<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____________ to ____________
Commission File Number
----------------------
1-956
Duquesne Light Company
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0451600
------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 Seventh Avenue
Pittsburgh, Pennsylvania 15219
-------------------------------
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (412) 393-6000
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- ----
DQE is the holder of all shares of outstanding common stock, $1 par value, of
Duquesne Light Company consisting of 10 shares as of February 21, 1997.
[X] 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 the 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 .
<PAGE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Registrant Title of each class on which registered
-------------------- ---------------------------------------- ----------------------------
<S> <C> <C>
Duquesne Light Preferred Stock New York Stock Exchange
Company
</TABLE>
<TABLE>
<CAPTION>
Involuntary
Series Liquidation Value
------ -----------------
<S> <C> <C>
3.75% $50 per share
4.00% $50 per share
4.10% $50 per share
4.15% $50 per share
4.20% $50 per share
$2.10 $50 per share
8.375% $25 per share (1)
Sinking Fund Debentures, due March 1, 2010 (5%) New York Stock Exchange
</TABLE>
(1) Issued by Duquesne Capital, L.P., and the payments of
dividends and payments on liquidation or redemption are
guaranteed by Duquesne Light Company.
<PAGE>
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. BUSINESS
General 1
Results of Operations 2
Liquidity and Capital Resources 4
Rate Matters 5
Property, Plan and Equipment (PP&E) 6
Employees 8
Electric Utility Operations 8
Fossil Fuel 9
Nuclear Fuel 9
Nuclear Decommissioning 10
Nuclear Insurance 11
Spent Nuclear Fuel Disposal 11
Uranium Enrichment Decontamination and
Decommissioning 11
Environmental Matters 12
Outlook 13
Other 15
Executive Officers of the Registrant 16
ITEM 2. PROPERTIES 17
ITEM 3. LEGAL PROCEEDINGS 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED SHAREHOLDER
MATTERS 18
ITEM 6. SELECTED FINANCIAL DATA 18
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 19
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA 19
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT 19
ITEM 11. EXECUTIVE COMPENSATION 19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 19
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K 20
SCHEDULE II 32
SIGNATURES 33
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS 34
FINANCIAL STATEMENTS 35
SELECTED FINANCIAL DATA 59
GLOSSARY 60
<PAGE>
Part I
Item 1. Business.
General
- -------------------------------------------------------------------------------
Part I of this Annual Report, Form 10-K (Report) should be read in
conjunction with Duquesne Light Company's audited consolidated financial
statements, which are set forth on pages 35 through 58 in Part IV of this
Report. Explanations of certain financial and operating terms used in this
Report are set forth in a GLOSSARY on page 60 of this Report.
Duquesne Light Company (Duquesne) is a wholly owned subsidiary of DQE,
an energy services holding company. Duquesne is engaged in the production,
transmission, distribution and sale of electric energy. Duquesne has one wholly
owned subsidiary, Monongahela Light and Power which currently holds energy-
related lease investments.
Service Territory
Duquesne provides electric service to customers in Allegheny County,
including the City of Pittsburgh, Beaver County and Westmoreland County. This
represents approximately 800 square miles in southwestern Pennsylvania, located
within a 500-mile radius of one-half of the population of the United States and
Canada. The population of the area served by Duquesne, based on 1990 census
data, is approximately 1,510,000, of whom 370,000 reside in the City of
Pittsburgh. In addition to serving approximately 580,000 direct customers,
Duquesne also sells electricity to other utilities.
Regulation
Duquesne is subject to the accounting and reporting requirements of
the United States Securities and Exchange Commission (SEC). In addition,
Duquesne's operations are subject to regulation by the Pennsylvania Public
Utility Commission (PUC) and the Federal Energy Regulatory Commission (FERC)
under the Federal Power Act with respect to rates for interstate sales,
transmission of electric power, accounting and other matters.
The Electricity Generation Customer Choice and Competition Act
(Customer Choice Act) went into effect in Pennsylvania on January 1, 1997. This
legislation provides for a gradual deregulation of the generation of
electricity, while maintaining regulation of the transmission and distribution
of electricity and related services to customers. (See "Rate Matters" and
"Competition" discussions on pages 5 and 13.)
Duquesne's operations are also subject to regulation by the Nuclear
Regulatory Commission (NRC) under the Atomic Energy Act of 1954, as amended,
with respect to the operation of its jointly owned/leased nuclear power plants,
Beaver Valley Unit 1 (BV Unit 1), Beaver Valley Unit 2 (BV Unit 2) and Perry
Unit 1.
Duquesne's consolidated financial statements report regulatory assets
and liabilities in accordance with Statement of Financial Accounting Standards
No. 71, Accounting for the Effects of Certain Types of Regulation (SFAS No. 71),
and reflect the effects of the current ratemaking process. In accordance with
SFAS No. 71, Duquesne's consolidated financial statements reflect regulatory
assets and liabilities consistent with cost-based, pre-competition ratemaking
regulations. The regulatory assets represent probable future revenue to Duquesne
because provisions for these costs are currently included, or are expected to be
included, in charges to electric utility customers through the ratemaking
process.
Duquesne's operations or a portion of such operations could cease to
meet the SFAS No. 71 criteria for various reasons, including a change in the
FERC regulations or the competition-related changes in the PUC regulations
described above. (See "Rate Matters" and "Competition" discussions on pages 5
and 13.) Duquesne believes its electricity generating assets and related
regulatory assets continue to satisfy these criteria in light of the transition
to competitive generation under the Customer Choice Act. Should any portion of
Duquesne's operations be deemed to no longer meet the SFAS No. 71 criteria,
Duquesne may be required to write off any above-market cost assets, the recovery
of which is uncertain, and any regulatory assets or liabilities for those
operations that no longer meet these requirements.
1
<PAGE>
Results of Operations
- -------------------------------------------------------------------------------
Sales of Electricity to Customers
The decrease in 1996 total operating revenues was $3.0 million, as
compared to 1995. Comparing 1995 total operating revenues to 1994, there was an
increase of $11.2 million. Operating revenues are derived from Duquesne's sales
of electricity. The PUC authorizes rates for electricity sales which are cost-
based and are designed to recover Duquesne's operating expenses and investment
in electric utility assets and to provide a return on the investment. (See "Rate
Matters" and "Competition" discussions on pages 5 and 13.)
Electric Utility Sales by Customer Class (Kilowatt-Hours in Millions):
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Residential 3,321 3,378 3,219
Commercial 5,836 5,827 5,662
Industrial 3,285 3,237 3,256
Miscellaneous 83 84 84
- ----------------------------------------------------------------
Sales to Electric Utility Customers 12,525 12,526 12,221
- ----------------------------------------------------------------
Sales to Other Utilities 3,310 2,975 3,212
- ----------------------------------------------------------------
Total Sales 15,835 15,501 15,433
=================================================================
</TABLE>
Sales to residential and commercial customers are strongly influenced
by weather conditions. Warmer summer and colder winter seasons lead to increased
customer use of electricity for cooling and heating. Commercial sales are also
affected by regional economic development. Sales to industrial customers are
influenced by national and global economic conditions. Customer revenues
fluctuate as a result of changes in sales volume and changes in fuel and other
energy costs.
Net Customer Revenues
Net customer revenues, reflected on the statement of consolidated
income, decreased $8.3 million or 0.8 percent in 1996 compared to 1995. The
variance can be attributed primarily to decreased residential customer kilowatt-
hour (KWH) sales of 1.7 percent due to unseasonably warm summer temperatures in
1995, as compared to 1996, resulting in decreased revenues of $8.9 million.
Industrial KWH sales volume in 1996 increased when compared to the prior year
because of a self-generation outage experienced in 1996 by one of Duquesne's
large industrial customers. Sales to Duquesne's 20 largest customers accounted
for approximately 14 percent of customer revenues in 1996, 1995 and 1994.
In 1995 as compared to 1994, net customer revenues increased by $7.8
million, or 0.7 percent. The increase is the net result of higher KWH sales to
residential customers by 4.9 percent in response to extreme 1995 summer
temperatures, partially offset by lower fuel and other energy costs per KWH, the
benefits of which are passed through to the customers in the form of lower
rates. Revenues from electric sales to residential customers in 1995 exceeded
1994 residential revenues by $13.0 million.
Sales to Other Utilities
Short-term sales to other utilities are regulated by the FERC and are
made at market rates. Fluctuations in electricity sales to other utilities are
related to Duquesne's customer energy requirements, the energy market and
transmission conditions, and the availability of Duquesne's generating stations.
Duquesne's electricity sales to other utilities in 1995 were less than 1996 and
1994 due to the timing of generating station outages and the fluctuating level
of sales to Duquesne's electric utility customers. Future levels of short-term
sales to other utilities will be affected by Duquesne's sale of its ownership
interest in the Ft. Martin Power Station (Ft. Martin), the possible sale of
other generating stations, market rates, and by the outcome of Duquesne's FERC
filings requesting firm transmission access. (See "Mitigation Plan" and
"Transmission Access" discussions on pages 5 and 15.)
2
<PAGE>
Other Operating Revenues
Duquesne's non-KWH revenues comprise other operating revenues in
Duquesne's statement of consolidated income. Other operating revenues are
primarily comprised of revenues from joint owners of BV Unit 1 and BV Unit 2 for
their shares of the administrative and general costs of operating these units.
Other operating revenues, therefore, fluctuate depending on the timing of
scheduled refueling and maintenance outages at Beaver Valley Power Station
(BVPS) when significant costs are incurred. Both BV Unit 1 and BV Unit 2
underwent refueling outages in 1996 and 1995. BV Unit 2 experienced an extended
outage of 107 days during 1996 due to unanticipated repairs to two residual heat
removal pumps and reactor head vent valves, resulting in a $3.0 million increase
in other operating revenues during 1996. There were no refueling outages in
1994; accordingly, other operating revenues increased $5.7 million in 1995 when
compared to 1994.
Operating Expenses
Fuel and purchased power expense fluctuations generally result from
changes in the cost of fuel, the mix between coal and nuclear generation, the
total KWHs sold, and generating station availability. Because of the Energy Cost
Rate Adjustment Clause (ECR), changes in fuel and purchased power costs did not
impact earnings in 1996, 1995 and 1994.
Fuel and purchased power expense increased in 1996 compared to 1995
as a result of a 33 percent increase in purchased power prices. This increase
was partially offset by lower nuclear fuel costs. Fuel and purchased power
expense decreased in 1995 compared to 1994 due to lower nuclear fuel costs, a
more favorable generation mix and a 2.7 percent decline in KWH generation.
Other operating expense increased $2.8 million when comparing 1996 to
1995. The increase was the result of a one-time lease charge. In 1995, other
operating expense decreased $18.7 million when compared to 1994. This 1995
reduction reflects ongoing cost savings efforts.
Depreciation and amortization expense increased $25.7 million in 1996
when compared to 1995 primarily due to the increase in Duquesne's composite
depreciation rate from 3.5 percent to 4.25 percent effective May 1, 1996. During
the third quarter of 1996, Duquesne completed recovery of its investment in
Perry Unit 2, the construction of which was abandoned by Duquesne in 1986. The
resultant decrease in amortization expense was offset by Duquesne's increase in
depreciation, as well as $9 million that was expensed related to the
depreciation portion of deferred rate synchronization costs in conjunction with
Duquesne's Mitigation Plan. Depreciation and amortization expense increased
$27.6 million in 1995, primarily due to the change in Duquesne's composite
depreciation rate from 3.0 percent to 3.5 percent effective January 1, 1995.
Duquesne did not seek a rate increase to recover the additional costs. (See
"Mitigation Plan" discussion on page 5.)
Income taxes decreased in 1996 when compared to 1995 by $6.9 million,
primarily due to reduced taxable income. In 1995, taxable income was greater
than in 1994, resulting in increased income taxes of $1.8 million.
Other Income and (Deductions)
The increase of $22.9 million in other income and deductions, when
comparing 1996 to 1995, was primarily the result of income from long-term
investments made during late 1995 and 1996. Other income and deductions
decreased $10.3 million in 1995 when compared to 1994 primarily due to increases
in income taxes related to other income.
Interest Charges
Duquesne achieved reductions of $8.4 million and $3.8 million in
interest charges in 1996 and 1995, respectively. The decreases were primarily
due to the retirement of long-term debt during 1995. Interest expense in 1997
will be influenced by fluctuations in short-term rates and any new financing.
3
<PAGE>
Monthly Income Preferred Securities Dividend Requirements
The Monthly Income Preferred Securities Dividend Requirements reflect
the payment of $7.9 million in dividends in 1996 related to preferred stock
issued in May 1996.
Dividends on Preferred and Preference Stock
The decreases of $1.3 million and $0.7 million in 1996 and 1995 in
dividends on preferred and preference stock were primarily due to the retirement
of preferred stock in 1995.
Liquidity and Capital Resources
- -------------------------------------------------------------------------------
Capital Expenditures
Duquesne spent approximately $88.5 million in 1996, $78.7 million in
1995 and $94.3 million in 1994 for construction. Duquesne's capital expenditures
for construction focus on improving and/or expanding electric production,
transmission and distribution systems. Duquesne estimates that it will spend,
excluding allowance for funds used during construction (AFC) and nuclear fuel,
approximately $110 million, $110 million and $95 million for construction during
1997, 1998 and 1999. These estimates also exclude any potential expenditures for
reliability enhancements to the Brunot Island (BI) Unit 3 combustion turbine.
(See "Mitigation Plan" discussion on page 5.) Duquesne expects that funds
generated from operations will continue to be sufficient to fund a large part of
its capital needs.
Long-Term Investments
Duquesne's long-term investments consist of Duquesne's holdings of
DQE common stock, investments in affordable housing, lease investments, and
Duquesne's nuclear decommissioning trusts. Investing activities decreased in
1996, after increasing in 1995, when compared to 1994. Duquesne invested $1.5
million and $5.4 million in affordable housing funds during 1996 and 1995. Other
investments in 1996 totaled approximately $2.7 million. In addition, Duquesne
invested $57.5 million in lease investments during 1995.
Financing
Duquesne expects to meet its current obligations and debt maturities
through the year 2001 with funds generated from operations and through new
financings. At December 31, 1996, Duquesne was in compliance with all of its
debt covenants.
On May 14, 1996, Duquesne Capital L.P., a Delaware special-purpose
limited partnership the sole general partner of which is Duquesne, issued $150
million principal amount of 8-3/8 percent Cumulative Monthly Income Preferred
Securities (MIPS), Series A, with a stated liquidation value of $25.00. A
portion of the proceeds was used to retire $50 million of long-term debt
maturing May 15, 1996. Duquesne intends to continue to apply the remaining
proceeds to the purchase or redemption of outstanding securities and for general
corporate purposes.
In November 1997, $50 million of mortgage bonds will mature. Duquesne
expects to retire these bonds with available cash or to refinance the bonds.
Short-Term Borrowings
At December 31, 1996, Duquesne had a $150 million extendible revolving
credit arrangement expiring in October 1997. Interest rates can, in accordance
with the option selected at the time of the borrowing, be based on prime,
Eurodollar or certificate of deposit rates. Commitment fees are based on the
unborrowed amount of the commitment. The credit facility contains a two-year
repayment period for any amount outstanding at the expiration of the revolving
credit period. At December 31, 1996 and 1995, there were no short-term
borrowings outstanding.
4
<PAGE>
Sale of Accounts Receivable
Duquesne and an unaffiliated corporation have an agreement that
entitles Duquesne to sell, and the corporation to purchase, on an ongoing basis,
up to $50 million of accounts receivable. Duquesne had no receivables sold at
December 31, 1996. At December 31, 1995, Duquesne had sold $7 million of
receivables to the unaffiliated corporation. The accounts receivable sales
agreement, which expires in June 1997, is one of many sources of funds available
to Duquesne. Duquesne has not determined, but may attempt to extend the
agreement or to replace the facility with a similar arrangement or to eliminate
it upon expiration.
Nuclear Fuel Leasing
Duquesne finances its acquisitions of nuclear fuel through a leasing
arrangement under which it may finance up to $75 million of nuclear fuel. As of
December 31, 1996, the amount of nuclear fuel financed by Duquesne under this
arrangement totaled approximately $35 million. Duquesne plans to continue
leasing nuclear fuel to fulfill its requirements at least through September
1998, the remaining term of the leasing arrangement.
Rate Matters
- -------------------------------------------------------------------------------
Customer Choice Act
Under the Customer Choice Act, which went into effect on January 1,
1997, Pennsylvania has become a leader in customer choice. The Customer Choice
Act will enable Pennsylvania's electric utility customers to purchase
electricity at market prices from a variety of electric generation suppliers
(customer choice). Electric utility restructuring will be accomplished through a
two-stage process consisting of a pilot period (running through 1998) and a
phase-in period (1999 through 2001). The pilot period will give utilities an
opportunity to examine a wide range of technical and administrative details
related to competitive markets, including metering, billing, and cost and design
of unbundled electric services. Duquesne filed a pilot program with the PUC on
February 27, 1997, which proposes unbundling transmission, distribution,
electricity and competitive transition charges and offers participating
customers the same options that will be available in a competitive generation
market.
The pilot program will comprise approximately 5 percent of Duquesne's
residential, commercial and industrial demand beginning September 1, 1997.
Customers participating in the pilot will have two basic options. First,
customers can choose to continue taking bundled service from Duquesne under
approved tariffs. Second, customers can choose unbundled service with their
electricity provided by an alternative electric generation supplier. All
customers that choose unbundled electric service will be subject to unbundled
distribution charges approved by the PUC and unbundled transmission charges
pursuant to Duquesne's FERC-approved tariff. Each customer that elects unbundled
service also will be required to pay a non-bypassable access fee (competitive
transition charge) that provides Duquesne with a reasonable opportunity to
recover transition costs.
Duquesne must file a restructuring plan with the PUC by August 1, 1997
setting forth its proposals for the transition to customer choice and the
recovery of transition costs. (See "Competition" discussion on page 13.) The
phase-in to competition begins on January 1, 1999 when 33 percent of consumers
will have customer choice (including consumers covered by the pilot program); 66
percent of consumers will have customer choice by January 1, 2000; and all
consumers will have customer choice by January 1, 2001. Although the Customer
Choice Act will give customers their choice of electric generation suppliers,
delivery of the electricity from the generation supplier to the customer will
remain the responsibility of the existing franchised utility. Delivery of
electricity (including transmission, distribution and customer service) will
continue to be regulated in substantially the current manner.
Mitigation Plan
Duquesne has taken a number of steps to mitigate its potential
transition costs. (See "Competition" discussion on page 13.) In addition to the
steps taken during the last 10 years to prepare for competition, effective
January 1, 1995, Duquesne accelerated its rate of depreciation on its fixed
nuclear assets without seeking a rate increase to recover the additional costs.
On October 31, 1996, the sale of Duquesne's ownership interest in
5
<PAGE>
Ft. Martin was completed. Ft. Martin Unit 1 was owned 50 percent by Duquesne and
50 percent by its operator, Allegheny Power System (APS). The sale and a plan,
to be funded in part by the proceeds of the Ft. Martin transaction, were
approved by the PUC on May 23, 1996. Under the approved plan, Duquesne will not
increase its base rates for a period of five years through May 2001. In
addition, Duquesne recorded in October 1996 a one-time reduction of
approximately $130 million in the book value of Duquesne's nuclear plant
investment. The proceeds from the sale are expected to be used to fund
reliability enhancements to the BI Unit 3 combustion turbine and to reduce
Duquesne's capitalization. The approved plan also provides for incremental
increases of $25 million in depreciation and amortization expense in 1996, 1997
and 1998 related to Duquesne's nuclear investment, as well as additional annual
contributions to its nuclear plant decommissioning funds of $5 million, without
any increase in existing electric rates. Also, Duquesne will record an annual $5
million credit to the ECR during the plan period to compensate Duquesne's
customers for lost profits from any short-term power sales foregone by the sale
of its ownership interest in Ft. Martin. In addition, Duquesne will cap energy
costs, beginning April 1, 1997 through the remainder of the plan period, at a
historical five-year average of 1.47 cents per KWH. In accordance with the
approved plan, Duquesne has expensed $9 million related to the depreciation
portion of the deferred rate synchronization costs associated with BV Unit 2 and
Perry Unit 1. Duquesne's approved plan provides for the amortization of the
remaining deferred rate synchronization costs over a 10-year period. At December
31, 1996, the unamortized portion of these costs totaled $41.4 million, net of
deferred fuel savings related to the two units. (See "Deferred Rate
Synchronization Costs" below.) Finally, Duquesne's approved plan also provides
for annual assistance of $0.5 million to low-income customers.
Deferred Rate Synchronization Costs
In 1987, the PUC approved Duquesne's petition to defer initial
operating and other costs of BV Unit 2 and Perry Unit 1. Duquesne deferred the
costs incurred from November 1987, when the units went into commercial
operation, until March 1988, when a rate order was issued. In its rate order,
the PUC postponed ruling on whether these costs would be recoverable from
Duquesne's electric utility customers. Duquesne is not earning a return on the
deferred costs. (See "Mitigation Plan" discussion on page 5.)
Energy Cost Rate Adjustment Clause (ECR)
Through the ECR, Duquesne recovers (to the extent that such amounts
are not included in base rates) nuclear fuel, fossil fuel and purchased power
expenses and, also through the ECR, passes to its customers the profits from
short-term power sales to other utilities (collectively, ECR energy costs).
On Duquesne's statement of consolidated income, these ECR revenues are
included as a component of operating revenues. For ECR purposes, Duquesne defers
fuel and other energy expenses for recovery, or refunding, in subsequent years.
The deferrals reflect the difference between the amount that Duquesne is
currently collecting from customers and its actual ECR energy costs. The PUC
annually reviews Duquesne's ECR energy costs for the fiscal year April through
March, compares them to previously projected ECR energy costs, and adjusts the
ECR for over- or under-recoveries and for two PUC-established coal cost
standards. (See "Fossil Fuel" discussion on page 9.)
Under the Customer Choice Act, Duquesne may replace the ECR effective
April 1, 1997 by rolling its ECR energy costs into its base rates. The effect of
this change would be to provide to Duquesne an opportunity to further mitigate
its deferred energy costs based upon its ability to manage its energy costs.
Under Duquesne's PUC-approved Mitigation Plan, the level of energy cost recovery
is capped at 1.47 cents per KWH through May 2001. To the extent that projections
do not support recovery of previously deferred costs through this pricing
mechanism, these costs would become transition costs subject to recovery through
a competitive transition charge (CTC). (See "Competition" discussion on page
13.)
Property, Plant and Equipment (PP&E)
- -------------------------------------------------------------------------------
Investment in PP&E and Accumulated Depreciation
Duquesne's total investment in property, plant and equipment and the
related accumulated depreciation balances for major classes of property at
December 31, 1996 and 1995, are as follows:
6
<PAGE>
PP&E and Related Accumulated Depreciation at December 31
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
1996 1995
----------------------------------------------------------------------------
Accumulated Net Accumulated Net
Investment Depreciation Investment Investment Depreciation Investment
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Electric Production $2,467,786 $1,092,928 $1,374,858 $2,501,974 $ 885,389 $1,616,585
Electric Transmission 299,895 114,406 185,489 296,953 110,242 186,711
Electric Distribution 1,176,738 374,180 802,558 1,143,111 347,399 795,712
Electric General 324,366 168,470 155,896 314,844 141,133 173,711
Property Held for Future Use 190,821 82,737 108,084 216,633 94,283 122,350
Property Held Under Capital Leases 99,608 47,670 51,938 133,381 74,874 58,507
Other 49,559 10,909 38,650 45,114 19,787 25,327
- ------------------------------------------------------------------------------------------------------------------
Total $4,608,773 $1,891,300 $2,717,473 $4,652,010 $1,673,107 $2,978,903
==================================================================================================================
</TABLE>
Joint Interests in Generating Units
Duquesne has various contracts with Ohio Edison Company, Pennsylvania
Power Company, The Cleveland Electric Illuminating Company (CEI) and The Toledo
Edison Company, with respect to several jointly owned/leased generating units,
that include provisions for coordinated maintenance responsibilities, limited
and qualified mutual back-up in the event of outages, and certain capacity and
energy transactions.
In September 1995, Duquesne commenced arbitration against CEI, seeking
damages, termination of the Operating Agreement for Eastlake Unit 5 (Eastlake)
and partition of the parties' interests in Eastlake through a sale and division
of the proceeds. The arbitration demand alleged, among other things, the
improper allocation by CEI of fuel and related costs; the mismanagement of the
administration of the Saginaw coal contract in connection with the closing of
the Saginaw mine, which historically supplied coal to Eastlake; and the
concealment by CEI of material information. In October 1995, CEI commenced an
action against Duquesne in the Court of Common Pleas, Lake County, Ohio seeking
to enjoin Duquesne from taking any action to effect a partition on the basis of
a waiver of partition covenant contained in the deed to the land underlying
Eastlake. CEI also seeks monetary damages from Duquesne for alleged unpaid joint
costs in connection with the operation of Eastlake. Duquesne removed the action
to the United States District Court for the Northern District of Ohio, Eastern
Division, where it is now pending. Currently, the parties are engaged in
settlement discussions. To provide the parties with the opportunity to settle
their claims, the court has postponed litigation proceedings until April 1,
1997.
Joint Interests in Nuclear Power Stations
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Beaver Valley Perry
Unit 1 Unit 2 Unit 1
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Duquesne * 47.50% *13.74%(c) 13.74%
Ohio Edison Company 35.00% 41.88% 30.00%
Pennsylvania Power Company (a) 17.50% -- 5.24%
CEI (b) --% 24.47% * 31.11%
Toledo Edison Company (b) --% 19.91% 19.91%
- -----------------------------------------------------------------------------
*Denotes Operator
</TABLE>
(a) Subsidiary of Ohio Edison Company
(b) Subsidiary of Centerior Energy Corporation
(c) In 1987, Duquesne sold and leased back its 13.74 percent interest in BV Unit
2; the sale was exclusive of transmission and common facilities. The total
sales price of $537.9 million was the appraised value of Duquesne's interest
in the property. Duquesne subsequently leased back its interest in the unit
for a term of 29.5 years. The lease provides for semi-annual payments and is
accounted for as an operating lease. Duquesne is responsible under the terms
of the lease for all costs related to its interest in the unit.
7
<PAGE>
Joint Interests in Fossil Power Stations
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Bruce Mansfield
Sammis ------------------------- Eastlake
Unit 7 Unit 1 Unit 2 Unit 3 Unit 5
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Duquesne 31.20% 29.30% 8.00% 13.74% 31.20%
Ohio Edison Company * 48.00% 60.00% 39.30% 35.60% --
Pennsylvania Power Company (a) 20.80% * 4.20% * 6.80% * 6.28% --
CEI (b) -- 6.50% 28.60% 24.47% *68.80%
Toledo Edison Company (b) -- -- 17.30% 19.91% --
- -------------------------------------------------------------------------------
</TABLE>
*Denotes Operator
(a) Subsidiary of Ohio Edison Company
(b) Subsidiary of Centerior Energy Corporation
On September 13, 1996, Ohio Edison Company and Centerior Energy
Corporation entered into an agreement and plan of merger to form First Energy
Corporation. The regulatory approval process for the proposed merger is expected
to take approximately 12 to 18 months.
Property Held for Future Use
In 1986, the PUC approved Duquesne's request to remove Phillips Power
Station (Phillips) and a portion of BI from service and from rate base. In
accordance with Duquesne's Mitigation Plan, 112 MWs related to BI Units 2a and
2b were moved from property held for future use to electric plant in service in
1996. Duquesne expects to recover its investment in BI Units 3 and 4, which
remain in property held for future use through future electricity sales.
Duquesne believes its investment in BI will be necessary in order to meet future
business needs. A portion of the proceeds of the sale of Ft. Martin is expected
to be used to fund reliability enhancements to the BI Unit 3 combustion turbine.
The reliability enhancements are contingent upon the projects meeting a least-
cost test versus other potential sources of peaking capacity. (See "Mitigation
Plan" discussion on page 5.) Duquesne is analyzing the effects of customer
choice on its future generating requirements. Duquesne is planning to seek
recovery of its investment and associated costs of Phillips through a CTC. (See
"Competition" discussion on page 13.) In the event that market demand,
transmission access or rate recovery do not support the utilization of these
plants, Duquesne may have to write off part or all of these investments and
associated costs. At December 31, 1996, Duquesne's net of tax investment in
Phillips and BI held for future use was $53.6 million and $17.2 million.
Employees
- -------------------------------------------------------------------------------
At December 31, 1996, Duquesne had 3,413 employees, including 1,157
employees at the Duquesne-operated BVPS. In November 1996, Duquesne reached an
agreement on a three-year contract extension through September 30, 2001 with the
International Brotherhood of Electrical Workers, which represents approximately
2,000 of Duquesne's employees.
Electric Utility Operations
- -------------------------------------------------------------------------------
Duquesne's fossil plants operated at 76 percent availability in 1996
and 1995. Duquesne's nuclear plants operated at 76 percent availability in 1996
and 83 percent in 1995. The timing and duration of scheduled maintenance and
refueling outages, as well as the duration of forced outages, affect the
availability of power stations. Duquesne normally experiences its peak demand in
the summer. The 1996 customer system peak demand of 2,463 MW occurred on August
7, 1996.
Duquesne's plan for optimizing generation resources is designed to
reduce under-utilized generating capacity and employ cost-effective sources of
peaking capacity. The sale of Duquesne's ownership interest in Ft. Martin
reduced in-service capacity by 276 MW. In conjunction with the sale, Duquesne
returned 112 MW of peaking capacity at BI to electric plant in service.
Additionally, through potential reliability enhancements to the BI Unit 3
combustion turbine, Duquesne could return to service another 56 MW of oil-fired
peaking capacity. (See "Property Held for Future Use" discussion above.)
8
<PAGE>
Duquesne has a 13.74 percent ownership interest in Perry Unit 1, a
nuclear generating unit located in Ohio and operated by CEI. CEI management has
advised Duquesne that the Perry Course of Action (PCA), an action plan submitted
to the NRC in 1993, was completed at the end of the unit's fifth refueling
outage in the spring of 1996. Perry Unit 1 has followed the PCA with the Perry
Plan for Excellence, which is the long-term phase of the unit's performance
improvement program. Duquesne will continue to monitor closely the status of the
performance improvement program.
Fossil Fuel
- -------------------------------------------------------------------------------
Duquesne believes that sufficient coal for its coal-fired generating
units will be available from various sources to satisfy its requirements for the
foreseeable future. During 1996, approximately 2.4 million tons of coal were
consumed at Duquesne's two wholly owned coal-fired stations, Cheswick Power
Station (Cheswick) and Elrama Power Station (Elrama).
Duquesne owns Warwick Mine, an underground mine located approximately
83 river miles from Pittsburgh. At December 31, 1996, Duquesne's net investment
in the mine was $11.4 million. Duquesne estimates that, at December 31, 1996,
its economically recoverable coal reserves at Warwick Mine were in excess of 1.5
million tons. The unaffiliated contract operator at Warwick Mine notified
Duquesne that its financial circumstances and geologic conditions caused it to
cease operations late in 1996. Therefore, Duquesne is pursuing its remedies and
is currently negotiating to retain an operator for the mine as a smaller sized
operation. Additionally, Duquesne will continue to purchase coal on the open
market. This change should not impact Duquesne's ability to recover all of its
investment in Warwick Mine, the $2.6 million of unrecovered system-wide cost of
coal which excludes the Bruce Mansfield Power Station (Bruce Mansfield), or to
accrue funds for future liabilities. It is anticipated that this effort will be
successfully completed by March 31, 2000 when the system-wide coal cost cap
expires. The current estimated liability for mine closing, including final site
reclamation, mine water treatment and certain labor liabilities is $47.6
million, and Duquesne has recorded a liability on the consolidated balance sheet
of approximately $20.2 million toward these costs.
During 1996, 69 percent of Duquesne's coal supplies were provided by
contracts including Warwick Mine, with the remainder satisfied through purchases
on the spot market. Duquesne had four long-term contracts in effect at December
31, 1996 that, in combination with spot market purchases, are expected to
furnish an adequate future coal supply. Duquesne does not anticipate any
difficulty in replacing or renewing these contracts as they expire from 1997
through 2002. At December 31, 1996, Duquesne's wholly owned and jointly owned
generating units had on hand an average coal supply of 45 days.
The PUC has established two market price coal cost standards for
Duquesne. One applies only to coal delivered at Bruce Mansfield. The other, the
system-wide coal cost standard, applies to coal delivered to the remainder of
Duquesne's system. Both standards are updated monthly to reflect prevailing
market prices of similar coal. The PUC has directed Duquesne to defer recovery
of the delivered cost of coal to the extent that such cost exceeds generally
prevailing market prices for similar coal, as determined by the PUC. The PUC
allows deferred amounts to be recovered from customers when the delivered costs
of coal fall below such PUC-determined prevailing market prices. Duquesne's
obligations to pay certain debt service costs associated with the Bruce
Mansfield coal supply will end on January 1, 2000. The Bruce Mansfield coal
cost-capping mechanism does not expire until the recovery of all deferrals has
been resolved. Duquesne believes that Bruce Mansfield deferrals may increase
through the end of this decade and then be reduced to zero by the end of the
year 2002. The unrecovered cost of Bruce Mansfield coal was $9.6 million and the
unrecovered cost of the remainder of the system-wide coal was $2.6 million at
December 31, 1996. Duquesne believes that all deferred coal costs will be
recovered.
Nuclear Fuel
- -------------------------------------------------------------------------------
The cycle of production and utilization of nuclear fuel consists of
(1) mining and milling of uranium ore and processing the ore into uranium
concentrates, (2) converting uranium concentrates to uranium hexafluoride, (3)
enriching the uranium hexafluoride, (4) fabricating fuel assemblies, (5)
utilizing the nuclear fuel in the generating station reactor and (6) storing and
disposing of spent fuel.
9
<PAGE>
Adequate supplies of uranium and conversion services are under
contract for Duquesne's requirements for its jointly owned/leased nuclear units
through June and December 1997, respectively. Enrichment services are supplied
under a 1984 United States Enrichment Corporation Utility Services Contract
entered into for a period of 30 years by Duquesne for joint interests in Perry
Unit 1, BV Unit 1 and BV Unit 2. Under the terms and conditions of this
contract, Duquesne is committed to 100 percent of its enrichment needs through
1999; Duquesne has terminated, at zero cost, all of its enrichment services
requirements for fiscal years 2000 through 2005. Duquesne continues to review
the need for further enrichment services for the years 2006 through 2014 and may
terminate these future years' services under the contract. Fuel fabrication
contracts are in place to supply reload requirements for the next 18-month cycle
for BV Unit 1 and BV Unit 2 and the next fifteen 18-month cycles for Perry Unit
1. Duquesne will make arrangements for future uranium supply and related
services, as required.
Each utility company is responsible for financing its proportionate
share of the costs of nuclear fuel for each nuclear unit in which it has an
ownership or leasehold interest. Duquesne's nuclear fuel costs, which are
amortized to reflect fuel consumed, are charged to fuel expense and are
currently recovered through rates. Duquesne estimates that, over the next three
years, the expenditures for new fuel will exceed the amortization of nuclear
fuel consumed by approximately $4.4 million. The actual nuclear fuel costs to be
financed and amortized will be influenced by such factors as changes in interest
rates; lengths of the respective fuel cycles; reload cycle design; and changes
in nuclear material costs and services, the prices and availability of which are
not known at this time. Such costs may also be influenced by other events not
presently foreseen.
Nuclear Decommissioning
- -------------------------------------------------------------------------------
The PUC ruled that recovery of the decommissioning costs for BV Unit
1 could begin in 1977, and that recovery for BV Unit 2 and Perry Unit 1 could
begin in 1988. Duquesne expects to decommission BV Unit 1, BV Unit 2 and Perry
Unit 1 no earlier than the expiration of each plant's operating license in 2016,
2027 and 2026. At the end of its operating life, BV Unit 1 may be placed in safe
storage until BV Unit 2 is ready to be decommissioned, at which time the units
may be decommissioned together.
Based on site-specific studies finalized in 1992 for BV Unit 2, and
in 1994 for BV Unit 1 and Perry Unit 1, Duquesne's share of the total estimated
decommissioning costs, including removal and decontamination costs, currently
being used to determine Duquesne's cost of service, is $122 million for BV Unit
1, $35 million for BV Unit 2, and $67 million for Perry Unit 1. A study will be
performed in 1997 to update Duquesne's estimated decommissioning costs of BV
Unit 1 and BV Unit 2.
On July 18, 1996, the PUC issued a Proposed Policy Statement Regarding
Nuclear Decommissioning Cost Estimation and Cost Recovery for the purpose of
obtaining comments from the public. The proposed policy includes guidelines for
a site-specific study to estimate the cost of decommissioning. Guidelines
require that studies be performed at least every five years, address
radiological and non-radiological costs, and include a contingency factor of not
more than 10 percent. Under the proposed policy, annual decommissioning funding
levels are based on an annuity calculation recognizing inflation in the cost
estimates and earnings on fund assets. With respect to the transition to a
competitive generation market, the Customer Choice Act requires that utilities
include a plan to mitigate any shortfall in decommissioning trust fund payments
for the life of the facility with any future decommissioning filings. Consistent
with this requirement, Duquesne has increased its nuclear decommissioning
funding by $5 million under the PUC-approved plan for the sale of Duquesne's
ownership interest in Ft. Martin. (See "Mitigation Plan" discussion on page 5.)
These additional annual contributions bring the total annual funding to
approximately $9 million. Also, on October 17, 1996, the PUC adopted an
Accounting Order filed by Duquesne to recognize the increased funding as part of
Duquesne's cost of service. Duquesne expects to receive approval from the
Internal Revenue Service (IRS) for qualification of 100 percent of additional
nuclear decommissioning trust funding for BV Unit 2 and Perry Unit 1, and 79
percent for BV Unit 1.
Duquesne records nuclear decommissioning expense under the category of
depreciation and amortization expense and accrues a liability, equal to that
amount, for nuclear decommissioning costs. Funding for nuclear decommissioning
costs is deposited in external, segregated trust accounts and may be invested in
a portfolio of corporate common stock and debt securities, municipal bonds,
certificates of deposit and United States government securities. Trust fund
earnings increase the fund balance and the recorded liability. The market value
of the aggregate trust fund balances at December 31, 1996 totaled approximately
$33.7 million. On Duquesne's consolidated balance sheet, the decommissioning
trusts have been reflected in other long-term investments, and the related
liability has been recorded as other non-current liabilities.
10
<PAGE>
Nuclear Insurance
- -------------------------------------------------------------------------------
The Price-Anderson Amendments to the Atomic Energy Act of 1954 limit
public liability from a single incident at a nuclear plant to $8.9 billion. The
maximum available private primary insurance of $200 million has been purchased
by Duquesne. Additional protection of $8.7 billion would be provided by an
assessment of up to $79.3 million per incident on each nuclear unit in the
United States. Duquesne's maximum total possible assessment, $59.4 million,
which is based on its ownership or leasehold interests in three nuclear
generating units, would be limited to a maximum of $7.5 million per incident per
year. This assessment is subject to indexing for inflation and may be subject to
state premium taxes. If funds prove insufficient to pay claims, the United
States Congress could impose other revenue-raising measures on the nuclear
industry.
Duquesne's share of insurance coverage for property damage,
decommissioning and decontamination liability is $1.2 billion. Duquesne would be
responsible for its share of any damages in excess of insurance coverage. In
addition, if the property damage reserves of Nuclear Electric Insurance Limited
(NEIL), an industry mutual insurance company that provides a portion of this
coverage, are inadequate to cover claims arising from an incident at any United
States nuclear site covered by that insurer, Duquesne could be assessed
retrospective premiums totaling a maximum of $7.3 million.
In addition, Duquesne participates in a NEIL program that provides
insurance for the increased cost of generation and/or purchased power resulting
from an accidental outage of a nuclear unit. Subject to the policy limit, the
coverage provides for 100 percent of the estimated incremental costs per week
during the 52-week period starting 21 weeks after an accident and 80 percent of
such estimate per week for the following 104 weeks, with no coverage thereafter.
If NEIL's losses for this program ever exceed its reserves, Duquesne could be
assessed retrospective premiums totaling a maximum of $3.5 million.
Spent Nuclear Fuel Disposal
- -------------------------------------------------------------------------------
The Nuclear Waste Policy Act of 1982 established a policy for
handling and disposing of spent nuclear fuel and a policy requiring the
establishment of a final repository to accept spent nuclear fuel. Electric
utility companies have entered into contracts with the United States Department
of Energy (DOE) for the permanent disposal of spent nuclear fuel and high-level
radioactive waste in compliance with this legislation. The DOE has indicated
that its repository under these contracts will not be available for acceptance
of spent nuclear fuel before 2010. On July 23, 1996, the U.S. Court of Appeals
for the District of Columbia Circuit, in response to a suit brought by 25
electric utilities and 18 states and state agencies, unanimously ruled that the
DOE has a legal obligation to begin taking spent nuclear fuel by January 31,
1998. The DOE has not yet established an interim or permanent storage facility,
and has indicated that it will be unable to begin acceptance of spent nuclear
fuel for disposal by January 31, 1998. Further, Congress is considering
amendments to the Nuclear Waste Policy Act of 1982 that could give the DOE
authority to proceed with the development of a federal interim storage facility.
In the event the DOE does not begin accepting spent nuclear fuel, existing on-
site spent nuclear fuel storage capacities at BV Unit 1, BV Unit 2 and Perry
Unit 1 are expected to be sufficient until 2016 (end of operating license), 2013
and 2011, respectively.
On January 31, 1997, Duquesne joined 35 other electric utilities and 46
states, state agencies and regulatory commissions in filing a suit in the U.S.
Court of Appeals for the District of Columbia against the DOE. The suit requests
the court to suspend the utilities' payments into the Nuclear Waste Fund and to
place future payments into an escrow account until the DOE fulfills its
obligation to accept spent nuclear fuel. Significant additional expenditures for
the storage of spent nuclear fuel at BV Unit 2 and Perry Unit 1 could be
required if the DOE does not fulfill its obligation to accept spent nuclear
fuel.
Uranium Enrichment Decontamination and Decommissioning
- -------------------------------------------------------------------------------
Nuclear reactor licensees in the United States are assessed annually
for the decontamination and decommissioning of DOE uranium enrichment
facilities. Assessments are based on the amount of uranium a utility had
processed for enrichment prior to enactment of the National Energy Policy Act of
1992 (NEPA) and are to be paid by such utilities over a 15-year period. At
December 31, 1996, Duquesne's liability for contributions was approximately $9.3
million (subject to an inflation adjustment). Contributions, when made, are
currently recovered from customers through the ECR.
11
<PAGE>
Environmental Matters
- -------------------------------------------------------------------------------
The Comprehensive Environmental Response, Compensation and Liability
Act of 1980 and the Superfund Amendments and Reauthorization Act of 1986
(Superfund) established a variety of informational and environmental action
programs. The United States Environmental Protection Agency (EPA) informed
Duquesne of its potential involvement in three hazardous waste sites. Duquesne
reached agreements to make de minimus financial payments in 1995 related to two
sites in order to resolve any associated liability. Related to the remaining
site, Duquesne believes that available defenses, along with other factors
(including overall limited involvement, low estimated remediation costs and
other solvent, potentially responsible parties) will limit any potential
liability that Duquesne may have for cleanup costs. Duquesne believes that any
settlement or associated costs related to the remaining site will not have a
materially adverse effect on its financial position, results of operations or
cash flows.
As required by Title V of the Clean Air Act Amendments (Clean Air Act),
Duquesne filed comprehensive air operating permit applications for Cheswick,
Elrama, BI and Phillips during the last half of 1995. These applications are
still pending approval. Duquesne also filed its Title IV Phase II Clean Air Act
compliance plan with the PUC on December 27, 1995.
Although Duquesne believes it has satisfied all of the Phase I Acid
Rain Program requirements of the Clean Air Act, Phase II Acid Rain Program
requires significant additional reductions of sulfur dioxide (SO\\2\\) and
oxides of nitrogen (NO\\X\\) by the year 2000. Duquesne currently has 662 MW of
nuclear capacity and 1,187 MW of coal capacity equipped with SO\\2\\ emission-
reducing equipment (including 300 MW of property held for future use at
Phillips). Through the year 2000, Duquesne is considering a combination of
compliance methods that include fuel switching; increased use of, and
improvements in, SO\\2\\ emission-reducing equipment; low NO\\X\\ burner
technology; and the purchase of emission allowances for those remaining stations
not in compliance.
In addition to the Title IV Acid Rain Program requirements, Duquesne is
responsible for additional NO\\X\\ reduction requirements to meet Ozone Ambient
Air Quality Standards under Title I of the Clean Air Act. Flue gas conditioning
and post-combustion NO\\X\\ reduction technologies may be employed if
economically justified. Also, Duquesne is examining and developing innovative
emissions technologies designed to reduce costs. Duquesne continues to work with
the operators of its jointly owned stations to implement cost-effective
compliance strategies to meet these requirements.
Duquesne is closely monitoring other potential future air quality
programs and air emission control requirements that could result from more
stringent ambient air quality and emission standards for SO\\2\\ and NO\\X\\
particulates and other by-products of coal combustion. Duquesne expects the
Pennsylvania Department of Environmental Protection (DEP) to finalize in 1997 a
regulation to implement the additional NO\\X\\ control requirements that were
recommended by the Ozone Transport Commission. The estimated costs to comply
with this program have been included in Duquesne's capital cost estimates
through the year 2000. Since other potential programs are in various stages of
discussion and consideration, it is impossible to make reasonable estimates of
the potential costs and impacts, if any. Duquesne currently estimates that
additional capital costs to comply with Clean Air Act requirements through the
year 2000 will be approximately $20 million.
Duquesne has developed, patented and installed low NO\\X\\ burner
technology for the Elrama boilers. These cost-effective NO\\X\\ reduction
systems installed on the Elrama roof-fired boilers were specified as the
benchmark for the industry for this class of boilers in the EPA's final Group II
rulemaking. Duquesne is also currently evaluating additional low-cost,
developmental NO\\X\\ reduction technologies at Cheswick and Elrama. An
Artificial Neural Network control system enhancement, co-sponsored by the
Electric Power Research Institute and Duquesne, will be demonstrated at
Cheswick. The Gas Research Institute and Duquesne are sponsoring a targeted
natural gas reburn demonstration at Elrama. Both demonstrations were initiated
in 1996 and will be completed in 1997.
In 1992, the DEP issued Residual Waste Management Regulations
governing the generation and management of non-hazardous residual waste, such as
coal ash. Duquesne is assessing the sites it utilizes and has developed
compliance strategies that are currently under review by the DEP. Capital costs
of $2.5 million were incurred by Duquesne in 1996 to comply with these DEP
regulations. Based on information currently available, an additional $2.8
million will be spent in 1997. The additional capital cost of compliance through
the year 2000 is estimated, based on current information, to be $15 million.
This estimate is subject to the results of groundwater assessments and DEP final
approval of compliance plans.
12
<PAGE>
Duquesne is involved in various other environmental matters. Duquesne
believes that such matters, in total, will not have a materially adverse effect
on its financial position, results of operations or cash flows.
Outlook
- -------------------------------------------------------------------------------
Competition
The electric utility industry continues to undergo fundamental change
in response to open transmission access and increased availability of energy
alternatives. Under historical PUC ratemaking, regulated electric utilities were
granted exclusive geographic franchises to sell electricity in exchange for
making investments and incurring obligations to serve customers under the then-
existing regulatory framework. Through the ratemaking process, those prudently
incurred costs were recovered from customers, along with a return on the
investment. Additionally, certain operating costs were approved for deferral for
future recovery from customers. As a result of this historical ratemaking
process, utilities have assets recorded on their balance sheets at above-market
costs and have commitments to purchase power at above-market prices (transition
costs).
In Pennsylvania, under the Customer Choice Act which became effective
on January 1, 1997, consumers in a utility's traditional franchised territory
will ultimately be able to purchase electricity at market prices from a variety
of electric generation suppliers. Before the phase-in to customer choice begins
in 1999, the PUC expects utilities to take vigorous steps to mitigate transition
costs as much as possible without increasing the price they currently charge
customers. The PUC will determine what portion of a utility's remaining
transition costs will be recoverable from customers through a CTC. This charge
will be paid by consumers who choose alternative generation suppliers as well as
customers who choose their franchised utility. The CTC could last as long as
2005, providing a utility a total of up to nine years to recover transition
costs. An overall four-and-one-half year price cap will be imposed on the
transmission and distribution charges of electric utility companies.
Additionally, electric utility companies may not increase the generation price
component of prices as long as transition costs are being recovered, with
certain exceptions. If a utility ultimately is unable to recover its transition
costs within this pricing structure and timeframe, the costs will be written
off.
Duquesne has already been effective in mitigating its exposure to
transition costs. As the following table demonstrates, generating plant,
decommissioning and related regulatory asset costs have been reduced by
approximately $400 million during the past two years. These reductions have
resulted from a variety of strategies, such as selling generating assets,
accelerating recovery of fixed costs, increasing nuclear decommissioning charges
and reducing capitalized costs. Duquesne expects to continue these steps to
address its remaining transition costs. The Customer Choice Act provides another
option to mitigate transition costs. With PUC approval, utilities are permitted
to issue transition bonds with a maturity of 10 years or less. Proceeds can be
used to reduce transition costs. Duquesne is currently reviewing this
alternative as well as others to further mitigate its transition costs. (See
"Regulation" and "Rate Matters" discussions on pages 1 and 5.)
<TABLE>
<CAPTION>
Potential Transition Costs
- -------------------------------------------------------------------------------
December 31, January 1,
1996 1995
(Amounts in Millions of Dollars)
- -------------------------------------------------------------------------------
<S> <C> <C>
Nuclear plant $ 910.5 $1,149.0
Generation-related regulatory assets 417.9 495.8
BV Unit 2 lease 399.1 401.0
Unfunded generating plant decommissioning 299.5 371.0
Phillips 78.3 78.3
Warwick Mine 15.3 25.0
Purchase power contracts -- --
- -------------------------------------------------------------------------------
Total $2,120.6 $2,520.1
===============================================================================
</TABLE>
Any estimate of transition costs, including those in the table above,
is forward-looking and is highly dependent on estimates of the future market
prices for electric power. Higher market prices for electricity reduce
transition cost exposure, while lower market prices increase exposure. As part
of its transition filing, Duquesne is
13
<PAGE>
proposing to make a long-term sale of electricity during the transition period
to determine the market rate for power. In addition to market-related impacts,
any estimate of the ultimate level of transition costs also depends on, among
other things, the extent to which such costs are deemed recoverable by the PUC,
the ongoing level of Duquesne's costs of operations, regional and national
economic conditions, and growth of Duquesne's sales. Duquesne anticipates making
its transition filing, including the identification of potential transition
costs, as required by the PUC by August 1, 1997. The PUC is expected to rule on
Duquesne's ability to recover these costs through a CTC by May 1, 1998. Duquesne
believes, based upon prior rulings of the PUC, that it is entitled to recover
substantially all of its transition costs, but cannot predict the outcome of
this regulatory process. In the event that the PUC rules that any or all of
these transition costs cannot be recovered through a CTC mechanism or Duquesne
fails to satisfy the requirements of SFAS No. 71, these costs will be written
off. As Duquesne has substantial exposure to transition costs relative to its
size, significant transition cost write-offs could have a materially adverse
effect on Duquesne's financial position, results of operations and cash flows.
Various financial covenants and restrictions could be violated if substantial
write-off of assets or recognition of liabilities occurs.
In addition to the mitigation of transition costs, Duquesne has been
preparing for competition in a variety of ways. Duquesne has been building its
financial strength through the retirement and refinancing of long-term debt. In
1995, Duquesne's restrictive first mortgage bond indenture was replaced with a
new indenture with more flexible provisions. In 1996, Duquesne issued MIPS to
further add to its financial flexibility and creditworthiness.
Duquesne has better positioned its business for competition through
improving operations and enhancing customer relations. In recognition of
impending industry competition and in an effort to optimize its generation
resources, in 1989 Duquesne signed a contract with Delmarva Power for a bulk
power sale for a period of 20 years. This initiative would have resulted in the
refurbishment and return to service of Duquesne's cold-reserved generating
stations. Following the plan's failure to receive regulatory approval, in 1990
Duquesne announced a second long-term power sale initiative to restart these
power plants. This plan would have provided significant impetus to economic
development in Pennsylvania as well as providing Duquesne's customers with
substantial benefits in the form of lower rates. Duquesne's efforts to upgrade
and maintain the cold-reserved units have enabled Duquesne to utilize the BI
units to meet peak demand during periods of extreme weather in recent years and
have enabled the BI units to more quickly return to service as part of the Ft.
Martin sale. In 1991, Duquesne reorganized into strategic business units along
market lines and instituted cost reduction targets for capital, operation and
maintenance, and inventory expenditures. Workforce reductions were achieved
primarily through attrition. Since 1989 Duquesne has reduced its number of
employees by 25 percent. Recently, Duquesne signed a three-year contract
extension with its bargaining unit employees through September 2001. Throughout
the period, Duquesne has been aggressively reducing its fuel costs, achieving a
13 percent reduction in the unit cost of fuel since 1990. These measures have
enabled Duquesne to reduce its rates by nearly 36 percent, in real terms, since
1990. When considering the price freeze component of Duquesne's Mitigation Plan,
prices will have declined by nearly 50 percent in real terms during the decade
of the 1990s. From a customer relations standpoint, Duquesne negotiated long-
term contracts with more than 30 key industrial and commercial customers and was
recognized in 1996 for its economic development efforts in attracting major new
industrial expansions. In 1995, Duquesne became one of the first electric
utilities in the country to offer a full customer service guarantee and also
guaranteed to match any competing electricity supplier's price for new
businesses or for the expansion of existing businesses. Duquesne also is
offering to customers increased bill-paying options, including an advanced
technology service that enables customers to electronically receive and pay
their electric bills. This service assists major customers just as its earlier
Electricheck option helped smaller commercial and residential customers.
Additionally, Duquesne will be positioned to offer customers a wide range of new
services with the Customer Advanced Reliability System (CARS). Utility customers
will be linked to CARS by encoder receiver transmitters contained in new or
retrofitted electric meters. Data communications offered by this technology are
expected to result in improved reliability, security, and customer satisfaction.
At the national level, in 1996 the FERC issued two related final
rules that address the terms on which electric utilities will be required to
provide wholesale suppliers of electric energy with non-discriminatory access to
the utility's wholesale transmission system. The first rule, Order No. 888,
requires each public utility that owns, controls or operates interstate
transmission facilities to file a tariff offering unbundled transmission
services containing non-rate terms that conform to the FERC's pro forma tariff.
Order No. 888 also allows full recovery of prudently incurred costs from
departing customers. FERC deferred to state regulators with respect to retail
access, recovery of retail transition costs and the scope of state regulatory
jurisdiction. The second rule, Order No. 889, prohibits transmission owners and
their affiliates from gaining preferential access to information concerning
transmission and establishes a code of conduct to ensure the complete separation
of a utility's wholesale power marketing and transmission operation functions.
14
<PAGE>
Finally, the FERC simultaneously issued a new Notice of Proposed
Rulemaking (NOPR) on Capacity Reservation Open Access Transmission Tariffs
(CRT), which would require all market participants to reserve firm capacity
rights between designated receipt and delivery points. If adopted, the CRT would
replace the open access pro forma tariff implemented in Order No. 888. (See
"Transmission Access" discussion below.)
Duquesne is aware of the foregoing state and federal regulatory and
business uncertainties and is attempting to position itself to effectively
operate in a more competitive environment.
Transmission Access
In March 1994, Duquesne submitted, pursuant to the Federal Power Act,
two separate "good faith" requests for transmission service with APS and the
Pennsylvania-New Jersey-Maryland Interconnection Association (PJM Companies).
