<PAGE>
As filed with the Securities and Exchange Commission on September 30, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
(Exact name of registrant as specified in its charter)
Vermont 4911 03-0111290
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification
incorporation or organization) Code Number) Number)
77 Grove Street
Rutland, Vermont 05701
(802) 773-2711
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Joseph M. Kraus
77 Grove Street
Rutland, Vermont 05701
(802) 733-2711
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
Copies to:
M. Douglas Dunn, Esq.
Robert B. Williams, Esq.
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
(212) 530-5000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of each class of securities to Amount to be Proposed maximum Proposed maximum Amount of
be registered registered offering price per share aggregate offering price registration fee(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 1/8% Second Mortgage Bonds Due 2004 $75,000,000 100% $75,000,000 $20,850
====================================================================================================================================
</TABLE>
(1) In accordance with Rule 457(f)(2), the registration fee is calculated
based on the book value of the Old Bonds to be exchanged, as of July 30,
1999.
--------------------------
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not exchange these securities until the registration statement filed with the
Securities and Exchange commission relating to these securities is effective.
This prospectus is not an offer to exchange these securities and it is not
soliciting an offer to exchange these securities in any state where the offer or
exchange is not permitted.
================================================================================
Subject to Completion, dated September 30, 1999
PROSPECTUS
$75,000,000
Central Vermont Public Service Corporation
Offer to Exchange
8 1/8% Second Mortgage Bonds due 2004
For Any and All Outstanding
8 1/8% Second Mortgage Bonds due 2004
This prospectus and accompanying letter of transmittal relate to our
proposed offer to exchange up to $75,000,000 aggregate principal amount of new
8-1/8% Second Mortgage Bonds due 2004 (the "New Bonds"), which will be freely
transferable, for any and all outstanding 8-1/8% Second Mortgage Bonds due 2004
issued on July 30, 1999 (the "Old Bonds"), which have transfer restrictions.
o The exchange offer expires at 5:00 p.m., New York City time, on
1999, unless extended.
o The terms of the New Bonds are substantially identical to the Old
Bonds, except for transfer restrictions, registration rights and
liquidated damages.
o All Old Bonds that are validly tendered and not validly withdrawn
will be exchanged.
o Tenders of Old Bonds may be withdrawn at any time prior to
expiration of the exchange offer.
o Holders of Old Bonds do not have any appraisal or dissenters' rights
in connection with the exchange offer. Old Bonds not exchanged in
the exchange offer will remain outstanding and be entitled to the
benefits of the Indenture, but, except under limited circumstances,
will have no further exchange or registration rights under the
Registration Rights Agreement.
o We do not intend to apply for listing of the New Bonds on any
securities exchange or to arrange for them to be quoted on any
quotation system.
o The only conditions to completing the exchange offer are that the
exchange offer not violate applicable law or any applicable
interpretation of the staff of the Securities and Exchange
Commission and no injunction, order or decree has been issued when
would prohibit, prevent or materially impair our ability to proceed
with the exchange offer.
-------------------------
Please see "Risk Factors" beginning on page 16 for a discussion of factors
you should consider in connection with the exchange offer.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the New Bonds, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We may amend or supplement this prospectus from time to time by filing
amendments or supplements as required. You should read this entire prospectus
(and accompanying letter of transmittal and related documents) and any
amendments or supplements carefully before deciding to exchange your securities.
The date of this prospectus is _____ , 1999.
================================================================================
<PAGE>
TABLE OF CONTENTS
WHERE TO FIND MORE INFORMATION....................................2
FORWARD-LOOKING STATEMENTS........................................3
PROSPECTUS SUMMARY................................................4
RISK FACTORS.....................................................15
USE OF PROCEEDS..................................................25
CAPITALIZATION...................................................26
SELECTED CONSOLIDATED FINANCIAL DATA.............................27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......................................29
BUSINESS.........................................................44
REGULATION AND RATES.............................................48
ELECTRIC INDUSTRY RESTRUCTURING..................................51
OUR RESTRUCTURING PLAN...........................................54
DESCRIPTION OF OTHER INDEBTEDNESS AND PREFERRED STOCK............57
THE EXCHANGE OFFER...............................................59
DESCRIPTION OF THE NEW BONDS.....................................69
CERTAIN FEDERAL TAX CONSIDERATIONS..............................111
PLAN OF DISTRIBUTION............................................114
LEGAL MATTERS...................................................114
INDEPENDENT PUBLIC ACCOUNTANTS..................................114
<PAGE>
WHERE TO FIND MORE INFORMATION
In connection with the exchange offer, we have filed with the Securities
and Exchange Commission a registration statement under the Securities Act of
1933, as amended, relating to the New Bonds to be issued in the exchange offer.
As permitted by SEC rules, this prospectus omits information included in the
registration statement. For a more complete understanding of this exchange
offer, you should refer to the registration statement, including its exhibits.
We are also subject to the information requirements of the Securities
Exchange Act. Accordingly, we file annual, quarterly and current reports as well
as other information with the Securities and Exchange Commission. The public may
read and copy any reports or other information that we file with the SEC at the
SEC's public reference room, Room 1024 at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the SEC's regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048, and Suite 1400, 500
West Madison Street, Chicago, Illinois 60661. The public may obtain information
on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. Our SEC filings are also available to the public from commercial
document retrieval services and at the web site maintained by the SEC at
http://www.sec.gov.
We have securities listed on the New York Stock Exchange. You can inspect
and copy reports and other information about us at the NYSE's offices at 20
Broad Street, New York, New York.
We are "incorporating by reference" information into this prospectus. This
means that we are disclosing important information by referring to another
document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this prospectus, except for any information
superseded by information in this prospectus. This prospectus incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about us.
SEC Filing (File No. 1-8222) Period/Date
---------------------------- -----------
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Quarterly Report on Form 10-Q Quarter ended June 30, 1999
You may also obtain a copy of these filings and the exchange offer
registration statement at no cost by writing or telephoning us at the following
address:
Central Vermont Public Service Corporation
77 Grove Street
Rutland, Vermont 05701
(802) 773-2711
Attention: Corporate Secretary
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information that is different from this information.
1
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FORWARD-LOOKING STATEMENTS
This prospectus may contain statements regarding our assumptions,
projections, expectations, intentions or beliefs about future events. These
statements are intended as "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995 and for purposes of the safe harbor
provided by Section 21E of the Exchange Act and Section 27A of the Securities
Act. We caution that these statements may and often do vary from actual results
and the differences between these statements and actual results can be material.
Accordingly, we cannot assure you that actual results will not differ materially
from those expressed or implied by the forward-looking statements. Some of the
factors that could cause actual events to differ materially from those expressed
or implied in any forward-looking statement are:
o our ability to recover stranded costs;
o state and federal legislative and regulatory initiatives or
proceedings that affect the recovery of our investments or that have
an impact on rate structures and results of operation and cash flow;
o the weather and other natural phenomena;
o the timing and extent of changes in costs of labor and prices of
commodities and interest rates;
o changes in environmental and other laws and regulations to which we
and our subsidiaries are subject or other external factors over
which we have no control;
o the results of financing efforts;
o risks of ownership and decommissioning of nuclear facilities;
o expansion and other growth opportunities;
o technology advances in energy supply and distribution;
o achievement of Year 2000 readiness; and
o the effect of accounting policies issued periodically by accounting
standard-setting bodies.
These factors are discussed more completely in our filings with the SEC,
including our annual report on Form 10-K for the year ended December 31, 1998
and quarterly reports on Form 10-Q for the quarters ended March 31, and June 30,
1999, respectively, both of which are incorporated by reference into this
prospectus.
2
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus
and is not complete and may not contain all the information that is important to
you regarding the exchange offer. You should read the entire prospectus,
including the "Risk Factors" section and the financial statements and footnotes
thereto and other detailed information incorporated by reference into this
prospectus, before making a decision to participate in the exchange offer. As
used in this prospectus (unless otherwise noted or the context otherwise
requires), (1) "our," "us," "we" and "Company" refer to Central Vermont Public
Service Corporation and our subsidiaries and (2) "Bonds" refer to both the Old
Bonds and the New Bonds.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
We are the largest electric utility in Vermont. Together with our
subsidiaries, we engage principally in the purchase, production, transmission,
distribution and sale of electricity. We serve over 140,000 customers in nearly
three-quarters of the towns, villages and cities in Vermont, representing
approximately 50% of the Vermont population. We operate in New Hampshire through
our electric utility subsidiary, Connecticut Valley Electric Company Inc., or
Connecticut Valley, which serves approximately 10,000 customers. Our
consolidated operating revenues in 1998 were $303.8 million. Approximately 77%
of our consolidated operating revenues were generated from our retail electric
utility business in Vermont and approximately 7% were generated from our retail
electric utility business in New Hampshire. Our principal executive offices are
located at 77 Grove Street, Rutland, Vermont 05701. Our telephone number is
(802) 773-2711.
Our Vermont retail sales in 1998 of 2.1 million megawatt hours, or mWh,
were approximately 41% residential, 40% commercial, 18% industrial and 1% other.
Consolidated mWh sales in 1998 were 3.6 million. Consolidated mWh sales to
retail and firm wholesale customers accounted for 63.4% of our total sales
during 1998. The remaining sales were entitlement sales, sales to NEPOOL (the
New England power pool), and short-term power sales. Entitlement sales occur
when we sell a portion of the power to which we are entitled from a specific
contract or generating plant.
For 1998, our consolidated peak demand to serve our retail and firm
wholesale customers was 420.6 megawatts or mW. We currently purchase
approximately 86% of our retail and firm wholesale power needs under several
contracts of varying duration. During 1998, over 35% of these power needs came
from Vermont Yankee, an affiliated company which owns and operates a nuclear
generating unit. During 1998, over 32% of our power needs came from
Hydro-Quebec, one of the world's largest generators of hydroelectricity which is
owned by the province of Quebec, Canada. Our remaining sources of power include
purchase contracts with small power producers, purchases from NEPOOL and other
contracted sources, as well as our own generation. Our purchased power portfolio
includes a diversified mix of sources and fuel types to meet our long-term load
growth while providing short and intermediate term opportunities to purchase or
sell capacity and energy to reduce overall power costs.
We generate approximately 14% of our retail and firm wholesale power needs
through several wholly- and jointly-owned power plants. During 1998, our 20
wholly-owned hydroelectric plants accounted for approximately 9% of our overall
retail and firm wholesale energy needs. Our jointly-owned nuclear and fossil
fuel facilities, Millstone Unit #3 (nuclear), Wyman #4 (oil-fired) and Joseph C.
McNeil (wood, gas and oil-fired), together accounted for approximately 5% of our
1998 total retail and firm wholesale power needs.
We utilize our affiliate Vermont Electric Power Company, Inc., or VELCO,
to transmit our power in the State of Vermont. We are the largest user of
VELCO's transmission system.
Our wholly- and partially-owned subsidiaries engage in the following
energy and non-energy related businesses:
o We own all of Connecticut Valley, a regulated utility, which
distributes and sells electricity to approximately 10,000 customers
in 13 communities bordering the Connecticut River in New Hampshire.
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3
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o We own a 56.8% equity interest in VELCO, which owns and operates the
high voltage electric transmission system in Vermont.
o In addition to our 1.7% joint ownership in Millstone Unit #3, we own
equity interests in various nuclear facilities, including 31.3% of
Vermont Yankee Nuclear Power Corporation (Vermont Yankee), 2% of
Connecticut Yankee Atomic Power Company (Connecticut Yankee), 2% of
Maine Yankee Atomic Power Company (Maine Yankee), and 3.5% of Yankee
Atomic Electric Company (Yankee Atomic). Connecticut Yankee, Maine
Yankee and Yankee Atomic no longer operate and are in various stages
of decommissioning.
o We own all of Catamount Energy Corporation, or Catamount, which has
investments in energy generation projects in the United States and
Great Britain.
o We own all of SmartEnergy Services, Inc., or SmartEnergy, which
invests in unregulated energy and service related businesses.
OUR RESTRUCTURING PLAN
In order to improve our financial condition, enhance our ability to
compete effectively in a changing electric utility industry and stabilize
projected costs, we are pursuing a comprehensive financial restructuring plan
known as our Restructuring Plan. The Restructuring Plan is consistent with the
findings of the Working Group on Vermont's Electricity Future, or the Working
Group, which was appointed by Vermont's Governor in July 1998 to make
recommendations on restructuring the State's electric utility industry. We
support the conclusions of the Working Group, which are described in more detail
elsewhere in this offering memorandum. We are aggressively pursuing
implementation of our Restructuring Plan which includes the following elements:
o Retail choice: voluntarily giving up the exclusive right to supply
power to our present electric customers, while retaining our rights
as a distribution company, as part of a global settlement of
regulatory issues.
o Renegotiation of power purchase contracts: reducing our 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 represented nearly 38% of our 1998
net energy supply. We may seek to finance the cost of any auctions,
buy-outs or buy-downs of power contracts through the future issuance
of securities in the capital markets.
o Contract and asset disposition: seeking to sell some or all of our
power purchase contracts and generating assets, including our
interest in the Vermont Yankee nuclear generating plant. Efforts to
sell the Vermont Yankee plant and possibly purchase a portion of the
power from the plant are under way. On September 22, 1999, we
announced that we will seek, with the other Vermont Joint Owners, to
auction the contract with Hydro-Quebec.
o Cost-cutting: implementing cost-cutting measures to reduce cash flow
requirements while maintaining safety and reliability standards.
o Holding company: establishing a new holding company to help us
better organize our businesses.
o Industry consolidation: evaluating possible consolidation with other
Vermont electric distribution companies.
o Regulatory settlement: seeking a comprehensive regulatory settlement
that leads to long-term financial stability.
o Energy efficiency activities: creating a state sponsored
"energy-efficiency utility" to take over most system-wide
energy-efficiency services for electric customers.
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4
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While we cannot predict whether some or all of the elements of our
Restructuring Plan will be implemented, we are pursuing implementation of our
Restructuring Plan through negotiations with power suppliers, regulatory
proceedings, legislative proceedings and other means. If approved by the Vermont
Public Service Board, or PSB, the Vermont utility regulator, the tentative
timetable calls for consummation of each element of the Restructuring Plan by
mid-2000. See "Our Restructuring Plan" elsewhere in this offering memorandum.
Pending implementation of the Restructuring Plan, we continue to address
the regulatory and other challenges we face. The primary challenge to our
financial strength results from uncertainties regarding the receipt of adequate
and timely rate relief necessary to meet increased purchased power costs. Those
costs have increased principally as a result of our long-term power purchase
contract with Hydro-Quebec. These matters are discussed under the headings "Risk
Factors--Our obligations under the VJO Power Contract with Hydro-Quebec may
increase if a VJO member defaults" and "Business--VJO Power Contract with
Hydro-Quebec." We have been unable in recent regulatory proceedings to recover
the full amount of our purchased power costs related to the VJO Power Contract,
which is discussed below. Our regulatory proceedings are discussed under the
headings "Risk Factors--We face uncertainty relating to the resolution of our
Vermont rate proceedings," "Risk Factors--We face uncertainty relating to the
resolution of our New Hampshire rate proceedings" and "Regulation and Rates."
These matters could have a material adverse impact on our financial condition.
RECENT DEVELOPMENTS
Ice Storm Arbitration with Hydro-Quebec
During January 1998, a significant ice storm affected parts of New
England, New York 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 a power contract with Hydro-Quebec through the Vermont Joint
Owners, known as the VJO, a consortium of Vermont utilities. The power contract
between Hydro-Quebec and the VJO is referred to as the VJO Power Contract. The
storm caused 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. The VJO believes Hydro-Quebec
has been and remains unable to make available capacity with the degree of
firmness required by the VJO Power Contract. That review prompted the VJO to
initiate an arbitration proceeding. In the arbitration, the VJO is seeking to
terminate its contractual obligation to purchase power from Hydro-Quebec, to
recover damages associated with Hydro-Quebec's failure to comply with the VJO
Power Contract, and to recover capacity payments made during the period of
non-delivery. The results of the arbitration, which are expected in early 2000,
cannot be predicted at this time.
Possible Sale of Our Interest in the Vermont Yankee Nuclear Power Plant
We and the other owners of Vermont Yankee are negotiating a sale of the
plant to AmerGen Energy Company, which is an alliance of PECO Energy Company and
British Energy. We've also received an unsolicited expression of interest from
Entergy Nuclear, Inc. to buy Vermont Yankee's nuclear power plant. Vermont
Yankee's owners, which includes us, are pursuing parallel negotiations with the
two potential purchasers with the objective of reaching a definitive agreement,
if possible.
Although the sale is still being negotiated, we expect that if a sale
occurs we may purchase a pro rata share of the power generated at the plant. The
terms of any transaction may also include a limitation on our obligation to fund
decommissioning costs and may also reduce our current operating risk. In the
event negotiations are successful, the transaction would require the approval of
federal regulators, including the Federal Energy Regulatory Commission, or the
FERC, and the Nuclear Regulatory Commission, or the NRC, as well as state
regulators. Consummation of the sale would also be conditioned upon receipt of
acceptable regulatory, accounting and tax treatment of the transaction.
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5
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Possible Establishment of a New Holding Company
In an effort to prepare for the likely deregulation of the electric
utility industry in Vermont, we are pursuing a strategy of reorganizing into a
new holding company structure. Under the proposed structure, we would become a
subsidiary of a new holding company. Our two principal unregulated subsidiaries,
Catamount and SmartEnergy, would become direct subsidiaries of this new holding
company and would be our sister companies. We believe this holding company
structure would facilitate our transition to a deregulated electricity market.
On July 24, 1998, we filed a petition with the PSB for permission to reorganize
in this manner. The petition is still pending. In addition to PSB approval, the
proposed reorganization would require approval of federal regulators, including
the SEC and the FERC, our shareholders, and state regulators in Connecticut and
possibly other states. In any event, earnings from our unregulated subsidiaries
would not necessarily be available to support the repayment of the New Bonds.
See "Risk Factors--The Second Mortgage Indenture does not restrict our
unregulated subsidiaries."
Renewed Credit Facility and Liquidity
A portion of the net proceeds of the Bond offering were used to repay $15
million of outstanding loans under our revolving credit facility and the
remaining proceeds will be used for other general corporate purposes relative to
our utility business. We also canceled our $40 million revolving credit
facility. In addition, we recently extended until May 31, 2000 with renewal
options through November 5, 2002, an aggregate of approximately $16.9 million of
letters of credit which support outstanding development authority bonds. Our
reimbursement obligations in respect of these letters of credit are secured by
three new series of First Mortgage Bonds in an aggregate principal amount of
approximately $16.9 million. Separately, we have a $12 million accounts
receivable facility which matures in November 1999, which we intend to renew or
replace at or before maturity. We expect to require additional financing by
2004, to refinance the New Bonds and to meet our working capital needs. See
"Risk Factors--We may have insufficient liquidity to refinance the New Bonds at
maturity."
The above information about us is not comprehensive. More detailed
information on the matters addressed in this summary are included elsewhere or
incorporated by reference in this prospectus. For additional information about
our business and affairs, including our consolidated financial statements and
related notes, management's discussion and analysis, pending environmental,
legal and regulatory proceedings and descriptions of a number of laws and
regulations to which we are subject, you should refer to the documents
incorporated by reference in this prospectus which are listed under the heading
"Where to Find More Information."
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SUMMARY OF THE EXCHANGE OFFER
The form and terms of the New Bonds will be substantially identical to
those of the Old Bonds except that the New Bonds will have been registered under
the Securities Act. Therefore, the New Bonds will not be subject to transfer
restrictions, registration rights and related liquidated damages provisions
applicable to the Old Bonds.
The Exchange Offer ................... We are offering to exchange an aggregate
of $75.0 million principal amount of New
Bonds for $75.0 million of Old Bonds.
Old Bonds may only be exchanged in
multiples of $1,000 principal amount. To
be exchanged, an Old Bond must be
properly tendered and accepted. Subject
to conditions of the exchange offer, all
outstanding Old Bonds that are validly
tendered and not validly withdrawn will
be exchanged for New Bonds issued on or
promptly after the expiration date of
the exchange offer. See "The Exchange
Offer" and "The Exchange Offer-Certain
Conditions to the Exchange Offer."
Currently, there is $75.0 million
aggregate principal amount of Old Bonds
outstanding. No New Bonds are
outstanding.
Issuance of the Old Bonds;
Registration Rights .................. The Old Bonds were issued and sold to
the initial purchasers, Donaldson,
Lufkin & Jenrette Securities Corporation
and TD Securities (USA) Inc., on July
30, 1999. In connection with that sale,
we executed and delivered the
Registration Rights Agreement for the
benefit of the bondholders. In the
Registration Rights Agreement, we agreed
to either:
o commence an exchange offer under
which the New Bonds, registered
under the Securities Act with terms
substantially identical to those of
the Old Bonds, will be exchanged
for the Old Bonds pursuant to an
effective registration statement;
or
o cause the Old Bonds to be
registered under the Securities Act
pursuant to a resale shelf
registration statement.
If we do not comply with our obligations
under the Registration Rights Agreement,
we will be required to pay liquidated
damages that will be payable twice
yearly. See "The Exchange Offer."
Expiration Date....................... The exchange offer will expire at 5:00
p.m., New York City time, on 1999,
unless extended, in which case the term
"expiration date" shall mean the latest
date and time to which the exchange
offer is extended.
Conditions to the Exchange Offer...... We are not required to consummate the
exchange offer if there is any pending
or threatened action or proceeding or
proposed or effective legislation or
other law or rule that would make the
exchange offer illegal, cause us to have
to pay damages as a result of the
exchange offer or delay or otherwise
make it inadvisable to consummate the
exchange offer. See "The Exchange
Offer--Certain Conditions to the
Exchange Offer." The exchange offer is
not conditioned upon any minimum
aggregate principal amount of Old Bonds
being tendered for exchange. Other than
applicable U.S. federal and state
securities laws, we do not need to
satisfy any additional regulatory
requirements or obtain any regulatory
approval to conduct the exchange offer.
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Procedures for Tendering Old Bonds.... If you want to tender your Old Bonds in
the exchange offer, you must complete
and sign a letter of transmittal and
send it, together with the Old Bonds or
a notice of guaranteed delivery and any
other required documents, to The Bank of
New York, as exchange agent, in
compliance with the procedures for
guaranteed delivery contained in the
letter of transmittal. The letter of
transmittal must be received by the
exchange agent prior to 5 p.m. on the
expiration date of the exchange offer.
If your Old Bonds are registered in the
name of a nominee and you wish to tender
your Old Bonds in the exchange offer,
you should instruct your nominee to
promptly tender your Old Bonds on your
behalf.
Guaranteed Delivery Procedures........ If you wish to tender your Old Bonds
and:
o your Old Bonds are not immediately
available;
o you cannot deliver your Old Bonds
or any of the other documents
required by the letter of
transmittal to the exchange agent
prior to the expiration date of the
exchange offer; or
o you cannot complete the procedure
for book-entry transfer on a timely
basis;
You may tender your Old Bonds according
to the guaranteed delivery procedures
detailed in the letter of transmittal.
See "The Exchange Offer--Guaranteed
Delivery Procedures."
Withdrawal Rights..................... You may withdraw the tender of your Old
Bonds by providing a written withdrawal
notice to the Exchange Agent which must
be received by the Exchange Agent prior
to 5:00 p.m. on the expiration date. See
"The Exchange Offer--Withdrawal Rights."
Acceptance of the Old Bonds and
Delivery of the New Bonds............. We will accept for exchange any and all
Old Bonds by providing a written
withdrawal notice to the Exchange Agent
which must be received by the Exchange
Agent prior to 5:00 p.m. on the
expiration date. We will issue and
deliver the New Bonds promptly following
the expiration date of the exchange
offer. See "The Exchange Offer--Terms of
the Exchange Offer."
Resale of the New Bonds............... Based on SEC no action letters, we
believe that after the exchange offer
you may offer and sell the New Bonds
without registration under the
Securities Act so long as:
o You acquire the New Bonds in the
ordinary course of business;
o When the exchange offer begins you
do not have an arrangement with
another person to participate in a
distribution of the New Bonds; and
o You are not engaged in a
distribution of, nor do you intend
to distribute, the New Bonds;
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When you tender the Old Bonds we will
ask you to represent to us that:
o You are not an affiliate of ours
within the meaning of Rule 405 of
the Securities Act.
o You will acquire the New Bonds in
the ordinary course of business.
o When the exchange offer begins you
are not engaged in nor do you have
plans with another person to be
engage in a distribution of the New
Bonds.
If you are unable to make these
representations, you will be required to
comply with the registration and
prospectus delivery requirements under
the Securities Act in connection with
any secondary resale transaction.
If you are a broker-dealer and receive
New Bonds for your own account, you may
be deemed to be an "underwriter" within
the meaning of the Securities Act, and
you must acknowledge that you will
deliver a prospectus if you resell the
New Bonds. By acknowledging your intent
and delivering a prospectus you will not
be deemed to admit that your are an
"underwriter" under the Securities Act.
For a period of 180 days after the
exchange offer is consummated or until
the Old Bonds are resold, whichever
comes first, we will make this
prospectus available to any
broker-dealer in connection with such a
resale. See "Plan of Distribution."
If necessary, we will cooperate with you
to register and qualify the New Bonds
for offer or sale without any
restrictions or limitations under state
"blue sky" laws.
Consequences of Failure to Exchange... If you do not exchange your Old Bonds
for the New Bonds pursuant to the
exchange offer you will still be subject
to the restrictions on transfer of your
Old Bonds as contained in the legend on
the Old Bonds. In general, you may not
offer to sell or sell the Old Bonds,
except pursuant to a registration
statement under the Securities Act or
any exemption from registration
thereunder and in compliance with
applicable state securities laws.
Certain U.S. Federal Income
Tax Considerations.................... The exchange of Old Bonds for New Bonds
will not be a taxable event for United
States federal income tax purposes. You
will not recognize any taxable gain or
loss or any interest income as a result
of the exchange.
Registration Rights Agreement ........ The exchange offer is intended to
satisfy your registration rights under
the Registration Rights Agreement. Those
rights will terminate upon completion of
the exchange offer.
Use of Proceeds....................... We will not receive any proceeds from
the issuance of New Bonds pursuant to
the exchange offer. In consideration for
issuing the New Bonds in exchange for
the Old Bonds as described in this
prospectus, we will receive, retire and
cancel the Old Bonds. See "Use of
Proceeds."
Exchange Agent........................ The Bank of New York is the exchange
agent for the exchange offer.
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9
<PAGE>
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DESCRIPTION OF THE NEW BONDS
Issuer................................ Central Vermont Public Service
Corporation
New Bonds............................. $75.0 million in aggregate principal
amount of our 8 1/8% Second Mortgage
Bonds due 2004.
Maturity Date......................... August 1, 2004.
Interest Rate and Payment Dates....... Interest on the New Bonds will accrue at
the rate of 8 1/8% per annum from July
30, 1999, payable semiannually in cash
in arrears on February 1 and August 1 of
each year, commencing February 1, 2000;
provided that in the event the exchange
offer is consummated on or after
February 1, 2000, interest will accrue
from February 1, 2000.
Optional Redemption................... We may redeem the New Bonds at any time
in whole or in part at our option upon
not less than 30 nor more than 60 days'
notice, by paying 100% of the principal
amount thereof plus accrued and unpaid
interest thereon plus the Make Whole
Premium.
Change of Control..................... If we experience a change of control,
you will have the right to require us to
purchase all or any part of your New
Bonds at a price equal to 101% of the
aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to
the date of purchase. See "Risk
Factors--We may not have sufficient
funds to finance a 'change of control'
offer."
Security.............................. The New Bonds will be secured by a
second mortgage lien on all of our
utility property also subject to the
lien of our existing First Mortgage.
Ranking............................... The New Bonds will be secured
obligations and will rank:
o junior to our existing and future
First Mortgage Bonds;
o senior in right of payment to all
of our existing and future
unsecured obligations to the extent
of the value of the assets securing
the New Bonds, including
liabilities and obligations in
respect of power purchase contracts
and stranded cost obligations
associated with power purchase
contracts; and
o pari passu in right of payment with
(1) all future indebtedness that is
secured by a second mortgage lien
on our utility property also
subject to the lien of our existing
First Mortgage and (2) Old Bonds
that are not exchanged for New
Bonds in the exchange offer.
After the issuance of the New Bonds
there will be $93.4 million of First
Mortgage Bonds outstanding, all of which
will be senior to the New Bonds.
Prior to the maturity of the New Bonds,
$41.0 million of First Mortgage Bonds
will mature. We currently hold $10.0
million of retired First Mortgage Bonds.
We plan to use all $51.0 million of
these retired First Mortgage Bonds to
meet renewal fund requirements under the
First Mortgage. See "Description of New
Bonds--Issuance of Additional First
Mortgage Bonds." We expect the amount of
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
outstanding First Mortgage Bonds to
decline from $93.4 million to $52.4
million by December 31, 2003.
Due to the renewal fund requirements
under the First Mortgage, we do not
intend to issue any additional First
Mortgage Bonds prior to the maturity of
the New Bonds.
Covenants............................. We will issue the New Bonds under the
Second Mortgage Indenture. The
supplemental indenture providing for the
issuance of the New Bonds contains
several covenants that will not be
applicable at any time when the New
Bonds are rated investment grade. See
"Description of New Bonds--Changes in
Covenants When New Bonds Rated
Investment Grade." If applicable, these
covenants will among other things, place
limitations on our ability to:
o Sell assets or merge with or into
other companies;
o Pay dividends, make distributions
on or repurchase stock, and make
investments;
o Borrow money;
o Enter into sale-leaseback
transactions;
o Enter into transactions with
affiliates; and
o Make payments for consents.
The New Bonds are rated investment
grade. Therefore, the only restrictive
covenant that will apply when the New
Bonds are issued will be a restriction
on liens.
The Second Mortgage Indenture contains
other customary covenants.
Trustee............................... The Bank of New York.
You should refer to the section entitled "Risk Factors" for an explanation
of certain risks of investing in the New Bonds.
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11
<PAGE>
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SUMMARY SELECTED CONSOLIDATED
FINANCIAL DATA
(Dollars in thousands)
The following table presents summary selected consolidated financial
information about us as of the dates and for the periods indicated. The
historical financial data as of the end of and for each of the three years in
the period ended December 31, 1998, are derived from our audited consolidated
financial statements incorporated by reference herein. The historical financial
data as of and for the six months ended June 30, 1999 and June 30, 1998 are
derived from our unaudited financial statements which, in the opinion of our
management, contain all adjustments necessary for a fair presentation of the
information presented. This table should be read together with the detailed
financial and other information contained elsewhere or incorporated by reference
in this prospectus.
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
------------------------------------------- ----------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Operating revenues.......... $ 290,801 $ 304,732 $ 303,835 $ 150,364 $ 191,781(1)
Operating income(2)......... 23,275 18,636 7,991 6,600 15,719
Total interest expense,
net...................... 9,925 9,706 10,660 5,259 5,106
Net income.................. 19,442 16,340 3,983 4,812 13,146
Preferred stock dividend
requirements............. 2,028 2,028 1,945 973 931
Other Financial Data:
EBITDA(3)................... 63,128 60,471 45,312 17,801 34,349
Net cash provided by
operating activities..... 43,007 41,974 21,743 6,938 32,899
Capital expenditures(4)..... 20,541 15,678 18,254 8,130 7,364
Ratio of earnings to
fixed charges(5)......... 3.44x 3.77x 1.83x 1.01x 3.90x
Ratio of EBITDA to
interest expense......... 6.36x 6.23x 4.25x 3.38x 6.73x
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1998 As of June 30, 1999
----------------------- -------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................... $ 10,051 $ 19,277
Total assets........................................ 530,282 524,101
Total debt (incl. capital lease).................... 149,991 140,690
Common stock equity................................. 179,182 188,906
Preferred stock(6).................................. 26,054 26,054
</TABLE>
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12
<PAGE>
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(1) Includes $6.2 million (pre-tax) collected during the period pursuant to
the 4.7% temporary rate increase effective January 1, 1999, which is
subject to adjustment pending the outcome of regulatory proceedings in
Vermont, and other miscellaneous items.
(2) After deduction of taxes on income.
(3) EBITDA represents earnings before interest charges, taxes on income,
depreciation, amortization, gains on asset sales, cash investment income
and noncash transactions resulting from the regulatory disallowance of the
recovery of power costs incurred. EBITDA is not defined by GAAP, and is
presented here only to provide additional information about our ability to
meet our future requirements for debt service and capital expenditures.
EBITDA should not be considered an alternative to net income as an
indicator of operating performance or an alternative to cash flow as a
measure of liquidity.
(4) Capital expenditures consist of construction and plant expenditures and
energy efficiency expenditures not currently being recovered in rates.
(5) For purposes of determining the ratio of earnings to fixed charges, (i)
earnings consist of income before income taxes plus fixed charges; and
(ii) fixed charges consist of interest charges on all indebtedness,
including the portion of rental expense that is representative of the
interest factor.
(6) See "Description of Other Indebtedness and Preferred Stock--Preferred
Stock" for additional information about our outstanding preferred stock.
- --------------------------------------------------------------------------------
13
<PAGE>
RISK FACTORS
The following information is qualified in its entirety by the more
detailed information and the consolidated financial statements appearing
elsewhere or incorporated herein by reference in this prospectus.
There are Restrictions Upon Transfer and a Limited Trading Market for the Old
Bonds
We will issue New Bonds in exchange for the Old Bonds only after the
exchange agent receives your Old Bonds. Therefore, you should allow sufficient
time to ensure timely delivery of your Old Bonds. Neither we nor the exchange
agent is under any duty to give notification of defects or irregularities with
respect to your tender of the Old Bonds for exchange. If you do not tender your
Old Bonds, or if you do tender your Old Bonds and they are not accepted, your
Old Bonds will continue to be subject to the existing restrictions upon their
transfer. Accordingly, after completion of the exchange offer, you will only be
able to offer for sale, sell or otherwise transfer untendered Old Bonds as
follows:
o to the Company;
o pursuant to a registration statement that has been declared
effective under the Securities Act;
o for so long as the Old Bonds are eligible for resale pursuant to
Rule 144A under the Securities Act, to a person you reasonably
believe is a qualified institutional buyer ("QIB") within the
meaning of Rule 144A, that purchases for its own account or for the
account of a QIB to whom notice is given that the transfer is being
made in reliance on the exemption from the registration requirements
of the Securities Act provided by Rule 144A;
o pursuant to offers and sales that occur outside the United States to
foreign persons in transactions complying with the provisions of
Regulation S under the Securities Act;
o pursuant to any other available exemption from the registration
requirements of the Securities Act.
To the extent that Old Bonds are tendered and accepted in the exchange offer,
the liquidity of the trading market for untendered Old Bonds could be adversely
affected. See "The Exchange Offer."
In addition, any holder of the Old Bonds who tenders in the exchange offer
for the purpose of participating in a distribution of the New Bonds will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-dealer
who receives New Bonds for its own account in exchange for the Old Bonds, where
such Old Bonds were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such New Bonds. See "Plan
of Distribution."
