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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission file number 1-4698
NEVADA POWER COMPANY
(Exact name of registrant as specified in its charter)
Nevada 88-0045330
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
6226 West Sahara Avenue 89102
Las Vegas, Nevada (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (702) 367-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
-------------------------- -----------------------
Common Stock, $1 Par Value New York Stock Exchange
Pacific Exchange
Stock Purchase Rights New York Stock Exchange
8.2% Cumulative Quarterly Income
Preferred Securities, Series A New York Stock Exchange
* issued by NVP Capital I, a Delaware Statutory Business Trust
The payment of trust distributions and payments on liquidation or
redemption are guaranteed under certain circumstances by Nevada Power
Company. Nevada Power Company is the owner of 100% of the common
securities issued by NVP Capital I.
Securities registered pursuant to Section 12(g) of the Act:
Cumulative Preferred Stock, $20 Par Value, 5.40% Series
(Title of class)
Cumulative Preferred Stock, $20 Par Value, 5.20% Series
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
----- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
----
50,690,453 shares of Common Stock were outstanding as of March 18, 1998.
The aggregate market value of Common Stock, which is the only voting stock,
held by non-affiliates as of March 18, 1998, was $1,305,279,164. (Computed
by reference to the closing price on March 18, 1998, as reported by the Wall
Street Journal as New York Stock Exchange Composite Transactions.)
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 1997 are incorporated by reference into Parts II and IV
hereof.
(2) Portions of the Registrant's definitive Proxy Statement dated March 12,
1998 for the Company's annual meeting of shareholders on May 8, 1998, are
incorporated by reference into Part III hereof.
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TABLE OF CONTENTS
Page
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PART I
Item 1. Business ...................................... 1
Item 2. Properties .................................... 8
Item 3. Legal Proceedings ............................. 9
Item 4. Submission of Matters to a Vote of Security
Holders........................................ 10
Supplemental Item.
Executive Officers of Registrant .............. 10
PART II
Item 5. Market for the Registrant's Common Stock and
Related Security Holder Matters ............... 11
Item 6. Selected Financial Data ....................... 11
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation... 11
Item 8. Consolidated Financial Statements and
Supplementary Data ............................ 12
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ........ 12
PART III
Item 10. Directors and Executive Officers of the
Registrant .................................... 12
Item 11. Executive Compensation ........................ 12
Item 12. Security Ownership of Certain Beneficial Owners
and Management ................................ 12
Item 13. Certain Relationships and Related Transactions. 13
PART IV
Item 14. Exhibits, Consolidated Financial Statement
Schedule, and Reports on Form 8-K ............. 13
SIGNATURES .................................................. 26
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PART I
ITEM 1. BUSINESS
THE COMPANY
Nevada Power Company (Company), incorporated in 1929 under the laws of
Nevada, is an operating public utility engaged in the electric utility business
in the City of Las Vegas and vicinity in southern Nevada. Most of the Company's
operations are conducted in Clark County, Nevada (with an estimated service area
population of 1,303,000 at December 31, 1997) where the Company furnishes
electric service in the communities of Las Vegas, North Las Vegas, Henderson,
Searchlight, Laughlin and adjoining areas and to Nellis Air Force Base (a
permanent military installation northeast of Las Vegas and the USAF Tactical
Fighter Weapons Center). Electric service is also supplied to the Department of
Energy at Mercury and Jackass Flats in Nye County, where the Nevada Test Site is
located. The Company will supply 40 percent of the Nevada Test Site's future
electrical power according to a settlement agreement approved by the Public
Utilities Commission of Nevada (PUCN). See the "Competition" section in this
Form 10-K.
SOURCES OF ELECTRIC ENERGY SUPPLY
The electric energy obtained from the Company's own generating facilities
will be produced at the following plants:
Number Net Capacity
Plant of Units (Megawatts)
----- -------- ------------
Coal Fuel:
Reid Gardner (Steam).............. 3 330
Reid Gardner Unit No. 4 (Steam)... 1 275(1)
Mohave (Steam).................... 2 196(2)
Navajo (Steam).................... 3 255(3)
Natural Gas and Oil Fuel:
Clark (Steam)..................... 3 175
Clark (Gas Turbine)............... 1 50
Clark (Combined Cycle)............ 2 462
Sunrise (Steam)................... 1 80
Sunrise (Gas Turbine)............. 1 69
Harry Allen (Gas Turbine)......... 1 72
-----
1,964
=====
_________________
(1) This represents 25 megawatts of base load capacity, 235 megawatts of
peaking capacity and 15 megawatts (MW) upgrade capacity accomplished in
1990. Reid Gardner Unit No. 4, placed in service July 25, 1983, is a coal-
fired unit which is owned 32.2% by the Company and 67.8% by the Department
of Water Resources of the State of California (CDWR). The Company is
entitled to use 100% of the unit's peaking capacity for 1,500 hours each
year. The Company is entitled to 9.6% of the first 260 megawatts of
capacity and associated energy and is entitled to all of the 1990 15
megawatt upgrade through August 31, 1998 when the 15 megawatt upgrade
capacity will be transferred to CDWR. The Company had options for the use
of increasing amounts of capacity and energy from the unit beginning in
1998 so that the Company would have been entitled to use all of the unit's
output 15 years from that date. However, the 1998 through 2002 options for
10.17 MW per year were not exercised by the Company and have expired.
(2) This represents the Company's 14% undivided interest in the Mohave
Generating Station as tenant in common without right of partition with
three other non-affiliated utilities, less operating restrictions.
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(3) This represents the Company's 11.3% undivided interest in the Navajo
Generating Station as tenant in common without right of partition with
five other non-affiliated utilities.
The Company purchases Hoover Dam power pursuant to a contract with the
State of Nevada which became effective June 1, 1987 and will continue through
September 30, 2017. The Company's allocation of capacity is 235 MW.
The peak electric demand experienced by the Company was 3,469 megawatts on
August 7, 1997. This demand plus a reserve margin was served by a combination
of Company owned generation, and firm and short-term power purchases.
For 1998, the Company has contracts to purchase power from an independent
power producer (IPP) and four qualifying facilities (QF) (also known as
cogenerators) as follows:
Contract Term Net Capacity
---------------------
From To (Megawatts)
-------- -------- ------------
Independent Power Producer:
---------------------------
Nevada Sun-Peak Limited
Partnership ............. 06/08/91 05/31/16 210
Qualifying Facilities:
----------------------
Saguaro Power Company .... 10/17/91 04/30/22 90
Nevada Cogeneration
Associates #1 ........... 06/18/92 04/30/23 85
Nevada Cogeneration
Associates #2 ........... 02/01/93 04/30/23 85
Las Vegas Cogeneration
Limited Partnership ..... 05/10/94 05/31/24 45
---
515
===
The Company has total generating capacity of 2,714 megawatts, including 235
megawatts of Hoover Dam power, 210 megawatts of IPP power and 305 megawatts of
QF power. This along with agreements with other suppliers to purchase 1130
megawatts of firm capacity and associated energy, for the summer of 1998, will
not be sufficient to meet the 1998 anticipated peak load demand and reserve
margin needs. Accordingly, the Company is utilizing a competitive bidding
process as well as spot market purchases to obtain resources from other
suppliers for additional firm capacity and associated energy to meet the
projected peak needs for 1998.
FUEL SUPPLIES
The fuels used to provide energy for the Company's generating facilities
are coal, natural gas and oil. Its other sources of electricity are
hydroelectric (Hoover Dam) and purchased power.
The Company's primary fuel source for generation is coal. The following
table shows the actual sources of fuel for generation for 1997 and anticipated
sources of fuel for generation in 1998 and 1999.
1997 1998 1999
---- ---- ----
Coal........................ 67% 66% 65%
Natural Gas................. 33 34 35
--- --- ---
100% 100% 100%
=== === ===
The Company's average delivered cost per ton of coal burned was as follows:
1995 - $30.37; 1996 - $29.02; 1997 - $29.72.
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Coal for both the Mohave and Navajo Stations is obtained from surface
mining operations conducted by Peabody Coal Company (Peabody) on portions of the
Black Mesa in Arizona within the Navajo and Hopi Indian reservations. The
supply contracts with Peabody extend to December 31, 2005 for Mohave and to June
1, 2011 for Navajo, each contract having an option to extend for an additional
15 years.
Partial requirements for coal at the Reid Gardner Generating Station are
presently under contract through the year 2007. Although the Company cannot
predict how the coal market may fluctuate in the future, the Company anticipates
no major difficulties in purchasing the remainder of its coal requirements based
upon current coal market conditions in the Western United States. All coal for
Reid Gardner presently comes from underground mines in Utah and Colorado.
CONSTRUCTION AND FINANCING PROGRAMS
The Company carries on a continuing program to extend and enlarge its
facilities to meet current and future loads on its system. Gross plant
additions and retirements for the five years ended December 31, 1997 amounted to
$956,714,000 and $88,430,000, respectively.
Excluding Allowance for Funds Used During Construction, the Company's
actual construction expenditures for 1997 were $211 million, and currently
estimated construction expenditures for 1998 and 1999 are $295 million and $255
million, respectively.
The Company's construction program and estimated expenditures are subject
to continuing review and are revised from time to time due to various factors,
including the rate of load growth, escalation of construction costs,
availability of fuel types, changes in environmental regulations, adequacy of
rate relief and the Company's ability to raise necessary capital.
The Company will utilize internally generated cash and the proceeds from
industrial development revenue bonds (IDBs), first mortgage bonds (FMBs),
unsecured borrowings, preferred securities and common stock issues through
public offerings and the Stock Purchase and Dividend Reinvestment Plan (SPP) to
meet capital expenditure requirements through 1999.
The Company has the option of issuing new shares or using open market
purchases of its common stock to meet the requirements of the SPP. The Company
issued 1,515,716 shares of its common stock in 1997 under the SPP. At the end
of 1997, common equity represented 45% of total capitalization.
On November 20, 1997, Clark County, Nevada issued $52.3 million 5.9% IDBs
Series 1997A (Nevada Power Company Project) due 2032 and Coconino County,
Arizona issued $20 million 5.8% Pollution Control Revenue Bonds (PCRBs) Series
1997B (Nevada Power Company Project) due 2032. Net proceeds from the sale of
the IDBs were placed on deposit with a trustee and will be used to finance the
construction of certain facilities which qualify for tax-exempt financing. Net
proceeds from the sale of the PCRBs were placed on deposit with a trustee and
are being used to finance the construction of the Navajo scrubber facilities
which qualify for tax-exempt financing. At December 31, 1997, $52.9 million
remained on deposit with the trustee.
The Company also remarketed $85 million Series 1995B Clark County, Nevada
(Nevada Power Company Project) variable rate IDBs due 2030 at a 5.9 percent
fixed rate on November 24, 1997.
On January 29, 1998, the Company remarketed at fixed rates $141.05 million
Clark County, Nevada (Nevada Power Company Project) variable rate revenue bonds
consisting of $76.75 million Series 1995A IDBs due 2030 at 5.6 percent, $44
million Series 1995C IDBs due 2030 at 5.5 percent and $20.3 million Series 1995D
PCRBs with $14 million due 2011 at
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5.3 percent and $6.3 million due 2023 at 5.45
percent. On the same date, $13 million Coconino County, Arizona (Nevada Power
Company Project) Series 1995E PCRBs due 2022 were remarketed at a 5.35 percent
fixed rate.
The Indenture under which the Company's first mortgage bonds are issued
provides that no additional bonds may be issued unless earnings as defined equal
at least two and one-half times the interest requirements on all bonds to be
outstanding after the new issue. Based on its earnings through December 31,
1997 and assuming a 7.5 percent interest rate on new bonds, the Company would be
able to issue approximately $594 million of additional first mortgage bonds.
The Company's ability to issue additional debt is also limited by the need to
maintain a reasonable ratio of debt to equity.
The Company's ability to sell additional preferred stock is limited by the
necessity to meet required dividend coverages. At December 31, 1997, the
applicable dividend coverage test would permit the issuance of $429 million of
additional preferred stock at a dividend rate of 7.5 percent.
On April 2, 1997, NVP Capital I (Trust), a wholly-owned subsidiary of the
Company, issued 4,754,860 8.2% Quarterly Income Preferred Securities (QUIPS) at
$25 per security. The Company owns all of the Series A common securities,
147,058 shares issued by the Trust for $3.7 million. The QUIPS and the common
securities represent undivided beneficial ownership interests in the assets of
the Trust, a statutory business trust formed under the laws of the state of
Delaware. The existence of the Trust is for the sole purpose of issuing the
QUIPS and the common securities and using the proceeds thereof to purchase from
the Company its 8.2% Junior Subordinated Deferrable Interest Debentures (QUIDS)
due March 31, 2037, extendable to March 31, 2046 under certain conditions, in a
principal amount of $122.6 million. The sole asset of the Trust is the QUIDS.
The Company's obligations under the guarantee agreement entered into in
connection with the QUIPS when taken together with the Company's obligation to
make interest and other payments on the QUIDS issued to the Trust, and the
Company's obligations under the Indenture pursuant to which the QUIDS are issued
and its obligations under a trust agreement, including its liabilities to pay
costs, expenses, debts and liabilities of the Trust, provides a full and
unconditional guarantee by the Company of the Trust's obligations under the
QUIPS. Financial statements of the Trust are consolidated with the Company's.
Separate financial statements are not filed because the Trust is wholly-owned by
the Company and essentially has no independent operations, and the Company's
guarantee of the Trust's obligations is full and unconditional. The $118.9
million in net proceeds to the Company was used for general corporate utility
purposes and the repayment of short-term debt incurred to redeem the Company's
$38 million, 9.9% Redeemable Cumulative Preferred Stock on April 1, 1997.
RESOURCE PLANNING
The Company's rate of customer growth, especially in recent years, has been
among the highest in the nation. The annual customer growth rate was 6.4
percent, 7.2 percent, and 6.0 percent in 1997, 1996 and 1995, respectively.
The peak demand for electricity by the Company's customers increased from
3,332 megawatts in 1996 to 3,469 megawatts in 1997. The Company's 1997 energy
sales reached 14,596,228 megawatthours, an increase of 6.6 percent over 1996.
Pursuant to Nevada law, every three years the Company is required to file
with the PUCN a forecast of electricity demands for the next 20 years and the
Company's plans to meet those demands. The Company filed its 1997 Resource Plan
on June 3, 1997. On October 20, 1997, the PUCN rendered a decision on this
plan. Among the major items in the Company's 1997 Resource Plan which were
approved by the PUCN are the following:
(1) the Company will proceed to build a 500 kV transmission project known as
the Crystal Transmission Project, with an in-service date of June 1,
1999;
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(2) the Company will continue to pursue a strategy of relying on bulk
power purchases to meet near-term incremental increases in load;
(3) the Company will proceed with a joint 230 kV transmission project with
the Colorado River Commission with costs subject to prudency review in a
future rate case;
(4) the Company received limited approval to proceed with six switchyard
projects;
(5) the Company received approval for pre-development costs to build two 144
megawatt (MW) combustion turbines in 2002 and 2003 which would be
converted to a 410 MW combined cycle plant in 2004. An amendment to the
1997 Resource Plan will need to be filed by September 1999 for full
approval if the Company wants to proceed with building the turbines.
REGULATION AND RATES
The Company is subject to regulation by the PUCN which has regulatory
powers with respect to rates, facilities, services, reports, issuance of
securities and other matters.
On January 8, 1998, the PUCN approved a $45.6 million energy rate increase
effective February 1, 1998. The Company requested the increase to recover
higher costs for natural gas and purchased power. The PUCN also decided
previously recorded revenues from the sale of sulfur dioxide emission allowances
($2.3 million, before tax) should be reversed and credited to a deferred
liability account for a later determination.
Following is a summary of the rate increases and decreases that have been
granted the Company during the past three years.
SUMMARY OF RATE ADJUSTMENTS 1995 THROUGH 1997
Amount in
Effective Millions
Date Nature of Increase (Decrease) of Dollars
------------- ------------------------------ ----------
October 1, 1995 Energy rate decrease $(20.1)
December 1, 1995 Energy and resource plan
net rate decrease (17.6)
February 1, 1997 Energy rate decrease (45.0)
All amounts are on an annual basis.
As permitted by state statute, the Company defers differences between the
current cost of fuel plus net purchased power and base energy costs as defined.
Under regulations adopted by the PUCN, the balance in the deferred energy
account at the end of twelve months should be cleared over a subsequent period.
Recovery of increased costs is permitted to the extent that the Company has not
realized its authorized overall rate of return. If the Company has exceeded the
authorized rate of return, the portion of deferred energy costs represented in
such excess is transferred to the next deferred energy recovery period. The
energy costs deferred are included as a current item in determining taxable
income for federal income tax purposes. However, for financial statement
purposes, the federal income tax effect is deferred and amortized to income as
the deferred energy account is cleared. PUCN regulations allow the fuel base
portion of the Company's general rates to be changed at the time of a hearing to
clear the balance in the deferred energy account. This permits the recovery of
fuel expenses on a deferred basis, but, recovery will have no effect on the
Company's earnings. Effective February 1, 1997, explicit capacity costs
associated with certain purchased power contracts were included in general rates
rather than the deferred energy cost accounting mechanism.
The Company recovers the costs of developing its 20-year resource plan in
general rates effective February 1997. In the past, the recovery of these costs
was administered
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under the state's deferred accounting procedures. Also, by an
order of the PUCN in June 1988, the Company is allowed to capitalize certain
costs associated with Commission approved conservation programs.
ENVIRONMENTAL MATTERS
The Company is subject to regulation by federal, state and local
authorities with regard to air and water quality control and other environmental
matters.
Environmental expenditures made by the Company are currently being
recovered through customer rates. The following is a discussion of pending
environmental matters:
The Federal Clean Air Act Amendments of 1990 (Amendments) include
provisions for reduction of emissions of oxides of nitrogen by establishing new
emission limits for coal-fired generating units. This will require the
installation of additional pollution-control technology at some of the Reid
Gardner Station generating units before 2000 at an estimated cost to the Company
of no more than $6 million; $3 million has been spent to date.
Also, the United States Congress authorized the EPA to study the potential
impact the Mohave Generating Station (Mohave) may have on visibility in the
Grand Canyon area. Results of this study are expected in 1998. The majority
owner has estimated that control costs, if required, could total between $200
and $300 million. (See the Legal Proceedings section of this Form 10-K.)
In 1991, the EPA published an order requiring the Navajo Generating Station
(Navajo) to install scrubbers to remove 90 percent of sulfur dioxide emissions
beginning in 1997. As an 11.3 percent owner of Navajo, the Company will be
required to fund an estimated $50.9 million for installation of the scrubbers.
The first of three scrubber units was placed in commercial operation in November
1997. At that point, the project was approximately 50 percent complete. The
first of the other two units is expected to be on line in 1998 and the last unit
in 1999. The Company has spent approximately $40.7 million through December
1997 on the scrubbers' construction. In 1992, the Company received resource
planning approval from the PUCN for its share of the cost of the scrubbers.
COMPETITION
On January 22, 1998 the Nevada Supreme Court reversed an order of the
Eighth Judicial District Court for Clark County, Nevada (District Court) in
which the District Court concluded that the PUCN had erred in its interpretation
of a 1963 territorial agreement between the Company and Valley Electric
Association. The District Court's order found that under the 1963 territorial
agreement each of those two electric suppliers had an exclusive right to provide
service to a portion of the Nevada Test Site (Test Site). The Nevada Supreme
Court agreed with the PUCN that the 1963 territorial agreement did not envision
the creation of exclusive service areas within the Test Site. Both the Company
and Valley Electric Association could provide service for the Test Site's entire
load and the Test Site could choose the supplier of service. In February 1998,
the United States Department of Energy (DOE) on behalf of the Test Site filed
with the District Court a Motion for Order Consistent with the Nevada Supreme
Court's ruling.
During the above proceedings, Valley Electric, the Company, the PUCN
Regulatory Operations Staff and Lincoln County Power District No. 1 (Lincoln
Power)(a governmental electric supplier that holds itself out as providing
electric service in Lincoln County, Nevada, where a portion of the Test Site is
located), entered into a Stipulation, Settlement Agreement and Release
(Settlement Agreement) for service to the Test Site. Under the Settlement
Agreement, the Test Site's electrical usage would be split among Valley Electric
(40 percent), the Company (40 percent) and Lincoln Power (20 percent), and each
of the three electric suppliers unconditionally released and forever discharged
each other from any and all claims for damages based directly or indirectly on
the geographic
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scope of the service provided to the Test Site before and during
the term of the Settlement Agreement. On May 12, 1997 the PUCN approved the
Settlement Agreement. Except for the release and discharge for damage claims,
the term of the Settlement Agreement is three years, beginning May 12, 1997.
The Settlement Agreement also provides, however, that, except for the release
and discharge, under certain specified conditions it may be reopened,
renegotiated or modified by PUCN orders terminating or modifying its terms. One
of the conditions is reversal of the District Court's order. The PUCN must
approve any changes to the Settlement Agreement. Regardless of the outcome of
this matter, the Company believes there will not be a material impact on its
operations, or upon its competitive position generally.
On July 16, 1997, the Governor of the state of Nevada signed into law
Assembly Bill 366 (AB 366) which provides for competition to be implemented in
the electric utility industry in the state no later than December 31, 1999
unless the PUCN determines a different date is necessary to protect the public
interest. AB 366 also changed the name of the Public Service Commission to the
PUCN, reduced it from five to three members, and removed the regulation of
transportation matters to another agency. It is expected that the generation,
aggregation (buying and reselling electricity to customers) and marketing of
electricity and possibly other utility services will be deemed competitive,
while transmission and distribution services will be deemed noncompetitive and
will continue to be regulated. The Company is required to submit a plan to the
PUCN to unbundle its integrated rates. A provider of a noncompetitive service
will be prohibited from providing a potentially competitive service except
through an affiliate which the PUCN has determined, after a hearing, has an
arm's length relationship with the provider of the noncompetitive service. Each
provider of a noncompetitive service that is necessary to the provision of a
potentially competitive service is required to make its facilities or services
available to all alternative sellers on equal and nondiscriminatory terms and
conditions. Alternative sellers of electricity must be licensed under rules yet
to be determined by the PUCN. AB 366 allows the PUCN to authorize full recovery
of costs which they determine to be stranded but does not guarantee full
recovery of those costs. Costs that were incurred by utilities to serve their
customers with the understanding that state regulatory commissions would allow
the costs to be recovered through electric rates are potentially stranded costs.
The greater part of the Company's potentially stranded costs are related to
contracts with qualifying facilities all of which were previously approved by
the PUCN. The PUCN shall designate a vertically integrated electric utility or
another entity to provide electric service to customers who are unable to obtain
electric service from an alternative seller or who fail to select an alternative
seller. The provider of last resort so designated by the PUCN is obligated to
provide electric service to those customers. The PUCN may authorize the right
to buy from alternative sellers in gradual phases. The rate charged for
residential service for customers who are unable to obtain electric service from
an alternative seller or who fail to select an alternative seller must not
exceed the rate charged for that service on July 1, 1997, however, the PUCN may
approve an increase in residential rates in an amount necessary to ensure
recovery by the Company of its just and reasonable costs. The residential rate
restriction will remain in place until 2003. Two-tenths of one percent of all
electric energy sold must come from a renewable resource produced in Nevada by
January 1, 2001. Fifty percent of this energy must be derived from solar power.
Every two years the standard increases by two-tenths of one percent until a
total of one percent of all electricity consumed comes from renewable resources.
In August 1997, the PUCN opened an investigatory docket of the issues to be
considered as a result of restructuring of the electric industry. The docket
sets forth the issues to be addressed as well as the steps the PUCN will take to
address them. Issues to be addressed include the following:
(1) Identification of all cost components in utility service and
establishment of allocation methods necessary for later pricing
of noncompetitive services;
(2) Designation of services as potentially competitive or noncompetitive;
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(3) Determination of rate design and non-price terms and conditions
for noncompetitive services;
(4) Establishment of licensing requirements for alternative sellers
of potentially competitive services;
(5) Past (stranded) costs;
(6) Criteria and standards by which the PUCN will apply the legislative
requirements concerning affiliate relations;
(7) Criteria and process by which the PUCN will appoint providers of
bundled electric service;
(8) Consumer protection;
(9) Anti-competitive behavior codes of conduct and enforcement;
(10) Price regulation for potentially competitive services in immature
markets;
(11) Compliance plans in accordance with regulation;
(12) Options for complying with legislative mandates for integrated
resource planning and portfolio standards;
(13) Innovative pricing for noncompetitive services.
In its Order dated November 4, 1997, the PUCN designated unbundled services
in eight major categories with twenty-six unbundled services in total. The
major categories include Generation Capacity and Energy Supply, Generation
Services Necessary to Support Transmission Service, Arranging for Power
Supplies, Power Delivery, End-Use Metering, Customer Accounting, Marketing and
Sales, and Public Good Services. The PUCN evaluated the cost unbundling
methodologies for the unbundled services set forth in its Order and, after
hearings, issued an Interim Order describing the process the parties should
follow to complete developing cost unbundling methodologies and to work toward
consensus on that issue.
The PUCN has the authority to classify a service as a potentially
competitive service if it finds the service meets specific requirements. The
PUCN has proposed regulations and held a hearing on the contents of applications
by any person seeking a designation of an unbundled service as potentially
competitive.
On January 21, 1998, the PUCN issued an Order to solicit comments on the
Classification of Components of Electric Service as Potentially Competitive
Services; Non-price Terms and Conditions for Distribution Tariffs; Licensing
of Alternative Sellers; and Consumer Protection. PUCN workshops have been
scheduled for March and April 1998 on these issues.
In response to the PUCN investigatory docket, the Company formed a
team of high level employees who have left their present positions to
work exclusively on the issues set forth in the docket. These
individuals will assist the officers of the Company in preparing for
potential policy making.
EMPLOYEES
The Company had 1,909 employees at December 31, 1997.
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ITEM 2. PROPERTIES
The Company's generating facilities are described under "Item 1. Business,
Sources of Electric Energy Supply".
The Company shares ownership in a 59-mile, 500 kilovolt line and two 15-
mile, 230 kilovolt lines that transmit power from the Mohave Generating Station
near Davis Dam on the Colorado River via Eldorado Substation to Mead Substation
located near Boulder City, Nevada. The Company has 32 miles of 230 kilovolt
line from Mead Substation to Las Vegas. This line, together with two Company-
owned 230 kilovolt lines presently connected to the Bureau of Reclamation lines
between Mead Substation and Henderson, Nevada, transmit the Mohave Generating
Station power to the Las Vegas area. A 25-mile, 230 kilovolt line between the
Mead Substation and the Company's Winterwood Substation was energized in 1988.
This line brings the additional Hoover energy to the Las Vegas Area and
increases the Company's interconnected transmission capabilities. The Company
shares ownership in 76 miles of 500 kilovolt transmission line from the Navajo
Generating Station to the Moenkopi Switchyard in Coconino County, Arizona (the
Southern Transmission System) and 274 miles of 500 kilovolt transmission line
from the Navajo Generating Station to the McCullough Substation in Clark County,
Nevada (the Western Transmission System). Power is transmitted from the
McCullough Substation to the Las Vegas area via three 230 kilovolt lines of 23
miles, 25 miles and 32 miles in length, respectively. The 25-mile line was
energized in May 1992. Two 230 kilovolt lines transmit power from the Reid
Gardner Station located near Glendale, Nevada. One is a 39 mile line to the
Pecos Substation and the other a 25 mile line to the Harry Allen Substation. In
1994, 20 miles of a 230 kilovolt line from the Harry Allen Substation to the
Pecos Substation was energized. One 39-mile, 230 kilovolt line transmits power
from the Reid Gardner Station located near Glendale, Nevada to the Pecos
Substation near North Las Vegas. A 7 mile, 230 kilovolt line between Westside
and Decatur Substations, both located in Las Vegas, was energized in 1991. In
addition to the above, the Company has 300 miles of 138 kilovolt and 489 miles
of 69 kilovolt transmission lines in service.
In 1990 the Company added a new transmission interconnection consisting of
a 345 kilovolt line from Harry Allen Substation in Southern Nevada to the
Nevada-Utah border where it connects with a PacifiCorp line to Red Butte
Substation in Southern Utah near the City of St. George and a 230 kilovolt line
from Harry Allen Substation to Westside Substation which is located in Las
Vegas. The Company owns the 50-mile, 230 kilovolt line and the 69 miles of the
345 kilovolt line from Harry Allen Substation to the Nevada-Utah border;
PacifiCorp owns the portion of the 345 kilovolt line from the Nevada-Utah border
to Red Butte Substation.
At December 31, 1997, the Company owned 108 transmission and distribution
substations with a total installed transformer capacity of 10,987,183 kilovolt-
amperes. In addition it co-owns with others the above mentioned Eldorado
Substation with installed transformer capacity of 1,000,000 kilovolt-amperes,
the McCullough Substation with installed transformer capacity of 1,250,000
kilovolt-amperes, the Reid Gardner Unit No. 4 Substation with installed capacity
of 318,000 kilovolt-amperes and Mead Substation with 250,000 kilovolt-amperes.
At Harry Allen Substation, the Company has a 336,000 kilovolt-ampere
transformer and two 336,000 kilovolt-ampere 345 kilovolt phase shifting
transformers which are used for necessary voltage transformations and to control
flows on the interconnection.
As of December 31, 1997, there were approximately 3,162 miles of pole line
together with approximately 8,957 cable miles of underground in the Company's
distribution system with a total installed distribution transformer capacity of
6,676,565 kilovolt-amperes.
9
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Grand Canyon Trust and Sierra Club filed a lawsuit in the U.S. District
Court, District of Nevada, in February 1998 against the owners of the Mohave
Generating Station (Mohave) alleging violations of the Clean Air Act regarding
emissions of sulfur dioxide and particulates. The owners believe the emission
limits referenced in the suit are not applicable to Mohave. The owners
previously partnered with the Environmental Protection Agency (EPA) and the
National Park Service on a multi-year study to determine the impacts, if any, of
Mohave emissions on visibility in the Grand Canyon (see the Environmental
Matters section of this Form 10-K). The environmental groups want the owners to
install pollution control equipment at an estimated cost of $200 to $300
million. The Company owns a 14 percent interest in Mohave. The outcome of this
action can not be determined at this time.
The Company is involved in litigation arising in the normal course of
business. While the results of such litigation cannot be predicted with
certainty, management, based upon advice of counsel, believes that the final
outcome will not have a material adverse effect on the Company's financial
position, results of operations and net cash flow.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report, through the solicitation of
proxies or otherwise.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT
The Company's executive officers are as follows:
Age as of
Name December 31, 1997 Position
---- ----------------- --------
Charles A. Lenzie 60 Chairman of the Board and Chief
Executive Officer
Michael R. Niggli 48 President and Chief Operating Officer
David G. Barneby 52 Vice President, Power Delivery
Sally L. Galati 36 Vice President, Distribution
Cynthia K. Gilliam 49 Vice President, Retail Customer Services
Richard L. Hinckley 42 Vice President, Secretary and General
Counsel
Steven W. Rigazio 43 Vice President, Finance and
Planning, Treasurer, Chief Financial
Officer
Gloria T. Banks Weddle 48 Vice President, Corporate Services
Each of the executive officers has been actively engaged in the business of
the Company for more than five years with the exception of Mr. Niggli.
Charles A. Lenzie was elected Chairman of the Board and Chief Executive
Officer on May 1, 1989. Prior to that time he was President of the Company.
Michael R. Niggli joined the Company as President and Chief Operating
Officer in February 1998. Prior to joining the Company, he was Senior Vice
President of the Custom Accounts Market Unit for Entergy, a New Orleans-based
global energy company. At Entergy, Mr. Niggli served as Vice President of Fuels
Management, Vice President of Strategic Planning and Vice President for Customer
Service in Louisiana. He was promoted to Senior Vice President of Marketing in
1993 and Senior Vice President of the Custom Accounts Market Unit in 1996.
David G. Barneby was elected Vice President, Power Delivery effective
October 14, 1993. He joined the Company in 1965 as a Student Engineer and was
made a Junior Engineer in 1967. He was promoted to Superintendent of the Reid
Gardner Generating Station in
10
<PAGE>
1976; Project Manager - Reid Gardner Unit 4 in
1979 and in 1985 appointed Manager - Generation Engineering and Construction.
He was elected Vice President - Generation in 1989. His title was changed to
Vice President - Power Supply later that year.
Sally L. Galati was named Vice President, Distribution on March 13, 1997.
She first joined the Company in 1984 as an Engineer working in the Customer
Technical Services, Distribution and Transmission departments and was promoted
to Supervisor, Major Projects in 1992, Acting Manager, Builder Services in 1993,
Director, Distribution System Services in 1994 and Division Director,
Distribution Operations & Construction in 1995.
Cynthia K. Gilliam was elected Vice President, Retail Customer Services
effective October 14, 1993. She joined the Company in 1974 as a Rate Analyst
and was promoted to Rates Administrator in 1979 and to Manager of Financial
Planning in 1983. In 1987, she was appointed Manager of Human Resource
Planning. She was elected Vice President - Personnel in 1988 and her title was
changed to Vice President - Human Resources in 1989. In 1992, she was elected
Vice President - Customer Service.
Richard L. Hinckley was elected Vice President, Secretary and General
Counsel on May 15, 1991. He joined the Company as Staff Counsel in 1985 and was
promoted to Assistant Secretary and Chief Counsel in 1989. Prior to joining the
Company, he served as Staff Attorney with the PUCN and as Assistant Attorney
General in Utah.
Steven W. Rigazio was elected Vice President, Finance and Planning,
Treasurer, Chief Financial Officer effective October 14, 1993. He joined the
Company in 1984 as a Rates Administrator and was promoted to Supervisor of Rates
and Regulations in 1985, Manager of Rates and Regulatory Affairs in 1986,
Director of System Planning in 1990, Vice President - Planning in 1991 and Vice
President and Treasurer, Chief Financial Officer in 1992.
Gloria T. Banks Weddle was named Vice President, Corporate Services
effective January 1, 1996. She first joined the Company in 1973, was promoted
to Manager of Compensation and Benefits in 1988 and Director of Human Resources
in 1991. She was elected Vice President - Human Resources in 1992. On October
14, 1993, she was elected Vice President, Human Resources and Corporate
Services. Her title was changed to Vice President - Corporate Services in 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
Information with respect to the principal market for the Company's common
stock, securities exchange, shareholders of record, quarterly high and low sales
prices and quarterly dividend payments for 1997 and 1996 are hereby incorporated
by reference from page 49 of the Company's Annual Report to Shareholders for the
year ended December 31, 1997, which is filed herewith as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is hereby incorporated by reference from
page 52 of the Company's Annual Report to Shareholders for the year ended
December 31, 1997, which is filed herewith as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by Item 7 is hereby incorporated by reference from
pages 27 to 31 of the Company's Annual Report to Shareholders for the year ended
December 31, 1997, which are filed herewith as Exhibit 13.
11
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements for the years ended
December 31, 1997, 1996 and 1995 together with the auditors' report thereon
required by Item 8 are incorporated by reference from the following pages of the
Company's Annual Report to Shareholders for the year ended December 31, 1997,
which are filed herewith as Exhibit 13.
Annual
Report
Page
------
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995....................... 32
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995................ 33
Consolidated Balance Sheets - December 31, 1997
and 1996.............................................. 34-35
Consolidated Schedules of Capitalization -
December 31, 1997 and 1996............................. 36
Consolidated Schedules of Long-Term Debt -
December 31, 1997 and 1996............................. 37
Consolidated Statements of Retained Earnings for the
Years Ended December 31, 1997, 1996 and 1995.......... 38
Notes to Consolidated Financial Statements.............. 39-49
Independent Auditors' Report............................ 50
Report of Management.................................... 51
See Note 12 of Notes to Consolidated Financial Statements in the Company's
Annual Report to Shareholders for the unaudited selected quarterly financial
data required to be presented in this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no Report on Form 8-K filed within the twenty-four months
prior to the date of the most recent consolidated financial statements, December
31, 1997, reporting a change of accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 10 with respect to the Company's executive
officers is set forth in Part I, Item 4., under the preceding heading
"Supplemental Item. Executive Officers of Registrant." The other information
required by Item 10 is hereby incorporated by reference from the Company's
definitive Proxy Statement dated March 12, 1998 and heretofore filed with the
Securities and Exchange Commission (SEC.) (See the heading therein "Election of
Directors.")
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is hereby incorporated by reference
from the Company's definitive Proxy Statement dated March 12, 1998 and
heretofore filed with the SEC. (See the heading therein "Executive
Compensation.")
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is hereby incorporated by reference
from the Company's definitive Proxy Statement dated March 12, 1998 and
heretofore filed with the SEC. (See the heading therein "Security Ownership of
Management.")
12
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Management of the Company has no knowledge of any transaction,
relationship or indebtedness which is required to be disclosed by Item 13.
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
The Company's consolidated financial statements for the years ended
December 31, 1997, 1996 and 1995 together with the auditors' report appearing on
pages 32 to 50 of Nevada Power Company's 1997 Annual Report to Shareholders are
incorporated herein by reference and filed as Exhibit 13.
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE FOR THE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 PAGE
- -------------------------------------------- ----
Independent Auditors' Consent and Report on Schedule.............. 24
Schedule II - Valuation and Qualifying Accounts................... 25
All other schedules are omitted because they are not applicable, not
required, or because the information is included in the consolidated financial
statements or notes thereto.
EXHIBITS
FILED DESCRIPTION
- -------- -----------
10.83 Financing Agreement between Clark County, Nevada and
Nevada Power Company dated November 1, 1997
10.84 Financing Agreement between Coconino County, Arizona Pollution
Control Corporation and Nevada Power Company
dated November 1, 1997
10.85 Loan Agreement dated as of November
21, 1997 between Nevada Power
Company, certain banks, Nationsbank of Texas, N.A.
as Documentation Agent and Wells Fargo Bank,
National Association as Arranger and
Administrative Agent
13 Pages 27 to 52 of Nevada Power Company's Annual Report to
Shareholders for the Year Ended December 31, 1997
(incorporated by reference in Parts II and IV hereof)
23 Independent Auditors' Consent and Report on Schedule
27 Financial Data Schedule - December 31, 1997
13
<PAGE>
In addition to those Exhibits shown above, the Company hereby incorporates
the following Exhibits pursuant to Exchange Act Rule 12B-32 and Regulation
#201.24 by reference to the filings set forth below:
EXHIBIT ORIGINALLY FILED
NO. DESCRIPTION AS EXHIBIT FILE NO.
- ------- ----------- ---------------- --------
3.1 Restated Articles of Incorporation 3.8 to Form 10-K 1-4698
filed June 10, 1988 Year 1988
3.2 Amendment to Restated Articles of 4.7 to Form S-8 33-32372
Incorporation filed May 23, 1989
3.3 Amendment to Restated Articles of 4.8 to Form S-3 33-55698
Incorporation filed June 8, 1992
3.4 Restated Bylaws, as amended 3.4 to Form 10-K 1-4698
March 9, 1995 Year 1995
4.1 Certificate of Designation of Cumulative
Preferred Stock as follows:
5.40% Series 2.1 to Form S-1 2-16968
5.20% Series 2.1 to Form S-1 2-20618
4.70% Series 3.2 to Form 8-K 1-4698
July 1965
8% Series 2.1 to Form S-7 2-44513
8.70% Series 2.1 to Form S-7 2-49622
11.50% Series 2.1 to Form S-7 2-52238
9.75% Series 2.1 to Form S-7 2-56788
Auction Series A 4.6 to Form S-3 33-15554
Auction Series A as amended
November 14, 1991 4.9 to Form S-3 33-44460
Auction Series A as amended
December 12, 1991 4.1 to Form 10-K 1-4698
Year 1992
9.90% Series 4.1 to Form 10-K 1-4698
Year 1992
4.2 Indenture of Mortgage and Deed of 4.2 to Form S-1 2-10932
Trust Providing for First Mortgage
Bonds, dated October 1, 1953 and
Twenty-Six Supplemental Indentures
as follows:
First Supplemental Indenture, 4.2 to Form S-1 2-11440
dated August 1, 1954
Second Supplemental Indenture, 4.9 to Form S-1 2-12566
dated September 1, 1956
Third Supplemental Indenture, 4.13 to Form S-1 2-14949
dated May 1, 1959
Fourth Supplemental Indenture, 4.5 to Form S-1 2-16968
dated October 1, 1960
Fifth Supplemental Indenture, 4.6 to Form S-16 2-74929
dated December 1, 1961
Sixth Supplemental Indenture, 4.6A to Form S-1 2-21689
dated October 1, 1963
Seventh Supplemental Indenture, 4.6B to Form S-1 2-22560
dated August 1, 1964
Eighth Supplemental Indenture, 4.6C to Form S-9 2-28348
dated April 1, 1968
Ninth Supplemental Indenture, 4.6D to Form S-1 2-34588
dated October 1, 1969
Tenth Supplemental Indenture, 4.6E to Form S-7 2-38314
dated October 1, 1970
Eleventh Supplemental Indenture, 2.12 to Form S-7 2-45728
dated November 1, 1972
14
<PAGE>
EXHIBIT ORIGINALLY FILED
NO. DESCRIPTION AS EXHIBIT FILE NO.
- ------- ----------- ---------------- --------
Twelfth Supplemental Indenture, 2.13 to Form S-7 2-52350
dated December 1, 1974
Thirteenth Supplemental 4.14 to Form S-16 2-74929
Indenture, dated October 1,
1976
Fourteenth Supplemental 4.15 to Form S-16 2-74929
Indenture, dated May 1, 1977
Fifteenth Supplemental 4.16 to Form S-16 2-74929
Indenture, dated September 1,
1978
Sixteenth Supplemental Indenture, 4.17 to Form S-16 2-74929
dated December 1, 1981
Seventeenth Supplemental 4.2 to Form 10-K 1-4698
Indenture, dated August 1, 1982 Year 1982
Eighteenth Supplemental Indenture, 4.6 to Form S-3 33-9537
dated November 1, 1986
Nineteenth Supplemental Indenture, 4.2 to Form 10-K 1-4698
dated October 1, 1989 Year 1989
Twentieth Supplemental Indenture, 4.21 to Form S-3 33-53034
dated May 1, 1992
Twenty-First Supplemental 4.22 to Form S-3 33-53034
Indenture, dated June 1, 1992
Twenty-Second Supplemental 4.23 to Form S-3 33-53034
Indenture, dated June 1, 1992
Twenty-Third Supplemental 4.23 to Form S-3 33-53034
Indenture, dated October 1, 1992
Twenty-Fourth Supplemental 4.23 to Form S-3 33-53034
Indenture, dated October 1, 1992
Twenty-Fifth Supplemental 4.23 to Form S-3 33-53034
Indenture, dated January 1, 1993
Twenty-Sixth Supplemental 4.2 to Form 10-K 1-4698
Indenture, dated May 1, 1995 Year 1995
4.3 Instrument of Further Assurance 4.8 to Form S-1 2-12566
dated April 1, 1956 to Indenture
of Mortgage and Deed of Trust
dated October 1, 1953
4.4 Rights Agreement dated October 15, 4.1 to Form 8-A 1-4698
1990 between Manufacturers Hanover Year 1990
Trust Company and Nevada Power
Company
4.5 Junior Subordinated Indenture 4.01 to Form S-3 333-21091
between Nevada Power and IBJ Schroder
Bank & Trust Company, as Debenture
Trustee dated March 1, 1997
4.6 Trust Agreement of NVP Capital I 4.03 to Form S-3 333-21091
dated March 1, 1997
4.7 Form of Amended and Restated Trust 4.10 to Form S-3 333-21091
Agreement dated March 1, 1997
4.8 Form of Preferred Security 4.11 to Form S-3 333-21091
Certificate for NVP Capital I
and NVP Capital II dated
March 1, 1997
4.9 Form of Guarantee Agreement 4.12 to Form S-3 333-21091
dated March 1, 1997
15
<PAGE>
EXHIBIT ORIGINALLY FILED
NO. DESCRIPTION AS EXHIBIT FILE NO.
- ------- ----------- ---------------- --------
4.10 Form of Supplemental Indenture 4.13 to Form S-3 333-21091
between Nevada Power and IBJ Schroder
Bank & Trust Company, as Debenture
Trustee dated March 1, 1997
4.11 Form of Agreement as to Expenses 4.14 to Form S-3 333-21091
and Liabilities between Nevada
Power and NVP Capital I
dated March 1, 1997
10.1 Contract for Sale of Electrical 13.9A to Form S-1 2-10932
Energy between State of Nevada
and the Company, dated October
10, 1941
10.2 Amendment dated June 30, 1953 to 13.9A to Form S-1 2-10932
Exhibit 10.1
10.3 Contract for Sale of Electrical 13.10 to Form S-1 2-10932
Energy between State of Nevada
and the Company, dated June 1,
1951
10.4 Agreement dated November 10, 1948 13.18 to Form S-1 2-12697
between the Company and Lincoln
County Power District No. 1 and
Overton Power District No. 5
10.5 Agreement dated October 21, 1949 13.19 to Form S-9 2-12697
between the Company and Lincoln
County Power District No. 1 and
Overton Power District No. 5
10.6 Mohave Project Plant Site 13.27 to Form S-9 2-28348
Conveyance and Co-tenancy
Agreement dated May 29, 1967
between the Company and Salt
River Project Agricultural
Improvement and Power District
and Southern California Edison
Company
10.7 Eldorado System Conveyance and 13.30 to Form S-9 2-28348
Co-tenancy Agreement dated
December 20, 1967 between the
Company and Salt River Project
Agricultural Improvement and
Power District and Southern
California Edison Company
10.8 Mohave Operating Agreement dated 13.26F to Form S-1 2-38314
July 6, 1970 between the Company,
Salt River Project Agricultural
Improvement and Power District,
Southern California Edison
Company and Department of Water
and Power of the City of Los
Angeles
16
<PAGE>
EXHIBIT ORIGINALLY FILED
NO. DESCRIPTION AS EXHIBIT FILE NO.
- ------- ----------- ---------------- --------
10.9 Navajo Project Participation 13.27A to Form S-1 2-38314
Agreement dated September 30,
1969 between the Company, the
United States of America,
Arizona Public Service Company,
Department of Water and Power of
the City of Los Angeles, Salt
River Project Agricultural
Improvement and Power District
and Tucson Gas & Electric
Company
10.10 Navajo Project Coal Supply 13.27B to Form S-1 2-38314
Agreement dated June 1, 1970
between the Company, the United
States of America, Arizona
Public Service Company,
Department of Water and Power
of the City of Los Angeles,
Salt River Project Agricultural
District, Tucson Gas & Electric
Company and the Peabody Coal
Company
10.11 Contract dated January 1, 1968 13.32 to Form S-1 2-34588
between the Company and United
States Bureau of Reclamation for
interconnections at Mead Station
10.12 Note Agreement dated December 11, 5.35 to Form S-7 2-49622
1973 relating to $25,000,000
8-1/2% Promissory Notes due 1998
10.13 Reclaimed Wastewater Purchase 5.36 to Form S-7 2-52238
Agreement dated June 21, 1974
among City of Las Vegas, Nevada,
Clark County Sanitation District
No. 1, County of Clark, Nevada
and Nevada Power Company
10.14 Equipment Lease dated as of 5.37 to Form 8-K 1-4698
March 1, 1974 between Nevada Power April 1974
Company, Lessor, and Clark County,
Nevada, Lessee
10.15 Sublease Agreement dated as of 5.38 to Form 8-K 1-4698
March 1, 1974 between Clark April 1974
County, Nevada, Sublessor,
and Nevada Power Company,
Sublessee
10.16 Guaranty Agreement dated as of 5.39 to Form 8-K 1-4698
March 1, 1974 between Nevada April 1974
Power Company and Commerce
Union Bank as Trustee
17
<PAGE>
EXHIBIT ORIGINALLY FILED
NO. DESCRIPTION AS EXHIBIT FILE NO.
- ------- ----------- ---------------- --------
10.17 Navajo Project Co-tenancy 5.31 to Form 8-K 1-4698
Agreement dated March 23, 1976 April 1974
between the Company, Arizona
Public Service Company,
Department of Water and
Power of the City of Los Angeles,
Salt River Project Agricultural
Improvement and Power District,
Tucson Gas & Electric Company
and the United States of America
10.18 Amended Mohave Project Coal Supply 5.35 to Form S-7 2-56356
Agreement dated May 26, 1976
between the Company and Southern
California Edison Company,
Department of Water and Power of
the City of Los Angeles, Salt
River Project Agricultural
Improvement and Power District
and the Peabody Coal Company
10.19 Amended Mohave Project Coal Slurry 5.36 to Form S-7 2-56356
Pipeline Agreement dated May 26,
1976 between Peabody Coal Company
and Black Mesa Pipeline, Inc.
(Exhibit B to Exhibit 10.18)
10.20 Coal Supply Agreement dated October 5.38 to Form S-7 2-56356
15, 1975 between the Company and
United States Fuel Company
10.21 Amendment dated November 19, 1976 5.30 to Form S-7 2-62105
to Exhibit 10.20
10.22 Participation Agreement Reid 5.34 to Form S-7 2-65097
Gardner Unit No. 4 dated July
11, 1979 between the Company
and California Department of
Water Resources
10.23 Coal Supply Agreement dated 5.37 to Form S-7 2-62509
March 1, 1980 between the
Company and Beaver Creek
Coal Company
10.24 Coal Supply Agreement dated 5.38 to Form S-7 2-62509
March 1, 1980 between the
Company and Trail Mountain
Coal Company
10.25 Coal Supply Agreement dated 10.26 to Form 10-K 1-4698
December 8, 1980 between the Year 1981
Company and Plateau Mining
Company
10.26 Coal Supply Agreement dated 10.26 to Form 10-K 1-4698
August 31, 1982 between Year 1982
the Company and CO-OP
Mining Company
10.27 Coal Supply Agreement dated 10.27 to Form 10-K 1-4698
September 8, 1982 between the Year 1982
Company and Getty Mining
Company
18
<PAGE>
EXHIBIT ORIGINALLY FILED
NO. DESCRIPTION AS EXHIBIT FILE NO.
- ------- ----------- ---------------- --------
10.28 Coal Supply Agreement dated 10.28 to Form 10-K 1-4698
September 8, 1982 between the Year 1982
Company and Tower Resources,
Inc.
10.29 Coal Supply Agreement dated 10.29 to Form 10-K 1-4698
September 22, 1982 between the Year 1982
Company and Beaver Creek Coal
Company
10.30 Memorandum of Understanding 10.30 to Form 10-K 1-4698
Concerning Interconnection Year 1983
between Utah Power & Light
Company and Nevada Power
Company dated February 2, 1984
10.31 Sublease Agreement between Powveg 10.31 to Form 10-K 1-4698
Leasing Corp., as Lessor and Year 1983
Nevada Power Company as Lessee,
dated January 11, 1984 for
lease of administrative
headquarters
10.32 Participation Agreement between 10.32 to Form 10-K 1-4698
Utah Power & Light Company and Year 1985
the Company dated December 19,
1985
10.33 Sale and Purchase Agreement dated 10.33 to Form 10-K 1-4698
as of December 23, 1985 by and Year 1985
between Nevada Power Company and
CP National Corporation
10.34 Restated Coal Sales Agreement as 10.34 to Form 10-K 1-4698
of July 1, 1985 by and between Year 1985
Nevada Power Company and Trail
Mountain Coal Company
10.35 Summary of Supplemental Executive 10.35 to Form 10-K 1-4698
Retirement Plan as approved Year 1985
November 14, 1985
10.36 Financing Agreement dated as of 10.36 to Form 10-K 1-4698
February 1, 1983 between Clark Year 1985
County, Nevada and Nevada Power
Company
10.37 Financing Agreement between Clark 10.37 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1985
Company dated as of December 1,
1985
10.38 Reimbursement Agreement dated 10.38 to Form 10-K 1-4698
as of December 1, 1985 between Year 1986
The Fuji Bank, Limited and
Nevada Power Company
10.39 Contract for Sale of Electrical 10.39 to Form 10-K 1-4698
Energy between the State of Year 1987
Nevada and the Company, dated
July 8, 1987
10.40 Power Sales Agreement between 10.40 to Form 10-K 1-4698
Utah Power & Light Company and Year 1987
the Company, dated August 17,
1987
19
<PAGE>
EXHIBIT ORIGINALLY FILED
NO. DESCRIPTION AS EXHIBIT FILE NO.
- ------- ----------- ---------------- --------
10.41 Transmission Facilities Agreement 10.41 to Form 10-K 1-4698
between Utah Power & Light Year 1987
Company and the Company, dated
August 17, 1987
10.42 Financing Agreement between Clark 10.42 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1988
Company dated as of November 1,
1988
10.43 Reimbursement Agreement dated 10.43 to Form 10-K 1-4698
as of November 1, 1988 between Year 1988
The Fuji Bank, Limited and
Nevada Power Company
10.44 Power Purchase Contract dated 10.45 to Form 10-K 1-4698
February 15, 1990 between Year 1989
Mission Energy Company and
Nevada Power Company
10.45 Contact for Long-Term Power 10.46 to Form 10-K 1-4698
Purchases from Qualifying Year 1989
Facilities dated May 1, 1989
between Oxford Energy of Nevada
and Nevada Power Company
10.46 Contract A for Long-Term Power 10.47 to Form 10-K 1-4698
Purchases from Qualifying Year 1989
Facilities dated May 2, 1989
between Bonneville Nevada
Corporation and Nevada Power
Company
10.47 Contract for Long-Term Power 10.48 to Form 10-K 1-4698
Purchases from Qualifying Year 1989
Facilities dated April 10, 1989
between Magna Energy Systems,
Eastern Sierra Energy Company
and Nevada Power Company
10.48 Contract B for Long-Term Power 10.49 to Form 10-K 1-4698
Purchases from a Qualifying Year 1989
Facility dated October 27, 1989
between Bonneville Nevada
Corporation and Nevada Power
Company
10.49 Contract for Long-Term Power 10.50 to Form 10-K 1-4698
Purchases from Qualified Year 1989
Facilities dated February 12,
1990 between Las Vegas
Co-generation, Inc. and Nevada
Power Company
10.50 Agreement for Transmission 10.51 to Form 10-K 1-4698
Service dated March 29, 1989 Year 1989
between Overton Power District
No. 5 , Lincoln County Power
District No. 1 and Nevada Power
Company
10.51 Contract dated June 30, 1988 10.52 to Form 10-K 1-4698
between United States Department Year 1989
of Energy Western Area Power
Administration and Nevada Power
Company
20
<PAGE>
EXHIBIT ORIGINALLY FILED
NO. DESCRIPTION AS EXHIBIT FILE NO.
- ------- ----------- ---------------- --------
10.52 Executive Performance Incentive 10.53 to Form 10-K 1-4698
Plan dated as of January 1, 1989 Year 1989
10.53 Severance Allowance Plan 10.54 to Form 10-K 1-4698
adopted September 14, 1989 Year 1989
10.54 Power Purchase Contract dated 10.55 to Form 10-K 1-4698
July 5, 1990 between Year 1990
Mission Energy Company and
Nevada Power Company
10.55 Contract B for Long-Term Power 10.56 to Form 10-K 1-4698
Purchases from a Qualifying Year 1990
Facility dated May 24, 1990
between Bonneville Nevada
Corporation and Nevada Power
Company
10.56 Amendment dated June 15, 1989 to 10.57 to Form 10-K 1-4698
Exhibit 10.45 Year 1990
10.57 Amendment dated August 23, 1989 10.58 to Form 10-K 1-4698
to Exhibit 10.45 Year 1990
10.58 Amendment dated April 23, 1990 10.59 to Form 10-K 1-4698
to Exhibit 10.45 Year 1990
10.59 Exhibit H dated August 13, 1990 10.60 to Form 10-K 1-4698
to Exhibit 10.45 Year 1990
10.60 Western Systems Power Pool 10.61 to Form 10-K 1-4698
Agreement (Agreement) dated Year 1990
January 2, 1991 between
thirty-nine other Western
Systems Power Pool members as
listed on pages 1 and 2 of the
Agreement and Nevada Power
Company
10.61 Financing Agreement between Clark 10.62 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1990
Company dated June 1, 1990
10.62 Restated Power Sales Agreement 10.63 to Form 10-K 1-4698
dated March 25, 1991 between Year 1991
Pacificorp and Nevada Power
Company
10.63 Amendment dated July 17, 1990 to 10.64 to Form 10-K 1-4698
Exhibit 10.54 Year 1991
10.64 Financing Agreement between Clark 10.65 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1992
Company dated June 1, 1992
(Series 1992A)
10.65 Financing Agreement between Clark 10.66 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1992
Company dated June 1, 1992
(Series 1992B)
10.66 Financing Agreement between Clark 10.67 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1992
Company dated October 1, 1992
10.67 Power Sales Agreement dated 10.68 to Form 10-K 1-4698
October 19, 1992 between the Year 1992
Department of Water and Power
of the City of Los Angeles
and Nevada Power Company
21
<PAGE>
EXHIBIT ORIGINALLY FILED
NO. DESCRIPTION AS EXHIBIT FILE NO.
