UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) COMBINED ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
- -------------------------------------------------------------------------------
TNP ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
4100 International Plaza,
P. O. Box 2943, Commission File
Texas Fort Worth, Texas 76113 Number: 1-8847
- -------- ------------------------- ------------------
(State of (Address and zip code of
incorporation) principal executive offices)
Telephone number, including area code: 817-731-0099 75-1907501
------------ ------------------
(I.R.S. employer
identification no.)
Securities registered pursuant to Section 12(b) of the Act:
Shares Outstanding Name of each exchange
Title of each class on February 28, 1999 on which registered
- --------------------- -------------------- ----------------------
Common stock, no par value 13,373,933 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes \X\ No
\ \
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. \ \
The aggregate market value of TNP Enterprises, Inc. common stock
held by nonaffiliates on February 28, 1999, was $385,910,255 based on the
common stock's closing price on the New York Stock Exchange on the same
date of $29.25 per share.
- --------------------------------------------------------------------------------
TEXAS-NEW MEXICO POWER COMPANY
(Exact name of registrant as specified in its charter)
4100 International Plaza,
P. O. Box 2943, Commission File
Texas Fort Worth, Texas 76113 Number: 2-97230
- -------- ------------------------- ------------------
(State of (Address and zip code of
incorporation) principal executive offices)
Telephone number, including area code: 817-731-0099 75-0204070
------------ ------------------
(I.R.S. employer
identification no.)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ------------------------
First mortgage bonds: Series U, 9.25% due 2000 None
Secured debentures: Series A, 10.75% due 2003 None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes \X\ No
\ \
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. \X\
TNP Enterprises, Inc. holds all 10,705 outstanding common shares
of Texas-New Mexico Power Company.
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Document Part Where Incorporated
-------- -----------------------
Proxy Statement for 1999 Annual Meeting of
Holders of TNP Enterprises, Inc. Common Stock III
<PAGE>
TNP ENTERPRISES INC. AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
Combined Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1998
This combined annual report on Form 10-K is filed separately by TNP
Enterprises, Inc. and Texas-New Mexico Power Company. Information contained in
this report relating to Texas-New Mexico Power Company is filed by TNP
Enterprises, Inc. and separately by Texas-New Mexico Power Company on its own
behalf. Texas-New Mexico Power Company makes no representation as to information
relating to TNP Enterprises, Inc. or to any other affiliate or subsidiary of TNP
Enterprises, Inc., except as it may relate to Texas-New Mexico Power Company.
TABLE OF CONTENTS
Glossary of Terms.......................................................... 3
Part I
Item 1. BUSINESS......................................................... 4
Introduction..................................................... 4
TNMP's Service Areas............................................. 4
Seasonality of Business.......................................... 5
Sources of Energy................................................ 5
Government Regulation............................................ 6
Employees and Executive Officers................................. 6
Item 2. PROPERTIES....................................................... 8
Generating Facilities............................................ 8
Transmission and Distribution Facilities......................... 8
Administrative and Service Facilities............................ 8
Item 3. LEGAL PROCEEDINGS................................................ 8
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 9
Part II
Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.................................. 9
Item 6. SELECTED FINANCIAL DATA........................... .............. 10
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................. 12
Competitive Conditions........................................... 12
Results of Operations............................................ 13
Liquidity and Capital Resources.................................. 16
Other Matters.................................................... 19
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 20
TNP Enterprises, Inc. and Subsidiaries........................... 24
Texas-New Mexico Power Company and Subsidiaries.................. 29
Notes to Consolidated Financial Statements....................... 34
Selected Quarterly Consolidated Financial Data................... 46
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.............................. 46
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............... 47
Directors........................................................ 47
Executive Officers............................................... 47
Item 11. EXECUTIVE COMPENSATION........................................... 47
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT... 47
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 47
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K... 47
<PAGE>
TNP ENTERPRISES INC. AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
Combined Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1998
Glossary of Terms
As used in this combined report, the following abbreviations, acronyms, or
capitalized terms have the meanings set forth below:
Abbreviation, Acronym,
or Capitalized Term Meaning
- ---------------------- -----------
AFUDC ................. Allowance for borrowed funds used during construction
Bond Indenture......... Document pursuant to which FMBs are issued
Clear Lake ............ Clear Lake Cogeneration Limited Partnership
EPE ................... El Paso Electric Company
EPS ................... Earnings (loss) per share of common stock
ERCOT.................. Electric Reliability Council of Texas
FWI.................... Facility Works, Inc., a wholly owned subsidiary of TNP
FERC .................. Federal Energy Regulatory Commission
FMB(s)................. One or more First Mortgage Bonds issued by TNMP
GWH ................... Gigawatt-Hours IRS Internal Revenue Service
ITC ................... Investment Tax Credits
KWH ................... Kilowatt-Hours
MW .................... Megawatts
MWH ................... Megawatt-Hours
NMPRC.................. New Mexico Public Regulation Commission
NMPUC.................. New Mexico Public Utility Commission
PPM.................... PPM America, Inc.
PUCT................... Public Utility Commission of Texas
SPS ................... Southwestern Public Service Company
SFAS .................. Statement of Financial Accounting Standards
TEP ................... Tucson Electric Power Company
TGC ................... Texas Generating Company, a wholly owned subsidiary of
TNMP
TGC II................. Texas Generating Company II, a wholly owned subsidiary
of TNMP
TNP One................ A two-unit, lignite-fueled, circulating fluidized-bed
generating plant located in Robertson County, Texas
TNMP................... Texas-New Mexico Power Company, a wholly owned
subsidiary of TNP
TNP ................... TNP Enterprises, Inc.
Transition Plan........ TNMP's transition-to-competition plan in Texas
TU..................... Texas Utilities Electric Company
Unit 1................. The first electric generating unit of TNP One
Unit 2................. The second electric generating unit of TNP One
Y2K .................. The Year 2000 Issue
Statement Regarding Forward Looking Information
The discussions in this document that are not historical facts, including,
but not limited to, the continued application of regulatory accounting
principles, future cash flows and the potential recovery of stranded costs, are
based upon current expectations. Actual results may differ materially. Among the
facts that could cause the results to differ materially from expectations are
the following: legislation in Texas and New Mexico, the states TNMP serves,
affecting the regulation of TNMP's business; changes in regulations affecting
TNP and TNMP's businesses; PUCT or court disapproval of litigation settlement;
future acquisitions or strategic partnerships; general business and economic
conditions, and price fluctuations in the electric power market; the
effectiveness of TNMP's Y2K mitigation plan, and the timely Y2K compliance by
TNP' and TNMP's vendors; and other factors described from time to time in TNP's
and TNMP's reports filed with the Securities and Exchange Commission. TNP and
TNMP wish to caution readers not to place undue reliance on any such forward
looking statements, which are made pursuant to the Private Securities Litigation
Reform Act of 1995 and, as such, speak only as of the date made.
<PAGE>
PART I
Item 1. BUSINESS.
Introduction
TNP was organized as a holding company in 1983 and transacts business
through its subsidiaries. TNMP is a public utility engaged in generating,
purchasing, transmitting, distributing, and selling electricity to customers in
Texas and New Mexico. TNMP's predecessor was organized in 1925. TNMP has two
subsidiaries, TGC and TGC II, both of which were organized to facilitate TNMP's
acquisitions of TNP One, Unit 1 and Unit 2, in 1990 and 1991, respectively.
FWI is a wholly owned subsidiary of TNP that began operations in 1996. TNP
discontinued the construction operations of FWI in the late 1997, and
discontinued all remaining operations in the third quarter of 1998. The impact
of these discontinued operations to TNP's results of operations are described in
Item 7, "Results of Operations--Overall Results," and Note 3.
TNP, TNMP, TGC, TGC II and FWI are all Texas corporations. Their executive
offices are located at 4100 International Plaza, P.O. Box 2943, Fort Worth,
Texas 76113 and the telephone number is (817) 731-0099. Unless otherwise
indicated, all financial information in this report is presented on a
consolidated basis.
TNMP's Service Areas
TNMP provides electric service to 85 Texas and New Mexico municipalities
and adjacent rural areas with more than 228,000 customers. TNMP serves a market
niche of smaller to medium sized communities. Only two of the 85 communities in
TNMP's service area have populations in excess of 50,000. TNMP's service areas
are organized into three operating regions: the Gulf Coast Region, the
North-Central Region, and the Mountain Region.
Gulf Coast Region
The Gulf Coast Region includes the area along the Texas Gulf Coast between
Houston and Galveston. The oil and petrochemical industries, agricultural
industry and general commercial activity in the Houston area support the economy
of this area.
North-Central Region
The North-Central Region extends from Lewisville, Texas, which is 10 miles
north of Dallas-Fort Worth International Airport, to municipalities along the
Red River. TNMP provides electric service to a variety of commercial,
agricultural and petroleum industry customers in this area. This region also
includes municipalities and communities south and west of Fort Worth. This
area's economy depends largely on agriculture and, to a lesser extent, tourism
and oil production.
Mountain Region
The Mountain Region includes areas in southwest and south central New
Mexico. This region's economy is primarily dependent upon mining and
agriculture. Copper mines are the major industrial customers in this region.
This region also includes the area in far west Texas between Midland and El
Paso. The economy in this area is based primarily on oil and gas production,
agriculture, and food processing.
TNMP's revenues in all regions come primarily from retail customers. TNMP's
other sales represent resale of electricity to customers outside TNMP's system.
Revenues contributed by each operating sector and its percentage of total
operating revenues in 1998, 1997, and 1996, respectively, are set forth in the
following table. No single customer accounted for more than 10% of operating
revenues during the years presented in the table.
<TABLE>
<CAPTION>
Operating Revenues ($000s)
Sector 1998 1997 1996
-------- ----------------- ------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Gulf Coast $ 295,181 50.3% $ 315,596 54.3% $ 269,535 53.6%
North-Central 162,696 27.7 144,098 24.8 134,236 26.7
Mountain 117,407 20.0 107,243 18.5 98,966 19.7
Other 11,161 2.0 13,756 2.4 - -
---------- ----- ---------- ------- ---------- -----
Total $ 586,445 100.0% $ 580,693 100.0% $ 502,737 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
Franchises and Certificates of Public Convenience and Necessity
TNMP holds 83 franchises with terms ranging from 20 to 50 years and two
franchises with indefinite terms from the 85 municipalities to which it provides
electric service. These franchises will expire on various dates from 1999 to
2039. Three Texas franchises, comprising 27% of total company revenues, are
scheduled to expire in 1999. However, Texas law does not require an electric
utility to execute a franchise agreement with a Texas municipality to be
entitled to provide or continue to provide electrical service within the
municipality. A franchise agreement documents the mutually agreeable terms under
which the service will be provided. TNMP intends to negotiate and execute new or
amended franchise agreements to be effective before existing franchises expire.
TNMP also holds PUCT certificates of public convenience and necessity
covering all Texas areas that TNMP serves. These certificates include terms that
are customary in the public utility industry. TNMP generally has not been
required to have certificates of public convenience and necessity to provide
electric power in New Mexico.
Seasonality of Business
TNMP experiences increased sales and operating revenues during the summer
months as a result of increased air conditioner usage in hot weather. In 1998,
approximately 41% of annual revenues were recorded in June, July, August, and
September.
Sources of Energy
TNMP owns one 300 MW lignite-fueled generating facility, TNP One. During
1998, TNP One provided approximately 20% of TNMP's system wide energy
requirements. Power generated at TNP One is transmitted over TNMP's own
transmission lines to other utilities' transmission systems for delivery to
TNMP's Texas service area systems. To maintain a reliable power supply for its
customers and to coordinate interconnected operations, TNMP is a member of the
ERCOT and the Western Systems Coordinating Council.
TNMP purchases the remainder of its electricity from various suppliers with
diversified fuel sources. The availability and cost of purchased power to TNMP
is subject to changes in supplier costs, regulations and laws, fuel costs, and
other factors. TNMP has adequate resources through its firm contracts to serve
its entire customer load. These contracts allow TNMP the option to purchase
power within a specified minimum and maximum range. Purchases on the spot market
are primarily made in lieu of firm contract options when the spot market price
represents savings to TNMP's customers. In recent years TNMP has reduced its
reliance upon long-term power supply contracts in favor of contracts of a
shorter term. This enhances TNMP's ability to achieve greater purchased power
savings during periods of decreasing power costs, but exposes TNMP to greater
risk in the presence of rising costs. For example, TNMP incurred higher
purchased power costs in the summer of 1998, when the spot market price
ofpurchased power increased sharply.
The following table illustrates the composition of TNMP's sources of
electric energy in 1998.
<TABLE>
<CAPTION>
Year Contract Percent of
Expires Energy Provided
<S> <C> <C>
Generation
TNP One.................................... - 20%
Purchased Power
Firm contracts expiring in 1999............ - 4
Firm contracts expiring in 2000-2004
Texas Utilities.......................... 2002 18
Clear Lake Cogeneration L.P.............. 2004 8
Others................................... Various 5
Firm contracts expiring in 2005 or later... 2005 2
Buy-sell agreements........................ - 24
Spot market purchases...................... - 19
----
Total 100%
====
</TABLE>
Recovering Purchased Power and Fuel Costs
During 1998, fuel costs and the energy portion of purchased power costs in
the Texas jurisdiction were recovered from TNMP customers through the fuel
adjustment clause authorized by the PUCT. With the implementation of the
Transition Plan, the demand portion of purchased power costs, which had been
previously passed through to customers, are now being recovered through base
rates. The fixed fuel recovery factor and the related fuel reconciliation filed
with the PUCT are described in Note 2. In New Mexico, TNMP recovered purchased
power costs as specified by Community ChoiceR, which was effective May 1, 1997.
This plan froze rates (including the recovery of purchased power) for a
three-year transition period, beginning on the effective date.
Government Regulation
TNMP is subject to PUCT and NMPRC regulation. Some of its activities, such
as issuing securities, are also subject to FERC regulation. Utility industry
regulation continues to change both in reaction to, and as a primary force
behind, a more competitive industry. These changes are discussed in Item 7,
"Competitive Conditions."
In addition to regulation as a utility, TNMP's facilities are regulated by
the Environmental Protection Agency and Texas and New Mexico environmental
agencies. TNP One uses environmentally superior circulating fluidized bed
technology that eliminates the need for expensive scrubbers. TNMP was allotted
sufficient emission allowances to comply with the Clean Air Act of 1990 through
the year 2000. After 2000, TNMP expects to institute further controls or
purchase emission credits. During 1998, 1997, and 1996, TNMP incurred expenses
related to air, water, and solid waste pollution abatement (including ash
removal) of approximately $4.0 million, $5.0 million, and $6.1 million,
respectively.
Employees and Executive Officers
At December 31, 1998, TNMP had 823 employees, FWI had 58 employees, and TNP
had 4 employees. The employees are not represented by a union or covered by a
collective bargaining agreement. Management believes relations with its
employees are good.
Executive officers of TNP and TNMP, who are elected annually by the
respective boards of directors and serve at the discretion of the boards, are as
follows:
Name Age Position with TNP
Kevern R. Joyce 52 Chairman, President, & Chief Executive Officer
Jack V. Chambers, Jr. 49 Senior Vice President
Manjit S. Cheema 44 Senior Vice President & Chief Financial Officer
John P. Edwards 56 Senior Vice President
Ralph Johnson 55 Senior Vice President
W. Douglas Hobbs 55 Vice President
R. Michael Matte 45 Vice President
John A. Montgomery 37 Vice President
Michael D. Blanchard 48 Vice President & General Counsel
Patrick L. Bridges 40 Treasurer
Michael J. Ricketts 40 Controller
Paul W. Talbot 42 Secretary
Name Age Position with TNMP
Kevern R. Joyce 52 Chairman, President, & Chief Executive Officer
Jack V. Chambers, Jr. 49 Senior Vice President & Chief Customer Officer
Manjit S. Cheema 44 Senior Vice President & Chief Financial Officer
John P. Edwards 56 Senior Vice President - Corporate Relations
Ralph Johnson 55 Senior Vice President - Power Resources
Dennis R. Cash 45 Vice President & Regional Customer Officer
Allan B. Davis 61 Vice President & Regional Customer Officer
Larry W. Dillon 44 Vice President & Regional Customer Officer
John A. Montgomery 37 Vice President - Marketing
Melissa D. Davis 41 Vice President - Human Resources
Michael D. Blanchard 48 Vice President & General Counsel
Patrick L. Bridges 40 Treasurer
Scott Forbes 41 Chief Information Officer
Michael J. Ricketts 40 Controller
Paul W. Talbot 42 Secretary
Kevern R. Joyce joined TNP and TNMP in April 1994 as President and Chief
Executive Officer. He became Chairman in April 1995
Jack V. Chambers has served as Senior Vice President and Chief Customer
Officer of TNMP since 1994 and as Senior Vice President of TNP since April 1996.
He was TNMP's Sector Vice President - Revenue Production from 1990 to 1994.
Manjit S. Cheema joined TNMP in June 1994. He was Treasurer of TNMP from
June 1994 until September 1995. In December 1994, he became Vice President &
Chief Financial Officer of TNP and TNMP. He became Senior Vice President & Chief
Financial Officer of TNMP in July 1996 and became Senior Vice President & Chief
Financial Officer of TNP in May 1997.
John P. Edwards joined TNMP and TNP in July 1996 as Senior Vice President -
Corporate Relations. From October 1994 until joining TNMP and TNP, he was Senior
Vice President/Customer Group and Special Assistant to the Chief Operating
Officer, Tennessee Valley Authority. His primary responsibilities were general
administration of TVA's transmission operations, customer relationships, and
regulatory affairs.
Ralph Johnson joined TNMP and TNP in January 1995 as a consultant and
became Vice President in February 1995. In July 1996, he was named Senior Vice
President - Power Resources of TNMP. In May 1997, he was appointed Senior Vice
President at TNP. From March 1991 until he joined TNMP and TNP, Mr. Johnson was
Assistant General Manager for Tri-State Generation and Transmission Cooperative
in Denver, Colorado, which sells power to rural electric cooperatives.
Michael D. Blanchard became Vice President and General Counsel of TNMP and
TNP in February 1998. He was Corporate Secretary and General Counsel of TNMP and
TNP from 1987 to February 1998.
Patrick L. Bridges was appointed Treasurer of TNP and TNMP in September
1995. He served as TNMP's Director Finance from 1994 to September 1995 and as
Assistant Treasurer from 1993 to September 1995.
Dennis R. Cash became a TNMP Vice President and Regional Customer Officer
effective March 1999. He served as Vice President - Human Resources of TNMP from
1994 until March 1999.
Allan B. Davis has been a TNMP Vice President and Regional Customer Officer
since 1994.
Larry W. Dillon has been a TNMP Vice President and Regional Customer
Officer since 1994.
W. Douglas Hobbs was appointed as Vice President - Business Development of
TNP in May 1997. He was Vice President - Business Development of TNMP from
February 1997 to May 1997. He was a TNMP Vice President and Regional Customer
Officer from 1994 to February 1997.
John A. Montgomery was elected Vice President - Marketing of TNMP in
November 1998 and became Vice President of TNP in April 1996. He served as
President of FWI from April 1996 until May 1998. From December 1995 to January
1997 he served as TNMP's Vice President - Marketing. From February 1994 until he
joined TNMP, he served as Director of Marketing and Regional Marketing Director
of Greyhound Lines, Inc., a bus transportation company.
Melissa D. Davis was appointed Vice President - Human Resources of TNMP
effective March 1999. She served as a TNMP Vice President and Regional Customer
Officer from February 1997 until March 1999. From September 1995 to February
1997 she was TNMP's Controller. From 1994 to September 1995, she was Director -
Financial Accounting and Assistant Controller of TNMP.
Scott Forbes was elected Chief Information Officer of TNMP in June 1998. He
was Controller of TNMP from February 1997 to June 1998 and was Controller of TNP
from May 1997 to June 1998. From September 1996 to February 1997, he was
Manager-Financial Systems and Reporting. From January 1994 to September 1996 he
was Manager-Financial Reporting and Accounting Policy with Entergy Services,
Inc.
Paul W. Talbot was elected Corporate Secretary of TNP and TNMP in February
1998. He has been Senior Counsel of TNMP since August 1996. Before joining TNMP,
he was in the private practice of law in Dallas, Texas, for more than ten years.
R. Michael Matte became President of FWI in May 1998 and became Vice
President - Business Development of TNP effective November 1998. From January
1997 until joining FWI in May 1998, he was an independent management and utility
services consultant in Atlanta, Georgia. From March 1996 to January 1997, he
served as Regional Vice President Operations for ADT Security Services, an
electronic services company, and from January 1991 to March 1996, he served as
Regional General Manager of ADT.
Michael J. Ricketts was elected Controller of TNMP and TNP in June 1998.
From November 1996 to June 1998, he was Manager - Accounting Projects and from
1994 to November 1996, he was Supervisor - Accounting Support of TNMP.
Item 2. PROPERTIES.
Substantially all of TNMP's real and personal property secures its FMBs.
Substantially TNMP's entire real and personal property in Texas also secures its
Series A, 10.75% secured debentures. TNMP's long-term debt is described in Note
6.
Generating Facilities
TNP One is a two-unit, lignite-fueled generating plant, located in
Robertson County, Texas. TNP One generates power for TNMP's Texas service areas
and operates as a base load facility.
Transmission and Distribution Facilities
Management believes that TNMP's transmission and distribution facilities
are of sufficient capacity to serve existing customers adequately and can be
extended and expanded to serve customer growth for the foreseeable future. These
facilities primarily consist of overhead and underground lines, substations,
transformers, and meters. TNMP generally constructs its transmission and
distribution facilities on easements or public rights of way and not on real
property held in fee simple.
Administrative and Service Facilities
TNP's, TNMP's and FWI's corporate headquarters are located in an office
building in Fort Worth, Texas. Space in this building is leased through 2003.
TNMP owns or leases local offices in 39 of the municipalities that it
serves. TNMP owns 14 construction/service centers in Texas and New Mexico.
Item 3. LEGAL PROCEEDINGS.
TNMP and Clear Lake Limited Partnership ("Clear Lake") agreed in March 1999
to settle the lawsuit styled Clear Lake Cogeneration Limited Partnership vs.
Texas-New Mexico Power Company, pending in the 234th District court of Harris
County, Texas, and the parallel proceeding pending before the PUCT. These
proceedings arose out of disagreements between TNMP and Clear Lake over the
interpretation of certain terms of an agreement under which TNMP purchases
cogenerated electricity from Clear Lake. The settlement, which must be approved
by the PUCT, resolves all outstanding issues raised in these proceedings.
Under the settlement, TNMP, Clear Lake and Calpine Power Services Company
(an affiliate of Clear Lake) have entered into a revised purchased power
contract, effective as of October 1, 1998, governing energy and capacity
transactions between the parties. The key elements of the revised contract are:
- The capacity rate under which TNMP will purchase capacity from Clear
Lake is significantly reduced. The energy rate is virtually
unchanged.
- Clear Lake will be able to provide 250 MW of capacity from multiple
sources. Except for power plants named in the agreement, TNMP retains
certain rights of prior approval as to other sources of power and
energy.
- TNMP will pay for the cost of transmitting power from the existing
Clear Lake power plant to TNMP's load centers in the Gulf Coast Region
pursuant to new PUCT rules. Clear Lake will reimburse TNMP for any
excess transmission costs that TNMP would incur as a result of
delivery from points other than the Clear Lake Plant.
- Clear Lake will no longer pay for nor receive standby power, but will
generally guarantee 100% availability of capacity and energy. Clear
Lake may request that TNMP obtain or generate replacement power at a
negotiated fixed cost under certain limited conditions.
- Future disputes shall be resolved through consultation and
arbitration.
The settlement also provides that TNMP will pay Clear Lake $8 million when
the PUCT has approved the overall settlement and revised purchased power
contract. The settlement calls for regulatory recovery by TNMP of all payments
to be made by TNMP for power and energy, as well as the $8 million settlement
payment. TNMP does not expect this settlement to have a material adverse impact
on its financial position or results of operations.
TNMP is the defendant in a suit styled Phillips Petroleum Company vs.
Texas-New Mexico Power Company. This lawsuit was filed on October 1, 1997 and is
pending in the 149th Judicial District Court of Brazoria County, Texas. In this
matter, Phillips Petroleum Company contends that it sustained economic losses of
approximately $36 million following a one and one-half hour interruption in its
electrical service on May 17, 1997. TNMP claims that most, if not all of
Phillips Petroleum alleged damages are barred by limitations contained within
our tariff approved by the PUCT. The lawsuit is in the initial discovery stage.
In regard to this matter, TNMP believes that it has insurance coverage on most
claims of Phillips Petroleum up to a total of $31 million, with a $500,000
self-retention.
Information regarding additional regulatory and legal matters is provided
in Notes 2 and 9.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders in the fourth
quarter of 1998.
PART II
Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
TNP's common stock is traded on the New York Stock Exchange under the
symbol "TNP." The high and low prices of, and the amount of dividends declared
and paid on, TNP's common stock during each quarter in 1998 and 1997 were as
follows:
<TABLE>
<CAPTION>
TNP
MARKET PRICE RANGE DIVIDENDS
1998 1997 PAID
-------------------- ---------------------- -----------------
QUARTER HIGH LOW HIGH LOW 1998 1997
------- ---- --- ---- --- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First $33 7/8 $31 5/16 $27 3/4 $21 3/8 $ 0.27 $ 0.245
Second 34 1/32 30 11/16 24 18 7/8 0.27 0.245
Third 34 15/16 29 25 15/16 22 15/16 0.27 0.245
Fourth 38 11/16 31 3/8 33 3/4 24 7/16 0.29 0.270
------- --------
$ 1.10 $ 1.005
====== =======
</TABLE>
As of January 31, 1999, there were approximately 3,481 record holders of
TNP common stock.
TNP holds all 10,705 outstanding common shares of TNMP. During 1998 and
1997, TNMP paid common dividends to TNP as follows (in thousands):
QUARTER 1998 1997
------- ---- ----
First $ 10,000 $ 9,000
Second 3,600 11,800
Third 5,500 9,500
Fourth - 14,000
--------- ---------
Total $ 19,100 $ 44,300
========= =========
<PAGE>
<TABLE>
<CAPTION>
Item 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data of TNP and TNMP for
1994 through 1998.
1998 1997 1996 1995 1994
-------------- ------------ --------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
TNP ENTERPRISES, INC. (In thousands except per share amounts and percentages)
Consolidated results
Operating revenues $ 586,493 $ 580,693 $ 502,737 $ 485,823 $ 477,989
Income (loss) from continuing operations before
the cumulative effect of change in accounting $ 32,134 $ 42,561 $ 26,150 $ 33,060 $ (17,441)
Net income (loss) $ 19,424 $ 29,678 $ 23,053 $ 41,505 $ (17,441)
Total assets $ 993,765 $ 991,926 $ 1,006,784 $ 1,030,433 $ 1,054,488
Common shares outstanding
Weighted average 13,244 13,083 11,465 10,901 10,750
End of year 13,294 13,133 13,006 10,920 10,866
Per share of common stock
Earnings (loss) from continuing operations before
the cumulative effect of change in accounting $ 2.42 $ 3.24 $ 2.27 $ 2.98 $ (1.70)
Earnings (loss) $ 1.46 $ 2.26 $ 2.00 $ 3.75 $ (1.70)
Cash dividends declared $ 1.10 $ 1.00 $ 0.93 $ 0.82 $ 1.22
Book value $ 23.19 $ 22.71 $ 21.41 $ 19.91 $ 17.01
Capitalization
Common shareholders' equity $ 308,294 $ 298,241 $ 278,474 $ 217,457 $ 184,869
Preferred stock 3,060 $ 3,240 $ 3,420 $ 3,600 $ 8,680
Long-term debt, less current maturities 459,000 $ 478,041 $ 533,964 $ 611,925 $ 682,832
============ ============= ============== ============= =============
Total capitalization $ 770,354 $ 779,522 $ 815,858 $ 832,982 $ 876,381
============ ============= ============== ============= =============
Capitalization ratios
Common shareholders' equity 40.0% 38.3% 34.1% 26.1% 21.1%
Preferred stock 0.4 0.4 0.4 0.4 1.0
Long-term debt, less current maturities 59.6 61.3 65.5 73.5 77.9
============ ============= ============== ============= =============
Total capitalization 100.0% 100.0% 100.0% 100.0% 100.0%
============ ============= ============== ============= =============
TEXAS-NEW MEXICO POWER COMPANY
Consolidated results
Operating revenues $ 586,445 $ 580,693 $ 502,737 $ 485,823 $ 477,989
Income (loss) before the cumulative effect
of change in accounting $ 34,321 $ 43,918 $ 26,862 $ 33,364 $ (16,634)
Net income (loss) $ 34,321 $ 43,918 $ 26,862 $ 41,809 $ (16,634)
Total assets $ 973,566 $ 967,006 $ 1,002,157 $ 1,024,943 $ 1,043,178
Capitalization
Common shareholder's equity $ 302,096 $ 287,021 $ 287,548 $ 224,351 $ 185,777
Preferred stock $ 3,060 $ 3,240 $ 3,420 $ 3,600 $ 8,680
Long-term debt, less current maturities $ 450,000 $ 477,900 $ 533,800 $ 611,925 $ 682,832
============ ============= ============== ============= =============
Total capitalization $ 755,156 $ 768,161 $ 824,768 $ 839,876 $ 877,289
============ ============= ============== ============= =============
Capitalization ratios
Common shareholder's equity 40.0% 37.4% 34.9% 26.7% 21.2%
Preferred stock 0.4 0.4 0.4 0.4 1.0
Long-term debt, less current maturities 59.6 62.2 64.7 72.9 77.8
============ ============= ============== ============= =============
Total capitalization 100.0% 100.0% 100.0% 100.0% 100.0%
============ ============= ============== ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS-NEW MEXICO POWER COMPANY
SELECTED OPERATING STATISTICS
1998 1997 1996 1995 1994
------------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Operating revenues (in thousands):
Residential* $ 225,870 $ 211,398 $ 206,748 $ 200,455 $ 194,933
Commercial* 164,800 155,539 150,034 148,908 141,886
Industrial* 150,883 170,169 129,972 113,728 122,714
Other* 33,731 29,831 15,983 22,732 18,456
Power Marketing 11,161 13,756 - - -
================== =============== =============== =============== ===============
Total $ 586,445 $ 580,693 $ 502,737 $ 485,823 $ 477,989
================== =============== =============== =============== ===============
Sales (MWH):
Residential 2,439,478 2,251,119 2,230,558 2,141,553 2,085,621
Commercial 1,883,422 1,772,591 1,725,650 1,681,130 1,618,840
Industrial 4,981,773 5,523,907 3,797,776 2,704,159 2,652,844
Other 113,535 107,847 108,039 113,985 114,190
Power Marketing 425,216 494,705 - - -
================== =============== =============== =============== ===============
Total 9,843,424 10,150,169 7,862,023 6,640,827 6,471,495
================== =============== =============== =============== ===============
Number of customers (at year end):
Residential 197,155 192,005 187,796 183,863 185,364
Commercial 30,884 30,289 29,864 29,361 30,624
Industrial 138 139 135 136 142
Other 227 222 224 244 237
Power Marketing 16 16 - - -
================== =============== =============== =============== ===============
Total 228,420 222,671 218,019 213,604 216,367
================== =============== =============== =============== ===============
Revenue statistics:
Average annual use per residential
customer (KWH) 12,491 11,835 11,973 11,476 11,354
Average annual revenue per residential
customer (dollars) 1,157 1,111 1,110 1,074 1,061
Average revenue per KWH sold
per residential customer (cents) 9.26 9.39 9.27 9.36 9.35
Average revenue per KWH sold
total sales (cents) 5.96 5.72 6.39 7.32 7.39
Net generation and purchases (MWH):
Generated 2,062,958 2,089,448 2,296,056 2,351,000 2,336,830
Purchased 8,256,857 8,443,990 5,769,173 4,612,186 4,472,306
================== =============== =============== =============== ===============
Total 10,319,815 10,533,438 8,065,229 6,963,186 6,809,136
================== =============== =============== =============== ===============
Average cost per KWH purchased (cents) 3.38 3.09 3.51 3.87 4.35
Employees (year-end)
Texas-New Mexico Power Company 823 811 819 858 894
Facility Works 58 494 116 - -
TNP Enterprises 4 - - - -
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
SIGNIFICANT EVENTS AND KNOWN TRENDS AFFECTING TNP AND TNMP
Competitive Conditions
The electric utility industry continues its transition toward an
environment of increased competition. TNMP expects the portions of operations
pertaining to transmission and distribution to continue to be regulated.
Pressures that underlie the movement toward increasing competition are numerous
and complex. They include legislative and regulatory changes, technological
advances, consumer demands, greater availability of natural gas, environmental
needs, and other factors. The increasingly competitive environment presents
opportunities to compete for new customers, as well as the risk of loss of
existing customers.
The most significant effect of competition on TNMP, as well as other
utilities, will be the ability to recover potential stranded costs. "Stranded
costs" is the difference between what it costs TNMP to provide energy and what a
customer would be willing to pay for energy in a competitive market. The
inability to recover a significant portion of stranded costs would adversely
impact TNP's and TNMP's financial condition. In Texas, TNMP's potential stranded
cost relates to TNP One, its 300 MW generating unit, and could potentially be
more than $270 million. In New Mexico, TNMP's potential stranded cost relates to
its fixed purchased power contracts. As of December 31, 1998, TNMP had reserved
$3.4 million for its potential stranded costs in New Mexico. Additional stranded
costs could potentially be zero to $7 million, depending on the market price of
purchased power at the onset of competition.
Legislators in both Texas and New Mexico have introduced bills that propose
to open the business to competition. The bills also address recovery of stranded
costs. In Texas, TNMP's Transition Plan includes provisions for modifying the
plan so that it conforms to subsequently enacted legislation
The following discusses TNMP's strategy to transition to competition and to
provide TNMP the ability to recover its potential stranded costs in Texas and
New Mexico. Although the recoverability and amount of stranded costs is
uncertain, management realizes there is some risk that shareholders may be
required to share the financial burden of stranded costs with customers.
Texas Transition Plan
On July 22, 1998, the PUCT approved TNMP's Transition Plan, and issued a
final order documenting its approval on November 7, 1998. The Transition Plan
includes a number of provisions that impact TNMP's financial results. They are:
- TNMP will implement a series of residential and commercial
rate reductions totaling 9% and 3%, respectively, during a
five-year transition period. The first rate reductions for
residential and commercial customers of 3% and 1%,
respectively, were implemented retroactive to January 1, 1998.
The remaining reductions will be effective in January of 2000
and 2001.
- TNMP's earnings on its Texas operations are capped at an
11.25% return on equity less assumed discounts on industrial
rates, which, for 1998, were $4.1 million. In 1999, the
discounts are expected to be approximately $2.9 million. TNMP
will apply Texas earnings in excess of the cap to recover
stranded costs related to its generation investment (TNP One)
or will refund them to customers, according to PUCT
guidelines.
- The Plan includes a cap on allowed operating and maintenance
expenses applicable to TNMP's Texas operations based on cost
incurred per customer in 1996.
- TNMP will record $15 million of additional depreciation
annually during 1999-2002 to recover stranded costs.
- Finally, the manner in which TNMP recovers the cost of
purchased power from its customers has changed. In the past,
all of these costs were passed directly through to TNMP's
customers via adjustment factors that could change as often as
monthly. Under this methodology, purchased power expense had
no impact on operating income. Effective with the new rates
under the Transition Plan, only the energy-related portion of
purchased power will be passed through directly to customers
via the fuel adjustment clause. The demand-related portion of
purchased power will be recovered through base rates and is
not subject to adjustment or future reconciliation. Therefore,
any difference, between the amount of demand-related purchased
power recovered through TNMP's rates and the actual cost of
such, will affect operating income.
Absent legislation implementing retail competition, at the end of the
five-year transition period, TNMP shall file with the PUCT a proposal to
voluntarily implement retail access, contingent upon the approval of an
appropriate mechanism for recovery of any remaining stranded costs. The PUCT has
committed to full recovery of stranded costs if they are quantified using a
market-based methodology, TNMP offers retail access, and stranded costs are
allocated fairly to all customers.
During the year ended December 31, 1998, the Transition Plan reduced TNMP's
operating income as summarized in the table below (amounts in thousands except
per share items):
<TABLE>
<CAPTION>
Pre-tax amounts Per share
<S> <C> <C>
One-time charges:
Costs to implement the plan $ 3,300 $ 0.17
One-time customer refund 1,447 0.06
-------- ------
Subtotal 4,747 0.23
-------- ------
1998 impacts:
Rate structure change 9,940 0.49
Lower recovery of demand
purchased power expenses 7,548 0.37
-------- ------
Subtotal $17,488 0.86
------- ------
Total effect of the plan $22,235 $ 1.09
======== ======
</TABLE>
The combination of the one-time customer refund and implementing the rate
structure change reduced operating revenue by $11.4 million (pre-tax). TNMP's
earnings for the year ended December 31, 1998 did not exceed the earnings cap
imposed by the Transition Plan. The Transition Plan includes a provision that
allows the PUCT to review TNMP's earnings and the related earnings cap.
New Mexico Community Choice
On April 11, 1997, the NMPUC approved TNMP's plan for transition to
competition in its New Mexico service territory, called Community Choice. TNMP
implemented Community Choice effective May 1, 1997. Community Choice provides
TNMP's customers the right to choose their electricity provider after a
three-year transition period. The plan freezes rates (including the recovery of
purchased power) during the transition period, and allows for customer
aggregation based on market forces. As of December 31, 1998, TNMP had reserved
$3.4 million for its potential stranded costs in New Mexico.
Impact of Competition on TNMP
In addition to pursuing the satisfactory resolution of the stranded cost
issue, TNMP is pursuing strategies to retain and attract new customers. TNMP's
competitive position has been strengthened with the PUCT open access to
transmission rule. Management believes TNMP's revenue growth opportunities are
through an increased customer base and new services.
As noted above, the Transition Plan changes the way TNMP recovers the
demand component of purchased power. The change increases the risk that TNMP
will have to absorb increases in the demand cost of purchased power, while at
the same time it allows TNMP to retain the benefit of savings realized from
lowering these costs. TNMP is actively managing its resources to optimize the
rewards and diminish the risks in it power supply portfolio.
Results of Operations
Overall Results
Income applicable to common stock was $19.3 million for 1998, compared to
$29.5 million in 1997. The 1998 results included the effect of FWI's
discontinued operations of $12.7 million, and costs to implement the transition
plan of $3.0 million. The 1997 results included a $12.9 million loss associated
with FWI's discontinued operations. Exclusive of one-time items, the 1998
earnings were $35.0 million, a $7.4 million decrease as compared to the 1997
earnings of $42.4 million.
Income applicable to common stock was $22.9 million in 1996. Results for
1996 included a $3.1 million loss associated with FWI's discontinued operations,
and a $1.3 million after tax charge for the settlement of litigation associated
with the Series T FMB retirement in 1995. Excluding the one-time items, 1997
earnings were $15.1 million higher than 1996 earnings of $27.3 million.
The following table sets forth results of operations for 1998, 1997, and
1996 and the impact of one-time items:
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------- -----------
Amount EPS Amount EPS Amount EPS
------- ------- --------- --------- --------- -------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Income applicable to common
stock before one-time items.................. $ 34,969 $ 2.65 $ 42,403 $ 3.24 $ 27,283 $ 2.38
--------- -------- ---------- ---------- --------- ------
One-time items, net of income taxes:
Discontinued operations of FWI............... (12,710) (0.96) (12,883) (0.98) (3,097) (0.27)
Transition plan costs........................ (2,985) (0.23) - - - -
Series T litigation settlement............... - - - - (1,300) (0.11)
--------- -------- ---------- --------- ---------- ------
Total one-time items, net................ (15,695) (1.19) (12,883) (0.98) (4,397) (0.38)
--------- -------- ---------- --------- --------- ------
Income applicable to common stock............... $ 19,274 $1.46 $ 29,520 $ 2.26 $ 22,886 $ 2.00
========= ======== ========== ========== ========== ======
</TABLE>
Beginning in 1996, FWI's operations included construction and service
activities. In late 1997, management reevaluated FWI's strategy and adopted a
revised strategy to concentrate on service and maintenance activities and to
discontinue the construction segment. In 1998, TNP elected to discontinue all
remaining operations of FWI. See Note 3 for additional information regarding the
discontinued operations.
The operations of TNMP currently represent most of TNP's operations. The
following discussion focuses on TNMP's operations, except where stated
otherwise.
Operating Revenues
The following table summarizes the components of operating revenues (in
thousands).
<TABLE>
<CAPTION>
Increase (Decrease)
1998 1997 1996 `98 v. `97 `97 v. `96
---------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 586,445 $ 580,693 $ 502,737 $ 5,752 $ 77,956
Purchased power & fuel expenses 316,911 302,773 243,682 14,138 59,091
---------- --------- ---------- --------- ---------
Base revenues $ 269,534 $ 277,920 $ 259,055 $ (8,386) $ 18,865
========== ========= ========== ========= =========
</TABLE>
Purchased power & fuel expenses are discussed in "Results of
Operations--Operating Expenses."
The following table summarizes the components of the base revenues
increase (decrease) from 1998 to 1997 and from 1997 to 1996 (in thousands).
<TABLE>
<CAPTION>
`98 v. `97 `97 v. `96
---------- ----------
<S> <C> <C>
Weather related $11,711 $ (332)
Customer growth 4,896 4,053
Reserve for Texas customer refunds (10,971) -
Lower recovery of Texas demand purchased power costs (7,548) -
Industrial - firm rate sales (9,020) (2,448)
Industrial - Texas economy rate sales 148 5,331
Transmission revenue 831 8,251
Unbilled revenue and other 1,567 4,010
--------- ---------
Base revenues increase (decrease) $ (8,386) $18,865
========= =======
</TABLE>
The base revenue decrease of $8.4 million during 1998 resulted primarily
from the implementation of the Texas Transition Plan and the loss of a
significant industrial customer (see Note 9). As discussed in Note 2, the
Transition Plan had the effect of reducing base rate revenues and reducing
recovery of demand purchased power costs. Offsetting the base revenue decrease
were increased sales due to hotter than normal weather during the summer, and
customer growth in the residential and commercial classes.
The base revenue increase of $18.9 million during 1997 resulted primarily
from implementing the new transmission access rules during 1997, growth in
residential and commercial customers, and a full year of operation of its
control area in Texas that TNMP implemented on July 31, 1996. The control area
is an electrical system that enables TNMP to instantaneously balance its system
resources with loads. Implementation of the control area enabled TNMP to enhance
its industrial economy rate sales, non-industrial standby revenues, and power
marketing sales. The control area also permitted TNMP to replace standby power
for TNP One with the purchase of planning reserves.
The components of GWH sales for 1998 and 1997 are summarized in the
following table:
<TABLE>
<CAPTION>
1998 1997 Variance %
---- ---- -------- -----
<S> <C> <C> <C> <C>
Residential 2,440 2,251 189 8.4
Commercial 1,883 1,772 111 6.3
Industrial:
Firm 505 1,080 (575) (53.2)
Economy 4,476 4,444 32 0.7
Power marketing 425 495 (70) (14.1)
Other 114 108 6 5.6
------ ------- ------- -----
Total GWH sales 9,843 10,150 (307) (3.0)
===== ======= ======= =====
</TABLE>
1998 sales decreased 307 GWHs (or 3%), from 1997 levels, due to the
movement of a significant industrial customer to self-generation and decreased
off-system sales. This decrease was partially offset by increased residential
and commercial sales due to hotter-than-normal weather and customer growth.
As discussed in "Competitive Conditions--Texas Transition Plan" and Note 2,
the PUCT approved the Texas Transition Plan during 1998. The Transition Plan
includes a five-year transition period, with a series of rate reductions for
residential and commercial customers beginning in 1998. The agreement provides
for TNMP to recover a portion of its potential stranded costs during the
transition period. Also, TNMP's earnings on Texas operations are capped at
11.25% return on equity less assumed discounts on industrial rates, which, for
1998, were $4.1 million. Texas earnings in excess of the cap will be applied by
TNMP to recover stranded costs related to its generation investment (TNP One) or
refunded to customers. During 1998, TNMP did not have any excess earnings on its
Texas operations. This was primarily due to higher than expected demand
purchased power costs as discussed in "Operating Expenses - Purchased Power &
Fuel."
As discussed in "Competitive Conditions--New Mexico Community Choice" and
Note 2, TNMP implemented its Community Choice plan in New Mexico on May 1, 1997.
The plan provides TNMP's customers the right to choose their energy provider
after a three-year transition period and freezes rates (including the recovery
of purchased power) during the transition period. The rates represent a slight
reduction as compared to rates in effect prior to May 1997. The reduced rates
have not had a material adverse effect on TNP's or TNMP's financial condition.
A significant industrial customer in Texas left TNMP's system in February
1998 and replaced the power previously provided by TNMP with power from a
cogeneration plant built by a third party wholesale power producer. This
customer provided sales of 629 GWH and annual revenues of $28.3 million in 1997
($10.1 million in base revenues). Purchases by this customer in 1998 were 74
GWH, providing total revenues of $3.1 million and base revenues of $0.9 million.
During late 1997, TNMP renegotiated with a large industrial customer in New
Mexico to continue providing full service until the end of the New Mexico
Community Choice transition period (April 30, 2000). Effective January 1, 1999,
this customer reduced its firm purchased power commitment by 55%. After the end
of the transition period, TNMP will provide firm transmission service to this
customer, and this customer can purchase its KWH requirements on the open
market. Currently, TNMP is this customer's lowest cost U.S. electric supplier.
This customer provided sales of 1,101 GWH and revenues of $39.9 million in 1998
($11.9 million in base revenues).
Operating Expenses
Operating expenses for 1998 were $18.1 million higher than in 1997, due
primarily to higher purchased power expenses.
Operating expenses for 1997 were $72.4 million higher than in 1996, due
primarily to higher purchased power expenses stemming from increased sales
requirements under agreements with two cogeneration customers and income taxes.
Purchased Power & Fuel Expenses
The following table summarizes the components of purchased power and fuel
expenses (in thousands).
<PAGE>
<TABLE>
<CAPTION>
Increase (Decrease)
1998 1997 1996 `98 v. `97 `97 v. `96
---------- ---------- ---------- ---------- ---------
Pass-through expenses
<S> <C> <C> <C> <C> <C>
Purchased power $ 155,679 $ 259,605 $ 196,481 $ (103,926) $ 63,124
Fuel 38,299 39,676 45,300 (1,377) (5,624)
---------- ---------- ---------- ---------- ---------
Subtotal 193,978 299,281 241,781 (105,303) 57,500
Non pass-through purchased power 121,287 1,438 - 119,849 1,438
Other 1,646 2,054 1,901 (408) 153
---------- ---------- ---------- ---------- ---------
Total $ 316,911 $ 302,773 $ 243,682 $ 14,138 $ 59,091
========== ========== ========== ========== =========
</TABLE>
During 1998, purchased power and fuel expenses increased by $14.1 million
due to increased purchased power expenses during the hotter-than-normal summer
weather, recognition of expenses in compliance with the Transition Plan, and
settlement of a billing dispute. As discussed in Note 2, the Transition Plan
changes the method of recovering purchased power expenses from customers.
Effective January 1, 1998, only the energy-related portion of purchased power is
passed through directly to customers via the fixed fuel recovery factor. The
demand-related portion of purchased power will be recovered through base rates.
Therefore, any difference between the amount of demand-related purchased power
recovered through TNMP's rates and the actual costs will affect operating
income. Texas demand charges are $98.3 million of the $121.3 million shown above
as non pass-through purchased power. Firm purchased power costs in New Mexico
account for the remainder. Recovery of demand purchased power in Texas amounted
to $90.8 million in 1998, resulting in a reduction of $7.5 million in pre-tax
operating income. Prior to January 1, 1998, the majority of purchased power
costs were recoverable from customers via a recovery clause.
During 1997, purchased power and fuel expenses increased by $59.1 million
primarily due to additional MWHs purchased to meet increased sales requirements
from the agreements negotiated with the two cogeneration customers during the
second quarter of 1996.
Other Operating Expenses
Other operating expenses in 1998 increased by $6.9 million compared to
1997. This resulted from additional transmission expenses of $3.1 million as
compared to 1997, and the $3.3 million write-off of deferred costs related to
the Transition Plan, as discussed in "Competitive Conditions--Texas Transition
Plan" and Note 2.
Other operating expenses in 1997 were comparable to 1996. Cost savings from
reduced standby expenses resulting from implementation of the control area
offset a $2.0 million increase in the Texas transmission expenses.