Because of a lack of progress on pricing and other issues, Duquesne subsequently
filed with the FERC applications for transmission service. In May 1995, the FERC
instructed APS and the PJM Companies to provide transmission service to Duquesne
and directed the parties to negotiate specific rates, terms and conditions. No
terms were agreed to, and briefs were filed with the FERC outlining the areas of
disagreement. The matter is now pending before the FERC. In July 1996, Duquesne
filed with the FERC a request for acceptance of a capacity reservation tariff to
replace the previously filed FERC Order No. 888 pro forma tariff. (See
"Competition" discussion on page 13.) Duquesne's tariff proposes to adopt
marginal cost pricing for transmission service on Duquesne's transmission
system. In February 1997, the FERC rejected Duquesne's tariff filing, but
permitted Duquesne to request a hearing to determine whether Duquesne's tariff
is just and reasonable as well as consistent with or superior to the Order No.
888 pro forma tariff. Duquesne has requested such a hearing.
Duquesne is currently evaluating the impact of FERC regulatory
actions on these proceedings. Duquesne cannot predict the final outcome of these
proceedings.
Beaver Valley Power Station (BVPS) Steam Generators
BVPS's two units are equipped with steam generators designed and
built by Westinghouse Electric Corporation (Westinghouse). Similar to other
Westinghouse nuclear plants, outside diameter stress corrosion cracking (ODSCC)
has occurred in the steam generator tubes of both units. The units continue to
have the capability to operate at 100 percent reactor power although 15 percent
of BV Unit 1 and 2 percent of BV Unit 2 steam generator tubes have been removed
from service. Material acceleration in the rate of ODSCC could lead to a loss in
plant efficiency and significant repairs or replacement of BV Unit 1 steam
generators. The total replacement cost of the BV Unit 1 steam generators is
estimated at $125 million, $59 million of which would be Duquesne's
responsibility. The earliest that the BV Unit 1 steam generators could be
replaced during a scheduled refueling outage is the fall of 2000.
Other
- -------------------------------------------------------------------------------
Retirement Plan Measurement Assumptions
Duquesne increased the discount rate used to determine the projected
benefit obligation on Duquesne's retirement plans at December 31, 1996 to 7.5
percent. The assumed change in future compensation levels and assumed rate of
return on plan assets were also increased to reflect current market and economic
conditions. The effects of these changes on Duquesne's retirement plan
obligations are reflected in the amounts shown in "Employee Benefits," Note N to
the consolidated financial statements, on page 55. The resulting change in
related expenses for subsequent years is not expected to be material.
Except for historical information contained herein, the matters
discussed in this Annual Report on Form 10-K, are forward-looking statements
that involve risks and uncertainties including, but not limited to, economic,
competitive, governmental and technological factors affecting Duquesne's
operations, markets, products, services and prices, and other factors discussed
in Duquesne's filings with the Securities and Exchange Commission.
----------------------------------
15
<PAGE>
Executive Officers of the Registrant
Set forth below are the names, ages as of March 1, 1997, positions and
brief accounts of the business experience during the past five years of the
executive officers of Duquesne.
<TABLE>
<CAPTION>
Name Age Office
- ------------------ ---- --------------------------------------------------------
<S> <C> <C>
David D. Marshall 44 President and Chief Executive Officer since August 1996.
President and Chief Operating Officer from February
1995 to August 1996. Executive Vice President from
February 1992 to February 1995, Assistant to the
President from October 1990 to February 1992, and
Vice President - Corporate Development from August
1987 to February 1992.
Gary L. Schwass 51 Senior Vice President since February 1995 and Chief
Financial Officer since July 1989. Vice President -
Finance from May 1988 to February 1995.
James E. Cross 50 President, Generation Group since September 1996.
Senior Vice President - Nuclear since February 1995.
Vice President - Nuclear from September 1994 to
February 1995. Formerly Vice President, Thermal
Operations, and Chief Nuclear Officer of Portland
General Electric from May 1993 to September 1994;
and Vice President and Chief Nuclear Officer of
Portland General Electric from December 1991 to
May 1993.
Dianna L. Green 50 Senior Vice President - Customer Operations since
April 1995. Senior Vice President - Administration
from February 1995 to April 1995. Vice President -
Administrative Services from August 1988 to
February 1995.
Gary R. Brandenberger 59 Vice President - Power Supply since August 1986.
William J. DeLeo 46 Vice President - Marketing and Corporate
Performance since April 1995. Vice President -
Corporate Performance and Information Services
from January 1991 to April 1995.
Victor A. Roque 50 Vice President since April 1995 and General Counsel
since November 1994. Previously Vice President,
General Counsel and Secretary for Orange and
Rockland Utilities from April 1989 to November 1994.
Donald J. Clayton 42 Treasurer since January 1995. Assistant Treasurer
from May 1990 to January 1995.
Morgan K. O'Brien 36 Controller and Principal Accounting Officer since
October 1995. Assistant Controller from
December 1993 to October 1995. Manager,
Corporate Taxes, from September 1991 to
December 1993.
</TABLE>
16
<PAGE>
Item 2. Properties.
Duquesne's properties consist of electric generating stations,
transmission and distribution facilities, and supplemental properties and
appurtenances, comprising as a whole an integrated electric utility system,
located in Allegheny, Beaver and Westmoreland counties in southwestern
Pennsylvania.
Duquesne owns all or a portion of the following generating units
except Beaver Valley Unit 2, which is leased.
<TABLE>
<CAPTION>
Duquesne's
Share of Net Plant Output
Capacity Year Ended
(Megawatts) December 31, 1996
Name and Location Type Summer Winter (Megawatt-hours)
- ------------------ ---- ------ ----- -----------------
<S> <C> <C> <C> <C>
Cheswick Coal 562 570 3,101,155
Springdale, Pa.
Elrama Coal 474 487 2,572,107
Elrama, Pa.
Sammis Unit 7 (1) Coal 187 187 1,058,157
Stratton, Ohio
Eastlake Unit 5 (1) Coal 186 186 972,750
Eastlake, Ohio
Beaver Valley Unit 1 (1) Nuclear 385 385 2,713,594
Shippingport, Pa.
Beaver Valley Unit 2 (1) Nuclear 113 113 674,893
Shippingport, Pa.
Perry Unit 1 (1) Nuclear 161 164 1,026,442
North Perry, Ohio
Bruce Mansfield Unit 1 (1) Coal 228 228 965,248
Shippingport, Pa.
Bruce Mansfield Unit 2 (1) Coal 62 62 285,792
Shippingport, Pa.
Bruce Mansfield Unit 3 (1) Coal 110 110 480,342
Shippingport, Pa.
Ft. Martin Unit 1 (2) Coal 276 276 1,215,111
Brunot Island
Brunot Island, Pa. Oil 166 178 (6,846)
----- ----- ----------
Total 2,910 2,946 15,058,745
==========
Property held for future use:
Brunot Island Oil 92 128
Phillips Coal 300 300
----- -----
Total 3,302 3,374
===== =====
</TABLE>
(1) Amounts represent Duquesne's share of the unit which is owned by Duquesne in
common with one or more other electric utilities (or, in the case of Beaver
Valley Unit 2, leased by Duquesne).
(2) Amount represents Duquesne's share of the unit, which was sold on October
31, 1996.
Duquesne owns 24 transmission substations (including interests in
common in the step-up transformers at Sammis Unit 7; Eastlake Unit 5; Bruce
Mansfield Unit 1; Beaver Valley Unit 1; Beaver Valley Unit 2; Perry Unit 1;
Bruce Mansfield Unit 2; and Bruce Mansfield Unit 3) and 562 distribution
substations. Duquesne has 714 circuit-miles of transmission lines, comprising
345,000, 138,000 and 69,000 volt lines. Street lighting and distribution
circuits of 23,000 volts and less include approximately 50,000 miles of lines
and cable.
17
<PAGE>
Duquesne owns the Warwick Mine, including 4,849 acres owned in fee of
unmined coal lands and mining rights, located on the Monongahela River in Greene
County, Pennsylvania, approximately 83 river miles from Pittsburgh. (See Item 1.
BUSINESS. "Fossil Fuel" discussion on page 9.)
Additional information relating to Item 2. PROPERTIES, is set forth
in Note D, "Property, Plant and Equipment," of the consolidated financial
statements for year ended December 31, 1996, on page 42. The information is
incorporated here by reference.
Item 3. Legal Proceedings.
Rate-Related Legal Proceedings, Property, Plant and Equipment-Related Legal
Proceedings and Environmental Legal Proceedings
- --------------------------------------------------------------------------------
Eastlake Unit 5
In September 1995, Duquesne commenced arbitration against CEI, seeking
damages, termination of the Operating Agreement for Eastlake Unit 5 (Eastlake)
and partition of the parties' interests in Eastlake through a sale and division
of the proceeds. The arbitration demand alleged, among other things, the
improper allocation by CEI of fuel and related costs; the mismanagement of the
administration of the Saginaw coal contract in connection with the closing of
the Saginaw mine, which historically supplied coal to Eastlake; and the
concealment by CEI of material information. In October 1995, CEI commenced an
action against Duquesne in the Court of Common Pleas, Lake County, Ohio seeking
to enjoin Duquesne from taking any action to effect a partition on the basis of
a waiver of partition covenant contained in the deed to the land underlying
Eastlake. CEI also seeks monetary damages from Duquesne for alleged unpaid joint
costs in connection with the operation of Eastlake. Duquesne removed the action
to the United States District Court for the Northern District of Ohio, Eastern
Division, where it is now pending. Currently, the parties are engaged in
settlement discussions. To provide the parties with the opportunity to settle
their claims, the court has postponed litigation proceedings until April 1,
1997.
Proceedings involving Duquesne's rates are reported in Item 1.
BUSINESS "Rate Matters." Proceedings involving Property, Plant and Equipment are
reported in Item 1. BUSINESS "Property, Plant and Equipment." Proceedings
involving environmental matters are reported in Item 1. BUSINESS "Environmental
Matters."
Item 4. Submission of Matters to a Vote Of Security Holders.
Not applicable.
Part II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
Duquesne's common stock is not publicly traded. Effective July 7, 1989,
Duquesne became a wholly owned subsidiary of DQE, the holding company formed as
part of a shareholder-approved restructuring. As a result of the restructuring,
Duquesne's shareholders received DQE common stock in exchange for their shares
of Duquesne common stock, which were cancelled. DQE owns all of Duquesne's
outstanding common stock, which consists of 10 shares. As such, this item is not
applicable to Duquesne because all its common equity is held solely by DQE.
During 1996 and 1995, Duquesne declared quarterly dividends on its common stock
totaling $276 million and $144 million, respectively.
Item 6. Selected Financial Data.
Selected financial data for Duquesne for each of the six years in the
period ended December 31, 1996, are set forth on page 59. The financial data is
incorporated here by reference.
18
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Management's discussion and analysis of financial condition and
results of operations are set forth in Item 1. BUSINESS. The discussion and
analysis are incorporated here by reference.
Item 8. Consolidated Financial Statements and Supplementary Data.
The Consolidated Balance Sheet of Duquesne Light Company and its
subsidiary as of December 31, 1996 and 1995, and the related Statements of
Consolidated Income, Retained Earnings and Cash Flows for each of the three
years in the period ended December 31, 1996, together with the Independent
Auditors' Report dated January 28, 1997, are set forth in pages 34 to 58 of this
Report. The consolidated financial statements and report are incorporated here
by reference. Quarterly financial information is included on page 58 in Note O
to Duquesne's consolidated financial statements and is incorporated here by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Part III
Item 10. Directors and Executive Officers of the Registrant.
All directors of DQE are also directors of Duquesne. Information
relating to DQE's and Duquesne's board of directors is set forth on page 6 of
the 1996 DQE Annual Report to Shareholders filed here as part of this Report in
Exhibit 99.2. The information is incorporated here by reference. Information
relating to the executive officers of the Registrant is set forth in Part I of
this Report under the caption "Executive Officers of the Registrant."
Item 11. Executive Compensation.
The information relating to executive compensation is set forth in
Exhibit 99.1, filed as part of this Report. The information is incorporated here
by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
DQE is the beneficial owner and holder of all shares of outstanding
Common Stock, $1 par value, of Duquesne Light, consisting of 10 shares as of
February 21, 1997. Information relating to the ownership of equity securities of
DQE and Duquesne Light by directors and executive officers of Duquesne Light is
set forth in Exhibit 99.1, filed as part of this Report. The information is
incorporated here by reference.
Item 13. Certain Relationships and Related Transactions.
None.
19
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1) The following information is set forth here on pages 34 through 58:
Report of Independent Certified Public Accountants.
Statement of Consolidated Income for the Three Years Ended December 31, 1996.
Consolidated Balance Sheet, December 31, 1996 and 1995.
Statement of Consolidated Cash Flows for the Three Years Ended
December 31, 1996.
Statement of Consolidated Retained Earnings for the Three Years Ended
December 31, 1996.
Notes to Consolidated Financial Statements.
(a)(2) The following financial statement schedule and the related
Report of Independent Certified Public Accountants (See pages 32 and 34.) are
filed here as a part of this Report:
Schedule for the Three Years Ended December 31, 1996:
II- Valuation and Qualifying Accounts.
The remaining schedules are omitted because of the absence of the
conditions under which they are required or because the information called for
is shown in the financial statements or notes to the financial statements.
(a)(3) Exhibits are set forth in the Exhibits Index on pages 21
through 31, and incorporated here by reference. Documents other than those
designated as being filed here are incorporated here by reference. Previously
filed documents incorporated by reference to a DQE Annual Report on Form 10-K, a
Quarterly Report on Form 10-Q or a Current Report on Form 8-K are at Securities
and Exchange Commission File No. 1-10290. Documents incorporated by reference to
a Duquesne Light Company Annual Report on Form 10-K, Quarterly Report on
Form 10-Q or a Current Report on Form 8-K are at Securities and Exchange
Commission File No. 1-956. The Exhibits include the management contracts and
compensatory plans or arrangements required to be filed as exhibits to this Form
10-K by Item 601(d)(10)(iii), of Regulation S-K.
(b) Reports on Form 8-K filed during the twelve months ended December
31, 1996:
(1) May 13, 1996 - The following event was reported:
Item 7. Statement re: Calculation of Ratio of Earnings to Combined
Fixed Charges and Preferred and Preference Stock Dividend
Requirements.
No financial statements were filed with this report.
20
<PAGE>
<TABLE>
<CAPTION>
Exhibits Index
Exhibit Method of
No. Description Filing
-------- -------------------------------------------------- ----------------------------
<S> <C> <C>
3.1 Restated Articles of Duquesne Light Company, as Exhibit 3.1 to the Form 10-K
amended through December 19, 1991 and as currently Annual Report of Duquesne
in effect. Light Company for the year
ended December 31, 1991.
3.2 By-Laws of Duquesne Light Company, as amended Filed here.
through December 18, 1996 and as currently in effect.
4.1 Indenture dated March 1, 1960, relating to Duquesne Exhibit 4.3 to the Form 10-K
Light Company's 5% Sinking Fund Debentures. Annual Report of DQE for the
year ended December 31, 1989.
4.2 Indenture of Mortgage and Deed of Trust dated as of Exhibit 4.3 to Registration
April 1, 1992, securing Duquesne Light Company's Statement (Form S-3)
First Collateral Trust Bonds. No. 33-52782.
4.3 Supplemental Indentures supplementing the said
Indenture of Mortgage and Deed of Trust -
Supplemental Indenture No. 1. Exhibit 4.4 to Registration
Statement (Form S-3)
No. 33-52782.
Supplemental Indenture No. 2 through Supplemental Exhibit 4.4 to Registration
Indenture No. 4. Statement (Form S-3)
No. 33-63602.
Supplemental Indenture No. 5 through Supplemental Exhibit 4.6 to the Form 10-K
Indenture No. 7. Annual Report of Duquesne
Light Company for the year
ended December 31, 1993.
Supplemental Indenture No. 8 and Supplemental Exhibit 4.6 to the Form 10-K
Indenture No. 9. Annual Report of Duquesne
Light Company for the year
ended December 31, 1994.
Supplemental Indenture No. 10 through Supplemental Exhibit 4.4 to the Form 10-K
Indenture No. 12. Annual Report of Duquesne
Light Company for the year
ended December 31, 1995.
Supplemental Indenture No. 13. Filed here.
4.4 Amended and Restated Agreement of Limited Partnership Filed here.
of Duquesne Capital L.P., dated as of May 14, 1996.
4.5 Payment and Guarantee Agreement dated as of May 14, Filed here.
1996 by Duquesne Light Company with respect to MIPS.
4.6 Indenture dated as of May 1, 1996 by Duquesne Light Filed here.
Company to the First National Bank of Chicago as
Trustee.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
-------- --------------------------------------------------------- -------------------------
<S> <C> <C>
Agreements relating to Jointly Owned Generating Units:
10.1 Administration Agreement dated as of September 14, 1967. Exhibit 5.8 to Registration
Statement (Form S-7)
No. 2-43106.
10.2 Transmission Facilities Agreement dated as of September Exhibit 5.9 to Registration
14, 1967. Statement (Form S-7)
No. 2-43106.
10.3 Operating Agreement dated as of September 21, 1972 Exhibit 5.1 to Registration
for Eastlake Unit No. 5. Statement (Form S-7)
No. 2-48164.
10.4 Memorandum of Agreement dated as of July 1, 1982 re Exhibit 10.14 to the Form 10-K
reallocation of rights and liabilities of the companies Annual Report of Duquesne
under uranium supply contracts. Light Company for the year
ended December 31, 1987.
10.5 Operating Agreement dated August 5, 1982 as of Exhibit 10.17 to the Form 10-K
September 1, 1971 for Sammis Unit No. 7. Annual Report of Duquesne
Light Company for the year
ended December 31, 1988.
10.6 Memorandum of Understanding dated as of March 31, Exhibit 10.19 to the Form 10-K
1985 re implementation of company-by-company Annual Report of DQE for the
management of uranium inventory and delivery. year ended December 31, 1989.
10.7 Restated Operating Agreement for Beaver Valley Unit Exhibit 10.23 to the Form 10-K
Nos. 1 and 2 dated September 15, 1987. Annual Report of Duquesne
Light Company for the year
ended December 31, 1987.
10.8 Operating Agreement for Perry Unit No. 1 dated Exhibit 10.24 to the Form 10-K
March 10, 1987. Annual Report of Duquesne
Light Company for the year
ended December 31, 1987.
10.9 Operating Agreement for Bruce Mansfield Units Nos. 1, Exhibit 10.25 to the Form 10-K
2 and 3 dated September 15, 1987 as of June 1, 1976. Annual Report of Duquesne
Light Company for the year
ended December 31, 1987.
10.10 Basic Operating Agreement, as amended January 1, 1993. Exhibit 10.10 to the Form 10-K
Annual Report of Duquesne
Light Company for the year
ended December 31, 1993.
10.11 Amendment No. 1 dated December 23, 1993 to Exhibit 10.11 to the Form 10-K
Transmission Facilities Agreement (as of January 1, 1993). Annual Report of Duquesne
Light Company for the year
ended December 31, 1993.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
-------- --------------------------------------------------- ------------------------------
<S> <C> <C>
10.12 Microwave Sharing Agreement (as amended Exhibit 10.12 to the Form 10-K
January 1, 1993) dated December 23, 1993. Annual Report of Duquesne
Light Company for the year
ended December 31, 1993.
10.13 Agreement (as of September 1, 1980) dated Exhibit 10.13 to the Form 10-K
December 23, 1993 for termination or construction Annual Report of Duquesne
of certain agreements. Light Company for the year
ended December 31, 1993.
10.14 Fort Martin Power Station Asset Purchase Agreement Exhibit 10.17 to the Form 10-K
dated as of November 28, 1995. Annual Report of Duquesne
Light Company for the year
ended December 31, 1995.
Agreements relating to the Sale and Leaseback
of Beaver Valley Unit No. 2:
10.15 Order of the Pennsylvania Public Utility Commission Exhibit 28.2 to the Form 10-Q
dated September 25, 1987 regarding the application Quarterly Report of Duquesne
of the Duquesne Light Company under Section 1102(a)(3) Light Company for the quarter
of the Public Utility Code for approval in connection ended September 30, 1987.
with the sale and leaseback of its interest in
Beaver Valley Unit No. 2.
10.16 Order of the Pennsylvania Public Utility Commission Exhibit 10.28 to the Form 10-K
dated October 15, 1992 regarding the Securities Annual Report of Duquesne
Certificate of Duquesne Light Company for the Light Company for the year
assumption of contingent obligations under ended December 31, 1992.
financing agreements in connection with the
refunding of Collateralized Lease Bonds.
x10.17 Facility Lease dated as of September 15, 1987 between Exhibit (4)(c) to Registration
The First National Bank of Boston, as Owner Trustee Statement (Form S-3)
under a Trust Agreement dated as of September 15, 1987 No. 33-18144.
with the limited partnership Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
y10.18 Facility Lease dated as of September 15, 1987 between Exhibit (4)(d) to Registration
The First National Bank of Boston, as Owner Trustee Statement (Form S-3)
under a Trust Agreement dated as of September 15, No. 33-18144.
1987, with the corporate Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
x10.19 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.30 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, 1987 ended December 31, 1987.
with the limited partnership Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
-------- ------------------------------------------------------ -----------------------------------
<S> <C> <C>
y10.20 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.31 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, ended December 31, 1987.
1987 with the corporate Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
x10.21 Amendment No. 2 dated as of November 15, 1992 to Exhibit 10.33 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, 1987 ended December 31, 1992.
with the limited partnership Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
y10.22 Amendment No. 2 dated as of November 15, 1992 to Exhibit 10.34 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, ended December 31, 1992.
1987 with the corporate Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
x10.23 Amendment No. 3 dated as of October 13, 1994 to Exhibit 10.25 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, 1987 ended December 31, 1994.
with the limited partnership Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
y10.24 Amendment No. 3 dated as of October 13, 1994 to Exhibit 10.26 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, 1987 ended December 31, 1994.
with the corporate Owner Participant named therein,
Lessor, and Duquesne Light Company, Lessee.
x10.25 Participation Agreement dated as of September 15, Exhibit (28)(a) to Registration
1987 among the limited partnership Owner Statement (Form S-3)
Participant named therein, the Original Loan No. 33-18144.
Participants listed in Schedule 1 thereto, as Original
Loan Participants, DQU Funding Corporation, as Funding
Corp, The First National Bank of Boston, as Owner
Trustee, Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
y10.26 Participation Agreement dated as of September 15, 1987 Exhibit (28)(b) to Registration
among the corporate Owner Participant named therein, Statement (Form S-3)
the Original Loan Participants listed in Schedule 1 No. 33-18144.
thereto, as Original Loan Participants, DQU Funding
Corporation, as Funding Corp, The First National Bank
of Boston, as Owner Trustee, Irving Trust Company, as
Indenture Trustee and Duquesne Light Company, as
Lessee.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
-------- ------------------------------------------------------- --------------------------------
<S> <C> <C>
x10.27 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.34 to the Form 10-K
Participation Agreement dated as of September 15, 1987 Annual Report of Duquesne
among the limited partnership Owner Participant named Light Company for the year
therein, the Original Loan Participants listed therein, ended December 31, 1987.
as Original Loan Participants, DQU Funding
Corporation, as Funding Corp, The First National Bank
of Boston, as Owner Trustee, Irving Trust Company, as
Indenture Trustee and Duquesne Light Company, as Lessee.
y10.28 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.35 to the Form 10-K
Participation Agreement dated as of September 15, 1987 Annual Report of Duquesne
among the corporate Owner Participant named therein, Light Company for the year
the Original Loan Participants listed therein, ended December 31, 1987.
as Original Loan Participants, DQU Funding Corporation,
as Funding Corp, The First National Bank of Boston, as
Owner Trustee, Irving Trust Company, as Indenture
Trustee and Duquesne Light Company, as Lessee.
x10.29 Amendment No. 2 dated as of March 1, 1988 to Exhibit (28)(c)(3) to
Participation Agreement dated as of September 15, 1987 Registration Statement
among the limited partnership Owner Participant named (Form S-3) No. 33-54648.
therein, DQU Funding Corporation, as Funding Corp,
The First National Bank of Boston, as Owner Trustee,
Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
y10.30 Amendment No. 2 dated as of March 1, 1988 to Exhibit (28)(c)(4) to
Participation Agreement dated as of September 15, 1987 Registration Statement
among the corporate Owner Participant named therein, (Form S-3) No. 33-54648.
DQU Funding Corporation, as Funding Corp,
The First National Bank of Boston, as Owner Trustee,
Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
x10.31 Amendment No. 3 dated as of November 15, 1992 to Exhibit 10.41 to the Form 10-K
Participation Agreement dated as of September 15, 1987 Annual Report of Duquesne
among the limited partnership Owner Participant named Light Company for the year
therein, DQU Funding Corporation, as Funding Corp, ended December 31, 1992.
DQU II Funding Corporation, as New Funding Corp,
The First National Bank of Boston, as Owner Trustee,
The Bank of New York, as Indenture Trustee and
Duquesne Light Company, as Lessee.
y10.32 Amendment No. 3 dated as of November 15, 1992 to Exhibit 10.42 to the Form 10-K
Participation Agreement dated as of September 15, 1987 Annual Report of Duquesne
among the corporate Owner Participant named therein, Light Company for the year
DQU Funding Corporation, as Funding Corp, ended December 31, 1992.
DQU II Funding Corporation, as New Funding Corp,
The First National Bank of Boston, as Owner Trustee,
The Bank of New York, as Indenture Trustee and
Duquesne Light Company, as Lessee.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
-------- ------------------------------------------------- -----------------------------------
<S> <C> <C>
x10.33 Amendment No. 4 dated as of October 13, 1994 to Exhibit 10.35 to the Form 10-K
Participation Agreement dated as of September 15, 1987 Annual Report of Duquesne
among the limited partnership Owner Participant named Light Company for the year
therein, DQU Funding Corporation, as Funding Corp, ended December 31, 1994.
DQU II Funding Corporation, as New Funding Corp,
The First National Bank of Boston, as Owner Trustee,
The Bank of New York, as Indenture Trustee and
Duquesne Light Company, as Lessee.
y10.34 Amendment No. 4 dated as of October 13, 1994 to Exhibit 10.36 to the Form 10-K
Participation Agreement dated as of September 15, 1987 Annual Report of Duquesne
among the corporate Owner Participant named therein, Light Company for the year
DQU Funding Corporation, as Funding Corp, DQU II ended December 31, 1994.
Funding Corporation, as New Funding Corp,
The First National Bank of Boston, as Owner Trustee,
The Bank of New York, as Indenture Trustee and
Duquesne Light Company, as Lessee.
z10.35 Ground Lease and Easement Agreement dated as of Exhibit (28)(e) to Registration
September 15, 1987 between Duquesne Light Company, Statement (Form S-3)
Ground Lessor and Grantor, and The First National Bank No. 33-18144.
of Boston, as Owner Trustee under a Trust Agreement
dated as of September 15, 1987 with the limited
partnership Owner Participant named therein,
Tenant and Grantee.
z10.36 Assignment, Assumption and Further Agreement dated as Exhibit (28)(f) to Registration
of September 15, 1987 among The First National Bank of Statement (Form S-3)
Boston, as Owner Trustee under a Trust Agreement dated No. 33-18144.
as of September 15, 1987 with the limited partnership
Owner Participant named therein, The Cleveland Electric
Illuminating Company, Duquesne Light Company, Ohio
Edison Company, Pennsylvania Power Company and The
Toledo Edison Company.
z10.37 Additional Support Agreement dated as of September 15, Exhibit (28)(g) to Registration
1987 between The First National Bank of Boston, as Statement (Form S-3)
Owner Trustee under a Trust Agreement dated as of No. 33-18144.
September 15, 1987 with the limited partnership Owner
Participant named therein, and Duquesne Light Company.
z10.38 Indenture, Bill of Sale, Instrument of Transfer and Exhibit (28)(h) to Registration
Severance Agreement dated as of October 2, 1987 Statement (Form S-3)
between Duquesne Light Company, Seller, and The First No. 33-18144.
National Bank of Boston, as Owner Trustee under a Trust
Agreement dated as of September 15, 1987 with the
limited partnership Owner Participant named therein,
Buyer.
z10.39 Tax Indemnification Agreement dated as of September 15, Exhibit 28.1 to the Form 8-K
1987 between the Owner Participant named therein and Current Report of Duquesne
Duquesne Light Company, as Lessee. Light Company dated
November 20, 1987.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
-------- ------------------------------------------------- -------------------------------
<S> <C> <C>
z10.40 Amendment No. 1 dated as of November 15, 1992 to Exhibit 10.48 to the Form 10-K
Tax Indemnification Agreement dated as of September 15, Annual Report of Duquesne
1987 between the Owner Participant named therein and Light Company for the year
Duquesne Light Company, as Lessee. ended December 31, 1992.
z10.41 Amendment No. 2 dated as of October 13, 1994 to Tax Exhibit 10.43 to the Form 10-K
Indemnification Agreement dated as of September 15, 1987 Annual Report of Duquesne
between the Owner Participant named therein and Light Company for the year
Duquesne Light Company, as Lessee. ended December 31, 1994.
z10.42 Extension Letter dated December 8, 1992 from Exhibit 10.49 to the Form 10-K
Duquesne Light Company, each Owner Participant, The Annual Report of Duquesne
First National Bank of Boston, the Lease Indenture Light Company for the year
Trustee, DQU Funding Corporation and DQU II ended December 31, 1992.
Funding Corporation addressed to the New Collateral
Trust Trustee extending their respective representations
and warranties and covenants set forth in each of the
Participation Agreements.
x10.43 Trust Indenture, Mortgage, Security Agreement and Exhibit (4)(g) to Registration
Assignment of Facility Lease dated as of September 15, Statement (Form S-3)
1987 between The First National Bank of Boston, as No. 33-18144.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the limited partnership Owner
Participant named therein, and Irving Trust Company,
as Indenture Trustee.
y10.44 Trust Indenture, Mortgage, Security Agreement and Exhibit (4)(h) to Registration
Assignment of Facility Lease dated as of September 15, Statement (Form S-3)
1987 between The First National Bank of Boston, as No. 33-18144.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the corporate Owner
Participant named therein, and Irving Trust Company,
as Indenture Trustee.
x10.45 Supplemental Indenture No. 1 dated as of December 1, Exhibit 10.45 to the Form 10-K
1987 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of Light Company for the year
September 15, 1987 between The First National Bank ended December 31, 1987.
of Boston, as Owner Trustee under a Trust Agreement
dated as of September 15, 1987 with the limited
partnership Owner Participant named therein, and Irving
Trust Company, as Indenture Trustee.
y10.46 Supplemental Indenture No. 1 dated as of December 1, Exhibit 10.46 to the Form 10-K
1987 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of Light Company for the year
September 15, 1987 between The First National Bank of ended December 31, 1987.
Boston, as Owner Trustee under a Trust Agreement
dated as of September 15, 1987 with the corporate
Owner Participant named therein, and Irving Trust
Company, as Indenture Trustee.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
-------- ------------------------------------------------------- -------------------------------
<S> <C> <C>
x10.47 Supplemental Indenture No. 2 dated as of November 15, Exhibit 10.54 to the Form 10-K
1992 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of September 15, Light Company for the year
1987 between The First National Bank of Boston, as ended December 31, 1992.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the limited partnership Owner
Participant named therein, and The Bank of New York,
as Indenture Trustee.
y10.48 Supplemental Indenture No. 2 dated as of November 15, Exhibit 10.55 to the Form 10-K
1992 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of September 15, Light Company for the year
1987 between The First National Bank of Boston, as ended December 31, 1992.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the corporate Owner
Participant named therein, and The Bank of New York,
as Indenture Trustee.
10.49 Reimbursement Agreement dated as of October 1, 1994 Exhibit 10.51 to the Form 10-K
among Duquesne Light Company, Swiss Bank Annual Report of Duquesne
Corporation, New York Branch, as LOC Bank, Union Light Company for the year
Bank, as Administrating Bank, Swiss Bank ended December 31, 1994.
Corporation, New York Branch, as Administrating Bank
and The Participating Banks Named Therein.
10.50 Collateral Trust Indenture dated as of November 15, 1992 Exhibit 10.58 to the Form 10-K
among DQU II Funding Corporation, Duquesne Light Annual Report of Duquesne
Company and The Bank of New York, as Trustee. Light Company for the year
ended December 31, 1992.
10.51 First Supplemental Indenture dated as of November 15, Exhibit 10.59 to the Form 10-K
1992 to Collateral Trust Indenture dated as of Annual Report of Duquesne
November 15, 1992 among DQU II Funding Corporation, Light Company for the year
Duquesne Light Company and The Bank of New York, as ended December 31, 1992.
Trustee.
x10.52 Refinancing Agreement dated as of November 15, 1992 Exhibit 10.60 to the Form 10-K
among the limited partnership Owner Participant Annual Report of Duquesne
named therein, as Owner Participant, DQU Funding Light Company for the year
Corporation, as Funding Corp, DQU II Funding ended December 31, 1992.
Corporation, as New Funding Corp, The First
National Bank of Boston, as Owner Trustee, The Bank
of New York, as Indenture Trustee, The Bank of New
York, as Collateral Trust Trustee, The Bank of New York,
as New Collateral Trust Trustee, and Duquesne Light
Company, as Lessee.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
-------- --------------------------------------------------------- -------------------------------
<S> <C> <C>
y10.53 Refinancing Agreement dated as of November 15, 1992 Exhibit 10.61 to the Form 10-K
among the corporate Owner Participant named therein, Annual Report of Duquesne
as Owner Participant, DQU Funding Corporation, Light Company for the year
as Funding Corp, DQU II Funding Corporation, ended December 31, 1992.
as New Funding Corp, The First National Bank of Boston,
as Owner Trustee, The Bank of New York, as Indenture
Trustee, The Bank of New York, as Collateral Trust Trustee,
The Bank of New York, as New Collateral Trust Trustee,
and Duquesne Light Company, as Lessee.
x10.54 Addendum dated December 8, 1992 to Refinancing Exhibit 10.62 to the Form 10-K
Agreement dated as of November 15, 1992 among the Annual Report of Duquesne
limited partnership Owner Participant named therein, Light Company for the year
as Owner Participant, DQU Funding Corporation, as ended December 31, 1992.
Funding Corp, DQU II Funding Corporation, as New
Funding Corp, The First National Bank of Boston, as
Owner Trustee, The Bank of New York, as Indenture
Trustee, The Bank of New York, as Collateral Trust Trustee,
The Bank of New York, as New Collateral Trust Trustee,
and Duquesne Light Company, as Lessee.
y10.55 Addendum dated December 8, 1992 to Refinancing Exhibit 10.63 to the Form 10-K
Agreement dated as of November 15, 1992 among the Annual Report of Duquesne
corporate Owner Participant named therein, as Light Company for the year
Owner Participant, DQU Funding Corporation, as ended December 31, 1992.
Funding Corp, DQU II Funding Corporation, as New
Funding Corp, The First National Bank of Boston, as
Owner Trustee, The Bank of New York, as Indenture
Trustee, The Bank of New York, as Collateral Trust Trustee,
The Bank of New York, as New Collateral Trust Trustee,
and Duquesne Light Company, as Lessee.
Other Agreements:
10.56 Deferred Compensation Plan for the Directors of Exhibit 10.1 to the Form 10-K
Duquesne Light Company, as amended to date. Annual Report of DQE for the
year ended December 31, 1992.
10.57 Incentive Compensation Program for Certain Executive Exhibit 10.2 to the Form 10-K
Officers of Duquesne Light Company, as amended to Annual Report of DQE for the
date. year ended December 31, 1992.
10.58 Description of Duquesne Light Company Pension Exhibit 10.3 to the Form 10-K
Service Supplement Program. Annual Report of DQE for the
year ended December 31, 1992.
10.59 Duquesne Light Company Outside Directors' Filed here.
Retirement Plan, as amended to date.
10.60 Duquesne Light/DQE Charitable Giving Program. Exhibit 10.6 to the Form 10-K
Annual Report of DQE for the
year ended December 31, 1992.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
-------- ------------------------------------------------- -----------------------------------
<S> <C> <C>
10.61 Performance Incentive Program for DQE, Inc. and Exhibit 10.7 to the Form 10-K
Subsidiaries formerly known as the Duquesne Light Annual Report of DQE for the
Company Performance Incentive Program. year ended December 31, 1996.
10.62 Employment Agreement dated as of December 15, Exhibit 10.5 to the Form 10-K
1992 between DQE, Duquesne Light Company and Annual Report of DQE for the
Wesley W. von Schack. year ended December 31, 1992.
10.63 First Amendment dated as of October 25, 1994 to Exhibit 10.8 to the Form 10-K
Employment Agreement dated as of December 15, Annual Report of DQE for the
1992 between DQE, Duquesne Light Company and year ended December 31, 1994.
Wesley W. von Schack.
10.64 Resignation Agreement between DQE and Duquesne Exhibit 10.1 to the Form 10-Q
Light Company and Wesley W. von Schack. Quarterly Report of DQE for
the quarter ended
September 30, 1996.
10.65 Employment Agreement dated as of August 30, 1994 Exhibit 10.9 to the Form 10-K
between DQE, Duquesne Light Company and Annual Report of DQE for the
David D. Marshall. year ended December 31, 1994.
10.66 First Amendment dated as of June 27, 1995 to Exhibit 10.68 to the Form 10-K
Employment Agreement dated as of August 30, 1994 Annual Report of Duquesne
between DQE, Duquesne Light Company and Light Company for the year
David D. Marshall. ended December 31, 1995.
10.67 Employment Agreement dated as of August 30, 1994 Duquesne Light Company
between DQE, Duquesne Light Company and Exhibit 10.10 to the Form 10-K
Gary L. Schwass. Annual Report of DQE for the
year ended December 31, 1994.
10.68 Employment Agreement dated as of August 30, 1994 Exhibit 10.68 to the Form 10-K
between Duquesne Light Company and Dianna L. Annual Report of DQE for the
Green. year ended December 31, 1994.
10.69 First Amendment dated as of June 27, 1995 to Exhibit 10.71 to the Form 10-K
Employment Agreement dated as of August 30, 1994 Annual Report of Duquesne
between Duquesne Light Company and Dianna L. Light Company for the year
Green. ended December 31, 1995.
10.70 Employment Agreement dated as of October 14, 1996 Filed here.
between Duquesne Light Company and James E. Cross.
10.71 Non-Competition and Confidentiality Agreement dated Exhibit 10.14 to the Form 10-K
as of October 3, 1996 by and among DQE, Inc., Duquesne Annual Report of DQE for the
Light Company and David D. Marshall, together with a year ended December 31, 1996.
schedule listing substantially identical agreements with
Dianna L. Green, Victor A. Roque, James D. Mitchell
and James E. Cross.
12.1 Calculation of Ratio of Earnings to Fixed Charges. Filed here.
21.1 Subsidiaries of registrant:
Duquesne has no significant subsidiaries.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
-------- ------------------------------------------------- ----------------------------------
<S> <C> <C>
23.1 Independent Auditors' Consent. Filed here.
27.1 Financial Data Schedule. Filed here.
99.1 Executive Compensation of Duquesne Light Company Filed here.
Executive Officers for 1996 and Security Ownership
of Duquesne Light Company Directors and
Executive Officers as of February 21, 1997.
99.2 Directors of DQE and Duquesne Light Company. Filed here.
</TABLE>
x An additional document, substantially identical in all material respects to
this Exhibit, has been entered into relating to one additional limited
partnership Owner Participant. Although the additional document may differ in
some respects (such as name of the Owner Participant, dollar amounts and
percentages), there are no material details in which the document differs from
this Exhibit.
y Additional documents, substantially identical in all material respects to
this Exhibit, have been entered into relating to four additional corporate Owner
Participants. Although the additional documents may differ in some respects
(such as names of the Owner Participants, dollar amounts and percentages), there
are no material details in which the documents differ from this Exhibit.
z Additional documents, substantially identical in all material respects to
this Exhibit, have been entered into relating to six additional Owner
Participants. Although the additional documents may differ in some respects
(such as names of the Owner Participants, dollar amounts and percentages), there
are no material details in which the documents differ from this Exhibit.
Copies of the exhibits listed above will be furnished, upon request, to
holders or beneficial owners of any class of Duquesne's stock as of February 21,
1997, subject to payment in advance of the cost of reproducing the exhibits
requested.
------------------------------
31
<PAGE>
SCHEDULE II
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1996, 1995 and 1994
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
-------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Accounts Deductions of Year
------------ ---------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Reserve Deducted from the Asset
to which it applies:
Allowance for uncollectible accounts $17,920 $10,582 $4,080 (A) $14,288 (B) $18,294
------- ------- ------ ------- -------
Year Ended December 31, 1995
Reserve Deducted from the Asset
to which it applies:
Allowance for uncollectible accounts $15,021 $13,430 $3,567 (A) $14,098 (B) $17,920
------- ------- ------ ------- -------
Year Ended December 31, 1994
Reserve Deducted from the Asset
to which it applies:
Allowance for uncollectible accounts $13,282 $11,890 $3,837 (A) $13,988 (B) $15,021
------- ------- ------ ------- -------
</TABLE>
Notes: (A) Recovery of accounts previously written off.
(B) Accounts receivable written off.
32
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DUQUESNE LIGHT COMPANY
(Registrant)
Date: March 25, 1997 By: /s/ David D. Marshall
-----------------------------
(Signature)
David D. Marshall
President, Chief
Executive Officer and Director
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
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David D. Marshall President, Chief Executive Officer and March 25, 1997
- --------------------------- Director
David D. Marshall
/s/ Gary L. Schwass Senior Vice President and Chief Financial March 25, 1997
- --------------------------- Officer
Gary L. Schwass
/s/ Morgan K. O'Brien Controller and Principal Accounting Officer March 25, 1997
- ---------------------------
Morgan K. O'Brien
/s/ Daniel Berg Director March 25, 1997
- ---------------------------
Daniel Berg
/s/ Doreen E. Boyce Director March 25, 1997
- ---------------------------
Doreen E. Boyce
/s/ Robert P. Bozzone Director March 25, 1997
- ---------------------------
Robert P. Bozzone
/s/ Sigo Falk Director March 25, 1997
- ---------------------------
Sigo Falk
/s/ William H. Knoell Director March 25, 1997
- ---------------------------
William H. Knoell
/s/ Robert Mehrabian Director March 25, 1997
- ---------------------------
Robert Mehrabian
/s/ Thomas J. Murrin Director March 25, 1997
- ---------------------------
Thomas J. Murrin
/s/ Eric W. Springer Director March 25, 1997
- ---------------------------
Eric W. Springer
</TABLE>
33
<PAGE>
Report of Independent Certified Public Accountants
To the Directors and Stockholder of Duquesne Light Company:
We have audited the accompanying consolidated balance sheet of
Duquesne Light Company (a wholly owned subsidiary of DQE) and its subsidiaries
as of December 31, 1996 and 1995, and the related consolidated statements of
income, retained earnings, and cash flows for each of the three years in the
period ended December 31, 1996. Our audits also included the financial statement
schedule listed in the Index at Item 14. These financial statements and
financial statement schedule are the responsibility of Duquesne's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule 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, such consolidated financial statements present fairly,
in all material respects, the financial position of Duquesne Light Company and
its subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 28, 1997
34
<PAGE>
<TABLE>
<CAPTION>
Statement of Consolidated Income
- -------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
------------------------------------------------------
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues:
Sales of Electricity:
Residential $ 405,392 $ 414,291 $ 401,246
Commercial 494,919 497,187 495,734
Industrial 190,723 190,689 195,852
Provision for doubtful accounts (10,582) (13,430) (11,890)
- -------------------------------------------------------------------------------------------------------------------
Net customer revenues 1,080,452 1,088,737 1,080,942
Utilities 58,292 55,963 58,295
- -------------------------------------------------------------------------------------------------------------------
Total Sales of Electricity 1,138,744 1,144,700 1,139,237
Other 38,081 35,084 29,387
- -------------------------------------------------------------------------------------------------------------------
Total Operating Revenues 1,176,825 1,179,784 1,168,624
- -------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Fuel 204,655 208,546 222,420
Purchased power 32,269 23,422 21,715
Other operating 253,109 250,322 269,001
Maintenance 78,386 81,516 79,488
Depreciation and amortization 216,338 190,679 163,114
Taxes other than income taxes 84,625 86,349 85,839
Income taxes 85,364 92,313 90,491
- -------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 954,746 933,147 932,068
- -------------------------------------------------------------------------------------------------------------------
Operating Income 222,079 246,637 236,556
- -------------------------------------------------------------------------------------------------------------------
Other Income and (Deductions):
Interest and dividend income 12,216 7,923 6,503
Income taxes 2,356 (581) 6,300
Allowance for equity funds used during construction -- 721 1,295
Other 9,991 (6,404) (2,151)
- -------------------------------------------------------------------------------------------------------------------
Total Other Income 24,563 1,659 11,947
- -------------------------------------------------------------------------------------------------------------------
Income Before Interest and Other Charges 246,642 248,296 248,503
- -------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 88,478 95,391 101,027
Other interest 1,632 2,599 1,095
Allowance for borrowed funds used during construction (1,249) (764) (1,068)
- -------------------------------------------------------------------------------------------------------------------
Total Interest Charges 88,861 97,226 101,054
- -------------------------------------------------------------------------------------------------------------------
Monthly Income Preferred Securities Dividend Requirements 7,921 -- --
- -------------------------------------------------------------------------------------------------------------------
Net Income 149,860 151,070 147,449
Dividends on Preferred and Preference Stock 4,045 5,320 6,046
- -------------------------------------------------------------------------------------------------------------------
Earnings for Common Stock $ 145,815 $ 145,750 $ 141,403
===================================================================================================================
</TABLE>
See notes to consolidated financial statements.
35
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
- -------------------------------------------------------------------------------------
(Thousands of Dollars)
--------------------------
As of December 31,
--------------------------
Assets 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Property, Plant and Equipment:
Electric plant in service $ 4,272,623 $ 4,262,670
Construction work in progress 45,059 38,134
Property held under capital leases 99,608 133,381
Property held for future use 190,821 216,633
Other 662 1,192
- -------------------------------------------------------------------------------------
Gross property, plant and equipment 4,608,773 4,652,010
Less: Accumulated depreciation and amortization (1,891,300) (1,673,107)
- -------------------------------------------------------------------------------------
Total Property, Plant and Equipment -- Net 2,717,473 2,978,903
- -------------------------------------------------------------------------------------
Long-Term Investments:
Investment in DQE Common Stock 59,319 66,757
Other investments 102,948 102,648
- -------------------------------------------------------------------------------------
Total Long-Term Investments 162,267 169,405
- -------------------------------------------------------------------------------------
Current Assets:
Cash and temporary cash investments 154,414 2,490
- -------------------------------------------------------------------------------------
Receivables:
Electric customer accounts receivable 92,475 103,821
Other utility receivables 18,635 22,441
Other receivables 12,829 11,842
Less: Allowance for uncollectible accounts (18,294) (17,920)
- -------------------------------------------------------------------------------------
Receivables less allowance for uncollectible accounts 105,645 120,184
Less: Receivables sold -- (7,000)
- -------------------------------------------------------------------------------------
Total Receivables -- Net 105,645 113,184
- -------------------------------------------------------------------------------------
Materials and supplies (at average cost):
Coal 19,097 25,454
Operating and construction 52,669 53,298
- -------------------------------------------------------------------------------------
Total Materials and Supplies 71,766 78,752
- -------------------------------------------------------------------------------------
Other current assets 8,828 7,955
- -------------------------------------------------------------------------------------
Total Current Assets 340,653 202,381
- -------------------------------------------------------------------------------------
Other Non-Current Assets:
Regulatory assets 636,816 678,700
Other 39,877 38,276
- -------------------------------------------------------------------------------------
Total Other Non-Current Assets 676,693 716,976
- -------------------------------------------------------------------------------------
Total Assets $ 3,897,086 $ 4,067,665
=====================================================================================
</TABLE>
See notes to consolidated financial statements.
36
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
- --------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
-----------------------
As of December 31,
- --------------------------------------------------------------------------------------------------------------
Capitalization and Liabilities 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capitalization:
Common stock (authorized -- 90,000,000 shares, issued and outstanding -- 10 shares) $ -- $ --
Capital surplus 825,540 837,265
Retained earnings 163,884 294,069
- --------------------------------------------------------------------------------------------------------------
Total Common Stockholder's Equity 989,424 1,131,334
- --------------------------------------------------------------------------------------------------------------
Non-redeemable preferred stock 63,608 63,608
Non-redeemable Monthly Income Preferred Securities 150,000 --
Non-redeemable preference stock 28,997 29,615
- --------------------------------------------------------------------------------------------------------------
Total preferred and preference stock before deferred ESOP benefit 242,605 93,223
Deferred employee stock ownership plan (ESOP) benefit (19,533) (22,257)
- --------------------------------------------------------------------------------------------------------------
Total Preferred and Preference Stock 223,072 70,966
- --------------------------------------------------------------------------------------------------------------
Long-term debt 1,271,961 1,322,531
- --------------------------------------------------------------------------------------------------------------
Total Capitalization 2,484,457 2,524,831
- --------------------------------------------------------------------------------------------------------------
Obligations Under Capital Leases 28,407 34,546
- --------------------------------------------------------------------------------------------------------------
Current Liabilities:
Current maturities and sinking fund requirements 70,912 71,051
Accounts payable 84,272 76,435
Accrued liabilities 59,020 53,930
Dividends declared 2,371 37,015
Other 4,613 9,191
- --------------------------------------------------------------------------------------------------------------
Total Current Liabilities 221,188 247,622
- --------------------------------------------------------------------------------------------------------------
Non-Current Liabilities:
Deferred income taxes-net 726,517 805,996
Deferred investment tax credits 106,201 115,760
Deferred income 139,075 162,916
Other 191,241 175,994
- --------------------------------------------------------------------------------------------------------------
Total Non-Current Liabilities 1,163,034 1,260,666
- --------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note B through N)
- --------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $3,897,086 $4,067,665
==============================================================================================================
</TABLE>
See notes to consolidated financial statements.
37
<PAGE>
<TABLE>
<CAPTION>
Statement of Consolidated Cash Flows
- --------------------------------------------------------------------------------------------------------
(Thousands of Dollars)
--------------------------------------
Year Ended December 31,
--------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 149,860 $ 151,070 $ 147,449
Principal non-cash charges (credits) to net income:
Depreciation and amortization 216,338 190,679 163,114
Capital lease, nuclear fuel and other amortization 24,006 32,670 36,940
Deferred income taxes and investment tax credits -- net (98,874) (41,410) (33,411)
Phase-in plan revenues and related carrying charges -- -- 28,621
Changes in working capital other than cash (20,872) 30,656) (36,884)
Other 11,182 33,749 45,315
- --------------------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities 281,640 397,414 351,144
- --------------------------------------------------------------------------------------------------------
Cash Flows Provided By (Used In) Investing Activities:
Sale of generating station 169,100 -- --
Construction expenditures (88,546) (78,656) (94,315)
Long-term investments (4,225) (62,854) (5,317)
Proceeds from disposition of investments 4,203 -- --
Other (700) (4,534) 2,077
- --------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Investing Activities 79,832 (146,044) (97,555)
- --------------------------------------------------------------------------------------------------------
Cash Flows Used In Financing Activities:
Sale of bonds -- -- 114,110
Issuance of preferred stock 150,000 -- --
Decrease in notes payable -- -- (10,990)
Dividends on capital stock (281,015) (150,059) (151,059)
Reductions of long-term obligations:
Preferred and preference stock -- (29,732) (39,958)
Long-term debt (50,812) (56,114) (114,835)
Capital leases (19,326) (26,373) (33,522)
Other (8,395) (2,506) (1,431)
- --------------------------------------------------------------------------------------------------------
Net Cash Used In Financing Activities (209,548) (264,784) (237,685)
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 151,924 (13,414) 15,904
Cash and temporary cash investments at beginning of year 2,490 15,904 --
- --------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of year $ 154,414 $ 2,490 $ 15,904
========================================================================================================
</TABLE>
Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Cash paid during the year for:
<S> <C> <C> <C>
Interest (net of amount capitalized) $ 86,409 $ 95,521 $ 102,944
- --------------------------------------------------------------------------------------------------------
Income taxes $ 165,948 $ 115,504 $ 111,614
- --------------------------------------------------------------------------------------------------------
Non-cash investing and financing activities:
Capital lease obligations recorded $ 13,050 $ 14,961 $ 16,909
Contribution of DQE Common Stock from parent company $ -- $ -- $ 19,531
Preferred stock issued in conjunction with long-term investments $ -- $ 3,000 $ --
=========================================================================================================
</TABLE>
See notes to consolidated financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
Statement of Consolidated Retained Earnings
- ------------------------------------------------------------------------------------------
(Thousands of Dollars)
------------------------------
Year Ended December 31,
------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $294,069 $292,319 $294,916
Net Income for the Year 149,860 151,070 147,449
- ------------------------------------------------------------------------------------------
Total 443,929 443,389 442,365
Cash dividends declared:
Preferred stock 2,712 3,870 4,592
Preference stock (net of tax benefit of ESOP dividend) 1,333 1,450 1,454
Common stock 276,000 144,000 144,000
- ------------------------------------------------------------------------------------------
Total Cash Dividends Declared 280,045 149,320 150,046
- ------------------------------------------------------------------------------------------
Balance at end of year $163,884 $294,069 $292,319
==========================================================================================
</TABLE>
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
A. Summary of
Significant
Accounting
Policies
Consolidation
- --------------------------------------------------------------------------------
Duquesne Light Company (Duquesne) is a wholly owned subsidiary of DQE,
an energy services holding company. Duquesne is engaged in the production,
transmission, distribution and sale of electric energy. Duquesne has one wholly
owned subsidiary, Monongahela Light and Power which makes long-term investments.
All material intercompany balances and transactions have been
eliminated in the preparation of the consolidated financial statements of
Duquesne.
Basis of Accounting
- --------------------------------------------------------------------------------
Duquesne is subject to the accounting and reporting requirements of
the United States Securities and Exchange Commission (SEC). In addition,
Duquesne's operations are subject to regulation by the Pennsylvania Public
Utility Commission (PUC) and the Federal Energy Regulatory Commission (FERC)
under the Federal Power Act with respect to rates for interstate sales,
transmission of electric power, accounting and other matters.
Duquesne's consolidated financial statements report regulatory assets
and liabilities in accordance with Statement of Financial Accounting Standards
No. 71, Accounting for the Effects of Certain Types of Regulation (SFAS No. 71),
and reflect the effects of the current ratemaking process. In accordance with
SFAS No. 71, Duquesne's consolidated financial statements reflect regulatory
assets and liabilities consistent with cost-based, pre-competition ratemaking
regulations. (See "Rate Matters," Note F, on page 44.)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. The reported amounts of revenues and expenses during the reporting
period may also be affected by the estimates and assumptions management is
required to make. Actual results could differ from those estimates.
Revenues from Sales of Electricity
- --------------------------------------------------------------------------------
Meters are read monthly and electric utility customers are billed on
the same basis. Revenues are recorded in the accounting periods for which they
are billed, with the exception of energy cost recovery revenues. (See "Energy
Cost Rate Adjustment Clause (ECR)" discussion on page 40.)
39
<PAGE>
Duquesne's Electric Service Territory
- --------------------------------------------------------------------------------
Duquesne provides electric service to customers in Allegheny County,
including the City of Pittsburgh, Beaver County and Westmoreland County. This
represents approximately 800 square miles in southwestern Pennsylvania, located
within a 500-mile radius of one-half of the population of the United States and
Canada. The population of the area served by Duquesne's operations, based on
1990 census data, is approximately 1,510,000, of whom 370,000 reside in the City
of Pittsburgh. In addition to serving approximately 580,000 direct customers,
Duquesne also sells electricity to other utilities.
