UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Form 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-8222
Central Vermont Public Service Corporation
(Exact name of registrant as specified in its charter)
Incorporated in Vermont 03-0111290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
77 Grove Street, Rutland, Vermont 05701
(Address of principal executive offices) (Zip Code)
802-773-2711
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of October 29, 1999
there were outstanding 11,466,805 shares of Common Stock, $6 Par Value.
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Form 10-Q
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income and Retained Earnings
for the three and nine months ended September 30, 1999
and 1998 3
Consolidated Balance Sheet as of September 30, 1999 and
December 31, 1998 4
Consolidated Statement of Cash Flows for the nine
months ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-41
PART II. OTHER INFORMATION 42-43
SIGNATURE 44
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating Revenues $113,221 $69,522 $305,002 $219,886
Operating Expenses
Operation
Purchased power 79,538 42,196 192,472 127,784
Production and transmission 5,996 5,925 16,756 17,279
Other operation 2,932 9,955 36,166 32,808
Maintenance 5,660 3,767 12,700 11,421
Depreciation 4,308 4,145 12,705 12,603
Other taxes, principally property
taxes 2,952 2,779 8,854 8,623
Taxes on income 77 (176) 7,872 1,837
--------- -------- --------- ---------
Total operating expenses 111,463 68,591 287,525 212,355
--------- -------- --------- ---------
Operating Income 1,758 931 17,477 7,531
--------- -------- --------- ---------
Other Income and Deductions
Equity in earnings of affiliates 699 808 2,204 2,384
Other income, net 146 754 1,436 1,714
Benefit (provision) for income taxes 4 (62) (258) -
--------- -------- --------- ---------
Total other income and deductions, net 849 1,500 3,382 4,098
--------- -------- --------- ---------
Total Operating and Other Income 2,607 2,431 20,859 11,629
--------- -------- --------- ---------
Net Interest Expense 2,197 2,660 7,303 7,919
--------- -------- --------- ---------
Net Income (Loss) Before Extraordinary
Credit 410 (229) 13,556 3,710
Extraordinary Credit Net of Taxes - - - 873
--------- -------- --------- ---------
Net Income (Loss) 410 (229) 13,556 4,583
Retained Earnings at Beginning of
Period 77,436 74,646 67,748 75,841
--------- -------- --------- ---------
Cash Dividends Declared
Preferred stock 466 486 1,397 1,459
Common stock 5,043 48 7,570 5,082
--------- -------- --------- ---------
Total dividends declared 5,509 534 8,967 6,541
--------- -------- --------- ---------
Retained Earnings at End of Period $72,337 $73,883 $72,337 $73,883
========= ======== ========= =========
Earnings (Losses) Available For
Common Stock $(56) $(715) $ 12,159 $ 3,124
Average Shares of Common Stock
Outstanding 11,463,019 11,448,585 11,462,196 11,432,844
Basic and Diluted Share of Common Stock:
Earnings (losses) before extraordinary
credit $.00 $(.06) $1.06 $.19
Extraordinary credit - - - .08
--------- --------- --------- ----------
Earnings (Losses) Per Basic and Diluted
Share of Common Stock $.00 $(.06) $1.06 $.27
========= ========= ======== =========
Dividends Paid Per Share of Common Stock $.22 $.22 $.66 $.66
The accompanying notes are an integral part of these consolidated financial
statements.
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
September 30 December 31
1999 1998
<S> <C> <C>
Assets
Utility Plant, at original cost $475,068 $469,204
Less accumulated depreciation 171,426 160,666
-------- --------
303,642 308,538
Construction work in progress 10,000 10,461
Nuclear fuel, net 1,252 948
-------- --------
Net utility plant 314,894 319,947
-------- --------
Investments and Other Assets
Investments in affiliates, at equity 25,660 26,142
Non-utility investments 37,410 35,896
Non-utility property, less accumulated depreciation 2,568 2,920
-------- --------
Total investments and other assets 65,638 64,958
-------- --------
Current Assets
Cash and cash equivalents 66,262 10,051
Special deposits 397 424
Accounts receivable, less allowance for uncollectible
accounts ($1,262 in 1999 and $2,242 in 1998) 39,231 29,224
Unbilled revenues 12,876 18,677
Materials and supplies, at average cost 3,729 3,746
Prepayments 2,903 1,881
Other current assets 6,053 9,768
-------- --------
Total current assets 131,451 73,771
-------- --------
Regulatory Assets 59,046 66,719
-------- --------
Other Deferred Charges 5,625 4,887
-------- --------
Total Assets $576,654 $530,282
======== ========
Capitalization and Liabilities
Capitalization
Common stock, $6 par value, authorized
19,000,000 shares; outstanding 11,785,848 shares $ 70,715 $ 70,715
Other paid-in capital 45,334 45,318
Accumulated other comprehensive income (365) (365)
Treasury stock (322,829 shares and
324,717 shares, respectively, at cost) (4,209) (4,234)
Retained earnings 72,337 67,748
--------- ---------
Total common stock equity 183,812 179,182
Preferred and preference stock 8,054 8,054
Preferred stock with sinking fund requirements 17,000 18,000
Long-term debt 166,400 90,077
Capital lease obligations 15,330 16,141
--------- ---------
Total capitalization 390,596 311,454
--------- ---------
Current Liabilities
Short-term debt 12,000 37,000
Current portion of long-term debt and preferred stock 4,183 6,773
Accounts payable 16,867 11,589
Accounts payable - affiliates 8,788 11,784
Accrued income taxes - 2,975
Dividends declared 2,988 2,521
Nuclear decommissioning costs 4,820 4,820
Disallowed purchased power costs 1,840 7,361
Other current liabilities 19,700 17,403
--------- ---------
Total current liabilities 71,186 102,226
--------- ---------
Deferred Credits
Deferred income taxes 49,787 47,581
Deferred investment tax credits 6,537 6,831
Nuclear decommissioning costs 19,918 23,239
Other deferred credits 38,630 38,951
--------- ---------
Total deferred credits 114,872 116,602
--------- ---------
Total Capitalization and Liabilities $576,654 $530,282
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
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<TABLE>
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended
September 30
1999 1998
<S> <C> <C>
Cash Flows Provided (Used) By
Operating Activities
Net income $13,556 $4,583
Adjustments to reconcile net income to net cash
provided by operating activities
Equity in earnings of affiliates (2,204) (2,383)
Dividends received from affiliates 2,591 2,595
Equity in earnings of non-utility investments (1,146) (5,094)
Distribution of earnings from non-utility
investments 2,906 2,953
Extraordinary credit - (1,294)
Depreciation 12,705 12,603
Deferred income taxes and investment tax credits 2,884 2,427
Net deferral and amortization of nuclear refueling
replacement energy and maintenance costs 1,575 (2,838)
Amortization of conservation and load management
costs 5,080 4,226
Amortization of capital leases 811 811
Decrease in accounts receivable and unbilled
revenues 3,461 9,485
Increase (decrease)in accounts payable 2,415 (941)
Decrease in accrued income taxes (2,975) (9,606)
Change in other working capital items (8,102) (4,411)
Other, net (1,462) 3,727
-------- --------
Net cash provided by operating activities 32,095 16,843
-------- --------
Investing Activities
Construction and plant expenditures (9,209) (11,550)
Conservation & load management expenditures (2,118) (1,857)
Return of capital 140 140
Non-utility investments (3,305) (102)
Other investments, net 162 (234)
-------- --------
Net cash used for investing activities (14,330) (13,603)
-------- --------
Financing Activities
Short-term debt, net (28,750) (650)
Long-term debt, net 76,483 (15)
Common and preferred dividends paid (8,496) (8,513)
Reduction in capital lease obligations (811) (811)
Sale of common stock 25 451
Other (5) (54)
-------- --------
Net cash provided (used) for financing activities 38,446 (9,592)
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 56,211 (6,352)
Cash and Cash Equivalents at Beginning of Period 10,051 16,506
-------- --------
Cash and Cash Equivalents at End of Period $66,262 $10,154
======== ========
Supplemental Cash Flow Information
Cash paid during the period for:
Interest (net of amounts capitalized) $ 5,490 $ 5,534
Income taxes (net of refunds) $ 9,717 $ 9,940
The accompanying notes are an integral part of these consolidated financial
statements.
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CENTRAL VERMONT PUBLIC SERVICE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Note 1 - Accounting Policies
The Company's significant accounting policies are described in
Notes 1 and 15 of Notes to Consolidated Financial Statements included in
its 1998 Annual Report on Form 10-K filed with the Securities and
Exchange Commission. For interim reporting purposes, the Company
follows these same basic accounting policies but considers each interim
period as an integral part of an annual period.
RECLASSIFICATION Certain reclassifications have been made to prior
year Consolidated Statement of Cash Flows to conform with the 1999
presentation.
The financial information included herein is unaudited; however,
such information reflects all adjustments (consisting of normal
recurring accruals) which are, in the opinion of management, necessary
for a fair statement of results for the interim periods.
Note 2 - Environmental
The Company is engaged in various operations and activities which
subject it to inspection and supervision by both federal and state
regulatory authorities including the United States Environmental
Protection Agency (EPA). It is Company policy to comply with all
environmental laws. The Company has implemented various procedures and
internal controls to assess and assure compliance. If non-compliance is
discovered, corrective action is taken. Based on these efforts and the
oversight of those regulatory agencies having jurisdiction, the Company
believes it is in compliance, in all material respects, with all
pertinent environmental laws and regulations.
Company operations occasionally result in unavoidable, inadvertent
releases of regulated substances or materials, for example the rupture
of a pole mounted transformer, or a broken hydraulic line. Whenever the
Company learns of such a release, the Company responds in a timely
fashion and in a manner that complies with all federal and state
requirements. Except as discussed in the following paragraphs, the
Company is not aware of any instances where it has caused, permitted or
suffered a release or spill on or about its properties or otherwise
which is likely to result in any material environmental liabilities to
the Company.
The Company is an amalgamation of more than 100 predecessor
companies. Those companies engaged in various operations and activities
prior to being merged into the Company. At least two of these companies
were involved in the production of gas from coal to sell and distribute
to retail customers at three different locations. These activities were
discontinued by the Company in the late 1940's or early 1950's. The
coal gas manufacturers, other predecessor companies, and the Company
itself may have engaged in waste disposal activities which, while legal
and consistent with commercially accepted practices at the time, may not
meet modern standards and thus represent potential liability.
The Company continues to investigate, evaluate, monitor and, where
appropriate, remediate contaminated sites related to these historic
activities. The Company's policy is to accrue a liability for those
sites where costs for remediation, monitoring and other future
activities are probable and can be reasonably estimated. As part of
that process, the Company also researches the possibility of insurance
coverage that could defray any such remediation expenses.
CLEVELAND AVENUE PROPERTY The Company's Cleveland Avenue property
located in the City of Rutland, Vermont, a site where one of its
predecessors operated a coal-gasification facility and later the Company
sited various operations functions. Due to the presence of coal tar
deposits and Polychlorinated Biphenyl (PCB) contamination and
uncertainties as to potential off-site migration of those contaminants,
the Company conducted studies in the late 1980's and early 1990's to
determine the magnitude and extent of the contamination. After
completing its preliminary investigation, the Company engaged a
consultant to assist in evaluating clean-up methodologies and provide
cost estimates. Those studies indicated the cost to remediate the site
would be approximately $5.0 million. This was charged to expense in the
fourth quarter of 1992. Site investigation has continued over the last
several years and the Company continues to work with the State in a
joint effort to develop a mutually acceptable solution.
BRATTLEBORO MANUFACTURED GAS FACILITY From the early to late 1940's,
the Company owned and operated a manufactured gas facility in
Brattleboro, Vermont. The Company recently received a letter from the
State of New Hampshire asking the Company to conduct a scoping study in
and around the site of the former facility. The Company has engaged a
qualified consultant to do the scoping study and a search for other
Potential Responsible Parties (PRPs). At this time the Company has not
finalized an estimate of its potential liability at this site.
The Company is not subject to any pending or threatened litigation
with respect to any other sites that have the potential for causing the
Company to incur material remediation expenses, nor has the EPA or other
federal or state agency sought contribution from the Company for the
study or remediation of any such sites.
A reserve of $9.9 million has been established representing
management's best estimate of the costs to remediate these sites.
Note 3 - Retail Rates
The Company recognizes that adequate and timely rate relief is
necessary if it is to maintain its financial strength, particularly
since Vermont regulatory rules do not allow for changes in purchased
power and fuel costs to be automatically passed on to consumers through
rate adjustment clauses. The Company intends to continue its practice of
periodically reviewing costs and requesting rate increases when
warranted.
Vermont Retail Rate Proceedings
On September 22, 1997, the Company filed with the Public Service
Board, or PSB, for a 6.6% or $15.4 million retail rate increase to
become effective June 6, 1998 to offset the increasing cost of providing
service. $14.3 million or 92.9% of the rate increase request was to
recover contractual increases in the cost of power the Company purchases
from Hydro-Quebec. At the same time, the Company also filed a request to
eliminate the then current differential between the rates charged
customers in the summer and the rates charged customers in the winter
and price electricity the same year-round.
In response to the Company's filing, the PSB decided to appoint an
independent investigator to examine the Company's decision to buy power
from Hydro-Quebec. The Company made a filing with the PSB stating that
the PSB as well as other parties should be barred from reviewing past
decisions because the PSB already examined the Company's decision to buy
power from Hydro-Quebec in a 1994 rate case in which the Company was
penalized for "improvident power supply management." During February
1998, the Department of Public Service, or DPS, filed testimony in
opposition to the Company's retail rate increase request. The DPS
recommended that the PSB instead reduce the Company's then current
retail rates by 2.5% or $5.7 million. The Company sought, and the PSB
granted, permission to stay this rate case and to file an interlocutory
appeal of the PSB's denial of the Company's motion to preclude a
re-examination of the Company's Hydro-Quebec contract in 1991. The
Company recently argued its position before the Vermont Supreme Court.
Although the Vermont Supreme Court has not yet rendered a decision and
it is uncertain when a decision is forthcoming, a decision by the end of
1999 is possible.
The Company filed on June 12, 1998 with the PSB for a 10.7% retail
rate increase that supplanted the September 22, 1997, 6.6% rate increase
request, to be effective March 1, 1999. On October 27, 1998, the Company
reached an agreement with the DPS regarding the June 1998 retail rate
increase request providing for a temporary rate increase in the
Company's Vermont retail rates of 4.7% or $10.9 million on an annualized
basis beginning with service rendered on or after January 1, 1999. The
agreement was approved by the PSB on December 11, 1998.
The 4.7% rate increase is subject to retroactive or prospective
adjustment upon future resolution of issues arising under the Vermont
Joint Owners, or VJO, Power Contract presently before the Vermont
Supreme Court. The agreement temporarily disallows approximately $7.4
million for the Company's purchased power costs under the VJO Power
Contract pending resolution of the issues before the Vermont Supreme
Court. As a result of the 4.7% rate increase agreement, during the
fourth quarter of 1998, the Company recorded a pre-tax loss of $7.4
million for disallowed purchased power costs, representing the Company's
estimated under-recovery of power costs under the VJO Power Contract for
calendar year 1999. If in the future, the Company is unable to increase
rates to recover the temporary disallowed purchased power costs under
the VJO power contract or otherwise mitigate these costs, the Company
would be required to record losses for any estimated future under
recovery. At this time, the Company does not believe that such a loss
is probable.
This temporary $7.4 million disallowance was calculated using
comparable methodology to that used by the PSB in the Green Mountain
Power rate case on February 28, 1998. In that case, the PSB found Green
Mountain Power's decision to commit to the VJO Power Contract in 1991
"imprudent" and that power purchased under it was not "used and useful."
As a result, the PSB concluded that a portion of Green Mountain Power's
current costs should not be imposed on Green Mountain Power's customers
and were disallowed. Green Mountain Power is appealing that rate order
to the Vermont Supreme Court. Should the Company receive a similar order
from the PSB, the Company would experience a material adverse effect on
its results of operations and financial condition.
Assuming an unfavorable Vermont Supreme Court ruling and depending
on the methodology subsequently used by the PSB to determine the amount
of any disallowance, the amount of any permanent disallowance, it could
be more or less than the $7.4 million temporary disallowance. However,
if the Company receives an unfavorable ruling from the Vermont Supreme
Court and the PSB subsequently issues a final rate order adopting the
disallowance methodology used to determine the temporary Hydro-Quebec
disallowance described above for the duration of the VJO Power Contract,
the Company would not be able to recover approximately $205.0 million of
power costs over the life of the contract, including $11.5 million in
2000, $11.6 million in 2001, $11.7 million in 2002, $11.9 in million
2003 and $12.1 million in 2004. In such an event, the Company would be
required to take an immediate charge to earnings of approximately $205.0
million (pre-tax). Such an outcome could jeopardize the Company's
ability to continue as a going concern.
New Hampshire Retail Rate/Federal Court Proceedings
Connecticut Valley Electric Company Inc.'s, or Connecticut
Valley's, retail rate tariffs, approved by the New Hampshire Public
Utilities Commission, or NHPUC, contain a Fuel Adjustment Clause, or
FAC, and a Purchased Power Cost Adjustment, or PPCA. Under these
clauses, Connecticut Valley recovers its estimated annual costs for
purchased energy and capacity which are reconciled when actual data is
available.
On February 28, 1997 the NHPUC published its detailed Final Plan to
restructure the electric utility industry in New Hampshire. Also on
February 28, 1997, the NHPUC, in a supplemental order specific to
Connecticut Valley, found that Connecticut Valley was imprudent for not
terminating the FERC-authorized power contract between Connecticut
Valley and the Company, required Connecticut Valley to give notice to
cancel its contract with the Company and denied stranded cost recovery
related to this power contract. Connecticut Valley filed for rehearing
of the February 28, 1997 NHPUC Order.
On April 7, 1997, the NHPUC issued an Order addressing certain
threshold procedural matters raised in motions for rehearing and/or
clarification filed by various parties, including Connecticut Valley,
relative to the Final Plan and interim stranded cost orders. The April
7, 1997 Order stayed those aspects of the Final Plan that were the
subject of rehearing or clarification requests and also stayed the
interim stranded cost orders for the various parties, including
Connecticut Valley. As such, those matters pertaining to the power
contract between Connecticut Valley and the Company were stayed. The
suspension of these orders was to remain in effect until two weeks
following the issuance of any order concerning outstanding requests for
rehearing and clarification.
In an Order dated December 31, 1997 in Connecticut Valley's FAC
and PPCA docket, the NHPUC found Connecticut Valley acted imprudently by
not terminating the wholesale contract between Connecticut Valley and
the Company, notwithstanding the stays of its February 28, 1997 Orders.
The NHPUC Order further directed Connecticut Valley to freeze its
current FAC and PPCA rates (other than short term rates to be paid to
certain Qualifying Facilities) effective January 1, 1998, on a temporary
basis, pending a hearing to determine: 1) the appropriate proxy for a
market price that Connecticut Valley could have obtained if it had
terminated its wholesale contract with the Company; 2) the implications
of allowing Connecticut Valley to pass on to its customers only that
market price; and 3) whether the NHPUC's final determination on the FAC
and PPCA rates should be reconciled back to January 1, 1998 or some
other date.
On January 19, 1998, Connecticut Valley and the Company filed with
the Federal District Court, or Court for a temporary restraining order
to maintain the status quo ante by staying the NHPUC Order of December
31, 1997 and preventing the NHPUC from taking any action that (i)
compromises cost-based rate making for Connecticut Valley; (ii)
interferes with the Federal Energy Regulatory Commission's, or FERC
exclusive jurisdiction over the Company's pending application to recover
wholesale stranded costs upon termination of its wholesale power
contract with Connecticut Valley; or (iii) prevents Connecticut Valley
from recovering through retail rates the stranded costs and purchased
power costs that it incurs pursuant to its FERC-authorized wholesale
rate schedule with the Company.
On February 23, 1998, the NHPUC announced in a public meeting that
it reaffirmed its finding of imprudence and designated a proxy market
price for power at 4 cents per kWh in lieu of the actual costs incurred
pursuant to the wholesale power contract with the Company. In addition,
the NHPUC indicated, subject to certain conditions which were
unacceptable to the companies, that it would permit Connecticut Valley
to maintain its current rates pending a decision in Connecticut Valley's
appeal of the NHPUC Order to the
New Hampshire Supreme Court.
Based on the December 31, 1997 NHPUC Order as well as the NHPUC's
February 23, 1998 announcement, which resulted in the establishment of
Connecticut Valley's rates on a non cost-of-service basis, Connecticut
Valley no longer qualified, as of December 31, 1997, for the application
of Statement of Financial Accounting Standards, or SFAS, No. 71,
"Accounting for the Effects of Certain Types of Regulation." As a
result, Connecticut Valley wrote-off all of its regulatory assets
associated with its New Hampshire retail business as of December 31,
1997. This write-off amounted to approximately $1.2 million on a
pre-tax basis. In addition, Connecticut Valley recorded a $5.5 million
pre-tax loss in 1997 for disallowed power costs.
On March 20, 1998, the NHPUC issued an order which affirmed,
clarified and modified various generic policy statements including the
reaffirmation to establish rates on the basis of a regional average
announced previously in its
February 28, 1997 Order. The March 20, 1998 Order also addressed all
outstanding motions for rehearings or clarification relative to the
policies or legal positions articulated in the Final Plan and removed
the stay covering the Company's interim stranded cost order of April 7,
1997. In addition, the March 20, 1998 Order imposed various compliance
filing requirements.
On April 3, 1998, the Court held a hearing on the Companies' motion
for a Temporary Restraining Order, or TRO, and Preliminary Injunction
against the NHPUC at which time both the companies and the NHPUC
presented arguments. In an oral ruling from the bench, and in a written
order issued on April 9, 1998, the Court concluded that the companies
had established each of the prerequisites for preliminary injunctive
relief and directed and required the NHPUC to allow Connecticut Valley
to recover through retail rates all costs for wholesale power
requirements service that Connecticut Valley purchases from the Company
pursuant to its FERC-authorized wholesale rate schedule effective
January 1, 1998 until further court order. Connecticut Valley received
an order from the NHPUC authorizing retail rates to recover such costs
beginning in May 1998. On April 14, 1998, the NHPUC filed a notice of
appeal and a motion for a stay of the Court's preliminary injunction.
The NHPUC's request for a stay was denied. At the same time, the NHPUC
permitted Connecticut Valley to recover in rates the full cost of its
wholesale power purchases from the Company.
Also, on April 3, 1998, the Court indicated its earlier TRO
enjoining the NHPUC's restructuring orders applied to Connecticut Valley
and prohibits the enforcement of the restructuring orders until the
Court conducts a consolidated hearing and rules on the requests for
permanent injunctive relief by plaintiff Public Service Company of New
Hampshire, or PSNH, and the other utilities that had been allowed to
intervene in these proceedings, including the Company and Connecticut
Valley. The plaintiffs-intervenors thereafter filed a motion asking
the Court to extend its stay of action by the NHPUC to implement
restructuring and to make clear that the stay encompasses the NHPUC's
order of March 20, 1998.
As a result of these Court orders, Connecticut Valley's 1997
charges, described above, were reversed in the first quarter of 1998.
Combined, the reversal of these charges increased 1998 net income and
earnings per share of common stock by approximately $4.5 million and
$.39, respectively.
On April 1, 1998, Citizens Bank of New Hampshire, or Bank notified
Connecticut Valley that it was in default of the Loan Agreement between
the Bank and Connecticut Valley dated December 27, 1994 and that the
Bank would exercise all of its remedies from and after May 5, 1998 in
the event that the violations were not cured. After reversing the 1997
write-offs described above, Connecticut Valley was in compliance with
the financial covenants associated with its $3.75 million loan with the
Bank. As a result, Connecticut Valley satisfied the Bank's requirements
for curing the violation.
On May 11, 1998 the NHPUC issued an order requiring Connecticut
Valley to show cause why it should not be held in contempt for its
failure to meet the compliance filing requirements of its March 20, 1998
Order. A hearing on this matter was scheduled for June 11, 1998, which
was subsequently canceled because of the Court's June 5, 1998 Order,
discussed below.
On June 5, 1998, the Court issued an Order which denied the NHPUC's
motion for a stay of the Court's preliminary injunction. The Order
clearly stated that no restructuring effort in New Hampshire can move
forward without the Court's approval unless all New Hampshire utilities
agree to the plan. The Order suspended all involuntary restructuring
efforts for all New Hampshire utilities until a hearing on the merits
was conducted. The NHPUC appealed this Order to the United States First
Circuit Court of Appeals, or Court of Appeals.
On July 23, 1998, the NHPUC issued an order vacating that portion
of its February 27, 1997 restructuring order that had directed
Connecticut Valley to terminate its RS-2 wholesale power purchases from
the Company. The NHPUC has expressly stated in federal court filings
that its July 23, 1998 order "clarified that Connecticut Valley should
not terminate the RS-2 Rate Schedule if such termination would trigger
the exit fee" for which the Conpany has sought authorization from FERC.
On November 24, 1998, Connecticut Valley filed with the NHPUC its
annual FAC/PPCA rates to be effective January 1, 1999. On January 4,
1999, the NHPUC issued an Order allowing Connecticut Valley to implement
the proposed FAC rate of $.008 per KWH and the proposed PPCA rate of
$.01000 per KWH, on a temporary basis, effective on all bills rendered
on or after January 1, 1999. In addition, the NHPUC also ordered
Connecticut Valley to pay refunds plus interest to its retail customers
for any overcharges collected as a result of the April 9, 1998 Federal
District Court Order, should it be overturned or modified, which are
included in the estimated total losses of $4.3 million discussed below.
On December 3, 1998, the Court of Appeals announced its decisions
on the appeals taken by the NHPUC from the preliminary injunctions
issued by the Court. Those preliminary injunctions had stayed
implementation of the NHPUC's plan to restructure the New Hampshire
electric industry and required the NHPUC to allow Connecticut Valley to
recover through its retail rates the full cost of wholesale power
obtained from the Company.
The Court of Appeals affirmed the preliminary injunction, issued by
the Court, staying restructuring until the plaintiff utilities' claims
(including those of the Company and Connecticut Valley) are fully tried.
The Court of Appeals found that PSNH had sufficiently established that
without the preliminary injunction against restructuring it would suffer
substantial irreparable injury and that it had sufficient claims against
restructuring to warrant a full trial. The Court of Appeals also
affirmed the extension of the preliminary injunction to protect the
other plaintiff utilities, including Connecticut Valley and the Company,
although it questioned whether the other utilities had arguments as
strong against restructuring as PSNH because they did not have formal
agreements with the State similar to PSNH's Rate Agreement. The Court
of Appeals stated that if the Court awards the utilities permanent
injunctive relief against restructuring after the case is tried, then it
must explain why the other utilities are also entitled to such relief.
The NHPUC filed a petition for rehearing on December 17, 1998. The
Court of Appeals denied the petition on January 13, 1999.
The Court of Appeals also reversed the Court's preliminary
injunction requiring the NHPUC to allow Connecticut Valley to recover in
retail rates the full cost of the power it buys from the Company.
Although the Court of Appeals found that Connecticut Valley and the
Company had made a strong showing of irreparable injury to justify the
preliminary injunction, it concluded that Connecticut Valley's and the
Company's claims did not have a sufficient probability of success to
warrant such preliminary relief. The Court of Appeals explained that
the filed-rate doctrine preserving the exclusive jurisdiction of the
FERC over wholesale power rates did not prevent the NHPUC from deciding
whether Connecticut Valley's power purchases from the Company were
prudent given alternative available sources of wholesale power. The
Court of Appeals then stated that Connecticut Valley's rates could be
reduced to the level prevailing on December 31, 1997. However, the
Court of Appeals also stated that if the NHPUC ordered Connecticut
Valley's rates to be reduced below the level existing as of December 31,
1997, "it will be time enough to consider whether they are precluded
from the Court's injunction against the Final Plan or on other grounds."
On December 17, 1998, Connecticut Valley and the Company filed a
petition for rehearing on the grounds that the Court of Appeals had not
given sufficient weight to the Court's factual findings and that the
Court of Appeals had misapprehended both factual and legal issues.
Connecticut Valley and the Company also asked that the entire Court of
Appeals, rather than only the three-judge appellate panel that had
issued the December 3 decision, consider their petition for rehearing.
On January 13, 1999, the Court of Appeals denied the petition for
rehearing.
Connecticut Valley and the Company then requested the Court of
Appeals to stay the issuance of its mandate until the companies could
file a petition of certiorari to the United States Supreme Court and the
Supreme Court acted on the petition.
On January 22, 1999, the Court of Appeals denied the request.
However, the Court of Appeals granted a 21-day stay to enable the
Company to seek a stay pending certiorari from the Circuit Justice of
the Supreme Court. On February 11, 1999, the Company and Connecticut
Valley filed a petition for a writ of certiorari with the United States
Supreme Court and a motion to stay the effect of the Court of Appeals'
decision while the case was pending in the Supreme Court. The motion
for a stay was addressed to Justice Souter who is responsible for such
motions pertaining to the Court of Appeals for the First Circuit. On
February 18, 1999, Justice Souter denied the stay pending the petition
for certiorari and on April 19, 1999 the Supreme Court denied the
petition for certiorari.
As a result of the December 3, 1998 Court of Appeals' decision
discussed above, on March 22, 1999, the NHPUC issued an Order which
directed Connecticut Valley to file within five business days its
calculation of the difference between the total FAC and PPCA revenues
that it would have collected had the 1997 FAC and PPCA rate levels been
in effect the entire year. In its Order, the NHPUC also directed
Connecticut Valley to calculate a rate reduction to be applied to all
billings for the period April 1, 1999 through December 31, 1999 to
refund the 1998 over collection relative to the 1997 rate level. The
Company estimated this amount to be approximately $2.7 million on a
pre-tax basis. Connecticut Valley filed the required tariff page with
the NHPUC, under protest and with reservation of all rights, on March
26, 1999 and implemented the refund effective April 1, 1999.
As a result of legal and regulatory actions discussed above,
Connecticut Valley no longer qualified as of December 31, 1998 for the
application of SFAS No. 71, and wrote-off in the fourth quarter of 1998
all its regulatory assets associated with its New Hampshire retail
business estimated at approximately $1.3 million on a pre-tax basis at
December 31, 1998. In addition, Connecticut Valley also recorded
estimated total losses of $4.3 million pre-tax during the fourth quarter
of 1998 for disallowed power costs of $1.6 million and its refund
obligations of $2.7 million. Company management, however, continues to
believe that the NHPUC's actions are illegal and unconstitutional and
will present its arguments in the appropriate forum.
The pre-tax losses described above resulted in Connecticut Valley
violating applicable covenants, which if not waived or renegotiated,
would have allowed Connecticut Valley's lender the right to accelerate
the repayment of a $3.75 million loan with Connecticut Valley. On March
12, 1999, Connecticut Valley was notified by the Bank that it would
exercise appropriate remedies in connection with the violation of
financial covenants associated with the $3.75 million loan agreement
unless the violation was cured by April 11, 1999. To avoid default of
this loan agreement, on April 6, 1999, pursuant to an agreement reached
on March 26, 1999, the Company purchased from the Bank the $3.75 million
note.
On April 7, 1999, the Court ruled from the bench that the March 22,
1999 NHPUC Order requiring Connecticut Valley to provide a refund to its
retail customers was illegal and beyond the NHPUC's authority. The
Court also ruled that the NHPUC cannot reduce Connecticut Valley's rates
below rates in effect at December 31, 1997. Accordingly, Connecticut
Valley removed the rate refund from retail rates effective April 16,
1999. Lastly, the Court denied the NHPUC's motion to dissolve the
injunction staying the implementation of its restructuring plan and
stated its desire to rule on the pending motion for summary judgement
and to conduct a hearing on the Company's request for a permanent
injunction, after the NHPUC completes hearings on PSNH's stranded costs.
The District Court's decision was issued as a written order on May 11,
1999.
The NHPUC held a hearing on April 22, 1999 to determine whether to
modify Connecticut Valley's 1999 power rates by returning the rates to
the levels that were in effect on December 31, 1997. On May 17, 1999,
the NHPUC issued an order requiring Connecticut Valley to set temporary
rates at the level in effect as of December 31, 1997, subject to future
reconciliation, effective with bills issued on and after June 1, 1999.
On May 24, 1999, the NHPUC filed a petition for mandamus in the
Court of Appeals challenging the Court's May 11, 1999 ruling and seeking
a decision allowing the refunds as required by the NHPUC's March 22,
1999 order. The Court of Appeals denied that petition on June 2, 1999.
The NHPUC immediately filed a notice of appeal in the Court of Appeals
again challenging the Court's May 11, 1999 ruling. In that appeal, the
Company and Connecticut Valley contend, among other things, that it is
unfair for the NHPUC to direct Connecticut Valley to continue to
purchase wholesale power under RS-2 in order to avoid the triggering of
a FERC exit fee, but at the same time to freeze Connecticut Valley's
rates at their December 31, 1997 level which does not enable Connecticut
Valley to recover all of its RS-2 costs. The appeal is fully briefed,
and oral argument is expected to be held in January or February, 2000.
On June 14, 1999, PSNH and various parties in New Hampshire
announced that a "Memorandum of Understanding" had been reached that is
intended to result in a detailed settlement proposal to the NHPUC that
would resolve PSNH's claims against the NHPUC's restructuring plan. On
July 6, 1999, PSNH petitioned the Court to stay its proceedings
indefinitely while the proposed settlement is reviewed and approved by
the NHPUC and the New Hampshire Legislature. On July 12, 1999, the
Company and Connecticut Valley objected to any stay that would allow the
NHPUC's rate freeze order to remain in effect for an extended period and
asked the Court to proceed with prompt hearings on its summary judgement
motion and trial on the merits. On October 20, 1999 the Court heard oral
arguments pertaining to the pretrial motions of the Company and the
NHPUC for summary judgement and dismissal, respectively. The Court took
the matters under advisement and indicated that a written order would
ensue.
FERC Proceedings
The Company filed an application with the FERC in June 1997, to
recover stranded costs in connection with its wholesale rate schedule
with Connecticut Valley and a notice of cancellation of the Connecticut
Valley rate schedule (contingent upon the recovery of the stranded costs
that would result from the cancellation of this rate schedule). In
December 1997, the FERC rejected the Company's proposal to recover
stranded costs through the imposition of a surcharge on our transmission
tariff, but indicated that it would consider an exit fee mechanism for
collecting stranded costs. The FERC denied the Company's motion for a
rehearing regarding the surcharge proposal, so the Company filed a
request with the FERC for an exit fee mechanism to collect the stranded
costs resulting from the cancellation of the contract with Connecticut
Valley. The stranded cost obligation sought to be recovered through an
exit fee, expressed on a net present value basis as of January 1, 1999,
is approximately $48.0 million. During April and May 1999, nine days of
hearings were held at the FERC before an Administrative Law Judge, who
will determine, among other things, whether Connecticut Valley qualifies
for an exit fee, and if so, the amount of Connecticut Valley's stranded
cost obligation to be paid to the Company as an exit fee. The ruling of
the administrative law judge is expected later this year, and the FERC
will act on the judge's recommendations sometime thereafter.
If the Company is unable to obtain an order authorizing the
recovery of costs in connection with the June 1997 FERC filing or in the
Federal Court, it is possible that the Company would be required to
recognize a pre-tax loss under this contract totaling approximately
$60.0 million on a pre-tax basis. The Company would also be required to
write-off approximately $4.0 million (pre-tax) in regulatory assets
associated with its wholesale business. However, even if the Company
obtains a FERC order authorizing the updated requested exit fee, if
Connecticut Valley is unable to recover its costs by increasing its
rates, Connecticut Valley would be required to recognize a loss under
this contract of approximately $48.0 million (pre-tax) representing
future underrecovery of power costs.
In addition to its efforts before the Court and FERC, Connecticut
Valley has initiated efforts and will continue to work for a negotiated
settlement with parties to the New Hampshire restructuring proceeding
and the NHPUC. On September 14 and 15, 1998 the Company participated in
a settlement conference with an Administrative Law Judge assigned for
the settlement process at the FERC and the parties to the Company's exit
fee filing.
An adverse resolution of these proceedings would have a material
adverse effect on the Company's results of operations and cash flows.
However, the Company cannot predict the ultimate outcome of this matter.
Note 4 - Segment Reporting
The Company adopted SFAS No.131,"Disclosures about Segments of an
Enterprise and Related Information," effective for financial statements
for periods beginning after December 15, 1997. Operating segments are
defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. The Company's chief
operating decision making group is the Board of Directors, which is
comprised of nine Directors including the Chairman of the Board and the
Company's President and Chief Executive Officer. The operating segments
are managed separately because each operating segment represents a
different retail rate jurisdiction or offers different products or
services.
The Company's reportable operating segments include Central Vermont
Public Service Corporation, or Central Vermont which engages in the
purchase, production, transmission, distribution and sale of electricity
in Vermont; Connecticut Valley Electric Company Inc., or Connecticut
Valley which distributes and sells electricity in parts of New
Hampshire; and Catamount Energy Corporation, or Catamount which has
investments is energy generation projects in the United States and Great
Britain. Connecticut Valley, while managed on an integrated basis with
Central Vermont, is presented separately because of its separate and
distinct regulatory jurisdiction. Other operating segments include
segments below the quantitative threshold for separate disclosure. These
operating segments are SmartEnergy Services, Inc. which invests in
unregulated energy and service related businesses, and C. V. Realty,
Inc., a real estate company whose purpose is to own, acquire, buy, sell
and lease real and personal property and interests therein related to
the utility business.
The accounting policies of the operating segments are the same as
those described in Notes 1 and 15 to Consolidated Financial Statements
included in the Company's 1998 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. Intersegment revenues include sales
of purchased power to Connecticut Valley and revenues for support
services to Connecticut Valley, Catamount and SmartEnergy. These
intersegment sales and services for each jurisdiction are based on
actual rates or current costs. The Company evaluates performance based
on standalone operating segment net income.
Financial information by industry segment for the three and nine months
ended September 30, 1999 and 1998, is as follows (dollars in thousands):
<TABLE>
<CAPTION>
Reclassifications
Central Vermont Connecticut Valley All & Consolidating
Vermont New Hampshire Catamount Other<F1> Entries Consolidated
--------------- ------------------ --------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended September 30
1999
Revenues from external
customers $108,813 $ 4,408 $ 140 $ 1,097 $(1,237) $113,221
Intersegment revenues 2,858 - - - (2,858) -
Net income (loss) 459 159 334 (542) - 410
Total assets 520,374 12,247 41,298 9,107 (6,372) 576,654
1998
Revenues from external
customers $ 64,348 $ 5,176 $ 193 $ 448 $ (643) $ 69,522
Intersegment revenues 2,994 - - - (2,994) -
Net income (loss) (697) 51 799 (382) - (229)
Total assets 462,563 13,081 42,768 3,708 (4,939) 517,181
Reclassifications
Central Vermont Connecticut Valley All & Consolidating
Vermont New Hampshire Catamount Other<F1> Entries Consolidated
--------------- ------------------ --------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Nine Months Ended September 30
1999
----
Revenues from external
customers $289,293 $15,710 $ 436 $ 5,383 $(5,820) $305,002
Intersegment revenues 9,313 - - - (9,313) -
Net income (loss) 12,558 483 1,247 (732) - 13,556
Total assets 520,374 12,247 41,298 9,107 (6,372) 576,654
1998
----
Revenues from external
customers $203,564 $16,325 $ 327 $ 1,395 $(1,725) $219,886
Intersegment revenues 9,768 - - - (9,768) -
Net income (loss) (758) 4,508 2,075 (1,242) - 4,583
Total assets 462,563 13,081 42,768 3,708 (4,939) 517,181
<F1>Includes segments below the quantitative threshold for separate disclosure.
</TABLE>
Note 5 - Investment in Vermont Yankee Nuclear Power Corporation
The Company accounts for its investment in Vermont Yankee using the
equity method. Summarized financial information for Vermont Yankee
Nuclear Power Corporation follows:
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
Operating revenues $49,029 $43,186 $139,182 $152,269
Operating income $ 3,651 $ 3,929 $ 11,044 $ 11,639
Net income $ 1,580 $ 1,816 $ 4,874 $ 5,324
Company's equity in
net income $463 $594 $ 1,504 $ 1,643
On October 15, 1999 the Company and the other owners of Vermont
Yankee accepted a bid for sale of the plant to AmerGen Energy Co.,
which is owned by PECO Energy Company and British Energy. This
transaction will also involve the Company entering into a contract to
purchase a portion of the power produced by this plant. The Vermont
Yankee sale needs to be approved by various state and federal regulatory
bodies. If the Company receives necessary approvals the transaction is
expected to be completed by Summer 2000.
<PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1999
Earnings Overview
The Company recorded losses available for common stock of $56,000,
or $.00 per share of common stock for the third quarter of 1999,
compared to a net loss of $715,000, or a loss of $.06 per share of
common stock, for the third quarter of 1998. Due to the Company's
winter sales peak and higher winter rates, the Company normally
experiences losses in the second and third quarters when sales are lower
and rates are reduced.
Improved third quarter 1999 earnings compared to the third quarter
of 1998 resulted primarily from higher retail revenues associated with
the positive impact of a 4.7% temporary Vermont rate increase ($1.7
million after-tax, or $.15 per share of common stock) as well as a 4.4%
increase in retail mWh sales ($1.4 million after-tax, or $.12 per share
of common stock.) These increases are partially offset by higher
operating and maintenance costs of $2.4 million after-tax, or $.22 per
share of common stock, caused primarily by Hurricane Floyd during
September 1999 as well as increased regulatory and legal costs.
For the nine months ended September 30, 1999, earnings available
for common stock were $12.2 million compared to $3.1 million in 1998.
Earnings per share of common stock for these respective periods were
$1.06 and $.27.
Increased earnings for the nine months of 1999 reflect the positive
impact of a 4.7% temporary Vermont rate increase ($5.4 million
after-tax, or $.47 per share of common stock) as well as a 2.9% increase
in retail mWh sales.
Other factors affecting results for 1999, including the positive
affect of lower net power costs, are described in Results of Operations
below.
The 1998 nine months reflect the positive impact of reversing
Connecticut Valley Electric Company Inc.'s, or Connecticut Valley's
fourth quarter 1997 after-tax charges of $4.5 million or $.39 per share
of common stock.
RESULTS OF OPERATIONS
The major elements of the Consolidated Statement of Income are
discussed below.
Operating Revenues and mWh Sales
A summary of mWh sales and operating revenues for the three and
nine months ended September 30, 1999 and 1998 (and the related
percentage changes from 1998) is set forth below:
<TABLE>
<CAPTION>
Three Months Ended September 30
Percentage Percentage
mWh Increase Revenues (000's) Increase
1999 1998 (Decrease) 1999 1998 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Residential 225,927 215,475 4.9 $26,907 $24,894 8.1
Commercial 246,269 242,033 1.8 25,625 24,310 5.4
Industrial 109,445 99,229 10.3 7,739 6,888 12.4
Other retail 1,579 1,799 (12.2) 454 488 (7.0)
--------- ------- ------- -------
Total retail sales 583,220 558,536 4.4 60,725 56,580 7.3
--------- ------- ------- -------
Resale sales:
Firm 307 492 (37.6) 37 24 54.2
Entitlement 99,354 93,320 6.5 5,017 4,562 10.0
Other 1,153,598 264,571 336.0 45,441 7,145 536.0
--------- ------- -------- -------
Total resale sales 1,253,259 358,383 249.7 50,495 11,731 330.4
--------- ------- -------- -------
Other revenues - - - 2,001 1,211 65.2
--------- -------- -------- -------
Total sales 1,836,479 916,919 100.3 $113,221 $69,522 62.9
========= ======== ======== =======
Nine Months Ended September 30
Percentage Percentage
mWh Increase Revenues (000's) Increase
1999 1998 (Decrease) 1999 1998 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Residential 712,872 692,304 3.0 $90,759 $84,499 7.4
Commercial 709,703 694,801 2.1 79,653 74,953 6.3
Industrial 322,238 307,647 4.7 26,317 24,344 8.1
Other retail 4,688 5,364 (12.6) 1,343 1,457 (7.8)
--------- --------- ------- -------
Total retail sales 1,749,501 1,700,116 2.9 198,072 185,253 6.9
--------- --------- ------- -------
Resale sales:
Firm 1,653 1,617 2.2 116 61 90.2
Entitlement 280,614 229,076 22.5 14,964 14,825 .9
Other 2,642,182 578,741 356.5 87,697 15,966 449.3
--------- --------- -------- --------
Total resale sales 2,924,449 809,434 261.3 102,777 30,852 233.1
--------- --------- -------- --------
Other revenues - - - 4,153 3,781 9.8
--------- --------- -------- --------
Total sales 4,673,950 2,509,550 86.2 $305,002 $219,886 38.7
========= ========== ======== ========
</TABLE>
Retail revenues increased $4.1 million or 7.3% compared to last
year. This increase results from a 4.7% temporary retail rate increase
and 4.4% higher mWh sales in the 1999 third quarter as compared to the
same period in 1998.
For the nine months ended September 30, 1999, retail mWh sales
increased 2.9% reflecting a return to normal winter weather compared to
1998.
Retail revenues increased $12.8 million or 6.9% for the nine months
of 1999 compared to last year. This increase is due to the 4.7%
temporary retail rate increase discussed above and the impact of higher
mWh sales.
For the 1999 third quarter and nine months, entitlement mWh sales
increased 6.5% and 22.5% respectively and related revenues increased
10.0% and .9% respectively compared to the same periods last year. This
increase results primarily from the Vermont Yankee extended refueling
outage in 1998.
Other 1999 resale sales increased 889,027 mWh ($38.3 million) and
2,063,441 mWh ($71.7 million) for the third quarter and nine months,
respectively, primarily as a result of activity by the Company through
its alliance with Virginia Power in jointly supplying wholesale power in
the Northeast and Mid-Atlantic states. In the third quarter of 1999 the
Company decided to discontinue this alliance because the Company
believes the risks associated with this relationship outweigh the
potential rewards.
Other revenues increased for the third quarter and nine months of
1999 primarily due to reimbursement of net power margins associated with
the Virginia Power Alliance discussed above.
Net Purchased Power and Production Fuel Costs
The net cost components of purchased power and production fuel
costs for the three and nine months ended September 30, 1999 and 1998
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended September 30
1999 1998
Units Amount Units Amount
<S> <C> <C> <C> <C>
Purchased and produced:
Capacity (MW) 734 $21,870 543 $24,106
Energy (mWh) 1,799,373 57,669 869,234 18,090
------- -------
Total purchased power costs 79,539 42,196
Production fuel (mWh) 87,035 1,208 96,602 612
------- -------
Total purchased power and
production fuel costs 80,747 42,808
Entitlement and other resale sales (mWh) 1,252,952 50,458 357,891 11,707
------- -------
Net purchased power and production
fuel costs $30,289 $31,101
======= =======
Nine Months Ended September 30
1999 1998
Units Amount Units Amount
<S> <C> <C> <C> <C>
Purchased and produced:
Capacity (MW) 856 $ 66,781 559 $71,221
Energy (mWh) 4,543,993 125,691 2,408,734 56,563
-------- --------
Total purchased power costs 192,472 127,784
Production fuel (mWh) 292,651 2,554 243,214 1,521
-------- --------
Total purchased power and
production fuel costs 195,026 129,305
Less entitlement and
other resale sales (mWh) 2,922,796 102,661 807,817 30,791
------- -------
Net purchased power and production
fuel costs $92,365 $98,514
======= =======
</TABLE>
Net purchased power and production fuel costs decreased $2.3
million, or 7.4% for the third quarter of 1999 compared to the third
quarter of 1998 primarily as the result of better performance at
Millstone Unit No. 3 and at the Vermont Yankee nuclear power plant. The
1999 third quarter also reflects the positive impact of $1.8 million
(pre-tax) as the result of recognizing disallowed Hydro-Quebec power
costs during the fourth quarter of 1998.
For the nine months ended September 30, 1999, net purchased power
and production fuel costs decreased $6.1 million or 6.2% compared to the
same period in 1998 resulting from better performance at Millstone Unit
No. 3 and at the Vermont Yankee nuclear power plant.
Energy purchases increased $39.6 million for the 1999 third quarter
and $69.1 million for the nine moths ended September 30, 1999. These
increases primarily relate to the Virginia Power Alliance and were
offset by increases in other resale sales described above.
In addition, nine months ended September 30, 1999 reflects the
positive impact of $5.5 million (pre-tax) as the result of recognizing
disallowed Hydro-Quebec power costs during the fourth quarter of 1998.
The 1998 nine months ended September 30 reflect the positive impact of
reversing Connecticut Valley's fourth quarter 1997 charge of $5.5
million pre-tax.
Generating Units
The Company owns and operates 20 hydroelectric generating units and
two gas turbines and one diesel peaking unit with a combined nameplate
capability of 73.7 MW.
The Company is currently in the process of relicensing or preparing
to relicense eight separate hydroelectric projects under the Federal
Power Act. These projects, some of which are grouped together under a
single license, represent approximately 29.9 MW, or about 72.4% of the
Company's total hydroelectric nameplate capacity. In the new licenses,
the FERC is expected to impose conditions designed to address the impact
of the projects on fish and other environmental concerns. The Company is
unable to predict the impact of the imposition of such conditions, but
capital expenditures and operating costs are expected to increase and
net generation from these projects will decrease in future periods.
The Company has equity ownership interests in four nuclear
generating companies: Vermont Yankee, Maine Yankee, Connecticut Yankee
and Yankee Atomic. In addition, the Company maintains joint-ownership
interests in Joseph C. McNeil, a 53 MW wood, gas and oil-fired unit;
Wyman #4, a 619 MW oil fired unit; and Millstone Unit No. 3, an 1149 MW
nuclear unit. (Also see Vermont Yankee below.)
MERRIMACK UNIT #2
Until its termination on April 30, 1998, the Company purchased
power and energy from Merrimack Unit #2 pursuant to a contract dated
July 16, 1966 entered into by and between Vermont Electric Power
Company, Inc., or Velco and Public Service Company of New Hampshire, or
PSNH. Pursuant to the contract, as amended, Velco agreed to reimburse
PSNH, in the proportion which the Velco quota bears to the demonstrated
net capability of the plant, for all fixed costs of the unit and
operating costs of the unit incurred by PSNH, which are reasonable and
cost-effective for the remaining term of the Velco contract.
In early 1998, PSNH took the Merrimack Unit #2 facility off line,
shut it down and commenced a maintenance outage. In February, March and
April of 1998, PSNH billed Velco for costs to complete the maintenance
outage. Velco disputes the validity of a portion of the charges on
grounds that the maintenance performed at the unit was to extend the
life of the Merrimack plant beyond the term of the Velco contract and
that the charges in connection with said investments were not reasonable
and cost-effective for the remaining term of the Velco contract. The
Company estimates that the portion of the disputed charges allocable to
the Company could be as much as $1.0 million on a pre-tax basis.
NUCLEAR MATTERS
The Company maintains a 1.7303% joint-ownership interest in the
Millstone Unit No. 3 of the Millstone Nuclear Power Station and owns a
2% equity interest in Connecticut Yankee. These two plants are operated
by Northeast Utilities, or NU. The Company also owns 2%, 3.5% and 31.3%
equity interest in Maine Yankee, Yankee Atomic and Vermont Yankee,
respectively.
Millstone Unit No. 3
Millstone Unit No. 3 resumed operation in June 1998 after a lengthy
outage, and accordingly, production fuel costs increased for the nine
months of 1999 compared to the same period in 1998.
The Company remains actively involved with the other non-operating
minority joint-owners of Millstone Unit No. 3. This group is engaged in
various activities to monitor and evaluate NU and Northeast Utilities
Service Co.'s efforts relating to Millstone Unit No. 3. On August 7,
1997, the Company and eight other non-operating owners of Millstone Unit
No. 3 filed a demand for arbitration with Connecticut Light and Power
Company and Western Massachusetts Electric Company, both NU affiliates,
and lawsuits against NU and its trustees. The arbitration and lawsuits
seek to recover costs associated with replacement power, operation and
maintenance costs and other costs resulting from the lengthy outage of
Millstone Unit No. 3. The non-operating owners claim that NU and two of
its wholly owned subsidiaries failed to comply with NRC's regulations,
failed to operate the facility in accordance with good operating
practice and attempted to conceal their activities from the
non-operating owners and the NRC.
Based on the most recent decommissioning estimate in 1997, the
Company's total share of the Millstone Unit No. 3 decommissioning costs
at December 31, 1998 was $9.7 million. As of December 31, 1998, the
Company has funded $3.2 million of these costs.
On September 15, 1999, NU announced that is intends to acution its
nuclear generating plants, including Millstone Unit No. 3. We cannot
predict at this time the effect of such an auction, if it occurs, on the
Company or on the ongoing litigation.
On October 27, 1999, NU and New England Power Company, or NEP,
disclosed that NU had reached an agreement with NEP and Montaup Electric
Company, or MEC, two of the non-operating minority joint owners, to
settle their claims in the arbitration and lawsuits. The settlement
involves payment of fixed and contingent amounts to NEP and MEC and the
inclusion of their Millstone Unit No. 3 interests in NU's auction of the
plant. The other non-operating minority joint owners, including the
Company, remain active in the arbitration and lawsuits and in seeking to
settle our claims against NU.
Maine Yankee
On August 6, 1997, the Maine Yankee's nuclear power plant was
prematurely retired from commercial operation. The Company relied on
Maine Yankee for less than 5% of its required system capacity. Future
payments for the closing, decommissioning and recovery of the remaining
investment in Maine Yankee are estimated to be approximately $715.0
million in 1998 dollars including a decommissioning obligation of $344.0
million.
On January 19, 1999, Maine Yankee and the active intervenors filed
an Offer of Settlement with the FERC which the FERC has approved. As a
result, all issues raised in the FERC proceeding, including recovery of
anticipated future payments for closing, decommissioning and recovery of
the remaining investment in Maine Yankee are resolved. Also resolved are
the issues raised by the secondary purchasers, who purchased Maine
Yankee power through agreements with the original owners, by limiting
the amounts they will pay for decommissioning the Maine Yankee plant and
by settling other points of contention affecting individual secondary
purchasers. As a result, it is possible that the Company will not be
able to recover approximately $.5 million of these costs.
Connecticut Yankee
On December 4, 1996, the Connecticut Yankee Nuclear power plant was
prematurely retired from commercial operation. The Company relied on
Connecticut Yankee for less than 3.0% of its required system capacity.
On August 31, 1998, a FERC Administrative Law Judge recommended
that the owners of Connecticut Yankee, including the Company, may
collect from customers $350.0 million for decommissioning the
Connecticut Yankee Nuclear Power Plant rather than the $426.7 million
requested. The Administrative Law Judge ruling is subject to approval
by the FERC Commissioners. If approved, it is possible that the Company
would not be able to recover approximately $1.5 million of
decommissioning costs through the regulatory process.
Yankee Atomic
In 1992, the Yankee Atomic nuclear power plant was retired from
commercial operation. The Company relied on Yankee Atomic for less than
1.5% of its system capacity.
Maine Yankee, Connecticut Yankee and Yankee Atomic Decommissioning Costs
Presently, costs billed to the Company by Maine Yankee, Connecticut
Yankee and Yankee Atomic, including a provision for ultimate
decommissioning of the units, are being collected from the Company's
customers through existing retail and wholesale rate tariffs. The
Company's share of remaining costs with respect to Maine Yankee,
Connecticut Yankee and Yankee Atomic's decisions to discontinue
operation is estimated to be $14.1 million, $9.0 million and $1.6
million, respectively, at September 30, 1999. These amounts are subject
to ongoing review and revisions and are reflected in the accompanying
balance sheet both as regulatory assets and nuclear decommissioning
costs (current and non-current). Although the estimated costs of
decommissioning are subject to change due to changing technologies and
regulations, the Company expects that the nuclear generating companies'
liability for decommissioning, including any future changes in the
liability, will be recovered in their rates over their operating or
license lives.
The decision to prematurely retire these nuclear power plants was
based on economic analyses of the costs of operating them compared to
the costs of closing them and incurring replacement power costs over the
remaining period of the plants' operating licenses. The Company
believes that based on the current regulatory process, its proportionate
share of Maine Yankee, Connecticut Yankee and Yankee Atomic
decommissioning costs will be recovered through the regulatory process
and, therefore, the ultimate resolution of the premature retirement of
the three plants has not and should not have a material adverse effect
on the Company's earnings or financial condition.
Vermont Yankee
On October 9, 1996 the Nuclear Regulatory Commission (NRC) issued
an industry-wide information request to nuclear operators in the United
States, including Vermont Yankee. The NRC was concerned that NRC
inspections and reviews at a number of plants had turned up
discrepancies between those plants' original designs and their actual
configurations and operating procedures. The NRC required information
from each plant, including Vermont Yankee, that would provide the NRC
added confidence and assurance that the plants are operated and
maintained within their design basis and any deviations are reconciled
in a timely manner. On February 14, 1997, Vermont Yankee filed its
initial response with the NRC, concluding that "Vermont Yankee's overall
performance in the areas of design and configuration control is
fundamentally sound."
The most recent Plant Performance Review (April 9, 1999) issued by
the NRC states that (i) engineering programs, including Design Basis
Documentation development were being implemented well, (ii)Design Basis
Documentation item resolution presents a challenge to the engineering
work force, and (iii) an inspection will be conducted in the future
specifically looking at the resolution of Design Basis Documentation
program identified discrepancies. The design analysis will be completed
in 2000.
The Design Basis Documentation project, or Project initiated by
Vermont Yankee during 1996 is expected to be completed in 2000. The
Company's 35% share of the total cost for this Project is expected to be
between $5.5 million and $6.2 million. Such costs are being deferred by
Vermont Yankee and amortized over the remaining license life of the
plant.
On February 25, 1999, the Board of Directors of Vermont Yankee
granted an exclusive right to AmerGen Energy Co. to conduct a 120-day
period of due diligence and negotiate a possible agreement to purchase
the assets of Vermont Yankee.
On July 16, 1999, the Board of Directors of Vermont Yankee delayed
a decision on whether to sell the nuclear unit to AmerGen Energy Co.
until August 2, 1999.
On August 2, 1999 Vermont Yankee received an unsolicited expression
of interest from Entergy Nuclear, Inc. to buy Vermont Yankee's nuclear
power plant.
On October 15, 1999 the Company and the other owners of Vermont
Yankee accepted a bid for sale of the plant to AmerGen Energy Co.,
which is owned by PECO Energy Company and British Energy. This
transaction will also involve the Company entering into a contract to
purchase a portion of the power produced by this plant. The Vermont
Yankee sale needs to be approved by various state and federal regulatory
bodies. If the Company receives necessary approvals, the transaction is
expected to be completed by Summer 2000.
Before final closing, the deal will require various regulatory
approvals including the Federal Energy Regulatory Commission, the
Nuclear Regulatory Commission, the Securities and Exchange Commission
and the Vermont Public Service Board. The sale of the boiling water
reactor has been the subject of negotiation between Vermont Yankee's
owners and AmerGen since February 1999.
Assuming a final closing date for the transaction of July 1, 2000,
AmerGen will pay Vermont Yankee about $23.5 million for the plant and
property and will assume full responsibility and liability for operating
and ultimately decommissioning the nuclear station.
As a condition of the sale, Vermont Yankee's current owners will
make a one-time payment of $54.3 million to pre-pay the plant's
decommissioning fund at $313 million. In return, AmerGen will assume
full responsibility for all future operating costs and the estimated
$800 million price tag for decommissioning the plant at the end of its
operating license in 2012.
Cogeneration/Small Power Qualifying Facilities
A number of small power producers using hydroelectric, biomass, and
refuse-burning generation are currently producing energy that the
Company is purchasing. The majority of these purchases are made from a
state appointed purchasing agent which purchases and redistributes the
power to all Vermont utilities. For the three and nine months ended
September 30, 1999, the Company received 36,973 mWh and 137,662 mWh,
respectively, from these sources for which the Company paid $3.7 million
and $15.0 million, respectively.
As part of the Company's initiative to cut power costs and
restructure Vermont's utility industry, on August 3, 1999, the Company,
Green Mountain Power, Citizens' Utilities and all of Vermont's 15
municipal utilities, filed a petition with the PSB requesting
modification of the contracts between the independent power producers
and the utilities. The petition is based on unique provisions of the
existing contracts and PSB regulations that provide for modifications
and alterations that serve the public interest. The petition outlines
seven specific elements that, if implemented, could ultimately allow for
the buy-out and buy-down of these contracts and reduce ratepayers'
committed power costs.
On September 3, 1999, the PSB responded to the Company's petition
by opening a formal investigation regarding these contracts. Shortly
thereafter, Citizens Utilities Hardwick Electric Department and the
Burlington Electric Department notified parties that they were
withdrawing from the petition but they will participate in the case as a
non-moving party. At this time, the Company cannot predict the outcome
of this proceeding which remains at a preliminary status before the
Public Service Board.
Production and Transmission
As a result of a settled transmission contract dispute between
NEPOOL, representing various New England utilities and Hydro-Quebec,
production and transmission expenses decreased approximately $.5 million
for the nine months ended September 30,1999 compared to the same period
in 1998, partially offset by higher fuel costs related to the Company's
joint ownership units.
Other Operation
The increase in other operation expenses of approximately $3.0
million and $3.4 million for the third quarter of 1999 and for the nine
months ended September 30, 1999, respectively, results primarily from
increased regulatory and legal costs as well as increased conservation
and load management costs.
Maintenance
Maintenance expenses increased approximately $1.9 million and $1.3
million for the third quarter of 1999 and for the nine months ended
September 30, 1999, respectively. The increase is primarily from higher
maintenance costs related to Hurricane Floyd during September 1999 as
well as increased maintenance costs related to Millstone Unit No. 3.
Maintenance costs for 1998 include the severe ice storm in January 1998.
The increase in maintenance expenses of approximately $1.9 million
and $1.3 million for the first nine months of 1999 results primarily
from the severe ice storm in January 1998 partially offset by increased
maintenance costs related to Millstone Unit No. 3.
Income Taxes
Federal and state income taxes fluctuate with the level of pre-tax
earnings. The increase in total income tax expense for the third
quarter and nine months ended September 30, 1999 results primarily from
an increase in pre-tax earnings for the period.
Other Income and Deductions
The decrease in Other Income and Deductions of $.7 million for the
third quarter and nine months of 1999, respectively, is due to lower
equity income from non-utility subsidiary companies.
Net Interest Expense
The decrease in net interest expense of $.5 million and $.6 million
for the third quarter and nine months of 1999, respectively, is due to
the retirement of long-term debt in December 1998, resulting in a
decrease of $1.6 million partially offset by an increase of $.9 million
in interest expense related to short-term borrowings.
Extraordinary Credit
The 1998 extraordinary credit net of taxes of approximately $.9
million represents a reversal of a charge of a like amount taken in the
fourth quarter of 1997.
Dividends Declared
The increase in common dividends declared results from an early
declaration made in September 1999 for the quarterly dividend paid on
November 15, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity is primarily affected by the level of cash
generated from operations and the funding requirements of its ongoing
construction and C&LM programs. Net cash flow provided by operating
activities generated $32.1 million and $16.8 million for the nine months
ended September 30, 1999 and 1998, respectively. The increase is
primarily due to improved cash earnings, and the extended refueling
outage at the Vermont Yankee Nuclear Power Plant during 1998.
The Company ended the nine months of 1999 with cash and cash
equivalents of $66.3 million, an increase of $56.2 million from the
beginning of the year. The increase in cash for the nine months of 1999
was the result of $32.1 million provided by operating activities, $38.4
million provided by financing activities, offset by $14.3 million used
for investing activities.
Operating Activities - Net income, depreciation and deferred income
taxes and investment tax credits provided $29.1 million. About $3.0
million of cash was provided by working capital and other operating
activities.
Investing Activities - Construction and plant expenditures consumed
approximately $9.2 million, while $5.1 million was used for C&LM
programs and non-utility investments.
Financing Activities - Dividends paid on common stock were $7.6
million while preferred dividends were $.9 million and reduction in
capital lease obligations required $.8 million. Reduction in short-term
debt was $28.8 million and issuance of long-term debt provided $76.5
million.
The level of short-term borrowings fluctuates based on seasonal
corporate needs, the timing of long-term financings and market
conditions.
On July 30, 1999 the Company sold $75.0 million aggregate principal
amount of 8 1/8% Second Mortgage Bonds due 2004 at a price of 99.915% in
accordance with Securities and Exchange Commission Rule 144A. The net
proceeds of the offering were used to repay $15.0 million of outstanding
loans under the Company's revolving credit facility and are expected to
be used for other general corporate purposes relative to the Company's
utility business. In addition, the Company canceled its $40.0 million
revolving credit facility. The bonds have not yet been registered under
the Securities Act of 1933 and may not be offered or sold in the United
States absent registration under such Act or applicable exemption from
the registration requirements.
The Company has an aggregate of $16.9 million of letters of credit
with termination dates that have been extended to May 31, 2000 with
renewal options through November 5, 2002. In addition, the Company has
a $12.0 million accounts receivable facility that matures on November
29, 1999. Our intent is to pay off this facility when it matures.
On March 12, 1999, Connecticut Valley was notified by Citizens Bank
of
New Hampshire, or Bank that it would exercise appropriate remedies in
connection with the violation of financial covenants associated with the
$3.75 million loan agreement with the Bank unless the violation was
cured by April 11, 1999. To avoid default of this loan agreement, on
April 6, 1999, pursuant to an agreement reached on March 26, 1999, the
Company purchased from the Bank the $3.75 million note.
On February 2, 1999, Standard & Poor's Corporation, or Standard &
Poor's lowered its corporate credit rating on the Company to triple 'B'
minus from triple 'B', the senior secured rating to triple 'B' plus from
single 'A' minus, and the preferred stock rating to double 'B' plus from
triple 'B' minus. However, on February 17, 1999, Standard & Poor's
rating on the Company's preferred stock was automatically reduced to
double 'B' in response to a global policy change in the way Standard &
Poor's rates preferred stock. In addition, the ratings were also placed
on CreditWatch with negative implications.
Standard & Poor's stated "the CreditWatch listing reflects the
potentially adverse impact of pending legal and regulatory decisions
that could seriously weaken the Company's credit profile. The
downgrades reflect increased business risk and weakened financial
measures as a result of recent regulatory decisions in Vermont and New
Hampshire and an adverse ruling by the United States First Circuit Court
of Appeals."
Standard & Poor's also said "Resolution of the CreditWatch listing
will depend on the outcome of the pending Federal Energy Regulatory
Commission case and other legal proceedings at State and Federal levels,
which could be resolved in 1999. Adequate rate relief and successful
mitigation of high power costs through contract renegotiations or other
methods are essential to stabilizing the ratings."
On July 16, 1999, Standard & Poor's assigned its triple-'B'- minus
rating to the Company's then proposed $75.0 million second mortgage
bonds. Concurrently, the bonds were placed on CreditWatch with negative
implications.
Standard & Poor's said "the second mortgage bonds are rated the
same as the Company's corporate credit rating, and not notched up,
because Standard & Poor's projects that the value of the Company's
collateral will not substantially exceed the maximum combined amount of
first and second mortgage bonds that could be outstanding under the
terms of their respective indentures in a default scenario."
On February 17, 1999, Duff & Phelps Credit Rating Co., or Duff &
Phelps placed the credit ratings of the Company on Rating Watch-Down due
to the high level of regulatory and public policy uncertainty in Vermont
and the recent unfavorable ruling by the United States Court of Appeals
relating to Connecticut Valley, the Company's wholly owned New Hampshire
subsidiary.
Duff & Phelps stated "recent negative rulings by the PSB regarding
purchased power costs and the high level of uncertainty with public
policy toward electric utilities in Vermont adds risk to the Company's
financial profile going forward."
On July 16, 1999 Duff & Phelps lowered the preferred stock rating
to 'BB+' (Double-B-plus) from 'BBB-' (Triple-B-minus) to reflect the new
$75.0 million issuance of second mortgage bonds. Duff & Phelps credit
ratings remain at 'BBB' (Triple-B) for first mortgage bonds.
Current credit ratings of the Company's securities by Duff & Phelps
and Standard & Poor's are as follows:
Duff & Standard
Phelps & Poor's
Corporate Credit Rating N/A BBB-
First Mortgage Bonds BBB BBB+
Second Mortgage Bonds BBB- BBB-
Preferred Stock BB+ BB
On November 12, 1998, Catamount, replaced its $8.0 million credit
facility with a $25.0 million revolving credit facility expiring
November 11, 2002 which provides for up to $25.0 million in revolving
credit loans and letters of credit. Catamount currently has a $1.2
million letter of credit outstanding to support certain of its
obligations in connection with a debt service requirement in the
Appomattox Cogeneration project and aggregated letters of credit of
$11.0 million in support of construction and equity commitments for its
Gauley River Power project.
Financial obligations of the Company's non-regulated subsidiaries
are non-recourse to the Company.
The Company cannot assure that its business will generate
sufficient cash flow from operations or that future borrowings will be
available to the Company in an amount sufficient to enable the Company
to pay its indebtedness, including the $75.0 million second mortgage
bonds when due, or to fund its other liquidity needs. The Company's
ability to repay its indebtedness is, to a certain extent, subject to
general economic, financial, competitive, legislative, regulatory,
weather and other factors that are beyond its control. The type, timing
and terms of future financing that the Company may need will be
dependent upon its cash needs, the availability of refinancing sources
and the prevailing conditions in the financial markets. The Company
cannot guarantee that any sources will be available to the Company at
any given time or that the terms of such sources will be favorable.
Hydro-Quebec Contract
The Company is purchasing varying amounts of power from
Hydro-Quebec through 2016 as a party to a power contract with
Hydro-Quebec entered into through the VJO, a consortium of Vermont
utilities which includes the Company, Green Mountain Power, Citizens
Utilities, Rochester Electric Light & Power and the Vermont Public Power
Supply authority representing municipalities and a cooperative in
Vermont. The Company's obligation is approximately 46% of the total
contract, or approximately $1.0 billion over the next 17 years based on
current power market forecasts. The VJO participation contract under
which the VJO resells Hydro-Quebec power to the Vermont purchasing
utilities, including the Company, contains "step up" provisions
providing that if any purchasing utility defaults on its purchase
obligations, the other participants will assume responsibility for the
defaulting party's share on a pro rata basis.
During January 1998, a significant ice storm affected parts of New
York, New England and the Province of Quebec, Canada. This storm damaged
major components of the Hydro-Quebec transmission system over which
power is supplied to Vermont under the VJO Power Contract with
Hydro-Quebec. This resulted in a 61-day interruption of a significant
portion of scheduled contractual energy deliveries into Vermont. The ice
storm's effect on Hydro-Quebec's transmission system caused the VJO to
examine Hydro-Quebec's overall reliability and ability to deliver
energy. On the basis of that examination, the VJO determined that
Hydro-Quebec has been and remains unable to make available capacity with
the degree of firmness required by the VJO Power Contract. That
determination has prompted the VJO to initiate an arbitration
proceeding. In the arbitration, the VJO is seeking to terminate the
contract, to recover damages associated with Hydro-Quebec's failure to
comply with the contract, and to recover capacity payments made during
the period of non-delivery.
In September 1999 an initial two weeks of hearings were held
dealing primarily with issues of contract interpretation. Additional
hearings dealing with technical issues will be held in the first quarter
of 2000 and the Company expects a decision by the end of June 2000.
Diversification
Catamount Resources Corporation was formed for the purpose of
holding the Company's subsidiaries that invest in non-regulated business
opportunities. Catamount Energy Corporation, or Catamount, a subsidiary
of Catamount Resources Corporation, invests in energy generation
projects in the United States and Great Britain. Through its
wholly-owned subsidiaries, Catamount has interests in six operating
independent power projects located in Glenns Ferry and Rupert, Idaho;
Rumford, Maine; East Ryegate, Vermont; Thetford, England; and Hopewell,
Virginia. In addition, Catamount has interests in a project under
construction in Summersville, West Virginia and a project under
development in Fort Dunlop, England. Catamount's after-tax earnings
were $.3 million and $.8 million for the third quarter 1999 and 1998,
respectively and $1.2 million and $2.1 million for the nine months ended
September 30, 1999 and 1998, respectively.
SmartEnergy Services Inc., or SmartEnergy, also a subsidiary of
Catamount Resources Corporation invests in unregulated energy and
service related businesses. SmartEnergy also owns 70% of Home Service
Solutions, or HSS, which provides home and small business maintenance
and repair services. HSS is currently operating in fifteen U.S. cities
as part of a program with Sam's Clubs, a division of Wal-Mart.
SmartEnergy incurred losses of $.4 million for both the third quarter
1999 and 1998 and losses of $1.0 million and $1.2 million for the nine
months ended September 30, 1999 and 1998, respectively.
Rates and Regulation
The Company recognizes that adequate and timely rate relief is
necessary if the Company is to maintain its financial strength,
particularly since Vermont regulatory rules do not allow for changes in
purchased power and fuel costs to be automatically passed on to
consumers through rate adjustment clauses. The Company intends to
continue its practice of periodically reviewing costs and requesting
rate increases when warranted.
Vermont: On June 12, 1998, the Company filed with the PSB for a
10.7% retail rate increase to be effective March 1, 1999. This rate
case proceeding supplanted the 6.6% rate increase request referenced
below that is now stayed pending a review on the so-called preclusion
issue by the Vermont Supreme Court, or VSC. On October 27, 1998, the
Company reached an agreement with the DPS regarding the 10.7% rate
increase request.
The agreement, which was approved by the PSB on December 11, 1998,
provides for a temporary rate increase in the Company's Vermont retail
rates of 4.7% or $10.9 million on an annualized basis beginning with
service rendered January 1, 1999 and sets the Company's authorized
return on equity in its Vermont retail business at 11% before
disallowances in connection with the Hydro-Quebec Contract.
The 4.7% rate increase is subject to retroactive or prospective
adjustment upon future resolution of issues arising under the Vermont
Joint Owners, or VJO, Power Contract presently before the Vermont
Supreme Court. The agreement temporarily disallows approximately $7.4
million for the Company's purchased power costs under the VJO Power
Contract pending resolution of the issues before the Vermont Supreme
Court. As a result of the 4.7% rate increase agreement, during the
fourth quarter of 1998, the Company recorded a pre-tax loss of $7.4
million for disallowed purchased power costs, representing the Company's
estimated under-recovery of power costs under the VJO Power Contract for
calendar year 1999. If in the future, the Company is unable to increase
rates to recover the temporary disallowed purchased power costs under
the VJO power contract or otherwise mitigate these costs, the Company
would be required to record losses for any estimated future under
recovery. At this time, the Company does not believe that such a loss
is probable.
This temporary $7.4 million disallowance was calculated using
comparable methodology to that used by the PSB in the Green Mountain
Power rate case on February 28, 1998. In that case, the PSB found Green
Mountain Power's decision to commit to the VJO Power Contract in 1991
"imprudent" and that power purchased under it was not "used and useful."
As a result, the PSB concluded that a portion of Green Mountain Power's
current costs should not be imposed on Green Mountain Power's customers
and were disallowed. Green Mountain Power is appealing that rate order
to the Vermont Supreme Court. Should the Company receive a similar order
from the PSB, the Company would experience a material adverse effect on
its results of operations and financial condition.
Assuming an unfavorable Vermont Supreme Court ruling and depending
on the methodology used to determine the amount of any permanent
disallowance, it could be more or less than the $7.4 million temporary
disallowance. However, if the Company receives an unfavorable ruling
from the Vermont Supreme Court and the PSB subsequently issues a final
rate order adopting the disallowance methodology used to determine the
temporary Hydro-Quebec disallowance described above for the duration of
the VJO Power Contract, the Company would not be able to recover
approximately $205.0 million of power costs over the life of the
contract, including $11.5 million in 2000, $11.6 million in 2001, $11.7
million in 2002, $11.9 in million 2003 and $12.1 million in 2004. In
such an event, the Company would be required to take an immediate charge
to earnings of approximately $205.0 million (pre-tax). Such an outcome
could jeopardize the ability of the Company to continue as a going
concern.
On September 22, 1997, the Company filed for a 6.6% or $15.4
million general rate increase to become effective June 6, 1998 to offset
the increasing cost of providing service. $14.3 million or 92.9% of the
rate increase request was to recover contractual increases in the cost
of power the Company purchases from Hydro-Quebec. At the same time, the
Company also filed a request to eliminate the then current differential
between the rates charged customers in the summer and the rates charged
customers in the winter and price electricity the same year-round. The
change would be revenue-neutral within classes of customers and overall.
Over time, customers would see a leveling off of rates so they would pay
the same per kilowatt-hour during the winter and summer months.
In response to the Company's filing, the PSB decided to appoint an
independent investigator to examine the Company's decision to buy power
from Hydro-Quebec. The Company made a filing with the PSB stating that
the PSB as well as other parties should be barred from reviewing past
decisions because the PSB already examined the Company's decision to buy
power from Hydro-Quebec in a 1994 rate case in which the Company was
penalized for "improvident power supply management." During February
1998, the Department of Public Service, or DPS, filed testimony in
opposition to the Company's retail rate increase request. The DPS
recommended that the PSB instead reduce the Company's then current
retail rates by 2.5% or $5.7 million. The Company sought, and the PSB
granted, permission to stay this rate case and to file an interlocutory
appeal of the PSB's denial of the Company's motion to preclude a
re-examination of the Company's Hydro-Quebec contract in 1991. The
Company recently argued its position before the Vermont Supreme Court.
Although the Vermont Supreme Court has not yet rendered a decision and
it is uncertain when a decision is forthcoming, a decision by the end of
1999 is possible.
On February 28, 1998 the PSB issued an Order in a Green Mountain
Power rate case. That Order found Green Mountain Power's decision to
lock-in the Hydro-Quebec VJO contract in 1991 imprudent and further
found that the contract was not used and useful. As such, the PSB
concluded that a large portion of the contract's current costs should
not be imposed on consumers and were disallowed. Green Mountain Power
appealed this rate order to the VSC. The Company is one of the
participants in the Hydro-Quebec VJO contract. If the Company were to
eventually receive a rate order that would result in disallowance of
Hydro-Quebec power costs on a permanent basis similar to that contained
in the Green Mountain Power February 28, 1998 rate order, the Company's
ability to continue as a going concern could be jeopardized. Because of
these risks and because the PSB rejected the Company's claim that the
PSB was precluded from again trying the Company on certain Hydro-Quebec
and related demand side management, or DSM issues, the Company concluded
that it was necessary to have the so-called preclusion issue reviewed by
the VSC before the PSB issues a final order in the Company's 6.6% rate
increase request. Refer to Note 3 to the Consolidated Financial
Statements for related information.
