***************************************************************************
* *
* Information contained herein is subject to completion and amendment. *
* A registration statement relating to these securities has been *
* declared effective by the Securities and Exchange Commission pursuant *
* to Rule 415 under the Securities Act of 1933. This preliminary *
* prospectus supplement and the accompanying prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any jurisdiction *
* in which such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* jurisdiction. *
* *
***************************************************************************
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED SEPTEMBER 27, 1995
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 26, 1995)
$30,000,000
SYSTEM ENERGY RESOURCES, INC.
% DEBENTURES DUE OCTOBER 1, 2000
------------------------------
Interest on the Company's % Debentures due October 1, 2000 (the
"Debentures") is payable semi-annually on April 1 and October 1, commencing
April 1, 1996. The Debentures are not redeemable prior to maturity.
The Debentures will be issued only as fully registered securities
represented by one or more global Debentures registered in the name of The
Depository Trust Company, New York, New York ("DTC"), as depository, or its
nominee. Beneficial interests in the global Debenture(s) will be shown on, and
transfers thereof will be effected only through, records maintained by DTC and
its participants. Except as provided in the accompanying Prospectus, owners of
beneficial interests in the global Debenture(s) will not be entitled to receive
physical delivery of Debentures in definitive form and will not be considered
holders thereof. See "Description of Debt Securities -- Book-Entry
System -- Global Debt Securities" in the accompanying Prospectus.
SEE "RISK FACTORS" AT PAGE 3 OF THE ACCOMPANYING PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Debenture...................... % % %
- -------------------------------------------------------------------------------------------------
Total.............................. $ $ $
=================================================================================================
</TABLE>
(1) Plus accrued interest from October 1, 1995.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deduction of expenses payable by the Company, estimated at $318,000.
------------------------------
The Debentures are offered subject to prior sale, when, as and if delivered
to and accepted by the Underwriters and subject to certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that the Debentures will be
ready for delivery through the book-entry facilities of DTC, New York, New York,
on or about October , 1995.
------------------------------
BEAR, STEARNS & CO. INC. SALOMON BROTHERS INC
------------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER , 1995.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Reference is made to "Incorporation of Certain Documents by Reference" in
the accompanying Prospectus. At the date of this Prospectus Supplement, the
Incorporated Documents (as defined in the accompanying Prospectus) include the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 (the
"1994 10-K") and the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1995 and June 30, 1995.
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The selected financial information of the Company set forth below has been
derived from and should be read in conjunction with the financial statements and
other financial information contained in the Incorporated Documents.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------------------------------
DECEMBER 31,
JUNE 30, ------------------------------------------------------
1995 1994 1993 1992 1991 1990
----------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Operating Revenues..................................... $ 486,193 $474,963 $650,768 $723,410 $686,664 $801,618
Operating Income....................................... 163,008 171,767 272,202 323,176 318,812 382,028
Interest Expense (net)................................. 168,352 175,102 190,424 204,116 229,057 242,400
Net Income............................................. 5,013(a) 5,407(a) 93,927 130,141 104,622 168,677
Ratio of Earnings to Fixed Charges(b).................. 1.23 1.23 1.87 2.04 1.74 2.10
AS OF JUNE 30, 1995 (UNAUDITED)
-------------------------------------------------
ACTUAL AS ADJUSTED(C)
---------------------- ----------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- -------
Balance Sheet Data:
Capitalization:
Common Stock and Paid-in Capital........................................ $ 789,357 34.1 $ 789,357 33.7
Retained Earnings....................................................... 84,448 3.7 84,448 3.6
---------- ------- ---------- -------
Total Common Shareholder's Equity................................... 873,805 37.8 873,805 37.3
First Mortgage Bonds(d)................................................. 530,319 22.9 530,319 22.6
Debentures.............................................................. -- -- 30,000 1.3
Other Long-Term Debt(d)................................................. 909,207 39.3 909,207 38.8
---------- ------- ---------- -------
Total Capitalization................................................ $2,313,331 100.0 $2,343,331 100.0
========= ======= ========= =======
</TABLE>
- ---------------
(a) Net income for the 12 month periods ended June 30, 1995 and December 31,
1994 includes a charge of $80.2 million as a result of the settlement of a
long-standing dispute (the "FERC Settlement") involving income tax allocation
procedures of the Company. For further information with respect to the FERC
Settlement, reference is made to Note 2, "Rate and Regulatory Matters," of the
Company's Notes to the 1994 Financial Statements on page 327 of the 1994 10-K.
(b) "Earnings," as defined by Securities and Exchange Commission Regulation S-K,
represent the aggregate of (1) net income, (2) taxes based on income, (3)
investment tax credit adjustments-net and (4) fixed charges. "Fixed Charges"
include interest (whether expensed or capitalized), related amortization and
interest applicable to rentals charged to operating expenses.
(c) Adjusted to reflect the issuance and sale of the Debentures.
(d) Excludes current maturities of First Mortgage Bonds which totaled $105
million at June 30, 1995. See "Use of Proceeds" below. There were no current
maturities of Other Long-Term Debt at June 30, 1995.
S-2
USE OF PROCEEDS
The net proceeds to be received from the issuance and sale of the
Debentures will be added to the Company's general funds, and will be used to
replace a portion of the funds required to meet the maturity of $105,000,000
principal amount of the Company's 6.12% First Mortgage Bonds on October 1, 1995.
DESCRIPTION OF THE DEBENTURES
The following description of the terms of the Debentures offered hereby
supplements the description of the general terms and provisions of the
Debentures set forth in the accompanying Prospectus under the heading
"Description of Debt Securities", to which description reference is hereby made.
INTEREST, MATURITY AND PAYMENT
The Debentures will mature on October 1, 2000 and will bear interest from
October 1, 1995 at the rate set forth on the cover page hereof, payable April 1
and October 1 of each year ("Interest Payment Dates"), commencing April 1, 1996.
Interest is payable to holders of record at the close of business on the March
15 or September 15 next preceding the interest payment date ("Regular Record
Dates"). Principal and interest are payable at the corporate trust office of
Chemical Bank, as paying agent of the Company (the "Paying Agent"), in New York,
New York. For so long as the Debentures are registered in the name of DTC, or
its nominee, the principal and interest due on the Debentures will be payable by
the Paying Agent to DTC for payment to its participants for subsequent
disbursement to the beneficial owners. Interest on any overdue principal will
accrue at the same rate as the interest rate on the Debentures set forth on the
cover page hereof, but interest will not accrue on overdue installments of
interest on the Debentures.
REDEMPTION
The Debentures will not be redeemable prior to maturity.
