and delivery of the Indenture, have happened,
exist, and have been performed as so required.
THIS BOND shall not be entitled to any benefit under the
Indenture, or any indenture supplemental thereto, or become valid or
obligatory for any purpose until (i) Trustee shall have manually signed
the certificate of authentication hereon or (ii) a manually signed
Comptroller's Registration Certificate is attached hereto.
<PAGE> 22
IN WITNESS WHEREOF, Matagorda County Navigation District Number
One has caused this bond to be signed by the manual or facsimile signature
of the Chairman of the Board of Navigation and Canal Commissioners and
attested by the manual or facsimile signature of the Secretary of said
Board and the corporate seal of said Issuer to be duly impressed, printed,
or lithographed on this bond.
MATAGORDA COUNTY NAVIGATION DISTRICT
NUMBER ONE
____________________________________
Chairman, Board of Navigation
and Canal Commissioners
ATTEST:
_____________________________
Secretary
(SEAL)
(FORM OF TRUSTEE'S AUTHENTICATION CERTIFICATE FOR BONDS)
TRUSTEE'S CERTIFICATE
DATE: __________
This bond is one of the bonds described in the within mentioned
Indenture of Trust.
THE BANK OF NEW YORK, Trustee
____________________________________
Authorized Signature
(INSERT APPROPRIATE BOND INSURANCE LEGEND)
<PAGE> 23
(FORM OF STATE COMPTROLLER'S CERTIFICATE
FOR ALL BONDS UPON INITIAL ISSUE)
COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. _____
I HEREBY CERTIFY that there is on file and of record in my
office a certificate of the Attorney General of the State of Texas to the
effect that this bond has been examined by him as required by law, and
that he finds that it has been issued in conformity with the Constitution
and laws of the State of Texas, and that it is a valid and binding special
obligation of Matagorda County Navigation District Number One and said
bond has this day been registered by me.
WITNESS my signature and seal this
__________________________________
Comptroller of Public Accounts of
the State of Texas
(SEAL)
FORM OF ASSIGNMENT:
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered owner of this
bond or duly authorized representative or attorney thereof, hereby assigns
this bond to
______________________
/_____________________/ ___________________________________
(Assignee's Social (print or typewrite Assignee's name
Security or Taxpayer and address, including zip code)
Identification Number)
_________________________________________________________________________
and hereby irrevocably constitutes and appoints
_________________________________________________________________________
attorney to transfer the registration of this bond on the Bond
Registration Books with full power of substitution in the premises.
Dated: __________________
Signature Guaranteed: ________________________________
NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Bond in every particular, without
alteration or enlargement or any change whatever; and
<PAGE> 24
NOTICE: Signature(s) must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Trustee, which requirements
include membership or participation in STAMP or such other "signature
guaranty program" as may be determined by the Trustee in addition to or in
substitution for STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
Section 2.05. Required Certificate by State Comptroller.
Before the initial delivery of the Bonds, there shall be endorsed on each
of said Bonds a certificate of registration duly executed by or on behalf
of the Comptroller of Public Accounts of the State of Texas.
Section 2.06. Registrar. Issuer shall keep or cause to be
kept within the State of Texas books for the registration and transfer of
Bonds and Issuer hereby appoints Trustee as Bond Registrar to keep such
books within the State of Texas and make such registrations and transfers
under such reasonable regulations as Issuer or the Bond Registrar may
prescribe; and Bond Registrar will register or transfer or cause to be
registered or transferred therein, as hereinbefore provided, any Bonds
entitled to be so registered or transferred, upon presentation thereof at
such office.
Section 2.07. Title and Negotiability of Bonds. Bonds may be
transferred on the aforesaid registration books by the registered owner in
person or by his duly authorized attorney, by proper written instrument of
transfer in form, and with guaranty of signatures, satisfactory to Issuer
and Trustee. Bonds may, upon surrender thereof at the aforesaid office of
Trustee, be exchanged for a like aggregate principal amount of Bonds, in
any other authorized denomination or denominations, maturity and interest
rate, bearing interest from the last Interest Payment Date to which
interest has been paid in full on the Bonds so surrendered. Such
transfers of registration or exchanges of Bonds shall be without charge to
the owner of such Bonds, but any taxes or other governmental charges
required to be paid with respect to the same shall be paid by the Bond-
holder requesting such registration, transfer, or exchange as a condition
precedent to the exercise of such privilege.
Except as provided in Sections 2.09 and 2.10, every Bond shall
be dated the date of its registration and authentication and shall bear
interest (i) in the case of the initial Bond or Bonds delivered hereunder,
from July 1, 1995, and (ii) in the case of all other Bonds delivered
thereafter, from the Interest Payment Date next preceding the date of its
authentication (unless such date of authentication is after any Record
Date but on or before the next following Interest Payment Date in which
case it shall bear interest from such next following Interest Payment
Date, or if it shall be authenticated on or prior to the Record Date for
the first the Interest Payment Date for such Bond, it shall bear interest
from the date prescribed for such Bond).
Each Bond delivered pursuant to any provision of this Indenture
in exchange or substitution for, or upon the transfer of the whole or any
part of, one or more other Bonds, shall carry all of the rights to
interest accrued and unpaid and to accrue which were carried by the whole
or such part, as the case may be, of such one or more other Bonds, and
<PAGE> 25
notwithstanding anything contained in this Indenture, such Bonds shall be
so dated or bear such notation, that neither gain nor loss in interest
shall result from any such exchange, substitution, or transfer.
Every exchange or transfer of Bonds under the foregoing
provisions shall be effected in such manner as may be prescribed by Issuer
or pursuant to its authorization, with the approval of Trustee. Trustee
shall not be required to make exchanges or transfers of any Bond during
the period commencing with the close of business on any Record Date and
ending with the opening of business on the next following Interest Payment
Date or the maturity date of a series of Bonds, anything in the Indenture
or such Bond to the contrary notwithstanding.
In addition, in the event of a non-payment on a scheduled
Interest Payment Date, and for 60 days thereafter, a new Record Date for
such interest payment (a "Special Record Date") will be established by
Trustee, if and when funds for the payment of such interest or any portion
thereof have been received from Company. Notice of the Special Record
Date and of the scheduled payment date of the past due interest (the
"Special Payment Date"), which shall be 15 days after the Special Record
Date shall be sent at least five business days prior to the Special Record
Date by United States mail, first class, postage prepaid, to the address
of each registered owner of a Bond appearing on the bond registration
books at the close of business on the last Business Day next preceding the
date of mailing of such notice.
Section 2.08. Payment of Bonds. The person in whose name any
Bond shall be registered on the books of Issuer may be deemed and treated
as the absolute owner thereof for all purposes of this Indenture, whether
or not such Bond shall be overdue, and Issuer and Trustee and any Paying
Agent shall not be affected by any notice to the contrary; and payment of,
or on account of, the principal of, premium, if any, and interest on any
such Bond shall be made only to such registered owner thereof; but such
registration may be changed as provided herein. All such payments shall
be valid and effectual to satisfy and discharge the liability upon such
Bond to the extent of the sum or sums so paid.
Section 2.09. Temporary Bonds. Until Bonds in definitive form
are ready for delivery, Issuer may execute, and upon its request in
writing, Trustee shall authenticate and deliver in lieu of any thereof,
and subject to the same provisions, limitations, and conditions, one or
more printed, lithographed, or typewritten Bonds in temporary form,
substantially of the tenor of the Bonds hereinbefore described, without
coupons, and with appropriate omissions, variations, and insertions. Such
Bond or Bonds in temporary form may be for the principal amount of $5,000
or any integral multiple or multiples thereof, as Issuer may determine.
Until exchanged for Bonds in definitive form, such Bonds in temporary form
shall be entitled to the lien and benefit of this Indenture. Issuer
shall, without unreasonable delay, prepare, execute, and deliver to
Trustee, and thereupon, upon the presentation and surrender of the Bond or
Bonds in temporary form, Trustee shall authenticate and deliver, in
exchange therefor, a Bond or Bonds in definitive form in authorized
denominations of the same series, maturity, and interest rate for the same
aggregate principal amount as the Bond or Bonds in temporary form
<PAGE> 26
surrendered. Such exchange shall be made by Issuer at its own expense and
without making any charge therefor. When and as interest is paid upon
Bonds in temporary form, the fact of such payment shall be noted thereon
by the owner. Any such temporary Bonds shall be numbered consecutively
upward from TR-1.
Section 2.10. Loss, Theft, Destruction, or Mutilation of
Bonds. Upon receipt by Issuer and Trustee of evidence satisfactory to
both of them that any outstanding Bond has been mutilated, destroyed,
lost, or stolen, and of indemnity satisfactory to both of them, Issuer, in
its discretion, may execute and thereupon Trustee shall authenticate and
deliver a new Bond of the same series, maturity and interest rate and of
like tenor, as the mutilated, destroyed, lost, or stolen Bond, in exchange
and substitution for, and upon surrender and cancellation of, the
mutilated Bond or in lieu of and in substitution for the Bonds so de-
stroyed, lost, or stolen. In the event any such Bond shall have matured,
instead of issuing a duplicate Bond, Trustee may pay the same from amounts
available for such purpose. Such replacement Bonds shall be issued in
accordance with law. Issuer and Trustee may charge the owner of the Bond
destroyed, lost, or stolen the expenses incurred in the issuance of the
replacement Bonds or payment thereof, and may require indemnification
satisfactory to both of them.
Section 2.11. Cancellation and Destruction. Upon the
surrender to Trustee of any temporary or mutilated Bonds, or Bonds
transferred or exchanged for other Bonds, or Bonds acquired, redeemed, or
received by Trustee through the operation of a sinking fund, if any, or
Bonds acquired or redeemed or paid at maturity by Issuer, the same shall
forthwith be cancelled or destroyed by Trustee at the option of Issuer.
Cancelled Bonds shall be delivered to Issuer and in the case of
destruction a certificate of destruction shall be delivered to Issuer.
Section 2.12. Book-Entry Only System. The Bonds shall be
initially issued in the form of a single fully registered Bond. After
initial issuance, the ownership of the Bond shall be registered in the
name of Cede & Co., as nominee of DTC, and except as provided in Section
2.13 hereof, all of the outstanding Bonds shall be registered in the name
of Cede & Co., as nominee of DTC.
With respect to Bonds registered in the name of Cede & Co., as
nominee of DTC, Issuer and Trustee shall have no responsibility or
obligation to any participant in DTC (a "DTC Participant") or to any
person on behalf of whom such a DTC Participant holds an interest in the
Bonds, except as provided in this Indenture. Without limiting the
immediately preceding sentence, Issuer and Trustee shall have no
responsibility or obligation with respect to (i) the accuracy of the
records of DTC, Cede & Co. or any DTC Participant with respect to any
ownership interest in the Bonds, (ii) the delivery to any DTC Participant
or any other person, other than a Bondholder, as shown on the registration
books, of any notice with respect to the Bonds, including any notice of
redemption, or (iii) the payment to any DTC Participant or any other
person, other than a Bondholder as shown in the registration books, of any
amount with respect to principal of, premium, if any, or interest on, the
Bonds. Notwithstanding any other provision of this Indenture to the
<PAGE> 27
contrary, Issuer and Trustee shall be entitled to treat and consider the
person in whose name each Bond is registered in the registration books as
the absolute owner of such Bond for the purpose of payment of principal,
premium, if any, and interest with respect to such Bond, for the purpose
of giving notices of redemption and other matters with respect to such
Bond, for the purpose of registering transfers with respect to such Bond,
and for all other purposes whatsoever. Trustee shall pay all principal
of, premium, if any, and interest on the Bonds only to or upon the order
of the respective owners, as shown in the registration books as provided
in this Indenture, or their respective attorneys duly authorized in
writing, and all such payments shall be valid and effective to fully
satisfy and discharge Issuer's obligations with respect to payment of
principal of, premium, if any, and interest on, the Bonds to the extent of
the sum or sums so paid. No person other than an owner, as shown in the
registration books, shall receive a Bond certificate evidencing the
obligation of Issuer to make payments of principal, premium, if any, and
interest, pursuant to this Indenture. Upon delivery by DTC to Trustee of
written notice to the effect that DTC has determined to substitute a new
nominee in place of Cede & Co., and subject to the provisions in this
Indenture with respect to payment of interest to the registered owner at
the close of business on the Record Date, the word "Cede & Co." in this
Indenture shall refer to such new nominee of DTC.
Section 2.13. Successor Securities Depository; Transfers
Outside Book-Entry Only System. (a) In the event that Company determines
that DTC is incapable of discharging its responsibilities described herein
and in the representation letter of Issuer to DTC (the "DTC Letter") and
that it is in the best interest of the beneficial owners of the Bonds that
they be able to obtain certificated Bonds, Issuer, at the direction of the
Company, shall (i) appoint a successor securities depository, qualified to
act as such under Section 17(a) of the Securities Exchange Act of 1934, as
amended, notify DTC and DTC Participants, identified by DTC, of the
appointment of such successor securities depository and transfer one or
more separate Bonds to such successor securities depository or (ii) notify
DTC and DTC Participants, identified by DTC, of the availability through
DTC of Bonds and transfer one or more separate Bonds to DTC Participants,
identified by DTC, having Bonds credited to their DTC accounts. In such
event, the Bonds shall no longer be restricted to being registered in the
registration books in the name of Cede & Co., as nominee of DTC, but may
be registered in the name of the successor securities depository, or its
nominee, or in whatever name or names Bondholders transferring or
exchanging Bonds shall designate, in accordance with the provisions of
this Indenture.
(b) Upon the written consent of 100% of the beneficial owners
of the Bonds, Trustee, in accordance with the DTC Letter, shall withdraw
the Bonds from DTC, and authenticate and deliver Bonds fully registered to
the assignees of DTC or its nominee. If the request for such withdrawal
is not the result of any Issuer action or inaction, such withdrawal,
authentication and delivery shall be at the cost and expense (including
costs of printing, preparing and delivering such Bonds) of the persons
requesting such withdrawal, authentication and delivery.
<PAGE> 28
Section 2.14. Payments to Cede & Co. Notwithstanding any
other provision of this Indenture to the contrary, so long as any Bond is
registered in the name of Cede & Co., as nominee of DTC, all payments with
respect to principal of, premium, if any, and interest on, such Bond and
all notices with respect to such Bond shall be made and given,
respectively, in the manner provided in the DTC Letter.
ARTICLE III
Authorization and Issuance of Bonds
Section 3.01. Limitation on Issuance of Bonds. No Bonds shall
be delivered under this Indenture except in accordance with the provisions
of this Article.
Section 3.02. Principal Amount, Interest Rate, Interest
Payment Dates, and Maturity Dates of the Bonds. There shall be delivered
under and secured by this Indenture, for the purpose of refunding all of
the outstanding Prior Bonds, an issue of Bonds in the aggregate principal
amount of $100,635,000. Bonds thus to be delivered shall be fully
registered Bonds without coupons, in the denomination of $5,000 or any
integral multiple thereof, numbered from R-1 upward, and entitled
"Matagorda County Navigation District Number One Pollution Control Revenue
Refunding Bonds (Central Power and Light Company Project) Series 1995".
The Bonds shall mature on July 1, 2028, shall be dated July 1, 1995 and
the principal amount thereof shall bear interest (i) in the case of the
initial Bond or Bonds delivered pursuant to the Indenture, from July 1,
1995, and (ii) in the case of all other Bonds delivered thereafter, from
the Interest Payment Date next preceding the date of authentication
(unless such date of authentication is after any Record Date but on or
before the next following Interest Payment Date in which case such
principal amount shall bear interest from such next following Interest
Payment Date, or if any Bond shall be authenticated on or prior to the
Record Date for the January 1, 1996 Interest Payment Date, it shall bear
interest from July 1, 1995). Interest shall be paid by check to the
registered owner thereof as such owner appears on the Record Date next
preceding each Interest Payment Date on the registration books kept by
Trustee. Interest shall be payable semiannually on each January 1 and
July 1, beginning January 1, 1996. Payment of principal and premium, if
any, on all Bonds and accrued interest upon the redemption of any Bonds
shall be made upon the presentation and surrender of such Bonds at the
principal corporate trust office of Trustee as the same shall become due
and payable. Interest shall be calculated upon the basis of a 360-day
year consisting of twelve thirty day months.
Section 3.03. Interest Rate. (a) The Bonds shall bear
interest at the rate of _______ percent (_______%) per annum from July 1,
1995 to and including July 1, 2028 or the date of redemption prior to
maturity.
<PAGE> 29
Section 3.04. Execution and Delivery of Bonds. The Bonds
shall be executed by Issuer and delivered to Trustee and thereupon shall
be delivered by Trustee to the initial purchasers thereof, but only upon
receipt by Trustee of:
(1) A copy of the Bond Resolution adopted by the Board and
certified by the Secretary of the Board, authorizing this
Indenture, the issuance of the Bonds, and the delivery of the
Bonds;
(2) The purchase price of the Bonds delivered as stated in
the Bond Resolution;
(3) A certificate of the Chairman or Secretary of the
Board of Issuer stating that on the date of such delivery of
such Bonds, Issuer is not in default in the performance or
observance of any of the covenants, conditions, agreements, or
provisions of this Indenture; and
(4) A Written Order directing the delivery of the Bonds.
Section 3.05. No Additional Bonds. No Bonds other than the
Series 1995 Bonds authorized and issued hereunder shall be issued under
this Indenture.
Section 3.06. No Limitation on Issuer. No provision in this
Indenture shall in any way affect the statutory right of Issuer to issue
bonds supported wholly by ad valorem or other taxes or bonds secured by
revenues other than the revenues herein pledged, or bonds secured by taxes
and revenues other than the revenues herein pledged.
ARTICLE IV
Redemption of Bonds
Section 4.01. Redemption in Accordance with Indenture. Any
redemption of all or any part of the Bonds issued under the provisions of
this Indenture which are subject to redemption shall be made in the manner
provided in this Article.
Section 4.02. Selection by Lot. In case of the redemption of
less than all of the Bonds Outstanding, except as otherwise provided
herein, the particular Bonds or portions of Bonds to be redeemed shall be
selected from all the Outstanding Bonds by lot or other customary means by
Trustee in such manner as Trustee in its discretion may deem proper in
order to assure to each owner of Bonds a fair opportunity to have his Bond
or Bonds or portions thereof drawn; provided, however, Trustee shall treat
each such Bond of a denomination of more than $5,000 as representing that
number of Bonds of $5,000 denominations obtained by dividing the principal
amount of such Bonds by $5,000.
<PAGE> 30
Section 4.03. Notice of Redemption. In case of any redemption,
Trustee shall cause notice of such redemption to be given by mailing by
first-class mail, postage prepaid, a copy of the redemption notice to the
registered owners of the Bonds designated for redemption in whole or in
part, at their addresses as the same shall last appear upon the
registration books, not more than 60 nor less than 30 days prior to the
redemption date. In addition, notice of redemption shall be sent by
certified or registered mail, return receipt requested, or by over night
delivery service (1) contemporaneously with such mailing: (A) to any
registered owner of $1,000,000 or more in principal amount of Bonds and
(B) to at least two or more information services of national recognition
that disseminate redemption information with respect to municipal bonds
and (2) to any securities depository registered as such pursuant to the
Securities Exchange Act of 1934, as amended, that is an owner of Bonds to
be redeemed so that such notice is received at least two days prior to
such mailing date. An additional notice of redemption shall be given by
certified mail, postage prepaid, mailed not less than 60 nor more than 90
days after the redemption date to any owner of Bonds selected for
redemption that has not surrendered the Bonds called for redemption, at
the address as the same shall appear upon the registration books.
All notices of redemption shall state:
(1) the redemption date,
(2) the redemption price,
(3) the identification, including complete designation
(including series) and issue date of the Bonds and the CUSIP
number, certificate number (and in the case of partial
redemption, the respective principal amounts), interest rates
and maturity dates of the Bonds to be redeemed,
(4) that on the redemption date the Redemption Price will
become due and payable upon each such Bond, and that interest
thereon shall cease to accrue from and after said date,
(5) the name and address of Trustee and any Paying Agent
for such Bonds, including the place where such Bonds are to be
surrendered for payment of the Redemption Price;
provided, however, that failure to give any such notice or any defect
therein with respect to any particular Bond will not affect the validity
of any call for the redemption of any other Bonds.
Section 4.04. Proceedings for Redemption. If notice of
redemption has been duly mailed to registered owners at their respective
addresses as the same may appear in the registry books, or duly waived by
the owners of all Bonds called for redemption, then the Bonds or portions
thereof called for redemption shall be due and payable on the redemption
date at the Redemption Price. Payment of the Redemption Price, together
with accrued interest, shall be made by Trustee to or upon the order of
the owners of the Bonds called for redemption upon surrender of such
<PAGE> 31
Bonds. The Redemption Price of and the interest accrued on the Bonds
being redeemed shall be paid out of the Bond Fund. If there shall be
called for redemption less than all of a Bond, Issuer shall execute and
deliver and Trustee shall authenticate, upon surrender of such Bond, and
without charge to the owner thereof, for the unredeemed balance of the
Bond so surrendered, Bonds of like maturity and interest payment dates.
From and after the redemption date designated in such notice or
waiver, deposit of redemption moneys, or to the extent permitted in
Article IX, "Governmental Obligations", as therein defined, having been
made and notice given or waived as aforesaid, notwithstanding that any
Bonds so called for redemption in whole or in part shall not have been
surrendered for cancellation, no further interest shall accrue upon the
principal of any of the Bonds or portions thereof so called for
redemption. If the notice of redemption has been made, and if due
provision for payment is made, all as provided above, such Bonds or
portions thereof shall not be regarded as being Outstanding and shall
cease to be entitled to any lien, benefit, or security under this
Indenture, and the owners thereof shall have no rights in respect of such
Bonds, or portions thereof, except to receive payment of the Redemption
Price thereof and unpaid interest accrued to the date fixed for
redemption.
Section 4.05. Redemption of Bonds. The Bonds shall be subject
to redemption prior to their scheduled maturity in accordance with the
following provisions and otherwise in the manner set forth in this
Indenture:
(a) Optional Redemption. At the option of Issuer, to be
exercised at the direction of Company, on July 1, ____ or on
any date thereafter, in whole or in part (and if in part in the
manner specified in Section 4.02), upon acceleration of the
payments by Company in accordance with the Agreement for any
purpose and from any moneys available for such purpose other
than for purposes or from moneys described in (b) or (c) below,
upon payment of the applicable Redemption Price expressed as a
percentage of the principal amount of the Bonds to be redeemed
set forth in the schedule below, together with unpaid interest
accrued to date of redemption, to wit:
Redemption Date Redemption Price
The Bonds shall be called for redemption by Trustee
pursuant to the foregoing paragraph (a) upon receipt by Trustee
at least forty-five days prior to the redemption date of
written notice from Company of the exercise of such option.
Such notice shall specify the redemption date, the principal
amount of the Bonds so to be called for redemption, and the
applicable Redemption Price.
<PAGE> 32
(b) Extraordinary Optional Redemption. At the option of
Issuer, to be exercised at the direction of Company, at any
time, in whole, on acceleration of the payments by Company in
accordance with the Agreement, at a redemption price equal to
the principal amount of the Outstanding Bonds, plus unpaid
interest accrued to date of redemption, upon occurrence of any
of the following events:
(i) in the reasonable judgment of Company
unreasonable burdens or excessive liabilities shall have
been imposed upon Issuer or Company with respect to the
Facilities or the Plant, including without limitation (A)
the imposition of any income or other taxes not being
imposed on July 1, 1995 or (B) the imposition of any ad
valorem property or other taxes (other than ad valorem
property or other taxes being imposed on July 1, 1995 upon
similarly assessed property within the same taxing juris-
diction);
(ii) the Facilities or the Plant shall have been
damaged or destroyed to such extent that, in the opinion of
Company, (A) within a period of six consecutive months
following such damage or destruction, it is not practicable
or desirable to rebuild, repair or restore the same, (B)
Company will be thereby prevented from carrying on its
normal operations of the Facilities or the Plant for a
period of six consecutive months or (C) the cost of
restoration would exceed by $1,500,000 or more the net
proceeds of insurance thereon;
(iii) title to, or temporary use of, all or
substantially all of the Facilities or the Plant shall have
been taken under the exercise of the power of eminent
domain;
(iv) changes in the economic availability of
materials, labor, services, supplies (including fuel),
equipment or other property, facilities or things necessary
for the operation of the Facilities or the Plant shall have
occurred, or technological, regulatory or other changes
shall have occurred, which, in the opinion of Company,
render the continued operation of the Facilities or the
Plant uneconomic;
(v) any court or administrative body shall enter a
judgment, order or decree requiring Company to cease, or
dispose of, all or any substantial part of its operations
of the Facilities or the Plant to such extent that, in the
opinion of Company, it is or will be thereby prevented from
carrying on its normal operations of the Facilities or the
Plant for a period of six or more consecutive months; or
<PAGE> 33
(vi) as a result of any change in the Constitution of
the State of Texas or the Constitution of the United States
of America or of any legislative or administrative action
(whether state or federal) or of any final decree,
judgment, or order of any court or administrative body
(whether state or federal), the obligations of Company
under the Agreement shall have become unenforceable or
impossible of performance in any material respect in
accordance with the intent and purpose of the parties as
expressed in the Agreement.
The exercise of any such option shall be at the direction of
Company which shall give written notice to Issuer and Trustee
within one hundred twenty (120) days after the occurrence of an
event described in clause (i), (ii), (iii), (iv), (v), or (vi)
above, which notice shall specify that, as determined by
Company, one or more of such events has occurred or one or more
of such conditions is continuing and also shall specify a date
for redemption not less than 45 nor more than 120 days after
the date such notice is given.
(c) Special Mandatory Redemption. The Bonds are subject
to mandatory redemption in whole or in part at any time (and if
in part in the manner specified in Section 4.02) if such
partial redemption will preserve the exemption from federal
income taxation of interest on the remaining Bonds Outstanding,
at a redemption price equal to the principal amount thereof
together with unpaid interest accrued to the date fixed for
redemption, and without premium, if (i) a final decree or
judgment of any federal court, in which Company participates to
the extent it deems sufficient, or (ii) a final action by the
Internal Revenue Service, in proceedings in which Company
participates to the extent it deems sufficient, determines that
the interest paid or payable on any such Bonds to other than,
as provided in the Code, a "substantial user" of the
Facilities or a "related person" is or was includable in the
gross income of the owner thereof for federal income tax
purposes under the Code, as a result of the failure by the
Company to observe or perform any covenant, condition, or
agreement on its part to be observed or performed under the
Agreement or the inaccuracy of any representation by Company
under the Agreement; provided, however, that no decree or
judgment by any court or action by the Internal Revenue Service
shall be considered final unless the Bondholder involved in
such proceeding or action (A) gives Company and Trustee prompt
notice of the commencement thereof and (B), if Company agrees
to pay all expenses in connection therewith and to indemnify
such Bondholder against all liabilities in connection
therewith, offers Company the opportunity to control the
defense thereof. Any such redemption shall be made on a date
determined by the Trustee not more than 180 days after the time
of such final decree, judgment or action. The Trustee shall
give the Issuer and Company not less than forty-five days
written notice of such date.
<PAGE> 34
Section 4.06. Trustee to Call Bonds. If Issuer exercises an
option to call Bonds prior to stated maturities under Section 4.05, or if
the Bonds are required to be redeemed prior to stated maturities, Trustee
shall give notice of such redemption in accordance with Section 4.03 after
receiving notice thereof in accordance with the provisions of Section 7.03
of the Agreement. Should the Corporate Trust Department of the Trustee
receive notice in writing from any owner of Bonds of an event requiring
redemption of the Bonds, notice thereof shall be given to Company and
Issuer.
ARTICLE V
Bond Fund
Section 5.01. The Bond Fund. There is hereby created the Bond
Fund, which shall be held by Trustee. Concurrently with the delivery of
Bonds to the purchasers thereof, there shall be paid to Trustee for
deposit in the Bond Fund, from the proceeds of the sale of Bonds, the
interest accrued on the Bonds to date of delivery to the initial
purchasers, and such other amounts as may be specified by the Bond
Resolution authorizing the issuance of such Bonds. Issuer hereby directs
payment to Trustee of any and all amounts payable to Issuer under the
Agreement (except certain payments for compensation and indemnification of
Issuer to be paid to Issuer pursuant to Sections 4.04, 5.03, and 6.04
thereof). Trustee shall deposit in the Bond Fund such payments and other
moneys required to be deposited therein pursuant to the provisions of the
Agreement or this Indenture.
Section 5.02. Payment from Bond Fund. Trustee shall pay from
the moneys in the Bond Fund the interest on the Bonds as the same shall
become due and the principal of the Bonds as the same shall mature or be
called for redemption prior to stated maturity together with any premium
due thereon at the time of redemption.
Section 5.03. (a) Bond Fund Requirement. In accordance with
the Agreement all payments made by Company are to be made to Trustee for
deposit to the credit of the Bond Fund. Such payments, together with
other moneys available therefor in the Bond Fund, are calculated to
include (i) all interest scheduled to accrue on all Outstanding Bonds as
the same comes due, and (ii) the payment of the principal and premium, if
any, of the Outstanding Bonds as they shall mature or be redeemed.
(b) Disposition of Prepayments. Any prepayments made by
Company in accordance with Article VII of the Agreement shall be applied,
as Company shall direct, in accordance with the provisions of Section 4.05
hereof or credited against payments required under Section 3.04 of the
Agreement.
Section 5.04. (a)Funds Held in Trust. All moneys from time to
time received by Trustee and held in the Bond Fund shall be held in trust
by Trustee for the benefit of the owners of the Bonds entitled to be paid
therefrom.
<PAGE> 35
(b) Nonpresentment of Bonds. In the event any Bond shall not
be presented for payment when the principal thereof becomes due, either at
maturity, at the date fixed for redemption thereof, or otherwise, if funds
sufficient to pay such Bond shall have been made available to Trustee for
the benefit of the owner or owners thereof, all liability of Issuer to the
owner thereof for the payment of such Bond shall thereupon cease and be
completely discharged, and it shall be the duty of Trustee to hold such
funds, without liability for interest thereon, for the benefit of the
owner of such Bond, who shall thereafter be restricted exclusively to such
funds, for any claim of whatever nature on his part under this Indenture
or on, or with respect to, said Bond; provided, that any funds which shall
be so held by Trustee, and which remain unclaimed by the owner of the Bond
not presented for payment for a period of two (2) years after the date on
which such Bond shall have become payable, shall upon request in writing
by Company be paid to Company and thereafter the owner of such Bond shall
look only to Company for payment and then only to the amount so received
without any interest thereon and Trustee shall have no responsibility with
respect to such moneys. To the extent applicable, Title 6 of the Texas
Property Code will apply to unclaimed moneys.
Section 5.05. Investment of Moneys in Certain Funds. Issuer
hereby gives its express written authority to Company to direct the
investment of the moneys in the Bond Fund by Trustee as hereinafter
provided. Issuer hereby finds and determines that the investment of any
money held as part of the Bond Fund in obligations hereinafter permitted
will yield the highest possible rate of return while providing necessary
protection of the principal consistent with the needs for such money under
this Indenture and the Agreement. Any money held as part of the Bond Fund
shall be invested or reinvested by Trustee upon the written direction of
Company acting through an Authorized Company Representative in:
(i) direct obligations of, or obligations guaranteed by,
the United States of America, and any bonds or other
obligations of the Federal National Mortgage Association
(including Participation Certificates), Government National
Mortgage Association, Federal Farm Credit Banks, Federal
Intermediate Credit Banks, Federal Banks for Cooperatives,
Federal Land Banks, Federal Home Loan Mortgage Corporation and
Federal Home Loan Banks;
(ii) interest-bearing certificates of deposit (secured by
the obligations described in the foregoing subparagraph (i)) in
a national or state bank or a trust company (which may be
Trustee) which has a combined capital and surplus aggregating
not less than Two Hundred Fifty Million Dollars ($250,000,000);
(iii) any obligation secured by a pooling of one or more
of the foregoing;
(iv) any obligation described in Section 103(a) of the
Code; or
(v) as otherwise permitted by law for such funds.
