<PAGE>
================================================================================
UNITED STATES 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, 1999
<TABLE>
<S> <C> <C> <C>
Registrant, State of Incorporation, Address of
Commission File Principal Executive Offices and Telephone I.R.S. employer State of
Number Number Identification Number Incorporation
1-8788 SIERRA PACIFIC RESOURCES 88-0198358 Nevada
P.O. Box 10100 (6100 Neil Road)
Reno, Nevada 89520-0400 (89511)
(775) 834-4011
1-4698 NEVADA POWER COMPANY 88-0045330 Nevada
6226 West Sahara Avenue
Las Vegas, Nevada 89146
(702) 367-5000
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
Securities of Sierra Pacific Resources:
--------------------------------------
Common Stock, $1.00 par value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities of Nevada Power Company and subsidiaries:
----------------------------------------------------
8.2% Cumulative Quarterly Income New York Stock Exchange
Preferred Securities, Series A,
issued by NVP Capital I
7 3/4% Cumulative Quarterly Trust Issued New York Stock Exchange
Preferred Securities, issued by NVP Capital III
(Title of each class) (Name of exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether 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
---
State the aggregate market value of the voting stock held by non-affiliates.
As of March 21, 2000: $ 1,048,866,818
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
<TABLE>
<S> <C>
Common Stock, $1.00 par value, of Sierra Pacific Resources Outstanding at March 21, 2000: 78,419,949 Shares
Sierra Pacific Resources is the sole holder of the 1,000 shares of outstanding Common Stock, $1.00 stated value, of Nevada Power
Company.
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement to be filed in
connection with the annual meeting of shareholders, to be held June 19, 2000,
are incorporated by reference into Part III hereof.
This combined Annual Report on Form 10-K is separately filed by Sierra Pacific
Resources and Nevada Power Company. Information contained in this document
relating to Nevada Power Company is filed by Sierra Pacific Resources and
separately by Nevada Power Company on its own behalf. Nevada Power Company makes
no representation as to information relating to Sierra Pacific Resources or its
subsidiaries, except as it may relate to Nevada Power Company
================================================================================
<PAGE>
SIERRA PACIFIC RESOURCES
1999 ANNUAL REPORT FORM 10-K
CONTENTS
<TABLE>
<S> <C>
PART I........................................................................................................... 3
ITEM 1. BUSINESS (1)...................................................................................... 3
SIERRA PACIFIC RESOURCES...................................................................................... 3
INTRODUCTION.................................................................................................. 4
BUSINESS OUTLOOK AND OVERVIEW................................................................................. 6
ITEM 2. PROPERTIES........................................................................................ 26
ITEM 3. LEGAL PROCEEDINGS................................................................................. 26
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................... 27
PART II.......................................................................................................... 31
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (SPR).................... 31
ITEM 6. SELECTED FINANCIAL DATA........................................................................... 32
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS.............................................................. 32
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (SPR)............................... 48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................................... 49
INDEPENDENT AUDITORS' REPORT.................................................................................. 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................................................... 62
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES............. 95
PART III......................................................................................................... 96
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............................................. 96
ITEM 11. EXECUTIVE COMPENSATION......................................................................... 96
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................. 96
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................. 96
PART IV.......................................................................................................... 97
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS on FORM 8-K............................... 97
SIGNATURES.................................................................................................... 99
INDEPENDENT AUDITORS' REPORT.................................................................................. 100
</TABLE>
2
<PAGE>
PART I
(1) The information in this Form 10-K, and in the Form 10-K of SPPC attached as
an Appendix, includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements relate to anticipated financial performance, management's plans
and objectives for future operations, business prospects, outcome of
regulatory proceedings, market conditions and other matters. Words such as
"anticipate," "believe," "estimate," "expect," "intend," "plan" and
"objective" and other similar expressions identify those statements that are
forward-looking. These statements are based on management's beliefs and
assumptions and on information currently available to management. Actual
results could differ materially from those contemplated by the forward-
looking statements. In addition to any assumptions and other factors
referred to specifically in connection with such statements, factors that
could cause SPR's, NVP's or SPPC's actual results to differ materially from
those contemplated in any forward-looking statement include, among others,
the following: (1) the pace and extent of the ongoing restructuring of the
electric and gas industries in Nevada and California; (2) the outcome of
regulatory and legislative proceedings and operational changes related to
industry restructuring; (3) the amount NVP and SPPC are allowed to recover
from customers for certain costs that prove to be uneconomic in the new
competitive market; (4) regulatory delays or conditions imposed by
regulatory bodies in approving the acquisition of Portland General Electric;
(5) the outcome of ongoing and future regulatory proceedings; (6)
management's ability to integrate the operations of SPR, NVP, SPPC, and
Portland General Electric and to implement and realize anticipated cost
savings from the merger of SPR and NVP and the acquisition of Portland
General Electric; (7) the results of the contemplated sales by NVP and SPPC
of their Nevada generating assets; (8) industrial, commercial and
residential growth in the service territories of NVP and SPPC; (9)
fluctuations in electric, gas and other commodity prices and the ability to
manage such fluctuations successfully; (10) changes in the capital markets
and interest rates affecting the ability to finance capital requirements;
(11) the loss of any significant customers; (12) the weather and other
natural phenomena; and (13) changes in the business of major customers which
may result in changes in the demand for services of NVP or SPPC. Other
factors and assumptions not identified above may also have been involved in
deriving these forward-looking statements, and the failure of those other
assumptions to be realized, as well as other factors, may also cause actual
results to differ materially from those projected. SPR assumes no obligation
to update forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting forward-looking
statements.
ITEM 1. BUSINESS
SIERRA PACIFIC RESOURCES
Sierra Pacific Resources, hereafter known as SPR, was incorporated under
Nevada Law on December 12, 1983. SPR's mailing address is P.O. Box 30150 (6100
Neil Road), Reno, Nevada 89520-3150.
SPR has seven primary, wholly owned subsidiaries: Nevada Power Company
(NVP), Sierra Pacific Power Company (SPPC), Tuscarora Gas Pipeline Company
(TGPC), Sierra Pacific Communications (SPC), Sierra Energy Company dba e.three
(e.three), Sierra Pacific Energy Company (SPE), and Lands of Sierra (LOS).
3
<PAGE>
INTRODUCTION
AN EXPLANATION OF THE REPORTING FORMAT
The body of this report describes the merger between Sierra Pacific
Resources and Nevada Power Company, which was completed on July 28, 1999. The
form of this merger resulted in reporting and accounting requirements, which may
be difficult for the reader of the document to understand. The purpose of this
section is to bring clarity to the reporting and accounting methods and to
assist the user of the report in understanding all aspects of Sierra Pacific
Resources and its subsidiaries.
The merger between Sierra Pacific Resources and Nevada Power Company is a
reverse acquisition. Specifically, Sierra Pacific Resources is the legal parent
of Nevada Power Company after the merger. In addition, Sierra Pacific Resources
remained the parent of its pre merger subsidiaries, including Sierra Pacific
Power Company. However, for financial reporting and accounting purposes, Nevada
Power Company was determined to be the acquiring entity under the guidance of
Accounting Principles Board Opinion No. 16, Business Combinations.
As a result, the consolidated financial statements included in this report
represent the requirements of purchase accounting, with Nevada Power Company
represented as the acquirer. Under this financial presentation two general items
must be noted. First, all historic financial information presented in the
financial statements is that of Nevada Power Company; that is, the information
presented for 1998 and 1997 reflects the amount previously reported for Nevada
Power Company in its Annual Report on Form 10-K and includes no information for
Sierra Pacific Resources. Second, the financial information for the year ended
December 31, 1999 reflects the acquisition of Sierra Pacific Resources by Nevada
Power Company on August 1, 1999. Therefore, the results of operations reflect
twelve months of information for Nevada Power Company and five months of
information for Sierra Pacific Resources and its pre merger subsidiaries. This
presentation is carried forward to the notes to the financial statements so that
the notes are consistent with the financial statements of which they are an
integral part.
In order to provide insight into the significant operations of the
consolidated entity, the discussion has been divided wherever possible to
highlight the activities of the major subsidiaries of Sierra Pacific Resources.
Specifically, Item 7, Management's Discussion and Analysis includes a table,
which provides separate operating results for the major subsidiaries, Nevada
Power Company and Sierra Pacific Power Company. The table also provides the
total Other Subsidiaries operating results as well as the Consolidated Total.
This format allows the discussion to be focused on the operating results of each
entity. This discussion is performed by the inclusion of a brief paragraph of
the minor subsidiaries, which comprise the Other Subsidiaries. Sierra Pacific
Power Company, is required to file a stand-alone Annual Report on Form 10-K.
Therefore, its operating results for the entire year of 1999 are thoroughly
discussed in its Annual Report on Form 10-K and included in this report by
reference. The line-by-line discussion, included in this report, therefore
focuses on Nevada Power Company's operating results. Therefore a review of this
report, which covers the Management Discussion and Analysis for Nevada Power
Company and the Annual Report on Form 10-K of Sierra Pacific Power Company,
which is attached, will provide the reader with a comprehensive analysis of the
results of operations of the consolidated entity.
This Item 1, Business, goes on to discuss the major operations of the
consolidated entity. It then discusses the Electric Industry Trends, the Sierra
Pacific Resources and Nevada Power Company Merger and Generation Divestiture for
the consolidated entity. The next sections of Item 1 include a detailed
discussion of the Business & Competitive Environment, Major Projects and
Financing Programs, Construction Program, Facilities & Operations, General
Regulation and Rate Proceedings for
4
<PAGE>
Nevada Power Company only. This presentation allows the reader to focus on the
main business issues of Nevada Power Company. The same issues are discussed for
Sierra Pacific Power Company in its stand-alone Annual Report on Form 10-K,
which is included by reference.
The discussion of the Environment, includes not only the significant issues
of Nevada Power Company but also the remainder of Sierra Pacific Resources,
other than Sierra Pacific Power Company, which is discussed in its Annual Report
on Form 10-K.The remainder of Item 1 is general information, which is reported
on a consolidated basis.
Item 5, Market for the Registrant's Common Stock and Related Stockholder
Matters, reflects the stock prices and dividends paid for Sierra Pacific
Resources, including the information for periods before the merger, for SPR.
Item 6, Selected financial data is presented in a manner consistent with
the financial statements. All historic information presented is that of Nevada
Power Company.
Item 7A, Quantitative and Qualitative Disclosures About Market Risk,
presents data related to all of consolidated long-term debt at the end of the
year and therefore includes the debt of SPR and all its subsidiaries.
To further assist the reader, parenthetical references are included after
each major section title. These references provide insight into the specific
entity addressed in the section. References to SPR refer to the consolidated
entity, except for the section related to debt financing in which SPR debt is
discussed separately from that of its subsidiaries.
5
<PAGE>
BUSINESS OUTLOOK AND OVERVIEW
PORTLAND GENERAL ELECTRIC ACQUISITION
- -------------------------------------
On November 8, 1999, SPR and Enron Corporation (Enron) announced that they
had entered into a purchase and sale agreement for Enron's wholly owned electric
utility subsidiary, Portland General Electric Company (PGE). PGE is an electric
utility serving more than 700,000 retail customers in northwest Oregon. PGE will
become a wholly-owned subsidiary of SPR. Under terms of the agreement, Enron
will sell PGE to SPR for $2.1 billion, comprised of $2.02 billion in cash and
the assumption of Enron's approximately $80 million merger payment obligation.
In addition, $1.0 billion in PGE debt and preferred stock will be reflected in
SPR's Consolidated Financial Statements. At closing, the transaction will be
financed through a bank loan. Ultimately, the transaction is expected to be
financed with $750 million of the proceeds from the sale of the Nevada
generation assets of SPR's NVP and SPPC subsidiaries, the issuance by SPR of
debt and equity securities, and internal cash flow.
The proposed transaction is subject to customary closing conditions,
including, without limitation, the receipt of all necessary governmental
approvals, including the Federal Energy Regulatory Commission (FERC), the
Securities and Exchange Commission (SEC), the Oregon Public Utility Commission
(OPUC) and the Nuclear Regulatory Commission. Also, SPR intends to register with
the SEC as a public utility holding company under the Public Utility Holding
Company Act. SPR has filed a Petition for Declaratory Judgment with the Public
Utilities Commission of Nevada (PUCN) seeking its waiver of jurisdiction over
SPR's conversion to a public utility holding company. SPR completed its filings
with the FERC, the Department of Justice, the OPUC and the SEC by March 3, 2000.
Approvals are expected to be received by the second half of 2000.
SUBSIDIARIES OF SIERRA PACIFIC RESOURCES
- ----------------------------------------
Nevada Power Company
- --------------------
NVP is an operating public utility that provides electric service in Clark
County in southern Nevada. The assets of NVP represented 52% of the consolidated
assets of SPR at December 31, 1999. NVP provides electricity to approximately
566,700 customers in the communities of Las Vegas, North Las Vegas, Henderson,
Searchlight, Laughlin and adjoining areas. Service is also provided to Nellis
Air Force Base and the Department of Energy at Mercury and Jackass Flats at the
Nevada Test Site. For a detailed discussion of NVP matters, see the discussion
that follows SPR's other subsidiaries.
Sierra Pacific Power Company
- ----------------------------
SPPC is an operating public utility primarily engaged in the distribution,
transmission, generation, purchase and sale of electric energy. SPPC also
provides natural gas and water services in the Reno/Sparks area of Nevada. The
assets of SPPC represented 40% of the consolidated assets of SPR at December 31,
1999. SPPC provides electricity to approximately 302,000 customers in a 50,000
square mile service area including western, central and northeastern Nevada,
including the cities of Reno, Sparks, Carson City, Elko, and a portion of
eastern California, including the Lake Tahoe area.
A complete description of SPPC is contained in its Annual Report on Form
10-K for the year ended December 31, 1999, attached hereto as an Appendix.
6
<PAGE>
Tuscarora Gas Pipeline Company
- ------------------------------
TGPC was formed as a wholly owned subsidiary in 1993 for the purpose of
entering into a partnership (Tuscarora Gas Transmission Company or TGTC) with a
subsidiary of TransCanada to develop, construct and operate a natural gas
pipeline to serve an expanding gas market in Reno, northern Nevada, and
northeastern California. In December 1995, TGTC completed construction and began
service on its 229-mile pipeline extending from Malin, Oregon to Reno, Nevada.
TGTC interconnects with PG&E Gas Transmission-Northwest (PG&E GT-NW) at Malin,
Oregon. PG&E GT-NW is a major interstate natural gas pipeline extending from the
U.S./Canadian border, at a point near Bonners Ferry, Idaho to the
Oregon/California border. The PG&E GT-NW system provides TGTC customers access
to natural gas reserves in the Western Canadian Sedimentary basin, one of the
largest natural gas reserve basins in North America. As of December 31, 1999,
SPR had an investment of approximately $16.4 million in this subsidiary.
As an interstate pipeline, TGTC provides only transportation service. SPPC
was the largest customer of TGTC during 1999, contributing 95% of revenues.
Malin, Oregon began taking service from TGTC during October 1996. The Sierra
Army Depot at Herlong, California began taking service from TGTC October 1997.
In 1998, TGTC began serving two new customers - the United States Gypsum Company
located north of Empire, Nevada and HL Power Company located northwest of
Wendel, California.
For a discussion of TGPC's results of operations refer to Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Sierra Pacific Communications
- -----------------------------
SPC, formerly Sierra Pacific Media Group, was created to examine and pursue
telecommunications opportunities that leveraged existing skill sets of
installing and deploying pipe and wire infrastructure. SPC presently has fiber
optic assets deployed in the cities of Reno and Las Vegas. The expanding
telecommunications market in these areas should provide continuing future
opportunities to expand this fiber base and other profitable opportunities.
For a discussion of SPC's results of operations refer to Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
e.three
- -------
e.three was organized in October 1996 as an unregulated wholly owned
subsidiary of SPR. It provides comprehensive energy and other business solutions
in commercial and industrial markets. This is accomplished by offering a variety
of energy-related products and services to increase customers' productivity and
profits and improve the quality of the indoor environment. These products and
services include: technology and efficiency improvements to lighting, heating,
ventilation and air-conditioning equipment; installation or retrofit of controls
and power quality systems; energy performance contracting; end-use services; and
ongoing energy monitoring and verification services.
In September 1998, e.three and Nevada Electric Investment Company (NEICO),
a wholly-owned subsidiary of Nevada Power Company, formed e.three Custom Energy
Solutions, LLC, a Nevada limited liability company, for the purpose of selling
and implementing energy-related performance contracts and similar energy
services in Southern Nevada. e.three Custom Energy Solutions, LLC's primary
focus for its sales activities is in the commercial and industrial markets.
During the latter half
7
<PAGE>
of 1999, e.three Custom Energy Solutions, LLC began developing a chilled water-
cooling plant in the downtown area of Las Vegas. The plant will be owned by
e.three Custom Energy Solutions, LLC and will supply the indoor air-cooling
requirements for a number of businesses in its immediate vicinity. The plant is
expected to be operational in the third quarter of 2000.
In October 1998, e.three acquired Independent Energy Consulting, Inc.
(IEC), a California based company, in an exchange of SPR stock for all of IEC's
stock. IEC provides energy procurement management, third party auditing,
performance contract consulting and strategic energy planning in the industrial
and commercial markets.
For a discussion of e.three's results of operations refer to Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Sierra Pacific Energy Company
- -----------------------------
SPE was formed to market a package of technology and energy-related
products and services in Nevada. SPE filed an application with the PUCN to be
licensed as an Alternative Seller of Electricity in the State of Nevada. Except
for its interest in the Aladdin project discussed below, SPE has withdrawn its
application with the PUCN to be licensed as an Alternative Seller of Electricity
in the State of Nevada and is dissolving its retail energy marketing efforts.
SPE will retain its interest in the Northwind Aladdin LLC (a limited liability
company owned by NEICO & UTT Nevada, Inc., an affiliate of Unicom Thermal
Technologies, Inc.) to own, construct and maintain the facility for the
production and distribution of chilled water, hot water, and emergency electric
power for the Aladdin project in Las Vegas, Nevada.
For a discussion of SPE's results of operations refer to Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Lands of Sierra
- ---------------
Lands of Sierra (LOS) was organized in 1964 to develop and manage SPPC's
non-utility property in Nevada and California. These properties previously
included retail, industrial, office and residential sites, timberland, and other
properties. Remaining properties include land in Nevada and California. SPR has
decided to focus on its core energy business. In keeping with this strategy, LOS
continues to sell its remaining properties.
For a discussion of LOS' results of operations refer to Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
ELECTRIC INDUSTRY TRENDS (SPR)
- ------------------------------
On July 28, 1999, SPR completed its merger with NVP. More than 30 other
mergers of electric and/or gas companies were pending, announced, or completed
in 1999. Merger and acquisition activity is expected to continue into the next
decade, as companies' position themselves for continued electric restructuring
throughout the United States.
SPR announced its plan to divest its generation assets in June 1998. A
stipulation on the Divestiture Plan was approved by the PUCN in February 2000.
This stipulation will clear the way for the Divestiture process to begin. See
detail discussion on the divestiture in the Generation Divestiture Section.
8
<PAGE>
Federal and state legislation is moving the electric utility industry
toward competition. Federal and state regulators play critical roles in
establishing a competitive marketplace. Currently, 21 states have passed
restructuring bills, and 19 more states are considering legislation to
restructure their electric markets. In addition, the U.S. Congress is
considering national legislation that would implement electric restructuring
across the nation. Passage of a comprehensive federal bill is expected within
the next several years. Regulatory changes generally focus on the unbundling of
utility functions into separate products and services. The major product being
opened to competition is energy (e.g., kilowatt hours). Other services such as
meter reading and billing are also being opened to competition in some states,
including California and Nevada. The delivery of energy (e.g., transmission and
distribution) to businesses and homes remains a utility product regulated by the
FERC and state regulators.
On December 15, the FERC issued Order No. 2000, a long awaited rule on
Regional Transmission Organizations (RTO's). The implementation of Order No.
2000 is expected to have major long-term effects on the electric power markets
by promoting regionalization of the transmission grid.
SPR's utility subsidiaries are subject to California, Nevada and the FERC
regulatory jurisdiction. Federal and state regulation will continue to play an
active role in SPR's utility businesses. SPR's electric system demand exceeds
the import capabilities of its transmission system. Accordingly, some of SPR's
generation capacity has been identified as "must run" in order to meet load.
Tariffs governing the availability and pricing of "must run" facilities after
the divestiture of generation have been approved by the FERC (see Generation
Divestiture). The FERC will also regulate SPR's subsidiaries' electric
transmission system. The states will continue to regulate retail distribution
services determined to be non-competitive.
All of NVP's and the majority of SPPC's operating revenues are related to
electric sales in Nevada. Nevada passed Assembly Bill 366 (AB366) in July 1997,
as enabling legislation to implement electric industry restructuring in Nevada.
This legislation was modified in June 1999 by Senate Bill 438 (SB438). SB438
provides for competition to be implemented in the Nevada electric utility
industry (see Electric Restructuring Activities). On February 28, 2000, the
governor of Nevada postponed the expected March 1, 2000 opening date. No new
date has been set, but competition could begin later in 2000 or possibly in
2001. SB438 allows the PUCN to authorize full recovery of costs that it
determines to be stranded as a result of restructuring and provides criteria for
recovery of costs associated with purchase power obligations. In addition, SB438
provides the electric distribution utility will be the provider of last resort
(PLR) until alternate methods go into effect, no sooner than July 1, 2001; under
rates which will be capped until March 1, 2003.
In August 1997, the PUCN opened an investigatory docket of the issues to be
considered as a result of restructuring the electric industry under AB366 and
SB438. NVP and SPPC are participants in this docket in which new regulations for
the restructured marketplace have been developed. These regulations include
standards of conduct, consumer protection, stranded costs and licensing
provisions for alternative sellers. Implementation of some of the regulations,
including unbundling of services, stranded costs and provider of last resort,
has already posed or is expected to pose financial risks to NVP and SPPC. NVP
and SPPC are working to mitigate these risks by changing their business
strategies, actively pursuing regulatory remedies and, if necessary, pursuing
legal remedies. See further discussion regarding restructuring activities and
potential risks in Item 7, Nevada Matters.
For more information regarding regulatory changes affecting NVP, see Item
7, Nevada Matters, FERC Matters and Note 3 of SPR's consolidated financial
statements. For a discussion of Electric Trends related to SPPC, see its Annual
Report on Form 10-K attached as an appendix.
9
<PAGE>
SIERRA PACIFIC RESOURCES AND NEVADA POWER COMPANY MERGER
- ---------------------------------------------------------
As previously mentioned, the merger between SPR and NVP was finalized on
July 28, 1999 following receipt of all regulatory approvals. The PUCN gave
unanimous approval of a stipulation among the merging companies, the PUCN staff
and the Utility Consumer Advocate (UCA), regarding the merger.
As part of the stipulation approved by the PUCN, the companies were
required to re-file the plan to divest their generating assets, and file a final
Independent System Administrator (ISA) proposal with the PUCN and the FERC. In
January 2000, the FERC approved the ISA proposal; the PUCN's decision on this
matter is still pending. See Generation Divestiture and Item 7, Nevada Matters
for more information.
As part of the conditions for the merger, NVP and SPPC were required to
file a general rate case and unbundle costs. In April 1999, Phase I of the
revenue requirement and the unbundling study was filed with the PUCN. In
September 1999, the PUCN issued an interim order on revenue requirements. In
October 1999, the utilities filed Phase II regarding rate design. Hearings for
SPPC were conducted in November 1999, and hearings for NVP were held in February
2000. Phase III will be filed 15 days following the PUCN decision on Phases I
and II and will include full proposed tariffs for distribution service and all
other noncompetitive services. NVP and SPPC are also required to file a general
rate case three years after the start of retail competition in the state of
Nevada. The filing would give the companies the opportunity to recover certain
costs of the merger, provided they can demonstrate that merger savings exceed
certain merger costs. Merger costs are to be split among the non-competitive,
potentially competitive and unregulated services or businesses. An opportunity
to recover the non-competitive portion of the merger costs will be addressed in
the rate case that follows the start of competition in Nevada. The burden is on
NVP and SPPC to prove that merger savings exceed merger costs. NVP and SPPC will
also have the opportunity to recover goodwill in the same proceeding. For more
information regarding the Merger, see Note 2 of SPR's consolidated financial
statements.
GENERATION DIVESTITURE (SPR)
- ----------------------------
In June 1998, SPR announced a plan to divest its generation assets. This
business strategy was described in the SPR/NVP merger applications filed with
the PUCN and the FERC in July 1998.
The FERC, Department of Justice, and SEC approved the merger. The PUCN
conditionally approved the merger in December 1998, and one of the conditions
was the filing of the divestiture plan with the PUCN. The plan was filed in
April 1999, and included details about the auction process, market power
mitigation, sale of the assets in described bundles, description of the proposed
generation tariffs, description of the proposed independent system
administrator, and the description of the proposed power purchase contracts.
In June 1999, the PUCN approved a stipulation in the Merger docket case
with several conditions. Some of those conditions were: re-file the divestiture
plan with the PUCN; file the generation aggregation tariffs (GAT) at the FERC;
file the proposal for the ISA at the FERC; file proposals for the buyback or
purchase power contracts; and file proposals for mitigation of the QF and
purchase power contracts.
10
<PAGE>
A revised Divestiture Plan was filed with the PUCN in October 1999. The
PUCN held a hearing on December 28, 1999 and a stipulation was offered to the
Commission for approval. Approval was received in February 2000.
In accordance with the approved stipulation, SPR will be offering for sale
generation assets with peak capacity of approximately 2,985 megawatts (MW) with
approximately 1045 MW owned by SPPC and approximately 1,940 MW owned by NVP.
Potential buyers will be allowed to offer bids for different combinations of
assets or for a consolidated asset. The plants utilize either coal, natural gas,
or oil as fuel and are a mix of base load or peaking units consisting of
conventional steam turbines, combined-cycle, or combustion turbines.
SPR anticipates closing the sales of the generation assets during a period
beginning in the fourth quarter of 2000 and ending in 2003.
BUSINESS & COMPETITIVE ENVIRONMENT (NVP)
- ----------------------------------------
For a discussion of SPPC, see its 1999 Annual Report on Form 10-K attached
as an Appendix.
Transmission
- ------------
The FERC issued Order 2000 in December 1999. The order requires all
investor-owned utilities in the United States that own interstate transmission
to file their plans regarding Regional Transmission Organizations (RTO's) by
October 15, 2000. Utilities must file by that date, either joining an RTO or
stating why they are not joining one. The RTO must be operational by December
15, 2001 with congestion management in place one year later.
The FERC has required that RTO's be operated by independent entities that
are not participants in the energy market. The RTO must accommodate broad
participation by both private and public utilities, provide customer-efficient
price signals and be independent of market participants (i.e., sellers of energy
to end use customers). In addition, RTO rates must eliminate pancaking (multiple
rates on a transmission path), manage congestion and internal parallel flows,
deal effectively with non-RTO transmission owning entities (not under the FERC
jurisdiction) and provide correct investment incentives. The FERC has offered
the possibility of incentive ratemaking to RTO's that meet all the criteria for
a large-scale regional entity.
NVP, with SPPC, will explore strategic transmission options, using the
guidelines included in the Order 2000. Their response will be filed before the
October 15, 2000 deadline. The FERC filings for the start of Nevada
restructuring and the PGE acquisition will anticipate this October RTO filing.
Distribution
- ------------
NVP's electric business contributed $977.26 million (100%) of 1999
operating revenues. The system has an annual load factor of approximately 46.3%,
which is lower than the industry norm of 50% to 55%.
Winter peak loads are low relative to the summer peak. Winter load above
the base amount is driven by air handling in forced air furnaces. Summer peak
loads are driven by air conditioning demand. NVP's peak load increased an
average of 8.14% annually over the past five years, reaching 3,993 MW on July 1,
1999. NVP's total electric megawatt-hour (MWh) sales have increased an average
of 7.21% annually over the past five years.
11
<PAGE>
NVP's service territory continues to be one of the fastest growing areas in
the nation. A significant part of the growth in NVP's electric sales has
resulted from new residential, industrial, and gaming customers.
NVP's electric customers by class contributed the following toward 1999 and
1998 megawatt-hour sales:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
<S> <C> <C> <C> <C>
Residential 6,138,436 37.9% 5,735,698 38.7%
Office 875,716 5.4% 777,171 5.2%
Gaming, recreation, restaurants 3,009,526 18.6% 2,604,906 17.6%
Wholesale 829,551 5.1% 670,724 4.5%
Retail 462,918 2.9% 405,833 2.7%
All other & unclassified 4,873,063 30.1% 4,638,646 31.3%
-------------------- --------------------
Total 16,189,210 100.0% 14,832,978 100.0%
</TABLE>
Las Vegas, Nevada is one of the top resort destinations in the world. Ten
of the world's largest resorts are located in Las Vegas. The total number of
hotel rooms available is 128,000; 13,000 of those rooms were added in 1999.
Overall hotel room capacity is 20% higher than the national average. McCarran
International Airport has added international carriers and increased flights
into Las Vegas.
NVP supplies electricity to a residential customer base with demands of
6,138,436 MWh, 37.9% of total MWh demand. This demand has increased 7% from
1998.
In 1999, NVP worked with local economic development entities to expand and
diversify the economy of southern Nevada. In cooperation with local economic
development partners, NVP has developed joint marketing plans, which have
enabled recruiting and attraction efforts to be more efficient and far reaching.
Over 1,000,000 square feet of commercial or industrial space relocated or
expanded to southern Nevada in 1999, helping to build demand to 5,784,168 MWh.
The growth in 1999 of non-gaming and non-retail commercial and industrial
customers is reflective of the growth in recent years. Efforts to diversify
southern Nevada's economy are continuing to be successful. In contributing to
these efforts in 1999, NVP began focusing a part of its recruitment and
attraction efforts on the plastics/polymers and metals fabrication industries.
NVP's industrial and large commercial customers continue their interest in
the electric supply source options potentially available to them under
regulatory reforms currently being considered in Nevada. NVP continues to
prepare for a more competitive environment and has actively participated in
regulatory reform deliberations in Nevada. Upon opening the market to retail
access, one of the most significant regulations that will impact the
distribution business is the requirement to be the provider of last resort for
customers who do not chose a competitive supplier or who are unable to secure a
new supplier. Due to a proposed PUCN rule that the provider of last resort be
placed into a separate business function equivalent to an affiliate, recent PUCN
decisions regarding recovery of fuel expenses, and the stringent proposed
regulations, significant detrimental financial impacts are expected to occur. As
a result, assuming no regulatory relief, NVP is determined to exit the provider
of last resort requirement as quickly as possible. First NVP would seek to exit
the energy supply portion of the provider of last resort. Then, if current
legislation and regulation do not change, NVP would plan to exit other services,
including metering, billing and customer service functions. See Item 7, Nevada
Matters and FERC Matters.