UNDERWRITING
Under the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters has severally agreed to
purchase, the respective principal amount of the Debentures set forth opposite
its name below:
UNDERWRITER PRINCIPAL AMOUNT
---------------------------------------------- ----------------
Bear, Stearns & Co. Inc...................... $
Salomon Brothers Inc......................... $
------------
Total.............................. $ 30,000,000
============
The Underwriting Agreement provides that the several obligations of the
Underwriters to pay for and accept delivery of the Debentures are subject to
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters' obligations are such that they are committed to
take and pay for all of the Debentures offered hereby if any are taken,
provided, that under certain circumstances involving a default of one
Underwriter, less than all of the Debentures may be purchased. Default by one
Underwriter would not relieve the non-defaulting Underwriter from its several
obligation, and in the event of such a default, the non-defaulting Underwriter
may be required by the Company to purchase the principal amount of the
Debentures that it has severally agreed to purchase and, in addition, to
purchase the principal amount of the Debentures that the defaulting Underwriter
shall have failed to purchase up to a principal amount equal to one-ninth of the
principal amount of the Debentures that such non-defaulting Underwriter has
otherwise agreed to purchase.
S-3
The Underwriters have advised the Company that they propose to offer all or
part of the Debentures directly to purchasers at the initial public offering
price set forth on the cover page of this Prospectus Supplement, and to certain
securities dealers at such price less a concession not in excess of % of the
principal amount of the Debentures. The Underwriters may allow, and such dealers
may reallow to certain brokers and dealers, a concession not in excess of %
of the principal amount of the Debentures. After the Debentures are released for
sale to the public, the offering price and other selling terms may from time to
time be varied.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
There is presently no trading market for the Debentures and there is no
assurance that a market will develop. Although they are under no obligation to
do so, the Underwriters presently intend to act as market makers for the
Debentures in the secondary trading market, but may discontinue such
market-making at any time without notice.
S-4
PROSPECTUS
$265,000,000
SYSTEM ENERGY RESOURCES, INC.
DEBT SECURITIES
------------------------------
System Energy Resources, Inc. ("System Energy" or the "Company") intends to
offer from time to time up to $265,000,000 aggregate principal amount of
unsecured debt securities (the "Debt Securities") in one or more series, at
prices and upon terms to be determined at the time or times of sale. For each
issue of the Debt Securities (the "Offered Securities") there will be a
Prospectus Supplement ("Prospectus Supplement") accompanying this Prospectus
that will set forth, without limitation and to the extent applicable, the
specific designation, aggregate principal amount, denomination, maturity,
premium, if any, rate of interest (which may be fixed or variable) or method of
calculation thereof, time of payment of interest, any terms for redemption, any
sinking fund provisions, the initial public offering price, the names of any
underwriters or agents, the principal amounts, if any, to be purchased by the
underwriters, the compensation of such underwriters or agents, the amount and
proposed use of proceeds to the Company from the Offered Securities, and any
other special terms of or pertinent information with respect to the Offered
Securities and the Company.
SEE "RISK FACTORS" AT PAGE 3 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Debt Securities will be sold through one or more underwriters, dealers
or agents, or directly to one or more purchasers. The Prospectus Supplement will
set forth the names of the underwriters, dealers or agents, if any, any
applicable commissions or discounts and the net proceeds to the Company from any
such sale of the Offered Securities. See "Plan of Distribution."
------------------------------
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 26, 1995.
AVAILABLE INFORMATION
System Energy is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports include information, as of
particular dates, concerning the Company's directors and officers, their
remuneration, the principal holders of the Company's securities and any material
interests of such persons in transactions with the Company. Such reports and
other information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street N.W., Room
1024, Washington, D.C. 20549-1004; and at the following Regional Offices of the
Commission: Chicago Regional Office, 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661, and New York Regional Office, 7 World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can also be obtained at
prescribed rates from the Public Reference Branch of the Commission at its
principal office at 450 Fifth Street N.W., Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1994 (the "1994 10-K").
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995.
In addition, all documents filed by the Company with the Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents (such documents, and the documents enumerated
above, being herein referred to as "Incorporated Documents," provided, however,
that the documents enumerated above or subsequently filed by the Company
pursuant to Section 13, 14 or 15(d) of the Exchange Act prior to the filing of
the Company's next Annual Report on Form 10-K with the Commission shall not be
Incorporated Documents or be incorporated by reference in this Prospectus or be
a part hereof from and after any such filing of an Annual Report on Form 10-K).
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for all purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document or in a Prospectus Supplement modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the Incorporated Documents, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference herein. Requests for
such copies should be directed to Christopher T. Screen, P.O. Box 61000, New
Orleans, Louisiana 70161, telephone: (504) 576-4212.
No person has been authorized to give any information or to make any
representation not contained in this Prospectus, as supplemented or amended, or
with respect to the Debt Securities, and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company
or any other person. This Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction.
2
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Company since the date of this Prospectus.
RISK FACTORS
Prospective purchasers of the Debt Securities offered hereby should
carefully consider the matters set forth below, as well as the other information
contained in this Prospectus and the Incorporated Documents, in evaluating an
investment in the Debt Securities.
RISKS OF OWNERSHIP OF NUCLEAR GENERATING FACILITIES
The Company is subject to the risks attendant upon the ownership and
operation of Grand Gulf 1 ("Grand Gulf 1"), a 1,250 megawatt nuclear powered
generating unit, which is the Company's principal asset. These include risks
arising from the operation of nuclear facilities and the storage, handling and
disposal of high-level and low-level radioactive materials, limitations on the
amounts and types of insurance commercially available in respect of losses that
might arise in connection with nuclear operations, and uncertainties with
respect to the technological and financial aspects of decommissioning nuclear
plants at the end of their licensed lives. The Nuclear Regulatory Commission
(the "NRC") has broad authority under Federal law to impose licensing and
safety-related requirements upon owners and operators of nuclear generating
facilities and, in the event of non-compliance, has the authority to impose
fines or shut down a unit, or both, depending upon its assessment of the
severity of the situation, until compliance is achieved. Safety requirements
promulgated by the NRC have, in the past, necessitated substantial capital
expenditures at nuclear plants and additional such expenditures could be
required in the future. In addition, although the Company has no reason to
anticipate a serious nuclear incident at Grand Gulf 1, if such an incident did
occur, it could have a material but presently undeterminable adverse effect on
the financial position of the Company.
RISKS ASSOCIATED WITH UNSECURED NATURE OF DEBT SECURITIES
The Debt Securities offered hereby will be unsecured obligations of the
Company. For further information with respect to the Company's secured debt
obligations and contractual arrangements for the benefit of other creditors,
reference is made to "The Company -- Contractual Arrangements for the Benefit of
Other Creditors" below.