Our obligations under the VJO Power Contract with Hydro-Quebec may increase if a
VJO member defaults
We are obligated to continue purchasing varying amounts of power from
Hydro-Quebec until 2016 as a party to the VJO Power Contract with Hydro-Quebec
through the Vermont Joint Owners, or VJO. Our remaining total commitment to
purchase power under this contract is estimated, based on current power market
forecasts, to be approximately $1.0 billion over the next 17 years. The VJO
participation contract under which the VJO resells Hydro-Quebec power to the
Vermont purchasing utilities, including ourselves, 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. Our obligation is approximately 46% of the total
contract, and Green Mountain Power Corporation, another Vermont utility, is
obligated to purchase approximately 38% of the power purchased by the VJO under
the contract. A default by utilities that purchase power from the VJO,
particularly the utilities with significant purchase obligations, could have a
material adverse effect on our financial results. For example, if Green Mountain
Power defaults, our financial viability would be threatened because our
resulting "step up" obligation would exceed our financial resources. Many of the
utilities that purchase power under the VJO Power Contract face regulatory and
financial challenges similar to our own. We cannot predict
14
<PAGE>
whether all of the utilities that purchase power under the VJO Power Contract
will continue to meet their obligations.
We face uncertainty relating to the resolution of our Vermont rate proceedings
We face uncertainties regarding the receipt of adequate and timely rate
relief necessary to meet increased purchased power costs. These increases in
purchased power costs arise principally under the VJO Power Contract. Vermont
regulations do not allow for changes in purchased power and fuel costs to be
passed on to consumers through automatic rate adjustment clauses. Therefore, our
practice is to review costs periodically and to request rate increases when
warranted. We have been unable in recent regulatory proceedings to recover the
full amount of our purchased power costs under the VJO Power Contract.
We reached agreement with the Vermont Department of Public Service, or
DPS, the consumer advocate in Vermont, regarding a retail rate increase request
we filed in June 1998, providing for a temporary increase in our Vermont retail
rates of 4.7% or $10.9 million on an annualized basis, beginning January 1,
1999. The June 1998 rate increase request was primarily intended to recover the
cost of power purchases from Hydro-Quebec under the VJO Power Contract. The rate
increase, which was approved by the PSB, is subject to a retroactive or
prospective adjustment upon the resolution of issues relating to the VJO Power
Contract, which issues we have appealed to the Vermont Supreme Court. A decision
by the end of 1999 is possible. On July 8, 1999, Hydro-Quebec filed a Motion to
Intervene in this rate case. We cannot predict what, if any, impact this filing
will have or if the motion will be granted. See "Regulation and Rates--Vermont
Retail Rate Proceedings."
If we receive an unfavorable ruling from the Vermont Supreme Court and the
PSB subsequently issues a rate order permanently adopting the disallowance
methodology used in determining the temporary rate increase, or a similar
methodology, for the duration of the VJO Power Contract, we would be required to
take an immediate charge to pre-tax earnings of $205.0 million. Such an outcome
would jeopardize our ability to continue as a going concern. See "Regulation and
Rates--Vermont Retail Rate Proceedings."
We face uncertainty relating to the resolution of our New Hampshire rate
proceedings
We are party to regulatory proceedings before the federal courts and the
Federal Energy Regulatory Commission, or the FERC, as described below. We cannot
predict the ultimate outcome of either proceeding at this time. An adverse
outcome in either proceeding could materially and adversely effect our results
of operations and financial condition.
Federal Court proceedings. In February 1997, the New Hampshire Public
Utilities Commission, or NHPUC, ordered Connecticut Valley, our subsidiary that
conducts our distribution utility operations in New Hampshire, to terminate its
wholesale rate schedule with us. The NHPUC subsequently found Connecticut Valley
"imprudent" for not having previously taken steps to terminate the rate schedule
and ordered that rates be reduced to market levels. We are seeking relief in
federal court to reverse the NHPUC's decision. See "Regulation and Rates--New
Hampshire Retail Rate Proceedings."
The court's ruling on several summary judgment motions is expected to
occur later this year.
FERC proceedings. We have filed with the FERC seeking to recover stranded
costs through an exit fee in connection with the cancellation of the Connecticut
Valley rate schedule. The stranded cost obligation sought to be recovered,
expressed on a net present value basis as of January 1, 1999, is approximately
$48.0 million. The FERC administrative law judge's ruling on our request for
recovery is expected later this year. The FERC will act on the judge's
recommendations sometime thereafter.
If we are unable to obtain an order authorizing the recovery of the costs
sought in our FERC filing, we would be required to recognize a pre-tax loss
under this contract totaling approximately $60.0 million. We would also be
required to write-off approximately $4.0 million (pre-tax) in regulatory assets
associated with our wholesale business. The cash flow shortfall from our
revenues would be approximately $6.0 million (pre-tax) annually.
15
<PAGE>
However, even if we obtain a FERC order authorizing the exit fee we have
requested, if Connecticut Valley is unable to recover its costs by increasing
the rates it charges its customers, Connecticut Valley would be required to
recognize a loss of approximately $48.0 million (pre-tax).
Our other stranded costs may not be recoverable
Restructuring initiatives and regulatory pressures in our companies'
service territories have created uncertainty with respect to future rates and
the recovery of "stranded costs." Stranded costs are expenditures incurred, or
commitments for future expenditures made, on behalf of customers with the
expectation that such expenditures would be recoverable in the future through
retail rates. Stranded costs might not be recoverable from customers in a fully
competitive electric utility industry because our costs may be above retail
prices paid by customers. We are vulnerable to stranded costs principally
because of:
o our long-term commitment to purchase power under the VJO Power
Contract;
o our investment in nuclear generating capacity;
o significant regulatory assets, which are costs that have already
been expended but have been deferred by state regulators for future
collection from customers; and
o our obligations under other power purchase contracts that are priced
above the current market.
As of December 31, 1998, based on the DPS's estimate known as the "low
market price estimate," we have above-market power obligations with a combined
net present value of approximately $500 million. Our financial strength and
resulting ability to perform in a restructured environment will be negatively
affected if we are unable to recover our power obligations, and a reasonable
return on our power generation investments. Even if we are given the opportunity
to recover a large portion of our stranded costs, our earnings prospects in a
restructured environment will likely be affected in ways that we cannot now
predict.
Implementation of our restructuring plan is uncertain
We have filed with the PSB a plan to permit retail access in our service
territory and restructure Vermont's electric industry. See "Our Restructuring
Plan." We believe that implementation of our Restructuring Plan is a critical
element to improving our future financial performance and to providing our
customers with more stable electric rates and the continuation of efficient and
reliable electric service. We expect to formally submit our proposal regarding
all elements of our Restructuring Plan to the PSB by the end of 1999.
In the first session of the 1999-2000 Biennium of the Vermont legislature,
restructuring initiatives were considered that, had they been enacted, could
have impeded our ability to implement our Restructuring Plan, such as providing
the legislature with veto power over the restructuring decisions of the PSB and
providing a 10% rate reduction for all Vermont utility customers.
We cannot determine whether these legislative initiatives or future
restructuring legislation will be enacted in the second session of the 1999-2000
Biennium of the Vermont legislature. We also cannot predict the response of the
PSB to our Restructuring Plan. If our Restructuring Plan is not implemented or
its terms are materially and adversely changed because of legislative or
regulatory initiatives, we could experience an adverse impact on our financial
condition.
We face uncertainty relating to the proposed Vermont electric industry
restructuring
Competition in the energy industry continues to grow as a result of
legislative and regulatory initiatives, technological advances, relatively high
electric rates in some regions of the country, including New England, surplus
generating capacity and the increased availability of natural gas. Changes in
the industry may place downward
16
<PAGE>
pressure on power prices and increase customer choice through competition. In
the second session of the 1999-2000 Biennium, convening January 4, 2000, it is
expected that the Vermont Legislature will again debate deregulating our
industry and opening it up to retail competition. See "Electric Industry
Restructuring." If retail competition is implemented in Vermont or New
Hampshire, we are unable to predict the impact of such competition on our future
financial results.
Some restrictive covenants contained in the Second Mortgage Indenture do not
apply so long as the New Bonds are rated investment grade
Several restrictive covenants (not including any covenants restricting
liens) will not apply at any time that the New Bonds have an investment grade
rating from Standard & Poor's Corporation, or S&P, or Moody's Investor Service,
Inc., or Moody's. S&P has indicated that at the time of issuance, the New Bonds
will be rated BBB- (an investment grade rating). Consequently, the New Bonds
will not have the benefit of these covenants until such time, if ever, that
S&P's rating of the New Bonds, if applicable, falls below BBB- or Moody's'
rating of the New Bonds, if applicable, is also below investment grade.
The Second Mortgage Indenture does not restrict our unregulated subsidiaries
We own several unregulated subsidiaries which engage in various businesses
including the development of independent power projects, the rental of water
heaters and the provision of home maintenance and repair services. The covenants
contained in the Second Mortgage Indenture generally do not apply to these
subsidiaries and do not restrict our ability to sell or otherwise dispose of our
interests in these subsidiaries. If we reorganize under a new holding company
structure, our principal unregulated subsidiaries, Catamount and SmartEnergy,
would cease to be our subsidiaries and would instead become our sister
companies. In any event, earnings from their operations would not necessarily be
available to support the repayment of the New Bonds.
Several events of default do not apply to Connecticut Valley
Until our investment in Connecticut Valley exceeds $12.0 million, several
events with respect to Connecticut Valley, including bankruptcy, significant
defaults under its debt obligations and significant judgments, will not
constitute an Event of Default under the Second Mortgage Indenture.
We may have insufficient liquidity to refinance the New Bonds at maturity
Based on our current level of operations and current rate levels, after
receipt of the proceeds of the offering and assuming (i) the continued receipt
of the temporary 4.7% rate increase in Vermont and (ii) the renewal of our $12
million accounts receivable facility which matures in November 1999, we believe
our cash flow from operations should be adequate to meet our future liquidity
needs for the next four years. However, we will require new financing by 2004 to
repay the New Bonds at maturity and to meet our working capital needs. We cannot
assure you, however, that our business will generate sufficient cash flow from
operations, that the temporary rate increase will remain at current levels or
that future borrowings will be available to us in an amount sufficient to enable
us to pay our indebtedness, including the New Bonds when due, or to fund our
other liquidity needs during the next four years. The resolution of these
uncertainties is, to a significant extent, subject to general economic,
financial, competitive, legislative, regulatory, weather and other factors that
are beyond our control. The type, timing and terms of financing that we may need
will be dependent upon our cash needs, the availability of refinancing sources
and the prevailing conditions in the financial markets. We cannot assure you
that any sources will be available to us at any given time or that the terms of
such sources will be favorable.
17
<PAGE>
We will continue to have substantial leverage after the offering
The following chart shows important information about our leverage. This
information is adjusted for the completion of the offering as of the dates or at
the beginning of the periods specified below and the application of the net
proceeds as intended:
As Adjusted
At June 30, 1999
---------------------
(Dollars in millions)
Total indebtedness (including capital lease obligations) $ 195.7
Total preferred stock .................................. 26.1
Stockholders' equity (excluding preferred stock) ....... 187.3
--------
Total capitalization ................................ $ 409.1
Total indebtedness to total capitalization ............. 47.8%
As Adjusted
For the Year Ended
December 31, 1998
------------------
Ratio of earnings to fixed charges...................... 1.36x
Our indebtedness could have important consequences to you. For example, it
could:
o make it more difficult for us to satisfy our obligations with
respect to the New Bonds;
o make it more difficult to satisfy mandatory redemption requirements
contained in our preferred stock;
o increase our vulnerability to general adverse economic and industry
conditions;
o limit our ability to fund future working capital, capital
expenditures and other general corporate requirements;
o require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund common dividends, working
capital, capital expenditures and other general corporate purposes;
o limit our flexibility in planning for, or reacting to, changes in
our business and the industry in which we operate; and
o limit, among other things, our ability to borrow additional funds
because of the financial and other restrictive covenants under the
terms of our indebtedness. Failure to comply with those covenants
could result in defaults which, if not cured or waived, could have a
material adverse effect on us.
We will have additional borrowings available to us, even after the offering
Under the terms of our First Mortgage and Second Mortgage Indentures, our
letter of credit facilities and other debt instruments, we will be able to incur
additional indebtedness in the future, subject to limitations contained in those
instruments. See "Description of Other Indebtedness and Preferred Stock--Other
Indebtedness." This debt may be either secured or unsecured. More specifically,
we may seek to issue additional debt in connection with implementing our
Restructuring Plan or in connection with auctioning, buying-out or buying-down
above-market power purchase contracts. If new debt is added to our and our
subsidiaries' current debt levels, we and they could face risks associated with
additional leverage.
We have significant financial obligations that are not reflected in our
financial statements
As a consequence of our investments in nuclear generating assets and
electric transmission facilities, and our long-term power purchase agreements,
we have significant financial obligations that are not reflected in our
18
<PAGE>
financial statements. Through our investments in Vermont Yankee, Maine Yankee,
Connecticut Yankee and Yankee Atomic, and our ownership of a portion of
Millstone Unit #3, we are obligated to contribute to the capital requirements
and to pay a portion of the operating costs and decommissioning expenses of
these facilities, which is proportionate to our entitlement share of each
facility's generation output. We also have financial obligations related to our
ownership interest in VELCO. Although we own over 56% of VELCO, we are
contractually restricted from exercising control over the company, and, as a
result, VELCO's financials are not consolidated with our own. Finally, our
long-term power purchase agreement with Hydro-Quebec obligates us to make
payments through 2016. See "--The costs of decommissioning our partially-owned
nuclear generating facilities could be greater than our current estimates."
Current accounting rules may no longer apply to us in the future, causing
extraordinary charges
Statement of Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation," or SFAS No. 71, allows regulated
entities like us, in appropriate circumstances, to establish regulatory assets
and liabilities, and thereby defer the income statement impact of some of our
costs and revenues that are expected to be realized in future rates. We believe
that we currently comply with the provisions of SFAS No. 71 for both our
regulated Vermont service territory and FERC-regulated wholesale businesses.
However, due to legal and regulatory actions, our regulated utility subsidiary
in New Hampshire, Connecticut Valley, no longer accounts for its results of
operations using SFAS 71. In the event we determine that we no longer meet the
criteria for following SFAS No. 71 for our Vermont regulated utility business,
the accounting impact would be an extraordinary, non-cash charge to operations
of approximately $60.7 million (pre-tax) as of June 30, 1999. Criteria that
would give rise to the discontinuance of SFAS No. 71 include (1) increased
competition that restricts our ability to establish prices to recover specific
costs or (2) a significant change in the manner in which rates are set by
regulators from cost-of-service-based regulation to another form of regulation.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," requires that any assets, including
regulatory assets, that are no longer probable of recovery through future
revenues, be revalued based on future cash flows. SFAS No. 121 requires that a
rate-regulated enterprise recognize an impairment loss for the amount of costs
excluded from probable recovery. As of June 30, 1999, based upon the regulatory
environment within which we currently operate, SFAS No. 121 did not have an
impact on our financial position or results of operations. Competitive
influences or regulatory developments may adversely impact this status in the
future.
Because we are unable to predict what form possible future restructuring
legislation may take, we cannot predict if or to what extent SFAS No. 71 or SFAS
No. 121 will continue to be applicable in the future.
Our business is subject to significant government regulation that we can neither
predict nor control
We are regulated in virtually all aspects of our utility business by
various federal and state agencies. At the federal level, we are regulated by,
among others, the Securities and Exchange Commission, the FERC and the Nuclear
Regulatory Commission (NRC). The NRC is empowered to regulate the siting,
construction and operation of nuclear reactors with respect to public health,
safety, environmental and antitrust matters. Under its continuing jurisdiction,
the NRC may, after appropriate proceedings, require modification of units for
which operating licenses have already been issued, or impose new conditions on
such licenses, and may require that the operation of a unit cease or that the
level of generation of a unit be temporarily or permanently reduced.
Also at the federal level, we are subject to federal legislation under the
Public Utility Holding Company Act of 1935. Because we own a utility subsidiary,
we fall under the act's definition of a holding company. However, we are
currently exempt, under Rule 2 of the SEC's rules under the act, from all
provisions of the act except for Section 9(a)(2), which relates to the
acquisition of securities of public utility affiliates.
At the state level, we are subject to comprehensive regulation by, among
others, the PSB, the NHPUC and, for financing approvals, the Connecticut
Department of Public Utility Control.
19
<PAGE>
In recent years, there has been significant activity at both legislative
and regulatory levels, throughout the United States, including New England, to
change the nature of regulation of our industry. Existing and future government
regulations may greatly influence how we operate our business, our business
strategy and, ultimately, our financial viability. We cannot predict the future
regulatory framework of our business.
Municipalization is a possible threat to our business in some geographic areas
One possible competitive threat we face is the potential for customers to
acquire our assets through a process known as municipalization. Under both
Vermont and New Hampshire law, municipalities are authorized to acquire the
electric distribution facilities located within their boundaries. In Vermont,
the exercise of such authority is conditioned upon an affirmative three-fifths
vote of the legal voters in an election and upon the payment of just
compensation including severance damages. Just compensation is determined either
by negotiation between the municipality and the utility or, in the event the
parties fail to reach an agreement, by the PSB after a hearing. If either party
is dissatisfied, the statute allows them to appeal the Board's determination to
the Vermont Supreme Court.
There has been only one instance where the Vermont law has been invoked.
In 1977, the Town of Springfield acted to acquire our distribution facilities in
that community, but the action was subsequently discontinued by mutual agreement
of the parties in 1985. In addition, in late 1994 the Select Board of the Town
of Bennington considered whether to publicly hold a vote to acquire our
facilities located in Bennington. By vote of the Selectors taken on January 9,
1995, however, the Town decided not to pursue the vote at that time.
In New Hampshire, the exercise of such authority is conditioned upon a
two-thirds vote of the governing body of a city or town and a confirming vote of
the legal voters of such city or town within one year, and upon a determination
of the value of the property proposed to be taken. Value is determined by
negotiation or by the NHPUC after notice and hearing. An aggrieved party may
appeal the NHPUC determination to the New Hampshire Supreme Court. In the summer
of 1997, the City of Claremont, New Hampshire, engaged a consulting firm to
conduct a study to determine Claremont's options under New Hampshire law
including the possible municipalization of Connecticut Valley's service area
located within its jurisdiction. The City Council appropriated approximately
$750,000 for purposes of the study which has now been completed and the council
recently voted to pursue municipalization. On August 25, 1999, the City Council
narrowly approved a $50,000 public relations campaign in connection with the
proposed municipalization. Most recently, on September 8, 1999, the City Council
voted to reschedule the citizens' vote on municpalization which had been set for
November, 1999. No new date for the citizens' vote has been set.
No other municipality served by us, so far as we know, has taken any
formal steps in an attempt to establish a municipal electric distribution
system. We cannot predict whether efforts to municipalize portions of our
service territory will be successful, and if so, what the impact will be on our
financial condition.
The costs of decommissioning our partially-owned nuclear generating facilities
could be greater than our current estimates
We have equity ownership interests in various nuclear generating
facilities including: 31.3% of the common stock of Vermont Yankee; 2% of the
outstanding common stock of Maine Yankee; 2% of the outstanding common stock of
Connecticut Yankee; and 3.5% of the outstanding common stock of Yankee Atomic.
We also own a 1.7% undivided interest in Millstone Unit #3, part of the
Millstone Nuclear Power Station.
Each of the Yankee companies and Millstone has engaged consultants to
estimate the cost of decommissioning its nuclear generating unit. These
estimates vary depending on the method of decommissioning, economic assumptions,
site and unit specific variables, and other factors. Therefore, these estimates,
as well as actual costs, are subject to change. Based on the most recent
decommissioning estimate in 1997, our total share of the Millstone Unit #3
decommissioning costs at December 31, 1998 was $9.7 million. As of December 31,
1998, we have funded $3.2 million of these costs. Our share of remaining total
costs with respect to Maine Yankee, Connecticut Yankee and
20
<PAGE>
Yankee Atomic, which have discontinued their operations and are in varying
stages of decommissioning, is estimated to be approximately $27.0 million. We
believe that substantially all of our proportionate share of the Maine Yankee,
Connecticut Yankee and Yankee Atomic decommissioning costs will be recovered
through the regulatory process. Although we believe that the resolution of the
premature retirement of these three plants will not have a material adverse
effect on our financial condition, there can be no assurance that our percentage
share of the decommissioning costs will not increase.
Vermont Yankee is in the process of preparing an updated site
decommissioning cost study. Preliminary results indicate that the new
decommissioning estimate could exceed $500 million in 1998 dollars versus the
current estimate of $406.8 million in 1998 dollars. We would be responsible for
up to 35% of these estimated costs. In conformity with our Restructuring Plan,
we are seeking to sell our interest in Vermont Yankee; even if the plant is sold
we may continue to purchase power from the facility. See "Our Restructuring
Plan." 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. We have also received an unsolicited expression of interest from Entergy
Nuclear, Inc., to buy Vermont Yankee's nuclear power plant. Vermont Yankee's
owners, including us, are pursuing parallel negotiations with the two potential
purchasers with the objective of reaching a definitive agreement, if possible.
Our business is subject to stringent environmental laws, which are subject to
change
In recent years, public concern for the environment has resulted in
increased governmental regulation of environmental matters. These environmental
regulations are administered by local, state and Federal regulatory authorities
and concern the impact of our generation, transmission, distribution,
transportation and waste handling facilities on air, water, land and aesthetic
qualities. We are subject to these regulations in the licensing and operation of
the generation, transmission and distribution facilities in which we have an
interest.
We are required to comply with a number of statutes and regulations
relating to protection of the environment and to the safety and health of the
public and of the personnel in operating plants or engaged in the construction,
operation and maintenance of our other facilities. Such statutes and
regulations, which historically have changed from time to time, include
regulation of hazardous materials associated with each plant, limitations on
noise emissions from the plants, safety and health standards, and practices and
procedures and requirements relating to the discharge of air and water
pollutants. In addition, we could become liable for the investigation and
removal of any hazardous materials that may be found on our property regardless
of the sources of such hazardous materials. Failure to comply with any such
statutes or regulations or any change in the requirements of such statutes or
regulations could result in civil or criminal liability, imposition of cleanup
liens and fines and large expenditures to bring such property into compliance.
We cannot presently forecast the costs or other effects which environmental
regulation may ultimately have upon our existing and proposed facilities and
operations. We believe that, through the rate-making process, we should be able
to recover these costs reasonably incurred and related to our utility
operations, although there can be no assurance that we will be able to do so and
there is substantial uncertainty as to the portion of those costs we can
ultimately recover. In addition, not all of those costs are related to our
current utility operations. Finally, restructuring of the Vermont electric
utility industry would render significantly more uncertain our ability to
recover our environmental regulatory costs. See Note 14 of the Notes to
Consolidated Financial Statements for the year ended December 31, 1998
incorporated by reference in this offering memorandum.
Secured lenders may face potential environmental liability
Lenders that hold a security interest in real property may, in particular
circumstances, be held liable under environmental laws for the costs of
remediating or preventing releases or threatened releases of hazardous
substances at the mortgaged property. While lenders that neither foreclose on
nor participate in the management of a mortgaged property (as interpreted under
applicable law) generally have not been subject to such liability, lenders that
take possession of a mortgaged property or that participate in the management of
a mortgaged property must carefully adhere to federal and state rules to avoid
liability. In this regard, upon a default on the New Bonds or under the Second
Mortgage Indenture, the Trustee or the holders of the New Bonds would need to
evaluate the impact of
21
<PAGE>
these potential liabilities before determining whether to foreclose on the
mortgaged properties securing the New Bonds and exercising other available
remedies. In addition, the Trustee may decline to foreclose upon the mortgaged
properties or exercise remedies available to the extent that the Trustee does
not receive indemnification to its satisfaction from the holders of the New
Bonds.
We face uncertainty in relicensing hydroelectric projects
We are currently in the process of relicensing or preparing to license
eight separate hydroelectric generating facilities under the Federal Power Act.
These facilities, some of which are evaluated by the FERC as a single project,
represent approximately 29.9 mW, or 72.4%, of our 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. We are unable to predict the impact of imposition of such conditions,
but capital expenditures and operating costs are expected to increase and net
generation from these facilities will decrease in future periods.
The value of your collateral may not be sufficient to repay the New Bonds
The assets securing the New Bonds are not liquid and their value to you
may be substantially less than their value to us. In addition, the value of your
collateral may decline over time. Accordingly, we can give you no assurance:
o as to the value or sufficiency of the collateral securing your New
Bonds;
o as to the amounts of proceeds from the sale, disposition or
liquidation of any of the collateral upon the Trustee's exercise of
remedies following an event of default under the New Bonds; or
o that there would be sufficient proceeds upon the sale, disposition
or liquidation of the collateral to repay the principal and accrued
but unpaid interest, if any, on the New Bonds.
Proceeds of any sale of the collateral may not be sufficient to repay all
amounts due on the New Bonds. To the extent you are not repaid from the proceeds
of the sale of the collateral, you would have only an unsecured claim against
our remaining assets.
Your security interest under the Second Mortgage is junior to the lien of the
First Mortgage
The Second Mortgage Indenture provides you with a security interest in our
assets, to the extent described therein, but that security interest is
subordinated to the security interests in favor of the holders of our
outstanding First Mortgage Bonds. The holders of the First Mortgage Bonds
generally have the exclusive right to control decisions relating to the
enforcement of remedies. As a result, the holders of the Second Mortgage Bonds
may not be able to force a sale of the collateral securing their Second Mortgage
Bonds or otherwise independently pursue the remedies of a secured creditor under
the Second Mortgage Bonds as long as the First Mortgage Bonds are outstanding.
Holders of the First Mortgage Bonds may have interests that are different from
the interests of holders of the Second Mortgage Bonds and they may elect not to
pursue their remedies under the First Mortgage Indenture at a time when it would
be advantageous for the holders of the Second Mortgage Bonds to do so. In
addition, because the lien of our First Mortgage Indenture is superior to the
lien of the Second Mortgage Indenture, holders of the First Mortgage Bonds would
have a prior right in payment to the proceeds of the sale of any of their
collateral.
We may not have sufficient funds to finance a "change of control" offer
Upon the occurrence of specific kinds of events that result in our
experiencing a change of control, we will be required to offer to repurchase all
outstanding New Bonds. However, it is possible that we will not have sufficient
funds at the time of the change of control to make the required repurchase of
New Bonds. In addition, important
22
<PAGE>
corporate events, such as leveraged recapitalizations that would increase the
level of our indebtedness, would not constitute a "Change of Control" under the
Second Mortgage Indenture. See "Description of New Bonds--Repurchase at the
Option of the Holders--Change of Control."
23
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds in connection with the exchange offer. In
consideration for issuing the New Bonds in exchange for the Old Bonds as
described in this prospectus, we will receive, retire and cancel the Old Bonds.
The net proceeds from the sale of the Old Bonds, before payment of
expenses but including the initial purchasers' discount, were approximately
$74,281,000. We used $15.0 million of the net proceeds to repay amounts
outstanding under our revolving credit facility which has been terminated. We
have used and will use the balance of the proceeds of the offering of the Second
Mortgage Bonds to pay expenses associated with the issuance of the Old Bonds and
the New Bonds and for general corporate purposes relating to our regulated
utility business, including the repayment of $41.0 million of First Mortgage
Bonds which mature between now and 2004. The remaining proceeds have been
invested in short-term interest-bearing obligations until they are applied as
discussed above. See "Description of Certain Other Indebtedness and Preferred
Stock."
24
<PAGE>
CAPITALIZATION
The following table sets forth (i) our consolidated capitalization at June
30, 1999 and (ii) our capitalization adjusted to reflect the sale of the Second
Mortgage Bonds and the use of the proceeds as discussed under "Use of Proceeds."
This table should be read in conjunction with our audited consolidated financial
statements and the related notes for the year ended December 31, 1998 and our
unaudited consolidated financial statements and related notes for the quarter
ended June 30, 1999, which are incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
As of June 30, 1999
-------------------
Actual As Adjusted(1)
-------- --------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Cash and cash equivalents ............................. $ 19,277 $ 71,221
======== ========
Short-term debt:
Revolving Credit Facility(2) ..................... $ 20,000 $ 0
Accounts Receivable Facility(3) .................. 12,000 12,000
-------- --------
Total Short-term debt ............................ 32,000 12,000
-------- --------
Long-term debt (including current portion):
First Mortgage Bonds ............................. $ 76,500 $ 76,500
8 1/8% Second Mortgage Bonds, due 2004 .......... 0 75,000
Development Authority Bonds(4) ................... 16,300 16,300
Other (various) .................................. 289 289
-------- --------
Total long-term debt ............................. 93,089 168,089
-------- --------
Capital Lease Obligations ............................. $ 15,601 $ 15,601
-------- --------
Cumulative Preferred stock (including current portion):
Non-redeemable ................................... $ 8,054 $ 8,054
Redeemable ....................................... 18,000 18,000
-------- --------
Total cumulative preferred stock(5) .............. 26,054 26,054
-------- --------
Common stockholders' equity ........................... 188,906 187,301
-------- --------
Total Capitalization .................................. $355,650 $409,045
======== ========
</TABLE>
- ----------
(1) The information in this column reflects adjustments for the issuance of
the Second Mortgage Bonds and the application of the proceeds thereof as
of the first day of the year ended June 30, 1999.
(2) The Revolving Credit Facility was terminated upon the initial issuance
date of the Old Bonds.
(3) The Accounts Receivable Facility is currently limited in aggregate
principal amount to $12 million.
(4) These bonds include $5.0 million of Millstone Pollution Control Bonds,
$5.5 million of Seabrook Pollution Control Bonds and $5.8 million of East
Barnet Hydroelectric Revenue Bonds, issued by development authorities in
Connecticut, New Hampshire and Vermont, respectively. The bonds are
secured by three outstanding letters of credit which in turn will be
secured by the pledge of approximately $16.9 million of First Mortgage
Bonds Series PP, QQ and RR due 2015, 2009 and 2013, respectively.
(5) See "Description of Other Indebtedness and Preferred Stock--Preferred
Stock" for additional information about our outstanding preferred stock.
25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
The following table presents selected consolidated financial information
about us as of the dates and for the periods indicated. The historical financial
data as of the end of and for each of the five years in the period ended
December 31, 1998, are derived from our audited consolidated financial
statements incorporated by reference herein. The historical financial data as of
and for the six months ended June 30, 1999 and June 30, 1998 are derived from
our unaudited financial statements which, in the opinion of our management,
contain all adjustments necessary for a fair presentation of the information
presented. This table should be read together with the detailed financial and
other information contained elsewhere or incorporated by reference in this
prospectus.
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
Year Ended December 31, --------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Operating revenues ................... $ 277,158 $ 288,277 $ 290,801 $ 304,732 $ 303,835 $ 150,364 $ 191,781(1)
Operating expenses
Operations
Purchased power ............ 143,162 149,665 154,422 171,443 184,887 85,588 112,934
Production and transmission 21,122 20,883 20,941 22,417 23,383 11,354 10,760
Other operations ........... 40,691 42,116 38,098 40,909 44,110 22,853 23,234
Maintenance ..................... 12,245 12,874 14,918 15,333 15,613 7,654 7,040
Depreciation .................... 16,478 17,297 17,960 16,931 16,708 8,458 8,397
Other taxes, principally property
Taxes ....................... 10,423 10,543 10,971 11,490 11,426 5,844 5,902
Taxes on income ................. 11,934 10,662 10,216 7,573 (283) 2,013 7,795
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses ........ 256,055 264,040 267,526 286,096 295,844 143,764 176,062
--------- --------- --------- --------- --------- --------- ---------
Operating income(2) .................. 21,103 24,237 23,275 18,636 7,991 6,600 15,719
Other income and deductions(2) ....... 3,828 5,782 6,092 8,221 6,652 2,598 2,533
--------- --------- --------- --------- --------- --------- ---------
Total operating and other income ..... 24,931 30,019 29,367 26,857 14,643 9,198 18,252
--------- --------- --------- --------- --------- --------- ---------
Interest expense
Interest on long-term debt ...... 9,611 9,544 9,473 9,337 9,868 4,944 3,866
Other interest .................. 657 798 615 400 831 329 1,261
Allowance for borrowed funds
during construction ......... (137) (174) (163) (31) (39) (14) (21)
--------- --------- --------- --------- --------- --------- ---------
Total interest expense, net .......... 10,131 10,168 9,925 9,706 10,660 5,259 5,106
--------- --------- --------- --------- --------- --------- ---------
Net income before extraordinary
(charge)/credit .................. 14,800 19,851 19,442 17,151 3,983 3,939 13,146
Extraordinary (charge)/credit, net of
taxes ............................ -- -- -- (811) --(6) 873 --
--------- --------- --------- --------- --------- --------- ---------
Net income ........................... $ 14,800 $ 19,851 $ 19,442 $ 16,340 $ 3,983 $ 4,812 $ 13,146
Preferred stock dividend
Requirements ..................... 2,138 2,028 2,028 2,028 1,945 973 931
--------- --------- --------- --------- --------- --------- ---------
Earnings available for common
stock ............................ $ 12,662 $ 17,823 $ 17,414 $ 14,312 $ 2,038 $ 3,839 $ 12,215
========= ========= ========= ========= ========= ========= =========
Other Financial Data:
EBITDA(3) ............................ $ 60,797 $ 65,455 $ 63,128 $ 60,471 $ 45,312 $ 17,801 $ 34,349
Net cash provided by operating
Activities ....................... $ 49,426 $ 41,711 $ 43,007 $ 41,974 $ 21,743 $ 6,938 $ 32,899
Capital expenditures(4) .............. $ 28,780 $ 25,236 $ 20,541 $ 15,678 $ 18,254 $ 8,130 $ 7,364
Ratio of earnings to fixed
charges(5) ....................... 3.43x 3.47x 3.44x 3.77x 1.83x 1.01x 3.90x
Ratio of EBITDA to interest
Expense .......................... 6.00x 6.44x 6.36x 6.23x 4.25x 3.38x 6.73x
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of June 30, 1999
1994 1995 1996 1997 1998 -------------------
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ...... $7,559 $11,962 $6,365 $16,506 $10,051 $19,277
Total assets ................... 490,399 489,931 502,968 531,940 530,282 524,101
Total debt (incl. Capital lease) 156,365 153,032 144,443 147,243 149,991 140,690
Common stock equity ............ 170,784 179,760 186,469 187,123 179,182 188,906
Preferred Stock(7) ............. 28,054 28,054 28,054 27,054 26,054 26,054
</TABLE>
- ----------
26
<PAGE>
(1) Includes $6.2 million (pre-tax) collected during the period pursuant to
the 4.7% temporary rate increase effective January 1, 1999, which is
subject to adjustment pending the outcome of regulatory proceedings in
Vermont, and other miscellaneous items.
(2) After deduction of taxes on income.
(3) EBITDA represents earnings before interest charges, taxes on income,
depreciation, amortization, gains on asset sales, cash investment income
and noncash transactions resulting principally from the regulatory
disallowance of the recovery of power costs incurred. EBITDA is not
defined by GAAP, and is presented here only to provide additional
information about our ability to meet our future requirements for debt
service and capital expenditures. EBITDA should not be considered an
alternative to net income as an indicator of operating performance or an
alternative to cash flow as a measure of liquidity.
(4) Capital expenditures consist of construction and plant expenditures and
energy efficiency expenditures not currently being recovered in rates.
(5) For purposes of determining the ratio of earnings to fixed charges, (i)
earnings consist of income before income taxes plus fixed charges; and
(ii) fixed charges consist of interest charges on all indebtedness,
including the portion of rental expense that is representative of the
interest factor.