New Hampshire: Connecticut Valley Electric Company Inc. or
Connecticut Valley's retail rate tariffs, approved by the New Hampshire
Public Utilities Commission, or NHPUC, contain a Fuel Adjustment Clause,
or FAC, and a Purchased Power Cost Adjustment, or PPCA. Under these
clauses, Connecticut Valley recovers its estimated annual costs for
purchased energy and capacity which are reconciled when actual data is
available.
On November 26, 1997, Connecticut Valley filed a request with the
NHPUC to increase FAC, PPCA and short-term energy purchase rates
effective on or after January 1, 1998. The requested increase in rates
resulted from higher forecast energy and capacity charges on power
Connecticut Valley purchases from the Company plus removal of a credit
effective during 1997 to refund overcollections from 1996.
In an Order dated December 31, 1997 in Connecticut Valley's FAC and
PPCA docket, the NHPUC found Connecticut Valley acted imprudently by not
terminating the wholesale contract between Connecticut Valley and the
Company, notwithstanding the stays of its February 28, 1997 Orders. The
NHPUC Order further directed Connecticut Valley to freeze its current
FAC and PPCA rates (other than short term rates to be paid to certain
Qualifying Facilities) effective January 1, 1998, on a temporary basis,
pending a hearing to determine: 1) the appropriate proxy for a market
price that Connecticut Valley could have obtained if it had terminated
its wholesale contract with the Company; 2) the implications of allowing
Connecticut Valley to pass on to its customers only that market price;
and 3) whether the NHPUC's final determination on the FAC and PPCA rates
should be reconciled back to January 1, 1998 or some other date. See
Electric Industry Restructuring discussed below and Note 3 to the
Consolidated Financial Statements for additional information.
On April 9, 1998 the Court issued a preliminary injunction against
the NHPUC and directed and required the NHPUC to allow Connecticut
Valley to recover through retail rates all costs for wholesale power
requirements service that Connecticut Valley purchases from the Company
pursuant to its FERC-authorized wholesale rate schedule effective
January 1, 1998 until further court order. Connecticut Valley received
an order from the NHPUC authorizing retail rates to recover such costs
beginning in May 1998.
On November 24, 1998, Connecticut Valley filed with the NHPUC its
annual FAC/PPCA rates to be effective January 1, 1999. On January 4,
1999, the NHPUC issued an Order allowing Connecticut Valley to implement
the proposed FAC rate of $.008 per KWH and the proposed PPCA rate of
$.01000 per KWH, on a temporary basis, effective on all bills rendered
on or after January 1, 1999. In addition, the NHPUC also ordered
Connecticut Valley to pay refunds plus interest to its retail customers
for any overcharges collected as a result of the April 9, 1998 Federal
District Court Order, should it be overturned or modified.
As a result of the December 3, 1998 Court of Appeals' decision, see
New Hampshire Retail Rates / Federal Court Proceedings below, on March
22, 1999, the NHPUC issued an Order which directed Connecticut Valley to
file within five business days its calculation of the difference between
the total FAC and the PPCA revenues that it would have collected had the
1997 FAC and PPCA rate levels been in effect the entire year. In its
Order, the NHPUC also directed Connecticut Valley to calculate a rate
reduction to be applied to all billings for the period April 1, 1999
through December 31, 1999 to refund the 1998 over collection relative to
the 1997 rate level. The Company estimated this amount to be
approximately $2.7 million on a pre-tax basis. Connecticut Valley filed
the required tariff page with the NHPUC, under protest and with
reservation of all rights, on March 26, 1999 and implemented this refund
effective April 1, 1999.
On April 7, 1999, the Court ruled from the bench that the March 22,
1999 NHPUC Order requiring Connecticut Valley to provide a refund to its
retail customers was illegal and beyond the NHPUC's authority. The
Court also ruled that the NHPUC cannot reduce Connecticut Valley's rates
below rates in effect at December 31, 1997. Accordingly, Connecticut
Valley removed the rate refund from retail rates effective April 16,
1999.
The NHPUC held a hearing on April 22, 1999 to determine whether to
modify Connecticut Valley's 1999 power rates by returning the rates to
the levels that were in effect on December 31, 1997. On May 17, 1999,
the NHPUC issued an order requiring Connecticut Valley to set temporary
rates at the level in effect as of December 31, 1997, subject to future
reconciliation effective with bills issued on and after June 1, 1999.
Proposed Formation of Holding Company
In order to further prepare the Company for deregulation of the
electric utility industry in Vermont, on July 24, 1998, the Company
filed a petition with the PSB for permission to create a holding company
that would have as direct subsidiaries the Company and the unregulated
subsidiaries, Catamount and SmartEnergy. The Company believes that a
holding company structure will facilitate the Company's transition to a
deregulated electricity market. The proposed holding company formation
must also be approved by Federal regulators, including the Securities
and Exchange Commission and the FERC, and by the Company's shareholders.
Year 2000 Information Systems Modifications
Many computer programs cannot distinguish between the Year 2000 and
the Year 1900. The Company's information systems could be affected by
the date change in Year 2000 because most software application and
operational programs will not properly recognize calendar dates
beginning in the Year 2000. If not corrected, many computer
applications could fail or create erroneous results. In order to
address this problem for our own computer systems, the Company has
utilized internal and external resources, including outside consultants,
to make our applications Year 2000 compliant. Inventory, assessment and
remediation testing and implementation activities are now complete. The
Company believes that all of its financial and operating systems are now
Year 2000 compliant.
However, the Company's operations could still be adversely affected
if a date-related system failure occurred with one of its major power
suppliers, such as Hydro-Quebec or Vermont Yankee, with one of our other
major suppliers, with Velco, the company responsible for transmission in
Vermont. Velco, Hydro-Quebec and Vermont Yankee indicate they are now
all Year 2000 ready. Other delivery systems outside of Vermont could,
in the event of a date-related system failure, cause additional power
supply interruptions. The Company has requested written reports from
its power supply vendors regarding each Company's status relative to
Year 2000 compliance and based on responses to date, these power supply
vendors have indicated that they are either currently compliant or
expect to be compliant before the end of the year.
The Company has also requested compliance information from other
major vendors and suppliers, including those providing transmission and
power delivery services outside of Vermont. While this process is not
yet complete, based upon responses to date, many of those major vendors
and suppliers have indicated that they will be Year 2000 compliant in a
timely manner. There can be no guarantee, however, that these third
parties' will be successful in their compliance efforts or that their
failure to remediate Year 2000 issues would not have a material adverse
effect on the Company.
The failure of the Company's principal power and transmission
suppliers to remedy Year 2000 compliance issues could have a material
adverse effect on the Company and result in interruptions of power
supply and transmission.
The Company is part of the Northeast grid contingency plan to
provide electricity to its customers on a priority basis in the event of
power outages. The Company also has other contingency plans developed
in the event of the failure of its transmission, generation,
distribution, metering, telecommunications, information and public
communications systems.
The Company has incurred $4.0 million to date to make the necessary
modifications to its computer systems. During the first quarter of 1998,
the Company requested an Accounting Order from the PSB to defer these
operating and maintenance costs. On August 31, 1998, the PSB issued an
Accounting Order authorizing the Company to defer a portion of these
costs and amortize them over a five-year period beginning January 1,
2000. Per PSB Order dated December 11, 1998, the Company is authorized
to seek recovery of these costs through future regulatory proceedings.
ELECTRIC INDUSTRY RESTRUCTURING
The electric utility industry is in a period of transition that may
result in a shift away from rate making based on cost of service and
return on equity to more market-based rates. Many states, including
Vermont and New Hampshire, where the Company does business, are
exploring new mechanisms to bring greater competition, customer choice
and market influence to the industry while retaining the public benefits
associated with the current regulatory system.
Vermont
Recently, there have been three primary sources of Vermont
governmental activity in attempting to restructure the electric industry
in Vermont: (1) the Governor's Working Group, created by the Governor of
Vermont; (2) the PSB's Docket No. 6140, through which the PSB is
considering restructuring proposals; and(3) Senate Bill 62 of the
Vermont Senate, which calls for retail competition.
The Working Group
On July 22, 1998, the Governor of Vermont issued an Executive Order
establishing the Working Group on Vermont's Electricity Future to lead a
new effort to review the issues of potential restructuring of Vermont's
electric industry. The Working Group was created to determine how
restructuring the electric industry in Vermont could reduce both current
and long-term electric costs for all classes of Vermont electric
consumers. The Working Group was asked to provide a fact-based analysis
of the options for electric industry restructuring and the impact of
such industry changes on consumers and upon Vermont utilities. Further,
the Working Group was directed by the Governor of Vermont to gather
information on and evaluate the possible consequences of the current
financial status of Vermont electric utilities.
A report was issued by the Working Group on December 18, 1998. Key
conclusions of its report were:
- The bankruptcy of Vermont electric utilities should not be viewed
as an appropriate means to reduce Vermont utilities' above-market power
supply costs.
- Vermont should restructure its electric industry by moving
rapidly to retail choice whereby consumers would purchase power directly
from competing power suppliers.
- Vermont electric utilities should pursue power contract
renegotiations through payments to buy down power contracts or buy-out
power contracts. Financing for such payments should be obtained in the
capital markets after a comprehensive regulatory process dealing with
all of the elements of the restructuring of the Vermont electric utility
industry.
- The Vermont electric utilities should pursue auctions of their
power generation assets and remaining power contracts.
- Consolidation of existing electric utilities in Vermont (there are
currently 22 utilities) should be considered in order to effect
additional savings for utility customers.
The Working Group noted that by March 1, 2000, most New Englanders
outside Vermont will have a choice of their power supplier. While New
England has the highest electricity rates in the nation, electricity
costs in Vermont have been among the lowest in the region, although our
rates are higher than the Vermont average. However, that advantage is
eroding as other states in New England restructure their electric
utility industries. Therefore, the Working Group noted that it is in the
interest of Vermont ratepayers to have the benefit of a restructured
electric utility industry as soon as possible.
Public Service Board Docket No. 6140
On September 15, 1998, the PSB opened a formal proceeding in Docket
No. 6140 with the goal of creating a regulatory environment and a
procedural framework to call forth, for disciplined review, proposals
for reducing current and future power costs in Vermont. The PSB intended
that this proceeding would define one or more acceptable courses for
reform. All Vermont utilities were made a party to that proceeding.
Subsequent to the PSB's announcement, preliminary position papers were
filed and a series of technical conferences were convened with the PSB
to recommend the scope of the investigation, potential courses for
reform of Vermont's power supply and other matters associated therewith
including the consideration of the
Working Group's recommendations.
On March 3, 1999, the Company filed its Restructuring Plan, a
Working Plan to restructure a significant portion of Vermont's Electric
Utility Industry, with the PSB and parties in Docket No. 6140. The
Company's plan was a joint plan with Green Mountain Power Corporation.
On July 12, 1999, the PSB issued a Status Order concluding that the
objective of implementing power supply reform may be advanced more
effectively in ways other than holding further technical conferences in
this docket. Absent good reason to hold one or more technical
conferences pertinent to power supply reform, the PSB indicated that the
docket will be closed on December 31, 1999. As a companion proceeding to
its investigation in Docket No. 6140, on January 19, 1999, the PSB
issued an order opening a new contested case proceeding, Docket No.
6140-A, where it indicated that it intended to issue final, binding and
appealable orders concerning matters related to the reform and
restructuring of Vermont's electric utility industry. Initially, the PSB
notified parties that it intended proceedings in Docket No. 6140-A to
consider matters associated with the bankruptcy of one or more of the
Vermont electric utilities. After an opportunity for comment, the focus
of the proceeding was amended to first consider the principles,
authority and proposals for reform of Vermont's electric power supply.
This includes issues associated with the scope and extent of the Board's
authority to approve "securitization" and other financings proposed to
be entered into in connection with the buy-out or buy-down of power
contracts and the criteria to be applied by the PSB when considering
voluntary utility restructuring proposals.
By Order dated June 24, 1999 in Docket 6140-A, the PSB formally
adopted the Vermont Principles on Electric Utility Restructuring. The
Order explains that proposals to open utility franchise service areas to
retail competition, including our Restructuring Plan, will only be
approved if they can be found to satisfy the public good after due
consideration is given to each of 14 Restructuring Principles. If one or
more of the principles is not satisfied by the proposal, then the
proponent must offer justification for the deficiency and demonstrate
satisfaction of certain statutory requirements. As such, the PSB stated
that any filing proposing to open a franchise territory to retail choice
would have to be supported, at a minimum, by an explanation of how that
proposal fulfills the policy objectives established by the Vermont
Principles on Electric Utility Restructuring.
With regard to financing, no party to the investigation asked that
the PSB clarify its authority or issue a declaratory ruling concerning
the criteria to be considered when approving utility financings for the
buy-out or buy-down of committed power contracts. During the
investigation, both the Company and Green Mountain Power Corporation
asserted that anticipated refinancing approaches could be accomplished
utilizing the existing Vermont and federal legislative regime that
governs the regulation of electric utilities and that "securitization"
style financings were not presently being contemplated. Because no party
to the Docket contradicted these statements, the Board accepted our
assertions and took no further action to evaluate specific utility
financing proposals.
In contrast Vermont Electric Power Producers, Inc., or VEPP, the
PSB's purchasing agent for the purchase of power from qualifying
facilities pursuant to PSB Rule 4.100, proposed to use administrative
securitization to finance the reform of its power purchase contracts.
However, at the request of all commenting parties, the PSB determined to
withhold judgment on the issue as to whether the PSB had jurisdiction to
authorize a VEPP financing until such time as a specific proposal was
actually filed with the PSB. Toward this end, the PSB has stated that it
will convene a workshop, independent of this Docket, to further discuss
VEPP's financing proposal and to prepare for the opening of a possible
rulemaking proceeding to amend Rule 4.100 on this topic. In the absence
of any requests for further investigation or action to be filed within
30 days of the Docket No. 6140-a Order, this investigation will be
closed by the PSB.
Vermont Senate Bill 62
On April 3, 1997, Senate Bill 62, or S.62, an act relating to
electric industry restructuring, was passed by the Vermont Senate.
Pursuant to S.62, electric utility customers would have been entitled to
purchase electricity in a competitive market place. Incumbent
investor-owned electric utilities, including the Company, would have
been required to separate their regulated distribution and transmission
operations from the competitive generation and retail operations. S.62
provided for the recovery of a portion of an investor-owned utility's
"above market costs" which became stranded on account of the
introduction of competition within their service area. When considering
the recovery of such amounts, S.62 would have required the PSB to weigh
the goal of sharing net prudently incurred, discretionary above-market
costs "evenly" between utilities and customers against other goals
including preserving the continuing financial integrity of the existing
utility and respecting the just interests of investors.
The Company believes that the unmodified provisions of S.62 would
not have met the criteria for continuing application of SFAS No. 71.
S.62 also created an incentive for us to take steps to close the Vermont
Yankee nuclear power station by conditioning the recovery of certain
plant-related stranded costs on the decision of its owners to cease
operations in 1998, unless the PSB agreed to allow the plant to run for
up to two more refuelings to avoid power shortages or for other public
interest reasons.
To become law, S.62 also needed to pass the Vermont House of
Representatives and be signed by the Governor of the State of Vermont.
Since the 1998 Legislative session adjourned in April 1998 and S.62 was
not passed by the House and signed by the Governor of Vermont, the bill
did not become law and therefore died upon adjournment.
Instead of considering S.62, the Vermont House of Representatives
convened a special committee to study matters relating to the reform of
Vermont's electric utility system in the summer of 1997. That committee
issued a report and proposed legislation that would have provided for
performance-based ratemaking but explicitly rejected retail choice.
However, neither the House of Representatives nor the Vermont Senate
acted on these reforms and the bill died upon adjournment. Therefore, at
this time, it cannot be determined whether future restructuring
legislation will be enacted in the current Biennium of the Vermont
legislature.
The first session of the 1999-2000 Biennium of the Vermont
legislature adjourned on May 15, 1999 without reaching a consensus on
electric utility restructuring. Several measures were considered by
various committees of the House and the Senate, including
securitization, authorization of retail choice, establishment of a
legislative veto over any restructuring agreement reached between the
PSB and the utilities, various mandated levels of rate reductions for
customers paying stranded costs, and capturing for customers any or a
portion of the gain from the sale of a utility's transmission and
distribution assets.
In the second session of the 1999-2000 Biennium, convening January
4, 2000, the Company cannot determine whether or if the Vermont
Legislature will again debate deregulating the electric industry and
opening it up to retail competition.
The Company supports the Working Group recommendations described
above and believes that the restructuring of the electric industry is
essential to improve our financial position, enhance our ability to
effectively compete in a changing electric utility industry and
stabilize projected costs.
As a result, the Company is pursuing a comprehensive financial
Restructuring Plan, certain elements of which were included in a report
that the Company and Green Mountain Power filed with the PSB in the
first quarter of 1999 in connection with the proceedings in Docket No.
6140 described above. The Company is aggressively pursuing
implementation of the Restructuring Plan which includes the following
elements:
- Retail choice: voluntarily giving up the exclusive right to supply
power to the Company's present electric customers, while retaining its
rights as a distribution company, as part of a global settlement of
regulatory issues.
- Renegotiation of certain purchase power contracts: reducing the
Company's future cost of power by renegotiating power contracts,
specifically those with Hydro-Quebec and the Vermont purchasing agent's
contracts with small power producers which together represent
approximately 40% of the Company's 1998 net energy supply. The Company
may seek to finance the cost of any buy-outs or buy-downs of power
contracts through the future issuance of securities in the capital
markets.
- Contract and asset disposition: seeking to sell power purchase
contracts and generating assets, including the interest in the Vermont
Yankee nuclear generating plant. On September 22, 1999, the Company
announced that it will seek, with the other Vermont Joint Owners, to
auction the contract with Hydro-Quebec. On October 15, 1999, the Company
and the other owners of Vermont Yankee accepted a bid for sale of the
plant to AmerGen Energy Company, which is owned by PECO Energy Company
and British Energy. This transaction will also involve taking back a
contract to purchase a portion of the power produced by this plant. The
Vermont Yankee sale needs to be approved by numerous state and federal
regulatory bodies. The transaction is expected to be complete next
summer.
- Cost-cutting: implementing cost-cutting measures to reduce cash
flow requirements while maintaining safety and reliability standards.
- Holding company: establishing a holding company to help the
Company better organize its business.
- Industry consolidation: evaluating possible consolidation with
other Vermont electric distribution companies.
- Regulatory settlement: seeking a comprehensive regulatory
settlement that leads to long-term financial stability.
- Energy efficiency activities: creating a state sponsored "energy
efficiency utility" to take over most system-wide energy-efficiency
services for electric customers. On September 30, 1999, the PSB issued
a final Order approving a Memorandum of Understanding between the
Company, the Vermont Department of Public Service, all other Vermont
electric utility companies and other interested parties that calls for
the establishment of the energy-efficiency utility and provides for its
funding via a separate stated Energy Efficiency Charge.
The Company believes that implementation of its Restructuring Plan
is a critical element to improving its future financial performance and
to providing its customers with more stable electric rates and the
continuation of efficient and reliable electric service. The key
contingency of the Company's Restructuring Plan is regulatory approval
of a rate schedule that will allow the Company to recover the costs of
the restructuring. If the financial restructuring described in this
section is completed in conjunction with the deregulation of Vermont's
electric industry described in "Electric Industry Restructuring," the
Company anticipates that its utility financial performance and prospects
will improve significantly.
Consolidation
The Company regularly assesses the opportunities for consolidation
within Vermont.
New Hampshire Retail Rates / Federal Court Proceedings
On February 28, 1997 the NHPUC published its detailed Final Plan to
restructure the electric utility industry in New Hampshire. Also on
February 28, 1997, the NHPUC, in a supplemental order specific to
Connecticut Valley, found that Connecticut Valley was imprudent for not
terminating the FERC-authorized power contract between Connecticut
Valley and the Company, required Connecticut Valley to give notice to
cancel its contract with the Company and denied stranded cost recovery
related to this power contract. Connecticut Valley filed for rehearing
of the February 28, 1997 NHPUC Order.
On April 7, 1997, the NHPUC issued an Order addressing certain
threshold procedural matters raised in motions for rehearing and/or
clarification filed by various parties, including Connecticut Valley,
relative to the Final Plan and interim stranded cost orders. The April
7, 1997 Order stayed those aspects of the Final Plan that were the
subject of rehearing or clarification requests and also stayed the
interim stranded cost orders for the various parties, including
Connecticut Valley. As such, those matters pertaining to the power
contract between Connecticut Valley and the Company were stayed. The
suspension of these orders was to remain in effect until two weeks
following the issuance of any order concerning outstanding requests for
rehearing and clarification.
On November 17, 1997, the City of Claremont, New Hampshire
(Claremont), filed with the NHPUC a petition for a reduction in
Connecticut Valley's electric rates. Claremont based its request on the
NHPUC's earlier finding that Connecticut Valley's failure to terminate
its wholesale power contract with the Company as ordered in the NHPUC
Stranded Cost Order of February 28, 1997 was imprudent. Claremont
alleged that if Connecticut Valley had given written notice of
termination to the Company in 1996 when legislation to restructure the
electric industry was enacted in New Hampshire, Connecticut Valley's
obligation to purchase power from the Company would have terminated as
of January 1, 1998.
On November 26, 1997, Connecticut Valley filed a request with the
NHPUC to increase the FAC, PPCA and short-term energy purchase rates
effective on or after January 1, 1998. The requested increase in rates
resulted from higher forecast energy and capacity charges on power
Connecticut Valley purchases from the Company plus removal of a credit
effective during 1997 to refund overcollections from 1996. Connecticut
Valley objected to the NHPUC's notice of intent to consolidate
Claremont's petition into the FAC and PPCA docket, stating that
Claremont's complaint should be heard as part of the NHPUC restructuring
docket. Over Connecticut Valley's objection at the hearing on December
17, 1997, the NHPUC consolidated Claremont's petition with Connecticut
Valley's FAC and PPCA proceeding.
In an Order dated December 31, 1997 in Connecticut Valley's FAC and
PPCA docket, the NHPUC found Connecticut Valley acted imprudently by not
terminating the wholesale contract between Connecticut Valley and the
Company, notwithstanding the stays of its February 28, 1997 Orders. The
NHPUC Order further directed Connecticut Valley to freeze its current
FAC and PPCA rates (other than short term rates to be paid to certain
Qualifying Facilities) effective January 1, 1998, on a temporary basis,
pending a hearing to determine: 1) the appropriate proxy for a market
price that Connecticut Valley could have obtained if it had terminated
its wholesale contract with the Company; 2) the implications of allowing
Connecticut Valley to pass on to its customers only that market price;
and 3) whether the NHPUC's final determination on the FAC and PPCA rates
should be reconciled back to
January 1, 1998 or some other date.
On January 19, 1998, Connecticut Valley and the Company filed with
the Court for a temporary restraining order to maintain the status quo
ante by staying the December 31, 1997 NHPUC Order and preventing the
NHPUC from taking any action that (i) compromises cost-based rate making
for Connecticut Valley or otherwise seeks to impose market price-based
rate making on Connecticut Valley; (ii) interferes with the FERC's
exclusive jurisdiction over the Company's pending application to recover
wholesale stranded costs upon termination of its wholesale power
contract with Connecticut Valley; or (iii) prevents Connecticut Valley
from recovering through retail rates the stranded costs and purchased
power costs that it incurs pursuant to its FERC-authorized wholesale
rate schedule with the Company.
On February 23, 1998, the NHPUC announced in a public meeting that
it reaffirmed its finding of imprudence and designated a proxy market
price for power at 4 cents per kWh in lieu of the actual costs incurred
pursuant to the wholesale power contract with the Company. In addition,
the NHPUC indicated, subject to certain conditions which were
unacceptable to the companies, that it would permit Connecticut Valley
to maintain its current rates pending a decision in Connecticut Valley's
appeal of the NHPUC Order to the New Hampshire Supreme Court.
Based on the December 31, 1997 NHPUC Order as well as the NHPUC's
February 23, 1998 announcement, which resulted in the establishment of
Connecticut Valley's rates on a non cost-of-service basis, Connecticut
Valley no longer qualified, as of December 31, 1997, for the application
of SFAS No. 71. As a result, Connecticut Valley wrote-off all of its
regulatory assets associated with its New Hampshire retail business as
of December 31, 1997. This write-off amounted to $1.2 million on a pre
tax basis. In addition, Connecticut Valley recorded a $5.5 million pre
tax loss in 1997 for disallowed power costs.
On March 20, 1998, the NHPUC issued an order which affirmed,
clarified and modified various generic policy statements including the
reaffirmation to establish rates on the basis of a regional average
announced previously in its February 28, 1997 Final Plan. The March 20,
1998 order also addressed all outstanding motions for rehearings or
clarification relative to the policies or legal positions articulated in
the Final Plan and removed the stay covering the Company's interim
stranded cost order of April 7, 1997. In addition, the March 20, 1998
Order imposed various compliance filing requirements.
On April 3, 1998, the Court held a hearing on the Companies' motion
for a Temporary Restraining Order, or TRO, and Preliminary Injunction
against the NHPUC at which time both the Companies and the NHPUC
presented arguments. In an oral ruling from the bench, and in a written
order issued on April 9, 1998, the Court concluded that the Companies
had established each of the prerequisites for preliminary injunctive
relief and directed and required the NHPUC to allow Connecticut Valley
to recover through retail rates all costs for wholesale power
requirements service that Connecticut Valley purchases from the Company
pursuant to its FERC-authorized wholesale rate schedule effective
January 1, 1998 until further court order. Connecticut Valley received
an order from the NHPUC authorizing retail rates to recover such costs
beginning in May 1998. On April 14, 1998, the NHPUC filed a notice of
appeal and a motion for a stay of the Court's preliminary injunction.
The NHPUC's request for a stay was denied. At the same time, the NHPUC
permitted Connecticut Valley to recover in rates the full cost of its
wholesale power purchases from the Company.
Also, on April 3, 1998, the Court indicated that its earlier TRO
enjoining the NHPUC's restructuring orders applied to Connecticut Valley
and prohibits the enforcement of the restructuring orders until the
Court conducts a consolidated hearing and rules on the requests for
permanent injunctive relief by plaintiff PSNH and the other utilities
that had been allowed to intervene in these proceedings, including the
Company and Connecticut Valley. The plaintiffs-intervenors thereafter
filed a motion asking the Court to extend its stay of action by the
NHPUC to implement restructuring and to make clear that the stay
encompasses the NHPUC's order of March 20, 1998.
As a result of these Court orders, Connecticut Valley's 1997
charges described above were reversed in the first quarter of 1998.
Combined, the reversal of these charges increased first quarter 1998 net
income and earnings per share of common stock by $4.5 million and $.39,
respectively.
On April 1, 1998, Citizens Bank of New Hampshire, or Bank, notified
Connecticut Valley that it was in default of the Loan Agreement between
the Bank and Connecticut Valley dated December 27, 1994 and that the
Bank would exercise all of its remedies from and after May 5, 1998 in
the event that the violations were not cured. After reversing the 1997
write-offs described above, Connecticut Valley was in compliance with
the financial covenants associated with its $3.75 million loan with the
Bank. As a result, Connecticut Valley satisfied the Bank's requirements
for curing the violation.
On May 11, 1998 the NHPUC issued an order requiring Connecticut
Valley to show cause why it should not be held in contempt for its
failure to meet the compliance filing requirements of its March 20, 1998
Order. A hearing on this matter was scheduled for June 11, 1998, which
was subsequently cancelled because of the Court's June 5, 1998 Order,
discussed below.
On June 5, 1998, the Court issued an Order which denied the NHPUC's
motion for a stay of the Court's preliminary injunction. The Order
clearly states that no restructuring effort in New Hampshire can move
forward without the Court's approval unless all New Hampshire utilities
agree to the plan. The Order suspended all involuntary restructuring
efforts for all New Hampshire utilities until a hearing is conducted.
The NHPUC appealed this Order to the United States First Circuit Court
of Appeals (Court of Appeals).
On July 23, 1998, the NHPUC issued an order vacating that portion
of its February 27, 1997 restructuring order that had directed
Connecticut Valley to terminate its RS-2 wholesale power purchases from
the Company. The NHPUC has expressly stated in federal court filings
that its July 23, 1998 order "clarified that Connecticut Valley should
not terminate the RS-2 Rate Schedule if such termination would trigger
the exit fee" for which the Conpany has sought authorization from FERC.
On November 24, 1998, Connecticut Valley filed with the NHPUC its
annual FAC/PPCA rates to be effective January 1, 1999. On January 4,
1999, the NHPUC issued an Order allowing Connecticut Valley to implement
the proposed FAC rate of $.008 per KWH and the proposed PPCA rate of
$.01000 per KWH rate on a temporary basis, effective on all bills
rendered on or after January 1, 1999. In addition, the NHPUC also
ordered Connecticut Valley to pay refunds plus interest to its retail
customers for any overcharges collected as a result of the April 9, 1998
Court Order should it be overturned or modified, which are included in
the estimated total losses of $4.3 million discussed below.
On December 3, 1998, the Court of Appeals announced its decisions
on the appeals taken by the NHPUC from the preliminary injunctions
issued by the Court. Those preliminary injunctions had stayed
implementation of the NHPUC's plan to restructure the New Hampshire
electric industry and required the NHPUC to allow Connecticut Valley to
recover through its retail rates the full cost of wholesale power
obtained from the Company.
The Court of Appeals affirmed the preliminary injunction, issued by
the Court, staying restructuring until the plaintiff utilities' claims
(including those of the Company and Connecticut Valley) are fully tried.
The Court of Appeals found that PSNH had sufficiently established that
without the preliminary injunction against restructuring it would suffer
substantial irreparable injury and that it had sufficient claims against
restructuring to warrant a full trial. The Court of Appeals also
affirmed the extension of the preliminary injunction to protect the
other plaintiff utilities, including Connecticut Valley and the Company,
although it questioned whether the other utilities had arguments as
strong against restructuring as PSNH because they did not have formal
agreements with the State similar to PSNH's Rate Agreement. The Court
of Appeals stated that if the Court awards the utilities permanent
injunctive relief against restructuring after the case is tried, then it
must explain why the other utilities are also entitled to such relief.
The NHPUC filed a petition for rehearing on December 17, 1998. The
Court of Appeals denied the petition on January 13, 1999.
The Court of Appeals also reversed the Court's preliminary
injunction requiring the NHPUC to allow Connecticut Valley to recover in
retail rates the full cost of the power it buys from the Company.
Although the Court of Appeals found that Connecticut Valley and the
Company had made a strong showing of irreparable injury to justify the
preliminary injunction, it concluded that Connecticut Valley's and the
Company's claims did not have a sufficient probability of success to
warrant such preliminary relief. The Court of Appeals explained that
the filed-rate doctrine preserving the exclusive jurisdiction of the
FERC over wholesale power rates did not prevent the NHPUC from deciding
whether Connecticut Valley's power purchases from the Company were
prudent given alternative available sources of wholesale power. The
Court of Appeals then stated that Connecticut Valley's rates could be
reduced to the level prevailing on December 31, 1997. However, the
Court of Appeals also stated that if the NHPUC ordered Connecticut
Valley's rates to be reduced below the level existing as of December 31,
1997, "it will be time enough to consider whether they are precluded
from the Court's injunction against the Final Plan or on other grounds."
On December 17, 1998, Connecticut Valley and the Company filed a
petition for rehearing on the grounds that the Court of Appeals had not
given sufficient weight to the Court's factual findings and that the
Court of Appeals had misapprehended both factual and legal issues.
Connecticut Valley and the Company also asked that the entire Court of
Appeals, rather than only the three-judge appellate panel that had
issued the December 3 decision, consider their petition for rehearing.
On January 13, 1999, the Court denied the petition for rehearing.
Connecticut Valley and the Company then requested the Court of
Appeals to stay the issuance of its mandate until the companies could
file a petition for certiorari to the United States Supreme Court and
the Supreme Court acted on the petition.
On January 22, 1999, the Court of Appeals denied the request.
However, the Court of Appeals granted a 21-day stay to enable the
Company to seek a stay pending certiorari from the Circuit Justice of
the Supreme Court. On February 11, 1999, the Company and Connecticut
Valley filed a petition for a writ of certiorari with the United States
Supreme Court and a motion to stay the effect of the Court of Appeals'
decision while the case was pending in the Supreme Court. The motion
for a stay was addressed to Justice Souter who is responsible for such
motions pertaining to the Court of Appeals for the First Circuit. On
February 18, 1999, Justice Souter denied the stay pending the petition
for certiorari. On April 19, 1999, the Supreme Court denied the
petition for certiorari.
As a result of the December 3, 1998 Court of Appeals' decision
discussed above, on March 22, 1999, the NHPUC issued an Order which
directed Connecticut Valley to file within five business days its
calculation of the difference between the total FAC and PPCA revenues
that it would have collected had the 1997 FAC and PPCA rate levels been
in effect the entire year. In its Order, the NHPUC also directed
Connecticut Valley to calculate a rate reduction to be applied to all
billings for the period April 1, 1999 through December 31, 1999 to
refund the 1998 over collection relative to the 1997 rate level. The
Company estimated this amount to be approximately $2.7 million on a
pre-tax basis. Connecticut Valley filed the required tariff page with
the NHPUC, under protest and with reservation of all rights, on March
26, 1999 and implemented the refund effective April 1, 1999.
As a result of legal and regulatory actions discussed above,
Connecticut Valley no longer qualified as of December 31, 1998 for the
application of SFAS No. 71, and wrote-off in the fourth quarter of 1998
all its regulatory assets associated with its New Hampshire retail
business estimated at approximately $1.3 million on a pre-tax basis at
December 31, 1998. In addition, Connecticut Valley recorded estimated
total losses of $4.3 million pre-tax during the fourth quarter of 1998
for disallowed power costs of $1.6 million and its refund obligations of
$2.7 million. Company management, however, continues to believe that
the NHPUC's actions are illegal and unconstitutional and will present
its arguments in the appropriate forum.
The pre-tax losses described above resulted in Connecticut Valley
violating applicable covenants, which if not waived or renegotiated,
would have allowed Connecticut Valley's lender the right to accelerate
the repayment of a $3.75 million loan with Connecticut Valley. On March
12, 1999, Connecticut Valley was notified by the Bank that it would
exercise appropriate remedies in connection with the violation of
financial covenants associated with the $3.75 million loan agreement
unless the violation was cured by April 11, 1999. To avoid default of
this loan agreement, on April 6, 1999, pursuant to an agreement reached
on March 26, 1999, the Company purchased from the Bank the $3.75 million
note.
On April 7, 1999, the Court ruled from the bench that the March 22,
1999 NHPUC Order requiring Connecticut Valley to provide a refund to its
retail customers was illegal and beyond the NHPUC's authority. The
Court also ruled that the NHPUC cannot reduce Connecticut Valley's rates
below rates in effect at December 31, 1997. Accordingly, Connecticut
Valley removed the rate refund from retail rates effective April 16,
1999. Lastly, the Court denied the NHPUC's motion to dissolve the
injunction staying the implementation of its restructuring plan and
stated its desire to rule on the pending motion for summary judgement
and to conduct a hearing on the Company's request for a permanent
injunction, after the NHPUC completes hearings on PSNH's stranded costs.
The District Court's decision was issued as a written order on May 11,
1999.
The NHPUC held a hearing on April 22, 1999 to determine whether to
modify Connecticut Valley's 1999 power rates by returning the rates to
the levels that were in effect on December 31, 1997. On May 17, 1999,
the NHPUC issued an order requiring Connecticut Valley to set temporary
rates at the level in effect as of December 31, 1997, subject to future
reconciliation, effective with bills issued on and after June 1, 1999.
On May 24, 1999, the NHPUC filed a petition for mandamus in the
Court of Appeals challenging the Court's May 11, 1999 ruling and seeking
a decision allowing the refunds as required by the NHPUC's March 22,
1999 order. The Court of Appeals denied that petition on June 2, 1999.
The NHPUC immediately filed a notice of appeal in the Court of Appeals
again challenging the Court's May 11, 1999 ruling. In that appeal, the
Company and Connecticut Valley contend, among other things, that it is
unfair for the NHPUC to direct Connecticut Valley to continue to
purchase wholesale power under RS-2 in order to avoid the triggering of
a FERC exit fee, but at the same time to freeze Connecticut Valley's
rates at their December 31, 1997 level which does not enable Connecticut
Valley to recover all of its RS-2 costs. The appeal is fully briefed,
and oral argument is expected to be held in January or February, 2000.
On June 14, 1999, PSNH and various parties in New Hampshire
announced that a "Memorandum of Understanding" had been reached that is
intended to result in a detailed settlement proposal to the NHPUC that
would resolve PSNH's claims against the NHPUC's restructuring plan. On
July 6, 1999, PSNH petitioned the Court to stay its proceedings
indefinitely while the proposed settlement is reviewed and approved by
the NHPUC and the New Hampshire Legislature. On July 12, 1999 the
Company and Connecticut Valley objected to any stay that would allow the
NHPUC's rate freeze order to remain in effect for an extended period and
asked the Court to proceed with prompt hearings on its summary judgement
motion and trial on the merits. On October 20, 1999 the Court heard oral
arguments pertaining to the pretrial motions of the Company and the
NHPUC for summary judgement and dismissal, respectively. The Court took
the matters under advisement and indicated that a written order would
ensue.
FERC Proceedings
The Company filed an application with the FERC in June 1997, to
recover stranded costs in connection with its wholesale rate schedule
with Connecticut Valley and a notice of cancellation of the Connecticut
Valley rate schedule (contingent upon the recovery of the stranded costs
that would result from the cancellation of this rate schedule). In
December 1997, the FERC rejected the Company's proposal to recover
stranded costs through the imposition of a surcharge on our transmission
tariff, but indicated that it would consider an exit fee mechanism for
collecting stranded costs. The FERC denied the Company's motion for a
rehearing regarding the surcharge proposal, so the Company filed a
request with the FERC for an exit fee mechanism to collect the stranded
costs resulting from the cancellation of the contract with Connecticut
Valley. The stranded cost obligation sought to be recovered through an
exit fee, expressed on a net present value basis as of January 1, 1999,
is approximately $48.0 million. During April and May 1999, nine days of
hearings were held at the FERC before an Administrative Law Judge, who
will determine, among other things, whether Connecticut Valley qualifies
for an exit fee, and if so, the amount of Connecticut Valley's stranded
cost obligation to be paid to the Company as an exit fee. The ruling of
the administrative law judge is expected later this year, and the FERC
will act on the judge's recommendations sometime thereafter.
If the Company is unable to obtain an order authorizing the
recovery of costs in connection with the June 1997 FERC filing or in the
Federal Court, the Company would be required to recognize a pre-tax loss
under this contract totaling approximately $60.0 million on a pre-tax
basis. The Company would also be required to write-off approximately
$4.0 million (pre-tax)in regulatory assets associated with its wholesale
business. However, even if the Company obtains a FERC order authorizing
the updated requested exit fee, if Connecticut Valley is unable to
recover its costs by increasing its rates, Connecticut Valley would be
required to recognize a loss under this contract of approximately $48.0
million (pre-tax).
In addition to its efforts before the Court and FERC, Connecticut
Valley has initiated efforts and will continue to work for a negotiated
settlement with parties to the New Hampshire restructuring proceeding
and the NHPUC. On September 14 and 15, 1998 the Company participated in
a settlement conference with an Administrative Law Judge assigned for
the settlement process at the FERC and the parties to the Company's exit
fee filing.
An adverse resolution of these proceedings would have a material
adverse effect on the Company's results of operations and cash flows.
However, the Company cannot predict the ultimate outcome of this matter.
For further information on New Hampshire restructuring issues and
other regulatory events in New Hampshire affecting the Company or
Connecticut Valley and the 1997 and 1998 charges and reversals of the
1997 charges, see the Company's Current Reports on Form 8-K dated
January 12, 1998, January 28, 1998, April 1, 1998 and February 1, 1999;
the Company's Form 10-Q for the quarterly periods ended March 31, June
30 and September 30, 1998; and March 31 and June 30, 1999. Also, Item
1. Business-New Hampshire Retail Rates, Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations-Electric
Industry Restructuring-New Hampshire and Item 8. Financial Statements
and Supplementary Data-Note 13, Retail Rates-New Hampshire in the
Company's 1998 and 1997 Annual Reports on Form 10-K.
Connecticut Valley constitutes approximately 7% of the Company's
total retail mWh sales.
Competition-Risk Factors
If retail competition is implemented in Vermont or New Hampshire,
the Company is unable to predict the impact of this competition on its
revenues, the Company's ability to retain existing customers with
respect to their power supply purchases and attract new customers or the
margins that will be realized on retail sales of electricity, if any
such sales are sought. The Company expects its power distribution and
transmission service to its customers to continue on an exclusive basis
subject to continuing economic regulation.
Historically, electric utility rates have been based on a utility's
costs. As a result, electric utilities are subject to certain
accounting standards that are not applicable to other business
enterprises in general. SFAS No. 71 requires regulated entities, in
appropriate circumstances, to establish regulatory assets and
liabilities, and thereby defer the income statement impact of certain
costs and revenues that are expected to be realized in future rates.
As described in Note 1 of Notes to Consolidated Financial
Statements included in its 1998 Annual Report on Form 10-K, the Company
believes it currently complies with the provisions of SFAS No. 71 for
both its regulated Vermont service territory and FERC regulated
wholesale businesses. In the event the Company determines that it no
longer meets the criteria for following SFAS No. 71, the accounting
impact would be an extraordinary, non-cash charge to operations of
approximately $59.0 million on a pre-tax basis as of September 30,
1999. Criteria that give rise to the discontinuance of SFAS No. 71
include (1) increasing competition that restricts the Company's ability
to establish prices to recover specific costs and (2) a significant
change in the manner in which rates are set by regulators from cost
based regulation to another form of regulation.
The Securities and Exchange Commission has questioned the ability
of certain utility companies continuing the application of SFAS No. 71
where legislation provides for the transition to retail competition.
Deregulation of the price of electricity issues related to the
application of SFAS No. 71 and 101, as to when and how to discontinue
the application of SFAS No. 71 by utilities during transition to
competition has been referred to the Financial Accounting Standards
Board's Emerging Issues Task Force (EITF).
The EITF has reached a tentative consensus, and no further
discussion is planned, that regulatory assets should be assigned to
separable portions of the Company's business based on the source of the
cash flows that will recover those regulatory assets. Therefore, if the
source of the cash flows is from a separable portion of the Company's
business that meets the criteria to apply SFAS No. 71, those regulatory
assets should not be written off under SFAS No. 101, "Accounting for the
Discontinuation of Application of SFAS No. 71," but should be assessed
under paragraph 9 of SFAS No. 71 for realizability.
SFAS No. 121, "Accounting for the Impairment of Long Lived Assets
and for Long-Lived Assets to Be Disposed Of," which was adopted by the
Company on January 1, 1996, requires that any assets, including
regulatory assets, that are no longer probable of recovery through
future revenues, be revalued based upon future cash flows. SFAS No. 121
requires that a rate-regulated enterprise recognize an impairment loss
for the amount of costs excluded from recovery. As of September 30,
1999, based upon the regulatory environment within which the Company
currently operates, SFAS No. 121 did not have an impact on the Company's
financial position or results of operations. Competitive influences or
regulatory developments may impact this status in the future.
Because the Company is unable to predict what form possible future
restructuring legislation will take, it cannot predict if or to what
extent SFAS Nos. 71 and 121 will continue to be applicable in the
future. In addition, if the Company is unable to mitigate or otherwise
recover stranded costs that could arise from any potentially adverse
legislation or regulation, the Company would have to assess the
likelihood and magnitude of losses incurred under its power contract
obligations.
As such, the Company cannot predict whether any restructuring
legislation enacted in Vermont or New Hampshire, once implemented, would
have a material adverse effect on the Company's operations, financial
condition or credit ratings. However, the Company's failure to recover
a significant portion of its purchased power costs, would likely have a
material adverse effect on the Company's results of operations, cash
flows, ability to obtain capital at competitive rates and ability to
exist as a going concern. It is possible that stranded cost exposure
before mitigation could exceed the Company's current total common stock
equity.
Forward Looking Statements
This document contains statements that are forward looking. These
statements are based on current expectations that are subject to risks
and uncertainties. Actual results will depend, among other things, upon
general economic and business conditions, weather, the actions of
regulators, including the outcome of the litigation involving
Connecticut Valley before the FERC and the Court and the Company's
pending rate cases before the PSB and associated appeal to the Vermont
Supreme Court, as well as other factors which are described in further
detail in the Company's filings with the Securities and Exchange
Commission. The Company cannot predict the outcome of any of these
proceedings or other factors.
<PAGE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On August 7, 1997, the Company and eight other non-operating
owners of Millstone Unit No.3 filed a demand for arbitration with
Connecticut Light and Power Company and Western Massachusetts Electric
Company, both NU affiliates, and lawsuits against NU and its trustees.
The arbitration and lawsuits seek to recover costs associated with
replacement power, operation and maintenance costs and other costs
resulting from the shutdown of Millstone Unit #3. The non-operating
owners claim that NU and two of its wholly owned subsidiaries failed to
comply with NRC's regulations, failed to operate the facility in
accordance with good operating practice and attempted to conceal their
activities from the non-operating owners and the NRC. A mediator has
been hired in an attempt to settle prior arbitration and the lawsuit.
On September 15, 1999, NU announced that is intends to acution its
nuclear generating plants, including Millstone Unit No. 3. We cannot
predict at this time the effect of such an auction, if it occurs, on the
Company or on the ongoing litigation.
On October 27, 1999, NU and New England Power Company, or NEP,
disclosed that NU had reached an agreement with NEP and Montaup Electric
Company, or MEC, two of the non-operating minority joint owners, to
settle their claims in the arbitration and lawsuits. The settlement
involves payment of fixed and contingent amounts to NEP and MEC and the
inclusion of their Millstone Unit No. 3 interests in NU's auction of the
plant. The other non-operating minority joint owners, including the
Company, remain active in the arbitration and lawsuits and in seeking to
settle our claims against NU.
Except as otherwise described under Management's Discussion and
Analysis of Financial Condition and Results of Operations, Item 2, there
are no other material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company or
any of its subsidiaries is a party or to which any of their property is
subject.
Items 2, 3 and 4
None.
Item 5. Other Information.
In May 1999, the City Council of the City of Claremont New
Hampshire considered whether to publicly warn a vote to acquire the
Company's facilities located in Claremont and to establish a municipal
electric utility pursuant to N.H.R.S.A. Chapter 38 et. sec. By vote of
six to three, the Council voted to proceed towards the establishment of
a municipal electric utility and acquisition of Company facilities. This
action will require that the City hold an election within one year of
the Council's action to determine if a majority of the qualified voters
will confirm the Council's decision. Should the Council's decision be
confirmed by Claremont voters, the Council will have thirty days from
the date of the confirming vote to notify the Company of its intention
to purchase all or such portion of the Company's plant and property
located within Claremont and such portion of the plant lying without the
municipality as the public interest may require. The Company would
thereafter have sixty days to reply to the City's inquiry. If there is
no agreement between the Company and the City, Claremont may proceed to
condemn the Company's facilities with proceedings before the New
Hampshire Public Utilities Commission as provided for in Chapter 38 and
the FERC as provided for in its Rule 35.26 (18CFR Chapter 1). Most
recently, on September 8, 1999, the City Council voted to postpone
indefinitely the citizens' vote on municpalization which had been set
for November 2, 1999. No new date for the citizens' vote has been set.
The Company cannot predict at this time when or if a citizens' vote on
municipalization will be held in connection with this initiative.
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits
4. Instruments defining the rights of security
holders,including indentures
4.57 Forty-First Supplemental Indenture Dated
as of July 19, 1999 and Resolutions
Establishing Series PP (Millstone)Bonds,
Series QQ (Seabrook) Bonds and Series RR
(East Barnet)Bonds and Matters connected
Therewith Adopted July 19, 1999.
4.58 Second Mortgage Indenture Dated as of July
15, 1999, Central Vermont Public Service
Corporation to The Bank of New York,
Trustee
4.59 First Supplemental Indenture to the Second
Mortgage, Central Vermont Public Service
Corporation to The Bank of New York,
Trustee Dated as of July 15, 1999,
creating an issue of Mortgage Bonds,
8-1/8% Second Mortgage Bonds Due 2004.
4.60 A/B Exchange Registration Rights Agreement
Dated as of July 30, 1999 by and among
Central Vermont Public Service Corporation
and Donaldson, Lufkin & Jenrette
Securities Corporation, TD Securities
(USA)Inc.
27. Financial Data Schedule
(b) Item 5. Other Events, dated July 30, 1999 re. Central
Vermont sold $75 million aggregate principal amount of 8-1/8% Second
Mortgage Bonds due 2004.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
(Registrant)
By Francis J. Boyle
Francis J. Boyle, Senior Vice President,
Principal Financial Officer and Treasurer
By James M. Pennington
James M. Pennington, Vice President, Controller
and Principal Accounting Officer
Dated November 12, 1999
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This Financial Data Schedule contains summary information extracted from the
Consolidated Financial Statements included herein and is qualified in its
entirety by reference to such financial statements (dollars in thousands, except
per share amounts).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 314894
<OTHER-PROPERTY-AND-INVEST> 65638
<TOTAL-CURRENT-ASSETS> 131451
<TOTAL-DEFERRED-CHARGES> 64671
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 576654
<COMMON> 66506
<CAPITAL-SURPLUS-PAID-IN> 45334
<RETAINED-EARNINGS> 72337
<TOTAL-COMMON-STOCKHOLDERS-EQ> 183812
17000
8054
<LONG-TERM-DEBT-NET> 166400
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 3183
1000
<CAPITAL-LEASE-OBLIGATIONS> 15330
<LEASES-CURRENT> 1094
<OTHER-ITEMS-CAPITAL-AND-LIAB> 180781
<TOT-CAPITALIZATION-AND-LIAB> 576654
<GROSS-OPERATING-REVENUE> 305002
<INCOME-TAX-EXPENSE> 7872
<OTHER-OPERATING-EXPENSES> 279653
<TOTAL-OPERATING-EXPENSES> 287525
<OPERATING-INCOME-LOSS> 17477
<OTHER-INCOME-NET> 3382
<INCOME-BEFORE-INTEREST-EXPEN> 20859
<TOTAL-INTEREST-EXPENSE> 7303
<NET-INCOME> 13556
1397
<EARNINGS-AVAILABLE-FOR-COMM> 12159
<COMMON-STOCK-DIVIDENDS> 7570
<TOTAL-INTEREST-ON-BONDS> 4667
<CASH-FLOW-OPERATIONS> 32095
<EPS-BASIC> 1.06
<EPS-DILUTED> 1.06
</TABLE>
EXHIBIT 4.57
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Forty-First Supplemental Indenture
Dated as of July 19, 1999
and
Resolutions Establishing Series PP (Millstone) Bonds, Series QQ
(Seabrook) Bonds and
Series RR (East Barnet) Bonds and Matters Connected Therewith
Adopted July 19, 1999
RECORDING INFORMATION
___________________________________ Town Clerk's Office - Received
this Supplemental Indenture for record on the _________ day of
______________, 19__, at ______ o'clock, __.M., and filed the bound
copy as Book ____________ in accordance with T 24 VSA, Section 1155,
and cross-indexed in the Land Records in Book ________ at Page _____.
Attest:__________________________
Town Clerk
THIS SUPPLEMENTAL INDENTURE, dated as of July 19, 1999, by and
between CENTRAL VERMONT PUBLIC SERVICE CORPORATION, a corporation duly
organized and existing under the laws of the State of Vermont, having
offices at 77 Grove Street, Rutland, Vermont 05701 (hereinafter
generally referred to as the Company), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, having offices at 2 Avenue
Lafayette, Boston, Massachusetts 02111 (hereinafter generally referred
to as the Trustee), as the second successor trustee under said
Indenture of Mortgage,
WITNESSETH that:
WHEREAS the Company heretofore duly executed and delivered to Old
Colony Trust Company, as Trustee, or to its successor as trustee, an
Indenture of Mortgage (hereinafter generally referred to as the
Original Indenture), dated as of October 1, 1929, but actually
executed on October 24, 1929 (the Original Indenture, with all
indentures supplemental thereto as therein provided, being hereinafter
generally referred to as the Mortgage), Liber 150 of Mortgages, Page
51, Grafton County (New Hampshire) Registry of Deeds, Liber 616, Folio
484, Sullivan County (New Hampshire) Records, Vol. 234, Page 531, in
the Office of the Secretary of State of Connecticut, in the Office of
the City Clerk of Rutland, Vermont, in the offices of the clerks of
certain other counties, towns and cities in the State of Vermont and
in the States of New Hampshire, Maine, Connecticut and New York, and
in the Office of the Secretary of State of the State of Vermont, to
which Original Indenture this instrument is supplemental, and forty
duly recorded indentures supplemental thereto and in modification and
confirmation thereof, whereby all the properties of the Company,
whether owned at the time of the execution thereof or thereafter
acquired, with certain exceptions and reservations therein fully set
forth, were granted, assigned, transferred, mortgaged and pledged to
the Trustee, in trust upon the terms and conditions set forth therein,
to secure bonds of the Company issued and to be issued in accordance
with the terms of the Mortgage and for other purposes more
particularly set forth therein; and
WHEREAS on January 4, 1971, Old Colony Trust Company was merged
into The First National Bank of Boston which thereupon succeeded to
the trusts under the Mortgage; and
WHEREAS on September 29, 1995, The First National Bank of Boston
sold substantially all its corporate trust business and assets to
State Street Bank and Trust Company which thereupon commenced to act
as Trustee under the Mortgage (hereinafter referred to as the
Succession); and
WHEREAS as of December 29, 1997, the Company, The First National
Bank of Boston and the Trustee executed and delivered the Thirty-Ninth
Supplemental Indenture confirming the Succession and making certain
representations and agreements with respect thereto; and
WHEREAS in order to comply with the obligations of the Company in
Section 12 of Article III and elsewhere in the Original Indenture, and
the provisions of said section and of Section 1 of Article XVI of the
Original Indenture, it is desirable and the Company is required and
has duly and lawfully determined, at the request of the Trustee, to
execute and deliver this instrument for the purpose of complying with
said obligations and provisions; and
WHEREAS the Company has caused to be paid or redeemed all bonds
issued under the Mortgage other than those now outstanding as
described below and has caused to be paid or redeemed or has otherwise
discharged the underlying bonds of its predecessor corporations
described in the Original Indenture and the mortgages securing the
same; and the Company has also issued and there are outstanding on the
date of delivery hereof $76,500,000 in principal amount of First
Mortgage Bonds, Series FF, GG, HH, JJ, LL, MM, NN and OO and the
Company proposes to issue under the Mortgage $5,133,562.00 in
aggregate principal amount of additional First Mortgage Bonds, Series
PP (Millstone), due no later than December 16, 2015 (herein referred
to as the bonds of Series PP), $5,788,750.00 in aggregate principal
amount of additional First Mortgage Bonds, Series QQ (Seabrook), due
no later than December 16, 2009 (herein referred to as the bonds of
Series QQ), and $6,015,275.35 in aggregate principal amount of
additional First Mortgage Bonds, Series RR (East Barnet), due no later
than December 16, 2013 (herein referred to as the bonds of Series RR),
which series (subject to the restrictions and provisions contained in
the Mortgage) are limited to such aggregate principal amount; and
WHEREAS this Supplemental Indenture has been duly and legally
authorized by the Board of Directors of the Company, and the use of
terms and expressions herein is in accordance with the definitions,
uses and constructions contained in the Original Indenture as
heretofore and hereby supplemented, modified and confirmed; and
WHEREAS the bonds of Series PP, Series QQ and Series RR and the
Trustee's certificate thereon are to be substantially in the
respective forms set forth in resolutions (a certified copy of which
is on file with the Trustee) of the Board of Directors of the Company
designating and authorizing the bonds of Series PP, Series QQ and
Series RR, and the bonds of Series PP, Series QQ and Series RR are to
be redeemable as set forth in said forms of bonds of Series PP, Series
QQ and Series RR;
NOW THEREFORE, in confirmation of and supplementing the Mortgage
and pursuant to, in compliance with, and in execution of, the powers,
authorities and obligations conferred, imposed and reserved therein
and every other power, authority and obligation appertaining thereto,
in consideration of the premises, and of the sum of one dollar to it
duly paid by said State Street Bank and Trust Company and of other
good and valuable consideration, the receipt whereof is hereby
acknowledged, said Central Vermont Public Service Corporation has
given, granted, bargained, sold, transferred, assigned, pledged,
mortgaged, warranted, conveyed and confirmed to the Trustee, and by
these presents does give, grant, bargain, sell, transfer, assign,
pledge, mortgage, warrant, convey and confirm, unto said State Street
Bank and Trust Company as Trustee as aforesaid, and its successor or
successors in the trusts under the Mortgage and hereunder, and its and
their assigns, (a) all and singular the plants, rights, permits,
franchises, privileges, easements and property, real, personal and
mixed, described in the Original Indenture and each of the preceding
Supplemental Indentures, and thereby or otherwise thereunder conveyed,
pledged, assigned, transferred and mortgaged, or intended so to be
(said descriptions in the Original Indenture and each of the preceding
Supplemental Indentures being hereby made a part hereof to the same
extent as if set forth herein at length), whether then or now owned or
thereafter or hereafter acquired, except such of said properties or
interests therein as may have been released by the Trustee or any
previous trustee under the Mortgage or sold or disposed of in whole or
in part as permitted by the provisions of the Original Indenture as
heretofore supplemented and amended and (b) also, but without in any
way limiting the generality of the foregoing, all of the right, title
and interest of the Company in and to the franchises, rights, titles,
interests, easements and properties described in Schedule A hereto
attached and hereby made a part hereof as fully as if set forth herein
at length.
Subject, however, as to all of the foregoing, to the specific rights,
privileges, liens, encumbrances, restrictions, conditions,
limitations, covenants, interests, reservations, exceptions and
otherwise as provided in the Original Indenture and preceding
Supplemental Indentures, and in the descriptions in the schedules
thereto and hereto and in the deeds or grants in said schedules
referred to.
BUT SPECIFICALLY RESERVING AND EXCEPTING (as the same were
reserved and excepted from the lien of the Original Indenture and all
preceding Supplemental Indentures) from this instrument and the grant,
conveyance, mortgage, transfer and assignment herein contained (1) all
right, title and interest of the Company, now owned or hereafter
acquired, in and to the properties and rights specified in subclauses
(a) and (c), both inclusive, of the granting clauses on page 11 of the
Original Indenture, and (2) (as the same, pursuant to the provisions
of Section 18(b) of Article 2 of the Fifth Supplemental Indenture,
dated as of February 1, 1945, were reserved from the lien of the
Original Indenture and the preceding Supplemental Indentures) all
telephone properties, whether heretofore or now owned or hereafter
acquired by the Company.
TO HAVE AND TO HOLD all said property hereby conveyed, assigned,
pledged or mortgaged, or intended so to be, together with the rents,
issues and profits thereof, as well as all such after-acquired
property, unto the Trustee, its successor or successors in the trusts
under the Mortgage and hereunder and its and their assigns forever;
BUT IN TRUST, NEVERTHELESS, under and subject to the provisions
and conditions, with all the powers and authority and for the trusts
and purposes, herein and in the Mortgage set forth, (1) for the equal
and proportionate benefit and security (except as provided in Section
3 of Article III and elsewhere in the Original Indenture as heretofore
and hereby supplemented, modified and confirmed) of the holders of all
bonds and interest coupons heretofore, now and hereafter issued under
the Mortgage and from time to time outstanding, pursuant to the
provisions thereof, and for the enforcement of the payment of said
bonds and coupons when payable, and the performance of and compliance
with the covenants and conditions of the Mortgage, without (except as
aforesaid) any preference, distinction or priority as to lien or
otherwise of any bond or coupon over any other bond or coupon by
reason of the difference in the series or time of the actual issue,
sale or negotiation thereof, or for any other reason whatsoever, so
that each and every bond heretofore, now or hereafter issued under the
Mortgage shall have the same lien, and so that the interest and
principal of every such bond shall, subject to the terms of the
Original Indenture, be equally and proportionately secured thereby and
hereby, as if it had been made, executed, delivered, sold and
negotiated simultaneously with the execution and delivery of the
Original Indenture; and (2) subject to the covenants, agreements,
rights, privileges, immunities, trusts and duties set forth in the
Original Indenture, as heretofore supplemented, modified and
confirmed, and in this Supplemental Indenture.
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED, upon the trusts
and for the purposes aforesaid, as set forth in this, following
covenants, agreements, conditions and provisions:
ARTICLE 1.
CERTAIN TERMS OF THE BONDS OF SERIES PP, SERIES QQ AND SERIES RR
SECTION 1.
(a) The bonds of Series PP are issued to secure the payment of all of
the obligations and liabilities of the Company (the Millstone
Obligations) under the Amended and Restated Reimbursement Agreement,
dated as of September 24, 1992, between the Company and The Toronto
Dominion Bank (the Bank) (as amended, restated, supplemented or
otherwise modified from time to time, the Millstone Reimbursement
Agreement, and including any replacement or successor reimbursement
agreement entered by the Company through December 1, 2015), in
connection with the issuance by the Bank (or its successor or assignee
or any replacement issuer) of the Letter of Credit (as defined in the
Millstone Reimbursement Agreement, the Millstone Letter of Credit)
which secures the Company's obligations pursuant to the Connecticut
Development Authority Floating Rate Monthly Demand Millstone Pollution
Control Revenue Bonds (Central Vermont Public Service Corporation -
1985 Series), due December 1, 2015. The bonds of Series PP will be
registered in the name of the Bank and will be transferable to any
successor or assignee of the Bank in connection with the transfer of
all of the Bank's right, title and interest in, to and under the
Millstone Reimbursement Agreement, or to any issuer of any replacement
or successor Millstone Letter of Credit, or to the Company. The
Trustee shall be fully protected in registering the transfer of the
bonds of Series PP in accordance with the written directions from the
Bank or its registered transferee.
(b) The bonds of Series QQ are issued to secure the payment of all of
the obligations and liabilities of the Company (the Seabrook
Obligations) under the Letter of Credit and Reimbursement Agreement,
dated as of November 1, 1994, between the Company and the Bank (as
amended, restated, supplemented or otherwise modified from time to
time, the Seabrook Reimbursement Agreement, and including any
replacement or successor reimbursement agreement entered by the
Company through December 1, 2009), in connection with the issuance by
the Bank (or its successor or assignee or any replacement issuer) of
the Letter of Credit (as defined in the Seabrook Reimbursement
Agreement, the Seabrook Letter of Credit) which secures the Company's
obligations pursuant to the New Hampshire Industrial Development
Authority Demand Pollution Control Revenue Bonds (Central Vermont
Public Service Corporation Project), due December 1, 2009. The bonds
of Series QQ will be registered in the name of the Bank and will be
transferable to any successor or assignee of the Bank in connection
with the transfer of all of the Bank's right, title and interest in,
to and under the Seabrook Reimbursement Agreement, or to any issuer of
any replacement or successor Seabrook Letter of Credit, or to the
Company. The Trustee shall be fully protected in registering the
transfer of the bonds of Series QQ in accordance with the written
directions from the Bank or its registered transferee.
(c) The bonds of Series RR are issued to secure the payment of all of
the obligations and liabilities of the Company (the East Barnet
Obligations and, collectively with the Millstone Obligations and the
Seabrook Obligations, the Obligations) under the Guaranty, dated as of
April 29, 1993 (the Guaranty), made by the Company in favor of the
Bank, in connection with (i) the Reimbursement Agreement, dated as of
April 29, 1993, between Central Vermont Public Service Corporation -
East Barnet Hydroelectric, Inc. (East Barnet) and the Bank (as
amended, restated, supplemented or otherwise modified from time to
time, the East Barnet Reimbursement Agreement, and including any
replacement or successor reimbursement agreement entered by East
Barnet through December 1, 2013) and (ii) the issuance by the Bank (or
its successor or assignee or any replacement issuer) of the Letter of
Credit (as defined in the East Barnet Reimbursement Agreement, the
East Barnet Letter of Credit) which secures the obligations of East
Barnet and the Company pursuant to the Vermont Industrial Development
Authority Floating Rate Monthly Demand Hydroelectric Revenue Bonds
(Central Vermont Public Service Corporation - East Barnet Project),
due December 1, 2013. The bonds of Series RR will be registered in
the name of the Bank and will be transferable to any successor or
assignee of the Bank in connection with the transfer of all of the
Bank's right, title and interest in, to and under the East Barnet
Reimbursement Agreement and the Guaranty, or to any issuer of any
replacement or successor East Barnet Letter of Credit, or to the
Company. The Trustee shall be fully protected in registering the
transfer of the bonds of Series RR in accordance with the written
directions from the Bank or its registered transferee.
SECTION 2.
(a) The bonds of Series PP shall mature upon the irrevocable and
indefeasible satisfaction in full by or on behalf of the Company of
the Millstone Obligations and the expiration or termination of the
Millstone Letter of Credit (including any replacement thereof or
successor thereto) in accordance with its terms. The obligation of
the Company to make payments with respect to the bonds of Series PP
shall be satisfied and discharged to the extent the Company shall have
irrevocably and indefeasibly satisfied and discharged in full the
Millstone Obligations. The Trustee may conclusively presume that no
Event of Default (as defined in the Millstone Reimbursement Agreement)
has occurred and no amounts are due under the bonds of Series PP
unless and until the Trustee shall have received from the Bank a
written notice of the occurrence of an Event of Default (as defined in
the Millstone Reimbursement Agreement) or a written demand from the
Bank (which notice or demand has not been subsequently rescinded or
revoked by the Bank) as described in the form of bond. Upon the
release of the bonds of Series PP to the Trustee by the Bank and
written affirmation from the Company to the Trustee that no
replacement or successor Millstone Letter of Credit shall be entitled
to the benefits of the bonds of Series PP, the Trustee shall cancel
and destroy such bonds, and the bonds of such Series PP shall be
deemed to have been paid in full and shall cease to be entitled to the
lien of the Mortgage.
(b) The bonds of Series QQ shall mature upon the irrevocable and
indefeasible satisfaction in full by or on behalf of the Company of
the Seabrook Obligations and the expiration or termination of the
Seabrook Letter of Credit (including any replacement thereof or
successor thereto) in accordance with its terms. The obligation of
the Company to make payments with respect to the bonds of Series QQ
shall be satisfied and discharged to the extent the Company shall have
irrevocably and indefeasibly satisfied and discharged in full the
Seabrook Obligations. The Trustee may conclusively presume that no
Event of Default (as defined in the Millstone Reimbursement Agreement)
has occurred and no amounts are due under the bonds of Series QQ
unless and until the Trustee shall have received from the Bank a
written notice of the occurrence of an Event of Default (as defined in
the Seabrook Reimbursement Agreement) or a written demand from the
Bank (which notice or demand has not been subsequently rescinded or
revoked by the Bank) as described in the form of bond. Upon the
release of the bonds of Series QQ to the Trustee by the Bank and
written affirmation from the Company to the Trustee that no
replacement or successor Seabrook Letter of Credit shall be entitled
to the benefits of the bonds of Series QQ, the Trustee shall cancel
and destroy such bonds, and the bonds of such Series QQ shall be
deemed to have been paid in full and shall cease to be entitled to the
lien of the Mortgage.
(c) The bonds of Series RR shall mature upon the irrevocable and
indefeasible satisfaction in full by or on behalf of the Company of
the East Barnet Obligations and the expiration or termination of the
East Barnet Letter of Credit (including any replacement thereof or
successor thereto) in accordance with its terms. The obligation of
the Company to make payments with respect to the bonds of Series RR
shall be satisfied and discharged to the extent the Company shall have
irrevocably and indefeasibly satisfied and discharged in full the East
Barnet Obligations. The Trustee may conclusively presume that no
Event of Default (as defined in the Millstone Reimbursement Agreement)
has occurred and no amounts are due under the bonds of Series RR
unless and until the Trustee shall have received from the Bank a
written notice of the occurrence of an Event of Default (as defined in
the East Barnet Reimbursement Agreement) and a written demand on the
Guaranty or a written demand from the Bank (which notice or demand has
not been subsequently rescinded or revoked by the Bank) as described
in the form of bond. Upon the release of the bonds of Series RR to
the Trustee by the Bank and written affirmation from the Company to
the Trustee that no replacement or successor East Barnet Letter of
Credit shall be entitled to the benefits of the bonds of Series RR,
the Trustee shall cancel and destroy such bonds, and the bonds of such
Series RR shall be deemed to have been paid in full and shall cease to
be entitled to the lien of the Mortgage.
SECTION 3. The bonds of Series PP, Series QQ and Series RR shall
bear interest at the same rates as the Obligations that such bonds
secure, which may provide for interest at floating interest rates on
overdue amounts and other costs and expenses.
SECTION 4. The bonds of Series PP, Series QQ and Series RR shall not
be redeemable prior to maturity except as set forth in the forms of
bond of such Series.
SECTION 5. Notwithstanding any provisions of the Mortgage or the
bonds of Series PP, Series QQ or Series RR, all payments on the bonds
of Series PP, Series QQ and Series RR shall be made directly to each
registered holder of such bonds, or its nominee, at such address as
may from time to time be furnished by such holder in writing without
surrender or presentation of such bonds of Series PP, Series QQ or
Series RR, as the case may be, to the Trustee (except in the case of
payment or redemption of any bond of Series PP, Series QQ or Series RR
in whole) and with respect to each such original holder or subsequent
holder such payments shall be made in accordance with the provisions
of any written agreement between such original holder and the Company
which shall have been communicated and consented to by the Trustee.
The Trustee hereby consents to the method of payment described in the
letter agreement, dated July 22, 1999, between the Company and the
Bank.
ARTICLE 2.
MISCELLANEOUS PROVISIONS.
SECTION 1. The Trustee hereby confirms its approval, previously
given, of the designation "First Mortgage Bonds, Series PP
(Millstone)" for the bonds of said Series PP, the designation "First
Mortgage Bonds, Series QQ (Seabrook)" for the bonds of said Series QQ,
and the designation "First Mortgage Bonds, Series RR (East Barnet)"
for the bonds of said Series RR.
SECTION 2. The Trustee shall be entitled to, may exercise and shall
be protected by, where and to the full extent that the same are
applicable, all the rights, powers, privileges, immunities and
exemptions provided in the Mortgage as if the provisions concerning
the same were incorporated herein at length. The Trustee under the
Mortgage shall ex officio be Trustee hereunder. The recitals and
statements in this Supplemental Indenture and in the bonds shall be
taken as statements by the Company alone, and shall not be considered
as made by or as imposing any obligation or liability upon the
Trustee, nor shall the Trustee be held responsible for the legality or
validity of this Supplemental Indenture or of the bonds, and the
Trustee makes no covenants or representations, and shall not be
responsible, as to and for the effect, authorization, execution,
delivery or recording of this Supplemental Indenture.
SECTION 3. This Supplemental Indenture shall become void when the
Original Indenture as heretofore supplemented and amended shall be
void.
SECTION 4. The Mortgage as supplemented hereby is ratified and
confirmed in all respects.
SECTION 5. If and to the extent that any provision of this
Supplemental Indenture limits, qualifies or conflicts with the duties
imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act of 1939, as amended, through operation of Section
318(c), such imposed duties shall control.
SECTION 6. This Supplemental Indenture may be simultaneously executed
in any number of counterparts, and all said counterparts executed and
delivered, each as an original, shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, said CENTRAL VERMONT PUBLIC SERVICE
CORPORATION has caused this instrument to be signed, and its corporate
seal attested by its Secretary to be hereunto affixed, by Francis J.
Boyle, its Senior Vice President, Chief Financial Officer, Treasurer
and Agent in that behalf duly authorized, and said STATE STREET BANK
AND TRUST COMPANY has caused this instrument to be executed in its
corporate name and its corporate seal to be hereto affixed by Laura S.
Cawley, its Assistant Vice President, all as of the day and year first
above written.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: FRANCIS J. BOYLE
FRANCIS J. BOYLE
Its: Senior Vice President, Chief Financial Officer,
Treasurer and Agent
Attest:
JOSEPH M. KRAUS
JOSEPH M. KRAUS
Its: Secretary
Signed, sealed and delivered (Corporate Seal)
behalf of Central Vermont Public
Service Corporation in the presence
of:
KIMBERLY A. PRITCHARD
KIMBERLY A. PRITCHARD
PATRICIA C. MITIGUY
PATRICIA C. MITIGUY
STATE STREET BANK AND TRUST COMPANY
as Trustee as aforesaid,
By: LAURA S. CAWLEY
LAURA S. CAWLEY
Its: Assistant Vice President
(Corporate Seal)
Signed, sealed and delivered
on behalf of State Street Bank and
Trust Company in the presence of:
PETER M. MURPHY
PETER M. MURPHY
ELIZABETH BOYCE
ELIZABETH BOYCE
STATE OF VERMONT )
) ss.
COUNTY OF RUTLAND )
On this 28th day of July, A.D. 1999, before me, a Notary Public
in and for said State, duly commissioned and acting as such,
personally came Francis J. Boyle, Senior Vice President, Chief
Financial Officer, Treasurer and Agent of said Central Vermont Public
Service Corporation, to me personally known and known to me to be one
of the persons named in and who executed the foregoing instrument, and
who being duly sworn by me did depose and say: that he resides in
Rutland Town, Vermont; that he is Treasurer and agent duly authorized
of Central Vermont Public Service Corporation, a Vermont corporation
and the Corporation described in and which executed the above
instrument as party of the first part; that he knows the seal of said
Corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order and authority of the
Board of Directors of said Corporation, and that he signed his name
thereto by like order and authority, and he acknowledged and declared
that he executed the foregoing instrument and affixed the seal of said
Central Vermont Public Service Corporation thereto as its Agent by
order and authority of the Board of Directors of said Corporation, and
acknowledged the same to be his free act and deed in said capacity,
and the free act and deed of said Corporation in said capacity.
WITNESS my hand and official seal the day and year aforesaid.
BONNIE L. O'ROURKE
BONNIE L. O'ROURKE
Notary Public
My commission expires February 10, 2003
(Notarial Seal)
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF SUFFOLK )
On this 26th day of July, A.D. 1999, before me, a Notary Public
in and for said Commonwealth, duly commissioned and acting as such,
personally came Laura S. Cawley, Assistant Vice President of State
Street Bank and Trust Company, to me personally known and known to me
to be one of the persons named in and who executed the foregoing
instrument, and who being duly sworn by me did depose and say: that
she resides in the Town of Hingham, Massachusetts, that she is the
Assistant Vice President and agent duly authorized of State Street
Bank and Trust Company, the trust company described in and which
executed the above instrument as party of the second part; that she
knows the seal of said trust company; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order and
authority of the Board of Directors of said trust company, and that
she signed her name thereto by like order and authority, and she
acknowledged and declared that she executed the foregoing instrument
and affixed the seal of said trust company thereto as its Agent by
order and authority of the Board of Directors of said trust company,
and acknowledged the same to be her free act and deed in said
capacity, and the free act and deed of said trust company in said
capacity. And said Laura S. Cawley, an Assistant Vice President of
said State Street Bank and Trust Company, further acknowledged that
she accepted the trust hereinbefore created for, and on behalf of,
said State Street Bank and Trust Company, Trustee, upon the terms
therein named.
WITNESS my hand and official seal the day and year aforesaid.
ROSE MARIE MOGAURO
ROSE MARIE MOGAURO
Notary Public
My commission expires January 14, 2005
(Notarial Seal)
SCHEDULE A.
DESCRIPTION OF PROPERTIES.
All land and premises, rights, privileges and easements conveyed
or purported to have been conveyed to the Company in and by the
following described deeds and the records thereof are hereby
incorporated herein by reference:
Properties acquired after January 28, 1998 or not previously
described: None
Also, all property of every kind whatsoever, including land and
premises, rights, privileges, easements, transmission lines,
substations and distribution lines, in the following towns:
IN NEW LONDON COUNTY, STATE OF CONNECTICUT:
Waterford
IN HARTFORD COUNTY, STATE OF CONNECTICUT:
Berlin
IN CUMBERLAND COUNTY, STATE OF MAINE:
Yarmouth
IN SULLIVAN COUNTY, STATE OF NEW HAMPSHIRE:
Charlestown Cornish Plainfield
Claremont Newport Unity
IN CHESHIRE COUNTY, STATE OF NEW HAMPSHIRE:
Chesterfield Hinsdale
IN GRAFTON COUNTY, STATE OF NEW HAMPSHIRE:
Bath Lyman Orford
Haverhill Lyme Piermont
IN WASHINGTON COUNTY, STATE OF NEW YORK:
Granville Hampton
IN RENSSELAER COUNTY, STATE OF NEW YORK:
Hoosick
IN ADDISON COUNTY, STATE OF VERMONT:
Addison Leicester Ripton
Bridport Lincoln Salisbury
Bristol Middlebury Shoreham
Cornwall Monkton Starksboro
Ferrisburg New Haven Vergennes
Goshen Orwell Weybridge
Granville Panton Whiting
Hancock
IN BENNINGTON COUNTY, STATE OF VERMONT:
Arlington Manchester Searsburg
Bennington Peru Shaftsbury
Dorset Pownal Sunderland
Glastenbury Rupert Winhall
Landgrove Sandgate Woodford
IN CALEDONIA COUNTY, STATE OF VERMONT:
Barnet Lyndon Walden
Danville Ryegate Waterford
Kirby St. Johnsbury Wheelock
IN CHITTENDEN, COUNTY, STATE OF VERMONT:
Buels Gore Essex Milton
Burlington Huntington Underhill
Colchester Jericho Westford
IN ESSEX COUNTY, STATE OF VERMONT:
Concord Guildhall Victory
Granby Lunenburg
IN FRANKLIN COUNTY, STATE OF VERMONT:
Bakersfield Fletcher Richford
Berkshire Franklin Sheldon
Enosburg Georgia St. Albans City
Fairfax Highgate St. Albans Town
Fairfield Montgomery Swanton
IN LAMOILLE COUNTY, STATE OF VERMONT:
Belvidere Eden Johnson
Cambridge Hyde Park
IN ORANGE COUNTY, STATE OF VERMONT:
Bradford Fairlee Thetford
Braintree Newbury Tunbridge
Brookfield Randolph Vershire
Chelsea Strafford West Fairlee
IN ORLEANS COUNTY, STATE OF VERMONT:
Lowell Irasburg
IN RUTLAND COUNTY, STATE OF VERMONT:
Benson Middletown Springs Sherburne
Brandon Mt. Holly Shrewsbury
Castleton Mt. Tabor Sudbury
Chittenden Pawlet Tinmouth
Clarendon Pittsfield Wallingford
Danby Pittsford Wells
Fair Haven Poultney West Haven
Hubbardton Proctor West Rutland
Ira Rutland City
Mendon Rutland Town
IN WASHINGTON COUNTY, STATE OF VERMONT:
Northfield Roxbury
IN WINDHAM COUNTY, STATE OF VERMONT:
Athens Guilford Stratton
Brattleboro Jamaica Townshend
Brookline Londonderry Vernon
Dover Marlboro Wardsboro
Dummerston Newfane Westminster
Grafton Rockingham Windham
IN WINDSOR COUNTY, STATE OF VERMONT:
Andover Hartland Sharon
Baltimore Ludlow Springfield
Barnard Norwich Stockbridge
Bethel Plymouth Weathersfield
Bridgewater Pomfret Weston
Cavendish Reading West Windsor
Chester Rochester Windsor
Hartford Royalton Woodstock
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
RESOLUTIONS ESTABLISHING SERIES PP BONDS, SERIES QQ BONDS
AND SERIES RR BONDS, AND MATTERS CONNECTED THEREWITH.