THE COMPANY
GENERAL
The Company's principal executive offices are located at Echelon One, 1340
Echelon Parkway, Jackson, Mississippi 39213. The Company's telephone number is
601-368-5000. The Company is a wholly-owned subsidiary of Entergy Corporation
("Entergy"), a registered public utility holding company under the Public
Utility Holding Company Act of 1935, as amended, which also owns all of the
common stock of Arkansas Power & Light Company ("AP&L"), Gulf States Utilities
Company, Louisiana Power & Light Company ("LP&L"), Mississippi Power & Light
Company ("MP&L") and New Orleans Public Service Inc. ("NOPSI"). Other
subsidiaries of Entergy include Entergy Services, Inc., a service company,
Entergy Operations, Inc., a nuclear management services company ("Entergy
Operations"), Entergy Power, Inc., a wholesale power company, and Entergy
Enterprises, Inc., a non-utility company. AP&L, LP&L, MP&L and NOPSI own System
Fuels, Inc., which is responsible for the procurement, transportation and
storage of fuel supplies for their generating plants.
NATURE OF THE COMPANY'S BUSINESS
The Company's principal asset consists of a 90% ownership/leasehold
interest in Grand Gulf 1, a 1,250 megawatt nuclear powered electric generating
unit near Port Gibson, Mississippi. The other 10% of Grand
3
Gulf 1 is owned by South Mississippi Electric Power Association, a wholesale
cooperative in Mississippi. The Company has approximately a 78.5% ownership
interest and, pursuant to a sale and leaseback transaction, an 11.5% leasehold
interest in Grand Gulf 1. The Company sells the capacity and energy from its 90%
interest exclusively to four affiliated companies that are also subsidiaries of
Entergy. These sales are made under the Unit Power Sales Agreement among the
Company, AP&L, LP&L, MP&L and NOPSI (the "Unit Power Sales Agreement") which has
been approved by the Federal Energy Regulatory Commission ("FERC"). (See
"-- Source of Revenue" below.) At June 30, 1995, the Company had utility plant
(net of accumulated depreciation) of $2.7 billion, long-term debt of $1.4
billion and common shareholder's equity of $874 million.
The Company was formed in 1974 to construct, finance and own certain
base-load generating units for the operating subsidiaries of Entergy. At that
time, the Company contracted with MP&L for MP&L to act as the Company's agent
for the design, construction, operation and maintenance of the Grand Gulf
Station, a proposed two-unit nuclear-powered electric generating station having
a capacity of 2,500 MW. Grand Gulf 1 was placed in commercial operation on July
1, 1985. Construction of the proposed second unit of the Grand Gulf Station
("Grand Gulf 2") was suspended in 1985 and this unit was canceled and written
off in 1989. On July 28, 1986, the Company's name was changed from "Middle South
Energy, Inc." to "System Energy Resources, Inc.," and effective December 20,
1986, the Company assumed the primary responsibilities, previously assigned to
MP&L, for the management, operation and maintenance of the Grand Gulf Station.
In 1990, Entergy Operations took over responsibility for operating Grand Gulf 1.
SOURCE OF REVENUE
The operating revenues of the Company are derived from the allocation of
the capacity and energy associated with the Company's 90% share of Grand Gulf 1
pursuant to the Unit Power Sales Agreement. Under that agreement, the Company
has agreed to sell all of its 90% owned and leased share of capacity and energy
from Grand Gulf 1 to AP&L, LP&L, MP&L and NOPSI in accordance with specified
percentages (AP&L 36%, LP&L 14%, MP&L 33% and NOPSI 17%) as ordered by FERC.
Charges under this agreement are paid in consideration for the respective
entitlements of AP&L, LP&L, MP&L and NOPSI to receive capacity and energy, and
are payable irrespective of the quantity of energy delivered so long as the unit
remains in commercial operation. The current monthly obligation for payments
from AP&L, LP&L, MP&L and NOPSI to the Company under the Unit Power Sales
Agreement is approximately $49 million.
The financial condition of the Company depends exclusively upon the receipt
of payments from AP&L, LP&L, MP&L and NOPSI and on the continued commercial
operation of Grand Gulf 1. The Company has no reason to believe that these
companies will not be in a position to meet their financial obligations to pay
for their allocated portions of Grand Gulf 1 capacity and energy. For
information with respect to AP&L's, LP&L's, MP&L's and NOPSI's other commitments
and contingent obligations, reference is made to Note 8, "Commitments and
Contingencies" of the Notes to the 1994 Financial Statements of each of AP&L,
LP&L, MP&L and NOPSI in its Annual Report on Form 10-K for the year ended
December 31, 1994.
The Unit Power Sales Agreement will remain in effect until terminated by
the parties (such termination being subject to FERC approval), which the Company
expects to occur upon Grand Gulf 1's retirement from service at the expiration
date of its operating license, which currently is June 16, 2022, but which the
Company currently is seeking to extend to November 1, 2024. In general, approval
by holders of any of the Company's outstanding indebtedness for borrowed money
would not be required for termination, amendment or modification of the Unit
Power Sales Agreement. For further information with respect to the Unit Power
Sales Agreement, reference is made to "Certain System Financial and Support
Agreements," under Part 1, Item 1 on page 11 of the 1994 10-K and to Note 7,
"Commitments and Contingencies" of the Company's Notes to the 1994 Financial
Statements on page 332 of the 1994 10-K.
CONTRACTUAL ARRANGEMENTS FOR THE BENEFIT OF OTHER CREDITORS
Substantially all of the Company's property is subject to the lien of the
Company's First Mortgage Bond Indenture, which secured approximately
$725,319,000 of outstanding debt at June 30, 1995. In addition, certain
indebtedness for borrowed money of the Company, including its outstanding First
Mortgage Bonds, is
4
secured by assignments of the Company's rights under the Capital Funds
Agreement, dated as of June 21, 1974, as amended and supplemented, between the
Company and Entergy (the "Capital Funds Agreement") and under the Availability
Agreement, dated as of June 21, 1974, as amended, among the Company, AP&L, LP&L,
MP&L and NOPSI (the "Availability Agreement").
Pursuant to the Capital Funds Agreement, Entergy has agreed to supply to
the Company sufficient capital to (1) maintain the Company's equity capital at
an amount equal to a minimum of 35% of its total capitalization (excluding
short-term debt), and (2) permit the continuation of commercial operation of
Grand Gulf 1 and to pay in full all indebtedness for borrowed money of the
Company when due under any circumstances.