Energy Cost Rate Adjustment Clause (ECR)
- --------------------------------------------------------------------------------
Through the ECR, Duquesne recovers (to the extent that such amounts
are not included in base rates) nuclear fuel, fossil fuel and purchased power
expenses and, also through the ECR, passes to its customers the profits from
short-term power sales to other utilities (collectively, ECR energy costs).
Nuclear fuel expense is recorded on the basis of the quantity of electric energy
generated and includes such costs as the fee imposed by the United States
Department of Energy (DOE) for future disposal and ultimate storage and
disposition of spent nuclear fuel. Fossil fuel expense includes the costs of
coal, natural gas and fuel oil used in the generation of electricity.
On Duquesne's statement of consolidated income, these ECR revenues are
included as a component of operating revenues. For ECR purposes, Duquesne
defers fuel and other energy expenses for recovery, or refunding, in subsequent
years. The deferrals reflect the difference between the amount that Duquesne is
currently collecting from customers and its actual ECR energy costs. The PUC
annually reviews Duquesne's ECR energy costs for the fiscal year April through
March, compares them to previously projected ECR energy costs, and adjusts the
ECR for over- or under-recoveries and for two PUC-established coal cost
standards. (See "Deferred Coal Costs" and "Warwick Mine Costs" discussions, Note
F, on pages 45 and 46.)
Over- or under-recoveries from customers are recorded in the
consolidated balance sheet as payable to, or receivable from, customers. At
December 31, 1996 and 1995, $1.8 million and $5.8 million were payable to
customers and shown as other current liabilities.
Under the Electricity Generation Customer Choice and Competition Act
(Customer Choice Act), Duquesne may replace the ECR effective April 1, 1997 by
rolling its ECR energy costs into its base rates. The effect of this change
would be to provide to Duquesne an opportunity to further mitigate its deferred
energy costs based upon its ability to manage its energy costs. Under Duquesne's
PUC-approved Mitigation Plan, the level of energy cost recovery is capped at
1.47 cents per kilowatt-hour (KWH) through May 2001. To the extent that
projections do not support recovery of previously deferred costs through this
pricing mechanism, these costs would become transition costs subject to recovery
through a competitive transition charge (CTC). (See "Customer Choice Act" and
"Mitigation Plan" discussions, Note F, on page 44.)
Maintenance
- --------------------------------------------------------------------------------
Incremental maintenance expense incurred for refueling outages at
Duquesne's nuclear units is deferred for amortization over the period between
refueling outages (generally 18 months). Duquesne accrues, over the periods
between outages, anticipated expenses for scheduled major fossil generating
station outages. Maintenance costs incurred for non-major scheduled outages and
for forced outages are charged to expense as such costs are incurred.
Depreciation and Amortization
- --------------------------------------------------------------------------------
Depreciation of property, plant and equipment, including plant-related
intangibles, is recorded on a straight-line basis over the estimated remaining
useful lives of properties. Amortization of other intangibles is recorded on a
straight-line basis over a five-year period. Depreciation and amortization of
other properties are calculated on various bases.
40
<PAGE>
Duquesne records decommissioning costs under the category of
depreciation and amortization expense and accrues a liability, equal to that
amount, for nuclear decommissioning expense. On Duquesne's consolidated balance
sheet, the decommissioning trusts have been reflected in other long-term
investments, and the related liability has been recorded as other non-current
liabilities. (See "Nuclear Decommissioning" discussion, Note J, on page 49.)
Duquesne's composite depreciation rate increased from 3.5 percent to
4.25 percent effective May 1, 1996 and 3.0 percent to 3.5 percent effective
January 1, 1995. Also in 1996, Duquesne expensed $9 million related to the
depreciation portion of deferred rate synchronization costs in conjunction with
Duquesne's Mitigation Plan.
Income Taxes
- --------------------------------------------------------------------------------
Duquesne uses the liability method in computing deferred taxes on all
differences between book and tax bases of assets. These book/tax differences
occur when events and transactions recognized for financial reporting purposes
are not recognized in the same period for tax purposes. The deferred tax
liability or asset is also adjusted in the period of enactment for the effect of
changes in tax laws or rates.
Duquesne recognizes a regulatory asset for the deferred tax liabilities
that are expected to be recovered from customers through rates. (See "Rate
Matters," Note F, and "Income Taxes," Note H, on pages 44 and 46.)
Duquesne reflects the amortization of the regulatory tax receivable
resulting from reversals of deferred taxes as depreciation and amortization
expense. Reversals of accumulated deferred income taxes are included in income
tax expense.
When applied to reduce Duquesne's income tax liability, investment tax
credits related to electric utility property generally are deferred. Such
credits are subsequently reflected, over the lives of the related assets, as
reductions to income tax expense.
Property, Plant and Equipment
- --------------------------------------------------------------------------------
The asset values of Duquesne's properties are stated at original
construction cost, which includes related payroll taxes, pensions and other
fringe benefits, as well as administrative and general costs. Also included in
original construction cost is an allowance for funds used during construction
(AFC), which represents the estimated cost of debt and equity funds used to
finance construction.
Additions to, and replacements of, property units are charged to plant
accounts. Maintenance, repairs and replacement of minor items of property are
recorded as expenses when they are incurred. The costs of properties that are
retired (plus removal costs and less any salvage value) are charged to
accumulated depreciation and amortization.
Substantially all of Duquesne's properties are subject to a first
mortgage lien.
Asset Impairment
- --------------------------------------------------------------------------------
The effects of adopting Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of (SFAS No. 121), on January 1, 1996 did not have a
material impact on Duquesne's financial position, results of operations or cash
flows, based on the current regulatory structure in which it operates. As
competitive factors influence pricing in the utility industry, this assessment
may change in the future. The general requirements of SFAS No. 121 apply to non-
current assets and require impairment to be considered whenever evidence
suggests that it is no longer probable that future cash flows in an amount at
least equal to the asset book value will result.
41
<PAGE>
Stock-Based Compensation
- --------------------------------------------------------------------------------
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123) encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. Duquesne has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of DQE's stock at the
date of the grant over the amount an employee must pay to acquire the stock.
Compensation cost for stock appreciation rights is recorded annually based on
the quoted market price of DQE's stock at the end of the period.
Temporary Cash Investments
- --------------------------------------------------------------------------------
Temporary cash investments are short-term, highly liquid investments
with original maturities of three or fewer months. They are stated at market,
which approximates cost. Duquesne considers temporary cash investments to be
cash equivalents.
Reclassifications
- -------------------------------------------------------------------------------
The 1995 and 1994 consolidated financial statements have been
reclassified to conform with accounting presentations adopted during 1996.
B. Receivables
Duquesne and an unaffiliated corporation have an agreement that
entitles Duquesne to sell, and the corporation to purchase, on an ongoing basis,
up to $50 million of accounts receivable. Duquesne had no receivables sold at
December 31, 1996. At December 31, 1995, Duquesne had sold $7 million of
receivables to the unaffiliated corporation. The accounts receivable sales
agreement, which expires in June 1997, is one of many sources of funds available
to Duquesne. Duquesne has not determined, but may attempt to extend the
agreement or to replace the facility with a similar arrangement or to eliminate
it upon expiration.
C. Changes
in Working
Capital Other
Than Cash
<TABLE>
<CAPTION>
Changes in Working Capital Other than Cash
- --------------------------------------------------------------------
1996 1995 1994
(Amounts in Thousands of Dollars)
- --------------------------------------------------------------------
<S> <C> <C> <C>
Receivables $ 7,539 $ 19,131 $ 6,708
Materials and supplies 1,286 9,994 2,932
Other current assets (873) 7,840 (6,929)
Accounts payable 9,437 15,781 (23,816)
Other current liabilities (38,261) (22,090) (15,779)
- --------------------------------------------------------------------
Total $(20,872) $ 30,656 $(36,884)
====================================================================
</TABLE>
D. Property,
Plant and
Equipment
In addition to its wholly owned generating units, Duquesne, together
with other electric utilities, has an ownership or leasehold interest in certain
jointly owned units. Duquesne is required to pay its share of the construction
and operating costs of the units. Duquesne's share of the operating expenses of
the units is included in the statement of consolidated income.
42
<PAGE>
<TABLE>
<CAPTION>
Generating Units at December 31, 1996
- --------------------------------------------------------------------------------------------
Generating Net Utility Fuel
Unit Capability Plant Source
(Megawatts) (Millions of Dollars)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cheswick 570 $ 120.2 Coal
Elrama (a) 487 98.0 Coal
Eastlake Unit 5 186 39.4 Coal
Sammis Unit 7 187 49.5 Coal
Bruce Mansfield Unit 1 (a) 228 65.5 Coal
Bruce Mansfield Unit 2 (a) 62 18.9 Coal
Bruce Mansfield Unit 3 (a) 110 49.8 Coal
Beaver Valley Unit 1 (b) 385 215.9 Nuclear
Beaver Valley Unit 2 (c)(d) 113 14.3 Nuclear
Beaver Valley Common Facilities 153.2
Perry Unit 1 (e) 164 398.5 Nuclear
Brunot Island (f) 178 23.1 Fuel Oil
- --------------------------------------------------------------------------------------------
Total 2,670 1,246.3
Property held for future use:
Brunot Island (f) 128 28.5 Fuel Oil
Phillips (a) 300 78.3 Coal
- --------------------------------------------------------------------------------------------
Total Generating Units 3,098 $1,353.1
============================================================================================
</TABLE>
(a) The unit is equipped with flue gas desulfurization equipment.
(b) The Nuclear Regulatory Commission (NRC) has granted a license to operate
through January 2016.
(c) On October 2, 1987, Duquesne sold its 13.74 percent interest in Beaver
Valley Unit 2 and leased it back; the sale was exclusive of transmission
and common facilities. Amounts shown represent facilities not sold and
subsequent leasehold improvements.
(d) The NRC has granted a license to operate through May 2027.
(e) The NRC has granted a license to operate through March 2026.
(f) A portion of the proceeds of the sale of the Ft. Martin Power Station is
expected to be used to fund reliability enhancements to the Brunot Island
(BI) Unit 3 combustion turbine. The reliability enhancements are
contingent upon the projects meeting a least-cost test versus other
potential sources of peaking capacity. BI Units 2a and 2b were moved from
property held for future use to electric plant in service in 1996, in
accordance with Duquesne's Mitigation Plan. (See "Mitigation Plan"
discussion, Note F, on page 44.)
E. Long-Term
Investments
At December 31, 1996 and 1995, the fair market value of Duquesne's
investment in DQE common stock was $59.3 million and $66.8 million. At December
31, 1996 and 1995, the cost of Duquesne's investment in DQE common stock was
$40.3 million and $43.9 million.
Duquesne makes equity investments in affordable housing. At
December 31, 1996, Duquesne had investments in eight affordable housing
developments.
Deferred income primarily relates to Duquesne's lease investments.
Deferred amounts will be recognized as income over the lives of the underlying
lease investments over periods generally not exceeding five years.
Duquesne's other investments are primarily in assets of nuclear
decommissioning trusts and marketable securities. In accordance with SFAS No.
115, these investments are classified as available-for-sale and are stated at
market value. The amount of unrealized holding gains related to marketable
securities at both December 31, 1996 and 1995 are $19.0 million and $22.9
million ($11.1 million and $13.4 million net of tax).
43
<PAGE>
F. Rate Matters
Customer Choice Act
- -------------------------------------------------------------------------------
Under the Customer Choice Act, which went into effect on January 1,
1997, Pennsylvania has become a leader in customer choice. The Customer Choice
Act will enable Pennsylvania's electric utility customers to purchase
electricity at market prices from a variety of electric generation suppliers
(customer choice). Electric utility restructuring will be accomplished through a
two-stage process consisting of a pilot period (running through 1998) and a
phase-in period (1999 through 2001). Before the phase-in to customer choice
begins in 1999, the PUC expects utilities to take vigorous steps to mitigate
transition costs as much as possible without increasing the price they currently
charge customers. The PUC will determine what portion of a utility's remaining
transition costs will be recoverable from customers through a CTC. This charge
will be paid by consumers who choose alternative generation suppliers as well as
customers who choose their franchised utility. The CTC could last as long as
2005, providing a utility a total of up to nine years to recover transition
costs. An overall four-and-one-half year price cap will be imposed on the
transmission and distribution charges of electric utility companies.
Additionally, electric utility companies may not increase the generation price
component of prices as long as transition costs are being recovered, with
certain exceptions. If a utility ultimately is unable to recover its transition
costs within this pricing structure and timeframe, the costs will be written
off.
Mitigation Plan
- -------------------------------------------------------------------------------
Duquesne has taken a number of steps to mitigate its potential
transition costs. In addition to the steps taken during the last 10 years to
prepare for competition, effective January 1, 1995, Duquesne accelerated its
rate of depreciation on its fixed nuclear assets without seeking a rate increase
to recover the additional costs. On October 31, 1996, the sale of Duquesne's
ownership interest in the Ft. Martin Power Station (Ft. Martin) was completed.
Ft. Martin Unit 1 was owned 50 percent by Duquesne and 50 percent by its
operator, Allegheny Power System. The sale and a plan, to be funded in part by
the proceeds of the Ft. Martin transaction, were approved by the PUC on May 23,
1996. Under the approved plan, Duquesne will not increase its base rates for a
period of five years through May 2001. In addition, Duquesne recorded in October
1996 a one-time reduction of approximately $130 million in the book value of
Duquesne's nuclear plant investment. The proceeds from the sale are expected to
be used to fund reliability enhancements to the BI Unit 3 combustion turbine and
to reduce Duquesne's capitalization. The approved plan also provides for
incremental increases of $25 million in depreciation and amortization expense in
1996, 1997 and 1998 related to Duquesne's nuclear investment, as well as
additional annual contributions to its nuclear plant decommissioning funds of $5
million, without any increase in existing electric rates. Also, Duquesne will
record an annual $5 million credit to the ECR during the plan period to
compensate Duquesne's customers for lost profits from any short-term power sales
foregone by the sale of its ownership interest in Ft. Martin. In addition,
Duquesne will cap energy costs, beginning April 1, 1997 through the remainder of
the plan period, at a historical five-year average of 1.47 cents per KWH. In
accordance with the approved plan, Duquesne has expensed $9 million related to
the depreciation portion of the deferred rate synchronization costs associated
with Beaver Valley Unit 2 (BV Unit 2) and Perry Unit 1. Duquesne's approved plan
provides for the amortization of the remaining deferred rate synchronization
costs over a 10-year period. At December 31, 1996, the unamortized portion of
these costs totaled $41.4 million, net of deferred fuel savings related to the
two units. (See "Deferred Rate Synchronization Costs" discussion on page 45.)
Finally, Duquesne's approved plan also provides for annual assistance of $0.5
million to low-income customers.
Regulatory Assets
- -------------------------------------------------------------------------------
As a result of the application of SFAS No. 71, Duquesne records
regulatory assets on its consolidated balance sheet. The regulatory assets
represent probable future revenue to Duquesne because provisions for these costs
are currently included, or are expected to be included, in charges to electric
utility customers through the ratemaking process.
A company's electric utility operations or a portion of such operations
could cease to meet the SFAS No. 71 criteria for various reasons, including a
change in the FERC regulations or the competition-related changes in the PUC
regulations. (See "Customer Choice Act" discussion above.) Duquesne currently
believes its electricity generating assets and related regulatory assets
continue to satisfy these criteria in
44
<PAGE>
light of the transition to competitive generation under the Customer Choice Act.
Should any portion of Duquesne's electric utility operations be deemed to no
longer meet the SFAS No. 71 criteria, Duquesne may be required to write off any
above-market cost assets, the recovery of which is uncertain, and any regulatory
assets or liabilities for those operations that no longer meet these
requirements.
<TABLE>
<CAPTION>
Regulatory Assets at December 31
- ----------------------------------------------------------------------------------------------------
1996 1995
(Amounts in Thousands of Dollars)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Regulatory tax receivable (Note H) $394,131 $414,543
Unamortized debt costs (Note K)(a) 93,299 98,776
Deferred rate synchronization costs (see below) 41,446 51,149
Beaver Valley Unit 2 sale/leaseback premium (Note I)(b) 30,059 31,564
Deferred employee costs (c) 29,589 31,218
Deferred nuclear maintenance outage costs (Note A) 13,462 6,776
Deferred coal costs (see below) 12,191 12,753
DOE decontamination and decommissioning receivable (Note J) 9,779 10,687
Extraordinary property loss (d) - 8,300
Other 12,860 12,934
- ----------------------------------------------------------------------------------------------------
Total Regulatory Assets $636,816 $678,700
====================================================================================================
</TABLE>
(a) The premiums paid to reacquire debt prior to scheduled maturity dates are
deferred for amortization over the life of the debt issued to finance the
reacquisitions.
(b) The premium paid to refinance the BV Unit 2 lease was deferred for
amortization over the life of the lease.
(c) Includes amounts for recovery of accrued compensated absences and accrued
claims for workers' compensation.
(d) During the third quarter of 1996, Duquesne completed recovery of its
investment in Perry Unit 2.
Deferred Rate Synchronization Costs
- -------------------------------------------------------------------------------
In 1987, the PUC approved Duquesne's petition to defer initial
operating and other costs of BV Unit 2 and Perry Unit 1. Duquesne deferred the
costs incurred from November 1987, when the units went into commercial
operation, until March 1988, when a rate order was issued. In its rate order,
the PUC postponed ruling on whether these costs would be recoverable from
Duquesne's customers. Duquesne is not earning a return on the deferred costs.
(See "Mitigation Plan" discussion on page 44.)
Deferred Coal Costs
- -------------------------------------------------------------------------------
The PUC has established two market price coal cost standards for
Duquesne. One applies only to coal delivered at the Bruce Mansfield Power
Station (Bruce Mansfield). The other, the system-wide coal cost standard,
applies to coal delivered to the remainder of Duquesne's system. Both standards
are updated monthly to reflect prevailing market prices of similar coal. The PUC
has directed Duquesne to defer recovery of the delivered cost of coal to the
extent that such cost exceeds generally prevailing market prices for similar
coal, as determined by the PUC. The PUC allows deferred amounts to be recovered
from customers when the delivered costs of coal fall below such PUC-determined
prevailing market prices.
In 1990, the PUC approved a joint petition for settlement that
clarified certain aspects of the system-wide coal cost standard. Duquesne has
exercised options to extend the coal cost standard through March 2000. The
unrecovered cost of Bruce Mansfield coal was $9.6 million and $8.4 million, and
the unrecovered cost of the remainder of the system-wide coal was $2.6 million
and $4.4 million at December 31, 1996 and 1995. Duquesne believes that all
deferred coal costs will be recovered.
45
<PAGE>
Warwick Mine Costs
- -------------------------------------------------------------------------------
The 1990 joint petition for settlement also recognized costs at
Duquesne's Warwick Mine, which had been excluded from rate base since 1981, and
allowed for recovery of such costs, including the costs of ultimately closing
the mine. (See "Deferred Coal Costs" discussion on page 45.) In 1990, Duquesne
entered into an agreement under which an unaffiliated company will operate the
mine until March 2000 and sell the coal produced. Production began in late 1990.
The contract operator at Warwick Mine notified Duquesne that its financial
circumstances and geologic conditions caused it to cease operations late in
1996. Therefore, Duquesne is pursuing its remedies and is currently negotiating
to retain an operator for the mine as a smaller sized operation. Additionally,
Duquesne will continue to purchase coal on the open market. In the past year,
the Warwick Mine supplied slightly less than one-fifth of the coal used in the
production of electricity at Duquesne's wholly owned and jointly owned plants.
This change should not impact Duquesne's ability to recover all of its
investment in Warwick Mine, the $2.6 million of unrecovered system-wide cost of
coal which excludes Bruce Mansfield, or to accrue funds for future liabilities.
It is anticipated that this effort will be successfully completed by March 31,
2000 when the system-wide coal cost cap expires.
Costs at the Warwick Mine and Duquesne's investment in the mine are
expected to be recovered through the cost of coal in the ECR. Recovery is
subject to the system-wide coal cost standard and the cap agreed to as part of
Duquesne's Mitigation Plan. Duquesne also has an opportunity to earn a return on
its investment in the mine through the cost of coal during the period of the
system-wide coal cost standard, including extensions. At December 31, 1996,
Duquesne's net investment in the mine was $11.4 million. The current estimated
liability for mine closing, including final site reclamation, mine water
treatment and certain labor liabilities, is $47.6 million, and Duquesne has
recorded a liability on the consolidated balance sheet of approximately $20.2
million toward these costs.
Property Held for Future Use
- -------------------------------------------------------------------------------
In 1986, the PUC approved Duquesne's request to remove Phillips Power
Station (Phillips) and a portion of Brunot Island (BI) from service and from
rate base. In accordance with Duquesne's Mitigation Plan, 112 MWs related to BI
Units 2a and 2b were moved from property held for future use to electric plant
in service in 1996. Duquesne expects to recover its investment in BI Units 3 and
4, which remain in property held for future use through future electricity
sales. Duquesne believes its investment in BI will be necessary in order to meet
future business needs. A portion of the proceeds of the sale of Ft. Martin is
expected to be used to fund reliability enhancements to the BI Unit 3 combustion
turbine. The reliability enhancements are contingent upon the projects meeting a
least-cost test versus other potential sources of peaking capacity. (See
"Mitigation Plan" discussion on page 44.) Duquesne is analyzing the effects of
customer choice on its future generating requirements. Duquesne is planning to
seek recovery of its investment and associated costs of Phillips through a CTC.
In the event that market demand, transmission access or rate recovery do not
support the utilization of these plants, Duquesne may have to write off part or
all of these investments and associated costs. At December 31, 1996, Duquesne's
net of tax investment in Phillips and BI held for future use was $53.6 million
and $17.2 million.
G. Short-Term
Borrowing and
Revolving
Credit
Arrangements
At December 31, 1996, Duquesne had a $150 million extendible revolving
credit arrangement expiring in October 1997. Interest rates can, in accordance
with the option selected at the time of the borrowing, be based on prime,
Eurodollar or certificate of deposit rates. Commitment fees are based on the
unborrowed amount of the commitment. The credit facility contains a two-year
repayment period for any amount outstanding at the expiration of the revolving
credit period. At December 31, 1996 and 1995, there were no short-term
borrowings outstanding.
H. Income Taxes
Since DQE's formation in 1989, Duquesne has filed consolidated federal
income tax returns with its parent and other companies in the affiliated group.
The annual federal corporate income tax returns have been audited by the
Internal Revenue Service (IRS) for the tax years through 1992. The tax years
1993 through 1996 remain subject to IRS review. Duquesne does not believe that
final settlement of the federal income tax returns for the years 1991 through
1996 will have a materially adverse effect on its financial position, results of
operations or cash flows.
46
<PAGE>
<TABLE>
<CAPTION>
Deferred Tax Assets (Liabilities) at December 31
- -----------------------------------------------------------------------------------------------
1996 1995
(Amounts in Thousands of Dollars)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Investment tax credits unamortized $ 44,067 $ 48,033
Gain on sale/leaseback of BV Unit 2 61,131 64,124
Tax benefit -- long-term investments 139,075 164,582
Other 19,144 41,509
- -----------------------------------------------------------------------------------------------
Deferred tax assets 263,417 318,248
- -----------------------------------------------------------------------------------------------
Property depreciation (785,950) (871,539)
Regulatory assets (150,346) (172,008)
Loss on reacquired debt unamortized (33,331) (35,340)
Other (20,307) (45,357)
- -----------------------------------------------------------------------------------------------
Deferred tax liabilities (989,934) (1,124,244)
- -----------------------------------------------------------------------------------------------
Net Deferred Tax Liabilities $ (726,517) $ (805,996)
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Income Taxes
- -------------------------------------------------------------------------------------------------------
1996 1995 1994
(Amounts in Thousands of Dollars)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Currently payable: Federal $ 95,524 $ 103,271 $ 90,157
State 29,325 30,453 33,000
Deferred -- net: Federal (30,950) (28,381) (20,058)
State (697) (5,778) (7,232)
Investment tax credits deferred -- net (7,838) (7,252) (5,376)
- -------------------------------------------------------------------------------------------------------
Total Included in Operating Expenses 85,364 92,313 90,491
- -------------------------------------------------------------------------------------------------------
Included in other income and deductions:
Currently payable: Federal 42,323 2,199 (5,961)
State 14,710 (1,619) 406
Deferred -- net: Federal (43,493) 442 (99)
State (14,176) 137 (39)
Investment tax credits (1,720) (578) (607)
- -------------------------------------------------------------------------------------------------------
Total Included in Other Income and Deductions (2,356) 581 (6,300)
- -------------------------------------------------------------------------------------------------------
Total Income Tax Expense $ 83,008 $ 92,894 $ 84,191
- -------------------------------------------------------------------------------------------------------
</TABLE>
Total income taxes differ from the amount computed by applying the
statutory federal income tax rate to income before income taxes.
<TABLE>
<CAPTION>
Income Tax Expense Reconciliation
- ------------------------------------------------------------------------------------------------
1996 1995 1994
(Amounts in Thousands of Dollars)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed federal income tax at statutory rate $ 81,504 $ 85,387 $ 81,074
Increase (decrease) in taxes resulting from:
State income taxes, net of federal income tax benefits 18,955 15,076 16,988
Amortization of deferred investment tax credits (9,559) (7,831) (5,983)
Revenue requirement adjustment to regulatory taxes -- -- (12,178)
Other (7,892) 262 4,290
- ------------------------------------------------------------------------------------------------
Total Income Tax Expense $ 83,008 $ 92,894 $ 84,191
================================================================================================
</TABLE>
47
<PAGE>
Duquesne leases nuclear fuel, a portion of a nuclear generating plant,
certain office buildings, computer equipment, and other property and equipment.
<TABLE>
<CAPTION>
Capital Leases at December 31
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995
(Amounts in Thousands of Dollars)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nuclear fuel $ 79,103 $ 112,573
Electric plant 20,505 20,808
- -----------------------------------------------------------------------------------------------------------------------------------
Total 99,608 133,381
Less: Accumulated amortization (47,670) (74,874)
- -----------------------------------------------------------------------------------------------------------------------------------
Property Held Under Capital Leases -- Net (a) $ 51,938 $ 58,507
===================================================================================================================================
</TABLE>
(a) Includes $2,618 in 1996 and $2,910 in 1995 of capital leases with
associated obligations retired.
In 1987, Duquesne sold and leased back its 13.74 percent interest in BV
Unit 2; the sale was exclusive of transmission and common facilities. The total
sales price of $537.9 million was the appraised value of Duquesne's interest in
the property. Duquesne subsequently leased back its interest in the unit for a
term of 29.5 years. The lease provides for semi-annual payments and is accounted
for as an operating lease. Duquesne is responsible under the terms of the lease
for all costs of its interest in the unit. In December 1992, Duquesne
participated in the refinancing of collateralized lease bonds to take advantage
of lower interest rates and reduce the annual lease payments. The bonds were
originally issued in 1987 for the purpose of partially financing the lease of BV
Unit 2. In accordance with the BV Unit 2 lease agreement, Duquesne paid the
premiums of approximately $36.4 million as a supplemental rent payment to the
lessors. This amount was deferred and is being amortized over the remaining
lease term. At December 31, 1996, the deferred balance was approximately $30.1
million.
Leased nuclear fuel is amortized as the fuel is burned and charged to
fuel and purchased power expense on the statement of consolidated income. The
amortization of all other leased property is based on rental payments made.
These lease-related expenses are charged to operating expenses on the statement
of consolidated income.
<TABLE>
<CAPTION>
Summary of Rental Payments
- ----------------------------------------------------------------------
1996 1995 1994
(Amounts in Thousands of Dollars)
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Operating leases $ 59,503 $ 57,617 $ 56,437
Amortization of capital leases 19,378 26,705 33,596
Interest on capital leases 3,703 4,332 4,996
- ----------------------------------------------------------------------
Total Rental Payments $ 82,584 $ 88,654 $ 95,029
======================================================================
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Future Minimum Lease Payments
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Leases Capital Leases
Year Ended December 31, (Amounts in Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1997 $ 57,001 $ 24,186
1998 56,876 11,380
1999 56,869 6,516
2000 56,830 4,166
2001 56,745 2,481
2002 and thereafter 846,852 18,555
- ------------------------------------------------------------------------------------------------------------------------------------
Total Minimum Lease Payments $1,131,173 $ 67,284
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Amount representing interest (17,964)
- ------------------------------------------------------------------------------------------------------------------------------------
Present value of minimum lease payments for capital
leases (a) $ 49,320
====================================================================================================================================
</TABLE>
(a) Includes current obligations of $20.9 million at December 31, 1996.
Future minimum lease payments for capital leases are related
principally to the estimated use of nuclear fuel financed through leasing
arrangements and building leases. Future minimum lease payments for operating
leases are related principally to BV Unit 2 and certain corporate offices.
Future payments due to Duquesne, as of December 31, 1996, under
subleases of certain corporate office space are approximately $4.5 million in
1997, $4.6 million in 1998 and $18.5 million thereafter.
J. Commitments
and
Contingencies
Construction
- -------------------------------------------------------------------------------
Duquesne estimates that it will spend, excluding AFC and nuclear fuel,
approximately $110 million, $110 million and $95 million for construction during
1997, 1998 and 1999. These estimates also exclude any potential expenditures for
reliability enhancements to the BI Unit 3 combustion turbine. (See "Mitigation
Plan" discussion, Note F, on page 44.)
Nuclear-Related Matters
- -------------------------------------------------------------------------------
Duquesne has an ownership interest in three nuclear units, two of
which it operates. The operation of a nuclear facility involves special risks,
potential liabilities, and specific regulatory and safety requirements. Specific
information about risk management and potential liabilities is discussed below.
Nuclear Decommissioning. The PUC ruled that recovery of the
decommissioning costs for Beaver Valley Unit 1 (BV Unit 1) could begin in 1977,
and that recovery for BV Unit 2 and Perry Unit 1 could begin in 1988. Duquesne
expects to decommission BV Unit 1, BV Unit 2 and Perry Unit 1 no earlier than
the expiration of each plant's operating license in 2016, 2027 and 2026. At the
end of its operating life, BV Unit 1 may be placed in safe storage until BV Unit
2 is ready to be decommissioned, at which time the units may be decommissioned
together.
Based on site-specific studies finalized in 1992 for BV Unit 2, and
in 1994 for BV Unit 1 and Perry Unit 1, Duquesne's share of the total estimated
decommissioning costs, including removal and decontamination costs, currently
being used to determine Duquesne's cost of service, is $122 million for BV Unit
1, $35 million for BV Unit 2, and $67 million for Perry Unit 1. A study will be
performed in 1997 to update Duquesne's estimated decommissioning costs of BV
Unit 1 and BV Unit 2.
On July 18, 1996, the PUC issued a Proposed Policy Statement Regarding
Nuclear Decommissioning Cost Estimation and Cost Recovery for the purpose of
obtaining comments from the public. The proposed policy includes guidelines for
a site-specific study to estimate the cost of decommissioning. Guidelines
require that studies be performed at least every five years, address
radiological and non-radiological costs, and include a contingency factor of not
more than 10 percent. Under the proposed policy, annual decommissioning funding
levels are based on an annuity calculation recognizing inflation in the cost
49
<PAGE>
estimates and earnings on fund assets. With respect to the transition to a
competitive generation market, the Customer Choice Act requires that utilities
include a plan to mitigate any shortfall in decommissioning trust fund payments
for the life of the facility with any future decommissioning filings. Consistent
with this requirement, Duquesne has increased its nuclear decommissioning
funding by $5 million under the PUC-approved plan for the sale of Duquesne's
ownership interest in Ft. Martin. (See "Mitigation Plan" discussion, Note F, on
page 44.) These additional annual contributions bring the total annual funding
to approximately $9 million. Also, on October 17, 1996, the PUC adopted an
Accounting Order filed by Duquesne to recognize the increased funding as part of
Duquesne's cost of service. Duquesne expects to receive approval from the IRS
for qualification of 100 percent of additional nuclear decommissioning trust
funding for BV Unit 2 and Perry Unit 1, and 79 percent for BV Unit 1.
Funding for nuclear decommissioning costs is deposited in external,
segregated trust accounts and may be invested in a portfolio of corporate common
stock and debt securities, municipal bonds, certificates of deposit and United
States government securities. Trust fund earnings increase the fund balance and
the recorded liability. The market value of the aggregate trust fund balances at
December 31, 1996 totaled approximately $33.7 million.
Nuclear Insurance. The Price-Anderson Amendments to the Atomic Energy
Act of 1954 limit public liability from a single incident at a nuclear plant to
$8.9 billion. The maximum available private primary insurance of $200 million
has been purchased by Duquesne. Additional protection of $8.7 billion would be
provided by an assessment of up to $79.3 million per incident on each nuclear
unit in the United States. Duquesne's maximum total possible assessment, $59.4
million, which is based on its ownership or leasehold interests in three nuclear
generating units, would be limited to a maximum of $7.5 million per incident per
year. This assessment is subject to indexing for inflation and may be subject to
state premium taxes. If funds prove insufficient to pay claims, the United
States Congress could impose other revenue-raising measures on the nuclear
industry.
Duquesne's share of insurance coverage for property damage,
decommissioning and decontamination liability is $1.2 billion. Duquesne would be
responsible for its share of any damages in excess of insurance coverage. In
addition, if the property damage reserves of Nuclear Electric Insurance Limited
(NEIL), an industry mutual insurance company that provides a portion of this
coverage, are inadequate to cover claims arising from an incident at any United
States nuclear site covered by that insurer, Duquesne could be assessed
retrospective premiums totaling a maximum of $7.3 million.
In addition, Duquesne participates in a NEIL program that provides
insurance for the increased cost of generation and/or purchased power resulting
from an accidental outage of a nuclear unit. Subject to the policy limit, the
coverage provides for 100 percent of the estimated incremental costs per week
during the 52-week period starting 21 weeks after an accident and 80 percent of
such estimate per week for the following 104 weeks, with no coverage thereafter.
If NEIL's losses for this program ever exceed its reserves, Duquesne could be
assessed retrospective premiums totaling a maximum of $3.5 million.
Beaver Valley Power Station (BVPS) Steam Generators. BVPS's two units
are equipped with steam generators designed and built by Westinghouse Electric
Corporation (Westinghouse). Similar to other Westinghouse nuclear plants,
outside diameter stress corrosion cracking (ODSCC) has occurred in the steam
generator tubes of both units. BV Unit 1, which was placed in service in 1976,
has required removal of approximately 15 percent of its steam generator tubes
from service through a process called "plugging." However, BV Unit 1 continues
to have the capability to operate at 100 percent reactor power and has the
ability to return tubes to service by repairing them through a process called
"sleeving." To date, no tubes at either BV Unit 1 or BV Unit 2 have been
sleeved. BV Unit 2, which was placed in service 11 years after BV Unit 1, has
not yet exhibited the degree of ODSCC experienced at BV Unit 1. Approximately 2
percent of BV Unit 2's tubes are plugged; however, it is too early in the life
of the unit to determine the extent to which ODSCC may become a problem.
50
<PAGE>
Duquesne has undertaken certain measures, such as increased
inspections, water chemistry control and tube plugging, to minimize the
operational impact of and to reduce susceptibility to ODSCC. Although Duquesne
has taken these steps to allay the effects of ODSCC, the inherent potential for
future ODSCC in steam generator tubes of the Westinghouse design still exists.
Material acceleration in the rate of ODSCC could lead to a loss of plant
efficiency, significant repairs or the possible replacement of the BV Unit 1
steam generators. The total replacement cost of the BV Unit 1 steam generators
is currently estimated at $125 million. Duquesne would be responsible for $59
million of this total, which includes the cost of equipment removal and
replacement steam generators but excludes replacement power costs. The earliest
that the BV Unit 1 steam generators could be replaced during a scheduled
refueling outage is the fall of 2000.
BV Unit 1 completed its 11th refueling outage on May 11, 1996. The
outage lasted 49 days and was the shortest refueling outage in the history of
the unit. During the outage, various inspections of the unit's steam generators
were made, including examinations using a new "Plus Point" probe. As a result of
these inspections, Duquesne returned to service tubes that had previously been
plugged. Following the refueling outage, 85 percent of the steam generator tubes
were in service, approximately 1 percent more than at the beginning of the
outage.
BV Unit 2 completed its sixth refueling outage on December 16, 1996.
The outage lasted 107 days due to unanticipated repairs to two residual heat
removal pumps and reactor head vent valves. Various inspections of the unit's
steam generators, including inspections using the Plus Point probe, were
completed. Upon completion of the outage, approximately 98 percent of the unit's
steam generator tubes remained in service.
Duquesne continues to explore all viable means of managing ODSCC,
including new repair technologies, and plans to continue to perform 100 percent
tube inspections during future refueling outages, which occur at, approximately,
18-month intervals for each unit. Duquesne will continue to monitor and evaluate
the condition of the BVPS steam generators.
Spent Nuclear Fuel Disposal. The Nuclear Waste Policy Act of 1982
established a policy for handling and disposing of spent nuclear fuel and a
policy requiring the establishment of a final repository to accept spent nuclear
fuel. Electric utility companies have entered into contracts with the DOE for
the permanent disposal of spent nuclear fuel and high-level radioactive waste in
compliance with this legislation. The DOE has indicated that its repository
under these contracts will not be available for acceptance of spent nuclear fuel
before 2010. On July 23, 1996, the U.S. Court of Appeals for the District of
Columbia Circuit, in response to a suit brought by 25 electric utilities and 18
states and state agencies, unanimously ruled that the DOE has a legal obligation
to begin taking spent nuclear fuel by January 31, 1998. The DOE has not yet
established an interim or permanent storage facility, and has indicated that it
will be unable to begin acceptance of spent nuclear fuel for disposal by January
31, 1998. Further, Congress is considering amendments to the Nuclear Waste
Policy Act of 1982 that could give the DOE authority to proceed with the
development of a federal interim storage facility. In the event the DOE does not
begin accepting spent nuclear fuel, existing on-site spent nuclear fuel storage
capacities at BV Unit 1, BV Unit 2 and Perry Unit 1 are expected to be
sufficient until 2016 (end of operating license), 2013 and 2011, respectively.
On January 31, 1997, Duquesne joined 35 other electric utilities and 46
states, state agencies and regulatory commissions in filing a suit in the U.S.
Court of Appeals for the District of Columbia against the DOE. The suit requests
the court to suspend the utilities' payments into the Nuclear Waste Fund and to
place future payments into an escrow account until the DOE fulfills its
obligation to accept spent nuclear fuel. Significant additional expenditures for
the storage of spent nuclear fuel at BV Unit 2 and Perry Unit 1 could be
required if the DOE does not fulfill its obligation to accept spent nuclear
fuel.
51
<PAGE>
Uranium Enrichment Decontamination and Decommissioning. Nuclear
reactor licensees in the United States are assessed annually for the
decontamination and decommissioning of DOE uranium enrichment facilities.
Assessments are based on the amount of uranium a utility had processed for
enrichment prior to enactment of the National Energy Policy Act of 1992 (NEPA)
and are to be paid by such utilities over a 15-year period. At December 31,
1996, Duquesne's liability for contributions was approximately $9.3 million
(subject to an inflation adjustment). Contributions, when made, are currently
recovered from customers through the ECR.
Fossil Decommissioning
- -------------------------------------------------------------------------------
In Pennsylvania, current ratemaking does not allow utilities to
recover future decommissioning costs through depreciation charges during the
operating life of fossil-fired generating stations. In 1996, the Financial
Accounting Standard Board issued an exposure draft, Accounting for Certain
Liabilities Related to Closure or Removal of Long-Lived Assets. The primary
effect of this exposure draft would be to change the way Duquesne accounts for
nuclear and fossil decommissioning costs. The exposure draft calls for recording
the present value of estimated future cash flows to decommission Duquesne's
nuclear and fossil power plants as an increase to asset balances and as a
liability. This amount is currently estimated to be $299.5 million. Duquesne
will seek to recover these costs through a CTC.
Guarantees
- -------------------------------------------------------------------------------
Duquesne and the other owners of Bruce Mansfield have guaranteed
certain debt and lease obligations related to a coal supply contract for Bruce
Mansfield. At December 31, 1996 Duquesne's share of these guarantees was $20.3
million. The prices paid for the coal by the companies under this contract are
expected to be sufficient to meet debt and lease obligations to be satisfied in
the year 2000. (See "Deferred Coal Costs" discussion, Note F, on page 45.) The
minimum future payments to be made by Duquesne solely in relation to these
obligations are $5.9 million in 1997, $5.6 million in 1998, $5.3 million in
1999, and $4.2 million in 2000. Duquesne's total payments for coal purchased
under the contract were $26.9 million in 1996, $28.9 million in 1995, and $23.3
million in 1994.
Residual Waste Management Regulations
- -------------------------------------------------------------------------------
In 1992, the Pennsylvania Department of Environmental Protection (DEP)
issued Residual Waste Management Regulations governing the generation and
management of non-hazardous residual waste, such as coal ash. Duquesne is
assessing the sites it utilizes and has developed compliance strategies that are
currently under review by the DEP. Capital costs of $2.5 million were incurred
by Duquesne in 1996 to comply with these DEP regulations. Based on information
currently available, an additional $2.8 million will be spent in 1997. The
additional capital cost of compliance through the year 2000 is estimated, based
on current information, to be $15 million. This estimate is subject to the
results of groundwater assessments and DEP final approval of compliance plans.
Employees
- -------------------------------------------------------------------------------
In November 1996, Duquesne reached an agreement on a three-year
contract extension through September 30, 2001 with the International Brotherhood
of Electrical Workers (IBEW), which represents approximately 2,000 of Duquesne's
employees.
Other
- -------------------------------------------------------------------------------
Duquesne is involved in various other legal proceedings and
environmental matters. Duquesne believes that such proceedings and matters, in
total, will not have a materially adverse effect on its financial position,
results of operations or cash flows.
52
<PAGE>
K. Long-Term
Debt
The pollution control notes arise from the sale of bonds by public
authorities for the purposes of financing construction of pollution control
facilities at Duquesne's plants or refunding previously issued bonds. Duquesne
is obligated to pay the principal and interest on these bonds. For certain of
the pollution control notes, there is an annual commitment fee for an
irrevocable letter of credit. Under certain circumstances, the letter of credit
is available for the payment of interest on, or redemption of, all or a portion
of the notes.
<TABLE>
<CAPTION>
Long-Term Debt At December 31
- ---------------------------------------------------------------------------------------------------------------
Principal Outstanding
Interest (Amounts in Thousands of Dollars)
Rate Maturity 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First mortgage bonds 4.75%-8.75% 1997-2025 $ 853,000 (a) $ 903,000 (b)
Pollution control notes (c) 2009-2030 417,985 417,985
Sinking fund debentures 5% 2010 4,891 5,703
Less: Unamortized debt discount
and premium -- net (3,915) (4,157)
- ---------------------------------------------------------------------------------------------------------------
Total Long-Term Debt $1,271,961 $1,322,531
===============================================================================================================
</TABLE>
(a) Excludes $50.0 million related to current maturities on November 15, 1997.
(b) Excludes $50.0 million related to a current maturity on May 15, 1996.
(c) The pollution control notes have adjustable interest rates. The interest
rates at year-end averaged 3.7 percent in 1996 and 3.9 percent in 1995.
At December 31, 1996, sinking fund requirements and maturities of
long-term debt outstanding for the next five years were $50.0 million in 1997,
$75.1 million in 1998, $75.4 million in 1999, $100.4 million in 2000, and $0.4
million in 2001.
Total interest costs incurred were $94.6 million in 1996, $103.3
million in 1995, and $107.7 million in 1994. Interest costs attributable to
long-term debt and other interest were $90.1 million, $98.0 million and $102.1
million in 1996, 1995 and 1994, respectively. Interest costs incurred also
include $4.5 million, $5.3 million and $5.6 million attributable to capital
leases in 1996, 1995 and 1994, respectively. Of these amounts, $0.8 million in
1996, $1.0 million in 1995, and $0.6 million in 1994 were capitalized as AFC.
Debt discount or premium and related issuance expenses are amortized over the
lives of the applicable issues.
During 1994, Duquesne's BV Unit 2 lease arrangement was amended to
reflect an increase in federal income tax rates. At the same time, the
associated letter of credit securing the lessor's equity interest in the unit
was increased from $188 million to $194 million and the term of the letter of
credit was extended to 1999. If certain specified events occur, the letter of
credit could be drawn down by the owners, the leases could terminate, and
collateralized lease bonds ($391.8 million at December 31, 1996) would become
direct obligations of Duquesne.
At December 31, 1996 and 1995, Duquesne was in compliance with all of
its debt covenants.
At December 31, 1996, the fair value of Duquesne's long-term debt,
including current maturities and sinking fund requirements, estimated on the
basis of quoted market prices for the same or similar issues or current rates
offered to Duquesne for debt of the same remaining maturities, was $1,321.6
million. The principal amount included in Duquesne's consolidated balance sheet
is $1,325.9 million.
53
<PAGE>
L. Preferred and
Preference
Stock
<TABLE>
<CAPTION>
Preferred and Preference Stock at December 31
- -----------------------------------------------------------------------------------------------------
(Shares and Amounts in Thousands)
-----------------------------------------------------
1996 1995
Call Price ----------------------------------------
Per Share Shares Amount Shares Amount
Preferred Stock Series:
<S> <C> <C> <C> <C> <C>
3.75% (a) (b) (c) $51.00 148 $ 7,407 148 $ 7,407
4.00% (a) (b) (c) 51.50 550 27,486 550 27,486
4.10% (a) (b) (c) 51.75 120 6,012 120 6,012
4.15% (a) (b) (c) 51.73 132 6,643 132 6,643
4.20% (a) (b) (c) 51.71 100 5,021 100 5,021
$2.10 (a) (b) (c) 51.84 159 8,039 159 8,039
9.00% (d) -- -- 3,000 -- 3,000
8.375% (e) -- 6,000 150,000 -- --
- ----------------------------------------------------------------------------------------------------
Total Preferred Stock 7,209 213,608 1,209 63,608
- ----------------------------------------------------------------------------------------------------
Preference Stock Series: (f)
Plan Series A (c) (g) 37.18 817 28,997 834 29,615
- ----------------------------------------------------------------------------------------------------
Total Preference Stock 817 28,997 834 29,615
- ----------------------------------------------------------------------------------------------------
Deferred ESOP benefit (19,533) (22,257)
- ----------------------------------------------------------------------------------------------------
Total Preferred and Preference Stock $223,072 $ 70,966
====================================================================================================
</TABLE>
(a) Preferred stock: 4,000,000 authorized shares; $50 par value; cumulative
(b) $50 per share involuntary liquidation value
(c) Non-redeemable
(d) 500 authorized shares; 10 issued $300,000 par value; involuntary
liquidation value $300,000 per share; mandatory redemption beginning
August 2000
(e) Cumulative Monthly Income Preferred Securities Series A: 6,000,000
authorized shares; $25 involuntary liquidation value
(f) Preference stock: 8,000,000 authorized shares; $1 par value cumulative
(g) $35.50 per share involuntary liquidation value
Holders of Duquesne's preferred stock are entitled to cumulative
quarterly dividends. If four quarterly dividends on any series of preferred
stock are in arrears, holders of the preferred stock are entitled to elect a
majority of Duquesne's board of directors until all dividends have been paid.
Holders of Duquesne's preference stock are entitled to receive cumulative
quarterly dividends if dividends on all series of preferred stock are paid. If
six quarterly dividends on any series of preference stock are in arrears,
holders of the preference stock are entitled to elect two of Duquesne's
directors until all dividends have been paid. At December 31, 1996, Duquesne had
made all dividend payments. Preferred and preference dividends were $12.0
million, $5.3 million and $6.0 million in 1996, 1995 and 1994. Total preferred
and preference stock had involuntary liquidation values of $242.5 million and
$93.1 million, which exceeded par by $28.2 million and $28.8 million at December
31, 1996 and 1995.
In December 1991, Duquesne established an Employee Stock Ownership
Plan (ESOP) to provide matching contributions for a 401(k) Retirement Savings
Plan for Management Employees. (See "Employee Benefits," Note N, on page 55.)
Duquesne issued and sold 845,070 shares of preference stock, plan series A to
the trustee of the ESOP. As consideration for the stock, Duquesne received a
note valued at $30 million from the trustee. The preference stock has an annual
dividend rate of $2.80 per share, and each share of the preference stock is
exchangeable for one and one-half shares of DQE common stock. At December 31,
1996, $19.5 million of preference stock issued in connection with the
establishment of the ESOP had been offset, for financial statement purposes, by
the recognition of a deferred ESOP benefit. Dividends on the preference stock
and cash contributions from Duquesne are used to repay the ESOP note. Duquesne
made cash contributions of approximately $1.4 million for 1996, $1.6 million for
1995, and $2.2 million for 1994. These cash contributions were the difference
between the ESOP debt service and the amount of dividends on ESOP shares ($2.3
million in 1996 and 1995, and $2.4 million in 1994). As shares of preference
stock are allocated to the accounts of participants in the ESOP, Duquesne
recognizes compensation expense, and the amount of the deferred compensation
benefit is amortized.
54
<PAGE>
Duquesne recognized compensation expense related to the 401(k) plans of $2.3
million in 1996, $2.3 million in 1995, and $1.8 million in 1994. Outstanding
preferred and preference stock is generally callable, on notice of not less than
30 days, at stated prices plus accrued dividends.
M. Common Stock
and Capital
Surplus
<TABLE>
<CAPTION>
Common Stock and Capital Surplus
- -----------------------------------------------------------------------
Capital Surplus 1996 1995 1994
Year Ended December 31, (Amounts in Thousands of Shares)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Premium on common stock $825,814 $837,539 $823,886
Capital stock expense (274) (274) (693)
- -----------------------------------------------------------------------
Total Capital Surplus $825,540 $837,265 $823,193
=======================================================================
</TABLE>
In July 1989, Duquesne became a wholly owned subsidiary of DQE, the
holding company formed as part of a shareholder-approved restructuring. As a
result of the restructuring, DQE common stock replaced all outstanding shares of
Duquesne common stock, except for 10 shares which DQE holds.
DQE or its predecessor, Duquesne, has continuously paid dividends on
common stock since 1953. Dividends may be paid on DQE common stock to the extent
permitted by law and as declared by its board of directors. However, in
Duquesne's Restated Articles of incorporation, provisions relating to preferred
and preference stock may restrict the payment of Duquesne's common dividends. No
dividends or distributions may be made on Duquesne's common stock if Duquesne
has not paid dividends or sinking fund obligations on its preferred or
preference stock. Further, the aggregate amount of Duquesne's common stock
dividend payments or distributions may not exceed certain percentages of net
income if the ratio of common stockholder's equity to total capitalization is
less than specified percentages. As all of Duquesne's common stock is owned by
DQE, to the extent that Duquesne cannot pay common dividends, DQE may not be
able to pay dividends to its common shareholders. No part of the retained
earnings of Duquesne was restricted at December 31, 1996.
N. Employee
Benefits
Retirement Plans
- -------------------------------------------------------------------------------
Duquesne maintains retirement plans to provide pensions for all
eligible employees. Upon retirement, an employee receives a monthly pension
based on his or her length of service and compensation. The cost of funding the
pension plan is determined by the unit credit actuarial cost method. Duquesne's
policy is to record this cost as an expense and to fund the pension plans by an
amount that is at least equal to the minimum funding requirements of the
Employee Retirement Income Security Act of 1974 (ERISA) but that does not exceed
the maximum tax-deductible amount for the year. Pension costs charged to expense
or construction were $11.9 million for 1996, $6.1 million for 1995, and $8.9
million for 1994.
55
<PAGE>
<TABLE>
<CAPTION>
Funded Status of the Retirement Plans and Amounts Recognized on the Consolidated Balance Sheet at
December 31
- -----------------------------------------------------------------------------------------------------------------------
1996 1995
(Amounts in Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits rendered to date:
Vested benefits $413,109 $378,344
Non-vested benefits 22,551 19,110
- ------------------------------------------------------------------------------------------------------------------------
Accumulated benefits obligation based on compensation to date 435,660 397,454
Additional benefits based on estimated future salary levels 61,438 53,757
- ------------------------------------------------------------------------------------------------------------------------
Projected benefits obligation 497,098 451,211
Fair market value of plan assets 525,871 490,870
- ------------------------------------------------------------------------------------------------------------------------
Projected benefits obligation under plan assets $ 28,773 $ 39,659
========================================================================================================================
Unrecognized net gain $128,382 $124,794
Unrecognized prior service cost (43,790) (37,535)
Unrecognized net transition liability (13,853) (15,665)
Net pension liability per consolidated balance sheet (41,966) (31,935)
- ------------------------------------------------------------------------------------------------------------------------
Total $ 28,773 $ 39,659
========================================================================================================================
Assumed rate of return on plan assets 8.25% 8.00%
- ------------------------------------------------------------------------------------------------------------------------
Discount rate used to determine projected benefits obligation 7.50% 7.00%
- ------------------------------------------------------------------------------------------------------------------------
Assumed change in compensation levels 5.25% 5.00%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Pension assets consist primarily of common stocks, United States
obligations and corporate debt securities.
<TABLE>
<CAPTION>
Components of Pension Cost
- ---------------------------------------------------------------------------------------------------------------
1996 1995 1994
(Amounts in Thousands of Dollars)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (benefits earned during the year) $ 12,209 $ 9,953 $ 12,482
Interest on projected benefits obligation 32,597 30,063 28,221
Return on plan assets (58,173) (99,246) 1,967)
Net amortization and deferrals 25,312 65,316 (33,783)
- ---------------------------------------------------------------------------------------------------------------
Net Pension Cost $ 11,945 $ 6,086 $ 8,887
===============================================================================================================
</TABLE>
Retirement Savings Plan and Other Benefit Options
- -------------------------------------------------------------------------------
Duquesne sponsors separate 401(k) retirement plans for its management
and bargaining unit employees.
The 401(k) Retirement Savings Plan for Management Employees provides
that Duquesne will match employee contributions to a 401(k) account up to a
maximum of 6 percent of an employee's eligible salary. Duquesne's match consists
of a $0.25 base match per eligible contribution dollar and an additional $0.25
incentive match per eligible contribution dollar, if Board-approved targets are
achieved. The 1996 incentive target for management was accomplished. Duquesne is
funding its matching contributions to the 401(k) Retirement Savings Plan for
Management Employees with payments to an ESOP established in December 1991. (See
"Preferred and Preference Stock," Note L, on page 54.)
The 401(k) Retirement Savings Plan for IBEW Represented Employees
provides that, beginning in 1995, Duquesne will match employee contributions to
a 401(k) account up to a maximum of 4 percent of an employee's eligible salary.
Duquesne's match consists of a $0.25 base match per eligible contribution dollar
and an additional $0.25 incentive match per eligible contribution dollar, if
certain targets are met. In 1996, these incentive targets were not met by
Duquesne's union-represented employees.
56
<PAGE>
DQE's shareholders have approved a long-term incentive plan through
which Duquesne may grant management employees options to purchase, during the
years 1987 through 2006, up to a total of 7.5 million shares of DQE's common
stock at prices equal to the fair market value of such stock on the dates the
options were granted. At December 31, 1996, approximately 3.1 million of these
shares were available for future grants.
As of December 31, 1996, 1995 and 1994, active grants totaled
1,698,000; 2,159,000; and 2,118,000 shares. Exercise prices of these options
ranged from $8.2084 to $30.875 at December 31, 1996, and from $8.2084 to $27.625
at December 31, 1995, and from $8.2084 to $23.0833 at December 31, 1994.