(6) Excludes approximately $9,000 of net extraordinary charges (after-tax)
recorded in the twelve months ended December 31, 1998 but classified in
"Other income and deductions."
(7) See "Description of Other Indebtedness and Preferred Stock--Preferred
Stock" for additional information about our outstanding preferred stock.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six months ended June 30, 1999 compared with six months ended June 30, 1998
Earnings Overview
Net income and earnings per share of common stock for the first six months
ended June 30, 1999 were $12.2 million and $1.07 compared to $3.8 million and
$.34 for the corresponding period last year.
Improved net income and earnings per share of common stock for 1999
reflect the positive impact of a 4.7% temporary Vermont retail rate increase
effective with service rendered January 1, 1999 as well as a 2.2% increase in
retail mWh sales.
The 1998 first six months reflects the positive impact of reversing
Connecticut Valley's fourth quarter 1997 after-tax charges of $4.5 million, or
$.39 per share of common stock.
The major elements of the Consolidated Statement of Income are discussed
below.
Results of Operations
Operating Revenues and mWh Sales
A summary of mWh sales and operating revenues for the six months ended
June 30, 1999 and 1998 (and the related percentage changes from 1998) is set
forth below:
<TABLE>
<CAPTION>
1999 1998 (Decrease) 1999 1998 (Decrease)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Residential ............................ 274,697 264,461 3.9 % $ 38,693 $ 35,177 10.0 %
Commercial ............................. 235,320 228,432 3.0 30,324 27,462 10.4
Industrial ............................. 115,181 109,888 4.8 11,276 10,095 11.7
Other retail ........................... 1,538 1,802 (14.7) 439 483 (9.1)
--------- --------- --------- ---------
Total retail sales ....................... 626,736 604,583 3.7 80,732 73,217 10.3
--------- --------- --------- ---------
Resale sales:
<CAPTION>
Six Months Ended June 30
------------------------------------------------------------------------------------
mWh Percentage Revenues (000's) Percentage
-------------------------- Increase -------------------------- Increase
1999 1998 (Decrease) 1999 1998 (Decrease)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Residential ............................ 486,945 476,829 2.1 % $ 63,852 $ 59,605 7.1 %
Commercial ............................. 463,434 452,768 2.4 54,028 50,643 6.7
Industrial ............................. 212,793 208,418 2.1 18,579 17,456 6.4
Other retail ........................... 3,109 3,565 (12.8) 888 969 (8.4)
--------- --------- --------- ---------
Total retail sales ....................... 1,166,281 1,141,580 2.2 137,347 128,673 6.7
--------- --------- --------- ---------
Resale sales:
Firm ................................... 1,346 1,125 19.6 79 37 113.5
Entitlement ............................ 181,260 135,756 33.5 9,947 10,263 (3.1)
Other .................................. 1,488,584 314,170 373.8 42,256 8,821 379.0
--------- --------- --------- ---------
Total resale sales ....................... 1,671,190 451,051 270.5 52,282 19,121 173.4
--------- --------- --------- ---------
Other revenues ........................... -- -- -- 2,152 2,570 (16.3)
--------- --------- --------- ---------
Total sales ............................ 2,837,471 1,592,631 78.2 $ 191,781 $ 150,364 27.5
========= ========= ========= =========
</TABLE>
Retail mWh sales for the first six months of 1999 increased 2.2% compared
to the first six months of 1998 reflecting a return to normal winter weather
compared to 1998. Retail revenues increased $8.7 million, or 6.7% compared to
last year. This variance is attributable to a $2.5 million impact of higher mWh
sales in the first six months of 1999 as compared to the first six months of
1998 and $6.2 million resulting from the 4.7% temporary Vermont retail rate
increase discussed above and other miscellaneous items.
28
<PAGE>
For the first six months of 1999, entitlement mWh sales increased 33.5%
while related revenues decreased 3.1% compared to the same period last year.
These variances result from the Vermont Yankee extended refueling outage in
1998.
Other 1999 resale sales increased 1,174,414 mWh and other resale revenues
increased $33.4 million for the first six months of 1999 primarily as a result
of our increased level of activity through our alliance with Virginia Power in
jointly supplying wholesale power in the Northeast and Mid-Atlantic states. At
the present time, however, we are discontinuing this alliance because we believe
the risks associated with continuing this relationship outweigh the potential
rewards.
Other revenues decreased for the first six months of 1999 primarily due to
lower revenues associated with transmission interconnection agreements partially
offset by increased pole attachment rentals.
Net Purchased Power and Production Fuel Costs
The net cost components of purchased power and production fuel costs for
the first six months ended June 30, 1999 and 1998 are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Units Amount Units Amount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Purchased and produced:
Capacity (mW) ........................... 917 $ 44,911 567 $ 47,115
Energy (mWh) ............................ 2,744,620 68,023 1,539,300 38,473
---------- ----------
Total purchased power costs ....... 112,934 85,588
Production fuel (mWh) ................... 205,616 1,346 146,612 909
---------- ----------
Total purchased power and production fuel costs 114,280 86,497
Less entitlement and other resales (mWh) 1,669,844 52,203 449,926 19,084
---------- ----------
Net purchased power and production fuel costs . $ 62,077 $ 67,413
========== ==========
</TABLE>
Net purchased power and production fuel costs decreased $5.3 million, or
7.9% for the first half of 1999 compared to the first half of 1998 resulting
from better performance at Millstone Unit #3 and Vermont Yankee nuclear power
plant.
Energy purchases increased $29.6 million for the first six months of 1999.
These increases primarily relate to the Virginia Power Alliance and were offset
by increases in other resale sales described above.
In addition, the 1999 first half reflects the positive impact of $3.7
million (pre-tax) as the result of disallowed Hydro-Quebec power costs during
the fourth quarter of 1998. The 1998 first half reflects the positive impact of
reversing Connecticut Valley's fourth quarter 1997 charge of $5.5 million
(pre-tax).
Generating Units
We own and operate 20 hydroelectric generating units and two oil-fired
turbines and one diesel peaking unit with a combined nameplate capability of
73.7 mW. We have equity ownership interests in four nuclear generating
companies: Vermont Yankee, a 514 mW nuclear unit of which we own 31.3%, Maine
Yankee, an 847 mW nuclear unit of which we own 2%, Connecticut Yankee, a 582 mW
nuclear unit of which we own 2%, and Yankee Atomic, a 173 mW nuclear unit of
which we own 3.5%. Connecticut Yankee, Maine Yankee and Yankee Atomic no longer
operate and are in various stages of decommissioning. In addition, we maintain
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 #3, an 1149 mW
nuclear unit, which is a part of the Millstone Nuclear Power Station. Millstone
Unit #3 and Connecticut Yankee are operated by Northeast Utilities (NU).
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<PAGE>
We are currently in the process of relicensing or preparing to license
eight separate hydroelectric generating facilities under the Federal Power Act.
These facilities, some of which are evaluated by the FERC as a single project,
represent approximately 29.9 mW, or about 72.4% of our 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. We are 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.
Merrimack Unit #2
Until contract termination on April 30, 1998, we purchased power and
energy from Merrimack Unit #2 pursuant to a contract dated July 16, 1966 entered
into by and between VELCO and Public Service Company of New Hampshire (PSNH).
Pursuant to the contract, 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 then-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 at the unit was performed to extend the life of the Merrimack plant
beyond the term of the VELCO contract and that the maintenance charges were not
reasonable and cost-effective for the remaining term of the VELCO contract. We
estimate that the portion of the disputed charges allocable to us could be as
much as $1.0 million (pre-tax).
Nuclear Matters
Millstone Unit #3
Millstone Unit #3 resumed operation in June 1998 after a lengthy outage
and, accordingly, production fuel costs increased for the first half of 1999
compared to the first half of 1998.
We remain actively involved with the other non-operating minority
joint-owners of Millstone Unit #3. This group is engaged in various activities
to monitor and evaluate NU and Northeast Utilities Service Co.'s efforts
relating to Millstone Unit #3. On August 7, 1997, we and eight other
non-operating owners of Millstone Unit #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 #3. The non-operating owners claim that NU and two of its
wholly-owned subsidiaries failed to comply with the 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, our total share
of the Millstone Unit #3 decommissioning costs at December 31, 1998 was $9.7
million. As of December 31, 1998, we have funded $3.2 million of these costs.
On September 15, 1999, NU announced that it intends to auction its nuclear
plants, including Millstone Unit #3. We cannot predict at this time the effect
of such an auction, if it occurs, on us or on the ongoing litigation.
Maine Yankee
On August 6, 1997, the Maine Yankee nuclear power plant was prematurely
retired from commercial operation. We relied on Maine Yankee for less than 5% of
our 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.
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<PAGE>
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 we will not be
able to recover approximately $500,000 of these costs.
Connecticut Yankee
On December 4, 1996, the Connecticut Yankee nuclear power plant was
prematurely retired from commercial operation. We relied on Connecticut Yankee
for less than 3% of our required system capacity.
On August 31, 1998, a FERC administrative law judge recommended that the
owners of Connecticut Yankee, including us, 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
we 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. We relied on Yankee Atomic for less than 1.5% of our system capacity.
Maine Yankee, Connecticut Yankee and Yankee Atomic Decommissioning Costs
Presently, substantially all of the costs billed to us by Maine Yankee,
Connecticut Yankee and Yankee Atomic, including a provision for ultimate
decommissioning of the units, are being collected from our customers through
existing retail and wholesale rate tariffs. Our share of remaining costs with
respect to Maine Yankee, Connecticut Yankee and Yankee Atomic's decisions to
discontinue operation is estimated to be $14.6 million, $9.4 million and $2.0
million, respectively, at June 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 liability (current and
non-current). Although the estimated costs of decommissioning are subject to
change due to changing technologies and regulations, we expect 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 each of 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. We believe that based on the current
regulatory process, substantially all of our 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 our earnings or financial condition.
Vermont Yankee
On October 9, 1996, the 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
31
<PAGE>
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. Based
on a conservative assessment, Vermont Yankee has informed the NRC that
sufficient design analysis may not be available for an unlikely operating
condition of the containment depressurization system. The issue is expected to
be resolved with the completion of design analysis and no modification to the
facility. The analysis will be complete in September 1999.
This Design Basis Documentation project is expected to be completed in
2000. Our 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. Vermont Yankee's owners, including us, are pursuing parallel negotiations
with the two potential purchasers with the objective of reaching a definitive
agreement, if possible.
Cogeneration/Small Power Qualifying Facilities
A number of small power producers using hydroelectric, biomass, and
refuse-burning generation are currently producing energy that we are 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
first six months ended June 30, 1999, we received 100,689 mWh from these sources
for which we paid $11.3 million.
As a part of our initiative to cut power costs and restructure Vermont's
utility industry, on August 3, 1999, we, 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 our petition by opening a formal
investigation regarding these contracts.
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 $600,000 for the first six months
of 1999 compared to the first six months of 1998, partially offset by higher
nuclear fuel costs related to Millstone Unit #3.
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<PAGE>
Maintenance
The decrease in maintenance expenses of about $600,000 results primarily
from the severe ice storm in January 1998 partially offset by increased
maintenance costs related to Millstone Unit #3. See "Offering Memorandum
Summary--Recent Developments--Ice Storm Arbitration with Hydro-Quebec."
Income Taxes
Federal and state income taxes fluctuate with the level of pre-tax
earnings. The increase in total income tax expense for the first six months of
1999 results primarily from an increase in pre-tax earnings for the period.
Extraordinary Credit
The 1998 extraordinary credit net of taxes of approximately $900,000
represents a reversal of a charge of a like amount taken in the fourth quarter
of 1997.
Fiscal year 1998 compared with Fiscal year 1997
Earnings Overview
Our 1998 net income was $4.0 million or $.18 per share of common stock,
which equates to a 1.1% return on average common equity. Net income and earnings
per share of common stock for 1998 compare to $16.3 million and $1.25 in 1997,
and $19.4 million and $1.51 in 1996. The return on average common equity was
7.5% for 1997 and 9.4% for 1996.
For 1998, net income and earnings per share of common stock for our
utility business reflect the negative impact of increased operating costs,
predominantly purchased power, and two regulatory actions. First, during April
1998, we agreed to toll the statutory period of time in which the PSB must act
on our pending 6.6% rate increase request filed in September 1997. At the same
time, we asked the Vermont Supreme Court to review the PSB's denial of our claim
that the PSB is precluded from again litigating a number of VJO Power Contract
and demand side management decisions. The appeal and associated stay of the rate
case significantly delayed the date that new rates would have otherwise taken
effect. As a result, our earnings for 1998 were adversely affected. Second,
because of the October 27, 1998 retail rate increase settlement discussed in
"Regulation and Rates," net income and earnings per share of common stock for
1998 include the negative impact of an after-tax disallowance of $4.3 million,
or $.38 per share of common stock for our purchased power costs under the VJO
Power Contract.
Also, for 1998 net income and earnings per share of common stock for our
utility business reflect the net effect at Connecticut Valley of charges taken
during the fourth quarter of 1998 of $3.7 million, or $.32 per share of common
stock, offset by the reversal of 1997 charges during the first quarter of 1998
of $4.5 million, or $.39 per share of common stock. These charges and reversal
of charges are discussed below and in Notes 1 and 13 to the consolidated
financial statements incorporated by reference in this offering memorandum.
For 1997, net income and earnings per share of common stock for our
utility business reflect a net of tax extraordinary charge of approximately
$800,000 and $.07, respectively, associated with the discontinued application of
SFAS No. 71 applied to Connecticut Valley. In addition, Connecticut Valley
incurred an after-tax charge of $3.6 million and $.31 per share of common stock
for disallowed power costs.
For 1997, non-utility net income and earnings per share of common stock
reflect a gain of $1.8 million and $.16, respectively, from the sale by
Catamount of its 8.1% partnership interest in the NW Energy Williams Lake L.P.
Project.
In addition, 1997 net income and earnings per share of common stock
reflected an after-tax gain of approximately $1.3 million and $.12,
respectively, from sale of non-utility property.
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<PAGE>
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 1998, 1997 and 1996 is
set forth below:
<TABLE>
<CAPTION>
mWh Sales Revenue
--------------------------------- ---------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential ............ 930,666 945,199 957,733 $ 115,911 $ 116,314 $ 108,603
Commercial ............. 937,547 916,311 900,590 103,221 104,460 98,890
Industrial ............. 418,778 427,764 401,781 33,617 34,206 32,399
Other retail ........... 7,123 7,138 7,229 1,943 1,937 1,856
--------- --------- --------- --------- --------- ---------
Total retail sales ....... 2,294,114 2,296,412 2,267,333 254,692 256,917 241,748
--------- --------- --------- --------- --------- ---------
Resale sales:
Firm ................. 2,284 1,051 1,717 94 46 81
Entitlement .......... 319,703 378,273 470,760 19,370 18,925 24,781
Other ................ 1,008,635 827,818 770,542 26,861 22,265 18,705
--------- --------- --------- --------- --------- ---------
Total resale sales ..... 1,330,622 1,207,142 1,243,019 46,325 41,236 43,567
--------- --------- --------- --------- --------- ---------
Other revenues ......... -- -- -- 2,818 6,579 5,486
--------- --------- --------- --------- --------- ---------
Total ................ 3,624,736 3,503,554 3,510,352 $ 303,835 $ 304,732 $ 290,801
========= ========= ========= ========= ========= =========
</TABLE>
Year-to-year fluctuations in total retail mWh sales are primarily affected
by customer growth, conservation and load management programs, as well as
relative prices of alternate energy sources, weather patterns and conservation
induced by price changes and income elasticity responses of customers. Compared
to 1997, retail mWh sales for 1998 decreased 2,298 mWh and related revenues
decreased $2.2 million, or .9% compared to 1997. The revenue decrease is
primarily attributable to a modified rate design reflected in bills rendered
since April 1, 1997. The modified rate design, which is revenue neutral on an
annual basis, decreases prices charged during the winter months of December
through March and increases prices during the remaining months of the year.
Retail mWh sales for 1997 increased 1.3% compared to 1996 reflecting an
improved Vermont economy. However, retail revenues increased $15.2 million or
6.3% over 1996 due to a $12.8 million increase in revenues resulting from the
full year impact of a 5.5% retail rate increase effective June 1, 1996, 2%
retail rate increase effective January 1, 1997, the positive impact of the
modified rate design described above, and a 1.3% increase in retail mWh sales.
For 1998, entitlement mWh sales decreased 15.5% compared to 1997. The
decrease results primarily from the scheduled refueling and maintenance outage
of the Vermont Yankee nuclear power plant. The outage, which reduced the plant's
1998 output, also reduced mWh sales. However, a portion of the higher costs of
our share of Vermont Yankee's costs associated with the refueling and
maintenance outage was passed on to entitlement customers resulting in an
increase in entitlement revenues of $400,000, or 2.4%.
Entitlement mWh sales and revenues decreased for 1997 compared to 1996
primarily due to the scheduled termination of several sales agreements in late
1996.
Other resale sales increased 180,817 mWh and related revenues increased
$4.6 million for 1998. The increase resulted primarily from short-term system
capacity sales made by us and Virginia Power, with which we jointly supply
wholesale power in the Northeast and Mid-Atlantic States. This increase is
partially offset by lower sales to New England power pool, or NEPOOL.
Other resale sales and revenues for 1997 increased 7.4% and 19%,
respectively, due to increased sales to NEPOOL partially offset by a decrease in
wholly-owned and jointly-owned units sales.
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<PAGE>
Other revenues decreased for 1998 due to a provision for rate refunds in
New Hampshire of $2.7 million related to a Connecticut Valley fuel adjustment
clause and purchased power cost adjustment associated with the December 3, 1998
Court of Appeals decision discussed in "Regulation and Rates," and to lower
revenues associated with transmission interconnection agreements partially
offset by increased pole attachment rentals.
The increases in other revenues for 1997 resulted primarily from an
increase in transmission revenues related to various transmission
interconnection agreements.
The table below summarizes the components of increases or decreases
in revenues compared to the prior year:
1998 1997
---- ----
(Dollars in thousands)
Revenue increase (decrease) from:
Retail mWh sales ........................... $ (90) $ 2,377
Retail rates ............................... (2,135) 12,792
Changes in firm resale sales ............... 48 (35)
Changes in entitlement sales ............... 445 (5,856)
Changes in other resale sales .............. 4,596 3,560
Changes in other revenues .................. (3,761) 1,093
-------- --------
Net increase over prior year ................... $ (897) $ 13,931
======== ========
Power Resources
We currently purchase approximately 86% of our retail and firm wholesale
power needs under several contracts of varying duration. Firm wholesale consists
solely of an approximate 1 mW sale to a small Vermont utility. During 1998, over
35% of our power needs came from Vermont Yankee, an affiliated company which
owns and operates a nuclear generating unit from which we receive our
entitlement share of the output. Our purchased power portfolio includes a
diversified mix of sources and fuel types to meet our long-term load growth
while providing short and intermediate term opportunities to purchase or sell
capacity and energy to reduce overall power costs. A breakdown of our energy
sources is shown below:
Year Ended December 31,
-----------------------------
1998 1997 1996
---- ---- ----
Nuclear generating companies ..... 36% 45% 46%
Hydro-Quebec VJO ................. 32 35 29
Other Canadian imports ........... 5 6 9
PSNH-coal ........................ 3 14 12
Company-owned hydro .............. 9 8 9
Jointly-owned units .............. 4 2 3
Small power producers ............ 9 8 9
Other purchases/(sales), net ..... 2 (18) (17)
--- --- ---
100% 100% 100%
=== === ===
In 1992, 1996 and 1997, the Boards of Directors of Yankee Atomic,
Connecticut Yankee and Maine Yankee, respectively, decided to permanently
discontinue operation of the Yankee Atomic, Connecticut Yankee and Maine Yankee
nuclear power plants, and to decommission the facilities. For additional
information in regard to the permanent shutdown of these nuclear power plants
see "Nuclear Matters" above and Note 2 to the Consolidated Financial Statements
incorporated by reference herein.
The Vermont Yankee nuclear power plant, which provides approximately
one-third of our required power supply, began a refueling outage on March 21,
1998 and returned to service on June 3, 1998. The refueling outage extended
twenty-six days beyond the estimated forty-nine days. Vermont Yankee had no
scheduled refueling outage in 1997 and had a scheduled refueling outage from
September 7 through November 5, 1996.
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<PAGE>
During scheduled nuclear refueling outages, we purchase more costly
replacement energy from other sources to satisfy energy needs. In accordance
with current rate-making treatment, we defer and amortize to expense over their
respective fuel cycles the incremental replacement energy and maintenance costs
associated with the scheduled portion of refueling outages for the Vermont
Yankee nuclear power plant and Millstone Unit #3 jointly-owned nuclear
generating unit. During 1998, we incurred $3.1 million and $6.5 million for
replacement energy and maintenance costs, respectively, of which $7.2 million in
total was deferred. During 1996, we deferred $1.5 million and $6 million of
replacement energy and maintenance costs, respectively.
Under a long-term purchase power contract expiring in 2016, we receive
varying amounts of capacity and energy from Hydro-Quebec. See Note 14 to the
Consolidated Financial Statements incorporated by reference herein for further
details related to the VJO Power Contract.
Under long-term contracts, we purchase power from a number of small power
producers who own qualifying facilities under the Public Utility Regulatory
Policies Act of 1978. These qualifying facilities produce energy using
hydroelectric, wood, biomass and refuse-burning generation. During 1998, we
purchased 212,702 mWh of which 154,832 mWh was associated with the Vermont
Electric Power Producers and 38,283 mWh is associated with a New
Hampshire/Vermont solid waste plant which sells directly to Connecticut Valley.
We expect to purchase an average of approximately 203,000 mWh of small power
output in each year 1999 through 2003. Based on the forecast level of
production, the total commitment in the next five years to purchase power from
these qualifying facilities is estimated to be $113.7 million.
We engage in purchases and sales with other electric utilities and with
NEPOOL to take advantage of immediate pricing and other market conditions and to
balance our needs with our resources. We also engaged in marketing activities
with Virginia Power, with which we would jointly buy and sell wholesale power in
the Northeast and Mid-Atlantic states. At the present time, however, we are
discontinuing this alliance. These joint purchases are not included in the table
above.
The net cost components of purchased power and production fuel costs for
the past three years were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- ---------------------
Units Amount Units Amount Units Amount
----- ------ ----- ------ ----- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Purchased and produced:
Capacity (mW) .......... 613 $ 104,740 527 $ 99,513 526 $ 86,431
Energy (mWh) ........... 3,478,860 80,147 3,470,235 71,930 3,445,259 67,991
--------- --------- ---------
Total purchased power costs 184,887 171,443 154,422
Production fuel (mWh) .. 332,835 1,996 237,064 1,820 295,802 1,570
--------- --------- ---------
Total purchased power and
production fuel costs .... 186,883 173,263 155,992
Less entitlement and
other resales (mWh) ... 1,328,338 (46,231) 1,206,091 (41,190) 1,241,302 (43,486)
--------- --------- ---------
Net purchased power and
production fuel costs ....... 140,652 $ 132,073 $ 112,506
========= ========= =========
</TABLE>
For 1998, purchased capacity cost increased $5.2 million over 1997. This
increase is the result of a $7.4 million disallowance of Hydro-Quebec power
costs discussed below, $7.2 million of higher costs primarily associated with
the VJO Power Contract, the Vermont Yankee extended outage and $1.6 million of
disallowed power costs at Connecticut Valley. Offsetting this increase is the
impact at Connecticut Valley totaling $11.0 million, associated with the
reversal of a $5.5 million charge-off during 1998 and a charge-off during 1997
of $5.5 million. See "Electric Utility Restructuring" below and Note 13 to the
Consolidated Financial Statements incorporated by reference herein for
additional information.
The increase in purchased capacity cost of $13.1 million for 1997 over
1996 resulted from $7.4 million in higher prices, $200,000 increase due to the
amount of mW purchased and $5.5 million representing Connecticut Valley's
estimated loss on power contracts for the twelve months following December 31,
1997 discussed below and in Note 13 to the Consolidated Financial Statements
incorporated by reference herein. Pursuant to a PSB Accounting Order, during the
first half of 1997, we reduced capacity costs by $5.8 million related to the VJO
Power Contract for which a payment of $5.8 million was received from
Hydro-Quebec on June 30, 1997.
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<PAGE>
Energy costs are directly related to the variable prices of oil, nuclear
fuel and coal but, more importantly, to the proportion of our purchased energy
that comes from each of these fuel sources. The increase in energy costs for
1998 resulted from an 11.1% or, $8.0 million, increase in unit costs of mWh
purchased and a $200,000 increase due to the volume of mWh purchased. The price
increases result primarily from the higher costs under the VJO Power Contract,
increased purchases from small power producers and the Vermont Yankee extended
outage.
The increase in energy costs for 1997 resulted from a 5%, or $3.4 million
increase in unit costs of mWh purchased and a 0.7%, or $500,000, increase due to
the volume of mWh purchased. The price increase results primarily from the need
to replace power due to the shutdown of Maine Yankee and Connecticut Yankee and
the outage at Millstone Unit #3. For information related to recovery of costs
associated with the premature retirement of the Maine Yankee and Connecticut
Yankee nuclear power plants see Note 2 to the Consolidated Financial Statements
incorporated by reference herein.
We are responsible for paying our entitlement percentage of
decommissioning costs for Vermont Yankee, Connecticut Yankee, Maine Yankee and
Yankee Atomic as well as our joint ownership percentage of decommissioning costs
for Millstone Unit #3. See Notes 2 and 14 to the Consolidated Financial
Statements incorporated by reference herein. The staff of the SEC has questioned
current accounting practices of the electric utility industry, including our
own, regarding the recognition, measurement and classification of
decommissioning costs for nuclear generating stations in financial statements of
electric utilities. In response to these questions, the Financial Accounting
Standards Board has agreed to review the industry-wide accounting for nuclear
decommissioning costs. If current electric utility industry accounting practices
for such decommissioning costs are changed, it is possible that annual expense
provisions for decommissioning costs could increase, the total estimated costs
for decommissioning could be recorded as a liability, and income from external
decommissioning trusts could be reported as investment income instead of a
reduction to decommissioning expense. We do not believe that such changes, if
required, would have a material adverse effect on results of operations due to
our ability to recover decommissioning costs through the regulatory process. See
"Liquidity and Capital Resources--Competition" in our Annual Report on Form 10-K
for the year ended December 31, 1998, for related information.
Millstone Unit #3 resumed operation in June 1998 after a lengthy outage;
accordingly, production fuel costs increased for 1998 compared to 1997. Also,
due to increased generation at the Wyman #4 and the Joseph C. McNeil generating
stations, production fuel costs increased for 1997 compared to 1996.
Based on present commitments and contracts, we expect that net purchased
power and production fuel costs will be approximately $127.0 million, $143.0
million and $143.0 million for the period 1999 through 2001, respectively.
Production and Transmission
Due to increased production costs, primarily related to Millstone Unit #3
and higher transmission costs, production and transmission expenses increased
$1.5 million in 1997 compared to 1996.
Other Operating Expenses
Primarily due to increased legal and regulatory expenses, other operating
expenses increased $3.2 million for 1998 compared to 1997.
Other operating expenses, in 1997, increased $2.8 million compared to 1996
resulting primarily from increased amortization of conservation and load
management costs combined with a decrease in deferral of conservation and load
management costs.
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<PAGE>
Maintenance Expenses
Maintenance expenses associated with our joint ownership interest in
Millstone Unit #3 decreased for 1998 compared to 1997. However, this decrease
was offset by an increase in maintenance expenses associated with our tree
trimming program and expenses attributable to the severe ice storm in January
1998. The increase in maintenance expenses for 1997 compared to 1996 is due to
increased Millstone Unit #3 maintenance costs.
Income Taxes
Federal and state income taxes fluctuate with the level of pre-tax
earnings. These taxes decreased for 1998 and 1997 as a result of lower pre-tax
earnings.
Other Income, net
Total other income, net decreased for 1998 compared to 1997 and increased
in 1997 over 1996 as the result of gains of $5.0 million from non-recurring
asset sales. Also, Other income, net for 1996 and 1997 include $2.3 million and
$400,000 of expenses incurred in connection with the Gauley River Power project,
currently under construction, in Summersville, West Virginia.
Other Interest Expense
Other interest expense increased for 1998 due to an increase in
outstanding short-term debt offset somewhat by lower interest rates. Other
interest expense declined for 1997 due to a decrease in short-term debt levels.
Extraordinary Credit (Charge)
As a result of legal and regulatory actions associated with Connecticut
Valley, in 1997 we recorded an extraordinary charge of $800,000. See "Electric
Utility Restructuring--New Hampshire" in our Annual Report on Form 10-K for the
year ended December 31, 1998, which is incorporated by reference herein.
Cash Dividends Declared--Common
Due to an early common dividend declaration made in December 1997 for the
quarterly dividend paid on February 13, 1998, common dividends declared
decreased for 1998 compared to 1997 and increased for 1997 compared to 1996.
LIQUIDITY AND CAPITAL RESOURCES
First six months ended June 30, 1999 compared with six months ended June 30,
1998
Our liquidity is primarily affected by the level of cash generated from
operations and the funding requirements of its ongoing construction and
conservation and load management programs. Net cash flow provided by operating
activities generated $32.9 million and $6.9 million for the first six months
ended June 30, 1999 and 1998, respectively. The increase is primarily due to
improved cash earnings, lower tax payments and the extended refueling outage at
Vermont Yankee during 1998.
We ended the first six months of 1999 with cash and cash equivalents of
$19.3 million, an increase of $9.2 million from the beginning of the year. The
increase in cash for the first six months of 1999 was the result of $32.9
million provided by operating activities, offset by $8.9 million used for
investing activities and $14.8 million used for financing activities.
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Operating Activities
Net income, depreciation and deferred income taxes and investment tax
credits provided $23.0 million. About $9.9 million of cash was provided by
working capital and other operating activities.
Investing Activities
Construction and plant expenditures consumed approximately $5.8 million,
while $3.1 million was used for energy-efficiency programs and non-utility
investments.
Financing Activities
Dividends paid on common stock were $5.0 million while preferred dividends
were $.5 million and reduction in capital lease obligations required $.5
million. Reduction in short-term debt was $8.8 million.
The level of short-term borrowings fluctuates based on seasonal corporate
needs, the timing of long-term financings and market conditions.
Fiscal Year 1998 compared with Fiscal Year 1997
Our liquidity is primarily affected by the level of cash generated from
operations and the funding requirements of its ongoing construction and
conservation and load management programs.
Net cash provided by operating activities generated $21.7 million in 1998,
$42.0 million in 1997 and $43.0 million in 1996.
We ended 1998 with cash and cash equivalents of $10.1 million, a decrease
of $6.5 million from the beginning of the year. The decrease in cash for 1998
was the result of $21.7 million provided by operating activities, $18.4 million
used for investing activities and $9.8 million used for financing activities.
Operating Activities
Net income, depreciation and deferred income taxes and investment tax
credits provided $14.7 million. $7.0 million was provided from fluctuations in
working capital and other operating activities.
Investing Activities
Construction and plant expenditures consumed $16.0 million while $5.3
million was used for conservation and load management programs and non-utility
investments. $2.9 million was provided by a reduction in an escrow account to
fund a non-utility investment.
Financing Activities
Dividends paid on common stock were $10.1 million, while preferred stock
dividends were $1.9 million. Retirement of long-term debt and retirement of
preferred stock required $20.5 million and $1.0 million, respectively, and
reduction in capital lease obligations required $1.1 million. Short-term
obligations and sale of common stock provided $24.3 million and $500,000,
respectively.
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Excluding allowance for funds used during construction, construction
expenditures are estimated at $18.0 million, $16.0 million and $16.0 million for
the years 1999 through 2001, respectively.
Our level of short-term borrowings fluctuates based on seasonal corporate
needs, the timing of long-term financings and market conditions.
On June 3, 1996, our Board of Directors increased the quarterly dividend
rate from $.20 to $.22 per share payable August 15, 1996.
Through a common stock repurchase program initiated in 1994 and
subsequently suspended in order to preserve capital for use in industry
restructuring and other business purposes, we purchased 324,717 shares of our
common stock in open market transactions during 1995, 1996 and 1997 at an
average price of $13.19 per share. These transactions are recorded as treasury
stock, at cost, in our Consolidated Balance Sheet. Our capital structure ratios
(including amounts of long-term debt due within one year) for the past three
years were as follows:
December 31,
-------------------------------
1998 1997 1996
---- ---- ----
Common stock equity ..................... 56% 54% 53%
Preferred stock ......................... 8 8 8
Long-term debt .......................... 31 33 34
Capital lease obligations ............... 5 5 5
--- --- ---
100 100 100
=== === ===
Liquidity and Capital Resources Generally
On July 30, 1999 we 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. We used $15.0 million of the net
proceeds to repay amounts outstanding under our revolving credit facility which
has been terminated. We have used and will use the balance of the proceeds of
the offering of the Old Bonds to pay expenses associated with the issuance of
the Old Bonds and for general corporate purposes relating to our regulated
utility business and repayment of the $41.0 million of First Mortgage Bonds
which mature between now and 2004. The remaining proceeds have been invested in
short-term interest-bearing obligations until they are applied as discussed
above. See "Description of Certain Other Indebtedness and Preferred Stock."
See "Risk Factors--We may have insufficient liquidity to refinance the New
Bonds at maturity." In addition, we recently extended until May 31, 2000 with
renewal options through November 5, 2002, an aggregate of approximately $16.9
million of letters of credit which support outstanding development authority
bonds. Our reimbursement obligations in respect of these letters of credit are
secured by three new series of First Mortgage Bonds in an aggregate principal
amount of approximately $16.9 million. Separately, we have a $12.0 million
accounts receivable facility which matures in November 1999, which we may renew
or replace at or before maturity.
On March 12, 1999, Connecticut Valley was notified by Citizens Bank of New
Hampshire that it would exercise appropriate remedies in connection with the
violation of financial covenants associated with the $3.8 million loan agreement
with Citizens 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, we purchased from Citizens Bank the $3.8 million
note.
On February 2, 1999, Standard & Poor's Corporation lowered our corporate
credit rating 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. 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 our credit profile. The downgrades reflect increased business risk
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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 February 17, 1999, Standard & Poor's rating on our preferred stock was
automatically reduced to BB in response to a global policy change in the way
Standard & Poor's rates preferred stock.
On July 16, 1999, Standard & Poor's assigned its triple-'B'-minus rating
to our proposed $75.0 million second mortgage bonds. Concurrently, the Second
Mortgage Bonds were placed on credit watch with negative implications.
Standard & Poor's said "the second mortgage bonds are rated the same as
our corporate credit rating, and not notched up, because Standard & Poor's
projects that the value of our 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."
Also on February 17, 1999, Duff & Phelps Credit Rating Co. placed our
credit ratings 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.
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."
Also 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 our 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, one of our wholly owned non-utility
subsidiaries, 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 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 our wholly-owned unregulated subsidiaries are
non-recourse to the Company.
We cannot assure you that our business will generate sufficient cash flow
from operations or that future borrowings will be available to us in an amount
sufficient to enable us to pay our indebtedness, including the $75.0 million
Second Mortgage Bonds when due, or to fund our other liquidity needs. Our
ability to repay our indebtedness is, to a certain extent, subject to general
economic, financial, competitive, legislative, regulatory, weather and other
factors that are beyond our control. The type, timing and terms of future
financing that we may
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need will be dependent upon our cash needs, the availability of refinancing
sources and the prevailing conditions in the financial markets. We cannot assure
you that any sources will be available to us at any given time or that the terms
of such sources will be favorable.