- ------- ----------- ---------------- --------
10.68 Long-Term Incentive Plan dated 10.69 to Form 10-K 1-4698
as of January 1, 1993 Year 1993
10.69 Contract for Long-Term Power 10.70 to Form 10-K 1-4698
Purchases from Qualifying Year 1993
Facilities dated May 27, 1992
between Las Vegas Co-generation,
Inc. and Nevada Power Company
Replaces Exhibit 10.49
10.70 Settlement Agreement and Promissory 10.71 to Form 10-K 1-4698
Note between Mountain Coal Company Year 1993
and Atlantic Richfield Company and
Nevada Power Company dated
March 9, 1994
10.71 401(k) Savings Plan, as amended 99.1 to Form S-8 33-50809
and restated January 1, 1990
10.72 Amendment dated January 1, 1991 99.2 to Form S-8 33-50809
to Exhibit 10.71
10.73 Letter of Credit and Reimbursement 10.72 to Form 10-K 1-4698
Agreement dated as of April 12, Year 1994
1994 between Nevada Power Company
and Societe Generale, Los Angeles
Branch and Amendment No. 1 thereto
dated as of May 3, 1994
10.74 Loan Agreement dated as of November 10.73 to Form 10-K 1-4698
21, 1994 between Nevada Power Year 1994
Company, certain banks, and First
Interstate Bank of Nevada, N.A. as
the Administrative Agent
10.75 Financing Agreement between Clark 10.75 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1995
Company dated October 1, 1995
(Series 1995A)
10.76 Financing Agreement between Clark 10.76 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1995
Company dated October 1, 1995
(Series 1995B)
10.77 Financing Agreement between Clark 10.77 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1995
Company dated October 1, 1995
(Series 1995C)
10.78 Financing Agreement between Clark 10.78 to Form 10-K 1-4698
County, Nevada and Nevada Power Year 1995
Company dated October 1, 1995
(Series 1995D)
10.79 Financing Agreement between 10.79 to Form 10-K 1-4698
Coconino County, Arizona Pollution Year 1995
Control Corporation and Nevada Power
Company dated October 1, 1995
(Series 1995E)
10.80 Letter of Credit and Reimbursement 10.80 to Form 10-K 1-4698
Agreement dated as of October 1, Year 1995
1995 among Nevada Power Company,
The Banks Named Herein, and Societe
Generale, Los Angeles Branch
22
<PAGE>
EXHIBIT ORIGINALLY FILED
NO. DESCRIPTION AS EXHIBIT FILE NO.
- ------- ----------- ---------------- --------
10.81 Letter of Credit and Reimbursement 10.81 to Form 10-K 1-4698
Agreement dated as of October 1, Year 1995
1995 among Nevada Power Company,
The Banks Named Herein, and Barclays
Bank PLC, New York Branch
10.82 Financing Agreement between Coconino 10.82 to Form 10-K 1-4698
County, Arizona Pollution Control Year 1996
Corporation and Nevada Power
Company dated October 1, 1996
REPORTS ON FORM 8-K
The Company filed no current report on Form 8-K during the quarter
ended December 31, 1997.
23
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
We consent to the incorporation by reference in Registration Statements No.
333-46567 and 333-21091 on Form S-3 and in Registration Statements No. 33-34011
and 33-61365 on Form S-8 of Nevada Power Company of our report dated February
13, 1998 incorporated by reference in this Annual Report on Form 10-K of Nevada
Power Company for the year ended December 31, 1997.
Our audits of the consolidated financial statements referred to in our
aforementioned report also included the consolidated financial statement
schedule of Nevada Power Company, listed in Item 14. This consolidated
financial statement schedule is the responsibility of Nevada Power Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
March 19, 1998
24
<PAGE>
NEVADA POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS OF DOLLARS)
RESERVE FOR
DOUBTFUL
ACCOUNTS
-----------
BALANCE AT JANUARY 1, 1995............................... $ 1,395
Provision charged to income............................. 3,590
Amounts written off, less recoveries.................... (3,658)
-------
BALANCE AT DECEMBER 31, 1995............................. 1,327
Provision charged to income............................. 3,829
Amounts written off, less recoveries.................... (2,264)
-------
BALANCE AT DECEMBER 31, 1996............................. 2,892
Provision charged to income............................. 2,737
Amounts written off, less recoveries.................... (3,338)
-------
BALANCE AT DECEMBER 31, 1997............................. $ 2,291
=======
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEVADA POWER COMPANY
-------------------------------------
(Registrant)
March 23, 1998 By CHARLES A. LENZIE
-------------------------------------
Charles A. Lenzie
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
March 23, 1998 By CHARLES A. LENZIE
-------------------------------------
Charles A. Lenzie, Chairman of
the Board and Chief Executive
Officer and Director
(Principal Executive Officer)
March 23, 1998 By STEVEN W. RIGAZIO
-------------------------------------
Steven W. Rigazio, Vice President,
Finance and Planning, Treasurer,
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
March 23, 1998 By MARY KAYE CASHMAN
-------------------------------------
Mary Kaye Cashman, Director
March 23, 1998 By MARY LEE COLEMAN
-------------------------------------
Mary Lee Coleman, Director
March 23, 1998 By FRED D. GIBSON JR.
-------------------------------------
Fred D. Gibson Jr., Director
March 23, 1998 By JOHN L. GOOLSBY
-------------------------------------
John L. Goolsby, Director
March 23, 1998 By JERRY E. HERBST
-------------------------------------
Jerry E. Herbst, Director
March 23, 1998 By MICHAEL R. NIGGLI
-------------------------------------
Michael R. Niggli, President, Chief
Operating Officer and Director
March 23, 1998 By JOHN F. O'REILLY
-------------------------------------
John F. O'Reilly, Director
March 23, 1998 By FRANK E. SCOTT
-------------------------------------
Frank E. Scott, Director
By
-------------------------------------
Arthur M. Smith, Director
March 23, 1998 By JELINDO A. TIBERTI
-------------------------------------
Jelindo A. Tiberti, Director
26
<PAGE>
27\
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
GENERAL In 1997, earnings increased, as compared to 1996, due primarily to the
$5.5 million, net of tax, write-off recorded in the fourth quarter of 1996
resulting from the Public Utilities Commission of Nevada (PUCN) (previously the
Public Service Commission of Nevada) order in the 1995 deferred energy case.
In 1996, earnings were only slightly higher and earnings per share
decreased, as compared to 1995, due primarily to a fourth quarter write-off
resulting from the PUCN order in the 1995 deferred energy case. An increase
in average shares of common stock outstanding, as compared to 1995, also
contributed to the decrease in earnings per share.
Average shares of common stock outstanding for 1997 increased by 1.7
million shares compared to 1996 and by 1.7 million shares for 1996 compared
to 1995, as a result of the sale of shares through the Stock Purchase and
Dividend Reinvestment Plan (SPP).
- --------------------------------------------------------------------------------
REVENUES Revenues during 1997, 1996 and 1995 were $799 million, $805 million
and $750 million, respectively.
The .8 percent decrease in 1997 as compared to 1996 was primarily a
result of an energy rate decrease effective February 1, 1997.
The 7.4 percent increase in 1996, as compared to 1995, was a result of
warmer weather and continued customer growth.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN REVENUE FROM PRIOR YEAR (IN MILLIONS)
NATURE OF INCREASE (DECREASE) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Kilowatthour sales $ 44.1 $ 86.2 $ (5.5)
General rate changes 111.7 - (5.2)
Deferred energy adjustments (25.8) (27.1) (3.9)
Fuel cost less rate changes (137.3) (4.5) .1
Other 1.1 .8 .3
-----------------------------------
Total increase (decrease) $ (6.2) $ 55.4 $(14.2)
- --------------------------------------------------------------------------------
-----------------------------------
</TABLE>
- --------------------------------------------------------------------------------
FUEL AND PURCHASED POWER Fuel expense increased $26.6 million in 1997,
as compared with 1996, primarily due to higher average fuel prices and increased
generation.
In 1997, as compared to 1996, purchased power expense increased 5.1 percent
due to higher average purchased power prices.
Fuel expense increased $8.7 million in 1996, as compared with 1995,
primarily due to higher average natural gas prices.
In 1996, as compared to 1995, purchased power expense increased 14.5
percent due to increased power purchases offset in part by lower average
purchased power prices.
Effective February 1, 1997 and October 1 and December 1, 1995, the PUCN
granted Nevada Power Company (Company) decreases of $45.0 million, $20.1 million
and $17.1 million, respectively, in energy rates.
In 1997, the Company deferred $27.8 million of increased energy costs
for collection in a later period and refunded $32.6 million of energy cost
decreases which had been previously deferred. In 1996, the Company deferred
$14.5 million of decreased energy costs for refund in a later period and
refunded $5.7 million of energy cost decreases which had been previously
deferred. In 1995, the Company deferred $19.8 million of decreased energy
costs for refund in a later period and collected $22.9 million of energy cost
increases which had been previously deferred. Recovery of fuel expenses is
administered under the state's deferred energy cost accounting procedures.
(See Note 1 of "Notes to Consolidated Financial Statements.") Under the
deferred energy procedure, changes in the costs of fuel and purchased power
are reflected in customer rates through annual rate adjustments and do not
affect earnings.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/28
The following tables summarize kilowatthour data.
<TABLE>
<CAPTION>
SOURCE OF KILOWATTHOURS SOLD 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Company generation 54% 50% 56%
Hoover Dam hydroelectric 4 4 4
Purchased power 42 46 40
----------------------------------------------------------
100% 100% 100%
- --------------------------------------------------------------------------------------------------------------
----------------------------------------------------------
COMPANY GENERATED KILOWATTHOURS BY FUEL SOURCE
- --------------------------------------------------------------------------------------------------------------
Coal 67% 76% 77%
Natural Gas 33 24 23
----------------------------------------------------------
100% 100% 100%
- --------------------------------------------------------------------------------------------------------------
----------------------------------------------------------
FUEL COSTS PER KILOWATTHOUR
- --------------------------------------------------------------------------------------------------------------
Coal 1.39 CENTS 1.39 CENTS 1.44 CENTS
Natural Gas 2.25 1.95 1.51
- --------------------------------------------------------------------------------------------------------------
----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
OTHER OPERATING EXPENSES AND TAXES Other operations expense increased
$3.8 million in 1996 due primarily to increased administrative and general
expenses and transmission expenses resulting from increased labor costs.
The level of maintenance and repair expenses depends primarily upon the
scheduling, magnitude and number of unit overhauls at the Company's generating
stations. In 1997, these expenses increased by $7.7 million due primarily to
increased maintenance expense at the Reid Gardner and Clark Generating Stations.
In 1996, these expenses increased by $10.9 million due primarily to increased
maintenance expense at the Reid Gardner and Navajo Generating Stations.
Depreciation expense increased $4.5 million in 1997 and $6.5 million in
1996 because of a growing electric plant asset base.
- -------------------------------------------------------------------------------
OTHER INCOME AND EXPENSES Other miscellaneous, net increased by $4.4 million
in 1997 due primarily to the $5.5 million, net of tax, write-off recorded in the
fourth quarter of 1996 resulting from the PUCN order in the 1995 deferred energy
case.
Other miscellaneous, net decreased by $11.1 million in 1996 due primarily
to the $2.3 million, net of tax, gain recorded in the first quarter of 1995 for
the sale of mining property by the Company's unregulated subsidiary, the $5.5
million, net of tax, write-off resulting from the above mentioned PUCN order and
$2.1 million, net of tax, in decreased carrying charges on deferred energy
costs.
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
CASH FLOWS Overall net cash flows increased during 1997, as compared to
1996, as a result of more cash being provided by financing activities
partially offset by less cash being provided by operating activities and more
cash being used in investing activities. The energy rate decrease effective
February 1, 1997 was the primary cause of the decrease in cash being provided
by operating activities partially offset by timing differences in federal
income tax payments. The increase in cash used in investing activities was
due to increased construction expenditures. The increase in cash being
provided by financing activities was a result of the issuance of the Series
A, 8.2% Cumulative Quarterly Income Preferred Securities (QUIPS) by the
Company's subsidiary trust, NVP Capital I (See Note 6 to "Consolidated
Financial Statements") and the issuance of the Series 1997B $20 million
Pollution Control Revenue Bonds (PCRBs). The net proceeds from the issuance
of the Series 1997A $52.3 million Industrial Development Revenue Bonds (IDBs)
remain on deposit with a trustee. (See the Long-Term Debt section of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations.")
Overall net cash flows decreased during 1996, as compared to 1995, as a
result of less cash being provided by operating activities and more cash being
used in investing activities. Energy rate decreases effective October 1 and
December 1, 1995 were the main cause of the reduction in cash provided by
operating activities. The increase in net cash used in investing activities in
1996 over 1995 resulted primarily from the 1995 transfer of cash from the sale
of mining property by the Company's unregulated subsidiary. The change in cash
flows from 1995 to 1996 related to long-term debt and the associated funds held
in trust resulted mainly from the 1995 issuance of the $85 million Series AA
First Mortgage Bonds (FMBs) and $239.05 million in variable rate revenue bonds.
The net proceeds from
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
29\
the variable rate revenue bonds were placed on deposit with a trustee and $162.3
million of those proceeds were then withdrawn from trust in 1995 for the
redemption of various series of revenue bonds. A portion of the proceeds from
the Series AA FMBs were used to redeem the $50 million Series U FMBs in 1995.
- -------------------------------------------------------------------------------
RESOURCE DEVELOPMENT AND CONSTRUCTION PROGRAMS Pursuant to Nevada law, every
three years the Company is required to file with the PUCN a forecast of
electricity demands for the next 20 years and the Company's plans to meet those
demands. The Company filed its 1997 Resource Plan on June 3, 1997. On October
20, 1997, the PUCN rendered a decision on this plan. Among the major items in
the Company's 1997 Resource Plan which were approved by the PUCN are the
following:
(1) the Company will proceed to build a 500 kV transmission project known as
the Crystal Transmission Project, with an in-service date of June 1, 1999;
(2) the Company will continue to pursue a strategy of relying on bulk power
purchases to meet near-term incremental increases in load;
(3) the Company will proceed with a joint 230 kV transmission project with the
Colorado River Commission with costs subject to prudency review in a future
rate case;
(4) the Company received limited approval to proceed with six switchyard
projects;
(5) the Company received approval for pre-development costs to build two 144
megawatt (MW) combustion turbines in 2002 and 2003 which would be converted
to a 410 MW combined cycle plant in 2004. An amendment to the 1997 Resource
Plan will need to be filed by September 1999 for full approval if the
Company wants to proceed with building the turbines.
Budgeted construction expenditures for 1998 and 1999 are $295 million and $255
million, respectively, excluding allowance for funds used during construction.
For the next five years customer growth is estimated to average 5.1 percent
per year while demand for electricity is estimated to increase by an average of
6.0 percent per year.
In order to assemble the resource plan and budget construction expenditures
and also estimate customer growth and demand for electricity, the Company is
required to make assumptions. The assumptions include but are not limited to
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices, and other factors.
If actual events differ from any of these assumptions, the resource plan and
predictions of future expenditures, growth and demand may change.
- -------------------------------------------------------------------------------
FINANCIAL STRATEGIES Rapid growth continues to be forecasted for the
Company's service territory for the late 1990s and into the next century. As
in the past, the Company will rely upon the financial markets to provide a
substantial portion of the funds to build necessary Company-owned facilities.
Customer growth averaged 6.6 percent annually during the three years ended
December 31, 1997.
During this period of continued rapid growth, the Company is committed to
maintaining shareholder value by utilizing a balanced and flexible financing
approach using low cost financing whenever possible, reducing costs and seeking
legislative and regulatory support as needed.
- -------------------------------------------------------------------------------
CAPITALIZATION The Company will utilize internally generated cash and the
proceeds from IDBs, FMBs, unsecured borrowings, preferred securities and
common stock issues through public offerings and the SPP to meet capital
expenditure requirements through 1999.
- -------------------------------------------------------------------------------
NEW FINANCING CAPACITY Under the tests required by the Company's FMBs and
the terms of its preferred stock issues, as of December 31, 1997, the Company
could issue up to $594 million of additional FMBs at an assumed interest rate
of 7.5 percent and up to $429 million of additional preferred stock at an
assumed dividend of 7.5 percent.
On August 21, 1997, the Company received approval from the PUCN to issue
and sell up to $213 million of preferred stock, tax advantaged preferred stock
and/or common stock through public or private offerings, the Company's SPP, the
Company's 401(k) plan or any other method deemed appropriate. Approval was also
received to issue and sell $487 million of tax-exempt, taxable, tax advantaged
and/or any other type of debt the Company determines to be appropriate at the
time. The Company also received approval to secure any of the debt through the
issuance and pledge of first mortgage bonds only if it cannot, at the time of
issuance, economically and effectively issue investment grade unsecured debt.
The financing approval expires on December 31, 1999.
- -------------------------------------------------------------------------------
EARNINGS TO INTEREST AND PREFERRED DIVIDENDS COVERAGE For the year 1997, the
ratio of earnings to interest charges was 2.76 times compared to 2.92 times in
1996. The ratio of earnings to interest charges plus preferred dividends was
2.70 times in 1997 compared to 2.66 times in 1996.
- -------------------------------------------------------------------------------
COMMON EQUITY The Company has the option to issue new common shares or purchase
shares on the open market to satisfy the needs of the SPP. During 1997, the
Company issued $31.8 million of common stock under the SPP. (See Note 5 of
"Notes to Consolidated Financial Statements.") At year end, common equity
represented 45 percent of total capitalization.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/30
- -------------------------------------------------------------------------------
CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES On April 2, 1997, NVP Capital
I (Trust), a wholly-owned subsidiary of the Company, issued 4,754,860 8.2% QUIPS
at $25 per security. The Company owns all of the Series A common securities,
147,058 shares issued by the Trust for $3.7 million. The $118.9 million in net
proceeds to the Company was used for general corporate utility purposes and
repayment of short-term debt incurred to redeem the Company's $38 million, 9.9%
Redeemable Cumulative Preferred Stock on April 1, 1997. (See Note 6 of "Notes to
Consolidated Financial Statements.")
- -------------------------------------------------------------------------------
SHORT-TERM DEBT The Company has PUCN approval for authority to issue
short-term unsecured promissory notes not to exceed $225 million with such
authorization to expire on December 31, 1999 and has a committed bank line
for $125 million which expires on November 21, 2002. The short-term financing
is expected to be utilized to fund some of the Company's construction
expenditures until long-term financing is secured. At December 31, 1997, the
Company had no balance outstanding on this line.
- -------------------------------------------------------------------------------
LONG-TERM DEBT On November 20, 1997, Clark County, Nevada issued $52.3 million
5.9% IDBs Series 1997A (Nevada Power Company Project) due 2032 and Coconino
County, Arizona issued $20 million 5.8% Pollution Control Revenue Bonds (PCRBs)
Series 1997B (Nevada Power Company Project) due 2032. Net proceeds from the sale
of the IDBs were placed on deposit with a trustee and will be used to finance
the construction of certain facilities which qualify for tax-exempt financing.
Net proceeds from the sale of the PCRBs were placed on deposit with a trustee
and are being used to finance the construction of the Navajo scrubber facilities
which qualify for tax-exempt financing. At December 31, 1997, $52.9 million
remained on deposit with the trustee.
The Company also remarketed $85 million Series 1995B Clark County, Nevada
(Nevada Power Company Project) variable rate IDBs due 2030 at a 5.9 percent
fixed rate on November 24, 1997.
On January 29, 1998, the Company remarketed at fixed rates $141.05
million Clark County, Nevada (Nevada Power Company Project) variable rate
revenue bonds consisting of $76.75 million Series 1995A IDBs due 2030 at 5.6
percent, $44 million Series 1995C IDBs due 2030 at 5.5 percent and $20.3
million Series 1995D PCRBs with $14 million due 2011 at 5.3 percent and $6.3
million due 2023 at 5.45 percent. On the same date, $13 million Coconino
County, Arizona (Nevada Power Company Project) Series 1995E PCRBs due 2022
were remarketed at a 5.35 percent fixed rate.
A discussion of long-term debt maturities, including sinking fund
requirements, is contained in Note 7 of "Notes to Consolidated Financial
Statements."
- -------------------------------------------------------------------------------
REGULATION The PUCN allows recovery of costs on an historical test year in
setting rates charged to customers for electrical service. (See Industry
Restructuring section below.)
Environmental expenditures made by the Company are currently being
recovered through customer rates. A discussion of pending environmental
matters is contained in Note 9 of "Notes to Consolidated Financial
Statements."
- -------------------------------------------------------------------------------
CONCLUDED RATE MATTERS On January 8, 1998, the PUCN approved a $45.6 million
energy rate increase effective February 1, 1998. The Company requested the
increase to recover higher costs for natural gas and purchased power. The PUCN
also decided previously recorded revenues from the sale of sulfur dioxide
emission allowances ($2.3 million, before tax) should be reversed and credited
to a deferred liability account for a later determination in a general rate
case.
The table below summarizes the rate adjustments that have been granted to
the Company during the past three years.
- -------------------------------------------------------------------------------
SUMMARY OF RATE ADJUSTMENTS 1995 THROUGH 1997 (IN MILLIONS)
<TABLE>
<CAPTION>
EFFECTIVE DATE NATURE OF INCREASE (DECREASE) Amount
- -------------------------------------------------------------------------------
<S> <C> <C>
October 1, 1995 Energy rate decrease $(20.1)
December 1, 1995 Energy and resource plan net rate decrease (17.6)
February 1, 1997 Energy rate decrease (45.0)
- -------------------------------------------------------------------------------
</TABLE>
INDUSTRY RESTRUCTURING On July 16, 1997, the Governor of the state of Nevada
signed into law Assembly Bill 366 (AB 366) which provides for competition to be
implemented in the electric utility industry in the state no later than December
31, 1999 unless the PUCN determines a different date is necessary to protect the
public interest. AB 366 also changed the name of the Public Service Commission
to the PUCN, reduced it from five to three members, and removed the regulation
of transportation matters to another agency. It is expected that the generation,
aggregation (buying and reselling electricity to customers) and marketing of
electricity and possibly other utility services will be deemed competitive,
while transmission and distribution services will be deemed noncompetitive and
will continue
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
31\
to be regulated. The Company is required to submit a plan to the PUCN to
unbundle its integrated rates. A provider of a noncompetitive service will be
prohibited from providing a potentially competitive service except through an
affiliate which the PUCN has determined, after a hearing, has an arm's length
relationship with the provider of the noncompetitive service. Each provider
of a noncompetitive service that is necessary to the provision of a
potentially competitive service is required to make its facilities or
services available to all alternative sellers on equal and nondiscriminatory
terms and conditions. Alternative sellers of electricity must be licensed
under rules yet to be determined by the PUCN. AB 366 allows the PUCN to
authorize full recovery of costs which they determine to be stranded but does
not guarantee full recovery of those costs. Costs that were incurred by
utilities to serve their customers with the understanding that state
regulatory commissions would allow the costs to be recovered through electric
rates are potentially stranded costs. The greater part of the Company's
potentially stranded costs are related to contracts with qualifying
facilities all of which were previously approved by the PUCN. The PUCN shall
designate a vertically integrated electric utility or another entity to
provide electric service to customers who are unable to obtain electric
service from an alternative seller or who fail to select an alternative
seller. The provider of last resort so designated by the PUCN is obligated to
provide electric service to those customers. The PUCN may authorize the right
to buy from alternative sellers in gradual phases. The rate charged for
residential service for customers who are unable to obtain electric service
from an alternative seller or who fail to select an alternative seller must
not exceed the rate charged for that service on July 1, 1997, however, the
PUCN may approve an increase in residential rates in an amount necessary to
ensure recovery by the Company of its just and reasonable costs. The
residential rate restriction will remain in place until 2003. Two-tenths of
one percent of all electric energy sold must come from a renewable resource
produced in Nevada by January 1, 2001. Fifty percent of this energy must be
derived from solar power. Every two years the standard increases by
two-tenths of one percent until a total of one percent of all electricity
consumed comes from renewable resources.
In August 1997, the PUCN opened an investigatory docket of the issues to
be considered as a result of restructuring of the electric industry. The
docket sets forth the issues to be addressed as well as the steps the PUCN
will take to address them. Issues to be addressed include the following:
(1) Identification of all cost components in utility service and establishment
of allocation methods necessary for later pricing of noncompetitive
services;
(2) Designation of services as potentially competitive or noncompetitive;
(3) Determination of rate design and non-price terms and conditions for
noncompetitive services;
(4) Establishment of licensing requirements for alternative sellers of
potentially competitive services;
(5) Past (stranded) costs;
(6) Criteria and standards by which the PUCN will apply the legislative
requirements concerning affiliate relations;
(7) Criteria and process by which the PUCN will appoint providers of bundled
electric service;
(8) Consumer protection;
(9) Anti-competitive behavior codes of conduct and enforcement;
(10) Price regulation for potentially competitive services in immature markets;
(11) Compliance plans in accordance with regulation;
(12) Options for complying with legislative mandates for integrated resource
planning and portfolio standards;
(13) Innovative pricing for noncompetitive services.
In its Order dated November 4, 1997, the PUCN designated unbundled services in
eight major categories with twenty-six unbundled services in total. The major
categories include Generation Capacity and Energy Supply, Generation Services
Necessary to Support Transmission Service, Arranging for Power Supplies, Power
Delivery, End-Use Metering, Customer Accounting, Marketing and Sales, and Public
Good Services. The PUCN evaluated the cost unbundling methodologies for the
unbundled services set forth in its Order and, after hearings, issued an Interim
Order describing the process the parties should follow to complete developing
cost unbundling methodologies and to work toward consensus on that issue.
The PUCN has the authority to classify a service as a potentially
competitive service if it finds the service meets specific requirements. The
PUCN has proposed regulations and held a hearing on the contents of
applications by any person seeking a designation of an unbundled service as
potentially competitive.
On January 21, 1998, the PUCN issued an Order to solicit comments on the
Classification of Components of Electric Service as Potentially Competitive
Services; Non-price Terms and Conditions for Distribution Tariffs; Licensing
of Alternative Sellers; and Consumer Protection. PUCN workshops have been
scheduled for March and April 1998 on these issues.
The deregulation of the electric utility industry has caused a
reevaluation of current accounting guidelines for electric utilities. A
discussion of this subject is included in Note 1 of "Notes to Consolidated
Financial Statements."
- -------------------------------------------------------------------------------
YEAR 2000 The Company has begun converting its computer systems to be year
2000 compliant (e.g., to recognize the difference between '99 and '00 as one
year instead of negative 99 years). The Company believes the impact the year
2000 issue will have on its business applications will not be material. The
Company is still reviewing this issue for its electrical systems equipment. A
plan is in progress to identify and correct problems related to the year
2000 issue.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/32
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
<S> <C> <C> <C>
ELECTRIC REVENUES (NOTE 1) $799,148 $805,374 $749,981
- --------------------------------------------------------------------------------------------------
OPERATING EXPENSES AND TAXES:
Fuel 138,956 112,321 103,582
Purchased and interchanged power 277,644 264,143 230,694
Deferred energy cost adjustments, net (Note 1) (60,400) 8,817 42,658
-------------------------------------------
Net energy costs 356,200 385,281 376,934
Other production operations 21,214 17,834 17,813
Other operations 101,597 99,266 95,458
Maintenance and repairs 52,126 44,464 33,598
Provision for depreciation (Note 1) 66,273 61,771 55,302
General taxes 21,064 19,558 18,946
Federal income taxes (Notes 1 and 2) 43,478 44,970 34,372
-------------------------------------------
661,952 673,144 632,423
- --------------------------------------------------------------------------------------------------
OPERATING INCOME 137,196 132,230 117,558
- --------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSES):
Allowance for other funds used
during construction (Note 1) 8,760 6,240 5,353
Other miscellaneous, net (5,741) (10,116) 996
-------------------------------------------
3,019 (3,876) 6,349
- --------------------------------------------------------------------------------------------------
INCOME BEFORE INTEREST DEDUCTIONS 140,215 128,354 123,907
- --------------------------------------------------------------------------------------------------
INTEREST DEDUCTIONS:
Interest on long-term debt 50,791 47,792 47,745
Other interest 1,531 2,584 1,566
Allowance for borrowed funds used
during construction (Note 1) (2,579) (890) (2,375)
-------------------------------------------
49,743 49,486 46,936
- --------------------------------------------------------------------------------------------------
DISTRIBUTION REQUIREMENTS ON COMPANY-
OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUST
(NOTE 6) 7,256 - -
- --------------------------------------------------------------------------------------------------
NET INCOME 83,216 78,868 76,971
DIVIDEND REQUIREMENTS ON PREFERRED STOCK 1,125 3,956 3,966
- --------------------------------------------------------------------------------------------------
EARNINGS AVAILABLE FOR COMMON STOCK $ 82,091 $ 74,912 $ 73,005
- --------------------------------------------------------------------------------------------------
-------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 49,691 47,976 46,288
- --------------------------------------------------------------------------------------------------
-------------------------------------------
EARNINGS PER AVERAGE COMMON SHARE $ 1.65 $ 1.56 $ 1.58
- --------------------------------------------------------------------------------------------------
-------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
33\
(IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 83,216 $ 78,868 $ 76,971
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 78,274 69,876 66,950
Deferred income taxes and investment tax credits 21,599 5,679 (15,975)
Allowance for other funds used during construction (8,760) (6,240) (5,353)
Changes in-
Receivables (15,407) (1,754) 5,099
Fuel stock and materials and supplies 163 2,105 (2,053)
Accounts payable and other current liabilities 8,306 (6,257) (1,526)
Deferred energy costs (59,543) 12,093 42,624
Accrued taxes and interest 2,416 (13,105) 16,784
Other assets and liabilities 108 13,725 2,398
-------------------------------------------
Net cash provided by operating activities 110,372 154,990 185,919
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures and gross additions (213,550) (180,871) (178,770)
Investment in subsidiaries and other (463) 70 17,942
-------------------------------------------
Net cash used in investing activities (214,013) (180,801) (160,828)
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of capital stock 32,473 37,395 33,339
Issuance of company-obligated mandatorily
redeemable preferred securities 118,872 - -
Issuance of long-term debt 72,285 20,000 324,050
Deposit of funds held in trust (74,672) (22,814) (240,690)
Withdrawal of funds held in trust 74,424 47,581 170,381
Retirement of long-term debt (5,334) (5,418) (219,351)
Retirement of preferred stock (38,200) (200) (200)
Cash dividends (81,216) (80,370) (77,699)
Other financing activiies 3,185 6,674 10,463
-------------------------------------------
Net cash provided by financing activities 101,817 2,848 293
- --------------------------------------------------------------------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS (NOTE 1):
Net increase (decrease) during the year (1,824) (22,963) 25,384
Beginning of year 2,544 25,507 123
-------------------------------------------
End of year $ 720 $ 2,544 $ 25,507
- --------------------------------------------------------------------------------------------------
-------------------------------------------
CASH PAID DURING THE YEAR FOR:
Interest, net of amounts capitalized $ 64,692 $ 59,521 $ 56,644
- --------------------------------------------------------------------------------------------------
-------------------------------------------
Income taxes $ 19,545 $ 51,282 $ 32,885
- --------------------------------------------------------------------------------------------------
-------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/34
(IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
December 31, 1997 1996
<S> <C> <C>
ASSETS
Electrical Plant, at original cost (Notes 1, 7, 9 and 11):
Production $ 900,971 $ 854,386
Transmission 326,917 321,041
Distribution 978,144 873,998
General 172,264 145,522
------------------------------
2,378,296 2,194,947
Less accumulated depreciation 647,208 592,571
------------------------------
Net plant in service 1,731,088 1,602,376
Construction work in progress 158,029 140,820
Property under capital leases 69,261 73,803
Plant held for future use 2,331 2,331
------------------------------
1,960,709 1,819,330
- --------------------------------------------------------------------------------------------
Investments (Note 1) 13,571 10,734
- --------------------------------------------------------------------------------------------
Current Assets:
Cash and temporary cash investments (Note 1) 720 2,544
Customer receivables-
Billed 45,776 45,885
Unbilled (Note 1) 28,237 23,689
Reserve for doubtful accounts (2,291) (2,892)
Other receivables 16,415 6,472
Fuel stock, at average cost 7,325 9,104
Materials and supplies, at average cost 35,045 27,501
Deferred energy asset (Note 1) 30,597 -
Deferred taxes on deferred energy liability (Notes 1 and 2) - 10,139
Prepayments 6,711 8,203
------------------------------
168,535 130,645
- --------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense, being amortized 30,461 27,050
Other (Note 10) 166,146 175,465
------------------------------
196,607 202,515
- --------------------------------------------------------------------------------------------
TOTAL ASSETS $2,339,422 $2,163,224
- --------------------------------------------------------------------------------------------
------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
35\
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
DECEMBER 31, 1997 1996
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization (See Consolidated Schedules of Capitalization
and Long-Term Debt):
Common shareholders' equity $ 833,623 $ 800,154
Redeemable cumulative preferred stock - 38,000
Cumulative preferred stock with
mandatory sinking funds 3,463 3,663
Company-obligated mandatorily redeemable
preferred securities 118,872 -
Long-term debt 895,439 841,364
------------------------------
1,851,397 1,683,181
- -----------------------------------------------------------------------------------------------------------
Current Liabilities:
Current maturities and sinking fund requirements
(See Consolidated Schedules of Capitalization and Long-Term Debt) 19,937 5,714
Accounts payable 64,737 58,289
Accrued taxes 7,543 6,372
Accrued interest 7,284 6,039
Customers' service deposits 15,095 14,540
Deferred taxes on deferred energy asset (Notes 1 and 2) 10,709 -
Deferred energy liability (Note 1) - 28,725
Other 22,554 21,611
------------------------------
147,859 141,290
- -----------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 9)
Deferred Credits and Other Liabilities:
Deferred investment tax credits (Notes 1 and 2) 29,544 31,004
Deferred taxes on income (Notes 1 and 2) 235,846 234,209
Customers' advances for construction 55,772 51,123
Other (Note 10) 19,004 22,417
------------------------------
340,166 338,753
- -----------------------------------------------------------------------------------------------------------
TOTAL CAPITALIZATION AND LIABILITIES $2,339,422 $2,163,224
- -----------------------------------------------------------------------------------------------------------
------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/36
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1997 1996
<S> <C> <C> <C> <C>
COMMON SHAREHOLDERS' EQUITY (NOTE 5):
Common stock, $1 par value, authorized
70,000,000 shares; issued and outstanding
50,399,746 and 48,785,846 shares at
December 31, 1997 and 1996; stated at $ 53,604 $ 51,990
Premium on capital stock 667,203 635,420
Unamortized capital stock expense (4,216) (4,616)
Retained earnings 117,032 117,360
---------------------------------------------------------
Total common shareholders' equity 833,623 45.0% 800,154 47.5%
- --------------------------------------------------------------------------------------------------------------------------
REDEEMABLE CUMULATIVE PREFERRED
STOCK (NOTES 5, 6 AND 8):
$20 par value, authorized 4,500,000 shares for
all series; outstanding at December 31, 1997 and
1996; 9.90% Series, zero and 1,900,000 shares - 38,000
---------------------------------------------------------
Total - 38,000 2.3
- --------------------------------------------------------------------------------------------------------------------------
CUMULATIVE PREFERRED STOCK WITH
MANDATORY SINKING FUNDS (NOTE 5):
Outstanding at December 31, 1997 and 1996:
5.40% Series, 38,669 and 40,669 shares 773 813
5.20% Series, 36,507 and 38,507 shares 730 770
4.70% Series, 108,006 and 114,006 shares 2,160 2,280
---------------------------------------------------------
3,663 3,863
Current sinking fund requirement (200) (200)
---------------------------------------------------------
Total 3,463 .2 3,663 .2
- --------------------------------------------------------------------------------------------------------------------------
COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF THE COMPANY'S
SUBSIDIARY TRUST, NVP CAPITAL I,
HOLDING SOLELY $122.6 MILLION
PRINCIPAL AMOUNT OF 8.2% JUNIOR
SUBORDINATED DEBENTURES OF THE
COMPANY, DUE 2037 (NOTE 6) 118,872 6.4 - -
- --------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT
(See Consolidated Schedules of Long-Term Debt) 895,439 48.4 841,364 50.0
- --------------------------------------------------------------------------------------------------------------------------
Total capitalization $1,851,397 100.0% $1,683,181 100.0%
- --------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED SCHEDULES OF CAPITALIZATION
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
37\
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
DECEMBER 31, 1997 1996
<S> <C> <C>
LONG-TERM DEBT (NOTES 7, 8 AND 9):
First mortgage bonds:
7 1/8% Series I due 1998 $ 15,000 $ 15,000
7 5/8% Series L due 2002 15,000 15,000
7.80% Series T due 2009 15,000 15,000
6.70% Series V due 2022 105,000 105,000
6.60% Series W due 2019 39,500 39,500
7.20% Series X due 2022 78,000 78,000
6.93% Series Y due 1999 45,000 45,000
8.50% Series Z due 2023 45,000 45,000
7.06% Series AA due 2000 85,000 85,000
----------------------------
442,500 442,500
Industrial development revenue bonds:
7.80% due 2020 100,000 100,000
5.90% Series 1997A due 2032 52,285 -
5.90% Series 1995B due 2030 85,000 -
Variable rate-
Series 1995A due 2030 76,750 76,750
Series 1995B due 2030 - 85,000
Series 1995C due 2030 44,000 44,000
Pollution control revenue bonds:
6 3/8% due 2036 20,000 20,000
5.80% Series 1997B due 2032 20,000 -
Variable rate-
Series 1995D due 2011 14,000 14,000
Series 1995D due 2023 6,300 6,300
Series 1995E due 2022 13,000 13,000
Less funds held in trust (52,948) (52,700)
8.5% Note Due 2000 300 400
Obligations under capital leases 93,985 97,629
----------------------------
915,172 846,879
Debt premium and discount, being amortized 4 (1)
Current maturities and sinking fund requirements (19,737) (5,514)
- -----------------------------------------------------------------------------------------------------------
Total long-term debt $895,439 $841,364
- -----------------------------------------------------------------------------------------------------------
----------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
CONSOLIDATED SCHEDULES OF LONG-TERM DEBT
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/38
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $117,360 $118,860 $119,600
Add-Net Income 83,216 78,868 76,971
------------------------------------------
200,576 197,728 196,571
------------------------------------------
Deduct:
Dividends paid in cash:
Cumulative preferred stock-
5.40%, 5.20% and 4.70% Series 184 194 204
9.90% Series (Notes 5 and 6) 941 3,762 3,762
Common stock 79,176 76,412 73,745
------------------------------------------
80,301 80,368 77,711
Redemption of preferred stock
(Notes 5 and 6) 3,243 - -
------------------------------------------
83,544 80,368 77,711
------------------------------------------
Balance at End of Year $117,032 $117,360 $118,860
- -----------------------------------------------------------------------------------------------------------
------------------------------------------
See Notes to Consolidated Financial Statements.
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
39\
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
For ratemaking and other purposes, the Company is subject to the jurisdiction of
the PUCN and the Federal Energy Regulatory Commission (FERC). The accounting
records of the Company are maintained in accordance with the uniform system of
accounts prescribed by the FERC and adopted by the PUCN.
The Company is subject to the provisions of Statement of Financial
Accounting Standards No. 71, Accounting for the Effects of Certain Types of
Regulation, which require the Company to record certain regulatory assets and
liabilities.
- --------------------------------------------------------------------------------
CONTINUING APPLICABILITY OF FASB 71 The Company's rates are currently
subject to approval by the PUCN and are designed to recover the Company's
costs of providing services to its customers. A primary difference between a
rate regulated entity and an unregulated entity is the timing of recognizing
certain assets and expenses for financial reporting purposes. The Statement
of Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation" (FAS 71), prescribes the method to be used to
record the financial transactions of a regulated entity. The criteria for
applying FAS 71 include the following: (i) rates are set by an independent
third party regulator, (ii) approved rates are intended to recover the
specific costs of the regulated products or services, (iii) rates set at
levels that will recover costs, can be charged to and collected from
customers. If the Company determines as a result of competitive changes in
Nevada, PUCN orders or otherwise that its business, or a portion of its
business, fails to meet any of these three criteria of FAS 71, it may have to
eliminate from its Consolidated Financial Statements the related transactions
prescribed by the regulators that would not have been recognized if it had
been a non-regulated company, which could result in an impairment of or
write-off of utility assets. The Company believes, however, that it continues
to meet the criteria for operating as a rate regulated entity, as prescribed
by FAS 71.
In July 1997, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus on several issues which have
arisen due to deregulation of the electric utility industry and the continuing
applicability of FAS 71. The EITF reached a consensus that a company should stop
applying FAS 71 to a separable portion of its business when deregulatory
legislation or a rate order which results in deregulation gives enough detail
for the company to reasonably determine how the transition plan to deregulation
will effect that separable portion. Once FAS 71 is no longer applied to that
separable portion of the business it will be disclosed separately in the
company's financial statements. Any regulatory assets and liabilities that
originated in that separable portion of the company should be evaluated on the
basis of which portion of the business the regulated cash flows to settle them
will come from and will not be eliminated until they are recovered, individually
impaired or eliminated by the regulator or the portion of the business where the
regulated cash flows come from can no longer apply FAS 71. Any new regulatory
assets and liabilities are recognized within the portion of the company where
the regulated cash flows for their recovery or settlement are derived and are
eliminated in the same manner as existing regulatory assets and liabilities as
described above.
- --------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, NVP Capital I. All
significant intercompany transactions and balances have been eliminated in
consolidation.
- --------------------------------------------------------------------------------
USE OF ESTIMATES The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
- --------------------------------------------------------------------------------
ELECTRIC REVENUES The Company bills its customers monthly on a cycle basis
and recognizes the estimated amount of revenue applicable to kilowatthours of
energy sold but not yet billed at the end of an accounting period.
- --------------------------------------------------------------------------------
DEFERRED ENERGY COST ADJUSTMENTS As permitted by state statute, the Company
defers differences between the current cost of fuel plus net purchased power and
base energy costs as defined. Any over or under recoveries are deferred in the
balance sheet as a current asset or current liability. Under regulations adopted
by the PUCN, deferred energy rates are revised at least every 12 months to clear
the accumulated deferred balance over a future period. Effective February 1,
1997, explicit capacity costs associated with certain purchased power contracts
were included in general rates rather than the deferred energy cost accounting
mechanism.
- --------------------------------------------------------------------------------
ELECTRIC PLANT The costs of betterments and additions to electric plant and
replacements of retirement units of property are capitalized. Such costs include
labor, payroll taxes, material, transportation, an allowance for funds used
during construction and, where applicable, property taxes. Maintenance is
charged with the cost of repairs and minor replacements. Accumulated
depreciation is charged for the cost of plant retired, less net salvage.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/40
Depreciation has been provided for financial statement purposes on a
straight-line basis at rates based upon the estimated useful lives of the
various classes of plant. The provisions for depreciation during 1997, 1996 and
1995 were equivalent to an annual rate of approximately 2.9 percent of the
average gross investment in depreciable plant.
- --------------------------------------------------------------------------------
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION The allowance for funds used
during construction (AFUDC) represents the estimated costs of borrowed and
equity funds applicable to electric plant construction.
The FERC has prescribed a specific computational method for determining the
AFUDC rate. The PUCN has authorized the AFUDC rate to be the lesser of the rate
determined under the FERC computational method or the rate equivalent to the
overall rate of return authorized by the PUCN. The overall rate of return
authorized by the PUCN was 9.66 percent beginning July 1994. The Company's
actual AFUDC rate averaged 9.66 percent for 1997, 1996 and 1995.
- --------------------------------------------------------------------------------
RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board
recently issued Statement of Financial Accounting Standards No. 128 (FAS 128),
Earnings Per Share, which the Company adopted as of December 15, 1997. FAS 128
establishes standards for computing and presenting earnings per share to make
them comparable to international earnings per share standards and requires dual
presentation of basic and diluted earnings per share for entities with complex
capital structures. The adoption resulted in no effect on the computation of the
Company's earnings per share.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 130 (FAS 130), Reporting Comprehensive
Income, which is effective for fiscal years beginning after December 15,
1997. FAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. After adoption, the Company expects there will be no
material effect on the disclosures in its consolidated financial statements.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 131 (FAS 131), Disclosures about Segments
of an Enterprise and Related Information, which is effective for financial
statements for fiscal years beginning after December 15, 1997. FAS 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Due to recent legislation enacted in
Nevada for restructuring the electric utility industry, the Company cannot
predict the effect adoption of FAS 131 will have on disclosures in its
consolidated financial statements.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 (FAS 109), Accounting for
Income Taxes. FAS 109 requires recognition of deferred tax liabilities and
assets for the future tax consequences of events that have been included in
the consolidated financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse. The Company's December 31, 1997 consolidated balance
sheet contains a net regulatory asset of $79 million related to federal
income taxes. (See Note 10 of "Notes to Consolidated Financial Statements.")
In November 1991, the PUCN issued an order which allows the Company to
recover the previously flowed through tax benefits ratably over the estimated
remaining book life of the plant. Calculated at current rates, approximately $32
million of income taxes will be allowed in future rates.
Investment tax credits earned have been deferred and are being amortized to
income ratably over the estimated service lives of the related property.
- --------------------------------------------------------------------------------
CASH FLOW INFORMATION Cash equivalents, which generally are convertible to
cash at par on short notice and mature three months or less from the date of
acquisition, are reported as temporary cash investments.
The Company had no material noncash investing or financing transactions
during 1997, 1996 or 1995.
- --------------------------------------------------------------------------------
OTHER ACCOUNTING POLICIES The Company uses the equity method of accounting
to report immaterial investments in unconsolidated subsidiaries.
Certain amounts in prior periods have been reclassified to conform to the
consolidated financial statement presentation for December 31, 1997.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
41\
2 FEDERAL INCOME AND OTHER TAXES
- --------------------------------------------------------------------------------
The total federal income tax expense as set forth in the accompanying
Consolidated Statements of Income results in an effective federal income tax
rate different from the statutory federal income tax rate for the following
reasons:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal income tax at statutory rate $44,954 35.0% $42,613 35.0% $40,167 35.0%
Adjustments:
Investment tax credit amortization (1,460) (1.1) (1,460) (1.2) (1,460) (1.3)
Other items 1,731 1.3 1,731 1.4 (916) (.8)
--------------------------------------------------------------------------------------
Total recorded federal income tax $45,225 35.2% $42,884 35.2% $37,791 32.9%
- -------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Federal income taxes included in:
Operating expenses $43,478 $44,970 $34,372
Other miscellaneous, net 1,747 (2,086) 3,419
--------------------------------------------------------------------------------------
$45,225 $42,884 $37,791
- -------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
The current and deferred components of federal income taxes included in
operating expenses are as follows:
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current federal income taxes $ 21,899 $ 39,312 $ 50,367
------------------------------------------
Deferred federal income taxes:
Depreciation differences 13,669 16,427 8,323
Deferred energy costs 20,848 (3,544) (15,595)
Contributions in aid of construction (6,302) (7,720) (4,510)
Allowance for borrowed funds used during construction (2,406) (281) 683
Coal contract buyout (787) 1,752 (1,039)
Other-net (1,983) 484 (2,397)
------------------------------------------
23,039 7,118 (14,535)
------------------------------------------
Investment tax credit amortization (1,460) (1,460) (1,460)
------------------------------------------
Total $43,478 $44,970 $ 34,372
- -------------------------------------------------------------------------------------------------------------------------------
------------------------------------------
</TABLE>
The regulatory asset for temporary differences related to liberalized
depreciation will continue to be amortized using the average rate assumption
method required by the Tax Reform Act of 1986. The regulatory liability for
temporary differences caused by investment tax credits will be amortized ratably
in the same fashion as the deferred investment tax credit under former Internal
Revenue Code Section 46(f)(2).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/42
The net deferred federal income tax liability consists of deferred federal
income tax liabilities less deferred federal income tax assets related to:
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED FEDERAL INCOME TAX LIABILITIES:
Temporary basis differences-plant $ (95,077) $(101,596)
Investment tax credits (29,544) (31,004)
Excess of tax depreciation over book depreciation (133,084) (121,822)
Coal contract buyout (1,138) (1,925)
Accrued taxes (3,298) (3,326)
Demand-side program costs (712) (2,353)
Debt reacquisition costs (2,420) (2,663)
Deferred energy (10,709) -
Other (116) (524)
-----------------------------
Total (276,098) (265,213)
- --------------------------------------------------------------------------------------------------
DEFERRED FEDERAL INCOME TAX ASSETS:
Unamortized investment tax credits 15,908 16,694
Refundable customer advances 18,920 17,295
Deferred energy - 10,139
Nonrefundable contributions in aid of construction 15,017 10,339
Capitalized expenses (27) (231)
Supplemental executive retirement plan 2,249 1,601
Other 681 2,281
-----------------------------
Total 52,748 58,118
- --------------------------------------------------------------------------------------------------
Net deferred tax liability $(223,350) $(207,095)
- --------------------------------------------------------------------------------------------------
-----------------------------
</TABLE>
3 EMPLOYEE BENEFITS
- --------------------------------------------------------------------------------
DEFINED CONTRIBUTION RETIREMENT PLAN The Company maintains an employee
investment plan (401(k) Plan) which was established January 1, 1990, under
Section 401(k) of the Internal Revenue Code. Employees who are at least 21 years
old and have completed one month of service may become "participants" in the
401(k) Plan. The Company matches 50 percent of a participant's contributions to
the 401(k) Plan not to exceed 3 percent of the participants annual compensation.
All Company contributions are invested in common stock of the Company. The
amounts expensed for Company matching contributions to the 401(k) Plan were
$2,074,000 for 1997, $1,821,000 for 1996 and $1,533,000 for 1995.
- --------------------------------------------------------------------------------
DEFINED BENEFIT RETIREMENT PLAN The Company has a non-contributory defined
benefit retirement plan (PLAN) designed to meet the provisions of the Employee
Retirement Income Security Act of 1974. All employees age 21 and over who have
completed one year of service with at least 1,000 hours worked participate in
the PLAN. Benefits under the PLAN are dependent upon each participant's salary
for the highest consecutive 60 months of service and length of service.
The Company also has a Supplemental Executive Retirement Plan (SERP) in
addition to the regular PLAN. Participation is limited to such officers as the
Board of Directors may select. Presently, 28 active or retired designated
officers and employees participate in the SERP. The SERP will be funded as
benefits are disbursed.
The table on the next page sets forth the funded status and amounts
recognized in the Company's consolidated financial statements at December 31,
1997, 1996 and 1995 for both the PLAN and SERP.
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit obligations
for both the PLAN and SERP were 7.5 percent and 4.5 percent in 1997, 8 percent
and 4.5 percent in 1996, and 7.25 percent and 4.5 percent in 1995, respectively.
The expected rate of return on PLAN assets was 8.5 percent in 1997, 1996 and
1995. PLAN assets are primarily invested in listed stocks, fixed income
securities and federal agencies securities.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
43\
<TABLE>
<CAPTION>
RECONCILIATION OF FUNDED STATUS (IN THOUSANDS)
PLAN SERP
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 78,646 $ 69,822 $ 72,412 $ 6,235 $ 5,123 $ 5,038
Nonvested benefit obligation 4,904 4,228 4,702 1,217 319 838
---------------------------------------------------------------------------------------
Accumulated benefit obligation $ 83,550 $ 74,050 $ 77,114 $ 7,452 $ 5,442 $ 5,876
- -------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Projected benefit obligation $110,503 $ 96,592 $103,973 $ 9,030 $ 6,662 $ 7,063
Plan assets at fair value 100,899 81,564 74,628 - - -
---------------------------------------------------------------------------------------
Plan assets less than projected
benefit obligation (9,604) (15,028) (29,345) (9,030) (6,662) (7,063)
Unrecognized prior service costs 5,809 6,386 7,147 515 495 594
Unrecognized net loss (292) 2,712 16,000 3,646 1,692 2,492
4th quarter contributions/benefits 1,196 800 - 109 110 -
---------------------------------------------------------------------------------------
Pension liability $ (2,891) $ (5,130) $ (6,198) $ (4,760) $ (4,365) $ (3,977)
- -------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Net pension expense comprised
the following:
Service cost $ 4,304 $ 4,843 $ 3,351 $ 102 $ 102 $ 96
Interest cost on projected benefit
obligation 7,893 7,642 6,947 544 517 502
Return on plan assets (16,493) (3,897) (14,049) - - -
Net amortization and deferral 10,054 (2,060) 9,125 185 235 160
- -------------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 5,758 $ 6,528 $ 5,374 $ 831 $ 854 $ 758
- -------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company accounts for
postretirement benefits other than pensions in accordance with Statement of
Financial Accounting Standards No. 106 (FAS 106), Employers' Accounting for
Postretirement Benefits Other Than Pensions. The Company has elected to amortize
its transition obligation at January 1, 1993 over a period of 20 years.
The Company currently provides postretirement medical, dental and vision
benefits to employees who have retired. The postretirement health care plan is
contributory, and retirees' contributions can be adjusted annually for increases
in the cost of providing the benefits. The postretirement health care plan is
being funded in amounts not to exceed the lesser of amounts collected from
customers through rates or amounts allowable under the Internal Revenue Code as
amended from time to time.
Net periodic postretirement benefit cost for the years ended December 31,
1997, 1996 and 1995 included the following components:
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 370 $ 406 $ 293
Interest cost on projected benefit obligation 1,269 1,223 1,881
Return on assets (1,589) (543) (303)
Amortization of transition obligation 1,532 713 1,198
----------------------------------------
Net periodic postretirement benefit cost $1,582 $1,799 $3,069
- -------------------------------------------------------------------------------------------------
----------------------------------------
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/44
A reconciliation of the funded status of the plan to the amounts recognized in
the Consolidated Balance Sheets as of December 31, 1997 and 1996 is as follows:
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Retirees $ (9,901) $(11,331)
Fully eligible active employees (247) (182)
Other active employees (5,348) (4,552)
----------------------------
Accumulated postretirement benefit obligation (15,496) (16,065)
Fair value of assets 8,665 7,075
----------------------------
Accumulated postretirement benefit obligation in excess of assets (6,831) (8,990)
Unrecognized transition obligation 14,530 15,498
Unrecognized gain (11,576) (9,667)
4th quarter contributions/benefits 1,267 174
----------------------------
Accrued postretirement benefit liability $ (2,610) $(2,985)
- --------------------------------------------------------------------------------------------------
----------------------------
</TABLE>
The medical cost trend rate assumed for 1998 was 7.0 percent, grading down to
4.75 percent in 2001 and remaining at that level thereafter. The health care
cost trend rate has a significant effect on the accumulated postretirement
benefit obligation and net periodic cost. A one-percentage-point increase in the
assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation at December 31, 1997 by $803,000 and would
increase the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1997 by $60,000. The weighted-average
discount rate used in determining the accumulated postretirement benefit
obligation at December 31, 1997 was 7.5 percent. The expected rate of return on
assets was 8.5 percent in 1997. Assets are primarily invested in listed stocks,
fixed income securities and federal agencies securities.