Expiration dates of these grants ranged from 1997 to 2006 at December 31, 1996;
from 1997 to 2005 at December 31, 1995; and from 1997 to 2004 at December 31,
1994. As of December 31, 1996, 1995 and 1994, stock appreciation rights (SARs)
had been granted in connection with 984,000; 1,202,000; and 1,190,000 of the
options outstanding. During 1996, 715,000 SARs were exercised; 267,000 options
were exercised at prices ranging from $8.2084 to $20.3334; and 150 options were
cancelled. During 1995, 367,000 SARs were exercised; 133,000 options were
exercised at prices ranging from $8.2084 to $21.6667; and 28,000 options were
cancelled. During 1994, 1,254,000 SARs were exercised; 339,000 options were
exercised at prices ranging from $8.2084 to $18.9167; and 80,000 options were
cancelled. Of the active grants at December 31, 1996, 1995 and 1994, 668,000;
929,000; and 918,000 were not exercisable.
Other Post-Retirement Benefits
- -------------------------------------------------------------------------------
In addition to pension benefits, Duquesne provides certain health care
benefits and life insurance for some retired employees. Substantially all of
Duquesne's full-time employees may, upon attaining the age of 55 and meeting
certain service requirements, become eligible for the same benefits available to
retired employees. Participating retirees make contributions, which are adjusted
annually, to the health care plan. The life insurance plan is non-contributory.
Company-provided health care benefits terminate when covered individuals become
eligible for Medicare benefits or reach age 65, whichever comes first. Duquesne
funds actual expenditures for obligations under the plans on a "pay-as-you-go"
basis. Duquesne has the right to modify or terminate the plans.
Duquesne accrues the actuarially determined costs of the aforementioned
post-retirement benefits over the period from the date of hire until the date
the employee becomes fully eligible for benefits. Duquesne has elected to
amortize the transition liability over 20 years.
<TABLE>
<CAPTION>
Components of Post-Retirement Cost
- ----------------------------------------------------------------------------------------------
1996 1995
(Amounts in Thousands of Dollars)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost (benefits earned during the period) $1,182 $1,315
Interest cost on accumulated benefit obligation 2,046 2,340
Amortization of the transition obligation over 20 years 1,700 1,700
Other (812) (582)
- ----------------------------------------------------------------------------------------------
Total Post-Retirement Cost $4,116 $4,773
==============================================================================================
</TABLE>
The accumulated post-retirement benefit obligation comprises the
present value of the estimated future benefits payable to current retirees and a
pro rata portion of estimated benefits payable to active employees after
retirement.
57
<PAGE>
<TABLE>
<CAPTION>
Funded Status of Post-Retirement Plan at December 31
- -----------------------------------------------------------------------------------------------------------------
1996 1995
(Amounts in Thousands of Dollars)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits:
Retirees $ 8,840 $ 7,359
Fully eligible active plan participants 3,829 3,187
Other active plan participants 26,352 21,935
- -----------------------------------------------------------------------------------------------------------------
Accumulated post-retirement benefit obligation 39,021 32,481
Fair market value of plan assets -- __
- -----------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation in excess of plan assets $(39,021) $(32,481)
=================================================================================================================
Unrecognized net actuarial gains $ 2,874 $ 8,427
Unrecognized net transition liability (27,198) (28,898)
Post-retirement liability per consolidated balance sheet (14,697) (12,010)
- -----------------------------------------------------------------------------------------------------------------
Total $(39,021) $(32,481)
=================================================================================================================
Discount rate used to determine projected benefit obligation 7.50% 7.00%
- -----------------------------------------------------------------------------------------------------------------
Health care cost trend rates:
For year beginning January 1 6.96% 8.80%
Ultimate rate in the year 2000 6.00% 5.50%
- -----------------------------------------------------------------------------------------------------------------
Effect of a one percent increase in health care cost trend
rates:
On accumulated projected benefit obligation $ 2,920 $ 3,228
On aggregate of annual service and interest costs $ 391 $ 435
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
O. Quarterly
Financial
Information
(Unaudited)
Summary of Selected Quarterly Financial Data (Thousands of
Dollars, Except Per Share Amounts)
- -------------------------------------------------------------------------------
[The quarterly data reflect seasonal weather variations in Duquesne's
service territory.]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1996 First Quarter Second Quarter Third Quarter Fourth Quarter
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (a) $290,857 $284,522 $320,275 $281,171
Operating Income (a) 54,584 50,161 69,738 47,596
Net Income 36,749 32,571 50,852 29,688
<CAPTION>
==================================================================================================================================
1995 First Quarter Second Quarter Third Quarter Fourth Quarter
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (a) $286,616 $274,669 $337,156 $281,343
Operating Income (a) 57,542 55,705 76,001 57,389
Net Income 33,371 32,441 52,787 32,471
==================================================================================================================================
</TABLE>
(a) Restated to conform with presentations adopted during 1996.
----------------------------------
Except for historical information contained herein, the matters discussed in
this Annual Report on Form 10-K, are forward-looking statements that involve
risks and uncertainties including, but not limited to, economic, competitive,
governmental and technological factors affecting Duquesne's operations, markets,
products, services and prices, and other factors discussed in Duquesne's filings
with the Securities and Exchange Commission.
58
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Amounts in Thousands of Dollars 1996 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT ITEMS
Total operating revenues $1,176,825 $1,179,784 $1,168,624 $1,160,685 $1,150,380 $1,173,105
Operating income $ 222,079 $ 246,637 $ 236,556 $ 240,168 $ 258,367 $ 270,559
Net income $ 149,860 $ 151,070 $ 147,449 $ 147,362 $ 149,768 $ 143,133
Earnings for common stock $ 145,815 $ 145,750 $ 141,403 $ 138,174 $ 140,357 $ 132,332
- ---------------------------------------------------------------------------------------------------------
BALANCE SHEET ITEMS
Property, plant and equipment-net $2,717,473 $2,978,903 $3,068,519 $3,123,948 $3,018,641 $3,037,454
Total assets $3,897,086 $4,067,665 $4,149,867 $4,388,103 $3,718,092 $3,802,626
- ---------------------------------------------------------------------------------------------------------
Capitalization:
Common stockholder's equity $ 989,424 $1,131,334 $1,115,512 $1,100,671 $1,107,609 $1,064,104
Non-redeemable preferred and
preference stock 223,072 70,966 95,345 124,736 123,430 121,906
Redeemable preferred and
preference stock -- -- -- 8,392 8,579 15,437
Long-term debt 1,271,961 1,322,531 1,368,930 1,416,705 1,413,001 1,420,726
- ---------------------------------------------------------------------------------------------------------
Total capitalization $2,484,457 $2,524,831 $2,579,787 $2,650,504 $2,652,619 $2,622,173
=========================================================================================================
</TABLE>
59
<PAGE>
Glossary of Terms Following are explanations of certain financial and
operating terms used in our report.
Competitive Transition Charge (CTC)/
Intangible Transition Charge (ITC)
- --------------------------------------------------------------------------------
During the electric utility restructuring from the traditional regulatory
framework to customer choice, utilities will have the opportunity to recover
transition costs from customers through a surcharge, or competitive transition
charge. Alternatively, if the utility gains PUC approval and securitizes
its transition costs, it may then charge an intangible transition charge.
Customer Choice
- --------------------------------------------------------------------------------
The Pennsylvania Customer Choice Act (see "Customer Choice Act" discussion
on page 5) will give customers the right to contract for electricity at
market prices from PUC-approved electric generation suppliers.
Decommissioning Costs
- --------------------------------------------------------------------------------
Decommissioning costs are expenses to be incurred in connection with the
entombment, decontamination, dismantlement, removal and disposal of structures,
systems and components of a power plant that has permanently ceased the
production of electric energy.
Deferred Energy Costs
- --------------------------------------------------------------------------------
In conjunction with the Energy Cost Rate Adjustment Clause, Duquesne records
deferred energy costs to offset differences between actual energy costs
and the level of energy costs currently recovered from its rate-regulated
electric utility customers.
Demand
- --------------------------------------------------------------------------------
Demand is the amount of electricity delivered to consumers at any instant
or averaged over a period of time.
Energy Cost Rate Adjustment Clause (ECR)
- --------------------------------------------------------------------------------
Duquesne recovers through the ECR, to the extent that such amounts are
not included in base rates, the cost of nuclear fuel, fossil fuel and purchased
power costs and passes to its customers the profits from short-term power
sales to other utilities.
Federal Energy Regulatory Commission (FERC)
- --------------------------------------------------------------------------------
The FERC is an independent five-member commission within the United States
Department of Energy. Among its many responsibilities, the FERC sets rates
and charges for the wholesale transportation and sale of natural gas and
electricity.
Kilowatt (KW)
- --------------------------------------------------------------------------------
A kilowatt is equal to 1,000 watts. A watt is the rate at which electricity
is generated or consumed. A kilowatt-hour (KWH) is a measure of the quantity
of electricity generated or consumed in one hour.
Peak Demand
- --------------------------------------------------------------------------------
Peak demand is the amount of electricity required during periods of highest
usage. Peak periods fluctuate by season and generally occur in the morning
hours in winter and in late afternoon during the summer.
Pennsylvania Public Utility Commission (PUC)
- --------------------------------------------------------------------------------
The PUC is the Pennsylvania governmental body that regulates all utilities
(electric, gas, telephone, water, etc.) and is made up of five members
nominated by the governor and confirmed by the senate.
Regulatory Assets
- --------------------------------------------------------------------------------
Regulatory assets are costs that Duquesne would otherwise have charged
to expense which are capitalized or deferred because these costs are currently
being recovered or because it is probable that the PUC and the FERC will
allow recovery of these costs through the ratemaking process. For example,
under traditional regulation, tax benefits associated with electric generating
assets were required to be immediately passed on to a utility's customers.
These same benefits later would be incurred as a tax cost, which the utility
would expect to collect from its customers under the traditional regulatory
framework.
Transition Costs
- --------------------------------------------------------------------------------
Transition or stranded costs are the net present value of a utility's
known or measurable costs related to electric generation that are recoverable
under the current regulatory framework, but which may not be recoverable
in a competitive generation market and which will remain following mitigation
efforts taken by such utility to recover the costs. Examples of potential
transition costs include regulatory assets; the unfunded portion of
decommissioning costs; costs of employee severance, retraining, early
retirement, and outplacement; and generation-related costs, including the
associated capital costs. The PUC will determine the level of transition
costs a utility may recover.
Unbundled Electric Service
- --------------------------------------------------------------------------------
Electric utilities traditionally have been obligated to serve customers
from the generation through the delivery of electricity. Under the Pennsylvania
Customer Choice Act, electric service will be unbundled. Although customer
choice will give consumers their choice of electric generation suppliers,
delivery of the electricity from the generation supplier to the consumer
will remain the responsibility of the existing franchised utility.
60
<PAGE>
Exhibit 3.2
DUQUESNE LIGHT COMPANY
BY-LAWS
EFFECTIVE DECEMBER 18, 1996
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meeting. The Company shall hold an annual
---------------
stockholders' meeting for election of Directors at a date, location (within or
outside Pennsylvania) and time set by the Board of Directors. Annual meetings
shall be general meetings, open for the transaction of any business within the
powers of the Company without special notice of such business, except in cases
in which special notice is required by statute, the Articles or these By-Laws.
SECTION 2. Special Meetings. Special meetings of the stockholders
-----------------
may be called at any time by the Chairman of the Board or President or by the
Board of Directors, and (to the extent permitted by statute) shall be called at
the written request of stockholders owning at least 20% of the shares of
<PAGE>
capital stock entitled to be voted at the meeting, which request shall state the
purpose of the proposed meeting.
SECTION 3. Notice of Meetings. Written notice of every meeting of
-------------------
the stockholders shall be given to each stockholder entitled to vote at such
meeting, at least five days (or such other period as required by statute) before
the meeting, by the Chairman of the Board or Secretary. Failure to give notice
of any annual meeting or irregularity in the notice shall not affect the
validity of any proceedings at such meeting (other than proceedings of which
special notice is required by law, the Articles or these By-Laws).
SECTION 4. Quorum. At all meetings of stockholders, a majority of
-------
the outstanding shares of capital stock entitled to vote, represented by
stockholders in person or by proxy, shall constitute a quorum.
SECTION 5. Judges of Election. Three judges of election shall be
-------------------
appointed by the Board of Directors for any meeting of stockholders. The judges
of election shall act as
2
<PAGE>
tellers of any ballot vote taken at the meeting and certify the result.
SECTION 6. Voting and Proxies. Any stockholder having the right to
-------------------
vote at any meeting shall be entitled to one vote for each share of stock held.
At meetings for the election of Directors, each stockholder entitled to vote
shall be entitled to votes equal to the number of shares held multiplied by the
number of Directors to be elected, and each stockholder may cast all votes for a
single candidate or distribute them among any two or more candidates.
Any stockholder entitled to vote at any meeting of stockholders may
vote either in person or by proxy, but no proxy which is dated more than three
years prior to the meeting at which it is offered shall confer the right to
vote. Every proxy shall be in writing, signed by a stockholder or duly
authorized attorney in fact, and dated.
SECTION 7. Order of Business. At all meetings of stockholders, the
-------------------
order of business shall be, as far as applicable and practicable, as follows:
3
<PAGE>
(1) Organization.
(2) Proof of giving of the notice of meeting or of waivers thereof.
(3) Submission by the Secretary, or by the judges of election, of a list of
stockholders entitled to vote, present in person or by proxy.
(4) If an annual meeting, presentation of unapproved minutes of preceding
meetings and action thereon.
(5) Matters to be voted upon as specified in the notice of meeting.
(6) Reports.
(7) Unfinished business.
(8) New business.
(9) Adjournment.
4
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Election and Powers. The business and affairs of the
--------------------
Company shall be managed by its Board of Directors. The Board may exercise all
the powers of the Company except such as are by statute, the Articles or these
By-Laws conferred upon or reserved to the stockholders. At each annual meeting
the stockholders shall elect directors of the class whose term then expires, to
hold office until the third succeeding annual meeting. Except as otherwise
expressly provided in the Articles, each director shall hold office until a
successor is elected and qualified, or until such director's earlier death,
resignation or removal in the manner provided in Section 11 of this Article II.
The number of directors which shall constitute the full Board of Directors shall
be not less than one as fixed by the Board of Directors.
SECTION 2. Lead Directors. Directors who are not employees of the
----------------
Company (the "outside directors") may elect one or two outside directors on an
annual basis to serve as Lead Director(s) of the Board. In the absence of the
Chairman
5
<PAGE>
and President, or at the request of the Board of Directors, a Lead Director may
chair meetings of the stockholders or Board of Directors. A Lead Director may
also 1) call for and chair meetings of the outside directors and 2) consult with
and advise the Chairman, President and Chief Executive Officer of the Company on
matters of Board and corporate governance.
SECTION 3. Eligibility for Election. No person who is an employee of
--------------------------
the Company, except the Chairman of the Board or President, shall be eligible to
serve as a Director of the Company after retiring as an employee. The mandatory
retirement age for directors is 70 except for directors completing a current
term of office or directors currently serving as Lead Directors.
SECTION 4. Regular Meetings. After each meeting of stockholders at
------------------
which Directors shall have been elected, the Board of Directors shall meet as
soon as practicable for the purpose of organization and the transaction of other
business. Additional regular meetings shall be held as fixed by the Board of
Directors.
6
<PAGE>
SECTION 5. Special Meetings. Special meetings of the Board of
-----------------
Directors shall be held whenever called by the Chairman of the Board, the
President or a majority of the Board of Directors.
SECTION 6. Place of Meetings. The Board of Directors may hold its
------------------
regular and special meetings at such places as it designates.
SECTION 7. Notice of Meetings. No notice of regular meetings of the
--------------------
Board of Directors need be given. Notice of the place, day and hour of every
special meeting shall be given to each director at least one day before the
meeting, by personal, telex or telephonic notification, at the director's
residence or usual place of business, or in the alternative, upon three days'
notice to the director's last known mailing address. The failure to give notice
shall not affect the validity of any meeting as to any director who attends the
meeting or waives notice in writing. No notice of adjourned meetings of the
Board of Directors need be given. All regular and special meetings of the Board
of Directors shall be general
7
<PAGE>
meetings open for the transaction of any business without special notice of such
business.
SECTION 8. Quorum. At all meetings of the Board of Directors, a
--------
majority of the directors shall constitute a quorum for the transaction of
business. Except in cases in which it is by law, the Articles or these By-Laws
otherwise provided, a majority of the quorum shall decide any questions.
SECTION 9. Vacancies. Vacancies on the Board of Directors shall be
----------
filled as provided in the Articles.
SECTION 10. Compensation. The directors may be compensated for their
--------------
services on a periodic basis and/or receive a fixed sum for attendance at each
regular, special or Committee meeting and every adjournment thereof. The amount
shall be fixed by resolution of the Board of Directors. The directors shall be
reimbursed for all reasonable traveling expenses incurred in attending meetings.
Directors who are employees of the Company shall not be paid for their services
as directors.
8
<PAGE>
SECTION 11. Removal. Any Director, any class of Directors or the
--------
entire Board of Directors may be removed as provided in the Articles.
SECTION 12. Indemnification of Directors and Officers.
------------------------------------------
(a) Right of Indemnification. Except as prohibited by law, every
--------------------------
Director and officer of the Company shall be entitled as of right to be
indemnified by the Company against reasonable expense and any liability paid or
incurred by such person in connection with any actual or threatened claim,
action, suit or proceeding, civil, criminal, administrative, investigative or
other, whether brought by or in the right of the Company or otherwise, by reason
of such person being or having been a Director or officer of the Company or by
reason of the fact that such person is or was serving at the request of the
Company as a director, officer, employee, fiduciary or other representative of
another corporation, partnership, joint venture, trust, employee benefit plan or
other entity (such claim, action, suit or proceeding hereinafter being referred
to as "action"); provided, however, that no such right of indemnification shall
exist with respect to an action brought
9
<PAGE>
by a Director or officer against the Company (other than a suit for
indemnification as provided in paragraph (b)). Such indemnification shall
include the right to have expenses incurred by such person in connection with an
action paid in advance by the Company prior to final disposition of such action,
subject to such conditions as may be prescribed by law. Persons who are not
Directors or officers of the Company may be similarly indemnified in respect of
service to the Company or to another such entity at the request of the Company
to the extent the Board of Directors at any time denominates such person as
entitled to the benefits of this Section. As used herein, "expense" shall
include fees and expenses of counsel selected by such person; and "liability"
shall include amounts of judgments, excise taxes, fines and penalties, and
amounts paid in settlement.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
---------------------------------
this Section is not paid in full by the Company within thirty days after a
written claim has been received by the Company, the claimant may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim, and, if successful in whole or in part, the claimant
10
<PAGE>
shall also be entitled to be paid the expense of prosecuting such claim. It
shall be a defense to any such action that the conduct of the claimant was such
that under Pennsylvania law the Company would be prohibited from indemnifying
the claimant for the amount claimed, but the burden of proving such defense
shall be on the Company. Neither the failure of the Company (including its
Board of Directors, independent legal counsel and its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because the conduct of the claimant
was not such that indemnification would be prohibited by law, nor an actual
determination by the Company (including its Board of Directors, independent
legal counsel or its stockholders) that the conduct of the claimant was such
that indemnification would be prohibited by law, shall be a defense to the
action or create a presumption that the conduct of the claimant was such that
indemnification would be prohibited by law.
(c) Insurance and Funding. The Company may purchase and maintain
----------------------
insurance to protect itself and any person eligible to be indemnified hereunder
against any liability or expense
11
<PAGE>
asserted or incurred by such person in connection with any action, whether or
not the Company would have the power to indemnify such person against such
liability or expense by law or under the provisions of this Section 12. The
Company may create a trust fund, grant a security interest, cause a letter of
credit to be issued or use other means (whether or not similar to the foregoing)
to ensure the payment of such sums as may become necessary to effect
indemnification as provided herein.
(d) Non-Exclusivity; Nature and Extent of Rights. The right of
---------------------------------------------
indemnification provided for herein (1) shall not be exclusive of any other
rights, whether existing now or later, to which those seeking indemnification
may be entitled under any agreement, by-law or charter provision, vote of
stockholders or Directors or otherwise, (2) shall be deemed to create
contractual rights in favor of persons entitled to indemnification, (3) shall
continue as to persons who have ceased to have the status pursuant to which they
were entitled or were denominated as entitled to indemnification and shall inure
to the benefit of the heirs and legal representatives of persons entitled to
indemnification hereunder and (4) shall be applicable to actions, suits or
proceedings commenced after adoption, whether arising from acts or omissions
occurring
12
<PAGE>
before or after the adoption hereof. The right of indemnification may not be
amended, modified or repealed so as to limit the indemnification provided herein
with respect to any acts or omissions occurring prior to the adoption of any
such amendment or repeal.
SECTION 13. Personal Liability of Directors.
--------------------------------
(a) To the fullest extent that the laws of the Commonwealth of
Pennsylvania, as in effect on January 27, 1987 or as thereafter amended, permit
elimination or limitation of the liability of directors, no Director of the
Company shall be personally liable for monetary damages as such for any action
taken, or any failure to take any action, as a Director.
(b) This Section 13 shall not apply to any action filed prior to January
27, 1987, nor to any breach of performance or failure of performance of duty by
a Director occurring prior to January 27, 1987. Any amendment or repeal of this
Section 13 which has the effect of increasing Director liability shall operate
prospectively only, and shall not affect action taken, or any failure to act,
prior to its adoption.
13
<PAGE>
ARTICLE III
COMMITTEES
Committees. The Board of Directors may by resolution designate and
------------
discontinue such standing or special committees as it deems desirable. Each
committee shall have such powers and perform such duties, not inconsistent with
law, as may be assigned by the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. Executive Officers. The executive officers of the Company
--------------------
shall be a Chairman of the Board, a President, one or more Vice Presidents, a
Secretary, a Treasurer and a Controller. The Chairman of the Board and the
President shall be chosen from among the Directors. The executive officers
shall be elected annually by the Board of Directors at its first meeting
following the annual meeting, and each such officer shall hold office until the
corresponding meeting in the next year and until a successor has been duly
chosen and
14
<PAGE>
qualified, or until such officer's earlier death, resignation or removal. Any
vacancy in the above offices may be filled for the unexpired portion of the term
by the Board of Directors, at any regular or special meeting.
SECTION 2. Chairman of the Board. The Chairman of the Board shall
----------------------
preside at any meeting of the stockholders or of the Board of Directors and
shall have all the powers and authority vested in a presiding officer by law or
practice to conduct an orderly meeting. In addition to any specific powers
conferred by these By-Laws, the Chairman of the Board shall have the powers and
duties assigned by the Board of Directors.
SECTION 3. President. In addition to any specific powers conferred
-----------
by these By-Laws, the President shall have the powers and duties assigned by the
Board of Directors. At the request or in the absence or disability of the
Chairman of the Board, the President shall preside at any meeting of the
stockholders or of the Board of Directors.
SECTION 4. Chief Executive Officer. The Board of Directors shall
------------------------
designate the Chairman of the Board or President
15
<PAGE>
or the person holding both of such offices to perform the functions of the Chief
Executive Officer. The Chief Executive Officer shall carry out the policies
approved by the Board of Directors. In addition to any specific powers
conferred by these By-Laws, the Chief Executive Officer shall have supervision
over, and shall exercise general executive powers concerning, all the operations
and business of the Company. The Chief Executive Officer shall also have and
exercise such powers and duties as assigned by the Board of Directors and may
delegate executive and other powers and duties to any other officer.
SECTION 5. Vice Presidents. At the request of the President, or in
-----------------
the absence or disability of the President, any Vice President shall perform the
duties of the President, and when so acting shall have the powers of the
President, unless otherwise determined by the Board of Directors. Each Vice
President shall also have and exercise such powers and duties as assigned by the
Board of Directors or the Chief Executive Officer.
SECTION 6. Secretary. The Secretary shall perform all duties
-----------
incident to the office of a secretary of a
16
<PAGE>
corporation, and such other duties as assigned by the Board of Directors or the
Chief Executive Officer.
SECTION 7. Treasurer. The Treasurer shall perform all the duties
-----------
incident to the office of a treasurer of a corporation, and such other duties as
assigned by the Board of Directors or the Chief Executive Officer.
SECTION 8. Controller. The Controller shall perform all duties
------------
incident to the office of a controller of a corporation, and such other duties
as assigned by the Board of Directors or the Chief Executive Officer.
SECTION 9. Assistant Officers. The Board of Directors may elect one
-------------------
or more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers. Each assistant officer shall hold office for such period and shall
have such authority and perform such duties as the Board of Directors or the
Chief Executive Officer may prescribe.
SECTION 10. Certain Powers of Officers. Except in cases in which the
----------------------------
signing and execution shall have been expressly delegated by the Board of
Directors to some other
17
<PAGE>
officer,employee or agent of the Company, the Chairman of the Board or President
or a Vice President may sign and execute in the name of the Company all
authorized deeds, mortgages, bonds, contracts or other instruments; provided,
however, that a Vice President may delegate to any General Manager or Manager
reporting to such officer authority to sign and execute in the name of the
Company all authorized contracts and similar instruments pursuant to a policy
approved by the Board of Directors.
SECTION 11. Compensation. The Board of Directors shall have the
-------------
power to fix the compensation of the Chairman of the Board, President and any
Vice President of the Company. The Chief Executive Officer shall have the power
to fix the compensation of the Secretary, the Treasurer, the Controller and
assistant officers.
ARTICLE V
STOCK
SECTION 1. Certificates. Every stockholder shall be entitled to a
-------------
certificate or certificates of stock of the
18
<PAGE>
Company in a form prescribed by the Board of Directors, duly numbered and sealed
with the corporate seal of the Company, and setting forth the number and kind of
shares represented thereby; provided however, that the Board of Directors shall
have the power to provide for uncertificated shares of any class or series of
stock or any part thereof. The certificates shall be signed by Chairman of the
Board, the President or a Vice President and by the Treasurer or the Secretary.
The Board of Directors may also appoint one or more Transfer Agents and/or
Registrars for its stock of any class and may require stock certificates to be
countersigned and/or registered by one or more of such Transfer Agents and/or
Registrars.
SECTION 2. Transfer of Shares. The Board of Directors shall have
--------------------
power and authority to make all rules and regulations concerning the issue,
transfer, and registration of certificates of stock.
SECTION 3. Record Dates. The Board of Directors shall have the
--------------
authority to fix in advance a date, not exceeding ninety (90) days preceding any
meeting of stockholders, or the date for payment of any dividend, or the date
for the allotment of rights, or the date when any change, conversion, or
exchange
19
<PAGE>
of capital stock shall go into effect (each a "stockholder event"), as a record
date, in connection with such stockholder event, and in such case only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to participate in such stockholder event, notwithstanding any transfer
of any stock on the books of the Company after any such record date.
SECTION 4. Mutilated, Lost or Destroyed Certificates.
--------------------------------------------
The holder of any certificate representing shares of stock of the Company shall
immediately notify the Company of any mutilation, loss or destruction thereof,
and the Board of Directors may, in its discretion, cause one or more new
certificates, for the same number of shares in the aggregate, to be issued to
such holder upon the surrender of the mutilated certificate, or in case of loss
or destruction of the certificate, upon satisfactory proof of such loss or
destruction and the deposit of indemnity by way of bond or otherwise, in such
form and amount and with such sureties or security as the Board of Directors may
require to indemnify the Company against loss or liability by reason of the
issuance of such new certificate or certificates, and the failure of such holder
to comply with such requirements shall constitute a waiver by such
20
<PAGE>
holder of any right to receive such new certificate or certificates.
ARTICLE VI
DIVIDENDS AND FINANCE
SECTION 1. Dividends. Subject to the provisions of the Articles, the
-----------
Board of Directors may, in its discretion, declare what, if any, dividends shall
be paid upon the stock of the Company. Except as otherwise provided by the
Articles, dividends shall be payable upon such dates as the Board of Directors
may designate. Before payment of any dividend there may be set aside out of any
funds of the Company available for dividends such sum or sums as the Directors,
in their absolute discretion, think proper as a reserve fund to meet
contingencies, for equalizing dividends, or for repairing or maintaining any
property of the Company, or for such other purposes as the Directors shall think
conducive to the interests of the Company, and the Directors may abolish any
such reserve in the manner in which it is created.
21
<PAGE>
SECTION 2. Checks, Drafts, Etc. Unless otherwise provided by resolution
---------------------
of the Board of Directors, all checks, drafts, or orders for the payment of
money, notes, and other evidences of indebtedness, issued in the name of the
Company, shall be signed by the Treasurer or an Assistant Treasurer and
countersigned by the Chairman of the Board, the President or a Vice President.
SECTION 3. Fiscal Year. The fiscal year of the Company shall be the
-------------
calendar year, unless otherwise provided by the Board of Directors.
ARTICLE VII
SUNDRY PROVISIONS
SECTION 1. Seal. The Corporate Seal of the Company shall contain
------
within a circle the words "Duquesne Light Company", and in an inner circle the
word "SEAL".
SECTION 2. Inspection of Books and Records. The Board of Directors
---------------------------------
may determine whether and, if allowed, when and under what conditions and
regulations, the books and records of the Company shall be open to the
inspection of stockholders,
22
<PAGE>
and the rights of stockholders in this respect are and shall be limited
accordingly, except as otherwise provided by statute. No stockholder has the
right to inspect any book or record or receive any statement for an improper
purpose.
SECTION 3. Bonds. The Board of Directors may require any officers,
-------
agents, or employees of the Company to give a bond to the Company, conditioned
upon the faithful discharge of their duties, with one or more sureties and in
such amount as may be satisfactory to the Board of Directors.
SECTION 4. Voting Upon Stock in Other Corporations. Any stock in
-----------------------------------------
other corporations, which may be held by the Company, may be represented and
voted at any meeting of stockholders of such other corporations by the Chairman
of the Board, the President or a Vice President of the Company or by proxy
executed in the name of the Company by the Chairman of the Board, the President
or a Vice President with the corporate seal affixed and attested by the
Secretary or an Assistant Secretary.
SECTION 5. Amendments. Except as provided by the Articles or by
------------
statute, the authority to adopt, amend and repeal the By-Laws is exclusively
vested in the Board of Directors.
23
<PAGE>
SECTION 6. Participation in Meeting by Telephone. One or more
---------------------------------------
Directors may participate in a meeting of the Board of Directors or a committee
of the Board of Directors by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can communicate with each other.
SECTION 7. Informal Action by Directors or Committees.
-------------------------------------------
Any action which may be taken at a meeting of the Board of Directors or a
committee of the Board of Directors may be taken without a meeting if a consent
or consents in writing setting forth the action so taken shall be signed by all
of the Directors or the members of the committee and shall be filed with the
Secretary of the Company.
24
<PAGE>
EXHIBIT 4.3
- --------------------------------------------------------------------------------
DUQUESNE LIGHT COMPANY
TO
MELLON BANK, N.A.
Trustee
---------------------------
Supplemental Indenture No. 13
Dated March 22, 1996
Supplemental to the Indenture of Mortgage
and Deed of Trust dated as of April 1, 1992
Subjecting additional property to the lien of the
Indenture dated as of April 1, 1992
- --------------------------------------------------------------------------------
<PAGE>
SUPPLEMENTAL INDENTURE No. 13, dated March 22, 1996, between DUQUESNE LIGHT
COMPANY, a corporation duly organized and existing under the laws of the
Commonwealth of Pennsylvania (hereinafter sometimes called the "Company"), and
MELLON BANK, N.A., a national banking association organized and existing under
the laws of the United States of America, trustee (hereinafter sometimes called
the "Trustee"), under the Indenture of Mortgage and Deed of Trust, dated as of
April 1, 1992 (hereinafter called the "Original Indenture"), this Supplemental
Indenture No. 13 being supplemental thereto. The Original Indenture and any and
all indentures and instruments supplemental thereto are hereinafter sometimes
collectively called the "Mortgage."
Recitals of the Company
The Original Indenture was authorized, executed and delivered by the
Company to provide for the issuance from time to time of its Securities (such
term and all other capitalized terms used herein without definition having the
meanings assigned to them in the Original Indenture), to be issued in one or
more series as contemplated therein, and to provide security for the payment of
the principal of and premium, if any, and interest, if any, on the Securities.
The Original Indenture has been recorded in the Recorders' Offices of the
various counties of Pennsylvania as follows:
In Allegheny County in Mortgage Book Vol. 12068, page 8;
In Beaver County in Mortgage Book Vol. 1208, page 520;
In Greene County in Mortgage Book Vol. 100, page 174;
In Washington County in Mortgage Book Vol. 1873, page 1;
In Westmoreland County in Mortgage Book Vol. 2862, page 221;
and has also been recorded in the Office of the Clerk of County Commission of
Monongalia County, West Virginia, in Deed of Trust Book Vol. 672, page 129, the
Office of the Clerk of County Commission of Hancock County, West Virginia, in
Deed of Trust Book Vol. 293, page 46, the Recorder's Office of Belmont County,
Ohio, in Mortgage Book Vol. 586, page 273, the Recorder's Office of Columbiana
County, Ohio, in Mortgage Book Vol. 318, page 289, the Recorder's Office of
Jefferson County, Ohio, in Mortgage Book Vol. 65, page 675, the Recorder's
Office of Lake County, Ohio, in Mortgage Book Vol. 711, page 217, and the
Recorder's Office of Monroe County, Ohio, in Mortgage Book Vol. 129, page 301.
Section 1401 of the Original Indenture provides that the Company and the
Trustee may enter into one or more supplemental indentures for the purpose,
among others, of subjecting additional property to the Lien of the Mortgage.
The Company has acquired additional properties which it desires to subject
to the Lien of the Mortgage by this Supplemental Indenture No. 13.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 13 WITNESSETH, that, in
consideration of the premises and of the purchase of the Securities by the
Holders thereof, and in order to secure the payment of the principal of and
premium, if any, and interest, if any, on all Securities from time to time
Outstanding and the performance of the covenants contained therein and in the
Mortgage and to declare the terms and conditions on which such Securities are
secured, the Company grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms to the Trustee, and grants
to the Trustee a security interest in, the following:
<PAGE>
Granting Clause First
All right, title and interest of the Company in and to property (other than
Excepted Property), real, personal and mixed and wherever situated, in any case
used or to be used in or in connection with the generation, purchase,
transmission, distribution or sale by the Company of electric energy (whether or
not such use is the sole use of such property), including without limitation (a)
all land and interests in land described in Schedule A hereto; (b) all other
lands, easements, servitudes, licenses, permits, rights of way and other rights
and interests in or relating to real property or the occupancy or use of the
same; (c) all plants, generators, turbines, engines, boilers, fuel handling and
transportation facilities, air and water pollution control and sewage and solid
waste disposal facilities and other machinery and facilities for the generation
of electric energy; (d) all switchyards, lines, towers, substations,
transformers and other machinery and facilities for the transmission of electric
energy; (e) all lines, poles, conduits, conductors, meters, regulators and other
machinery and facilities for the distribution of electric energy; (f) all
buildings, offices, warehouses and other structures; and (g) all pipes, cables,
insulators, ducts, tools, computers and other data processing and/or storage
equipment and other equipment, apparatus and facilities and all other property,
of whatever kind and nature, ancillary to or otherwise used or to be used in
conjunction with any or all of the foregoing or otherwise, directly or
indirectly, in furtherance of the generation, purchase, transmission,
distribution or sale by the Company of electric energy;
Excepted Property
Expressly excepting and excluding, however, from the Lien and operation of
the Mortgage all Excepted Property of the Company, whether now owned or
hereafter acquired;
TO HAVE AND TO HOLD all such property, real, personal and mixed, unto the
Trustee forever;
SUBJECT, HOWEVER, to Permitted Liens and to Liens which have been granted
by the Company to other Persons prior to the date of the execution and delivery
of the Original Indenture, and subject also, as to any property acquired by the
Company after the date of execution and delivery of the Original Indenture, to
vendors' Liens, purchase money mortgages and other Liens thereon at the time of
the acquisition thereof (including, but not limited to, the Lien of any Class
"A" Mortgage), it being understood that with respect to any of such property
which was at the date of execution and delivery of the Original Indenture or
thereafter became or hereafter becomes subject to the Lien of any Class "A"
Mortgage, the Lien of the Mortgage shall at all times be junior and subordinate
to the Lien of such Class "A" Mortgage;
IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of all Outstanding Securities without
any priority of any such Security over any other such Security; and
THE PARTIES HEREBY FURTHER COVENANT AND AGREE that this Supplemental
Indenture No. 13 is a supplement to the Mortgage. As supplemented by this
Supplemental Indenture No. 13, the Mortgage is in all respects ratified,
approved and confirmed, and the Mortgage and this Supplemental Indenture No. 13
shall together constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture No.
13 to be duly executed, and their respective corporate seals to be affixed and
attested, all as of the day and year first above written.
DUQUESNE LIGHT COMPANY
By: /s/ Gary L. Schwass
------------------------------
Gary L. Schwass
Senior Vice President and
Chief Financial Officer
Attest:
/s/ Diane S. Eismont
- --------------------
Secretary
MELLON BANK, N.A., Trustee
By: /s/ E. D. Renn
------------------------------
E. D. Renn
Vice President
Attest:
/s/ Kent Christman
- -------------------------
Authorized Officer
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 21st day of March, 1996, before me personally came Gary L. Schwass,
to me known, who, being by me duly sworn, did depose and say that he is the
Senior Vice President and Chief Financial Officer of Duquesne Light 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/ Joanne E. Kirin
--------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 22nd day of March, 1996, before me personally came E. D. Renn, to me
known, who, being by me duly sworn, did depose and say that she is a Vice
President of Mellon Bank, N.A., the national banking association described in
and which executed the foregoing instrument; that she knows the seal of said
national banking association; that the seal affixed to said instrument is the
seal of said national banking association; that it was so affixed by authority
of the Board of Directors of said national banking association, and that she
signed her name thereto by like authority.
/s/ Judith A. Hyde
--------------------------
Notary Public
<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A., is One
Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ Kent Christman
-----------------------------------------
Authorized Signatory of Mellon Bank, N.A.
March 22, 1996
<PAGE>
Schedule A
I
All of the following described property situate in the County of Beaver and
Commonwealth of Pennsylvania, the deeds herein recited being recorded in the
Recorder's Office of said County, and reference being made thereto for a more
particular description of said property, viz:
Undivided 17.01% interest as tenant in common with Pennsylvania Power
Company, The Cleveland Electric Illuminating Company, Ohio Edison
Company and The Toledo Edison Company in a parcel of land situate in
the Borough of Shippingport. Conveyed by Thomas R. Allison and Nancy
D. Allison, husband and wife, to Duquesne Light Company, et al. Deed
dated July 12, 1995. Deed Book Volume 1658, page 398. Tax Parcel
I.D. No. 62-180-0111-N00.
Undivided 17.01% interest as tenant in common with Pennsylvania Power
Company, The Cleveland Electric Illuminating Company, Ohio Edison
Company and The Toledo Edison Company in a parcel of land situate in
the Borough of Shippingport. Conveyed by Harry N. Shane, widower, to
Duquesne Light Company, et al. Deed dated December 28, 1995. Deed
Book Volume 1683, page 842. Tax Parcel I.D. No. 62-180-0111-001.
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded March 25, 1996
Mortgage Book Volume 15589, page 74
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded March 25, 1996
Mortgage Book Volume 1414, page 397
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded March 26, 1996
Mortgage Book Volume 153, page 564
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded March 26, 1996
Mortgage Book Volume 2857, page 569
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded March 26, 1996
Mortgage Book Volume 3754, page 190
Belmont County, Ohio
Office of Recorder
Received March 28, 1996
Recorded March 29, 1996
Mortgage Book Volume 651, page 630
Columbiana County, Ohio
Office of Recorder
Recorded March 26, 1996
Official Records Volume 522, page 636
Jefferson County, Ohio
Office of Recorder
Received March 26, 1996
Recorded March 27, 1996
Official Records Volume 189, page 762
Lake County, Ohio
Office of Recorder
Recorded March 26, 1996
Official Records File 960009987
<PAGE>
Monroe County, Ohio
Office of Recorder
Received March 28, 1996
Recorded March 28, 1996
Official Records Volume 20, page 434
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded March 26, 1996
Deed of Trust Book 335, page 57
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded March 26, 1996
Deed of Trust Book 806, page 676
<PAGE>
EXHIBIT 4.4
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF DUQUESNE CAPITAL L.P.
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF DUQUESNE
CAPITAL L.P. dated as of May 14, 1996 is entered into by and among Duquesne
Light Company, a Pennsylvania corporation ("Duquesne Light"), as the General
Partner, and Susan Fields (the "Initial Limited Partner"), together with the
other Persons who become Limited Partners of the Partnership as provided herein.
WHEREAS, Duquesne Light and the Initial Limited Partner have heretofore
formed a limited partnership pursuant to (S) 17-201 of the Delaware Revised
Uniform Limited Partnership Act, 6 Del. C. (S) 17-101, et seq., as amended from
--- - -------
time to time (the "Act"), by filing a Certificate of Limited Partnership with
the office of the Secretary of State of the State of Delaware on April 27, 1994,
and entering into an Agreement of Limited Partnership of Duquesne Light L.P.,
dated as of April 27, 1994, and Duquesne Light and the Initial Limited Partner
have agreed pursuant to an Amended and Restated Agreement of Limited Partnership
of Duquesne Capital L.P. dated as of May 9, 1994 to change the name of the
Partnership from Duquesne Light L.P. to Duquesne Capital L.P. (the "Original
Limited Partnership Agreement") and such name change has been reflected by
filing an Amended and Restated Certificate of Limited Partnership with the
office of the Secretary of State of the State of Delaware on May 9, 1994; and
WHEREAS, the Partners desire to continue the Partnership as a limited
partnership under the Act and to amend and restate the Original Limited
Partnership Agreement in its entirety;
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINED TERMS
Unless the context otherwise requires, the terms defined in this Article I
shall, for the purposes of this Agreement, have the meanings herein specified.
<PAGE>
"Act" shall mean the Delaware Revised Uniform Limited Partnership Act, 6
Del. C. (S) 17-101, et seq., as the same may be amended from time to time, and
- --- - -------
any successor to such Act.
"Affiliate" shall mean, with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person. For purposes of this definition, the term "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.
"Agreement" shall mean this Amended and Restated Agreement of Limited
Partnership of the Partnership, as amended, supplemented or restated and in
effect from time to time.
"Bankruptcy" shall mean any events specified in (S)(S) 17-402(a)(4) and (5)
of the Act.
"Book-Entry Interest" shall mean a beneficial interest in an LP
Certificate, ownership and transfers of which shall be made through book entries
by the Depository as described in Section 14.4.
"Certificate" shall mean the Certificate of Limited Partnership and any and
all amendments thereto and restatements thereof filed on behalf of the
Partnership with the office of the Secretary of State of the State of Delaware
pursuant to the Act.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section ((S)) of the Code refers not only
to such specific section but also to any corresponding provision of any federal
tax statute enacted after the date of this Agreement, as such specific section
or corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Covered Person" shall mean the General Partner, any Affiliate of the
General Partner or any officers, directors, shareholders, partners, employees,
representatives or agents of the General Partner or their respective Affiliates,
or any employee or agent of the Partnership or its Affiliates.
"Debentures" shall mean the subordinated debentures of Duquesne Light
issued in one or more series under the Indenture and having certain payment
terms that correspond to the terms of the related series of Preferred
Securities.
"Depository" shall mean The Depository Trust Company, New York, New York,
or its successors and assigns and any other securities depository for the
Preferred Securities in accordance with this Agreement.
-2-
<PAGE>
"Dividends" shall mean the distributions paid or payable to any Limited
Partner who is a Preferred Security Holder pursuant to the terms of the
Preferred Securities held by such Limited Partner.
"Duquesne Light" means Duquesne Light Company, a Pennsylvania corporation,
and any successor thereto permitted under the Indenture.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and any successor to such statute.
"Fiscal Year" shall mean (i) the period commencing upon the formation of
the Partnership and ending on December 31, 1996, (ii) any subsequent twelve (12)
month period commencing on January 1 and ending on December 31.
"General Partner" shall mean Duquesne Light, in its capacity as general
partner of the Partnership, together with any successor thereto that becomes a
general partner of the Partnership pursuant to the terms of this Agreement.
"General Partner Interests" shall mean the Interests of the General Partner
in the Partnership.
"Guarantee" shall mean the Payment and Guarantee Agreement of Duquesne
Light dated as of May 14, 1996 relating to the Preferred Securities.
"Guarantor" means Duquesne Light.
"Holder" or "Preferred Security Holder" means a Person in whose name an LP
Certificate is registered on the books and records of the Partnership; provided,
however, that in determining whether the Holders of the requisite percentage of
Preferred Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include Duquesne Light or any Affiliate of
Duquesne Light.
"Indemnified Person" shall mean each Limited Partner, any Affiliate of the
General Partner or any officers, directors, shareholders, partners, employees,
representatives or agents of the General Partner or of any Affiliate of the
General Partner, or any employee or agent of the Partnership or its Affiliates.
"Indenture" shall mean the Indenture of Duquesne Light dated as of May 1,
1996 between Duquesne Light and The First National Bank of Chicago, as trustee.
"Initial Limited Partner" shall mean Susan Fields.
-3-
<PAGE>
"Interest" shall mean the entire interest of a Partner in the Partnership
at any particular time, including the right of such Partner to any and all
benefits to which a Partner may be entitled as provided in this Agreement,
together with the obligations of such Partner to comply with all of the terms
and provisions of this Agreement.
"Limited Partners" shall mean any Person who is admitted to the Partnership
as a limited partner of the Partnership in accordance with the terms of this
Agreement, including the Preferred Security Holders, together with any
successors thereto, in each such Person's capacity as a limited partner of the
Partnership.
"LP Certificate" shall mean a certificate substantially in the form
attached hereto as Exhibit A, evidencing the Preferred Securities held by a
Limited Partner.
"Partners" shall mean the General Partner and the Limited Partners,
collectively, and a "Partner" shall mean any one of the Partners.
"Partnership" shall mean the limited partnership heretofore formed and
continued pursuant to this Agreement, and any successor thereto.
"Person" shall mean any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
or other legal entity or organization.
"Preferred Securities" shall have the meaning set forth in Section 10.2 of
this Agreement.
"Preferred Security Owner" shall mean, with respect to a Book-Entry
Interest, a Person who is the beneficial owner of such Book-Entry Interest, as
reflected on the books of the Depository, or on the books of a Person
maintaining an account with such Depository (directly as a participant or as an
indirect participant in the Depository, in each case in accordance with the
rules of such Depository).
"Purchase Price" shall mean the amount paid for each Preferred Security in
the initial offering thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
successor to such statute.
"Tax Matters Partner" means the General Partner designated as such in
Section 12.1 hereof.
-4-
<PAGE>
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Underwriting Agreement" means an Underwriting Agreement among the
Partnership, Duquesne Light and the underwriters named therein relating to the
issuance and sale of one or more series of Preferred Securities.
ARTICLE II
CONTINUATION AND TERM
Section 2.1 Formation. The General Partner and the Initial Limited
---------
Partner have previously formed the Partnership as a limited partnership pursuant
to the provisions of the Act and hereby amend and restate the Original Limited
Partnership Agreement in its entirety.
Section 2.2 Continuation.
------------
(a) The Partners hereby agree to continue the Partnership under and
pursuant to the provisions of the Act and agree that the rights, duties and
liabilities of the Partners shall be as provided in the Act, except as otherwise
provided herein.
(b) Upon the execution of this Agreement or a counterpart of this
Agreement, Duquesne Light shall continue as the General Partner and Susan Fields
shall continue as the Initial Limited Partner. Pursuant to Section 2.2(c) of
this Agreement, the Holders of Preferred Securities from time to time shall be
admitted to the Partnership as Limited Partners. Following the admission of any
Holder of Preferred Securities to the Partnership as a Limited Partner, the
Initial Limited Partner shall withdraw from the Partnership and shall receive
the return of her capital contribution without interest or deduction, and the
remaining Partners hereby agree to continue the business of the Partnership
without dissolution.
(c) Without execution of this Agreement, upon receipt by a Person of an LP
Certificate and payment for the Preferred Security being acquired by such
Person, which shall be deemed to constitute a request by such Person that the
books and records of the Partnership reflect its admission as a Limited Partner,
such Person shall be admitted to the Partnership as a Limited Partner and shall
become bound by this Agreement.
(d) The name and mailing address of each Partner and the amount
contributed by such Partner to the capital of the Partnership shall be listed on
the books and records of the Partnership. The General Partner shall be required
to update the books and records from time to time as necessary to accurately
reflect the information therein.
-5-
<PAGE>
(e) The General Partner shall execute, deliver and file any and all
amendments to and restatements of the Certificate.
Section 2.3 Name. The name of the Partnership heretofore formed and
----
continued hereby is Duquesne Capital L.P., unless and until the name of the
Partnership is changed by the General Partner, in its sole discretion, and an
appropriate amendment to the Certificate is filed as required by the Act.
Section 2.4 Duration. The Partnership commenced on the date the
--------
Certificate was filed in the office of the Secretary of State of the State of
Delaware and shall continue until December 31, 2049 unless sooner dissolved
before such date in accordance with the provisions of this Agreement.
Section 2.5 Registered Agent and Office. The Partnership's
---------------------------
registered agent and office in the State of Delaware is The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. At any time, the General Partner may designate another
registered agent and/or registered office.
Section 2.6 Principal Place of Business. The principal place of
---------------------------
business of the Partnership shall be c/o Duquesne Light Company, 411 Seventh
Avenue, P.O. Box 1930, Pittsburgh, Pennsylvania 15230-1930. The General Partner
may change the location of the Partnership's principal place of business in its
sole and absolute discretion.
Section 2.7 Statutory Compliance. The General Partner shall
--------------------
execute and file on behalf and at the expense of the Partnership all
appropriate certificates required by law to be filed in connection with the
formation and existence of the Partnership, and the General Partner shall
execute and so file such other documents, applications and instruments as it may
be deemed necessary or appropriate with respect to the formation of and the
conduct of business by the Partnership, including, without limitation, the
conduct of business, if any, of the Partnership in Pennsylvania.
ARTICLE III
PURPOSE AND POWERS OF THE PARTNERSHIP
Section 3.1 Purpose. The sole purpose of the Partnership is to issue
-------
interests in the Partnership, including, without limitation, General Partner
Interests and Preferred Securities, and to lend the proceeds thereof to Duquesne
Light in return for Debentures of Duquesne Light, and to engage in any and all
activities necessary, advisable or incidental thereto.
-6-
<PAGE>
Section 3.2 Powers of the Partnership.
-------------------------
(a) The Partnership shall have the power and authority to take any and
all actions necessary, appropriate, proper, advisable, incidental or convenient
to or for the furtherance of the purpose set forth in Section 3.1., including
all of the powers that may be exercised by the General Partner on behalf of the
Partnership pursuant to this Agreement.
(b) The Partnership, and the General Partner on behalf of the
Partnership, may enter into and execute, deliver, acknowledge and perform one or
more Underwriting Agreements, registration statements, applications and filings
to list Preferred Securities on one or more national securities exchanges or
qualify the Preferred Securities for sale in various jurisdictions, and any
other contracts, applications, certificates or agreements contemplated thereby
or specifically described therein, and make loans to Duquesne Light in return
for Debentures of Duquesne Light, all without any further act, vote or approval
of any Partner notwithstanding any other provision of this Agreement, the Act or
other applicable law. The General Partner is hereby authorized to enter into and
perform on behalf of the Partnership all such contracts, applications, filings,
certificates and agreements, but such authorization shall not be deemed a
restriction on the power of the General Partner to enter into other documents on
behalf of the Partnership to the extent specifically provided for in this
Agreement.
Section 3.3 Limitations on Partnership Powers. Notwithstanding the
---------------------------------
foregoing provisions of Section 3.2, neither the Partnership nor the General
Partner on behalf of the Partnership shall have the power or authority to (a)
borrow money or to become liable for the borrowings of any third party or (b)
except as expressly provided in Section 3.1, to engage in any financial or other
trade or business. The Partnership shall not do business in any jurisdiction
other than Delaware or Pennsylvania, it being understood that the issuance and
sale of Preferred Securities may be consummated in New York.
ARTICLE IV
CAPITAL CONTRIBUTIONS, SECURITIES
AND CAPITAL ACCOUNTS
Section 4.1 Capital Contributions.
---------------------
(a) The General Partner has contributed the amount of $1,515,175.00 to
the capital of the Partnership and shall make such further contributions as are
necessary to satisfy its obligations under Section 6.4.
-7-
<PAGE>
(b) The Initial Limited Partner has contributed the amount of $1 to the
capital of the Partnership, which amount shall be returned to the Initial
Limited Partner upon her withdrawal from the Partnership.
(c) With respect to each Limited Partner, there shall be contributed to
the capital of the Partnership the amount of the Purchase Price for the
Preferred Securities acquired by it (such amount being such Limited Partner's
capital contribution to the Partnership). No Limited Partner shall be required
to make any additional capital contribution to the Partnership in respect of the
Preferred Securities held by it.
Section 4.2 Securities.
----------
(a) The Preferred Securities held by a Preferred Security Holder
shall be registered in its name on the books and records of the Partnership. A
Preferred Security Holder's Interests shall be represented by the Preferred
Securities so registered in its name. Each Limited Partner and Holder of
Preferred Securities hereby agrees that its Interests and any Preferred
Securities held by it shall for all purposes be personal property. No Limited
Partner or Holder of Preferred Securities shall have any interest in specific
Partnership property.
(b) The General Partner Interests shall be set forth on the books and
records of the Partnership. The General Partner hereby agrees that the General
Partner Interests shall for all purposes be personal property. The General
Partner shall have no interest in specific Partnership property.
Section 4.3 Capital Accounts. An individual capital account (a
----------------
"Capital Account") shall be established and maintained for each Partner which
shall be credited with the capital contributions made and the profits allocated
to the Partner (or predecessor in interest) and debited by the distributions
made and losses allocated to the Partner (or predecessor thereof). Any
syndication expenses incurred by the Partnership shall be allocated exclusively
to the Capital Account of the General Partner. All provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with the
Treasury Regulations promulgated under Code (S) 704(b), and shall be interpreted
and applied in a manner consistent with such Treasury Regulations.
ARTICLE V
PARTNERS
Section 5.1 Powers of Partners. The Partners shall have the power to
------------------
exercise any and all rights or powers granted to the Partners pursuant to the
express terms of this Agreement.
-8-
<PAGE>
Section 5.2 Partition. Each Partner waives any and all rights that
---------
it may have to maintain an action for partition of the Partnership's property.
Section 5.3 Withdrawal. A Partner (other than the Initial Limited
----------
Partner) may not withdraw from the Partnership prior to the dissolution and
winding up of the Partnership except upon the assignment of its Interests
(including any redemption, repurchase or other acquisition by the Partnership or
Duquesne Light, as the case may be), in accordance with the provisions of this
Agreement. A withdrawing Partner shall not be entitled to receive any
distribution and shall not otherwise be entitled to receive the fair value of
its Interests except as otherwise expressly provided in this Agreement.
ARTICLE VI
MANAGEMENT
Section 6.1 Management of the Partnership. The General Partner shall
-----------------------------
have full, exclusive and complete discretion to manage and control the business
and affairs of the Partnership, to make all decisions affecting the business and
affairs of the Partnership and to take all such actions as it deems necessary,
appropriate or convenient to accomplish the purpose of the Partnership as set
forth herein, all subject, however, to the provisions of Section 16.12 hereof.
Section 6.2 Expenses. The General Partner shall pay for all, and the
--------
Partnership shall not be obligated to pay, directly or indirectly, any, of the
costs and expenses of the Partnership (including, without limitation, costs and
expenses relating to the organization of, and offering of limited partner
interests in, the Partnership and costs and expenses relating to the operation
of the Partnership, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services and computing or
accounting equipment, any paying agents, registrars, transfer agents,
duplicating, travel and telephone).