Interest Charges
During 1998, interest charges decreased $3.2 million due primarily to
reduced borrowings and lower interest rates on the credit facilities.
During 1997, interest charges decreased $12.5 million due primarily to the
retirement of Series T FMBs in January 1997 and applying cash flow from
operations to reduce debt levels. The 11.25% Series T FMBs were retired with
lower cost borrowings from the credit facilities and an equity contribution from
TNP in late 1996, resulting from its common stock sale.
In January 1999, TNMP retired its 12.5% secured debentures when they
matured. It also issued $175 million of 6.25% Senior Notes due in 2009. Interest
charges are expected to continue to decrease during 1999 due to the lower
interest rate on the Senior Notes and reduced borrowings against the credit
facilities.
Liquidity and Capital Resources
Sources of Liquidity
The main sources of liquidity for TNP are cash flow from operations,
borrowings from credit facilities and sale of additional common stock.
TNP's cash flow from operations totaled $72.9 million, $103.9 million and
$65.2 million in 1998, 1997 and 1996. Cash flow from operations decreased in
1998 due to increases in purchased power costs and expenses for nonregulated
activities. In addition, 1997 cash flow included $20.5 million from the one-time
factoring of unbilled accounts receivables. Cash flow from operations increased
in 1997 from 1996 due to factoring unbilled receivables and increased base
revenues. The changes in TNMP's cash flow from operations mirrored those of TNP.
TNMP has two existing credit facilities with a total of $100 million of
unused borrowings available, as of December 31, 1998. In January 1999, TNMP
entered into a third credit facility that provides $35 million of borrowing
capacity through April 1999.
In November 1998, TNP entered into a new credit facility with a total
commitment of $50 million, and unused borrowing capacity of $41 million at
December 31, 1998. Borrowings under this facility can be used for investing in
TNP's subsidiaries, payment of dividends to TNP's shareholders, investing in
nonregulated businesses, and other general corporate purposes.
TNP reserved one million shares of common stock for issuance through a
direct stock purchase plan that began in 1997. The plan is designed to provide
investors with a convenient method to purchase shares of TNP's common stock
directly from the company and to reinvest cash dividends. The plan has replaced
TNP's prior dividend reinvestment plan. As of December 31, 1998, the remaining
reserve for direct stock purchase plan was 946,000 shares.
Capital Resources
TNP's and TNMP's capital structure continued to improve during 1998, as
TNMP was able to reduce debt due to continued strong earnings for the year. The
equity portion of TNP's capital structure increased from 38.3% at December 31,
1997, to 40.0% at December 31, 1998. Conversely, the long-term debt ratio
decreased from 61.3% to 59.6% for the same period. TNMP experienced similar
results with its capital ratios.
TNMP's capital requirements through 2003 are projected to be as follows
(amounts in millions):
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003
------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
FMB and secured debenture maturities (see Note 6) $ - $ 100.0 $ - $ - $ 140.0
Capital expenditures 37.7 33.5 33.8 35.3 36.5
------- -------- -------- ------- -------
Total capital requirements $ 37.7 $ 133.5 $ 33.8 $ 35.3 $ 176.5
======= ======== ======== ======= =======
</TABLE>
TNMP believes that cash flow from operations, borrowings in the capital
markets, and periodic borrowings under the credit facilities will be sufficient
to meet working capital requirements and planned capital requirements through
the foreseeable future.
Other Matters
Application of SFAS 71
As a result of the Energy Policy Act of 1992 and actions of regulatory
commissions, the electric utility industry is moving toward a combination of
competition and a modified regulatory environment. TNMP's financial statements
currently reflect assets and costs based on current cost-based ratemaking
regulations in accordance with SFAS 71, Accounting for the Effects of Certain
Types of Regulation. Continued applicability of SFAS 71 to TNMP's financial
statements requires that rates set by an independent regulator on a
cost-of-service basis can actually be charged to and collected from customers.
In the event that all or a portion of a utility's operations cease to meet
those criteria for various reasons, including deregulation, a change in the
method of regulation, or a change in the competitive environment for the
utility's regulated service, the utility will have to discontinue SFAS 71 for
that portion of operations. That discontinuation would be reported by the
write-off of unrecoverable regulatory assets and liabilities.
As discussed in Note 2, as a result of the Community Choice program in New
Mexico, TNMP discontinued the application of SFAS 71 to its generation/power
supply operations in New Mexico during 1997. The discontinuing of regulatory
accounting principles had no effect on TNMP's financial condition. Also, as
discussed in "Competitive Conditions--Texas Transition Plan" and Note 2, on July
22, 1998, the PUCT approved TNMP's Transition Plan, and issued a final order
documenting its approval on November 7, 1998. The PUCT has committed to full
recovery of stranded costs if they are quantified using a market-based
methodology, TNMP offers retail access, and stranded costs are allocated fairly
to all customers. Rates under the Transition Plan continue to be cost-based, and
TNMP will continue to apply SFAS 71 to its Texas generation/power supply
operations until it requests, and the PUCT approves authority to implement
retail competition.
Year 2000
TNMP is actively addressing the Year 2000 Issue (Y2K) throughout its
operating and office environments. Many existing computer programs were designed
and developed to use only two digits to identify a year in the date field. If
not addressed, these computer systems could fail, with possible material adverse
effects on TNMP's operations.
In mid-1997 TNMP's information technology staff began to identify and
assess corporate software applications, equipment and operating systems. In
early 1998, the project was expanded to include professionals from throughout
the company and to identify and assess embedded systems. TNMP's project to
analyze Y2K has included the following phases: identification, assessment,
remediation/implementation and testing.
In its analysis to identify and assess Y2K impact on company systems, TNMP
has conducted extensive studies to analyze the impact of Y2K on all operating
systems. As a result of these studies, TNMP has developed a Y2K mitigation plan.
The plan requires TNMP to amend, replace, or upgrade most of its primary
corporate information systems, some of which were already being replaced or
upgraded pursuant to a previously approved plan to replace or upgrade such
systems.
The following is a brief summary of the renovation and validation, and
implementation progress for the critical business areas of TNMP - generation,
transmission, distribution, energy management, and corporate information
systems.
Generating Units. TNMP owns one power plant, TNP One, which is located in
Robertson County, Texas. TNP One has two units that burn lignite as the primary
fuel source to generate power. The total lignite supply is provided from a mine
adjacent to the power plant. TNP plans to increase the coal supply to provide
for an additional six-week supply prior to January 1, 2000. The plant is also
capable of burning natural gas, as well as various waste products. TNP One
personnel are consulting with the manufacturers of the Plant Control Computer
which provides for most of the computerized operations of the boiler and turbine
controls, as well as the Continuous Emissions Monitoring System. Integrated
testing of the Plant Control Computer was completed on Unit 1 in early February
1999. The integrated testing on Unit 1 detected no Y2K problems. Testing will be
done on Unit 2 while the plant is down for a maintenance outage this spring.
Tests of the Continuous Emissions Monitoring System determined that only
non-critical Y2K issues were detected. Upgrades to that software are currently
underway. An extensive list of other minor suspect devices has been compiled and
is also in the process of being tested.
As of March 1, 1999, the TNP One generation plant has completed the
assessment of all mission-critical facilities, and is approximately 52 percent
complete with the testing and remediation of those facilities. All testing and
remediation is expected to be complete by June 1999.
Distribution System. TNMP is primarily a distribution company. Over 600
suspect distribution system devices have been identified and are being tested.
TNMP is currently testing the devices that have external clock functions.
Devices that have no external clock function are being checked with the
manufacturer and TNMP is reviewing their testing of those devices. All of TNMP's
critical distribution substations have designs which contain redundant relaying
or bypass switching schemes to remove failed devices and equipment for normal
operations, allowing for quick restoration of power to customers.
As of March 1, 1999, TNMP is 84 percent complete on the assessment of all
Distribution System mission-critical facilities, and is approximately 53 percent
complete with the testing and remediation of those facilities. All testing and
remediation is expected to be complete by June 1999.
Transmission System. TNMP has transmission lines which are a part of the
transmission grid comprised within the Electric Reliability Council of Texas
(ERCOT). The transmission grid within ERCOT is operated by member utilities in
conjunction with an Independent System Operator. TNMP is participating on
ERCOT's Year 2000 Technical Task Force and on the Year 2000 Operational
Preparedness and Planning Task Force. TNMP will be participating in all testing,
drills and contingency planning done by the Independent System Operator.
Testing of transmission line electronic protective devices by TNMP
personnel is underway with completion anticipated by June 1999.
Supervisory Control and Data Acquisition Systems (SCADA) and Energy
Management Systems. TNMP has three SCADA systems in Texas. A SCADA system
reports on the status on protective devices, allows for the remote control of
these same devices, and reports and tracks critical power flow information on
the transmission and distribution grids. These systems are new, having been
upgraded in 1997 and 1998. TNMP is in the process of replacing the SCADA system
in New Mexico, which is not Year 2000 compliant.
As of March 1, 1999, TNMP is 93 percent complete on the assessment of all
SCADA and Energy Management Systems mission-critical facilities, and is
approximately 22 percent complete with the testing and remediation of those
facilities. All testing and remediation is expected to be complete by June 1999,
except for the New Mexico SCADA system that will be complete in August 1999.
Information Technology Systems. As of March 1, 1999, approximately 90% of
TNMP's infrastructure supporting its business systems has been tested and
verified as Y2K compliant. TNMP expects to have the remaining infrastructure Y2K
compliant by the end of the first quarter of 1999. TNMP has completed the
upgrade of its financial and accounting system to a Y2K compliant version.
Integrated testing of the upgraded financial system will be done in April 1999.
A new customer information system is expected to be implemented and tested
during the third quarter of 1999 and other corporate information systems
directly related to TNMP's operations are expected to be installed and tested by
September 1999. TNMP incorporates unit testing, system testing, integration
testing and acceptance testing into the verification methodology.
Y2K Remediation Cost. The costs associated with TNMP's Y2K efforts are
expected to be approximately $10.2 million. Approximately $9 million of the
total cost is to upgrade or replace various information technology systems, as
discussed above, as well as improve the infrastructure to support those systems.
TNMP does not expect these costs to have a material impact on its financial
position or results of operations. TNMP continues to work with key software
vendors and outside consultants to validate its Y2K compliance project. To date,
TNMP has spent approximately $4.3 million on Y2K remediation. TNMP has in the
past used, and expects to continue to use, cash flow from operations to fund
costs associated with Y2K.
Third-Party Vendors. In addition to its own mitigation plan, TNMP is
actively working with its key vendors and other third parties with which TNMP
has a material relationship to assist such parties in achieving compliance with
respect to Y2K in those systems affecting TNMP's operations. Such parties
include electric power providers in Texas and New Mexico; the fuel, ash
disposal, and limestone contractors at TNP One; transmission and distribution
material suppliers; and banking partners. Although TNMP believes that such
persons are working diligently to properly address Y2K, TNMP cannot guarantee
that these third-party systems will be timely converted, or that a failure to
convert by another company or a conversion that is incompatible with TNMP's
systems, would not have a material adverse effect on TNMP.
Contingency Plans. The primary operating processes of TNMP's business
(e.g., the production, transmission, and distribution of electric power) are
subject to contingencies related to weather, equipment failure, and other
factors. TNMP has drafted Y2K contingency plans by adapting previously existing
contingency plans. TNMP will complete the Y2K contingency plan by June 1999.
The Risks of the Company's Year 2000 Issues. Based upon its current
assessment and testing of the Y2K issue, TNMP believes the reasonably likely
worst-case Y2K scenarios would have the following impacts upon it and its
operations. With respect to its ability to provide energy to its customers, TNMP
believes that the reasonably likely worst-case scenario is for small, localized
interruptions of electrical service that are restored in a time frame that is
within normal service levels. With respect to services that are essential to
TNMP's operations, such as customer service, business operations, supplies and
emergency response capabilities, the reasonably likely worst-case scenario is
for minor disruptions of essential services with rapid recovery and all
essential information and processes ultimately recovered.
While risks related to the third parties' lack of Y2K readiness could
materially and adversely affect TNMP's business, results of operations and
financial condition, TNMP expects its Y2K readiness efforts to reduce
significantly its level of uncertainty about the impact of third party Y2K
issues on both its IT systems and non-IT systems.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
TNP's and TNMP's involvement in the trading of market risk sensitive
instruments is minimal and does not have a material impact to either company's
financial condition or results of operations. As noted in Item 1, "Sources of
Energy", TNMP's exposure to changes in the prevailing market price of power has
increased. This exposure is due to TNMP's greater reliance on shorter term
contracts and, as discussed in item 7, "Competitive Conditions", the fact that
TNMP no longer passes the demand component of purchased power costs directly
through to its customers. As a result, TNMP is exposed to the risk of executing
new purchased power contracts at market prices. Conversely, TNMP has the
opportunity to benefit from a favorable market for purchased power.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of TNP Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets and consolidated
statements of capitalization of TNP Enterprises, Inc. (a Texas corporation) (the
"Company") as of December 31, 1998 and 1997, and the related consolidated
statements of income, common shareholders' equity and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Fort Worth, Texas
February 12, 1999
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder and Board of Directors of
Texas-New Mexico Power Company:
We have audited the accompanying consolidated balance sheets and consolidated
statements of capitalization of Texas-New Mexico Power Company (a Texas
corporation) (the "Company") as of December 31, 1998 and 1997, and the related
consolidated statements of income, common shareholder's equity and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Fort Worth, Texas
February 12, 1999
<PAGE>
Independent Auditor's Report
The Board of Directors and Shareholders
TNP Enterprises, Inc.:
We have audited the accompanying consolidated statements of income, common
shareholders' equity, and cash flows of TNP Enterprises, Inc. and subsidiaries
for the year ended December 31, 1996. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
TNP Enterprises, Inc. and subsidiaries for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG LLP
Fort Worth, Texas
January 30, 1997
<PAGE>
Independent Auditor's Report
The Board of Directors
Texas-New Mexico Power Company:
We have audited the accompanying consolidated statements of income, common
shareholder's equity, and cash flows of Texas-New Mexico Power Company (a wholly
owned subsidiary of TNP Enterprises, Inc.) and subsidiaries for the year ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Texas-New Mexico Power Company and subsidiaries for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
KPMG LLP
Fort Worth, Texas
January 30, 1997
<PAGE>
<TABLE>
<CAPTION>
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
(In thousands except per share amounts)
OPERATING REVENUES (Note 2) $ 586,493 $ 580,693 $ 502,737
---------------- ---------------- ----------------
OPERATING EXPENSES:
Purchased power and fuel 316,911 302,773 243,682
Other operating and maintenance 95,168 86,385 84,417
Depreciation 38,056 38,853 38,172
Taxes other than income taxes 36,014 33,667 33,256
Income taxes 15,480 21,242 10,375
---------------- ---------------- ----------------
Total operating expenses 501,629 482,920 409,902
---------------- ---------------- ----------------
NET OPERATING INCOME 84,864 97,773 92,835
---------------- ---------------- ----------------
OTHER INCOME:
Other income and deductions, net 1,280 1,443 1,956
Income taxes (125) 257 722
---------------- ---------------- ----------------
Other income, net of taxes 1,155 1,700 2,678
---------------- ---------------- ----------------
INCOME BEFORE INTEREST CHARGES 86,019 99,473 95,513
---------------- ---------------- ----------------
INTEREST CHARGES:
Interest on long-term debt 48,393 52,557 64,654
Other interest and amortization of debt-related costs 5,492 4,355 4,709
---------------- ---------------- ----------------
Total interest charges 53,885 56,912 69,363
---------------- ---------------- ----------------
INCOME FROM CONTINUING OPERATIONS 32,134 42,561 26,150
Loss from discontinued nonregulated operations, net of taxes
(Note 3) 12,710 12,883 3,097
---------------- ---------------- ----------------
NET INCOME 19,424 29,678 23,053
Dividends on preferred stock 150 158 167
---------------- ---------------- ----------------
INCOME APPLICABLE TO COMMON STOCK $ 19,274 $ 29,520 $ 22,886
================ ================ ================
EARNINGS PER SHARE OF COMMON STOCK:
Earnings from continuing operations $ 2.42 $ 3.24 $ 2.27
Loss from discontinued nonregulated operations (0.96) (0.98) (0.27)
---------------- ---------------- ----------------
EARNINGS PER SHARE $ 1.46 $ 2.26 2.00
================ ================ ================
DIVIDENDS PER SHARE OF COMMON STOCK $ 1.10 $ 1.005 $ 0.93
================ ================ ================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 13,244 13,083 11,465
================ ================ ================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1998 1997 1996
---------------- ------------------ -----------------
<S> <C> <C> <C>
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from sales to customers $ 600,596 $ 625,032 $ 505,307
Purchased power and fuel costs paid (318,616) (299,554) (244,272)
Cash paid for payroll and to other suppliers (116,852) (125,188) (75,138)
Interest paid, net of amounts capitalized (51,592) (57,337) (69,247)
Income taxes paid (6,825) (9,089) (15,684)
Other taxes paid (35,089) (32,990) (32,243)
Other operating cash receipts and payments, net 1,250 2,979 (3,522)
---------------- ------------------ -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 72,872 103,853 65,201
---------------- ------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (37,534) (28,232) (28,006)
Additions to other property and nonregulated investments (1,020) (1,777) (2,771)
Withdrawals from (deposits to) escrow account (1,902) - -
---------------- ------------------ -----------------
NET CASH USED IN INVESTING ACTIVITIES (40,456) (30,009) (30,777)
---------------- ------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on preferred and common stocks (14,729) (13,305) (10,866)
Common stock issuances 5,355 3,392 48,798
Borrowings from (repayments to) revolving credit facilities - net (11,000) 45,000 12,000
Other long-term debt issuances - - 202
Deferred expenses associated with financings (7,382) - (588)
Redemptions:
First mortgage bonds (8,000) (100,900) (96,508)
Obligation - FWI investment acquisition - (300) -
Other long-term debt (141) (61) -
Preferred stock (180) (180) (180)
---------------- ------------------ -----------------
NET CASH USED IN FINANCING ACTIVITIES (36,077) (66,354) (47,142)
---------------- ------------------ -----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (3,661) 7,490 (12,718)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15,877 8,387 21,105
---------------- ------------------ -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,216 $ 15,877 $ 8,387
================ ================== =================
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income $ 19,424 $ 29,678 $ 23,053
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 38,056 38,853 38,170
Amortization of debt-related costs and other deferred charges 4,819 3,810 3,329
Allowance for borrowed funds used during construction (228) (47) (99)
Deferred income taxes 4,722 7,434 (193)
Investment tax credits 1,281 1,406 (380)
Cash flows impacted by changes in current assets and liabilities:
Deferred purchased power and fuel costs 894 995 5,696
Accounts payable 976 (1,411) 6,406
Accrued interest (2,303) (3,556) (3,103)
Accrued taxes (3,299) (1,244) (7,372)
Reserve for customer refund 10,971 - -
Changes in other current assets and liabilities (2,215) 25,099 (1,507)
Other, net (226) 2,836 1,201
---------------- ------------------ -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 72,872 $ 103,853 $ 65,201
================ ================== =================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1998 1997
-------------------- -------------------
<S> <C> <C>
(In thousands)
ASSETS
UTILITY PLANT:
Electric plant $ 1,260,147 $ 1,235,257
Construction work in progress 6,294 2,281
-------------------- -------------------
Total 1,266,441 1,237,538
Less accumulated depreciation 343,562 314,270
-------------------- -------------------
Net utility plant 922,879 923,268
-------------------- -------------------
OTHER PROPERTY AND INVESTMENTS, at cost 10,384 5,704
-------------------- -------------------
CURRENT ASSETS:
Cash and cash equivalents 12,216 15,877
Accounts receivable 5,955 8,585
Inventories, at lower of average cost or market:
Fuel 677 483
Materials and supplies 4,567 4,440
Deferred purchased power and fuel costs 1,676 2,570
Accumulated deferred income taxes 2,235 1,707
Other current assets 4,403 982
-------------------- -------------------
Total current assets 31,729 34,644
-------------------- -------------------
DEFERRED CHARGES 28,773 28,310
-------------------- -------------------
$ 993,765 $ 991,926
==================== ===================
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholders' equity:
Common stock - no par value per share. Authorized 50,000,000
shares; issued 13,293,996 shares in 1998 and 13,132,821 in 1997 $ 192,518 $ 187,163
Retained earnings 115,776 111,078
-------------------- -------------------
Total common shareholders' equity 308,294 298,241
Preferred stock 3,060 3,240
Long-term debt, less current maturities 459,000 478,041
-------------------- -------------------
Total capitalization 770,354 779,522
-------------------- -------------------
CURRENT LIABILITIES:
Current maturities of long-term debt - 100
Accounts payable 28,011 27,035
Accrued interest 5,020 7,323
Accrued taxes 14,290 17,589
Customers' deposits 3,609 3,249
Reserve for customer refund 10,971 -
Other current liabilities 25,202 26,665
-------------------- -------------------
Total current liabilities 87,103 81,961
-------------------- -------------------
REGULATORY TAX LIABILITIES 957 6,318
ACCUMULATED DEFERRED INCOME TAXES 97,346 85,250
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 20,916 21,149
DEFERRED CREDITS 17,089 17,726
COMMITMENTS AND CONTINGENCIES (Notes 2 and 9)
-------------------- -------------------
$ 993,765 $ 991,926
==================== ===================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
1998 1997
----------------- -------------------
<S> <C> <C>
(In thousands)
COMMON SHAREHOLDERS' EQUITY
Common stock with no par value per share
Authorized shares - 50,000,000
Outstanding shares - 13,293,996 in 1998 and 13,132,821 in 1997 $ 192,518 $ 187,163
Retained earnings 115,776 111,078
----------------- -------------------
Total common shareholders' equity 308,294 298,241
----------------- -------------------
</TABLE>
PREFERRED STOCK
Preferred stock with no par value
Authorized shares - 5,000,000
Outstanding shares - None
Redeemable cumulative preferred stock of TNMP with $100 par value
Authorized shares - 1,000,000
<TABLE>
<CAPTION>
Redemption
price at TNMP's Outstanding shares
option 1998 1997
------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Series B 4.65% $ 100.00 19,200 20,400 1,920 2,040
Series C 4.75% 100.00 11,400 12,000 1,140 1,200
--------- --------- ----------------- -------------------
Total redeemable cumulative preferred stock 30,600 32,400 3,060 3,240
--------- --------- ----------------- -------------------
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM DEBT
FIRST MORTGAGE BONDS
<S> <C> <C>
Series M 8.70% due 2006 - 8,000
Series U 9.25% due 2000 100,000 100,000
SECURED DEBENTURES
12.50% due 1999 130,000 130,000
Series A 10.75% due 2003 140,000 140,000
REVOLVING CREDIT FACILITIES
1995 Facility - -
1996 Facility 80,000 100,000
1998 Facility 9,000 -
OTHER
- 141
----------------- -------------------
Total long-term debt 459,000 478,141
Less current maturities - (100)
----------------- -------------------
Total long-term debt, less current maturities 459,000 478,041
----------------- -------------------
TOTAL CAPITALIZATION $ 770,354 $ 779,522
================= ===================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TNP ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
For the Years Ended December 31,
Common Shareholders' Equity
-------------------------------------------------------------------------------
Common Stock Retained
Shares Amount Earnings Total
------------------ ---------------- ---------------- ----------------
(In thousands)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Balance at January 1, 1996 10,920 $ 134,973 $ 82,484 $ 217,457
Net income - - 23,053 23,053
Dividends on preferred stock - - (167) (167)
Dividends on common stock - $0.93 per share - - (10,699) (10,699)
Sale of common stock 2,086 48,798 - 48,798
Retirement of preferred stock - - 32 32
------------------ ---------------- ---------------- ----------------
Balance at December 31, 1996 13,006 183,771 94,703 278,474
YEAR ENDED DECEMBER 31, 1997
Net income - - 29,678 29,678
Dividends on preferred stock - - (158) (158)
Dividends on common stock - $1.005 per share - - (13,158) (13,158)
Sale of common stock 127 3,392 - 3,392
Retirement of preferred stock - - 13 13
------------------ ---------------- ---------------- ----------------
Balance at December 31, 1997 13,133 187,163 111,078 298,241
YEAR ENDED DECEMBER 31, 1998
Net income - - 19,424 19,424
Dividends on preferred stock - - (150) (150)
Dividends on common stock - $1.10 per share - - (14,579) (14,579)
Sale of common stock 161 5,355 - 5,355
Retirement of preferred stock - - 3 3
------------------ ---------------- ---------------- ----------------
Balance at December 31, 1998 13,294 $192,518 $ 115,776 $ 308,294
================== ================ ================ ================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
1998 1997 1996
------------------- ------------------ ------------------
<S> <C> <C> <C>
(In thousands)
OPERATING REVENUES (Note 2) $ 586,445 $ 580,693 $ 502,737
------------------- ------------------ ------------------
OPERATING EXPENSES:
Purchased power and fuel 316,911 302,773 243,682
Other operating and maintenance 91,171 84,294 83,948
Depreciation of utility plant 38,054 38,851 38,170
Taxes other than income taxes 36,298 33,260 32,727
Income taxes 16,863 22,062 10,333
------------------- ------------------ ------------------
Total operating expenses 499,297 481,240 408,860
------------------- ------------------ ------------------
NET OPERATING INCOME 87,148 99,453 93,877
------------------- ------------------ ------------------
OTHER INCOME:
Other income and deductions, net 952 1,120 1,626
Income taxes (52) 257 722
------------------- ------------------ ------------------
Other income, net of taxes 900 1,377 2,348
------------------- ------------------ ------------------
INCOME BEFORE INTEREST CHARGES 88,048 100,830 96,225
------------------- ------------------ ------------------
INTEREST CHARGES:
Interest on long-term debt 48,342 52,557 64,654
Other interest and amortization of debt-related costs 5,385 4,355 4,709
------------------- ------------------ ------------------
Total interest charges 53,727 56,912 69,363
------------------- ------------------ ------------------
NET INCOME 34,321 43,918 26,862
Dividends on preferred stock 150 158 167
------------------- ------------------ ------------------
INCOME APPLICABLE TO COMMON STOCK $ 34,171 $ 43,760 $ 26,695
=================== ================== ==================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1998 1997 1996
------------------- ------------------ -------------------
<S> <C> <C> <C>
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from sales to customers $ 579,482 $ 606,803 $ 502,954
Purchased power and fuel costs paid (318,616) (299,554) (244,272)
Cash paid for payroll and to other suppliers (72,590) (86,607) (75,807)
Interest paid, net of amounts capitalized (51,545) (57,331) (69,236)
Income taxes paid (2,786) (8,464) (14,242)
Other taxes paid (35,492) (32,980) (31,219)
Other operating cash receipts and payments, net 864 2,600 1,135
------------------- ------------------ -------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 99,317 124,467 69,313
------------------- ------------------ -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (37,506) (27,942) (28,006)
Withdrawals from (deposits to) escrow account (1,902) 1,670 (1,669)
------------------- ------------------ -------------------
CASH FLOWS USED IN INVESTING ACTIVITIES (39,408) (26,272) (29,675)
------------------- ------------------ -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on preferred and common stocks (19,249) (44,458) (10,867)
Equity contribution from TNP Enterprises - - 47,170
Borrowings from (repayments to) revolving credit facilities-net (20,000) 45,000 12,000
Deferred expenses associated with financings (7,275) - (588)
Redemptions:
First mortgage bonds (8,000) (100,900) (96,508)
Preferred stock (180) (180) (180)
------------------- ------------------ -------------------
NET CASH USED IN FINANCING ACTIVITIES (54,704) (100,538) (48,973)
------------------- ------------------ -------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 5,205 (2,343) (9,335)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,772 5,115 14,450
------------------- ------------------ -------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,977 $ 2,772 $ 5,115
=================== ================== ===================
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income $ 34,321 $ 43,918 $ 26,862
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of utility plant 38,054 38,851 38,170
Amortization of debt-related costs and other deferred charges 4,710 3,810 3,329
Allowance for borrowed funds used during construction (228) (47) (99)
Deferred income taxes 9,559 10,650 1,140
Investment tax credits 1,173 2,121 (111)
Cash flows impacted by changes in current assets and liabilities:
Deferred purchased power and fuel costs 894 995 5,696
Accounts payable 2,029 (2,395) 5,214
Accrued interest (2,319) (3,556) (3,103)
Accrued taxes 2,698 850 (8,429)
Reserve for customer refund 10,971 - -
Changes in other current assets and liabilities (4,485) 24,751 786
Other, net 1,940 4,519 (142)
------------------- ------------------ -------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 99,317 $ 124,467 $ 69,313
=================== ================== ===================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED BALANCE SHEETS
December 31,
1998 1997
---------------- ------------------
<S> <C> <C>
(In thousands)
ASSETS
UTILITY PLANT:
Electric plant $ 1,260,099 $ 1,235,239
Construction work in progress 6,294 2,281
---------------- ------------------
Total 1,266,393 1,237,520
Less accumulated depreciation 343,562 314,270
---------------- ------------------
Net utility plant 922,831 923,250
---------------- ------------------
OTHER PROPERTY AND INVESTMENTS, at cost 2,116 214
---------------- ------------------
CURRENT ASSETS:
Cash and cash equivalents 7,977 2,772
Accounts receivable 923 2,342
Inventories, at lower of average cost or market:
Fuel 677 483
Materials and supplies 4,567 4,440
Deferred purchased power and fuel costs 1,676 2,570
Accumulated deferred income taxes - 1,707
Other current assets 4,093 222
---------------- ------------------
Total current assets 19,913 14,536
---------------- ------------------
DEFERRED CHARGES 28,706 29,006
---------------- ------------------
$ 973,566 $ 967,006
================ ==================
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholder's equity:
Common stock, $10 par value per share
Authorized 12,000,000 shares; issued 10,705 shares $ 107 $ 107
Capital in excess of par value 222,149 222,146
Retained earnings 79,840 64,768
---------------- ------------------
Total common shareholder's equity 302,096 287,021
Redeemable cumulative preferred stock 3,060 3,240
Long-term debt, less current maturities 450,000 477,900
---------------- ------------------
Total capitalization 755,156 768,161
---------------- ------------------
CURRENT LIABILITIES:
Current maturities of long-term debt - 100
Accounts payable 26,888 24,859
Accrued interest 5,004 7,323
Accrued taxes 20,449 17,751
Customers' deposits 3,609 3,249
Accumulated deferred income taxes 649 -
Reserve for customer refund 10,971 -
Other current liabilities 17,076 19,148
---------------- ------------------
Total current liabilities 84,646 72,430
---------------- ------------------
REGULATORY TAX LIABILITIES 957 6,318
ACCUMULATED DEFERRED INCOME TAXES 93,378 81,085
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 22,729 21,286
DEFERRED CREDITS 16,700 17,726
COMMITMENTS AND CONTINGENCIES (Notes 2 and 9)
---------------- ------------------
$ 973,566 $ 967,006
================ ==================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
1998 1997
----------------- ------------------
<S> <C> <C>
(In thousands)
COMMON SHAREHOLDER'S EQUITY
Common stock, $10 par value per share
Authorized shares - 12,000,000
Outstanding shares - 10,705 $ 107 $ 107
Capital in excess of par value 222,149 222,146
Retained earnings 79,840 64,768
----------------- ------------------
Total common shareholder's equity 302,096 287,021
----------------- ------------------
</TABLE>
PREFERRED STOCK
Redeemable cumulative preferred stock with $100 par value
Authorized shares - 1,000,000
<TABLE>
<CAPTION>
Redemption
price at TNMP's Outstanding shares
option 1998 1997
------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
Series B 4.65% $ 100.00 19,200 20,400 1,920 2,040
Series C 4.75% 100.00 11,400 12,000 1,140 1,200
------------- ------------- ----------------- ------------------
Total redeemable cumulative preferred stock 30,600 32,400 3,060 3,240
------------- ------------- ----------------- ------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
LONG-TERM DEBT
FIRST MORTGAGE BONDS
Series M 8.70% due 2006 - 8,000
Series U 9.25% due 2000 100,000 100,000
SECURED DEBENTURES
12.50% due 1999 130,000 130,000
Series A 10.75% due 2003 140,000 140,000
REVOLVING CREDIT FACILITIES
1995 Facility - -
1996 Facility 80,000 100,000
----------------- ------------------
Total long-term debt 450,000 478,000
Less current maturities - (100)
----------------- ------------------
Total long-term debt, less current maturities 450,000 477,900
----------------- ------------------
TOTAL CAPITALIZATION $ 755,156 $ 768,161
================= ==================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of TNP Enterprises, Inc.)
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S EQUITY
For the Years Ended December 31,
Common Shareholder's Equity
--------------------------------------------------------------------------------
Capital in
Common Stock Excess of Retained
Shares Amount Par Value Earnings Total
------ ------ --------- -------- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Balance at January 1, 1996 11 $ 107 $ 174,931 $ 49,313 $ 224,351
Net income - - - 26,862 26,862
Dividends on preferred stock - - - (167) (167)
Dividends on common stock - - - (10,700) (10,700)
Equity contribution from TNP Enterprises - - 47,170 - 47,170
Retirement of preferred stock - - 32 - 32
---------- --------------- --------------- ------------- -----------------
Balance at December 31, 1996 11 107 222,133 65,308 287,548
YEAR ENDED DECEMBER 31, 1997
Net income - - - 43,918 43,918
Dividends on preferred stock - - - (158) (158)
Dividends on common stock - - - (44,300) (44,300)
Retirement of preferred stock - - 13 - 13
---------- --------------- --------------- ------------- -----------------
Balance at December 31, 1997 11 107 222,146 64,768 287,021
YEAR ENDED DECEMBER 31, 1998
Net income - - - 34,321 34,321
Dividends on preferred stock - - - (150) (150)
Dividends on common stock - - - (19,099) (19,099)
Retirement of preferred stock - - 3 - 3
---------- --------------- --------------- ------------- -----------------
Balance at December 31, 1998 11 $ 107 $ 222,149 $ 79,840 $ 302,096
========== =============== =============== ============= =================
</TABLE>
<PAGE>
TNP ENTERPRISES, INC. AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
General Information
The consolidated financial statements of TNP and subsidiaries include the
accounts of TNP and its wholly owned subsidiaries, TNMP, FWI, and TNP Operating
Company. The consolidated financial statements of TNMP and subsidiaries include
the accounts of TNMP and its wholly owned subsidiaries, TGC and TGC II. All
intercompany transactions and balances have been eliminated in consolidation.
TNMP is TNP's principal operating subsidiary. TNMP is a public utility
engaged in generating, purchasing, transmitting, distributing, and selling
electricity in Texas and New Mexico. TNMP is subject to PUCT and NMPRC
regulation. Some of TNMP's activities, including the issuance of securities, are
subject to FERC regulation, and its accounting records are maintained in
accordance with FERC's Uniform System of Accounts.
The use of estimates is required to prepare TNP's and TNMP's consolidated
financial statements in conformity with generally accepted accounting
principles. Management believes that estimates are essential and will not
materially differ from actual results. However, adjustments may be necessary in
the future to the extent that future estimates or actual results are different
from the estimates used in the 1998 financial statements.
Accounting for the Effects of Regulation
Electric utilities operate in a highly regulated environment. TNP's and
TNMP's consolidated financial statements reflect the application of certain
accounting standards, including SFAS 71, "Accounting for the Effects of Certain
Types of Regulation," which provide for recognition of the economic effects of
rate regulation. Among these effects are the recognition of regulatory assets
and liabilities. Regulatory assets represent revenues associated with certain
costs that TNMP expects to recover from customers in future rates. Regulatory
liabilities are costs previously collected from customers or other amounts that
reduce future rates. The following table summarizes TNP's and TNMP's regulatory
assets and liabilities as of December 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
---------- ---------
(In thousands)
<S> <C> <C>
Regulatory Assets:
Deferred purchased power and fuel costs $ 1,676 $ 2,570
Deferred charges:
Losses on reacquired debt 6,494 8,621
Rate case expenses 1,396 3,638
Deferred accounting amounts 3,221 4,026
---------- ---------
Total $ 12,787 $ 18,855
========== =========
Regulatory Liabilities:
Income tax related $ 957 $ 6,318
========== =========
</TABLE>
As discussed in Note 2, TNMP has two plans - the Texas Transition Plan and
the New Mexico Community Choice plan - approved by the regulatory commissions in
the respective jurisdictions. Based on these plans, management believes it
probable that TNMP will continue, for the foreseeable future, to meet the
criteria for continued application of SFAS 71 to its transmission and
distribution portions of its business, and the generation/power supply portion
of its business in Texas. Also, the Texas Transition Plan allows TNMP to recover
from customers the regulatory assets included in the table above.
Utility Plant
Utility plant is stated at the historical cost of construction, which
includes labor, materials, indirect charges for such items as engineering and
administrative costs, and AFUDC. Property repairs and replacement of minor items
are charged to operating expenses; major replacements and improvements are
capitalized to utility plant.
AFUDC is a non-cash item designed to enable a utility to capitalize
interest costs during periods of construction. Established regulatory practices
enable TNMP to recover these costs from customers. The composite rate used for
AFUDC was 6.0% in each of the years 1998, 1997, and 1996.
The costs of depreciable units of plant retired or disposed of in the
normal course of business are eliminated from utility plant accounts and such
costs plus removal expenses less salvage are charged to accumulated
depreciation. When complete operating units are disposed of, appropriate
adjustments are made to accumulated depreciation, and the resulting gains or
losses, if any, are recognized.
Depreciation is provided on a straight-line method based on the estimated
lives of the properties as indicated by periodic depreciation studies. A portion
of depreciation of transportation equipment used in construction is charged to
utility plant accounts in accordance with the equipment's use. Depreciation as a
percentage of average depreciable cost was 3.2%, 3.3%, and 3.2% in 1998, 1997,
and 1996, respectively. As explained in Note 2, TNMP will record $15 million of
additional depreciation annually during 1999-2002 to recover stranded costs, and
may record additional amounts of depreciation based on operation of the earnings
cap, due to implementation of the Transition Plan.
Cash Equivalents
All highly liquid debt instruments with maturities of three months or less
when purchased are considered cash equivalents.
Customer Receivables and Operating Revenues
TNMP accrues estimated revenues for electricity delivered since the latest
billing. TNMP, under a factoring arrangement with an unaffiliated company, sells
its customer receivables on a nonrecourse basis. Amounts estimated to have been
delivered, but remaining unbilled, are also sold in connection with this
agreement.
Purchased Power and Fuel Costs
As discussed in Note 2, TNMP has two plans - the Texas Transition Plan and
the New Mexico Community Choice plan - approved by the regulatory commissions in
the respective jurisdictions.
In Texas, as of January 1, 1998, the recovery of the demand-related portion
of purchased power costs has changed pursuant to the Texas Transition Plan as
discussed in Note 2. There are no changes to the recovery of the energy-related
portion of purchased power costs and fuel costs.
In New Mexico, as of May 1, 1997, the recovery of purchased power costs
changed pursuant to the New Mexico Community Choice plan discussed in Note 2.
Prior to the implementation of both plans, differences between amounts
collected and allowable costs were generally recovered either as purchased power
subject to refund or deferred purchased power and fuel costs in accordance with
regulatory ratemaking policy.
Deferred Charges
Expenses incurred in issuing long-term debt and related discount and
premium are amortized on a straight-line basis over the lives of the respective
issues.
Included in deferred charges are other assets that are expected to benefit
future periods and certain costs that are deferred for ratemaking purposes and
amortized over periods allowed by regulatory authorities.
Derivatives
The initial cost of an interest rate collar is being amortized over the
term of the related agreement. Unamortized premiums of $164,000 are included in
Deferred Charges in the consolidated balance sheets. Amounts to be received or
paid under the agreement, if any, will be recognized when they occur as a
component of interest expense. As of December 31, 1998, no such amounts have
been received or paid.
Income Taxes
TNP files a consolidated federal income tax return that includes its
subsidiaries and the consolidated operations of TNMP. The amounts of income
taxes recognized in TNMP's accompanying consolidated financial statements were
computed as if TNMP and its subsidiaries filed a separate consolidated federal
income tax return.
ITC amounts utilized in the federal income tax return are generally
deferred and amortized to earnings ratably over the estimated service lives of
the related assets.
Fair Values of Financial Instruments
Fair values of cash equivalents, temporary investments, and customer
receivables approximated the carrying amounts because of the short maturities of
those instruments.
The estimated fair values of long-term debt and preferred stock were based
on quoted market prices of the same or similar issues. The estimated fair values
of TNMP's financial instruments are as follows:
<PAGE>
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------------------ -----------------------------
Carrying Amount Fair Values Carrying Amount Fair Values
--------------- ----------- --------------- -----------
(In thousands)
Assets
<S> <C> <C> <C> <C>
Interest rate collar $ 164 $ (333) $ 262 $ 235
Capitalization and Liabilities
Long-term debt 459,000 475,189 478,000 505,400
Preferred stock 3,060 1,978 3,240 2,653
</TABLE>
Common Stock
At December 31, 1998, 81,999 shares of TNP's common stock were reserved for
issuance to TNMP's 401(k) plan, and 1,198,356 shares of TNP's common stock were
reserved for subsequent issuance under other stock compensation or shareholder
plans.
Shareholder Rights Plan
TNP has a shareholder rights plan that is designed to protect TNP's
shareholders from coercive takeover tactics and inadequate or unfair takeover
bids. The rights plan provides for the distribution of one right for each share
of TNP's common stock currently outstanding or issued until the close of
business on August 11, 2008.
Upon the occurrence of certain events, each right entitles a shareholder to
elect to purchase one share of common stock at $100 per share or, under certain
circumstances, shares of common stock at half the then-current market price or
to receive TNP common stock or other securities having an aggregate value equal
to the excess of (i) the value of the common stock or other securities on the
date the rights are exercised over (ii) the cash payment that would have been
payable upon exercise of the rights if cash payment had been elected.
Until certain triggering events occur, the rights will trade together with
TNP's common stock and separate rights certificates will not be issued. Among
the triggering events are the acquisition by a person or group of 10% or more of
TNP's outstanding common stock or the commencement of a tender or exchange offer
that, upon consummation, would result in a person or group of persons owning 15%
or more of TNP's outstanding common stock. The rights expire August 11, 2008,
unless earlier redeemed or exchanged by TNP, and have had no effect on EPS.
Stock-Based Compensation
As discussed in Note 4, TNP has an equity based incentive compensation plan
that awards stock-based compensation. In 1995 the FASB issued SFAS 123,
"Accounting for Stock-Based Compensation", that changes the method for
calculating expenses associated with stock-based compensation. SFAS 123, which
became effective for 1996, also allows companies to retain the approach as set
forth in APB Opinion 25, "Accounting for Stock Issued to Employees", for
measuring expense for its stock-based compensation. TNP has elected to continue
to apply the provisions of APB Opinion 25 in calculating stock-based
compensation. The application of SFAS 123 would have had no effect on the amount
of expense associated with TNP's stock-based compensation.
Reclassification
Certain items in 1996 and 1997 were reclassified to conform to the 1998
presentation.
<PAGE>
Note 2. Regulatory Matters
As the electric utility industry continues its transition toward an
environment of increased competition, the most significant effect of competition
on TNMP, as well as many other utilities, will be the ability to recover
potential stranded costs. "Stranded costs" is the difference between what it
currently costs TNMP to provide electricity and what a customer would be willing
to pay for such service in a competitive market. The inability to recover a
significant portion of stranded costs would adversely impact TNP's and TNMP's
financial condition. In Texas, TNMP's potential stranded cost relates to TNP
One, its 300 MW generating unit, and could potentially be more than $270
million. As of December 31, 1998, TNMP had reserved $3.4 million for its
potential stranded costs in New Mexico. Additional stranded costs could
potentially be zero to $7 million, depending on the market price of purchased
power at the onset of competition.
The following discusses TNMP's strategy to transition to competition and to
recover its potential stranded costs in Texas and New Mexico.
Texas Transition Plan
On July 22, 1998, the PUCT approved TNMP's transition-to-competition plan
(Transition Plan), and issued a final order documenting its approval on November
7, 1998. The Transition Plan includes a number of provisions that impact TNMP's
financial results. They are:
- TNMP will implement a series of residential and commercial
rate reductions totaling 9% and 3%, respectively, during a
five-year transition period. The first rate reductions for
residential and commercial customers of 3% and 1%,
respectively, were implemented retroactive to January 1, 1998.
The remaining reductions will be effective in January of 2000
and 2001.
- TNMP's earnings on its Texas operations are capped at an
11.25% return on equity less assumed discounts on industrial
rates, which, for 1998, were $4.1 million. In 1999, the
discounts are expected to be approximately $2.9 million. TNMP
will apply Texas earnings in excess of the cap to recover
stranded costs related to its generation investment (TNP One)
or will refund them to customers, according to PUCT
guidelines.
- The Plan includes a cap on allowed operating and maintenance
expenses applicable to TNMP's Texas operations based on cost
incurred per customer in 1996.
- TNMP will record $15 million of additional depreciation
annually during 1999-2002 to recover stranded costs.
- Finally, the manner in which TNMP recovers the cost of
purchased power from its customers has changed. In the past,
all of these costs were passed directly through to TNMP's
customers via adjustment factors that could change as often as
monthly. Under this methodology, purchased power expense had
no impact on operating income. Effective with the new rates
under the Transition Plan, only the energy-related portion of
purchased power will be passed through directly to customers
via the fuel adjustment clause. The demand-related portion of
purchased power will be recovered through base rates and is
not subject to adjustment or future reconciliation. Therefore,
any difference, between the amount of demand-related purchased
power recovered through TNMP's rates and the actual cost of
such, will affect operating income.
Absent legislation implementing retail competition prior to the end of the
five-year transition period, TNMP shall file with the PUCT, at the end of the
transition period, a proposal to voluntarily implement retail access, contingent
upon the approval of an appropriate mechanism for recovery of any remaining
stranded costs. The PUCT has committed to full recovery of stranded costs if
they are quantified using a market-based methodology, TNMP offers retail access,
and stranded costs are allocated fairly to all customers. Rates under the
Transition Plan continue to be cost-based, and TNMP will continue to apply SFAS
71 to its Texas generation/power supply operations until it requests, and the
PUCT approves authority to implement retail competition.
Implementation of the Transition Plan reduced operating revenue by $11.4
million (pre-tax). The base rate reductions accounted for $9.9 million of the
change, and a one-time customer refund accounted for the remaining $1.5 million.
TNMP's earnings for the year ended December 31, 1998, did not exceed the
earnings cap imposed by the Transition Plan.
New Mexico Community Choice
Following NMPUC approval on April 11, 1997, TNMP implemented Community
Choice, its plan for transition to competition for its New Mexico service
territory effective May 1, 1997. The plan provides TNMP's customers the right to
choose their electricity provider after a three-year transition period. The plan
freezes rates (including the recovery of purchased power) during the transition
period, and allows for customer aggregation based on market forces. As of
December 31, 1998, TNMP had reserved $3.4 million for its potential stranded
costs in New Mexico.
As a result of the New Mexico Community Choice plan, the power supply
portion of TNMP's New Mexico operations no longer qualifies for the application
of SFAS 71. Accordingly, in 1997, TNMP discontinued regulatory accounting
principles for the New Mexico power supply operations. The discontinuation of
SFAS 71 had no effect on TNMP's financial statements in the period of adoption.
The transmission and distribution operations in New Mexico will continue to
follow SFAS 71.
Fuel Reconciliation
TNMP's fixed fuel factor in Texas remains constant until changed as part of
a general rate case or fuel reconciliation, or until the PUCT orders a
reconciliation for any over or under collections of fuel costs. TNMP filed a
reconciliation of fuel costs in June 1997, for the period of October 1993
through December 1996. In January 1998, TNMP reached a stipulated agreement with
the staff of the PUCT and several other interested parties. The agreement, which
was approved by the PUCT on April 21, 1998, specified that all fuel costs
incurred during the reconciliation period were reasonable and necessary. Also,
the agreement did not propose a change to the fixed fuel factor.
Note 3. Discontinued Nonregulated Operations
Management, with approval from the Board of Directors, authorized a plan to
discontinue the construction activities of FWI in late 1997. During the third
quarter of 1998, TNP elected to discontinue all remaining operations of FWI.
The pre-tax loss on discontinued operations recognized in 1998 was $19.6
million ($12.7 million, net of taxes, or $0.96 per share). The 1998 pre-tax loss
resulted from construction delays, a shortage of skilled labor, and job site
performance problems. Due to these reasons, there are a few jobs not completed
at December 31, 1998. TNP expects the jobs to be completed during 1999.
The pre-tax loss on discontinued operations recognized in 1997 was $19.8
million ($12.9 million, net of taxes, or $0.98 per share). All losses incurred
by FWI, both construction and service, incurred in 1997 have been reclassified
as losses from discontinued operations.