Pursuant to the Availability Agreement and the assignments thereof, AP&L,
LP&L, MP&L and NOPSI are individually obligated to make payments or subordinated
advances to the Company in accordance with stated percentages (AP&L 17.1%, LP&L
26.9%, MP&L 31.3% and NOPSI 24.7%) in amounts that, when added to amounts
received under the Unit Power Sales Agreement or otherwise, are adequate to
cover all of the Company's (i) operating expenses for the Grand Gulf Station,
including depreciation at a specified rate and permanent shutdown costs, (ii)
interest charges, and (iii) an amount sufficient to amortize the Company's
investment in Grand Gulf 2 over 27 years. The respective percentages of payments
due by AP&L, LP&L, MP&L and NOPSI were agreed upon by the parties pursuant to an
amendment to the Availability Agreement in connection with the financing of the
construction costs of Grand Gulf 1. The different percentages of allocation of
capacity and energy from Grand Gulf 1, and the corresponding payments due by
AP&L, LP&L, MP&L and NOPSI, under the Unit Power Sales Agreement were ordered by
FERC in June 1985 based upon FERC's determination of these companies' system
wide demand responsibilities.
The Availability Agreement provides assurances that the Company would have
available to it adequate cash resources to cover its operating expenses,
interest costs and depreciation charges and permanent shutdown costs in the
event of a shortfall of funds available to the Company from sales of capacity
and energy under the Unit Power Sales Agreement and from other sources. These
assurances do not cover or provide for a return on equity. On the other hand,
payments to the Company under the Unit Power Sales Agreement cover the Company's
full cost of service, to the extent allowed pursuant to FERC ratemaking
practices, including a return on equity. The Availability Agreement by its terms
provides that amounts payable thereunder in respect of Grand Gulf 1 are payable
even if the unit is not in service for any reason. As discussed above, payments
under the Unit Power Sales Agreement are required to be made so long as Grand
Gulf 1 remains in commercial operation. Since commercial operation of Grand Gulf
1 began, payments under the Unit Power Sales Agreement to the Company have
exceeded the amounts payable under the Availability Agreement. Accordingly, no
payments under the Availability Agreement by AP&L, LP&L, MP&L and NOPSI have
ever been required.
The Capital Funds Agreement and the Availability Agreement may be
terminated, amended or modified by mutual agreement of the parties thereto, and
upon obtaining, if required, the consent of those holders of the Company's
indebtedness then outstanding who have received assignments of such agreements
as described above. The Company's obligation to pay when due the principal of
and premium, if any, and interest on the Debt Securities will not be secured by
any assets of the Company or by any pledge of the Company's First Mortgage
Bonds, nor by any assignment of the Company's rights under the Capital Funds
Agreement, the Availability Agreement or the Unit Power Sales Agreement. Holders
of the Debt Securities offered hereby will have no direct legal recourse against
the Company, Entergy or AP&L, LP&L, MP&L and NOPSI under the terms of the
Capital Funds Agreement, the Availability Agreement or the Unit Power Sales
Agreement. For further information with respect to these agreements, reference
is made to "Certain System Financial and Support Agreements," under Part 1, Item
1 on page 11 of the 1994 10-K, and to Note 7, "Commitments and Contingencies" of
the Company's Notes to the 1994 Financial Statements on page 332 of the 1994
10-K.
The information above relating to the Company does not purport to be
comprehensive and should be read together with the financial statements and
other information contained in the Incorporated Documents. For further
information concerning Entergy, AP&L, LP&L, MP&L and NOPSI, reference is made to
the
5
information relating to such companies contained in the Annual Report on Form
10-K for the year ended December 31, 1994 of Entergy, AP&L, LP&L, MP&L and
NOPSI.
USE OF PROCEEDS
Except as otherwise described in any Prospectus Supplement, the net
proceeds to be received from the issuance and sale of the Offered Securities are
expected to be applied primarily to the redemption, repurchase, repayment or
retirement of outstanding indebtedness of the Company. The interest rate and
maturity of any indebtedness to be discharged with the proceeds of any series of
the Debt Securities will be set forth in the applicable Prospectus Supplement.
<TABLE>
<CAPTION>
RATIO OF EARNINGS TO FIXED CHARGES
TWELVE MONTHS ENDED
--------------------------------------------------
DECEMBER 31,
JUNE 30, --------------------------------------
1995 1994 1993 1992 1991 1990
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(a).... 1.23(b) 1.23(b) 1.87 2.04 1.74 2.10
</TABLE>
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(a) "Earnings," as defined by Commission Regulation S-K, represent the aggregate
of (1) net income, (2) taxes based on income, (3) investment tax credit
adjustments -- net and (4) fixed charges. "Fixed Charges" include interest
(whether expensed or capitalized), related amortization and interest
applicable to rentals charged to operating expenses.
(b) Earnings for the twelve month periods ended June 30, 1995 and December 31,
1994 include a charge of $80.2 million as a result of the settlement of a
long-standing dispute at the Federal Energy Regulatory Commission (the
"FERC Settlement") involving income tax allocation procedures of the
Company. For further information with respect to the FERC Settlement,
reference is made to Note 2, "Rate and Regulatory Matters," of the
Company's Notes to the 1994 Financial Statements on page 327 of the 1994
10-K.
DESCRIPTION OF DEBT SECURITIES
Set forth below are certain general terms and provisions of the Debt
Securities, which may be issued from time to time in one or more series. The
particular terms of each series of Offered Securities will be described in a
Prospectus Supplement relating thereto. Accordingly, for a description of the
terms of any particular series, reference must be made to both the description
set forth below and the Prospectus Supplement relating thereto.
The statements under this heading do not purport to be complete and are
subject to the detailed provisions of an Indenture to be dated as of September
1, 1995, (the "Indenture") between the Company and Chemical Bank, as trustee
(the "Trustee"), a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. References in
parentheses below refer to section numbers in the Indenture and capitalized
terms not otherwise defined herein shall have the respective meanings ascribed
to them in the Indenture.
GENERAL
The Debt Securities may be issued in one or more new series under the
Indenture. The Indenture does not contain any limitation on the principal amount
of Debt Securities which may be issued thereunder. The Debt Securities will be
unsecured obligations of the Company.