4 SHORT-TERM BORROWINGS
- --------------------------------------------------------------------------------
The Company has a $125 million bank revolving credit facility which expires on
November 21, 2002, and pays a facility fee based on the Company's senior
unsecured debt rating. Borrowing rates under the bank line are determined by
both current market rates and the Company's senior unsecured debt rating. There
were no short-term borrowings outstanding on the bank line at December 31, 1997
and 1996.
5 CAPITAL STOCK
- --------------------------------------------------------------------------------
The changes in common stock shares for 1995, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
SHARES
<S> <C>
Outstanding, January 1, 1995 45,382,370
Issued under 401(k) Savings Plan 77,846
Issued under Stock Purchase and Dividend Reinvestment Plan 1,577,977
- ----------------------------------------------------------------------------------
Outstanding, December 31, 1995 47,038,193
Issued under 401(k) Savings Plan 87,889
Issued under Stock Purchase and Dividend Reinvestment Plan 1,659,764
- ----------------------------------------------------------------------------------
Outstanding, December 31, 1996 48,785,846
Issued under 401(k) Savings Plan 98,184
Issued under Stock Purchase and Dividend Reinvestment Plan 1,515,716
- ----------------------------------------------------------------------------------
Outstanding, December 31, 1997 50,399,746
- ----------------------------------------------------------------------------------
--------------
</TABLE>
Premium on capital stock increased $31.8 million, $35.2 million and $31.9
million during 1997, 1996 and 1995, respectively, due to issuances of common
stock. Cash dividends paid per share on common stock were $1.60 each year during
1997, 1996 and 1995.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
45\
On April 30, 1992, the Company issued shares of Redeemable Cumulative
Preferred Stock, 9.90% Series with a 10-year dividend period requiring mandatory
redemption April 1, 2002. All of this preferred stock was redeemed on April 1,
1997.
Under the provisions of the 4.70%, 5.20% and 5.40% series cumulative
preferred stock with mandatory sinking funds, the Company is obligated to use
its best efforts to purchase, each year, up to an aggregate of 6,000, 2,000 and
2,000 shares, respectively, at prices not in excess of $20.00 per share. The
obligations are not cumulative. The 5.20% series and 5.40% series are presently
redeemable at the option of the Company at $21.00 per share and the 4.70% series
at $20.25 per share.
In October 1990, the Company adopted a Stockholder Rights Plan and issued
through dividend to its common shareholders one stock purchase right for each
outstanding share of common stock. The rights expire in October 2000. The
rights to purchase junior preference shares, common shares or shares of a
successor corporation are not exercisable unless certain events occur and are
intended to assure fair shareholder treatment in any takeover of the Company and
to guard against abusive takeover tactics.
6 PREFERRED SECURITIES
- --------------------------------------------------------------------------------
On April 2, 1997, NVP Capital I (Trust), a wholly-owned subsidiary of the
Company, issued 4,754,860 8.2% QUIPS at $25 per security. The Company owns all
of the Series A common securities, 147,058 shares issued by the Trust for $3.7
million. The QUIPS and the common securities represent undivided beneficial
ownership interests in the assets of the Trust, a statutory business trust
formed under the laws of the state of Delaware. The existence of the Trust is
for the sole purpose of issuing the QUIPS and the common securities and using
the proceeds thereof to purchase from the Company its 8.2% Junior Subordinated
Deferrable Interest Debentures (QUIDS) due March 31, 2037, extendable to March
31, 2046 under certain conditions, in a principal amount of $122.6 million. The
sole asset of the Trust is the QUIDS. The Company's obligations under the
guarantee agreement entered into in connection with the QUIPS when taken
together with the Company's obligation to make interest and other payments on
the QUIDS issued to the Trust, and the Company's obligations under the Indenture
pursuant to which the QUIDS are issued and its obligations under a trust
agreement, including its liabilities to pay costs, expenses, debts and
liabilities of the Trust, provides a full and unconditional guarantee by the
Company of the Trust's obligations under the QUIPS. Financial statements of the
Trust are consolidated with the Company's. Separate financial statements are not
filed because the Trust is wholly-owned by the Company and essentially has no
independent operations, and the Company's guarantee of the Trust's obligations
is full and unconditional. The $118.9 million in net proceeds to the Company was
used for general corporate utility purposes and the repayment of short-term debt
incurred to redeem the Company's $38 million, 9.9% Redeemable Cumulative
Preferred Stock on April 1, 1997.
7 LONG-TERM DEBT
- --------------------------------------------------------------------------------
None of the long-term debt is held by or for the account of the Company.
The amounts of long-term debt maturities, including sinking fund
requirements, are $19.7 million in 1998, $50.2 million in 1999, $90.4 million
in 2000, $3.6 million in 2001 and $20.0 million in 2002, including $4.5
million, $4.9 million, $5.2 million, $3.5 million and $5.0 million for
obligations under capital leases, respectively.
Generally, electric plant is subject to the first mortgage lien. It is the
Company's intention to meet the sinking fund requirements for its series I and L
first mortgage bonds by pledging property additions in lieu of cash payments.
The series T, V, W and X first mortgage bonds correspond with respect to their
terms to two series of collateralized pollution control revenue bonds and two
series of industrial development revenue bonds issued by Clark County, Nevada.
The industrial development revenue bonds and pollution control revenue
bonds were issued by various municipal authorities and are guaranteed as to
payment of principal and interest by the Company.
8 FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
Disclosure by the Company of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial Accounting
Standards No. 107 (FAS 107), Disclosures about Fair Value of Financial
Instruments. At December 31, 1997, the provisions of FAS 107 apply only to the
Company's long-term debt and QUIPS. At December 31, 1996, the provisions of FAS
107 apply only to the Company's long-term debt and redeemable cumulative
preferred stock. The Company's redeemable cumulative preferred stock was
redeemed on April 1, 1997. (See Note 6 of "Notes to Consolidated Financial
Statements.")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/46
In accordance with FAS 107, the Company estimates the fair value of its
long-term debt based on quoted market prices for the same or similar issues or
on current interest rates available to the Company for debt with similar terms
and maturity. The fair value of the Company's redeemable cumulative preferred
stock was based on the per share closing price times the number of shares
outstanding at December 31, 1996. The book value and estimated fair value of the
Company's long-term debt, including current maturities and sinking fund
requirements and excluding obligations under capital leases, were $821 million
and $857 million at December 31, 1997, and $749 million and $782 million at
December 31, 1996, respectively. The book value and estimated fair value of the
QUIPS were $119 million and $125 million at December 31, 1997, respectively. The
book value and estimated fair value of the redeemable cumulative preferred stock
were $38 million and $40.4 million at December 31, 1996, respectively. The
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have an effect on the
estimated fair value amounts.
9 COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
LEGAL MATTERS The Company is involved in litigation arising in the normal
course of business. While the results of such litigation cannot be predicted
with certainty, management, based upon advice of counsel, believes that the
final outcome will not have a material adverse effect on the Company's financial
position, results of operations and net cash flow.
On February 6, 1997, the PUCN issued its opinion and order in the last
phase of the 1995 deferred energy case concerning the prudency of the
Company's fuel and purchased power expenditures during the period June 1993
to May 1995, a buyout of a coal supply agreement and a credit to customers
related to the use of coal reserves in an unregulated subsidiary company. The
PUCN order resulted in a fourth quarter 1996 charge of $5.5 million, net of
tax, for amounts disallowed by the PUCN. On May 7, 1997, the Company filed a
Petition for Judicial Review in the First District Court in Carson City,
Nevada challenging the PUCN's findings which resulted in disallowances.
The Grand Canyon Trust and Sierra Club filed a lawsuit in the U.S.
District Court, District of Nevada, in February 1998 against the owners of
the Mohave Generating Station (Mohave) alleging violations of the Clean Air
Act regarding emissions of sulfur dioxide and particulates. The owners
believe the emission limits referenced in the suit are not applicable to
Mohave. The owners previously partnered with the Environmental Protection
Agency (EPA) and the National Park Service on a multi-year study to determine
the impacts, if any, of Mohave emissions on visibility in the Grand Canyon
(See Environmental Matters below). The environmental groups want the owners
to install pollution control equipment at an estimated cost of $200 to $300
million. The Company owns a 14 percent interest in Mohave. The outcome of
this action cannot be determined at this time.
- --------------------------------------------------------------------------------
ENVIRONMENTAL MATTERS The Federal Clean Air Act Amendments of 1990
(Amendments) include provisions for reduction of emissions of oxides of nitrogen
by establishing new emission limits for coal-fired generating units. This will
require the installation of additional pollution-control technology at some of
the Reid Gardner Station generating units before 2000 at an estimated cost to
the Company of no more than $6 million; $3 million has been spent to date.
Also, the United States Congress authorized the EPA to study the potential
impact Mohave may have on visibility in the Grand Canyon area. Results of this
study are expected in 1998. The majority owner has estimated that control costs,
if required, could total between $200 and $300 million.
In 1991, the EPA published an order requiring the Navajo Generating Station
(Navajo) to install scrubbers to remove 90 percent of sulfur dioxide emissions
beginning in 1997. As an 11.3 percent owner of Navajo, the Company will be
required to fund an estimated $50.9 million for installation of the scrubbers.
The first of three scrubber units was placed in commercial operation in November
1997. At that point, the project was approximately 50 percent complete. The
first of the other two units is expected to be on line in 1998 and the last unit
in 1999. The Company has spent approximately $40.7 million through December 1997
on the scrubbers' construction. In 1992, the Company received resource planning
approval from the PUCN for its share of the cost of the scrubbers.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
47\
- --------------------------------------------------------------------------------
LEASES In 1984, the Company sold its administrative headquarters facility,
less furniture and fixtures, for $27 million and entered into a 30-year capital
lease of that facility with five-year renewal options beginning in year 31. The
fixed rental obligation for the first 30 years is $5.1 million per year. Future
cash rental payments as of December 31, 1997, are as follows:
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
1998 $ 3,605
1999 4,880
2000 6,156
2001 6,156
2002 6,156
Thereafter 86,589
- --------------------------------------------------------------------------------
$113,542
- --------------------------------------------------------------------------------
------------
</TABLE>
The amount of imputed interest necessary to reduce the future cash rental
payments to present value is $65.9 million as of December 31, 1997.
Total interest expense on the lease obligation was $5.5 million and total
amortization of the leased facility was $(12,000) for the year ended December
31, 1997. The total accumulated amortization of the leased facility on December
31, 1997, was $9.8 million.
At December 31, 1997, the Company has certain long-term noncancelable
operating lease agreements for which the future minimum lease payments are
immaterial.
- --------------------------------------------------------------------------------
FUEL AND PURCHASED POWER OBLIGATIONS The Company has eight long-term
contracts for the purchase of electric energy and/or capacity. The contracts
expire in years ranging from 1998 to 2016.
Total payments under these contracts were $51.0 million, $48.6 million and
$40.5 million in 1997, 1996 and 1995, respectively. The cost of power obtained
under these contracts is included in purchased and interchanged power expense in
the Consolidated Statements of Income.
At December 31, 1997, the estimated future payments for capacity and energy
that the Company is obligated to purchase under these contracts, subject in part
to certain conditions, are as follows:
<TABLE>
<CAPTION>
Accounted for
as Long-Term Accounted for
Executory as Long-Term
(IN THOUSANDS) Contracts Capital Lease
<S> <C> <C>
1998 $ 39,050 $ 12,373
1999 21,376 11,844
2000 11,297 11,315
2001 - 10,786
2002 - 10,282
Thereafter - 101,404
- --------------------------------------------------------------------------------
Total minimum payment $ 71,723 158,004
- ------------------------------------------------------------
----------
Less amount representing estimated
executory costs included in total
minimum payment (86,248)
-------------
Net minimum payments 71,756
Less amount representing interest (25,442)
-------------
Present value of net minimum payments $ 46,314
- --------------------------------------------------------------------------------
-------------
</TABLE>
Total interest expense on the purchase power obligation accounted for as a
capital lease was $4.6 million and total amortization was $5.2 million in 1997.
Total accumulated amortization was $36.7 million as of December 31, 1997.
The Company has contracted with various coal suppliers to provide coal
to the Reid Gardner Generating Station. The contracts expire in years ranging
from 1999 to 2007.
Costs of approximately $18.1 million, $25.9 million and $25.0 million were
incurred under the long-term coal contracts in 1997, 1996 and 1995,
respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/48
In addition, the Company has long-term transportation arrangements with
railway companies to transport coal to the Reid Gardner Generating Station and a
coal railcar lease. The contracts expire in 1999, 2000 and 2011.
Costs of approximately $15.0 million, $18.5 million and $20.9 million were
incurred under the coal transportation contracts in 1997, 1996 and 1995,
respectively.
At December 31, 1997 the estimated future payments for purchase and
transportation of coal that the Company is obligated to purchase under these
contracts are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
Coal Transportation Coal Use
<S> <C> <C>
1998 $14,070 $ 14,652
1999 13,278 14,754
2000 12,111 12,223
2001 1,012 12,468
2002 1,012 12,717
Thereafter 9,026 60,018
----------------------------------------
$50,509 $126,832
- --------------------------------------------------------------------------------
----------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CONSTRUCTION Certain commitments have been incurred at December 31, 1997, in
connection with the 1998 construction budget. Construction expenditures are
estimated at $295 million, excluding AFUDC, for 1998.
10 OTHER DEFERRED CHARGES AND CREDITS
- --------------------------------------------------------------------------------
OTHER DEFERRED CHARGES At December 31, 1997, other deferred charges include
a regulatory asset of $95.1 million and a deferred tax asset of $15.9. The
regulatory asset represents future revenue to be received from customers due
to the flow-through of tax benefits of temporary differences in prior years
and the deferred tax asset is from temporary differences caused by investment
tax credits.
At December 31, 1997, organizational study, early retirement and severance
costs of $4 million are included in other deferred charges as a regulatory asset
and are being amortized over an eight-year period effective February 1994 as
approved in an order issued by the PUCN in 1994. These costs are a result of the
completion of a comprehensive organizational study started in 1993.
Other deferred charges as of December 31, 1997, also include $33.9 million
for deferred federal income taxes on customer advances for construction and $1.1
million for conservation programs.
- --------------------------------------------------------------------------------
OTHER DEFERRED CREDITS Other deferred credits as of December 31, 1997, include
a regulatory liability of $15.9 million representing amounts to be refunded to
customers in the future as a result of the Company adopting FAS 109.
11 INTERESTS IN JOINTLY OWNED ELECTRIC UTILITY FACILITIES
- --------------------------------------------------------------------------------
At December 31, 1997, the Company owned the following undivided interests in
jointly owned electric utility facilities:
<TABLE>
<CAPTION>
Company's Share of
- ----------------------------------------------------------------------------------------------------------------
Construction
Percent Owned Plant Accumulated Net Plant Work In
(IN THOUSANDS) by Company In Service Depreciation In Service Progress
<S> <C> <C> <C> <C> <C>
FACILITY
Navajo Generating Station 11.3 $173,856 $ 74,767 $ 99,089 $ 19,300
Mohave Generating Station 14.0 76,971 28,387 48,584 937
Reid Gardner Unit
No. 4 Generating Station 32.2 140,111 44,514 95,597 1,153
---------------------------------------------------------
Total $390,938 $147,668 $243,270 $21,390
- ----------------------------------------------------------------------------------------------------------------
---------------------------------------------------------
</TABLE>
The amounts above for Navajo and Mohave include the Company's share of
transmission systems and general plant equipment and, in the case of Navajo, the
Company's share of the jointly owned railroad which delivers coal to the plant.
Each participant provides its own financing for all of these jointly owned
facilities. The Company's share of operating expenses for these facilities is
included in the corresponding operating expenses in the Consolidated Statements
of Income.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
49\
12 QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1997:
Electric Revenues $155,355 $199,970 $284,994 $158,829
Operating Income 19,441 32,297 66,483 18,975
Net Income 8,570 18,870 52,747 3,029
Earnings Available for Common Stock 7,583 18,823 52,701 2,984
Earnings per Average Common Share .15 .38 1.06 .06
Dividends per Common Share .40 .40 .40 .40
Common Stock Price per Share:
High 20 25/32 21 1/2 22 3/16 27 5/8
Low 19 3/4 19 3/8 20 5/8 20 5/8
- ------------------------------------------------------------------------------------------------------------------
1996:
Electric Revenues $147,128 $199,468 $293,536 $165,242
Operating Income 14,678 33,239 69,272 15,041
Net Income (Loss) 3,518 21,182 57,435 (3,267)
Earnings (Loss) Available for Common Stock 2,529 20,192 56,446 (4,255)
Earnings (Loss) per Average Common Share .05 .42 1.17 (.09)
Dividends per Common Share .40 .40 .40 .40
Common Stock Price per Share:
High 22 7/8 22 21 3/4 20 7/8
Low 21 1/8 19 3/4 19 7/8 20
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The business of the Company is seasonal in nature and it is management's
opinion that comparisons of earnings for the quarters do not give a true
indication of overall trends and changes in the Company's operations.
The fourth quarter of 1996 reflects a write-off of $5.5 million, net of
tax, or 11 cents per average common share resulting from the PUCN order in
the 1995 deferred energy case.
High and low common stock prices shown are as reported by the Wall
Street Journal as New York Stock Exchange Composite Transactions. The common
stock is also listed on the Pacific Exchange.
Holders of common stock are entitled to dividends as are declared by the
Board of Directors, subject to the rights of the cumulative preferred stock
and the preference stock of the Company to quarterly cumulative dividends as
declared by the Board of Directors. The Company has paid quarterly dividends
on its common stock since August 1954.
The Company had 49,174 shareholders of record of common stock at
December 31, 1997.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
/50
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF NEVADA POWER COMPANY:
We have audited the consolidated balance sheets and schedules of capitalization
and long-term debt of Nevada Power Company as of December 31, 1997 and 1996, and
the related consolidated statements of income, retained earnings and cash flows
for each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company at December
31, 1997 and 1996, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Las Vegas, Nevada
February 13, 1998
REPORT OF INDEPENDENT AUDITORS
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
51\
The management of Nevada Power Company is responsible for the consolidated
financial statements presented in this report. Management prepared the
consolidated financial statements in conformity with generally accepted
accounting principles applicable to public utilities which are consistent in all
material respects with the accounting prescribed by the Public Utilities
Commission of Nevada and the Federal Energy Regulatory Commission. In preparing
the consolidated financial statements, management made informed judgments and
estimates relating to events and transactions being reported.
The Company has a system of internal accounting and financial controls and
procedures in place to insure that the financial records reflect the
transactions of the Company and that assets are safeguarded. This system is
examined by management on a continuing basis for effectiveness and efficiency
and is reviewed on a regular basis by an internal audit staff that reports
directly to the Audit Committee of the Board of Directors.
The consolidated financial statements have been audited by Deloitte &
Touche LLP, independent auditors. The auditors provide an objective,
independent review as to management's discharge of its responsibilities as
they relate to the fairness of reported operating results and financial
condition. Their audit includes procedures which provide them reasonable
assurance that the consolidated financial statements are not misleading and
includes a review of the Company's system of internal accounting and
financial controls and a test of transactions.
The Board of Directors has oversight responsibility for determining that
management has fulfilled its obligation in the preparation of consolidated
financial statements and the ongoing examination of the Company's system of
internal accounting controls. The Audit Committee, which is composed solely of
outside directors, meets regularly with management, Deloitte & Touche LLP and
the internal audit staff to discuss accounting, auditing and financial reporting
matters. The Audit Committee reviews the program of audit work performed by the
internal audit staff. To insure auditor independence, both Deloitte & Touche LLP
and the internal audit staff have complete and free access to the Audit
Committee.
REPORT OF MANAGEMENT
NEVADA POWER COMPANY 1997 ANNUAL REPORT
<PAGE>
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<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
SUMMARY OF OPERATIONS
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS):
<S> <C> <C> <C> <C> <C>
Electric Revenues:
Residential $ 358,921 $ 354,883 $ 319,373 $ 331,671 $ 267,941
Commercial and industrial 380,531 394,743 383,080 380,223 326,006
Other electric sales 48,749 45,683 38,700 43,732 48,504
Miscellaneous 10,947 10,065 8,828 8,532 9,321
--------------------------------------------------------------------------
799,148 805,374 749,981 764,158 651,772
--------------------------------------------------------------------------
Net Income (a) 83,216 78,868 76,971 81,870 73,548
Dividend Requirements on Preferred Stock 1,125 3,956 3,966 3,976 3,986
Earnings Available for Common Stock (a) $ 82,091 $ 74,912 $ 73,005 $ 77,894 $ 69,562
Weighted Average Number of Common
Shares Outstanding 49,691 47,976 46,288 42,784 39,482
Earnings per Average Common Share (a) $ 1.65 $ 1.56 $ 1.58 $ 1.82 $ 1.76
Dividends per Common Share $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60
CAPITALIZATION (IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS):
Long-Term Debt $ 895,439 $ 841,364 $ 799,999 $ 712,571 $ 716,589
Company-obligated Mandatorily Redeemable
Preferred Securities of the Company's
Subsidiary Trust, NVP Capital I 118,872 - - - -
Cumulative Preferred Stock - 38,000 38,000 38,000 38,000
Cumulative Preferred Stock with Mandatory
Sinking Funds 3,463 3,663 3,863 4,064 4,264
Common Shareholders' Equity 833,623 800,154 764,361 731,749 645,924
Book Value per Common Share $ 16.54 $ 16.40 $ 16.25 $ 16.12 $ 15.56
RETURN ON COMMON SHAREHOLDERS' EQUITY 9.85% 9.36% 9.55% 10.64% 10.77%
ELECTRIC PLANT INVESTMENT
(IN THOUSANDS):
Gross $ 2,607,917 $ 2,411,901 $ 2,247,923 $ 2,079,694 $ 1,901,448
Depreciated 1,960,709 1,819,330 1,701,120 1,584,003 1,450,146
TOTAL ASSETS (IN THOUSANDS) $ 2,339,422 $ 2,163,224 $ 2,073,050 $ 1,907,389 $ 1,809,337
CONSTRUCTION EXPENDITURES
EXCLUDING AFUDC (IN THOUSANDS) $ 210,971 $ 179,981 $ 176,395 $ 179,674 $ 157,458
OPERATING AND SALES DATA:
Generating Capacity and Firm Purchases
(Megawatts) 3,621 3,858 3,525 3,462 3,488
Peak Load (Megawatts) 3,469 3,332 3,066 2,920 2,681
Electric Sales (Megawatthours) 14,596,228 13,697,059 12,109,355 11,942,724 11,155,270
Number of Customers (Year-End) 518,391 487,064 454,166 428,286 403,875
Average Annual Kilowatthour Sales per
Residential Customer 12,757 13,199 12,367 13,605 13,008
NUMBER OF EMPLOYEES (YEAR-END) 1,909 1,792 1,761 1,759 1,741
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Amount for 1993 includes write-offs for deferred energy costs and
preliminary study costs for a cancelled coal-fired generating station
project. Amount for 1994 includes other income from the resolution of a
regulatory investigation of replacement power costs resulting from a 1985
generating station accident. Amount for 1996 includes a write-off resulting
from the PUCN order in the 1995 deferred energy case.
STATISTICAL SUMMARY 1997-1993
NEVADA POWER COMPANY 1997 ANNUAL REPORT<PAGE>
<PAGE>
FINANCING AGREEMENT
Dated as of November 1, 1997
By and Between
CLARK COUNTY, NEVADA
and
NEVADA POWER COMPANY
RELATING TO
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(NEVADA POWER COMPANY PROJECT)
SERIES 1997A
The amounts payable to the Issuer (except for amounts payable
to, and certain rights and privileges of, the Issuer under Sections 3.1,
4.2(e), 4.2(g), 5.3 and 6.4 hereof and any rights of the Issuer to receive any
notices, certificates, requests, requisitions or communications hereunder) and
certain other rights of the Issuer under this Financing Agreement have been
pledged and assigned under the Indenture of Trust dated as of November 1,
1997, between the Issuer and United States Trust Company of New York, as
Trustee.
<PAGE>
FINANCING AGREEMENT
TABLE OF CONTENTS
(This Table of Contents is not a part of this
Agreement and is only for convenience of reference)
SECTION HEADING PAGE
ARTICLE I DEFINITIONS........................................1
ARTICLE II REPRESENTATIONS....................................5
Section 2.1. Representations and Covenants by the Issuer......5
Section 2.2. Representations by the Company...................6
ARTICLE III COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS...7
Section 3.1. Agreement to Complete the Acquisition,
Construction and Equipping of the Project........7
Section 3.2. Agreement to Issue Bonds; Application of Bond
Proceeds.........................................7
Section 3.3. Disbursements from the Construction Fund.........8
Section 3.4. Establishment of Completion Date.................9
Section 3.5. Investment of Moneys in the Bond Fund and
Construction Fund...............................10
Section 3.6. Tax Exempt Status of Bonds......................11
ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT.................11
Section 4.1. Loan of Bond Proceeds...........................11
Section 4.2. Loan Repayments and Other Amounts Payable.......11
Section 4.3. No Defense or Set-Off...........................14
Section 4.4. Payments Pledged and Assigned...................14
Section 4.5. Letter of Credit and Credit Facility............14
Section 4.6. Payment of the Bonds and Other Amounts..........15
ARTICLE V SPECIAL COVENANTS AND AGREEMENTS..................16
[Section 5.1. Company to Maintain Its Corporate Existence;
Conditions under Which Exceptions Permitted.....16
Section 5.2. Annual Statement................................16
Section 5.3. Maintenance and Repair; Insurance; Taxes; Etc...16
Section 5.4. Recordation and Other Instruments...............16
Section 5.5. No Warranty by the Issuer.......................17
Section 5.6. Agreement as to Ownership and Use of the
Project.........................................17
Section 5.7. Company to Furnish Notice of Adjustments of
Interest Rate Periods...........................17
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<PAGE>
Section 5.8. Information Reporting, Etc......................17
Section 5.9. Limited Liability of Issuer.....................17
Section 5.10. Inspection of Project...........................18
Section 5.11. Purchases of Bonds by Company or Issuer
Prohibited; Exceptions..........................18
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES....................18
Section 6.1. Events of Default Defined.......................18
Section 6.2. Remedies on Default.............................20
Section 6.3. No Remedy Exclusive.............................20
Section 6.4. Agreement to Pay Fees and Expenses of Counsel...21
Section 6.5. No Additional Waiver Implied by One Waiver;
Consents to Waivers.............................21
ARTICLE VII OPTIONS AND OBLIGATIONS OF COMPANY; PREPAYMENTS;
REDEMPTION OF BONDS...............................22
Section 7.1. Option to Prepay................................22
Section 7.2. Obligation to Prepay............................22
Section 7.3. Notice of Prepayment............................22
ARTICLE VIII MISCELLANEOUS.....................................23
Section 8.1. Notices.........................................23
Section 8.2. Assignments.....................................23
Section 8.3. Severability....................................23
Section 8.4. Execution of Counterparts.......................23
Section 8.5. Amounts Remaining in Bond Fund..................23
Section 8.6. Amendments, Changes and Modifications...........24
Section 8.7. Governing Law...................................24
Section 8.8. Authorized Issuer and Company Representatives...24
Section 8.9. Term of the Agreement...........................24
Section 8.10. Cancellation at Expiration of Term..............24
Section 8.11. References to Bank and Provider.................25
Section 8.12. Specific Request for Ratings Required...........25
Signatures.......................................................26
EXHIBIT A - DESCRIPTION OF THE PROJECT
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<PAGE>
THIS FINANCING AGREEMENT made and entered into as of November 1, 1997,
by and between CLARK COUNTY, NEVADA, a political subdivision of the State of
Nevada, party of the first part (hereinafter referred to as the "Issuer"),
and NEVADA POWER COMPANY, a corporation duly organized and existing under the
laws of the State of Nevada, party of the second part (hereinafter referred
to as the "Company"),
WITNESSETH:
In consideration of the respective representations and
agreements hereinafter contained, the parties hereto agree as follows (provided,
that in the performance of the agreements of the Issuer herein contained, any
obligation it may thereby incur shall not constitute or give rise to a pecuniary
liability or a charge upon its general credit or against its taxing powers but
shall be payable solely out of the Revenues (as hereinafter defined) derived
from this Financing Agreement and the Bonds, as hereinafter defined):
ARTICLE I
DEFINITIONS;
The following terms shall have the meanings specified in this Article
unless the context clearly requires otherwise. The singular shall include
the plural and the masculine shall include the feminine.
"Act" means the County Economic Development Revenue Bond Law, as
amended, contained in Sections 244A.669 to 244A.763, inclusive, of the
Nevada Revised Statutes.
"Act of Bankruptcy" means the filing of a petition in bankruptcy by
or against the Company or the Issuer under the Bankruptcy Code.
"Administrative Expenses" means the reasonable and necessary
expenses (including the reasonable value of employee services and fees of
Counsel) incurred by the Issuer in connection with the Bonds, this
Agreement, the Indenture and any transaction or event contemplated by this
Agreement or the
Indenture.
"Agreement" means this Financing Agreement by and between the Issuer and
the Company, as from time to time amended and supplemented.
"Authorized Company Representative" means any person who, at the time,
shall have been designated to act on behalf of the Company by a written
certificate furnished to the Issuer, the Remarketing Agent and the Trustee
containing the specimen signature of such person and signed on behalf of
the Company by any officer of the Company. Such certificate may
designate an alternate or alternates.
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<PAGE>
"Authorized Issuer Representative" means any person at the time
designated to act on behalf of the Issuer by a written certificate furnished to
the Company and the Trustee containing the specimen signature of such person
and signed on behalf of the Issuer by its Chair. Such certificate may
designate an alternate
or alternates.
"Bank" means the Provider of any Letter of Credit delivered in
accordance with Section 4.5 of this Agreement, in its capacity as issuer of
such Letter of Credit, its successors in such capacity, and its assigns.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978,
as amended from time to time, or any substitute or replacement legislation.
"Bond" or "Bonds" means any one or more of the bonds
authorized, authenticated and delivered under the Indenture.
"Bond Counsel" means the Counsel who renders the opinion as to the
tax-exempt status of interest on the Bonds or other nationally recognized
municipal bond counsel mutually acceptable to the Issuer, the Trustee, the
Bank and the Company.
"Bond Fund" means the fund created by Section 6.02 of the Indenture.
"Business Day" means a day on which banks located in the city in which
the Principal Office of the Trustee is located and in the city or cities in
which any office at which any action must be instituted or taken in order to
realize upon any Letter of Credit or Credit Facility then in effect is or are
located, are not
required or authorized to remain closed and on which the New York Stock
Exchange is not closed.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and regulations promulgated or proposed thereunder.
"Company" means Nevada Power Company, a Nevada corporation, and
its successors and assigns and any surviving, resulting or transferee
corporation as permitted in Section 5.1 hereof.
"Completion Date" means the date of completion of the acquisition
and construction of the Project as that date shall be certified as
provided in Section 3.4 hereof.
"Construction Fund" means the fund created by Section 6.07 of the
Indenture.
"Construction Period" means the period between the beginning of
construction and equipping of the Project or the date on which the Bonds are
first delivered to the purchasers thereof, whichever is earlier, and the
Completion Date.
"Cost" or "Cost of the Project" means the items authorized to be paid
from the Construction Fund pursuant to the provisions of paragraphs (a) to
(i), inclusive, of Section 3.3 hereof.
-2-
<PAGE>
"Counsel" means an attorney at law or a firm of attorneys (who may be
an employee of or counsel to the Issuer or the Company or the Trustee) duly
admitted to the practice of law before the highest court of any state of the
United States of America or of the District of Columbia.
"Credit Facility" means any credit facility, including any
instruments accompanying or relating to such Credit Facility delivered to
the Trustee in connection therewith, provided in accordance with Section 4.5 of
this Agreement.
"Exempt Facilities" means facilities for the local furnishing of
electric energy within the meaning of Section 142(a)(8) of the Code.
"Extraordinary Services" and "Extraordinary Expenses" means all
services rendered and all expenses (including fees of Counsel) incurred
under the Indenture and the Tax Agreement other than Ordinary Services
and Ordinary Expenses.
"Fitch" means Fitch Investors Service, L.P., a limited partnership
organized and existing under the laws of the State of New York, its
successors and their assigns, and, if such limited partnership shall be
dissolved or liquidated or is no longer performing the functions of a
securities rating agency, "Fitch" shall be deemed to refer to any other
nationally recognized securities rating agency designated by the Company and
acceptable to the Bank, with notice to the Trustee.
"Force Majeure" means acts of God, strikes, lockouts or other
industrial disturbances; acts of public enemies; orders or restraints of any
kind of the governments of the United States or of the State, or any of their
departments, agencies or officials, or any civil or military authority;
insurrections; riots; landslides; lightning; earthquakes; fires;
tornadoes; volcanoes; storms; droughts; floods; explosions, breakage, or
malfunction or accident to machinery, transmission lines, pipes or canals,
even if resulting from negligence; civil disturbances; or any other cause
not reasonably within the control of the Company.
"Governing Body" means the Board of County Commissioners of the Issuer.
"Hereof," "herein," "hereunder" and other words of similar import refer
to this Agreement as a whole.
"Indenture" means the Indenture of Trust relating to this Agreement
between the Issuer and United States Trust Company of New York, as Trustee, of
even date herewith, pursuant to which the Bonds are authorized to be issued,
including any indentures supplemental thereto or amendatory thereof.
"Insider" shall have the meaning set forth in the Bankruptcy Code.
"Issuer" means Clark County, Nevada, and any successor body to the duties
or functions of the Issuer.
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<PAGE>
"Letter of Credit" means any irrevocable direct-pay Letter of Credit
issued by a Bank to the Trustee, including any extensions thereof,
delivered in accordance with Section 4.5 of this Agreement.
"Moody's" means Moody's Investors Service, Inc. a corporation organized
and existing under the laws of the State of Delaware, its successors and
their assigns, and, if such corporation shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency,
"Moody's" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Company and acceptable to the Bank,
with notice to the Trustee.
"Ordinary Services" and "Ordinary Expenses" means those services
normally rendered and those expenses, including fees of Counsel, normally
incurred by a trustee or paying agent under instruments similar to the
Indenture and the Tax Agreement.
"Original Purchaser" means Bear, Stearns & Co. Inc., acting on behalf
of itself and others.
"Owner" or "owner of Bonds" means the Person or Persons in whose name
or names a Bond shall be registered on books of the Issuer kept by the Registrar
for that purpose in accordance with the terms of the Indenture.
"Person" means natural persons, firms, partnerships,
associations, corporations, trusts and public bodies.
"Project" means the facilities described in Exhibit A to this Agreement,
as it may be amended and supplemented from time to time.
"Project Certificate" means the Company's Project Certificate,
delivered concurrently with the issuance of the Bonds, with respect to certain
facts which are within the knowledge of the Company and certain reasonable
assumptions of the Company, to enable Chapman and Cutler, as Bond Counsel,
to determine that interest on the Bonds is not includable in the gross income
of the Owners of the Bonds for federal income taxes purposes.
"Rebate Fund" means the Rebate Fund, if any, created and
established pursuant to the Tax Agreement and Section 6.21 of the Indenture.
"Reimbursement Agreement" means any reimbursement agreement between
the Company and a Bank pursuant to which a Letter of Credit is issued by such
Bank and delivered to the Trustee, and in each case any and all
modifications, amendments and supplements thereto.
"Remarketing Agent" means the remarketing agent, if any, appointed
in accordance with Section 4.11 of the Indenture and any permitted
successor thereto.
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<PAGE>
"Revenues" means the amounts pledged under the Indenture to the payment
of principal of, premium, if any, and interest on the Bonds, consisting of
the following: (i) all amounts payable from time to time by the Company
under Section 4.2(a) of this Agreement, and all receipts of the Trustee
credited under the provisions of the Indenture against said amounts payable,
including all moneys drawn by the Trustee under a Letter of Credit to pay the
principal of and premium, if any, and interest on the Bonds and all amounts
realized by the Trustee from any Credit Facility to pay the principal of and
premium, if any, and interest on the Bonds, all of which amounts are to be
deposited in the Bond Fund, (ii) any portion of the net proceeds of the Bonds
deposited with the Trustee in the Bond Fund under Section 6.03 of the Indenture
and (iii) any amounts paid into the Bond Fund from the Construction Fund,
including income on investments.
"S&P" means Standard & Poor's Rating Services, a division of The McGraw-
Hill Companies, Inc., a corporation organized and existing under the laws of the
State of New York, its successors and their assigns, and, if such
division or corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, "S&P" shall be deemed
to refer to any other nationally recognized securities rating agency
designated by the Company and acceptable to the Bank, with notice to the
Trustee.
"State" means the State of Nevada.
"Tax Agreement" means the Tax Exemption Certificate and Agreement
with respect to the Bonds, dated the date of the delivery of the Bonds,
among the Company, the Issuer and the Trustee, as from time to time
amended and supplemented.
"Trust Estate" means the property conveyed to the Trustee pursuant to
the Granting Clauses of the Indenture.
"Trustee" means United States Trust Company of New York, as trustee
under the Indenture and any successor trustee appointed pursuant to Section
10.06 or 10.09 of the Indenture at the time serving as successor Trustee
thereunder, and any separate or co-trustee serving as such thereunder.
All other terms used herein which are defined in the Indenture shall
have the same meanings assigned them in the Indenture unless the context
otherwise requires.
ARTICLE II
REPRESENTATIONS;
SECTION 2.1 REPRESENTATIONS AND CONVENANTS BY THE ISSUER. The Issuer
makes the following representations and covenants as the basis for the
undertakings on its part herein contained:
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<PAGE>
(a) The Issuer is a duly organized and existing
political subdivision of the State. Under the provisions of
the Act, the Issuer is authorized to enter into the
transactions contemplated by this Agreement, the Indenture
and the Tax Agreement and to carry out its obligations
hereunder and thereunder. The Issuer has duly authorized
the execution and delivery of this Agreement, the Indenture
and the Tax Agreement.
(b) The Bonds are to be issued under and secured by
the Indenture, pursuant to which certain of the Issuer's
interests in this Agreement and the Revenues derived by the
Issuer pursuant to this Agreement will be pledged and
assigned as security for payment of the principal of,
premium, if any, and interest on, the Bonds.
(c) The Governing Body of the Issuer has found that
the issuance of the Bonds will further the public
purposes of the Act.
(d) The Issuer has not assigned and will not assign
any of its interests in this Agreement other than pursuant
to the Indenture.
(e) No member of the Governing Body of the Issuer,
nor any other officer of the Issuer, has any interest,
financial, employment or other, in the Company or in the
transactions contemplated hereby.
SECTION 2.2. REPRESENTATIONS BY THE COMPANY. The Company makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Company is a corporation duly incorporated
under the laws of the State and is in good standing in the
State, is qualified to do business as a foreign corporation
in all other states and jurisdictions wherein the nature of
the business transacted by the Company or the nature of
the property owned or leased by it makes such licensing
or qualification necessary, has power to enter into and by
proper corporate action has been duly authorized to execute
and deliver this Agreement and the Tax Agreement.
(b) Neither the execution and delivery of this
Agreement or the Tax Agreement, the consummation of the
transactions contemplated hereby and thereby, nor the
fulfillment of or compliance with the terms and conditions of
this Agreement and the Tax Agreement, conflicts with or
results in a breach of any of the terms, conditions or
provisions of any corporate restriction or any agreement
or instrument to which the Company is now a party or by
which it is bound, or constitutes a default under any of
the foregoing, or results in the creation or imposition of
any lien, charge or encumbrance whatsoever upon any of the
property or assets of the Company under the terms of any
instrument or agreement other than the Indenture.
(c) The statements, information and descriptions
contained in the Project Certificate and the Tax Agreement,
as of the date hereof and at the time of the delivery of the
Bonds to the Original Purchaser, are and will be true, correct
and
-6-
<PAGE>
complete, do not and will not contain any untrue statement
or misleading statement of a material fact, and do not and
will not omit to state a material fact required to be stated
therein or necessary to make the statements, information and
descriptions contained therein, in the light of the
circumstances under which they were made, not misleading,
and the estimates and the assumptions contained in the
Project Certificate and the Tax Agreement, as of the date
hereof and as of the date of issuance and delivery of the
Bonds, are and will be reasonable and based on the best
information available to the Company.
ARTICLE III
COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS
SECTION 3.1. AGREEMENT TO COMPLETE THE ACQUISITION, CONSTRUCTION AND
EQUIPPING OF THE PROJECT. The Company agrees that it will complete or cause
to be completed the acquisition, construction and equipping of the Project
with such reasonable dispatch as it shall deem prudent in the conduct of its
affairs, and that the Project, while operated by the
Company, as herein provided, will at all times be a "project" within the
meaning of the Act and be Exempt Facilities.
Exhibit A hereto may be amended or supplemented by the Company from time
to time, to add to or remove from the Project any item or interest therein
or to change the nature of all or any part of the facilities constituting the
Project, provided that there shall be delivered by the Company to the
Issuer and the
Trustee in connection with any such amendment or supplement:
(i) a certificate of the Authorized Company
Representative describing the proposed changes and
stating that they will not have the effect of
disqualifying the Project as a "project" within the meaning of
the Act or as Exempt Facilities;
(ii) a copy of the amendment or supplement to Exhibit A
hereto and such other documents, certificates and showings
as may be required by Counsel rendering the opinion in
clause (iii) of this paragraph; and
(iii) an opinion of Bond Counsel to the effect that
such amendment complies with the requirements of this Section
3.1 and is in proper form for execution and delivery by the
Issuer and that the exemption from federal income taxes of
interest on the Bonds is not adversely affected by reason of
such amendment and the changes in the Project contemplated
thereby.
SECTION 3.2 AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. In
order to provide funds to lend to the Company to finance the Cost of the
Project as provided in Section 4.1 hereof, the Issuer agrees that it will issue
under the Indenture, sell and cause to be delivered to the Original Purchaser
thereof, its Bonds in the aggregate principal amount of $52,285,000, bearing
interest and maturing as set forth in the Indenture. The Issuer will
thereupon deposit the proceeds received from the sale of the Bonds as
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<PAGE>
follows: (1) in the Bond Fund, a sum equal to any accrued interest paid by
the Original Purchaser of the Bonds; and (2) in the Construction Fund, the
balance of the proceeds (net of underwriting discount) from the sale of the
Bonds.
SECTION 3.3. DISBURSEMENTS FROM THE CONSTRUCTION FUND. The Issuer will in
the Indenture authorize and direct the Trustee to disburse the moneys in the
Construction Fund to or on behalf of the Company, upon compliance with
Section 6.07 of the Indenture, for the following purposes (but, subject to the
provisions of Section 3.5 hereof, for no other purpose):
(a) Payment to the Company of such amounts, if any,
as shall be necessary to reimburse the Company in full
for all advances and payments made by it at any time prior
to or after the delivery of the Bonds for expenditures in
connection with the preparation of plans and specifications
for the Project (including any preliminary study or planning
of the Project or any aspect thereof) and the acquisition,
construction and equipping of the Project.
(b) Payment of the initial or acceptance fees, if any,
of the Trustee, the application fee, the closing fee and the
Administrative Expenses of the Issuer, bond insurance
premium, legal and accounting fees and expenses and printing
and engraving costs incurred in connection with the
authorization, sale and issuance of the Bonds and the
preparation of this Agreement, the Indenture, the Tax
Agreement, the Bonds and all other documents in
connection with the authorization, sale and issuance of the
Bonds.
(c) Payment for labor, services, materials and
supplies used or furnished in site improvement and in the
construction and equipping of the Project and miscellaneous
expenditures incidental to any of the foregoing items.
(d) Payment of the fees, if any, for architectural,
engineering, legal, underwriting and supervisory services with
respect to the Project.
(e) Payment of the premiums on all insurance required
to be taken out and maintained in connection with the
Project during the Construction Period.
(f) Payment of the taxes, assessments and other
charges, if any, that may become payable during the
Construction Period with respect to the Project.
(g) Payment of expenses incurred in seeking to
enforce any remedy against any contractor or subcontractor
or any other third party in respect of any default under a
contract relating to the Project.
(h) Interest on the Bonds and any Letter of Credit
fees during the construction of the Project, but only to the
extent provided by the Project Certificate.
-8-
<PAGE>
(i) Payment of any other costs which constitute a part
of the Cost of the Project in accordance with generally
accepted applicable accounting principles, which are
permitted by the Act and which will not adversely affect
the exemption from federal income taxes of interest on any
of the Bonds.
The Company covenants and agrees that it will not take any action
or authorize or permit, to the extent such action is within its control, any
action to be taken which would cause the interest on the Bonds to become
includable in the federal gross income of the Owners of the Bonds, provided
that the Company shall not have violated this covenant if the interest on any of
the Bonds becomes includable in the federal gross income of an Owner or a
beneficial owner who is a "substantial user" of the Project or a "related
person" within the meaning of Section 147(a) of the Code. The Company further
covenants and agrees to comply with all of the requirements and restrictions of
the Project Certificate.
SECTION 3.4. ESTABLISHMENT OF COMPLETION DATE. As soon as practicable
after the completion of construction of the Project, and in any event not
more than ninety (90) days
thereafter, the Company shall furnish to the Trustee a certificate signed by
an Authorized Company Representative stating (i) that construction of the
Project has been completed substantially in accordance with the plans and
specifications, (ii) the Completion Date, (iii) the Cost of the Project, (iv)
the portion of the Cost of the Project which has then been paid and (v) the
portion of the Cost of the Project which has not yet then been paid. Such
certificate may state that it is given without prejudice to any rights against
third parties which exist at the
date of such certificate or which may subsequently come into being.
Moneys (including investment proceeds) remaining in the Construction Fund
on the date of such certificate may be used, at the direction of an
Authorized Company Representative, to the extent indicated, for the payment,
in accordance with the provisions of this Agreement, of any Cost of the
Project not then paid as specified in the above-mentioned certificate.
Any moneys (including investment proceeds) remaining in the Construction
Fund on the date of the aforesaid certificate and not so set aside for
the payment of such Cost of the Project shall be transferred or disbursed in
accordance with Section 1.142-2 of the Regulations (as defined in the Tax
Agreement) or any successor thereto. The Company acknowledges that these
provisions generally require that a portion of the Bonds be redeemed, or
defeased to the first call date (with appropriate
notice to the Internal Revenue Service), within 90 days of the earlier of (i)
the date on which the Company determines that the Project will not be
completed or (ii) the date on which the Project is Placed-in-Service (as
defined in the Tax Agreement).
In the event the moneys in the Construction Fund available for payment
of the Cost of the Project should not be sufficient to pay the costs
thereof in full, the Company agrees to pay directly, or to deposit in the
Construction Fund moneys sufficient to pay, the costs of completing the Project
as may be in excess of the moneys available therefor in the Construction Fund.
The Issuer does not make any warranty, either express or implied, that the
moneys which will be paid into the Construction Fund and which, under the
provisions of this Agreement, will be available for payment of the Cost of the
Project, will be sufficient to pay all the costs which will be incurred in that
connection. The Company agrees that if
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after exhaustion of the moneys in the Construction Fund the Company should
pay, or deposit moneys in the Construction Fund for the payment of, any
portion of the Cost of the Project pursuant to the provisions of this Section,
it shall not be entitled to any reimbursement therefor from the Issuer or from
the Trustee or from the owners of any of the Bonds, nor shall it be entitled
to any diminution of the loan repayment installments or other amounts
payable under Section 4.2 hereof.
SECTION 3.5. INVESTMENT OF MONEYS IN THE BOND FUND AND CONSTRUCTION FUND.
Except as otherwise herein provided, any moneys held as a part of the Bond
Fund or the Construction Fund shall be invested or reinvested by the Trustee at
the written direction, or the oral direction promptly confirmed in writing, of
an Authorized Company Representative as to specific investments, to the
extent permitted by law, in:
(a) bonds or other obligations of the United States of
America;
(b) bonds or other obligations, the payment of the
principal of and interest on which is unconditionally
guaranteed by the United States of America;
(c) obligations issued or guaranteed as to principal
and interest by any agency or person controlled or
supervised by and acting as an instrumentality of the
United States of America pursuant to authority granted
by the Congress of the United States of America;
(d) obligations issued or guaranteed by any state of the
United States of America, or any political subdivision of
any such state, or in funds consisting of such obligations
to the extent described in Treasury Regulation 1.148-
8(e)(3)(iii);
(e) prime commercial paper;
(f) prime finance company paper;
(g) bankers' acceptances drawn on and accepted by
commercial banks;
(h) repurchase agreements fully secured by
obligations issued or guaranteed as to principal and
interest by the United States of America or by any person
controlled or supervised by and acting as an instrumentality
of the United States of America pursuant to authority
granted by the Congress of the United States of America;
(i) certificates of deposit issued by commercial
banks, including banks domiciled outside of the United States
of America; and
(j) units of taxable government money market
portfolios composed of obligations guaranteed as to principal
and interest by the United States of America or repurchase
agreements fully collateralized by such obligations.
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The investments so purchased shall be held by the Trustee and shall
be deemed at all times a part of the Bond Fund or Construction Fund, as the case
may be, and the interest accruing thereon and any profit realized therefrom
shall be credited to such fund, subject to the provisions of the Tax
Agreement. The Company agrees that to the extent any moneys in the Bond
Fund represent moneys realized under a Letter of Credit or any Credit Facility
or moneys held for the payment of Bonds pursuant to Sections 6.12 and 6.18 of
the Indenture or moneys held for the payment of the purchase price of Bonds
pursuant to Article IV of the Indenture, such moneys shall not be invested.
In addition, the Company agrees that to the extent that any moneys in the Bond
Fund represent moneys to be used to pay the premium portion of the
redemption price of Bonds pursuant to Section 3.01(A)(3) or (4) of the
Indenture, such moneys shall be invested only in
Governmental Obligations maturing on or before the applicable redemption date
or dates.
SECTION 3.6. TAX EXEMPT STATUS OF BONDS. The Company covenants and
agrees that it has not taken or permitted and will not take or permit any
action which results in interest paid
on the Bonds being included in gross income of the holders or beneficial
owners of the Bonds for purposes of federal income taxation (other than a
holder or beneficial owner who is a "substantial user" of the Project or a
"related person" within the meaning of Section 147(a) of the Code). The
Company covenants that none of the proceeds of the Bonds or the payments
to be made under this Agreement, or any other funds which may be deemed
to be proceeds of the Bonds pursuant to Section 148(a) of the Code, will be
invested or used in such a way, and that no actions will be taken or not
taken, as to cause the Bonds to be treated as "arbitrage bonds" within the
meaning of Section 148(a) of the Code. Without limiting the generality of the
foregoing, the Company covenants and agrees that it will comply with the
provisions of the Tax Agreement and the Project Certificate.
ARTICLE IV
LOAN AND PROVISIONS FOR REPAYMENT;
SECTION 4.1. LOAN OF BOND PROCEEDS. (a) The Issuer agrees, upon the
terms and conditions in this Agreement, to lend to the Company the proceeds
(exclusive of accrued interest, if any) received by the Issuer from the sale
of the Bonds in order to pay the Cost of the Project and the Company agrees to
apply the gross proceeds of such loan to pay the Cost of the Project or as
otherwise permitted in Section 3.4 hereof.
(b) The Issuer and the Company expressly reserve the right to enter
into, to the extent permitted by law, an agreement or agreements other
than this Agreement, with respect to the issuance by the Issuer, under an
indenture or indentures other than the Indenture, of obligations to provide
additional funds to pay the Cost of the Project or to refund all or any
principal amount of the Bonds, or any combination thereof.
SECTION 4.2. LOAN REPAYMENTS AND OTHER AMOUNTS PAYABLE. (a) On each
date provided in or pursuant to the Indenture for the payment (whether at
maturity or upon redemption or acceleration) of principal of, and premium, if
any, and interest on, the Bonds,
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until the principal of, and premium, if any, and interest on, the Bonds shall
have been fully paid or provision for the payment thereof shall have been made
in accordance with the Indenture, the Company shall pay to the Trustee in
immediately available funds, for deposit in the Bond Fund, as a
repayment installment of the loan of the proceeds of the Bonds pursuant to
Section 4.1(a) hereof, a sum equal to the amount payable on such date
(whether at maturity or upon redemption or acceleration) as principal of, and
premium, if any, and interest on, the Bonds as provided in the Indenture;
provided, however, that the obligation of the Company to make any such
payment shall be deemed to be satisfied and discharged to the extent of
the corresponding payment realized by the Trustee under any Letter of Credit or
Credit Facility; and provided further, that the obligation of the Company to
make any such repayment installment shall be reduced by the amount of any
moneys then on deposit in the Bond Fund and available for such payment.
(b) The Company shall pay to the Trustee amounts equal to the amounts to
be paid by the Trustee for the purchase of Bonds pursuant to Article IV of
the Indenture. Such amounts shall be paid by the Company to the
Trustee in immediately available funds on the date such payments pursuant to
Section 4.05 of the Indenture are to be made; provided, however, that the
obligation of the Company to make any such payment shall be deemed to be
satisfied and discharged to the extent of the corresponding payment realized
by the Trustee under any Letter of Credit or Credit Facility or to the
extent moneys are available from the sources described in clauses (i) and
(ii) of Section 4.05(a) of the Indenture.
(c) The Company agrees to pay to the Trustee (i) the fees of the
Trustee for the Ordinary Services rendered by it and an amount equal to the
Ordinary Expenses incurred by it under the Indenture and the Tax Agreement,
as and when the same become due, and (ii) the reasonable fees, charges and
expenses of the Trustee for reasonable Extraordinary Services and Extraordinary
Expenses, as and when the same become due, incurred under the Indenture and
the Tax Agreement. The Company agrees that the Trustee, its officers,
agents, servants and employees, shall not be liable for, and agrees that
it will at all times indemnify and hold harmless the Trustee, its
officers, agents, servants and employees against, and pay all expenses of
the Trustee, its officers, agents, servants and employees, relating to any
lawsuit, proceeding or claim and resulting from any action or omission
taken or made by or on behalf of the Trustee, its officers, agents, servants
and employees pursuant to this Agreement, the Indenture or the Tax Agreement,
that may be occasioned by any cause (other than the negligence or willful
misconduct of the Trustee, its officers, agents, servants and employees). In
case any action shall be brought against the Trustee in respect of which
indemnity may be sought against the Company, the Trustee shall promptly
notify the Company in writing and the Company shall be entitled to assume
control of the defense thereof, including the employment of Counsel and the
payment of all expenses. The Trustee shall have the right to employ separate
Counsel in any such action and participate in the defense thereof, but the
fees and expenses of such Counsel shall be paid by the Trustee unless the
employment of such Counsel has been authorized by the Company. The Company
shall not be liable for any settlement of any such action without its consent,
but if any such action is settled with the consent of the Company or if there
be final judgment for the plaintiff in any such action, the Company agrees to
indemnify and hold harmless the Trustee from and against any loss or
liability by reason of such settlement or final judgment. The Company
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agrees that the indemnification provided herein shall survive the
termination of this Agreement or the Indenture or the resignation of the
Trustee.
(d) The Company agrees to pay all costs incurred in connection with
the issuance of the Bonds (which may be paid from the proceeds of the Bonds
to the extent permitted by the Project Certificate) and the Issuer shall
have no obligation with respect to such costs.
(e) The Company agrees to indemnify and hold harmless the Issuer and
any member, officer, official or employee of the Issuer against any and all
losses, costs, charges, expenses, judgments and liabilities created by or
arising out of this Agreement, the Indenture or the Tax Agreement or
otherwise incurred in connection with the issuance of the Bonds. The Company
agrees to pay the Issuer its closing fee in connection with the issuance of
the Bonds in the amount of $50,000. The Issuer may submit to the Company
periodic statements, not more
frequently than monthly, for its Administrative Expenses and the Company
shall make payment to the Issuer of the full amount of each such statement
within 30 days after the Company receives such statement.
(f) The Company agrees to pay to the Remarketing Agent, if any,
the reasonable fees, charges and expenses of such Remarketing Agent, and the
Issuer shall have no obligation or liability with respect to the payment of
any such fees, charges or expenses.