Section 6.3 Powers of the General Partner. The General Partner shall
-----------------------------
have the right, power and authority in the management of the business and
affairs of the Partnership to do or cause to be done any and all acts deemed by
the General Partner to be necessary, appropriate or convenient to effectuate the
business, purposes and objectives of the Partnership, all subject, however, to
the provisions of Section 16.12 hereof. Without limiting the generality of the
foregoing, the General Partner shall have the power and authority without any
further act, vote or approval of any Partner to:
(a) issue Interests, including the General Partner Interests, and the
Preferred Securities in accordance with this Agreement;
(b) act as registrar and transfer agent for the Preferred Securities;
-9-
<PAGE>
(c) establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including with respect to
Dividends and voting rights and pay Dividends and make all other required
payments and distributions on General Partner Interests and Preferred Securities
as the Partnership's paying agent;
(d) bring and defend on behalf of the Partnership actions and
proceedings at law or in equity before any court or governmental, administrative
or other regulatory agency, body or commission or otherwise;
(e) employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors and
consultants and pay reasonable compensation for such services; and
(f) execute all documents or instruments, perform all duties and powers
and do all things for and on behalf of the Partnership in all matters necessary
or desirable or incidental to the foregoing.
The expression of any power or authority of the General Partner in
this Agreement shall not in any way limit or exclude any other power or
authority which is not specifically or expressly set forth in this Agreement.
Notwithstanding the foregoing, the General Partner shall not have the
power to permit or cause the Partnership to file a voluntary petition in
bankruptcy without the affirmative vote of the Holders of 66-2/3% in aggregate
liquidation preference of the outstanding Preferred Securities.
Section 6.4 Ownership by the General Partner. The capital
--------------------------------
contributions made by the General Partner to the Partnership shall be at least
equal to 1% of the total contributions made by all Partners to the Partnership,
and except as otherwise provided in this Agreement, at all times at least 1% of
all income, gain, loss, deduction and credit of the Partnership shall be
allocated to the General Partner.
Section 6.5 No Management by the Limited Partners. Except as
-------------------------------------
otherwise expressly provided herein, no Limited Partner, in its capacity as
such, shall take part in the day-to-day management, operation or control of the
business and affairs of the Partnership. The Limited Partners shall not be
agents of the Partnership and shall not have any right, power or authority to
transact any business in the name of the Partnership or to act for or on behalf
of or to bind the Partnership.
Section 6.6 Limitation of Liability. Except as otherwise expressly
-----------------------
required by law, a Limited Partner, in its capacity as such, shall have no
liability in excess of (a) the amount of its capital contributions, (b) its
share of any assets and undistributed profits of the Partnership, and (c) the
amount of any distributions wrongfully distributed to it. The Limited Partners
and the
-10-
<PAGE>
Initial Limited Partner shall have no liability under this Agreement except as
expressly provided in this Agreement or the Act.
ARTICLE VII
AMENDMENTS AND MEETINGS
Section 7.1 Amendments. Except as otherwise provided in this
----------
Agreement or by any applicable terms of any Action (as hereinafter defined)
establishing a series of Preferred Securities, this Agreement may be amended by,
and only by, a written instrument executed by the General Partner; provided,
however, that (i) no amendment shall be made, and any such purported amendment
shall be void and ineffective, to the extent the result thereof would be to
cause the Partnership to be treated as anything other than a partnership for
purposes of United States income taxation and (ii) any amendment which would
adversely affect the powers, preferences or special rights of any series of
Preferred Securities may be effected only as permitted by the terms of such
series of Preferred Securities.
Section 7.2 Meetings of the Partners.
------------------------
(a) Meetings of the Partners may be called at any time by the General
Partner or as provided in any Action establishing a series of Preferred
Securities. Except to the extent otherwise provided in any such Action, the
following provisions shall apply to meetings of Partners.
(b) Notice of any such meeting shall be given to all Partners not less
than thirty (30) business days nor more than sixty (60) days prior to the date
of such meeting. Partners may vote in person or by proxy at such meeting.
Whenever a vote, consent or approval of Partners is permitted or required under
this Agreement, such vote, consent or approval may be given at a meeting of
Partners or by written consent.
(c) Each Partner may authorize any Person to act for it by proxy on all
matters in which a Partner is entitled to participate, including waiving notice
of any meeting, or voting or participating at a meeting. Every proxy must be
signed by the Partner or its attorney-in-fact. No proxy shall be valid after
the expiration of eleven (11) months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of the
Partner executing it.
(d) Each meeting of Partners shall be conducted by the General
Partner or by such other Person as the General Partner may designate.
(e) The General Partner, in its sole discretion, shall establish all
other provisions relating to meetings of Partners, including notice of the time,
place or purpose of any meeting at
-11-
<PAGE>
which any matter is to be voted on by any Partners, waiver of any such notice,
action by consent without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with respect to
the exercise of any such right to vote; provided however, that unless the
General Partner has established a lower percentage, a majority of the Partners
entitled to vote thereat shall constitute a quorum at all meetings of the
Partners.
ARTICLE VIII
ALLOCATIONS
Section 8.1 Profits. Each fiscal period, the net profits of the
-------
Partnership will be allocated (i) first, to the Preferred Security Holders, in
proportion to the number of Preferred Securities held by each such Holder, in an
amount equal to the excess of (a) the Dividends accrued on the Preferred
Securities since their date of issuance through and including the close of the
current fiscal period (whether or not paid) over (b) the amount of profits
allocated to the Preferred Security Holders pursuant to this Section 8.1(i) in
all prior fiscal periods and (ii) thereafter, to the General Partner.
Section 8.2 Losses. Except in connection with a dissolution and
------
liquidation of the Partnership, the net losses of the Partnership shall be
allocated each year to the General Partner. Upon a dissolution and liquidation
of the Partnership, net losses shall be allocated to each Preferred Security
Holder in an amount equal to the excess of (a) such Preferred Security Holder's
Capital Account over (b) such Preferred Security Holder's Liquidation
Distribution (as defined with respect to each Preferred Security in the Action
establishing such Preferred Security), with any remaining net losses being
allocated to the General Partner.
Section 8.3 Allocation Rules.
----------------
(a) For purposes of determining the profits, losses or any other items
allocable to any period, profits, losses and any such other items shall be
determined on a daily, monthly or other basis, as determined by the General
Partner using any method that is permissible under (S) 706 of the Code and the
Treasury Regulations thereunder.
(b) The Partners are aware of the income tax consequences of the
allocations made by this Article VIII and hereby agree to be bound by the
provisions of this Article VIII in reporting their shares of Partnership income
and loss for income tax purposes.
ARTICLE IX
DIVIDENDS
-12-
<PAGE>
Section 9.1 Dividends. Limited Partners shall receive periodic
---------
Dividends, if any, redemption payments and Liquidation Distributions in
accordance with the applicable terms of the Preferred Securities. Subject to
the rights of the Preferred Securities, all remaining cash shall be distributed
to the General Partner at such time as the General Partner shall determine.
Section 9.2 Limitations on Distributions. Notwithstanding any
----------------------------
provision to the contrary contained in this Agreement, the Partnership shall not
make a distribution (including a Dividend) to any Partner on account of its
interest in the Partnership if such distribution (including a Dividend) would
violate (S)17-607 of the Act or other applicable law.
Section 9.3 Withholding. The Partnership shall comply with all
-----------
withholding requirements under federal, state and local law. The Partnership
shall request, and the Partners shall provide to the Partnership, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Partner, and any representations and forms as shall reasonably
be requested by the Partnership to assist it in determining the extent of, and
in fulfilling, its withholding obligations. The Partnership shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Partner, shall remit amounts withheld
with respect to the Partners to applicable jurisdictions. To the extent that
the Partnership is required to withhold and pay over any amounts to any
authority with respect to distributions or allocations to any Partner, the
amount withheld shall be deemed to be a distribution in the amount of the
withholding to the Partner. In the event of any claimed overwitholding,
Partners shall be limited to an action against the applicable jurisdiction. If
the amount withheld was not withheld from actual distributions, the Partnership
may reduce subsequent distributions by the amount of such withholding.
ARTICLE X
THE GENERAL PARTNER INTERESTS AND PREFERRED SECURITIES
Section 10.1 Interests of the Partners.
-------------------------
(a) Duquesne Light shall be the sole general partner of the Partnership
and shall hold all of the General Partner Interests of the Partnership.
(b) The aggregate number of Preferred Securities which the Partnership
shall have authority to issue is unlimited.
Section 10.2 Preferred Securities. (a) The General Partner on behalf
--------------------
of the Partnership is authorized to issue limited partner interests (the
"Preferred Securities"), in one or more series, having such designations,
rights, privileges, restrictions, preferences and other terms and provisions as
may from time to time be established in a written action or actions (each, an
"Action") of the General Partner providing for issue of such series. In
connection with the
-13-
<PAGE>
foregoing, the General Partner is expressly authorized, prior to issuance, to
set forth in an Action or Actions providing for the issue of such series, the
following:
(i) the distinctive designation of such series which shall
distinguish it from other series;
(ii) the number of Preferred Securities included in such series;
(iii) the annual Dividend rate (or method of determining such
rate) for Preferred Securities of such series and the date or dates upon which
such Dividends shall be payable;
(iv) whether Dividends on the Preferred Securities of such
series shall be cumulative, and, in the case of Preferred Securities of any
series having cumulative Dividend rights, the date or dates or method of
determining the date or dates from which Dividends on the Preferred Securities
of such series shall be cumulative;
(v) the amount or amounts which shall be paid out of the assets
of the Partnership to the Holders of the Preferred Securities of such series
upon voluntary or involuntary dissolution, liquidation or winding up of the
Partnership;
(vi) the price or prices at which, the period or periods within
which and the terms and conditions upon which the Preferred Securities of such
series may be redeemed or purchased, in whole or in part, at the option of the
Partnership;
(vii) the obligation, if any, of the Partnership to purchase or
redeem Preferred Securities of such series pursuant to a sinking fund or
otherwise and the price or prices at which, the period or periods within which
and the terms and conditions upon which the Preferred Securities of such series
shall be redeemed, in whole or in part, pursuant to such obligation;
(viii) the period or periods within which and the terms and
conditions, if any, including the price or prices or the rate or rates of
conversion or exchange and the terms and conditions of any adjustments thereof,
upon which the Preferred Securities of such series shall be convertible or
exchangeable at the option of the Preferred Security Holder, the Partnership or
Duquesne Light into any other Interests or securities or other property or cash
or into any other series of Preferred Securities;
(ix) the voting rights, if any, of the Preferred Securities of
such series in addition to those required by law, including the number of votes
per Preferred Security and any requirement for the approval by the Holders of
Preferred Securities, or of the Preferred Securities of one or more series, or
of both, as a condition to specified Action or amendments to this Agreement;
-14-
<PAGE>
(x) the ranking of the Preferred Securities of the series as
compared with Preferred Securities of other series in respect of the right to
receive Dividends and the right to receive payments out of the assets of the
Partnership upon voluntary or involuntary dissolution, winding up or termination
of the Partnership;
(xi) the nature and terms of the Debentures and any other backup
undertakings of Duquesne Light and/or another subsidiary of Duquesne Light to be
provided to Holders of the Preferred Securities of such series; and
(xii) any other relative rights, powers and duties of the
Preferred Securities of the series not inconsistent with this Agreement or with
applicable law;
provided that the proceeds of the issuance of each such series of Preferred
Securities, together with the proceeds of any related capital contribution of
the General Partner, shall be loaned to Duquesne Light in return for a
concurrently issued series of Debentures in aggregate principal amount equal to
the aggregate liquidation preference of the Preferred Securities of such series
and the related capital contribution, bearing interest at an annual rate equal
to the annual Dividend rate on such Preferred Securities payable at such times
as the Dividends on such Preferred Securities, and having certain redemption
provisions which correspond to the redemption provisions for such Preferred
Securities.
(b) In connection with the foregoing and without limiting the
generality thereof, the General Partner is hereby expressly authorized, without
the vote or approval of any Partner or Holder of Preferred Securities, to take
any Action to create under the provisions of this Agreement a series of
Preferred Securities that was not previously outstanding, including a series
ranking junior to other series of Preferred Securities in respect of the right
to receive Dividends and the right to receive payments out of assets of the
Partnership upon voluntary or involuntary dissolution, liquidation or winding up
of the Partnership. Without the vote or approval of any Partner or Holder of
Preferred Securities, the General Partner may execute, swear to, acknowledge,
deliver, file and record whatever documents may be required in connection with
the issue from time to time of Preferred Securities in one or more series as
shall be necessary, convenient or desirable to reflect the issue of such series.
The General Partner shall do all things it deems to be appropriate or necessary
to comply with the Act and is authorized and directed to do all things it deems
to be necessary or permissible in connection with any future issuance, including
compliance with any statute, rule, regulation or guideline of any federal, state
or other governmental agency or any securities exchange.
(c) Any Action or Actions taken by the General Partner pursuant to
the provisions of this Section 10.2 shall be deemed an amendment and supplement
to and part of this Agreement.
(d) All Preferred Securities shall rank senior to the General Partner
Interests in respect of the right to receive Dividends or other property
distributions and the right to receive payments out of the assets of the
Partnership upon voluntary or involuntary dissolution, liquidation
-15-
<PAGE>
or winding up of the Partnership. All Preferred Securities redeemed, purchased
or otherwise acquired by the Partnership (including Preferred Securities
surrendered for conversion or exchange) shall be cancelled and thereupon
restored to the status of authorized but unissued Preferred Securities
undesignated as to series.
(e) No Holder of Preferred Securities shall be entitled as a matter
of right to subscribe for or purchase, or have any preemptive right with respect
to, any part of any new series or additional issue of an existing series of
Preferred Securities, or of interests or securities convertible into any
Preferred Securities, whether now or hereafter authorized and whether issued for
cash or other consideration or by way of Dividend or distribution.
(f) Except as otherwise provided in this Agreement or by the General
Partner in accordance with Section 10.2(a) above in respect of any series of
Preferred Securities and as otherwise required by law, all management of the
Partnership shall be vested exclusively in the General Partner.
(g) Any Person acquiring Preferred Securities shall be admitted to
the Partnership as a Limited Partner upon compliance with Section 2.2.
(h) If any action is, by the terms of the Indenture, not permitted to
be taken by the Partnership without the consent of holders of Preferred
Securities or any representative appointed with respect to any series of
Preferred Securities, the General Partner shall not, without such requisite
consent, take any such action.
(i) The General Partner shall notify holders of Preferred Securities
of each series of any notice of default received from the trustee under the
Indenture with respect to the related series of Debentures within 20 days of
receipt of such notice; provided, however, in the event that the General Partner
receives notice from the Trustee that an Event of Default under the Indenture
has occurred and the Preferred Securities are then held by the Depository, then
the General Partner shall notify the holders of Preferred Securities of such
Event of Default within 5 Business Days (as defined in the Indenture) of receipt
of such notice.
ARTICLE XI
BOOKS AND RECORDS
Section 11.1 Books, Records and Financial Statements.
---------------------------------------
(a) At all times during the continuance of the Partnership, the
Partnership shall maintain, at its principal place of business, separate books
of account for the Partnership that shall show a true and accurate record of all
costs and expenses incurred, all charges made, all credits made and received and
all income derived in connection with the operation of the Partnership's
-16-
<PAGE>
business in accordance with generally accepted accounting principles
consistently applied, and, to the extent inconsistent therewith, in accordance
with this Agreement. Such books of account, together with a copy of this
Agreement and a certified copy of the Certificate, shall at all times be
maintained at the principal place of business of the Partnership and shall be
open to inspection and examination at reasonable times by each Limited Partner
or its duly authorized representative for any purpose reasonably related to such
Limited Partner's interest in the Partnership.
(b) Notwithstanding any other provision of this Agreement, the General
Partner may, to the maximum extent permitted by applicable law, keep
confidential from the Limited Partners any information the disclosure of which
the General Partner reasonably believes is not in the best interests of the
Partnership or is adverse to the interests of the Partnership or which the
Partnership or the General Partner is required by law or by an agreement with
any Person to keep confidential.
(c) The General Partner shall prepare and maintain, or cause to be
prepared and maintained, the books of account of the Partnership and within
three (3) months after the close of each Fiscal Year the General Partner shall
transmit to each Partner a statement indicating such Partner's share of each
item of Partnership income, gain, loss, deduction or credit for such Fiscal Year
for Federal income tax purposes.
Section 11.2 Accounting Method. For both financial and tax reporting
-----------------
purposes and for purposes of determining profits and losses, the books and
records of the Partnership shall be kept on the accrual method of accounting
applied in a consistent manner and shall reflect all Partnership transactions
and be appropriate and adequate for the Partnership's business.
ARTICLE XII
TAX MATTERS
Section 12.1 Tax Matters Partner. The General Partner is hereby
-------------------
designated as "Tax Matters Partner" of the Partnership for purposes of (S)
6231(a)(7) of the Code and shall have the power to manage and control, on behalf
of the Partnership, any administrative proceeding at the Partnership level with
the Internal Revenue Service relating to the determination of any item of
Partnership income, gain, loss, deduction or credit for Federal income tax
purposes.
Section 12.2 No Right to Make Section 754 Election. The General
-------------------------------------
Partner shall not make an election in accordance with (S) 754 of the Code.
Section 12.3 Taxation as Partnership. The General Partner and the
-----------------------
Preferred Security Holders acknowledge that they intend, for Federal income tax
purposes, that the Partnership shall be treated as a partnership and that the
General Partner and the Holders of Preferred Securities shall be treated as
Partners of such Partnership for such purposes.
-17-
<PAGE>
ARTICLE XIII
EXCULPATION AND INDEMNIFICATION
Section 13.1 Exculpation.
-----------
(a) No Covered Person shall be liable to the Partnership or any
Indemnified Person for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Covered Person in good faith on behalf
of the Partnership and in a manner reasonably believed to be within the scope of
authority conferred on such Covered Person by this Agreement, except that a
Covered Person shall be liable for any such loss, damage or claim incurred by
reason of such Covered Person's gross negligence, bad faith, recklessness or
willful misconduct.
(b) Each Covered Person shall be fully protected in relying in good
faith upon the records of the Partnership and upon such information, opinions,
reports or statements presented to the Partnership by any Person as to matters
such Covered Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Partnership, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which distributions to Partners might properly be paid.
Section 13.2 Duties.
------
(a) To the extent that, at law or in equity, a Covered Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to any Indemnified Person, such Covered Person acting under this
Agreement shall not be liable to the Partnership or to any other Indemnified
Person for its good faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they restrict the duties and
liabilities of a Covered Person otherwise existing at law or in equity, are
agreed by the parties hereto to replace such other duties and liabilities of
such Covered Person.
(b) Unless otherwise expressly provided herein, (a) whenever a
conflict of interest exists or arises between a Covered Person, on the one hand,
and the Partnership or a Limited Partner, on the other hand, or (b) whenever
this Agreement or any other agreement contemplated herein or therein provides
that a Covered Person shall act in a manner that is, or provide terms that are,
fair and reasonable to the Partnership or any Partner, such Covered Person shall
resolve such conflict of interest, take such action or provide such terms,
considering in each case the relative interest of each party (including its own
interest) to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interests, any customary or accepted industry
practices, and any applicable generally accepted accounting practices or
principles. In the absence of gross negligence, recklessness, bad faith or
willful misconduct by the Covered Person, the resolution, action or term so
made, taken or provided by such Covered Person shall
-18-
<PAGE>
not constitute a breach of this Agreement or any other agreement contemplated
herein or of any duty or obligation of such Covered Person at law or in equity
or otherwise.
(c) Whenever in this Agreement the General Partner or an Indemnified
Person is permitted or required to make a decision (i) in its "discretion" or
under a grant of similar authority, the General Partner or such Indemnified
Person shall be entitled to consider only such interests and factors as it
desires, including its own interests, and shall have no duty or obligation to
give any consideration to any interest of or factors affecting the Partnership
or any other Person, or (ii) in its "good faith" or under another express
standard, the General Partner or such Indemnified Person shall act under such
express standard and shall not be subject to any other or different standard
imposed by this Agreement or other applicable law.
Section 13.3 Indemnification. To the fullest extent permitted by
---------------
applicable law, an Indemnified Person shall be entitled to indemnification from
the Partnership for any loss, damage or claim incurred by such Indemnified
Person by reason of any act or omission performed or omitted by such Indemnified
Person in good faith on behalf of the Partnership and in a manner reasonably
believed to be within the scope of authority conferred on such Indemnified
Person by this Agreement, except that no Indemnified Person shall be entitled to
be indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of gross negligence, recklessness, bad faith or
willful misconduct with respect to such acts or omissions; provided, however,
-------- -------
that any indemnity under this Section 13.3 shall be provided out of and to the
extent of Partnership assets only, and no Covered Person shall have any personal
liability on account thereof.
Section 13.4 Expenses. To the fullest extent permitted by applicable
--------
law, expenses (including legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding may, from time to time,
be advanced by the Partnership prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Partnership of an
undertaking by or on behalf of the Indemnified Person to repay such amount if it
shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 13.3 hereof.
Section 13.5 Outside Businesses. Any Partner or Affiliate thereof
------------------
may engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Partnership, and the Partnership and the Partners shall have no rights by
virtue of this Agreement in and to such independent ventures or the income or
profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper. No Partner or Affiliate thereof shall be obligated to present any
particular investment opportunity to the Partnership even if such opportunity is
of a character that, if presented to the Partnership, could be taken by the
Partnership, and any Partner or Affiliate thereof shall have the right to take
for its own account (individually or as a partner or fiduciary) or to recommend
to others any such particular investment opportunity.
-19-
<PAGE>
Section 13.6 Liability of the General Partner. Except as otherwise
--------------------------------
provided in the Act, the General Partner shall have the liabilities of a partner
in a partnership without limited partners to any Person other than the
Partnership and the Limited Partners. Except as otherwise provided in this
Agreement or the Act, the General Partner shall have the liabilities of a
partner in a partnership without limited partners to the Partnership and each
Limited Partner.
Section 13.7 Waiver by General Partner; Indemnification of
---------------------------------------------
Partnership by General Partner. The General Partner hereby waives all rights of
- ------------------------------
indemnification which it may have against the Partnership under this Agreement
or otherwise. The General Partner also hereby agrees to indemnify and hold
harmless the Partnership for (i) any payments made by it under this Article
XIII, and (ii) any indemnity payments the Partnership may otherwise be required
to make under applicable law.
ARTICLE XIV
TRANSFERS
Section 14.1 Transfer of Interests. (a) Preferred Securities shall be
---------------------
freely transferable by a Preferred Security Holder.
(b) The General Partner may not assign its interest in the Partnership
in whole or in part under any circumstances, except to a successor of Duquesne
Light under the Indenture. Any such assignee of all or a part of the Interest of
a General Partner in the Partnership shall be admitted to the Partnership as a
general partner of the Partnership immediately prior to the effective date of
such assignment, and such additional or successor General Partner is hereby
authorized to and shall continue the business of the Partnership without
dissolution.
(c) No Interest shall be transferred, in whole or in part, except in
accordance with the terms and conditions set forth in this Agreement. Any
transfer or purported transfer of any Interest not made in accordance with this
Agreement shall be null and void.
Section 14.2 Transfer of LP Certificates. The General Partner shall
---------------------------
provide for the registration of LP Certificates and of transfers of LP
Certificates without charge by or on behalf of the Partnership, but upon payment
in respect of any tax or other governmental charges which may be imposed in
relation to it, together with the giving of such indemnity as the General
Partner may require. Upon surrender for registration of transfer of any LP
Certificate, the General Partner shall cause one or more new LP Certificates to
be issued in the name of the designated transferee or transferees. Every LP
Certificate surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the General Partner duly
executed by the Preferred Security Holder or his or her attorney duly authorized
in writing. Each LP Certificate surrendered for registration of transfer shall
be cancelled by the General Partner. A transferee of an LP Certificate shall be
admitted to the Partnership as a
-20-
<PAGE>
Limited Partner and shall be entitled to the rights and subject to the
obligations of a Preferred Security Holder hereunder upon the receipt by such
transferee of an LP Certificate. The transferor of an LP Certificate shall
cease to be a limited partner of the Partnership at the time that the transferee
of the LP Certificate is admitted to the Partnership as a Limited Partner in
accordance with this Section 14.2.
Section 14.3 Persons Deemed Preferred Security Holders. The
-----------------------------------------
Partnership may treat the Person in whose name any LP Certificate shall be
registered on the books and records of the Partnership as the Preferred Security
Holder and the sole holder of such LP Certificate for purposes of receiving
Dividends and for all other purposes whatsoever and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such LP
Certificate on the part of any other Person, whether or not the Partnership
shall have actual or other notice thereof.
Section 14.4 Book-Entry Interests. The LP Certificates, on original
--------------------
issuance, will be issued in the form of a global LP Certificate or LP
Certificates representing Book-Entry Interests, to be delivered to the
Depository, by, or on behalf of, the Partnership. Such LP Certificate or LP
Certificates shall initially be registered on the books and records of the
Partnership in the name of the Depository or its nominee, and no Preferred
Security Owner will receive a definitive LP Certificate representing such
Preferred Security Owner's interests in such LP Certificate, except as provided
in Section 14.6. Unless and until definitive, fully registered LP Certificates
(the "Definitive LP Certificates") have been issued to the Preferred Security
Owners pursuant to Section 14.6:
(a) The provisions of this Section shall be in full force and effect;
(b) The Partnership and the General Partner shall be entitled to
deal with the Depository for all purposes of this Agreement (including the
payment of Dividends on the LP Certificates and receiving approvals, votes or
consents hereunder) as the Preferred Security Holder and the sole holder of the
LP Certificates and shall have no obligation to the Preferred Security Owners;
(c) To the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section shall
control; and
(d) The rights of the Preferred Security Owners shall be exercised
only through the Depository and shall be limited to those established by law and
agreements between such Preferred Security Owners and the Depository and/or the
Depository participants. Unless and until the Definitive LP Certificates are
issued pursuant to Section 14.6, the Depository will be responsible for making
book-entry transfers among its participants and accepting and transmitting
payments of Dividends on the LP Certificates to such participants.
Section 14.5 Notices to the Depository. Whenever a notice or other
-------------------------
communication to the Preferred Security Holders is required under this
Agreement, unless and
-21-
<PAGE>
until Definitive LP Certificates shall have been issued to the Preferred
Security Owners pursuant to Section 14.6, the General Partner shall give all
such notices and communications specified herein to be given to the Preferred
Security Holders to the Depository, and shall have no obligations to the
Preferred Security Owners.
Section 14.6 Definitive LP Certificates. If (a) the Depository
--------------------------
elects to discontinue its services as securities depository and gives reasonable
notice to the Partnership, or (b) the Partnership elects to terminate the book-
entry system through the Depository then the Partnership shall either (i)
appoint a successor Depository or (ii) cause Definitive LP Certificates to be
prepared by the Partnership. Upon surrender of the global LP Certificate or LP
Certificates representing the Book-Entry Interests by the Depository,
accompanied by registration instructions, the General Partner shall cause
Definitive LP Certificates to be delivered to Preferred Security Owners in
accordance with the instructions of the Depository. Neither the General Partner
nor the Partnership shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Any Person receiving a Definitive LP Certificate in
accordance with this Article XIV shall be admitted to the Partnership as a
Limited Partner upon receipt of such Definitive LP Certificate. The Depository
or the nominee of the Depository, as the case may be, shall cease to be a
limited partner of the Partnership under this Section 14.6 at the time that at
least one additional Person is admitted to the Partnership as a Limited Partner
in accordance with this Section 14.6. The Definitive LP Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the General Partner, as evidenced by its execution
thereof.
Section 14.7 Surrender of Preferred Securities by General Partner.
----------------------------------------------------
If at any time Duquesne Light shall surrender any Preferred Securities of a
particular series to the Partnership, the Partnership shall surrender to or upon
the order of Duquesne Light Debentures of the series issued concurrently with
the Preferred Securities so surrendered, in aggregate principal amount equal to
the aggregate liquidation preference of such Preferred Securities so
surrendered.
ARTICLE XV
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 15.1 No Dissolution. The Partnership shall not be
--------------
dissolved by the admission of additional or successor Partners in accordance
with the terms of this Agreement. The death, withdrawal, incompetency,
Bankruptcy, dissolution or other cessation to exist as a legal entity of a
Limited Partner, or the occurrence of any other event which terminates the
Interest of a Limited Partner in the Partnership, shall not in and of itself
cause the Partnership to be dissolved and its affairs wound up. To the fullest
extent permitted by applicable law, upon the occurrence of any such event, the
General Partner may, without any further act, vote or approval of any Partner,
admit any Person to the Partnership as an additional or substitute Limited
Partner, which
-22-
<PAGE>
admission shall be effective as of the date of the occurrence of such event, and
the business of the Partnership shall be continued without dissolution.
Section 15.2 Events Causing Dissolution. The Partnership shall be
--------------------------
dissolved and its affairs shall be wound up upon the occurrence of any of the
following events:
(a) the expiration of the term of the Partnership, as provided in
Section 2.4 hereof;
(b) the withdrawal, removal or Bankruptcy of the General Partner or
assignment by the General Partner of its entire Interest in the Partnership when
the assignee is not admitted to the Partnership as an additional or successor
General Partner in accordance with Section 14.1(b), or the occurrence of any
other event that results in the General Partner ceasing to be a general partner
of the Partnership under the Act, unless, in any such case, the business of the
Partnership is continued in accordance with the Act;
(c) the entry of a decree of judicial dissolution under (S)17-802
of the Act; or
(d) the written consent of all Partners.
Section 15.3 Notice of Dissolution. Upon the dissolution of the
---------------------
Partnership, the General Partner, as liquidating trustee, shall promptly notify
the Partners of such dissolution.
Section 15.4 Liquidation. Upon dissolution of the Partnership, the
-----------
General Partner, as liquidating trustee, shall immediately commence to wind up
the Partnership's affairs; provided, however, that a reasonable time shall be
-------- -------
allowed for the orderly liquidation of the assets of the Partnership and the
satisfaction of liabilities to creditors so as to enable the Partners to
minimize the normal losses attendant upon a liquidation. The Preferred Security
Holders shall continue to share profits and losses during liquidation in the
same proportions, as specified in Article VIII hereof, as before liquidation.
The proceeds of liquidation shall be distributed, as realized, in the following
order and priority:
(a) to creditors of the Partnership, including Partners who are
creditors, to the extent permitted by law, in satisfaction of the liabilities of
the Partnership (whether by payment or the making of reasonable provision for
payment thereof), other than liabilities for distributions (including Dividends)
to Partners;
(b) to the Preferred Security Holders of each series then outstanding
in accordance with their respective interests and in the amount of their
respective Liquidation Distributions; and
(c) the balance to the General Partner.
-23-
<PAGE>
Section 15.5 Termination. The Partnership shall terminate when all
-----------
of the assets of the Partnership shall have been distributed in the manner
provided for in this Article XV, and the Certificate shall have been cancelled
in the manner required by the Act.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Notices. All notices provided for in this Agreement
-------
shall be in writing, duly signed by the party giving such notice.
(a) All notices provided for in this Agreement to the Partnership or
General Partner shall be delivered, telecopied or mailed by registered or
certified mail, as follows:
(i) if given to the Partnership, in care of the General Partner
at the Partnership's mailing address set forth below:
c/o Duquesne Light Company
411 Seventh Avenue
P.O. Box 1930
Pittsburgh, Pennsylvania 15230-1930
Telecopy: (412) 393-6004
Telephone: (412) 393-6230
Attention: Treasurer
(ii) if given to the General Partner, at its mailing address
set forth below:
Duquesne Light Company
411 Seventh Avenue
P.O. Box 1930
Pittsburgh, Pennsylvania 15230-1930
Telecopy: (412) 393-6004
Telephone: (412) 393-6000
Attention: Treasurer
All such notices shall be deemed to have been given when received.
(b) All notices provided for in this Agreement to any other Partner
shall be given at the address set forth on the books and records of the
Partnership, by mail, first-class postage prepaid, and shall be deemed given
when so mailed.
-24-
<PAGE>
Section 16.2 Failure to Pursue Remedies. The failure of any party to
--------------------------
seek redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
Section 16.3 Cumulative Remedies. The rights and remedies provided
-------------------
by this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
Section 16.4 Binding Effect. This Agreement shall be binding upon
--------------
and inure to the benefit of all of the parties and, to the extent permitted by
this Agreement, their successors, legal representatives and assigns.
Section 16.5 Interpretation. Throughout this Agreement, nouns,
--------------
pronouns and verbs shall be construed as singular or plural, whichever shall be
applicable. All references herein to "Articles", "Sections" and "paragraphs"
shall refer to corresponding provisions of this Agreement.
Section 16.6 Severability. The invalidity or unenforceability of any
------------
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
Section 16.7 Counterparts. This Agreement may be executed in any
------------
number of counterparts with the same effect as if all parties hereto had signed
the same document. All counterparts shall be construed together and shall
constitute one instrument.
Section 16.8 Integration. This Agreement constitutes the entire
-----------
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
Section 16.9 Governing Law. This Agreement and the rights of the
-------------
parties hereunder shall be interpreted in accordance with the laws of the State
of Delaware, and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
Section 16.10 Headings. The headings and subheadings in this
--------
Agreement are included for convenience and identification only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof.
-25-
<PAGE>
Section 16.11 Power of Attorney. Appointment of General Partner.
----------------- ------------------------------
(a) Each Limited Partner hereby irrevocably constitutes and appoints the General
Partner as its true and lawful attorney in fact, in its name, place, and stead,
to make, execute, acknowledge, and file the following documents, to the extent
consistent with the other provisions of this Agreement:
(i) This Agreement, and, to the extent required by law, the
Certificate;
(ii) Any fictitious or assumed-name certificates required to be
filed on behalf of the Partnership;
(iii) Any application or registration to do business in any State
other than, or in addition to, the State of Delaware;
(iv) Deeds, notes, mortgages, pledges, security instruments of
any kind and nature, leases, and such other instruments as may be necessary to
carry on the business of the Partnership; provided that no such instrument shall
increase the personal liability of the Limited Partners;
(v) All certificates and other instruments that the General
Partner deems appropriate or necessary to form and qualify, or continue the
qualification of, the Partnership as a limited partnership in the State of
Delaware and all jurisdictions in which the Partnership may intend to conduct
business or own property;
(vi) Any duly adopted amendment to or restatement of this
Agreement or the Certificate;
(vii) All conveyances and other instruments or documents that
the General Partner deems appropriate or necessary to effect or reflect the
dissolution, liquidation and termination of the Partnership pursuant to the
terms of this Agreement (including a certificate of cancellation); and
(viii) All other instruments as the attorneys-in-fact or any of
them may deem necessary or advisable to carry out fully the provisions of this
Agreement in accordance with its terms.
(b) It is expressly intended by each Limited Partner that the power
of attorney granted by Section 16.11(a) is coupled with an interest, shall be
irrevocable, and shall survive and not be affected by the subsequent disability
or incapacity of such Limited Partner (or if such Limited Partner is a
corporation, partnership, trust, association, limited liability company or other
legal entity, by the dissolution or termination thereof).
-26-
<PAGE>
Section 16.12 Enforcement of the Indenture by Limited Partners. Any
------------------------------------------------
provision of this Agreement to the contrary notwithstanding, any request,
demand, authorization, direction, notice, consent, election, waiver or other
action provided by the Indenture to be made, given or taken by holders of
Debentures, including without limitation any of the foregoing to be made, given
or taken by holders of Debentures in connection with the enforcement of the
obligations of Duquesne Light under the Indenture or on the Debentures, may be
made, given or taken by the Holders of Preferred Securities having a liquidation
preference equal to the principal amount of Debentures required to be held in
order for holders of Debentures to take such action or, if so provided in the
Action with respect to such Preferred Securities, by one or more special
representatives appointed by such Holders of Preferred Securities ("Special
Representative"). For purposes of the preceding sentence and Section 104 of the
Indenture, upon the reasonable request of the Trustee to provide the identities
of Holders of Preferred Securities or any of their Special Representatives, the
General Partner, at its own cost, shall promptly provide copies of the
applicable excerpts of the books and records of the Partnership to the Trustee.
If any such action shall be taken by holders of Debentures, and by Holders of
Preferred Securities or Special Representatives thereof as contemplated above,
the action taken by Holders of Preferred Securities or by one or more Special
Representatives, as the case may be, shall control. Without limiting the
generality of the foregoing, registered Holders of Preferred Securities of each
series, or the Special Representative(s) appointed by such Holders of Preferred
Securities, shall be entitled to enforce, to the fullest extent permitted by
applicable law, Duquesne Light's obligations under the Indenture and the
Debentures that were issued concurrently with such Preferred Securities to the
extent provided in Sections 111 and 610 of the Indenture.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above stated.
GENERAL PARTNER:
DUQUESNE LIGHT COMPANY
By: /s/ Donald J. Clayton
------------------------------------
Name: Donald J. Clayton
Title: Treasurer
INITIAL LIMITED PARTNER:
SUSAN FIELDS
By: /s/ Susan Fields
--------------------------------------
<PAGE>
Exhibit A
===============================================================================
Certificate Number Number of Preferred Securities
R-1
================================================================================
CUSIP NO.
Certificate Evidencing Preferred Securities
of
Duquesne Capital L.P.
% Cumulative Monthly Income Preferred Securities, Series
-- --
(liquidation preference $25 per security)
Duquesne Capital L.P., a limited partnership formed under the laws of
the State of Delaware (the "Partnership"), hereby certifies that (the
-----------
"Preferred Security Holder") is the registered owner of ( )
------- ---------
preferred securities of the Partnership representing Interests in the
Partnership of a series designated the % Cumulative Monthly Income Preferred
--
Securities, Series (liquidation preference $25 per security) (the "Series
-- --
Preferred Securities"). The Series Preferred Securities are fully paid and
--
nonassessable Interests in the Partnership, as to which the limited partners of
the Partnership who hold the Series Preferred Securities, in their capacities
--
as limited partners of the Partnership, will have no liability solely by reason
of being Preferred Security Holders in excess of their obligations to make
payments provided for in the Limited Partnership Agreement (as defined below)
and their share of the Partnership's assets and undistributed profits (subject
to the obligation of a Preferred Security Holder to repay any funds wrongfully
distributed to it). The Series Preferred Securities are transferable on the
--
books and records of the Partnership, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed and in proper form
for transfer. The powers, preferences and special rights and limitations of the
Series Preferred Securities are established pursuant to, and this certificate
--
and the Series Preferred Securities represented hereby are issued and shall
--
in all respects be subject to the terms and provisions of, the Amended and
Restated Agreement of Limited Partnership of the Partnership dated as of May 14,
1996, as the same may, from time to time, be amended (the "Limited Partnership
Agreement") authorizing the issuance of the Series Preferred Securities and
--
determining the powers, preferences, and other special rights and limitations,
regarding Dividends, voting, return of capital and otherwise, and other matters
relating to the Series Preferred Securities. Capitalized terms used herein
--
but not defined shall have the meaning given them in the Limited Partnership
Agreement. The Preferred Security Holder is entitled to the benefits of the
Payment and Guarantee Agreement of Duquesne Light Company, a Pennsylvania
corporation, dated as of May 14, 1996 (the "Guarantee") and the % Subordinated
--
Deferrable Interest Debentures, Series of Duquesne Light Company (the
--
"Debentures") issued pursuant to the Indenture dated as of May 1, 1996 between
Duquesne Light Company and The First National Bank of Chicago, as Trustee, in
each case to the extent provided therein and in the Limited Partnership
Agreement. The Partnership will furnish a copy of the Limited Partnership
Agreement, the Guarantee and the Debentures to the Preferred Security Holder
without charge upon written request to the Partnership at its principal place of
business or registered office.
The Preferred Security Holder, by accepting this certificate, is
deemed to have agreed that the Debentures and the Guarantee are subordinate and
junior in right of payment to all Senior Indebtedness of Duquesne Light Company
as and to the extent provided in the Indenture and the Guarantee. Upon receipt
of this certificate,
<PAGE>
the Preferred Security Holder is admitted to the Partnership as a Limited
Partner, is bound by the Limited Partnership Agreement and is entitled to the
benefits thereunder and to the benefits of the aforesaid Indenture.
IN WITNESS WHEREOF,
the Partnership has executed this certificate this day of , 199 .
--- --------- -
DUQUESNE CAPITAL L.P.
By: Duquesne Light Company, its General Partner
By:
-----------------------------------------
A-2
<PAGE>
EXHIBIT 4.5
PAYMENT AND GUARANTEE AGREEMENT
PAYMENT AND GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of May
14, 1996, is executed and delivered by Duquesne Light Company, a Pennsylvania
corporation (the "Guarantor"), for the benefit of the Holders (as defined below)
from time to time of the Preferred Securities (as defined below) of Duquesne
Capital L.P., a Delaware limited partnership (the "Issuer").
WHEREAS, the Issuer will issue from time to time its preferred limited
partnership interests in one or more series ("Preferred Securities"), and the
Guarantor desires to issue this Guarantee Agreement for the benefit of the
Holders thereof from time to time, as provided herein;
WHEREAS, the Issuer will loan the proceeds from the issuance and sale of
the Preferred Securities to the Guarantor in return for Debentures (as defined
below) which will be issued by the Guarantor pursuant to the Indenture (as
defined below); and
WHEREAS, the Guarantor desires hereby irrevocably and unconditionally to
agree to the extent set forth herein to pay to the Holders the Guarantee
Payments (as defined below) and to make certain other payments on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the purchase by each Holder of the
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders.
ARTICLE I
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Amended and Restated Agreement of Limited Partnership of the
Issuer dated as of May 14, 1996 (the "Partnership Agreement").
"Debentures" shall mean subordinated debentures of the Guarantor issued in
one or more series under the Indenture and having certain payment terms which
correspond to the terms of the related series of Preferred Securities.
"Guarantee Payments" shall mean the following payments, without
duplication, to the extent not paid by the Issuer: (i) any accumulated and
unpaid Dividends on the Preferred Securities of any series (together with
interest on such Dividends at an annual rate equal to the applicable annual
dividend rate for such Preferred Securities, to the extent permitted by
applicable
<PAGE>
law), but only to the extent that the Issuer has (a) funds legally available for
the payment of such Dividends, as determined by the General Partner, and (b)
cash on hand sufficient to make such payment; (ii) the Redemption Price (as
defined below) payable with respect to any Preferred Securities called for
redemption by the Issuer, but only to the extent that the Issuer has (a) funds
legally available for the payment of such Redemption Price, as determined by the
General Partner, and (b) cash on hand sufficient to make such payment; and (iii)
upon a liquidation of the Issuer, the lesser of (a) the Liquidation Distribution
(as defined below) and (b) the amount of assets of the Issuer legally available
to the Issuer for distribution to holders of Preferred Securities.
"Holder" shall mean a Person in whose name an LP certificate evidencing a
Preferred Security is registered on the books and records of the Issuer;
provided, however, that in determining whether the Holders of the requisite
percentage of Preferred Securities have given any request, notice, consent or
waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of
the Guarantor.
"Indenture" shall mean the Indenture, dated as of May 1, 1996, between the
Guarantor and The First National Bank of Chicago, as trustee, pursuant to which
the Guarantor will issue Debentures from time to time to evidence the loan of
the proceeds received by the Issuer from (i) the issuance and sale of the
Preferred Securities and (ii) capital contributions made by the Guarantor to the
Issuer.
"Liquidation Distribution" shall mean the aggregate of the liquidation
preference of $25 per Preferred Security plus an amount equal to any accumulated
and unpaid Dividends (together with interest on such Dividends at an annual rate
equal to the annual dividend rate on the Preferred Securities, to the extent
permitted by applicable law) to the date of payment.
"Redemption Price" shall mean $25 per Preferred Security plus an amount
equal to any accumulated and unpaid Dividends (together with interest on such
Dividends at an annual rate equal to the annual dividend rate on the Preferred
Securities, to the extent permitted by applicable law) to the date fixed for
redemption.
ARTICLE II
SECTION 2.021. The Guarantor irrevocably and unconditionally agrees to pay
in full to the Holders the Guarantee Payments, as and when due, regardless of
any defense, right of set-off or counterclaim which the Issuer may have or
assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders.
SECTION 2.022. The Guarantor hereby waives notice of acceptance of this
Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
2
<PAGE>
SECTION 2.023. The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement shall in no way be affected or impaired
by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Dividends, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than any extension arising out
of a permitted extension of any interest payment periods for the Debentures);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Issuer granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt, of
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, any of the Preferred
Securities; or
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 2.024. This Guarantee Agreement is a guarantee of payment and not
of collection. A Holder may enforce this Guarantee Agreement directly against
the Guarantor, and the Guarantor hereby waives any right or remedy to require
that any action be brought against the Issuer or any other person or entity
before proceeding against the Guarantor. Subject to Section 2.05 hereof, all
waivers herein contained shall be without prejudice to the Holders' right at the
Holders' option to proceed against the Issuer, whether by separate action or by
joinder. The Guarantor agrees that this Guarantee Agreement shall not be
discharged except by payment of the Guarantee Payments in full and by complete
performance of all obligations of the Guarantor contained in this Guarantee
Agreement.
3
<PAGE>
SECTION 2.025. The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to the Holders by
the Guarantor under this Guarantee Agreement and shall have the right to waive
payment of any amount of Dividends in respect of which payment has been made to
the Holders by the Guarantor pursuant to Section 2.01; provided, however, that
the Guarantor shall not (except to the extent required by mandatory provisions
of law) exercise any rights which it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of a
payment under this Guarantee Agreement, if, at the time of any such payment, any
amounts are due and unpaid under this Guarantee Agreement. To the extent that
any amounts shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to pay over such amounts to the Holders.
SECTION 2.026. The Guarantor acknowledges that its obligations hereunder
are independent of the obligations of the Issuer with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and sole debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (f), inclusive, of Section 2.03 hereof.
ARTICLE III
SECTION 3.031. So long as any Preferred Securities remain outstanding, the
Guarantor shall not declare or pay any dividend on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of its capital stock or make
any guarantee payments with respect to the foregoing (other than payments under
this Guarantee Agreement) if at such time the Guarantor shall be in default with
respect to its payment or other obligations hereunder or there shall have
occurred and be continuing a payment default (whether before or after the
expiration of any period of grace) or an Event of Default (as defined in the
Indenture) under the Indenture.
SECTION 3.032. The Guarantor covenants, so long as any Preferred Securities
remain outstanding, that it will: (i) not voluntarily (to the extent permitted
by law) dissolve, liquidate or wind-up the Issuer; (ii) remain the sole General
Partner (as defined in the Partnership Agreement) of the Issuer and timely
perform all of its duties as General Partner of the Issuer (including the duty
to pay dividends on the Preferred Securities), provided that any permitted
successor of the Guarantor under the Indenture may succeed to the Guarantor's
duties as General Partner; and (iii) use its reasonable efforts to cause the
Issuer to remain a limited partnership (or permitted successor under the
Partnership Agreement) and otherwise continue to be treated as a partnership for
Federal income tax purposes.
SECTION 3.033. This Guarantee Agreement will constitute an unsecured
obligation of the Guarantor and will rank subordinate in right of payment to all
Senior Indebtedness (as defined in the Indenture). Each Holder shall be deemed
to agree, by its acceptance hereof, and likewise covenants and agrees that (1)
any amounts payable hereunder are
4
<PAGE>
hereby expressly subordinated, to the same extent as payments of principal of
and premium, if any, and interest on each and all of the Debentures issued under
the Indenture, in right of payment to the prior payment in full of all Senior
Indebtedness, and (2) it accepts the provisions of Article Fifteen of the
Indenture applicable to and binding the Debenture holders as if it were a
Debenture holder and such provisions applied to it and to the same extent that
such provisions apply to and bind the Debenture holders.
ARTICLE IV
This Guarantee Agreement shall terminate and be of no further force and
effect upon full payment of the Redemption Price of all Preferred Securities or
upon full payment of the Liquidation Distribution with respect to all Preferred
Securities upon liquidation of the Issuer; provided, however, that this
Guarantee Agreement shall continue to be effective or shall be reinstated, as
the case may be, if at any time any Holder of Preferred Securities must restore
payment of any sums paid under the Preferred Securities or under this Guarantee
Agreement for any reason whatsoever.
ARTICLE V
SECTION 5.051. All guarantees and agreements contained in this Guarantee
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders.
SECTION 5.052. Except with respect to any changes which do not adversely
affect the rights of holders of Preferred Securities of any series (in which
case no vote will be required), this Guarantee Agreement may only be amended by
an instrument in writing signed by the Guarantor with the prior approval of the
Holders of not less than 66-2/3% in aggregate liquidation preference of the
outstanding Preferred Securities of each such affected series (voting together
as one class), obtained in the manner provided in the Partnership Agreement.
SECTION 5.053. Any notice, request or other communication required or
permitted to be given hereunder to the Guarantor shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail) or telex, addressed to the Guarantor, as follows (and if so
given, shall be deemed given when mailed or upon receipt of an answer-back, if
sent by telex):
Duquesne Light Company
411 Seventh Avenue
P.O. Box 1930
Pittsburgh, Pennsylvania 15230-1930
Facsimile No.: (412) 393-6004
Attention: Treasurer
5
<PAGE>
Any notice, request or other communication required or permitted to be
given hereunder to the Holders shall be given by the Guarantor in the same
manner as notices sent by the Issuer to the Holders.
SECTION 5.054. This Guarantee Agreement is solely for the benefit of the
Holders and is not separately transferable from the Preferred Securities.
SECTION 5.055. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
6
<PAGE>
This Guarantee Agreement is executed as of the day and year first above
written.
DUQUESNE LIGHT COMPANY
By /s/ Donald J. Clayton
------------------------------
Name: Donald J. Clayton
Title: Treasurer
<PAGE>
===============================================================================
EXHIBIT 4.6
DUQUESNE LIGHT COMPANY
TO
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
------------------
INDENTURE
Dated as of May 1, 1996
------------------
================================================================================
<PAGE>
DUQUESNE LIGHT COMPANY
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of May 1, 1996
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
(S)310 (a)(1).............................................. 909
(a)(2).............................................. 909
(a)(3).............................................. Not Applicable
(a)(4).............................................. Not Applicable
(b)................................................. 908
910
(S)311 (a)................................................. 913
(b)................................................. 913
(c)................................................. 913
(S)312 (a)................................................. 1001
(b)................................................. 1001
(c)................................................. 1001
(S)313 (a)................................................. 1002
(b)................................................. 1002
(c)................................................. 1002
(d)................................................. 1002
(S)314 (a)................................................. 1002
(a)(4).............................................. 606
(b)................................................. Not Applicable
(c)(1).............................................. 102
(c)(2).............................................. 102
(c)(3).............................................. Not Applicable
(d)................................................. Not Applicable
(e)................................................. 102
(S)315 (a)................................................. 901
903
(b)................................................. 902
(c)................................................. 901
(d)................................................. 901
(e)................................................. 814
(S)316 (a)................................................. 812
(a)(1)(A)........................................... 802
812
(a)(1)(B)........................................... 813
(a)(2).............................................. Not Applicable
(b)................................................. 104
808
(S)317 (a)(1).............................................. 803
(a)(2).............................................. 804
(b)................................................. 603
(S)318 (a)................................................. 107
</TABLE>
<PAGE>
INDENTURE, dated as of May 1, 1996, between DUQUESNE LIGHT COMPANY, a
corporation duly organized and existing under the laws of the Commonwealth of
Pennsylvania (herein called the "Company"), having its principal office at 411
Seventh Avenue, P.O. Box 1930, Pittsburgh, Pennsylvania 15230-1930, and The
First National Bank of Chicago, a national banking association duly organized
and existing under the laws of the United States of America, having its
principal corporate trust office at One First National Plaza, Suite 0126,
Chicago, Illinois 60670, as Trustee (herein called the "Trustee").
RECITAL 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 unsecured
subordinated debentures, notes or other evidences of indebtedness (herein called
the "Securities"), to be issued in one or more series as contemplated herein;
and all acts necessary to make this Indenture a valid agreement of the Company
have been performed.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities or of series
thereof, as follows:
ARTICLE ONE
Definitions and Other Provisions of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, 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 terms used herein without definition which are defined in
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 generally accepted
accounting principles in the United States, 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 accounting principles as are generally
accepted in the United States at the date of such computation or, at
the election of the Company in any particular case, at the date of the
execution and delivery of this Indenture; provided, however, that in
determining generally accepted accounting principles applicable to the
Company, the Company shall, to the extent required, conform to any
order, rule or regulation of any administrative agency, regulatory
authority or other governmental body having jurisdiction over the
Company; and
<PAGE>
-2-
(d) 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.
Certain terms, used principally in Article Nine, are defined in that
Article.
"Act", when used with respect to any Holder of a Security, has the
meaning specified in Section 104.
"Additional Interest" has the meaning specified in Section 312.
"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.
"Authenticating Agent" means any Person (other than the Company or any
Affiliate of the Company) authorized by the Trustee pursuant to Section 914 to
act on behalf of the Trustee to authenticate one or more series of Securities.
"Authorized Executive Officer" means the Chairman of the Board, the
President, any Vice President, the Treasurer, any Assistant Treasurer or any
other duly authorized officer of the Company.
"Board of Directors" means either the board of directors of the
Company or any committee thereof duly authorized to act in respect of matters
relating to this Indenture.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary 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", when used with respect to a Place of Payment or any
other particular location specified in the Securities or this Indenture, means
any day, other than a Saturday or Sunday, which is not a day on which banking
institutions or trust companies in such Place of Payment or other location are
generally authorized or required by law, regulation or executive order to remain
closed, except as may be otherwise specified as contemplated by Section 301.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the date of execution and delivery of this Indenture such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body, if any, performing such duties at such
time.
<PAGE>
-3-
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture 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" or "Company Order" means a written request or order
signed in the name of the Company by an Authorized Executive Officer and
delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution and delivery of this
Indenture is located at One First National Plaza, Suite 0126, Chicago, Illinois
60670.
"corporation" means a corporation, association, company, joint stock
company or business trust.
"Defaulted Interest" has the meaning specified in Section 307.
"Dollar" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States as at the time shall be legal tender for the
payment of public and private debts.
"Event of Default" has the meaning specified in Section 801.
"Governmental Authority" means the government of the United States or
of any State or Territory thereof or of the District of Columbia or of any
county, municipality or other political subdivision of any of the foregoing, or
any department, agency, authority or other instrumentality of any of the
foregoing.
"Government Obligations" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
entitled to the benefit of the full faith and credit thereof; and
(b) certificates, depositary receipts or other instruments
which evidence a direct ownership interest in obligations described in
clause (a) above or in any specific interest or principal payments due
in respect thereof; provided, however, that the custodian of such
obligations or specific interest or principal payments shall be a bank
or trust company (which may include the Trustee or any Paying Agent)
subject to Federal or state supervision or examination with a combined
capital and surplus of at least $50,000,000; and provided, fur ther,
that except as may be otherwise required by law, such custodian shall
be obligated to pay to the holders of such certificates, depositary
receipts or other instruments the full amount received by such
custodian in respect of such obligations or specific payments and
shall not be permitted to make any deduction therefrom.
"Guarantee" means the Payment and Guarantee Agreement dated as of May
14, 1996, delivered by the Company for the benefit of the holders of Preferred
Securities.
<PAGE>
-4-
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed and delivered
and 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 301.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as provided in such Security or in this Indenture, whether at the
Stated Maturity, by declaration of acceleration, upon call for redemption or
otherwise.