Reference is made to the Prospectus Supplement relating to any particular
series of Offered Securities for the following terms, among others: (1) the
title of such Debt Securities; (2) any limit on the aggregate principal amount
of such Debt Securities or the series of which they are a part; (3) the date or
dates on which the principal of any of such Debt Securities will be payable; (4)
the rate or rates at which any of such Debt
6
Securities will bear interest, if any, the date or dates from which any such
interest will accrue, the Interest Payment Dates on which any such interest will
be payable and the Regular Record Date for any such interest payable on any
Interest Payment Date; (5) the place or places where the principal of and
premium, if any, and interest on any of such Debt Securities will be payable;
(6) the period or periods within which, the price or prices at which and the
terms and conditions on which any of such Debt Securities may be redeemed, in
whole or in part, at the option of the Company; (7) the obligation, if any, of
the Company to redeem or purchase any of such Debt Securities pursuant to any
sinking fund or analogous provision or at the option of the Holder thereof, and
the period or periods within which, the price or prices at which and the terms
and conditions on which any of such Debt Securities will be redeemed or
purchased, in whole or in part, pursuant to any such obligation; (8) the
denominations in which any of such Debt Securities will be issuable if other
than denominations of $1,000 and any integral multiple thereof; (9) if the
amount of principal of or any premium or interest on any of such Debt Securities
will be determined with reference to an index or pursuant to a formula, the
manner in which such amounts will be determined; (10) if any such Debt
Securities will be issued in global form and, if so, any and all matters
incidental to such Debt Securities; (11) any addition to the Events of Default
applicable to any of such Debt Securities; (12) any addition to the covenants of
the Company for the benefit of the Holders of such Debt Securities in the
Indenture; and (13) any other terms of such Debt Securities not inconsistent
with the provisions of the Indenture. (Section 301).
FORM, EXCHANGE AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities of each series will be issuable only in fully registered form
without coupons and in denominations of $1,000 and any integral multiple
thereof. (Sections 201 and 302).
At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to global securities, Debt Securities of any series will
be exchangeable for other Debt Securities of the same series, of any authorized
denomination and of like tenor and aggregate principal amount (Section 305).
Subject to the terms of the Indenture and the limitations applicable to
global securities, Debt Securities may be presented for exchange as provided
above or for registration of transfer (duly endorsed or accompanied by a duly
executed instrument of transfer) at the office of the Security Registrar or at
the office of any transfer agent designated by the Company for such purpose. The
Company may designate itself the Security Registrar. No service charge will be
made for any registration of transfer or exchange of Debt Securities, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Such transfer or exchange
will be effected upon the Security Registrar or such transfer agent, as the case
may be, being satisfied with the documents of title and identity of the person
making the request. (Section 305). Any transfer agent (in addition to the
Security Registrar) initially designated by the Company for any Debt Securities
will be named in the applicable Prospectus Supplement. The Company may at any
time designate additional transfer agents or rescind the designation of any
transfer agent or approve a change in the office through which any transfer
agent acts, except that the Company will be required to maintain a transfer
agent in each Place of Payment for the Debt Securities of each series. (Section
602).
The Company will not be required to (i) issue, register the transfer of, or
exchange any Debt Security or any Tranche thereof during a period beginning at
the opening of business 15 days before the day of mailing of a notice of
redemption of any such Debt Security called for redemption and ending at the
close of business on the day of such mailing or (ii) register the transfer of or
exchange any Debt Security so selected for redemption, in whole or in part,
except the unredeemed portion of any such Debt Security being redeemed in part.
(Section 305).
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Debt Security on any Interest Payment Date will be made to the
person in whose name such Debt Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest. (Section 307).
7
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
the Company may designate for such purpose from time to time. Unless otherwise
indicated in the applicable Prospectus Supplement, the corporate trust office of
the Trustee in New York City will be designated as the Company's sole Paying
Agent for payments with respect to Debt Securities of each series. Any other
Paying Agents initially designated by the Company for the Debt Securities of a
particular series will be named in the applicable Prospectus Supplement. The
Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent or approve a change in the office through which
any Paying Agent acts, except that the Company will be required to maintain a
Paying Agent in each Place of Payment for the Debt Securities of a particular
series. (Section 602).
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to the Company, and the Holder of such
Debt Security thereafter may look only to the Company for payment thereof.
(Section 603).
REDEMPTION
Any terms for the optional or mandatory redemption of any series of Debt
Securities will be set forth in the applicable Prospectus Supplement. Except as
shall otherwise be provided in the applicable Prospectus Supplement with respect
to Debt Securities that are redeemable at the option of the Holder, Debt
Securities will be redeemable only upon notice by mail not less than 30 nor more
than 60 days' prior to the date fixed for redemption, and, if less than all the
Debt Securities of a series, or any Tranche thereof, are to be redeemed, the
particular Debt Securities to be redeemed will be selected by such method as
shall be provided for any particular series, or in the absence of any such
provision, by such method of random selection as the Security Registrar deems
fair and appropriate. (Section 403 and 404).
Any notice of redemption at the option of the Company may state that such
redemption will be conditional upon receipt by the Paying Agent or Agents, on or
prior to the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest, if any, on such Debt Securities
and that if such money has not been so received, such notice will be of no force
and effect and the Company will not be required to redeem such Debt Securities
(Section 404).
EVENTS OF DEFAULT
The Indenture defines the occurrence of any one or more of the following
events to be an "Event of Default":
(a) failure to pay any interest on any Debt Security within sixty (60) days
after the same becomes due and payable;
(b) failure to pay the principal of or premium, if any, on any Debt
Security when due and payable;
(c) failure to perform or breach of any other covenant or warranty of the
Company in the Indenture (other than a covenant or warranty of the
Company in the Indenture solely for the benefit of one or more series of
Debt Securities other than such series), for 60 days after written
notice to the Company by the Trustee, or to the Company and the Trustee
by the Holders of at least 33% in principal amount of the Debt
Securities outstanding under the Indenture as provided in the Indenture;
(d) certain events of bankruptcy, insolvency or reorganization; or
(e) any other Event of Default specified with respect to the Debt
Securities (Section 801).
No Event of Default with respect to a particular series of the Debt
Securities necessarily constitutes an Event of Default with respect to any other
series of Debt Securities that may be issued under the Indenture.
8
REMEDIES
If an Event of Default occurs and is continuing with respect to Debt
Securities of any series at the time Outstanding, then either the Trustee or the
Holders of not less than 33% in principal amount of the Outstanding Debt
Securities of such series may declare the principal amount (or if any of the
Debt Securities of such series are Discount Securities, such portion of the
principal amount of such Debt Securities as may be specified in the applicable
Prospectus Supplement) of all of the Debt Securities of such series to be due
and payable immediately; provided, however, that if an Event of Default occurs
and is continuing with respect to more than one series of Debt Securities, the
Trustee or the Holders of not less than 33% in aggregate principal amount of the
Outstanding Debt Securities of all such series, considered as one class, may
make such declaration of acceleration, and not the Holders of the Debt
Securities of any one of such series.
