PROSPECTUS SUPPLEMENT
(To Prospectus dated June 20, 1997)
$307,632,000
Waterford 3 Secured Lease Obligation Bonds, 8.09% Series due 2017
------------------------
Interest Payable January 2 and July 2
------------------------
The Waterford 3 Secured Lease Obligation Bonds, 8.09% Series due 2017 (the
"Collateral Bonds"), will be indirectly secured, as described in the
accompanying Prospectus, by liens on, and a security interest in,
certain ownership interests in, and the respective Leases relating to,
Unit No. 3 (nuclear) of the Waterford Steam Electric Generating
Station ("Waterford 3"), and will be payable solely from basic
rentals and certain other amounts to be
paid under such Leases by
Entergy Louisiana, Inc.
------------------------
The Collateral Bonds will be issued by W3A Funding Corporation ("Funding
Corporation"), a Delaware corporation created for the sole purpose of
issuing the Collateral Bonds, as described in the accompanying
Prospectus. Entergy Louisiana, Inc. (formerly Louisiana Power &
Light Company), a Louisiana corporation (the "Company"), will be
unconditionally obligated to make rental payments in amounts that
will be at least sufficient to pay in full, when due, all
scheduled payments of principal of and interest on the
Collateral Bonds, although the Collateral Bonds will not
be direct obligations of, or guaranteed by,
the Company.
The Collateral Bonds will mature on January 2, 2017. The principal of the
Collateral Bonds will be payable from time to time in installments. The
Collateral Bonds will be redeemable, in whole or in part, on not less
than 20 days' notice, either upon certain terminations of the Leases,
or at the option of Funding Corporation, at the redemption prices
set forth herein (including a Make-Whole Premium (as defined
herein) if redemption occurs at the option of Funding
Corporation prior to January 22, 2008), in each case
together with accrued interest to the date fixed for
redemption. (See "Certain Terms of the
Collateral Bonds.")
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
PRICE TO UNDERWRITING
PUBLIC(1) COMMISSIONS(2)(3) PROCEEDS(2)
-------------- ----------------- --------------
Per Collateral Bond......... 100% .875% 100%
Total................... $ 307,632,000 $ 2,691,780 $ 307,632,000
- ------------
(1) Plus accrued interest, if any, from the date of original issuance.
(2) Expenses, estimated to be $500,000, and underwriting commissions will be
paid from an additional investment of the Owner Participant (as defined
herein). Expenses, estimated to be $360,000, will be paid by the Company.
(3) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
------------------------
The Collateral Bonds are offered by the Underwriters named herein subject to
prior sale, when, as and if accepted by the Underwriters, and subject to
approval of certain legal matters by Winthrop, Stimson, Putnam & Roberts,
counsel for the Underwriters, and certain other conditions. It is expected that
delivery of the Collateral Bonds will be made on or about July 17, 1997 through
the book-entry facilities of The Depository Trust Company ("DTC") against
payment therefor in immediately available funds.
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MORGAN STANLEY DEAN WITTER CITICORP SECURITIES, INC.
June 26, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COLLATERAL BONDS.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR, AND PURCHASE, THE COLLATERAL BONDS IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
SELECTED INFORMATION
THE FOLLOWING MATERIAL, WHICH IS PRESENTED HEREIN SOLELY TO FURNISH LIMITED
INTRODUCTORY INFORMATION REGARDING THE COLLATERAL BONDS, IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. CERTAIN CAPITALIZED TERMS
USED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE DEFINED
IN THE GLOSSARY AT THE END OF THE ACCOMPANYING PROSPECTUS.
SECURITIES OFFERED; INTEREST
$307,632,000 aggregate principal amount of Waterford 3 Secured Lease
Obligation Bonds, which bear interest at the rate of 8.09% per annum and mature
on January 2, 2017.
Interest on the Collateral Bonds will be payable on January 2 and July 2 of
each year, commencing January 2, 1998.
PRINCIPAL INSTALLMENT PAYMENTS
The Supplemental Indenture relating to the Collateral Bonds (the
"Supplemental Indenture") provides for the payment of principal installments
on the Collateral Bonds on each of the Installment Payment Dates set forth
below, in an aggregate amount (subject to adjustment in certain circumstances)
equal to the Installment Payment Amounts (as defined herein) set forth below,
together with interest accrued to such Installment Payment Date. The Outstanding
Balance Factor set forth below for each Installment Payment Date is for
descriptive purposes only, and, unless there has been a partial redemption or a
default or other installment payment adjustment, represents a factor that when
multiplied by the original principal amount of each Collateral Bond will
indicate the outstanding principal amount remaining unpaid after payment of the
principal installment due on such Installment Payment Date.
INSTALLMENT AGGREGATE INSTALLMENT
PAYMENT DATE PAYMENT AMOUNT OUTSTANDING BALANCE FACTOR
--------------- ---------------------- ---------------------------
January 2, 1999 $ 25,241,472 0.9179491
January 2, 2000 20,558,918 0.8511196
January 2, 2001 20,558,917 0.7842900
January 2, 2002 20,558,918 0.7174604
January 2, 2003 33,299,885 0.6092145
January 2, 2004 16,468,500 0.5556814
January 2, 2005 626,260 0.5536457
January 2, 2006 2,660,265 0.5449981
January 2, 2007 3,043,190 0.5351058
January 2, 2008 5,261,900 0.5180013
January 2, 2009 11,172,116 0.4816848
January 2, 2010 14,913,336 0.4332070
January 2, 2011 23,802,318 0.3558343
January 2, 2012 13,976,385 0.3104021
January 2, 2013 10,239,787 0.2771163
January 2, 2014 13,787,285 0.2322988
January 2, 2015 12,647,430 0.1911866
January 2, 2016 1,322,961 0.1868861
January 2, 2017 57,492,157 0.0000000
(See "Certain Terms of the Collateral Bonds -- Principal Installment
Payments.")
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<PAGE>
REDEMPTION
The Collateral Bonds will be redeemable, in whole or in part, on not less
than 20 days' notice, either (a) upon certain terminations of the Leases at a
redemption price of 100% of the unpaid principal amount thereof plus accrued
interest, if any, to the redemption date or (b) at the option of Funding
Corporation, at a redemption price of 100% of the unpaid principal amount
thereof plus accrued interest, if any, to the redemption date, plus a Make-Whole
Premium (as defined herein) if such redemption occurs at the option of Funding
Corporation prior to January 22, 2008. (See "Certain Terms of the Collateral
Bonds -- Redemption.")
SECURITY AND SOURCE OF PAYMENT
The Collateral Bonds will be indirectly secured, as described in the
accompanying Prospectus,
by liens on, and a security interest in, certain ownership interests in, and the
respective Leases relating to, Waterford 3, and will be payable solely from
basic rentals and certain other amounts to be paid under such Leases by the
Company. Each Collateral Bond will be secured by the Pledged Lessor Bonds, which
will be held by the Trustee. Each Pledged Lessor Bond will be secured by, among
other things, (a) a lien on and security interest in the Undivided Interest of
the Lessor issuing such Pledged Lessor Bond and (b) certain of the rights of
such Lessor under its Lease with the Company, including the right to receive
basic rent and certain other amounts payable by the Company thereunder. The
Company is unconditionally obligated to make payments under the Leases in
amounts that will be at least sufficient to provide for scheduled payments of
the principal of and interest on the Pledged Lessor Bonds which amounts, in
turn, will be sufficient to provide for scheduled payments of principal of and
interest on the Collateral Bonds when due. However, neither the Collateral Bonds
nor the Pledged Lessor Bonds will be direct obligations of, or guaranteed by,
the Company. (See "Security and Source of Payment for the Collateral Bonds" in
the accompanying Prospectus.)
Upon the occurrence and continuance of any Lease Indenture Event of Default
that results from a Lease Event of Default, the related Lessor will control the
exercise of remedies against the Company under the related Lease, subject to the
right of the Lease Indenture Trustee to cause such Lessor to forbear from any
proposed action that would have a material adverse effect on the Holders of the
related Lessor Bonds. There could be circumstances, therefore, in which amounts
due on the Collateral Bonds are not paid and neither the Lease Indenture Trustee
nor the Trustee would be able to direct such Lessor's pursuit of remedies
against the Company under such Lease. The Lease Indenture Trustee would not be
precluded, however, from selling the related Lease Indenture Estate (including
the Undivided Interest) in a foreclosure or similar proceeding. If such sale
occurs prior to or simultaneously with the termination of the related Lease,
such Lessor must first be given an opportunity to purchase such Lease Indenture
Estate at the proposed sale price. In the event of a sale pursuant to a
foreclosure or similar proceeding (other than a sale to such Lessor), the Lease
Indenture Trustee would have the right to terminate such Lease in connection
with such sale. (See "Description of the Lease Indentures -- Notice; Waiver;
Acceleration and Remedies" in the accompanying Prospectus.)
Under certain circumstances the Company (or jointly the Company and an
Affiliate thereof) may elect, or may be required, to assume the Pledged Lessor
Bonds issued under any Lease Indenture, in whole or in part, and all obligations
of the related Lessor under such Lease Indenture. (See "Description of the
Lease Indentures -- Assumption by the Company" in the accompanying Prospectus.)
In such cases, the Holders of the Collateral Bonds would retain the benefit of
the pledge and mortgage under the Lease Indenture of the related Undivided
Interest and the obligation to make payments on the Pledged Lessor Bonds would
become a direct obligation of the Company.
The Holders of the Collateral Bonds will have no recourse against the
general credit of any of the institutions or individuals acting as Lessors or
against the general credit of the Owner Participant.
S-3
<PAGE>
For a description of possible limitations on amounts payable as damages if
the Company were to reject the Leases in the context of a bankruptcy proceeding,
see "Security and Source of Payment for the Collateral Bonds" in the
accompanying Prospectus.
WATERFORD 3
Waterford 3 is a one-unit, nuclear-fueled electric generating plant located
in St. Charles Parish, Louisiana. Waterford 3, which was placed in commercial
operation in 1985, has a net generating capability of 1,075 MW. Unit 3 excludes
certain transmission, pollution control and other facilities included in
Waterford 3.
USE OF PROCEEDS
The Company has determined, in light of prevailing economic and financial
circumstances, to cause a refinancing of Initial Lessor Bonds which were
originally issued on September 28, 1989 and are currently outstanding. As part
of such refinancing, the Lessors will redeem outstanding Initial Lessor Bonds
with the proceeds of the issuance and sale of the Collateral Bonds and certain
other funds as described herein. (See "Use of Proceeds" in this Prospectus
Supplement and "The Transactions and the Refinancing" in the accompanying
Prospectus.)
W3A FUNDING CORPORATION
Funding Corporation was incorporated under the laws of the State of
Delaware for the purpose of facilitating the refinancing of the debt associated
with the Lessors' interests in Unit 3. The assets of Funding Corporation will
consist of the Pledged Lessor Bonds, which are payable from basic rent and
certain other payments which the Company is unconditionally obligated to make
under the Leases. (See "W3A Funding Corporation" in the accompanying
Prospectus.)
RECENT DEVELOPMENTS
On January 6, 1997, Waterford 3 received from the NRC its Systematic
Assessment of Licensee Performance ("SALP") report for the period April 29,
1995 through November 30, 1996. During this period, observed performance
declined from the previous SALP report and three of the four functional areas
received lower ratings. Operations remained at Category 2 (good performance).
Maintenance and Plant Support moved from Category 1 (superior performance) to
Category 2, and Engineering moved from Category 1 to Category 3 (acceptable
performance). Waterford 3 personnel currently are having bimonthly performance
meetings with NRC personnel, and significant Waterford 3 management changes have
been effected in order to address these matters. Additionally, the Company has
instituted a multi-year program to improve performance and is incurring
additional costs in doing so.
A scheduled 45-day refueling outage for Waterford 3 began on April 12,
1997. Additional work and two minor incidents caused the period to be extended
from May 27 to mid-June. On May 28, 1997, a start-up transformer at Waterford 3
failed due to an internal fault. A replacement transformer was located and is
being shipped to Waterford 3, where certain plant configuration changes are
being made to facilitate its installation. Re-starting of the plant after
installation of the replacement transformer is currently scheduled for mid-July.
In June 1995, the Louisiana Public Service Commission (the "LPSC")
approved a Formula Rate Plan (the "FRP") for the Company for a period of two
years. Under the FRP, the Company's earned return on equity ("ROE") is
reviewed annually. The review considers the Company's performance during the
previous calendar year in determining whether rates should be adjusted. The
purpose of a FRP is to minimize the need for costly and lengthy rate proceedings
and create an incentive to improve the efficiency of the Company's operations.
If the Company's earned ROE for the test year falls within a certain "band"
above and below the LPSC's approved ROE midpoint for the Company (currently
11.2%, thereby setting the ROE band at 10.4% to 12.0%), no change is required in
rates. If the earned ROE falls above or below the bandwidth, the Company's rates
will be adjusted by an amount that reduces by 60% the difference between the
earned ROE and the top or bottom of the band, as appropriate.
S-4
<PAGE>
The Company's May 30, 1997 FRP filing (based on test year 1996) showed the
necessity to reduce rates by approximately $27.8 million. Additionally, in order
to reflect certain Waterford 3 related items (property tax and termination of
the phase-in plan) that are addressed outside the FRP, the filing showed the
necessity to additionally reduce rates by approximately $26.7 million. These two
reductions produce a total reduction of approximately $54.6 million to be
implemented beginning with the first billing cycle of July 1997. The May 30
filing is the final filing in the two year period of the FRP. There has been no
determination by the LPSC as to whether the FRP should be extended, modified or
terminated.
CERTAIN TERMS OF THE COLLATERAL BONDS
THE FOLLOWING DESCRIPTION OF CERTAIN TERMS OF THE COLLATERAL BONDS OFFERED
HEREBY SUPPLEMENTS, AND SHOULD BE READ TOGETHER WITH, THE STATEMENTS UNDER
"DESCRIPTION OF THE COLLATERAL BONDS AND THE INDENTURE" IN THE ACCOMPANYING
PROSPECTUS. CAPITALIZED TERMS USED IN THIS PROSPECTUS SUPPLEMENT HAVE THE SAME
MEANINGS AS IN THE ACCOMPANYING PROSPECTUS.
INTEREST RATE, STATED MATURITY AND PAYMENT
The Collateral Bonds will mature January 2, 2017, and will bear interest on
the unpaid principal amount thereof from the date of issuance at the rate of
8.09% per annum. Such interest will be payable on January 2 and July 2 of each
year, commencing January 2, 1998, to the Holders thereof at the close of
business on the December 15 or June 15, as the case may be, next preceding such
interest payment date (each, a "Regular Record Date"). (Supplemental
Indenture)
The Collateral Bonds will be issued originally solely in book-entry form to
DTC or its nominee, Cede & Co., to be held in DTC's book-entry only system. So
long as the Collateral Bonds are held in the book-entry only system, DTC (or a
successor securities depositary) or its nominee will be the registered owner or
holder of the Collateral Bonds for all purposes of the Indenture and of the
Collateral Bonds. (See " -- Book-Entry Only System" below.) Except as
described under " -- Book-Entry Only System" below, Beneficial Owners (as
defined below) of the Collateral Bonds will not have the right to have any
Collateral Bonds registered in their names and will not receive or have the
right to receive physical delivery of certificates representing their ownership
interests in the Collateral Bonds. For so long as any purchaser is the
Beneficial Owner of a Collateral Bond, such purchaser must maintain an account
with a broker or dealer who is, or acts through, a DTC Participant (as defined
below) to receive payment of the principal of and premium, if any, and interest
on such Collateral Bond. The laws of some states may require that certain
purchasers of securities take physical delivery of such securities. Such limits
and laws may impair the ability to transfer beneficial interests in Collateral
Bonds.
So long as the Collateral Bonds are held in the book-entry only system, the
principal of and premium, if any, and interest on the Collateral Bonds will be
paid through the facilities of DTC (or a successor securities depository). If
the book-entry only system is discontinued, the principal of and premium, if
any, and interest payable at maturity on the Collateral Bonds will be payable at
the corporate trust office of any paying agent designated by Funding Corporation
from time to time; and interest and Installment Payment Amounts (as defined
below), other than such amounts payable at maturity or with respect to which
there has been a default in payment, will be paid by check drawn upon the paying
agent and mailed to the address of the person entitled thereto, as shown in the
securities register on the Regular Record Date for such payments.
Because the principal of each Collateral Bond will be subject to payment
from time to time without surrender of, or notation on, the Collateral Bond, the
unpaid principal amount of each Collateral Bond as reflected in the securities
register maintained by the Trustee shall be controlling and binding on each
Holder with respect to the actual unpaid principal amount of a Collateral Bond
as of any date. In any case where any redemption date, any Installment Payment
Date or the stated maturity of principal of or any installment of interest on
any Collateral Bond, or any date on which any defaulted interest or principal is
proposed to be paid, is not a business day, then (notwithstanding any other
provision of the Indenture or such Collateral Bond) payment of interest and/or
principal and premium, if any, shall be due and payable on the next
S-5
<PAGE>
succeeding business day with the same force and effect as if made on or at such
nominal redemption date, stated maturity, Installment Payment Date or date on
which the defaulted interest or principal is proposed to be paid, and no
interest will accrue on the amount so payable for the period from and after such
redemption date, stated maturity, Installment Payment Date or date for the
payment of defaulted interest or principal, as the case may be. If there has
been a default in the payment of interest or any Installment Payment Amount on
any Collateral Bond, such defaulted interest or principal may be payable to the
Holder of such Collateral Bond as of the close of business on a date selected by
the Trustee which is not more than 15 days and not less than 10 days prior to
the date proposed by Funding Corporation for payment of such defaulted interest
or principal or in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Collateral Bond may be
listed, if the Trustee deems such manner of payment practicable. (Indenture,
Sections 1.13, 2.10 and 2.16)
PRINCIPAL INSTALLMENT PAYMENTS
On each Installment Payment Date (set forth below), Funding Corporation
will pay an installment of principal of each Collateral Bond equal (subject to
adjustment as described below) in amount (an "Installment Payment Amount") to
the Installment Payment Percentage (set forth below) for such Installment
Payment Date multiplied by the original principal amount of such Collateral
Bond.