12
<PAGE>
NVP's Megawatt hour sales to wholesale customers have increased at a rate
of 27% over the past year. During 1999, firm and non-firm sales to wholesale
customers comprised about 5% of total energy sales. The wholesale market can be
very competitive, and with the advent of the California Independent System
Operator (ISO) and Power Exchange (PX), there has been a definite change in the
margins. Volatility of annual sales volume to wholesale customers is highly
affected by weather and unit availability.
Percent
MWh of Total
------- --------
Firm Sales 306,537 37.4%
Non-firm Sales 466,418 56.9%
Firm Off-System Sales 47,085 5.7%
------- ------
Total 820,040 100.0%
======= ======
While the wholesale sales in 1999 represented 5% of NVP sales, they
represent only 2.9% of electric revenues. NVP utilizes wholesale sales to better
manage fuel and purchased power costs.
NVP has a program in place to provide customers with a choice of qualified
contractors to construct new distribution facilities. This program is especially
aimed at the developers of large-scale projects and has provided them with more
flexibility to coordinate the stages of their construction. NVP began
implementing an automated utility design and mapping system to be completed in
2000. This project will provide more accurate and timely designs. These designs
will provide a seamless map of the electric distribution system within our
coverage area. This will lead to a more efficient method to operate and maintain
our distribution systems.
MAJOR PROJECTS (NVP)
- --------------------
NVP'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 NVP's ability to raise necessary capital.
Of the $245.0 million projected for NVP's 1999 construction program, $224.0
million was actually spent. Internally generated funds provided 19.5% of all
construction expenditures.
Estimated construction expenditures of NVP for 2000 are $223.1 million.
NVP may utilize internally generated cash and proceeds from the issuance of
securities to meet capital requirements.
The following NVP major projects have been approved in previous resource
plans, and have been financed by internally generated cash and/or the proceeds
from various forms of debt and preferred securities. For a description of SPPC's
Major Projects and Financing please see its Annual Report on Form 10-K for the
period ended December 31, 1999, attached as an Appendix.
Crystal Transmission Project
- ----------------------------
Crystal Transmission is a 500 kilovolt (kV) transmission project that was
placed in service in May 1999. Total project costs incurred through December 31,
1999 were $97.8 million. Actual costs incurred in 1999 were $16.0 million.
Estimated costs for 2000 are $.1 million.
13
<PAGE>
River Mountain Project
- ----------------------
River Mountain is a 230kV joint transmission project with the Colorado
River Commission. Total project costs incurred through December 31, 1999 were
$4.8 million. Actual costs for 1999 were $4.6 million. Estimated costs for 2000
are $29.3 million.
FINANCING PROGRAMS (SPR and NVP)
For a discussion of SPPC, see its 1999 Annual Report on Form 10-K attached
as an Appendix.
On July 28, 1999, immediately following the completion of the merger
between SPR and NVP, SPR put into place two unsecured revolving credit
facilities totaling $500 million. The first is a $150 million 364-day unsecured
revolving credit facility that is convertible at SPR's election into a one-year
term loan. The second is a $350 million three-year unsecured revolving credit
facility. These facilities replaced SPR's previous credit facility and may be
used for working capital and general corporate purposes, including commercial
paper backup. At the same time NVP put into place a $150 million 364-day
unsecured revolving credit facility that is convertible at NVP's election into a
one-year term loan. This facility replaced the previous credit facility for NVP
and may also be used for working capital and general corporate purposes,
including commercial paper backup. In addition, immediately following the
merger, SPR and NVP established new commercial paper programs. SPR issued $456.2
million of commercial paper to provide temporary funding of the cash portion of
the merger consideration and NVP issued $90 million of commercial paper to pay
off short-term debt.
SPR has filed a registration statement with the SEC for the issuance of up
to $500 million of debt securities and/or trust-preferred securities. Although
no securities have been issued to date under this registration statement, SPR
intends to issue the entire registered amount as debt securities by the end of
the first quarter, or early in the second quarter, of 2000. The proceeds from
such issuance will be used to retire short-term indebtedness, which was incurred
to provide temporary funding of the cash consideration due in the merger of SPR
with NVP
On April 1, 1999, SPR redeemed $10,000,000 of senior notes, Series D,
leaving the Series E $10,000,000 senior notes, which mature April 1, 2000.
On October 1, 1999, NVP redeemed $45,000,000 Series Y, 6.93%, of First
Mortgage Bonds.
On October 15, 1999, NVP issued $100 million of floating rate notes
("Notes") due October 6, 2000. Interest on the Notes, payable quarterly,
commenced on January 15, 2000. The interest rate on the Notes for each interest
period to maturity is a floating rate, subject to adjustment every three months.
This quarterly rate is equal to the London Interbank Offered Rate (LIBOR) for
three-month U.S. dollar deposits plus a spread of 0.79%. The Notes will not be
entitled to any sinking fund and will be redeemable, in whole, at the option of
NVP beginning on April 15, 2000 and on the 15/th/ day of each month thereafter.
The proceeds of this financing were used to pay down commercial paper.
On October 20, 1999, NVP redeemed $10,000,000 Series Z, 8.5%, of First
Mortgage Bonds. On October 15, 1999, PaineWebber offered to Nevada Power Company
$10,000,000 par amount of the Series Z, 8.5% bonds due January 1, 2023 at a
price of $101.65. On October 15, 1999 NVP accepted Paine Webber's offer of
$101.65 plus accrued interest on $10,000,000 par amount of the Series Z 8.5%
bonds and settled on October 20, 1999. The Series Z bonds are callable by NVP on
January 1, 2003 at a price of $103.71.
14
<PAGE>
See Note 9 of SPR's consolidated financial statements for more information
related to long-term debt.
CONSTRUCTION PROGRAM (NVP)
- --------------------------
Gross construction expenditures for 1999, including allowance for funds
used during construction (AFUDC) and contributions in aid of construction were
$224.9 million and for the period 1995 through 1999 were $1,141.8 million.
Estimated construction expenditures for 2000 and the period from 2001 to 2004
are as follows (dollars in thousands):
Total
2000 2001-2004 5-Year
--------------------------------
Total construction expenditures $223,095 $890,112 $1,113,207
AFUDC (11,400) (45,062) ($56,462)
Net salvage, including cost of removal (1,100) (4,400) (5,500)
Net customer advances and
contributions in aid of construction (20,080) (80,320) (100,400)
--------------------------------
Total cash requirements $190,515 $760,330 $ 950,845
================================
Total construction expenditures estimated for 2000 and the 2001-2004 period
consist of the following (dollars in thousands):
Total
2000 2001-2004 5-Year
-------- --------- ----------
Electric Facilities:
Distribution $135,060 $504,906 $ 639,966
Generation 9,134 8,770 17,904
Transmission 51,576 275,261 326,837
Other 27,325 101,175 128,500
--------------------------------
$223,095 $890,112 $1,113,207
================================
15
<PAGE>
FACILITIES & OPERATIONS (NVP)
- -----------------------------
Total System
- ------------
NVP continues to maintain a wide variety of resources in its generation
system. During 1999, NVP generated 56.7% of its total electric energy
requirements in its own plants, purchasing the remaining 44.7% as shown below:
Megawatt- Percent
Hours of Total
------------- ------------
Company Generation
------------------
Gas/Oil 3,710,876 23.0%
Coal 5,457,087 33.8%
------------- ------------
Total Generated 9,167,963 56.7%
------------- ------------
Purchased Power
---------------
Long-Term Firm:
Hydro 638,527 4.0%
Utility Purchases 215,515 1.4%
Non-Utility Purchases
Other 2,363,931 14.6%
Spot Market 4,644,012 28.7%
------------- ------------
Total Purchased 7,861,985 48.7%
------------- ------------
Less Net Sales -872,302 -5.4%
------------- ------------
Total 16,157,646 100.0%
============== ============
Risk Management
- ---------------
NVP recognizes that the management of energy commodity (electricity,
natural gas, coal, and oil) price risk is an essential component of its efforts
to manage revenues and expenses. As a result of the merger of SPR and NVP, the
Board of Directors of the combined company requested that management review and
consolidate the Risk Management Programs of the two utilities. SPPC and NVP
engaged the services of a leading energy risk management consulting company to
review existing policies and procedures, make any recommendations to the
existing Program, and implement the revised Program. That project led the
companies to adapt revised policies and procedures, implement new IT systems to
track any commodity price exposures, as well as focus on potential "Earnings-at-
Risk" which measures the amount of exposure that the companies have to energy
prices at any point in time.
Load and Resources Forecast
- ---------------------------
The electric customer growth rate was 5.9%, 6.2%, and 6.8% in 1999, 1998
and 1997, respectively. The annual retail electricity sales reached 16,157,646
megawatt-hours in 1999, which represents an increase 8.2% over 1998. The peak
electric demand rose from 3,855 megawatts in 1998 to 3,993 megawatts in 1999.
16
<PAGE>
The Nevada Legislature mandated retail access to alternative electric
suppliers. While the opening date of competition is not yet known, once access
begins, NVP will continue to be required to supply electricity to customers as
the "provider of last resort". It is expected that some customers will elect to
receive their electric supply from other suppliers; however, reasonable
estimates of the number and timing of customers switching are not yet available.
The proposed "provider of last resort" regulations have highlighted NVP's
exposure to fuel price risks. The projections shown below are forecasts of the
load to be provided to all of NVP's current customers, and therefore include
demand that may actually be met by other electric suppliers.
NVP has committed as part of the merger agreement with PUCN to divest its
generation facilities to enhance competition in a deregulated environment.
Current plans call for the divestiture to occur in the year 2000. Until such
time, NVP will continue to provide energy through generation and purchased power
to meet both summer and winter peak loads. NVP's actual total system capability
and peak loads for 1999, and as estimated for summer peak demand through 2001
(assuming no curtailment of supply or load and normal weather conditions), are
indicated below:
<TABLE>
<CAPTION>
Capacity at 1999 Peak Forecast Summer Peak
------------------------------------------------
MW % 2000 2001
------------------------------------------------
<S> <C> <C> <C> <C>
NVP Generation:
Existing (1) 1,939 43% 1,939 0
------------------------------------------------
Purchases
Long/Short-Term Firm (2) (3) 1,875 42% 2,091 4,490
Non-Utility Generators (4) 515 12% 515 305
Wholesale Sales 55 1% 29 32
------------------------------------------------
Subtotal 2,335 52% 2,577 4,763
------------------------------------------------
Additional Required 198 5% 260 267
Total System Capacity 4,472 100% 4,776 5,030
================================================
Net System Peak (5) 3,993 89% 4,264 4,491
Planning Reserves 479 11% 512 539
------------------------------------------------
Total 4,472 100% 4,776 5,030
================================================
Growth over previous year 6.8% 5.3%
</TABLE>
(1) Assumes divestiture is complete by peak season 2001.
(2) Long-term purchases include NVP's allotment of Hoover energy. Values are
net of losses.
(3) Includes potential short-term firm purchases that are not under contract.
Values shown represent purchases within existing transmission system
limits.
(4) Includes Sunpeak IPP units, which will be divested with NVP's generating
units.
(5) The system peak shown for 1999 is the actual system peak of 3.993 MW, which
occurred on July 1, 1999.
NVP plans its system consistent with the Western System Coordinating
Council guidelines, which recommends planning reserves in excess of required
operating reserves. The "Additional Required" represents the difference between
the planning reserves and the operating reserves needed for the system. These
additional reserves will be met, if needed, by short-term purchases through
2001.
17
<PAGE>
Generation
- ----------
The following is a list of NVP's generation plants including their megawatt
(MW) summer net capacity, the type of fuel that they use to generate, and the
year(s) that the unit(s) was (were) installed.
<TABLE>
<CAPTION>
Number
of MW Year(s)
Name Type/Fuel Units Capacity Installed
---- --------- ------ -------- ---------
<S> <C> <C> <C> <C>
Clark Station Steam/Gas Turbine, Combined 1955, 1957, 1961, 1973,
Cycle/Natural Gas, Oil 6 687 1993, 1994
Reid Gardner (1) Steam/Coal 4 580 1965, 1968, 1976, 1983
Navajo (2) Steam/Coal 3 255 1974
Mohave (3) Steam/Coal 2 196 1971
Sunrise Steam/Gas Turbine, Natural Gas, Oil 2 149 1964, 1974
Harry Allen Gas Turbine, Natural Gas, Oil 1 72 1995
--------
1,939
========
</TABLE>
(1) This represents 24 megawatts of base load capacity and 226 megawatts of
peaking capacity. Reid Gardner Unit No. 4, placed in service July 25, 1983,
is a coal-fired unit, which is owned 32.2% by NVP and 67.8% by the
Department of Water Resources of the State of California (CDWR). NVP is
entitled to use 100% of the unit's peaking capacity for 1,500 hours each
year. NVP is entitled to 9.6% of the first 250 megawatts of capacity and
associated energy. NVP had options for the use of increasing amounts of
capacity and energy from the unit beginning in 1998 so that NVP would have
been entitled to use all of the unit's output 15 years from that date.
However, the 1998 through 2003 options for 10.17 MW per year were not
exercised and have expired.
(2) This represents NVP's 11.3% undivided interest in the Navajo Generating
Station as tenant in common without right of partition with five other non-
affiliated utilities.
(3) This represents NVP'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.
Purchased Power
- ---------------
NVP maintains and utilizes a diverse portfolio of resources to minimize its
net average system operating costs. These resources consist of contracted and
spot market supplies, as well as its own generation. During the last several
years, NVP has witnessed a dramatic increase in the price of market energy,
compared to previous years. Some of this is reflective of the overall increase
in electricity costs throughout the country, the changing of regulatory
environments and the opening of new and/or deregulated markets.
NVP is a member of the Western Systems Power Pool and the Southwest Reserve
Sharing Group (SWRSG). NVP's membership in the SWRSG has allowed it to network
with other utilities in an effort to more efficiently use its resources in the
sharing of responsibilities for reserves.
NVP purchases both forward firm energy (typically in blocks) and spot
market energy based on economics, operating reserve margins and unit
availability. NVP has been able to efficiently manage its growing loads by
utilizing its generation resources in conjunction with buying and selling
opportunities in the market.
18
<PAGE>
NVP's peak electric demand was experienced on July 1, 1999 with a peak
system load of 3993 MWs. This demand plus a reserve margin was served by a
combination of company owned generation, and firm and short-term power
purchases.
NVP 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. NVP's allocation of hydro capacity is 235MWs.
NVP has a contract to purchase 210 MWs from an independent power producer.
The contract became effective June 8, 1991 and will continue through May 31,
2016.
According to the regulations of the Public Utility Regulator Policies Act
(PURPA), NVP is obligated, under certain conditions, to purchase the generation
produced by small power producers and cogeneration facilities at costs
determined by the appropriate state utility commission. Generation facilities
that meet the specifications of the regulations are known as qualifying
facilities (QFs). As of December 31, 1999, NVP had a total of 305 MWs of
contractual firm capacity under contract with four QFs. All QF contracts
currently delivering power to NVP at long-term rates have been approved by the
PUCN and have QF status as approved by the FERC. The QFs are as follows:
Net
Qualifying Facility Contract Contract Capacity
Start End (MW)
-------------------------------------------------------------
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
-------
Total 305
=======
Energy purchased by NVP from the QFs constituted 30% of the purchase power
requirements and 15% of the net system requirements during 1999. All of the QFs
are cogenerators providing steam for various products and businesses.
Transmission
- ------------
The management of SPR is responsible for exploring strategic transmission
options for both NVP and SPPC. NVP 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. NVP has 32 miles of 230-
kilovolt lines from Mead Substation to Las Vegas. This line, together with two
NVP-owned 10-mile 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 NVP's Winterwood Substation was energized
in 1988. This line brings the additional Hoover energy to the Las Vegas Area and
increases NVP's interconnected transmission capabilities. NVP shares ownership
in 76 miles of 500 kilovolt transmission line from the Navajo Generating Station
to the Moenkopi Switchyard in Coconino County, Arizona (the
19
<PAGE>
Southern Transmission System) and 224 miles of 500 kilovolt transmission line
from the Navajo Generating Station to the Crystal Substation and 52 miles of 500
kilovolt transmission line from Crystal Substation 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 25 mile - 230-kilovolt lines transmit power
from the Reid Gardner Station located near Glendale, Nevada to the Harry Allen
Substation.
In 1990, NVP 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 Northwest Substation which is located in Las Vegas. NVP 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
Harry Allen Substation, NVP 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.
In 1999, NVP added the Crystal Transmission Project. This project increased
the transfer capability into the Las Vegas Valley up to 950 MWs by looping the
Navajo-McCullough 500 kilovolt line into the new Crystal substation (located 6
miles northeast of Harry Allen station) and adding 54 miles of 230 kilovolt
transmission lines from Crystal substation to Harry Allen station and into the
Las Vegas Valley. The project also provided necessary voltage and flow control
for the northern Las Vegas Valley by looping all 230 kilovolt lines in the
vicinity into Harry Allen substation and adding two 672 kilovolt-ampere
transformers and two 672 kilovolt-ampere phase shifting transformers at Crystal
substation. In total, NVP has 386 miles of 230 kilovolt, 344 miles of 138
kilovolt and 485 miles of 69 kilovolt transmission lines in service.
Fuel Availability
- -----------------
NVP's 1999 fuel requirements for electric generation were provided by
natural gas (40.6%), coal (59.3%) and oil (0.1%).
The average costs of coal, gas and oil for energy generation per million
British thermal units (MMBtu) for the years 1995 - 1999, along with the
percentage contribution to total fuel requirements were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
Average Consumption Cost & Percentage Contribution to Total Fuel Requirements
Gas Coal Oil
--- ---- ---
$/MMBtu Percent $/MMBtu Percent $/MMBtu Percent
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1999 2.27 40.6% 1.28 59.3% 4.01 0.1%
1998 2.35 33.0% 1.15 67.0% *
1997 2.25 33.0% 1.39 67.0% *
1996 1.95 24.0% 1.39 76.0% *
1995 1.51 23.0% 1.44 77.0% *
* Oil was less than .1% of consumption
---------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Coal delivered to the Reid Gardner Station originates from various mines in
the Utah coalfields and is delivered to the Station via the Union Pacific. The
Union Pacific Rail Transportation contract was effective January 1, 1996 and
expires December 31, 2000. This contract provides for deliveries from the Provo,
Utah interchange to Reid Gardner Station in Moapa, Nevada.
The Union Pacific Railroad originates a portion of NVP's contract and spot
coal in the Price, Utah area for delivery to the Provo interchange, then to the
Reid Gardner Station. This contract expired on December 31,1999.
The Utah Railway contract originates the remainder of NVP's Price area
supplies. This contact expires on December 31, 2000 with provisions for
extension of the term. All of NVP's rail transportation contracts contain
certain tonnage requirements and railroad service criteria.
Coal for both the Mohave and Navajo Stations is obtained from surface
mining operations conducted by Peabody Coal Company 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.
NVP purchases natural gas on a firm, fixed and indexed price basis from the
Rocky Mountain, San Juan or Permian Supply Basins. As sufficient, economic gas
supplies are available on seasonal, monthly and daily terms, NVP has no long
term gas supply contracts.
Gas is transported to the Clark and Sunrise stations via El Paso Natural
Gas Company from the San Juan and Permian Basins and by Kern River Gas
Transmission Company from the Rocky Mountain Basin. As there is sufficient
economically priced pipeline capacity in the region, NVP has not entered into
any long-term interstate transportation contracts.
Local transportation service to Clark and Sunrise is provided under a 32-
year transportation services contract with Southwest Gas Company signed in 1995.
This contact provides firm service and contains certain operating and nominating
provisions. The Harry Allen Station is directly connected to Kern River.
No. 2 Fuel Oil provides a secondary fuel for Clark, Sunrise and Harry Allen
Stations and is used in the igniters at Reid Gardner.
GENERAL REGULATION (NVP)
- ------------------------
NVP is subject to the jurisdiction of the PUCN with respect to rates,
standards of service, siting of and necessity for generation and certain
transmission facilities, accounting, issuance of securities and other matters
with respect to electric operations. NVP submits resource plans regarding its
electric operations to the PUCN for approval.
Under federal law, NVP is subject to certain jurisdictional regulation,
primarily by the FERC. The FERC has jurisdiction under the Federal Power Act
with respect to rates, service, interconnection, accounting, and other matters
in connection with NVP's sales of electricity for resale and the transmission of
energy. The FERC also has jurisdiction over the natural gas pipeline companies
from which NVP takes service.
21
<PAGE>
As a result of regulation, many of the fundamental business decisions of
NVP, as well as the rate of return it is permitted to earn on its utility
assets, are subject to the approval of governmental agencies.
NVP is also subject to regulation by environmental authorities. See
Environment.
RATE PROCEEDINGS (NVP)
- ----------------------
Nevada Matters
- --------------
Electric Industry Restructuring
- -------------------------------
During the 1997 session, the Nevada Legislature passed Assembly Bill 366
(AB366). AB366 was a comprehensive bill that introduced competition for electric
and gas retail services. Since the fall of 1997, the PUCN has been developing
regulations to implement AB366. In the 1999 session, the legislature passed
Senate Bill 438 (SB438), which significantly modified many provisions of AB366.
These two pieces of legislation substantially alter the way the company is
regulated and how it will serve its customers.
Non-price Terms and Conditions for Distribution Service
- -------------------------------------------------------
On February 2, 1999, NVP filed its non-price terms and conditions for
unbundled distribution service. A stipulation resolving most issues and agreeing
to further filings on unresolved issues was filed with the PUCN on April 9,
1999, and subsequently approved by the Commission on April 22, 1999.
Settlements regarding the unresolved issues were subsequently filed and approved
by the Commission.
Unbundling of Utility Services
- ------------------------------
On April 1, 1999, in accordance with the merger order and the
implementation of AB366, NVP filed a revenue requirements and unbundling study
with the PUCN (the "Compliance Filing. The Compliance Filing included the
development of an electric revenue requirement for the test period 1998. The
Compliance Filing regulation requires the revenue requirement development to be
in the form used for rate cases. In the unbundling study, the revenue
requirement was assigned and allocated to a number of service components
including generation, aggregation, transmission, distribution, metering,
billing, and customer services. On September 23, 1999, the PUCN issued an
interim order on NVP's April 1, 1999 Compliance Filing. The order contained the
PUCN's decision on revenue requirements, return on equity, depreciation, and the
unbundling study. NVP did not utilize the order's revenue requirement, return on
equity or depreciation rates from phase II of the case because SB438 legally
mandated that NVP use its July 1, 1999 revenue requirement.
Pricing of Distribution Service
- -------------------------------
On October 12, 1999, NVP filed final versions of the approved non-price
terms and conditions and rates reflecting a revenue requirement in accordance
with SB 438. Hearings were held in January 2000. A decision is expected in 2000.
Deferred Energy Filing
- ----------------------
NVP filed a deferred energy case on July 15, 1999, covering the period from
June 1, 1998 through May 31, 1999. On September 30, 1999, NVP filed an update
through August 31, 1999. Hearings began in January 2000. On February 4, 2000 the
PUCN issued an order that rejected NVP's updated September 30, 1999 deferred
energy filing. In addition, on March 21, 2000 the PUCN made
22
<PAGE>
available a draft order that indicated a substantial reduction in NVP's
requested rate relief on the remaining $44 million included in the case. NVP
expects a final decision to be issued on March 27, 2000, which will
substantially reflect the decision in the draft order. As a result of these
decisions, NVP recognized a reserve for previously deferred energy and imputed
capacity costs of $80 million. $56 million of the reserve is associated with the
February 4 decision and $24 million is associated with the March 21 decision.
NVP intends to appeal the decisions.
See Item 7, Management's Discussion and Analysis, Nevada Matters for a
discussion of Nevada regulatory issues.
FERC Matters
- ------------
On May 29, 1999, NVP filed an application with the FERC to increase its
Open Access Transmission rates. On November 24, 1999, an unopposed motion to
suspend the procedural schedule to allow consummation of a settlement was filed
with the Commission. The Settlement was filed February 8, 2000, and the proposed
rates became effective on March 1, 2000.
On March 31, 1999, NVP filed with the FERC for approval of generation
tariffs, which contain the rates, terms and conditions under which the new
owners of NVP's generation would operate after divestiture. The FERC approved
the tariffs on November 1, 1999. In compliance with the FERC's November 1, 1999
order, NVP filed pro forma service agreements for the approved tariffs on
November 16, 1999 which were subsequently approved on December 16, 1999.
On July 23, 1999, NVP and SPPC submitted a filing to create the Mountain
West Independent Scheduling Administrator. The filing was made to request
approval of certain of the tariffs and agreements with respect to the
transmission services of NVP and SPPC. On January 27, 2000, the FERC issued an
order approving with modifications the Mountain West ISA proposal. Proceedings
before the PUCN are still pending.
See Item 7, FERC Matters for more discussion of FERC regulatory issues.
For regulatory issues related to SPPC, refer to its Annual Report on Form 10-K
for the period ending December 31, 1999, which is attached as an appendix.
ENVIRONMENT (NVP AND LOS)
- -------------------------
For a discussion of environmental issues related to SPPC, refer to its 1999
Annual Report on Form 10-K, which is attached as an Appendix.
General
- -------
As with other utilities, NVP is subject to federal, state and local
regulations governing air and water quality, hazardous and solid waste, land use
and other environmental considerations. Nevada's Utility Environmental
Protection Act requires approval of the PUCN prior to construction of major
utility generation and transmission facilities. The United States Environmental
Protection Agency (EPA), Nevada Division of Environmental Protection (NDEP), and
Clark County Health District (CCHD) administer regulations involving air
quality, water pollution and solid, hazardous and toxic waste. SPR's board of
directors has a comprehensive environmental policy and separate board committee,
which oversees corporate performance and achievements, related to the
environment.
23
<PAGE>
1999 Activities
- ---------------
Lands of Sierra, a wholly-owned subsidiary of SPR, owns property in North
Lake Tahoe, California, which is leased to independent condominium owners. The
property has both soil and groundwater petroleum contaminate resulting from a
historic underground fuel tank. Additional contaminate from a third party fuel
tank on the property has also been identified and is undergoing
characterization. Remediation costs are estimated from $60,000 - $250,000.
As part of the generation divestiture process, Phase I and/or Phase II
Environmental Assessments were conducted at NVP's Harry Allen, Clark, Sunrise
and Reid Gardner facilities. Additional environmental assessments will be
conducted in 2000 to further characterize the sites. Remediation costs are
unknown because characterization is not complete.
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. To meet these requirements, NVP
installed additional pollution control technology at the Reid Gardner Station.
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
Generation Station (including NVP), alleging violations of the Clean Air Act
regarding emissions of sulfur dioxide and particulates. An additional plaintiff,
National Parks and Conservation Association later joined the suit. The plant
owners and plaintiffs have had numerous settlement discussions and filed a
proposed settlement with the court on October 6, 1999. The consent decree,
approved by the court in November, established emission limits for sulfur
dioxide and opacity and required installation of air pollution controls for
sulfur dioxide, nitrogen oxides and particulate matter. The new emission limits
must be met by January 1, 2006 and April 1, 2006, for the first and second
units, respectively. However, if the owners sell their entire ownership
interest, with a closing date prior to December 30, 2002, then the new emission
limits become effective 36 months and 39 months from the date of last closing
for the two respective units. The estimated cost of new controls is $300
million. As a 14% owner in the Mohave Station, NVP's costs could be $42 million.
Also, the United States Congress authorized the EPA to study the potential
impact Mohave may have on visibility in the Grand Canyon area. A final report of
the study results was released in March 1999. The study acknowledges that sulfur
dioxide emissions from Mojave are transported to the Grand Canyon. EPA has
solicited information to determine whether visibility impairment in the Grand
Canyon can be reasonably attributed to Mohave. If EPA determines that
significant visibility impairment is reasonably attributable to the station, EPA
could initiate a review for Best Available Retrofit Technology. Based upon
indications from EPA and the National Park Service, the Plant owners believe
that terms of the settlement of the suit discussed above are expected to be
reflected in a State Implementation Plan for Nevada and resolve any concerns of
EPA regarding visibility impairment.
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% owner of Navajo, NVP was required to fund an
estimated $48 million for installation of the scrubbers. The first of three
scrubber units was placed in commercial operation in November 1997, the second
scrubber in September 1998, with the last scrubber placed in operation in June
1999. Currently, the project is 98% complete. NVP spent approximately $47.6
million on the scrubbers' construction. In 1992, NVP received resource-planning
approval from the PUCN for its share of the cost of the scrubbers.
24
<PAGE>
NVP recently determined that while constructing the McCullough-Arden
transmission line, access roads were created within a wilderness study area in
violation of the Bureau of Land Management (BLM) Right of Way Grant. NVP's
preliminary estimate for restoration costs is $200,000, which was reserved as of
December 31, 1999.
In May 1997, the NDEP ordered NVP to submit a plan to eliminate the
discharge of Reid Gardner Station wastewater to groundwater. The Order also
required a hydrological assessment of groundwater impacts in the area. In June
1999, NDEP determined that wastewater ponds have degraded groundwater quality.
In August 1999, NDEP issued a discharge permit to Reid Gardner Station and an
Order that requires all wastewater ponds to be closed or lined with impermeable
liners over the next 10 years. This Order also required NVP to submit a Site
Characterization Plan to NDEP to ascertain impacts. Technical information from
the Plan will be used to develop a corrective action plan and allow NVP to
determine an estimate of remediation costs for cleanup. New pond construction
and lining costs are estimated at $20,000,000.
Also, at the Reid Gardner Station, the NDEP has determined that there is
additional groundwater contamination that resulted from oil spills at the
facility. NDEP has required submitting a corrective action. The extent of
contamination has not yet been determined. However, management does not expect
this item to materially affect the financial position of SPR or NVP.
In May NDEP issued an order to eliminate the discharge of NVP's Clark
Station wastewater to groundwater. The Order also required a hydrological
assessment of groundwater impacts in the area. $565,000 will be spent in the
next two years to line existing ponds. The extent of contamination has not been
determined. However, management does not expect this item to materially affect
the financial position of SPR or NVP.
In August NDEP issued an order to correct deficient ambient air monitoring
quality control procedures at the NVP Reid Gardner Station. NVP has agreed to
conduct a supplemental environmental project limited to $9,000 in lieu of a
fine.
Nevada Electric Investment Company (NEICO), a subsidiary of NVP in 1999,
owns property in Wellington, Utah, which was the site of a coal washing and load
out facility. The site now has a reclamation estimate supported by a bond of
$4.9 million with the Utah Division of Oil and Gas Mining. The property was
under contract for sale and the contract required the purchaser to provide $1.3
million in escrow towards reclamation. However, the sales contract was recently
terminated and NEICO has taken title to the escrow funds. It is NEICO's
intention to sell the property.