<PAGE> 36
If not otherwise directed, Trustee shall invest cash balances in a cash
management fund described in (iii) above. Trustee is specifically
authorized to implement its automated cash investment system to assure
that cash on hand is invested and to charge its normal cash management
fees, which may be deducted from income earned on investments.
In the event the laws of Texas are amended to allow investment
of these funds in other investments and securities, such additional
investments shall be authorized by this Section. The type, amount, and
maturity of all investments shall be as specified to Trustee upon the
direction of an Authorized Company Representative confirmed in writing.
The Trustee may make any and all such investments through its own
investment department or with any affiliate bank in each case acting in
its commercial banking capacity.
The securities purchased or investments made with the moneys in
the Bond Fund shall at all times be deemed a part of the Bond Fund. The
interest, including realized discount on securities purchased, received on
all such securities shall be deposited in or credited to the Bond Fund.
All such securities and investments shall be deposited with Trustee.
Trustee shall not be liable or responsible for any loss resulting from any
such investments or resulting from the redemption or sale of any such
investment as herein authorized. If at any time it shall become necessary
that some or all of the securities purchased with the moneys in the Bond
Fund be redeemed or sold in order to raise moneys necessary to comply with
the provisions of this Indenture, Trustee shall, without further
authorization than is herein contained, effect such redemption or sale,
employing, in the case of a sale, any commercially reasonable method of
effecting the same.
Section 5.06. Moneys Secured. All moneys deposited with Trustee
and not invested in securities by Trustee pursuant to the provisions
hereof or to the extent not insured by the Federal Deposit Insurance
Corporation or other federal agency, shall continuously be secured, for
the benefit of Issuer and the owners of the Bonds, to the extent and as
required by law for security of Issuer's funds. Such securities shall be
deposited with Trustee.
Section 5.07. Bond Fund Balance. Except as provided in (b) of
Section 5.04, any amounts remaining in the Bond Fund, after all of the
Bonds shall be deemed to have been paid and discharged under the
provisions of this Indenture and the fees, charges, and expenses of Issuer
and the Trustee, and all other amounts required to be paid under this
Indenture shall have been paid, shall be paid to Company, or to such
person, body, or authority as may be entitled to receive the same.
Section 5.08. Exemption from Federal Income Taxation. Issuer
will not knowingly take any action, or omit to take any action, which
action or omission will adversely affect the exclusion from gross income
for federal income tax purposes of interest on the Bonds, and in the event
of such action or omission will promptly, upon receiving knowledge
thereof, take all lawful actions, based on advice of counsel and at the
expense of Company, as may rescind or otherwise negate such action or
omission.
<PAGE> 37
Section 5.09. Special Rebate Fund. (a) A Special Rebate Fund
is hereby established by Issuer. Such Special Rebate Fund shall be for
the sole benefit of the United States of America and shall not be subject
to the claim of any other person, including without limitation any
Bondholder. The Special Rebate Fund is established for the purpose of
complying with section 148 of the Code and the Regulations.
(b) On the fifth anniversary of the date of issuance of the
Bonds and on each fifth anniversary thereafter, Trustee shall receive from
Company a computation of the amount of Excess Earnings (as hereinafter
defined), if any, for the period beginning on the date of delivery of the
Bonds and ending at the close of each such fifth Bond Year (as hereinafter
defined) and transfer an amount equal to the difference, if any, between
the amount then in the Special Rebate Fund and the Excess Earnings so
computed. The term "Bond Year" means with respect to the Bonds each one-
year period ending on the anniversary of the date of delivery of the
Bonds. If, at the close of any Bond Year, the amount in the Special
Rebate Fund exceeds the amount that would be required to be paid to the
United States of America under paragraph (d) below if the Bonds had been
paid in full, such excess may be transferred from the Special Rebate Fund
and paid to Company to be used for such purposes for which, or to be
redeposited to such fund from which, such amounts were originally derived.
(c) In general, Excess Earnings for any period of time means
the sum of
(i) the excess of --
(A) the aggregate amount earned during such period of
time on all Nonpurpose Investments (including gains on the
disposition of such obligations) in which Gross Proceeds of the
issue are invested (other than amounts attributable to an
excess described in this subparagraph (c)(i)), over
(B) the amount that would have been earned during such
period of time if the Yield on such Nonpurpose Investments
(other than amounts attributable to an excess described in this
subparagraph (c)(i)) had been equal to the yield on the issue,
plus
(ii) any income during such period of time attributable to the
excess described in subparagraph (c)(i) above.
The terms Nonpurpose Investments, Gross Proceeds and Yield shall have the
meanings given to such terms in Section 148 of the Code and the
Regulations promulgated pursuant to such section.
(d) Trustee shall pay to the United States of America at least
once every five years an amount that ensures that at least 90 percent of
the Excess Earnings from the date of delivery of the Bonds to the close of
the period for which the payment is being made will have been paid.
Trustee shall pay to the United States of America not later than 60 days
after the Bonds have been paid in full 100 percent of the amount then
required to be paid under section 148(f) of the Code as a result of Excess
Earnings.
<PAGE> 38
(e) The amounts to be computed, paid, deposited or disbursed
under this Section 5.09 shall be determined by Company within thirty days
after each successive fifth anniversary date of the date of issuance of
the Bonds. By such date, Company shall also notify, in writing, Trustee
and Issuer of the determinations Company has made and the payment to be
made pursuant to the provisions of this section. Upon written request of
any registered owner of Bonds, Company shall furnish to such registered
owner of Bonds a certificate (supported by reasonable documentation, which
may include calculation by Bond Counsel or by some other service
organization) showing compliance with this section and other applicable
provisions of section 148 of the Code.
(f) Trustee shall maintain a record of the periodic
determinations by Company of the Excess Earnings for a period beginning on
the first anniversary date of the issuance of the Bonds and ending on the
date six years after the final retirement of the Bonds.
(g) The provisions of this Section 5.09 shall not apply to
Bonds to the extent that such Bonds qualify for the exceptions to rebate
set forth in Section 148(f)(4)(B) of the Code.
ARTICLE VI
Application of Proceeds
Section 6.01. Application of Original Proceeds of Bonds. The
proceeds of the Bonds delivered to Trustee hereunder shall be applied on
the date of delivery of the Bonds by Trustee as follows:
(a) deposit in the Bond Fund, a sum equal to the accrued
interest, if any, paid by the initial purchasers of the Bonds.
(b) transfer to the Prior Trustee for the 1984 Bonds, for
deposit in a separate account of the bond fund established pursuant to
Article V of the 1984 Indenture, for the purpose of refunding all of the
outstanding 1984 Bonds, $68,870,000 of such proceeds.
(c) transfer to the Prior Trustee for the 1985A Bonds, for
deposit in a separate account of the bond fund established pursuant to
Article V of the 1985A Indenture, for the purpose of refunding all of the
outstanding 1985A Bonds, $31,765,000 of such proceeds.
Section 6.02. Consideration for Refunding. Issuer hereby finds
that the refunding of all of the outstanding 1984 Bonds and the
outstanding 1985A Bonds will result in substantial gross savings and
present value savings on debt service on the 1984 Bonds and 1985A Bonds.
<PAGE> 39
ARTICLE VII
General Covenants
Section 7.01. Intentionally Omitted.
Section 7.02. Payment of Principal and Interest. Solely from
the source pledged to the payment of the Bonds, Issuer will duly and
punctually pay or cause to be paid the principal of, premium, if any, and
interest on every Bond, on the date and at the place and in the manner
specified in the Bonds according to the true intent and meaning thereof,
and Issuer will faithfully do and perform and at all times fully observe
any and all covenants, undertakings, and provisions contained herein or in
any Bond.
Section 7.03. Authority of Issuer and Preservation of Rights.
Issuer represents that it is a conservation and reclamation district, and
a governmental agency and body politic and corporate, duly created,
organized, and existing under the Constitution and laws of the State of
Texas and a "district" as such term is defined in the Acts, and has proper
authority to refund all or a portion of the Prior Bonds, to issue the
Bonds, and to pledge the revenues in the manner and form as herein done or
intended, and that all corporate action on its part to that end has been
duly and validly taken; and will use its best efforts to maintain,
preserve, and renew all the rights, powers, privileges, and franchises
owned by it. Issuer will at all times maintain a lawful Board, and at all
times function and act in the best interest of the Bondholders.
Section 7.04. Installment Payment Agreement. Issuer will comply
with, and take all reasonable and lawful measures to enforce, the terms of
the Agreement. So long as any Bond is Outstanding, Issuer will require
Company to pay, or cause to be paid, all of the payments and other costs
and charges payable by Company under the Agreement; Issuer will not enter
into any agreement with Company amending the Agreement or any agreements
supplemental thereto or constituting additional agreements which will
effect any reduction in the payments required to be paid to Issuer
thereunder; Issuer will require Company to observe faithfully all of its
covenants and agreements under the Agreement and all agreements
supplemental thereto, additional agreements, and agreements amending any
of the foregoing; and, in case Company shall fail to make such payments or
observe said covenants and agreements, Issuer will institute and prosecute
all such legal proceedings as may be appropriate for the protection of the
owners of the Bonds. Trustee shall have full right and authority to
enforce the rights of Issuer under the Agreement assigned by this
Indenture, and Issuer covenants that, prior to its bringing any action to
enforce such rights, Issuer will give Trustee reasonable notice and
Trustee shall have the right to participate in and, if it so desires,
control such action.
Section 7.05. Further Assurances. Issuer covenants that it will
from time to time execute and deliver such further instruments, will
perform all covenants, undertakings, stipulations, and provisions
contained in this Indenture and take such further action as may be
reasonable and as may be required to carry out the purpose of this Inden
<PAGE> 40
ture; provided, however, that no such instruments or action shall pledge
the credit or taxing power of the State of Texas, Issuer, or any political
subdivision of said State.
Section 7.06. Extension of Bonds. In order to prevent any
accumulation of claims for interest after maturity, Issuer will not
directly or indirectly extend or assent to the extension of the time of
payment of any claims for interest on any of the Bonds and will not
directly or indirectly be a party to or approve any such arrangement by
purchasing or funding such claims for interest or in any other manner. In
case any such claim for interest shall be extended or funded in violation
hereof, such claim for interest shall not be entitled, in case of any
default hereunder, to the benefit or security of this Indenture except
subject to the prior payment in full of the principal of all other Bonds
issued and Outstanding hereunder, and of all claims for interest which
shall not have been so extended or funded.
Section 7.07. Reports. Issuer shall cause Company to furnish to
Trustee a copy of its annual report to its preferred shareholders at the
same time it is made available to such shareholders.
Section 7.08. Further Actions by Issuer and Trustee. Issuer and
Trustee mutually covenant that they will, from time to time, each upon the
written request of the other, take such further action as may be
reasonable and as may be required by the other to carry out the purposes
of this Indenture; provided, however, that no such action shall impose any
personal liability on any director, officer, employee, agent, or
representative of Issuer, and provided further, that Trustee shall have no
obligation to take any action which, in the opinion of Trustee, would
impose any personal or corporate liability on Trustee or any officer,
employee, agent, or representative of Trustee.
Section 7.09. Paying Agents. Issuer hereby designates Trustee
as the original Paying Agent under this Indenture. It shall not be
necessary to name a Paying Agent or Paying Agents in addition to Trustee.
ARTICLE VIII
Defaults and Remedies
Section 8.01. Definition of "Event of Default". The following
shall be "events of default" under this Indenture and the term "Event of
Default" shall mean, whenever it is used in this Indenture, any one or
more of the following events:
(a) payment of the principal of and premium, if any, on
any of the Bonds shall not be made when the same shall become
due and payable at maturity, upon redemption or otherwise;
(b) payment of an installment of interest on any of the
Bonds shall not be made when the same shall become due and
payable and such failure shall continue for a period of sixty
(60) days;
<PAGE> 41
(c) there shall be an Event of Default as defined in the
Agreement; or
(d) Issuer shall default in the due and punctual
performance of any other of the covenants, conditions,
agreements, and provisions contained in the Bonds or in this
Indenture on the part of Issuer to be performed, and such
default shall continue for ninety (90) days after written
notice specifying such default and requiring the same to be
remedied shall have been given to Issuer and Company by
Trustee, which may give such notice in its discretion and shall
give such notice at the written request of the owners of not
less than 25% in aggregate principal amount of the Bonds then
Outstanding.
With regard to any Event of Default concerning which notice is
given to Issuer and Company under Section 8.01(d), Issuer hereby grants
Company full authority for the account of Issuer to the extent permitted
by law to cure such default; provided, however, if said default be such
that it cannot be corrected within the ninety (90) day period, it shall
not constitute an Event of Default under Section 8.01(d) if corrective
action is instituted by Issuer or Company within the ninety (90) day
period and diligently pursued until the default is corrected. With regard
to any Event of Default, Trustee shall immediately give telephonic notice
confirmed by writing, to Issuer and Company specifying such Event of
Default.
Should any Event of Default occur and be continuing, then
Trustee may, and upon written request of the owners of not less than 25%
in aggregate principal amount of the Bonds then Outstanding shall,
provided that written notice of the default has been delivered to Issuer
and Company by Trustee, declare the principal of all Bonds then
Outstanding to be due and payable immediately, and upon such declaration
the said principal, together with interest accrued thereon, shall become
due and payable immediately at the place of payment provided therein
without any presentment, protest, demand, or other notice of any kind, all
of which are hereby waived by Issuer, anything in this Indenture or in
said Bonds to the contrary notwithstanding, and interest shall accrue at
the highest rate borne by any Outstanding Bonds to the extent permitted by
law, on the amount declared to be due and payable from the date of such
declaration until payment is made in full.
The above provisions, however, are subject to the condition
that if, after the principal of said Bonds shall have been so declared to
be due and payable, the principal of the Bonds and all arrears of interest
upon the Bonds (except the principal of, and interest on, the Bonds which
by such declaration shall have become due and payable), and interest on
overdue installments of principal and interest, to the extent legally
permissible, and all other sums payable under this Indenture shall have
been paid by or on behalf of Issuer and Company, and Issuer and Company
also shall have performed all other things in respect of which they may
have been in default hereunder or under the Agreement and shall have paid
or shall have caused to be paid the reasonable charges of Trustee and its
counsel and of the owners of said Bonds, including reasonable attorney's
<PAGE> 42
fees paid or incurred, and all other Trustee Expenses shall have been
paid, then and in every such case, such default may, but is not obligated
to be waived and such declaration and its consequences rescinded and
annulled by Trustee by written notice to Issuer and Company, provided,
that if such declaration was requested by the owners of not less than
twenty-five per cent (25%) in aggregate principal amount of the
Outstanding Bonds, such waiver, rescission, and annulment shall have been
consented to by the owners of a majority in aggregate principal amount of
the Bonds then Outstanding, which consent shall be binding upon Trustee
and upon all owners of Bonds issued hereunder, but no such waiver,
rescission, and annulment shall extend to or affect any subsequent default
or impair any right or remedy consequent thereon.
Section 8.02. Declaration of Principal and Interest Due. In any
case in which under the provisions of Section 8.01 Trustee has the right
to declare the principal of all Bonds then Outstanding to be due and
payable immediately, Trustee, as the assignee and pledgee of all the
right, title, and interest of Issuer in and to the Agreement, may (a)
enforce each and every right granted to Issuer under the Agreement and (b)
pursue any other legal or equitable remedy as may, in the opinion of
Trustee, be most effectual to protect and enforce the rights of the
Bondholders and Trustee hereunder. In the event Trustee declares the
principal of all Bonds then Outstanding to be due and payable, Trustee
shall concurrently therewith declare all payments to be made under the
Agreement to be due and payable, provided, Trustee has the authority to do
so by virtue of the occurrence and continuance of an Event of Default
under the Agreement.
Section 8.03. Enforcement of Indenture and Bonds. Upon the
happening of any Event of Default then and in every such case Trustee in
its discretion may, and upon the written request of the owners of not less
than twenty-five per cent (25%) in aggregate principal amount of the Bonds
then Outstanding and upon receipt of indemnity to its satisfaction shall,
in its own right:
(a) by mandamus, or other suit, action, or proceeding at
law or in equity, enforce all rights of the Bondholders, and
require Issuer or Company to carry out any other agreements
with or for the benefit of the Bondholders and to perform its
or their duties under the Act, the Indenture and the Agreement;
(b) bring suit upon the Bonds;
(c) by action or suit at law or in equity require Issuer
to account as if it were the trustee of an express trust for
the Bondholders; or
(d) by action or suit at law or in equity enjoin any acts
or things which may be unlawful or in violation of the rights
of the Bondholders.
<PAGE> 43
Section 8.04. Restoration. In case any proceeding taken by
Trustee on account of any default shall have been discontinued or
abandoned for any reason, or shall have been determined adversely to
Trustee, then and in every case Issuer, Trustee, and the Bondholders shall
be restored to their former positions and rights hereunder, respectively,
and all rights, remedies, and powers of Trustee shall continue as though
no such proceeding had been taken.
Section 8.05. Direction by Majority in Principal Amount of
Bondholders. (a) Anything in this Indenture to the contrary
notwithstanding, the owners of a majority in aggregate principal amount of
the Bonds then Outstanding hereunder shall have the right, by an
instrument in writing executed and delivered to Trustee, to direct the
method and place of conducting all remedial proceedings to be taken by
Trustee hereunder. Such directive must be in accordance with law and this
Indenture.
(b) In the event Trustee shall receive conflicting or
inconsistent requests or indemnity from two or more groups of owners of
the Bonds, each representing less than a majority of the aggregate
principal amount of the Bonds then Outstanding, Trustee in its sole
discretion may determine what action, if any, shall be taken,
notwithstanding any other provision of this Indenture.
Section 8.06. Rights by Owner. No owner of any of the Bonds
shall have any right to institute any suit, action, or proceeding in
equity or at law for the execution of any trust hereunder, or any other
remedy hereunder or on said Bonds, unless such owner previously shall have
given to Trustee written notice of an Event of Default as hereinabove
provided and unless also the owners of not less than twenty-five per cent
(25%) in aggregate principal amount of the Bonds then Outstanding shall
have made written request of Trustee, after the right to exercise such
powers or rights of action, as the case may be, shall have accrued, and
shall have afforded Trustee a reasonable opportunity either to proceed to
exercise the powers hereinabove granted, or to institute such action,
suit, or proceeding in its or their name; nor unless there also shall have
been offered to Trustee security and indemnity satisfactory to it against
the costs, expenses, fees, losses and liabilities to be incurred therein
or thereby, and Trustee shall have refused or neglected to comply with
such request within a reasonable time; and such notification, request, and
offer of indemnity are hereby declared in every such case, at the option
of Trustee, to be conditions precedent to the execution of the powers and
trusts of this Indenture or to any other remedy hereunder; it being
understood and intended that no one or more owners of the Bonds hereby
secured shall have any right in any manner whatever by his or their action
to affect, disturb, or prejudice the security of this Indenture, or to
enforce any right hereunder or under the Bonds, except in the manner
herein provided, and that all proceedings at law or in equity shall be
instituted, had, and maintained in the manner herein provided and for the
equal and ratable benefit of all owners of Outstanding Bonds. Nothing
contained in this Indenture shall, however, affect or impair the right of
any Bondholder to enforce the payment of the principal of, premium, if
any, and interest on any Bond at and after the maturity thereof, or the
<PAGE> 44
obligation of Issuer to pay the principal of and any premium and interest
on each of the Bonds issued hereunder to the respective owners thereof at
the time and place, from the source, and in the manner in said Bonds
expressed.
Section 8.07. Enforcement of Remedies without Possession of
Bonds. All rights of action under this Indenture or under any of the
Bonds secured hereby which are enforceable by Trustee may be enforced by
it without the possession of any of the Bonds or the production thereof on
the trial or other proceedings relative thereto, and any such suit,
action, or proceeding instituted by Trustee shall be brought in its name
for the equal and ratable benefit of the owners of the Bonds, subject to
the provisions of this Indenture.
Section 8.08. Remedies Not Exclusive. No remedy herein
conferred upon or reserved to Trustee or to the owners of the Bonds is
intended to be exclusive of any other remedy or remedies, and each such
remedy shall be cumulative, and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by
statutes, including the Acts.
Section 8.09. Delay by Trustee. No delay or omission of Trustee
or of any owner of the Bonds to exercise any right or power accruing upon
any Event of Default shall impair any such right or power or shall be
construed to be a waiver of any such Event of Default, or an acquiescence
therein; and every power and remedy given by this Article to Trustee and
to the owners of the Bonds, respectively, may be exercised from time to
time and as often as may be deemed expedient.
Section 8.10. Application of Moneys. Any moneys received by
Trustee or by any receiver pursuant to this Article shall be applied:
First: to the payment of the fees, counsel fees, and advances
and expenses of Trustee and of the receiver, if any, and all costs and
disbursements allowed by the court if there be any court action, and all
other Trustee Expenses accrued hereunder.
Second: (a) in case the principal of the Bonds shall not have
become due, to the payment of the interest in default, in the order of the
maturity of the installments of such interest, with interest, so far as
the same may be legally enforceable, on the overdue installments thereof
at the rate borne by any Outstanding Bonds, and, if the amounts available
shall be insufficient to pay in full any particular installment, then such
payments to be made ratably according to the amounts due on such
installment to the persons or parties entitled thereto, without
discrimination or preference; or
(b) in case the principal of any of the Bonds shall have become
due, by declaration or otherwise, first to the payment of the interest in
default, in the order of the maturity of the installments of such
interest, and thereafter to the payment of the principal of, and premium,
if any, on all Bonds then due with interest, so far as the same may be
legally enforceable, on the overdue interest and principal (including
premium) at the rate borne by any Outstanding Bonds, and, if the amounts
<PAGE> 45
available shall not be sufficient to pay in full Bonds due on any
particular date together with such interest, then such payments,
respectively, to be made ratably according to the amount of principal due
on such date to the persons or parties entitled thereto, without
discrimination or preference.
Third: to the payment of Issuer's counsel fees and other
expenses, if any.
Fourth: to the payment of the surplus, if any, to whomever is
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
Section 8.11. Unlawful Grants of Power. It is the purpose and
intention of this Article to provide rights and remedies to Trustee and
Bondholders which may be lawfully granted, but should any right or remedy
herein granted be held to be unlawful, Trustee and the Bondholders shall
be entitled, as above set forth, to every other right and remedy provided
in this Indenture.
Section 8.12. Payments under Municipal Bond Insurance Policy.
So long as the Municipal Bond Insurance Policy shall be in full force and
effect, Issuer and Trustee hereby agree to comply with the following
provisions:
(a) If Trustee has notice that any owner of the Bonds has
been required to disgorge payments of principal or interest on
the Bonds to a trustee in bankruptcy or creditors or others
pursuant to a final judgment by a court of competent
jurisdiction that such payment constitutes a voidable
preference to such owner of Bonds within the meaning of any
applicable bankruptcy laws, then Trustee shall notify Bond
Insurer or its designee of such fact by telephone, telecopy or
telegraphic notice, confirmed in writing by registered or
certified mail.
(b) Trustee is hereby irrevocably designated, appointed,
directed and authorized to act as attorney-in-fact for owners
of the Bonds as follows:
(i) If and to the extent there is a deficiency in
amounts required to pay interest on the Bonds, Trustee
shall (A) execute and deliver to State Street Bank and
Trust Company, N.A., or its successors under the Municipal
Bond Insurance Policy (the "Insurance Paying Agent"), in
form satisfactory to the Insurance Paying Agent, an
instrument appointing Bond Insurer as agent for such owners
in any legal proceeding related to the payment of such
interest and an assignment to Bond Insurer of the claims
for interest to which such deficiency relates and which are
paid by Bond Insurer, (B) receive as designee of the
respective owners (and not as Trustee) in accordance with
<PAGE> 46
the tenor of the Municipal Bond Insurance Policy payment
from the Insurance Paying Agent with respect to the claims
for interest so assigned, and (C) disburse the same to such
respective owners; and
(ii) If and to the extent of a deficiency in amounts
required to pay principal of the Bonds, Trustee shall (A)
execute and deliver to the Insurance Paying Agent in form
satisfactory to the Insurance Paying Agent an instrument
appointing Bond Insurer as agent for such owner in any
legal proceeding relating to the payment of such principal
and an assignment to Bond Insurer of any of the Bonds
surrendered to the Insurance Paying Agent of so much of the
principal amount thereof as has not previously been paid or
for which moneys are not held by Trustee and available for
such payment (but such assignment shall be delivered only
if payment from the Insurance Paying Agent is received),
(B) receive as designee of the respective owners (and not
as Trustee) in accordance with the tenor of the Municipal
Bond Insurance Policy payment therefor from the Insurance
Paying Agent, and (C) disburse the same to such owners.
(c) Payments with respect to claims for interest on and
principal of Bonds disbursed by Trustee from proceeds of the
Municipal Bond Insurance Policy shall not be considered to
discharge the obligation of Issuer or Company with respect to
such Bonds, and Bond Insurer shall become the owner of such
unpaid Bonds and claims for the interest in accordance with the
tenor of the assignment made to it under the provisions of this
subsection or otherwise.
(d) Irrespective of whether any such assignment is
executed and delivered, Issuer and Trustee hereby agree for the
benefit of Bond Insurer that:
(i) To the extent Bond Insurer makes payments,
directly or indirectly (as by paying through Trustee), on
account of principal of or interest on the Bonds, Bond
Insurer will be subrogated to the rights of such owners to
receive the amount of such principal and interest from
Issuer, with interest thereon as provided and solely from
the sources stated in this Indenture and the Bonds; and
(ii) They will accordingly pay Bond Insurer the
amounts of such principal and interest (including principal
and interest recovered under subparagraph (ii) of the first
paragraph of the Municipal Bond Insurance Policy, which
principal and interest shall be deemed past due and not
have been paid), with interest thereon as provided in this
Indenture and the Bonds, but only from the sources and in
the manner provided herein for the payment of principal of
and interest on the Bonds to owners, and will otherwise
treat Bond Insurer as the owner of such rights to the
amount of such principal and interest.
<PAGE> 47
ARTICLE IX
Defeasance
Section 9.01. Release of Indenture. When all of the Bonds shall
have been paid, or provided for, and discharged, and there shall have been
paid, or provision shall have been made for paying, all fees, expenses and
charges of Trustee, Issuer, and any Paying Agent due or to become due
through the date on which the last of the Bonds is retired, then this
Indenture shall cease, terminate, and become null and void, and thereupon
Trustee shall release this Indenture including the cancellation and
discharge of the lien hereof, and execute and deliver to Issuer such
instruments in writing as shall have been provided by the Issuer and be
requisite to satisfy and discharge the lien hereof and to enter on the
records such satisfaction and discharge as may be reasonably required by
Issuer, and Trustee shall reassign and transfer, assign, and deliver to
Issuer the Trust Estate at the time subject to the lien of this Indenture
which may then be in its possession, except such moneys and/or "Gov-
ernmental Obligations", hereinafter defined in Section 9.02, as are held
by Trustee for the payment of the principal of, the interest on, and the
premium, if any, due on the retirement of the Bonds. After such payment
and discharge, the Bonds shall not be entitled to any benefits of this
Indenture, except the right to be paid from the moneys and/or Governmental
Obligations so held by Trustee for the payment thereof. If such payment
and discharge, including the fees, expenses and charges indicated above,
or provision therefor, have been made with respect to all the Bonds, the
interest of Trustee hereunder shall cease in respect of such Bonds and
such Bonds shall not be entitled to any benefits of this Indenture, except
the right to be paid from the moneys and/or Governmental Obligations so
held by Trustee for the payment thereof.
Notwithstanding the satisfaction and discharge of this
Indenture, Trustee shall continue to be obligated to hold in trust any
moneys or investments then held by Trustee for the payment of the
principal of, premium, if any, and interest on the Bonds, to pay to the
owners of Bonds the funds so held by Trustee as and when such payment
becomes due, and to pay over to Company any amounts required to be paid to
Company in accordance with Sections 5.04(b), 5.07, 8.10, and 9.02.
Notwithstanding the satisfaction and discharge of this
Indenture, the provisions of Sections 2.07 and 2.08, and Article X hereof
shall remain in full force and effect and Trustee shall, so long as the
Bonds shall not have matured in accordance with their terms, upon
redemption, or otherwise (and thereafter with respect to rights and
liabilities accrued prior to such maturity), be entitled to exercise
rights and remedies under the Agreement for the benefit of owners of the
Bonds.
Section 9.02. (a) Satisfaction of Indenture. Bonds shall be
deemed to have been paid and discharged within the meaning of Section
9.01:
<PAGE> 48
(1) if Trustee and any Paying Agent shall hold, in trust
for and irrevocably committed thereto, sufficient cash, and/or
(2) to the extent permitted by law, if Trustee shall hold,
in trust for and irrevocably committed thereto, Governmental
Obligations, as defined hereinafter in this Section, certified
by an independent public accounting firm of national reputation
to be of such maturities and interest payment dates and to bear
such interest as will, without further investment or
reinvestment of either the principal amount thereof or the
interest earnings therefrom (likewise to be held in trust and
committed, except as hereinafter provided), be sufficient
together with any moneys referred to in subsection (a)(1)
above,
for the payment, at their maturity or redemption date, of the principal
thereof, together with the premium, if any, and interest accrued to the
date of maturity or redemption, as the case may be, or if default in such
payments shall have occurred on such date then to the date of the tender
of such payment; provided, that if any Bonds are to be redeemed prior to
the maturity thereof, notice of such redemption shall have been duly given
or provision satisfactory to Trustee shall have been duly made for the
giving of such notice. Any moneys held in accordance with the provisions
of this Section shall be invested, at the request and upon the written
direction of Issuer, after consultation with an Authorized Company
Representative, subject to the limitations of (b) below, only in
Governmental Obligations, as defined hereinafter in this Section, the
maturities or redemption dates of which, when Trustee becomes the owner
thereof, shall coincide as nearly as practicable with, but not later than,
the time or times at which said moneys will be required for the aforesaid
purposes.
(b) No Arbitrage. Issuer hereby covenants that no investment
will be made or accepted hereunder and no use will be made of any moneys
or such investments which would cause the Bonds to be classified as
arbitrage bonds within the meaning of Section 148 of the Code.
(c) Advance Funding and Defeasance. For the purposes of this
Article, the term "Governmental Obligations" shall mean any of the
following which are noncallable and which at the time of investment are
legal investments under the laws of Texas for the moneys proposed to be
invested therein:
(i) direct general obligations of, or obligations the
payment of the principal and interest of which are
unconditionally guaranteed by, the United States of America; or
(ii) bonds, debentures, or notes issued by any of the
following federal agencies: Federal Banks for Cooperatives,
Federal Land Banks, Federal Home Loan Banks, Federal Farm
Credit Banks, Federal Intermediate Credit Banks, Government
National Mortgage Association, Federal Home Loan Mortgage
Corporation, or Federal National Mortgage Association
(including Participation Certificates).