I, JOSEPH M. KRAUS, hereby certify that I am Secretary of Central
Vermont Public Service Corporation and that the following is a true
copy of the resolutions adopted at a duly-convened meeting of the
Board of Directors of said Corporation held on July 19, 1999, at which
a quorum was present and acting throughout:
On motion duly made and seconded, the following resolutions were
unanimously passed:
Resolutions Relating to the Series PP (Millstone) Bonds
RESOLVED: That this Board of Directors of Central Vermont Public
Service Corporation hereby determines upon a forty-first series of
bonds to be issued from time to time upon proper resolutions of the
Board of Directors under the terms of an Indenture of Mortgage (the
"Mortgage") between this Company and State Street Bank and Trust
Company (successor trustee to The First National Bank of Boston,
successor trustee to Old Colony Trust Company), Trustee, dated as of
October 1, 1929 (but actually executed October 24, 1929), as amended,
and duly recorded, among other places, in the Office of the City Clerk
of Rutland, Vermont, and in Washington County, New York, Liber 150 of
Mortgages, Page 51, Grafton County, New Hampshire, Registry of Deeds,
Liber 616, Folio 484, Sullivan County, New Hampshire, Records, Vol.
234, Page 531, in the Office of the Secretary of State of Connecticut,
in the offices of the clerks of certain other counties, towns and
cities in the State of Vermont and in the States of New Hampshire,
Maine, Connecticut and New York, and in the office of the Secretary of
State of Vermont; that the bonds are issued to secure the payment of
the obligations and liabilities of the Company (the "Millstone
Obligations") under the Amended and Restated Reimbursement Agreement,
dated as of September 24, 1992, between the Company and The Toronto
Dominion Bank (the "Bank" and including any replacement, or successor
issuer or permitted assignee) as amended, restated, supplemented or
otherwise modified from time to time, the "Millstone Reimbursement
Agreement" and including any replacement or successor reimbursement
agreement entered by the Company through the Millstone Revenue Bonds
Maturity Date, as defined below, in connection with the issuance by
the Bank of the Letter of Credit (as defined in the Millstone
Reimbursement Agreement and including any replacement or successor
letter of credit issued through the Millstone Revenue Bonds Maturity
Date, the "Millstone Letter of Credit"), which Millstone Letter of
Credit is issued to provide, among other things, funds for the payment
of principal of and interest on Connecticut Development Authority (the
"Millstone Issuer") Floating Rate Monthly Demand Millstone Pollution
Control Revenue Bonds (Central Vermont Public Service Corporation -
1985 Series) (the "Millstone Revenue Bonds"), which Millstone Revenue
Bonds mature on the first day of December 2015 (the "Millstone Revenue
Bonds Maturity Date"); that said series shall be designated as Series
PP and that the bonds of said series shall be designated as "First
Mortgage Bonds, Series PP (Millstone)"; that the bonds of Series PP
shall be in the form of registered bonds without coupons; that each of
the bonds of Series PP shall be dated as of the date of issue; that
the bonds of Series PP will be registered in the name of the Bank and,
in accordance with and pursuant to the transfer provisions of the
Mortgage, will be transferable to any successor or assignee of the
Bank in connection with the transfer of all of the Bank's right, title
and interest in, to and under the Millstone Reimbursement Agreement,
or to any issuer of any replacement or successor Millstone Letter of
Credit; that the Trustee shall be fully protected in registering the
transfer of the bonds of Series PP in accordance with and pursuant to
the transfer provisions of the Mortgage and the written directions
from the Bank; that the bonds of Series PP shall mature upon the
earlier of (i) the date fifteen (15) days following the Millstone
Revenue Bonds Maturity Date or (ii) the irrevocable and indefeasible
satisfaction in full by or on behalf of the Company of the Millstone
Obligations and the expiration or termination of the Millstone Letter
of Credit in accordance with its terms unless the Bonds are
transferred to the issuer of any successor Millstone Letter of Credit
or to the Company; that the obligations of the Company to make
payments on the bonds of Series PP shall be satisfied and discharged
to the extent the Company shall have irrevocably indefeasibly
satisfied in full and discharged the Millstone Obligations; that the
Trustee may conclusively presume that no Event of Default (as defined
in the Millstone Reimbursement Agreement) has occurred and no amounts
are due under the bonds and said bonds of Series PP shall not be due
and payable, if at all, unless and until the Trustee shall have
received from the Bank a written notice of the occurrence of an Event
of Default (as defined in the Millstone Reimbursement Agreement) or a
written demand from the Bank (which notice or demand has not been
subsequently rescinded or revoked by the Bank) as described in the
form of bond; that the bonds of Series PP shall bear interest at the
same rates as the Millstone Obligations that such bonds secure, which
may provide for interest at floating interest rates on overdue
amounts; that the bonds of Series PP shall not be redeemable at or
prior to maturity except as set forth in the forms of bonds of Series
PP; that notwithstanding any provisions of the Mortgage or the bonds
of eries PP, all payments on the bonds of Series PP shall be made
directly to each registered holder of such bonds, or its nominee, at
such address as may from time to time be furnished by such holder in
writing without surrender or presentation of such bonds of Series PP
to the Trustee (except in the case of payment or redemption of any
bond of Series PP in whole) and with respect to each such original
holder or subsequent holder such payments shall be made in accordance
with the provisions of any written agreement between such original
holder and the Company which shall have been communicated and
consented to by the Trustee; that upon the release of the bonds of
Series PP to the Trustee by the Bank, the Trustee shall cancel and
destroy such bonds, and the bonds of such Series PP shall be deemed to
have been paid or redeemed in full and shall cease to be entitled to
the lien of the Mortgage; that said bonds of Series PP are (subject to
the provisions of said Mortgage) to be limited in express aggregate
principal amount to $5,133,562.00, and to mature no later than
December 16, 2015, to be substantially in the form to be authorized at
this meeting and to be in the denomination of $1.00 and multiples
thereof; that said bonds of Series PP shall not be redeemed at the
option of the Company on or before December 16, 2015; that subject to
the provisions of Section 5 of Article 1 of the Forty-First
Supplemental Indenture the principal of the bonds of Series PP shall
be payable, if at all, at the principal office of the Trustee in the
City of Boston, Massachusetts, or its successor in trust under said
Indenture of Mortgage, in coin or currency of the United States of
America which at the time of payment is legal tender for public and
private debts; that, subject to the provisions of Section 5 of Article
1 of said Supplemental Indenture, payments on the bonds of Series PP
shall be made, if at all, in like coin or currency at the office or
agency of this Company in the City of Boston, Massachusetts, or, at
the option of the holders, in the Borough of Manhattan, City and State
of New York, and may be paid by wire transfer to the holder of any
bond of Series PP in accordance with written payment instructions from
such holder to the Trustee if given sufficiently prior, in the
Trustee's sole determination, to the date on which any such payment is
due under such bond; and
RESOLVED: That this Board hereby approves the following forms of
registered bonds without coupons of Series PP, subject to such
changes, insertions and omissions in each, not substantially at
variance with said forms, as may be determined upon and approved by
the President or one of the Vice Presidents of this Company and
approved by the Trustee; and that the execution of said bonds by the
President or one of the Vice Presidents of this Company and the
authentication thereof by the Trustee shall be conclusive evidence
that each so executed is within the authority conveyed by this
resolution:
(FORM OF REGISTERED BOND WITHOUT COUPONS OF SERIES PP)
No. RPP $5,133,562,000
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
FIRST MORTGAGE BOND
SERIES PP (MILLSTONE)
Due No Later Than December 16, 2015
CENTRAL VERMONT PUBLIC SERVICE CORPORATION, a Vermont corporation
(hereinafter called the Company), for value received, hereby promises
to pay to _________________________, as the Bank (the "Bank") under
the Millstone Reimbursement Agreement hereinafter defined, or its
registered successors or assigns, the principal sum of up to
$5,133,562.00 (Five Million One Hundred Thirty-Three Thousand Five
Hundred and Sixty-Two Dollars) on the date State Street Bank and Trust
Company, as Trustee, shall have received from the Bank a written
notice of the occurrence of an Event of Default (as defined in the
Millstone Reimbursement Agreement) or a written demand from the Bank
(which notice or demand has not been subsequently rescinded or revoked
by the Bank), but in no event later than December 16, 2015, and to pay
to the registered holder hereof all other Obligations (as defined in
the Millstone Reimbursement Agreement), plus interest on such amounts,
if any, as described below.
All amounts payable on this bond shall be payable at the
principal office of State Street Bank and Trust Company in the City of
Boston, Massachusetts, or its successor in trust under the Indenture
of Mortgage hereinafter referred to, in coin or currency of the United
States of America which, at the time of payment, is legal tender for
public and private debts, and may be paid by wire transfer to the
holder of this bond in accordance with written payment instructions
from such holder to the Trustee if given sufficiently prior, in the
Trustee's sole determination, to the date on which any such payment is
due under this bond.
This bond is one of the bonds issued and to be issued from time
to time under and in accordance with, and, irrespective of the
designations thereof or the series in which issued, all equally
secured by, an Indenture of Mortgage dated as of October 1, 1929
(hereinafter as supplemented, modified or confirmed by forty-one
supplemental indentures, counterparts of which are on file with the
Trustee, and by all other indentures supplemental to any or all,
collectively called the "Mortgage"), and any and all such supplemental
indentures, between the Company and Old Colony Trust Company or The
First National Bank of Boston or State Street Bank and Trust Company,
as Trustee, to which Mortgage reference is hereby made for a
description of the property mortgaged and pledged, the nature and
extent of the security, the terms and conditions upon which releases
and other dispositions of the property covered by the Mortgage may be
made, and the rights of the holders of said bonds and of the Trustee
in respect of such security; but neither the foregoing reference to
the Mortgage nor any provisions of this bond or of the Mortgage shall
affect or permit any impairment of the absolute, unconditional and
unalterable obligations of the Company to pay, at the maturities
herein provided, the amounts payable on this bond as herein provided.
By the terms of the Mortgage the bonds to be secured thereby are
issuable in series, which may vary as to date, amount, date of
maturity, rate of interest, and in other respects as in the Mortgage
provided.
The bonds of this Series have been issued to the Bank as the
provider of a Letter of Credit pursuant to the Amended and Restated
Reimbursement Agreement, dated as of September 24, 1992, between the
Company and the Bank (as amended, restated, supplemented or otherwise
modified from time to time, the "Millstone Reimbursement Agreement"
and including any replacement or successor reimbursement agreement
entered by the Company through December 1, 2015) to secure all
obligations and liabilities (the "Millstone Obligations") of the
Company that may be due and payable in connection with the Millstone
Reimbursement Agreement. The principal amount of this bond is and
shall not exceed $5,133,562.00.
Except as hereinafter provided, interest on this bond accrues and
is payable at the same rates (determined on a weighted average basis
if more than one rate is in effect with respect to the Millstone
Obligations) and on the same dates as interest is payable on the
Millstone Obligations under the terms of the Millstone Reimbursement
Agreement, which provides for interest at a floating rate on overdue
amounts (all as provided for in the Millstone Reimbursement
Agreement). Interest shall accrue from the date of an Event of
Default under the Millstone Reimbursement Agreement, as provided
therein, but shall not be deemed to accrue under this bond from that
date until the date the Trustee has received a certificate from the
holder of this bond stating that an Event of Default has occurred and
is continuing, and setting forth the principal amount, the amount of
all other Millstone Obligations, if any, and the interest rate
applicable thereto.
The obligation of the Company to make payments hereunder on the
bonds of this Series shall be fully or partially, as the case may be,
satisfied and discharged to the extent that, at any time that any such
payment shall be due, the Company shall have irrevocably and
indefeasibly paid fully or partially the then-due Millstone
Obligations.
Upon surrender for cancellation, at any time or from time to
time, of bonds of this Series by the Bank to the Trustee, the bonds
surrendered shall be deemed fully redeemed or paid and the obligations
of the Company thereunder shall be terminated, and such bonds shall be
canceled.
In the manner provided in the Mortgage, the bonds of this Series shall
be redeemed only in whole by payment of the principal amount thereof
plus all other Millstone Obligations and accrued interest thereon, if
any, to the redemption date, upon receipt by the Trustee and the
Company of a written demand from the Bank. Such demand shall also (a)
state that an Event of Default has occurred and is continuing under
(and as defined in) the Millstone Reimbursement Agreement, (b) state
that the amount of the Millstone Obligations then outstanding under
the Millstone Reimbursement Agreement has been declared immediately
due and payable pursuant to the provisions of the Millstone
Reimbursement Agreement, (c) specify the amount of the Millstone
Obligations then due for which demand is being made, and identify the
portions of such amount that are attributable to principal, interest
and fees, respectively, and (d) specify the interest rate then
applicable and the date from which unpaid interest on such Millstone
Obligations has then accrued, if any is due, and the interest rate, if
any, applicable to unpaid amounts from the date of such demand until
paid, and (e) state that such declaration of maturity has not been
rescinded. The bonds of this Series shall be redeemed on the fifth
business day following receipt by the Trustee of the notice from the
Bank of such Event of Default and demand for payment in accordance
with the terms of this paragraph. Such redemption shall be rescinded
and become null and void for all purposes of the Mortgage upon
rescission in writing of the aforesaid demand for payment and notice
of redemption under the Millstone Reimbursement Agreement received by
the Trustee no later than the business day prior to the date fixed for
redemption, and thereupon no redemption of the bonds of this Series
and no payments in respect thereof shall be effected or required.
Notwithstanding the provisions of the previous paragraph, in the
case of certain events of default specified in the Mortgage, the
principal of this bond may be declared or may become due and payable
in the manner and with the effect provided in the Mortgage.
No recourse shall be had for the payment of the principal or
interest of this bond, or for any claim based hereon, or otherwise in
respect hereof or of the Mortgage, to or against any incorporator,
stockholder, officer or director, past, present or future, of the
Company, either directly or through the Company, under any
constitution or statute or rule of law, or by the enforcement of any
assessment or penalty, or otherwise, all such liability of
incorporators, stockholders, directors and officers being waived and
released by the holder hereof by the acceptance of this bond and being
likewise waived and released by the terms of the Mortgage.
This bond is nontransferable except to effect transfer to any
replacement or successor issuer or assignee of the Bank in connection
with the transfer of all of the Bank's right, title and interest in,
to and under the Millstone Reimbursement Agreement, or to any
replacement or successor issuer of a Millstone Letter of Credit, or to
the Company, but is exchangeable by the registered holder hereof, in
person or by attorney duly authorized, at the corporate trust office
of the Trustee, in Boston, Massachusetts, any such permitted transfer
or exchange to be made in the manner and upon the conditions
prescribed in the Mortgage, upon the surrender and cancellation of
this bond and the payment of any stamp tax or other governmental
charge, and upon any such transfer or exchange a new registered bond
or bonds of the same series and maturity date and for the same
aggregate principal amount, in authorized denominations, will be
issued to the transferee, or the registered holder, as the case may
be, in exchange herefor. The Company and the Trustee may deem and
treat the person in whose name this bond is registered as the absolute
owner for the purpose of receiving payment and for all other purposes.
This bond shall not be valid or become obligatory for any purpose
unless and until it shall have been authenticated by the execution by
the Trustee or its successor in trust under the Mortgage of the
certificate endorsed hereon.
IN WITNESS HEREOF, Central Vermont Public Service Corporation has
caused this bond to be executed in its name by the manual or facsimile
signature of its President or one of its Vice Presidents, and its
corporate seal (or a facsimile thereof) to be hereto affixed and
attested by the manual or facsimile signature of its Secretary or one
of its Assistant Secretaries, this _____ day of _____, ____.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: ______________________________
[Vice] President
Attest:
_________________________
[Assistant] Secretary
(FORM OF ENDORSEMENT FOR ALL SERIES PP BONDS)
FOR VALUE RECEIVED hereby
sell(s), assign(s) and transfer(s) unto
, the within bond issued by Central Vermont Public Service
Corporation, and all rights thereunder, hereby irrevocably
constituting and appointing attorney to
transfer said bond on the books of said Company, with full power of
substitution in the premises.
Dated:_____________________
_______________________________
In the presence of:
______________________________
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.
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE OFFERED OR SOLD IN CONTRAVENTION OF ANY SUCH LAW.
(FORM OF TRUSTEE'S CERTIFICATE FOR ALL SERIES PP BONDS)
This bond is one of the bonds of the series designated therein,
described in the within-mentioned Mortgage.
STATE STREET BANK AND TRUST COMPANY
By:_________________________
Authorized Officer
RESOLVED: That this Company's First Mortgage Bonds, Series PP
(Millstone), to be issued under said Indenture of Mortgage shall be
executed in the name of this Company by the manual or facsimile
signature of its President or one of its Vice Presidents and shall
have affixed thereto the corporate seal of this Company (which may be
facsimile) attested by the manual or facsimile signature of its
Secretary or an Assistant Secretary.
RESOLVED: That, subject to obtaining the approval of the Vermont
Public Service Board, this Board hereby authorizes the issue of
$5,133,562.00 in principal amount of said First Mortgage Bonds, Series
PP (Millstone), which series have been determined upon and established
at this meeting, to be issued in respect of payment, cancellation,
redemption or other discharge of bonds of one or more series
theretofore authenticated under any provision of the Indenture of
Mortgage, as amended, pursuant to and in conformity with the
provisions of said Indenture of Mortgage, as amended, particularly
Section 2 of Article II thereof.
RESOLVED: That this Board of Directors hereby authorizes State Street
Bank and Trust Company, Trustee under said Indenture of Mortgage, from
time to time to authenticate, on application of the President or any
Vice President of this Company, and deliver on the written order of
the President or any Vice President, $5,133,562.00 in principal amount
of said First Mortgage Bonds, Series PP (Millstone), in such
definitive forms and denominations authorized by resolutions of this
Board as he or she may specify, but only upon said State Street Bank
and Trust Company, Trustee, being satisfied that all the requirements
of Article II of said Indenture of Mortgage, as amended, relating to
the issue of bonds in respect of payment, cancellation, redemption or
other discharge of bonds of one or more series theretofore
authenticated under any provision of the Indenture of Mortgage, as
amended, have been complied with and upon the deposit with the Trustee
of the documents required under said Article II.
Resolutions Relating to the Series QQ (Seabrook) Bonds
RESOLVED: That this Board of Directors of Central Vermont Public
Service Corporation hereby determines upon a forty-second series of
bonds to be issued from time to time upon proper resolutions of the
Board of Directors under the terms of an Indenture of Mortgage (the
"Mortgage") between this Company and State Street Bank and Trust
Company (successor trustee to The First National Bank of Boston,
successor trustee to Old Colony Trust Company), Trustee, dated as of
October 1, 1929 (but actually executed October 24, 1929), as amended,
and duly recorded, among other places, in the Office of the City Clerk
of Rutland, Vermont, and in Washington County, New York, Liber 150 of
Mortgages, Page 51, Grafton County, New Hampshire, Registry of Deeds,
Liber 616, Folio 484, Sullivan County, New Hampshire, Records, Vol.
234, Page 531, in the Office of the Secretary of State of Connecticut,
in the offices of the clerks of certain other counties, towns and
cities in the State of Vermont, and in the States of New Hampshire,
Maine, Connecticut and New York and in the office of the Secretary of
State of Vermont; that the bonds are issued to secure the payment of
the obligations and liabilities of the Company (the "Seabrook
Obligations") under the Letter of Credit and Reimbursement Agreement,
dated as of November 1, 1994, between the Company and The Toronto
Dominion Bank (the "Bank" and including any replacement, or successor
issuer or permitted assignee) as amended, restated, supplemented or
otherwise modified from time to time, the "Seabrook Reimbursement
Agreement" and including any replacement or successor reimbursement
agreement entered by the Company through the Seabrook Revenue Bonds
Maturity Date, as defined below, in connection with the issuance by
the Bank of the Letter of Credit (as defined in the Seabrook
Reimbursement Agreement and including any replacement or successor
letter of credit issued through the Seabrook Revenue Bonds Maturity
Date, the "Seabrook Letter of Credit"), which Seabrook Letter of
Credit is issued to provide, among other things, funds for the payment
of principal of and interest on the New Hampshire Industrial
Development Authority (the "Seabrook Issuer") Demand Pollution Control
Revenue Bonds (Central Vermont Public Service Corporation Project)
(the "Seabrook Revenue Bonds"), which Seabrook Revenue Bonds mature on
the first day of December 2009 (the "Seabrook Revenue Bonds Maturity
Date"); that said series shall be designated as Series QQ and that the
bonds of said series shall be designated as "First Mortgage Bonds,
Series QQ (Seabrook)"; that the bonds of Series QQ shall be in the
form of registered bonds without coupons; that each of the bonds of
Series QQ shall be dated as of the date of issue; that the bonds of
Series QQ will be registered in the name of the Bank and, in
accordance with and pursuant to the transfer provisions of the
Mortgage, will be transferable to any successor or assignee of the
Bank in connection with the transfer of all of the Bank's right, title
and interest in, to and under the Seabrook Reimbursement Agreement, or
to any issuer of any replacement or successor Seabrook Letter of
Credit; that the Trustee shall be fully protected in registering the
transfer of the bonds of Series QQ in accordance with and pursuant to
the transfer provisions of the Mortgage and the written directions
from the Bank; that the bonds of Series QQ shall mature upon the
earlier of (i) the date fifteen (15) days following the Seabrook
Revenue Bonds Maturity Date or (ii) the irrevocable and indefeasible
satisfaction in full by or on behalf of the Company of the Seabrook
Obligations and the expiration or termination of the Seabrook Letter
of Credit in accordance with its terms unless the Bonds are
transferred to the issuer of any successor Seabrook Letter of Credit
or to the Company; that the obligations of the Company to make
payments on the bonds of Series QQ shall be satisfied and discharged
to the extent the Company shall have irrevocably indefeasibly
satisfied in full and discharged the Seabrook Obligations; that the
Trustee may conclusively presume that no Event of Default (as defined
in the Seabrook Reimbursement Agreement) has occurred and no amounts
are due under the bonds and said bonds of Series QQ shall not be due
and payable, if at all, unless and until the Trustee shall have
received from the Bank a written notice of the occurrence of an Event
of Default (as defined in the Seabrook Reimbursement Agreement) or a
written demand from the Bank (which notice or demand has not been
subsequently rescinded or revoked by the Bank) as described in the
form of bond; that the bonds of Series QQ shall bear interest at the
same rates as the Seabrook Obligations that such bonds secure, which
may provide for interest at floating interest rates on overdue
amounts; that the bonds of Series QQ shall not be redeemable at or
prior to maturity except as set forth in the forms of bonds of Series
QQ; that notwithstanding any provisions of the Mortgage or the bonds
of Series QQ,all payments on the bonds of Series QQ shall be made
directly to each registered holder of such bonds, or its nominee, at
such address as may from time to time be furnished by such holder in
writing without surrender or presentation of such bonds of Series QQ
to the Trustee (except in the case of payment or redemption of any
bond of Series QQ in whole) and with respect to each such original
holder or subsequent holder such payments shall be made in accordance
with the provisions of any written agreement between such original
holder and the Company which shall have been communicated and
consented to by the Trustee; that upon the release of the bonds of
Series QQ to the Trustee by the Bank, the Trustee shall cancel and
destroy such bonds, and the bonds of such Series QQ shall be deemed to
have been paid or redeemed in full and shall cease to be entitled to
the lien of the Mortgage; that said bonds of Series QQ are (subject to
the provisions of said Mortgage) to be limited in express aggregate
principal amount to $5,788,750.00, and to mature no later than
December 16, 2009, to be substantially in the form to be authorized at
this meeting and to be in the denomination of $1.00 and multiples
thereof; that said bonds of Series QQ shall not be redeemed at the
option of the Company on or before December 16, 2009; that subject to
the provisions of Section 5 of Article 1 of the Forty-First
Supplemental Indenture the principal of the bonds of Series QQ shall
be payable, if at all, at the principal office of the Trustee in the
City of Boston, Massachusetts, or its successor in trust under said
Indenture of Mortgage, in coin or currency of the United States of
America which at the time of payment is legal tender for public and
private debts; that, subject to the provisions of Section 5 of Article
1 of said Supplemental Indenture, payments on the bonds of Series QQ
shall be made, if at all, in like coin or currency at the office or
agency of this Company in the City of Boston, Massachusetts, or, at
the option of the holders, in the Borough of Manhattan, City and State
of New York, and may be paid by wire transfer to the holder of any
bond of Series QQ in accordance with written payment instructions from
such holder to the Trustee if given sufficiently prior, in the
Trustee's sole determination, to the date on which any such payment is
due under such bond; and
RESOLVED: That this Board hereby approves the following forms of
registered bonds without coupons of Series QQ, subject to such
changes, insertions and omissions in each, not substantially at
variance with said forms, as may be determined upon and approved by
the President or one of the Vice Presidents of this Company and
approved by the Trustee; and that the execution of said bonds by the
President or one of the Vice Presidents of this Company and the
authentication thereof by the Trustee shall be conclusive evidence
that each so executed is within the authority conveyed by this
resolution:
(FORM OF REGISTERED BOND WITHOUT COUPONS OF SERIES QQ)
No. RQQ $5,788,750.00
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
FIRST MORTGAGE BOND
SERIES QQ (SEABROOK)
Due No Later Than December 16, 2009
CENTRAL VERMONT PUBLIC SERVICE CORPORATION, a Vermont corporation
(hereinafter called the Company), for value received, hereby promises
to pay to _________________________, as the Bank (the "Bank") under
the Seabrook Reimbursement Agreement hereinafter defined, or its
registered successors or assigns, the principal sum of up to
$5,788,750.00 (Five Million Seven Hundred Eighty-Eight Thousand Seven
Hundred Fifty Dollars) on the date State Street Bank and Trust
Company, as Trustee, shall have received from the Bank a written
notice of the occurrence of an Event of Default (as defined in the
Seabrook Reimbursement Agreement) or a written demand from the Bank
(which notice or demand has not been subsequently rescinded or revoked
by the Bank), but in no event later than December 16, 2009, and to pay
to the registered holder hereof all other Obligations (as defined in
the Seabrook Reimbursement Agreement), plus interest on such amounts,
if any, as described below.
All amounts payable on this bond shall be payable at the
principal office of State Street Bank and Trust Company in the City of
Boston, Massachusetts, or its successor in trust under the Indenture
of Mortgage hereinafter referred to, in coin or currency of the United
States of America which, at the time of payment, is legal tender for
public and private debts, and may be paid by wire transfer to the
holder of this bond in accordance with written payment instructions
from such holder to the Trustee if given sufficiently prior, in the
Trustee's sole determination, to the date on which any such payment is
due under this bond.
This bond is one of the bonds issued and to be issued from time
to time under and in accordance with, and, irrespective of the
designations thereof or the series in which issued, all equally
secured by, an Indenture of Mortgage dated as of October 1, 1929
(hereinafter as supplemented, modified or confirmed by forty-one
supplemental indentures, counterparts of which are on file with the
Trustee, and by all other indentures supplemental to any or all,
collectively called the "Mortgage"), and any and all such supplemental
indentures, between the Company and Old Colony Trust Company or The
First National Bank of Boston or State Street Bank and Trust Company,
as Trustee, to which Mortgage reference is hereby made for a
description of the property mortgaged and pledged, the nature and
extent of the security, the terms and conditions upon which releases
and other dispositions of the property covered by the Mortgage may be
made, and the rights of the holders of said bonds and of the Trustee
in respect of such security; but neither the foregoing reference to
the Mortgage nor any provisions of this bond or of the Mortgage shall
affect or permit any impairment of the absolute, unconditional and
unalterable obligations of the Company to pay, at the maturities
herein provided, amounts payable on this bond as herein provided. By
the terms of the Mortgage the bonds to be secured thereby are issuable
in series, which may vary as to date, amount, date of maturity, rate
of interest, and in other respects as in the Mortgage provided.
The bonds of this Series have been issued to the Bank, as the
provider of a Letter of Credit pursuant to the Letter of Credit and
Reimbursement Agreement, dated as of November 1, 1994, between the
Company and the Bank (as amended, restated, supplemented or otherwise
modified from time to time, the "Seabrook Reimbursement Agreement" and
including any replacement or successor reimbursement agreement entered
by the Company through December 1, 2009) to secure all obligations and
liabilities (the "Seabrook Obligations") of the Company that may be
due and payable in connection with the Seabrook Reimbursement
Agreement. The principal amount of this bond is and shall not exceed
$5,788,750.00.
Except as hereinafter provided, interest on this bond accrues and
is payable at the same rates (determined on a weighted average basis
if more than one rate is in effect with respect to the Seabrook
Obligations) and on the same dates as interest is payable on the
Seabrook Obligations under the terms of the Seabrook Reimbursement
Agreement, which provides for interest at a floating rate on overdue
amounts (all as provided for in the Seabrook Reimbursement Agreement).
Interest shall accrue from the date of an Event of Default under the
Seabrook Reimbursement Agreement, as provided therein, but shall not
be deemed to accrue under this bond from that date until the date the
Trustee has received a certificate from the holder of this bond
stating that an Event of Default has occurred and is continuing, and
setting forth the principal amount, the amount of all other Seabrook
Obligations, if any, and the interest rate applicable thereto.
The obligation of the Company to make payments hereunder on the
bonds of this Series shall be fully or partially, as the case may be,
satisfied and discharged to the extent that, at any time that any such
payment shall be due, the Company shall have irrevocably and
indefeasibly paid fully or partially the then-due Seabrook
Obligations.
Upon surrender for cancellation, at any time or from time to
time, of bonds of this Series by the Bank to the Trustee, the bonds
surrendered shall be deemed fully redeemed or paid and the obligations
of the Company thereunder shall be terminated, and such bonds shall be
canceled.
In the manner provided in the Mortgage, the bonds of this Series
shall be redeemed only in whole by payment of the principal amount
thereof, plus all other Seabrook Obligations and accrued interest
thereon, if any, to the redemption date, upon receipt by the Trustee
and the Company of a written demand from the Bank. Such demand shall
also (a) state that an Event of Default has occurred and is continuing
under (and as defined in) the Seabrook Reimbursement Agreement, (b)
state that the amount of the Seabrook Obligations then outstanding
under the Seabrook Reimbursement Agreement has been declared
immediately due and payable pursuant to the provisions of the Seabrook
Reimbursement Agreement, (c) specify the amount of the Seabrook
Obligations then due for which demand is being made, and identify the
portions of such amount that are attributable to principal, interest
and fees, respectively, and (d) specify the interest rate then
applicable and the date from which unpaid interest on such Seabrook
Obligations has then accrued, if any is due, and the interest rate, if
any, applicable to unpaid amounts from the date of such demand until
paid, and (e) state that such declaration of maturity has not been
rescinded. The bonds of this Series shall be redeemed on the fifth
business day following receipt by the Trustee of the notice from the
Bank of such Event of Default and demand for payment in accordance
with the terms of this paragraph. Such redemption shall be rescinded
and become null and void for all purposes of the Mortgage upon
rescission in writing of the aforesaid demand for payment and notice
of redemption under the Seabrook Reimbursement Agreement received by
the Trustee no later than the business day prior to the date fixed for
redemption, and thereupon no redemption of the bonds of this Series
and no payments in respect thereof shall be effected or required.
Notwithstanding the provisions of the previous paragraph, in the
case of certain events of default specified in the Mortgage, the
principal of this bond may be declared or may become due and payable
in the manner and with the effect provided in the Mortgage.
No recourse shall be had for the payment of the principal or
interest of this bond, or for any claim based hereon, or otherwise in
respect hereof or of the Mortgage, to or against any incorporator,
stockholder, officer or director, past, present or future, of the
Company, either directly or through the Company, under any
constitution or statute or rule of law, or by the enforcement of any
assessment or penalty, or otherwise, all such liability of
incorporators, stockholders, directors and officers being waived and
released by the holder hereof by the acceptance of this bond and being
likewise waived and released by the terms of the Mortgage.
This bond is nontransferable except to effect transfer to any
replacement or successor issuer or assignee of the Bank in connection
with the transfer of all of the Bank's right, title and interest in,
to and under the Seabrook Reimbursement Agreement, or to any
replacement or successor issuer of a Seabrook Letter of Credit, or to
the Company, but is exchangeable by the registered holder hereof, in
person or by attorney duly authorized, at the corporate trust office
of the Trustee, in Boston, Massachusetts, any such permitted transfer
or exchange to be made in the manner and upon the conditions
prescribed in the Mortgage, upon the surrender and cancellation of
this bond and the payment of any stamp tax or other governmental
charge, and upon any such transfer or exchange a new registered bond
or bonds of the same series and maturity date and for the same
aggregate principal amount, in authorized denominations, will be
issued to the transferee, or the registered holder, as the case may
be, in exchange herefor. The Company and the Trustee may deem and
treat the person in whose name this bond is registered as the absolute
owner for the purpose of receiving payment and for all other purposes.
This bond shall not be valid or become obligatory for any purpose
unless and until it shall have been authenticated by the execution by
the Trustee or its successor in trust under the Mortgage of the
certificate endorsed hereon.
IN WITNESS HEREOF, Central Vermont Public Service Corporation has
caused this bond to be executed in its name by the manual or facsimile
signature of its President or one of its Vice Presidents, and its
corporate seal (or a facsimile thereof) to be hereto affixed and
attested by the manual or facsimile signature of its Secretary or one
of its Assistant Secretaries, this ____ day of __________, ____.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: ______________________________
[Vice] President
Attest:
_________________________
[Assistant] Secretary
(FORM OF ENDORSEMENT FOR ALL SERIES QQ BONDS)
FOR VALUE RECEIVED hereby sell(s),
assign(s) and transfer(s) unto , the within
bond issued by Central Vermont Public Service Corporation, and all
rights thereunder, hereby irrevocably constituting and appointing
attorney to transfer said bond on the books of
said Company, with full power of substitution in the premises.
Dated:_____________________
_______________________________
In the presence of:
______________________________
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.
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAW OF ANY STATE, AND MAY
NOT BE OFFERED OR SOLD IN CONTRAVENTION OF ANY SUCH LAW.
(FORM OF TRUSTEE'S CERTIFICATE FOR ALL SERIES QQ BONDS)
This bond is one of the bonds of the series designated therein,
described in the within-mentioned Mortgage.
STATE STREET BANK AND TRUST COMPANY
By:_________________________
Authorized Officer
RESOLVED: That this Company's First Mortgage Bonds, Series QQ
(Seabrook), to be issued under said Indenture of Mortgage shall be
executed in the name of this Company by the manual or facsimile
signature of its President or one of its Vice Presidents and shall
have affixed thereto the corporate seal of this Company (which may be
facsimile) attested by the manual or facsimile signature of its
Secretary or an Assistant Secretary.
RESOLVED: That, subject to obtaining the approval of the Vermont
Public Service Board, this Board hereby authorizes the issue of
$5,788,750.00 in principal amount of said First Mortgage Bonds, Series
QQ (Seabrook), which series have been determined upon and established
at this meeting, to be issued in respect of payment, cancellation,
redemption or other discharge of bonds of one or more series
theretofore authenticated under any provision of the Indenture of
Mortgage, as amended, pursuant to and in conformity with the
provisions of said Indenture of Mortgage, as amended, particularly
Section 2 of Article II thereof.
RESOLVED: That this Board of Directors hereby authorizes State Street
Bank and Trust Company, Trustee under said Indenture of Mortgage, from
time to time to authenticate, on application of the President or any
Vice President of this Company, and deliver on the written order of
the President or any Vice President, $5,788,750.00 in principal amount
of said First Mortgage Bonds, Series QQ (Seabrook), in such definitive
forms and denominations authorized by resolutions of this Board as he
or she may specify, but only upon said State Street Bank and Trust
Company, Trustee, being satisfied that all the requirements of Article
II of said Indenture of Mortgage, as amended, relating to the issue of
bonds in respect of payment, cancellation, redemption or other
discharge of bonds of one or more series theretofore authenticated
under any provision of the Indenture of Mortgage, as amended, have
been complied with and upon the deposit with the Trustee of the
documents required under said Article II.
Resolutions Relating to the Series RR (East Barnet) Bonds
RESOLVED: That this Board of Directors of Central Vermont Public
Service Corporation hereby determines upon a forty-third series of
bonds to be issued from time to time upon proper resolutions of the
Board of Directors under the terms of an Indenture of Mortgage (the
"Mortgage") between this Company and State Street Bank and Trust
Company (successor trustee to The First National Bank of Boston,
successor trustee to Old Colony Trust Company), Trustee, dated as of
October 1, 1929 (but actually executed October 24, 1929), as amended,
and duly recorded, among other places, in the Office of the City Clerk
of Rutland, Vermont, and in Washington County, New York, Liber 150 of
Mortgages, Page 51, Grafton County, New Hampshire, Registry of Deeds,
Liber 616, Folio 484, Sullivan County, New Hampshire, Records, Vol.
234, Page 531, in the Office of the Secretary of State of Connecticut,
in the offices of the clerks of certain other counties, towns and
cities in the State of Vermont and in the States of New Hampshire,
Maine, Connecticut and New York and in the office of the Secretary of
State of Vermont; that the bonds are issued to secure the payment of
the obligations and liabilities of the Company (the "East Barnet
Obligations") under the Guaranty, dated as of April 29, 1993 (as it
may be from time to time amended, supplemented or replaced, the
"Guaranty"), made by the Company in favor of The Toronto-Dominion Bank
(the "Bank" and including any replacement, or successor issuer or
permitted assignee) in connection with (i) the Reimbursement
Agreement, dated as of April 29, 1993, between Central Vermont Public
Service Corporation East Barnet Hydroelectric, Inc. ("East Barnet")
and the Bank (as amended, restated, supplemented or otherwise modified
from time to time, the "East Barnet Reimbursement Agreement" and
including any replacement or successor reimbursement agreement entered
by East Barnet through the East Barnet Revenue Bonds Maturity Date
hereinafter defined) and (ii) the issuance by the Bank (or its
successor or assignee or any replacement issuer) of the Letter of
Credit (as defined in the East Barnet Reimbursement Agreement, the
"East Barnet Letter of Credit") which secures the obligations of East
Barnet and the Company pursuant to Vermont Industrial Development
Authority (the "East Barnet Issuer") Floating Rate Monthly Demand
Hydroelectric Revenue Bonds (Central Vermont Public Service
Corporation East Barnet Project) (the "East Barnet Revenue Bonds"),
which East Barnet Revenue Bonds mature on the first day of December,
2013 (the "East Barnet Revenue Bonds Maturity Date"); that said series
shall be designated as Series RR and that the bonds of said series
shall be designated as "First Mortgage Bonds, Series RR (East
Barnet)"; that the bonds of Series RR shall be in the form of
registered bonds without coupons; that each of the bonds of Series RR
shall be dated as of the date of issue; that the bonds of Series RR
will be registered in the name of the Bank and, in accordance with and
pursuant to the transfer provisions of the Mortgage, will be
transferable to any successor or assignee of the Bank in connection
with the transfer of all of the Bank's right, title and interest in,
to and under the East Barnet Reimbursement Agreement and the Guaranty,
or to any issuer of any replacement or successor East Barnet Letter of
Credit, or to the Company; that the Trustee shall be fully protected
in registering the transfer of the bonds of Series RR in accordance
with and pursuant to the transfer provisions of the Mortgage and the
written directions from the Bank; that the bonds of Series RR shall
mature upon the earlier of (i) the date fifteen (15) days following
the East Barnet Revenue Bonds Maturity Date or (ii) the irrevocable
and indefeasible satisfaction in full by or on behalf of the Company
of the East Barnet Obligations and the expiration or termination of
the East Barnet Letter of Credit in accordance with its terms unless
the Bonds are transferred to the issuer of any successor East Barnet
Letter of Credit or to the Company; that the obligations of the
Company to make payments on the bonds of Series RR shall be satisfied
and discharged to the extent the Company shall have irrevocably and
indefeasibly satisfied in full and discharged the East Barnet
Obligations; that the Trustee may conclusively presume that no Event
of Default (as defined in the East Barnet Reimbursement Agreement) has
occurred and no amounts are due under the bonds and said bonds of
Series RR shall not be due and payable, if at all, unless and until
the Trustee shall have received from the Bank a written notice of the
occurrence of an Event of Default (as defined in the East Barnet
Reimbursement Agreement) and a demand on the Guaranty or a written
demand from the Bank (which notice or demand has not been subsequently
rescinded or revoked by the Bank) as described in the form of bond;
that the bonds of Series RR shall bear interest at the same rates as
the East Barnet Obligations that such bonds secure, which may provide
for interest at floating interest rates on overdue amounts; that the
bonds of Series RR shall not be redeemable at or prior to maturity
except as set forth in the forms ofbonds of Series RR; that
notwithstanding any provisions of the Mortgage or the bonds of Series
RR, all payments on the bonds of Series RR shall be made directly to
each registered holder of such bonds, or its nominee, at such address
as may from time to time be furnished by such holder in writing
without surrender or presentation of such bonds of Series RR to the
Trustee (except in the case of payment or redemption of any bond of
Series RR in whole) and with respect to each such original holder or
subsequent holder such payments shall be made in accordance with the
provisions of any written agreement between such original holder and
the Company which shall have been communicated and consented to by the
Trustee; that upon the release of the bonds of Series RR to the
Trustee by the Bank, the Trustee shall cancel and destroy such bonds,
and the bonds of such Series RR shall be deemed to have been paid or
redeemed in full and shall cease to be entitled to the lien of the
Mortgage; that said bonds of Series RR are (subject to the provisions
of said Mortgage) to be limited in express aggregate principal amount
to $6,015,275.35, and to mature no later than December 16, 2013, to be
substantially in the form to be authorized at this meeting and to be
in the denomination of $1.00 and multiples thereof (provided that one
such bond may include an additional $0.35 in principal amount
thereof); that said bonds of Series RR shall not be redeemed at the
option of the Company on or before December 16, 2013; that subject to
the provisions of Section 5 of Article 1 of the Forty-First
Supplemental Indenture the principal of the bonds of Series RR shall
be payable, if at all, at the principal office of the Trustee in the
City of Boston, Massachusetts, or its successor in trust under said
Indenture of Mortgage, in coin or currency of the United States of
America which at the time of payment is legal tender for public and
private debts; that, subject to the provisions of Section 5 of Article
1 of said Supplemental Indenture, payments on the bonds of Series RR
shall be made, if at all, in like coin or currency at the office or
agency of this Company in the City of Boston, Massachusetts, or, at
the option of the holders, in the Borough of Manhattan, City and State
of New York, and may be paid by wire transfer to the holder of any
bond of Series RR in accordance with written payment instructions from
such holder to the Trustee if given sufficiently prior, in the
Trustee's sole determination, to the date on which any such payment is
due under such bond; and
RESOLVED: That this Board hereby approves the following forms of
registered bonds without coupons of Series RR, subject to such
changes, insertions and omissions in each, not substantially at
variance with said forms, as may be determined upon and approved by
the President or one of the Vice Presidents of this Company and
approved by the Trustee; and that the execution of said bonds by the
President or one of the Vice Presidents of this Company and the
authentication thereof by the Trustee shall be conclusive evidence
that each so executed is within the authority conveyed by this
resolution:
(FORM OF REGISTERED BOND WITHOUT COUPONS OF SERIES RR)
No. RRR $6,015,275.35
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
FIRST MORTGAGE BOND
SERIES RR (EAST BARNET)
Due No Later Than December 16, 2013
CENTRAL VERMONT PUBLIC SERVICE CORPORATION, a Vermont corporation
(hereinafter called the Company), for value received, hereby promises
to pay to _________________________, as the Bank (the "Bank") under
the East Barnet Reimbursement Agreement hereinafter defined, or its
registered successors or assigns, the principal sum of up to
$6,015,275.35 (Six Million Fifteen Thousand Two Hundred Seventy-Five
Dollars and Thirty-Five Cents) on the date State Street Bank and Trust
Company, as Trustee, shall have received from the Bank a written
notice of the occurrence of an Event of Default (as defined in the
East Barnet Reimbursement Agreement) and a written demand on the
Guaranty hereinafter defined or a written demand from the Bank (which
notice or demand has not been subsequently rescinded or revoked by the
Bank), but in no event later than December 16, 2013, and to pay to the
registered holder hereof all other Obligations (as defined in the
Guaranty), plus interest on such amounts, if any, as described below.
All amounts payable on this bond shall be payable at the
principal office of State Street Bank and Trust Company in the City of
Boston, Massachusetts, or its successor in trust under the Indenture
of Mortgage hereinafter referred to, in coin or currency of the United
States of America which, at the time of payment, is legal tender for
public and private debts, and may be paid by wire transfer to the
holder of this bond in accordance with written payment instructions
from such holder to the Trustee if given sufficiently prior, in the
Trustee's sole determination, to the date on which any such payment is
due under this bond.
This bond is one of the bonds issued and to be issued from time
to time under and in accordance with, and, irrespective of the
designations thereof or the series in which issued, all equally
secured by, an Indenture of Mortgage dated as of October 1, 1929
(hereinafter as supplemented, modified or confirmed by forty-one
supplemental indentures, counterparts of which are on file with the
Trustee, and by all other indentures supplemental to any or all,
collectively called the "Mortgage"), and any and all such supplemental
indentures, between the Company and Old Colony Trust Company or The
First National Bank of Boston or State Street Bank and Trust Company,
as Trustee, to which Mortgage reference is hereby made for a
description of the property mortgaged and pledged, the nature and
extent of the security, the terms and conditions upon which releases
and other dispositions of the property covered by the Mortgage may be
made, and the rights of the holders of said bonds and of the Trustee
in respect of such security; but neither the foregoing reference to
the Mortgage nor any provisions of this bond or of the Mortgage shall
affect or permit any impairment of the absolute, unconditional and
unalterable obligations of the Company to pay, at the maturities
herein provided, the amounts payable on this bond as herein provided.
By the terms of the Mortgage the bonds to be secured thereby are
issuable in series, which may vary as to date, amount, date of
maturity, rate of interest, and in other respects as in the Mortgage
provided.
The bonds of this Series have been issued to the Bank, as the
provider of a letter of credit pursuant to the Reimbursement
Agreement, dated as of April 29, 1993, between Central Vermont Public
Service Corporation - East Barnet Hydroelectric, Inc. ("East Barnet")
and the Bank (as amended, restated, supplemented or otherwise modified
from time to time, the "East Barnet Reimbursement Agreement" and
including any replacement or successor reimbursement agreement entered
by East Barnet through December 1, 2013) and the Guaranty, dated as of
April 29, 1993 (as it may be from time to time amended, supplemented
or replaced, the "Guaranty") made by the Company in favor of the Bank
to secure all obligations and liabilities of the Company that may be
due and payable in connection with the East Barnet Reimbursement
Agreement. The obligations and liabilities of the Company to the Bank
under the Guaranty are referred to herein as the "East Barnet
Obligations." The principal amount of this bond is and shall not
exceed $6,015,275.35.
Except as hereinafter provided, interest on this bond accrues and
is payable at the same rates (determined on a weighted average basis
if more than one rate is in effect with respect to the East Barnet
Obligations) and on the same dates as interest is payable on the East
Barnet Obligations under the terms of the Guaranty and the East Barnet
Reimbursement Agreement, which provides for interest at a floating
rate on overdue amounts (all as provided for in the East Barnet
Reimbursement Agreement). Interest shall accrue from the date of an
Event of Default under the East Barnet Reimbursement Agreement, as
provided therein, but shall not be deemed to accrue under this bond
from that date until the date the Trustee has received a certificate
from the holder of this bond stating that an Event of Default has
occurred and is continuing and that a written demand has been made by
the Bank under the Guaranty, and setting forth the principal amount,
the amount of all other East Barnet Obligations, if any, and the
interest rate applicable thereto.
The obligation of the Company to make payments hereunder on the
bonds of this Series shall be fully or partially, as the case may be,
satisfied and discharged to the extent that, at any time that any such
payment shall be due, the Company or East Barnet shall have
irrevocably and indefeasibly paid fully or partially the then-due East
Barnet Obligations.
Upon surrender for cancellation, at any time or from time to
time, of bonds of this Series by the Bank to the Trustee, the bonds
surrendered shall be deemed fully redeemed or paid and the obligations
of the Company and East Barnet thereunder shall be terminated, and
such bonds shall be canceled.
In the manner provided in the Mortgage, the bonds of this Series
shall be redeemed only in whole by payment of the principal amount
thereof, plus all other East Barnet Obligations and accrued interest
thereof, if any, to the redemption date, upon receipt by the Trustee
and the Company of a written demand from the Bank. Such demand shall
also (a) state that an Event of Default has occurred and is continuing
under (and as defined in) the East Barnet Reimbursement Agreement, (b)
state that the amount of the East Barnet Obligations then outstanding
under the Guaranty has been declared immediately due and payable
pursuant to the provisions of the Guaranty and in accordance with the
East Barnet Reimbursement Agreement, (c) specify the amount of the
East Barnet Obligations then due for which demand is being made, and
identify the portions of such amount that are attributable to
principal, interest and fees, respectively, and (d) specify the
interest rate then applicable and the date from which unpaid interest
on such East Barnet Obligations has then accrued, if any is due, and
the interest rate, if any, applicable to unpaid amounts from the date
of such demand until paid, and (e) state that such declaration of
maturity has not been rescinded. The bonds of this Series shall be
redeemed on the fifth business day following receipt by the Trustee of
the notice from the Bank of such Event of Default and demand for
payment in accordance with the terms of this paragraph. Such
redemption shall be rescinded and become null and void for all
purposes of the Mortgage upon rescission in writing of the aforesaid
demand for payment and notice of redemption under the Guaranty and the
East Barnet Reimbursement Agreement received by the Trustee no later
than the business day prior to the date fixed for redemption, and
thereupon no redemption of the bonds of this Series and no payments in
respect thereof shall be effected or required.
Notwithstanding the provisions of the previous paragraph, in the
case of certain events of default specified in the Mortgage, the
principal of this bond may be declared or may become due and payable
in the manner and with the effect provided in the Mortgage.
No recourse shall be had for the payment of the principal or
interest of this bond, or for any claim based hereon, or otherwise in
respect hereof or of the Mortgage, to or against any incorporator,
stockholder, officer or director, past, present or future, of the
Company or East Barnet, either directly or through the Company or East
Barnet, under any constitution or statute or rule of law, or by the
enforcement of any assessment or penalty, or otherwise, all such
liability of incorporators, stockholders, directors and officers being
waived and released by the holder hereof by the acceptance of this
bond and being likewise waived and released by the terms of the
Mortgage.
This bond is nontransferable except to effect transfer to any
replacement or successor issuer or assignee of the Bank in connection
with the transfer of all of the Bank's right, title and interest in,
to and under the East Barnet Reimbursement Agreement and the Guaranty,
or to any replacement or successor issuer of a East Barnet Letter of
Credit, or to the Company or East Barnet, but is exchangeable by the
registered holder hereof, in person or by attorney duly authorized, at
the corporate trust office of the Trustee, in Boston, Massachusetts,
any such permitted transfer or exchange to be made in the manner and
upon the conditions prescribed in the Mortgage, upon the surrender and
cancellation of this bond and the payment of any stamp tax or other
governmental charge, and upon any such transfer or exchange a new
registered bond or bonds of the same series and maturity date and for
the same aggregate principal amount, in authorized denominations, will
be issued to the transferee, or the registered holder, as the case may
be, in exchange herefor. The Company and the Trustee may deem and
treat the person in whose name this bond is registered as the absolute
owner for the purpose of receiving payment and for all other purposes.
This bond shall not be valid or become obligatory for any purpose
unless and until it shall have been authenticated by the execution by
the Trustee or its successor in trust under the Mortgage of the
certificate endorsed hereon.
IN WITNESS HEREOF, Central Vermont Public Service Corporation has
caused this bond to be executed in its name by the manual or facsimile
signature of its President or one of its Vice Presidents, and its
corporate seal (or a facsimile thereof) to be hereto affixed and
attested by the manual or facsimile signature of its Secretary or one
of its Assistant Secretaries, this ____ day of _________, ____.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: ______________________________
[Vice] President
Attest:
_________________________
[Assistant] Secretary
(FORM OF ENDORSEMENT FOR ALL SERIES RR BONDS)
FOR VALUE RECEIVED hereby sell(s),
assign(s) and transfer(s) unto , the within
bond issued by Central Vermont Public Service Corporation, and all
rights thereunder, hereby irrevocably constituting and appointing
attorney to transfer said bond on the books of
said Company, with full power of substitution in the premises.
Dated:_____________________
______________________________
In the presence of:
______________________________
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.
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAW OF ANY STATE AND MAY NOT
BE OFFERED OR SOLD IN CONTRAVENTION OF ANY SUCH LAW.
(FORM OF TRUSTEE'S CERTIFICATE FOR ALL SERIES RR BONDS)
This bond is one of the bonds of the series designated therein,
described in the within-mentioned Mortgage.
STATE STREET BANK AND TRUST COMPANY
By: _________________________
Authorized Officer
RESOLVED: That this Company's First Mortgage Bonds, Series RR (East
Barnet), to be issued under said Indenture of Mortgage shall be
executed in the name of this Company by the manual or facsimile
signature of its President or one of its Vice Presidents and shall
have affixed thereto the corporate seal of this Company (which may be
facsimile) attested by the manual or facsimile signature of its
Secretary or an Assistant Secretary.
RESOLVED: That, subject to obtaining the approval of the Vermont
Public Service Board, this Board hereby authorizes the issue of
$6,015,275.35 in principal amount of said First Mortgage Bonds, Series
RR (East Barnet), which series have been determined upon and
established at this meeting, to be issued in respect of payment,
cancellation, redemption or other discharge of bonds of one or more
series theretofore authenticated under any provision of the Indenture
of Mortgage, as amended, pursuant to and in conformity with the
provisions of said Indenture of Mortgage, as amended, particularly
Section 2 of Article II thereof.
RESOLVED: That this Board of Directors hereby authorizes State Street
Bank and Trust Company, Trustee under said Indenture of Mortgage, from
time to time to authenticate, on application of the President or any
Vice President of this Company, and deliver on the written order of
the President or any Vice President, $6,015,275.35 in principal amount
of said First Mortgage Bonds, Series RR (East Barnet), in such
definitive forms and denominations authorized by resolutions of this
Board as he or she may specify, but only upon said State Street Bank
and Trust Company, Trustee, being satisfied that all the requirements
of Article II of said Indenture of Mortgage, as amended, relating to
the issue of bonds in respect of payment, cancellation, redemption or
other discharge of bonds of one or more series theretofore
authenticated under any provision of the Indenture of Mortgage, as
amended, have been complied with and upon the deposit with the Trustee
of the documents required under said Article II.
Resolutions Relating To The Series PP, Series QQ and Series RR
Bonds
WHEREAS, by Section 12 of Article III of the Indenture of Mortgage of
this Company to State Street Bank and Trust Company (successor trustee
to The First National Bank of Boston, successor trustee to Old Colony
Trust Company), Trustee, dated as of October 1, 1929, this Company
covenanted "that it will, upon reasonable request, execute and deliver
such further instruments and do such further acts as may be necessary
or proper to carry out more effectually the purposes of this Mortgage,
especially to make subject to the lien hereof any property now owned
or hereafter acquired by it, which it is herein provided shall be
subject to the lien hereof", and, by Section 1 of Article XVI thereof,
it is provided, among other things, that this Company and the Trustee
may enter into such indentures supplemental thereto as may be deemed
necessary or desirable "to assign, convey, confirm, mortgage, pledge,
transfer and set over unto the Trustee, subject to such liens or other
encumbrances as shall be therein specifically described, additional
property or properties of the Company, for the equal and proportionate
benefit and security, except as herein otherwise expressly provided,
of the holders and owners of all bonds at any time issued and
outstanding under this Mortgage", and "to add to the covenants or
agreements of the Company for the protection of the bondholders and of
the trust estate", and "to provide the terms and conditions of
redemption of the bonds, and/or for a special sinking fund for the
retirement of the bonds of any particular series then about to be
issued", and "for any other purpose not inconsistent with the terms of
this Mortgage and which shall not impair the security of the same",
NOW, THEREFORE, BE IT
RESOLVED: That this Board hereby approves a Forty-First Supplemental
Indenture to be dated as of July 19, 1999, setting forth the terms of
the Company's First Mortgage Bonds, Series PP (Millstone), Series QQ
(Seabrook) and Series RR (East Barnet), and authorizes and directs the
President or any Vice President of this Company for the time being in
office, each as such officer and as agent of this Company, to execute
and seal with the corporate seal of this Company (which shall be
attested by the Secretary or an Assistant Secretary of this Company
for the time being in office), and deliver to State Street Bank and
Trust Company, Trustee, said Supplemental Indenture, substantially in
the form presented to this meeting, subject to such changes,
insertions and omissions as may be determined and approved by the
President or Vice President of this Company executing the same, that
such determination and approval are within the authority conveyed by
this resolution to be conclusively evidenced by the execution of said
Supplemental Indenture on behalf of this Company and such execution
being a sufficient identification thereof for all purposes as the
Supplemental Indenture hereby authorized.
RESOLVED: That this Company hereby appoints State Street Bank and
Trust Company, a Massachusetts trust company, having its principal
office in the City of Boston, as the Boston paying agent of this
Company for the purpose of paying the interest on this Company's First
Mortgage Bonds, Series PP (Millstone), Series QQ (Seabrook) and Series
RR (East Barnet), to be issued under and secured by the Mortgage and
hereby designates the principal office of said State Street Bank and
Trust Company as the office or agency of this Company in Boston,
Massachusetts, at which payment may be made to or upon the written
order of the holders of the registered bonds of Series PP (Millstone),
Series QQ (Seabrook) and Series RR (East Barnet).
RESOLVED: That the officers of this Company and its counsel be and
they are, and each of them singly is, hereby authorized to do any and
all acts or things and to execute any and all documents necessary or,
in the opinion of the officer or officers or counsel so acting,
desirable to carry out the purposes of the foregoing resolutions and
each of them.
And I further certify that the foregoing resolutions have not
since been amended or rescinded and are now in full force and effect.
IN WITNESS WHEREOF I have hereunto set my hand as such Secretary
and have affixed the corporate seal of said Corporation this 28th day
of July 1999.
JOSEPH M. KRAUS
JOSEPH M. KRAUS
Secretary
(Corporate Seal)
EXHIBIT 4.58
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
TO
THE BANK OF NEW YORK,Trustee
SECOND MORTGAGE INDENTURE
Dated as of July 15, 1999
This Instrument Grants A Security Interest By A Utility
This Instrument Contains After-Acquired Property Provisions
CROSS REFERENCE SHEET TO
TRUST INDENTURE ACT OF 1939
Section of Act Section of Indenture
310(a)........................ 7.04,14.01,14.14,
14.15,14.18
310(b)........................ 14.12
311(a) and (b)................ 14.11
312(a), (b) and (c)........... 17.01
313(a), (b), (c) and (d)...... 17.03
314(a)........................ 17.02
314(b)........................ 7.05
314(c)(1) and (2)............. 21.01(b)
314(c)(3)..................... Not applicable
314(d)(1)..................... 1.03, 10.03(b),
10.04(b), 10.05(a)(ii),
10.06(a)(iii)
314(d)(2)..................... 1.03,
10.05(a)(ii),
10.06(a)(iii)
314(d)(3)..................... 3.04(c), 3.04(d)
10.03(c), 10.05(a)(ii)
and (iii)
314(e)........................ 21.01 (a)
315(a)........................ 14.01(c),14.02(a),14.07(a)
315(b)........................ 12.01(b)
315(c)........................ 14.01(b)
315(d)........................ 14.02
315(e)........................ 12.14(c)
316(a)(1)..................... 12.04,12.21
316(a)(2)..................... Omitted
316(a) last sentence ......... 20.03
316(b)........................ 12.20
317(a)........................ 12.16(a),12.19
317(b)........................ 7.06(a)
318(a)........................ 21.04
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..............................5
Section 1.01. Trust Indenture Act..................5
Section 1.02. Construction of Accounting Terms.....6
Section 1.03. Definitions..........................6
"Accountant"........................................6
"Accountant's Certificate"..........................6
"Accredited Investor Bonds".........................6
"Agent Members".....................................6
"Affiliate".........................................6
"Appraiser".........................................6
"Appraiser's Certificate"...........................6
"Authorized Newspaper"..............................6
"Authorized Office..................................6
"Board" or "Board of Directors".....................6
"Bond Register".....................................7
"Bond Registrar"....................................7
"Bondable Property".................................7
"Bonded" or "Bonding"...............................9
"Bonds".............................................9
"Business Day".....................................10
"Company"..........................................10
"Corporate Trust Office"...........................10
"Cost".............................................10
"Default"..........................................10
"Depositary".......................................10
"Described Property"...............................10
"Engineer".........................................10
"Engineer's Certificate"...........................11
"Event of Default".................................11
"Excepted Property"................................11
"Exchange Act".....................................12
"Fair Value".......................................12
"First Mortgage"...................................12
"First Mortgage Bonds".............................13
"Generally Accepted Accounting Principles".........13
"Global Bonds".....................................13
"Governmental Obligations".........................13
"Holder"...........................................13
"Indenture"........................................13
"Independent"......................................13
"Investment Securities"............................13
"Legend"...........................................14
"Lien of this Indenture"...........................14
"Liquidated Damages"...............................14
"Make Whole Premium"...............................14
"Mortgaged Property"...............................14
"Officer's Certificate"............................14
"Officers' Certificate"............................14
"Operating Bank"...................................14
"Opinion of Counsel"...............................14
"Outstanding"......................................14
"Permissible Encumbrances".........................15
"Person"...........................................17
"Pollution Control Facilities".....................17
"Primary Purposes of the Company's Business".......17
"Prior Lien".......................................17
"Prior Lien Bonds".................................17
"Registered Bond"..................................17
"Registered Holder"................................17
"Responsible Officer"..............................17
"Retired"..........................................18
"Rule 144A Global Bond"............................18
"Securities Account"...............................18
"Securities Intermediary"..........................18
"Supplemental Indenture"...........................18
"TIA"..............................................18
"Trustee"..........................................18
"UCC"..............................................18
"Unbonded".........................................18
ARTICLE II FORMS, EXECUTION, REGISTRATIONS AND
EXCHANGE OF BONDS..................................18
Section 2.01. Series and Form of Bonds..........18
Section 2.02. Kinds and Denominations of Bonds..19
Section 2.03. Dates of and Interest on Bonds....19
Section 2.04. Printing, Execution and
Authentication of Bonds...........19
Section 2.05. Global Bonds......................23
Section 2.06. Registration, Registration of
Transfer and Exchange.............24
Section 2.07. Temporary Bonds...................27
Section 2.08. Replacement of Stolen, Lost,
Destroyed or Mutilated Bonds......27
Section 2.09. Trustee's Certificate on Bonds....27
Section 2.10. CUSIP Numbers.....................27
Section 2.11. Cancellations.....................28
ARTICLE III ISSUANCE OF BONDS BASED ON BONDABLE
PROPERTY...........................................28
Section 3.01. Bonds Issuable on Basis of
Bondable Property.................28
Section 3.02. No Bonds Issuable on Basis of
Bonded Bondable Property.........28
Section 3.03. Bonds Issuable to Specified
Percentage of Bondable Property...28
Section 3.04. Requirements for Issuance.........28
Section 3.05. Determination of Cost or Fair
Value.............................31
ARTICLE IV ISSUANCE OF BONDS BASED ON RETIRED
BONDS PREVIOUSLY OUTSTANDING.......................31
Section 4.01. Requirements for Issuance.........31
Section 4.02. No Bonds Issuable on Basis of
Bonded Bonds......................32
ARTICLE V ISSUANCE OF BONDS BASED ON DEPOSIT OF CASH
WITH TRUSTEE.......................................32
Section 5.01. Requirements for Issuance.........32
Section 5.02. Application of Cash Deposited Under
Section 5.01......................32
ARTICLE VI ISSUANCE OF BONDS BASED ON PRIOR LIEN
BONDS..............................................33
Section 6.01. Requirements for Issuance.........33
Section 6.02. No Bonds Issuable on Basis of
Bonded Prior Lien Bonds...........33
ARTICLE VII COVENANTS OF THE COMPANY..............33
Section 7.01. Payment of Principal and Interest.33
Section 7.02. Possession, Maintenance of Lien and
Right to Mortgage.................34
Section 7.03. Corporate Existence...............34
Section 7.04. Appointment of Trustee............34
Section 7.05. Recordation of Indenture..........34
Section 7.06. Paying Agents.....................35
Section 7.07. Payment of Taxes..................35
Section 7.08. Instruments of Further Assurance..35
Section 7.09. Books of Record and Account.......36
Section 7.10. Maintenance of Mortgaged Property.36
Section 7.11. Insurance.........................36
Section 7.12. Payments by Trustee...............38
ARTICLE VIII PRIOR LIEN BONDS DEPOSITED WITH
TRUSTEE............................................38
Section 8.01. Requirements Upon Deposit of
Prior Lien Bonds..................38
Section 8.02. Principal of and Interest on
Prior Lien Bonds..................38
Section 8.03. Surrender of Prior Lien Bonds.....38
Section 8.04. Extension of Maturity of Prior
Lien Bonds........................39
Section 8.05. Trustee's Rights Upon an Event
of Default........................39
ARTICLE IX REDEMPTION OF BONDS....................39
Section 9.01. Certain Bonds Redeemable..........39
Section 9.02. General Provisions and Mechanics
of Redemption.....................39
Section 9.03. Bonds Due on Redemption Date......40
Section 9.04. Moneys for Redemption Held in
Trust.............................40
Section 9.05. Partial Redemption of Registered
Bond..............................41
ARTICLE X POSSESSION, USE AND RELEASE OF MORTGAGED
PROPERTY...........................................41
Section 10.01. Company's Possession and Use.....41
Section 10.02. Actions Without Consent of
Trustee..........................41
Section 10.03. Release of Mortgaged Property if
Fair Value Test Satisfied........42
Section 10.04. Release of Limited Amount of
Mortgaged Property...............43
Section 10.05. Release of Mortgaged Property Not
Subject to a Prior Lien..........44
Section 10.06. Release of Mortgaged Property
Subject to a Prior Lien..........45
Section 10.07. Eminent Domain...................47
Section 10.08. Release of Governmental Obligations
and Purchase Money Obligations...48
Section 10.09. Substituted Property.............48
Section 10.10. Receiver, Trustee, etc...........48
Section 10.11. Suspension of Rights in Case of
an Event of Default..............48
Section 10.12. Purchaser in Good Faith..........49
ARTICLE XI APPLICATION OF FUNDS HELD BY TRUSTEE...49
Section 11.01. Withdrawal, Application or Use of
Cash Held by Trustee.............49
Section 11.02. Moneys to be Held in Trust;
Investment Thereof...............51
ARTICLE XII DEFAULT AND REMEDIES..................53
Section 12.01. Events of Default................53
Section 12.02. Upon an Event of Default Trustee
May Sell Mortgaged Property......55
Section 12.03. Upon an Event of Default and
Request of Holders of a Majority of
Bonds, Trustee Must Declare
Principal Due....................55
Section 12.04. Duty of Trustee to Act on Request
of Holders of a Majority of
Bonds............................56
Section 12.05. Mortgaged Property May be Sold as
an Entirety or in Parcels........56
Section 12.06. Notice of Sale...................56
Section 12.07. Adjournment of Sale..............57
Section 12.08. Interest of Purchaser and
Company..........................57
Section 12.09. Trustee's Receipt Sufficient to
Discharge Purchaser..............57
Section 12.10. Principal of Bonds to Become Due
in Case of Sale..................57
Section 12.11. Application of Sale Proceeds.....57
Section 12.12. Bonds May Be Applied Against
Purchase Price...................58
Section 12.13. Company Not to Insist Upon or
Plead Stay or Extension Law or
Exercise Right of Redemption. 58
Section 12.14. Holders Not to Institute Suit
Without Request to Trustee,
Trustee May Enforce Rights
Without Possession of Bonds;
Undertaking for Costs............59
Section 12.15. Remedies Cumulative..............60
Section 12.16. Covenant to Pay Trustee;
Judgment by Trustee; Application
of Moneys........................60
Section 12.17. Appointment of Receiver..........61
Section 12.18. Suits by Trustee to Protect
Security.........................61
Section 12.19. Trustee May File Proofs of
Claims...........................61
Section 12.20. Holders' Rights at Maturity
May Not be Impaired..............61
Section 12.21. Waiver of Past Events of
Default by Holders...............61
Section 12.22. Undertaking for Costs............62
ARTICLE XIII EFFECT OF MERGER, CONSOLIDATION,
CONVEYANCE AND LEASE...............................62
Section 13.01. Company may Merge or Consolidate
if no Impairment of Lien of
this Indenture and with
Assumption of Obligation
by Successor.....................62
Section 13.02. Upon Merger or Consolidation
Indenture not to Constitute
Lien Upon Certain Properties;
Successor Corporation to Confirm
Prior Lien of this Indenture
and Keep Mortgaged Property
Identifiable.....................62
Section 13.03. Rights of Successor Corporation..63
Section 13.04. Liens on Merged Entities.........64
ARTICLE XIV THE TRUSTEE...........................65
Section 14.01. Eligibility of Trustee and
Acceptance of Trust..............65
Section 14.02. Extent of Trustee's Liability....65
Section 14.03. Recitals Deemed Made By Company..67
Section 14.04. Trustee Not Liable for Debts
From Operation of Mortgaged
Property; Trustee May
Own Bonds........................67
Section 14.05. Trustee May Give Notices
Incidental to Action by it.......67
Section 14.06. Notice by Trustee to Company.....67
Section 14.07. Trustee May Rely on Certificates
and May Consult Counsel;
Responsibility in Selection
of Experts.......................68
Section 14.08. Moneys Deposited with Trustee to
be Held in Trust; Interest
on Such Moneys...................68
Section 14.09. Compensation of Trustee; Lien
Therefor.........................69
Section 14.10. Trustee May Rely on Matters
Established by Officers'
Certificate......................70
Section 14.11. Action to be Taken by Trustee
who Becomes Creditor of Company..70
Section 14.12. Action to be Taken by Trustee
in the Event of a Conflict
of Interest......................70
Section 14.13. Resignation or Removal of
Trustee..........................70
Section 14.14. Appointment of Successor Trustee.71
Section 14.15. Appointment of Separate Trustee
or Co-Trustee....................71
Section 14.16. Acceptance by Successor Trustee;
Requirements of Predecessor
Trustee Upon Retiring............73
Section 14.17. Merger or Consolidation of
Trustee..........................73
Section 14.18. Appointment of Successor Trustee
by Company.......................74
Section 14.19. Authenticating Agent.............74
ARTICLE XV SUPPLEMENTAL INDENTURES................75
Section 15.01. Provision for Supplemental
Indentures.......................75
Section 15.02. Requirements for Other
Supplemental Indentures..........77
Section 15.03. Execution of Supplemental
Indentures.......................78
ARTICLE XVI MEETINGS OF BONDHOLDERS...............78
Section 16.01. Manner of Calling Meetings
and Determination of Bonds
Affected.........................78
Section 16.02. Calling of Meetings by Company
or Holders.......................79
Section 16.03. Persons Entitled to Vote at
Meeting..........................79
Section 16.04. Conduct of Meetings; Regulations.79
Section 16.05. Manner of Voting.................80
Section 16.06. Rights of Trustee or Holders
Not to Be Hindered or Delayed....81
Section 16.07. Action By Written Consent........81
ARTICLE XVII BONDHOLDER LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE...........................81
Section 17.01. Company to Furnish Holder Lists..81
Section 17.02. Company to Make Filings With
Trustee and Otherwise Comply
with TIA Section 314.............81
Section 17.03. Trustee to Furnish Reports to
Holders and Otherwise Comply
with TIA Section 313.............81
ARTICLE XVIII SATISFACTION AND DEFEASANCE.........82
Section 18.01. Effect of Payment of Indebtedness;
Deposit of Moneys or Governmental
Obligations in Certain Instances
Deemed Payment...................82
Section 18.02. Unclaimed Moneys.................82
ARTICLE XIX IMMUNITY OF INCORPORATORS, SUBSCRIBERS
TO THE CAPITAL STOCK, STOCKHOLDERS, OFFICERS AND
DIRECTORS..........................................83
Section 19.01. General Provision................83
ARTICLE XX EVIDENCE OF RIGHTS OF BONDHOLDERS AND
OWNERSHIP OF BONDS.................................83
Section 20.01. Evidence of Action by Holders....83
Section 20.02. Inspection of Bonds..............84
Section 20.03. Bonds Owned by Company or Other
Obligor or Affiliate Thereof
Deemed Not to be Outstanding.....84
Section 20.04. Holder May Revoke Consent........85
ARTICLE XXI MISCELLANEOUS.........................85
Section 21.01. Certificates and Opinions........85
Section 21.02. Benefits of Indenture............85
Section 21.03. Successors and Assigns...........86
Section 21.04. Conflict with TIA................86
Section 21.05. TIA Construed as in Effect on
Date Hereof......................86
Section 21.06. Titles, Table of Contents, Etc...86
Section 21.07. Counterparts.....................86
ARTICLE XXII CERTAIN MATTERS RELATING TO THE
PROPERTY LOCATED IN THE STATE OF CONNECTICUT.......86
Section 22.01. Prejudgment Remedy Waiver........86
Section 22.02. Trustee Agent....................87
ARTICLE XXIII CERTAIN MATTERS RELATING TO THE
PROPERTY LOCATED IN THE STATE OF MAINE.............87
Section 23.01. Statutory Power of Sale..........87
Section 23.02. Sealed Instrument................87
Section 23.03. No Oral Modifications............87
Section 23.04. No Waiver of Foreclosure.........87
Section 23.05. Trustee Agent....................87
ARTICLE XXIV CERTAIN MATTERS RELATING TO THE
PROPERTY LOCATED IN THE STATE OF NEW HAMPSHIRE.....88
Section 24.01. Statutory Power of Sale..........88
Section 24.02. Extent of Mortgage and Security
Interest.........................88
Section 24.03. Trustee Agent....................88
ARTICLE XXV CERTAIN MATTERS RELATING TO THE
PROPERTY LOCATED IN THE STATE OF VERMONT...........88
Section 25.01. Non-Judicial Power of Sale.......89
Section 25.02. Limitation on Attorney's Fees
in Foreclosure...................89
Section 25.03. Subsequent Indebtedness..........89
Section 25.04. Trustee Agent....................89
ARTICLE XXVI CERTAIN MATTERS RELATING TO THE
PROPERTY LOCATED IN THE STATE OF NEW YORK..........89
Section 26.01. Section 254 of the RPL...........89
Section 26.02. Section 291-f of the RPL.........89
Section 26.03. Trust Fund.......................89
Section 26.04. Commercial Property..............90
Section 26.05. Transfer Tax.....................90
Section 26.06. Covenants in Addition to RPL.....90
Section 26.07. Trustee Agent....................90
Section 26.08. Maximum Principal Amount.........90
TESTIMONIUM........................................91
SIGNATURES AND SEALS...............................91
ACKNOWLEDGMENTS....................................93
SCHEDULE A........................................S-1
MORTGAGE INDENTURE, dated as of July 15, 1999, between CENTRAL VERMONT
PUBLIC SERVICE CORPORATION, a Vermont corporation, having offices at
77 Grove Street, Rutland, Vermont 05701 and THE BANK OF NEW YORK, as
Trustee, having offices at 101 Barclay Street, Floor 21 West, New
York, New York 10286.
WHEREAS, all capitalized terms used in this Indenture have the
respective meanings set forth in Article I; and
WHEREAS, the Company deems it necessary to borrow and, pursuant to
this Indenture, to issue Bonds for its corporate purposes from time to
time, and to mortgage and pledge the property hereinafter described to
secure payment of the Bonds; and
WHEREAS, all acts and things have been done and performed which are
necessary to make this Indenture, when duly executed and delivered, a
valid and binding mortgage for the security of all Bonds duly issued
hereunder and Outstanding from time to time; and the execution and
delivery of this Indenture have been in all respects duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that to secure the payment
of the principal of, premium, if any, and interest on, and other fees,
costs and expenses, if any, related to or arising under, all Bonds
issued and Outstanding under this Indenture when payable in accordance
with the provisions thereof and hereof, and to secure the performance
by the Company of, and its compliance with, the covenants and
conditions of this Indenture, and in consideration of the premises and
of Ten Dollars paid to the Company by the Trustee, the Company does
hereby grant, bargain, sell, warrant, release, convey, assign,
transfer, mortgage, pledge, set over and confirm unto The Bank of New
York, as Trustee, and to its successors in trust and to its assigns,
all of the property, rights and interests in the Described Property
(as defined below), and, other than Excepted Property, which is
expressly excepted and excluded from the Lien of this Indenture, and
subject to Article XIII, all of the property, rights and interests in
property acquired by the Company after the date of the execution of
this Indenture and used or to be used for one or more of the Primary
Purposes of the Company's Business, which shall be and are as fully
granted and conveyed by this Indenture and as fully embraced within
the Lien of this Indenture as if such property, rights and interest in
property were now owned by the Company and were specifically described
herein and conveyed hereby; the Company expressly reserves the right,
at any time and from time to time, by one or more Supplemental
Indentures, to subject to the Lien and operation of this Indenture any
part or all of the Excepted Property upon such terms and conditions
and subject to such restrictions, limitations and reservations as may
be set forth in such Supplemental Indenture or Indentures.