INSTALLMENT PAYMENT DATE INSTALLMENT PAYMENT PERCENTAGE
- ------------------------ -------------------------------
January 2, 1999 8.205086597%
January 2, 2000 6.682958210%
January 2, 2001 6.682957885%
January 2, 2002 6.682958210%
January 2, 2003 10.824584244%
January 2, 2004 5.353311749%
January 2, 2005 0.203574401%
January 2, 2006 0.864755617%
January 2, 2007 0.989230639%
January 2, 2008 1.710452749%
January 2, 2009 3.631649503%
January 2, 2010 4.847784366%
January 2, 2011 7.737269855%
January 2, 2012 4.543215595%
January 2, 2013 3.328583177%
January 2, 2014 4.481746047%
January 2, 2015 4.111220549%
January 2, 2016 0.430046614%
January 2, 2017 18.688613993%
Upon the occurrence of certain changes in Federal income tax rates or laws,
the Company or the Owner Participant may cause the principal amounts of
Collateral Bonds to be paid in installments on the Installment Payment Dates and
the stated maturity to be adjusted to match any adjustment made to the principal
amortization and maturity schedules of the Pledged Lessor Bonds in connection
with a recalculation of basic rent under one or more of the Leases, provided
that such adjustments shall not increase or decrease the average life of the
Collateral Bonds (calculated in accordance with generally accepted financial
practice from the date of initial issuance) by more than 6 months or extend the
final maturity of the Collateral Bonds. The Trustee shall send by mail to each
Holder of affected Collateral Bonds at least 30 days before the first payment
date with respect to which an adjustment is to be made, a revised payment
schedule of principal amounts of Collateral Bonds.
In the event there shall have been any partial redemption of the Collateral
Bonds (other than pursuant to principal installment payments), each Installment
Payment Amount for each Collateral Bond subsequent
S-6
<PAGE>
to such redemption shall be reduced by (i) in the case of a partial redemption
as described under "-- Redemption -- Optional Redemption," an amount equal to
the amount obtained by multiplying such Installment Payment Amount as in effect
prior to such redemption by a fraction of which the numerator shall be the
aggregate principal amount of Collateral Bonds redeemed pursuant to such partial
redemption, and the denominator shall be the aggregate unpaid principal amount
of Collateral Bonds outstanding immediately prior to such redemption and (ii) in
the case of a partial redemption as described under "-- Redemption -- Redemption
upon Lease Termination," an amount such that the aggregate of all principal
installment payments to be made on the Collateral Bonds on the relevant
Installment Payment Date shall be equal to the amount of principal of the
Pledged Lessor Bonds to be paid on such date under the remaining Lease
Indentures, any such reduction to be made on a pro rata basis, as nearly as
practicable, among the Holders of the Collateral Bonds.
(Supplemental Indenture)
REDEMPTION
REDEMPTION UPON LEASE TERMINATION
If any Lease is to be terminated as described in the accompanying
Prospectus in "Description of the Leases -- Purchase Option for Significant
Expenditures", " -- Periodic Purchase Option" or " -- Termination for
Obsolescence" or in "Other Agreements -- Participation Agreement", and all
Lessor Bonds issued under the related Lease Indenture are to be prepaid,
Collateral Bonds, equal in principal amount to the Pledged Lessor Bonds issued
under such Lease Indenture, will be redeemed on the date on which such Pledged
Lessor Bonds are to be prepaid, at a redemption price of 100% of the unpaid
principal amount thereof plus accrued interest, if any, to the redemption date,
all subject, however, except in the case of a termination for obsolescence, to
the right of the Company to assume such Pledged Lessor Bonds in which event
there will be no redemption of Collateral Bonds as a consequence of such
termination. (Indenture, Section 6.02, Supplemental Indenture)
OPTIONAL REDEMPTION
The Collateral Bonds will be subject to redemption, at the option of
Funding Corporation, in whole at any time or in part from time to time, at the
redemption price of 100% of the unpaid principal amount of such Collateral Bonds
to be so redeemed, plus accrued interest, if any, to the redemption date, plus,
if such redemption is made prior to January 22, 2008, the Make-Whole Premium, if
any.
The Make-Whole Premium, if any, on the Collateral Bonds will be determined
by an independent investment banking institution of national standing (the
"Investment Banker") selected by the Company or, if the Trustee does not
receive notice of such appointment at least ten days prior to a scheduled
redemption date or if any Lease Event of Default has occurred and is continuing,
selected by the Owner Trustee. The Investment Banker will first determine the
Treasury Rate with respect to any redemption of Collateral Bonds. The Treasury
Rate means, with respect to each Collateral Bond to be redeemed, a per annum
rate (expressed as a semiannual equivalent and as a decimal and, in the case of
United States Treasury bills, converted to a bond equivalent yield) determined
to be the per annum rate equal to the semiannual yield to maturity of United
States Treasury securities maturing on the Average Life Date (as defined below)
of such Collateral Bond, as determined by interpolation between the most recent
weekly average yields to maturity for two series of United States Treasury
securities (A) one maturing as close as possible to, but earlier than, the
Average Life Date of such Collateral Bond and (B) the other maturing as close as
possible to, but later than, the Average Life Date of such Collateral Bond, in
each case as published in the most recent H.15(519) (or, if a weekly average
yield to maturity for United States Treasury securities maturing on the Average
Life Date of such Collateral Bond is reported in the most recent H.15(519), as
published in H.15(519)). "H.15(519)" means Statistical Release H.15(519),
Selected Interest Rates," or any successor publication, published by the Board
of Governors of the Federal Reserve System. The "most recent H.15(519)" means
the latest H.15(519) which is published prior to the close of business on the
third business day prior to the applicable redemption date. The Average Life
Date for any Collateral Bond to be redeemed shall be the date
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<PAGE>
which follows the redemption date by a period equal to the Remaining Weighted
Average Life (as defined below) of such Collateral Bond. The Remaining Weighted
Average Life of such Collateral Bond with respect to the redemption of such
Collateral Bond is the number of days equal to the quotient obtained by dividing
(A) the sum of the products obtained by multiplying (1) the amount of each
remaining principal payment on such Collateral Bond by (2) the number of days
from and including the redemption date, to but excluding the scheduled payment
date of such principal payment by (B) the unpaid principal amount of such
Collateral Bond.
The "Make-Whole Premium" will be, with respect to the principal amount of
any Collateral Bond to be redeemed on any redemption date, the amount which the
Investment Banker determines as of the third Business Day prior to such
redemption date to equal the product obtained by multiplying (a) the excess, if
any, of (i) the sum of the present values of all the remaining scheduled
payments of principal and interest from the redemption date to stated maturity,
computed on a semi-annual basis by discounting such payments on each January 2
and July 2 at a rate equal to the Treasury Rate plus .125%, based on a 360-day
year of twelve 30-day months, over (ii) the aggregate unpaid principal amount of
such Collateral Bond plus any accrued but unpaid interest thereon by (b) a
fraction the numerator of which shall be the principal amount of such Collateral
Bond to be redeemed on such redemption date and the denominator of which shall
be the aggregate unpaid principal amount of such Collateral Bond; provided that
the aggregate unpaid principal amount of such Collateral Bond for the purpose of
clauses (a)(ii) and (b) of this definition will be determined after deducting
the principal installment, if any, due on such redemption date.
PROCEDURE FOR AND NOTICE OF REDEMPTION
If fewer than all of the Collateral Bonds shall be called for redemption,
the particular Collateral Bonds or portions thereof to be redeemed shall be
selected by the Trustee in the principal amount designated by Funding
Corporation except as otherwise required by the Indenture by prorating, as
nearly as practicable, the principal amount of such Collateral Bonds to be
redeemed among the Holders of such Collateral Bonds. Any Collateral Bonds and
portions of Collateral Bonds selected for redemption which are deemed to be paid
in accordance with the provisions of the Indenture will cease to bear interest
on the specified redemption date. Notice of redemption shall be given by mail
not less than 20 nor more than 60 days prior to the date fixed for redemption to
the Holders of Collateral Bonds to be redeemed (which, as long as the Collateral
Bonds are held in the book-entry only system, will be DTC (or its nominee) or a
successor depository); provided, however, that failure to duly give such notice
by mail, or any defect therein, shall not affect the validity of any proceedings
for the redemption of Collateral Bonds as to which there shall have been no such
failure or defect.
With respect to notice of any redemption of the Collateral Bonds, such
notice will state that such redemption will be conditional upon the receipt by
the Trustee at or prior to the date fixed for such redemption of money
sufficient to pay the principal of and premium, if any, and interest on such
Collateral Bonds. If such money is not so received, such notice will be of no
force and effect, Funding Corporation will not redeem such Collateral Bonds and
the Trustee will give notice, in the manner in which the notice of redemption
was given, that such money was not so received, and such redemption is not
required to be made.
(Indenture, Article Six; Supplemental Indenture; and form of Collateral Bond)
BOOK-ENTRY ONLY SYSTEM
DTC will act as securities depository for the Collateral Bonds. The
Collateral Bonds will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC's partnership nominee).
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Direct Participants") deposit with
DTC. DTC also facilitates the settlement
S-8
<PAGE>
among Direct Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Direct Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its Participants
(as defined below) and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks, and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants," and together with the Direct Participants, the
"Participants"). The rules applicable to DTC and its Participants are on file
with the SEC.
Purchases of Collateral Bonds under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Collateral
Bonds on DTC's records. The ownership interest of each actual purchaser of each
Collateral Bond ("Beneficial Owner") is in turn to be recorded on the Direct
and Indirect Participants' respective records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the Collateral Bonds are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners and will be settled in same-day funds. Beneficial Owners will
not receive certificates representing their ownership interests in the
Collateral Bonds except in the event that use of the book-entry system for the
Collateral Bonds is discontinued.
To facilitate subsequent transfers, all Collateral Bonds deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of the Collateral Bonds with DTC and their registration
in the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Collateral Bonds; DTC's records
reflect only the identity of the Direct Participant to whose accounts such
Collateral Bonds are credited, which may or may not be the Beneficial Owners.
The Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by either
Direct or Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. Redemption notices shall be sent by the
Trustee to Cede & Co. If less than all of the Collateral Bonds are being
redeemed, DTC will reduce pro rata the amount of the interest of each Direct
Participant in the Collateral Bonds to be redeemed in accordance with its
procedures.
Neither DTC nor Cede & Co. will consent or vote with respect to Collateral
Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Trustee as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Collateral Bonds are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Collateral Bonds
will be made to DTC. DTC's practice is to credit Direct Participants' accounts
on the payable date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on the
payable date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such Participants and not of DTC, the
Company, Funding Corporation, the Underwriters or the Trustee, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal, premium, if any, and interest to DTC is the
responsibility of the Trustee on behalf of Funding Corporation, disbursement of
such payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility of
Participants. If
S-9
<PAGE>
DTC is at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed, Funding Corporation will issue to Beneficial Owners
individual certificated Collateral Bonds representing their ownership interests
in Collateral Bonds. In addition, the Company may at any time determine not to
have any particular series of Collateral Bonds held in the book-entry only
system and, in such event, Funding Corporation will issue to Beneficial Owners
individual certificated Collateral Bonds representing their ownership interests
in such Collateral Bonds. In any such instance, a Beneficial Owner will be
entitled to have such certificated Collateral Bonds registered in its name.
Individual certificated Collateral Bonds so issued will be issued as registered
Collateral Bonds in denominations of $1,000 or any integral multiple thereof.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable,
including DTC, but none of the Company, Funding Corporation, the Underwriters or
the Trustee takes responsibility for the accuracy or completeness thereof.
None of the Company, the Trustee, Funding Corporation, the Underwriters or
any agent for payment on or registration of transfer or exchange of the
Collateral Bonds will have any responsibility or liability for any aspect of the
records relating to or payments made on account of interests of Beneficial
Owners of any Collateral Bond or for maintaining, supervising or reviewing any
records relating to such interests.
USE OF PROCEEDS
Proceeds from the issuance of the Collateral Bonds will be used to make
loans to the Lessors, to be evidenced by the Pledged Lessor Bonds, in amounts
sufficient, together with amounts made available to the Lessors by the Company
as rent under the related Leases and by the Owner Participant as an additional
investment, to enable the Lessors to redeem the outstanding Initial Lessor Bonds
and to pay certain costs and expenses incurred in connection with the
Refinancing.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company, Funding Corporation and the Underwriters, the Underwriters named below
have severally agreed to purchase from Funding Corporation, and Funding
Corporation has agreed to sell to the Underwriters, severally, the respective
principal amounts of the Collateral Bonds set forth below.
PRINCIPAL
AMOUNT OF
NAME COLLATERAL BONDS
- ------------------------------------- -----------------
Morgan Stanley & Co. Incorporated.... $ 153,816,000
Citicorp Securities, Inc............. 153,816,000
-----------------
Total........................... $ 307,632,000
=================
The Underwriting Agreement provides that the several obligations of the
Underwriters thereunder are subject to the approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase all of the Collateral
Bonds if any are purchased; provided that the Underwriting Agreement provides
that under certain circumstances involving a default of an Underwriter, less
than all of the Collateral Bonds may be purchased.
The Company has been advised by the several Underwriters that the
Underwriters propose to offer the Collateral Bonds directly to the public at the
public offering price set forth on the cover page of this Prospectus Supplement
and to certain dealers at such price less a concession of .50% of the principal
amount of the Collateral Bonds. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of .25% of the principal amount of
Collateral Bonds to certain other dealers. After the initial public offering,
the offering prices and other selling terms may be changed.
The Underwriting Agreement provides that, subject to certain conditions,
the Company will indemnify each Underwriter and its controlling persons against
certain liabilities, including certain liabilities under the
S-10
<PAGE>
Securities Act of 1933, as amended, and will contribute to payments the
Underwriters may be required to make in respect thereof.
The Company does not intend to apply for listing of the Collateral Bonds on
a national securities exchange but has been advised by the Underwriters that the
Underwriters presently intend to make a market in the Collateral Bonds, as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Collateral Bonds, and such market
making may be discontinued at any time at the sole discretion of each
Underwriter. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Collateral Bonds.
In order to facilitate the offering of the Collateral Bonds, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Collateral Bonds. Specifically, the Underwriters may
overallot in connection with the offering, creating a short position in the
Collateral Bonds for their own account. In addition, to cover overallotments or
to stabilize the price of the Collateral Bonds, the Underwriters may bid for,
and purchase, the Collateral Bonds in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the Collateral Bonds in the offering, if the syndicate
repurchases previously distributed Collateral Bonds in transactions to cover
syndicate short positions, in stabilizing transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Collateral
Bonds above independent market levels. The Underwriters are not required to
engage in these activities, and may end any of these activities any time.
From time to time, the Underwriters and/or certain of their affiliates
engage in transactions with or perform services for the Company in the ordinary
course of business. In addition, an affiliate of Citicorp Securities, Inc. is
the Owner Participant.
S-11
<PAGE>
PROSPECTUS
$322,526,000
Waterford 3 Secured Lease Obligation Bonds
The Waterford 3 Secured Lease Obligation Bonds (the "Collateral Bonds") will
be issued at one time or from time to time, in one or more series, at prices
and on terms to be determined at the time of sale. The Collateral Bonds
will be indirectly secured, as described herein, by liens on, and
security interests in, certain ownership interests in, and by the
Leases relating to, Unit No. 3 (nuclear) of the Waterford Steam
Electric Generating Station ("Waterford 3") and will be payable
solely from basic rentals and certain other amounts payable
under such Leases by
Entergy Louisiana, Inc.
The Collateral Bonds will be issued by W3A Funding Corporation ("Funding
Corporation"), a Delaware corporation created for the sole purpose of issuing
the Collateral Bonds as described herein. Entergy Louisiana, Inc. (formerly
Louisiana Power & Light Company), a Louisiana corporation (the
"Company"), as Lessee under each Lease, will be unconditionally
obligated to make rental payments in amounts that will be at least
sufficient to pay in full, when due, all scheduled payments of
principal of and interest on the Collateral Bonds, although the
Collateral Bonds will not be direct obligations of, or guaranteed
by, the Company. This Prospectus is supplemented by a prospectus
supplement (the "Prospectus Supplement") which sets forth the
designation, the aggregate principal amount, rate and time of
payment of interest, maturity, purchase price, initial public
offering price, redemption or installment payment
provisions and other specific terms of the Collateral
Bonds in respect of which this
Prospectus is being delivered.
The Collateral Bonds will be secured by a pledge and assignment of certain
nonrecourse Lessor Bonds (the "Pledged Lessor Bonds") issued by the Lessors
under the Lease Indentures described herein. Each Pledged Lessor Bond will be
secured by a lien on and security interest in the undivided ownership
interest in Waterford 3 of the Lessor which has issued such Pledged
Lessor Bonds and certain of the rights of such Lessor under its Lease
with the Company, including the right to receive the basic rentals and
certain other amounts payable by the Company thereunder. (See
"Security and Source of Payment for the Collateral Bonds,"
"Description of the Collateral Bonds and the Indenture,"
"Description of the Lease Indentures" and
"Description of the Leases.")
--------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Collateral Bonds will be sold through Morgan Stanley & Co. Incorporated and
Citicorp Securities, Inc. as set forth in the Prospectus Supplement. The net
proceeds from the sale of the Collateral Bonds, and any applicable
commissions or discounts, are set forth in the Prospectus Supplement.
This Prospectus may not be used to consummate sales of the
Collateral Bonds unless accompanied by the Prospectus
Supplement.
MORGAN STANLEY DEAN WITTER CITICORP SECURITIES, INC.
June 20, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "SEC"). Such reports include information, as of particular
dates, concerning the Company's directors and officers, their remuneration, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company. Such reports and other information can
be inspected and copied at the public reference facilities maintained by the SEC
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, 13th
floor, New York, New York 10048. Copies of this material can also be obtained at
prescribed rates from the Public Reference Section of the SEC at its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains
a Web site (http://www.sec.gov) that contains reports, proxy statements and
other information regarding the Company. The Company's series of 12.64%
Preferred Stock and 9.68% Preferred Stock are listed on the New York Stock
Exchange. Reports and other information concerning the Company can be inspected
and copied at the office of such Exchange at 20 Broad Street, New York, New York
10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1996 and the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997, each filed with the SEC pursuant to the Exchange Act, are incorporated
in this Prospectus by reference. In addition, all documents subsequently filed
by the Company pursuant to Section 13, 14 or 15(d) of the Exchange Act prior to
the termination of this offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of such
documents (such documents, and the documents enumerated above, being herein
referred to as "Incorporated Documents").