GENERAL - EMPLOYEES
- -------------------
SPR and its subsidiaries had 3,250 employees as of December 31, 1999, of
which 1,667 were employed by NVP and 1,430 were employed by SPPC. NVP's current
contract with the International Brotherhood of Electrical Workers Local #396,
which covers 53.5% of NVP's workforce, was renegotiated in 1997 and 1998, and is
in effect until February 1, 2002. The contract provides for a 4% general wage
increase for bargaining unit employees beginning February 2, 1998, with 3%
increases in 1999, 2000, and 2001. Nevada is a "right-to-work" state.
A description of SPPC employee issues is contained in its Annual Report on
Form 10-K for the year ended December 31, 1999, attached as an Appendix.
25
<PAGE>
GENERAL - FRANCHISES
- --------------------
NVP and SPPC have nonexclusive local franchises or revocable permits to
carry on its business in the localities in which its respective operations are
conducted in Nevada and California. The franchise and other governmental
requirements of some of the cities and counties in which NVP and SPPC operate
provide for payments based on gross revenues. During 1999, NVP and SPPC
collected $34.4 million in franchise or other fees based on gross revenues. They
also paid and recorded as expense $0.4 million of fees based on net profits.
<TABLE>
<CAPTION>
Franchise Type of Service Expiration Date
---------------------------------------------------------------------------------
<S> <C> <C> <C>
NVP:
Las Vegas Electric November 2029
Clark County Electric May 2004
Nye County Electric May 2006
City of Henderson Electric November 1999
SPPC:
Reno Electric, Gas and Water January 2006
Sparks Electric May 2006
Sparks Gas May 2007
Sparks Water April 2004
Carson City Electric February 2012
City of Elko Electric April 2017
City of South Lake Tahoe Electric April 2018
Washoe County Gas and Water May 2015
Washoe County Electric September 2015
Eureka County Electric July 2018
</TABLE>
NVP and SPPC apply for renewal of franchises in a timely manner prior to
their respective expiration dates.
GENERAL - RESEARCH AND DEVELOPMENT
- ----------------------------------
SPR has invested in Nth Power Technologies (Nth), a venture capital fund
that invests in developing technology companies. Nth has made several
investments that may result in SPR strengthening its market position and
developing new products and services.
ITEM 2. PROPERTIES
The general character of SPR's principal facilities is discussed in Item 1
- - Business.
A complete description of the properties of SPPC is contained in its Annual
Report on Form 10-K for the year ended December 31, 1999, attached as an
appendix.
ITEM 3. LEGAL PROCEEDINGS
SPR, through the course of its normal business operations, is currently
involved in a number of legal actions, none of which has had or, in the opinion
of management, is expected to have a significant impact on its financial
position or results of operations.
26
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Pursuant to General Instruction G, the following information is included as an
additional item in Part I, as of December 31, 1999:
27
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT (SPR)
The information with respect to SPR's directors called for by Item 10 of
Part III is hereby incorporated by reference from the section titled "Election
of Directors and Beneficial Ownership" of SPR's definitive proxy statement to be
filed pursuant to regulation 14A.
The following are current executive officers of the companies indicated and
their ages as of December 31, 1999. There are no family relationships among
them. Officers serve a term which extends to and expires at the annual meeting
of the Board of Directors or until a successor has been elected and qualified:
Michael R. Niggli, 50, Chairman and Chief Executive Officer
Mr. Niggli was elected Chairman and Chief Executive Officer of SPR, and
Chairman of NVP and SPPC upon the close of SPR's merger with NVP in July 1999.
He joined NVP as President and Chief Operating Officer in February 1998. He was
appointed by NVP's Board of Directors as Chief Executive Officer effective
February 23, 1999 and as Chairman on June 10, 1999. Prior to joining NVP, Mr.
Niggli 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.
Malyn K. Malquist, 47, President and Chief Operating Officer
Mr. Malquist was elected President and Chief Operating Officer of SPR,
President & Chief Executive Officer of NVP and SPPC upon the close of SPR's
merger with NVP in July 1999. He was previously elected President and Chief
Executive Officer of SPR in January 1998. In February 1998, Mr. Malquist was
elected to the additional position of Chairman. Mr. Malquist continued to hold
the positions of Chairman and Chief Executive Officer until SPR's merger with
NVP in July 1999. He was Sr. Vice President - Distribution Services Business
Group and Principal Operations Officer from August 1996 to January 1998. He
served as Senior Vice President and Chief Financial Officer of SPR from April
1994, when he joined SPR, until August 1996. Prior to joining SPR, Mr. Malquist
was with San Diego Gas and Electric, where from 1978 he held various financial
positions, including Treasurer in 1990 and Vice President in 1993.
William E. Peterson, 52, Senior Vice President, General Counsel and Corporate
Secretary
Mr. Peterson was elected to his present position in January 1994, and holds
the same positions with NVP and SPPC. He was previously Senior Vice President,
Corporate Counsel for SPPC from July 1993 to January 1994. Prior to joining SPR
in 1993, he served as General Counsel and Resident Agent for SPR since 1992,
while a partner in the Woodburn and Wedge law firm. He was a partner in the
Woodburn and Wedge law firm since 1982.
Mark A. Ruelle, 38, Senior Vice President, Chief Financial Officer and Treasurer
Mr. Ruelle was elected to his present position March 1, 1997, and holds the
same positions with NVP and SPPC. Prior to joining SPR, Mr. Ruelle was
President of Westar Energy, a subsidiary of Western Resources in 1996, and
before that, served as Vice President, Corporate Development for Western
Resources in 1995. Mr. Ruelle was with Western Resources since 1987 and served
in
28
<PAGE>
numerous positions in regulatory affairs, treasury, finance, corporate
development, and strategy planning.
Steven C. Oldham, 49, Vice President Corporate Development and Strategic
Planning for SPR
Mr. Oldham was elected to his current position in November 1996. His
previous executive positions include Vice President - Strategic Development;
Vice President - Information Resources, Corporate Redesign and Merger
Transaction; Vice President Regulation and Treasurer; and Treasurer and Director
of Finance. Mr. Oldham has been with SPR since 1976.
Mary O. Simmons, 44, Controller
Ms. Simmons was elected to her current position in June 1997, and holds the
same position with NVP and SPPC. Her previous positions include: Director,
Water Policy and Planning; Director, Budgets and Financial Services; and
Assistant Treasurer, Shareholder Relations for SPR. Ms. Simmons, a certified
public accountant, has been with SPR since 1985.
Steven Boss, 53, President, Sierra Pacific Energy Company/Nevada Power Services
Mr. Boss was elected to his current position in March 1999. He previously
was a consultant/attorney at Guy, Boss & Associates. Prior to this, he held the
position of Chief Executive Officer at Natural Gas Transmission Services, Inc.
Mr. Boss left SPR in February 2000 coincident with SPR's exit from the
unregulated retail energy business.
The following persons are Executive Officers of NVP (and SPPC) but do not
hold executive offices of SPR:
Steven W. Rigazio, 45, Senior Vice President, Energy Delivery
Mr. Rigazio was elected Senior Vice President, Energy Delivery, in July
1999. Previously he was Vice President, Finance and Planning, Treasurer, Chief
Financial Officer effective October 1993. Other management positions include
Vice President and Treasurer, Chief Financial Officer; Vice President, Planning;
Director of System Planning; Manager of Rates and Regulatory Affairs; and
Supervisor of Rates and Regulations. Mr. Rigazio has been with NVP since 1984.
David G. Barneby, 54, Vice President, Generation
Mr. Barneby was elected Vice President, Generation, in July 1999.
Previously he was elected Vice President, Power Delivery effective October 1993.
Mr. Barneby has been with NVP since 1965, and other management positions include
Vice President, Generation; Manager, Generation Engineering and Construction;
and Superintendent and Project Manager, Reid Gardner Unit 4.
Jeffrey L. Ceccarelli, 45, Vice President, Distribution Services, New Business
Mr. Ceccarelli was elected Vice President, Distribution Services, New
Business, in July 1999. He was elected Vice President, Distribution Services in
February 1998. Prior to this, he served as Executive Director, Distribution
Services. From January 1996 through January 1998, Mr. Ceccarelli was Director,
Customer Operations. A civil engineer, Mr. Ceccarelli has been with SPPC since
1972 and has held numerous management positions in operations, customer service,
design and engineering.
29
<PAGE>
Gloria T. Banks Weddle, 50, Vice President, Corporate Services
Ms. Weddle was named Vice President, Corporate Services of NVP effective
January 1996, and was elected to the same position with SPPC in July 1999.
Previously she was Vice President, Human Resources and Corporate Services
effective October 1993. Other management positions include Vice President,
Human Resources; Director of Human Resources; and Manager of Compensation and
Benefits. Ms. Weddle has been with NVP since 1973.
Matt H. Davis, 44, Vice President, Distribution Services, Operations and
Maintenance
Mr. Davis was elected Vice President, Distribution Services, Operations and
Maintenance in July 1999. Previously he was Director, System Planning and
Division Director, System Planning and Operations. Mr. Davis has been with NVP
since 1978and has held various positions in the distribution, transmission,
power contracts, and land services departments.
Douglas R. Ponn, 52, Vice President, Governmental and Regulatory Affairs
Mr. Ponn was elected Vice President, Governmental and Regulatory Affairs in
July 1999. Previously he was Executive Director, Governmental and Regulatory
Affairs. Mr. Ponn has been with SPPC since 1986.
Mary Jane Reed, 53, Vice President, Human Resources
Ms. Reed was elected Vice President, Human Resources of SPPC in January
1997, and was named to the same position with NVP in July 1999. She was
previously Vice President, Human Resources Network Group for Bell Atlantic
Corporation. Ms. Reed was with Bell Atlantic from 1968 - 1996 and in addition
to the Vice President's position, served as Director of Human Resources,
Assistant to the President for Consumer Affairs, and several other managerial
positions.
30
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS (SPR)
SPR's Common Stock is traded on the New York Stock Exchange (symbol SRP).
The dividends paid per share and high and low sale prices of the Common Stock in
the consolidated transaction reporting system in "The Dow Jones News Retrieval
Service" for 1999 and 1998 are as follows:
Dividends
Paid
Per Share High Low
--------- ---- ---
1999 First Quarter $.325 $39 7/8 $33 3/8
Second Quarter .340 37 34 1/2
Third Quarter* .250 39 1/8 21 1/8
Fourth Quarter .250 23 5/16 16 7/8
1998 First Quarter .310 37 7/8 34 9/16
Second Quarter .325 38 32 1/4
Third Quarter .325 39 1/2 34 7/16
Fourth Quarter .325 39 5/16 34 11/16
*The merger of SPR and NVP was consummated on July 28, 1999. After that time,
SPR owned all of the outstanding common stock of NVP. Prior to that time, SPR
owned no securities of NVP.
Number of Security Holders:
Title of Class Number of Holders
-------------- -----------------
Common Stock: $1.00 Par Value As of December 31, 1999: 29,344
On May 17, 1999 the Board of Directors declared a dividend based on 1) if
the merger with Nevada Power Company took place prior to August 1/st/, or 2) if
the merger with Nevada Power Company did not take place prior to August 1/st/.
The merger with Nevada Power Company took place at the close of business on July
28, 1999. An August 11/th/ dividend was paid based on that declaration. Future
dividends are considered by the Board of Directors and are subject to factors
that ordinarily affect dividend policy, such as future earnings and the
financial condition of SPR.
On February 25, 2000, the SPR Board of Directors voted for a quarterly
common dividend of $.25 per share. This dividend of approximately $19.6 million
will be paid on May 1, 2000, to holders of record as of April 14, 2000.
SPR's primary source of funds for the payment of dividends to its
stockholders is dividends paid by SPPC and NVP on their common stock, all of
which is owned by SPR. Certain contractual and regulatory restrictions may
affect the ability of NVP and SPPC to pay dividends to SPR. See Note 13 to the
consolidated financial statements.
31
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The table below, for periods prior to July 28, 1999, reflects historical
information for NVP.
<TABLE>
<CAPTION>
Year Ended December 31,
(dollars in thousands, except per share amounts)
------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 1,309,131 $ 873,682 $ 799,148 $ 805,374 $ 749,981
============== ============== ============== ============== ==============
Operating Income $ 171,158 $ 147,277 $ 137,196 $ 132,230 $ 117,558
============== ============== ============== ============== ==============
Net Income $ 51,750 $ 83,499 $ 82,091 $ 74,912 $ 73,005
============== ============== ============== ============== ==============
Earnings per Average
Common Share $ 0.83 $ 1.64 $ 1.65 $ 1.56 $ 1.58
============== ============== ============== ============== ==============
Total Assets $ 5,247,686 $ 2,541,840 $ 2,339,422 $ 2,163,224 $ 2,073,050
============== ============== ============== ============== ==============
Long-Term Debt and
Redeemable Preferred
Securities $ 1,793,999 $ 1,089,099 $ 1,014,311 $ 841,364 $ 799,999
============== ============== ============== ============== ==============
Cash Dividends Paid
Per Common Share $ 1.17 $ 1.45 $ 1.60 $ 1.60 $ 1.60
============== ============== ============== ============== ==============
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
(Refer to Introduction for a discussion of the format of the Management
Discussion and Analysis)
The merger between SPR and NVP was accounted for as a reverse purchase
under generally accepted accounting principles, with NVP considered the
acquiring entity, even though SPR survives and is the legal parent of NVP. For
accounting purposes, the merger was deemed to have occurred on August 1, 1999.
As a result of this reverse purchase accounting treatment; (i) the historical
financial statements of SPR for periods prior to the date of the merger are no
longer the financial statements of SPR, and therefore, are no longer presented;
(ii) the historical financial statements of SPR for periods prior to the date of
the merger are those of NVP; (iii) based on a merger date of August 1, 1999, the
Consolidated Statements of Income for the twelve months ended December 31, 1999
include five months (August through December 1999) of operating activity for SPR
and its subsidiaries other than NVP. The same statements include the operating
results of NVP for the entire periods presented.
RESULTS OF OPERATIONS OF EACH SUBSIDIARY
- ----------------------------------------
Sierra Pacific Resources (Holding Company)
- ------------------------------------------
The Consolidated Statements of Income of Sierra Pacific Resources for the
year ended December 31, 1999 include the operating results of the holding
company for the five month period ended December 31, 1999, based on a merger
date of August 1, 1999. The holding company operating results included
approximately $11.5 million of interest costs that resulted from the merger
financing. For additional merger information, see Note 2 of the consolidated
financial statements included in this report.
32
<PAGE>
Tuscarora Gas Pipeline Company
- ------------------------------
The Consolidated Statements of Income of Sierra Pacific Resources for the
year ended December 31, 1999 include the operating results of Tuscarora Gas
Pipeline Company (TGPC), a wholly-owned subsidiary of SPR, for the five month
period ended December 31, 1999 based on a merger date of August 1, 1999 for
accounting purposes. TGPC contributed $711 thousand in net income for the five
months ended December 31, 1999. TGPC contributed $1.8 million in net income for
the twelve months ended December 31, 1999.
e.three
- -------
The Consolidated Statements of Income of Sierra Pacific Resources for the
year ended December 31, 1999 include the operating results of e.three, a wholly-
owned subsidiary of SPR, for the five month period ended December 31, 1999 based
on a merger date of August 1, 1999 for accounting purposes. e.three incurred
net losses of $381 thousand for the five months ended December 31, 1999.
e.three incurred net losses of $788 thousand for the twelve months ended
December 31, 1999.
Sierra Pacific Energy Company
- -----------------------------
The Consolidated Statements of Income of Sierra Pacific Resources for the
year ended December 31, 1999 include the operating results of Sierra Pacific
Energy Company (SPE), a wholly-owned subsidiary of SPR, for the five month
period ended December 31, 1999 based on a merger date of August 1, 1999 for
accounting purposes. SPE incurred net losses of $2.2 million for the five months
ended December 31, 1999. SPE incurred net losses of $3.6 million for the twelve
months ended December 31, 1999.
Sierra Pacific Communications
- -----------------------------
The Consolidated Statements of Income of Sierra Pacific Resources for the
year ended December 31, 1999 include the operating results of Sierra Pacific
Communications (SPC), a wholly-owned subsidiary of SPR, for the five month
period ended December 31, 1999 based on a merger date of August 1, 1999 for
accounting purposes. SPC incurred net losses of $62 thousand for the five months
ended December 31, 1999. SPC incurred net losses of $75 thousand for the twelve
months ended December 31, 1999.
Lands of Sierra
- ---------------
The Consolidated Statements of Income of Sierra Pacific Resources for the
year ended December 31, 1999 include the operating results of Lands of Sierra
(LOS), a wholly-owned subsidiary of SPR, for the five month period ended
December 31, 1999 based on a merger date of August 1, 1999 for accounting
purposes. LOS contributed net income of $816 thousand for the five months ended
December 31, 1999. LOS contributed net income of $810 thousand for the twelve
months ended December 31, 1999.
33
<PAGE>
Sierra Pacific Power Company
- ----------------------------
A complete Management's Discussion and Analysis of SPPC is contained in its
Annual Report on Form 10-K for the year ended December 31, 1999, attached as an
appendix. The Consolidated Statements of Income for Sierra Pacific Resources for
the year ended December 31, 1999 include net income of $21.9 million contributed
by SPPC which represents SPPC's operating activity for the five month period
ended December 31, 1999. SPPC contributed $66.2 million in net income for the
twelve months ended December 31, 1999, as shown in its annual report on Form 10-
K, which is attached to this report as an appendix.
Nevada Power Company
- --------------------
Based on a merger date of August 1, 1999, the Consolidated Statements of
Income for the twelve months ended December 31, 1999 include five months (August
through December 1999) operating activity for SPR and its subsidiaries other
than NVP. The same statements include the operating results of NVP for all of
1999 and all prior year periods presented.
As a result, the following Consolidated Statements of Income illustrate the
operating results of SPR's principal subsidiaries (NVP and SPPC) and the
combined results of all Other operations. The results of operations discussion
that follows is based on the NVP operating results included in these statements
as the operating results of the other subsidiaries have already been discussed
in this section.
On February 4, 2000 the PUCN issued an order that rejected NVP's updated
September 30, 1999 deferred energy filing. In addition, on March 21, 2000 the
PUCN made available a draft order that indicated a substantial reduction in
NVP's requested rate relief on the remaining $44 million included in the case.
NVP expects a final decision to be issued on March 27, 2000, which will
substantially reflect the decision in the draft order. As a result of these
decisions, NVP operating results for 1999 include a pre-tax charge of $80.0
million. $56 million of the charge is associated with the February 4 decision
and $24 million is associated with the March 21 decision. NVP is appealing the
PUCN decisions. If not for this charge, NVP's net income would have been
approximately $7 million higher than it was in 1998.
The discussion of SPPC is in its annual report on Form 10-K for the period
ended December 31, 1999, which is attached as an appendix. The Other
subsidiaries have been discussed in this section.
34
<PAGE>
<TABLE>
<CAPTION>
SIERRA PACIFIC RESOURCES CONSOLIDATING STATEMENTS OF INCOME
(Dollars in Thousands)
Year Ended December 31,
1999
----------------------------------------------------------------------------
12 Months 5 Months Sierra Consolidated
Nevada Power Pacific Power 5 Months Other Total
---------------- ----------------- ------------------ ---------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $ 977,262 $ 259,440 $ - $ 1,236,702
Gas - 38,958 - 38,958
Water - 24,339 - 24,339
Other - - 9,132 9,132
----------- ------------ ------------ ------------
977,262 322,737 9,132 1,309,131
----------- ------------ ------------ ------------
OPERATING EXPENSES:
Operation:
Purchased power 293,600 79,856 - 373,456
Fuel for power generation 154,546 51,584 - 206,130
Gas purchased for resale - 27,262 - 27,262
Deferral of energy cross-net 97,238 - - 97,238
Other 141,041 51,038 11,389 203,468
Maintenance 50,805 9,579 - 60,384
Depreciation and amortization 80,644 32,349 243 113,236
Taxes: - - - -
Income taxes 19,943 11,390 (5,247) 26,086
Other than income 22,462 8,161 90 30,713
----------- ------------ ------------ ------------
860,279 271,219 6,475 1,137,973
----------- ------------ ------------ ------------
OPERATING INCOME 116,983 51,518 2,657 171,158
----------- ------------ ------------ ------------
OTHER INCOME:
Allowance for other funds used during construction 3,713 (1,339) - 2,374
Other income - net (1,824) (1,044) 352 (2,516)
----------- ------------ ------------ ------------
1,889 (2,383) 352 (142)
----------- ------------ ------------ ------------
Total Income 118,872 49,135 3,009 171,016
----------- ------------ ------------ ------------
INTEREST CHARGES:
Long-term debt 64,454 16,978 299 81,731
Other 8,815 6,012 11,529 26,356
Allowance for borrowed funds used during
construction and capitalized interest (8,356) 229 - (8,127)
----------- ------------ ------------ ------------
64,913 23,219 11,828 99,960
----------- ------------ ------------ ------------
INCOME BEFORE OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES 53,959 25,916 (8,819) 71,056
Preferred dividend requirements of
mandatorily redeemable preferred securities (15,172) (1,738) - (16,910)
----------- ------------ ------------ ------------
INCOME BEFORE PREFERRED DIVIDENDS 38,787 24,178 (8,819) 54,146
Preferred dividend requirements (95) (2,301) (2,396) (174)
----------- ------------ ------------ ------------
NET INCOME $ 38,692 $ 21,877 $(8,819) 51,750
=========== ============ ============ ============
<CAPTION>
Years Ended December 31,
1998 1997
------------- ------------
Nevada Power Nevada Power
------------ ------------
<S> <C> <C>
OPERATING REVENUES:
Electric $873,682 $799,148
Gas - -
Water - -
Other - -
---------- ----------
873,682 799,148
---------- ----------
OPERATING EXPENSES:
Operation:
Purchased power 283,838 277,644
Fuel for power generation 149,804 138,956
Gas purchased for resale - -
Deferral of energy cross-net (29,680) (60,400)
Other 134,652 122,811
Maintenance 49,082 52,126
Depreciation and amortization 73,562 66,273
Taxes: - -
Income taxes 42,949 43,478
Other than income 22,198 21,064
---------- ----------
726,405 661,952
---------- ----------
OPERATING INCOME 147,277 137,196
---------- ----------
OTHER INCOME:
Allowance for other funds used during construction 8,944 8,760
Other income - net
(4,602) (5,741)
---------- ----------
4,342 3,019
Total Income ---------- ----------
151,619 140,215
INTEREST CHARGES: ---------- ----------
Long-term debt
Other
Allowance for borrowed funds used during 56,995 50,791
construction and capitalized interest 6,018 1,531
(6,080) (2,579)
---------- ----------
56,933 49,743
---------- ----------
INCOME BEFORE OBLIGATED MANDATORILY 94,686 90,472
REDEEMABLE PREFERRED SECURITIES
Preferred dividend requirements of
mandatorily redeemable preferred securities
(11,013) -
----------- -----------
INCOME BEFORE PREFERRED DIVIDENDS 83,673 83,216
Preferred dividend requirements
(174) (1,125)
----------- -----------
NET INCOME $ 83,499 $ 82,091
=========== ==========
</TABLE>
35
<PAGE>
Nevada Power Company Operating Results
- --------------------------------------
The causes for significant changes in specific lines comprising the results
of operations for NVP for the years ended are as provided (dollars in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Electric Operating Revenues:
Residential $ 416,345 9.5% $ 380,299 6.0% $ 358,921
Commercial 200,186 13.9% 175,760 11.5% 157,694
Industrial 290,409 16.4% 249,390 11.9% 222,837
----------------- ------------ ----------------- ------------ -----------------
Retail revenues 906,940 12.6% 805,449 8.9% 739,452
Other 70,322 3.1% 68,233 14.3% 59,696
----------------- ------------ ----------------- ------------ -----------------
Total Revenues $ 977,262 11.9% $ 873,682 9.3% $ 799,148
================= ============ ================= ============ =================
Total retail sales (MWH) 14,715,000 9.1% 13,491,000 3.7% 13,012,000
----------------- ------------ ----------------- ------------ -----------------
Average retail revenue per MWH $ 61.63 3.2% $ 59.70 5.1% $ 56.83
</TABLE>
NVP's residential and commercial electric revenue increased in 1999
primarily due to 6% customer growth for both categories and an energy price
increase of 4% effective March 1999. Industrial electric revenues increased in
1999 primarily due to 7% customer growth and an energy price increase of 4%
effective March 1999. Other electric revenues increased in 1999 due to greater
wholesale electric revenue that was partially offset by lower emission credits
and water rights revenue in 1999.
Residential, commercial and industrial electric revenues increased in 1998
due to an approximate 6% growth in all customer categories and an energy price
increase of 6% during February 1998. The increase in 1998 revenues was
partially offset by milder weather during the summer of 1998. Other electric
revenues increased as a result of the sale of emission credits and water rights
in 1998.
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Total Purchased Power $ 338,972 19.4% $ 283,838 2.2% $ 277,644
Less Imputed Capacity Deferral $ (45,372) - $ - - $ -
----------------- ------------ ---------------- ------------ ------------------
Purchased Power $ 293,600 3.4% $ 283,838 2.2% $ 277,644
Purchased Power MWH 7,861,985 14.2% 6,886,920 -2.7% 7,078,669
Average cost per MWH of
Purchased Power $ 43.12 4.6% $ 41.21 5.1% $ 39.22
</TABLE>
36
<PAGE>
NVP has historically used deferred accounting for energy costs (see Note
1).
NVP's Purchase power costs were higher in 1999 due to a 14% increase in the
volume purchased related to customer growth and an increase in the per unit cost
of power. This increase in cost was partially offset by a $45 million
adjustment (shown separately above) in 1999 related to the deferral of the
portion of one-part firm power contracts deemed by regulators to be related to
capacity costs rather than energy costs. NVP began deferring these costs in
1999 to comply with an order from the PUCN.
During 1999 the cost of energy continued to exceed the corresponding
allowed revenue component that resulted in a deferral of expense of $9.8
million. This amount was offset by the recovery of energy costs related to
prior years of $27.3 million.
In 1998 purchased power costs increased 2.2% primarily due to higher
average unit prices paid for purchased power.
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Fuel for Power Generation $ 154,546 3.2% $ 149,804 7.8% $ 138,956
MWHs generated 9,167,963 3.7% 8,843,057 7.5% 8,228,100
Average fuel cost per MWH
of Generated Power $ 16.86 -0.5% $ 16.94 0.3% $ 16.89
</TABLE>
In 1999, NVP's fuel expense increased 3.2%, primarily due to an increase in
volumes generated to accommodate customer growth described previously. In 1998,
fuel expense increased 7.8%, primarily due to increased generation to
accommodate customer growth.
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Deferral of energy costs-net $ 97,238 427.6% $ (29,680) 50.9% $ (60,400)
</TABLE>
On February 4, 2000 the PUCN issued an order that rejected NVP's updated
September 30, 1999 deferred energy filing. In addition, on March 21, 2000 the
PUCN made available a draft order that indicated a substantial reduction in
NVP's requested rate relief on the remaining $44 million included in the case.
NVP expects a final decision to be issued on March 27, 2000, which will
substantially reflect the decision in the draft order. As a result of these
decisions, a reserve was recognized for previously deferred energy and imputed
capacity costs with a charge of $80 million to Deferral of energy costs-net.
$56 million of the reserve is associated with the February 4 decision and $24
million is associated with the March 21 decision. Also, Deferral of energy
costs-net were higher in 1999 because NVP was granted a price increase to cover
current fuel expense, which allowed NVP to recognize previously deferred costs
currently.
37
<PAGE>
In 1998, NVP deferred $27.0 million of increased energy costs for
collection in a later period and recognized $2.7 million of energy cost
deferrals that had been deferred prior to 1998. In 1997, NVP deferred $27.8
million of increased energy costs for collection in a later period and
recognized $32.6 million of energy cost decreases that had been previously
deferred.
Recovery of fuel expenses is administered under the state's deferred energy
cost accounting procedures. 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 income. See Note 1 of "Notes to Consolidated
Financial Statements" for more information regarding deferred energy accounting.
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Allowance for other funds used
during construction $ 3,713 -58.5% $ 8,944 2.1% $ 8,760
Allowance for borrowed funds used
during construction 8,356 37.4% 6,080 135.8% 2,579
---------------- ------------ ----------------- ------------ ------------------
$ 12,069 -19.7% $ 15,024 32.5% $ 11,339
---------------- ------------ ----------------- ------------ ------------------
</TABLE>
NVP's AFUDC was lower in 1999 because of construction completed in May 1999
for the Crystal Transmission Project. In 1998, NVP expended approximately $100
million more on construction activity than in 1997. The additional costs in
1998 resulted in higher AFUDC.
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------- --------------------------------- ------------------
Change from Change from
Amount Prior year Amount Prior year Amount
----------------- ------------- ----------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Other operating expense $ 141,041 4.7% $ 134,652 9.6% $ 122,811
Maintenance expense 50,805 3.5% 49,082 -5.8% 52,126
Depreciation and amortization 80,644 9.6% 73,562 11.0% 66,273
Income taxes 19,943 -53.6% 42,949 -1.2% 43,478
Interest charges on long-term debt 64,454 13.1% 56,995 12.2% 50,791
Interest charges- other 8,815 46.5% 6,018 293.1% 1,531
Other Income (expense)-net (1,824) -60.4% (4,602) -19.8% (5,741)
</TABLE>
38
<PAGE>
NVP's other operating expense increased $6.4 million in 1999 primarily due
to growth related costs for distribution expenses and administrative and general
costs that included group insurance and short-term incentive costs. Other
operating expense increased in 1998 primarily due to increased costs for outside
services, computer software and maintenance, administrative and general salaries
and pension costs.
The level of NVP maintenance and repair expenses depends primarily upon the
scheduling, magnitude and number of generation unit overhauls at NVP's
generating stations. In 1999 maintenance expense increased by $1.7 million
primarily due to boiler maintenance at the Reid Gardner Generating Station. In
1998, maintenance expense decreased by $3.0 million due primarily to lower
maintenance expense at the Reid Gardner Generating Station.
NVP Depreciation expense was higher in 1999 because of the addition of
approximately $280 million in depreciable assets during the current year
including the completion of the Crystal Transmission Project in June 1999.
Also, depreciation expense increased $7.3 million in 1998 because of a growing
electric depreciable asset base.
NVP Income taxes were lower in 1999 due to lower operating income before
taxes. Income taxes for 1998 and 1997 were comparable.
Interest charges on NVP long-term debt were higher in 1999 due to interest
costs on $130.0 million of unsecured notes issued in March 1999. Interest on
long-term debt increased in 1998 primarily due to the issuance in November 1997
of the new Series 1997A $52.3 million Industrial Development Revenue Bonds
(IDBs) and Series 1997B $20 million Pollution Control Revenue Bonds (PCRBs) and
the remarketing at fixed rates in January 1998 of variable rate revenue bonds,
$76.8 million, Series 1995A, $44, million Series 1995C, $20.3 million, Series
1995D and $13 million, Series 1995E. See Note 9 of "Notes to Consolidated
Financial Statements" for additional information regarding long-term debt.