THE DESCRIBED PROPERTY
(A) The real property more particularly described herein and in
Schedule A attached hereto, incorporated herein and made a part hereof
(the "Land");
(B) TOGETHER WITH (1) all and singular the plants, rights, permits,
franchises, privileges, easements and property, real, personal and
mixed, together with the rents, issues and profits thereof, all as
more particularly described in that certain Indenture of Mortgage
dated as of October 1, 1929, but actually executed on October 24, 1929
(as from time to time amended and supplemented, the "First Mortgage"),
recorded in Liber 150 of Mortgages, Page 51, Grafton County (New
Hampshire) Registry of Deeds, Liber 616, Folio 484, Sullivan County
(New Hampshire) Records, Vol. 234, Page 531, in the Office of the
Secretary of State of Connecticut at Volume 51:M of the Railroad
Mortgages, in the Office of the City Clerk of Rutland, Vermont at Book
51A, in Liber 150 of Mortgages, Page 51 in the Washington County
Clerk's Office (New York), in the Office of the Secretary of State of
the States of Vermont and Maine, and in the offices of the clerks of
certain other towns, cities and counties in such states, and forty-one
(41) duly recorded (where necessary) supplemental indentures thereto
and in modification and confirmation thereof, and thereby or otherwise
thereunder conveyed, pledged, assigned, transferred and mortgaged, or
intended so to be (such descriptions in the First Mortgage being
hereby made a part hereof to the same extent as if set forth herein at
length), whether then or now owned or thereafter or hereafter
acquired, except such of said properties or interests therein as may
have been released or sold or disposed of in whole or in part as
permitted by the provisions of the First Mortgage as heretofore
supplemented and amended and (2) also, but without in any way limiting
the generality of the foregoing, all of the right, title and interest
of the Company in and to the franchises, rights, titles, interests,
easements and properties described in Schedule A hereto attached and
hereby made a part hereof as fully as if set forth herein at length it
being the intention of the Company that the properties and interests
subject to the lien of this Indenture are identical to the properties
and interests subject to the lien of the First Mortgage, for so long
as the First Mortgage shall be in effect;
(C) TOGETHER WITH all right, title and interest, if any, which the
Company may now have or hereafter acquire of whatever character
whether as owner, lessee or otherwise, whether vested or contingent,
in and to (1) the Land and all buildings, structures and improvements
of every nature whatsoever now or hereafter situated on the Land
(collectively, the "Buildings"), (2) all building materials, supplies
and other property now or hereafter stored at or delivered to the Land
or any other location for installation in or on the Land or any of the
Buildings, and all fixtures, fittings, machinery, appliances,
equipment, apparatus and furnishings now or hereafter attached to, and
used or intended to be used in connection with, the Land, any of the
Buildings or in connection with any construction or other work now or
hereafter conducted in or on the Land or any of the Buildings, and all
extensions, additions, improvements, betterments, renewals,
substitutions and replacements to or of any of the foregoing, (all of
the property described in this clause (2), being collectively referred
to herein as the "Equipment"; the Buildings and the Equipment being
collectively referred to herein as the "Improvements");
(D) TOGETHER WITH all proceeds, products, extensions, additions,
improvements, betterments, renewals, substitutions, replacements,
accessions, accretions and relictions of and to all or any part of the
Premises (as defined below) or any other property encumbered by this
Indenture;
(E) TOGETHER WITH all right, title and interest of the Company, of
whatever character (whether vested or contingent and whether now owned
or hereafter acquired), in and to (1) all streets, roads and public
places (whether open or proposed) now or hereafter adjoining or
otherwise providing access to the Land, (2) the land lying in the bed
of such streets, roads and public places, and (3) all other sidewalks,
alleys, ways, passages, vaults, water courses, strips and gores of
land now or hereafter adjoining or used or intended to be used in
connection with all or any part of the property described in
paragraphs (A), (B), (C) and (D) hereof;
(F) TOGETHER WITH all easements, rights-of-way and rights of use or
passage (whether public or private), estates, interests, benefits,
powers, rights (including, without limitation, any and all lateral
support, drainage, slope, riparian, littoral, sewer, water, air, oil,
gas, mineral and subsurface rights), privileges, claims, franchises,
licenses, profits, rents, royalties, tenements, hereditaments,
reversions, remainders and appurtenances of every nature whatsoever in
any way now or hereafter belonging, relating or appertaining to all or
any part of the property described in paragraphs (A), (B), (C), (D)
and (E) hereof (all rights and interests described in clauses (A),
(B), (C), (D), (E) and (F) being collectively referred to herein as
the "Premises");
(G) TOGETHER WITH (1) any and all judgments, settlements, claims,
awards, insurance proceeds and other proceeds and compensation, and
any interest thereon (collectively, "Compensation"), now or hereafter
made or payable in connection with (a) any casualty or other damage to
all or any part of the property described in paragraphs (A), (B), (C),
(D), (E) and (F) hereof, (b) any condemnation proceedings affecting
any such property or any rights thereto or any interest therein, (c)
any damage to or taking of any such property or any rights thereto or
any interest therein arising from or otherwise relating to any
exercise of the power of eminent domain (including, without
limitation, any and all Compensation for change of grade of streets or
any other injury to or decrease in the value of any such property), or
(d) any conveyance in lieu of or under threat of any such taking, (2)
any and all proceeds of any sale, assignment or other disposition of
any such property or any rights thereto or any interest therein, (3)
any and all proceeds of any other conversion (whether voluntary or
involuntary) of any such property or any rights thereto or any
interest therein into cash or any liquidated claim, and (4) any and
all option rights, contract rights, permits, licenses, approvals,
actions and rights in action now or hereafter arising from or relating
to any such property (including, without limitation, all rights of the
Company in and to insurance proceeds and any and all contracts and
bonds relating to operation, maintenance, construction, renovation,
restoration, repair, management or security of any such property);
(H) TOGETHER WITH all leasehold estates, right, title and interest of
the Company in any and all leases, subleases, management agreements,
arrangements, concessions or agreements relating to the use or
occupancy of the Premises or any portion thereof and all rents of and
from all or any part of the foregoing whether now or hereafter payable
or accruing (including, without limitation, any and all money and
other consideration paid or payable from time to time by any and all
tenants, licensees, occupants or other users of any such property),
and all rights of the Company or any other Person to collect and
receive the same; provided, however, that permission is hereby given
to the Company, so long as no Event of Default (as hereinafter
defined) shall have occurred, to collect and use such rents, but not
before, they become due and payable, which permission shall terminate
immediately, without the necessity of any action by the Trustee, upon
the occurrence of any Event of Default;
(I) TOGETHER WITH (1) all right, title and interest of the Company
(whether as seller, purchaser or otherwise) in and to any and all
agreements now or hereafter relating to any purchase, sale, occupancy
or other transfer of all or any part of the property described in
paragraphs (A), (B), (C), (D), (E), (F), (G) and (H) hereof (whether
or not such purchase, sale, occupancy or other transfer shall be
completed), and (2) all right, title and interest of the Company
(whether as lessor, lessee or otherwise) in and to any and all leases,
subleases, use, occupancy and similar agreements (including, without
limitation, oil, gas and mining leases) now or hereafter relating to
all or any part of the property described in paragraphs (A), (B), (C),
(D), (E) and (F) hereof (each being referred to in this paragraph as a
"lease"), together with any and all guaranties and security of, for or
otherwise relating to any such lease (including, without limitation,
any and all right, title and interest of the Company in and to
property of any tenant or other Person, whether such right, title and
interest shall have arisen under applicable law or under any such
lease or other arrangement) and together with all rent and other
consideration (whether monetary or otherwise) now or hereafter payable
or accruing under or in connection with any such lease (including,
without limitation, any and all cancellation or termination payments
and any and all damages payable in connection with any default),
subject, however, to the conditional permission given to the Company
to collect and use the rents, royalties, issues, profits, revenues,
income and other benefits arising under any such lease as provided
above and, so long as no Event of Default has occurred, to possess,
control, manage, operate and otherwise deal with the property
described in paragraphs (A), (B), (C), (D), (E), (F), (G) and (H)
hereof;
(J) TOGETHER WITH any and all right, title and interest of the Company
in all reciprocal easement agreements, operating agreements and any
other agreements affecting the Land and Improvements; and
(K) TOGETHER WITH any and all further or greater estate, right, title,
interest, claim and demand of the Company, of whatever character
(whether vested or contingent and whether now owned or hereafter
acquired), in and to any of the property described in the foregoing
paragraphs or any rights or interests appurtenant thereto.
BUT SPECIFICALLY RESERVING AND EXCEPTING (as the same were reserved
and excepted from the lien of the First Mortgage) from this Indenture
and the grant, conveyance, mortgage, transfer and assignment herein
all Excepted Property.
All of the property described in the paragraphs (A), (B), (C), (D),
(E), (F), (G), (H), (I), (J) and (K) above, and each item of property
therein described is collectively referred to in this Indenture as the
"Described Property".
TO HAVE AND TO HOLD all such properties, rights and interests in
property granted, bargained, sold, warranted, released, conveyed,
assigned, transferred, mortgaged, pledged, set over and confirmed or
in which a security interest has been granted by the Company in this
Indenture or intended or agreed to be so granted, together with all
the appurtenances thereto, unto the Trustee and its successors and
assigns forever.
SUBJECT, HOWEVER, as to the properties, rights and interests in
property severally embraced therein or affected thereby, to the First
Mortgage for so long as any First Mortgage Bonds are outstanding, and
to other Permissible Encumbrances;
BUT IN TRUST, nevertheless, for the equal and proportionate benefit
and security of all present and future holders of the Bonds issued
hereunder and to be issued hereunder and secured by the Lien of this
Indenture, and to secure the payment of the principal of, premium, if
any, and interest on, and other fees, costs and expenses, if any,
related to or arising under, the Bonds issued and Outstanding under
this Indenture when payable in accordance with the provisions thereof
and hereof, and to secure the performance by the Company, of, and its
compliance with, the covenants and conditions of this Indenture
without any preference, priority or distinction of any one Bond over
any other Bond by reason of priority in the issue or negotiation
thereof or otherwise.
PROVIDED, HOWEVER, and these presents are upon the condition, that if
the Company shall pay or cause to be paid the principal of, premium,
if any, and interest on, and other fees, costs and expenses relating
to or arising under, the Bonds at the times and in the manner therein
and herein provided, or shall provide, in the manner permitted hereby,
for the payment thereof, and if the Company shall also pay or cause to
be paid all other sums payable hereunder by it and perform all of the
covenants and comply with all of the conditions of this Indenture,
then this Indenture and the estate and rights hereby granted shall
cease, determine and be void, otherwise to be and remain in full force
and effect.
IT IS HEREBY COVENANTED AND AGREED, by and between the Company and the
Trustee, that all Bonds are to be authenticated, delivered and issued,
and that all Mortgaged Property is to be held, subject to the further
covenants, conditions, uses and trusts hereinafter set forth, and the
Company, for itself and its successors and assigns, does hereby
covenant and agree to and with the Trustee and its successors in
trust, for the benefit of those who shall hold Bonds, as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Trust Indenture Act. (a) Whenever this Indenture
refers to a provision of the Trust Indenture Act of 1939, as amended
("TIA"), such provision is incorporated by reference in and made a
part of this Indenture. The following TIA terms incorporated in this
Indenture have the following meanings:
"indenture securities" means the Bonds.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Bonds.
(b) All terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of
the Securities and Exchange Commission have the meanings assigned to
them in the TIA or such statute or rule as in force on the date of
execution of this Indenture.
Section 1.02. Construction of Accounting Terms.
The accounting terms used in this Indenture shall be construed in
accordance with Generally Accepted Accounting Principles.
Section 1.03. Definitions.
For purposes of this Indenture, the following terms have the following
meanings:
"Accountant" means the Chief Accounting Officer, Controller, Assistant
Controller, Treasurer or Assistant Treasurer of the Company or a
Person who is qualified to pass upon accounting matters, who or which
need not be a certified or public accountant and, unless required to
be Independent, may be employed by or Affiliated with the Company.
"Accountant's Certificate" means a certificate signed by an
Accountant.
"Accredited Investor Bonds" has the meaning given in Section 2.04(d).
"Agent Members" has the meaning give in Section 2.04(e)(i).
"Affiliate" means a Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with,
another Person; "Affiliated" has a meaning correlative to the
foregoing.
"Appraiser" means a Person engaged in the business of appraising
property competent to determine the Fair Value or fair market value of
the particular property in question, and who or which, unless required
to be Independent, may be employed by or Affiliated with the Company.
"Appraiser's Certificate" means a certificate signed by an Appraiser;
any Appraiser's Certificate which is relied upon by an Independent
Engineer, for purposes of an Independent Engineer's Certificate, shall
be signed by an Independent Appraiser.
"Authorized Newspaper" means a newspaper of general circulation in the
relevant area, printed in the English language and customarily
published on each Business Day; whenever successive publications in an
Authorized Newspaper are required by this Indenture, such publications
may be made on the same or different days and in the same or in
different Authorized Newspapers.
"Authorized Officer" means the Chairman of the Board, Chief Executive
Officer, the President, a Vice President, the Chief Financial Officer,
the Treasurer, an Assistant Treasurer, the Controller, an Assistant
Controller, the Secretary or an Assistant Secretary of the Company.
"Board" or "Board of Directors" means
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the board of directors of the
general partner of the partnership; and
(3) with respect to any other Person, the board or committee of
such Person servicing a similar function.
"Bond Register" has the meaning given in Section 2.06(a).
"Bond Registrar" has the meaning given in Section 2.06(a).
"Bondable Property" means the Mortgaged Property as of July 15, 1999,
plus any property acquired or constructed by the Company which is
included in the Mortgaged Property after July 15, 1999, subject to the
following provisions:
(i) Bondable Property:
(A) need not consist of a specific or completed development, plant,
betterment, addition, extension, improvement or enlargement, but may
include construction work in progress and property in the process of
purchase insofar as the Company shall have acquired legal title to
such property, and may include the following:
(1) fractional and other undivided interests of the Company in
property owned jointly or in common with other Persons, whether or not
there are with respect to such property, other agreements or
obligations on the part of the Company, if there is an effective bar
against partition of such property which would preclude the sale of
such property by any or all of such other Persons or the holder or
holders of any lien or liens on the interest of any of such other
Persons in such property, without the consent of the Company;
(2) engineering, economic, environmental, financial, geological and
legal or other surveys, data processing equipment and software,
preliminary to or associated with the acquisition or construction of
property included or intended to be included in the Mortgaged
Property; and
(3) property located over, on or under property owned by other
Persons, including governmental or municipal agencies, bodies or
subdivisions, under permits, licenses, easements, franchises and other
similar privileges, if the Company shall have the right to remove the
same; and
(B) may include renewals, replacements and substitution of property
not excluded from this definition of Bondable Property; but
(C) shall not include:
(1) Excepted Property; or
(2) going concern value or good will.
(ii) The "amount" of any Bondable Property means the lesser of the
Cost or Fair Value of Bondable Property certified to the Trustee in an
Engineer's Certificate (or in case such Fair Value shall not be
required to be evidenced to the Trustee, the Cost thereof) minus, in
the case of Bondable Property which is (A) owned by the Company
subject to a Prior Lien on the date of this Indenture, or (B) acquired
by the Company after July 15, 1999 subject to a Prior Lien (other than
a Prior Lien to which such Bondable Property becomes subject, solely
as a result of such acquisition, pursuant to an after-acquired
property clause of such Prior Lien), the aggregate principal amount of
the Prior Lien Bonds secured by such Prior Liens and (I) outstanding
at July 15, 1999 and at the date of such acquisition, respectively,
and (II) issued after such date, respectively.
(iii) When any Bondable Property is certified to the Trustee in any
Engineer's Certificate delivered with an application, and as a basis
for the authentication and delivery of Bonds, the release of Mortgaged
Property or the withdrawal of cash (except in the case of the release
of Mortgaged Property, the withdrawal of cash representing the
proceeds of insurance or the payment of or on account of obligations
secured by purchase money mortgages, in each case on the basis of
Bondable Property acquired or constructed within 90 days prior to the
date of the application for such release or the receipt by the Trustee
of such cash, or within 90 days subsequent to such application or
receipt of cash),
(A) there shall be deducted from the Cost or Fair Value of such
Bondable Property, as the case may be (as evidenced in such
application), an amount equal to the aggregate Cost of all Bondable
Property retired on and after July 15, 1999, minus the aggregate Cost
of all Bondable Property acquired or constructed by the Company which
is included in the Mortgaged Property after such date, and has been
Bonded as the basis for the withdrawal of cash pursuant to Section
11.01(a)(i)(B), and
(B) there may, at the option of the Company, be added to such Cost or
Fair Value, as the case may be, the sum of
(1) all or any portion which the Company then elects to add to the
total of (aa) the fair market value in cash, as set forth in an
Appraiser's Certificate dated the date of such application, of the
unpaid principal amount of any obligations (which are not in default)
secured by purchase money mortgages and Governmental Obligations, plus
(bb) any cash, then held by the Trustee, in either case representing
the proceeds of insurance on, or of the release or other disposition
of, Bondable Property retired; and
(2) the principal amount of any Bonds which the Company then elects so
to add, the right to the authentication and delivery of which under
Article IV or Article VI shall have been waived as a basis for the
release of Bondable Property retired except to the extent that such
Bondable Property shall have been released in accordance with Section
10.05 or 10.06;
provided, however, that neither any reduction in the Cost or Fair
Value of property recorded in an account of the Company nor the
transfer of any amount from such an account to another such account
shall be deemed to be Bondable Property retired.
"Bonded" or "Bonding" as applied to Bonds, Prior Lien Bonds or
Bondable Property means that such Bonds, Prior Lien Bonds or Bondable
Property are within one or more of the following classes:
(i) the aggregate amount of Bondable Property that has been used as a
basis for the authentication and delivery of Bonds pursuant to Article
III or the withdrawal of cash pursuant to Section 11.01;
(ii) Bonds that have been used as a basis for the authentication and
delivery of Bonds pursuant to Article IV or the withdrawal of cash
pursuant to Section 11.01, and Bonds and Prior Lien Bonds paid,
purchased or redeemed with moneys applied or used by the Trustee
pursuant to Section 11.01;
(iii) Bonds and Prior Lien Bonds that have been used as a basis for a
waiver by the Company, pursuant to Section 10.05 or 10.06, of its
right to the authentication and delivery of Bonds pursuant to Article
IV or Article VI;
(iv) Bonds, Prior Lien Bonds and Bondable Property that have been
allocated or used as a basis for any credit or action or pursuant to
any provision of, or retired through the operation of, any sinking,
improvement, maintenance, replacement or analogous fund for any series
of Bonds; provided, however, that any such Bonds, Prior Lien Bonds or
Bondable Property so allocated or used shall be reinstated as Unbonded
when all of the Bonds of the series of Bonds for the benefit of which
such fund was established are retired; and provided, further, that
Bondable Property shall not be deemed "Bonded" merely by virtue of its
acquisition or extension in satisfaction of any Renewal Fund
obligations under (and as defined in) the First Mortgage or any
analogous provisions of any other Prior Lien; or
(v) Prior Lien Bonds that have been (A) used as a basis for the
authentication and delivery of Bonds pursuant to Article VI or the
withdrawal of cash pursuant to Section 11.01, (B) used as a basis for
the issuance of Prior Lien Bonds under such Prior Lien or (C) used as
a basis for the release of property or the withdrawal of cash under
any Prior Lien.
All Bondable Property which shall be retired, abandoned, destroyed,
released or otherwise disposed of shall be deemed Bondable Property
retired, but as in this Indenture provided may at any time thereafter
again become Bondable Property.
"Bonds" means bonds authenticated and delivered under this Indenture.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which banks located in Rutland, Vermont or in the city where
the Trustee maintains its principal office and place of business are
required or authorized to be closed.
"Company" means Central Vermont Public Service Corporation, a Vermont
corporation, and its successors and assigns.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of this
Indenture is located at 101 Barclay Street, Floor 21 West, New York,
New York 10286.
"Cost" means the actual cost to the Company of any property, which
cost shall include (i) cash or its equivalent, including without
limitation all costs and allowances for funds used during the
construction thereof, and other deferred costs relating to such
construction, but only to the extent permitted by Generally Accepted
Accounting Principles or accounting orders from any governmental
regulatory commission, (ii) the fair market value in cash (as of the
date of delivery) of any securities delivered in connection with the
acquisition of such property, (iii) the principal amount of any Prior
Lien Bonds secured by a Prior Lien upon such property at the time of
its acquisition unless such principal amount of Prior Lien Bonds has
previously been used in determining the Cost of other property subject
to such Prior Lien and (iv) the principal amount of any other
indebtedness incurred or assumed in connection with the acquisition of
such property; the Cost of property acquired by the Company without
consideration or by in-kind exchange, or by merger, consolidation or
dissolution shall be deemed to be the Fair Value thereof at the date
of its acquisition.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Depositary" means, with respect to Bonds of any series for which the
Company shall determine that such Bonds will be issued as a Global
Bond, The Depository Trust Company, New York, New York, another
clearing agency or any successor registered as a clearing agency under
the Exchange Act or other applicable statute or regulation, which, in
each case, shall be designated by the Company pursuant to either
Section 2.04 or 2.06.
"Described Property" has the meaning given in the granting clauses in
this Indenture.
"Engineer" means a Person engaged in the engineering business, and who
or which, unless required to be Independent, may be employed by or
Affiliated with the Company, except that an Independent Engineer shall
sign Engineer's Certificates delivered in connection with the release
of Mortgaged Property pursuant to Section 10.03, 10.04, 10.05, 10.06
or 10.07, if the Fair Value of the Mortgaged Property to be released
and of all other Mortgaged Property released since the commencement of
the then current calendar year, or the Fair Value of any purchase
money obligations or Governmental Obligations included in the
consideration for such release and of all other securities made a
basis of any authentication and delivery of Bonds, withdrawal of cash
or release of Mortgaged Property under this Indenture since the
commencement of the then current calendar year, as set forth in
Engineer's Certificates required pursuant to Article X of this
Indenture, is 10% or more of the aggregate principal amount of Bonds
at the time Outstanding, unless the Fair Value of the Mortgaged
Property to be released or of any purchase money obligations or
Governmental Obligations included in the consideration for such
release and of all other securities made a basis of any authentication
and delivery of Bonds, withdrawal of cash or release of Mortgaged
Property, as set forth in such Engineer's Certificate, is, in each
case, less than $25,000 or less than 1% of the aggregate principal
amount of Bonds at the time of Outstanding.
"Engineer's Certificate" means a certificate signed by an Engineer.
"Event of Default" means any event specified in Section 12.01(a) and,
with respect to any series of Bonds, any event identified as an "Event
of Default" in the supplemental indenture pursuant to which such
series of Bonds are issued.
"Excepted Property" means all of the following described property,
whether now owned or hereafter acquired by the Company, except (so
long as any First Mortgage Bonds are outstanding) to the extent
subject to the lien of the First Mortgage:
(i) all cash, shares of stock, bonds, notes and other obligations and
securities not deposited, or required to be deposited, with the
Trustee by the express provisions of this Indenture;
(ii) all bills, notes and other instruments and accounts receivable,
judgments, demands, general intangibles and choses in action, and all
contracts, leases and operating agreements not pledged or required to
be pledged with the Trustee;
(iii) all merchandise, equipment, spare parts, tools, materials,
supplies and fuel held for sale or other disposition in the ordinary
course of business or for use or consumption in, or in the operation
of, any properties of, or for the benefit of, the Company, or held in
advance of use thereof for maintenance, replacement or fixed capital
purposes;
(iv) all electricity, gas, steam, water, ice and other materials,
products or services generated, manufactured, produced, provided or
purchased by the Company for sale or distribution or used or to be
used by the Company;
(v) all railcars, aircraft, watercraft, automobiles, buses, trucks,
tractors, trailers and similar vehicles and movable equipment, and all
components, spare parts, accessories, supplies and fuel used or to be
used in connection with any of the foregoing;
(vi) all office furniture and office equipment;
(vii) the last day of the term of any lease or leasehold now owned or
hereafter acquired by the Company which is specifically subjected to
the Lien of this Indenture;
(viii) all timber, crops, sand, gravel, rocks, earth, natural gas,
oil, coal, uranium and other products or components of land and
minerals, harvested, mined or extracted from or otherwise separated
from the earth, or lying or being upon, within or under any properties
of the Company, including Mortgaged Property, and timber, crops,
gravel, sand, rocks, earth, gas, oil, coal, uranium and other land and
mineral rights, leases and royalties and income therefrom, and rights
to explore for minerals;
(ix) except as the same may be specifically subjected to the Lien of
this Indenture, all nuclear fuel, cores and materials;
(x)all satellites and other equipment and materials used or to be used
in outer space; all business machines; all communications equipment;
all computer equipment; all record production, storage and retrieval
equipment; all telephone properties or equipment; and all components,
spare parts, accessories, programs and supplies used or to be used in
connection with any of the foregoing;
(xi) all real or personal property which meets all of the following
conditions:
(A) is not specifically described in this Indenture,
(B) is not specifically subjected or required to be subjected to the
Lien of this Indenture by any express provision of this Indenture, and
(C) is not used or to be used as an integral part of one or more of
the Primary Purposes of the Company's Business, or in connection with
the operation of any property specifically subjected or required to be
subjected to the Lien of this Indenture by the express provisions of
this Indenture;
(xii) the Company's franchise to be a corporation;
(xiii) all books and records;
(xiv) Pollution Control Facilities; and
(xv) so long as any First Mortgage Bonds remain Outstanding, all other
property of the Company that is not subject to the lien of the First
Mortgage.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Value" when applied to property means its fair value as
determined without deduction for any Prior Liens upon such property,
which fair value may be determined without physical inspection by use
of accounting or engineering records and other data maintained by, or
available to, the Company.
"First Mortgage" means the Mortgage of the Company dated October 1,
1929, to Old Colony Trust Company, as Trustee, as from time to time
amended and supplemented, under which Indenture State Street Bank and
the Trust Company is now serving as second successor trustee, as more
particularly described in paragraph (B) of the granting clauses in
this Indenture.
"First Mortgage Bonds" means the securities and other Indebtedness
issued from time to time pursuant to the First Mortgage.
"Generally Accepted Accounting Principles" means generally accepted
accounting principles in use at June 30, 1999, or, at the option of
the Company, other generally accepted accounting principles which are
in use at the time of their determination; in determining generally
accepted accounting principles, the Company may, but shall not be
required to, conform to any accounting order, rule or regulation of
any regulatory authority having jurisdiction over the operations of
the Company.
"Global Bonds" has the meaning given in Section 2.04(e)(i).
"Governmental Obligations" means direct obligations of or obligations
unconditionally guaranteed by the federal government or any political
subdivision of the United States of America, any agency, department or
any other administrative authority or instrumentality thereof,
including without limitation, any local or other governmental agency
or other authority within the United States of America.
"Holder" means the bearer of a definitive Bond or the Registered
Holder of a Registered Bond.
"Indenture" means this instrument and all Supplemental Indentures; all
references to "herein", "hereof" and "hereunder" shall respectively
mean in, of or under this Indenture.
"Independent" when used with respect to any specified Person means a
Person selected by the Chairman of the Board, Chief Executive Officer,
President, Chief Financial Officer or a Vice President of the Company
and approved by the Trustee, who (i) is in fact independent, (ii) does
not have any direct financial interest or any material indirect
financial interest in the Company or in any other obligor on the Bonds
or in any Affiliate of the Company or any such other obligor and (iii)
is not connected with the Company or such other obligor as an
Affiliate or an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions.
"Investment Securities" means any of the following obligations or
securities on which neither the Company nor any of its subsidiaries is
the obligor: (a) bonds or other obligations of the United States of
America; (b) interest bearing deposit accounts (which may be
represented by certificates of deposit) in national or state banks
having a combined capital and surplus of not less than $10,000,000, or
savings and loan associations having total assets of not less than
$40,000,000; (c) bankers' acceptances drawn on and accepted by
commercial banks (which may include the Trustee) having a combined
capital and surplus of not less than $10,000,000; (d) direct
obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, any state of the United States of
America or the District of Columbia, or any political subdivision of
any of the foregoing, which are rated in any of the three highest
rating categories by a nationally recognized rating agency; (e) bonds
or other obligations of any agency or instrumentality of the United
States of America; (f) commercial or finance company paper which is
rated in any of the three highest rating categories by a nationally
recognized rating agency; (g) corporate debt securities rated in any
of the three highest rating categories by a nationally recognized
rating agency; (h) repurchase agreements with banking or financial
institutions having a combined capital and surplus of not less than
$10,000,000 (which may include the Trustee) with respect to any of the
foregoing obligations or securities; and (i) any other obligations or
securities which may lawfully be purchased by the Trustee.
"Legend" has the meaning given in Section 2.06(d).
"Lien of this Indenture" means the lien created by this instrument
(including the lien on property acquired after the date of the
execution of this Indenture) and the lien created by any subsequent
conveyance to the Trustee, whether made by the Company or any other
Person, effectively constituting any property a part of the security
held by the Trustee for the benefit of the holders of all Outstanding
Bonds.
"Liquidated Damages", if applicable to any series of Bonds, has the
meaning given in the Supplemental Indenture pursuant to which such
series of Bonds is issued.
"Make Whole Premium", if applicable to any series of Bonds, has the
meaning given in the Supplemental Indenture pursuant to which such
series of Bonds is issued.
"Mortgaged Property" means as of any particular time all of the
property that is used or to be used for one or more of the Primary
Purposes of the Company's Business, and any other property (including
securities and cash held by the Trustee pursuant to this Indenture)
which at such time is subject, or is intended by the terms of this
Indenture to be subject, to the Lien of this Indenture, however
created, including (i) all Described Property, and (ii) all of such
property which is acquired by the Company after June 30, 1999 and
(iii) all property described in Supplemental Indentures, but Mortgaged
Property shall not include Excepted Property.
"Officer's Certificate" means a certificate signed by the principal
executive officer, principal financial officer or principal accounting
officer of the Company.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Chief Executive Officer, President, a Vice-President of the
Company and the Chief Financial Officer, the Chief Accounting Officer,
Treasurer, an Assistant Treasurer, the Controller or Assistant
Controller of the Company.
"Operating Bank" means the Person acting, at the time of
determination, as the operating bank under this Agreement. The
initial Operating Bank is the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company.
"Outstanding" means as of any particular time with respect to Bonds,
all Bonds which theretofore have been authenticated and delivered by
the Trustee under this Indenture, except (i) Bonds theretofore paid,
retired, redeemed, discharged or canceled, or Bonds for the purchase,
payment or redemption of which moneys or Governmental Obligations in
the necessary amount shall have been deposited with, or shall then be
held by, the Trustee with irrevocable direction to apply such moneys
or the proceeds of such Governmental Obligations to such purchase,
payment or redemption, provided that, in the case of redemption, the
notice required by Article IX shall have been given or provided for to
the satisfaction of the Trustee, (ii) Bonds deposited with or held in
pledge by the Trustee under this Indenture, including any Bonds so
held under any sinking, improvement, maintenance, replacement or
analogous fund, and (iii) Bonds authenticated and delivered upon
transfer of which or in exchange or substitution for and/or in lieu of
which other Bonds have been authenticated and delivered.
"Permissible Encumbrances" means as of any particular time any of the
following:
(i) the Lien of this Indenture and all liens and encumbrances junior
thereto;
(ii) liens for taxes or assessments by governmental bodies and liens
for worker's compensation awards and similar obligations not yet due
or the payment of which is being contested in good faith by the
Company;
(iii) any right of any municipal or other governmental body or agency,
by virtue of any franchise, grant, license, permit, contract or
statute, to occupy, purchase or designate a purchaser of, or to order
the sale of, any Mortgaged Property upon payment of reasonable
compensation therefor, or to modify or terminate any franchise, grant,
license, permit, contract or other right, or to regulate the property
and business of the Company;
(iv) liens and charges incidental to construction or current
operations of the Company which are not delinquent or, whether or not
delinquent, are being contested in good faith by the Company;
(v) easements, rights of way, restrictions, exceptions or
reservations, and zoning ordinances, regulations and restrictions,
with respect to any property or rights of way of the Company, which do
not materially impair the use of such property or rights of way for
the purposes for which such property or rights of way are held by the
Company;
(vi) irregularities in or defects of title to any property or rights
of way of the Company, which do not materially impair the use of such
property or rights of way for the purposes for which such property or
rights of way are held by the Company;
(vii) liens securing obligations neither (A) assumed by the Company
nor (B) on account of which it customarily pays interest, directly or
indirectly, existing upon real estate, or rights in or relating to
real estate acquired by the Company for rights of way for lines,
structures and appurtenances thereto;
(viii) party-wall agreements and agreements for and obligations
relating to the joint or common use of property owned solely by the
Company or owned by the Company in common or jointly with one or more
parties, provided such agreements or obligations do not materially
interfere with the use of the property by the Company;
(ix) liens securing indebtedness incurred by a Person, other than the
Company, which indebtedness has been neither assumed nor guaranteed by
the Company nor on which it customarily pays interest, existing on
property which the Company owns jointly or in common with such Person
or such Person and others, if there is an effective bar against
partition of such property, which would preclude the sale of such
property by such other Person or the holder of such lien without the
consent of the Company;
(x) any attachment, judgment and other similar lien arising in
connection with court proceedings (A) in an amount not in excess of
the greater of $10,000,000 or 10% of the principal amount of the
Outstanding Bonds at the time such attachment, judgment or lien
arises, or (B) the execution of which has been stayed or which has
been appealed and secured, if necessary, by an appeal bond;
(xi) the burdens of any law or governmental rule, regulation, order or
permit requiring the Company to maintain certain facilities or to
perform certain acts as a condition of its occupancy or use of, or
interference with, any public or private lands or highways or any
river, stream or other waters;
(xii)any duties or obligations of the Company to any federal, state or
local or other governmental authority with respect to any franchise,
grant, license, contract or permit which affects any Mortgaged
Property;
(xiii) liens in favor of a government or governmental entity securing
(A) payments pursuant to a statute (other than taxes and assessments)
or (B) indebtedness incurred to finance all or part of the purchase
price or Cost of construction of the property subject to such lien;
(xiv) any other liens or encumbrances of whatever nature or kind
which, in the Opinion of Counsel, do not, individually or in the
aggregate, materially impair the Lien of this Indenture or the
security afforded thereby for the benefit of the Holders;
(xv) any trustee's lien under this Indenture or the interest of the
Trustee in any "securities entitlement" (as defined in Section
8-102(1)(17) of the UCC) in any Securities Account established
pursuant to this Indenture;
(xvi) the lien of the First Mortgage;
(xvii) any other Prior Lien if (A) at the time of the acquisition by
the Company of the Mortgaged Property subject to such other Prior
Lien, the Cost or Fair Value, whichever is less, of such Mortgaged
Property is at least equal to the principal amount of the obligations
secured by such other Prior Lien, (B) all other liens on such
Mortgaged Property, except for Permissible Encumbrances, shall have
been discharged at the time of such acquisition and (C) such other
Prior Lien shall not attach to any other Mortgaged Property other than
pursuant to an after-acquired property clause of such other Prior
Lien; but, if the Company, as successor corporation, shall have
executed a Supplemental Indenture relating thereto in accordance with
Article XIII, the extension of such other Prior Lien to Mortgaged
Property subsequently acquired by the Company shall be permitted
notwithstanding the foregoing limitation; and
(xviii) liens on any Excepted Property.
For the purpose of this Indenture, no mortgage or other lien on any
property of the Company shall be considered as a "mortgage," "lien,"
"charge" or "encumbrance" if moneys or Governmental Obligations
sufficient to pay or redeem the indebtedness secured by such mortgage
or lien shall be held in trust for such purpose by the Trustee or by
the trustee, mortgagee or other holder of such mortgage or lien; the
sufficiency of such moneys or Governmental Obligations shall be
evidenced to the Trustee by an Accountant's Certificate.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"Pollution Control Facilities" means the facilities of the Company or
its subsidiaries financed by certain development bonds, including the
Millstone Pollution Control Bonds, the Seabrook Pollution Control
Bonds and the East Barnet Hydroelectric Revenue Bonds, issued by
development authorities in Connecticut, New Hampshire and Vermont,
respectively.
"Primary Purposes of the Company's Business" means either the
production or furnishing, or the production and furnishing, and the
purchase, sale, transmission and distribution, for or on behalf of
itself or others, of electricity, water, steam or fuel in any form and
for any purpose, or the furnishing of telephonic and other
communication services or sewage services.
"Prior Lien" means the First Mortgage and any other mortgage, lien,
charge, encumbrance, security interest on or in, or pledge of, any
Mortgaged Property existing both at and immediately prior to the time
of the acquisition by the Company of such Mortgaged Property, or
created as a purchase money mortgage on such Mortgaged Property at the
time of its acquisition by the Company, in each case ranking prior to
or on a parity with the Lien of this Indenture.
"Prior Lien Bonds" means First Mortgage Bonds and all other
indebtedness (including the evidences thereof), if any, secured by a
Prior Lien.
"Registered Bond" means any Bond registered as to both principal and
interest or as to principal only in the Bond Register maintained
pursuant to Section 2.06.
"Registered Holder" means the Person or Persons in whose name or
names the particular Registered Bond shall be registered on the books
of the Company kept for that purpose in accordance with the terms of
this Indenture.
"Responsible Officer" shall mean, when used with respect to the
Trustee, any officer within the corporate trust department of the
Trustee, including any vice president, assistant vice president,
assistant secretary, assistant treasurer, trust officer or any other
officer of the Trustee who customarily performs functions similar to
those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of this Indenture.
"Retired" means as of any particular time Bonds and Prior Lien Bonds
theretofore but after June 30, 1999, paid, retired, redeemed, canceled
or otherwise discharged, or for the purchase, payment, retirement or
redemption of which moneys or Governmental Obligations in the
necessary amount shall have been deposited with, or shall then be held
by, the Trustee with respect to Bonds, or the trustee or mortgagee
under the Prior Lien which secures such Prior Lien Bonds, with respect
to Prior Lien Bonds, in each case with irrevocable direction to apply
such moneys or the proceeds of such Governmental Obligations to such
purchase, payment, retirement or redemption; provided that, in the
case of redemption of Bonds, the notice required by Article IX shall
have been given or provided for to the satisfaction of the Trustee.
"Rule 144A Global Bond" has the meaning given in Section 2.04(d).
"Securities Account" means a securities account as defined in Section
8-501(a) of the UCC maintained in the name of the Trustee as
"entitlement holder" (as defined in Section 8-102(a)(7) of the UCC) on
the books and records of the Operating Bank or another Securities
Intermediary in the State of New York.
"Securities Intermediary" means any "securities intermediary" of the
Trustee as defined in 31 C.F.R. Section 357.2 or Section 8-102(a)(14)
of the UCC.
"Supplemental Indenture" means any supplemental indenture hereafter
duly authorized and approved by the Board and entered into between the
Company and the Trustee in accordance with this Indenture.
"TIA" has the meaning given to such term in Section 1.01.
"Trustee" means the Person named as Trustee in the first paragraph of
this Indenture and any successor thereto pursuant to Section 14.14.
"UCC" means the Uniform Commercial Code of the State of New York, as
in effect from time to time.
"Unbonded" as applied to Bonds, Prior Lien Bonds or Bondable Property
means that such Bonds, Prior Lien Bonds or Bondable Property are not
Bonded.
ARTICLE II
FORMS, EXECUTION, REGISTRATIONS AND EXCHANGE OF BONDS
Section 2.01. Series and Form of Bonds. At the option of the
Company, Bonds may be issued under this Indenture in one or more
series and in an unlimited amount, the Bonds of each series to mature
on such date or dates and bear interest, if any, at such rate or rates
(which may be based on a formula or otherwise change from time to time
prior to maturity of any such Bonds) as shall be set forth in a
Supplemental Indenture authorized by the Board prior to the
authentication of such Bonds. The form of each series of Bonds shall
be set forth in a Supplemental Indenture. The Bonds of any one or
more series may be expressed in one or more foreign languages, if also
expressed in the English language. The English text shall govern the
construction thereof and both or all texts shall constitute only a
single obligation. The English text of the definitive Bonds,
Registered Bonds and the Trustee's authentication certificate shall be
in the form set forth in a Supplemental Indenture; provided, however,
that the form of each series of Bonds shall specify the descriptive
title of such series of Bonds (which title shall contain the words
"Mortgage Bond"), the designation of such series, the rate or rates of
interest, if any, or the method by which such rate or rates are
determined, to be borne by the Bonds of such series, the coin or
currency, including composite currencies such as the European currency
unit, in which payable (which need not be coin or currency of the
United States of America), the date or dates of maturity, the dates
for the payment of interest, and a place or places (which need not be
in the United States of America) and the means (which may include
mail) for the payment of principal of, premium, if any, and interest
on such Bonds. Any series of Bonds to the extent issued in registered
form may provide for record dates for the payment of interest. Any
series of Bonds may also have such omissions or modifications or
contain such other provisions not prohibited by this Indenture as may
be set forth in a Supplemental Indenture.
The Bonds of each series shall be issuable in registered form without
coupons. Definitive Bonds shall be produced in such manner as shall
be determined by the officers executing such Bonds, as evidenced by
their execution thereof.
Section 2.02. Kinds and Denominations of Bonds. Any series of
Bonds may be executed, authenticated and delivered originally as
definitive Bonds and/or as Registered Bonds, of such denomination or
denominations as may be specified in a Supplemental Indenture or a
Board resolution.
Section 2.03. Dates of and Interest on Bonds. Unless otherwise
specifically provided in a Supplemental Indenture with respect to a
series of Bonds, each Registered Bond shall be dated as of the date of
its authentication; provided, however, that if any Registered Bond
shall be authenticated and delivered upon a transfer of, or in
exchange for or in lieu of, any Bond or Bonds upon which interest is
in Default, it shall be dated so that such Bond shall bear interest
from the last preceding date to which interest shall have been paid on
the Bond or Bonds in respect of which such Registered Bond shall have
been delivered, unless otherwise specifically provided with respect to
a series of Bonds. Unless other provisions (including, but not
limited to, provisions establishing record dates for the payment of
interest) are specifically provided in a Supplemental Indenture with
respect to a series of Bonds, (a) the Registered Bonds of such series
shall bear interest, if any, from the beginning of the interest period
for such series during which such Bonds were authenticated, and (b)
the first interest period for each series of Bonds shall begin on the
date of their issuance. The definitive Bonds of each series, if any,
shall be dated as of such date as may be set forth in a Supplemental
Indenture and designated in the form of Bond established for such
series.
Section 2.04. Printing, Execution and Authentication of Bonds.
(a) The Bonds shall, subject to the provisions of Section 2.07, be
printed on steel engraved borders or fully or partially engraved, or
legibly typed, as the proper officers of the Company may determine,
and shall be signed on behalf of the Company by an Authorized Officer
and need not be attested. The signature of the Authorized Officer
upon the Bonds may be in the form of a facsimile signature of a
present or any future Authorized Officer and may be imprinted or
otherwise reproduced on the Bonds and for that purpose the Company may
use the facsimile signature of any Person who shall have been an
Authorized Officer, notwithstanding the fact that at the time the
Bonds shall be authenticated and delivered or disposed of that Person
shall have ceased to be an Authorized Officer.
(b) Only such Bonds as shall bear thereon a certificate of
authentication substantially in the form established for such Bonds,
executed manually by an authorized signatory of the Trustee, or by any
Authenticating Agent with respect to such Bonds, shall be entitled to
the benefits of this Indenture or be valid or obligatory for any
purpose. Such certificate executed by the Trustee, or by any
Authenticating Agent appointed by the Trustee with respect to such
Bonds, upon any Bonds executed by the Company shall be conclusive
evidence that the Bond so authenticated has been duly authenticated
and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Bonds of any series executed
by the Company to the Trustee for authentication, together with a
written order of the Company for the authentication and delivery of
such Bonds, signed by an Authorized Officer, and the Trustee in
accordance with such written order shall authenticate and deliver such
Bonds.
In authenticating such Bonds and accepting the additional
responsibilities under this Indenture in relation to such Bonds, the
Trustee shall be entitled to receive, and (subject to Section 14.01)
shall be fully protected in relying upon (i) an Opinion of Counsel and
(ii) an Officers' Certificate, each stating that the form and terms
thereof have been established in conformity with the provisions of
this Indenture. Each Opinion of Counsel and Officers' Certificate
delivered pursuant to this Section 2.04 shall include all statements
prescribed by Section 21.01(a). If all the Bonds of any series are
not to be issued at one time, it shall not be necessary to deliver an
Opinion of Counsel and Officers' Certificate at the time of issuance
of each Bond, but such opinion and certificate shall be delivered at
or before the time of issuance of the first Bond of such series to be
issued.
(c) Any of the Bonds may be issued with appropriate insertions,
omissions, substitutions and variations, and may have imprinted or
otherwise reproduced thereon such legend or legends, not inconsistent
with the provisions of this Indenture, as may be required to comply
with any law or with any rules or regulations pursuant thereto, or
with the rules of any securities market in which the Bonds are
admitted to trading, or to conform to general usage.
(d) Bonds offered and sold in reliance on Rule 144A under the
Securities Act ("Rule 144A") shall be issued in the form of one or
more permanent Global Bonds (the "Rule 144A Global Bonds") for each
series of Bonds in definitive, fully registered form without interest
coupons substantially in the form of the Bond in the relevant
Supplemental Indenture with such legends as may be applicable thereto
in accordance with the form of such Bond deposited with the Trustee,
at the Corporate Trust Office, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Rule 144A
Global Bonds with respect to any series of Bonds may from time to time
be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary, and the Depositary or its
nominee, as the case may be, as hereinafter provided.
Bonds offered and sold to institutions that are "accredited
investors" within the meaning of Rule 501(a)(1), (2), (3) or (7) of
the Securities Act in reliance on an exemption from registration under
the Securities Act shall be issued in the form of certificated Bonds
(the "Accredited Investor Bonds") in definitive, fully registered form
without interest coupons substantially in the form of the Bond in the
relevant Supplemental Indenture with such legends as may be applicable
thereto, duly executed by the Company and authenticated and delivered
by the Trustee as hereinafter provided.
(e) (i) This Section 2.04(e)(i) shall apply only to Bonds in global
form ("Global Bonds") deposited with the Depositary.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.04(e)(i), authenticate and deliver Global Bonds
for each series of Bonds that (a) shall be registered in the name of
the Depositary for such Global Bonds or the nominee of such
Depositary, (b) shall be deposited on behalf of Agent Members (as
defined herein) with the Trustee as custodian for the Depositary and
(c) shall bear legends substantially to the following effect:
"UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
[INSERT NAME AND ADDRESS OF DEPOSITARY] TO THE COMPANY OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND IS
REGISTERED IN THE NAME OF [INSERT NAME OF NOMINEE OF DEPOSITARY], OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
[INSERT NAME OF DEPOSITARY] (AND ANY PAYMENT IS MADE TO [INSERT NAME
OF NOMINEE OF DEPOSITARY]) OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF [INSERT NAME OF DEPOSITARY]), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
[INSERT NAME OF NOMINEE OF DEPOSITARY], HAS AN INTEREST HEREIN".
"TRANSFERS OF THIS BOND SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF [INSERT NAME OF DEPOSITARY] OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS BOND SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE
WITH THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF".
Members of, or participants in, a Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global
Bond held on their behalf by the Depositary or under any Global Bond,
and the Depositary may be treated by the Company, the Trustee, and any
agent of the Company or the Trustee as the absolute owner of such
Global Bond for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or
any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Agent Members,
the operation of customary practices governing the exercise of the
rights of a holder of any security.
(ii) This Section 2.04(e)(ii) shall apply only to Rule 144A Global
Bonds, any certificated Bonds issued in accordance with Section 2.05
hereof in exchange therefore (and any certificated securities issued
to qualified institutional buyers in exchange therefore) and to
Accredited Investor Bonds.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.04(e)(ii), authenticate and deliver Rule 144A
Global Bonds, certificated Bonds issued in accordance with Section
2.05 hereof in exchange therefore (and any certificated securities
issued to qualified institutional buyers in exchange therefore) and
Accredited Investor Bonds for each series of Bonds that shall bear
legends substantially to the following effect:
"THIS BOND (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT)(A "QIB"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS BOND
EXCEPT (A) TO THE COMPANY (INCLUDING ANY OF THE COMPANY'S
SUBSIDIARIES), (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND THE DELIVERY TO THE TRUSTEE OF SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT) OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS BOND OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
Section 2.05. Global Bonds. (a) Except for a transfer pursuant
to the provisions of Section 2.06(b)(iii) hereof, portions of a Global
Bond of any series deposited with the Depositary pursuant to Section
2.04 shall be transferred in certificated form to the beneficial
owners thereof only if such transfer complies with Section 2.06 and
(i) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Bond or if at any time such
Depositary ceases to be a "clearing agency" registered under the
Exchange Act and a successor depositary is not appointed by the
Company within 90 days of such notice, (ii) a Default or Event of
Default has occurred and is continuing with respect to the Bonds of
such series and payment of principal thereof and interest thereon has
been accelerated and the owners of beneficial interests in the Global
Bonds with fractional undivided interests aggregating not less than a
majority interest advise the Trustee, the Company and the Depositary
through Agent Members in writing that the continuation of a book-entry
system through the Depositary or its successors is no longer in their
best interest or (iii) the Company, at its option, elects to cause the
issuance of certificated bonds in lieu of such Global Bond and so
notifies the Trustee in writing.
(b) Portions of any Global Bond of any series that are transferable to
the beneficial owners thereof pursuant to this Section 2.05 shall be
surrendered by the Depositary to the Trustee at its New York office
for registration of transfer, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon
such registration of transfer of each portion of such Global Bond, an
equal aggregate principal amount of Bonds of such series of authorized
denominations. Any portion of a Global Bond whose registration is
transferred pursuant to this Section 2.05 shall be executed,
authenticated and delivered in the denominations as specified in the
relevant Supplemental Indenture pursuant to Section 2.02 and
registered in such names as the Depositary shall direct. Any Bond of
any series delivered in exchange for a portion of a Rule 144A Global
Bond of such series shall bear the Legend regarding transfer
restrictions applicable to Rule 144A Global Bonds set forth in the
form of Bond in the relevant Supplemental Indenture.
(c) Subject to the provisions of Section 2.04(e) above, the registered
holder of any Global Bond may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Bonds of the applicable
series.
(d) In the event of the occurrence of any of the events specified in
paragraph (a) of this Section 2.05, the Company shall promptly make
available to the Trustee a reasonable supply of certificated Bonds of
each applicable series in definitive fully registered form without
interest coupons.
(e) The Global Bonds of each series issued and authenticated pursuant
to the first paragraph of Section 2.04(b) (both before and after the
expiration of the restricted period) and the Rule 144A Global Bonds of
each series shall each be assigned separate securities identification
numbers.
Section 2.06. Registration, Registration of Transfer and
Exchange. (a) The Company shall cause to be kept, at each office or
agency to be designated by the Company for the purpose, a register or
registers (each, the "Bond Register") in which, subject to such
reasonable regulations as it may prescribe, it will register or cause
to be registered, and will register or cause to be registered the
transfer of, Bonds as in this Article provided. The Trustee is hereby
appointed "Bond Registrar" for the purpose of registering Bonds and
transfers of Bonds as herein provided. Any successor Bond Registrar
shall be appointed as authorized by a Board resolution. If at any
time the Trustee shall not be serving as Bond Registrar, at all
reasonable times such Bonds Register shall be open for inspection by
the Trustee.
Upon due presentation for registration of transfer of any Bond at
each such office or agency, the Company shall execute and the Trustee
shall authenticate and deliver in the name of the transferee or
transferees a new Bond or Bonds of the same series in authorized
denominations for a like aggregate principal amount.
Any Bond or Bonds may be exchanged for a Bond or Bonds of the
same series in other authorized denominations, in an equal aggregate
principal amount. Bonds to be exchanged shall be surrendered at the
office or agency of the Company designated for such purpose in the
Borough of Manhattan, the City and State of New York, and the Company
shall execute and the Trustee shall authenticate and deliver in
exchange therefor the Bond or Bonds of the same series which the
Holder making the exchange shall be entitled to receive, bearing
numbers not contemporaneously outstanding.
All Bonds presented for registration of transfer, exchange,
redemption or payment shall (if so required by the Company or the
Trustee) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the
Company or the Trustee duly executed by, the Holder or its attorney
duly authorized in writing.
The Company or Trustee shall not be required to exchange or
register a transfer of any Bonds of any series for a period of 15 days
next preceding the first mailing of notice of redemption of Bonds of
such series to be redeemed or any Bond of any series selected, called
or being called for redemption except, in the case of any Bond of such
series where public notice has been given that such Bond is to be
redeemed in part, the portion thereof not so to be redeemed.
All Bonds of any series issued upon any registration of transfer
or exchange of Bonds shall be valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Bonds of such series surrendered upon such
registration of transfer or exchange.
(b) Notwithstanding any provision to the contrary herein, so long as a
Global Bond of any series remains outstanding and is held by or on
behalf of the Depositary, transfers of a Global Bond of such series,
in whole or in part, shall only be made (x) in the case of transfers
of portions of a Global Bond of such series to beneficial owners
thereof in certificated form, in accordance with Section 2.05, and (y)
in all other cases, in accordance with this Section 2.06(b) (and
subject, in each case, to the provisions of any Legend (as defined
herein) imprinted on such Global Bond). The registered Holder of a
Bond shall be treated as the owner of it for all purposes.
(i) Transfers of Global Bonds as such. Subject to clauses (ii)
through (iv) of this Section 2.06(b), transfers of a Global Bond shall
be limited to transfers of such Global Bond in whole, and not in part,
to nominees of the Depositary or to a successor of the Depositary or
such successor's nominee.
(ii) Accredited Investor Bond to Rule 144A Global Bond. If a holder
of an Accredited Investor Bond of any series wishes at any time to
exchange its interest in such Bond for an interest in the Rule 144A
Global Bond of such series or transfer its interest in such Bond to a
Person who wishes to take delivery thereof in the form of an interest
in the Rule 144A Global Bond of such series such holder may, subject
to the rules and procedures of the Depositary, exchange or transfer or
cause the exchange or transfer of such interest for an equivalent
beneficial interest in the Rule 144A Global Bond of such series, in
accordance with, and subject to, this clause (ii). Upon receipt by
the Trustee, at the Corporate Trust Office of (A) instructions from
the Depositary directing the Trustee to credit or cause to be credited
a beneficial interest in the Rule 144A Global Bond of a series in an
amount equal to the aggregate principal amount of the Accredited
Investor Bond to be exchanged or transferred, such instructions to
contain information regarding the Agent Member's account with the
Depositary to be credited with such increase and (B) a certificate in
the form attached to the relevant Supplemental Indenture given by the
holder of such interest and stating that the Person exchanging or
transferring such interest in the Accredited Investor Bond of such
series reasonably believes that the Person acquiring such interest in
the Rule 144A Global Bond is a "qualified institutional buyer" (as
defined in Rule 144A) and is obtaining such beneficial interest in a
transaction meeting the requirements of Rule 144A, the Trustee shall
instruct the Depositary to cancel such Bond surrendered for transfer
or exchange in accordance with Section 2.11 hereof, and the Trustee
shall instruct the Depositary, concurrently with such cancellation, to
increase the principal amount of the Rule 144A Global Bond of such
series by the aggregate principal amount of the Accredited Investor
Bond of such series to be so exchanged or transferred, and to credit
or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Rule 144A Global Bond of
such series equal to the aggregate principal amount of the cancelled
Accredited Investor Bond of such series.
(iii) Rule 144A Global Bond to Accredited Investor Bond. If a holder
of a beneficial interest in the Rule 144A Global Bond of any series
wishes at any time to exchange its interest in such Global Bond for an
Accredited Investor Bond or transfer its interest in such Bond to a
Person who wishes to take delivery thereof in the form of an
Accredited Investor Bond of such series, such holder may, subject to
the rules and procedures of the Depositary, exchange or transfer or
cause the exchange or transfer of such interest for an equivalent
interest in an Accredited Investor Bond of such series, in accordance
with, and subject to, this clause (iii). Upon receipt by the Trustee,
at the Corporate Trust Office, of a certificate in the form attached
to the relevant Supplemental Indenture given by the holder of such
beneficial interest and stating that the Person exchanging or
transferring such interest reasonably believes that the Person
acquiring such interest in an Accredited Investor Bond of such series
is an institution that is an "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and is obtaining
such interest in a transaction exempt from the Securities Act, the
Trustee shall instruct the Depositary to reduce the Rule 144A Global
Bond of such series by the aggregate principal amount of the
beneficial interest in such Global Bonds to be exchanged or
transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver in the name of the Person specified in such
instructions an Accredited Investor Bond of such series equal to the
reduction in the principal amount of the Rule 144A Global Bond of such
series.
(iv) Other Exchanges. In the event that a Global Bond is exchanged
for Bonds in definitive registered form without interest coupons
pursuant to Section 2.05 hereof, such Bonds may be exchanged or
transferred for one another only in accordance with such procedures as
are substantially consistent with the provisions of clauses (ii) and
(iii) above (including, without limitation, the certification
requirements intended to insure that such exchanges or transfers
comply with Rule 144A, Rule 144 and generally with the Securities Act,
as the case may be) and as may be from time to time adopted by the
Company and the Trustee.
Successive registrations and registrations of transfers and
exchanges as aforesaid may be made from time to time as desired, and
each such registration shall be noted on the Bond Register. No
service charge shall be made for any registration of transfer or
exchange of the Bonds, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith and any other amounts required to be paid by the
provisions of the Bonds.
If Bonds are issued upon the registration of transfer, exchange
or replacement of Bonds not bearing the legends required by the form
of Bond in the relevant Supplemental Indenture hereto (collectively,
the "Legend"), the Bonds so issued shall not bear the Legend. If
Bonds are issued upon the registration or transfer, exchange or
replacement of Bonds bearing the Legend, or if a request is made to
remove the Legend on a Bond, the Bonds so issued shall bear the
Legend, or the Legend shall not be removed, as the case may be, unless
there is delivered to the Company and the Trustee such satisfactory
evidence, which may include an Opinion of Counsel of recognized
standing licensed to practice law in the State of New York and
experienced in matters involving the Securities Act, as may be
reasonably required by the Company that neither the Legend nor the
restrictions on transfer set forth therein are required to ensure that
transfers thereof comply with the provisions of Rule 144A or Rule 144
or that such Bonds are not "restricted securities" within the meaning
of Rule 144. Upon provision of such satisfactory evidence, the
Trustee, at the direction of the Company, shall authenticate and
deliver a Bond that does not bear the Legend. If a Legend is removed
from the face of a Bond and the Bond is subsequently held by an
affiliate of the Company, the Legend shall be reinstated.
Section 2.07. Temporary Bonds. There may be authenticated and
delivered and issued from time to time in lieu of (or in exchange for)
any definitive Bond or Bonds issued or issuable under this Indenture,
one or more temporary Bonds substantially of the tenor of such
definitive Bonds without coupons, and with or without the privilege of
registration as to principal only, or as to both principal and
interest, and such temporary Bond or Bonds may be in such denomination
or denominations as may be specified in a Supplemental Indenture.
Until a definitive Bond or Bonds are delivered in exchange therefor,
the holder of each such temporary Bond or Bonds shall be entitled to
the Lien and benefit of this Indenture. Upon the exchange by the
Company of definitive Registered Bonds for temporary Bonds (which
exchange the Company shall make on request of, and without charge to,
the holder of temporary Bonds, when definitive Bonds are ready for
delivery) such temporary Bond or Bonds shall be canceled by the
Trustee. Unregistered temporary Bonds of any series shall bear
interest from the beginning of the interest period for Bonds of that
series during which such unregistered temporary Bonds were
authenticated. The holder of one or more temporary Bonds may
surrender and exchange them for cancellation in bearer form, or, if
registered, accompanied by a written instrument or instruments of
transfer, if required by the Company, duly executed by the registered
holder or by the duly authorized attorney of such holder, at the
office or agency of the Company designated by it, and shall be
entitled to receive a temporary Bond or Bonds of the same series of
like aggregate principal amount of such other denominations as may be
specified in a Supplemental Indenture.
Section 2.08. Replacement of Stolen, Lost, Destroyed or
Mutilated Bonds. Upon receipt by the Company and the Trustee of
evidence satisfactory to them of the theft, loss, destruction or
mutilation of any Outstanding Bond, and of indemnity satisfactory to
them, and upon payment, if the Company or the Trustee shall require
it, of a reasonable charge and upon reimbursement to the Company and
the Trustee of all reasonable expense incident thereto, and upon
surrender and cancellation of such Bond, if mutilated, the Company may
execute, and the Trustee shall thereupon authenticate and deliver, a
new Bond of like tenor and of the same series in lieu of such stolen,
lost, destroyed or mutilated Bond, or if any such Bond shall have
matured or be about to mature, instead of issuing a substituted Bond
the Company may pay the same. Any indemnity bond shall name as
obligees the Company, the Trustee, and if requested by the Company,
any paying agent.
Section 2.09. Trustee's Certificate on Bonds. No Bond shall be
secured by this Indenture unless there shall be endorsed thereon the
certificate of the Trustee that it is one of the Bonds (or temporary
Bonds) of the series therein designated, herein described or provided
for; and such certificate on any such Bond shall be conclusive
evidence that such Bond has been duly authenticated and delivered by
the Trustee and when delivered by the Company will be secured by this
Indenture.
Section 2.10. CUSIP Numbers. The Company in issuing the Bonds
may, and in the case of Global Bonds pursuant to Section 2.05(e)
shall, use "CUSIP" numbers (if then generally in use), and, if so
used, the Trustee shall use "CUSIP" numbers in notices of redemption
as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers
either as printed on the Bonds or as contained in any notice of a
redemption and that reliance may be placed only on the other
identification numbers printed on the Bonds, and any such redemption
shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the
CUSIP numbers.
Section 2.11. Cancellations. All Bonds surrendered for the
purpose of payment, redemption, exchange or registration of transfer
shall, if surrendered to the Company or any paying agent, be delivered
to the Trustee for cancellation or, if surrendered to the Trustee,
shall be cancelled by it, and no Bonds shall be issued in lieu thereof
except as expressly required or permitted by any of the provisions of
this Indenture. On request of the Company, the Trustee shall deliver
to the Company cancelled Bonds held by the Trustee. All cancelled
Bonds held by the Trustee shall be disposed of in accordance with the
Trustee's policy of disposal of cancelled Bonds; provided that the
Trustee shall not be required to destroy cancelled Bonds. If the
Company shall otherwise acquire any of the Bonds, however, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Bonds unless and until the same are
delivered to the Trustee for cancellation.
ARTICLE III
ISSUANCE OF BONDS BASED ON BONDABLE PROPERTY
Section 3.01. Bonds Issuable on Basis of Bondable Property. The
Trustee shall, from time to time, upon the written order or orders of
the Company signed by its Chairman of the Board, Chief Executive
Officer, President or a Vice-President and its Secretary, an Assistant
Secretary, its Chief Financial Officer, its Treasurer or an Assistant
Treasurer, authenticate and deliver Bonds of one or more series, or
any portion of a series, upon the basis of Bondable Property, but only
in accordance with and subject to the conditions, provisions and
limitations set forth in this Article III.
Section 3.02. No Bonds Issuable on Basis of Bonded Bondable
Property. No Bonds shall be authenticated and delivered at any time
under this Article III upon the basis of Bonded Bondable Property.
Section 3.03. Bonds Issuable to Specified Percentage of Bondable
Property. Bonds of any one or more series may be authenticated and
delivered under this Article III in a principal amount not exceeding
the aggregate amount of Unbonded Bondable Property at the time of such
authentication and delivery.
Section 3.04. Requirements for Issuance. No Bonds shall be
authenticated or delivered under this Article III by the Trustee upon
the basis of Bondable Property, until the Trustee shall have received
the following:
(a) A Board resolution authorizing proper officers of the Company to
(i) request the Trustee to authenticate and deliver Bonds, (ii)
approve the Supplemental Indenture pursuant to which such Bonds are to
be issued, (iii) specify the principal amount of Bonds to be
authenticated and delivered, the series thereof and any other matters
with respect thereto required by this Indenture, and (iv) set forth
instructions for the delivery of such Bonds;
(b) An Officers' Certificate stating that to the knowledge of the
signers of such Officers' Certificate none of the events which
constitute a Default or an Event of Default has occurred and is
continuing;
(c) An Engineer's Certificate, dated the date of such application,
stating:
(i) the amount, as of the date not more than 90 days prior to the date
of such application, of Bondable Property made a basis for the
application;
(ii) that all such property is Bondable Property as defined in Section
1.03;
(iii) that all such Bondable Property is desirable for use or is used
in the proper conduct of the business of the Company;
(iv) that such amount of Bondable Property is not then Bonded;
(v) a brief description, with respect to any Bondable Property (which
has not been included in Bondable Property that has previously been
made the basis for an application under this Section 3.04) acquired,
made or constructed in whole or in part through the delivery of
securities, of the securities so delivered and stating the date of
such delivery;
(vi) that the Cost of such Bondable Property is a specified amount
and, except as to Bondable Property for which a statement is to be
made in an Independent Engineer's Certificate as provided in Section
3.04(d), that the Fair Value of such Bondable Property as of a date
not more than 90 days prior to the date of such application is a
specified amount;
(vii) the amount required to be deducted in respect of Bondable
Property under clause (iii)(A) of the definition of "Bondable
Property" in Section 1.03 and the amount elected to be added under
clause (iii)(B) of the definition of "Bondable Property" in Section
1.03;
(viii) what part, if any, of such Bondable Property, which has not
been included in Bondable Property that has previously been made a
basis for an application under this Section 3.04, includes property
which within six months prior to the date of acquisition thereof by
the Company has been used or operated by others than the Company in a
business similar to that in which it has been or is to be used or
operated by the Company and showing whether or not the Fair Value
thereof as of a date not more than 90 days prior to the date of such
application is less than $25,000 and whether or not the Fair Value is
less than 1% of the aggregate principal amount of the Bonds
Outstanding at the date of such application; and
(ix) that any property or rights of way included in such Bondable
Property are not subject to any easements, rights of way,
restrictions, exceptions or reservations or zoning ordinances,
restrictions or regulations or irregularities in or defects of title
that materially impair the use of such property or rights of way for
the purposes for which the same are held by the Company;
(d) in case any Bondable Property, which has not been included in
Bondable Property that has previously been made the basis for an
application under this Section 3.04, is shown by the Engineer's
Certificate provided for in Section 3.04(c) to include property which
within six months prior to the date of acquisition thereof by the
Company has been used or operated by others than the Company in a
business similar to that in which it has been or is to be used or
operated by the Company and such certificate does not show the Fair
Value thereof, as of a date not more than 90 days prior to the date of
such application, to be less than $25,000 or less than 1% of the
aggregate principal amount of the Bonds Outstanding at the date of
such application, an Independent Engineer's Certificate stating as to
such Bondable Property and (at the option of the Company) as to any
other Bondable Property included in the Engineer's Certificate
provided for in Section 3.04(c), that the then aggregate Fair Value
thereof, as of a date not more than 90 days prior to the date of such
application, in the opinion of the signer of such Engineer's
Certificate is a specified amount, and the Fair Value in the opinion
of such signer of any Bondable Property so used or operated which has
been subjected to the Lien of this Indenture since the commencement of
the calendar year which includes the date of such application, as a
basis for the authentication and delivery of Bonds, and as to which an
Independent Engineer's Certificate has not previously been furnished
to the Trustee;
(e) in case any Bondable Property is shown by the Engineer's
Certificate provided for in Section 3.04(c) to have been acquired,
made or constructed in whole or in part through the delivery of
securities, an Appraiser's Certificate stating the opinion of the
signer of such Appraiser's Certificate of the fair market value in
cash of such securities at the time of delivery thereof in payment for
or for the acquisition of such Bondable Property;
(f) an Opinion of Counsel stating the opinion of such Counsel:
(i) to the effect that (except as to paving, grading and other
improvements to, under or upon public highways, bridges, parks or
other public property of analogous character) this Indenture is, or
upon the delivery of, and/or the filing and/or recording in the proper
places and manner of, the instruments of conveyance, assignment or
transfer, if any, specified in said Opinion of Counsel, will be a
valid lien on the Bondable Property made the basis of such
application, subject to no lien thereon prior or equal to the Lien of
this Indenture, except Permissible Encumbrances;
(ii) to the effect that the Company has corporate authority to operate
the Bondable Property in respect to which such application is made;
and
(iii) as to the general nature and extent of any Prior Liens existing
upon any of such Bondable Property, and the principal amount of the
then outstanding Prior Lien Bonds secured thereby, if any;
(g) an Opinion or Opinions of Counsel stating the opinion of such
Counsel to the effect that:
(i) such issue of the Bonds has been duly authorized by the Company;
and
(ii) such issue of the Bonds has been duly authorized by any and all
governmental authorities the consent of which is requisite to the
legal issue of such Bonds, specifying any official orders or
certificates, or other documents, by which such consent is or may be
evidenced, or that no consent of any governmental authority is
requisite;
(h) copies of the instruments of conveyance, assignment and transfer,
if any, specified in the Opinion of Counsel provided for in Section
3.04(f);
(i) copies of the orders or certificates, or other documents, if any,
specified in the Opinion of Counsel provided for in Section 3.04(g);
and
(j) if, in order to render the Opinion of Counsel provided for in
Section 3.04(f) or Section 3.04(g), counsel shall deem it necessary
that additional facts or matters be stated in the Engineer's
Certificate provided for in Section 3.04(c), then such Engineer's
Certificate may state all such additional facts or matters as such
counsel may request. In addition, in giving the Opinion of Counsel
provided for in Section 3.04(f)(i), counsel may rely upon (A) opinions
of special counsel for the Company and its subsidiaries, (B) opinions
of in-house counsel for the Company's divisions and its subsidiaries,
(C) title insurance policies, title insurance commitments and reports,
lien search certificates and other similar evidences of the existence
of liens on property and (D) certificates of officers and other
representatives of the Company and its subsidiaries.
Section 3.05. Determination of Cost or Fair Value. The Cost or Fair
Value of any Bondable Property and the fair market value in cash of
any securities delivered in payment therefor or for the acquisition
thereof and the amounts of any deductions and any additions made in
respect of Bondable Property pursuant to clause (ii) or clause (iii)
of the definition of "Bondable Property" in Section 1.03 shall be
determined for the purposes of this Article III by the certificates
provided for in Section 3.04; in the case of Bondable Property subject
to a Prior Lien, the Fair Value of such Bondable Property shall be
determined as if such Bondable Property were free of such Prior Lien.
ARTICLE IV
ISSUANCE OF BONDS BASED ON RETIRED BONDS
PREVIOUSLY OUTSTANDING
Section 4.01. Requirements for Issuance. Subject to Section
4.03, the Trustee shall, from time to time, upon the written order or
orders of the Company signed by its Chairman of the Board, Chief
Executive Officer, President or a Vice-President and its Secretary, an
Assistant Secretary, its Chief Financial Officer, its Treasurer or an
Assistant Treasurer, authenticate and deliver Bonds of one or more
series, or any portion of a series, in a principal amount equal to and
on the basis of the principal amount of any Retired Bonds, but only
after the Trustee shall have received the following:
(a) the Board resolution provided for in Section 3.04(a);
(b) the Officers' Certificate provided for in Section 3.04(b);
(c) an Officers' Certificate stating that Bonds theretofore
authenticated and delivered under this Indenture of a specified
principal amount (not less than the principal amount of Bonds for
which such request for authentication and delivery is made under this
Section 4.01), have been Retired or surrendered to the Trustee for
cancellation (otherwise than upon exchanges or transfers of Bonds) or
concurrently with the authentication and delivery of the Bonds
requested will be Retired or surrendered to the Trustee for
cancellation (otherwise then upon exchanges or transfers of Bonds),
and further stating that no part of such principal amount of Bonds has
theretofore been Bonded;
(d) the Opinion or Opinions of Counsel provided for in Section
3.04(g); and
(e) copies of the orders or certificates, or other documents, if any,
specified in the Opinion of Counsel provided for in Section 4.01(d).
Section 4.02. No Bonds Issuable on Basis of Bonded Bonds. No
Bonds shall be authenticated and delivered at any time under this
Article IV upon the basis of Bonded Bonds.
ARTICLE V
ISSUANCE OF BONDS BASED ON DEPOSIT OF CASH WITH TRUSTEE
Section 5.01. Requirements for Issuance. The Trustee shall,
from time to time, upon the written order or orders of the Company
signed by its Chairman of the Board, Chief Executive Officer,
President or a Vice-President and its Secretary, an Assistant
Secretary, its Chief Financial Officer, its Treasurer or an Assistant
Treasurer, authenticate and deliver Bonds of one or more series, or
any portion of a series, upon deposit with the Trustee by the Company
of cash equal to the aggregate principal amount of the Bonds so
requested to be authenticated and delivered, but only after the
Trustee shall have received:
(a) the Board resolution provided for in Section 3.04(a);
(b) the Officers' Certificate provided for in Section 3.04(b);
(c) the Opinion or Opinions of Counsel provided for in Section
3.04(g); and
(d) copies of the orders or certificates, or other documents, if any,
specified in the Opinion of Counsel provided for in Section 5.01(c).
Section 5.02. Application of Cash Deposited Under Section 5.01.
All cash deposited with the Trustee under Section 5.01 shall be held
and applied in accordance with Article XI.
ARTICLE VI
ISSUANCE OF BONDS BASED ON PRIOR LIEN BONDS
Section 6.01. Requirements for Issuance. Subject to Section
6.02, the Trustee shall, from time to time, upon the written order or
orders of the Company signed by its Chairman of the Board, Chief
Executive Officer, President or a Vice-President and its Secretary, an
Assistant Secretary, its Chief Financial Officer, its Treasurer or an
Assistant Treasurer, authenticate and deliver Bonds in one or more
series, or any portion of a series, in a principal amount equal to and
on the basis of the principal amount of any Prior Lien Bonds purchased
or acquired by the Company and deposited with the Trustee or Retired
after June 30, 1999, but only after the Trustee shall have received
the following:
(a) the Board resolution provided for in Section 3.04(a);
(b) the Officers' Certificate provided for in Section 3.04(b);
(c) the Opinion or Opinions of Counsel provided for in Section
3.04(g);
(d) copies of the orders or certificates, or other documents, if any,
specified in the Opinion of Counsel provided for in Section 6.01(c);
and
(e) an Officers' Certificate stating that Prior Lien Bonds of a
specified principal amount (not less than the principal amount of
Bonds for which such request for authentication and delivery is made
under this Section 6.01) have been Retired or concurrently with the
authentication and delivery of the Bonds requested will be Retired or
purchased or acquired by the Company and deposited with the Trustee,
and further stating that no part of such principal amount of Prior
Lien Bonds has theretofore been Bonded, accompanied by any such Prior
Lien Bonds purchased or acquired by the Company, or a certificate of
the trustee or mortgagee under such Prior Lien stating that such Prior
Lien Bonds have not been used as a basis for the issuance of Prior
Lien Bonds pursuant to such Prior Lien and that such Prior Lien Bonds
have been purchased, paid, retired, redeemed, canceled or otherwise
discharged, or that provision for such purchase, payment, retirement,
redemption, cancellation or other discharge satisfactory to such
trustee or mortgagee has been made, including the deposit of any
necessary moneys or Governmental Obligations with such trustee or
mortgagee.
Section 6.02. No Bonds Issuable on Basis of Bonded Prior Lien
Bonds. No Bonds shall be authenticated and delivered at any time
under this Article VI upon the basis of Bonded Prior Lien Bonds.
ARTICLE VII
COVENANTS OF THE COMPANY
Section 7.01. Payment of Principal and Interest. The Company
will duly and punctually pay the principal of, premium, if any, and
interest on all Outstanding Bonds at the times and places and in the
manner provided for in the Bonds and this Indenture.
Section 7.02. Possession, Maintenance of Lien and Right to
Mortgage. On the date of the execution of this Indenture the Company
is lawfully seized and possessed of all the Mortgaged Property in
existence on such date, free and clear of all liens other than
Permissible Encumbrances; the Company will maintain and preserve the
Lien of this Indenture so long as any Bond is Outstanding subject to
its right to create Prior Liens which are Permissible Encumbrances;
and the Company has good right and lawful authority to mortgage the
Mortgaged Property, as provided in and by this Indenture.
Section 7.03. Corporate Existence. The Company will, subject to
Article XIII, at all times maintain its corporate existence and right
to carry on business, and duly procure all renewals and extensions
thereof, if and when any shall be necessary.
Section 7.04. Appointment of Trustee. Whenever necessary to
avoid or fill a vacancy in the office of Trustee, the Company will in
the manner provided in Section 14.14 appoint a Trustee so that there
shall be at all times a Trustee which shall at all times be a bank or
trust company having its principal office and place of business in the
United States of America and a corporation or association organized
and doing business under the laws of the United States or of any State
or the District of Columbia, with a combined capital and surplus of at
least Twenty Million Dollars ($20,000,000), and authorized under such
laws to exercise corporate trust powers and be subject to supervision
or examination by Federal, State or District of Columbia authority.
Section 7.05. Recordation of Indenture. The Company will cause
this Indenture and all Supplemental Indentures or notices in respect
thereof to be promptly recorded and filed and re-recorded and refiled
in such manner and in such places as may be required by law in order
fully to preserve and protect the security of the Holders and all
rights of the Trustee, and will deliver to the Trustee:
(a) promptly after the execution and delivery of this Indenture and of
each Supplemental Indenture, an Opinion of Counsel either stating that
in the opinion of such counsel this Indenture or such Supplemental
Indenture or notice in respect thereof has been properly recorded and
filed, so as to make effective the Lien of this Indenture intended to
be granted hereby, and reciting the details of such action, or stating
that in the opinion of such counsel no such action is necessary to
make the Lien of this Indenture effective. It shall be sufficient to
comply with this Section 7.05(a) if (i) such Opinion of Counsel states
that this Indenture or such Supplemental Indenture or notice has been
mailed or hand-delivered, or received for recording or filing in each
jurisdiction in which it is required to be recorded or filed and that,
in the opinion of such counsel (if such is the case), such receipt for
recording or filing makes or will make effective the Lien of this
Indenture intended to be created thereby, and (ii) such Opinion of
Counsel is delivered to the Trustee within such time, following the
date of the execution and delivery of this Indenture or such
Supplemental Indenture, as shall be practicable having due regard to
the number and distance of the jurisdictions in which this Indenture
or such Supplemental Indenture is required to be recorded or filed;
(b) at least annually after the execution and delivery of this
Indenture, an Opinion of Counsel either stating that in the opinion of
such counsel such action has been taken, since the date of the most
recent Opinion of Counsel furnished pursuant to this Section 7.05(b)
or the first Opinion of Counsel furnished pursuant to Section 7.05(a),
with respect to the recording, filing, re-recording and refiling of
this Indenture and of each Supplemental Indenture and each notice with
respect thereto, as is necessary to maintain the Lien of this
Indenture and reciting the details of such action, or stating that in
the opinion of such counsel no such action is necessary to maintain
such lien.