<PAGE> 49
Notwithstanding any provision of any other Article of this
Indenture which may be contrary to the provisions of this Article, all
moneys or Governmental Obligations set aside and held in trust pursuant to
the provisions of this Article for the payment of Bonds (including
interest and premium thereon, if any) shall be applied to and used solely
for the payment of the particular Bonds (including interest and premium
thereon, if any), or any Bonds exchanged pursuant to Section 2.07 or 2.10,
with respect to which such moneys and Governmental Obligations have been
so set aside in trust. When all the Bonds in respect of which such moneys
and Governmental Obligations have been deposited shall be deemed to have
been paid and discharged, all moneys and Governmental Obligations received
or held pursuant to the provisions of this Article which, in the opinion
of an independent public accounting firm of national reputation, are not
needed for the payment of any other obligation hereunder, shall be applied
in accordance with Section 5.07.
Section 9.03. Reliance on Discharge. Any discharge,
satisfaction, and release of this Indenture and the lien thereof by the
Trustee which recites it has been made pursuant to the provisions of this
Article shall be conclusive evidence thereof, shall be binding upon the
parties hereto and the owners of all Bonds then Outstanding hereunder, and
may be relied upon by any persons whomsoever, without the production of
the cancelled Bonds and without the necessity to inquire as to the power
or authority of the Trustee to give such discharge, satisfaction, and
release or to see the application of any moneys paid or deposited in
respect thereof.
Section 9.04. Defeasance. Prior to any defeasance becoming
effective under this Indenture, (i) the amounts required to be deposited
pursuant to this Indenture and any escrow deposit agreement shall be
invested only in Government Obligations and (ii) Bond Insurer shall have
received (a) any final official statement that may be delivered in
connection with any refunding obligations, (b) a copy of the accountants'
verification report, (c) a copy of an escrow deposit agreement in form and
substance acceptable to Bond Insurer, and (d) a copy of an opinion of bond
counsel, addressed to Bond Insurer, to the effect that such Bonds have
been paid within the meaning and with the effect expressed in the
Indenture, and that the covenants, agreements and other obligations of
Issuer to the holders of such Bonds have been discharged and satisfied.
ARTICLE X
Concerning the Trustee
Section 10.01. Acceptance of Trusts and Conditions of
Acceptance. Trustee accepts and agrees to execute the trusts hereby
created, but only upon the additional terms set forth in this Article, to
all of which the parties hereto and the respective owners of the Bonds
agree.
<PAGE> 50
Section 10.02. Recitals Not Trustee's. The recitals,
statements, and representations in this Indenture or in the Bonds
contained, save only Trustee's authentication upon the Bonds, shall be
taken and construed as made by and on the part of Issuer, and not by
Trustee, and Trustee assumes and shall be under no responsibility or
obligation for the correctness of same.
Section 10.03. Advice. Trustee may execute any of the trusts
or powers hereof and perform the duties required of it by or through
attorneys, agents, receivers, or employees, and shall be entitled to
advice of counsel concerning all matters of trust hereof and its duty
hereunder, and Trustee shall not be answerable for the default or
misconduct of any such attorney, agent, or employee selected by it with
reasonable care. Trustee shall not be answerable for the exercise of any
discretion or power under this Indenture nor for anything whatsoever in
connection with the Trust Estate except only its own willful misconduct or
negligence.
Section 10.04. Fees. Issuer has agreed with Company in the
Agreement that Company is to pay to Trustee:
(i) an amount equal to the annual fee of Trustee, as
trustee, for the ordinary services of Trustee to be rendered
and its ordinary expenses to be incurred, including counsel
fees, under the Indenture during the next succeeding twelve-
month period;
(ii) the reasonable fees, expenses and charges of Trustee,
as Bond Registrar and Paying Agent, as provided in the
Indenture during each twelve-month period; and
(iii) the reasonable fees, expenses and charges of Trustee
for necessary extraordinary services rendered by it and
extraordinary expenses incurred by it under this Indenture as
and when the same become due, including, without limitation,
any fees, expenses or charges due to any change from the book-
entry only system described in Sections 2.12 and 2.13 hereof;
provided, that Company may, without creating a default under
the Agreement, contest in good faith the necessity for any such
extraordinary services and extraordinary expenses and the
reasonableness of any such fees, charges, or expenses.
Therefore, all payments due Trustee for fees or services hereunder and for
expenses incurred shall be received from Company, and no such fees or
expenses shall be payable by Issuer. Notwithstanding anything to the
contrary contained herein; Trustee shall have a lien and security
interest, with right of payment prior to payment on the Bonds, upon the
Trust Estate for the payment of the Trustee Expenses and may, to the
extent the same have not been paid by Company, reimburse itself out of the
Trust Estate for the Trustee Expenses.
Section 10.05. Insurance. Trustee shall be under no duty to
effect or to renew any policies of insurance, or to report or file claims
or proofs of loss for any loss or damage insured against or which may
occur; nor shall Trustee be liable as an insurer.
<PAGE> 51
Section 10.06. Notice. Trustee shall not be required to take
notice, or in the absence of actual knowledge, be deemed to have notice of
any default under this Indenture, other than a default under Section
8.01(a) or (b), unless specifically notified in writing of such default by
the owners of at least twenty-five per cent (25%) in aggregate principal
amount of the Bonds then Outstanding, and in the absence of any such
notice, Trustee may conclusively assume there is no such default. Trustee
may, however, at any time, in its discretion, require of Issuer full
information and advice as to the performance of any of the covenants,
conditions, and agreements contained herein, and require of Company full
information and advice as to the performance of any of the covenants,
conditions, and agreements contained in the Agreement.
Section 10.07. Request; Indemnity. Trustee shall be under no
obligation to take any action in respect of any default or otherwise, or
toward the execution or enforcement of any of the trusts hereby created,
or to institute, appear in, or defend any suit or other proceeding in
connection therewith, unless requested in writing so to do by the owners
of at least twenty-five per cent (25%) in aggregate principal amount of
the Bonds then Outstanding and, if in its opinion such action may tend to
involve it in expense or liability, unless furnished, from time to time as
often as it may require, with security and indemnity satisfactory to it;
but the foregoing provisions are intended only for the protection of
Trustee, and shall not affect any discretion or power given by any
provisions of this Indenture to Trustee to take action in respect of any
default without such notice or request from the Bondholders, or without
such security or indemnity.
Section 10.08. Reliance by Trustee. Trustee shall be protected
and shall incur no liability in acting or proceeding in good faith upon
any resolution, notice, telegram, request, consent, waiver, certificate,
statement, affidavit, voucher, bond, requisition, or other paper or
document which it shall in good faith believe to be genuine and to have
been passed or signed by the proper board or person or to have been
prepared and furnished pursuant to any of the provisions of this
Indenture, and Trustee shall be under no duty to make any investigation or
inquiry as to any statements contained or matters referred to in any such
instrument, but may accept and rely upon the same as conclusive evidence
of the truth and accuracy of such statements. Trustee shall not be bound
to recognize any person as an owner of any Bond or to take any action at
his request unless such Bond shall be deposited with Trustee or
satisfactory evidence of the ownership of such Bond is furnished to
Trustee.
Section 10.09. Ownership of Bonds. Trustee may in good faith
buy, sell, own, hold, and deal in any of the Bonds issued hereunder and
secured by this Indenture, and may join in any action which any Bondholder
may be entitled to take with like effect as if Trustee were not a party to
this Indenture. Trustee, either as principal or agent, may also engage in
or be interested in any financial or other transaction with Issuer or
Company, and may act as depository, trustee, or agent for, any committee
or body of Bondholders secured hereby or other obligations of Issuer as
freely as if it were not Trustee hereunder.
<PAGE> 52
Section 10.10. Interest on Moneys Held. Trustee may allow and
credit interest upon any moneys which it may at any time receive under any
of the provisions of this Indenture, at such rate, if any, as it
customarily allows upon similar funds of similar size and under similar
conditions. All interest allowed on any such moneys shall be credited as
provided in Article V with respect to interest on investments.
Section 10.11. Construction. Trustee may construe any of the
provisions of this Indenture insofar as the same may appear to be
ambiguous or inconsistent with any other provision hereof, and any
construction of any such provisions hereof by Trustee in good faith shall
be binding upon the Bondholders.
Section 10.12. Resignation of Trustee. Trustee may resign and
be discharged of the trusts created by this Indenture by executing an
instrument in writing resigning such trust and specifying the date when
such resignation shall take effect, and filing the same with the Secretary
of Issuer and with the Secretary of Company not less than sixty (60) days
before the date specified in such instrument when such resignation shall
take effect, and by giving notice to the registered owner of each of the
Outstanding Bonds of such resignation by first class mail, in a sealed
envelope, postpaid, addressed to each registered owner at his address
recorded on the bond registration books not less than three (3) weeks
prior to the date specified in such notice when such resignation shall
take effect. Such resignation shall take effect on the day specified in
such instrument and notice, unless previously a successor trustee shall be
appointed as hereinafter provided, in which event such resignation shall
take effect immediately on the appointment of such successor trustee.
Section 10.13. Removal of Trustee. Trustee or any trustee
hereafter appointed hereunder may be removed at any time by an instrument
in writing, appointing a successor trustee, filed with the trustee so
removed and executed by the owners of a majority in aggregate principal
amount of the Bonds then Outstanding.
Section 10.14. Appointment of Successor Trustee. In case at
any time Trustee, or any trustee hereafter appointed, shall resign, or
shall be removed, or shall be dissolved, or if its property or affairs
shall be taken under the control of any state or federal court or admin-
istrative body because of insolvency, or for any other reason, a vacancy
shall forthwith and ipso facto exist in the office of trustee, a successor
may be appointed by the owners of a majority in aggregate principal amount
of the Bonds then Outstanding, by an instrument or instruments in writing
filed with the Secretary of the Board of Issuer, signed by such
Bondholders or by their attorney-in-fact duly authorized. Copies of each
instrument shall be promptly delivered by Issuer to the predecessor
trustee and to the trustee so appointed.
Until a successor trustee shall be appointed by the Bondholders
as herein authorized, Issuer, by an instrument authorized by resolution of
its Board, may appoint a trustee to fill such vacancy. After any
appointment by Issuer or the Bondholders, Issuer shall cause notice of
such appointment to be immediately mailed to the registered owner of each
of the Outstanding Bonds by first class mail, in a sealed envelope,
<PAGE> 53
postpaid, addressed to each registered owner at his address recorded on
the bond registration books. Any new trustee so appointed by Issuer shall
immediately and without further act be superseded by a trustee appointed
by the Bondholders in the manner above provided.
Section 10.15. Qualification of Successor Trustee. Every
successor in the trust appointed in pursuance of the foregoing provisions
of this Article shall be a trust company, a bank and trust company or a
national bank with trust powers, having a combined capital and surplus of
at least Two Hundred Fifty Million Dollars ($250,000,000) if there be such
a trust company, bank and trust company, or national bank willing and able
to accept the trust on reasonable and customary terms.
Section 10.16. Court Appointment. In case at any time Trustee
or any trustee hereafter appointed shall resign and no appointment of a
successor trustee shall be made pursuant to the foregoing provisions of
this Article prior to the date specified in the notice of resignation as
the date when such resignation shall take effect, the retiring trustee may
forthwith apply to a court of competent jurisdiction for the appointment
of a successor trustee. If, in a proper case, no appointment of a
successor trustee shall be made pursuant to the foregoing provisions of
this Article within two (2) months after a vacancy shall have occurred in
the office of Trustee, any Bondholder may apply to any court of competent
jurisdiction to appoint a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper, prescribe and appoint a
successor trustee.
Section 10.17. Transfer to Successor Trustee. Any successor
trustee appointed hereunder shall execute, acknowledge, and deliver to
Issuer an instrument accepting such appointment hereunder, and thereupon
such successor trustee, without any further act, deed, or conveyance,
shall become duly vested with all the estates, property, rights, powers,
trusts, duties, and obligations of its predecessor in the trust hereunder,
with like effect as if originally named Trustee herein. Upon request of
such trustee, the trustee ceasing to act and Issuer shall execute and
deliver an instrument transferring to such successor trustee all the
estates, property, rights, powers, and trusts hereunder of the trustee so
ceasing to act; and the trustee so ceasing to act shall, after payment of
all fees and expenses due it, pay over to the successor trustee all moneys
and other assets at the time held by it hereunder.
Section 10.18. Merger or Consolidation of the Trustee. Any
corporation into which any trustee hereunder may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which any trustee hereunder shall be a party, shall be
the successor trustee under this Indenture, without the execution or
filing of any paper or any further act on the part of the parties hereto,
anything to the contrary notwithstanding.
Section 10.19. Prudent Man Rule. Notwithstanding any other
provisions of this Article, Trustee shall, during the existence of an
Event of Default known to Trustee, exercise such of the rights and powers
vested in it by this Indenture and use the same degree of skill and care
in their exercise as a prudent man would use and exercise under the
circumstances in the conduct of his own affairs.
<PAGE> 54
Section 10.20. Notice of Default to Registered Owners. Upon
the occurrence of an Event of Default hereunder (or an event which with
the passage of time or giving of notice or both would be an Event of
Default) to the knowledge of Trustee, Trustee shall within thirty (30)
days give written notice thereof by mail to each registered owner of Bonds
then Outstanding at his last address appearing upon the Bond registry
books of Issuer kept by Trustee, unless such Event of Default shall have
been cured before the giving of such notice.
Section 10.21. Judicial Proceedings. In any judicial
proceeding to which Issuer is party and which in the opinion of Trustee
and its counsel has a substantial bearing on the interests of the
Bondholders, Trustee, if permitted by the court having jurisdiction in the
premises, may intervene on behalf of the owners of the Bonds and shall,
upon receipt of indemnity satisfactory to it, do so if requested in
writing by the owners of at least twenty-five per cent (25%) in aggregate
principal amount of Bonds then Outstanding.
Section 10.22. Trustee's Performance. The duties and
obligations of Trustee shall be determined solely by the express
provisions of this Indenture, and Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be
read into this Indenture against Trustee. Trustee is not a party to the
Agreement and notwithstanding any provision herein or therein, Trustee
shall have no duty or obligation to Company except as may be expressly set
forth in this Indenture.
Section 10.23. Trustee to Record. Trustee shall (1) cause the
Agreement, this Indenture, any additional security instruments filed with
Trustee as additional security for the Bonds, each amendment and
supplement to any such instrument, and a memorandum, financing statement,
or continuation statement with respect to such instruments, amendments, or
supplements to be filed, registered, and recorded and to be refiled,
reregistered, and rerecorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and
fully to protect the lien of this Indenture and to publish notice of and
to protect the rights and security of the owners of the Bonds and the
rights of Trustee under the Agreement and this Indenture and (2) perform
or cause to be performed from time to time any other act as required by
law, and execute and file or cause to be executed and filed any and all
instruments of further assurance (including financing statements with
respect to any of such instruments) that may be necessary for such
publication and protection. Issuer shall, when so requested by Trustee,
execute all such instruments, memoranda, or statements necessary to
maintain, protect, or preserve the interests assigned to Trustee under
this Indenture. It is specifically agreed that Trustee may rely upon
opinions of counsel as to what, if any, filings are necessary under this
Section.
<PAGE> 55
Issuer covenants that it will do, execute, acknowledge, and
deliver, or cause to be done, executed, acknowledged, and delivered, such
indentures supplemental hereto and such further acts, instruments, and
transfers as Trustee may reasonably require for the better assigning,
pledging, and confirming unto Trustee the Trust Estate assigned and the
revenues pledged hereunder.
ARTICLE XI
Modification of This Indenture and
Supplemental Indenture
Section 11.01. Modification by Issuer and Trustee. With
consent of Company, Issuer, when authorized by resolution of the Board,
and Trustee from time to time and at any time, subject to the conditions
and restrictions in this Indenture contained, may, without the consent of
the Bondholders, enter into an indenture or indentures supplemental
hereto, which thereafter shall form a part hereof, for any one or more of
the following purposes:
(a) To add to the covenants and agreements of Issuer
contained in this Indenture other covenants and agreements
thereafter to be observed, and to surrender any right or power
herein reserved to or conferred upon Issuer;
(b) To modify any of the provisions of this Indenture or
relieve Issuer from any of the obligations, conditions, or
restrictions herein contained; provided, that no such
modification shall be or become operative or effective which
shall in any manner impair any of the rights of the Bondholders
or of Trustee; and provided further, that Trustee may in its
sole discretion decline to enter into any such supplemental
indenture which in its opinion may not afford adequate
protection to Trustee when the same shall become operative;
(c) To cure any ambiguity or to cure, correct, or
supplement any defect or inconsistent provision contained in
this Indenture or in any supplemental indenture in a manner
which, in the opinion of Bond Counsel, is not adverse to the
interests of the Bondowners;
(d) To make such provision in regard to matters or
questions arising under this Indenture as may be necessary or
desirable and not inconsistent with this Indenture and not, in
the opinion of Bond Counsel, adverse to the interests of the
Bondholders; or
(e) To make any other change which, in the opinion of Bond
Counsel, does not materially adversely affect the rights of
Issuer or any Bondholder;
<PAGE> 56
and Issuer hereby covenants that it will perform all the requirements of
any such supplemental indentures which may be in effect from time to time;
but no restriction or obligation imposed hereby or by any supplemental
indenture upon Issuer in respect of any of the Bonds then Outstanding
under this Indenture may, except as otherwise provided in Section 11.02,
be waived or modified by such supplemental indentures, or otherwise.
Nothing in this Article contained shall affect or limit the right or
obligation of Issuer to execute and deliver to Trustee any instrument of
further assurance or other instrument which elsewhere in this Indenture it
is provided shall be delivered to Trustee.
Section 11.02. Consent by Bondholders. Exclusive of the
purposes set forth in Section 11.01, from time to time the owners of not
less than a majority in aggregate principal amount of the Bonds affected
and at the time Outstanding, by an instrument or instruments in writing
signed by such owners and filed with Trustee, shall have power to assent
to and authorize any modification or alteration of any of the provisions
of this Indenture that shall be proposed by Issuer and consented to by
Trustee and Company; and any action herein authorized to be taken, with
the assent or authority given as aforesaid, shall be binding upon all of
the Bondholders hereby secured and upon Trustee as fully as though such
actions were specifically and expressly authorized by the terms of this
Indenture; provided that, without the consent of all Bondholders affected
and at the time Outstanding, no such modification or alteration shall
permit:
(a) the reduction of the percentage of Bonds, the consent
of the owners of which is required for any such modification or
alteration;
(b) the extension of the time or times of payment of the
principal of, premium, if any, or interest on any of the Bonds,
or the reduction in the principal amount thereof or in the rate
of interest or the amount of any premium thereon or any other
modification in the terms of payment of the principal thereof
or interest or premium thereon;
(c) the creation by Issuer of any lien ranking prior to or
on a parity with the lien of this Indenture;
(d) the giving of any preference of any Bond over any
other Bond; or
(e) the extension of any waiver of default to subsequent
defaults.
Any modification of the provisions of this Indenture so made as aforesaid
shall be set forth in a supplemental indenture between Trustee and Issuer
which shall, if deemed advisable by counsel, be recorded in the same
manner as this Indenture.
<PAGE> 57
Section 11.03. Bond Insurer to be Deemed Bondowner; Rights of
Bond Insurer; Payments by Bond Insurer in Advance of Scheduled Maturity
Dates; Notices. (a) Notwithstanding any provision of this Indenture to
the contrary, Bond Insurer shall at all times be deemed the exclusive
owner of all Bonds for the purposes of all approvals, consents, waivers,
institution of any action, and the direction of all remedies. No
acceleration of the Bonds shall be permitted, and no Event of Default
relating to the Bonds shall be waived, without Bond Insurer's consent.
Subject to Section 10.07, Bond Insurer shall have the right to direct all
remedies pursuant to this Indenture.
(b) No amendment or supplement shall be made to this Indenture
or to the Agreement without the prior written consent of Bond Insurer to
such amendment or supplement, except amendments or supplements made
pursuant to Section 11.01 hereof. A copy of such amendment or supplement
shall be sent by Trustee to Standard & Poor's Corporation, 25 Broadway,
21st Floor, New York, New York 10004.
(c) To the extent that Bond Insurer makes payment of the
principal of or interest on the Bonds, it shall become the owner of such
Bonds, appurtenant coupons or right to payment of such principal of or
interest on such Bonds and shall be fully subrogated to all of the
registered owners' rights to payment thereof. To evidence such
subrogation (i) in the case of subrogation as to claims for past due
interest, the Trustee shall note Bond Insurer's rights as subrogee on the
registration books of Issuer maintained by Trustee upon receipt of proof
from Bond Insurer as to payment of interest thereon to the registered
owners of the Bonds, and (ii) in the case of subrogation as to claims for
past due principal, Trustee shall note Bond Insurer's rights as subrogee
on the registration books of Issuer maintained by Trustee upon surrender
of the Bonds by the registered owners thereof to the Insurance Paying
Agent.
(d) In the event that the principal of and/or interest on the
Bonds shall be paid by Bond Insurer pursuant to the terms of the Municipal
Bond Insurance Policy, (i) such Bonds shall continue to be Outstanding
under this Bond Indenture, (ii) the assignment and pledge of the Trust
Estate and all covenants, agreements and other obligations of Issuer to
the registered owners shall continue to exist, and Bond Insurer shall be
fully subrogated to all of the rights of such registered owners in
accordance with the terms and conditions of subparagraph (c) above and the
Municipal Bond Insurance Policy, and (iii) the Company shall reimburse
Bond Insurer for the amounts paid by Bond Insurer under the policy.
Amounts paid to Bond Insurer as bond owner and subrogee shall, to the
extent of such payment, be credited against the amounts to be paid to Bond
Insurer pursuant to clause (iii).
(e) In the event that Bond Insurer shall make any payments of
principal of, and/or interest on, any of the Bonds pursuant to the terms
of the Municipal Bond Insurance Policy, and the Bonds are accelerated,
Bond Insurer may, at any time and at its sole option, pay to the owners of
the Bonds all or any portion of amounts due under the Bonds prior to the
stated maturity dates thereof.
<PAGE> 58
(f) Bond Insurer shall be notified (i) in advance of the
execution of any supplemental indenture and of any amendment, change or
modifications of the Agreement in the event consent of the owners of
Bonds is not required, (ii) immediately upon the occurrence of any Event
of Default or of any event that with notice and/or with the lapse of time
could become an Event of Default, and (iii) of any redemption of Bonds at
the same time that the owners of the Bonds to be redeemed are notified.
In addition, all notices, reports, certificates and opinions to be
delivered to or by Bond Trustee or to the owners of Bonds or available at
the request of the owners of the Bonds shall also be delivered to Bond
Insurer or made available at Bond Insurer's request, as the case may be.
(g) Trustee shall also notify Bond Insurer immediately upon
the resignation or removal of Trustee or the appointment of a successor
Trustee. Any notice that is required to be given to the owners of the
Bonds or to the Trustee pursuant to this Indenture, any supplemental
indenture and the Agreement shall also be provided to Bond Insurer. All
notices required to be given to Bond Insurer under this Indenture shall be
in writing and shall be sent by registered or certified mail or by
overnight delivery, addressed to Manager, Surveillance Department, MBIA
Insurance Corporation, 113 King Street, Armonk, New York 10504.
ARTICLE XII
Miscellaneous
Section 12.01. Successors and Assigns. In the event of the
dissolution of Issuer, all of the covenants, stipulations, promises, and
agreements in this Indenture contained, by or on behalf of, or for the
benefit of, Issuer, shall bind or inure to the benefit of the successors
of Issuer from time to time and any officer, board, commission, agency, or
instrumentality to whom or to which any power or duty of Issuer shall be
transferred.
Section 12.02. Parties, the Company and Bondholders Alone Have
Rights Under Indenture. Except as herein otherwise specifically provided,
nothing in this Indenture expressed or implied is intended or shall be
construed to confer upon any person, firm, or corporation other than the
parties hereto, the Company and the owners of the Bonds issued hereunder,
any right, remedy, or claim by reason of this Indenture, said Indenture
being intended to be for the sole and exclusive benefit of the parties
hereto, the Company and the owners of the Bonds issued hereunder.
Section 12.03. Survival of Valid Bonds. In case any one or
more of the provisions of this Indenture or of the Bonds issued hereunder
shall, for any reason, be held to be illegal or invalid, such illegality
or invalidity shall not affect any other provisions of this Indenture or
of said Bonds, but this Indenture and the Bonds shall be construed and
enforced as if such illegal or invalid provisions had not been contained
therein.
<PAGE> 59
Section 12.04. Personal Liability. No covenant or agreement
contained in the Bonds or in this Indenture shall be deemed to be the
covenant or agreement of any member, agent, or employee of Issuer or
Trustee in his individual capacity, and neither the members of the Board
nor any official executing the Bonds shall be liable personally on the
Bonds or be subject to any personal liability or accountability by reason
of the issuance thereof.
Section 12.05. Notices. All notices, certificates, requests,
or other communications hereunder shall be sufficiently given and shall be
deemed given, unless otherwise required by this Indenture, when mailed by
first class mail, postage prepaid, addressed as follows: if to Issuer,
Matagorda County Navigation District Number One, 209 Fifth Street,
Palacios, Texas 77465, attention: General Manager; if to Company at the
address set forth in the Agreement; and if to Trustee, The Bank of New
York, 101 Barclay Street, 21st Floor, New York, New York 10286,
attention: Corporate Trust Department.
A duplicate copy of each notice, certificate, request, or other
communication given hereunder to Issuer, Company, or Trustee shall also be
given to the others. Company, Issuer, and Trustee may, by written notice
given hereunder, designate any further or different addresses to which
subsequent notices, certificates, requests, or other communication shall
be sent.
Section 12.06. Counterparts. This Indenture may be executed in
any number of counterparts, each of which, when so executed and delivered,
shall be an original; but such counterparts shall together constitute but
one and the same instrument.
Section 12.07. Construction. The laws of the State of Texas
shall govern the construction of this Indenture and of all Bonds issued
hereunder.
Section 12.08. Holidays. Whenever in this Indenture a duty or
payment is required to be performed or made or a notice given on a given
day of the month, and such day is not a Business Day, the required duty
shall be performed on the next succeeding day which is a Business Day.
Section 12.09. Instruments by Bondholders and Proof of
Ownership of Bonds. Any request, direction, consent, or other instrument
in writing required or permitted by this Indenture to be signed or
executed by Bondholders may be in any number of concurrent instruments of
similar tenor and may be signed or executed by such Bondholders in person
or by agent appointed by an instrument in writing. Proof of the execution
of any such instrument and of the ownership of Bonds shall be sufficient
for any purpose of this Indenture and shall be conclusive in favor of
Trustee with regard to any action taken by it under such instrument if
made in the following manner:
<PAGE> 60
(a) The fact and date of the execution by any person of
any such instrument may be proved by the certificate of any
officer in any jurisdiction who, by the laws thereof, has power
to take acknowledgements within such jurisdiction, to the
effect that the person signing such instrument acknowledged
before him the execution thereof, or by an affidavit of a
witness to such execution.
(b) The fact of the holding of the Bonds hereunder by any
Bondholder and the amount and the numbers of such Bonds and the
date of his holding the same shall be proved by the
registration books kept under the provisions of Article II.
Nothing contained in this Article shall be construed as
limiting Trustee to such proof, it being intended that Trustee may accept
any other evidence of the matters herein stated which to it may seem
sufficient. Any request or consent of the owners of any Bond shall bind
every future owner of the same Bond in respect of anything done by Trustee
in pursuance of such request or consent.
Section 12.10. Alternative Notice to Bondholders. In case it
shall for any reason be impracticable to publish or mail any notice
required by any provision of this Indenture to be published or sent to
Bondholders, then such method of publication or notification as shall be
made with the approval of Trustee shall constitute sufficient notice.
<PAGE> 61
IN WITNESS WHEREOF, MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER
ONE, acting through its Board of Navigation and Canal Commissioners, has
caused this Indenture to be executed in its name by its Chairman and
attested by its Secretary, and approved by its General Manager, and its
corporate seal hereto affixed and THE BANK OF NEW YORK, to evidence its
acceptance of the trusts hereby created and vested in it, has caused this
Indenture to be executed in its behalf by one of its Vice Presidents, all
as of the day and in the year first above written.
MATAGORDA COUNTY NAVIGATION DISTRICT
NUMBER ONE
By__________________________________
Chairman, Board of Navigation and
Canal Commissioners
(SEAL)
ATTEST:
By ____________________________
Secretary
APPROVED:
By ____________________________
General Manager
THE BANK OF NEW YORK
By__________________________________
Vice President
<PAGE> 1
EXHIBIT 3
---------
D R A F T
BOND PURCHASE AGREEMENT
MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE
$100,635,000
_% Pollution Control Revenue Refunding Bonds
(Central Power and Light Company Project)
Series 1995
BOND PURCHASE AGREEMENT (this "Purchase Agreement") dated
June __, 1995 between MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE, a
governmental agency and body politic and corporate of the State of Texas
(the "Issuer") and MORGAN STANLEY & CO. INCORPORATED, GOLDMAN, SACHS & CO.
and J.P. MORGAN SECURITIES INC. (the "Underwriters").
1. Background
(a) Subject to the terms and conditions herein set forth,
the Underwriters hereby agree to jointly and severally purchase
from the Issuer, and the Issuer hereby agrees to sell and
deliver to the Underwriters, the Pollution Control Revenue
Refunding Bonds (Central Power and Light Company Project)
Series 1995 (the "Refunding Bonds") in the principal amounts
set forth in Schedule I hereto. The Refunding Bonds shall be
dated, shall mature and shall bear interest from time to time
at the rate per annum as set forth in Section 2 hereof and the
Refunding Bonds shall otherwise have such terms and provisions
as set forth in the Official Statement and the Indenture (as
hereinafter defined).
(b) The Refunding Bonds will be issued pursuant to
resolutions adopted by the Board of Directors of the Issuer on
June 1, 1995 (the "Resolution"), and under an Indenture of
Trust dated as of July 1, 1995 (the "Indenture") between the
Issuer and The Bank of New York, as trustee (the "Trustee").
The Refunding Bonds are to be issued to provide funds for the
redemption and cancellation of all outstanding Matagorda County
Navigation District Number One 10-1/8% Pollution Control
Revenue Bonds (Central Power and Light Company Project) Series
1984 (the "Series 1984 Bonds") and all outstanding Matagorda
County Navigation District Number One 9-3/4% Collateralized
Pollution Control Revenue Bonds (Central Power and Light
Company Project) Series 1985A (the "Series 1985A Bonds"). The
Series 1984 Bonds and the Series 1985A Bonds were issued to
provide funds for the acquisition, construction and improvement
of certain pollution control and solid waste disposal
<PAGE> 2
facilities (the "Facilities") at the South Texas Project
Nuclear Generating Plant (the "Plant") located in Matagorda
County, Texas. The Company owns a 25.2% undivided interest in
the Plant. In connection with the issuance of the Refunding
Bonds, the Issuer and the Company have entered into an
Installment Payment Agreement dated as of July 1, 1995 (the
"Installment Agreement"), which obligates the Company to pay
amounts designed to be sufficient to pay the principal of,
premium, if any, and interest on the Refunding Bonds. The
Issuer has assigned the right to receive such payments from the
Company to the Trustee pursuant to the Indenture.
(c) MBIA Insurance Corporation ("MBIA") has made a
commitment to issue a municipal bond insurance policy (the
"Municipal Bond Insurance Policy") relating to the Bonds
effective as of the date issuance of the Bonds. The Municipal
Bond Insurance Policy will insure payment only as principal or
interest payments become due but are not paid.