<PAGE>
Note 4. Employee Benefit Plans
Pension and Postretirement Benefits Plan
TNMP has a defined benefit pension plan covering substantially all of its
employees. Benefits are based on an employee's years of service and
compensation. TNMP's funding policy is to contribute the minimum amount required
by federal funding standards. TNMP also sponsors a health care plan that
provides postretirement medical and death benefits to retirees who satisfied
minimum age and service requirements during employment.
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------- -----------------------
1998 1997 1998 1997
--------- --------- ---------- ----------
(In thousands)
Change in projected benefit obligation:
<S> <C> <C> <C> <C>
Benefit obligation at beginning of year $ 76,316 $ 66,406 $ 10,651 $ 16,805
Service cost 1,439 1,371 309 467
Interest cost 5,055 5,074 736 1,253
Participant contributions - - 183 92
Plan amendments (873) - - (8,000)
Actuarial (gain) or loss, including changes
in discount rate 1,366 8,273 442 1,436
Benefits paid (6,908) (4,808) (1,446) (1,402)
--------- ---------- ----------- -----------
Benefit obligation at end of year $ 76,395 $ 76,316 $ 10,875 $ 10,651
======== ========= ========== ==========
</TABLE>
TNMP amended its pension and postretirement benefit plans effective October
1, 1997. The amendments were recognized at January 1, 1998, for the pension
plan, and at October 1, 1997, for the postretirement benefit plan.
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------- -----------------------
1998 1997 1998 1997
-------- --------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Change in plan assets:
Fair value of plan assets at beginning of year $ 95,751 $ 82,771 $ 8,274 $ 6,975
Actual return on plan assets, net of expenses 8,871 17,788 1,105 861
Employer contributions - - 1,597 1,624
Participant contributions - - 183 92
Benefits paid (6,908) (4,808) (1,223) (1,278)
-------- --------- ---------- ----------
Fair value of plan assets at end of year $ 97,714 $ 95,751 $ 9,936 $ 8,274
======== ========= ========== ==========
Reconciliation of funded status:
Funded status $ 21,319 $ 19,435 $ (938) $ (2,377)
Unrecognized actuarial gain (25,620) (24,779) (6,216) (6,168)
Unrecognized transition (asset) or obligation (35) (59) 4,540 12,864
Unrecognized prior service cost (2,152) (1,434) - (8,000)
--------- ---------- ----------- -----------
Prepaid (accrued) benefit cost $ (6,488) $ (6,837) $ (2,614) $ (3,681)
======== ========= ========== ==========
Components of net periodic benefit cost:
Service cost $ 1,439 $ 1,371 $ 309 $ 468
Interest cost 5,055 5,074 736 1,253
Expected return on plan assets (6,664) (6,219) (484) (434)
Amortization of prior service cost (156) (154) - -
Amortization of transitional (asset) or obligation (24) (24) 325 857
Recognized actuarial gain - - (326) (405)
--------- ---------- ----------- -----------
Net periodic benefit cost $ (350) $ 48 $ 560 $ 1,739
======== ========= ========== ==========
Weighted-average assumptions as of December 31:
Discount rate 6.75% 7.00% 6.75% 7.00%
Expected long-term rate of return on plan assets 9.50% 9.50% 5.25% 5.25%
Average rate of compensation increase 4.00% 4.00% N/A N/A
</TABLE>
<PAGE>
The assumed health care cost trend rate used to measure the expected cost
of benefits was 5.3% for 1998 and is assumed to trend downward slightly each
year to 4.3% for 2003 and thereafter. Assumed health care cost trend rates could
have a significant effect on the amounts reported for the health care plans. A
one-percentage-point change in assumed health care cost trend rates would have
the following effects (in thousands):
<TABLE>
One-Percentage-Point One-Percentage-Point
Increase Decrease
-------------------- --------------------
<S> <C> <C>
Effect on total of service and interest cost
components for 1998 $ 3 $ (4)
Effect on year-end 1998 postretirement
benefit obligation 48 (61)
</TABLE>
Incentive Plans
TNP and TNMP have several incentive compensation plans. All employees
participate in one or more of these plans. Incentive compensation is based on
meeting key financial and operational performance goals such as cash value added
or earnings per share, operations and maintenance costs per KWH, and system
reliability measures. Operating expenses for 1998, 1997, and 1996 included costs
for the various cash and equity plans of $5.9 million, $6.0 million, and $4.8
million, respectively.
Other Employee Benefits
TNMP has a 401(k) plan designed to enhance the other retirement plans
available to its employees. Employees may invest their contributions in fixed
income securities, mutual funds, or TNP common stock. TNMP's contributions are
used to purchase TNP common stock, which employees may later convert to other
investment options.
TNMP has employment contracts with certain members of management and other
key personnel. The contracts provide for lump sum compensation payments and
other rights in the event of termination of employment or other adverse
treatment of such persons following a "change in control" of TNP or TNMP. Such
event is defined to include, among other things, substantial changes in the
corporate structure, ownership, or board of directors of either entity.
An excess benefit plan has been provided for certain key personnel and
retired employees. The payment of benefits under the excess benefit plan is
partially provided under an insurance policy arrangement for paying the benefits
that generally would have been provided by the pension and thrift plans except
for federal limitations.
Note 5. Income Taxes
Components of income taxes were as follows:
<TABLE>
<CAPTION>
TNP TNMP
---------------------------------- ------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(In thousands)
Taxes on net operating income:
<S> <C> <C> <C> <C> <C> <C>
Federal - current $ 9,751 $ 12,251 $ 10,240 $ 6,299 $ 9,140 $ 8,596
State - current 164 428 86 197 428 86
Federal - deferred 3,962 6,747 49 8,872 9,963 1,381
ITC adjustments 1,603 1,816 - 1,495 2,531 270
-------- ---------- ---------- --------- ---------- ----------
15,480 21,242 10,375 16,863 22,062 10,333
-------- ---------- ---------- --------- ---------- ----------
Taxes on other income (loss):
Federal - current (313) (534) (100) (313) (534) (100)
Federal - deferred 760 687 (241) 687 687 (241)
ITC adjustments (322) (410) (381) (322) (410) (381)
-------- ---------- ---------- --------- ---------- ----------
125 (257) (722) 52 (257) (722)
-------- ---------- ---------- --------- ---------- ----------
Tax benefit from discontinued
nonregulated operations (Note 3) (6,843) (6,660) (1,658) - - -
-------- ---------- ---------- --------- ---------- ----------
Total income taxes $ 8,762 $ 14,325 $ 7,995 $ 16,915 $ 21,805 $ 9,611
======== ========== ========== ========= ========== ==========
</TABLE>
The amounts for total income taxes differ from the amounts computed by
applying the appropriate federal income tax rate to earnings (loss) before
income taxes for the following reasons:
<TABLE>
<CAPTION>
TNP TNMP
--------------------------------- ---------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory tax rate $ 9,796 $ 15,252 $ 10,850 $ 17,864 $ 22,854 $ 12,735
Amortization of
accumulated deferred ITC (1,525) (1,403) (1,323) (1,525) (1,403) (1,323)
Amortization of
excess deferred taxes (141) (141) (143) (141) (141) (143)
State income taxes 197 428 86 197 428 86
ITC related to 1995
PUCT disallowance (322) (410) (191) (322) (410) (191)
ITC adjustment - - (760) - - -
Other, net 757 599 (524) 842 477 (1,553)
-------- -------- --------- -------- -------- --------
Actual income taxes $ 8,762 $ 14,325 $ 7,995 $ 16,915 $ 21,805 $ 9,611
======== ======== ========= ======== ======== ========
</TABLE>
The tax effects of temporary differences that gave rise to significant
portions of net current and net noncurrent deferred income taxes as of December
31, 1998, and 1997, are presented below.
<TABLE>
<CAPTION>
TNP TNMP
-------------------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands)
Current deferred income taxes:
<S> <C> <C> <C> <C>
Deferred tax assets:
Unbilled revenues $ 91 $ 2,905 $ 91 $ 2,905
Other 2,999 - 115
----------- ----------- --------- -----------
3,090 2,905 206 2,905
Deferred tax liability:
Deferred purchased power and fuel costs (855) (1,198) (855) (1,198)
----------- ----------- ----------- -----------
Current deferred income taxes, net $ 2,235 $ 1,707 $ (649) $ 1,707
=========== =========== =========== ===========
Noncurrent deferred income taxes:
Deferred tax assets:
Minimum tax credit carryforwards $ 30,241 $ 27,414 $ 34,437 $ 34,377
ITC carryforwards 5,018 6,608 3,206 6,472
Regulatory related items 12,731 17,135 12,731 17,135
Accrued employee benefit costs 3,330 3,195 3,330 3,195
Other (890) 3,449 694 787
----------- ----------- ----------- -----------
50,430 57,801 54,398 61,966
----------- ----------- ----------- -----------
Deferred tax liabilities:
Utility plant, principally due to
depreciation and basis differences (135,870) (128,913) (135,870) (128,913)
Deferred charges (4,611) (6,101) (4,611) (6,101)
Regulatory related items (7,295) (8,037) (7,295) (8,037)
----------- ----------- ----------- -----------
(147,776) (143,051) (147,776) (143,051)
----------- ----------- ----------- -----------
Noncurrent deferred income taxes, net $ (97,346) $ (85,250) $ (93,378) $ (81,085)
=========== =========== =========== ===========
</TABLE>
Federal tax carryforwards as of December 31, 1998, were as follows:
<TABLE>
<CAPTION>
TNP TNMP
--- ----
(In thousands)
Minimum tax credits
<S> <C> <C>
Amount $ 30,241 $ 34,437
Expiration period None None
Investment tax credit
Amount $ 5,018 $ 3,206
Expiration period 2005 2005
</TABLE>
<PAGE>
Note 6. Long-Term Debt
First Mortgage Bonds
FMBs issued under the Bond Indenture are secured by substantially all
utility plant owned directly by TNMP. The Bond Indenture restricts cash dividend
payments on TNMP common stock as discussed in Note 7.
The maximum amount of any additional FMBs that TNMP can issue is determined
by both a collateral requirement and by an interest coverage requirement. The
collateral requirement is a function of property additions, previuosly redeemed
FMBs, and cash deposited with the trustee. As of December 31, 1998, the
collateral requirement was more restrictive than the interest coverage
requirement, and TNMP could therefore issue up to $267 million of additional
FMBs. After the issuance of $175 million of FMBs in January 1999 to secure the
Senior Notes, TNMP could issue an additional $92 million of FMBs.
Secured Debentures
TNMP's Series A, 10.75% secured debentures ($140 million) are secured with
a first lien on a portion of Unit 1, and by second liens on substantially all
utility plant in Texas owned directly by TNMP. The secured debentures also
contain restrictions on dividends and asset dispositions. TNMP's 12.5% secured
debentures ($130 million) were retired at maturity in January 1999.
Senior Notes
In January 1999, TNMP issued $175 million of 6.25% Senior Notes due in 2009
and used the proceeds to retire its 12.5% secured debentures and reduce
outstanding borrowings under the credit facilities. The Senior Notes were issued
under a new indenture that allows the issuance of unsecured debt. The new notes
are initially secured by FMBs. However, when TNMP repays its existing FMBs and
secured debentures, the collateral securing the Senior Notes will be released,
and they will become unsecured, but will remain the senior debt obligations of
TNMP.
Revolving Credit Facilities
The following table summarizes the terms of TNP's and TNMP's revolving
credit facilities at December 31,1998:
<TABLE>
<CAPTION>
Total Amount Commitment 1998 Average
Commitment Outstanding Expires Interest Rate Security
(in thousands)
<S> <C> <C> <C> <C> <C>
1998 TNP Facility $ 50,000 $ 9,000 November 2003 5.62% Unsecured
1995 TNMP Facility 100,000 - November 2000 7.45% Unsecured
1996 TNMP Facility 80,000 80,000 September 2001 6.96% Unsecured
Interim TNMP Facility 35,000 - April 1999 N/A Unsecured
</TABLE>
The composite average borrowing rates under TNMP's credit facilities were
6.99% and 7.15% for 1998 and 1997, respectively. The interest rate margins on
the 1996 and 1995 facilities have decreased by 0.50% since the ratings on TNMP's
FMBs have been upgraded by the rating agencies.
TNMP has a $50 million interest rate collar to mitigate exposure to
variable interest rates. The collar sets floor and ceiling rates on the 90-day
LIBOR rate at 5.25% and 7.50%, respectively. The term of the interest rate
collar is September 1997 through September 2000. TNMP also has a $100 million
interest rate collar to mitigate the risk of refinancing the Series A, 10.75%
Secured Debentures and the 9.25% FMBs. The collar sets floor and ceiling rates
on the 10-year U. S. Treasury bond at 4.91% and 6.25%, respectively. The collar
expires, and is exercisable only on, September 15, 2000.
TNMP has sufficient liquidity to satisfy the possibility of any known
contingencies. Management believes cash flow from operations, the new debt
described above, and periodic borrowings under its two credit facilities should
be sufficient to meet working capital requirements and planned capital
expenditures at least through 1999.
Under specified conditions, TNMP's credit facilities restrict the payment
of cash dividends on TNMP common stock. The credit facilities also prohibit the
sale, lease, transfer, or other disposition of assets other than in the ordinary
course of business.
Maturities
As of December 31, 1998, FMB and secured debenture maturities and sinking
fund requirements for the five years following 1998 are as follows:
<PAGE>
<TABLE>
<CAPTION>
Credit Secured
Year FMBs Facilities Debentures Total
---- ---- ---------- ---------- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
1999 $ - $ - $ - $ -
2000 100,000 - - 100,000
2001 - 80,000 - 80,000
2002 - - - -
2003 - 9,000 140,000 149,000
</TABLE>
In January 1999, TNMP retired upon their maturity, $130 million of 12.5%
secured debentures, and issued $175 million of 6.25% Senior Notes due in 2009.
TNMP's Series A, 10.75% Secured Debentures of $140 million are callable at par
on September 15, 2000.
Note 7. Capital Stock and Dividends
TNP
In November 1998, TNP increased its quarterly dividend from $0.27 to $0.29
per share.
In October 1996, TNP issued 2 million shares of common stock in a public
offering, with net proceeds of approximately $47,170,000. The net proceeds were
transferred to TNMP as an equity contribution and used to retire debt.
TNMP
The 1995 and 1996 TNMP Credit Facilities restrict the payment of cash
dividends by TNMP. As of December 31, 1998, $14.7 million of unrestricted
retained earnings were available for dividends.
Note 8. Segment and Related Information
During 1998, TNP adopted FASB Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information". TNP has two reportable
segments. The primary segment is TNMP, which provides regulated electric service
in Texas and New Mexico. The other reportable segment is FWI, which before
operations were discontinued, provided integrated mechanical, electrical,
plumbing and other maintenance and repair services to commercial customers in
Texas metropolitan areas. TNP manages the segments separately to respond to the
unique distinctions between regulated and unregulated businesses.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Intersegment revenues are not
material.
The following tables present information about profits, losses and assets
of TNP's reportable segments (in thousands):
<TABLE>
<CAPTION>
1998
-----
TNMP FWI All Other Eliminations Consolidated
---- --- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 586,445 $ - $ 48 $ - $ 586,493
Depreciation and amortization 42,161 - 2 - 42,163
Income taxes 16,863 - (1,383) - 15,480
Interest revenue 944 - 391 - 1,335
Total interest charges 53,727 - 158 - 53,885
Income (loss) from continuing operations 34,321 - (2,187) - 32,134
Loss from discontinued nonregulated
operations - 12,710 - - 12,710
Net income (loss) 34,321 (12,710) (2,187) - 19,424
Total assets 973,566 10,081 10,344 (226) 993,765
Property additions 37,506 - 1,048 - 38,554
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1997
---- TNMP FWI All Other Eliminations Consolidated
---- --- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 580,693 $ - $ - $ - $ 580,693
Depreciation and amortization 40,169 - 2 - 40,171
Income taxes 22,062 - (820) - 21,242
Interest revenue 1,497 - 326 - 1,823
Total interest charges 56,912 - - - 56,912
Income (loss) from continuing operations 43,918 - (1,357) - 42,561
Loss from discontinued nonregulated
operations - 12,883 - - 12,883
Net income (loss) 43,918 (12,883) (1,357) - 29,678
Total assets 967,006 10,239 11,748 2,933 991,926
Property additions 27,942 - 2,067 - 30,009
</TABLE>
<TABLE>
<CAPTION>
1996
---- TNMP FWI All Other Eliminations Consolidated
---- --- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 502,737 $ - $ - $ - $ 502,737
Depreciation and amortization 39,488 - 2 - 39,490
Income taxes 10,333 - 42 - 10,375
Interest revenue 1,250 - 326 - 1,576
Total interest charges 69,363 - - - 69,363
Income (loss) from continuing operations 26,862 - (712) - 26,150
Loss from discontinued nonregulated
operations - 3,097 - - 3,097
Net income (loss) 26,862 (3,097) (712) - 23,053
Total assets 1,002,157 2,361 7,836 (5,570) 1,006,784
Property additions 28,006 - 2,771 - 30,777
</TABLE>
Note 9. Commitments and Contingencies
Fuel Supply Agreement
TNMP has an agreement with the Walnut Creek Mining Company to purchase
lignite for TNP One through at least 2017. Depending on the output of TNP one,
the contract could supply the plant for several years beyond 2017. Phillips Coal
Company and Peter Kiewit Sons' jointly own Walnut Creek Mining Company, Inc.
Wholesale Purchased Power Agreements
TNMP purchases approximately 80% of its electricity requirements from
various wholesale suppliers. These contracts are scheduled to expire in various
years through 2005.
In 1998, TU was TNMP's largest wholesaler of electricity. In 1998, TU
supplied approximately 32% of TNMP's Texas capacity and 23% of its Texas energy
requirements. During 1995, pursuant to terms of the contract, TNMP notified TU
of its intent to cease purchasing electricity at 19 of the 20 points of delivery
served by TU, effective January 1, 1999. The nineteen points of delivery account
for approximately 70% of the electricity delivered to TNMP from TU. At that
time, the TU Agreement required TNMP to continue purchasing electricity at the
remaining point of delivery through May of 2010. In late 1997, TNMP and TU
modified the agreement to change the termination date of the contract from May
2010 to June 2002. Therefore, TNMP currently has no obligation to purchase
electricity from TU beyond June 2002.
At December 31, 1998, TNMP had various outstanding commitments for take or
pay agreements, including the fuel supply agreement discussed above. Detailed
below are the fixed and determinable portion of the obligations (amounts in
millions):
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Purchased power agreements $ 74.3 $ 53.3 $ 58.9 $ 26.9 $ 17.3
Fuel supply agreements 32.0 32.8 33.6 34.4 35.3
------- -------- -------- ------- -------
Total $ 106.3 $ 86.1 $ 92.5 $ 61.3 $ 52.6
======= ======== ======== ======= =======
</TABLE>
Significant Customer
A significant industrial customer in Texas left TNMP's system in February
1998 and replaced the power previously provided by TNMP with power from a
cogeneration plant built by a third party wholesale power producer. This
customer provided sales of 629 GWH and annual revenues of $28.3 million in 1997
($10.1 million in base revenues). Purchases by this customer in 1998 were 74
GWH, providing total revenues of $3.1 million and base revenues of $0.9 million.
Legal Actions
TNMP and Clear Lake Limited Partnership ("Clear Lake") agreed in March 1999
to settle the lawsuit styled Clear Lake Cogeneration Limited Partnership vs.
Texas-New Mexico Power Company, pending in the 234th District court of Harris
County, Texas, and the parallel proceeding pending before the PUCT. These
proceedings arose out of disagreements between TNMP and Clear Lake over the
interpretation of certain terms of an agreement under which TNMP purchases
cogenerated electricity from Clear Lake. The settlement, which must be approved
by the PUCT, resolves all outstanding issues raised in these proceedings.
Under the settlement, TNMP, Clear Lake and Calpine Power Services Company
(an affiliate of Clear Lake) have entered into a revised purchased power
contract, effective as of October 1, 1998, governing energy and capacity
transactions between the parties. The key elements of the revised contract are:
- The capacity rate under which TNMP will purchase capacity from Clear
Lake is significantly reduced. The energy rate is virtually
unchanged.
- Clear Lake will be able to provide 250 MW of capacity from multiple
sources. Except for power plants named in the agreement, TNMP retains
certain rights of prior approval as to other sources of power and
energy.
- TNMP will pay for the cost of transmitting power from the existing
Clear Lake power plant to TNMP's load centers in the Gulf Coast Region
pursuant to new PUCT rules. Clear Lake will reimburse TNMP for any
excess transmission costs that TNMP would incur as a result of
delivery from points other than the Clear Lake Plant.
- Clear Lake will no longer pay for nor receive standby power, but will
generally guarantee 100% availability of capacity and energy. Clear
Lake may request that TNMP obtain or generate replacement power at a
negotiated fixed cost under certain limited conditions.
- Future disputes shall be resolved through consultation and
arbitration.
The settlement also provides that TNMP will pay Clear Lake $8 million when
the PUCT has approved the overall settlement and revised purchased power
contract. The settlement calls for regulatory recovery by TNMP of all payments
to be made by TNMP for power and energy, as well as the $8 million settlement
payment. TNMP does not expect this settlement to have a material adverse impact
on its financial position or results of operations.
Phillips Petroleum. TNMP is the defendant in a suit styled Phillips
Petroleum Company vs. Texas-New Mexico Power Company. This lawsuit was filed on
October 1, 1997 and is pending in the 149th Judicial District Court of Brazoria
County, Texas. In this matter, Phillips Petroleum Company contends that it
sustained economic losses of approximately $36 million following a one and
one-half hour interruption in its electrical service on May 17, 1997. TNMP
claims that most, if not all of Phillips Petroleum alleged damages are barred by
limitations contained within our tariff approved by the PUCT. The lawsuit is in
the initial discovery stage. In regard to this matter, TNMP believes that it has
insurance coverage on most claims of Phillips Petroleum up to a total of $31
million, with a $500,000 self-retention.
TNMP is involved in various claims and other legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
dispositions of these matters will not have a material adverse effect on TNMP's
and TNP's consolidated financial position or results of operations.
<PAGE>
TNP ENTERPRISES, INC. AND SUBSIDIARIES
Selected Quarterly Consolidated Financial Data
<TABLE>
<CAPTION>
The following selected quarterly consolidated financial data for TNP is
unaudited, and, in the opinion of TNP's management, is a fair summary of the
results of operations for such periods:
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
(In thousands except per share amounts)
1998
<S> <C> <C> <C> <C>
Operating revenues........................................ $ 124,581 $ 143,111 $ 189,439 $ 129,362
Net operating income...................................... 18,491 19,101 33,119 14,153
Income from continuing operations......................... 5,130 5,832 20,890 282
Net income (loss)......................................... 4,626 (767) 18,561 (2,996)
Earnings per share of common stock from
continuing operations*................................. 0.39 0.44 1.58 0.02
Earnings (loss) per share of common stock................. 0.35 (0.06) 1.40 (0.23)
Dividends per share of common stock....................... $ 0.27 $ 0.27 $ 0.27 $ 0.29
Weighted average common shares outstanding................ 13,188 13,240 13,263 13,283
1997
Operating revenues........................................ $ 126,222 $ 132,361 $ 187,035 $ 135,075
Net operating income...................................... 19,430 23,023 37,510 17,810
Income from continuing operations......................... 5,120 8,847 23,741 4,853
Net income (loss)......................................... 4,110 7,431 20,694 (2,557)
Earnings per share of common stock from
continuing operations*................................. 0.39 0.68 1.81 0.37
Earnings (loss) per share of common stock *............... 0.31 0.56 1.58 (0.20)
Dividends per share of common stock....................... $ 0.245 $ 0.245 $ 0.245 $ 0.27
Weighted average common shares outstanding................ 13,025 13,069 13,092 13,128
</TABLE>
* The individual quarters do not add to the yearly totals since the per share
amounts are based upon the average number of shares outstanding during each
quarter.
Generally, the variations between quarters reflect the seasonal
fluctuations of TNMP's business. Provisions for losses related to discontinuing
operations at FWI's construction segment account for the decreases in operating
results reported in the fourth quarter of 1997, and the second and fourth
quarters of 1998. Discontinuing operations of FWI's service segment caused the
decreased operating results shown in the third quarter of 1998. Implementation
of the Texas Transition Plan also had a negative impact on operating results in
the second, third, fourth quarters of 1998.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors
The information required by this item is incorporated by reference to
"Election of Directors" and "Security Ownership of Management and Certain
Beneficial Owners" in the proxy statement relating to the 1999 Annual Meeting of
TNP Common Shareholders.
Executive Officers
The information set forth under "Employees and Executives" in Part I is
incorporated here by reference.
Item 11. EXECUTIVE COMPENSATION.*
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.*
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.*
* The information required by Items 11, 12, and 13 is incorporated by
reference to "Compensation of Executive Officers," "Election of Directors -
Direct Compensation," and "Security Ownership of Management and Certain
Beneficial Owners" in the proxy statement relating to the 1999 Annual
Meeting of TNP Common Shareholders.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following financial statements are filed as part of this report:
Page
Reports of Independent Public Accountants.................................... 20
Independent Auditors' Reports................................................ 22
TNP
Consolidated Statements of Income, Three Years Ended December 31, 1998....... 24
Consolidated Statements of Cash Flows, Three Years Ended December 31, 1998... 25
Consolidated Balance Sheets, December 31, 1998, and 1997..................... 26
Consolidated Statements of Capitalization, December 31, 1998, and 1997....... 27
Consolidated Statements of Common Shareholders' Equity, Three Years
Ended December 31, 1998.................................................... 28
TNMP
Consolidated Statements of Income, Three Years Ended December 31, 1998....... 29
Consolidated Statements of Cash Flows, Three Years Ended December 31, 1998... 30
Consolidated Balance Sheets, December 31, 1998, and 1997..................... 31
Consolidated Statements of Capitalization, December 31, 1998, and 1997....... 32
Consolidated Statements of Common Shareholder's Equity, Three Years
Ended December 31, 1998.................................................... 33
Notes to Consolidated Financial Statements................................... 34
Selected Quarterly Consolidated Financial Data - TNP......................... 46
(b) TNP and TNMP filed a Form 8-K relating to TNP's amended Shareholders' Rights
Plan on October 9, 1998.
(c) The Exhibit Index on pages 49 - 54 is incorporated here by reference.
(d) All financial statement schedules are omitted, as the required
information is not applicable or the information is presented in the
consolidated financial statements or related Notes.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrants have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized.
TNP ENTERPRISES, INC. AND TEXAS-NEW MEXICO POWER COMPANY
Date: March 19, 1999 By: /s/ Manjit S. Cheema
--------------------------------------
Manjit S. Cheema, Senior Vice President
& Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrants and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Title Date
----- ----
<S> <C> <C>
By /s/ Kevern R. Joyce Chairman, President, & Chief Executive Officer 3/19/99
------------------------- -------
Kevern R. Joyce
By /s/ Manjit S. Cheema Senior Vice President & Chief Financial Officer 3/19/99
------------------------- of TNMP and TNP -------
Manjit S. Cheema
By /s/ Michael J. Ricketts Controller of TNMP & TNP 3/19/99
------------------------- -------
Michael J. Ricketts
By /s/ R. Denny Alexander Director 3/19/99
------------------------- -------
R. Denny Alexander
By /s/ John A. Fanning Director 3/19/99
------------------------- -------
John A. Fanning
By /s/ Sidney M. Gutierrez Director 3/19/99
------------------------- -------
Sidney M. Gutierrez
By /s/ J. R. Holland, Jr. Director 3/19/99
------------------------- -------
J. R. Holland, Jr.
By /s/ Harris L. Kempner, Jr. Director 3/19/99
------------------------- -------
Harris L. Kempner, Jr.
By /s/ Dr. Carol D. Smith Surles Director 3/19/99
------------------------- -------
Dr. Carol D. Smith Surles
By /s/ Larry G. Wheeler Director 3/19/99
------------------------- -------
Larry G. Wheeler
By /s/ Dennis H. Withers Director 3/19/99
------------------------- -------
Dennis H. Withers
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibits filed with this report are denoted by "*."
Exhibit
No. Description
- ------- -------------
TNP incorporates the following exhibits by reference to the exhibits and filings
noted in parenthesis.
3(a) - Articles of Incorporation and Amendments through March 6, 1984 (Exhibit
3(a) to TNP 1984 Form S-14, File No. 2-89800).
3(b) - Amendment to Articles of Incorporation filed September 25, 1984
(Exhibit 3(b) to TNP 1984 Form 10-K, File No. 1-8847).
3(c) - Amendment to Articles of Incorporation filed August 29, 1985 (Exhibit
3(a) to TNP 1985 Form 10-K, File No. 1-8847).
3(d) - Amendment to Articles of Incorporation filed June 2, 1986 (Exhibit 3(a)
to TNP 1986 Form 10-K, File No. 1-8847).
3(e) - Amendment to Articles of Incorporation filed May 10, 1988 (Exhibit 3(e)
to TNP 1988 Form 10-K, File No. 1-8847).
3(f) - Amendment to Articles of Incorporation filed May 10, 1988 (Exhibit 3(f)
to TNP 1988 Form 10-K, File No. 1-8847).
3(g) - Amendment to Articles of Incorporation filed December 27, 1988 (Exhibit
3(g) to TNP 1988 Form 10-K, File No. 1-8847).
3(h) - Bylaws, as amended (Exhibit 3(h) to joint 1994 Form 10-K, File Nos.
1-8847 and 2-97230).
4(u) - Amended and Restated Rights Agreement between TNP Enterprises, Inc. and
Bank of New York, as Rights Agent, dated August 11, 1998and Form of Right
Certificate, effective August 11, 1998 (Exhibit 10 to TNP Form 8-K filed
October 9, 1998, File No. 1-8847).
*23 - Independent Public Accountants' Consent - Arthur Andersen LLP.
Independent Auditors' Consent - KPMG LLP.
*27 - Financial Data Schedule for TNP.
TNMP incorporates the following exhibits by reference to the exhibits and
filings noted in parenthesis.
3(i) - Restated Articles of Incorporation. (Exhibit 3(i) to TNMP 1996 10-K, File
No. 2-97230)
3(ii)- Bylaws, as amended November 15, 1994 (Exhibit 3(hh) to TNMP 1994 Form
10-K, File No. 2-97230).
*27 - Financial Data Schedule for TNMP.
TNP and TNMP incorporate the following exhibits by reference to the exhibits and
filings noted in parenthesis.
4(a) - Indenture of Mortgage and Deed of Trust dated as of November 1, 1944
(Exhibit 2(d) to Community Public Service Co. ("CPS") 1978 Form S-7,
File No. 2-61323).
4(b) - Seventh Supplemental Indenture dated as of May 1, 1963 (Exhibit 2(k) to
CPS Form S-7, File No. 2-61323).
4(c) - Eighth Supplemental Indenture dated as of July 1, 1963 (Exhibit 2(1), to
CPS Form S-7, File No. 2-61323).
4(d) - Ninth Supplemental Indenture dated as of August 1, 1965 (Exhibit 2(m), to
CPS Form S-7, File No. 2-61323).
4(e) - Tenth Supplemental Indenture dated as of May 1, 1966 (Exhibit 2(n), to
CPS Form S-7, File No. 2-61323).
4(f) - Eleventh Supplemental Indenture dated as of October 1, 1969 (Exhibit
2(o), to CPS Form S-7, File No. 2-61323).
4(g) - Twelfth Supplemental Indenture dated as of May 1, 1971 (Exhibit 2(p), to
CPS Form S-7, File No. 2-61323).
4(h) - Thirteenth Supplemental Indenture dated as of July 1, 1974 (Exhibit 2(q),
to CPS Form S-7, File No. 2-61323).
4(i) - Fourteenth Supplemental Indenture dated as of March 1, 1975 (Exhibit
2(r), to CPS Form S-7, File No. 2-61323).
4(j) - Fifteenth Supplemental Indenture dated as of September 1, 1976 (Exhibit
2(e), File No. 2-57034).
4(k) - Sixteenth Supplemental Indenture dated as of November 1, 1981 (Exhibit
4(x), File No. 2-74332).
4(l) - Seventeenth Supplemental Indenture dated as of December 1, 1982 (Exhibit
4(cc), File No. 2-80407).
4(m)- Eighteenth Supplemental Indenture dated as of September 1, 1983
(Exhibit (a) to Form 10-Q of TNMP for the quarter ended September 30,
1983, File No. 1-4756).
4(n)- Nineteenth Supplemental Indenture dated as of May 1, 1985 (Exhibit
4(v), File No. 2-97230).
4(o) - Twentieth Supplemental Indenture dated as of July 1, 1987 (Exhibit 4(o)
to Form 10-K of TNMP for the year ended December 31, 1987, File No.
2-97230).
4(p) - Twenty-First Supplemental Indenture dated as of July 1, 1989 (Exhibit
4(p) to Form 10-Q of TNMP for the quarter ended June 30, 1989, File No.
2-97230).
4(q)- Twenty-Second Supplemental Indenture dated as of January 15, 1992
(Exhibit 4(q) to Form 10-K of TNMP for the year ended December 31, 1991,
File No. 2-97230).
4(r)- Twenty-Third Supplemental Indenture dated as of September 15, 1993
(Exhibit 4(r) to Form 10-K of TNMP for the year ended December 31, 1993,
File No. 2-97230).
4(s)- Twenty-Fourth Supplemental Indenture dated as of November 3, 1995
(Exhibit 4(s) to Form 10-K of TNMP for the year ended December 31, 1993,
File No. 2-97230).
4(t)- Twenty-Fifth Supplemental Indenture dated as of September 10, 1996
(Exhibit 4(t) to Form 10-Q of TNMP for the quarter ended September 30,
1996, File No. 2-97230).
4(u)*- Twenty-Sixth Supplemental Indenture dated January 1, 1999.
4(v) - Indenture and Security Agreement for 10 3/4% Secured Debentures dated
as of September 15, 1993 (Exhibit 4(t) to TNMP 1993 Form 10-K, File No.
2-97230).
4(w)*- Indenture dated as of January 1, 1999 between TNMP and the Chase Bank
of Texas, N. A.
4(x)*- First Supplemental Indenture dated as of January 1, 1999 to Indenture
dated as of January 1, 1999 between TNMP and the Chase Bank of Texas, N.
A.
Contracts Relating to TNP One
10(a)- Fuel Supply Agreement, dated November 18, 1987, between Phillips Coal
Company and TNMP(Exhibit 10(j) to TNMP 1987 Form 10-K, File No. 2-97230).
10(a)1-Amendment No. 1, dated as of April 1, 1988, to Fuel Supply Agreement
dated November 18, 1987, between Phillips Coal Company and TNMP (Exhibit
10(a)1 to Joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).
10(a)2 - Amendment No. 2, dated as of November 29, 1994, between Walnut Creek
Mining Company and TNMP, to Fuel Supply Agreement dated November 18,
1987, between Phillips Coal Company and TNMP, (Exhibit 10(a)2 to joint
1994 Form 10-K, File Nos. 1-8847 and 2-97230).
10(b) - Unit 1 First Amended and Restated Project Loan and Credit Agreement,
dated as of January 8, 1992 (the "Unit 1 Credit Agreement"), among TNMP,
TGC, certain banks (the "Unit 1 Banks") and Chase Manhattan Bank
(National Association), as Agent for the Unit 1 Banks (the "Unit 1
Agent"), (Exhibit 10(c) to TNMP 1991 Form 10-K, File No. 2-97230).
10(b)1 - Participation Agreement, dated as of January 8, 1992, among certain
banks, Participants, and the Unit 1 Agent (Exhibit 10(c)1 to TNMP 1991
Form 10-K, File No. 2-97230).
10(b)2 - Amendment No. 1, dated as of September 21, 1993, to the Unit 1 Credit
Agreement (Exhibit 10(b)2 to TNMP 1993 Form 10-K , File No. 2-97230).
10(c) - Assignment and Security Agreement, dated as of January 8, 1992, among
TGC and the Unit 1 Agent (Exhibit 10(d) to TNMP 1991 Form 10-K, File No.
2-97230).
10(d) - Amended and Restated Subordination Agreement, dated as of October 1,
1988, among TNMP, Continental Illinois National Bank and Trust Company of
Chicago and the Unit 1 Agent (Exhibit 10(uu) to TNMP 1988 Form 10-K, File
No. 2-97230).
10(e) - Unit 1 Mortgage and Deed of Trust, dated as of December 1, 1987,
(Exhibit 10(ee) to TNMP 1987 Form 10-K, File No. 2-97230).
10(e)1 - Supplemental Unit 1 Mortgage and Deed of Trust executed on January 27,
1992, (Exhibit 10(g)4 to TNMP 1991 Form 10-K , File No. 2-97230).
10(e)2 - First TGC Modification and Extension Agreement, dated as of January 24,
1992, among the Unit 1 Banks, the Unit 1 Agent, TNMP, and TGC (Exhibit
10(g)1 to TNMP 1991 Form 10-K, File No. 2-97230).
10(e)3 - Second TGC Modification and Extension Agreement, dated as of January
27, 1992, among the Unit 1 Banks, the Unit 1 Agent, TNMP, and TGC
(Exhibit 10(g)2 to TNMP 1991 Form 10-K, File No. 2-97230).
10(e)4 - Third TGC Modification and Extension Agreement, dated as of January 27,
1992, among the Unit 1 Banks, the Unit 1 Agent, TNMP, and TGC (Exhibit
10(g)3 to TNMP 1991 Form 10-K, File No. 2-97230).
10(e)5 - Fourth TGC Modification and Extension Agreement, dated as of September
29, 1993, among the Unit 1 Banks, the Unit 1 Agent, TNMP, and TGC
(Exhibit 10(f)5 to TNMP 1993 Form 10-K, File No. 2-97230).
10(e)6 - Fifth TGC Modification and Extension Agreement, dated as of September
29, 1993, among the Unit 1 Banks, the Unit 1 Agent, TNMP, and TGC
(Exhibit 10(f)6 to TNMP 1993 Form 10-K, File No. 2-97230).
10(f) - Indemnity Agreement dated December 1, 1987, by Westinghouse, CE and
Zachry, (Exhibit 10(ff) to TNMP 1987 Form 10-K, File No. 2-97230).
10(g) - Unit 1 Second Lien Mortgage and Deed of Trust dated as of December 1,
1987, (Exhibit 10(jj) to TNMP 1987 Form 10-K, File No. 2-97230).
10(g)1 - Correction Second Lien Mortgage and Deed of Trust, dated as of December
1, 1987, (Exhibit 10(vv) to TNMP 1988 Form 10-K, File No. 2-97230).
10(g)2 - Second Lien Mortgage and Deed of Trust Modification, Extension and
Amendment Agreement, dated as of January 8, 1992 (Exhibit 10(i)2 to TNMP
1991 Form 10-K, File No. 2-97230).
10(g)3 - TNMP Second Lien Mortgage Modification No. 2, dated as of September 21,
1993 (Exhibit 10(h)3 to TNMP 1993 Form 10-K, File No. 2-97230).
10(h) - Agreement for Conveyance and Partial Release of Liens, dated as of
December 1, 1987, by PFC and the Unit 1 Agent (Exhibit 10(kk) to TNMP
1987 Form 10-K, File No. 2-97230).
10(i) - Inducement and Consent Agreement, dated as of June 15, 1988, among
Phillips Coal Company, Kiewit Texas Mining Company, TNMP, Phillips
Petroleum Company, and Peter Kiewit Son's, Inc. (Exhibit 10(nn) to TNMP
1988 Form 10-K, File No. 2-97230).
10(j) - Assumption Agreement, dated as of October 1, 1988, by TGC, in favor of
certain banks, the Unit 1 Agent, and the Depositary, as defined therein
(Exhibit 10(ww) to TNMP 1988 Form 10-K, File No. 2-97230).
10(k) - Guaranty, dated as of October 1, 1988, by TNMP of TGC obligations under
Unit 1 Credit Agreement (Exhibit 10(xx) to TNMP 1988 Form 10-K of TNMP,
File No. 2-97230).
10(l) - First Amended and Restated Facility Purchase Agreement dated as of
January 8, 1992, between TNMP and TGC (Exhibit 10(n) to TNMP 1991 Form
10-K, 1991, File No. 2-97230).
10(m) - Operating Agreement, dated as of October 1, 1988, between TNMP and TGC
(Exhibit 10(zz) to TNMP 1988 Form 10-K, File No. 2-97230).
10(n) - Unit 2 First Amended and Restated Project Loan and Credit Agreement,
dated as of January 8, 1992 (the "Unit 2 Credit Agreement"), among TNMP,
TGC II, certain banks (the "Unit 2 Banks") and The Chase Manhattan Bank
(National Association), as Agent for the Unit 2 Banks (the "Unit 2
Agent") (Exhibit 10(q) to TNMP 1991 Form 10-K, File No. 2-97230).
10(n)1 - Amendment No. 1, dated as of September 21, 1993, to the Unit 2 Credit
Agreement (Exhibit 10(o)1 to TNMP 1993 Form 10-K, File No. 2-97230).
10(o) - Assignment and Security Agreement, dated as of January 8, 1992, among
TGC II and the Unit 2 Agent (Exhibit 10(r) to TNMP 1991 Form 10-K, File
No. 2-97230).
10(p) - Assignment and Security Agreement dated as of October 1, 1988, by TNMP
to the Unit 2 Agent (Exhibit 10(jjj) to TNMP 1988 Form 10-K, File No.
2-97230).
10(q) - Subordination Agreement, dated as of October 1, 1988, among TNMP,
Continental Illinois National Bank and Trust Company of Chicago, and the
Unit 2 Agent (Exhibit 10(mmm) to TNMP 1988 Form 10-K, File No. 2-97230).
10(r) - Unit 2 Mortgage and Deed of Trust dated as of October 1, 1988 (Exhibit
10(uuu) to TNMP 1988 Form 10-K, File No. 2-97230).
10(r)1 - First TGC II Modification and Extension Agreement, dated as of January
24, 1992, among the Unit 2 Banks, the Unit 2 Agent, TNMP, and TGC II
(Exhibit 10(u)1 to TNMP 1991 Form 10-K, File No. 2-97230).
10(r)2 - Second TGC II Modification and Extension Agreement, dated as of January
27, 1992, among the Unit 2 Banks, the Unit 2 Agent, TNMP and TGC II
(Exhibit 10(u)2 to TNMP 1991 Form 10-K, File No. 2-97230).
10(r)3 - Third TGC II Modification and Extension Agreement, dated as of January
27, 1992, among the Unit 2 Banks, the Unit 2 Agent, TNMP, and TGC II
(Exhibit 10(u)3 to TNMP 1991 Form 10-K, File No. 2-97230).
10(r)4 - Fourth TGC II Modification and Extension Agreement, dated as of
September 29, 1993, among the Unit 2 Banks, the Unit 2 Agent, TNMP, and
TGC II (Exhibit 10(s)4 to TNMP 1993 Form 10-K, File No. 2-97230).
10(r)5 - Fifth TGC II Modification and Extension Agreement, dated as of June 15,
1994, among the Unit 2 Banks, the Unit 2 Agent, TNMP, and TGC II (Exhibit
10(s)5 to TNMP Form 10-Q for quarter ended June 30, 1994, File No.
2-97230).
10(s) - Release and Waiver of Liens and Indemnity Agreement, dated October 1,
1988, by Westinghouse, CE, and Zachry (Exhibit 10(vvv) to TNMP 1988 Form
10-K, File No. 2-97230).
10(t) - Second Lien Mortgage and Deed of Trust, dated as of October 1, 1988,
(Exhibit 10(www) to TNMP 1988 Form 10-K, File No. 2-97230).
10(t)1 - Second Lien Mortgage and Deed of Trust Modification, Extension and
Amendment Agreement, dated as of January 8, 1992, (Exhibit 10(w)1 to TNMP
1991 Form 10-K, File No. 2-97230).
10(t)2 - TNMP Second Lien Mortgage Modification No. 2, dated as of September 21,
1993, (Exhibit 10(u)2 to TNMP 1993 Form 10-K, File No. 2-97230).
10(u) - Intercreditor and Nondisturbance Agreement, dated as of October 1,
1988, among PFC, Texas PFC, Inc., TNMP, certain creditors, as defined
therein, and the Collateral Agent, as defined therein (Exhibit 10(xxx) to
TNMP 1988 Form 10-K, File No. 2-97230).
10(u)1 - Amendment No. 1, dated as of January 8, 1992, to Intercreditor and
Nondisturbance Agreement, (Exhibit 10(x)1 to TNMP 1991 Form 10-K, File
No. 2-97230).
10(u)2 - Amendment No. 2, dated as of September 21, 1993, to Intercreditor and
Nondisturbance Agreement, (Exhibit 10(v)2 to TNMP 1993 Form 10-K of TNMP,
File No. 2-97230).
10(v) - Grant of Reciprocal Easements and Declaration of Covenants Running with
the Land, dated October 1, 1988, between PFC and Texas PFC, Inc. (Exhibit
10(yyy) to TNMP 1988 Form 10-K, File No. 2-97230).
10(w) - Non-Partition Agreement, dated as of May 30, 1990, among TNMP, TGC, and
the Unit 1 Agent (Exhibit 10(ss) to TNMP 1990 Form 10-K of TNMP, File No.
2-97230).
10(x) - Assumption Agreement, dated as of May 31, 1991, by TGC II in favor of
certain banks, the Unit 2 Agent, and the Depositary, as defined therein
(Exhibit 10(kkk) to Amendment No. 1 to File No. 33-41903).
10(y) - Guaranty, dated as of May 31, 1991, by TNMP, for TGC II obligations
under the Unit 2 Credit Agreement (Exhibit 10(lll) to Amendment No. 1 to
File No. 33-41903).
10(z) - First Amended and Restated Facility Purchase Agreement dated as of
January 8, 1992, between TNMP, and TGC II (Exhibit 10(dd) to TNMP 1991
Form 10-K, File No. 2-97230).
10(z)1 - Amendment No. 1 to the Unit 2 First Amended and Restated Facility
Purchase Agreement, dated as of September 21, 1993, between TNMP and TGC
II (Exhibit 10(aa)1 to TNMP 1993 Form 10-K, File No. 2-97230).
10(aa) - Operating Agreement, dated as of May 31, 1991, between TNMP and TGC II
(Exhibit 10(nnn) to Amendment No. 1 to File No. 33-41903).
10(bb) - Non-Partition Agreement, dated as of May 31, 1991, among TNMP, TGC II,
and the Unit 2 Agent (Exhibit 10(ppp) to Amendment No. 1 to File No.
33-41903).
10(cc) - Revolving Credit Facility Agreement, dated as of November 3, 1995,
among TNMP, certain lenders, and Chemical Bank, as Administrative Agent
and Collateral Agent. (Exhibit 10(cc) to Form 10-K of TNP and TNMP for
1996, File Nos. 1-8847 and 2-97230).
10(cc)1- Form of Guarantee and Pledge Agreement, dated as of November 3, 1995,
between TGC II, and Chemical Bank, as collateral agent (Exhibit D to
Revolving Credit Facility Agreement). (Exhibit 10(cc)1 to Form 10-K of
TNP and TNMP for 1996, File Nos. 1-8847 and 2-97230).
10(cc)2- Form of Bond Agreement, dated as of November 3, 1995, between TNMP and
Chemical Bank, as Collateral Agent (Exhibit E to Revolving Credit
Facility Agreement). (Exhibit 10(cc)2 to Form 10-K of TNP and TNMP for
1996, File Nos. 1-8847 and 2-97230).
10(cc)3- Form of Note Pledge Agreement, dated as of November 3, 1995, between
TNMP and Chemical Bank, as collateral agent (Exhibit F to Revolving
Credit Facility Agreement). (Exhibit 10(cc)3 to Form 10-K of TNP and TNMP
for 1996, File Nos. 1-8847 and 2-97230).
10(cc)4- Form of Sixth TGC II Modification and Extension Agreement, dated as of
November 3, 1995, among the Unit 2 Banks, The Chase Manhattan Bank, as
agent, TNMP, and TGC II (Exhibit H to the Revolving Credit Facility
Agreement). (Exhibit 10(cc)4 to Form 10-K of TNP and TNMP for 1996, File
Nos. 1-8847 and 2-97230).
10(cc)5- Form of Second Lien Mortgage and Deed of Trust Modification, Extension
and Amendment Agreement No. 3, dated as of November 3, 1995 (Exhibit I to
the Revolving Credit Facility Agreement). (Exhibit 10(cc)5 to Form 10-K
of TNP and TNMP for 1996, File Nos. 1-8847 and 2-97230).