Any statement contained herein or in an Incorporated Document shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in any other subsequently filed Incorporated
Document or in an accompanying Prospectus Supplement modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN
DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR
ALL OF THE INCORPORATED DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE THEREIN. REQUESTS
SHOULD BE DIRECTED TO CHRISTOPHER T. SCREEN, P.O. BOX 61000, NEW ORLEANS,
LOUISIANA 70161, TELEPHONE NUMBER 504-576-4212. THE INFORMATION RELATING TO THE
COMPANY CONTAINED IN THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT
DOES NOT PURPORT TO BE COMPREHENSIVE AND SHOULD BE READ TOGETHER WITH THE
INFORMATION CONTAINED IN THE INCORPORATED DOCUMENTS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR, WITH RESPECT TO ANY SERIES
OF THE COLLATERAL BONDS, THE PROSPECTUS SUPPLEMENT RELATING THERETO, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS AND
ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS AND A PROSPECTUS SUPPLEMENT NOR ANY
SALE MADE THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THAT
PROSPECTUS SUPPLEMENT.
2
<PAGE>
THE COMPANY
Entergy Louisiana, Inc. (formerly Louisiana Power & Light Company) was
incorporated under the laws of the State of Louisiana on October 15, 1974 and is
the successor by merger to a predecessor Louisiana Power & Light Company, which
was incorporated under the laws of the State of Florida in 1927. The merger
became effective on February 28, 1975. The Company's principal executive offices
are located at 639 Loyola Avenue, New Orleans, Louisiana 70113. Its telephone
number is (504) 576-4000.
The Company is an electric public utility company with all of its
operations in the State of Louisiana. All of the outstanding common stock of the
Company is owned by Entergy Corporation ("Entergy"), a Delaware corporation.
Entergy is a registered public utility holding company under the Public Utility
Holding Company Act of 1935, as amended. The Company, Entergy Arkansas, Inc.,
Entergy Gulf States, Inc., Entergy Mississippi Inc. and Entergy New Orleans,
Inc. are the principal operating electric utility subsidiaries of Entergy. Other
Entergy subsidiaries include System Energy Resources, Inc., a generating
company, Entergy Services, Inc., a service company, Entergy Operations, Inc., a
nuclear management services company, CitiPower Ltd., a retail electric
distribution company servicing Melbourne, Australia and surrounding suburbs,
London Electricity plc, a retail electricity distribution company servicing
London, United Kingdom, Entergy Power, Inc., a wholesale power company, and
Entergy Enterprises, Inc., a non-utility company.
The Company, Entergy Arkansas, Inc., Entergy Mississippi Inc. and Entergy
New Orleans, Inc. own all of the capital stock of System Fuels, Inc., a special
purpose company which implements and/or maintains certain programs for the
procurement, delivery and storage of fuel supplies for certain Entergy
subsidiaries, including the Company.
The foregoing information relating to the Company does not purport to be
comprehensive and should be read together with the financial statements and
other information contained in the Incorporated Documents.
USE OF PROCEEDS
Unless the accompanying Prospectus Supplement provides otherwise, the
proceeds of the sale of the Collateral Bonds will be used to make loans to the
Lessors, to be evidenced by the Pledged Lessor Bonds, in amounts sufficient,
together with amounts made available to the Lessors by the Company as rent under
the related Leases and from amounts made available by the Owner Participant as
an additional investment, to enable the Lessors to redeem all the outstanding
Initial Lessor Bonds and to pay certain costs and expenses incurred in
connection with the Refinancing.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company has calculated ratios of earnings to fixed charges pursuant to
Item 503 of SEC Regulation S-K as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------------
DECEMBER 31 MARCH 31
---------------------------------------- --------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges... 2.79 3.06 2.91 3.18 3.16 3.04
</TABLE>
THE TRANSACTIONS AND THE REFINANCING
On September 28, 1989, the Company sold, for an aggregate purchase price of
$353,600,000, and leased back, on a long-term net lease basis, three undivided
portions of its 100% ownership interest in Unit 3 in three substantially
identical, but entirely separate, Transactions, each such Transaction being
documented separately. Such Undivided Interests, which represent, in the
aggregate, approximately a 10.5% interest in Unit 3 (which is equivalent on a
cost basis to approximately a 9.3% interest in Waterford 3), were sold to First
National Bank of Commerce, New Orleans, Louisiana, as Owner Trustee under each
of three separate trust agreements (each such agreement with an institutional
investor as an Owner Participant) and
3
<PAGE>
as Lessor under each of three separate leases with the Company. Unit 3 excludes
certain transmission, pollution control and other facilities included in
Waterford 3. At the end of the terms of the Leases and assuming the Company does
not exercise any of its purchase options under any Lease, the Lessors, together,
as owners of the Undivided Interests, will be entitled to approximately 10.5% of
the capacity and energy produced by Waterford 3; prior to such time such
capacity and energy remain available to the Company. After the term of a Lease,
any person (including a Lessor) other than the Company which has possession of
the related Undivided Interest would be required to compensate the Company for
the use of certain of such excluded facilities, at such levels that the sum of
such compensation (discounted to present value, where appropriate) and the fair
market value of such Undivided Interest, as of the end of the term of such
Lease, would approximate the fair market value, determined as of such time, of
an undivided ownership interest in Waterford 3 equal to such person's
entitlement share of the capacity of Waterford 3.
Approximately 87.7% of the aggregate consideration paid by the Lessors for
their respective interests in Unit 3 was provided to the Lessors from the
issuance and sale of the Waterford 3 Secured Lease Obligation Bonds (the
"Initial Lessor Bonds") in 1989. The balance of such consideration was
contributed to the Lessors by the Owner Participant. As of May 31, 1997, the
outstanding Initial Lessor Bonds consist of (i) $73,344,000 aggregate principal
amount of 10.30% Series A due January 2, 2005, $36,674,000 aggregate principal
amount of 10.30% Series B due January 2, 2005 and $19,656,000 aggregate
principal amount of 10.30% Series C due January 2, 2005, and (ii) $95,896,000
aggregate principal amount of 10.67% Series A due January 2, 2017, $47,949,000
aggregate principal amount of 10.67% Series B due January 2, 2017 and
$25,700,000 aggregate principal amount of 10.67% Series C due January 2, 2017.
The Company has determined, in light of prevailing economic and financial
circumstances, to exercise its option pursuant to the Participation Agreements
to request the respective Lessors to refinance the Initial Lessor Bonds which
are currently outstanding (the "Refinancing"). The Lessors will obtain the
funds required to redeem the Initial Lessor Bonds and to pay related expenses
from non-recourse borrowings by them from Funding Corporation and from rent
payments that the Company has agreed to make under the Leases with such Lessors
and from amounts made available from the Owner Participant as an additional
investment. The loans by Funding Corporation to each Lessor will be evidenced by
one or more new series of Lessor Bonds (the "Pledged Lessor Bonds") issued by
such Lessor to Funding Corporation under the related Lease Indenture. The
Pledged Lessor Bonds of each Lessor will be secured by, among other things, the
basic rentals and certain other payments which the Company is obligated to make
under the relevant Lease. Funding Corporation will obtain the funds to enable it
to make the loans to the Lessors through the offer and sale of the Collateral
Bonds. (See "Security and Source of Payment for the Collateral Bonds" and
"Use of Proceeds.")
4
<PAGE>
FLOW OF FUNDS FOR DEBT SERVICE PAYMENTS ON THE COLLATERAL BONDS
ENTERGY LOUISIANA, INC.
(LESSEE)
| Rental Payments Due
| Under the Leases
| (Assigned by the
\ / Owner Trustees)
|
LEASE
INDENTURE ----------------------------------|
TRUSTEES |
| Debt Service for |
| the Pledged Lessor |
| Bonds |
\ / | Rental Payments
| | in Excess of
TRUSTEE FOR THE COLLATERAL BONDS | Debt Service
(ISSUED BY W3A FUNDING CORPORATION) |
| |
| Debt Service for \ /
| the Collateral Bonds |
\ / OWNER
| TRUSTEES
COLLATERAL BONDHOLDERS (LESSORS)
|
| Rental Payments
| in Excess of
\ / Debt Service
|
OWNER
PARTICIPANT
See "Security and Source of Payment for the Collateral Bonds."
5
<PAGE>
SECURITY AND SOURCE OF PAYMENT FOR THE COLLATERAL BONDS
Concurrently with the initial authentication and delivery of the Collateral
Bonds of each series, Funding Corporation will cause to be delivered to the
Trustee Pledged Lessor Bonds (a) issued as separate series under the Lease
Indentures, (b) payable as to principal on such dates and in such amounts that
on the stated maturity of principal and each sinking fund redemption date or
principal installment payment date of such Collateral Bonds there shall be
payable on the Pledged Lessor Bonds an amount in respect of principal equal to
the principal amount of such Collateral Bonds then to mature or to be payable in
installments of principal or be redeemed, (c) bearing interest at the same rate
and payable at the same times as the corresponding Collateral Bonds of such
series, (d) containing provisions for redemption, including redemption premiums,
correlative to the provisions for redemption (other than pursuant to a sinking
fund) of the corresponding Collateral Bonds of such series and (e) registered in
the name of the Trustee. (Indenture, Section 2.03)
The Pledged Lessor Bonds, which will be without recourse to the general
credit of the related Owner Trustee and the Owner Participant and will not be
direct obligations of, or guaranteed by, the Company, will be payable from and
secured by, among other things, a lien on and security interest in the related
Undivided Interest, and, subject to certain exceptions, the rights of the Owner
Trustee under the related Lease, including the right to receive all basic
rentals and certain other payments to be made by the Company (subject in each
case to certain permitted liens). Excluded from the Lease Indenture Estate are
any and all Excepted Payments and certain other rights. The Leases provide that
basic rent payments to be made by the Company be calculated in such amounts as
will be sufficient to provide for the payment, when due, of scheduled payments
of principal of and interest on all of the related Lessor Bonds. (See
"Description of the Leases -- Term and Rentals.") Each Lease is a net lease
pursuant to which the Company will be unconditionally obligated to make all
payments thereunder. (See "Description of the Leases -- Net Lease.") If a
Lease Event of Default shall have occurred and be continuing under any Lease,
remedies under such Lease may be exercised as described in "Description of the
Leases -- Remedies."
If a Lease Indenture Event of Default shall have occurred and be
continuing, remedies may be exercised as described under "Description of the
Lease Indentures -- Notice; Waiver; Acceleration and Remedies." If a Lease
Indenture Event of Default shall have occurred and be continuing at a time when
there shall not have occurred and be continuing a Lease Event of Default under
the related Lease, the exercise of such remedies may not disturb the Company's
quiet use and possession of the related Undivided Interest or require prepayment
of basic rent, Casualty Value or Special Casualty Value under such Lease.
In certain instances, the Company, or the Company and an Affiliate thereof
jointly, may elect or may be required to assume the obligations of the Owner
Trustee under the related Lease Indenture and on all or a portion of the related
Lessor Bonds (see "Description of the Lease Indentures -- Assumption by the
Company"). Upon such an assumption, the Owner Trustee would be released from
its obligations under such Lease Indenture and on the related Lessor Bonds. In
such case, the Holders of such Lessor Bonds would retain the benefit under the
related Lease Indenture of the lien on and security interest in the related
Undivided Interest, and the obligation to make payments on such Lessor Bonds
would become a direct obligation of the Company, or the Company and an Affiliate
thereof, as the case may be.
Subject to certain conditions, additional Collateral Bonds may be issued
under the Indenture (a) for the purpose of redeeming all or any part of any
series of Collateral Bonds previously issued under such Indenture, including the
Collateral Bonds issued in connection with the Refinancing, and of providing
funds for the payment of certain expenses incurred in connection with the
issuance of such additional Collateral Bonds and (b) to provide funds for all or
a portion of certain alterations, modifications, additions or capital
improvements to Unit 3, subject to certain limitations. All additional
Collateral Bonds issued under the Indenture will be secured equally, together
with the Collateral Bonds issued in connection with the Refinancing, by all
Lessor Bonds pledged by Funding Corporation to the Trustee.
The Company has issued a series of first mortgage bonds under its first
mortgage bond indenture to secure the payment to the Owner Participant of the
equity portion of amounts payable by the Company under the respective Leases and
other transaction documents. If prior to maturity of such first mortgage
6
<PAGE>
bonds, there shall have occurred an Event of Loss, Deemed Loss Event, Financial
Event or Lease Event of Default in respect of which the Lessee shall be
obligated to prepay all or any portion of the principal of the promissory note
which was issued by the Company to the Owner Participant as a condition to the
issuance of the Initial Lessor Bonds, then such first mortgage bonds shall be
redeemed, on the date such prepayment is to be made, in a principal amount equal
to the portion of the principal of the promissory note then to be prepaid.
Neither the holders of the Lessor Bonds (including the Trustee, as holder of the
Pledged Lessor Bonds) nor the Holders of the Collateral Bonds are entitled to
the benefit of any such financial support. (See "Other Agreements --
Participation Agreement.")
If the Company were to enter into bankruptcy or reorganization proceedings,
the Company or its bankruptcy trustee could reject any Lease. In such event,
there could be no assurance that the amount of any claim for damages under such
Lease would be allowed in amounts sufficient to provide for the repayment of the
related Collateral Bonds. Under Section 502(b)(6) of the United States
Bankruptcy Code, as amended, a claim by a lessor for damages resulting from the
rejection of a lease of real property in connection with bankruptcy proceedings
affecting the lessee may be limited to an amount equal to the rent reserved
under the lease, without acceleration, for the greater of 1 year or 15 percent
(but not more than 3 years) of the remaining term of the lease, plus rent
already due but unpaid. Although there can be no assurances, Louisiana counsel
to the Company believes that it is likely that a bankruptcy court would find
much of the property covered by the Leases to be real property. If such property
were held to constitute personal property, the above limitation would not apply.
In any case, rejection of any Lease by the Company or its bankruptcy trustee
would not deprive the related Lease Indenture Trustee of its lien on and
security interest in the related Undivided Interest. Rejection of any Lease
would deprive the Company of the benefit of the related Undivided Interest and
any revenues which could be derived from the sale of the output thereof.
If the Owner Participant or any Lessor becomes subject to bankruptcy or
reorganization proceedings and, by reason of such proceedings, the Owner
Participant or any Lessor is held to have recourse liability to the Holder of
any Lessor Bond or the related Lease Indenture Trustee, and such Holder or the
related Lease Indenture Trustee actually receives payment on account of such
recourse liability, such Holder or the Lease Indenture Trustee, as the case may
be, is required to promptly refund to the Owner Participant or any Lessor, as
appropriate, any amount of such payment which exceeds the amount which would
have been received on or prior to the date of such payment by such Holder or the
Lease Indenture Trustee if the Owner Participant or the Lessor had not become
subject to such recourse liability. (Participation Agreement, Section 20(f))
For further information with respect to the source of payment for the
Collateral Bonds, the Indenture and the Lease Indentures relating to the Lessor
Bonds, see "Description of the Collateral Bonds and the Indenture" and
"Description of the Lease Indentures."
W3A FUNDING CORPORATION
Funding Corporation was incorporated under the laws of the state of
Delaware for the purpose of facilitating the Refinancing and has only nominal
equity capital. The only business of Funding Corporation will be the issuance
and sale of the Collateral Bonds and the lending of the proceeds therefrom. (See
"Use of Proceeds.") Funding Corporation may (but is not required to) make
loans in connection with any significant capital improvements which may be
installed at Unit 3 from time to time. The assets of Funding Corporation will
consist of any Lessor Bonds issued by the Lessors to Funding Corporation from
time to time and $1,000 in cash, representing the equity capital contributed by
its sole shareholder, NCR Holding, Inc., which is a wholly-owned subsidiary of
NCR Corporate Research, Ltd. None of the Company, any Lessor or the Owner
Participant holds any ownership interest in Funding Corporation, NCR Holding,
Inc. or NCR Corporate Research, Ltd., and no person affiliated with the Company,
any Lessor or the Owner Participant is an officer, director or employee of any
such entity.
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DESCRIPTION OF THE COLLATERAL BONDS AND THE INDENTURE
The statements contained under this caption are intended to briefly
summarize the Collateral Bonds; they do not purport to be complete and are
qualified in their entirety by reference to the Indenture, a copy of the form of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. A Prospectus Supplement will describe the following terms
of the series of Collateral Bonds to be issued: (1) the designation of each
series of the Collateral Bonds; (2) the aggregate principal amount of each
series; (3) the date on which each series will mature; (4) the rate at which
each series will bear interest and the date from which such interest accrues;
(5) the dates on which interest will be payable; and (6) the prices, terms and
conditions upon which each series may be redeemed by the Company prior to
maturity or upon which installment payments of principal will become due and
payable.
GENERAL
The Collateral Bonds are to be issued under the Collateral Trust Indenture
(the "Indenture") among Funding Corporation, the Company and Bankers Trust
Company, as Trustee, as supplemented by one or more Supplemental Indentures,
among such parties.
Unless otherwise indicated in a Prospectus Supplement, the Collateral Bonds
will be issued in fully registered form without coupons in denominations of
$1,000 or any integral multiple thereof. Collateral Bonds may be surrendered for
registration of transfer or exchange for Collateral Bonds of the same series and
maturity at the corporate trust office of Bankers Trust Company, registrar and
paying agent for the Collateral Bonds, in New York, New York. The Trustee shall
not be required to register the transfer or exchange of any Collateral Bonds
called for redemption or during a period of 15 days preceding a mailing of
notice of redemption. No service charge will be required of any Bondholder
participating in any transfer or exchange of Collateral Bonds in respect of such
transfer or exchange, but, with certain exceptions, payment may be required of
any tax or other governmental charges that may be imposed in connection
therewith. (Indenture, Sections 2.05 and 2.08)
ADDITIONAL SECURITIES
The Indenture provides that the aggregate principal amount of Securities
(including the Collateral Bonds) which may be issued thereunder is unlimited,
provided that at least an equal aggregate principal amount of Lessor Bonds must
be pledged as security under the Indenture in support of the payment of such
Securities. A separate Supplemental Indenture will be entered into among Funding
Corporation, the Company and the Trustee establishing the designation, interest
rate, sinking fund, installment payments of principal and redemption provisions,
if any, and other specific terms of any particular series of Securities.