ADDITIONAL ITEMS
Catamount's after-tax earnings were $.9 million and $1.3 million for the
first six months of 1999 and 1998, respectively.
Catamount's after-tax earnings were $3.3 million, $4.1 million and
$500,000 for 1998, 1997 and 1996, respectively. Earnings for 1997 include a net
of tax gain of $1.8 million from the sale of NW Energy Williams Lake L.P. Also,
results of operation for 1997 and 1996 include $400,000 and $2.3 million of
pre-tax expenses related to the Gauley River project currently under
construction in Summersville, West Virginia.
SmartEnergy incurred losses of $.6 million and $.9 million for the first
six months of 1999 and 1998, respectively.
SmartEnergy incurred losses of $1.5 million and $700,000 for 1998 and
1997, respectively, and earnings of $300,000 for 1996.
Year 2000 Information
Many computer programs cannot distinguish between the year 2000 and the
year 1900. Unless corrected, this programming error could create erroneous data
or otherwise cause computer programs to malfunction. In order to address this
problem for our own computer systems, we have utilized both 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.
As of June 30, 1999, we believe all our systems are Year 2000 compliant.
However, our operations could still be adversely affected if a date-related
system failure occurred with one of our major power suppliers, such as Hydro-
Quebec or Vermont Yankee, with one of our other major suppliers, with Velco, or
with other delivery systems outside of Vermont. Velco has indicated that it is
Year 2000 ready. We have requested written reports from our power supply vendors
regarding each company's status and based on responses to date, these power
supply vendors have indicated that they are either currently compliant or expect
to be compliant by the third quarter of 1999. We have 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 will not have a material adverse effect on us.
We are part of the Northeast grid contingency plan which would go into
effect immediately to provide electricity to our customers on a priority basis
in the event of a power outage. We also have other contingency plans developed
in the event of a failure of our transmission, generation, distribution,
metering, telecommunications, information or public communications systems. We
believe we will incur approximately $3.8 million of costs associated with making
the necessary modifications to our centralized and non-centralized computer
systems. As of June 30, 1999, approximately $3.6 million of these costs have
been incurred.
During the first quarter of 1998, we 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 us 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, we are authorized to seek recovery of these costs
through future regulatory proceedings.
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BUSINESS
We are the largest electric utility in Vermont. Together with our various
wholly-owned and partially-owned subsidiaries, we are engaged in the purchase,
production, transmission, distribution and sale of electricity as well as
certain non-energy related businesses. We serve over 140,000 customers in nearly
three-quarters of the towns, villages and cities in Vermont. Our revenues are
primarily derived from retail activities in the State of Vermont and resale
activities throughout the Northeast and Mid-Atlantic States.
Our subsidiaries are engaged in various activities involving the
generation, transmission and distribution of electricity. Connecticut Valley is
our wholly-owned subsidiary that distributes and sells electricity to
approximately 10,000 customers in 13 communities in New Hampshire bordering the
Connecticut River.
We maintain a diverse customer base, with minimal concentration of
customer risk. In 1998, our five largest customers accounted for only 4.7% of
consolidated revenues, and our single largest customer represented only 1.3% of
consolidated revenues.
We own 56.8% of the common stock and 46.6% of the preferred stock of
VELCO, which owns and operates the high voltage transmission system in Vermont.
In 1983, VELCO created a wholly-owned subsidiary, Vermont Electric Transmission
Company, Inc., or VETCO, to finance, construct and operate the Vermont portion
of the 450 KV HVDC transmission line connecting the Province of Quebec with
Vermont and New England.
We have equity ownership interests in various nuclear facilities
including: 31.3% of the common stock of Vermont Yankee; 2% of the outstanding
common stock of Maine Yankee; 2% of the outstanding common stock of Connecticut
Yankee; and 3.5% of the outstanding common stock of Yankee Atomic. We also own a
1.73% undivided interest in Millstone Unit #3. Connecticut Yankee, Maine Yankee
and Yankee Atomic no longer operate and are in various stages of
decommissioning.
Central Vermont Public Service Corporation-East Barnet Hydroelectric,
Inc., one of our wholly-owned subsidiaries, was formed for the purpose of
acquiring and constructing a hydroelectric project in East Barnet, Vermont,
which became operational September 1, 1984 and has been leased and operated by
us since its in-service date.
Catamount Resources Corporation was formed for the purpose of holding our
subsidiaries that invest in unregulated business opportunities. Catamount, a
subsidiary of Catamount Resources Corporation, invests in unregulated energy
generation projects in the United States and Great Britain. Currently,
Catamount, through its wholly-owned subsidiaries, 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.
Another subsidiary of Catamount Resources Corporation, SmartEnergy,
operates several unregulated energy and service related businesses. SmartEnergy
was originally formed to engage in the sale of or rental of electric water
heaters, energy efficient products and other related goods and services.
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 six U.S. cities, and is in the process of expanding into another nine, as
part of a national roll-out program with Sam's Clubs, a division of WalMart. See
"Risk Factors--The Second Mortgage Indenture does not restrict our unregulated
subsidiaries."
Power Resources
We currently purchase approximately 86% of our retail and firm wholesale
power needs under several contracts of varying duration. Firm wholesale consists
solely of an approximate 1 mW sale to a small Vermont utility. During 1998, over
35% of our power needs came from Vermont Yankee, an affiliated company, which
owns and operates a
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nuclear generating unit from which we receive our entitlement share of the
output. During this same time period, over 32% of these power needs came from
Hydro-Quebec, one of the world's largest generators of hydroelectricity which is
owned by the province of Quebec, Canada. Our remaining sources of power include
purchase contracts with small power producers, purchases from NEPOOL, and other
contracted sources, as well as our own generation. Our purchased power portfolio
includes a diversified mix of sources and fuel types to meet our long-term load
growth while providing short and intermediate term opportunities to purchase or
sell capacity and energy to reduce overall power costs.
The power required to serve our (including Connecticut Valley's) retail
and firm wholesale customers was 2,488,581 mWh for the year ended December 31,
1998. The following tabulation shows the sources and amounts of the energy and
capacity available to us for the year ended December 31, 1998.
<TABLE>
<CAPTION>
Net
Effective
Capability
12 month Generated and
Power Source Average Purchased
- ------------ ----------- --------------------------
mW mWh Percentage
----- -------- ----------
<S> <C> <C> <C>
Wholly- and Jointly-Owned Plants
Hydro.......................................... 40.7 221,763 8.9%
Diesel and Turbines............................ 28.9 1,258 0.1
Millstone #3................................... 8.2 59,291 2.4
Wyman #4....................................... 10.9 19,126 0.8
McNeil......................................... 10.5 31,396 1.3
Long-Term Power Contracts
Vermont Yankee................................. 133.6(1) 884,455(1) 35.5
Hydro-Quebec VJO............................... 143.3(1) 799,493(1) 32.1
Small Power Producers.......................... 33.7 212,645 8.5
Merrimack #2................................... 15.7 73,116 2.9
----- --------- -----
Total Owned and Long-Term Sources.................. 425.5 2,302,543 92.5
Other Sources/Uses
Short-term Purchases........................... 1,209,024
Less Short-term Wholesale Sales and Other...... (1,022,986)
Net........................................ 186,038 7.5
--------- -----
Net Power for Retail and Firm Wholesale Sales...... 2,488,581 100.0
========= =====
</TABLE>
- ----------
(1) Vermont Yankee purchases are net of Vermont Yankee entitlement sales of
approximately 25 mW and 161,475 mWh to another utility. Hydro-Quebec
purchases are net of sales back to Hydro-Quebec of 25 mW and 156,331 mWh.
Wholly-Owned Plants. We own and operate 20 hydroelectric generating
facilities in Vermont which have an aggregate nameplate capability of 44.7 mW
and two oil-fired turbines and one diesel peaking unit with a combined nameplate
capability of 29.0 mW.
Jointly-Owned Plants. We have a joint ownership interest in the following
generating and transmission plants, for which we are responsible for our share
of the operating expenses.
Name Fuel Type Ownership mW Entitlement
- ---- --------- --------- --------------
Millstone #3.......................... Nuclear 1.73% 20
Wyman #4.............................. Oil 1.78% 11
Joseph C. McNeil...................... Various 20.00% 10.6
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Equity Ownership in Plants. In 1966, we purchased 35% of the Vermont
Yankee common stock and were entitled to receive a like percentage of the output
of the unit. In late 1969 and early 1970, we sold at cost a combined total of
3.7% of our original equity investment and we currently resell at cost 3.9% of
our entitlement. Our current equity ownership and net entitlement percentages
are 31.3 and 31.1, respectively.
Major Long-Term Purchases. Under various contracts, we purchase from
Hydro-Quebec capacity and associated energy. Under the terms of these contracts,
we are required to pay some fixed capacity costs whether or not energy purchases
above a minimum level described in the contracts are made. Such minimum energy
purchases must be made whether or not other less expensive energy sources might
be available.
Small Power Qualifying Facilities. A number of small producers using
hydroelectric, biomass, and refuse-burning generation are currently producing
energy that we are 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 year ended December 31, 1998, we received 212,645
mWh from these sources for which we paid $22,557,152.
We have sufficient power under contract and through market purchases to
supply our current franchise obligations. We expect to actively manage our
portfolio of supply and demand side resources over the near-term, as we have in
the past, to minimize net power costs for our customers and shareholders. The
timing and nature of these events will be largely determined by future
legislative and regulatory actions at the state and national levels. See "Risk
Factors."
VJO Power Contract with Hydro-Quebec
We are 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 us, Green Mountain Power,
Citizens Utilities, Rochester Electric Light & Power and the Vermont Public
Power Supply authority representing municipalities and a cooperative in Vermont.
Our 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 ourselves, 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. See "Risk Factors--Our obligations under the VJO
Power Contract with Hydro-Quebec may increase if a VJO member defaults."
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. The VJO believes Hydro-Quebec has been and remains unable to
make available capacity with the degree of firmness required by the VJO Power
Contract. That review 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. The results of the arbitration cannot be predicted at this time.
On September 22, 1999, we announced that we will seek, with the other
Vermont Joint Owners, to auction the contract with Hydro-Quebec.
Transmission
VELCO provides transmission services for the State of Vermont acting by
and through the DPS, and for all of the electric distribution utilities in the
State of Vermont and is reimbursed for its costs for the transmission of power
for such entities. VELCO has 535 miles of transmission lines consisting
primarily of 115 kV and greater. We, as the
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largest electric distribution utility in Vermont, are the major user of VELCO's
transmission system. VELCO also receives and delivers power to us and the other
electric utilities (cooperative, municipal and investor-owned) in Vermont and
transmits power for the Vermont utilities. We own a majority interest in the
Class B common stock of VELCO, but our ability to control VELCO is limited by a
Four-Party Agreement between us, VELCO, Green Mountain Power and Citizens
Utilities, another Vermont utility. We also own several transmission lines. We
have 7.5 miles of transmission lines of 120 kV and 606 miles of subtransmission
lines, which are predominantly 34.5 and 46 kV.
Proposed Formation of a Holding Company
On July 24, 1998, we filed a petition with the PSB for permission to
create a holding company that would have as direct subsidiaries us and our
unregulated subsidiaries, Catamount and SmartEnergy. We believe that a holding
company structure will facilitate our transition to a deregulated electricity
market. The proposed holding company formation must also be approved by federal
regulators, including the SEC and the FERC, and by our shareholders.
Stranded Costs
Currently, we are a party to:
o power purchase agreements that require us to make capacity and/or
energy payments to power suppliers or aggregating entities in
exchange for capacity/electricity from those power suppliers; and
o ownership agreements regarding our equity ownership in power
producing facilities, including nuclear power plants, that provide
for us to fund our pro rata share of operating expenses of the power
producing investments in exchange for receiving our pro rata share
of the power output from these investments.
The cost of power under the power purchase agreements and the ownership
agreements exceeds the current market cost of power within New England. We are
addressing the increasing cost of power with measures including (i) negotiating
modifications in the power purchase and ownership agreements and (ii) evaluating
the divestiture of our generating assets and power purchase agreements. However,
we cannot increase rates without the PSB's approval. Failure to recover costs
through rates could impair our financial condition. We may not be able to reduce
our operating costs to levels that would obviate the need for rate increases
without impairing our ability to operate. See "Risk Factors--Our other stranded
costs may not be recoverable."
As a result of our above-market power costs and the uncertainty regarding
our ability to recover these costs through rate increases, we are likely to have
stranded costs related to the power purchase agreements, the ownership
agreements and other elements of our business. Any inability to recover our cost
of power and other stranded costs may affect our ability to generate an adequate
return on our equity and invested capital.
The above-market power costs of purchases from Hydro-Quebec, Vermont
Yankee and small power producers would comprise the majority of our stranded
costs. The stranded costs associated with these power sources should be
evaluated in the context of their contribution to our overall power supply. In
1998, these power sources accounted for approximately 76% of our retail and firm
wholesale energy needs.
If Vermont's electric industry is deregulated, we intend to request that
the State provide us with a competitive transition charge to recover stranded
costs associated with our wholesale power purchase contracts and other stranded
costs. See "Electric Industry Restructuring."
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REGULATION AND RATES
We recognize that adequate and timely rate relief is necessary if we are
to maintain our 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. We intend to continue
our practice of periodically reviewing costs and requesting rate increases when
warranted.
Vermont Retail Rate Proceedings
On September 22, 1997, we 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
we purchase from Hydro-Quebec. At the same time, we also filed a request to
eliminate the current differential between the rates we charge customers in the
summer and the rates we charge customers in the winter and price electricity the
same year-round.
In response to our filing, the PSB decided to appoint an independent
investigator to examine our decision to buy power from Hydro-Quebec. We 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 our
decision to buy power from Hydro-Quebec in a 1994 rate case in which we were
penalized for "improvident power supply management." During February 1998, the
Department of Public Service, or DPS, filed testimony in opposition to our
retail rate increase request. The DPS recommended that the PSB instead reduce
our then current retail rates by 2.5% or $5.7 million. We sought, and the PSB
granted, permission to stay this rate case and to file an interlocutory appeal
of the PSB's denial of our motion to preclude a re-examination of our
Hydro-Quebec contract in 1991. We recently argued our position before the
Vermont Supreme Court. The Vermont Supreme Court has not rendered a decision. A
decision by the end of 1999 is possible.
We filed on June 12, 1998 with the PSB for a 10.7% retail rate increase
that supplanted our September 22, 1997, 6.6% rate increase request, to be
effective March 1, 1999. On October 27, 1998, we reached an agreement with the
DPS regarding our June 1998 retail rate increase request providing for a
temporary rate increase in our Vermont retail rates of 4.7% or $10.9 million on
an annualized basis beginning 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 the issue presently before the Vermont Supreme Court,
which is described above. The agreement temporarily disallows approximately $7.4
million of our purchased power costs under the VJO Power Contract pending
resolution of the issue before the Vermont Supreme Court. As a result of the
agreement on our rate case, during the fourth quarter of 1998, we recorded a
loss of approximately $7.4 million (pre-tax) for disallowed purchased power
costs, representing our estimated under-recovery of power costs under the VJO
Power Contract for calendar year 1999.
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 we receive a
similar order from the PSB, we would experience a material adverse effect on our
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 disallowance, the amount of any
permanent disallowance could be more or less than the $7.4 million temporary
disallowance. However, if we receive an unfavorable ruling from the Vermont
Supreme Court and the PSB subsequently issues a rate order permanently adopting
the disallowance methodology used to determine the temporary Hydro-Quebec
disallowance described above, or a similar methodology, for the duration of the
VJO Power Contract, we 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
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$12.1 million in 2004. In such an event, we would be required to take an
immediate charge to earnings of $205.0 million (pre-tax). Such an outcome could
jeopardize our ability to continue as a going concern.
New Hampshire Retail Rate Proceedings
Federal Court Proceedings
We sell firm power to Connecticut Valley under a wholesale rate schedule
based on forecast volumes and power costs for each calendar year, which is
reconciled to actual data annually. In February 1997, the New Hampshire Public
Utilities Commission, or NHPUC, ordered Connecticut Valley to terminate the
wholesale rate schedule with us. The NHPUC subsequently found Connecticut Valley
"imprudent" for not having previously taken steps to terminate the rate schedule
and ordered that rates be reduced to market levels. We are seeking relief in
federal court to reverse the NHPUC's decision. To date rates have not been
reduced below where they were as of December 1997.
Along with other New Hampshire utilities we are also seeking injunctive
relief in United States District Court against the NHPUC's efforts to
restructure the New Hampshire electric utility industry generally. In April
1998, Connecticut Valley obtained a preliminary injunction which required the
NHPUC to allow it to recover through retail rates a portion of its stranded
costs and purchased power costs incurred pursuant to its FERC-authorized
wholesale rate schedule. The Court of Appeals vacated the injunction, finding
that Connecticut Valley had not demonstrated a sufficient probability of success
to warrant preliminary relief. At the same time, the Court of Appeals indicated
that rates could not be reduced below where they were as of December 1997.
However, the Court of Appeals did uphold the preliminary injunction staying the
NHPUC's plans to restructure the New Hampshire electricity industry. The matter
has returned to the District Court for hearings on Connecticut Valley's motion
for a permanent injunction against the NHPUC concerning restructuring. That
hearing, as well as the court's ruling on several dispositive summary judgment
motions, is likely to occur late this year.
Connecticut Valley also purchases power from several small power producers
who own qualifying facilities as defined by the Public Utility Regulatory
Policies Act of 1978. In 1998, under long-term contracts with these qualifying
facilities, Connecticut Valley purchased 41,477 mWh, of which 38,283 mWh were
purchased from Wheelabrator Claremont Company, L.P., or Wheelabrator.
Connecticut Valley has asserted before the FERC that Wheelabrator has not been a
qualifying facility since the plant began operation. On February 11, 1998, the
FERC issued an order denying Connecticut Valley's request for a refund of past
purchased power costs and for lower future costs based on our petition. We filed
a request for rehearing with the FERC on March 13, 1998 which was denied.
Subsequently, Connecticut Valley appealed to the D.C. Circuit Court of Appeals
which has yet to render a decision.
FERC Proceedings
In June 1997, we filed an application with the FERC to recover stranded
costs in connection with our 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 our proposal to
recover our 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 our motion for a rehearing
regarding our surcharge proposal, so we filed a request with the FERC for an
exit fee mechanism to collect the stranded costs resulting from the cancellation
of our 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 us 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.
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If we are unable to obtain an order authorizing the recovery of costs in
connection with our June 1997 FERC filing, we would be required to recognize a
loss under this contract totaling approximately $60.0 million (pre-tax). We
would also be required to write-off approximately $4.0 million (pre-tax) in
regulatory assets associated with our wholesale business. The cash flow
shortfall from our revenues would be approximately $6.0 million (pre-tax)
annually. However, even if we obtain a FERC order authorizing the updated
requested exit fee, if Connecticut Valley is unable to recover these costs by
increasing its rates, Connecticut Valley would be required to recognize a loss
under this contract of approximately $48.0 million (pre-tax).
Proceedings relating to Connecticut Valley's Fuel Adjustment Clause and
Purchased Power Cost Adjustment
Connecticut Valley's retail rate tariffs, approved by the 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. Based on a motion by the City of Claremont, an intervenor, the NHPUC,
in its order dated December 31, 1997, found that Connecticut Valley was
imprudent for not terminating its wholesale power contract with us and
ultimately ordered that we could only recover rates at the current market
levels. Subsequently, the NHPUC, in deference to a temporary restraining order
issued by a federal district court, allowed FAC and PPCA rates effective May 1,
1998 that would make us whole for 1997 undercollections, the 1998
undercollections incurred through April 30, 1998, and the increase in 1998 power
costs.
On the basis of estimates of costs for 1999 and reconciliations from 1998,
the combined 1999 FAC and PPCA rates would have resulted in a decrease in
revenues of approximately $2.3 million for 1999. The decrease was primarily
caused by the elimination of the various undercollections from prior periods
mentioned above. The City of Claremont filed a motion to determine the prudence
of the 1999 power costs. However, by agreement of the parties, including the
NHPUC, the hearing was limited to the mathematical calculation of the FAC and
PPCA. An NHPUC order allowed the decrease. Following the lifting of the
temporary restraining order, the NHPUC has ordered FAC and PPCA rates to be
reduced to the levels prevailing on December 31, 1997.
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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 we do 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.
Recently, there have been three primary sources of Vermont governmental
activity in attempting to restructure the electric industry in Vermont: (a) the
Governor's Working Group, created by the Governor of Vermont; (b) the PSB's
Docket No. 6140, through which the PSB is considering restructuring proposals;
and (c) 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:
o The bankruptcy of Vermont electric utilities should not be viewed as
an appropriate means to reduce Vermont utilities' above-market power
supply costs.
o Vermont should restructure its electric industry by moving rapidly
to retail choice whereby consumers would purchase power directly
from competing power suppliers.
o 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.
o The Vermont electric utilities should pursue auctions of their power
generation assets and remaining power contracts.
o 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
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acceptable courses for reform. All Vermont utilities were made parties 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.
As of this time, the PSB has yet to act on any proposal or recommendation
made concerning the disposition of the matters in Docket No. 6140. 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. These include 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 the 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 we and Green Mountain
Power Corporation asserted that our 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 VEPP, Inc., 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 (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
us, 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.
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We believe 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 plant
by conditioning the recovery of 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 Vermont. Since the 1998
Legislative session adjourned in April 1998 and S.62 was not passed by the House
and signed by the Governor, 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.
We expect the second session of the Biennium, which convenes on January 4,
2000, will be very active on restructuring issues. However, it cannot be
predicted at this time whether restructuring legislation will be enacted in this
Biennium.
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OUR RESTRUCTURING PLAN
We support the Working Group recommendations described above and believe
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, we are pursuing a comprehensive financial Restructuring Plan,
a number of elements of which were included in a report that we 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. We are aggressively
pursuing implementation of the Restructuring Plan which includes the following
elements:
o Retail choice: voluntarily giving up the exclusive right to supply
power to our present electric customers, while retaining our rights
as a distribution company, as part of a global settlement of
regulatory issues.
o Renegotiation of power purchase contracts: reducing our 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 nearly 38% of our 1998 net
energy supply. We 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. On September 22, 1999, we
announced that we will seek, with the other Vermont Joint Owners, to
auction the contract with Hydro-Quebec.
o Contract and asset disposition: seeking to sell power purchase
contracts and generating assets, including our interest in the
Vermont Yankee nuclear generating plant. Efforts to sell the Vermont
Yankee plant and possibly purchase a portion of the power from the
plant are already under way.
o Cost-cutting: implementing cost-cutting measures to reduce cash flow
requirements while maintaining safety and reliability standards.
o Holding company: establishing a holding company to help us better
organize our business.
o Industry consolidation: evaluating possible consolidation with other
Vermont electric distribution companies.
o Regulatory settlement: seeking a comprehensive regulatory settlement
that leads to long-term financial stability.
o Energy efficiency activities: creating a state sponsored
"energy-efficiency utility" to take over most system-wide
energy-efficiency services for electric customers.
We believe that implementation of our Restructuring Plan is a critical
element to improving our future financial performance and to providing our
customers with more stable electric rates and the continuation of efficient and
reliable electric service. The key contingency to our Restructuring Plan is
regulatory approval of a rate schedule that will allow us to recover the costs
of the restructuring. See "--Rate Establishment." 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," we
anticipate that our utility financial performance and prospects will improve
significantly.
Retail Choice
We intend to file a petition with the PSB to establish retail access for
our customers. The petition will:
o confirm our consent to providing our retail customers their choice
of power suppliers;
o seek a PSB order relieving us of our obligation to supply capacity
and energy to consumers; and
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o establish us as the exclusive electric distribution provider within
our service territory.
We will also propose tariff amendments to establish open access and
customer choice. All of these proposals would result in our giving up our
current exclusive rights to serve present customers' electricity requirements,
except for distribution services, and allow competitive electricity sales for
our electric customers in Vermont, as part of a global settlement with our
regulators.
Renegotiation of Power Purchase Agreements
We intend to reduce our future cost of power through the auction, buy-out
or buy-down of the power purchase agreements with Hydro-Quebec and the Vermont
purchasing agent's contracts with independent power producers. The power
purchase agreements accounted for approximately 38% of our retail mWh needs in
1998. If we successfully auction, buy-out or buy-down these agreements, and
appropriate regulatory approvals are obtained, we intend to seek to finance the
payments made to power suppliers with securities issued in the capital markets.
This aspect of the Restructuring Plan would effectively create an unsecured
on-balance sheet liability, and possibly an off-balance sheet liability for
Vermont's independent power producer contracts, for the repayment of debt
incurred to fund auctions, buy-downs or buy-outs for the above-market costs of
the power purchase agreements. We believe that a successful re-negotiation would
result in improved operating cash flow that would be adequate to service the
obligations related to the purchased agreements and fund our ongoing operations.
Participants in the VJO, ourselves included, are now negotiating the terms under
which the agreements obligating (i) the VJO to buy power from Hydro-Quebec and
(ii) the VJO participants to buy their respective percentage commitments from
the VJO can be restructured. There can be no assurances, however, that we will
be successful in renegotiating these contracts or in completing the related
financing.
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, should 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 our petition by opening a formal investigation
regarding these contracts.
Disposition of generating assets
We are evaluating wholly-owned and jointly-owned generating sources to
determine whether they should be sold, operated or shut down. On February 25,
1999, the Board of Directors of Vermont Yankee granted an exclusive right to
AmerGen Energy Co. to conduct 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.
Vermont Yankee's owners, which includes us, are pursuing parallel negotiations
with the two potential purchasers with the objective of reaching a definitive
agreement, if possible.
Creation of an Energy-Efficiency Utility
On April 30, 1999, we entered into a Memorandum of Understanding, or MOU,
with the DPS for the creation of an energy-efficiency utility to provide
state-wide demand-side management services. Subsequently, other Vermont
utilities, as well as consumer interest groups, have endorsed the proposal. The
MOU was filed with the
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PSB on April 30, 1999 for approval in Docket No. 5980 which was opened by the
PSB to investigate the DPS's proposed Statewide Energy Efficiency Plan.
If approved by the PSB, the MOU would resolve all issues now outstanding
in Docket No. 5980 including the governance structure for the energy-efficiency
utility, the design of the energy-efficiency utility programs and services, and
the energy efficiency utility budgets. The MOU also resolves all claims based on
alleged actions or failures to act prior to January 1, 2000 that we failed to
satisfy our demand-side management obligations to customers under Vermont law
and regulations. The PSB is currently considering the approval of the MOU which
is expected during the third quarter of 1999. If approved by the PSB, the new
energy-efficiency delivery system would be in place beginning in the year 2000
and would replace most services now provided to customers by us. In May 1999,
the legislature approved, and in June the Governor of Vermont signed,
legislation supportive of the MOU.
Consolidation
We have signed individual confidentiality and cooperation agreements with
Green Mountain Power, Citizens Utilities and Washington Electric Cooperative to
permit an exchange of information to evaluate the possibility of consolidating
Vermont utility operations. There have been no material developments as a result
of these agreements.
Cost-Cutting Opportunities
We have been actively pursuing cost-cutting opportunities to improve our
financial performance. We estimate that our number of employees will have been
reduced by approximately 32% from 1993 through 2000.
Rate Establishment
If the realization of other elements of our Restructuring Plan begins, we
will file petitions with the PSB for the establishment of rates that would
provide for revenues in amounts sufficient to support the financings necessary
to restructure our power supply portfolio in the above manner. It is essential
that the PSB permit us to recover in rates an annual amount sufficient to cover
our costs, including those incurred in connection with various components of the
Restructuring Plan.
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DESCRIPTION OF OTHER INDEBTEDNESS AND PREFERRED STOCK
Upon the completion of the offering, in addition to the Second Mortgage
Bonds, we (excluding our subsidiaries) will have the following indebtedness
outstanding.
First Mortgage Bonds
We have issued First Mortgage Bonds, which are senior to the Second
Mortgage Bonds, under the Mortgage of the Company, dated as of October 1, 1929,
and indentures supplemental thereto, to Old Colony Trust Company, as trustee, as
from time to time amended and supplemented, under which Mortgage State Street
Bank and Trust Company is now serving as successor trustee.
As of June 30, 1999, we had outstanding eight series of First Mortgage
Bonds, in an aggregate principal amount of $76,500,000. At the present time, we
do not intend to issue any additional First Mortgage Bonds other than as
discussed below. The following table sets forth our upcoming obligations with
respect to principal payments and mandatory sinking fund obligations on the
First Mortgage Bonds outstanding as of June 30, 1999:
<TABLE>
<CAPTION>
Principal Amount Due
------------------------------------------------
1999 2000 2001 2002 2003 2004
------- ------- ------ ------- ------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Series of First Mortgage Bonds
9.20% Series FF........................ $ 7,500
9.26% Series GG........................ $3,000
9.97% Series HH........................ $3,000 $ 4,000 $4,000 $4,000 $ 3,000
8.91% Series JJ........................
5.54% Series LL........................ $ 5,000
6.01% Series MM........................ $ 7,500
6.27% Series NN........................
6.90% Series OO........................
Totals............................. $3,000 $16,500 $4,000 $7,000 $10,500 0
</TABLE>
In addition to the eight series of First Mortgage Bonds outstanding as of
June 30, 1999, concurrently with the issuance of the Old Bonds, we issued three
new series of First Mortgage Bonds designated Series PP, QQ and RR with a total
aggregate principal amount of approximately $16.9 million. These First Mortgage
Bonds were issued as replacement security for our obligations in connection with
approximately $16.9 million of outstanding letters of credit. These First
Mortgage Bonds will be provided as replacement security only and do not increase
our indebtedness.
The First Mortgage constitutes a direct first mortgage lien on
substantially all of our existing tangible utility property, which includes our
fixed property and franchises, consisting principally of electric plants and
systems, electric generating plants, electric transmission lines, electrical
substations and switching stations, and electric distribution systems, and
buildings, subject only to liens and encumbrances permitted under the First
Mortgage. In general, all our tangible utility property acquired after the date
of the Second Mortgage Indenture will continue to be subjected to the lien of
the First Mortgage, which is senior to the lien of your New Bonds.
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Other Indebtedness
The following table summarizes our other significant credit obligations in
place following the offering, including amounts outstanding and
corresponding maturity dates:
Amount
Outstanding at
Description of Obligation June 30, 1999 Maturity
- ------------------------------------------------------------------------------
(in thousands)
Tax-Exempt Revenue Bonds(1)
New Hampshire Development
Authority..................... $ 5,500 December 2009
Vermont Development Authority... 5,800 December 2013
Connecticut Development Authority 5,000 December 2015
Accounts Receivable Facility........ $12,000 November 1999
Capital Lease Obligations........... $15,601 December 2006 (phase I
transmission facilities)
December 2015 (phase II
transmission facilities)
- ----------
(1) We are obligated, in specified circumstances, to reimburse the issuer of
the three letters of credit that support these development authority bonds
pursuant to three reimbursement agreements and a guaranty. These
agreements contain specified covenants applicable to us so long as the
letters of credit or our related reimbursement obligations remain
outstanding. Among these covenants is the requirement that we not permit
our consolidated leverage ratio (i.e., the ratio of total indebtedness
that is recourse to us to total capitalization of us and our consolidated
subsidiaries) to be greater than 0.5 to 1.0.
Preferred Stock
As of June 30, 1999, we had outstanding 80,538 shares of non-redeemable
preferred stock and 180,000 shares of 8.30% Series redeemable preferred stock.
We are required to redeem $1.0 million of the 8.30% Series preferred stock each
year at par through a mandatory sinking fund. We may also redeem at par up to an
additional $1.0 million each year at our option. As of June 30, 1999, we had no
other preferred or preference stock outstanding.
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THE EXCHANGE OFFER
We issued the Old Bonds on July 30, 1999 (the "Closing Date") to the
initial purchasers in an offering to qualified institutional buyers under Rule
144A under the Securities Act. As a condition to the sale of the Old Bonds, the
Company and the initial purchasers entered into the Registration Rights
Agreement on the Closing Date. The registration statement, of which this
prospectus is part, is intended to satisfy our obligation to conduct an exchange
offer under the Registration Rights Agreement summarized below. This summary of
provisions of the Registration Rights Agreement does not purport to be complete
and reference is made to the provisions of the Registration Rights Agreement
which has been filed as an exhibit to the registration statement and a copy of
which is available as set forth in "Where to Find More Information."
Pursuant to the Registration Rights Agreement, we agreed to file with the
SEC an exchange offer registration statement on the appropriate form under the
Securities Act with respect to the New Bonds. Upon the effectiveness of the
exchange offer registration statement, we will offer to the holders of Old Bonds
who are able to make specified representations the opportunity to exchange their
Old Bonds for the New Bonds. If we are not permitted to consummate the exchange
offer because the exchange offer is not permitted by applicable law or SEC
policy, or any bondholder notifies us within the specified time period that it:
o is prohibited by law or SEC policy from participating in the
exchange offer;
o may not resell the New 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 bondholder; or
o is a broker-dealer and holds Old Bonds acquired directly from us or
an affiliate of ours,
we will use our reasonable best efforts to file with the SEC a shelf
registration statement to cover resales of the Old Bonds by the bondholders who
satisfy conditions relating to the provision of information in connection with
the shelf registration statement. The Registration Rights Agreement, dated as of
July 30, 1999, provides that we will:
o file an exchange offer registration statement with the SEC on or
prior to October 28, 1999;
o use our reasonable best efforts to have the exchange offer
registration statement declared effective by the SEC on or prior to
February 25, 1999;
o commence the exchange offer and use our reasonable best efforts to
issue on or prior to 45 business days after the date on which the
exchange offer registration statement was declared effective by the
SEC, New Bonds in exchange for all Old Bonds tendered prior thereto
in the exchange offer; and
o if obligated, to use our reasonable best efforts to file a shelf
registration statement with the SEC on or prior to 45 days after
such filing obligation arises and to cause the shelf registration
statement to be declared effective by the SEC on or prior to 90 days
after we are required to file such shelf registration statement.
If:
o we fail to file with the SEC any of the registration statements
required by the Registration Rights Agreement on or before the date
specified for such filing;
o any of such registration statement is not declared effective by the
SEC on or prior to the date specified for such effectiveness;
o we fail to consummate the exchange offer on or prior to the date
specified with respect to the exchange offer registration statement;
or
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o any registration statement required by the Registration Rights
Agreement is filed and declared effective but thereafter ceases to
be effective or usable for its intended purpose;
(each such event referred to in the clauses above a "Registration Default"),
then we will pay liquidated damages to each bondholder, with respect to the
first 90-day period immediately following the occurrence of the first
Registration Default of a rate per annum equal to 0.25% of the principal amount
of transfer restricted securities held by such holder. 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 of liquidated damages of 0.75% per annum of the
principal amount of transfer restricted securities. We in no event are required
to pay liquidated damages for more than one Registration Default at any given
time. We will pay all accrued liquidated damages (as more fully set forth in the
Indenture and the Old Bonds) on each Interest Payment Date. Following the cure
of all Registration Defaults, liquidated damages will not accrue.