(d) Concurrently with the execution and delivery of this
Purchase Agreement, the Company is delivering to the Issuer and
the Underwriters its Letter of Representation dated of even
date herewith in substantially the form of Appendix A hereto
(the "Letter of Representation") indicating its approval of the
terms and provisions of this Purchase Agreement and
acknowledging that the Issuer will sell the Refunding Bonds to
the Underwriters and the Underwriters will jointly and
severally purchase the Refunding Bonds and make a public
offering thereof in reliance upon the representations,
covenants and indemnities contained in the Letter of
Representation.
(e) The Facilities constitute solid waste disposal
facilities or air or water pollution control facilities for
purposes of Section 103(b)(4)(E) or (F) of the Internal Revenue
Code of 1954, as amended. The Refunding Bonds will be
obligations described in Section 1313 of the Tax Reform Act of
1986 so that interest on the Refunding Bonds will not be
includible in gross income for federal tax purposes (except as
noted in the opinion of Bond Counsel included as Appendix B to
the Official Statement) and the Underwriters may offer the
Refunding Bonds for sale without registration under the
Securities Act of 1933, as amended (the "Securities Act"), or
qualification of the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Act").
(f) A Preliminary Official Statement dated May 31, 1995,
including all Appendices thereto and all documents incorporated
therein by reference (the "Preliminary Official Statement"),
has been prepared for use in the offering of the Refunding
Bonds, and a final Official Statement dated as of the date
hereof, including all Appendices thereto and all documents
incorporated therein by reference (the "Final Official
<PAGE> 3
Statement"), has been delivered by the Issuer to the
Underwriters. The Final Official Statement, as it may be
amended or supplemented with the consent of the Issuer, the
Underwriters and the Company, is hereinafter referred to as the
"Official Statement."
2. Purchase, Sale and Closing. Subject to the terms and
conditions herein set forth, the Underwriters agree to jointly and
severally purchase from the Issuer, and the Issuer agrees to sell to the
Underwriters, Refunding Bonds in the principal amount set forth opposite
each Underwriter's name on Schedule I hereto at a purchase price equal to
100% of the principal amount thereof, plus accrued interest from July 1,
1995 through the day preceding the date of Closing (as herein defined).
The Refunding Bonds shall be dated July 1, 1995, shall mature on July 1,
2028 and shall bear interest from time to time at the rate of _% per
annum. Payment shall be made in immediately available Federal funds
payable to the order of the Trustee for the account of the Issuer.
Closing (the "Closing") will be at the offices of Milbank, Tweed, Hadley &
McCloy, 1 Chase Manhattan Plaza, New York, New York at 10:00 A.M., New
York time, on July 18, 1995 (the "Closing Date"), or at such other date,
time or place as may be agreed on by the Issuer, the Company and the
Underwriters. Refunding Bonds will be delivered to The Depository Trust
Company at least 24 hours before Closing; the Refunding Bonds will be
registered in the name of CEDE & Co. in the denomination of $100,635,000.
3. Issuer's Representations. The Issuer makes the following
representations and warranties, all of which shall survive Closing:
(a) The information with respect to the Issuer contained
in the Preliminary Official Statement and in the Final Official
Statement is, and, as such information may be amended or
supplemented as of the Closing Date will be, true and correct
in all material respects, and such information does not, and as
it may be amended or supplemented as of the Closing Date will
not, include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements in the
Preliminary Official Statement and the Official Statement
relating to the Issuer, in the light of the circumstances under
which they were made, not misleading. The copies of the Final
Official Statement delivered to the Underwriters on the date
hereof have been duly signed and delivered by the Issuer.
(b) The Issuer is a duly constituted and validly existing
governmental agency and body politic and corporate of the State
of Texas, with full legal right, power and authority under and
pursuant to Chapters 30, 60 and 62, Texas Water Code (the
"Enabling Legislation"), to execute and deliver this Purchase
Agreement, the Installment Agreement and the Indenture, to sign
and deliver the Official Statement, to carry out and consummate
the transactions contemplated by each of the foregoing and all
other agreements relating thereto, and to issue, sell and
deliver the Refunding Bonds for the purpose of refunding all or
any part of outstanding bonds of the Issuer.
<PAGE> 4
(c) The Issuer has full legal right, power and authority
and has taken all necessary action and has complied with all
applicable provisions of law required (i) to adopt the
Resolution, (ii) to execute and deliver this Purchase
Agreement, the Installment Agreement, the Refunding Bonds and
the Indenture, (iii) to issue and sell the Refunding Bonds to
the Underwriters pursuant hereto and to the Indenture and (iv)
to carry out and consummate all other transactions contemplated
by each of such documents, and the Issuer has complied with all
applicable provisions of law in all matters relating to such
transactions.
(d) The Issuer has duly authorized (i) the delivery and
due performance of the Resolution and the execution, delivery
and due performance of this Purchase Agreement, the Installment
Agreement, the Refunding Bonds and the Indenture, including,
without limitation, the issuance and sale of the Refunding
Bonds to the Underwriters, (ii) the execution and delivery of
the Official Statement by the Issuer and the distribution of
the Preliminary Official Statement and the Official Statement
and (iii) the taking of any and all such action as may be
required on the part of the Issuer to carry out, give effect to
and consummate the transactions contemplated by each of the
foregoing. None of the proceedings or actions taken by the
Issuer with respect to any of the Refunding Bonds, the
Indenture, the Installment Agreement, the Preliminary Official
Statement, the Official Statement or this Purchase Agreement
have been repealed, rescinded or revoked. The Official
Statement is deemed final by the Issuer for purposes of Rule
15c2-12 ("Rule 15c2-12") under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(e) The Issuer has not been notified of any listing or
proposed listing by the Internal Revenue Service to the effect
that the Issuer is a bond issuer whose arbitrage certifications
may not be relied upon.
(f) The Resolution has been duly adopted by the Issuer,
is in full force and effect and constitutes the legal, valid
and binding act of the Issuer. This Purchase Agreement has
been duly executed and delivered by the Issuer and constitutes
the legal, valid and binding obligation of the Issuer
enforceable against the Issuer in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the enforcement of creditors' rights generally and to
the effect of general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity
or at law). The Installment Agreement and the Indenture each
will be duly executed by the Issuer and, when delivered, each
will constitute the legal, valid and binding obligation of the
Issuer enforceable against the Issuer in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
<PAGE> 5
reorganization, moratorium or other similar laws relating to or
affecting the enforcement of creditors' rights generally and to
the effect of general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity
or at law).
(g) When delivered to and paid for by the Underwriters at
Closing in accordance with the provisions of this Purchase
Agreement, the Refunding Bonds initially delivered will have
been duly approved by the Attorney General of the State of
Texas and registered by the Comptroller of Public Accounts of
the State of Texas, and the Refunding Bonds will be duly
authorized, executed, issued and delivered and will constitute
legal, valid, binding and enforceable special obligations of
the Issuer in accordance with their terms and in conformity
with the Enabling Legislation and will be entitled to the
benefit and security of the Installment Agreement, the
Resolution and the Indenture.
(h) No approval, permit, consent or authorization of any
governmental or public agency, authority or person not already
obtained (other than the approval of the Attorney General of
the State of Texas with respect to the Refunding Bonds, the
registration of the Refunding Bonds by the Comptroller of
Public Accounts of the State of Texas and the order of the
Securities and Exchange Commission (the "Commission") under the
Public Utility Holding Company Act of 1935 (the "1935 Act")
authorizing the Company's obligations with respect to the
Refunding Bonds and the Installment Agreement, which approvals
and orders shall be obtained on or prior to the Closing Date,
the receipt of which are expressly made a condition to the
Issuer's, the Underwriters' and the Company's respective
obligations to issue, sell and purchase the Refunding Bonds
hereunder and under the Letter of Representation; and other
than any approvals that might be required under the Blue Sky or
securities laws of any jurisdiction) is required in connection
with the issuance and sale of the Refunding Bonds, the adoption
of the Resolution or the execution and delivery by the Issuer
of the Refunding Bonds, the Installment Agreement, the
Indenture or this Purchase Agreement or the performance of its
obligations under any of such instruments.
(i) The adoption of the Resolution, the issuance and sale
of the Refunding Bonds, the acceptance of the Letter of
Representation, the execution and delivery by the Issuer of
this Purchase Agreement, the Installment Agreement, the
Refunding Bonds and the Indenture, the execution and delivery
by the Issuer of the Official Statement and compliance with the
provisions hereof and thereof, will not conflict with, violate
or result in a breach of any provision of, or constitute a
default (or an event which with notice or passage of time, or
both, would constitute a default) on the part of the Issuer
under, any indenture, commitment, agreement or other instrument
<PAGE> 6
to which the Issuer is a party or by which it is bound, or
under any provision of the Texas Constitution or any existing
law, rule, regulation, judgment, ordinance, order or decree to
which the Issuer (or any of its directors or officers in their
respective capacities as such) is subject, or result in the
creation or imposition of any lien, charge or other security
interest or encumbrance of any nature whatsoever upon any of
the property, assets or revenues of the Issuer, except as
provided in the Refunding Bonds and the Indenture.
(j) The Issuer is solvent and since its creation, the
Issuer has not been in default in the payment of principal of,
premium, if any, or interest on, or otherwise been in default
with respect to, any of its bonds, notes or other securities or
any legally authorized obligation issued or guaranteed by it;
and no bankruptcy or insolvency proceedings have been taken by
or against the Issuer.
(k) Payments under the Installment Agreement, the
Indenture, the Resolution and the Refunding Bonds, and the
interest on the Refunding Bonds, are not subject to taxation in
the State of Texas. No legislation, ordinance, rule or
regulation has been enacted by, or is currently pending before,
any governmental body, department or agency of the State of
Texas, nor has any decision been rendered by any court of
competent jurisdiction of the State of Texas, which would
adversely affect the exemption from all taxation in the State
of Texas of (i) any payments under the Installment Agreement,
the Indenture, the Resolution or the Refunding Bonds and the
interest on the Refunding Bonds or (ii) all bonds and
obligations of the general character of the Refunding Bonds.
There are no stamp, documentary, transfer or like taxes in the
State of Texas which would be applicable to the original
issuance or subsequent transfers of the Refunding Bonds.
(l) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court,
public board, governmental agency or body or arbitrator,
pending or, to the best of the knowledge of the Issuer,
threatened (nor to the best of the knowledge of the Issuer is
there any basis therefor), which in any way questions the
validity of the Enabling Legislation, the powers of the Issuer
referred to in paragraphs (b) and (c) of this Section 3 above,
or the validity of any proceedings taken by the Issuer in
connection with the issuance and sale of the Refunding Bonds,
or wherein an unfavorable decision, ruling or finding might
adversely affect the transactions contemplated hereby or by the
Installment Agreement, the Indenture or the Official Statement
or which, in any way, might adversely affect the validity or
enforceability of the Refunding Bonds, the Resolution, the
Installment Agreement, the Indenture or this Purchase Agreement
(or of any other instrument required or contemplated for use in
consummating the transactions contemplated thereby or hereby)
or the exclusion from gross income for federal income tax
purposes of interest on the Refunding Bonds.
<PAGE> 7
4. Covenants and Agreements of the Issuer. The Issuer
covenants and agrees with the Underwriters that it will:
(a) Furnish or cause to be furnished to each of the
Underwriters (i) on the date of the execution of this Purchase
Agreement, two copies of the Final Official Statement and, on
the date of any amendment or supplement thereto, two copies of
such amendment or supplement, prepared in a manner consistent
with (b) below, in each case signed by or on behalf of the
Issuer by its Chairman and (ii) on or prior to the Closing
Date, two specimens of the form of Refunding Bond, two
certified copies of the Resolution and two executed copies of
the Indenture and of the Installment Agreement (which documents
shall be in the forms previously delivered to each of the
Underwriters, subject to such changes as the Underwriters shall
approve); the Issuer agrees that the Company may at its expense
furnish to each of the Underwriters, without charge, as many
copies of the Official Statement and any amendment or
supplement thereto as such Underwriter may reasonably request.
(b) Before amending or supplementing the Official
Statement, furnish to each of the Underwriters two copies and
the Company two copies of each proposed amendment or
supplement. No amendment or supplement to the Official
Statement will contain material information different from that
contained in the Final Official Statement which is reasonably
unsatisfactory to the Underwriters or the Company.
(c) During such period as the Underwriters believe
delivery of the Official Statement is necessary or desirable in
connection with sales of the Refunding Bonds by any Underwriter
or a dealer, if any event shall occur as a result of which it
may be necessary to amend or supplement the Official Statement
in order to make the statements therein, in the light of the
circumstances when the Official Statement is delivered to a
purchaser, not misleading, immediately notify the Underwriters
and the Company of such event and cooperate at the request of
the Underwriters in the preparation of amendments or
supplements to the Official Statement which in the judgment of
the Underwriters are necessary so that the statements in the
Official Statement as so amended or supplemented will not, in
light of the circumstances when the Official Statement is
delivered to a purchaser, be misleading.
(d) Cooperate in qualifying the Refunding Bonds for offer
and sale and in determining their eligibility for investment
under the laws of such jurisdictions as the Underwriters may
reasonably request, provided that the Issuer shall not be
required to qualify to do business or consent to general
service of process in any state or jurisdiction other than the
State of Texas.
<PAGE> 8
(e) Apply the proceeds from the issuance and sale of the
Refunding Bonds in the manner set forth in the Official
Statement, and not take any action which will adversely affect
the exclusion from gross income for federal income tax purposes
of the interest on the Refunding Bonds.
(f) Promptly make or cause to be made under the Uniform
Commercial Code of the State of Texas, or under any other
applicable law, at such times as may be required, all filings,
if any, required in order to establish, maintain, protect or
preserve the interest of the Trustee in the rights assigned to
it under the Resolution, the Installment Agreement and the
Indenture.
(g) The Issuer will refrain from knowingly taking any
action with regard to which the Issuer may exercise control
that would result, or could reasonably be expected to result,
in the loss of the exclusion from gross income for federal
income tax purposes of the interest on the Refunding Bonds
referred to under the caption "Tax Matters" in the Official
Statement.
5. Survival of Representations, Warranties and Agreements.
The respective covenants, agreements, representations, warranties and
other statements of each of the Issuer and the Underwriters, as set forth
in this Purchase Agreement or made by them pursuant to this Purchase
Agreement, shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Issuer or any Underwriter or any
officer, director or controlling person thereof, and shall survive the
termination of this Purchase Agreement and the delivery of and payment for
the Refunding Bonds.
6. Conditions of Underwriters' Obligations. The
Underwriters' obligation to purchase and pay for the Refunding Bonds at
Closing is subject to the performance by the Issuer of its obligations and
agreements to be performed hereunder and under the Installment Agreement,
the Resolution and the Indenture at or prior to Closing and the
performance by the Company of the obligations to be performed by it under
the Letter of Representation and the Installment Agreement at or prior to
Closing and to the fulfillment of the following conditions at or prior to
Closing:
(a) The Company shall have executed and the Issuer shall
have accepted the Letter of Representation and the
representations and warranties of the Issuer herein and of the
Company in the Letter of Representation shall be true and
correct on and as of the Closing Date;
(b) Each of the Indenture and the Installment Agreement
shall have been duly authorized, executed and delivered by the
respective parties thereto and shall be in full force and
effect, and each shall not have been amended, modified or
supplemented since the date hereof except as may have been
agreed to by the Underwriters;
<PAGE> 9
(c) Neither the Issuer nor the Company shall be in
default in the performance of any of their covenants and
agreements herein or in the Letter of Representation,
respectively;
(d) Subsequent to the execution of this Purchase
Agreement, there shall not have been any downgrading of any
rating by Moody's Investors Service, Inc. or Standard & Poor's
Corporation of any securities issued by the Company or of any
bonds issued by the Issuer with respect to the Facilities of
the Company in Matagorda County or of the Refunding Bonds;
(e) The Underwriters shall have received:
(i)The Final Official Statement signed on behalf of
the Issuer by its Chairman, together with any amendments
or supplements thereto to the Closing Date;
(ii) Opinions of McCall, Parkhurst & Horton L.L.P.,
Bond Counsel ("Bond Counsel"), dated the Closing Date,
substantially in the forms attached hereto as Exhibit A-1
and Exhibit A-2;
(iii) An opinion, dated the Closing Date, of
Mayfield & Mayfield ("Issuer's Counsel"), counsel for the
Issuer, substantially in the form attached hereto as
Exhibit B;
(iv) An opinion, dated the Closing Date, of Milbank,
Tweed, Hadley & McCloy, special counsel for the Company,
substantially in the form attached hereto as Exhibit C;
(v) An opinion, dated the Closing Date, of Vinson &
Elkins L.L.P., special counsel for the Company,
substantially in the form attached hereto as Exhibit D;
(vi) An opinion, dated the Closing Date, of Sidley &
Austin, counsel for the Underwriters, substantially in the
form attached hereto as Exhibit E;
(vii) A letter, dated the Closing Date, from Arthur
Andersen LLP, independent certified public accountants of
the Company, in form and substance satisfactory to the
Underwriters and their counsel and covering the matters
set forth in Exhibit F hereto;
(viii) A certificate, dated the Closing Date, signed
by the Chairman of the Issuer or other appropriate
official satisfactory to the Underwriters, to the effect
that each of the representations and warranties of the
Issuer set forth in this Purchase Agreement is true and
correct on and as of the Closing Date as if made on and as
of the Closing Date and that all agreements to be complied
<PAGE> 10
with and obligations to be performed by the Issuer
hereunder and under the Installment Agreement, the
Resolution and the Indenture on or prior to the Closing
Date or as contemplated hereby or thereby have been
complied with and performed;
(ix) A certificate, dated the Closing Date, signed
by a Vice President or the Treasurer of the Company to the
effect that, (A) the representations and warranties
contained in the Letter of Representation or in any
certificate delivered by the Company hereunder or
thereunder is true and correct in all material respects on
and as of the Closing Date as if made on and as of the
Closing Date, (B) all agreements to be complied with and
obligations to be performed by the Company pursuant to the
Letter of Representation or as contemplated by the Letter
of Representation, the Resolution, the Installment
Agreement or the Indenture on or prior to the Closing Date
have been complied with and performed and (C) there has
been no material adverse change in the Company's financial
condition or any adverse development concerning its
business or assets which would result in a material
adverse change in its prospective financial condition or
results of operations from that described in or
contemplated by the Official Statement or, if such change
has occurred, full information with respect thereto;
(x) A certificate, satisfactory in form and
substance to the Underwriters, of one or more duly
authorized officers of the Trustee, dated the Closing
Date, as to the due authentication and delivery of the
Refunding Bonds by the Trustee under the Indenture;
(xi) Arbitrage certifications, satisfactory in form
to the Underwriters and Underwriters' counsel, by the
Company and the Issuer (which may be in the form of a
single document);
(xii) Evidence, satisfactory to the Underwriters, of
the ratings on the Refunding Bonds;
(xiii) Such additional certificates (including
appropriate no litigation certificates), instruments or
other documents as the Underwriters or Underwriters'
counsel may reasonably request to evidence compliance with
applicable law, the authority of the Trustee to act under
the Indenture, and the due performance and satisfaction by
the Company at or prior to such date of all agreements
then to be performed and all conditions then to be
satisfied by it, in connection with this Purchase
Agreement, the Letter of Representation, the Installment
Agreement, the Resolution and the Indenture, and to
evidence that the interest on the Refunding Bonds is
<PAGE> 11
excludable from the gross income of the owners thereof for
federal income tax purposes under the statutes,
regulations, published rulings and court decisions on the
Closing Date, and the status of the offering under the
Securities Act, the 1935 Act and the Trust Act;
(xiv) An opinion, dated the closing Date, of a
Vice President and Assistant General Counsel of MBIA,
substantially in the form attached hereto as Exhibit
G; and
(xv) A copy of the Municipal Bond Insurance
Policy, as issued by MBIA and delivered to the
Trustee, substantially in the form of Exhibit C to
the Official Statement, together with evidence
satisfactory to the Underwriters that all general and
special conditions to the effectiveness of the
Municipal Bond Insurance Policy have been satisfied.
(f) At Closing there shall not have been any material
adverse change in the financial condition of the Company or any
adverse development concerning the business or assets of the
Company which would result in a material adverse change in the
prospective financial condition or results of operations of the
Company from that described in the Official Statement which, in
the sole judgment of the Underwriters, makes it inadvisable to
proceed with the sale of the Refunding Bonds;
(g) The Commission shall have issued an order under the
1935 Act, authorizing the Company's obligations with respect to
the Refunding Bonds and the Installment Agreement; the Attorney
General of the State of Texas shall have examined the Refunding
Bonds and the records relating to their issuance, shall have
certified as to their validity and shall have approved the
Refunding Bonds; and the Refunding Bonds shall have been
registered by the Comptroller of Public Accounts of the State
of Texas;
(h) All matters relating to this Purchase Agreement, the
Official Statement, the Refunding Bonds and the sale thereof,
the Installment Agreement, the Indenture, the Resolution, the
Letter of Representation, and the consummation of the
transactions contemplated hereby or thereby shall be
satisfactory to and approved by the Underwriters as of the
Closing, which approval shall not be unreasonably withheld.
Any certificate signed by or on behalf of the Issuer or the
Company and delivered at the Closing shall be a representation
and warranty by the Issuer or the Company, as the case may be,
to the Underwriters as to the statements made therein;
<PAGE> 12
(i) The Underwriters shall have received from the Company
payment on the Closing Date by corporate check of the
Underwriters' fees (____% of the principal amount of the
Refunding Bonds) as set forth in Section 5 of the Letter of
Representation; and
(j) Subsequent to the dates as of which information is
given in the Official Statement, there shall not have been any
change or decrease specified in the letter required by
subsection (e)(vii) which is, in the judgment of the
Underwriters, so material and adverse as to make it impractical
or inadvisable to proceed with the offering or delivery of the
Refunding Bonds as contemplated in the Official Statement.
7. Events Permitting the Underwriters to Terminate. The
Underwriters may terminate their several obligations to purchase the
Refunding Bonds at any time before Closing if any of the following occurs:
(a) A legislative, executive or regulatory action
(including the introduction or proposal for adoption of
legislation, executive orders or regulations) or a court
decision which, in the sole judgment of any of the
Underwriters, casts sufficient doubt on the legality of, or the
tax-free status of interest on, obligations of the general kind
and character as the Refunding Bonds so as to materially impair
the marketability or materially lower the market price thereof
or would make it impractical to market the Refunding Bonds on
the terms and in the manner contemplated in the Official
Statement;
(b) Any action by the Commission, any other governmental
agency, or a court which, directly or indirectly, would
require, in the reasonable judgment of the Underwriters, (i)
registration of the Refunding Bonds under the Securities Act or
(ii) qualification of an indenture in respect of the Refunding
Bonds under the Trust Act, or any such action or legislative,
executive or regulatory action with the purpose or effect of
otherwise prohibiting the issuance, offering or sale of the
Refunding Bonds as contemplated hereby or by the Official
Statement or of obligations of the general character of the
Refunding Bonds;
(c) (i) Any general suspension or material limitation on
trading in securities on the New York Stock Exchange or by the
Commission or by any federal or state agency or by the decision
of any court, any limitation on prices for such trading or any
restrictions on the distribution of securities, (ii) trading in
any securities of the Company shall have been suspended by the
Commission or a national securities exchange, (iii) a general
banking moratorium on commercial banking activities in New York
shall have been declared either by federal or New York State
authorities, (iv) the rating assigned by any nationally
recognized securities rating agency to any securities of the
Company as of the date of this Purchase Agreement shall have
<PAGE> 13
been lowered since that date or (v) there shall have occurred
any outbreak or material escalation of hostilities or other
calamity or crisis, the effect of which on the financial
markets of the United States is such as to make it, in the
judgment of the Underwriters, impracticable to market the
Refunding Bonds; or
(d) Any event or condition not expressly contemplated in
the Official Statement which, in the sole judgment of the
Underwriters, renders untrue or incorrect, in any material
adverse respect as of the time to which the same purports to
relate, the information, including the financial statements,
contained in the Official Statement, including Appendices
thereto and documents incorporated therein by reference, or
which requires that information not reflected in such Official
Statement should be reflected therein in order to make the
statements and information contained therein not misleading in
any material respect at such time, which, in either event, in
the sole judgment of the Underwriters, makes it inadvisable to
proceed with the sale of the Refunding Bonds; provided,
however, that the Underwriters shall not exercise the
termination right provided in this subparagraph (d) (i) until
they shall have consulted with the Company with respect to the
event or condition at issue and (ii) so long as the Company and
the Underwriters shall reasonably believe that such event or
condition can be eliminated or cured prior to the Closing Date.
8. Execution in Counterparts. This Purchase Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Purchase Agreement by signing any such counterpart.
9. Notices and Other Actions. All notices, requests, demands
and formal actions hereunder will be in writing mailed, telegraphed or
delivered to:
The Underwriters:
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
Attention: Municipal Department
The Issuer:
Matagorda County
Navigation District Number One
209 Fifth Street
Palacios, Texas 77465
Attention: General Counsel and Manager
<PAGE> 14
10. Governing Law. This Purchase Agreement shall be governed
by and construed in accordance with the laws of the State of New York,
except that the rights, privileges, duties and immunities of the Issuer
shall be governed by the laws of the State of Texas.
11. Successors. This Purchase Agreement will inure to the
benefit of and be binding upon the parties and their respective
successors, and will not confer any rights upon any other person. The
term "successor" shall not include any holder of any Refunding Bonds
merely by virtue of such holding.
MATAGORDA COUNTY NAVIGATION
DISTRICT NUMBER ONE
By:________________________
Chairman
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
By: Morgan Stanley & Co. Incorporated
By:__________________________________
Francis J. Sweeney
Principal
<PAGE> 15
SCHEDULE I
Principal Amount
Underwriters of Refunding Bonds
- ------------ ------------------
Morgan Stanley & Co. Incorporated. . . . . . $34,635,000
Goldman, Sachs & Co. . . . . . . . . . . . . $33,000,000
J.P. Morgan Securities Inc. . . . . . . . . . $33,000,000
-----------
Total $100,635,000
============
<PAGE> 16
EXHIBIT A-1
MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE
POLLUTION CONTROL REVENUE REFUNDING BONDS
(CENTRAL POWER AND LIGHT COMPANY PROJECT)
SERIES 1995
WE HAVE EXAMINED into the validity of the bonds described above
(the "Bonds"), issued by the Matagorda County Navigation District Number One
(the "Issuer"), initially dated as of July 1, 1995, in the aggregate principal
amount of $100,635,000, maturing July 1, 2028 (unless the Bonds shall become
due or shall be redeemed prior to their scheduled maturity in accordance with
the terms and conditions stated in the text of the Bonds), and bearing
interest from the dates specified therein until maturity or redemption, at the
rates and payable on the dates and in the manner described in the text of the
Bonds. The Bonds are in registered form in denominations of $5,000 and
integral multiples thereof.
WE HAVE ACTED AS BOND COUNSEL for the Issuer for the purpose of
rendering an opinion with respect to the authorization, issuance, delivery,
legality, and validity of the Bonds under the laws and Constitution of the
State of Texas, with respect to any exemption of the interest on the Bonds
from federal income taxes, and for the other limited purposes set forth herein
and in a supplemental opinion of even date herewith. We have not been
requested to examine, and have not investigated or verified, any statements,
records, material, or other matters relating to the financial condition or
capabilities of the corporation hereinafter described, and we express no
opinion with respect thereto.
WE HAVE EXAMINED the Constitution and laws of the State of Texas
under which the Issuer was created and exists and pursuant to which it has
authorized and issued the Bonds; certified copies of the proceedings of the
governing body of said Issuer; certificates of Central Power and Light
Company, a Texas corporation (the "Company"); the Installment Payment
Agreement dated as of July 1, 1995 (the "Agreement"), between the Issuer and
the Company; the Indenture of Trust dated as of July 1, 1995 (the
"Indenture"), between the Issuer and The Bank of New York (the "Trustee");
resolutions of the Issuer, including the resolution authorizing the issuance
of the Bonds, adopted June 1, 1995 (the "Bond Resolution"); certificates,
resolutions, and representations of the Company and the Trustee, including
certificates and representations with respect to certain material facts which
are solely within the knowledge of the party rendering such certificates and
representations; and the opinions of Milbank, Tweed, Hadley & McCloy and
Vinson & Elkins L.L.P., counsel to the Company, upon which certifications,
representations, and opinions we rely to the extent we consider appropriate;
and other instruments authorizing and relating to the issuance of the Bonds,
including one of the executed Bonds (Bond R-1).
<PAGE> 17
THE BONDS are secured by the Indenture whereunder the Trustee, or
its successor as Trustee, is custodian of the Bond Fund created therein, and
is obligated to enforce the rights of the owners of the Bonds, and to perform
other duties, in the manner and under the conditions stated in the Indenture.
BASED ON SAID EXAMINATION, it is our opinion that the Issuer is a
governmental agency and body politic and corporate of the State of Texas,
validly operating and existing as a conservation and reclamation district and
a navigation district under Texas law with full power and authority to enter
into and carry out the terms of the Agreement and the Indenture.
IT IS FURTHER OUR OPINION that the Bond Resolution has been duly
and lawfully adopted and that the Bonds have been duly and validly authorized,
issued, executed, authenticated, and delivered in accordance with law and the
Indenture, and constitute valid, legal, binding, and enforceable special
obligations of the Issuer in accordance with their terms and the terms of the
Indenture, with the principal of, premium, if any, and interest on the Bonds
being payable from, and secured by a first lien on and pledge of all of the
right, title, and interest of the Issuer in and to the Agreement, together
with all moneys payable thereunder, excluding certain rights relating to
certain payments for expenses and indemnification of the Issuer. Pursuant to
the Agreement, the Company has agreed to make payments to the Trustee for
deposit into the Bond Fund established by the Indenture in amounts sufficient
to pay and redeem, or provide for the payment and redemption of, the principal
of, premium, if any, and interest on the Bonds, when due as required by the
Indenture.
THE RIGHTS OF THE ISSUER under the Agreement have been duly and
legally assigned in the Indenture to the Trustee and have been pledged to the
payment of the principal of, premium, if any, and interest on the Bonds. It
is our opinion that the Agreement has been duly and lawfully authorized,
executed, and delivered by the Issuer, and is a legal, valid, binding, and
enforceable obligation of the Issuer in accordance with its terms and
conditions. Milbank, Tweed, Hadley & McCloy and Vinson & Elkins L.L.P.,
counsel for the Company, have rendered their respective opinions of even date
herewith to the effect that the Agreement has been duly and lawfully
authorized, executed, and delivered by the Company, and that it is a legal,
valid, binding, and enforceable obligation of the Company. We note that said
counsel each has stated that the enforceability of the Agreement is subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws relating to or affecting creditors' rights generally.
IT IS FURTHER OUR OPINION that the Indenture has been duly and
lawfully authorized, executed, and delivered, that it is in full force and
effect, that it is legal, valid, binding, and enforceable in accordance with
its terms and conditions, and that it creates the valid pledge which it
purports to create.
THE ISSUER has reserved the right to amend the Indenture as
provided therein and subject to the restrictions therein stated.
<PAGE> 18
THE OPINIONS HEREINABOVE expressed are qualified to the extent that
the obligations of the Company, the Trustee, and the Issuer, and the
enforceability thereof, with respect to the Bonds, the Agreement, the Bond
Resolution, and the Indenture are subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to or
affecting creditors' rights generally.