(Indenture, Section 2.03) Any additional series of Securities will be secured
pari passu with the Collateral Bonds by the Pledged Lessor Bonds. (Indenture,
Granting Clauses)
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS BY FUNDING CORPORATION
The certificate of incorporation of Funding Corporation provides that
Funding Corporation will not (a) dissolve or liquidate, in whole or in part, or
(b) merge into or consolidate with, or sell all or any part of its assets to,
any person, firm, corporation, partnership or other entity unless the acquiring
entity or the surviving corporation, as the case may be, has a certificate of
incorporation containing provisions identical to those of Funding Corporation's
certificate of incorporation restricting the nature of its business and purposes
and its ability to take certain action and, in the case of a sale of assets, the
acquiring entity shall have assumed all the liabilities and obligations of
Funding Corporation. In addition, Funding Corporation has agreed in the
Indenture that it will not amend those provisions of its certificate of
incorporation that restrict the nature of its business, purposes and activities
and that provide for its capitalization. (Indenture, Section 5.08)
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EVENTS OF DEFAULT
The following will be Events of Default under the Indenture:
(a) failure to pay any interest on any Security when it becomes due
and payable, and the continuation of such failure for a period of 10 days;
or
(b) failure to pay any principal of or premium, if any, on any
Security when it becomes due and payable, whether at its stated maturity of
principal, on any applicable redemption date or any principal installment
payment date or at any other time, and the continuation of such failure for
a period of 10 days; or
(c) failure on the part of either Funding Corporation or the Company
to perform or observe any covenant or agreement in the Indenture to be
performed or observed by it, and the continuation of such failure for a
period of 30 days after notice has been given to Funding Corporation or the
Company, as the case may be, by the Trustee, or to the Company or Funding
Corporation, as the case may be, and the Trustee by the Holders of at least
25% in principal amount of the outstanding Securities, specifying such
failure and requiring it to be remedied and stating that such notice is a
"Notice of Default" under the Indenture; provided, however, that the
continuation of such failure for a period of 30 days or more after such
notice has been so given (but in no event for a period which is greater
than one year after such notice has been given) shall not constitute an
Event of Default if (i) such failure can be remedied but cannot be remedied
within such 30 days; (ii) the Company or Funding Corporation, as the case
may be, is diligent in pursuing a remedy of such failure and (iii) such
failure does not impair in any respect the lien and security interest
created by the Indenture; or
(d) the occurrence of any Lease Indenture Event of Default; or
(e) the entry of a decree or order by a court having jurisdiction in
the premises adjudging Funding Corporation a bankrupt or insolvent or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of Funding Corporation under the
U.S. Bankruptcy Code or any other applicable federal or state law or law of
the District of Columbia, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of Funding Corporation or
of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuation of any such decree or
order unstayed and in effect for a period of 75 consecutive days; or
(f) the institution by Funding Corporation of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by the institution of
bankruptcy of insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the
United States Bankruptcy Code or any other applicable federal or state law
or law of the District of Columbia, or the consent by it to the filing of
any such petition or the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of Funding Corporation or
of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due, or the
taking of corporate action by Funding Corporation in furtherance of any
such action.
(Indenture, Section 8.01)
The Company and Funding Corporation must file an annual certificate with
the Trustee as to compliance with the provisions of the Indenture. (Indenture,
Section 5.09)
Funding Corporation has agreed in the Indenture that it will not take
certain corporate action which could result in its being declared bankrupt or
insolvent. (Indenture, Section 5.08) The Company, the Lessors, the Owner
Participant and the Lease Indenture Trustees have each agreed in the
Participation Agreements that none of them will file, or join in the filing of,
a petition seeking reorganization, arrangement, adjustment, or composition of or
in respect of Funding Corporation prior to the 181st day following the payment
in full of the Collateral Bonds and discharge of the Indenture. Notwithstanding
the
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foregoing, the Participation Agreement does not prohibit any such party from
participating in any such action instituted by any other person. (Participation
Agreement, Sections 6(b), 7(b), 8(b) and 9(b))
ACCELERATION AND REMEDIES
Upon the occurrence and continuance of an Event of Default, (i) if such
Event of Default is of the type specified in clause (a), (b), (c), (e) or (f) of
the first paragraph under "Events of Default" above, the Trustee may and, upon
the direction of the Holders of not less than a majority in principal amount of
the Securities outstanding the Trustee shall, and (ii) if such Event of Default
is of the type specified in clause (d) of the first paragraph under "Events of
Default" above (including without limitation a Lease Event of Default which has
resulted in a default of the type specified in clause (a) or (b) of such
paragraph) under circumstances in which there has been an acceleration of a
maturity of the related Pledged Lessor Bonds, the Trustee shall, declare all the
Securities to be immediately due and payable; provided that no such declaration
will be made (and the Trustee will not take action to sell any property pledged
to it under the Indenture or to institute proceedings for payment on any
Securities or Pledged Lessor Bonds) in the case of a payment default of the type
specified in clause (a) or (b) of such paragraph which resulted directly from a
failure by the Company to make any payment of rent under a Lease until such time
as the Lessor under such Lease has been given the opportunity to exercise its
rights, if any, to cure such default under the related Lease Indenture. (See
"Description of the Lease Indentures -- Rights of Lessor to Cure and Purchase
Lessor Bonds.") (Indenture, Section 8.02)
In addition, upon the occurrence of a Lease Indenture Event of Default,
Lease Indenture Default, Event of Loss, Deemed Loss Event or Financial Event, if
an officer of the Trustee has actual knowledge thereof, the Trustee will give
notice to all Holders of such fact in accordance with the provisions of the
Indenture and thereafter each Holder will have the right to direct the Trustee,
as the holder of the Pledged Lessor Bonds issued under such Lease Indenture, to
vote the principal amount of such Pledged Lessor Bonds in proportion to the
principal amount of Securities owned by such Holder, or to direct the related
Lease Indenture Trustee to take such action, or refrain from taking such action,
as it is permitted to take under the terms of the related Lease Indenture. Under
each Lease Indenture, directions given to the Lease Indenture Trustee as
described in the preceding sentence will be dictated by (x) in the case of a
Lease Indenture Event of Default or a Lease Indenture Default, the holders of no
less than a majority in aggregate principal amount of the outstanding Lessor
Bonds of all series (considered as one class) and (y) in the case of an Event of
Loss, Deemed Loss Event or Financial Event, the holders of not less than 5% in
aggregate principal amount of the outstanding Lessor Bonds of all series
(considered as one class), which, in either case, will mean, until such time, if
any, as additional Lessor Bonds are issued under such Lease Indenture, the
Holders of not less than a majority or 5% respectively in aggregate principal
amount of the Collateral Bonds outstanding as a result of the pass-through
voting mechanism described above. (Indenture, Section 3.03; Lease Indenture,
Sections 2.16 and 7.07)
With certain exceptions, the request of the Holders of not less than a
majority in aggregate principal amount of Securities outstanding will be
necessary to require the Trustee to exercise any remedy under the Indenture.
(Indenture, Section 8.07) The Trustee will be entitled to receive reasonable
indemnity and under certain circumstances is not required to act. (Indenture,
Section 9.03) In addition, no Holder shall have any right to pursue any remedy
under the Indenture unless the Trustee shall have been given written notice of
an Event of Default, the Holders of at least 25% in principal amount of all
Securities then outstanding shall have requested the Trustee to pursue a remedy,
the Trustee shall have been offered satisfactory indemnity, the Trustee shall
have failed to comply with such request within 60 days after receipt of such
request and the Trustee shall not have received during such 60 day period any
direction inconsistent with such request from Holders of a majority in principal
amount of outstanding Securities. (Indenture, Section 8.09)
VOTING OF LESSOR BONDS
The Trustee, as holder of the Pledged Lessor Bonds, will have the right to
vote and give consents and waivers in respect of such Pledged Lessor Bonds and
the Lease Indentures only as described below. The Holders of the Securities may
instruct the Trustee as to action by the Trustee, as holder of the Pledged
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Lessor Bonds, under any Lease Indenture, including the voting of Pledged Lessor
Bonds. Upon receiving from Holders any directions as to the taking of any
action, including the voting of any Pledged Lessor Bond, the Trustee shall
specify to the related Lease Indenture Trustee the principal amount of the
Pledged Lessor Bonds which is in favor of the action or vote, the principal
amount of the Pledged Lessor Bonds which is opposed to the action or vote and
the principal amount of the Pledged Lessor Bonds which is not taking any
position as to the action or vote. Such principal amounts shall be determined by
allocating to the total principal amounts of the Pledged Lessor Bonds with
respect to which direction is to be given the proportionate principal amount of
Securities taking corresponding positions or not taking any position, based on
the aggregate principal amount of outstanding Securities. (Indenture, Section
3.03) Because the Lease Indentures permit additional Lessor Bonds to be issued
and secured thereunder, and do not require that such additional Lessor Bonds be
issued only to Funding Corporation, it is possible that at some future time the
Pledged Lessor Bonds would not constitute a majority of the Lessor Bonds issued
and outstanding under the Lease Indentures. (See "Description of the Lease
Indentures -- Additional Lessor Bonds.")
SUPPLEMENTAL INDENTURE
Without the consent of the Holders of any Securities, Funding Corporation,
the Company and the Trustee may enter into supplemental indentures for the
following purposes:
(a) to establish the form and terms of any series of Securities;
(b) to evidence the succession of another corporation to the Company,
and the assumption by any such successor of the covenants of the Company
contained in the Indenture, or to evidence the succession of another
corporation to Funding Corporation, and the assumption by any such
successor of the covenants of Funding Corporation contained in the
Indenture and in the Securities;
(c) to evidence the succession of a new trustee or the appointment of
a co-trustee or a separate trustee under the Indenture;
(d) to add to the covenants of Funding Corporation or of the Company,
for the benefit of the Holders of the Securities, or to evidence the
surrender of any right or power conferred in the Indenture upon Funding
Corporation or the Company;
(e) to convey, transfer and assign to the Trustee, and to subject to
the lien of the Indenture, additional Pledged Lessor Bonds or additional
properties or assets, and to correct or amplify the description of any
property at any time subject to the lien of the Indenture or to assure,
convey and confirm unto the Trustee any property subject or required to be
subject to the lien of the Indenture;
(f) to permit or facilitate the issuance of Securities in
uncertificated form;
(g) to change or eliminate any provision of the Indenture; provided,
however, that if such change or elimination will adversely affect the
interests of the Holders of Securities of any series, such change or
elimination will become effective with respect to such series only when no
Security of such series remains outstanding; or
(h) to cure any ambiguity, to correct or supplement any provision in
the Indenture which may be defective or inconsistent with any other
provision in the Indenture, or to make any other provisions with respect to
matters or questions arising under the Indenture, provided such action
shall not adversely affect the interest of the Holders of the Securities in
any material respect.
Without limiting the generality of the foregoing, if the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), as in effect at the date
of the execution and delivery of the Indenture or at any time thereafter shall
be amended and
(x) if any such amendment shall require one or more changes to any
provisions of the Indenture or the inclusion in the Indenture of any
additional provisions, or shall by operation of law be deemed to effect
such changes or incorporate such provisions by reference or otherwise, or
(y) if any such amendment shall permit one or more changes to, or the
elimination of, any provisions of the Indenture which, at the date of the
execution and delivery of the Indenture or at any
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time thereafter, are required by the Trust Indenture Act to be contained in
the Indenture or are contained in the Indenture to reflect any provisions
of the Trust Indenture Act as in effect on such date,
the Indenture shall be deemed to have been amended to conform to such amendment
to the Trust Indenture Act or to effect such changes or elimination, and Funding
Corporation, the Company and the Trustee may, without the consent of any
Holders, enter into a supplemental indenture to evidence such amendment.
(Indenture, Section 11.01)
With the consent of the Holders of not less than a majority in aggregate
principal amount of all Securities then outstanding considered as one class,
Funding Corporation, the Company and the Trustee may enter into supplemental
indentures for any purpose; provided that if there is more than one series of
Securities outstanding and if a proposed supplemental indenture directly affects
the Holders of at least one, but not all, of such series, then only the consent
of a majority in aggregate principal amount of the Holders of the directly
affected series of Securities will be required; and provided, further, that
without the consent of the Holders of all the Securities then outstanding
directly affected thereby no such supplemental indenture may:
(a) change the stated maturity of the principal of, or any installment
of interest on, or the maturity date of any installment of principal of, or
the dates or circumstances of payment of premium, if any, on any Security
or reduce the principal amount of, or the interest on, or any premiums
payable upon any redemption of, any Security or change the place of payment
where, or the coin or currency in which, any Security or the premium, if
any, or interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment of principal or interest on or
after the stated maturity thereof (or, in the case of redemption, on or
after the redemption date) or such payment of premium, if any, on or after
the date such premium becomes due and payable or change the dates or
amounts of payments to be made through the operation of a sinking fund (if
any) or through installment payments of principal (if any) in respect of
such Securities;
(b) permit the creation of any lien prior or, except with respect to
additional Securities issued in accordance with the Indenture, equal to the
lien of the Indenture with respect to any of the Pledged Lessor Bonds,
terminate the lien of the Indenture on the Pledged Lessor Bonds (except as
permitted by the Indenture) or deprive any Holder of the security afforded
by the Indenture;
(c) reduce the percentage in principal amount of the Securities the
consent of whose Holders is required for any supplemental indenture or the
consent of whose Holders is required for any waiver provided for in the
Indenture or reduce the requirements of the Indenture relating to (1) a
quorum for meetings of Holders or (2) action taken by Holders pursuant to
the Indenture at meetings thereof; or
(d) modify any of the above provisions or the provisions of the
Indenture dealing with waivers of past defaults, except to increase the
percentage of the Holders whose consent is required for certain action or
to provide that certain other provisions of the Indenture cannot be
modified or waived without the consent of the Holders affected thereby.
(Indenture, Section 11.02)
Without the consent of the Holders of any Securities, the Trustee may join
in the execution of amendments of or supplements to, or waivers of the
provisions of, any Participation Agreement. (Indenture, Section 11.08)
DEFEASANCE
Securities of any series, or any portion of the principal amount thereof,
will, prior to the maturity thereof, be deemed to have been paid for purposes of
the Indenture (except as to any surviving rights of registration of transfer or
exchange expressly provided for in the Indenture), and the entire indebtedness
of Funding Corporation in respect thereof will be deemed to have been satisfied
and discharged, if (a) there shall have been irrevocably deposited with the
Trustee, in trust, money in an amount which will be sufficient to pay when due
the principal of and premium, if any, and interest due and to become due on such
Securities or portions thereof on and prior to the stated maturity of principal
or redemption date or (b) the
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Pledged Lessor Bonds of the corresponding series are deemed to have been paid in
accordance with the defeasance provisions of the Lease Indenture or Lease
Indentures under which such Pledged Lessor Bonds were issued; provided, however,
that such Securities will not be deemed to have been satisfied and discharged
unless, among other things, there has been delivered to the Indenture Trustee an
opinion of counsel to the effect that such satisfaction and discharge shall not
be deemed to be, or result in, a taxable event with respect to the Holders of
such Securities for purposes of federal income taxation, except that no such
opinion of counsel need be delivered if the Indenture Trustee shall have
received documentary evidence that each Holder of such Securities either is not
subject to, or is exempt from, federal income taxation. (Indenture, Section
12.01) (See also "Description of the Lease Indentures -- Defeasance.")
THE TRUSTEE
Bankers Trust Company will act as Trustee under the Indenture. As of the
date of the issuance of the Collateral Bonds, Bankers Trust Company will also be
Lease Indenture Trustee under each of the Lease Indentures entered into in
connection with the Transactions.
DESCRIPTION OF THE LEASE INDENTURES
The statements made under this caption are intended to summarize the Lease
Indentures as they relate to the Lessor Bonds; they do not purport to be
complete and are qualified in their entirety by reference to the Lease
Indentures, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part. Each Lease Indenture is an
entirely separate indenture but contains substantially the same terms and
provisions as each other Lease Indenture. Unless the context requires otherwise,
in the following summary references to the Lease Indenture, the Lease Indenture
Estate, the Lease, the Lessor, the Owner Participant, the Owner Trustee, the
Lessor Bonds and the Pledged Lessor Bonds relate to each Lease Indenture.
GENERAL
Lessor Bonds (including the Initial Lessor Bonds, Pledged Lessor Bonds and
other Lessor Bonds) may be issued under the Lease Indentures. The Pledged Lessor
Bonds will, at the direction of Funding Corporation, be pledged and assigned to
the Trustee for the benefit of the Holders of the Securities (including the
Collateral Bonds).