10(cc)6- Form of Assignment and Amendment Agreement, dated as of November 3,
1995, among TNMP, TGC II, and Chemical Bank, as administrative agent and
collateral agent (Exhibit J to the Revolving Credit Facility Agreement).
(Exhibit 10(cc)6 to Form 10-K of TNP and TNMP for 1996, File Nos. 1-8847
and 2-97230).
10(cc)7- Form of Assignment of TGC II Mortgage Lien, dated as of November 3,
1995, by The Chase Manhattan Bank as agent to Chemical Bank (Exhibit K to
the Revolving Credit Facility Agreement). (Exhibit 10(cc)7 to Form 10-K
of TNP and TNMP for 1996, File Nos. 1-8847 and 2-97230).
10(cc)8- Form of Collateral Transfer of Notes, Rights and Interests, dated as of
November 3, 1995, between TNMP and Chemical Bank, as Administrative Agent
and as Collateral Agent (Exhibit L to the Revolving Credit Facility
Agreement). (Exhibit 10(cc)8 to Form 10-K of TNP and TNMP for 1996, File
Nos. 1-8847 and 2-97230).
10(cc)9- Form of Assignment of Second Lien Mortgage and Deed of Trust, dated as
of November 3, 1995, between the Chase Manhattan Bank, as Agent, and
Chemical Bank, as agent (Exhibit M to the Revolving Credit Facility
Agreement). (Exhibit 10(cc)9 to Form 10-K of TNP and TNMP for 1996, File
Nos. 1-8847 and 2-97230).
10(cc)10- Form of Collateral Transfer of Notes, Rights and Interests, dated as
of November 3, 1995, between TNMP and Chemical Bank, as Administrative
Agent and as Collateral Agent (Exhibit N to the Revolving Credit Facility
Agreement). (Exhibit 10(cc)10 to Form 10-K of TNP and TNMP for 1996, File
Nos. 1-8847 and 2-97230).
10(cc)11- Form of Amendment No. 1, dated as of November 3, 1995, to the
Assignment and Security Agreement between TNMP, and The Chase Manhattan
Bank, as agent (Exhibit O to the Revolving Credit Agreement). (Exhibit
10(cc)11 to Form 10-K of TNP and TNMP for 1996, File Nos. 1-8847 and
2-97230).
10(cc)12- Amendment No. 1 dated October 28, 1998 to Revolving Credit Facility
Agreement dated as of November 3, 1995 among TNMP, certain lenders, and
Chase Bank, N.A. (successor by merger to Chemical Bank) as Administrative
Agent and Collateral Agent (Exhibit 10(a) to Form 10Q of TNP and TNMP for
quarter ended September 30, 1998. (File Nos. 1-8847 and 2-97230.)
Power Supply Contracts
10(dd) - Contract dated May 12, 1976, between TNMP and Houston Lighting & Power
Company (Exhibit 5(a), File No. 2-69353).
10(dd)1- Amendment, dated January 4, 1989, to contract between TNMP and Houston
Lighting & Power Company (Exhibit 10(cccc) to TNMP 1988 Form 10-K, File
No. 2-97230).
10(ee) - Amended and Restated Agreement for Electric Service dated May 14, 1990,
between TNMP and Texas Utilities Electric Company (Exhibit 10(vv) to TNMP
1990 Form 10-K, File No. 2-97230).
10(ee)1- Amendment, dated April 19, 1993, to Amended and Restated Agreement for
Electric Service, between TNMP and Texas Utilities Electric Company
(Exhibit 10(ii)1 to 1993 Form S-2, Registration Statement, File No.
33-66232).
10(ff) - Contract dated April 27, 1977, between TNMP and West
Texas Utilities Company, as amended (Exhibit 10(e) of Form 8 applicable
to TNMP 1986 Form 10-K, File No. 2-97230).
10(gg) - Contract dated April 29, 1987, between TNMP and El Paso Electric
Company (Exhibit 10(f) of Form 8 applicable to TNMP 1986 Form 10-K, File
No. 2-97230).
10(hh) - Amended and Restated Contract for Electric Service, dated April 29,
1988, between TNMP and Public Service Company of New Mexico (Exhibit
10(zz)3 to Amendment No. 1 to File No. 33-41903).
10(ii) - Contract dated December 8, 1981, between TNMP and SPS as amended
(Exhibit 10(h) of Form 8 applicable to TNMP 1986 Form 10-K, File No.
2-97230).
10(ii)1- Amendment, dated December 12, 1988, to contract between TNMP and SPS
(Exhibit 10(llll) to TNMP 1988 Form 10-K, File No. 2-97230).
10(ii)2- Amendment, dated December 12, 1990, to contract between TNMP and SPS
(Exhibit 19(t) to TNMP 1990 Form 10-K, File No. 2-97230).
10(jj) - Contract dated August 31, 1983, between TNMP and Capitol Cogeneration
Company, Ltd. (Exhibit 10(i) of Form 8 applicable to TNMP 1986 Form 10-K,
File No. 2-97230).
10(jj)1- Agreement Substituting a Party, dated May 3, 1988, among Capitol
Cogeneration Company, Ltd., Clear Lake Cogeneration Limited Partnership
and TNMP (Exhibit 10(nnnn) to TNMP 1988 Form 10-K, File No. 2-97230).
10(jj)2- Letter Agreements, dated May 30, 1990, and August 28, 1991, between
Clear Lake Cogeneration Limited Partnership and TNMP (Exhibit 10(oo)2 to
TNMP 1992 Form 10-K, File No. 2-97230).
10(jj)3- Notice of Extension Letter, dated August 31, 1992, between Clear Lake
Cogeneration Limited Partnership and TNMP (Exhibit 10(oo)3 to TNMP 1992
Form 10-K, File No. 2-97230).
10(jj)4- Scheduling Agreement, dated September 15, 1992, between Clear Lake
Cogeneration Limited Partnership and TNMP (Exhibit 10(oo)4 to TNMP 1992
Form 10-K, File No. 2-97230).
10(kk) - Interconnection Agreement between TNMP and Plains Electric Generation
and Transmission Cooperative, Inc. dated July 19, 1984 (Exhibit 10(j) of
Form 8 applicable to TNMP 1986 Form 10-K, File No. 2-97230).
10(ll) - Interchange Agreement between TNMP and El Paso Electric Company dated
April 29, 1987 (Exhibit 10(l) of Form 8 applicable to TNMP 1986 Form
10-K, File No. 2-97230).
10(mm) - Amendment No. 1, dated November 21, 1994, to Interchange Agreement
between TNMP and El Paso Electric Company (Exhibit 10(nn)1 to joint 1994
Form 10-K, File Nos. 1-8847 and 2-97230).
10(nn) - DC Terminal Participation Agreement between TNMP and El Paso Electric
Company dated December 8, 1981 as amended (Exhibit 10(m) of Form 8
applicable to TNMP 1986 Form 10-K, File No. 2-97230).
10(oo) - Agreement for Purchase and Sale of Energy effective as of May 1, 1996
among TNMP, Amoco Chemical Company and Amoco Oil Company (Exhibit 10 (pp)
to joint 1997 Form 10-K, File Nos. 1-8847 and 2-97230).
10(pp) - Agreement dated December 30, 1994 between TNMP and Union Carbide
Corporation ("UCC") for Purchase of Capacity and Energy from UCC (Exhibit
10(qq) to joint 1997 Form 10-K, File Nos. 1-8847 and 2-97230).
10(qq) Letter agreement dated November 24, 1997 between TNMP and Texas Utilities
Electric Company (Exhibit 10(qq) to joint 1998 Form 10-K, File Nos.
1-8447 and 2-97230.
Management Contracts
10(rr) - Form of TNMP Executive Agreement for Severance Compensation Upon Change
in Control and schedule of substantially identical agreements (Exhibit
10(rr) to joint 1998 Form 10-K, File Nos. 1-8447and 2-97230).
10(ss) - Agreement dated March 25, 1994 between Kevern Joyce and TNP and TNMP
(Exhibit 10(tt) to TNP and TNMP 1994 Form 10-Q, File Nos. 1-8847 and
2-97230).
10(tt) - Amendment dated February 16, 1998 to Agreement dated March 25, 1994
between Kevern Joyce and TNP and TNMP (Exhibit 10(rr) to joint 1998 Form
10-K, File Nos. 1-8447and 2-97230).
10(uu) - Agreement dated February 16, 1998 between John Edwards and TNMP
(Exhibit 10(rr) to joint 1998 Form 10-K, File Nos. 1-8447and 2-97230).
10(vv) - Agreement dated February 16, 1998 between Ralph S. Johnson and TNMP
(Exhibit 10(rr) to joint 1998 Form 10-K, File Nos. 1-8447and 2-97230).
*10(ww)- Form of TNP Incentive Compensation Award Agreement and schedule of
substantially identical agreements.
*21 - Subsidiaries of the Registrants.
This Instrument Contains After-Acquired Property Provisions
This Instrument Grants a Security Interest by a Utility
Texas-New Mexico Power Company
(Formerly Community Public Service Company)
To
U.S. Bank Trust National Association,
Trustee
Twenty-Sixth Supplemental Indenture
Dated as of
January 1, 1999
--------------------
Supplemental to and Modifying
Indenture of Mortgage
and
Deed of Trust
Dated as of November 1, 1944
(as supplemented and modified)
This Instrument Contains After-Acquired Property Provisions.
------------------
This Instrument Grants a Security Interest by a Utility.
------------------
<PAGE>
This is a Security Agreement granting a Security Interest in
Chattels including Chattels affixed to Realty as well as a
Mortgage and Deed of Trust upon Real Estate and Other Property
THIS TWENTY-SIXTH SUPPLEMENTAL INDENTURE, dated as of January 1, 1999,
between Texas-New Mexico Power Company (formerly Community Public Service
Company), as debtor, a Texas corporation (the "Company"), whose mailing address
and address of its principal place of business is 4100 International Plaza, P.O.
Box 2943, Fort Worth, Texas 76113, and U.S. Bank Trust National Association,
formerly First Trust National Association, formerly First Trust of Illinois,
National Association (the "Trustee"), (which is successor trustee to Bank of
America Illinois, a banking corporation organized under the laws of Illinois,
which was formerly known, at various times, as Continental Bank, a banking
corporation organized under the laws of Illinois, Continental Bank, National
Association, and Continental Illinois National Bank and Trust Company of Chicago
(the "Predecessor Trustee")), as Trustee and secured party, and having its
principal place of business and mailing address at 111 East Wacker Drive, Suite
3000, Chicago, Illinois 60601:
WHEREAS, Community Public Service Company, a Delaware corporation the
"Predecessor Company"), has heretofore executed and delivered to the City
National Bank and Trust Company of Chicago (the "Original Trustee"), an
Indenture of Mortgage and Deed of Trust dated as of November 1, 1944 (the
"Original Indenture," capitalized terms used herein and not otherwise defined
herein shall have the same meaning as set forth in the Original Indenture), to
secure as provided therein, its bonds (in the Original Indenture and herein
called the "Bonds") to be designated generally as its "First Mortgage Bonds" and
to be issued in one or more series as provided in the Original Indenture; and
WHEREAS, the Predecessor Company has heretofore executed and delivered
to the Original Trustee six indentures supplemental to the Original Indenture,
which supplemental indentures were dated as of March 1, 1947, January 1, 1949,
January 1, 1952, March 1, 1954, June 1, 1957 and June 1, 1961, respectively; and
WHEREAS, simultaneously with the merger of the Predecessor Company into
the Company, the Company has executed and delivered a Seventh Supplemental
Indenture, dated as of May 1, 1963, to Continental Illinois National Bank and
Trust Company of Chicago (into which on September 1, 1961, the Original Trustee
was merged) as Predecessor Trustee; and
WHEREAS, the Company has executed and delivered to the Predecessor
Trustee an Eighth Supplemental Indenture dated as of July 1, 1963; a Ninth
Supplemental Indenture dated as of August 1, 1965; a Tenth Supplemental
Indenture dated as of May 1, 1966; an Eleventh Supplemental Indenture dated as
of October 1, 1969; a Twelfth Supplemental Indenture dated as of May 1, 1971; a
Thirteenth Supplemental Indenture dated as of July 1, 1974; a Fourteenth
Supplemental Indenture dated as of March 1, 1975; a Fifteenth Supplemental
Indenture dated as of September 1, 1976; a Sixteenth Supplemental Indenture
dated as of November 1, 1981; a Seventeenth Supplemental Indenture dated as of
December 1, 1982; an Eighteenth Supplemental Indenture dated as of September 1,
1983; a Nineteenth Supplemental Indenture dated as of May 1, 1985; a Twentieth
Supplemental Indenture dated as of July 1, 1987; a Twenty-First Supplemental
Indenture dated as of July 1, 1989; a Twenty-Second Supplemental Indenture dated
as of January 15, 1992; a Twenty-Third Supplemental Indenture dated as of
September 15, 1993; a Twenty-Fourth Supplemental Indenture dated as of November
3, 1995 and a Twenty-Fifth Supplemental Indenture dated as of September 10,
1996;
WHEREAS, pursuant to the Original Indenture, as heretofore supplemented
and modified, there have been executed, authenticated and delivered $100,000,000
in original principal amount of First Mortgage Bonds of Series U, 9 1/4% due
2000, of which $100,000,000 in principal amount remain outstanding; and
WHEREAS, Continental Illinois National Bank and Trust Company of
Chicago changed its name to Continental Bank, National Association, effective
December 12, 1988; Continental Bank, National Association changed its name to
Continental Bank, effective June 29, 1994; and Continental Bank changed its name
to Bank of America Illinois effective September 1, 1994; and
WHEREAS, on August 21, 1995 Bank of America Illinois and certain of its
affiliates and First Bank National Association (the parent of First Trust of
Illinois, National Association) and certain of its affiliates, entered into a
Purchase and Assumption Agreement, as supplemented, which provided for the
purchase by the Trustee (or an affiliate) of substantially all of the Illinois
trust and agency appointments of the Predecessor Trustee, including the
appointment under the Original Indenture, as supplemented and modified; and
WHEREAS, on December 31, 1996, First Trust of Illinois, National
Association changed its name to First Trust National Association and on March
30, 1998, First Trust National Association changed its name to U.S. Bank Trust
National Association; and
WHEREAS, pursuant to Section 3-3 of the Illinois Corporate Fiduciary
Act (the "Act") and the No-Objection letter No. 95-1021 dated July 21, 1995 from
the Illinois Commissioner of Banks and Trust Companies, the sale of the
Predecessor Trustee's corporate trust business to another corporate fiduciary
will result in automatic succession of the transferred accounts pursuant to the
provisions of the Act, provided such succession is not prohibited by the trust
instrument's provisions; and
WHEREAS, the Trustee is qualified and eligible to act as trustee
pursuant to the Original Indenture, as supplemented and modified, and the
automatic succession is not prohibited by the Original Indenture; and
WHEREAS, to complete the transfer under the Act, the Trustee and the
Predecessor Trustee entered into an Instrument of Transfer and Assignment of
Certain Illinois Appointments dated December 8, 1995 whereby the Trustee became
the trustee under the Original Indenture, as supplemented and modified; and
WHEREAS, it is provided in the Original Indenture, among other things,
that the Company and the Trustee may, and when so required by the Original
Indenture shall, enter into such indentures supplemental thereto as may or shall
by them be deemed necessary or desirable and which shall thereafter form a part
thereof for the purposes, among others, of (a) subjecting to the lien of the
Original Indenture additional property acquired by the Company, (b) providing
for the creation of any new series of Bonds, designating the series to be
created and specifying the form and provisions of the Bonds of such series, (c)
providing for a sinking, amortization, improvement or other analogous funds for
the benefit of all or any of the Bonds of any one or more series, of such
character and of such amount and upon such terms and conditions as shall be
contained in such supplemental indenture; and (d) providing for modifications in
the Original Indenture, subject to certain conditions; and
WHEREAS, the Company has executed and delivered to Chase Bank of Texas,
N.A. (the "Senior Debt Trustee") an indenture dated as of January 1, 1999 (the
"Senior Debt Indenture") to provide for the issuance from time to time of its
debentures, notes, bonds or other evidences of indebtedness; and
WHEREAS, the Company is entering into an Indenture supplemental to the
Senior Debt Indenture dated as of January 1, 1999 (the "First Supplemental
Indenture") with the Senior Debt Trustee for the purpose of issuing a series of
securities in an aggregate principal amount of $$175,000,000 to be designated
the "6 1/4% Senior Notes Due 2009" (the "Senior Notes"); and
WHEREAS, the First Supplemental Indenture requires, as a condition
precedent to the issuance and effectiveness of the Senior Notes, that the
Company issue a new series of First Mortgage Bonds to the Senior Debt Trustee in
an aggregate principal amount of up to $175,000,000 to secure the payment when
due of the Senior Notes until the Release Date (as such term is defined in the
First Supplemental Indenture); and
WHEREAS, the agreements of the parties to the First Supplemental
Indenture constitute consideration for the issuance of such First Mortgage Bonds
to the Senior Debt Trustee; and
WHEREAS, the Company desires to, and as required by the First
Supplemental Indenture proposes to, create under the Original Indenture a new
issue of First Mortgage Bonds, to be designated as First Mortgage Bonds, Series
X (the "Bonds of Series X") to be due on January 15, 2009, in an aggregate
principal amount of up to $175,000,000 and proposes to issue the same upon the
execution of this Twenty-Sixth Supplemental Indenture; and
WHEREAS, it is the intent of the Company and the Senior Debt Trustee
that any payment made in respect to the Company's obligations under the Senior
Notes shall be deemed a payment in respect of the Bonds of Series X and all
payments which are applied to payment of the outstanding principal balance of
the Senior Notes shall be deemed to be payments of principal of the Bonds of
Series X and the balance of such Bonds of Series X shall be reduced concurrently
with such payment; and
WHEREAS, it is the intent of the Company and the Senior Debt Trustee
that there be no duplication in the obligations paid by the Company under the
Senior Notes and the Bonds of Series X, but the payments, if any, of principal
of or interest on the Bonds of Series X be applied to payment of the Senior
Notes and that the benefits and security of the lien of the Original Indenture,
as supplemented and amended, be extended to the Senior Notes until the Release
Date by means of the issuance and delivery of the Bonds of Series X to the
Senior Debt Trustee for the benefit of the holders of the Senior Notes; and
WHEREAS, the Company is required to execute this Twenty-Sixth
Supplemental Indenture and hereby requests the Trustee to join in this
Twenty-Sixth Supplemental Indenture for the purpose, among others, of (i)
creating and describing the terms of the Bonds of Series X and (ii) subjecting
to the lien of the Original Indenture, as supplemented and modified, additional
property (the "Additional Property") acquired by the Company since the execution
and delivery of the Twenty-Fifth Supplemental Indenture dated as of September
16, 1996 (the Original Indenture as heretofore supplemented and modified and as
supplemented and modified by this Twenty-Sixth Supplemental Indenture being
herein sometimes called the "Indenture"); and
WHEREAS, all acts and proceedings required by law and by the Restated
Articles of Incorporation and By-Laws of the Company necessary to make the Bonds
of Series X, when executed by the Company, authenticated and delivered by the
Trustee and duly issued, the valid, binding and legal obligations of the
Company, and to constitute the Indenture a valid and binding mortgage and deed
of trust for the security of all of the First Mortgage Bonds in accordance with
its and their terms, have been done and taken; and the execution and delivery of
this Twenty-Sixth Supplemental Indenture have been in all respects duly
authorized.
NOW, THEREFORE, THIS TWENTY-SIXTH SUPPLEMENTAL INDENTURE, WITNESSETH,
that, in order to secure the payment of the principal of, premium, if any, and
interest on all Bonds at any time issued and outstanding under the Indenture, to
indirectly secure payment of the principal of, premium, in any, and interest on
all Senior Notes at any time issued and outstanding under the Senior Debt
Indenture, according to their tenor, purport and effect, to expressly subject
the Additional Property to the lien of the Indenture, and to secure the
performance and observance of all the covenants and conditions contained in the
Senior Notes and in the Senior Debt Indenture, and to declare the terms and
conditions upon and subject to which the Bonds of Series X are to be issued and
secured, and for the purpose of confirming the lien of the Original Indenture,
as heretofore supplemented and modified, and for and in consideration of the
premises and of the mutual covenants contained in the Indenture and of the
acceptance of the Bonds of Series X by the holders thereof, and of the sum of $1
to the Company paid by the Trustee at or before the execution and delivery
hereof, and for other valuable considerations, the receipt whereof is hereby
acknowledged, the Company has executed and delivered this Twenty-Sixth
Supplemental Indenture, and by these presents does grant, bargain, sell, convey,
assign, transfer, mortgage, pledge, hypothecate, set over and confirm unto the
Trustee, the following property, rights, privileges and franchises, to wit:
CLAUSE I.
All the property, real, personal or mixed, tangible or intangible
(other than that Excepted Property as defined in the Granting Clauses of the
Original Indenture) of every kind, character and description which is described
in Article Five hereof.
CLAUSE II.
Without in any way limiting anything in Article Five hereof or
hereinafter described, all and singular the lands, real estate, chattels real,
interests in lands, leaseholds, ways, rights-of-way, easements, servitudes,
permits and licenses, lands under water, riparian rights, franchises,
privileges, gas or electric generating plants, natural gas plants, gas storage
plants and facilities, gas or electric transmission and distribution systems,
gas gathering systems and tap lines, and all apparatus and equipment
appertaining thereto, offices, buildings, warehouses and other structures,
machine shops, tools, materials and supplies and all property of any nature
appertaining to any of the plants, systems, business or operations of the
Company, whether or not affixed to the realty, used in the operation of any of
the premises or plants or systems or otherwise, which are now owned or which may
hereafter be owned or acquired by the Company, other than Excepted Property as
defined in the Granting Clauses of the Original Indenture.
CLAUSE III.
All corporate, Federal, state, municipal and other permits, consents,
licenses, bridge licenses, bridge rights, river permits, franchises, grants,
privileges and immunities of every kind and description, now belonging to or
which may hereafter be owned, held, possessed or enjoyed by the Company
(including those described in Article Five hereof and other than Excepted
Property as defined in the Granting Clauses of the Original Indenture) and all
renewals, extensions, enlargements and modifications of any of them.
CLAUSE IV.
Also all other property, real, personal or mixed, tangible or
intangible (other than Excepted Property as defined in the Granting Clauses of
the Original Indenture) of every kind, character and description and wheresoever
situated, whether or not useful in the generation, manufacture, production,
transportation, distribution or sale of gas or electricity, now owned or which
may hereafter be acquired by the Company, it being the intention hereof that all
property, rights and franchises acquired by the Company after the date hereof
(other than Excepted Property as defined in the Granting Clauses of the Original
Indenture) shall be as fully embraced within and subjected to the lien hereof as
if such property were now owned by the Company and were specifically described
herein and conveyed hereby.
CLAUSE V.
Together with all and singular the plants, buildings, improvements,
additions, tenements, hereditaments, easements, rights, privileges, licenses and
franchises and all other appurtenances whatsoever belonging or in anywise
appertaining to any of the property hereby mortgaged or pledged, or intended so
to be, or any part thereof, and the reversion and reversions, remainder and
remainders, and the rents, revenues, issues, earnings, income, products and
profits thereof, and of every part and parcel thereof, and all the estate,
right, title, interest, property, claim and demand of every nature whatsoever of
the Company at law, in equity or otherwise howsoever, in, of and to such
property and every part and parcel thereof.
CLAUSE VI.
Also any and all property, real, personal, or mixed (including Excepted
Property as defined in the Granting Clauses of the Original Indenture), that
may, from time to time hereafter, by delivery or by writing of any kind, for the
purpose hereof be in anywise subjected to the lien hereof or be expressly
conveyed, mortgaged, assigned, transferred, deposited and/or pledged by the
Company or by anyone in its behalf or with its consent, to and with the Trustee,
which is hereby authorized to receive the same at any and all times as and for
additional security and also, when and as in the Indenture provided, as
substituted security hereunder, to the extent permitted by law. Such conveyance,
mortgage, assignment, transfer, deposit and/or pledge or other creation of lien
by the Company or by anyone in its behalf or with its consent of or upon any
property as and for additional security may be made subject to any reservations,
limitations, conditions and provisions which shall be set forth in an instrument
or agreement in writing executed by the Company or the person or corporation
conveying, assigning, mortgaging, transferring, depositing and/or pledging the
same and/or by the Trustee, respecting the use, management and disposition of
the property so conveyed, assigned, mortgaged, transferred, deposited and/or
pledged, or the proceeds thereof.
EXCEPTED PROPERTY
There is, however, expressly excepted and excluded from the lien and
operation of the Indenture all property specifically excepted under the heading
"Excepted Property" of the Granting Clauses of the Original Indenture and all
property released or otherwise disposed of pursuant to the provisions of Article
Seven of the Original Indenture.
The Company may, however, pursuant to the provisions of Granting Clause
VI above, subject to the lien and operation of the Indenture, all or any part of
the Excepted Property as defined in the Granting Clauses of the Original
Indenture.
TO HAVE AND TO HOLD the Trust Estate (as defined in Paragraph A of
Section 1.06 of the Original Indenture) and all and singular the lands,
properties, estates, rights, franchises, privileges and appurtenances hereby
mortgaged, conveyed, pledged or assigned, or intended so to be, together with
all the appurtenances thereto appertaining, unto the Trustee and its successors
and assigns, forever:
SUBJECT, HOWEVER, to Permitted Encumbrances as defined in Paragraph G
of Section 1.07 of the Original Indenture, and with respect to any property
which the Company may hereafter acquire, all terms, conditions, agreements,
covenants, exceptions and reservations expressed or provided in the deeds or
other instruments, respectively, under and by virtue of which the Company shall
hereafter acquire the same and to any liens thereon existing, and to any liens
for unpaid portions of the purchase money placed thereon, at the time of such
acquisitions;
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate use,
benefit, security and protection of those who from time to time shall hold the
Bonds and coupons authenticated and delivered under the Indenture and duly
issued by the Company, without any discrimination, preference or priority of any
one Bond or coupon over any other by reason of priority in the time of issue,
sale or negotiation thereof or otherwise, except as provided in Section 10.02 of
the Original Indenture, so that, subject to said Section 10.02 of the Original
Indenture, each and all of said Bonds and coupons shall have the same right,
lien and privilege under the Original Indenture, as heretofore supplemented and
as supplemented by this Twenty-Sixth Supplemental Indenture, and shall be
equally secured thereby and hereby and shall have the same proportionate
interest and share in the Trust Estate, with the same effect as if all of the
Bonds and coupons had been issued, sold and negotiated simultaneously; and in
trust for enforcing payment of the principal of the Bonds and of the premium, if
any, and interest thereon, according to the tenor, purport and effect of the
Bonds and coupons and of the Indenture, and for enforcing the terms, provisions,
covenants and stipulations in the Indenture and in the Bonds set forth;
UPON CONDITION that, until the happening of an Event of Default (as
defined in Section 14.01 of the Original Indenture), the Company shall be
suffered and permitted to possess, use and enjoy the Trust Estate, except money,
securities and other personal property pledged or deposited with or required to
be pledged or deposited with the Trustee under the Indenture, and to receive and
use the rents, revenues, issues, earnings, income, products and profits
therefrom:
ARTICLE ONE
BONDS OF SERIES X AND CERTAIN PROVISIONS RELATING THERETO
SECTION 1.01. Terms of Bonds of Series X. There shall be, and hereby
is, created a new series of Bonds, known as and entitled "First Mortgage Bonds,
Series X, due 2009" (herein referred to as the "Bonds of Series X"), and the
form thereof shall be substantially as hereinafter set forth in Section 1.02
hereof. The principal amount of the Bonds of Series X shall not be limited
except as provided in Section 2.01 of the Original Indenture (as amended by
Section 1.01 of the Thirteenth Supplemental Indenture dated as of July 1, 1974)
and except as may be provided in any indenture supplemental thereto. The
definitive Bonds of Series X shall be issued only as registered Bonds without
coupons of the denomination of $1,000 or any multiple thereof, and of such
respective amounts of each of said denominations as may be executed by the
Company and delivered to the Trustee for authentication and delivery.
The Bonds of Series X shall be registered in the name of the Senior
Debt Trustee or to any successor trustee under the Senior Debt Indenture for the
benefit of the holders of the Senior Notes.
The Bonds of Series X are to be issued to the Senior Debt Trustee to
secure the payment when due of all obligations of the Company under the Senior
Notes.
The Bonds of Series X are to be dated as of January 12, 1999, are to be
issued in the aggregate principal amount of $175,000,000 and are to mature on
January 15, 2009. The principal of the Bonds of Series X shall be payable in
whole or in installments on such date or dates as the Company has any obligation
to make any principal payment under the Senior Notes, but not later than [the
maturity date of the Senior Notes]. The Bonds of Series X will have the same
stated rates of interest (and interest shall be calculated in the same manner)
and "interest payment dates" (herein so called) as the Senior Notes.
Any payment made in respect to the Company's obligations under the
Senior Notes shall be deemed a payment in respect of the Company's related
obligations under the Bonds of Series X. The obligation of the Company to make
payments with respect to the principal of, premium, if any, and interest on the
Bonds of Series X shall be fully satisfied and discharged to the extent that, at
any time that any such payment shall be due, the Company shall have paid fully
the then due principal of, premium, if any, and interest on, and fees with
respect to, the Senior Notes. Until such time as the Trustee shall have received
notice from the Senior Debt Trustee that an "Event of Default" under the First
Supplemental Indenture has occurred and is continuing, the Trustee shall be
entitled to assume that all such payments have been made. Any such notice shall
provide the Trustee with information on the principal and interest payments due
thereafter on the Bonds of Series X. Any payments of the principal of, premium,
if any, and the interest on the Bonds of Series X shall be payable, in such coin
or currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, at the principal
office of the Trustee in the City of Chicago, State of Illinois. Interest on
Bonds of Series X shall be payable in each case to the holder of record on the
record date as set forth below.
On the Release Date, the Bonds of Series X shall be surrendered to the
Company pursuant to the terms of the First Supplemental Indenture and the
Company's obligations under the Bonds of Series X from the Release Date forward
shall be discharged and deemed satisfied.
The definitive Bonds of Series X may be issued in the form of Bonds
engraved, printed, lithographed on steel engraved borders or typed on safety
paper.
The person in whose name any Bond of Series X is registered at the
close of business on any record date (as hereinbelow defined) with respect to
any interest payment date shall be entitled to receive the interest payable on
such interest payment date notwithstanding the cancellation of such Bond of
Series X upon any transfer or exchange thereof (including any exchange effected
as an incident to a partial redemption thereof) subsequent to the record date
and prior to such interest payment date, except that, if and to the extent that
the Company defaults in the payment of the interest due on such interest payment
date, then the registered holders of Bonds of Series X on such record date shall
have no further right to or claim in respect of such defaulted interest as such
registered holders on such record date, and the persons entitled to receive
payment of any defaulted interest thereafter payable or paid on any Bonds of
Series X shall be the registered holders of such Bonds of Series X on the record
date for payment of such defaulted interest. The term "record date" as used in
this Section 1.01, and in the form of the Bonds of Series X, with respect to any
interest payment date applicable to the Bonds of Series X, shall mean the date
fifteen days prior to such interest payment date (or the preceding business day
if a holiday or other day on which the office of the Trustee is closed), or such
record date established for defaulted interest as hereinafter provided.
Subject to the provisions of Section 2.11 of the Original Indenture,
all definitive Bonds of Series X, upon surrender at the principal office of the
Trustee, shall be exchangeable for other Bonds of Series X of a different
denomination or denominations, as requested by the holder surrendering the same.
The Company shall execute, and the Trustee shall authenticate and deliver, Bonds
of Series X whenever the same shall be required for any such exchange.
Notwithstanding the provisions of Section 2.11 of the Original
Indenture, no charge shall be made for any exchange of Bonds of Series X for
other Bonds of Series X of different authorized denominations or for any
transfer of Bonds of Series X, except that the Company at its option may require
the payment of a sum sufficient to reimburse it for any stamp tax or other
governmental charge incident thereto.
The Bonds of Series X shall be redeemed by the Company in whole at any
time prior to maturity at a redemption price of 100% of the principal amount to
be redeemed, plus any accrued and unpaid interest to the redemption date, but
only if the Trustee shall receive a written demand from the Senior Debt Trustee
for redemption of all Bonds of Series X held by the Senior Debt Trustee stating
that an "Event of Default" under the First Supplemental Indenture has occurred
and is continuing and that payment of the principal amount outstanding under the
Senior Notes, all interest thereon and all other amounts payable thereunder are
immediately due and payable and demanding payment thereof; provided, however,
that the Bonds of Series X shall not be redeemed in the event that prior to the
date of such redemption the Trustee shall have received a certificate of the
Senior Debt Trustee (a) stating that there has been a waiver of such Event of
Default, or (b) withdrawing said written demand. The redemption of the Bonds of
Series X shall be made forthwith upon receipt of such demand by the Company from
the Senior Debt Trustee on behalf of the holders of the Senior Notes or the
Trustee.
The Trustee hereunder shall, by virtue of its office as such Trustee,
be a paying agent of the Company for the purpose of the payment of the principal
of and premium, if any, and interest on the Bonds of Series X and the registrar
and transfer agent of the Company for the purpose of registering and
transferring Bonds of Series X. Neither the Company nor the Trustee shall be
required to make transfers or exchanges of Bonds of Series X for a period of ten
days next preceding the mailing of notice of redemption of Bonds of Series X to
be redeemed and neither the Company nor the Trustee shall be required to make
transfers or exchanges of any Bonds of Series X designated in whole for
redemption or that part of any Bond of Series X designated in part for
redemption.
SECTION 1.02. Form of Bonds of Series X. The Bonds of Series X shall be
in substantially the following form:
THIS BOND IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TRUSTEE UNDER THE
INDENTURE DATED JANUARY 1, 1999, AS SUPPLEMENTED, BETWEEN TEXAS-NEW
MEXICO POWER COMPANY AND CHASE BANK OF TEXAS, N.A., TRUSTEE
[FORM OF BOND OF Series X]
No. X $[ ]
TEXAS-NEW MEXICO POWER COMPANY
First Mortgage Bond, Series X, Due 2009
Texas-New Mexico Power Company, a Texas corporation (hereinafter called
the "Company"), for value received, hereby promises to pay to Chase Bank of
Texas, N.A. as Senior Debt Trustee (as hereinafter defined) under the Senior
Debt Indenture (as hereinafter defined), or to any successor Trustee under the
Senior Debt Indenture, Million Dollars ($ ) or such lesser amount as is equal to
the aggregate principal amount of the outstanding Senior Notes (as defined in
the First Supplemental Indenture hereinafter defined), in whole or in
installments on such date or dates as the Company has any obligation to make
payments under the First Supplemental Indenture, but not later than the Maturity
Date (as defined in the First Supplemental Indenture), and to pay interest on
the unpaid principal amount hereof to the registered owner hereof at such rate
per annum on each interest payment date (as hereinafter defined) and at maturity
as shall cause the amount of interest payable on such interest payment date (as
hereinafter defined) on this Bond to equal the amount of interest and fees
payable on such interest payment date (as hereinafter defined) under the First
Supplemental Indenture as provided below.
The principal of, premium, if any, and interest on this Bond are
payable at the principal corporate trust office mentioned on the reverse hereof
of U.S. Bank Trust National Association (the "Trustee"), or its successor in
trust under the Indenture (as hereinafter defined), in the City of Chicago,
Illinois, in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts.
The Bonds of Series X have been issued to the Senior Debt Trustee in
connection with the issuance of the Senior Notes, to secure the payment when due
of all obligations of the Company under the Senior Notes issued under an
indenture supplemental (the "First Supplemental Indenture") to the Original
Senior Debt Indenture (hereinafter defined) with the Senior Debt Trustee for the
purpose of issuing a series of securities in an aggregate principal amount of
$175,000,000 to be designated the "6 1/4% Senior Notes Due 2009" (the "Senior
Notes"). The Company has executed and delivered to Chase Bank of Texas, N.A.
(the "Senior Debt Trustee") an indenture dated as of January 1, 1999 (the
"Original Senior Debt Indenture" and together with the First Supplemental
Indenture, the "Senior Debt Indenture") to provide for the issuance from time to
time of its debentures, notes, bonds or other evidences of indebtedness.
The interest on this Bond shall be payable on the same dates (each, an
"interest payment date") as interest is payable from time to time pursuant to
the Senior Notes until maturity of this Bond, or until the occurrence of the
Release Date, or, if the Company defaults in the payment of principal due on
this Bond, until such principal and interest shall have been paid in full and
the Company's obligations with respect thereto discharged as provided in the
Indenture (as hereinafter defined). The amount of interest payable from time to
time under the Senior Notes, the basis on which such interest is computed and
the dates on which such interest is payable are set forth in the First
Supplemental Indenture.
Any payment of the principal of, premium, if any, and interest made in
respect of the Company's obligations under the Senior Notes shall be deemed a
payment in respect of the respective obligations under the Bonds of Series X.
The obligation of the Company to make payments with respect to the principal of,
premium, if any, and interest on the Bonds of Series X shall be fully satisfied
and discharged to the extent that, at any time that any such payment shall be
due, the Company shall have paid fully the then due principal of, premium, if
any, and interest on, the Senior Notes.
On the Release Date (as defined in the First Supplemental Indenture),
and subject to the terms and conditions of the First Supplemental Indenture,
this Bond shall be surrendered to the Company and the Company's obligations
hereunder from the Release Date forward shall be discharged and deemed
satisfied.
This Bond shall not become or be valid or obligatory for any purpose
until the certificate of authentication hereon shall have been signed by the
Trustee.
The provisions of this Bond are continued on the reverse hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
IN WITNESS WHEREOF, TEXAS-NEW MEXICO POWER COMPANY has caused this Bond
to be executed in its corporate name by the manual or facsimile signature of its
President or one of its Vice Presidents and its corporate seal to be impressed
or imprinted hereon, attested by the manual or facsimile signature of its
Secretary or one of its Assistant Secretaries, and this Bond to be dated.
TEXAS-NEW MEXICO POWER COMPANY,
By:
President
Attest:
Secretary
(Seal)
Date of Authentication:------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within-mentioned
Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee
Authorized Officer
[FORM OF REVERSE OF BOND OF SERIES X]
This Bond is one of an authorized issue of Bonds of the Company known
as its "First Mortgage Bonds," limited as provided in the Indenture hereinafter
mentioned, issued and to be issued in one or more series under, and all equally
and ratably secured (except as any sinking, amortization, improvement, renewal,
replacement or other analogous fund established under the Indenture hereinafter
mentioned, may afford additional security for the Bonds of any particular
series) by an Indenture of Mortgage and Deed of Trust dated as of November 1,
1944, executed to City National Bank and Trust Company of Chicago, as to which
Continental Illinois National Bank and Trust Company of Chicago (which later
changed its name to Continental Bank, National Association, then to Continental
Bank, a banking corporation organized under the laws of Illinois, and then to
Bank of America Illinois, a banking corporation organized under the laws of
Illinois, who was succeeded by First Trust of Illinois, National Association
which later changed its name to First Trust National Association, then to U.S.
Bank Trust National Association), as successor trustee, as Trustee, as
supplemented by twenty-five supplemental indentures thereto, including the
Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth,
Nineteenth, Twentieth, Twenty-First, Twenty-Second, Twenty-Third, Twenty-Fourth
and Twenty-Fifth Supplemental Indentures which also modified the Original
Indenture and the Twenty-Sixth Supplemental Indenture (the "Twenty-Sixth
Supplemental Indenture") dated as of January 1, 1999 (said Indenture of Mortgage
and Deed of Trust, as so supplemented and modified, being herein called the
"Indenture"), to which Indenture reference is hereby made for a description of
the properties mortgaged and pledged, the nature and extent of the security, the
rights of the holders of the Bonds and the appurtenant coupons and of the
Trustee and of the Company in respect of such security, and the terms and
conditions upon which the Bonds are and are to be secured.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than seventy-five per cent
in principal amount of the Bonds (exclusive of Bonds disqualified by reason of
the Company's interest therein) at the time outstanding, including, if more than
one series of Bonds shall be at the time outstanding, not less than sixty per
cent in principal amount of each series affected, to execute supplemental
indentures amending the Indenture; provided, however, that no such supplemental
indenture shall extend the fixed maturity of this Bond or reduce the rate or
extend the time of payment of interest hereon or reduce the amount of the
principal hereof or reduce any premium payable on the redemption hereof, without
the consent of the holder hereof.
As provided in the Indenture, the Bonds are issuable in Series which
may vary as in the Indenture provided or permitted. This Bond is one of a series
entitled "First Mortgage Bonds, Series X, due 2009" (hereinafter called the
"Bonds of Series X").
Bonds of this series may, upon surrender thereof at the principal
office of the Trustee, be exchanged for several Bonds of the same series for a
like aggregate principal amount in authorized denominations; and several Bonds
of this series, registered in the same name, may, upon surrender thereof at said
principal office of the Trustee, be exchanged for one Bond of the same series
for a like aggregate principal amount in authorized denominations. No charge
shall be made for any exchange of Bonds of this series for other Bonds of
different authorized denominations or for any transfer of this Bond, except that
the Company at its option may require the payment of a sum sufficient to
reimburse it for any stamp tax or other governmental charge incidental thereto.
The Company and the Trustee may deem and treat the person in whose name
this Bond shall be registered as the absolute owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Bond shall be overdue; and all such payments shall be valid and effectual
to satisfy and discharge the liability upon this Bond to the extent of the sum
or sums so paid.
If an event of default as defined in the Indenture shall occur, the
principal of all the Bonds of Series X may become or be declared due and payable
upon the conditions and in the manner and with the effect provided in the
Indenture and the First Supplemental Indenture.
No recourse shall be had for the payment of the principal of or the
interest on this Bond or for any claim based hereon or otherwise in respect
hereof or based on or in respect of the Indenture, against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty, or otherwise, all such liability being by the acceptance hereof and as
part of the consideration for the issue hereof expressly waived and released, as
provided in the Indenture; provided, however, that nothing herein or in the
Indenture contained shall be taken to prevent recourse to and the enforcement of
the liability, if any, of any shareholder or any stockholder or subscriber to
capital stock upon or in respect of shares of capital stock not fully paid.
This Bond is nontransferable except to effect transfer to any successor
to the Senior Debt Trustee under the First Supplemental Indenture, but is
exchangeable by the registered holder hereof, in person or by attorney duly
authorized, at the corporate trust office of the Trustee, any such permitted
transfer or exchange to be made in the manner and upon the conditions prescribed
in the Indenture, upon the surrender and cancellation of this Bond and the
payment of any applicable taxes and fees required by law, and upon any such
transfer or exchange a new registered bond or bonds or the same series and
tenor, will be issued to the authorized transferee, or the registered holder, as
the case may be.
Upon notice being given of the redemption of all or part of the Senior
Notes in accordance with the Senior Debt Indenture and such Senior Notes
becoming due and payable in accordance with such notice of redemption, the
Company shall redeem, on the redemption date specified in such notice a
principal amount of Bonds of Series X equal to the principal amount of Senior
Notes to be redeemed, at a redemption price equal to the principal amount of
such Bonds of Series X to be redeemed, plus a premium, if any, equal to the
premium payable on the redemption of such Senior Notes, if any, plus accrued
interest to such redemption date.
Upon payment by the Company of principal, premium, if any, and interest
in satisfaction of amounts due and payable in accordance with such notice of
redemption of all or part of the Senior Notes, as the case may be, the Company's
obligations to make payment with respect to the amounts due and payable with
respect to the principal amount of Bonds of Series X to be redeemed shall be
satisfied.
The Company covenants that, prior to the Release Date, it will not take
any action that would cause the outstanding principal amount of the Bonds of
Series X to be less than the then outstanding principal amount of the Senior
Notes.
ARTICLE TWO
AMOUNT OF BONDS OUTSTANDING
The aggregate principal amount of Bonds of the Company outstanding and
presently to be issued and outstanding under the provisions of, and secured by
the Indenture, will be $275,000,000 consisting of $100,000,000 principal amount
of First Mortgage Bonds, Series U, 9 1/4% due 2000, due September 15, 2000 and
$175,000,000 principal amount of First Mortgage Bonds, Series X, due 2009, due
January 15, 2009, to be issued pursuant to Article Four of the Original
Indenture as provided for in this Twenty-Sixth Supplemental Indenture.
Additional Bonds of Series U and X and of subsequent series created
after the execution and delivery of this Twenty-Sixth Supplemental Indenture,
may, from time to time, be authenticated, delivered and issued pursuant to the
terms of the Indenture.
ARTICLE THREE
ADDITIONAL COVENANTS OF COMPANY
The Company covenants and agrees with the Trustee, for the benefit of
the Trustee and all the present and future holders of the Bonds, that the
Company will pay the principal of, premium, if any, and interest on all Bonds
issued or to be issued and secured by the Indenture, as well as all Bonds which
may be hereafter issued in exchange or substitution therefor, and will perform
and fulfill all of the terms, covenants and conditions of the Original
Indenture, with respect to the additional Bonds to be issued under the
Indenture.
ARTICLE FOUR
MISCELLANEOUS
This instrument is executed and shall be construed as an indenture
supplemental to the Original Indenture as heretofore supplemented and shall form
a part thereof, and the Original Indenture as heretofore supplemented is hereby
confirmed.
The recitals in this Twenty-Sixth Supplemental Indenture are made by
the Company only and not by the Trustee; and all of the provisions contained in
the Original Indenture in respect of the rights, privileges, immunities, powers
and duties of the Trustee shall be applicable in respect hereof as fully and
with like effect as if set forth herein in full.
Although this Twenty-Sixth Supplemental Indenture is dated for
convenience and for the purpose of reference as of January 1, 1999, the actual
date or dates of execution thereof by the Company and the Trustee are as
indicated by their respective acknowledgments hereto annexed.
In order to facilitate the recording or filing of this Twenty-Sixth
Supplemental Indenture, the same may be simultaneously executed in several
counterparts, each of which shall be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.
ARTICLE FIVE
FIRST
Land
The following described lots, pieces, or parcels of land acquired by
the Company since the execution and delivery of the Twenty-Fifth Supplemental
Indenture dated as of September 10, 1996, are located in the States and in the
Counties designated and hereinafter set forth:
STATE OF TEXAS
Coryell County
All that piece or parcel of land, situate, lying and being in the
County of Coryell, State of Texas, and described as follows: Out of the C.
Cazenobe Survey in the town of Gatesville, Coryell County, Texas, and being all
of Lot No. 6, and parts of Lots Nos. 2, 3, 9 and 10 in Block No. 9, as shown by
the plat of the town of Gatesville, Texas, adopted May 1, 1925, and further
described as follows:
BEGINNING at a point 154 feet E of the S W corner of said Block No. 9,
of said town of Gatesville, Texas, in the North line of Saunders
Street, at the S W corner of Lot No. 7, in said Block No. 9, --said
beginning point being further identified as being at the South or outer
edge of the Concrete curb; Thence North with the West line of Lot. No.
7 in Block No. 9, of the Town of Gatesville, Texas, and the fence
between this property and the property on the east thereof, now owned
by A. H. Meadows, a distance of 100 feet for a corner of this; Thence
West and parallel to the North line of Saunders Street, a distance of
50 feet for a corner of this; Thence South and parallel with the East
line hereof, a distance of 100 feet to the South or outer edge of the
Concrete Curb on the North line of Saunders Street; Thence with the
south or outer edge of the said concrete curb and the North line of
Saunders Street, East 50 feet to the place of beginning.
FOURTH
Franchises
All and singular, the corporate, federal, state, municipal and other
franchises, permits, consents, licenses, grants, immunities, privileges, and
rights owned by the Company and now held by the Company for the construction,
maintenance, and operation of electric light, heat, and power plants and
systems; for the construction, maintenance; as well as all franchises, grants,
immunities, privileges, and rights of the Company used or useful in the
operation of the Trust Estate, including all and singular the franchises,
grants, immunities, privileges, and rights of the Company granted by the
governing authorities of the cities and towns enumerated in the schedule below,
and by all other municipalities or political subdivisions, and all renewals,
extensions, and modifications of said franchises, grants, privileges, and
rights, or any of them, including:
A. State of New Mexico
None
B. State of Texas
Municipality Expiration Date
------------------------------------------------------------
Alvin Extended to April, 20 1999
Hamilton Extended to January 10, 2015
La Marque Extended to July 31, 1999
Texas City Extended to September 30, 1999
<PAGE>
IN WITNESS WHEREOF, TEXAS-NEW MEXICO POWER COMPANY has caused this
Twenty-Sixth Supplemental Indenture to be signed in its corporate name by its
President or a Vice President and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary, and, in token of its
acceptance of the trust created hereby, U.S. Bank Trust National Association has
caused this Twenty-Sixth Supplemental Indenture to be signed in its corporate
name by one of its Vice Presidents and attested by one of its Assistant
Secretaries, all as of the day and year first above written.