IN OUR OPINION, except as discussed below, the interest on the
Bonds will be excludable from the gross income of the owners of the Bonds for
federal income tax purposes under the statutes, regulations, published
rulings, and court decisions existing on the date of this opinion. The
exceptions are as follows:
(1) interest on the Bonds will be includable in the gross
income of the owner thereof during any period that such Bonds are
owned by either a "substantial user" of the facilities financed
with the proceeds of the Bonds or a "related person" of such user,
as provided in section 103(b)(13) of the Internal Revenue Code of
1954, as amended;
(2) interest on the Bonds will be included in a corporation's
alternative minimum taxable income for purposes of determining the
alternative minimum tax and the environmental tax imposed on
corporations by sections 55 and 59A of the Internal Revenue Code of
1986, as amended (the "Code");
(3) interest on the Bonds will be subject to the branch
profits tax imposed on foreign corporations by section 884 of the
Code; and
(4) interest on the Bonds will be subject to the tax imposed
by section 1375 of the Code on the excess net passive income of
certain S corporations that have Subchapter C earnings and profits.
Section 57(a)(5) of the Code includes as an individual and
corporate alternative minimum tax preference item, the interest on certain
"private activity bonds," other than bonds issued after August 7, 1986, to
currently refund such bonds. In our opinion, the interest on the Bonds is not
an alternative minimum tax preference item under such section.
IN EXPRESSING THIS OPINION as to the exclusion from gross income of
interest, we have (a) relied upon information furnished by the Company, and
particularly written representations of officers of the Company with respect
to certain material facts which are solely within their knowledge, relating to
the Facilities, as defined in the Agreement, and the use of the proceeds of
the Bonds and the prior bonds, and (b) assumed continuing compliance with
covenants of the Company, the Issuer and the Trustee with respect to certain
matters, including arbitrage and the application of Bond proceeds. Failure to
comply with certain of these representations and covenants may cause interest
on the Bonds to become includable in gross income retroactively to the date of
their issuance.
<PAGE> 19
EXCEPT AS STATED ABOVE, we express no opinion as to any other
federal, state or local tax consequences of acquiring, carrying, owning or
disposing of the Bonds. In particular, but not by way of limitation, we
express no opinion with respect to the federal, state or local tax
consequences arising from the enactment of any pending or future legislation.
Respectfully,
<PAGE> 20
CERTIFICATE
I, the undersigned, Secretary, Board of Navigation and Canal
Commissioners of Matagorda County Navigation District Number One, hereby
certify that the above and foregoing is a true, full and correct copy of the
opinion of McCall, Parkhurst & Horton L.L.P., Attorneys at Law, as to the
validity and security of the bonds described therein, which opinion was dated
and delivered concurrently with the original delivery of said bonds.
(facsimile signature)
Secretary
<PAGE> 21
EXHIBIT A-2
_____________ __, 1995
SUPPLEMENTAL OPINION
Central Power and Light Company Matagorda County Navigation
P. O. Box 2121 District Number One
Corpus Christi, Texas 78403 209 Fifth Street
Palacios, Texas 77465
Morgan Stanley & Co. Incorporated The Bank of New York,
Goldman, Sachs & Co. as trustee
J. P. Morgan Securities Inc. 101 Barclay Street, 21st Floor
c/o Morgan Stanley & Co. Incorporated New York, New York 10286
1221 Avenue of the Americas
New York, New York 10020
Re: Matagorda County Navigation District Number One Pollution Control
Revenue Refunding Bonds (Central Power and Light Company Project)
Series 1995 (the "Bonds")
Gentlemen:
At your request, and in our capacity as Bond Counsel for the
Matagorda County Navigation District Number One (the "Issuer") in connection
with the issuance of the Bonds, we have examined, to the extent indicated and
deemed necessary in order to render this opinion, the Installment Payment
Agreement, dated as of July 1, 1995 between the Issuer and Central Power and
Light Company (the "Company"), relating to the Bonds (the "Agreement"); the
resolution authorizing the Bonds adopted by the Issuer on June 1, 1995 (the
"Resolution"); the Indenture of Trust dated as of July 1, 1995 (the
"Indenture"), between the Issuer and The Bank of New York, as Trustee (the
"Trustee"), relating to the Bonds; Section 103 of the Internal Revenue Code of
1986, as amended (the "Code"); the Official Statement dated June __, 1995 (the
"Official Statement"), executed by the Issuer, exclusive of the information
contained in Appendix A thereto; the Bond Purchase Agreement dated June __,
1995, between the Issuer and the Underwriters referred to therein relating to
the Bonds (the "Bond Purchase Agreement"); an opinion of even date herewith of
Messrs. Milbank, Tweed, Hadley & McCloy, New York, New York, Special Counsel
to the Company; an opinion of even date herewith of Vinson & Elkins L.L.P.,
Dallas, Texas, Special Texas Counsel to the Company; Section 3(a)(2) of the
Securities Act of 1933, as amended (the "Securities Act"); and Section
304(a)(4)(B) of the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").
<PAGE> 22
Based on such information, it is our opinion that:
1. The Issuer has full legal right, power, and authority to
issue, sell, and deliver the Bonds to the Underwriters as provided
in the Bond Purchase Agreement, and to carry out and consummate all
other transactions to be carried out and consummated by it as
contemplated by the Bond Purchase Agreement, and the Issuer has
complied with all applicable provisions of law, in all matters
relating to such transactions.
2. The Issuer has duly authorized (A) the execution,
delivery, and due performance of the Bond Purchase Agreement, the
Agreement, and the Indenture, (B) the signing and delivery of the
Official Statement by the Issuer and the distribution of the
Preliminary Official Statement and the Official Statement, and (C)
the taking of any and all such action as may be required on the
part of the Issuer to carry out, give effect to, and consummate the
transactions to be carried out and consummated by the Issuer as
contemplated by each of said instruments.
3. Each of the Bond Purchase Agreement, the Agreement, and
the Indenture has been duly authorized, executed and delivered by
the Issuer and constitutes the legal, valid, and binding obligation
of the Issuer.
4. No filing, registering, recording, or refiling or
rerecording of any document is required in order to establish,
protect, and preserve the interest of the Trustee in the rights
assigned to it under the Indenture or to perfect or maintain the
security interest created thereby.
5. All authorizations, consents, and approvals of, and
registrations or filings with, governmental bodies or agencies
(other than approvals that might be required under the securities
or Blue Sky laws of any jurisdiction) required in connection with
the execution and delivery of the Bonds, the Bond Purchase
Agreement, the Indenture, and the Agreement and the adoption of the
Resolution, or in connection with the carrying out by the Issuer of
its obligations thereunder, have been obtained or made and are in
full force and effect, including, without limitation, the approval
of the Bonds by the Attorney General of the State of Texas and
registration of the Bonds upon initial issuance by the Comptroller
of Public Accounts of the State of Texas.
<PAGE> 23
6. Payments to the owners of the Bonds under the Indenture,
the Agreement, and the Bonds, and interest on the Bonds, are, under
current law, not subject to taxation in the State of Texas, except
for the possible applicability of ad valorem and inheritance taxes.
7. It is not necessary in connection with the public
offering and sale of the Bonds to register the Bonds, the
Resolution, the Indenture or the Bond Purchase Agreement under the
Securities Act or to qualify the Indenture under the Trust
Indenture Act.
8. The statements contained in the Official Statement,
including any amendments or supplements thereto, under the captions
"The Bonds" (except for the subcaption "Book-Entry Only System"),
"The Agreement" and "The Indenture", insofar as such statements
summarize the provisions of the documents referred to therein,
accurately and fairly present the information purported to be
shown. The statements in the Official Statement, including any
amendments or supplements thereto, under the captions "The Issuer"
and "Tax Matters" are accurate statements or summaries of the
matters therein set forth and fairly present the information
purported to be shown.
The opinions herein expressed are (a) subject to applicable
bankruptcy, insolvency, and similar laws affecting creditors' rights
generally, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law); and (b) qualified to the extent the indemnification or contribution
provisions contained in the instruments covered by such opinions may be
limited by applicable securities laws and public policy.
In our capacity as Bond Counsel, we have rendered our opinion of
even date herewith as to the validity and enforceability of the Bonds and the
status of interest on the Bonds under federal income tax law. You are
authorized to rely on such opinion as if it were expressly addressed to you.
This opinion may be relied upon only by the addressees hereof and
by other persons to whom written permission to rely hereon is granted by us.
Respectfully,
<PAGE> 24
EXHIBIT B
Form of Opinion of Mayfield and Mayfield
[Letterhead of Mayfield and Mayfield]
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
c/o Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
The Bank of New York
101 Barclay Street
21st Floor
New York, New York 10286
Central Power and Light Company
P. O. Box 2121
Corpus Christi, Texas 78403
Re: Matagorda County Navigation District Number One Pollution
Control Revenue Refunding Bonds (Central Power and Light
Company Project) Series 1995 (the "Bonds")
Gentlemen:
At your request, and in our capacity as General Counsel for the
Matagorda County Navigation District Number One (the "Issuer") in
connection with the issuance of the Bonds, we have examined, to the extent
indicated and deemed necessary in order to render this opinion, the
Installment Payment Agreement, dated as of July 1, 1995 between the Issuer
and Central Power and Light Company (the "Company"), relating to the Bonds
(the "Agreement"); the resolutions authorizing the Bonds adopted by the
Issuer on March 2, 1974 and June 1, 1995 (collectively, the "Resolution");
the Indenture of Trust dated as of July 1, 1995, between the Issuer and
The Bank of New York, as Trustee, relating to the Bonds (the "Indenture");
the Official Statement dated June __, 1995 (the "Official Statement"),
issued by the Issuer, exclusive of the Appendices thereto; the Bond
Purchase Agreement dated June __, 1995, between the Issuer and the
Underwriters referred to therein relating to the Bonds (the "Bond Purchase
Agreement"); an opinion of even date of Messrs. Milbank, Tweed, Hadley &
McCloy, New York, New York and Vinson & Elkins L.L.P., Counsel to the
Company; and the opinions of even date of Messrs. McCall, Parkhurst &
Horton L.L.P., Dallas, Texas, Bond Counsel. Unless otherwise indicated
herein, capitalized terms used herein shall have the meanings given in the
Bond Purchase Agreement.
<PAGE> 25
IN OUR OPINION:
1. The Issuer is a duly constituted and validly existing
governmental agency and body politic and corporate of the State of Texas,
with full legal right, power and authority to finance the Project, to
issue, sell and deliver the Bonds pursuant to the Bond Purchase Agreement
and the Indenture, to execute and deliver the Bond Purchase Agreement, the
Agreement and the Indenture, to sign and deliver the Official Statement
and to carry out and consummate all other transactions contemplated by
each of the aforesaid instruments, and the Issuer has taken all necessary
action and has complied with all applicable provisions of law required to
duly authorize and make the Bond Purchase Agreement, the Agreement, the
Indenture and the Bonds the valid and binding obligations they purport to
be, including, without limitation, due adoption of the Resolution.
2. The Agreement, the Indenture and the Bond Purchase
Agreement have been duly authorized, executed and delivered by the Issuer
and each constitutes a legal, valid and binding agreement of the Issuer,
enforceable in accordance with its terms. The signing of the Official
Statement has been duly authorized, and the Official Statement has been
duly signed and delivered, by the Issuer.
3. To the best of our knowledge, none of the adoption of the
Resolution, the execution and delivery by the Issuer of the Agreement, the
Indenture, the Bond Purchase Agreement or the Bonds, the signing and
delivery of the Official Statement (and authorization of the distribution
of the Official Statement), nor compliance with the provisions thereof
(except the Official Statement) or the consummation of the transactions
contemplated thereby by the Issuer conflicts with or results in a breach
of any provisions of, or constitutes a default under, any indenture,
commitment, agreement or other instrument to which the Issuer is a party
or by which it is bound or under any provision of the Texas Constitution
or any existing law, rule, regulation, judgment, ordinance, order or
decree to which the Issuer (or any of its officers in their respective
capacities as such) is subject, or results in the creation of any lien,
charge or other security interest or incumbrance of any nature whatsoever
upon any of the property or assets of the Issuer, except as provided by
the Bonds and the Indenture.
4. There is no action, suit, proceeding or investigation, at
law or in equity, before or by any court, governmental agency or body or
arbitrator, pending or, to the best of our knowledge, threatened against
or affecting the Issuer wherein an unfavorable decision, ruling or finding
would adversely affect the transactions contemplated by the Bond Purchase
Agreement, the Agreement, the Indenture or the Official Statement, or
which, in any way, would adversely affect the validity or enforceability
of the Bonds, the Agreement, the Indenture or the Bond Purchase Agreement
or any agreement or instrument to which the Issuer is a party and which is
used or contemplated for use in the consummation of the transactions
contemplated by any of the foregoing or the exemption from taxation of the
Bonds as set forth in the approving opinion of McCall, Parkhurst & Horton
L.L.P.
<PAGE> 26
5. Nothing has come to our attention which leads us to believe
that the information set forth in the Official Statement with respect to
the Issuer and the transactions of the Issuer contemplated thereby
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
6. The Issuer has not granted a security interest in any
amounts payable to the Issuer under the Agreement, nor have any such
amounts been otherwise pledged or encumbered, to secure any outstanding
indebtedness of the Issuer other than the Bonds.
7. None of the proceedings or actions taken by the Issuer with
respect to any of the Bonds, the Indenture, the Agreement, the Preliminary
Official Statement, the Official Statement or the Bond Purchase Agreement
have been repealed, rescinded or revoked.
The opinions herein expressed are (A) subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally, and subject, as to enforceability, to general principals of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law), and (B) qualified to the extent that the indemnif-
ication and contribution provisions contained in the agreements covered by
such opinions may be limited by applicable securities laws and public
policy.
Respectfully yours,
MAYFIELD AND MAYFIELD
<PAGE> 27
EXHIBIT C
[Letterhead of Milbank, Tweed, Hadley & McCloy]
July __, 1995
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Re: Matagorda County Navigation District Number One (Texas)
__% Pollution Control Revenue Refunding Bonds
(Central Power and Light Company Project)
Series 1995
Dear Sirs:
We have acted as special counsel for Central Power and Light
Company (the "Company") in connection with the purchase by you from
Matagorda County Navigation District Number One (Texas) (the "Issuer")
pursuant to the Bond Purchase Agreement dated June __, 1995 (the "Purchase
Agreement"), of $100,635,000 aggregate principal amount of __% Pollution
Control Revenue Refunding Bonds (Central Power and Light Company Project)
Series 1995 (the "Bonds"), issued under and pursuant to an Indenture of
Trust, dated as of July 1, 1995 (the "Indenture"), between the Issuer and
The Bank of New York, as Trustee (the "Trustee"). Capitalized terms used
herein and not otherwise defined shall have the respective meanings
assigned to such terms in the Purchase Agreement.
<PAGE> 28
We have examined originals, or copies certified to our
satisfaction, of such corporate records of the Company, indentures,
agreements and other instruments, certificates of public officials,
certificates of officers and representatives of the Company and of the
Trustee and other documents as we have deemed it necessary to require as a
basis for the opinions hereinafter expressed. In such examination we have
assumed the genuineness of all signatures and the authenticity of all
documents submitted to us as originals and the conformity with the
originals of all documents submitted to us as copies. As to various
questions of fact material to such opinions we have, when relevant facts
were not independently established, relied upon certifications by officers
of the Company and other appropriate persons and statements contained in
the Official Statement, including Appendix A thereto (the "Official
Statement").
Based upon the foregoing, and having regard to legal
considerations which we deem relevant, we are of the opinion that:
1. The Company is a corporation validly existing and in
good standing under the laws of the State of Texas.
2. The Installment Agreement has been duly and validly
authorized by all necessary corporate action of the Company,
has been duly and validly executed and delivered by the
Company, and is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general
applicability relating to or affecting the enforcement of
creditors' rights generally and to the effects of general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law), including
without limitation (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedies
and (b) concepts of materiality, reasonableness, good faith and
fair dealing.
<PAGE> 29
3. The order dated June __, 1995 of the Securities and
Exchange Commission (the "Commission") under the Public Utility
Holding Company Act of 1935, as amended (the "1935 Act"),
granting and permitting to become effective the Form U-1
Application-Declaration, as amended, of the Company (File No.
70-8597) with respect to the Bonds and the Installment
Agreement has been entered and to the best of our knowledge is
in full force and effect. No further consent, approval,
authorization, or order of, or registration or filing with, any
Federal commission, court, governmental or regulatory body or
authority is necessary with respect to the Company for the
approval of the Resolution by the Company, the execution,
delivery and performance by the Company of the Installment
Agreement and the Letter of Representation, the approval by the
Company of the terms and provisions of the Purchase Agreement
or the consummation by the Company of the transactions
contemplated by the Installment Agreement, the Letter of
Representation, the Purchase Agreement and the Official
Statement.
4. The Company has duly approved the forms of the
Resolution, the Indenture and the Purchase Agreement; the
Purchase Agreement has been duly authorized and accepted by the
Company and the Letter of Representation has been duly
authorized, executed and delivered by the Company. The Company
has duly authorized the taking of all action necessary to carry
out and give effect to the transactions contemplated to be
performed by it by the Official Statement, the Installment
Agreement, the Letter of Representation and the Purchase
Agreement.
5. The Official Statement and any amendment or supplement
thereto and each document relating to the Company incorporated
by reference in the Official Statement, as such document was
originally filed pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act") (except for the financial
statements and schedules and other financial and statistical
data included or incorporated by reference therein, as to which
we express no opinion), appear on their face to be
appropriately responsive in all material respects to the
requirements of the Exchange Act and the Securities Act of
1933, as amended (the "Act"), and the rules and regulations of
the Commission thereunder applicable to prospectuses contained
in registration statements on Form S-3 as if the Act, rules and
regulations were applicable to the Official Statement.
6. The offer, sale and delivery of the Bonds to the public
are not required to be registered under the Act and no
qualification of the Indenture is required under the Trust
Indenture Act of 1939, as amended, in connection with such
transactions.
<PAGE> 30
7. Except as may be specifically set forth in the Official
Statement and except for the proceedings relating to the
opinion of the Attorney General of the State of Texas on the
Bonds and to the registration of the Bonds upon initial
issuance by the Comptroller of Public Accounts of the State of
Texas, to the best of our knowledge there is no action, suit,
proceeding or investigation, at law or in equity, before or by
any court, governmental agency or body or arbitrator, involving
the Company or the Facilities, pending or threatened (i) which
might reasonably be expected to materially and adversely affect
(x) the condition (financial or otherwise), results of
operations or properties of the Company or (y) the operation,
condition or feasibility of the Facilities or (ii) wherein any
unfavorable decision, ruling or finding would materially and
adversely affect (x) the transactions contemplated to be
performed by the Company by the Letter of Representation, the
Installment Agreement or the Official Statement or (y) the
validity or enforceability of the Bonds, the Installment
Agreement, the Indenture, the Purchase Agreement or the Letter
of Representation. We express no opinion as to any proceeding
to which the Issuer is a party and the Company is not.
8. The approval of the Resolution, the Indenture, and the
Purchase Agreement, the execution and delivery of the Letter of
Representation and the Installment Agreement, and compliance
with the provisions thereof or consummation of the transactions
contemplated thereby by the Company will not result in a
violation of any of the terms or provisions of any indenture,
mortgage, deed of trust, commitment, agreement or other
instrument, of which we have knowledge, to which the Company is
a party or by which it is bound, or any existing order of which
we have knowledge of any court or any Federal regulatory body
or administrative agency or other Federal governmental body
having jurisdiction over the Company or any of its properties,
nor will such action result in any violation of the provisions
of the Restated Articles of Incorporation or By-laws of the
Company or any Federal laws of the United States or to the best
of our knowledge result in the creation or imposition of any
lien, charge or other security interest or encumbrance of any
nature whatsoever upon any of the properties or assets of the
Company (except the lien, if any, created by the Installment
Agreement).
As to the financial statements included in the Official
Statement, we have made no examination of the Company's books of account
and we therefore express no opinion. As to the statements under the
headings "The Bonds" (other than under the sub-heading "Book-Entry Only
System"), "The Agreement", and "The Indenture" (except for the financial
<PAGE> 31
statements and schedules and other financial and statistical data included
or incorporated by reference therein, as to which we express no opinion),
we are of the opinion that the statements are accurate in all material
respects and do not omit any material fact necessary to make such
statements, in light of the circumstances under which they were made, not
misleading. As to other matters we have not undertaken to determine
independently the accuracy or completeness of the statements contained in
the Official Statement. We have, however, participated in the preparation
of the Official Statement and we have reviewed such of the corporate
records of the Company as we deemed advisable. None of the foregoing
disclosed to us any information which gave us reason to believe that the
Official Statement (except for the financial statements and other
financial and statistical data included or incorporated by reference
therein, as to which we express no opinion) contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
This opinion is subject to the interest on the Bonds being
excluded from gross income of holders thereof for Federal income tax
purposes, as to which you have received opinions of McCall, Parkhurst &
Horton L.L.P. and with respect to which we express no opinion.
In rendering the opinions hereinabove expressed, we have relied
upon the opinion of even date hereof, delivered to you concurrently
herewith, of Messrs. Vinson & Elkins L.L.P., Dallas, Texas, counsel for
the Company, as to all matters governed by Texas law, and as to such
matters, the opinions hereinabove expressed are subject to all
qualifications, limitations, assumptions and reliances, and other
considerations, therein set forth.
<PAGE> 32
We do not express any opinion as to matters governed by any
laws other than the laws of the State of New York, the Federal laws of the
United States of America and, to the extent hereinabove stated, in
reliance on the opinion of counsel for the Company, the laws of the State
of Texas.
Very truly yours,
RBW/GJF
<PAGE> 33
EXHIBIT D
FORM OF VINSON & ELKINS L.L.P. OPINION
July ___, 1995
Morgan Stanley & Co. Incorporated
Goldman Sachs & Co.
J.P. Morgan Securities Inc.
c/o Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
Central Power and Light Company
539 North Carancahua Street
Corpus Christi, Texas 78401
McCall, Parkhurst & Horton L.L.P.
717 North Harwood
Ninth Floor
Dallas, Texas 75201
Ladies and Gentlemen:
We have acted as special Texas counsel for Central Power and Light
Company, a Texas corporation (the "Company"), in connection with the
issuance and sale by the Matagorda County Navigation District Number One
(the "Issuer") of its Pollution Control Revenue Refunding Bonds (Central
Power and Light Company Project) Series 1995 (the "Refunding Bonds") to be
issued and sold pursuant to the terms of the Bond Purchase Agreement dated
June ___, 1995 (the "Purchase Agreement") between the Issuer and Morgan
Stanley & Co. Incorporated, Goldman, Sachs & Co. and J.P. Morgan
Securities Inc. (the "Underwriters"). This opinion is being furnished to
you pursuant to Paragraph 6(e)(v) of the Purchase Agreement. Capitalized
terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Purchase Agreement.
We have examined originals or certified copies of all such corporate
records of the Company, indentures, agreements and other instruments,
certificates of public officials, certificates of officers and
representatives of the Company and other documents that we considered
necessary and proper in order to render the opinions hereinafter
expressed. In our examination we have assumed the genuineness of all
signatures, the accuracy and completeness of all documents submitted to
us, the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as
certified or photostatic copies. As to factual matters material to the
opinions herein stated, we have relied to the extent we deem such reliance
proper upon certificates given or representations made by public officials
and duly authorized representatives of the Company.
<PAGE> 34
Based upon the foregoing, and subject to the qualifications
hereinafter set forth, we are of the opinion that:
1. The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Texas.
2. The Company is a public utility (as defined in the Public
Utility Regulatory Act ("PURA") of the State of Texas), duly authorized by
its Restated Articles of Incorporation, filed with the Secretary of State
of the State of Texas (the "Texas Secretary of State") on January 30,
1990, as amended through the date hereof, to conduct the business of
generating and supplying gas, electric light and motor power to the
public. The Company is authorized under the laws of the State of Texas to
operate as an electric utility (as defined in PURA) in the areas of the
State of Texas in which it currently does so, except where the failure to
be so authorized could not reasonably be expected to result in a material
adverse change in the financial condition, results in operations or
business of the Company (a "Material Adverse Effect").
3. The Company has valid and subsisting municipal franchises,
licenses or permits authorizing it to operate as an electric utility in
all of the municipalities listed on Exhibit A hereto (which municipalities
the Company has certified to us are all the municipalities served by it
from which the Company derives a material amount of electric operating
revenues) wherein such a franchise, license or permit is required.
4. Except as set forth in the Official Statement, including
Appendix A thereto and the documents incorporated by reference in Appendix
A, there is no litigation or other legal proceedings applying the laws of
the State of Texas pending to which the Company is a party or to which the
property of the Company or the Facilities is subject that (i) could
reasonably be expected to result in a Material Adverse Effect or
(ii) wherein any unfavorable decision, ruling or finding might reasonably
be expected to (x) adversely affect the transactions contemplated to be
performed by the Company by the Letter of Representation, by the Purchase
Agreement, by the Installment Agreement or by the Official Statement or
(y) adversely affect the validity of the Refunding Bonds, the Installment
Agreement, the Indenture, the Resolution, the Purchase Agreement, or the
Letter of Representation, and, to the best of our knowledge, no such
litigation or proceedings have been threatened.
5. Each of the Installment Agreement and the Letter of
Representation has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms.
6. The terms of the Purchase Agreement have been approved by the
Company.
7. No approval, authorization, consent, certificate or order of
any commission or regulatory authority of the State of Texas (other than
the opinion of the Attorney General of the State of Texas on the Refunding
Bonds, the registration of the Refunding Bonds upon initial issuance by
<PAGE> 35
the Comptroller of Public Accounts of the State of Texas, the
certification of the appropriate governmental agencies that the Facilities
are in furtherance of the purpose of abating or controlling atmospheric
pollutants or contaminants or water pollution or in connection with the
"blue sky" or securities laws or regulations of the State of Texas) is
necessary with respect to the execution, delivery and performance by the
Company of the Letter of Representation, the Installment Agreement, or the
consummation by the Company of the transactions contemplated by the Letter
of Representation, the Installment Agreement, the Purchase Agreement or
the Official Statement.
Before rendering the opinions set forth herein, in our role as
special Texas counsel to the Company in connection with the offering of
the Refunding Bonds, we reviewed the Official Statement; however, we did
not participate in its preparation. Although we have not independently
verified, and do not warrant or pass upon the accuracy or completeness of
the statements contained in the Official Statement (relying, with respect
to materiality, to the extent we deem such reliance proper, upon the
opinions of officers and other representatives of the Company) no facts
have come to our attention as a result of the foregoing review which lead
us to believe that the Official Statement, as amended and supplemented
through the date hereof, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. Notwithstanding the
foregoing, we express no belief as to (a) the financial statements and
schedules and other financial and statistical data included in the
Official Statement or any amendment or supplement thereto or
(b) regulatory and other legal matters not governed by the laws of the
State of Texas.
With respect to the opinions contained in paragraph 1. above
regarding the valid existence of the Company, we have relied solely upon
(i) certificates provided by officials of the State of Texas or
(ii) telegraphic or oral confirmation therefrom where such certificates
were unavailable as of the date hereof.
With respect to the opinions contained in paragraph 4. above, we have
relied solely upon certificates of officers of the Company and searches as
of recent dates of our files, the Company's records and court records of
the following courts: The state district courts for Dallas County, Travis
County, Matagorda County and Nueces County, Texas; and the federal
district courts for the Southern District (Corpus Christi and Galveston
Divisions) and the Northern District (Dallas Division) of Texas.
The opinions contained in paragraph 5. above to the extent such
opinions relate to enforceability are limited by the following:
(i) principles of equity which may limit the availability of certain
equitable remedies; and (ii) bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium, and other laws applicable to creditors'
rights or the collection of debtors' obligations generally.
<PAGE> 36
We are licensed to practice law in the State of Texas and do not hold
ourselves out to be experts on the laws of any jurisdiction other than the
State of Texas. We express no opinion with regard to any matter which may
be governed by the laws of any state or other jurisdiction (including the
United States of America) other than the State of Texas.
This opinion is limited to the matters stated herein and no opinion
is implied or may be inferred beyond the matters herein expressly stated.
Except as provided otherwise in a written consent signed by us, the
opinions expressed herein are for the sole benefit of, and may only be
relied upon by, you, your counsel and Milbank, Tweed, Hadley & McCloy,
special counsel for the Company, and the opinions herein expressed are not
to be used, circulated, quoted or otherwise referred to in any manner
other than as specifically provided in the Purchase Agreement and the
Indenture, or by or to any other person.
Very truly yours,
<PAGE> 37
EXHIBIT A
- ---------
MUNICIPALITIES
Alice
Bay City
Beeville
Corpus Christi
Del Rio
Eagle Pass
Edinburg
Harlingen
Ingleside
Kingsville
Laredo
McAllen
Mission
Pharr
Rockport
Uvalde
Victoria
Weslaco
<PAGE> 38
EXHIBIT E
Letterhead of Sidley & Austin
July __, 1995
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
J. P. Morgan Securities Inc.
Corporate Finance - 33rd Floor
60 Wall Street
New York, New York 10260
Re: Matagorda County Navigation District Number One
__% Pollution Control Revenue Refunding Bonds
(Central Power and Light Company Project)
Series 1995 (the "Refunding Bonds")
Gentlemen:
We have acted as your counsel in connection with the Bond
Purchase Agreement dated June __, 1995 (the "Purchase Agreement") between
you, as underwriters, and Matagorda County Navigation District Number One
(the "Issuer"), your purchase pursuant thereto of $100,635,000 aggregate
principal amount of the Refunding Bonds and the Letter of Representation
dated June __, 1995 (the "Letter of Representation") between you and
Central Power and Light Company, a Texas corporation (the "Company").
Capitalized terms not defined herein have the meanings specified in the
Purchase Agreement.
As your counsel, we have, among other things, participated with
officers and representatives of the Company, including its counsel and
independent public accountants, and your representatives in the
preparation of the Official Statement dated July __, 1995 (the "Official
Statement") relating to the Refunding Bonds.
Pursuant to the requirement of Section 6(e)(vi) of the Purchase
Agreement, this will advise you that in our opinion:
<PAGE> 39
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Texas.
2. The terms of the Purchase Agreement have been approved
by the Company, and the Letter of Representation has been duly
authorized, executed and delivered by the Company.
3. The Installment Payment Agreement dated as of July _,
1995 (the "Installment Agreement") between the Company and the
Issuer has been duly authorized, executed and delivered by the
Company, and (assuming that the Installment Agreement has been
duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, the Issuer) constitutes a valid
and binding obligation of the Company enforceable against the
Company in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the
enforcement of creditors' rights generally and to the effects of
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law).
4. The Refunding Bonds are exempted securities under
Section 3(a)(2) of the Securities Act of 1933, as amended (the
"Act"), to the extent provided in the Act, and the offer and
sale thereof do not require registration under the Act or
qualification of the Indenture under the Trust Indenture Act of
1939, as amended.
5. The statements in the Official Statement under the
headings "The Bonds" (other than under the subheading "The Bonds
- Book-Entry Only System"), "The Agreement" and "The Indenture,"
and any other statements therein which purport to describe or
summarize the Refunding Bonds, the Indenture and the Installment
Agreement, (except for the financial statements and schedules
and other financial and statistical data included or
incorporated by reference therein, as to which we express no
belief), insofar as such statements constitute summaries of the
provisions of the documents or securities referred to therein,
are accurate in all material respects.