LEASE INDENTURE EVENTS OF DEFAULT
The following are Lease Indenture Events of Default:
(a) any Lease Event of Default described in the following clauses of
the first paragraph in "Description of the Leases -- Lease Events of
Default": (i) clause (a)(x), except a failure of the Company to pay an
amount which constitutes an Excepted Payment or except in the case of a
default in the payment of Casualty Value, Special Casualty Value, or the
payment of the equity portion of Casualty Value or Special Casualty Value,
where the Owner Trustee has not rescinded or terminated the Lease or (ii)
clause (e) or (g);
(b) the rescission or termination of, or the taking of action by the
Owner Trustee or the Owner Participant, the effect of which would be to
rescind or terminate, the Lease;
(c) the exercise by the Owner Trustee or the Owner Participant of
certain remedies under the Lease, as a result of which the Company would be
obligated to pay liquidated damages, prior to the occurrence of any of the
events set forth in clause (b) above;
(d) any assignment, sublease or transfer by the Company of the Lease
and the other transaction documents in violation of the terms thereof;
(e) breach by the Company of the provisions of the related
Participation Agreement relating to the maintenance of its corporate
existence and relating to a merger by the Company into or consolidation of
the Company with another entity or the sale or transfer of all or
substantially all of the Company's assets by the Company (see "Other
Agreements -- Participation Agreement");
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(f)(x) failure by the Owner Trustee to make any payment in respect of
the principal of or premium, if any, or interest on the Lessor Bonds within
five business days after the same shall have become due (other than by
virtue of any failure by the Company to make any payment of rent therefor);
or (y) following the actual receipt by the Owner Participant of proceeds of
a partial draw upon a letter of credit in excess of the amounts due to the
Owner Participant at the time of such partial draw, failure of such Owner
Participant to cause such excess proceeds to be delivered to the Lease
Indenture Trustee within five business days after the actual receipt of
such proceeds;
(g)(x) failure by the Owner Trustee to perform or observe any covenant
or agreement in the Lease Indenture to be performed or observed by it
(other than any failure by the Owner Trustee to pay or cause to be paid any
payment of the principal of or premium, if any, or interest on the Lessor
Bonds when due), or (y) failure by the Owner Participant to observe its
covenant in the Participation Agreement not to create certain liens on the
Lease Indenture Estate or the trust estate and, in either case, the
continuation of such failure for a period of 30 days after notice thereof
has been given to the Owner Trustee, the Owner Participant and the Company
by the Lease Indenture Trustee or to the Lease Indenture Trustee, the
Company, the Owner Trustee and the Owner Participant by the Holders of at
least 25% in aggregate principal amount of the outstanding Lessor Bonds of
all series, considered as one class; provided, however, that the
continuation of such failure for a period of 30 days or more after such
notice has been so given (but in no event for a period which is greater
than one year after such notice has been given) shall not constitute a
Lease Indenture Event of Default if (i) such failure can be remedied but
cannot be remedied within such 30 days, (ii) the Owner Trustee or the Owner
Participant, as the case may be, is diligently pursuing a remedy of such
failure and (iii) such failure does not impair in any material respect the
mortgage and security interest created by the Lease Indenture;
(h) any representation or warranty made by the Owner Trustee in the
Participation Agreement, or any representation or warranty made by the
Owner Participant in the Participation Agreement concerning liens against
the trust estate or the Lease Indenture Estate as a result of claims
against the Owner Participant unrelated to the Transactions shall prove to
have been incorrect in any material respect when such representation or
warranty was made or given and remains materially incorrect at the time of
discovery; provided, however, that such failure of such representation or
warranty to be correct shall not constitute a Lease Indenture Event of
Default if (i) the facts or circumstances making such representation or
warranty incorrect can be remedied or changed so that such representation
or warranty will henceforth be correct in all material respects, (ii) the
Owner Trustee or the Owner Participant, as the case may be, is diligently
pursuing such a remedy or change, (iii) such remedy or change is, in fact,
accomplished within a period of one year from the time that the Owner
Trustee or the Owner Participant, as the case may be, has been notified of
such misrepresentation or breach of warranty and (iv) such facts or
circumstances do not impair in any material respect the mortgage and
security interest created by the Lease Indenture;
(i)(x) the Owner Trustee shall file any petition for dissolution or
liquidation of the trust created by the trust agreement or shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or subsequently in effect, or the Owner Trustee shall have
consented to the entry of an order for relief with respect to the trust in
an involuntary case under any such law, or a receiver, custodian or trustee
(or other similar official) shall be appointed for the Owner Trustee or
shall take possession of any substantial part of its property (other than
at the instance of the Lease Indenture Trustee or the Holders of Lessor
Bonds), or the Owner Trustee shall make a general assignment for the
benefit of the trust's creditors, or shall enter into an agreement of
composition with the trust's creditors; or (y) there shall be filed (other
than at the instance of the Lease Indenture Trustee or the Holders of
Lessor Bonds) against the Owner Trustee an involuntary petition in
bankruptcy which results in an order for relief being entered or,
notwithstanding that an order for relief has not been entered, the petition
is not dismissed within 60 days after the date of the filing of the
petition, or there shall be filed (other than at the instance of the Lease
Indenture Trustee or the Holders of Lessor Bonds) under any Federal or
state law relating to bankruptcy, insolvency or relief of debtors any
petition against the Owner Trustee for reorganization, composition,
extension or arrangement with
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creditors which either (i) results in a finding or adjudication of
insolvency of the Owner Trustee or (ii) is not dismissed within 60 days
after the date of the filing of such petition;
(j)(x) the Owner Participant shall file any petition for dissolution
or liquidation of the Owner Participant, or shall commence a voluntary
case, under any applicable bankruptcy, insolvency or other similar law now
or subsequently in effect, or the Owner Participant shall have consented to
the entry of an order for relief in an involuntary case under any such law,
or shall fail generally to pay its debts as such debts become due (within
the meaning of the United States Bankruptcy Code, as amended), or a
receiver, custodian or trustee (or other similar official) shall be
appointed for the Owner Participant or shall take possession of any
substantial part of its property, or the Owner Participant shall make a
general assignment for the benefit of its creditors, or shall enter into an
agreement of composition with its creditors; or (y) there shall be filed
against the Owner Participant an involuntary petition in bankruptcy which
results in an order for relief being entered or, notwithstanding that an
order for relief has not been entered, the petition is not dismissed within
60 days after the date of the filing of the petition, or there shall be
filed under any Federal or state law relating to bankruptcy, insolvency or
relief of debtors any petition against the Owner Participant for
reorganization, composition, extension or arrangement with creditors which
either (i) results in a finding or adjudication of insolvency of the Owner
Participant or (ii) is not dismissed within 60 days after the filing of
such petition and any such event materially adversely affects the Holders
of the Lessor Bonds; or
(k) after a Special Transfer has been effected and amounts payable to
the Owner Participant have been paid in full in accordance with the
Participation Agreement, any violation or breach of any covenant of the
Company concerning the Company's continuing obligation to pay rent under
the Lease or concerning its obligation to effectuate and evidence an
assumption as described in "Description of the Lease Indentures --
Assumption by the Company."
(Lease Indenture, Section 7.01)
NOTICE; WAIVER; ACCELERATION AND REMEDIES
The Lease Indenture Trustee, if it has knowledge of any Lease Indenture
Default or Lease Indenture Event of Default, is required to give notice thereof
(unless such Lease Indenture Default or Lease Indenture Event of Default shall
have been waived or cured) within 90 days thereof in writing to the Holders of
the outstanding Lessor Bonds of all series, the Owner Trustee, the Owner
Participant and the Company; provided that, except in the case of a default in
the payment of principal of or premium, if any, or interest on any Lessor Bond,
the Lease Indenture Trustee will be protected in withholding such notice if in
good faith it determines that the withholding of such notice is in the interest
of the Holders; and provided, further, that in the case of a Lease Indenture
Event of Default specified in clause (g) above, no such notice will be given
until at least 30 days after the occurrence thereof. In the event the Lease
Indenture Trustee has knowledge of an Event of Loss, Deemed Loss Event or
Financial Event, the Lease Indenture Trustee shall give prompt notice thereof,
and in any event, within 90 days after occurrence thereof, to the Holders of the
outstanding Lessor Bonds. (Lease Indenture, Section 8.02) For all purposes of
the Lease Indenture, in the absence of actual knowledge of a Responsible Officer
of the Lease Indenture Trustee, the Lease Indenture Trustee will not be deemed
to have knowledge of any Lease Indenture Default or Lease Indenture Event of
Default (except the failure of the Company to pay any installment of basic rent
within 5 business days after the same has become due) unless notified thereof in
writing by any Holder, the Owner Trustee, the Owner Participant or the Company.
(Lease Indenture, Section 8.03)
The Holders of a majority in aggregate principal amount of the outstanding
Lessor Bonds of all series, considered as one class, may on behalf of the
Holders of all Lessor Bonds of all series waive any past Lease Indenture Default
or Lease Indenture Event of Default and its consequences, except that only the
Holders of all Lessor Bonds affected thereby may waive a Lease Indenture Default
or Lease Indenture Event of Default (a) in the payment of the principal of or
premium, if any, or interest on such Lessor Bonds, or (b) in respect of a
covenant or other provision of the Lease Indenture which under the Lease
Indenture cannot be modified
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or amended without the consent of the Holder of each outstanding Lessor Bond
affected. (Lease Indenture, Section 7.09)
If a Lease Indenture Event of Default has occurred and is continuing, the
Lease Indenture Trustee may, and upon the written request of, and the proffering
of satisfactory indemnity by, the Holders of a majority in aggregate principal
amount of the outstanding Lessor Bonds of all series, considered as one class,
shall, declare the unpaid principal amount of all outstanding Lessor Bonds, with
accrued interest thereon, to be immediately due and payable, but the Lease
Indenture Trustee shall not make any such declaration in the case of a Lease
Indenture Event of Default which resulted from a failure by the Company to make
a payment of rent under the Lease until the Owner Trustee and the Owner
Participant have been given an opportunity to cure such default as described
below under "Rights of Lessor to Cure and Purchase Lessor Bonds." (Lease
Indenture, Sections 7.02, 7.16 and 8.03)
Upon the occurrence and during the continuance of a Lease Indenture Event
of Default, the Lease Indenture Trustee may, and upon the written request of,
and the proffering of satisfactory indemnity or security by, the Holders of a
majority in aggregate principal amount of the outstanding Lessor Bonds of all
series, considered as one class, shall, subject to the Lessor's rights described
under the following two paragraphs and under "Rights of Lessor to Cure and
Purchase Lessor Bonds" below, exercise any or all of the rights and remedies
available to it under the Lease Indenture and applicable law, including (a) the
institution of judicial proceedings, either at law or in equity or otherwise, to
protect its rights and those of the Holders under the Lease Indenture or for
foreclosure of the lien thereof and (b) the sale in whole or in part of the
Lease Indenture Estate. (Lease Indenture, Sections 7.03 through 7.08 and Section
8.03) No Holder shall have any right to pursue any remedy under the Lease
Indenture unless the Lease Indenture Trustee shall have been given written
notice of a Lease Indenture Event of Default, the Holders of at least 25% in
principal amount of all Lessor Bonds then outstanding shall have requested the
Lease Indenture Trustee to pursue a remedy, the Lease Indenture Trustee shall
have been offered satisfactory indemnity, the Lease Indenture Trustee shall have
failed to comply with such request within 60 days after receipt of such request
and the Lease Indenture Trustee shall not have received during such 60 day
period any direction inconsistent with such request from Holders of a majority
in principal amount of outstanding Lessor Bonds. (Lease Indenture, Section 7.10)
Except in the case of Lease Indenture Events of Default (i) described in
clauses (f) through (k) under "Lease Indenture Events of Default" above and
(ii) occurring or continuing after a Special Transfer, an assumption of the
Lessor Bonds by the Company as described below under " -- Assumption by the
Company" or any of certain drawings upon a letter of credit, and except as
described in the next paragraph, the exercise of remedies against the Company
under the Lease will be controlled by the Owner Trustee. In such circumstances,
however, the Owner Trustee will be required to consult with the Lease Indenture
Trustee as to any proposed exercise or pursuit of remedies and the Lease
Indenture Trustee will have the right to cause the Owner Trustee to forbear from
such action if the Lease Indenture Trustee has determined that such action would
have a material adverse effect on the Holders of the Lessor Bonds. In addition,
the Owner Trustee will not exercise or pursue remedies in a manner which would
unreasonably deprive the Holders of the Lessor Bonds of a material right or
remedy unless the Owner Trustee is commensurately adversely affected. There
could be circumstances, therefore, in which amounts due on the Lessor Bonds are
not paid and the Lease Indenture Trustee is not able to direct the Owner
Trustee's pursuit of remedies against the Company under the Lease. (Lease
Indenture, Sections 7.03 and 7.17)
Although, as described above, the exercise of remedies will generally be
within the control of the Owner Trustee, the Lease Indenture Trustee will have
the right to sell the Lease Indenture Estate in foreclosure or similar
proceedings. However, if such sale occurs prior to or simultaneously with the
termination of the Lease, the Lease Indenture Trustee must have offered to sell
to the Owner Trustee the Lease Indenture Estate at a stated price determined by
the Lease Indenture Trustee. If the Owner Trustee does not, within 60 days
following receipt of such offer, elect to so purchase the Lease Indenture
Estate, the Lease Indenture Trustee may foreclose and sell the Lease Indenture
Estate within 180 days to any person (other than the Lease Indenture Trustee or
a Holder or Holders of more than 25% of the outstanding Lessor
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Bonds (including, in each case, affiliates thereof)) for not less than such
stated price. In the event of a sale by the Lease Indenture Trustee pursuant to
a foreclosure or similar proceeding (other than a sale to the Owner Trustee),
the Lease Indenture Trustee will have the right to terminate the Lease in
connection with such sale subject, however, to the Company's rights under the
Lease. (See "Limitation on Remedies" below.) (Lease Indenture, Section 7.17)
If a Lease Indenture Event of Default occurs and is continuing, and the
maturity of the Lessor Bonds has been accelerated, any sums held or received by
the Lease Indenture Trustee may be applied to reimburse the Lease Indenture
Trustee for any expense (to the extent not previously reimbursed) incurred by it
and to pay its fees and any other amounts due it prior to any payments to
Holders of the Lessor Bonds. (Lease Indenture, Section 3.03)
In the event of a bankruptcy of the Owner Participant, it is possible that,
notwithstanding that the Undivided Interest is owned by the Owner Trustee in
trust, the Undivided Interest and the related Lease and Pledged Lessor Bonds
might become subject to bankruptcy proceedings. In such event, payments under
such Lease or on such Pledged Lessor Bonds might be interrupted and the ability
of the Lease Indenture Trustee to exercise its remedies under the Lease
Indenture might be restricted, although the Lease Indenture Trustee would retain
its status as a secured creditor in respect of the Lease and the Undivided
Interest.
RIGHTS OF LESSOR TO CURE AND PURCHASE LESSOR BONDS
The Lease Indenture provides that a Lease Indenture Event of Default is to
be deemed cured if such Lease Indenture Event of Default results from a
non-payment of rent under the Lease and the Owner Trustee or Owner Participant
has paid all principal of and interest on the Lessor Bonds due (other than by
acceleration) on the date such rent was payable within 15 days after receipt by
the Owner Trustee of notice of such nonpayment. However, such right of the Owner
Trustee or Owner Participant to cure the non-payment of rent is limited to not
more than six basic rent payment dates or two consecutive basic rent payment
dates during the Lease term. (Lease Indenture, Section 7.16)
If a Lease Indenture Event of Default has occurred and is continuing and
(a) the Lessor Bonds have been accelerated and (b) the Owner Trustee, within 30
days after receiving notice thereof from the Lease Indenture Trustee, has given
written notice to the Lease Indenture Trustee of its intention to purchase all
the Lessor Bonds, then, upon receipt by the Lease Indenture Trustee within 10
business days after such notice from the Owner Trustee of an amount equal to the
aggregate unpaid principal amount of and interest on the Lessor Bonds then
outstanding (as well as any interest on overdue principal and, to the extent
permitted by law, overdue interest), each Holder of a Lessor Bond will be
required to sell such Lessor Bond, and its right, title and interest in and to
the Lease Indenture and the Lease Indenture Estate, to the Owner Trustee. (Lease
Indenture, Section 7.16)
LIMITATION ON REMEDIES
Notwithstanding any other provision of the Lease Indenture, so long as no
Lease Event of Default has occurred and is continuing, the Lease Indenture
Trustee may not take or cause to be taken any action (x) contrary to the
Company's rights under the Lease, including the right to quiet use, enjoyment
and possession of the Undivided Interest or (y) that would require prepayment of
any scheduled payment of rent thereunder. (Lease Indenture, Section 7.20)
ASSUMPTION BY THE COMPANY
Under certain circumstances and subject to the satisfaction of certain
conditions, the Company, or the Company and an Affiliate thereof jointly, may
elect, or may be required, to assume the obligations of the Owner Trustee under
the Lease Indenture and on all or a portion of the Lessor Bonds. Upon such
assumption, the Lease Indenture and the Lessor Bonds so assumed will become
direct obligations of the Company (and such Affiliate), the Lease will
terminate, the Undivided Interest of the Lessor in Unit 3 will be transferred to
the Company (and/or any such Affiliate) and the Owner Trustee will be released
and discharged from all further obligations and liabilities under the Lease
Indenture and on the Lessor Bonds so assumed. Although certain changes would be
made to the Lease Indenture to reflect the termination of the
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Lease, the lien on and security interest in the Undivided Interest created by
the Lease Indenture would not be affected thereby. (Lease Indenture, Section
2.16)
Upon the occurrence of an Event of Loss, Deemed Loss Event, Financial Event
or Lease Event of Default, the Owner Participant can demand that the Company pay
the excess of Casualty Value (in the case of an Event of Loss or Lease Event of
Default) or Special Casualty Value (in the case of a Deemed Loss Event or
Financial Event, subject to certain exceptions) over the principal of and
accrued interest on the Lessor Bonds then outstanding. (Participation Agreement,
Sections 15 (a), (b) and (c) and Section 16(a)) At the time of the issuance of
the Initial Lessor Bonds, the Company issued and delivered to the Owner
Participant a promissory note evidencing the Company's obligation to pay such
amounts. (Participation Agreement, Section 16(a)) In addition, upon the
occurrence of any of such Events, the Owner Participant can effect a Special
Transfer of the beneficial interest in the owner trust to the Company.
(Participation Agreement, Section 15(d))
If an Event of Loss, Deemed Loss Event or Financial Event has occurred in
respect of which the Owner Participant has demanded payment as described above
or in response to which a Special Transfer has been effected, the Company, in
order to effectuate and evidence an assumption of the Owner Trustee's
obligations under the Lease Indenture and on the Lessor Bonds, may, and upon the
direction of the Lease Indenture Trustee (to be given at the direction of the
Holders of not less than 5% in aggregate principal amount of the Lessor Bonds
outstanding of all series, considered as one class) or the Owner Trustee, shall
promptly, commence and diligently pursue all steps requisite to deliver to the
Lease Indenture Trustee, among other things, (a) a duly executed assumption
agreement of the Company (and, if applicable, any of its Affiliates), (b) an
opinion of counsel as to, among other things, compliance with the conditions of
the assumption (including the obtainment of any necessary governmental actions),
(c) an indenture supplemental to the Lease Indenture that, among other things,
confirms the release of the Owner Trustee and contains provisions amending the
Lease Indenture to delete references to the Lease and to reflect the fact that
the obligations of the Owner Trustee have been assumed by the Company (and, if
applicable, such Affiliate), (d) a certificate of responsible officers of the
Company (and, if applicable, such Affiliate) to the effect that (i) to the best
of such officers' knowledge, no Lease Indenture Default or Lease Indenture Event
of Default has occurred and is continuing, (ii) such assumption is permitted by
the provisions of the Company's (and, if applicable, such Affiliate's) articles
of incorporation and by-laws (or similar corporate documents) and (iii) the
Company (and, if applicable, such Affiliate) is not insolvent at the time of
such assumption and (e) a certificate of a responsible officer of the Owner
Trustee to the effect that, to the best of such officer's knowledge, no Lease
Indenture Default or Lease Indenture Event of Default has occurred and is
continuing (Lease Indenture, Section 2.16); provided, however, that, upon the
occurrence of a Special Transfer, the Company, without further act, will be
deemed to have assumed the obligation, and will be obligated to pay the
principal of and premium, if any, and interest on the Lessor Bonds,
notwithstanding (x) the Lessor's coextensive obligation to pay the principal of
and premium, if any, and interest on the Lessor Bonds (which shall continue
until the documents listed above have been delivered to the Lease Indenture
Trustee) or (y) any provision of any transaction document to the contrary.