NVP Interest charges- other was higher in 1999 because of interest costs
associated with higher short-term borrowings in 1999. Other interest expense
was also higher in 1998 compared to 1997 due to higher short-term borrowings.
NVP Other income (expense)-net was lower in 1999 because corporate and
short-term incentive costs were charged to operating expense rather that other
expense during 1999. Other expense was lower in 1998 because of higher costs in
1997 for cancellation fees, adjustments related to the PUCN decision and higher
short-term incentive costs.
39
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (SPR)
- -------------------------------------
Overall net cash flows increased slightly during 1999, as compared to 1998.
Net cash flows were greater in 1999 due to more cash provided from operating and
financing activities. The increase in cash provided from operating and
financing activities was partially offset by more cash used in investing
activities. The increase in cash flows from operating activities was primarily
due to the collection of revenues related to previously deferred energy costs.
Increased cash from financing activities resulted from the issuance of $456.2
million of commercial paper by SPR to provide funding of the cash portion of the
merger consideration. Also, NVP issued long-term debt of $130 million senior
unsecured notes, due 2004 and both SPPC and NVP each issued $100 million
floating rate notes in September and October 1999, respectively. Cash utilized
for Investing activities increased primarily as a result of the merger cash
requirements. See Note 2 to the consolidated financial statements included in
this report for more information about the merger cash requirements.
Overall net cash flows increased during 1998, as compared to 1997, due to
higher net cash from operating and financing activities that was partially
offset by more cash used in investing activities. The increase in cash from
operating activities was mainly due to an energy rate increase effective
February 1, 1998, offset by the deferral of energy cost recovery. The increase
in cash used in investing activities was primarily due to increased construction
expenditures. The increase in net cash used in financing activities was mainly
due to increased short-term borrowing.
CONSTRUCTION EXPENDITURES AND FINANCING (SPR)
- ---------------------------------------------
A description of construction expenditures and financing of SPPC is
contained in its Annual Report on Form 10-K for the period ended December 31,
1999, attached as an appendix.
The table below provides SPR's consolidated cash construction expenditures
and internally generated cash, net for 1999. The historical information for
1998 and 1997 is NVP information. (Dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997 Total
-------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Cash construction expenditures* $ 729,794 $ 302,041 204,795 $ 1,236,630
============== =============== ============= ==============
Net cash flow from operating activities 211,089 148,281 107,792 467,162
Less common & preferred cash dividends 115,833 73,962 81,216 271,011
-------------- --------------- ------------- --------------
Internally generated cash 95,256 74,319 26,576 196,151
============== =============== ============= ==============
Internally generated cash as a percentage of
cash construction expenditures 13% 25% 13% 16%
</TABLE>
* 1999 cash construction expenditures include $448.3 million of merger related
costs.
SPR's estimated cash construction expenditures for 2000 through 2004 are
$1.6 billion. SPR estimates that 90% of its 2000 cash expenditures of
approximately $308 million will be provided by internally generated funds, with
the remainder being provided by the issuance of long-term debt and short-term
debt.
The estimated level of internally generated cash utilized for construction
of 90% anticipates that NVP and SPPC will pay all of their net income in
dividends to SPR. SPR anticipates capital contributions of $44 million to NVP
and $28 million to SPPC in 2000.
40
<PAGE>
CAPITAL STRUCTURE (SPR AND RELEVANT SUBSIDIARIES)
- -------------------------------------------------
On July 28, 1999, immediately following the consummation of the merger with
NVP, SPR put into place a $500 million unsecured revolving credit facility.
This facility may be used for working capital and general corporate purposes,
including for commercial paper backup, and replaced SPR's existing credit
facility. At the same time, SPPC and NVP each put into place a $150 million
unsecured revolving credit facility, which replaced all existing credit
facilities. These two facilities may also be used for working capital and
general corporate purposes, including for commercial paper backup. In addition,
immediately following the merger, SPR and NVP established new commercial paper
programs, and SPPC revised its existing commercial paper program. SPR issued
$456.2 million of commercial paper to provide temporary funding of the cash
portion of the merger consideration and NVP issued $90 million of commercial
paper to pay off short-term debt.
SPR has filed a registration statement with the SEC for the issuance of up
to $500 million of debt securities and/or trust preferred securities. Although
no securities have been issued to date under this registration statement, SPR
intends to issue the entire registered amount as debt securities by the end of
the first quarter, or early in the second quarter, of 2000. The proceeds from
such issuance will be used to retire short-term indebtedness which was incurred
to provide temporary funding of the cash consideration due in the merger of SPR
with NVP.
As of December 31, 1999, SPR had $463 million of commercial paper issued
and outstanding, NVP had $82 million of commercial paper issued and outstanding
and SPPC had $110 million of commercial paper issued and outstanding. SPR's,
NVP's and SPPC's commercial paper programs are rated A2 and P2 by Standard and
Poor's and Moody's, respectively.
SPR's actual consolidated capital structure at December 31, 1999 and 1998
was as follows. The 1998 capital structure presented is NVP information.
(Dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Short-Term Debt (1) $ 957,688 22% $ 155,380 7%
Long-Term Debt 1,556,627 36% 900,227 43%
Preferred Stock 50,000 1% 3,265 -
Preferred Securities 237,372 6% 188,872 9%
Common Equity 1,477,129 35% 864,036 41%
--------------------------- --------------------------
TOTAL $4,278,816 100% $2,111,780 100%
=========================== ==========================
</TABLE>
(1) Including current maturities of long-term debt and preferred stock.
As of December 31, 1999, under tests required by NVP's first mortgage bonds
and the terms of its preferred stock issues, NVP could issue up to $785 million
of additional first mortgage bonds at an assumed interest rate of 8.0% and up to
$84 million of additional preferred stock at an assumed dividend of 8.0%.
NVP's secured long-term debt is rated A and Baa1 by Standard & Poor's and
Moody's, respectively. NVP's pre-tax interest coverages for 1999, 1998 and 1997
were 2.35%, 3.22% and 3.59%, respectively.
41
<PAGE>
SPR currently does not have a secured long-term debt rating by Standard &
Poor's or Moody's. A description of SPPC's capital structure, first mortgage
bond and preferred stock issuance restrictions, its long-term debt ratings and
its pre-tax interest coverage ratios are contained in its Annual Report Form 10-
K for the period ended December 31, 1999, attached as an appendix.
REGULATORY EVENTS (NVP)
- -----------------------
For a discussion of Regulatory Events of SPPC, see its annual report on
Form 10-K for the period ended December 31, 1999, which is attached as an
Appendix.
Industry Restructuring
- ----------------------
Electric Restructuring Activities
- ---------------------------------
In 1997, the Governor of Nevada signed into law Assembly Bill 366 (AB366)
that provided for competition to be implemented in the electric utility
industry. In 1999 the Governor signed into law Senate Bill 438 (SB438) that
amended AB366. SB438 contains the following major provisions:
. In addition to generation, metering and billing are declared to be
potentially competitive services.
. The start date for competition is March 1, 2000 or such other start
date determined to be in the public interest by the Governor.
. The electric distribution utility is the provider of last resort (PLR)
until alternate methods go into effect, no sooner than July 1, 2001.
PLR rates are capped until March 1, 2003 at the rates in effect as of
July 1, 1999, as adjusted for any deferred energy cases filed with the
PUCN prior to October 1, 1999.
. Allows the use of the net proceeds of generation divestiture to pay
for certain reductions in PLR revenues until March 1, 2003, arising
from the departure of customers who select new suppliers.
. Repeals deferred energy for electric utilities on October 1, 1999.
. Permits alternative sellers to submit bids to provide PLR service
after July 1, 2001, subject to a PUCN public interest finding and a
PUCN-held auction.
. Provides for the recovery of Past Costs, often referred to as stranded
costs, including specific criteria for recovery of purchase power
costs.
The PUCN has conducted a number of hearings associated with AB366 and
SB438. In February 2000 the Governor of Nevada delayed the start date of
competition indefinitely. Electric competition may begin later in 2000 or 2001.
Generally, restructuring regulations have proceeded slowly. Currently, many
important regulations, including the affiliate regulations and the PLR, are not
complete. In their present form several of the proposed regulations could have
potentially significant negative financial ramifications. These regulations and
the potential risks are described below. NVP's management is actively working to
modify these regulations. Several key Nevada restructuring issues have also
arisen in other states, been litigated, and resolved in favor of the utility.
If final regulations are not modified to remove the financial risk exposures,
NVP will likely pursue legal action to resolve these issues. As a final option,
NVP will seek an injunction to the start of competition or to overturn portions
of SB438.
42
<PAGE>
Affiliate Transaction Regulation
- --------------------------------
While SB438 allows for the use of name and logo, the affiliate regulation
has not yet been modified to reflect this change. In addition, NVP has
requested that the PUCN modify the rule related to sharing services, sharing
officers and directors, and transfer pricing. To date the PUCN has not acted on
this request. On March 30, 1999, SPPC and NVP filed with the District Court a
"Complaint and Petition for Declaratory and Injunctive Relief and for Judicial
Review" relating to the Affiliate Transaction Rules. SPPC and NVP asked that
the court find that the rules "violate plaintiff's federal and state
constitutional guarantees, are unlawful and invalid because they were enacted in
violation of the procedural and substantive provisions of the Administrative
Procedures Act, and are unlawful and invalid because they exceed the authority
of the PUCN and are unsupported by the evidence." SPPC and NVP asked that the
court order the PUCN "to cease and desist from enforcing the regulations."
Past Costs
- ----------
Past costs, commonly referred to as stranded costs in other jurisdictions,
were the subject of several hearings in 1999. AB366/ SB438 permit the recovery
of costs associated with potentially competitive services, such as generation
and purchased power, pursuant to specified legal criteria. In the hearings,
various topics were discussed, including the characteristics that define
recoverable past costs, criteria for evaluating the effectiveness of mitigation
efforts, options for cost recovery mechanisms, and applicable tax and accounting
issues.
On December 29, 1999 the PUCN adopted the past cost regulation. This
regulation requires the utility to file for past costs 45 days after the
adoption of the regulation or issuance of the final order in the compliance plan
filing. The regulation requires estimates of book values and market values as
of the opening date of competition. In addition NVP must provide documentation
relative to criteria in the law such as mitigation efforts, conduct relative to
other states, and efforts to minimize taxes. The PUCN will take these criteria
into consideration in determining allowable past costs. During comments related
to this rule, NVP raised a number of legal issues including treatment of
purchase power agreements, ability to true up initial estimates of past costs to
actual results, and ability to recover costs to implement restructuring. NVP
has not completed an estimate of its past costs, since such a calculation is
dependent on a variety of issues related to restructuring which are not resolved
at this time. However, based upon the current regulation and the positions
taken by other parties to the rulemaking, several risk areas have been
identified including:
. SB438 criteria provides latitude for the PUCN to reduce NVP's stranded
cost claim.
. Purchase power agreements are the largest category of past costs.
Federal and state laws provide protection to federally mandated power
purchase contracts. NVP believes that the PUCN regulation provides
less security to recover purchase power costs than provided by federal
and state laws.
. Because the regulation does not provide a guaranteed true up to actual
results, it is possible that stranded cost recovery could be set too
low to recover all stranded costs.
. The stranded cost proceeding will establish the gain or loss on the
divestiture sale of generation assets; the regulation provides that
any gain on divestiture would be utilized to reduce stranded costs.
Some elements of the calculation may be controversial. In addition,
the regulation does not address other claims to the generation gain,
such as recovery of certain revenue shortfalls as allowed by SB438,
which may arise as customers leave the PLR.
43
<PAGE>
NVP is currently evaluating challenges to the regulation and will actively
pursue changes in the regulatory process or, if necessary, pursue legal
challenges in the federal and or state courts. NVP believes that based upon the
content of the regulation and the applicable law, a legal challenge relative to
purchase power agreements has a strong possibility of being successful.
Provider of Last Resort
- -----------------------
The provider of last resort (PLR) will provide electric service to
customers who do not select an electricity provider and to customers who are not
able to obtain service from an alternative seller after the date competition
begins. SB438 provides for the electric distribution utility (EDU) to provide
PLR services until July 1, 2001. The PUCN has conducted several workshops and
hearings on the PLR regulations. This rule is not expected to be finalized
until mid-2000. The current draft proposed regulation includes standards of
conduct relative to distribution and provider of last resort functions, which
require segregation of operating functions and constraints on sharing of common
services. As part of their comments during development of the proposed
regulation, NVP raised concerns regarding the financial impacts of the proposed
regulations that place into question the financial viability of the PLR. For
instance the current regulations restrict the PLR from relying on distribution
assets or revenues to obtain credit. Second, the current regulations provide no
financial reward potential for the significant fuel price risks that the PLR may
face during the PLR rate cap period which ends March 1, 2003. Third, the
proposed standards of conduct for the EDU and PLR will increase costs as a
result of the loss of economies of scale and scope.
In addition to these impacts, the proposed regulation does not address two
important areas associated with the PLR. Regulations have yet to be developed
that fairly compensates the utility for recovery of revenue shortfalls allowed
under SB438 which arise as customers leave the PLR for new suppliers.
Regulations also do not address how NVP will be able to collect the costs,
allowed by SB438, which will be incurred to serve customers who leave the PLR
and later return.
In the ongoing rulemaking process NVP is working to address these serious
concerns and modify the PLR regulation. If the proposed regulations are adopted
in their current form, NVP will seek to transition out of the PLR function. In
addition, if necessary, NVP is prepared to pursue legal remedies to mitigate
any significant financial exposures associated with the final PLR regulation.
Independent Scheduling Administrator
- ------------------------------------
NVP has participated in interim Independent Scheduling Administrator (iISA)
working groups which are developing iISA standards, protocols and procedures.
The PUCN has held hearings regarding entities interested in performing the iISA
function, the timeline, the functions to be performed, the costs and how these
entities will adhere to the PUCN iISA principles. To date NVP has not agreed to
provide funding for the iISA because the PUCN has not provided a mechanism for
NVP to recover costs associated with iISA. However, in February 2000, the PUCN
opened an investigatory docket to consider the funding and other transmission
access issues. See FERC Matters for further discussion.
Gas Restructuring
- -----------------
To comply with Nevada AB366 for natural gas deregulation, the PUCN has
developed some new natural gas rules. In 1999, little gas restructuring activity
occurred. Two new regulations, gas licensing and gas licensing fees were
adopted by the PUCN in 1999.
44
<PAGE>
Nevada Matters
- --------------
Non-price Terms and Conditions for Distribution Service
- -------------------------------------------------------
On February 2, 1999, NVP filed its non-price terms and conditions for
unbundled distribution service. A stipulation resolving most issues and agreeing
to further filings on unresolved issues was filed with the PUCN, and
subsequently approved by the Commission on April 22, 1999. Settlements
regarding the unresolved issues were subsequently filed and approved by the
Commission.
Unbundling of Utility Services
- ------------------------------
On April 1, 1999, NVP filed the revenue requirements and unbundling study
portions of the Compliance Filing with the PUCN. The filing included the
development of an electric revenue requirement for the test period 1998. The
compliance filing rule requires the revenue requirement development to be in the
same form used for rate cases. In the unbundling study, the revenue requirement
was assigned and allocated to a number of service components including
generation, aggregation, transmission, distribution, metering, billing, and
customer services. On September 23, 1999, The PUCN issued an interim order on
NVP's April 1 compliance filing. The order contained the PUCN's decision on
revenue requirements, return on equity, depreciation, and the unbundling study.
NVP did not utilize the order's revenue requirement, return on equity or
depreciation rates from Phase II of the case because SB438 legally mandated that
NVP use its July 1, 1999 revenue requirement.
Pricing of Distribution Service
- -------------------------------
On October 12, 1999, NVP filed final versions of the approved non-price
terms and conditions and rates reflecting a revenue requirement thought by NVP
to be correct and in accordance with SB438. Hearings were held in January 2000.
Merger of SPR and Nevada Power Company
- --------------------------------------
On April 8, 1998, NVP and SPPC filed a joint application with the PUCN for
approval of their proposed merger. On January 4, 1999, the PUCN issued the
final order in the merger case. On December 31, 1998, the PUCN voted 3-0 to
approve the merger, with conditions. The conditions include, among others,
requirements to divest generation, file the divestiture plan with the Commission
for approval, file an ISA proposal with the FERC, file a generation tariff with
the FERC, file a rate case and unbundle costs in 1999, file a subsequent rate
case three years after retail competition, and submit application to recover
stranded costs.
Deferred Energy Filing
- ----------------------
NVP filed a deferred energy case on July 15, 1999, covering the period from
June 1, 1998 through May 31, 1999. SB 438 froze the rates for NVP at the level
that was in effect on July1, 1999, except that the PUCN was authorized to modify
those rates in decisions related to deferred accounting cases filed by NVP prior
to October 1, 1999. Accordingly, on September 30, 1999, NVP filed an update
through August 31, 1999. Hearings began in January 2000. On February 4, 2000
the PUCN issued an order that rejected NVP's updated September 30, 1999 deferred
energy filing. In addition, on March 21, 2000 the PUCN made available a draft
order that indicated a substantial reduction in NVP's requested rate relief on
the remaining $44 million included in the case. NVP expects a final decision to
be issued on March 27, 2000, which will substantially reflect the decision in
the draft order. As a result of these decisions, NVP recognized a reserve for
previously deferred energy and imputed capacity costs of $80
45
<PAGE>
million. $56 million of the reserve is associated with the February 4 decision
and $24 million is associated with the March 21 decision. NVP intends to appeal
the decisions.
Earnings Sharing
- ----------------
On April 30, 1999, SPPC filed its second compliance filings related to the
1997 rate stipulation The filings provide a calculation of SPPC's electric and
gas earnings in excess of a 12% return on equity (ROE). Any earnings in excess
of 12% ROE are shared 50/50 between shareholders and customers. On August 19,
1999, the PUCN approved a stipulation between SPPC, Staff, and the UCA that
rebated $7.37 million and $1.98 million to electric and gas customers,
respectively in 1999. Based on 1999 operating results, SPPC anticipates it may
make refunds to customers. Appropriate reserves have been recorded to reflect
any anticipated refunds.
Generation Divestiture
- ----------------------
SPPC has filed with the PUCN its request for approval to sell its
generation plants on October 12, 1999. On February 18, 2000, the PUCN approved
an application to sell the generation plants of both SPPC and NVP. The PUCN
approved the revised divestiture plan unanimously. Under the terms of the
approved plan, both utilities will sell all of their power plants through an
auction process.
FERC Matters
- ------------
On April 14, 1999, the FERC voted to approve the merger of SPR and NVP, as
proposed. In approving the merger the FERC required the companies to divest of
their generation facilities (as proposed by the companies) and required NVP to
file an update of its transmission rates (also proposed by the companies).
On May 17th, TDPUD filed a Petition for Rehearing of the FERC's order
approving the merger. TDPUD claims the FERC violated its own policy by allowing
the merger to be consummated prior to divestiture of generation assets. SPPC and
NVP filed an answer to TDPUD's Petition for Rehearing in May. On July 14, 1999,
the FERC denied in all aspects TDPUD's petition.
On May 29, 1999, NVP filed an application with the FERC to increase its
Open Access Transmission rates. On November 24, 1999, an unopposed motion to
suspend the procedural schedule to allow consummation of a settlement was filed
with the FERC. The Settlement was filed on February 8, 2000 and the rates
became effective on March 1, 2000.
On March 31, 1999, NVP filed with the FERC for approval of generation
tariffs, which contain the rates, terms and conditions under which the new
owners of NVP's generation would operate after divestiture. The FERC approved
the tariffs on November 1, 1999. In compliance with the FERC's November 1 order,
NVP filed pro forma service agreements for the approved tariffs, which were
subsequently approved on December 16, 1999.
On July 23, 1999, NVP and SPPC submitted a filing to create the Mountain
West Independent Scheduling Administrator. The filing was made to request
approval of certain of the tariffs and agreements with respect to the
transmission services of NVP and SPPC. A decision is expected in 2000.
46
<PAGE>
YEAR 2000 ISSUES (NVP)
- ----------------------
All significant computer systems of SPR are owned by NVP and SPPC. A
complete description of Year 2000 (Y2K) issues related to SPPC is contained in
its Annual Report on Form 10-K for the period ended December 31, 1999, attached
as an appendix. The following discussion describes Y2K issues of NVP.
NVP made Y2K readiness a top priority for all of its departments. With the
oversight of several officers, NVP reviewed all of its computers, software
programs and electrical systems to verify that appropriate actions were taken in
order to be Year 2000 ready, including the ability to process, calculate,
compare and sequence date data into the next century, and, to make all necessary
leap year corrections.
Overall status for NVP as of November 30, 1999 showed completion of mission
critical functions. This status was within the guidelines established for NVP to
achieve Y2K readiness. All generation units were successfully remediated and
tested.
Even though NVP was confident that its critical systems would be fully
remediated by July 1999, NVP initiated a corporate-wide process of Y2K
contingency planning. Contingency planning was affected by the responses
received from business partners and suppliers, as well as NVP's determination of
the reasonably worst-case scenario. As a result of the overall efforts of NVP,
there was no materially adverse impact on the utility's financial position,
results of operations or cash flows.
Based on the work done within NVP, it is not anticipated that there will be
any Y2K problems of significance or material impact, however NVP will maintain
its awareness of the potential for Y2K problems throughout 2000.
The total cumulative cost to NVP for addressing Y2K readiness was
originally estimated to be in the range of $4 to $7 million, including operating
and capital expenditures. Through December 1999, approximately $3.0 million in
operating expenses and approximately $2.4 million in capital additions were
actually incurred. While additional expenditures and capital additions may be
incurred during 2000, additional expenditures and capital additions are expected
to be nominal.
47
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (SPR)
SPR has evaluated its risk related to financial instruments whose values
are subject to market sensitivity. The only such instruments are fixed-rate and
variable-rate debt, and preferred securities obligations, which were as follows
as of December 31, 1998 and 1999.
Long-term debt (dollars in thousands):
<TABLE>
<CAPTION>
Expected Weighted Average
Maturity Date Expected Maturity Amounts Interest Rates Fair Value
- ----------------------------------------------------------------------------------------------------------------------------
December 31 December 31 December 31
Fixed Rate 1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1999 - $ 136,600 - 6.88%
2000 102,709 85,000 7.00% 7.06%
2001 19,732 - 5.58% -
2002 17,626 15,000 7.05% 7.625%
2003 20,711 - 5.53% -
2004 132,621 - 6.20% -
Thereafter 1,285,936 714,007 6.68% 6.60%
============================ =========================== ===========================
Total Fixed Rate $ 1,579,335 $ 950,607 $ 1,540,990 $ 1,018,000
Variable Rate
Due 2000 $ 100,000 - 6.92%
Due 2020 80,000 - *3.81%
============================ =========================== ===========================
$ 180,000 - $ 180,000 -
Preferred securities
(fixed rate)
Due 2036 $ 237,372 $ 188,872 8.18% $ 208,618 $ 193,000
============================ =========================== ===========================
Total $ 1,996,707 $1,139,479 $ 1,929,608 $1,211,000
</TABLE>
* Weighted daily average rate for month ended December 31, 1998 and 1999.
Commodity Price Risk
- --------------------
SPR is exposed to commodity price risk primarily related to changes in the
market price of electricity as well as changes in fuel costs incurred to
generate electricity. Although the potential exists for market risk within these
contracts, the future costs are expected to be covered in the rate making
process. SPPC's gas local distribution company is also protected by deferred
energy accounting procedures (See Note 1 to the Financial Statements). These
risks are not expected to expose SPR to significant market risks related to
commodity price fluctuations. As a result of the merger of SPR and NVP, the
Board of Directors of the combined company requested that management review and
consolidate the Risk Management Programs of the two utilities. SPPC and NVP
engaged the services of a leading energy risk management consulting company to
review existing policies and procedures, make any recommendations to the
existing Program, and implement the revised Program. That project led SPPC and
NVP to adopt revised policies and procedures, implement new IT systems to track
any commodity price exposures, as well as focus on potential "Earnings-at-Risk"
which measures the amount of exposure that SPPC and NVP have to energy prices at
any point in time.
48
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(Refer to Introduction for a discussion of the method of accounting reflected
in the Financial Statements)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report............................................... 50
Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and 1998........ 51
Consolidated Statements of Income for the Years Ended December 31,
1999, 1998 and 1997............................................... 52
Consolidated Statements of Common Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997...................... 53
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.................................. 54
Consolidated Statements of Capitalization as of December 31, 1999
and 1998.......................................................... 55-56
Balance Sheets for Nevada Power Company as of
December 31, 1999 and 1998....................................... 57
Statements of Income for Nevada Power Company
for the Years Ended December 31, 1999, 1998 and 1997.............. 58
Statements of Cash Flows for Nevada Power Company
for the Years Ended December 31, 1999, 1998 and 1997............. 59
Statements of Capitalization for Nevada Power
Company as of December 31, 1999 and 1998......................... 60-61
Notes to Financial Statements.............................................. 62-95
</TABLE>
49
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Sierra Pacific Resources
Reno, Nevada
We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Sierra Pacific Resources and
subsidiaries (the Company) and the separate balance sheets and statements of
capitalization of Nevada Power Company (NVP) as of December 31, 1999 and 1998,
and the related statements of income, common shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's and NVP's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of the Company and the financial
position of NVP as of December 31, 1999 and 1998, and the respective results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States.