(g) In the event the Company shall fail to make any of the
payments required by (a) or (b) of this Section 4.2, the payment so in
default shall continue as an obligation of the Company until the amount in
default shall have been fully paid and the Company will pay interest to the
extent permitted by law, on any overdue amount at the rate of interest borne
by the Bonds on the date on which such amount became due and payable until
paid. In the event that the Company shall fail to make any of the payments
required by (c), (d), (e) or (f) of this Section 4.2, the payment so in default
shall continue as an obligation of the Company until the amount in default
shall have been fully paid, and the Company agrees to pay the same with
interest thereon to the extent permitted by law at a rate 1% above the rate of
interest then charged by the Trustee on 90-day commercial loans to its prime
commercial borrowers until paid.
(h) To the extent that a Letter of Credit is in effect and moneys
on deposit in the Bond Fund constitute Available Moneys or have been
deposited in separate, segregated accounts in the Bond Fund for the purpose
of becoming Available Moneys, such moneys shall not be available for transfer
and shall not be transferred from the Bond Fund to the Rebate Fund to satisfy
the requirements of the Tax Agreement (unless the Company fails to pay the
amounts described below). In the event that moneys are not available for
transfer from the Bond Fund to the Rebate Fund as required by the Tax
Agreement, the Company agrees to pay any such amount required to be so
transferred and not available for such purpose in the Bond Fund by paying
such amount to the Trustee for deposit directly into the Rebate Fund.
The obligation of the Company set forth in this Section 4.2(h) shall survive the
termination of this Agreement.
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SECTION 4.3. NO DEFENSE OR SET-OFF. The obligation of the Company to
make the payments pursuant to this Agreement shall be absolute and
unconditional without defense or set-off by reason of any default by the
Issuer under this Agreement or under any other agreement between the Company
and the Issuer or for any other reason, it being the intention of the parties
that the payments required hereunder will be paid in full when due without any
delay or diminution whatsoever.
SECTION 4.4. PAYMENTS PLEDGED AND ASSIGNED. It is understood and agreed
that all payments required to be made by the Company pursuant to Section 4.2
hereof (except payments made to the Trustee pursuant to Section 4.2(c) hereof,
to any Remarketing Agent pursuant to Section 4.2(f) hereof, to the Issuer
pursuant to Section 4.2(e) hereof and to any or all the Issuer and the
Trustee and any Remarketing Agent pursuant to Section 4.2(g) hereof) and
certain rights of the Issuer hereunder are pledged and assigned by the
Indenture. The Company consents to such pledge and assignment. The Issuer
hereby directs the Company and the Company hereby agrees to pay or cause to
be paid to the Trustee all said amounts except payments to be made to any
Remarketing Agent pursuant to Section 4.2(f) hereof and payments to be made to
the Issuer pursuant to Sections 4.2(e) and (g) hereof. The Project will not
constitute any part of the security for the Bonds.
SECTION 4.5. LETTER OF CREDIT AND CREDIT FACILITY. (a) The Company has no
obligation to provide a Letter of Credit or other Credit Facility hereunder.
At any time the Company may, at its option, provide for the delivery to the
Trustee of a Letter of Credit or a Credit Facility.
(b) Any Letter of Credit delivered to the Trustee hereunder will
comply with the provisions of Section 6.19(b) of the Indenture. Any Credit
Facility (a) may consist, at the option of the Company, of (i) first
mortgage bonds of the Company, (ii) a letter of credit, (iii) a standby bond
purchase agreement, (iv)
bond insurance or (v) such other security or credit support as the Company
may elect to furnish, or any combination thereof.
(c) As a condition to the exercise by the Company of its option set
forth
in Section 4.5(b) hereof to deliver a Letter of Credit or other Credit
Facility, the Company shall provide to the Issuer and the Trustee a notice
specifying (i) that a Letter of Credit or other Credit Facility will be
delivered to the Trustee, (ii) the effective date of such delivery (which
must be at least five Business Days prior to the date of delivery of such
Letter of Credit or other Credit Facility and, if a Letter of Credit or other
Credit Facility is then in effect, must also be at least five Business Days
prior to the date such existing Letter of Credit or other Credit Facility is
to expire by its terms), (iii) if applicable, the form and substance of the
Letter of Credit or other Credit Facility then in effect, and (iv) the form
and substance of the Letter of Credit or other Credit Facility to be in
effect on the date specified in (ii) above. Such notice to the Trustee must be
delivered by the Company at least ten Business Days prior to the effective date
of such Letter of Credit or Credit Facility or, if a Letter of Credit or
other Credit Facility is then in effect, at least 20 days prior to the fifth
Business Day next preceding the effective date of such change, and must be
accompanied by the opinion of Bond Counsel required by Section 6.19 or 6.20
of the Indenture, as the case may be, and (i) if a Letter of Credit or other
Credit Facility is then in effect, a letter from
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Moody's, if the Bonds should then be rated by Moody's, and from S&P, if the
Bonds should then be rated by S&P, and from Fitch, if the Bonds are then rated
by Fitch, to the effect that the substitution of the proposed Credit Facility
for the Letter of Credit or other Credit Facility then in effect will not by
itself result in a reduction, suspension or withdrawal of its ratings of the
Bonds which then prevail (except that such rating evidence shall not be
required if the Bonds are subject to
mandatory tender for purchase pursuant to Section 4.02(a)(iii) of the
Indenture), and (ii) the form of the substitute Letter of Credit or other
Credit Facility to be in place on the effective date of such change, together
with any documentation and opinions referred to by Moody's or S&P or Fitch, as
the case may be, in any
such letter.
(d) The Issuer and the Company agree that the Issuer will in the
Indenture authorize and direct the Trustee to accept and agree to conditions and
provisions of any Letter of Credit or any other Credit Facility which may be
provided in accordance with the provisions of this Section 4.5.
SECTION 4.6. PAYMENT OF THE BONDS AND OTHER AMOUNTS. The Bonds and
interest and premium, if any, thereon shall be payable solely from (i)
payments made by the Company to the Trustee under Section 4.2(a) hereof,
(ii) amounts realized under any Letter of Credit or Credit Facility then in
effect and (iii) other moneys on deposit in the Bond Fund and available
therefor.
Payments of principal of, and premium, if any, or interest on, the
Bonds with moneys in the Bond Fund or the Construction Fund constituting
proceeds from the sale of the Bonds or earnings on investments made under the
provisions of the Indenture shall be credited against the obligation to
pay required by Section 4.2(a) hereof, and the obligation to pay required
by Section 4.2(a) hereof shall be deemed to be satisfied and discharged to
the extent of the corresponding payment made to the Trustee under any
Letter of Credit or Credit Facility then in effect.
Whenever any Bonds are redeemable in whole or in part at the option of
the Company, the Trustee, on behalf of the Issuer, shall redeem the same
upon the request of the Company and such redemption (unless conditional)
shall be made from payments made by the Company to the Trustee under Section
4.2(a) hereof and amounts realized under any Letter of Credit or Credit
Facility then in effect equal to the redemption price of such Bonds.
Whenever payment or provision therefor has been made in respect of
the principal of, or premium, if any, or interest on, all or any portion of the
Bonds in accordance with the Indenture (whether at maturity or upon
redemption or acceleration or upon provision for payment in accordance with
Article VIII of the Indenture), payments shall be deemed paid to the extent such
payment or provision therefor has been made and is considered to be a
payment of principal of, or premium, if any, or interest on, such Bonds. If
such Bonds are thereby deemed paid in full, the Trustee shall notify the
Company and the Issuer that such
payment requirement has been satisfied. Subject to the foregoing, or unless
the Company is
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entitled to a credit under this Agreement or the Indenture, all payments
shall be in the full amount required by Section 4.2(a) hereof.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS;
SECTION 5.1. COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; CONDITIONS UNDER
WHICH EXCEPTIONS PERMITTED. The Company agrees that during the term of this
Agreement, it will maintain its corporate existence and its good standing in the
State, will not dissolve or otherwise dispose of all or substantially all of
its assets and will not consolidate with or merge into another corporation
unless (a) the acquirer of its assets or the corporation with which it shall
consolidate or into which it shall merge shall (i) be a corporation organized
under the laws of one of the states of the United States of America, (ii) be
qualified to do business in the State, and (iii) assume in writing all of the
obligations of the Company under this Agreement and the Tax Agreement.
SECTION 5.2. ANNUAL STATEMENT. The Company agrees to have an annual
audit made by its regular independent certified public accountants and to
furnish the Trustee (within 30 days after receipt by the Company) with a
balance sheet and statement of income and surplus showing the financial
condition of the Company and its consolidated subsidiaries, if any, at the
close of each fiscal year and the results of operations of the Company and
its consolidated subsidiaries, if any, for each fiscal year, accompanied by
a report of said accountants that such statements have been prepared in
accordance with generally accepted accounting principles. The Company's
obligations under this Section 5.2 may be satisfied by delivering a copy of
the Company's Annual Report to the Trustee at the same time that it is mailed to
stockholders.
SECTION 5.3. MAINTENANCE AND REPAIR; INSURANCE; TAXES; ETC.. The Company
shall maintain or cause to be maintained the Project in good repair and keep
it properly insured and shall promptly pay or cause to be paid all costs
thereof. The Company shall promptly pay or cause to be paid all installments
of taxes, installments of special assessments, and all governmental, utility
and other charges with respect to the Project, when due. The Company may, at
its own expense and in its own name in good faith contest or appeal any
such taxes, assessments or other charges, or installments thereof, but shall
not permit any such taxes, assessments or other charges, or installments
thereof, to remain unpaid if such nonpayment shall subject the Project or any
part thereof to loss
or forfeiture.
SECTION 5.4. RECORDATION AND OTHER INSTRUMENTS. The Company shall cause
such security agreements, financing statements and all supplements thereto
and other instruments as may be required from time to time to be kept, to be
recorded and filed in such manner and in such places as may be required by law
in order to fully preserve, protect and perfect the security of the Owners of
the Bonds and the rights of the Trustee and, after payment in full of the Bonds
as provided in the Indenture, the rights of the Bank provided in the
Indenture, and to perfect the security interest created by the Indenture.
The Company
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agrees to abide by the provisions of Section 5.04 of the Indenture to the
extent applicable to the Company.
SECTION 5.5. NO WARRANTY BY THE ISSUER. The Issuer makes no warranty,
either express or implied, as to the Project or that it will be suitable for
the purposes of the Company or needs of the Company.
SECTION 5.6. AGREEMENT AS TO OWNERSHIP AND USE OF THE PROJECT. The Issuer
and the Company agree that title to the Project shall be in and remain in the
Company, and that the Project shall be the sole property of the Company in
which the Issuer shall have no interest.
SECTION 5.7. COMPANY TO FURNISH NOTICE OF ADJUSTMENTS OF INTEREST RATE
PERIODS. The Company is hereby granted the option to designate from time to
time changes in Rate Periods (and to rescind such changes) in the manner and
to the extent set forth in Section 2.03 of the Indenture. In the event
the Company elects to exercise any such option, the Company agrees that it
shall cause notices of adjustments of Rate Periods (or rescissions thereof) to
be given to the Issuer, the Trustee and the Remarketing Agent in
accordance with Section 2.03(a), (b), (c), (d) or (f) of the Indenture.
SECTION 5.8. INFORMATION REPORTING, ETC. The Issuer covenants and agrees
that, upon the direction of the Company or Bond Counsel, it will mail or cause
to be mailed to the Secretary of the Treasury (or his designee as prescribed by
regulation, currently the Internal Revenue Service Center, Philadelphia, PA
19255) a statement setting forth the information required by Section 149(e)
of the Code, which statement shall be in the form of the Information Return
for Tax-Exempt Private Activity Bond Issues (Form 8038) of the Internal
Revenue Service (or any successor form) and which shall be completed by the
Company and Bond Counsel based in part upon information supplied by the Company
and Bond Counsel.
SECTION 5.9. LIMITED LIABILITY OF ISSUER. Any obligation or liability of
the Issuer created by or arising out of this Agreement or otherwise incurred
in connection with the issuance of the Bonds (including without limitation
any liability created by or arising out of the representations, warranties or
covenants set forth herein or otherwise) shall not impose a debt or pecuniary
liability upon the Issuer or the State or any political subdivision thereof,
or a charge upon the general credit
or taxing powers of any of the foregoing, but shall be payable solely out of
the Revenues or other amounts payable by the Company to the Issuer
hereunder or otherwise (including without limitation any amounts derived from
indemnifications given by the Company).
Neither the issuance of the Bonds nor the delivery of this Agreement
shall, directly or indirectly or contingently, obligate the Issuer or the
State or any political subdivision thereof to levy any form of taxation
therefor or to make any appropriation for their payment. Nothing in the Bonds
or in the Indenture or
this Agreement or the proceedings of the Issuer authorizing the Bonds or in
the Act or in any other related document shall be construed to authorize the
Issuer to create a debt of the Issuer or the State or any political subdivision
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thereof within the meaning of any constitutional or statutory provision of
the State. The principal of, and premium, if any, and interest on, the
Bonds shall be payable solely from the funds pledged for their payment in
accordance with the Indenture and available therefor under this Agreement and
under any Letter of Credit or Credit Facility then in effect. Neither the
State nor any political subdivision thereof shall in any event be liable for the
payment of the principal of, premium, if any, or interest on, the Bonds or
for the performance of any pledge, obligation or agreement of any kind
whatsoever which may be undertaken by the Issuer. No breach of any such pledge,
obligation or agreement may impose any pecuniary liability upon the Issuer or
the State or any political subdivision thereof, or any charge upon the general
credit or against the taxing power of the Issuer or the State or any political
subdivision thereof.
SECTION 5.10. INSPECTION OF PROJECT. The Company agrees that the Issuer
and the Trustee and their duly authorized representatives shall have the right
at all reasonable times to enter upon and examine and inspect the Project
property and shall also be permitted, at all reasonable times, to examine the
books and records of the Company insofar as they relate to the Project.
SECTION 5.11. PURCHASES OF BONDS BY COMPANY OR ISSUER PROHIBITED;
EXCEPTIONS. At any time while a Letter of Credit is in effect, the Company
shall not and shall not allow any Insider of the Company to purchase any
Bonds except (a) with Available Moneys or (b) as provided in Section 4.2(b)
hereof. At any time while a Letter of Credit is in effect, the Issuer shall
not and shall not allow any Insider of the Issuer to purchase any Bonds except
with Available Moneys.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES;
SECTION 6.1. EVENTS OF DEFAULT DEFINED. The following shall be "events
of default" under this Agreement and the terms "event of default" or "default"
shall mean, whenever they are used in this Agreement, any one or more of the
following events:
(a) Failure by the Company to pay when due any amounts
required to be paid under Section 4.2(a) hereof, which
failure results in an event of default under subparagraph
(a) or (b) of Section 9.01 of the Indenture; or
(b) Failure by the Company to pay or cause to be
paid any payment required to be paid under Section 4.2(b)
hereof, which failure results in an event of default under
subparagraph (c) of Section 9.01 of the Indenture; or
(c) Failure by the Company to observe and perform
any covenant, condition or agreement on its part to be
observed or performed in this Agreement, other than as
referred to in (a) and (b) above, for a period of 90 days
after written notice, or in the case of failure by the
Company to observe and perform any covenant, condition or
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agreement on its part to be observed or performed in Section
4.2(h) hereof, for a period of 30 days after written
notice, specifying such failure and requesting that
it be remedied and stating that such notice is a "Notice
of Default" hereunder, given to the Company by the Trustee or
to the Company and the Trustee by the Issuer, unless the
Issuer and the Trustee shall agree in writing to an
extension of such time prior to its expiration; provided,
however, if the failure stated in the notice cannot be
corrected within the applicable period, the Issuer and
the Trustee will not unreasonably withhold their consent to
an extension of such time if corrective action is
instituted within the applicable period and diligently
pursued until the failure is corrected and such corrective
action or diligent pursuit is evidenced to the Trustee by a
certificate of an Authorized Company Representative; or
(d) A proceeding or case shall be commenced, without
the application or consent of the Company, in any court of
competent jurisdiction seeking (i) liquidation,
reorganization, dissolution, winding-up or composition or
adjustment of 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 under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or
adjustment of debts, and such proceeding or cause shall
continue undismissed, or an order, judgment, or decree
approving or ordering any of the foregoing shall be
entered and shall continue in effect for a period of 90
days; or an order for relief against the Company shall be
entered against the Company in an involuntary case under the
Bankruptcy Code (as now or hereafter in effect) or other
applicable law; or
(e) The Company shall admit in writing its inability to
pay its debts generally as they become due or shall file
a petition in voluntary bankruptcy or shall make any
general assignment for the benefit of its creditors, or
shall consent to the appointment of a receiver or trustee of
all or substantially all of its property, or shall commence a
voluntary case under the Bankruptcy Code (as now or hereafter
in effect), or shall file in any court of competent
jurisdiction a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts, or shall
fail to controvert in a timely or appropriate manner, or
acquiesce in writing to, any petition filed against it in an
involuntary case under such Bankruptcy Code or other
applicable law; or
(f) Dissolution or liquidation of the Company; provided
that the term "dissolution or liquidation of the Company"
shall not be construed to include the cessation of the
corporate existence of the Company resulting either from a
merger or consolidation of the Company into or with another
corporation or a dissolution or liquidation of the Company
following a transfer of all or substantially all of its
assets as an entirety, under the conditions permitting such
actions contained in Section 5.1 hereof; or
(g) The occurrence of an "event of default" under the
Indenture.
-19-
<PAGE>
The foregoing provisions of Section 6.1(c) are subject to the
following limitations: If by reason of Force Majeure the Company is unable in
whole or in part to carry out its agreements on its part herein contained,
other than the obligations on the part of the Company contained in Article IV
and Sections 5.3 and 6.4 hereof, the Company shall not be deemed in default
during the continuance of such inability. The Company agrees, however, to
remedy with all reasonable dispatch the cause or causes preventing the
Company from carrying out its agreements; provided that the settlement
of strikes, lockouts and other industrial disturbances shall be entirely
within the discretion of the Company and the Company shall not be required to
make settlement of strikes, lockouts and other industrial disturbances by
acceding to the demands of the opposing party or parties when such course is
in the sole judgment of the Company unfavorable to the Company.
SECTION 6.2. REMEDIES ON DEFAULT. Whenever any event of default referred
to in Section 6.1 hereof shall have happened and be continuing, the Trustee,
as assignee of the Issuer:
(a) shall, by notice in writing to the Company,
declare the unpaid indebtedness under Section 4.2(a) hereof
to be due and payable immediately, if concurrently with or
prior to such notice the unpaid principal amount of the Bonds
shall have been declared to be due and payable, and upon any
such declaration the same (being an amount sufficient,
together with other moneys
available therefor in the Bond Fund, to pay the unpaid
principal of, premium, if any, and interest accrued on, the
Bonds) shall become and shall be immediately due and payable
as liquidated damages; and
(b) may take whatever action at law or in equity
as may appear necessary or desirable to collect the
payments and other amounts then due and thereafter to become
due hereunder or to enforce performance and observance
of any obligation, agreement or covenant of the Company
under this Agreement.
Any amounts collected pursuant to action taken under this Section 6.2
shall be paid into the Bond Fund (unless otherwise provided in this
Agreement) and applied in accordance with the provisions of the Indenture.
No action taken pursuant to this Section 6.2 shall relieve the Company
from the Company's
obligations pursuant to Section 4.2 hereof.
No recourse shall be had for any claim based on this Agreement against
any officer, director or stockholder, past, present or future, of the
Company as such, either directly or through the Company, under any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise.
Nothing herein contained shall be construed to prevent the Issuer
from enforcing directly any of its rights under the second paragraph of
Section 3.1 hereof and under Sections 4.2(e), 4.2(g), 5.3 and 6.4 hereof.
SECTION 6.3. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Issuer is intended to be exclusive of any other
available remedy or remedies,
-20-
<PAGE>
but each and every such remedy shall be cumulative and shall be in addition
to every other remedy given under this Agreement or now or hereafter existing
at law or in equity or by statute. No delay or omission to exercise any
right or power accruing upon any default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order
to entitle the Issuer or the Trustee to exercise any remedy reserved to it in
this Article, it shall not be necessary to give any notice, other than such
notice as may be herein expressly required. Subject to the provisions of the
Indenture and hereof, such rights and remedies as are given the Issuer
hereunder shall also extend to the Trustee. The Owners
of the Bonds, subject to the provisions of the Indenture, shall be entitled
to the benefit of all covenants and agreements herein contained.
SECTION 6.4. AGREEMENT TO PAY FEES AND EXPENSES OF COUNSEL. In the event
the Company should default under any of the provisions of this Agreement and
the Issuer or the Trustee should employ Counsel or incur other expenses for
the collection of the indebtedness hereunder or the enforcement of
performance or observance of any obligation or agreement on the part of the
Company herein contained, the Company agrees that it will on demand therefor
pay to the Trustee, the Issuer or, if so directed by the Issuer, to the
Counsel for the Issuer, the reasonable fees of such Counsel and such other
expenses so incurred by or on behalf of the Issuer or the Trustee.
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER; CONSENTS TO
WAIVERS. In the event any agreement contained in this Agreement should be
breached by either party and thereafter waived by the other party, such
waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder. No waiver shall be effective unless
in writing and signed by the party making the waiver. The Issuer shall have
no power to waive any default hereunder by the Company without both the
consent of the Trustee and the Bank to such waiver. The Trustee and the
Bank shall have the power to waive any default by the Company hereunder,
except a default under the second paragraph of Section 3.1 hereof, or under
Section 3.6, 4.2(e), 4.2(g), 5.3 or 6.4 hereof, in so far as it pertains to the
Issuer, without the prior written concurrence of the Issuer.
Notwithstanding the foregoing, if, after the acceleration of the maturity
of the outstanding Bonds by the Trustee pursuant to
Section 9.02 of the Indenture, (i) all arrears of principal of and interest
on the outstanding Bonds and interest on overdue principal and (to the
extent permitted by law) on overdue installments of interest at the rate of
interest borne by the Bonds on the date on which such principal or interest
became due and payable and the premium, if any, on all Bonds then Outstanding
which have become due and payable otherwise than by acceleration, and all other
sums payable under the Indenture, except the principal of and the interest on
such Bonds which by such acceleration shall have become due and payable, shall
have been paid, (ii) all other things shall have been performed in respect
of which there was a default, (iii) there shall have been paid the reasonable
fees and expenses of the Trustee and of the Owners of such Bonds, including
reasonable attorneys' fees
paid or incurred and (iv) such event of default under the Indenture shall
be waived in accordance with Section 9.09 of the Indenture with the consequence
that such acceleration under Section 9.02 of the Indenture is rescinded,
then the Company's default hereunder shall be deemed to have been
waived and its consequences rescinded and no further action or consent
-21-
<PAGE>
by the Trustee or the Issuer or the Bank shall be required; provided that
there has been furnished an opinion of Bond Counsel to the effect that such
waiver will not adversely affect the exemption from federal income taxes of
interest on the Bonds.
ARTICLE VII
OPTIONS AND OBLIGATIONS OF COMPANY;
PREPAYMENTS; REDEMPTION OF BONDS
SECTION 7.1. OPTION TO PREPAY. The Company shall have, and is hereby
granted, the option to prepay the payments due hereunder in whole or in part at
any time or from time to time (a) to provide for the redemption of Bonds
pursuant to the provisions of Section 3.01(A) of the Indenture or (b) to
provide for the defeasance of the Bonds pursuant to Article VIII of the
Indenture. In the event the Company elects to provide for the redemption
of Bonds as permitted by this Section, the Company shall notify and instruct
the Trustee in accordance with Section 7.3 hereof to redeem all or any portion
of the Bonds in advance of maturity. If the Company so elects, any
redemption of Bonds pursuant to Section 3.01(A) of the Indenture may be
made conditional.
SECTION 7.2. OBLIGATION TO PREPAY. The Company covenants and agrees that
if all or any part of the Bonds are unconditionally called for redemption
in accordance with the Indenture or become subject to mandatory redemption, it
will prepay the indebtedness hereunder in whole or in part, prior to the
date on which notice of such redemption is given to the owners of such Bonds,
in an amount sufficient to redeem such Bonds on the
date fixed for the redemption of the Bonds.
SECTION 7.3. NOTICE OF PREPAYMENT. Upon the exercise of the option
granted to the Company in Section 7.1 hereof, or upon the Company having
knowledge of the occurrence of any event requiring mandatory redemption of
the Bonds in accordance with Section 3.01(B) of the Indenture, the Company
shall give written notice to the Issuer, the Bank, the Remarketing Agent and
the Trustee. The notice shall provide for the date of the application of the
prepayment made by the Company hereunder to the retirement of the Bonds in
whole or in part pursuant to call for redemption and shall be given by the
Company not less than 45 days prior to the date of the redemption which is to
occur as a result of such prepayment (or such later date as is acceptable to
the Trustee and the Issuer), and in the case of a redemption of Bonds pursuant
to Section 3.01(B) of the Indenture shall be given on a date which will permit
the redemption of the Bonds within the time required by Section 3.01(B) of
the Indenture. On the date fixed for redemption of the Bonds or portions
thereof, there shall be deposited with the Trustee from drawings upon any Letter
of Credit then in effect or payments by the Company or from amounts
realized under any Credit Facility as required by Section 7.1 or 7.2, as
appropriate, for payment into the Bond Fund. Any other provision of this
Agreement or the Indenture to the contrary notwithstanding, any prepayment of
moneys hereunder shall be made in such manner and at such time that any
redemption of Bonds or portions thereof will be made with Available Moneys.
-22-
<PAGE>
ARTICLE VIII
MISCELLANEOUS;
SECTION 8.1. NOTICES. Except as otherwise provided herein, all notices,
certificates or other communications hereunder shall be sufficiently given
if in writing and shall be deemed given when mailed by first class mail,
postage prepaid, or by qualified overnight courier service, courier charges
prepaid, or by facsimile (receipt of which is orally confirmed) addressed as
follows: If to the Issuer, at 500 South Grand Central Parkway, 6th
Floor, Las Vegas, Nevada 89155-1601, or to telecopy number (702) 455-
3558, Attention: County Manager; if to the Company, at P.O. Box 230, 6226 West
Sahara Avenue, Las Vegas, Nevada 89151 (89102 for Federal Express), or to
telecopy number (702) 367-5864, Attention: Treasurer; if to the Trustee, at 114
West 47th
Street, New York, New York 10036-1532 or to telecopy number (212) 852-
1625, Attention: Corporate Trust Administration; if to the Remarketing Agent,
at the address specified by the Remarketing Agent; and if to the Bank, at the
address specified by the Bank. In case by reason of the suspension of
regular mail
service, it shall be impracticable to give notice by first class mail of
any event to the Issuer, to the Company, to the Remarketing Agent or to the Bank
when such notice is required to be given pursuant to any provisions of this
Agreement, then any manner of giving such notice as shall be satisfactory to
the Trustee shall be deemed to be sufficient giving of such notice. The Issuer,
the Company, the Trustee, the Remarketing Agent and the Bank may, by notice
pursuant to this Section 8.1, designate any different addresses to which
subsequent notices, certificates or other communications shall be sent.
SECTION 8.2. ASSIGNMENTS.. This Agreement may not be assigned by
either party without consent of the other and the Bank, except that the Issuer
shall assign to the Trustee its rights under this Agreement (except
under the second paragraph of Section 3.1 and under Sections 4.2(e),
4.2(g), 5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the
Company may assign its rights under this Agreement to any transferee or any
surviving or resulting corporation as provided by Section 5.1 hereof.
SECTION 8.3. SEVERABILITY. If any provision of this Agreement shall be
held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative, or unenforceable to
any extent whatever.
SECTION. EXECUTION OF COUNTERPARTS. This Agreement may be
simultaneously executed in several counterparts, each of which shall be
an original and all of which shall constitute but one and the same
instrument.
SECTION 8.5. AMOUNTS REMAINING IN BOND FUND. It is agreed by the parties
hereto that after payment in full of (i) the Bonds (or provision for payment
thereof having been made in accordance with the provisions of the Indenture),
(ii) the fees, charges and expenses of the Trustee in accordance with
the Indenture, (iii) the Administrative Expenses, (iv) the fees and
expenses of the Remarketing Agent and the Issuer and (v) all other amounts
required to be paid under this Agreement and the Indenture, any amounts
remaining in
-23-
<PAGE>
the Bond Fund shall belong to and be paid to the Company by the Trustee;
provided, however, that if there remain reimbursement or other
obligations of the Company under any Reimbursement Agreement, such moneys
remaining in the Bond Fund shall, subject to Section 13.10(b) of the
Indenture, be paid by the Trustee to the Bank upon written direction of
the Bank to such extent.
SECTION 8.6. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement may
be amended, changed, modified, altered or terminated only by written
instrument executed by the Issuer and the Company, and only if the written
consent of the Trustee and the Bank thereto is obtained. Subject to the
written consent of the Trustee and the Bank, the Issuer and the Company agree
to enter into such amendments, changes and modifications to this Agreement
(i) as may be required by the provisions of this Agreement or the Indenture,
(ii) for the purpose of curing any ambiguity, formal defect or omission in
this Agreement, (iii) so as to add additional rights acquired in
accordance with the provisions of this Agreement, (iv) to preserve the
exemption from federal income taxes of interest on the Bonds, or any of them,
(v) to qualify the Bonds for an appropriate rating by Moody's or S&P or Fitch,
as the case may be, or to maintain any such rating, or (vi) in connection with
any other change herein which is not to the prejudice of the Trustee, the Bank
or the Owners of the Bonds; provided, however, that the Issuer shall not
thereby incur any monetary obligation or liability (except only to the
extent that the same shall be payable solely and only out of funds provided or
to be provided by the Company) or surrender or abdicate in whole or in part
any of its essential governmental functions or powers or any of its discretion
in exercising the same.
SECTION 8.7. GOVERNING LAW. This Agreement shall be governed exclusively
by and construed in accordance with the applicable laws of the State.
SECTION 8.8. AUTHORIZED ISSUER AND COMPANY REPRESENTATIVES. Whenever under
the provisions of this Agreement the approval of the Issuer or the Company is
required to take some action at the request of the other, such approval of such
request shall be given for the Issuer by the Authorized Issuer Representative
and for the Company by the Authorized Company Representative, and the other
party hereto and the Trustee shall be authorized to act on any such
approval or request and neither party hereto shall have any complaint against
the other or against the Trustee as a result of any such action taken.
SECTION 8.9. TERM OF THE AGREEMENT. This Agreement shall be in full
force and effect from its date to and including such date as all of the Bonds
issued under the Indenture shall have been fully paid or retired (or provision
for such payment shall have been made as provided in the Indenture), provided
that all representations and certifications by the Company as to all matters
affecting the tax-exempt status of the Bonds and the covenants of the Company
in Sections 4.2(c), 4.2(d), 4.2(e), 4.2(f), 4.2(g) and 4.2(h) hereof shall
survive the termination of this Agreement.
SECTION 8.10. CANCELLATION AT EXPIRATION OF TERM. At the acceleration,
termination or expiration of the term of this Agreement and following full
payment of the Bonds or provision for payment thereof and of all other fees and
charges having been made
-24-
<PAGE>
in accordance with the provisions of this Agreement and the Indenture, the
Issuer shall deliver to the Company any documents and take or cause the
Trustee to take such actions as may be necessary to effectuate the
cancellation and evidence the termination of this Agreement.
SECTION 8.11. REFERENCES TO BANK AND PROVIDER. At any time that a Letter of
Credit (and if at such time there shall be no Pledged Bonds) or any Credit
Facility is not in effect and the Bank shall have been paid all amounts owed
them under the Reimbursement Agreement (as evidenced by a written certificate
of the Bank delivered to the Trustee to such effect), all references herein to
the Bank or the Provider, as the case may be, shall be deemed ineffective. Any
provisions hereof requiring the consent of the Bank or the Provider shall be
deemed ineffective if the Bank or the Provider is at any such time in default
in its obligations under the Letter of Credit or Credit Facility, as the case
may be, to fund a drawing thereunder made in strict compliance with the terms of
such Letter of Credit or Credit Facility.
SECTION 8.12. SPECIFIC REQUEST FOR RATINGS REQUIRED. No reference herein to
Moody's or S&P or Fitch shall be construed by any such rating agency as a
request or permission to issue a rating on the Bonds. Any rating on the
Bonds shall be issued by any rating agency only pursuant to specific written
request therefor from the Company.
-25-
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement
to be executed in their respective corporate names and their respective
corporate seals to be hereunto affixed and attested by their duly authorized
officers, all as of the date first above written.
CLARK COUNTY, NEVADA
By Yvonne Atkinson Gates
--------------------------
Chair
Board of County Commissioners
(SEAL)
Attest:
Loretta Bowman
____________________________________
County Clerk
NEVADA POWER COMPANY
By Steven W. Rigazio
----------------------------
President, Finance and Planning,
Treasurer, Chief Financial Officer
(SEAL)
Attest:
Richard L. Hinckley
____________________________________
Secretary
-26-
<PAGE>
EXHIBIT A
(Attached to Financing Agreement between Clark County, Nevada and Nevada
Power Company, dated as of November_1, 1997).
The Project consists of the following facilities, all as more
particularly described in the Project Certificate and only to the extent
provided in the Project Certificate:
Additions and improvements to the Local Distribution System which
consists of the low-voltage electric distribution facilities by which
the Company furnishes electric energy to customers within its retail customer
service area, together with additions and improvements to the Company's other
plant, property and equipment for use in connection therewith for the same
purpose, including but not limited to poles, conductors, transformers,
circuit-breakers, meters, customer service connections, and related
substations, switchyards, controls, communications equipment, and related
land, land-rights, structures, improvements, equipment and other facilities
necessary or useful for the
operation, maintenance, control or protection of the following.
-27-
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF NEVADA POWER COMPANY AS OF DECEMBER 31, 1997 AND
THE RELATED CONSOLIDATED STATEMENTS OF INCOME, CASH FLOWS AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $1,960,709
<OTHER-PROPERTY-AND-INVEST> 13,571
<TOTAL-CURRENT-ASSETS> 168,535
<TOTAL-DEFERRED-CHARGES> 196,607
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,339,422
<COMMON> 53,604
<CAPITAL-SURPLUS-PAID-IN> 662,987
<RETAINED-EARNINGS> 117,032
<TOTAL-COMMON-STOCKHOLDERS-EQ> 833,623
118,872
3,463
<LONG-TERM-DEBT-NET> 805,941
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 15,250
200
<CAPITAL-LEASE-OBLIGATIONS> 89,498
<LEASES-CURRENT> 4,487
<OTHER-ITEMS-CAPITAL-AND-LIAB> 468,088
<TOT-CAPITALIZATION-AND-LIAB> 2,339,422
<GROSS-OPERATING-REVENUE> 799,148
<INCOME-TAX-EXPENSE> 43,478
<OTHER-OPERATING-EXPENSES> 618,474
<TOTAL-OPERATING-EXPENSES> 661,952
<OPERATING-INCOME-LOSS> 137,196
<OTHER-INCOME-NET> 3,019
<INCOME-BEFORE-INTEREST-EXPEN> 140,215
<TOTAL-INTEREST-EXPENSE> 56,999
<NET-INCOME> 83,216
1,125
<EARNINGS-AVAILABLE-FOR-COMM> 82,091
<COMMON-STOCK-DIVIDENDS> 79,176
<TOTAL-INTEREST-ON-BONDS> 50,791
<CASH-FLOW-OPERATIONS> 110,372
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 0<F1>
<FN>
<F1>INAPPLICABLE
</FN>
</TABLE>
<PAGE>
===================================================================
FINANCING AGREEMENT
Dated as of November 1, 1997
By and Between
COCONINO COUNTY, ARIZONA POLLUTION CONTROL CORPORATION
and
NEVADA POWER COMPANY
RELATING TO
POLLUTION CONTROL REVENUE BONDS
(NEVADA POWER COMPANY PROJECT)
SERIES 1997B
===================================================================
The amounts payable to the Issuer (except for amounts
payable to, and certain rights and privileges of, the Issuer
under Sections 3.1, 4.2(e), 4.2(g), 5.3 and 6.4 hereof and any
rights of the Issuer to receive any notices, certificates,
requests, requisitions or communications hereunder) and certain
other rights of the Issuer under this Financing Agreement have
been pledged and assigned under the Indenture of Trust dated as
of November 1, 1997, between the Issuer and United States Trust
Company of New York, as Trustee.
<PAGE>
FINANCING AGREEMENT
TABLE OF CONTENTS
(This Table of Contents is not a part of this Agreement
and is only for convenience of reference)
SECTION HEADING PAGE
ARTICLE I DEFINITIONS........................................1
ARTICLE II REPRESENTATIONS....................................5
Section 2.1. Representations and Covenants by the Issuer......5
Section 2.2. Representations by the Company...................6
ARTICLE III COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS...7
Section 3.1. Agreement to Complete the Acquisition,
Construction and Equipping of the Project........7
Section 3.2. Agreement to Issue Bonds; Application
of Bond Proceeds.................................7
Section 3.3. Disbursements from the Construction Fund.........8
Section 3.4. Establishment of Completion Date.................9
Section 3.5. Investment of Moneys in the Bond Fund
and Construction Fund............................9
Section 3.6. Tax Exempt Status of Bonds......................11
ARTICLE IV LOAN AND PROVISIONS FOR REPAYMENT.................11
Section 4.1. Loan of Bond Proceeds...........................11
Section 4.2. Loan Repayments and Other Amounts
Payable.........................................11
Section 4.3. No Defense or Set-Off...........................13
Section 4.4. Payments Pledged and Assigned...................13
Section 4.5. Letter of Credit and Credit Facility............14
Section 4.6. Payment of the Bonds and Other Amounts..........15
ARTICLE V SPECIAL COVENANTS AND AGREEMENTS..................15
[Section 5.1. Company to Maintain Its Corporate Existence;
Conditions under Which Exceptions Permitted.....15
Section 5.2. Annual Statement................................16
Section 5.3. Maintenance and Repair; Insurance;
Taxes; Etc......................................16
Section 5.4. Recordation and Other Instruments...............16
Section 5.5. No Warranty by the Issuer.......................16
Section 5.6. Agreement as to Ownership and Use of
the Project.....................................16
Section 5.7. Company to Furnish Notice of Adjustments
of Interest Rate Periods........................16
Section 5.8. Information Reporting, Etc......................17
-i-
<PAGE>
Section 5.9. Limited Liability of Issuer.....................17
Section 5.10. Inspection of Project...........................17
Section 5.11. Purchases of Bonds by Company or Issuer
Prohibited; Exceptions..........................17
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES....................18
Section 6.1. Events of Default Defined.......................18
Section 6.2. Remedies on Default.............................19
Section 6.3. No Remedy Exclusive.............................20
Section 6.4. Agreement to Pay Fees and Expenses of
Counsel.........................................20
Section 6.5. No Additional Waiver Implied by One
Waiver; Consents to Waivers.....................20
ARTICLE VII OPTIONS AND OBLIGATIONS OF COMPANY;
PREPAYMENTS; REDEMPTION OF BONDS..................21
Section 7.1. Option to Prepay................................21
Section 7.2. Obligation to Prepay............................21
Section 7.3. Notice of Prepayment............................21
ARTICLE VIII MISCELLANEOUS.....................................22
Section 8.1. Notices.........................................22
Section 8.2. Assignments.....................................22
Section 8.3. Severability....................................23
Section 8.4. Execution of Counterparts.......................23
Section 8.5. Amounts Remaining in Bond Fund..................23
Section 8.6. Amendments, Changes and Modifications...........23
Section 8.7. Governing Law...................................23
Section 8.8. Authorized Issuer and Company
Representatives.................................23
Section 8.9. Term of the Agreement...........................24
Section 8.10. Cancellation at Expiration of Term..............24
Section 8.11. References to Bank and Provider.................24
Section 8.12. Specific Request for Ratings Required...........24
Section 8.13. Notice Regarding Cancellation of
Contracts.......................................24
Signatures.......................................................26
EXHIBIT A - DESCRIPTION OF THE PROJECT
-ii-
<PAGE>
THIS FINANCING AGREEMENT made and entered into as of
November 1, 1997, by and between COCONINO COUNTY, ARIZONA
POLLUTION CONTROL CORPORATION, an Arizona nonprofit corporation
and political subdivision of the State of Arizona, party of the
first part (hereinafter referred to as the "Issuer"), and NEVADA
POWER COMPANY, a corporation duly organized and existing under
the laws of the State of Nevada, party of the second part
(hereinafter referred to as the "Company"),
WITNESSETH:
In consideration of the respective representations and
agreements hereinafter contained, the parties hereto agree as
follows (provided, that in the performance of the agreements of
the Issuer herein contained, any obligation it may thereby incur
shall not constitute or give rise to a pecuniary liability or a
charge upon its general credit or against its taxing powers but
shall be payable solely out of the Revenues (as hereinafter
defined) derived from this Financing Agreement and the Bonds, as
hereinafter defined):
ARTICLE I
DEFINITIONS;
The following terms shall have the meanings specified in
this Article unless the context clearly requires otherwise. The
singular shall include the plural and the masculine shall include
the feminine.
"Act" means Title 35, Chapter 6, Arizona Revised Statutes,
as amended.
"Act of Bankruptcy" means the filing of a petition in
bankruptcy by or against the Company or the Issuer under the
Bankruptcy Code.
"Administrative Expenses" means the reasonable and necessary
expenses (including the reasonable value of employee services and
fees of Counsel) incurred by the Issuer in connection with the
Bonds, this Agreement, the Indenture and any transaction or event
contemplated by this Agreement or the Indenture.
"Agreement" means this Financing Agreement by and between
the Issuer and the Company, as from time to time amended and
supplemented.
"Authorized Company Representative" means any person who, at
the time, shall have been designated to act on behalf of the
Company by a written certificate furnished to the Issuer, the
Remarketing Agent and the Trustee containing the specimen
signature of such person and signed on behalf of the Company by
any officer of the Company. Such certificate may designate an
alternate or alternates.
"Authorized Issuer Representative" means any person at the
time designated to act on behalf of the Issuer by a written
certificate furnished to the Company and the Trustee
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containing the specimen signature of such person and signed on
behalf of the Issuer by its President, Vice President or
Secretary. Such certificate may designate an alternate or
alternates.
"Bank" means the Provider of any Letter of Credit delivered
in accordance with Section 4.5 of this Agreement, in its capacity
as issuer of such Letter of Credit, its successors in such
capacity, and its assigns.
"Bankruptcy Code" means the United States Bankruptcy Reform
Act of 1978, as amended from time to time, or any substitute or
replacement legislation.
"Bond" or "Bonds" means any one or more of the bonds
authorized, authenticated and delivered under the Indenture.
"Bond Counsel" means the Counsel who renders the opinion as
to the tax-exempt status of interest on the Bonds or other
nationally recognized municipal bond counsel mutually acceptable
to the Issuer, the Trustee, the Bank and the Company.
"Bond Fund" means the fund created by Section 6.02 of the
Indenture.
"Business Day" means a day on which banks located in the
city in which the Principal Office of the Trustee is located and
in the city or cities in which any office at which any action
must be instituted or taken in order to realize upon any Letter
of Credit or Credit Facility then in effect is or are located,
are not required or authorized to remain closed and on which the
New York Stock Exchange is not closed.
"Code" means the United States Internal Revenue Code of
1986, as amended, and regulations promulgated or proposed
thereunder.
"Company" means Nevada Power Company, a Nevada corporation,
and its successors and assigns and any surviving, resulting or
transferee corporation as permitted in Section 5.1 hereof.
"Completion Date" means the date of completion of the
acquisition and construction of the Project as that date shall be
certified as provided in Section 3.4 hereof.
"Construction Fund" means the fund created by Section 6.07
of the Indenture.
"Construction Period" means the period between the beginning
of construction and equipping of the Project or the date on which
the Bonds are first delivered to the purchasers thereof,
whichever is earlier, and the Completion Date.
"Cost" or "Cost of the Project" means the items authorized
to be paid from the Construction Fund pursuant to the provisions
of paragraphs (a) to (i), inclusive, of Section 3.3 hereof.
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"Counsel" means an attorney at law or a firm of attorneys
(who may be an employee of or counsel to the Issuer or the
Company or the Trustee) duly admitted to the practice of law
before the highest court of any state of the United States of
America or of the District of Columbia.
"Credit Facility" means any credit facility, including any
instruments accompanying or relating to such Credit Facility
delivered to the Trustee in connection therewith, provided in
accordance with Section 4.5 of this Agreement.
"Exempt Facilities" means pollution facilities within the
meaning of Section 103(b)(4)(F) of the Internal Revenue Code of
1954, as amended, and regulations promulgated or proposed
thereunder.
"Extraordinary Services" and "Extraordinary Expenses" means
all services rendered and all expenses (including fees of
Counsel) incurred under the Indenture and the Tax Agreement other
than Ordinary Services and Ordinary Expenses.
"Fitch" means Fitch Investors Service, L.P., a limited
partnership organized and existing under the laws of the State of
New York, its successors and their assigns, and, if such limited
partnership shall be dissolved or liquidated or is no longer
performing the functions of a securities rating agency, "Fitch"
shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Company and acceptable
to the Bank, with notice to the Trustee.
"Force Majeure" means acts of God, strikes, lockouts or
other industrial disturbances; acts of public enemies; orders or
restraints of any kind of the governments of the United States or
of the State, or any of their departments, agencies or officials,
or any civil or military authority; insurrections; riots;
landslides; lightning; earthquakes; fires; tornadoes; volcanoes;
storms; droughts; floods; explosions, breakage, or malfunction or
accident to machinery, transmission lines, pipes or canals, even
if resulting from negligence; civil disturbances; or any other
cause not reasonably within the control of the Company.
"Governing Body" means the Board of Directors of the Issuer.
"Hereof," "herein," "hereunder" and other words of similar
import refer to this Agreement as a whole.
"Indenture" means the Indenture of Trust relating to this
Agreement between the Issuer and United States Trust Company of
New York, as Trustee, of even date herewith, pursuant to which
the Bonds are authorized to be issued, including any indentures
supplemental thereto or amendatory thereof.
"Insider" shall have the meaning set forth in the Bankruptcy
Code.
"Issuer" means Coconino County, Arizona Pollution Control
Corporation, and any successor body to the duties or functions of
the Issuer.
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"Letter of Credit" means any irrevocable direct-pay Letter
of Credit issued by a Bank to the Trustee, including any
extensions thereof, delivered in accordance with Section 4.5 of
this Agreement.
"Moody's" means Moody's Investors Service, Inc. a
corporation organized and existing under the laws of the State of
Delaware, its successors and their assigns, and, if such
corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, "Moody's"
shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Company and acceptable
to the Bank, with notice to the Trustee.
"Ordinary Services" and "Ordinary Expenses" means those
services normally rendered and those expenses, including fees of
Counsel, normally incurred by a trustee or paying agent under
instruments similar to the Indenture and the Tax Agreement.
"Original Purchaser" means Bear, Stearns & Co. Inc., acting
on behalf of itself and others.
"Owner" or "owner of Bonds" means the Person or Persons in
whose name or names a Bond shall be registered on books of the
Issuer kept by the Registrar for that purpose in accordance with
the terms of the Indenture.
"Person" means natural persons, firms, partnerships,
associations, corporations, trusts and public bodies.
"Project" means the facilities described in Exhibit A to
this Agreement, as it may be amended and supplemented from time
to time.
"Project Certificate" means the Company's Project
Certificate, delivered concurrently with the issuance of the
Bonds, with respect to certain facts which are within the
knowledge of the Company and certain reasonable assumptions of
the Company, to enable Chapman and Cutler, as Bond Counsel, to
determine that interest on the Bonds is not includable in the
gross income of the Owners of the Bonds for federal income taxes
purposes.
"Rebate Fund" means the Rebate Fund, if any, created and
established pursuant to the Tax Agreement and Section 6.21 of the
Indenture.
"Reimbursement Agreement" means any reimbursement agreement
between the Company and a Bank pursuant to which a Letter of
Credit is issued by such Bank and delivered to the Trustee, and
in each case any and all modifications, amendments and
supplements thereto.
"Remarketing Agent" means the remarketing agent, if any,
appointed in accordance with Section 4.11 of the Indenture and
any permitted successor thereto.
"Revenues" means the amounts pledged under the Indenture to
the payment of principal of, premium, if any, and interest on the
Bonds, consisting of the following: (i) all amounts
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payable from time to time by the Company under Section
4.2(a) of this Agreement, and all receipts of the Trustee
credited under the provisions of the Indenture against said
amounts payable, including all moneys drawn by the Trustee
under a Letter of Credit to pay the principal of and premium,
if any, and interest on the Bonds and all amounts realized by
the Trustee from any Credit Facility to pay the principal of and
premium, if any, and interest on the Bonds, all of which amounts
are to be deposited in the Bond Fund, (ii) any portion of the
net proceeds of the Bonds deposited with the Trustee in the
Bond Fund under Section 6.03 of the Indenture and (iii) any
amounts paid into the Bond Fund from the Construction Fund,
including income on investments.
"S&P" means Standard & Poor's Rating Services, a division of
The McGraw-Hill Companies, Inc., a corporation organized and
existing under the laws of the State of New York, its successors
and their assigns, and, if such division or corporation shall be
dissolved or liquidated or shall no longer perform the functions
of a securities rating agency, "S&P" shall be deemed to refer to
any other nationally recognized securities rating agency
designated by the Company and acceptable to the Bank, with notice
to the Trustee.
"State" means the State of Arizona.
"Tax Agreement" means the Tax Exemption Certificate and
Agreement with respect to the Bonds, dated the date of the
delivery of the Bonds, among the Company, the Issuer and the
Trustee, as from time to time amended and supplemented.
"Trust Estate" means the property conveyed to the Trustee
pursuant to the Granting Clauses of the Indenture.
"Trustee" means United States Trust Company of New York, as
trustee under the Indenture and any successor trustee appointed
pursuant to Section 10.06 or 10.09 of the Indenture at the time
serving as successor Trustee thereunder, and any separate or co-
trustee serving as such thereunder.
All other terms used herein which are defined in the
Indenture shall have the same meanings assigned them in the
Indenture unless the context otherwise requires.
ARTICLE II
REPRESENTATIONS;
SECTION 2.1. REPRESENTATIONS AND COVENANTS BY THE SSUER. The
Issuer makes the following representations and covenants as the
basis for the undertakings on its part herein contained:
(a) The Issuer is a duly organized and existing
political subdivision of the State. Under the provisions of
the Act, the Issuer is authorized to enter into the
transactions contemplated by this Agreement, the Indenture
and the Tax Agreement and
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to carry out its obligations hereunder and thereunder.
The Issuer has duly authorized the execution and delivery of
this Agreement, the Indenture and the Tax Agreement.
(b) The Bonds are to be issued under and secured by
the Indenture, pursuant to which certain of the Issuer's
interests in this Agreement and the Revenues derived by the
Issuer pursuant to this Agreement will be pledged and
assigned as security for payment of the principal of,
premium, if any, and interest on, the Bonds.
(c) The Governing Body of the Issuer has found that
the issuance of the Bonds will further the public purposes
of the Act.
(d) The Issuer has not assigned and will not assign
any of its interests in this Agreement other than pursuant
to the Indenture.
(e) No member of the Governing Body of the Issuer, nor
any other officer of the Issuer, has any interest,
financial, employment or other, in the Company or in the
transactions contemplated hereby.
SECTION 2.2. REPRESENTAITONS BY THE COMPANY. The Company
makes the following representations as the basis for the
undertakings on its part herein contained:
(a) The Company is a corporation duly incorporated
under the laws of the State and is in good standing in the
State, is qualified to do business as a foreign corporation
in all other states and jurisdictions wherein the nature of
the business transacted by the Company or the nature of the
property owned or leased by it makes such licensing or
qualification necessary, has power to enter into and by
proper corporate action has been duly authorized to execute
and deliver this Agreement and the Tax Agreement.
(b) Neither the execution and delivery of this
Agreement or the Tax Agreement, the consummation of the
transactions contemplated hereby and thereby, nor the
fulfillment of or compliance with the terms and conditions
of this Agreement and the Tax Agreement, conflicts with or
results in a breach of any of the terms, conditions or
provisions of any corporate restriction or any agreement or
instrument to which the Company is now a party or by which
it is bound, or constitutes a default under any of the
foregoing, or results in the creation or imposition of any
lien, charge or encumbrance whatsoever upon any of the
property or assets of the Company under the terms of any
instrument or agreement other than the Indenture.
(c) The statements, information and descriptions
contained in the Project Certificate and the Tax Agreement,
as of the date hereof and at the time of the delivery of the
Bonds to the Original Purchaser, are and will be true,
correct and complete, do not and will not contain any untrue
statement or misleading statement of a material fact, and do
not and will not omit to state a material fact required to
be stated therein or necessary to make the statements,
information and descriptions contained therein, in the light
of the circumstances under which they were made, not
misleading, and the estimates and the assumptions contained
in the Project Certificate and the Tax
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Agreement, as of the date hereof and as of the date of
issuance and delivery of the Bonds, are and will be
reasonable and based on the best information available to the
Company.
ARTICLE III
COMPLETION OF THE PROJECT; ISSUANCE OF THE BONDS
SECTION 3.1. AGREEMENT TO COMPLETE THE ACQUISITION,
CONSTRUCTION AND EQUIPPING OF THE PROJECT.. The Company agrees
that it will complete or cause to be completed the acquisition,
construction and equipping of the Project with such reasonable
dispatch as it shall deem prudent in the conduct of its
affairs, and that the Project, while operated by the Company,
as herein provided, will at all times be a "project" within the
meaning of the Act and be Exempt Facilities.
Exhibit A hereto may be amended or supplemented by the
Company from time to time, to add to or remove from the Project
any item or interest therein or to change the nature of all or
any part of the facilities constituting the Project, provided
that there shall be delivered by the Company to the Issuer and
the Trustee in connection with any such amendment or supplement:
(i) a certificate of the Authorized Company
Representative describing the proposed changes and stating
that they will not have the effect of disqualifying the
Project as a "project" within the meaning of the Act or as
Exempt Facilities;
(ii) a copy of the amendment or supplement to Exhibit A
hereto and such other documents, certificates and showings
as may be required by Counsel rendering the opinion in
clause (iii) of this paragraph; and
(iii) an opinion of Bond Counsel to the effect that such
amendment complies with the requirements of this Section 3.1
and is in proper form for execution and delivery by the
Issuer and that the exemption from federal income taxes of
interest on the Bonds is not adversely affected by reason of
such amendment and the changes in the Project contemplated
thereby.
SECTION 3.2. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND
PROCEEDS. In order to provide funds to lend to the Company to
finance the Cost of the Project as provided in Section 4.1
hereof, the Issuer agrees that it will issue under the Indenture,
sell and cause to be delivered to the Original Purchaser thereof,
its Bonds in the aggregate principal amount of $20,000,000,
bearing interest and maturing as set forth in the Indenture. The
Issuer will thereupon deposit the proceeds received from the sale
of the Bonds as follows: (1) in the Bond Fund, a sum equal to
any accrued interest paid by the Original Purchaser of the Bonds;
and (2) in the Construction Fund, the balance of the proceeds
(net of underwriting discount) from the sale of the Bonds.
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SECTION 3.3. DISBURSEMENTS FROM THE CONSTRUCTION FUND. The
Issuer will in the Indenture authorize and direct the Trustee to
disburse the moneys in the Construction Fund to or on behalf of
the Company, upon compliance with Section 6.07 of the Indenture,
for the following purposes (but, subject to the provisions
of Section 3.5 hereof, for no other purpose):
(a) Payment to the Company of such amounts, if any, as
shall be necessary to reimburse the Company in full for all
advances and payments made by it at any time prior to or
after the delivery of the Bonds for expenditures in
connection with the preparation of plans and specifications
for the Project (including any preliminary study or planning
of the Project or any aspect thereof) and the acquisition,
construction and equipping of the Project.
(b) Payment of the initial or acceptance fees, if any,
of the Trustee, the Administrative Expenses of the Issuer,
bond insurance premium, legal and accounting fees and
expenses and printing and engraving costs incurred in
connection with the authorization, sale and issuance of the
Bonds and the preparation of this Agreement, the Indenture,
the Tax Agreement, the Bonds and all other documents in
connection with the authorization, sale and issuance of the
Bonds.