(Participation Agreement, Section 15(d)(4))
Upon satisfaction of the conditions and payment of the amounts described in
the preceding paragraph, the Lessor is required to transfer title to the
Undivided Interest to the Company as directed by the Company (or an Affiliate of
the Company), subject to the lien of the Lease Indenture. (Lease, Sections 9(c)
and (d))
If the Company makes the payments to the Owner Participant as described
above upon the occurrence of an Event of Loss, Deemed Loss Event, Financial
Event or Lease Event of Default, but has not yet delivered the documents listed
in the second preceding paragraph, then the Owner Participant must make a
Special Transfer. (Participation Agreement, Section 15(d))
Any of the following events will constitute "Events of Loss":
(a) a final shutdown of Unit 3 which could result from any of several
events, including, and in some cases, subject to certain grace periods,
certain NRC licensing problems with respect to Unit 3, direction by the NRC
or other governmental authority to suspend operation of Unit 3 for reasons
of radiological health and safety for a period exceeding or reasonably
expected (in the opinion of an
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independent expert) to exceed 24 consecutive months, cessation of operation
of Unit 3 for such period if resumption of operation would require
concurrence of the NRC or other governmental authority, the occurrence of
certain Nuclear Incidents (as defined in the Atomic Energy Act) with
respect to Unit 3 as a result of which Unit 3 ceases to operate for a
period exceeding or reasonably expected (in the opinion of an independent
expert) to exceed 18 consecutive months, damage to Unit 3 and failure to
restore Unit 3 within the shorter of three years or the period from the
occurrence of such damage until the end of the Lease term, the destruction
of Unit 3, or a declaration by the NRC that an Extraordinary Nuclear
Occurrence (as defined in the Atomic Energy Act) has occurred with respect
to Unit 3;
(b) a requisition of title of Unit 3 or the Undivided Interest or
certain shared facilities or the site of Unit 3 by a governmental authority
for a period of time which exceeds or is reasonably expected to exceed the
shorter of 60 months and the remaining Lease term, subject to certain
contest rights of the Company; or
(c) a requisition of the use of Unit 3 or the Undivided Interest or
certain shared facilities or the site of Unit 3 by a governmental
authority, other than a requisition of title, which would significantly
interfere with the use of Unit 3 or the Undivided Interest, and which
requisition is for a period of time which exceeds or is reasonably expected
to exceed the shorter of 60 months and the remaining Lease term, subject to
certain contest rights of the Company.
(Participation Agreement, Appendix A)
Any of the following events will constitute "Deemed Loss Events":
(a) the Lessor or Owner Participant becoming subject to adverse
regulation as a public utility solely as a result of the Transaction;
(b) certain changes and/or new interpretations by a governmental
authority regarding applicable law, including the Price-Anderson Act, the
Atomic Energy Act, the Nuclear Waste Act or NRC regulations, as a result of
which (i) the Lessor or Owner Participant would more likely than not become
liable or responsible in any capacity for payments owed in respect of the
nuclear waste fund or in respect of, among other things, the handling or
disposal of nuclear waste and other radioactive or hazardous materials or
(ii) the Lessor or the Owner Participant may be prohibited from asserting
the limitation on liability of lessors provided by the 1988 amendments to
the Price-Anderson Act or is more likely than not to be prohibited from
asserting any other material right, protection or defense available under
applicable law as of the date of closing of the Transactions with respect
to civil or criminal actions brought in connection with a nuclear incident;
(c) the Lessor or Owner Participant more likely than not being
required to become a licensee under the Atomic Energy Act or otherwise
subject to the Atomic Energy Act or otherwise subject to NRC or other
significant regulation relating to nuclear energy, environmental or safety
matters solely as a result of the Transaction; or
(d) any governmental action or change in applicable law the effect of
which is more likely than not to (i) cause the Lessor or Owner Participant
to become liable with respect to the decommissioning of Unit 3 or (ii)
constitute an assertion that (x) the exercise of certain rights of the
Lessor or Owner Participant would constitute impermissible control over
Unit 3 or the licensees of Unit 3 or would violate certain NRC or Atomic
Energy Act regulations or (y) the acquisition or transfer of the Undivided
Interest would violate other provisions of applicable law.
(Participation Agreement, Appendix A)
Any of the following events will be deemed "Financial Events" if it
remains not cured following expiration of any applicable notice or cure period
(there being no such notice or cure period in the case of the events described
in clauses (f) and (g) below) and if the Company shall not have timely provided
the Owner Participant with a letter of credit:
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(a) the Company shall have failed to maintain, as of the end of any fiscal
quarter, total equity capital (including preferred stock) at least equal to 30%
of the sum of total capitalization plus certain short-term debt;
(b) the Company shall have failed to maintain, in respect of the
twelve-month period ending on the last day of any fiscal quarter, a fixed charge
coverage ratio of at least 1.50;
(c) except for certain permitted transactions, the Company shall have sold,
assigned, or otherwise disposed of any substantial part of its assets other than
in the ordinary course of business without the prior approval of the Owner
Participant, provided that the event described in this clause (c) will not
constitute a Financial Event if the Company has delivered first mortgage bonds
to the Owner Participant (see "Other Agreements -- Participation Agreement");
(d) the Company shall have merged with or into or consolidated with or into
any other corporation or entity in violation of certain conditions without the
prior approval of the Owner Participant;
(e) the Company shall have created, assumed or suffered to exist liens
(except for certain permitted liens) upon its assets;
(f) subject to certain exceptions, the acceleration of certain indebtedness
of the Company for borrowed money or default in payment of such indebtedness at
maturity, if the total of all such indebtedness so accelerated or defaulted
exceeds $10,000,000;
(g) the occurrence of any of the events described in clause (e) under
"Description of the Leases -- Lease Events of Default";
(h) certain events relating to termination of certain of the Company's
pension plans; or
(i) Entergy shall cease to own, directly or indirectly, all of the common
stock equity and all of the voting stock of the Company or its permitted
successors (other than preferred stock that has only limited voting rights upon
default in the payment of dividends).
In general, the cure periods in respect of Financial Events of the type other
than those described in clauses (f) and (g) above are 365 days.
(Participation Agreement, Appendix A)
The Company (or the Company and one of its Affiliates) may, at its option,
but is not required to, assume all or a portion of the Lessor Bonds if it
chooses to exercise any of certain purchase options described under "Description
of the Leases -- Purchase Option for Significant Expenditures" or " -- Periodic
Purchase Option" or under "Other Agreements -- Participation Agreement." Any
such assumption would be conditioned upon the prior delivery to the Lease
Indenture Trustee of certain documents as described under " -- Assumption by the
Company." (See Lease Indenture, Section 2.16(b); Lease, Sections 13(f) and (g);
and Participation Agreement, Section 16(d))
DEFEASANCE
The Lessor Bonds of any series, or any portion of the principal amount
thereof, will, at or prior to the maturity thereof, be deemed to have been paid
for purposes of the Lease Indenture, and the entire indebtedness of the Owner
Trustee (or other obligor thereon) in respect thereof will be deemed to have
been satisfied and discharged, if there shall have been irrevocably deposited
with the Lease Indenture Trustee, in trust, either (a) moneys in an amount which
will be sufficient, or (b) Federal Securities (as defined below), which do not
contain provisions permitting the redemption or other prepayment thereof at the
option of the issuer thereof, the principal of and the interest on which when
due, without any regard to reinvestment thereof, will provide moneys which,
together with the moneys, if any, deposited with or held by the Lease Indenture
Trustee, will be sufficient, to pay when due the principal of and premium, if
any, and interest due and to become due on such Lessor Bonds on and prior to the
maturity thereof; provided, however, that such Lessor Bonds will not be deemed
to have been satisfied and discharged unless, among other things, there has been
delivered to the Lease Indenture Trustee an opinion of counsel to the effect
that such satisfaction and discharge of the indebtedness of the Owner Trustee
with respect to such Lessor Bonds shall not be
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deemed to be, or result in, a taxable event with respect to the Holders of such
Bonds for purposes of federal income taxation, except that no such opinion of
counsel need be delivered if the Lease Indenture Trustee shall have received
documentary evidence that each Holder of such Lessor Bonds either is not subject
to, or is exempt from, federal income taxation. For this purpose, the term
"Federal Securities" is defined as direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America or certificates of an ownership interest in the principal of
or interest on such obligations. (Lease Indenture, Section 11.01)
RELEASES
The Lease Indenture Trustee will release from the lien of the Lease
Indenture any property subject to the lien thereof which is taken by any
governmental authority pursuant to a power of eminent domain or other right to
acquire such property (whether or not such taking constitutes an Event of Loss)
upon its receipt of, among other things, a written request from the Owner
Trustee or the Company requesting such release and the net proceeds of any
property so taken. (Lease Indenture, Section 13.01)
Subject to the following paragraph, the Owner Trustee or, with the Owner
Trustee's consent, the Company, may obtain the release from the lien of the
Lease Indenture of the Owner Trustee's interest in any component of Unit 3 the
removal of which would not materially impair the operating capacity, cost
efficiency or value of Unit 3, and the Lease Indenture Trustee will release from
the lien of the Lease Indenture its interest in any such component upon its
receipt of, among other things, a written request from the Owner Trustee or the
Company requesting such release and a certificate of an engineer or other expert
(who in certain cases will be required to be independent of the Owner Trustee
and the Company and any Affiliate of either thereof) certifying (x) the value of
the property to be released and (y) that, in the opinion of such expert, the
proposed release will not impair the security under the Lease Indenture in
violation of the provisions thereof. (Lease Indenture, Section 13.02)
In addition to the release provisions described above, the Owner Trustee
or, with the Owner Trustee's consent, the Company, may sell or otherwise dispose
of, free from the lien of the Lease Indenture and without obtaining any release
or other consent from the Lease Indenture Trustee, the Owner Trustee's interest
in any components of Unit 3 which have become obsolete or otherwise permanently
no longer useful for the operation of Unit 3. All replacement components
incorporated in Unit 3 will, to the extent of the Owner Trustee's interest
therein, immediately become subject to the lien of the Lease Indenture. (Lease
Indenture, Section 13.03)
SUPPLEMENTAL INDENTURES
Without the consent of the Holders of any Lessor Bonds, the Owner Trustee
and the Lease Indenture Trustee may enter into supplemental indentures for the
following purposes:
(a) to establish the form and terms of Lessor Bonds of any series;
(b) to evidence the succession of another bank or trust company to the
Owner Trustee and the assumption by any such successor of the covenants of
the Owner Trustee contained in the Lease Indenture and in the Lessor Bonds
or the appointment of a co-trustee pursuant to the terms of the Trust
Agreement;
(c) to evidence the succession of a new trustee or the appointment of
a co-trustee or a separate trustee under the Lease Indenture;
(d) to grant or confer upon the Lease Indenture Trustee for the
benefit of the Holders any additional rights, remedies, powers, authority
or security which may be lawfully so granted or conferred and which grant
or conferral is not contrary to or inconsistent with the Lease Indenture;
(e) to add to the covenants of the Owner Trustee for the benefit of
the Holders or to evidence the surrender of any right or power conferred in
the Lease Indenture upon the Owner Trustee;
(f) to convey, transfer and assign to the Lease Indenture Trustee, and
to subject to the lien of the Lease Indenture, additional properties or
assets, or to correct or amplify the description of any property
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at any time subject to the lien of the Lease Indenture or to assure, convey
and confirm unto the Lease Indenture Trustee any property subject or
required to be subject to the lien of the Lease Indenture;
(g) to modify, eliminate or add to the provisions of the Lease
Indenture to the extent necessary to qualify or continue the qualification
of the Lease Indenture (including any supplemental indenture) under the
Trust Indenture Act, or under any similar federal statute subsequently
enacted, or to add to the Lease Indenture such other provisions as may be
expressly permitted by that Act;
(h) to permit or facilitate the issuance of Lessor Bonds in
uncertificated form;
(i) to change or eliminate any provision of the Lease Indenture;
provided, however, that if such change or elimination will adversely affect
the interests of the Holders of Lessor Bonds of any series, such change or
elimination will become effective with respect to such series only when no
Lessor Bond of such series remains outstanding;
(j) to evidence an assumption by the Company of the Lessor Bonds, and
the release of the Owner Trustee from its obligations thereon, and to make
the related changes in the Lease Indenture;
(k) to cure any ambiguity or to correct or supplement any provision in
the Lease Indenture which may be defective or inconsistent with any other
provision in the Lease Indenture; or
(l) to make any other provisions with respect to matters or questions
arising under the Lease Indenture, provided such action shall not adversely
affect the interests of the Holders of the Lessor Bonds in any material
respect.
(Lease Indenture, Section 10.01)
Subject to the foregoing paragraph, with the consent of the Holders of not
less than a majority in aggregate principal amount of the outstanding Lessor
Bonds of all series, considered as one class, the Owner Trustee may, and the
Lease Indenture Trustee shall, enter into supplemental indentures for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, the Lease Indenture; provided that if there is more
than one series of Lessor Bonds outstanding and if a proposed supplemental
indenture directly affects the Holders of at least one, but not all, of such
series, then only the consent of a majority in aggregate principal amount of the
outstanding Lessor Bonds of all series so directly affected, considered as one
class, will be required; and provided, further, that without the consent of the
Holder of each outstanding Lessor Bond directly affected thereby no such
supplemental indenture may:
(a) change the stated maturity of the principal of, or any installment
of interest on, or the date or circumstances of payment of premium, if any,
on, any Lessor Bond, or reduce the principal amount thereof or the interest
thereon or any premium payable upon the redemption thereof, or change the
place of payment where, or the coin or currency in which, any Lessor Bond
or the premium, if any, or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment of
principal or interest on or after the stated maturity thereof (or, in the
case of redemption, on or after the redemption date) or such payment of
premium, if any, on or after the date such premium becomes due and payable
or change the dates or amounts of payments to be made through the operation
of the sinking fund in respect of such Lessor Bonds;
(b) permit the creation of any lien prior to or, except with respect
to additional series of Lessor Bonds issued in accordance with the Lease
Indenture, equal to the lien of the Lease Indenture with respect to any of
the Lease Indenture Estate, or deprive any Holder of the benefit of the
lien of the Lease Indenture upon any part of the Lease Indenture Estate for
the security of its Lessor Bonds;
(c) reduce the percentage in principal amount of the outstanding
Lessor Bonds, the consent of whose Holders is required for any supplemental
indenture or for any waiver provided for in the Lease Indenture;
(d) modify the order of priorities in which distributions of income
and proceeds from the Lease Indenture Estate are to be made under the Lease
Indenture;
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(e) modify the definitions of "Outstanding," "Lease Indenture
Default" or "Lease Indenture Event of Default";
(f) modify any of the above provisions or the provisions of the Lease
Indenture dealing with waivers of past defaults, except to increase the
percentage of the Holders whose consent is required for certain action or
to provide that certain other specified provisions of the Lease Indenture
cannot be modified or waived without the consent of the Holder of each
Lessor Bond affected thereby.
(Lease Indenture, Section 10.02)
LIMITATIONS ON AMENDMENTS OF OTHER DOCUMENTS
The Lease Indenture Trustee, without the consent of the Holders of any
Lessor Bonds, (a) will, upon receipt of written instructions to such effect from
the Company and the Owner Trustee, consent to amendments of or supplements to,
or waivers of any provisions of, the Lease or any other transaction document
included in the Lease Indenture Estate and (b) may join in the execution of
amendments of or supplements to, or waivers of any provisions of, the
Participation Agreement, in each case for the purpose of adding any provision
to, or changing in any manner or waiving or eliminating any provisions of, any
such transaction document; provided, however, that, without the consent of the
Holders of not less than a majority in aggregate principal amount of the
outstanding Lessor Bonds of all series, considered as one class, the Lease
Indenture Trustee will not consent to any such amendment, supplement or waiver
which amends or waives certain provisions of the Lease relating to, among other
things, liens, the right of the Company to assign or sublease its rights and
obligations under the Lease, certain Lease Events of Default or the exercise of
remedies under the Lease; provided, further, that, without the consent of the
Holders of the outstanding Lessor Bonds of all series, the Lease Indenture
Trustee will not consent to any such amendment, supplement or waiver which will:
(1) amend or waive certain provisions of the Lease relating to, among
other things, the sufficiency of certain rental payments to provide funds
at least equal to scheduled amounts payable on the Lessor Bonds, the "net
lease" obligations of the Company thereunder and the Company's
unconditional obligation to make basic rental and certain other payments
under the Lease, the obligation of the Owner Trustee to redeem the Lessor
Bonds in the event of an obsolescence termination of the Lease by the
Company, or the Lease Event of Default occasioned by the failure of the
Company to pay basic rent when due;
(2) modify the definitions of "Lease Default" or "Lease Event of
Default"; or
(3) (A) release the Company from its obligation to pay basic rent,
Casualty Value, Special Casualty Value or any payment required to be made
by it pursuant to an exercise of remedies under the Lease or (B) reduce the
amount or change the timing of any payments of basic rent, Casualty Value,
Special Casualty Value or any payments required to be made by the Company
pursuant to an exercise of remedies under the Lease so that such payments
would be insufficient to pay the principal of, and interest on, the
outstanding Lessor Bonds of all series when due.