TEXAS-NEW MEXICO POWER COMPANY,
(Corporate Seal) By: /s/ M.S. Cheema
---------------------------
M. S. Cheema
Senior Vice President
Attest:
/s/ Paul W. Talbot
- ----------------------
Paul W. Talbot
Secretary
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By: /s/ Larry Kusch
-----------------------------
Assistant Vice President
Attest:
/s/ H. H. Hall, Jr.
- ----------------------
Assistant Secretary
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF COOK )
On this 12th day of January, 1999, before me, S. Rhoden, Notary Public
in and for the County and State aforesaid, personally appeared Larry Kusch, to
me personally known, and known to me to be the person whose name is subscribed
to the foregoing instrument and known to me to be an Assistant Vice President of
U.S. Bank Trust National Association, who, being by me duly sworn, did say that
he resides in Chicago, Illinois; that he is a Vice President of said U.S. Bank
Trust National Association, and that said instrument was signed in behalf of
said association by authority of its Board of Directors; and said H. H. Hall,
Jr., acknowledged said instrument to be the free act and deed of said
association, and acknowledged to me that he executed said instrument for the
purposes and consideration therein expressed and as the act of said association.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office this
12th day of January, 1999.
/s/ S. Rhoden
--------------------
(NOTARIAL SEAL)
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
M. S. Cheema, being duly sworn, deposes and says:
1. That he is Senior Vice President of TEXAS-NEW MEXICO POWER COMPANY,
a Texas corporation, one of the corporations described in, and which executed
the foregoing instrument, and is one of the officers who executed the foregoing
instrument in behalf of TEXAS-NEW MEXICO POWER COMPANY.
2. That TEXAS-NEW MEXICO POWER COMPANY, one of the corporations which
executed the aforementioned instrument, is a corporation engaged in the States
of Texas and New Mexico in the generation, purchase, transmission, distribution
and sale of electricity to the public and, consequently, is a utility as
described in Section 35.01, Texas Business and Commerce Code, Revised Civil
Statutes of Texas.
Subscribed and sworn to before me
this 12th day of January, 1999.
/s/ Marilyn Weinstein
------------------------
(NOTARIAL SEAL)
TEXAS-NEW MEXICO POWER COMPANY
and
CHASE BANK OF TEXAS, N.A.
as Trustee
INDENTURE
Dated as of
January 1, 1999
Providing for Issuance of Securities
<PAGE>
TEXAS-NEW MEXICO POWER COMPANY
Reconciliation and tie between the Trust Indenture Act and Indenture,
dated as of January 1, 1999
Trust Indenture Indenture
Act Section Section
Sec. 310(a)(1)............................................... 6.9
(a)(2)............................................... 6.9
(a)(3)............................................... Not Applicable
(a)(4)............................................... Not Applicable
(a)(5)............................................... 6.9
(b).................................................. 6.8, 6.10
(c).................................................. Not Applicable
Sec. 311 .................................................... 6.13
Sec. 312(a).................................................. 7.1
(b).................................................. 7.2(a)
(c).................................................. 7.2(c)
Sec. 313(a).................................................. 7.3(a)
(b).................................................. 7.3(b)
(c).................................................. 7.3(a)
(d).................................................. 7.3(c)
Sec. 314(a)(1)(2)(3)......................................... 7.4
(a)(4)............................................... 10.4
(b).................................................. Not Applicable
(c)(1)............................................... 1.2
(c)(2)............................................... 1.2
(c)(3)............................................... Not Applicable
(d).................................................. Not Applicable
(e).................................................. 1.2
Sec. 315(a).................................................. 6.1(a), 6.1(c)
(b).................................................. 6.2
(c).................................................. 6.1(b)
(d).................................................. 6.1(c)
(d)(1)............................................... 6.1(a)
(d)(2)............................................... 6.1(c)(2)
(d)(3)............................................... 6.1(c)(3)
(e).................................................. 5.14
Sec. 316(a).................................................. 1.1
(a)(1)(A)............................................ 5.12, 5.14
(a)(1)(B)............................................ 5.13
(a)(2)............................................... Not Applicable
(b).................................................. 5.8
(c).................................................. 1.4(d)
Sec. 317(a)(1)............................................... 5.3
(a)(2)............................................... 5.4
(b).................................................. 10.3
Sec. 318(a).................................................. 1.7
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 Definitions and Other Provisions of General Application.............1
Section 1.1 Definitions......................................................1
"Act" 2
"Affiliate" 2
"Attributable Value" 2
"Authenticating Agent" 2
"Board of Directors" 2
"Board Resolution" 2
"Business Day" 2
"Commission" 2
"Company" 3
"Company Request" and "Company Order" 3
"Consolidated Capitalization" 3
"Corporate Trust Office" 3
"Corporation" 3
"Covenant Defeasance" 3
"Defaulted Interest" 3
"Defeasance" 3
"Depositary" 3
"Event of Default" 3
"Exchange Act" 3
"Federal Bankruptcy Act" 3
"Funded Indebtedness" 4
"Global Security" 4
"Holder" 4
"Indebtedness" 4
"Indenture" 4
"Independent" 5
"Interest" 5
"Interest Payment Date" 5
"Investment Company Act" 5
"Lien" 5
"Maturity" 5
"Net Tangible Assets" 5
"Notice of Default" 5
"Officer" 5
"Officers' Certificate" 5
"Opinion of Counsel" 6
"Original Issue Discount Security" 6
"Outstanding" 6
"Paying Agent" 7
"Periodic Offering" 7
"Person" 7
"Place of Payment" 7
"Predecessor Securities" 7
"Redemption Date" 7
"Redemption Price" 7
"Regular Record Date" 8
"Repayment Date" 8
"Repayment Price" 8
"Responsible Officer" 8
"Sale and Leaseback Transaction" 8
"Securities Act" 8
"Security" 8
"Security Register" 8
"Security Registrar" 8
"Special Record Date" 8
"Stated Maturity" 9
"Subsidiary" 9
"Trust Indenture Act" 9
"Trustee" 9
"U.S. Government Obligations" 9
"Vice President" 9
Section 1.2 Compliance Certificates and Opinions.....................9
Section 1.3 Form of Documents Delivered to Trustee..................10
Section 1.4 Acts of Holders.........................................10
Section 1.5 Notices, etc., to Trustee and Company...................11
Section 1.6 Notices to Holders; Waiver..............................12
Section 1.7 Conflict with Trust Indenture Act.......................12
Section 1.8 Effect of Headings and Table of Contents................12
Section 1.9 Successors and Assigns..................................12
Section 1.10 Separability Clause....................................12
Section 1.11 Benefits of Indenture..................................13
Section 1.12 Governing Law..........................................13
Section 1.13 Legal Holidays.........................................13
Section 1.14 Counterparts...........................................13
Section 1.15 No Recourse Against Others.............................13
ARTICLE 2 Security Forms.............................................13
Section 2.1 Forms Generally.........................................13
Section 2.2 Forms of Securities.....................................14
Section 2.3 Form of Trustee's Certificate of Authentication.........14
Section 2.4 Securities Issuable in the Form of a Global Security....14
ARTICLE 3 The Securities.............................................16
Section 3.1 General Title; General Limitations; Issuable in
Series; Terms of Particular Series...........................16
Section 3.2 Denominations...........................................18
Section 3.3 Execution, Authentication, Delivery and Dating..........18
Section 3.4 Temporary Securities....................................21
Section 3.5 Registration, Transfer and Exchange.....................21
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities........22
Section 3.7 Payment of Interest; Interest Rights Preserved..........23
Section 3.8 Persons Deemed Owners...................................24
Section 3.9 Cancellation............................................24
Section 3.10 Computation of Interest................................25
Section 3.11 Periodic Offering of Securities........................25
Section 3.12 CUSIP Numbers..........................................25
ARTICLE 4 Satisfaction and Discharge.................................25
Section 4.1 Satisfaction and Discharge of Indenture.................25
Section 4.2 Application of Trust Money..............................27
ARTICLE 5 Remedies...................................................27
Section 5.1 Events of Default.......................................27
Section 5.2 Acceleration of Maturity; Rescission and Annulment......28
Section 5.3 Collection of Indebtedness and Suits for Enforcement
by Trustee...................................................29
Section 5.4 Trustee May File Proofs of Claim........................30
Section 5.5 Trustee May Enforce Claims Without Possession
of Securities................................................30
Section 5.6 Application of Money Collected..........................31
Section 5.7 Limitation on Suits.....................................31
Section 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest.........................................31
Section 5.9 Restoration of Rights and Remedies......................32
Section 5.10 Rights and Remedies Cumulative.........................32
Section 5.11 Delay or Omission Not Waiver...........................32
Section 5.12 Control by Holders.....................................32
Section 5.13 Waiver of Defaults.....................................32
Section 5.14 Undertaking for Costs..................................33
Section 5.15 Waiver of Stay or Extension Laws.......................33
ARTICLE 6 The Trustee................................................33
Section 6.1 Certain Duties and Responsibilities.....................33
Section 6.2 Notice of Defaults......................................34
Section 6.3 Certain Rights of Trustee...............................35
Section 6.4 Not Responsible for Recitals or Issuance of Securities..36
Section 6.5 May Hold Securities.....................................36
Section 6.6 Money Held in Trust.....................................36
Section 6.7 Compensation and Reimbursement..........................36
Section 6.8 Disqualification; Conflicting Interests.................37
Section 6.9 Corporate Trustee Required; Eligibility.................37
Section 6.10 Resignation and Removal; Appointment of Successor......37
Section 6.11 Acceptance of Appointment by Successor.................39
Section 6.12 Merger, Conversion, Consolidation or Successor
to Business..................................................40
Section 6.13 Preferential Collection of Claims Against Company......40
Section 6.14 Appointment of Authenticating Agent....................43
Section 6.15 No Conflict.............................................44
ARTICLE 7 Holders' Lists and Reports byTrustee and Company...........46
Section 7.1 Company to Furnish Trustee Names and Addresses of
Holders......................................................46
Section 7.2 Preservation of Information; Communications to
Holders......................................................46
Section 7.3 Reports by Trustee......................................47
Section 7.4 Reports by Company......................................48
Section 7.5 Statement by Officers as to Default.....................49
ARTICLE 8 Consolidation, Merger, Conveyance, Transfer or Lease.......49
Section 8.1 Company May Consolidate, etc. Only on Certain Terms.....49
Section 8.2 Successor Corporation Substituted.......................50
ARTICLE 9 Supplemental Indentures....................................50
Section 9.1 Supplemental Indenture Without Consent of Holders.......50
Section 9.2 Supplemental Indentures With Consent of Holders.........51
Section 9.3 Execution of Supplemental Indentures....................52
Section 9.4 Effect of Supplemental Indentures.......................52
Section 9.5 Conformity with Trust Indenture Act.....................52
Section 9.6 Reference in Securities to Supplemental Indentures......53
ARTICLE 10 Covenants.................................................53
Section 10.1 Payment of Principal, Premium and Interest.............53
Section 10.2 Maintenance of Office or Agency........................53
Section 10.3 Money for Security Payments to Be Held in Trust........53
Section 10.4 Statement as to Compliance.............................55
Section 10.5 Corporate Existence....................................55
Section 10.6 Maintenance of Properties..............................55
Section 10.7 Maintenance of Insurance...............................55
Section 10.8 Waiver of Certain Covenants............................55
Section 10.9 Further Assurances.....................................56
Section 10.10 Restrictions on Liens.................................56
Section 10.11 Restrictions on Sale and Leaseback Transactions.......58
Section 10.12 Compliance with Laws...................................58
Section 10.13 Payment of Taxes and Claims............................59
ARTICLE 11 Redemption of Securities..................................59
Section 11.1 Applicability of Article...............................59
Section 11.2 Election to Redeem; Notice to Trustee..................59
Section 11.3 Selection by Trustee of Securities to Be Redeemed......59
Section 11.4 Notice of Redemption...................................60
Section 11.5 Deposit of Redemption Price............................60
Section 11.6 Securities Payable on Redemption Date..................61
Section 11.7 Securities Redeemed in Part............................61
ARTICLE 12 Sinking Funds.............................................61
Section 12.1 Applicability of Article...............................61
Section 12.2 Satisfaction of Sinking Fund Payments with Securities..61
Section 12.3 Redemption of Securities for Sinking Fund..............62
ARTICLE 13Defeasance and Covenant Defeasance ........................62
Section 13.1 Company's Right with Respect to Defeasance or Covenant
Defeasance...................................................62
Section 13.2 Defeasance and Discharge...............................62
Section 13.3 Covenant Defeasance....................................63
Section 13.4 Conditions to Defeasance or Covenant Defeasance........63
Section 13.5 Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions......................65
Section 13.6 Reinstatement..........................................65
<PAGE>
INDENTURE dated as of January 1, 1999 (the "Indenture"),
between TEXAS-NEW MEXICO POWER COMPANY, a corporation duly organized and
existing under the laws of the State of Texas (hereinafter called the
"Company"), having its principal place of business at 4100 International Plaza,
Fort Worth, Texas 76113 and CHASE BANK OF TEXAS, N.A., a national banking
association, duly organized and existing under the laws of the United States of
America, as trustee hereunder (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance from time to time of its debentures,
notes, bonds or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more fully registered series as in this
Indenture provided.
All things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
AGREEMENTS OF THE PARTIES
To set forth or to provide for the establishment of the terms
and conditions upon which the Securities are to be authenticated, issued and
delivered, and in consideration of the premises and the purchase of Securities
by the Holders thereof, it is mutually covenanted and agreed as follows, for the
equal and proportionate benefit of all Holders of the Securities or of a series
thereof, as the case may be:
ARTICLE 1
Definitions and Other Provisions
of General Application
Section 1.1 Definitions.
For all purposes of this Indenture and of any indenture supplemental hereto,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act or by Commission rule under the Trust Indenture Act, either
directly or by reference therein, have the meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with United States generally accepted
accounting principles, and, except as otherwise herein expressly provided, the
term "generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such United States accounting
principles as are generally accepted at the date of such computation;
(d) all references in this instrument to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this instrument. The words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other subdivision; and
(e) "including" and words of similar import shall be deemed
to be followed by "without limitation."
"Act", when used with respect to any Holder, has the meaning
specified in Section 1.4.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Attributable Value" in respect of any Sale and Leaseback
Transaction means, as of the time of determination, the lesser of (i) the sale
price of the Property so leased multiplied by a fraction the numerator of which
is the remaining portion of the base term of the lease included in such Sale and
Leaseback Transaction and the denominator of which is the base term of such
lease, and (ii) the total obligation (discounted to present value at the rate of
interest specified by the terms of such lease) of the lessee for rental payments
(other than amounts required to be paid on account of property taxes as well as
maintenance, repairs, insurance, water rates and other items which do not
constitute payments for property rights) during the remaining portion of the
base term of the lease included in such Sale and Leaseback Transaction.
"Authenticating Agent" means any Person authorized by the
Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series under Section 6.14.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that
board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Board of Directors of the Company
to have been duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"Business Day" means each day which is neither a Saturday,
Sunday or other day on which banking institutions in the pertinent Place or
Places of Payment are authorized or required by law or executive order to be
closed.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" and "Company Order" mean, respectively, a
written request or order signed in the name of the Company by any two of the
following: its Chairman of the Board, its Vice Chairman of the Board, President
or a Vice President, its Treasurer, Assistant Treasurer, its Controller,
Assistant Controller, its Secretary or Assistant Secretary, its principal
financial officer, its principal accounting officer or any other officer,
employee or agent of the Company duly authorized by a Board Resolution and
delivered to the Trustee.
"Consolidated Capitalization" of the Company means
consolidated total assets less consolidated non-interest bearing current
liabilities, all as shown by a consolidated balance sheet of the Company and all
Subsidiaries prepared in accordance with generally accepted accounting
principles at the date of such balance sheet.
"Corporate Trust Office" means the principal office of the
Trustee in Dallas, Texas at which at any particular time its corporate trust
business shall be administered, which office at the date hereof is located at
2200 Ross Avenue, 5th Floor, Dallas, Texas 75201, except that with respect to
presentation of Securities for payment or for registration of transfer or
exchange, such term shall mean the office or agency of the Trustee at which at
any particular time its corporate agency business shall be conducted; and such
other officer as the Trustee may designate from time to time.
"Corporation" means a corporation, association, company,
joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in Section
13.3.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Defeasance" has the meaning specified in Section 13.2.
"Depositary" means, unless otherwise specified by the Company
pursuant to either Section 2.4 or Section 3.1, with respect to Securities of any
series issuable or issued as a Global Security, The Depository Trust Company,
New York, New York, or any successor thereto registered as a clearing agency
under the Exchange Act or other applicable statute or regulation.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Federal Bankruptcy Act" has the meaning specified in Section
6.13.
"Funded Indebtedness" means notes, bonds, debentures or other
similar evidences of Indebtedness for money borrowed which by its terms matures
at or is extendible or renewable at the option of the obligor to a date more
than 12 months after the date of the creation of such Indebtedness.
"Global Security" means, with respect to any series of
Securities issued hereunder, a Security which is executed by the Company and
authenticated and delivered by the Trustee to the Depositary or pursuant to the
Depositary's instruction, all in accordance with this Indenture and an indenture
supplemental hereto, if any, or Board Resolution and pursuant to a Company
Request, which shall be registered in the name of the Depositary or its nominee
and which shall represent, and shall be denominated in an amount equal to the
aggregate principal amount of, all of the Outstanding Securities of such series
or any portion thereof, in either case having the same terms, including the same
original issue date, date or dates on which principal is due, and interest rate
or method of determining interest.
"Holder", when used with respect to any Security, means the
Person in whose name such Security is registered in the Security Register.
"Indebtedness" means, with respect to any Person (without
duplication), (a) any liability of such Person (1) for borrowed money or under
any reimbursement obligation relating to a letter of credit, financial bond or
similar instrument or agreement, (2) evidenced by a bond, note, debenture or
similar instrument or agreement (including a purchase money obligation) given in
connection with the acquisition of any business, properties or assets of any
kind (other than a trade payable or a current liability arising in the ordinary
course of business or a performance bond or similar obligation), (3) for the
payment of money relating to any obligations under any capital lease of real or
personal property or (4) for purposes of Sections 10.6 and 10.7, under any
agreement or instrument in respect of an interest rate or currency swap,
exchange or hedging transaction or other financial derivatives transaction; (b)
any liability of others described in the preceding clause (a) that the Person
has guaranteed or that is otherwise its legal liability; and (c) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (a) and (b) above. For the purpose
of determining any particular amount of Indebtedness under this definition,
guarantees of (or obligations with respect to letters of credit or financial
bonds supporting) Indebtedness otherwise included in the determination of such
amount shall not be included.
"Indenture" or "this Indenture" means this instrument as
originally executed or as it may from time to time be supplemented or amended by
one or more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof and shall include the terms of particular series of
Securities established as contemplated by Section 3.1; provided, however, that
if at any time more than one Person is acting as Trustee under this instrument
due to the appointment of one or more separate Trustees for any one or more
separate series of Securities pursuant to Section 6.10, "Indenture" shall mean,
with respect to such series of Securities for which any such Person is Trustee,
this instrument as originally executed or as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof and including the terms of the
particular series of Securities for which such Person is Trustee established as
contemplated by Section 3.1, exclusive, however, of any provisions or terms
which relate solely to other series of Securities for which such Person is not
Trustee, regardless of when such terms or provisions were adopted, and exclusive
of any provisions or terms adopted by means of one or more indentures
supplemental hereto executed and delivered after such Person had become such
Trustee but to which such Person, as such Trustee, was not a party.
"Independent", when used with respect to any specified Person,
means such a Person who (1) is in fact independent, (2) does not have any direct
financial interest or any material indirect financial interest in the Company or
in any other obligor upon the Securities or in any Affiliate of the Company or
of such other obligor, and (3) is not at the relevant time connected with the
Company or such other obligor or any Affiliate of the Company or of such other
obligor, as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions. Whenever it is herein provided
that any Independent Person's opinion or certificate shall be furnished to the
Trustee, such Person shall be appointed by a Company Order, and such opinion or
certificate shall state that the signer has read this definition and that the
signer is Independent within the meaning hereof.
"Interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after Maturity, means
interest payable after Maturity.
"Interest Payment Date", when used with respect to any series
of Securities, means the Stated Maturity of any installment of interest on those
Securities.
"Investment Company Act" means the Investment Company Act of
1940 and any statute successor thereto, in each case as amended from time to
time.
"Lien" means, with respect to any Property, any mortgage or
deed of trust, pledge, hypothecation, assignment, security interest, lien,
encumbrance, or other security arrangement of any kind or nature whatsoever on
or with respect to such Property (including any conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"Maturity", when used with respect to any Securities, means
the date on which the principal of any such Security or an installment of
principal becomes due and payable as therein or herein provided, whether on a
Repayment Date, at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"Net Tangible Assets" means the amount shown as total assets
on the consolidated balance sheet of the Company prepared in accordance with
generally accepted accounting principles on the date of such balance sheet, less
the following: (i) intangible assets including, but without limitation, such
items as goodwill, trademarks, tradenames, patents and unamortized debt discount
and expense and other regulatory assets carried as an asset on the balance
sheet; and (ii) appropriate adjustments, if any, on account of minority
interests.
"Notice of Default" means a written notice of the kind
specified in Section 5.1(d).
"Officer" means the Chairman of the Board, the Vice Chairman
of the Board, the President or a Vice President, the Treasurer, an Assistant
Treasurer, the Controller, an Assistant Controller, the Secretary or an
Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by any two
of the following: the Chairman of the Board, the Vice Chairman of the Board, the
President or a Vice President, the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary of
the Company, its principal financial officer, its principal accounting officer
or any other officer, employee or agent of the Company duly authorized by a
Board Resolution, and delivered to the Trustee. Wherever this Indenture requires
that an Officers' Certificate be signed also by an engineer or an accountant or
other expert, such engineer, accountant or other expert (except as otherwise
expressly provided in this Indenture) may be in the employ of the Company.
"Opinion of Counsel" means a written opinion of counsel, who
may (except as otherwise expressly provided in this Indenture) be an employee of
or counsel to the Company. Such counsel shall be acceptable to the Trustee,
whose acceptance shall not be unreasonably withheld.
"Original Issue Discount Security" means any Security deemed
an Original Issue Discount Security for United States federal income tax
purposes.
"Outstanding", when used with respect to Securities or
Securities of any series, means, as of the date of determination, all such
Securities theretofore authenticated and delivered under this Indenture, except:
(a) such Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) such Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated in
trust by the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture and provision therefor satisfactory to the Trustee has been made;
(c) Securities as to which Defeasance has been effected
pursuant to Section 13.2; and
(d) such Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this Indenture, or
which shall have been paid pursuant to the terms of Section 3.6 (except with
respect to any such Security as to which proof satisfactory to the Trustee is
presented that such Security is held by a Person in whose hands such Security is
a legal, valid and binding obligation of the Company).
In determining whether the Holders of the requisite principal amount of such
Securities Outstanding have given, made or taken any request, demand,
authorization, direction, notice, consent or waiver hereunder as of any date,
(A) the principal amount of an Original Issue Discount Security which shall be
deemed to be Outstanding shall be the amount of the principal thereof which
would be due and payable as of such date upon acceleration of the Maturity
thereof to such date pursuant to Section 5.2, (B) if, as of such date, the
principal amount payable at the Stated Maturity of a Security is not
determinable, the principal amount of such Security which shall be deemed to be
Outstanding shall be the amount as specified or determined as contemplated by
Section 3.1, (C) the principal amount of a Security denominated in one or more
foreign currencies or currency units which shall be deemed to be Outstanding
shall be the U.S. dollar equivalent, determined as of such date in the manner
provided as contemplated by Section 3.1, of the principal amount of such
Security (or, in the case of a Security described in clause (A) or (B) above, of
the amount determined as provided in such clause), and (D) Securities owned by
the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent, waiver or other action, only Securities which a Responsible Officer of
the Trustee actually knows to be owned by the Company or any other obligor upon
the Securities or any Affiliate of the Company or such other obligor upon the
Securities or any Affiliate of the Company or such other obligor shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee certifies to the Trustee the pledgee's
right to act as owner with respect to such Securities and that the pledgee is
not the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of or any premium or interest on any Securities on behalf of
the Company.
"Permitted Encumbrances" has the meaning specified in Section
10.10.
"Periodic Offering" means an offering of Securities of a
series from time to time the specific terms of which Securities, including
without limitation the rate or rates of interest (or formula for determining the
rate or rates of interest), if any, thereon, the Stated Maturity or Maturities
thereof and the redemption provisions, if any, with respect thereto, are to be
determined by the Company or its agents upon the issuance of such Securities.
"Person" means any individual, corporation, partnership, joint
venture, association, company, trust, unincorporated organization or government
or any agency or political subdivision thereof.
"Place of Payment" means, with respect to any series of
Securities issued hereunder, the city or political subdivision in which the
Paying Agent is located and so designated with respect to the series of
Securities in question in accordance with the provisions of Section 3.1, which
if not so designated shall be The City of New York.
"Predecessor Securities" of any particular Security means
every previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this definition,
any Security authenticated and delivered under Section 3.6 in exchange for or in
lieu of a lost, mutilated, destroyed or stolen Security shall be deemed to
evidence the same debt as the lost, mutilated, destroyed or stolen Security.
"Property" of any Person shall mean all such Person's (i)
property and assets and (ii) rights to and interests in all property and assets.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price specified in such Security or pursuant to this
Indenture at which it is to be redeemed pursuant to this Indenture or, if not
specified, at 100% of the outstanding principal amount thereof.
"Regular Record Date" for the interest payable on the
Securities of any series on any Interest Payment Date means the date specified
in such Securities of any series or pursuant to this Indenture as the Regular
Record Date, irrespective of whether such date is a Business Day.
"Repayment Date", when used with respect to any Security to be
repaid at the option of the Holder, means the date fixed for such repayment in
such Security or pursuant to this Indenture.
"Repayment Price", when used with respect to any Security to
be repaid at the option of the Holder, means the price specified in such
Security or pursuant to this Indenture at which it is to be repaid pursuant to
such Security.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
senior trust officer or trust officer, the controller and any assistant
controller, or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Sale and Leaseback Transaction" has the meaning specified in
Section 10.11.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" has the meaning stated in the first recital of this
Indenture and more particularly means any Security authenticated and delivered
under this Indenture; provided, however, that if at any time there is more than
one Person acting as Trustee under this Indenture, "Security" with respect to
the Indenture as to which such Person is Trustee shall have the meaning stated
in the first recital of this Indenture and shall more particularly mean a
Security authenticated and delivered under this Indenture, exclusive, however,
of a Security of any series as to which such Person is not Trustee.
"Security Register" shall have the meaning specified in
Section 3.5.
"Security Registrar" means the Person who keeps the Security
Register specified in Section 3.5.
"Special Record Date" for the payment of any Defaulted
Interest (as defined in Section 3.7) means a date fixed by the Trustee pursuant
to Section 3.7.
"Stated Maturity", when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal of such
Security or such installment of principal or interest is due and payable.
"Subsidiary" means any corporation or other business entity of
which the Company owns or controls (either directly or through one or more other
Subsidiaries) more than 50% of the issued share capital or other ownership
interests, in each case having ordinary voting power to elect or appoint
directors, managers or trustees of such corporation or other business entity
(whether or not capital stock or other ownership interests or any other class or
classes shall or might have voting power upon the occurrence of any
contingency).
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended, as in force at the date as of which this Indenture was executed;
provided, however, that in the event that such Act is amended after such date,
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean and include each Person who is then a Trustee hereunder. If
at any time there is more than one such Person, "Trustee" as used with respect
to the Securities of any series shall mean the Trustee with respect to the
Securities of that series.
"U.S. Government Obligations" means securities that are (1)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (2) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof or any other
Person, and shall also include a depository receipt issued by a bank (as defined
in Section 3(a)(2) of the Securities Act), as custodian with respect to any
obligation or a specific payment of principal of or interest on any such
obligation held by such custodian for the account of the holder of such
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the obligation or the specific payment of principal of or interest on the
obligation evidenced by such depository receipt.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president," including an
assistant vice president.
Section 1.2 Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee (a) an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and (b) an Opinion of Counsel stating that in the opinion of counsel providing
such Opinion all such conditions precedent, if any, have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance by or
on behalf of the Company with a condition or covenant provided for in this
Indenture (except for the written statement required by Section 10.4) shall
include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such officer, the
officer has made such examination or investigation as is necessary to enable the
person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.3 Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to the other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such Officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such certificate or opinion is based are
erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless counsel providing
such Opinion of Counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Section 1.4 Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Indenture to be given, made or taken by Holders of any series
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee, and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness to such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by an officer of a corporation or a member of a partnership, on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his or her authority. The fact and date of
the execution of any such instrument or writing, or the authority of the person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(c) The ownership of Securities shall be proved by the
Security Register.
(d) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other action, 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, waiver or other action, but the
Company shall have no obligation to do so. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other
action may be given before or after the 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 determining whether Holders of the requisite proportion of
Securities Outstanding have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other action, and
for that purpose the Securities Outstanding shall be computed as of the record
date; provided that no such authorization, agreement or consent by the Holders
on the record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than 180 days after the
record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Security shall bind every
future Holder and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof, in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon whether or not notation of such action is made upon such
Security.
(f) Without limiting the foregoing, a Holder entitled
hereunder to give or take any such action with regard to any particular Security
may do so with regard to all or any part of the principal amount of such
Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any different part of such
principal amount.
Section 1.5 Notices, etc., to Trustee and Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office, Attn: Corporate
Trust Department, with a courtesy copy to the Trustee's counsel (which shall not
constitute Notice to the Trustee): McGuire, Craddock, Strother & Hale, P.C.,
3550 Lincoln Plaza, Dallas, Texas 75201, Attn: Charles J. McGuire, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (except as otherwise expressly provided
herein or, in the case of a request for repayment, as specified in the Security
carrying the right to repayment) if in writing and mailed by courier to the
Company addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously furnished
in writing to the Trustee by the Company or telecopied and confirmed by mail.
Section 1.6 Notices to Holders; Waiver. Where this Indenture
or any Security provides for notice to Holders of any event, such notice shall
be sufficiently given (unless otherwise herein or in such Security expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at its address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
or any Security provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or otherwise, it shall be impractical to
mail notice of any event to any Holder when such notice is required to be given
pursuant to any provision of this Indenture, then any method of notification as
shall be satisfactory to the Trustee and the Company shall be deemed to be a
sufficient giving of such notice.
Section 1.7 Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with a provision of the Trust
Indenture Act that is required under the Trust Indenture Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
Section 1.8 Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 1.9 Successors and Assigns. All covenants and
agreements in this Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
Section 1.10 Separability Clause. In case any provision in
this Indenture or in the Securities shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 1.11 Benefits of Indenture. Nothing in this Indenture
or in any Securities, express or implied, shall give to any Person, other than
the parties hereto and their successors hereunder, any Authenticating Agent, any
Paying Agent, the Security Registrar, and their successors hereunder and the
Holders of Securities (or such of them as may be affected thereby), any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12 GOVERNING LAW. THIS INDENTURE AND THE SECURITIES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
Section 1.13 Legal Holidays. Except as may be otherwise
specified with respect to any particular Securities, in any case where any
Interest Payment Date, Redemption Date or Stated Maturity of any Security shall
not be a Business Day at any Place of Payment, then (notwithstanding any other
provision of this Indenture or of the Securities) payment of interest or
principal (and premium, if any) need not be made at such Place of Payment on
such date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date,
Redemption Date or at the Stated Maturity, and no interest shall accrue on such
payment for the period from and after such Interest Payment Date, Redemption
Date or at the Stated Maturity, as the case may be.
Section 1.14 Counterparts. This instrument may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 1.15 No Recourse Against Others. A director, officer,
employee or shareholder, as such, of the Company, shall not have liability for
any obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Holder shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of the Securities.
ARTICLE 2
Security Forms
Section 2.1 Forms Generally. The Securities of each series
shall be in substantially the forms set forth in this Article 2, or in such
other form as shall be established by or pursuant to a Board Resolution and set
forth in an Officers' Certificate or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with applicable laws or
regulations or with the rules of any securities exchange or Depositary therefor,
or as may, consistently herewith, be determined by the Officers executing such
Securities, as evidenced by their execution of the Securities. Any portion of
the text of any Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security. If the form of
Securities of any series is established by action taken pursuant to a Board
Resolution, a copy of an appropriate record of such action shall be certified by
the Secretary or an Assistant Secretary of the Company and delivered to the
Trustee at or prior to the delivery of the Company Order contemplated by Section
3.3 for the authentication and delivery of such Securities.
The definitive Securities shall be printed, typewritten,
mimeographed, lithographed or engraved or produced by any combination of these
methods on steel engraved borders or may be produced in any other manner, all as
determined by the Officers of the Company executing such Securities, as
evidenced by their execution of such Securities, subject, with respect to the
Securities of any series, to the rules of any securities exchange on which such
Securities are listed.
Section 2.2 Forms of Securities. Each Security shall be in the
form of Exhibit A hereto or in one of the forms approved from time to time by or
pursuant to a Board Resolution or established in one or more indentures
supplemental hereto. Prior to the delivery of a Security to the Trustee for
authentication in any form approved by or pursuant to a Board Resolution, the
Company shall deliver to the Trustee the Board Resolution by or pursuant to
which such form of Security has been approved, which Board Resolution shall have
attached thereto a true and correct copy of the form of Security which has been
approved thereby or, if a Board Resolution authorizes a specific person or
persons to approve a form of Security, a certificate of such person or persons
approving the form of Security attached thereto. Any form of Security approved
by or pursuant to a Board Resolution must be acceptable as to form to the
Trustee, such acceptance to be evidenced by the Trustee's authentication of
Securities in that form or a certificate signed by a Responsible Officer of the
Trustee and delivered to the Company.
Section 2.3 Form of Trustee's Certificate of Authentication.
The form of Trustee's Certificate of Authentication for any Security issued
pursuant to this Indenture shall be substantially as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: [ ],
as Trustee
By:
Authorized Signatory
Section 2.4 Securities Issuable in the Form of a Global
Security. (a) If the Company establishes pursuant to Sections 2.2 and 3.1 that
the Securities of a particular series are to be issued in whole or in part in
the form of one or more Global Securities, then the Company shall execute and
the Trustee or its agent shall, in accordance with Section 3.3 and the Company
Request delivered to the Trustee or its agent thereunder, authenticate and make
available for delivery such Global Security or Securities which (i) shall
represent, and shall be denominated in an amount equal to the aggregate
principal amount of, the Outstanding Securities of such series to be represented
by such Global Security or Securities or such portion thereof as the Company
shall specify in a Company Request, (ii) shall be registered in the name of the
Depositary for such Global Security or Securities or its nominee, (iii) shall be
made available for delivery by the Trustee or its agent to the Depositary or
pursuant to the Depositary's instruction and (iv) shall bear the legends with
respect to Global Securities substantially to the effect set forth in Exhibit A.
(b) Notwithstanding any other provisions of this Section 2.4
or of Section 3.5, but subject to the provisions of paragraph (c) below, unless
the terms of a Global Security expressly permit such Global Security to be
exchanged in whole or in part for individual Securities, a Global Security may
be transferred, in whole but not in part and in the manner provided in Section
3.5, only to a nominee of the Depositary for such Global Security, to the
Depositary, to a successor Depositary for such Global Security selected or
approved by the Company or to a nominee of such successor Depositary.
(c) (i) If at any time the Depositary for a Global Security
notifies the Company that it is unwilling or unable to continue as Depositary
for such Global Security or if at any time the Depositary for the Securities for
such series ceases to be a clearing agency registered under the Exchange Act or
other applicable statute or regulation, the Company shall appoint a successor
Depositary with respect to such Global Security. If a successor Depositary for
such Global Security is not appointed by the Company within 90 days after the
Company receives such notice or becomes aware of such ineligibility, the Company
will execute, and the Trustee or its agent, upon receipt of a Company Request
for the authentication and delivery of individual Securities of such series in
exchange for such Global Security, will authenticate and make available for
delivery, individual Securities of such series of like tenor and terms in an
aggregate principal amount equal to the principal amount of the Global Security
in exchange for such Global Security.
(ii) The Company may at any time and in its sole discretion
determine that the Securities of any series or portion thereof issued or
issuable in the form of one or more Global Securities shall no longer be
represented by such Global Security or Securities. In such event the Company
will execute, and the Trustee or its agent, upon receipt of a Company Request
for the authentication and delivery of individual Securities of such series in
exchange in whole or in part for such Global Security, will authenticate and
make available for delivery individual Securities of such series of like tenor
and terms in definitive form in an aggregate principal amount equal to the
principal amount of such Global Security or Securities representing such series
or portion thereof in exchange for such Global Security or Securities.
(iii) If specified by the Company pursuant to Sections 2.2 and
3.1 with respect to Securities issued or issuable in the form of one or more
Global Securities, the Depositary for such Global Security or Securities may
surrender such Global Security or Securities in exchange in whole or in part for
individual Securities of such series of like tenor and terms in definitive form
on such terms as are acceptable to the Company and such Depositary. Thereupon
the Company shall execute, and the Trustee or its agent shall authenticate and
make available for delivery, without service charge, (1) to each Person
specified by such Depositary a new Security or Securities of the same series of
like tenor and terms and of any authorized denomination as requested by such
Person in aggregate principal amount equal to and in exchange for such Person's
beneficial interest in the Global Security or Securities and (2) to such
Depositary a new Global Security or Securities of like tenor and terms and in an
authorized denomination equal to the difference, if any, between the principal
amount of the surrendered Global Security or Securities and the aggregate
principal amount of Securities delivered to the Holders thereof.
(iv) In any exchange provided for in any of the preceding four
paragraphs, the Company will execute and the Trustee or its agent will
authenticate and make available for delivery individual Securities in definitive
registered form in authorized denominations. Upon the exchange of the entire
principal amount of a Global Security for individual Securities, such Global
Security shall be cancelled by the Trustee or its agent. Except as provided in
the immediately preceding paragraph, Securities issued in exchange for a Global
Security pursuant to this Section shall be registered in such names and in such
authorized denominations as the Depositary for such Global Security, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee or the Security Registrar. The Trustee or the Security
Registrar shall deliver such Securities to the Persons in whose names such
Securities are so registered.
ARTICLE 3
The Securities
Section 3.1 General Title; General Limitations; Issuable in
Series; Terms of Particular Series. The aggregate principal amount of securities
which may be authenticated and delivered and Outstanding under this Indenture is
not limited.
The Securities issued under this Indenture may be issued in
one or more series up to an aggregate principal amount of Securities as from
time to time may be authorized by the Board of Directors. The Securities shall
be direct, unsecured (unless one or more series of Securities is secured
pursuant to the provision of a supplement to this Indenture) obligations of the
Company and shall rank without preference or priority among themselves and pari
passu with all existing and future unsecured and unsubordinated Indebtedness of
the Company, provided, that if any existing or future Indebtedness of the
Company or any Subsidiary or any other Person is secured by any Lien on any
Property of the Company or any Subsidiary, whether such Lien is assumed or
created or otherwise brought into existence prior to the issuance of any
Securities under this Indenture or thereafter, then such Securities shall be
secured to the extent provided in Section 10.10 hereof. All Securities of each
series under this Indenture shall in all respects be equally and ratably
entitled to the benefits hereof with respect to such series without preference,
priority or distinction on account of the actual time of the authentication and
delivery or Stated Maturity of the Securities of such series.
Each series of Securities shall be created either by or
pursuant to a Board Resolution or by or pursuant to an indenture supplemental
hereto. The Securities of each such series may bear such date or dates, be
payable at such place or places, have such Stated Maturity or Maturities, bear
interest at such rate or rates (which may be fixed or floating), from such date
or dates, payable in such installments and on such dates and at such place or
places to the Holders of Securities registered as such on the related Regular
Record Dates, or may bear no interest, and may be redeemable or repayable at
such Redemption Price or Prices or Repayment Price or Prices, as the case may
be, whether at the option of the Holder or otherwise, and upon such terms, all
as shall be provided for in or pursuant to the Board Resolution or in or
pursuant to the supplemental indenture creating that series. There may also be
established in or pursuant to a Board Resolution and, subject to Section 3.3,
set forth, or determined in the manner provided, in an Officers' Certificate, or
pursuant to a supplemental indenture prior to the issuance of Securities of each
such series, provision for:
(a) the title of the Securities of the series (which shall
distinguish the Securities of the series from all other series of Securities);
(b) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Sections 3.4, 3.5, 3.6, 9.6 or
11.7 hereof and except for any Securities which, pursuant to Section
3.3 hereof, are deemed never to have been authenticated and delivered
hereunder);
(c) the Person to whom any interest on a Security of the
series shall be payable, if other than the Person in whose name the
Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest;
(d) the date or dates on which the principal or installments
of principal of any Securities of the series is payable and any rights
to extend such date or dates and the duration of such extension;
(e) the rate or rates (which may be fixed or variable) per annum at
which the Securities of the series will bear interest or the method by
which such rate or rates shall be determined, the date from which such
interest will accrue or the method by which such date or dates shall be
determined and the right (if any) to extend such dates and the duration
of such extension;
(f) the obligation, if any, of the Company to redeem, repay or
purchase any Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof, and the
period or periods within which, the price or prices at which and the
terms and conditions upon which any Securities of the series shall be
redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation;
(g) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Securities of the
series shall be issuable;
(h) if other than the principal amount thereof, the portion of
the principal amount of Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 5.2 hereof;
(i) if other than such coin or currency of the United States
of America as at the time of payment is legal tender for payment of
public or private debts, the coin or currency in which payment of the
principal of (and premium, if any) and interest, if any, on the
Securities of the series shall be payable and the manner of determining
the equivalent thereof in the currency of the United States of America
for any purpose, including for purposes of the definition of
"Outstanding" in Section 1.1;
(j) if the principal of (and premium, if any) or interest, if
any, on the Securities of the series are to be payable, at the election
of the Company or a Holder thereof, in a coin or currency other than
that in which the Securities are stated to be payable, the period or
periods within which, and the terms and conditions upon which, such
election may be made;
(k) if the amount of payments of principal of (and premium, if
any) or interest, if any, on the Securities of the series may be
determined with reference to an index based on a coin or currency other
than that in which the Securities are stated to be payable or pursuant
to a formula, the manner in which such amounts shall be determined;
(l) any provisions permitted by this Indenture relating to
Events of Default or covenants of the Company with respect to such
series of Securities;
(m) if the principal amount payable at the Stated Maturity of
any Securities of the series will not be determinable as of any one or
more dates prior to the Stated Maturity, the amount which shall be
deemed to be the principal amount of such Securities as of any such
date for any purpose thereunder or hereunder, including the principal
amount thereof which shall be due and payable upon any Maturity other
than the Stated Maturity or which shall be deemed to be Outstanding as
of any date prior to the Stated Maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount shall be
determined);
(n) if applicable, that the Securities of the series, in whole
or any specified part, shall not be defeasible pursuant to Section 13.2
or Section 13.3 or both such Sections and, if other than by a Company
Order, the manner in which any election by the Company to defease such
Securities shall be evidenced;
(o) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global
Securities and, in such case, the respective Depositaries for such
Global Securities, the form of any legend or legends which shall be
borne by any such Global Security in addition to or in lieu of that set
forth in Exhibit A and any circumstances in addition to or in lieu of
those set forth in Sections 2.4, 3.4 and 3.5 in which any such Global
Security may be exchanged in whole or in part for Securities
registered, and any transfer of such Global Security in whole or in
part may be registered, in the name or names of Persons other than the
Depositary for such Global Security or a nominee thereof;
(p) providing collateral to the Trustee to secure payment of
the principal of (and premium, if any) and interest on the Securities
of any series, and provisions for the release of any such collateral;
and
(q) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture), including, without
limitation, any terms required or appropriate to establish one or more
series of Securities issued in a Periodic Offering.
All Securities of any one series (other than Securities
offered in a Periodic Offering) shall be substantially identical except as to
denomination and except as may otherwise be provided in or pursuant to the Board
Resolution referred to above and set forth in the Officers' Certificate referred
to above or in any such indenture supplemental hereto.
If any of the terms of the series, including the form of
Security of such series, are established by action taken pursuant to a Board
Resolution, a copy of an appropriate record of such action setting forth the
terms of such series shall be certified by the Secretary or an Assistant
Secretary or other authorized officer of the Company, and delivered to the
Trustee at or prior to the delivery of the Company Order contemplated by Section
3.3 hereof for the authentication and delivery of such series of Securities.
With respect to Securities of a series offered in a Periodic
Offering, such Board Resolution and Officers' Certificate or supplemental
indenture may provide general terms or parameters for Securities of such series
and provide either that the specific terms of particular Securities of such
series shall be specified in a Company Order or that such terms shall be
determined by the Company or its agents in accordance with other procedures
specified in a Company Order as contemplated by the third paragraph of Section
3.3.
Any terms or provisions in respect of the Securities of any
series issued under this Indenture may be determined pursuant to this Section by
providing in a Board Resolution or supplemental indenture for the method by
which such terms or provisions shall be determined.
Section 3.2 Denominations. The Securities of each series shall
be issuable in registered form without coupons, except as otherwise expressly
provided in an applicable Officers' Certificate or a supplemental indenture, in
such denominations as shall be specified as contemplated by Section 3.1 hereof.
In the absence of any such provisions with respect to the Securities of any
series, the Securities of that series shall be issuable only in U.S. dollars in
fully registered form without coupons in denominations of $1,000 and any
integral multiple thereof.
Section 3.3 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by: its Chairman of
the Board, its Vice Chairman of the Board, its President, one of its Vice
Presidents or its Treasurer. The signature of any of these Officers or agents on
the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers, employees or agents of the
Company shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Securities or did not hold such offices at the date of such Securities.
The Company may at any time and from time to time after the
execution and delivery of this Indenture deliver Securities of any series
executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Securities, or, in the
case of Securities offered in a Periodic Offering, from time to time in
accordance with such other procedures (including, without limitation, the
receipt by the Trustee of electronic instructions from the Company or its duly
authorized agents, promptly confirmed in writing by the Company) acceptable to
the Trustee as may be specified from time to time by a Company Order for the
specific terms of the Securities being so offered; and the Trustee shall, in
accordance with a Company Order, authenticate and make available for delivery
such Securities as provided in this Indenture and not otherwise.
Prior to any such authentication and delivery, the Trustee
shall be entitled to receive, in addition to any Officers' Certificate and
Opinion of Counsel required to be furnished to the Trustee pursuant to Section
1.2, and the Board Resolution and any certificate relating to the issuance of
the series of Securities required to be furnished pursuant to Section 2.2, and
shall be fully protected in relying upon, an Opinion of Counsel stating that:
(a) if the form or forms of such Securities have been
established by or pursuant to Board Resolution as permitted by Section
2.1 hereof, that such form has been established in conformity with the
provisions of this Indenture;
(b) the terms of such Securities have been established in
conformity with the provisions of this Indenture; and
(c) such Securities, when completed by appropriate insertions
and executed and delivered by the Company to the Trustee for
authentication in accordance with this Indenture, authenticated and
delivered by the Trustee in accordance with this Indenture and issued
by the Company in the manner and subject to any conditions specified in
such Opinion of Counsel, will constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their terms,
subject to applicable bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting the
enforcement of creditors' rights, to general equitable principles and
to such other qualifications as such counsel shall conclude do not
materially affect the rights of Holders of such Securities;
provided, however, that, with respect to Securities of a series offered
in a Periodic Offering, the Trustee shall be entitled to receive such
Opinion of Counsel in connection only with the first authentication of
Securities of such series, and in such case the opinions described in
clauses (b) and (c) above may state, respectively, that
(i) if the terms of such Securities are to
be established pursuant to a Company Order or pursuant to such
procedures as may be specified from time to time by a Company
Order, all as contemplated by a Board Resolution or action
taken pursuant thereto, such terms will have been duly
authorized by the Company and established in conformity with
the provisions of this Indenture; and
(ii) that such Securities, when completed by
appropriate insertions and executed and delivered by the
Company to the Trustee in accordance with this Indenture,
authenticated and delivered by the Trustee in accordance with
this Indenture, and issued and delivered by the Company and
paid for, all in accordance with any agreement of the Company
relating to the offering, issuance and sale of such
Securities, will be duly issued under this Indenture and will
constitute the legal, valid and binding obligations of the
Company, enforceable in accordance with their terms, subject
to bankruptcy, insolvency, reorganization and other similar
laws of general applicability relating to or affecting
generally the enforcement of creditors' rights, to general
equitable principles and to such other qualifications as such
counsel shall conclude do not materially affect the rights of
Holders of such Securities and any coupons;
and, if the authentication and delivery relates to a new series of
Securities created by an indenture supplemental hereto, also stating
that all laws and requirements with respect to the form and execution
by the Company of the supplemental indenture with respect to that
series of Securities have been complied with; the Company has corporate
power to execute and deliver any such supplemental indenture and has
taken all necessary corporate action for those purposes; and any such
supplemental indenture has been executed and delivered and constitutes
the legal, valid and binding obligation of the Company enforceable in
accordance with its terms (subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general
principles of equity); and
(d) that no consent, approval, authorization, order,
registration or qualification of or with any court or any governmental
agency or body having jurisdiction over the Company is required for the
execution and delivery of such Securities by the Company, except such
as have been obtained (except that no opinion need be expressed as to
the state securities or Blue Sky laws).