At any time after the declaration of acceleration with respect to the Debt
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee, the Event of Default
giving rise to such declaration of acceleration will, without further act, be
deemed to have been waived, and such declaration and its consequences will,
without further act, be deemed to have been rescinded and annulled, if:
(a) the Company has paid or deposited with the Trustee a sum sufficient to
pay:
(1) all overdue interest on the Debt Securities of such series;
(2) the principal of and premium, if any, on the Debt Securities of such
series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed
therefor in such Debt Securities;
(3) interest upon overdue interest at the rate or rates prescribed
therefore in the Debt Securities of such series, to the extent that
payment of such interest is lawful; and
(4) all amounts due to the Trustee under the Indenture;
and
(b) any other Event or Events of Default with respect to the Debt
Securities of such series, other than the nonpayment of the principal
of the Debt Securities of such Series which has become due solely by
such declaration of acceleration, have been cured or waived as provided
in the Indenture (Section 802).
If an Event of Default occurs and is continuing with respect to a series of
Debt Securities, the Holders of a majority in principal amount of the
Outstanding Debt Securities of such series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of such series; provided, however, that if an
Event of Default occurs and is continuing with respect to more than one series
of Debt Securities issued under the Indenture, the Holders of a majority in
aggregate principal amount of the outstanding Debt Securities of all such
series, considered as one class, will have the right to make such direction, and
not the Holders of the Debt Securities of any one of such series; and provided,
further, that (a) such direction will not be in conflict with any rule of law or
with the Indenture and will not involve the Trustee in personal liability in
circumstances where reasonable indemnity would not in the Trustee's sole
discretion be adequate and (b) the Trustee may take any other action it deems
proper which is not inconsistent with such direction (Section 812).
The Holders of a majority in principal amount of the then Outstanding Debt
Securities of any series may waive any past default under the Indenture except a
default (a) in the payment of the principal of or premium, if any, or interest,
if any, on any Debt Security of such series or (b) with respect to a covenant or
provision of the Indenture which under the Indenture cannot be modified or
amended without the consent of the Holder of each Outstanding Debt Security of
such series affected (Section 813).
9
The right of a Holder of the Debt Securities to institute a proceeding with
respect to the Indenture is subject to certain conditions precedent, but each
Holder has an absolute right to receive payment of principal and premium, if
any, and interest, if any, on or after the applicable due date specified in such
Debt Security and to institute suit for the enforcement of any such payment
(Sections 807 and 808). The Indenture provides that the Trustee, within 90 days
after the occurrence of any default thereunder with respect to the Debt
Securities of any series, is required to give the Holders of the Debt Securities
of such series notice of such default, unless cured or waived; provided,
however, that, except in the case of a default in the payment of principal of or
premium, if any, or interest, if any, on the Debt Securities of such series, the
Trustee may withhold such notice if the Trustee determines that it is in the
interest of such Holders to do so; and provided, further, that in the case of an
Event of Default of the character specified above in clause (c) under "Events of
Default," no such notice shall be given to such Holders until at least 75 days
after the occurrence thereof (Section 902).
The Company will be required to furnish annually to the Trustee a statement
by an appropriate officer as to such officer's knowledge of the Company's
compliance with all conditions and covenants under the Indenture, such
compliance to be determined without regard to any period of grace or requirement
of notice under the Indenture (Section 606).
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Company will not consolidate with or merge into any other corporation
or convey, transfer, or lease its properties and assets substantially as an
entirety to any Person unless (a) the corporation formed by such consolidation
or into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the property and assets of the Company
substantially as an entirety, is a Person organized and existing under the laws
of the United States of America, any State thereof or the District of Columbia,
and such Person expressly assumes, by supplemental indenture, the due and
punctual payment of the principal of and premium, if any, and interest, if any,
on all the Outstanding Debt Securities and the performance of all of the
covenants of the Company under the Indenture, (b) immediately after giving
effect to such transactions, no Event of Default, and no event which after
notice and lapse of time would become an Event of Default, will have occurred
and be continuing, and (c) the Company will have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel as provided in the Indenture
(Section 1101).
Unless otherwise indicated in the applicable Prospectus Supplement, there
are no provisions that will afford the holders of Debt Securities protection in
the event of a highly leveraged transaction involving the Company. There are
also no provisions that will require the repurchase of the Debt Securities upon
a change in control of the Company.
MODIFICATION OF INDENTURE
Without the consent of any Holders of Debt Securities, the Company and the
Trustee may enter into one or more supplemental indentures, in form satisfactory
to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company in the
Indenture and the Debt Securities;
(b) to add to the covenants of the Company for the benefit of the Holders
of all or any series of Outstanding Debt Securities or to surrender any
right or power conferred upon the Company by the Indenture;
(c) to add any additional Events of Default with respect to all or any
series of outstanding Debt Securities;
(d) to change or eliminate any provision of the Indenture or to add any
provision to the Indenture; provided that if such change, elimination or
addition will adversely affect the interests of the Holders of Debt
Securities of any series in any material respect, such change,
elimination or addition will become effective with respect to such
series only when there is no Debt Security of such series remaining
Outstanding under the Indenture;
10
(e) to provide collateral security for the Debt Securities;
(f) to establish the form or terms of Debt Securities of any series as
permitted by the Indenture;
(g) to provide for the authentication and delivery of bearer securities and
coupons appertaining thereto representing interest, if any, thereon and
for the registration, exchange and replacement thereof and for the
giving of notice to, and the solicitation of the vote or consent of, the
holders thereof, and any matters incidental thereto;
(h) to evidence and provide for the acceptance of appointment of a separate
or successor Trustee under the Indenture with respect to the Debt
Securities of one or more series and to add to or change any of the
provisions of the Indenture as shall be necessary to provide for or to
facilitate the administration of the trusts under the Indenture by more
than one Trustee;
(i) to provide for the procedures required to permit the utilization of a
noncertificated system of registration for any series of Debt
Securities;
(j) to change any place or places where (1) the principal of and premium,
if any, and interest, if any, on all or any series of Debt Securities
shall be payable, (2) all or any series of Debt Securities may be
surrendered for registration of transfer, (3) all or any series of Debt
Securities may be surrendered for exchange, and (4) notices and demands
to or upon the Company in respect of all or any series of Debt
Securities may be served; or
(k) to cure any ambiguity, defect or inconsistency or to make any other
changes to the provisions of the Indenture with respect to matters and
questions arising under the Indenture, provided such action shall not
adversely affect the interests of the Holders of Debt Securities of any
series in any material respect (Section 1201).