Section 7.06. Paying Agents. (a) If the Company shall appoint
one or more paying agents other than the Trustee, the Company will
cause each such paying agent to execute and deliver to the Trustee an
instrument in which such paying agent shall agree with the Trustee,
subject to this Section 7.06, (i) that such paying agent shall hold in
trust for the benefit of the Holders or the Trustee all sums held by
such paying agent for the payment of the principal of, premium, if
any, and interest on the Bonds; and (ii) that such paying agent shall
give to the Trustee notice of any default by the Company in the making
of any deposit with it for the payment of the principal of, premium,
if any, or interest on the Bonds, and of any default by the Company in
the making of any such payment; such paying agent shall not be
obligated to segregate such sums from other funds of such paying agent
except to the extent required by law, or unless otherwise directed by
the Company.
(b) If the Company acts as its own paying agent, the Company will, on
or before each installment of principal of, premium, if any, or
interest on the Bonds is required to be paid, set aside and segregate
and hold in trust for the benefit of the Holders or the Trustee a sum
sufficient to pay such principal, premium or interest on the Bonds and
will notify the Trustee of such action, or of any failure to take such
action.
(c) Anything in this Section 7.06 to the contrary notwithstanding, the
Company may at any time, for the purpose of obtaining a release or
satisfaction of this Indenture or for any other reason, pay or cause
to be paid to the Trustee all sums held in trust by the Company or any
paying agent as required by this Section 7.06, such sums to be held by
the Trustee upon the trusts contained in this Indenture.
(d) Anything in this Section 7.06 to the contrary notwithstanding, the
holding of sums in trust as provided in this Section 7.06 is subject
to Section 18.02.
Section 7.07. Payment of Taxes. The Company will pay all taxes
and assessments and other governmental charges lawfully levied or
assessed upon the Mortgaged Property, any income from the Mortgaged
Property, or the interest of the Trustee in the Mortgaged Property,
before the same shall result in the attachment of a lien on the
Mortgaged Property and will use its commercially reasonable best
efforts duly to observe and conform to all valid requirements of any
governmental authority relative to any Mortgaged Property, and all
covenants, terms and conditions upon or under which any Mortgaged
Property is held; provided, however, that nothing in this Section 7.07
shall require the Company to use its commercially reasonable best
efforts to observe or conform to any requirement of any governmental
authority or to cause to be paid or discharged, or to make provisions
for, any such lien or charge, or to pay any such tax, assessment or
governmental charge so long as the validity thereof shall be contested
in good faith and by appropriate legal proceedings.
Section 7.08. Instruments of Further Assurance. The Company
will execute and deliver such Supplemental Indenture or Indentures and
such further instruments and do such further acts as may be necessary
or proper to carry out more effectually the purposes of this Indenture
and to make subject to the Lien of this Indenture any property (other
than Excepted Property) hereafter acquired and intended or required to
be so subject.
Section 7.09. Books of Record and Account. The Company will
keep proper books of record and account, in which full and correct
entries shall be made of all dealings or transactions of or in
relation to the Bonds and the business, properties and affairs of the
Company in accordance with Generally Accepted Accounting Principles.
The Company will furnish to the Trustee any and all information as the
Trustee may reasonably request with respect to the performance by the
Company of its covenants in this Indenture.
Section 7.10. Maintenance of Mortgaged Property. The Company
will cause the Mortgaged Property to be maintained and kept in good
condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried
on by the Company with the Mortgaged Property may be properly
conducted at all times; provided, however, that nothing in this
Section 7.10 shall prevent the Company from discontinuing the
operation and maintenance of any Mortgaged Property if, in the
judgment of the Company, such discontinuance is desirable in the
conduct of its business, and, in the reasonable judgment of the
Company, is not in any material respect adverse to the Holders.
Section 7.11. Insurance. (a) The Company will keep or cause to
be kept all the Mortgaged Property insured with reasonable deductibles
and retentions against loss by fire to the extent that property of
similar character is usually so insured by companies similarly
situated and operating like properties, by insurance companies which
the Company believes to be reputable; or the Company will, in lieu of
or supplementing such insurance in whole or in part, adopt some other
method or plan of protection or, alone or in conjunction with any
other Person or Persons, create an insurance fund to protect the
Mortgaged Property against loss by fire.
(b) Proceeds of any insurance or alternative method or plan of
protection of the Company against losses of the kind specified in
Section 7.11(a) shall, at the option of the Company, be paid to the
Company, and the Company shall be under no obligation to use such
proceeds to rebuild or repair damaged or destroyed Mortgaged Property
to the extent that the Fair Value of all of the Mortgaged Property
after the damage or destruction of Mortgaged Property with respect to
which such proceeds are payable equals or exceeds an amount equal to
the aggregate principal amount of Outstanding Bonds and Prior Lien
Bonds outstanding, upon receipt by the Trustee of:
(i) an Engineer's Certificate stating that the Fair Value of the
Mortgaged Property remaining after such damage or destruction of
Mortgaged Property is a specified amount; and
(ii) an Accountant's Certificate stating that the Fair Value of all of
the Mortgaged Property, as certified in the Engineer's Certificate
provided for in Section 7.11(b)(i), equals or exceeds an amount equal
to the aggregate principal amount of Outstanding Bonds and Prior Lien
Bonds outstanding.
(c) If the Fair Value of all of the Mortgaged Property after such
damage or destruction of Mortgaged Property does not equal or exceed
an amount equal to the aggregate principal amount of Outstanding Bonds
and Prior Lien Bonds outstanding, (i) the proceeds of such insurance
paid with respect to any such loss shall be paid to the Trustee, as
the interest of the Trustee may appear, or to the trustee or mortgagee
under any Prior Lien upon the Mortgaged Property so destroyed or
damaged, if the terms of such Prior Lien require such proceeds so to
be paid; (ii) if the Company shall adopt such other method or plan, it
will pay or cause to be paid to the Trustee on account of any loss
sustained because of the destruction or damage of any Mortgaged
Property by fire, an amount of cash equal to such loss less any amount
otherwise paid with respect to such loss to the Trustee, or to the
trustee or mortgagee under any such Prior Lien upon the Mortgaged
Property so destroyed or damaged, if the terms of such Prior Lien
require payments for such loss so to be paid (any amounts of cash so
required to be paid by the Company pursuant to any such method or plan
being deemed to be proceeds of insurance for the purposes of this
Indenture); and (iii) to the extent any proceeds of insurance as set
forth in this Section 3.07(c) are deposited with and subsequently
released by the trustee or mortgagee under any Prior Lien upon the
Mortgaged Property so destroyed or damaged to the Company, such
proceeds shall then be paid by the Company to the Trustee to the
extent that, but for the requirements of such Prior Lien, the Company
would have been required under this Section to pay such amounts to the
Trustee.
(d) All moneys paid to the Trustee by the Company or received by the
Trustee as proceeds of any insurance shall, subject to Section 7.11(b)
and to the requirements of any Prior Lien, be held by the Trustee and,
subject to such requirements, shall be paid by the Trustee to the
Company to reimburse the Company for an equal amount spent for the
purchase or other acquisition of property which becomes Mortgaged
Property at the time of such purchase or acquisition, or in the
rebuilding or renewal of the Mortgaged Property destroyed or damaged,
upon receipt by the Trustee of (i) an Officers' Certificate requesting
such reimbursement, (ii) an Accountant's Certificate stating the
amounts so spent and the Cost of any Mortgaged Property so purchased
or acquired, (iii) an Engineer's Certificate stating the nature of
such rebuilding or renewal and the Fair Value of the Mortgaged
Property so rebuilt or renewed, and (iv) an Opinion of Counsel to the
effect that the Mortgaged Property so purchased, rebuilt or renewed is
subject to the Lien of this Indenture to the same extent as was the
Mortgaged Property so destroyed or damaged.
(e) Any moneys not applied in accordance with Section 7.11(d) within
18 months after the receipt of such moneys by the Trustee, or in
respect of which notice in writing of the intention of the Company to
apply such moneys to the work of rebuilding or renewal then in
progress and uncompleted shall not have been given to the Trustee by
the Company within such 18 months, or which the Company shall at any
time notify the Trustee is not to be so applied, shall be held and
applied in accordance with Article XI.
(f) There shall be delivered to the Trustee, on or before May 1 of
each year and also whenever the Trustee shall make request therefor, a
detailed statement, signed by the Treasurer or an Assistant Treasurer
of the Company, of any fire insurance policies then outstanding and in
force upon any Mortgaged Property, including the names of the
insurance companies which have issued such policies and the amounts
and expiration dates thereof, together with a detailed statement,
signed by the Treasurer or an Assistant Treasurer of the Company, of
any alternative method or plan of protection. Any such detailed
statement shall be sufficient if it refers to the most recent
statement delivered pursuant to this Section 7.11(f) and describes in
detail the changes, if any, that have occurred since the date of such
statement.
Section 7.12. Payments by Trustee. The Trustee may, but shall
not be obligated to, make any payment that the Company in this
Indenture agrees to make, upon any default by the Company in making
such payment, and the Company covenants and agrees that it will repay
to the Trustee any and all moneys that the Trustee so pays.
ARTICLE VIII
PRIOR LIEN BONDS DEPOSITED WITH TRUSTEE
Section 8.01. Requirements Upon Deposit of Prior Lien Bonds.
Each Prior Lien Bond deposited with the Trustee shall be accompanied
by appropriate instruments of transfer, and the Trustee may cause any
or all registered Prior Lien Bonds deposited under this Article VIII
to be registered in its name as Trustee, or otherwise, or in the name
or names of its nominee or nominees.
Section 8.02. Principal of and Interest on Prior Lien Bonds.
All Prior Lien Bonds received by the Trustee under this Article VIII
shall be held as part of the Mortgaged Property for the protection and
further security of the Bonds. Except during the continuance of an
Event of Default, no payment of principal of, or premium, if any, or
interest on any Prior Lien Bond, for which the Company is the obligor,
held by the Trustee shall be made or demanded and the coupons thereto
appertaining as they mature shall be canceled by the Trustee and
delivered to the Company. Except during the continuance of an Event
of Default, all moneys received by the Trustee (a) on account of the
principal of or the premium, if any, or interest on any Prior Lien
Bond, or (b) by reason of the sale or surrender of any Prior Lien Bond
for cancellation pursuant to any sinking fund or analogous fund or
other similar device for the retirement of Prior Lien Bonds, shall be
paid by the Trustee to the Company.
Section 8.03. Surrender of Prior Lien Bonds. (a) Except during
the continuance of an Event of Default, the Trustee, on the written
request of the Company, shall cause any Prior Lien Bonds held by it
under this Article VIII to be canceled, and the obligations thereby
evidenced to be satisfied and discharged, provided, however, that it
shall have received notice from the trustee, mortgagee or other holder
of the Prior Lien securing such Prior Lien Bonds, that such trustee,
mortgagee or other holder will, on surrender of the Prior Lien Bonds
so held by the Trustee, cause the Prior Lien securing the same to be
satisfied and discharged. Upon similar request the Trustee shall sell
(on such terms as the Company shall designate) or surrender any Prior
Lien Bonds held by it subject to this Article VIII to the trustee,
mortgagee or other holder of the Prior Lien which secures such Prior
Lien Bonds to be held uncanceled for the purposes of any sinking or
analogous fund or other similar device for the retirement of such
Prior Lien Bonds, provided, however, that if all of the property
securing any Prior Lien Bonds deposited with the Trustee under this
Article VIII shall have been released from the Lien of this Indenture,
such bonds shall thereupon cease to be Prior Lien Bonds and shall be
surrendered forthwith by the Trustee to the Company upon its written
request.
(b) Prior to any sale or surrender of Prior Lien Bonds by the Trustee
in accordance with Section 8.03(a), there shall be delivered to the
Trustee, an Appraiser's Certificate, made and dated not more than 90
days prior to the date of the Company's request for such sale or
surrender, stating the fair market value in cash, in the opinion of
the signer of such Appraiser's Certificate, of the Prior Lien Bonds to
be sold or surrendered, and an Officers' Certificate stating that, in
the opinion of the signers of such Officers' Certificate, the sale or
surrender thereof will not impair the security under this Indenture.
(c) Any moneys received by the Trustee on account of the principal of
Prior Lien Bonds pursuant to Section 8.02 or upon the sale or
surrender of Prior Lien Bonds pursuant to this Section 8.03 shall be
held and applied in accordance with Article XI.
Section 8.04. Extension of Maturity of Prior Lien Bonds. On the
request of the Company as evidenced by an Officers' Certificate, the
Trustee shall permit the extension of the maturity of and/or any other
modification of any Prior Lien Bonds held by the Trustee subject to
this Article VIII and/or any modification of any Prior Lien.
Section 8.05. Trustee's Rights Upon an Event of Default. Upon
the occurrence and during the continuance of an Event of Default, the
Trustee may exercise any and all rights of a holder with respect to
the Prior Lien Bonds then held by it under this Article VIII or may
take any other action which shall in its judgment be desirable or
necessary to avail itself of the security for such Prior Lien Bonds.
ARTICLE IX
REDEMPTION OF BONDS
Section 9.01. Certain Bonds Redeemable. (a) Any Outstanding
Bonds which are, by their terms, redeemable before maturity, at the
option of the Company or pursuant to the provisions of this Indenture,
may be redeemed at such times, in such amounts and at such prices as
may be specified therein and in accordance with this Article IX.
(b) The Company at its option may, at any time, redeem the Bonds of
any series in accordance with the Supplemental Indenture pursuant to
which the Bonds of such series were issued, in whole or in part, upon
payment of a redemption price equal to the principal amount of the
Bonds to be redeemed plus accrued and unpaid interest thereon, if any,
plus, if such Supplemental Indenture so provides, the Make Whole
Premium or similar premium, if any, applicable to such Bonds, or for
any other redemption price as may be specified in the Supplemental
Indenture pursuant to which the Bonds of such series were issued.
Section 9.02. General Provisions and Mechanics of Redemption.
(a) If less than all of the Outstanding Bonds of any series are to be
redeemed, the particular Bonds to be redeemed shall be selected by the
Trustee from the Outstanding Bonds of such series which have not
previously been called for redemption, by such method as the Trustee
shall deem fair and appropriate, but special provisions for the
selection of the particular Bonds to be redeemed within a particular
series may be provided by a Supplemental Indenture.
(b) Unless otherwise provided as to a particular series of Bonds,
notice of the intention of the Company to redeem any Bonds which are
not Registered Bonds shall be given to the holders of such Bonds, by
or on behalf of the Company, by publication in one Authorized
Newspaper in the Borough of Manhattan, the City and State of New York,
and in one Authorized Newspaper in the city, if different, in which
the Trustee maintains its principal office and place of business, once
at least 30 and not more than 60 days prior to the date fixed for
redemption. If less than all Bonds of any particular series are to be
redeemed and unless otherwise provided as to a particular series of
Bonds, the number of any Bonds to be redeemed shall be included in
such notice and may be stated: individually; in groups from one number
to another number, both inclusive, except such as shall have been
previously called for redemption or otherwise retired; or in any other
way satisfactory to the Trustee.
(c) No notice of the intention of the Company to redeem Registered
Bonds is required to be published in an Authorized Newspaper, but a
copy of such notice shall be mailed to the holders of such Registered
Bonds, not less than 30 nor more than 60 days before the date fixed
for such redemption, at the last address appearing for each of such
holders in the Bond Register maintained pursuant to Section 2.06.
(d) If at the time of publication or mailing of any notice of
redemption the Company shall not have irrevocably directed the Trustee
to apply from moneys and/or Governmental Obligations deposited with
the Trustee or held by it and available to be used for the redemption
of Bonds sufficient to redeem all the Bonds called for redemption,
such notice may state that it is subject to the receipt of such moneys
and/or Governmental Obligations by the Trustee before the date fixed
for redemption and such notice shall be of no effect unless such
moneys and/or Governmental Obligations are so received before such
date.
(e) Failure duly to give notice of the intention of the Company to
redeem any Bonds by publication and/or by mailing to the owner or
holder of such Bond shall not affect the validity of the proceedings
for the redemption of any other Bond.
Section 9.03. Bonds Due on Redemption Date. Publication or
mailing of the notice of redemption, if required, having been
completed as provided in Section 9.02(b) or 9.02(c) and the Company
having before the redemption date specified in such notice irrevocably
directed the Trustee to apply from moneys and/or Governmental
Obligations deposited with the Trustee or held by it and available to
be used for the redemption of Bonds, moneys and/or the proceeds from
such Governmental Obligations in an amount sufficient to redeem all of
the Bonds called for redemption, including accrued interest, and any
Make Whole Premium, the Bonds called for redemption shall become due
and payable on such redemption date.
Section 9.04. Moneys for Redemption Held in Trust. All moneys
and/or Governmental Obligations held by the Trustee for the redemption
of Bonds shall, subject to Section 18.02, be held in trust for the
account of the holders of the Bonds so to be redeemed, and such moneys
and/or the proceeds of such Governmental Obligations shall be paid to
them respectively, upon presentation and surrender of such Bond. On
and after such date fixed for redemption, if moneys and/or proceeds of
Governmental Obligations in the necessary amount for the redemption of
the Bonds to be redeemed shall be held by the Trustee for the purpose,
such Bonds shall cease to bear interest and shall cease to be entitled
to the Lien of this Indenture.
Section 9.05. Partial Redemption of Registered Bond. If any
Registered Bond shall be called for redemption in part only, the
notice of such redemption shall specify the principal amount thereof
to be redeemed, and such Registered Bond shall be presented for
cancellation properly endorsed for transfer at or after the date fixed
for the redemption thereof, and thereupon the payment with respect to
such Bond shall be made upon surrender of such Bond so endorsed, and a
Bond or Bonds for the unpaid balance of the principal amount of the
Registered Bond so presented and surrendered shall be executed by the
Company and authenticated and delivered by the Trustee without charge
therefor to the holder thereof.
ARTICLE X
POSSESSION, USE AND RELEASE OF MORTGAGED PROPERTY
Section 10.01. Company's Possession and Use. The Company shall
be suffered and permitted to possess, enjoy, use and operate the
Mortgaged Property (except cash or securities paid to or deposited
with or required by the express terms of this Indenture to be paid to
or deposited with the Trustee) and to take and use any and all tolls,
rents, revenues, earnings, interest, dividends, royalties, issues,
income and profits thereof, as if this Indenture had not been made,
with power in the ordinary course of business to alter, repair, change
and add to its buildings, structures and any or all of its plant and
equipment, constructed or owned or hereafter constructed or acquired
by the Company, and hereby granted, bargained, sold, warranted,
released, conveyed, assigned, transferred, mortgaged, pledged, set
over or confirmed, to the Trustee, or intended so to be.
Section 10.02. Actions Without Consent of Trustee. The Company
may at any time and from time to time, without any release or consent
by the Trustee:
(a) sell or otherwise dispose of, free from the Lien of this
Indenture, or abandon or otherwise retire, any personalty or fixtures
which are part of the Mortgaged Property and which, in the judgment of
the Company, shall have become old, inadequate, obsolete, worn out,
unfit, unadapted, unserviceable, undesirable or unnecessary for use in
the Company's operations;
(b) cancel or make changes in or alterations of or substitutions for
any and all leases;
(c) alter, change the location of, add to, repair and replace any
and all transmission and distribution lines, substations, machinery,
fixtures and other equipment;
(d) cancel, make changes in or substitutions for or dispose of any
and all rights of way (including easements and licenses);
(e) surrender or assent to the modification of any franchise
(including in that term any ordinances, indeterminate permits,
licenses or other operating rights, however denominated, granted by
Federal, State, municipal or other governmental authority) under which
the Company may be operating if, in the judgment of the Company, it is
advisable to do so;
(f) abandon, or permit the abandonment of, the operation of any
Mortgaged Property and surrender any franchises, as defined in Section
10.02(e), under which such Mortgaged Property is operated, if, in the
judgment of the Company, the operation of such Mortgaged Property and
such franchises is not, under the circumstances, necessary or
important for the operation of the remaining Mortgaged Property, or
whenever the Company deems such abandonment or surrender to be
advisable for any reason; provided, however, that if the amount at
which such property and all other properties so abandoned or
surrendered during the same calendar year was originally charged to
the fixed property accounts of the Company is 10% or more of the
aggregate principal amount of the Bonds Outstanding immediately prior
to such abandonment or surrender, there shall be furnished to the
Trustee an Independent Engineer's Certificate to the effect that
neither such operation nor such franchises are, under the
circumstances, necessary or important for the operation of the
remaining property of the Company or that such abandonment or
surrender is advisable for some other specified reason, and in either
case that such abandonment or surrender will not impair the security
under this Indenture in contravention of the provisions hereof; and
(g) grant or convey rights of way and easements over or in respect
of any real Mortgaged Property owned by the Company, provided that
such grant or conveyance will not, in the judgment of the Company,
impair the usefulness of such real Mortgaged Property in the Company's
operations.
Section 10.03. Release of Mortgaged Property if Fair Value Test
Satisfied. Subject to Section 10.11, the Trustee shall release from
the Lien of this Indenture any Mortgaged Property if the Fair Value of
all of the Mortgaged Property (excluding the Mortgaged Property to be
released but including any Mortgaged Property to be acquired by the
Company with the proceeds of, or otherwise in connection with, such
release) equals or exceeds an amount equal to the aggregate principal
amount of Outstanding Bonds and Prior Lien Bonds outstanding at the
time of such release, upon receipt by the Trustee of:
(a) an Officers' Certificate, dated the date of such release,
requesting such release, describing in reasonable detail the Mortgaged
Property to be released and stating the reason for such release;
(b) an Engineer's Certificate, dated the date of such release,
stating (i) that the signer of such Engineer's Certificate has
examined such Officers' Certificate in connection with such release,
(ii) the Fair Value, in the opinion of the signer of such Engineer's
Certificate, of (A) all of the Mortgaged Property, and (B) the
Mortgaged Property to be released, in each case as of a date not more
than 90 days prior to the date of such release, and (iii) that in the
opinion of such signer, such release will not impair the security
under this Indenture in contravention of the provisions hereof;
(c) in the case any Bondable Property is being acquired by the
Company with the proceeds of, or otherwise in connection with, such
release, an Engineer's Certificate, dated the date of such release, as
to the Fair Value, as of a date not more than 90 days prior to the
date of such release, of the Bondable Property being so acquired (and
if within six months prior to the date of acquisition by the Company
of the Bondable Property being so acquired, such Bondable Property has
been used or operated by a Person or Persons other than the Company in
a business similar to that in which it has been or is to be used or
operated by the Company, and the Fair Value to the Company of such
Bondable Property, as set forth in such Certificate, is not less than
$25,000 and not less than 1% of the aggregate principal amount of
Bonds at the time Outstanding, such certificate shall be an
Independent Engineer's Certificate);
(d) an Accountant's Certificate, dated the date of such release,
stating the aggregate principal amount of Outstanding Bonds and Prior
Lien Bonds outstanding at the time of such release, and stating that
the Fair Value of all of the Mortgaged Property (excluding the
Mortgaged Property to be released but including any Bondable Property
to be acquired by the Company with the proceeds of, or otherwise in
connection with, such release) stated in the Engineer's Certificates
filed pursuant to Section 10.03(b) and Section 10.03(c) equals or
exceeds an amount equal to such aggregate principal amount; and
(e) an Officers' Certificate, dated the date of such release,
stating whether, and if so in what respect and to what extent, to the
knowledge of the signers of such Officers' Certificate, there has
occurred and is continuing an Event of Default.
Section 10.04. Release of Limited Amount of Mortgaged Property.
If the Company is unable, or elects not, to obtain, in accordance with
Section 10.03, the release from the Lien of this Indenture of
Mortgaged Property, subject to Section 10.11, the Trustee shall
release from the Lien of this Indenture any Mortgaged Property if the
Fair Value thereof, as shown by the Engineer's Certificate filed
pursuant to Section 10.04(b), is less than one-half of 1% of the
aggregate principal amount of Outstanding Bonds and Prior Lien Bonds
outstanding at the time of such release, provided that the aggregate
Fair Value of all Mortgaged Property released pursuant to this Section
10.04, as shown by all Engineer's Certificates filed pursuant to
Section 10.04(b) in any period of 12 consecutive calendar months which
includes the date of such Engineer's Certificate, shall not exceed 1%
of the aggregate principal amount of the Outstanding Bonds and Prior
Lien Bonds outstanding at the time of such release, upon receipt by
the Trustee of:
(a) an Officers' Certificate, dated the date of such release,
requesting such release, describing in reasonable detail the Mortgaged
Property to be released and stating the reason for such release;
(b) an Engineer's Certificate, dated the date of such release,
stating (A) that the signer of such Engineer's Certificate has
examined such Officers' Certificate in connection with such release,
(B) the Fair Value, in the opinion of the signer of such Engineer's
Certificate, of such Mortgaged Property to be released as of a date
not more than 90 days prior to the date of such release, and (C) that
in the opinion of such signer such release will not impair the
security under this Indenture in contravention of the provisions
hereof;
(c) an Accountant's Certificate, dated the date of such release,
stating the aggregate principal amount of Outstanding Bonds and Prior
Lien Bonds outstanding at the time of such release, that one-half of
1% of such aggregate principal amount exceeds the Fair Value of the
Mortgaged Property for which such release is applied for, and that 1%
of such aggregate principal amount exceeds the aggregate Fair Value of
all Mortgaged Property released from the Lien of this Indenture
pursuant to this Section 10.04, as shown by all Engineer's
Certificates filed pursuant to Section 10.04(b) in such period of 12
consecutive calendar months; and
(d) an Officers' Certificate, dated the date of such release,
stating whether, and if so in what respect and to what extent, to the
knowledge of the signers of such Officers' Certificate, there has
occurred and is continuing an Event of Default.
Section 10.05. Release of Mortgaged Property Not Subject to a
Prior Lien. (a) If the Company is unable, or elects not, to obtain,
in accordance with Section 10.03, the release from the Lien of this
Indenture of Mortgaged Property which is not subject to a Prior Lien,
the Company may, subject to Section 10.11, obtain the release of such
Mortgaged Property from the Lien of this Indenture on the basis of
cash, Governmental Obligations, purchase money obligations, Bondable
Property acquired by the Company with the proceeds of, or otherwise in
connection with, such release, or the waiver of the right to the
authentication and delivery of Bonds as described in Section
10.05(a)(iii)(B), or a combination thereof, and the Trustee shall
release such Mortgaged Property from the Lien of this Indenture, upon
receipt by the Trustee of:
(i) an Officers' Certificate, dated the date of such release,
requesting such release, describing in reasonable detail the Mortgaged
Property to be released, stating the reason for such release and
stating the amount and character of the consideration to be received
by the Company therefor;
(ii) an Engineer's Certificate, dated the date of such release,
stating (A) that the signer of such Engineer's Certificate has
examined such Officers' Certificate in connection with such release,
(B) the Fair Value, in the opinion of the signer of such Engineer's
Certificate, of the Mortgaged Property to be released as of a date not
more than 90 days prior to the date of such release, (C) the fair
market value in cash, in the opinion of such signer (which opinion may
be based on an Appraiser's Certificate), of any Governmental
Obligations and purchase money obligations included in the
consideration for such release and (D) that in the opinion of such
signer such release will not impair the security under this Indenture
in contravention of the provisions hereof;
(iii) (A) an aggregate amount of Governmental Obligations and purchase
money obligations having a fair market value in cash as evidenced by
an Appraiser's Certificate, cash and evidence of the acquisition by
the Company of Bondable Property with the proceeds of, or otherwise in
connection with, such release (the amount of such Bondable Property
shall be the Fair Value thereof as of a date not more than 90 days
prior to the date of such release, as evidenced to the Trustee by an
Engineer's Certificate, dated the date of such release, and if within
six months prior to the date of acquisition by the Company of the
Bondable Property being so acquired such Bondable Property has been
used or operated by a Person or Persons other than the Company in a
business similar to that in which it has been or is to be used or
operated by the Company, and the Fair Value to the Company of such
Bondable Property, as set forth in such Certificate, is not less than
$25,000 and not less than 1% of the aggregate principal amount of
Bonds at the time Outstanding, such certificate, shall be an
Independent Engineer's Certificate), not less than the Fair Value of
the Mortgaged Property to be released, or (B) an Officers'
Certificate, dated the date of such release, waiving the right of the
Company to the authentication and delivery of an aggregate principal
amount of Bonds up to the amount required by Section 10.05
(a)(iii)(A), on the basis of the retirement of previously Outstanding
Bonds under Article IV or on the basis of the purchase or acquisition
and deposit or the retirement of Prior Lien Bonds under Article VI,
and stating the matters required to be stated in the Officers'
Certificate provided for in Section 4.01(c) or Section 6.01(e), as the
case may be, in either case appropriately modified to reflect that the
action being taken is the waiver of the right to, rather than a
request for, the authentication and delivery of Bonds, or if
applicable, accompanied by the certificate of the trustee or mortgagee
under the Prior Lien securing such Prior Lien Bonds provided for in
Section 6.01(a) in lieu of stating the matters required to be stated
in the Officers' Certificate provided for in Section 6.01(e), or (C) a
combination of the items specified in Section 10.05(a)(iii)(A) and
(B);
(iv) in case any obligations secured by a purchase money mortgage
upon the Mortgaged Property to be released are included in the
consideration for such release and are delivered to the Trustee in
connection with such release, an Opinion of Counsel, dated the date of
such release, stating that such obligations are valid obligations and
that any purchase money mortgage securing such obligations is closed
and is, or upon recording or filing in designated places will be,
sufficient to afford a valid lien upon the Mortgaged Property to be
released from the Lien of this Indenture, subject to no lien prior
thereto, except such liens, if any, as shall have existed thereon
immediately prior to such release as Permissible Encumbrances; and
(v) an Officers' Certificate, dated the date of such release,
stating whether, and if so in what respect and to what extent, to the
knowledge of the signers of such Officers' Certificate, there has
occurred and is continuing an Event of Default.
(b) Any cash received by the Trustee pursuant to this Section 10.05
shall be held and applied in accordance with Article XI.
Section 10.06. Release of Mortgaged Property Subject to a Prior
Lien. (a) If the Company is unable, or elects not, to obtain, in
accordance with Section 10.03, the release from the Lien of this
Indenture of Mortgaged Property which is subject to a Prior Lien,
subject to Section 10.11, the Trustee shall release such Mortgaged
Property from the Lien of this Indenture if there has been or is being
substituted for such Mortgaged Property, by delivery to the trustee,
mortgagee or other holder of such Prior Lien and/or to the Trustee, an
aggregate amount of Governmental Obligations and purchase money
obligations having a fair market value in cash, cash and evidence of
Bondable Property acquired by the Company with the proceeds of, or
otherwise in connection with, such release, or the waiver of the right
to the authentication and delivery of Bonds as described in Section
10.06(a)(iv)(B), or a combination thereof, not less than the Fair
Value of the Mortgaged Property to be released from the Lien of this
Indenture, upon receipt by the Trustee of:
(i) an Officers' Certificate, dated the date of such release,
requesting such release, describing in reasonable detail the Mortgaged
Property to be released, the Prior Lien to which such Mortgaged
Property is subject, the amount of cash, Governmental Obligations or
purchase money obligations to be delivered to, the Prior Lien trustee,
mortgagee or other holder of such Prior Lien and/or to the Trustee, or
both, and any Bondable Property acquired by the Company with the
proceeds of, or otherwise in connection with, such release, in each
case in substitution for such Mortgaged Property, and stating the
reason for such release;
(ii) an Opinion of Counsel, dated the date of such release, that the
Mortgaged Property to be released from the Lien of this Indenture is
subject to the Prior Lien described in the foregoing Officers'
Certificate and that, based upon documents received by such counsel,
the Company appears to have complied with all the terms and conditions
for such release under such Prior Lien;
(iii) an Engineer's Certificate, dated the date of such release,
stating (A) that the signer of such Engineer's Certificate has
examined such Officers' Certificate in connection with such release,
(B) the Fair Value, in the opinion of such signer, of the Mortgaged
Property to be released as of a date not more than 90 days prior to
the date of such release, (C) the Fair Value in the opinion of such
signer (which opinion may be based on an Appraiser's Certificate) of
any Governmental Obligations and purchase money obligations included
in the consideration for such release and (D) that, in the opinion of
such signer, such release will not impair the security under this
Indenture in contravention of the provisions hereof;
(iv) (A) an aggregate amount of Governmental Obligations and purchase
money obligations having a fair market value in cash as evidenced by
an Appraiser's Certificate, cash and evidence of the acquisition by
the Company of Bondable Property with the proceeds of, or otherwise in
connection with, such release (the amount of such Bondable Property
shall be the Fair Value thereof as of a date not more than 90 days
prior to the date of such release, as evidenced to the Trustee by an
Engineer's Certificate, dated the date of such release, and if within
six months prior to the date of acquisition by the Company of the
Bondable Property being so acquired such Bondable Property has been
used or operated by a Person or Persons other than the Company in a
business similar to that in which it has been or is to be used or
operated by the Company, and the Fair Value to the Company of such
Bondable Property, as set forth in such Certificate, is not less than
$25,000 and not less than 1% of the aggregate principal amount of
Bonds at the time Outstanding, such certificate, shall be an
Independent Engineer's Certificate), not less than the excess, if any,
of (1) the Fair Value, as specified in the Engineer's Certificate
described in Section 10.06(a)(iii), of the Mortgaged Property to be
released over (2) the aggregate amount of Governmental Obligations and
purchase money obligations having a fair market value in cash as
evidenced by an Appraiser's Certificate and cash deposited with the
trustee, mortgagee or other holder of such Prior Lien; or (B) an
Officers' Certificate, dated the date of such release, waiving the
right of the Company to the authentication and delivery of an
aggregate principal amount of Bonds up to the amount required by
Section 10.06(a)(iv)(A), on the basis of the retirement of previously
Outstanding Bonds under Article IV or on the basis of the purchase or
acquisition and deposit or the retirement of Prior Lien Bonds under
Article VI, and stating the matters required to be stated in the
Officers' Certificate provided for in Section 4.01(c) or Section
6.01(e), as the case may be, in either case appropriately modified to
reflect that the action being taken is the waiver of the right to,
rather than a request for, the authentication and delivery of Bonds,
or if applicable, accompanied by the certificate of the trustee or
mortgagee under the Prior Lien securing such Prior Lien Bonds provided
for in Section 6.01(e) in lieu of stating the matters required to be
stated in the Officers' Certificate provided for in Section 6.01(e),
or (C) a combination of the items specified in Section 10.06(a)(iv)(A)
and (B);
(v) in case any obligations secured by a purchase money mortgage
upon the Mortgaged Property to be released are included in the
consideration for such release and are delivered to the Trustee in
connection with such release, an Opinion of Counsel, dated the date of
such release, stating that such obligations are valid obligations and
that any purchase money mortgage securing such obligations is closed
and is, or upon recording or filing in designated places will be,
sufficient to afford a valid lien upon the Mortgaged Property to be
released from the Lien of this Indenture, subject to no lien prior
thereto, except such liens, if any, as shall have existed thereon
immediately prior to such release as Permissible Encumbrances; and
(vi) an Officers' Certificate, dated the date of such release,
stating whether, and if so in what respect and to what extent, to the
knowledge of the signers of such Officers' Certificate, there has
occurred; and is continuing an Event of Default.
(b) Any cash received by the Trustee pursuant to this Section 10.06
shall be held and applied in accordance with Article XI.
Section 10.07. Eminent Domain. In case (a) any Mortgaged
Property shall be taken by exercise of the power of eminent domain, or
by similar right or power, or if any governmental authority shall
exercise any right which it may now or hereafter have to purchase or
designate a purchaser of, or order the sale of, all or any Mortgaged
Property, or in case of any sale or conveyance of Mortgaged Property
in lieu and in reasonable anticipation of any such event, and (b) the
Company is unable, or elects not, to obtain, in accordance with
Section 10.03, the release from the Lien of this Indenture of such
Mortgaged Property, all net proceeds of each such taking, purchase or
sale, or, in case of a sale or conveyance in anticipation thereof, an
aggregate amount of Governmental Obligations or purchase money
obligations having a fair market value in cash as evidenced by an
Appraiser's Certificate and cash, not less than the Fair Value, as of
a date not more than 90 days prior to the date of such release, as
evidenced by an Engineer's Certificate, dated the date of such
release, of the Mortgaged Property sold or conveyed, together with all
net sums payable for any damage to any Mortgaged Property by or in
connection with any such taking, purchase, sale or conveyance, to the
extent not deposited under a Prior Lien with the trustee, mortgagee or
other holder of such Prior Lien, shall be deposited with the Trustee,
to be held and applied in accordance with Article XI; provided that,
to the extent such sums as set forth in this Section 10.07 are
deposited with and subsequently released by the trustee or mortgagee
under any Prior Lien, such proceeds shall then be paid by the Company
to the Trustee to the extent that, but for the requirements of such
Prior Lien, the Company would have been required under this Section
10.07 to deposit such amounts with the Trustee; and the Trustee
(subject to Section 10.11) shall release the Mortgaged Property so
taken, purchased, sold or conveyed upon being furnished with:
(i) an Opinion of Counsel, dated the date of such release, to the
effect that such Mortgaged Property has been lawfully taken, purchased
or sold as aforesaid; or
(ii) in case of any such sale or conveyance in anticipation of such
taking, purchase or sale, a Board resolution to the effect that such
sale or conveyance was in lieu and in reasonable anticipation of such
taking, purchase or sale.
Section 10.08. Release of Governmental Obligations and Purchase
Money Obligations. (a) Any Governmental Obligations and purchase
money obligations received or to be received by the Trustee under this
Indenture in consideration for the release of any Mortgaged Property
from the Lien of this Indenture by the Trustee, and the purchase money
mortgage securing such purchase money obligations shall be released by
the Trustee from the Lien of this Indenture and delivered or assigned
to the Company, or as it shall request, upon payment by the Company to
the Trustee of the unpaid principal of such Governmental Obligations
or such purchase money mortgage and/or of the obligations thereby
secured or at any time after the Trustee shall have received on
account of the principal thereof an amount in cash equal to the
aggregate principal amount of any such Governmental Obligations or
such purchase money obligations to the extent made a basis of a credit
in the application for the release from this Indenture of such
Mortgaged Property.
(b) Any cash received by the Trustee pursuant to this Section 10.08
shall be held and applied in accordance with Article XI.
Section 10.09. Substituted Property. All rights and property
(other than cash) acquired by the Company by exchange or purchase to
take the place of, or in consideration for, any Mortgaged Property
surrendered, modified, released (other than pursuant to Section 10.05,
Section 10.06 or Section 10.07) or sold, under this Indenture, shall
forthwith and without further conveyance, transfer or assignment
become subject to the Lien of this Indenture; but the Company, at the
request of the Trustee from time to time, or without such request to
the extent necessary to comply with any applicable legal requirements
for the full protection of the Trustee and the Holders, will grant,
bargain, sell, warrant, release, convey, assign, transfer, mortgage,
pledge, set over and confirm any and all such property to the Trustee,
by proper deeds or other instruments, which the Company will duly
record and file, and rerecord and refile, in all places required for
the proper protection of the Trustee and of the Holders, upon the
trusts and for the purposes of this Indenture.
Section 10.10. Receiver, Trustee, etc. In case a receiver or
trustee of the Company, or of all or a substantial part of the
Mortgaged Property or business of the Company, shall be lawfully
appointed, all acts or requests which the Company may do or make under
the foregoing provisions of this Article X may be done or made by such
receiver or trustee with the consent of the Trustee, which may give or
withhold such consent from time to time in its uncontrolled
discretion, subject to Section 14.01 and Section 14.02. In case the
Trustee shall be in possession of the Mortgaged Property under this
Indenture, the Trustee in its uncontrolled discretion, without any
action or request by the Company or any receiver or trustee, and
without hereby limiting any other right or power of the Trustee, may
take any action authorized by this Indenture to be taken by the
Company, by the Company and the Trustee or by the Trustee on the
request of the Company.
Section 10.11. Suspension of Rights in Case of an Event of
Default. (a) At any time when an Event of Default has occurred and is
continuing, the Company shall not have the right to exercise any
privilege or to take any action permitted by this Article X (except
under Sections 10.01 and 10.02) except to the extent that it shall
have obtained the written consent of the Trustee; and the Trustee may,
subject to Section 14.01 and Section 14.02, give or withhold such
consent from time to time in its discretion.
(b) For purposes of this Section 10.11, an Event of Default shall be
deemed to have occurred and be continuing upon the occurrence of any
of the events specified in Section 12.01 without awaiting the
expiration of any period of grace or the giving of notice.
Section 10.12. Purchaser in Good Faith. No purchaser in good
faith of Mortgaged Property purporting to be released under any of the
provisions of this Article X shall be bound to ascertain the authority
of the Trustee to execute the release or to inquire as to any facts
required by the provisions hereof for the exercise of such authority,
or to see to the application of any purchase money.
ARTICLE XI
APPLICATION OF FUNDS HELD BY TRUSTEE
Section 11.01. Withdrawal, Application or Use of Cash Held by
Trustee. (a) Unless the Company is in default in the payment of any
interest on any Bonds then Outstanding or any Event of Default shall
have occurred and be continuing, any cash deposited with Trustee
pursuant to Section 5.01 shall be held by the Trustee and such cash,
and any other cash which, under any other provision of this Indenture
(whether referred to as cash or moneys in any such provision), is
required to be held and applied in accordance with this Article XI,
may be withdrawn, used or applied as provided in this Section 11.01:
(i) may be withdrawn from time to time by the Company to the extent
of the lesser of the Cost or the Fair Value of Unbonded Bondable
Property Bonded after making any deductions and additions in respect
of Bondable Property pursuant to clauses (ii) or (iii) of the
definition of "Bondable Property" in Section 1.03;
(ii) may be withdrawn from time to time by the Company in an amount
equal to the principal amount of Bonds which the Company shall have
the right to have authenticated and delivered under Article IV or
Article VI;
(iii) may, upon the request of the Company, be applied by the Trustee
to the payment at maturity of any Outstanding Bonds or Prior Lien
Bonds or to the redemption of any Outstanding Bonds or Prior Lien
Bonds which are, by their terms, redeemable, of such series as may be
designated by the Company;
(iv) may be used by the Trustee for the purchase of Bonds or Prior
Lien Bonds of such series as may be designated by the Company;
provided, however, that none of such cash shall be applied to the
payment of more than the principal amount of any Bonds or Prior Lien
Bonds so purchased, except to the extent that the aggregate principal
amount of all Bonds and Prior Lien Bonds theretofore, and all Bonds or
Prior Lien Bonds then to be, so purchased, shall have exceeded the
aggregate cost for principal, interest, brokerage and premium, if any,
on all Bonds and Prior Lien Bonds theretofore, and on all Bonds or
Prior Lien Bonds then to be, so purchased; and/or
(v) may, with the consent of the Company, which consent shall not be
unreasonably withheld, be applied by the Trustee from time to time to
the payment of fees, charges and expenses of the Trustee in accordance
with this Indenture.
(b) Such cash shall, from time to time, be paid out or used or
applied by the Trustee, as aforesaid, upon the request of the Company,
and upon receipt by the Trustee of an Officers' Certificate stating
that the Company is not in default in the payment of the interest on
any Bonds then Outstanding and that no Event of Default has occurred
and is continuing. In case such withdrawal of cash is, in whole or in
part, based upon Unbonded Bondable Property as permitted under Section
11.01(a)(i), the Company shall comply with all applicable provisions
of Article III as if such Unbonded Bondable Property were made a basis
for the authentication and delivery of Bonds thereon equivalent in
principal amount to the amount of the cash to be withdrawn on such
basis; or in case the withdrawal of cash is, in whole or in part,
based upon the right to the authentication and delivery of Bonds
pursuant to Section 11.01(a)(ii), the Company shall comply with all
applicable provisions of Article IV or Article VI, as the case may be,
relating to such authentication and delivery; recognizing that, in
each such case, the action being taken is the withdrawal of cash
rather than the authentication and delivery of Bonds.
(c) Any withdrawal of cash pursuant to Section 11.01(a)(i) or
Section 11.01(a)(ii) shall operate as a waiver by the Company of its
right to the authentication and delivery of Bonds upon the basis of
which such cash was withdrawn, and such Bonds may not thereafter be
authenticated and delivered hereunder on such basis, and the amount of
any Bondable Property, Bonds or Prior Lien Bonds which have been made
the basis for such withdrawal shall be Bonded.
(d) Any obligation secured by a purchase money mortgage received by
the Trustee under this Indenture in consideration for the release of
any Mortgaged Property from the Lien of this Indenture may be released
from the Lien of this Indenture at any time upon payment by the
Company to the Trustee of the unpaid portion of the principal of such
obligation; provided, however, at any time after the Trustee shall
have received on account of the principal of any obligation secured by
a purchase money mortgage on specified Mortgaged Property (from the
Company, the obligor or otherwise), an amount in cash equal to the
aggregate principal amount of such obligation to the extent made a
basis of a credit in the application for the release from the Lien of
this Indenture of such Mortgaged Property, the Trustee shall deliver
to the Company on the written request of an Authorized Officer the
purchase money mortgage on such Mortgaged Property and all obligations
secured thereby then held by the Trustee.
(e) The principal of and interest on any Governmental Obligations
and purchase money obligations secured by a purchase money mortgage
held by the Trustee shall be collected by the Trustee as and when such
principal and interest become payable. Unless the Company is in
default in the payment of the interest on any Outstanding Bond or any
Event of Default shall have occurred and be continuing, the interest
received by the Trustee on any such obligations shall be paid over to
the Company, and any payments received by the Trustee on account of
the principal of any such obligations in excess of the amount of
credit used by the Company in respect of such obligations upon the
release of any Mortgaged Property from the Lien of this Indenture
shall also be paid to the Company.
(f) The Trustee shall have and may exercise all the rights and
powers of an owner of obligations secured by purchase money mortgage
held by the Trustee and of all substitutions therefor and, without
limiting the generality of the foregoing, may collect and receive all
insurance moneys payable to it under any provision thereof and apply
the same in accordance with the provisions thereof, may consent to
extensions thereof at a higher or lower rate of interest, may join in
any plan or plans of voluntary or involuntary reorganization or
readjustment or rearrangement and may accept and hold under this
Indenture new obligations, stocks or other securities issued in
exchange therefor under any such plan, and any discretionary action
which the Trustee may be entitled to take in connection with any such
obligations or substitutions therefor shall be taken, so long as no
Event of Default has occurred and is continuing, in accordance with
the request of the Company, evidenced by a Board resolution, and while
an Event of Default is continuing, in the discretion of the Trustee.
Section 11.02. Moneys to be Held in Trust; Investment Thereof.
(a) Subject to Section 18.02, all moneys received by the Trustee
shall, until withdrawn, used or applied as provided in this Indenture,
be held in trust for the purposes for which they were paid, but need
not be segregated from other funds except as directed by the Company
or as and to the extent required by law.
(b) After compliance with any applicable legal requirements, the
Trustee may deposit all or any part of moneys received by it, in a
certificate of deposit or otherwise, to its credit as Trustee in its
own banking department or, with the consent of the Company, in any
bank or trust company having a combined capital and surplus of not
less than Twenty Million Dollars ($20,000,000); or the Trustee, after
such compliance and subject to Section 11.02(g), may so deposit all or
any part of such moneys, together with moneys of like nature held by
it under other indentures and trust instruments, to its credit as
Trustee of all moneys deposited in each such account.
(c) When so directed by the Company, subject to clauses (f) and (g)
of this Section 11.02, the Trustee shall invest all or any part of
such moneys received by it in any Investment Securities; and the
Trustee, when so directed by the Company, shall sell or repurchase all
or any part of such Investment Securities. Such Investment Securities
shall be held by the Trustee as part of the Mortgaged Property;
provided, however, that the proceeds of such Investment Securities
representing interest shall be paid or credited to the Company and
shall not constitute Mortgaged Property. If any such sale, or any
payment on the maturity of any such Investment Securities held by the
Trustee, shall produce a net sum less than the cost (including accrued
interest) of such Investment Securities sold or paid, the Company will
promptly pay to the Trustee such amount of cash as will, with the net
proceeds of such sale or such payment, equal the cost (including
accrued interest) of such Investment Securities so sold or paid; and
if any such sale, or any payment at the maturity of any such
Investment Securities held by the Trustee, shall produce a net sum
greater than the cost (including accrued interest) of such Investment
Securities so sold or paid the Trustee shall, if no Event of Default
has occurred and is continuing, pay to the Company the amount of such
excess. The Company will also pay to the Trustee all brokers' fees
and other expenses incurred by the Trustee in connection with its
investment of such moneys and the sale of such Investment Securities.
In the event of a loss on the sale of such investments (after giving
effect to any interest or other income thereon (except to the extent
theretofore paid to the Company), the Trustee shall have no
responsibility in respect of such loss except that the Trustee shall
notify the Company of the amount of such loss and the Company shall
promptly pay such amount to the Trustee to be credited as part of the
moneys originally invested.
(d) The Trustee hereby agrees to act as the Operating Bank
hereunder. From time to time as called for by this Section 11.02 of
the Indenture, the Operating Bank shall establish and maintain on the
books and records of its office in New York, New York, and maintain in
the name of the Trustee, each respective Securities Account to be
established for the investment of moneys held by the Trustee under
this Indenture to the extent required to be invested pursuant to
Section 11.02(c) of this Indenture. In the event of any replacement
of the Trustee under this Indenture, the successor trustee (or any
other Person designated by the Trustee with the Company's consent)
shall become the Operating Bank, concurrently with such succession,
for all purposes of this Indenture. The Trustee, in its capacity as
the Operating Bank, also agrees to cooperate with any replacement
Operating Bank as to the transfer of any property in, or records
relating to, any Securities Account maintained by it under this
Indenture.
(e) The Trustee, in its respective capacities as the Trustee and as
the Operating Bank, hereby agrees that (i) all Investment Securities
invested by the Trustee pursuant to Section 11.02(c) will be held in
one or more accounts maintained in the Trustee's name with the
Operating Bank, and each such account will be a Securities Account of
which the Operating Bank is the Securities Intermediary and in respect
of which the Trustee is the "entitlement holder" (as defined in
Section 8-102(a)(7) of the UCC) of the "securities entitlement" (as
defined in Section 8-102(a)(17) of the UCC) with respect to each
"financial asset" (as defined in Section 8-102(a)(9) of the UCC)
credited to such account, (ii) all cash required to be deposited in
any such account, all Investment Securities and all other property
acquired with cash credited to any such account will be credited to
such account, (iii) all items of property (whether cash, Investment
Securities, other investments, securities, instruments or other
property) credited to each Securities Account will be treated as a
"financial asset" (as defined in Section 8-102(a)(9) of the UCC) under
Article 8 of the UCC, (iv) the Operating Bank's "securities
intermediary's jurisdiction" (as defined in Section 8-110(e) of the
UCC) with respect to each such account is the State of New York and
(v) all securities, instruments and other property registered in or
credited to any such Securities Account shall be payable to or to the
order of, or registered in the name of, the Operating Bank or shall be
endorsed to the Operating Bank or in blank, and in no case whatsoever
shall any financial asset credited to any Securities Account be
registered in the name of the Company, payable to or to the order of
the Company or specially endorsed to the Company except to the extent
the foregoing have been specially endorsed by the Company to the
Operating Bank or in blank. The Trustee agrees that it will hold (and
will indicate clearly in the books and records that it holds) its
"security entitlement" to the "financial asset" credited to each
Securities Account in trust for the purposes for which all monies
received by the Trustee for deposit into such Securities Account were
paid.
(f) The Trustee shall allow interest on any moneys held by it under
this Indenture and deposited by it in its banking department, at the
current rate or rates, if any, from time to time paid by it on similar
deposits of like size and nature over like periods of time, unless in
a particular instance the Trustee and the Company shall otherwise
agree. Interest so allowed and interest received by the Trustee from
deposits in other banks and trust companies of moneys which are a part
of the Mortgaged Property made pursuant to Section 11.02(b), except as
otherwise herein provided in respect of particular moneys, shall, if
no Event of Default has occurred and is continuing, be paid or
credited to the Company by the Trustee.
(g) At the direction of the Company, the Trustee shall establish one
or more accounts for the deposit and/or investment of moneys received
by it, including a separate account from which all moneys payable by
the Trustee on behalf of the Company shall be paid and into which
moneys shall be deposited by the Company, or by the Trustee on behalf
of the Company, from other accounts or investments held or managed by
the Trustee, as needed, so that such account shall be operated with a
zero balance.
ARTICLE XII
DEFAULT AND REMEDIES
Section 12.01. Events of Default. (a) Each of the following
events is an "Event of Default":
(i) default in the due and punctual payment of the principal of or
premium, if any, on any Bond, when such principal or premium shall
have become due and payable, whether at maturity, pursuant to any
sinking fund or analogous fund, or by declaration or otherwise, which
default shall have continued for a period of more than one day;
(ii) default in the payment of any interest on any Bond, when and as
the same shall have become due and payable, which default shall have
continued for a period of 90 days;
(iii) default in the payment of principal of, premium, if any, or
interest on any Prior Lien Bond outstanding, continued beyond the
period of grace, if any, specified in the Prior Lien securing payment
of such principal, premium and interest;
(iv) default in the due observance or performance of any other
covenant or condition in this Indenture which is required to be kept
or performed by the Company, and which default shall have continued
for the period of 90 days after written notice thereof shall have been
given to the Company by the Trustee, or by the holders of not less
than 30% in aggregate principal amount of the Outstanding Bonds;
(v) by decree of a court of competent jurisdiction the Company is
adjudicated a bankrupt or insolvent, or an order is made by such court
for the winding up or liquidation of the affairs of the Company or
approving a petition seeking reorganization or arrangement of the
Company under the bankruptcy law or other law or statute of the United
States of America or of any State, or, by order of such court, a
trustee or liquidator or receiver is appointed for the Company or for
the property of the Company, and any such decree or order shall
continue in effect for a period of 90 days;
(vi) the Company files a petition for voluntary bankruptcy, or
consents to the filing of any such petition, or makes an assignment
for the benefit of creditors, or consents to the appointment of a
trustee or liquidator or receiver of the Company or of all or a
substantial part of its Mortgaged Property, or files a petition or
answer or consent seeking reorganization or arrangement under the
bankruptcy law or other law, or statute of the United States of
America or of any State, or consents to the filing of any such
petition, or files a petition to take advantage of any debtors' act;
and
(vii) the occurrence of any default by the Company, continued beyond
the period of grace, if any, under the terms of any indenture
supplemental hereto or any Bond, if different from the Events of
Default specified in this Section 12.01(a).
(b) The Trustee shall, within 90 days after the occurrence thereof,
give to the Holders, in the manner and to the extent provided in TIA
Section 313(c), notice of all defaults known to the Trustee, unless
such defaults shall have been cured before the giving of such notice
(the term "defaults" for the purposes of this Section 12.01 (b) being
hereby defined to be the events specified in Section 12.01(a), not
including any periods of grace provided for therein); but in the case
of defaults of the character specified in Sections 12.01(a)(ii) and
12.01(a)(iv), no such notice shall be given until at least 60 days
after the occurrence thereof, provided that, except in the case of
default in the payment of the principal of or interest or Liquidated
Damages, if any, on any of the Bonds or in the payment of any sinking
or analogous fund installment and Liquidated Damages, the Trustee
shall be protected in withholding such notice if and so long as the
Board of Directors, the Executive Committee, or a trust committee of
directors and/or Responsible Officers, of the Trustee in good faith
determine that the withholding of such notice is in the interests of
the Holders.
(c) In each and every case of an Event of Default, and during the
continuance thereof, the Trustee directly or by its agents or attorney
may, to the extent permitted by law, enter upon the Mortgaged
Property; may exclude the Company and its agents and employees wholly
therefrom, either directly or by its receivers, agents, employees or
attorneys; may use, operate, manage and control the Mortgaged
Property, and conduct the business of the Mortgaged Property to the
best advantage of the Holders; may make all necessary or proper
repairs, renewals, replacements and useful alterations, additions,
betterments and improvements to the Mortgaged Property as the Trustee
may deem best; may manage and operate the Mortgaged Property and
exercise all rights and powers of the Company in respect thereof, and
be entitled to collect and receive all tolls, earnings, income, rents,
issues and profits thereof; and, after deducting all expenses incurred
hereunder and all payments which may be made for taxes, assessments,
insurance and prior or other proper charges upon the Mortgaged
Property or any part thereof, as well as just and reasonable
compensation for the services of the Trustee and for all agents and
employees properly engaged by it, the Trustee shall apply the moneys
arising as aforesaid, as follows:
(i) in case none of the principal of or premium, if any, on the
Bonds shall have become due, to the payment of any interest in
default, in the order of the maturity of the installments of such
interest, with interest thereon at the same rates, respectively, as
were borne by the respective Bonds on which such interest shall be in
default; such payments to be made ratably to the Persons entitled
thereto, without discrimination or preference;
(ii) in case the principal of or premium, if any, on any Bond shall
have become due, at maturity by declaration or otherwise, first to the
payment of the accrued interest (with interest on the overdue
installments thereof at the same rates, respectively, as were borne by
the respective Bonds on which such interest shall be in default) in
the order of the maturity of such installments, and next, to the
payment of the principal of and any premium, if any, due on all
Outstanding Bonds; in every instance such payments to be made ratably
to the Persons entitled to such payment without any discrimination or
preference.
(d) If the Trustee shall have entered, or shall have elected to
enter, the Mortgaged Property, or in case a receiver of the Mortgaged
Property shall have been appointed, or in case an Event of Default
shall have occurred and be continuing, in each case as described in
this Section 12.01, the Trustee shall be entitled to vote all shares
of stock, if any, then subject to the Lien of this Indenture, and, for
the benefit of the Holders, shall be entitled to collect and receive
all dividends on all such shares of stock, and all sums payable for
principal of, premium, if any, and interest on any Bonds or
obligations which then shall be subject to the Lien of this Indenture,
and to apply the moneys received in accordance with Section
12.01(c)(i) and Section 12.01(c)(ii); and, as holder of any shares of
stock and of any such Bonds, to perform any and all acts, or to make
or execute any and all transfers, requests, requisitions or other
instruments, for the purpose of carrying out this Section 12.01, but
if a receiver of any Mortgaged Property shall have been appointed and
shall be in possession thereof, the Trustee from time to time in its
discretion may, and if requested by the holders of a majority in
aggregate principal amount of the Outstanding Bonds the Trustee shall,
turn over to such receiver any part or all of the interest moneys and
cash dividends declared and paid out of current earnings, so collected
by the Trustee, and may cooperate with such receiver in managing and
operating all of the properties and business of the Company in such
manner as the Trustee shall deem to be in the best interests of the
Holders.
Section 12.02. Upon an Event of Default Trustee May Sell
Mortgaged Property. Subject to the requirements of applicable law, in
case of the occurrence and during the continuance of any Event of
Default, the Trustee, directly or by its agents or attorneys, with or
without entry upon the Mortgaged Property, in its discretion (a) may
sell, subject to Prior Liens, to the highest and best bidder, all or
any part of the Mortgaged Property of every kind and all right, title
and interest therein and right of redemption thereof, which sale shall
be made at public auction at such place and at such time and upon such
terms as the Trustee may fix and briefly specify in the notice of sale
to be given as provided in this Indenture, or as may be required by
law; or (b) may proceed to protect and to enforce the rights of the
Trustee and of the Holders under this Indenture, by suit or suits in
equity or at law, whether for the specific performance of any covenant
or agreement in this Indenture, or in aid of the execution of any
power granted by this Indenture, or for the foreclosure of this
Indenture, or for the enforcement of any other appropriate legal or
equitable remedy, as the Trustee, being advised by counsel, may deem
most effectual to protect and enforce any of its rights or exercise of
any of its duties hereunder.
Section 12.03. Upon an Event of Default and Request of Holders
of a Majority of Bonds, Trustee Must Declare Principal Due. (a) In
case of the occurrence and during the continuance of any Event of
Default, the Trustee may, and upon the written request of the holders
of a majority in aggregate principal amount of the Outstanding Bonds
(or such other amount as may be specified with respect to any
particular series of Bonds in the supplemental indenture pursuant to
which such series of Bonds is issued, if an Event of Default shall
have occurred and be continuing solely under clause (vii) of Section
12.01(a) with respect to such series of Bonds) shall, by notice in
writing delivered to the Company, declare the principal of all
Outstanding Bonds (including, but not limited to, the Bonds of such
series) to be due and payable immediately, and upon any such
declaration, the same shall be immediately due and payable, anything
in this Indenture or in such Bonds contained to the contrary
notwithstanding. This provision, however, is subject to the condition
that if at any time after the principal of such Bonds shall have been
so declared due and payable and before any sale of the Mortgaged
Property shall have been made pursuant to this Article XII, the
holders of a majority in aggregate principal amount of the Outstanding
Bonds, by written notice to the Company and to the Trustee, may
rescind such declaration and its consequences. No such rescission
shall affect any subsequent default or impair any right consequent
thereon.
(b) In case the Trustee shall have proceeded to enforce any right
under this Indenture by foreclosure, entry or otherwise, and such
proceeding shall have been discontinued or abandoned because of a
waiver, or for any other reason, or shall have been determined
adversely to the Trustee, then and in every such case the Company and
the Trustee shall be restored to their former positions and rights
hereunder in respect of the Mortgaged Property; and all rights,
remedies and powers of the Trustee shall continue as though no such
proceeding had been taken.
Section 12.04. Duty of Trustee to Act on Request of Holders of a
Majority of Bonds. Upon the written request of the holders of a
majority in aggregate principal amount of the Outstanding Bonds
(determined as provided in Section 20.03), in case of the occurrence
and during the continuance of any Event of Default, it shall be the
duty of the Trustee, upon being indemnified as provided in Section
12.14, to take all steps necessary for the protection and enforcement
of its rights and the rights of the Holders, and to exercise the
powers of entry or sale conferred in this Indenture, or both, or to
take appropriate judicial proceedings by action, suit or otherwise, as
the Trustee shall deem most expedient in the interest of the Holders;
but anything in this Indenture to the contrary notwithstanding, the
holders of not less than 75% in aggregate principal amount of the
Outstanding Bonds, from time to time shall have the right to direct
and control the action of the Trustee in any proceedings under this
Article XII.
Section 12.05. Mortgaged Property May be Sold as an Entirety or
in Parcels. In the event of any sale, whether made under the power
of sale herein granted, or under or by virtue of judicial proceedings,
or of some judgment or decree of foreclosure and sale, subject to the
requirements of applicable law, all of the Mortgaged Property, shall
be sold as an entirety or in such parcels as the holders of a majority
in aggregate principal amount of the Outstanding Bonds shall in
writing request, or in absence of such request, as the Trustee may
determine.
Section 12.06. Notice of Sale. Notice of any sale of Mortgaged
Property under this Indenture shall state the time when and the place
where such sale is to be made, shall contain a brief general
description of the Mortgaged Property to be sold, and shall be
published in one Authorized Newspaper published in the City of
Rutland, Vermont and in one Authorized Newspaper published in the
Borough of Manhattan in the City and State of New York, at least once
preceding such sale, the first publication in each such Authorized
Newspaper to be made not less than twenty (20) days prior to the date
of such sale, and such other notice as may be required by law shall
also be given.
Section 12.07. Adjournment of Sale. From time to time the
Trustee, or other Person acting in any sale of Mortgaged Property to
be made under this Indenture, may adjourn such sale by announcement at
the time and place appointed for such sale or for such adjourned sale
or sales; and without further notice or publication, such sale may be
made at the time and place to which such sale shall be so adjourned.
Section 12.08. Interest of Purchaser and Company. (a) Upon the
completion of any sale of any Mortgaged Property under or by virtue of
this Indenture, the Trustee shall execute and deliver to the purchaser
a good and sufficient deed or other instruments conveying, assigning
and transferring such Mortgaged Property. The Trustee and its
successors are hereby appointed the attorneys of the Company, in its
name and stead, to make all necessary conveyances, assignments and
transfers of Mortgaged Property and for that purpose may execute all
necessary deeds and instruments of conveyance, assignment and
transfer, and may substitute one or more Persons with similar power,
the Company hereby ratifying and confirming all that its said
attorneys, or such substitute or substitutes, shall lawfully do by
virtue hereof. Nevertheless, the Company, if so requested by the
Trustee, shall join in the execution and delivery of such conveyances,
assignments and transfers.
(b) Any such sale of Mortgaged Property made under or by virtue of
this Indenture, whether under the power of sale herein granted or
pursuant to judicial proceedings, shall operate to divest all right,
title, interest, claim and demand, either at law or in equity, of the
Company, in and to the Mortgaged Property sold, and shall be a
perpetual bar, both at law and in equity, against the Company, its
successors and assigns, and against any and all Persons claiming or to
claim the Mortgaged Property sold or any part thereof, from, through
or under the Company or its successors or assigns.
Section 12.09. Trustee's Receipt Sufficient to Discharge
Purchaser. The receipt by the Trustee or other authorized Person of
money paid for the purchase of Mortgaged Property shall be a
sufficient discharge to any purchaser of such Mortgaged Property, and
no such purchaser or the representative, grantee or assignee of such
purchaser, after paying such purchase money and receiving such
receipt, shall be affected by, or in any manner answerable for any
loss, misapplication or non-application of such purchase money, or be
bound to inquire as to the authorization, necessity, expediency or
regularity of such sale.
Section 12.10. Principal of Bonds to Become Due in Case of Sale.
In case of any sale of Mortgaged Property under this Article XII,
whether under the power of sale granted in this Indenture or pursuant
to judicial proceedings, the aggregate principal amount of the
Outstanding Bonds, if not previously due, shall at once become due and
payable, anything in such Bonds or in this Indenture to the contrary
notwithstanding.
Section 12.11. Application of Sale Proceeds. The purchase money
received by the Trustee from the sale of Mortgaged Property under the
power of sale granted in this Indenture, or a sale pursuant to
judicial proceedings under this Indenture, together with any other
moneys which may be held by the Trustee under any provision of this
Indenture as part of the Mortgaged Property, shall be applied as
follows:
First. To the payment of the costs and expenses of such sale,
including reasonable compensation to the Trustee, its agents,
attorneys and counsel, and of all expenses, liabilities or advances
made or incurred by the Trustee under this Indenture, and to the
payment of all taxes, assessments or Prior Liens, except any taxes,
assessments or other Prior Liens subject to which such sale shall have
been made.
Second. To the payment of the whole amount then owing and unpaid
upon the Outstanding Bonds, for principal of, premium, if any, and
interest on such Outstanding Bonds, with interest accruing on the
overdue principal, premium, if any, and installments of interest at
the same rates respectively as were borne by the respective Bonds
whereof the principal, premium, if any, or installments of interest
may be overdue, and in case such proceeds shall be insufficient to pay
in full the whole amount so due and unpaid upon such Bonds, then to
the payment of such principal, premium, if any, and interest, without
preference or priority, ratably according to the aggregate of such
principal, premium, if any, and interest. Such payments shall be made
on the date fixed by the Trustee, upon presentation of the Outstanding
Bonds, stamping thereon the amount paid if such Bonds and coupons are
only partly paid, and upon surrender thereof if fully paid.
Third. To the payment of the surplus, if any, to the Company,
its successors or assigns.
Section 12.12. Bonds May Be Applied Against Purchase Price. In
case of any sale of any Mortgaged Property under this Article XII,
whether under power of sale granted in this Indenture or pursuant to
judicial proceedings, any Holder, or the Trustee, subject to Section
14.01 and Section 14.02, may bid for and purchase any Mortgaged
Property, and, upon compliance with the terms of sale, may hold,
retain, possess and dispose of such property in absolute right of such
Holder or the Trustee, without further accountability, and shall be
entitled, for the purpose of making settlement or payment for the
Mortgaged Property purchased, to use and apply any Bonds by presenting
such Bonds, in order that there may be credited thereon the sum
apportionable and applicable thereto out of the net proceeds of such
sale; and thereupon such purchaser shall be credited on account of
such purchase price with the sum apportionable and applicable out of
such net proceeds to the payment of or as credit on the Outstanding
Bonds so presented.
Section 12.13. Company Not to Insist Upon or Plead Stay or
Extension Law or Exercise Right of Redemption. The Company will not,
in the event of any sale of Mortgaged Property under this Article XII,
insist upon or plead, or in any manner whatever claim or take the
benefit or advantage of, any stay or extension law now or at any time
in force, nor will it claim, take or insist upon any benefit or
advantage from any law now or at any time in force, providing for the
valuation or appraisement of Mortgaged Property, or any part thereof,
prior to any sale thereof, or to the decree, judgment or order of any
court of competent jurisdiction; nor, after any such sale, will the
Company claim or exercise any right under any statute now or at any
time made or enacted, or otherwise, to redeem the Mortgaged Property
so sold, or any part thereof; and the Company hereby expressly waives
all benefit and advantage of any such law, or laws, and covenants that
it will not invoke or utilize any such law or laws in order to hinder,
delay or impede the execution of any power herein granted and
delegated to the Trustee, but the Company will permit the execution of
every such power as though no such law or laws had been made or
enacted.
Section 12.14. Holders Not to Institute Suit Without Request to
Trustee, Trustee May Enforce Rights Without Possession of Bonds;
Undertaking for Costs. (a) No holder of any Outstanding Bond shall
have any right to institute any suit, action or proceeding in equity
or at law for the foreclosure of this Indenture, or for the execution
of any trust of the Indenture or for the appointment of a receiver or
for any other remedy under this Indenture, unless (i) the holders of
not less than 30% in aggregate principal amount of the Outstanding
Bonds shall (A) have requested the Trustee in writing to take action
in respect of such matter and shall have afforded to the Trustee a
reasonable opportunity either to proceed to exercise the powers
granted in this Indenture to the Trustee, or to institute such action,
suit or proceeding in its own name and (B) have offered to the Trustee
security and indemnity satisfactory to it against the costs, expenses
and liabilities to be incurred therein or thereby, and (ii) the
Trustee shall have refused or neglected to act on such notice, request
and indemnity; such notification, request and offer of indemnity are
hereby declared, in every such case, at the option of the Trustee, to
be conditions precedent to the execution by the Trustee of its powers
and trusts under this Indenture and to any action or cause of action
the Trustee may take or possess for foreclosure or for the appointment
of a receiver or any other remedy hereunder; it being understood and
intended that no one or more holders of Outstanding Bonds shall have
any right in any manner whatever to affect, disturb or prejudice the
Lien of this Indenture by action of such one or more holders, or to
enforce any right under this Indenture, 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 ratable benefit of all holders of such Outstanding Bonds.
(b) All rights of action under this Indenture may be enforced by the
Trustee without the possession of any Bond or the production thereof
at trial or other proceedings relative thereto, and any such suit or
proceedings instituted by the Trustee shall be brought in its own
name, and any recovery of judgment shall be for the ratable benefit of
the holders of such Bonds.
(c) All parties to this Indenture agree, and each holder of any Bond
by his, her or its acceptance thereof shall be deemed to have agreed,
that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as
Trustee, the filing by any party litigant in such suit or an
undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including attorneys' fees,
against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party
litigant; but this Section 12.14(c) shall not apply to any suit
instituted by the Trustee, to any suit instituted by the Holder or
Holders holding more than 10% in aggregate principal amount of
Outstanding Bonds, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of, premium, if any, or
interest on any Bond on or after the respective due dates expressed in
such Bond.
Section 12.15. Remedies Cumulative. No remedy herein conferred
upon or reserved to the Trustee is intended to be exclusive of any
other remedy or remedies; but each and every 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
statute. No delay or omission of the Trustee or Holders in exercising
any right or power accruing upon any continuing 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 such
right and power may be exercised from time to time and as often as may
be deemed expedient.
Section 12.16. Covenant to Pay Trustee; Judgment by Trustee;
Application of Moneys. (a) In case (i) default shall be made in the
payment of any interest on any Outstanding Bond and such default shall
have continued for a period of 90 days or (ii) default shall be made
in the payment of the principal of or premium, if any, on any
Outstanding Bond when payable, whether upon the maturity of such Bond,
or upon a declaration of maturity as authorized by this Indenture, or
upon a sale as set forth in Section 12.10; then, upon demand of the
Trustee, the Company will pay to the Trustee, for the benefit of the
holders of the Outstanding Bonds, the whole amount that then shall
have become due and payable on all such Outstanding Bonds, for
principal, premium, if any, or interest, as the case may be, with
interest upon the overdue principal, premium, if any, and interest
payable at the same rates respectively as were borne by the respective
Bonds whereof the principal, premium, if any, or interest shall be
overdue; and in the case the Company shall fail to pay the same
forthwith upon such demand, the Trustee, in its own name and as the
trustee of an express trust, shall be entitled to recover judgment
against the Company for the whole amount so due and unpaid.
(b) The Trustee shall be entitled to recover judgment as described
in Section 12.16(a), either before, after or during the pendency of
any proceedings for the enforcement of the Lien of this Indenture, and
the right of the Trustee to recover such judgment shall not be
affected by any entry or sale of Mortgaged Property, or by the
exercise of any other right, power or remedy for the enforcement of
this Indenture; and in case of a sale of Mortgaged Property, and of
the application of the proceeds of such sale to the payment of the
obligations secured by the Lien of this Indenture, the Trustee, in its
own name and as trustee of an express trust, shall be entitled to
enforce payment of and to receive all amounts then remaining due and
unpaid upon any and all of the Outstanding Bonds for the benefit of
the Holders, and shall be entitled to recover judgment for any portion
of such obligations remaining unpaid, with interest. No recovery of
any such judgment by the Trustee, and no levy of execution of any such
judgment upon any of the Mortgaged Property, or any other property,
shall in any manner or to any extent affect the Lien of this Indenture
upon any Mortgaged Property, or any rights, powers or remedies of the
Trustee, or any lien, rights, powers or remedies of the Holders, but
such lien, rights, powers and remedies of the Trustee and of the
Holders shall continue unimpaired as before.
(c) Any moneys received by the Trustee under this Section 12.16
shall be applied by the Trustee to the payment of the amounts then due
and unpaid on the Outstanding Bonds in respect of which such moneys
shall have been received, ratably and without any preference or
priority of any kind, according to the amounts due and payable on such
Bonds, at the date fixed by the Trustee for the distribution of such
moneys, upon presentation of the several Bonds and stamping such
payments thereon, if partly paid, and upon surrender thereof, if fully
paid.
Section 12.17. Appointment of Receiver. In case of the
occurrence and during the continuance of any Event of Default, upon
application of the Trustee, a receiver may be appointed to take
possession of, and to operate, maintain and manage, the whole or any
part of the Mortgaged Property, and the Company shall transfer and
deliver to such receiver all such Mortgaged Property, wheresoever it
may be situated; and in every case, when a receiver of the whole or of
any part of such Mortgaged Property shall be appointed under this
Section 12.17, or otherwise, the net income and profits of such
Mortgaged Property shall be paid over to, and shall be received by,
the Trustee, for the benefit of the Holders. This Section 12.17,
however, is subject to the exclusive right of the Trustee, as pledgee,
to retain the possession and control of any stocks, bonds, cash and
indebtedness pledged or to be pledged with or held by the Trustee
hereunder.
Section 12.18. Suits by Trustee to Protect Security. The
Trustee shall have power to institute and to maintain such suits and
proceedings as it may be advised shall be necessary or expedient to
prevent any impairment of the Lien of this Indenture by any acts of
the Company, or of others, in violation of this Indenture or which are
unlawful, or as the Trustee may be advised shall be necessary or
expedient to preserve and to protect its interests and the security
and interests of the Holders in respect of the Mortgaged Property, or
in respect of the income, earnings, rents, issues and profits thereof,
including power to institute and to maintain suits or proceedings to
restrain the enforcement of, or compliance with, or the observance of,
any legislative or other governmental enactment, rule or order which
may be unconstitutional or otherwise invalid, if the enforcement of,
or compliance with, or observance of, such enactment, rule or order
would impair the Lien of this Indenture or be prejudicial to the
interests of the Holders or of the Trustee.
Section 12.19. Trustee May File Proofs of Claims. The Trustee
may file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee and
of the Holders allowed in any judicial proceedings relative to the
Company, its creditors or the Mortgaged Property. Nothing contained
in this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any
plan of reorganization, arrangement, adjustment or composition
affecting the Bonds or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 12.20. Holders' Rights at Maturity May Not be Impaired.
Notwithstanding any other provision of this Indenture, the right of
any holder of any Bond to receive payment of the principal of,
premium, if any, and interest on such Bond, on or after the respective
due dates expressed in such Bond, or to institute suit for the
enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such holder.
Section 12.21. Waiver of Past Events of Default by Holders. The
holders of a majority in aggregate principal amount of Bonds
Outstanding (determined as provided in Section 20.03) which would be
affected by such waiver may, on behalf of the holders of all the Bonds
so affected, waive any past Event of Default and its consequences,
except (a) an Event of Default in the payment of the principal of,
premium, if any, or interest on any Bond, (b) an Event of Default
arising from the creation of any lien prior to or on a parity with the
Lien of this Indenture, except Permissible Encumbrances or (c) an
Event of Default in respect of the waiver of which a specific
provision is otherwise made in this Indenture.
Section 12.22. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorney's fees and expenses, against any party litigant in
the suit, having due regard to the merits and good faith of the claims
or defenses made by the party litigant. This Section 12.22 does not
apply to a suit by the Trustee, a suit by a Holder hereof, or a suit
by a Holder of more than 10% in principal amount of the then
Outstanding Bonds.