"Officer's Certificate" means a certificate signed by an Authorized
Executive Officer and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, or other counsel acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(b) Securities deemed to have been paid in accordance with
Section 701; and
(c) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it and the Company that such
Securities are held by a bona fide purchaser or purchasers in whose
hands such Securities are valid obligations of the Company;
provided, however, that in determining whether or not the Holders of the
requisite principal amount of the Securities Outstanding under this Indenture,
or the Outstanding Securities of any series, have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or whether or not
a quorum is present at a meeting of Holders of Securities, Securities owned by
the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor (unless the Company, such Affiliate or such
obligor owns all Securities Outstanding under this Indenture, or all Outstanding
Securities of each such series, as the case may be, determined without regard to
this provision) 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 or waiver or
upon any such determination as to the
<PAGE>
-5-
presence of a quorum, only Securities which the Trustee knows to be so owned
shall be so disregarded; pro vided, however, that Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
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; and provided, further, that, in the case of any Security the
principal of which is payable from time to time without presentment or
surrender, the principal amount of such Security that shall be deemed to be
Outstanding at any time for all purposes of this Indenture shall be the original
principal amount thereof less the aggregate amount of principal thereof
theretofore paid.
"Partnership" means Duquesne Capital L.P., a Delaware limited
partnership, or any permitted successor under the Partnership Agreement.
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of Duquesne Capital L.P., dated as of May 14, 1996, as it
may be amended from time to time.
"Paying Agent" means any Person, including the Company, authorized by
the Company to pay the principal of, and premium, if any, or interest, if any,
on any Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust or unincorporated organization or any
Governmental Authority.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places, specified as contemplated by Section 301, at
which, subject to Section 602, principal of and premium, if any, and interest,
if any, on the Securities of such series are payable.
"Predecessor Security" 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 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed (to the extent
lawful) to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.
"Preferred Securities" means any limited partnership interests issued
by the Partnership or similar securities issued by a permitted successor to the
Partnership in accordance with the Partnership Agreement.
"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 at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
<PAGE>
-6-
"Responsible Officer", when used with respect to the Trustee, means
any officer of the Trustee assigned by the Trustee to administer its corporate
trust matters.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any securities authenticated and delivered
under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means all obligations (other than non-recourse
obligations and the indebtedness issued under this Indenture) of, or guaranteed
or assumed by, the Company for borrowed money, including both senior and
subordinated indebtedness for borrowed money (other than the Securities), or for
the payment of money relating to any lease which is capitalized on the
consolidated balance sheet of the Company and its subsidiaries in accordance
with generally accepted accounting principles as in effect from time to time, or
evidenced by bonds, debentures, notes or other similar instruments, and in each
case, amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligations, whether existing as of the date of this Indenture
or subsequently incurred by the Company; provided that the Company's obligations
under the Guarantee shall not be deemed to be Senior Indebtedness.
"Special Record Date" for the payment of any Defaulted Interest on the
Securities of any series means a date fixed by the Trustee pursuant to Section
307.
"Special Representative" means any special representative duly
appointed by the holders of Preferred Securities of any series in accordance
with the Partnership Agreement or Action or Actions of the General Partner
establishing such series.
"Stated Maturity", when used with respect to any obligation or any
installment of principal thereof or interest thereon, means the date on which
the principal of such obligation or such installment of principal or interest is
stated to be due and payable (without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension).
"Trust Indenture Act" means, as of any time, the Trust Indenture Act
of 1939, or any successor statute, as in effect at such time.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
with respect to one or more series of Securities pursuant to the applicable
provisions of this Indenture, and thereafter "Trustee" shall mean or include
each Person who is then a Trustee hereunder, and if at any time there is more
than one such Person, "Trustee" as used with respect to the Securities of any
series shall means the Trustee with respect to Securities of that series.
"United States" means the United States of America, its territories,
its possessions and other areas subject to its political jurisdiction.
<PAGE>
-7-
SECTION 102. Compliance Certificates and Opinions.
Except as otherwise expressly provided in this Indenture, upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall, if requested by the Trustee,
furnish to the Trustee an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel 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 with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each Person signing such certificate or
opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) 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;
(c) a statement that, in the opinion of each such Person, such
Person has made such examination or investigation as is necessary to
enable such Person to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 103. 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 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 Officer's Certificate or opinion is
based are erroneous. Any such certificate or 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 such 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.
<PAGE>
-8-
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.
Whenever, subsequent to the receipt by the Trustee of any Board
Resolution, Officer's Certificate, Opinion of Counsel or other document or
instrument, a clerical, typographical or other inadvertent or unintentional
error or omission shall be discovered therein, a new document or instrument may
be substituted therefor in corrected form with the same force and effect as if
originally filed in the corrected form and, irrespective of the date or dates of
the actual execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been executed and/or delivered as of the date
or dates required with respect to the document or instrument for which it is
substituted. Anything in this Indenture to the contrary notwithstanding, if any
such corrective document or instrument indicates that action has been taken by
or at the request of the Company which could not have been taken had the
original document or instrument not contained such error or omission, the action
so taken shall not be invalidated or otherwise rendered ineffective but shall be
and remain in full force and effect, except to the extent that such action was a
result of willful misconduct or bad faith. Without limiting the generality of
the foregoing, any Securities issued under the authority of such defective
document or instrument shall nevertheless be the valid obligations of the
Company entitled to the benefits of this Indenture equally and ratably with all
other Outstanding Securities, except as aforesaid.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
election, waiver or other action provided by this Indenture to be made, given or
taken by Holders 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 or, alternatively, may be embodied in and evidenced by the
record of Holders, as the case may be, voting in favor thereof, either in person
or by proxies duly appointed in writing, at any meeting of Holders duly called
and held in accordance with the provisions of Article Thirteen, or a combination
of such instruments and any such record. Except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
or record or both are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments and any such record
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments
and so voting at any such meeting. Proof of execution of any such instrument or
of a writing appointing any such agent, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and (subject to
Section 901) conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section. The record of any meeting of Holders shall be
proved in the manner provided in Section 1306.
Anything in this Indenture to the contrary notwithstanding, any
request, demand, authorization, direction, notice, consent, election, waiver or
other action provided by this Indenture to be made, given or taken by Holders,
including without limitation any of the foregoing to be made, given or taken by
Holders in connection with the enforcement of the obligations of the Company
under this Indenture or on the Securities as contemplated by Section 610, may be
made, given or taken by the registered holders of Preferred Securities having a
liquidation preference equal to the principal amount of Securities required to
be held in order for Holders to take such action or by one or more Special
Representatives appointed by such holders of Preferred Securities. If any such
action shall be taken by Holders, and by holders of Preferred
<PAGE>
-9-
Securities or Special Representatives thereof as contemplated in the preceding
sentence, the action taken by holders of Preferred Securities or Special
Representatives thereof shall control. Any such action taken by registered
holders of Preferred Securities or by one or more Special Representatives
thereof shall be evidenced to the Trustee in the same manner as an Act of
Holders, as provided in this Section 104(a). The Trustee shall be entitled to
rely on the books and records of the Partnership in determining the identities
of the holders of Preferred Securities (and, upon the reasonable request of the
Trustee, the Company, as General Partner of the Partnership, shall, at its own
expense, promptly provide copies of applicable portions of such books and
records to the Trustee to the extent reasonably necessary to enable the Trustee
to make such determination).
<PAGE>
-10-
(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 of such
execution or by a certificate of a 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 or may be
proved in any other manner which the Trustee and the Company deem sufficient.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority.
(c) The principal amount and serial numbers of Securities held by any
Person, and the date of holding the same, shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of a Holder shall bind every future Holder of the
same Security 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.
(e) Until such time as written instruments shall have been delivered
to the Trustee with respect to the requisite percentage of principal amount of
Securities for the action contemplated by such instruments, any such instrument
executed and delivered by or on behalf of a Holder may be revoked with respect
to any or all of such Securities by written notice by such Holder or any
subsequent Holder, proven in the manner in which such instrument was proven.
(f) Securities of any series authenticated and delivered after any
Act of Holders may, and shall if required by the Trustee, bear a notation in
form approved by the Trustee as to any action taken by such Act of Holders. 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 such action may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
(g) If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
If such a record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such record
date, but only the Holders of record at the close of business on the record date
shall be deemed to be Holders for the purposes of determining whether Holders of
the requisite proportion of the Outstanding Securities have authorized or agreed
or consented to such request, demand, authorization, direction, notice, consent,
waiver or other Act, and for that purpose the Outstanding Securities shall be
computed as of the record date.
SECTION 105. Notices, etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
election, 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, the
Trustee by any Holder or by the Company, or the Company by the Trustee or by any
Holder, shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and
<PAGE>
-11-
delivered personally to an officer or other responsible employee of the
addressee, or transmitted by facsimile transmission, telex or other direct
written electronic means to such telephone number or other electronic
communications address as the parties hereto shall from time to time designate,
or transmitted by registered mail, charges prepaid, to the applicable address
set opposite such party's name below or to such other address as either party
hereto may from time to time designate:
If to the Trustee, to:
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, Illinois 60670
Attention: Corporate Trust Services Division
Telephone: (312) 407-1901
Telecopy: (312) 407-1708
If to the Company, to:
Duquesne Light Company
411 Seventh Avenue
P.O. Box 1930
Pittsburgh, Pennsylvania 15230-1930
Attention: Treasurer
Telephone: (412) 393-6000
Telecopy: (412) 393-6004
Any communication contemplated herein shall be deemed to have been
made, given, furnished and filed if personally delivered, on the date of
delivery, if transmitted by facsimile transmission, telex or other direct
written electronic means, on the date of transmission, and if transmitted by
registered mail, on the date of receipt.
SECTION 106. Notice to Holders of Securities; Waiver.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given, and shall be deemed given, to Holders if in writing and mailed, first-
class postage prepaid, to each Holder affected by such event, at the address of
such Holder 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 case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice to
Holders by mail, then such notification as shall be made with the approval of
the Trustee shall constitute a sufficient notification for every purpose
hereunder. In any case
<PAGE>
-12-
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.
Any notice required by this Indenture may be waived in writing by the
Person entitled to re ceive such notice, either before or after the event
otherwise to be specified therein, 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.
SECTION 107. Conflict With Trust Indenture Act.
If any provision of this Indenture limits, qualifies or conflicts with
another provision hereof which is required or deemed to be included in this
Indenture by, or is otherwise governed by, any of the provisions of the Trust
Indenture Act, such other provision shall control; and if any provision hereof
otherwise conflicts with the Trust Indenture Act, the Trust Indenture Act shall
control.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings in this Indenture and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. 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 110. Separability Clause.
In case any provision in this Indenture or 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 111. Benefits of Indenture.
Nothing in this Indenture or the Securities, express or implied, shall
give to any Person, other than the parties hereto, their successors hereunder,
the Holders and, so long as the notice described in Section 1513 hereof has not
been given, the holders of Senior Indebtedness, any benefit or any legal or
equitable right, remedy or claim under this Indenture; provided, however, that
so long as any Preferred Securities remain outstanding, the holders of such
Preferred Securities, or the Special Representative appointed by such holders
may, to the fullest extent permitted by applicable law, enforce the Company's
obligations hereunder and under the Securities that were issued concurrently
with such Preferred Securities directly against the Company to the same extent
as if such holders of Preferred Securities held a principal amount of such
Securities equal to the liquidation preference of the Preferred Securities held
by such holders and take such other action as is specified in Section 104(a)
hereof without first proceeding against the Partnership.
<PAGE>
-13-
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, except to the extent that
the law of any other jurisdiction shall be mandatorily applicable.
SECTION 113. Legal Holidays.
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
other than a provision in Securities of any series, or in the Board Resolution
or Officer's Certificate which establishes the terms of the Securities of such
series, which specifically states that such provision shall apply in lieu of
this Section) 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, except that if such Business
Day is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect,
and in the same amount, as if made on the Interest Payment Date or Redemption
Date, or at the Stated Maturity, and, if such payment is made or duly provided
for on such Business Day, no interest shall accrue on the amount so payable for
the period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, to such Business Day.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The definitive Securities of each series shall be in substantially the
form or forms thereof established in the supplemental indenture, Board
Resolution or Officer's Certificate (or any combination thereof) establishing
such series, 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 the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of the Securities. If the form or forms of Securities of any series
are established in a Board Resolution or in an Officer's Certificate, such Board
Resolution or Officer's Certificate, if any, shall be delivered to the Trustee
at or prior to the delivery of the Company Order contemplated by Section 303 for
the authentication and delivery of such Securities.
The Securities of each series shall be issuable in registered form
without coupons. The definitive Securities shall be produced in such manner as
shall be determined by the officers executing such Securities, as evidenced by
their execution thereof.
<PAGE>
-14-
SECTION 202. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially
the form set forth below:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
_________________________________
as Trustee
By: _____________________________
Authorized Officer
ARTICLE THREE
The Securities
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited; provided,
however, that all Securities shall be issued to evidence loans by the
Partnership of the proceeds of the issuance of Preferred Securities of the
Partnership plus the amount of capital contributions made by the Company to the
Partnership from time to time.
The Securities may be issued in one or more series. Prior to the
authentication and delivery of Securities of any series, there shall be
established by specification in a supplemental indenture, a Board Resolution or
an Officer's Certificate (or any combination thereof):
(a) the title of the Securities of such series (which shall
distinguish the Securities of such series from Securities of all
other series);
(b) any limit upon the aggregate principal amount of the
Securities of such 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 Section 304, 305,
306, 406 or 1206 and, except for any Securities which, pursuant to
Section 303, are deemed never to have been authenticated and delivered
hereunder);
(c) the Person or Persons (without specific identification) to
whom interest on Securities of such series shall be payable on any
Interest Payment Date, if other than the Persons in whose names such
Securities (or one or more Predecessor Securities) are registered at
the close of business on the Regular Record Date for such interest;
<PAGE>
-15-
(d) the date or dates on which the principal of the Securities
of such series is payable or any formulary or other method or other
means by which such date or dates shall be determined, by reference or
otherwise (without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension);
(e) the rate or rates at which the Securities of such series
shall bear interest, if any (including the rate or rates at which
overdue principal shall bear interest, if different from the rate or
rates at which such Securities shall bear interest prior to Maturity,
and, if applicable, the rate or rates at which overdue premium or
interest shall bear interest, if any), or any formulary or other
method or other means by which such rate or rates shall be determined,
by reference or otherwise; the date or dates from which such interest
shall accrue; the Interest Payment Dates on which such interest shall
be payable and the Regular Record Date, if any, for the interest
payable on such Securities on any Interest Payment Date; and the basis
of computation of interest, if other than as provided in Section 310;
(f) the place or places at which (1) the principal of and
premium, if any, and interest, if any, on Securities of such series
shall be payable, (2) registration of transfer of Securities of such
series may be effected, (3) exchanges of Securities of such series may
be effected and (4) notices and demands to or upon the Company in
respect of the Securities of such series and this Indenture may be
served; the Security Registrar for such series; and if such is the
case, that the principal of such Securities shall be payable without
presentation or surrender thereof;
(g) the period or periods within which, or the date or dates on
which, the price or prices at which and the terms and conditions upon
which the Securities of such series may be redeemed, in whole or in
part, at the option of the Company;
(h) the obligation or obligations, if any, of the Company to
redeem or purchase the Securities of such series pursuant to any
sinking fund or other mandatory redemption provisions or at the option
of a Holder thereof and the period or periods within which or the date
or dates on which, the price or prices at which and the terms and
conditions upon which such Securities shall be redeemed or purchased,
in whole or in part, pursuant to such obliga tion, and applicable
exceptions to the requirements of Section 404 in the case of mandatory
redemption or redemption at the option of the holder;
(i) the denominations in which Securities of such series shall
be issuable if other than denominations of $25 and any integral
multiple thereof;
(j) any Events of Default, in addition to those specified in
Section 801, with respect to the Securities of such series, and any
covenants of the Company for the benefit of the Holders of the
Securities of such series in addition to those set forth in Article
Six;
(k) if the Securities of such series are to be issued in global
form, (i) any limitations on the rights of the Holder or Holders of
such Securities to transfer or exchange the same or to obtain the
registration of transfer thereof, (ii) any limitations on the rights
of the Holder
<PAGE>
-16-
or Holders thereof to obtain certificates therefor in definitive form
in lieu of temporary form and (iii) any and all other matters
incidental to such Securities;
(l) any limitations on the rights of the Holders of the
Securities of such Series to transfer or exchange such Securities or
to obtain the registration of transfer thereof; and if a service
charge will be made for the registration of transfer or exchange of
Securities of such series, the amount or terms thereof;
(m) any exceptions to Section 113, or variation in the
definition of Business Day, with respect to the Securities of such
series; and
(n) any other terms of the Securities of such series not
inconsistent with the provisions of this Indenture.
All Securities of any one series shall be substantially identical,
except as to principal amount and date of issue and except as may be set forth
in the terms of such series as contemplated above. The Securities of each
series shall be subordinated in right of payment to Senior Indebtedness as
provided in Article Fifteen.
SECTION 302. Denominations.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, the Securities of each series shall be issuable in
denominations of $25 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, the Securities shall be executed on behalf of the
Company by an Authorized Executive Officer and may have the corporate seal of
the Company affixed thereto or reproduced thereon attested by any other
Authorized Executive Officer or by the Secretary of the Company. The signature
of any or all of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at the time of execution Authorized Executive Officers or the Secretary
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 Trustee shall authenticate and deliver Securities of a series, for
original issue, at one time or from time to time in accordance with the Company
Order referred to below, upon receipt by the Trustee of:
(a) the instrument or instruments establishing the form or forms
and terms of such series, as provided in Sections 201 and 301;
<PAGE>
-17-
(b) a Company Order requesting the authentication and delivery
of such Securities and, to the extent that the terms of such
Securities shall not have been established in an indenture
supplemental hereto, a Board Resolution, or an Officer's Certificate
(or any combination thereof), all as contemplated by Sections 201 and
301, establishing such terms;
(c) the Securities of such series, executed on behalf of the
Company by an Authorized Executive Officer;
(d) an Opinion of Counsel to the effect that:
(i) the form or forms of such Securities have been duly
authorized by the Company and have been established in
conformity with the provisions of this Indenture;
(ii) the terms of such Securities have been duly authorized
by the Company and have been established in conformity with the
provisions of this Indenture; and
(iii) such Securities, when authenticated and delivered by
the Trustee and issued and delivered by the Company in the manner
and subject to any conditions specified in such Opinion of
Counsel, will have been duly issued under this Indenture and will
constitute valid and legally binding obligations of the Company,
entitled to the benefits provided by this Indenture, and
enforceable in accordance with their terms, subject, as to
enforcement, to laws relating to or affecting generally the en
forcement of creditors' rights, including, without limitation,
bankruptcy and insolvency laws and to general principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
If the form or terms of the Securities of any series have been
established by or pursuant to a Board Resolution or an Officer's Certificate as
permitted by Sections 201 or 301, the Trustee shall not be required to
authenticate such Securities if the issuance 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 specified as contemplated by Section 301 with respect
to any series of Securities, each Security shall be dated the date of its
authentication.
Unless otherwise specified as contemplated by Section 301 with respect
to any series of Securities, 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 or its agent by manual signature, 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 this Indenture. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
to the Company, or any Person acting on its behalf, but shall never have been
issued and sold by the Company, and the Company shall deliver such Security to
the Trustee for cancellation as provided in Section 309 together with a written
statement (which need not comply with Section 102 and need not be accompanied by
an Opinion of Counsel) stating that such Security has never been
<PAGE>
-18-
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 hereof.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, 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, 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; provided, however, that temporary
Securities need not recite specific redemption, sinking fund, conversion or
exchange provisions.
Unless otherwise specified as contemplated by Section 301 with respect
to any series of Securities, after the preparation of definitive Securities of
such series, the temporary Securities of such series shall be exchangeable,
without charge to the Holder thereof, for definitive Securities of such series
upon surrender of such temporary Securities at the office or agency of the
Company maintained pursuant to Section 602 in a Place of Payment for such
Securities. Upon surrender of temporary Securities for such exchange, the
Company shall, except as aforesaid, execute and the Trustee shall authenticate
and deliver in exchange therefor definitive Securities of the same series, of
authorized denominations and of like tenor and aggregate principal amount.
Until exchanged in full as hereinabove provided, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of the same series and of like
tenor authenticated and delivered hereunder.
SECTION 305. Registration; Registration of Transfer and Exchange.
The Company shall cause to be kept in each office designated pursuant
to Section 602, with respect to the Securities of each series, a register (all
registers kept in accordance with this Section being collectively 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 of
such series and the registration of transfer thereof. The Company shall
designate one Person to maintain the Security Register for the Securities of
each series on a consolidated basis, and such Person is referred to herein, with
respect to such series, as the "Security Registrar." Anything herein to the
contrary notwithstanding, the Company may designate one or more of its offices
as an office in which a register with respect to the Securities of one or more
series shall be maintained, and the Company may designate itself the Security
Registrar with respect to one or more of such series. The Security Register
shall be open for inspection by the Trustee and the Company at all reasonable
times.
Except as otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, upon surrender for registration of
transfer of any Security of such series at any office or agency of the Company
maintained pursuant to Section 602 in a Place of Payment for such series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series, of authorized denominations and of like tenor and aggregate
principal amount.
<PAGE>
-19-
Except as otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, any Security of such series may be
exchanged at the option of the Holder, for one or more new Securities of the
same series, of authorized denominations and of like tenor and aggregate
principal amount, upon surrender of the Securities to be exchanged at any such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities delivered upon any registration of transfer or exchange
of Securities shall be 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, the Trustee or the
Security Registrar) be duly endorsed or shall be accompanied by a written
instrument of transfer in form satisfactory to the Company, the Trustee or the
Security Registrar, as the case may be, duly executed by the Holder thereof or
his attorney duly authorized in writing.
Unless otherwise specified as contemplated by Section 301, with
respect to Securities of any series, no service charge shall be made for any
registration of transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 406 or 1206 not
involving any transfer.
The Company shall not be required to execute or to provide for the
registration of transfer of or the exchange of (a) Securities of any series
during a period of 15 days immediately preceding the date notice is to be given
identifying the serial numbers of the Securities of such series called for
redemption or (b) any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series, and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (a)
evidence to their satisfaction of the ownership of and the destruction, loss or
theft of any Security and (b) such security or indemnity as may be reasonably
required by them to save each of them and any agent of either of them harmless,
then, in the absence of notice to the Company or the Trustee that such Security
is held by a Person purporting to be the owner of such Security, the Company
shall execute, and, upon the Company's request, the Trustee shall authenticate
and deliver, in lieu of any such destroyed, lost or stolen Security, a new
Security of the same series, and of like tenor and principal amount and bearing
a number not contemporaneously outstanding.
Notwithstanding the foregoing, 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.
<PAGE>
-20-
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
reasonable expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone other than
the Holder of such new Security, and any such new Security shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Securities of such series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Unless otherwise specified as contemplated by Section 301 with respect
to the Securities of any series, 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.
Subject to Section 311, 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 related Regular Record Date by virtue of
having been such Holder, and such Defaulted Interest may be paid by the Company,
at its election in each case, as provided in clause (a) or (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 date (herein called 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
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 De faulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit on or 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 promptly cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder of
Securities of such series at the address of such Holder as it appears
in the Security Register, 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
<PAGE>
-21-
whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on
such Special Record Date.
(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 and Section
305, 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 were carried by such other
Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a 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 such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and premium, if
any, and (subject to Sections 305 and 307) interest, if any, 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.
SECTION 309. Cancellation by Security Registrar.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Security
Registrar, be delivered to the Security Registrar and, if not theretofore
canceled, shall be promptly canceled by the Security Registrar. The Company may
at any time deliver to the Security Registrar for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever or which the Company shall not have issued and
sold, and all Securities so delivered shall be promptly canceled by the Security
Registrar. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities held by the Security
Registrar shall be disposed of in accordance with a Company Order delivered to
the Security Registrar and the Trustee, and the Security Registrar shall
promptly deliver a certificate of disposition to the Trustee and the Company
unless, by a Company Order, similarly delivered, the Company shall direct that
canceled Securities be returned to it. The Security Registrar shall promptly
deliver evidence of any cancellation of a Security in accordance with this
Section 309 to the Trustee and the Company.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year consisting of twelve 30-day months and
for any period shorter than a full month, on the basis of the actual number of
days elapsed in such period.
<PAGE>
-22-
SECTION 311. Extension of Interest Payment Period.
Unless otherwise specified as contemplated by Section 301 with respect
to Securities of any series, the Company shall have the right at any time, so
long as the Company is not in default in the payment of interest on the
Securities of any series hereunder, to extend interest payment periods on all
Securities of such series for a period of up to 60 consecutive months, and at,
or at any time prior to, the end of any such extended interest payment period,
the Company shall pay all interest then accrued and unpaid (together with
interest thereon at the rate specified for such Securities to the extent
permitted by applicable law) in the same manner as provided for the payment of
Defaulted Interest in Section 307 hereof; provided that, during any such
extended interest payment period, the Company shall not pay or declare any
dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments with respect
to the foregoing (other than payments under the Guarantee). Prior to the end of
any such extended interest payment period of less than 60 consecutive months,
the Company may further extend the interest payment period, provided that such
extended interest payment period together with all such further extensions
thereof may not exceed a period of 60 consecutive months. Following the
termination of any extended interest payment period, if the Company has paid all
accrued and unpaid interest (together with interest thereon at the rate
specified for such Securities to the extent permitted by applicable law)
required by the Securities for such period, the Company shall have the right to
again extend the interest payment periods for up to 60 consecutive months as
herein provided.
If the Partnership is the sole holder of Securities at the time the
Company elects to extend an interest payment period, the Company shall give the
Partnership and the Trustee notice of its selection of such extended interest
payment period one Business Day prior to the earlier of (i) the date dividends
on any series of the Preferred Securities would otherwise be payable and (ii)
the date the Partnership is required to give notice of the record or payment
date of such dividends to any national securities exchange on which the
Preferred Securities of such series shall be listed or to holders of the
Preferred Securities of such series, but in any event not less than two Business
Days prior to such record date. The Company shall cause the Partnership to give
such notice of the Company's selection of any such extended interest payment
period to the holders of the Preferred Securities.
If the Partnership is not the sole holder of Securities at the time
the Company elects to extend an interest payment period, the Company shall give
the holders of the Securities and the Trustee notice of its selection of such
extended interest payment period ten Business Days prior to the related Interest
Payment Date.
SECTION 312. Additional Interest.
So long as any Preferred Securities remain outstanding, if the
Partnership shall be required to pay, with respect to its income derived from
the interest payments on the Securities of any series, any amounts for or on
account of any taxes, duties, assessments or governmental charges of whatever
nature imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as interest on such series such additional
interest ("Additional Interest") as may be necessary in order that the net
amounts received and retained by the Partnership after the payment of such
taxes, duties, assessments or governmental charges shall result in the
Partnership's having such funds as it would have had in the absence of the
payment of such taxes, duties, assessments or governmental charges.
<PAGE>
-23-
ARTICLE FOUR
Redemption of Securities
SECTION 401. 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 301 for Securities of such
series) in accordance with this Article.
SECTION 402. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution or an Officer's Certificate. 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 in
writing of such Redemption Date and of the principal amount of such Securities
to be redeemed. In the case of any redemption of Securities (a) prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture or (b) pursuant to an election of the
Company which is subject to a condition specified in the terms of such
Securities, the Company shall furnish the Trustee with an Officer's Certificate
evidencing compliance with such restriction or condition.
SECTION 403. Selection of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected by the Security Registrar
from the Outstanding Securities of such series not previously called for
redemption, by such method as shall be provided for any particular series, or,
in the absence of any such provision, by such method as the Security Registrar
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to the minimum authorized denomination for
Securities of such series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of such series; provided, however, that
if, as indicated in an Officer's Certificate, the Company shall have offered to
purchase all or any principal amount of the Securities then Outstanding of any
series, and less than all of such Securities as to which such offer was made
shall have been tendered to the Company for such purchase, the Security
Registrar, if so directed by Company Order, shall select for redemption all or
any principal amount of such Securities which have not been so tendered.
The Security Registrar shall promptly notify the Company and the
Trustee in writing of the Securities selected for redemption and, in the case of
any Securities selected to be redeemed in part, the principal amount thereof to
be redeemed.
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.
<PAGE>
-24-
SECTION 404. Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section
106 to the Holders of the Securities to be redeemed not less than 30 nor more
than 60 days prior to the Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Securities of any series are to be
redeemed, the identification of the particular Securities to be
redeemed and the portion of the principal amount of any Security to be
redeemed in part,
(d) that on the Redemption Date the Redemption Price, together
with accrued interest, if any, to the Redemption Date, will become
due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after
said date,
(e) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued interest,
if any, unless it shall have been specified as contemplated by
Section 301 with respect to such Securities that such surrender shall
not be required,
(f) that the redemption is for a sinking or other fund, if
such is the case, and
(g) such other matters as the Company shall deem desirable or
appropriate.
If so specified with respect to any Securities in accordance with
Section 301, with respect to any notice of redemption of Securities at the
election of the Company, unless, upon the giving of such notice, such Securities
shall be deemed to have been paid in accordance with Section 701, such notice
may state that such redemption shall be conditional upon the receipt by the
Paying Agent or Agents for such Securities, on or prior to the date fixed for
such redemption, of money sufficient to pay the principal of and premium, if
any, and interest, if any, on such Securities and that if such money shall not
have been so received such notice shall be of no force or effect and the Company
shall not be required to redeem such Securities. In the event that such notice
of redemption contains such a condition and such money is not so received, the
redemption shall not be made and within a reasonable time thereafter notice
shall be given, in the manner in which the notice of redemption was given, that
such money was not so received and such redemption was not required to be made,
and the Paying Agent or Agents for the Securities otherwise to have been
redeemed shall promptly return to the Holders thereof any of such Securities
which had been surrendered for payment upon such redemption.
Notice of redemption of Securities to be redeemed at the election of
the Company, and any notice of non-satisfaction of a condition for redemption as
aforesaid, shall be given by the Company or, at the
<PAGE>
-25-
Company's request, by the Security Registrar in the name and at the expense of
the Company. Notice of mandatory redemption of Securities shall be given by the
Security Registrar in the name and at the expense of the Company.
SECTION 405. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, and the
conditions, if any, set forth in such notice having been satisfied, the
Securities or portions thereof so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified, and from and
after such date (unless, in the case of an unconditional notice of redemption,
the Company shall default in the payment of the Redemption Price and accrued
interest, if any) such Securities or portions thereof, if interest-bearing,
shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with such notice, such Security or portion thereof
shall be paid by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided, however, that no such
surrender shall be a condition to such payment if so specified as contemplated
by Section 301 with respect to such Security; and provided, further, that except
as otherwise specified as contemplated by Section 301 with respect to such
Security any installment of interest on any Security the Stated Maturity of
which installment is on or prior to the Redemption Date shall be payable to the
Holder of such Security, or one or more Predecessor Securities, registered as
such at the close of business on the related Regular Record Date according to
the terms of such Security and subject to the provisions of Section 307.
SECTION 406. Securities Redeemed in Part.
Upon the surrender of any Security which is to be redeemed only in
part 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 his attorney duly authorized in writing), 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, of any
authorized denomination requested by such Holder and of like tenor and in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered.
ARTICLE FIVE
Sinking Funds
SECTION 501. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of the Securities of any series, except as otherwise
specified as contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series 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 Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any
series, the cash amount of any sinking
<PAGE>
-26-
fund payment may be subject to reduction as provided in Section 502. Each
sinking fund payment shall be applied to the redemption of Securities of the
series in respect of which it was made as provided for by the terms of such
Securities.
SECTION 502. Satisfaction of Sinking Fund Payments With Securities.
The Company (a) may deliver Outstanding Securities (other than any
previously called for redemption) of a series in respect of which a mandatory
sinking fund payment is to be made and (b) may apply as a credit Securities of
such 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 or
Outstanding Securities purchased by the Company, in each case in satisfaction of
all or any part of such mandatory sinking fund payment with respect to the
Securities of such series; provided, however, that no Securities shall be
applied in satisfaction of a mandatory sinking fund payment if such Securities
shall have been previously so applied. Securities so applied shall be received
and credited for such purpose by the Trustee at the Redemption Price specified
in such Securities for redemption through operation of the sinking fund and the
amount of such mandatory sinking fund payment shall be reduced accordingly.
SECTION 503. Redemption of Securities for Sinking Fund.
Not less than 45 days prior to each sinking fund payment date for the
Securities of any series, the Company shall deliver to the Trustee an Officer's
Certificate specifying:
(a) the amount of the next succeeding mandatory sinking fund
payment for such series;
(b) the amount, if any, of the optional sinking fund payment
to be made together with such mandatory sinking fund payment;
(c) the aggregate sinking fund payment;
(d) the portion, if any, of such aggregate sinking fund
payment which is to be satisfied by the payment of cash; and
(e) the portion, if any, of such aggregate sinking fund
payment which is to be satisfied by delivering and crediting
Securities of such series pursuant to Section 502 and stating the
basis for such credit and that such Securities have not previously
been so credited, and the Company shall also deliver to the Trustee
any Securities to be so delivered. If the Company shall not deliver
such Officer's Certificate, the next succeeding sinking fund payment
for such series shall be made entirely in cash in the amount of the
mandatory sinking fund payment. Not less than 30 days before 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 403 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 404. Such notice having been duly given,
the redemption of such Securities shall be made upon the terms and in
the manner stated in Sections 405 and 406.
<PAGE>
-27-
ARTICLE SIX
Covenants
SECTION 601. Payment of Principal, Premium and Interest.
The Company shall pay the principal of and premium, if any, and
interest, if any (including Additional Interest), on the Securities of each
series in accordance with the terms of such Securities and this Indenture.
SECTION 602. Maintenance of Office or Agency.
The Company shall maintain in each Place of Payment for the Securities
of each series an office or agency where payment of such Securities shall be
made, where the registration of transfer or exchange of such Securities may be
effected and where notices and demands to or upon the Company in respect of such
Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of each such office or agency and prompt notice to the Holders of any such
change in the manner specified in Section 106. If at any time the Company shall
fail to maintain any such required office or agency in respect of Securities of
any series, or shall fail to furnish the Trustee with the address thereof,
payment of such Securities shall be made, registration of transfer or exchange
thereof may be effected and notices and demands may be served at the Corporate
Trust Office of the Trustee, and the Company hereby appoints the Trustee as its
agent for all such purposes in any such event.
The Company may also from time to time designate one or more other
offices or agencies with respect to the Securities of one or more series for any
or all of the foregoing purposes and may from time to time rescind such
designations; provided, however, that, unless otherwise specified as
contemplated by Section 301 with respect to the Securities of such series, no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency for such purposes in each Place of
Payment for such Securities in accordance with the requirements set forth above.
The Company shall give prompt written notice to the Trustee, and prompt notice
to the Holders in the manner specified in Section 106, of any such designation
or rescission and of any change in the location of any such other office or
agency.
Anything herein to the contrary notwithstanding, any office or agency
required by this Section may be maintained at an office of the Company, in which
event the Company shall perform all functions to be performed at such office or
agency.
SECTION 603. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to the Securities of any series, it shall, on or before each due date of
the principal of and premium, if any, and interest, if any, on any of such
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal and premium or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided. The Company shall promptly notify the Trustee of any
failure by the Company (or any other obligor on such Securities) to make any
payment of principal of or premium, if any, or interest, if any, on such
Securities.
<PAGE>
-28-
Whenever the Company shall have one or more Paying Agents for the
Securities of any series, it shall, on or before each due date of the principal
of and premium, if any, and interest, if any, on such Securities, deposit with
such Paying Agents sums sufficient (without duplication) to pay the principal
and premium or interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company shall promptly notify the
Trustee of any failure by it so to act.
The Company shall cause each Paying Agent for the Securities of any
series, other than the Company or the Trustee, 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 shall:
(a) hold all sums held by it for the payment of the principal
of and premium, if any, or interest, if any, on such Securities 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 failure by the Company (or
any other obligor upon such Securities) to make any payment of
principal of or premium, if any, or interest, if any, on such
Securities; 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 so held in trust by such Paying Agent and furnish to the
Trustee such information as it possesses regarding the names and
addresses of the Persons entitled to such sums.
The Company may at any time 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, 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, if so
stated in a Company Order delivered to the Trustee, in accordance with the
provisions of Article Seven; 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 of and premium, if
any, or interest, if any, on any Security 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, upon such payment or
discharge, the Holder of such Security shall, as an unsecured general creditor
and not as a Holder of an Outstanding Security, look only to the Company for
payment of the amount so due and payable and remaining unpaid, 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; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such payment to the Company, may at the expense of the Company cause to be
mailed, on one occasion only, notice to such Holder that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such mailing, any unclaimed balance of such money then
remaining will be paid to the Company.
SECTION 604. Corporate Existence.
<PAGE>
-29-
Subject to the rights of the Company under Article Eleven, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence.
SECTION 605. Maintenance of Properties.
The Company shall cause (or, with respect to property owned in common
with others, make reasonable effort to cause) all its properties used or useful
in the conduct of its business to be maintained and kept in good condition,
repair and working order and shall cause (or, with respect to property owned in
common with others, make reasonable effort to cause) to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as,
in the judgment of the Company, may be necessary so that the business carried on
in connection therewith may be properly conducted; provided, however, that
nothing in this Section shall prevent the Company from discontinuing, or causing
the discontinuance of, the operation and maintenance of any of its properties if
such discontinuance is, in the judgment of the Company, desirable in the conduct
of its business.
SECTION 606. Statement as to Compliance.
The Company shall deliver to the Trustee, within 150 days after the
end of each fiscal year of the Company ending after the date hereof, a written
statement, which need not comply with Section 102, signed by an Authorized
Executive Officer of the Company, stating that
(a) a review of the activities of the Company during such year and of
performance under this Indenture has been made under such officer's
supervision, and
(b) to the best of his knowledge, based on such review, either (1)
the Company has fulfilled all its obligations under this Indenture
throughout such year, or, if there has been a default in the fulfillment
of any such obligation, specifying each such default known to such officer
and the nature and status thereof and (2) no Event of Default has occurred
and is continuing or, if an Event of Default has occurred and is
continuing, specifying each such Event of Default known to such officer
and the nature and status thereof.
SECTION 607. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in (a) Section 602 or any additional
covenant or restriction specified with respect to the Securities of any series
as contemplated by Section 301 if before the time for such compliance the
Holders of at least a majority in aggregate principal amount of the Outstanding
Securities of all series with respect to which compliance with Section 602 or
such additional covenant or restriction is to be omitted, considered as one
class, shall, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision or condition
and (b) Section 604, 605, 606 or Article Eleven if before the time for such
compliance the Holders of at least a majority in principal amount of Securities
Outstanding under this Indenture shall, by Act of such Holders, either waive
such compliance in such instance or generally waive compliance with such term,
provision or condition; but, in the case of (a) or (b), 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; provided, however,
so long as the
<PAGE>
-30-
Partnership holds Securities of any series, the Partnership may not waive
compliance or waive any default in compliance by the Company with any covenant
or other term contained in this Indenture or the Securities of such series
without the approval of the holders of at least 66-2/3% in aggregate liquidation
preference of the outstanding Preferred Securities affected, obtained as
provided in the Partnership Agreement.
SECTION 608. Restriction on Payment of Dividends.
So long as any Preferred Securities of any series remain outstanding,
the Company shall not declare or pay any dividend on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock, or make any guarantee payments with respect to the foregoing
(other than payments under the Guarantee) if at such time (a) the Company shall
be in default with respect to its payment or other obligations under the
Guarantee, (b) there shall have occurred and be continuing a payment default
(whether before or after expiration of any period of grace) or an Event of
Default hereunder or (c) the Company shall have elected to extend any interest
payment period as provided in Section 311, and any such period, or any extension
thereof, shall be continuing.
SECTION 609. Maintenance of Partnership Existence.
So long as Preferred Securities of any series remain outstanding, the
Company shall (i) maintain direct or indirect ownership of all interests in the
Partnership other than such Preferred Securities, (ii) not voluntarily (to the
extent permitted by law) dissolve, liquidate or wind up the Partnership, (iii)
remain the sole General Partner of the Partnership and timely perform in all
material respects all of its duties as General Partner of the Partnership
(including the duty to pay dividends on the Preferred Securities), and (iv) use
reasonable efforts to cause the Partnership to remain a limited partnership and
otherwise continue to be treated as a partnership for Federal income tax
purposes provided that any permitted successor to the Company under this
Indenture may succeed to the Company's duties as General Partner of the
Partnership; and provided further that the Company may permit the Partnership to
consolidate or merge with or into another limited partnership or other permitted
successor under the Partnership Agreement so long as the Company agrees to
comply with this Section 609 with respect to such successor limited partnership
or other permitted successor.
SECTION 610. Rights of Holders of Preferred Securities.
So long as any Preferred Securities remain outstanding, the Company's
obligations under this Indenture will be for the benefit of the holders from
time to time of Preferred Securities, and the holders of Preferred Securities of
each series, or the Special Representative or Special Representatives appointed
by such holders, will be entitled to enforce, to the fullest extent permitted by
applicable law, this Indenture and the Securities that were issued concurrently
with such Preferred Securities directly against the Company to the same extent
as if such holders of Preferred Securities held a principal amount of such
Securities equal to the liquidation preference of the Preferred Securities held
by such holders.
ARTICLE SEVEN
Satisfaction and Discharge
SECTION 701. Satisfaction and Discharge of Securities.
<PAGE>
-31-
Any Security or Securities, or any portion of the principal amount
thereof, shall be deemed to have been paid for all purposes of this Indenture,
and the entire indebtedness of the Company in respect thereof shall be deemed to
have been satisfied and discharged, if there shall have been irrevocably
deposited with the Trustee or any Paying Agent (other than the Company), in
trust:
(a) money in an amount which shall be sufficient, or
(b) in the case of a deposit made prior to the Maturity of such
Securities or portions thereof, Government Obligations, which shall not
contain provisions permitting the redemption or other prepayment thereof at
the option of the issuer thereof, the principal of and the interest on
which when due, without any regard to reinvestment thereof, will provide
moneys which, together with the money deposited with or held by the Trustee
or such Paying Agent, shall be sufficient, or
(c) a combination of (a) or (b) which shall be sufficient,
to pay when due the principal of and premium, if any, and interest, if any, due
and to become due on such Securities or portions thereof on or prior to
Maturity; provided, however, that in the case of the provision for payment or
redemption of less than all the Securities of any series, such Securities or
portions thereof shall have been selected by the Security Registrar as provided
herein and, in the case of a redemption, the notice requisite to the validity of
such redemption shall have been given or irrevocable authority shall have been
given by the Company to the Trustee to give such notice, under arrangements
satisfactory to the Trustee; and provided further that the Company shall have
delivered to the Trustee and such Paying Agent:
(x) if such deposit shall have been made prior to the Maturity
of such Securities, a Company Order stating that the money and
Government Obligations deposited in accordance with this Section shall
be held in trust, as provided in Section 703; and
(y) if Government Obligations shall have been deposited, an
Opinion of Counsel that the obligations so deposited constitute
Government Obligations and do not contain provisions permitting the
redemption or other prepayment at the option of the issuer thereof,
and an opinion of an independent public accountant of nationally
recognized standing, selected by the Company, to the effect that the
requirements set forth in clause (b) above have been satisfied; and
(z) if such deposit shall have been made prior to the Maturity
of such Securities, an Opinion of Counsel to the effect that the
Holders of such Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of the satisfaction and
discharge of the Company's indebtedness in respect of such Securities,
and such Holders will be subject to Federal income taxation on the
same amounts and in the same manner and at the same times as if such
satisfaction and discharge had not occurred.
Upon the deposit of money or Government Obligations, or both, in
accordance with this Section, together with the documents required by clauses
(x), (y) and (z) above, the Trustee shall, upon receipt of a Company Request,
acknowledge in writing that the Security or Securities or portions thereof with
respect to which such deposit was made are deemed to have been paid for all
purposes of this Indenture and that the entire indebtedness of the Company in
respect thereof has been satisfied and discharged as contemplated in this
<PAGE>
-32-
Section. In the event that all of the conditions set forth in the preceding
paragraph shall have been satisfied in respect of any Securities or portions
thereof except that, for any reason, the Opinion of Counsel specified in clause
(z) shall not have been delivered, such Securities or portions thereof shall
nevertheless be deemed to have been paid for all purposes of this Indenture, and
the Holders of such Securities or portions thereof shall nevertheless be no
longer entitled to the benefits of this Indenture or of any of the covenants of
the Company under Article Six (except the covenants contained in Sections 602
and 603) or any other covenants made in respect of such Securities or portions
thereof as contemplated by Section 301, but the indebtedness of the Company in
respect of such Securities or portions thereof shall not be deemed to have been
satisfied and discharged prior to Maturity for any other purpose, and the
Holders of such Securities or portions thereof shall continue to be entitled to
look to the Company for payment of the indebtedness represented thereby; and,
upon Company Request, the Trustee shall acknowledge in writing that such
Securities or portions thereof are deemed to have been paid for all purposes of
this Indenture.
If payment at Stated Maturity of less than all of the Securities of
any series is to be provided for in the manner and with the effect provided in
this Section, the Security Registrar shall select such Securities, or portions
of principal amount thereof, in the manner specified by Section 403 for
selection for redemption of less than all the Securities of a series.
In the event that Securities which shall be deemed to have been paid
for purposes of this Indenture, and, if such is the case, in respect of which
the Company's indebtedness shall have been satisfied and discharged, all as
provided in this Section, do not mature and are not to be redeemed within the
sixty (60) day period commencing with the date of the deposit of moneys or
Government Obligations, as aforesaid, the Company shall, as promptly as
practicable, give a notice, in the same manner as a notice of redemption with
respect to such Securities, to the Holders of such Securities to the effect that
such deposit has been made and the effect thereof.
Notwithstanding that any Securities shall be deemed to have been paid
for purposes of this Indenture, as aforesaid, the obligations of the Company and
the Trustee in respect of such Securities under Sections 304, 305, 306, 404, 503
(as to notice of redemption), 602, 603, 907 and 914 and this Article Seven shall
survive.
The Company shall pay, and shall indemnify the Trustee or any Paying
Agent with which Government Obligations shall have been deposited as provided in
this Section against, any tax, fee or other charge imposed on or assessed
against such Government Obligations or the principal or interest received in
respect of such Government Obligations, including, but not limited to, any such
tax payable by any entity deemed, for tax purposes, to have been created as a
result of such deposit.
Anything herein to the contrary notwithstanding, (a) if, at any time
after a Security would be deemed to have been paid for purposes of this
Indenture, and, if such is the case, the Company's indebtedness in respect
thereof would be deemed to have been satisfied and discharged, pursuant to this
Section (without regard to the provisions of this paragraph), the Trustee or any
Paying Agent, as the case may be, shall be required to return the money or
Government Obligations, or combination thereof, deposited with it as aforesaid
to the Company or its representative under any applicable Federal or State
bankruptcy, insolvency or other similar law, such Security shall thereupon be
deemed retroactively not to have been paid and any satisfaction and discharge of
the Company's indebtedness in respect thereof shall retroactively be deemed not
to have been effected, and such Security shall be deemed to remain Outstanding
and (b) any satisfaction and discharge of
<PAGE>
-33-
the Company's indebtedness in respect of any Security shall be subject to the
provisions of the last paragraph of Section 603.
SECTION 702. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as hereinafter expressly provided), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) no Securities remain Outstanding hereunder; and
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
provided, however, that if, in accordance with the last paragraph of Section
701, any Security, previously deemed to have been paid for purposes of this
Indenture, shall be deemed retroactively not to have been so paid, this
Indenture shall thereupon be deemed retroactively not to have been satisfied and
discharged, as aforesaid, and to remain in full force and effect, and the
Company shall execute and deliver such instruments as the Trustee shall
reasonably request to evidence and acknowledge the same.
Notwithstanding the satisfaction and discharge of this Indenture as
aforesaid, the obligations of the Company and the Trustee under Sections 304,
305, 306, 404, 503 (as to notice of redemption), 602, 603, 907 and 914 and this
Article Seven shall survive.
Upon satisfaction and discharge of this Indenture as provided in this
Section, the Trustee shall assign, transfer and turn over to the Company,
subject to the lien provided by Section 907, any and all money, securities and
other property then held by the Trustee for the benefit of the Holders of the
Securities other than money and Government Obligations held by the Trustee
pursuant to Section 703.
SECTION 703. Application of Trust Money.
Neither the Government Obligations nor the money deposited pursuant to
Section 701, nor the principal or interest payments on any such Government
Obligations, shall be withdrawn or used for any purpose other than, and shall be
held in trust for, the payment of the principal of and premium, if any, and
interest, if any, on the Securities or portions of principal amount thereof in
respect of which such deposit was made, all subject, however, to the provisions
of Section 603; provided, however, that, so long as there shall not have
occurred and be continuing an Event of Default any cash received from such
principal or interest payments on such Government Obligations, if not then
needed for such purpose, shall, to the extent practicable, be invested in
Government Obligations of the type described in clause (b) in the first
paragraph of Section 701 maturing at such times and in such amounts as shall be
sufficient to pay when due the principal of and premium, if any, and interest,
if any, due and to become due on such Securities or portions thereof on and
prior to the Maturity thereof, and interest earned from such reinvestment shall
be paid over to the Company as received, free and clear of any trust, lien or
pledge under this Indenture except the lien provided by Section 907; and
provided, further, that, so long as there shall not have occurred and be
continuing an Event of Default, any moneys held in accordance with this Section
on the Maturity of all such Securities in excess of the amount required to pay
the principal of and premium, if any, and interest, if any, then due on such
<PAGE>
-34-
Securities shall be paid over to the Company free and clear of any trust, lien
or pledge under this Indenture except the lien provided by Section 907; and
provided, further, that if an Event of Default shall have occurred and be
continuing, moneys to be paid over to the Company pursuant to this Section shall
be held until such Event of Default shall have been waived or cured.
ARTICLE EIGHT
Events of Default; Remedies
SECTION 801. Events of Default.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events:
(a) failure to pay any interest, including any Additional Interest,
on any Security of such series within thirty (30) days after the same
becomes due and payable (whether or not payment is prohibited by the
provisions of Article Fifteen hereof); provided, however, that a valid
extension of the interest payment period by the Company as contemplated in
Section 311 of this Indenture shall not constitute a failure to pay
interest for this purpose; or
(b) failure to pay the principal and premium, if any, on any
Security of such series at its Maturity (whether or not payment is
prohibited by the provisions of Article Fifteen hereof); or
(c) failure to perform or breach of any covenant or warranty of the
Company in this Indenture (other than a covenant or warranty a default in
the performance of which or breach of which is elsewhere in this Section
specifically dealt with or which has expressly been included in this
Indenture solely for the benefit of one or more series of Securities other
than such series) for a period of 60 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 principal amount
of the Outstanding Securities of such 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, unless the Trustee, or the
Trustee and the Holders of a principal amount of Securities of such series
not less than the principal amount of Securities the Holders of which gave
such notice, as the case may be, shall agree in writing to an extension of
such period prior to its expiration; provided, however, that the Trustee,
or the Trustee and the Holders of such principal amount of Securities of
such series, as the case may be, shall be deemed to have agreed to an
extension of such period if corrective action is initiated by the Company
within such period and is being diligently pursued; or
(d) the entry by a court having jurisdiction in the premises of (1) a
decree or order for relief in respect of the Company or the Partnership in
an involuntary case or proceeding under any appli cable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (2) a decree
or order adjudging the Company or the Partnership a bankrupt or insolvent,
or approving as properly filed a petition by one or more Persons other than
the Company or the Partnership seeking reorgani zation, arrangement,
adjustment or composition of or in respect of the Company or the
Partnership under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee,
<PAGE>
-35-
trustee, sequestrator or other similar official for the Company or the
Partnership or for any substantial part of either of their property, or
ordering the winding up or liquidation of either of their affairs, and any
such decree or order for relief or any such other decree or order shall
have remained unstayed and in effect for a period of 90 consecutive days;
or
(e) the commencement by the Company or the Partnership 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 either the Company or the Partnership to the entry of a decree
or order for relief in respect of it in a 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 either the Company or the
Partnership of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or State law, or the consent by either
the Company or the Partnership to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or the
Partnership or of any substantial part of either of their property, or the
making by either the Company or the Partnership of an assignment for the
benefit of creditors, or the admission by either in writing of its
inability to pay its debts generally as they become due, or the
authorization of such action by the Board of Directors or the General
Partner, as the case may be; or
(f) any other Event of Default specified with respect to Securities
of such series.
SECTION 802. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default due to the default in payment of principal of,
or interest on, any series of Securities or due to the default in the
performance or breach of any other covenant or warranty of the Company
applicable to the Securities of such series but not applicable to all
outstanding Securities shall have occurred and be continuing, either the Trustee
or the Holders of not less than 25% in principal amount of the Securities of
such series or the Special Representative in respect of such series may then
declare the principal of all Securities of such series and interest accrued
thereon to be due and payable immediately (provided that the payment of
principal and interest on such Securities shall remain subordinated to the
extent provided in Article Fifteen hereof). If an Event of Default due to
default in the performance of any other of the covenants or agreements herein
applicable to all Outstanding Securities or due to certain events of bankruptcy,
insolvency or reorganization of the Company or the Partnership shall have
occurred and be continuing, either the Trustee or the Holders of not less than
25% in principal amount of all Securities then Outstanding (considered as one
class) or the Special Representatives appointed in respect of series of
Outstanding Securities representing not less than 25% in principal amount of all
Securities then Outstanding, and not the Holders of the Securities of any one of
such series or the Special Representative appointed in respect of any one
series, may declare the principal of all Securities and interest accrued thereon
to be due and payable immediately (provided that the payment of principal and
interest on such Securities shall remain subordinated to the extent provided in
the Indenture).
At any time after such a declaration of acceleration with respect to
Securities of any series shall have been made and before a judgment or decree
for payment of the money due shall have been obtained by the Trustee as
hereinafter in this Article provided, the Event or Events of Default giving rise
to such
<PAGE>
-36-
declaration of acceleration shall, without further act, be deemed to have been
waived, and such declaration and its consequences shall, without further act, be
deemed to have been rescinded and annulled, if
(a) the Company shall have paid or deposited with the Trustee a sum
sufficient to pay
(1) all overdue interest on all Securities of such series;
(2) the principal of and premium, if any, on any Securities of
such series which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates prescribed
therefor in such Securities;
(3) interest upon overdue interest at the rate or rates
prescribed therefor in such Securities to the extent that payment of
such interest is lawful;
(4) all amounts due to the Trustee under Section 907;
and
(b) any other Event or Events of Default with respect to Securities
of such series, other than the non-payment of the principal of Securities
of such series which shall have become due solely by such declaration of
acceleration, shall have been cured or waived as provided in Section 813.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 803. Collection of Indebtedness and Suits for Enforcement by Trustee.
If an Event of Default described in clause (a) or (b) of Section 801
shall have occurred and be continuing, the Company shall, upon demand of the
Trustee, pay to it, for the benefit of the Holders of the Securities of the
series with respect to which such Event of Default shall have occurred, the
whole amount then due and payable on such Securities for principal and premium,
if any, and interest, if any, and, to the extent permitted by law, interest on
premium, if any, and on any overdue principal and interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover any amounts due to the Trustee under
Section 907.
If the Company shall fail 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 such 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 such
Securities, wherever situated.
If an Event of Default with respect to Securities of any series shall
have occurred and be continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of Securities 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
<PAGE>
-37-
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 804. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Partnership or the Company or any other
obligor upon the Securities or the property of the Partnership or the Company or
of such other obligor or their creditors, the Trustee (irrespective of whether
the principal of 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 proceeding
or otherwise,
(a) to file and prove a claim for the whole amount of principal,
premium, if any, and interest, if any, owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for amounts due to the Trustee under Section 907) 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 payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amounts due it under Section 907.
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.
SECTION 805. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities 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 agents and counsel, be for the
ratable benefit of the Holders in respect of which such judgment has been
recovered.
SECTION 806. Application of Money Collected.