(c) Payment for labor, services, materials and
supplies used or furnished in site improvement and in the
construction and equipping of the Project and miscellaneous
expenditures incidental to any of the foregoing items.
(d) Payment of the fees, if any, for architectural,
engineering, legal, underwriting and supervisory services
with respect to the Project.
(e) Payment of the premiums on all insurance required
to be taken out and maintained in connection with the
Project during the Construction Period.
(f) Payment of the taxes, assessments and other
charges, if any, that may become payable during the
Construction Period with respect to the Project.
(g) Payment of expenses incurred in seeking to enforce
any remedy against any contractor or subcontractor or any
other third party in respect of any default under a contract
relating to the Project.
(h) Interest on the Bonds and any Letter of Credit
fees during the construction of the Project, but only to the
extent provided by the Project Certificate.
(i) Payment of any other costs which constitute a part
of the Cost of the Project in accordance with generally
accepted applicable accounting principles, which are
permitted by the Act and which will not adversely affect the
exemption from federal income taxes of interest on any of
the Bonds.
The Company covenants and agrees that it will not take any
action or authorize or permit, to the extent such action is
within its control, any action to be taken which would
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cause the interest on the Bonds to become includable in the
federal gross income of the Owners of the Bonds, provided that
the Company shall not have violated this covenant if the
interest on any of the Bonds becomes includable in the federal
gross income of an Owner or a beneficial owner who is a
"substantial user" of the Project or a "related person"
within the meaning of Section 147(a) of the Code. The
Company further covenants and agrees to comply with all of the
requirements and restrictions of the Project Certificate.
SECTION 3.4. ESTABLISHMENT OF COMPLETION DATE.. As
soon as practicable after the completion of construction of the
Project, and in any event not more than ninety (90) days
thereafter, the Company shall furnish to the Trustee a
certificate signed by an Authorized Company Representative
stating (i) that construction of the Project has been completed
substantially in accordance with the plans and specifications,
(ii) the Completion Date, (iii) the Cost of the Project, (iv) the
portion of the Cost of the Project which has then been paid and
(v) the portion of the Cost of the Project which has not yet then
been paid. Such certificate may state that it is given without
prejudice to any rights against third parties which exist at the
date of such certificate or which may subsequently come into
being.
Moneys (including investment proceeds) remaining in the
Construction Fund on the date of such certificate may be used, at
the direction of an Authorized Company Representative, to the
extent indicated, for the payment, in accordance with the
provisions of this Agreement, of any Cost of the Project not then
paid as specified in the above-mentioned certificate. Any moneys
(including investment proceeds) remaining in the Construction
Fund on the date of the aforesaid certificate and not so set
aside for the payment of such Cost of the Project shall be
transferred or disbursed in accordance with Section 1.142-2 of
the Regulations (as defined in the Tax Agreement) or any
successor thereto. The Company acknowledges that these
provisions generally require that a portion of the Bonds be
redeemed, or defeased to the first call date (with appropriate
notice to the Internal Revenue Service), within 90 days of the
earlier of (i) the date on which the Company determines that the
Project will not be completed or (ii) the date on which the
Project is Placed-in-Service (as defined in the Tax Agreement).
In the event the moneys in the Construction Fund available
for payment of the Cost of the Project should not be sufficient
to pay the costs thereof in full, the Company agrees to pay
directly, or to deposit in the Construction Fund moneys
sufficient to pay, the costs of completing the Project as may be
in excess of the moneys available therefor in the Construction
Fund. The Issuer does not make any warranty, either express or
implied, that the moneys which will be paid into the Construction
Fund and which, under the provisions of this Agreement, will be
available for payment of the Cost of the Project, will be
sufficient to pay all the costs which will be incurred in that
connection. The Company agrees that if after exhaustion of the
moneys in the Construction Fund the Company should pay, or
deposit moneys in the Construction Fund for the payment of, any
portion of the Cost of the Project pursuant to the provisions of
this Section, it shall not be entitled to any reimbursement
therefor from the Issuer or from the Trustee or from the owners
of any of the Bonds, nor shall it be entitled to any diminution
of the loan repayment installments or other amounts payable under
Section 4.2 hereof.
SECTION 3.5. INVESTMENT OF MONEYS IN THE BOND FUND AND
CONSTRUCITON FUND. Except as otherwise herein provided, any
moneys held as a part of the Bond Fund or
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the Construction Fund shall be invested or reinvested by the
Trustee at the written direction, or the oral direction
promptly confirmed in writing, of an Authorized Company
Representative as to specific investments, to the extent permitted
by law, in:
(a) bonds or other obligations of the United States of
America;
(b) bonds or other obligations, the payment of the
principal of and interest on which is unconditionally
guaranteed by the United States of America;
(c) obligations issued or guaranteed as to principal
and interest by any agency or person controlled or
supervised by and acting as an instrumentality of the United
States of America pursuant to authority granted by the
Congress of the United States of America;
(d) obligations issued or guaranteed by any state of
the United States of America, or any political subdivision
of any such state, or in funds consisting of such
obligations to the extent described in Treasury Regulation
1.148-8(e)(3)(iii);
(e) prime commercial paper;
(f) prime finance company paper;
(g) bankers' acceptances drawn on and accepted by
commercial banks;
(h) repurchase agreements fully secured by obligations
issued or guaranteed as to principal and interest by the
United States of America or by any person controlled or
supervised by and acting as an instrumentality of the United
States of America pursuant to authority granted by the
Congress of the United States of America;
(i) certificates of deposit issued by commercial
banks, including banks domiciled outside of the United
States of America; and
(j) units of taxable government money market
portfolios composed of obligations guaranteed as to
principal and interest by the United States of America or
repurchase agreements fully collateralized by such
obligations.
The investments so purchased shall be held by the Trustee
and shall be deemed at all times a part of the Bond Fund or
Construction Fund, as the case may be, and the interest accruing
thereon and any profit realized therefrom shall be credited to
such fund, subject to the provisions of the Tax Agreement. The
Company agrees that to the extent any moneys in the Bond Fund
represent moneys realized under a Letter of Credit or any Credit
Facility or moneys held for the payment of Bonds pursuant to
Sections 6.12 and 6.18 of the Indenture or moneys held for the
payment of the purchase price of Bonds pursuant to Article IV of
the Indenture, such moneys shall not be invested. In addition,
the Company agrees that to the extent that any moneys in the Bond
Fund represent moneys to be used to pay the premium portion of
the redemption price of Bonds pursuant to Section 3.01(A)(3) or
(4) of the
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Indenture, such moneys shall be invested only in Governmental
Obligations maturing on or before the applicable redemption
date or dates.
SECTION 3.6. TAX EXEMPT STATUS OF BONDS. The Company
covenants and agrees that it has not taken or permitted and will
not take or permit any action which results in interest paid on
the Bonds being included in gross income of the holders or
beneficial owners of the Bonds for purposes of federal income
taxation (other than a holder or beneficial owner who is a
"substantial user" of the Project or a "related person"
within the meaning of Section 147(a) of the Code). The
Company covenants that none of the proceeds of the Bonds or the
payments to be made under this Agreement, or any other funds which
may be deemed to be proceeds of the Bonds pursuant to Section
148(a) of the Code, will be invested or used in such a way, and
that no actions will be taken or not taken, as to cause the Bonds
to be treated as "arbitrage bonds" within the meaning of Section
148(a) of the Code. Without limiting the generality of the
foregoing, the Company covenants and agrees that it will comply
with the provisions of the Tax Agreement and the Project
Certificate.
ARTICLE IV
LOAN AND PROVISIONS FOR REPAYMENT;
SECTION 4.1. LOAN OF BOND PROCEEDS. (a) The Issuer agrees,
upon the terms and conditions in this Agreement, to lend to the
Company the proceeds (exclusive of accrued interest, if any)
received by the Issuer from the sale of the Bonds in order to
pay the Cost of the Project and the Company agrees to apply
the gross proceeds of such loan to pay the Cost of the
Project or as otherwise permitted in Section 3.4 hereof.
(b) The Issuer and the Company expressly reserve the right
to enter into, to the extent permitted by law, an agreement or
agreements other than this Agreement, with respect to the
issuance by the Issuer, under an indenture or indentures other
than the Indenture, of obligations to provide additional funds to
pay the Cost of the Project or to refund all or any principal
amount of the Bonds, or any combination thereof.
SECTION 4.2. LOAN REPAYMENTS AND OTHER AMOUNTS PAYABLE.
(a) On each date provided in or pursuant to the
Indenture for the payment (whether at maturity or upon redemption
or acceleration) of principal of, and premium, if any, and
interest on, the Bonds, until the principal of, and premium, if
any, and interest on, the Bonds shall have been fully paid or
provision for the payment thereof shall have been made in
accordance with the Indenture, the Company shall pay to the
Trustee in immediately available funds, for deposit in the Bond
Fund, as a repayment installment of the loan of the proceeds of
the Bonds pursuant to Section 4.1(a) hereof, a sum equal to the
amount payable on such date (whether at maturity or upon
redemption or acceleration) as principal of, and premium, if any,
and interest on, the Bonds as provided in the Indenture;
provided, however, that the obligation of the Company to make any
such payment shall be deemed to be satisfied and discharged to
the extent of the corresponding payment realized by the Trustee
under any Letter of Credit or Credit Facility; and provided
further, that the obligation of the Company to make any such
repayment
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installment shall be reduced by the amount of any moneys then
on deposit in the Bond Fund and available for such payment.
(b) The Company shall pay to the Trustee amounts equal to
the amounts to be paid by the Trustee for the purchase of Bonds
pursuant to Article IV of the Indenture. Such amounts shall be
paid by the Company to the Trustee in immediately available funds
on the date such payments pursuant to Section 4.05 of the
Indenture are to be made; provided, however, that the obligation
of the Company to make any such payment shall be deemed to be
satisfied and discharged to the extent of the corresponding
payment realized by the Trustee under any Letter of Credit or
Credit Facility or to the extent moneys are available from the
sources described in clauses (i) and (ii) of Section 4.05(a) of
the Indenture.
(c) The Company agrees to pay to the Trustee (i) the fees
of the Trustee for the Ordinary Services rendered by it and an
amount equal to the Ordinary Expenses incurred by it under the
Indenture and the Tax Agreement, as and when the same become due,
and (ii) the reasonable fees, charges and expenses of the Trustee
for reasonable Extraordinary Services and Extraordinary Expenses,
as and when the same become due, incurred under the Indenture and
the Tax Agreement. The Company agrees that the Trustee, its
officers, agents, servants and employees, shall not be liable
for, and agrees that it will at all times indemnify and hold
harmless the Trustee, its officers, agents, servants and
employees against, and pay all expenses of the Trustee, its
officers, agents, servants and employees, relating to any
lawsuit, proceeding or claim and resulting from any action or
omission taken or made by or on behalf of the Trustee, its
officers, agents, servants and employees pursuant to this
Agreement, the Indenture or the Tax Agreement, that may be
occasioned by any cause (other than the negligence or willful
misconduct of the Trustee, its officers, agents, servants and
employees). In case any action shall be brought against the
Trustee in respect of which indemnity may be sought against the
Company, the Trustee shall promptly notify the Company in writing
and the Company shall be entitled to assume control of the
defense thereof, including the employment of Counsel and the
payment of all expenses. The Trustee shall have the right to
employ separate Counsel in any such action and participate in the
defense thereof, but the fees and expenses of such Counsel shall
be paid by the Trustee unless the employment of such Counsel has
been authorized by the Company. The Company shall not be liable
for any settlement of any such action without its consent, but if
any such action is settled with the consent of the Company or if
there be final judgment for the plaintiff in any such action, the
Company agrees to indemnify and hold harmless the Trustee from
and against any loss or liability by reason of such settlement or
final judgment. The Company agrees that the indemnification
provided herein shall survive the termination of this Agreement
or the Indenture or the resignation of the Trustee.
(d) The Company agrees to pay all costs incurred in
connection with the issuance of the Bonds (which may be paid from
the proceeds of the Bonds to the extent permitted by the Project
Certificate) and the Issuer shall have no obligation with respect
to such costs.
(e) The Company agrees to indemnify and hold harmless the
Issuer and any member, officer, official or employee of the
Issuer against any and all losses, costs, charges, expenses,
judgments and liabilities created by or arising out of this
Agreement, the Indenture or the Tax Agreement or otherwise
incurred in connection with the issuance of the Bonds. The
Issuer
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may submit to the Company periodic statements, not more
frequently than monthly, for its Administrative Expenses and the
Company shall make payment to the Issuer of the full amount of
each such statement within 30 days after the Company receives
such statement.
(f) The Company agrees to pay to the Remarketing Agent, if
any, the reasonable fees, charges and expenses of such
Remarketing Agent, and the Issuer shall have no obligation or
liability with respect to the payment of any such fees, charges
or expenses.
(g) In the event the Company shall fail to make any of the
payments required by (a) or (b) of this Section 4.2, the payment
so in default shall continue as an obligation of the Company
until the amount in default shall have been fully paid and the
Company will pay interest to the extent permitted by law, on any
overdue amount at the rate of interest borne by the Bonds on the
date on which such amount became due and payable until paid. In
the event that the Company shall fail to make any of the payments
required by (c), (d), (e) or (f) of this Section 4.2, the payment
so in default shall continue as an obligation of the Company
until the amount in default shall have been fully paid, and the
Company agrees to pay the same with interest thereon to the
extent permitted by law at a rate 1% above the rate of interest
then charged by the Trustee on 90-day commercial loans to its
prime commercial borrowers until paid.
(h) To the extent that a Letter of Credit is in effect and
moneys on deposit in the Bond Fund constitute Available Moneys or
have been deposited in separate, segregated accounts in the Bond
Fund for the purpose of becoming Available Moneys, such moneys
shall not be available for transfer and shall not be transferred
from the Bond Fund to the Rebate Fund to satisfy the requirements
of the Tax Agreement (unless the Company fails to pay the amounts
described below). In the event that moneys are not available for
transfer from the Bond Fund to the Rebate Fund as required by the
Tax Agreement, the Company agrees to pay any such amount required
to be so transferred and not available for such purpose in the
Bond Fund by paying such amount to the Trustee for deposit
directly into the Rebate Fund. The obligation of the Company set
forth in this Section 4.2(h) shall survive the termination of
this Agreement.
SECTION 4.3. NO DEFENSE OR SET-OFF. The obligation of the
Company to make the payments pursuant to this Agreement shall
be absolute and unconditional without defense or set-off by
reason of any default by the Issuer under this Agreement or under
any other agreement between the Company and the Issuer or for
any other reason, it being the intention of the parties that the
payments required hereunder will be paid in full when due
without any delay or diminution whatsoever.
SECTION 4.4. PAYMENTS PLEDGED AND ASSIGNED. It is
understood and agreed that all payments required to be made by
the Company pursuant to Section 4.2 hereof (except payments made
to the Trustee pursuant to Section 4.2(c) hereof, to any
Remarketing Agent pursuant to Section 4.2(f) hereof, to the
Issuer pursuant to Section 4.2(e) hereof and to any or all the
Issuer and the Trustee and any Remarketing Agent pursuant to
Section 4.2(g) hereof) and certain rights of the Issuer
hereunder are pledged and assigned by the Indenture. The
Company consents to such pledge and assignment. The Issuer
hereby directs the Company and the Company hereby agrees to
pay or cause to be paid to the Trustee all said amounts except
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payments to be made to any Remarketing Agent pursuant to
Section 4.2(f) hereof and payments to be made to the Issuer
pursuant to Sections 4.2(e) and (g) hereof. The Project will not
constitute any part of the security for the Bonds.
SECTION 4.5. LETTER OF CREDIT AND CREDIT FACILITY.
(a) The Company has no obligation to provide a Letter of Credit
or other Credit Facility hereunder. At any time the Company may,
at its option, provide for the delivery to the Trustee of a
Letter of Credit or a Credit Facility.
(b) Any Letter of Credit delivered to the Trustee hereunder
will comply with the provisions of Section 6.19(b) of the
Indenture. Any Credit Facility (a) may consist, at the option of
the Company, of (i) first mortgage bonds of the Company, (ii) a
letter of credit, (iii) a standby bond purchase agreement, (iv)
bond insurance or (v) such other security or credit support as
the Company may elect to furnish, or any combination thereof.
(c) As a condition to the exercise by the Company of its
option set forth in Section 4.5(b) hereof to deliver a Letter of
Credit or other Credit Facility, the Company shall provide to the
Issuer and the Trustee a notice specifying (i) that a Letter of
Credit or other Credit Facility will be delivered to the Trustee,
(ii) the effective date of such delivery (which must be at least
five Business Days prior to the date of delivery of such Letter
of Credit or other Credit Facility and, if a Letter of Credit or
other Credit Facility is then in effect, must also be at least
five Business Days prior to the date such existing Letter of
Credit or other Credit Facility is to expire by its terms), (iii)
if applicable, the form and substance of the Letter of Credit or
other Credit Facility then in effect, and (iv) the form and
substance of the Letter of Credit or other Credit Facility to be
in effect on the date specified in (ii) above. Such notice to
the Trustee must be delivered by the Company at least ten
Business Days prior to the effective date of such Letter of
Credit or Credit Facility or, if a Letter of Credit or other
Credit Facility is then in effect, at least 20 days prior to the
fifth Business Day next preceding the effective date of such
delivery, and must be accompanied by the opinion of Bond Counsel
required by Section 6.19 or 6.20 of the Indenture, as the case
may be, and (i) if a Letter of Credit or other Credit Facility is
then in effect, a letter from Moody's, if the Bonds should then
be rated by Moody's, and from S&P, if the Bonds should then be
rated by S&P, and from Fitch, if the Bonds are then rated by
Fitch, to the effect that the substitution of the proposed Letter
of Credit or other Credit Facility for the Letter of Credit or
other Credit Facility then in effect will not by itself result in
a reduction, suspension or withdrawal of its ratings of the Bonds
which then prevail (except that such rating evidence shall not be
required if the Bonds are subject to mandatory tender for
purchase pursuant to Section 4.02(a)(iii) of the Indenture), and
(ii) the form of the substitute Letter of Credit or other Credit
Facility to be in place on the effective date of such change,
together with any documentation and opinions referred to by
Moody's or S&P or Fitch, as the case may be, in any such letter.
(d) The Issuer and the Company agree that the Issuer will
in the Indenture authorize and direct the Trustee to accept and
agree to conditions and provisions of any Letter of Credit or any
other Credit Facility which may be provided in accordance with
the provisions of this Section 4.5.
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SECTION . PAYMENT OF THE BONDS AND OTHER AMOUNTS.
The Bonds and interest and premium, if any, thereon shall be
payable solely from (i) payments made by the Company to the
Trustee under Section 4.2(a) hereof, (ii) amounts realized under
any Letter of Credit or Credit Facility then in effect and
(iii) other moneys on deposit in the Bond Fund and available
therefor.
Payments of principal of, and premium, if any, or interest
on, the Bonds with moneys in the Bond Fund or the Construction
Fund constituting proceeds from the sale of the Bonds or earnings
on investments made under the provisions of the Indenture shall
be credited against the obligation to pay required by
Section 4.2(a) hereof, and the obligation to pay required by
Section 4.2(a) hereof shall be deemed to be satisfied and
discharged to the extent of the corresponding payment made to the
Trustee under any Letter of Credit or Credit Facility then in
effect.
Whenever any Bonds are redeemable in whole or in part at the
option of the Company, the Trustee, on behalf of the Issuer,
shall redeem the same upon the request of the Company and such
redemption (unless conditional) shall be made from payments made
by the Company to the Trustee under Section 4.2(a) hereof and
amounts realized under any Letter of Credit or Credit Facility
then in effect equal to the redemption price of such Bonds.
Whenever payment or provision therefor has been made in
respect of the principal of, or premium, if any, or interest on,
all or any portion of the Bonds in accordance with the Indenture
(whether at maturity or upon redemption or acceleration or upon
provision for payment in accordance with Article VIII of the
Indenture), payments shall be deemed paid to the extent such
payment or provision therefor has been made and is considered to
be a payment of principal of, or premium, if any, or interest on,
such Bonds. If such Bonds are thereby deemed paid in full, the
Trustee shall notify the Company and the Issuer that such payment
requirement has been satisfied. Subject to the foregoing, or
unless the Company is entitled to a credit under this Agreement
or the Indenture, all payments shall be in the full amount
required by Section 4.2(a) hereof.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS;
SECTION 5.1. COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; CONDITIONS UNDER
WHICH EXCEPTIONS PERMITTED. The
Company agrees that during the term of this Agreement, it will
maintain its corporate existence and its good standing in the
State, will not dissolve or otherwise dispose of all or
substantially all of its assets and will not consolidate with or
merge into another corporation unless (a) the acquirer of its
assets or the corporation with which it shall consolidate or into
which it shall merge shall (i) be a corporation organized under
the laws of one of the states of the United States of America,
(ii) be qualified to do business in the State, and (iii) assume
in writing all of the obligations of the Company under this
Agreement and the Tax Agreement.
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SECTION 5.2. ANNUAL STATEMENT. The Company agrees to have
an annual audit made by its regular independent certified
public accountants and to furnish the Trustee (within 30 days
after receipt by the Company) with a balance sheet and statement
of income and surplus showing the financial condition of the
Company and its consolidated subsidiaries, if any, at the
close of each fiscal year and the results of operations of
the Company and its consolidated subsidiaries, if any, for
each fiscal year, accompanied by a report of said
accountants that such statements have been prepared in
accordance with generally accepted accounting principles.
The Company's obligations under this Section 5.2 may be satisfied
by delivering a copy of the Company's Annual Report to the
Trustee at the same time that it is mailed to
stockholders.
SECTION 5.3. MAINTENANCE AND REPAIR; INSURANCE; TAXES; ETC.
The Company shall maintain or cause to be maintained the
Project in good repair and keep it properly insured and shall
promptly pay or cause to be paid all costs thereof. The Company
shall promptly pay or cause to be paid all installments of taxes,
installments of special assessments, and all governmental,
utility and other charges with respect to the Project, when due.
The Company may, at its own expense and in its own name in good
faith contest or appeal any such taxes, assessments or other
charges, or installments thereof, but shall not permit any such
taxes, assessments or other charges, or installments thereof, to
remain unpaid if such nonpayment shall subject the Project or any
part thereof to loss or forfeiture.
SECTION 5.4. RECORDATION AND OTHER INSTRUMENTS.
The Company shall cause such security agreements, financing
statements and all supplements thereto and other instruments as
may be required from time to time to be kept, to be recorded and
filed in such manner and in such places as may be required by law
in order to fully preserve, protect and perfect the security of
the Owners of the Bonds and the rights of the Trustee and, after
payment in full of the Bonds as provided in the Indenture, the
rights of the Bank provided in the Indenture, and to perfect the
security interest created by the Indenture. The Company agrees
to abide by the provisions of Section 5.04 of the Indenture to
the extent applicable to the Company.
SECTION 5.5. NO WARRANTY BY THE ISSUER. The Issuer makes no
warranty, either express or implied, as to the Project or that it
will be suitable for the purposes of the Company or needs of the
Company.
SECTION 5.6. AGREEMENT AS TO OWNERSHIP AND USE OF THE PROJECT.
The Issuer and the Company agree that title to the
Project shall be in and remain in the Company, and that the
Project shall be the sole property of the Company in which the
Issuer shall have no interest.
SECTION 5.7. COMPANY TO FURNISH NOTICE OF ADJUSTMENTS OF INTEREST RATE
PERIODS. The Company is hereby
granted the option to designate from time to time changes in Rate
Periods (and to rescind such changes) in the manner and to the
extent set forth in Section 2.03 of the Indenture. In the event
the Company elects to exercise any such option, the Company
agrees that it shall cause notices of adjustments of Rate Periods
(or rescissions thereof) to be given to the Issuer, the Trustee
and the Remarketing Agent in accordance with Section 2.03(a),
(b), (c), (d) or (f) of the Indenture.
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SECTION 5.8. INFORMATION REPORTING, ETC. The Issuer
covenants and agrees that, upon the direction of the Company or
Bond Counsel, it will mail or cause to be mailed to the Secretary
of the Treasury (or his designee as prescribed by regulation,
currently the Internal Revenue Service Center, Philadelphia, PA
19255) a statement setting forth the information required by
Section 149(e) of the Code, which statement shall be in the form
of the Information Return for Tax-Exempt Private Activity Bond
Issues (Form 8038) of the Internal Revenue Service (or any
successor form) and which shall be completed by the Company and
Bond Counsel based in part upon information supplied by the Company
and Bond Counsel.
SECTION 5.9. LIMITED LIABILITY OF ISSUER. Any obligation or
liability of the Issuer created by or arising out of this
Agreement or otherwise incurred in connection with the issuance of
the Bonds (including without limitation any liability created by or
arising out of the representations, warranties or covenants set
forth herein or otherwise) shall not impose a debt or
pecuniary liability upon the Issuer or the State or any political
subdivision thereof, or a charge upon the general credit or
taxing powers of any of the foregoing, but shall be payable
solely out of the Revenues or other amounts payable by the
Company to the Issuer hereunder or otherwise.
Neither the issuance of the Bonds nor the delivery of this
Agreement shall, directly or indirectly or contingently, obligate
the Issuer or the State or any political subdivision thereof to
levy any form of taxation therefor or to make any appropriation
for their payment. Nothing in the Bonds or in the Indenture or
this Agreement or the proceedings of the Issuer authorizing the
Bonds or in the Act or in any other related document shall be
construed to authorize the Issuer to create a debt of the Issuer
or the State or any political subdivision thereof within the
meaning of any constitutional or statutory provision of the
State. The principal of, and premium, if any, and interest on,
the Bonds shall be payable solely from the funds pledged for
their payment in accordance with the Indenture and available
therefor under this Agreement and under any Letter of Credit or
Credit Facility then in effect. Neither the State nor any
political subdivision thereof shall in any event be liable for
the payment of the principal of, premium, if any, or interest on,
the Bonds or for the performance of any pledge, obligation or
agreement of any kind whatsoever which may be undertaken by the
Issuer. No breach of any such pledge, obligation or agreement
may impose any pecuniary liability upon the Issuer or the State
or any political subdivision thereof, or any charge upon the
general credit or against the taxing power of Coconino County,
Arizona or the State or any political subdivision thereof. The
Issuer has no taxing power.
SECTION 5.10. INSPECTION OF PROJECT. The Company agrees that
the Issuer and the Trustee and their duly authorized
representatives shall have the right at all reasonable times to
enter upon and examine and inspect the Project property and
shall also be permitted, at all reasonable times, to examine the
books and records of the Company insofar as they relate to the
Project.
SECTION 5.11. PURCHASES OF BONDS BY COMPANY OR ISSUER PROHIBITED;
EXCEPTIONS. At any time while a Letter of Credit
is in effect, the Company shall not and shall not allow any
Insider of the Company to purchase any Bonds except (a) with
Available Moneys or (b) as provided in Section 4.2(b) hereof. At
any time while a Letter of Credit is
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in effect, the Issuer shall not and shall not allow any Insider of
the Issuer to purchase any Bonds except with Available Moneys.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES;
SECTION 6.1. EVENTS OF DEFAULT DEFINED. The following
shall be "events of default" under this Agreement and the terms
"event of default" or "default" shall mean, whenever they are
used in this Agreement, any one or more of the following events:
(a) Failure by the Company to pay when due any amounts
required to be paid under Section 4.2(a) hereof, which
failure results in an event of default under subparagraph
(a) or (b) of Section 9.01 of the Indenture; or
(b) Failure by the Company to pay or cause to be paid
any payment required to be paid under Section 4.2(b) hereof,
which failure results in an event of default under
subparagraph (c) of Section 9.01 of the Indenture; or
(c) Failure by the Company to observe and perform any
covenant, condition or agreement on its part to be observed
or performed in this Agreement, other than as referred to in
(a) and (b) above, for a period of 90 days after written
notice, or in the case of failure by the Company to observe
and perform any covenant, condition or agreement on its part
to be observed or performed in Section 4.2(h) hereof, for a
period of 30 days after written notice, specifying such
failure and requesting that it be remedied and stating that
such notice is a "Notice of Default" hereunder, given to the
Company by the Trustee or to the Company and the Trustee by
the Issuer, unless the Issuer and the Trustee shall agree in
writing to an extension of such time prior to its
expiration; provided, however, if the failure stated in the
notice cannot be corrected within the applicable period, the
Issuer and the Trustee will not unreasonably withhold their
consent to an extension of such time if corrective action is
instituted within the applicable period and diligently
pursued until the failure is corrected and such corrective
action or diligent pursuit is evidenced to the Trustee by a
certificate of an Authorized Company Representative; or
(d) A proceeding or case shall be commenced, without
the application or consent of the Company, in any court of
competent jurisdiction seeking (i) liquidation,
reorganization, dissolution, winding-up or composition or
adjustment of 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 under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or
adjustment of debts, and such proceeding or cause shall
continue undismissed, or an order, judgment, or decree
approving or ordering any of the foregoing shall be entered
and shall continue in effect for a period of 90 days; or an
order for relief against the Company shall be entered
against the Company in an involuntary case under the
Bankruptcy Code (as now or hereafter in effect) or other
applicable law; or
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(e) The Company shall admit in writing its inability
to pay its debts generally as they become due or shall file
a petition in voluntary bankruptcy or shall make any general
assignment for the benefit of its creditors, or shall
consent to the appointment of a receiver or trustee of all
or substantially all of its property, or shall commence a
voluntary case under the Bankruptcy Code (as now or
hereafter in effect), or shall file in any court of
competent jurisdiction a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of
debts, or shall fail to controvert in a timely or
appropriate manner, or acquiesce in writing to, any petition
filed against it in an involuntary case under such
Bankruptcy Code or other applicable law; or
(f) Dissolution or liquidation of the Company;
provided that the term "dissolution or liquidation of the
Company" shall not be construed to include the cessation of
the corporate existence of the Company resulting either from
a merger or consolidation of the Company into or with
another corporation or a dissolution or liquidation of the
Company following a transfer of all or substantially all of
its assets as an entirety, under the conditions permitting
such actions contained in Section 5.1 hereof; or
(g) The occurrence of an "event of default" under the
Indenture.
The foregoing provisions of Section 6.1(c) are subject to
the following limitations: If by reason of Force Majeure the
Company is unable in whole or in part to carry out its agreements
on its part herein contained, other than the obligations on the
part of the Company contained in Article IV and Sections 5.3 and
6.4 hereof, the Company shall not be deemed in default during the
continuance of such inability. The Company agrees, however, to
remedy with all reasonable dispatch the cause or causes
preventing the Company from carrying out its agreements; provided
that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the
Company and the Company shall not be required to make settlement
of strikes, lockouts and other industrial disturbances by
acceding to the demands of the opposing party or parties when
such course is in the sole judgment of the Company unfavorable to
the Company.
SECTION 6.2. REMEDIES ON DEFAULT. Whenever any event of
default referred to in Section 6.1 hereof shall have happened
and be continuing, the Trustee, as assignee of the Issuer:
(a) shall, by notice in writing to the Company,
declare the unpaid indebtedness under Section 4.2(a) hereof
to be due and payable immediately, if concurrently with or
prior to such notice the unpaid principal amount of the
Bonds shall have been declared to be due and payable, and
upon any such declaration the same (being an amount
sufficient, together with other moneys available therefor in
the Bond Fund, to pay the unpaid principal of, premium, if
any, and interest accrued on, the Bonds) shall become and
shall be immediately due and payable as liquidated damages;
and
(b) may take whatever action at law or in equity as
may appear necessary or desirable to collect the payments
and other amounts then due and thereafter to become
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due hereunder or to enforce performance and observance of any
obligation, agreement or covenant of the Company under this
Agreement.
Any amounts collected pursuant to action taken under this
Section 6.2 shall be paid into the Bond Fund (unless otherwise
provided in this Agreement) and applied in accordance with the
provisions of the Indenture. No action taken pursuant to this
Section 6.2 shall relieve the Company from the Company's
obligations pursuant to Section 4.2 hereof.
No recourse shall be had for any claim based on this
Agreement against any officer, director or stockholder, past,
present or future, of the Company as such, either directly or
through the Company, under any constitutional provision, statute
or rule of law, or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise.
Nothing herein contained shall be construed to prevent the
Issuer from enforcing directly any of its rights under the second
paragraph of Section 3.1 hereof and under Sections 4.2(e),
4.2(g), 5.3 and 6.4 hereof.
SECTION 6.3. NO REMEDY EXCLUSIVE. No remedy herein
conferred upon or reserved to the Issuer is intended to be
exclusive of any other available remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to
every other remedy given under this Agreement or now or hereafter
existing at law or in equity or by statute. No delay or omission
to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver
thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to
entitle the Issuer or the Trustee to exercise any remedy reserved
to it in this Article, it shall not be necessary to give any
notice, other than such notice as may be herein expressly
required. Subject to the provisions of the Indenture and hereof,
such rights and remedies as are given the Issuer hereunder shall
also extend to the Trustee. The Owners of the Bonds, subject
to the provisions of the Indenture, shall be entitled to the
benefit of all covenants and agreements herein contained.
SECTION 6.4. AGREEMENT TO PAY FEES AND EXPENSES OF COUNSEL.
In the event the Company should default under any of
the provisions of this Agreement and the Issuer or the Trustee
should employ Counsel or incur other expenses for the collection
of the indebtedness hereunder or the enforcement of performance
or observance of any obligation or agreement on the part of the
Company herein contained, the Company agrees that it will on
demand therefor pay to the Trustee, the Issuer or, if so directed
by the Issuer, to the Counsel for the Issuer, the reasonable fees
of such Counsel and such other expenses so incurred by or on
behalf of the Issuer or the Trustee.
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER; CONSENTS TO
WAIVERS. In the event any agreement contained in
this Agreement should be breached by either party and thereafter
waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any
other breach hereunder. No waiver shall be effective unless in
writing and signed by the party making the waiver. The Issuer
shall have no power to waive any default hereunder by the Company
without both the consent of the Trustee and the Bank to such
waiver. The Trustee and the Bank shall have the
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power to waive any default by the Company hereunder, except a
default under the second paragraph of Section 3.1 hereof, or
under Section 3.6, 4.2(e), 4.2(g), 5.3 or 6.4 hereof, in so far
as it pertains to the Issuer, without the prior written
concurrence of the Issuer. Notwithstanding the foregoing, if,
after the acceleration of the maturity of the outstanding Bonds
by the Trustee pursuant to Section 9.02 of the Indenture, (i)
all arrears of principal of and interest on the outstanding
Bonds and interest on overdue principal and (to the extent
permitted by law) on overdue installments of interest at the
rate of interest borne by the Bonds on the date on which such
principal or interest became due and payable and the premium,
if any, on all Bonds then Outstanding which have become due
and payable otherwise than by acceleration, and all other sums
payable under the Indenture, except the principal of and the
interest on such Bonds which by such acceleration shall have
become due and payable, shall have been paid, (ii) all other
things shall have been performed in respect of which there was a
default, (iii) there shall have been paid the reasonable fees and
expenses of the Trustee and of the Owners of such Bonds,
including reasonable attorneys' fees paid or incurred and (iv)
such event of default under the Indenture shall be waived in
accordance with Section 9.09 of the Indenture with the consequence
that such acceleration under Section 9.02 of the Indenture is
rescinded, then the Company's default hereunder shall be deemed
to have been waived and its consequences rescinded and no
further action or consent by the Trustee or the Issuer or the Bank
shall be required; provided that there has been furnished an
opinion of Bond Counsel to the effect that such waiver will not
adversely affect the exemption from federal income taxes of
interest on the Bonds.
ARTICLE VII
OPTIONS AND OBLIGATIONS OF COMPANY;
PREPAYMENTS; REDEMPTION OF BONDS
SECTION 7.1. OPTION TO PREPAY. The Company shall have, and
is hereby granted, the option to prepay the payments due
hereunder in whole or in part at any time or from time to time
(a) to provide for the redemption of Bonds pursuant to the
provisions of Section 3.01(A) of the Indenture or (b) to provide
for the defeasance of the Bonds pursuant to Article VIII of
the Indenture. In the event the Company elects to provide for
the redemption of Bonds as permitted by this Section, the
Company shall notify and instruct the Trustee in accordance with
Section 7.3 hereof to redeem all or any portion of the Bonds in
advance of maturity. If the Company so elects, any
redemption of Bonds pursuant to Section 3.01(A) of the
Indenture may be made conditional.
SECTION 7.2. OBLIGATION TO PREPAY. The Company covenants and
agrees that if all or any part of the Bonds are unconditionally
called for redemption in accordance with the Indenture or become
subject to mandatory redemption, it will prepay the indebtedness
hereunder in whole or in part, prior to the date on which notice
of such redemption is given to the owners of such Bonds, in an
amount sufficient to redeem such Bonds on the date fixed for
the redemption of the Bonds.
SECTION 7.3. NOTICE OF PREPAYMENT. Upon the exercise of
the option granted to the Company in Section 7.1 hereof, or
upon the Company having knowledge of the
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occurrence of any event requiring mandatory
redemption of the Bonds in accordance with Section 3.01(B) of the
Indenture, the Company shall give written notice to the Issuer,
the Bank, the Remarketing Agent and the Trustee. The notice
shall provide for the date of the application of the prepayment
made by the Company hereunder to the retirement of the Bonds in
whole or in part pursuant to call for redemption and shall be
given by the Company not less than 45 days prior to the date of
the redemption which is to occur as a result of such prepayment
(or such later date as is acceptable to the Trustee and the
Issuer), and in the case of a redemption of Bonds pursuant to
Section 3.01(B) of the Indenture shall be given on a date which
will permit the redemption of the Bonds within the time required
by Section 3.01(B) of the Indenture. On the date fixed for
redemption of the Bonds or portions thereof, there shall be
deposited with the Trustee from drawings upon any Letter of
Credit then in effect or payments by the Company or from amounts
realized under any Credit Facility then in effect as required by
Section 7.1 or 7.2, as appropriate, for payment into the Bond
Fund. Any other provision of this Agreement or the Indenture to
the contrary notwithstanding, any prepayment of moneys hereunder
shall be made in such manner and at such time that any redemption
of Bonds or portions thereof will be made with Available Moneys.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. NOTICES. Except as
otherwise provided herein, all notices, certificates or other
communications hereunder shall be sufficiently given if in
writing and shall be deemed given when mailed by first class
mail, postage prepaid, or by qualified overnight courier service,
courier charges prepaid, or by facsimile (receipt of which is
orally confirmed) addressed as follows: If to the Issuer, at c/o
Mangum, Wall, Stoops & Warden, P.L.L.C., 222 East Birch Avenue,
Flagstaff, Arizona 86001, or to telecopy number (520) 773-1312;
if to the Company, at P.O. Box 230, 6226 West Sahara Avenue, Las
Vegas, Nevada 89151 (89102 for Federal Express), or to telecopy
number (702) 367-5864, Attention: Treasurer; if to the Trustee,
at 114 West 47th Street, New York, New York 10036-1532 or to
telecopy number (212) 852-1625, Attention: Corporate Trust
Administration; if to the Remarketing Agent, at the address
specified by the Remarketing Agent; and if to the Bank, at the
address specified by the Bank. In case by reason of the
suspension of regular mail service, it shall be impracticable to
give notice by first class mail of any event to the Issuer, to
the Company, to the Remarketing Agent or to the Bank when such
notice is required to be given pursuant to any provisions of this
Agreement, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be sufficient
giving of such notice. The Issuer, the Company, the Trustee, the
Remarketing Agent and the Bank may, by notice pursuant to this
Section 8.1, designate any different addresses to which
subsequent notices, certificates or other communications shall be
sent.
SECTION 8.2. ASSIGNMENTS. This Agreement may not be
assigned by either party without consent of the other and the
Bank, except that the Issuer shall assign to the Trustee its
rights under this Agreement (except under the second
paragraph of Section 3.1 and under Sections 4.2(e), 4.2(g),
5.3, and 6.4 hereof) as provided by Section 4.4 hereof, and the
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Company may assign its rights under this Agreement to any
transferee or any surviving or resulting corporation as provided
by Section 5.1 hereof.
SECTION 8.3. SEVERABILITY. If any provision of this
Agreement shall be held or deemed to be or shall, in fact, be
illegal, inoperative or unenforceable, the same shall not affect
any other provision or provisions herein contained or render
the same invalid, inoperative, or unenforceable to any
extent whatever.
SECTION 8.4. EXECUTION OF COUNTERPARTS. This Agreement may
be simultaneously executed in several counterparts, each of
which shall be an original and all of which shall constitute
but one and the same instrument.
SECTION 8.5. AMOUNTS REMAINING IN BOND FUND. It is agreed by
the parties hereto that after payment in full of (i) the Bonds (or
provision for payment thereof having been made in accordance
with the provisions of the Indenture), (ii) the fees, charges and
expenses of the Trustee in accordance with the Indenture,
(iii) the Administrative Expenses, (iv) the fees and expenses
of the Remarketing Agent and the Issuer and (v) all other
amounts required to be paid under this Agreement and the
Indenture, any amounts remaining in the Bond Fund shall belong to
and be paid to the Company by the Trustee; provided, however,
that if there remain reimbursement or other obligations of the
Company under any Reimbursement Agreement, such moneys remaining
in the Bond Fund shall, subject to Section 13.10(b) of the
Indenture, be paid by the Trustee to the Bank upon written
direction of the Bank to such extent.
SECTION 8.6. AMENDMENTS, CHANGES AND MODIFICATIONS. This
Agreement may be amended, changed, modified, altered or
terminated only by written instrument executed by the Issuer
and the Company, and only if the written consent of the Trustee and
the Bank thereto is obtained. Subject to the written consent of
the Trustee and the Bank, the Issuer and the Company agree to
enter into such amendments, changes and modifications to this
Agreement (i) as may be required by the provisions of this
Agreement or the Indenture, (ii) for the purpose of curing
any ambiguity, formal defect or omission in this Agreement,
(iii) so as to add additional rights acquired in accordance with
the provisions of this Agreement, (iv) to preserve the
exemption from federal income taxes of interest on the Bonds, or
any of them, or (v) to qualify the Bonds for an appropriate
rating by Moody's or S&P or Fitch, as the case may be, or to
maintain any such rating, or (vi) in connection with any other
change herein which is not to the prejudice of the Trustee, the
Bank or the Owners of the Bonds; provided, however, that the
Issuer shall not thereby incur any monetary obligation
or liability (except only to the extent that the same shall be
payable solely and only out of funds provided or to be provided
by the Company) or surrender or abdicate in whole or in part any
of its essential governmental functions or powers or any of its
discretion in exercising the same.
SECTION 8.7. GOVERNING LAW. This Agreement shall be governed
exclusively by and construed in accordance with the applicable laws
of the State.
SECTION 8.8. AUTHORIZED ISSUER AND COMPANY REPRESENTATIVES.
Whenever under the provisions of this Agreement the approval of the
Issuer or the Company is required to take some action at the
request of the other, such approval of such request shall be given
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<PAGE>
for the Issuer by the Authorized Issuer Representative and for
the Company by the Authorized Company Representative, and the
other party hereto and the Trustee shall be authorized to act
on any such approval or request and neither party hereto shall
have any complaint against the other or against the Trustee as a
result of any such action taken.
SECTION 8.9. TERM OF THE AGREEMENT. This Agreement shall be
in full force and effect from its date to and including such
date as all of the Bonds issued under the Indenture shall have
been fully paid or retired (or provision for such payment shall
have been made as provided in the Indenture), provided that all
representations and certifications by the Company as to all
matters affecting the tax-exempt status of the Bonds and the
covenants of the Company in Sections 4.2(c), 4.2(d), 4.2(e),
4.2(f), 4.2(g) and 4.2(h) hereof shall survive the termination of
this Agreement.
SECTION 8.10. CANCELLATION AT EXPIRATION OF TERM. At
the acceleration, termination or expiration of the term of this
Agreement and following full payment of the Bonds or provision
for payment thereof and of all other fees and charges having been
made in accordance with the provisions of this Agreement and the
Indenture, the Issuer shall deliver to the Company any documents
and take or cause the Trustee to take such actions as may be
necessary to effectuate the cancellation and evidence the
termination of this Agreement.
SECTION 8.11. REFERENCES TO BANK AND PROVIDER.
At any time that a Letter of Credit (and if at such time there
shall be no Pledged Bonds) or any Credit Facility is not in
effect and the Bank shall have been paid all amounts owed them
under the Reimbursement Agreement (as evidenced by a written
certificate of the Bank delivered to the Trustee to such effect),
all references herein to the Bank or the Provider, as the case
may be, shall be deemed ineffective. Any provisions hereof
requiring the consent of the Bank or the Provider shall be deemed
ineffective if the Bank or the Provider is at any such time in
default in its obligations under the Letter of Credit or Credit
Facility, as the case may be, to fund a drawing thereunder made
in strict compliance with the terms of such Letter of Credit or
Credit Facility.
SECTION 8.12. SPECIFIC REQUEST FOR RATINGS REQUIRED. No
reference herein to Moody's or S&P or Fitch shall
be construed by any such rating agency as a request or permission
to issue a rating on the Bonds. Any rating on the Bonds shall be
issued by any rating agency only pursuant to specific written
request therefor from the Company.
SECTION 8.13. NOTICE REGARDING CANCELLATION OF CONTRACTS.
As required by
the provisions of Section 38-511,
Arizona Revised Statutes, as amended, notice is hereby given that
political subdivisions of the State of Arizona or any of their
departments or agencies may, within three (3) years of its
execution, cancel any contract, without penalty or further
obligation, made by the political subdivisions or any of their
departments or agencies on or after September 30, 1988, if any
person significantly involved in initiating, negotiating,
securing, drafting or creating the contract on behalf of the
political subdivisions or any of their departments or agencies
is, at any time while the contract or any extension of the
contract is in effect, an employee or agent of any other party to
the contract in any capacity or a consultant to any other party
of the contract with respect to the subject matter of the
contract. The cancellation shall be effective when written
notice from the chief executive
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<PAGE>
officer or governing body of the political subdivision is received
by all other parties to the contract unless the notice specifies
a later time.
The Trustee covenants and agrees not to employ as an
employee, agent or, with respect to the subject matter of this
Agreement, a consultant, any person significantly involved in
initiating, negotiating, securing, drafting or creating this
Agreement on behalf of the Issuer within three (3) years from the
execution hereof, unless a waiver is provided by the Issuer.
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<PAGE>
IN WITNESS WHEREOF, the Issuer and the Company have caused
this Agreement to be executed in their respective corporate names
and their respective corporate seals to be hereunto affixed and
attested by their duly authorized officers, all as of the date
first above written..c.:::Signatures;
COCONINO COUNTY, ARIZONA POLLUTION
CONTROL CORPORATION
Joseph R. Gee
By ----------------------------
President
Board of Directors
(SEAL)
Attest:
Terrence J. Rice
____________________________________
Secretary
NEVADA POWER COMPANY
Steven W. Rigazio
By ---------------------------------
Vice President, Finance and Planning,
Treasurer, Chief Financial Officer
(SEAL)
Attest:
Richard L. Hinckley
____________________________________
Secretary
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<PAGE>
EXHIBIT A
(Attached to Financing Agreement between Coconino County, Arizona
Pollution Control Corporation and Nevada Power Company, dated as
of November 1, 1997).
The Project consists of the undivided interest of Nevada
Power Company in the flue gas desulfurization system, including
functionally related and subordinate facilities, being installed
for the removal of sulfur dioxide from combustion gases prior to
discharge into the atmosphere, at the Navajo Generation Station
owned by Nevada Power Company and others and located in Coconino
County, Arizona.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOAN AGREEMENT
Dated as of November 21, 1997
among
NEVADA POWER COMPANY
The Lenders herein named
NATIONSBANK OF TEXAS, N.A.
as Documentation Agent
and
WELLS FARGO BANK, NATIONAL ASSOCIATION
as Arranger and Administrative Agent.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS 1
1.1 Defined Terms 1
1.2 Use of Defined Terms 24
1.3 Accounting Terms 24
1.4 Rounding 24
1.5 Exhibits and Schedules 24
1.6 References to "Borrower and its Subsidiaries" 25
1.7 Miscellaneous Terms 25
ARTICLE 2 LOANS AND LETTERS OF CREDIT 26
2.1 Committed Loans and Swing Line Loans - General 26
2.2 Competitive Advances 28
2.3 Swing Line Loans 31
2.4 Base Rate Loans 31
2.5 Eurodollar Rate Loans 31
2.6 Letters of Credit 32
2.7 Voluntary Reduction of the Commitment 36
2.8 Administrative Agent's Right to Assume Funds Available
for Advances 37
ARTICLE 3 PAYMENTS AND FEES 38
3.1 Principal and Interest 38
3.2 Facility Fees 40
3.3 Arrangement Fee 40
3.4 Agency Fee 41
3.5 Letter of Credit Fees 41
3.6 Increased Commitment Costs 41
3.7 Eurodollar Fees and Costs 42
3.8 Default Rate 45
3.9 Computation of Interest and Fees 45
3.10 Non-Banking Days 45
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<PAGE>
3.11 Manner and Treatment of Payments 46
3.12 Funding Sources 47
3.13 Failure to Charge Not Subsequent Waiver 47
3.14 Administrative Agent's Right to Assume Payments Will be Made
by Borrower 48
3.15 Fee Determination Detail 48
3.16 Survivability 48
ARTICLE 4 REPRESENTATIONS AND WARRANTIES 49
4.1 Existence and Qualification; Power; Compliance With Law 49
4.2 Authority; Compliance With Other Agreements and Instruments
and Government Regulations 49
4.3 No Governmental Approvals Required 50
4.4 Subsidiaries 50
4.5 Financial Statements 50
4.6 No Other Liabilities; No Material Adverse Effect 51
4.7 Title to and Location of Property 51
4.8 Intangible Assets 51
4.9 Governmental Regulation 51
4.10 Litigation 51
4.11 Binding Obligations 52
4.12 No Default 52
4.13 Pension Plans 52
4.14 Regulations G, U and X 52
4.15 Disclosure 53
4.16 Tax Liability 53
4.17 Pari Passu Status 53
4.18 Hazardous Materials 53
ARTICLE 5 AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING
REQUIREMENTS) 55
5.1 Payment of Taxes and Other Potential Liens 55
5.2 Preservation of Existence 55
5.3 Maintenance of Properties 55
5.4 Maintenance of Insurance 56
5.5 Compliance With Laws 56
5.6 Inspection Rights 56
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<PAGE>
5.7 Keeping of Records and Books of Account 56
5.8 Compliance With Agreements 56
5.9 Use of Proceeds 57
5.10 Hazardous Materials Laws 57
ARTICLE 6 NEGATIVE COVENANTS 58
6.1 Disposition of Property 58
6.2 Mergers 58
6.3 Investments and Acquisitions 58
6.4 Hostile Tender Offers 59
6.5 Distributions 59
6.6 ERISA Compliance 59
6.7 Change in Nature of Business 59
6.8 Indebtedness and Contingent Obligations 59
6.9 Transactions with Affiliates 60
6.10 Adjusted Stockholders' Equity 60
6.11 Total Debt to Total Capitalization 60
6.12 Amendments to Certain Agreements 60
6.13 Investments in Subsidiaries 60
ARTICLE 7 INFORMATION AND REPORTING REQUIREMENTS 61
7.1 Financial and Business Information 61
ARTICLE 8 CONDITIONS 63
8.1 Initial Advances, Swing Line Loans and Letters of Credit 63
8.2 Any Advance, etc. 65
ARTICLE 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT 66
9.1 Events of Default 66
9.2 Remedies Upon Event of Default 68
ARTICLE 10 THE ADMINISTRATIVE AGENT 71
10.1 Appointment and Authorization 71
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<PAGE>
10.2 Administrative Agent and Affiliates 71
10.3 Proportionate Interest of the Lenders in any Collateral 71
10.4 Lenders' Credit Decisions 72
10.5 Action by Administrative Agent; Etc. 72
10.6 Liability of Administrative Agent and Arranger 73
10.7 Indemnification 75
10.8 Successor Administrative Agent 75
10.9 No Obligations of Borrower 76
10.10 The Swing Line 76
ARTICLE 11 MISCELLANEOUS 78
11.1 Cumulative Remedies; No Waiver 78
11.2 Amendments; Consents 78
11.3 Costs, Expenses and Taxes 79
11.4 Nature of Lenders' Obligations 80
11.5 Survival of Representations and Warranties 80
11.6 Notices 80
11.7 Execution of Loan Documents; Counterparts 80
11.8 Binding Effect; Assignment 81
11.9 Setoff Rights 83
11.10 Sharing of Setoffs 84
11.11 Indemnity by Borrower 84
11.12 Nonliability of the Lenders 85
11.13 No Third Parties Benefited 86
11.14 Termination of Existing Loan Documents 87
11.15 Further Assurances 87
11.16 Integration 87
11.17 Governing Law 87
11.18 Severability of Provisions 87
11.19 Independent Covenants 88
11.20 Headings 88
11.21 Time of the Essence 88
11.22 Purported Oral Amendments 88
11.23 Jury Trial Waiver 88
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<PAGE>
Exhibits
- --------
A - Commitment Assignment and Acceptance
B - Committed Advance Note
C - Competitive Advance Note
D - Competitive Bid
E - Competitive Bid Request
F - Compliance Certificate
G - Opinion of Counsel
H - Request for Letter of Credit
I - Request for Loan
J - Swing Line Note
Schedules
- ---------
1.1 Pro Rata Shares of the Main Commitment
4.4 Subsidiaries and other Investments
4.10 Litigation
4.13 ERISA
4.17 Existing Liens and Rights of Others
4.18 Hazardous Materials
6.8 Existing Indebtedness and Contingent Obligations
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<PAGE>
LOAN AGREEMENT
--------------
Dated as of November 21, 1997
This LOAN AGREEMENT ("Agreement") is entered into by and between
Nevada Power Company, a Nevada corporation ("Borrower"), and each lender whose
name is set forth on the signature pages hereof or which may hereafter execute
and deliver a Commitment Assignment and Acceptance with respect to this
Agreement pursuant to Section 11.8 (collectively, the "Lenders"
----
and individually, a "Lender"), NationsBank of Texas, N.A., as Documentation
Agent and Wells Fargo Bank, National Association, as Arranger and Administrative
Agent. In consideration of the mutual covenants and agreements herein contained,
the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Acquisition" means any transaction, or any series of related
-----------
transactions, by which Borrower and/or any of its Subsidiaries directly or
indirectly (a) acquires any going business or all or substantially all of the
assets of any firm, partnership, joint venture, corporation or division thereof,
whether through purchase of assets, merger or otherwise, (b) acquires (in one
transaction or as the most recent transaction in a series of transactions)
control of at least a majority in ordinary voting power of the securities of a
corporation which have ordinary voting power for the election of directors or
(c) acquires control of more than 50% of the ownership interests in any
partnership, joint venture, limited liability company or other business entity
which does not have outstanding voting securities.
"Adjusted Stockholders' Equity" means, as of any date of determination,
-----------------------------
the Stockholders' Equity of Borrower and its Subsidiaries on that date minus (a)
the book value of any capital stock of Borrower held in the treasury of
Borrower, (b) any current sinking fund requirement with respect to any preferred
stock of Borrower, (c) any unamortized capital stock expense and
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<PAGE>
(d) any accounts or loans receivable due to Borrower or any of its Subsidiaries
from stockholders, directors, officer, employees and Affiliates of Borrower.
"Administrative Agent" means Wells Fargo Bank, National Association, when
--------------------
acting in its capacity as the Administrative Agent under any of the Loan
Documents, and any successor Administrative Agent.
"Administrative Agent's Office" means the Administrative Agent's address
-----------------------------
as set forth on the signature pages of this Agreement, or such other address as
the Administrative Agent hereafter may designate by written notice to Borrower
and the Lenders.
"Advance" means any Advance made or to be made by any Lender to Borrower
-------
as provided in Article 2, and includes each Base Rate Advance, each Eurodollar
Rate Advance and each Competitive Advance.