(Lease Indenture, Section 10.03)
LIMITATION OF LIABILITY
The Lessor Bonds will not be direct obligations of, or guaranteed by, the
Company, any Owner Participant, or any institution or individual acting as Owner
Trustee in its individual capacity. All payments to be made by the Owner Trustee
under the Lease Indenture or on the Lessor Bonds will be made only from the
Lease Indenture Estate or the income and proceeds received by the Lease
Indenture Trustee therefrom. Neither the Owner Participant, the Lease Indenture
Trustee nor the Owner Trustee in its individual capacity, will be liable to any
Holder for any amounts payable on any Lessor Bonds or otherwise under the Lease
Indenture. (Lease Indenture, Section 2.15)
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ADDITIONAL BONDS
The Lease Indenture permits the issuance of additional Lessor Bonds at any
time or from time to time, subject to certain conditions, for cash in the
original principal amount of such additional Lessor Bonds for the following
purposes: (a) refunding a previously issued series of Lessor Bonds in whole or
in part and providing funds for the payment of certain expenses incurred in
connection therewith and/or (b) providing funds for all or any portion of the
Owner Trustee's share of certain capital improvements to Unit 3. (Lease
Indenture, Section 2.05) All of the Lessor Bonds issued and outstanding under
the Lease Indenture will rank on a parity with each other and will as to each
other be secured equally and ratably thereunder, without preference, priority or
distinction of any thereof over any other by reason of difference in time of
issuance or otherwise. (Lease Indenture. Section 2.03)
DESCRIPTION OF THE LEASES
The statements contained under this caption are intended to summarize the
Leases as they relate to the Collateral Bonds; they do not purport to be
complete and are qualified in their entirety by reference to the Leases, copies
of which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part. Each Lease is an entirely separate lease but contains
substantially the same terms and provisions as each other Lease. In the
following summary, references to the Lease, the Lease Indenture, the Owner
Participant, the Undivided Interest, the Lessor and the Lessor Bonds relate to
each Lease.
TERM AND RENTALS
The Lessor has acquired its Undivided Interest and has leased such interest
of the Company pursuant to the Lease, which has a term expiring on July 1, 2017
unless earlier terminated or extended as described below. Basic rent is required
to be paid by the Company under the Lease in immediately available funds on each
January 2 and July 2, through July 2, 2017. (Lease, Sections 2(b) and 3(a)) The
amount of basic rent payable under the Lease on each basic rent payment date
will be calculated to be at least equal to the scheduled amount of principal of
and interest then payable on all Lessor Bonds then outstanding. (Lease, Section
3(g)) Each payment of basic rent by the Company during such time as the Lease
Indenture is in effect will be made to the Lease Indenture Trustee and applied
first to the payment of principal and interest due from the Lessor on the Lessor
Bonds. Except in the case of an acceleration of Lessor Bonds due to a continuing
Lease Indenture Event of Default, the balance of any payments of basic rent
under the Lease, after payment of the scheduled principal of and interest on the
Lessor Bonds, will be distributed to the Owner Trustee on behalf of the Owner
Participant, as beneficial owner of the trust which is the owner of the
Undivided Interest. (Lease Indenture, Sections 3.01, 3.03 and 3.06)
NET LEASE
The obligations of the Company under the Lease are those of a lessee under
a "net lease", and the Company will be responsible under the Lease for paying
all insurance premiums, operating and maintenance costs and all other similar
costs associated with the Undivided Interest. Payments of rent under the Lease
by the Company are to be made without counterclaim, set-off, defense, abatement,
suspension or reduction except for certain rights of set-off the exercise of
which would not reduce the amount of rent required to be paid by the Company to
an amount insufficient to pay in full the principal of, premium, if any, and
interest on the Lessor Bonds then due. (Lease, Section 4)
CAPITAL IMPROVEMENTS
The Company may incur costs from time to time in connection with capital
improvements to Unit 3. Certain of such costs, based on the Owner Trustee's
proportionate interest in Unit 3, may be financed through a supplemental
financing. (See "Description of the Lease Indentures -- Additional Bonds.") In
the event of such a supplemental financing, the rent under the Lease will be
increased to cover the additional debt service. In addition, the Owner
Participant may elect to make an additional equity investment with respect to
the cost of any capital improvements on terms to be agreed upon. (Lease, Section
8(f))
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RIGHTS TO ASSIGN OR SUBLEASE
The Company is permitted to assign, sublease, encumber or transfer its
rights and obligations under the Lease and other documents related to the
Transactions subject to certain conditions, including that the Company remain
the primary obligor on the Lease. (Lease, Section 11)
INSURANCE
The Company is required under the Lease to carry and maintain, with respect
to the Undivided Interest, Unit 3 and the Unit 3 site, the insurance described
below:
(a) Provided that such insurance is commercially available at a
commercially reasonable cost, "all-risk" property insurance (excluding
flood and earthquake insurance) covering physical loss with respect to Unit
3;
(b) Bodily injury and property damage liability insurance covering
claims arising out of the ownership, operation, maintenance, condition or
use of Unit 3; and
(c) Nuclear liability insurance.
With respect to each of the types of insurance described in (a) through (c)
above, the Company is required to maintain such insurance in such amounts and
with such terms as are consistent with the Company's normal practice, and in any
event in such amounts and with such terms as are consistent with applicable law
and prudent utility practice. The Company is also required to maintain
supplier's and transporter's insurance and master workers policy coverages, in
each case in amounts consistent with prudent utility practice and applicable
law.
In addition, subject to such insurance being commercially available at a
commercially reasonable cost, the Company is further required to maintain
replacement power insurance covering not less than 90 percent of the cost of
replacing power, as reasonably estimated by the Company in the event of damage
or destruction at the Unit 3 site. However, the Company shall not be required to
maintain such replacement power coverage if the Company provides the Owner
Participant with a letter of credit as described under "Other
Agreements -- Participation Agreement."
(Lease, Section 10)
Proceeds of property insurance received by the Lessor or the Company as a
result of the occurrence of an Event of Loss shall be applied in reduction of
the Company's obligation to make payment of the excess of Casualty Value over
the principal of and accrued interest on the Lessor Bonds to the Owner
Participant with the balance, if any, of such proceeds to be paid to the
Company, subject, however, to any priority allocation of such proceeds. (Lease,
Section 9(g)) In general, the Lease Indenture Trustee and the Holders of the
Lessor Bonds will have no rights in respect of the proceeds of property
insurance except for the assignment (to the extent, if any, of amounts then due
and owing in respect of the principal of and premium, if any, and interest on
the Lessor Bonds) by the Owner Trustee to the Lease Indenture Trustee of the
Owner Trustee's rights in respect of such proceeds received as a result of the
occurrence of an Event of Loss.
PURCHASE AND RENEWAL OPTIONS AT THE END OF THE LEASE TERM
The Company has the option under the Lease to purchase at fair market sales
value the Lessor's Undivided Interest at the end of the term of the Lease, or to
renew the Lease for one or more periods of three years, at a fair market rental
value or, subject to receipt of a satisfactory appraisal which will address
certain tax matters, to renew the Lease at the end of the initial Lease term at
a fixed rate rental for a single period of at least two years. (Lease, Sections
12 and 13) If the Company does not give notice of its election to exercise the
options to purchase the Undivided Interest or renew the Lease not earlier than
five but not later than two years prior to the expiration of the Lease, the
Lessor may, on at least one year's prior written notice, terminate the Lease on
the date specified in the notice. Upon such termination, the Company must pay to
the Lessor all basic rent then due or accrued, together with any other amounts
then payable to the Owner Trustee, the Owner Participant and the Lease Indenture
Trustee. On or prior to such termination, the Lessor would be required to
deposit with the Lease Indenture Trustee cash in an amount equal to the unpaid
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principal amount of all Lessor Bonds outstanding on such date, and all premium,
if any, and interest accrued or to accrue on and as of such termination. (Lease,
Section 14(c))
PURCHASE OPTION FOR SIGNIFICANT EXPENDITURES
The Company has the option on any January 2 or July 2 on or after January
2, 2000 to terminate the Lease if the Company is planning or required to make
any significant expenditure for certain types of capital improvements to Unit 3.
On such January 2 or July 2, the Company must pay to the Lessor an amount equal
to the higher of the fair market sales value of the Undivided Interest and
Casualty Value determined as of such January 2 or July 2 together with any other
amounts then payable to the Owner Trustee, the Owner Participant and the Lease
Indenture Trustee and, assuming such payment, the Lessor would be required to
transfer the Undivided Interest to the Company. If the Company has assumed all
or a portion of the Lessor Bonds then outstanding, such amount shall be reduced
by the principal amount of the Lessor Bonds so assumed. A "significant
expenditure" is an expenditure with respect to certain capital improvements to
Unit 3 which (i) for the period until and including September 28, 2009, shall
have been reasonably estimated by the Company to exceed $250,000,000 (as such
amount may be adjusted periodically in accordance with the Consumer Price Index)
and (ii) for the period from the day next succeeding the last day of the period
specified in clause (i) above until the end of the Lease term, shall have been
reasonably estimated by the Company to exceed $100,000,000 (as such amount may
be adjusted periodically in accordance with the Consumer Price Index). (Lease,
Section 13(f))
PERIODIC PURCHASE OPTION
The Company has the option on January 2 in each of the years 2000, 2005 and
2010 to terminate the Lease and to purchase the Undivided Interest. On such
January 2, the Company must pay to the Lessor an amount equal to the higher of
the fair market sales value of the Undivided Interest and Casualty Value
determined as of such January 2 together with any other amounts then payable to
the Owner Trustee, the Owner Participant and the Lease Indenture Trustee. If the
Company has assumed all or a portion of the Lessor Bonds then outstanding, such
amount shall be reduced by the principal amount of the Lessor Bonds so assumed.
(Lease, Section 13 (g))
TERMINATION FOR OBSOLESCENCE
The Company has the option on any January 2 or July 2, on or after January
2, 2000, to terminate the Lease if the Company's Board of Directors determines
that the Company's leasehold interest in the Undivided Interest is uneconomic or
obsolete for the Company's purposes. In such event, the Lessor may elect to
either retain the Undivided Interest or sell it to the highest bidder. On the
Lease termination date, if the Lessor has not elected to retain the Undivided
Interest, the Lessor will be required to sell the Undivided Interest to the
highest bidder (which may not be either the Company or any Affiliate thereof)
and the Company must pay to the Lessor an amount equal to the excess, if any, of
Special Casualty Value as of the termination date over such net sale price, and
any other amounts then payable to the Owner Trustee, the Owner Participant and
the Lease Indenture Trustee; provided, however, that if the highest bid shall be
less than Special Casualty Value, the Lessee may reject the bid, in which case
no sale shall occur. If no such sale shall occur or if the Company shall not
have fulfilled its obligations in respect of such termination, the Lease will
continue in full force and effect. (Lease, Sections 14(a) and 14(b)) In the
event of such a termination, the Lessor Bonds will be redeemed. (Lease
Indenture, Section 5.02(a))
LEASE EVENTS OF DEFAULT
The following are Lease Events of Default:
(a) the Company shall fail to make or cause to be made, (x) any
payment of basic rent, Casualty Value, Special Casualty Value, or the
payment of the equity portion of Casualty Value or Special Casualty Value
or any other amount determined by reference to any of such amounts pursuant
to any of the transaction documents, within five business days after the
same shall become due or (y) any payment of supplemental rent (other than
Casualty Value, Special Casualty Value, or the payment of
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the equity portion of Casualty Value or Special Casualty Value) including,
without limitation, any payments due under the Tax Indemnification
Agreement, within 20 days after the same shall become due or be demanded,
as the case may be; or
(b) the Company shall fail to perform or observe any covenant,
condition or agreement to be performed or observed by it under the
Participation Agreement relating to the maintenance of its corporate
existence and maintenance of certain of its material rights and franchises,
and the conditions under which it may merge, consolidate or dispose of all
or substantially all of its assets, or to comply with the return or the
assignment and sublease provisions of the Lease; or
(c) the Company shall fail to perform or observe any covenant,
condition or agreement (other than those referred to in clauses (a), (b),
(f) and (h) of this paragraph) to be performed or observed by it under the
Lease or any other transaction document (other than under the Tax
Indemnification Agreement or under the general tax indemnity provisions of
the Participation Agreement), and such failure shall continue for a period
of 30 days after there shall have been given to the Company by the Lessor
or the Owner Participant a notice specifying such failure and requiring it
to be remedied; provided, however, that the continuation of such failure
for a period of 30 days or more after such notice has been so given (but in
no event for a period which is greater than one year after such notice has
been given) shall not constitute a Lease Event of Default if (a) such
failure can be remedied but cannot be remedied within such 30 days, (b) the
Company is diligently pursuing a remedy of such failure and (c) such
failure does not impair in any material respect the Company's ability to
perform its obligations under any of the transaction documents to which the
Company is a party, or the Lessor's interest in Unit 3 or the mortgage and
security interest created by the Lease Indenture; or
(d) any representation or warranty made by the Company in the Lease,
any other transaction document (other than the Tax Indemnification
Agreement) or any agreement, document or certificate delivered by the
Company in connection with the Transactions shall prove to have been
incorrect in any material respect when such representation or warranty was
made or given if such representation or warranty continues to be material
and remain materially incorrect at the time in question; provided, however,
that such failure of such representation or warranty to be correct shall
not constitute a Lease Event of Default if (i) the facts or circumstances
making such representation or warranty incorrect can be remedied or changed
so that such representation or warranty will thenceforth be correct in all
material respects, (ii) the Company is diligently pursuing such a remedy or
change, (iii) such remedy or change is, in fact, accomplished within a
period of one year from the time that the Company has been notified or has
knowledge of such misrepresentation or breach of warranty and (iv) such
facts or circumstances do not impair in any material respect the Company's
ability to perform its obligations under any of the transaction documents
to which the Company is a party or the Lessor's interest in Unit 3 or the
mortgage and security interest created by the Lease Indenture; or
(e) (x) the Company shall (i) admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due, (ii) apply for
or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (iii) make a general assignment for the
benefit of its creditors, (iv) commence a voluntary case under the United
States Bankruptcy Code, (v) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or readjustment of debts, (vi) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to,
any petition filed against it in an involuntary case under the United
States Bankruptcy Code, or (vii) take any corporate action for the purpose
of effecting any of the foregoing; or (y) a proceeding or case shall be
commenced, without the application or consent of the Company, in any court
of competent jurisdiction, seeking (i) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its debts,
(ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of the Company or of all or any substantial part of its assets, or
(iii) similar relief in respect of the Company under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts, and such proceeding or case shall continue
undismissed, or an order,
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judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against the Company shall be entered in an
involuntary case under the United States Bankruptcy Code; or
(f) if the Company shall theretofore have provided a letter of credit
to the Owner Participant, the Company (A) shall fail, at any time, to
provide or maintain a letter of credit which complies with the terms and
conditions of the Participation Agreement, whether or not the Company has
used its best efforts to obtain and maintain such letter of credit or (B)
shall fail to provide a renewal or replacement letter of credit so
complying (l) by the tenth day prior to the stated termination date of an
existing letter of credit or (2) if the issuing bank of an existing letter
of credit shall have delivered notice, in accordance with the terms
thereof, that such existing letter of credit will be terminated prior to
its stated termination date, by the tenth day prior to the date of such
early termination; or
(g) the occurrence and continuance of an event of default under any
other lease, executed and delivered as of the same date as the Lease, under
which the Company is the lessee of an undivided interest in Unit 3, and the
declaration of such lease to be in default by any party thereto; or
(h) any suspension, revocation or termination of the nuclear liability
insurance required to be maintained under the Lease; provided, however,
that such suspension, revocation or termination shall not constitute a
Lease Event of Default if the applicable insurer has failed to comply with
applicable notice termination provisions of the pertinent policy; and
provided, further, that the foregoing proviso shall cease to apply upon the
earlier of (x) five business days following receipt by the Company of
actual notice of such suspension, revocation or termination or (y) the
applicable termination date of such policy assuming that the insurer had
complied with its notice obligations under the pertinent policy; or
(i) any material obligation of the Company under the Lease or any
other documents relating to the Transaction to which it is a party shall at
any time for any reason cease to be valid and binding on the Company, or
shall be declared to be null and void, or the validity or enforceability
thereof shall be contested by the Company or any governmental agency or
authority, or the Company shall assert that it has no further liability or
obligation under the Lease or any other document relating to the
Transactions to which it is a party; or
(j) final judgment for the payment of money in excess of $10,000,000
shall be rendered against the Company and the Company shall not have
discharged the same or provided for its discharge in accordance with its
terms or bonded the same or procured a stay of execution thereof within 60
days from the entry thereof; or
(k) the Company shall exercise, or commence any action or proceeding
or take any action seeking to exercise, any rights it may have under
Louisiana law to partition Unit 3.
(Lease, Section 15)
REMEDIES
Upon the occurrence and continuance of any Lease Event of Default, a Lessor
may exercise one or more of the remedies set forth in the Lease, which include
the following: (a) the Lessor may declare the Lease to be in default or may
terminate the Lease; (b) the Lessor may repossess the Undivided Interest; (c)
the Lessor may sell the Undivided Interest or any part thereof; (d) the Lessor
may hold, keep idle or lease to others all or any part of the Undivided
Interest; (e) the Lessor may demand any unpaid rent plus, as liquidated damages,
any of the following amounts which the Lessor, in its sole discretion, shall
specify: (i) an amount equal to the excess of Casualty Value over the fair
market rental value of the Undivided Interest until the end of the remaining
useful life of Unit 3 (discounted to present value), (ii) an amount equal to the
excess of Casualty Value over the fair market sales value of the Undivided
Interest, (iii) an amount equal to the excess of the present value of all
installments of basic rent until the end of the Lease term over the present
value of the fair market rental value of the Undivided Interest until the end of
such term, or (iv) an amount equal to the highest of Casualty Value, such
discounted fair market rental value and such fair
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market sales value; and (f) if the Lessor shall have sold all the Undivided
Interest pursuant to clause (c) above, the Lessor, in lieu of exercising its
rights under clause (e) above may demand that the Company pay to the Lessor, as
liquidated damages, any unpaid rent plus the amount of any deficiency between
the sale proceeds and Casualty Value together with interest on the amount of
such rent and such deficiency.