Transfer Restricted Securities
For purposes of the foregoing, transfer restricted securities means: each
Old Bond until:
o the date on which such Old Bond is exchanged for a New Bond which is
entitled to be resold to the public by such bondholder without
complying with the prospectus delivery requirements of the
Securities Act;
o the date on which such Old Bond has been disposed of in accordance
with a shelf registration statement; or
o the date on which such Old Bond is sold pursuant to Rule 144 under
the Securities Act or may be sold without restrictions pursuant to
Rule 144(k) under the Securities Act;
and each New Bond held by a broker-dealer until the date on which such New Bond
is disposed of by a broker-dealer as set forth under "Plan of Distribution"
below.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all of the Old Bonds
validly tendered and not withdrawn prior to the expiration date of the exchange
offer. As of the date of this prospectus, $75.0 million aggregate principal
amount of the Old Bonds is outstanding and no New Bonds are outstanding. This
prospectus, together with the letter of transmittal, is first being sent on or
about , to all bondholders known to us. Our obligation to accept the Old Bonds
for exchange pursuant to the exchange offer is subject to the conditions as set
forth under "-Certain Conditions to the Exchange Offer" below. We will issue
$1,000 principal amount of New Bonds in exchange for each $1,000 principal
amount of outstanding Old Bonds accepted in the exchange offer. Bondholders may
tender some or all of their Old Bonds pursuant to the exchange offer. See
"--Consequences of Failure to Exchange." However, the Old Bonds may be tendered
only in integral multiples of $1,000.
The New Bonds will evidence the same debt as the Old Bonds for which they
are exchanged, and are entitled to the benefits of the Indenture. The form and
terms of the New Bonds are the same as the form and terms of the Old Bonds,
except that the New Bonds have been registered under the Securities Act.
Therefore, the New Bonds will not bear legends restricting their transfer.
Bondholders do not have any appraisal or dissenters' rights under the
Indenture in connection with the exchange offer. We intend to conduct the
exchange offer in accordance with the applicable requirements of Regulation 14E
under the Exchange Act.
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We shall be deemed to have accepted validly tendered Old Bonds when, as,
and if we have given verbal or written notice of our acceptance to the exchange
agent. The exchange agent will act as agent for the tendering bondholders for
the purpose of receiving the New Bonds.
If any tendered Old Bonds are not accepted for exchange because of an
invalid tender, or the failure to satisfy other conditions to the exchange offer
or otherwise, we will return such unaccepted tenders of Old Bonds without
expense to the bondholder of the Old Bond, as promptly as practicable after the
expiration date of the exchange offer.
Bondholders whose Old Bonds are not tendered or are tendered but not
accepted in the exchange offer will continue to hold such Old Bonds and will be
entitled to all the rights and preferences and subject to the limitations
applicable to the Old Bonds under the Indenture. Following completion of the
exchange offer, the bondholders will continue to be subject to the existing
restrictions upon transfer of the Old Bonds and we will have no further
obligation to those bondholders to provide for the registration under the
Securities Act of the Old Bonds held by them. To the extent that Old Bonds are
tendered and accepted in the exchange offer, the trading market for untendered,
and tendered but unaccepted, Old Bonds could be adversely affected.
Bondholders who tender Old Bonds in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of Old
Bonds pursuant to the exchange offer. We will pay all charges and expenses,
other than applicable taxes, in connection with the exchange offer. See "-Fees
and Expenses; Solicitation of Tenders."
Expiration Date; Extensions; Amendments
The term expiration date shall mean 5:00 p.m., New York City time on ,
unless we extend the exchange offer. If we do extend the exchange offer, the
term expiration date shall mean the date and time to which the exchange offer is
extended. In order to extend the expiration date of the exchange offer, we will
notify the exchange agent of any extension by verbal or written notice, mail to
the registered bondholders an announcement of that notice, and will make a
release to the Dow Jones News Services prior to 9:00 a.m., New York City time,
on the next business day after the previously scheduled expiration date of the
exchange offer.
We reserve the right at our sole discretion:
o to delay accepting any Old Bonds;
o to extend the exchange offer;
o to terminate the exchange offer and not accept the Old Bonds not
previously accepted if any of the conditions set forth below under
"-Certain Conditions to the Exchange Offer" shall have occurred and
shall not have been waived by us, by giving oral or written notice
of such delay, extension or termination to the exchange agent; or to
amend the terms of the exchange offer in any manner. Any such delay
in acceptance, extension, termination or amendment will be followed
as promptly as practicable by oral or written notice thereof to the
bondholders. If the exchange offer is amended in a manner determined
by us to constitute a material change, we will promptly disclose
such amendment by means of a prospectus supplement that will be
distributed to all bondholders, and we will extend the exchange
offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to
bondholders, if the exchange offer would otherwise expire during
such five to ten business day period. During any extension of the
expiration date of the exchange offer, all Old Bonds previously
tendered will remain subject to the exchange offer and may be
accepted for exchange by us.
We shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
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Interest on the New Bonds
Interest accrues on the New Bonds at the rate of 8 1/8% per annum from
July 30, 1999 and is payable in cash semiannually in arrears on February 1 and
August 1 of each year, commencing February 1, 2000; provided that in the event
the exchange offer is consummated on or after February 1, 2000, interest will
accrue from February 1, 2000 and interest will be payable commencing on August
1, 2000. No interest will be payable on the Old Bonds on the date of the
exchange for the New Bonds and therefore no interest will be paid thereon to the
bondholders at such time.
Procedures for Tendering the Old Bonds
When a beneficial owner of Old Bonds tenders them to the Company as set
forth below and the Company accepts the Old Bonds, the beneficial owner of the
Old Bonds and the Company will be deemed to have entered into a binding
agreement upon the terms and subject to the conditions set forth in this
prospectus and the letter of transmittal.
Except as set forth below, if you wish to tender the Old Bonds for
exchange pursuant to the exchange offer, we must receive a properly completed
and duly executed letter of transmittal, including all other documents required
by such letter of transmittal, to the exchange agent at one of the addresses set
forth below under "Exchange Agent" on or prior to the expiration date of the
exchange offer. In addition:
o the exchange agent must receive certificates for such Old Bonds
along with the letter of transmittal;
o the exchange agent must receive prior to the expiration date of the
exchange offer a timely confirmation of a book-entry transfer of
such Old Bonds into the exchange agent's account at the Depository
Trust Company pursuant to the procedure for book-entry transfer
described below; or
o the bondholder must comply with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF OLD BONDS, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE BONDHOLDER. IF SUCH
DELIVERY IS BY MAIL, WE RECOMMEND THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT
TIME TO ASSURE TIMELY DELIVERY. YOU SHOULD NOT SEND LETTERS OF TRANSMITTAL OR
OLD BONDS TO US.
Each signature on a letter of transmittal or a notice of withdrawal, as
the case may be, must be guaranteed unless the Old Bonds surrendered for
exchange pursuant thereto are tendered:
o by a registered bondholder who has not completed the box entitled
"Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" in the letter of transmittal; or
o for the account of an eligible institution (as defined below).
In the event that a signature on a letter of transmittal or a notice of
withdrawal, as the case may be, is required to be guaranteed, such guarantee
must be by a firm which is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the United
States or otherwise be an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). If
the Old Bonds are registered in the name of a person other than the person
signing the letter of transmittal, the Old Bonds surrendered for exchange must
be endorsed by, or be accompanied by, a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by us in our sole
discretion, duly executed by the registered bondholder with the signature
thereon guaranteed by an Eligible Institution. If the letter of transmittal is
signed by a person or persons other than the registered bondholder or
bondholders, the Old Bonds must either be endorsed by the registered bondholder
with signature guaranteed by an Eligible Institution or accompanied by
appropriate powers of attorney
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with signature guaranteed by an Eligible Institution. In either case, the Old
Bonds must be signed exactly as the name or names of the registered bondholder
or bondholders that appear on the Old Bonds.
If a trustee, executor, administrator, guardian, attorney-in-fact, officer
of a corporation or another acting in a fiduciary or representative capacity
signs the letter of transmittal or any Old Bonds or powers of attorney, the
person signing should indicate in which capacity he or she is signing and,
unless waived by us, submit proper evidence satisfactory to us of his or her
authority to sign with the letter of transmittal.
By tendering, each bondholder will represent to us that, among other
things:
o the New Bonds acquired pursuant to the exchange offer are being
acquired in the ordinary course of business of the person receiving
such New Bonds, whether or not that person is the bondholder;
neither the bondholder nor any such other person has an arrangement
or understanding with any person to participate in the distribution
of such New Bonds;
o if the bondholder is not a broker-dealer, or is a broker-dealer but
will not receive New Bonds for its own account in exchange for the
Old Bonds, neither the bondholder nor any such other person is
engaged in or intends to participate in the distribution of such New
Bonds; and neither the bondholder nor any such other person is an
"affiliate" of ours, as defined under Rule 405 of the Securities
Act. If the tendering bondholder is a broker-dealer that will
receive New Bonds for its own account in exchange for Old Bonds that
were acquired as a result of market-making activities or other
trading activities, the bondholder may be deemed to be an
"underwriter" within the meaning of the Securities Act and will be
required to acknowledge that it will deliver a prospectus in
connection with any resale of such New Bonds. The letter of
transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
DELIVERY OF DOCUMENTS TO US OR THE DEPOSITORY TRUST COMPANY DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
We will determine in our sole discretion all questions as to the validity,
form, eligibility (including time of receipt) and acceptance of the Old Bonds
tendered for exchange, which determination shall be final and binding. We
reserve the absolute right to reject any and all tenders of any particular Old
Bonds not properly tendered or to not accept any particular Old Bonds which
acceptance might, in our judgment or our counsel, be unlawful. We also reserve
the absolute right in our sole discretion to waive any defects or irregularities
or conditions of the exchange offer as to any particular Old Bonds either before
or after the expiration date of the exchange offer (including the right to waive
the ineligibility of any bondholder who seeks to tender Old Bonds in the
exchange offer). The interpretation of the terms and conditions of the exchange
offer as to any particular Old Bonds either before or after the expiration date
of the exchange offer (including the letter of transmittal and its instructions)
by us shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with the tenders of Old Bonds for exchange must be
cured within a reasonable period of time as we shall determine. Neither the
Company, the exchange agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of Old
Bonds for exchange, nor shall any of them incur any liability for failure to
give such notification.
Acceptance of the Old Bonds for Exchange; Delivery of the New Bonds
Upon satisfaction or waiver of all of the conditions to the exchange
offer, we will accept, promptly after the expiration date of the exchange offer,
all Old Bonds properly tendered and will issue the New Bonds promptly after
acceptance of the Old Bonds. See "--Certain Conditions to the Exchange Offer"
below. For purposes of the exchange offer, we shall be deemed to have accepted
properly tendered Old Bonds for exchange when, and if we have given verbal or
written notice of our acceptance to the exchange agent. In all cases, issuance
of the New Bonds for the Old Bonds that are accepted for exchange pursuant to
the exchange offer will be made only after timely receipt by the exchange agent
of the following:
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o certificates for such Old Bonds or a timely confirmation of a
book-entry transfer of such Old Bonds into the exchange agent's
account at the Depository Trust Company pursuant to the book-entry
transfer procedures described below;
o a properly completed and duly executed letter of transmittal; and
o all other required documents.
If any tendered Old Bonds are not accepted for any reason set forth in the terms
and conditions of the exchange offer or if certificates representing the Old
Bonds are submitted for a greater principal amount than the bondholder desires
to exchange, those unaccepted or non-exchanged Old Bonds will be returned
without expense to the tendering bondholder thereof (or, in the case of Old
Bonds tendered by book-entry transfer into the exchange agent's account at the
Depository Trust Company pursuant to the book-entry transfer procedures
described below, those non-exchanged Old Bonds will be credited to an account
maintained with the Depository Trust Company) as promptly as practicable after
the expiration or termination of the exchange offer.
Book-Entry Transfer
The exchange agent will make a request to establish an account with
respect to the Old Bonds at the Depository Trust Company for purposes of the
exchange offer promptly after the date of this prospectus. Any financial
institution that is a participant in the Depository Trust Company's systems may
make book-entry delivery of the Old Bonds by causing the Depository Trust
Company to transfer such Old Bonds into the exchange agent's account at the
Depository Trust Company in accordance with the Depository Trust Company's
Automated Tender Offer Program ("ATOP") procedures for transfer. However, the
exchange for the Old Bonds so tendered will only be made after timely
confirmation of such book-entry transfer of Old Bonds into the exchange agent's
account, and timely receipt by the exchange agent of an Agent's Message (as such
term is defined in the next sentence) and any other documents required by the
letter of transmittal on or prior to the expiration date of the exchange offer
or pursuant to the guaranteed delivery procedures described below. The term
"Agent's Message" means a message, transmitted by the Depository Trust Company
and received by the exchange agent and forming a part of a timely confirmation
of a book-entry transfer, which states that the Depository Trust Company has
received an express acknowledgement from a bondholder tendering Old Bonds that
are the subject of such timely confirmation of a book-entry transfer that such
bondholder has received and agrees to be bound by the terms of the letter of
transmittal, and that we may enforce such agreement against such bondholder.
Guaranteed Delivery Procedures
If a registered bondholder of the Old Bonds desires to tender such Old
Bonds and the Old Bonds are not immediately available, or time will not permit
such bondholder's Old Bonds or other required documents to reach the exchange
agent before the expiration date of the exchange offer, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if:
o the tender is made through an Eligible Institution;
o prior to the expiration date of the exchange offer, the exchange
agent receives from such Eligible Institution a properly completed
and duly executed letter of transmittal (or a facsimile thereof) and
Notice of Guaranteed Delivery, substantially in the form provided by
us (by telegram, telex, facsimile transmission, mail or hand
delivery), setting forth the name and address of the bondholder and
the amount of Old Bonds tendered, stating that the tender is being
made thereby and guaranteeing that within five New York Stock
Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates of all physically
tendered Old Bonds, in proper form for transfer, or a timely
confirmation of a book-entry transfer, as the case may be, and any
other documents required by the letter of transmittal will be
deposited by the Eligible Institution with the exchange agent; and
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o the certificates for all physically tendered Old Bonds, in proper
form for transfer, or a timely confirmation of a book-entry
transfer, as the case may be, and all other documents required by
the letter of transmittal, are received by the exchange agent within
five NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
Withdrawal Rights
You may withdraw your tender of the Old Bonds at any time prior to the
expiration date of the exchange offer.
For a withdrawal to be effective, the exchange agent must receive a
written notice of withdrawal at the applicable address set forth below under
"Exchange Agent." Any such notice of withdrawal must:
o specify the name of the person having tendered the Old Bonds to be
withdrawn;
o identify the Old Bonds to be withdrawn (including the principal
amount of such Old Bonds); and
o (where certificates for Old Bonds have been transmitted) specify the
name in which such Old Bonds are registered, if different from that
of the withdrawing bondholder.
If certificates for Old Bonds have been delivered or otherwise identified to the
exchange agent, then, prior to the release of such certificates, the withdrawing
bondholder must also submit the serial numbers of the particular certificates to
be withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such bondholder is an Eligible Institution. If Old
Bonds have been tendered pursuant to the procedure for book-entry transfer
described above, any note of withdrawal must specify the name and number of the
account at the Depository Trust Company to be credited with the withdrawn Old
Bonds and otherwise comply with the procedures of such facility. We will
determine all questions as to the validity, form and eligibility (including time
of receipt) of such notices, which shall be final and binding on all parties.
Any Old Bonds so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the exchange offer. Old Bonds which have been tendered
for exchange but which are not exchanged for any reason will be returned to the
bondholder thereof without cost to such bondholder (or, in the case of Old Bonds
tendered by book-entry transfer procedures described above, such Old Bonds will
be credited to an account maintained with the Depository Trust Company for the
Old Bonds) as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. You may retender your properly withdrawn Old
Bonds by following one of the procedures described under "Procedures for
Tendering the Old Bonds" above at any time on or prior to the expiration date of
the exchange offer.
Certain Conditions to the Exchange Offer
Notwithstanding any other provision of the exchange offer, we shall not be
required to accept for exchange, or to issue New Bonds in exchange for, any Old
Bonds and may terminate or amend the exchange offer, if at any time before the
acceptance of such Old Bonds for exchange or the exchange of the New Bonds for
such Old Bonds, there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been issued by,
any court or governmental agency or other governmental regulatory or
administrative agency or commission:
(1) seeking to restrain or prohibit the making or consummation of the
exchange offer or any other transaction contemplated by the exchange
offer, or assessing or seeking any damages as a result thereof; or
(2) resulting in a material delay in our ability to accept for exchange
or exchange some or all of the Old Bonds pursuant to the exchange
offer; or
(3) any statute, rule, regulation, order or injunction shall be sought,
proposed, introduced, enacted, promulgated or deemed applicable to
the exchange offer or any of the transactions contemplated by the
exchange offer by any government or governmental authority, domestic
or foreign; or
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(4) any action shall have been taken, proposed or threatened, by any
government, governmental authority, agency or court, domestic or
foreign;
that in our sole judgment might directly or indirectly result in any of the
consequences referred to in (1) or (2) above or, in our sole judgment, might
result in the holders of New Bonds having obligations with respect to resales
and transfers of New Bonds which exceed those described in this prospectus, or
would otherwise make it inadvisable to proceed with the exchange offer. If we
determine in good faith that any of the conditions are not met, we may:
o refuse to accept any Old Bonds and return all tendered Old Bonds to
exchanging bondholders;
o extend the exchange offer and retain all Old Bonds tendered prior to
the expiration of the exchange offer, subject, however, to the
rights of bondholders to withdraw such Old Bonds (see "-Withdrawal
Rights"); or
o waive some of the unsatisfied conditions with respect to the
exchange offer and accept all properly tendered Old Bonds which have
not been withdrawn or revoked. If such waiver constitutes a material
change to the exchange offer, we will promptly disclose such waiver
by means of a prospectus supplement that will be distributed to all
bondholders.
Bondholders have specified rights and remedies against us under the
Registration Rights Agreement, including specified liquidated damages, should we
fail to consummate the exchange offer within a specified period of time,
notwithstanding a failure due to the occurrence of any of the conditions stated
above. Such conditions are not intended to modify those rights or remedies in
any respect. The foregoing conditions are for our benefit and may be asserted by
us in good faith regardless of the circumstances giving rise to such condition
or may be waived by us in whole or in part at any time and from time to time in
our discretion. The failure by us at any time to exercise the foregoing rights
shall not be deemed a wavier of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
Exchange Agent
The Bank of New York has been appointed as exchange agent for the exchange
offer. You should direct your questions and requests for assistance, requests
for additional copies of this prospectus or of the letter of transmittal to the
exchange agent addressed as follows:
- --------------------------------------------------------------------------------
By overnight courier or by hand: By registered or certified mail:
- --------------------------------------------------------------------------------
The Bank of New York The Bank of New York
- --------------------------------------------------------------------------------
Corporate Trust Service Window 101 Barclay Street 7E
- --------------------------------------------------------------------------------
Ground Level New York, NY 10286
- --------------------------------------------------------------------------------
101 Barclay Street Attention: Enrique Lopez
- --------------------------------------------------------------------------------
New York, NY 10286 Telephone: (212) 815-2742
- --------------------------------------------------------------------------------
Attention: Enrique Lopez Facsimile: (212) 815-6339/4699
- --------------------------------------------------------------------------------
Reorg Department, 7 East
- --------------------------------------------------------------------------------
Telephone: (212) 815-2742
- --------------------------------------------------------------------------------
Facsimile: (212) 815-4699
- --------------------------------------------------------------------------------
IF YOU DELIVER TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMIT
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, IT WILL NOT BE A VALID
DELIVERY.
Fees and Expenses; Solicitation of Tenders
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telephone or in person by our officers and regular employees and
our affiliates.
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We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection with the exchange offer. The
cash expenses to be incurred in connection with the exchange offer will be paid
by us and are estimated in the aggregate to be $140,000 which includes fees and
expenses of the exchange agent and Trustee plus accounting and legal fees.
We will pay all transfer taxes, if any, applicable to the exchange of the
Old Bonds pursuant to the exchange offer. If, however, certificates representing
the New Bonds or the Old Bonds for principal amounts not tendered or accepted
for exchange are to be delivered to, or are to be registered or issued in the
name of, any person other than the registered bondholders tendered, or if a
transfer tax is imposed for any reason other than the exchange of the Old Bonds
pursuant to the exchange offer, then the tendering bondholder must pay the
amount of any such transfer taxes (whether imposed on the registered holder or
any other persons). If a tendering bondholder does not submit satisfactory
evidence of payment of such taxes or exemption therefrom to the exchange agent,
the amount of such transfer taxes will be billed directly to such tendering
bondholder.
We have not authorized any person to give any information or to make any
representations in connection with the exchange offer other than those contained
in this prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by us. Neither the delivery of this
prospectus nor any exchange made hereunder shall, under any circumstances,
create any implication that there has been no change in our affairs since the
respective dates as of which information is given in this prospectus. The
exchange offer is not being made to (nor will tenders be accepted from or on
behalf of) bondholders in any jurisdiction in which the making of the exchange
offer or the acceptance of this prospectus would not be in compliance with the
laws of such jurisdiction.
Accounting Treatment
We will record the New Bonds at the same carrying value as the Old Bonds,
which is face value, as recorded in our accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The costs of the exchange offer will be expensed over the term of
the New Bonds.
Consequences of Failure to Exchange
If you do not exchange your Old Bonds for New Bonds pursuant to the
exchange offer, you will continue to be subject to the restrictions on transfer
of such Old Bonds as set forth in the legend on the Old Bonds. In general, you
may not offer to sell or sell the Old Bonds, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. We do not
intend to register the Old Bonds under the Securities Act. We believe that,
based upon interpretations contained in no-action letters issued to third
parties by the staff of the SEC, any bondholder may offer for resale, resell or
otherwise transfer the New Bonds issued pursuant to the exchange offer in
exchange for the Old Bonds (unless the bondholder is an "affiliate" of ours
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that:
o the bondholder acquires the New Bonds in the ordinary course of its
business; and
o the bondholder has no arrangement with any person to participate in
the distribution of such Old Bonds; and
o each broker-dealer that receives New Bonds for its own account in
exchange for Old Bonds must acknowledge that it will deliver a
prospectus in connection with any resale of such New Bonds. See
"Plan of Distribution."
If any bondholder (other than a broker-dealer described in the preceding
sentence) has any arrangement or understanding with respect to the distribution
of the New Bonds to be acquired pursuant to the exchange offer, such bondholder
could not rely on the applicable interpretations of the staff of the SEC and
must comply with the
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registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. In addition, to comply with the
securities laws of various jurisdictions, if applicable, you may not offer or
sell the New Bonds unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification is
available and is complied with.
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DESCRIPTION OF THE NEW BONDS
You can find the definitions of many of the terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Company" refers only to Central Vermont Public Service Company and not to any
of its subsidiaries.
The Company will issue the New Bonds under a Second Mortgage Indenture
(the "Second Mortgage Indenture") between itself and The Bank of New York, as
trustee (the "Trustee"). The Second Mortgage Indenture will be supplemented by a
second supplemental indenture (the "Supplemental Indenture" and, together with
the Second Mortgage Indenture, the "Second Mortgage"), in a public transaction
registered under the Securities Act. The terms of the New Bonds 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 "Trust Indenture
Act"). The issuance of the New Bonds under the Supplemental Indenture will be
based upon retired Old Bonds to be exchanged for New Bonds as contemplated in
the Registration Rights Agreement (such exchange, the "Exchange Offer"). See
"The Exchange Offer." The New Bonds will be secured by the Mortgaged Property.
The following description is a summary of the material provisions of the
Second Mortgage, as supplemented by the Supplemental Indenture. This summary
does not purport to be complete and does not restate those agreements in their
entirety. This summary is subject to, and qualified in its entirety by,
reference to the provisions of the Second Mortgage and the Supplemental
Indenture. We urge you to read the Second Mortgage and the Supplemental
Indenture because they, and not this description, define your rights as holders
of the New Bonds. Copies of the Second Mortgage and the Supplemental Indenture
are available as described under "--Additional Information." Certain defined
terms used in this description but not defined below under "--Certain
Definitions" have the meanings assigned to them in the Second Mortgage and the
Supplemental Indenture.
Brief Description of the New Bonds
The New Bonds:
o are general obligations of the Company and not those of our
subsidiaries;
o are secured by a second priority mortgage lien on the Mortgaged
Property; and
o are effectively senior in right of payment to any future unsecured
Indebtedness of the Company to the extent of the value of the
Mortgaged Property.
Principal, Maturity and Interest
The Second Mortgage Indenture provides for the issuance by the Company of
Second Mortgage Bonds with an unlimited maximum aggregate principal amount. The
New Bonds represent the second series of Second Mortgage Bonds issued under the
Second Mortgage in an aggregate principal amount of $75.0 million minus the
outstanding aggregate principal amount of the Old Bonds that have not been
accepted for exchange pursuant to the Exchange Offer. The New Bonds and all
other series of Second Mortgage Bonds issued under the Second Mortgage are
collectively referred to as "Second Mortgage Bonds." The Company will issue New
Bonds in denominations of $1,000 and integral multiples of $1,000. The New Bonds
will mature on August 1, 2004, unless we redeem the New Bonds earlier as
discussed below.
Interest on the New Bonds will accrue at the rate of 8 1/8% per annum and
will be payable semi-annually in arrears on February 1 and August 1, commencing
on February 1, 2000. The Company will make each interest payment to the Holders
of record on the immediately preceding January 15 and July 15.
Interest on the New Bonds will accrue from July 30, 1999 or, if interest
has already been paid on the Old Bonds to be exchanged pursuant to the Exchange
Offer for the corresponding New Bonds, from the date it was most recently paid
thereon. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
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Methods of Receiving Payments on the New Bonds
The New Bonds will be issued in the form of one or more Global Bonds, in
registered form, without coupons, in denominations of $1,000 or any integral
multiple thereof as described under "--Book-Entry, Delivery and Form." The
Global Bonds will be registered in the name of a nominee of DTC. Each Global
Bond (and any New Bond issued in exchange therefor) will be subject to
restrictions on transfer set forth therein as described under "--Book-Entry,
Delivery and Form--Certificated Bonds." Except as set forth under "--Book-Entry,
Delivery and Form--Certificated Bonds," owners of beneficial interests in a
Global Bond will not be entitled to have New Bonds registered in their names,
will not receive or be entitled to receive physical delivery of the New Bond and
will not be considered the registered holder of the New Bond under the Second
Mortgage.
So long as New Bonds are held in the form of one or more Global Bonds,
payments of principal, premium and interest will be payable through the
facilities of DTC.
Paying Agent and Registrar for the New Bonds
The Trustee will initially act as Paying Agent and Registrar. The Company
may change the Paying Agent or Registrar without prior notice to the Holders,
and the Company or any of its Subsidiaries may act as Paying Agent or Registrar.
Transfer and Exchange
A Holder may transfer or exchange New Bonds in accordance with the Second
Mortgage. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Second Mortgage. The Company is not required to transfer or
exchange any New Bond selected for redemption. Also, the Company is not required
to transfer or exchange any New Bond for a period of 15 days before a selection
of New Bonds to be redeemed. The registered Holder of a New Bond will be treated
as the owner of it for all purposes.
Security and Priority
The New Bonds will be secured equally and ratably with all Second Mortgage
Bonds of other series that may be issued in the future under the Second Mortgage
Indenture by a second mortgage lien on substantially all of our tangible utility
assets (but not any property of our subsidiaries).
o We own our principal plants and properties, insofar as they
constitute real estate, in fee.
o We also own equity interests in the Vermont Yankee, Maine Yankee,
Connecticut Yankee and Yankee Atomic nuclear generating plants
(which equity interests are not a part of the security under the
First Mortgage and Second Mortgage).
o We have leases, easements or permits to operate our facilities
located on property we do not own.
o We have also obtained permits, grants, easements, licenses or
franchises for our electric transmission and distribution systems,
which are mostly located over or under highways, streets, other
public places or property owned by others.
The lien of the Second Mortgage is subject to Permissible Encumbrances and
specified exceptions. We will probably acquire property after the Initial
Issuance Date, which may be subject to the lien of the Second Mortgage and, to
the extent described below, will also be subject to the prior lien of the First
Mortgage Bonds. Such after-acquired property may also be subject to prior liens,
subject to limitations under our First Mortgage and Second
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Mortgage, which secure debt outstanding at the time of such acquisition in an
amount not in excess of its Cost or fair market value, whichever is less, and to
other Permissible Encumbrances.
We own property excepted from the lien of the Second Mortgage. Excepted
property under the First Mortgage and the Second Mortgage includes, among other
things:
o cash and securities (unless deposited with the respective trustees);
o accounts receivable, contracts, leases and operating agreements;
o equipment, materials, supplies and fuel held for sale or other
disposition in the ordinary course of business or for consumption or
use by us;
o electricity, gas and other materials, products or services
generated, manufactured, produced or purchased by us for sale or
distribution or to be used by us;
o telephone properties, leasehold interests and leasehold
improvements; and
o other real and personal property which is not used or to be used for
one or more of the primary purposes of our business.
The Trustee shall have a lien, senior to the Second Mortgage, on the
Mortgaged Property for the payment of its reasonable compensation and expenses
and for indemnity against liabilities.
The lien of the First Mortgage ranks prior to the lien of the Second
Mortgage. The aggregate principal amount of First Mortgage Bonds outstanding at
June 30, 1999 was $76.5 million. The outstanding First Mortgage Bonds mature at
various dates through 2031. See "Description of Other Indebtedness and Preferred
Stock." Our reimbursement obligations in respect of three letters of credit
aggregating approximately $16.9 million, which support three series of
industrial development bonds, were, concurrently with the issuance of the Old
Bonds, secured by a pledge of newly-issued First Mortgage Bonds, in an aggregate
principal amount of approximately $16.9 million. These First Mortgage Bonds are
referred to herein as the "Pledge Bonds." There are no other material prior
liens on the Mortgaged Property. Additional First Mortgage Bonds may be issued
in the future in accordance with the provisions of the First Mortgage described
below under the heading "Issuance of Additional First Mortgage Bonds" subject to
the restrictions on us contained in the terms of other indebtedness. At June 30,
1999, we could have issued up to $26.9 million of additional First Mortgage
Bonds under the First Mortgage prior to the issuance of the Pledge Bonds.
Agreements relating to the outstanding letters of credit currently contain
restrictive covenants further limiting the amount of indebtedness we can incur.
See "Description of Other Indebtedness and Preferred Stock--Other Indebtedness."
As discussed under the heading "Issuance of Additional First Mortgage Bonds", we
do not expect to issue additional First Mortgage Bonds prior to the maturity of
the Second Mortgage Bonds.
While First Mortgage Bonds are outstanding, the trustee under the First
Mortgage shall have control over the utilization of remedies available with
respect to the Mortgaged Property. Upon the occurrence and during the
continuance of a Default or Event of Default the trustee under the First
Mortgage (or if there are no First Mortgage Bonds outstanding, the Trustee) may
sell the Mortgaged Property or any part thereof in accordance with the terms of
the First Mortgage and any required regulatory approvals.
All funds received by the Trustee for the benefit of the Holders of the
New Bonds will be distributed by the Trustee in accordance with the provisions
of the Second Mortgage. Subject to the priority of the First Mortgage and any
required regulatory approvals, the Trustee will determine the circumstances and
manner in which the Mortgaged Property shall be disposed of, including, but not
limited to, the determination of whether to release all or any portion of the
Mortgaged Property from the Lien created by the Second Mortgage and whether to
foreclose on the Mortgaged Property following a Default or Event of Default.
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Release and Substitution of Mortgaged Property
Mortgaged Property may be released from the lien of the Second Mortgage:
(1) if after such release, the fair market value of the remaining
Mortgaged Property, including any Mortgaged Property to be acquired as a
result of such release, equals or exceeds a sum equal to the aggregate
principal amount of outstanding New Bonds, Old Bonds and Prior Lien Bonds,
including First Mortgage Bonds, outstanding; or
(2) if, subject to a 1% limitation during any 12-month period, the
fair market value of the Mortgaged Property to be released is less than
1/2 of 1% of the aggregated principal amount of outstanding New Bonds, Old
Bonds and Prior Lien Bonds, including First Mortgage Bonds, outstanding;
or
(3) on the basis of the deposit of cash, purchase money obligations,
Governmental Obligations or Bondable Property acquired by us with the
proceeds of, or otherwise in connection with, such release, or a waiver of
the right to authenticate and deliver Second Mortgage Bonds on the basis
of Second Mortgage Bonds or Prior Lien Bonds, including First Mortgage
Bonds, which have been retired, purchased or acquired by us since the date
of the Second Mortgage and have not theretofore been Bonded, or
combination thereof.
Withdrawal of Cash
We may withdraw cash deposited with the Trustee in the amount of:
(1) 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 (a) outstanding and secured by a
Prior Lien on Bondable Property owned by us at the date of the Second
Mortgage, (b) outstanding and secured by a Prior Lien on Bondable Property
at the date of its acquisition by us after such date and (c) issued after
the date of the Second Mortgage; or
(2) the principal amount of Second Mortgage Bonds previously issued
under the Second Mortgage and Prior Lien Bonds, including First Mortgage
Bonds, in each case which have been retired or purchased or acquired by
us, and which have not theretofore been Bonded.
Issuance of Additional Second Mortgage Bonds
The Second Mortgage permits us to issue additional Second Mortgage Bonds
in a principal amount equal to the sum of:
(1) 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 (a) outstanding and secured by a
Prior Lien on Bondable Property owned by us at the date of the Second
Mortgage, (b) outstanding and secured by a Prior Lien on Bondable Property
at the date of its acquisition by us after such date and (c) issued after
the date of the Second Mortgage; and
(2) the principal amount of New Bonds, Old Bonds and Prior Liens
Bonds, including First Mortgage Bonds, which we have retired, purchased or
acquired since the date of the Second Mortgage or we are retiring,
purchasing or acquiring, and which have not already been Bonded; and
(3) the amount of cash deposited with the Trustee for such purpose.
Bondable Property includes our electric generating, electric transmission
and distribution properties; construction work in progress; property in the
process of being purchased in which we have legal title; easements on property
of others; fractional and undivided interests in property; engineering,
financial, economic and legal and
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other surveys, data processing equipment and software associated with the
acquisition or construction of property; and property we own located on property
others own, which we have the right to remove.
We will issue the New Bonds on the basis of retired Old Bonds. In
accordance with the limitations above, at June 30, 1999, after giving effect to
the issuance of the Old Bonds, we could have issued approximately $59.5 million
of additional Second Mortgage Bonds, subject to the restrictions on us contained
in the terms of other indebtedness. See "Description of Other Indebtedness and
Preferred Stock--Other Indebtedness." Subject to these additional restrictions
and after giving effect to the issuance of the New Bonds and the Pledge Bonds,
as of June 30, 1999, we could have issued approximately $20 million of
additional Second Mortgage Bonds.
Issuance of Additional First Mortgage Bonds
So long as the requirements of the First Mortgage are met, we may issue
additional First Mortgage Bonds to the extent of one or more of the following:
(1) the amount of available previously retired First Mortgage Bonds;
(2) 60% of the value of expenditures we make for additions and
improvements to our property subject to the First Mortgage;
(3) the amount of retired obligations secured by property we
acquire; and
(4) the amount of cash on deposit with the First Mortgage trustee.
If First Mortgage Bonds are issued on the basis of (2) above, and in some
cases under (1) above, we must meet a mortgage interest coverage test that
requires us to have net earnings equal to at least twice the interest on all
First Mortgage Bonds to be outstanding after an issuance.