Subject to the provisions of Article Fifteen, any money collected by
the Trustee pursuant to this Article 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, if any, upon
presentation
<PAGE>
-38-
of the Securities in respect of which or for the benefit of which such money
shall have been collected 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
907;
Second: To the payment of the amounts then due and unpaid upon the
Securities for principal of and premium, if any, and interest, if any, 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, if any, respectively; and
Third: To the Company.
SECTION 807. Limitation on Suits.
No Holder 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 shall have previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities of
such series;
(b) the Holders of not less than a 25% in aggregate principal
amount of the Outstanding Securities of all series in respect of which an
Event of Default shall have occurred and be continuing, considered as one
class, 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 shall have offered to the Trustee
reasonable indemnity 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 offer of indemnity shall have failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request shall have
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 all
series in respect of which an Event of Default shall have occurred and be
continuing, considered as one class;
it being understood and intended that no one or more of such Holders 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 of
such Holders or to obtain or to seek to obtain priority or preference over any
other of 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 of such
Holders.
<PAGE>
-39-
SECTION 808. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision 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 Section
307 and 311) interest, if any, on such Security on the Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 809. 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 shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee or to such Holder, then and in every such case, subject
to any determination in such proceeding, the Company, and Trustee and such
Holder shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and such Holder
shall continue as though no such proceeding had been instituted.
SECTION 810. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 306, 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 811. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 812. Control by Holders of Securities.
If an Event of Default shall have occurred and be continuing in
respect of a series of Securities, the Holders of a majority in principal amount
of the Outstanding Securities of such series or the Special Representative
appointed in respect of such 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, however, that if an Event of Default
shall have occurred and be continuing with respect to more than one series of
Securities, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of all such series, considered as one class, or the
Special Representative or Special Representatives appointed with respect to
series of Outstanding Securities representing 66-2/3% in aggregate principal
amount of the Outstanding Securities of all such series,
<PAGE>
-40-
as the case may be, shall have the right to make such direction, and not the
Holders of the Securities or the Special Representative of any one of such
series; and provided, further, that such direction shall not be in conflict with
any rule of law or with this Indenture. Before proceeding to exercise any right
or power hereunder at the direction of such Holders or any such Special
Representative, the Trustee shall be entitled to receive from such Holders or
any such Special Representative reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
any such direction.
SECTION 813. Waiver of Past Defaults.
The Holders of not less than a majority in 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 default hereunder with respect to such
series and its consequences, except a default
(a) in the payment of the principal of or premium, if any, or
interest, if any, on any Security of such series, or
(b) in respect of a covenant or provision hereof which under Section
1202 cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected;
provided, however, that so long as the Partnership holds the Securities of any
series, the Partnership may not waive any past default without the consent of at
least 66-2/3% in aggregate liquidation preference of the outstanding Preferred
Securities affected, obtained as provided in the Partnership Agreement.
Upon any such waiver, such default shall cease to exist, and any and
all Events 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 814. Undertaking for Costs.
The Company and the Trustee agree, and each Holder by his 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; but the
provisions of this Section shall not apply to any suit instituted by the
Company, 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 aggregate
principal amount of the Outstanding Securities of all series in respect of which
such suit may be brought, considered as one class, or to any suit instituted by
any Holder for the enforcement of the payment of the principal of or premium, if
any, or interest, if any, on any Security on or after the Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on or
after the Redemption Date).
<PAGE>
-41-
SECTION 815. 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 NINE
The Trustee
SECTION 901. Certain Duties and Responsibilities.
(a) The Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee in the Trust
Indenture Act.
(b) 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.
(c) 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.
SECTION 902. Notice of Defaults.
The Trustee shall give notice of any default hereunder with respect to
the Securities of any series to the Holders of Securities of such series in the
manner and to the extent required to do so by the Trust Indenture Act, unless
such default shall have been cured or waived; provided, however, that in the
case of any default of the character specified in Section 801(c), no such notice
to Holders shall be given until at least 45 days after the occurrence thereof.
For the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time, or both, would become, an Event of Default.
SECTION 903. Certain Rights of Trustee.
Subject to the provisions of Section 901 and to the applicable
provisions of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
<PAGE>
-42-
order, bond, debenture, note, 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, or as
otherwise expressly provided herein, 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 Officer's 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 Holder pursuant to this Indenture, unless such Holder shall have
offered to the Trustee reasonable security or indemnity 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 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 (subject to applicable legal requirements) be entitled to examine,
during normal business hours, 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; and
(h) except as otherwise provided in Section 801, the Trustee shall
not be charged with knowledge of any Event of Default with respect to the
Securities of any series for which it is acting as Trustee unless either
(1) a Responsible Officer of the Trustee shall have actual knowledge of the
Event of Default or (2) written notice of such Event of Default shall have
been given to the Trustee by the Company, any other obligor on such
Securities or by any Holder of such Securities.
SECTION 904. 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
responsibility for their correctness. The Trustee makes no representations as
to the validity or
<PAGE>
-43-
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 905. May Hold Securities.
Each of the Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 908 and 913, may otherwise deal with the Company with the same rights
it would have if it were not the Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 906. 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
expressly provided herein or otherwise agreed with, and for the sole benefit of,
the Company.
SECTION 907. Compensation and Reimbursement.
The Company shall
(a) pay to the Trustee from time to time reasonable compensation
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, reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances reasonably incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except to the extent
that any such expense, disbursement or advance may be attributable to the
Trustee's negligence, wilful misconduct or bad faith; and
(c) indemnify the Trustee for, and hold it harmless from and
against, any loss, liability or expense reasonably incurred by it arising
out of or in connection with the acceptance or administration of the trust
or trusts hereunder or the performance of its duties hereunder, including
the costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or
duties hereunder, except to the extent any such loss, liability or expense
may be attributable to its negligence, wilful misconduct or bad faith.
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 other than
property and funds held in trust under Section 703 (except as otherwise provided
in Section 703). "Trustee" for purposes of this Section shall include any
predecessor Trustee; provided, however, that the negligence, wilful misconduct
or bad faith of any Trustee hereunder shall not affect the rights of any other
Trustee hereunder.
<PAGE>
-44-
SECTION 908. Disqualification; Conflicting Interests.
If the Trustee shall have or acquire any conflicting interest within
the meaning of the Trust Indenture Act, it shall either eliminate such
conflicting interest or resign to the extent, in the manner and with the effect,
and subject to the conditions, provided in the Trust Indenture Act and this
Indenture. For purposes of Section 310(b)(1) of the Trust Indenture Act and to
the extent permitted thereby, the Trustee, in its capacity as trustee in respect
of the Securities of any series, shall not be deemed to have a conflicting
interest arising from its capacity as trustee in respect of the Securities of
any other series.
SECTION 909. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States of America, any State or Territory 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 or State authority, or
(b) if and to the extent permitted by the Commission by rule,
regulation or order upon application, a corporation or other Person
organized and doing business under the laws of a foreign government,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 or the Dollar
equivalent of the applicable foreign currency and subject to supervision or
examination by authority of such foreign government or a political
subdivision thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees,
and, in either case, qualified and eligible under this Article and the Trust
Indenture Act. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of such supervising or
examining authority, then for the purposes of this Section, 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 the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 910. 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 in accordance with the
applicable requirements of Section 911.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 911 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.
<PAGE>
-45-
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of such series delivered to the
Trustee and to the Company; provided that so long as any Preferred Securities
remain outstanding, the Partnership shall not execute any Act to remove the
Trustee without the consent of the holders of 66-2/3% in aggregate liquidation
preference of Preferred Securities outstanding, obtained as provided in the
Partnership Agreement.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 908 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder for at least six months, or
(2) the Trustee shall cease to be eligible under Section 909
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (x) the Company by a Board Resolution may remove the
Trustee with respect to all Securities or (y) subject to Section 814, any Holder
who has been a bona fide Holder for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all Securities and
the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause
(other than as contemplated in clause (y) in subsection (d) of this Section),
with respect to the Securities of one or more series, 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 911. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
911, become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company. If
no successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 911, any Holder who has been a bona fide 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
appointment of a successor Trustee with respect to the Securities of such
series.
<PAGE>
-46-
(f) So long as no Event of Default or event which is, or after notice
or lapse of time, or both, would become, an Event of Default shall have occurred
and be continuing, if the Company shall have delivered to the Trustee (i) a
Board Resolution appointing a successor Trustee, effective as of a date
specified therein, and (ii) an instrument of acceptance of such appointment,
effective as of such date, by such successor Trustee in accordance with Section
911, the Trustee shall be deemed to have resigned as contemplated in subsection
(b) of this Section, the successor Trustee shall be deemed to have been
appointed pursuant to subsection (e) of this Section and such appointment shall
be deemed to have been accepted as contemplated in Section 911, all as of such
date, and all other provisions of this Section and Section 911 shall be
applicable to such resignation, appointment and acceptance except to the extent
inconsistent with this subsection (f).
(g) 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
all Holders of Securities of such 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 911. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of all series, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on the request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of all sums owed to it, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder.
(b) 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
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) 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 retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring 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 retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee and
(3) 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 constitute such Trustees 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 such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring 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,
<PAGE>
-47-
powers, trusts and duties of the retiring 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 retiring
Trustee, upon payment of all sums owed to it, shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any instruments which fully vest in and confirm to such successor
Trustee all such rights, powers and trusts referred to in subsection (a) or (b)
of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 912. Merger, Conversion, Consolidation or Succession 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 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 deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 913. Preferential Collection of Claims Against Company.
If the Trustee shall be or become a creditor of the Company or any
other obligor upon the Securities (other than by reason of a relationship
described in Section 311(b) of the Trust Indenture Act), the Trustee shall be
subject to any and all applicable provisions of the Trust Indenture Act
regarding the collection of claims against the Company or such other obligor.
For purposes of Section 311(b) of the Trust Indenture Act:
(a) 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;
(b) 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.
<PAGE>
-48-
SECTION 914. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities of one or more series which shall be authorized to act on
behalf of the Trustee to authenticate Securities of such series issued upon
original issuance and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 306, and Securities so authenticated
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
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 or territory thereof or the District of Columbia or the
Commonwealth of Puerto Rico, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent 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, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
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, 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 to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company. 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.
The Trustee 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 such payments, in accordance
with, and subject to the provisions of, Section 907.
The provisions of Sections 308, 904 and 905 shall be applicable to
each Authenticating Agent.
<PAGE>
-49-
If an appointment with respect to the Securities of one or more series
shall be made pursuant to this Section, the Securities of such series may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication substantially in the following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
________________________
As Trustee
By______________________
As Authenticating
Agent
By______________________
Authorized Signatory
If all of the Securities of a series may not be originally issued at
one time, and if the Trustee does not have an office capable of authenticating
Securities upon original issuance located in a Place of Payment where the
Company wishes to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested by the Company in writing (which writing
need not comply with Section 102 and need not be accompanied by an Opinion of
Counsel), shall appoint, in accordance with this Section and in accordance with
such procedures as shall be acceptable to the Trustee, an Authenticating Agent
having an office in a Place of Payment designated by the Company with respect to
such series of Securities.
ARTICLE TEN
Holders' Lists and Reports by Trustee and Company
SECTION 1001. Lists of Holders.
Semiannually, not later than June 30 and December 31 in each year,
commencing December 31, 1996, and at such other times as the Trustee may request
in writing, the Company shall furnish or cause to be furnished to the Trustee
information as to the names and addresses of the Holders, and the Trustee shall
preserve such information and similar information received by it in any other
capacity and afford to the Holders access to information so preserved by it, all
to such extent, if any, and in such manner as shall be required by the Trust
Indenture Act; provided, however, that no such list need be furnished so long as
the Trustee shall be the Security Registrar.
SECTION 1002. Reports by Trustee and Company.
Not later than December 31 in each year, the Trustee shall transmit to
the Holders and the Commission a report with respect to any events and other
matters described in Section 313(a) of the Trust Indenture Act, in such manner
and to the extent required by the Trust Indenture Act. The Trustee shall
<PAGE>
-50-
transmit to the Holders and the Commission, and the Company shall file with the
Trustee (within thirty (30) days after filing with the Commission in the case of
reports which pursuant to the Trust Indenture Act must be filed with the
Commission and furnished to the Trustee) and transmit to the Holders, such other
information, reports and other documents, if any, at such times and in such
manner, as shall be required by the Trust Indenture Act.
ARTICLE ELEVEN
Consolidation, Merger, Conveyance or Other Transfer
SECTION 1101. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other
corporation, or convey or otherwise transfer or lease its properties and assets
substantially as an entirety to any Person, unless
(a) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer,
or which leases, the properties and assets of the Company substantially as
an entirety shall be a Person organized and 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 satisfactory to the Trustee, the due
and punctual payment of the principal of and premium, if any, and interest,
if any, on all Outstanding Securities and the performance 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 for borrowed money which becomes an obligation of the
Company as a result of such transaction as having been incurred by the
Company 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 occurred and be continuing; and
(c) the Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, or other transfer or lease and such
supplemental indenture comply with this Article and that all conditions
precedent herein provided for relating to such transactions have been
complied with.
SECTION 1102. Successor Corporation Substituted.
Upon any consolidation by the Company with or merger by the Company
into any other corporation or any conveyance, or other transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 1101, the successor corporation formed by such consolidation or
into which the Company is merged or the Person 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,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities Outstanding hereunder.
<PAGE>
-51-
ARTICLE TWELVE
Supplemental Indentures
SECTION 1201. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company 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, all as provided in Article Eleven; or
(b) to add one or more covenants of the Company or other provisions
for the benefit of all Holders or for the benefit of the Holders of, or to
remain in effect only so long as there shall be Outstanding, Securities of
one or more specified series, or to surrender any right or power herein
conferred upon the Company; or
(c) to add any additional Events of Default with respect to all or
any series of Securities Outstanding hereunder; or
(d) to change or eliminate any provision of this Indenture or to
add any new provision to this Indenture; provided, however, that if such
change, elimination or addition shall adversely affect the interests of the
Holders of Securities of any series in any material respect, such change,
elimination or addition shall become effective with respect to such series
only when no Security of such series remains Outstanding; or
(e) to provide collateral security for the Securities; or
(f) to establish the form or terms of Securities of any series as
contemplated by Sections 201 and 301; or
(g) to evidence and provide for the acceptance of appointment
hereunder by a separate or successor Trustee with respect to the Securities
of one or more series 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 911(b); or
(h) to provide for the procedures required to permit the Company to
utilize, at its option, a noncertificated system of registration for all, or any
series of, the Securities; or
(i) to change any place or places where (1) the principal of and premium,
if any, and interest, if any, on all or any series of Securities shall be
payable, (2) all or any series of Securities may be surrendered for
registration of transfer, (3) all or any series of Securities may be
surrendered for
<PAGE>
-52-
exchange and (4) notices and demands to or upon the Company in respect of
all or any series of Securities and this Indenture may be served; or
(j) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other changes to the provisions hereof or to add
other provisions with respect to matters or questions arising under this
Indenture, provided that such other changes or additions shall not
adversely affect the interests of the Holders of Securities of any series
in any material respect.
Without limiting the generality of the foregoing, if the Trust
Indenture Act as in effect at the date of the execution and delivery of this
Indenture or at any time thereafter shall be amended and
(x) if any such amendment shall require one or more changes to any
provisions hereof or the inclusion herein of any additional provisions, or
shall by operation of law be deemed to effect such changes or incorporate
such provisions by reference or otherwise, this Indenture shall be deemed
to have been amended so as to conform to such amendment to the Trust
Indenture Act, and the Company and the Trustee may, without the consent of
any Holders, enter into an indenture supplemental hereto to effect or
evidence such changes or additional provisions; or
(y) if any such amendment shall permit one or more changes to, or the
elimination of, any provisions hereof which, at the date of the execution
and delivery hereof or at any time thereafter, are required by the Trust
Indenture Act to be contained herein, this Indenture shall be deemed to
have been amended to effect such changes or elimination, and the Company
and the Trustee may, without the consent of any Holders, enter into an
indenture supplemental hereto to evidence such amendment hereof.
SECTION 1202. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Securities of all series then Outstanding
under this Indenture, considered as one class, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provi sions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or modifying
in any manner the rights of the Holders of Securities of such series under the
Indenture; provided, however, that if there shall be Securities of more than one
series Outstanding hereunder and if a proposed supplemental indenture shall
directly affect the rights of the Holders of Securities of one or more, but less
than all, of such series, then the consent only of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all series so
directly affected, considered as one class, shall be required; and provided,
further, that no such supplemental indenture shall
(a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on (except as provided in Section
311 hereof), any Security, or reduce the principal amount thereof or the
rate of interest thereon (or the amount of any installment of interest
thereon) or the method of calculating such rate or reduce any premium
payable upon the redemption thereof, or change the coin or currency (or
other property), in which any Security or any premium or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or
<PAGE>
-53-
after the Stated Maturity of any Security (or, in the case of redemption,
on or after the Redemption Date), without, in any such case, the consent of
the Holder of such Security, or
(b) reduce the percentage in principal amount of the Outstanding
Securities of any series (or, if applicable, in liquidation preference of
any series of Preferred Securities), the consent of the Holders of which is
required for any such supplemental indenture, or the consent of the Holders
of which is required for any waiver of compliance with any provision of
this Indenture or of any default hereunder and its consequences, or reduce
the requirements of Section 1304 for quorum or voting, without, in any such
case, the consent of the Holders of each Outstanding Security of such
series, or
(c) modify any of the provisions of this Section, Section 607 or
Section 813, with respect to the Securities of any series, except to
increase the percentages in principal amount referred to in this Section or
such other Sections or to provide that 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, or the deletion of this proviso, in accordance with the
requirements of Sections 911(b) and 1201(g).
Notwithstanding the foregoing, so long as any of the Preferred Securities remain
outstanding, the Partnership may not consent to a supplemental indenture under
this Section 1202 without the prior consent, obtained as provided in the
Partnership Agreement, of the holders of not less than 66-2/3% in aggregate
liquidation preference of all Preferred Securities affected, considered as one
class, or, in the case of changes described in clauses (a), (b) and (c) above,
100% in aggregate liquidation preference of all Preferred Securities then
outstanding which would be affected thereby, considered as one class. 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 1203. 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 901) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties, immunities or liabilities under this Indenture or
otherwise.
SECTION 1204. 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
<PAGE>
-54-
purposes; and every Holder of Securities theretofore or thereafter authenticated
and delivered hereunder shall be bound thereby. Any supplemental indenture
permitted by this Article may restate this Indenture in its entirety, and, upon
the execution and delivery thereof, any such restatement shall supersede this
Indenture as theretofore in effect for all purposes.
SECTION 1205. 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 1206. 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.
SECTION 1207. Modification Without Supplemental Indenture.
If the terms of any particular series of Securities shall have been
established in a Board Resolution or an Officer's Certificate as contemplated by
Section 301, and not in an indenture supplemental hereto, additions to, changes
in or the elimination of any of such terms may be effected by means of a
supplemental Board Resolution or Officer's Certificate, as the case may be,
delivered to, and accepted by, the Trustee; provided, however, that such
supplemental Board Resolution or Officer's Certificate shall not be accepted by
the Trustee or otherwise be effective unless all conditions set forth in this
Indenture which would be required to be satisfied if such additions, changes or
elimination were contained in a supplemental indenture shall have been
appropriately satisfied. Upon the acceptance thereof by the Trustee, any such
supplemental Board Resolution or Officer's Certificate shall be deemed to be a
"supplemental indenture" for purposes of Section 1204 and 1206.
ARTICLE THIRTEEN
Meetings of Holders; Action Without Meeting
SECTION 1301. Purposes for Which Meetings May Be Called.
A meeting of Holders of Securities of one or more, or all, series may
be called at any time and from time to time pursuant to this Article to make,
give or take any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be made, given or taken by
Holders of Securities of such series.
<PAGE>
-55-
SECTION 1302. Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of
Securities of one or more, or all, series for any purpose specified in Section
1301, to be held at such time and at such place in the Borough of Manhattan, The
City of New York, as the Trustee shall determine, or, with the approval of the
Company, at any other place. Notice of every such meeting, setting forth the
time and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be given, in the manner provided in Section 106,
not less than 21 nor more than 180 days prior to the date fixed for the meeting.
(b) If the Trustee shall have been requested to call a meeting of the
Holders of Securities of one or more, or all, series by the Company or by the
Holders of 33% in aggregate principal amount of all of such series, considered
as one class, for any purpose specified in Section 1301, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have given the notice of such meeting within
21 days after receipt of such request or shall not thereafter proceed to cause
the meeting to be held as provided herein, then the Company or the Holders of
Securities of such series in the amount above specified, as the case may be, may
determine the time and the place in the Borough of Manhattan, The City of New
York, or in such other place as shall be determined or approved by the Company,
for such meeting and may call such meeting for such purposes by giving notice
thereof as provided in subsection (a) of this Section.
(c) Any meeting of Holders of Securities of one or more, or all,
series shall be valid without notice if the Holders of all Outstanding
Securities of such series are present in person or by proxy and if rep
resentatives of the Company and the Trustee are present, or if notice is waived
in writing before or after the meeting by the Holders of all Outstanding
Securities of such series, or by such of them as are not present at the meeting
in person or by proxy, and by the Company and the Trustee.
SECTION 1303. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities of one
or more, or all, series a Person shall be (a) a Holder of one or more
Outstanding Securities of such series, or (b) a Person appointed by an
instrument in writing as proxy for a Holder or Holders of one or more
Outstanding Securities of such series by such Holder or Holders. The only
Persons who shall be entitled to attend any meeting of Holders of Securities of
any series shall be the Persons entitled to vote at such meeting and their
counsel, any repre sentatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
SECTION 1304. Quorum; Action.
The Persons entitled to vote a majority in aggregate principal amount
of the Outstanding Securities of the series with respect to which a meeting
shall have been called as hereinbefore provided, considered as one class, shall
constitute a quorum for a meeting of Holders of Securities of such series;
provided, however, that if any action is to be taken at such meeting which this
Indenture expressly provides may be taken by the Holders of a specified
percentage, which is less than a majority, in principal amount of the
Outstanding Securities of such series, considered as one class, the Persons
entitled to vote such specified percentage in principal amount of the
Outstanding Securities of such series, considered as one class, shall constitute
a quorum. In the absence of a quorum within one hour of the time appointed for
any such meeting, the meeting shall, if convened at the request of Holders of
Securities of such series, be dissolved. In any other
<PAGE>
-56-
case the meeting may be adjourned for such period as may be determined by the
chairman of the meeting prior to the adjournment of such meeting. In the
absence of a quorum at any such adjourned meeting, such adjourned meeting may be
further adjourned for such period as may be determined by the chairman of the
meeting prior to the adjournment of such adjourned meeting. Except as provided
by Section 1305(e), notice of the reconvening of any meeting adjourned for more
than 30 days shall be given as provided in Section 1302(a) not less than ten
days prior to the date on which the meeting is scheduled to be reconvened.
Notice of the reconvening of an adjourned meeting shall state expressly the
percentage, as provided above, of the principal amount of the Outstanding
Securities of such series which shall constitute a quorum.
Except as limited by Section 1202, any resolution presented to a
meeting or adjourned meeting duly reconvened at which a quorum is present as
aforesaid may be adopted only by the affirmative vote of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of the
series with respect to which such meeting shall have been called, considered as
one class; provided, however, that, except as so limited, any resolution with
respect to any action which this Indenture expressly provides may be taken by
the Holders of a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities of such series, considered as one
class, may be adopted at a meeting or an adjourned meeting duly reconvened and
at which a quorum is present as aforesaid by the affirmative vote of the Holders
of such specified percentage in principal amount of the Outstanding Securities
of such series, considered as one class.
Any resolution passed or decision taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all the
Holders of Securities of the series with respect to which such meeting shall
have been held, whether or not present or represented at the meeting.
SECTION 1305. Attendance at Meetings; Determination of Voting Rights; Conduct
and Adjournment of Meetings.
(a) Attendance at meetings of Holders of Securities may be in person
or by proxy; and, to the extent permitted by law, any such proxy shall remain in
effect and be binding upon any future Holder of the Securities with respect to
which it was given unless and until specifically revoked by the Holder or future
Holder of such Securities before being voted.
(b) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Holders of Securities in regard to proof of the holding of such
Securities and of the appointment of proxies and in regard to the appointment
and duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate. Except as
otherwise permitted or required by any such regulations, the holding of
Securities shall be proved in the manner specified in Section 104 and the
appointment of any proxy shall be proved in the manner specified in Section 104.
Such regulations may provide that written instruments appointing proxies,
regular on their face, may be presumed valid and genuine without the proof
specified in Section 104 or other proof.
(c) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Holders as provided in Section 1302(b), in which case the
Company or the Holders of Securities of the series calling the meeting, as the
case may be, shall in like manner appoint a temporary chairman. A permanent
chairman and a permanent secretary
<PAGE>
-57-
of the meeting shall be elected by vote of the Persons entitled to vote a
majority in aggregate principal amount of the Outstanding Securities of all
series represented at the meeting, considered as one class.
(d) At any meeting each Holder or proxy shall be entitled to one vote
for each $25 principal amount of Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any Security challenged as not Outstanding and ruled by the chairman
of the meeting to be not Outstanding. The chairman of the meeting shall have no
right to vote, except as a Holder of a Security or proxy.
(e) Any meeting duly called pursuant to Section 1302 at which a
quorum is present may be adjourned from time to time by Persons entitled to vote
a majority in aggregate principal amount of the Outstanding Securities of all
series represented at the meeting, considered as one class; and the meeting may
be held as so adjourned without further notice.
SECTION 1306. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the Holders
or of their representatives by proxy and the principal amounts and serial
numbers of the Outstanding Securities, of the series with respect to which the
meeting shall have been called, held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports of all
votes cast at the meeting. A record of the proceedings of each meeting of
Holders shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 1302 and, if
applicable, Section 1304. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
SECTION 1307. Action Without Meeting.
In lieu of a vote of Holders at a meeting as hereinbefore contemplated
in this Article, any request, demand, authorization, direction, notice, consent,
waiver or other action may be made, given or taken by Holders by written
instruments as provided in Section 104.
ARTICLE FOURTEEN
Immunity of Incorporators,
Stockholders, Officers and Directors
SECTION 1401. Liability Solely Corporate.
<PAGE>
-58-
No recourse shall be had for the payment of the principal of or
premium, if any, or interest, if any, on any Securities, or any part thereof, or
for any claim based thereon or otherwise in respect thereof, or of the
indebtedness represented thereby, or upon any obligation, covenant or agreement
under this Indenture, against any incorporator, stockholder, officer or
director, as such, past, present or future of the Company or of any predecessor
or successor corporation (either directly or through the Company or a
predecessor or successor corporation), whether by virtue of any constitutional
provision, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly agreed and understood that this
Indenture and all the Securities are solely corporate obligations, and that no
personal liability whatsoever shall attach to, or be incurred by, any
incorporator, stockholder, officer or director, past, present or future, of the
Company or of any predecessor or successor corporation, either directly or
indirectly through the Company or any predecessor or successor corporation,
because of the indebtedness hereby authorized or under or by reason of any of
the obligations, covenants or agreements contained in this Indenture or in any
of the Securities or to be implied herefrom or therefrom, and that any such
personal liability is hereby expressly waived and released as a condition of,
and as part of the consideration for, the execution of this Indenture and the
issuance of the Securities.
ARTICLE FIFTEEN
SUBORDINATION OF SECURITIES
SECTION 1501. Securities Subordinate to Senior Indebtedness.
The Company, for itself, its successors and assigns, covenants and
agrees, and each Holder of the Securities of each series, by its acceptance
thereof, likewise covenants and agrees, that the payment of the principal of and
premium, if any, and interest, if any, on each and all of the Securities is
hereby expressly subordinated, to the extent and in the manner set forth in this
Article, in right of payment to the prior payment in full of all Senior
Indebtedness.
Each Holder of the Securities of each series, by its acceptance
thereof, authorizes and directs the Trustee on its behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article, and appoints the Trustee its attorney-in-fact for any and all such
purposes.
SECTION 1502. Payment Over of Proceeds of Securities.
In the event (a) of any insolvency or bankruptcy proceedings or any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or a substantial part of its property, or of any
proceedings for liquidation, dissolution or other winding up of the Company,
whether or not involving insolvency or bankruptcy, or (b) subject to the
provisions of Section 1503, that (i) a default shall have occurred with respect
to the payment of principal of or interest on or other monetary amounts due and
payable on any Senior Indebtedness, or (ii) there shall have occurred a default
(other than a default in the payment of principal or interest or other monetary
amounts due and payable) in respect of any Senior Indebtedness, as defined
therein or in the instrument under which the same is outstanding, permitting the
holder or holders thereof to accelerate the maturity thereof (with notice or
lapse of time, or both), and such default shall have continued beyond the period
of grace, if any, in respect thereof, and, in the cases of subclauses (i) and
(ii) of this clause (b), such default shall not have been cured or waived or
shall not have ceased to exist, or (c) that the principal
<PAGE>
-59-
of and accrued interest on the Securities of any series shall have been declared
due and payable pursuant to Section 801 and such declaration shall not have been
rescinded and annulled as provided in Section 802, then:
(1) the holders of all Senior Indebtedness shall first be entitled to
receive payment of the full amount due thereon, or provision shall be made
for such payment in money or money's worth, before the Holders of any of
the Securities are entitled to receive a payment on account of the
principal of or interest on the indebtedness evidenced by the Securities,
including, without limitation, any payments made pursuant to Articles Four
and Five;
(2) any payment by, or distribution of assets of, the Company of any
kind or character, whether in cash, property or securities, to which any
Holder or the Trustee would be entitled except for the provisions of this
Article, shall be paid or delivered by the person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of such Senior Indebtedness
or their representative or representatives or to the trustee or trustees
under any indenture under which any instruments evidencing any of such
Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of such Senior Indebtedness
held or represented by each, to the extent necessary to make payment in
full of all Senior Indebtedness remaining unpaid after giving effect to any
concurrent payment or distribution (or provision therefor) to the holders
of such Senior Indebtedness, before any payment or distribution is made to
the Holders of the indebtedness evidenced by the Securities or to the
Trustee under this Indenture; and
(3) in the event that, notwithstanding the foregoing, any payment
by, or distribution of assets of, the Company of any kind or character,
whether in cash, property or securities, in respect of principal of or
interest on the Securities or in connection with any repurchase by the
Company of the Securities, shall be received by the Trustee or any Holder
before all Senior Indebtedness is paid in full, or provision is made for
such payment in money or money's worth, such payment or distribution in
respect of principal of or interest on the Securities or in connection with
any repurchase by the Company of the Securities shall be paid over to the
holders of such Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any such Senior Indebtedness may have been
issued, ratably as aforesaid, for application to the payment of all Senior
Indebtedness remaining unpaid until all such Senior Indebtedness shall have
been paid in full, after giving effect to any concurrent payment or
distribution (or provision therefor) to the holders of such Senior
Indebtedness.
Notwithstanding the foregoing, at any time after the 123rd day
following the date of deposit of cash or Government Obligations pursuant to
Section 701 (provided all conditions set out in such Section shall have been
satisfied), the funds so deposited and any interest thereon will not be subject
to any rights of holders of Senior Indebtedness including, without limitation,
those arising under this Article Fifteen; provided
<PAGE>
-60-
that no event described in clauses (d) and (e) of Section 801 with respect to
the Company has occurred during such 123-day period.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan or reorganization or readjustment which are subordinate
in right of payment to all Senior Indebtedness which may at the time be
outstanding to the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. The consolidation of the
Company with, or the merger of the Company into, another corporation or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in Article Eleven hereof
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section 1502 if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
stated in Article Eleven hereof. Nothing in Section 1501 or in this Section
1502 shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 907.
SECTION 1503. Disputes with Holders of Certain Senior Indebtedness.
Any failure by the Company to make any payment on or perform any other
obligation in respect of Senior Indebtedness, other than any indebtedness
incurred by the Company or assumed or guaranteed, directly or indirectly, by the
Company for money borrowed (or any deferral, renewal, extension or refunding
thereof) or any other obligation as to which the provisions of this Section
shall have been waived by the Company in the instrument or instruments by which
the Company incurred, assumed, guaranteed or otherwise created such indebtedness
or obligation, shall not be deemed a default under clause (b) of Section 1502 if
(i) the Company shall be disputing its obligation to make such payment or
perform such obligation and (ii) either (A) no final judgment relating to such
dispute shall have been issued against the Company which is in full force and
effect and is not subject to further review, including a judgment that has
become final by reason of the expiration of the time within which a party may
seek further appeal or review, or (B) in the event that a judgment that is
subject to further review or appeal has been issued, the Company shall in good
faith be prosecuting an appeal or other proceeding for review and a stay or
execution shall have been obtained pending such appeal or review.
SECTION 1504. Subrogation.
Senior Indebtedness shall not be deemed to have been paid in full
unless the holders thereof shall have received cash (or securities or other
property satisfactory to such holders) in full payment of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness, the Holders of the Securities shall be subrogated to the rights of
the holders of Senior Indebtedness to receive any further payments or
distributions of cash, property or securities of the Company applicable to the
holders of the Senior Indebtedness until all amounts owing on the Securities
shall be paid in full; and such payments or distributions of cash, property or
securities received by the Holders of the Securities, by reason of such
subrogation, which otherwise would be paid or distributed to the holders of such
Senior Indebtedness shall, as between the Company, its creditors other than the
holders of Senior Indebtedness, and the Holders, be deemed to be a payment by
the Company to or on account of Senior Indebtedness, it being understood that
the provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
the Senior Indebtedness, on the other hand.
<PAGE>
-61-
SECTION 1505. Obligation of the Company Unconditional.
Nothing contained in this Article or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of and interest on the Securities as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders and creditors of the Company
other than the holders of Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
Upon any payment or distribution of assets or securities of the
Company referred to in this Article, the Trustee and the Holders shall be
entitled to rely upon any order or decree of a court of competent jurisdiction
in which such dissolution, winding up, liquidation or reorganization proceedings
are pending for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon, and all other facts pertinent thereto or
to this Article.
SECTION 1506. Priority of Senior Indebtedness Upon Maturity.
Upon the maturity of the principal of any Senior Indebtedness by lapse
of time, acceleration or otherwise, all matured principal of Senior Indebtedness
and interest and premium, if any, thereon shall first be paid in full before any
payment of principal or premium or interest, if any, is made upon the Securities
or before any Securities can be acquired by the Company or any sinking fund
payment is made with respect to the Securities (except that required sinking
fund payments may be reduced by Securities acquired before such maturity of such
Senior Indebtedness).
SECTION 1507. Trustee as Holder of Senior Indebtedness.
The Trustee shall be entitled to all rights set forth in this Article
with respect to any Senior Indebtedness at any time held by it, to the same
extent as any other holder of Senior Indebtedness. Nothing in this Article shall
deprive the Trustee of any of its rights as such holder.
SECTION 1508. Notice to Trustee to Effectuate Subordination.
Notwithstanding the provisions of this Article or any other provision
of the Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment of moneys
to or by the Trustee unless and until the Trustee shall have received written
notice thereof from the Company, from a Holder or from a holder of any Senior
Indebtedness or from any representative or representatives of such holder and,
prior to the receipt of any such written notice, the Trustee shall be entitled,
subject to Section 901, in all respects to assume that no such facts exist;
provided, however, that, if prior to the fifth Business Day preceding the date
upon which by the terms hereof any such moneys may become payable for any
purpose, or in the event of the execution of an instrument pursuant to Section
702 acknowledging satisfaction and discharge of this Indenture, then if prior to
the second Business Day preceding the date of such execution, the Trustee shall
not have received with respect to such moneys the notice provided
<PAGE>
-62-
for in this Section, then, anything herein contained to the contrary
notwithstanding, the Trustee may, in its discretion, receive such moneys and/or
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary, which may be received by it on or after
such date; provided, however, that no such application shall affect the
obligations under this Article of the persons receiving such moneys from the
Trustee.
SECTION 1509. Modification, Extension, etc. of Senior Indebtedness.
The holders of Senior Indebtedness may, without affecting in any
manner the subordination of the payment of the principal of and premium, if any,
and interest, if any, on the Securities, at any time or from time to time and in
their absolute discretion, agree with the Company to change the manner, place or
terms of payment, change or extend the time of payment of, or renew or alter,
any Senior Indebtedness, or amend or supplement any instrument pursuant to which
any Senior Indebtedness is issued, or exercise or refrain from exercising any
other of their rights under the Senior Indebtedness including, without
limitation, the waiver of default thereunder, all without notice to or assent
from the Holders or the Trustee.
SECTION 1510. Trustee Has No Fiduciary Duty to Holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and objectives as
are specifically set forth in this Indenture, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if it shall mistakenly pay over or deliver to the
Holders or the Company or any other Person, money or assets to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article or otherwise.
SECTION 1511. Paying Agents Other Than the Trustee.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully for all intents and purposes as if such Paying Agent were named
in this Article in addition to or in place of the Trustee; provided, however,
that Sections 1507, 1508 and 1510 shall not apply to the Company if it acts as
Paying Agent.
SECTION 1512. Rights of Holders of Senior Indebtedness Not Impaired.
No right of any present or future holder of Senior Indebtedness to
enforce the subordination herein shall at any time or in any way be prejudiced
or impaired by any act or failure to act on the part of the Company or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
SECTION 1513. Effect of Subordination Provisions; Termination.
<PAGE>
-63-
Notwithstanding anything contained herein to the contrary, other than
as provided in the immediately succeeding sentence, all the provisions of this
Indenture shall be subject to the provisions of this Article, so far as the same
may be applicable thereto.
Notwithstanding anything contained herein to the contrary, the
provisions of this Article Fifteen shall be of no further effect, and the
Securities shall no longer be subordinated in right of payment to the prior
payment of Senior Indebtedness, if the Company shall have delivered to the
Trustee a notice to such effect. Any such notice delivered by the Company shall
not be deemed to be a supplemental indenture for purposes of Article Twelve
hereof.
_________________________
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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
DUQUESNE LIGHT COMPANY
By: /s/ Donald J. Clayton
------------------------------
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By: /s/ Mary R. Fonti
--------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
Definitions and Other Provisions of General Application
<S> <C>
SECTION 101. Definitions................................................. 1
Act................................................................. 2
Additional Interest................................................. 2
Affiliate........................................................... 2
Authenticating Agent................................................ 2
Authorized Executive Officer........................................ 2
Board of Directors.................................................. 2
Board Resolution.................................................... 2
Business Day........................................................ 2
Commission.......................................................... 2
Company............................................................. 2
Company Request or Company Order.................................... 3
Corporate Trust Office.............................................. 3
Corporation......................................................... 3
Defaulted Interest.................................................. 3
Dollar or $......................................................... 3
Event of Default.................................................... 3
Governmental Authority.............................................. 3
Government Obligations.............................................. 3
Guarantee........................................................... 3
Holder.............................................................. 3
Indenture........................................................... 3
Interest Payment Date............................................... 4
Maturity............................................................ 4
Officer's Certificate............................................... 4
Opinion of Counsel.................................................. 4
Outstanding......................................................... 4
Partnership......................................................... 5
Partnership Agreement............................................... 5
Paying Agent........................................................ 5
Person.............................................................. 5
Place of Payment.................................................... 5
Predecessor Security................................................ 5
Preferred Securities................................................ 5
Redemption Date..................................................... 5
Redemption Price.................................................... 5
Regular Record Date................................................. 5
</TABLE>
- ------------------
Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
-ii-
<TABLE>
<CAPTION>
Page
----
<S> <C>
Responsible Officer................................................. 5
Securities.......................................................... 5
Security Register and Security Registrar............................ 6
Senior Indebtedness................................................. 6
Special Record Date................................................. 6
Special Representative.............................................. 6
Stated Maturity..................................................... 6
Trust Indenture Act................................................. 6
Trustee............................................................. 6
United States....................................................... 6
SECTION 102. Compliance Certificates and Opinions........................ 6
SECTION 103. Form of Documents Delivered to Trustee...................... 7
SECTION 104. Acts of Holders............................................. 8
SECTION 105. Notices, etc. to Trustee and Company........................ 9
SECTION 106. Notice to Holders of Securities; Waiver..................... 10
SECTION 107. Conflict With Trust Indenture Act........................... 11
SECTION 108. Effect of Headings and Table of Contents.................... 11
SECTION 109. Successors and Assigns...................................... 11
SECTION 110. Separability Clause......................................... 11
SECTION 111. Benefits of Indenture....................................... 11
SECTION 112. Governing Law............................................... 12
SECTION 113. Legal Holidays.............................................. 12
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally............................................. 12
SECTION 202. Form of Trustee's Certificate of Authentication............. 13
ARTICLE THREE
The Securities
SECTION 301. Amount Unlimited; Issuable in Series......................... 13
SECTION 302. Denominations................................................ 15
SECTION 303. Execution, Authentication, Delivery and Dating............... 15
SECTION 304. Temporary Securities......................................... 17
SECTION 305. Registration; Registration of Transfer and Exchange.......... 17
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities............. 18
SECTION 307. Payment of Interest; Interest Rights Preserved............... 19
SECTION 308. Persons Deemed Owners........................................ 20
SECTION 309. Cancellation by Security Registrar........................... 20
SECTION 310. Computation of Interest...................................... 21
SECTION 311. Extension of Interest Payment Period......................... 21
SECTION 312. Additional Interest.......................................... 21
</TABLE>
<PAGE>
-iii-
<TABLE>
<CAPTION>
Page
----
ARTICLE FOUR
Redemption of Securities
<S> <C>
SECTION 401. Applicability of Article..................................... 22
SECTION 402. Election to Redeem; Notice to Trustee........................ 22
SECTION 403. Selection of Securities to Be Redeemed....................... 22
SECTION 404. Notice of Redemption......................................... 23
SECTION 405. Securities Payable on Redemption Date........................ 24
SECTION 406. Securities Redeemed in Part.................................. 24
ARTICLE FIVE
Sinking Funds
SECTION 501. Applicability of Article..................................... 25
SECTION 502. Satisfaction of Sinking Fund Payments With Securities........ 25
SECTION 503. Redemption of Securities for Sinking Fund.................... 25
ARTICLE SIX
Covenants
SECTION 601. Payment of Principal, Premium and Interest................... 26
SECTION 602. Maintenance of Office or Agency.............................. 26
SECTION 603. Money for Securities Payments to Be Held in Trust............ 27
SECTION 604. Corporate Existence.......................................... 28
SECTION 605. Maintenance of Properties.................................... 28
SECTION 606. Statement as to Compliance................................... 28
SECTION 607. Waiver of Certain Covenants.................................. 29
SECTION 608. Restriction on Payment of Dividends.......................... 29
SECTION 609. Maintenance of Partnership Existence......................... 29
SECTION 610. Rights of Holders of Preferred Securities.................... 30
ARTICLE SEVEN
Satisfaction and Discharge
SECTION 701. Satisfaction and Discharge of Securities..................... 30
SECTION 702. Satisfaction and Discharge of Indenture...................... 32
SECTION 703. Application of Trust Money................................... 33
</TABLE>
<PAGE>
-iv-
<TABLE>
<CAPTION>
Page
----
ARTICLE EIGHT
Events of Default; Remedies
<S> <C>
SECTION 801. Events of Default............................................ 33
SECTION 802. Acceleration of Maturity; Rescission and Annulment........... 34
SECTION 803. Collection of Indebtedness and Suits for Enforcement by
Trustee...................................................... 36
SECTION 804. Trustee May File Proofs of Claim............................. 36
SECTION 805. Trustee May Enforce Claims Without Possession of Securities.. 37
SECTION 806. Application of Money Collected............................... 37
SECTION 807. Limitation on Suits.......................................... 37
SECTION 808. Unconditional Right of Holders to Receive Principal,
Premium and Interest......................................... 38
SECTION 809. Restoration of Rights and Remedies........................... 38
SECTION 810. Rights and Remedies Cumulative............................... 38
SECTION 811. Delay or Omission Not Waiver................................. 39
SECTION 812. Control by Holders of Securities............................. 39
SECTION 813. Waiver of Past Defaults...................................... 39
SECTION 814. Undertaking for Costs........................................ 40
SECTION 815. Waiver of Stay or Extension Laws............................. 40
ARTICLE NINE
The Trustee
SECTION 901. Certain Duties and Responsibilities.......................... 40
SECTION 902. Notice of Defaults........................................... 41
SECTION 903. Certain Rights of Trustee.................................... 41
SECTION 904. Not Responsible for Recitals or Issuance of Securities....... 42
SECTION 905. May Hold Securities.......................................... 42
SECTION 906. Money Held in Trust.......................................... 42
SECTION 907. Compensation and Reimbursement............................... 42
SECTION 908. Disqualification; Conflicting Interests...................... 43
SECTION 909. Corporate Trustee Required; Eligibility...................... 43
SECTION 910. Resignation and Removal; Appointment of Successor............ 44
SECTION 911. Acceptance of Appointment by Successor....................... 45
SECTION 912. Merger, Conversion, Consolidation or Succession to Business.. 46
SECTION 913. Preferential Collection of Claims Against Company............ 47
SECTION 914. Appointment of Authenticating Agent.......................... 47
ARTICLE TEN
Holders' Lists and Reports by Trustee and Company
SECTION 1001. Lists of Holders............................................ 49
SECTION 1002. Reports by Trustee and Company.............................. 49
</TABLE>
<PAGE>
-v-
<TABLE>
<CAPTION>
Page
----
ARTICLE ELEVEN
Consolidation, Merger, Conveyance or Other Transfer
<S> <C>
SECTION 1101. Company May Consolidate, etc., Only on Certain Terms........ 49
SECTION 1102. Successor Corporation Substituted........................... 50
ARTICLE TWELVE
Supplemental Indentures
SECTION 1201. Supplemental Indentures Without Consent of Holders.......... 50
SECTION 1202. Supplemental Indentures With Consent of Holders............. 52
SECTION 1203. Execution of Supplemental Indentures........................ 53
SECTION 1204. Effect of Supplemental Indentures........................... 53
SECTION 1205. Conformity With Trust Indenture Act......................... 53
SECTION 1206. Reference in Securities to Supplemental Indentures.......... 53
SECTION 1207. Modification Without Supplemental Indenture................. 54
ARTICLE THIRTEEN
Meetings of Holders; Action Without Meeting
SECTION 1301. Purposes for Which Meetings May Be Called................... 54
SECTION 1302. Call, Notice and Place of Meetings.......................... 54
SECTION 1303. Persons Entitled to Vote at Meetings........................ 55
SECTION 1304. Quorum; Action.............................................. 55
SECTION 1305. Attendance at Meetings; Determination of Voting Rights;
Conduct and Adjournment of Meetings....................... 56
SECTION 1306. Counting Votes and Recording Action of Meetings............. 57
SECTION 1307. Action Without Meeting...................................... 57
ARTICLE FOURTEEN
Immunity of Incorporators,
Stockholders, Officers and Directors
SECTION 1401. Liability Solely Corporate.................................. 57
ARTICLE FIFTEEN
SUBORDINATION OF SECURITIES
SECTION 1501. Securities Subordinate to Senior Indebtedness............... 58
SECTION 1502. Payment Over of Proceeds of Securities...................... 58
</TABLE>
<PAGE>
-vi-
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1503. Disputes with Holders of Certain Senior Indebtedness....... 60
SECTION 1504. Subrogation................................................ 60
SECTION 1505. Obligation of the Company Unconditional.................... 60
SECTION 1506. Priority of Senior Indebtedness Upon Maturity.............. 61
SECTION 1507. Trustee as Holder of Senior Indebtedness................... 61
SECTION 1508. Notice to Trustee to Effectuate Subordination.............. 61
SECTION 1509. Modification, Extension, etc. of Senior Indebtedness....... 61
SECTION 1510. Trustee Has No Fiduciary Duty to Holders of Senior
Indebtedness............................................ 62
SECTION 1511. Paying Agents Other Than the Trustee....................... 62
SECTION 1512. Rights of Holders of Senior Indebtedness Not Impaired...... 62
SECTION 1513. Effect of Subordination Provisions; Termination............ 62
Testimonium............................................................... 63
Signatures and Seals...................................................... 64
Acknowledgments......................................................... 64-65
</TABLE>
<PAGE>
Exhibit 10.59
DUQUESNE LIGHT COMPANY
OUTSIDE DIRECTORS' RETIREMENT PLAN
Originally effective April 18, 1989.
Revised March 27, 1990.
Revised June 27, 1995.
Revised August 27, 1996.
<PAGE>
DUQUESNE LIGHT COMPANY
OUTSIDE DIRECTORS' RETIREMENT PLAN
Table of Contents
-----------------
Article Page
- ------- ----
I Purpose.................................... 1
II Definitions................................ 1
III Eligibility................................ 2
IV Retirement Benefits........................ 2
V Deferred Compensation...................... 4
VI Status of Plan............................. 4
VII Rights Nonassignable....................... 5
VIII Administration............................. 5
IX Termination................................ 6
X Standstill Provision....................... 6
XI Amendment.................................. 7
XII Miscellaneous.............................. 7
<PAGE>
DUQUESNE LIGHT COMPANY
OUTSIDE DIRECTORS' RETIREMENT PLAN
----------------------------------
ARTICLE I
1.01 The purpose of this Retirement Plan is to provide directors of
Duquesne Light Company with payments after retirement in recognition of their
service to the Company and to assure that the overall compensation arrangements
for directors are adequate to attract and retain highly qualified individuals.
ARTICLE II
Definitions
-----------
2.01 "Board" or "Board of Directors" means the board of directors of the
Company.
2.02 "Company" means Duquesne Light Company.
2.03 "Director" means an individual serving on the Board of Directors.
2.04 "Participant" means a director, former director, or the beneficiary of
a deceased director or former director, who is eligible for or entitled to
receive benefits under this Plan.
2.05 "Plan" means this Outside Directors' Retirement Plan.
2.06 "Retirement" means termination of service as a director for any
reason, including without limitation, death, resignation or not being re-
elected.
<PAGE>
ARTICLE III
Eligibility
-----------
3.01 Directors of the Company shall be eligible to participate in this Plan
as of the later of the effective date of the Plan, or the first day of their
first term as a director, except that a director who is a participant in any tax
qualified retirement plan of the Company (a "Qualified Director") will not be
eligible to participate until the effective date of his or her retirement from
the Company.
3.02 A director shall be eligible for benefits under this Plan upon
completion of five (5) years of service on the Board or, in the case of a
Qualified Director, upon completion of one (1) year of service on the Board
following his or her retirement from the Company.
ARTICLE IV
Retirement Benefits
-------------------
4.01 Participants shall be paid a monthly benefit following retirement in
accordance with the terms and conditions of this Plan.
4.02 A director's monthly benefit shall be equal to one-twelfth (1/12) of
the annual retainer in effect on the effective date of the director's retirement
from the Board, and shall continue for the number of months equal to the
director's total months of service on the Board prior to attaining the age of 70
(excluding a Qualified Director's Service on the Board during his or her
employment with the Company), but in no event longer than 120 months. For
purposes of determining
2
<PAGE>
the annual retainer in effect on the effective date of a director's retirement,
any portion of such annual retainer that is payable in shares of DQE Common
Stock shall be valued based upon the purchase price paid by the Company in
connection with the most recent issuance of shares to the director, or if there
was no purchase of shares by the Company in connection with such issuance of
shares to the director, then such value shall be based on the average of the
high and low trading prices of DQE Common Stock on the date of such issuance of
shares as quoted in the New York Stock Exchange Composite Transactions listing
in The Wall Street Journal; and
4.03 Subject to Section 4.02, a director's months of service shall include
any period during which the director served on the Board prior to the effective
date of the Plan and any non-consecutive periods of service.
4.04 Meeting fees are not considered as a part of the retainer for purposes
of this Plan.
4.05 Payment of benefits under this Plan shall begin upon the later of:
(a) The first day of the month following the director's retirement
from the Board or
(b) a date elected by the director in writing on or before
December 31 of the year prior to the calendar year in which
the director retires.
3
<PAGE>
A director may make and/or change the election under this section at any time
prior to December 31 of the year prior to retirement. An election pursuant to
this section may be revoked prior to retirement.
4.06 Upon the death of a director, either before or after benefits begin,
the balance of such director's benefits under this Plan shall thereafter be paid
to such one or more beneficiaries as the director shall name in a written
beneficiary designation filed with the Corporate Secretary Unit of the Company.
If no beneficiary or beneficiaries are designated, the balance shall be paid to
the director's estate. Payments to a beneficiary under this Plan shall be in
the same amount and over the same term as payments to the deceased director,
except that a beneficiary may make a written election to receive a lump sum
distribution.
ARTICLE V
Deferred Compensation
---------------------
5.01 Benefits determined under this Plan will be based upon the director's
full retainer entitlement and shall not be reduced by any amount that a director
may elect to defer under the Directors' Deferred Compensation Plan.
ARTICLE VI
Status of Plan
--------------
6.01 This Plan is a nonqualified supplemental retirement plan. As such,
all payments from this Plan shall be made from the general assets of the
Company. This Plan shall not require the Company to set aside, segregate,
earmark, pay into
4
<PAGE>
trust or special account or otherwise restrict the use of its assets in the
operation of its business. A participant shall have no greater right or status
than an unsecured creditor of the Company with respect to any amounts owed to
any participant under this Plan.
ARTICLE VII
Rights Nonassignable
--------------------
7.01 All payments to persons entitled to benefits under this Plan shall be
made to such persons and shall not be transferable or otherwise assignable in
anticipation of payment of such benefits, in whole or in part, by the voluntary
or involuntary acts of any such persons or by operation of law. In addition,
such payments shall not be subject to garnishment, attachment or any other legal
process of creditors of such persons.
ARTICLE VIII
Administration
--------------
8.01 Full power and authority to construe, interpret and administer this
Plan shall be vested in the Compensation Committee of the Board which shall have
full power and authority to make each determination provided for in this Plan.
All determinations made by the Compensation Committee of the Board shall be
conclusive and binding upon the Company and each participant or former
participant.
5
<PAGE>
ARTICLE IX
Termination
-----------
9.01 The Board of Directors may terminate this Plan at any time. Upon
termination of the Plan, benefits shall be paid in accordance with Article IV to
any participant who is receiving benefits under Section 4.05 or 4.06 prior to
the date of termination of the Plan or to any director who has prior to the date
of termination:
(a) satisfied the eligibility requirements of Article III,
(b) retired from the Board of Directors of the Company, and
(c) has not begun to receive benefits under this Plan.
No other payments shall be made to any person under the Plan after the date of
termination, including but not limited to directors who meet the eligibility
requirements of Article III but who have not retired from the Board as of the
date of Plan termination.
ARTICLE X
Standstill Provision
--------------------
10.01 After December 1, 1996, no benefits shall continue to accrue or
shall become payable to any person who was an active director of the
Company as of December 1, 1996. Instead, each active outside director will
receive a one-time award of shares of DQE Common Stock as provided under
the DQE, Inc. 1996 Stock Plan for Non-Employee Directors.
6
<PAGE>
ARTICLE XI
Amendment
---------
11.01 Except as provided in Section 11.02 below, the Board of Directors
may, in its discretion, amend this Plan from time to time.
11.02 No amendment to the Plan may take away or reduce the benefit of any
participant who is, or but for an election of a later starting date under
Section 4.05(b), would be, receiving a benefit under the Plan at the time of the
amendment.
ARTICLE XII
Miscellaneous
-------------
12.01 If the person to receive payment is adjudged or deemed to be legally
incompetent, the payments shall be made to the duly appointed guardian of such
incompetent, or they may be made to such person or persons who are caring for or
supporting such incompetent; and the receipt by such person or persons shall be
a complete acquittance for the payment of the benefit.
12.02 The expenses of administration of this Plan shall be borne by the
Company.
12.03 This Plan shall be construed, administered and enforced according to
the laws of the Commonwealth of Pennsylvania.