The remedies in the Lease are cumulative and in addition to any other
remedy available to the Lessor at law or in equity, and no exercise of any
remedy under the Lease will, except as specifically provided therein, relieve
the Company of any of its liabilities and obligations under the Lease. (Lease,
Section 16)
QUIET ENJOYMENT
The transaction documents provide that, unless a Lease Event of Default has
occurred and is continuing, the Company's use and possession of Unit 3,
including the Undivided Interest, shall not be interrupted by the Lessor or any
person claiming by, through or under the Lessor. (Lease, Section 6(a))
OTHER AGREEMENTS
The discussion of the Participation Agreements and Tax Indemnification
Agreements below is intended to merely summarize certain provisions of those
agreements as they relate to the Collateral Bonds and the Transactions; it does
not purport to be complete and is qualified in its entirety by reference to
those agreements, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
PARTICIPATION AGREEMENT
In each Participation Agreement the Company has agreed, among other things,
that it will at all times maintain its corporate existence and will not
consolidate with or merge into, or sell, transfer or otherwise dispose of
substantially all of its assets to, any person unless immediately after giving
effect to such transaction a number of conditions are met, including the
requirements that (a) the survivor be a corporation organized under the laws of
the United States of America, a State thereof or the District of Columbia, (b)
the survivor of such transaction assumes the obligations of the Company under
each of the documents relating to the Transactions to which the Company was a
party, (c) such transaction does not permit the early termination of any letter
of credit prior to its scheduled expiration date, (d) all governmental actions
and corporate approvals have been obtained for the transaction, (e) the
transaction will not result in a material violation of any provision of any
agreement or financing arrangement to which the Company is a party, and (f) the
survivor delivers to the Owner Participant, the Owner Trustee and the Lease
Indenture Trustee opinions and officers' certificates as to, among other things,
compliance with the transfer conditions above. (Participation Agreement, Section
9(b) (3)) Reference is also made to the discussion above under "Description of
the Lease Indentures -- Assumption by the Company" for additional restrictions
in respect of certain mergers, consolidations or sales of assets affecting the
Company.
Pursuant to each Participation Agreement, the Company provided the Owner
Participant with financial support to secure the payment to the Owner
Participant of the equity portion of amounts payable by the Lessee under the
Lease and related documents in the form of a new series of first mortgage bonds
issued under the Company's first mortgage indenture. Upon the occurrence of an
Event of Loss, a Deemed Loss Event, a Financial Event or a Lease Event of
Default under the related Lease, an Owner Participant would be entitled to
demand payment on such first mortgage bonds in an amount generally not exceeding
Casualty Value less the aggregate principal amount of and accrued interest on
the related Lessor Bonds then outstanding. The Holders of the Lessor Bonds
(including the Trustee, as holder of the Pledged Lessor Bonds) and Holders of
the Collateral Bonds are not entitled to the benefit of such first mortgage
bonds. As an alternative to the first mortgage bonds, the Company could supply
such financial support in the form of a letter of credit issued by a commercial
bank. Once a letter of credit has been provided to an Owner Participant, the
Company will be required to provide a letter of credit for such Owner
Participant for the remainder of the basic term of the related Lease. If a
letter of credit were about to expire or be terminated prior to the scheduled
expiration thereof, and the Company does not replace such letter of credit with
another letter of credit issued by an eligible bank, the Company would have the
right to purchase the related
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Undivided Interest from the related Lessor, thereby terminating the related
Lease, at a price equal to the higher of fair market sales value and Casualty
Value; provided, however, that if the Company had assumed all or a portion of
the related Lessor Bonds then outstanding, the purchase price would be reduced
by the principal amount of such Lessor Bonds then outstanding. (Participation
Agreement, Section 16(d))
Subject to certain first refusal rights of the Company, any Owner
Participant may at any time assign, convey or otherwise transfer its interest
in, to and under any transaction document or its trust estate to a person with a
net worth at the time of such transfer of not less than $50 million or to a
person whose obligations under the transaction documents have been guaranteed by
a person with such a net worth. The transferring Owner Participant will, with
certain limited exceptions, be released from its obligations under the
transaction documents and the transferee Owner Participant shall succeed to such
obligations and rights of the transferring Owner Participant. (Participation
Agreement, Section 14)
TAX INDEMNIFICATION AGREEMENT
Pursuant to separate Tax Indemnification Agreements for each Transaction
between the Company and the Owner Participant, the Company is obligated to pay
to the Owner Participant, among other things, amounts which, on an after-tax
basis, equal the amounts of additional federal income taxes payable by the Owner
Participant with respect to any current or prior taxable year as a result of a
Tax Loss and any interest, penalties or additions to any tax imposed as a result
of such Tax Loss or the contest thereof. For purposes of each Tax
Indemnification Agreement, "Tax Loss" includes, subject to certain exceptions:
(a) loss to the Owner Participant of depreciation or analogous deductions with
respect to the related Undivided Interest or interest deductions with respect to
the related Lessor Bonds; (b) loss to the Owner Participant of foreign tax
credits due to the treatment of any item of income, gain, loss or deduction with
respect to the related Transaction as derived from, or allocable to, foreign
sources (in the case of either (a) or (b) as a result of, among other things,
(i) any act or failure to act by the Company, (ii) any misrepresentation or
breach of warranty or covenant in the transaction documents by the Company,
(iii) bankruptcy of the Company or any disposition of the related Undivided
Interest pursuant to the exercise of remedies under the related Indenture or
(iv) damage to or the taking of the related Undivided Interest); or (c)
unanticipated income of the Owner Participant with respect to the related
Undivided Interest.
PLAN OF DISTRIBUTION
The Prospectus Supplement relating to a series of Collateral Bonds will set
forth the terms of the offering of the Collateral Bonds, including the names of
underwriters, including Morgan Stanley & Co. Incorporated and Citicorp
Securities, Inc., the proceeds to Funding Corporation from such sale, any items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed to dealers. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time. The Collateral Bonds will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of each resale.
Unless otherwise set forth in the Prospectus Supplement, the obligations of the
underwriters to purchase the Collateral Bonds will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all
such Collateral Bonds if any are purchased; provided that the agreement between
the Company and the underwriters providing for the sale of the Collateral Bonds
may provide that under certain circumstances involving a default of
underwriters, less than all of the Collateral Bonds may be purchased.
Each Prospectus Supplement relating to a particular offering of Collateral
Bonds will contain a statement (1) as to whether or not the existence of a
secondary market for such securities can be predicted and, if such existence is
predicted, as to the extent of such secondary market, and (2) as to whether or
not the underwriter or underwriters intend to make a market in such securities.
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Subject to certain conditions, the Company may agree to indemnify the
underwriter or underwriters and their controlling persons against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended.
EXPERTS AND LEGALITY
The Company's balance sheets as of December 31, 1996 and 1995 and the
statements of income, retained earnings, and cash flows and the related
financial statement schedule for each of the three years in the period ended
December 31, 1996, incorporated by reference in this Prospectus, have been
incorporated by reference herein in reliance on the reports of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
Legal matters in connection with the issuance of the Collateral Bonds will
be passed upon for the Company by Monroe & Lemann (A Professional Corporation),
New Orleans, Louisiana, and Reid & Priest LLP, New York, New York, and for the
underwriters by Winthrop, Stimson, Putnam & Roberts, New York, New York.
However, all legal matters pertaining to the organization of the Company will be
passed upon only by Monroe & Lemann (A Professional Corporation). In rendering
such opinions, Reid & Priest LLP and Winthrop, Stimson, Putnam & Roberts will
rely upon the opinion of Monroe & Lemann (A Professional Corporation) as to
matters of Louisiana law, and Monroe & Lemann (A Professional Corporation) will
rely upon the opinion of Reid & Priest LLP as to matters of New York law.
Certain matters with respect to the legality of the Lessor Bonds will be passed
upon for the Owner Trustee by Haight, Gardner, Poor & Havens, New York, New
York, and by Liskow & Lewis, New Orleans, Louisiana.
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GLOSSARY
CERTAIN CAPITALIZED TERMS USED IN THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT HAVE THE FOLLOWING MEANINGS AND SUCH MEANINGS SHALL APPLY
TO TERMS BOTH SINGULAR AND PLURAL UNLESS THE CONTEXT CLEARLY REQUIRES OTHERWISE:
"AFFILIATE" means with respect to the Company any other person directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, the Company. For purposes of this definition, the term "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of such person, whether through the
ownership of voting securities or by contract or otherwise.
"ATOMIC ENERGY ACT" means the Atomic Energy Act of 1954, as amended, and
regulations from time to time issued, published or promulgated pursuant thereto.
"CASUALTY VALUE" means an amount specified in each Lease which the
Company must pay to the Lessor under such Lease in certain circumstances, which
amount is, in general and among other things, calculated to preserve the net
economic return of the related Owner Participant.
"COLLATERAL BONDS" mean the Collateral Bonds offered by this Prospectus
and the accompanying Prospectus Supplement.
"COMPANY" means Entergy Louisiana, Inc. (formerly Louisiana Power & Light
Company), a Louisiana corporation, and its permitted successors and assigns.
"DEEMED LOSS EVENT" means any of the events described as a Deemed Loss
Event in each Lease upon the occurrence of which the Company must (subject to
certain conditions) acquire the beneficial interest of the related Owner
Participant and/or assume the related Lessor Bonds. (See "Description of the
Lease Indentures -- Assumption by the Company.")
"EVENT OF LOSS" means any of the events described as an Event of Loss in
each Lease upon the occurrence of which the Company must (subject to certain
conditions) acquire the beneficial interest of the Owner Participant and/or
assume the related Lessor Bonds. (See "Description of the Lease Indentures
Assumption by the Company.")
"EXCEPTED PAYMENT" means (i) any indemnity payment (including payments
under the Tax Indemnification Agreement) payable to the Owner Trustee or the
Owner Participant, (ii) any amount payable under any transaction document to
reimburse the Lessor or the Owner Participant for performing or complying with
any of the obligations of the Company under and as permitted by any transaction
document, (iii) any insurance proceeds or other payments received with respect
to an Event of Loss in excess of amounts then due and owing to reimburse the
Lease Indenture Trustee for any of its expenses and to pay the reasonable
remuneration of the Lease Indenture Trustee plus amounts then due and owing in
respect of the principal of and premium, if any, and interest on all Lessor
Bonds outstanding, (iv) any insurance proceeds under liability policies,
replacement power insurance policies and insurance policies not required by the
Lease, (v) any payment of the equity portion of Casualty Value or Special
Casualty Value in respect of an Event of Loss, Deemed Loss Event or Financial
Event, (vi) amounts payable to the Owner Trustee in connection with the exercise
by the Company of its option to purchase the Undivided Interest during the term
of the Lease (subject, in any event, to the condition that the Company shall
have assumed all of the Lessor Bonds then outstanding and none of such Lessor
Bonds are then to be redeemed), (vii) if a letter of credit has been terminated
or has expired, the portion, if any, of Casualty Value or Special Casualty Value
(before taking into account the effect of certain drawings on such letter of
credit) equal to the amount by which Casualty Value, reduced by the principal
amount of and accrued interest on the outstanding Lessor Bonds, exceeds the sum
of all amounts drawn under such letter of credit and not reinstated, (viii) any
amount payable to the Owner Participant by any transferee as the purchase price
of the Owner Participant's interest in the trust estate, (ix) the ongoing fees
and expenses of the Owner Trustee under the transaction documents and (x) any
payments in respect of interest to the extent attributable to payments referred
to in clauses (i) through (vii) above.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FINANCIAL EVENT" means any of the events described as a Financial Event
in each Lease upon the occurrence of which the Company must (subject to certain
conditions) acquire the beneficial interest of the related Owner Participant
and/or assume the related Lessor Bonds. (See "Description of the Lease
Indentures -- Assumption by the Company.")
"FUNDING CORPORATION" means W3A Funding Corporation, a Delaware
corporation.
"HOLDER", as used in "Description of the Collateral Bonds and the
Indenture," means the registered holder of Securities, as indicated on the
Security Register maintained under the Indenture, and, as used in "Description
of the Lease Indentures," means the registered holder of Lessor Bonds under a
Lease Indenture, as indicated on the Bond Register maintained under such Lease
Indenture.
"INDENTURE" means the Collateral Trust Indenture, among Funding
Corporation, the Company and the Trustee, as supplemented and amended, including
by the Supplemental Indenture pursuant to which the Collateral Bonds are issued.
"INITIAL LESSOR BONDS" means Waterford 3 Secured Lease Obligation Bonds
issued in 1989 by the respective Lessors as three separate issues under three
separate Lease Indentures, each issue comprised of a series maturing in 2005 and
a series maturing in 2017.
"LEASE" means each Facility Lease, dated as of September 1, 1989, as
supplemented, under which the Company leases an Undivided Interest in Unit 3
from a Lessor in connection with the Transactions. "Leases" means each and
every Lease.
"LEASE DEFAULT" means an event or condition which, with the giving of
notice or lapse of time, or both, would constitute a Lease Event of Default.
"LEASE EVENT OF DEFAULT" means an Event of Default as such term is
defined under a Lease. (See "Description of the Leases -- Lease Events of
Default.")
"LEASE INDENTURE" means each Indenture of Mortgage and Deed of Trust,
dated as of September 1, 1989, as supplemented, between a Lessor and the Lease
Indenture Trustee, pursuant to which the Lessor Bonds are issued. "Lease
Indentures" means each and every Lease Indenture.
"LEASE INDENTURE DEFAULT" means an event or condition which, with the
giving of notice or the lapse of time, or both, would constitute a Lease
Indenture Event of Default.
"LEASE INDENTURE ESTATE" means the trust estate assigned, transferred and
pledged by a Lessor to the related Lease Indenture Trustee under its Lease
Indenture, for the ratable benefit of the holders of the Lessor Bonds issued
thereunder.
"LEASE INDENTURE EVENT OF DEFAULT" means an Indenture Event of Default as
such term is defined in a Lease Indenture. (See "Description of the Lease
Indentures -- Lease Indenture Events of Default.")
"LEASE INDENTURE TRUSTEE" means each institution and/or individual acting
as an indenture trustee under each of the Lease Indentures. "Lease Indenture
Trustees" means each and every Lease Indenture Trustee.
"LESSOR" means any institution and/or individual acting as Owner Trustee
under a trust agreement with an Owner Participant and as Lessor under a Lease
and which, in such capacity, has purchased an Undivided Interest in Unit 3 as
part of the Transactions. "Lessors" means each and every Lessor.
"LESSOR BONDS" means the non-recourse bonds issued by a Lessor under its
Lease Indenture.
"NRC" means the Nuclear Regulatory Commission of the United States of
America or any successor agency.
"NUCLEAR WASTE ACT" means the Nuclear Waste Policy Act of 1982, as
amended, or any comparable successor law.
"OWNER PARTICIPANT" means a corporation that, in connection with the
Transactions, has acquired a beneficial interest in the owner trust which is the
owner and Lessor of an Undivided Interest.
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"OWNER TRUSTEE" means each institution and/or individual acting as owner
trustee under a trust agreement with an Owner Participant in connection with the
Transactions.
"PARTICIPATION AGREEMENT" means each Participation Agreement, dated as of
September 1, 1989, as amended, entered into among the Company, Funding
Corporation, the Owner Participant, a Lessor, a Lease Indenture Trustee and the
Trustee, which relates to a Transaction and sets forth the terms and conditions
upon which a Transaction will be consummated. "Participation Agreements" mean
each and every Participation Agreement.
"PLEDGED LESSOR BONDS" means the Lessor Bonds which are pledged by
Funding Corporation to Trustee as security for Securities (including the
Collateral Bonds).
"PRICE-ANDERSON ACT" means the Price-Anderson Act (1957), as amended.
"REFINANCING" means the series of transactions pursuant to which the
Initial Lessor Bonds will be refinanced.
"RESPONSIBLE OFFICER" shall mean, with respect to the subject matter of
any covenant, agreement or obligation of any party contained in any Transaction
Document, the President, any Vice President, Assistant Vice President, Account
Officer, Treasurer, Assistant Treasurer or any other officer who in the normal
performance of his operational responsibility would have knowledge of such
matter and the requirements with respect thereto.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means bonds, notes or other evidences of indebtedness which
may be issued under the Indenture.
"SPECIAL CASUALTY VALUE" means an amount specified in each Lease which
the Company must pay to the Lessor under such Lease in certain circumstances,
which amount is, in general and among other things, calculated to preserve the
net economic return of the related Owner Participant.
"SPECIAL TRANSFER" means the assignment and transfer by an Owner
Participant of its beneficial interest in the related owner trust to the Company
or its designee upon the occurrence of an Event of Loss, a Deemed Loss Event,
Financial Event or a Lease Event of Default.
"SUPPLEMENTAL FINANCING" means the issuance of additional Lessor Bonds
under a Lease Indenture to finance the related Lessor's proportionate share of
capital improvements to Unit 3.
"SUPPLEMENTAL INDENTURE" means a supplemental indenture to the Indenture,
among Funding Corporation, the Company and the Trustee, relating to the
Collateral Bonds.
"TAX INDEMNIFICATION AGREEMENT" means each tax indemnification agreement
dated as of September 1, 1989, as amended, between the Company and an Owner
Participant.
"TRANSACTION" means any of the three transactions pursuant to which the
Company sold the Undivided Interests in Unit 3 to the Lessors under three
separate owner trust agreements and leased back such interests pursuant to three
separate Leases. "Transactions" refers to all of such transactions.
"TRUSTEE" means Bankers Trust Company, as trustee under the Indenture.
"UNDIVIDED INTEREST" means any of the three undivided interests in Unit
3, which interests compose in aggregate an approximate 10.5% interest in Unit 3
(as defined) (which is equivalent on a cost basis to an approximate 9.3%
interest in Waterford 3) and each of which undivided interest was sold by the
Company to the Owner Trustee under three separate owner trust agreements with
the Owner Participant, and then leased back to the Company on a long-term net
lease basis.
"UNIT 3" means Waterford 3, exclusive of certain transmission, pollution
control and other facilities, together with certain capital improvements
thereto.
"WATERFORD 3" means Unit No. 3 (nuclear) of the Waterford Steam Electric
Generating Station.
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