The First Mortgage provides that additional First Mortgage Bonds may not
be issued on the basis of (2) above if the property that is to be the basis for
issuance is subject to a Lien other than the lien of the First Mortgage.
Therefore, we will not be permitted to issue Second Mortgage Bonds on the basis
of (2) above so long as the lien of the Second Mortgage is in place.
Furthermore, we do not have and do not expect to have prior to the maturity of
the Second Mortgage Bonds, any obligations that would serve as a basis for
issuance under (3) above.
At the time we issued the Old Bonds, we issued approximately $16.9 million
of Pledge Bonds on the basis of (1) above to secure our reimbursement
obligations under letters of credit supporting outstanding development authority
bonds. After the issuance of the Pledge Bonds, $10.0 million of previously
retired First Mortgage Bonds is available as the basis for issuance of
additional First Mortgage Bonds. Prior to the maturity of the Second Mortgage
Bonds, we also expect to retire an additional $41.0 million of First Mortgage
Bonds. The maximum amount of First Mortgage Bonds that can be outstanding at any
time prior to the maturity of the Second Mortgage Bonds is $103.4 million.
However, we are required to meet renewal fund requirements under the First
Mortgage each year which we expect to meet with all available retired First
Mortgage Bonds. Retired First Mortgage Bonds used to meet those requirements may
not be used as the basis for issuance of additional First Mortgage Bonds.
Therefore, we do not intend to issue any additional First Mortgage Bonds prior
to the maturity of the Second Mortgage Bonds.
Optional Redemption
The New Bonds will be redeemable at the option of the Company at any time,
in whole or in part, upon not less than 30 nor more than 60 days' notice, in
cash at a redemption price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon through the applicable redemption date plus
the Make Whole Premium.
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Selection and Notice
If less than all of the New Bonds are to be redeemed at any time, the
Trustee will select New Bonds for redemption on a pro rata basis.
No New Bonds of $1,000 in principal amount or less shall be redeemed in
part. 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 New Bonds to
be redeemed at its registered address. Notices of redemption may not be
conditional.
If any New Bond is to be redeemed in part only, the notice of redemption
that relates to that New Bond shall state the portion of the principal amount
thereof to be redeemed. A new New Bond in principal amount equal to the
unredeemed portion of the original New Bond will be issued in the name of the
Holder thereof upon cancellation of the original New Bond. New Bonds called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest will cease to accrue on New Bonds or portions of them
called for redemption.
Mandatory Redemption
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the New Bonds.
Changes in Covenants when New Bonds Rated Investment Grade
If at any time the New Bonds are rated BBB- (or the equivalent) or higher
by S&P or Baa 3 (or the equivalent) or higher by Moody's (each a "Rating Event"
and such date, the "Rating Event Date"), the covenants specifically listed under
the captions:
"Repurchase at the Option of Holders--Asset Sales other than Mortgaged
Property Asset Sales;"
"Repurchase at the Option of Holders--Mortgaged Property Asset Sales and
Events of Loss;"
"Certain Covenants--Restricted Payments;"
"--Incurrence of Indebtedness;"
"--Dividend and Other Payment Restrictions Affecting Regulated
Subsidiaries;"
"--Merger, Consolidation or Sale of Assets;"
"--Sale and Leaseback Transactions;"
"--Transactions with Affiliates;" and
"--Payments for Consents"
in this prospectus (collectively, the "Suspended Covenants") will not be
applicable to the New Bonds; provided, however, if at any time after a Rating
Event Date the New Bonds shall be rated lower than BBB- by S&P, if rated by S&P,
and Baa 3 by Moody's, if rated by Moody's, the Suspended Covenants shall be
automatically reinstated (the "Reinstated Covenants") and all events that
occurred during any time that such covenants were suspended and that would have
violated such covenants had such covenants 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 covenants for all purposes;
provided, further that thereafter all events occurring during any period in
which the Suspended Covenants have been reinstated shall be required to be in
compliance with the Reinstated Covenants.
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Notwithstanding the foregoing, if S&P and Moody's cease to rate the New
Bonds 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.
There can be no assurance that a Rating Event Date will occur, or, if one
occurs, that the New Bonds will continue to maintain an investment grade rating.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of New Bonds 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 New
Bonds 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 New
Bonds repurchased plus accrued and unpaid interest thereon, to the date of
purchase. Within thirty days following any Change of Control, the Company will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase New Bonds 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.
The Company will 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 the New Bonds as a result of 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 will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Change of Control provisions of the
Second Mortgage by virtue of such compliance.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all New Bonds or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all New Bonds or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the Trustee the New Bonds so
accepted together with an Officers' Certificate stating the aggregate
principal amount of New Bonds or portions thereof being purchased by the
Company.
The Paying Agent will promptly mail to each Holder of New Bonds so
tendered the Change of Control Payment for such New Bonds, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new New Bond equal in principal amount to any unpurchased portion
of the New Bonds surrendered, if any; provided that each such new New Bond will
be in a principal amount of $1,000 or an integral multiple thereof.
The provisions described above that require the Company to make a Change
of Control Offer following a Change of Control will be applicable regardless of
whether any other provisions of the Second Mortgage are applicable. Except as
described above with respect to a Change of Control, the Second Mortgage does
not contain provisions that permit the Holders of the New Bonds to require that
the Company repurchase or redeem the New Bonds in the event of a takeover,
recapitalization or similar transaction.
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The Company will 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 New Bonds validly tendered and not withdrawn under
such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of the Company and its
subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of New Bonds to require the Company to repurchase such New Bonds as a
result of a sale, lease, transfer, conveyance or other disposition of less than
all of the assets of the Company and its subsidiaries taken as a whole to
another Person or group may be uncertain.
The Change of Control purchase feature of the New Bonds may in specified
circumstances make more difficult or discourage a takeover. The Change of
Control purchase feature of the New Bonds is not the result of our knowledge of
any specific effort to accumulate shares of our common stock or to obtain
control of us by means of a merger, tender offer, solicitation or otherwise.
Instead, the Change of Control purchase feature of the New Bonds is a term
contained in many similar debt offerings and the terms of such feature result
from negotiations between us and the Initial Purchasers when the Second Mortgage
was established. In addition, our ability to purchase may be limited by
financial resources and our inability to raise the required funds because of
restrictions on the issuance of securities contained in other covenants
applicable to the New Bonds.
Asset Sales other than Mortgaged Property Asset Sales
The Company will not, and will not permit any of its Regulated
Subsidiaries to, consummate an Asset Sale, other than a Mortgaged Property Asset
Sale, unless:
(1) 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 $5.0 million); 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
(2) 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 (2) shall not
apply to Designated Asset Sales with an aggregate fair market value since
the Initial Issuance Date of less than $5.0 million). 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 New Bonds)
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) any 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).
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:
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(1) 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
(2) the repayment of outstanding Prior Lien Bonds.
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 the Second Mortgage.
Any Net Proceeds from Asset Sales other than Mortgaged Property Asset
Sales that are not applied or invested as provided in the second sentence of
this section will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $7.5 million, the Company or the applicable
Regulated Subsidiary will be required to make an offer to all Holders of New
Bonds (an "Asset Sale Offer") and all holders of additional Second Mortgage
Bonds then outstanding to purchase the maximum principal amount of New Bonds 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 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 New Bonds 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
New Bonds and such additional Second Mortgage Bonds surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the New
Bonds 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.
Mortgaged Property Asset Sales and Events of Loss
The Company will not engage in a Mortgaged Property Asset Sale unless:
(1) 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
$10.0 million 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 $10.0 million; 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 $10.0 million limitation in this clause (1);
(2) 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;
(3) 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 (1) and (2) above and
(b) if the fair market value of the Mortgaged Property being
sold exceeds $5.0 million, such fair market value was based on the
opinion of an Independent Appraiser prepared contemporaneously with
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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;
(4) 100% of such consideration is in cash or Cash Equivalents; and
(5) 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.
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:
(1) to purchase or otherwise invest in Bondable Property which shall
become additional Mortgaged Property under the Second Mortgage; or
(2) to repay outstanding Prior Lien Bonds.
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 the second paragraph of the
covenant entitled "Asset Sales other than Mortgaged Property Asset Sales." 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.
If the Company suffers an Event of Loss with respect to Mortgaged
Property:
(1) 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
(2) the Company shall take such actions, at its sole expense, as may
be required to ensure that the Trustee, pursuant to 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 the Second Mortgage.
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:
(1) to purchase or otherwise invest in Bondable Property which shall
become additional Mortgaged Property under the Second Mortgage;
(2) to restore the relevant Mortgaged Property; or
(3) to repay outstanding Indebtedness with Liens on the Mortgaged
Property that rank prior in payment to the New Bonds.
In the event that the Company elects to restore the relevant Mortgaged
Property pursuant to the foregoing clause (2), within six months of receipt of
such Net Proceeds from an Event of Loss, the Company shall:
(1) give the Trustee irrevocable written notice of such election;
and
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(2) 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 the terms of the second paragraph of
this covenant.
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:
(1) 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 $1.0 million, 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 $5.0 million, 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;
(2) the Trustee will release such certified purchase price to the
Company, free of the Lien of the Second Mortgage; and
(3) the Company shall take such actions, at its sole expense, as
shall be required to permit the Trustee, pursuant to the Second Mortgage,
to release such Net Proceeds, together with any interest thereon, from the
lien of the 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
Permissable Encumbrances) on such Bondable Property under the Second
Mortgage.
Certain Covenants
Restricted Payments
The Company will not, and will not permit any of its Regulated
Subsidiaries to, directly or indirectly:
(1) 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 (a) dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company and (b) 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);
(2) 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);
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness other
than the First Mortgage Bonds or the Second Mortgage Bonds or Indebtedness
payable to the Company, except at Stated Maturity; or
(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above being collectively
referred to as "Restricted Payments"),
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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;
(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 2.5 to 1 (calculated as described below
under the caption "--Incurrence of Indebtedness"); 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 clauses (2), (3), (4), (6), (7), (8) or (9) of the
next succeeding paragraph), 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 is 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.
Notwithstanding the foregoing:
(A) 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
(B) following a Holding Company Transaction, neither the Company nor any
Regulated Subsidiary shall make a Restricted Payment other than a Restricted
Investment unless:
(1) 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
(2) 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
(C) 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, $1.0 million and (ii) thereafter, $2.0 million in any fiscal year and
(b) not to exceed $10.0 million 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
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Subsidiaries will be entitled, in any succeeding fiscal year, to make Restricted
Investments in an amount equal to (a) $2.0 million 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.
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 clause (C) above, provided that such distributions
shall reduce, dollar for dollar, the amount of Restricted Investments permitted
to be made by the Company by clause (C) above.
The preceding provisions will not prohibit:
(1) 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;
(2) 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 from clause (3) (b) above;
(3) 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;
(4) 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;
(5) 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 (i) any
management, employee or director equity subscription agreement or stock
option agreement or (ii) 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;
(6) 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;
(7) the repayment of (a) revolving credit borrowings used to finance
working capital needs or (b) other revolving credit facilities utilized to
finance accounts receivable;
(8) 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
(9) 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
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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 (9) 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 (9), 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.
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
covenant shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
Independent Appraiser if the fair market value exceeds $10.0 million. 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 "Restricted Payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the Supplemental Indenture.
Incurrence Of Indebtedness
The Company will not, and will 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 will 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.
The foregoing provisions will not apply to the incurrence of any of the
following Indebtedness (collectively, "Permitted Debt"):
(1) the existence of the Existing Indebtedness;
(2) the incurrence by the Company of Indebtedness represented by the
Old Bonds to be issued on the Initial Issuance Date and the New Bonds to
be issued pursuant to this prospectus;
(3) 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,
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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 (3), not to exceed $5.0
million at any time outstanding;
(4) 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 the first paragraph of this
covenant or clauses (1), (2), (3) or (9) of this paragraph;
(5) 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 New Bonds, and
(b) (i) 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 (ii)
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 (5);
(6) the incurrence by the Company or any of its Regulated
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging: (a) interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Second Mortgage
to be outstanding; or (b) 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 (b), the Net Termination
Value of such Hedging Obligations shall not at any time exceed $3.0
million;
(7) 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;
(8) 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;
(9) 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;
(10) 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;
(11) 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 $15.0 million at any one time outstanding;
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(12) the incurrence of Indebtedness by Connecticut Valley in an
amount not to exceed $5.0 million 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 $3.8 million issued by
Connecticut Valley and owed to and held by the Company, until all amounts
on such note are paid in full; or
(13) 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 $15.0 million.
For purposes of determining compliance with this "Incurrence of
Indebtedness" covenant, 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 (1) through (13) above, or is entitled to be incurred pursuant to the
first paragraph of this covenant, the Company will 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
covenant.
Liens
The Company will 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:
(a) Permissable Encumbrances;
(b) Liens which rank prior in right of payment to the Lien on the
Mortgaged Property securing the New Bonds, provided such Liens do not
secure an amount of Indebtedness in excess of:
(1) $103.4 million, minus;
(2) the aggregate principal amount of Second Mortgage Bonds
issued pursuant to and in accordance with clause (c)(2) below on the
basis of the retirement, purchase or acquisition of Prior Lien
Bonds;
(c) Liens which rank equal in right of payment with the Lien on the
Mortgaged Property securing the New Bonds, provided such Liens do not
secure an amount of Indebtedness in excess of the sum of:
(1) 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 (a)
outstanding and secured by a Prior Lien on Bondable Property owned
by the Company at the date of the Second Mortgage, (b) outstanding
and secured by a Prior Lien on Bondable Property at the date of its
acquisition by the Company after such date and (c) issued after the
date of the Second Mortgage; and
(2) the principal amount of Old Bonds, New Bonds and Prior
Liens Bonds, including First Mortgage Bonds, which the Company has
retired, purchased or acquired since the date of the Second Mortgage
or the Company is retiring, purchasing or acquiring, and which have
not already been Bonded; and
(3) the amount of cash deposited with the Trustee for such
purpose;
(d) Liens on Mortgaged Property that rank junior in right of payment
to the Lien of the Second Mortgage.
The Company will 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:
(a) Liens on Equity Interests in Unregulated Subsidiaries;
(b) Liens on Equity Interests or assets of Connecticut Valley
securing Indebtedness in an aggregate principal amount not to exceed $5.0
million;
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(c) Liens on any property acquired, constructed or improved by the
Company after the date the Old Bonds 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);
(d) 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;
(e) 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);
(f) 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;
(g) 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;
(h) 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;
(i) 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;
(j) 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;
(k) 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;
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(l) 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;
(m) Liens on accounts receivable of the Company or any Regulated
Subsidiary securing Indebtedness incurred pursuant to clause (11) of the
covenant entitled under "Incurrence of Indebtedness"; and
(n) Liens on assets of a special purpose entity incurred in
connection with a Securitization Transaction.
Dividend and Other Payment Restrictions Affecting Regulated Subsidiaries
The Company will not, and will 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:
(a) pay dividends or make any other distributions to the Company or
any of its Regulated Subsidiaries
(i) on its Capital Stock; or
(ii) with respect to any other interest or participation in,
or measured by, its profits;
(b) pay any Indebtedness owed to the Company or any of its Regulated
Subsidiaries;
(c) make loans or advances to the Company or any of its Regulated
Subsidiaries; or
(d) transfer any of its properties or assets to the Company or any
of its Regulated Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) 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;
(2) applicable law or regulation;
(3) 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;
(4) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practice;
(5) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (d) in the prior paragraph to the extent applicable to the property
so acquired;
(6) any contract for the sale of 100% of the Capital Stock of a
Regulated Subsidiary;
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(7) 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;
(8) Liens securing Indebtedness that limit the right of the debtor
to dispose of the assets subject to such Lien;
(9) 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;
(10) 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;
(11) restrictions contained in the Indebtedness described in clause
(12) of the definition of Permitted Debt in the covenant entitled
"--Incurrence of Indebtedness";
(12) Indebtedness of a Regulated Subsidiary owed to and held by the
Company; and
(13) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Merger, Consolidation or Sale of Assets
The Company may not, directly or indirectly: (1) consolidate or merge with
or into another Person (whether or not the Company is the surviving
corporation); or (2) 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:
(1) 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 New Bonds;
(2) immediately before and after such transaction no Default or
Event of Default exists; and
(3) 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 as described
above under the caption "--Incurrence of Indebtedness),"
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.
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Designation of Regulated and Unregulated Subsidiaries
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 the covenant
described above under the caption "--Restricted Payments" 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.
Sale and Leaseback Transactions
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:
(1) 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 the covenant
described above under the caption "--Incurrence of Indebtedness;"
(2) 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
(3) 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, the covenant described above under the caption
"Repurchase at the Option of Holders--Asset Sales other than Mortgaged
Property Asset Sales," and "Repurchase at the Option of Holders--Mortgaged
Property Asset Sales and Events of Loss."
The foregoing shall not prevent transactions between or among the Company
and/or its Regulated Subsidiaries or Securitization Transactions.
Transactions with Affiliates
The Company will not, and will 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:
(1) 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
(2) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction involving
aggregate consideration in excess of $2.5 million a resolution of
the Board of Directors set forth in an officer's certificate
certifying that such
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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 $10.0 million, 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.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) 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;
(2) 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;
(3) transactions between or among the Company and/or its Regulated
Subsidiaries; and
(4) Restricted Payments permitted by the provisions of the Second
Mortgage described above under the caption "--Restricted Payments."
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 New Bonds for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Second Mortgage or such New Bonds unless such consideration is offered to
be paid or agreed to be paid to all holders of the New Bonds that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
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.
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Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on the
New Bonds;
(2) default in payment when due of the principal of, or premium, if
any, on the New Bonds;
(3) at any time such covenants are applicable, failure by the
Company or any of its Regulated Subsidiaries for 30 days after notice to
comply with the covenants described under the captions "Repurchase at the
Option of Holders--Mortgaged Property Asset Sales and Events of Loss," or
"--Certain Covenants--Merger, Consolidation or Sale of Assets;"
(4) failure by the Company or any of its Regulated Subsidiaries for
60 days after notice to comply with any of the other agreements in the
Second Mortgage;
(5) 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 $5.0
million or more;
(6) failure by the Company or any of its Regulated Subsidiaries to
pay final non-appealable judgments aggregating in excess of $5.0 million,
which judgments are not paid, discharged or stayed for a period of 60
days, provided, that this clause (6) will not apply to any judgment in
favor of the Company against a Regulated Subsidiary; and
(7) events of bankruptcy or insolvency with respect to the Company
or any of its Regulated Subsidiaries.
In the case of an Event of Default arising from 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 New Bonds
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 New Bonds may declare
all the New Bonds to be due and payable immediately.
However, solely for purposes of determining whether an Event of Default
arises under (5), (6) or (7) above, 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 $12.0 million.
Holders of the New Bonds may not enforce the Second Mortgage or the New
Bonds except as provided in the Second Mortgage. Subject to specified
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 New Bonds notice of
specified continuing Defaults or Events of Default (except a Default or Event of
Default relating to the payment of principal, interest, payments of any sinking
or analogous fund) if it determines that withholding notice is in their
interest.
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The Holders of a majority in 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 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 New Bonds pursuant
to the optional redemption provisions of the Supplemental Indenture, an
equivalent premium shall become and be immediately due and payable to the extent
permitted by law upon the acceleration of the New Bonds.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Second Mortgage. At any time the Suspended
Covenants 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.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the New Bonds, the Second Mortgage or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of New
Bonds by accepting a New Bond waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the New Bonds. The
waiver may not be effective to waive liabilities under the federal securities
laws.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding New Bonds ("Legal
Defeasance") except for:
(1) the rights of Holders of outstanding New Bonds to receive
payments in respect of the principal of, or interest or premium on such
New Bonds when such payments are due from the trust referred to below;
(2) the Company's obligations with respect to the New Bonds
concerning issuing temporary New Bonds, registration New Bonds, mutilated,
destroyed, lost or stolen New Bonds and the maintenance of an office or
agency for payment and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Second Mortgage.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to covenants that are
described in the Second Mortgage ("Covenant Defeasance") and thereafter any
omission to comply with those covenants shall not constitute a Default or Event
of Default with respect to the New Bonds. In the event Covenant Defeasance
occurs, events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the New
Bonds.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the New Bonds, cash in U.S. dollars,
non-callable Governmental Obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, or
interest and premium on the outstanding New Bonds on the stated maturity
or on the
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applicable redemption date, as the case may be, and the Company must
specify whether the New Bonds are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to
the Trustee confirming that (a) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (b) 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 New Bonds 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;
(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to
the Trustee confirming that the Holders of the outstanding New Bonds 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;
(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit (other than a Default
or Event of Default resulting from the borrowing of funds to be applied to
such deposit); or (b) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will 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;
(6) the Company must have delivered to the Trustee an Opinion of
Counsel to the effect that, 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;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of New Bonds over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Amendment, Supplement and Waiver
The Supplemental Indenture
Except as provided in the next two succeeding paragraphs, the Supplemental
Indenture or the New Bonds may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the New Bonds then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, New Bonds), and any
existing default or compliance with any provision of the Supplemental Indenture
or the New Bonds may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding New Bonds (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, New Bonds).
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Without the consent of each Holder affected, an amendment or waiver of the
Supplemental Indenture or the New Bonds may not (with respect to any New Bonds
held by a non-consenting Holder):
(1) reduce the principal amount of New Bonds whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any New
Bond or alter the provisions with respect to the redemption of the New
Bonds (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on
any New Bond;
(4) waive a Default or Event of Default in the payment of principal
of, or interest, or premium, if any, on the New Bonds (except a rescission
of acceleration of the New Bonds by the Holders of at least a majority in
aggregate principal amount of the New Bonds and a waiver of the payment
default that resulted from such acceleration);
(5) make any New Bond payable in money other than that stated in the
New Bonds;
(6) make any change in the provisions of the Supplemental Indenture
relating to waivers of past Defaults or the rights of Holders of New Bonds
to receive payments of principal of, or interest, or premium, if any, on
the New Bonds;
(7) waive a redemption payment with respect to any New Bond (other
than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"); or
(8) make any change in the preceding amendment and waiver
provisions.
Notwithstanding the preceding, without the consent of any Holder of New
Bonds, the Company and the Trustee may amend or supplement the Supplemental
Indenture or the New Bonds:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated New Bonds in addition to or in
place of certificated New Bonds;
(3) to provide for the assumption of the Company's obligations to
Holders of New Bonds in the case of a merger or consolidation or sale of
all or substantially all of the Company's assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of New Bonds or that does not adversely affect the
legal rights under the Second Mortgage of any such Holder; or
(5) to comply with requirements of the Commission in order to effect
or maintain the qualification of the Second Mortgage under the Trust
Indenture Act.
The Second Mortgage Indenture
In addition to the amendment, supplement and waiver provisions contained
within the Supplemental Indenture, the Second Mortgage Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
holders of at least a majority in aggregate principal amount of the Second
Mortgage Bonds then outstanding, to modify the Second Mortgage Indenture;
provided that no such modification may, without the consent of each holder of
outstanding Second Mortgage Bonds affected thereby, extend the fixed maturity of
any Second Mortgage Bonds, or reduce the principal amount thereof, or reduce the
rate or extend the time of interest thereon, or reduce any Make Whole Premium
payable upon the redemption thereof.
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The Second Mortgage Indenture also permits specified amendments,
supplements and waivers without the consent of the holders of the Second
Mortgage Bonds, including one or more supplemental indentures for the creation
of any new series of Second Mortgage Bonds.
Satisfaction of New Bonds
The Second Mortgage will cease to be of further effect as to the New Bonds
when:
(1) either:
(a) all New Bonds that have been authenticated (except lost,
stolen or destroyed New Bonds that have been replaced or paid and
New Bonds 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
(b) all New Bonds that have not been delivered to the Trustee
for cancellation have become due and 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 will be sufficient, without consideration of any
reinvestment of interest, to pay and discharge the entire
indebtedness on the New Bonds not delivered to the Trustee for
cancellation for principal, premium and accrued interest to the date
of maturity or redemption;
(2) 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 will 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;
(3) the Company has paid or caused to be paid all sums payable by it
in respect of the New Bonds; and
(4) the Company has delivered irrevocable instructions to the
Trustee under the Second Mortgage to apply the deposited money toward the
payment of the New Bonds at maturity or the redemption date, as the case
may be.
In addition, the Company must deliver an Officers' Certificate and an
Opinion of Counsel to the Trustee stating that all conditions precedent to
satisfaction have been satisfied.
Concerning the Trustee
If the Trustee becomes a creditor of the Company, the Second Mortgage
limits its right to obtain payment of claims in some cases, or to realize on
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 Commission for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
Second Mortgage Bonds will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available to the Trustee,
subject to exceptions. The Second Mortgage provides that in case an Event of
Default shall occur and be continuing, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of its own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Second
Mortgage at the request of any holder of Second Mortgage Bonds, unless such
holder shall have offered to the Trustee security and indemnity satisfactory to
it against any loss, liability or expense.
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Additional Information
Anyone who receives this prospectus may obtain a copy of the Second
Mortgage, the Supplemental Indenture and Registration Rights Agreement without
charge by writing to Central Vermont Public Service Corporation 77, Grove
Street, Rutland, Vermont, Attention: Chief Financial Officer.
Book-Entry, Delivery and Form
Except as described in the next paragraph, the New Bonds will initially be
issued in the form of one or more Global Bonds (the "Global Bonds"). The Global
Bonds will be deposited on the date of the closing of this exchange offering
with, or on behalf of, The Depository Trust Company ("DTC") and registered in
the name of Cede & Co., as nominee of DTC (such nominee being referred to herein
as the "Global Bond Holder").
New Bonds that are issued as described below under "--Certificated Bonds"
will be issued in the form of registered definitive certificates (the
"Certificated Bonds"). Upon the transfer of Certificated Bonds, Certificated
Bonds may, unless all Global Bonds have previously been exchanged for
Certificated Bonds, be exchanged for an interest in the Global Bond representing
the principal amount of New Bonds being transferred, subject to the transfer
restrictions set forth in the Second Mortgage.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and other organizations. Access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interests
in, and transfers of ownership interests in, each security held by or on behalf
of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Company that, pursuant to procedures established
by it:
(1) upon deposit of the Global Bonds, DTC will credit the accounts
of Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Bonds; and
(2) ownership of these interests in the Global Bonds will be shown
on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners
of beneficial interest in the Global Bonds).
So long as the Global Bond Holder is the registered owner of any New
Bonds, the Global Bond Holder will be considered the sole Holder under the
Second Mortgage of any New Bonds evidenced by the Global Bonds. Beneficial
owners of New Bonds evidenced by the Global Bonds will not be considered the
owners or Holders thereof under the Second Mortgage for any purpose, including
with respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records of DTC or for
maintaining, supervising or reviewing any records of DTC relating to the New
Bonds.
Payments in respect of the principal of, and interest and premium on a
Global Bond registered in the name of the Global Bond Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Bond Holder in its capacity as the registered Holder under the Second Mortgage.
Under the terms of the Second Mortgage, the Company and the Trustee will treat
the Persons in whose names the New Bonds, including the Global Bonds, are
registered as the owners thereof for the purpose of receiving payments and for
all other
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purposes. Consequently, neither the Company, the Trustee nor any agent of the
Company or the Trustee has or will have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the Global Bonds or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership
interests in the Global Bonds; or
(2) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the New Bonds (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not receive
payment on such payment date. Each relevant Participant is credited with an
amount proportionate to its beneficial ownership of an interest in the principal
amount of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of New Bonds
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the New Bonds, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Certificated New Bonds
Subject to specified conditions, any Person having a beneficial interest
in a Global Bond may, upon prior written request to the Trustee, exchange such
beneficial interest for New Bonds in the form of certificated New Bonds. Upon
any such issuance, the Trustee is required to register such certificated New
Bonds in the name of, and cause the same to be delivered to, such Person or
Persons (or the nominee of any thereof). In addition, if:
(1) DTC (a) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Bonds and the Company fails to
appoint a successor depositary or (b) has ceased to be a clearing agency
registered under the Exchange Act;
(2) the Company, at its option, notifies the Trustee in writing that
it elects to cause the issuance of certificated New Bonds in lieu of a
Global Bond; or
(3) there shall have occurred and be continuing a Default or Event
of Default with respect to the New Bonds;
then, upon surrender by the Global Bond Holder of its Global Bond, New Bonds in
such form will be issued to each person that the Global Bond Holder and DTC
identify as being the beneficial owner of the related New Bonds.
Neither the Company nor the Trustee will be liable for any delay by the
Global Bond Holder or DTC in identifying the beneficial owners of New Bonds and
the Company and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Bond Holder or DTC for all purposes.
Same Day Settlement and Payment
The Company will make payments in respect of the New Bonds represented by
the Global Bonds (including principal, premium, if any, and interest) by wire
transfer of immediately available funds to the accounts specified by the Global
Bond Holder. The Company will make all payments of principal, interest and
premium, if any, with respect to certificated New Bonds by wire transfer of
immediately available funds to the accounts specified by the Holders thereof
holding more than $1.0 million of New Bonds or, if no such account is specified,
or if such Holder
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of certificated New Bonds holds $1.0 million or less of New Bonds, by mailing a
check to each such Holder's registered address. The New Bonds represented by the
Global Bonds are expected to trade in DTC's Same-Day Funds Settlement System,
and any permitted secondary market trading activity in such New Bonds will,
therefore, be required by DTC to be settled in immediately available funds. The
Company expects that secondary trading in any certificated New Bonds will also
be settled in immediately available funds.
Certain Definitions
Set forth below are defined terms used in the Second Mortgage. Reference
is made to the Second Mortgage for a full disclosure of all such terms, as well
as any other capitalized terms used herein for which no definition is provided.
"Accounts Receivable Facility" means that 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:
(1) 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
(2) 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. 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 $2.0 million; or
(b) for Net Proceeds in excess of $2.0 million.
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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 the Second Mortgage;
(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 (i) assets of the type specified in the definition of
"Securitization Transaction" to a special purpose entity and (ii) 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 Second
Mortgage.
"Bonded" shall have the meaning set forth in the Second Mortgage.
"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;
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(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 States 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 $500.0 million;
(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 Investors Service, Inc. or Standard & Poor's Rating Services 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.
"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 (as defined under the
caption "Merger, Consolidation, or Sale of Assets" above) are not
Continuing Directors.
Notwithstanding the foregoing, a "Change of Control" shall not include a
"Holding Company Transaction."
"Common Stock" means the Company's common stock, $1.00 par value.
"Connecticut Valley" means Connecticut Valley Electric Company Inc., a New
Hampshire corporation.
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"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 accounts 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
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(3) 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
clause (9) of the covenant entitled "--Restricted Payments" 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.
"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 New Bonds. 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 the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
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"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 $1.0
million.
"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 $17.0 million 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 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.
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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:
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(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 New 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, or partner, director or Person performing similar
functions.
"Initial Issuance Date" means July 30, 1999.
"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 the final paragraph of the
covenant described above under the caption "--Certain Covenants--Restricted
Payments." 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 the
final paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"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,
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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.
"Make Whole Premium" with respect to any New Bond shall mean with respect
to any prepayment of such New Bond 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 New Bond (for the avoidance of doubt, such amounts shall include all
principal and interest payable with respect to such New Bond) (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 New Bond then to be prepaid.
"Moody's" means Moody's Investor Service, Inc., or any successor to its
securities ratings business.
"Mortgaged Property" means all of the Company's property subject to the
Lien of the Second Mortgage.
"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 Disposition of all
or substantially all of the assets of the Company and its Regulated Subsidiaries
taken as a whole will be governed by the provisions of the Second Mortgage
described above under the caption "--Change of Control" or the provisions
described above under the caption "--Merger, Consolidation or Sale of Assets"
and not by the provisions of the covenant entitled "Mortgaged Property Asset
Sales and Events of Loss"), 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 $2.0 million at any one
time provided such property has been replaced by property 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 our customers within our franchise area (but not our 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,
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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 Old Bonds and the New Bonds) 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 Second
Mortgage 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;
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(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
New Bonds, 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 New Bonds on terms at least as favorable to the Holders
of New Bonds 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" means any Lien on 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 the Second Mortgage.
"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.
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"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.
"S&P" means Standard & Poor's Ratings Group or any successor to its
securities ratings business.
"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.
"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).
"Treasury Rate" shall mean at any time with respect to the New Bonds 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 New
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 New Bonds then being prepaid. If no
maturity exactly corresponding to such Weighted Average Life to maturity of such
New Bonds shall appear therein, the weekly average yield for the two most
closely corresponding published
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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 Old Bonds, New Bonds, Prior Lien Bonds or
Bondable Property means that such Old Bonds, New Bonds, 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 clause (2) of the covenant entitled
"Transactions with Affiliates") 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; and
(5) is not subject to federal or state regulation as a public
utility company.
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
preceding conditions and was permitted by the covenant described above under the
caption "--Certain Covenants--Restricted Payments." 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 the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness," the Company shall be in
default of such covenant. 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 the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness," 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.
"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
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
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(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.
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CERTAIN FEDERAL TAX CONSIDERATIONS
The following is a summary of the material United States federal income
tax consequences resulting from the exchange offer and from the ownership of the
New Bonds. It deals only with New Bonds held as capital assets and not with
special classes of bondholders, such as dealers in securities or currencies,
life insurance companies, tax exempt entities, and persons that hold a New Bond
in connection with an arrangement that completely or partially hedges the New
Bond. The discussion is based upon the Internal Revenue Code of 1986, as
amended, and regulations, rulings and judicial decisions thereunder as of the
date hereof. Such authorities may be repealed, revoked or modified so as to
produce federal income tax consequences different from those discussed below.
BONDHOLDERS TENDERING THEIR OLD BONDS OR PROSPECTIVE PURCHASERS OF NEW
BONDS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL
INCOME TAX AND ANY STATE OR LOCAL INCOME OR FRANCHISE TAX CONSEQUENCES IN THEIR
PARTICULAR SITUATIONS AND ANY CONSEQUENCES UNDER THE LAWS OF ANY OTHER TAXING
JURISDICTION.
The exchange of New Bonds for the Old Bonds pursuant to the exchange offer
will not be treated as an "exchange" for United States federal income tax
purposes because the New Bonds will not be considered to differ materially in
kind or extent from the Old Bonds. Rather, the New Bonds received by a
bondholder will be treated as a continuation of the Old Bonds in the hands of
such bondholder. As a result, there will be no United States federal income tax
consequences to bondholders exchanging the Old Bonds for the New Bonds pursuant
to the exchange offer. The bondholder must continue to include stated interest
in income as if the exchange had not occurred. The adjusted basis and holding
period of the New Bonds for any bondholder will be the same as the adjusted
basis and holding period of the Old Bonds. Similarly, there would be no United
States federal income tax consequences to a holder of Old Bonds that does not
participate in the exchange offer.
United States Holders
For purposes of this discussion, a "United States Holder" means:
(1) a citizen or resident of the United States;
(2) a partnership, corporation or other entity created or organized in or
under the law of the United States or of any State of the United States;
(3) an estate the income of which is subject to United States federal
income tax regardless of its source;
(4) a trust, if either:
(a) a court within the United States is able to exercise primary
supervision over the administration of the trust, and one or more United
States persons have the authority to control all substantial decisions of
the trust; or
(b) the trust was in existence on August 20, 1996 and elected to be
treated as a United States person at all times thereafter;
(5) any other person that is subject to United States federal income tax
on interest income derived from a Bond as a result of such income being
effectively connected with the conduct by such person of a trade or business
within the United States; or
(6) certain former citizens of the United States whose income and gain on
the New Bonds will be subject to U.S. income tax.