The consent of the Holders of a majority in aggregate principal amount of
the Debt Securities of all series then Outstanding under the Indenture,
considered as one class, is required for the purpose of adding any provisions
to, or changing in any manner or eliminating any of the provisions of, the
Indenture pursuant to an indenture or supplemental indenture; provided, however,
that if less than all of the series of Debt Securities Outstanding under the
Indenture are directly affected by a supplemental indenture, then the consent
only of the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of all series so directly affected, considered as
one class, will be required; and provided, further, that if the Debt Securities
of any series have been issued in more than one Tranche and if the proposed
supplemental indenture directly affects the rights of the Holders of Debt
Securities of one or more, but less than all, of such Tranches, then the consent
only of the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of all Tranches so directly affected, considered as
one class, will be required; and provided, further, that no such supplemental
indenture will, without the consent of the Holder of each Outstanding Security
under the Indenture of each such series directly affected thereby, (a) change
the Stated Maturity of, or any installment of principal of or interest on, any
Debt Security, or reduce the principal thereof or the rate of interest (or the
amount of any installment of interest thereon), if any, thereon or redemption
premium thereon, or change the method of calculating the rate of interest
thereon, or reduce the amount of the principal of any Discount Security that
would be due and payable upon a declaration of acceleration of the Maturity
thereof, or change the coin or currency (or other property) in which any Debt
Security or any premium or the interest thereon is payable or impair the right
to institute suit for the enforcement of any such payment on or after the Stated
Maturity of any Debt Security (or, in the case of redemption, on or after the
Redemption Date), (b) reduce the percentage in principal amount of the Debt
Securities Outstanding under such series, the consent of the Holders of which is
required for any supplemental indenture or waiver of compliance with any
provision of the Indenture or any default thereunder and its consequences or to
reduce the requirements for quorum and voting under the Indenture, or (c) modify
certain of the provisions of the Indenture relating to supplemental indentures,
waivers of certain covenants and waivers of past defaults.
A supplemental indenture which changes or eliminates any covenant or other
provision of the Indenture which has expressly been included solely for the
benefit of one or more particular series of Debt Securities or
11
one or more Tranches thereof, or which modifies the rights of the Holders of
Debt Securities of such series or Tranches with respect to such covenant or
other provision, shall be deemed not to affect the rights under the Indenture of
the Holders of Debt Securities of any other series or Tranche (Section 1202).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver under the
Indenture or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) Debt Securities owned by the Company or any other obligor upon
the Debt Securities or any Affiliate of the Company or of such other obligor
(unless the Company, such Affiliate or such obligor owns all Outstanding Debt
Securities under the Indenture, or all Outstanding Debt Securities of each such
series and each such Tranche, as the case may be, determined without regard to
this clause (i)) shall be disregarded and deemed not to be Outstanding; (ii) the
principal amount of a Discount Security that shall be deemed to be Outstanding
for such purposes shall be the amount of the principal thereof that would be due
and payable as of the date of such determination upon a declaration of
acceleration of the Maturity thereof as provided in the Indenture; and (iii) the
principal amount of a Debt Security denominated in one or more foreign
currencies or a composite currency that will be deemed to be Outstanding will be
the amount of Dollars which could have been purchased by the principal amount
(or, in the case of a Debt Security described in clause (ii) above, of the
amount described in such clause) of such currency or composite currency
evidenced by such Debt Security. (Section 101).
If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, election, waiver or other Act, the
Company may, at its option, by Board Resolution, fix in advance a record date
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, election, waiver or other Act, but
the Company shall have no obligation to do so. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, election,
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on the record date shall be deemed to
be Holders for the purposes of (i) determining whether Holders of the requisite
proportion of the Outstanding Debt Securities have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other Act and for that purpose the Outstanding Debt Securities shall
be computed as of the record date or (ii) determining which Holders may revoke
any such Act Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of a Holder shall bind every future Holder of the
same Debt Security and the Holder of every Debt Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Debt Security. (Section 104).
DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement for a
series of Offered Securities, any series of Debt Securities, or any portion of
the principal amount thereof, will be deemed to have been paid for purposes of
the Indenture (except as to any surviving rights of registration of transfer or
exchange expressly provided for in the Indenture), and the entire indebtedness
of the Company in respect thereof will be deemed to have been satisfied and
discharged, if there shall have been irrevocably deposited with the Trustee or
any Paying Agent (other than the Company), in trust: (a) money in an amount
which will be sufficient, or (b) Government Obligations (as defined below),
which do not contain provisions permitting the redemption or other prepayment
thereof at the option of the issuer thereof, the principal of and the interest
on which when due, without any regard to reinvestment thereof, will provide
moneys which, together with the money, if any, deposited with or held by the
Trustee or such Paying Agent, will be sufficient, or (c) a combination of (a)
and (b) which will be sufficient, to pay when due the principal of and premium,
if any, and interest, if any, due and to become due on such Debt Securities of
such series or portions thereof (Section 701). For this purpose, Government
Obligations, include direct obligations of, or obligations unconditionally
guaranteed by, the United States of America entitled to the benefit of the full
faith and credit thereof and certificates, depositary receipts or other
instruments which evidence a direct ownership interest in such obligations or in
any specific interest or principal payments due in respect thereof.
12
While there may be no legal precedent on point, it is possible that for
federal income tax purposes any deposit contemplated in the preceding paragraph
could be treated as a taxable exchange of the related Debt Securities for an
issue of obligations of the trust or a direct interest in the cash and
securities held in the trust. In that case, Holders of such Debt Securities
would recognize a gain or loss for federal income tax purposes, as if their
share of the trust obligations or the cash or securities deposited, as the case
may be, had actually been received by them in exchange for their Debt
Securities. In addition, such Holders thereafter would be required to include in
income a share of the income, gain or loss of the trust. The amount so required
to be included in income could be different from the amount that would be
includable in the absence of such deposit. Prospective investors are urged to
consult their own tax advisors as to the specific consequences to them of such
deposit.
RESIGNATION OF TRUSTEE
The Trustee may resign at any time by giving written notice thereof to the
Company or may be removed at any time by Act of the Holders of a majority in
principal amount of the then Outstanding Debt Securities delivered to the
Trustee and the Company. No resignation or removal of the Trustee and no
appointment of a successor trustee will become effective until the acceptance of
appointment by a successor trustee in accordance with the requirements of the
Indenture. So long as no Event of Default or event which, after notice or lapse
of time, or both, would become an Event of Default has occurred and is
continuing and except with respect to a Trustee appointed by Act of the Holders,
if the Company has delivered to the Trustee a resolution of its Board of
Directors appointing a successor trustee and such successor has accepted such
appointment in accordance with the terms of the Indenture, the Trustee will be
deemed to have resigned and the successor will be deemed to have been appointed
as trustee in accordance with the Indenture. (Section 910).