"Affiliate" means, as to any Person, any other Person which directly or
---------
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (and the correlative terms,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise); provided that, in any event, any
Person that owns, directly or indirectly, 5% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation having 100 or more record owners of such securities (other than
securities having such power only by reason of the happening of a contingency),
or 5% or more of the partnership or other ownership interests of any other
Person having 100 or more owners of such partnership or other ownership
interests (other than as a limited partner of such other Person), will be deemed
to control such corporation or other Person.
"Agreement" means this Loan Agreement, either as originally executed or as
---------
it may from time to time be supplemented, modified, amended, restated or
extended.
"Arranger" means Wells Fargo Bank, National Association.
--------
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<PAGE>
"Aggregate Effective Amount" means, as of any date of determination and
--------------------------
with respect to all Letters of Credit then outstanding, the sum of (a) the
aggregate effective face amounts of all such Letters of Credit not then paid by
the Issuing Lender plus (b) the aggregate amounts paid by the Issuing Lender
under such Letters of Credit not then reimbursed to the Issuing Lender by
Borrower pursuant to Section 2.6(d) and not the subject of Advances made
pursuant to Section 2.6(e).
"Banking Day" means any Monday, Tuesday, Wednesday, Thursday or Friday,
-----------
other than a day on which banks are authorized or required to be closed in
Nevada, California or New York.
"Base Rate" means, as of any date of determination, the higher of (a) the
---------
Prime Rate or (b) the Federal Funds Rate plus one half of one percent per annum.
"Base Rate Advance" means a Committed Advance made hereunder and
-----------------
designated as a Base Rate Advance in accordance with Article 2.
"Base Rate Loan" means a Committed Loan made hereunder and designated as a
--------------
Base Rate Loan in accordance with Article 2.
"Borrower" means Nevada Power Company, a Nevada corporation, and its
--------
successors and permitted assigns.
"Capital Lease" means, as to any Person, a lease of any Property by that
-------------
Person as lessee that is, or should be in accordance with Financial Accounting
Standards Board Statement No. 13, recorded as a "capital lease" on the balance
sheet of that Person prepared in accordance with GAAP.
"Cash" means, when used in connection with any Person, all monetary and
----
non-monetary items owned by that Person that are treated as cash in accordance
with GAAP, consistently applied.
"Cash Equivalents" means, when used in connection with any Person, that
----------------
Person's Investments in:
(a) Government Securities due within one year after the date of the
making of the Investment;
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<PAGE>
(b) readily marketable direct obligations of any State of the United
States of America or any political subdivision of any such State
given on the date of such investment a credit rating of at least
Aa by Moody's Investors Service, Inc. or AA by Standard & Poor's
Rating Group (a division of McGraw-Hill, Inc.), in each case due
within one year after the date of the making of the Investment;
(c) certificates of deposit issued by, bank deposits in, eurodollar
deposits through, bankers' acceptances of, and reverse repurchase
agreements covering Government Securities executed by, any Lender
or any bank, savings and loan or savings bank doing business in
and incorporated under the Laws of the United States of America
or any State thereof and having on the date of such Investment
combined capital, surplus and undivided profits of at least
$250,000,000, in each case due within one year after the date of
the making of the Investment;
(d) certificates of deposit issued by, bank deposits in, eurodollar
deposits through, bankers' acceptances of, and reverse repurchase
agreements covering Government Securities executed by, any branch
or office located in the United States of America of a bank
incorporated under the Laws of any jurisdiction outside the
United States of America having on the date of such Investment
combined capital, surplus and undivided profits of at least
$500,000,000, in each case due within one year after the date
of the making of the Investment; and
(e) readily marketable commercial paper of corporations doing
business in and incorporated under the Laws of the United States
of America or any State thereof given on the date of such
Investment the highest credit rating by Moody's Investors
Service, Inc. and Standard & Poor's Rating Group (a division of
McGraw-Hill, Inc.), in each case due within 270 days after the
date of the making of the Investment.
"Certificate of a Responsible Official" means a certificate signed
-------------------------------------
by a Responsible Official of the Person providing the certificate.
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<PAGE>
"Closing Date" means the time and Banking Day on which the conditions set
------------
forth in Section 8.1 are satisfied.
"Code" means the Internal Revenue Code of 1986, as amended or replaced
----
and as in effect from time to time.
"Commitment" means the sum of (a) the Main Commitment plus (b) the Swing
-----------
Line Commitment.
"Commitment Assignment and Acceptance" means a Commitment Assignment and
------------------------------------
Acceptance executed by a Lender and an Eligible Assignee substantially in the
form of Exhibit A and registered with the Administrative Agent pursuant to
Section 11.8.
"Committed Advance" means an Advance made to Borrower by any Lender in
-----------------
accordance with its Pro Rata Share of the Main Commitment pursuant to Section
2.1.
"Committed Advance Note" means any of the promissory notes made by
----------------------
Borrower in favor of a Lender evidencing Committed Advances under that Lender's
Pro Rata Share of the Main Commitment, substantially in the form of Exhibit B,
either as originally executed or as the same may from time to time be
supplemented, modified, amended, renewed, extended or supplanted.
"Committed Loans" means Loans that are comprised of Committed Advances.
---------------
"Common Stock" means the $1.00 par value common stock of Borrower.
------------
"Competitive Advance" means an Advance made to Borrower by any Lender
-------------------
pursuant to a Competitive Bid under Section 2.2 (and not in accordance with that
Lender's Pro Rata Share of the Main Commitment).
"Competitive Advance Note" means any of the promissory notes made by
------------------------
Borrower in favor of a Lender to evidence Competitive Advances made by that
Lender substantially in the form of Exhibit C, either as originally executed or
as the same may from time to time be supplemented, modified, amended, renewed,
extended or supplanted.
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<PAGE>
"Competitive Bid" means (a) a written bid to provide a Competitive Advance
---------------
submitted to the Administrative Agent substantially in the form of Exhibit D,
and properly completed to provide all information required to be included
therein or (b), at the election of any Lender, a bid to provide a Competitive
Advance submitted to the Administrative Agent by that Lender by telephone which,
if so made, shall be made by a Responsible Official of that Lender and deemed to
have been made incorporating the substance of Exhibit D.
"Competitive Bid Request" means (a) a written request submitted by
-----------------------
Borrower to the Administrative Agent to provide a Competitive Bid, substantially
in the form of Exhibit E, signed by a Responsible Official of Borrower and
properly completed to provide all information required to be included therein or
(b), at the election of Borrower, a telephonic request by Borrower to the
Administrative Agent to provide a Competitive Bid which, if so made, shall be
made by a Responsible Official of Borrower and deemed to have been made
incorporating the substance of Exhibit E.
"Compliance Certificate" means a certificate in the form of Exhibit F,
----------------------
properly completed and signed by a Senior Officer of Borrower.
"Contingent Obligation" means, as to any Person, any (a) direct or
---------------------
indirect guarantee of Indebtedness of, or other obligation performable by, any
other Person, including any endorsement (other than for collection or deposit in
the ordinary course of business), co-making or sale with recourse of the
obligations of any other Person, or (b) assurance given to an obligee with
respect to the performance of an obligation by, or the financial condition of,
any other Person, whether direct, indirect or contingent, including any purchase
or repurchase agreement covering such obligation or any collateral security
therefor, any agreement to provide funds (by means of loans, capital
contributions or otherwise) to such other Person, any agreement to support the
solvency or level of any balance sheet item to such other Person, or any "keep-
well", "take-or-pay", "through put" or other arrangement of whatever nature
having the effect of assuring or holding harmless any obligee against loss with
respect to any obligation of such other Person, or (c) any obligation of a
partnership or joint venture of which such Person is a partner or joint
venturer. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the related primary
obligation (unless the Contingent Obligation is limited by its terms to a lesser
amount, in
-6-
<PAGE>
which case to the extent of such amount) or, if not stated or determin- able,
the maximum reasonably anticipated liability in respect thereof as determined by
the Person in good faith.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
outstanding Securities issued by that Person or of any material agreement,
instrument or undertaking to which that Person is a party or by which it or any
of its Property is bound.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of
------------------
America, as amended from time to time, and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, or similar debtor relief Laws from time to time in
effect affecting the rights of creditors generally.
"Default" means any Event of Default or any event that, with the giving of
-------
any applicable notice or passage of time specified in Section 9.1, or both,
would be an Event of Default.
"Default Rate" means the interest rate described in Section 3.8.
------------
"Designated Deposit Account" means a demand deposit account to be
--------------------------
maintained by Borrower with the Administrative Agent, as from time to time
designated by Borrower by written notification to the Administrative Agent.
"Designated Employee" means any natural Person designated by Borrower as an
-------------------
employee of Borrower authorized to make requests for Loans under this Agreement
on behalf of Borrower pursuant to a written notice thereof signed by a
Responsible Official of Borrower delivered to Administrative Agent.
"Designated Eurodollar Market" means, with respect to any Eurodollar Rate
----------------------------
Loan, the London interbank market.
"Disposition" means the sale, transfer or other disposition in any single
-----------
transaction or series of related transactions of any asset, or group of related
assets, of Borrower or any of its Subsidiaries (including a sale, transfer or
other disposition by Borrower to one or more of its Subsidiaries or by a
-7-
<PAGE>
Subsidiary of Borrower to another Subsidiary of Borrower) that has or have at
the date of the Disposition either a book value or fair market value (which
shall be deemed to be equal to the sales price for such asset or assets upon a
sale to a Person that is not an Affiliate of Borrower) equal to or greater than
$50,000,000, other than (a) the sale or other disposition of inventory
----------
in the ordinary course of business, (b) the sale or other disposition of
equipment that is replaced by equip-ment performing substantially the same
function not later than thirty (30) days after such sale or disposition and (c)
the sale or other disposition of Cash Equivalents in the ordinary course of
business.
"Distribution" means, with respect to any shares of capital stock
------------
or any warrant or right to acquire shares of capital stock or any other equity
security issued by a Person, (a) the retirement, redemption, purchase, or other
acquisition for value (other than for common stock of such Person) by such
Person of any such security, (b) the declaration or (without duplication)
payment by such Person of any dividend in Cash or in Property (other than in
----------
common stock of such Person) on or with respect to
any such security, (c) any Investment by such Person in the holder of any such
security where such Investment is made in lieu of, or to avoid characterization
as, a Distribution described in clauses (a) or (b) above
--- ---
and (d) any other payment by such Person constituting a distribution under
applicable Laws with respect to such security.
"Documentation Agent" means NationsBank of Texas, N.A. The
-------------------
Documentation Agent shall have no rights, duties or responsibilities under the
Loan Documents beyond those of a Lender.
"dollars" or "$" means United States dollars.
------- -
"Eligible Assignee" means (a) with respect to any Lender, any
-----------------
Affiliate of that Lender, (b) any other Person (including any Lender) approved
---------
in writing by Borrower, which approval shall not be unreasonably withheld or
delayed.
"ERISA" means the Employee Retirement Income Security Act of 1974,
-----
and any regulations issued pursuant thereto, as amended or replaced and as in
effect from time to time.
"ERISA Affiliate" means, with respect to any Person, any other
---------------
Person (or any trade or business, whether or not incorporated) that is
under
-8-
<PAGE>
common control with that Person within the meaning of Section 414 of the
Code.
"Eurodollar Banking Day" means any Banking Day on which dealings
----------------------
in dollar deposits are conducted by and among banks in the Designated Eurodollar
Market.
"Eurodollar Base Rate" means, with respect to any Eurodollar Rate Loan,
--------------------
the interest rate per annum (determined solely by the Administrative Agent and
rounded upward to the next 1/100 of 1%) at which deposits in dollars are offered
to prime banks by major banks in the Designated Eurodollar Market at or about
11:00 a.m. local time in the Designated Eurodollar Market, two (2) Eurodollar
Banking Days before the first day of the applicable Eurodollar Period in an
aggregate amount approximately equal to the amount
of such Eurodollar Rate Loan and for a period of time comparable to the number
of days in the applicable Eurodollar Period. The determination of the
Eurodollar Rate by the Administrative Agent shall be conclusive in the absence
of manifest error.
"Eurodollar Lending Office" means, as to each Lender, its office or branch
-------------------------
so designated by written notice to Borrower and the Administrative Agent as its
Eurodollar Lending Office. If no Eurodollar Lending Office is designated by a
Lender, its Eurodollar Lending Office shall be its office at its address for
purposes of notices hereunder.
"Eurodollar Obligations" means eurocurrency liabilities, as defined in
----------------------
Regulation D.
"Eurodollar Period" means, as to each Eurodollar Rate Loan, the period
-----------------
commencing on the date specified by Borrower pursuant to Section 2.1(c) and
------
ending 1, 2, 3 or 6 months thereafter, as specified by Borrower in the
applicable Request for Loan; provided that:
--------
(a) The first day of any Eurodollar Period shall be a Eurodollar
Banking Day;
(b) Any Eurodollar Period that would otherwise end on a day
that is not a Eurodollar Banking Day shall be extended to
the next succeeding Eurodollar Banking Day unless such
Eurodollar
-9-
<PAGE>
Banking Day falls in another calendar month, in which case such
Eurodollar Period shall end on the next preceding Eurodollar
Banking Day; and
(c) No Eurodollar Period shall extend beyond the Maturity Date.
"Eurodollar Rate" means, with respect to any Eurodollar Rate
---------------
Loan, the interest rate (rounded upward to the next 1/100 of 1%)
determined to be equal to the Eurodollar Base Rate divided by [1 minus
---------- -----
the Eurodollar Reserve Percentage].
"Eurodollar Rate Advance" means an Advance made hereunder and
-----------------------
designated as a Eurodollar Rate Advance in accordance with Article 2.
---------
"Eurodollar Rate Loan" means a Committed Loan made hereunder and
--------------------
designated as a Eurodollar Rate Loan in accordance with Article 2.
---------
"Eurodollar Rate Spread" means an additional component of
----------------------
interest (which may vary over the term of any Eurodollar Rate Loan) to
be added to the
Eurodollar Rate in determining the interest rate payable with respect to
Eurodollar Rate Loans. As of each date of determination, the Eurodollar
Rate Spread equals the interest rate per annum set forth below opposite
the credit rating then assigned to the Senior Unsecured Debt by Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Group
(a division of McGraw-Hill, Inc.) ("S&P") on that date:
Credit Rating Eurodollar Rate Spread
------------- ----------------------
S&P Moody's
--- -------
A- or A3 (or higher) .1600%
BBB+ or Baa1 .2000%
BBB or Baa2 .2250%
BBB- or Baa3 .2500%
BB+ or Ba1 (or lower) .5000%
; provided that (a) if the credit ratings assigned by Moody's and S&P
--------
differ by one "notch" (e.g., BBB+ versus Baa2) then the higher (BBB+)
---
of the two credit ratings shall be used, (b) if the credit ratings
assigned by Moody's and S&P
-10-
<PAGE>
differ by more than one "notch" (e.g. BBB+ versus Baa3), then the average
---
(BBB/Baa2) of the two credit ratings shall be used and (c) if the Senior
Unsecured Debt is at any time not rated by Moody's or S&P then the credit
rating that is one "notch" below the credit rating then assigned to the First
Mortgage Bonds by Moody's or S&P (as applicable) shall be deemed to be the
credit rating assigned by such rating agency to the Senior Unsecured Debt.
"Eurodollar Reserve Percentage" means, with respect to any
-----------------------------
Eurodollar Rate Loan, the percentage applicable as of the date of determination
of the Eurodollar Base Rate representing the aggregate reserve requirements of
the Administrative Agent (disregarding any offsetting amounts that may be
available to the Administrative Agent to decrease such requirements to
the extent that such offsetting amounts arose out of transactions other than
those contemplated by this Agreement) under Regulation D and any other
applicable Laws with respect to Eurodollar Obligations in an aggregate
amount equal to the amount of such Eurodollar Rate Loan and for a time
period comparable to the number of months in the applicable Eurodollar
Period. The determination by the Administrative Agent of any applicable
Eurodollar Reserve Percentage shall be presumed correct in the absence of
manifest error.
"Event of Default" shall have the meaning provided in Section
----------------
9.1.
- ---
"Existing Loan Documents" means the loan documents executed in
-----------------------
connection with that certain Loan Agreement dated as of November 21, 1994 among
Borrower, the Banks (as therein defined) therein named and Wells Fargo Bank,
National Association (successor by merger to First Interstate Bank of Nevada,
N.A.), as Administrative Agent, as amended.
"Facility Fee Rate" means, as of each date of determination, the
-----------------
rate per annum set forth below opposite the credit rating then assigned to the
Senior Unsecured Debt by Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.) ("S&P") on
that date:
-11-
<PAGE>
Credit Rating Facility Fee Rate
------------- -----------------
S&P's Moody's
----- -------
A- or A3 (or higher) .0900%
BBB+ or Baa1 .1000%
BBB or Baa2 .1150%
BBB- or Baa3 .1500%
BB+ or Ba1 (or lower) .2500%
; provided that (a) if the credit ratings assigned by Moody's and S&P
-------------
differ by one "notch" (e.g., BBB+ versus Baa2) then the higher (BBB+) of the
---
two credit ratings shall be used, (b) if the credit ratings assigned by Moody's
and S&P differ by more than one "notch" (e.g. BBB+ versus Baa3), then the
---
average (BBB/Baa2) of the two credit ratings shall be used and (c) if the
Senior Unsecured Debt is at any time not rated by Moody's or S&P then the
credit rating that is one "notch" below the credit rating then assigned to the
First Mortgage Bonds by Moody's or S&P (as applicable) shall be deemed to be
the credit rating assigned by such rating agency to the Senior Unsecured Debt.
"Federal Funds Rate" means, as of any date of determination, the
------------------
interest rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not
a Banking Day, for the next preceding Banking Day) by the Federal Reserve
Bank of New York in its statistical release H-15 or, if such rate is not so
published for any day which is a Banking Day, the average of the
quotations for such day on such transactions, as received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
"First Mortgage Bonds" means those certain First Mortgage Bonds
--------------------
of Borrower issued pursuant to the Indenture.
"Fiscal Quarter" means the fiscal quarter of Borrower consisting
--------------
of a three month fiscal period ending on each March 31, June 30, September 30
and December 31.
"Fiscal Year" means the fiscal year of Borrower consisting of a
-----------
twelve month fiscal period ending on each December 31.
-12-
<PAGE>
"GAAP" means, as of any date of determination, accounting
----
principles set forth as "generally accepted" in then currently effective
Statements of the Auditing Standards Board of the American Institute of
Certified Public Accountants, or, if no such Statements are then in effect,
that are then approved by such other entity as may be approved by a significant
segment of the accounting profession in the United States of America. The term
"consistently applied," as used in connection therewith, means that the
--------------------
accounting principles applied are consistent in all material respects to those
applied at prior dates or for prior periods.
"Government Securities" means readily marketable direct full
---------------------
faith and credit obligations of the United States of America or obligations
unconditionally guaranteed by the full faith and credit of the United States of
America.
"Governmental Agency" means (a) any foreign, federal, state,
-------------------
county or municipal government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau,
commission, department, instrumentality or public body, (c) any court or
administrative tribunal or (d) with respect to any Person, any arbitration
tribunal or other non-governmental authority to whose jurisdiction that Person
has consented.
"Hazardous Materials" means substances defined as hazardous
-------------------
substances pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. 9601 et seq., or as hazardous, toxic
or pollutant pursuant to the Hazardous Materials Transportation Act,
49 U.S.C. 1801, et seq., the Resource Conservation and Recovery Act,
42 U.S.C. 6901, et seq., or any other applicable Law governing
environmental health and hygiene, in each case as such Laws are amended
from time to time.
"Hazardous Materials Laws" means all federal, state or local
------------------------
laws, ordinances, rules or regulations governing the disposal of Hazardous
Materials applicable to any of the Property.
"Indebtedness" means, as to any Person, (a) all indebtedness of
------------
such Person for borrowed money, (b) that portion of the obligations of such
Person under Capital Leases which is properly recorded as a liability on a
-13-
<PAGE>
balance sheet of that Person prepared in accordance with Generally
Accepted Accounting Principles, (c) any obligation of such Person that is
evidenced by a promissory note or other instrument representing an
extension of credit to such Person, whether or not for borrowed money,
(d) any obligation of such Person for the deferred purchase price of
Property or services (other than trade or other accounts payable in the
----------
ordinary course of business in accordance with customary terms), (e) any
obligation of such Person that is secured by a Lien on assets of such
Person, whether or not that Person has assumed such obligation or
whether or not such obligation is non-recourse to the credit of such
Person, but only to the extent of the fair market value of the assets so
subject to the Lien,
(f) obligations of such Person arising under acceptance facilities or
under facilities for the discount of accounts receivable of such Person
and (g) obligations of such Person for unreimbursed draws under letters
of credit issued for the account of such Person. The obligations of
Borrower with respect to "mandatorily redeemable preferred securities"
of Borrower's trust Subsidiary shall not in any event be deemed
"Indebtedness."
"Indenture" means that certain Indenture of Mortgage and Deed of
---------
Trust dated October 1, 1953 between Borrower (under its prior name,
Southern Nevada Power Co.) and Wells Fargo Bank, National Association
(successor by merger to First Interstate Bank of Nevada, N.A., formerly
known as First National Bank of Nevada, Reno, Nevada), as Trustee, as
amended as of the Closing Date.
"Insignificant Subsidiary" means, as of any date of
------------------------
determination, any Subsidiary of Borrower that holds assets that are
less than 3% of the total consolidated assets of Borrower and its
Subsidiaries as of the last
day of the Fiscal Quarter then most recently ended; provided that if at
--------
any date the aggregate assets held by all such Subsidiaries exceeds 15%
of the total consolidated assets of Borrower and its Subsidiaries as of
the last day of the Fiscal Quarter
than most recently ended, then none of such Subsidiaries shall thereafter
be deemed an Insignificant Subsidiary absent the express written approval
of the Majority Lenders.
"Intangible Assets" means assets that are considered intangible
-----------------
assets under GAAP, including (a) any write-up in book value of any asset
---------
subsequent to its acquisition and (b) customer lists, goodwill, computer
-14-
<PAGE>
software, copyrights, trade names, trademarks, patents, unamortized
deferred charges, unamortized debt discount, capitalized research and
development costs and other intangible assets.
"Interest Differential" means, with respect to any prepayment of
---------------------
a Eurodollar
Rate Loan on a day other than the last day of the applicable Eurodollar
Period and with respect to the failure to borrow a Eurodollar Rate Loan
on the date or in the amount specified in a Request for Loan, (a) the
per annum interest rate payable with respect to that Eurodollar Rate
Loan as of the date of the prepayment or failure to borrow, minus (b)
-----
the Euro-dollar Rate, as applicable, on or as near as practicable to,
the date of the prepayment or failure to borrow for a Eurodollar Rate
Loan com-mencing on such date and ending on the last day of
the applicable Eurodollar Period. The determination of the Interest
Differential by the Administrative Agent shall be conclusive in the
absence of manifest error.
"Investment" means, when used in connection with any Person, any
----------
investment by or of that Person, whether by means of purchase or other
acquisition of capital stock or other Securities of any other Person or
by means of loan, advance, capital contribution, guaranty or other debt
or equity participation or interest, or otherwise, in any other Person,
including any partnership and joint
---------
venture interests of such Person in any other Person. The amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.
"Issuing Lender" means Wells Fargo Bank, National Association.
--------------
"Laws" means, collectively, all foreign, federal, state and local
----
statutes, treaties, rules, regulations, ordinances, codes and
administrative or controlling precedents of any Governmental Agency.
"Lender" means any of the lenders signatory to this Agreement,
------
their successors and, upon the effective date after registration with the
Administrative Agent pursuant to Section 11.8 of a Commitment Assignment
----
and Acceptance executed by an Eligible Assignee, such Eligible Assignee.
"Letters of Credit" means any of the standby letters of credit
-----------------
issued by the Issuing Lender under the Main Commitment pursuant to
-15-
<PAGE>
Section 2.6, either as originally issued or as the same may be
---
supplemented, modified, amended, renewed, extended or supplanted.
"Letter of Credit Fee Rate" means, as of any date of
-------------------------
determination, a rate per annum equal to the Eurodollar Rate Spread in
effect as of that date.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment for security, security interest, encumbrance, lien or charge
of any kind, whether voluntarily incurred or arising by operation of Law
or otherwise,
affecting any Property, including any agreement to grant any of the
---------
foregoing, any conditional sale or other title retention agreement, any
lease in the nature of a security interest, and/or the filing of or
agreement to give any financing statement under the Uniform Commercial
Code or comparable Law of any jurisdiction with respect to any Property.
"Loan" means any group of Advances made at any one time by the
----
Lenders under the Main Commitment pursuant to Article 2.
---------
"Loan Documents" means, collectively, this Agreement, the Notes,
--------------
any Request for Loan, any Competitive Bid Request and any other
certificates, documents or agreements of any type or nature heretofore
or hereafter executed and delivered by Borrower to the Administrative
Agent or to any Lender in furtherance of this Agreement,
in each case either as originally executed or as the same may from time
to time be supplemented, modified, amended, restated, extended or
supplanted.
"Main Commitment" means, subject to Section 2.7, $105,000,000,
--------------- ---
provided, that the amount of the Main Commitment shall automatically
--------
increase on the date of any Event of Default by the amount of the Swing
Line Commitment concurrently with the elimination of the Swing Line
Commitment. The respective Pro Rata Shares of the Lenders with respect
to the Main Commitment as of the date hereof are set forth in Schedule
1.1.
"Majority Lenders" means, as of any date of determination,
----------------
Lenders whose aggregate Pro Rata Share or Swing Line Commitment is at
least 66 2/3% of the Commitment then in effect or, if the Commitment is
then suspended or terminated, Lenders holding Notes evidencing at least
66 2/3% of the aggregate Indebtedness evidenced by the Notes.
-16-
<PAGE>
"Material Adverse Effect" means any set of circumstances or
-----------------------
events which
(a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of any Loan
Document, (b) is or could reasonably be expected to be material and
adverse to the condition (financial or otherwise) or business operations
of Borrower and its Subsidiaries, taken as a whole, or to the prospects
of Borrower and its Subsidiaries, taken as a whole, (c) materially
impairs or could reasonably be expected to materially impair the ability
of Borrower and its Subsidiaries, taken as a whole, to perform its
Obligations or (d) materially impairs or could reasonably be expected to
materially impair the ability of any of the Lenders to enforce any of its
legal remedies pursuant to the Loan Documents.
"Maturity Date" means November 24, 2002.
-------------
"Maximum Competitive Advance" means, with respect to any
---------------------------
Competitive Bid made by a Lender, the amount set forth therein as the
maximum Competitive Advance which that Lender is willing to make in
response to the related Competitive Bid Request.
"Multiemployer Plan" means any employee benefit plan of a type
------------------
described in Section 4001(a)(3) of ERISA.
"Negative Pledge" means any covenant binding on Borrower that
---------------
prohibits the creation of Liens on any Property of Borrower.
"Notes" means, collectively, the Competitive Advance Notes, the
-----
Committed Advance Notes and the Swing Line Note.
"Obligations" means all present and future obligations of every
-----------
kind or nature of Borrower at any time and from time to time owed to the
Administrative Agent or the Lenders or any one or more of them under any
one or more of the Loan Documents, whether due or to become due, matured
or unmatured, liquidated or unliquidated, or contingent or
noncontingent, including obligations of performance as well as
---------
obligations of payment, and including interest that accrues after the
---------
commencement of any proceeding under any Debtor Relief Law by or
against Borrower or any Subsidiary of Borrower.
"Opinion of Counsel" means the favorable written legal opinion of
------------------
Richard L. Hinckley, general counsel to Borrower, substantially in the
form of
-17-
<PAGE>
Exhibit G, together with copies of any officer's certificate or legal
---------
opinion of another counsel or law firm relied upon by such counsel in
its opinion.
"Party" means any Person other than the Administrative Agent and
-----
the Lenders, which now or hereafter is a party to any of the Loan
Documents.
"PBGC" means the Pension Benefit Guaranty Corporation or any
----
successor thereto established under ERISA.
"Pension Plan" means any "employee pension benefit plan" that is
------------
subject to Title IV of ERISA and which is maintained for employees of
Borrower or any of its ERISA Affiliates.
"Permitted Encumbrances" means:
----------------------
(a) inchoate Liens incident to construction or maintenance of
real property, or Liens incident to construction or maintenance of real
property, now or hereafter filed of record for which adequate reserves
have been set aside and which are being contested in good faith by
appropriate proceedings and have not proceeded to judgment;
(b) Liens for taxes and assessments on real property which are
not yet past due, or Liens for taxes and assessments on real property for
which adequate reserves have been set aside and are being contested in
good faith by appropriate proceedings and have not proceeded to judgment;
(c) easements, exceptions, reservations, or other agreements
granted or entered into after the date hereof for the purpose of
pipelines, conduits, cables, wire communication lines, power lines and
substations, streets, trails, walkways, drainage, irrigation, water, and
sewerage purposes, dikes, canals, ditches, the removal of oil, gas, coal,
or other minerals, and other like purposes affecting real property which
in the aggregate do not materially burden or impair the fair market value
or use of such real property for the purposes for which it is or may
reasonably be expected to be held;
(d) rights reserved to or vested in any Governmental Agency by
Law to control or regulate, or obligations or duties under Law to any
Governmental Agency with respect to, the use of any real property;
-18-
<PAGE>
(e) rights reserved to or vested in any Governmental Agency by
Law to control or regulate, or obligations or duties under Law to any
Governmental Agency with respect to, any right, power, franchise, grant,
license, or permit;
(f) present or future zoning laws and ordinances or other laws
and ordinances restricting the occupancy, use, or enjoyment of real
property;
(g) statutory Liens, other than those described in clauses (a)
or
(b) above, arising in the ordinary course of business with respect to
obligations which are not delinquent or are being contested in good faith
by appropriate proceedings, provided that, if delinquent, adequate
--------
reserves have been set aside with respect thereto and, by reason of
nonpayment, no Property is subject to a material risk of loss or
forfeiture;
(h) Liens consisting of pledges or deposits to secure
obligations under workers' compensation laws or similar legislation,
including Liens of judgments thereunder which are not currently
dischargeable;
(i) Liens consisting of pledges or deposits of Property to
secure performance in connection with operating leases made in the
ordinary course of business to which Borrower or a Subsidiary is a party
as lessee, provided the aggregate value of all such pledges and deposits
--------
in connection with any such lease does not
at any time exceed 16-2/3% of the annual fixed rentals payable under such
lease;
(j) Liens consisting of deposits of Property to secure statutory
obligations of Borrower or a Subsidiary of Borrower in the ordinary
course of its business; and
(k) Liens consisting of deposits of Property to secure (or in
lieu of) surety, appeal or customs bonds in proceedings to which Borrower
or a Subsidiary of Borrower is a party in the ordinary course of its
business
"Permitted Right of Others" means a Right of Others consisting of
-------------------------
(a) an interest (other than a legal or equitable co-ownership interest,
an option or right to acquire a legal or equitable co-ownership interest
and any interest of a ground lessor under a ground lease) that does not
materially impair the value or use of Property for the purposes for
which it is or may reasonably be expected
-19-
<PAGE>
to be held, (b) an option or right to acquire a Lien that would be a
Permitted Encumbrance, and (c) the reversionary interest of a landlord
under a lease of Property.
"Person" means any entity, whether an individual, trustee,
------
corporation, general partnership, limited partnership, joint stock
company, trust, estate, unincorporated organization, business
association, tribe, firm,joint venture, Governmental Agency, or
otherwise.
"Prime Rate" means the rate of interest most recently announced
----------
by Wells Fargo Bank, National Association at its principal office in San
Francisco as its Prime Rate, with the understanding that the Prime Rate
is one of several
base rates used by Wells Fargo Bank and serves as the basis upon which
effective rates of interest are calculated for those loans making
reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Wells Fargo
Bank may designate. Each change in the Prime Rate will be effective on
the day the change is announced within Wells Fargo Bank.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Pro Rata Share" means, with respect to each Lender, the
--------------
percentage of the Main Commitment set forth opposite the name of that
Lender on Schedule 1.1. Upon the occurrence of an Event of Default and
-------------
automatic increase in the amount of
the Main Commitment by the amount of the former Swing Line Commitment,
(a) the Pro Rata Share of the Lender which is the Swing Line Lender shall
automatically ratably increase so that it includes the former Swing Line
Commitment, and (b) the Pro Rata Share of each other Lender shall
automatically ratably decrease.
"Quarterly Payment Date" means December 31, 1997 and each
----------------------
subsequent March 31, June 30, September 30 and December 31, through the
Maturity Date.
"Regulations G, U and X" mean, respectively, Regulations G, U and
----------------------
X, as at any time amended, of the Board of Governors of the Federal
Reserve System, or any other regulation in substance substituted
therefor.
-20-
<PAGE>
"Request for Letter of Credit" means a written request for a
----------------------------
Letter of Credit
substantially in the form of Exhibit H, signed by a Responsible Official
---------
of Borrower and properly completed to provide all information required to
be included therein.
"Request for Loan" means a written request for a Loan or a Swing
----------------
Line Loan substantially in the form of Exhibit I, signed by a
---------
Responsible Official of Borrower and properly completed to provide all
information required to be included therein.
"Requirement of Law" means, as to any Person, the articles or
------------------
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any Law, or judgment, award,
decree, writ or determination of a Governmental Agency, in each case
applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
"Responsible Official" means (a) when used with reference to a
--------------------
Person other than an individual, any corporate officer of such Person,
general partner of such Person, corporate officer of a corporate general
partner of such Person, or corporate officer of a corporate general
partner of a partnership that is a general partner of such Person, or
any other responsible official thereof duly acting on behalf thereof,
and (b) when used with reference to a Person who is an individual,
such Person or his authorized agent acting through a power of attorney.
Any document or certificate hereunder that is signed or executed by a
Responsible Official of a Person shall be conclusively presumed to have
been authorized by all necessary corporate, partnership and/or other
action on the part of that Person.
"Right of Others" means, as to any Property in which a Person has
---------------
an interest, (a) any legal or equitable right, title or other interest
(other than a Lien) held by any other Person in or with respect to that
Property, and (b) any option or right (including any option or right to
---------
acquire a Lien) held by any other Person to
acquire any such right, title or other interest in or with respect to
that Property.
"Securities" means any capital stock, share, voting trust
----------
certificate, bond, debenture, note or other evidence of indebtedness,
limited
-21-
<PAGE>
partnership interest, or any warrant, option or other right to purchase
or acquire any of the foregoing.
"Senior Officer" means the (a) chief executive officer, (b) chief
--------------
operating officer, (c) chief financial officer, (d) vice president, or
(e) treasurer, in each case whatever the title nomenclature may be, of
the Person designated.
"Senior Unsecured Debt" means (a) if there is then outstanding
---------------------
any publicly-held issue of senior long-term unsecured debt of Borrower
that is not benefitted by any third party credit enhancement, such issue
and (b) if there is not then outstanding any such publicly-held issue,
the hypothetical senior long-term unsecured debt of Borrower not
benefitted by any third party credit enhancement and issued pursuant to
governing documents containing customary covenants for senior long-term
unsecured debt of issuers comparable to Borrower.
"Special Eurodollar Circumstance" means (a) the adoption of any
-------------------------------
Law by any Governmental Agency, central branch or comparable authority
with respect
to activities in the Designated Eurodollar Market, or (b) any change in
the interpretation or administration of any existing Law by any Govern-
mental Agency, central bank or comparable authority charged with the
interpretation or administration thereof, or (c) compliance by any Lender
or its Eurodollar Lending Office with any request or directive (whether
or not having the force of Law) of any such Governmental Agency, central
bank or comparable authority, or (d) the existence or occurrence of
circumstances affecting the Designated Eurodollar Market generally that
are beyond the reasonable control of the Lenders.
"Stockholders' Equity" means, as of any date of determination and
--------------------
with respect to any Person, the consolidated stockholders' equity of the
Person as of that date determined in accordance with GAAP; provided that
(i) there shall be excluded from
Stockholders' Equity any amount attributable to capital stock that is,
directly or indirectly, required to be redeemed or repurchased by such
Person at a specified date or upon the occurrence of specified events or
at the election of the holder thereof and (ii) the Stockholders' Equity
of Borrower shall in any event include amounts attributable to
"mandatorily redeemable preferred securities" of Borrower's trust
Subsidiary for which Borrower is obligated.
-22-
<PAGE>
"Subsidiary" means, as of any date of determination and with
----------
respect to any
Person, any corporation, partnership, joint venture, limited liability
company or other business entity, whether now existing or hereafter
organized or acquired: (a) in the case of a corporation, of which a
majority of the securities having ordinary voting power for the election
of directors or other governing body (other than securities having such
power only by reason of the happening of a contingency) are at the time
beneficially owned by such Person and/or one or more Subsidiaries of such
Person, or (b) in the case of a partnership, joint venture, limited
liability company or other business entity, of which such Person or a
Subsidiary of such Person is a general partner or joint venturer or of
which a majority of the partnership or other ownership interests are at
the time beneficially owned by such Person and/or one or more of its
Subsidiaries.
"Swing Line Lender" means Wells Fargo Bank, National Association.
-----------------
"Swing Line Commitment" means (a) prior to the occurrence of an
---------------------
Event of Default, a $20,000,000 lending commitment extended by the Swing
Line Lender pursuant to this Agreement in which each of the Lenders
shall have a partial unfunded pro rata participation in accordance with
Section 10.10, and (b) thereafter, $0.
-----
"Swing Line Note" means a promissory note in the form of Exhibit
--------------- -------
J made by Borrower in favor of the Swing Line Lender to evidence the
-
Swing Line Loans, either as originally executed or as it may from time
to time be supplemented, modified, amended, restated or extended.
"Swing Line Loan" means a loan made by the Swing Line Lender
---------------
hereunder in accordance with Section 2.3.
---
"Termination Event" means (a) a "reportable event" as defined in
-----------------
Section 4043 of ERISA (other than a "reportable event" that is not
----------
subject to the provision for 30 day notice to the PBGC), (b) the
withdrawal of Borrower or any of its
ERISA Affiliates from a Pension Plan during any plan year in which it was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA,
(c) the filing of a notice of intent to terminate a Pension Plan or the
treatment of an amendment to a Pension Plan as a termination thereof
pursuant to Section 4041 of ERISA, (d) the institution of proceedings to
terminate a Pension Plan by the PBGC or (e) any other event or condition
which might
-23-
<PAGE>
reasonably be expected to constitute grounds under ERISA for the
termination of, or the apportionment of a trustee to administer, any
Pension Plan.
"Total Capitalization" means, as of any date of determination,
--------------------
the sum of (a) Adjusted Stockholders' Equity as of that date plus (b)
----
the principal amount as of that date of Indebtedness of Borrower and its
Subsidiaries for borrowed money having an initial maturity in excess of
one year from the date of its incurrence.
"Total Debt" means, as of any date of determination, all
----------
Indebtedness of Borrower and its Subsidiaries for borrowed money on that
date minus the amount of all cash and securities deposited in trust as
security for such Indebtedness with the lenders thereof on that date.
"type", when used with respect to any Loan or Advance, means the
----
designation of whether such Loan or Advance is a Base Rate Loan or
Advance or a Eurodollar Rate Loan or Advance.
1.2 Use of Defined Terms. Any defined term used in the plural shall refer
--------------------
to all members of the relevant class, and any defined term used in the singular
shall refer to any one or more of the members of the relevant class.
1.3 Accounting Terms. All accounting terms not specifically defined in
----------------
this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity
with, GAAP applied on a consistent basis, except as otherwise specifically
------
prescribed herein. In the event that GAAP changes during the term of this
Agreement such that the financial covenants contained in Sections 6.10 through
----
6.11 would then be calculated in a different manner or with different
- ----
components, a) Borrower and the Lenders agree to promptly amend this Agreement
in such respects as are necessary to conform those covenants as criteria for
evaluating Borrower's financial condition to substantially the same criteria as
were effective prior to such change in GAAP and (b) unless and until such an
amendment to the Loan Documents is effected, Borrower shall report its
performance with respect to the affected covenants in accordance with GAAP as in
effect prior to such changes.
1.4 Rounding. Any financial ratios required to be maintained by Borrower
--------
pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than
the number of places by which such ratio is expressed in this Agreement and
rounding the result up or
-24-
<PAGE>
down to the nearest number (with a round-up if there is no nearest number) to
the number of places by which such ratio is expressed in this Agreement.
1.5 Exhibits and Schedules. All Exhibits and Schedules to this Agreement,
----------------------
either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference.
A matter disclosed on any Schedule shall be deemed disclosed on all Schedules.
1.6 References to "Borrower and its Subsidiaries". Any reference herein
--------------------------------------------
to "Borrower and its Subsidiaries" or the like shall refer solely to Borrower
during such times, if any, as Borrower shall have no Subsidiaries.
1.7 Miscellaneous Terms The term "or" is disjunctive; the term "and" is
-------------------
conjunctive. The term "shall" is mandatory; the term "may" is permissive.
Masculine terms also apply to females; feminine terms also apply to males. The
term "including" is by way of example and not limitation. Each reference to an
hour or time of the day set forth in any Loan Document shall be deemed to be a
reference to the hour or time of the day in Las Vegas, Nevada.
-25-
<PAGE>
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 Committed Loans and Swing Line Loans - General.
----------------------------------------------
(a) Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time from the Closing Date
through the Maturity Date, each Lender shall, pro rata according to its
Pro Rata Share of the then applicable Main Commitment, make Committed
Advances to Borrower under the Main Commitment in such amounts as
Borrower may request that do not exceed in the aggregate at any one time
outstanding the amount of that Lender's Pro Rata Share of the then
applicable Main Commitment; provided that giving effect to the Committed
--------
Loan of which such Advance is a part, the sum of (i) the outstanding
------
principal amount of the Committed Loans plus (ii) the Aggregate
----
Effective Amount of all outstanding Letters of Credit, plus (iii) the
----
outstanding principal amount of the Competitive Advances shall not exceed
the Main Commitment. Subject to the limitations set forth herein,
Borrower may borrow, repay and reborrow under the Main Commitment without
premium or penalty.
(b) Subject to the terms and conditions set forth in this
Agreement, at any time and from time to time from the Closing Date
through
the Maturity Date, the Swing Line Lender shall make Swing Line Loans to
Borrower under the Swing Line Commitment in such amounts as Borrower may
request that do not exceed in the aggregate at any one time outstanding
the amount of the Swing Line Commitment; provided that (i) giving
--------
effect to the requested Swing Line Loan, the outstanding principal amount
of the Swing Line Loans shall not exceed the Swing Line Commitment and
(ii) Borrower may not request a Swing Line Loan during the existence of
any Event of Default. Subject to the limitations set forth herein,
Borrower may borrow, repay and reborrow under the Swing Line Commitment
without premium or penalty.
(c) Subject to the next sentence, each Committed Loan and each
Swing Line Loan shall be made pursuant to a Request for Loan which shall
specify the requested (i) date of such Loan or Swing Line Loan, (ii) type
of Loan, (iii) amount of such Loan or Swing Line Loan and (iv) if a
Eurodollar Rate Loan is requested, the Eurodollar Period for such Loan.
Unless the Administrative Agent has notified, in its sole and absolute
discretion, Borrower to the contrary, a Committed Loan or Swing Line Loan
may be requested by
-26-
<PAGE>
telephone, telecopier or telex by a Responsible Official of Borrower or
by any Designated Employee, in which case Borrower shall promptly confirm
such request by transmitting a telecopy of, or at Administrative Agent's
request by mailing, a Request for Loan conforming to the preceding
sentence to Administrative Agent.
(d) Promptly following receipt of a Request for Loan, the
Administrative Agent shall notify each Lender (or, in the case of a
Request for Loan specifying a Swing Line Loan, the Swing Line Lender) by
telephone, telecopier or telex of the date and type of the Committed Loan
or Swing Line Loan, any applicable Eurodollar Period, and that Lender's
Pro Rata Share of the Loan. Not later than 11:00 a.m. (California time),
on the date specified for any Committed Loan, each Lender shall make its
Pro Rata Share of the Committed Loan available to the Administrative
Agent at the Administrative Agent's Office in immediately available
funds. Upon fulfillment of the applicable conditions set forth in
Article 8, all Committed Advances and Swing Line Loans shall be credited
---------
in immediately available funds to the Designated Deposit Account.
(e) Unless the Majority Lenders otherwise consent, each
Committed
Loan that is a Base Rate Loan shall be an integral multiple of $100,000
but not less than $1,000,000 and each Committed Loan that is a Eurodollar
Rate Loan shall be an integral multiple of $1,000,000 but not less than
$5,000,000. Unless the Swing Line Lender objects, each Swing Line Loan
shall be in such amount as may be requested by Borrower.
(f) The Committed Advances made by each Lender under its Pro
Rata Share of the Main Commitment shall be evidenced by that Lender's
Committed Advance Note. The Swing Line Loans shall be evidenced by the
Swing Line Note.
(g) A Request for Loan shall be irrevocable upon the
Administrative Agent's first notification thereof.
(h) If no Request for Loan (or telephonic or other request for a
Committed Loan or Swing Line Loan referred to in the second sentence of
Section 2.1(c), if applicable) has been made within the requisite notice
------
periods set forth in Sections 2.3 and 2.4 in connection with a Committed
--- ---
Loan which, if made, would not increase the outstanding principal
Indebtedness outstanding under the Main Commitment, then Borrower
shall be deemed to have requested
-27-
<PAGE>
a Base Rate Loan in an amount equal to the amount necessary to cause
such outstanding principal Indebtedness to remain the same and, subject
to Section 8.2 the Lenders shall make the Advances necessary to make such
---
Committed Loan notwithstanding Sections 2.1(c) and 2.4.
------ ---
(i) If a Committed Loan is to be made on the same date that
another Committed Loan is due and payable, Borrower or the Lenders, as
the case may be, shall make available to the Administrative Agent the net
amount of funds giving effect to both such Committed Loans and the effect
for purposes of this Agreement shall be the same as if separate transfers
of funds had been made with respect to each such Committed Loan.
2.2 Competitive Advances.
--------------------
(a) Subject to the terms and conditions hereof, at any time and
from time to time from the Closing Date through the Maturity Date, each
Lender may in its sole and absolute discretion make Competitive Advances
to Borrower in such principal amounts as Borrower may request pursuant to
a Competitive Bid Request, provided that giving effect to the requested
--------
Competitive Advance, the sum of (i) the outstanding principal amount of
------
the Committed Loans plus (ii) the Aggregate Effective Amount of all
----
outstanding Letters of Credit, plus (iii) the outstanding principal
----
amount of the Competitive Advances shall not exceed the Main
Commitment.
(b) Borrower shall request Competitive Advances by submitting a
Competitive Bid Request to the Administrative Agent, which Competitive
Bid Request shall specify the relevant date, amount and maturity for the
proposed Competitive Advance and shall state that a Competitive Bid is
requested on the basis of either an absolute, all-in rate (an "All-In
Bid") or the basis of a margin over the Eurodollar Rate (a "Eurodollar
Bid"). Any Competitive Bid Request made by telephone shall promptly be
confirmed by the delivery to Administrative Agent in person or by
telecopier of a written Competitive Bid Request. The Competitive Bid
Request must be received by the Administrative Agent not later than
11:00 a.m. on a Banking Day that is (i) in the case of each All-In Bid,
at
least two (2) Banking Days prior, and (ii) in the case of each Eurodollar
Bid, at least four (4) Banking Days prior, to the date of the proposed
Competitive Advance.
-28
<PAGE>
(c) Unless the Administrative Agent otherwise agrees, in its
sole and absolute discretion, no Competitive Bid Request shall be made by
Borrower if Borrower has, within the immediately preceding five (5)
Banking Days, submitted another Competitive Bid Request.
(d) Each Competitive Bid Request must be made for a Competitive
Advance of at least $5,000,000 and shall be in an integral multiple of
$1,000,000.
(e) No Competitive Bid Request shall be made for a Competitive
Advance with a maturity of less than 14 days or more than 180 days, or
with a maturity date subsequent to the Maturity Date.
(f) The Administrative Agent shall, promptly after receipt of a
Competitive Bid Request, notify the Lenders thereof by telephone and
provide the Lenders a copy thereof by telecopier. Any Lender may, by
written notice to the Administrative Agent, advise the Administrative
Agent that it elects not to be so notified of Competitive Bid Requests,
in which case the Administrative Agent shall not notify such Lender of
the Competitive Bid Request.
(g) Each Lender receiving a Competitive Bid Request may, in its
sole and absolute discretion, make or not make a Competitive Bid
responsive to the Competitive Bid Request. Each Competitive Bid shall be
submitted to the Administrative Agent not later than 8:00 a.m.
(California time) (i) in the case of each Absolute Bid on the Business
Day of the
proposed Competitive Advance and (ii) in the case of each Eurodollar Bid,
on the date which is three Business Days prior to the date of the
requested Competitive Advance. Any Competitive Bid received by the
Administrative Agent after 8:00 a.m. on such dates shall be disregarded
for purposes of this Agreement. Any Competitive Bid made by telephone
shall promptly be confirmed by the delivery to the Administrative Agent
in person or by telecopier of a written Competitive Bid.
(h) Each Competitive Bid shall specify the All-In Bid or the
Eurodollar Bid as requested in the Competitive Bid Request for the
offered Maximum Competitive Advance set forth in the Competitive Bid.
The Maximum Competitive Advance offered by a Lender
in a Competitive Bid may be less
than the Competitive Advance requested by Borrower in the Competitive Bid
Request, but shall be an integral multiple of $1,000,000. Any
Competitive Bid which offers an interest rate other than an All-In Bid or
----------
Eurodollar Bid (as
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<PAGE>
requested in the Competitive Bid Request), is in a form other than set
forth in Exhibit D or which otherwise contains any term, condition or
---------
provision not contained in the Competitive Bid Request shall be
disregarded for purposes of this
Agreement. A Competitive Bid once submitted to the Administrative Agent
shall be irrevocable until 9:00 a.m. (California time) on the date upon
which Borrower must accept or reject such Competitive Bid (as set forth
in (j) below), and shall expire by its terms at such time unless
accepted by Borrower prior thereto.
(i) Promptly after 9:00 a.m. on the date upon which it receives
Competitive Bids, the Administrative Agent shall notify Borrower of the
names of any Lenders which have made Competitive Bids at or before
8:00 a.m. (California time) on that date, provided that if the Lender
--------
which serves as the Administrative Agent intends to make a Competitive
Bid, it shall do
so by notifying Borrower prior to 7:45 a.m. on that date. In each case,
the Administrative Agent shall inform Borrower of the Maximum Competitive
Advance and All-In Bid or Eurodollar Bid (as applicable) set
forth by each Lender in its Competitive Bid.
The Administrative Agent shall promptly confirm such notifications in
writing delivered in person or by telecopier to Borrower.
(j) Borrower may, in its sole and absolute discretion, reject
any
or all of the Competitive Bids. If Borrower accepts any Competitive Bid,
the following shall apply: (a) Borrower must accept all Competitive Bids
at all lower interest rates before accepting any portion of a Competitive
Bid at a higher interest rate, (b) if two or more Lenders have submitted
a Competitive Bid at the same interest rate, then Borrower must accept
either all of such Competitive Bids or accept such Competitive Bids in
the same proportion as the Maximum Competitive Advance of each Lender
bears to the aggregate Maximum Competitive Advances of all such Lenders
and (c) Borrower may not accept Competitive Bids for an aggregate amount
in excess of the requested Competitive Advance set forth in the
Competitive Bid Request. Acceptance of a Competitive Bid by Borrower
shall be
irrevocable upon communication thereof to the Administrative Agent. The
Administrative Agent shall promptly notify each of the Lenders whose
Competitive Bid has been accepted by Borrower by telephone, which
notification shall promptly be confirmed in writing delivered in person
or by telecopier to such Lenders. Any Competitive Bid not accepted by
Borrower by 9:00 a.m. (California time) on the date of the proposed
Competitive Bid shall be deemed rejected.
-30-
<PAGE>
(k) A Lender whose Competitive Bid has been accepted by Borrower
shall make the Competitive Advance in accordance with the Competitive Bid
Request and with its Competitive Bid, subject to the applicable
conditions set forth in this Agreement by making funds immediately
available to the
Administrative Agent at the Administrative Agent's Office in the amount
of such Competitive Advance not later than 11:00 a.m. (California time)
on the date of such acceptance. The Administrative Agent shall then
promptly credit the Competitive Advance in immediately available funds to
the Designated Deposit Account.
(l) The Administrative Agent shall notify Borrower and the
Lenders promptly after any Competitive Advance is made of the amounts and
maturity of such Competitive Advances and the identity of the Lenders
making such Competitive Advances.
(m) The Competitive Advances made by a Lender shall be evidenced
by that Lender's Competitive Advance Note.
(n) Borrower shall pay to the Administrative Agent a fee with
respect to each Competitive Bid Request submitted to the Administrative
Agent, in the amounts and at the times set forth in a letter agreement
between Borrower and Administrative Agent.
2.3 Swing Line Loans. Each request by Borrower for a Swing Line Loan
----------------
shall Be made pursuant to a Request for Loan (or telephonic or other request
for a Loan referred to in the second sentence of Section 2.1(c), if applicable)
-----
received by the Administrative Agent, at the Administrative Agent's Office, not
later than 2:00 p.m. on the day of the requested Swing Line Loan.
2.4 Base Rate Loans. Each request by Borrower for a Base Rate Loan shall
---------------
be made pursuant to a Request for Loan (or telephonic or other request for a
Loan referred to in the second sentence of Section 2.1(c), if applicable)
-----
received by the
Administrative Agent, at the Administrative Agent's Office, not later than 11:00
a.m. (California time) on the day prior to the date of the requested Base Rate
Loan. All Loans shall
constitute Base Rate Loans unless properly designated as Eurodollar Rate Loans.
-31-
<PAGE>
2.5 Eurodollar Rate Loans
---------------------
(a) Each request by Borrower for a Eurodollar Rate Loan shall be
made pursuant
to a Request for Loan (or telephonic or other request for a Loan referred
to in the second sentence of Section 2.1(c), if applicable) received by
-----
the Administrative
Agent, at the Administrative Agent's Office, not later than 11:00 a.m.
(California time) at least three (3) Eurodollar Banking Days before the
first day of the applicable Eurodollar Period.
(b) Prior to the first day of the applicable Eurodollar Period,
the Administrative Agent shall determine the applicable Eurodollar Rate
(which determination shall be conclusive in the absence of manifest
error)
and promptly shall give notice of the same to Borrower and the Lenders by
telephone, telecopier or telex.
(c) Unless all of the Lenders otherwise consent, no Eurodollar
Rate Loan may be requested during the continuance of a Default or Event
of Default.
(d) Unless the Majority Lenders otherwise consent, no more than
six (6) Eurodollar Loans shall be outstanding at any one time.
(e) Nothing contained herein shall require any Lender to fund
any Eurodollar Rate Advance in the Designated Eurodollar Market.
2.6 Letters of Credit.
-----------------
(a) Subject to the terms and conditions hereof, at any time and
from time to time from the Closing Date through the Maturity Date, the
Issuing Lender shall issue such Letters of Credit under the Main Commit-
ment as Borrower may request by a Request for Letter of Credit; provided
--------
that (i) giving effect to all such Letters of Credit, the sum of (A) the
---
aggregate principal amount outstanding of the Committed Loans, plus (B)
----
the Aggregate Effective Amount of all outstanding Letters of Credit,
plus (C) the outstanding principal amount of the Competitive Advances
----
shall not exceed the Main Commitment and (ii) the Aggregate
Effective Amount under all outstanding Letters of Credit shall not exceed
$5,000,000.
Each Letter of Credit shall be in a form and for a purpose acceptable to
the Issuing
Lender. Unless all the Lenders otherwise consent in a writing delivered
to the Administrative Agent, the term of any
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<PAGE>
Letter of Credit shall not exceed one (1) year or extend beyond the
Maturity Date.
(b) Each Request for Letter of Credit shall be submitted to the
Issuing Lender, with a copy to the Administrative Agent, at least three
(3) Banking Days prior to the date upon which the related Letter of
Credit
is proposed to be issued. The Administrative Agent shall promptly notify
the Issuing Lender whether such Request for Letter of Credit, and the
issuance of a Letter of Credit pursuant thereto, conforms to the
requirements of this Agreement. Upon issuance of a Letter of Credit, the
Issuing Lender shall promptly notify the Administrative Agent, and the
Administrative Agent shall promptly notify the Lenders, of the amount and
terms thereof.