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Payments of Interest
Interest on a New Bond will be taxable to a United States Holder as
ordinary interest income at the time it is received or accrued, depending on the
bondholder's method of accounting for tax purposes.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply with respect to
non-corporate United States Holders to payments of principal and interest on a
New Bond and the proceeds of the sale of a New Bond before Maturity. A 31%
"backup withholding" tax will apply to such payments if the United States Holder
fails to provide an accurate taxpayer identification number or to report all
interest and dividends required to be shown on its federal income tax returns.
United States Alien Holders
As used herein, a "United States Alien" is a person or entity that, for
United States federal income tax purposes, is not a United States Holder.
Payments to United States Aliens
Under current United States federal income and estate tax law:
(1) payments of principal and interest on a New Bond by us or any paying
agent to a bondholder that is a United States Alien will not be subject to
withholding of United States federal income tax, provided that the bondholder:
(a) does not actually or constructively own 10% or more of the
combined voting power of our stock;
(b) is not a controlled foreign corporation related to us through
stock ownership; and
(c) provides a statement, under penalties of perjury (such as Form
W-8BEN), to the Company that the holder is a United States Alien and
provides its name and address;
(2) a bondholder that is a United States Alien will not be subject to
United States federal income tax on gain realized on the sale, exchange or
redemption of such Bond, unless:
(a) the gain is effectively connected with the conduct of a trade or
business within the United States by the United States Alien; or
(b) in the case of a United States Alien who is a nonresident alien
individual and holds the New Bond as a capital asset, such holder is
present in the United States for 183 or more days in the taxable year and
certain other requirements are met; and
(3) a New Bond will not be subject to United States federal estate tax as
a result of the death of a bondholder who is not a citizen or resident of the
United States at the time of death, provided that:
(a) such bondholder did not at the time of death actually or
constructively own 10% or more of the combined voting power of all classes
of our stock; and,
(b) at the time of such bondholder's death, payments of interest on
such Bond would not have been effectively connected with the conduct by
such bondholder of a trade or business in the United States.
United States information reporting requirements and backup withholding
tax will not apply to payments on a New Bond made outside the United States by
us or any paying agent (acting in its capacity as such) to a
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bondholder that is a United States Alien provided that a statement described in
(1)(c) above has been received and neither we nor our paying agent has actual
knowledge that the payee is not a United States Alien.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a New Bond effected outside
the United States by a foreign office of a "broker" (as defined in applicable
Treasury regulations), provided that such broker:
(1) is a United States Alien;
(2) derives less than 50% of its gross income for certain periods from the
conduct of a trade or business in the United States; and
(3) is not a controlled foreign corporation as to the United States (a
person described in (1), (2) and (3) above being hereinafter referred to as a
"foreign controlled person"). Payment of the proceeds of the sale of a New Bond
effected outside the United States by a foreign office of any broker that is not
a foreign controlled person will not be subject to backup withholding tax, but
will be subject to information reporting requirements unless such broker has
documentary evidence in its records that the beneficial owner is a United States
Alien and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption.
New regulations governing backup withholding and information reporting are
generally scheduled to become effective for payments made after December 31,
2000. Rules under these regulations will have essentially the same substantive
effect, but will unify current certification procedures and forms.
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PLAN OF DISTRIBUTION
This prospectus, as it may be amended or supplemented from time to time,
may be used by a Broker-Dealer in connection with the resale of the New Bonds
received in exchange for the Old Bonds where such Old Bonds were acquired for
its own account as a result of market-making activities or other trading
activities (other than where acquired directly from the Company or any
"Affiliate," as defined in Rule 144 of the Securities Act). Each such
Broker-Dealer that participates in the exchange offer that receives the New
Bonds for its own account pursuant to the exchange offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Bonds. We
have agreed that for a period of 180 days after the exchange offer is
consummated or until the Old Bonds are resold, whichever comes first, we will
use our best efforts to make this prospectus, as amended or supplemented,
available to any such Broker-Dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of New Bonds by
Participating Broker-Dealers. New Bonds received by Broker-Dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Bonds or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Broker-Dealer and/or the purchasers of any such New Bonds. Any Broker-Dealer
that resells New Bonds that were received by it for its own account pursuant to
the exchange offer and any broker or dealer that participates in a distribution
of such New Bonds may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Bonds and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. For a period of one year
after the expiration date of the exchange offer, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any Broker-Dealer that requests such documents in the letter of
transmittal.
This prospectus has been prepared for use in connection with the exchange
offer and may be used by the initial purchasers in connection with the offers
and sales related to market-making transactions in the New Bonds. The initial
purchasers may act as principals or agents in such transactions. Such sales will
be made at prices related to prevailing market prices at the time of sale. We
will not receive any of the proceeds of such sales. The initial purchasers have
no obligation to make a market in the New Bonds and may discontinue their
market-making activities at any time without notice, at their sole discretion.
LEGAL MATTERS
Opinions as to the validity of the New Bonds will be rendered for us by
Joseph M. Kraus, Esq., our Senior Vice President and General Counsel, and by
Milbank, Tweed, Hadley & McCloy LLP, our special counsel. Mr. Kraus is one of
our full-time officers and owns 1,379 shares of our common stock directly and as
a participant in various employee benefit plans. Milbank, Tweed, Hadley & McCloy
LLP represents the Initial Purchasers or their affiliates from time to time in
matters unrelated to the exchange offer.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements and schedule, incorporated by
reference in this prospectus and elsewhere in the registration statement, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
113
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
Sections 8.50 through 8.56 of the Vermont Business Corporation Act, inter
alia, generally empower a Vermont corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that such person is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interest of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. Similar
indemnity is authorized for such person against expenses (including attorneys'
fees) actually and reasonably incurred in connection with the defense or
settlement of any such threatened, pending or completed action or suit if such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the corporation, and provided further
that (unless a court of competent jurisdiction otherwise provides) such person
shall not have been adjudged liable to the corporation. Any such indemnification
may be made only as authorized in each specific case upon a determination by the
shareholders or disinterested directors or by independent legal counsel in a
written opinion that indemnification is proper because the indemnitee has met
the applicable standard of conduct.
Section 8.57 of the Vermont Business Corporation Act further authorizes a
corporation to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise, against any liability asserted
against such person, and incurred by such person in any such capacity, or
arising out of that person's status as such, whether or not the corporation
would otherwise have the power to indemnify that person under Section 8.50
through 8.56.
The Registrant's By-laws provide that, to the extent legally permissible,
the Registrant may indemnify any of its Directors, officers and employees who,
as a result of such position, was or is a party or is threatened to be made a
party to any contemplated, pending or completed action, suitor proceeding,
whether civil, criminal, administrative or investigative and whether formal or
informal against expenses, actually or reasonable incurred by him or her in
connection with such action, suit or proceeding.
Item 21. Exhibits and Financial Schedule Tables
(a) Exhibits:
A list of exhibits included as part of this registration statement is set
forth in the Exhibit Index that immediately precedes such exhibits and is
incorporated herein by reference.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
they are not required, are inapplicable or the required information has already
been provided elsewhere in the registration statement.
(c) Certain Reports, Opinions or Appraisals:
No such Reports, Opinions or Appraisals are applicable to this
registration statement.
II-1
<PAGE>
Item 22. Undertakings
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d)of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the Trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
such Act.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within business one day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a post
effective amendment all information concerning a transaction, and the company
being acquired involved herein, that was not subject of and included in the
registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Rutland,
State of Vermont, September 30, 1999.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By:
/s/ Francis J. Boyle
- ------------------------------------------------------------
Francis J. Boyle
Senior Vice President, Chief Financial Officer and Treasurer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes and appoints
Francis J. Boyle, Joseph M. Kraus and Kenneth C. Picton or any one of them, as
his or her attorney-in-fact, with full power of substitution and resubstitution
to sign and file on his or her behalf individually and in each such capacity
stated below any and all amendments and post-effective amendments to this
Registration Statement and any registration statement of the company relating to
New Bonds filed after the date hereof pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, as fully as such person could do in person,
hereby verifying and confirming all that said attorney-in-fact, or any one of
them, or their or his substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- ------------------------------------ ------------------
<S> <C> <C>
/s/ Robert H. Young President, Chief Executive Officer September 30, 1999
- ----------------------------- and Director (Principal Executive
Robert H. Young Officer)
/s/ Francis J. Boyle Senior Vice President, Chief September 30, 1999
- ----------------------------- Financial Officer and Treasurer
Francis J. Boyle (Principal Financial Officer)
/s/ James M. Pennington Vice President and Controller September 30, 1999
- ----------------------------- (Controller and Principal Accounting
James M. Pennington Officer)
/s/ Robert L. Barnett Director September 30, 1999
- -----------------------------
Robert L. Barnett
/s/ Frederic H. Bertrand Director and Chairman of the Board September 30, 1999
- -----------------------------
Frederic H. Bertrand
/s/ Rhonda L. Brooks Director September 30, 1999
- -----------------------------
Rhonda L. Brooks
/s/ Robert G. Clarke Director September 30, 1999
- -----------------------------
Robert G. Clarke
/s/ Luthor F. Hackett Director September 30, 1999
- -----------------------------
Luthor F. Hackett
Director September 30, 1999
- -----------------------------
Patrick J. Martin
/s/ Mary Alice McKenzie Director September 30, 1999
- -----------------------------
Mary Alice McKenzie
/s/ Janice L. Scites Director September 30, 1999
- -----------------------------
Janice L. Scites
</TABLE>
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- --------------------------------------------------------------------
4.1 Second Mortgage Indenture between the Registrant and The Bank of New
York, as Trustee, dated as of July 15, 1999.
4.2 Form of Second Supplemental Indenture between the Registrant and The
Bank of New York, as Trustee.
4.3 Form of Exchange Bond of the Registrant (included in Exhibit 4.2).
4.4 Registration Rights Agreement among the Registrant, Donaldson,
Lufkin & Jenrette Securities Corporation and TD Securities (USA)
Inc., dated as of July 30, 1999.
5 Legality Opinion of Milbank, Tweed, Hadley & McCloy LLP.
12 Statement Regarding Computation of Ratios of Earnings to Fixed
Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Milbank, Tweed, Hadley & McCloy LLP (included in
Exhibit 5)
24 Power of Attorney. (included on signature page)
25 Form T-1 Statement of Eligibility and Qualification, under the Trust
Indenture Act of 1939, of The Bank of New York, as Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
- -----------------
<PAGE>
EXHIBIT 4.1
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
<PAGE>
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET TO
TRUST INDENTURE ACT OF 1939
Section of Act Section of Indenture
-------------- --------------------
<S> <C>
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>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
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 Officer".........................................................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
</TABLE>
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<TABLE>
<S> <C>
"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
</TABLE>
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<TABLE>
<S> <C>
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
</TABLE>
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<TABLE>
<S> <C>
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
</TABLE>
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<TABLE>
<S> <C>
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
</TABLE>
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<TABLE>
<S> <C>
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
</TABLE>
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<CAPTION>
<S> <C>
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
</TABLE>
<PAGE>
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
<PAGE>
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
2
<PAGE>
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,
3
<PAGE>
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
4
<PAGE>
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.
5
<PAGE>
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
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<PAGE>
(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.
7
<PAGE>
(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
8
<PAGE>
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.
9
<PAGE>
"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
10
<PAGE>
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
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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.
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"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
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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
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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
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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.
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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.
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"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
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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
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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.
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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
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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
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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
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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.
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<PAGE>
(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
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<PAGE>
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.
(c) 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.
(d) 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.
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<PAGE>
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
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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;
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(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
29
<PAGE>
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;
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(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
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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.
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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.
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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
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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
35
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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:
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(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
37
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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
38
<PAGE>
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,
39
<PAGE>
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
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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;
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(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
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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 1/2 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
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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 1/2 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
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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
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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
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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
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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
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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
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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.
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(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;
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(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
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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.
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(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
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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
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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
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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
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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
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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
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of Bonds. Upon the written request of the holders of a majority in aggregate
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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.
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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.
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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,
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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
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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
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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,
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Trustee May Enforce Rights Without Possession of Bonds; Undertaking for Costs.
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(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.
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(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
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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
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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.
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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
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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
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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
execution 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
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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.
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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
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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
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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.
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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
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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
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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
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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
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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.
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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.
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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:
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(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;
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(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 Prior
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.
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(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
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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 addressed 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.
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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
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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
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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.
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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
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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
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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
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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
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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. (S)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. (S)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
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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.
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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.
89
<PAGE>
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.
(a) 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.
(b) 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
90
<PAGE>
SUPPLEMENTS HERETO), OR WHICH IS NOW SECURED BY THIS INDENTURE (EXCLUSIVE OF
ANY SUPPLEMENTS HERETO), IS ZERO.
91
<PAGE>
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
92
<PAGE>
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
93
<PAGE>
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)
94
<PAGE>
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)
95
<PAGE>
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:
S-1
<PAGE>
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:
S-2
<PAGE>
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
S-3
<PAGE>
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
Dununerston 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
S-4
<PAGE>
EXHIBIT 4.2
================================================================================
----------
Second Supplemental Indenture
----------
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
TO
THE BANK OF NEW YORK,
Trustee
Dated as of ________ __, 1999
----------
CREATING AN ISSUE OF MORTGAGE BONDS
8 1/8% SECOND MORTGAGE BONDS DUE 2004
----------
SUPPLEMENTAL TO THE SECOND MORTGAGE INDENTURE
DATED AS OF JULY 15, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.......................................................2
Section 1.01. Defined Terms...........................................2
"Accounts Receivable Facility"...................................2
"Acquired Debt"..................................................2
"Affiliate"......................................................2
"Appraiser"......................................................2
"Asset Sale".....................................................2
"Attributable Debt"..............................................3
"Board of Directors".............................................4
"Bondable Property"..............................................4
"Bonded".........................................................4
"Bonds of First Series"..........................................4
"Bonds of Second Series".........................................4
"Capital Lease Obligation".......................................4
"Capital Stock"..................................................4
"Cash Equivalents"...............................................4
"Catamount Energy"...............................................5
"Catamount Resources"............................................5
"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".............................................6
"Consolidated"...................................................6
"Consolidated Cash Flow".........................................6
"Consolidated Net Worth".........................................7
"Consolidated Utility Income"....................................7
"Continuing Directors"...........................................8
"CV Realty"......................................................8
"Default"........................................................8
"Designated Asset Sale"..........................................8
"Disqualified Stock".............................................8
"East Barnet"....................................................8
"Equity Interests"...............................................8
"Event of Loss"..................................................8
"Exchange Offer".................................................8
"Existing Indebtedness"..........................................9
"First Mortgage".................................................9
"First Mortgage Bonds"...........................................9
<PAGE>
Page
----
"Fixed Charges"..................................................9
"Fixed Charge Coverage Ratio"....................................9
"GAAP"..........................................................10
"Governmental Obligations"......................................10
"Guarantee".....................................................10
"Hedging Obligations"...........................................11
"Holding Company"...............................................11
"Holding Company Transaction"...................................11
"Indebtedness"..................................................11
"Independent"...................................................12
"Initial Issuance Date".........................................12
"Investments"...................................................12
"Lien"..........................................................12
"Make Whole Premium"............................................12
"Moody's".......................................................13
"Mortgaged Property Asset Sale".................................13
"Net Income"....................................................13
"Net Proceeds"..................................................14
"Net Termination Value".........................................14
"Non-Recourse Debt".............................................14
"Obligations"...................................................14
"Operating Cash Flow"...........................................15
"Permissable Encumbrances"......................................15
"Permitted Investments".........................................15
"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".........................................17
"Securitization Transaction"....................................17
"Significant Subsidiary"........................................17
"Smart Energy"..................................................17
"Standard & Poor's".............................................17
"Stated Maturity"...............................................17
"Subsidiary"....................................................17
"Successor Entity"..............................................17
"Treasury Rate".................................................17
"Unbonded"......................................................18
"Unregulated Subsidiary"........................................18
ii
<PAGE>
Page
----
"VELCO".........................................................18
"Vermont Yankee"................................................18
"Voting Stock"..................................................19
"Weighted Average Life to Maturity".............................19
"Wholly-Owned Regulated Subsidiary".............................19
ARTICLE II 8 1/8% SECOND MORTGAGE BONDS DUE 2004...........................20
Section 2.01. Bonds of Second Series.................................20
Section 2.02. Redemption; Make Whole Premium; Transfer and
Exchange.............................................21
Section 2.03. Change of Control......................................21
Section 2.04. Form of Bonds..........................................23
Section 2.05. Bonds Exchangeable Upon Surrender......................23
Section 2.06. Authentication of Bonds................................23
Section 2.07. Definitive Bonds.......................................23
ARTICLE III COVENANTS......................................................23
Section 3.01. Payment of Bonds of Second Series......................23
Section 3.02. Maintenance of Office or Agency........................23
Section 3.03. Reports................................................24
Section 3.04. Compliance Certificate; Notice of Default..............24
Section 3.05. Payments For Consent...................................25
Section 3.06. Restricted Payments....................................25
Section 3.07. Dividend and Other Payment Restrictions Affecting
Regulated Subsidiaries...............................29
Section 3.08. Incurrence of Indebtedness.............................31
Section 3.09. Asset Sales other than Mortgaged Property Asset
Sales................................................34
Section 3.10. Mortgaged Property Asset Sales and Events of Loss......35
Section 3.11. Transactions with Affiliates...........................37
Section 3.12. Liens..................................................38
Section 3.13. Sale and Leaseback Transactions........................41
Section 3.14. Designation of Regulated and Unregulated
Subsidiaries.........................................41
Section 3.15. Changes in Covenants when Bonds of Second Series
Rated Investment Grade...............................42
ARTICLE IV EVENTS OF DEFAULT AND REMEDIES..................................42
Section 4.01. Events of Default......................................42
Section 4.02. Acceleration...........................................44
ARTICLE V THE TRUSTEE......................................................44
Section 5.01. Extent of Trustee's Liability..........................44
ARTICLE VI SUCCESSORS......................................................44
Section 6.01. Merger, Consolidation, or Sale of Assets...............44
ARTICLE VII LEGAL DEFEASANCE AND COVENANT DEFEASANCE.......................45
Section 7.01. Option to Effect Legal Defeasance or Covenant
Defeasance...........................................45
Section 7.02. Legal Defeasance and Discharge.........................45
iii
<PAGE>
Page
----
Section 7.03. Covenant Defeasance....................................46
Section 7.04. Conditions to Legal or Covenant Defeasance.............46
Section 7.05. Deposited Money and Governmental Obligations to be
Held in Trust; Other Miscellaneous Provisions........47
Section 7.06. Reinstatement..........................................48
ARTICLE VIII SATISFACTION OF BONDS OF SECOND SERIES........................48
Section 8.01. Satisfaction...........................................48
ARTICLE IX MISCELLANEOUS PROVISIONS........................................49
Section 9.01. Incorporation of the Terms of the Indenture............49
Section 9.02. Amendment of the Second Supplemental Indenture.........49
Section 9.03. Benefits of Indenture..................................50
Section 9.04. Successors and Assigns.................................51
Section 9.05. Headings...............................................51
Section 9.06. Counterparts...........................................51
EXHIBIT 1 - Form of Bond...................................................E-1
iv
<PAGE>
SECOND SUPPLEMENTAL INDENTURE (the "Second Supplemental Indenture"), dated
as of ________ __, 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 Second 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 and the Trustee did enter into the First Supplemental
Indenture, dated as of July 15, 1999, to create a first series of bonds under
the Indenture;
WHEREAS, the Company did covenant with the initial purchasers of the first
series of bonds to exchange such bonds under an exchange offer and pursuant to a
registration statement filed with the Commission for registered bonds of the
Company;
WHEREAS, the Company desires in and by this Second Supplemental Indenture
to create a second series of bonds to be issued under the Indenture for the
purpose of consummating an exchange of such bonds for all outstanding bonds of
first series under the Indenture;
WHEREAS, the Company desires to, in and through this Second Supplemental
Indenture, designate such second series, to set forth a maturity date, interest
rate, form and other terms of such bonds, all substantially the same as the
first series bonds except that such second series bonds shall be registered with
the Commission; and
WHEREAS, all acts and things necessary to make this Second 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:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms. Unless otherwise defined herein, all
capitalized terms used in this Second Supplemental Indenture have the respective
meanings given to them in the Indenture. For purposes of this Second
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:
2
<PAGE>
(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 Second 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.
3
<PAGE>
"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" means the first series of bonds issued and
secured by the Indenture, designated as "8 1/8% Second Mortgage Bonds due 2004".
"Bonds of Second 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 States 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;
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(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.
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"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 accounts 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
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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
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(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 Second 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.
"Exchange Offer" has the meaning given in Section 2.01.
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"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
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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.
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"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.
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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 Second 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.
"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.
"Make Whole Premium", with respect to any Bond of Second Series,
means, with respect to any prepayment of such Bond of Second Series in
circumstances requiring the
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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 Second Series (for the avoidance of doubt, such
amounts shall include all principal and interest payable with respect to such
Bond of Second 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 Second 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).
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"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 Second Series and 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.
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"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);
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(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 Second
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 Second Series on terms at least as favorable to the Holders of Bonds of
Second 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.
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"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
Second 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
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Second 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 Second Series then
being prepaid. If no maturity exactly corresponding to such Weighted Average
Life to maturity of such Bonds of Second 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, Bonds of Second
Series, Prior Lien Bonds or Bondable Property means that such Bonds of First
Series, Bonds of Second 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.
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"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.
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ARTICLE II
8 1/8% SECOND MORTGAGE BONDS DUE 2004
Section 2.01. Bonds of Second Series. There is hereby created a second
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
Second Series"). The issuance of the Bonds of Second Series hereunder shall be
based upon retired Bonds of First Series previously outstanding, to be exchanged
for Bonds of Second Series as contemplated by the Registration Rights Agreement
(such offer, the "Exchange Offer"). The Bonds of Second Series shall be issued
in an aggregate principal amount of $75,000,000 minus the outstanding aggregate
principal amount of the Bonds of First Series that have not been tendered and
accepted for exchange pursuant to the Exchange Offer. The Bonds of Second 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 Second Series issued
shall be dated on the expiration of the Exchange Offer. All Bonds of Second
Series shall mature August 1, 2004; the principal of and interest and premium,
if any, on the Bonds of Second 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 and premium, 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 Second
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 Initial Issuance Date or, if interest has already been paid on
the Bonds of First Series to be exchanged pursuant to the Exchange Offer for the
corresponding Bonds of Second Series 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 Second
Series represented by the Global Bond (including principal, premium, if any, and
interest) 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 and premium, if any, with respect to Bonds of Second 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 Second Series or, if no such account is
specified or if a Holder holds Bonds of Second 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
Second Series, the Person in whose name any Bonds of Second 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 Second 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
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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 Second 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 Second 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 Second Series. The Company shall have the right to redeem the Bonds of Second
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 Second Series, in cash at a redemption price equal to
100% of the principal amount of the Bonds of Second 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 Second Series, neither the
Company nor the Trustee shall be required to (i) register the transfer of or
exchange any Bonds of Second Series during a period beginning at the opening of
15 days before any selection for redemption of such Bonds of Second 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
Second Series to be redeemed or (ii) register the transfer of or exchange any
Bonds of Second Series so selected for redemption, in whole or in part, except
the unredeemed portion of any Bonds of Second 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 Second Series except
the portion, if any, of such Bonds of Second Series not to be so redeemed.
In the case of any redemption of the Bonds of Second Series by the Trustee
pursuant to this Second 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 Second
Series at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest 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 Second Series tendered will be accepted for payment; (ii) the purchase
price and the purchase date, which shall be no
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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 Second
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
Second 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 Second Series purchased pursuant to a
Change of Control Offer will be required to surrender the Bonds of Second
Series, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the form of Bonds of Second 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 Second
Series delivered for purchase, and a statement that such Holder is withdrawing
his election to have the Bonds of Second Series purchased; and (vii) that
Holders whose Bonds of Second Series are being purchased only in part will be
issued new Bonds of Second Series equal in principal amount to the unpurchased
portion of the Bonds of Second 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
Second 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 Second 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 Second Series or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee the Bonds of Second Series so
accepted together with an Officers' Certificate stating the aggregate principal
amount of Bonds of Second Series or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Bonds of Second
Series so tendered the Change of Control Payment for such Bonds of Second
Series, and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Bond of Second Series equal in
principal amount to any unpurchased portion of the Bonds of Second 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 Second Series validly tendered and not withdrawn under such Change of
Control Offer.
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Section 2.04. Form of Bonds. The Bonds of Second Series shall be
registered bonds without coupons. Bonds of Second 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 Second 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 Second 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 Second
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 Second 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 Second 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 Second Series in temporary form as provided in Section 2.07 of the
Indenture.
Section 2.07. Definitive Bonds. Definitive Bonds of Second 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 Second Series are Outstanding, subject to Section
3.15, the Company covenants and agrees as follows:
Section 3.01. Payment of Bonds of Second Series. The Company shall pay or
cause to be paid the principal of, premium, if any, and interest on the Bonds of
Second Series on the dates and in the manner provided in the Bonds of Second
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.
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 Second 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 Second Series and this Second
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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 Second 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.
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(b) At any time the Suspended Sections are applicable to the Bonds of
Second 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 Second 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 Second Series unless such consideration is offered to be paid or agreed to be
paid to all holders of the Bonds of Second 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
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(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
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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
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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
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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 Second 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
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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;
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(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 or the Bonds of Second Series in
aggregate principal amount not to exceed $75,000,000 at any
time outstanding;
(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
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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 Second 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
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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
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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 Second 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 Second 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 Second Series (an
"Asset Sale Offer") and all holders of additional Second Mortgage Bonds then
Outstanding to purchase the maximum principal amount of Bonds of Second 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 thereon, if any, to
the date of purchase, in accordance with the procedures set
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forth in the Second Mortgage. To the extent that the aggregate amount of Bonds
of Second 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 Second Series
and such additional Second Mortgage Bonds surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Bonds of Second
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
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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 Second Series.
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(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
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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 Second 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 Second 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
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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,
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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
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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
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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 Second Series Rated
Investment Grade.
(a) If at any time the Bonds of Second 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 Second Supplemental Indenture (collectively, the "Suspended
Sections") shall not be applicable to the Bonds of Second Series; provided,
however if at any time after a Rating Event Date the Bonds of Second 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 Second 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 Second
Series:
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(a) the Company defaults in the payment when due of interest on the Bonds
of Second 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 Second 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 Second 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 Second 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
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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 Second
Series pursuant to the optional redemption provisions of this Second
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 Second 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 Second Series may declare all the Bonds of Second 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 Second 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 Second 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 Second Supplemental Indenture other than as set forth in the Indenture; and
this Second 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 Second 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
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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 Second 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 Second
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 Second 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
Second 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 Second 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 Second 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, and interest on such
Bonds of Second Series when such payments are due, (b) the Company's obligations
with respect to such Bonds of Second Series under Sections 7.04(a) and 7.04(b)
of this Second Supplemental Indenture hereof, (c) the rights, powers, trusts,
duties and immunities
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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 Second 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 Second 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 Second
Series shall not be deemed Outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the Outstanding Bonds
of Second 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 Second Supplemental Indenture and such Bonds of Second
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 Second 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 Second 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, if any, on the Outstanding
Bonds of Second 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
Second 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
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Opinion of Counsel shall confirm that, the Holders of the Outstanding Bonds of
Second 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 Second
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 Second 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 Second Series shall
be held in trust and applied by the Trustee, in accordance with the provisions
of such Bonds of Second 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 Second
Series of all sums due and to become due thereon in respect of principal,
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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 Second 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 Second 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 Second Series following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Bonds of Second 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 SECOND SERIES
Section 8.01. Satisfaction. The Second Mortgage shall cease to be of
further effect as to the Bonds of Second Series when (a) either: (i) all Bonds
of Second Series that have been authenticated (except lost, stolen or destroyed
Bonds of Second Series that have been replaced or paid and Bonds of Second
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 Second 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
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interest, to pay and discharge the entire indebtedness on the Bonds of Second
Series not delivered to the Trustee for cancellation for principal, premium, 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 Second 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 Second 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 Second Supplemental Indenture; and the Indenture as
supplemented and amended by this Second Supplemental Indenture is in all
respects ratified and confirmed; and the Indenture, as amended, and this Second
Supplemental Indenture shall be read, taken and construed as one and the same
instrument.
Section 9.02. Amendment of the Second Supplemental Indenture.
(a) Except as provided in the next two succeeding paragraphs, the
Supplemental Indenture or the Bonds of Second Series may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Bonds of Second Series then Outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Bonds of Second Series), and any existing default or
compliance with any provision of the Second Supplemental Indenture or the Bonds
of Second Series may be waived with the consent of the Holders of a majority in
principal amount of the then Outstanding Bonds of Second Series (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Bonds of Second Series).
(b) Without consent of each Holder affected, an amendment or waiver of the
Second Supplemental Indenture or the Bonds of Second Series may not (with
respect to any Bonds of Second Series held by a non-consenting Holder):
(i) reduce the principal amount of the Bonds of Second 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 Second Series or alter the provisions with respect to
the redemption of the
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Bonds of Second 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 Second Series;
(iv) waive a Default or Event of Default in the payment of
principal of, or interest or premium, if any, on the Bonds of
Second Series (except a rescission of acceleration of the
Bonds of Second Series by the Holders of at least a majority
in aggregate principal amount of the Bonds of Second Series
and a waiver of the payment default that resulted from such
acceleration);
(v) make any Bond of Second Series payable in money other than
that stated in the Bonds of Second Series;
(vi) make any change in the provisions of the Second Supplemental
Indenture relating to waivers of past Defaults or the rights
of Holders of Bonds of Second Series to receive payments of
principal of, interest, if any, or premium, if any, on the
Bonds of Second Series;
(vii) waive a redemption payment with respect to any Bond of Second
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 Second Series, the Company and the Trustee may amend or supplement the
Second Supplemental Indenture or the Bonds of Second 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 Second 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 Second 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 Second Supplemental
Indenture is intended, or shall be construed, to give to any Person, other than
the parties hereto and the
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holders of Bonds of Second 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 Second Supplemental Indenture, or under any covenant, condition or
provision herein contained, all the covenants, conditions and provisions of this
Second 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 Second
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 Second 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
Second Supplemental Indenture are inserted for convenience of reference and
shall not be deemed to be any part hereof.
Section 9.06. Counterparts. This Second 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.
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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 __________, its _________ 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 _____________________,
___________________, all as of the day and year first above written.
CENTRAL VERMONT PUBLIC
SERVICE CORPORATION
By ________________________
Name:
Title:
Attest:
By ________________________
Name:
Title:
Signed, sealed and delivered on (Corporate Seal)
behalf of Central Vermont Public
Service Corporation in the presence
of:
_________________________
Name:
Title:
_________________________
Name:
Title:
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THE BANK OF NEW YORK
as Trustee as aforesaid,
By ________________________
Name:
Title:
(Corporate Seal)
Signed, sealed and delivered
on behalf of The Bank of New York
in the presence of:
_________________________
Name:
Title:
_________________________
Name:
Title:
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STATE OF VERMONT )
) ss.
COUNTY OF RUTLAND )
On this ___ day of _______, A.D. 1999, before me, a Notary Public in and
for said State of Vermont, duly commissioned and acting as such, personally came
__________________________________________, ______ 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 ____________,
Vermont; that he is ____________________ 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.
_______________________
Name:
Notary Public
My commission expires __________
(Notarial Seal)
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this ___ day of ________, A.D. 1999, before me, a Notary Public in and
for said State of New York, duly commissioned and acting as such, personally
came _____________, __________________ 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 _______________________________________; that he/she is
__________________ 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 he/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
he/she signed his/her name thereto by like order and authority, and he/she
acknowledged and declared that he/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
his/her free act and deed in said capacity, and the free act and deed of said
Corporation in said capacity. And said _____________________,
___________________ 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.
______________________
Name:
Notary Public
My commission expires ___________
(Notarial Seal)
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EXHIBIT 1
Form of Bond
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the issuer
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.
THIS BOND OF SECOND SERIES IS A GLOBAL BOND AS REFERRED TO IN THE
INDENTURE HEREINAFTER REFERENCED AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR THE INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS GLOBAL BOND MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
8 1/8% Second Mortgage Bonds due 2004
(Series B)
No. [R-001]
$[_________]
CUSIP 155771 AQ 1
CENTRAL VERMONT PUBLIC SERVICE CORPORATION promises to pay to Cede &
Co. or registered assigns, the principal sum of $[________]
([__________________________] DOLLARS) on August 1, 2004.
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Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Reference is hereby made to the further provisions of this Bond of
Second Series set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been manually
executed by or on behalf of the Trustee under the Indenture, this Bond of Second
Series shall not be entitled to any benefits under the Indenture, or be valid or
obligatory for any purpose.
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IN WITNESS WHEREOF, CENTRAL VERMONT PUBLIC SERVICE CORPORATION has
caused this Bond of Second Series to be duly executed.
Dated: _______, _____
CENTRAL VERMONT PUBLIC SERVICE
CORPORATION
By:_____________________________________
Robert H. Young
President and Chief Executive Officer
(SEAL)
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Bonds of Second Series referred to in the
within-mentioned Second Mortgage.
Dated: _______, ____
THE BANK OF NEW YORK,
as Trustee
By: __________________________________
Name:
Authorized Signatory
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REVERSE OF BOND
8 1/8% Second Mortgage Bonds due 2004
(Series B)
(the "Bonds of Second 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 Second Series at a rate of 8 1/8% per annum, 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 of Second Series will accrue from July 30, 1999, or, if
interest has already been paid on the Bonds of First Series to be exchanged
pursuant to the Exchange Offer for the corresponding Bonds of Second Series,
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 terms of redemption
shall be pursuant to Section 2.02 of the Second Supplemental Indenture, as
defined below.
2. METHOD OF PAYMENT. So long as there is no existing default in the
payment on the Bonds of Second Series, the Company will pay to the Person in
whose name any Bonds of Second Series is registered at the close of business on
any record date (as defined in Section 2.01 of the Second 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 Second 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
Second 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
and premium, if any, on the Bonds of Second 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 and premium, 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 Second Series, except as set forth below; provided that
all payments by the Company of principal of, or interest and premium, if any, on
(a) the Bonds
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of Second 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 Second 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 Second 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 Second
Series, or if no such account is specified.
3. PAYING AGENT, REGISTRAR AND EXCHANGE AGENT. 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. The Bank of New York will also act as Exchange Agent pursuant to the
Exchange Offer.
4. SECOND MORTGAGE INDENTURE AND SECOND SUPPLEMENTAL INDENTURE. The
Company issued the Bonds of Second Series under a Second Mortgage Indenture
dated as of July 15, 1999 (the "Indenture") and a Second Supplemental Indenture
thereto, dated as of ________, 1999 (the "Second Supplemental Indenture"), each
between the Company and the Trustee. The Indenture and the Second 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 Second 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 Second 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 Second Series conflicts
with the express provisions of the Second Mortgage, the provisions of the Second
Mortgage shall govern and be controlling. The Bonds of Second Series are secured
obligations of the Company limited to an aggregate principal amount of
$75,000,000, minus the outstanding aggregate principal amount of the Bonds of
First Series that have not been accepted for exchange pursuant to the Exchange
Offer.