The Trustee shall not be required to authenticate and deliver
any such Securities if the issue of such Securities pursuant to this Indenture
will affect the Trustee's own rights, duties or immunities under the Securities
and this Indenture or otherwise in a manner which is not reasonably acceptable
to the Trustee.
Unless otherwise provided in the form of Security for any
series, all Securities shall be dated the date of their authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein executed by the Trustee by manual signature of an Authenticating Agent,
and such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of the Indenture. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 3.9, together
with a written statement (which need not comply with Section 1.2 and need not be
accompanied by an Opinion of Counsel) stating that such Security has never been
issued and sold by the Company, for all purposes of this Indenture such Security
shall be deemed never to have been authenticated and delivered hereunder and
shall never be entitled to the benefits of this Indenture.
Section 3.4 Temporary Securities. Pending the preparation of
definitive Securities of any series, the Company may execute, and, upon receipt
of the documents required by Section 3.3, together with a Company Order, the
Trustee shall authenticate and make available for delivery, temporary Securities
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of such
Securities.
If temporary Securities of any series are issued, the Company
will cause definitive Securities of such series to be prepared without
unreasonable delay. After the preparation of definitive Securities of such
series, the temporary Securities of such series shall be exchangeable for
definitive Securities of such series upon surrender of the temporary Securities
of such series at the office or agency of the Company in a Place of Payment for
that series, without charge to the Holder; and upon surrender for cancellation
of any one or more temporary Securities of any series the Company shall execute
and the Trustee shall authenticate and make available for delivery in exchange
therefor a like principal amount of definitive Securities of the same series of
authorized denominations and of like tenor and aggregate principal amount. Until
so exchanged, the temporary Securities of any series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series and tenor.
Upon any exchange of a portion of a temporary Global Security
for a definitive Global Security or for the individual Securities represented
thereby pursuant to this Section 3.4 or Section 3.5, the temporary Global
Security shall be endorsed by the Trustee to reflect the reduction of the
principal amount evidenced thereby, whereupon the principal amount of such
temporary Global Security shall be reduced for all purposes by the amount so
exchanged and endorsed.
Section 3.5 Registration, Transfer and Exchange. The Company
shall keep or cause the Security Registrar to keep a register (herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities, or of Securities of a particular series, and for transfers of
Securities or of Securities of such series. Any such register shall be in
written form or in any other form capable of being converted into written form
within a reasonable time. If the Company maintains such Security Register, at
all reasonable times the information contained in such register or registers
shall be available for inspection by the Trustee at the office or agency to be
maintained by the Company as provided in Section 10.2.
Subject to Section 2.4, upon surrender for registration of
transfer of any Security of any series at the office or agency of the Company in
a Place of Payment for that series, the Company shall execute, and the Trustee
or its agent shall authenticate and make available for delivery, in the name of
the designated transferee or transferees, one or more new Securities of the same
series, of any authorized denominations and of a like tenor, aggregate principal
amount and Stated Maturity.
Subject to Section 2.4, at the option of the Holder,
Securities of any series may be exchanged for other Securities of the same
series of any authorized denominations and of a like tenor, aggregate principal
amount and Stated Maturity, upon surrender of the Securities to be exchanged at
such office or agency maintained by the Company in any Place of Payment for such
series. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee or its agent shall authenticate and make
available for delivery, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
Unless otherwise provided in the Security to be registered for
transfer or exchange, no service charge shall be imposed on any Holder for any
registration of transfer or exchange of Securities, but the Company may (unless
otherwise provided in such Security) require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with registration of any transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4, 9.6 or 11.7 not involving any transfer.
The Company may but shall not be required (i) to issue,
register the transfer of or exchange any Security of any series during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption of Securities of such series selected for redemption under
Section 11.3 and ending at the close of business on the date of such mailing,
(ii) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except for the portion of such Security not so
selected for redemption or (iii) to register the transfer of or exchange any
Security between any Regular Record Date and the related Interest Payment Date.
None of the Company, the Trustee, any agent of the Trustee,
any Paying Agent or the Security Registrar will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of a Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Neither the Company nor the Trustee shall have any
responsibility or obligation to any participant in the Depositary, any Person
claiming a beneficial ownership interest in the Securities under or through the
Depositary or any such participant, or any other Person which is not shown on
the Security Register as being a Holder, with respect to (1) the Securities; (2)
the accuracy of any records maintained by the Depositary or any such
participant; (3) the payment by the Depositary or any such participant of any
amount in respect to the principal of or premium or interest on the Securities;
(4) any notice which is permitted or required to be given to Holders of
Securities under this Indenture; or (5) any consent given or other action taken
by the Depositary as Holder of Securities.
The Company initially appoints the Trustee to act as Security
Registrar for the Securities on its behalf. The Company may at any time and from
time to time authorize any Person to act as Security Registrar in place of the
Trustee with respect to any series of Securities issued under this Indenture.
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities.
If (a) any mutilated Security is surrendered to the Trustee or the Company, and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Security, and (b) there is delivered to the Company and the Trustee
such security or indemnity as may be required by them to save each of them and
their agents harmless, then, in the absence of actual notice to the Company and
the Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon its request the Trustee or its agents shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Security
or in exchange for such mutilated Security, a new Security of like tenor,
series, Stated Maturity and principal amount, bearing a number not
contemporaneously Outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee, any Paying Agent and
any Securities Registrar) connected therewith.
Every new Security of any series issued pursuant to this
Section in lieu of any destroyed, lost or stolen Security or in exchange for
such mutilated Security shall constitute an original additional contractual
obligation of the Company, whether or not the mutilated, destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and such new
Security shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of the same series duly issued
hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies of any Holder with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Securities.
Section 3.7 Payment of Interest; Interest Rights Preserved.
Unless otherwise provided with respect to any series of Securities pursuant to
Section 3.1, interest on any Security which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security of any series which is payable,
but is not punctually paid or duly provided for, on any Interest Payment Date
(herein called "Defaulted Interest") shall forthwith cease to be payable to the
Holder on the relevant Regular Record Date by virtue of its having been such
Holder; and, except as hereinafter provided, such Defaulted Interest may be paid
by the Company, at its election in each case, as provided in clause (a) or
clause (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each such Security of such series and
the date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be given to each Holder of such
series in the manner set forth in Section 1.6, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons in
whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (b).
(b) The Company may make payment of any Defaulted Interest on
the Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
such Securities may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of, or in
exchange for, or in lieu of any other Security, shall carry the rights to
interest accrued and unpaid, and to accrue, which rights were carried by such
other Security.
Section 3.8 Persons Deemed Owners. Prior to the due
presentment for registration of transfer of any Security, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Holder of such
Security as its owner for the purpose of receiving payment of principal of (and
premium, if any), and (subject to Section 3.7) interest on, such Security and
for all other purposes whatsoever, whether or not such Security be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the
Security Registrar will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of a Security in global form or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
No holder of any beneficial interest in any Global Security
held on its behalf by a Depositary (or its nominee) shall have any rights under
this Indenture with respect to such Global Security or any Security represented
thereby, and such Depositary may be treated by the Company, the Trustee, and any
agent of the Company or the Trustee as the owner of such Global Security or any
Security represented thereby for all purposes whatsoever.
Notwithstanding the foregoing, with respect to any Global
Security, nothing herein shall prevent the Company, the Trustee, or any agent of
the Company or the Trustee, from giving effect to any written certification,
proxy or other authorization furnished by any Depositary, as a Holder, with
respect to such Global Security or shall impair, as between such Depositary and
owners of beneficial interests in such Global Security, the operation of
customary practices governing the exercise of the rights of such Depositary (or
its nominee) as Holder of such Global Security.
Section 3.9 Cancellation. All Securities surrendered for
payment, redemption, repurchase, registration of transfer, conversion or
exchange or for credit against any sinking fund, if any, shall, if surrendered
to any Person other than the Trustee, be delivered to the Trustee and, if not
already cancelled, shall be promptly cancelled by the Trustee. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and may deliver to the Trustee (or to any other Person for
delivery to the Trustee) for cancellation any Securities previously
authenticated hereunder which the Company has not issued and sold, and all
Securities so delivered shall be promptly cancelled by the Trustee. No Security
shall be authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be disposed of as directed by a
Company Order.
Section 3.10 Computation of Interest. Unless otherwise
provided as contemplated in Section 3.1, interest on the Securities of any
series shall be calculated on the basis of a 360-day year of twelve 30-day
months.
Section 3.11 Periodic Offering of Securities. Notwithstanding
any contrary provision herein, if all Securities of a series are not to be
originally issued at one time, it shall not be necessary for the Company to
deliver to the Trustee an Officers' Certificate, Board Resolution, supplemental
indenture, Opinion of Counsel or Company Request otherwise required pursuant to
Sections 2.2, 3.1 and 3.3 at or prior to the time of authentication of each
Security of such series if such documents are delivered to the Trustee or its
agent at or prior to the authentication upon original issuance of the first
Security of such series to be issued; provided that any subsequent request by
the Company to the Trustee to authenticate Securities of such series upon
original issuance shall constitute a representation and warranty by the Company
and its counsel that as of the date of such request, the statements made in the
Officers' Certificate and opinions made in the Opinion of Counsel delivered
pursuant to Section 1.2 and 3.3, respectively, were true and correct as if made
on such date.
An Officers' Certificate, supplemental indenture or Board
Resolution delivered by the Company to the Trustee in the circumstances set
forth in the immediately preceding paragraph may provide that Securities which
are the subject thereof will be authenticated and delivered by the Trustee or
its agent on original issue from time to time upon the written order of a person
or persons designated in such Officers' Certificate, supplemental indenture or
Board Resolution (any such telephonic instructions to be confirmed promptly in
writing by such person or persons) and that such person or persons are
authorized to determine, consistent with such Officers' Certificate,
supplemental indenture or Board Resolution, such terms and conditions of the
Securities as are specified in such Officers' Certificate, supplemental
indenture or Board Resolution.
Section 3.12 CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) in addition to
serial numbers, and, if so, the Trustee shall use "CUSIP" numbers in addition to
serial 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 "CUSIP" numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the serial or other identification numbers printed on the Securities, 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 such
"CUSIP" numbers.
ARTICLE 4
Satisfaction and Discharge
Section 4.1 Satisfaction and Discharge of Indenture. This
Indenture shall, upon Company Request, cease to be of further effect with
respect to any series of Securities (except as to any surviving rights of
registration of transfer or exchange or replacement of Securities of such series
expressly provided for herein or in the form of security for such series), and
the Trustee, on written demand of and at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture as to such series, when
(a) either
(i) all Securities of that series theretofore authenticated
and delivered (other than (1) Securities of such series which
have been mutilated, destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.6, and (2)
Securities of such series for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to issued under
this Indenture delivered to the Trustee or its agent cancelled
or for cancellation; or
(ii) all such Securities of that series not theretofore
delivered to the Trustee or its agent cancelled or for
cancellation
(1) have become due and payable,
(2) will become due and payable at their Stated
Maturity within one year,
(3) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company, or
(4) are deemed paid and discharged pursuant to Section 13.2,
as applicable,
and the Company, in the case of (1), (2) or (3) above, has deposited or
caused to be deposited with the Trustee, as trust funds in trust for
the purpose, money in an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to the
Trustee canceled or for cancellation, for principal (and premium, if
any) and interest to the date of such deposit (in the case of
Securities which have become due and payable), or to the Stated
Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company with respect to the Securities of such
series; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture with respect to the Securities of such
series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture with respect to
any series of Securities, the obligations of the Company to the Trustee with
respect to such series under Section 6.7, the obligations of the Trustee to any
Authenticating Agent under Section 6.14 and, if money shall have been deposited
with the Trustee pursuant to subclause (ii) of clause (a) of this Section, the
obligations of the Trustee under Sections 4.2 and 10.3 shall survive.
Section 4.2 Application of Trust Money. Subject to the
provisions of the last paragraph of Section 10.3, all money deposited with the
Trustee pursuant to Section 4.1 shall be held in trust and applied by it, in
accordance with the provisions of the series of Securities and this Indenture,
to the payment, either directly or through any Paying Agent (including the
Company acting as its own Paying Agent) as the Trustee may determine, to the
Persons entitled thereto, of the principal (and premium, if any) and interest
for whose payment such money has been deposited with the Trustee.
ARTICLE 5
Remedies
Section 5.1 Events of Default. "Event of Default," wherever
used herein with respect to Securities of any series, and unless otherwise
provided with respect to Securities of any series pursuant to Section 3.1(l),
means any one of the following events (whatever the reason for such Event of
Default and whether it is voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body), unless such
event is either inapplicable to a particular series (to the extent expressly
provided in the form of Security for such series) or it is specifically deleted
or modified in the supplemental indenture creating such series of Securities or
in the form of Security for such series:
(a) default by the Company in the payment of any principal (or
premium, if any) of the Securities of that series when due and payable,
whether at Maturity or otherwise; or
(b) default by the Company in the payment of any interest upon
any Security of that series when it becomes due and payable, and the
continuance of such default for a period of 30 consecutive days; or
(c) default in the deposit of any sinking fund payment, when
and as due by the terms of a Security of that series; or
(d) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been
included in this Indenture solely for the benefit of series of
Securities other than that series), and continuance of such default or
breach for a period of 60 consecutive days after there has been given,
by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities of that series a written
notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(e) a default under any Indebtedness by the Company or any
Subsidiary (including a default with respect to Securities of any
series other than that series) or under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness by the Company (including this
Indenture) or any Subsidiary, whether such Indebtedness now exists or
shall hereafter be created, in an aggregate principal amount exceeding
$10,000,000 (or its equivalent in any other currency or currencies)
which default shall have resulted in such Indebtedness becoming or
being declared due and payable; or
(f) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(g) the commencement by the Company of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by
it to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable
federal or state law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally
as they become due, or the taking of corporate action by the Company in
furtherance of any such action; or
(h) any other Event of Default provided with respect to
Securities of that series.
Section 5.2 Acceleration of Maturity; Rescission and
Annulment. If an Event of Default (other than an Event of Default specified in
Section 5.1(e) or 5.1(f)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in aggregate principal amount of the Outstanding
Securities of that series may declare the aggregate principal amount of all the
Securities of that series (or, if any Securities of that series are Original
Issue Discount Securities, such lesser portion of the aggregate principal amount
of such Securities as may be specified by the terms thereof) to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), and upon any such declaration such aggregate principal
amount (or specified amount) shall become immediately due and payable. If an
Event of Default specified in Section 5.1(e) or 5.1(f) with respect to
Securities of any series at the time Outstanding occurs, the aggregate principal
amount of all the Securities of that series (or, if any Securities of that
series are Original Issue Discount Securities, such lesser portion of the
aggregate principal amount of such Securities as may be specified by the terms
thereof) shall automatically, and without any declaration or other action on the
part of the Trustee or any Holder, become immediately due and payable.
At any time after such a declaration of acceleration with
respect to Outstanding Securities of any series has been made and before a
judgment or decree for payment of the money due has been obtained by the Trustee
as hereinafter in this Article provided, the Holders of a majority in aggregate
principal amount of the Outstanding Securities of that series, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue interest on all Securities of that series,
(ii) the principal of (and premium, if any, on) any Securities
of that series which have become due otherwise than by such
declaration of acceleration and any interest thereon at the
rate or rates prescribed therefor in such Securities,
(iii) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(iv) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel;
and
(b) all Events of Default with respect to Securities of that
series, other than the non-payment of the principal of Securities of
that series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 5.3 Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if:
(a) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
then the Company will, upon written demand of the Trustee, pay to the Trustee,
for the benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal (and premium, if any) and interest and,
to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate or rates prescribed therefor in such Securities, and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may at its discretion proceed to
protect and enforce its rights and the rights of the Holders of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, moratorium of payments, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of, and any
interest on, the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in such proceedings
or otherwise,
(a) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and take such other actions, including
participating as a member, voting or otherwise, of any official
committee of creditors appointed in such matter, to file such other
papers or documents as may be necessary and advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel and all other amounts due the Trustee under Section
6.7) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official, in any such judicial proceeding is hereby authorized by
each Holder to make such payment to the Trustee and, in the event that the
Trustee consents to the making of such payments directly to the Holders, to pay
to the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.7.
Nothing herein contained 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
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of such Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
Section 5.5 Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities of any series may be prosecuted and enforced by the Trustee without
the possession of any of the Securities of such series or, the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agent and counsel, be for the ratable benefit of the Holders of the
Securities of the series in respect of which such judgment has been recovered.
Section 5.6 Application of Money Collected. Any money
collected by the Trustee with respect to a series of Securities pursuant to this
Article 5 shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the Securities
of such series and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 6.7; and
SECOND: To the payment of the amounts then due and unpaid upon
the Securities of that series for principal (and premium, if any) and interest,
in respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Securities for principal (premium, if any) and interest,
respectively.
Section 5.7 Limitation on Suits. No Holder of any Security of
any series shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to Securities of
such series;
(b) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities of such series shall have made
written request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders have furnished to the Trustee
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and furnishing of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities of
such series;
it being understood and intended that no one or more Holders of Securities of
such series shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb or prejudice the
rights of any other Holders of Securities of such series, or to obtain or to
seek to obtain priority or preference over any other such Holders or to enforce
any right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all the Holders of all Securities of such series.
Section 5.8 Unconditional Right of Holders to Receive
Principal, Premium and Interest. Notwithstanding any other provisions in this
Indenture, the Holder of any Security shall have the right, which is absolute
and unconditional, to receive payment of the principal of (and premium, if any)
and (subject to Sections 3.7 and 12.1) interest on such Security on the
respective Stated Maturities expressed in such Security (or, in the case of
redemption or repayment, on the Redemption Date or Repayment Date, as the case
may be) and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder.
Section 5.9 Restoration of Rights and Remedies. If the Trustee
or any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case the Company, the Trustee and the Holders shall, subject
to any determination in such proceeding, be restored severally and respectively
to their former positions hereunder, and thereafter all rights and remedies of
the Trustee and the Holders shall continue as though no such proceeding had been
instituted.
Section 5.10 Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities in the last paragraph of Section 3.6, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11 Delay or Omission Not. No delay in exercising or
omission to exercise any remedy, right or power accruing upon the occurrence of
any Event of Default shall impair the remedy, right or power, or shall be
construed to be a waiver of any Event of Default or acquiescence therein. Every
remedy, right and power may be exercised from time to time and as often as may
be deemed to be expedient. No waiver of any Event of Default, whether by the
Trustee or by the Holders, shall extend to or shall affect any subsequent Event
of Default or shall impair any remedy, right or power consequent thereon.
Section 5.12 Control by Holders. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of any series shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee, with respect to the Securities of such series;
provided that
(a) the Trustee shall have the right to decline to follow any
such direction if the Trustee, being advised by counsel, determines
that the action so directed may not lawfully be taken or would conflict
with this Indenture;
(b) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to Holders not taking part in such
action;
(c) such direction shall be presented by such Holders to the
Trustee in a timely manner;
(d) such direction shall not be in conflict with any rule of
law or with this Indenture; and
(e) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 5.13 Waiver of Defaults. The Holders of not less than
a majority in aggregate principal amount of the Outstanding Securities of any
series may on behalf of the Holders of all the Securities of such series waive
any past or existing default hereunder with respect to such series and its
consequences, except a default not theretofore cured
(a) in the payment of the principal of (or premium, if any) or
interest on any Security of such series, or in the payment of any
sinking or purchase fund or analogous obligation with respect to the
Securities of such series, or
(b) in respect of a covenant or provision hereof which under
Article 9 cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 5.14 Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Security by such Holder's 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, suffered or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable 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; provided,
however, that the provisions of this Section 5.14 shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities of any series to which the suit relates against the
Company and not the Trustee, or to any suit instituted by any Holder against the
Company and not the Trustee for the enforcement of the payment of the principal
of (or premium, if any) or interest on any Security on or after the respective
Stated Maturities expressed in such Security (or, in the case of redemption or
repayment, on or after the Redemption Date or Repayment Date).
Section 5.15 Waiver of Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE 6
The Trustee
Section 6.1 Certain Duties and Responsibilities. (a) Except
during the continuance of an Event of Default with respect to any series of
Securities,
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture with
respect to the Securities of such series, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may,
with respect to Securities of such series, conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations, or other facts
or contents stated therein).
(b) If an Event of Default with respect to any series of
Securities has occurred and is continuing of which a Responsible Officer of the
Trustee has actual knowledge, the Trustee shall exercise with respect to the
Securities of such series such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) 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) this subsection (c) shall not be construed to limit the
effect of subsection (a) of this Section 6.1;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be 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 Securities of any series (or such lesser
percentage as provided in this Indenture) 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 with respect to the Securities of such series.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section 6.1.
Section 6.2 Notice of Defaults. Within 90 days after the
Trustee has received written notice of any default hereunder with respect to
Securities of any series, the Trustee shall transmit by mail to all Holders of
such series, as their names and addresses appear in the Security Register,
notice of such default hereunder known to the Trustee, unless such default shall
have been cured or waived; provided, however, that, except in the case of a
default in the payment of the principal of (or premium, if any) or interest, if
any, on any Security of such series, or in the payment of any sinking fund
installment with respect to Securities of such series, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Holders of such series; and provided further
that in the case of any default of the character specified in Section 5.1(d)
with respect to Securities of such series, no such notice to Holders of such
series shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section 6.2, the term "default," with respect to Securities
of any series, means any event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to Securities of such
series.
Section 6.3 Certain Rights of Trustee. Except as otherwise
provided in Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate or other
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note or other evidence of Indebtedness or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(e) 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 furnished 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;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of Indebtedness or other paper or document, but
the Trustee, in its sole 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 to examine the books, records and premises of
the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably believed by
it to be authorized or within the discretion or rights or powers conferred upon
it by this Indenture;
(i) 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 Securities and this Indenture; and
(j) the permissive right of the Trustee to take or refrain
from taking any actions enumerated in this Indenture shall not be construed as a
duty and the Trustee shall not be answerable in such actions other than for its
own negligence, bad faith or willful misconduct in exercising any such right.
Section 6.4 Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, (except the
Trustee's certificates of authentication) shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. Neither the Trustee nor any Authenticating
Agent makes any representations as to the validity or sufficiency of this
Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent
shall be accountable for the use or application by the Company of Securities or
the proceeds thereof.
Section 6.5 May Hold Securities. The Trustee, any
Authenticating Agent, any Paying Agent, the Security Registrar or any other
agent of the Company or the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Securities and, subject to Sections 6.8 and
6.13, may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or
such other agent.
The Trustee may become and act as Trustee under other
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding in the same
manner as if it were not Trustee hereunder.
Section 6.6 Money Held in Trust. Money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as the Trustee has otherwise agreed in
writing with the Company.
Section 6.7 Compensation and Reimbursement. The Company agrees
(a) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree to in
writing for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses, including
taxes (other than taxes based upon, measured by, or determined by the income of
the Trustee), disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and expenses and disbursements of its agents and counsel), except
any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(c) to indemnify the Trustee (and its directors, officers,
employees and agents) and any predecessor Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the reasonable costs
and expenses and reasonable attorneys' fees of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder.
The obligations of the Company under this Section 6.7 to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional Indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. As security for the performance of the
obligations of the Company under this Section, the Trustee shall have a lien
prior to the Securities upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the payment of principal of (and
premium, if any) or interest on particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.1(e) or Section
5.1(f), 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.
Any Paying Agent or Authenticating Agent appointed hereunder
shall be entitled to the benefits of Section 6.7(c) as if the indemnity set
forth therefor were specifically afforded to such Paying Agent or Authenticating
Agent.
The provisions of this Section shall survive the termination
of this Indenture.
Section 6.8 Disqualification; Conflicting Interests. The
Trustee for the Securities of any series issued hereunder shall be subject to
the provisions of Section 310(b) of the Trust Indenture Act during the period of
time provided for therein. In determining whether the Trustee has a conflicting
interest as defined in Section 310(b) of the Trust Indenture Act with respect to
the Securities of any series, there shall be excluded for purposes of the
conflicting interest provisions of such Section 310(b) the Securities of every
other series issued under this Indenture. Nothing herein shall prevent the
Trustee from filing with the Commission the application referred to in the
second to last paragraph of Section 310(b) of the Trust Indenture Act.
Section 6.9 Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder with respect to the Securities of each
series, which may be Trustee hereunder for Securities of one or more other
series. Each Trustee shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000. If any such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section and to the extent permitted by
the Trust Indenture Act, the combined capital and surplus of such Person shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee with respect to the
Securities of any series shall cease to be eligible in accordance with the
provisions of this Section 6.9, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article 6.
Section 6.10 Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to any one
or more series of Securities by giving written notice thereof to the Company. If
an instrument of acceptance by a successor Trustee required by Section 6.11
hereof shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to any
one or more series of Securities by Act of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of that series,
delivered to the Trustee and to the Company. If the instrument of acceptance by
a successor Trustee required by Section 6.11 hereof shall not have been
delivered to the Trustee within 30 days after the delivery of such Act, the
removed Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(d) If at any time:
(i) the Trustee fails to comply with Section 310(b) of the
Trust Indenture Act pursuant to Section 6.8 with respect to any series
of Securities after written request therefor by the Company or by any
Holder who has been a Holder of a Security of that series for at least
six months, or
(ii) the Trustee ceases to be eligible under Section 6.9 with
respect to any series of Securities and fails to resign after written
request therefor by the Company or by any such Holder, or
(iii) the Trustee becomes incapable of acting with respect to
any series of Securities, or
(iv) the Trustee is adjudged a bankrupt or insolvent or a
receiver of the Trustee or of its property is appointed or any public
officer takes charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (1) the Company by a Board Resolution may remove the
Trustee, with respect to the Securities of that series, or in the case of clause
(iv), with respect to all series, or (2) subject to Section 5.14, any Holder who
has been a Holder of a Security of such series for at least six months may, on
behalf of itself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee with respect to the series, or, in the case of clause (iv),
with respect to all series.
(e) If the Trustee resigns, is removed or becomes incapable of
acting with respect to any series of Securities, or if a vacancy occurs in the
office of the Trustee with respect to any series of Securities for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor Trustee
or Trustees with respect to the Securities of that or those series (it being
understood that any such successor Trustee may be appointed with respect to the
Securities of one or more or all of such series and that at any time there shall
be only one Trustee with respect to the Securities of any particular series) and
shall comply with the applicable requirements of Section 6.11. If, within one
year after such resignation, removal or incapacity, or the occurrence of such
vacancy, a successor Trustee with respect to such series of Securities is
appointed by Act of the Holders of a majority in aggregate principal amount of
the Outstanding Securities of such series delivered to the Company and the
predecessor Trustee, the successor Trustee so appointed shall, forthwith upon
its acceptance of such appointment in accordance with the applicable
requirements of Section 6.11 hereof, become the successor Trustee with respect
to such series and supersede the successor Trustee appointed by the Company with
respect to such series. If no successor Trustee with respect to such series has
been so appointed by the Company or the Holders of such series and accepted
appointment in the manner required by Section 6.11 hereof, any Holder who has
been a Holder of a Security of that series for at least six months may, on
behalf of itself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
by mailing written notice of such event by first-class mail, postage prepaid, to
the Holders of Securities of that series as their names and addresses appear in
the Security Register. Each notice shall include the name of the successor
Trustee with respect to the Securities of such series and the address of its
Corporate Trust Office.
Section 6.11 Acceptance of Appointment by. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the
Company and to the predecessor Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the predecessor Trustee shall become
effective with respect to any series as to which it is resigning or being
removed as Trustee, and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the predecessor Trustee with respect to any such series; but, on request of
the Company or the successor Trustee, such predecessor Trustee shall, upon
payment of its reasonable charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
predecessor Trustee, and shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such predecessor Trustee
hereunder with respect to all or any such series, subject nevertheless to its
lien, if any, provided for in Section 6.7. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
In case of the appointment hereunder of a successor Trustee
with respect to the Securities of one or more (but not all) series, the Company,
the predecessor Trustee and each successor Trustee with respect to the
Securities of such one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall accept such appointment
and which (i) shall contain such provisions as shall be necessary or desirable
to transfer and confirm to, and to vest in, each successor Trustee all the
rights, powers, trusts and duties of the predecessor Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates, (ii) if the predecessor Trustee is not retiring with respect to
all Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
predecessor Trustee with respect to the Securities of that or those series as to
which the predecessor Trustee is not retiring shall continue to be vested in the
predecessor Trustee, and (iii) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall deem such
Trustees to be co-trustees of the same trust and that each such Trustee shall be
trustee of a trust or trusts hereunder separate and apart from any trust or
trusts hereunder administered by any other Trustee; and upon the execution and
delivery of such supplemental indenture the resignation or removal of the
predecessor Trustee shall become effective to the extent provided therein and
each such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the predecessor
Trustee with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates; but, on request of the Company or
any successor Trustee, such predecessor Trustee shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such
predecessor Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in the first or second preceding paragraph, as the case may be.
No successor Trustee with respect to any series of Securities
shall accept its appointment unless at the time of such acceptance such
successor Trustee shall be qualified and eligible with respect to that series
under this Article 6.
Section 6.12 Merger, Conversion, Consolidation or Successor to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and make available for delivery the Securities so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
Section 6.13 Preferential Collection of Claims Against
Company. (a) Subject to subsection (b) of this Section, if the Trustee shall be
or shall become a creditor, directly or indirectly, secured or unsecured, of the
Company within three months prior to a default, as defined in subsection (c) of
this Section, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the Holders of the
Securities and the holders of other indenture securities (as defined in
subsection (c) of this Section):
(i) an amount equal to any and all reductions in the amount
due and owing upon any claim as such creditor in respect of principal
or interest, effected after the beginning of such three-month period
and valid as against the Company and its other creditors, except any
such reduction resulting from the receipt or disposition of any
property described in paragraph (ii) of this subsection, or from the
exercise of any right of set-off which the Trustee could have exercised
if a petition in bankruptcy had been filed by or against the Company
upon the date of such default; and
(ii) all property received by the Trustee in respect of any
claim as such creditor, either as security therefor, or in satisfaction
or composition thereof, or otherwise, after the beginning of such
three-month period, or an amount equal to the proceeds of any such
property, if disposed of, subject, however, to the rights, if any, of
the Company and its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee
(1) to retain for its own account (x) payments made on account
of any such claim by any Person (other than the Company) who is liable
thereon, and (y) the proceeds of the bona fide sale of any such claim
by the Trustee to a third person, and (z) distributions made in cash,
securities or other property in respect of claims filed against the
Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act, or applicable
state law;
(2) to realize, for its own account, upon any property held by
it as security for any such claim, if such property was so held prior
to the beginning of such three-month period;
(3) to realize, for its own account, but only to the extent of
the claim hereinafter mentioned, upon any property held by it as
security for any such claim, if such claim was created after the
beginning of such three-month period and such property was received as
security therefor simultaneously with the creation thereof, and if the
Trustee shall sustain the burden of proving that at the time such
property was so received the Trustee had no reasonable cause to believe
that a default as defined in subsection (c) of this Section would occur
within three months; or
(4) to receive payment on any claim referred to in paragraph
(2) or (3), against the release of any property held as security for
such claim as provided in paragraph (2) or (3), as the case may be, to
the extent of the fair value of such property.
For the purpose of paragraphs (2), (3) and (4), property
substituted after the beginning of such three-month period for property held as
security at the time of such substitution shall, to the extent of the fair value
of the property released, have the same status as the property released, and, to
the extent that any claim referred to in any of such paragraphs is created in
renewal of or in substitution for or for the purpose of repaying or refunding
any preexisting claim of the Trustee as such creditor, such claim shall have the
same status as such pre-existing claim.
If the Trustee is required to account for the assets of its
trust, the funds and property held in such special account and the proceeds
thereof shall be apportioned between the Trustee, the Holders and the holders of
other indenture securities in such manner that the Trustee, the Holders and the
holders of other indenture securities realize, as a result of payments from such
special account and payments of dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to the
Federal Bankruptcy Act or applicable state law, the same percentage of their
respective claims, figured before crediting to the claim of the Trustee anything
on account of the receipt by it from the Company of the funds and property in
such special account and before crediting to the respective claims of the
Trustee and the Holders and the holders of other indenture securities dividends
on claims filed against the Company in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable state law, but after crediting thereon receipts on account of the
Indebtedness represented by their respective claims from all sources other than
from such dividends and from the funds and property so held in such special
account. As used in this paragraph, with respect to any claim, the term
"dividends" shall include any distribution with respect to such claim, in
bankruptcy or receivership or proceedings for reorganization pursuant to the
Federal Bankruptcy Act or applicable state law, whether such distribution is
made in cash, securities, or other property, but shall not include any such
distribution with respect to the secured portion, if any, of such claim. The
court in which such bankruptcy, receivership or proceedings for reorganization
is pending shall have jurisdiction (i) to apportion between the Trustees and the
Holders and the holders of other indenture securities in accordance with the
provisions of this paragraph, the funds and property held in such special
account and proceeds thereof, or (ii) in lieu of such apportionment, in whole or
in part, to give to the provisions of this paragraph due consideration in
determining the fairness of the distributions to be made to the Trustee and the
Holders and the holders of other indenture securities with respect to their
respective claims, in which event it shall not be necessary to liquidate or to
appraise the value of any securities or other property held in such special
account or as security for any such claim, or to make a specific allocation of
such distributions as between the secured and unsecured portions of such claims,
or otherwise to apply the provisions of this paragraph as a mathematical
formula.
Any Trustee which has resigned or been removed after the
beginning of such three-month period shall be subject to the provisions of this
subsection as though such resignation or removal had not occurred. If any
Trustee has resigned or been removed prior to the beginning of such three-month
period, it shall be subject to the provisions of this subsection if and only if
the following conditions exist:
(i) the receipt of property or reduction of claim, which would
have given rise to the obligation to account, if such Trustee had
continued as Trustee, occurred after the beginning of such three-month
period; and
(ii) such receipt of property or reduction of claim occurred
within three months after such resignation or removal.
(b) There shall be excluded from the operation of subsection
(a) of this Section 6.13 a creditor relationship arising from
(1) the ownership or acquisition of securities issued under
any indenture, or any security or securities having a maturity of one
year or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court
of competent jurisdiction, or by this Indenture, for the purpose of
preserving any property which shall at any time be subject to the lien
of this Indenture or of discharging tax liens or other prior liens or
encumbrances thereon, if notice of such advances and of the
circumstances surrounding the making thereof is given to the Holders at
the time and in the manner provided in this Indenture;
(3) disbursements made in the ordinary course of business in
the capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an Indebtedness created as a result of services rendered
or premises rented; or an Indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (c) of
this Section 6.13;
(5) the ownership of stock or of the other securities of a
corporation organized under the provisions of Section 25(a) of the
Federal Reserve Act, as amended, which is directly or indirectly a
creditor of the Company; or
(6) the acquisition, ownership, acceptance or negotiation of
any drafts, bills of exchange, acceptances or obligations which fall
within the classification of self-liquidating paper as defined in
subsection (c) of this Section 6.13.
(c) For the purpose of this Section 6.13 only:
(1) The term "default" means any failure to make payment in
full of the principal of or interest on any of the Securities or upon
the other indenture securities when and as such principal or interest
becomes due and payable.
(2) The term "other indenture securities" means securities
upon which the Company is an obligor (as defined in the Trust Indenture
Act) outstanding under any other indenture (i) under which the Trustee
is also trustee, (ii) which contains provisions substantially similar
to the provisions of this Section 6.13 and (iii) under which a default
exists at the time of the apportionment of the funds and property held
in such special account.
(3) The term "cash transaction" means any transaction in which
full payment for goods or securities sold is made within seven days
after delivery of the goods or securities in currency or in checks or
other orders drawn upon banks or bankers and payable upon demand.
(4) The term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security
is received by the Trustee simultaneously with the creation of the
creditor relationship with the Company arising from the making,
drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation.
(5) The term "Company" means any obligor upon the Securities.
(6) The term "Federal Bankruptcy Act" means the Bankruptcy
Code or Title 11 of the United States Code.
Section 6.14 Appointment of Authenticating Agent. From time to
time the Trustee, in its sole discretion, may appoint one or more Authenticating
Agents with respect to one or more series of Securities with power to act on the
Trustee's behalf and subject to its direction in the authentication and delivery
of Securities of such series or in connection with transfers and exchanges under
Sections 3.4, 3.5, 3.6 and 11.7 hereof as fully to all intents and purposes as
though the Authenticating Agent had been expressly authorized by those Sections
of this Indenture to authenticate and deliver Securities of such series. For all
purposes of this Indenture, the authentication and delivery of Securities by an
Authenticating Agent pursuant to this Section 6.14 shall be deemed to be
authentication and delivery of such Securities "by the Trustee". Each such
Authenticating Agent 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, any state thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal,
state or District of Columbia authority. If such corporation publishes reports
of condition at least annually pursuant to law or the requirements of such
authority, then for the purposes of this Section 6.14 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section 6.14, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section 6.14.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section 6.14, without the execution or filing of
any paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and, if other than the Company, to the
Company. The Trustee may at any time terminate the appointment of an
Authenticating Agent by giving written notice thereof to such Authenticating
Agent and, if other than the Company, to the Company. Upon receiving such a
notice of resignation or upon each a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders of Securities of the series with respect to which such Authenticating
Agent will serve, as their names and addresses appear in the Security Register.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 6.14.
The Company agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this Section, and
the Trustee shall be entitled to be reimbursed for any payments made by it
subject to the provisions of Section 6.7.
If an appointment with respect to one or more series of
Securities is made pursuant to this Section 6.14, the Securities of such series
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
ARTICLE 7
Holders' Lists and Reports by
Trustee and Company
Section 7.1 Company to Furnish Trustee Names and Addresses of
Holders. The Company will furnish or cause to be furnished to the
Trustee with respect to the Securities of each series
(a) semi-annually, not later than 15 days after each Regular
Record Date, or, in the case of any series of Securities on which
semi-annual interest is not payable, not more than 15 days after such
semi-annual dates as may be specified by the Trustee, a list, in such
form as the Trustee may reasonably require, of the names and addresses
of the Holders as of such Regular Record Date or semi-annual date, as
the case may be, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished, provided, however, that if
and so long as the Trustee is Security Registrar for any series of
Securities, no such list shall be required to be furnished with respect
to any such series.
Section 7.2 Preservation of Information; Communications to
Holders. (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of Securities contained in the
most recent list furnished to the Trustee as provided in Section 7.1 hereof and
the names and addresses of Holders of Securities received by the Trustee in its
capacity as Security Registrar. The Trustee may destroy any list furnished to it
as provided in Section 7.1 hereof upon receipt of a new list so furnished.
(b) If three or more Holders of Securities of any series
(hereinafter referred to as "applicants") apply in writing to the Trustee, and
furnish to the Trustee reasonable proof that each such applicant has owned a
Security of such series for a period of at least six months preceding the date
of such application, and such application states that the applicants desire to
communicate with other Holders of Securities of such series or with the Holders
of all Securities with respect to their rights under this Indenture or under
such Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall,
within five Business Days after the receipt of such application, at its
election, either
(i) afford such applicants access to the information preserved
at the time by the Trustee in accordance with Section 7.2(a) hereof, or
(ii) inform such applicants as to the approximate number of
Holders of Securities of such series or all Securities, as the case may
be, whose names and addresses appear in the information preserved at
the time by the Trustee in accordance with Section 7.2(a) hereof, and
as to the approximate cost of mailing to such Holders the form of proxy
or other communication, if any, specified in such application.
If the Trustee elects not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder of a Security of such series or to all Holders,
as the case may be, whose names and addresses appear in the information
preserved at the time by the Trustee in accordance with Section 7.2(a) hereof, a
copy of the form of proxy or other communication which is specified in such
request, with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the payment, of the
reasonable expenses in connection with such mailing, unless, within five days
after such tender, the Trustee mails to such applicants and files with the
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interests of the Holders of Securities of such series or
all Holders, as the case may be, or would be in violation of applicable law.
Such written statement shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the objections specified in the
written statement so filed, enters an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, the Commission finds, after notice and opportunity for hearing, that
all the objections so sustained have been met and enters an order so declaring,
the Trustee shall mail copies of such material to all Holders of such series or
all Holders, as the case may be, with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders of Securities in
accordance with Section 7.2(b) hereof, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 7.2(b)
hereof.
Section 7.3 Reports by Trustee. (a) The term "reporting date"
as used in this Section means May 15. Within 60 days after the reporting date in
each year, beginning in 1999, the Trustee shall transmit by mail to all Holders,
as their names and addresses appear in the Security Register, a brief report
dated as of such reporting date with respect to any of the following events
which may have occurred during the 12 months immediately preceding the date of
such report (but if no such event has occurred within such period no report need
be transmitted):
(1) any change to its eligibility under Section 6.9 hereof and
its qualifications under Section 6.8 hereof;
(2) the creation of or any material change to a relationship
specified in Section 310(b)(1) through Section 310(b)(10) of the Trust
Indenture Act;
(3) the character and amount of any advances (and if the
Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such) which remain unpaid on the date
of such report, and for the reimbursement of which it claims or may
claim a lien or charge, prior to that of Securities of any series, on
any property or funds held or collected by it as Trustee, except that
the Trustee shall not be required (but may elect) to report such
advances if such advances so remaining unpaid aggregate not more than
1/2 of 1% of the principal amount of the Securities of such series
outstanding on the date of such report;
(4) any change to the amount, interest rate and maturity date
of all other Indebtedness owing by the Company (or by any other obligor
on the Securities) to the Trustee in its individual capacity, on the
date of such report, with a brief description of any property held as
collateral security therefor, except an Indebtedness based upon a
creditor relationship arising in any manner described in Section
6.13(b)(2), (3), (4) or (6);
(5) any change to the property and funds, if any, physically
in the possession of the Trustee as such on the date of such report;
(6) any additional issue of Securities which the Trustee has
not previously reported; and
(7) any action taken by the Trustee in the performance of its
duties hereunder which it has not previously reported and which in its
opinion materially affects the Securities, except action in respect of
a default, notice of which has been or is to be withheld by the Trustee
in accordance with Section 6.2.
(b) The Trustee shall transmit by mail to all Holders, as
their names and addresses appear in the Security Register, a brief report with
respect to the character and amount of any advances (and if the Trustee elects
so to state, the circumstance surrounding the making thereof) made by the
Trustee (as such) since the date of the last report transmitted pursuant to
subsection (a) of this Section (or if no such report has yet been so
transmitted, since the date of execution of this instrument) for the
reimbursement of which it claims or may claim a lien or charge, prior to that of
the Securities of any series, on property or funds held or collected by it as
Trustee, and which it has not previously reported pursuant to this subsection,
except that the Trustee shall not be required (but may elect) to report such
advances if such advances remaining unpaid at any time aggregate 10% or less of
the principal amount of the Securities outstanding of such series at such time,
such report to be transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when any Securities are listed on any stock
exchange.
Section 7.4 Reports by Company. The Company shall
(a) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if
the Company is not required to file information, documents or reports pursuant
to either of said Sections, then it will file with the Trustee and the
Commission, in accordance with rules and regulations prescribed from time to
time by the Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of the
Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules and
regulations;
(b) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by the
Company with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations; and
(c) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to paragraph (a) and (b) of
this Section 7.4 as may be required by rules and regulations prescribed from
time to time by the Commission.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
Section 7.5 Statement by Officers as to Default. The Company
shall deliver to the Trustee, as promptly as is practicable and in any event
within five days after the Company becomes aware of the occurrence of any Event
of Default, or an event which, with notice or the lapse of time or both, would
constitute an Event of Default, an Officers' Certificate setting forth the
details of such Event of Default or default and the action which the Company
proposes to take with respect thereto.
ARTICLE 8
Consolidation, Merger, Conveyance, Transfer or Lease
Section 8.1 Company May Consolidate, etc. Only on Certain
Terms. The Company shall not consolidate with or merge with or into any other
Person (whether or not the Company shall be the surviving corporation) or sell,
convey, transfer or lease its properties and assets substantially as an entirety
to any Person or group of affiliated Persons, in one transaction or a series of
related transactions, unless:
(a) the corporation formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance,
transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation organized and
validly existing under the laws of the United States of America, any
state thereof or the District of Columbia, and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form reasonably satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium, if any) and interest
on all the Securities and the performance or observance of every
covenant of this Indenture on the part of the Company to be performed
or observed;
(b) immediately after giving effect to such transaction and
treating any Indebtedness which becomes an obligation of the Company or
any Subsidiary as a result of such transaction as having been incurred
by the Company or such Subsidiary at the time of such transaction, no
Event of Default, and no event which, after notice or lapse of time, or
both, would become an Event of Default, shall have happened and be
continuing;
(c) if, as a result of any such consolidation or merger or
such conveyance, transfer or lease, properties or assets of the Company
would become subject to a mortgage, pledge, lien, security interest or
other encumbrance which would not be permitted by this Indenture, the
Company or such successor Person, as the case may be, shall take such
steps as shall be necessary effectively to secure the Securities
equally and ratably with (or prior to) all Indebtedness secured
thereby; and
(d) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer and lease and such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with.
Section 8.2 Successor Corporation Substituted. Upon any
consolidation or merger, or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 8.1 hereof, the successor Person formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein. In the event of any such
conveyance or transfer, but not in the case of a lease, the Company as the
predecessor corporation may be dissolved, wound up or liquidated at any time
thereafter and the Company, except in the case of a lease, shall be discharged
from all obligations under this Indenture and the Securities.
ARTICLE 9
Supplemental Indentures
Section 9.1 Supplemental Indenture Without Consent of Holders.
Without the consent of the Holders of any Securities, the Company, when
authorized by or pursuant to a Board Resolution or a Company Order, and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, 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 herein and in the Securities;
(b) to add to the covenants of the Company for the benefit of
the Holders of the Securities of any or all series (and if such
covenants or the surrender of such right or power are to be for the
benefit of less than all series of Securities, stating that such
covenants are expressly being included or such surrenders are expressly
being made solely for the benefit of one or more specified series), or
to surrender any right or power herein conferred upon the Company;
(c) to cure any ambiguity or defect, to correct or supplement
any provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture or the Securities or make any
other changes herein or therein;
(d) to add any additional Events of Default for the benefit of
the Holders of all or any series of Securities (and if such additional
Events of Default are to be for the benefit of less than all series of
Securities, stating that such additional Events of Default are
expressly being included solely for the benefit of such series);
(e) to comply with any requirement in order to effect or
maintain the qualification of this Indenture under the Trust Indenture
Act;
(f) to establish any form of Security, as provided in Article
2, and to provide for the issuance of any series of Securities as
provided in Article 3 and to set forth the terms thereof, and/or to add
to the rights of the Holders of the Securities of any series;
(g) to secure the Securities pursuant to the requirements of
Section 3.1 or Section 10.10 or otherwise;
(h) to establish the form or terms of Securities of any series
as permitted by Sections 2.1, 2.2 and 3.1;
(i) to evidence and provide for the acceptance of appointment
by another Person as a successor Trustee hereunder with respect to one
or more series of Securities and to add to or change any of the
provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 6.11 hereof; or
(j) to provide for the issuance of Securities in bearer form
with coupons as well as fully registered form.
No supplemental indenture for the purposes identified in
clause (b), (c) or (f) above may be entered into if to do so would adversely
affect the interest of the Holders of Securities of any series.