(c) Upon the issuance of a Letter of Credit, each Lender shall
be deemed to have purchased a pro rata participation in such Letter of
Credit from the Issuing Lender in an amount equal to that Lender's Pro
Rata Share
of the Main Commitment. Without limiting the scope and nature of each
Lender's participation in any Letter of Credit, to the extent that the
Issuing Lender has not been reimbursed by Borrower for any payment
required to be made by the Issuing Lender under any Letter of Credit,
each Lender shall, pro rata according to its Pro Rata Share, reimburse
the
Issuing Lender through the Administrative Agent promptly upon demand for
the amount of such payment. The obligation of each Lender to so
reimburse
the Issuing Lender shall be absolute and unconditional and shall not be
affected by the occurrence of an Event of Default or any other occurrence
or event. Any such reimbursement shall not relieve or otherwise impair
the obligation of Borrower to reimburse the Issuing Lender for the amount
of any payment made by the Issuing Lender under any Letter of Credit
together with interest as hereinafter provided.
(d) Borrower agrees to pay to the Issuing Lender through the
Administrative Agent an amount equal to any payment made by the Issuing
Lender with respect to each Letter of Credit within one (1) Banking Day
after demand made by the Issuing Lender therefor, together with interest
on such amount from the date of any payment made by the Issuing Lender at
the rate applicable to Alternate Base Rate Loans for three Business Days
and thereafter at the Default Rate. The principal amount of any such
payment shall be used to reimburse the Issuing Lender for the payment
made
by it under the Letter of Credit and, to the extent that the Lenders have
not reimbursed the Issuing Lender pursuant to Section 2.6(c), the
-----
interest amount of any such payment
--33-
<PAGE>
shall be for the account of the Issuing Lender. Each Lender that has
reimbursed the Issuing Lender pursuant to Section 2.6(c) for its Pro Rata
------
Share of any payment made by the Issuing Lender under a Letter of Credit
shall thereupon
acquire a pro rata participation, to the extent of such reimbursement, in
the claim of
the Issuing Lender against Borrower for reimbursement of principal and
interest under this Section 2.6(d) and shall share, in accordance with
-----
that pro rata participation, in any principal payment made by Borrower
with respect to such claim and
in any interest payment made by Borrower (but only with respect to
periods
subsequent to the date such Lender reimbursed the Issuing Lender) with
respect to such claim.
(e) Borrower may, pursuant to a Request for Loan, request that
Advances be made pursuant to Section 2.1(a) to provide funds for the
-----
payment required by Section 2.6(d) and, for this purpose, the conditions
-----
precedent set forth in Article 8
---------
shall not apply. The proceeds of such Advances shall be paid directly to
the Issuing Lender to reimburse it for the payment made by it under the
Letter of Credit.
(f) If Borrower fails to make the payment required by
Section 2.6(d) within the time period therein set forth, in lieu of the
------
reimbursement to the Issuing Lender under Section 2.4(c) the Issuing
------
Lender may (but is not required to), without notice to or the consent of
Borrower,
instruct the Administrative Agent to cause Advances to be made by the
Lenders under the
Commitment in an aggregate amount equal to the amount paid by the Issuing
Lender with
respect to that Letter of Credit and, for this purpose, the conditions
precedent set forth in Article 8 shall not apply. The proceeds of such
---------
Advances shall be paid directly to the Issuing Lender to reimburse it for
the payment made by it under the Letter of Credit.
(g) The issuance of any supplement, modification, amendment,
renewal, or extension to or of any Letter of Credit shall be treated in
all respects the same as the issuance of a new Letter of Credit.
(h) The obligation of Borrower to pay to the Issuing Lender the
amount of any payment made by the Issuing Lender under any Letter of
Credit shall be absolute, unconditional, and irrevocable, subject only to
performance by the Issuing Lender of its obligations to Borrower under
Uniform Commercial Code Section 5109. Without limiting the foregoing,
-34-
<PAGE>
Borrower's obligations shall not be affected by any of the following
circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit, this Agreement, or any other agreement or instrument
relating thereto;
(ii) any amendment or waiver of or any consent to
departure from the Letter of Credit, this Agreement, or any other
agreement or instrument relating thereto, with the consent of
Borrower;
(iii) the existence of any claim, setoff, defense, or
other rights which Borrower may have at any time against the
Issuing Lender, the Administrative Agent or any Lender, any
beneficiary of the Letter of Credit (or any persons or entities
for whom any such beneficiary may be acting) or any other Person,
whether in connection with the Letter of Credit, this Agreement,
or any other agreement or instrument relating thereto, or any
unrelated transactions;
(iv) any demand, statement, or any other document presented
under the Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect whatsoever so long as
any such document appeared substantially to comply with the terms
of the Letter of Credit;
(v) payment by the Issuing Lender in good faith under the
Letter of Credit against presentation of a draft or any
accompanying document which does not strictly comply with the
terms of the Letter of Credit;
(vi) the existence, character, quality, quantity, condition,
packing, value or delivery of any Property purported to be
represented by documents presented in connection with any Letter
of Credit or any difference between any such Property and the
character, quality, quantity, condition, or value of such
Property as described in such documents;
-35-
<PAGE>
(vii) the time, place, manner, order or contents of
shipments or deliveries of Property as described in documents
presented in connection with any Letter of Credit or the
existence, nature and extent of any insurance relative thereto;
(viii) the solvency or financial responsibility of any
party
issuing any documents in connection with a Letter of Credit;
(ix) any failure or delay in notice of shipments or
arrival of any Property;
(x) any error in the transmission of any message
relating to a Letter of Credit not caused by the Issuing Lender,
or any delay or interruption in any such message;
(xi) any error, neglect or default of any correspondent of
the Issuing Lender in connection with a Letter of Credit;
(xii) any consequence arising from acts of God, war,
insurrection, civil unrest, disturbances, labor disputes,
emergency conditions or other causes beyond the control of the
Issuing Lender;
(xiii) so long as the Issuing Lender in good faith
determines that the contract or document appears substantially to
comply with the terms of the Letter of Credit, the form,
accuracy,
genuineness or legal effect of any contract or document referred
to in any document submitted to the Issuing Lender in connection
with a Letter of Credit; and
(xiv) where the Issuing Lender has acted in good faith and
observed general banking usage, any other circumstances
whatsoever.
(i) The Issuing Lender shall be entitled to the protection
accorded to the Administrative Agent pursuant to Section 10.6, mutatis
---- -------
mutandis.
--------
(j) The Uniform Customs and Practice for Documentary Credits, as
published in its most current version by the International Chamber of
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<PAGE>
Commerce, shall be deemed a part of this Section and shall apply to all
Letters of Credit to the extent not inconsistent with applicable Law.
2.7 Voluntary Reduction of the Commitment. Borrower shall have the right,
-------------------------------------
at any time
and from time to time, without penalty or charge, upon at least five (5) Banking
Days' prior written notice to the Administrative Agent, voluntarily to reduce,
permanently and irrevocably, in aggregate principal amounts in an integral
multiple of $1,000,000 which are not less than $5,000,000, all or a portion of
the then undisbursed portion of the Commitment; provided that any such reduction
--------
shall be accompanied by
payment of all accrued and unpaid facility fees with respect to the portion of
the Commitment being reduced. Any such reduction may be allocated between the
Main Commitment and the Swing Line Commitment by Borrower in amounts which are
integral multiples of $1,000,000.
2.8 Administrative Agent's Right to Assume Funds Available for Advances.
-------------------------------------------------------------------
Unless the Administrative Agent shall have been notified by any Lender no later
than the
Banking Day prior to the funding by the Administrative Agent of any Loan that
such Lender does not intend to make available to the Administrative Agent such
Lender's Pro Rata Share of the total amount of such Loan (and provided that the
--------
Administrative Agent has given such Lender notice of such Loan in accordance
with Section
2.1(d)), the Administrative Agent may assume that such Lender has made
- ------
such amount available to the Administrative Agent on the date of the Loan and
the Administrative Agent may, in reliance upon such
assumption, make available to
Borrower a corresponding amount. If the Administrative Agent has made funds
available to Borrower based on such assumption and such corresponding amount is
not in fact made available to the Administrative Agent by such Lender, the
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender. If such Lender does not pay such corresponding amount
forthwith upon the Adminis-trative Agent's demand therefor, the Administrative
Agent promptly shall notify
Borrower and Borrower shall pay such corresponding amount to the Administrative
Agent. The Administrative Agent also shall be entitled to recover from such
Lender interest on such corresponding amount in respect of each day from the
date such corresponding amount was made available by the Administrative Agent to
Borrower to the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to the Federal Funds Rate.
-37-
<PAGE>
ARTICLE 3
PAYMENTS AND FEES
-----------------
3.1 Principal and Interest.
----------------------
(a) Interest shall be payable on the outstanding daily unpaid
principal amount of each Advance and each Swing Line Loan from the date
thereof until payment in full is made and shall accrue and be payable at
the rates set forth herein before and after default, before and after
maturity, before and after judgment, and before and after the
commencement
of any proceeding under any Debtor Relief Law, with interest on overdue
interest to bear interest at the Default Rate to the fullest extent
permitted by applicable Laws.
(b) Interest accrued on each Base Rate Loan through the last day
of each calendar month shall be due and payable on the fifth Banking Day
following that day. Interest accrued on each Swing Line Loan through the
last day of each calendar month shall be due and payable on that day.
Except as otherwise provided in Section 3.8, the unpaid principal amount
------ ---
of each Base
Rate Loan and each Swing Line Loan shall bear interest at a fluctuating
rate per annum
equal to the Base Rate. Each change in the interest rate applicable to
Base Rate Loans and Swing Line Loans shall take effect simultaneously
with the corresponding
changes in the Base Rate. Each change in the Base Rate shall be
effective
as of 12:01 a.m. on the Banking Day on which such change the Base Rate is
announced, unless otherwise specified in such announcement, in which case
the change shall be effective as so specified.
(c) Interest accrued on each Eurodollar Rate Loan which is for a
term of three months or less shall be due and payable on the last day of
the related Eurodollar Period. Interest accrued on each other Eurodollar
Rate Loan shall be due and payable on each Quarterly Payment Date and on
the last day of the related Eurodollar Period. Except as otherwise
------
provided in Section 3.8, the unpaid principal amount of any Eurodollar
---
Rate Loan shall bear interest at a rate per annum equal to the Eurodollar
Rate for that Eurodollar Rate Loan plus the applicable Eurodollar Rate
----
Spread.
(d) Interest accrued on each Competitive Advance shall be due
and payable on the maturity date of the Competitive Advance. Except as
otherwise provided in Section 3.8, the unpaid principal amount of each
---
-38-
<PAGE>
Competitive Advance shall bear interest at the interest rate specified in
the related Competitive Bid.
(e) If not sooner paid, the principal Indebtedness evidenced by
the Notes shall be payable as follows:
(i) the principal amount of each Eurodollar Rate Loan shall
be payable immediately on the last day of the Eurodollar Period for
such Loan;
(ii) the principal amount of each Competitive Advance shall
be payable immediately on the maturity date specified in the related
Competitive Bid;
(iii) the principal Indebtedness evidenced by the Notes
shall be payable immediately in immediately available funds, to the
extent that the sum of (A) the outstanding principal amount of the
---
Loans plus (B) the Aggregate Effective Amount of all outstanding
----
Letters of Credit at any time exceeds the Commitment;
(iv) the principal Indebtedness evidenced by the Committed
Notes shall be payable immediately in immediately available funds, to
the extent that the sum of (A) the principal amount of the Committed
------
Loans made under
the Main Commitment plus (B) the principal amount of any outstanding
----
Competitive
Advances plus (C) the Aggregate Effective Amount of all outstanding
----
Letters of Credit at any time exceeds the Main Commitment;
(v) the principal Indebtedness evidenced by the Swing Line
Note shall be payable immediately in immediately available funds, to
the extent that the principal amount of the outstanding Swing Line
Loans at any time exceeds the Swing Line Commitment; and
(vi) the principal Indebtedness evidenced by the Notes
shall
in any event be payable immediately in immediately available funds on
the Maturity Date.
(f) The principal Indebtedness evidenced by the Notes shall be
prepaid on the second anniversary of the Closing Date unless on or before that
------
-39-
<PAGE>
date Borrower furnishes to the Administrative Agent a written opinion of
its legal counsel, in form and substance acceptable to the Administrative
Agent,
to the effect that all regulatory approvals from Governmental Agencies
necessary to permit the maturity date of the credit facilities under this
Agreement to extend to the Maturity Date have been obtained and are in full
force and effect, attaching a copy of such regulatory approvals.
(g) Subject to clause (h) of this Section, the Notes may, at any
time and from time to time, voluntarily be paid or prepaid in whole or in
part
without premium or penalty, except that with respect to any voluntary
------
prepayment under this subsection, (i) any partial prepayment of Loans
under the Main Commitment shall be in an integral multiple of $1,000,000,
but not less than $5,000,000,
(ii) the Administrative Agent shall have received written notice of any
prepayment
at least one (1) Banking Day, in the case of a Base Rate Loan, and three
(3) Banking Days, in the case of a Eurodollar Rate Loan, before the date
of prepayment, which notice shall identify the date and amount of the
prepayment and the Loan(s) being prepaid, (iii) each prepayment of
principal in respect of a Eurodollar Rate Loan shall be accompanied by
payment of interest accrued through the date of payment on the amount of
principal paid and (iv) in any event, any payment or prepayment of all or
any part of any Eurodollar Rate Loan on a day other than the last day of
the applicable Eurodollar Period shall be subject to Section 3.7(d).
------
(h) No Competitive Advance Note may be prepaid without the prior
written consent of the Lender making such Competitive Advance.
3.2 Facility Fees. On each Quarterly Payment Date and on the earlier of
-------------
the Maturity
Date and the date upon which the Obligations are paid in full and the Commitment
terminated, Borrower shall pay to the Administrative Agent (a) for the account
of each Lender according to its Pro Rata Share of the Main Commitment, a
facility fee equal to the then applicable Facility Fee Rate times the Main
Commitment for the period since the last Quarterly Payment Date and (b) for the
account of the Swing Line Lender, a facility fee equal to the then applicable
Facility Fee Rate times the Swing Line
Commitment for the period since the last Quarterly Payment Date.
3.3 Arrangement Fee. On the Closing Date, Borrower shall pay to the
---------------
Arranger the
arrangement fee as heretofore agreed upon by letter agreement dated November 21,
1997 between Borrower and the Arranger. The arrangement fee paid to the
Arranger is solely for its own account and is nonrefundable.
-40-
<PAGE>
3.4 Agency Fee Borrower shall pay to the Administrative Agent an agency
----------
fee in such
amounts and at such times as heretofore agreed upon by letter agreement dated
November 21, 1997 between Borrower and the Administrative Agent. The agency fee
paid to the Administrative Agent is solely for its own account and is
nonrefundable.
3.5 Letter of Credit Fees. Concurrently with the issuance of each Letter
---------------------
of Credit,
Borrower shall pay a letter of credit issuance fee to the Issuing Lender, for
the sole account of the Issuing Lender, in an amount set forth in a letter
agreement
dated November 21, 1997 between Borrower and the Issuing Lender. The letter of
credit issuance fee is nonrefundable. Borrower shall also concurrently pay to
the Administrative Agent, for the ratable account of the Lenders in accordance
with their Pro Rata Share of the Main Commitment, standby letter of credit fees
in an amount equal to the Letter of Credit Fee Rate times the amount of the
-----
Letter of
Credit for the period commencing on the earlier of (a) the maturity date of such
----------
Letter of
Credit or (b) the first anniversary of the issuance date of such Letter of
Credit, and shall further pay such an issuance fee on each anniversary of the
issuance date of such Letter of Credit. Borrower shall also pay customary
amendment, transfer, negotiation and other fees to the Issuing Lender, for the
sole account of the Issuing Lender.
3.6 Increased Commitment Costs. If any Lender determines in good faith
--------------------------
that compliance
with any Law or regulation enacted or promulgated after the Closing Date, or
with any guideline or request from any central bank or other Governmental Agency
issued or made after the Closing Date (whether or not having the force of Law)
has or would have the effect of reducing the rate of return on the capital of
such Lender or any corporation controlling such Lender as a consequence of, or
with reference to, such Lender's portion of the Commitment or its making or
maintaining of Advances or Swing Line Loans, below the rate which the Lender or
such other corporation could have achieved but for such compliance (taking into
account the policies of such Lender or corporation with regard to capital), then
the Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), immediately pay to such Lender
additional amounts sufficient to compensate such Lender or other corporation for
such reduction. A certificate as to such amounts, submitted to the Borrower and
the Administrative Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent of any circumstances that would cause the
Borrower to pay additional amounts pursuant to this Section, provided that the
--------
failure to give such notice shall not affect the Borrower's obligation to pay
such additional amounts hereunder.
-41-
<PAGE>
3.7 Eurodollar Fees and Costs.
-------------------------
(a) If, after the date hereof, the existence or occurrence of
any Special Eurodollar Circumstance:
(1) shall subject any Lender or its Eurodollar Lending
Office to any tax, duty or other charge or cost with respect to any
Eurodollar Rate Advance, its Notes or its obligation to make
Eurodollar Rate Advances, or shall change the basis of taxation of
payments to any Lender of the principal of or interest on any
Eurodollar Rate Advance or any other amounts due under this
Agreement
in respect of any Eurodollar Rate Advance, its Notes or its
obligation to make Eurodollar Rate Advances (except for changes in
------
any tax on the overall net income, gross income or gross receipts of
such Lender or
its Eurodollar Lending Office);
(2) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of
---------
Governors of
the Federal Reserve System), special deposit or similar requirements
against assets of, deposits with or for the account of, or credit
extended by, any Lender or its Eurodollar Lending Office; or
(3) shall impose on any Lender or its Eurodollar Lending
Office or the Designated Eurodollar Market any other condition
affecting any Eurodollar Rate Advance, its Notes, its obligation to
make Eurodollar Rate Advances or this Agreement, or shall otherwise
affect any of the same;
and the result of any of the foregoing, as determined by such Lender,
increases the cost to such Lender or its Eurodollar Lending Office of
making or maintaining any Eurodollar Rate Advance or in respect of any
Eurodollar Rate Advance, its Notes or its obligation to make Eurodollar
Rate Advances or reduces the amount of any sum received or receivable by
such Lender or its Eurodollar Lending Office with respect to any
Eurodollar Rate Advance, its Notes or its obligation to make Eurodollar
Rate Advances (assuming such Lender's Eurodollar Lending Office had
funded
100% of its Eurodollar Rate Advance in the Designated Eurodollar Market),
then, upon demand by such Lender (with a copy to the Administrative
Agent), Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender for
-42-
<PAGE>
such increased cost or reduction (determined as though such Lender's
Eurodollar Lending Office had funded 100% of its Eurodollar Rate Advance
in the Designated Eurodollar Market). A statement of any Lender claiming
compensation under this subsection shall be conclusive in the absence of
manifest error. Each Lender agrees to endeavor promptly to notify
Borrower of any event of which it has actual knowledge, occurring after
the Closing Date, which will entitle such Lender to compensation pursuant
to this Section, and agrees to designate a different Eurodollar Lending
Office if such designation will avoid the need for or reduce the amount
of
such compensation and will not, in the judgment of such Lender, otherwise
be disadvantageous to such Lender. If any Lender claims compensation
under this Section, Borrower may at any time, upon at least four (4)
Eurodollar Banking Days' prior notice to the Administrative Agent and
Lenders and upon payment in full of the amounts provided for in this
Section through the date of such payment plus any prepayment fee required
by Section 3.7(d), pay in full all Eurodollar Rate Advances or request
-----
that all Eurodollar Rate Advances be converted to Base Rate Advances.
(b) If, after the date hereof, the existence or occurrence of
any
Special Eurodollar Circumstance shall, in the opinion of any Lender, make
it unlawful, impossible or impracticable for such Lender or its
Eurodollar
Lending Office to make, maintain or fund its portion of any Eurodollar
Rate Loan, or materially restrict the authority of such Lender to
purchase
or sell, or to take deposits of, dollars in the Designated Eurodollar
Market, or to determine or charge interest rates based upon the
Eurodollar
Rate, and such Lender shall so notify the Administrative Agent and the
other Lenders, then the Lenders' obligation to make Eurodollar Rate
Advances shall be suspended for the duration of such illegality,
impossibility or impracticability and the Administrative Agent forthwith
shall give notice thereof to Borrower. Upon receipt of such notice, the
outstanding principal amount of all Eurodollar Rate Advances, together
with accrued interest thereon, automatically shall be converted to Base
Rate Advances with Eurodollar Periods corresponding to the Eurodollar
Loans of which such Eurodollar Rate Advances were a part on either (1)
the
last day of the Eurodollar Period(s) applicable to such Eurodollar Rate
Advances if the affected Lender may lawfully continue to maintain and
fund
such Eurodollar Rate Advances to such day(s) or (2) immediately if the
affected Lender may not lawfully continue to fund and maintain such
Eurodollar Rate Advances to such day(s), provided that in such event the
--------
conversion shall
not be subject to payment of a prepayment fee under Section 3.7(d).
------
-43-
<PAGE>
(c) If, with respect to any proposed Eurodollar Rate Loan:
(1) the Administrative Agent reasonably determines that, by
reason of circumstances affecting the Designated Eurodollar Market
generally that are beyond the reasonable control of the Lenders,
deposits in dollars (in the applicable amounts) are not being
offered
to each of the Lenders in the Designated Eurodollar Market for the
applicable Eurodollar Period; or
(2) the Majority Lenders advise the Administrative Agent
that the Eurodollar Rate as determined by the Administrative Agent
(i) does not represent the effective pricing to such Lenders for
deposits in dollars in the Designated Eurodollar Market in the
relevant amount for the applicable Eurodollar Period, or (ii) will
not adequately and fairly reflect the cost to such Lenders of making
the applicable Eurodollar Rate Advances;
then the Administrative Agent forthwith shall give notice thereof to
Borrower and the Lenders, whereupon until the Administrative Agent
notifies Borrower that the circumstances giving rise to such suspension
no
longer exist, the obligation of the Lenders to make any future Eurodollar
Rate Advances shall be suspended. If at the time of such notice there is
then pending a Request for Loan that specifies a Eurodollar Rate Loan,
such Request for Loan shall be deemed to specify a Base Rate Loan.
(d) Upon payment or prepayment of any Eurodollar Rate Advance,
(other than as
the result of a conversion required under Section 3.7(b)), on a day other
-------
than the last day in the applicable Eurodollar
Period (whether voluntarily,
involuntarily, by reason of acceleration, or otherwise), or upon the
failure of Borrower to borrow on the date or in the amount specified for
a
Eurodollar Rate Loan in any Request for Loan, Borrower shall pay to the
appropriate Lender a prepayment fee or failure to borrow fee, as the case
may be, calculated as follows (and determined as though 100% of the
Eurodollar Rate Advance had been funded in the Designated Eurodollar
Market):
(1) principal amount of the Eurodollar Rate Advance, times
-----
[number of days between the date of prepayment and the last day
-44-
<PAGE>
in the applicable Eurodollar Period], divided by 360, times the
------- -----
applicable Interest Differential; plus
----
(2) all actual out-of-pocket expenses (other than
those
taken into account in the calculation of the Interest Differential)
incurred by the Lender (excluding allocations of any expense
---------
internal
to that Lender) and reasonably attributable to such payment or
prepayment;
provided that no prepayment fee or failure to borrow fee shall be payable
--------
(and no
credit or rebate shall be required) if the product of the foregoing
formula is not a positive number. Each Lender's determination of the
amount of any prepayment fee or failure to borrow fee payable under this
Section 3.7(d) shall be conclusive in the absence of manifest error.
------
3.8 Default Rate. From and after the occurrence of any Event of Default
------------
the Loans and the Swing Line Loans shall bear interest at a fluctuating interest
rate per annum at all times equal to the sum of the Base Rate plus 3% per annum,
--- -- ----
to the fullest extent permitted by applicable Laws. Accrued and unpaid interest
on past due amounts (including, without limitation, interest on past due
---------
interest) shall be compounded quarterly, on the last day of each calendar
quarter, to the fullest extent permitted by applicable Laws.
3.9 Computation of Interest and Fees. Computation of interest on Base
--------------------------------
Rate Loans, Swing
Line Loans, Eurodollar Rate Loans, Competitive Advances and on facility and
letter of credit fees shall be calculated on the basis of a year of 360 days and
the actual number of days elapsed. Borrower acknowledges that this calculation
method will result in a higher yield to the Lenders than a method based on a
year
of 365 or 366 days. Any Loan or Swing Line Loan that is repaid on the same day
on which it is made shall bear interest for one day. Notwithstanding anything
in this Agreement to the contrary, interest in excess of the maximum amount
permitted by applicable Laws shall not accrue or be payable hereunder or under
the Notes, and any amount paid as interest hereunder or under the Notes which
would otherwise be in excess of such maximum permitted amount shall instead be
treated as a payment of principal.
3.10 Non-Banking Days. If any payment to be made by Borrower or any other
----------------
Party under any Loan Document shall come due on a day other than a Banking Day,
payment shall
instead be considered due on the next succeeding Banking Day and the extension
of time shall be reflected in computing interest.
-45-
<PAGE>
3.11 Manner and Treatment of Payments.
--------------------------------
(a) Each payment hereunder or on the Notes or under any other
Loan Document shall be made to the Administrative Agent for the account
of
each of the Lenders, or the Administrative Agent, as the case may be, in
immediately available funds not later than 11:00 a.m. (or, in the case of
payments with respect to Swing Line Loans, not later than 12:00 noon) on
the day of payment (which must be a Banking Day). All payments received
after 11:00 a.m. (or, in the case of payments with respect to Swing Line
Loans, not later than 12:00 noon) on any particular Banking Day, shall be
deemed received on the next succeeding Banking Day. The amount of all
payments received by the Administrative Agent for the account of each
Lender shall be promptly paid by the Administrative Agent to the
applicable Lender in immediately available funds. Should the
Administrative Agent fail to remit to any Lender any funds actually
received by the Administrative Agent and due to that Lender on the same
Banking Day upon which such funds are deemed received by the
Administrative Agent as set forth above, that Lender shall be entitled to
recover interest on such funds from the Administrative Agent at a rate
per
annum equal to the Federal Funds Rate. All payments shall be made in
lawful money of the United States of America.
(b) Each payment or prepayment on account of any Committed Loan
shall be applied pro rata according to the outstanding Committed Advances
made by each Lender comprising such Committed Loan. Each payment or
prepayment of a Competitive Advance shall be applied to the Competitive
Advance Note held by the Lender which made such Competitive Advance.
(c) Each Lender shall use its best efforts to keep a record of
Advances and Swing Line Loans made by it and payments received by it with
respect to its Notes and such record shall be presumptive evidence of the
amounts owing. Notwithstanding the foregoing sentence, no Lender shall
be liable to any Party for any failure to keep such a record.
(d) Each payment of any amount payable by Borrower or any other
Party under this Agreement or any other Loan Document shall be made free
and clear of, and without reduction by reason of, any taxes, assessments
or other charges imposed by any Governmental Agency, central bank or
comparable authority (other than taxes on income or gross receipts
generally applicable
-46-
<PAGE>
to banks). To the extent that Borrower is obligated by applicable Laws
to make any deduction or withholding on account of taxes, assessments or
other charges imposed by any Governmental Agency from any amount payable
to any Lender under any Loan Document, Borrower shall (i) make such
deduction or withholding and pay the same to the relevant Governmental
Agency and (ii) pay such additional amount to that Lender as is necessary
to result in that Lender's receiving a net after-tax (or after-assessment
or after-charge) amount equal to the amount to which that Lender would
have been entitled under the Loan Document absent such deduction or
withholding. If and when receipt of such payment results in an excess
payment or credit to that Lender on account of such taxes, assessments or
other charges, that Lender shall refund such excess to Borrower.
(e) Each Lender which is organized outside the United States of
America shall promptly deliver to Borrower and the Administrative Agent a
completed Internal Revenue Service Form 4224 and any other certificate or
statement or exemption required by applicable Laws, properly completed
and
duly executed by such Lender, to establish that such payment is (1) not
subject to withholding under the Code because such payment is effectively
connected with the conduct by such Lender of a trade or business in the
United States of America or (2) totally exempt from United States tax
under a provision of an applicable tax treaty. Unless Borrower and the
Administrative Agent have received such Form or other documents
satisfactory to them indicating that payments hereunder or under the
Notes
are not subject to United States withholding tax or are subject to such
tax at a rate reduced by an applicable tax treaty, the Administrative
Agent shall withhold the taxes from such payment at the applicable statu-
tory rate in the case of payments to or for any Lender organized under
the Laws of a jurisdiction outside the United States of America and
Section 3.11(d) shall not apply thereto.
-------
3.12 Funding Sources. Nothing in this Agreement shall be deemed to
---------------
obligate any Lender
to obtain the funds for any Loan, Swing Line Loan or Advance in any particular
place or manner or to constitute a representation by any Lender that it has
obtained or will obtain the funds for any Loan, Swing Line Loan or Advance in
any particular place or manner.
3.13 Failure to Charge Not Subsequent Waiver. Any decision by the
---------------------------------------
Administrative Agent
or any Lender not to require payment of any interest (including interest arising
---------
under Section 3.8), fee, cost or other amount payable under any Loan
----
-47-
<PAGE>
Document, or to calculate any amount payable by a particular method, on any
occasion shall in no way limit or be deemed a waiver of the Administrative
Agent's or such Lender's right to require full payment of any interest
(including interest arising under Section 3.8), fee, cost or other amount
--------- ---
payable under any Loan Document,
or to calculate an amount payable by another method, on any other or subsequent
occasion.
3.14 Administrative Agent's Right to Assume Payments Will be Made by
---------------------------------------------------------------
Borrower. Unless the Administrative Agent shall have been notified by Borrower
- --------
prior to the date
on which any payment to be made by Borrower hereunder is due that Borrower does
not intend to remit such payment, the Administrative Agent may, in its
discretion, assume that Borrower has remitted such payment when so due and the
Administrative Agent may, in its discretion and in reliance upon such
assumption,
make available to each Lender on such payment date an amount equal to such
Lender's share of such assumed payment. If Borrower has not in fact remitted
such payment to the Administrative Agent, each Lender shall forthwith on demand
repay to the Administrative Agent the amount of such assumed payment made
available to such Lender, together with interest thereon in respect of each day
from and including the date such amount was made available by the Administrative
Agent to such Lender to the date such amount is repaid to the Administrative
Agent at a rate per annum equal to the actual cost to the Administrative Agent
of funding such amount as notified by the Administrative Agent to such Lender.
3.15 Fee Determination Detail. The Administrative Agent, and any Lender,
------------------------
shall provide
reasonable detail to Borrower regarding the manner in which the amount of any
payment to the Lenders, or that Lender, under Article 3 has been determined.
---------
3.16 Survivability All of Borrower's obligations under Sections 3.6 and
------------- ---
3.7 shall survive the date on which all Loans and the Swing Line Loans are fully
- ---
paid.
-48-
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to the Lenders that:
4.1 Existence and Qualification; Power; Compliance With Laws. Borrower is
--------------------------------------------------------
a corporation
duly formed, validly existing and in good standing under the Laws of Nevada.
Borrower is duly qualified to transact business, and is in good standing, in
Nevada and each other jurisdiction in which the conduct of its business or the
ownership or leasing of its Properties makes such qualification or registration
necessary, except where the failure so to qualify or register and
------
to be in good standing would not constitute a Material Adverse Effect. Borrower
has all requisite corporate power and authority to conduct its business, to own
and lease its Properties and to execute and deliver each Loan Document to which
it is a Party and to perform the Obligations. All outstanding shares of capital
stock of Borrower are duly authorized, validly issued, fully paid, nonassessable
and issued in compliance with all applicable state and federal securities and
other Laws. Borrower is in compliance with all Laws and other legal
requirements
applicable to its business, has obtained all authorizations, consents,
approvals,
orders, licenses and permits from, and has accomplished all filings, registra-
tions and qualifications with, or obtained exemptions from any of the foregoing
from, any Governmental Agency that are necessary for the transaction of its
business, except where the failure so to comply, file, register, qualify or
------
obtain exemptions does not constitute a Material Adverse Effect.
4.2 Authority; Compliance With Other Agreements and Instruments and
---------------------------------------------------------------
Government Regulations. The execution, delivery and performance by each Party
- ----------------------
of the Loan Documents to
which it is a party have been duly authorized by all necessary corporate action,
and do not:
(a) Require any consent or approval not heretofore obtained of
any partner, director, stockholder, security holder or creditor of such
Party;
(b) Violate or conflict with any provision of such Party's
certificate of incorporation or bylaws;
(c) Result in or require the creation or imposition of any Lien
or Right of Others upon or with respect to any Property now owned or
leased or hereafter acquired by such Party;
-49-
<PAGE>
(d) Violate any Requirement of Law applicable to such Party;
(e) result in a breach of or default under, or would, with the
giving of notice or the lapse of time or both, constitute a breach of or
default under, or cause or permit the acceleration of any obligation owed
under, any indenture or loan or credit agreement or any other Contractual
Obligation to which such Party is a party or by which such Party or any
of its Property is bound or affected;
and no such Party is in violation of, or default under, any Requirement of Law
or
Contractual Obligation, or any indenture, loan or credit agreement described in
Section 4.2(e), in any respect that constitutes a Material Adverse Effect.
------
4.3 No Governmental Approvals Required. Subject to the representations of
----------------------------------
the Lenders
contained in Section 11.8, no authorization, consent, approval, order, license
----
or permit from,
or filing, registration or qualification with, any Governmental Agency is
required to authorize or permit under applicable Laws the execution, delivery
and performance by each Party of the Loan Documents to which it is a party.
4.4 Subsidiaries.
------------
(a) Schedule 4.4 hereto correctly sets forth the names, the form
------------
of legal entity, number of shares of capital stock issued and
outstanding,
jurisdictions of organization and chief executive offices of all Subsidi-
aries of Borrower. Except as described in Schedule 4.4, Borrower does
------------
not own any capital stock or equity interest in any Person.
(b) Each Subsidiary of Borrower is in compliance with all Laws
and other requirements applicable to its business and has obtained all
authorizations, consents, approvals, orders, licenses, and permits from,
and each such Subsidiary has accomplished all filings, registrations, and
qualifications with, or obtained exemptions from any of the foregoing
from, any Governmental Agency that are necessary for the transaction of
its business, except where the failure so to comply, file, register,
------
qualify or obtain exemptions does not constitute a Material Adverse
Effect.
4.5 Financial Statements. Borrower has furnished to the Lenders (a) the
--------------------
audited consolidated financial statements of Borrower and its Subsidiaries as at
December 31, 1996 and for the Fiscal Year then ended and (b) the unaudited
-50-
<PAGE>
consolidated financial statements of Borrower and its Subsidiaries as at
September 30, 1997 and for the three Fiscal Quarters then ended. Such financial
statements fairly present the financial condition and the results of operations
of Borrower and its Subsidiaries as at such dates and for such periods in
accordance with GAAP, consistently applied.
4.6 No Other Liabilities; No Material Adverse Effect. Borrower and its
------------------------------------------------
Subsidiaries do
not have any material liability or material contingent liability not reflected
or disclosed in the balance sheet or notes thereto described in Section 4.5(b),
-----
other than liabilities and contingent liabilities arising in the ordinary course
of business subsequent to September 30, 1997. No event or
circumstance has occurred that constitutes a
Material Adverse Effect with respect to Borrower and its Subsidiaries since
September 30, 1997.
4.7 Title to and Location of Property. Borrower and its Subsidiaries have
---------------------------------
good and valid
title to all the Property reflected in the balance sheet described in Section
4.5(b), other than Property subsequently sold or disposed of in the ordinary
course of business, free and clear of
all Liens and Rights of Others, other than (i) Liens and Rights of Others
----------
permitted by Section 6.8.
---
4.8 Intangible Assets. Borrower owns, or possesses the right to use to
-----------------
the extent
necessary in its business, all trademarks, trade names, copyrights, patents,
patent rights, computer software, licenses and other Intangible Assets that are
used in the conduct of its business as now operated and which are material to
the
condition (financial or otherwise), business or operations of Borrower, and no
such Intangible Asset, to the best knowledge of Borrower, conflicts with the
valid trademark, trade name, copyright, patent, patent right or Intangible Asset
of any other Person to the extent that such conflict constitutes a Material
Adverse Effect.
4.9 Governmental Regulation. Borrower and its Subsidiaries have obtained
-----------------------
all approvals
necessary under the Public Utility Holding Company Act of 1935 and the Federal
Power Act to permit the execution, delivery and performance of the Obligations
under the Loan Documents. Neither Borrower nor any of its Subsidiaries is
subject to regulation under the Interstate Commerce Act, the Investment Company
Act of 1940 or to any other Law limiting or regulating its ability to incur
Indebtedness for money borrowed.
4.10 Litigation. Except for (a) any matter fully covered (subject to
---------- ------
applicable
deductibles and retentions) by insurance for which the insurance carrier has
assumed
-51-
<PAGE>
full responsibility, (b) any matter, or series of related matters, involving a
claim against Borrower or any of its Subsidiaries of less than $5,000,000, (c)
matters described in public documents filed with Governmental Agencies and
previously delivered to the Lenders, and (d) matters set forth in Schedule 4.10,
----
there are no actions, suits, proceedings or investigations pending as to which
Borrower or any of its Subsidiaries have been served or have received notice or,
to the best knowledge of Borrower, threatened against or affecting Borrower or
any of its Subsidiaries or any Property of any of them before any Governmental
Agency. Except for matters set forth in Schedule 4.10,
------ -------------
there is no reasonable basis, to the best knowledge of Borrower, for any action,
suit, proceeding or investigation against or affecting Borrower or any of its
Subsidiaries or any Property of any of them before any Governmental Agency which
would constitute a Material Adverse Effect.
4.11 Binding Obligations. Each of the Loan Documents will, when executed
-------------------
and delivered
by any Party, constitute the legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms, except as
------
enforcement may be
limited by Debtor Relief Laws or equitable principles relating to the granting
of specific
performance and other equitable remedies as a matter of judicial discretion.
4.12 No Default. No event has occurred and is continuing that is a
----------
Default or Event of Default.
4.13 Pension Plans. Schedule 4.13 correctly lists each Pension Plan
-------------- -------------
which, as of the
Closing Date, Borrower or any of its ERISA Affiliates maintains or to which, as
of the Closing Date, Borrower or any ERISA Affiliate contributes or is required
to contribute. As of the Closing Date, all contributions required to be made
under any such Pension Plan have been made to such plan or have been reflected
as a liability on the consolidated balance sheet described in Section 4.5(b).
-----
There is no
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
any liability to the PBGC with respect to any Pension Plan other than a
Multiemployer Plan.
4.14 Regulations G, U and X. No part of the proceeds of any Advance or
----------------------
Swing Line Loan
hereunder will be used to purchase or carry, or to extend credit to others for
the purpose of purchasing or carrying, any "margin stock" (as such term is
defined in Regulation G) in violation of Regulations G, U or X. Neither
Borrower
nor any of its Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any such "margin stock."
-52-
<PAGE>
4.15 Disclosure. No written statement made by a Responsible Official of
----------
Borrower to the
Administrative Agent, the Arranger, the Swing Line Lender or any Lender in
connection with this Agreement, or in connection with any Advance or Swing Line
Loan, contains any untrue statement of a material fact or omits a material fact
necessary to make the statement made not misleading in light of all the
circumstances existing at the date the statement was made. Borrower has not
intentionally withheld from the Lenders any information with respect to any
circumstance or event which constitutes a Material Adverse Effect.
4.16 Tax Liability. Borrower and its Subsidiaries have filed all tax
-------------
returns which are
required to be filed, and have paid, or made provision for the payment of, all
taxes with respect to the periods, Property or transactions covered by said
returns, or pursuant to any assessment received by Borrower or any of its
Subsidiaries, except (a) taxes for which Borrower has been fully indemnified and
------
(b) such taxes,
if any, as are being contested in good faith by appropriate proceedings and as
to which adequate reserves have been established and maintained. To the best
knowledge of Borrower, there is no tax assessment contemplated or proposed by
any Governmental Agency against Borrower
or any of its Subsidiaries that would constitute a Material Adverse Effect.
4.17 Pari Passu Status. No Indebtedness of Borrower or any of its
-----------------
Subsidiaries is
entitled to priority of payment over the Obligations, whether by contract or by
operation of law, provided that it is acknowledged that the First Mortgage Bonds
--------
have the benefit of the
collateral described in the Indenture. The Property of Borrower and its
Subsidiaries is not subject to any Lien or Negative Pledge not described on
Schedule 4.17 or Schedule 6.8, other
- ------------- ------------
than Liens in favor of the Trustee under the Indenture securing the obligations
of Borrower under the Indenture.
4.18 Hazardous Materials. Except as described in Schedule 4.18, (a)
------------------- -------------
neither Borrower
nor any Subsidiary of Borrower at any time has disposed of, discharged, released
or threatened the release of any Hazardous Materials on, from or under the
Property in violation of any Hazardous Materials Law that would individually or
in the aggregate constitute a Material Adverse Effect, (b) to the best knowledge
of Borrower, no condition exists that violates any Hazardous Material Law
affecting any Property except for such violations that would not individually or
in the aggregate have a Material Adverse Effect, (c) no Property or any portion
thereof is or has been utilized by Borrower or any Subsidiary of Borrower as a
site for the manufacture of any Hazardous Materials and (d) to the extent that
any Hazardous Materials are used, generated or stored by Borrower or any
Subsidiary of Borrower on any Property, or
-53-
<PAGE>
transported to or from such Property by Borrower or any Subsidiary of Borrower,
such use, generation, storage and transportation are in compliance in all
material respects with all Hazardous Materials Laws.
-54-
<PAGE>
ARTICLE 5
AFFIRMATIVE COVENANTS
---------------------
(OTHER THAN INFORMATION AND
--------------------------
REPORTING REQUIREMENTS)
----------------------
So long as any Advance or Swing Line Loan remains unpaid, or any other
Obligation remains unpaid or unperformed, or any portion of the Commitment
remains in force, Borrower shall, and shall cause each of its Subsidiaries to,
unless the Administrative Agent (with the approval of the Majority Lenders)
otherwise consents in writing:
5.1 Payment of Taxes and Other Potential Liens. Pay and discharge
------------------------------------------
promptly all taxes,
assessments and governmental charges or levies imposed upon any of them, upon
their respective Property or any part thereof, upon their respective income or
profits or any part thereof or upon any right or interest of the Administrative
Agent or any Lender under any Loan Document, except that Borrower and its
------
Subsidiaries shall not
be required to pay or cause to be paid (a) any income or gross receipts tax or
any other tax on or measured by income gener-ally applicable to banks or (b) any
tax, assessment, charge or levy that is not yet past due, or is being contested
in good faith by appropriate proceedings, so
long as the relevant entity has established and maintains adequate reserves for
the payment of the same and by reason of such nonpayment and contest no material
item or portion of Property of Borrower and its Subsidiaries, taken as a whole,
is in jeopardy of being seized, levied upon or forfeited.
5.2 Preservation of Existence. Preserve and maintain their respective
-------------------------
existences in the
jurisdiction of their formation and all authorizations, rights, franchises,
privileges, consents, approvals, orders, licenses, permits, or registrations
from
any Governmental Agency that are necessary for the transaction of their respec-
tive business, and qualify and remain qualified to transact business in each
jurisdiction in which such qualification is necessary in view of their
respective
business or the ownership or leasing of their respective Properties except that
------
a merger permitted under Section 6.2 shall not constitute a violation of this
---
covenant.
5.3 Maintenance of Properties. Maintain, preserve and protect all of
-------------------------
their respective
depreciable Properties in good order and condition, subject to wear and tear in
the ordinary course of business, and not permit any waste of their respective
Properties.
-55-
<PAGE>
5.4 Maintenance of Insurance. Maintain liability, casualty and other
------------------------
insurance (subject
to customary deductibles and retentions), with responsible insurance companies
in such amounts and against such risks as is carried by responsible companies
engaged in similar businesses and owning similar assets in the general areas in
which Borrower and its Subsidiaries operate.
5.5 Compliance With Laws. Comply with all Requirements of Laws
--------------------
noncompliance with which
constitutes a Material Adverse Effect, except that Borrower and its Subsidiaries
------
need not comply
with a Requirement of Law then being contested by any of them in good faith by
appropriate proceedings.
5.6 Inspection Rights. At any time during regular business hours and as
-----------------
often as
requested (but not so as to materially interfere with the business of Borrower
or any of its Subsidiaries), permit the Administrative Agent or any authorized
employee, agent or representative thereof, to examine, audit and make copies and
abstracts from the records and books of account of, and to visit and inspect the
Properties of, Borrower and its Subsidiaries and to discuss the affairs,
finances
and accounts of Borrower and its Subsidiaries with any of their officers, key
employees, accountants, customers or vendors. Following the occurrence of any
Default, (if in any event the Administrative Agent does not obtain information
reasonably satisfactory to a Lender as a result of any examination, audit,
visit,
inspection or discussion referred to above) each Lender shall, upon written
notice to Administrative Agent, be permitted to exercise each of the rights
granted to the Administrative Agent by this Section.
5.7 Keeping of Records and Books of Account. Keep adequate records and
---------------------------------------
books of account reflecting all financial transactions in conformity with GAAP,
consistently applied, and in material conformity with
all applicable requirements of any
Governmental Agency having regulatory jurisdiction over Borrower or any of its
Subsidiaries.
5.8 Compliance With Agreements. Promptly and fully comply with all
--------------------------
Contractual
Obligations under all material agreements, indentures, leases and/or instruments
to which any one or more of them is a party, whether such material agreements,
indentures, leases or instruments are with a Lender or another Person, except
------
that Borrower and its Subsidiaries need not comply with Contractual Obligations
(a) under any such agreements, indentures, leases or instruments then being
contested by any of them in good
faith by appropriate proceedings or (b) if the failure to comply with such
agreements, indentures, leases or instruments does not constitute a Material
Adverse Effect.
-56-
<PAGE>
5.9 Use of Proceeds. Use the proceeds of Advances and Swing Line Loans
---------------
only for proper corporate purposes of Borrower.
5.10 Hazardous Materials Laws. Keep and maintain all Property and each
------------------------
portion thereof
in compliance in all material respects with all applicable Hazardous Materials
Laws and promptly notify the Administrative Agent in writing (attaching a copy
of any pertinent written material) of (a) any and all material enforcement,
cleanup,
removal or other governmental or regulatory actions instituted, completed or
threatened in writing by a Governmental Agency pursuant to any applicable
Hazardous Materials Laws, (b) any and all material claims made or threatened in
writing by any Person against Borrower relating to damage, contribution, cost
recovery, compensation, loss or injury resulting from any Hazardous Materials
and
(c) discovery by any Senior Officer of Borrower of any material occurrence or
condition on any real property adjoining or in the vicinity of any Property that
could reasonably be expected to cause such Property or any part thereof to be
subject to any restrictions on ownership, occupancy, transferability or use of
such Property under any applicable Hazardous Materials Laws.
-57-
<PAGE>
ARTICLE 6
---------
NEGATIVE COVENANTS
------------------
So long as any Advance or Swing Line Loan remains unpaid, or any other
Obligation remains unpaid or unperformed, or any portion of the Commitment
remains in force, Borrower shall not, and shall not permit any of its
Subsidiaries to, unless the Administrative Agent (with the approval of the
Majority Lenders or, if required pursuant to Section 11.2, all of the Lenders)
----
otherwise consents in writing:
6.1 Disposition of Property. Make any Disposition of its Property,
-----------------------
whether now owned or
hereafter acquired, if, giving effect thereto, the aggregate book value or fair
market value of the Property which is the subject of all Dispositions by
Borrower
and its Subsidiaries during the immediately preceding twelve (12) month period
exceeds $100,000,000.
6.2 Mergers. Merge, consolidate or amalgamate with or into any Person,
-------
except:
(a) mergers, consolidations or amalgamations of a Subsidiary of
Borrower into Borrower; and
(b) mergers, consolidations or amalgamations in furtherance of
Investments and Acquisitions permitted by this Agreement;
provided, in each case, that (y) no Default or Event of Default occurs by reason
- --------
of the
consummation of such merger, consolidation or amalgamation, and (z) Borrower is
the survivor of such merger, consolidation or amalgamation, or Borrower's
survivor expressly assumes the Obligations of Borrower to the Administrative
Agent and the Lenders pursuant to a written instrument which is in form and
substance acceptable to the Administrative Agent and the Majority Lenders.
6.3 Investments and Acquisitions. Make any Acquisition or enter into any
----------------------------
agreement to
make any Acquisition, or make or suffer to exist any Investment, except:
------
(a) Investments existing on the Closing Date and disclosed in
Schedule 4.4;
------------
(b) Investments consisting of Cash Equivalents; and
-58-
<PAGE>
(c) Acquisitions and Investments not described above in an
amount not exceeding
(i) $250,000,000 in any Fiscal Year or (ii) $750,000,000 in the aggregate
during the term
of this Agreement; provided that nothing in this Section 6.3(c) shall
--------
permit an Investment prohibited by Section 6.13.
----
6.4 Hostile Tender Offers. Make any offer to purchase or acquire, or
---------------------
consummate a
purchase or acquisition of, 5% or more of the capital stock of any corporation
or
other business entity if the board of directors of such corporation or business
entity has notified Borrower that it opposes such offer or purchase.
6.5 Distributions. Make any Distribution which would result in a Default
-------------
or, in any
event during the existence of an Event of Default, whether from capital, income
or otherwise, and whether in Cash or other Property.
6.6 ERISA Compliance (a) Permit any Pension Plan, other than a
---------------- ----------
Multiemployer Plan, to
incur any material "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA, whether or not waived, or (b) in a manner which could
result in the imposition of a material Lien on any Property of Borrower or any
of
its Subsidiaries pursuant to Section 4068 of ERISA, (i) permit any Pension Plan
maintained by any of them to suffer a Termination Event or (ii) incur withdrawal
liability under any Multiemployer Plan.
6.7 Change in Nature of Business. Make any material change in the nature
----------------------------
of the business
of Borrower and its Subsidiaries, taken as a whole, as at present conducted.
6.8 Indebtedness and Contingent Obligations. Create, incur, assume or
---------------------------------------
suffer to exist
any Indebtedness or Contingent Obligation, except:
------
(a) Indebtedness and Contingent Obligations in favor of the
Lenders or the Administrative Agent under the Loan Documents;
(b) Existing Indebtedness and Contingent Obligations disclosed
in
Schedule 6.8 and, subject to Section 6.12, Indebtedness or Contingent
------------ ----
Obligations which refinance or replace such Indebtedness or Contingent
Obligations,
provided, in each case, that the principal amount thereof is not
--------
increased;
-59-
<PAGE>
(c) Indebtedness not described above that is not secured by a
Lien on any Property of Borrower or any of its Subsidiaries not in excess
of (i) $300,000,000 incurred during any Fiscal Year or (ii) $900,000,000
in the aggregate outstanding at any time; and
(d) Indebtedness pursuant to any series of First Mortgage Bonds
hereafter issued in accordance with the terms of the Indenture.
6.9 Transactions with Affiliates. Enter into any transaction of any kind
----------------------------
with any
Affiliate of Borrower other than (a) transactions between or among Borrower and
----------
its wholly-owned
Subsidiaries or between or among its wholly-owned Subsidiaries and (b)
transactions on terms at least as favorable to Borrower or its Subsidiaries as
would be the case in an arm's-length transaction between unrelated parties of
equal bargaining power.
6.10 Adjusted Stockholders' Equity. Permit Adjusted Stockholders' Equity,
-----------------------------
as of the last
day of any Fiscal Quarter, to be less than the sum of (a) $800,000,000 plus (b)
------ ----
an amount equal
to 33 1/3% of the net cash proceeds from all issuances by Borrower of its
capital stock subsequent to the Closing Date.
6.11 Total Debt to Total Capitalization. Permit the ratio of Total Debt
----------------------------------
to Total
Capitalization, as of the last day of any Fiscal Quarter, to be greater than
0.65 to 1.00.
6.12 Amendments to Certain Agreements. Amend the Indenture in a manner
--------------------------------
which is adverse
to the interests of the Lenders or, in any event, to change the definition or
means of application of the definition of "Excluded Property" used therein.
6.13 Investments in Subsidiaries. Make any Investment in a Subsidiary of
---------------------------
Borrower if,
giving effect thereto, the aggregate of all Investments made by Borrower in all
Subsidiaries of Borrower during the immediately preceding twelve (12) month
period exceeds $100,000,000.
-60-
<PAGE>
ARTICLE 7
---------
INFORMATION AND REPORTING REQUIREMENTS
--------------------------------------
7.1 Financial and Business Information. So long as any Advance or Swing
----------------------------------
Line Loan remains unpaid, or any other Obligation remains unpaid or unperformed,
or any
portion of the Commitment remains in force, Borrower shall, unless the
Administrative Agent (with the approval of the Majority Lenders) otherwise
consents in writing, deliver to the Lenders, at Borrower's sole expense:
(a) As soon as practicable, and in any event concurrently with
its submission to the Securities and Exchange Commission, Borrower's
quarterly report on form 10-Q, together with a certificate executed by a
Senior Officer of Borrower stating that no Default or Event of Default
has occurred as of the date of such quarterly report;
(b) As soon as practicable, and in any event concurrently with
its submission to the Securities and Exchange Commission, Borrower's
annual report on form 10-K, together with a certificate executed by a
Senior Officer of Borrower stating that no Default or Event of Default
has occurred as of the date of such annual report;
(c) As soon as practicable, and in any event within 45 days
after
the end of each Fiscal Quarter (other than the last Fiscal Quarter in
each
Fiscal Year, and then within 90 days after the end of such Fiscal
Quarter), a Compliance Certificate;
(d) Promptly after the same are available, copies of each proxy
or financial statement or other report or communication sent to the
shareholders of Borrower, and copies of all other regular, periodic and
special reports and registration statements which Borrower or a
Subsidiary
of Borrower may file or be required to file under Sections 13 or 15(d) of
the Securities Exchange Act of 1934;
(e) Promptly after request by any Lender, copies of any other
specific report or other document that was filed by Borrower or any of
its Subsidiaries with any Governmental Agency if such report or document
would, under applicable Laws, be available to any Person submitting a
request therefor to that Governmental Agency;
-61-
<PAGE>
(f) As soon as practicable, and in any event within one Banking
Day after a Responsible Official of Borrower obtains actual knowledge of
the existence of any condition or event which constitutes a Default or
Event of Default, written notice specifying the nature and period of
exis-
tence thereof and specifying what action Borrower or any of its Subsidi-
aries are taking or propose to take with respect thereto;
(g) Promptly upon a Senior Officer of Borrower becoming aware,
and in any event within five Banking Days after becoming aware, of the
occurrence of any (i) "reportable event" (as such term is defined in
Section 4043 of ERISA) or (ii) "prohibited transaction" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code) in
connection
with any Pension Plan, other than a Multiemployer Plan, or any trust
created thereunder, a written notice specifying the nature thereof, what
action Borrower and any of its Subsidiaries is taking or proposes to take
with respect thereto, and, when known, any action taken by the Internal
Revenue Service with respect thereto; and
(h) Such other data and information as from time to time may be
reasonably requested by the Administrative Agent or by any Lender.