BOOK-ENTRY SYSTEM -- GLOBAL DEBT SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement, The
Depository Trust Company, New York, New York ("DTC") will act as securities
depository for the Debt Securities. The Debt Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
partnership nominee). One or more fully-registered global certificates will be
issued for the Debt Securities representing the aggregate principal amount of
such series of Debt Securities, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants (the "Direct Participants") deposit with
DTC. DTC also facilitates the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Direct Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly (the "Indirect Participants," and together with the Direct
Participants, the "Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Debt Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Debt Securities
on DTC's records. The ownership interest of each actual purchaser of each
Debenture (a "Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' respective records. Beneficial Owners will not receive
written confirmation from DTC of their purchase, but Beneficial Owners are
expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interest in the Debt Securities
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are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interest in Debt Securities except in the event
that use of the book-entry system for the Debt Securities is discontinued.
To facilitate subsequent transfers, all Debt Securities deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of the Debt Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Debt Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such Debt
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
securities of an issue are being redeemed, DTC's practice is to determine by lot
the amount of the interest of each Direct Participant in such series to be
redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the Debt
Securities. Under its usual procedures, DTC mails an omnibus proxy (an "Omnibus
Proxy") to the Participants as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Debt Securities are credited on the record
date (identified in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Debt Securities
will be made to DTC. DTC's practice is to credit Direct Participants' accounts
on the relevant payment date in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it will not receive
payment on such payment date. Payments by Participants to Beneficial Owners will
be governed by standing instructions and customary practices, as is the case
with securities for the accounts of customers in bearer form or registered in
"street-name," and will be the responsibility of such Participant and not of
DTC, the Underwriters, or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
redemption premium, if any, and interest to DTC is the responsibility of the
Company or the Trustee. Disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Debt Securities at any time by giving reasonable notice to the
Company. Under such circumstances and in the event that a successor securities
depository is not obtained, Debt Securities certificates are required to be
printed and delivered. In addition, the Company may decide to discontinue use of
the system of book-entry transfers through DTC (or a successor securities
depository). In that event, Debt Securities certificates will be printed and
delivered.
The Company will not have any responsibility or obligation to Participants
or the persons for whom they act as nominees with respect to the accuracy of the
records of DTC, its nominee or any Direct or Indirect Participant with respect
to any ownership interest in the Debt Securities, or with respect to payments to
or providing of notice for the Direct Participants, the Indirect Participants or
the Beneficial Owners.
So long as Cede & Co. is the registered owner of the Debt Securities, as
nominee of DTC, references herein to Holders of the Debt Securities shall mean
Cede & Co. or DTC and shall not mean the Beneficial Owners of the Debt
Securities.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC. Neither the Company, the Trustee nor the
underwriters, dealers or agents takes responsibility for the accuracy or
completeness thereof.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities: (i) through underwriters or
dealers, (ii) directly to one or more purchasers, (iii) through agents or (iv)
through a combination of any such methods of sale. The applicable Prospectus
Supplement with respect to the Offered Securities shall set forth the terms of
the offering of the Offered Securities, including the name or names of any
underwriters, dealers or agents, the purchase price of such Offered Securities
and the proceeds to the Company from such sale, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price and any discounts or concessions allowed or reallowed or paid by any
underwriters to dealers. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers by any underwriters may be
changed from time to time.
If underwriters are used in the sale of the Offered Securities, such
Offered Securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The underwriters with respect to a particular
underwritten offering of Offered Securities will be named in the applicable
Prospectus Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover page of such Prospectus Supplement. In connection with the sale of
Offered Securities, the underwriters may receive compensation from the Company
or from purchasers in the form of discounts, concessions or commissions. The
underwriters will be, and any dealers participating in the distribution of the
Offered Securities may be, deemed to be underwriters within the meaning of the
Securities Act of 1933, as amended. The Company has agreed to indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended. The underwriting agreement pursuant to which
any Offered Securities are to be sold will provide that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters will be obligated to purchase all of the Offered Securities if any
are purchased; provided that the agreement between the Company and the
underwriter providing for the sale of the Offered Securities may provide that
under certain circumstances involving a default of underwriters that less than
all of the Offered Securities may be purchased.
Offered Securities may be sold directly by the Company or through agents
designated by the Company from time to time. The applicable Prospectus
Supplement shall set forth the name of any agent involved in the offer or sale
of the Offered Securities in respect of which such Prospectus Supplement is
delivered as well as any commissions payable by the Company to such agent.
Unless otherwise indicated in the Prospectus Supplement, any such agent will be
acting on a best efforts basis for the period of its appointment.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject to those conditions set forth in the
applicable Prospectus Supplement, and such Prospectus Supplement will set forth
the commission payable for solicitation of such contracts.
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EXPERTS AND LEGALITY
The Company's balance sheet as of December 31, 1994 and the statements of
income, retained earnings, and cash flows for the year ended December 31, 1994,
incorporated by reference in this Prospectus, have been incorporated by
reference herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The financial statements as of December 31, 1993 and for each of the two
years in the period ended December 31, 1993, incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports dated February 11, 1994 (November 30, 1994
as to Note 2, "Rate and Regulatory Matters -- FERC Settlement"), which included
an explanatory paragraph relating to the Company's change in method of
accounting for income taxes, also incorporated by reference herein.
The legality of the Debt Securities will be passed upon for the Company by
Reid & Priest LLP, New York, New York and Wise Carter Child & Caraway,
Professional Association, Jackson, Mississippi. Certain legal matters will be
passed upon for any underwriters, dealers or agents by Winthrop, Stimson, Putnam
& Roberts, New York, New York. Matters pertaining to New York law will be passed
upon by Reid & Priest LLP, New York counsel to the Company; matters pertaining
to Arkansas law will be passed upon by Friday, Eldredge & Clark, Little Rock,
Arkansas, Arkansas counsel to the Company; and matters pertaining to Mississippi
law will be passed upon by Wise Carter Child & Caraway, Professional
Association, Mississippi counsel to the Company.
The statements as to matters of law and legal conclusions made under
"Description of Debt Securities" have been reviewed by Wise Carter Child &
Caraway, Professional Association, Jackson, Mississippi, and by Reid & Priest
LLP, New York, New York, and are set forth herein in reliance upon the opinions
of said firms, respectively, and upon their authority as experts.
The statements made in the Incorporated Documents as to matters of law and
legal conclusions, based on the belief or opinion of the Company or otherwise
pertaining to (i) titles to properties, franchises and other operating rights of
the Company, (ii) regulations to which the Company is subject, and (iii) any
legal proceedings to which the Company is a party, are made on the authority of
Wise Carter Child & Caraway, Professional Association, and such statements are
included in such documents and herein in reliance upon their authority as
experts.
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