ARTICLE XIII
EFFECT OF MERGER, CONSOLIDATION, CONVEYANCE AND LEASE
Section 13.01. Company may Merge or Consolidate if no Impairment
of Lien of this Indenture and with Assumption of Obligation by
Successor. Nothing in this Indenture shall prevent any consolidation
or merger of the Company with or into, or any conveyance, transfer or
lease, subject to the Lien of this Indenture, of all or substantially
all of the Mortgaged Property to, any corporation lawfully entitled to
acquire, lease or operate the Mortgaged Property; provided, however,
and the Company covenants and agrees, that such consolidation, merger,
conveyance, transfer or lease shall be upon terms which would fully
preserve and in no respect create any Prior Lien (other than
Permissible Encumbrances) on the Mortgaged Property, or impair the
Lien or security of this Indenture, or any of the rights or powers of
the Trustee or the Holders under this Indenture; and provided further,
that any such lease shall be made expressly subject to immediate
termination by the Company or by the Trustee at any time during the
continuance of an Event of Default, and also by the purchaser of the
Mortgaged Property so leased at any sale thereof under this Indenture,
whether such sale is made under the power of sale conferred in this
Indenture or judicial proceedings; and provided, further, that, upon
any such consolidation, merger, conveyance or transfer, or upon any
such lease the term of which extends beyond the date of maturity of
any of the then Outstanding Bonds, the due and punctual payment of the
principal of, premium, if any, and interest on all such Bonds
according to their tenor and the due and punctual performance and
observance of all the covenants and conditions of this Indenture to be
kept or performed by the Company shall be expressly assumed in a
Supplemental Indenture executed with the Trustee and caused to be
recorded by the corporation formed by such consolidation or surviving
such merger, or acquiring all or substantially all the Mortgaged
Property, or by the lessee under any such lease the term of which
extends beyond the date of maturity of any of the then Outstanding
Bonds.
Section 13.02. Upon Merger or Consolidation Indenture not to
Constitute Lien Upon Certain Properties; Successor Corporation to
Confirm Prior Lien of this Indenture and Keep Mortgaged Property
Identifiable. (a) In the absence of an express grant by any such
successor corporation, this Indenture shall not by reason of any such
consolidation, merger, conveyance, transfer or lease or otherwise,
constitute or become a lien upon, and the Mortgaged Property shall not
include or comprise:
(i) any property or franchises owned prior to such consolidation,
merger, conveyance, transfer or lease by any corporation with or into
which the Company or any successor corporation may be consolidated or
merged or to which the Company or any successor corporation may make
any such conveyance, transfer or lease, and which, prior to such
consolidation, merger, conveyance, transfer or lease, were not subject
to the Lien of this Indenture; and
(ii) any property or franchises which may be purchased, constructed
or otherwise acquired by any such successor corporation after the date
of any such consolidation, merger, conveyance, transfer or lease;
excepting only the property and franchises referred to in Section
13.02(b)(i) which shall be and become subject to the Lien of this
Indenture, notwithstanding any such consolidation, merger, conveyance,
transfer or lease.
(b) In order to confirm of record the Lien of this Indenture and to
preserve and protect the rights of the Holders hereunder, the
Supplemental Indenture provided for in Section 13.01, if it does not
contain an express grant by the successor corporation, as further
security for all Bonds issued and to be issued hereunder, of all its
property and franchises then owned and which it may thereafter acquire
(other than Excepted Property) shall contain:
(i) a grant by such successor corporation confirming the prior Lien
of this Indenture upon the Mortgaged Property and subjecting to the
Lien of this Indenture as a first lien, or as a lien subject only to
liens (including any Prior Liens) affecting the property and
franchises of the Company prior to such consolidation, merger,
conveyance, transfer or lease, (A) all property and franchises which
such successor corporation shall thereafter acquire or construct which
shall form an integral part of, or be essential to the use or
operation of, any property then or thereafter subject to the Lien of
this Indenture, and (B) all renewals, replacements and additional
property as may be purchased, constructed or otherwise acquired by
such successor corporation from and after the date of such
consolidation, merger, conveyance, transfer or lease, as the case may
be, to maintain the Mortgaged Property in good repair, working order
and condition as an operating system or systems; and
(ii) a covenant by such successor corporation to keep the Mortgaged
Property as far as practicable identifiable; and a stipulation that
the Trustee shall not be taken impliedly to waive, by accepting or
joining in the Supplemental Indenture, any rights it would otherwise
have.
Section 13.03. Rights of Successor Corporation. In case the
Company, as permitted by Section 13.01, shall be consolidated with or
merged into any other corporation or shall convey or transfer, subject
to the Lien of this Indenture, all or substantially all the Mortgaged
Property, the successor corporation formed by such consolidation, or
into which the Company shall have been merged, or which shall have
received a conveyance or transfer as aforesaid, and upon executing
with the Trustee and causing to be recorded the Supplemental Indenture
provided for in Section 13.01, shall succeed to and be substituted for
the Company with the same effect as if such corporation had been named
herein, and shall have and may exercise under this Indenture the same
powers and rights as the Company, and, without in any way limiting or
impairing by the enumeration of the following rights and powers the
scope and intent of the foregoing, such corporation thereafter may
cause to be executed, authenticated and delivered, either in its own
name or in the name of the Company, such Bonds as might have been
executed, issued and delivered by the Company after the date of such
consolidation, merger, conveyance or transfer, and had such
consolidation, merger, conveyance or transfer not occurred, and upon
the order of such corporation in lieu of the Company, but subject to
all the terms, conditions and restrictions prescribed in this
Indenture concerning the authentication and delivery of Bonds, the
Trustee shall authenticate and deliver any Bonds delivered to it for
authentication which shall have been previously executed by the proper
officers of the Company, and such Bonds as such corporation shall
thereafter, in accordance with this Indenture, cause to be executed
and delivered to the Trustee for such purpose, and such corporation
shall also have and may exercise, subject to all applicable terms,
conditions and restrictions prescribed in this Indenture, the rights
and powers of the Company as to withdrawal of cash and release of
Mortgaged Property from the Lien of this Indenture, which the Company
might have exercised after the date of such consolidation, merger,
conveyance or transfer, and had such consolidation, merger, conveyance
or transfer not occurred. All of the Bonds so issued or delivered
shall in all respects have the same legal right and security as the
Bonds theretofore issued or delivered in accordance with the terms of
this Indenture as though all of such Bonds had been authenticated and
delivered at the date of the execution of this Indenture. As a
condition precedent to the executon by such corporation and the
authentication and delivery by the Trustee of any such Bonds, the
withdrawal of cash or the release of Mortgaged Property from the Lien
of this Indenture, under any provision of this Indenture on the basis
of Bondable Property acquired, made or constructed by such
corporation, the Supplemental Indenture provided for in Section 13.01,
or a subsequent Supplemental Indenture, shall contain a conveyance or
transfer and mortgage in terms sufficient to subject such property to
the Lien of this Indenture; and provided further that the lien created
thereby and the lien thereon shall have similar force, effect and
standing as the Lien of this Indenture would have if the Company was
not consolidated with or merged into such other corporation or did not
convey or transfer, subject to the Lien of this Indenture, all or
substantially all the Mortgaged Property, as aforesaid, to such
corporation, and would itself on or after the date of such
consolidation, merger, conveyance or transfer, acquire or construct
such property, and in respect thereof request the authentication and
delivery of Bonds or the withdrawal of cash or the release of
Mortgaged Property from the Lien of this Indenture as provided in this
Indenture.
Section 13.04. Liens on Merged Entities. In case the Company,
as permitted by Section 13.01, shall be consolidated with or merged
into any other corporation, or shall convey or transfer, subject to
the Lien of this Indenture, all or substantially all of the Mortgaged
Property as aforesaid, neither this Indenture nor the Supplemental
Indenture with the Trustee to be executed and caused to be recorded by
such corporation as provided in Section 13.01, shall, unless such
Supplemental Indenture shall otherwise provide, become or be required
to become or be a lien upon any of the properties or franchises then
owned or thereafter acquired by such corporation (by purchase,
consolidation, merger, donation, construction, erection or in any
other way) except (a) those acquired by such corporation from the
Company, and improvements, extensions and addition thereto and
renewals and replacements thereof, (b) the property used by such
corporation as a basis under any of the provisions of this Indenture
for the authentication and delivery of Bonds, the withdrawal of cash,
the release of Mortgaged Property from the Lien of this Indenture or
otherwise, and (c) such franchises, repairs and property acquired,
made or constructed by the successor corporation (i) to maintain,
renew and preserve the franchises which are subject to the Lien of
this Indenture, (ii) to maintain the Mortgaged Property as an
operating system or systems in good repair, working order and
condition, (iii) in rebuilding or renewal of any of the Mortgaged
Property damaged or destroyed, or (iv) in replacement of or
substitution for machinery, apparatus, equipment, frames, towers,
poles, wire, pipe, implements or furniture, or any other fixtures or
personalty, which are Mortgaged Property and which have become old,
inadequate, obsolete, worn out, unfit, unadapted, unserviceable,
undesirable or unnecessary for use in the operation of the Mortgaged
Property.
ARTICLE XIV
THE TRUSTEE
Section 14.01. Eligibility of Trustee and Acceptance of Trust.
(a) The Trustee shall at all times be a bank or trust company eligible
under Section 7.04 and have a combined capital and surplus of not less
than Twenty Million Dollars ($20,000,000). If the Trustee publishes
reports of condition at least annually, pursuant to law or to the
requirement of any supervising or examining authority referred to in
Section 7.04, then for the purposes of this Section 14.01 the combined
capital and surplus of the Trustee shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published.
(b) The Trustee hereby accepts the trust created by this Indenture.
The Trustee and, if a separate or co-trustee is appointed pursuant to
Section 14.15, such separate or co-trustee, undertakes prior to an
Event of Default, and after the curing of all Events of Default which
may have occurred, to perform such duties and only such duties as are
specifically set forth in this Indenture, and, if an Event of Default
has occurred and is continuing, to exercise such of the rights and
powers vested in it by this Indenture, and to use the same degree of
care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of his or her own
affairs. For purposes of this Section 14.01 and Section 14.02, an
Event of Default shall be deemed cured when the act or omission or
other event giving rise to such Event of Default shall have been
cured, remedied or terminated.
(c) The Trustee, upon receipt of evidence furnished to it by or on
behalf of the Company pursuant to any provision of this Indenture,
will examine such evidence to determine whether or not it conforms to
the requirements of this Indenture.
Section 14.02. Extent of Trustee's Liability. (a) No provision
of this Indenture shall be construed to relieve the Trustee from
liability for its own negligent action, its own negligent failure to
act, or its own willful misconduct, except that
(i) prior to an Event of Default, and after the curing of all Events
of Default which may have occurred, the Trustee shall not be liable
except for the performance of such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations shall
be read into this Indenture against the Trustee but the duties and
obligations of the Trustee, prior to an Event of Default, and after
the curing of all Events of Default which may have occurred, shall be
determined solely by the express provisions of this Indenture;
(ii) prior to an Event of Default, and after the curing of all Events
of Default which may have occurred, and in the absence of bad faith on
the part of the Trustee, the Trustee may conclusively rely upon
certificates or opinions conforming to the requirements of this
Indenture as to the truth of the statements and the correctness of the
opinions expressed therein;
(iii) no Trustee which is a corporation shall be personally liable for
any error of judgment made in good faith by a Responsible Officer or
Responsible Officers of such Trustee unless it shall be proved that
such Trustee was negligent in ascertaining pertinent facts and no
Trustee who is an individual shall be personally liable for any error
of judgment made in good faith by such individual unless it shall be
proved that such individual was negligent in ascertaining the
pertinent facts;
(iv) the Trustee shall not be personally liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the holders of a majority in aggregate principal
amount of the Outstanding Bonds (determined as provided in Section
20.03) relating to the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture;
(v) the Trustee may execute any of the trusts or powers or perform
any duties under this Indenture either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney, who is
not, in either case, an employee of the Trustee, appointed with due
care by it hereunder;
(vi) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee security or indemnity
satisfactory to the Trustee against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
(vii) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, upon reasonable
request and at all reasonable times, to examine the books, records and
premises of the Company, personally or by agent or attorney at the
sole cost of the Company and shall incur no liability or additional
liability of any kind by reason of such inquiry or investigation;
(viii) the Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Responsible Officer of the
Trustee has actual knowledge thereof or unless written notice of any
event which is in fact such a default is received by the Trustee at
the Corporate Trust Office of the Trustee, and such notice references
the Bonds and this Indenture; and
(ix) the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee
in each of its capacities hereunder, and to each agent, custodian and
other Person employed to act hereunder.
(b) The provisions of this Section 14.02 which have been made
specifically applicable to the Trustee shall apply to the Trustee and,
if a separate or co-trustee is appointed pursuant to Section 14.15, to
any separate or co-trustee.
Section 14.03. Recitals Deemed Made By Company. The recitals in
this Indenture and in the Bonds (except the Trustee's authentication
certificate) shall be taken as the statements of the Company and the
Trustee assumes no responsibility for the correctness of such
statements. The Trustee makes no representations as to the condition,
genuineness, validity or value of the Mortgaged Property, or any part
thereof, or as to the title of the Company thereto, or as to the
validity or adequacy of the security afforded thereby and hereby, or
as to the validity of this Indenture or of the Bonds issued hereunder.
The Trustee shall be under no responsibility or duty with respect to
the disposition of any Bonds authenticated and delivered hereunder or
the application of the proceeds thereof or the application of any
moneys paid to the Company under any provision hereof.
Section 14.04. Trustee Not Liable for Debts From Operation of
Mortgaged Property; Trustee May Own Bonds. (a) The Trustee and any
separate or co-trustee shall not be personally liable in case of entry
by it upon the Mortgaged Property for debts contracted or liability or
damages incurred in the management or operation of Mortgaged Property.
(b) The Trustee, any paying agent, bond registrar, or authenticating
agent, in its individual or any other capacity, may become the holder,
owner or pledgee of Bonds and, subject to Section 14.11 and Section
14.12, may otherwise deal with the Company with the same rights the
Trustee would have if it were not Trustee, paying agent, bond
registrar or authenticating agent.
Section 14.05. Trustee May Give Notices Incidental to Action by
it. Whenever it is provided in this Indenture that the Trustee shall
take any action upon the happening of a specified event or upon the
fulfillment of any condition or upon the request of the Company or of
Holders, the Trustee taking such action shall have full power to give
any and all notices to do any and all acts and things incidental to
such action.
Section 14.06. Notice by Trustee to Company. Any notice or
demand which by any provision of this Indenture is required or
permitted to be given or served by the Trustee on the Company shall be
deemed to have been sufficiently given or served, for all purposes,
five (5) days after being deposited first-class postage prepaid in a
post office letter box addressed (until another address is filed by
the Company with the Trustee for the purpose of this Section 14.06) to
the Company at the following address:
Central Vermont Public Service Corporation
77 Grove Street
Rutland, Vermont 05701
Attention: Treasurer
Section 14.07. Trustee May Rely on Certificates and May Consult
Counsel; Responsibility in Selection of Experts. (a) To the extent
permitted by Section 14.01 and Section 14.02:
(i) the Trustee may rely and shall be protected in acting upon any
Accountant's Certificate, Appraiser's Certificate, Officers'
Certificate, Engineer's Certificate, Opinion of Counsel, Board
resolution, certificate, opinion, notice, demand, request, waiver,
consent, order, appraisal, report, bond or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties; and any request or direction of the
Company mentioned herein shall be sufficiently evidenced by an
Officers' Certificate, a Board resolution or a written order signed by
its Chairman of the Board, Chief Executive Officer, President or a
Vice-President and by its Secretary, an Assistant Secretary, Chief
Financial Officer, Treasurer or an Assistant Treasurer or, to the
extent provided in this Indenture, by an Authorized Officer; and
(ii) the Trustee may consult with counsel of its selection and the
opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by the Trustee
hereunder in good faith and in accordance with the opinion of such
counsel.
(b) The Trustee shall not have any responsibility for the selection,
appointment or approval of any expert for any purpose expressed in
this Indenture, except that nothing in this Section 14.07 shall
relieve the Trustee of its obligation to exercise reasonable care with
respect to such selection, appointment or approval of experts who may
furnish opinions or certificates to the Trustee pursuant to this
Indenture.
(c) Nothing in this Section 14.07 shall be deemed to modify the
obligation of the Trustee to exercise during the continuance of an
Event of Default the rights and powers vested in it by this Indenture
with the degree of care and skill specified in Section 14.01.
Section 14.08. Moneys Deposited with Trustee to be Held in
Trust; Interest on Such Moneys. (a) Subject to Section 18.02, all
moneys received by the Trustee whether as Trustee or paying agent
shall, until withdrawn, used, invested or applied as provided in this
Indenture, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the
extent required by law. In accordance with Section 11.02, the Trustee
may allow and credit to the Company interest on any moneys received by
the Trustee hereunder at such rate, if any, as may be agreed upon by
the Company and the Trustee from time to time and as may be permitted
by law.
(b) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for
believing that the repayment of such funds or liability is not
reasonably assured to it.
Section 14.09. Compensation of Trustee; Lien Therefor. (a) The
Company shall pay to the Trustee from time to time, and the Trustee
shall be entitled to receive from the Company, compensation as shall
be agreed to in writing by the Company and the Trustee for all
services rendered by the Trustee in its execution of the trusts
created by this Indenture and in its exercise and performance of any
of the powers and duties of the Trustee hereunder, which compensation
shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust, and the Company shall
reimburse the Trustee for all appropriate advances made by the Trustee
and shall pay to the Trustee from time to time its expenses and
disbursements (including the reasonable compensation and the expenses
and disbursements of all Persons not regularly in its employ and, to
the extent permitted by law, of its counsel) incurred without
negligence or bad faith. The Company also covenants to indemnify each
of the Trustee and any predecessor Trustee for, and to hold it
harmless against, any loss, liability or expense, including taxes
(other than taxes based upon, measured by or determined by, the income
of the Trustee) incurred without negligence or bad faith on the part
of the Trustee and any predecessor Trustee and any predecessor
Trustee, arising out of or in connection with the acceptance or
administration of the trust created by this Indenture, including the
costs and expenses of defending against any claim of liability in the
premises. To secure the performance of the obligations of the Company
under this Section 14.09, the Trustee shall have (in addition to any
other rights under this Indenture) a lien prior to that of the Holders
upon the Mortgaged Property, including all Mortgaged Property and
funds held or collected by the Trustee.
(b) If, and to the extent that, the Trustee and its counsel and
other Persons not regularly in its employ do not receive compensation
for services rendered, reimbursement of its or their advances,
expenses and disbursements, or indemnity, as provided in Section
14.09(a), as the result of allowances made in any reorganization,
bankruptcy, receivership, liquidation or other proceeding or by any
plan of reorganization or readjustment of obligations of the Company,
the Trustee shall be entitled, in priority to the Holders, to receive
any distribution of any securities, dividends or other disbursements
which would otherwise be made to the Holders in any such proceeding or
proceedings and the Trustee is hereby constituted and appointed,
irrevocably, the attorney-in-fact for the Holders and each of them to
collect and receive, in their name, place and stead, such
distributions, dividends or other disbursements, to deduct therefrom
the amounts due to the Trustee, its counsel and other Persons not
regularly in its employ on account of services rendered, advances,
expenses and disbursements made or incurred, or indemnity, and to pay
and distribute the balance, pro rata, to the Holders. The Trustee
shall have a lien upon any securities or other considerations to which
the Holders may become entitled pursuant to any such plan of
reorganization or readjustment of obligations, or in any such
proceeding or proceedings; and the court or judge in any such
proceeding or proceedings may determine the terms and conditions under
which any such lien shall exist and be enforced.
(c) If, and to the extent that the Trustee incurs expenses or
renders services in connection with an Event of Default specified
herein, the expenses (including the reasonable charges and expenses of
its counsel) and the compensation for the services are intended to
constitute expenses of administration under any applicable Federal or
state bankruptcy, insolvency or other similar law.
(d) The provisions of this Section 14.09 shall survive the
termination of this Indenture.
Section 14.10. Trustee May Rely on Matters Established by
Officers' Certificate. Whenever in the administration of the trusts
created by this Indenture, prior to an Event of Default, or after the
curing of an Event of Default, the Trustee shall deem it necessary or
desirable that a matter be proved or established prior to taking or
suffering any action hereunder, such matter (unless other evidence in
respect thereof is herein specifically prescribed) may to the extent
permitted by Sections 14.01 and 14.02 be deemed to be conclusively
proved and established by an Officers' Certificate delivered to the
Trustee, and such Officers' Certificate shall be full warrant to the
Trustee for any action taken or suffered by it under this Indenture in
reliance thereon.
Section 14.11. Action to be Taken by Trustee who Becomes
Creditor of Company. The Trustee shall comply with TIA Section
311(a), excluding any creditor relationship listed in TIA Section
311(b). A trustee which has resigned or been removed shall be subject
to TIA Section 311(a) to the extent indicated therein.
Section 14.12. Action to be Taken by Trustee in the Event of a
Conflict of Interest. The Trustee shall comply with TIA Section
310(b); provided, however, that (i) there shall be excluded from the
requirements of TIA Section 310(b)(1) all indentures which may be
excluded pursuant to the proviso to TIA Section 310(b)(1); and (ii)
the provisions of the first sentence of TIA Section 310(b)(9) shall
not apply to any securities described in the second sentence of TIA
Section 310(b)(9).
Section 14.13. Resignation or Removal of Trustee. (a) The
Trustee may at any time resign and be discharged of the trusts created
by this Indenture by giving written notice to the Company specifying
the day upon which such resignation shall take effect and thereafter
publishing notice thereof, in one Authorized Newspaper in the Borough
of Manhattan, the City and State of New York, and in one Authorized
Newspaper in the city, if different, in which the principal office of
the Trustee is located, once each, and such resignation shall take
effect upon the day specified in such notice unless previously a
successor trustee shall have been appointed by the Holders or the
Company in the manner provided in Section 14.14, and in such event
such resignation shall take effect immediately on the appointment of
such successor trustee, provided, however, that if all then
Outstanding Bonds shall be Registered Bonds, no notice need be given
except by mail to all holders of Registered Bonds at the last address
appearing for each of such holders in the Bond Register maintained
pursuant to Section 2.06. This Section 14.13 shall not be applicable
to resignations pursuant to TIA Section 310(b).
(b) The Trustee may be removed at any time by an instrument or
concurrent instruments in writing filed with such Trustee and signed
and acknowledged by the holders of a majority in principal amount of
the then Outstanding Bonds or by their attorneys-in-fact duly
authorized.
(c) In case at any time the Trustee shall cease to be eligible in
accordance with Section 7.04 or Section 14.01, then the Trustee so
ceasing to be eligible shall resign immediately in the manner and with
the effect provided in this Section 14.13; and in the event that it
does not resign immediately in such case, then it may be removed
forthwith by an instrument or concurrent instruments in writing filed
with the Trustee so ceasing to be eligible and either (i) signed by
the Chairman of the Board, Chief Executive Officer, President or a
Vice-President of the Company attested to by the Secretary or an
Assistant Secretary of the Company or (ii) signed and acknowledged by
the holders of a majority in principal amount of Outstanding Bonds or
by their attorneys in fact duly authorized.
Section 14.14. Appointment of Successor Trustee. (a) In case at
any time the Trustee shall resign or shall be removed (unless such
Trustee shall be removed as provided in TIA Section 310(b) in which
event the vacancy shall be filled as provided therein) or shall be
adjudged a bankrupt or insolvent, or if a receiver of the Trustee or
of its property shall be appointed, or if any public officer shall
take charge or control of the Trustee, or of its property or affairs,
for the purpose of rehabilitation, conservation or liquidation, or a
vacancy shall be deemed to exist in the office of the Trustee for any
other reason, the Company, by a Board resolution, shall promptly
appoint a successor trustee. In case all or substantially all of the
Mortgaged Property shall be in the possession of a receiver or trustee
lawfully appointed, such receiver or trustee, by written instrument,
may similarly appoint a successor to fill such vacancy until a new
trustee shall be so appointed by the Holders. Within ninety (90) days
after such resignation, removal or incapability or the occurrence of
such vacancy, a successor Trustee may be appointed by act of the
holders of a majority in aggregate principal amount of the Outstanding
Bonds, delivered to the Company and the retiring Trustee, and the
successor trustee so appointed shall, forthwith upon its acceptance of
such appointment, become the successor trustee and supersede the
successor trustee appointed by the Company or by such receiver or
trustee.
(b) The Company shall give notice of any appointment of a successor
Trustee made by it or by act of the Holders in the manner provided in
Section 14.13.
(c) If in a proper case no appointment of a successor Trustee shall
be made pursuant to Section 14.14(a) within ninety (90) days after a
vacancy shall have occurred in the office of Trustee, any Holder or
any retiring Trustee may apply to any court of competent jurisdiction
to appoint a successor Trustee. Said court may thereupon after such
notice, if any, as such court may deem proper and prescribe, appoint a
successor Trustee.
(d) If any Trustee resigns because of a conflict of interest as
provided in Section 14.12 and a successor Trustee has not been
appointed by the Company or the Holders or, if appointed, has not
accepted the appointment, within 30 days after the date of such
resignation, the resigning Trustee may apply to any court of competent
jurisdiction for the appointment of a successor Trustee.
(e) Any Trustee appointed under this Section 14.14 as a successor
Trustee shall be a bank or trust company eligible under Section 7.04
and Section 14.01 and qualified under Section 14.12.
Section 14.15. Appointment of Separate Trustee or Co-Trustee.
(a) At any time or times, for the purpose of conforming to any legal
requirements, restrictions or conditions in any State or jurisdiction
in which any Mortgaged Property may be located, the Company and the
Trustee shall have the power to appoint, and, upon the request of the
Trustee, the Company shall for such purpose join with the Trustee in
the execution, delivery and performance of all instruments and
agreements necessary or proper to appoint, one or more Persons
approved by the Trustee, either to act as separate trustee or
trustees, or co-trustee or co-trustees jointly with the Trustee, of
all or any of the Mortgaged Property. In the event that the Company
shall not have joined in such appointment within 15 days after the
receipt by it of a request to do so, the Trustee alone shall have
power to make such appointment.
(b) Every separate trustee, every co-trustee and every successor
trustee, other than any trustee which may be appointed as a successor
to the original Trustee, shall, to the extent permitted by law, but to
such extent only, be appointed subject to the following provisions and
conditions, namely:
(i) the rights, powers, duties and obligations conferred or imposed
upon trustees hereunder or any of them shall be conferred or imposed
upon and exercised or performed by the Trustee or by the Trustee and
such separate trustee or separate trustees or co-trustee or co
trustees jointly, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
the Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations shall
be exercised and performed by such separate trustee or separate
trustees or co-trustee or co-trustees;
(ii) the Bonds shall be authenticated and delivered, and all powers,
duties, obligations and rights conferred upon the Trustee in respect
of the custody of all Bonds and other securities and of all cash
pledged or deposited hereunder, shall be exercised solely by the
original Trustee or its successors in the trust hereunder; and
(iii) the Company and the Trustee, at any time by an instrument in
writing executed by them jointly, may accept the resignation of or
remove any separate trustee or co-trustee appointed under this Section
14.15 or otherwise, and, upon the request of the Trustee, the Company
shall, for such purpose, join with the Trustee in the execution,
delivery and performance of all instruments and agreements necessary
or proper to make effective such resignation or removal. In the event
that the Company shall not have joined in such action within 15 days
after the receipt by it of a request so to do, the Trustee alone shall
have power to accept such resignation or to remove any such separate
trustee or co-trustee. A successor to any separate trustee or co
trustee so resigned or removed may be appointed in the manner provided
in this Section 14.15.
(c) No trustee shall be personally liable by reason of any act or
omission of any other trustee hereunder.
(d) Any notice, request or other writing, by or on behalf of the
Holders delivered to the original Trustee, or its successor in the
trust hereunder, shall be deemed to have been delivered to all of the
then trustees or co-trustees as effectually as if delivered to each of
them. Every instrument appointing any trustee or trustees other than
a successor to the original Trustee shall refer to this Indenture and
the conditions expressed in this Article XIV and upon the acceptance
in writing of such appointment, such trustee or trustees, or co
trustee or co-trustees, shall be vested with the estates or property
specified in such instrument, either jointly with the original
Trustee, its successor, or separately, as may be provided in such
instrument subject to all the trusts, conditions and provisions of
this Indenture; and every such instrument shall be filed with the
original Trustee or its successor in the trust hereunder. Any
separate trustee or trustees, or any co-trustee or co-trustees, may at
any time by an instrument in writing constitute the original Trustee
or its successor in the trust hereunder the agent or attorney in fact
for such trustee, with full power and authority, to the extent which
may be permitted by law, to do any and all acts and things and
exercise any and all discretion authorized or permitted by such
trustee, for and on behalf of such trustee, and in such trustee's
name. In case any separate trustee or trustees or co-trustee or co
trustees, or a successor to any of them, shall die, become incapable
of acting, resign or be removed, all the estates, property, rights,
powers, trusts, duties and obligations of said separate trustee or co
trustee, so far as permitted by law, shall vest in and be exercised by
the original Trustee or its successor in the trust hereunder, without
the appointment of a new, trustee as successor to such separate
trustee or co-trustee.
Section 14.16. Acceptance by Successor Trustee; Requirements of
Predecessor Trustee Upon Retiring. Any successor trustee appointed
hereunder shall execute, acknowledge and deliver to the predecessor
trustee, and also to the Company, an instrument accepting such
appointment hereunder, and thereupon such successor trustee, without
any further act, deed or conveyance, shall become fully vested with
all the estates, properties, rights, powers, trusts, duties and
obligations of its predecessor in trust hereunder, with like effect as
if originally named as trustee herein; but the trustee ceasing to act
shall nevertheless, on the written request of the Company, or of the
successor trustee, or of the holders of not less than 10% in principal
amount of the then Outstanding Bonds, execute, acknowledge and deliver
such instruments of conveyance and further assurance and do such other
things as may reasonably be required for more fully and certainly
vesting and confirming in such successor trustee all the right, title
and interest of the trustee to which such trustee succeeds in and to
the Mortgaged Property and such rights, powers, trusts, duties and
obligations, and the trustee ceasing to act shall also, upon like
request, pay over, assign and deliver to the successor trustee any
money or other Mortgaged Property, including any pledged securities
which may then be in the possession of such trustee. If any deed,
conveyance or instrument in writing from the Company is required by
the new trustee for more fully and certainly vesting in and confirming
to such new trustee such estates, properties, rights, powers, trusts,
duties and obligations, any and all such deeds, conveyances and
instruments in writing shall, on request, be executed, acknowledged
and delivered by the Company.
Section 14.17. Merger or Consolidation of Trustee. Any
corporation into which the Trustee may be merged or with which it may
be consolidated or any corporation resulting from any merger or
consolidation in which the Trustee shall be a party or any corporation
to which substantially all the business and assets of the Trustee may
be transferred, provided such corporation shall be eligible under
Section 7.04 and Section 14.01 and qualified under Section 14.12,
shall be the successor trustee under this Indenture, without the
execution or filing of any instrument or the performance of any
further act on the part of the Company or any other trustee hereunder,
anything herein to the contrary notwithstanding. In case any of the
Bonds contemplated to be issued hereunder shall have been
authenticated but not delivered, any such successor to the Trustee
may, subject to the same terms and conditions as though such successor
had itself authenticated such Bonds, adopt the certificate of
authentication of the original Trustee or of any successor to it as
trustee hereunder, and deliver the such Bonds so authenticated; and in
case any of such Bonds shall not have been authenticated, any
successor to the Trustee may authenticate such Bonds either in the
name of any predecessor trustee or in the name of the successor
trustee, and in all such cases such certificate shall have the full
force which the certificate of the Trustee shall have; provided,
however, that the right to authenticate Bonds in the name of the
original Trustee shall apply only to its successor or successors by
merger or consolidation or sale as aforesaid.
Section 14.18. Appointment of Successor Trustee by Company.
Notwithstanding any other provision of this Indenture, by instrument
executed by order of the Board and duly acknowledged by its proper
officers, the Company may appoint any corporation eligible under
Section 7.04 and Section 14.01 and qualified under Section 14.12 as
Trustee in succession to the Trustee on the date of such appointment,
and the corporation so appointed Trustee shall thereupon become
successor Trustee hereunder.
Section 14.19. Authenticating Agent. At any time there is any
series of Bonds issued hereunder listed on the New York Stock
Exchange, there shall (unless (a) a successor to the Trustee
appointed, qualified and acting as Trustee in accordance with the
provisions of Section 14.14 shall have its principal corporate trust
office in the Borough of Manhattan, City and State of New York or (b)
an appointment of an authenticating agent is not required in order to
comply with the rules of the New York Stock Exchange by virtue of the
maintenance by the Trustee or any successor trustee of an office
and/or other facilities in the Borough of Manhattan, City and State of
New York, for the performance of the functions which would otherwise
be required by such rules to be performed by an authenticating agent
or for any other reason) be an authenticating agent for the Bonds.
Such authenticating agent shall be appointed by the Trustee, shall be
acceptable to the Company, and shall at all times be a corporation
organized and doing business under the laws of the United States or of
a State, authorized under such laws to act as authenticating agent,
having a combined capital and surplus of at least Twenty Million
Dollars ($20,000,000), and being subject to supervision or examination
by Federal or State authority and, if there be such a corporation
willing and able to act as authenticating agent on reasonable and
customary terms, having its principal corporate trust office in the
Borough of Manhattan, City and State of New York. If such corporation
publishes reports of condition at least annually, pursuant to law, or
to the requirements of any supervising or examining authority, then
for the purposes of this Section 14.19 the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.
Any corporation into which any authenticating agent may be merged
or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate
agency business of any authenticating agent, shall continue to be the
authenticating agent without the execution or filing of any paper or
any further act on the part of the Trustee or the authenticating
agent.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and the Company. The Trustee may
at any time terminate the agency of any authenticating agent by giving
written notice of termination to such authenticating agent and the
Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any authenticating agent shall
cease to be eligible in accordance with the provisions of this Section
14.19, the Trustee promptly shall appoint a successor authenticating
agent and shall give written notice of such appointment to the
Company. Any successor authenticating agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers,
duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as authenticating agent herein. No
successor authenticating agent shall be appointed unless eligible
under the provisions of this Section 14.19.
Any authenticating agent by the acceptance of its appointment
shall be deemed to have agreed with the Company and the Trustee that:
it will perform and carry out the duties of an authenticating agent as
herein set forth, including among other things, the duty to
authenticate and deliver bonds when presented to it in connection with
exchanges or transfers of bonds (but not upon the original issue
thereof or in cases of replacement of bonds mutilated, defaced, lost
or stolen); it will furnish from time to time as requested by the
Company or the Trustee appropriate records of all transactions carried
out by it as authenticating agent and will furnish the Company or the
Trustee such other information and reports as the Company or the
Trustee may reasonably require; it is eligible for appointment as
authenticating agent and will notify the Company and the Trustee
promptly if it shall cease to be so eligible; it will indemnify the
Trustee against any loss, liability or expense incurred by the Trustee
and will defend any claims asserted against the Trustee by reason of
any acts or failures to act of the authenticating agent but it shall
have no liability for any action taken by it at the specific direction
of the Trustee.
The Company agrees to pay to the authenticating agent from time
to time reasonable compensation for its services.
ARTICLE XV
SUPPLEMENTAL INDENTURES
Section 15.01. Provision for Supplemental Indentures.
Without the consent of any Holder, the Trustee and the Company, when
authorized by a Board resolution, from time to time and at any time,
may enter into Supplemental Indentures hereto which shall thereafter
form a part hereof, for any one or more of the following purposes:
(a) to amplify or correct the description of any property conveyed
or pledged or intended so to be by this Indenture, or to convey,
transfer and assign to the Trustee and to subject to the Lien of this
Indenture with the same force and effect as if included in the
granting clause hereof, additional property and franchises, together
with such other provisions as may be appropriate to express the
respective rights of the Trustee and the Company in regard thereto;
(b) to convey, transfer and assign to the Trustee and to subject to
the Lien of this Indenture with the same force and effect as if
included in the granting clause hereof, property of subsidiaries of
the Company used or to be used for one or more purposes which if owned
by the Company would constitute property used or to be used for one or
more of the Primary Purposes of the Company's Business, which property
shall for all purposes of this Indenture be deemed to be property of
the Company, together with such other provisions as may be appropriate
to express the respective rights of the Trustee and the Company in
regard thereto;
(c) to close this Indenture against the issue of additional Bonds or
to add limitations on the amount, terms, provisions, authentication,
delivery, issue and purposes of the issue of Bonds under this
Indenture;
(d) to provide for the issue of Bonds of any series, to add or omit
provisions with respect to such series (including but not limited to
provisions regarding covenants, events of default, remedies, mandatory
or optional prepayment, amendments and modifications, and legal and
covenant defeasance), and to establish the forms and provisions of the
Bonds of such series, all in a manner not prohibited by the provisions
of this Indenture;
(e) to provide the terms and conditions of the exchange or
conversion, at the option of the holders of Bonds of any series, of
the Bonds of such series for or into Bonds of other series or stock or
other securities of the Company or any other corporation;
(f) to provide for alternative methods or forms for evidencing and
recording the ownership of Bonds and matters related thereto;
(g) to reflect changes in Generally Accepted Accounting Principles;
(h) to change the words "Mortgage Bonds" to "First Mortgage Bonds"
in the descriptive title of all Outstanding Bonds at any time after
the discharge of the First Mortgage;
(i) to comply with the rules or regulations of any national
securities exchange on which any of the Bonds may be listed;
(j) to modify the provisions of this Indenture to such extent as
shall be necessary to continue the qualification of this Indenture
under the TIA, or under any similar federal statute hereafter enacted;
(k) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by such
successor corporation of the covenants and obligations of the Company
under this Indenture; to evidence the succession of a new trustee to
any trustee hereunder; or to evidence the appointment and the terms of
such appointment of any co-trustee or separate trustee appointed
pursuant to the provisions of Section 14.15;
(l) to change, alter, modify, vary or eliminate any of the terms,
provisions, restrictions or conditions of this Indenture; provided,
however, that any such changes, alterations, modifications, variations
or eliminations made in a Supplemental Indenture pursuant to this
provision which would materially adversely affect the rights of the
holders of any Bonds then Outstanding against the Company or its
property shall be expressly stated in such Supplemental Indenture to
become effective only when there are no Outstanding Bonds which were
authenticated and delivered prior to the execution of such
Supplemental Indenture for the purpose of relieving the Company from
any of the obligations, conditions or restrictions herein contained or
otherwise; and
(m) 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 or for the purpose of supplying any
omission, curing any ambiguity, or curing, correcting or supplementing
any defective or inconsistent provision contained in this Indenture or
for any other purpose not inconsistent with this Indenture and which
will not materially impair the security of the same.
Section 15.02. Requirements for Other Supplemental Indentures.
(a) With the consent (evidenced as provided in Article XX) of the
holders of a majority in aggregate principal amount of the Outstanding
Bonds which would be affected by the action to be taken, and in case
one or more of the series of Outstanding Bonds would be materially
adversely affected by, the action to be taken, with the consent of the
holders of not less than 60% (or such other amount as may be specified
in the Supplemental Indenture pursuant to which the Bonds of such
series were issued) in aggregate principal amount of such series so
affected (which need not include 60% (or such other amount) of each
such series), the Company, when authorized by a Board resolution, and
the Trustee may, from time to time and at any time, enter into a
Supplemental Indenture for the purpose of adding any provision to or
changing in any manner or eliminating any provision of this Indenture
or of modifying in any manner the rights of the holders of Bonds;
provided, however, that anything in this Section 15.02 to the contrary
notwithstanding, no such Supplemental Indenture shall, without the
consent of the holder of each Outstanding Bond affected thereby, (i)
extend the fixed maturity of any Bonds, change any terms of any
sinking fund or analogous fund or conversion rights with respect to
any Bonds, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof, or, subject
to Article XII, limit the right of a holder of Bonds to institute suit
for the enforcement of payment of principal of, premium, if any, or
interest on such Bonds in accordance with the terms of such Bonds, or
(ii) reduce the aforesaid percentage of Bonds, the holders of which
are required to consent to any such Supplemental Indenture, or (iii)
permit the creation by the Company of any Prior Lien other than
Permissible Encumbrances (but no amendment of the First Mortgage nor
any merger or consolidation, as permitted by Section 13.01, of the
Company with any other Person owning property that is subject to a
Prio Lien shall be deemed the creation of any Prior Lien). For the
purposes of this Section 15.02, Bonds shall be deemed to be materially
adversely affected by a Supplemental Indenture if such Supplemental
Indenture materially adversely affects or materially diminishes the
rights of holders thereof against the Company or against its property.
The Trustee may in its discretion determine whether or not, in
accordance with the foregoing, Bonds of any particular series would be
materially adversely affected by any Supplemental Indenture and any
such determination shall be conclusive upon the holders of Bonds of
such series and all other series. Subject to Section 14.01 and
Section 14.02, the Trustee shall not be liable for any such
determination made in good faith.
(b) Upon the request of the Company, accompanied by a copy of a
Board resolution authorizing the execution of any such Supplemental
Indenture, and upon the filing with the Trustee of evidence of the
consent of Holders as aforesaid, the Trustee shall join with the
Company in the execution of such Supplemental Indenture.
(c) It shall not be necessary for the consent of the Holders under
this Section 15.02 to approve the particular form of any proposed
Supplemental Indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
(d) The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Persons entitled to consent to
any indenture supplemental hereto. If a record date is fixed, the
Holders on such record date, or their duly designated proxies, and
only such Persons, shall be entitled to consent to such supplemental
indenture, whether or not such Holders remain Holders after such
record date; provided, that unless such consent shall have become
effective by virtue of the requisite percentage having been obtained
prior to the date which is 90 days after such record date (unless a
shorter period after such record date shall have been specified, in
which case such shorter period shall apply), any such consent
previously given shall automatically and without further action by any
Holder be cancelled and of no further effect.
Section 15.03. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article Fifteen or the
modification thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture.
The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
ARTICLE XVI
MEETINGS OF BONDHOLDERS
Section 16.01. Manner of Calling Meetings and Determination of
Bonds Affected. (a) The Trustee shall on request of the Company
pursuant to a Board resolution or upon written request of the holders
of a majority in aggregate principal amount of Outstanding Bonds call
a meeting of Holders to be held at such time and at such place in
either the Borough of Manhattan, the City and State of New York, or
the city in which the principal office of the Trustee or the city in
which the principal office of the Company is located, as the Trustee
shall determine. Notice of every meeting of Holders, setting forth
the time and the place of such meeting and in general terms the action
proposed to be taken at such meeting and specifying each series of
Bonds which would be affected by the proposed action, shall be
published at least two times in one Authorized Newspaper in the
Borough of Manhattan, the City and State of New York and in one
Authorized Newspaper in the city in which the principal office of the
Trustee is located, the first publication in each such Authorized
Newspaper to be not less than 20 nor more than 60 days prior to the
date fixed for such meeting (except that, if all the Bonds which would
be affected by the proposed action are Registered Bonds, such
publication need not be made) and shall be mailed not less than 30
days before such meeting (i) to each holder on a record date not more
than 15 days prior to the date of such mailing of Registered Bonds
which would be affected by the action proposed to be taken at the
meeting and then Outstanding, addressed to such holder at the address
appearing on the Bond Register maintained pursuant to Section 2.06,
(ii) if any of the Bonds which would be affected by the proposed
action are not Registered Bonds, to each holder of any such Bond
payable to bearer who shall have filed, within two years prior to the
date of such mailing, with the Trustee an address for notices to be
addressed to such holder and to all other such holders whose names and
addresses are preserved at the time by the Trustee, as provided in TIA
Section 312(a), (iii) to the Trustee addessed to it at 101 Barclay
Street, Floor 21 West, New York, New York 10286, or at such other
address as may be designated by the Trustee from time to time, and
(iv) to the Company addressed to it at 77 Grove Street, Rutland,
Vermont 05701, Attention: Treasurer, or at such other address as may
be designated by the Company from time to time; provided, however,
that the mailing of such notice to any Holder shall in no case be a
condition precedent to the validity of any action taken at such
meeting.
(b) The Trustee may in its discretion determine whether or not Bonds
of any particular series would be affected by the action proposed to
be taken at a meeting and, if such action is the authorization of a
Supplemental Indenture as provided in Section 15.02, whether or not
such Bonds would be materially adversely affected, and any such
determination shall be conclusive upon the holders of Bonds of such
series and all other series. Subject to Section 14.01 and Section
14.02, the Trustee shall not be liable for any such determination made
in good faith.
Section 16.02. Calling of Meetings by Company or Holders. In
case at any time the Company, pursuant to a Board resolution, or the
holders of a majority in aggregate principal amount of the Outstanding
Bonds, shall have requested the Trustee to call a meeting of Holders,
by written request setting forth in general terms the action proposed
to be taken at such meeting, and the Trustee shall not have made the
first publication of the notice of such meeting or mailed the notice
of such meeting, if publication need not be made, within 20 days after
receipt of such request, then the Company or the holders of Bonds in
the amount above specified may determine the time and place in the
Borough of Manhattan, the City and State of New York, or in the city
in which the principal office of the Trustee or the city in which the
principal office of the Company is located, for such meeting and may
call such meeting by giving notice thereof as provided in Section
16.01.
Section 16.03. Persons Entitled to Vote at Meeting. To be
entitled to vote at any meeting of Holders a Person shall (a) be a
holder of one or more definitive Bonds transferable by delivery of a
series which would be affected by the proposed action; or (b) be a
holder of one or more Registered Bonds of such a series (whether such
Bonds are fully registered or registered only as to principal); or (c)
be the holder of a certificate (with respect to one or more Bonds of
such a series) then in effect and satisfactory to the Trustee issued
pursuant to Section 20.01; or (d) be a Person appointed by an
instrument in writing as a proxy for such a holder or holders of Bonds
of such a series or for a holder of such a certificate, provided that
no Person who holds a Bond which is excluded in the determination of
the requisite amount concurring in any action as set forth in Section
20.03 shall be permitted to vote. The only Persons who shall be
entitled to be present or to speak at any meeting of Holders shall be
the Persons entitled to vote at such meeting and their counsel,
proxies and any representatives of the Trustee and its counsel, and
any representatives of the Company and its counsel.
Section 16.04. Conduct of Meetings; Regulations. (a)
Notwithstanding any other provision of this Indenture, the Trustee on
its own initiative or on request of the Company, may, or upon request
of the holders of a majority in principal amount of the Outstanding
Bonds shall, from time to time, make such reasonable regulations, and
may vary such regulations, as it may deem advisable for any meeting of
Holders, in regard to the appointment and duties of inspectors of
votes, the submission and examination of proxies, certificates and
other evidences of the right to vote, and, except as otherwise
provided in this Section 16.04 and in Section 16.05, such other
matters concerning the conduct of the meeting as the Trustee may deem
advisable. Except as otherwise permitted or required by any such
regulations, the holding of Bonds shall be proved in the manner
specified in Section 20.01 and the appointment of any proxy shall be
proved in the manner specified in Section 20.01 or by having the
signature of the Person executing the proxy witnessed or guaranteed by
any bank, banker or trust company authorized by Section 20.01 to
certify to the holding of Bonds which are transferable by delivery.
(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by the Holders as provided in Section 16.02,
in which case the Company or the Holders calling the meeting, as the
case may be, shall in a similar manner appoint a temporary chairman.
A permanent chairman and a permanent secretary of the meeting shall be
elected by vote of the holders of a majority in principal amount of
the Bonds represented at the meeting and entitled to vote. The
Trustee shall appoint an alternate chairman and an alternate secretary
of the meeting from among the Persons present and entitled to vote at
such meeting, who shall, respectively, succeed to and serve as
permanent chairman and permanent secretary of the meeting in the event
the permanent chairman and/or the permanent secretary, as the case may
be, for any reason is unable or fails to perform the functions of such
office, including taking the actions provided for in Section 16.05(a).
(c) Subject to Section 20.03, upon the submission of any resolution
at any meeting, each Holder or proxy shall be entitled to one vote for
each and every $1,000 principal amount of Outstanding Bonds held by
such Holder or by the Holders represented by such proxy, as the case
may be, the holders of which are entitled by this Article XVI to vote,
provided, however, that no vote shall be cast or counted at any
meeting in respect of any Bond challenged as not Outstanding and ruled
by the chairman of the meeting to be not Outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Bonds
held by such chairman or instruments in writing as aforesaid duly
designating such chairman as the person to vote on behalf of other
Holders. Any meeting of Holders duly called pursuant to Section 16.01
or Section 16.02 may be adjourned from time to time, and the meeting
may be held as so adjourned, without further notice.
Section 16.05. Manner of Voting. (a) The vote upon any action
proposed to be taken at such meeting, which action shall be submitted
to the meeting in the form of a resolution, shall be by written
ballots on which shall be subscribed the signatures of the Holders or
their representatives by proxy and the serial number or numbers of the
Bonds held or represented by them. The chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Holders shall be prepared by the
secretary of the meeting and there shall be attached to said record
the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more Persons having knowledge
of the facts, setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 16.01. The
record shall show the serial numbers of the Bonds voting in favor of
any resolution submitted in accordance with this Article XVI. The
record shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be
preserved by the Trustee.
(b) Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
Section 16.06. Rights of Trustee or Holders Not to Be Hindered
or Delayed. Nothing in this Article XVI contained shall be deemed or
construed to authorize or permit, by reason of any call of a meeting
of Holders or any rights expressly or impliedly conferred hereunder to
make such call, any hindrance or delay in the exercise of any right or
rights conferred upon or reserved to the Trustee or to the Holders
under any provision of this Indenture or of the Bonds.
Section 16.07. Action By Written Consent. Any action which may
be taken at a meeting of Holders, including the authorization of a
Supplemental Indenture as provided in Sections 15.02(a), may be taken
without a meeting, without prior notice and without a vote, if such
action is consented to in writing (evidenced as provided in Article
XX) by the holders of Outstanding Bonds holding not less than the
minimum aggregate principal amount of Outstanding Bonds which is
necessary to authorize or take such action at a meeting of Holders.
ARTICLE XVII
BONDHOLDER LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 17.01. Company to Furnish Holder Lists. The Company
shall, so long as any Bonds are Outstanding under this Indenture,
furnish or cause to be furnished to the Trustee between March 1 and
March 15 and between September 1 and September 15 of each year,
commencing in the year 2000, and at such other times as the Trustee
may request in writing, the information required by TIA Section
312(a), which the Trustee shall preserve as required by TIA Section
312(a). The Trustee shall also comply with TIA Section 312(b), but
the Trustee, the Company and each Person acting on behalf of the
Trustee or the Company shall have the protection of TIA Section
312(c).
Section 17.02. Company to Make Filings With Trustee and
Otherwise Comply with TIA Section 314. The Company shall (a) file
with the Trustee, within 15 days after it is required to file the same
with the Securities and Exchange Commission, copies of the reports,
information and documents (or portions thereof) required to be so
filed pursuant to TIA Section 314(a), and (b) comply with the other
provisions of TIA Section 314(a), including the provision of an
Officer's Certificate pursuant to TIA Section 314(a)(4). Delivery of
such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall
not constitute constructive notice of any information contained
therein or determinable from information contained therein, including
the Company's compliance with any of its covenants hereunder (as to
which the Trustee is entitled to rely exclusively on Officers'
Certificates).
Section 17.03. Trustee to Furnish Reports to Holders and
Otherwise Comply With TIA Section 313. The Trustee shall (a) transmit
within 60 days after June 30 in each year, beginning with the year
2000, to the Holders, a brief report dated as of such June 30 and
complying with the requirements of TIA Section 313(a), and (b) comply
with the other provisions of TIA Section 313.
ARTICLE XVIII
SATISFACTION AND DEFEASANCE
Section 18.01. Effect of Payment of Indebtedness; Deposit of
Moneys or Governmental Obligations in Certain Instances Deemed
Payment. (a) The Trustee may, and upon request of the Company shall,
satisfy and discharge the Lien of this Indenture and execute and
deliver to the Company such deeds and instruments as shall be required
to discharge the Lien of this Indenture, and reconvey and transfer to
the Company the Mortgaged Property, whenever all indebtedness secured
hereby shall have been paid or deemed to have been paid, including all
proper charges of the Trustee hereunder, and thereupon the Holders
shall have no rights under this Indenture except to payment of
principal of, premium, if any, and interest on their Bonds.
(b) Notwithstanding the satisfaction and discharge of this
Indenture, the Trustee shall have an unsecured right to charge and be
reimbursed by the Company for any reasonable expenditures and
liabilities (incurred in good faith and without negligence by the
Trustee) which it may thereafter incur.
(c) Bonds for the payment of which and Bonds for the redemption of
which, either moneys in the necessary amount or Governmental
Obligations in an amount which, taking into account any reinvestment
and proceeds thereof, will, in the opinion of an Accountant as
certified to the Trustee in an Accountant's Certificate, provide
moneys which, together with the moneys, if any, deposited with or held
by the Trustee, shall be sufficient to pay when due the principal of,
premium, if any, and interest due and to become due on such Bonds on
the redemption or maturity date thereof and on the cash interest
payment dates thereof, as the case may be, shall have been set apart
by or deposited with the Trustee, with irrevocable direction to apply
the same to such payment, subject to Section 18.02 and with or without
any additional right given to the Holders to surrender their Bonds or
obtain therefrom payment therefor prior to the redemption or maturity
date, shall for all purposes under this Indenture, including
satisfying the Lien of this Indenture, be deemed to have been paid;
provided that in case of redemption the notice of such redemption
shall have been given or arrangements shall have been made to the
satisfaction of the Trustee that such notice will be given; provided,
further, that with respect to Bonds of any series, the defeasance
provisions, if any, of the supplemental indenture pursuant to which
Bonds of such series were issued are complied with.
Section 18.02. Unclaimed Moneys. In case any moneys deposited
with the Trustee or any paying agent or proceeds of the investment in
or sale of Governmental Obligations held in trust for the payment of
principal of, premium, if any, or interest on any Bond remain
unclaimed for two years after such principal, premium or interest has
become due and payable, the Trustee or such paying agent shall so
advise the Company and, upon receipt of a written request of the
Company, shall pay over to or upon the written order of the Company
said moneys, and thereupon the Trustee or such paying agent shall be
released from any and all further liability with respect to the
payment of such principal of or premium or interest on such Bond, and
the holder of such Bond (subject to any applicable statute of
limitations) shall be entitled as an unsecured creditor to seek the
payment thereof from the Company unless an applicable abandoned
property law designates another Person.
ARTICLE XIX
IMMUNITY OF INCORPORATORS, SUBSCRIBERS TO THE CAPITAL STOCK,
STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 19.01. General Provision. No recourse under or upon any
obligation, covenant or agreement contained in this Indenture, or in
any Bond or because of the creation of any indebtedness hereby
secured, shall be had against any incorporator or any past, present or
future subscriber to the capital stock, stockholder, officer,
director, agent or representative of the Company or of any predecessor
or successor corporation, as such, either directly or through the
Company or any predecessor or successor corporation, under any rule of
law, statute or constitution or by the enforcement of any assessment
or by any legal or equitable proceeding or otherwise; it being
expressly agreed and understood that this Indenture and the
obligations hereby secured are solely corporate obligations, and that
no such personal liability shall attach to, or be incurred by, such
incorporators, subscribers to the capital stock, stockholders,
officers, directors, agents or representations of the Company or of
any predecessor or successor corporation, or any of them, as such,
because of the incurring of the indebtedness hereby authorized, or
under or by reason of any of the obligations, covenants or agreements
contained in this Indenture or in any of the Bonds, or implied
therefrom, and that any and all such personal liability of every name
and nature, and any and all such rights and claims against every such
incorporator, subscriber to the capital stock, stockholder, officer or
director, agent or representative, as such, whether arising at common
law or in equity, or created by rule of law, statute, constitution or
otherwise, are expressly released and waived as a condition of, and as
part of the consideration for, the execution of this Indenture and the
issue of the Bonds secured hereby.
ARTICLE XX
EVIDENCE OF RIGHTS OF BONDHOLDERS AND OWNERSHIP OF BONDS
Section 20.01. Evidence of Action by Holders. (a) Whenever in
this Indenture it is provided that the holders of a specified
percentage in aggregate principal amount of the Bonds may take any
action (including the making of any demand or request, the giving of
any notice, waiver or consent, or the taking of any other action) the
fact that at the time of taking any such action the holders of such
specified percentage have joined therein may be evidenced (i) by any
instrument or any number of instruments of similar tenor executed by
Holders in person or by attorney appointed in writing, or (ii) by the
record of the Holders voting in favor thereof at any meeting of
Holders duly called and held in accordance with the provisions of
Article XVI, or (iii) by a combination of such instrument or
instruments and any such record of such a meeting of Holders.
(b) Proof of the execution of any such instrument, or of a writing
appointing any such attorney, or of the holding by any Person of any
of the Bonds shall, subject to Section 14.01, Section 14.02 and
Section 14.07, be sufficient for any purpose of this Indenture (except
as otherwise expressly provided) if made in the following manner:
(i) the fact and date of the execution by any Person of any
instrument or writing may be proved by the certificate of any notary
public, or other officer authorized to take acknowledgments of deeds
to be recorded in the jurisdiction in which such notary public or
officer purports to act, that the Person signing such instrument or
writing acknowledged to such notary public or officer the execution
thereof, or by an affidavit of a witness to such execution sworn to
before any such notary public or officer;
(ii) the amount of Bonds transferable by delivery, and the series and
serial numbers thereof, held by any Person, and the date of such
Person's holding such Bonds, may be proved either by exhibiting such
Bonds themselves or by a certificate executed by any trust company,
bank, banker or other depositary wherever situated, if such
certificate shall be deemed by the Trustee to be satisfactory, showing
that at the date therein mentioned such Person had on deposit with or
exhibited to such depositary, the Bonds described in such certificate.
Each such certificate shall be dated and shall state that on the date
thereof Bond or Bonds bearing a specified serial number or numbers
were deposited with or exhibited to such depositary by the Person
named in such certificate. No such certificate shall continue to be
effective if (A) a certificate bearing a later date issued in respect
of the same Bond shall be produced, or (B) the Bond specified in such
certificate (or a Bond or Bonds issued in exchange or substitution for
such Bond) shall be produced, or (C) the Bond specified in such
certificate shall be registered as to principal or shall have been
surrendered in exchange for a Registered Bond. The Trustee may
nevertheless in its discretion require further proof in cases where it
deems further proof desirable. The ownership of Registered Bonds
shall be proved by the register or registers of the Company. The
record of any Holders' meeting shall be proved in the manner provided
in Section 16.05.
Section 20.02. Inspection of Bonds. Neither the Company nor the
Trustee shall be bound to recognize any Person as the holder of a Bond
unless and until such Bond is submitted for inspection, if required,
and the title of such Person to such Bond satisfactorily established,
if disputed.
Section 20.03. Bonds Owned by Company or Other Obligor or
Affiliate Thereof Deemed Not to be Outstanding. In determining
whether or not the holders of the requisite aggregate principal amount
of Bonds have taken any action under this Indenture, Bonds which are
owned by the Company or any other obligor on the Bonds or by any
Affiliate of the Company or such obligor shall be disregarded and
deemed not to be Outstanding for the purpose of any such
determination, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such action only Bonds
which the Trustee knows are so owned shall be disregarded. Bonds so
owned which have been pledged in good faith may be regarded as
Outstanding for purposes of this Section 20.03, if the pledgee shall
establish to the satisfaction of the Trustee the pledgee's right to
vote such Bonds and that the pledgee is not an Affiliate of the
Company or any other obligor on the Bonds. In case of a dispute as to
such right, any decision by the Trustee made upon the advice of
counsel shall be full protection to the Trustee.
Section 20.04. Holder May Revoke Consent. At any time prior to
(but not after) the evidencing to the Trustee, as provided in Section
20.01, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Bonds specified in this Indenture in
connection with such action, any holder of a Bond the serial number of
which is shown by the evidence to be included in the Bonds the holders
of which have taken such action may, by filing written notice with the
Trustee at its principal office and upon proof of such holding as
provided in Section 20.01, revoke such action so far as concerns such
Bond. Except as aforesaid any such action taken by the holder of any
Bond shall be conclusive and binding upon such holder and upon all
future holders of such Bond (and any Bond issued in lieu thereof or
exchanged therefor), irrespective of whether or not any notation of
such action is made upon such Bond, and in any event, any action taken
by the holders of the percentage in aggregate principal amount of the
Bonds specified in this Indenture in connection with such action shall
be conclusively binding upon the Company, the Trustee and the holders
of all the Bonds.
ARTICLE XXI
MISCELLANEOUS
Section 21.01. Certificates and Opinions. (a) Each certificate
or opinion which is required by this Indenture to be delivered to the
Trustee with respect to compliance with a condition or covenant
contained in this Indenture (other than the Officer's Certificate
delivered pursuant to Section 17.02(b)) shall include (i) a statement
that the Person making such certificate or opinion has read such
covenant or condition; (ii) a brief statement as to the nature and
scope of the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based; (iii) a
statement that, in the opinion of such Person, such Person has made
such examination or investigation as is necessary to enable such
Person to express an informed opinion as to whether or not such
covenant or condition has been complied with; and (iv) a statement as
to whether or not in the opinion of such Person such condition or
covenant has been complied with.
(b) Every request or application by the Company for action by the
Trustee shall be accompanied by an Officers' Certificate and an
Opinion of Counsel stating in each case that in the opinion of the
Person making such certificate or opinion the conditions precedent, if
any, to such action, provided for in this Indenture (including any
covenants the compliance with which constitutes a condition
precedent), have been complied with.
(c) The same officer or officers of the Company, or the same
Engineer or counsel or other Person, as the case may be, need not
certify to all the matters required to be certified under the
provisions of any Article or Section of this Indenture, but different
officers, Engineers, counsel or other Persons may certify to different
matters respectively.
Section 21.02. Benefits of Indenture. Nothing in this
Indenture, or any Bond, expressed or implied, is intended, or shall be
construed, to give to any Person, other than the Trustee, the Holders
and the Company, any legal or equitable right, remedy, or claim under
or in respect of this Indenture, or under any of its covenants,
conditions or provisions; all of which are intended to be and are for
the sole and exclusive benefit of the Trustee, the Holders and the
Company.
Section 21.03. Successors and Assigns. Whenever any Person is
referred to in this Indenture, such reference shall be deemed to
include the successors or assigns of such Person, and all the
covenants and agreements in this Indenture contained by or on behalf
of the Company or by or on behalf of the Trustee shall bind and inure
to the benefit of the respective successors and assigns of the Company
and the Trustee whether so expressed or not.
Section 21.04. Conflict with TIA. If any provision of this
Indenture limits, qualifies or conflicts with another provision of
this Indenture which is required to be included pursuant to any
requirements of Sections 310 to 317, inclusive, of the TIA, such
required provision shall control.
Section 21.05. TIA Construed as in Effect on Date Hereof.
Wherever reference is made in this Indenture to the TIA, such
reference is made to the TIA as it was in force on the date of the
execution of this Indenture.
Section 21.06. Titles, Table of Contents, Etc. The titles of
the Articles, Sections, the table of contents and the marginal
annotations in this Indenture are included for convenience of
reference only and shall not be deemed to be part of this Indenture.
Section 21.07. Counterparts. This Indenture may be executed in
several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
ARTICLE XXII
CERTAIN MATTERS RELATING TO THE PROPERTY
LOCATED IN THE STATE OF CONNECTICUT
Notwithstanding any provision hereof or of the Bonds to the
contrary, with respect to any Mortgaged Property now or hereafter
located in the State of Connecticut and encumbered by this Indenture,
the following provision shall apply:
Section 22.01. Prejudgment Remedy Waiver. THE COMPANY
ACKNOWLEDGES THAT THE ISSUANCE OF THE BONDS IS A "COMMERCIAL
TRANSACTION" AS DEFINED BY CHAPTER 903a OF THE CONNECTICUT GENERAL
STATUTES AND, PURSUANT TO SECTION 52-278f OF SAID CONNECTICUT GENERAL
STATUTES, WAIVES ANY RIGHT TO NOTICE AND HEARING UNDER SECTIONS
52-278Aa THROUGH 52-278q OF THE CONNECTICUT GENERAL STATUTES, AS NOW
OR HEREAFTER AMENDED, OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH
RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE BONDHOLDERS MAY EMPLOY
TO ENFORCE THEIR RIGHTS AND REMEDIES IN CONNECTION WITH THE BONDS,
THIS INDENTURE OR ANY OTHER DOCUMENTS SECURING THE BONDS. THE COMPANY
AUTHORIZES THE BONDHOLDERS' ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT
REMEDY WITHOUT SECURING A COURT ORDER. THE COMPANY ACKNOWLEDGES IT
MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS COUNSEL.
Section 22.02. Trustee Agent. The Trustee may, at the Company's
expense, appoint an agent to perform its duties under this Article.
ARTICLE XXIII
CERTAIN MATTERS RELATING TO THE PROPERTY
LOCATED IN THE STATE OF MAINE
Notwithstanding any provision hereof or of the Bonds to the
contrary, with respect to any Mortgaged Property now or hereafter
located in the State of Maine and encumbered by this Indenture, the
following provisions shall apply:
Section 23.01. Statutory Power of Sale. In addition to the
remedies set forth herein, the Holders and the Trustee shall have, to
the fullest extent now or hereafter available, the Statutory Power of
Sale pursuant to the applicable provisions of Titles 14 and 33 of the
Maine Revised Statutes of 1964, as the same have been and shall be
amended. The Company acknowledges that this Indenture is given
primarily for a business, commercial or agricultural purpose.
Section 23.02. Sealed Instrument. This Indenture is intended to
take effect as a sealed instrument.
Section 23.03. No Oral Modifications. The Company confirms and
acknowledges its understanding that, pursuant to 10 M.R.S.A. Section
1146(2), to the extent applicable, no promise, contract, or agreement
to lend money, extend credit, forbear from collection of a debt or
make any other accommodation for the repayment of a debt for more than
$250,000 may be enforced in court against the Holders unless the
promise, contract or agreement is in writing and signed by the Trustee
on behalf of the Holders.
Section 23.04. No Waiver of Foreclosure. The Company agrees for
itself, its successors and assigns, that the acceptance, before the
expiration of the right of redemption and after the commencement of
foreclosure proceedings of this Indenture, of insurance proceeds,
eminent domain awards, rents or anything else of value required to be
applied on or to the indebtedness secured hereby by Holders, the
Trustee or any other person or party holding under the Holders, shall
not constitute a waiver of such foreclosure, and this agreement by the
Company shall be that agreement referred to in 14 M.R.S.A. Section
6204, as the same may be amended, as necessary to prevent such waiver
of foreclosure. This agreement by the Company is intended to apply to
the acceptance and such application of any such proceeds, awards,
rents and other sums or anything else of value whether the same shall
be accepted from, or for the account of, the Company or from any other
source whatsoever by the Holders, the Trustee or by any other person
or party holding under the Holders at any time or times in the future
while any liabilities of the Company, hereunder or under any Bonds, to
the Holders shall remain outstanding.
Section 23.05. Trustee Agent. The Trustee may, at the Company's
expense, appoint an agent to perform its duties under this Article.
ARTICLE XXIV
CERTAIN MATTERS RELATING TO THE PROPERTY
LOCATED IN THE STATE OF NEW HAMPSHIRE
Notwithstanding any provision hereof or of the Bonds to the
contrary, with respect to any Mortgaged Property now or hereafter
located in the State of New Hampshire and encumbered by this
Indenture, the following provisions shall apply:
Section 24.01. Statutory Power of Sale. Upon the occurrence and
during the continuance of any Event of Default, the Trustee and the
Holders may, in addition to any other rights or remedies available to
them under this Indenture, at law or in equity, take such action,
without notice or demand, as it deems advisable to protect and enforce
its rights against the Company and in and to the Mortgaged Property or
any one or more of them, including, but not limited to, the following
action, which may be pursued singly, concurrently or otherwise, at
such time and in such order as the Holders may determine, in their
sole discretion, without impairing or otherwise affecting any other
rights or remedies of the Holders hereunder, at law or in equity:
sell the Mortgaged Property or any part thereof and any or all estate,
claim, demand, right, title and interest of the Company therein and
rights of redemption thereof, pursuant to the STATUTORY POWER OF SALE
in some place in any municipality in which any of the Mortgaged
Property is located, at one or more sales, in whole or in parcels, in
any order or manner, at such time and place, upon such terms and after
such notice thereof as may be required or permitted by law, at the
discretion of the Holders, and in the event of a sale, by foreclosure
or otherwise, of less than all of the Mortgaged Property, this
Indenture shall continue as a lien on the remaining portion of the
Mortgaged Property.
Section 24.02. Extent of Mortgage and Security Interest. Notice
is hereby given, for purposes of N.H. RSA Section 479-3, that the
maximum amount that this Indenture secures with respect to any
supplemental indenture is the principal amount provided for by such
supplemental indenture (which may include future advances made
thereunder provided that the amount outstanding under any such
supplemental indenture does not exceed the maximum amount for which it
provides), plus accrued interest thereon, plus any advances made to
protect the Holders' interest in the Mortgaged Property, plus any
applicable late charges and any costs or expenses incurred in
foreclosure or in otherwise enforcing the Holders' rights hereunder or
under such supplemental indenture.
Section 24.03. Trustee Agent. The Trustee may, at the Company's
expense, appoint an agent to perform its duties under this Article.
ARTICLE XXV
CERTAIN MATTERS RELATING TO THE PROPERTY
LOCATED IN THE STATE OF VERMONT
Notwithstanding any provision hereof or of the Bonds to the
contrary, with respect to any Mortgaged Property now or hereafter
located in the State of Vermont and encumbered by this Indenture, the
following provisions shall apply:
Section 25.01. Non-Judicial Power of Sale. The Company hereby
grants to the Trustee and the Holders a power of sale and,
accordingly, the Holders shall have all rights and powers granted by
Vermont law to the holder of a mortgage containing a power of sale,
including, without limitation, the right, to the extent permitted by
Vermont law, to foreclose the Company's equity of redemption upon a
default under this mortgage, by exercising the power of sale without
first commencing a foreclosure action or obtaining a foreclosure
decree, and to give such notice and to do all other acts, including
the giving of a foreclosure deed upon completion of the foreclosure
sale, as permitted or required by Vermont law to foreclose a mortgage
without judicial action.
Section 25.02. Limitation on Attorney's Fees in Foreclosure.
The Company agrees that the Company's award of reasonable attorney's
fees resulting from an enforcement, foreclosure, collection, or other
proceeding in connection with the Holder's rights or remedies, or
otherwise in connection with this loan, may exceed two percent of the
total principal, interest, and costs due.
Section 25.03. Subsequent Indebtedness. In addition to all
other indebtedness and obligations described herein, this Indenture
shall secure to the Holders the prompt payment and performance of any
and all obligations of the Company to the Holders under or in
connection with this Indenture and the Bonds, whether direct or
indirect, absolute or contingent, primary or secondary, due or to
become due, now existing or hereafter arising or acquired.
Section 25.04. Trustee Agent. The Trustee may, at the Company's
expense, appoint an agent to perform its duties under this Article.
ARTICLE XXVI
CERTAIN MATTERS RELATING TO THE PROPERTY
LOCATED IN THE STATE OF NEW YORK
Notwithstanding any provisions hereof or of the Bonds to the
contrary, with respect to any Mortgaged Property now or hereafter
located in the State of New York and encumbered by this Indenture, the
following provisions shall apply:
Section 26.01. Section 254 of the RPL. In the event of any
conflict, inconsistency or ambiguity between the provisions of this
Indenture and the Bonds, and the provisions of subsection 4 of Section
254 of the Real Property Law of New York, the provisions of this
Indenture and the Bonds shall control.
Section 26.02. Section 291-f of the RPL. In addition to any
other right or remedy contained herein or in this Indenture and the
Bonds, the Holders shall have all of the rights against lessees of the
Mortgaged Property or any part thereof as are set forth in Section
291-f of the Real Property Law of New York.
Section 26.03. Trust Fund. This instrument is subject to the
Trust Fund provisions of Section 13 of the Lien Law of New York.
Section 26.04. Commercial Property. The Company represents and
warrants that this Indenture does not encumber real property
principally improved or to be improved by one or more structures
containing in the aggregate not more than six (6) residential dwelling
units having their own separate cooking facilities.
Section 26.05. Transfer Tax. The Company covenants and agrees
that, in the event of a sale of the Mortgaged Property or other
transfer, it will duly complete, execute and deliver to the Holders
contemporaneously with the submission to the applicable taxing
authority or recording officer, all forms and supporting documentation
required by such taxing authority or recording officer to estimate and
fix any and all applicable state and local real estate transfer taxes,
including, without limitation, any real estate transfer taxes payable
under Article 31 of the New York State Tax Law or under Title 11,
Chapter 21 of the Administration Code of the City of New York, if
applicable, or any successor provisions thereto (collectively,
"Transfer Taxes") by reason of such sale or other transfer or
recording of the deed evidencing such sale or other transfer. This
Section 15.5(b) shall apply only if this Indenture remains outstanding
after any such sale or transfer.
The Company shall pay all Transfer Taxes that may hereafter
become due and payable with respect to any transfer, and in default
thereof the Holders may pay the same and the amount of such payment
shall be added to this Indenture and, unless incurred in connection
with a foreclosure of this Indenture, be secured by this Indenture.
The provisions of this Section 25.05 shall survive any transfer and
the delivery of the deed in connection with any transfer.
Section 26.06. Covenants in Addition to RPL. All covenants
hereof shall be construed as affording to the Holders rights in
addition to and not exclusive of the rights conferred under the
provisions of Section 254, 271, 272 and 291-f of the Real Property Law
of the State of New York or any other applicable Legal Requirement.
Section 26.07. Trustee Agent. The Trustee may, at the Company's
expense, appoint an agent to perform its duties under this Article.
Section 26.08. Maximum Principal Amount. FOR PURPOSES OF
ARTICLE 11 OF THE TAX LAW OF THE STATE OF NEW YORK, THIS INDENTURE IS
INTENDED TO BE A TRUST MORTGAGE AS THAT TERM IS USED IN SECTION 259 OF
THAT LAW. NOTWITHSTANDING ANY PROVISION SET FORTH HEREIN TO THE
CONTRARY, THE AMOUNT WHICH AT THE TIME OF THE EXECUTION AND DELIVERY
HEREOF HAS BEEN ADVANCED OR ACCRUED HEREON (EXCLUSIVE OF ANY
SUPPLEMENTS HERETO), OR WHICH IS NOW SECURED BY THIS INDENTURE
(EXCLUSIVE OF ANY SUPPLEMENTS HERETO), IS ZERO.
IN WITNESS WHEREOF, said CENTRAL VERMONT PUBLIC SERVICE
CORPORATION has caused this instrument to be signed, and its corporate
seal attested by its Secretary to be hereunto affixed, by Francis J.
Boyle, its Senior Vice President, Chief Financial Officer, Treasurer
and Agent in that behalf duly authorized, and said THE BANK OF NEW
YORK, to evidence its acceptance of the trust hereby created, has
caused its corporate name to be hereunto affixed, and this instrument
to be executed in its corporate name and its corporate seal to be
hereto affixed by Iliana A. Arciprete, Assistant Treasurer, all as of
the day and year first above written.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: FRANCIS J. BOYLE
FRANCIS J. BOYLE
Its: Senior Vice President, Chief
Financial Officer,
Treasurer and Agent
Attest:
JOSEPH M. KRAUS
JOSEPH M. KRAUS
Its: Secretary
Signed, sealed and delivered on (Corporate Seal)
behalf of Central Vermont Public
Service Corporation in the presence
of:
KIMBERLY A. PRITCHARD
KIMBERLY A. PRITCHARD
PATRICIA C. MITIGUY
PATRICIA C. MITIGUY
THE BANK OF NEW YORK
as Trustee as aforesaid,
By: ILIANA A. ARCIPRETE
ILIANA A. ARCIPRETE
Its: Assistant Treasurer
(Corporate Seal)
Signed, sealed and delivered
on behalf of The Bank of New York
in the presence of:
ANTHONY M. HITCHMAN
ANTHONY M. HITCHMAN
MICHELE L. RUSSO
MICHELE L. RUSSO
STATE OF VERMONT )
) ss.
COUNTY OF RUTLAND )
On this 28th day of July, A.D. 1999, before me, a Notary Public
in and for said State of Vermont, duly commissioned and acting as
such, personally came Francis J. Boyle, Senior Vice President, Chief
Financial Officer, Treasurer and Agent of said Central Vermont Public
Service Corporation, to me personally known and known to me to be one
of the persons named in and who executed the foregoing instrument, and
who being duly sworn by me did depose and say: that he resides in
Rutland Town, Vermont; that he is Senior Vice President, Chief
Financial Officer, Treasurer and agent duly authorized of Central
Vermont Public Service Corporation, a Vermont corporation and the
Corporation described in and which executed the above instrument as
party of the first part; that he knows the seal of said Corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order and authority of the Board of Directors of
said Corporation, and that he signed his name thereto by like order
and authority, and he acknowledged and declared that he executed the
foregoing instrument and affixed the seal of said Central Vermont
Public Service Corporation thereto as its Agent by order and authority
of the Board of Directors of said Corporation, and acknowledged the
same to be his free act and deed in said capacity, and the free act
and deed of said Corporation in said capacity.
WITNESS my hand and official seal the day and year aforesaid.
ANNE M. MISEROCCHI
ANNE M. MISEROCCHI,
Notary Public
My commission expires February 10, 2003
(Notarial Seal)
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 26th day of July, A.D. 1999, before me, a Notary Public
in and for said State of New York, duly commissioned and acting as
such, personally came Iliana A. Arciprete, Assistant Treasurer of said
The Bank of New York, to me personally known and known to me to be one
of the persons named in and who executed the foregoing instrument, and
who being duly sworn by me did depose and say: that she resides at 51
Cedar Terrace, Staten Island, New York; that she is Assistant
Treasurer and agent duly authorized of The Bank of New York, the
Corporation described in and which executed the above instrument as
party of the second part; that she knows the seal of said Corporation;
that the seal affixed to said instrument is such corporate seal; that
it was so affixed by order and authority of the Board of Directors of
said Corporation, and that she signed her name thereto by like order
and authority, and she acknowledged and declared that she executed the
foregoing instrument and affixed the seal of said Corporation thereto
as its Agent by order and authority of the Board of Directors of said
Corporation, and acknowledged the same to be her free act and deed in
said capacity, and the free act and deed of said Corporation in said
capacity. And said Iliana A Arciprete, Assistant Treasurer of said
The Bank of New York, further acknowledged that she accepted the trust
herein created for, and on behalf of, said The Bank of New York,
Trustee, upon the terms therein named.
WITNESS my hand and official seal the day and year aforesaid.
WILLIAM J. CASSELS
WILLIAM J. CASSELS
Notary Public
My commission expires May 16, 2000
(Notarial Seal)
SCHEDULE A.
DESCRIPTION OF PROPERTIES.