DELOITTE & TOUCHE LLP
Reno, Nevada
March 21, 2000
50
<PAGE>
SIERRA PACIFIC RESOURCES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
ASSETS 1999 1998
- ------ ----------- ----------
<S> <C> <C>
Utility Plant, at Original Cost:
Plant in service $ 5,351,399 $ 2,695,312
Less accumulated provision for depreciation 1,571,102 708,791
----------- -----------
3,780,297 1,986,521
Construction work in progress 293,232 213,365
----------- -----------
4,073,529 2,199,886
----------- -----------
Investments in subsidiaries and other property, net 105,880 24,483
----------- -----------
Current Assets:
Cash and cash equivalents 4,789 1,770
Accounts receivable less provision for
uncollectible accounts: 1999 - $6,475; 1998 - $2,429 215,972 97,298
Materials, supplies and fuel, at average cost 73,621 39,606
Deferred energy costs 14,884 62,489
Other 7,003 7,787
----------- -----------
316,269 208,950
----------- -----------
Deferred Charges:
Goodwill 327,725 -
Regulatory tax asset 196,364 62,906
Other regulatory assets 105,242 22,236
Other 122,677 23,379
----------- -----------
752,008 108,521
$ 5,247,686 $ 2,541,840
=========== ===========
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common shareholders' equity $ 1,477,129 $ 864,036
Preferred stock 50,000 3,265
SPPC/NVP - obligated mandatorily redeemable preferred securities 237,372 188,872
Long-term debt 1,556,627 900,227
----------- -----------
3,321,128 1,956,400
----------- -----------
Current Liabilities:
Short-term borrowings 754,979 105,000
Current maturities of long-term debt 202,709 50,380
Accounts payable 138,448 82,721
Accrued interest 15,394 7,829
Dividends declared 20,850 207
Accrued salaries and benefits 15,410 9,713
Deferred taxes on deferred energy costs 5,683 21,871
Other current liabilities 29,773 14,859
----------- -----------
1,183,246 292,580
----------- -----------
Commitments & Contingencies (Note 17)
Deferred Credits:
Deferred federal income taxes 413,964 165,625
Deferred investment tax credits 62,604 28,083
Regulatory tax liability 52,839 16,779
Customer advances for construction 109,422 64,114
Accrued retirement benefits 67,314 14,234
Other 37,169 4,025
----------- -----------
743,312 292,860
----------- -----------
$ 5,247,686 $ 2,541,840
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
SIERRA PACIFIC RESOURCES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Operating Revenues:
Electric $ 1,236,702 $ 873,682 $ 799,148
Gas 38,958 - -
Water 24,339 - -
Other 9,132 - -
----------- ----------- -----------
1,309,131 873,682 799,148
----------- ----------- -----------
Operating Expenses:
Operation:
Purchased power 373,456 283,838 277,644
Fuel for power generation 206,130 149,804 138,956
Gas purchased for resale 27,262 - -
Deferral of energy costs-net 97,238 (29,680) (60,400)
Other 203,468 134,652 122,811
Maintenance 60,384 49,082 52,126
Depreciation and Amortization 113,236 73,562 66,273
Taxes:
Income taxes 26,086 42,949 43,478
Other than income 30,713 22,198 21,064
----------- ----------- -----------
1,137,973 726,405 661,952
----------- ----------- -----------
Operating Income 171,158 147,277 137,196
----------- ----------- -----------
Other Income:
Allowance for other funds used during construction 2,374 8,944 8,760
Other income -net (2,516) (4,602) (5,741)
----------- ----------- -----------
(142) 4,342 3,019
----------- ----------- -----------
Total Income Before Interest Charges 171,016 151,619 140,215
----------- ----------- -----------
Interest Charges:
Long-term debt 81,731 56,995 50,791
Other 26,356 6,018 1,531
Allowance for borrowed funds used during construction
and capitalized interest (8,127) (6,080) (2,579)
----------- ----------- -----------
99,960 56,933 49,743
----------- ----------- -----------
Income before obligated mandatorily redeemable preferred
securities 71, 056 94,686 90,472
Preferred dividend requirements of SPPC/NVP obligated
mandatorily redeemable preferred securities (16,910) (11,013) (7,256)
----------- ----------- -----------
Income before preferred dividend requirements of
subsidiary 54,146 83,673 83,216
Preferred dividend requirements of subsidiary and
redemption premium (2,396) (174) (1,125)
----------- ----------- -----------
Net Income $ 51,750 $ 83,499 $ 82,091
=========== =========== ===========
Net Income Per Share - Basic $ 0.83 $ 1.64 $ 1.65
- Diluted $ 0.83 $ 1.64 $ 1.65
Weighted Average Shares of Common Stock
Outstanding 62,577,385 50,993,000 49,691,000
Annual Dividends Paid Per Share of Common Stock $ 1.165 $ 1.45 $ 1.60
</TABLE>
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
SIERRA PACIFIC RESOURCES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Common Stock:
Balance at Beginning of Year $ 54,066 $ 53,604 $ 51,990
401(k) Savings plan - 65 98
Stock purchase and dividend reimbursement - 397 1,516
Merger conversion 36,064 - -
Merger cash consideration (11,716) - -
----------- ---------- ----------
Balance at end of year 78,414 54,066 53,604
----------- ---------- ----------
Other Paid-In Capital:
Balance at Beginning of Year 683,156 662,987 631,204
Premium on sale of common stock - 20,169 31,783
CSIP, DRP, ESPP and other 1,409 - -
Merger transactions 275,384 - -
Revaluation of pension asset 66 - -
Goodwill 331,174 - -
----------- ---------- ----------
Balance at End of Year 1,293,990 683,156 662,987
----------- ---------- ----------
Retained Earnings:
Balance at Beginning of Year 126,814 117,032 117,360
Income before preferred dividends 54, 146 83,673 83,216
Dividends declared:
Preferred stock of subsidiaries (2,721) (174) (1,125)
Common stock (73,514) (73,717) (79,176)
Premium redemption of preferred stock - - (3,243)
----------- ---------- ----------
Balance at End of Year 104, 725 126,814 117,032
----------- ---------- ----------
Total Common Shareholder's Equity at End of Year $1,477, 129 $ 864,036 $ 833,623
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
53
<PAGE>
SIERRA PACIFIC RESOURCES
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
- ------------------------------------
Income before preferred dividends $ 54, 146 $ 83,673 $ 83,216
Non-cash items included in income:
Depreciation and amortization 113,236 73,562 66,273
Deferred taxes and investment tax credits (16,543) 23,640 21,599
AFUDC and capitalized interest (10,501) (15,025) (11,339)
Deferred energy costs 48,313 (33,819) (59,543)
Early retirement and severance amortization 1,748 - -
Other non-cash 24,122 13,896 12,001
Changes in certain assets and liabilities, net of
acquisition:
Accounts receivable (7,393) (9,034) (15,407)
Materials, supplies and fuel (3,846) 2,764 163
Other current assets 155 1,359 1,492
Accounts payable 49,655 22,788 8,306
Other current liabilities (6,342) (7,918) 4,540
Other - net (35,661) (7,605) (3,509)
---------- ---------- ----------
Net Cash Flows From Operating Activities 211,089 148,281 107,792
---------- ---------- ----------
Cash Flows From Investing Activities:
- ------------------------------------
Acquisition of business net of cash acquired (448,311) - -
Additions to utility plant (299,064) (314,933) (211,371)
Non-cash charges to utility plant (3,645) 3,996 1,493
Customer refunds for construction 8,173 - -
Contributions in aid of construction 13,053 8,896 5,083
---------- ---------- ----------
Net cash used for utility plant (729,794) (302,041) (204,795)
Proceeds from sale of other assets - - 4
(Investments in) disposal of subsidiaries and 1,366 (2,277) (5,636)
other property - net
---------- ---------- ----------
Net Cash Used in Investing Activities (728,428) (304,318) (210,427)
---------- ---------- ----------
Cash Flows From Financing Activities:
- ------------------------------------
Increase in short-term borrowings 495,165 105,000 -
Proceeds from issuance of long-term debt 230,699 - 76,261
Retirement of long-term debt (63,293) (17,436) (7,131)
Change in funds held in trust - 52,939 (248)
Proceeds from NVP, obligated mandatorily - 70,000 118,872
redeemable preferred securities
Retirement of preferred stock (26,380) (200) (38,200)
Sale of common stock - 20,746 32,473
Dividends paid (115,833) (73,962) (81,216)
---------- ---------- ----------
Net Cash From Financing Activities 520,358 157,087 100,811
---------- ---------- ----------
Net Increase/Decrease in Cash and Cash Equivalents 3,019 1,050 (1,824)
Beginning Balance in Cash and Cash Equivalents 1,770 720 2,544
---------- ---------- ----------
Ending Balance in Cash and Cash Equivalents $ 4,789 $ 1,770 $ 720
========== ========== ==========
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Paid During Year For:
Interest $ 127,063 $ 75,487 $ 64,692
Income taxes 43,719 27,110 19,545
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
SIERRA PACIFIC RESOURCES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
1999 1998
----------- -----------
<S> <C> <C>
Common Shareholders' Equity:
- ---------------------------
Common stock, $1.00 par value, authorized 250 million;
issued and outstanding 1999: 78,428,480 shares; 1998, 51,265,117 shares $ 78,414 $ 54,066
Additional paid-in capital 1,293,990 683,156
Retained earnings 104, 725 126,814
----------- -----------
Total Common Shareholders' Equity 1,477, 129 864,036
----------- -----------
Preferred Stock of Subsidiaries:
- -------------------------------
Not subject to mandatory redemption
Outstanding at December 31
5.40% Series, 36,669 shares - 733
5.20% Series, 34,570 shares - 692
4.70% Series, 102,006 shares - 2,040
Class A Series 1; $1.95 dividend 50,000 -
----------- -----------
Subtotal 50,000 3,465
Current sinking fund requirements: - (200)
----------- -----------
Total Preferred Stock 50,000 3,265
----------- -----------
Preferred Securities of Subsidiaries:
- ------------------------------------
NVP obligated Mandatorily Redeemable Preferred Securities of NVP's
Subsidiary Trust, NVP Capital I, holding solely $122.6 million principal amount of 118,872 118,872
8.2% Junior Subordinated Debentures of NVP, due 2037
NVP Capital III, holding solely $72.2 million principal amount of 7 3/4% Junior 70,000 70,000
Subordinated Debentures of NVP, due 2038
SPPC obligated Mandatorily Redeemable Preferred Securities of SPPC's
Subsidiary Trust, SPPC Capital I, holding solely $50 million principal amount of
8.60% Junior Subordinated Debentures of SPPC, due 2036 48,500 -
----------- -----------
Total Preferred Securities 237,372 188,872
----------- -----------
Long-Term Debt:
- --------------
First Mortgage Bonds:
Unamortized bond premium and discount, net (583) 6
Debt Secured by First Mortgage Bonds:
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
8.50% Series Z due 2023 35,000 45,000
7.06% Series AA due 2000 85,000 85,000
2.00% Series Z due 2004 72 -
2.00% Series O due 2011 1,374 -
6.35% Series FF due 2012 1,000 -
6.55% Series AA due 2013 39,500 -
6.30% Series DD due 2014 45,000 -
6.65% Series HH due 2017 75,000 -
6.65% Series BB due 2017 17,500 -
6.55% Series GG due 2020 20,000 -
6.30% Series EE due 2022 10,250 -
6.95% to 8.61% Series A MTN due 2022 110,000 -
7.10% and 7.14% Series B MTN due 2023 58,000 -
6.62% to 6.83% Series C MTN due 2006 50,000 -
5.90% Series JJ due 2023 9,800 -
5.90% Series KK due 2023 30,000 -
</TABLE>
55
<PAGE>
SIERRA PACIFIC RESOURCES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
<TABLE>
<CAPTION>
Continued from previous page December 31,
1999 1998
----------- ----------
<S> <C> <C>
5.00% Series Y due 2024 3,138 -
6.70% Series II due 2032 21,200 -
5.47% Series D MTN due 2001 17,000 -
5.50% Series D MTN due 2003 5,000 -
5.59% Series D MTN due 2003 13,000 -
----------- ----------
Subtotal, excluding current portion 898,751 427,506
----------- ----------
Industrial development revenue bonds
7.80% due 2020 100,000 100,000
5.90% Series 1997A due 2032 52,285 52,285
5.90% Series 1995B due 2030 85,000 85,000
5.60% Series 1995A due 2030 76,750 76,750
5.50% 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 20,000
5.30% Series 1995D due 2011 14,000 14,000
5.45% Series 1995D due 2023 6,300 6,300
5.35% Series 1995E due 2022 13,000 13,000
Less funds held in trust - (10)
----------- ----------
Total excluding current portion 431,335 431,325
----------- ----------
6.20% Senior unsecured note Series A 130,000 -
Obligation under capital leases 87,007 91,249
Current maturities and sinking fund requirements (89,842) (50,180)
Variable rate note:
Water facilities note maturing 2020 80,000
Other, excluding current portion 19,376 327
----------- ----------
Total Long-Term Debt 1,556,627 900,227
----------- ----------
TOTAL CAPITALIZATION $ 3,321,128 $1,956,400
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
NEVADA POWER COMPANY
BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
ASSETS 1999 1998
- ------ ----------- ----------
<S> <C> <C>
Utility Plant, at Original Cost:
Plant in service $ 2,928,973 $2,695,312
Less accumulated provision for depreciation 772,003 708,791
----------- ----------
2,156,970 1,986,521
Construction work in progress 195,671 213,365
----------- ----------
2,352,641 2,199,886
----------- ----------
Investments in Sierra Pacific Resources (Note 1A) 654,156 -
Investments in subsidiaries and other property, net 15,644 24,483
----------- ----------
669,800 24,483
----------- ----------
Current Assets:
Cash and cash equivalents 243 1,770
Accounts receivable less provision for
uncollectible accounts: 1999 - $2,826; 1998 - $2,429 110,955 97,298
Materials, supplies and fuel, at average cost 43,108 39,606
Deferred energy costs 14,884 62,489
Other 3,573 7,787
----------- ----------
172,763 208,950
----------- ----------
Deferred Charges:
Regulatory tax asset 130,833 62,906
Other regulatory assets 28,190 22,236
Other 24,258 23,379
----------- ----------
183,281 108,521
----------- ----------
$ 3,378,485 $2,541,840
=========== ==========
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common shareholders' equity, including $654,156 of equity in Sierra Pacific $ 1,477,129 864,036
Resources in 1999 (Note 1A)
Preferred stock - 3,265
Obligated mandatorily redeemable preferred securities 188,872 188,872
Long-term debt 931,004 900,227
----------- ----------
2,597,005 1,956,400
----------- ----------
Current Liabilities:
Short-term borrowings 182,000 105,000
Current maturities of long-term debt 89,842 50,380
Accounts payable 75,088 82,721
Accrued interest 10,098 7,829
Dividends declared 24,126 207
Accrued salaries and benefits 7,025 9,713
Deferred taxes on deferred energy costs 5,683 21,871
Other current liabilities 18,536 14,859
----------- ----------
412,398 292,580
----------- ----------
Commitments & Contingencies (Note 17)
Deferred Credits:
Deferred federal income taxes 236,139 165,625
Deferred investment tax credits 26,624 28,083
Regulatory tax liability 14,993 16,779
Customer advances for construction 69,341 64,114
Accrued retirement benefits 18,262 14,234
Other 3,723 4,025
----------- ----------
369,082 292,860
----------- ----------
$ 3,378,485 $2,541,840
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
NEVADA POWER COMPANY
STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Operating Revenues:
Electric $ 977,262 $ 873,682 $ 799,148
----------- ----------- -----------
977,262 873,682 799,148
----------- ----------- -----------
Operating Expenses:
Operation:
Purchased power 293,600 283,838 277,644
Fuel for power generation 154,546 149,804 138,956
Deferral of energy costs-net 97,238 (29,680) (60,400)
Other 141,041 134,652 122,811
Maintenance 50,805 49,082 52,126
Depreciation and Amortization 80,644 73,562 66,273
Taxes:
Income taxes 19,943 42,949 43,478
Other than income 22,462 22,198 21,064
----------- ----------- -----------
860,279 726,405 661,952
----------- ----------- -----------
Operating Income 116,983 147,277 137,196
----------- ----------- -----------
Other Income:
Equity in earnings of Sierra Pacific Resources (Note 1A) 13,058 - -
Allowance for other funds used during construction 3,713 8,944 8,760
Other income -net (1,824) (4,602) (5,741)
----------- ----------- -----------
14,947 4,342 3,019
----------- ----------- -----------
Total Income Before Interest Charges 131,930 151,619 140,215
----------- ----------- -----------
Interest Charges:
Long-term debt 64,454 56,995 50,791
Other 8,815 6,018 1,531
Allowance for borrowed funds used during construction
and capitalized interest (8,356) (6,080) (2,579)
----------- ----------- -----------
64,913 56,933 49,743
----------- ----------- -----------
Income before obligated mandatorily redeemable preferred
securities 67,017 94,686 90,472
Preferred dividend requirements obligated mandatorily
redeemable preferred securities (15,172) (11,013) (7,256)
----------- ----------- -----------
Income before preferred dividend requirements of 51,845
subsidiary 83,673 83,216
Preferred dividend requirements and redemption premium (95) (174) (1,125)
----------- ----------- -----------
Net Income $ 51,750 $ 83,499 $ 82,091
=========== =========== ===========
Net Income Per Share - Basic $ 0.83 $ 1.64 $ 1.65
- Diluted $ 0.83 $ 1.64 $ 1.65
Weighted Average Shares of Common Stock
Outstanding 62,577,385 50,993,000 49,691,000
Annual Dividends Paid Per Share of Common Stock $ 1.165 $ 1.45 $ 1.60
</TABLE>
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
NEVADA POWER COMPANY
STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Income before preferred dividends $ 51,845 $ 83,673 $ 83,216
Non-cash items included in income:
Depreciation and amortization 80,643 73,562 66,273
Deferred taxes and investment tax credits (18,913) 23,640 21,599
AFUDC and capitalized interest (12,069) (15,025) (11,339)
Deferred energy costs 48,313 (33,819) (59,543)
Other non-cash 16,908 13,896 12,001
Equity in earnings of Sierra Pacific Resources (Note 1A) (13,058) - -
Changes in certain assets and liabilities:
Accounts receivable (11,795) (9,034) (15,407)
Material, supplies and fuel (3,502) 2,764 163
Other current assets 1,778 1,359 1,492
Accounts payable 34,964 22,788 8,306
Other current liabilities 17,066 (7,918) 4,540
Other - net (14,002) (7,605) (3,509)
---------- ---------- -----------
Net Cash Flows From Operating Activities 178,178 148,281 107,792
---------- ---------- -----------
Cash Flows From Investing Activities:
Additions to utility plant (223,963) (314,933) (211,371)
Non-cash charges to utility plant (2,184) 3,996 1,493
Customer refunds for construction 5,228 - -
Contributions in aid of construction - 8,896 5,083
---------- ---------- -----------
Net cash used for utility plant (220,919) (302,041) (204,795)
Proceeds from sale of other assets - - 4
(Investments in) disposal of subsidiaries and other property - net 1,499 (2,277) (5,636)
---------- ---------- -----------
Net Cash Used In Investing Activities (219,420) (304,318) (210,427)
Cash Flows From Financing Activities:
Increase (Decrease) in short-term borrowings 77,000 105,000 -
Proceeds from issuance of long-term debt 129,900 - 76,261
Retirement of long-term debt (60,283) (17,436) (7,131)
Change in funds held in trust 9 52,939 (248)
Proceeds from NVP-obligated mandatorily redeemable - 70,000 118,872
preferred securities
Retirement of preferred stock (3,265) (200) (38,200)
Sale of common stock - 20,746 32,473
Additional investment of parent 18,000
Dividends paid (121,646) (73,962) (81,216)
---------- ---------- -----------
Net Cash From Financing Activities 39,715 157,087 100,811
---------- ---------- -----------
Net Increase/Decrease in Cash and Cash Equivalents (1,527) 1,050 (1,824)
Beginning Balance in Cash and Cash Equivalents 1,770 720 2,544
---------- ---------- -----------
Ending Balance in Cash and Cash Equivalents $ 243 $ 1,770 $ 720
========== ========== ===========
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Paid During Year For:
Interest $ 91,196 $ 75,487 $ 64,692
Income taxes 38,219 27,110 19,545
</TABLE>
The accompanying notes are an integral part of the financial statements.
59
<PAGE>
NEVADA POWER COMPANY
STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
1999 1998
---------- --------
<S> <C> <C>
Common Shareholders' Equity:
- ---------------------------
Common Shareholders' Equity, including $654,156 of equity in
Sierra Pacific Resources in 1999 (Note 1A) $1,477, 129 $864,036
Preferred Stock:
- ---------------
Not subject to mandatory redemption:
Outstanding at December 31, 1998 and 1999:
5.40% Series, 36,669 and 38,669 shares - 733
5.20% Series, 34,570 and 36,507 shares - 692
4.70% Series, 102,006 and 108,006 shares - 2,040
---------- --------
Subtotal - 3,465
Current sinking fund requirements: (200)
---------- --------
Total Preferred Stock - 3,265
---------- --------
Preferred Securities:
- --------------------
NVP obligated Mandatorily Redeemable Preferred Securities of NVP's 118,872
Subsidiary Trust, NVP Capital I, holding solely $122.6 million principal
amount of 118,872
8.2% Junior Subordinated Debentures of NVP, due 2037
NVP Capital III, holding solely $72.2 million principal amount of 7 3/4% Junior 70,000 70,000
Subordinated Debentures of NVP, due 2038
---------- --------
Total Preferred Securities 188,872 188,872
---------- --------
Long-Term Debt:
- --------------
First Mortgage Bonds:
Unamortized bond premium and discount, net 212 6
Debt Secured by First Mortgage Bonds:
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
8.50% Series Z due 2023 35,000 45,000
7.06% Series AA due 2000 85,000 85,000
---------- --------
Subtotal, excluding current portion 372,712 427,506
Industrial development revenue bonds
7.80% due 2020 100,000 100,000
5.90% Series 1997A due 2032 52,285 52,285
5.90% Series 1995B due 2030 85,000 85,000
5.60% Series 1995A due 2030 76,750 76,750
5.50% Series 1995C due 2030 44,000 44,000
</TABLE>
60
<PAGE>
NEVADA POWER COMPANY
STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
<TABLE>
<CAPTION>
Continued from previous page December 31,
1999 1998
----------- ----------
<S> <C> <C>
Pollution control revenue bonds
6 3/8% due 2036 20,000 20,000
5.80% Series 1997B due 2032 20,000 20,000
5.30% Series 1995D due 2011 14,000 14,000
5.45% Series 1995D due 2023 6,300 6,300
5.35% Series 1995E due 2022 13,000 13,000
Less funds held in trust - (10)
----------- ----------
Total excluding current portion 431,335 431,325
----------- ----------
6.20% Senior unsecured note Series A 130,000 -
Obligation under capital leases 87,007 91,249
Current maturities and sinking fund requirements (89,842) (50,180)
Other, excluding current portion (208) 327
----------- ----------
Total Long-Term Debt 931,004 900,227
----------- ----------
TOTAL CAPITALIZATION $2,597, 005 $1,956,400
----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
61
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies for both utility and non-utility
operations are as follows:
General
- -------
The consolidated financial statements include the accounts of Sierra
Pacific Resources (SPR) and its wholly-owned subsidiaries, Nevada Power Company
(NVP), Sierra Pacific Power Company (SPPC), Tuscarora Gas Pipeline Company
(TGPC), Lands of Sierra, Inc. (LOS), Sierra Gas Holding Company (SGHC), Sierra
Energy Company dba e.three (e.three), Sierra Pacific Energy Company (SPE),
Sierra Water Development Company (SWDC) and Sierra Pacific Communications (SPC).
All significant intercompany balances and intercompany transactions have been
eliminated in consolidation. See Note 2 for additional information regarding
the presentation of consolidated financial results pursuant to the 1999 merger
of SPR and NVP.
NVP is an operating public utility that provides electric service in Clark
County in southern Nevada. The assets of NVP represent 52% of the consolidated
assets of SPR at December 31, 1999. NVP provides electricity to approximately
566,700 customers in the communities of Las Vegas, North Las Vegas, Henderson,
Searchlight, Laughlin and adjoining areas. Service is also provided to Nellis
Air Force Base and the Department of Energy at Mercury and Jackass Flats at the
Nevada Test Site. The consolidated financial statements of SPR include the
accounts of NVP's wholly-owned subsidiaries, NVP Capital I, NVP Capital III, and
Nevada Electric Investment Company. NVP has accounted for the earnings of its
subsidiaries on the equity method in the financial statements.
SPPC is an operating public utility that provides electric service in
northern Nevada and northeastern California. SPPC also provides natural gas
and water services in the Reno/Sparks area of Nevada. The assets of SPPC
represent 40% of the consolidated assets of SPR at December 31, 1999. SPPC
provides electricity to approximately 302,000 customers in a 50,000 square mile
service area including western, central and northeastern Nevada, including the
cities of Reno, Sparks, Carson City, Elko, and a portion of eastern California,
including the Lake Tahoe area. The consolidated financial statements of SPR
include the accounts of SPPC's wholly-owned subsidiaries, Pinon Pine
Corporation, Pinon Pine Investment Company, GPSF-B, and Sierra Pacific Power
Capital I (Trust).
NVP's and SPPC's accounts for electric operations and SPPC's accounts for
gas operations are maintained in accordance with the Uniform System of Accounts
prescribed by the Federal Energy Regulatory Commission. SPPC maintains its
accounts for water operations in accordance with the Uniform System of Accounts
prescribed by the National Association of Regulatory Utility Commissioners.
TGPC is a partner in a joint venture that developed, constructed, and
operates a natural gas pipeline serving the expanding gas market in the Reno
area and certain northeastern California markets. TGPC accounts for its joint
venture interest under the equity method. e.three provides comprehensive energy
services in commercial and industrial markets on a regional basis. SPE markets
a package of telecommunication products and services. SPC was formed in 1999 to
provide telecommunications services using fiber optic cable technology in both
northern and southern Nevada.
62
<PAGE>
SPR is a limited partner in an energy technology venture capital
partnership formed to gain access to new technologies that could affect SPR and
its subsidiaries. This partnership invests in energy companies offering
technologies of strategic advantage to its partners. The initial term of this
partnership expires in 2006, with two extensions of up to two years each. SPR's
investment in the partnership was $3.5 million as of December 31, 1999, of which
$1,250,000 was made in 1999. The remaining $1.5 million balance of SPR's
commitment will be drawn as funds are needed by the partnership over the next
two years. Gains and losses will be allocated 80% to the limited partners based
on their contributions, and 20% to the general partner. SPR, as a limited
partner, is entitled to 7.89% and accounts for this investment on the cost
basis.
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 certain assets and
liabilities. These estimates and assumptions also affect the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of certain revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Certain reclassifications have been made for comparative purposes but have
not affected previously reported net income or common shareholders' equity.
Utility Plant
- -------------
In addition to direct labor and material costs, NVP and SPPC also charge
the following to the cost of constructing utility plant: the cost of time spent
by administrative employees in planning and directing construction work;
property taxes; employee benefits (including such costs as pensions,
postretirement and postemployment benefits, vacations and payroll taxes); and an
allowance for funds used during construction (AFUDC).
The original cost of plant retired or otherwise disposed of and the cost of
removal less salvage is generally charged to the accumulated provision for
depreciation. The cost of current repairs and minor replacements is charged to
operating expenses when incurred. The cost of renewals and betterments is
capitalized.
Allowance For Funds Used During Construction and Capitalized Interest
- ---------------------------------------------------------------------
As part of the cost of constructing utility plant, NVP and SPPC capitalize
AFUDC. AFUDC represents the cost of borrowed funds and, where appropriate, the
cost of equity funds used for construction purposes in accordance with rules
prescribed by the FERC and the PUCN. AFUDC is capitalized in the same manner as
construction labor and material costs, with an offsetting credit to "other
income" for the portion representing the cost of equity funds and as a reduction
of interest charges for the portion representing borrowed funds. Recognition of
this item as a cost of utility plant is in accordance with established
regulatory ratemaking practices. Such practices permit the utility to earn a
fair return on, and recover in rates charged for utility services, all capital
costs. This is accomplished by including such costs in the rate base and in the
provision for depreciation. NVP's AFUDC rates used during 1999, 1998, and 1997
were 8.55%, 9.66% and 9.66%, respectively. SPPC's AFUDC rates used during 1999,
1998, and 1997 were 6.09%, 7.69% and 8.30%, respectively. As specified by the
PUCN, certain projects were assigned a lower AFUDC rate due to specific low-
interest-rate financings directly associated with those projects.
63
<PAGE>
Depreciation
- ------------
Depreciation is calculated using the straight-line composite method over
the estimated remaining service lives of the related properties. NVP's
depreciation provision for 1999, 1998 and 1997, as authorized by the PUCN and
stated as a percentage of the original cost of depreciable property, was
approximately 2.9%. SPPC's depreciation provision for 1999, 1998 and 1997, as
authorized by the PUCN and stated as a percentage of the original cost of
depreciable property, was approximately 3.14%, 3.31%, and 3.16%, respectively.
Cash and Cash Equivalents
- -------------------------
Cash is comprised of cash on hand and working funds. Cash equivalents
consist of high quality investments in money market funds. Short-term
investments in money market funds were $.2 million and $.7 million for December
31, 1999 and 1998, respectively.
Regulatory Accounting and Other Regulatory Assets
- -------------------------------------------------
NVP's and SPPC's rates are currently subject to the approval of the PUCN
and are designed to recover the cost of providing generation, transmission and
distribution services. As a result, NVP and SPPC qualify for the application of
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the
Effects of Certain Types of Regulation", issued by the Financial Accounting
Standards Board (FASB). This statement recognizes that the rate actions of a
regulator can provide reasonable assurance of the existence of an asset and
requires the capitalization of incurred costs that would otherwise be charged to
expense where it is probable that future revenue will be provided to recover
these costs. SFAS No. 71 prescribes the method to be used to record the
financial transactions of a regulated entity. The criteria for applying SFAS
No. 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, and (iii) rates that are set at levels that will
recover costs can be charged to and collected from customers. SFAS No. 101,
"Regulated Enterprises-Accounting for the Discontinuation of Application of FASB
Statement No. 71", requires that an enterprise whose operations cease to meet
the qualifying criteria of SFAS No. 71 discontinue the application of that
statement by eliminating the effects of any actions of regulators that had been
previously recognized.
In 1997, the Emerging Issues Task Force (EITF) released Issue 97-4. In
doing so, it reached a consensus that a utility subject to a deregulation plan
for its generation business should stop applying SFAS No. 71 to the generating
portion of its business no later than the date when a deregulation plan with
sufficient detail of the effect of the plan is known. EITF 97-4 also reached a
consensus that regulatory assets and liabilities that originated in a portion of
the business that is discontinuing its application of SFAS No. 71 should be
evaluated on the basis of where (that is, the portion of the business in which)
the regulated cash flows to realize and settle them will be derived. The result
of the consensus is that there is no elimination of regulatory assets which the
deregulatory legislation or rate order specifies collection of, if the
regulatory assets are recoverable through a portion of the business which
remains subject to SFAS No. 71.
64
<PAGE>
In conformity with SFAS No. 71, the accounting for NVP and SPPC conforms to
generally accepted accounting principles as applied to regulated public
utilities and as prescribed by the agencies and commissions of the jurisdictions
in which they operate. In accordance with these principles, certain costs that
would otherwise be charged to expense or capitalized as plant costs are deferred
as regulatory assets based on expected recovery from customers in future rates.
Management's expected recovery of deferred costs is based upon specific
ratemaking decisions or precedent for each item. The following other regulatory
assets were included in the consolidated balance sheets as of December 31
(dollars in thousands):
<TABLE>
<CAPTION>
DESCRIPTION 1999 1998 AMORTIZATION PERIODS
- ----------- ---- ---- --------------------
<S> <C> <C> <C>
Early retirement and severance offers $ 17,001 1,657 Various through 2004
Loss on reacquired debt 31,279 13,689 Various through 2030
Plant assets 7,104 0 Various through 2031
Merger transition costs/1/ 6,638 0 To be determined
Merger severance/relocation/1/ 19,398 0 To be determined
Merger goodwill/1/ 3,392 0 To be determined
Other costs 20,430 6,890 Various
---------------------------
Total $ 105,242 22,236
===========================
</TABLE>
Currently, the electric utility industry is predominantly regulated on a
basis designed to recover the cost of providing electric power to its retail and
wholesale customers. If cost-based regulation were to be discontinued in the
industry for any reason, including competitive pressure on the cost-based prices
of electricity, profits could be reduced, and utilities might be required to
reduce their asset balances to reflect a market basis less than cost.
Discontinuance of cost-based regulation would also require affected utilities to
write off their associated regulatory assets. Management cannot predict the
potential impact, if any, of these competitive forces on NVP's and SPPC's future
financial position and results of operations.
Deferral of Energy Costs
- ------------------------
Nevada and California statutes permit regulated utilities to, from time-to-
time, adopt deferred energy accounting procedures, which record as deferred
energy costs the difference between actual energy expense and energy revenues.
Under regulations adopted by the PUCN, deferred energy rates are revised at
least every 12 months to recapture the accumulated deferred balance over a
future period. The intent of these procedures is to ease the effect of
fluctuations in the cost of purchased gas, fuel and purchased power.
NVP utilized deferred energy accounting procedures in 1997, 1998 and 1999.
During 1999 SPPC did not employ deferred energy accounting procedures, but has
resumed those procedures for natural gas operations as of January 1, 2000.
The passage of SB438 in Nevada terminated deferred energy accounting for
electric utility operations effective October 1, 1999.
/1/ See Note 2 for information regarding merger and the amortization period for
these costs. Also, merger goodwill included in the schedule represents the
amount of goodwill that was amortized during 1999 under generally accepted
accounting principles and subsequently removed from expense and established as a
regulatory asset. Note 2 presents a calculation of the total goodwill
recognized from the merger transaction.
65
<PAGE>
Federal Income Taxes and Investment Tax Credits
- -----------------------------------------------
SPR and its subsidiaries file a consolidated federal income tax return.
Current income taxes are allocated based on SPR's and each subsidiary's
respective taxable income or loss and investment tax credits as if each
subsidiary filed a separate return. Deferred taxes are provided on temporary
differences at the statutory income tax rate in effect as of the most recent
balance sheet date.
SPR accounts for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes." SFAS No. 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.
For regulatory purposes, NVP and SPPC are authorized to provide for
deferred taxes on the difference between straight-line and accelerated tax
depreciation on post-1969 utility plant expansion property, deferred energy, and
certain other differences between financial reporting and taxable income,
including those added by the Tax Reform Act of 1986 (TRA). In 1981, NVP and
SPPC began providing for deferred taxes on the benefits of using the Accelerated
Cost Recovery System for all post-1980 property. In 1987, the TRA required NVP
and SPPC to begin providing deferred taxes on the benefits derived from using
the Modified Accelerated Cost Recovery System.
Investment tax credits are no longer available to NVP and SPPC. The
deferred investment tax credits are being amortized over the estimated service
lives of the related properties.
Revenues
- --------
Operating revenues include unbilled utility revenues earned (service has
been delivered, but not yet billed by the end of the accounting period). These
amounts are also included in accounts receivable.
Recent Pronouncements of the FASB
- ---------------------------------
In June 1998, the FASB issued SFAS No. 133, entitled "Accounting for
Derivative Instruments and Hedging Activities". This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position, and measure those instruments at fair value. In May 1999, members of
the FASB agreed to delay the effective date of SFAS No. 133 to fiscal years
beginning after June 15, 2000. SPR is still assessing the impact of SFAS No.
133 on its financial condition and results of operations.
66
<PAGE>
NOTE 1A. FINANCIAL STATEMENTS OF NEVADA POWER COMPANY
For accounting purposes, NVP is deemed to be the acquirer of SPR, and this
is reflected in the SPR Consolidated Financial Statements. However, after the
merger with SPR and as a result of the structure of the transactions, NVP is a
separate legal entity, which is a wholly owned subsidiary of SPR. As a legal
matter, NVP does not own any equity interest in SPR. The audited NVP Financial
Statements accommodate the presentation of financial information of NVP on a
stand-alone basis, without the benefit of the other SPR entities, by summarizing
all non-NVP financial information into a few items on each of the Financial
Statements. These summarized items are repeated below:
Non-NVP Financial Items on the NVP Financial Statements
NVP Balance Sheet:
- -----------------
Investments in Sierra Pacific Resources $654,156
Equity in Sierra Pacific Resources $654,156
The Investment in Sierra Pacific Resources reflects the net assets, after
deducting for all liabilities and preferred stock of Sierra Pacific Resources
not related to NVP. The Equity in Sierra Pacific Resources reflects the sum of
paid-in-capital and retained earnings of SPR, without the benefit of NVP.