During the course of the preparation of the Official Statement,
we have participated in conferences with your representatives and officers
and representatives of the Company, including its counsel and independent
public accountants, during the course of which we discussed the affairs of
the Company and the contents of the Official Statement. We have also
reviewed the documents incorporated by reference in Appendix A to the
Official Statement. Except as stated in paragraph 5 above, we have not
independently checked the accuracy or completeness of, or otherwise
verified, and accordingly are not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Official Statement; and we have relied as to
<PAGE> 40
materiality, to a large extent, upon the judgment of officers and
representatives of the Company. However, as a result of such
participation and review, nothing has come to our attention which causes
us to believe that the Official Statement, including the aforementioned
documents incorporated therein by reference, (other than the financial
statements, financial data, statistical data and supporting schedules
included or incorporated by reference therein, as to which we express no
belief), includes any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
We have reviewed the opinions dated the date hereof pursuant to
the Purchase Agreement by Mayfield and Mayfield, counsel for the Issuer;
McCall, Parkhurst & Horton L.L.P., Bond Counsel; Milbank, Tweed, Hadley &
McCloy, special counsel for the Company; and Vinson & Elkins L.L.P.,
counsel for the Company in the State of Texas. We believe that you are
justified in relying on such opinions. We have also examined the letter
to you dated the date hereof from Arthur Andersen LLP relating to the
financial statements and schedules and certain other matters with respect
to the Company. We participated in discussions with representatives of
Arthur Andersen LLP and with your representatives relating to the form of
such letter, and we believe that the letter delivered to you is
substantially in the agreed form.
For the purpose of rendering the foregoing opinions, we have
relied, as to various questions of fact material to such opinions, upon
the representations made in the Purchase Agreement and in the Letter of
Representation and upon certificates of officers of the Company and the
Issuer. We also have examined originals, or copies of originals certified
to our satisfaction, of such agreements, documents, certificates and other
statements of government officials and other instruments, have examined
such questions of law and have satisfied ourselves as to such matters of
fact as we have considered relevant and necessary as a basis for this
opinion. We have assumed the authenticity of all documents submitted to
us as originals, the genuineness of all signatures, the legal capacity of
all natural persons and the conformity with the original documents of any
copies thereof submitted to us for our examination.
In rendering the opinions hereinabove expressed, we have relied
exclusively with your permission upon the aforesaid opinions of Mayfield &
Mayfield, Vinson & Elkins L.L.P. and McCall, Parkhurst & Horton L.L.P., as
to all matters governed by Texas law, and, as to all such matters, the
opinions hereinabove expressed are subject to all the qualifications,
limitations, assumptions, reliances and other considerations therein set
forth.
This opinion is limited to the laws of the United States of
America and the State of New York and, to the extent stated in the
preceding paragraph, is given in reliance on the opinions therein
mentioned.
<PAGE> 41
This opinion assumes that interest on the Refunding Bonds is
excludable from gross income of holders thereof for federal income tax
purposes to the extent described in the Official Statement, as to which
you are receiving the opinion of McCall, Parkhurst & Horton L.L.P. and
with respect to which we express no opinion.
This opinion is being delivered solely for the benefit of the
persons to whom it is addressed; accordingly, it may not be quoted, filed
with any governmental authority or other regulatory agency or otherwise
circulated or utilized for any other purpose without our prior written
consent.
Very truly yours,
<PAGE> 42
EXHIBIT F
Form of letter of Arthur Andersen LLP,
independent public accountants to the Company.
The letter will confirm that with respect to the Company that
they are independent public accountants within the meaning of Rule 101 of
the Code of Professional Ethics of the American Institute of Certified
Public Accountants and as would be required under the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
thereunder were the Securities Act, rules and regulations applicable to
the Official Statement, and shall be to the effect that:
(i) in their opinion, the financial statements of the
Company examined by them and incorporated by reference in the
Official Statement comply as to form in all material respects
with the accounting requirements of the Securities Act, and the
published rules and regulations thereunder which would be
applicable if the issuance of the securities were subject to the
accounting requirements for registration statements on Form S-3
under the Securities Act;
(ii) on the basis of a reading of the 1995 minutes of the
meetings of the stockholder and the Board of Directors of the
Company as set forth in the minute books through a specified
date not more than five business days prior to the date of the
letter, a reading of the unaudited financial statements of the
Company included or incorporated by reference in the Official
Statement and also the latest available financial statements of
the Company, and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters
(which procedures do not constitute an examination made in
accordance with generally accepted auditing standards), nothing
came to their attention that caused them to believe that:
(1) if any unaudited financial statements of the
Company are included by incorporation in the Official
Statement, that they do not comply as to form in all
material respects with the applicable accounting
requirements of the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and
the published rules, regulations and releases under such
acts or said financial statements are not fairly presented
in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of
the audited financial statements included by incorporation
in the Official Statement,
<PAGE> 43
(2) if any unaudited amounts of total operating
revenue and net income of the Company are set forth or
incorporated in the Official Statement, including amounts
set forth under "Selected Financial Information" or a
similar caption, that they have not been prepared in
conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of
the audited financial statements included by incorporation
in the Official Statement,
(3) there was any decrease, at the date of the latest
available financial statements, in the net assets of the
Company (other than decreases resulting from regular
dividends on preferred or common stock) as compared to the
net assets as shown on the December 31, 1994 balance sheet
included by incorporation in the Official Statement,
(4) there has been any decrease in operating
revenues, operating income or net income for common stock
or ratio of earnings to fixed charges for the twelve months
ended on the date of the latest available financial
statements of the Company, as compared with the audited
amounts thereof and such ratio for the twelve months ended
December 31, 1994, set forth in the income statement of the
Company for the twelve months ended that date identified
elsewhere in such letter, except in all instances as set
forth or incorporated in or contemplated by the Official
Statement or, except as disclosed in such letter, or
(5) there has been during the period from the date of
the latest available financial statements through a
specified date not more than five business days prior to
the date of their letter, (a) any decrease in the net
assets of the Company (other than decreases resulting from
regular dividends on preferred or common stock) or (b) any
decrease in operating revenues, operating income or net
income for common stock as compared with the same prior
year period for the Company, except in all instances as set
forth or incorporated in or contemplated by the Official
Statement or, except as disclosed in such letter; and
(iii) they have recalculated the ratios contained in
"Ratio of Earnings to Fixed Charges" and "Selected Financial
Information" or similar captions in the Official Statement from
dollar amounts derived directly from the general accounting
records of the Company or from schedules prepared by the Company
or derived directly form such records or schedules by analysis
or computation, and have found the calculation of such ratios to
be mathematically correct and such ratios to be in agreement,
except in both cases as otherwise stated in such letter.
<PAGE> 1
EXHIBIT 4
---------
D R A F T
APPENDIX A
CENTRAL POWER AND LIGHT COMPANY
LETTER OF REPRESENTATION
$100,635,000
Matagorda County Navigation District Number One
Pollution Control Revenue Refunding Bonds
(Central Power and Light Company Project)
Series 1995
June __, 1995
Matagorda County Navigation District Number One
209 Fifth Street
Palacios, Texas 77465
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
J.P. Morgan Securities Inc.
Corporate Finance-33rd Floor
60 Wall Street
New York, New York 10260
Dear Sirs:
1. Introduction and Background. Pursuant to a Bond Purchase
Agreement of even date herewith (the "Purchase Agreement") between
Matagorda County Navigation District Number One (the "Issuer") and Morgan
Stanley & Co. Incorporated, Goldman, Sachs & Co. and J.P. Morgan
Securities Inc. (the "Underwriters"), the Issuer has agreed to sell to the
Underwriters, and the Underwriters have jointly and severally agreed to
purchase from the Issuer and to offer for sale the bonds described above
(the "Refunding Bonds"), by means of the Final Official Statement of even
date herewith, as it may be amended or supplemented with the consent of
the Underwriters, the Issuer and Central Power and Light Company, a Texas
corporation (the "Company"), describing the definitive terms and
<PAGE> 2
provisions of the Refunding Bonds and containing in Appendix A thereto
information concerning the Company, which Appendix A, including all
documents incorporated therein by reference, shall for all purposes hereof
be deemed to be a part of the Official Statement, all on terms approved by
the Company. Unless otherwise defined herein, all capitalized terms used
herein shall have the meanings assigned thereto in the Purchase Agreement.
The Company hereby (i) approves the terms and provisions of the
Purchase Agreement and of the Refunding Bonds, (ii) requests the Issuer to
issue and sell the Refunding Bonds and (iii) acknowledges that the Issuer
and the Underwriters are entering into the Purchase Agreement and agreeing
to sell and purchase the Refunding Bonds on the terms and subject to the
conditions therein set forth, in reliance on the representations,
covenants and agreements of the Company contained in this Letter of
Representation.
2. Representations by the Company. The Company makes the
following representations and warranties, all of which shall survive the
termination of the Purchase Agreement and the sale and delivery of the
Refunding Bonds to the Underwriters.
(a) That the Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas, with
full corporate power and authority to engage in the business and
activities conducted by it as described in the Official Statement and,
subject to the opinion of the Attorney General of the State of Texas
approving the Refunding Bonds and the registration of the Refunding Bonds
upon initial issue by the Comptroller of Public Accounts of the State of
Texas, the receipt of which are expressly made a condition to the
Company's obligations under the Installment Agreement, has full power and
authority to execute and deliver and to carry out and perform its
obligations under this Letter of Representation and the Installment
Agreement.
(b) That the Company has duly approved the forms of the
Resolution, the Indenture and the Purchase Agreement. The Installment
Agreement has been duly authorized, executed and delivered by the Company
and is a legal, valid and binding obligation of the Company enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally and to the effect of general
principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law). The Company has duly authorized the
taking of all action necessary to carry out and give effect to the
transactions contemplated to be performed by it by the Official Statement,
the Installment Agreement, the Purchase Agreement and this Letter of
Representation. The Commission has issued an order (the "Order") under
the 1935 Act authorizing the Company's obligations with respect to this
Letter of Representation, the Installment Agreement, the Refunding Bonds
and the Purchase Agreement.
(c) That this Letter of Representation has been duly executed
and delivered by the Company.
<PAGE> 3
(d) The approval of the Resolution, the Indenture and the
Purchase Agreement, the execution and delivery of this Letter of
Representation and the Installment Agreement and compliance with the
provisions of such instruments and consummation of the transactions
contemplated hereby and thereby, do not and will not conflict with,
violate or result in a breach of any provision of or constitute a default
(or an event which with notice or passage of time, or both, would
constitute a default) on the part of the Company under its Restated
Articles of Incorporation or By-laws, under any indenture, commitment,
agreement or other instrument to which the Company is a party or by which
it is bound or under any existing law, rule, regulation, judgment,
ordinance, order or decree to which the Company is subject; nor will such
approval, execution, delivery, compliance or consummation result in the
creation or imposition of any lien, charge or other security interest or
encumbrance of any nature whatsoever upon any of the property or assets of
the Company (except the lien, if any, created by the Installment
Agreement).
(e) No consent, approval, authorization or order of any court or
governmental agency or body is required in respect of the approval of the
Resolution by the Company, the approval of the terms of the Purchase
Agreement, the valid execution, delivery and performance by the Company of
this Letter of Representation and the Installment Agreement or the
consummation by the Company of the transactions contemplated by the
Purchase Agreement, this Letter of Representation, the Installment
Agreement and the Official Statement, except (i) the Order, (ii) the
approving opinion of the Attorney General of the State of Texas relating
to the Refunding Bonds, (iii) the registration of the Refunding Bonds upon
initial issuance by the Comptroller of Public Accounts of the State of
Texas and (iv) such as may be required under securities or Blue Sky laws
of any jurisdiction in connection with the offering and sale of the
Refunding Bonds.
(f) That the information with respect to it (including Appendix
A) and the Facilities and the use of the proceeds from the issuance and
sale of the Refunding Bonds included in the Indenture, the Resolution, the
Purchase Agreement and the Refunding Bonds and the information (other than
under the captions "The Issuer", "The Bonds - Book-Entry Only System",
"Tax Matters" and "Underwriting") contained or incorporated by reference
in the Official Statement (including any amendments or supplements
thereto) is true and correct in all material respects and does not
include, and the Preliminary Official Statement as of its date did not
include, any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading in
light of the circumstances under which they were made; that it has
approved the Official Statement and consents to the use thereof by the
Underwriters in connection with the offering of the Refunding Bonds; that
the Official Statement is deemed final by the Company for purposes of Rule
15c2-12 under the Exchange Act; and that the financial statements relating
to it included or incorporated by reference in the Official Statement
(including Appendix A thereto) and the Preliminary Official Statement
(including Appendix A thereto) have been prepared in accordance with
generally accepted accounting principles applied on a consistent
<PAGE> 4
basis (except as otherwise disclosed in the notes to such financial
statements) and fairly present its financial condition and the results of
its operations at the dates and for the respective periods indicated
therein.
(g) That any document, certificate or other written statement
furnished by the Company to the Underwriters or McCall, Parkhurst & Horton
L.L.P., Bond Counsel, or Sidley & Austin, counsel to the Underwriters,
relating to the Company, the Facilities or the Refunding Bonds is true and
correct in all material respects and does not or will not, as the case may
be, include any 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 under
which they were made.
(h) Except as may be specifically set forth in the Official
Statement and except for the proceedings relating to the opinion of the
Attorney General of the State of Texas on the Refunding Bonds and to the
registration of the Refunding Bonds upon initial issuance by the
Comptroller of Public Accounts of the State of Texas, there is no action,
suit, proceeding or investigation, at law or in equity, before or by any
court, governmental agency or body or arbitrator, involving the Company or
the Facilities, pending or, to the best knowledge of the Company,
threatened (i) which might reasonably be expected to (x) materially and
adversely affect the condition (financial or otherwise), results of
operations, business or properties of the Company or (y) materially and
adversely affect the operation, condition or feasibility of the Facilities
or (ii) wherein any unfavorable decision, ruling or finding might
reasonably be expected to (x) adversely affect the transactions
contemplated to be performed by the Company hereby, by the Purchase
Agreement, by the Installment Agreement or by the Official Statement or
(y) adversely affect the validity or enforceability of the Refunding
Bonds, the Installment Agreement, the Indenture, the Resolution, the
Purchase Agreement or this Letter of Representation or any agreement or
instrument to which the Company is a party and which is used or
contemplated for use in the consummation of the transactions contemplated
hereby or thereby.
(i) Arthur Andersen LLP, are independent public accountants with
respect to the Company, as would be required under the Securities Act and
the rules and regulations thereunder if the Securities Act and the rules
and regulations thereunder were applicable to the Official Statement.
(j) That (i) the Facilities consist of either land or property
of a character subject to depreciation for federal income tax purposes and
will be used to abate or control air and water pollution or contamination
by removing, altering, disposing or storing pollutants, contaminants,
wastes or heat or to collect, store or treat sewage or solid wastes prior
to final disposal thereof; (ii) the Facilities will not result in an
increase in production or capacity, production efficiencies, the
production of a by-product, the extension of the useful life of any
manufacturing or production facility or any part thereof at the Plant or
other property which is not part of the Plant, which would jeopardize the
<PAGE> 5
exclusion of the interest on the Refunding Bonds from the gross income of
the recipients thereof for federal income tax purposes, and none of the
Facilities would have been installed but for the purpose of disposing of
sewage or solid waste or controlling pollution; and (iii) all other
information supplied by the Company in connection with the transactions
contemplated hereby and by the Official Statement with respect to the
exclusion from gross income for federal income tax purposes of interest on
the Refunding Bonds is correct and complete.
(k) That all required certificates that the Facilities (other
than the solid waste disposal facilities that require no certifications),
as designed, are in furtherance of the purpose of abating or controlling
air or water pollution have been obtained from the Texas Air Control Board
and the Texas Department of Water Resources, respectively, and remain in
full force and effect.
(l) That the Company is eligible as an issuer to file
registration statements on Form S-3 under the Securities Act, and each
document filed by it under the Exchange Act and incorporated (or to be
incorporated) in the Preliminary Official Statement or the Official
Statement by reference complied when so filed (or will comply when so
filed) in all material respects with the act under which it was so filed,
and, during the period that an Official Statement is required to be
delivered, no such document hereafter so filed will include any 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.
(m) That there has been no material adverse change in the
Company's financial condition or any adverse development concerning the
Company's business and assets which would reasonably be expected to result
in a material adverse change in its prospective financial condition or
results of operations from that shown in the Official Statement.
(n) That no event of default or event which, with notice or
passage of time, or both, would constitute an event of default or a
default under any agreement or instrument to which the Company is a party
or by which it is or may be bound or to which any of its property or
assets is or may be subject and which would materially and adversely
affect the transactions contemplated by the Installment Agreement, the
Official Statement, the Purchase Agreement or this Letter of
Representation has occurred and is continuing.
3. Covenants of the Company. The Company will:
(a) Notify the Underwriters of any material adverse change in
its business, properties or financial condition occurring before Closing
or within three months thereafter which would require revision of the
information in the Official Statement in order to make the representations
set forth in Section 2(f) hereof true and correct.
<PAGE> 6
(b) Refrain from taking any action, or from permitting any
action, with regard to which it may exercise control, to be taken, that
(i) would in any way cause the proceeds from the sale of the Refunding
Bonds to be applied in a manner other than as provided in the Resolution,
the Installment Agreement, the Indenture and discussed in the Official
Statement, (ii) would result in the loss of the exclusion from gross
income for federal income tax purposes of interest on the Refunding Bonds,
or (iii) it has reason to believe will adversely jeopardize the continued
validity and effectiveness of such exemption.
(c) Deliver to the Underwriters upon request copies of documents
of the Company incorporated by reference into the Official Statement and
all documents to which Section 3(d) hereof refers at such times and in
such quantities as are necessary to enable the Underwriters to satisfy
requests for such information, and enable the Underwriters to make such
documents available for inspection, as described in the Official
Statement.
(d) During the period commencing on the date hereof and ending
upon completion of the distribution of the Refunding Bonds (but in no
event later than 90 days after the date of the Closing), the Company will,
promptly after filing any document with the Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act, furnish a copy thereof to the
Underwriters and the Issuer.
4. Indemnification; Contribution. (a) The Company agrees to
indemnify and hold harmless the Issuer, its officials, directors, members,
officers, employees and agents and each of the Underwriters, their
respective officers, directors, officials, employees and each person, if
any, who controls any of the Underwriters within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (collectively,
"Indemnified Parties") from and against any and all losses, claims,
damages or liabilities to which such Indemnified Party may become subject
under the Securities Act, the Exchange Act or the common law or otherwise,
and to reimburse each such Indemnified Party for any reasonable legal or
other expenses (including reasonable counsel fees) incurred by it or them
in connection with defending against any such losses, claims, damages or
liabilities, arising out of or in connection with the offering and sale of
the Refunding Bonds (i) on the ground that the Preliminary Official
Statement or the Final Official Statement (except with respect to the
Issuer for the information relating to the Issuer under the caption "The
Issuer" and with respect to any such Underwriter for information under the
caption "Underwriting" and any information furnished in writing by such
Underwriter specifically for use therein) includes any untrue statement or
an alleged untrue statement of material fact or any omission or an alleged
omission to state a material fact necessary to make the statements therein
not misleading in light of the circumstances under which they were made,
or (ii) arising by virtue of the failure to register the Refunding Bonds
under the Securities Act or to qualify the Indenture under the Trust Act.
<PAGE> 7
(b) By acceptance hereof each of the Underwriters agrees to
indemnify and hold harmless the Issuer, its officers, directors, employees
and agents and the Company, its officers, directors and employees, and
each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
(collectively, "Indemnified Parties"), from and against any and all
losses, claims, damages or liabilities to which such Indemnified Party may
become subject under the Securities Act, the Exchange Act or the common
law or otherwise, and to reimburse each such Indemnified Party for any
reasonable legal or other expenses (including reasonable counsel fees)
incurred by it or them in connection with defending against any such
losses, claims, damages or liabilities, arising out of or in connection
with the offering and sale of the Refunding Bonds on the grounds that the
information under the caption "Underwriting" or the information furnished
by such Underwriter in writing specifically for use in the Preliminary
Official Statement or the Final Official Statement includes any untrue
statement or alleged untrue statement of a material fact or an omission or
an alleged omission to state a material fact necessary to make the
statements therein not misleading in light of the circumstances under
which they were made.
(c) Promptly after the commencement of any action against an
Indemnified Party hereunder in respect of which indemnity is to be sought
against the Company or any Underwriter, as the case may be (the
"Indemnifying Party"), such Indemnified Party will notify the Indemnifying
Party in writing of such action and the Indemnifying Party may participate
in, and, to the extent that it may wish, jointly with any other
Indemnifying Party similarly notified, assume the defense thereof,
including the employment of counsel and the payment of all expenses; but
the omission so to notify the Indemnifying Party will not relieve the
Indemnifying Party from any liability which it may have to any Indemnified
Party otherwise than hereunder. The Indemnifying Party shall not be
liable for any settlement of any such action effected without its consent,
but if settled with the consent of the Indemnifying Party or if there is a
final judgment for the plaintiff in any such action, the Indemnifying
Party will indemnify and hold harmless any Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
The indemnity agreements contained herein shall include reimbursement for
expenses reasonably incurred by an Indemnified Party in investigating the
claim and in defending it if the Indemnifying Party declines to assume the
defense and shall survive termination of the Purchase Agreement, this
Letter of Representation and the delivery of the Refunding Bonds.
(d) If the indemnification provided for in this Section 4 is
unavailable to or insufficient to hold harmless an Indemnified Party under
Subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then the
Company 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 Company on the one hand and the
Indemnified Party on the other in connection with the statements or
omissions or other matters which resulted in such losses, claims, damages
and liabilities (or actions in respect thereof), as well as any other
<PAGE> 8
relevant equitable considerations. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one
hand or the Indemnified Party on the other and each such party's relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Subsection (d) were determined solely by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this
Subsection (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 in this Subsection (d) shall be deemed
to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such
action or claim. No Indemnified Party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from the Company if the Company is
not guilty of such fraudulent misrepresentation. The obligations of the
Company under this Subsection (d) shall be in addition to any liability
which the Company may have otherwise than under this Section 4.
5. Payment of Costs and Expenses. All expenses and costs of
the authorization, issuance, sale and delivery of the Refunding Bonds
(including, without limitation: the preparation and furnishing to the
Underwriters of the Preliminary Official Statement and the Official
Statement and any amendments or supplements thereto, and the preparation
and execution of the Indenture, the Refunding Bonds, the Installment
Agreement, the Resolution, the Letter of Representation and the Purchase
Agreement; rating agency fees, the issuance and closing fees of the
Issuer, the fees and disbursements of Bond Counsel, Counsel to the Issuer,
the financial advisor to the Issuer and Counsel to the Company; the
expenses, including the legal fees of Counsel to the Underwriters incurred
in connection with qualifying the Refunding Bonds for sale under the
securities laws of various jurisdictions and preparing Blue Sky memoranda)
shall be paid by the Company. In addition, the Company shall pay to the
Underwriters on the Closing Date by corporate check the fees of the
Underwriters in connection with the offering of the Refunding Bonds in an
amount equal to ____% of the principal amount of the Refunding Bonds.
Each Underwriter will pay its own costs and expenses, including
advertising and legal expenses (except as noted in this Section 5).
6. Execution in Counterparts. This Letter of Representation
may be executed and accepted in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and any of
the parties hereto may execute and accept this Letter of Representation by
signing any such counterpart.
<PAGE> 9
7. Notices. All notices, requests, demands and formal actions
hereunder will be in writing mailed, telegraphed or delivered to:
The Underwriters:
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
Attention: Municipal Department
The Issuer:
Matagorda County
Navigation District Number One
209 Fifth Street
Palacios, Texas 77465
Attention: General Counsel and Manager
The Company:
c/o Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
Attention: Director - Finance
8. Successors. This Letter of Representation will inure to the
benefit of and be binding upon the parties and their successors and each
other Indemnified Party and will not confer any rights upon any other
person. The term "successor" shall not include any holder of any
Refunding Bonds merely by virtue of such holding.
9. Survival of Agreements and Representations. The indemnity
and other agreements contained and the representations and warranties of
the Company set forth in this Letter of Representation shall remain
operative and in full force and effect regardless of (i) any termination
of the Purchase Agreement, (ii) any investigation made by or on behalf of
the Underwriters or any person controlling the Underwriters or by or on
behalf of the Company, its directors or officers or any person controlling
the Company, and (iii) sale and delivery of the Refunding Bonds.
<PAGE> 10
10. Governing Law. This Letter of Representation shall be
governed by and construed in accordance with the laws of the State of New
York, except that the rights, privileges, duties and immunities of the
Issuer shall be governed by the laws of the State of Texas.
Very truly yours,
CENTRAL POWER AND LIGHT COMPANY
By:____________________________
Name:
Title:
Accepted:
MATAGORDA COUNTY NAVIGATION
DISTRICT NUMBER ONE
By:________________________
Name:
Chairman
Accepted:
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
By: Morgan Stanley & Co. Incorporated
By:___________________________________
Francis J. Sweeney
Principal
<PAGE> 1
EXHIBIT 5
---------
D R A F T
*****************************************************
* PRELIMINARY OFFICIAL STATEMENT DATED MAY 31, 1995 *
*****************************************************
NEW ISSUE -- BOOK-ENTRY ONLY
$100,635,000
Matagorda County Navigation
District Number One (Texas)
__% Pollution Control Revenue Refunding Bonds
(Central Power and Light Company Project)
Series 1995
Dated: July 1, 1995 Due: July 1,
2028
The Bonds are limited obligations of the Issuer and do not constitute an
indebtedness, or a charge against the general credit or taxing powers, of
the Issuer or the State of Texas. The Bonds are payable from, and secured
by a pledge of, the revenues to be received by the Issuer under an
Installment Payment Agreement from
CENTRAL POWER AND LIGHT COMPANY
_______________
The Bonds will be issuable only as fully registered bonds
without coupons and when initially issued are expected to be registered in
the name of Cede & Co., as nominee of The Depository Trust Company, New
York, New York ("DTC"). DTC will act as securities depositary for the
Bonds. Purchases of beneficial ownership interests in the Bonds will be
made in book-entry form only in denominations of $5,000 or any integral
multiple thereof. Purchasers of beneficial ownership interests will not
receive certificates representing their interests in the Bonds. Principal
of, premium, if any, and interest on the Bonds (payable on January 1 and
July 1, commencing January 1, 1996), will be paid in the manner described
herein. See "THE BONDS--Book-Entry Only System" herein. The Bonds are
subject to redemption prior to maturity as described herein.
__________________
MBIA
Payment of the principal and interest on the Bonds when due
will be insured by a municipal bond insurance policy to be issued by MBIA
Insurance Corporation simultaneously with the delivery of the Bonds. See
"The MBIA Insurance Corporation Insurance Policy" herein.
_______________
<PAGE> 2
Price 100%
(Plus accrued interest from July 1, 1995)
_______________
In the opinion of Bond Counsel, interest on the Bonds will be
excludable from gross income for federal income tax purposes under
existing statutes, regulations, rulings and court decisions, except as
explained under "TAX MATTERS" herein, and will not be treated as a
preference item in calculating the alternative minimum tax imposed on
individuals and corporations. For further information, see "TAX MATTERS".
_______________
The Bonds are offered, subject to prior sale, when, as and if
issued by the Issuer and accepted by the Underwriters, subject to the
approval of legality by the Attorney General of the State of Texas and
McCall, Parkhurst & Horton, L.L.P., Bond Counsel, the approval of certain
other legal matters by Sidley & Austin, counsel for the Underwriters, and
certain other conditions. It is expected that delivery of the Bonds will
be made in New York, New York on or about July 18, 1995.
_______________
MORGAN STANLEY & CO.
Incorporated
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES
INC.
Dated: ______, 1995
<PAGE> 3
**************************************************************************
* This Preliminary Official Statement and the information contained *
* herein are subject to completion or amendment. Under no circumstances *
* shall this Preliminary Official Statement constitute an offer to sell *
* or solicitaion of an offer to buy nor shall there be any sale of these *
* securities in any jurisdiction in which such offer, solicitation or *
* sale would be unlawful prior to registration or qualification under *
* the securities laws of any such jurisdiction. *
**************************************************************************
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
No dealer, salesman or any other person is authorized to give
any information or to make any representation not contained in this
Official Statement, and any information not contained herein must not be
relied upon as having been authorized by Matagorda County Navigation
District Number One, Central Power and Light Company or any Underwriter.
This Official Statement does not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of the Bonds,
by any person in any jurisdiction in which it is unlawful for such person
to make such offer, solicitation or sale.
Neither the delivery of this Official Statement nor any sale
hereunder shall under any circumstances create any implication that there
has been no change in the affairs of Matagorda County Navigation District
Number One or Central Power and Light Company since the date hereof.
TABLE OF CONTENTS
Page
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE ISSUER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE FACILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
THE INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
THE MBIA INSURANCE CORPORATION INSURANCE POLICY . . . . . . . . . . . 15
TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
UNDERWRITING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
APPENDIX A - CENTRAL POWER AND LIGHT COMPANY. . . . . . . . . . . . . A-1
APPENDIX B - FORM OF OPINION OF BOND COUNSEL. . . . . . . . . . . . . B-1
APPENDIX C - FORM OF MUNICIPAL BOND INSURANCE POLICY. . . . . . . . . C-1
<PAGE> 4
$100,635,000
MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE
POLLUTION CONTROL REVENUE REFUNDING BONDS
(Central Power and Light Company Project)
Series 1995
Due July 1, 2028
_______________
INTRODUCTION
This Official Statement is provided to furnish information
regarding the issuance by Matagorda County Navigation District Number One,
a governmental agency and body politic and corporate of the State of Texas
(the "Issuer"), of its Pollution Control Revenue Refunding Bonds (Central
Power and Light Company Project) Series 1995 (the "Bonds") in the
aggregate principal amount of up to $100,635,000.
The issuance and sale of the Bonds has been authorized by a
Resolution adopted by the Board of Navigation and Canal Commissioners of
the District on June 1, 1995 (the "Resolution") and will be issued
pursuant to an Indenture of Trust to be dated as of July 1, 1995 (the
"Indenture") between the Issuer and The Bank of New York, as trustee (the
"Trustee").
The proceeds of the Bonds will be used to refund all of the
outstanding (i) $68.87 million of the Issuer's outstanding 10-1/8%
Pollution Control Revenue Bonds (Central Power and Light Company Project)
Series 1984 (the "Series 1984 Bonds") and (ii) $31.765 million of the
Issuer's outstanding 9-3/4% Collateralized Pollution Control Revenue Bonds
(Central Power and Light Company Project) Series 1985A (the "Series 1985A
Bonds" and, together with the Series 1984 Bonds, the "Prior Bonds"), which
were issued to finance the cost of the acquisition, construction and
improvement of certain pollution control and solid waste disposal
facilities, as hereinafter described, at the South Texas Project Electric
Generating Station (the "Plant") located between Bay City, Texas and
Palacios, Texas. Central Power and Light Company, a Texas business
corporation (the "Company"), owns a 25.2% undivided interest in the Plant.
Except where the context otherwise indicates, the term "Facilities" herein
refers to the Company's portion of certain of the pollution control and
solid waste disposal facilities at the Plant.
Pursuant to an Installment Payment Agreement to be dated as of
July 1, 1995 (the "Agreement") between the Issuer and the Company, the
Company will be obligated to make payments at such times and in such
amounts as shall be required to pay, when due, the principal of, premium,
if any, and interest on, the Bonds. Neither the Facilities nor the Plant
constitutes security for the Bonds, which will be secured only by the
assignment and pledge of the Agreement, the moneys deposited or required
to be deposited under the Indenture (other than moneys deposited to the
Special Rebate Fund), and the Company's absolute, irrevocable and
unconditional obligation to make payments thereunder.
<PAGE> 5
There follows in this Official Statement brief descriptions of
the Issuer, the Facilities, the Use of Proceeds, the Bonds, the Agreement,
the Indenture and the MBIA Insurance Corporation Insurance Policy. Such
descriptions do not purport to be complete and are qualified in their
entirety by reference to each specific document so described. See
"MISCELLANEOUS" herein for information with respect to obtaining copies of
such documents. Terms not defined herein have the meanings set forth in
such documents. Appendix A to this Official Statement has been furnished
by, and contains information concerning, the Company, including certain
financial statements and other information incorporated therein by
reference.