All land and premises, rights, privileges and easements conveyed
or purported to have been conveyed to the Company in and by the
following described deeds and the records thereof are hereby
incorporated herein by reference:
Properties acquired after January 28, 1998 or not previously
described: None
Also, all property of every kind whatsoever, including land and
premises, rights, privileges, easements, transmission lines,
substations and distribution lines, in the following towns:
IN NEW LONDON COUNTY, STATE OF CONNECTICUT:
Waterford
IN HARTFORD COUNTY, STATE OF CONNECTICUT:
Berlin
IN CUMBERLAND COUNTY, STATE OF MAINE:
Yarmouth
IN SULLIVAN COUNTY, STATE OF NEW HAMPSHIRE:
Charlestown Cornish Plainfield
Claremont Newport Unity
IN CHESHIRE COUNTY, STATE OF NEW HAMPSHIRE:
Chesterfield Hinsdale
IN GRAFTON COUNTY, STATE OF NEW HAMPSHIRE:
Bath Lyman Orford
Haverhill Lyme Piermont
IN WASHINGTON COUNTY, STATE OF NEW YORK:
Granville Hampton
IN RENSSELAER COUNTY, STATE OF NEW YORK:
Hoosick
IN ADDISON COUNTY, STATE OF VERMONT:
Addison Leicester Ripton
Bridport Lincoln Salisbury
Bristol Middlebury Shoreham
Cornwall Monkton Starksboro
Ferrisburg New Haven Vergennes
Goshen Orwell Weybridge
Granville Panton Whiting
Hancock
IN BENNINGTON COUNTY, STATE OF VERMONT:
Arlington Manchester Searsburg
Bennington Peru Shaftsbury
Dorset Pownal Sunderland
Glastenbury Rupert Winhall
Landgrove Sandgate Woodford
IN CALEDONIA COUNTY, STATE OF VERMONT:
Barnet Lyndon Walden
Danville Ryegate Waterford
Kirby St. Johnsbury Wheelock
IN CHITTENDEN, COUNTY, STATE OF VERMONT:
Buels Gore Essex Milton
Burlington Huntington Underhill
Colchester Jericho Westford
IN ESSEX COUNTY, STATE OF VERMONT:
Concord Guildhall Victory
Granby Lunenburg
IN FRANKLIN COUNTY, STATE OF VERMONT:
Bakersfield Fletcher Richford
Berkshire Franklin Sheldon
Enosburg Georgia St. Albans City
Fairfax Highgate St. Albans Town
Fairfield Montgomery Swanton
IN LAMOILLE COUNTY, STATE OF VERMONT:
Belvidere Eden Johnson
Cambridge Hyde Park
IN ORANGE COUNTY, STATE OF VERMONT:
Bradford Fairlee Thetford
Braintree Newbury Tunbridge
Brookfield Randolph Vershire
Chelsea Strafford West Fairlee
IN ORLEANS COUNTY, STATE OF VERMONT:
Lowell Irasburg
IN RUTLAND COUNTY, STATE OF VERMONT:
Benson Middletown Springs Sherburne
Brandon Mt. Holly Shrewsbury
Castleton Mt. Tabor Sudbury
Chittenden Pawlet Tinmouth
Clarendon Pittsfield Wallingford
Danby Pittsford Wells
Fair Haven Poultney West Haven
Hubbardton Proctor West Rutland
Ira Rutland City
Mendon Rutland Town
IN WASHINGTON COUNTY, STATE OF VERMONT:
Northfield Roxbury
IN WINDHAM COUNTY, STATE OF VERMONT:
Athens Guilford Stratton
Brattleboro Jamaica Townshend
Brookline Londonderry Vernon
Dover Marlboro Wardsboro
Dummerston Newfane Westminster
Grafton Rockingham Windham
IN WINDSOR COUNTY, STATE OF VERMONT:
Andover Hartland Sharon
Baltimore Ludlow Springfield
Barnard Norwich Stockbridge
Bethel Plymouth Weathersfield
Bridgewater Pomfret Weston
Cavendish Reading West Windsor
Chester Rochester Windsor
Hartford Royalton Woodstock
EXHIBIT 4.59
First Supplemental Indenture
__________
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
TO
THE BANK OF NEW YORK, Trustee
Dated as of July 15, 1999
__________
CREATING AN ISSUE OF MORTGAGE BONDS
8 1/8% SECOND MORTGAGE BONDS DUE 2004
__________
SUPPLEMENTAL TO SECOND MORTGAGE INDENTURE
DATED AS OF JULY 15, 1999
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.............................................1
Section 1.01. Defined Terms.......................................1
"Accounts Receivable Facility"...............................1
"Acquired Debt"..............................................2
"Affiliate"..................................................2
"Appraiser"..................................................2
"Asset Sale".................................................2
"Attributable Debt"..........................................3
"Board of Directors".........................................3
"Bondable Property"..........................................3
"Bonded".....................................................3
"Bonds of First Series"......................................4
"Capital Lease Obligation"...................................4
"Capital Stock"..............................................4
"Cash Equivalents"...........................................4
"Catamount Energy"...........................................4
"Catamount Resources"........................................4
"Change of Control"..........................................5
"Change of Control Offer"....................................5
"Change of Control Payment"..................................5
"Change of Control Payment Date".............................5
"Common Stock"...............................................5
"Commission".................................................5
"Connecticut Valley".........................................5
"Consolidated"...............................................5
"Consolidated Cash Flow".....................................5
"Consolidated Net Worth".....................................6
"Consolidated Utility Income"................................7
"Continuing Directors".......................................7
"CV Realty"..................................................7
"Default"....................................................8
"Designated Asset Sale"......................................8
"Disqualified Stock".........................................8
"East Barnet"................................................8
"Equity Interests"...........................................8
"Event of Loss"..............................................8
"Existing Indebtedness"......................................8
"First Mortgage".............................................8
"First Mortgage Bonds".......................................8
"Fixed Charges"..............................................8
"Fixed Charge Coverage Ratio"................................9
"GAAP"......................................................10
"Governmental Obligations"..................................10
"Guarantee".................................................10
"Hedging Obligations".......................................10
"Holding Company"...........................................10
"Holding Company Transaction"...............................10
"Indebtedness"..............................................11
"Independent"...............................................11
"Initial Issuance Date".....................................11
"Investments"...............................................12
"Lien"......................................................12
"Liquidated Damages"........................................12
"Make Whole Premium"........................................12
"Moody's"...................................................12
"Mortgaged Property Asset Sale".............................12
"Net Income"................................................13
"Net Proceeds"..............................................13
"Net Termination Value".....................................13
"Non-Recourse Debt".........................................14
"Obligations"...............................................14
"Operating Cash Flow".......................................14
"Permissable Encumbrances"..................................14
"Permitted Investments".....................................14
"Permitted Refinancing Indebtedness"........................15
"Person"....................................................16
"Power Contract Buyout".....................................16
"Preferred Stock"...........................................16
"Prior Lien"................................................16
"Prior Lien Bonds"..........................................16
"PSB".......................................................16
"Registration Rights Agreement".............................16
"Regulated Subsidiary"......................................16
"Restricted Investment".....................................16
"Sale and Leaseback Transaction"............................16
"Second Mortgage Bonds".....................................16
"Securitization Transaction"................................16
"Significant Subsidiary"....................................16
"Smart Energy"..............................................17
"Standard & Poor's".........................................17
"Stated Maturity"...........................................17
"Subsidiary"................................................17
"Successor Entity"..........................................17
"Treasury Rate".............................................17
"Unbonded"..................................................17
"Unregulated Subsidiary"....................................18
"VELCO".....................................................18
"Vermont Yankee"............................................18
"Voting Stock"..............................................18
"Weighted Average Life to Maturity".........................18
"Wholly-Owned Regulated Subsidiary".........................18
ARTICLE II 8 1/8% SECOND MORTGAGE BONDS DUE 2004.................19
Section 2.01. Bonds of First Series..............................19
Section 2.02. Redemption; Make Whole Premium;
Transfer and Exchange..............................20
Section 2.03. Change of Control..................................20
Section 2.04. Form of Bonds......................................21
Section 2.05. Bonds Exchangeable Upon Surrender..................22
Section 2.06. Authentication of Bonds............................22
Section 2.07. Definitive Bonds...................................22
ARTICLE III COVENANTS............................................22
Section 3.01. Payment of Bonds of First Series...................22
Section 3.02. Maintenance of Office or Agency....................22
Section 3.03. Reports............................................23
Section 3.04. Compliance Certificate; Notice of Default..........23
Section 3.05. Payments For Consent...............................24
Section 3.06. Restricted Payments................................24
Section 3.07. Dividend and Other Payment Restrictions Affecting
Regulated Subsidiaries.............................28
Section 3.08. Incurrence of Indebtedness.........................30
Section 3.09. Asset Sales other than Mortgaged Property Asset
Sales..............................................33
Section 3.10. Mortgaged Property Asset Sales and Events of Loss..34
Section 3.11. Transactions with Affiliates.......................36
Section 3.12. Liens..............................................37
Section 3.13. Sale and Leaseback Transactions....................40
Section 3.14. Designation of Regulated and Unregulated
Subsidiaries.......................................40
Section 3.15. Changes in Covenants when Bonds of First Series
Rated Investment Grade.............................41
ARTICLE IV EVENTS OF DEFAULT AND REMEDIES........................41
Section 4.01. Events of Default..................................41
Section 4.02. Acceleration.......................................43
ARTICLE V THE TRUSTEE............................................43
Section 5.01. Extent of Trustee's Liability......................43
ARTICLE VI SUCCESSORS............................................43
Section 6.01. Merger, Consolidation, or Sale of Assets...........43
ARTICLE VII LEGAL DEFEASANCE AND COVENANT DEFEASANCE.............44
Section 7.01. Option to Effect Legal Defeasance or Covenant
Defeasance.........................................44
Section 7.02. Legal Defeasance and Discharge.....................44
Section 7.03. Covenant Defeasance................................45
Section 7.04. Conditions to Legal or Covenant Defeasance.........45
Section 7.05. Deposited Money and Governmental Obligations to be
Held in Trust; Other Miscellaneous Provisions......46
Section 7.06. Reinstatement......................................47
ARTICLE VIII SATISFACTION OF BONDS OF FIRST SERIES...............47
Section 8.01. Satisfaction.......................................47
ARTICLE IX MISCELLANEOUS PROVISIONS..............................48
Section 9.01. Incorporation of the Terms of the Indenture........48
Section 9.02. Amendment of the First Supplemental Indenture......48
Section 9.03. Benefits of Indenture..............................49
Section 9.04. Successors and Assigns.............................50
Section 9.05. Headings...........................................50
Section 9.06. Counterparts.......................................50
EXHIBIT 1 Form of Bond.........................................E-1
FIRST SUPPLEMENTAL INDENTURE (the "First Supplemental Indenture"),
dated as of July 15 , 1999, to a Second Mortgage Indenture, dated as of
July 15, 1999 (the "Indenture", and, as it may be supplemented or
amended from time to time, including, without limitation, by this First
Supplemental Indenture, the "Second Mortgage"), between CENTRAL VERMONT
PUBLIC SERVICE CORPORATION, a Vermont corporation (the "Company"),
having offices at 77 Grove Street, Rutland, Vermont 05701, and THE BANK
OF NEW YORK, a New York banking corporation, as Trustee (the "Trustee"),
having offices at 101 Barclay Street, Floor 21 West, New York, New York
10286.
WHEREAS, the Company has heretofore executed and delivered to the
Trustee the Indenture to secure Mortgage Bonds issued by the Company
pursuant to the Indenture, unlimited in aggregate principal amount
except as therein otherwise provided;
WHEREAS, Sections 2.01 and 15.01 of the Indenture provide, among
other things, that the Company and the Trustee may enter into
supplemental indentures to provide for the issuance of bonds of any
series and to establish the form and provisions of the bonds of such
series, all in a manner not inconsistent with the provisions of the
Indenture;
WHEREAS, the Company desires in and by this First Supplemental
Indenture to create a first series of bonds to be issued under the
Indenture, to designate such series, to set forth the maturity date,
interest rate and the form and other terms of such bonds; and
WHEREAS, all acts and things necessary to make this First
Supplemental Indenture, when duly executed and delivered, a valid,
binding and legal instrument in accordance with its terms and for the
purposes herein expressed, have been done and performed; and the
execution and delivery of this Supplemental Indenture have been in all
respects duly authorized;
NOW, THEREFORE, in consideration of the premises and in further
consideration of the sum of Ten Dollars in lawful money of the United
States of America paid to the Company by the Trustee at or before the
execution and delivery of this Supplemental Indenture, the receipt
whereof is hereby acknowledged, and of other good and valuable
consideration, it is agreed by and between the Company and the Trustee
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms. Unless otherwise defined herein, all
capitalized terms used in this First Supplemental Indenture have the
respective meanings given to them in the Indenture. For purposes of
this First Supplemental Indenture, the following terms have the
following meanings:
"Accounts Receivable Facility" means that certain accounts receivable
facility existing pursuant to the Receivables Purchase Agreement, dated
as of November 29, 1998, between the Company and The First National Bank
of Boston.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and (ii) Indebtedness secured by a
Lien encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this
definition, "control," as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of
a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common
control with" shall have correlative meanings; provided, further, that
no Person (other than the Company or any Regulated Subsidiary of the
Company) which makes, or in which a special purpose entity makes, an
Investment in connection with a Securitization Transaction will be
deemed to be an Affiliate of the Company or any of its Regulated
Subsidiaries solely by reason of such Investment.
"Appraiser" means a Person engaged in the business of appraising
property competent to determine the fair market value of the particular
property in question, and who or which, unless required to be
Independent, may be employed by or Affiliated with the Company.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets by
the Company or any Regulated Subsidiary other than sales of inventory or
other current assets in the ordinary course of business consistent with
past practice; or
(2) the issuance of Equity Interests in any of the Company's Regulated
Subsidiaries or the sale of Equity Interests in any of its Regulated
Subsidiaries;
in the case of either clause (1) or (2), whether in a single transaction
or a series of related transactions:
(a) that have a fair market value in excess of $2,000,000 or
(b) for Net Proceeds in excess of $2,000,000.
Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales:
(1) a transfer of assets by the Company to a Regulated Subsidiary or by
a Regulated Subsidiary to the Company or to another Regulated
Subsidiary;
(2) an issuance of Equity Interests by a Regulated Subsidiary to the
Company or to another Regulated Subsidiary;
(3) a Restricted Payment that is permitted by this First Supplemental
Indenture;
(4) sales of property or equipment that have become worn out, obsolete
or damaged or otherwise unsuitable for use in connection with the
business of the Company or any of its Regulated Subsidiaries;
(5) transactions involving the license, lease or sublease of any real or
personal property in the ordinary course of business;
(6) a transfer of Equity Interests in, or an issuance of Equity
Interests of, (x) a Subsidiary of the Company that is not a Regulated
Subsidiary or (y) any Person that is an Unregulated Subsidiary on the
Initial Issuance Date;
(7) sales of (a) assets of the type specified in the definition of
"Securitization Transaction" to a special purpose entity and (b)
accounts receivable, in each case for the fair market value thereof,
including cash in an amount at least equal to 75% of the book value
thereof as determined in accordance with GAAP, it being understood that,
for the purposes of this clause (7), notes received in exchange for the
transfer of assets of the type specified in the definition of
"Securitization Transaction" will be deemed cash if the special purpose
entity or other payor is required to repay said notes as soon as
practicable from available cash collections less amounts required to be
established as reserves pursuant to contractual agreements with entities
that are not Affiliates of the Company entered into as part of a
Securitization Transaction; or
(8) sales of Equity Interests in VELCO for fair market value, as
evidenced by a resolution of the Board of Directors.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation
of the lessee for net rental payments during the remaining term of the
lease included in such sale and leaseback transaction including any
period for which such lease has been extended or may, at the option of
the lessor, be extended. Such present value shall be calculated using a
discount rate equal to the rate of interest implicit in such
transaction, determined in accordance with GAAP.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the board of directors of the general
partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
"Bondable Property" shall have the meaning set forth in the Indenture.
"Bonded" shall have the meaning set forth in the Indenture.
"Bonds of First Series" has the meaning given in Section 2.01.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease
that would at that time be required to be capitalized on a balance sheet
in accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions
of assets of, the issuing Person.
"Cash Equivalents" means:
(1)United State dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than twelve months
from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of twelve months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank having capital
and surplus in excess of $500,000,000;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause(3) above;
(5)commercial paper having the highest rating obtainable from Moody's or
Standard & Poor's and in each case maturing within six months after the
date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of
this definition.
"Catamount Energy" means Catamount Energy Corporation, a Vermont
corporation.
"Catamount Resources" means Catamount Resources Corporation, a Vermont
corporation.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all the assets of the Company and
its regulated Subsidiaries taken as a whole;
(2) the adoption of a plan relating to the liquidation or dissolution of
the Company;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person" or
"group" (as such terms are defined in Sections 13(d)(3) and 14(d)(2) of
the Exchange Act) becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the total voting power of all classes
of outstanding Voting Stock of the Company; or
(4) the first day on which a majority of the members of the Board of
Directors of the Company or of any Successor Entity are not Continuing
Directors.
Notwithstanding the foregoing, a "Change of Control" shall not include a
"Holding Company Transaction."
"Change of Control Offer" shall have the meaning given in Section
2.03(a).
"Change of Control Payment" shall have the meaning given in Section
2.03(a).
"Change of Control Payment Date" shall have the meaning given in Section
2.03(a).
"Common Stock" means the Company's common stock, $1.00 par value.
"Commission" means the Securities and Exchange Commission.
"Connecticut Valley" means Connecticut Valley Electric Company Inc., a
New Hampshire corporation.
"Consolidated" means, with respect to the Company, the consolidation of
the accounts of the Regulated Subsidiaries with those of the Company,
all in accordance with GAAP (without duplication); provided, however,
that "consolidation" will not include consolidation of the acconts of
any Unregulated Subsidiary with the accounts of the Company. The term
"consolidation" has a correlative meaning.
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Utility Income of such Person for such
period plus:
(1) an amount equal to any extraordinary loss plus any net loss realized
by such Person or any of its Regulated Subsidiaries in connection with
an Asset Sale, to the extent such losses were deducted in computing such
Consolidated Utility Income; plus
(2) provision for taxes based on income or profits of such Person and
its Regulated Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Utility
Income; plus
(3) consolidated interest expense of such Person and its Regulated
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated
Utility Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses (excluding
any such non-cash expense (other than the amortization of the cost of
Power Contract Buyouts after the Initial Issuance Date) to the extent
that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in
a prior period) of such Person and its Regulated Subsidiaries for such
period to the extent that such depreciation, amortization and other non
cash expenses were deducted in computing such Consolidated Utility
Income; minus
(5) non-cash items increasing such Consolidated Utility Income for such
period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the
income or profits of, and the depreciation and amortization and other
non-cash expenses of, a Regulated Subsidiary of the Company shall be
added to Consolidated Utility Income to compute Consolidated Cash Flow
of the Company only to the extent that a corresponding amount would be
permitted at the date of determination to be distributed to the Company
by such Regulated Subsidiary without prior governmental approval (that
has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Regulated Subsidiary or its stockholders.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of the following amounts (each determined in accordance
with GAAP):
(1) the consolidated equity of the common shareholders (or equity
holders) of such Person and its consolidated Subsidiaries as of such
date; plus
(2) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock that by its
terms is not entitled to the payment of dividends unless such dividends
may be declared and paid only out of net earnings in respect of the year
of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock; less
(1)all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the Initial Issuance Date in the book value of any asset
owned by such Person or a Subsidiary of such Person.
"Consolidated Utility Income" means, with respect to any specified
Person for any period, the aggregate of the Net Income of such Person
and its Regulated Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP; provided that:
(1) the Net Income of any Person that is not a Regulated Subsidiary or
that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions
paid in cash to the specified Person or a Wholly-Owned Regulated
Subsidiary thereof;
(2) the Net Income of any Regulated Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Regulated Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Regulated Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded;
(5) the Net Income of any Unregulated Subsidiary shall be excluded,
whether or not distributed to the specified Person or one of its
Subsidiaries; and
(6) to the extent such amounts have not already been excluded in
calculating Consolidated Utility Income, the amounts paid pursuant to
Section 3.06(d)(ix) shall be excluded.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of the Second
Mortgage; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"CV Realty" means C.V. Realty, Inc., a Vermont corporation.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Asset Sale" means an Asset Sale that is not a Mortgaged
Property Asset Sale and that is designated as a Designated Asset Sale by
the Board of Directors.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it
is exchangeable, in each case at the option of the holder thereof), or
upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the
option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date of final maturity of the Bonds of
First Series. Notwithstanding the preceding sentence, any Capital Stock
that would constitute Disqualified Stock solely because the holders
thereof have the right to require the Company to repurchase such Capital
Stock upon the occurrence of a change of control or an asset sale shall
not constitute Disqualified Stock if the terms of such Capital Stock
provide that the Company may not repurchase or redeem any such Capital
Stock pursuant to such provisions unless such repurchase or redemption
complies with Section 3.06.
"East Barnet" means Central Vermont Public Service Corporation East
Barnet Hydroelectric, Inc., a Vermont corporation.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security
that is convertible into, or exchangeable for, Capital Stock).
"Event of Loss" means (i) the loss or destruction of or damage to any
Mortgaged Property, (ii) the condemnation, seizure, confiscation,
requisition of the use or taking by exercise of the power of eminent
domain or otherwise of any Mortgaged Property or (iii) any consensual
settlement in lieu of any event listed in clause (ii), in each case
whether in a single event or a series of related events, that results in
Net Proceeds from all sources in excess of $1,000,000.
"Existing Indebtedness" means Indebtedness of the Company and its
Regulated Subsidiaries in existence on the Initial Issuance Date, until
such amounts are repaid, including, without limitation, up to
$17,000,000 of First Mortgage Bonds Series PP, QQ and RR to be issued on
the Initial Issuance Date.
"First Mortgage" means the Mortgage of the Company dated October 1,
1929, to the State Street Bank and Trust Company, successor to Old
Colony Trust Company, as Trustee, as from time to time amended and
supplemented.
"First Mortgage Bonds" means the securities and other Indebtedness
authenticated and delivered from time to time pursuant to the First
Mortgage.
"Fixed Charges" means, with respect to any specified Person for any
period, the sum, without duplication, of:
(1) the consolidated interest expense of such Person and its Regulated
Subsidiaries for such period, whether paid or accrued, including,
without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect
to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net of the effect of all payments made or received
pursuant to Hedging Obligations; plus
(2) the consolidated interest of such Person and its Regulated
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Regulated Subsidiaries or
secured by a Lien on assets of such Person or one of its Subsidiaries,
whether or not such guarantee or Lien is called upon; plus
(4) the product of (a) all dividends, whether paid or accrued and
whether or not in cash, on any series of preferred stock of such Person
or any of its Regulated Subsidiaries, other than dividends on Equity
Interests payable solely in Equity Interests of the Company (other than
Disqualified Stock) or to the Company or a Regulated Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with
GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person
and its Regulated Subsidiaries for such period to the Fixed Charges of
such Person and its Regulated Subsidiaries for such period. In the
event that the specified Person or any of its Regulated Subsidiaries
incurs, assumes, Guarantees, repays, repurchases or redeems any
Indebtedness (other than ordinary working capital borrowings) or issues,
repurchases or redeems preferred stock subsequent to the commencement of
the period for which the Fixed Charge Coverage Ratio is being calculated
and on or prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase
or redemption of preferred stock, and the use of the proceeds therefrom
as if the same had occurred at the beginning of the applicable four
quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage
Ratio:
(1) acquisitions that have been made by the specified Person or any of
its Regulated Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four
quarter reference period or subsequent to such reference period and on
or prior to the Calculation Date shall be given pro forma effect as if
they had occurred on the first day of the four-quarter reference period
and Consolidated Cash Flow for such reference period shall be calculated
on a pro forma basis in accordance with Regulation S-X under the
Securities Act, but without giving effect to clause (3) of the proviso
set forth in the definition of Consolidated Utility Income;
(2)the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the specified Person or any of its Regulated
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles in use at the
Initial Issuance Date or, at the option of the Company, other generally
accepted accounting principles which are in use at the time of their
determination; in determining generally accepted accounting principles,
the Company may, but shall not be required to, conform to any accounting
order, rule or regulation of any regulatory authority having
jurisdiction over the electric generating, transmission or distribution
operations of the Company.
"Governmental Obligations" means direct obligations of or obligations
unconditionally guaranteed by the federal government or any political
subdivision of the United States of America, any agency, department or
any other administrative authority or instrumentality thereof, including
without limitation, any local or other governmental agency or other
authority within the United States of America.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement
agreements in respect thereof, of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates; and
(3) agreements in connection with commodities swaps or options.
"Holding Company" means the corporation formed in a Holding Company
Transaction which, immediately following such transaction, holds all of
the Company's outstanding capital stock other than preferred stock.
"Holding Company Transaction" means any transaction or series of
transactions the result of which is that a holding company acquires all
of the outstanding common stock of the Company, substantially as
contemplated by the Company's holding company filing with the PSB as of
the Initial Issue Date, provided, in no event shall a "Holding Company
Transaction" include any transaction in which any portion of the
business conducted by the Company or a Regulated Subsidiary, or any of
the Capital Stock of a Regulated Subsidiary, is transferred to a Person
other than the Company or a Regulated Subsidiary.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable; or
(6) any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of
credit and Hedging Obligations) would appear as a liability upon a
balance sheet of the specified Person prepared in accordance with GAAP.
In addition, the term "Indebtedness" includes all Indebtedness of others
secured by a Lien on any asset of the specified Person (whether or not
such Indebtedness is assumed by the specified Person) and, to the extent
not otherwise included, the Guarantee by the specified Person of any
indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other
Indebtedness.
"Independent" means, when used with respect to any specified Person, a
Person selected by the Chairman of the Board, Chief Executive Officer,
President, Chief Financial Officer or a Vice President of the Company
and approved by the Trustee, who (i) is in fact independent, (ii) does
not have any material direct financial interest or any material indirect
financial interest in the Company or in any other obligor on the Bonds
of First Series or in any Affiliate of the Company or any such other
obligor and (iii) is not connected with the Company or such other
obligor as an Affiliate or an officer, employee, promoter, underwriter,
trustee, or partner, director or Person performing similar functions.
"Initial Issuance Date" means July 30, 1999, or such other date as may
be agreed among the Company, Donaldson, Lufkin & Jenrette Securities
Corporation and TD Securities (USA) Inc. on which the Bonds of First
Series are initially issued.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in
the forms of loans (including Guarantees or other obligations), advances
or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all
items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. If the Company or any Regulated
Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Regulated Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such
Person is no longer a Regulated Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of
such Regulated Subsidiary not sold or disposed of in an amount
determined as provided in Section 3.06(e). The acquisition by the
Company or any Regulated Subsidiary of the Company of a Person that
holds an Investment in a third Person shall be deemed to be an
Investment by the Company or such Regulated Subsidiary in such third
Person in an amount equal to the fair market value of the Investment
held by the acquired Person in such third Person in an amount determined
as provided in Section 3.06(e).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under
applicable law, including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in, except in connection
with any Securitization Transaction, and any filing of or agreement to
give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction.
"Liquidated Damages" has the same meaning given thereto in the
Registration Rights Agreement.
"Make Whole Premium", with respect to any Bond of First Series, means,
with respect to any prepayment of such Bond of First Series in
circumstances requiring the payment of a Make Whole Premium, an amount
equal to the excess of (a) the aggregate present value as of the date of
such prepayment of the expected future cash flows of such Bond of First
Series (for the avoidance of doubt, such amounts shall include all
principal and interest payable with respect to such Bond of First
Series) (exclusive of interest accrued to the date of prepayment) that,
but for such prepayment, would have been payable if such prepayment had
not been made, all determined by discounting such amounts at a rate
which is equal to the Treasury Rate three days prior to prepayment plus
50 basis points over (b) the aggregate principal amount of the Bond of
First Series then to be prepaid.
"Moody's" means Moody's Investor Service, Inc., or any successor to its
securities ratings business.
"Mortgaged Property Asset Sale" means the sale, lease (other than an
operating lease), conveyance or other disposition (each, a
"Disposition") of any Mortgaged Property, including, without limitation,
by means of an amalgamation, merger, consolidation or similar
transaction (provided that the Disposition of all or substantially all
of the assets of the Company and its Regulated Subsidiaries taken as a
whole shall be governed by Section 2.03 and/or Section 6.01 and not by
the provisions of Section 3.10), or a series of related Dispositions by
the Company or any of its Regulated Subsidiaries involving the Mortgaged
Property, other than
(1) the sale for fair market value of machinery, equipment, furniture,
apparatus, tools or implements or other property that may be defective
or may have become worn out or obsolete or no longer useful in the
reasonable judgment of the Company in the operations of the Company;
(2) the sale or exchange of property at the Company's operating
facilities with an aggregate value not to exceed $2,000,000 at any one
time, provided such equipment has been replaced by equipment of equal or
greater value within 180 days of such sale or exchange. A Mortgaged
Property Asset Sale shall not include the requisition of title to or the
seizure, condemnation, forfeiture or casualty of any Mortgaged Property;
or
(3) the voluntary transfer, waiver or modification of the right to sell
power to the customers of the Company within its franchise (but not its
rights as a distribution company) in contemplation of or as part of the
restructuring of the Company.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale; or (b) the disposition of any securities by such Person or
any of its Regulated Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Regulated Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Regulated Subsidiaries in respect of any Asset Sale or
Mortgaged Property Asset Sale (including, without limitation, any cash
received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale or Mortgaged Property Asset
Sale), net of the direct costs relating to such Asset Sale or Mortgaged
Property Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result
thereof, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, and amounts
required to be applied to the repayment of Indebtedness, other than the
First Mortgage Bonds and Second Mortgage Bonds, secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"Net Termination Value" shall mean the difference between (a)the
aggregate amounts (if any) that would be required to be paid by the
Company or any Regulated Subsidiary if such Hedging Obligation were
terminated by reason of default relating to the Company or a Regulated
Subsidiary, and (b) the aggregate amounts (if any) that the Company or
any Regulated Subsidiary would be entitled to receive if such Hedging
Obligations were terminated by reason of a default relating to the
Company or any Regulated Subsidiary. The Net Termination Value shall be
determined (a) as of the end of the most recent fiscal quarter ended or
(b) as of the date such Hedging Obligation is entered into if it is
entered into after the end of such fiscal quarter.
"Non-Recourse Debt" means Indebtedness
(1) as to which neither the Company nor any of its Regulated
Subsidiaries (other than the special purpose entity incurring such
Indebtedness, in the case of Indebtedness incurred in the ordinary
course of business) (a) provides credit support of any kind (including
any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a guarantor or
otherwise, or (c) constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unregulated Subsidiary) would permit upon notice, lapse of time or both
any holder of any other Indebtedness (other than the Bonds of First
Series) of the Company or any of its Regulated Subsidiaries (other than
the special purpose entity incurring such Indebtedness, in the case of
Indebtedness incurred in the ordinary course of business), to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity; and
(3) with respect to any such Indebtedness incurred after the Initial
Issuance Date, the lenders have been notified of the non-recourse nature
of the Indebtedness.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
"Operating Cash Flow" means, with respect to any Person for any period,
the net cash provided by operating activities of such Person and its
Regulated Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP.
"Permissable Encumbrances" shall have the meaning set forth in the
Indenture.
"Permitted Investments" means
(1) an Investment by the Company or a Regulated Subsidiary in the
Company or in a Regulated Subsidiary of the Company;
(2) an Investment in Cash Equivalents;
(3) an Investment by the Company or any Regulated Subsidiary in a
Person, if as a result of such Investment
(a) such Person becomes a direct or indirect Regulated Subsidiary of the
Company or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Regulated Subsidiary of the Company;
(4) an Investment received in connection with the bankruptcy or
reorganization of customers and suppliers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business; and
(5) the acquisition by the Company, a Regulated Subsidiary or a special
purpose entity in connection with a Securitization Transaction of Equity
Interests of a trust or other Person established by the Company, a
Regulated Subsidiary or such special purpose entity to effect such
Securitization Transaction; and any other Investment by the Company or a
Subsidiary of the Company in a special purpose entity or any Investment
by a special purpose entity in any other Person in connection with a
Securitization Transaction (provided, that such other Investment is in
the form of a note or other instrument that the special purpose entity
or other Person is required to repay as soon as practicable from
available cash collections) less amounts required to be established as
reserves pursuant to contractual agreements with entities that are not
Affiliates of the Company entered into as part of a Securitization
Transaction.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Regulated Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund, other Indebtedness of the Company or any of its
Regulated Subsidiaries (other than intercompany Indebtedness); provided
that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
(or accreted value, if applicable) of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus all accrued
interest thereon and the amount of all expenses and premiums incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Bonds of
First Series, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated
in right of payment to, the Bonds of First Series on terms at least as
favorable to the Holders of Bonds of First Series as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by the
Regulated Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Power Contract Buyout" means the termination, restatement or amendment
of power purchase agreements of the Company or any Regulated Subsidiary
pursuant to the terms of any settlement agreement approved by the PSB.
"Preferred Stock" means any Capital Stock of the Company which by its
terms has preference to common stock in right of dividends or other
distributions or upon liquidation or dissolution.
"Prior Lien" shall have the meaning set forth in the Indenture.
"Prior Lien Bonds" means the First Mortgage Bonds and any other bonds,
notes or other Indebtedness (including the evidence thereof) secured by
a Prior Lien
"PSB" means the Vermont Public Service Board.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of July 30, 1999, among the Company, Donaldson,
Lufkin & Jenrette Securities Corporation and TD Securities (USA) Inc.
"Regulated Subsidiary" means Connecticut Valley and East Barnet and any
other Subsidiary of the Company that is not an Unregulated Subsidiary.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Sale and Leaseback Transaction" means any form of lease arrangement in
which the Company or a Regulated Subsidiary sells an asset to another
Person in exchange for cash and then contracts to lease the asset for a
specified term.
"Second Mortgage Bonds" means bonds of any series authenticated and
delivered from time to time under the Second Mortgage.
"Securitization Transaction" means a transaction in which the Company or
any Regulated Subsidiary, pursuant to authorization of the PSB, if
required by applicable law, or other appropriate governmental
authorizations, transfers rights or other property to a Person formed as
a special purpose entity in conjunction with a financing involving such
Person of accounts receivable of such person or based on the Company's
or such Regulated Subsidiary's right to collect a non-bypassable
transition or similar charge or other transferred right or property;
provided that all Indebtedness incurred in connection with any such
transaction shall constitute Non-Recourse Indebtedness.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such
Regulation is in effect on the date hereof.
"Smart Energy" means Smart Energy Services, Inc., a Vermont
corporation.
"Standard & Poor's" means Standard & Poor's Ratings Group or any
successor to its securities ratings business.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment
of interest or principal (including mandatory sinking fund payments) was
scheduled to be paid in the original documentation governing such
Indebtedness, and shall not include any contingent obligations to repay,
redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by such Person or one or more of
the other Subsidiaries of such Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or(b) the
only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Successor Entity" shall have the meaning in Section 6.01.
"Treasury Rate" means, at any time with respect to the Bonds of First
Series being prepaid, (a) the yield reported on page C4 of the Bloomberg
Financial Markets Service (or, if not available, any other nationally
recognized trading screen reporting on-line intraday trading in United
States government securities) at 11:00 a.m. (New York, New York time)
for those actively traded United States government securities having a
maturity (rounded to the nearest month) corresponding to the remaining
Weighted Average Life to Maturity of the Bonds of First Series being
prepaid or (b) in the event that no nationally recognized trading screen
reporting on-line intraday trading in United States government
securities is available, Treasury Rate shall mean the weekly average of
the yield to maturity on the United States Treasury obligations with a
constant maturity (as compiled by and published in the most recently
published issue of the United States Federal Reserve Statistical Release
designated H.15(519) or its successor publication) most nearly equal to
(by rounding to the nearest month) the Weighted Average Life to Maturity
of the Bonds of First Series then being prepaid. If no maturity exactly
corresponding to such Weighted Average Life to maturity of such Bonds of
First Series shall appear therein, the weekly average yield for the two
most closely corresponding published maturities shall be calculated
pursuant to the foregoing sentence and the Treasury Rate shall be
interpolated or extrapolated, as the case may be, from such yields on a
straight-line basis (rounding, in the case of relevant periods, to the
nearest month).
"Unbonded" as applied to Bonds of First Series, Prior Lien Bonds or
Bondable Property means that such Bonds of First Series, Prior Lien
Bonds or Bondable Property are not Bonded.
"Unregulated Subsidiary" means (a) CV Realty, Catamount Resources,
Catamount Energy, Smart Energy and VELCO and (b) any of their respective
Subsidiaries and (c) any other Subsidiary of the Company that is
designated by the Board of Directors as an Unregulated Subsidiary
pursuant to a Board Resolution, but, in each case, only to the extent
that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Regulated Subsidiary of the
Company (other than transactions permitted by Section 3.11(b)) unless
the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Regulated Subsidiary than
those that might be obtained at the time from Persons who are not
Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of its
Regulated Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its
Regulated Subsidiaries;
(5) is not subject to federal or state regulation as a public utility
company.
"VELCO" means Vermont Electric Power Company, Inc., a Vermont
corporation.
"Vermont Yankee" means Vermont Yankee Nuclear Power Corporation, a
Vermont corporation, or the Company's interest therein, as the context
may require.
"Voting Stock" of any Person as of any date means the Capital Stock of
that Person that is at the time entitled to vote in the election of the
Board of Directors of that Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly-Owned Regulated Subsidiary" of any specified Person means a
Regulated Subsidiary of such Person all of the outstanding Capital Stock
or other ownership interests of which (other than directors' qualifying
shares) shall at the time be owned by such Person or by one or more
Wholly-Owned Regulated Subsidiaries of such Person.
ARTICLE II
8 1/8% SECOND MORTGAGE BONDS DUE 2004
Section 2.01. Bonds of First Series. There is hereby created a
first series of bonds to be issued under and secured by the Indenture,
to be designated as "8 1/8% Second Mortgage Bonds due 2004," of the
Company ("Bonds of First Series"). The Bonds of First Series shall be
issued in an aggregate principal amount of $75,000,000. The Bonds of
First Series shall be registered bonds without coupons and shall be
dated as described in Section 2.03 of the Indenture except that the
Bonds of First Series first issued shall be dated July 30, 1999. All
Bonds of First Series shall mature August 1, 2004; the principal of and
interest, premium, if any, and Liquidated Damages, if any, on the Bonds
of First Series shall be payable in lawful money of the United States of
America; the place where such principal shall be payable shall be at the
principal office of the Trustee in the Borough of Manhattan, City and
State of New York (or at the principal office of any successor in
trust); the place where interest, premium, if any, and Liquidated
Damages, if any, shall be payable shall be the office or agency of the
Company in the Borough of Manhattan, City and State of New York, or by
check mailed to the registered holders of the Bonds of First Series,
except as set forth below; the rate of interest shall be 8 1/8% per
annum, payable semi-annually on the first day of February and the first
day of August each year, commencing on February 1, 2000; interest on the
Bonds shall accrue from the date of original issuance or, if interest
has already been paid, from the date it was most recently paid, and
shall be computed on a basis of a 360-day year comprised of twelve 30
day months; and the terms of redemption shall be as referred to in
Section 2.02 of this Article II.
The Company shall make all payments in respect of the Bonds of
First Series represented by the Global Bond (including principal,
premium, if any, interest and Liquidated Damages, if any) by wire
transfer of immediately available funds to the account specified by the
Global Bond Holder. The Company shall make all payments of principal,
interest, premium, if any, and Liquidated Damages, if any, with respect
to Bonds of First Series represented by certificated bonds by wire
transfer of immediately available funds to the respective accounts
specified in writing to the Paying Agent prior to the applicable record
date by any Holders of not less than $1,000,000 in principal amount of
the Bonds of First Series or, if no such account is specified or if a
Holder holds Bonds of First Series in a lesser amount, by mailing a
check to each such Holder's registered address.
So long as there is no existing default in the payment on the Bonds
of First Series, the Person in whose name any Bonds of First Series is
registered at the close of business on any record date (as defined
below) with respect to any interest payment date shall be entitled to
receive the interest payable on such interest payment date,
notwithstanding any transfer or exchange of such Bonds of First Series
subsequent to the record date and on or prior to such interest payment
date, except as and to the extent the Company shall default in the
payment of the interest due on such interest payment date, in which case
defaulted interest shall be paid to the Person in whose name such Bonds
of First Series is registered on the date of payment of such defaulted
interest.
As used in this Section 2.01, the term "default in the payment of
interest" means failure to pay interest due on the applicable interest
payment date disregarding any period of grace permitted by Section 12.01
of the Indenture, and the term "record date" with respect to each
February 1 interest payment date means the January 15 immediately
preceding such February 1, and with respect to each August 1 interest
payment date means the July 15 immediately preceding such August 1.
Section 2.02. Redemption; Make Whole Premium; Transfer and
Exchange. The Bonds of First Series will not be subject to any
mandatory redemption, sinking fund or other obligation of the Company to
amortize, redeem or retire the Bonds of First Series. The Company shall
have the right to redeem the Bonds of First Series in whole or in part
(if in part, on a pro rata basis), at any time and from time to time,
upon not less than 30 nor more than 60 days' notice to holders of such
Bonds of First Series, in cash at a redemption price equal to 100% of
the principal amount of the Bonds of First Series to be redeemed, plus
accrued and unpaid interest thereon through the applicable redemption
date, plus the applicable Make Whole Premium. No bonds of $1,000 in
principal amount or less shall be redeemed in part.
In the event of any redemption of the Bonds of First Series,
neither the Company nor the Trustee shall be required to (i) register
the transfer of or exchange any Bonds of First Series during a period
beginning at the opening of 15 days before any selection for redemption
of such Bonds of First Series and ending at the close of business on the
earliest date on which the relevant notice of redemption is deemed to
have been given to all holders of Bonds of First Series to be redeemed
or (ii) register the transfer of or exchange any Bonds of First Series
so selected for redemption, in whole or in part, except the unredeemed
portion of any Bonds of First Series being redeemed in part. In the
event that any Bondholder surrenders a Bond for repayment pursuant to a
Change of Control, neither the Company nor the Trustee shall be required
to register the transfer of or exchange of any such Bonds of First
Series except the portion, if any, of such Bonds of First Series not to
be so redeemed.
In the case of any redemption of the Bonds of First Series by the
Trustee pursuant to this First Supplemental Indenture, notice of
redemption shall be given in a similar manner by the Trustee.
Section 2.03. Change of Control.
(a) If a Change of Control occurs, the Company shall make an offer (a
"Change of Control Offer") to each Holder to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Bonds
of First Series at a purchase price equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder stating: (i) that the Change of
Control Offer is being made pursuant to this Section 2.03 and that all
Bonds of First Series tendered will be accepted for payment; (ii) the
purchase price and the purchase date, which shall be no earlier than 30
days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"); (iii) that any Bond of First Series
not tendered will continue to accrue interest; (iv) that, unless the
Company defaults in the payment of the Change of Control Payment, all
Bonds of First Series accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date; (v) that Holders electing to have any Bonds of First
Series purchased pursuant to a Change of Control Offer will be required
to surrender the Bonds of First Series, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the form of Bonds of
First Series completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (vi) that Holders will be
entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the second Business Day preceding
the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of Bonds of First Series delivered for purchase, and a
statement that such Holder is withdrawing his election to have the Bonds
of First Series purchased; and (vii) that Holders whose Bonds of First
Series are being purchased only in part will be issued new Bonds of
First Series equal in principal amount to the unpurchased portion of the
Bonds of First Series surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with
the repurchase of Bonds of First Series in connection with a Change of
Control. To the extent that the provisions of any securities laws or
regulations conflict with the Change of Control provisions of the Second
Mortgage, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations
under the Change of Control provisions of the Second Mortgage by virtue
of such compliance.
(b)On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment all Bonds of First Series or
portions thereof properly tendered pursuant to the Change of Control
Offer, (ii) deposit with the Paying Agent an amount equal to the Change
of Control Payment in respect of all Bonds of First Series or portions
thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Bonds of First Series so accepted together with an Officers'
Certificate stating the aggregate principal amount of Bonds of First
Series or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to each Holder of Bonds of First Series so
tendered the Change of Control Payment for such Bonds of First Series,
and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Bond of First Series
equal in principal amount to any unpurchased portion of the Bonds of
First Series surrendered by such Holder, if any; provided, that each
such new Bond shall be in a principal amount of $1,000 or an integral
multiple thereof. The Company shall publicly announce the results of
the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date. The Company shall not be required to
make a Change of Control Offer upon a Change of Control if a third party
makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the Second
Mortgage applicable to a Change of Control Offer made by the Company and
purchases all Bonds of First Series validly tendered and not withdrawn
under such Change of Control Offer.
Section 2.04. Form of Bonds. The Bonds of First Series shall be
registered bonds without coupons. Bonds of First Series may be issued
in denominations of $1,000 and shall be numbered consecutively from "R1"
upward and in such integral multiples of $1,000 as the Company may
authorize, appropriately numbered, the execution and delivery thereof to
be conclusive evidence of such authorization.
The form of Bonds of First Series shall be substantially in the
form of Exhibit 1 attached hereto (and any of the provisions of such
Bond may be set forth on the reverse side thereof).
Section 2.05. Bonds Exchangeable Upon Surrender. Bonds of First
Series shall be exchangeable upon surrender thereof at the principal
office of the Trustee in the Borough of Manhattan, City and State of New
York (or at the principal office of any successor in trust) for
registered Bonds of First Series without coupons of the same aggregate
principal amount but of different authorized denomination or
denominations, subject to Section 2.02 of this Article II. The
Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents (including, but
not limited to, those set forth on the form of Bonds of First Series)
and the Company may require a Holder to pay any taxes and fees required
by law or permitted by the Second Mortgage.
Section 2.06. Authentication of Bonds. Until Bonds of First
Series in definitive form are ready for delivery, the Company may
execute, and upon its request in writing the Trustee shall authenticate
and deliver in lieu thereof, Bonds of First Series in temporary form as
provided in Section 2.07 of the Indenture.
Section 2.07. Definitive Bonds. Definitive Bonds of First Series
may be in the form of fully engraved Bonds or Bonds printed or legibly
typed.
ARTICLE III
COVENANTS
So long as any Bonds of First Series are Outstanding, subject to
Section 3.15, the Company covenants and agrees as follows:
Section 3.01. Payment of Bonds of First Series. The Company shall
pay or cause to be paid the principal of, premium, if any, and interest
on the Bonds of First Series on the dates and in the manner provided in
the Bonds of First Series. Principal, premium, if any, and interest
shall be considered paid on the date due if the Paying Agent, if other
than the Company or a Regulated Subsidiary thereof, holds as of
10:00 a.m. Eastern Time on the due date money deposited by the Company
in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company
shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
Section 3.02. Maintenance of Office or Agency. The Company shall
maintain in the Borough of Manhattan, the City and State of New York, an
office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where the Bonds of First
Series may be surrendered for registration of transfer or for exchange
and where notices and demands to or upon the Company in respect of the
Bonds of First Series and this First Supplemental Indenture may be
served. The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency.
If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Bonds of First Series may be presented or
surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation
or rescission shall in any manner relieve the Company of its obligation
to maintain an office or agency in the Borough of Manhattan, the City
and State of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company.
Section 3.03. Reports. The Company shall file with the Trustee,
within 15 days of filing them with the Commission, copies of the
current, quarterly and annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as
the Commission may by rules and regulations prescribe) that the Company
is required to file with the Commission pursuant to Section 13 and 15(d)
of the Exchange Act. If the Company is not subject to the requirements
of Section 13 or 15(d) of the Exchange Act, the Company shall
nevertheless file with the Commission and the Trustee, on the date upon
which it would have been required to file with the Commission, current,
quarterly and annual financial statements, including any notes thereto
(and with respect to annual reports, an auditor's report by a firm of
established national reputation, upon which the Trustee may conclusively
rely), and a "Management's Discussion and Analysis of Financial
Condition and Results of Operation," both comparable to that which the
Company would have been required to include in such current, quarterly
and annual reports, information, documents or other reports on Forms
8-K, 10-Q and 10-K if the Company were subject to the requirements of
Section 13 or 15(d) of the Exchange Act, provided that the Company shall
not be required to register under the Exchange Act by virtue of this
provision, if not otherwise required to do so.
Section 3.04. Compliance Certificate; Notice of Default.
(a)The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review
of the activities of the Company and its Regulated Subsidiaries during
the preceding fiscal year has been made under the supervision of the
signing officers with a view to determining whether the Company has
kept, observed, performed and fulfilled its obligations under the Second
Mortgage, and further stating, as to each such officer signing such
certificate, that to the best of his or her knowledge either (i) no
Default or Event of Default has occurred and is continuing, as of the
date of such certificate, or (ii) if a Default or Event of Default shall
have occurred and is continuing on such date, describing all such
Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect
thereto.
(b) At any time the Suspended Sections are applicable to the Bonds of
First Series pursuant to Section 3.15, upon becoming aware of any
Default of Event of Default, the Company shall deliver to the Trustee a
statement specifying such Default or Event of Default.
Section 3.05. Payments For Consent. Neither the Company nor any
of it its Subsidiaries will, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to
any holder of the Bonds of First Series for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of the
Second Mortgage or such Bonds of First Series unless such consideration
is offered to be paid or agreed to be paid to all holders of the Bonds
of First Series that consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to such consent, waiver
or agreement.
Section 3.06. Restricted Payments.
(a) Subject to the other provisions of this Section 3.06, the Company
shall not, and shall not permit any of its Regulated Subsidiaries to,
directly or indirectly:
(i) declare or pay any dividend or make any cash dividend or other
distribution on account of the Company's or any of its Regulated
Subsidiaries' Equity Interests, including, without limitation, any
payment in connection with any merger or consolidation involving the
Company, other than (x) dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company and (y) any
portion of a dividend or distribution by a Regulated Subsidiary of the
Company that is payable to the Company or to any Regulated Subsidiary of
the Company);
(ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation in connection with any merger or
consolidation involving the Company) from any Person other than the
Company or a Regulated Subsidiary any Equity Interests of the Company,
any of its Subsidiaries or any direct or indirect parent of the Company
(other than the conversion or exchange of Equity Interests of the
Company for other Equity Interests of the Company);
(iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness other
than First Mortgage Bonds or Second Mortgage Bonds or Indebtedness
payable to the Company, except at Stated Maturity; or
(iv) make any Restricted Investment (all such payments and other actions
set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted
Payments:
(1) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(2) except in the case of a Restricted Investment, the Company would, at
the time of such Restricted Payment, and after giving pro forma effect
thereto as if such Restricted Payment had been made at the beginning of
the applicable four-quarter period, have a Fixed Charge Coverage Ratio
of not less than 2.50 to 1 (calculated as described in Section 3.08);
and
(3) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Regulated Subsidiaries
after the Initial Issuance Date (excluding Restricted Payments permitted
by clause (ii), (iii), (iv), (vi), (vii), (viii) or (ix) of
Section 3.06(d)), is less than the sum of
(A) 20% of the Consolidated Cash Flow of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the Initial Issuance Date through the end of
the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Cash Flow for such period is a
deficit, less 100% of such deficit), plus
(B) 100% of the aggregate net cash proceeds received by the Company
after the Initial Issuance Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests (other than
Disqualified Stock) of the Company or from the issue or sale of
convertible or exchangeable Disqualified Stock or convertible or
exchangeable debt securities of the Company that have been converted
into or exchanged for such Equity Interests (other than Equity Interests
(or Disqualified Stock or debt securities) sold to a Subsidiary of the
Company), plus
(C) to the extent that any Restricted Investment that was made after the
Initial Issuance Date sold for cash or Cash Equivalents or was otherwise
liquidated or repaid for cash or Cash Equivalents, the lesser of (i) the
cash return of capital with respect to such Restricted Investment (less
the cost of disposition, if any) and (ii) the initial amount of such
Restricted Investment, plus
(D) $15,000,000.
(b) Notwithstanding the foregoing:
(i) nothing in this covenant shall prohibit or restrict any distribution
of any Equity Interests (other than Disqualified Stock) of the Company
or of any of its Unregulated Subsidiaries as part of a Holding Company
Transaction; and
(ii) following a Holding Company Transaction, subject to clauses (c) and
(d) of this Section 3.06, neither the Company nor any Regulated
Subsidiary shall make a Restricted Payment other than a Restricted
Investment unless:
(A) such Restricted Payment is used to pay expenses incurred by the
Holding Company or a wholly-owned subsidiary of the Holding Company in
the ordinary course of business if, and only to the extent that, such
expenses represent a cost of the Company or a Regulated Subsidiary
incurred in the ordinary course of business; or
(B) the proceeds of such Restricted Payment are utilized by the Holding
Company solely to fund a pro rata distribution to the public
shareholders of the Holding Company; and
(iii) Subject to clauses (c) and (d) of this Section 3.06, the Company
and its Regulated Subsidiaries shall not make any Restricted Investments
other than Restricted Investments in an aggregate amount (a) equal to
(i) for the period from the Initial Issuance Date through December 31,
1999, $1,000,000 and (ii) thereafter, $2,000,000 in any fiscal year and
(b) not to exceed $10,000,000 since the Initial Issuance Date, provided,
that, if in any fiscal year the aggregate amount of any such Restricted
Investments is less than the amount permitted in any fiscal year, the
Company and its Regulated Subsidiaries will be entitled, in any
succeeding fiscal year, to make Restricted Investments in an amount
equal to (a) $2,000,000 plus (b) the aggregate amount of Restricted
Investments that were permitted but not made in any earlier fiscal year
(or portion thereof) after the Initial Issuance Date.
(c) The Company shall be permitted to make distributions to the Holding
Company in an amount not to exceed, in any period, the amount of
Restricted Investments permitted by Section 3.06(b)(iii), provided that
such distributions shall reduce, dollar for dollar, the amount of
Restricted Investments permitted to be made by the Company under
Section 3.06(b)(iii).
(d) Nothing in this Section 3.06 shall prohibit:
(i)so long as no Default shall have occurred and be continuing or would
be caused thereby, the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such payment
would have complied with the provisions of the Second Mortgage;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Indebtedness other than the First Mortgage Bonds or
the Second Mortgage Bonds of the Company or of any Equity Interests of
the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to the Regulated Subsidiary of
the Company) of, Equity Interests of the Company (other than
Disqualified Stock), provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded
Section 3.06(a)(3)(B);
(iii) the defeasance, redemption, repurchase or other acquisition of
Indebtedness other than First Mortgage Bonds or Second Mortgage Bonds of
the Company with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness;
(iv) the payment of any dividend by a Regulated Subsidiary of the
Company to the holders of its common Equity Interests on a pro rata
basis;
(v) the repurchase, redemption, cancellation or other acquisition or
retirement for value of any Equity Interests of the Company or any
Subsidiary of the Company held by any member of the Company's (or any of
its Subsidiaries') management, employees or directors pursuant to
(x) any management, employee or director equity subscription agreement
or stock option agreement or (y) upon the death, disability or
termination of employment of such members of management employees or
directors; provided that the aggregate price paid for all such
purchased, redeemed, acquired or retired Equity Interests shall not
exceed $1,000,000 in any twelve-month period;
(vi) so long as no Default shall have occurred and be continuing or
would be caused thereby, the payment of dividends, and the satisfaction
of mandatory redemption obligations, in respect of any Preferred Stock
outstanding on the Initial Issuance Date in accordance with the terms
thereof in effect on such date;
(vii) the repayment of (x) revolving credit borrowings used to finance
working capital needs or (y) other revolving credit facilities utilized
to finance accounts receivable;
(viii) the utilization, in accordance with the terms of the
Company's Dividend Reinvestment Plan or employee benefit plans, of any
proceeds from dividends paid by the Company in respect of its Capital
Stock permitted by this covenant to be made to purchase additional
shares of the Company's Capital Stock for the benefit of the
participants in such plan; and
(ix) payments to any direct or indirect parent corporation of the
Company in respect of (A) federal income taxes for the tax periods for
which a federal consolidated return is filed by such direct or indirect
parent corporation of the Company for a consolidated group of which such
direct or indirect parent corporation of the Company is the parent and
the Company and its Subsidiaries are members, in an amount not to exceed
the hypothetical federal income taxes that the Company would have paid
if the Company and its Regulated Subsidiaries filed a separate
consolidated return with the Company as the parent, taking into account
carryovers and carrybacks of tax attributes (including net operating
losses) that would have been allowed if such separate consolidated
return had been filed, (B) state income tax for the tax periods for
which a state combined, consolidated or unitary return is filed by such
direct or indirect parent corporation of the Company for a combined,
consolidated or unitary group of which such direct or indirect parent
corporation of the Company is the parent and the Company and its
Subsidiaries are members, in an amount not to exceed the hypothetical
state income taxes that the Company would have paid if the Company and
its Regulated Subsidiaries had filed a separate combined, consolidated
or unitary return taking into account carryovers and carrybacks of tax
attributes (including net operating losses) that would have been allowed
if such separate combined return had been filed and (C) capital stock,
net worth, or other similar taxes (but for the avoidance of doubt,
excluding any taxes based on net or gross income) payable by such direct
or indirect parent corporation of the Company based on or attributable
to its investment in or ownership of the Company and its Regulated
Subsidiaries; provided, however, that in no event shall any such tax
payment pursuant to this clause (ix) exceed the amount of federal (or
state, as the case may be) income tax that is, at the time the Company
makes such tax payments, actually due and payable by such direct or
indirect parent corporation of the Company to the relevant taxing
authorities or to become due and payable within 30 days of such payment
of the Company; provided, further, that for purposes of this
clause (ix), payments made by any Regulated Subsidiary to a Regulated
Subsidiary or the Company which are in turn distributed by such
Regulated Subsidiary or the Company to any direct or indirect parent
corporation of the Company shall be disregarded.
(e) For purposes of this Section 3.06, the amount of all Restricted
Payments (other than cash) shall be the fair market value on the date of
the Restricted Payment of the asset(s) or securities proposed to be
transferred or issued to or by the Company or such Regulated Subsidiary,
as the case may be, pursuant to the Restricted Payment. The fair market
value of any assets or securities that are required to be valued by this
Section 3.06 shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee. The
Board of Directors' determination shall be based upon an opinion or
appraisal issued by an Independent Appraiser if the fair market value
exceeds $10,000,000. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this
Section 3.06 were computed, together with a copy of any fairness opinion
or appraisal required by this First Supplemental Indenture.
Section 3.07. Dividend and Other Payment Restrictions Affecting
Regulated Subsidiaries.
(a) The Company shall not, and shall not permit any of its Regulated
Subsidiaries to, directly or indirectly, create or permit to exist or
become effective any consensual encumbrance or restriction on the
ability of any Regulated Subsidiary to (i) pay dividends or make any
other distributions to the Company or any of its Regulated Subsidiaries
(A) on its Capital Stock or (B) with respect to any other interest or
participation in, or measured by, its profits; (ii) pay any Indebtedness
owed to the Company or any of its Regulated Subsidiaries; (iii) make
loans or advances to the Company or any of its Regulated Subsidiaries;
or (iv) transfer any of its properties or assets to the Company or any
of its Regulated Subsidiaries.
(b) However, Section 3.07(a) shall not apply to encumbrances or
restrictions existing under or by reason of:
(i) Existing Indebtedness as in effect on the Initial Issuance Date
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in such Existing Indebtedness,
as in effect on the Initial Issuance Date;
(ii) applicable law or regulation;
(iii) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Regulated Subsidiaries as in
effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired;
(iv) by reason of customary non-assignment provisions in leases entered
into in the ordinary course of business and consistent with past
practice;
(v) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
Section 3.07(a)(iv) to the extent applicable to the property so
acquired;
(vi) any contract for the sale of 100% of the Capital Stock of a
Regulated Subsidiary;
(vii) Permitted Refinancing Indebtedness; provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced;
(viii) Liens securing Indebtedness that limit the right of the
debtor to dispose of the assets subject to such Lien;
(ix) Indebtedness or other contractual requirements of a special
purpose entity in connection with a Securitization Transaction, provided
that such restrictions apply only to such special purpose entity;
(x) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements,
stock sale agreements and other similar agreements entered into in the
ordinary course of business;
(xi) restrictions contained in the Indebtedness described in
Section 3.08(b)(xii);
(xii) Indebtedness of a Regulated Subsidiary owed to and held by the
Company; and
(xiii) restrictions on cash or other deposits or net worth imposed
by customers under contracts entered into in the ordinary course of
business.
Section 3.08. Incurrence of Indebtedness.
(a) The Company shall not, and shall not permit any of its Regulated
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable, contingently
or otherwise, with respect to (collectively, "incur"), any Indebtedness
(including Acquired Debt) or issue any Disqualified Stock and the
Company shall not permit any of its Regulated Subsidiaries to issue any
preferred stock; provided, however, that the Company may incur
Indebtedness (including Acquired Debt) and issue Disqualified Stock if
the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such Indebtedness is
incurred or Disqualified Stock or preferred stock is issued would have
been at least 2.50 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if such
Indebtedness had been incurred or such Disqualified Stock or preferred
stock had been issued at the beginning of such four-quarter period.
(b) The foregoing provisions shall not apply to the incurrence of any
of the following Indebtedness (collectively, "Permitted Debt"):
(i) the existence of the Existing Indebtedness;
(ii) the incurrence by the Company of Indebtedness represented by the
Bonds of First Series to be issued on the Initial Issuance Date and the
Exchange Bonds (as defined in the Registration Rights Agreement) to be
issued pursuant to the Registration Rights Agreement;
(iii) the incurrence by the Company or any of its Regulated Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Regulated Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (iii), not to exceed $5,000,000 at any time
outstanding;
(iv) the incurrence by the Company or any of its Regulated Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by the Second
Mortgage to be incurred under Section 3.08(a) or clauses (i), (ii),
(iii) or (ix) of this paragraph;
(v) the incurrence by the Company or any of its Regulated Subsidiaries
of intercompany Indebtedness between or among the Company and/or any of
its Regulated Subsidiaries; provided, however, that:
(A) if the Company is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment in full
in cash of all Obligations with respect to the Bonds of First Series,
and
(B) (x) any subsequent issuance or transfer of Equity Interests that
results in any Person other than the Company or a Regulated Subsidiary
being the obligee on such Indebtedness and (y) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Regulated Subsidiary and that results in such Person being
the obligee on such Indebtedness, shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Regulated Subsidiary, as the case may be, that was not permitted by this
clause (v);
(vi) the incurrence by the Company or any of its Regulated Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging: (x) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Second Mortgage to
be outstanding; or (y) the cost of commodities purchased or received by
the Company or any of its Regulated Subsidiaries in the ordinary course
of business provided that, in the case of clause (y), the Net
Termination Value of such Hedging Obligations shall not at any time
exceed $3,000,000;
(vii) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms, and the payment of
dividends on Disqualified Stock in the form of additional shares of the
same class of Disqualified Stock will not be deemed to be an incurrence
of Indebtedness or an issuance of Disqualified Stock for purposes of
this covenant; provided, in each such case, that the amount thereof is
included in Fixed Charges of the Company as accrued;
(xiii) Indebtedness of the Company or any Regulated Subsidiary
represented by performance bonds and letters of credit for the account
of the Company or such Regulated Subsidiary, as the case may be, in
order to provide security for workers' compensation claims and payment
obligations in connection with self-insurance, in each case, that are
incurred in the ordinary course of business in accordance with customary
industry practice in amounts, and for the purposes, customary in the
Company's industry;
(ix) the incurrence by the Company of unsecured Indebtedness after the
Initial Issuance Date the proceeds of which are utilized to finance
Power Contract Buyouts and related restructuring and transaction and
financing costs;
(x) the incurrence by a special purpose entity of Indebtedness in a
Securitization Transaction that is without recourse to the Company or to
any other Regulated Subsidiary of the Company or their assets (other
than such special purpose entity and its assets and, as to the Company
or any Regulated Subsidiary of the Company, other than pursuant to
representations, warranties, covenants and indemnities customary for
such transactions) and is not guaranteed by any such Person;
(xi) the incurrence by the Company or any of its Regulated Subsidiaries
of Indebtedness under the Accounts Receivables Facility or any other
similar accounts receivables facilities, including any refinancings or
replacements thereof in an aggregate principal amount of Indebtedness
not to exceed $15,000,000 at any one time outstanding;
(xii) the incurrence of Indebtedness by Connecticut Valley in an amount
not to exceed $5,000,000 at any time outstanding; provided, however,
that all net proceeds shall be applied to the repayment of the note in
the original principal amount of $3,800,000 issued by Connecticut Valley
and owed to and held by the Company, until all amounts on such note are
paid in full; or
(xiii) the incurrence by the Company or any of its Regulated
Subsidiaries of additional Indebtedness after the Initial Issuance Date
in an aggregate principal amount (or accreted value, as applicable) at
any time outstanding not to exceed $15,000,000.
(c) For purposes of determining compliance with this Section 3.08, in
the event that an item of proposed Indebtedness meets the criteria of
more than one of the categories of Permitted Debt described in
clauses (i) through (xiii) of Section 3.08(b), or is entitled to be
incurred pursuant to Section 3.08(a), the Company shall be permitted to
classify such item of Indebtedness on the date of its incurrence, or
later reclassify all or a portion of such item of Indebtedness, in any
manner that complies with this Section 3.08.
Section 3.09. Asset Sales other than Mortgaged Property Asset
Sales.
(a) The Company shall not, and shall not permit any of its Regulated
Subsidiaries to, consummate an Asset Sale, other than a Mortgaged
Property Asset Sale, unless: (i) the Company (or the Regulated
Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets or
Equity Interests issued or sold or otherwise disposed of (evidenced by a
resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee in the event of any Asset Sale over
$5,000,000); provided, that for purposes of an event set forth in clause
(ii) of the definition of "Event of Loss," fair market value shall be
the fair market value judicially determined by a court of competent
jurisdiction, and (ii) at least 75% of the consideration therefor
received by the Company or such Regulated Subsidiary is in the form of
cash or cash equivalents (provided that the requirement of this
clause (ii) shall not apply to Designated Asset Sales with an aggregate
fair market value since the Initial Issuance Date of less than
$5,000,000). For purposes of this provision, each of the following
shall be deemed to be cash: (A) any liabilities (as shown on the
Company's or such Regulated Subsidiary's most recent balance sheet) of
the Company or any Regulated Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the
Bonds of First Series) that are assumed by the transferee of any such
assets pursuant to an agreement that releases the Company or such
Regulated Subsidiary from further liability and (B) securities, notes or
other obligations received by the Company or any such Regulated
Subsidiary from such transferee that are converted within 180 days by
the Company or such Regulated Subsidiary into cash (to the extent of the
cash received).
(b) Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, other than a Mortgaged Property Asset Sale, the Company or
any Regulated Subsidiary may apply such Net Proceeds to: (i) the making
of a capital expenditure or the acquisition of other property or assets,
in each case which is used or useable in the regulated utility business
of the Company or its Regulated Subsidiaries on the Initial Issuance
Date or businesses reasonably related thereto or (ii) the repayment of
outstanding Prior Lien Bonds.
(c) Pending the final application of any such Net Proceeds, the
Company or such Regulated Subsidiary may temporarily reduce amounts
available under revolving credit facilities or invest such Net Proceeds
in any manner that is not prohibited by this First Supplemental
Indenture and the Second Mortgage.
(d) Any Net Proceeds from Asset Sales other than Mortgaged Property
Asset Sales that are not applied or invested as provided in
Section 3.09(b) shall be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $7,500,000, the Company
or the applicable Regulated Subsidiary will be required to make an offer
to all Holders of Bonds of First Series (an "Asset Sale Offer") and all
holders of additional Second Mortgage Bonds then Outstanding to purchase
the maximum principal amount of Bonds of First Series and such
additional Second Mortgage Bonds that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Second Mortgage. To the extent that the
aggregate amount of Bonds of First Series and such additional Second
Mortgage Bonds tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company or its Regulated Subsidiaries may use any
remaining Excess Proceeds for general corporate purposes. If the
aggregate principal amount of Bonds of First Series and such additional
Second Mortgage Bonds surrendered by Holders thereof exceeds the amount
of Excess Proceeds, the Trustee shall select the Bonds of First Series
and additional Second Mortgage Bonds to be purchased on a pro rata
basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero. Notwithstanding the foregoing, neither
the Company nor any Regulated Subsidiary shall be obligated to make an
Asset Sale Offer if such offer would violate an order, rule or
regulation of a governmental authority with jurisdiction over the
Company or any such Regulated Subsidiary; provided that the Company and
such Regulated Subsidiary shall use their reasonable best efforts to
vacate or modify such order to permit such Asset Sale Offer.
Section 3.10. Mortgaged Property Asset Sales and Events of Loss.
(a) The Company shall not engage in a Mortgaged Property Asset Sale
unless
(i) such Mortgaged Property Asset Sale involves the Mortgaged Property
in its entirety, or, if such Mortgaged Property Asset Sale involves less
than all of the Mortgaged Property (a "Partial Mortgaged Property Asset
Sale"), such Partial Mortgaged Property Asset Sale involves a single
Mortgaged Property Asset Sale with a fair market value at the time of
consummation of such Mortgaged Property Asset Sale not exceeding
$10,000,000 and is not part of a series of Mortgaged Property Asset
Sales in any twelve month period with an aggregate value (measured as of
the time of consummation of such sales) exceeding $10,000,000; provided,
however, that any Mortgaged Property Asset Sale in contemplation of or
as part of the restructuring of the Company in which the Company divests
generation assets and/or power purchase agreements shall not be subject
to the $10,000,000 limitation in this clause (i);
(ii) the Company receives consideration in respect of and concurrently
with such Mortgaged Property Asset Sale at least equal to the fair
market value of such Mortgaged Property;
(iii) with respect to each such Mortgaged Property Asset Sale, the
Company delivers an Officers' Certificate to the Trustee dated no more
than 15 days prior to the date of consummation of the relevant Mortgaged
Property Asset Sale, certifying that
(A) such sale complies with clauses (i) and (ii) above and
(B) if the fair market value of the Mortgaged Property being sold
exceeds $5,000,000, such fair market value was based on the opinion of
an Independent Appraiser prepared contemporaneously with such Mortgaged
Property Asset Sale and which opinion, in such case, will be attached to
the Officers' Certificate, as evidenced by copies of a resolution of the
Board of Directors of the Company adopted in respect of and
substantially concurrently with such Mortgaged Property Asset Sale;
(iv) 100% of such consideration is in cash or Cash Equivalents; and
(v) the Net Proceeds therefrom shall be paid to the trustee under the
First Mortgage to be held in accordance with the terms of the First
Mortgage if any First Mortgage Bonds are then outstanding and, upon
release of such Net Proceeds by such trustee, such Net Proceeds shall be
paid directly to the Trustee pursuant to the Second Mortgage, to be held
by the Trustee as additional Mortgaged Property. To the extent that
such Net Proceeds are applied to the purchase of Bondable Property, such
Bondable Property shall become subject to the Lien of the Second
Mortgage and shall become additional Mortgaged Property.
(b) The Company, within 360 days from the date of consummation of such
Mortgaged Property Asset Sale, may apply all of the Net Proceeds of a
Mortgaged Property Asset Sale: (i) to purchase or otherwise invest in
Bondable Property which shall become additional Mortgaged Property under
the Second Mortgage; or (ii) to repay outstanding Prior Lien Bonds.
(c) Any such Net Proceeds of a Mortgaged Property Asset Sale not so
applied shall constitute "Excess Proceeds" and shall be applied, to the
extent the Net Proceeds can be released from the First Mortgage and
Second Mortgage, to make an Asset Sale Offer, in accordance with the
terms of Section 3.09(b). The Company shall use its reasonable best
efforts to obtain the release of such Net Proceeds from the provisions
of the First Mortgage and the Second Mortgage.
(d) If the Company suffers an Event of Loss with respect to Mortgaged
Property: (i) the Net Proceeds therefrom shall be paid to the trustee
under the First Mortgage to be held in accordance with the terms of the
First Mortgage if any First Mortgage Bonds are then outstanding and,
upon release of such Net Proceeds by such trustee, such Net Proceeds
shall be paid directly to the Trustee pursuant to the Second Mortgage,
to be held by the Trustee as additional Mortgaged Property; and (ii) the
Company shall take such actions, at its sole expense, as may be required
to ensure that the Trustee, pursuant to the Second Mortgage, has from
the date of such deposit a Lien (ranking prior to all other Liens on the
property other than the Lien of the First Mortgage) on such Net Proceeds
pursuant to the terms of this Second Mortgage.
(e) As any portion or all of the Net Proceeds from any such Event of
Loss are received by the Trustee, the Company may apply all of such
amount or amounts, as received, together with all interest earned
thereon, individually or in combination: (i) to purchase or otherwise
invest in Bondable Property which shall become additional Mortgaged
Property under the Second Mortgage, (ii) to restore the relevant
Mortgaged Property or (iii) to repay outstanding Indebtedness with Liens
on the Mortgaged Property that rank prior in payment to the Bonds of
First Series.
(f) In the event that the Company elects to restore the relevant
Mortgaged Property pursuant to Section 3.10(e)(ii), within six months of
receipt of such Net Proceeds from an Event of Loss, the Company shall
(i) give the Trustee irrevocable written notice of such election and
(ii) enter into a binding commitment to restore such Mortgaged Property,
a copy of which shall be supplied to the Trustee, and shall have 12
months or as soon as is reasonably practicable from the date of such
binding commitment to complete such restoration, which shall be carried
out with due diligence. Any such Net Proceeds of an Event of Loss not
so applied shall constitute "Excess Proceeds" and shall be applied to
make an Asset Sale Offer in accordance with Section 3.10(b).
(g) In the event that the Company decides pursuant to the foregoing
provisions to apply any portion of the Net Proceeds from a Mortgaged
Property Asset Sale or an Event of Loss to purchase or otherwise invest
in Bondable Property,
(i) the Company shall deliver an Officers' Certificate to the Trustee
dated no more than 30 days prior to the date of consummation of the
relevant investment in Bondable Property, certifying that the purchase
price for the amount of the investment in Bondable Property does not
exceed the fair market value of such Bondable Property, and, if the fair
market value of such Bondable Property exceeds $1,000,000, certifying
that the fair market value of such Bondable Property was determined in
good faith by the Board of Directors of the Company and, in the event
the fair market value of such Bondable Property exceeds $5,000,000, was
based on the opinion of an Independent Appraiser attached to the
Officer's Certificate, as evidenced by copies of a resolution of the
Board of Directors of the Company adopted in respect of and
substantially concurrently with the investment in such Bondable
Property;
(ii) the Trustee will release such certified purchase price to the
Company, free of the Lien of the Second Mortgage; and
(iii) the Company shall take such actions, at its sole expense, as shall
be required to permit the Trustee, pursuant to this Second Mortgage, to
release such Net Proceeds, together with any interest thereon, from the
lien of this Second Mortgage and to ensure that the Trustee has, from
the date of such purchase or investment, a Lien ranking prior to all
Liens (other than the Lien securing any outstanding First Mortgage Bonds
and Permissible Encumbrances) on such Bondable Property under the Second
Mortgage.
Section 3.11. Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its Regulated
Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or
for the benefit of, any Affiliate (each, an "Affiliate Transaction"),
unless: (i) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Regulated Subsidiary than those
that would have been obtained in a comparable transaction by the Company
or Regulated Subsidiary with an unrelated Person; and (ii) the Company
delivers to the Trustee (A) with respect to any Affiliate Transaction
involving aggregate consideration in excess of $2,500,000 a resolution
of the Board of Directors set forth in an officer's certificate
certifying that such Affiliate Transaction complies with clause (1)
above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors; and
(B) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $10,000,000, an opinion as to the fairness to
the Company or such Regulated Subsidiary of such Affiliate Transaction
from a financial point of view issued by an Independent Appraiser.
(b) The following items shall not be deemed to be Affiliate
Transactions and, therefore, shall not be subject to the provisions of
Section 3.11(a): (i) any employment agreement entered into by the
Company or any of its Regulated Subsidiaries in the ordinary course of
business and consistent with past practices of the Company or such
Regulated Subsidiary; (ii) commercial transactions in the ordinary
course of business for the provision of goods and services by the
Company to any of its Subsidiaries or Affiliates (or, following a
Holding Company Transaction, any Subsidiary or Affiliate of the Holding
Company); provided that the consideration received by the Company is not
less than the lower of cost to the Company of providing such goods and
services or the fair market value of such goods and services;
(iii) transactions between or among the Company and/or its Regulated
Subsidiaries; and (iv) Restricted Payments permitted by Section 3.06.
Section 3.12. Liens.
(a) The Company shall not, directly or indirectly, create, incur,
assume or suffer to exist any Lien of any kind on any Mortgaged
Property, other than the following Liens:
(i) Permissible Encumbrances;
(ii) Liens which rank prior in right of payment to the Lien on the
Mortgaged Property securing the Bonds of First Series, provided such
Liens do not secure an amount of Indebtedness in excess of:
(i) $103,400,000, minus (ii) the aggregate principal amount of Second
Mortgage Bonds issued pursuant to and in accordance with
Section 3.12(a)(iii)(B) on the basis of the retirement, purchase or
acquisition of Prior Lien Bonds;
(iii) Liens which rank equal in right of payment with the Lien on the
Mortgaged Property securing the Bonds of First Series, provided such
Liens do not secure an amount of Indebtedness in excess of the sum of:
(A) the lesser of the Cost or fair market value of Unbonded Bondable
Property, after deducting the principal amount of all Prior Lien Bonds,
including First Mortgage Bonds, which are (1) Outstanding and secured by
a Prior Lien on Bondable Property owned by the Company at the date of
the Second Mortgage, (2) Outstanding and secured by a Prior Lien on
Bondable Property at the date of its acquisition by the Company after
such date and (3) issued after the date of the Second Mortgage; and
(B) the principal amount of Bonds of First Series and Prior Liens Bonds,
including First Mortgage Bonds, which the Company has retired, purchased
or acquired since the date of this Second Mortgage or the Company is
retiring, purchasing or acquiring, and which have not already been
Bonded; and (C) the amount of cash deposited with the Trustee for such
purpose; and
(iv) Liens on Mortgaged Property that rank junior in right of payment
to the Lien of the Second Mortgage.