NVP Income Statement:
- --------------------
Equity in Earnings of Sierra Pacific Resources $ 13,058
The Equity in Earnings of Sierra Pacific Resources reflects five months of SPR
net income, after SPPC preferred stock dividends.
This line item is required by the rules of purchase accounting and does not
represent any asset to which holders of NVP's securities may look for recovery
of their investment. This item must be disregarded for determining the ability
of NVP to pay dividends (preferred or common), for calculating NVP ratio of
earnings to fixed charges and preferred dividends, and for all NVP mortgage and
charter issuance tests.
NVP Statement of Cash Flow:
- --------------------------
Equity in Earnings of Sierra Pacific Resources $ 13, 058
As in the income statement, the Equity in Earnings of Sierra Pacific Resources
reflects the five months of SPR net income, after SPPC preferred stock
dividends.
This line item is required by the rules of purchase accounting and does not
represent any asset to which holders of NVP's securities may look for recovery
of their investment. This item must be disregarded for determining the ability
of NVP to pay dividends (preferred or common), for calculating NVP ratio of
earnings to fixed charges and preferred dividends, and for all NVP mortgage and
charter issuance tests.
NVP Statement of Capitalization:
- -------------------------------
Equity in Sierra Pacific Resources $654,156
The Equity in Sierra Pacific Resources reflects the sum of paid-in-capital and
retained earnings of SPR on NVP's books.
This line item is required by the rules of purchase accounting and does not
represent any asset to which holders of NVP's securities may look for recovery
of their investment. This item must be disregarded for determing the ability of
NVP to pay dividends (preferred or common) for calculating NVP ratio of earnings
to fixed charges and preferred dividends, and for all NVP mortgage and charter
issuance tests.
67
<PAGE>
NOTE 2. SIERRA PACIFIC RESOURCES AND NEVADA POWER COMPANY MERGER
On July 28, 1999 the merger between SPR and NVP was finalized. The merger
was accounted for as a reverse purchase under generally accounting accepted
principles, with NVP considered the acquiring entity even though SPR survives
and is the legal parent of NVP. In addition, for accounting purposes, the merger
was deemed to have occurred on August 1, 1999. As a result of this reverse
purchase accounting treatment; (i) the historical financial statements of SPR
for periods prior to the date of the merger are no longer the financial
statements of SPR, and therefore, no longer presented; (ii) the historical
financial statements of SPR for periods prior to the date of the merger are
those of NVP; (iii) based on a merger date of August 1, 1999, the Consolidated
Statements of Income for the twelve months ended December 31, 1999 include five
months (August through December 1999) of operating activity for SPR and its
subsidiaries other than NVP. The same statements include the operating results
of NVP for the entire periods presented.
On June 11, 1999, following approvals from the Department of Justice and
the SEC, the PUCN gave unanimous approval of a stipulation among the merging
companies (SPR and NVP), the PUCN staff and the Utility Consumer Advocate,
regarding the merging companies' joint divestiture plan. As part of the
stipulation, the companies were required to re-file the divestiture plan and
file the final Independent System Administrator (ISA) proposal with the PUCN and
the FERC. The last filing was submitted in October 1999. The PUCN merger order
provides that upon selling the generating units, both companies can determine
how they will use the proceeds of the sales, up to the book value of the plants.
Any after-tax gains above book value will be used to offset past costs, as
determined by the PUCN. The PUCN order also provided that any remaining gains
can be used to offset goodwill. After-tax gains may not be sufficient to offset
goodwill. However, if SPPC and NVP demonstrate that the divestiture "resulted
in a market for generation services that produced market prices that are lower
than what could have been achieved otherwise, SPPC and NVP may include in the
general rate filing a request to recover goodwill." SPR expects that some of
the generation facility sales will be completed by late 2000. Following the
issuance of the PUCN order on the merger, the Nevada Legislature passed SB 438
that amended the restructuring process in Nevada. Among other provisions, it
required the utilities (SPPC and NVP) to provide last resort service at a capped
price, and provided that any shortfall experienced by the utilities in revenues
from the capped rates over experienced costs could be recovered from the net
gain from the generation divestiture. It is the utilities' position that any
net gain must first be applied to any such shortfall; any remaining net gain may
then be used to offset stranded costs and then allocated to goodwill.
Under terms of the stipulation, SPR's jurisdictional subsidiaries are
required to file a general rate case three years after the start of retail
competition in the state of Nevada that would give the merged company the
opportunity to recover costs of the merger, provided SPR's jurisdictional
subsidiaries can demonstrate that merger savings exceed merger costs. Merger
costs are to be split among the non-competitive, potentially competitive and
unregulated services or businesses. An opportunity to recover the non-
competitive portion of the merger costs will be addressed in the rate case that
follows the start of competition in Nevada. The burden is on SPPC and NVP to
prove that merger savings exceed merger costs. SPPC and NVP will also have the
opportunity to recover goodwill in the same proceeding.
Through December 31, 1999, SPR had incurred a total of $57.1 million in
capitalized costs since merger work began. The capitalized merger amounts
consist of $37.7 million of transaction and transition costs and $19.4 million
of employee separation costs. Employee separation, relocation, and related
costs for SPR were $14.9 million, of which $5.0 million remains unpaid as of
December 31, 1999. Other costs incurred in connection with employee separations
included pension and postretirement benefits net of curtailment gains of $4.5
million.
68
<PAGE>
In accordance with the terms of the merger, each outstanding share of SPR's
common stock was converted into the right to receive either $37.55 in cash or
1.44 shares of newly issued SPR common stock. Each outstanding share of NVP
common stock was converted to the right to receive either $26.00 in cash or 1.00
share of newly issued SPR common stock. 4,037,000 shares of SPR and 11,716,611
shares of NVP common stock were exchanged for $151.6 million and $304.6 million,
respectively. The remaining shares of each company were converted to newly
issued shares of SPR common stock. SPR stockholders and NVP stockholders
received 38,866,054 and 39,548,506 shares of newly issued SPR common stock,
resulting in 78,414,560 outstanding shares of SPR on August 1, 1999.
The total consideration paid to SPR common stockholders was equal to cash
of $151.6 million and 38,866,054 shares of newly issued SPR common stock at a
price of $24.18 per share based on the average closing price of NVP common stock
between April 22, 1998 and May 6, 1998. The eleven-day average price of NVP
common stock used in determining the total stock consideration represents the
market price over a reasonable period of time before and after the transaction
was announced on April 29, 1998. As shown below, $331.2 million of goodwill was
recorded in connection with the merger and is being amortized over 40 years.
The PUCN's order approving the merger allowed SPR to defer merger costs
(including goodwill) allocable to the regulated utilities for a three-year
period. At the end of the deferral period SPR will propose an amortization
period for goodwill and other merger costs. Accordingly, goodwill amortization
associated with the regulated utility companies is being reclassified to a
regulatory asset during the three-year period. Also, because SPR is deferring
merger costs as regulatory assets the transaction costs included in the
calculation of goodwill represent only costs allocable to the SPR's non-
regulated subsidiaries. The calculation of goodwill follows:
COMPUTATION OF GOODWILL
(Dollars and shares in thousands, except per share amounts)
Cash consideration $ 151.600
Common stock consideration
Sierra Pacific Resources stock converted 26,990
Conversion rate 1.440
-------
New shares received 38,866
NVP avg stock price 24.18
-------
Total stock consideration 939.780
Merger transaction costs allocated to
non-regulated subsidiaries 626
----------
Total Consideration 1.092,006
Fair value of Sierra Pacific Resources'
net assets at 7/31/99 694.729
Other assets recognized, net of tax, for
pension and other postretirement benefits 66,103
----------
Goodwill $ 331,174
==========
69
<PAGE>
Pro forma unaudited financial information for SPR on a consolidated basis,
giving effect to the merger as if it had occurred at the beginning of all
periods presented, is shown below. The pro forma information presented below is
not necessarily indicative of the results that would have occurred, or that
will occur in the future.
<TABLE>
<CAPTION>
(Dollars and shares in thousands Twelve Months Ended
except per share amounts) 1999 1998 1997
- -------------------------------- -----------------------------------------
<S> <C> <C> <C>
Operating Revenue $ 1,756,235 $ 1,615,523 $ 1,462,391
Operating Income $ 253,785 $ 281,759 $ 266,185
Net income $ 82,449 $ 141,355 $ 138,022
Net income per share-basic and diluted $ 1.05 $ 1.81 $ 1.80
Weighted Average Shares of Common
Stock Outstanding $ 78,414 $ 78,038 $ 76,627
Total Assets as of December 31 $ 5,247,606 $ 4,979,631 $ 4,605,713
</TABLE>
NOTE 3. REGULATORY ACTIONS
Nevada Matters
- --------------
On April 30, 1999, SPPC filed its second compliance filings related to the
1997 rate stipulation The filings provide a calculation of SPPC's electric and
gas earnings in excess of a 12 % return on equity (ROE). Any earnings in excess
of 12 % ROE are shared 50/50 between shareholders and customers. On August 19,
1999, the Commission approved a stipulation between SPPC, Staff, and the UCA,
which rebated $7.34 million and $2.0 million to electric and gas customers,
respectively in 1999. Based on 1999 operating results, SPPC anticipates in may
make refunds to customers. Appropriate reserves have been recorded to reflect
any anticipated refunds.
Deferred Energy Filing
- ----------------------
NVP filed a deferred energy case on July 15, 1999, covering the period from
June 1, 1998 through May 31, 1999. Senate Bill 438 froze the rates for NVP at
the level that was in effect on July 1, 1999, except that the PUCN was
authorized to modify those rates in decisions related to deferred accounting
cases filed by NVP prior to October 1, 1999. Accordingly, on September 30, 1999
NVP filed an update through August 31, 1999. Hearings began in January 2000. On
February 4, 2000 the PUCN issued an order that rejected NVP's updated September
30, 1999 deferred energy filing. In addition, on March 21, 2000 the PUCN made
available a draft order that indicated a substantial reduction in NVP's
requested rate relief on the remaining $44 million included in the case. NVP
expects a final decision to be issued on March 27, 2000, which will
substantially reflect the decision in the draft order. As a result of these
decisions, NVP recognized a reserve for previously deferred energy and imputed
capacity costs of $80 million. $56 million of the reserve is associated with
the February 4 decision and $24 million is associated with the March 21
decision. NVP intends to appeal the decisions.
California Matters
- ------------------
On February 18, 1999, the CPUC approved SPPC's proposed Revenue Cycle
Services Credits (RCSC) application filed February 2, 1998. The RCSC addresses
meter ownership, meter services, meter reading, and billing and applies to
customers who select their own provider of a revenue cycle service.
70
<PAGE>
On April 9, 1999, SPPC made a compliance tariff filing which reflects the
approved credits.
On April 5, 1999, the CPUC approved SPPC's proposed unbundled rates
effective back to June 1, 1998.
FERC Matters
- ------------
On May 29, 1999, SPPC and NVP filed an application with the FERC to
increase its Open Access Transmission rates. On November 24, 1999, an unopposed
motion to suspend the procedural schedule to allow consummation of a settlement
was filed with the FERC. The Settlement was filed February 8, 2000 and the
proposed rates became effective on March 1, 2000.
On March 31, 1999, NVP filed with the FERC for approval of generation
tariffs, which contain the rates, terms and conditions under which the new
owners of SPR's generation would operate after divestiture. The FERC approved
the tariffs on November 1, 1999. In compliance with the FERC's November 1 order,
NVP filed pro forma service agreements for the approved tariffs on November 16,
which were subsequently approved on December 16.
NOTE 4. EARNINGS PER SHARE
SPR follows SFAS No. 128, "Earnings Per Share". The following provides the
calculation for Diluted EPS. The difference between Basic EPS and Diluted EPS
is due to common stock equivalent shares resulting from stock options, the
employee stock purchase plan, performance shares and a non-employee director
stock plan. Common stock equivalents were determined using the treasury stock
method.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1999 1998 1997
------------------- -------------------- -------------------
<S> <C> <C> <C>
Basic EPS
Numerator
---------
Income available to common
stockholders ($000) $ 51, 750 $ 83,499 $ 82,091
------------------- -------------------- -------------------
Denominator
-----------
Weighted average number of shares 62,577,385 50,993,000 49,691,000
outstanding
Per-Share Amount $ 0.83 $ 1.64 $ 1.65
----------------
=================== ==================== ===================
Diluted EPS
Numerator
---------
Income available to common 51,750 83,499 82,091
stockholders ($000)
------------------- -------------------- -------------------
Denominator
-----------
Weighted average number of shares
outstanding before dilution 62,577,385 50,993,000 49,691,000
Stock options 20,447 0 0
Executive long term incentive plan
- performance shares 26,118 0 0
Non-employee stock plan 5,736 0 0
Employee stock purchase plan 1,790 0 0
62,631,476 50,993,000 49,691,000
------------------- -------------------- -------------------
Per-Share Amount $ 0.83 $ 1.64 $ 1.65
---------------- =================== ==================== ===================
</TABLE>
71
<PAGE>
NOTE 5. INVESTMENTS IN SUBSIDIARIES AND OTHER PROPERTY
Investments in subsidiaries and other property consisted of (dollars in
thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
--------------- -----------------
<S> <C> <C>
Investment in Pinon Pine, LLC $ 60,043 $ -
Investment in TGTC 16,408 -
Cash Value-Life Insurance 11,492 12,649
Installment Contracts 3,301 4,385
Note Receivable 2,700 -
Other 11,936 7,449
$105,880 $24,483
=============== =================
</TABLE>
Pinon Pine
- ----------
Pinon Pine Corp. and Pinon Pine Investment Co., subsidiaries of SPPC, own
25% and 75% of a 38% interest in Pinon Pine Company, L.L.C. GPSF-B, a Delaware
corporation formerly owned by General Electric Capital Corporation (GECC) and
now owned by SPPC, owns the remaining 62% as of February 1999. The LLC was
formed to take advantage of federal income tax credits associated with the
alternative fuel (syngas) produced by the coal gasifier available under (S) 29
of the Internal Revenue Code. The entire project, which includes an LLC-owned
gasifier and an SPPC-owned power island and post-gasification facility to
partially cool and clean the syngas, is referred to collectively as the Pinon
Pine Power Project.
SPPC has a funding arrangement with the Department of Energy (DOE). Under
the agreement, the DOE will provide funding towards the construction of the
project, and towards the operating and maintenance costs of the facility. The
DOE has committed $168 million of funding for Pinon construction and operation
costs. The DOE provided funding for approximately 53% of the estimated
construction cost and half of the operating and fuel expenses through December
31, 1999. Additional funding will be provided until the commitment is expended.
A dispute has arisen with the DOE regarding the historical and future funding of
natural gas costs. In February 1999, the DOE informed SPPC it will not fund the
remaining $14 million under the cooperative agreement until the dispute is
resolved. On November 2, 1999, SPPC reached final agreement with the DOE
regarding the allowability of previously incurred natural gas costs. The
agreement also redefines the cooperative agreement performance period and the
responsibilities of both parties through the remainder of the agreement. The
period of performance is extended until January 1, 2001 or until the facility is
sold or operational control is transferred. The DOE agrees to share past fuel
costs and future natural gas costs used to fuel the gas combustion turbine
during periods when air extraction from the process is directed to the gasifier
island. Estimated construction start-up and commissioning costs for Pinon,
including the DOE's portion are approximately $301.5 million, which includes
permitting taxes, start-up commissioning, operator training and Allowance for
Funds Used During Construction. DOE funding for construction through December
1999 is $161.4 million.
72
<PAGE>
Construction began on the project in February 1995, following resource plan
approval and the receipt of all permits and other approvals. The natural gas
portion (combined cycle combustion turbine) was satisfactorily completed and
placed in service December 1, 1996. The balance of the plant was completed in
June 1998. The construction of the gasifier portion of the project overran the
fixed contract price by approximately 12% or $12.6 million. The overrun is
primarily due to redesign issues, resolving technical issues relative to start
up and other costs due to a later than anticipated completion date. To date,
SPPC has not been successful in obtaining sustained operation of the gasifier
but work continues to identify problem areas and redesign solutions which will
likely require additional capital expenditures. Due to the problems noted
above, SPPC and Foster Wheeler settled on a portion of the cost overrun and have
entered into an alternative dispute resolution.
SPPC had to satisfy certain performance requirements as part of the
construction agreement with the LLC. The initial performance warranty required
that the gasifier attain an average capacity factor of 30% during 1997,
regardless of delays in the in-service date. Since the gasifier was not in
service in 1997, the certain performance warranties required by the contract
were not met. Consequently, SPPC paid GECC $2.8 million as satisfaction of the
performance obligation.
NOTE 6. JOINTLY OWNED FACILITIES
At December 31, 1999, SPR (through its utility subsidiaries NVP and SPPC)
owned the following undivided interests in jointly owned electric utility
facilities:
<TABLE>
<CAPTION>
Construction
% Owned Accumulated Net Plant in Work in Subsidiary
Generating Facility by Company Plant in Service Depreciation Service Progress
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Navajo Station 11.3 $200,224 $ 84,781 $115,443 $1,818 NVP
Mohave Facility 14.0 78,608 32,406 46,202 3,995 NVP
Reid Gardner No. 4 32.2 125,648 47,198 78,450 24 NVP
Valmy Station 50.0 280,924 112,056 168,868 618 SPPC
-------- -------- -------- ------
TOTAL $685,404 $276,441 $408,963 $6,455
======== ======== ======== ======
</TABLE>
The amounts above for Navajo and Mohave include NVP's share of transmission
systems and general plant equipment and, in the case of Navajo, NVP'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. NVP's
share of operating expenses for these facilities is included in the
corresponding operating expenses in the Consolidated Statements of Income.
73
<PAGE>
NOTE 7. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
As of December 31, 1999, 1,829,015 shares of common stock were reserved for
issuance under the Common Stock Investment Plan (CSIP), Employees' Stock
Purchase Plan (ESPP), Non-Employee Director Stock Plan and Executive Long-Term
Incentive Plan (ELTIP). The ELTIP for key management employees allows for the
issuance of SPR's common shares to key employees through December 31, 2003.
This Plan permits the following types of grants, separately or in combination:
nonqualified and qualified stock options; stock appreciation rights; restricted
stock; performance units; performance shares and bonus stock. SPR also provides
an ESPP to all of its employees meeting minimum service requirements. Employees
can choose twice each year to have up to 15% of their base earnings withheld to
purchase company common stock. The purchase price of the stock is 90% of the
market value on the offering date or 100% of the market price on the execution
date, if less. The Non-employee Director Stock Plan provides that a portion of
SPR's outside directors' annual retainer be paid in SPR common stock. SPR
records the costs of these plans in accordance with Accounting Principles Board
Opinion Number 25.
As a part of the August 1, 1999 merger, the NVP ELTIP was terminated and
existing SPR plans were adopted by the surviving company.
On September 21, 1999, the Board of Directors of SPR (the "SPR Board")
declared a dividend distribution of one right (an "SPR Right") for each
outstanding share of SPR common stock to shareholders of record at the close of
business on October 31, 1999. By issuing the new SPR Rights, the SPR Board
extended the benefits and protections afforded to shareholders under the Rights
Agreement, dated as of October 31, 1989, which expired on October 31, 1999.
Each SPR Right, initially evidenced by and traded with the shares of SPR Common
Stock, entitles the registered holder (other than an "Acquiring Person" as
defined in the Rights Agreement) to purchase at an exercise price of $75.00,
$150.00 worth of common stock at its then-market value, subject to certain
conditions and approvals set forth in the Rights Agreement. If, at any time
while there is an Acquiring Person, SPR engages in a merger or other business
combination transaction or series of related transactions in which the Common
Stock is changed or exchanged or 50% or more of its assets or earning power is
transferred, each SPR Right (not previously voided by the occurrence of a Flip-
in Event, as described in the Rights Agreement) will entitle its holder to
purchase, at the SPR Right's then-current Exercise Price, common stock of such
Acquiring Person having a calculated value of twice the SPR Right's then-current
Exercise Price. The SPR Rights are not exercisable until the Distribution Date
and expire on October 31, 2009, unless previously redeemed by SPR. Following an
SPR Distribution Date, the SPR Rights will trade separately from the SPR Common
Stock and will be evidenced by separate certificates. Until an SPR Right is
exercised, the holder thereof will have no rights as a shareholder of SPR,
including, without limitation, the right to receive dividends. The purpose of
the plan is to help ensure that SPR's shareholders receive fair and equal
treatment in the event of any proposed hostile takeover of SPR.
The changes in common stock and additional paid-in capital for 1999, 1998,
and 1997 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Shares Issued Amount
1999 1998 1997 1999 1998 1997
----------------- --------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Merger exchange 78,414,560 - - $66,540 $ - $ -
CSIP/DRP - 799,762 1,515,716 - 19,067 31,366
ESPP, and other - 65,609 98,184 - 1,564 2,031
78,414,560 865,371 1,613,900 $66,540 $20,631 $33,397
================= =============== ============== ============== ============== ===============
</TABLE>
74
<PAGE>
NOTE 8. PREFERRED STOCK AND PREFERRED SECURITIES
All issues of SPPC and NVP preferred stock are superior to SPR's common
stock with respect to dividend payments (which are cumulative) and liquidation
rights.
The following table indicates the number of shares outstanding and the
dollar amount thereof at December 31 of each year. The difference between total
shares authorized and the amount outstanding represents undesignated shares
authorized but not issued.
<TABLE>
<CAPTION>
Shares Issued Amount
--------------------------------- --------------
(Dollars in thousands) 1999 1998 1997 1999 1998 1997
------------- ------------- ------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Preferred Stock
- ---------------
With mandatory sinking fund
5.40% Series - 36,669 38,669 $ - $ 733 $ 773
5.20% Series - 34,570 36,507 - 692 730
4.70% Series - 102,006 108,006 - 2,040 2,160
--------------------------------------------- -----------------------------------------------
- 173,245 183,182 - 3,465 3,663
Current sinking fund
requirements - - - - (200) (200)
--------------------------------------------- -----------------------------------------------
173,245 183,182 - 3,265 3,463
Not subject to mandatory redemption:
Class A Series I 2,000,000 - - 50,000 - -
--------------------------------------------- -----------------------------------------------
Subtotal 2,000,000 - - 50,000 - -
Total Preferred Stock 2,000,000 173,245 183,182 50,000 3,265 3,463
============================================= ===============================================
Preferred Securities
- --------------------
Subject to mandatory redemption:
Preferred securities of
Sierra Pacific Power
Capital II 1,940,000 - - 48,500 - -
Preferred securities of
Nevada Power Co.
Capital I 147,058 147,058 147,058 118,872 118,872 118,872
Preferred securities of
Nevada Power Co.
Capital III 86,598 86,598 - 70,000 70,000 -
--------------------------------------------- -----------------------------------------------
Total Preferred Securities 2,173,656 233,656 147,058 $237,372 $188,872 $118,872
============================================= ===============================================
</TABLE>
On July 29, 1996, Sierra Pacific Power Capital I (the Trust), a wholly-
owned subsidiary of SPPC, issued $48.5 million (1,940,000 shares) of 8.60% Trust
Originated Preferred Securities (the Preferred Securities). SPPC owns all the
common securities of the Trust; 60,000 shares totaling $1.5 million (Common
Securities). The Preferred Securities and the Common Securities (the Trust
Securities) represent undivided beneficial ownership interests in the assets of
the Trust. The existence of the Trust is for the sole purpose of issuing the
Trust Securities and using the proceeds thereof to purchase from SPPC its 8.60%
Junior Subordinated Debentures due July 30, 2036, in a principal amount of $50
million. The sole asset of the Trust is SPPC's junior subordinated debentures.
SPPC's obligations provide a full and unconditional guarantee of the Trust's
obligations under the Preferred Securities.
75
<PAGE>
The Preferred Securities of Sierra Pacific Power Capital I are redeemable
only in conjunction with the redemption of the related 8.60% Junior Subordinated
Debentures. The Junior Subordinated Debentures will mature on July 30, 2036, and
may be redeemed, in whole or in part, at any time on or after July 30, 2001,or
at any time in certain circumstances upon the occurrence of a tax event. A tax
event occurs if an opinion has been received from tax counsel that there is more
than an insubstantial risk that: the Trust is, or will be subject to United
States federal income tax with respect to interest accrued or received on the
Junior Subordinated Debentures; the Trust is, or will be subject to more than a
de minimis amount of other taxes, duties or other governmental charges; interest
payable by SPPC to the Trust on the Junior Subordinated Debentures is not, or
will not be, deductible, in whole or in part by SPPC for federal income tax
purposes.
Upon the redemption of the Junior Subordinated Debentures, payment will
simultaneously be applied to redeem preferred securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debentures. The preferred securities are redeemable at $25 per
preferred security plus accrued dividends.
On April 2, 1997, NVP Capital I (Trust), a wholly-owned subsidiary of NVP
issued 4,754,860, 8.2% QUIPS at $25 per security. The NVP 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 NVP its 8.2% Junior Subordinated Deferrable
Interest Debentures (QUIDS) due March 31, 2037, extendible to March 31, 2046
under certain conditions, in a principal amount of $122.6 million. The sole
asset of the Trust is the QUIDS. Holders of the Series A QUIPS are entitled to
receive preferential cumulative cash distributions accruing from the date of
original issuance and payable quarterly on the last day of March, June,
September and December of each year. The Series A QUIPS are subject to mandatory
redemption, in whole or in part, upon repayment of the Series A QUIDS at
maturity or their earlier redemption in an amount equal to the amount of related
Series A QUIDS maturing or being redeemed. The QUIPS are redeemable at $25 per
preferred security plus accumulated and unpaid distributions thereon to the date
of redemption.
NVP's obligations provide a full and unconditional guarantee of the Trust's
obligations under the QUIPS. Financial statements of the Trust are consolidated
with NVP's. Separate financial statements are not filed because the Trust is
wholly-owned by NVP and essentially has no independent operations, and NVP's
guarantee of the Trust's obligations is full and unconditional. The $118.9
million in net proceeds was used for general corporate utility purposes and the
repayment of short-term debt.
In October 1998, NVP Capital III (Trust), a wholly-owned subsidiary of
Nevada Power Company, issued 2,800,000, 7 3/4% Cumulative Quarterly Trust Issued
Preferred Securities at $25 per security. NVP owns the entire common securities,
86,598 shares issued by the Trust for $2.2 million. The Trust Issued Preferred
Securities 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 Trust Issued Preferred Securities and the common
securities and using the proceeds thereof to purchase from NVP its 7 3/4% Junior
Subordinated Deferrable Interest Debentures due September 30, 2038, extendible
to September 30, 2047 under certain conditions, in a principal amount of $72.2
million. The sole asset of the Trust is the deferrable interest debentures.
Holders of the Trust Issued Preferred Securities are entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable quarterly on the last day of March, June, September and
December of each year. The Trust Issued
76
<PAGE>
Preferred Securities are subject to mandatory redemption, in whole or in part,
upon repayment of the deferrable interest debentures at maturity or their
earlier redemption in an amount equal to the amount of related deferrable
interest debentures maturing or being redeemed. The Trust Issued Preferred
Securities are redeemable at $25 per preferred security plus accumulated and
unpaid distributions thereon to the date of redemption. NVP's obligations
provide a full and unconditional guarantee of the Trust's obligations under the
Trust Issued Preferred Securities. Financial statements of the Trust are
consolidated with NVP's. Separate financial statements are not filed because the
Trust is wholly-owned by NVP and essentially has no independent operations, and
NVP's guarantee of the Trust's obligations is full and unconditional. The $70
million in net proceeds was used for general corporate utility purposes
including the repayment of short-term debt.
On July 23, 1999 NVP redeemed the 4.7%, 5.2% and 5.4% Series Redeemable
Cumulative Preferred Stock. The total par value and premium was $3.5 million and
was paid in accordance with the merger agreement with Sierra Pacific Resources.
On November 1, 1999, SPPC paid $23.5 million, par value and premium, to
redeem Series A, $2.44 Dividend (4.88%), Series B, $2.36 Dividend (4.72%) and
Series C, $3.90 Dividend (7.8%).
NOTE 9. LONG-TERM DEBT
Substantially all utility plant is subject to the lien of SPPC and NVP
indentures under which the first mortgage bonds are issued.
On June 17, 1998, SPPC redeemed $5 million, 8.65% First Mortgage Bonds
before the 2022 due date.
On April 1, 1998, SPR redeemed $10 million of Series C senior notes leaving
a remaining balance of $20 million, of which $10 million has been included in
the current liability portion of long-term debt on the consolidated balance
sheets at December 31, 1999. On April 1, 1999, these $10 million were redeemed.
Senior notes, Series D were redeemed on April 1, 1999 and Series E is due in
2000.
In December 1998, SPPC issued $35 million principal amount of
collateralized Medium-Term Notes, Series D, consisting of a three year non-
callable note, due in 2001, with an interest rate of 5.47% and five year non-
callable notes, due in 2003, with interest rates ranging from 5.50% to 5.59%.
For all notes, interest is payable in semi-annual payments. The proceeds to SPPC
from the sale of the notes was used for general corporate purposes including but
not limited to: the acquisition of property; the construction, completion,
extension or improvement of facilities; or discharge or refunding of
obligations, including short-term borrowings.
On April 9, 1999, SPPC sold the right to receive payments made in respect
of Transition Property as defined by the offering Circular dated March 30, 1999,
to SPPC Funding LLC, a Delaware special purpose limited liability company whose
sole member is SPPC, in exchange for the proceeds of the SPPC Funding LLC Notes,
Series 1999-1 (the Underlying Notes). SPPC Funding LLC then issued and sold the
Underlying Notes to the California Infrastructure and Economic Development Bank
Special Purpose Trust SPPC-1 (the Trust) in exchange for the proceeds of the
sale of the Trust's $24.0 million 6.4% Rate Reduction Certificates, Series 1999-
1 (the Certificates). The Trust, which had been established by the California
Infrastructure and Economic Development Bank, issued and sold the Certificates
in a private placement pursuant to Rule 144A under the Securities Act of 1933,
as amended.
77
<PAGE>
The Certificates are one of a series of rate reduction certificates that may be
issued from time to time by the Trust and sold to investors upon terms
determined at the time of sale.
On July 12, and July 16, of 1999, respectively, $10 million of the 6.86%
and $20 million of the 6.83% of the Series C, collateralized medium-term SPPC
notes matured.