5. OPTIONAL REDEMPTION. The Company shall have the option to redeem the
Bonds of Second 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 Second Series, in cash at a redemption price
equal to 100% of the principal amount of the Bonds of Second 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 Second Series
shall mean, with respect to any prepayment of such Bond of Second Series in
circumstances requiring the
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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 Second Series (for the avoidance of doubt, such
amounts shall include all principal and interest payable with respect to such
Bond of Second 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 Second 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
Second 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 Second 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 Second Series then being prepaid. If no maturity exactly corresponding
to such Weighted Average Life to maturity of such Bonds of Second 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 REDEMPTION. The Company shall not be required to make
mandatory redemption or sinking fund payments with respect to the Bonds of
Second Series.
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7. REPURCHASE AT OPTION OF HOLDER. (a) If a Change of Control occurs, each
Holder of Bonds of Second 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 Second 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 Second Series
repurchased plus accrued and unpaid interest 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 Second 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 Second 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 Second Series (an "Asset Sale Offer") and all holders of additional
Second Mortgage Bonds then Outstanding to purchase the maximum principal amount
of Bonds of Second 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
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 Second
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 Second Series and such
additional Second Mortgage Bonds surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Bonds of Second 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 Second Series to be redeemed at its registered address.
Notices of redemption may not be conditional. If any Bond of Second Series is to
be redeemed in part only, the notice of redemption that relates to that Bond of
Second Series shall state the portion of the principal amount thereof to be
redeemed. A new Bond of Second Series in principal amount equal to the
unredeemed portion of the original Bond of Second Series will be issued in the
name of the Holder thereof upon cancellation of the original Bond of Second
Series. Bonds of Second Series
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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 Second Series of $1,000 in principal amount
or less shall be redeemed in part.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Bonds of Second Series are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of the Bonds of Second Series may be
registered and Bonds of Second Series may be exchanged as provided in the Second
Mortgage. The Company is not required to transfer or exchange any Bonds of
Second Series selected for redemption. Also, the Company is not required to
transfer or exchange any Bonds of Second Series for a period of 15 days before a
selection of Bonds of Second Series to be redeemed.
10. PERSONS DEEMED OWNERS. The registered Holder of a Bond of Second
Series may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Second Supplemental Indenture or the Bonds of Second Series may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Bonds of Second Series then Outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
for, Bonds of Second Series), and any existing default or compliance with any
provision of the Second Supplemental Indenture or the Bonds of Second Series may
be waived with the consent of the Holders of a majority in principal amount of
the then Outstanding Bonds of Second Series (including, without limitation,
consents obtained in connection with a purchase of, or tender offer for, Bonds
of Second Series). Notwithstanding the preceding, without the consent of any
Holder of Bonds of Second Series, the Company and the Trustee may amend or
supplement the Second Supplemental Indenture or the Bonds of Second Series (a)
to cure any ambiguity, defect or inconsistency; (b) to provide for
uncertificated Bonds of Second Series in addition to or in place of certificated
Bonds of Second Series; (c) to provide for the assumption of the Company's
obligations to Holders of the Bonds of Second 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 Second 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 Second Series: (a)
default for 30 days in the payment when due of interest on the Bonds of Second
Series; (b) default in payment when due of the principal of, or premium, if any,
on the Bonds of Second Series; (c) at any time such
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<PAGE>
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
Second 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 Second 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 Second 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 Second 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
Second Series may declare all the Bonds of Second 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 Second Series may not enforce the Second
Mortgage or the Bonds of Second 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 Second Series notice of certain continuing Defaults or Events of
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<PAGE>
Default (except a Defaults or Events of Default relating to the payment of
principal, interest, payments of any sinking or analogous fund) 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 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 Second
Series pursuant to the optional redemption provisions of the Second 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 Second
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 Second 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 Second Series by
accepting such Bond of Second Series waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Bonds of
Second Series.
15. AUTHENTICATION. This Bond of Second Series shall not be valid
until authenticated by the manual signature of the Trustee or an
authenticating agent.
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<PAGE>
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. 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 Second 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 Second Series or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
This Bond of Second Series shall be deemed to be governed by and construed
in accordance with the laws of the State of New York.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Second Supplemental Indenture.
Requests may be made to:
Central Vermont Public Service Corporation
77 Grove Street
Rutland, Vermont 05701
Attention: Chief Financial Officer
E-12
<PAGE>
ASSIGNMENT FORM
To assign this Bond of Second Series, fill in the form below:
(I) or (we) assign and transfer this Bond of Second Series 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 of Second Series 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:__________________________________
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Bond of Second Series purchased by the
Company pursuant to Section 2.03, 3.09 or 3.10 of the Second 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 of Second Series
purchased by the Company pursuant to Section 2.03, Section 3.09 or Section 3.10
of the Second 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:__________________________________
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<PAGE>
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>
<CAPTION>
Principal
Amount of Amount of Amount of
decrease in increase in this Global Bond Signature of
Date of Principal Amount of Principal Amount of following such decrease Authorized Signatory
Exchange this Global Bond this Global Bond (or increase) of Trustee
- -------- ---------------- ---------------- ------------- ----------
<S> <C> <C> <C> <C>
</TABLE>
E-15
<PAGE>
EXHIBIT 4.4
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
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.
<PAGE>
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.
2
<PAGE>
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
3
<PAGE>
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:
4
<PAGE>
(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
5
<PAGE>
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
6
<PAGE>
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
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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
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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.
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<PAGE>
(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
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<PAGE>
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;
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(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);
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(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
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(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.
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(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
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<PAGE>
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 reimbursed 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.
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(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
17
<PAGE>
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:
18
<PAGE>
(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.
19
<PAGE>
(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.
20
<PAGE>
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
21
<PAGE>
EXHIBIT 5
[Letterhead of Milbank, Tweed, Hadley & McCloy LLP]
September 30, 1999
Central Vermont Public Service Corporation
77 Grove Street
Rutland, Vermont 05701
Re: Central Vermont Public Service Corporation
Proposed Exchange Offer
Ladies and Gentlemen:
We are acting as counsel to Central Vermont Public Service Corporation, a
Vermont corporation (the "Company"), in connection with the Company's proposed
offer to exchange its Series B 8 1/8% Second Mortgage Bonds due 2004 (the "New
Bonds") for its outstanding Series A 8 1/8% Second Mortgage Bonds due 2004 which
were issued under the Second Mortgage Indenture (the "Indenture") dated as of
July 15, 1999, between the Company and The Bank of New York, as Trustee, as
supplemented by the First Supplemental Indenture thereto. The New Bonds will be
issued pursuant to the Indenture, as supplemented by a Second Supplemental
Indenture between the Company and The Bank of New York, as Trustee. In
connection with the proposed exchange offer, the Company proposes to file a
registration statement on Form S-4 (the "Registration Statement") with the
Securities and Exchange Commission for the purpose of registering the New Bonds
under the Securities Act of 1933, as amended.
We have examined originals, or copies certified to our satisfaction, of
such corporate records of the Company, certificates of public officials,
certificates of officers and representatives of the Company and other documents
as we have deemed necessary as a basis for the opinions hereinafter expressed.
In our examination we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us a originals and the conformity
with the originals of all documents submitted to us as copies. As to various
questions of fact material to such opinions we have, when relevant facts were
not independently established, relied upon certifications by officers of the
Company and other appropriate persons and statements contained in the
Registration Statement.
Based on the foregoing and having regard to legal considerations which we
deem relevant, and subject to the proposed additional proceedings being taken as
now contemplated by us as your counsel and as contemplated by the Indenture and
the Second Supplemental Indenture prior to the issuance of the New Bonds in
exchange for the Old Bonds, we are of the opinion that the New Bonds will, upon
the issuance of the New Bonds in exchange for the Old Bonds in the
<PAGE>
manner described in the Registration Statement, assuming due authorization,
execution and delivery under Vermont law, constitute the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as (x) may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or transfer or similar laws of
general applicability affecting the enforcement of creditors' rights generally,
and (y) the enforceability thereof may be limited by the application of general
principles of equity (regardless of whether considered in a proceeding in equity
or at law), including, without limitation, (a) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and (b)
concepts of materiality, reasonableness, good faith and fair dealing.
We do not express any opinion as to matters governed by any laws other
than the laws of the State of New York and the Federal laws of the United States
of America.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our name in the Registration Statement under
"Legal Matters."
Very truly yours,
/s/Milbank, Tweed, Hadley & McCloy LLP
RBW/ABP
2
<PAGE>
EXHIBIT 12
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
6 months 6 months
1994 1995 1996 1997 1998 06/30/98 06/30/99
------ ------ ------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income 14,800 19,851 19,442 16,340 3,983 4,812 13,146
Plus (Minus):
Income Taxes 11,409 10,907 10,219 9,163 146 1,951 8,057
Write-offs and Reversals 4,189 424 0 6,700 6,261 (6,700) (3,900)
------ ------ ------ ------ ------ ------ ------
Net Income before taxes and extraordinary items 30,398 31,182 29,661 32,203 10,390 63 17,303
Fixed Charges:
Interest 10,267 10,342 10,088 9,737 10,699 5,273 5,127
Lease Interest 2,259 2,282 2,065 1,905 1,813 915 842
------ ------ ------ ------ ------ ------ ------
Total Fixed Charges 12,526 12,624 12,153 11,642 12,512 6,188 5,969
Income before taxes, extraordinary items
and fixed charges 42,924 43,806 41,814 43,845 22,902 6,251 23,272
Ratio of earnings to fixed charges 3.43 3.47 3.44 3.77 1.83 1.01 3.90
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated February 25,
1999 (except with respect to the matter discussed in Note 18, as to which the
date is March 26, 1999) included in Central Vermont Public Service Corporation's
Form 10-K for the year ended December 31, 1998 and to all references to our Firm
included in this registration statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
September 29, 1999
<PAGE>
EXHIBIT 25
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
-------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-------------
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
(Exact name of obligor as specified in its charter)
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)
-------------
8-1/8% Second Mortgage Bonds due 2004
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
1 to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-2-
<PAGE>
EXHIBIT 25
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 29th day of September, 1999.
THE BANK OF NEW YORK
By: /s/ MARY LAGUMIA
----------------------------------
Name: MARY LAGUMIA
Title: ASSISTANT VICE PRESIDENT
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS In Thousands
Cash and balances due from
depository institutions:
Noninterest-bearing balances and
currency and coin .......................................... $5,597,807
Interest-bearing balances ................................... 4,075,775
Securities:
Held-to-maturity securities ................................. 785,167
Available-for-sale securities ............................... 4,159,891
Federal funds sold and Securities
purchased under agreements to
resell ...................................................... 2,476,963
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ..................................................... 38,028,772
LESS: Allowance for loan and
lease losses ............................................... 568,617
LESS: Allocated transfer risk
reserve .................................................... 16,352
Loans and leases, net of unearned
income, allowance, and reserve ............................. 37,443,803
Trading Assets ................................................ 1,563,671
Premises and fixed assets (including
capitalized leases) ......................................... 683,587
Other real estate owned ....................................... 10,995
Investments in unconsolidated
subsidiaries and associated
companies ................................................... 184,661
Customers' liability to this bank on
acceptances outstanding ..................................... 812,015
Intangible assets ............................................. 1,135,572
Other assets .................................................. 5,607,019
-----------
Total assets .................................................. $64,536,926
===========
LIABILITIES
Deposits:
In domestic offices ......................................... $26,488,980
Noninterest-bearing ......................................... 10,626,811
Interest-bearing ............................................ 15,862,169
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ........................... 20,655,414
Noninterest-bearing ......................................... 156,471
Interest-bearing ............................................ 20,498,943
Federal funds purchased and
Securities sold under agreements
to repurchase ............................................... 3,729,439
Demand notes issued to the
U.S.Treasury ................................................ 257,860
Trading liabilities ........................................... 1,987,450
Other borrowed money:
With remaining maturity of one
year or less ............................................... 496,235
With remaining maturity of more
than one year through three years .......................... 465
With remaining maturity of more
than three years ........................................... 31,080
Bank's liability on acceptances
executed and outstanding .................................... 822,455
-4-
<PAGE>
EXHIBIT 25
Subordinated notes and debentures ............................. 1,308,000
Other liabilities ............................................. 2,846,649
-----------
Total liabilities ............................................. 58,624,027
===========
EQUITY CAPITAL
Common stock .................................................. 1,135,284
Surplus ....................................................... 815,314
Undivided profits and capital
reserves .................................................... 4,001,767
Net unrealized holding gains
(losses) on available-for-sale
securities .................................................. (7,956)
Cumulative foreign currency
translation adjustments ..................................... (31,510)
-----------
Total equity capital .......................................... 5,912,899
-----------
Total liabilities and equity capital .......................... $64,536,926
===========
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni
Alan R. Griffith Directors
Gerald L. Hassell
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
OFFER TO EXCHANGE ITS
8 1/8% SECOND MORTGAGE BONDS DUE 2004
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8 1/8% SECOND MORTGAGE BONDS DUE 2004
PURSUANT TO THE PROSPECTUS
DATED ________ ___, 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ________ ___, 1999, UNLESS THE OFFER IS EXTENDED
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
BY MAIL: OVERNIGHT DELIVERY/HAND:
The Bank of New York The Bank of New York
101 Barclay Street 7E Corporate Trust Service Window; Ground Level
New York, NY 10286 101 Barclay Street
Attn: Reorg. Dept. New York, NY 10286
Enrique Lopez Attn: Reorg. Dept. 7E
Enrique Lopez
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(212) 815-2742
FACSIMILE TRANSMISSIONS:
(212) 815-6339/4699
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE
INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of the Old Bonds
(as defined below) if either Old Bonds are to be forwarded herewith or if
tenders of Old Bonds are to be made by book-entry transfer to an account
maintained by The Bank of New York (the "Exchange Agent") at The Depository
Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange
Offer-Procedures for Tendering the Old Bonds" in the Prospectus.
-1-
<PAGE>
Holders of Old Bonds whose certificates (the "Certificates") for such Old
Bonds are not immediately available or who cannot deliver their Certificates and
all other required documents to the Exchange Agent on or prior to the expiration
date (as defined in the Prospectus) or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Old Bonds according to
the guaranteed delivery procedures set forth in "The Exchange Offer-Procedures
for Tendering the Old Bonds" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE COMPANY OR DTC DOES NOT CONSTITUTE DELIVERY
TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
ALL TENDERING HOLDERS COMPLETE THIS BOX:
<TABLE>
<CAPTION>
========================================================================================
DESCRIPTION OF OLD BONDS TENDERED
- ----------------------------------------------------------------------------------------
Please Print Name
and Address of
Registered Holder Principal Amount of Old Bonds
Principal Old Bonds Tendered Tendered
(Please Fill in Certificate (Attach additional (if Amount of Old Bonds Less
if Blank) Number(s)* List if Necessary) Than All)**
- ----------------- ----------- ------------------ -----------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
TOTAL AMOUNT TENDERED:
- ----------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Old Bonds may be tendered in whole or in part in denominations of $1,000
and integral multiples thereof.
========================================================================================
</TABLE>
BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY:
|_| CHECK HERE IF TENDERED OLD BONDS ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution_____________________________________________
DTC Account Number________________________________________________________
Transaction Code Number___________________________________________________
|_| CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD BONDS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)______________________________________________
Window Ticket Number (if any)_____________________________________________
Date of Execution of Notice of Guaranteed Delivery________________________
Name of Institution Which Guaranteed Delivery_____________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution_____________________________________________
DTC Account Number________________________________________________________
Transaction Code Number___________________________________________________
|_| CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD BONDS
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
|_| CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD BONDS FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name______________________________________________________________________
Address___________________________________________________________________
-2-
<PAGE>
EXHIBIT 99.1
Ladies and Gentlemen:
The undersigned hereby tenders to Central Vermont Public Service
Corporation (the "Company"), the above described aggregate principal amount of
the Company's 8 1/8% Second Mortgage Bonds Due 2004 (the "Old Bonds") in
exchange for a like aggregate principal amount of the Company's 8 1/8% Second
Mortgage Bonds Due 2004 (the "New Bonds") which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), upon the terms and
subject to the conditions set forth in the Company's prospectus dated ________
___, 1999 (as the same may be amended or supplemented from time to time, the
"Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitute the "Exchange
Offer"):
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Bonds tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Bonds as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Old Bonds, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Bonds to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Bonds to be issued in exchange for such Old
Bonds, (ii) present Certificates for such Old Bonds for transfer, and to
transfer the Old Bonds on the books of the Company, and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Bonds, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
BONDS TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
BONDS TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD BONDS TENDERED HEREBY,
AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION
RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
-3-
<PAGE>
The names(s) and address(es) of the registered holder(s) of the Old Bonds
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Bonds. The
Certificate number(s) and the Old Bonds that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Bonds are not exchanged pursuant to the Exchange Offer
for any reason, or if Certificates are submitted for more Old Bonds than are
tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Bonds will be returned (or, in the case of Old Bonds tendered by
book-entry transfer, such Old Bonds will be credited to an account maintained at
DTC), without expense to the tendering holder, promptly following the expiration
or termination of the Exchange Offer. The undersigned understands that tenders
of Old Bonds pursuant to any one of the procedures described in "The Exchange
Offer-Procedures for Tendering the Old Bonds" in the Prospectus and in the
instructions hereto will, upon the Company's acceptance for exchange of such
tendered Old Bonds, constitute a binding agreement between the undersigned and
the Company upon the terms and subject to the conditions of the Exchange Offer.
The undersigned recognizes that, under certain circumstances set forth in the
Prospectus, the Company may not be required to accept for exchange any of the
Old Bonds tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Bonds be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
the Old Bonds, that such New Bonds be credited to the account indicated above
maintained at DTC. If applicable, substitute Certificates representing the Old
Bonds not exchanged or not accepted for exchange will be issued to the
undersigned or, in the case of a book-entry transfer of Old Bonds, will be
credited to the account indicated above maintained at DTC. Similarly, unless
otherwise indicated under "Special Delivery Instructions," please deliver New
Bonds to the undersigned at the address shown below the undersigned's signature.
BY TENDERING OLD BONDS AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT: (1) THE NEW BONDS ACQUIRED
PURSUANT TO THE EXCHANGE OFFER ARE BEING ACQUIRED IN THE ORDINARY COURSE OF
BUSINESS OF THE PERSON RECEIVING SUCH NEW BONDS, WHETHER OR NOT THAT PERSON IS
THE UNDERSIGNED; (2) NEITHER THE UNDERSIGNED NOR ANY SUCH OTHER PERSON HAS AN
ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN THE DISTRIBUTION
OF SUCH NEW BONDS; (3) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, OR IS A
BROKER-DEALER BUT WILL NOT RECEIVE NEW BONDS FOR ITS OWN ACCOUNT IN EXCHANGE FOR
THE OLD BONDS, NEITHER THE UNDERSIGNED NOR ANY SUCH OTHER PERSON IS ENGAGED IN
OR INTENDS TO PARTICIPATE IN THE DISTRIBUTION OF SUCH NEW BONDS; AND (4) NEITHER
THE UNDERSIGNED NOR ANY SUCH OTHER PERSON IS AN "AFFILIATE" OF THE COMPANY, AS
DEFINED UNDER RULE 405 OF THE SECURITIES ACT.
-4-
<PAGE>
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION
RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME, MAY BE USED BY A BROKER-DEALER (A "PARTICIPATING BROKER-DEALER") IN
CONNECTION WITH THE RESALE OF THE NEW BONDS RECEIVED IN EXCHANGE FOR THE OLD
BONDS WHERE SUCH OLD BONDS WERE ACQUIRED FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES. EACH PARTICIPATING
BROKER-DEALER THAT PARTICIPATES IN THE EXCHANGE OFFER THAT RECEIVES THE NEW
BONDS FOR ITS OWN ACCOUNT PURSUANT TO THE EXCHANGE OFFER BY TENDERING SUCH OLD
BONDS AND EXECUTING THIS LETTER OF TRANSMITTAL AGREES THAT IT WILL DELIVER A
PROSPECTUS IN CONNECTION WITH ANY RESALE OF SUCH NEW BONDS. HOWEVER, BY SO
ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, A PARTICIPATING BROKER-DEALER WILL
NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE
SECURITIES ACT. THE COMPANY HAS AGREED THAT FOR A PERIOD OF THE SHORTER OF 180
DAYS AFTER THE EXCHANGE OFFER IS CONSUMMATED AND WHEN THE NEW BONDS ARE RESOLD,
THE COMPANY WILL USE ITS BEST EFFORTS TO MAKE THE PROSPECTUS, AS AMENDED OR
SUPPLEMENTED, AVAILABLE TO ANY PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION
WITH ANY SUCH RESALE. IN THAT REGARD, EACH PARTICIPATING BROKER-DEALER, BY
TENDERING SUCH OLD BONDS AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT
UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE OCCURRENCE OF ANY EVENT OR THE
DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY
REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE
PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE
STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF
CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH
PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW BONDS PURSUANT TO THE
PROSPECTUS UNTIL THE COMPANY HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO
CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR
SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR THE COMPANY HAS
GIVEN NOTICE THAT THE SALE OF THE NEW BONDS MAY BE RESUMED, AS THE CASE MAY BE.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
-5-
<PAGE>
================================================================================
HOLDER(S) SIGN HERE
(See Instructions 2, 5 and 6)
(Please Complete Substitute Form W-9 on Page 14)
(Bondholder's Signature(s) Must be Guaranteed if Required by Instruction 2)
Must be signed by registered holder(s) exactly as name(s) appear(s)
on Certificate(s) for the Old Bonds hereby tendered or on a security position
listing, or by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith (including such opinions of
counsel, certifications and other information as may be required by the Company
or the trustee for the Old Bonds to comply with the restrictions on transfer
applicable to the Old Bonds). If signature is by an attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another acting in
a fiduciary representative capacity, please set forth the signer's full title.
See Instruction 5.
________________________________________________________________________________
________________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Date______________________________________________________________________, 1999
Name(s)_________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT)
Capacity (full title)___________________________________________________________
ADDRESS_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number__________________________________________________
________________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
________________________________________________________________________________
(AUTHORIZED SIGNATURE)
Date______________________________________________________________________, 1999
Name of Firm____________________________________________________________________
Capacity (full title)___________________________________________________________
(PLEASE PRINT)
Address_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(include zip code)
Area Code and Telephone Number__________________________________________________
================================================================================
-6-
<PAGE>
================================================================================
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5 and 6) (See Instructions 1, 5 and 6)
To be completed ONLY if the New Bonds To be completed ONLY if New Bonds are
are to be issued in the name of to be sent to someone other than the
someone other than the registered registered holder of the Old Bonds
holder of the Old Bonds whose name(s) whose name(s) appear(s) above, or such
appear(s) above. registered holder(s) at an address
other than that shown above.
Issue: Send:
Old Bonds not tendered Old Bonds not tendered
New Bonds, to: New Bonds, to:
Name(s) ______________________________ Name(s)_______________________________
Address ______________________________ Address_______________________________
______________________________________ ______________________________________
______________________________________ ______________________________________
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
Area Code and Telephone Number________ Area Code and Telephone Number________
______________________________________ ______________________________________
______________________________________ ______________________________________
(TAX IDENTIFICATION OR SOCIAL (TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S)) SECURITY NUMBER(S))
================================================================================
-7-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed if either (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer-Procedures for Tendering Old Bonds" in the Prospectus. Certificates, or
timely confirmation of a book-entry transfer of such Old Bonds into the Exchange
Agent's account at DTC, as well as this Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at its address set forth herein on or prior to
the expiration date. Old Bonds may be tendered in whole or in part in the
principal amount of $1,000 and integral multiples of $1,000.
Holders who wish to tender their Old Bonds and (i) whose Old Bonds are not
immediately available or (ii) who cannot deliver their Old Bonds, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to the expiration date or (iii) who cannot complete the procedures for delivery
by book-entry transfer on a timely basis, may tender their Old Bonds by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer-Procedures for
Tendering the Old Bonds" in the Prospectus. Pursuant to such procedures: (i)
such tender must be made by or through an Eligible Institution (as defined
below); (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Company, must be
received by the Exchange Agent on or prior to the expiration date; and (iii) the
Certificates (or a timely confirmation of a book-entry transfer) representing
all tendered Old Bonds, in proper form for transfer, together with a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent within five New
York Stock Exchange, Inc. trading days after the date of execution of such
Notice of Guaranteed Delivery, all as provided in "The Exchange Offer-Guaranteed
Delivery Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Bonds to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the expiration
date. As used herein and in the Prospectus, "Eligible Institution" means a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act as "an
eligible guarantor institution," including (as such terms are defined therein)
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
-8-
<PAGE>
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of
the Old Bonds) of Old Bonds tendered herewith, unless such holder(s) has
completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" above, or
(ii) such Old Bonds are tendered for the account of a firm that is
an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Bonds Tendered" is inadequate, the Certificate number(s)
and/or the principal amount of Old Bonds and any other required information
should be listed on a separate signed schedule which is attached to this Letter
of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tender of the Old Bonds will be
accepted only in the principal amount of $1,000 and integral multiples thereof.
If less than all the Old Bonds evidenced by any Certificate submitted are to be
tendered, fill in the principal amount of the Old Bonds which are to be tendered
in the box entitled "Principal Amount of Old Bonds Tendered (If Principal Amount
of Old Bonds Less Than All)." In such case, new Certificate(s) for the remainder
of the Old Bonds that were evidenced by your old Certificate(s) will only be
sent to the holder of the Old Bond, promptly after the expiration date. All Old
Bonds represented by Certificates delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of the Old Bonds may be
withdrawn at any time on or prior to the expiration date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth above or in the
Prospectus on or prior to the expiration date. Any such notice of withdrawal
must specify the name of the person who tendered the Old Bonds to be withdrawn,
the aggregate principal amount of Old Bonds to be withdrawn, and (if
Certificates for Old Bonds have been tendered) the name of the registered holder
of the Old Bonds as set forth on the Certificate for the Old Bonds, if different
from that of the person who tendered such Old Bonds. If Certificates for the Old
Bonds have been delivered or otherwise identified to the Exchange Agent, then
prior to the physical release of such Certificates for the Old Bonds, the
tendering holder must submit the serial numbers shown on the particular
Certificates for the Old Bonds to be withdrawn and the signature on the notice
of withdrawal must be guaranteed by an Eligible Institution, except in the case
of Old Bonds tendered for the account of an Eligible Institution. If Old Bonds
have been tendered pursuant to the procedures for book-entry transfer set forth
in "The Exchange Offer-Procedures for Tendering the Old Bonds," the notice of
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawal of Old Bonds, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by written, telegraphic, telex or
facsimile transmission. Withdrawals of tenders of Old Bonds may not be
rescinded. Old Bonds properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but
-9-
<PAGE>
may be retendered at any subsequent time on or prior to the expiration date by
following any of the procedures described in the Prospectus under "The Exchange
Offer-Procedures for Tendering the Old Bonds."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Bonds which have been tendered
but which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Bonds tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Bonds tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal. If any
tendered Old Bonds are registered in different name(s) on several Certificates,
it will be necessary to complete, sign and submit as many separate Letters of
Transmittal (or facsimiles thereof) as there are different registrations of
Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company, in its sole discretion, of such persons'
authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of
the Old Bonds listed and transmitted hereby, no endorsement(s) of Certificate(s)
or separate bond power(s) are required unless New Bonds are to be issued in the
name of a person other than the registered holder(s). Signature(s) on such
Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Bonds listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company or the Trustee for the Old Bonds may require in accordance with the
restrictions on transfer applicable to the Old Bonds. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Bonds are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Bonds are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates of Old Bonds not exchanged will be returned by mail or, if tendered
by book-entry transfer, by crediting the account indicated above maintained at
DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and
-10-
<PAGE>
acceptance for exchange of any tender of Old Bonds, which determination shall be
final and binding on all parties. The Company reserves the absolute right to
reject any and all tenders determined by it not to be in proper form or the
acceptance of which, or exchange for, may, in the view of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer set forth
in the Prospectus under "The Exchange Offer-Certain Conditions to the Exchange
Offer" or any conditions or irregularity in any tender of Old Bonds of any
particular holder whether or not similar conditions or irregularities are waived
in the case of other holders. The Company's interpretation of the terms and
conditions of the Exchange Offer (including this Letter of Transmittal and the
instructions hereto) will be final and binding. No tender of Old Bonds will be
deemed to have been validly made until all irregularities with respect to such
tender have been cured or waived. Neither the Company, any affiliates or assigns
of the Company, the Exchange Agent, nor any other person shall be under any duty
to give notification of any irregularities in tenders or incur any liability for
failure to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address and
telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Bonds are accepted for exchange is required
to provide the Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service (the "IRS") may
subject the holder or other payee to a $50 penalty. In addition, payments to
such holders or other payees with respect to Old Bonds exchanged pursuant to the
Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked in if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Bonds or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Bonds. If the Old Bonds are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report. Certain holders
(including, among others, corporations, financial institutions and certain
foreign persons) may not be subject to these backup withholding and reporting
requirements. Such holders should nevertheless complete the
-11-
<PAGE>
attached Substitute Form W-9 below, and write "exempt" on the face thereof, to
avoid possible erroneous backup withholding. A foreign person may qualify as an
exempt recipient by submitting a properly completed IRS Form W-8, signed under
penalties of perjury, attesting to that holder's exempt status. Please consult
the enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which holders are exempt from
backup withholding. Backup withholding is not an additional U.S. Federal income
tax. Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Bonds have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Old Bonds for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Bonds are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Old Bonds
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Bonds in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
-12-
<PAGE>
TO BE COMPLETED BY ALL
TENDERING SECURITY HOLDERS
(SEE INSTRUCTION 9)
PAYER'S NAME: CENTRAL VERMONT PUBLIC SERVICE CORPORATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN ON THE TIN____________________
FORM W-9 LINE AT RIGHT AND CERTIFY BY SIGNING AND Social Security
DATING BELOW Number or Employer
Identification Number
- ------------------------------------------------------------------------------------------
Department of the NAME (Please Print)
Treasury Internal Part 2
Revenue Service _________________________________________
Awaiting
Payor's Request for ADDRESS__________________________________
Taxpayer
Identification _________________________________________ TIN |_|
Number (TIN) and
Certification CITY_____________________________________
STATE____________________ ZIP CODE_______
--------------------------------------------------------------------
Part 3 - CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT (1) the number shown on this form is my
correct taxpayer identification number (or I am waiting
for a number to be issued to me), (2) I am not subject to
backup withholding either because (i) I am exempt from
backup withholding, (ii) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to report all
interest or dividends, or (iii) the IRS has notified me
that I am not longer subject to backup withholding, and
(3) any other information provided on this form is true
and correct.
SIGNATURE__________________________________ DATE___________________
You must cross out item (iii) in Part (2) above if you have been
notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return
and you have not been notified by the IRS that you are no longer
subject to backup withholding.
- ------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY, IN CERTAIN CIRCUMSTANCES, RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTION FORM W-9 FOR ADDITIONAL DETAILS.
==========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments made to me on account of the New Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature___________________________________ Date___________________ , 1999
- --------------------------------------------------------------------------------
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<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number To Give the
Payer--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digs separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
- --------------------------------------------------------------------------------
Give the
SOCIAL
SECURITY
For this type of account: number of--
- --------------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the account or, if
account) combined funds, the first individual
on the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is also
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
5. Sole proprietorship The owner(3)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Give the
EMPLOYER
IDENTIFICATION
For this type of account: number of--
- --------------------------------------------------------------------------------
6. Sole Proprietorship The owner(3)
7. A valid trust, estate, or pension The legal entity(4)
trust
8. Corporate account The corporation
9. Religious, charitable, or The organization
educational organization account
10. Partnership The partnership
11. Association, club, or other The organization
tax-exempt organization
12. A broker or registered nominee The broker or nominee
13. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must
be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show your individual name. You may also enter your business name. You may
use either your Social Security Number or your Employer Identification
Number.
(4) List first and circle the name of the legal trust, estate or pension
trust. (Do not furnish the identifying number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
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<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include the
following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
o An international organization or any agency, or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a) of the Code.
o An entity registered at all times under the Investment Company Act of
1940.
o A foreign central bank of issue.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
o Payments described in section 6049(b)(5) of the Code to non-resident
aliens.
o Payments on tax-free covenant bonds under section 1451 of the Code.
o Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN
ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL
REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041A(a), 6045, 6050A and 6050N of
the Code and the regulations promulgated thereunder.
Privacy Act Notice.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to wilful neglect.
(2) Civil Penalty for False Information with Respect to Withholding--If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.--Wilfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
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<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
8 1/8% SECOND MORTGAGE BONDS DUE 2004
OF
CENTRAL VERMONT PUBLIC
SERVICE CORPORATION
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's (as defined below) 8 1/8% Second Mortgage Bonds
Due 2004 (the "Old Bonds") are not immediately available, (ii) the Old Bonds,
the Letter of Transmittal and all other required documents cannot be delivered
to The Bank of New York (the "Exchange Agent") on or prior to the expiration
date (as defined in the Prospectus referred to and as defined below) or (iii)
the procedures for delivery by book-entry transfer cannot be completed on a
timely basis. This Notice of Guaranteed Delivery may be delivered by hand,
overnight courier or mail, or transmitted by facsimile transmission, to the
Exchange Agent. See "The Exchange Offer-Procedures for Tendering the Old Bonds"
in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
BY MAIL: OVERNIGHT DELIVERY/HAND:
The Bank of New York The Bank of New York
101 Barclay Street 7E Corporate Trust Service Window;
New York, NY 10286 Ground Level
Attn: Reorg. Dept. 101 Barclay Street
Enrique Lopez New York, NY 10286
Attn: Reorg. Dept. 7E
Enrique Lopez
TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(212) 815-2742
FACSIMILE TRANSMISSIONS:
(212) 815-6339/4699
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF
<PAGE>
TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE
INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE
SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Central Vermont Public Service
Corporation, a Vermont corporation (the "Company"), upon the terms and subject
to the conditions set forth in the Company's prospectus dated __________ ____,
1999 (as the same may be amended or supplemented from time to time, the
"Prospectus"), and the related letter of transmittal (the "Letter of
Transmittal," which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of the Old Bonds set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption, "The Exchange Offer-Procedures for Tendering the
Old Bonds."
Aggregate Principal Name(s) of Registered Holder(s):
Amount Tendered:
Certificate No(s). Address(es):
(if available):
Area Code and Telephone Number(s):
If the Bonds will be tendered by book-entry transfer, provide the following
information:
Signature(s): ___________________________________________________________
DTC Account Number: __________________________________________________
Date: __________________________________________________________________
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Old Bonds
tendered hereby in proper form for transfer, or confirmation of the book entry
transfer of such Old Bonds to the Exchange Agent's account at The Depositary
Trust Company ("DTC"), pursuant to the procedures for book-entry transfer set
forth in the Prospectus, in either case together with one or more properly
completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and
any other required documents within five business days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old Bonds tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
Name of Firm:____________________________________________________________
_________________________________________________________________________
(AUTHORIZED SIGNATURE) (TITLE)
Address:_________________________________________________________________
_________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: _________________________________________
Date: ____________________________________
NOTE: DO NOT SEND THE OLD BONDS WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL
SURRENDER OF THE OLD BONDS MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED
BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS.
4