THE ISSUER
Matagorda County Navigation District Number One is a
governmental agency and body politic and corporate of the State of Texas
created as a conservation and reclamation district pursuant to Article
XVI, Section 59, of the Constitution of the State of Texas and by Chapters
60 and 62 of the Texas Water Code (the "Act"). The principal office of the
Issuer is in Palacios, Texas.
THE FACILITIES
The Facilities consist of various systems which are designed
for the abatement and control of pollution and the treatment and disposal
of sewage and solid waste resulting from the operation of the Plant. The
Plant is a nuclear generating station consisting of two units with the
capability of generating a total of 2500 megawatts of power. Unit 1 of
the Plant began commercial operation on August 25, 1988, and Unit 2 began
commercial operation on June 19, 1989.
USE OF PROCEEDS
The Bonds are being issued by the Issuer for the purpose of
providing funds for the redemption of all outstanding Prior Bonds. The
proceeds to be received by the Issuer from the issuance and sale of the
Bonds will be deposited into a separate account within the debt service
funds with respect to the Prior Bonds maintained by NationsBank of Texas,
N.A., Dallas, Texas (successor to RepublicBank Dallas, National
Association) ("NationsBank"), pursuant to an Indenture of Trust dated as
of October 15, 1984 between the Issuer and NationsBank with regard to the
Series 1984 Bonds and pursuant to an Indenture of Trust dated as of July
1, 1985 between the Issuer and NationsBank with regard to the Series 1985A
Bonds. The Company will provide any additional funds required to refund
all of the Prior Bonds from either internally generated funds or short-
term borrowings.
<PAGE> 6
THE BONDS
The Bonds will be issuable only as fully registered bonds
without coupons in denominations of $5,000 or any integral multiple
thereof. Bonds may be transferred or exchanged without cost, except for
any tax or other governmental charge.
The Bonds initially will be dated July 1, 1995. The Bonds will
mature on July 1, 2028 and will bear interest at the rate of ___% per
annum. Principal of and premium, if any, on the Bonds will be payable at
the corporate trust office of the Trustee in New York, New York. Interest
on the Bonds will be payable semi-annually on January 1 and July 1 of each
year, commencing January 1, 1996, and will be paid by check mailed to the
registered owners thereof of record as of the fifteenth day of the month
prior to such interest payment date. Each such payment date is
hereinafter referred to as an "Interest Payment Date".
Limited Obligations of the Issuer
The Bonds will be limited obligations of the Issuer, payable
solely from, and secured equally and ratably by, a first lien on and
pledge of all the right, title and interest of the Issuer in and to the
Agreement, including all moneys payable thereunder (except for certain
rights of the Issuer relating to expenses and indemnification). The Bonds
will not be secured by any lien or other interest in the Facilities or the
Plant. The Company is absolutely, irrevocably and unconditionally
obligated under the Agreement to pay to the Trustee, for the account of
the Issuer, an amount sufficient to pay, or provide for the payment of,
the principal of, premium, if any, and interest on the Bonds when due
(whether upon maturity, redemption or otherwise), and to pay certain other
charges. Neither the credit nor the taxing power of the State of Texas,
the Issuer or any other political subdivision of the State of Texas is
pledged for the payment of the principal of, premium, if any, or interest
on the Bonds. The Bonds shall not be deemed a general obligation of the
State of Texas, the Issuer or any other political subdivision of the State
of Texas. None of the State of Texas, the Issuer or any other political
subdivision of the State of Texas will be liable for the payment of the
principal of, premium, if any, or interest on the Bonds, except from those
revenues to be derived by the Issuer pursuant to the Agreement and pledged
to such payment. No holder of a Bond will have the right to demand
payment from moneys derived by taxation or any revenues of the Issuer,
except the funds pledged to the payment of the Bonds.
Notwithstanding its authorization of the Bonds and its approval
of this Official Statement, the Issuer does not endorse, or in any manner
guarantee or promise, directly or indirectly, to pay any obligations on
the Bonds from any source of funds other than as described herein, nor
does the Issuer guarantee, warrant or endorse the creditworthiness or
credit standing of the Company or in any manner guarantee, warrant or
endorse the investment quality or value of the Bonds.
<PAGE> 7
Redemption
The Bonds are subject to redemption prior to maturity as
follows:
Optional Redemption The Bonds will be subject to redemption
prior to maturity at the option of the Issuer, to be exercised at the
direction of the Company, on or after July 1, 2000[1], in whole or in part
at any time (and, if in part, in the manner specified in the Indenture)
upon prepayment by the Company of amounts due under the Agreement relating
to the Bonds for any purpose and from moneys available for such purpose at
the redemption prices (expressed as percentages of the principal amount of
the Bonds to be redeemed) set forth in the table below, plus, in each
case, accrued interest to the redemption date:
Redemption Date[1] (dates inclusive) Redemption Price
July 1, 2000 through June 30, 2001 102%
July 1, 2001 through June 30, 2002 101%
July 1, 2002 and thereafter 100%
____________
[1] Subject to change.
The Bonds will be called for redemption by the Trustee upon
receipt by the Trustee at least 45 days prior to the redemption date of a
written notice from the Company exercising such optional redemption and
specifying the redemption date, the principal amount of the Bonds to be
called for redemption and the applicable redemption price.
Extraordinary Optional Redemption The Bonds are subject to
redemption, at the option of the Issuer, to be exercised at the direction
of the Company, at any time, in whole upon acceleration of the payments by
the Company relating to the Bonds in accordance with the Agreement, at the
principal amount thereof plus accrued interest to the redemption date and
without premium, upon the occurrence of any one or more of the following
events:
(a) in the reasonable judgment of the Company, unreasonable
burdens or excessive liabilities shall have been imposed upon the Issuer
or the Company with respect to the Facilities or the Plant, including,
without limitation, (i) the imposition of any income or other taxes not
imposed on July 1, 1995 or (ii) the imposition of any ad valorem property
or other taxes (other than ad valorem property or other taxes imposed on
July 1, 1995 upon similarly assessed property within the same taxing
jurisdiction);
(b) the Facilities or the Plant shall have been damaged or
destroyed to such extent that, in the opinion of the Company, (i) within a
period of six consecutive months following such damage or destruction, it
is not practicable or desirable to rebuild, repair or restore the same,
<PAGE> 8
(ii) the Company will be thereby prevented from carrying on its normal
operations of the Facilities or the Plant for a period of six consecutive
months or (iii) the cost of restoration would exceed by $1,500,000 or more
the net proceeds of insurance thereon;
(c) title to, or temporary use of, all or substantially all the
Facilities or the Plant shall have been taken under the exercise of the
power of eminent domain;
(d) changes in the economic availability of materials, labor,
services, supplies (including fuel), equipment or other property,
facilities or things necessary for the operation of the Facilities or the
Plant shall have occurred, or technological, regulatory or other changes
shall have occurred, which, in the opinion of the Company, render the
continued operation of the Facilities or the Plant uneconomic;
(e) any court or administrative body shall enter a judgment,
order or decree requiring the Company to cease, or dispose of, all or any
substantial part of its operations of the Facilities or the Plant to such
extent that, in the opinion of the Company, it is or will be thereby
prevented from carrying on its normal operations of the Facilities or the
Plant for a period of six or more consecutive months; or
(f) as a result of any change in the Constitution of the State
of Texas or the Constitution of the United States of America or of any
legislative or administrative action (whether state or federal), or of any
final decree, judgment or order of any court or administrative body
(whether state or federal), the obligations of the Company under the
Agreement shall have become unenforceable or impossible of performance in
any material respect in accordance with the intent and purpose of the
parties as expressed in the Agreement as specified in the Indenture.
The Company must give written notice to the Issuer and the
Trustee of its direction to the Issuer to exercise an extraordinary option
to redeem within 120 days after the occurrence of an event specified above
giving rise to such option, which notice shall specify a date for
redemption not less than 45 nor more than 120 days after the date such
notice is given.
Special Mandatory Redemption The Bonds are subject to
mandatory redemption in whole or in part at any time, (and, if in part, in
the manner specified in the Indenture) if such partial redemption will
preserve the exclusion from gross income for federal income tax purposes
of interest on the remaining Bonds Outstanding, at a redemption price
equal to 100% of the principal amount thereof plus unpaid interest accrued
to the redemption date and without premium, if (a) a final decree or
judgment of any federal court, in which the Company participates to the
extent it deems sufficient, or (b) a final action by the Internal Revenue
Service, in proceedings in which the Company participates to the extent it
deems sufficient, determines that the interest paid or payable on any
Bonds to other than, as provided in the Internal Revenue Code of 1954, as
amended (the "1954 Code"), a "substantial user" of the Facilities or a
"related person" is or was includable in the gross income of the owner
<PAGE> 9
thereof for federal income tax purposes, as a result of the failure by the
Company to observe or perform any covenant, condition or agreement on its
part to be observed or performed under the Agreement or the inaccuracy of
any representation by the Company under the Agreement; provided, however,
that no decree or judgment by any court or action by the Internal Revenue
Service shall be considered final unless the bondholder involved in such
proceeding or action (i) gives the Company and the Trustee prompt notice
of the commencement thereof and (ii) if the Company agrees to pay all
expenses in connection therewith and to indemnify such bondholder against
all liabilities in connection therewith, offers the Company the
opportunity to control the defense thereof. Any such redemption shall be
made not more than 180 days after the date of such final decree, judgment
or action.
Notice of Redemption If any Bonds or portions thereof are
called for redemption, notice thereof will be given by mailing the same by
first-class mail, postage prepaid, not more than 60 nor less than 30 days
prior to the date fixed for redemption to each registered holder thereof
at his address, as the same may appear on the registration books of the
Trustee, unless waived by the holders of all Bonds called for redemption;
however, the failure to mail such notice or any defect therein with
respect to any particular Bond will not affect the validity of any call
for the redemption of any other Bonds.
No further interest will accrue on the principal of any Bond,
or portion thereof, called for redemption after the redemption date if
notice of redemption has been duly given or waived and payment therefor
has been duly provided by the Company.
Legal Holidays
Whenever under the Bonds or the Indenture a duty, notice or
payment is required to be performed, given or paid on a given day of a
month and such day is not a Business Day, as defined in the Indenture, the
required duty, notice or payment will be performed, given or paid on the
next succeeding Business Day.
Book-Entry Only System
The Depository Trust Company ("DTC") will act as securities
depositary for the Bonds. The ownership of the Bonds will be registered
in the name of Cede & Co., as nominee for DTC. One fully-registered bond
certificate will be issued for the Bonds, in the aggregate principal
amount of the Bonds, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. DTC was created to hold securities of its participants (the "DTC
Participants") and to facilitate the clearance and settlement of
securities transactions among DTC Participants in such securities through
<PAGE> 10
electronic book-entry changes in accounts of the DTC Participants,
eliminating the need of physical movement of securities certificates. DTC
Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations, some of
whom own DTC. Access to the DTC system is also available to others such
as banks, brokers, dealers and trust companies that clear through or
maintain a custodian relationship with a DTC Participant, either directly
or indirectly (the "Indirect Participants").
The DTC Participants will receive a credit balance in the
records of DTC to evidence their ownership of the Bonds, if any. The
ownership interest of each actual purchaser of each Bond (a "Beneficial
Owner") will be recorded through the records of the DTC Participant.
Beneficial Owners are expected to receive a written confirmation of their
purchase from the DTC Participant providing details of the Bond acquired.
Transfers of ownership interests in the Bonds will be accomplished by book
entries made by DTC and, in turn, by the DTC Participants who act on
behalf of the Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interest in the Bonds.
So long as Cede & Co. is the registered owner of the Bonds, as
nominee of DTC, references herein to the holder or registered holder of
the Bonds means Cede & Co. and not the Beneficial Owners of the Bonds.
DTC may determine to discontinue providing its service with
respect to the Bonds at any time by giving notice to the Issuer and
discharging its responsibilities with respect thereto under applicable
law. Under such circumstances, Bond certificates are required to be
delivered as described in the Indenture. Each Beneficial Owner, upon
registration of certificates representing Bonds held in such Beneficial
Owner's name, will become the registered holder of such Bonds.
The Issuer may determine that continuation of the system of
book-entry transfers through DTC (or a successor securities depositary) is
no longer desirable. In such event, Bond certificates will be delivered
as described in the Indenture.
The Issuer and the Trustee will recognize DTC or its nominee as
the registered holder for all purposes, including notices and voting.
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect Participants, and by DTC Participants and
Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory and regulatory
requirements as may be in effect from time to time.
Principal, premium, if any, and interest payments on the Bonds
will be made to DTC or its nominee, Cede & Co., as registered holder of
the Bonds. Upon receipt of moneys, DTC's current practice is to
immediately credit the accounts of the DTC Participants in accordance with
their respective holdings shown on the records of DTC. Payments by DTC
Participants and Indirect Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is now the
case with municipal securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility
<PAGE> 11
of such DTC Participant or Indirect Participant and not of DTC, the
Underwriters, the Company, the Trustee or the Issuer, subject to any
statutory and regulatory requirements as may be in effect from time to
time.
The information above concerning DTC and the book-entry-only
system has been obtained from DTC and is not guaranteed as to accuracy or
completeness by and is not to be construed as a representation by the
Issuer, the Trustee, the Company or the Underwriters.
The Issuer makes no assurances that DTC, the DTC Participants,
the Indirect Participants or other nominees of the Beneficial Owners will
act in accordance with the procedures described above or in a timely
manner.
THE AGREEMENT
Installment Payments
Under the Agreement, the Company agrees to make installment
payments in immediately available funds directly to the Trustee for
deposit in the Bond Fund established under the Indenture on each day on
which any payment of principal of, premium, if any, or interest on the
Bonds ("Debt Service") shall become due (whether at maturity or upon
redemption or acceleration or otherwise) in an amount which, together with
other money held by the Trustee under the Indenture, will enable the
Trustee to make such payment of Debt Service in full when due.
All the obligations of the Company under the Agreement are
absolute, irrevocable and unconditional, and the Company will make the
payments required by the Agreement free of any
deductions and without abatement or setoff.
Prepayment of Installment Payments
The Company may prepay the installment payments in whole or in
part at any time and, in the circumstances requiring redemption of the
Bonds (see "THE BONDS -- Redemption"), must prepay the installment
payments in an amount sufficient to effect the redemption of the required
principal amount of the Bonds. Optional prepayments may, at the Company's
direction, be used to redeem the Bonds pursuant to the optional redemption
provisions of the Indenture or credited against required installment
payments for Debt Service.
Tax Covenants of the Company
The Company covenants to refrain from any action which would
adversely affect, or to take such action to assure, the treatment of the
Bonds as obligations described in Section 103 of the Internal Revenue Code
of 1986 (the "Code") or Section 1313 of the Tax Reform Act of 1986, the
interest on which is not includable in the gross income of the owner,
<PAGE> 12
except to the extent that the Bonds are held by a substantial user of the
Facilities or a related person thereto, as those terms are used in Section
103(b)(13) of the 1954 Code, for purposes of federal income taxation.
The Company also covenants that it will restrict the use of the
proceeds of the Bonds and take other actions so that the Bonds will not
constitute "arbitrage bonds" under Section 148 of the Code. The Company
also agrees to remit to the Trustee any funds, to the extent not already
held by the Trustee, to be rebated to the United States pursuant to
Section 148 of the Code.
Defaults and Remedies under the Agreement
Any one or more of the following events will constitute an
"Event of Default" under the Agreement:
(a) failure by the Company to make the installment payments
required by the Agreement at or prior to the time when such payment is
required to be made and which failure, if with respect to the payment of
interest on the Bonds, shall continue for a period of 60 days;
(b) failure by the Company to observe or perform, or the breach
by the Company of, any representation, covenant or agreement in the
Agreement on its part to be observed or performed, other than as referred
to in subparagraph (a) above, for a period of 90 days after written notice
of such failure has been given to the Company by the Issuer or the
Trustee, unless the Issuer and the Trustee shall agree in writing to an
extension of such time prior to its expiration; provided, however, if such
failure can, in the reasonable judgment of the Company, be corrected, but
not within the 90 day period, such failure shall not constitute an Event
of Default if corrective action is instituted by the Company within the
applicable period and the Company notifies the Issuer and the Trustee of
such corrective action and undertakes to pursue and pursues the corrective
action until the failure is corrected; or
(c) certain events of dissolution, liquidation, insolvency,
bankruptcy or reorganization involving the Company.
The provisions of subparagraph (b) above are subject to the
limitation that if, by reason of force majeure described in the Agreement,
the Company is unable in whole or in part to carry out its obligations
under the Agreement, the Company will not be deemed in default during the
continuance of such inability. The Company, however, has agreed to use
its best efforts to remedy with all reasonable dispatch the cause or
causes preventing the Company from carrying out its agreements, provided
that the settlement of strikes, lockouts and other industrial disturbances
shall be entirely within the discretion of the Company. The occurrence of
any event of force majeure will not suspend or otherwise abate, and the
Company will not be relieved from, any obligation under the Agreement to
the extent that the Company's failure would result in the failure to pay
when due the principal of, premium, if any, and interest on the Bonds or
would result in the interest on any Bonds becoming includable in the gross
income of the holders thereof for federal income tax purposes. See "THE
INDENTURE--Defaults and Remedies under the Indenture" for information
<PAGE> 13
regarding the curing of defaults by the Company with the consent of the
Trustee and, in certain instances, the holders of a majority in aggregate
principal amount of Outstanding Bonds.
Whenever an Event of Default under the Agreement shall have
occurred and be continuing, (i) the Trustee, as provided in the Indenture,
may declare all installment payments payable for the remainder of the term
of the Agreement to be immediately due and payable and (ii) the Trustee or
the Issuer (subject to certain limitations), at the option of either, may
take whatever action at law or in equity may appear necessary or desirable
to collect the payments then due and thereafter to become due or to
enforce performance and observance of any representation, agreement or
covenant of the Company under the Agreement. Any amounts collected
pursuant to action taken upon the happening of an Event of Default will be
paid into the Bond Fund created under the Indenture and applied in
accordance with the provisions of the Indenture. See "THE INDENTURE --
Defaults and Remedies under the Indenture."
Modifications and Amendments
Prior to payment or provision for payment of the Bonds and all
expenses of the Trustee and the Issuer, the Agreement cannot be amended so
as to reduce or postpone the payments required to be made by the Company
to the Trustee, and cannot otherwise be amended, except to reflect a
change in the Company's ownership percentage in the Facilities or any
additional Facilities, without the prior written consent of the Trustee.
Corporate Existence; Exceptions
The Company has agreed that, during the term of the Agreement,
(a) it (or its permitted successors or assigns) will continue to be a
corporation duly qualified to do business in the State of Texas and (b) it
will not dispose of all or substantially all of its assets as an entirety
(whether by liquidation, dissolution or otherwise) and will not merge into
or consolidate with any other corporation unless the resulting, surviving
or transferee corporation, if other than the Company, irrevocably and
unconditionally assumes the due and punctual performance of the Company's
obligations under the Agreement.
THE INDENTURE
Assignment and Pledge
For the purpose of securing the payment of the principal of,
premium, if any, and interest on the Bonds, the Issuer has pledged and
assigned to the Trustee all the right, title and interest of the Issuer in
the Agreement, together with all moneys payable thereunder, other than
certain rights of the Issuer relating to certain payments for expenses and
indemnification. See "THE BONDS -- Limited Obligations of the Issuer."
<PAGE> 14
Bond Fund
In accordance with the Agreement, all payments made by the
Company thereunder will be made to the Trustee for deposit in the Bond
Fund established under the Indenture. All moneys from time to time
received by the Trustee and held in the Bond Fund will be held in trust by
the Trustee for the benefit of the holders of the Bonds entitled to be
paid therefrom.
Investment of Fund Moneys
Any moneys held as part of the Bond Fund will be invested or
reinvested by the Trustee, at the request and direction of the Company,
(i) in direct obligations of, or obligations guaranteed by, the United
States of America, and any bonds or other obligations of the Federal
National Mortgage Association (including Participation Certificates),
Government National Mortgage Association, Federal Farm Credit Banks,
Federal Intermediate Credit Banks, Federal Banks for Cooperatives, Federal
Land Banks, Federal Home Loan Mortgage Corporation and Federal Home Loan
Banks, (ii) in interest-bearing certificates of deposit secured by
obligations described in the foregoing clause (i) in a national or state
bank or a trust company (which may be the Trustee) which has a combined
capital and surplus aggregating not less than $250,000,000, (iii) in any
obligation secured by a pooling of one or more of the foregoing, (iv) in
any obligation described in Section 103(a) of the Code or (v) as otherwise
permitted by law.
The Company and the Issuer have agreed in the Agreement that
the proceeds of the Bonds and any investment thereof will not be used
directly or indirectly so as to cause all or any of the Bonds to be or
become "arbitrage bonds" within the meaning of Section 148 of the Code or
any regulations or rulings pertaining thereto.
Defaults and Remedies under the Indenture
Any one or more of the following events will constitute an
"Event of Default" under the Indenture:
(a) payment of the principal of and premium, if any, on any of
the Bonds shall not have been made when the same shall become due and
payable at maturity, upon redemption or otherwise;
(b) payment of an installment of interest on any of the Bonds
shall not have been made when the same shall become due and payable and
such failure shall continue for a period of 60 days;
(c) there shall be an "Event of Default" as defined in the
Agreement (see "THE AGREEMENT -- Defaults and Remedies under the
Agreement"); or
(d) the Issuer shall default in the due and punctual
performance of any other covenant, condition, agreement or provision
contained in the Bonds or in the Indenture on the part of the Issuer to be
performed, and such default shall continue for 90 days after written
<PAGE> 15
notice specifying the default and requiring the same to be remedied shall
have been given to the Issuer and the Company by the Trustee. Such notice
may be given by the Trustee in its discretion and shall be given at the
written request of the holders of not less than 25 percent in aggregate
principal amount of the Bonds then Outstanding; provided, however, that if
said default cannot be corrected within 90 days, it shall not constitute
an Event of Default if corrective action is instituted by the Issuer or
the Company within 90 days and diligently pursued until the default is
corrected.
Upon the occurrence and continuation of any Event of Default,
the Trustee may, and upon the written request of the holders of not less
than 25 percent in aggregate principal amount of the Bonds then
Outstanding shall, provided that written notice of the Event of Default
has been delivered to the Issuer and the Company by the Trustee, declare
the principal of and accrued interest on all Outstanding Bonds immediately
due and payable.
However, if, after the principal of the Bonds has been declared
to be due and payable, the principal of the Bonds and all arrears of
interest thereon (except the principal of, and interest on, the Bonds
which by such declaration have become due and payable), and interest on
overdue installments of principal and interest, to the extent legally
permissible, and all other sums payable under the Indenture shall have
been paid by or on behalf of the Issuer and the Company, and the Issuer
and the Company shall have performed all other things in respect of which
they may have been in default under the Indenture or under the Agreement,
and have paid or caused to be paid the reasonable charges of the Trustee
and of the holders of Bonds, including reasonable attorneys' fees paid or
incurred and all other expenses of the Trustee, then and in every such
case, such default may, in the Trustee's discretion, be waived and such
declaration and its consequences rescinded and annulled by the Trustee by
written notice to the Issuer and the Company; provided, that, if such
declaration was requested by the holders of not less than 25 percent in
aggregate principal amount of the Bonds Outstanding, such waiver,
rescission and annulment shall have been consented to by the holders of a
majority in aggregate principal amount of the Bonds then Outstanding. No
such waiver, rescission and annulment will extend to or affect any
subsequent default or impair any right or remedy consequent thereon.
Upon the happening of any Event of Default, the Trustee may,
and upon the written request of the holders of not less than 25 percent in
aggregate principal amount of the Bonds then Outstanding and receipt of
indemnity to its satisfaction shall, in its own right, (i) by mandamus, or
other suit, action or proceeding at law or in equity, enforce all rights
of the holders of the Bonds and require the Issuer or the Company to carry
out any agreements with or for the benefit of the holders of the Bonds;
(ii) bring suit upon the Bonds; (iii) by action or suit at law or in
equity require the Issuer to account as if it were the trustee of an
express trust for the holders of the Bonds; or (iv) by action or suit at
law or in equity enjoin any acts or things which may be unlawful or in
violation of the rights of the holders of the Bonds.
<PAGE> 16
All rights of action with respect to the Indenture shall be
exercised only by the Trustee, and no holder of a Bond shall have any
right to institute any suit, action or proceeding at law or in equity for
the execution of any trust or for any other remedy under the Indenture or
on the Bonds, unless: such suit, action, proceeding or remedy shall be
with respect to an Event of Default as to which the Trustee shall have
been given written notice by the holder of a Bond; the Trustee shall have
received the written request (after the power to exercise such powers or
rights of action, as the case may be, shall have accrued) of the holders
of not less than 25 percent in aggregate principal amount of the Bonds
then Outstanding to institute such suit, action, proceeding or remedy; the
Trustee shall have been afforded a reasonable opportunity either to
proceed to exercise its powers granted in an Event of Default or to
institute such action, suit, proceeding or remedy in the name of the
Trustee or of the holders of the Bonds; the Trustee shall have been
offered security and indemnity satisfactory to it; and the Trustee shall
have refused or neglected to comply with such request within a reasonable
time. However, each holder of a Bond shall have a right of action to
enforce the payment of the principal of, premium, if any, and interest on
any Bond held or owned by such holder at and after the maturity thereof,
or the obligation of the Issuer to pay the principal of and any premium
and interest on each such Bond at the time and place, from the source and
in the manner in said Bond expressed. The holders of a majority in
aggregate principal amount of the Bonds Outstanding shall have the right
to direct the method and place of conducting all remedial proceedings to
be taken by the Trustee under the Indenture.
MBIA Insurance Corporation Deemed to be a Bondholder
Notwithstanding any provision of the Indenture to the contrary,
MBIA Insurance Corporation (the "Bond Insurer") shall at all times be
deemed the exclusive owner of all Bonds for the purposes of all approvals,
consents, waivers, institution of any action, and the direction of all
remedies. No acceleration shall be permitted, and no Event of Default
shall be waived, without the Bond Insurer's consent. The Bond Insurer
shall have the right to direct all remedies pursuant to the Indenture.
Defeasance
When all the Bonds shall have been paid, or their payment
provided for, and discharged, and there shall have been paid, or provision
shall have been made for paying, all fees and charges of the Trustee, the
Issuer and any other paying agents due or to become due through the date
on which the last of the Bonds is or is to be retired, then the Indenture
shall cease, terminate and become null and void; and thereupon the Trustee
shall release the Indenture and shall cancel and discharge the lien
thereof; and the Trustee shall reassign and deliver to the Issuer any part
of the Trust Estate which may then be in its possession and subject to the
lien of the Indenture, except such moneys and/or "Governmental
Obligations" as are held by the Trustee for the payment of the principal
of, premium, if any, and interest due on the retirement of the Bonds.
After such payment and discharge, including the fees and charges indicated
above, or provision therefor, have been made with respect to all the
Bonds, the interest of the Trustee under the Indenture shall cease in
<PAGE> 17
respect of such Bonds, and such Bonds shall not be entitled to any
benefits of the Indenture, except the right to be paid from the moneys
and/or "Governmental Obligations" so held by the Trustee for the payment
thereof. Bonds shall be deemed to have been paid (a) if the Trustee and
any other paying agents shall hold, in trust, sufficient moneys or (b) if
the Trustee shall hold, in trust, "Governmental Obligations" of such
maturities and interest payment dates and bearing interest at such rates
as will, without further reinvestment of principal or the interest
thereon, be sufficient, together with any moneys referred to in (a) above,
for payment of the principal, premium, if any, and interest in respect of
such Bonds as they become due; provided, that, if any of such Bonds are to
be redeemed prior to maturity, notice of redemption in accordance with the
Indenture shall have been given or provision satisfactory to the Trustee
shall have been made for the giving of such notice. "Governmental
Obligations" shall mean any of the following which are noncallable and
which, at the time of investment, are legal investments under the laws of
the State of Texas for the moneys proposed to be invested therein: (i)
direct general obligations of, or obligations the payment of the principal
of and interest on which are unconditionally guaranteed by, the United
States of America; or (ii) bonds, debentures or notes issued by any of the
following federal agencies: Government National Mortgage Association,
Federal Banks for Cooperatives, Federal Farm Credit Banks, Federal Land
Banks, Federal Home Loan Banks, Federal Intermediate Credit Banks, Federal
Home Loan Mortgage Corporation or Federal National Mortgage Association
(including Participation Certificates).
The Trustee; Successors
The Trustee may invest in and treat itself as any other holder
of the Bonds. The Trustee may resign at any time after notice to the
Issuer and the Company and notice by first class mail to each registered
holder of Bonds, and may also be removed at any time by the holders of a
majority in aggregate principal amount of the Bonds then Outstanding. A
successor trustee may be appointed by the holders of a majority in
aggregate principal amount of the Bonds then Outstanding; provided, that
the Issuer may appoint a temporary trustee until the appointment of such
successor. Every successor trustee shall be a trust company, a bank and
trust company or a national bank with trust powers and having a combined
capital and surplus of at least $250,000,000, if there be such a trust
company, bank and trust company or national bank with trust powers willing
and able to accept the trust on reasonable and customary terms.
Supplemental Indentures
The Issuer and the Trustee, with the consent of the Company but
without the consent of the holders of the Bonds, may enter into
supplemental indentures, in respect of the Bonds, for any of the following
purposes:
(a) to add to the covenants and agreements of the Issuer in the
Indenture other covenants and agreements and to surrender any right or
power reserved to or conferred upon the Issuer therein;
<PAGE> 18
(b) to modify any of the provisions of the Indenture or relieve
the Issuer from any of the obligations, conditions or restrictions
contained therein; provided, that no such modification shall be or become
operative or effective which shall in any manner impair any of the rights
of the holders of the Bonds or the Trustee;
(c) to cure any ambiguity, or to cure, correct or supplement
any defect or inconsistent provision contained in the Indenture or any
indenture supplemental thereto in a manner which, in the opinion of Bond
Counsel, is not adverse to the interests of the holders of the Bonds;
(d) to make such provision in regard to matters or questions
arising under the Indenture as may be necessary or desirable and not
inconsistent with the Indenture and not, in the opinion of Bond Counsel,
adverse to the interests of the holders of the Bonds; or
(e) to make any other change which, in the opinion of Bond
Counsel, does not materially adversely affect the rights of the Issuer or
any holder of Bonds.
Exclusive of the purposes described in subparagraphs (a)
through (e) above, written approval of the holders of not less than a
majority in aggregate principal amount of the Bonds then Outstanding and
affected shall be required for any supplemental indenture, except that no
modification or alteration of the Indenture may be made without the
consent of all the holders of the Bonds at the time Outstanding and
affected by such modification or alteration which permits (i) the
reduction of the percentage of the Bonds, the consent of the holders of
which is required for any such modification or alteration, (ii) the
extension of the time or times of payment of the principal of, premium, if
any, or interest on any of the Bonds, or the reduction in the principal
amount of any of the Bonds, or in the rate of interest or the amount of
any premium thereon or any other modification in the terms of payment of
the principal thereof or interest or premium thereon, (iii) the creation
by the Issuer of any lien ranking prior to or on a parity with the lien of
the Indenture, (iv) the giving of any preference of any Bond over any
other Bond or (v) the extension of any waiver of default to subsequent
defaults. The Indenture further provides that the holders of not less
than a majority in aggregate principal amount of the Bonds Outstanding
shall have the power to waive any rights specifically provided with
respect to the Bonds and to assent to any modification of any such right
which may be proposed by the Issuer and consented to by the Trustee,
subject, however, to the provisions of clauses (a)-(e) above.