On September 17, 1999, SPPC issued $100 million floating rate notes, due
October 13, 2000. Interest on the notes is payable quarterly commencing on
December 15, 1999. The interest rate on the notes for each interest period to
maturity will be a floating rate, subject to adjustment every three months,
equal to the London InterBank Offered Rate (LIBOR) for three-month U.S. dollar
deposits plus a spread of 0.75%. These notes will not be entitled to any sinking
fund and will be redeemable without premium at the option of SPPC, in whole,
beginning on March 15, 2000 and on the 15th day of each month thereafter.
On January 29, 1998, NVP 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%, $44 million
Series 1995C IDBs due 2030 at 5.5% and $20.3 million Series 1995D PCRBs with $14
million due 2011 at 5.3% and $6.3 million due 2023 at 5.45%. On the same date,
$13 million Coconino County, Arizona (Nevada Power Company Project) Series 1995E
PCRBs due 2022 were remarketed at a 5.35% fixed rate.
On March 30, 1999, NVP issued $130 million, 6.2%, Series A senior unsecured
notes, due 2004. The notes were issued under rule 144A with registration rights.
Net proceeds were used to repay SPR's and NVP's lines of credit.
On October 1, 1999, NVP redeemed $45,000,000, Series Y, 6.93%, in first
mortgage bonds.
SPR's and NVP's aggregate annual amount of maturities for long-term debt
for the next five years is shown below (dollars in thousands):
<TABLE>
<CAPTION>
NVP SPR
<S> <C> <C>
2000 $ 89,842 $ 202,709
2001 0 19,732
2002 15,000 17,626
2003 0 20,711
2004 130,000 132,621
----------------- ----------------
Subtotal 234,842 393,399
Thereafter 786,004 1,365,937
----------------- ----------------
Total $1,020,846 $1,759,336
================= ================
</TABLE>
78
<PAGE>
NOTE 10. TAXES
The following reflects the composition of taxes on income (in thousands of
dollars):
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Federal:
Taxes estimated to be currently payable $ 42,379 $ 17,163 $ 18,939
Deferred taxes related to:
Excess of tax depreciation over book depreciation 11,569 24,111 13,669
Deferral of energy costs deducted currently for tax purposes-net (16,650) 11,162 20,848
Contributions in aid of construction and customer advances (11,508) (13,211) (6,302)
Avoided interest capitalized (3,594) 6,463 (2,406)
Repairs and Maintenance 1,469 - -
Severance Programs 6,072 - -
Other-net (464) 1,243 1,937
Net amortization of investment tax credit (2,285) (1,460) (1,460)
State (California) 370 - -
--------------------------------------------------
Total $ 27,358 $ 45,471 $ 45,225
==================================================
As Reflected in Statement of Income:
Federal income taxes $ 25,716 $ 42,949 $ 43,478
State income taxes 370 - -
--------------------------------------------------
Operating Income 26,086 42,949 43,478
Other income-net 1,272 2,522 1,747
--------------------------------------------------
Total $ 27,358 $ 45,471 $ 45,225
==================================================
</TABLE>
The total income tax provisions differ from amounts computed by applying
the federal statutory tax rate to income before income taxes for the following
reasons (in thousands of dollars):
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Income before preferred dividend requirements of subsidiary 54,146 $ 83,673 $ 83,216
Total income tax expense 27,358 45,471 45,225
--------------------------------------------------
81,504 129,144 128,441
Statutory tax rate 35% 35% 35%
Expected income tax expense 28,526 45,200 44,954
Depreciation related to difference in cost basis for tax purposes 1,879 1,431 1,431
Allowance for funds used during construction - equity 805 300 300
Tax benefit from the disposition of assets (184) - -
ITC amortization (2,441) (1,460) (1,460)
California franchise taxes (net of federal benefit) 241 - -
Other-net (1,468) - -
----------------------------------------------------
$ 27,358 $ 45,471 $ 45,225
====================================================
Effective tax rate 33. 6% 35.2% 35.2%
====================================================
</TABLE>
79
<PAGE>
The net deferred federal income tax liability consists of deferred federal
income tax liabilities less related deferred federal income tax assets, as shown
(in thousands of dollars):
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
Deferred Federal
Income Tax Liabilities:
AFUDC $ 11,098 $ 1,889
Bond redemption's 8,043 2,177
Excess of tax depreciation over book depreciation 336,545 162,655
Severance Programs 9,168 -
Repairs and maintenance 7,684 -
Tax benefits flowed through to customers 196,365 62,906
Other 10,481 4,187
--------------- --------------
Total $579,384 $233,814
--------------- --------------
Deferred Federal Income Tax Assets:
Avoided interest capitalized 19,443 885
Employee benefit plans 6,825 2,549
Demand side program costs 1,473 1,319
Gross-ups received on contributions in aid of construction and
advances including gross-ups 98,615 47,149
Unamortized investment tax credit 34,051 15,122
Other 5,013 1,165
--------------- --------------
Total 165,420 68,189
--------------- --------------
Deferred Federal Income Taxes $413,964 $165,625
=============== ==============
</TABLE>
SPR's balance sheets contain a net regulatory tax asset of $27.7 million at
December 31, 1999 and $26.7 million at December 31, 1998. The net regulatory
asset consists of future revenue to be received from customers (a regulatory tax
asset) of $65.5 million at December 31, 1999 and $65.6 million at December 31,
1998, due to flow through of the tax benefits of temporary differences. Offset
against these amounts are future revenues to be refunded to customers (a
regulatory tax liability), consisting of $17.9 million at December 31, 1999 and
$18.5 million at year-end 1998, due to temporary differences for liberalized
depreciation at rates in excess of current tax rates, and $20.0 million at
December 31, 1999 and $20.4 million at December 31, 1998 due to temporary
differences caused by the investment tax credit. The regulatory tax liability
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 tax liability for temporary differences caused by
the investment tax credit will be amortized ratably in the same fashion as the
deferred investment credit.
The income tax expense computed for NVP in accordance with FAS 109 reflects
the assets and liabilities of NVP on a stand alone basis and the effect of
filing a consolidated income tax return with its subsidiary companies.
80
<PAGE>
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The December 31, 1999 carrying amount for cash and cash equivalents,
current assets, accounts receivable, accounts payable, and current liabilities
approximates fair value due to the short-term nature of these instruments.
The total fair value of SPR and NVP's consolidated long-term debt at
December 31, 1999, is estimated to be $1,518 million and $910.9 million,
respectively, (excluding current portion) based on quoted market prices for the
same or similar issues or on the current rates offered to SPR and NVP for debt
of the same remaining maturities. The total fair value (excluding current
portion) was estimated to be $868 million at December 31, 1998. The estimated
fair value of SPR's and NVP's preferred securities are $208.6 million and $160.1
million, respectively, at December 31, 1999. The fair value of preferred
securities were estimated to be $193 million and $144.5 million, respectively,
at December 31, 1998.
NOTE 12. SHORT-TERM BORROWINGS
On July 28, 1999, immediately following the consummation of the merger
between SPR and NVP, SPR (holding company) put into place a $500 million
unsecured revolving credit facility, which replaced SPR's previous credit
facility of $10 million. This facility may be used for working capital and
general corporate purposes, including for commercial paper backup.
At the same time, NVP and SPPC each put into place $150 million unsecured
revolving credit facilities. These facilities may also be used for working
capital and general corporate purposes, including for commercial paper backup.
These new facilities replaced the existing credit facilities for NVP and SPPC.
Immediately following the merger, SPR and NVP established commercial paper
programs. These programs are rated A2/P2 by Standard and Poor's and Moody's,
respectively.
On October 15, 1999, NVP issued $100 million floating rate notes, due
October 6, 2000. Interest on the notes is payable quarterly commencing on
January 15, 2000. The interest rate on the notes for each interest period to
maturity will be a floating rate, subject to adjustment every three months,
equal to LIBOR for U.S. dollar deposits plus a spread of 0.79%. These notes will
not be entitled to any sinking fund and will be redeemable at the option of NVP,
in whole, beginning on April 15, 2000 and on the 15th day of each month
thereafter. The proceeds of this financing were used to pay down commercial
paper.
At December 31, 1999, SPR's (holding company) short-term debt was $463.4
million comprised entirely of commercial paper at an average interest rate of
6.51%. NVP's short-term debt was $182.0 million comprised of $82.0 million of
commercial paper at an average interest rate of 6.35% and the $100 million of
floating rate notes. SPPC had $109.6 million outstanding at year end in
commercial paper, with an average interest rate of 6.43%.
The other subsidiaries of SPR had no outstanding short-term borrowings at
this time.
NOTE 13. DIVIDEND RESTRICTIONS
SPR's primary source of funds for the payment of dividends to its
stockholders is dividends paid by SPPC and NPV on their common stock, all of
which is owned by SPR. Accordingly, SPR's ability to
81
<PAGE>
pay dividends is dependent upon the ability of SPPC and NPV to pay dividends on
their common stock. The Restated Articles of Incorporation of SPPC and NPV and
the indentures relating to the various series of their First Mortgage Bonds
contain restrictions as to the payment of dividends on their common stock and as
to the purchase or retirement of their capital stock. Under the most restrictive
of these provisions, approximately $146 million of SPPC's and NVP's retained
earnings were available at December 31, 1999, for the payment of cash dividends
to SPR. As of December 31, 1999, SPR had consolidated retained earnings of
approximately $120.3 million available for the payment of cash dividends on
SPR's common stock.
NOTE 14. RETIREMENT PLAN AND POST RETIREMENT BENEFITS
SPR has pension plans covering substantially all employees. Benefits are
based on years of service and the employee's highest compensation for a period
prior to retirement. SPR also has other postretirement plans, which provide
medical and life insurance benefits for certain retired employees. The following
table provides a reconciliation of benefit obligations, plan assets and the
funded status of the plans. The non-qualified Supplemental Executive Retirement
Plan (SERP) is included as part of pension benefits. This reconciliation is
based on a September 30, 1999 measurement date and reflects the merger of SPR
and NVP during 1999 under purchase accounting. SPPC is a member of the
controlled group in the multi-employer plans.
82
<PAGE>
<TABLE>
<CAPTION>
Other Postretirement
Pension Benefits Benefits
--------------------------------- ----------------------------------
1999 1998 1999 1998
--------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligations
Benefit obligation, beginning of year $149,031 $119,533 $ 16,381 $ 15,496
Service cost 8,481 5,386 996 432
Interest cost 12,823 9,285 1,982 1,155
Participant contributions 0 0 255 252
Plan amendment&special termination 5,865 2,240 1,312 0
Actuarial (gains) losses 4,663 18,001 (1,694) 47
Merger of SPPC Plans 192,140 0 60,386 0
Curtailment loss (gain) (5,373) 0 386 0
Benefits paid (19,160) (5,414) (2,017) (1,001)
Benefit obligation, end of year $348,470 $149,031 $ 77,987 $ 16,381
=============== ============== ================ ==============
Change in plan assets
Fair value of plan assets, beginning of year $111,160 $100,898 $ 11,139 $ 8,665
Actual return on plan assets 15,510 9,546 4,649 1,464
Company contributions 10,432 6,130 2,069 1,759
Participant contributions 0 0 255 252
Merger of SPPC Plans 208,766 0 50,593 0
Benefits paid (19,160) (5,414) (2,017) (1,001)
--------------- -------------- ---------------- --------------
Fair value of plan assets, end of year $326,708 $111,160 $ 66,688 $ 11,139
=============== ============== ================ ==============
Funded Status
Funded Status, end of year $(21,762) $(37,870) $(11,299) $ (5,243)
Unrecognized net actuarial (gains) losses 26,550 19,320 (8,746) (11,507)
Unrecognized prior service cost 6,375 7,784 0 0
Contributions made in 4th quarter 288 3,609 1,096 1,908
Unrecognized net transition obligation 0 0 12,217 13,561
--------------- -------------- ---------------- --------------
Accrued pension and postretirement
benefit obligations $ 11,451 $ (7,157) $ (6,732) $ (1,281)
=============== ============== ================ ==============
</TABLE>
The following amounts pertain to the non-qualified SERP plan covering
certain current and former employees. The projected benefit obligation and
accumulated benefit obligation for pension plans with accumulated benefit
obligations in excess of the plan assets were $18.5 million and $15.7 million,
respectively, at the end of the year and $9.7 million and $8.3 million,
respectively, at the beginning of the year.
83
<PAGE>
Amounts for pension and postretirement benefits recognized in the consolidated
balance sheets consist of the following:
<TABLE>
<CAPTION>
Other Postretirement
Pension Benefits Benefits
----------------------------------- ---------------------------------
1999 1998 1999 1998
----------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Prepaid pension asset $ 26,166 $ - N/A N/A
Accrued benefit liability (14,716) (7,157) $(6,732) $(1,281)
Intangible asset 346 577 N/A N/A
Accumulated other comprehensive income 606 (2,722) N/A N/A
Additional minimum liability (951) 2,145 N/A N/A
------------- ----------------- ---------------- -------------
Net amount recognized 11,451 (7,157) (6,732) (1,281)
============= ================= ================ =============
</TABLE>
The weighted-average actuarial assumptions as of December 31 were as
follows:
<TABLE>
<CAPTION>
Other Postretirement
Pension Benefits Benefits
-------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
-------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.50% 6.75% 7.50% 7.50% 6.50% 7.50%
Expected return on plan assets 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
Rate of compensation increase 4.50% 4.50% 4.50% NA NA NA
</TABLE>
SPR has assumed a health care cost trend rate of 6% for 1999 and all future
years.
84
<PAGE>
<TABLE>
<CAPTION>
Pension Benefits
-------------------------------------------------------
1999 1998 1997
-------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 8,481 $ 5,386 $ 4,406
Interest cost 12,823 9,285 8,437
Expected return on assets (11,712) (7,697) (7,015)
Amortization of:
Transition asset - - -
Prior service costs 841 780 675
Actuarial (gains) losses 976 187 86
---------------- -------------- -------------
Net periodic benefit cost 11,409 7,941 6,589
Additional charges (credits):
Special termination charges 5,865 - -
Curtailment credits (3,920) - -
---------------- -------------- -------------
Total net benefit cost $ 13,354 $ 7,941 $ 6,589
================ ============== =============
</TABLE>
<TABLE>
<CAPTION>
Other Postretirement Benefits
-------------------------------------------------------
1999 1998 1997
-------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 996 $ 433 $ 370
Interest cost 1,982 1,155 1,270
Expected return on assets (1,741) (770) (626)
Amortization of:
Prior service costs - - -
Transition obligation 1,344 967 967
Actuarial (gains) losses (596) (505) (399)
---------------- -------------- -------------
Net periodic benefit cost 1,985 1,280 1,582
Additional charges (credits):
Special termination charges 1,312 - -
Curtailment loss 1,283 - -
---------------- -------------- -------------
Total net benefit cost $ 4,580 $ 1,280 $ 1,582
================ ============== =============
</TABLE>
Net periodic pension and other postretirement benefit costs include the
following components:
A regulatory asset was booked to offset the net effect of special
termination benefits and curtailment costs incurred in connection with the
merger of the two companies. The portion of the net periodic benefit cost
recognized for pension benefits during 1999 was $10.5 million by NVP and $.9
million by SPPC. The portion for other postretirement benefits was $1.0 million
by NVP and $.9 million by SPPC.
85
<PAGE>
The assumed health care cost trend rate has a significant effect on the
amounts reported. A one percentage point change in the assumed health care cost
trend rate would have had the following effects on 1999 service and interest
costs and the accumulated postretirement benefit obligation at year end:
Increase Decrease
-------- --------
Effect on service and interest
components of net periodic cost $ 554 $ (512)
Effect on accumulated postretirement
benefit obligation $ 6,239 $ (5,776)
NOTE 15. STOCK COMPENSATION PLANS
At December 31, 1999 SPR had several stock-based compensation plans which
are described below. The Company applies Accounting Principals Board Opinion No.
25, Accounting for Stock Issued to Employees, in accounting for its stock option
plans. Accordingly, no compensation cost has been recognized for nonqualified
stock options and the employee stock purchase plan. The total compensation cost
that has been charged against income for the performance shares, dividend
equivalents and the non-employee director stock plans was $0.2 million for 1999.
SPR has adopted the disclosure-only provisions of SFAS No. 123, Accounting for
Stock Based Compensation. Had compensation cost for SPR's nonqualified stock
options and the employee stock purchase plan been determined based on the fair
value at the grant dates for awards under those plans consistent with the
provisions of SFAS No. 123, SPR's income applicable to common stock would have
been decreased to the pro forma amounts indicated below:
1999
----
Net Income As Reported $ 51,750
Pro Forma $ 51,084
Basic Earnings Per Share As Reported $ 0.83
Pro Forma $ 0.82
Diluted Earnings Per Share As Reported $ 0.83
Pro Forma $ 0.82
1. Prior to the August 1, 1999 merger, NVP did not have a nonqualified
stock option plan or an employee stock purchase plan; therefore,
historical data for the above item has been omitted because the
information, if presented, would be misleading and inappropriate.
SPR's executive long-term incentive plan for key management employees,
which was approved by shareholders on May 16, 1994, provides for the issuance of
up to 750,000 of SPR's common shares to key employees through December 31, 2003.
The plan permits the following types of grants, separately or in combination:
nonqualified and qualified stock options, stock appreciation rights, restricted
stock, performance units, performance shares, and bonus stock. During 1999 SPR
issued only nonqualified stock options and performance shares under the long-
term incentive plan.
Nonqualified stock options granted during 1999 were granted at an option
price not less than market value at the date of the grant (January 1, and August
1, 1999). The January 1, 1999 options vest to the participants 33 1/3% per year
over a three year period from the grant date, and may be exercised for a period
not exceeding ten years from the date of the grant. The August 1, 1999 options
vest to the participants 33 1/3% per year over a three year period beginning
January 1, 2000, and may be exercised for a period not exceeding ten years from
the date of the grant. The options may be exercised using either cash or
previously acquired shares, valued at the current market price, or a combination
of both.
86
<PAGE>
As a result of the merger with NVP on August 1, 1999, all shares
outstanding as of that date, for January 1, 1999 grants and prior (applicable
only to pre-merger SPR executives), were converted at a 1.44:1 ratio. The
subsequent change in the exercise prices and the outstanding shares is reflected
in all numbers shown for the applicable grants.
A summary of the status of SPR's nonqualified stock option plan as of
December 31, 1999, and changes during the year is presented below:
<TABLE>
<CAPTION>
1999
----------------------------------
Weighted-
Average
Exercise
Nonqualified Stock Options Shares Price
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at beginning of year (1) 285,931 $22.00
Granted (2) 583,016 $25.36
Exercised 1,286 $14.39
Forfeited 34,678 $22.48
Outstanding at end of year 832,983 $24.34
Options exercisable at year-end 126,844 $20.54
Weighted-average grant date fair value of options granted (3)
January 1 $ 4.05
August 1 $ 5.11
</TABLE>
1. There is no historical information presented because NVP did not have a
nonqualified stock option plan prior to the August 1, 1999 merger. After the
merger, the SPR plan, approved in 1994 by the SPR Board of Directors, was
adopted by the surviving company. Also, as a result of the merger, all SPR
options which were outstanding prior to the merger were converted at a 1.44:1
ratio. The beginning balance above consists of SPR shares outstanding prior
to the merger, and has been adjusted to reflect the increase in shares due to
the conversion.
2. The number of nonqualified stock options granted during the year consists of
209,576 shares for pre-merger grants, granted on January 1, 1999, and 373,440
shares granted on August 1, 1999, after the merger. The January 1 grants were
given to pre-merger SPR executives, and retroactively to the NVP executives
who joined SPR. The August 1 grants were given to all executives of the
merged company.
3. The fair value of each nonqualified option has been estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions used for grants on January 1, 1999 and August 1, 1999,
respectively: dividend yield of 4.40% and 4.25%, expected volatility of
18.60% and 17.41%, risk-free rate of return of 5.08% and 6.31%, and an
expected life of 10 years for all grants.
87
<PAGE>
The following table summarizes information about nonqualified stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------ -------------------------------------
Number Remaining Number
Outstanding at Contractual Exercisable at
Grant Date Exercise Price 12/31/99 Life Exercise Price 12/31/99
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
01/01/1994 $14.24 11,976 4 years $14.24 11,976
01/01/1995 $13.02 15,841 5 years $13.02 12,673
01/01/1996 $16.23 13,718 6 years $16.23 8,231
01/01/1997 $19.97 62,472 7 years $19.97 41,649
01/01/1998 $24.93 156,960 8 years $24.93 52,315
01/01/1999 $24.22 198,576 9 years $24.22 -
08/01/1999 $26.00 373,440 9.6 years $26.00 -
Weighted Average 8.7 years
Remaining
Contractual Life
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
During 1999 SPR granted 27,765 performance shares valued at $26.00 per
share. The actual number of shares earned by each participant is dependent upon
SPR achieving certain financial goals over three-year performance periods. The
value of performance shares, if earned, will be equal to the market value of
SPR's common shares as of the end of the performance periods. SPR, at its sole
discretion, may pay earned performance shares in the form of cash or in shares,
or a combination thereof.
Simultaneous with the grant of both the nonqualified options and
performance shares above, each participant was granted dividend equivalents for
all performance share grants, and for 1996 and prior nonqualified option grants.
Each dividend equivalent entitles the participant to receive a contingent right
to be paid an amount equal to dividends declared on shares originally granted
from the date of grant through the exercise date, or, in the case of performance
shares, throughout the performance period. Additionally, in order for dividend
equivalents to be paid on the performance shares, certain financial targets must
be met. Dividend equivalents will be forfeited if options expire unexercised.
Under SPR's employee stock purchase plan, SPR is authorized to issue up to
400,162 shares of common stock to all of its employees with minimum service
requirements. Under the terms of the plan, employees can choose twice each year
to have up to 15% of their base earnings withheld to purchase SPR's common
stock. The purchase price of the stock is 90% of the market value on the
offering commencement date. Employees can withdraw from the plan at any time
prior to the exercise date. Under the plan SPR sold 21,888 shares to employees
in 1999. Proforma compensation cost has been estimated for the employees'
purchase rights on the date of grant using the Black-Scholes option-pricing
model with the following assumptions used for 1999: average dividend yield of
4.31%, average expected volatility of 18.85%, and average risk-free interest
rates of 5.08%. The weighted average fair value of those purchase rights in 1999
was $2.85.
SPR's non-employee director stock plan provides that a portion of the
outside directors' annual retainer be paid in Company stock. Under the current
plan, the annual retainer for non-employee directors is $30,000, and the minimum
amount to be paid in Company stock is $20,000 per director. During 1999 SPR
granted the following total shares and related compensation to directors in
Company stock, respectively: 4,741 shares and $150,000. SPR also paid out
phantom stock shares to retiring directors in the amount of $1,222,110.
88
<PAGE>
NOTE 16. POSTEMPLOYMENT BENEFITS
During 1999, SPR offered a severance program to non-bargaining-unit
employees, which provides for severance pay and medical benefits continuation
totaling $13.7 million and $0.8 million respectively. As approved by the PUCN,
this cost was deferred as a regulatory asset as of December 31, 1999. The order
approving the merger by the PUCN, directed NVP and SPPC to defer merger costs
(including severance and related benefits) for a three-year period. The deferral
of these costs is intended to allow adequate time for the anticipated savings
from the merger to develop. At the end of the three-year period, the order
instructs SPPC and NVP to propose an amortization period for these costs, and
allows SPPC and NVP to recover the costs to the extent that they are offset by
merger savings. At December 31, 1999, the remaining liability for unpaid
severance was $5.0 million.
NOTE 17: COMMITMENTS AND CONTINGENCIES
NVP's and SPPC's combined estimated cash construction expenditures for the
year 2000 and the five-year period 2000-2004 are $328.2 million and $1,630.6
million, respectively.
NVP and SPPC have several long-term contracts for the purchase of electric
energy and/or capacity. These contracts expire in years ranging from 2000 to
2009. Estimated future commitments under non-cancelable agreements with initial
terms of one year or more at December 31, 1999 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Accounted for as
Long-Term Accounted for as
Executory Long-Term
Contracts Capital Lease
<S> <C> <C>
2000 $ 39,452 $11,352
2001 22,787 10,823
2002 23,488 10,319
2003 24,308 9,790
2004 25,182 9,286
2005 to 2009 114,840 82,826
</TABLE>
The above long-term capital lease minimum payments have not been reduced by
an estimated $79.4 million of executory costs and $17.5 million in interest.
89
<PAGE>
NVP and SPPC have several long-term contracts for the purchase and
transportation of coal and natural gas. These contracts expire in years ranging
from 2000 to 2015. Estimated future commitments under non-cancelable agreements
with initial terms of one year or more at December 31, 1999 were as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Coal and Gas Transportation
<S> <C> <C>
2000 $128,865 $ 60,037
2001 55,089 46,837
2002 33,364 45,849
2003 19,349 36,885
2004 11,476 32,972
2005 to 2015 28,533 295,848
</TABLE>
In 1984, NVP 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, 1999, were as follows (dollars in thousands):
<TABLE>
<S> <C>
2000 $ 6,156
2001 6,156
2002 6,156
2003 6,156
2004 6,156
2005 to 2014 74,277
</TABLE>
The amount of imputed interest necessary to reduce the future cash rental
payments to present value is $55.0 million as of December 31, 1999. Total
interest expense on the lease obligation was $5.9 million and total amortization
of the leased facility was $(397,000) for the year ended December 31, 1999. The
total accumulated amortization of the leased facility on December 31, 1999, was
$9.3 million.
SPPC has an operating lease for its corporate headquarters building. The
primary term of the lease is 25 years, ending in 2010. The current annual rental
is $5.4 million, which amount remains constant until the end of the primary
term. The lease has renewal options for an additional 50 years.
Estimated future minimum cash payments, including SPPC's headquarters
building, under non-cancelable operating leases with initial terms of one year
or more at December 31, 1999 were as follows (dollars in thousands):
<TABLE>
<S> <C>
2000 $12,890
2001 9,302
2002 7,953
2003 7,655
2004 7,523
2005 to 2045 77,664
</TABLE>
90
<PAGE>
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 (including NVP)
of the Mohave Generation Station ("Mohave"), alleging violations of the Clean
Air Act regarding emissions of sulfur dioxide and particulates. An additional
plaintiff, National Parks and Conservation Association, later joined the suit.
The plant owners and plaintiffs have had numerous settlement discussions and
filed a proposed settlement with the court on October 6, 1999. The consent
decree, approved by the court in November, established emission limits for
sulfur dioxide and opacity and required installation of air pollution controls
for sulfur dioxide, nitrogen oxides and particulate matter. The new emission
limits must be met by January 1, 2006 and April 1, 2006, for the first and
second units, respectively. However, if the owners sell their entire ownership
interest, with a closing date prior to December 30, 2002, then the new emission
limits become effective 36 months and 39 months from the date of last closing
for the two respective units. The estimated cost of new controls is $300
million. As a 14% owner in the Mohave Station, NVP's costs could be $42 million.
Also, the United States Congress authorized the Environmental Protection
Agency ("EPA") to study the potential impact Mohave may have on visibility in
the Grand Canyon area. A final report of the study results was released in March
1999. The study acknowledges that sulfur dioxide emissions from Mojave are
transported to the Grand Canyon. EPA has solicited information to determine
whether visibility impairment in the Grand Canyon can be reasonably attributed
to Mohave. If EPA determines that significant visibility impairment is
reasonably attributable to the station, EPA could initiate a review for Best
Available Retrofit Technology. Based upon indications from EPA and the National
Park Service, the Plant owners believe that terms of the settlement of the suit
discussed above are expected to be reflected in a State Implementation Plan for
Nevada and resolve any concerns of EPA regarding visibility impairment.
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% owner of Navajo, NVP was required to fund an
estimated $48 million for installation of the scrubbers. The first of three
scrubber units was placed in commercial operation in November 1997, the second
scrubber in September 1998, with the last scrubber placed in operation in June
1999. Currently, the project is 98% complete. NVP spent approximately $47.6
million on the scrubbers' construction. In 1992, NVP received resource-planning
approval from the PUCN for its share of the cost of the scrubbers.
In May 1997, the Nevada Division of Environmental Protection (NDEP) issued
an Order requiring NVP to submit a plan to eliminate the discharge of Reid
Gardner Station wastewater to groundwater. The Order also required a
hydrological assessment of groundwater impacts in the area. In June 1999, NDEP
determined that wastewater ponds have degraded groundwater quality. In August
1999, NDEP issued a discharge permit to Reid Gardner Station and an Order that
requires all wastewater ponds to be closed or lined with impermeable liners over
the next 10 years. This Order also required NVP to submit a Site
Characterization Plan to NDEP to ascertain impacts. Technical information from
the Plan will be used to develop a corrective action plan and allow NVP to
determine an estimate of remediation costs for cleanup. New pond construction
and lining costs are estimated at $20 million.
Also, at the NVP Reid Gardner Station, NDEP has determined that there is
additional groundwater contamination that resulted from oil spills at the
facility. NDEP has required submitting a corrective action. The extent of
contamination has not yet been determined. However, management does not expect
this item to materially affect the financial position of SPR or NVP.
91
<PAGE>
In May 1999 NDEP issued an Order to eliminate the discharge of NVP's Clark
Station wastewater to groundwater. The Order also required a hydrological
assessment of groundwater impacts in the area. $565,000 will be spent in the
next two years to line existing ponds. The extent of contamination has not been
determined. However, management does not expect this item to materially affect
the financial position of SPR or NVP.
In August 1999 NDEP issued an Order to correct deficient ambient air
monitoring quality control procedures at the Reid Gardner Station. NVP has
agreed to conduct a supplemental environmental project limited to $9,000 in lieu
of a fine.
NVP recently determined that, while constructing the McCullough-Arden
transmission line, access roads were created within a wilderness study area in
violation of the Bureau of Land Management (BLM) Right of Way Grant. NVP's
preliminary estimate for restoration costs is $200,000, which was reserved as of
December 31, 1999.
In September 1994, Region VII of EPA notified SPPC that SPPC was being
named as a potentially responsible party (PRP) regarding the past improper
handling of Polychlorinated Biphenyls (PCBs) by PCB Treatment, Inc., located in
Kansas City, Kansas, and Kansas City, Missouri (the Sites). The EPA is
requesting that SPPC voluntarily pay an undefined (pro rata) share of the
ultimate clean-up costs at the Sites. A number of the largest PRP's formed a
steering committee, which is chaired by SPPC. The responsibility of the
Committee is to direct clean-up activities, determine appropriate cost
allocation, and pursue actions against recalcitrant parties, if necessary. The
EPA issued an administrative order on consent requiring signatories to perform
certain investigative work at the Sites. The steering committee retained a
consultant to prepare an analysis regarding the Sites. The site evaluations have
been completed. EPA is developing an allocation formula to allocate the
remediation costs. SPPC has recorded preliminary liability for the Sites of
$650,000, of which approximately $150,000 has been spent through December 31,
1999. Once evaluations are completed, SPPC will be in a better position to
estimate and record the ultimate liabilities for the Sites.