Section 9.2 Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture or indentures, by Act of said Holders delivered to the
Company and the Trustee, when authorized by or pursuant to a Board Resolution or
a Company Order, the Company and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders of the Securities of each
such series under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent or affirmative vote of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal or interest, if any, on, any Security, or
reduce the principal amount thereof or the rate of interest thereon or
any premium payable upon the redemption thereof, or reduce the amount
of the principal of an Original Issue Discount Security or any other
Security which would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2, or change
any Place of Payment where, or the coin or currency in which, any
Security or any premium or interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or
after the Maturity or the Stated Maturity, as the case may be, thereof
(or, in the case of redemption or repayment, on or after the Redemption
Date or the Repayment Date, as the case may be);
(2) reduce the percentage in aggregate principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver of compliance with certain
provisions of this Indenture or with certain defaults hereunder and
their consequences, or the declaration of certain defaults hereunder,
provided for in this Indenture; or
(3) modify any of the provisions of this Section, Section 5.13
or Section 10.8, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to changes in
the references to "the Trustee" and concomitant changes in this Section
and Section 10.8, or the deletion of this proviso, in accordance with
the requirements of Sections 6.11 and 9.1(i).
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Persons entitled to consent to any
indenture supplemental hereto. If a record date is fixed, the Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to consent to such supplemental indenture whether or not such Holders
remain Holders after such record date; provided, that unless such consent shall
have become effective by virtue of the requisite percentage having been obtained
prior to the date which is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
cancelled and of no further effect.
A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or which
modifies the rights of the Holders of Securities of such series with respect to
such covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Supplemental Indentures In executing
or accepting the additional trusts created by any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Trustee shall be entitled to receive, and (subject to
Section 6.1) 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 and that such supplemental indenture has been duly
authorized, executed and delivered by the Company and constitutes a valid and
legally binding obligation of the Company enforceable against the Company in
accordance with its terms. The Trustee may, but shall not (except to the extent
required in the case of a supplemental indenture entered into under Sections
9.1(c), 9.1(f) or 9.1(i)) be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Section 9.4 Effect of Supplemental Indentures Upon the
execution of any supplemental indenture under this Article, this Indenture shall
be modified in accordance therewith, and such supplemental indenture shall form
a part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby to the extent provided therein.
Section 9.5 Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
Section 9.6 Reference in Securities to Supplemental Indentures
Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE 10
Covenants
Section 10.1 Payment of Principal, Premium and Interest. With
respect to each series of Securities, the Company will duly and punctually pay
the principal of (and premium, if any) and interest on such Securities of that
series in accordance with their terms and this Indenture, and will duly comply
with all the other terms, agreements and conditions contained in, or made in the
Indenture for the benefit of, the Securities of such series.
Section 10.2 Maintenance of Office or Agency. So long as any
of the Securities of a series remain outstanding, the Company will maintain an
office or agency in each Place of Payment where Securities may be presented or
surrendered for payment, where Securities may be surrendered for registration of
transfer or exchange and where notice and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and of any change in
the location, of such office or agency. If at any time the Company fails to
maintain any such required office or agency or fails 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, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies where the Securities of one or more series may be
presented or surrendered for any or all 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 each Place of Payment for Securities of any series for
such purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
Section 10.3 Money for Security Payments to Be Held in Trust.
If the Company at any time acts as its own Paying Agent for any series of
Securities, it will, on or before each due date of the principal of (or premium,
if any) or interest on, any of the Securities of such series, segregate and hold
in trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal (or premium, if any) or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided, and
will promptly notify the Trustee of its action or failure to so act.
Whenever the Company has one or more Paying Agents for any
series of Securities, it will, not later than 10:00 A.M., New York City time, on
or prior to each due date of the principal of (and premium, if any) or interest
on, any Securities of such series, deposit with a Paying Agent a sum in
immediately available funds sufficient to pay the principal (and premium, if
any) or interest so becoming due, such sum to be held in trust for the benefit
of the Persons entitled to such principal (and premium, if any) or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure to so act.
The Company will cause each Paying Agent other than the
Trustee for any series of Securities to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will
(a) hold all sums held by it for the payment of principal of
(and premium, if any) or interest on Securities of such series in trust
for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities of such series) in the making of
any such payment of principal (and premium, if any) or interest on the
Securities of such series; and
(c) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums held in trust by such Paying Agent for payment in respect of
the Securities of such series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture with respect to any series of
Securities or for any other purpose, pay, or by Company Order direct any Paying
Agent to pay, to the Trustee all sums held in trust by the Company or such
Paying Agent in respect of each and every series of Securities as to which it
seeks to discharge this Indenture or, if for any other purpose, all sums to be
held in trust by the Company in respect of all Securities, such sums to be held
by the Trustee upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal (and
premium, if any) or interest on any Security of any series and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease. The Trustee or such Paying
Agent, before being required to make any such repayment, may at the request and
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains, a notice that such moneys remain unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such moneys then remaining will be repaid
to the Company.
The Company initially authorizes the Trustee to act as Paying
Agent for the Securities on its behalf. The Company may at any time and from
time to time authorize one or more Persons to act as Paying Agent in addition to
or in place of the Trustee with respect to any series of Securities issued under
this Indenture.
Section 10.4 Statement as to Compliance. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal year, a
written statement signed by the principal executive officer, principal financial
officer or principal accounting officer of the Company, stating that
(a) a review of the activities of the Company during such year
and of the Company's performance under this Indenture and under the
terms of the Securities has been made under his supervision; and
(b) to the best of his knowledge, based on such review, the
Company has complied with all conditions and covenants under this
Indenture through such year, or, if there has been a default in the
fulfillment of any such obligation (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company
shall be in default, specifying all such defaults and the nature and
status thereof of which he may have knowledge, specifying each such
default known to him and the nature and status thereof.
Section 10.5 Corporate Existence. Subject to Article 8, the
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and will use its best efforts to
do or cause to be done all things necessary to preserve and keep in full force
and effect its rights (charter and statutory) and franchises and such rights and
franchises of its Subsidiaries; provided, however, that the Company shall not be
required to preserve or to cause its Subsidiaries to preserve any such right or
franchise if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Subsidiaries taken as a whole and that the loss thereof is not
disadvantageous in any material respect to the Holders.
Section 10.6 Maintenance of Properties. The Company will cause
all tangible properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with such necessary equipment and will cause to
be made such necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be reasonably
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section 10.6 shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
Section 10.7 Maintenance of Insurance. The Company will
maintain, and will cause each of its Subsidiaries to maintain, with insurers the
Company reasonably believes to be financially sound and reputable, insurance
deemed adequate by the Company with respect to its properties and business and
the properties and business of its Subsidiaries against loss or damage of the
kinds customarily insured against by corporations in the same or similar
business. Such insurance may be subject to co-insurance deductibility or similar
clauses which, in effect, result in self-insurance of certain losses, provided
that each self-insurance is in accord with the practices of corporations in the
same or similar business and adequate insurance reserves are maintained in
connection with such self-insurance.
Section 10.8 Waiver of Certain Covenants. The Company may omit
in any particular instance to comply with any term, provision or condition set
forth in Sections 9.1(b), 10.9, 10.10 or 10.11 hereof, inclusive, with respect
to the Securities of any series if before the time for such compliance the
Holders of at least a majority in aggregate principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
Section 10.9 Further Assurances. The Company shall, at its own
cost and expense, execute and deliver to the Trustee all such other documents,
instruments, and agreements and do all such other acts and things as may be
reasonably required, in the opinion of the Trustee, to enable the Trustee to
exercise and enforce its right under this Indenture and under the documents,
instruments and agreements required under this Indenture and to carry out the
intent of this Indenture.
Section 10.10 Restrictions on Liens. To the extent this
covenant is made applicable to the Securities of a particular series, the
Company will not, and will not permit any Subsidiary to, incur, issue, assume,
guarantee or permit to exist Indebtedness secured by any Lien of the Company or
any Subsidiary upon any of its respective Property, or upon shares of capital
stock or evidences of Indebtedness issued by any Subsidiary and owned by the
Company or any Subsidiary, whether owned at the date of this Indenture or
thereafter acquired, without making, or causing such Subsidiary to make,
effective provision to secure all of the Securities then Outstanding by such
Lien, equally and ratably with any and all other Indebtedness thereby secured,
so long a such Indebtedness shall be so secured.
The foregoing restrictions shall not apply to Indebtedness
secured by Liens existing on the date of this Indenture or by any of the
following (the "Permitted Encumbrances"):
(a) Liens on any Property acquired, constructed or improved by
the Company or any Subsidiary after the date of this Indenture 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) incurred after the date of this Indenture;
(b) Liens of or upon any property, shares of capital stock or
Indebtedness existing at the time of acquisition thereof, whether by
merger, consolidation, purchase, lease or otherwise (including Liens of
or upon property, shares of capital stock or Indebtedness of a
corporation existing at the time such corporation becomes a
Subsidiary);
(c) Liens in favor of the Company or any Subsidiary;
(d) 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);
(e) Liens on any 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 or any Subsidiary;
(f) 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 any
Subsidiary, or deposits or pledges to obtain the release of any of the
foregoing;
(g) 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 or any Subsidiary
is a party, or deposits to secure public or statutory obligations of
the Company or any Subsidiary, 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 surety, appeal or
customs bonds to which the Company or any Subsidiary is a party, or
deposits in litigation or other proceedings such as, but not limited
to, interpleader proceedings;
(h) 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 or any Subsidiary with respect to which the Company or such
Subsidiary is in good faith prosecuting an appeal or proceedings for
review; or Liens incurred by the Company or any Subsidiary for the
purpose of obtaining a stay or discharge in the course of any
litigation or other proceeding to which the Company or such Subsidiary
is a party;
(i) Liens for taxes or assessments or governmental charges or
levies not yet due or delinquent, or which can thereafter be paid
without penalty, or which are being contested in good faith by
appropriate proceedings;
(j) 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 business
of the Company or such Subsidiary and which do not, in the opinion of
the Company, materially detract from the value of such properties; and
(k) 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 (a), (b), or (e) to (j),
inclusive; provided that (i) such extension, renewal or replacement
Lien shall be limited to all or a part of the same property, shares of
stock or Indebtedness that secured the Lien extended, renewed or
replaced (plus improvements on such property) and (ii) the amount of
Indebtedness secured by such Lien at such time is not increased.
Notwithstanding the foregoing, the Company and its
Subsidiaries, or any of them, may incur, issue, assume, guarantee or permit to
exist Indebtedness secured by Liens without equally and ratably securing the
Securities of each series then Outstanding, provided, that at the time of such
incurrence, issuance, assumption or guarantee of Indebtedness, after giving
effect thereto and to the retirement of any Indebtedness of the Company or of
any Subsidiary which is concurrently being retired, the sum of (i) the aggregate
amount of all outstanding Indebtedness of the Company and all the Subsidiaries
secured by Liens which could not have been incurred, issued, assumed or
guaranteed by the Company or a Subsidiary without equally or ratably securing
the Securities of each series then Outstanding, except for the provisions of
this paragraph, plus (ii) the Attributable Value of Sale and Leaseback
Transactions entered into pursuant to the penultimate paragraph of Section
10.11, does not at such time exceed the greater of 10% of the Net Tangible
Assets or 10% of the Consolidated Capitalization of the Company.
Section 10.11 Restrictions on Sale and Leaseback Transactions.
To the extent made applicable to the Securities of a particular series, the
Company will not itself, and will not permit any Subsidiary to, enter into any
arrangement with any Person, providing for the leasing by the Company or a
Subsidiary for a period, including renewals, in excess of three years of any
Property which have been or are to be sold or transferred by the Company or any
Subsidiary to such Person (herein referred to as a "Sale and Leaseback
Transaction") unless either:
(a) The Company or such Subsidiary would, at the time of
entering into such arrangement, be entitled, without equally and
ratably securing the Securities of each series then Outstanding, to
incur, issue, assume or guarantee Indebtedness secured by a Lien on
such property, pursuant to paragraphs (a) to (k), inclusive, of Section
10.10; or
(b) the Company, within 180 days after the sale or transfer
shall have been made by the Company or by a Subsidiary, applies an
amount equal to the greater of (i) the net proceeds of the sale of
Property sold and leased back pursuant to such arrangement or (ii) the
fair market value of the Property so sold and leased back at the time
of entering into such arrangement (as determined by any two Officers)
to the retirement of Funded Indebtedness of the Company; provided, that
the amount to be applied to the retirement of Funded Indebtedness of
the Company shall be reduced by (i) the principal amount of any
Securities delivered within 120 days after such sale to the Trustee for
retirement and cancellation, and (ii) the principal amount of Funded
Indebtedness, other than Securities, voluntarily retired by the Company
within 120 days after such sale.
Notwithstanding the foregoing, the Company and its
Subsidiaries, or any of them, may enter into a Sale and Leaseback Transaction
which would otherwise be prohibited by this Section 10.11, provided, that at the
time of such transaction, after giving effect thereto, the sum of (i) the
aggregate amount of the Attributable Value in respect of all Sale and Leaseback
Transactions existing at such time which could not have been entered into except
for the provisions of this paragraph plus (ii) the aggregate amount of
outstanding Indebtedness secured by Liens in reliance on the last paragraph of
Section 10.10 does not at such time exceed the greater of 10% of the Net
Tangible Assets or 10% of the Consolidated Capitalization of the Company.
A Sale and Leaseback Transaction shall not be deemed to result
in the creation of a Lien.
Section 10.12 Compliance with Laws. The Company will, and will
cause each of its Subsidiaries to, comply with all applicable laws, rules,
regulations and orders of, and all applicable restrictions imposed by any
federal, state or local governmental authority in respect of the conduct of its
business and the ownership of its properties, except to the extent that any
non-compliance therewith would not have a material adverse effect.
The Company will, and will cause each of its Subsidiaries to seek and
maintain such governmental licenses, permits and approvals as are reasonably
required to conduct the business engaged in by the Company or such Subsidiary
and the failure of which to seek or maintain would not have a material adverse
effect.
Section 10.13 Payment of Taxes and Claims. The Company will,
and will cause each of its Subsidiaries to, pay and discharge when due all taxes
and claims imposed on it or on its income or profits or on any of its
properties, except such taxes or portions thereof that are being contested in
good faith in appropriate proceedings and for which appropriate reserves have
been established in accordance with generally accepted accounting principles or
the failure of which to pay and discharge would not have a material adverse
effect.
ARTICLE 11
Redemption of Securities
Section 11.1 Applicability of Article. Securities of any
series which are redeemable before their Stated Maturity shall be redeemable in
accordance with their terms and (except as otherwise specified as contemplated
by Section 3.1 for such Securities) in accordance with this Article 11.
Section 11.2 Election to Redeem; Notice to Trustee. The
election of the Company to redeem any Securities shall be evidenced by a Company
Order. In case of any redemption at the election of the Company of less than all
the Securities of any series (including any such redemption affecting only a
single Security), the Company shall, at least 45 days prior to the Redemption
Date fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date, of the principal amount of
Securities of such series to be redeemed and, if applicable, of the tenor of the
Securities to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
Section 11.3 Selection by Trustee of Securities to Be
Redeemed. If less than all the Securities of any series are to be redeemed
(unless all the Securities of such series and of a specified tenor are to be
redeemed), the particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of a portion of the principal amount of any Security of
such series, provided that the unredeemed portion of the principal amount of any
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security. If less than all the
Securities of such series and of a specified tenor are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series and specified tenor not previously called for redemption in
accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption as aforesaid and, in case of any
Securities selected for partial redemption as aforesaid, the principal amount
thereof to be redeemed.
The provisions of the two preceding paragraphs shall not apply
with respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has been
or is to be redeemed.
Section 11.4 Notice of Redemption. Notice of redemption shall
be given by first-class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the Redemption Date, to each Holder of Securities to be
redeemed, at the Holder's address appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all the Outstanding Securities of any series
consisting of more than a single Security are to be redeemed, the
identification (and, in the case of partial redemption of any such
Securities, the principal amounts) of the particular Securities to be
redeemed and, if less than all the Outstanding Securities of any series
consisting of a single Security are to be redeemed, the principal
amount of the particular Security to be redeemed;
(d) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security, and that interest, if
any, thereon shall cease to accrue from and after said date;
(e) the place where such Securities are to be surrendered for
payment of the Redemption Price, which shall be the office or agency of
the Company in the Place of Payment;
(f) if applicable, that the redemption is on account of a
sinking or purchase fund, or other analogous obligation; and
(g) the "CUSIP" number, if any.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company and shall
be irrevocable.
Section 11.5 Deposit of Redemption Price. On or prior to any
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 10.3) an amount of money sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities which are to be redeemed
on that date.
Section 11.6 Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, (premium, if any) and accrued interest and from and after
such date (unless the Company shall default in the payment of the Redemption
Price (premium, if any) and accrued interest) such Securities shall cease to
bear interest. Upon surrender of any such Security for redemption in accordance
with such notice, such Security shall be paid by the Company at the Redemption
Price, together with accrued interest to the Redemption Date; provided, however,
that, unless otherwise specified as contemplated by Section 3.1, installments of
interest whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.7.
If any Security called for redemption is not so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
Section 11.7 Securities Redeemed in Part. Any Security which
is to be redeemed only in part shall be surrendered at a Place of Payment
therefor (with, if the Company or the Trustee so requires, due endorsement by,
or a written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or the Holder's attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Security or Securities of the same series and of like tenor, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered; provided, however, that if a Global Security is so
surrendered, such new Security so issued shall be a new Global Security in a
denomination equal to the unredeemed portion of the principal of the Global
Security so surrendered.
ARTICLE 12
Sinking Funds
Section 12.1 Applicability of Article. The provisions of this
Article shall be applicable to any sinking fund for the retirement of Securities
of any series except as otherwise specified as contemplated by Section 3.1 for
such Securities.
The minimum amount of any sinking fund payment provided for by
the terms of any Securities is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of such Securities is herein referred to as an "optional sinking fund
payment". If provided for by the terms of any Securities, the cash amount of any
sinking fund payment may be subject to reduction as provided in Section 12.2.
Each sinking fund payment shall be applied to the redemption of Securities as
provided for by the terms of such Securities.
Section 12.2 Satisfaction of Sinking Fund Payments with
Securities. The Company (1) may deliver Outstanding Securities of a series
(other than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to any Securities of such series required to be made
pursuant to the terms of such Securities as and to the extent provided for by
the terms of such Securities; provided that the Securities to be so credited
have not been previously so credited. The Securities to be so credited shall be
received and credited for such purpose by the Trustee at the Redemption Price,
as specified in the Securities so to be redeemed, for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
Section 12.3 Redemption of Securities for Sinking Fund. Not
less than 35 days prior to each sinking fund payment date for any Securities,
the Company will deliver to the Trustee an Officers' Certificate specifying the
date and the amount of the next ensuing sinking fund payment for such Securities
pursuant to the terms of such Securities, the portion thereof, if any, which is
to be satisfied by payment of cash and the portion thereof, if any, which is to
be satisfied by delivering and crediting Securities pursuant to Section 12.2 and
will also deliver to the Trustee any Securities to be so delivered. Not less
than 32 days prior to each such sinking fund payment date, the Trustee shall
select the Securities to be redeemed upon such sinking fund payment date in the
manner specified in Section 11.3 and cause notice of the redemption thereof to
be given in the name of and at the expense of the Company in the manner provided
in Section 11.4. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
11.6 and 11.7.
ARTICLE 13
Defeasance and Covenant Defeasance
Section 13.1 Company's Right with Respect to Defeasance or
Covenant Defeasance. The Company will have the right, at any time, to have
Section 13.2 or Section 13.3 applied to any Securities or any series of
Securities, as the case may be (other than Securities of a series designated
pursuant to Section 3.1 as not being defeasible pursuant to such Section 13.2 or
13.3), upon compliance with the conditions set forth below in this Article. Any
such request shall be evidenced by a Company Order or in another manner
specified as contemplated by Section 3.1 for such Securities.
Section 13.2 Defeasance and Discharge. Upon the Company's
exercise of its right to have this Section applied to any Securities or any
series of Securities, as the case may be, the Company shall be deemed to have
been discharged from its obligations with respect to such Securities as provided
in this Section on and after the date the conditions set forth in Section 13.4
are satisfied (hereinafter called "Defeasance"). For this purpose, such
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by such Securities and to have satisfied all
its other obligations under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), subject to the following
which shall survive until otherwise terminated or discharged hereunder: (a) the
rights of Holders of such Securities to receive, solely from the trust fund
described in Section 13.4 and as more fully set forth in such Section, (i)
payments in respect of the principal of and any premium and interest on the
Outstanding Securities on the Stated Maturity of such principal or installment
of principal of and any premium or interest and (ii) the benefit of any
mandatory sinking fund payments applicable to the Securities on the day on which
such payments are due and payable in accordance with the terms of this Indenture
and the Securities, (b) the Company's obligations with respect to such
Securities under Sections 3.4, 3.5, 3.6, 10.2 and 10.3, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (d) this Article.
Subject to compliance with this Article, the Company may exercise its option to
have this Section applied to any Securities notwithstanding the prior exercise
of its option to have Section 13.3 applied to such Securities.
Section 13.3 Covenant Defeasance. Upon the Company's exercise
of its right to have this Section applied to any Securities or any series of
Securities, as the case may be, (a) the Company shall be released from its
obligations under Sections 10.10 and 10.11, and any covenants provided pursuant
to Section 3.1(k) relating to covenants of the Company with respect to a
particular series of Securities, Section 9.1(b) or 9.1(h) for the benefit of the
Holders of such Securities and (b) the occurrence of any event specified in
Sections 5.1(d) (with respect to Sections 10.10 and 10.11, and any such
covenants provided pursuant to Section 3.1(k) relating to covenants of the
Company with respect to a particular series of Securities, Section 9.1(b) or
9.1(h)), and 5.1(g) shall be deemed not to be or result in an Event of Default,
in each case with respect to such Securities as provided in this Section on and
after the date the conditions set forth in Section 13.4 are satisfied
(hereinafter called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that, with respect to such Securities, 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 specified Section (to the extent so specified
in the case of Section 5.1(d)), whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or by reason of any reference in
any such Section to any other provision herein or in any other document, but the
remainder of this Indenture and such Securities shall be unaffected thereby.
Section 13.4 Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section 13.2 or
Section 13.3 to any Securities or any series of Securities, as the case may be:
(a) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 6.9 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust
for the purpose of making the following payments, specifically pledged
as security for, and dedicated solely to, the benefits of the Holders
of such Securities, (1) money in an amount, or (2) U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment,
money in an amount, or (3) a combination thereof, in each case
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or any such other qualifying trustee) to pay
and discharge, (i) the principal of and any premium and each
installment of principal of and any premium and interest on the
Outstanding Securities on the respective Stated Maturities, and (ii)
any mandatory sinking fund payments applicable to the Securities on the
day on which such payments are due and payable in accordance with the
terms of this Indenture and such Securities.
(b) In the event of an election to have Section 13.2 apply to
any Securities or any series of Securities, as the case may be, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (1) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (2) since the
date of this instrument, there has been a change in the applicable
federal income tax law, in either case (1) or (2) to the effect that,
and based thereon such opinion shall confirm that, the Holders of such
Securities will not recognize gain or loss for federal income tax
purposes as a result of the deposit, Defeasance and discharge to be
effected with respect to such Securities and will be subject to federal
income tax on the same amount, in the same manner and at the same times
as would be the case if such deposit, Defeasance and discharge were not
to occur.
(c) In the event of an election to have Section 13.3 apply to
any Securities or any series of Securities, as the case may be, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of such Securities will not recognize gain
or loss for federal income tax purposes as a result of the deposit and
Covenant Defeasance to be effected with respect to such Securities and
will be subject to federal income tax on the same amount, in the same
manner and at the same times as would be the case if such deposit and
Covenant Defeasance were not to occur.
(d) Such provision would not cause any Outstanding Securities,
if then listed on any securities exchange, to be delisted as a result
of such deposit.
(e) No event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to such Securities
shall have occurred and be continuing at the time of such deposit or,
with regard to any such event specified in Sections 5.1(e) and (f), at
any time on or prior to the 90th day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied
until after such 90th day).
(f) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the
meaning of such Act).
(g) Such Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(h) Such Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act unless such trust
shall be registered under such Act or exempt from registration
thereunder.
(i) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant
Defeasance have been complied with.
Section 13.5 Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions. Subject to the provisions of the
last paragraph of Section 10.3, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee or other qualifying
trustee (solely for purposes of this Section and Section 13.6, the Trustee and
any such other trustee are referred to collectively as the "Trustee") pursuant
to Section 13.4 in respect of any Securities shall be held in trust and applied
by the Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any such Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal and any premium and interest, but money so held
in trust need not be segregated from other funds except to the extent required
by law. All money deposited with the Trustee pursuant to this Section may be
invested by the Trustee in U.S. Government Obligations if the Company so
instructs pursuant to a Company Order.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 13.4 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 Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 13.4 with respect to any Securities which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect the
Defeasance or Covenant Defeasance, as the case may be, with respect to such
Securities.
Section 13.6 Reinstatement. If the Trustee or the Paying Agent
is unable to apply any money in accordance with this Article with respect to any
Securities by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the obligations under this Indenture and such Securities from which the Company
has been discharged or released pursuant to Section 13.2 or 13.3 shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article with respect to such Securities, until such time as the Trustee or
Paying Agent is permitted to apply all money held in trust pursuant to Section
13.5 with respect to such Securities in accordance with this Article; provided,
however, that if the Company makes any payment of principal of or any premium or
interest on any such Security following such reinstatement of its obligations,
the Company shall be subrogated to the rights (if any) of the Holders of such
Securities to receive such payment from the money so held in trust.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed all as of the day and year first above written.
(Corporate Seal) TEXAS-NEW MEXICO POWER COMPANY
BY /s/ M.S. Cheema
--------------------------
Name: M.S. Cheema
Title: Senior Vice President &
Chief Financial Officer
Attest:
BY /s/ Paul W. Talbot
---------------------------
Name: Paul W. Talbot
Title: Secretary
(SEAL) CHASE BANK OF TEXAS, N.A., TRUSTEE
BY /s/ John G. Jones
-----------------------------
Name: John G. Jones
Title: Vice President
Attest:
BY /s/ Michael A. Scrivner
-----------------------------
Name: Michael A. Scrivner
Title: Vice President
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On this 11th day of January, 1999, before me, Rafael Beaumont, Notary
Public in and for the County and State aforesaid, personally appeared M. S.
Cheema, to me personally known, and known to me to be the person whose name is
subscribed to the foregoing instrument and known to me to be Senior Vice
President of TEXAS-NEW MEXICO POWER COMPANY, a Texas corporation, who being by
me duly sworn, did say that he resides in Weatherford, Texas, that he is Senior
Vice President of said TEXAS-NEW MEXICO POWER COMPANY and that the seal affixed
to said instrument is the corporate seal of said corporation, and that said
instrument was signed and sealed in behalf of said corporation by authority of
its Board of Directors; and said M. S. Cheema acknowledged said instrument to be
the free act and deed of said corporation, and acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed
and as the act of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office this
11th day of January, 1999.
/s/ Rafael Beaumont
-----------------------
(NOTARIAL SEAL)
STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, a Notary Public, on this day personally appeared John G. Jones,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of Chase
Bank of Texas, N.A., and that he has executed the same on behalf of said
corporation for the purposes and consideration therein expressed, and in the
capacity therein stated.
Given under my hand and seal of office this 8th day of January, 1999.
/s/ Patricia D. Blue
------------------------
Notary Public in and for the State
of Texas
(PERSONALIZED SEAL)
<PAGE>
EXHIBIT A
[If the Security is to be a Global Security, insert -- 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 SECURITY IS A GLOBAL SECURITY AS REFERRED TO IN THE INDENTURE HEREINAFTER
REFERENCED. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE
INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS GLOBAL SECURITY 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.]
TEXAS-NEW MEXICO POWER COMPANY
% ------ DUE
$-----------------
No.
CUSIP _________________
TEXAS-NEW MEXICO POWER COMPANY, a corporation duly organized
and existing under the laws of The State of Texas (herein called the "Company,"
which term includes any successor under the Indenture hereinafter referred to),
for value received, hereby promises to pay to or registered assigns, the
principal sum of $
on [if the Security is to bear interest prior to Maturity, insert -- , and to
pay interest thereon from , or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on and
in each year, commencing , at the rate per annum provided in
the title hereof, until the principal hereof is paid or made available for
payment [if applicable, insert -- , and, subject to the terms of the Indenture,
at the rate of % per annum on any overdue principal and premium and (to the
extent that the payment of such interest shall be legally enforceable) on any
overdue installment of interest, from the dates such amounts are due until they
are paid or made available for payment, and such interest shall be payable on
demand]. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the or (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for will forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities of this series not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.]
[If the Security is not to bear interest prior to Maturity,
insert --The principal of this Security shall not bear interest except in the
case of a default in payment of principal upon acceleration, upon redemption or
at Stated Maturity and in such case the overdue principal [and any overdue
premium] of this Security shall bear interest at the rate of % per annum (to the
extent that the payment of such interest shall be legally enforceable), which
shall accrue from the date of such default in payment to the date payment of
such principal has been made or duly provided for. Interest on any overdue
principal or premium shall be payable on demand. Any such interest on any
overdue principal [or premium] that is not so paid on demand shall bear interest
at the rate of % per annum (to the extent that the payment of such interest
shall be legally enforceable), which shall accrue from the date of such demand
for payment to the date payment of such interest has been made or duly provided
for, and such interest shall also be payable on demand.]
Payment of the principal of (and premium, if any) and
interest[, if any,] on this Security will be made at the office or agency of the
Company maintained for that purpose in , in [such coin or currency of the United
States of America as at the time of payment is legal tender for the payment of
public and private debts -- or state other currency]; [if this Security is not a
Global Security, insert -- provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register].
Reference is hereby made to the further provisions of this
Security 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
Security shall not be entitled to any benefits under the Indenture, or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, TEXAS-NEW MEXICO POWER COMPANY has caused
this Security to be duly executed.
Dated: TEXAS-NEW MEXICO POWER COMPANY
by
-------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Date: ,
as Trustee,
BY
Authorized Signatory
<PAGE>
[REVERSE OF SECURITY]
This Security is one of the duly authorized issue of
debentures, notes, bonds or other evidences of indebtedness of the Company
(hereinafter called the "Securities"), of the series hereinafter specified, all
issued or to be issued under and pursuant to the Indenture dated as of [ ], 1998
(hereinafter called the "Indenture"), duly executed and delivered by the Company
and [ ], as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and any other
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, obligations, duties and immunities
thereunder of the Trustee and any agent of the Trustee, any Paying Agent, the
Company and the Holders of the Securities and of the terms upon which the
Securities are issued and are to be authenticated and delivered. This Security
is one of the series designated on the face hereof [if applicable, insert -- ,
limited in aggregate principal amount to $--------. By the terms of the
Indenture, additional Securities [if applicable, insert -- of this series and]
of other separate series, which may vary as to date, amount, Stated Maturity,
interest rate or method of calculating the interest rate and in other respects
as therein provided, may be issued in an unlimited amount.]
[If applicable, insert -- This security is not subject to
redemption prior to the Stated Maturity.] [If applicable, insert --The
Securities of this series are subject to redemption upon not less than 30 or
more than 60 days' notice by mail to the Holders of such Securities at their
addresses in the Security Register for such series, [if applicable, insert --(1)
on in any year commencing with the year and ending with the year through
operation of the sinking fund for this series at a Redemption Price equal to
100% of the principal amount, and (2)] at any time [on or after , 19 ], as a
whole or in part, at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount):
If redeemed [on or before , %, and if redeemed] during the
12-month period beginning , of the years indicated:
Redemption Redemption
Year Price Year Price
-----------------------------------------------------------------------
and thereafter at a Redemption Price equal to % of the principal amount,
together in the case of any such redemption [if applicable, insert --(whether
through operation of the sinking fund or otherwise)] with accrued and unpaid
interest to the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.]
[If applicable, insert --The Securities of this series are
subject to redemption upon not less than 30 or more than 60 days' notice by mail
to the Holders of such Securities at their addresses in the Security Register
for such series, (1) on
in any year commencing with the year and ending with the year through operation
of the sinking fund for this series at the Redemption Prices for redemption
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below, and (2) at any time [if applicable, insert
- -- on or after ], as a whole or in part, at the election of the Company, at the
Redemption Prices for redemption otherwise than through operation of the sinking
fund (expressed as percentages of the principal amount) set forth in the table
below:
If redeemed during the 12-month period beginning ---- of the years
indicated:
Redemption Price
For Redemption Redemption Price For
Through Operation Redemption Otherwise
of the Than Through Operation
Year Sinking Fund of the Sinking Fund
--------------------------------------------------------------
and thereafter at a Redemption Price equal to % of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued and unpaid interest to the Redemption
Date, but interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such Securities, or one or
more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]
[If applicable, insert -- Notwithstanding the foregoing, the
Company may not, prior to , redeem any Securities of this series as
contemplated by [Clause (2) of] the preceding paragraph as a part of, or in
anticipation of, any refunding operation by the application, directly or
indirectly, of moneys borrowed having an interest cost to the Company
(calculated in accordance with generally accepted financial practice) of less
than % per annum.]
[If applicable, insert -- The sinking fund for this series
provides for the redemption on in each year beginning with the year and
ending with the year of [not less than] [("mandatory sinking fund") and, at
the option of the Company, not more than ] aggregate principal amount of
Securities of this series. [Securities of this series acquired or redeemed by
the Company otherwise than through [mandatory] sinking fund payments may be
credited against subsequent [mandatory] sinking fund payments otherwise
required to be made in the order in which they become due.]]
[If the Security is subject to redemption of any kind, insert
-- In the event of redemption of this Security in part only, a new Security or
Securities of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.]
The Indenture contains provisions for defeasance of (a) the
entire indebtedness of this Security and (b) certain restrictive covenants
upon compliance by the Company with certain conditions set forth therein.
[If the Security is not an Original Issue Discount Security,
insert --If an Event of Default with respect to Securities of this series
shall occur and be continuing, the principal of the Securities of this series
may be declared due and payable in the manner and with the effect provided in
the Indenture.]
[If the Security is an Original Issue Discount Security,
insert --If an Event of Default with respect to Securities of this series
shall occur and be continuing, an amount of principal of the Securities of
this series (the "Acceleration Amount") may be declared due and payable in the
manner and with the effect provided in the Indenture. Such amount shall be
equal to -- insert formula for determining amount. Upon payment (i) of the
Acceleration Amount so declared due and payable and (ii) of interest on any
overdue principal and overdue interest (in each case to the extent that the
payment of such interest shall be legally enforceable), all of the Company's
obligations in respect of the payment of the principal of and interest, if
any, on the Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Securities at the time Outstanding of all series to be
affected (voting as a class). The Indenture also contains provisions
permitting the Holders of specified percentages in principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders of
all Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders
of this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Security.
[If the Security is an Original Issue Discount Security, -- In
determining whether the Holders of the requisite principal amount of the
Outstanding 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 Securities, the principal amount of any
Original Issue Discount Security that shall be deemed to be Outstanding shall
be the amount of the principal thereof that would be due and payable as of the
date of such determination upon the acceleration of the Maturity thereof.]
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest, if any, on this Security at the times, place
and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in any place where the
principal of (and premium, if any) and interest, if any, on this Security are
payable, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered
form without coupons in denominations of $ and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
This Security shall be governed by and construed in accordance
with the laws of the State of New York.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
This Instrument Grants a Security Interest By a Utility
===============================================================================
TEXAS-NEW MEXICO POWER COMPANY
to
Chase Bank of Texas, N.A.,
as Trustee
-------------------------
First Supplemental Indenture
Dated as of January 1, 1999
Supplemental to the Indenture
dated as of January 1, 1999
Establishing a series of Securities
designated 6 1/4% Senior Notes Due 2009
================================================================================
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of January 1, 1999 (herein
called the "First Supplemental Indenture"), between Texas-New Mexico Power
Company, a corporation duly organized and existing under the laws of the State
of Texas (hereinafter called the "Company") and Chase Bank of Texas, N.A., as
Trustee under the Original Indenture referred to below (hereinafter called the
"Trustee").
WITNESSETH:
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture dated as of January 1, 1999 (hereinafter called the
"Original Indenture"), to provide for the issuance from time to time in one or
more series of its debentures, notes, bonds or other evidences of indebtedness
(herein called the "Securities"), the form and terms of which are to be
established as set forth in Sections 2.1 and 3.1 of the Original Indenture;
WHEREAS, Section 9.1 of the Original Indenture provides, among other
things, that the Company and the Trustee may enter into indentures supplemental
to the Original Indenture for, among purposes, (1) securing the Securities in
accordance with Section 3.1 and (2) establishing the form and terms of the
Securities of any series as permitted in Sections 2.1 and 3.1 of the Original
Indenture;
WHEREAS, the Company desires to create a series of the Securities in an
aggregate principal amount of $175,000,000 to be designated the "6 1/4% Senior
Notes Due 2009" (the "Senior Notes"), and all action on the part of the Company
necessary to authorize the issuance of the Senior Notes under the Original
Indenture and this First Supplemental Indenture has been duly taken;
WHEREAS, subject to the provisions hereof, the Company may issue one or
more series of Senior Note Mortgage Bonds (as hereinafter defined) and deliver
such series to the Trustee to hold in trust for the benefit of the respective
Holders from time to time of the Related Series of Securities (as defined
herein) and any payment by the Company of principal of, premium, if any, and
interest on, the Senior Notes will be applied by the Trustee to satisfy the
Company's obligations with respect to the principal of, premium, if any, and
interest on, the Related Series of Senior Note Mortgage Bonds; and, pursuant to
the terms and provisions hereof, the Company may require the Trustee to deliver
to the Company for cancellation any and all of the Related Series of Senior Note
Mortgage Bonds held by the Trustee; and
WHEREAS, all acts and things necessary to make the Senior Notes, when
executed by the Company and completed, authenticated and delivered by the
Trustee as provided in the Original Indenture and this First Supplemental
Indenture, the valid and binding obligations of the Company and to constitute
these presents a valid and binding supplemental indenture and agreement
according to its terms, have been done and performed;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
That in consideration of the premises and of the acceptance and
purchase of the Senior Notes by the holders thereof and of the acceptance of
this trust by the Trustee, the Company covenants and agrees with the Trustee,
for the equal benefit of holders of the Senior Notes, as follows:
ARTICLE ONE
Definitions
The use of the terms and expressions herein is in accordance with the
definitions, uses and constructions contained in the Original Indenture, as
amended and supplemented hereby, and the form of Senior Notes attached hereto as
Exhibit A.
ARTICLE TWO
Terms and Issuance of the 6 1/4% Senior Notes Due 2009
Section 2.1. Issue of Senior Notes. A series of Securities which shall
be designated the "6 1/4% Senior Notes Due 2009" shall be executed,
authenticated and delivered in accordance with the provisions of, and shall in
all respects be subject to, the terms, conditions and covenants of, the Original
Indenture, as amended, and this First Supplemental Indenture (including the form
of Senior Note set forth in Exhibit A). The aggregate principal amount of the
Senior Notes which may be authenticated and delivered under this First
Supplemental Indenture shall not, except as permitted by the provisions of the
Original Indenture, exceed $175,000,000.
Section 2.2. Form of Senior Notes; Incorporation of Terms. The form of
the Senior Notes shall be substantially in the form of Exhibit A attached
hereto. The terms of such Senior Notes are herein incorporated by reference and
are part of this First Supplemental Indenture.
Section 2.3. Depositary for Global Securities. The Depositary for any
Global Securities of the series of which this Security is a part shall be The
Depository Trust Company in the City of New York.
Section 2.4. Place of Payment. The Place of Payment in respect of the
Senior Notes will be at the principal office or agency of the Company in the
City of New York, State of New York or at the office or place of business of the
Trustee or its successor in trust under the Original Indenture, which, at the
date hereof, is located at 2200 Ross Avenue, 5th Floor, Dallas, Texas 75201.
Section 2.5. Related Series of Senior Note Mortgage Bonds. The Related
Series of Senior Note Mortgage Bonds for the Senior Notes shall be the Company's
Senior Note Mortgage Bonds, Series X, 6 1/4% due 2009.
Section 2.6. Restrictions on Liens. The covenant provided by Section
10.10 of the Original Indenture shall be applicable to the Senior Notes from and
after the Release Date, provided, that no Event of Default has occurred and at
such time is continuing under the Original Indenture.
Section 2.7. Restrictions on Sale and Leaseback Transactions. The
covenant provided by Section 10.11 of the Original Indenture shall be applicable
to the Senior Notes after the Release Date.
ARTICLE THREE
Amendments to Original Indenture
Section 3.1. Section 1.1 of the Original Indenture is hereby amended by
adding the following definitions:
"Expert" means any officer of the Company familiar with the
terms of the First Mortgage Indenture and this Indenture, any law firm,
any investment banking firm, or any other Person reasonably acceptable
to the Trustee.
"First Mortgage Bonds" means all first mortgage bonds issued
by the Company and outstanding under the First Mortgage Indenture,
other than Senior Note Mortgage Bonds.
"First Mortgage Indenture" means the Indenture of Mortgage and
Deed of Trust, dated November 1, 1944, by and between Community Public
Service Co. (now known as the Company) and City National Bank and Trust
Company of Chicago, Chicago, Illinois (whose current successor is U.S.
Bank Trust, N.A.) (as of the date hereof, the "First Mortgage
Trustee"), as supplemented and modified from time to
time
"First Mortgage Trustee" means the Person serving as trustee
at the time under the First Mortgage Indenture.
"Related Series of Securities", when used in reference to any
series of Senior Note Mortgage Bonds, means the series of Securities
which, in connection with its original authentication and issuance
pursuant to Section 3.3 hereof, such series of Senior Note Mortgage
Bonds were delivered to the Trustee pursuant to Section 14.1 hereof.
"Related Series of Senior Note Mortgage Bonds", when used in
reference to any series of Securities, shall mean the series of Senior
Note Mortgage Bonds delivered to the Trustee pursuant to Section 14.1
hereof in connection with the initial authentication and issuance of
Securities pursuant to Section 3.3 hereof.
"Release Date" means a date chosen by the Company which shall
be not earlier than the later of (i) the date as of which all First
Mortgage Bonds, other than the Senior Note Mortgage Bonds, have been
retired through payment, redemption, or otherwise (including those
First Mortgage Bonds "deemed to be paid" or as to which the entire
indebtedness is paid and discharged within the meaning used in Article
18 of the First Mortgage Indenture) at, before or after the maturity
thereof, and (ii) the date as of which no Liens on any Property of the
Company or any Subsidiary exists (whether such Liens secure
Indebtedness of the Company or any Subsidiary or any other Person),
except that this clause (ii) shall not apply to any Lien to the extent
described in clauses (a) through (k) of Section 10.10 of the Original
Indenture or in the last paragraph of such Section 10.10.
"Senior Note Mortgage Bonds" shall mean any bonds issued by
the Company under the First Mortgage Indenture and delivered to the
Trustee pursuant to Section 14.1 hereof.
Section 3.2. Prior to the Release Date, Section 1.5(a) of the Original
Indenture is hereby amended by inserting the words ", the First Mortgage
Trustee" following the words "by any Holder".
Section 3.3. Prior to the Release Date, Section 3.1 of the Original
Indenture is hereby amended in the following manner:
1. Section 3.1(l) is amended by deleting the ";" after the
word "Securities" and adding "and any change in the right of
the Trustee or the requisite Holders of such Securities to
declare the principal amount thereof due and payable pursuant
to Section 5.2;"
2. Section 3.1(p) is amended by deleting the word "and" at the
end of the Section;
3. The following Section 3.1(q) is added, to follow Section
3.1(p):
"(q) if prior to the Release Date, the designation of the
series of Senior Note Mortgage Bonds being delivered to the Trustee in
connection with such series of Securities, if any; and"
4. Former Section 3.1(q) is relettered as Section 3.1(r).
Section 3.4. Prior to the Release Date, the third paragraph of Section
3.3 of the Original Indenture is hereby amended by (a) adding "(i)" before the
words "a Company Order" on the third line of the paragraph, and (b) by adding,
after the words "so offered;" on the eighth line of such paragraph, the
following words:
"(ii) an Officers' Certificate stating that (x) the Company is not, and
upon the authentication by the Trustee of the series of Securities,
will not be in default under any of the terms or covenants contained in
the Indenture, (y) all conditions that must be met by the Company to
issue Securities under the Indenture have been met, and (z) if prior to
the Release Date, the series of Senior Note Mortgage Bonds being
delivered to the Trustee meets the requirements of Section 14.9 hereof,
and (iii) if prior to the Release Date, a series of Senior Note
Mortgage Bonds meeting the requirements of Section 14.9 hereof;"
Section 3.5. Prior to the Release Date, the fourth paragraph of Section
3.3 of the Original Indenture is hereby amended in the following manner:
1. Clause (b) of the fourth paragraph is amended by deleting
the word "and" at the end of the clause.
2. Clauses (d) and (e) are added after clause (c), as follows:
"(d) if prior to the Release Date, that the Senior
Note Mortgage Bonds to be delivered to the Trustee in
connection with the issuance of such series of Securities have
been duly authorized, and that such Senior Note Mortgage
Bonds, when authenticated and delivered by the First Mortgage
Trustee and issued by the Company in accordance with the terms
of the First Mortgage Indenture, will constitute valid and
legally binding obligations of the Company, enforceable in
accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or transfer or other similar laws relating to or
affecting the rights of creditors generally and except as the
enforceability thereof is subject to the application of
general principles of equity (regardless of whether considered
in a proceeding in equity or at law), including, without
limitation, (i) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy
and (ii) concepts of materiality, reasonableness, good faith
and fair dealing, and except as enforcement of remedial and
procedural provisions thereof may be limited by state laws
affecting the remedies for the enforcement of the security
provided for in the First Mortgage Indenture; and that such
Senior Note Mortgage Bonds will be entitled to the benefit of
the First Mortgage Indenture, equally and ratably, with all
other First Mortgage Bonds outstanding thereunder, except as
to any sinking fund provisions; and
(e) if prior to the Release Date, that the First
Mortgage Indenture and any required financing statements have
been duly filed and recorded in all places where such filing
or recording is necessary for the perfection or preservation
of the lien of the First Mortgage Indenture, and the First
Mortgage Indenture constitutes a valid and perfected first
lien upon the property purported to be covered thereby,
subject only to Permitted Encumbrances (as defined in the
First Mortgage Indenture);"
3. The proviso following clause (e) is amended (1) by adding
after the words "Opinion of Counsel" the words ", the
Officers' Certificate, the certificate of an Expert and the
Senior Note Mortgage Bonds"; and (2) by replacing "clauses (b)
and (c)" with "clauses (b), (c), (d) and (e)".
4. The word "and" at the end of subclause (i) is deleted, and
the following subclauses (iii) and (iv) are inserted after
subclause (ii):
"(iii) if prior to the Release Date, when
the terms of the Senior Note Mortgage Bonds have been
established in accordance with the instrument or
instruments creating the series of which such Senior
Note Mortgage Bonds are a part, that the Senior Note
Mortgage Bonds to be delivered to the Trustee in
connection with the issuance of such series of
Securities will have been duly authorized, and that
such Senior Note Mortgage Bonds, when authenticated
and delivered by the First Mortgage Trustee and
issued by the Company in accordance with the terms of
the First Mortgage Indenture, will constitute valid
and legally binding obligations of the Company,
enforceable in accordance with their terms, except as
may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or
transfer or other similar laws relating to or
affecting the rights of creditors generally and
except as the enforceability thereof is subject to
the application of general principles of equity
(regardless of whether considered in a proceeding in
equity or at law), including, without limitation, (i)
the possible unavailability of specific performance,
injunctive relief or any other equitable remedy and
(ii) concepts of materiality, reasonableness, good
faith and fair dealing, and except as enforcement of
remedial and procedural provisions thereof may be
limited by state laws affecting the remedies for the
enforcement of the security provided for in the First
Mortgage Indenture; and that such Senior Note
Mortgage Bonds will be entitled to the benefit of the
First Mortgage Indenture, equally and ratably, with
all other First Mortgage Bonds outstanding
thereunder, except as to any sinking fund provisions;
and
(iv) if prior to the Release Date, that when
the First Mortgage Indenture and any required
financing statements have been duly filed and
recorded in all places where such filing or recording
is necessary for the perfection or preservation of
the lien of the First Mortgage Indenture, the First
Mortgage Indenture will constitute a valid and
perfected first lien upon the property purported to
be covered thereby, subject only to Permitted
Encumbrances (as defined in the First Mortgage
Indenture);"
Section 3.6. Prior to the Release Date, Article 3 of the Original
Indenture is hereby amended by adding, after Section 3.12, the following Section
3.13:
"Section 3.13. Payment of Securities. The Trustee shall
receive the Senior Note Mortgage Bonds from the Company as provided in
this Indenture and shall hold the Senior Note Mortgage Bonds, and any
and all sums payable thereon or with respect thereto or realized
therefrom, in trust for the benefit of the Holders of the Securities,
as herein provided. Subject to Article Five hereof, all payments made
by the Company to the Trustee on a series of Senior Note Mortgage
Bonds, if any, shall be applied by the Trustee to pay, when due,
principal of, premium, if any, and interest on the Related Series of
Securities and, to the extent so applied, shall satisfy the Company's
obligations on such Securities. Notwithstanding the foregoing, the
Company's obligation to make payments of principal of, premium, if any,
and interest on any series of Senior Note Mortgage Bonds shall be fully
satisfied by making timely payments of principal of, premium, if any,
and interest on the Related Series of Securities."