THE MBIA INSURANCE CORPORATION INSURANCE POLICY
The following information has been furnished by the Bond
Insurer for use in this Official Statement. Reference is made to Appendix
C for a specimen of the Bond Insurer's policy.
The Bond Insurer's policy unconditionally and irrevocably
guarantees the full and complete payment required to be made by or on
behalf of the Issuer to the Trustee or its successor of an amount equal to
<PAGE> 19
(i) the principal of (either at the stated maturity or by a mandatory
redemption upon the occurrence of a determination of taxability) and
interest on the Bonds as such payments shall become due but shall not be
so paid (except that in the event of any acceleration of the due date of
such principal by reason of mandatory or optional redemption or
acceleration resulting from default or otherwise, other than a mandatory
redemption upon the occurrence of a determination of taxability, the
payments guaranteed by the Bond Insurer's policy shall be made in such
amounts and at such times as such payments of principal would have been
due had there not been any such acceleration); and (ii) the reimbursement
of any such payment which is subsequently recovered from any owner of the
Bonds pursuant to a final judgment by a court of competent jurisdiction
that such payment constitutes an avoidable preference to such owner within
the meaning of any applicable bankruptcy law (a "Preference").
The Bond Insurer's policy does not insure against loss of any
prepayment premium which may at any time be payable with respect to any
Bond. The Bond Insurer's policy does not, under any circumstance, insure
against loss relating to: (a) optional or mandatory redemptions (other
than mandatory redemption upon the occurrence of a determination of
taxability); (b) any payments to be made on an accelerated basis (other
than as stated in (a) above); or (c) any Preference relating to (a)
through (b) above. The Bond Insurer's policy also does not insure against
nonpayment of principal of or interest on the Bonds resulting from the
insolvency, negligence or any other act or omission of the Trustee or any
other paying agent for the Bonds.
Upon receipt of telephonic or telegraphic notice, such notice
subsequently confirmed in writing by registered or certified mail, or upon
receipt of written notice by registered or certified mail, by the Bond
Insurer from the Paying Agent or any owner of a Bond the payment of an
insured amount for which is then due, that such required payment has not
been made, the Bond Insurer on the due date of such payment or within one
business day after receipt of notice of such nonpayment, whichever is
later, will make a deposit of funds, in an account with State Street Bank
and Trust Company, N.A. ("State Street"), in New York, New York, or its
successor, sufficient for the payment of any such insured amounts which
are then due. Upon presentment and surrender of such Bonds or presentment
of such other proof of ownership of the Bonds, together with any
appropriate instruments of assignment to evidence the assignment of the
insured amounts due on the Bonds as are paid by the Bond Insurer, and
appropriate instruments to effect the appointment of the Bond Insurer as
agent for such owners of the Bonds in any legal proceeding related to
payment of insured amounts on the Bonds, such instruments being in a form
satisfactory to State Street, State Street shall disburse to such owners
or the Paying Agent payment of the insured amounts due on such Bonds, less
any amount held by the Paying Agent for the payment of such insured
amounts and legally available therefor.
The Bond Insurer, formerly known as Municipal Bond Investors
Assurance Corporation, is the principal operating subsidiary of MBIA Inc.,
a New York Stock Exchange listed company. MBIA Inc. is not obligated to
pay the debts of or claims against the Bond Insurer. The Bond Insurer is
domiciled in the State of New York and licensed to do business in all 50
<PAGE> 20
states, the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, the Virgin Islands of the
United States and the Territory of Guam. The Bond Insurer has one
European branch in the Republic of France.
As of March 31, 1995, the Bond Insurer had admitted assets of
$3.5 billion (unaudited), total liabilities of $2.4 billion (unaudited),
and total capital and surplus of $1.1 billion (unaudited) determined in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. As of December 31, 1994, the Bond
Insurer had admitted assets of $3.4 billion (audited), total liabilities
of $2.3 billion (audited), and total capital and surplus of $1.1 billion
(audited) determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. All
information regarding the Bond Bond Insurer, a wholly owned subsidiary of
MBIA Inc., including the financial statements of the Bond Insurer for the
year ended December 31, 1994, prepared in accordance with generally
accepted accounting principles, included in the Annual Report on Form 10-K
of MBIA Inc. for the year ended December 31, 1994 is hereby incorporated
by reference into this Official Statement and shall be deemed to be a part
hereof. Any statement contained in a document incorporated by reference
herein shall be modified or superseded for purposes of this Official
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Official Statement.
Furthermore, copies of the Bond Insurer's year end financial
statements prepared in accordance with statutory accounting practices are
available from the Bond Insurer. A copy of the Annual Report on Form 10-K
of MBIA Inc. is available from the Bond Insurer or the Securities and
Exchange Commission. The address of the Bond Insurer is 113 King Street,
Armonk, New York 10504.
Moody's Investors Service ("Moody's") rates the claims paying
ability of the Bond Insurer "Aaa". The Obligations are rated in the
highest rating category by Moody's.
Standard & Poor's Ratings Group, a division of The McGraw Hill
Companies, Inc. ("Standard & Poor's"), rates the claims paying ability of
the Bond Insurer "AAA". The Obligations are rated in the highest rating
category by Standard & Poor's.
The Moody's rating of the Bond Insurer should be evaluated
independently of the Standard & Poor's rating of the Bond Insurer. No
application has been made to any other rating agency in order to obtain
additional ratings on the Bonds. The ratings reflect the respective
rating agency's current assessment of the creditworthiness of the Bond
Insurer and its ability to pay claims on its policies of insurance. Any
further explanation as to the significance of the above ratings may be
obtained only from the applicable rating agency.
<PAGE> 21
The above ratings are not recommendations to buy, sell or hold
the Bonds, and such ratings may be subject to revision or withdrawal at
any time by the rating agencies. Any downward revision or withdrawal of
either or both ratings may have an adverse effect on the market price of
the Bonds. The Bond Insurer does not guaranty the market price of the
Bonds nor does it guaranty that the ratings on the Bonds will not be
reversed or withdrawn.
TAX MATTERS
On the date of the initial delivery of the Bonds, McCall,
Parkhurst & Horton, L.L.P., Dallas, Texas, Bond Counsel, will render its
opinion that, in accordance with statutes, regulations, published rulings
and court decisions existing on the date thereof, (1) interest on the
Bonds will be excludable from the "gross income" of the holders thereof,
except for any holder who is treated pursuant to Section 103(b)(13) of the
Internal Revenue Code of 1954 as a "substantial user" of the Facilities or
a "related person" to such user and (2) the Bonds will not be treated as
"private activity bonds" the interest on which would be included as an
alternative minimum tax preference item under Section 57(a)(5) of the
Internal Revenue Code of 1986 (the "Code"). Except as stated above, Bond
Counsel will express no opinion as to any other federal, state or local
tax consequences of the purchase, ownership or disposition of the Bonds.
See Appendix B -- Form of Opinion of Bond Counsel.
In rendering its opinion, Bond Counsel will rely upon (a)
information furnished by the Company, and, particularly, written
representations of officers and agents of the Company with respect to
certain material facts that are solely within their knowledge relating to
the use of the proceeds of the Bonds and the Prior Bonds, and the
construction and use of the Facilities, and (b) covenants of the Issuer
and the Company with respect to arbitrage, the application of the proceeds
to be received from the issuance and sale of the Bonds and the Prior Bonds
and certain other matters. Failure of the Issuer or the Company to comply
with these representations or covenants could cause the interest on the
Bonds to become includable in gross income retroactively to the date of
issuance of the Bonds.
The law upon which Bond Counsel has based its opinion is
subject to change by Congress and to subsequent judicial and
administrative interpretation by the courts and the Department of the
Treasury. There can be no assurance that such law or the interpretation
thereof will not be changed in a manner which would adversely affect the
tax treatment of the purchase, ownership or disposition of the Bonds.
Collateral Federal Income Tax Consequences
The following discussion is a summary of certain collateral
federal income tax consequences resulting from the purchase, ownership or
disposition of the Bonds. This discussion is based on existing statutes,
regulations, published rulings and court decisions, all of which are
subject to change or modification, retroactively.
<PAGE> 22
The following discussion is applicable to investors, other than
those, such as financial institutions, property and casualty insurance
companies, life insurance companies, individual recipients of Social
Security or Railroad Retirement benefits, certain S corporations with
Subchapter C earnings and profits and taxpayers who may be deemed to have
incurred or continued indebtedness to purchase tax-exempt obligations, who
are subject to special provisions of the Code.
INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL
PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE,
OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING
WHETHER TO PURCHASE THE BONDS.
Interest on the Bonds will be includable as an adjustment for
"adjusted earnings and profits" to calculate the alternative minimum tax
imposed on corporations by Section 55 of the Code. Section 55 of the Code
imposes a tax equal to 20 percent of the taxpayer's "alternative minimum
taxable income" if the amount of such alternative minimum tax is greater
than the taxpayer's regular income tax for the taxable year.
Interest on the Bonds is includable in the "alternative minimum
taxable income" of a corporation (other than a regulated investment
company or a real estate investment trust) for purposes of determining the
environmental tax imposed by Section 59A of the Code. Section 59A of the
Code imposes on a corporation an environmental tax, in addition to any
other income tax imposed by the Code, equal to 0.12 percent of the excess
of the modified alternative minimum taxable income of such corporation for
the taxable year over $2,000,000.
Interest on the Bonds may be subject to the "branch profits
tax" imposed on the effectively-connected earnings and profits of a
foreign corporation doing business in the United States.
Under the Code, holders of tax-exempt obligations, such as the
Bonds, may be required to disclose interest received or accrued during
each taxable year on their returns of federal income taxation.
Section 1276 of the Code provides for ordinary income tax
treatment of gain recognized upon the disposition of a tax-exempt
obligation, such as the Bonds, if such obligation was acquired at a
"market discount" and if the fixed maturity of such obligations is equal
to, or exceeds, one year from the date of issue. Such treatment applies
to "market discount bonds" to the extent such gain does not exceed the
accrued market discount of such bonds, although for this purpose, a de
minimis amount of market discount is ignored. A "market discount bond" is
one which is acquired by the holder at a purchase price which is less than
the stated redemption price at maturity. The "accrued market discount" is
the amount which bears the same ratio to the market discount as the number
of days during which the holder holds the obligation bears to the number
of days between the acquisition date and the final maturity date.
<PAGE> 23
State, Local and Foreign Taxes
Investors should consult their own tax advisors concerning the
tax implications of the purchase, ownership or disposition of the Bonds
under applicable state or local laws. Foreign investors should also
consult their own tax advisors regarding the tax consequences unique to
investors who are not United States persons.
LEGAL PROCEEDINGS
Legal matters incident to the authorization, issuance and sale
of the Bonds are subject to the unqualified approval of the Attorney
General of the State of Texas and of Bond Counsel. McCall, Parkhurst &
Horton, L.L.P. has acted in the capacity as Bond Counsel for the purpose
of rendering an opinion with respect to the authorization, issuance,
delivery, legality and validity of the Bonds and for the purpose of
rendering an opinion on the exclusion of the interest on the Bonds from
gross income for federal income tax purposes. Such firm has not been
requested to examine, and has not investigated or verified, any
statements, records, material or matters relating to the financial
condition or capabilities of the Company, and has not assumed
responsibility for the preparation of this Official Statement, except
that, in its capacity as Bond Counsel, such firm has reviewed the
information in this Official Statement and in Appendix A. Certain legal
matters are being passed upon for the Issuer by the firm of Mayfield &
Mayfield, counsel to the Issuer. Neither Bond Counsel nor counsel to the
Issuer has participated in the preparation of, or examined (and they
therefore will express no opinion on and assume no responsibility for),
the contents of Appendix A to this Official Statement, and they have not
considered it necessary to do so in order to render their opinions.
Certain legal matters will be passed upon for the Company by
its counsel, Milbank, Tweed, Hadley & McCloy, New York, New York, and by
its special counsel, Vinson & Elkins L.L.P., and for the Underwriters by
their counsel, Sidley & Austin, Chicago, Illinois.
UNDERWRITING
Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co. and
J.P. Morgan Securities Inc. (the "Underwriters"), have jointly and
severally agreed to purchase the Bonds at a price equal to 100% of the
principal amount thereof, plus accrued interest from July 1, 1995 to the
date of delivery. Under the terms of the Bond Purchase Agreement dated
June __, 1995 between the Underwriters and the Issuer, the Underwriters
have agreed, subject to the approval of certain legal matters by counsel
and to certain other conditions, to purchase all the Bonds if any such
Bonds are purchased. The Company has agreed to pay the Underwriters a
commission equal to ____% of the principal amount of the Bonds. The Bonds
may be offered and sold to certain dealers (including dealers depositing
such Bonds into investment accounts) and others at prices lower than the
<PAGE> 24
public offering price set forth on the cover page hereof. After such
Bonds are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Underwriters.
The Company has agreed to indemnify the Underwriters against or
to contribute toward certain liabilities, including liabilities under
federal securities laws.
MISCELLANEOUS
The foregoing summaries do not purport to be complete and are
expressly made subject to the exact provisions of the applicable documents
which are incorporated herein by reference. For details of all terms and
conditions with respect to the Bonds, reference is made to the Indenture,
and the Agreement, copies of which may be obtained from the Company and
the Underwriters during the initial offering period for the Bonds and
thereafter from the Trustee. Information concerning the Company is
contained or incorporated by reference in Appendix A to this Official
Statement. All the information contained under the heading "THE
FACILITIES" has been furnished by the Company, and the Issuer makes no
representations as to the accuracy or completeness of such information.
Under the Agreement, and otherwise, the Company is obligated to
make certain payments to the Issuer and has agreed to indemnify the Issuer
against certain liabilities, including liabilities under federal
securities laws.
The Issuer does not assume any responsibility for the matters
contained in this Official Statement, except for the matters contained
under the heading "THE ISSUER." All findings and determinations by the
Issuer relating to the issuance of the Bonds, are, and have been, made by
it for its own internal uses and purposes in performing its duties under
the laws of the State of Texas.
This Official Statement has been duly approved by the Board of
Navigation and Canal Commissioners of the Issuer.
MATAGORDA COUNTY NAVIGATION
DISTRICT NUMBER ONE
By:________________________
Chairman, Board of
Navigation and Canal
Commissioners
<PAGE> 25
___________________
APPENDIX A
___________________
CENTRAL POWER AND LIGHT COMPANY
The information contained in this Appendix to the Official Statement has
been obtained from Central Power and Light Company.
<PAGE> 26
THE COMPANY
The Company is a public utility engaged in generating,
purchasing, transmitting, distributing and selling electricity in south
Texas. It is a wholly-owned subsidiary of Central and South West
Corporation ("CSW"), a registered public utility holding company under the
Public Utility Holding Company Act of 1935.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of
1934, as amended (the "1934 Act"), are incorporated in this Official
Statement by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995.
3. The Company's Current Report on Form 8-K dated April 5,
1995.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act after the date of this Official
Statement and prior to the termination of this offering shall be deemed to
be incorporated by reference in this Appendix A from their respective
dates of filing.
The Company is subject to the informational requirements of the
1934 Act and the Public Utility Holding Company Act of 1935 and, in
accordance therewith, files reports and other information with the
Commission. Such reports and other information filed by the Company can
be inspected and copied at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and at
the Commission's Regional Offices at Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661-2511 and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the
Commission at its principal office at 450 Fifth Street, N.W., Washington,
D.C. 20549.
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Official Statement has been delivered, on
the written or oral request of any such person, a copy of any or all of
the documents referred to above which have been or may be incorporated in
this Appendix by reference, other than exhibits to such documents.
Written requests should be directed to Stephen D. Wise, Director, Finance,
Central and South West Corporation, 1616 Woodall Rogers Freeway, Dallas,
Texas 75266, as agent for the Company. The telephone number of CSW is
(214) 777-1000.
<PAGE> 27
SUMMARY INFORMATION
Business. . . . . . . . . . . . . . . . . . . . Electric Utility
Service Area. . . . . . . . . . . . . . . . . . Approximately 44,000 square
miles in south Texas
Population of Service Area. . . . . . . . . . . Approximately 1,969,000
Customers . . . . . . . . . . . . . . . . . . . Approximately 603,000
Generating Fuels for 1994 . . . . . . . . . . . Gas 56%; Coal 24%; Nuclear 20%
<TABLE>
SELECTED FINANCIAL INFORMATION
(in thousands, except percentages and ratios)
<CAPTION> Twelve Months
Ended March 31, Year Ended December 31,
1995 1994 1993 1992
-------------- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Income Summary:
Electric Operating Revenues $1,082,032 $1,217,979 $1,223,528 $1,113,423
Operating Income 249,863 256,251 190,079 266,665
Net Income 196,816 205,439 172,425 218,511
Ratio of Earnings
to Fixed Charges* 2.70 3.24 2.69 3.23
______________________
* For computation of the foregoing ratios (i) earnings consist of net income
plus fixed charges, federal and state income taxes, deferred income taxes
and investment tax credits and (ii) fixed charges consist of interest on
long-term debt, other interest charges, the interest component of leases
and amortization of debt discount, premium and expense.
Capitalization at
March 31, 1995
-----------------
(Unaudited)
Capitalization Summary:
Long Term Debt .................................. $1,468,001 46.9%
Preferred Stock ................................. 250,351 8.0
Common Equity ................................... 1,408,821 45.1
---------- -----
Total Capitalization ................................ $3,127,173 100.0%
</TABLE>
<PAGE> 28
CONSTRUCTION PROGRAM
The Company's capital expenditures for 1995-1997, including
allowance for funds used during construction ("AFUDC"), are estimated at
$111 million; $136 million and $110 million; respectively. The Company
anticipates that the majority of the funds required for its 1995-1997
capital expenditure program will be provided from internal sources. These
estimates are subject to change due to numerous factors, including load
growth, escalation of construction costs, changes in nuclear and
environmental regulation, delays from regulatory hearings, adequacy of
rate relief and the availability of necessary external capital.
EXPERTS
The audited financial statements and schedules of the Company
included in its Annual Report on Form 10-K for the year ended December 31,
1994, which has been incorporated herein by reference, have been examined
by Arthur Andersen LLP, independent public accountants, as indicated in
their report dated February 13, 1995 with respect thereto, which has been
incorporated herein by reference, in reliance upon the authority of said
firm as experts in accounting and auditing in giving said report.
<PAGE> 29
___________________
APPENDIX B
___________________
FORM OF OPINION OF BOND COUNSEL
<PAGE> 30
MATAGORDA COUNTY NAVIGATION DISTRICT NUMBER ONE
POLLUTION CONTROL REVENUE REFUNDING BONDS
(CENTRAL POWER AND LIGHT COMPANY PROJECT)
SERIES 1995
WE HAVE EXAMINED into the validity of the bonds described above
(the "Bonds"), issued by the Matagorda County Navigation District Number One
(the "Issuer"), initially dated as of July 1, 1995, in the aggregate principal
amount of $100,635,000, maturing July 1, 2028 (unless the Bonds shall become
due or shall be redeemed prior to their scheduled maturity in accordance with
the terms and conditions stated in the text of the Bonds), and bearing
interest from the dates specified therein until maturity or redemption, at the
rates and payable on the dates and in the manner described in the text of the
Bonds. The Bonds are in registered form in denominations of $5,000 and
integral multiples thereof.
WE HAVE ACTED AS BOND COUNSEL for the Issuer for the purpose of
rendering an opinion with respect to the authorization, issuance, delivery,
legality, and validity of the Bonds under the laws and Constitution of the
State of Texas, with respect to any exemption of the interest on the Bonds
from federal income taxes, and for the other limited purposes set forth herein
and in a supplemental opinion of even date herewith. We have not been
requested to examine, and have not investigated or verified, any statements,
records, material, or other matters relating to the financial condition or
capabilities of the corporation hereinafter described, and we express no
opinion with respect thereto.
WE HAVE EXAMINED the Constitution and laws of the State of Texas
under which the Issuer was created and exists and pursuant to which it has
authorized and issued the Bonds; certified copies of the proceedings of the
governing body of said Issuer; certificates of Central Power and Light
Company, a Texas corporation (the "Company"); the Installment Payment
Agreement dated as of July 1, 1995 (the "Agreement"), between the Issuer and
the Company; the Indenture of Trust dated as of July 1, 1995 (the
"Indenture"), between the Issuer and The Bank of New York (the "Trustee");
resolutions of the Issuer, including the resolution authorizing the issuance
of the Bonds, adopted June 1, 1995 (the "Bond Resolution"); certificates,
resolutions, and representations of the Company and the Trustee, including
certificates and representations with respect to certain material facts which
are solely within the knowledge of the party rendering such certificates and
representations; and the opinions of Milbank, Tweed, Hadley & McCloy and
Vinson & Elkins L.L.P., counsel to the Company, upon which certifications,
representations, and opinions we rely to the extent we consider appropriate;
and other instruments authorizing and relating to the issuance of the Bonds,
including one of the executed Bonds (Bond R-1).
<PAGE> 31
THE BONDS are secured by the Indenture whereunder the Trustee, or
its successor as Trustee, is custodian of the Bond Fund created therein, and
is obligated to enforce the rights of the owners of the Bonds, and to perform
other duties, in the manner and under the conditions stated in the Indenture.
BASED ON SAID EXAMINATION, it is our opinion that the Issuer is a
governmental agency and body politic and corporate of the State of Texas,
validly operating and existing as a conservation and reclamation district and
a navigation district under Texas law with full power and authority to enter
into and carry out the terms of the Agreement and the Indenture.
IT IS FURTHER OUR OPINION that the Bond Resolution has been duly
and lawfully adopted and that the Bonds have been duly and validly authorized,
issued, executed, authenticated, and delivered in accordance with law and the
Indenture, and constitute valid, legal, binding, and enforceable special
obligations of the Issuer in accordance with their terms and the terms of the
Indenture, with the principal of, premium, if any, and interest on the Bonds
being payable from, and secured by a first lien on and pledge of all of the
right, title, and interest of the Issuer in and to the Agreement, together
with all moneys payable thereunder, excluding certain rights relating to
certain payments for expenses and indemnification of the Issuer. Pursuant to
the Agreement, the Company has agreed to make payments to the Trustee for
deposit into the Bond Fund established by the Indenture in amounts sufficient
to pay and redeem, or provide for the payment and redemption of, the principal
of, premium, if any, and interest on the Bonds, when due as required by the
Indenture.
THE RIGHTS OF THE ISSUER under the Agreement have been duly and
legally assigned in the Indenture to the Trustee and have been pledged to the
payment of the principal of, premium, if any, and interest on the Bonds. It
is our opinion that the Agreement has been duly and lawfully authorized,
executed, and delivered by the Issuer, and is a legal, valid, binding, and
enforceable obligation of the Issuer in accordance with its terms and
conditions. Milbank, Tweed, Hadley & McCloy and Vinson & Elkins L.L.P.,
counsel for the Company, have rendered their respective opinions of even date
herewith to the effect that the Agreement has been duly and lawfully
authorized, executed, and delivered by the Company, and that it is a legal,
valid, binding, and enforceable obligation of the Company. We note that said
counsel each has stated that the enforceability of the Agreement is subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws relating to or affecting creditors' rights generally.
IT IS FURTHER OUR OPINION that the Indenture has been duly and
lawfully authorized, executed, and delivered, that it is in full force and
effect, that it is legal, valid, binding, and enforceable in accordance with
its terms and conditions, and that it creates the valid pledge which it
purports to create.
THE ISSUER has reserved the right to amend the Indenture as
provided therein and subject to the restrictions therein stated.
<PAGE> 32
THE OPINIONS HEREINABOVE expressed are qualified to the extent that
the obligations of the Company, the Trustee, and the Issuer, and the
enforceability thereof, with respect to the Bonds, the Agreement, the Bond
Resolution, and the Indenture are subject to applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to or
affecting creditors' rights generally.
IN OUR OPINION, except as discussed below, the interest on the
Bonds will be excludable from the gross income of the owners of the Bonds for
federal income tax purposes under the statutes, regulations, published
rulings, and court decisions existing on the date of this opinion. The
exceptions are as follows:
(1) interest on the Bonds will be includable in the gross
income of the owner thereof during any period that such Bonds are
owned by either a "substantial user" of the facilities financed
with the proceeds of the Bonds or a "related person" of such user,
as provided in section 103(b)(13) of the Internal Revenue Code of
1954, as amended;
(2) interest on the Bonds will be included in a corporation's
alternative minimum taxable income for purposes of determining the
alternative minimum tax and the environmental tax imposed on
corporations by sections 55 and 59A of the Internal Revenue Code of
1986, as amended (the "Code");
(3) interest on the Bonds will be subject to the branch
profits tax imposed on foreign corporations by section 884 of the
Code; and
(4) interest on the Bonds will be subject to the tax imposed
by section 1375 of the Code on the excess net passive income of
certain S corporations that have Subchapter C earnings and profits.
Section 57(a)(5) of the Code includes as an individual and
corporate alternative minimum tax preference item, the interest on certain
"private activity bonds," other than bonds issued after August 7, 1986, to
currently refund such bonds. In our opinion, the interest on the Bonds is not
an alternative minimum tax preference item under such section.
IN EXPRESSING THIS OPINION as to the exclusion from gross income of
interest, we have (a) relied upon information furnished by the Company, and
particularly written representations of officers of the Company with respect
to certain material facts which are solely within their knowledge, relating to
the Facilities, as defined in the Agreement, and the use of the proceeds of
the Bonds and the prior bonds, and (b) assumed continuing compliance with
covenants of the Company, the Issuer and the Trustee with respect to certain
matters, including arbitrage and the application of Bond proceeds. Failure to
comply with certain of these representations and covenants may cause interest
on the Bonds to become includable in gross income retroactively to the date of
their issuance.
<PAGE> 33
EXCEPT AS STATED ABOVE, we express no opinion as to any other
federal, state or local tax consequences of acquiring, carrying, owning or
disposing of the Bonds. In particular, but not by way of limitation, we
express no opinion with respect to the federal, state or local tax
consequences arising from the enactment of any pending or future legislation.
Respectfully,
<PAGE> 34
CERTIFICATE
I, the undersigned, Secretary, Board of Navigation and Canal
Commissioners of Matagorda County Navigation District Number One, hereby
certify that the above and foregoing is a true, full and correct copy of the
opinion of McCall, Parkhurst & Horton L.L.P., Attorneys at Law, as to the
validity and security of the bonds described therein, which opinion was dated
and delivered concurrently with the original delivery of said bonds.
(facsimile signature)
Secretary
<PAGE> 35
___________________
APPENDIX C
___________________
FORM OF MUNICIPAL BOND INSURANCE POLICY
<PAGE> 36
MBIA
FINANCIAL GUARANTY INSURANCE POLICY
MBIA Insurance Corporation
Armonk, New York 10504
Policy No. [NUMBER]
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this policy, hereby
unconditionally and irrevocably guarantees to any owner, as hereinafter
defined, of the following described obligations, the full and complete
payment required to be made by or on behalf of the Issuer to [PAYING
AGENT/TRUSTEE] or its successor (the "Paying Agent") of an amount equal to
(i) the principal of (either at the stated maturity or by any advancement
of maturity pursuant to a mandatory sinking fund payment) and interest on,
the Obligations (as that term is defined below) as such payments shall
become due but shall not be so paid (except that in the event of any
acceleration of the due date of such principal by reason of mandatory or
optional redemption or acceleration resulting from default or otherwise,
other than any advancement of maturity pursuant to a mandatory sinking
fund payment, the payments guaranteed hereby shall be made in such amounts
and at such times as such payments of principal would have been due had
there not been any such acceleration); and (ii) the reimbursement of any
such payment which is subsequently recovered from any owner pursuant to a
final judgment by a court of competent jurisdiction that such payment
constitutes an avoidable preference to such owner within the meaning of
any applicable bankruptcy law. The amounts referred to in clauses (i) and
(ii) of the preceding sentence shall be referred to herein collectively as
the "Insured Amounts." "Obligations" shall mean:
[PAR]
[LEGAL NAME OF ISSUE]
Upon receipt of telephonic or telegraphic notice, such notice subsequently
confirmed in writing by registered or certified mail, or upon receipt of
written notice by registered or certified mail, by the Insurer from the
Paying Agent or any owner of an Obligation the payment of an Insured
Amount for which is then due, that such required payment has not been
made, the Insurer on the due date of such payment or within one business
day after receipt of notice of such nonpayment, whichever is later, will
make a deposit of funds, in an account with State Street Bank and Trust
Company, N.A., in New York, New York, or its successor, sufficient for the
payment of any such Insured Amounts which are then due. Upon presentment
and surrender of such Obligations or presentment of such other proof of
ownership of the Obligations, together with any appropriate instruments of
assignment to evidence the assignment of the Insured Amounts due on the
Obligations as are paid by the Insurer, and appropriate instruments to
effect the appointment of the Insurer as agent for such owners of the
Obligations in any legal proceeding related to payment of Insured Amounts
on the Obligations, such instruments being in a form satisfactory to State
<PAGE> 37
Street Bank and Trust Company, N.A., State Street Bank and Trust Company,
N.A. shall disburse to such owners, or the Paying Agent payment of the
Insured Amounts due on such Obligations, less any amount held by the
Paying Agent for the payment of such Insured Amounts and legally available
therefor. This policy does not insure against loss of any prepayment
premium which may at any time be payable with respect to any Obligation.
As used herein, the term "owner" shall mean the registered owner of any
Obligation as indicated in the books maintained by the Paying Agent, the
Issuer, or any designee of the Issuer for such purpose. The term owner
shall not include the Issuer or any party whose agreement with the Issuer
constitutes the underlying security for the Obligations.
Any service of process on the Insurer may be made to the Insurer at its
offices located at 113 King Street, Armonk, New York 10504 and such
service of process shall be valid and binding.
This policy is non-cancellable for any reason. The premium on this policy
is not refundable for any reason including the payment prior to maturity
of the Obligations.
IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in
facsimile on its behalf by its duly authorized officers, this [DAY] day of
[MONTH, YEAR].
COUNTERSIGNED: MBIA Insurance Corporation
_______________________ __________________________
Resident Licensed Agent President
_______________________ Attest: __________________________
City, State Assistant Secretary
DISCLOSURE OF GUARANTY FUND NONPARTICIPATION: In the event the Insurer is
unable to fulfill its contractual obligation under this policy or contract
or application or certificate or evidence of coverage, the policyholder or
certificateholder is not protected by an insurance guaranty fund or other
solvency protection arrangement.
[SPECIMEN]
<PAGE> 38
MBIA
E N D O R S E M E N T
Attached to Policy No. [POLICY NUMBER] issued by MBIA Insurance
Corporation (the "Insurer"), to the Paying Agent, as defined in the
policy issued with respect to the Obligations.
It is further understood that this policy shall guarantee to the owner or
holder, as defined in the policy, the full and complete payments required
to be made by or on behalf of the Issuer if there occurs pursuant to the
terms of the Obligations an event which results in the loss of the tax
exempt status of the interest on the Obligations, including any principal,
interest or premium payments payable thereon, if any, as and when thereby
required.
This endorsement forms a part of the policy to which it is attached,
effective on the inception date of the policy.
IN WITNESS WHEREOF, the Insurer has caused this endorsement to be executed
in facsimile on its behalf by its President and its Assistant Secretary
this [DAY] of [MONTH, YEAR].
MBIA Insurance Corporation
__________________________
President
Attest: __________________________
Assistant Secretary
[SPECIMEN]