-62-
<PAGE>
ARTICLE 8
---------
CONDITIONS
----------
8.1 Initial Advances, Swing Line Loans and Letters of Credit. The
--------------------------------------------------------
obligation of each
Lender to make the initial Advance to be made by it hereunder, the obligation of
the Swing Line Lender to make the initial Swing Line Loan and the obligation of
the Issuing Bank to issue the initial Letter of Credit is subject to the
fulfillment of the following conditions precedent, each of which shall be
satisfied prior to the making of the initial Advances, Swing Line Loans (unless
all of the Lenders, in their sole and absolute discretion, shall agree
otherwise):
(a) The Administrative Agent shall have received all of the
following, each of which shall be originals unless otherwise specified,
each properly executed by a Responsible Official of each party thereto,
each dated as of the Closing Date and each in form and substance satis-
factory to the Administrative Agent, its legal counsel, and the Lenders
(unless otherwise specified or, in the case of the date of any of the
following, unless the Administrative Agent and each Lender otherwise
agree or direct):
(1) executed counterparts of this Agreement,
sufficient in number for distribution to the Lenders and Borrower;
(2) the Committed Advance Notes executed by Borrower
in favor of each Lender, each in a principal amount equal to that
Lender's Pro Rata Share of the Main Commitment;
(3) the Competitive Advance Notes executed by Borrower
in favor of each Lender, each in a principal amount equal to the
Main Commitment;
(4) the Swing Line Note executed by Borrower in favor
of the Swing Line Bank;
(5) such documentation as the Administrative Agent may
reasonably require to establish the due organization, valid
existence
and good standing of each of Borrower and its Subsidiaries, its
qualification to engage in business in each jurisdiction in which it
is engaged in business or required to be so qualified, its authority
to execute, deliver and perform the Loan Documents, and the
identity, authority and
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capacity of each Responsible Official thereof authorized to act on
its behalf,
including, without limitation, certified copies of its certificate
---------
of
incorporation and amendments thereto, bylaws and amendments thereto,
certificates of good standing and/or qualification to engage in
business, tax clearance certificates, certificates of corporate
resolutions, incumbency certificates, Certificates of Responsible
Officials, and the like;
(6) the Opinion of Counsel;
(7) a Certificate of a Responsible Official signed by a
Senior Officer of
Borrower certifying that the conditions specified in Sections 8.1(b)
-----
and 8.1(c) have been satisfied;
-----
(8) a Request for Loan;
(9) evidence that the execution, delivery and performance
of the Loan Documents has been authorized and approved by the Nevada
Public Service Commission and any other Governmental Agencies, the
approval of which is required to permit Borrower to legally enter
into the Loan Documents; and
(10) such other assurances, certificates, documents,
consents
or opinions as the Administrative Agent reasonably may require.
(b) The representations and warranties of Borrower contained in
Article 4 shall be true and correct.
---------
(c) Borrower shall be in compliance with all the terms and
provisions of the Loan Documents, and no Default or Event of Default
shall have occurred and be continuing.
(d) Borrower shall, concurrently with the Closing Date repay in
full the indebtedness to the other lenders under the Existing Loan
Documents, as well as all interest, costs, fees and expenses associated
therewith.
(e) Borrower shall have paid the fees described in Section 3.3.
---
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<PAGE>
8.2 Any Advance, etc.. In addition to any applicable conditions precedent
----------------
set forth elsewhere in this Article 8, the obligation of each Lender to make any
---------
Advance,
and the obligation of the Swing Line Lender to make any Swing Line Loan and the
obligation of the Issuing Lender to issue any Letter of Credit, is subject to
the following conditions precedent:
(a) except as disclosed by Borrower and approved in writing by
the Majority
Lenders, the representations and warranties contained in Article 4 (other
----------------
than Sections 4.4(a), 4.5, 4.6, 4.10 and 4.18 and except with respect to
----- ---- ---- ---- ----
any insignificant Subsidiary) shall be true and correct on and as of the
date of the Advance or Swing Line Loan as though made on that date;
(b) the Administrative Agent shall have timely received a
Request for Loan in
compliance with Article 2 (or telephonic or other request for loan
---------
referred to in
the second sentence of Section 2.1(c), if applicable) and shall have
-----
promptly notified
each Lender that is to fund such Advance or Swing Line Loan of such
request or (as applicable) the Issuing Lender shall have timely received
a Request for Letter of Credit in compliance with Article 2;
---------
(c) No Default or Event of Default shall have occurred; and
(d) the Administrative Agent shall have received, in form and
substance satisfactory to the Administrative Agent, such other
assurances,
certificates, documents or consents related to the foregoing as the
Administrative Agent reasonably may require.
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<PAGE>
ARTICLE 9
---------
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
----------------------------------------------------
9.1 Events of Default. The existence or occurrence of any one or more of
-----------------
the following
events, whatever the reason therefor and under any circumstances whatsoever,
shall constitute an Event of Default:
(a) Borrower fails to pay any principal on any of the Notes, or
any portion thereof, on the date when due; or
(b) Borrower fails to pay any interest on any of the Notes, or
any portion thereof, within three (3) Banking Days after the date when
due; or fails to pay any other fee or amount payable to Administrative
Agent or the Lenders under any Loan Document, or any portion thereof,
within three (3) Banking Days after demand therefor; or
(c) Any failure to comply with Section 7.1(f); or
------
(d) Borrower, any of its Subsidiaries or any other Party fails
to perform or
observe any covenant or agreement contained in Article 6 of the Loan
---------
Agreement; or
(e) Borrower, any of its Subsidiaries or any other Party fails
to
perform or observe any other covenant or agreement contained in the Loan
Agreement or any other Loan Document within thirty (30) days after the
giving of notice by the Administrative Agent or the Majority Lenders of
such Default; or
(f) Any representation or warranty made in any Loan Document
proves to have been incorrect when made or reaffirmed in any respect that
is materially adverse to the interests of the Administrative Agent or the
Lenders; or
(g) Borrower or any of its Subsidiaries (i) fails to pay the
principal, or any
principal installment, of any present or future indebtedness for borrowed
money
(other than under the Notes) in an amount in excess of $15,000,000, or
----------
any guaranty of
present or future indebtedness for borrowed money in an amount in excess
of $15,000,000, on its part to be paid, when due
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<PAGE>
(or within any stated grace period), whether at the maturity, upon
acceleration, by reason of required prepayment or otherwise or (ii) fails
to perform or observe any other term, covenant or agreement on its part
to be performed or observed, or suffers any event to occur, in connection
with any present or future indebtedness for borrowed money in an amount
in excess of $15,000,000, or of any guaranty of present or future
indebtedness for borrowed money in excess of $15,000,000, if as a result
of such failure or sufferance any holder or holders thereof (or an agent
or trustee on its or their behalf) has the right to declare such
indebted-
ness due before the date on which it otherwise would become due; or
(h) Any Loan Document, at any time after its execution and
delivery and for any reason other than the agreement of the Lenders or
satisfaction in full of all the Obligations, ceases to be in full force
and effect or is declared by a court of competent jurisdiction to be null
and void, invalid or unenforceable in any respect which, in any such
event
in the reasonable opinion of the Majority Lenders, is materially adverse
to the interests of the Lenders; or Borrower denies that it has any or
further liability or obligation under any Loan Document, or purports to
revoke, terminate or rescind same; or
(i) A judgment against Borrower or any of its Subsidiaries is
entered for the payment of money in excess of $5,000,000 and, absent
procurement of a stay of execution, such judgment remains unbonded or
unsatisfied for thirty (30) calendar days after the date of entry of
judg-
ment, or in any event, later than five (5) days prior to the date of any
proposed foreclosure sale thereunder; or
(j) Borrower or any of its Subsidiaries institutes or consents
to any proceeding under a Debtor Relief Law relating
to it or to all or any
part of its Property, or is unable or admits in writing its inability to
pay its debts as they mature, or makes an assignment for the benefit of
creditors; or applies for or consents to the appointment of any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar
officer for it or for all or any part of its Property; or any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar
officer is appointed without the application or consent of that Person
and the appointment continues undischarged or unstayed for sixty (60)
calendar
days; or any proceeding under a Debtor Relief Law relating to any such
Person or to all or any part of its Property is instituted without the
consent of that Person and continues undismissed or unstayed for sixty
(60) calendar days; or any judgment, writ, warrant of attachment or
execution or similar
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<PAGE>
process is issued or levied against all or any material part of the
Property of any such Person and is not released, vacated or fully bonded
within sixty (60) calendar days after its issue or levy; or
(k) The occurrence subsequent to the Closing Date of a
Termination Event with respect to any Pension Plan, maintained by
Borrower
or any ERISA Affiliate of Borrower if the aggregate liability of Borrower
and its ERISA Affiliates under ERISA as a result thereof exceeds
$5,000,000; or the complete or partial withdrawal subsequent to the
Closing Date by Borrower or any of its ERISA Affiliates from any
Multiemployer Plan if the aggregate liability of Borrower and its ERISA
Affiliates as a result thereof exceeds $5,000,000.
9.2 Remedies Upon Event of Default. Without limiting any other rights or
------------------------------
remedies of the Administrative Agent or the Lenders provided for
elsewhere in this Agreement, or
the Loan Documents, or by applicable Law, or in equity, or otherwise:
(a) Upon the occurrence of any Event of Default other than an
Event of Default
described in Section 9.1(j):
------
(1) the commitment to make Advances and Swing Line Loans
and
all other obligations of the Administrative Agent, the Swing Line
Lender or the Lenders and all rights of Borrower and any other
Parties under the Loan Documents shall be suspended without notice
to or demand upon Borrower, which are expressly waived by Borrower,
except that, subject to Section 11.2, the Majority Lenders
------ ----
may waive the Event of Default or, without waiving, determine, upon
terms and conditions satisfactory to the Majority Lenders (or all of
the Lenders, as the case may be), to reinstate the Commitment and
make further Advances and Swing Line Loans, which waiver or deter-
mination shall apply equally to, and shall be binding upon, all the
Lenders;
(2) the Issuing Bank may, with the approval of the
Administrative Agent on behalf of the Majority Lenders, demand
immediate payment by Borrower of an amount equal to the aggregate
amount of all outstanding Letters of Credit to be held by the
Issuing
Bank in an interest-bearing cash collateral account as collateral
hereunder; and
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<PAGE>
(3) the Majority Lenders may request the Administrative
Agent to, and the Administrative Agent thereupon shall, terminate
the
Commitment and declare all or any part of the unpaid principal of
all
Notes, all interest accrued and unpaid thereon and all other amounts
payable under the Loan Documents to be forthwith due and payable,
whereupon the same shall become and be forthwith due and payable,
without protest, presentment, notice of dishonor, demand or further
notice of any kind, all of which are expressly waived by Borrower.
(b) Upon the occurrence of any Event of Default described in
Section 9.1(j):
------
(1) the commitment to make Advances and Swing Line Loans
and
all other obligations of the Administrative Agent, the Swing Line
Lender or the Lenders and all rights of Borrower and any other
Parties under the Loan Documents shall terminate without notice to
or
demand upon Borrower, which are expressly waived by Borrower, except
------
that all the Lenders may waive the Event of Default or, without
waiving, determine,
upon terms and conditions satisfactory to all the Lenders, to
reinstate the
Commitment and make further Advances and Swing Line Loans, which
waiver or
determination shall apply equally to, and shall be binding upon, all
the Lenders;
(2) an amount equal to the aggregate amount of all
outstanding Letters of Credit shall be immediately due and payable
to the Issuing Bank without notice to or demand upon Borrower, which
are
expressly waived by Borrower, to be held by the Issuing Bank in an
interest-bearing cash collateral account as collateral hereunder;
and
(3) the unpaid principal of all Notes, all interest accrued
and unpaid thereon and all other amounts payable under the Loan
Docu-
ments shall be forthwith due and payable, without protest, present-
ment, notice of dishonor, demand or further notice of any kind, all
of which are expressly waived by Borrower.
(c) Upon the occurrence of any Event of Default, the Lenders and
the Administrative Agent, or any of them, without notice to or
demand upon
Borrower, which are expressly waived by Borrower, may proceed to
protect, exercise and enforce their rights and remedies under the
Loan Documents
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<PAGE>
against Borrower and any other Party and such other rights and remedies
as are provided by Law or equity.
(d) The order and manner in which the Lenders' rights and
remedies are to be exercised shall be determined by the Majority Lenders
in their sole discretion, and all payments received by the Administrative
Agent and the Lenders, or any of them, shall be applied first to the
costs
and expenses (including attorneys' fees and disbursements) of the
Administrative Agent, acting as Administrative Agent, and of the Lenders,
and thereafter paid pro rata to the Lenders in the same proportions that
the aggregate Obligations owed to each Lender under the Loan Documents
bear to the aggregate Obligations owed under the Loan Documents to all
the
Lenders, without priority or preference among the Lenders. Regardless of
how each Lender may treat payments for the purpose of its own accounting,
for the purpose of computing Borrower's Obligations hereunder and under
the Notes, payments shall be applied first, to the costs and
-----
expenses (including attorneys' fees and disbursements) of the
Administrative Agent, acting as the Administrative Agent, and then to the
Lenders, as set forth above, second, to the payment of accrued and unpaid
------
interest due under any Loan Documents to and including the date of such
application
(ratably, and without duplication, according to the accrued and unpaid
interest due under
each of the Loan Documents), and third, to the payment of all other
-----
amounts
(including principal and fees) then owing to the Administrative Agent or
the Lenders under the Loan Documents. No application of payments will
cure any Event of Default, or prevent acceleration, or continued
acceleration, of amounts payable under the Loan Documents, or prevent the
exercise, or continued exercise, of rights or remedies of the Lenders
hereunder or thereunder or at law or in equity.
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<PAGE>
ARTICLE 10
----------
THE ADMINISTRATIVE AGENT
------------------------
10.1 Appointment and Authorization. Each Lender hereby irrevocably
-----------------------------
appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under the Loan Documents as are delegated to the
Administrative Agent by the terms thereof or are reasonably incidental, as
determined by the Administrative Agent, thereto. This appointment and
authorization is intended solely for the purpose of facilitating the servicing
of
the Advances and does not constitute appointment of the Administrative Agent as
trustee for any Lender or as representative of any Lender for any other purpose
and, except as specifically set forth in the Loan Documents to the contrary, the
------
Administrative
Agent shall take such action and exercise such powers only in an administrative
and
ministerial capacity. The Administrative Agent is the agent of the Lenders only
and does not assume any agency relationship with Borrower, express or implied.
10.2 Administrative Agent and Affiliates. Wells Fargo Bank, National
-----------------------------------
Association (and
each successor Administrative Agent) has the same rights and powers under the
Loan Documents as any other Lender and may exercise the same as though it was
not
the Administrative Agent, and the term "Lender" or "Lenders" includes Wells
Fargo
Bank, National Association in its individual capacity. Wells Fargo Bank,
National Association (and each successor Administrative Agent) and its
Affiliates
may accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with Borrower, any Subsidiary thereof, or any
Affiliate of Borrower or any Subsidiary thereof, as if it was not the
Administrative Agent and without any duty to account therefor to the Lenders.
Wells Fargo Bank, National Association (and each successor Administrative Agent)
need not account to any other Lender for any monies received by it for
reimburse-
ment of its fees, costs and expenses as Administrative Agent hereunder, or for
any monies received by it in its capacity as a Lender hereunder. Neither the
Arranger, the Swing Line Lender nor the Administrative Agent shall be deemed to
hold a fiduciary relationship with any Lender and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise exist against the Administrative Agent, the
Swing Line Lender or the Arranger.
10.3 Proportionate Interest of the Lenders in any Collateral. The
-------------------------------------------------------
Administrative Agent,
on behalf of all the Lenders, shall hold in accordance with the Loan Documents
all collateral or interests therein, if any, received or held by the Administra-
tive Agent. Subject to the Administrative Agent's, the Swing Line Lender's and
the
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<PAGE>
Lender's rights to reimbursement for their costs and expenses hereunder
(including attorneys'
- ----------
fees and disbursements and other professional services) and subject to the
application of payments in accordance with Section 9.2(d), each Lender
(including the Swing Line Lender) shall
------
have an interest in any collateral or interests therein in the same proportions
that the aggregate Obligations beneficially owed such Lender under the Loan
Documents bear to the aggregate Obligations owed under the Loan Documents to all
the Lenders, without priority or preference among the Lenders.
10.4 Lenders' Credit Decisions. Each Lender agrees that it has,
-------------------------
independently and
without reliance upon the Administrative Agent, the Arranger, the Swing Line
Lender, any other Lender or the directors, officers, agents, employees or
attorneys of the Administrative Agent, the Arranger, the Swing Line Lender or of
any other Lender, and instead in reliance upon information supplied to it by or
on behalf of Borrower and upon such other information as it has deemed
appropriate, made its own independent credit analysis and decision to enter into
this Agreement. Each Lender also agrees that it shall, independently and
without
reliance upon the Administrative Agent, the Arranger, the Swing Line Lender any
other Lender or the directors, officers, agents, employees or attorneys of the
Administrative Agent, the Arranger, the Swing Line Lender or of any other
Lender,
continue to make its own independent credit analyses and decisions in acting or
not acting under the Loan Documents.
10.5 Action by Administrative Agent;.
------------------------------
(a) The Administrative Agent and the Swing Line Lender may
assume
that no Default has occurred and is continuing, unless the Administrative
Agent and the Swing Line Lender have received written notice from
Borrower
stating the nature of the Default or has received written notice from a
Lender stating the nature of the Default and that such Lender considers
the Default to have occurred and to be continuing.
(b) The Administrative Agent has only those obligations under
the
Loan Documents as are expressly set forth therein. The Arranger has no
obligations under the Loan Documents, although it is an intended third
party beneficiary of those Sections of this Agreement which refer to the
Arranger.
(c) Except for any obligation expressly set forth in the Loan
------
Documents and
as long as the Administrative Agent may assume that no Event of Default
has occurred and is continuing, the Administrative Agent may, but shall
not be required to, exercise its discretion to act or not act, except
------
that the
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<PAGE>
Administrative Agent shall be required to act or not act upon the
instruc-
tions of the Majority Lenders (or of all the Lenders, to the extent
required by this Agreement) and those instructions shall be binding upon
the Administrative Agent and all the Lenders, provided that the
--------
Administrative Agent
shall not be required to act or not act if to do so would be contrary to
any Loan
Document or to applicable Law or would result, in the reasonable judgment
of the
Administrative Agent, in substantial risk of liability to the
Administrative Agent.
(d) If the Administrative Agent has received a written notice
specified in
clause (a), the Administrative Agent shall give notice thereof to the
---
Lenders and shall
act or not act upon the instructions of the Majority Lenders (or of all
the Lenders, to
the extent required by Section 11.2), provided that the Administrative
---- --------
Agent shall not be required to act or not act if to do so would be
contrary to any Loan
Document or to applicable Law or would result, in the reasonable judgment
of the Administrative Agent, in substantial risk of liability to the
Administrative Agent, and except that if the Majority Lenders (or all the
------
Lenders, if
required under this Agreement) fail, for five (5) Banking Days after the
receipt of
notice from the Administrative Agent, to instruct the Administrative
Agent, then the
Administrative Agent, in its sole discretion, may act or not act as it
deems advisable for the protection of the interests of the Lenders.
(e) The Administrative Agent shall have no liability to any
Lender for acting, or not acting, as instructed by the Majority Lenders
(or all the Lenders, if required under this Agreement), notwithstanding
any other provision hereof.
10.6 Liability of Administrative Agent and Arranger. Neither the
----------------------------------------------
Administrative Agent,
the Arranger, nor any of their respective directors, advisors, officers, agents,
employees or attorneys shall be liable for any action taken or not taken by them
under or in connection with the Loan Documents, except for their own gross
------
negli-
gence or willful misconduct. Without limitation on the foregoing, the
Administrative Agent, the Arranger and their respective directors, advisors,
officers, agents, employees and attorneys:
(a) May treat the payee of any Note as the holder thereof until
the Administrative Agent receives written notice of the assignment or
transfer thereof, in form satisfactory to the Administrative Agent,
signed
by the payee, and may treat each Lender as the owner of that Lender's
interest in the
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<PAGE>
Obligations for all purposes of this Agreement until the Administrative
Agent receives written notice of the assignment or transfer thereof, in
form satisfactory to the Administrative Agent, signed by that Lender.
(b) May consult with legal counsel (including in-house legal
---------
counsel),
accountants (including in-house accountants) and other professionals or
---------
experts
selected by it, or with legal counsel, accountants or other professionals
or experts for Borrower and/or its Subsidiaries or the Lenders, and shall
not be liable for any action taken or not taken by it in good faith in
accordance with any advice of such legal counsel, accountants or other
professionals or experts.
(c) Shall not be responsible to any Lender for any statement,
warranty or representation made in any of the Loan Documents or in any
notice,
certificate, report, request or other statement (written or oral) given
or made in
connection with any of the Loan Documents, unless such statement,
------
warranty or representation is an independent statement, warranty or
representation of the
Administrative Agent which is not based upon information received by the
Administrative
Agent from Borrower or any other Person not affiliated with the
Administrative Agent.
(d) Except to the extent expressly set forth in the Loan Docu-
------
ments, shall
have no duty to ask or inquire as to the performance or observance by
Borrower or its Subsidiaries of any of the terms, conditions or covenants
of any of the Loan Documents or to inspect any collateral or the
Property,
books or records of Borrower or its Subsidiaries.
(e) Will not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, effectiveness,
sufficiency or value of any Loan Document, any other instrument or
writing
furnished pursuant thereto or in connection therewith, or any collateral.
(f) Will not incur any liability by acting or not acting in
reliance upon any Loan Document, notice, consent, certificate, statement,
request or other instrument or writing believed by it to be genuine and
signed or sent by the proper party or parties.
(g) Will not incur any liability for any arithmetical error in
computing any amount paid or payable by the Borrower or any Subsidiary
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<PAGE>
or Affiliate thereof or paid or payable to or received or receivable from
any Lender
under any Loan Document, including, without limitation, principal,
---------
interest, commitment
fees, Advances, Swing Line Loans and other amounts; provided that,
--------
promptly upon
discovery of such an error in computation, the Administrative Agent, the
Lenders and (to the extent applicable) Borrower and/or its Subsidiaries
or
Affiliates shall make such adjustments as are necessary to correct such
error and to restore the parties to the position that they would have
occupied had the error not occurred.
10.7 Indemnification. Each Lender and the Swing Line Lender shall,
---------------
ratably in accordance
with their respective portions of the Commitment, indemnify and hold the
Administrative Agent, and the Arranger and their respective directors, advisors,
officers, agents, employees and attorneys harmless against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever (including,
---------
without limitation, attorneys' fees and disbursements) that may be imposed on,
incurred by or asserted against it or them in any way relating to or arising out
of the Loan Documents (other than losses incurred by reason of the failure of
Borrower to pay the indebtedness represented by the Notes and interest thereon
or to pay the fees described in Sections 3.2 and 3.3) or any action taken or not
--- ---
taken by Wells Fargo Bank, National Association
as Administrative Agent thereunder, except such as result from their own gross
------
negligence or
willful misconduct. Without limitation on the foregoing, each Lender shall
reimburse the Administrative Agent and the Arranger upon demand for that
Lender's ratable share of any cost or expense incurred by the Administrative
Agent or the Arranger in connection with the negotiation, preparation,
execution, delivery, amendment, waiver, restructuring, reorganization (including
---------
a bankruptcy reorganization), enforcement or attempted enforcement of the Loan
Documents, to the extent that Borrower or any other Party is required by
Section 11.3 to pay that cost or expense but fails to do so upon demand.
----
10.8 Successor Administrative Agent. If the Administrative Agent
------------------------------
determines that for it
to continue as Administrative Agent would result in a conflict of interest
affecting the Administrative Agent, or would create an unacceptable risk of
significant liability of the Administrative Agent to a third party, or would
otherwise be inadvisable under prevailing standards of banking prudence, it may
resign as such at any time upon prior written notice to Borrower and the
Lenders,
to be effective upon a successor's acceptance of appointment as Administrative
Agent. The Administrative Agent may also resign as such absent such a
determination by it with the consent of Borrower, which shall not be
unreasonably
withheld, to be likewise effective. The Majority
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<PAGE>
Lenders at any time may remove the Administrative Agent by written notice to
that
effect to be effective on such date as the Majority Lenders designate. In
either
event: (a) the Majority Lenders shall appoint a successor Administrative Agent,
who must be from among the Lenders, provided that any resigning Administrative
--------
Agent shall be entitled to appoint a successor Administrative Agent from among
the Lenders, subject to acceptance of appointment by that successor
Administrative Agent, if the Majority Lenders have not appointed a successor
Administrative Agent within thirty (30) days after the date the resigning
Administrative Agent gave notice of resignation; (b) upon a
successor's acceptance of appointment as Administrative Agent, the successor
will
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Administrative Agent or the removed Administrative
Agent; and (c) upon the effectiveness of any resignation or removal, the
resigning Administrative Agent or the removed Administrative Agent thereupon
will
be discharged from its duties and obligations thereafter arising under the Loan
Documents other than obligations arising as a result of any action or inaction
of
the resigning Administrative Agent or the removed Administrative Agent prior to
the effectiveness of such resignation or removal.
10.9 No Obligations of Borrower. Nothing contained in this Article 10
-------------------------- ----------
shall be deemed to
impose upon Borrower any obligation in respect of the due and punctual
performance by the Administrative Agent of its obligations to the Lenders under
any provision of this Agreement, and Borrower shall have no liability to the
Administrative Agent or any of the Lenders in respect of any failure by the
Administrative Agent or any Lender to perform any of its obligations to the
Administrative Agent or the Lenders under this Agreement. Without limiting the
generality of the foregoing, where any provision of this Agreement relating to
the payment of any amounts due and owing under the Loan Documents provides that
such payments shall be made by Borrower to the Administrative Agent for the
account of the Lenders, Borrower's obligations to the Lenders in respect of such
payments shall be deemed to be satisfied upon the making of such payments to the
Administrative Agent in the manner provided by this Agreement.
10.10 The Swing Line. It is intended that each Lender and the Swing Line
--------------
Lender shall
have a proportionate credit risk with respect to the credit facilities extended
pursuant to this Agreement (other than any Competitive Advances) equal for each
-----
Lender to the proportion which (a) the amount of that Lender's Pro Rata Share of
the Main Commitment plus in the case of the Swing Line Lender, the Swing Line
----
Commitment, bears to (b)
the Commitment. To the extent, if any, that the aggregate principal amount of
the Obligations (other than any Competitive Advances) owed to
-----
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<PAGE>
any Lender are ratably in excess of its proportionate share of the Obligations
(determined in accordance with the foregoing sentence), then each Lender shall
be
deemed to have purchased a ratable unfunded participation in the excess such
Obligations owed to that Lender. Upon the occurrence of an Event of Default,
each Lender and the Swing Line Lender agree that (x) the amount of the Main
Commitment shall automatically be increased by the amount of the Swing Line
Commitment and the Swing Line Commitment terminated, (y) each Lender (or, in the
appropriate case, the Swing Line Lender) shall pay to the Swing Line Lender (or,
in the appropriate case, to the Lenders) such amounts as are necessary to result
in the Obligations (other than any outstanding Competitive Advances) owed to
-----
each Lender being
ratably equal, provided however, that in no event shall any Lender be obligated
--------
to make Advances
to Borrower which are greater than its pro rata share of the total Commitment.
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ARTICLE 11
----------
MISCELLANEOUS
-------------
11.1 Cumulative Remedies; No Waiver. The rights, powers, privileges and
------------------------------
remedies of the
Administrative Agent and the Lenders provided herein or in any Note or other
Loan
Document are cumulative and not exclusive of any right, power, privilege or
remedy provided by Law or equity. No failure or delay on the part of the
Administrative Agent or any Lender in exercising any right, power, privilege or
remedy may be, or may be deemed to be, a waiver thereof; nor may any single or
partial exercise of any right, power, privilege or remedy preclude any other or
further exercise of the same or any other right, power, privilege or remedy.
The
terms and conditions of Article 8 hereof are inserted for the sole benefit of
---------
the Administrative
Agent and the Lenders; the same may be waived in whole or in part, with or
without terms or
conditions, in respect of any Loan without prejudicing the Administrative
Agent's
or the Lenders' rights to assert them in whole or in part in respect of any
other
Loan.
11.2 Amendments; Consents. No amendment, modification, supplement,
--------------------
extension,
termination or waiver of any provision of this Agreement or any other Loan
Document, no approval or consent thereunder, and no consent to any departure by
the Borrower or any other Party therefrom, may in any event be effective unless
in writing signed by the Administrative Agent with the approval in writing of
the
Majority Lenders and Borrower, and then only in the specific instance and for
the
specific purpose given; and, without the approval in writing of all the Lenders,
no amendment, modification, supplement, termination, waiver or consent may be
effective:
(a) To amend or modify the principal of, or the amount of
principal, or the rate of interest payable on, any Note, or the amount of
the Main Commitment, the Swing Line Commitment or the Commitment or of
any
facility fee payable to any Lender, or any other fee or amount payable to
any Lender under the Loan Documents;
(b) To postpone any date fixed for any payment of principal of,
prepayment of principal of or any installment of interest on, any Note or
any installment of any facility fee, or any other fee or amount payable
to
any Lender under the Loan Documents, or to extend the term of the Commit-
ment, or to release any collateral for the Obligations;
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<PAGE>
(c) To amend or modify the provisions of the definitions of
"Commitment", "Main
---------- ----
Commitment", "Majority Lenders", or "Swing Line Commitment", Section 6.8
---------- ---------------- --------------------- ---
or this Section; or
(d) To amend or modify any provision of this Agreement that expressly
requires the consent or approval of all the Lenders.
Any amendment, modification, supplement, termination, waiver or consent pursuant
to this Section shall apply equally to, and shall be binding upon, all the
Lenders and the Administrative Agent.
11.3 Costs, Expenses and Taxes. Borrower shall pay on demand the
-------------------------
reasonable costs and
expenses of the Administrative Agent (including the fees and expenses of counsel
to the Administrative Agent) in connection with the negotiation, preparation,
execution and delivery of the Loan Documents, and of the Administrative Agent,
the Swing Line Lender and the Lenders in connection with any amendment, waiver,
refinancing, restructuring, reorganization (including a
---------
bankruptcy reorganization), enforcement or attempted enforcement of the Loan
Documents, and any matter related thereto, including, without limitation, filing
---------
fees, recording fees, title
insurance fees, appraisal fees, search fees and other out-of-pocket expenses and
the reasonable fees and out-of-pocket expenses of any legal counsel, independent
public accountants and other outside experts retained by the Administrative
Agent
or any Lender, and including, without limitation, any costs, expenses or fees
---------
incurred or
suffered by the Administrative Agent or any Lender in connection with or during
the course of any bankruptcy or insolvency proceedings of Borrower or any
Subsidiary thereof.
Borrower shall pay any and all documentary and other taxes (other than income or
gross receipts taxes generally applicable to banks) and all costs, expenses,
fees
and charges payable or determined to be payable in connection with the filing or
recording of this Agreement, any other Loan Document or any other instrument or
writing to be delivered hereunder or thereunder, or in connection with any
transaction pursuant hereto or thereto, and shall reimburse, hold harmless and
indemnify the Administrative Agent and the Lenders from and against any and all
loss, liability or legal or other expense with respect to or resulting from any
delay in paying or failure to pay any tax, cost, expense, fee or charge or that
any of them may suffer or incur by reason of the failure of any Party to perform
any of its Obligations. Any amount payable to the Administrative Agent or any
Lender under this Section shall bear interest from the second Banking Day
following the date of demand for payment at the Default Rate.
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<PAGE>
11.4 Nature of Lenders' Obligations. The obligations of the Lenders
------------------------------
hereunder are
several and not joint or joint and several. Nothing contained in this Agreement
or any other Loan Document and no action taken by the Administrative Agent or
the
Lenders or any of them pursuant hereto or thereto may, or may be deemed to, make
the Lenders a partnership, an association, a joint venture or other entity,
either among themselves or with the Borrower or any Affiliate of the Borrower.
Each Lender's several obligation to make Committed Advances is conditioned upon
the performance by all other Lenders of their obligations to make similar
Committed Advances. A default by any Lender will not increase the amount of the
Commitment attributable to any other Lender, and any Lender not in default may,
if it desires, assume in such proportion as the nondefaulting Lenders agree the
obligations of any Lender in default, but is not obligated to do so.
11.5 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained herein or in any other Loan Document, or in any certificate
or other
writing delivered by or on behalf of any one or more of the Parties to any Loan
Document, will survive the making of the Advances hereunder and the execution
and
delivery of the Notes, and have been or will be relied upon by the
Administrative
Agent and each Lender, notwithstanding any investigation made by the
Administrative Agent or any Lender or on their behalf.
11.6 Notices. Except as otherwise expressly provided in any Loan
------- ------
Document, all notices,
requests, demands, directions and other communications provided for hereunder or
under any other Loan Document must be in writing and must be mailed, telecopied,
or personally delivered to the appropriate party at the address set forth on the
signature pages of this Agreement or other applicable Loan Document or, as to
any
party to any Loan Document, at any other address as may be designated by it in a
written notice sent to all other parties to such Loan Document in accordance
with
this Section. Except as otherwise expressly provided in any Loan Document, if
------
any notice, request, demand, direction or other communication required or
permitted by any Loan Document is given by mail it will be effective on the
earlier of receipt or the third calendar day after deposit in the United States
mail with first class or airmail postage prepaid; if given by telex or
telecopier, when sent; or if given by personal delivery, when delivered.
11.7 Execution of Loan Documents; Counterparts. Unless the Administrative
-----------------------------------------
Agent
otherwise specifies with respect to any Loan Document, this Agreement and any
other Loan Document may be executed in any number of counterparts and any party
hereto or thereto may execute any counterpart, each of which when executed and
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<PAGE>
delivered will be deemed to be an original and all of which counterparts of this
Agreement or any other Loan Document, as the case may be, when taken together
will be deemed to be but one and the same instrument. The execution of this
Agreement or any other Loan Document by any party hereto or thereto will not
become effective until counterparts hereof or thereof, as the case may be, have
been executed by all the parties hereto or thereto.
11.8 Binding Effect; Assignment
--------------------------
(a) This Agreement and the other Loan Documents to which
Borrower is a Party
will be binding upon and inure to the benefit of Borrower, the
Administrative Agent, each
of the Lenders, and their respective successors and assigns, except that
------
Borrower may not
assign its rights hereunder or thereunder or any interest herein
or therein
without the prior written consent of all the Lenders. Each Lender
represents that
it is not acquiring its Notes with a view to the distribution thereof
within the meaning
of the Securities Act of 1933, as amended (subject to any requirement
that disposition
of such Notes must be within the control of such Lender). Any Lender may
at any time
pledge its Notes or any other instrument evidencing its rights as a
Lender under this
Agreement to a Federal Reserve Bank, but no such pledge shall release
that
Lender from its obligations hereunder or grant to such Federal Reserve
Bank the rights of a Lender hereunder absent foreclosure of such pledge.
(b) From time to time following the Closing Date, each Lender
may assign to one
or more Eligible Assignees all or any portion of its Pro Rata Share of
the Main
Commitment; provided that (i) such Eligible Assignee, if not then a
--------
Lender, shall be
reasonably acceptable to the Administrative Agent, (ii) such assignment
shall be evidenced by a Commitment Assignment and Acceptance, a copy of
which shall be furnished to the Administrative Agent for registration as
hereinbelow provided, (iii) the assignment shall not assign a Pro Rata
Share of the Main Commitment equivalent to less than $5,000,000 unless
the
assigning Lender thereby assigns its entire Pro Rata Share and (iv) the
effective date of any such assignment shall be as specified in the
Commitment Assignment and Acceptance, but without the consent of the
Administrative Agent not earlier than the date which is ten (10) Banking
Days after the date the Administrative Agent has registered the
Commitment
Assignment and Acceptance in the register kept for that purpose by the
Administrative Agent described below. Upon the effective date of such
Commitment Assignment and Acceptance, the Eligible Assignee named therein
shall be a Lender for all purposes of this
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<PAGE>
Agreement, with the Pro Rata Share of the Main Commitment therein set
forth and, to the extent of such Pro Rata Share, the assigning Lender
shall be released from its obligations under this Agreement. Borrower
agrees that it shall execute and deliver (against delivery by the
assigning Lender to Borrower of its Notes) to such assignee Lender, Note
evidencing that assignee Lender's Pro Rata Share of the Main Commitment
and any Competitive Advances to be made by that Lender, and to the
assigning Lender, a Note evidencing the remaining balance Pro Rata Share
retained by the assigning Lender.
(c) By executing and delivering a Commitment Assignment and
Acceptance, the Eligible Assignee thereunder acknowledges and agrees
that:
(i) other than the representation and warranty that it is the legal and
beneficial owner of the Pro Rata Share of the Main Commitment being
assigned thereby free and clear of any adverse claim, the assigning
Lender
has made no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness or sufficiency of this Agreement or any other
Loan Document; (ii) the assigning Lender has made no representation or
warranty and assumes no responsibility with respect to the financial
condition of Borrower or the performance by Borrower of the Obligations;
(iii) it has received a copy of this Agreement, together with copies of
the most recent financial statements delivered pursuant to Section 7.1
---
and such
other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Commitment Assignment
and Acceptance; (iv) it will, independently and without reliance upon the
Administrative Agent or any Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make
its
own credit decisions in taking or not taking action under this Agreement;
(v) it appoints and authorizes the Administrative Agent to take such
action and to exercise such powers under this Agreement as are delegated
to the Administrative Agent by this Agreement; and (vi) it will perform
in
accordance with their terms all of the obligations which by the terms of
this Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at the
Administrative
Agent's Office a copy of each Commitment Assignment and Acceptance
delivered to it and a register for recordation of the names and addresses
of the Lenders and their respective Pro Rata Shares of the Main
Commitment. Upon receipt of a completed Commitment Assignment and
Acceptance executed by
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<PAGE>
any Lender and an Eligible Assignee, and upon receipt of a registration
fee of $3,000 from such Eligible Assignee, Administrative Agent shall
record the making of the assignments contemplated in such Commitment
Assignment and Acceptance in such register. The entries in such register
shall be conclusive in the absence of manifest error, and the Borrower,
the Administrative Agent and the Lenders may treat each Person whose name
is recorded in the register as a Lender hereunder for all purposes of
this
Agreement.
(e) Each Lender may from time to time without the consent of
Borrower or the
Administrative Agent grant participations to one or more banks or other
financial
institutions in a portion of its Pro Rata Share of the Main Commitment;
provided,
- -
--------
however, that (i) such Lender's obligations under this Agreement shall
-------
remain
unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto
for the performance of such obligations, (iii) the participating banks or
other financial
institutions shall not be a Lender hereunder for any purpose except, if
------
the participation
agreement so provides, for the purposes of Sections 3.6, 3.7 and 11.11
--- --- -----
but only to the extent that the cost of such benefits to Borrower does
not
exceed the cost which Borrower would have incurred in respect of such
Lender absent the participation, (iv) Borrower, the Administrative Agent
and the other Lenders shall continue to deal solely and directly with
such
Lender in connection with such Lender's rights and obligations under this
Agreement, (v) the consent of the holder of such participation interest
shall not be required for amendments or waivers of provisions of the Loan
Documents other than those which (A) increase the monetary amount of any
----- ----
of the Commitment, (B) extend the Maturity Date or any other date upon
which any
payment of money is due to the Lenders or (C) reduce the rate of interest
on the Notes, or any fee or any other monetary amount payable to the
Lenders and (vi) such Lender shall notify the Administrative Agent in
writing of the identity of the participant and the amount of the
participation interest within five Banking Days after the date granted.
(f) The Swing Line Lender may assign the entire Swing Line
Commitment subject to the conditions and in the manner applicable to
assignments of portions of the Main Commitment set forth above.
(g) Notwithstanding anything to the contrary contained herein,
any Lender (a "Granting Lender") may grant to a special purpose funding
vehicle (an "SPC") of such Granting Lender, identified as such in writing
from time to time by the Granting Lender to the Administrative Agent and
Borrower,
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<PAGE>
the option to provide to Borrower all or any part of any Loan that such
Granting Lender
would otherwise be obligated to make to the Borrower pursuant to Sections
2.1(a) or 2.2,
----- ---
provided that (i) nothing herein shall constitute a commitment to make
--------
any Loan by
any SPC and (ii) if an SPC elects not to exercise such option or
otherwise
fails to provide all or any part of such Loan, the Granting Lender shall
be obligated to make such Loan pursuant to the terms hereof. The making
of a Loan by an SPC shall utilize the Pro Rata Share of the Main
Commitment of the Granting Lender to the same extent, and as if, such
Loan
were made by the Granting Lender. Each party hereby agrees that no SPC
shall be liable for any indemnity or similar payment obligation under
this
Agreement (all liability for which shall remain with the related Granting
Lender). In furtherance of the foregoing, each party hereto agrees
(which
agreement shall survive the termination of this Agreement) that, prior to
the date that is one year and one day after the payment in full of all
outstanding senior indebtedness of any SPC, it will not institute
against,
or join any other Person in instituting against, such SPC any proceeding
under any Debtor Relief Law, provided that the Granting Lender for each
--------
SPC hereby agrees to indemnify, save and hold harmless each other party
hereto
for any loss, cost, damage and expense arising out of its inability to
institute any such proceeding against the SPC related to such Granting
Lender. In addition, notwithstanding anything to the contrary contained
in this Section 11.8, any SPC may (i) with notice to, but without the
----
consent of,
Borrower or the Administrative Agent and without paying any processing
fee therefor,
assign all or a portion of its interests in any Loans to its Granting
Lender or to any financial institutions providing liquidity and/or credit
facilities to or for the account of such SPC to fund the Loans made by
such SPC or to support the securities (if any) issued by such SPC to fund
such Loans (but nothing contained herein shall be construed in derogation
of the obligation of the Granting Lender to make Loans hereunder),
provided that neither
--------
the consent of the SPC or of any such assignee shall be required for
amend-
ments or waivers of provisions of the Loan Documents except for those
amendments or waivers for which the consent of participants is required
under Section 11.8(e)(v), and (ii) disclose on a confidential basis any
---------
non-public
information relating to its Loans to any rating agency, commercial paper
dealer or
provider of a surety, guarantee or credit or liquidity enhancement to
such SPC.
11.9 Setoff Rights. If an Event of Default has occurred and is
-------------
continuing, the
Administrative Agent or any Lender (but only with the consent of the Majority
Lenders) may, to the extent permitted by applicable Laws, exercise its rights
under
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<PAGE>
applicable Laws to setoff and apply any funds in any deposit account maintained
with it by Borrower and/or any Property of Borrower in its possession against
the
Obligations.
11.10 Sharing of Setoffs. Each Lender severally agrees that if it,
------------------
through the exercise
of any right of setoff, banker's lien or counterclaim against Borrower, or
otherwise, receives payment, through any means, of the Obligations held by it
that is in excess of that Lender's Pro Rata Share of such payment, then: (a)
The
Lender exercising the right of setoff, banker's lien or counterclaim or
otherwise
receiving such payment shall purchase, and shall be deemed to have
simultaneously
purchased, from the other Lender a participation in the Obligations held by the
other Lender and shall pay to the other Lender a purchase price in an amount so
that the share of the Obligations held by each Lender after the exercise of the
right of setoff, banker's lien or counterclaim or receipt of payment shall be in
the same proportion that existed prior to the exercise of the right of setoff,
banker's lien or counterclaim or receipt of payment; and (b) Such other
adjustments and purchases of participations shall be made from time to time as
shall be equitable to ensure that all of the Lenders share any payment obtained
in respect of the Obligations ratably in accordance with each Lender's share of
the Obligations immediately prior to, and without taking into account, the
payment; provided that, if all or any portion of a disproportionate payment
--------
obtained as a result
of the exercise of the right of setoff, banker's lien, counterclaim or otherwise
is thereafter recovered from the purchasing Lender by Borrower or any Person
claiming through or succeeding to the rights of Borrower, the purchase of a
participation shall be rescinded and the
purchase price thereof shall be restored to the extent of the recovery, but
without interest. Each Lender that purchases a participation in the Obligations
pursuant to this Section shall from and after the purchase have the right to
give
all notices, requests, demands, directions and other communications under this
Agreement with respect to the portion of the Obligations purchased to the same
extent as though the purchasing Lender were the original owner of the
Obligations
purchased. Borrower expressly consents to the foregoing arrangements and agrees
that any Lender holding a participation in an Obligation so purchased may
exercise any and all rights of setoff, banker's lien or counterclaim with
respect
to the participation as fully as if the Lender were the original owner of the
Obligation purchased; provided, however, that each Lender agrees that it shall
--------
not exercise any right of setoff, banker's lien or counterclaim without first
obtaining the consent of the Majority Lenders.
11.11 Indemnity by Borrower. Borrower agrees to indemnify, save and hold
---------------------
harmless the
Administrative Agent, the Arranger, the Swing Line Lender and each Lender and
their directors, officers, agents, advisors, attorneys and employees (collec-
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<PAGE>
tively the "Indemnitees") from and against: (a) Any and all claims, demands,
-----------
actions or causes
of action that are asserted against any Indemnitee by any Person (other than the
Administrative Agent, the Arranger, the Swing Line Lender or a Lender) if the
claim, demand, action or cause of action directly or indirectly relates to a
claim, demand, action or cause of action that such Person has or asserts against
Borrower, any Affiliate of Borrower or any officer, director or shareholder of
Borrower; (b) Any and all claims, demands, actions or causes of action that are
asserted against any Indemnitee if the claim, demand, action or cause of action
arises out of or relates to the relationship between Borrower and the Lenders
under any of the Loan Documents or the transactions contemplated thereby; (c)
Any
and all administrative or investigative proceedings by any Governmental Agency
arising out of or related to any claim, demand, action or cause of action
described in clauses (a) or (b) above; and (d) Any and all liabilities, losses,
costs or expenses (including attorneys' fees and disbursements and other pro-
---------
fessional services) that any Indemnitee suffers or incurs as a result of the
assertion of any of the foregoing; provided that no Indemnitee shall be entitled
--------
to indemnification for
any loss caused by its own gross negligence or willful misconduct. Each
Indemnitee is authorized to employ counsel of its own choosing in enforcing its
rights hereunder and in defending against any claim, demand, action, cause of
action or administrative or
investigative proceeding covered by this Section; provided that each Indemnitee
--------
shall endeavor, in connection with any matter covered by this Section which also
involves other Indemnitees, to use reasonable efforts to avoid unnecessary
duplication of effort by counsel for all Indemnitees. Any obligation or
liability of Borrower to any Indemnitee under this Section shall be and hereby
is covered and secured by the Loan Documents and the Collateral, and shall
survive the expiration or termination of this Agreement and the repayment of all
Loans and Swing Line Loans and the payment and performance of all other
Obligations owed to the Lenders.
11.12 Nonliability of the Lenders. Borrower acknowledges and agrees that:
---------------------------
(a) Any inspections of any Property of Borrower made by or
through the Administrative Agent, the Arranger, the Swing Line Lender or
the Lenders are for purposes of administration of the Loan Documents only
and Borrower is not entitled to rely upon the same;
(b) By accepting or approving anything required to be observed,
performed, fulfilled or given to the Administrative Agent or the Lenders
pursuant to the Loan Documents, neither the Administrative Agent nor the
Lenders shall be deemed to have warranted or represented the sufficiency,
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<PAGE>
legality, effectiveness or legal effect of the same, or of any term,
provision or condition thereof, and such acceptance or approval thereof
shall not constitute a warranty or representation to anyone with respect
thereto by the Administrative Agent or the Lenders;
(c) The relationship between Borrower and the Administrative
Agent, the Arranger, the Swing Line Lender and the Lenders is, and shall
at all times remain, solely that of a borrower and lenders; neither the
Administrative Agent, the Arranger, the Swing Line Lender nor the Lenders
shall under any circumstance be construed to be partners or joint
venturers of Borrower or its Affiliates; neither the Administrative
Agent,
the Arranger, the Swing Line Lender nor the Lenders shall under any
circumstance be deemed to be in a relationship of confidence or trust or
a fiduciary relationship with Borrower or its Affiliates, or to owe any
fiduciary duty to Borrower or its Affiliates; neither the Administrative
Agent, the Arranger, the Swing Line Lender nor the Lenders undertake or
assume any responsibility or duty to Borrower or its Affiliates to
select,
review, inspect, supervise, pass judgment upon or inform Borrower or its
Affiliates of any matter in connection with their Property or the
operations of Borrower or its Affiliates; Borrower and its Affiliates
shall rely entirely upon their own judgment with respect to such matters;
and any review, inspection, supervision, exercise of judgment or supply
of information undertaken or assumed by the Administrative Agent, the
Arranger, the Swing Line Lender or the Lenders in connection with such
matters is solely for the protection of the Administrative Agent, the
Arranger, the Swing Line Lender and the Lenders and neither Borrower nor
any other Person is entitled to rely thereon; and
(d) The Administrative Agent, the Arranger, the Swing Line
Lender
and the Lenders shall not be responsible or liable to any Person for any
loss, damage, liability or claim of any kind relating to injury or death
to Persons or damage to Property caused by the actions, inaction or
negligence of Borrower and/or its Affiliates and Borrower hereby
indemnifies and holds the Administrative Agent, the Arranger, the Swing
Line Lender and the Lenders harmless from any such loss, damage,
liability or claim.
11.13 No Third Parties Benefited. This Agreement is made for the purpose
--------------------------
of defining and
setting forth certain obligations, rights and duties of Borrower, the
Administrative Agent, the Arranger, the Swing Line Lender, the Issuing Bank and
the Lenders in connection with the Loans, the Swing Line Loans and Advances, and
the Letters of Credit and is made for the sole benefit of Borrower, the
Administrative Agent, the Arranger, the Swing Line Lender and the Lenders, and
the Administrative
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<PAGE>
Agent's, the Arranger's, the Swing Line Lender's and the Lenders' successors and
assigns. Except as provided in Sections 11.8 and 11.11, no other Person shall
------ ---- -----
have any rights of any nature hereunder or by reason hereof.
11.14 Termination of Existing Loan Documents. Borrower agrees for the
--------------------------------------
benefit of the
lenders and the administrative agent under the Existing Loan Documents that,
concurrently with the execution and delivery of this Agreement, the lending
commitments under the Existing Loan Documents shall be deemed terminated. On
the
Closing Date, the Administrative Agent is hereby authorized and directed to
effect a net settlement of the amounts due to the Borrower, the Lenders and the
lenders under the Existing Loan Documents.
11.15 Further Assurances. Borrower and its Subsidiaries shall, at their
------------------
expense and
without expense to the Lenders or the Administrative Agent, do, execute and
deliver such further acts and documents as any Lender or the Administrative
Agent
from time to time reasonably requires for the assuring and confirming unto the
Lenders or the Administrative Agent of the rights hereby created or intended now
or hereafter so to be, or for carrying out the intention or facilitating the
performance of the terms of any Loan Document.
11.16 Integration. This Agreement, together with the other Loan
-----------
Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof. In the event of any conflict between the provisions of this Agreement
and those of any other Loan Document, the provisions of this Agreement shall
control and govern; provided that the inclusion of supplemental rights or
--------
remedies in favor of the Administrative Agent or the Lenders in any other Loan
Document shall not be deemed a conflict with this Agreement. Each Loan Document
was drafted with the joint participation of the respective parties thereto and
shall be construed neither against nor in favor of any party, but rather in
accordance with the fair meaning thereof.
11.17 Governing Law. Except to the extent otherwise expressly provided
------------- ------
therein, each
loan document shall be governed by, and construed and enforced in accordance
with, the local Laws of Nevada.
11.18 Severability of Provisions. Any provision in any Loan Document that
--------------------------
is held to be
inoperative, unenforceable or invalid as to any party or in any jurisdiction
shall, as to that party or jurisdiction, be inoperative, unenforceable or
invalid without
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<PAGE>
affecting the remaining provisions or the operation, enforceability or validity
of that provision as to any other party or in any other jurisdiction, and to
this
end the provisions of all Loan Documents are declared to be severable.
11.19 Independent Covenants. Each covenant in Articles 5, 6 and 7 is
--------------------- -------- - - -
independent of the
other covenants in those Articles; the breach of any such covenant shall not be
excused by the fact that the circumstances underlying such breach would be
permitted by another such covenant.
11.20 Headings. Article and Section headings in this Agreement and the
--------
other Loan
Documents are included for convenience of reference only and are not part of
this
Agreement or the other Loan Documents for any other purpose.
11.21 Time of the Essence. Time is of the essence of the Loan Documents.
-------------------
11.22 Purported Oral Amendments. BORROWER EXPRESSLY ACKNOWLEDGES THAT
-------------------------
THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR THE PROVISIONS
HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN WRITING THAT
COMPLIES WITH SECTION 11.2. BORROWER
----
AGREES THAT IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR
ORAL OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF THE ADMINISTRATIVE AGENT OR
ANY BANK THAT DOES NOT COMPLY WITH SECTION 11.2 TO EFFECT AN AMENDMENT,
MODIFICATION, WAIVER OR SUPPLEMENT TO THE AGREEMENT OF THE OTHER LOAN DOCUMENTS.
11.23 Jury Trial Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
-----------------
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION ARISING UNDER
ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT,
OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY TRIAL COURT WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN
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<PAGE>
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE
OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
BORROWER:
NEVADA POWER COMPANY, a Nevada corporation
By: Steven W. Rigazio
-----------------
Steven W. Rigazio, Vice President, Finance
and Planning, Treasurer, and Chief Financial
Officer
Address:
Nevada Power Company
6226 West Sahara Avenue
Las Vegas, Nevada 89102
Attention: Richard Schmalz
Telecopier: (702) 367-5036
Telephone: (702) 367-5608
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BANKS:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
individually, as the Swing Line Lender, the Issuing
Lender and Administrative Agent
By: Steven M. Dastrup
-----------------
Steven M. Dastrup
Vice President
Address for Matters Other than Loan Administration:
Wells Fargo Bank, National Association
Corporate Banking Division
3800 Howard Hughes Parkway
Las Vegas, Nevada 89109
Attn: Steven M. Dastrup
Vice President
Telecopier: (702) 791-6365
Telephone: (702) 791-6263
Address for Loan Administration:
Wells Fargo Bank, National Association
Commercial Bank Loan Center
Agency Dept. 2840
201 3rd Street, 8th Floor
San Francisco, California 94103
Attn: Manager
Telecopier: (415) 512-9408
Telephone: (415) 477-5418
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<PAGE>
NATIONSBANK OF TEXAS, N.A.
By: Curtis L. Anderson
-------------------
Curtis L. Anderson, Senior Vice President
Address:
NationsBank of Texas, N.A.
901 Main Street, 64th Floor
Dallas, Texas 75202
Attention: Curtis Anderson,
Senior Vice President
Telecopier: (214) 508-3943
Telephone: (214) 508-1290
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MELLON BANK, N.A.
By: Jacquelyn S. Peters
-------------------
Jacquelyn S. Peters
Vice President
Address:
Mellon Bank, N.A.
One Mellon Bank Center
Suite 4425
Pittsburgh, PA 15258-0001
Attention: Jacquelyn S. Peters
Vice President
Telecopier: (412) 236-1840
Telephone: (412) 236-2988
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<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By: Judy Crosswhite
---------------
Judy Crosswhite
Vice President
Address:
Bank of America National Trust
and Savings Association
Commercial Banking Division #2006
300 South 4th Street, 2nd Floor
Las Vegas, Nevada 89101
Attention: Judy Crosswhite
Vice President
Telecopier: (702) 654-7158
Telephone: (702) 654-7149
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THE FIRST NATIONAL BANK OF CHICAGO
By: Richard H. Waldman
------------------
Richard H. Waldman
Authorized Agent
Address:
The First National Bank of Chicago
One First National Plaza, 10th Floor
Suite 0363
Chicago, Illinois 60670-0363
Attention: Richard H. Waldman
Managing Director
Telecopier: (312) 732-3055
Telephone: (312) 732-3520
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<PAGE>
BANK OF MONTREAL, acting through its Chicago Branch
By: John K. Harche
--------------
John Harche
Director
Address:
Bank of Montreal
601 South Figueroa Street, Suite 4900
Los Angeles, California 90017
Attention: Warren Wimmer
Director Natural Resources
Telecopier: (213) 239-0680
Telephone: (213) 239-0633
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<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: Dale Parshall
-------------
Dale Parshall
Vice President
Address:
U.S. Bank National Association
555 SW Oak Street, Suite 400
Portland, Oregon 92704
Attention: Dale Parshall
Vice President
Telecopier: (503) 275-5428
Telephone: (503) 275-3476
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