(b) The Company shall not, directly or indirectly, create, incur,
assume or suffer to exist any Lien of any kind securing Indebtedness on
any asset now owned or hereafter acquired by the Company that does not
constitute Mortgaged Property, other than the following Liens:
(i) Liens on Equity Interests in Unregulated Subsidiaries;
(ii) Liens on Equity Interests or assets of Connecticut Valley securing
Indebtedness in an aggregate principal amount not to exceed $5,000,000;
(iii) Liens on any property acquired, constructed or improved by the
Company after the date the Bonds of First Series were issued, and which
are created or assumed contemporaneously with such acquisition,
construction or improvement, or within 180 days after the completion
thereof, to secure or provide for the payment of all or any part of the
cost of such acquisition, construction or improvement (including related
expenditures capitalized for federal income tax purposes in connection
therewith);
iv) Liens on any property existing at the time of acquisition thereof,
whether by merger, consolidation, purchase, lease or otherwise
(including Liens on property of a person existing at the time such
person becomes a Regulated Subsidiary); provided that such Liens were
not incurred in contemplation of the acquisition of such property and do
not extend to any assets other than those of the Person merged into or
consolidated with the Company or any Regulated Subsidiary or which
becomes a Regulated Subsidiary of the Company in connection with such
transaction;
(v) Liens in favor of the United States of America or any state
thereof, or any department, agency or instrumentality or political
subdivision of the United States of America or any State thereof or
political entity affiliated therewith to secure partial, progress,
advance or other payments, or other obligations, pursuant to any
contract or statute or to secure any Indebtedness Incurred for the
purpose of financing all or any part of the cost of acquiring,
constructing or improving the property subject to such Liens (including
Liens incurred in connection with pollution control, industrial revenue
or similar financings);
(vi) Liens on property created, assumed or otherwise brought into
existence in contemplation of the sale or other disposition of the
underlying property, whether directly or indirectly, by way of share
disposition or otherwise, provided, that 180 days from the creation of
such Liens the Company must have disposed of such property and any
Indebtedness secured by such Liens shall be without recourse to the
Company;
(vii) Liens imposed by law, such as mechanics', workmen's, repairmen's,
materialmen's, carriers', warehousemen's, vendors or other similar liens
arising in the ordinary course of business, or governmental (federal,
state or municipal) liens arising out of contracts for the sale of
products or services by the Company, or deposits or pledges to obtain
the release of any of the foregoing;
(viii) Liens arising out of pledges or deposits under workmen's
compensation laws or similar legislation and Liens of judgments
thereunder which are not currently dischargeable, or good faith deposits
in connection with bids, tenders, contracts (other than for the payment
of money) or leases to which the Company is a party, or deposits to
secure the Company's public or statutory obligations, or deposits in
connection with obtaining or maintaining self insurance or to obtain the
benefits of any law, regulation or arrangement pertaining to
unemployment insurance, old age pensions, social security or similar
matters, or deposits of cash or obligations of the United States of
America to secure security, appeal or customs bonds to which the Company
or any Regulated Subsidiary is a party, or deposits in litigation or
other proceedings such as, but not limited to, interpleader proceedings;
(ix) Liens created by or resulting from any litigation or other
proceeding which is being contested in good faith by appropriate
proceedings, including Liens arising out of judgments or awards against
the Company with respect to which the Company is in good faith
prosecuting an appeal or proceeding for review, or Liens incurred by the
Company for the purpose of obtaining a stay or discharge in the course
of any litigation or other proceeding to which the Company is a party;
(x) Liens for taxes or assessments or governmental charges or levies
not yet due or delinquent or which are being contested in good faith by
appropriate proceedings;
(xi) Liens consisting of easements, rights of way, zoning restrictions,
restrictions on the use of real property, and defects and irregularities
in the title thereto, landlords' liens and other similar liens and
encumbrances none of which interferes materially with the use of the
property covered thereby in the ordinary course of the Company's
business and which do not materially detract from the value of such
properties;
(xii) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Lien referred
to in the foregoing clauses; provided, that (i) such extension, renewal
or replacement Lien shall be limited to all or a part of the same
property or Indebtedness that secured the Lien extended, renewed or
replaced and (ii) the amount of Indebtedness secured by such Lien at
such time is not increased;
(xiii) Liens on accounts receivable of the Company or any Regulated
Subsidiary securing Indebtedness incurred pursuant to
Section 3.08(b)(xi); and
(xiv) Liens on assets of a special purpose entity incurred in connection
with a Securitization Transaction.
Section 3.13. Sale and Leaseback Transactions.
(a) The Company will not, and will not permit any of its Regulated
Subsidiaries to, enter into any sale and leaseback transaction; provided
that the Company or any Regulated Subsidiary may enter into a Sale and
Leaseback Transaction if: (i) the Company or that Regulated Subsidiary,
as applicable, could have incurred Indebtedness in an amount equal to
the Attributable Debt relating to such Sale and Leaseback Transaction
under Section 3.08; (ii) the gross cash proceeds of that Sale and
Leaseback Transaction are at last equal to the fair market value, as
determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee, of the property that is
the subject of that sale and leaseback transaction; and (iii) the
transfer of assets in that Sale and Leaseback Transaction is permitted
by, and the Company applies the proceeds of such transaction in
compliance with Section 3.09 and Section 3.10.
(b) The foregoing shall not prevent transactions between or among the
Company and/or its Regulated Subsidiaries or Securitization
Transactions.
Section 3.14. Designation of Regulated and Unregulated
Subsidiaries.
(a) The Board of Directors may designate any Regulated Subsidiary to
be an Unregulated Subsidiary if that designation would not cause a
Default; provided that in no event shall the regulated utility business
currently operated by the Company be transferred to or held by an
Unregulated Subsidiary. If a Regulated Subsidiary is designated as an
Unregulated Subsidiary, the aggregate fair market value of all
Outstanding Investments owned by the Company and its Regulated
Subsidiaries in the Subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will either
reduce the amount available for Restricted Payments under the first
paragraph of Section 3.06 or reduce the amount available for future
Investments under one or more clauses of the definition of Permitted
Investments, as the Company shall determine. That designation will only
be permitted if such Investment would be permitted at that time and if
such Regulated Subsidiary otherwise meets the definition of an
Unregulated Subsidiary. The Board of Directors may redesignate any
Unregulated Subsidiary to be a Regulated Subsidiary if the redesignation
would not cause a Default.
(b) Any designation of a Subsidiary of the Company as an Unregulated
Subsidiary shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such
designation complied with the conditions within the definition of
"Unregulated Subsidiary" and was permitted by Section 3.06. If, at any
time, any Unregulated Subsidiary would fail to meet the preceding
requirements as an Unregulated Subsidiary, it shall thereafter cease to
be an Unregulated Subsidiary for purposes of the Second Mortgage and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a
Regulated Subsidiary of the Company as of such date and, if such
Indebtedness is not permitted to be incurred as of such date under
Section 3.08, the Company shall be in default of such Section. The
Board of Directors of the Company may at any time designate any
Unregulated Subsidiary to be a Regulated Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a
Regulated Subsidiary of the Company of any outstanding Indebtedness of
such Unregulated Subsidiary and such designation shall be permitted only
if (1) such Indebtedness is permitted under Section 3.08, calculated on
a pro forma basis as if such designation had occurred at the beginning
of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following such designation.
Section 3.15. Changes in Covenants when Bonds of First Series
Rated Investment Grade.
(a) If at any time the Bonds of First Series are rated BBB- (or the
equivalent) or higher by Standard & Poor's or Baa 3 (or the equivalent)
or higher by Moody's (each, a "Rating Event" and such date, the "Rating
Event Date"), Sections 3.04(b), 3.05, 3.06, 3.07, 3.08, 3.09, 3.10,
3.11, 3.13 and 6.01 in this First Supplemental Indenture (collectively,
the "Suspended Sections") shall not be applicable to the Bonds of First
Series; provided, however if at any time after a Rating Event Date the
Bonds of First Series shall be rated lower than BBB- by Standard &
Poor's, if rated by Standard & Poor's, and Baa 3 by Moody's, if rated by
Moody's, the Suspended Sections shall be automatically reinstated (the
"Reinstated Sections") and all events that occurred during any time that
such sections were suspended and that would have violated such sections
had such sections been in effect shall be deemed not to constitute a
Default or an Event of Default, as the case may be, and shall be deemed
to have been in compliance with such sections for all purposes;
provided, further that thereafter all events occurring during any period
in which the Suspended Sections have been reinstated shall be required
to be in compliance with the Reinstated Sections.
(b) Notwithstanding the foregoing, if Standard & Poor's and Moody's
cease to rate the Bonds of First Series for reasons outside of the
control of the Company, the Company may select a replacement rating
agency that is a "nationally recognized statistical rating organization"
within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act,
and the lowest investment grade credit rating from such replacement
agency shall be substituted in the preceding paragraph for the
determination of a Rating Event.
ARTICLE IV
EVENTS OF DEFAULT AND REMEDIES
Section 4.01. Events of Default. The occurrence of any of the
following events shall be an "Event of Default" with respect to the
Bonds of First Series:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Bonds of First Series
and such default continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Bonds of First Series when the same becomes due
and payable at maturity, upon redemption (including in connection with
an offer to purchase) or otherwise;
(c) the Company or any of its Regulated Subsidiaries fails to comply
with any of the provisions of Section 3.10 or 6.01 at any time such
covenants are applicable for 30 days after notice to the Company by the
Trustee or the Holders of at least 25% in aggregate principal amount of
the Bonds of First Series then Outstanding voting as a single class;
(d) the Company fails to observe or perform any other covenant or
other agreement in the Second Mortgage for 60 days after notice to the
Company by the Trustee or the Holders of at least 25% in aggregate
principal amount of the Bonds of First Series then Outstanding voting as
a single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Regulated Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Regulated Subsidiaries), whether such Indebtedness
or guarantee now exists, or is created after the date of the Second
Mortgage (other than Indebtedness of a Regulated Subsidiary owed to and
held by the Company), if that default (i) is caused by a failure to pay
principal of, or interest or premium, if any, on such Indebtedness prior
to the expiration of the grace period provided in such Indebtedness on
the date of such default (a "Payment Default"); or (ii) results in the
acceleration of such Indebtedness prior to its express maturity, and, in
each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5,000,000 or more;
(f) failure by the Company or any of its Regulated Subsidiaries to pay
final non-appealable judgments aggregating in excess of $5,000,000,
which judgments are not paid, discharged or stayed for a period of 60
days, provided, that this clause (f) shall not apply to any judgment in
favor of the Company against a Regulated Subsidiary;
(g) any event of the type described in clauses (v) or (vi) of Section
12.01(a) of the Indenture shall occur with respect to the Company or any
of its Regulated Subsidiaries that are Significant Subsidiaries or any
group of Regulated Subsidiaries that, taken as a whole, would constitute
a Significant Subsidiary, in each case continued beyond the period of
grade specified therein; and
(h) the occurrence of any other Event of Default under (and as defined
in) the Indenture.
Notwithstanding the foregoing, solely for purposes of determining
whether an Event of Default has occurred under clause (e), (f) or (g) of
this Section 4.01, the term "Regulated Subsidiary" shall not include
Connecticut Valley at any time that the Investment by the Company in
Connecticut Valley (including amounts invested prior to the Initial
Issuance Date) does not exceed $12,000,000.
In the case of any Event of Default occurring by reason of any
willful action or inaction taken or not taken by or on behalf of the
Company with the intention of avoiding payment of any premium that the
Company would have been required to pay if the Company then had elected
to redeem the Bonds of First Series pursuant to the optional redemption
provisions of this First Supplemental Indenture, an equivalent premium
shall become and be immediately due and payable to the extent permitted
by law upon the acceleration of the Bonds of First Series.
Section 4.02. Acceleration. Subject to the Indenture, if any
Event of Default (other than an Event of Default specified in clause (g)
of Section 4.01 hereof with respect to the Company, any Regulated
Subsidiaries that are Significant Subsidiaries or any group of Regulated
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary) occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then Outstanding Bonds of First
Series may declare all the Bonds of First Series to be due and payable
immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (g) of Section 4.01 hereof occurs with respect to
the Company, any of its Regulated Subsidiaries that are Significant
Subsidiaries or any group of Regulated Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, all Outstanding Bonds
of First Series shall be due and payable immediately without further
action or notice.
ARTICLE V
THE TRUSTEE
Section 5.01. Extent of Trustee's Liability. The Trustee shall
not be responsible in any manner whatsoever for, or in respect of, the
validity or sufficiency of this First Supplemental Indenture or the due
execution hereof by the Company, or for, or in respect of, the recitals
and statements contained herein, all of which recitals and statements
are made solely by the Company. Except as herein otherwise provided, no
duties, responsibilities or liabilities are assumed, or shall be
construed to be assumed, by the Trustee by reason of this First
Supplemental Indenture other than as set forth in the Indenture; and
this First Supplemental Indenture is executed and accepted on behalf of
the Trustee, subject to all the terms and conditions set forth in the
Indenture, as fully to all intents as if the same were herein set forth
at length.
ARTICLE VI
SUCCESSORS
Section 6.01. Merger, Consolidation, or Sale of Assets. So long
as any Bonds of First Series are Outstanding, the Company shall not,
directly or indirectly: (a) consolidate or merge with or into another
Person (whether or not the Company is the surviving corporation); or (b)
sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company and its
Regulated Subsidiaries taken as a whole, in one or more related
transactions, to another Person; unless: (i) the corporation formed by
such consolidation or surviving in such merger or the Person that
acquires by sale, assignment, transfer, conveyance or other disposition,
or that leases, such assets (in each such case, the "Successor Entity"),
is a corporation organized and existing under the laws of the United
States, any State thereof or the District of Columbia and expressly
assumes the Company's obligations under the Second Mortgage and the
Bonds of First Series; (ii) immediately before and after such
transaction no Default or Event of Default exists; and (iii) the
Successor Entity (or the Company, in the case of a consolidation or
merger in which the Company is the surviving entity) (a) has
Consolidated Net Worth immediately after the transaction (but prior to
any revaluation or recalculation of Consolidated Net Worth as of the
date of the transaction relating to a carry-over basis (if any) of the
assets acquired in the transaction (as determined in accordance with
GAAP)) equal to or greater than the Consolidated Net Worth of the
Company immediately prior to the transaction; and (b) will, at the time
of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, have a Fixed Charge Coverage Ratio of not less than 2.50 to 1
(calculated in accordance with Section 3.08), provided, that the
foregoing clause (3) shall not prevent a Holding Company Transaction.
In addition, the Company may not, directly or indirectly, lease all
or substantially all of its properties of assets, in one or more related
transaction, to any other Person.
ARTICLE VII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 7.01. Option to Effect Legal Defeasance or Covenant
Defeasance. The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any
time, elect to have either Section 7.02 or 7.03 hereof be applied to all
Outstanding Bonds of First Series upon compliance with the conditions
set forth below in this Article VII.
Section 7.02. Legal Defeasance and Discharge. Upon the Company's
exercise under Section 7.01 hereof of the option applicable to this
Section 7.02, the Company shall, subject to the satisfaction of the
conditions set forth in Section 7.04 hereof, be deemed to have been
discharged from its obligations with respect to all Outstanding Bonds of
First Series on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance
means that the Company shall be deemed to have paid and discharged the
entire Indebtedness represented by the Outstanding Bonds of First
Series, which shall thereafter be deemed to be "Outstanding" only for
the purposes of Section 7.05 hereof and the other Sections of the
Indenture referred to in (a) and (b) below, and to have satisfied all
its other obligations under such Bonds of First Series and the Indenture
(and the Trustee, on demand of and at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of Outstanding Bonds of
First Series to receive solely from the trust fund described in
Section 7.04 hereof, and as more fully set forth in such Section,
payments in respect of the principal of, premium, if any, Liquidated
Damages, if any, and interest on such Bonds of First Series when such
payments are due, (b) the Company's obligations with respect to such
Bonds of First Series under Sections 7.04(a) and 7.04(b) of this First
Supplemental Indenture hereof, (c) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and the Company's obligations in
connection therewith and (d) this Article VII. Subject to compliance
with this Article VII, the Company may exercise its option under this
Section 7.02 notwithstanding the prior exercise of its option under
Section 7.03 hereof.
Section 7.03. Covenant Defeasance. Upon the Company's exercise
under Section 7.01 hereof of the option applicable to this Section 7.03,
the Company shall, subject to the satisfaction of the conditions set
forth in Section 7.04 hereof, be released from its obligations under the
covenants and agreements contained in Section 2.03, Article III, and
clause (d) of Section 4.01 hereof with respect to the Outstanding Bonds
of First Series on and after the date on which the conditions set forth
in Section 7.04 are satisfied (hereinafter, "Covenant Defeasance"), and
the Bonds of First Series shall thereafter be deemed not "Outstanding"
for the purposes of any direction, waiver, consent or declaration or act
of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other
purposes hereunder (it being understood that such Bonds of First Series
shall not be deemed Outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the Outstanding
Bonds of First Series, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set
forth in any such covenant or agreement, whether directly or indirectly,
by reason of any reference elsewhere herein to any such covenant or
agreement or by reason of any reference in any such covenant or
agreement to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of
Default under Section 4.01 hereof, but, except as specified above, the
remainder of this First Supplemental Indenture and such Bonds of First
Series shall be unaffected thereby. In addition, upon the Company's
exercise under Section 7.01 hereof of the option applicable to this
Section 7.03 hereof, subject to the satisfaction of the conditions set
forth in Section 7.04 hereof, the events described in clauses (c)
through (f) and (h) of Section 4.01 hereof shall not constitute Events
of Default.
Section 7.04. Conditions to Legal or Covenant Defeasance. The
following shall be the conditions to the application of either Section
7.02 or 7.03 hereof to the Outstanding Bonds of First Series:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of Bonds of First Series, cash in United
States dollars, non-callable Governmental Obligations, or a combination
thereof, in such amounts as will be sufficient, in the opinion of an
Independent Accountant, to pay the principal of, or interest and premium
and Liquidated Damages, if any, on the Outstanding Bonds of First Series
on the stated maturity or on the applicable redemption date, as the case
may be, and the Company must specify whether the Bonds of First Series
are being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 7.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that (i) the Company has received
from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date of the Second Mortgage, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the Outstanding Bonds of First Series will not
recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 7.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that the Holders of the Outstanding
Bonds of First Series will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing either: (i) on the date of such deposit (other than a
Default or Event of Default resulting from borrowing of funds to be
applied to such deposit); or (ii) insofar as Section 4.01(g) hereof is
concerned, at any time in the period ending on the 91st day after the
date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than the Second Mortgage) to which the
Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect, assuming no intervening bankruptcy of the Company
between the date of deposit and the 91st day following the deposit and
assuming that no Holder is an "insider" of the Company under applicable
bankruptcy law, after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of the Bonds of First Series over
any other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others;
and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
Section 7.05. Deposited Money and Governmental Obligations to be
Held in Trust; Other Miscellaneous Provisions. Subject to Section 18.02
of the Indenture, all money and non-callable Governmental Obligations
(including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 7.05, the
"Trustee") pursuant to Section 7.04 hereof in respect of the Outstanding
Bonds of First Series shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Bonds of First Series and the
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may
determine, to the Holders of such Bonds of First Series of all sums due
and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except
to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the cash or non
callable Governmental Obligations deposited pursuant to Section 7.04
hereof or the principal and interest received in respect thereof other
than any such tax, fee or other charge which by law is for the account
of the Holders of the Outstanding Bonds of First Series.
Anything in this Article VII or in Article XI of the Indenture to
the contrary notwithstanding, the Trustee shall deliver or pay to the
Company from time to time upon the request of the Company any money or
non-callable Governmental Obligations held by it as provided in Section
7.04 hereof which, in the opinion of an Independent Accountant expressed
in an Accountant's Certificate delivered to the Trustee (which may be
the opinion delivered under Section 7.04(a) hereof), are in excess of
the amount thereof that would then be required to be deposited to effect
an equivalent Legal Defeasance or Covenant Defeasance.
Section 7.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any United States dollars or non-callable Governmental
Obligations in accordance with Section 7.02 or 7.03 hereof, as the case
may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under the Indenture and the
Bonds of First Series shall be revived and reinstated as though no
deposit had occurred pursuant to Section 7.02 or 7.03 hereof until such
time as the Trustee or Paying Agent is permitted to apply all such money
in accordance with Section 7.02 or 7.03 hereof, as the case may be;
provided, however, that, if the Company makes any payment of principal
of, premium, if any, or interest on any Bond of First Series following
the reinstatement of its obligations, the Company shall be subrogated to
the rights of the Holders of such Bonds of First Series to receive such
payment from the money held by the Trustee or Paying Agent and, to the
extent of each such payment, the Trustee shall release from the Lien of
the Second Mortgage and deliver and pay to the Company the amounts
determined pursuant to the last paragraph of Section 7.05.
ARTICLE VIII
SATISFACTION OF BONDS OF FIRST SERIES
Section 8.01. Satisfaction. The Second Mortgage shall cease to be
of further effect as to the Bonds of First Series when (a) either:
(i) all Bonds of First Series that have been authenticated (except lost,
stolen or destroyed Bonds of First Series that have been replaced or
paid and Bonds of First Series for the payment of which money has
theretofore been deposited in trust and thereafter repaid to the
Company) have been delivered to the Trustee for cancellation; or (ii)
all Bonds of First Series that have not been delivered to the Trustee
for cancellation have become due an payable by reason of the making of a
notice of redemption or otherwise or will become due and payable within
one year and the Company has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust solely for the
benefit of the Holders, cash in U.S. dollars, non-callable Governmental
Obligations, or a combination thereof, in such amounts as shall be
sufficient, without consideration of any reinvestment of interest, to
pay and discharge the entire indebtedness on the Bonds of First Series
not delivered to the Trustee for cancellation for principal, premium and
Liquidated Damages, if any, and accrued interest to the date of maturity
or redemption; (b) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit or shall occur as a result
of such deposit and such deposit shall not result in a breach or
violation of, or constitute a default under, any other instrument to
which the Company is a party or by which the Company is bound; (c) the
Company has paid or caused to be paid all sums payable by it in respect
of the Bonds of First Series; and (d) the Company has delivered
irrevocable instructions to the Trustee under the Second Mortgage to
apply the deposited money toward the payment of the Bonds of First
Series at maturity or the redemption date, as the case may be. The
Company shall deliver an Officers' Certificate and an Opinion of Counsel
to the Trustee confirming that all conditions precedent set forth in
this Section 8.01 have been satisfied promptly upon the satisfaction of
such conditions.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.01. Incorporation of the Terms of the Indenture. Except
insofar as herein otherwise expressly provided, all the provisions,
definitions, terms and conditions of the Indenture, as amended, shall be
deemed to be incorporated in, and made a part of, this First
Supplemental Indenture; and the Indenture as supplemented and amended by
this First Supplemental Indenture is in all respects ratified and
confirmed; and the Indenture, as amended, and this First Supplemental
Indenture shall be read, taken and construed as one and the same
instrument.
Section 9.02. Amendment of the First Supplemental Indenture.
(a) Except as provided in the next two succeeding paragraphs, the
Supplemental Indenture or the Bonds of First Series may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the Bonds of First Series then Outstanding
(including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Bonds of First
Series), and any existing default or compliance with any provision of
the First Supplemental Indenture or the Bonds of First Series may be
waived with the consent of the Holders of a majority in principal amount
of the then Outstanding Bonds of First Series (including, without
limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Bonds of First Series).
(b) Without consent of each Holder affected, an amendment or waiver of
the First Supplemental Indenture or the Bonds of First Series may not
(with respect to any Bonds of First Series held by a non-consenting
Holder):
(i) reduce the principal amount of the Bonds of First Series the
Holders of which must consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any Bond
of First Series or alter the provisions with respect to the redemption
of the Bonds of First Series (other than provisions of or relating to
Sections 2.03, 3.09 and 3.10);
(iii) reduce the rate of or change the time for payment of interest on
any Bond of First Series;
(iv) waive a Default or Event of Default in the payment of principal
of, or interest, premium, if any, or Liquidated Damages, if any, on the
Bonds of First Series (except a rescission of acceleration of the Bonds
of First Series by the Holders of at least a majority in aggregate
principal amount of the Bonds of First Series and a waiver of the
payment default that resulted from such acceleration);
(v) make any Bond of First Series payable in money other than that
stated in the Bonds of First Series;
(vi) make any change in the provisions of the First Supplemental
Indenture relating to waivers of past Defaults or the rights of Holders
of Bonds of First Series to receive payments of principal of, interest,
if any, or premium or Liquidated Damages, if any, on the Bonds of First
Series;
(vii) waive a redemption payment with respect to any Bond of First
Series (other than a payment required by Section 2.03, 3.09 or 3.10); or
(viii) make any change in the preceding amendment and waiver
provisions.
(c) Notwithstanding the preceding, without the consent of any Holder
of Bonds of First Series, the Company and the Trustee may amend or
supplement the First Supplemental Indenture or the Bonds of First
Series;
(i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for uncertificated Bonds in addition to or in place of
certificated Bonds;
(iii) to provide for the assumption of the Company's obligations to
Holders of Bonds of First Series in the case of a merger or
consolidation or sale of all or substantially all of the Company's
assets;
(iv) to make any change that would provide any additional rights or
benefits to the Holders of Bonds of First Series or that does not
adversely affect the legal rights under the Second Mortgage of any such
Holder; or
(v) to comply with requirements of the Commission in order to effect
or maintain the qualification of the Second Mortgage under the TIA.
Section 9.03. Benefits of Indenture. Nothing in this First
Supplemental Indenture is intended, or shall be construed, to give to
any Person, other than the parties hereto and the holders of Bonds of
First Series issued and to be issued under, and secured by, the
Indenture, any legal or equitable right, remedy or claim under or in
respect of this First Supplemental Indenture, or under any covenant,
condition or provision herein contained, all the covenants, conditions
and provisions of this First Supplemental Indenture being intended to
be, and being, for the sole and exclusive benefit of the parties hereto
and of the holders of Bonds of First Series issued and to be issued
under the Indenture and secured thereby.
Section 9.04. Successors and Assigns. All covenants, stipulations
and agreements in this First Supplemental Indenture contained by or on
behalf of the Company shall bind and (subject to the provisions of the
Second Mortgage) inure to the benefit of its successors and assigns,
whether so expressed or not.
Section 9.05. Headings. The headings of the several Articles of
this First Supplemental Indenture are inserted for convenience of
reference and shall not be deemed to be any part hereof.
Section 9.06. Counterparts. This First Supplemental Indenture may
be executed in any number of counterparts, and each of such counterparts
when so executed shall be deemed to be an original; but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, said CENTRAL VERMONT PUBLIC SERVICE CORPORATION has
caused this instrument to be signed, and its corporate seal attested by
its Secretary to be hereunto affixed, by Francis J. Boyle, its Senior
Vice President, Chief Financial Officer, Treasurer and Agent in that
behalf duly authorized, and said THE BANK OF NEW YORK, to evidence its
acceptance of the trust hereby created, has caused its corporate name to
be hereunto affixed, and this instrument to be executed in its
corporate name and its corporate seal to be hereto affixed by Iliana A.
Arciprete, Assistant Treasurer, all as of the day and year first above
written.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: FRANCIS J. BOYLE
FRANCIS J. BOYLE
Its: Senior Vice President,
Chief Financial Officer,
Treasurer and Agent
Attest:
JOSEPH M. KRAUS
JOSEPH M. KRAUS
Its: Secretary
Signed, sealed and delivered on (Corporate Seal)
behalf of Central Vermont Public
Service Corporation in the presence
of:
KIMBERLY A. PRITCHARD
KIMBERLY A. PRITCHARD
PATRICIA C. MITIGUY
PATRICIA C. MITIGUY
THE BANK OF NEW YORK
as Trustee as aforesaid,
By: ILIANA A. ARCIPRETE
ILIANA A. ARCIPRETE
Its: Assistant Treasurer
(Corporate Seal)
Signed, sealed and delivered
on behalf of The Bank of New York
in the presence of:
ANTHONY M. HITCHMAN
ANTHONY M. HITCHMAN
MICHELE L. RUSSO
MICHELE L. RUSSO
STATE OF VERMONT )
) ss.
COUNTY OF RUTLAND )
On this 28th day of July, A.D. 1999, before me, a Notary Public in
and for said State of Vermont, duly commissioned and acting as such,
personally came Francis J. Boyle, Senior Vice President, Chief Financial
Officer, Treasurer and Agent of said Central Vermont Public Service
Corporation, to me personally known and known to me to be one of the
persons named in and who executed the foregoing instrument, and who
being duly sworn by me did depose and say: that he resides in Rutland
Town, Vermont; that he is Senior Vice President, Chief Financial
Officer, Treasurer and Agent duly authorized of Central Vermont Public
Service Corporation, a Vermont corporation and the Corporation described
in and which executed the above instrument as party of the first part;
that he knows the seal of said Corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order
and authority of the Board of Directors of said Corporation, and that he
signed his name thereto by like order and authority, and he acknowledged
and declared that he executed the foregoing instrument and affixed the
seal of said Central Vermont Public Service Corporation thereto as its
Agent by order and authority of the Board of Directors of said
Corporation, and acknowledged the same to be his free act and deed in
said capacity, and the free act and deed of said Corporation in said
capacity.
WITNESS my hand and official seal the day and year aforesaid.
ANNE M. MISEROCCHI
ANNE M. MISEROCCHI,
Notary Public
My commission expires February 10, 2003
(Notarial Seal)
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 26th day of July, A.D. 1999, before me, a Notary Public in
and for said State of New York, duly commissioned and acting as such,
personally came Iliana A. Arciprete, Assistant Treasurer of said The
Bank of New York, to me personally known and known to me to be one of
the persons named in and who executed the foregoing instrument, and who
being duly sworn by me did depose and say: that she resides at 51 Cedar
Terrace, Staten Island, New York; that she is Assistant Treasurer and
agent duly authorized of The Bank of New York, the Corporation described
in and which executed the above instrument as party of the second part;
that she knows the seal of said Corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order
and authority of the Board of Directors of said Corporation, and that
she signed her name thereto by like order and authority, and she
acknowledged and declared that she executed the foregoing instrument and
affixed the seal of said Corporation thereto as its Agent by order and
authority of the Board of Directors of said Corporation, and
acknowledged the same to be her free act and deed in said capacity, and
the free act and deed of said Corporation in said capacity. And said
Iliana A. Arciprete, Assistant Treasurer of said The Bank of New York,
further acknowledged that she accepted the trust herein before created
for, and on behalf of, said The Bank of New York, Trustee, upon the
terms therein named.
WITNESS my hand and official seal the day and year aforesaid.
WILLIAM J. CASSELS
WILLIAM J. CASSELS
Notary Public
My commission expires May 16, 2000
(Notarial Seal)
EXHIBIT 1
[Face of Bond]
CUSIP ____________
8 1/8% Second Mortgage Bonds due 2004
(Series A)
No. R $75,000,000
CENTRAL VERMONT PUBLIC SERVICE CORPORATION promises to pay
to Cede & Co. or registered assigns, the principal sum of Seventy Five
Million Dollars on August 1, 2004.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Dated:
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: __________________________________
Name:
Title:
(SEAL)
This is one of the Bonds referred to in
the within-mentioned Second Mortgage:
Dated:
THE BANK OF NEW YORK,
as Trustee
By: __________________________________
Name:
Authorized Signatory
[Back of Bond]
THIS BOND (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER:
(1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT)(A "QIB"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS BOND
EXCEPT (A) TO THE COMPANY (INCLUDING ANY OF THE COMPANY'S SUBSIDIARIES),
(B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (C) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND THE
DELIVERY TO THE TRUSTEE OF SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT) OR (D) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS BOND OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
8 1/8% Second Mortgage Bonds due 2004
(Series A)
(the "Bonds of First Series")
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Central Vermont Public Service Corporation, a Vermont
corporation (the "Company"), promises to pay interest on the principal
amount of this Bond of First Series at a rate of 8 1/8% per annum, from
July 30, 1999 until maturity, payable semi-annually in arrears on
February 1 and August 1 each year, commencing on February 1, 2000. The
Company shall make each interest payment to the Holders of record on the
immediately preceding January 15 and July 15. Interest on the Bonds
will accrue from the date of original issuance or, if interest has
already been paid, from the date it was most recently paid. Interest
will be computed on the basis of a 360-day year comprised of twelve 30
day months. The Company promises to pay Liquidated Damages, if any,
pursuant to the terms of the Registration Rights Agreement, as defined
below. The terms of redemption shall be pursuant to Section 2.02 of the
First Supplemental Indenture, as defined below.
2. METHOD OF PAYMENT. So long as there is no existing default in
the payment on the Bonds of First Series, the Company will pay to the
Person in whose name any Bonds of First Series is registered at the
close of business on any record date (as defined in Section 2.01 of the
First Supplemental Indenture) with respect to any interest payment date
the interest payable on such interest payment date, notwithstanding any
transfer or exchange of such Bonds of First Series subsequent to the
record date and on or prior to such interest payment date, except as and
to the extent the Company shall default in the payment of the interest
due on such interest payment date, in which case the Company will pay
defaulted interest to the Person in whose name such Bonds of First
Series is registered on the date of the payment of such defaulted
interest. The term "default in the payment of interest" means the
failure to pay interest due on the applicable interest payment date
disregarding any period of grace permitted by Section 12.01 of the
Indenture. The principal of and interest, premium, if any, and
Liquidated Damages, if any, on the Bonds of First Series shall be
payable in lawful money of the United States of America; the place where
such principal shall be payable shall be at the principal office of the
Trustee in the Borough of Manhattan, City and State of New York (or at
the principal office of any successor in trust); the place where
interest, premium, if any, and Liquidated Damages, if any, shall be
payable shall be the office or agency of the Company in the Borough of
Manhattan, City and State of New York, or by check mailed to the
registered holders of the Bonds of First Series, except as set forth
below; provided that all payments by the Company of principal of, or
interest, premium, if any, and Liquidated Damages, if any, on (a) the
Bonds of First Series represented by the Global Bond shall be paid by
wire transfer of immediately available funds to the account specified by
the Global Bond Holder and (b) the Bonds of First Series represented by
certificated bonds shall be paid (i) by wire transfer of immediately
available funds to the respective accounts specified in writing to the
Paying Agent prior to the applicable record date by any Holders of not
less than $1,000,000 in principal amount of the Bonds of First Series
and (ii) by check to the registered address of each Holder of $1,000,000
or less in principal amount of the Bonds of First Series, or if no such
account is specified.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York,
the Trustee under the Second Mortgage, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
4.SECOND MORTGAGE INDENTURE AND FIRST SUPPLEMENTAL. The Company
issued the Bonds of First Series under a Second Mortgage Indenture dated
as of July 15, 1999 (the "Indenture") and a First Supplemental Indenture
thereto, dated as of July 15, 1999 (the "First Supplemental Indenture"),
each between the Company and the Trustee. The Indenture and the First
Supplemental Indenture, as they may be further amended or supplemented
from time to time, are collectively referred to herein as the "Second
Mortgage." The terms of the Bonds of First Series include those stated
in the Second Mortgage and those made part of the Second Mortgage by
reference to the Trust Indenture Act of 1939, as amended (the "TIA").
The Bonds of First Series are subject to all such terms, and Holders are
referred to the Second Mortgage and the TIA for a statement of such
terms. To the extent any provision of this Bond of First Series
conflicts with the express provisions of the Second Mortgage, the
provisions of the Second Mortgage shall govern and be controlling. The
Bonds of First Series are secured obligations of the Company limited to
$75,000,000 in aggregate principal amount, plus amounts, if any, issued
to pay Liquidated Damages on Outstanding Bonds of First Series as set
forth in Paragraphs 1 and 2 hereof.
5. OPTIONAL REDEMPTION. The Company shall have the option to
redeem the Bonds of First Series in whole or in part (if in part, on a
pro rata basis), at any time and from time to time, upon not less than
30 nor more than 60 days' notice to Holders of such Bonds of First
Series, in cash at a redemption price equal to 100% of the principal
amount of the Bonds of First Series to be redeemed plus accrued and
unpaid interest thereon through the applicable redemption date, plus the
applicable Make Whole Premium. No bonds of $1,000 in principal amount
or less shall be redeemed in part.
"Make Whole Premium," with respect to any Bond of First Series shall
mean, with respect to any prepayment of such Bond of First Series in
circumstances requiring the payment of a Make Whole Premium, an amount
equal to the excess of (A) the aggregate present value as of the date of
such prepayment of the expected future cash flows of such Bond of First
Series (for the avoidance of doubt, such amounts shall include all
principal and interest payable with respect to such Bond of First
Series) (exclusive of interest accrued to the date of prepayment) that,
but for such prepayment, would have been payable if such prepayment had
not been made, all determined by discounting such amounts at a rate
which is equal to the Treasury Rate three days prior to prepayment plus
50 basis points over (B) the aggregate principal amount of the Bond of
First Series then to be prepaid. For purposes of this definition the
below listed terms shall be defined as follows:
"Treasury Rate" means, at any time with respect to the Bonds of First
Series being prepaid, (a) the yield reported on page C4 of the Bloomberg
Financial Markets Service (or, if not available, any other nationally
recognized trading screen reporting on-line intraday trading in United
States government securities) at 11:00 a.m. (New York, New York time)
for those actively traded United States government securities having a
maturity (rounded to the nearest month) corresponding to the remaining
Weighted Average Life to Maturity of the Bonds being prepaid or (b) in
the event that no nationally recognized trading screen reporting on-line
intraday trading in United States government securities is available,
Treasury Rate shall mean the weekly average of the yield to maturity on
the United States Treasury obligations with a constant maturity (as
compiled by and published in the most recently published issue of the
United States Federal Reserve Statistical Release designated H.15(519)
or its successor publication) most nearly equal to (by rounding to the
nearest month) the Weighted Average Life to Maturity of the Bonds of
First Series then being prepaid. If no maturity exactly corresponding
to such Weighted Average Life to maturity of such Bonds of First Series
shall appear therein, the weekly average yield for the two most closely
corresponding published maturities shall be calculated pursuant to the
foregoing sentence and the Treasury Rate shall be interpolated or
extrapolated, as the case may be, from such yields on a straight-line
basis (rounding, in the case of relevant periods, to the nearest month).
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (A)
the sum of the products obtained by multiplying (x) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (y) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by (B) the then outstanding principal amount of such
Indebtedness.
6. MANDATORY REDEMTION. The Company shall not be required to make
mandatory redemption or sinking fund payments with respect to the Bonds
of First Series.
7. REPURCHASE AT OPTION OF HOLDER. (a) If a Change of Control occurs,
each Holder of Bonds of First Series will have the right, at such
Holder's option, to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of that Holder's Bonds
of First Series pursuant to a Change of Control Offer on the terms set
forth in the Second Mortgage. In the Change of Control Offer, the
Company will offer a Change of Control Payment in cash equal to 101% of
the aggregate principal amount of Bonds of First Series repurchased plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to
the date of purchase. Within thirty days following any Change of
Control, the Company shall mail a notice to each Holder offering to
repurchase Bonds of First Series on the Change of Control Payment Date
specified in such notice, which date shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed, pursuant
to the procedures required by the Second Mortgage and described in such
notice.
(b) Pursuant to Section 3.09 of the First Supplemental Indenture, when
the aggregate amount of Excess Proceeds exceeds $7,500,000, the Company
or the applicable Regulated Subsidiary will be required to make an offer
to all Holders of Bonds of First Series (an "Asset Sale Offer") and all
holders of additional Second Mortgage Bonds then Outstanding to purchase
the maximum principal amount of Bonds of First Series and such
additional Second Mortgage Bonds that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Second Mortgage. To the extent that the
aggregate amount of Bonds of First Series and such additional Second
Mortgage Bonds tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company or its Regulated Subsidiaries may use any
remaining Excess Proceeds for general corporate purposes. If the
aggregate principal amount of Bonds of First Series and such additional
Second Mortgage Bonds surrendered by Holders thereof exceeds the amount
of Excess Proceeds, the Trustee shall select the Bonds of First Series
and additional Second Mortgage bonds to be purchased on a pro rata
basis. Upon completion of such Asset Sale Offer, the amount or Excess
Proceeds shall be reset at zero. Notwithstanding the foregoing, neither
the Company nor any Regulated Subsidiary shall be obligated to make an
Asset Sale Offer if such offer would violated an order, rule or
regulation of a governmental authority with jurisdiction over the
Company of any such Regulated Subsidiary; provided that the Company and
such Regulated Subsidiary shall used their reasonable best efforts to
vacate or modify such orders to permit such Asset Sale Offer.
8. NOTICE OF REDEMPTION. Notices of redemption shall be mailed by
first class mail at least 30 but not more than 60 days before the
redemption date to each Holder of Bonds of First Series to be redeemed
at its registered address. Notices of redemption may not be
conditional. If any Bond of First Series is to be redeemed in part
only, the notice of redemption that relates to that Bond of First Series
shall state the portion of the principal amount thereof to be redeemed.
A new Bond of First Series in principal amount equal to the unredeemed
portion of the original Bond of First Series will be issued in the name
of the Holder thereof upon cancellation of the original Bond of First
Series. Bonds of First Series called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest
will cease to accrue on Bonds or portions of them called for redemption.
No Bonds of First Series of $1,000 in principal amount or less shall be
redeemed in part.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Bonds of First Series
are in registered form without coupons in denominations of $1,000 and
integral multiples of $1,000. The transfer of the Bonds of First Series
may be registered and Bonds of First Series may be exchanged as provided
in the Second Mortgage. The Company is not required to transfer or
exchange any Bonds of First Series selected for redemption. Also, the
Company is not required to transfer or exchange any Bonds of First
Series for a period of 15 days before a selection of Bonds of First
Series to be redeemed.
10. PERSONS DEEMED OWNERS. The registered Holder of a Bond of
First Series may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the First Supplemental Indenture or the Bonds of First
Series may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Bonds of First Series
then Outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for,
Bonds of First Series), and any existing default or compliance with any
provision of the First Supplemental Indenture or the Bonds of First
Series may be waived with the consent of the Holders of a majority in
principal amount of the then Outstanding Bonds of First Series
(including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Bonds of First
Series). Notwithstanding the preceding, without the consent of any
Holder of Bonds of First Series, the Company and the Trustee may amend
or supplement the Supplemental Indenture or the Bonds of First Series
(a) to cure any ambiguity, defect or inconsistency; (b) to provide for
uncertificated Bonds of First Series in addition to or in place of
certificated Bonds of First Series; (c) to provide for the assumption of
the Company's obligations to Holders of the Bonds of First Series in
case of a merger or consolidation or sale of all or substantially all of
the Company's assets; (d) to make any change that would provide any
additional rights or benefits to the Holders of the Bonds of First
Series or that does not adversely affect the legal rights under the
Second Mortgage of any such Holder; or (e) to comply with the
requirements of the Securities and Exchange Commission in order to
effect or maintain the qualification of the Second Mortgage under the
Trust Indenture Act.
12. DEFAULTS AND REMEDIES. The occurrence of any of the following
events shall be an "Event of Default" with respect to the Bonds of First
Series: (a) default for 30 days in the payment when due of interest on,
or Liquidated Damages, if any, with respect to, the Bonds of First
Series; (b) default in payment when due of the principal of, or premium,
if any, on the Bonds of First Series; (c) at any time such covenants are
applicable, failure by the Company or any of its Regulated Subsidiaries
to comply with the provisions of Sections 3.10 or 6.01 under the First
Supplemental Indenture at any times such Sections are applicable for 30
days after notice to the Company by the Trustee or the Holders of at
least 25% in aggregate principal amount of the Bonds of the First Series
the Outstanding voting as a single class; (d) failure by the Company or
any of its Regulated Subsidiaries for 60 days after notice to comply
with any of the other covenants or agreements in the Second Mortgage for
60 days after notice to the Company by the Trustee or the Holders of at
least 25% in aggregate principal amount of Bonds of First Series then
Outstanding voting as a single class; (e) default under any mortgage,
indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Regulated Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Regulated
Subsidiaries), whether such Indebtedness or guarantee now exists or is
created after the date of the Second Mortgage (other than Indebtedness
of a Regulated Subsidiary owed to and held by the Company), if that
default: (A) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"); or (B) results in the acceleration of such
Indebtedness prior to its express maturity, and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $5,000,000 or more; (f) failure by the Company or any of it
Regulated Subsidiaries to pay final non-appealable judgments aggregating
in excess of $5,000,000, which judgments are not paid, discharged or
stayed for a period of 60 days, provided, that this clause (f) shall not
apply to any judgment in favor of the Company against a Regulated
Subsidiary; (g) certain events of bankruptcy or insolvency with respect
to the Company or its Regulated Subsidiaries and (h) certain other
events of default described in the Indenture.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Regulated
Subsidiary that is a Significant Subsidiary, or any group of Regulated
Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all Outstanding Bonds of First Series will become due and
payable immediately without further action or notice. If any other
Event of Default occurs and is continuing the Trustee or the Holders of
at least 25% in principal amount of the then Outstanding Bonds of First
Series may declare all the Bonds of First Series to be due and payable
immediately.
Notwithstanding the foregoing, solely for purposes of determining
whether an Event of Default has occurred under clause (e), (f) or (g)
above, the term "Regulated Subsidiary" shall not include Connecticut
Valley at any time that the Investment by the Company in Connecticut
Valley (including amount invested prior to the Initial Issuance Date)
does not exceed $12,000,000.
Holders of the Bonds of First Series may not enforce the Second
Mortgage or the Bonds of First Series except as provided in the Second
Mortgage. Subject to certain limitations, holders of a majority in
principal amount of the then Outstanding Second Mortgage Bonds may
direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Bonds of First Series notice of certain
continuing Defaults or Events of Default (except a Defaults or Events of
Default relating to the payment of principal, interest, payments of any
sinking or analogous fund or Liquidated Damages) if it determines that
withholding notice is in their interest.
The Holders of a majority of aggregate principal amount of the
Second Mortgage Bonds then Outstanding by notice to the Trustee may on
behalf of the Holders of all of the Second Mortgage Bonds waive any
existing Default or Event of Default and its consequences under the
Second Mortgage except a continuing Default or Event of Default in the
payment of interest or Liquidated Damages, if any, on, or the principal
of, the Second Mortgage Bonds.
In the case of any Event of Default occurring by reason of any
willful action or inaction taken or not taken by or on behalf of the
Company with the intention of avoiding payment of any premium that the
Company would have been required to pay if the Company then had elected
to redeem the Bonds of First Series pursuant to the optional redemption
provisions of the First Supplemental Indenture, an equivalent premium
shall become and be immediately due and payable to the extent permitted
by law upon the acceleration of the Bonds of First Series.
The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Second Mortgage. At any time
certain Suspended Sections are in effect, upon becoming aware of any
Default or Event of Default, the Company is required to deliver to the
Trustee a statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. If the Trustee becomes a
creditor of the Company, the Second Mortgage limits its right to obtain
payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions; however, if
it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Securities and Exchange Commission for
permission to continue, or resign.
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of the Company, as such, shall have any
liability for any obligations of the Company under the Bonds of First
Series, the Second Mortgage or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of a
Bonds of First Series by accepting such Bond of First Series waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Bonds of First Series.
15. AUTHENTICATION. This Bond of First Series shall not be valid
until authenticated by the manual signature of the Trustee or an
authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
17. REGISTRATION RIGHTS. In addition to the rights provided to
Holders of Bonds of First Series under the Second Mortgage, such Holders
shall have all the rights set forth in the Registration Rights Agreement
dated as of July __, 1999 among the Company, Donaldson, Lufkin &
Jenrette and TD Securities (USA) Inc. (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Bonds of First Series and the
Trustee may use CUSIP numbers in notices of redemption as a convenience
to Holders. No representation is made as to the accuracy of such
numbers either as printed on the Bonds of First Series or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture, the First Supplemental Indenture
and/or the Registration Rights Agreement. Requests may be made to:
Central Vermont Public Service Corporation
77 Grove Street
Rutland, Vermont 05701
Attention: Chief Financial Officer
ASSIGNMENT FORM
To assign this Bond, fill in the form below:
(I) or (we) assign and transfer this Bond to: __________________________
(Insert assignee's legal name)
________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________
to transfer this Bond on the books of the Company. The agent may
substitute another to act for him.
Date:
Your Signature: ________________________________________________
(Sign exactly as your name appears on the face of this Bond)
Signature Guarantee: __________________________________
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Bond purchased by the Company pursuant
to Section 2.03, 3.09 or 3.10 of the First Supplemental Indenture, check
the appropriate box below:
[ ] Section 2.03 [ ] Section 3.09 [ ] Section 3.10
If you want to elect to have only part of the Bond purchased by the
Company pursuant to Section 2.03, Section 3.09 or Section 3.10 of the
First Supplemental Indenture, state the amount you elect to have
purchased:
$__________________
Date:_____________________
Your Signature: ________________________________________________________
(Sign exactly as your name appears on the face of this Bond)
Tax Identification No.:____________________________
Signature Guarantee:________________________
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL BOND*
The following exchanges of a part of this Global Bond for an
interest in another Global Bond or for a Definitive Bond, or exchanges
of a part of another Global Bond or Definitive Bond for an interest in
this Global Bond, have been made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Amount of decrease Amount of increase Prinicpal amount Signature
Exchange in prinicipal in prinicpal of this Global of Authorized
amount of this amount of this following such officer of
Global Bond Global Bond decrease (or Trustee
increase)
</TABLE>
* This schedule should be included only if the Bond is issued in global
form.
EXHIBIT 4.60
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of July 30, 1999
by and among
Central Vermont Public Service Corporation
and
Donaldson, Lufkin & Jenrette Securities Corporation
TD Securities (USA) Inc.
This Registration Rights Agreement (this "Agreement") is made
and entered into as of July 30, 1999, by and among Central Vermont
Public Service Corporation, a Vermont corporation (the "Company"),
and Donaldson, Lufkin & Jenrette Securities Corporation and TD (USA)
Securities Inc. (each an "Initial Purchaser" and, collectively, the
"Initial Purchasers"), each of whom has agreed to purchase the
Company's 8 1/8% Transfer Restricted Second Mortgage Bonds due 2004
(the "Initial Bonds") pursuant to the Purchase Agreement (as defined
below).
This Agreement is made pursuant to the Purchase Agreement, dated
July 21, 1999 (the "Purchase Agreement"), by and among the Company
and the Initial Purchasers. In order to induce the Initial
Purchasers to purchase the Initial Bonds, the Company has agreed to
provide the registration rights set forth in this Agreement. Each of
the execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 3 of the
Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them the Second Mortgage
Indenture, dated as of July 15, 1999, as supplemented by the First
Supplemental Indenture thereto, dated as of July 15, 1999), between
the Company and The Bank of New York, as Trustee, relating to the
Initial Bonds and the Exchange Bonds (the "Second Mortgage
Indenture", as supplemented by the First Supplemental Indenture, the
"Second Mortgage").
The parties hereby agree as follows:
SECTION 1 DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Certificated Securities: Definitive Bonds, as defined in the Second
Mortgage.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration
Statement relating to the Exchange Bonds to be issued in the Exchange
Offer, (b) the maintenance of such Exchange Offer Registration
Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the
Registrar under the Second Mortgage of Exchange Bonds in the same
aggregate principal amount as the aggregate principal amount of
Initial Bonds tendered by Holders thereof pursuant to the Exchange
Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Bonds: The Company's 8 1/8% Second Mortgage Bonds due 2004
to be issued pursuant to the Second Mortgage: (i) in the Exchange
Offer or (ii) as contemplated by Section 4 hereof.
Exchange Offer: The exchange and issuance by the Company of a
principal amount of Exchange Bonds (which shall be registered
pursuant to the Exchange Offer Registration Statement) equal to the
outstanding principal amount of Initial Bonds that are tendered by
such Holders in connection with such exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Initial Bonds to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Prospectus: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all
material incorporated by reference into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Exchange Bonds pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each
case, (i) that is filed pursuant to the provisions of this Agreement
and (ii) including the Prospectus included therein, all amendments
and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Rule 144: Rule 144 promulgated under the Act.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Second Mortgage Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Second Mortgage.
Transfer Restricted Securities: Each (A) Initial Bond, until the
earliest to occur of (i) the date on which such Initial Bond is
exchanged in the Exchange Offer for an Exchange Bond which is
entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (ii)
the date on which such Initial Bond has been disposed of in
accordance with a Shelf Registration Statement, or (iii) the date on
which such Initial Bond is sold pursuant to Rule 144 under the Act or
may be sold without restrictions pursuant to Rule 144(k) under the
Act and each (B) Exchange Bond held by a Broker Dealer until the date
on which such Exchange Bonds is disposed of by a Broker-Dealer
pursuant to the "Plan of Distribution" contemplated by the Exchange
Offer Registration Statement (including the delivery of the
Prospectus contained therein).
SECTION 2 HOLDERS
A Person is deemed to be a holder of Transfer Restricted
Securities (each, a "Holder") whenever such Person owns Transfer
Restricted Securities.
SECTION 3 REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by
applicable federal law or applicable interpretations of the
Commission staff (after the procedures set forth in Section 6(a)(i)
below have been complied with), the Company shall (i) cause the
Exchange Offer Registration Statement to be filed with the Commission
as soon as practicable after the Closing Date, but in no event later
than 90 days after the Closing Date (such 90th day being the "Filing
Deadline"), (ii) use its reasonable best efforts to cause such
Exchange Offer Registration Statement to become effective at the
earliest possible time, but in no event later than 210 days after the
Closing Date (such 210th day being the "Effectiveness Deadline"),
(iii) in connection with the foregoing, (A) file all pre-effective
amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer
Registration Statement pursuant to Rule 430A under the Act and (C)
cause all necessary filings, if any, in connection with the
registration and qualification of the Exchange Bonds to be made under
the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, and (iv) upon the effectiveness
of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Exchange Bonds to
be offered in exchange for the Initial Bonds that are Transfer
Restricted Securities and (ii) resales of Exchange Bonds by Broker
Dealers that tendered into the Exchange Offer Initial Bonds that such
Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Initial
Bonds acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
(b) The Company shall use its reasonable best efforts to cause
the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal
and state securities laws to Consummate the Exchange Offer; provided,
however, that in no event shall such period be less than 20 Business
Days. The Company shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other
than the Exchange Bonds shall be included in the Exchange Offer
Registration Statement. The Company shall use its reasonable best
efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 45 business days
thereafter (such 45th day being the "Consummation Deadline").
(c) The Company shall include a "Plan of Distribution" section
in the Prospectus contained in the Exchange Offer Registration
Statement and indicate therein that any Broker-Dealer who holds
Transfer Restricted Securities that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other
trading activities (other than Transfer Restricted Securities
acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities pursuant to the
Exchange Offer. Such "Plan of Distribution" section shall also
contain all other information with respect to such sales by such
Broker-Dealers that the Commission may require in order to permit
such sales pursuant thereto, but such "Plan of Distribution" shall
not name any such Broker-Dealer or disclose the amount of Transfer
Restricted Securities held by any such Broker-Dealer, except to the
extent required by the Commission as a result of a change in policy,
rules or regulations after the date of this Agreement. See the
Shearman & Sterling no-action letter (available July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter"
within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its
initial sale of any Exchange Bonds received by such Broker-Dealer in
the Exchange Offer, the Company shall permit the use of the
Prospectus contained in the Exchange Offer Registration Statement by
such Broker-Dealer to satisfy such prospectus delivery requirement.
To the extent necessary to ensure that the prospectus contained in
the Exchange Offer Registration Statement is available for sales of
Exchange Bonds by Broker-Dealers, the Company agrees to use its
reasonable best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented, amended and current
as required by and subject to the provisions of Section 6(a) and (c)
hereof and in conformity with the requirements of this Agreement, the
Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of 180 days from the
Consummation Deadline or such shorter period as will terminate when
all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto. The Company shall provide
sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one
Business Day after such request, at any time during such period.
SECTION 4 SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not
permitted by applicable law or Commission policy (after the Company
has complied with the procedures set forth in Section 6(a)(i) below)
or (ii) if any Holder of Transfer Restricted Securities shall notify
the Company within 20 Business Days following the Consummation
Deadline that (A) such Holder was prohibited by law or Commission
policy from participating in the Exchange Offer or (B) such Holder
may not resell the Exchange Bonds acquired by it in the Exchange
Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is
not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds Initial Bonds acquired
directly from the Company or any of its Affiliates, then the Company
shall:
(x) use its reasonable best efforts to file, on or prior to
45 days after the earlier of (i) the date on which the Company
determines that the Exchange Offer Registration Statement cannot be
filed as a result of clause (a)(i) above and (ii) the date on which
the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "Filing Deadline"), a shelf registration
statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange Offer Registration Statement (the "Shelf
Registration Statement"), relating to all Transfer Restricted
Securities, and
(y) shall use its reasonable best efforts to cause such Shelf
Registration Statement to be declared effective on or prior to 90
days after the Filing Deadline for the Shelf Registration Statement
(such 90th day, the "Effectiveness Deadline").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the
Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer is not permitted under
applicable federal law (i.e., clause (a)(i) above), then the filing
of the Exchange Offer Registration Statement shall be deemed to
satisfy the requirements of clause (x) above; provided that, in such
event, the Company shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by
the Holders thereof entitled to the benefit of this Section 4(a), the
Company shall use its reasonable best efforts to keep any Shelf
Registration Statement required by this Section 4(a) continuously
effective, supplemented and amended as required by and subject to the
provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section
6(c)(i)) following the Closing Date, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such
Shelf Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection
with the Shelf Registration Statement. No Holder of Transfer
Restricted Securities may include any of its Transfer Restricted
Securities in any Shelf Registration Statement pursuant to this
Agreement unless and until such Holder furnishes to the Company in
writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as
applicable, of the Act and such other information as the Company may
reasonably request for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein.
No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such
Holder shall have provided all such information. Each selling Holder
agrees to promptly furnish additional information required to be
disclosed in order to make the information previously furnished to
the Company by such Holder not materially misleading.
SECTION 5 LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is
not filed with the Commission on or prior to the applicable Filing
Deadline, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the applicable
Effectiveness Deadline, (iii) the Exchange Offer has not been
Consummated on or prior to the Consummation Deadline or (iv) any
Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded within
2 Business Days by a post-effective amendment to such Registration
Statement that cures such failure and that is itself declared
effective within 5 Business Days of filing such post-effective
amendment to such Registration Statement (each such event referred to
in clauses (i) through (iv), a "Registration Default"), then the
Company hereby agrees to pay liquidated damages to each Holder of
Transfer Restricted Securities affected thereby, with respect to the
first 90-day period immediately following the occurrence of the first
Registration Default, at a rate per annum equal to 0.25% of the
principal amount of the Transfer Restricted Securities. The rate of
the liquidated damages will increase by an additional 0.25% per annum
with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum rate for all Registration
Defaults of 0.75% per annum of the principal amount of Transfer
Restricted Securities; provided that the Company shall in no event be
required to pay liquidated damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary
set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement),
in the case of (i) above, (2) upon the effectiveness of the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon
Consummation of the Exchange Offer, in the case of (iii) above, or
(4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the
Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement) to again be declared effective or made
usable in the case of (iv) above, the liquidated damages payable with
respect to the Transfer Restricted Securities as a result of such
clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders
entitled thereto, in the manner provided for the payment of interest
in the Second Mortgage, on each Interest Payment Date, as more fully
set forth in the Second Mortgage and the Bonds. Notwithstanding the
fact that any securities for which liquidated damages are due cease
to be Transfer Restricted Securities, all obligations of the Company
to pay liquidated damages with respect to such securities shall
survive until such time as such obligations with respect to such
securities shall have been satisfied in full.
Notwithstanding the foregoing, if the Company has complied with
its obligations under Section 6 of this Agreement, no Holder of
Initial Bonds shall be entitled to receive any liquidated damages
with respect to such Initial Bonds if a Holder of such Initial Bonds
was, at any time while the Exchange Offer was pending, eligible to
exchange, and did not validly tender, such Initial Bonds for Exchange
Bonds in the Exchange Offer.
SECTION 6 REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with
the Exchange Offer, the Company shall (x) comply with all applicable
provisions of Section 6(c) below, (y) use its reasonable best efforts
to effect such exchange and to permit the resale of Exchange Bonds by
Broker-Dealers that tendered in the Exchange Offer Initial Bonds that
such Broker-Dealer acquired for its own account as a result of its
market making activities or other trading activities (other than
Initial Bonds acquired directly from the Company or any of its
Affiliates) being sold in accordance with the intended method or
methods of distribution thereof, and (z) comply with all of the
following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as
the Exchange Offer, that in the reasonable opinion of counsel to the
Company raises a substantial question as to whether the Exchange
Offer is permitted by applicable federal law, the Company hereby
agrees to seek a no-action letter or other favorable decision from
the Commission allowing the Company to Consummate an Exchange Offer
for such Transfer Restricted Securities. The Company hereby agrees
to use its reasonable best efforts to pursue the issuance of such a
decision to the Commission staff level. In connection with the
foregoing, the Company hereby agrees to take all such other
reasonable actions as may be requested by the Commission or otherwise
required in connection with the issuance of such decision, including
without limitation (A) participating in telephonic conferences with
the Commission, (B) delivering to the Commission staff an analysis
prepared by counsel to the Company setting forth the legal bases, if
any, upon which such counsel has concluded that such an Exchange
Offer should be permitted and (C) diligently pursuing a resolution
(which need not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker-Dealer) shall furnish,
upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
Affiliate of the Company, (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the Exchange Bonds to be
issued in the Exchange Offer and (C) it is acquiring the Exchange
Bonds in its ordinary course of business. As a condition to its
participation in the Exchange Offer each Holder using the Exchange
Offer to participate in a distribution of the Exchange Bonds shall
acknowledge and agree that, if the resales are of Exchange Bonds
obtained by such Holder in exchange for Exchange Bonds acquired
directly from the Company or an Affiliate thereof, it (1) could not,
under Commission policy as in effect on the date of this Agreement,
rely on the position of the Commission enunciated in Morgan Stanley
and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above), and (2) must comply
with the registration and prospectus delivery requirements of the Act
in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental
letter to the Commission (A) stating that the Company is registering
the Exchange Offer in reliance on the position of the Commission
enunciated in Exxon Capital Holdings Corporation (available May 13,
1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
interpreted in the Commission's letter to Shearman & Sterling dated
July 2, 1993, and, if applicable, any no-action letter obtained
pursuant to clause (i) above, (B) including a representation that the
Company has not entered into any arrangement or understanding with
any Person to distribute the Exchange Bonds to be received in the
Exchange Offer and that, to the best of the Company's information and
belief, each Holder participating in the Exchange Offer is acquiring
the Exchange Bonds in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Exchange Bonds received in the Exchange Offer and
(C) any other undertaking or representation required by the
Commission as set forth in any no-action letter obtained pursuant to
clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall (i) comply with all the
provisions of Section 6(c) below and use its reasonable best efforts
to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended
method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b)
hereof), and pursuant thereto the Company will prepare and file with
the Commission a Registration Statement relating to the registration
on any appropriate form under the Act, which form shall be available
for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof within the
time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement, the
Company shall:
(i) use its reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that
would cause any such Registration Statement or the Prospectus
contained therein (A) to contain an untrue statement of material fact
or omit to state any material fact necessary to make the statements
therein not misleading or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required
by this Agreement, the Company shall file promptly an appropriate
amendment to such Registration Statement curing such defect, and, if
Commission review is required, use its best efforts to cause such
amendment to be declared effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for
the applicable period set forth in Section 3 or 4 hereof, as the case
may be; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act, and to comply fully with Rules 424, 430A and
462, as applicable, under the Act in a timely manner; and comply with
the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested by such
Holder, confirm such advice in writing, (A) when the Prospectus or
any Prospectus supplement or post-effective amendment has been filed,
and, with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information relating thereto, (C) of the issuance
by the Commission of any stop order suspending the effectiveness of
the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes,
(D) of the existence of any fact or the happening of any event that
makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires
the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or
that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky
laws, the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Notwithstanding the foregoing, but without limiting the Company's
obligations under Section 5 hereof, the Company may postpone taking
action with respect to a supplement or amendment with respect to a
Shelf Registration Statement or Prospectus contained therein for a
reasonable period of time, but in no event shall such period exceed
30 days, after the occurrence of any fact or event contemplated by
Section 6(c)(iii)(D) if, in the good faith opinion of the Board of
Directors of the Company, as evidenced by a resolution of the Board
of Directors, effecting the registration would adversely affect a
material impending financing, acquisition or disposition of assets or
stock, merger or other comparable transaction or would require the
Company to make public disclosure of information which would not
otherwise then be required and which would have a material adverse
effect upon the Company or its shareholders; provided that the
Company shall not delay such action pursuant to the foregoing more
than one in any 12-month period.
(v) furnish to each selling Holder named in any Registration
Statement or Prospectus in connection with such exchange or sale, if
any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial
filing of such Registration Statement), which documents will be
subject to the review and comment of such selling Holders in
connection with such sale, if any, for a period of at least five
Business Days, and the Company will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which such selling Holders shall
reasonably object within five Business Days after the receipt
thereof. A selling Holder shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed,
contains an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading
or fails to comply with the applicable requirements of the Act;
provided, however, that a selling Holder shall not be deemed to have
reasonably objected to such filing if the material misstatement or
omission or failure to comply with applicable requirements of the Act
results from the fact that such material misstatement or omission is
based upon information relating to any of the selling Holders
furnished to the Company by any of the selling Holders.
(vi) promptly prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to each selling Holder in
connection with such exchange or sale, if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders may
reasonably request;
(vii) make available, at reasonable times, for inspection by
each selling Holder and any attorney or accountant retained by such
selling Holders, all financial and other records and pertinent
corporate documents of the Company and cause the Company's officers,
directors and employees to supply all information reasonably
requested by any such selling Holder, attorney or accountant in
connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness; provided that such Persons shall first agree in
writing with the Company that any information that is reasonably and
in good faith designated by the Company in writing as confidential at
the time of delivery of such information shall be kept confidential
by such Persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond
to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements
pursuant to federal securities laws in connection with the filing of
such Registration Statement or the use of any Prospectus), (iii) such
information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard such information by
such Person or (iv) such information becomes available to such
Persons from a source other than the Company and its subsidiaries and
such source is not known, after due inquiry, by such Person to be
bound by a confidentiality agreement, provided, further, that the
foregoing investigation shall be coordinated on behalf of such
Persons by one representative designated by and on behalf of such
Persons and any such confidential information shall be available from
such representative to such Persons so long as any Person agrees to
be bound by such confidentiality agreement;
(viii) if requested by any selling Holders in connection with
such exchange or sale, promptly include in any Registration Statement
or Prospectus, pursuant to a supplement or post-effective amendment
if necessary, such information as such selling Holders may reasonably
request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(ix) furnish to each selling Holder in connection with such
exchange or sale, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits incorporated
therein by reference) provided that the provisos under Section
6(c)(vii) shall not apply to such documents to the extent that the
Company has requested confidential treatment from the Commission with
respect to any of such documents;
(x) deliver to each selling Holder without charge, as many
copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may
request; the Company hereby consents to the use (in accordance with
law) of the Prospectus and any amendment or supplement thereto by
each selling Holder in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) enter into such agreements (including underwriting
agreements) and make such representations and warranties and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any applicable Registration Statement contemplated by
this Agreement as may be reasonably requested by any Holder of
Initial Bonds in connection with any sale or resale pursuant to any
applicable Registration Statement. In such connection, the Company
shall:
(A) upon request of any selling Holder, furnish (or in the case
of paragraphs (2) and (3), use its reasonable best efforts to cause
to be furnished) to each selling Holder, upon the effectiveness of
the Shelf Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company by (x) the President or any Vice President and (y) a
principal financial or accounting officer of the Company, confirming,
as of the date thereof, the matters set forth in Sections 9(a) and
9(b) of the Purchase Agreement and such other similar matters as such
selling Holders may reasonably request;
(2) an opinion, dated the date of effectiveness of the Shelf
Registration Statement of counsel for the Company covering matters
similar to those set forth in paragraph (e) of Section 9 of the
Purchase Agreement and such other matters as such selling Holder may
reasonably request, and in any event including a statement to the
effect that such counsel has participated in conferences with
officers and other representatives of the Company, representatives of
the independent public accountants for the Company and has considered
the matters required to be stated therein and the statements
contained therein, although such counsel has not independently
verified the accuracy, completeness or fairness of such statements;
and that such counsel advises that, on the basis of the foregoing
(relying as to materiality to the extent such counsel deems
appropriate upon the statements of officers and other representatives
of the Company and without independent check or verification), no
facts came to such counsel's attention that caused such counsel to
believe that the shelf Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto became
effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus contained in such Registration Statement as of its date
contained an untrue statement of a material fact or omitted 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. Without limiting the foregoing, such counsel may state
further that such counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness of the
financial statements, notes and schedules and other financial and
statistical data included in the Shelf Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter as of the date of effectiveness
of the Shelf Registration Statement, from the Company's independent
accountants, in the customary form and covering matters of the type
customarily covered in comfort letters to underwriters in connection
with underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 9(h) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with the matters covered in clause (A) above and with any customary
conditions contained in any agreement entered into by the Company
pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the state securities or Blue Sky laws of
such jurisdictions as the selling Holders may reasonably request in
writing and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the
Transfer Restricted Securities covered by the applicable Registration
Statement; provided, however, that the Company shall be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service
of process in suits, other than as to matters and transactions
relating to the Registration Statement or to taxation, in any
jurisdiction where it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not
bearing any restrictive legends; and to register such Transfer
Restricted Securities in such denominations and such names as the
selling Holders may request at least 2 Business Days prior to such
sale of Transfer Restricted Securities;
(xiv) use its reasonable best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of
such Transfer Restricted Securities, subject to the proviso contained
in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide
the Trustee under the Second Mortgage with printed certificates for
the Transfer Restricted Securities which are in a form eligible for
deposit with the Depository Trust Company;
(xvi) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term
is defined in paragraph (c) of Rule 158 under the Act);
(xvii) cause the Second Mortgage to be qualified under the
TIA not later than the effective date of the first Registration
Statement required by this Agreement and, in connection therewith,
cooperate with the Trustee and the Holders to effect such changes to
the Second Mortgage as may be required for such Second Mortgage to be
so qualified in accordance with the terms of the TIA; and execute and
use its reasonable best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to
enable such Second Mortgage to be so qualified in a timely manner;
and
(xviii) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition
of a Transfer Restricted Security that, upon receipt of the notice
referred to in Section 6(c)(iii)(C) or any notice from the Company of
the existence of any fact of the kind described in Section
6(c)(iii)(D) hereof (in each case, a "Suspension Notice"), such
Holder will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until
(i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such
Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional
or supplemental filings that are incorporated by reference in the
Prospectus (in each case, the "Recommencement Date"). Each Holder
receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with
more recently dated Prospectuses or (ii) deliver to the Company (at
the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of the Prospectus covering such
Transfer Restricted Securities that was current at the time of
receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3
or 4 hereof, as applicable, shall be extended by a number of days
equal to the number of days in the period from and including the date
of delivery of the Suspension Notice to the date of delivery of the
Recommencement Date.
SECTION 7 REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees
and expenses; (ii) all reasonable fees and expenses of compliance
with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates, if
applicable, for the Exchange Bonds to be issued in the Exchange Offer
and printing of Prospectuses), messenger and delivery services and
telephone; (iv) all reasonable fees and disbursements of counsel for
the Company and the Holders of Transfer Restricted Securities
(subject to paragraph (b) of this Section 7); (v) all application and
filing fees in connection with listing the Exchange Bonds on a
national securities exchange or automated quotation system pursuant
to the requirements hereof; and (vi) all fees and disbursements of
independent certified public accountants of the Company (including
the expenses of any special audit and comfort letters required by or
incident to such performance). Notwithstanding the foregoing or
anything in this Agreement to the contrary, each Holder of Initial
Bonds being registered shall pay all commissions, placement agent
fees and underwriting discounts and commissions with respect to any
Initial Bonds sold by it.
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the
expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company.
(b) In connection with any Registration Statement required by
this Agreement (including, without limitation, the Exchange Offer
Registration Statement and the Shelf Registration Statement), the
Company will reimburse the Initial Purchasers and the Holders of
Transfer Restricted Securities who are tendering Initial Bonds in the
Exchange Offer and/or selling or reselling Initial Bonds or Exchange
Bonds pursuant to the "Plan of Distribution" contained in the
Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements
of not more than one counsel, who shall be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities
for whose benefit such Registration Statement is being prepared.
SECTION 8 INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each
Holder, its directors, officers and each Person, if any, who controls
such Holder (within the meaning of Section 15 of the Act or Section
20 of the Exchange Act), from and against any and all losses, claims,
damages, liabilities, judgments (including without limitation, any
reasonable legal or other expenses incurred in connection with
investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective
purchaser of Exchange Bonds or registered Initial Bonds, or caused by
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by an untrue statement
or omission or alleged untrue statement or omission that is based
upon information relating to any of the Holders furnished in writing
to the Company by any of the Holders; and provided, further, that
with respect to any such untrue statement in or omission from, or
alleged untrue statement of a material fact contained in or alleged
omission from any such Registration Statement or preliminary
prospectus (or amendment or supplement thereto), the indemnity
agreement contained in this Section 8(a) shall not inure to the
benefit of any such Holder to the extent that any such loss, claim,
damage, liability or judgment results from the fact that both (A) a
copy of the Prospectus was not sent or given to such person or prior
to the written confirmation of the sale of Bonds to such person and
(B) the untrue statement in or omission or alleged untrue statement
or alleged omission from the Registration Statement or preliminary
prospectus was corrected in the Prospectus (unless, in either case,
such failure to deliver the Prospectus was a result of non-compliance
by the Company with Section 6(c)(x) hereof).
(b) Each Holder of Transfer Restricted agrees, severally and
not jointly, to indemnify and hold harmless the Company, and its
directors and officers, and each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the Exchange
Act) the Company, to the same extent as the foregoing indemnity from
the Company set forth in section (a) above, but only with reference
to information relating to such Holder furnished in writing to the
Company by such Holder expressly for use in any Registration
Statement. In no event shall any Holder, its directors, officers or
any Person who controls such Holder be liable or responsible for any
amount in excess of the amount by which the total amount received by
such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities
and (ii) the amount of any damages that such Holder, its directors,
officers or any Person who controls such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a)
or 8(b) (the "indemnified party"), the indemnified party shall
promptly notify the person against whom such indemnity may be sought
(the "indemnifying person") in writing and the indemnifying party
shall assume the defense of such action, including the employment of
counsel reasonably satisfactory to the indemnified party and the
payment of all reasonable fees and expenses of such counsel, as
incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b), a
Holder shall not be required to assume the defense of such action
pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of the
Holder). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such
counsel shall have been specifically authorized in writing by the
indemnifying party, (ii) the indemnifying party shall have failed to
assume the defense of such action or employ counsel reasonably
satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party, and the indemnified
party shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which
case the indemnifying party shall not have the right to assume the
defense of such action on behalf of the indemnified party). In any
such case, the indemnifying party shall not, in connection with any
one action or separate but substantially similar or related actions
in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be
rimbursed as they are incurred. Such firm shall be designated in
writing by a majority of the Holders, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case
of parties indemnified pursuant to Section 8(b). The indemnifying
party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and
judgments by reason of any settlement of any action (i) effected with
the indemnifying party's written consent or (ii) effected without the
indemnifying party's written consent if the settlement is entered
into more than thirty Business Days after the indemnifying party
shall have received a written request from the indemnified party for
reimbursement for the reasonable fees and expenses of counsel (in any
case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the
indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement
or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the
indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of
such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf
of the indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities or judgments referred to
therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities or judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, on the one
hand, and the Holders, on the other hand, from their sale of Transfer
Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause 8(d)(i) above but also the relative fault of the Company, on
the one hand, and of the Holder, on the other hand, in connection
with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the
Company, on the one hand, and of the Holder, on the other hand, 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 by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and judgments referred to above
shall be deemed to include, subject to the limitations set forth in
Section 8(a), any legal or other fees or expenses reasonably incurred
by such party in connection with investigating or defending any
action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Holders were treated
as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. Notwithstanding the
provisions of this Section 8, no Holder, its directors, its officers
or any Person, if any, who controls such Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by
which the total amount received by such Holder with respect to its
sale of Transfer Restricted Securities pursuant to a Registration
Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any damages
which such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant
to this Section 8(c) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each
Holder hereunder and not joint.
SECTION 9 RULE 144A AND RULE 144
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in
which the Company (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such
Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities designated by such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A, and (ii) is subject to Section 13
or 15 (d) of the Exchange Act, to make all filings required thereby
in a timely manner in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144.
SECTION 10 MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that any
failure by the Company to comply with its obligations under Sections
3 and 4 hereof may result in material irreparable injury to the
Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for
such injuries precisely and that, in the event of any such failure,
the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under
Sections 3 and 4 hereof. The Company further agrees to waive the
defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or
after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof. The Company has not previously entered into
any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents
to or departures from the provisions hereof may not be given unless
(i) in the case of Section 5 hereof and this Section 10(c)(i), the
Company has obtained the written consent of Holders of all
outstanding Transfer Restricted Securities and (ii) in the case of
all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount
of Transfer Restricted Securities (excluding Transfer Restricted
Securities held by the Company or its Affiliates). Notwithstanding
the foregoing, a waiver or consent to departure from the provisions
hereof that relates exclusively to the rights of Holders whose
Transfer Restricted Securities are being tendered pursuant to the
Exchange Offer, and that does not affect directly or indirectly the
rights of other Holders whose Transfer Restricted Securities are not
being tendered pursuant to such Exchange Offer, may be given by the
Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company,
on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the
extent they may deem such enforcement necessary or advisable to
protect its rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested),
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records
of the Registrar under the Second Mortgage, with a copy to the
Registrar under the Second Mortgage; and
(ii) if to the Company:
Central Vermont Public Service Corporation
77 Grove Street
Rutland Vermont 05701
Telecopier No.: 802-747-1913
Attention: Chief Financial Officer
With a copy to:
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005-1413
Telecopier No.:212-530-5219
Attention: Robert B. Williams
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered;
five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the
Trustee at the address specified in the Second Mortgage.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of
the parties, including without limitation and without the need for an
express assignment, subsequent Holders; provided, that nothing herein
shall be deemed to permit any assignment, transfer or other
disposition of Transfer Restricted Securities in violation of the
terms hereof or of the Purchase Agreement or the Second Mortgage. If
any transferee of any Holder shall acquire Transfer Restricted
Securities in any manner, whether by operation of law or otherwise,
such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and
provisions of this Agreement, including the restrictions on resale
set forth in this Agreement and, if applicable, the Purchase
Agreement, and such Person shall be entitled to receive the benefits
hereof.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding
of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with
respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to
such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: /s/ Kent R. Brown
Name: Kent R. Brown
Title: Senior Vice President
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By: /s/ John Rice
Name: John Rice
Title: Senior Vice President
TD SECURITIES (USA) INC.
By: /s/ Thomas W. Regan, Jr.
Name: Thomas W. Regan, Jr.
Title: Managing Director