Section 3.7. Prior to the Release Date, Article 4 of the Original
Indenture is hereby amended by adding, after Section 4.2, the following Section
4.3:
"Section 4.3. Release of Related Series of Senior Note Mortgage Bonds.
(a) If the obligations of the Company to make payment with
respect to any series of Securities are satisfied and discharged, in
whole or in part, pursuant to this Article 4, the Related Series of
Senior Note Mortgage Bonds shall be deemed to be paid and discharged in
a principal amount equal to the principal amount of the Related Series
of Securities paid and discharged pursuant hereto.
(b) If the Company shall have paid or caused to be paid the
principal of and premium, if any, and interest on any Security (or
portion thereof), as and when the same shall have become due and
payable or the Company shall have delivered to the Trustee for
cancellation any Outstanding Security (or portion thereof), such
Security (or portion thereof) shall cease to be entitled to any lien,
benefit or security under this Indenture. Upon a Security of any series
(or portion thereof) ceasing to be entitled to any lien, benefit or
security under this Indenture, the obligation of the Company to make
payment with respect to principal of and premium, if any, and interest
on a principal amount of the Related Series of Senior Note Mortgage
Bonds equal to the principal amount of such Security (or portion
thereof) shall be satisfied and discharged and such Senior Note
Mortgage Bonds (or portion thereof) shall cease to secure the
Securities in any manner, and the Trustee shall release and deliver to
the Company such Senior Note Mortgage Bonds (or portion thereof).
(c) Upon the satisfaction and discharge of this Indenture, the
Trustee shall at the request of the Company return to the Company all
Senior Note Mortgage Bonds and all other property and money held by it
under this Indenture and determined by it to be in excess of the amount
required to be held under Section 4.1 hereof."
Section 3.8. Prior to the Release Date, Sections 5.1 of the Original
Indenture is hereby amended by replacing the "." at the end of clause (h) with
"; or" and by adding, after such clause (h), the following clauses (i) and (j):
"(i) a "default" as defined in the First Mortgage
Indenture has occurred and is continuing, and the First
Mortgage Trustee, the Company or Holders of at least 33% in
aggregate principal amount of the Securities at the time
outstanding shall have given written notice thereof to the
Trustee; or
(j) any Event of Default under any series of
Securities issued pursuant to this Indenture or any event of
default, as defined in any other indenture, mortgage or
instrument under which there may be issued, or by which there
may be secured or evidenced, any Indebtedness of the Company
(whether such Indebtedness now exists or shall hereafter be
created or incurred) shall occur and shall consist of default
in the payment of such Indebtedness at the maturity thereof
(after giving effect to any applicable grace period) or shall
result in Indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become
due and payable, and such default in payment is not cured or
such acceleration shall not be rescinded or annulled within 10
days after written notice to the Company from the Trustee or
to the Company and to the Trustee from the Holders of at least
10% in aggregate principal amount of the Securities of that
series at the time Outstanding; provided that if, prior to the
declaration of acceleration of the maturity of the Securities
of that series or the entry of judgment in favor of the
Trustee in a suit pursuant to Section 5.3, such default shall
be remedied or cured by the Company or waived by the holders
of such Indebtedness, then the Event of Default hereunder by
reason thereof shall be deemed likewise to have been thereupon
remedied, cured or waived without further action on the part
of either the Trustee or any of the Holders of the Securities
of that series, and provided further, that, subject to Section
6.1 and 6.2, the Trustee shall not be charged with knowledge
of any such default unless written notice of such default
shall have been given to the Trustee by the Company, by a
holder or an agent of a holder of any such Indebtedness, by
the trustee then acting under any indenture or other
instrument under which such default shall have occurred, or by
the Holders of at least five percent in aggregate principal
amount of the Securities of that series at the time
Outstanding."
Section 3.9. Prior to the Release Date, Section 5.2 of the Original
Indenture is hereby amended as follows:
1. A new paragraph is added, to follow the first paragraph of Section
5.2, as follows:
"Upon the Securities being declared to be or becoming due and
payable, the Trustee can immediately file with the First Mortgage
Trustee a written demand for redemption of all Senior Note Mortgage
Bonds pursuant to the applicable provisions of the supplemental
indenture to the First Mortgage Indenture."
2. The paragraph following the new second paragraph of Section 5.2 is
amended (i) by adding after the word "provided," the words "and prior
to the mailing to the Trustee by the First Mortgage Trustee of a firm,
valid and unconditional notice to the Trustee of the acceleration of
all of the First Mortgage Bonds issued and outstanding under the First
Mortgage Indenture," and (ii) by adding after the word "consequences"
the words "(including if given the written demand for redemption of all
Senior Note Mortgage Bonds)".
3. Clause (b) of Section 5.2 is amended by deleting the "." at the end
of such clause (b) and replacing it with "(including any defaults under
the First Mortgage Indenture, as evidenced by notice thereof from the
First Mortgage Trustee to the Trustee).".
Section 3.10. Prior to the Release Date, Section 5.3 of the Original
Indenture is hereby amended in the following manner:
1. By adding after the word "unpaid" in the second paragraph of Section
5.3 the following words: "(including, prior to the Release Date, to
exercise any rights to that end it may have as holder of the Senior
Note Mortgage Bonds)".
2. By adding after the first occurrence of the word "rights" in the
third paragraph of Section 5.3 the following words: "(including, prior
to the Release Date, its rights as holder of the Senior Note Mortgage
Bonds)".
Section 3.11. Prior to the Release Date, subclause (a) of the first
paragraph of Section 5.4 of the Original Indenture is hereby amended by adding,
after the word "(including" the words ", prior to the Release Date, any claims
of the Trustee as holder of Senior Note Mortgage Bonds and including".
Section 3.12. Prior to the Release Date, Section 5.5 of the Original
Indenture is hereby amended by adding, after the words "Securities of any
series" on the second line of such Section 5.5, the words "(including, prior to
the Release Date, its rights as holder of the Senior Note Mortgage Bonds),".
Section 3.13. Prior to the Release Date, Section 7.3 of the Original
Indenture is hereby amended as follows:
1. The word "and" at the end of Section 7.3(a)(6) is deleted.
2. The "." at the end of Section 7.3(a)(7) is replaced with "; and".
3. The following Section 7.3(a)(8) is added after Section 7.3(a)(7):
"(8) any release, or release and substitution, of
property subject to the lien of this Indenture (and the
consideration therefor, if any) which it has not previously
reported."
Section 3.14. Prior to the Release Date, Section 8.1(a) of the Original
Indenture is hereby amended in the following manner:
1. In Section 8.1(a), the letter "(i)" is added after the word
"assume,".
2. The ";" at the end of Section 8.1(a) is replaced by "," followed by
the words: "and (ii) if such consolidation, merger, conveyance, sale or
other transfer occurs prior to the Release Date, by an indenture
supplemental to the First Mortgage Indenture, executed and delivered to
the Trustee and the First Mortgage Trustee, in form satisfactory to the
Trustee and the First Mortgage Trustee, the due and punctual payment of
the principal of (and premium, if any) and interest on all of the
Senior Note Mortgage Bonds and the performance of every covenant of the
First Mortgage Indenture on the part of the Company to be performed or
observed;".
Section 3.15. Section 9.1(j) of Article 9 of the Original Indenture is
hereby amended by deleting the "." after the words "fully registered form" and
inserting in its place the word "; and" and by adding the following new
paragraph (k) after paragraph (j):
"(k) after the Release Date, to amend this Indenture to
eliminate any provisions related to the Senior Note Mortgage Bonds
which are no longer applicable."
Section 3.16. Prior to the Release Date, Section 9.2(l) of the Original
Indenture is hereby amended by replacing the ";" at the end of such Section
9.2(l) with "," followed by the words: "or impair the interest hereunder of the
Trustee in the Senior Note Mortgage Bonds, or prior to the Release Date, reduce
the principal amount of any series of Senior Note Mortgage Bonds to an amount
less than the principal amount of the Related Series of Securities or alter the
payment provisions of such Senior Note Mortgage Bonds in a manner adverse to the
Holders of the Securities;".
Section 3.17. Prior to the Release Date, Article 10 of the Original
Indenture is hereby amended by adding, after Section 10.13, the following
Section 10.14:
"Section 10.14. Opinions of Counsel. The Company shall deliver
to the Trustee:
(a) promptly after the execution and delivery of this
Indenture and of any indenture supplemental to this Indenture but
prior to the Release Date, an Opinion of Counsel either stating that,
in the opinion of such counsel, this Indenture or such supplemental
indenture and any financing or continuation statements have been
properly recorded and filed so as to make effective and to perfect the
security interest of the Trustee intended to be created by this
Indenture for the benefit of the Holders from time to time of the
Securities in the Senior Note Mortgage Bonds, and reciting the details
of such action, or stating that, in the opinion of such counsel, no
such action is necessary to perfect or make such security interest
effective and stating what, if any, action of the foregoing character
may reasonably be expected to become necessary prior to the next
succeeding March 1 to maintain, perfect and make such security
interest effective; and
(b) on or before March 1 of each year, beginning in 1999, and
prior to the Release Date, 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 10.14(b) or the first Opinion of Counsel furnished pursuant to
Section 10.14(a) hereof, with respect to the recording, filing,
rerecording, or refiling of this Indenture, each supplemental
indenture and any financing or continuation statements, as is
necessary to maintain and perfect the security interest of the Trustee
intended to be created by this Indenture for the benefit of the
Holders from time to time of the Securities in the Senior Note
Mortgage Bonds, and reciting the details of such action, or stating
that in the opinion of such counsel no such action is necessary to
maintain and perfect such security interest and stating what, if any,
action of the foregoing character may reasonably be expected to become
necessary prior to the next succeeding March 1 to maintain, perfect
and make such security interest effective."
Section 3.18. Prior to the Release Date, Section 13.2 of the Original
Indenture is hereby amended by replacing the "." after the word "Defeasance")"
in the first sentence of such Section with the following words: "and the
obligation of the Company to make payment with respect to the principal of and
premium, if any, and interest on the Related Series of Senior Note Mortgage
Bonds shall be satisfied and discharged, as provided in the supplemental
indenture or indentures to the First Mortgage Indenture creating such Senior
Note Mortgage Bonds and the Senior Note Mortgage Bonds shall cease to secure the
related Securities in any manner.".
Section 3.19. The Original Indenture is hereby amended by adding, after
Section 13.6, the following Article 14:
"ARTICLE 14
Senior Note Mortgage Bonds
Section 14.1. Delivery of Senior Note Mortgage Bonds to the Trustee.
Subject to the provisions of Section 4.1 and Section 14.10
hereof, the Company (a) shall, from time to time prior to the Release
Date, deliver to the Trustee, upon the issuance of a series of
Securities hereunder, Senior Note Mortgage Bonds conforming to the
requirements of Section 14.9 hereof, fully registered in the name of
the Trustee, in trust for the benefit of the Holders from time to time
of the Securities issued under this Indenture as security for any and
all obligations of the Company under the Securities, including, but not
limited to, (1) the full and prompt payment of the principal of the
Securities when and as the same shall become due and payable in
accordance with the terms and provisions of this Indenture or the
Securities, either at the stated maturity thereof, upon acceleration of
the maturity thereof or upon redemption, and (2) the full and prompt
payment of any interest on the Securities when and as the same shall
become due and payable in accordance with the terms and provisions of
this Indenture or the Securities and (b) shall deliver concurrently
therewith to the Trustee the certificate of the Expert required by
Section 14.6 hereof.
Section 14.2. Receipt.
The Trustee shall accept and acknowledge receipt of the Senior
Note Mortgage Bonds and Expert certificate described in Section 14.1
hereof upon the delivery thereof in accordance with said Section 14.1.
Section 14.3. Senior Note Mortgage Bonds Held by the Trustee.
The Trustee, as holder of the Senior Note Mortgage Bonds,
shall attend any meeting of bondholders under the First Mortgage
Indenture as to which it receives due notice, or, at its option, shall
deliver its proxy in connection therewith. Either at such meeting, or
otherwise where consent of holders of First Mortgage Bonds issued under
the First Mortgage Indenture is sought without a meeting, the Trustee
shall vote all of the Senior Note Mortgage Bonds held by it, or shall
consent or withhold its consent with respect thereto, as directed by
the Holders of not less than a majority in the aggregate principal
amount of the outstanding Securities; provided, however, the Trustee
shall not vote as such holder of any particular series of Senior Note
Mortgage Bonds in favor of, or give its consent to, any action which,
in the Trustee's opinion, would materially adversely affect such series
of Senior Note Mortgage Bonds in a manner not shared generally by all
other Senior Note Mortgage Bonds, except upon notification by the
Trustee to the Holders of the Related Series of Securities of such
proposal and consent thereto of the Holders of not less than a majority
in aggregate principal amount of the outstanding Securities of such
series.
Section 14.4. No Transfer of Senior Note Mortgage Bonds;
Exception.
Except as required to effect an assignment to a successor
trustee under this Indenture or pursuant to Section 14.5 or Section
14.8 hereof, the Trustee shall not sell, assign or transfer the Senior
Note Mortgage Bonds and the Company shall issue stop transfer
instructions to the First Mortgage Trustee and any transfer agent under
the First Mortgage Indenture to effect compliance with this Section
14.4.
Section 14.5. Delivery to the Company of All Senior Note
Mortgage Bonds.
When the obligation of the Company to make payment with
respect to the principal of and premium, if any, and interest on the
Senior Note Mortgage Bonds shall be satisfied or deemed satisfied
pursuant to Section 4.1 or Section 14.10 hereof, the Trustee shall,
upon written request of the Company and receipt of the certificate of
the Expert described in Section 14.6(b) hereof (if such certificate is
then required by Section 14.6(b) hereof), deliver to the Company
without charge therefor all of the Senior Note Mortgage Bonds, together
with such appropriate instruments of transfer or release as may be
reasonably requested by the Company. All Senior Note Mortgage Bonds
delivered to the Company in accordance with this Section 14.5 shall be
delivered by the Company to the First Mortgage Trustee for
cancellation.
Section 14.6. Reserved.
Section 14.7. Further Assurances.
The Company shall cause this Indenture, any indentures
supplemental to this Indenture, and any financing or continuation
statements to be promptly recorded and filed and rerecorded and refiled
in such a manner and in such places, as may be required by law in order
fully to preserve, protect and perfect the security of the Holders and
all rights of the Trustee, and, at its own expense, shall do such
further lawful acts and things, and execute and deliver such additional
conveyances, assignments, assurances, agreements, financing statements
and instruments, as may be necessary in order to better assign, assure,
perfect and confirm to the Trustee its security interest in the Senior
Note Mortgage Bonds and for maintaining, protecting and preserving such
security interest.
Section 14.8. Exchange and Surrender of Senior Note Mortgage
Bonds.
At any time at the written direction of the Company, the
Trustee shall surrender to the Company all or part of the Senior Note
Mortgage Bonds in exchange for Senior Note Mortgage Bonds equal in
aggregate outstanding principal amounts to, in different denominations
than but of the same series and with all other terms identical to, the
Senior Note Mortgage Bonds so surrendered to the Company. In addition,
at any time a Security shall cease to be entitled to any lien, benefit
or security under this Indenture pursuant to Section 4.4 hereof, the
Trustee shall surrender Senior Note Mortgage Bonds as provided in this
Section to the Company for cancellation. The Trustee shall, together
with such Senior Note Mortgage Bonds, deliver to the Company such
appropriate instruments of transfer or release as the Company may
reasonably request. Prior to the surrender required by this paragraph,
the Trustee shall receive from the Company the following, and (subject
to Section 6.1 hereof) shall be fully protected in relying upon, (a) an
Officers' Certificate stating (i) the aggregate outstanding principal
amount of the Senior Note Mortgage Bonds of the series surrendered by
the Trustee, after giving effect to such surrender, (ii) the aggregate
outstanding principal amount of the Related Series of Securities, (iii)
that the surrender of the Senior Note Mortgage Bonds will not result in
any default under this Indenture, and (iv) that any Senior Note
Mortgage Bonds to be received in exchange for the Senior Note Mortgage
Bonds being surrendered comply with the provisions of this Section
14.8.
The Company shall not be permitted to cause the surrender or
exchange of all or any part of a series of Senior Note Mortgage Bonds
contemplated in this Section 14.8, if, after such surrender or
exchange, the aggregate outstanding principal amount of the Related
Series of Securities would exceed the aggregate outstanding principal
amount of such series of Senior Note Mortgage Bonds held by the
Trustee. Any Senior Note Mortgage Bonds received by the Company
pursuant to this Section 14.8 shall be delivered to the First Mortgage
Trustee for cancellation.
Section 14.9. Terms of Senior Note Mortgage Bonds.
Each series of Senior Note Mortgage Bonds delivered to the
Trustee pursuant to Section 14.1 hereof shall have the same stated rate
or rates of interest (or interest calculated in the same manner),
Interest Payment Dates, Stated Maturity, and redemption provisions, and
shall be in the same aggregate principal amount, as the Related Series
of Securities being contemporaneously issued.
Section 14.10. Senior Note Mortgage Bonds as Security for
Securities.
Until the Release Date and subject to Article Four hereof,
Senior Note Mortgage Bonds delivered to the Trustee, for the benefit of
the Holders of the Securities, shall serve as security for any and all
obligations of the Company under the Securities, including, but not
limited to (1) the full and prompt payment of the principal of such
Securities when and as the same shall become due and payable in
accordance with the terms and provisions of this Indenture or the
Securities, either at the Stated Maturity thereof, upon acceleration of
the maturity thereof or upon redemption, and (2) the full and prompt
payment of any interest on such Securities when and as the same shall
become due and payable in accordance with the terms and provisions of
this Indenture or the Securities.
Notwithstanding anything in this Indenture to the contrary,
from and after the Release Date, the obligation of the Company to make
payment with respect to the principal of and premium, if any, and
interest on the Senior Note Mortgage Bonds shall be deemed satisfied
and discharged as provided in the supplemental indenture or indentures
to the First Mortgage Indenture creating such Senior Note Mortgage
Bonds and the Senior Note Mortgage Bonds shall cease to secure in any
manner Securities theretofore or subsequently issued. From and after
the Release Date, all Securities, whether theretofore or subsequently
issued, shall be unsecured, and any conditions to the issuance of
Securities that refer or relate to Senior Note Mortgage Bonds or the
First Mortgage Indenture shall be inapplicable. From and after the
Release Date, the Company shall cause the First Mortgage Indenture to
be closed and the Company shall not issue any additional First Mortgage
Bonds or Senior Note Mortgage Bonds under the First Mortgage Indenture.
Notice of the occurrence of the Release Date shall be given by the
Trustee to the Holders of the Securities in the manner provided in
Section 1.6 hereof not later than 30 days after the Company notifies
the Trustee of the occurrence of the Release Date."
ARTICLE FOUR
Miscellaneous
Section 4.1. Execution as Supplemental Indenture. This First
Supplemental Indenture is executed and shall be construed as an indenture
supplemental to the Original Indenture and, as provided in the Original
Indenture, this First Supplemental Indenture forms a part thereof.
Section 4.2. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof, or with a
provision of the Original Indenture, which is required to be included in this
First Supplemental Indenture, or in the Original Indenture, respectively, by any
of the provisions of the Trust Indenture Act, such required provision shall
control.
Section 4.3. Effect of Headings. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
Section 4.4. Effect of Amendments Effective Prior to the Release Date.
Whenever this Supplemental amends the Original Indenture during the period prior
to the Release Date, the Original Indenture shall revert back to its original
form after the Release Date.
Section 4.5. Successors and Assigns. All covenants and agreements by
the Company in this First Supplemental Indenture shall bind its successors and
assigns, whether so expressed or not.
Section 4.6. Separability Clause. In case any provision in this First
Supplemental Indenture or in the Senior Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 4.7. Benefits of First Supplemental Indenture. Nothing in this
First Supplemental Indenture or in the Senior Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this First Supplemental Indenture.
Section 4.8. Execution and Counterparts. This First Supplemental
Indenture may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
[CORPORATE SEAL]
TEXAS-NEW MEXICO POWER COMPANY
By /s/ M.S. Cheema
Name: M. S. Cheema
Title: Senior Vice President
Attest:
By /s/ Paul W. Talbot
Name: Paul W. Talbot
Title: Secretary
[SEAL] CHASE BANK OF TEXAS, N.A.,
As Trustee
By /s/ John G. Jones
Name: John G. Jones
Title: Vice President
Attest:
By /s/ Michael Scrivner
Name: Michael Scrivner
Title: Vice President
<PAGE>
STATE OF NEW YORK)
COUNTY OF NEW YORK)
On this 11th day of January, 1999, before me personally came
M.S. Cheema, to me known, who, being by me duly sworn, did depose and say that
he is a Senior Vice President of Texas-New Mexico Power Company, the corporation
described in and which executed the foregoing instrument; 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 authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
/s/ Rafael Beaumont
STATE OF TEXAS)
COUNTY OF DALLAS)
On this 8th day of January, 1999 before me personally came
John G. Jones, to me known, who, being by me duly sworn, did depose and say that
he is a Vice President of Chase Bank of Texas, N.A., a national association
described in and which executed the foregoing instrument; that he knows the seal
of said association; that the seal affixed to said instrument is such
association seal; that it was so affixed by authority of the Board of Directors
of said association, and that he signed his name thereto by like authority.
/s/ Patricia A. Blue
[Notarial Seal]
<PAGE>
EXHIBIT A
[If the Security is to be a Global Security, insert -- 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 SECURITY IS A GLOBAL SECURITY 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 SECURITY 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.]
TEXAS-NEW MEXICO POWER COMPANY
6 1/4% SENIOR NOTES DUE 2009
$-----------------
No. -------- CUSIP -----------------
TEXAS-NEW MEXICO POWER COMPANY, a corporation duly organized
and existing under the laws of the State of Texas (herein called the "Company,"
which term includes any successor under the Indenture hereinafter referred to),
for value received, hereby promises to pay to -------------------- or registered
assigns, the principal sum of $---------------- on -------------, and to pay
interest thereon from --------, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on ------------
and ----------- in each year, commencing --------, at the rate per annum
provided in the title hereof, until the principal hereof is paid or made
available for payment [if applicable, insert -- , and, subject to the terms of
the Indenture, at the rate of 6 1/4% per annum (assuming a 360-day year
consisting of twelve 30-day months) on any overdue principal and premium and (to
the extent that the payment of such interest shall be legally enforceable) on
any overdue installment of interest, from the dates such amounts are due until
they are paid or made available for payment, and such interest shall be payable
on demand]. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security is registered at the close of business on the
Regular Record Date for such interest, which shall be the ------- or --------
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities of this series not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest
on this Security will be made at the office or agency of the Company maintained
for that purpose in --------, in such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts; [if this Security is not a Global Security, insert -- provided,
however, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register].
Reference is hereby made to the further provisions of this
Security 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
Security shall not be entitled to any benefits under the Indenture, or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, TEXAS-NEW MEXICO POWER COMPANY has caused
this Security to be duly executed.
Dated: TEXAS-NEW MEXICO POWER COMPANY
BY ----------------------------------
Name:
Title:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Date: --------------------,
as Trustee,
by
-------------------------
Authorized Signatory
<PAGE>
[REVERSE OF NOTE]
This Security is one of the duly authorized issue of
debentures, notes, bonds or other evidences of indebtedness of the Company
(hereinafter called the "Securities"), of the series hereinafter specified, all
issued or to be issued under and pursuant to the Original Indenture dated as of
January 1, supplemented by the First Supplemental Indenture, dated as of January
1, 1999 (as so supplemented, the "Indenture"), duly executed and delivered by
the Company and Chase Bank of Texas, N.A., as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and any other indentures supplemental thereto reference is
hereby made for a statement of the respective rights, obligations, duties and
immunities thereunder of the Trustee and any agent of the Trustee, any Paying
Agent, the Company and the Holders of the Securities and of the terms upon which
the Securities are issued and are to be authenticated and delivered. This
Security is one of the series designated on the face hereof, which series is
limited in aggregate principal amount to $--------. By the terms of the
Indenture, additional Securities of other separate series, which may vary as to
date, aggregate principal amount, Stated Maturity, interest rate or method of
calculating the interest rate, redemption provisions and in other respects as
therein provided, may be issued in an unlimited amount.
Prior to the Release Date (as hereinafter defined), the
Securities of this series will be secured by first mortgage bonds (the "Senior
Note Mortgage Bonds") delivered by the Company to the Trustee for the benefit of
the Holders of the Securities, issued under the Indenture of Mortgage and Deed
of Trust, dated November 1, 1944, by and between the Company and U.S. Bank
Trust, N.A. (which is a successor to First Trust of Illinois, National
Association, which is successor trustee to Bank of America, Illinois, a banking
corporation organized under the laws of Illinois, which was formerly known, at
various times, as Continental Bank, a banking corporation organized under the
laws of Illinois, Continental Bank, National Association, and Continental
Illinois National Bank and Trust Company of Chicago) (the "First Mortgage
Trustee"), as supplemented and modified (the "First Mortgage Indenture")
pursuant to the Twenty-Sixth Supplemental Indenture dated January 1, 1999.
Reference is made to the First Mortgage Indenture and the Indenture for a
description of property mortgaged and pledged, the nature and extent of the
security, the rights of the holders of the first mortgage bonds under the First
Mortgage Indenture and of the First Mortgage Trustee in respect thereof, the
duties and immunities of the First Mortgage Trustee and the terms and conditions
upon which the Senior Note Mortgage Bonds are secured and the circumstances
under which additional first mortgage bonds may be issued.
FROM AND AFTER THE DATE CHOSEN BY THE COMPANY WHICH IS NOT
EARLIER THAN THE LATER OF (I) SUCH TIME AS ALL FIRST MORTGAGE BONDS (OTHER THAN
SENIOR NOTE MORTGAGE BONDS) ISSUED UNDER THE FIRST MORTGAGE INDENTURE HAVE BEEN
RETIRED THROUGH PAYMENT, REDEMPTION OR OTHERWISE (INCLUDING THOSE FIRST MORTGAGE
BONDS "DEEMED TO BE PAID" OR AS TO WHICH THE ENTIRE INDEBTEDNESS IS PAID AND
DISCHARGED WITHIN THE MEANING USED IN ARTICLE 18 OF THE FIRST MORTGAGE
INDENTURE) AT, BEFORE OR AFTER THE MATURITY THEREOF AND (II) THE DATE AS OF
WHICH NO LIENS ON ANY PROPERTY OF THE COMPANY OR ANY SUBSIDIARY EXISTS (WHETHER
SUCH LIENS SECURE INDEBTEDNESS OF THE COMPANY OR ANY SUBSIDIARY OR ANY OTHER
PERSON), EXCEPT THAT THIS CLAUSE (II) SHALL NOT APPLY TO ANY LIEN TO THE EXTENT
DESCRIBED IN CLAUSES (A) THROUGH (K) OF SECTION 10.10 OF THE ORIGINAL INDENTURE
OR I THE LAST PARAGRAPH OF SUCH SECTION 10.10 (THE "RELEASE DATE"), THE SENIOR
NOTE MORTGAGE BONDS SHALL, AT THE OPTION OF THE COMPANY, CEASE TO SECURE THE
SECURITIES OF THIS SERIES IN ANY MANNER; PROVIDED THAT NO DEFAULT OR EVENT OF
DEFAULT HAS OCCURRED AND AT SUCH TIME IS CONTINUING UNDER THE INDENTURE. IN
CERTAIN CIRCUMSTANCES PRIOR TO THE RELEASE DATE AS PROVIDED IN THE INDENTURE,
THE COMPANY IS PERMITTED TO REDUCE THE AGGREGATE PRINCIPAL AMOUNT OF A SERIES OF
SENIOR NOTE MORTGAGE BONDS HELD BY THE TRUSTEE, BUT IN NO EVENT PRIOR TO THE
RELEASE DATE TO AN AMOUNT LESS THAN THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT
OF THE SERIES OF SECURITIES INITIALLY ISSUED CONTEMPORANEOUSLY WITH SUCH SENIOR
NOTE MORTGAGE BONDS.
These Securities will be redeemable, in whole or in part, at
the option of the Company, upon not less than 30 or more than 60 days' notice by
mail to the Holders of such Securities at their addresses in the Security
Register for such series, on any date (a "Redemption Date") at a redemption
price equal to the greater of (a) 100% of their principal amount of the
Securities to be redeemed and (b) the sum of the present values of the remaining
scheduled payments of principal and interest thereon (exclusive of interest
accrued to such Redemption Date) discounted to such Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus [--] basis points, plus accrued and unpaid interest on
the principal amount being redeemed to such Redemption Date, all as calculated
by an Expert and delivered to the Trustee; provided, however, that installments
of interest on Securities that are due and payable on an Interest Payment Date
falling on or prior to the relevant Redemption Date shall be payable to the
holders of such Securities, registered as such at the close of business on the
relevant Record Date according to their terms and provisions of the Indenture.
"Treasury Rate" means, with respect to any Redemption Date for
the Securities, (a) the yield, under the heading that represents the average for
the immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication that is
published weekly by the Board of Governors of the Federal Reserve System and
that establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the Maturity Date, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight-line basis, rounding to the nearest month) or (b)
if such release (or any successor release) is not published during the week
immediately preceding the calculation date or does not contain such yields, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such Redemption Date. The Treasury Rate shall be
calculated on the third Business Day immediately preceding the Redemption Date.
"Comparable Treasury Issue" means, the United States Treasury
security selected by the Independent Investment Banker as having a maturity
comparable to the remaining term of the Securities to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Securities.
"Independent Investment Banker" means Donaldson, Lufkin &
Jenrette Securities Corporation, Warburg Dillon Read LLC, Chase Securities Inc.,
First Chicago Capital Markets, Inc. or NationsBanc Montgomery Securities LLC or,
if such firms are unwilling or unable to select the Comparable Treasury Issue,
an independent investment banking institution of national standing appointed by
the Company.
"Comparable Treasury Price" means, with respect to any
Redemption Date, (a) the average of four Reference Treasury Dealer Quotations
for such Redemption Date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (b) if the Trustee obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer" means each of Donaldson, Lufkin &
Jenrette Securities Corporation, Warburg Dillon Read LLC, Chase Securities Inc.,
First Chicago Capital Markets, Inc., NationsBanc Montgomery Securities LLC and
their respective successors; provided however, that if any of the foregoing
shall cease to be a primary U.S. Government securities dealer in New York City
(a "Primary Treasury Dealer"), the Company will substitute therefor another
Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to
the Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day immediately preceding such
Redemption Date.
In the event of redemption of this Security in part only, a
new Security or Securities of this series and of like tenor for the unredeemed
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The Indenture contains provisions for defeasance of (a) the
entire indebtedness of this Security and (b) certain restrictive covenants upon
compliance by the Company with certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this
series shall occur and be continuing, the unpaid principal of the Securities of
this series may be declared due and payable in the manner and with the effect
provided in the Indenture and, upon such declaration, the Trustee can demand the
redemption of the Senior Note Mortgage Bonds as provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding of all series to be affected
(voting as a class). The Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Securities of each
series at the time Outstanding, on behalf of the Holders of all Securities of
such series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest, if any, on this Security at the time, place and
rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in any place where the principal
of (and premium, if any) and interest, if any, on this Security are payable,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series and of like tenor, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities of this series are issuable only in registered
form without coupons in denominations of $1,000 and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
This Security shall be governed by and construed in accordance
with the laws of the State of New York.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
Incentive Compensation Award Agreement
for Short- and Long-Term Awards
This Agreement is dated and effective as of January 1, 1999, and is
between ----------------------------------- ("Participant"), Texas-New Mexico
Power Company (the "Company") and TNP Enterprises, Inc. ("TNP").
RECITALS
A Committee appointed by and having full authority to act on behalf of
the Board of Directors of the Company and TNP, respectively, (collectively, the
"Compensation Committee") adopted the following incentive compensation plans:
A. Texas-New Mexico Power Company Management Short-Term Incentive Plan
("Management Plan"); and
B. TNP Enterprises, Inc. Equity Incentive Plan ("Equity Plan").
On April 28, 1995, the Shareholders approved the adoption by the Board
of Directors of the Equity Plan.
The Management Plan provides for the payment of cash if certain
incentive goals are achieved. The Equity Plan provides for the delivery of stock
options, stock, and performance units upon the achievement of certain incentive
goals which may be short-term and/or long-term goals.
On February 15, 1999, the Compensation Committee (the "Committee")
established the performance goals to be achieved in order to earn incentive
compensation under the plans.
The Participant has been selected to receive awards under each plan
subject to the terms of each applicable plan and the Participant signing this
Award Agreement.
The Participant and the Company agree that this Agreement does not
affect Participant's status as an employee at will and further agree that either
party may terminate Participant's employment at any time with or without cause.
The Committee reserves, in its sole discretion, the right to interpret
the terms and conditions of any award and this agreement and to resolve any
disagreements or disputes concerning this Award Agreement and any decision is
binding upon all parties.
In consideration of the Recitals and mutual covenants and agreements
below, the Participant and the Company desire to and by their respective
signatures do hereby agree to the terms and conditions set forth below.
AGREEMENT
SHORT-TERM AWARDS
Short-Term Cash Award: Participant is hereby granted -----% of the
control point for Participant's salary range as established by the Compensation
Committee at the beginning of each plan year. The cash award is subject to the
1999 short-term goals for the Management Plan being met as such goals are set
forth on Exhibit A attached hereto and made a part hereof for all purposes. Such
award may be adjusted between 50% and 150% on a straight line basis depending
upon where the performance related to each goal occurs within the range
established for each goal. No award payment will be made for performance below
the established minimum for each goal set forth in Exhibit A. The cash award
shall be paid no later than March 15th following the end of the plan year.
The parties agree that no portion of the cash award is due or payable
regardless of whether any Corporate Operational Goal or Departmental/Individual
Goals are met unless the minimum Corporate Financial Goal is met. Further, the
Committee reserves the right to make year-end adjustments which may account for
any unusual or unforeseen events that impact the attainability of any goal.
Allocation of Awards: Participant agrees that the total amount of the
cash award will be allocated among the Corporate Financial Goal, Corporate
Operational Goals, and Departmental/Individual Performance Goals applicable to
such Participant as is set forth in Exhibit B which is attached hereto and made
a part hereof for all purposes.
Participant agrees that to the extent any amount of the total award is
allocated to the Departmental/Individual Performance Goals, such amount will be
due and payable only to the extent the performance of the Participant, as
determined by the officer executing this Agreement on behalf of the Company in
such officer's sole discretion (or, if Participant is the Chief Executive
Officer, then as determined by the Committee in its sole discretion), falls
within the Performance Rating range set forth in Exhibit C which is attached
hereto and made a part hereof for all purposes.
LONG-TERM AWARD
Long-Term Stock Award: Participant is hereby granted a stock award
equal to ------% of the control point for Participant's salary range as
established by the Compensation Committee as of the beginning of the long-term
plan cycle. Such long-term plan cycle award opportunity granted pursuant to the
Equity Plan being met is subject to the goals set forth on Exhibit D which is
attached hereto and made a part hereof for all purposes. Such award may be
adjusted between 50% and 200% on a straight-line basis, depending upon where the
performance related to each goal occurs within the range established for each
goal. No award payment will be made for performance below the established
minimum for each goal set forth in Exhibit D. Any stock award earned shall be
paid no later than March 15th following the end of the 1999 long-term plan
cycle. The 1999 Plan year cycle will be a period of three years beginning
January 1, 1999.
Allocation of Award: Participant agrees that the total amount awarded
under the Equity Plan will be allocated 100% to the goal established for Total
Shareholder Return in comparison to the Redwood Small Cap Utility index. The
amounts allocated to each set of goals will be due and payable only to the
extent each such goal shall be met as set forth in Exhibit D.
GENERAL TERMS
Dividend Equivalents: Participant shall have the right to receive, at
the time any stock awards are paid, cash in an amount equal in value to the
dividends declared on each Share on each record date occurring during the
applicable performance period established for each plan. Dividend equivalents
will not include any dividends on the dividend equivalents accrued during the
applicable performance periods.
Pro-Ration of Awards: If a Participant begins employment or
Participant's employment is terminated due to retirement, death, or disability
during a plan year or the 1999 long-term performance cycle, any award earned
shall be prorated based on the number of months of participation within the plan
year or long-term plan cycle. The prorated award will be based upon performance
determined at year or cycle end and will be paid at the same time as all other
awards are paid from each of the plans under which awards are made.
Termination of Employment: If employment is terminated for any reason
other than retirement, death, or disability, any award opportunity granted under
either plan shall be forfeited, provided that the Committee may waive such
forfeiture upon the CEO's recommendation, provided that if the Change in Control
paragraph is applicable that paragraph shall control.
Change in Control: In the event a Change in Control occurs as
that term is defined in the Executive Agreement for Severance Compensation, then
performance under this Agreement will be deemed to have been at target. To the
extent any payment of an award would have been in stock, such award shall be
deemed converted to a cash award in an amount equal to the value of the stock as
of the day the Change in Control event occurs. Provided that Participant is not
terminated for Cause, as that term is defined in the Executive Agreement for
Severance compensation, the Participant shall be entitled to receive payment of
the awards granted herein no later than the fifth calendar day following the
date of termination or 30 days following the Change in Control event, whichever
first occurs.
Valuation of Shares: Shares issued under the Equity Plan pursuant to
having been earned under the plan and the terms of this Agreement shall be
valued by averaging the high and low prices of the stock on the first trading
day of the plan performance period (the "Share Value"). The Share Value shall be
applied to the dollar value of the award to arrive at the equivalent number of
shares awarded. The awarded shares shall be adjusted for the average of the high
and low stock price on the last trading day of the plan year.
Tax Treatment: Payments are taxable to the Participant in the year of
receipt. The Company will have the right to deduct any federal, state, or local
taxes required by law to be withheld. In regard to any award made hereunder, a
Participant, at Participant's option, may elect to have the Company withhold
sufficient stock, to the extent payable, to pay the taxes then due on such
award.
Provisions Consistent with Plan: This Agreement shall be construed
consistent with the provisions of the applicable plan under which any award may
be made. Where matters are not addressed in this Award Agreement, but are
addressed in the Management Plan or Equity Plan, then such terms are deemed a
part of this Award Agreement and shall apply equally to all awards granted
herein, except for where such terms obviously apply solely to one of the plans.
If there is a conflict between the provisions of this Agreement and such plan,
the provisions of the applicable plan control. Unless otherwise noted to the
contrary, the definition of terms in each Plan also apply in this Agreement.
Attorney Fees: In the event either party is required to bring a cause
of action against the other to enforce the terms of this Agreement, then such
party, to the extent such party is successful in such action, shall be entitled
to reasonable attorney fees.
Governing Law: This Agreement shall be governed by the laws of the State of
Texas. Venue for any cause of action shall be Tarrant County, Texas.
Texas-New Mexico Power Company Participant:
By: By:
--------------------------- ----------------------
Kevern R. Joyce
President & Chief Executive Officer
TNP Enterprises, Inc. Participant
By: By:
-------------------------- ----------------------
Kevern R. Joyce
President & Chief Executive Officer
<PAGE>
TNP ENTERPRISES, INC. EXHIBIT A
TEXAS-NEW MEXICO POWER COMPANY
Short-Term Incentive Compensation Plans
1999 Goals
<TABLE>
<CAPTION>
1999 Goals
1998
Measurement Status Objectives Performance Minimum Target Maximum
----------- ------ ----------
---------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Financial
- ---------
1. Cash Value Added Same Improve Financial Condition $4.40 $3.86 $4.46 $5.06
2. Excess Earnings Transition New Focus on an important phase $.42 $.62 $.82
Plan of TNMP's transition plan
Operational TNMP
- ----------
1. Customer Satisfaction Same Improve Customer Service 83 80 83 86
Rating
2. Number of Recordable Same Reduce Employee Accidents 32 39 32 24
Accidents
3. System Reliability Same
A) Average Minute of Reduce Customer Outage Time 64 79 67 55
Outage per
customer
B) Average Number of Reduce no. of Customers .97 1.18 1.04 .88
Outage per Interrupted
Customer
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHORT-TERM MANAGEMENT INCENTIVE COMPENSATION EXHIBIT B
WEIGHTING OF 1999 SHORT-TERM GOALS
Excess
Earnings Corporate
TNMP Transition Operational
Position CVA Plan Goals* Departmental Individual Total
- --------------------------------------- ---------- --------------- ----------------- ---------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
- - CORPORATE EMPLOYEES
Chairman, President CEO 50 20 10 20 100%
Sr. VP/CCO 50 20 15 15 100%
Remaining Sr. VP's 50 20 5 10 15 100%
Other Officers 50 15 5 20 10 100%
Directors\Asst VPs 50 15 5 20 10 100%
Key Employees 50 10 5 35 100%
- - TNMP EMPLOYEES
RCOs 50 10 15 15 10 100%
Plant Manager 50 10 5 25 10 100%
Key Employees 50 10 5 35 100%
*Eliminate O&M/KWH Goal
</TABLE>
<PAGE>
EXHIBIT C
<TABLE>
<CAPTION>
DEPARTMENTAL/INDIVIDUAL PERFORMANCE TARGET GOALS
Individual Performance as a % of
Performance Rating Target Award
- ------------------ --------------------------------
<S> <C>
4 -- Greatly exceeded expectations for objective(s) 150%
(maximum)
3 -- Exceeded expectations for objective(s) 125%
2 -- Achieved expectations for objective(s) (target) 100%
1 -- Almost achieved expectations for objective(s) 50%
(minimum)
0 -- Improvement needed, failed to meet objective(s) 0%
</TABLE>
<PAGE>
EXHIBIT D
<TABLE>
<CAPTION>
LONG-TERM STOCK AWARD GOALS
Total Shareholder Return Payout on the basis of matrix reflecting
total shareholder return in relation to
the Redwood Small Cap Utility Index.
TSR to Redwood Small Cap Utility Index (100% weighting)
-------------------------------------------------------
Performance Ranking % of Target Shares Earned
- ------------ ------------------ -------------------------
<S> <C> <C>
Maximum Greater than or equal
to 100th percentile 200%
Greater than or equal
Target to 62.5th percentile 100%
Greater than or equal
Minimum to 35th percentile 50%
Below Minimum Less than 35th percentile 0%
</TABLE>
<PAGE>
1999 Recipients of Incentive Compensation Award
Name Position
1. Kevern Joyce Chairman, President & CEO
2. Jack Chambers SR VP & Chief Customer Officer
3. Manjit Cheema SR VP & Chief Financial Officer
4. John Edwards SR VP - Corporate Relations
5. Ralph Johnson SR VP - Power Resources
6. Mike Matte VP - Business Development
7. Mike Blanchard VP - General Counsel
8. Dennis Cash VP - Regional Customer Officer
9. Allan Davis VP - Regional Customer Officer
10. Melissa Davis VP - Human Resources
11. Larry Dillon VP - Regional Customer Officer
12. Doug Hobbs VP - Business Development
13. John Montgomery VP - Marketing
14. Pat Bridges Treasurer
15. Scott Forbes Chief Information Officer
16. Robert Castillo Assistant VP - New Mexico
17. Mike Ricketts Controller
18. Paul Talbot Corporate Secretary
19. Mark Coulson Assistant VP - Industrial Marketing
20. Larry Gunderson Director - Regulatory Affairs
21. Mark Wilson Director - Power Production
SUBSIDIARIES OF THE REGISTRANTS Exhibit 21
------------------------------- ----------
Name State of Incorporation
- ---- ----------------------
TNP
- ----
Texas-New Mexico Power Company Texas
Facility Works, Inc. Texas
TNP Operating Company Texas
TNMP
- ----
Texas Generating Company Texas
Texas Generating Company II Texas
TNP ENTERPRISES, INC. AND SUBSIDIARIES Exhibit 23
--------------------------------------
Independent Public Accountants' Consent
The Board of Directors
TNP Enterprises, Inc.:
As independent public accountants, we hereby consent to the use of our
reports included in this Form 10-K, into TNP Enterprises, Inc's previously filed
Registration Statements on Form S-8 (File Nos. 2-93265 and 33-58897) and
Registration Statements on Form S-3 (File Nos. 333-64215 and 333-17835). It
should be noted that we have not audited any financial statements of the company
subsequent to December 31, 1998 or performed any audit procedures subsequent to
the date of our report.
Arthur Andersen LLP
Fort Worth, Texas
March 19, 1999
TNP ENTERPRISES, INC. AND SUBSIDIARIES Exhibit 23
--------------------------------------
Independent Auditors' Consent
The Board of Directors
TNP Enterprises, Inc.:
We consent to incorporation by reference in the Registration Statements (Nos.
333-64215 and 333-17835) on Form S-3 and in the Registration Statements (Nos.
2-93265 and 33-58897) on Form S-8 of TNP Enterprises, Inc. of our report dated
January 30, 1997, relating to the consolidated statements of income, common
shareholders' equity, and cash flows of TNP Enterprises, Inc. and subsidiaries
for the year ended December 31, 1996 which report appears in the December 31,
1998 annual report and Form 10-K of TNP Enterprises, Inc.
KPMG LLP
Fort Worth, Texas
March 19, 1999
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000741612
<NAME> TNP ENTERPRISES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Dec-31-1998
<BOOK-VALUE> Per-Book
<TOTAL-NET-UTILITY-PLANT> 922,879
<OTHER-PROPERTY-AND-INVEST> 10,384
<TOTAL-CURRENT-ASSETS> 31,729
<TOTAL-DEFERRED-CHARGES> 28,773
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 933,765
<COMMON> 192,518
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 115,776
<TOTAL-COMMON-STOCKHOLDERS-EQ> 308,294
0
3,060
<LONG-TERM-DEBT-NET> 459,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 223,411
<TOT-CAPITALIZATION-AND-LIAB> 993,765
<GROSS-OPERATING-REVENUE> 586,493
<INCOME-TAX-EXPENSE> 15,480
<OTHER-OPERATING-EXPENSES> 486,149
<TOTAL-OPERATING-EXPENSES> 501,629
<OPERATING-INCOME-LOSS> 84,864
<OTHER-INCOME-NET> 1,155
<INCOME-BEFORE-INTEREST-EXPEN> 86,019
<TOTAL-INTEREST-EXPENSE> 53,885
<NET-INCOME> 19,424
150
<EARNINGS-AVAILABLE-FOR-COMM> 19,274
<COMMON-STOCK-DIVIDENDS> 14,579
<TOTAL-INTEREST-ON-BONDS> 48,393
<CASH-FLOW-OPERATIONS> 72,872
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.46
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000022767
<NAME> TEXAS-NEW MEXICO POWER CO.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 922,831
<OTHER-PROPERTY-AND-INVEST> 2,116
<TOTAL-CURRENT-ASSETS> 19,913
<TOTAL-DEFERRED-CHARGES> 28,706
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 973,566
<COMMON> 107
<CAPITAL-SURPLUS-PAID-IN> 222,149
<RETAINED-EARNINGS> 79,840
<TOTAL-COMMON-STOCKHOLDERS-EQ> 302,096
0
3,060
<LONG-TERM-DEBT-NET> 450,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 218,410
<TOT-CAPITALIZATION-AND-LIAB> 973,566
<GROSS-OPERATING-REVENUE> 586,445
<INCOME-TAX-EXPENSE> 16,863
<OTHER-OPERATING-EXPENSES> 482,434
<TOTAL-OPERATING-EXPENSES> 499,297
<OPERATING-INCOME-LOSS> 87,148
<OTHER-INCOME-NET> 900
<INCOME-BEFORE-INTEREST-EXPEN> 88,048
<TOTAL-INTEREST-EXPENSE> 53,727
<NET-INCOME> 34,321
150
<EARNINGS-AVAILABLE-FOR-COMM> 34,171
<COMMON-STOCK-DIVIDENDS> 19,099
<TOTAL-INTEREST-ON-BONDS> 48,342
<CASH-FLOW-OPERATIONS> 99,317
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