This amended and restated Plan is adopted and effective this 27th day of
August, 1996.
7
<PAGE>
ATTEST: DUQUESNE LIGHT COMPANY:
/s/ Diane S. Eismont BY: /s/ David D. Marshall
- ----------------------------- ----------------------------
(Corporate Seal) Secretary Title: President and Chief
Executive Officer
Originally effective April 18, 1989.
Revised March 27, 1990.
Revised June 27, 1995.
Revised August 27, 1996.
8
<PAGE>
EXHIBIT 10.70
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 14 day of October, 1996
(the "Effective Date") by and between Duquesne Light Company (hereinafter called
the "Company"), a Pennsylvania corporation and a wholly-owned subsidiary of DQE,
Inc.
a
n
d
James E. Cross, an individual residing in Allegheny County, Pennsylvania
(hereinafter called the "Executive");
WITNESSETH THAT:
WHEREAS, the Executive has been employed by the Company for a number of
years in executive capacities and with increasing responsibilities; and
WHEREAS, the Executive and the Company are mutually desirous that such
satisfactory employment relationship shall continue under the terms and
conditions hereinafter provided; and
WHEREAS, the execution and delivery of this Agreement have been duly
authorized by the Compensation Committee of the Board of Directors of the
Company and ratified by the Board of Directors of the Company (the "Board"),
NOW, THEREFORE, the Company and the Executive, each intending to be legally
bound, hereby mutually covenant and agree as follows:
1. Employment and Term.
-------------------
(a) Employment. The Company hereby offers to employ the Executive as the
----------
President, Generation Group of the Company, and the Executive hereby accepts
such employment with the Company, for the term set forth in Paragraph 1(b).
(b) Term. The term of the Executive's employment under this Agreement
----
shall commence on the Effective Date and end on the day immediately preceding
the third anniversary of the Effective Date, subject to the extension of such
term as hereinafter provided and earlier expiration of such term as provided in
Paragraph 7. The term of this Agreement shall be extended automatically for one
additional year as of each annual anniversary date hereof unless, no later than
ninety (90) days prior to such anniversary date, either the Board, on behalf of
the Company, or the Executive gives written notice to the other, in accordance
with Paragraph 12, that the term of this Agreement shall not be so extended.
<PAGE>
2. Duties. During the period of employment as provided in Paragraph 1(b)
------
hereof, the Executive shall serve as President, Generation Group of the Company
and perform all duties consistent with such positions at the direction of the
Chief Executive Officer of the Company or such other person not below the rank
of President as such Chief Executive Officer may designate. The Executive shall
devote his entire time during reasonable business hours (reasonable sick leave
and vacations excepted) and best efforts to fulfill faithfully, responsibly and
satisfactorily his duties hereunder.
3. Base Salary. For services performed by the Executive for the Employers
-----------
pursuant to this Agreement during the period of employment as provided in
Paragraph 1(b) hereof, the Company shall pay the Executive a base salary at the
rate of at least $275,000 per year, payable in substantially equal semi-monthly
installments (or otherwise in accordance with the Company's regular payroll
practices). Any compensation which may be paid to the Executive under any
additional compensation or incentive plan of the Company or which may be
otherwise authorized from time to time by the Board (or an appropriate committee
thereof) shall be in addition to the base salary to which the Executive shall be
entitled under this Agreement.
4. Salary Increases. During the period of employment as provided in
----------------
Paragraph 1(b) hereof, the base salary of the Executive shall be periodically
reviewed by the Compensation Committee of the Board to determine whether or not
the same should be increased in light of the duties and responsibilities of the
Executive and the performance thereof, and, if it is determined that an increase
is merited, such increase shall be promptly put into effect and the base salary
of the Executive as so increased shall constitute the base salary of the
Executive for purposes of Paragraph 3.
5. Other Benefits. In addition to the base salary to be paid to the
--------------
Executive pursuant to Paragraph 3 hereof, the Executive shall also be entitled
to the following:
(a) Participation in Plans. The Executive shall be eligible for
----------------------
participation in any bonus, incentive (short-term or long-term), stock option or
similar plan or program now in effect or hereafter established by the Company in
the same manner and to the same extent as, and subject to the same criteria
pertaining to, other senior executives of the Company. The Executive shall also
participate in the various benefit plans maintained in force by the Company from
time to time, including qualified and nonqualified pension, supplemental
pension, disability, medical, group life insurance, supplemental life insurance
coverage, business travel insurance, sick leave, and other similar retirement
and welfare benefit plans, programs and arrangements. Without limiting the
scope of the foregoing, the Company shall continue in force and effect the
existing nonqualified pension arrangements (the "Nonqualified Arrangements")
under which the Company has agreed to pay to the Executive or his beneficiary an
additional pension representing (i) the additional benefit the Executive would
have accrued under the Retirement Plan for Employees of Duquesne Light Company
(the "Retirement Plan") and the Supplemental Retirement Plan for Nonrepresented
Employees of Duquesne Light Company (the "Supplemental Plan") but for certain
limitations on such benefits set forth in the Internal Revenue Code and (ii) the
additional benefits the Executive would have accrued under the Retirement Plan
and the Supplemental Plan if he were credited thereunder with a total number of
years of Continuous Service (as defined in such Plans) equal to the sum of (A)
two (2) times the actual years of Continuous Service
-2-
<PAGE>
accumulated by the Executive to age sixty (60), not to exceed thirty-five (35),
plus (B) such Continuous Service as may be accrued by the Executive after age
sixty (60) under the terms of such Plans.
(b) Fringe Benefits. The Executive shall be entitled to perquisites of
---------------
office, fringe benefits and other similar benefits no less favorable than those
available to the Executive immediately prior to the effective date of this
Agreement, or, if greater, those available to the Executive at any time during
the term of this Agreement.
(c) Expense Reimbursement. The Company shall reimburse the Executive, upon
---------------------
proper accounting, for reasonable business expenses and disbursements incurred
by his in the course of the performance of his duties under this Agreement.
(d) Vacation. The Executive shall be entitled to five (5) weeks of
--------
vacation during each year of this Agreement, or such greater period as the Board
shall approve, without reduction in salary or other benefits.
6. Non-Competition and Confidentiality Agreement. Concurrently with the
---------------------------------------------
execution of this Agreement, the Company and the Executive are entering into a
Non-Competition and Confidentiality Agreement (the "Non-Competition Agreement")
which, among other things, sets forth certain covenants on the part of the
Executive. It is intended that the Non-Competition Agreement and this Agreement
be read together as a single agreement.
7. Termination. Unless earlier terminated in accordance with the
-----------
following provisions of this Paragraph 7, the Company shall continue to employ
the Executive and the Executive shall remain employed by the Company during the
entire term of this Agreement as set forth in Paragraph 1(b). Paragraph 8
hereof sets forth certain obligations of the Company in the event that the
Executive's employment hereunder is terminated. Certain capitalized terms used
in this Paragraph 7 and Paragraph 8 hereof are defined in Paragraph 7(c) below.
(a) Death or Disability. Except to the extent otherwise expressly stated
-------------------
herein, including without limitation, as provided in Paragraph 8(a) with respect
to certain post-Date of Termination payment obligations of the Company, this
Agreement shall terminate immediately as of the Date of Termination in the event
of the Executive's death or in the event that the Executive becomes disabled.
The Executive will be deemed to be disabled upon the earlier of (i) the end of a
twelve (12) consecutive month period during which, by reason of physical or
mental injury or disease, the Executive has been unable to perform substantially
the Executive's usual and customary duties under this Agreement and (ii) the
date that a reputable physician selected by the Company determines in writing
that the Executive will, by reason of physical or mental injury or disease, be
unable to perform substantially the Executive's usual and customary duties under
this Agreement for a period of at least twelve (12) consecutive months. At any
time and from time to time, upon reasonable request therefor by the Company, the
Executive shall submit to reasonable medical examination for the purpose of
determining the existence, nature and extent of any such disability. In
accordance with Paragraph 12, the Company shall promptly give the Executive
written notice of any such determination of the Executive's disability and of
the decision of the Company to terminate the Executive's employment by reason
thereof. In the event
-3-
<PAGE>
of disability, until the Date of Termination the base salary payable to the
Executive under Paragraph 3 hereof shall be reduced dollar-for-dollar by the
amount of disability benefits, if any, paid to the Executive in accordance with
any disability policy or program of the Company.
(b) Notification of Discharge for Cause or Resignation for Good Reason. In
------------------------------------------------------------------
accordance with the procedures hereinafter set forth, the Company may discharge
the Executive from his employment hereunder for Cause and the Executive may
resign from his employment hereunder for Good Reason. Any discharge of the
Executive by the Company for Cause or resignation by the Executive for Good
Reason shall be communicated by a Notice of Termination to the Executive (in the
case of discharge) or the Company (in the case of resignation) given in
accordance with Paragraph 12 of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination is to be other than the date of receipt of such
notice, specifies the termination date (which date shall in all events be within
fifteen (15) days after the giving of such notice). No purported termination of
the Executive's employment for Cause shall be effective without a Notice of
Termination. The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstances in enforcing the Executive's
rights hereunder.
(c) Definitions. For purposes of this Paragraph 7 and Paragraph 8 hereof,
-----------
the following capitalized terms shall have the meanings set forth below:
(i) "Accrued Obligations" shall mean, as of the Date of Termination,
-------------------
the sum of (A) the Executive's base salary under Paragraph 3 through the Date of
Termination to the extent not theretofore paid, (B) the amount of any bonus,
incentive compensation, deferred compensation and other cash compensation
accrued by the Executive as of the Date of Termination to the extent not
theretofore paid and (C) any vacation pay, expense reimbursements and other cash
entitlements accrued by the Executive as of the Date of Termination to the
extent not theretofore paid.
(ii) "Cause" shall mean either of the following that is materially and
-----
demonstrably detrimental to the goodwill of the Company or materially damaging
to the relationships of the Company with its customers, suppliers or employees:
(A) conviction of the Executive of a felony involving moral turpitude or (B)
gross negligence or willful misconduct by the Executive in the performance of
his duties under this Agreement.
(iii) "Date of Termination" shall mean (A) in the event of a
-------------------
discharge of the Executive by the Company for Cause or a resignation by the
Executive for Good Reason, the date the Executive (in the case of discharge) or
the Company (in the case of resignation) receives a Notice of Termination, or
any later date specified in such Notice of Termination, as the case may be, (B)
in the event of a discharge of the Executive without Cause or a resignation by
the Executive without Good Reason, the date the Executive (in the case of
discharge) or the Company (in the case of resignation) receives notice of such
termination of employment, (C) in the event of the Executive's death, the date
of
-4-
<PAGE>
the Executive's death, and (D) in the event of termination of the Executive's
employment by reason of disability pursuant to Paragraph 7(a), the date the
Executive receives written notice of such termination.
(iv) "Good Reason" shall mean any of the following: (A) the assignment to
-----------
the Executive of any duties inconsistent in any respect with the Executive's
positions with the Company as set forth in this Agreement (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Paragraph 2, or any action by the Company
which results in diminution in such positions, authority, duties or
responsibilities, excluding for this purpose any isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of written notice thereof given by the Executive in
accordance with Paragraph 12; (B) any failure by the Company to comply with any
of the provisions of this Agreement, other than any isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of written notice thereof given by the Executive
in accordance with Paragraph 12; (C) the Company's requiring the Executive to be
based at any office or location other than the principal executive office of the
Company or at any office or location not within thirty-five (35) miles of the
principal executive office of the Company in Pittsburgh, Pennsylvania; or (D)
any purported termination by the Company of the Executive's employment otherwise
than as expressly permitted by this Agreement.
-5-
<PAGE>
8. Obligations of the Employers Upon Termination.
---------------------------------------------
(a) Discharge for Cause, Resignation without Good Reason, Death or
--------------------------------------------------------------
Disability. In the event of a discharge of the Executive for Cause or
- ----------
resignation by the Executive without Good Reason, or in the event this Agreement
terminates pursuant to Paragraph 7(a) any reason of the death or disability of
the Executive:
(i) the Company shall pay all Accrued Obligations to the Executive, or
to his heirs or estate in the event of the Executive's death, in a lump sum in
cash within thirty (30) days after the Date of Termination; and
(ii) the Executive, or his beneficiary, heirs or estate in the event of
the Executive's death, shall be entitled to receive all benefits accrued by his
as of the Date of Termination under the Retirement Plan, the Supplemental Plan,
the Nonqualified Arrangements (but only to the extent not previously paid or
distributed to the Executive through the purchase of annuity contracts or
otherwise) and all other qualified and nonqualified retirement, pension, profit
sharing and similar plans of the Company in such manner and at such time as are
provided under the terms of such plans and arrangements; and
(iii) except as otherwise provided in Paragraph 16 hereof, all other
obligations of the Company hereunder shall cease forthwith.
(b) Discharge without Cause or Resignation for Good Reason. If the
------------------------------------------------------
Executive is discharged other than for Cause or disability or the Executive
resigns with Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within
thirty (30) days after the Date of Termination the aggregate of the following
amounts:
(A) all Accrued Obligations; and
(B) the balance of the base salary which as of the Date of
Termination remains to be paid to the Executive pursuant to
Paragraph 3 for the then-remaining term of this Agreement (taking
into account any extensions of such term in effect immediately
prior to the Date of Termination pursuant to Paragraph 1(b)); and
(C) the product of (1) the Monthly Bonus Amount multiplied
by (2) the number of full calendar months within the period from
the Date of Termination through and including the last day of the
then-remaining term of this Agreement (taking into account any
extensions of such term in effect immediately prior to the Date
of Termination pursuant to Paragraph 1(b)); and
(D) a lump sum amount equal to the Actuarial Equivalent of
the additional Accrued Pension the Executive would have accrued
under the Retirement Plan, the additional Accrued Supplemental
Pension the Executive
-6-
<PAGE>
would have accrued under the Supplemental Plan and the additional
benefit the Executive would have accrued under the Nonqualified
Arrangements if the Executive's actual Continuous Service had
ended on the last day of the then-remaining term of this
Agreement (taking into account any extensions of such term in
effect immediately prior to the Date of Termination pursuant to
Paragraph 1(b)) and had his Compensation for each calendar year
during such additional period equaled his Compensation for the
twelve (12) full calendar months immediately preceding the
calendar month in which the Date of Termination occurred (for
purposes of the foregoing, the terms "Actuarial Equivalent,"
"Accrued Pension," "Accrued Supplemental Pension," "Continuous
Service" and "Compensation" shall have the respective meanings
given to them under the Retirement Plan and the Supplemental
Plan, except as the term "Continuous Service" shall be modified
under the terms of the Nonqualified Arrangements).
(ii) for the then-remaining term of this Agreement (taking into
account any extensions of such term in effect immediately prior to the Date of
Termination pursuant to Paragraph 1(b)), the Company shall either (A) arrange to
provide the Executive, at the Company's cost, with life, disability and health-
and-accident insurance coverage providing substantially similar benefits to
those which the Executive was receiving immediately prior to the Date of
Termination, to the extent the Company continues to maintain benefit plans
providing for such benefits for executives generally or (B) in lieu of providing
such coverage, pay to the Executive within thirty (30) days after the Date of
Termination a lump sum amount in cash equal to two (2) times the projected cost
to the Company of providing the extended benefit coverage referred to in clause
(A) (as such cost shall be calculated by the Company's benefit consultants,
using reasonable assumptions); and
(iii) the Executive shall be entitled to receive all benefits accrued
by his as of the Date of Termination under the Retirement Plan, the Supplemental
Plan, the Nonqualified Arrangements (but only to the extent not previously paid
or distributed to the Executive through the purchase of annuity contracts or
otherwise) and all other qualified and nonqualified retirement, pension, profit
sharing and similar plans of the Company in such manner and at such time as are
provided under the terms of such plans; and
(iv) all stock options, stock appreciation rights, dividend
equivalent accounts and other stock interests or stock-based rights awarded to
the Executive on or before the Date of Termination under the Duquesne Light
Company Amended and Restated 1987 Long-Term Incentive Plan, the Executive
Incentive Plan or any similar plan of the Company shall become fully vested and
nonforfeitable as of the Date of Termination; provided, however, that if such
full vesting of all or any portion of such stock or stock-related awards
would constitute a violation of applicable law or the terms of any such plan of
the Company, then in lieu of the vesting of such awards (or such portion
thereof), the Company shall redeem such award (or such portion thereof) by
paying to the Executive in a lump sum in cash within thirty (30) days of the
Date of Termination an amount which represents the fair value of such award as
of the Date of Termination (reduced by any amount payable by the Executive under
the terms of such award (or such portion thereof) as an exercise or purchase
price with respect thereto); and
-7-
<PAGE>
(v) except as otherwise provided in Paragraph 16 hereof, all
other obligations of the Company hereunder shall cease forthwith.
(c) Payment Conditions. In addition to all other conditions under
------------------
this Agreement, the obligation of the Company to make payments and provide
benefits to the Executive or the Executive's beneficiary, heirs or estate under
this Agreement and otherwise shall terminate forthwith if any of the following
shall occur: (i) the Executive shall have breached any of his obligations under
this Agreement or (ii) the Executive in any way competes with or solicits the
employees of the Company, or any of its affiliates.
9. Indemnification. The Company shall defend and hold the Executive
---------------
harmless to the fullest extent permitted by applicable law in connection with
any claim, action, suit, investigation or proceeding arising out of or relating
to performance by the Executive of services for, or action of the Executive as a
Director, officer or employee of the Company, or of any other person or
enterprise at the request of the Company. Expenses incurred by the Executive in
defending a claim, action, suit or investigation or criminal proceeding shall be
paid by the Company in advance of the final disposition thereof upon the receipt
by the Company of an undertaking by or on behalf of the Executive to repay said
amount unless it shall ultimately be determined that the Executive is entitled
to be indemnified hereunder; provided, however, that this indemnification
arrangement shall not apply to a nonderivative action commenced by the Company
against the Executive. The foregoing shall be in addition to any
indemnification rights the Executive may have by law, contract, charter, by-law
or otherwise.
10. Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the heirs and representatives of the Executive and the
successors and assigns of the Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or a
significant portion of its respective assets, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform this Agreement if no such succession had taken place.
Regardless whether such agreement is executed, this Agreement shall be binding
upon any successor of the Company in accordance with the operation of law and
such successor shall be deemed the "Company" for purposes of this Agreement.
11. Dispute Resolution.
------------------
(a) Arbitration. Any controversy or claim arising out of or relating
-----------
to this Agreement or the breach thereof (including the arbitrability of any
controversy or claim), shall be settled by arbitration in accordance with the
internal laws of the Commonwealth of Pennsylvania by three arbitrators, one of
whom shall be appointed by the Board, one by the Executive and the third of whom
shall be appointed by the first two arbitrators. If the first two arbitrators
cannot agree on the appointment of a third arbitrator, then the third arbitrator
shall be appointed by the American Arbitration Association. The arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association, except with respect to the selection of arbitrators which shall be
as provided in this Paragraph 11(a). Except as
-8-
<PAGE>
otherwise provided in Paragraph 11(b), the cost of any arbitration proceeding
hereunder shall be borne equally by the Company and the Executive. The award of
the arbitrators shall be binding upon the parties. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
(b) Legal Expenses. In the event that it shall be necessary or
--------------
desirable for the Executive to retain legal counsel and/or incur other costs and
expenses in connection with the enforcement of any or all of his rights under
this Agreement, and provided that the Executive substantially prevails in the
enforcement of such rights, the Company shall pay (or the Executive shall be
entitled to recover from the Company, as the case may be) the Executive's
reasonable attorneys' fees and costs and expenses in connection with the
enforcement of the Executive's rights including the enforcement of any
arbitration award.
12. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) to the Board or the Company, to:
Duquesne Light Company
One Oxford Centre
Pittsburgh, PA 15279
Attention: Chief Executive Officer
(b) to the Executive, to:
James E. Cross
1610 Blackburn Heights Drive
Sewickley, PA 15143
Addresses may be changed by written notice sent to the other party at the last
recorded address of that party.
13. No Assignment. Except as otherwise expressly provided herein,
-------------
this Agreement is not assignable by any party and no payment to be made
hereunder shall be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or other charge.
14. Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in two or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
-9-
<PAGE>
15. Jurisdiction and Governing Law. Jurisdiction over disputes with
------------------------------
regard to this Agreement shall be exclusively in the courts of the Commonwealth
of Pennsylvania, and this Agreement shall be construed and interpreted in
accordance with and governed by the laws of the Commonwealth of Pennsylvania,
other than the conflict of laws provisions of such laws.
16. Survival. The provisions of this Paragraph 16 and of Paragraphs
--------
8, 9, 10, 11, 13, 15, 17, 18 and 19 of this Agreement shall survive the
termination of this Agreement to the extent necessary or appropriate to
effectuate the respective purposes of such provisions.
17. No Mitigation Required. The Executive shall not be required to
----------------------
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise; provided, however, that the amount of
any payment provided for under this Agreement be reduced dollar-for-dollar by
any compensation earned by the Executive as the result of employment by another
employer or otherwise after the Date of Termination, and the Executive shall
provide to the Company upon request documentation with respect to the amount of
any such compensation.
18. Severability. If any provision of this Agreement shall be
------------
adjudged by any court of competent jurisdiction to be invalid or unenforceable
for any reason, such judgment shall not affect, impair or invalidate the
remainder of this Agreement.
19. Prior Understandings. This Agreement and the Non-Competition
--------------------
Agreement embody the entire understanding of the parties hereof, and supersede
all other oral or written agreements or understandings between them regarding
the subject matter hereof. No change, alteration or modification hereof may be
made except in a writing, signed by each of the parties hereto. The headings in
this Agreement are for convenience and reference only and shall not be construed
as part of this Agreement or to limit or otherwise affect the meaning hereof.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
Attest: DUQUESNE LIGHT COMPANY
/s/ Diane S. Eismont /s/ David D. Marshall
___________________________ By______________________________
Diane S. Eismont, Secretary David D. Marshall
President and Chief
Executive Officer
EXECUTIVE
/s/ James E. Cross
By______________________________
James E. Cross
-11-
<PAGE>
EXHIBIT 12.1
DUQUESNE LIGHT COMPANY AND SUBSIDIARY
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest on long-term debt $ 82,505 $ 89,139 $ 94,646 $102,938 $119,179
Other interest 1,632 2,599 1,095 2,387 1,749
Monthly Income Preferred Securities dividend requirements 7,921 -- -- -- --
Amortization of debt discount, premium and expense--net 5,973 6,252 6,381 5,541 4,223
Portion of lease payments representing an interest factor 44,357 44,386 44,839 45,925 60,721
-------- -------- -------- -------- --------
Total Fixed Charges $142,388 $142,376 $146,961 $156,791 $185,872
-------- -------- -------- -------- --------
EARNINGS:
Income from continuing operations $149,860 $151,070 $147,449 $144,787 $149,768
Income taxes 83,008* 92,894* 84,191 77,237 110,993
Fixed charges as above 142,388 142,376 146,961 156,791 185,872
-------- -------- -------- -------- --------
Total earnings $375,256 $386,340 $378,601 $378,815 $446,633
-------- -------- -------- -------- --------
RATIO OF EARNINGS TO FIXED CHARGES 2.64 2.71 2.58 2.42 2.40
-------- -------- -------- -------- --------
</TABLE>
Duquesne's share of the fixed charges of an unaffiliated coal supplier,
which amounted to approximately $3.1 million for the twelve months ended
December 31, 1996, has been excluded from the ratio.
*Earnings related to income taxes reflect a $12.0 million and $13.5 million
decrease for the twelve months ended December 31, 1996 and December 31, 1995,
respectively, due to a financial statement reclassification related to Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes. The
ratio of earnings to fixed charges, absent this reclassification equals 2.72 and
2.81 for the twelve months ended December 31, 1996 and December 31, 1995,
respectively.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos. 33-
52782 and 33-63602, and Post Effective Amendment No. 1 to Registration Statement
Nos. 33-53563 and 33-53563-01 of Duquesne Light Company on Form S-3 of our
report dated January 28, 1997, appearing in the Annual Report on Form 10-K of
Duquesne Light Company for the year ended December 31, 1996.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
March 27, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,717,473
<OTHER-PROPERTY-AND-INVEST> 162,267
<TOTAL-CURRENT-ASSETS> 340,653
<TOTAL-DEFERRED-CHARGES> 676,693
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,897,086
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 825,540
<RETAINED-EARNINGS> 163,884
<TOTAL-COMMON-STOCKHOLDERS-EQ> 989,424
3,000
220,072<F1>
<LONG-TERM-DEBT-NET> 1,271,961
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 50,000
0
<CAPITAL-LEASE-OBLIGATIONS> 28,407
<LEASES-CURRENT> 20,912
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,313,310
<TOT-CAPITALIZATION-AND-LIAB> 3,897,086
<GROSS-OPERATING-REVENUE> 1,176,825
<INCOME-TAX-EXPENSE> 85,364
<OTHER-OPERATING-EXPENSES> 869,382
<TOTAL-OPERATING-EXPENSES> 954,746
<OPERATING-INCOME-LOSS> 222,079
<OTHER-INCOME-NET> 24,563
<INCOME-BEFORE-INTEREST-EXPEN> 246,642
<TOTAL-INTEREST-EXPENSE> 96,782<F2>
<NET-INCOME> 149,860
4,045
<EARNINGS-AVAILABLE-FOR-COMM> 145,815
<COMMON-STOCK-DIVIDENDS> 281,015
<TOTAL-INTEREST-ON-BONDS> 88,478
<CASH-FLOW-OPERATIONS> 281,640
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
<FN>
<F1>Includes Preference Stock of $9,464
<F2>Includes Monthly Income Preferred Securities Dividend
Requirements of $7,921
</TABLE>
<PAGE>
EXHIBIT 99.1
EXECUTIVE COMPENSATION OF
DUQUESNE LIGHT COMPANY EXECUTIVE
OFFICERS FOR 1996 AND SECURITY OWNERSHIP
OF DUQUESNE LIGHT COMPANY DIRECTORS
AND EXECUTIVE OFFICERS AS OF FEBRUARY 21, 1997
Compensation
The following Summary Compensation Table sets forth certain information as
to cash and noncash compensation earned and either paid to, or accrued for the
benefit of, the current President and Chief Executive Officer, the four other
highest-paid executive officers of Duquesne Light Company ("Duquesne"), and the
former Chairman of the Board and Chief Executive Officer who resigned effective
August 9, 1996, for service during the years indicated. Each of Messrs.
Marshall, Schwass, and Roque and Ms. Green is, and Mr. von Schack was, an
executive officer of both DQE and Duquesne. The titles listed are those held
for Duquesne, and the amounts shown for 1994, 1995, and 1996 are for service to
Duquesne only. Total compensation amounts are shown in the DQE Proxy Statement.
This information is incorporated here by reference. Mr. Cross is an executive
officer of Duquesne only, and the amounts shown are for services in that
capacity.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------ ------------------------------------------
Awards Payouts
---------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Performance LTIP Compen-
Name and Salary Bonus sation Award(s) Options/SARs Payouts sation
Principal Position Year ($) ($)(1) ($)(2) ($)(3) (#)(4) ($) ($)(2)(7)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
D. D. Marshall 1996 202,640 70,957 47,799 98,875 (5) 47,949 0 7,375
President & Chief 4,008 (6)
Executive Officer 1995 199,033 73,998 23,814 0 54,212 0 3,660
1994 171,638 48,450 6,997 0 52,813 0 4,033
J. E. Cross 1996 258,333 51,667 0 141,250 (5) 27,236 0 7,231
President, 5,650 (6)
Generation Group 1995 213,333 58,500 0 0 33,750 0 4,451
1994 79,125 14,625 0 0 37,500 0 1,121
G. L. Schwass 1996 125,000 43,750 62,096 0 54,471 0 4,458
Senior Vice Pres. 1995 184,817 67,174 51,724 0 52,493 0 3,794
and CFO 1994 171,638 57,000 19,073 0 52,813 0 3,739
D. L. Green 1996 136,500 32,760 9,702 3,955 (6) 48,954 0 7,622
Sr. Vice President 1995 184,000 51,900 44,268 0 28,954 0 4,460
Customer Operations 1994 166,333 49,500 16,319 0 35,469 0 4,482
V. A. Roque (5) 1996 122,500 36,750 0 3,878 (6) 12,174 0 7,388
Vice President and 1995 149,275 44,783 183,478 0 27,067 0 3,830
General Counsel
W. W. von Schack 1996 193,883 84,300 400,822 0 71,782 0 1,828 (8)
Former Chairman 1995 375,320 166,079 149,150 0 141,926 0 3,794
and CEO 1994 393,360 163,240 155,272 0 155,000 0 4,014
1/1/96 8/9/96
</TABLE>
<PAGE>
(1) The amount of any bonus compensation is determined annually based upon the
prior year's performance and either paid or deferred (via an eligible
participant's prior election) in the following year. The amounts shown for
each year are the awards earned in those years but established and paid or
deferred in the subsequent years. Mr. von Schack's bonus was prorated for
his months of service before his resignation.
(2) Amounts of Other Annual Compensation are connected to the funding of non-
qualified pension benefit accruals for Messrs. Marshall, Schwass, and von
Schack and Ms. Green. Amounts of Other Annual Compensation for Mr. Roque
represent reimbursement for moving expenses, including sale of residence
and income taxes. Amounts of All Other Compensation shown are Company
match contributions during 1994, 1995, and 1996 under the Duquesne Light
Company 401(k) Retirement Savings Plan for Management Employees and
compensatory tax payments on restricted stock.
(3) The awards listed are the only restricted stock holdings of the named
officers.
(4) Includes total number of stock options granted during the fiscal year, with
or without tandem SARs and stock-for-stock (reload) options on option
exercises, as applicable, whether vested or not. See table titled
Option/SAR Grants in Last Fiscal Year. The stock options are subject to
vesting (exercisability) based on Company and individual performance and
achievement of specified goals and objectives. Of the original amount of
1994 stock options granted, Messrs. Marshall and von Schack have lost 2,673
and 3,988 stock options, respectively. Of the amount of 1995 stock options
granted, Messrs. Marshall and von Schack have lost 347 and 1,524 stock
options, respectively. Of the amount of 1996 stock options granted, Ms.
Green and Mr. Cross lost 3,876 and 8,625 stock options, respectively.
(5) Vesting of this award is based on the achievement of performance goals for
a three-year period. Dividends will be accrued and paid after the end of
the three-year period on the shares earned.
(6) Represents the value of 200 shares of DQE Common Stock awarded as part of
the consideration for the signing of a Non-Competition and Confidentiality
Agreement. Dividends are paid quarterly.
(7) In 1996, premiums in the amount of $95,980 were paid by the Company for
split-dollar life insurance for Mr. von Schack. This amount was refunded
to the Company in full in 1996 in connection with his resignation.
(8) Includes a payment of $401 to cover one month's health care premium
pursuant to Mr. von Schack's resignation.
2
<PAGE>
Supplemental Tables
The following tables provide information with respect to options to purchase
DQE Common Stock and tandem stock appreciation rights in 1996 under the DQE,
Inc. Long-Term Incentive Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
Number of % of Total
Securities Options/SARs Exercise Grant
Underlying Granted to or Base Date
Options/SARs Employees Price Expiration Present
Name Granted (#) in Fiscal Year ($/Sh)(3) Date Value ($)(4)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
D. D. Marshall 20,290 (1) 4.7% 30.1875 02/26/06 89,276 *
13,139 (2) 3.0% 26.4375 02/18/02 37,709 *
619 (2) 0.1% 30.0000 02/18/02 2,037 *
13,901 (2) 3.2% 30.0000 08/29/04 49,210 *
J. E. Cross 22,360 (1) 5.2% 30.1875 02/26/06 98,384 *
2,403 (3) 0.6% 27.5625 08/29/04 7,834 *
2,473 (3) 0.6% 28.5625 08/29/04 7,889 *
G. L. Schwass 14,493 (1) 3.4% 30.1875 02/26/06 63,769 *
18,229 (2) 4.2% 27.5625 07/22/01 54,140 *
748 (2) 0.2% 27.5625 08/29/04 2,438 *
21,001 (2) 4.8% 29.7500 08/29/04 70,143 *
D. L. Green 13,565 (1) 3.2% 30.1875 02/26/06 59,686 *
15,133 (2) 3.5% 30.3125 07/31/98 41,313 *
1,535 (2) 0.4% 28.8125 07/31/98 3,653 *
18,721 (2) 4.3% 28.8125 07/22/01 54,104 *
V. A. Roque 12,174 (1) 2.8% 30.1875 02/26/06 53,566 *
W. W. von Schack 20,297 (2) 4.7% 30.7500 08/08/97 47,292 *
5,572 (2) 1.3% 30.7500 08/08/97 12,983 *
45,913 (1)(5) 10.6% 30.1875 08/08/97 105,141 *
</TABLE>
* The actual value, if any, an executive may realize will depend on the
difference between the actual stock price and the exercise price on the
date the option is exercised. There is no assurance that the value
ultimately realized by an executive, if any, will be at or near the value
estimated.
(1) These grants represent performance stock options with tandem stock
appreciation rights and stock-for-stock (reload) options. If the
performance conditions are met and the granted option is awarded, fifty
percent of the award vests immediately, although there is a six-month
holding period, and the remaining 50% vests one year later.
(2) These grants represent stock-for-stock (reload) options received upon
exercise of stock options by the applicable officer electing to use
previously owned DQE stock to exercise the options under the terms of the
Plan. These reload options include tandem stock appreciation rights and
dividend equivalent accounts and stock-for-stock options.
3
<PAGE>
(3) The exercise price of the options is the fair market value of DQE Common
Stock on the date such options were granted. The exercise price may be
payable in cash or previously owned shares of DQE Common Stock held for at
least six months.
(4) The grant date present value shown in column (f) gives the theoretical
value of the options listed in column (b) on the grant dates using the
Black-Scholes option pricing model, modified to account for the payment of
dividends. The theoretical value of the option was calculated assuming an
option life equal to the time period between the grant date and expiration
date (i.e., from 1.45 to 10.00 years); a periodic risk-free rate of return
equal to the yield of the U.S. Treasury note having a similar maturity date
as the option expiration date, as reported by Bloomberg Financial Markets
on the grant date (i.e., from 4.86% to 6.65%); the most recent initial
quarterly dividend as of the option grant date (i.e., from $0.32 to $0.34),
with an expected growth rate of 5.5% per year as estimated by "Value Line
Ratings and Reports", dated December 13, 1996; and an expected stock price
volatility as reported by Bloomberg Financial Markets over the same length
of time as the option life as of the month of the grant, (i.e., from 12.96%
to 17.94%). No adjustments to the grant date present values have been made
with respect to exercise restrictions, forfeiture, or early exercise.
(5) Vested upon award.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of
Securities Unexercised
Underlying Unexercised in-the-Money
Number of Options/SARs at Options/SARs at
Securities Fiscal Year-End (#)(6) Year-End ($)(6)(7)
Underlying Value ----------------------- --------------------
Options/SARs Realized Exercisable/ Exercisable/
Name Exercised (#) ($)(5) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
D. D. Marshall 38,012 (1) 271,938 40,839 / 84,525 190,809 / 328,803
31,177 (2) 271,720
18,511 (3) 159,715
23,422 (4) 302,532
J. E. Cross 5,522 (2) 42,728 20,756 / 53,333 158,012 / 230,080
13,500 (3) 96,468
G. L. Schwass 108,089 (1) 950,779 38,549 / 89,161 103,558 / 315,273
45,884 (2) 441,865
D. L. Green 20,897 (1) 151,937 73,921 / 65,612 511,022 / 194,314
43,989 (2) 690,645
V. A. Roque 12,115 (1) 83,542 11,500 / 38,507 103,500 / 157,349
2,000 (4) 15,625
W. W. von Schack 233,709 (1) 2,105,058 549,608 / 0 3,974,516 / 0
34,369 (2) 656,493
</TABLE>
(1) Stock appreciation rights exercised for stock and cash.
4
<PAGE>
(2) Stock options exercised for stock by tendering shares of previously-owned
DQE Common Stock.
(3) Stock appreciation rights exercised for cash.
(4) Stock options exercised for stock by tendering cash.
(5) Represents the difference between the exercise price of the options or SARs
and the fair market value of DQE Common Stock on the New York Stock
Exchange on the date of exercise.
(6) The numbers set forth include options/SARs previously granted (including
those granted in 1996) but not yet earned. The number to be earned will be
based on individual performance and could range from zero to the following
numbers for the named officers, respectively: 49,986 ($181,998); 37,360
$129,999); 49,986 ($181,998); 33,379 ($102,686); 26,391 ($68,499); and 0
($0). These options may be earned by the officer over future periods from
one to three years as established with each option grant.
(7) Represents the difference between the exercise price of the options or SARs
and the fair market value of DQE Common Stock on the New York Stock
Exchange on December 31, 1996.
Retirement Plan
The following table illustrates the estimated annual benefits payable at
the normal retirement age of 65 to management employees in the specified
earnings classifications and years of service shown:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Highest Years of Service
Consecutive ---------------------------------------------------------------------
Five-Year
Average
Compensation 5 10 15 20 25 30 35
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$125,000 $10,000 $ 20,000 $ 31,000 $ 41,000 $ 51,000 $ 59,000 $ 65,000
$150,000 $12,000 $ 25,000 $ 37,000 $ 50,000 $ 62,000 $ 72,000 $ 79,000
$175,000 $15,000 $ 29,000 $ 44,000 $ 59,000 $ 74,000 $ 85,000 $ 93,000
$200,000 $17,000 $ 34,000 $ 51,000 $ 68,000 $ 85,000 $ 98,000 $108,000
$300,000 $26,000 $ 52,000 $ 78,000 $104,000 $130,000 $149,000 $165,000
$400,000 $35,000 $ 70,000 $105,000 $140,000 $175,000 $201,000 $221,000
$500,000 $44,000 $ 88,000 $132,000 $176,000 $220,000 $252,000 $277,000
$600,000 $53,000 $106,000 $159,000 $212,000 $265,000 $304,000 $334,000
$700,000 $62,000 $124,000 $186,000 $248,000 $310,000 $356,000 $391,000
$800,000 $71,000 $142,000 $213,000 $284,000 $355,000 $407,000 $447,000
$900,000 $80,000 $160,000 $240,000 $320,000 $400,000 $459,000 $504,000
$950,000 $85,000 $169,000 $253,000 $338,000 $422,000 $485,000 $532,000
</TABLE>
Compensation utilized for pension formula purposes includes salary and
bonus reported in columns (c) and (d) of the Summary Compensation Table and
stock option compensation prior to March 1, 1994. An employee who has at least
five years of service has a vested interest in the retirement plan. Benefits
are received by an employee upon retirement, which may be as early as age 55.
Benefits are reduced by reason of retirement if commenced prior to age 60 or
upon election of certain options under which benefits are payable to survivors
upon the death of the employee. Pension amounts set forth in the above table
reflect the integration with social security of the tax-qualified retirement
plans. Retirement benefits are also subject to offset by other retirement plans
under certain conditions.
The credited years of service for Messrs. Marshall, Cross, and Schwass and
Ms. Green are 19, 4.5, 22, and 17, respectively. The current five-year covered
compensation and current
5
<PAGE>
years of credited service of Messrs. Roque and von Schack, respectively, are
$199,231 and 4; and $853,396 and 32.
Employment Agreements
DQE and Duquesne have three-year employment agreements with Messrs.
Marshall and Schwass, and Duquesne has a similar agreement with Mr. Cross and
Ms. Green. Each agreement is subject to automatic one-year renewals unless
prior written notice of termination is given by the officer or the Company.
The agreements provide, among other things, that each serve in his or her
present position at an annual base salary of at least $190,000 for each of
Messrs. Marshall and Schwass; at least $275,000 for Mr. Cross; and at least
$165,000 for Ms. Green, subject to periodic review, and for the participation of
each in executive compensation and other employee benefit plans of the
companies.
If any of the officers is discharged other than for cause or resigns for
good reason, then, in addition to any amounts earned but not paid as of the date
of termination, he or she would receive in a cash lump sum the balance of his or
her base salary for the remaining term of the agreement; a bonus amount of the
remaining term of the agreement calculated at a rate equivalent to his or her
prior year's bonus; and the actuarial equivalent of the additional pension he or
she would have accrued had his or her service for pension purposes continued
until the expiration of the agreement. In addition, the officer would be
entitled to immediate vesting (or the redemption in cash) of all of his or her
stock-based awards.
During 1996, the Board authorized and DQE and Duquesne entered into non-
competition and confidentiality agreements with Messrs. Marshall and Roque and
Ms. Green. Duquesne has a similar agreement with Mr. Cross. The agreements
provide that these individuals will not disclose confidential information about
the company or its affiliates; compete directly or indirectly with the Company
or any of its affiliates in a specified geographic area; solicit the business of
certain customers and suppliers of the Company; or induce any employee of the
Company or its affiliates to leave his or her current employment, each for
specified periods of time following the termination of his or her employment
with the Company. Consideration for these agreements was 200 shares of DQE
Common Stock subject to a one-year transfer restriction plus sufficient cash to
pay federal, state, and local taxes on the shares and an increase in the
severance benefits payable to the executive to one and one-half times the
severance benefits, if any, to which the individual is otherwise entitled with a
minimum of six months and a maximum of one year of severance pay. If, however,
an executive is a party to an employment agreement which provides greater
severance benefits than are provided under the non-competition and
confidentiality agreements, the employment agreement shall control.
In connection with the August 1996 resignation of Mr. von Schack as
Chairman and Chief Executive Officer of the Company, DQE, Duquesne, and Mr. von
Schack entered into a letter agreement pursuant to which Mr. von Schack was paid
a prorated bonus in the amount of $120,428 and his coverage under the medical
benefits program was continued for a period of one month. All of the stock
options granted to and currently held by Mr. von Schack were fully awarded,
vested, and made exercisable. Mr. von Schack agreed, among other things, not to
disclose confidential information about the Company and its affiliates; compete
directly or indirectly with the Company or any of its affiliates in a specified
geographic area; solicit the business of customers and suppliers of the Company;
or induce any employee of the Company or its affiliates to leave his or her
current employment, each for specified periods of time. Mr. von Schack also
released the Company from liability for claims arising from and during his
employment and his Employment Agreement with the Company was terminated. All of
Mr. von Schack's retirement benefits were fully vested and nonforfeitable and
will be distributed in accord with the terms of the retirement plans.
6
<PAGE>
Options and alternative stock appreciation rights granted under the DQE,
Inc. Long-Term Incentive Plan (as amended effective February 27, 1996) become
immediately and fully exercisable upon occurrence of certain change-in-control
events.
Beneficial Ownership of Stock
The following table shows all equity securities of DQE beneficially owned,
directly or indirectly, as of February 21, 1997, by each director and by each
executive officer named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Total Shares of Shares of Common Stock/
Common Stock Nature of Ownership (1)
--------------- ------------------------
<S> <C> <C>
Daniel Berg 6,689 5,039 VP, IP
1,650 Joint, SVP, SIP
Doreen E. Boyce 5,744 5,744 VP, IP
Robert P. Bozzone 18,695 (2) 8,620 VP, IP
7,000 VP, IP
3,075 VP
Sigo Falk 7,645 (3) 6,145 VP, IP
1,500 SVP, SIP
William H. Knoell 7,287 (4) 6,252 VP, IP
1,035 SVP, SIP
David D. Marshall 99,948 (5,6) 5,200 VP
65 VP, IP
16,894 Joint, SVP, SIP
Robert Mehrabian 6,890 (7) 2,008 VP, IP
3,382 VP
1,500 SVP, SIP
Thomas J. Murrin 5,829 (8) 1,893 VP, IP
3,186 VP
750 Joint, SVP, SIP
Eric W. Springer 7,728 (9) 6,837 VP, IP
James E. Cross 7,846 (5,6) 5,200 VP
2,646 Joint, SVP, SIP
Gary L. Schwass 91,357 (5) 20,141 VP, IP
Victor A. Roque 34,556 (5,6) 200 VP
407 VP, IP
1,637 Joint, SVP, SIP
Dianna L. Green 111,968 (5,6) 18,118 VP, IP
200 VP
Wesley W. von Schack 473,497 (5,10) 22,816 VP, IP
Directors, Nominees and
Executive Officers as a
Group (19 persons) 899,965
</TABLE>
None of the individuals named in the table above owned beneficially more
than 1% of the Company's outstanding shares of Common Stock. The directors and
executive officers as a group beneficially owned 1.16% of the Company's
outstanding shares of Common Stock as of February 21, 1997.
7
<PAGE>
(1) The term "Joint" means owned jointly with the person's spouse. The
initials "VP" and "IP" mean sole voting power and sole investment power,
respectively, and the initials "SVP" and "SIP" mean shared voting power and
shared investment power, respectively.
(2) 7,000 of these shares are held by a foundation established for charitable
purposes, for which Mr. Bozzone is the trustee but not an income
beneficiary. 3,075 shares were granted under the DQE, Inc. 1996 Stock Plan
for Non-Employee Directors to vest over four years.
(3) 1,500 of these shares are held by a trust in which Mr. Falk is an income
beneficiary but not a trustee.
(4) 1,035 of these shares are held by a trust in which Mr. Knoell is a trustee
and the income beneficiary.
(5) The amounts shown as owned by Messrs. Marshall, Cross, Schwass, Roque,
Mitchell, and von Schack and Ms. Green include shares of Common Stock which
they have the right to acquire within 60 days of February 21, 1997 through
the exercise of stock options granted under the Long-Term Incentive Plan in
the following amounts: 77,789; 29,381; 71,216; 32,312; 449,608; and
93,650, respectively, and all executive officers as a group: 964,293
shares.
(6) The amounts shown as being owned by Messrs. Marshall, Cross, and Roque and
Ms. Green include 200 shares of restricted stock which were awarded as part
of consideration for the signing of Noncompetition and Confidentiality
Agreements and are subject to forfeiture for a period of one year from the
date of the Agreement, and 5,000 shares of restricted stock granted to Mr.
Marshall which is subject to performance vesting for a three-year period.
(7) 1,500 of these shares are held in an IRA for which Mellon Bank, N.A. is the
trustee; Dr. Mehrabian is the beneficiary. 3,382 shares were granted under
the DQE, Inc. 1996 Stock Plan for Non-Employee Directors to vest over five
years.
(8) 3,186 shares were granted under the DQE, Inc. 1996 Stock Plan for Non-
Employee Directors to vest over three years.
(9) 891 of these shares are held by Mr. Springer's wife. Mr. Springer
disclaims beneficial ownership of such shares.
(10) 166 of these shares are held in an IRA for which The Dreyfuss Corporation
is the trustee, and Mr. von Schack is the beneficiary. 1,099 of these
shares are held in an IRA by Mr. von Schack's wife. Mr. von Schack
disclaims beneficial ownership of these shares.
(11) Messrs. Marshall, Cross, Schwass, and Roque and Ms. Green also beneficially
own 605, 185, 607, 151, and 609 shares, respectively, of Duquesne Light
Company Preference Stock, Plan Series A. The preference shares are held by
the ESOP trustee for Duquesne Light Company's 401(k) Plan on behalf of the
Executive Officers, who have voting but not investment power. The
preference shares are redeemable for DQE Common Stock or cash on
retirement, termination of employment, death, or disability. Shares
outstanding as of February 21, 1997 for the Preference Stock, Plan Series A
are 820,221. Victor Roque is not vested in these preference shares.
(12) The directors and executive officers do not own any shares of Duquesne
Preferred Stock.
8
<PAGE>
Directors' Fees and Plans
Directors who are not employees are compensated for their Board service by
a combination of DQE Common Stock and cash. They receive an annual Board
retainer of $15,000 in cash for service to the Company and its affiliates,
payable in twelve monthly installments, and 250 shares of DQE Common Stock,
payable in April of each year. Each director also receives a fee of $1,000 for
each Board and committee meeting attended. For service as Lead Directors in
1996, Messrs. Bozzone and Knoell each received 263 shares of DQE Common Stock
and $5,021 in cash. Dr. Berg received a fee of $1,000 per meeting for three
meetings he attended as a director of Chester Engineers, Inc., a Company
affiliate. Directors who are employees of the Company or any of its affiliates
do not receive fees for their services as directors.
In February of 1996, the Board of Directors authorized a study of outside
director pension programs. After a full review, the Board voted to terminate
the Outside Directors' Retirement Plan ("the Directors' Retirement Plan") for
individuals who become non-employee directors after August 27, 1996 and to
freeze the plan for current non-employee directors as of December 1, 1996.
Directors who retired prior to August 27, 1996 will continue to receive their
monthly benefits under the Directors' Retirement Plan which are equal to the
monthly retainer in effect at the time of retirement from the Board for a period
equal to the total months of service on the DQE and Duquesne Light Company
Boards but no longer than 120 months. As a result of the termination of the
Directors' Retirement Plan, new non-employee directors will not be entitled to
benefits under that Plan, and current non-employee directors will accrue no
additional retirement benefits for services after December 1, 1996. In full
satisfaction of their accrued benefits under the Directors' Retirement Plan,
current directors received as of December 31, 1996, shares of DQE Common Stock
and cash equal in value to the actuarial value of such accrued benefits. Such
actuarial value was determined assuming a 5% per annum increase in the annual
retainer, future annual increases in the value of DQE Common Stock of 6.5%, a
dividend yield of 4.5%, and an after-tax discount rate of 4.5% per annum. In
the case of current directors with less than ten years' service, all or a
portion of the shares received are subject to a vesting schedule. The vesting
schedule is the same as the vesting schedule to which benefits under the
Directors' Retirement Plan were subject, i.e., 50% vesting after five years of
service plus an additional 10% vesting in years six through ten.
In order to increase directors' stock-based compensation and thus
strengthen the link between directors' compensation and stockholder interests,
the Board adopted a new stock plan under which new non-employee directors will
each receive up to 4,150 shares of restricted DQE Common Stock that will vest at
the rate of 50% after five years of service as a director plus an additional 10%
per year in years six through ten. Unvested shares are forfeited if the
recipient ceases to be a director.
Each director under the age of 72 who is not an employee may elect under a
directors' deferred compensation plan to defer receipt of a percentage of his or
her director's remuneration until after termination of service as a director.
Deferred compensation may be received in one to ten annual installments
commencing, with certain exceptions, on the 15th day of January of the year
designated by the director. Interest accrues quarterly on all deferred
compensation at a rate equal to a specified bank's prime lending rate. Daniel
Berg and Robert Mehrabian elected to participate in the plan for 1996.
As part of its overall program to promote charitable giving, the Company
has a directors' Charitable Giving Program for all directors funded by Company-
owned life insurance policies on the directors. Directors are paired, and upon
the death of the second of the two directors, the Company will donate up to five
hundred thousand dollars each to one or more qualifying charitable organizations
recommended by each of the two directors and reviewed and approved by the
Employment and Community Relations Committee. A director must have Board
service
9
<PAGE>
of 60 months or more in order to qualify for the full donation amount,
with service of less than 60 months qualifying for an incremental donation. The
program does not result in any material cost to the Company.
The Company provides Business Travel Insurance to its non-employee
directors as part of its Business Travel Insurance Plan for Management
Employees. In the event of accidental death or dismemberment, benefits of up to
$400,000 per individual are provided. The program does not result in any
material cost to the Company.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Dr. Boyce and Messrs. Bozzone
and Falk. No member of the Compensation Committee was at any time during 1996
or at any other time an officer or employee of the Company.
No executive officer of the Company served on the Board of Directors or
Compensation Committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
10
<PAGE>
EXHIBIT 99.2
DIRECTORS OF DQE AND DUQUESNE LIGHT COMPANY
Terms Expiring in the Year 1997:
- --------------------------------
Daniel Berg, Age 67, Director of DQE since 1989. Institute Professor and Acting
Director, Services Research and Education Center, of Rensselaer Polytechnic
Institute. Also Senior Science Advisor of the National Science Foundation (NSF)
since January 1997. A director of Duquesne Light Company, Chester Engineers,
Inc. (an environmental consulting and engineering company), Hy-Tech Machine,
Inc. (manufacturer of specialty parts and equipment), and Joachim Machinery
Company, Inc. (distributor of machine tools), and Chairman of the Academic
Advisory Board of the National Academy of Engineering.
Robert P. Bozzone, Age 63, Director of DQE since 1990. Elected to be a Lead
Director in August of 1996. Vice Chairman of Allegheny Teledyne, Inc.
(specialty metals production) since its formation through the merger of
Allegheny Ludlum Corporation and Teledyne, Inc. in August 1996. Formerly Vice
Chairman from 1994-1996 and President and Chief Executive Officer from 1990-1994
of Allegheny Ludlum. Also a director of Duquesne Light Company and Allegheny
Teledyne, Inc., a trustee of Rensselaer Polytechnic Institute, a life member of
ASM International (engineering technical society), and a board member of the
Greater Pittsburgh Council--Boy Scouts of America, The Salvation Army, and
Catholic Charities. Also former Chairman of the Pittsburgh Branch of the
Federal Reserve Bank of Cleveland.
William H. Knoell, Age 72, Director of DQE since 1989. Elected to be a Lead
Director in August of 1996. Retired Chairman of the Board and Chief Executive
Officer of Cyclops Industries, Inc. (basic and specialty steels and fabricated
steel products, industrial and commercial construction). Also a director of
Duquesne Light Company, Cabot Oil & Gas Corporation and St. Clair Memorial
Hospital and a life trustee of Carnegie Mellon University.
Thomas J. Murrin, Age 67, Director of DQE since 1991. Dean of the A. J. Palumbo
School of Business Administration of Duquesne University since 1990. Prior to
that, Deputy Secretary of the U.S. Department of Commerce and President of the
Energy and Advanced Technology Group of Westinghouse Electric Corporation. Also
a director of Duquesne Light Company and Motorola, Inc. (manufacturer of
electronic equipment and components) and a member of the Executive Committee of
the U.S. Council on Competitiveness and Chairman of the District Export Council.
Terms Expiring in 1998:
- -----------------------
Doreen E. Boyce, Age 62, Director of DQE since 1989. President of the Buhl
Foundation (charitable institution for educational and public purposes). Also a
director of Duquesne Light Company, Microbac Laboratories, Inc., Orbeco
Analytical Systems, Inc. and Dollar Bank, Federal Savings Bank and a trustee of
Franklin & Marshall College.
1
<PAGE>
David D. Marshall, Age 44, Director of DQE since 1995. President and Chief
Executive Officer of DQE and Duquesne Light Company since August of 1996.
Previously Executive Vice President of DQE and President and Chief Operating
Officer of Duquesne Light Company since 1995. Vice President of DQE from 1989 to
1995, and Executive Vice President of Duquesne Light Company from 1992 to 1995.
Also a director of Duquesne Light Company, Chester Engineers, Inc., and
Southwestern Pennsylvania Industrial Resource Center (economic development), and
Trustee, Vice President, and Secretary of Penn's Southwest Association (economic
development).
Robert Mehrabian, Age 55, Director of DQE since 1991. President of Carnegie
Mellon University. Also a director of Duquesne Light Company, Allegheny
Teledyne, Inc., PPG Industries Inc., Mellon Bank Corporation, and Mellon Bank,
N.A. and an ex-officio trustee of Carnegie Mellon University.
Terms Expiring in 1999:
- -----------------------
Sigo Falk, Age 62, Director of DQE since 1989. Management of personal
investments. Chairman of The Maurice Falk Medical Fund and Leon Falk Family
Trust and a director of Duquesne Light Company. Also Chair of the Chatham
College Board of Trustees and a board member of the Historical Society of
Western Pennsylvania and the Allegheny Land Trust.
Eric W. Springer, Age 67, Director of DQE since 1989. Partner of Horty,
Springer & Mattern, P.C. (attorneys-at-law). Also a director of Duquesne Light
Company, a Trustee Emeritus of Presbyterian University Hospital and the
University of Pittsburgh Medical Center, and Past President of the Allegheny
County Bar Association.
2