Additionally, SPPC has four wells which currently exceed the federal
drinking water standard for naturally occurring arsenic concentrations.
Production from three of these wells continues by blending treated water. The
fourth well is out of service pending treatment. SPPC's water laboratory
research staff is developing options to assure that SPPC is prepared to meet new
arsenic standards. The new Arsenic regulations will be promulgated in 2000 and
the proposed regulation is expected to require action on 17 of the 25 wells
serving Sierra's system. Depending upon final rules from the EPA, SPPC may incur
between $70 million and $98 million by 2004 to meet the new standards.
As part of the Generation Divestiture process, SPPC conducted Phase I and
Phase II Environmental Assessments for its Ft. Churchill, Tracy and Valmy Power
Plants. Anticipated remediation cost is $150,000.
As part of the Generation Divestiture process, Phase I and/or Phase II
Environmental Assessments were conducted at NVP's Harry Allen, Clark, Sunrise
and Reid Gardner facilities. Additional environmental assessments will be
conducted in 2000 to further characterize the sites. Remediation costs are
unknown because characterization is not complete.
92
<PAGE>
Lands of Sierra owns property in North Lake Tahoe, California, which is
leased to independent condominium owners. The property has both soil and
groundwater petroleum contaminate resulting from a historic underground fuel
tank. Additional contaminate from a third party fuel tank on the property has
also been identified and is undergoing characterization. Remediation costs are
estimated from $60,000 to $250,000. After final characterization, remediation
costs will be known.
Nevada Electric Investment Company (NEICO), a subsidiary of NVP in 1999,
owns property in Wellington, Utah, which was the site of a coal washing and load
out facility. The site now has a reclamation estimate supported by a bond of
$4.9 million with the Utah Division of Oil and Gas Mining. The property was
under contract for sale and the contract required the purchaser to provide $1.3
million in escrow towards reclamation. However, the sales contract was recently
terminated and NEICO has taken title to the escrow funds. It is NEICO's
intention to sell the property.
See Notes 1, 3, 6, 8, 9, 12, 14, and 16 of SPR's consolidated financial
statements for additional commitments and contingencies.
SPR and its subsidiaries, through the course of their normal business
operations, are currently involved in a number of other legal actions, none of
which has had or, in the opinion of management, is expected to have a
significant impact on its financial position or results of operations.
NOTE 18. SEGMENT INFORMATION
SPR operates three business segments (as defined by FASB statement No. 131,
Disclosure about Segments of an Enterprise and Related Information) providing
regulated electric, natural gas and water service. Electric service is provided
to Las Vegas and surrounding Clark County, northern Nevada and the Lake Tahoe
area of California. Natural gas and water services are provided in the Reno-
Sparks area of Nevada. Other segment information includes segments below the
quantitative threshold for separate disclosure.
Information as to the operations of the different business segments is set
forth below based on the nature of products and services offered. SPR evaluates
performance based on several factors, of which the primary financial measure is
business segment operating income. The accounting policies of the business
segments are the same as those described in the summary of significant
accounting policies (Note 1). Intersegment revenues are not material.
In accordance with the requirements of purchase accounting and based on a
merger date of August 1, 1999, the segmented financial information for the
period ended December 31, 1999 includes five months of operating activity for
SPR's subsidiaries other than NVP. Segmented information for 1998 and 1997
includes only the operations of NVP.
<TABLE>
<CAPTION>
Reconciling
December 31, 1999 Electric Gas Water All Other Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $1,236,702 $ 38,958 $ 24,339 $ 9,132 $1,309,131
========== ======== ======== ========= ==========
Operating income $ 157,030 $ 3,175 $ 8,297 $ 2,656 $ 171,158
========== ======== ======== ========= ==========
Operating income taxes $ 30,120 $ 425 $ 788 $ (5,247) $ 26,086
========== ======== ======== ========= ==========
Depreciation $ 107,703 $ 2,128 $ 3,161 $ 244 $ 113,236
========== ======== ======== ========= ==========
Interest expense on
long term debt $ 75,870 $ 1,326 $ 4,236 $ 299 $ 81,731
========== ======== ======== ========= ==========
Assets $4,345,049 $152,016 $280,057 $ 426,881 $ 43,683 $5,247,686
========== ======== ======== ========= ========= ==========
Capital expenditures $ 275,761 $ 7,051 $ 16,252 $ 299,064
========== ======== ======== ==========
</TABLE>
93
<PAGE>
<TABLE>
<CAPTION>
Reconciling
December 31, 1998 Electric Gas Water All Other Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $ 873,682 $ 873,682
========== ============
Operating income $ 147,277 $ 147,277
========== ============
Operating income taxes $ 42,949 $ 42,949
========== ============
Depreciation $ 73,562 $ 73,562
========== ============
Interest expense
on long term debt $ 56,995 $ 56,995
========== ============
Assets $2,541,840 $ 2,541,840
========== ============
Capital expenditures $ 314,933 $ 314,933
========== ============
<CAPTION>
Reconciling
December 31, 1997 Electric Gas Water All Other Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $ 799,148 $ 799,148
========== ============
Operating income $ 137,196 $ 137,196
========== ============
Operating income taxes $ 43,478 $ 43,478
========== ============
Depreciation $ 66,273 $ 66,273
========== ============
Interest expense
on long term debt $ 50,791 $ 50,791
========== ============
Assets $2,339,422 $ 2,339,422
========== ============
Capital expenditures $ 211,371 $ 211,371
========== ============
</TABLE>
The reconciliation of segment assets at December 31, 1999 to the
consolidated total includes the following unallocated amounts:
<TABLE>
<CAPTION>
1999
----------
<S> <C>
Other property $ 2,661
Cash 3,011
Current assets- other 3,103
Other regulatory assets 34,571
Deferred charges- other 337
-------
$43,683
=======
</TABLE>
Segment information for NVP on an unconsolidated basis for the year ended
December 31, 1999 follows:
<TABLE>
<CAPTION>
December 31, 1999 Electric
<S> <C>
Operating Revenues $ 977,262
==========
Operating income $ 116,983
==========
Operating income taxes $ 19,943
==========
Depreciation $ 80,644
==========
Interest expense on long term debt $ 64,454
==========
Assets $3,378,485
==========
Capital expenditures $ 223,963
==========
</TABLE>
Results for the years ending December 31, 1998 and 1997 presented above are for
NVP alone.
94
<PAGE>
NOTE 19. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following figures are unaudited and include all adjustments necessary
in the opinion of management for a fair presentation of the results of interim
periods. In accordance with the requirements of purchase accounting and based
on a merger date of August 1, 1999, the quarterly financial information for the
first two quarters of 1999 and all four quarters of 1998 reflects the operations
of NVP. The information for the quarter ended September 30, 1999 includes two
months of operating activity for SPR's subsidiaries other than NVP as well as
the quarterly data for NVP. Dollars are presented in thousands except per share
amounts.
<TABLE>
<CAPTION>
Quarter Ended
-------------
Mar. 31, 1999 June 30, 1999 Sept. 30, 1999 Dec. 31, 1999
------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Operating Revenues $182,433 $237,937 $478,837 $409,924
=================== ================== =================== ==================
Operating Income $ 20,961 $ 30,913 $102,976 $ 16,308
=================== ================== =================== ==================
Net Income $ 4,483 $ 11,754 $ 64,700 $(29,187)
=================== ================== =================== ==================
Net Income per share-Basic $ 0.09 $ 0.23 $ 0.93 $ (0.42)
=================== ================== =================== ==================
-Diluted $ 0.09 $ 0.23 $ 0.93 $ (0.42)
=================== ================== =================== ==================
<CAPTION>
Quarter Ended
-------------
Mar. 31, 1998 June 30, 1998 Sept. 30, 1998 Dec. 31, 1998
------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Operating Revenues $165,263 $198,935 $327,776 $181,708
=================== ================== =================== ==================
Operating Income $ 21,263 $ 24,788 $ 76,919 $ 24,307
=================== ================== =================== ==================
Net Income $ 6,936 $ 10,446 $ 61,987 $ 4,304
=================== ================== =================== ==================
Net Income per share-Basic $ 0.14 $ 0.20 $ 1.21 $ 0.08
=================== ================== =================== ==================
-Diluted $ 0.14 $ 0.20 $ 1.21 $ 0.08
=================== ================== =================== ==================
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
NONE.
95
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to SPR's and NVP's directors called for by
Item 10 of Part III is hereby incorporated by reference from the section titled
"Security Ownership of Certain Beneficial Owners and Management" of SPR's
definitive proxy statement to be filed pursuant to regulation 14A.
Information with respect to SPR's and NVP's executive officers is set forth
in Part I hereof following Item 4.
ITEM 11. EXECUTIVE COMPENSATION
The information with respect to officers and directors called for by Item
11 of Part III is hereby incorporated by reference from the sections titled
"Directors Compensation", "Summary Compensation Table" and "Severance
Arrangements" of SPR's definitive proxy statement to be filed pursuant to
regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information with respect to security ownership of certain beneficial
owners and management called for by Item 12 of Part III is hereby incorporated
by reference from the sections titled "Solicitation of Proxies" and "Election of
Directors" of SPR's definitive proxy statement to be filed pursuant to
regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information with respect to Certain Relationships and Related
Transactions called for by Item 13 of Part III is hereby incorporated by
reference from the section titled "Transactions with Management" of SPR's
definitive proxy statement to be filed pursuant to Regulation 14A.
96
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Financial Statements:
Independent Auditors' Report........................................................ 50
Consolidated Balance Sheets as of December 31, 1999 and 1998........................ 51
Consolidated Statements of Income for the Years Ended December 31,
1999, 1998 and 1997............................................................... 52
Consolidated Statements of Common Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997...................................... 53
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.................................................. 54
Consolidated Statements of Capitalization as of December 31, 1999
and 1998.......................................................................... 55-56
Balance Sheets for Nevada Power Company as of
December 31, 1999 and 1998........................................................ 57
Statements of Income for Nevada Power Company
for the Years Ended December 31, 1999, 1998 and 1997.............................. 58
Statements of Cash Flows for Nevada Power
Company for the Years Ended December 31, 1999, 1998 and 1997...................... 59
Statements of Capitalization for Nevada Power
Company as of December 31, 1999 and 1998.......................................... 60-61
Notes to Financial Statements....................................................... 62-95
2. Financial Statement Schedules:
Independent Auditors' Report................................................. 100
Schedule II - Consolidated Valuation and Qualifying Accounts ................ 101
</TABLE>
All other schedules have been omitted because they are not required or
are not applicable, or the required information is shown in the
financial statements or notes thereto. Columns omitted from schedules
have been omitted because the information is not applicable.
3. Exhibits:
Exhibits are listed in the Exhibit Index on pages 102-114.
Reports on Form 8-K
Filed on November 12, 1999 - Item 5, Other Events.
97
<PAGE>
Reported that on November 5, 1999, Sierra Pacific Resources and Enron
Corporation entered into an agreement for Enron to sell its wholly owned
subsidiary, Portland General Electric.
Filed on December 7, 1999 - Item 5, Other Events
Reported that on September 21, 1999, the Board of Directors of Sierra
Pacific Resources declared a dividend distribution of one right for each
outstanding share of Sierra Pacific Resources common stock.
98
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 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.
SIERRA PACIFIC RESOURCES
By /S/ Michael R. Niggli
---------------------
Michael R. Niggli
Chairman, Chief Executive Officer and Director
March 22, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 22nd day of March 2000.
<TABLE>
<S> <C>
/S/ Mark A. Ruelle /S/ Mary O. Simmons
------------------------------------------- ------------------------------------------
Mark A. Ruelle Mary O. Simmons
Senior Vice President, Controller
Chief Financial Officer and Treasurer (Principal Accounting Officer)
(Principal Financial Officer)
/S/ Edward P. Bliss /S/ Mary Kaye Cashman
------------------------------------------- ------------------------------------------
Edward P. Bliss Mary Kaye Cashman
Director Director
/S/ Mary Lee Coleman /S/ Jerry E. Herbst
------------------------------------------- ------------------------------------------
Mary Lee Coleman Jerry E. Herbst
Director Director
/S/ Theodore J. Day /S/ James R. Donnelley
------------------------------------------- ------------------------------------------
Theodore J. Day James R. Donnelley
Director Director
/S/ John L. Goolsby /S/ Malyn K. Malquist
------------------------------------------- ------------------------------------------
John L. Goolsby Malyn K. Malquist
Director President & Chief Operating Officer
Director
/S/ John F. O'Reilly /S/ Krestine M. Corbin
------------------------------------------- ------------------------------------------
John F. O'Reilly Krestine M. Corbin
Director Director
/S/ Fred D. Gibson, Jr. /S/ James L. Murphy
------------------------------------------- ------------------------------------------
Fred D. Gibson, Jr. James L. Murphy
Director Director
/S/ Dennis E. Wheeler
-------------------------------------------
Dennis E. Wheeler
Director
</TABLE>
99
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Sierra Pacific Resources
Reno, Nevada
We have audited the consolidated financial statements of Sierra Pacific
Resources and subsidiaries (the "Company") as of December 31, 1999 and 1998, and
for each of the three years in the period ended December 31, 1999, and have
issued our report thereon dated February 29, 2000; such report is included
elsewhere in this Form 10-K. Our audits also included the consolidated
financial statement schedule listed in Item 14. This consolidated financial
statement schedule is the responsibility of the 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 financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLC
Reno, Nevada
March 21, 2000
100
<PAGE>
Sierra Pacific Resources
Schedule II - Consolidated Valuation Qualifying Accounts
For The Years Ended December 31, 1999, 1998, and 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Provisions for
Uncollectible
Accounts
--------------
<S> <C>
Balance at January 1, 1997 $ 2,892
Provision charged to income 2,737
Amounts written off, less recoveries (3,338)
--------------
Balance at December 31, 1997 2,291
Balance at January 1, 1998 2,291
Provision charged to income 3,697
Amounts written off, less recoveries (3,559)
--------------
Balance at December 31, 1998 2,429
Balance at January 1, 1999 2,429
Provision charged to income 4,019
Amounts written off, less recoveries (4,300)
SPR balance at August 1, 1999 4,327
--------------
Balance at December 31, 1999 $ 6,475
--------------
</TABLE>
101
<PAGE>
SIERRA PACIFIC RESOURCES
1999 FORM 10-K EXHIBIT INDEX
(a) Exhibits Index
Exhibits with respect to SPR's subsidiary, SPPC, are listed in the exhibit
index of its Annual Report on Form 10-K for the year ended December 31, 1999,
attached hereto as an Appendix.
Certain of the following exhibits with respect to SPR and its subsidiaries,
Nevada Power Company, Lands of Sierra, Inc., Sierra Energy Company, Tuscarora
Gas Pipeline Company and Sierra Water Development Company, are filed herewith.
Certain other of such exhibits have heretofore been filed with the Commission
and are incorporated herein by reference.
(* Filed herewith)
Sierra Pacific Resources
(3) . *(A) Restated Articles of Incorporation of Sierra Pacific
Resources dated July 28, 1999
. By-laws of SPR as amended through November 13, 1996 (filed as
Exhibit 3(A) to Form 10-K for year ended December 31, 1996)
Nevada Power Company
. *(B) Restated Articles of Incorporation of Nevada Power Company,
dated July 28, 1999
. *(C) Amended and Restated By-Laws of Nevada Power Company dated
July 28, 1999
Sierra Pacific Resources
(4) . Rights Agreement between Sierra Pacific Resources and Harris Trust
and Savings Bank dated as of September 21, 1999 (filed as Exhibit
99.1 to the Form 8-K dated December 7, 1999)
. Note Purchase Agreement, dated as of April 20, 1993, with respect
to the private placement of $50 million in senior notes (Filed as
Exhibit 10 to the Form 10-K for the year ended December 31, 1993)
Nevada Power Company
. *(A) Fiscal and Paying Agency Agreement dated as of October 12,
1999 between Nevada Power Company and Bankers Trust Company,
relating to Nevada Power Company's money market note program.
. *(B) Form of Global Floating Rate Note due October 6, 2000
. Indenture of Mortgage and Deed of Trust Providing for First
Mortgage
102
<PAGE>
Bonds, dated October 1, 1953 and Twenty-Six Supplemental
Indentures as follows:
. First Supplemental Indenture, dated August 1, 1954 (Filed as
Exhibit 4.2 to Form S-1, File No. 2-11440)
. Second Supplemental Indenture, dated September 1, 1956 (Filed as
Exhibit 4.9 to Form S-1, File No. 2-12566)
. Third Supplemental Indenture, dated May 1, 1959 (Filed as Exhibit
4.13 to Form S-1, File No. 2-14949)
. Fourth Supplemental Indenture, dated October 1, 1960 (Filed as
Exhibit 4.5 to S-1, File No. 2-16968)
. Fifth Supplemental Indenture, dated December 1, 1961 (Filed as
Exhibit 4.6 to Form S-16, File No. 2-74929)
. Sixth Supplemental Indenture, dated October 1, 1963 (Filed as
Exhibit 4.6A to Form S-1, File No. 2-21689)
. Seventh Supplemental Indenture, dated August 1, 1964 (Filed as
Exhibit 4.6B to Form S-1, File No. 2-22560)
. Eighth Supplemental Indenture, dated April 1, 1968 (Filed as
Exhibit 4.6C to Form S-9, File No. 2-28348
. Ninth Supplemental Indenture, dated October 1, 1969 (Filed as
Exhibit 4.6D to Form S-1, File No. 2-34588)
. Tenth Supplemental Indenture, dated October 1, 1970 (Filed as
Exhibit 4.6E to Form S-7, File No. 2-38314)
. Eleventh Supplemental Indenture, dated November 1, 1972 (Filed as
Exhibit 2.12 to Form S-7, File No. 2-45728)
. Twelfth Supplemental Indenture, dated December 1, 1974 (Filed as
Exhibit 2.13 to Form S-7, File No. 2-52350)
. Thirteenth Supplemental Indenture, dated October 1, 1976 (Filed as
Exhibit 4.14 to Form S-16, File No. 2-74929)
. Fourteenth Supplemental Indenture, dated May 1, 1977 (Filed as
Exhibit 4.15 to Form S-16, File No. 2-74929)
. Fifteenth Supplemental Indenture, dated September 1, 1978 (Filed
as Exhibit 4.16 to Form S-16, File No. 2-74929)
. Sixteenth Supplemental Indenture, December 1, 1981 (Filed as
Exhibit 4.17 to Form S-16, File No. 2-74929)
. Seventeenth Supplemental Indenture, dated August 1, 1982 (Filed as
103
<PAGE>
Exhibit 4.2 to Form 10-K, File No. 1-4698, Year 1982)
. Eighteenth Supplemental Indenture, dated November 1, 1986 (Filed
as Exhibit 4.6 to Form S-3, File No. 33-9537)
. Nineteenth Supplemental Indenture, dated October 1, 1989 (Filed as
Exhibit 4.2 to Form 10-K, File No. 1-4698, Year 1989)
. Twentieth Supplemental Indenture, dated May 1, 1992 (Filed as
Exhibit 4.21 to Form S-3, File No. 33-53034)
. Twenty-First Supplemental Indenture, dated June 1, 1992 (Filed as
Exhibit 4.22 to Form S-3, File No. 33-53034)
. Twenty-Second Supplemental Indenture, dated June 1, 1992 (Filed as
Exhibit 4.23 to Form S-3, Filed No. 33-53034)
. Twenty-Third Supplemental Indenture, dated October 1, 1992 (Filed
as Exhibit 4.23 to Form S-3, File No. 33-53034)
. Twenty-Fourth Supplemental Indenture, dated October 1, 1992 (Filed
as Exhibit 4.23 to Form S-3, File No. 33-53034)
. Twenty-Fifth Supplemental Indenture, dated January 1, 1993 (Filed
as Exhibit 4.23 to Form S-3, File No. 33-53034)
. Twenty-Sixth Supplemental Indenture, dated May 1, 1995 (Filed as
Exhibit 4.2 to Form 10-K, File No. 1-4698, Year 1995)
. *(C) Twenty-Seventh Supplemental Indenture dated as of July 1,
1999
. Instrument of Further Assurance dated April 1, 1956 to Indenture
of Mortgage and Deed of Trust dated October 1, 1953 (Filed as
Exhibit 4.8 to Form S-1, File No. 2-12666)
. Junior Subordinated Indenture between Nevada Power and IBJ
Schroder Bank & Trust Company, as Debenture Trustee dated March 1,
1997 (Filed as Exhibit 4.01 to Form S-3, File No. 333-21091)
. Trust Agreement of NVP Capital I dated March 1, 1997 (Filed as
Exhibit 4.03 to Form S-3, File No. 333-21091)
. Form of Amended and Restated Trust Agreement dated March 1, 1997
(Filed as Exhibit 4.10 to Form S-3, File No. 333-21091)
. Form of Preferred Security Certificate for NVP Capital I and NVP
Capital II dated March 1, 1997 (Filed as Exhibit 4.11 to Form S-3,
File No. 333-21091)
. Form of Guarantee Agreement dated March 1, 1997 (Filed as Exhibit
4.12 to Form S-3, File No. 333-21091)
. Form of Supplemental Indenture between Nevada Power and IBJ
104
<PAGE>
Schroder Bank & Trust Company, as Debenture Trustee dated March 1,
1997 (Filed as Exhibit 4.13 to Form S-3, File No. 333-21091)
. *(D) Supplemental Indenture No. 2 and Assumption Agreement, dated
as of June 1, 1999, between Nevada Power Company and IBJ Whitehall
Bank & Trust Company, supplementing and assuming the Junior
Subordinated Indenture dated as of March 1, 1997 between Nevada
Power Company and IBJ Whitehall Bank & Trust Company
. Form of Agreement as to Expenses and Liabilities between Nevada
Power and NVP Capital I dated March 1, 1997 (Filed as Exhibit 4.14
to Form S-3, File No. 333-21091)
. Form of Indenture between Nevada Power and IBJ Schroder Bank &
Trust Company, as Trustee dated October 1, 1998 (Filed as Exhibit
4.1 to Form S-3, File Nos. 333-63613 and 333-63613-01)
. *(E) Supplemental Indenture No. 1 and Assumption Agreement, dated
as of June 1, 1999, between Nevada Power Company and IBJ Whitehall
Bank & Trust Company, supplementing and assuming the Indenture
dated as of October 1, 1998 between Nevada Power Company and IBJ
Whitehall Bank & Trust Company
. Certificate of Trust of NVP Capital III dated October 1, 1998
(Filed as Exhibit 4.2 to Form S-3, File Nos. 333-63613 and 333-
63613-01)
. Trust Agreement for NVP Capital III dated October 1, 1998 (Filed
as Exhibit 4.3 to Form S-3, File Nos. 333-63613 and 333-63613-01)
. Form of Amended and Restated Declaration of Trust dated October 1,
1998 (Filed as Exhibit 4.4 to Form S-3, File Nos. 333-63613 and
333-63613-01)
. Form of Preferred Security Certificate for NVP Capital III dated
October 1, 1998 (Filed as Exhibit 4.5 to Form S-3, File Nos. 333-
63613 and 333-63613-01)
. Form of Preferred Securities Guarantee Agreement dated October 1,
1998 (Filed as Exhibit 4.7 to Form S-3, File Nos. 333-63613 and
333-63613-01)
. Form of Junior Subordinated Deferrable Interest Debenture dated
October 1, 1998 (Filed as Exhibit 4.9 to Form S-3, File Nos. 333-
63613 and 333-63613-01)
. Amendment dated April 29, 1998 to Rights Agreement Exhibit 4.4
(Filed as Exhibit 10.1 to Form 8-K, File No. 1-4698, Year 1998)
. Form of Senior Unsecured Note Indenture between Nevada Power
Company and IBJ Whitehall Bank & Trust Company dated as of April
1, 1999 (Filed as Exhibit 4.1 to Form S-4, File No. 333-77325)
. Supplemental Indenture No. 1 between Nevada Power Company and IBJ
Whitehall Bank & Trust Company dated as of March 1, 1999 (Filed as
Exhibit 4.2 to Form S-4, File No. 333-77325)
. Supplemental Indenture No. 2 between Nevada Power Company and IBJ
105
<PAGE>
Whitehall Bank & Trust Company dated as of April 1, 1999
(including form of 6.20% Senior Unsecured Note, Series B due April
15, 2004) (Filed as Exhibit 4.3 to Form S-4, File No. 333-77325)
. *(F) Supplemental Indenture No. 3 and Assumption Agreement, dated
as of July 1, 1999, between Nevada Power Company and IBJ Whitehall
Bank & Trust Company, supplementing and assuming the Senior
Unsecured Note Indenture dated as of March 1, 1999 between Nevada
Power Company and IBJ Whitehall Bank & Trust Company
(10) Sierra Pacific Resources
. Sierra Pacific Resources Executive Long-Term Incentive Plan
effective as of January 1, 1994 (Filed as Exhibit 99.1 to Form
S-8 dated November 30, 1994, Registration No. 33-87646)
. Change in Control Agreements dated February 18, 1997 by and among
Sierra Pacific Resources and the following officers
(individually): Gerald W. Canning, Jeffrey L. Ceccarelli, Randy G.
Harris, Malyn K. Malquist, Steven C. Oldham, William E. Peterson,
Mark A. Ruelle, Mary O. Simmons, and Mary Jane Willier (Filed as
Exhibit (10)(A) to Sierra Pacific Power Company's Form 10-K for
the year ended December 31, 1997)
. Stock Purchase Agreement between Enron Corp. and Sierra Pacific
Resources dated November 5, 1999, relating to the proposed
acquisition of Portland General Electric Company (Filed as Exhibit
10.1 to Form 8-K dated November 10, 1999)
. Employment Agreement dated as Of April 29, 1998 between Sierra
Pacific Resources and Michael R. Niggli (Exhibit 7.15.1 to
Agreement and Plan of Merger, dated as of April 29, 1998, among
Sierra Pacific Resources, Nevada Power Company, LAKE Merger Sub,
and DESERT Merger Sub, filed as Exhibit 2.1 to Form 8-K dated
April 30, 1998)
. Employment Agreement dated as of April 29, 1998 between Sierra
Pacific Resources and Malyn K. Malquist (Exhibit 7.15.2 to
Agreement and Plan of Merger, dated as of April 29, 1998, among
Sierra Pacific Resources, Nevada Power Company, LAKE Merger Sub,
and DESERT Merger Sub, filed as Exhibit 2.1 to Form 8-K dated
April 30, 1998)
. Sierra Pacific Resources' Executive Long-Term Incentive Plan
. Sierra Pacific Resources' Non-Employee Director Stock Plan
. Sierra Pacific Resources' Employee Stock Purchase Plan
. *(A) Credit Agreement dated as of June 24, 1999 among Sierra
Pacific Resources, Mellon Bank, N.A., First Union Bank and Wells
Fargo Bank, N.A. relating to $500,000,000 credit facility
Nevada Power Company
. *(B) Credit Agreement dated as of June 24, 1999 among Nevada Power
106
<PAGE>
Company, Mellon Bank, N.A., First Union Bank and Wells Fargo Bank,
N.A. relating to $150,000,000 credit facility
. *(C) Employment Agreement dated as of March 13, 1998 between
Nevada Power Company and Gloria Banks Weddle
. *(D) Employment Agreement dated as of March 13, 1998 between
Nevada Power Company and Steven W. Rigazio
. *(E) Retention Agreement dated as of July 28, 1999 between Nevada
Power Company and David G. Barneby
. Contract for Sale of Electrical Energy between State of Nevada and
Nevada Power Company, dated October 10, 1941 (Filed as Exhibit
13.9A to Form S-1, File No. 2-10932)
. Amendment dated June 30, 1953 to Exhibit 10.1 (Filed as Exhibit
13.9A to Form S-1, File No. 2-10932)
. Contract for Sale of Electrical Energy between State of Nevada and
Nevada Power Company, dated June 1, 1951 (Filed as Exhibit 13.10
to Form S-1, File No. 2-10932)
. Agreement dated November 10, 1948 between Nevada Power Company and
Lincoln County Power District No. 1 and Overton Power District No.
5 (Filed as Exhibit 13.18 to Form S-1, File No. 2-12697)
. Agreement dated October 21, 1949 between Nevada Power Company and
Lincoln County Power District No. 1 and Overton Power District No.
5 (Filed as Exhibit 13.19 to Form S-9, File No. 2.12697)
. Mohave Project Plant Site Conveyance and Co-tenancy Agreement
dated May 29, 1967 between Nevada Power Company and Salt River
Project Agricultural Improvement and Power District and Southern
California Edison Company (Filed as Exhibit 13.27 to Form S-9,
File No. 2-28348)
. Eldorado System Conveyance and Co-tenancy Agreement dated December
20, 1967 between Nevada Power Company and Salt River Project
Agricultural Improvement and Power District and Southern
California Edison Company (Filed as Exhibit 13.30 to Form S-9,
File No. 2-28348)
. Mohave Operating Agreement dated July 6, 1970 between Nevada Power
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 (Filed as Exhibit
13.26F to Form S-1, File No. 2-38314)
. Navajo Project Participation Agreement dated September 30, 1969
between Nevada Power 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
(Filed as Exhibit 13.27A to Form S-1, File No. 2-38314)
107
<PAGE>
. Navajo Project Coal Supply Agreement dated June 1, 1970 between
Nevada Power 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 (Filed as Exhibit
13.27B to Form S-1, File No. 2-38314)
. Contract dated January 1, 1968 between Nevada Power Company and
United States Bureau of Reclamation for interconnections at Mead
Station (Filed as Exhibit 13.32 to Form S-1, File No. 34588)
. Reclaimed Wastewater Purchase 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 (Filed as Exhibit
5.36 to Form S-7, File No. 2-52238)
. Equipment Lease dated as of March 1, 1974 between Nevada Power
Company, Lessor, and Clark County, Nevada, Lessee (Filed as
Exhibit 5.37 to Form 8-K, File No. 1-4698, April, 1974)
. Sublease Agreement dated as of March 1, 1974 between Clark County,
Nevada, Sublessor, and Nevada Power Company, Sublessee (Filed as
Exhibit 5.38 to Form 8-K, File No. 1-4698, April 1974)
. Guaranty Agreement dated as of March 1, 1974 between Nevada Power
Company and Commerce Union Bank as Trustee (Filed as Exhibit 5.39
to Form 8-K, File No. 1-4698, April 1974)
. Navajo Project Co-tenancy Agreement dated March 23, 1976 between
Nevada Power 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 (Filed as Exhibit 5.31 to
Form 8-K, File No. 1-4696, April 1974)
. Amended Mohave Project Coal Supply Agreement dated May 26, 1976
between Nevada Power 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 (Filed as Exhibit 5.35 to Form S-7, File
No. 2-56356)
. Amended Mohave Project Coal Slurry Pipeline Agreement dated May
26, 1976 between Peabody Coal Company and Black Mesa Pipeline,
Inc. (Exhibit B to Exhibit 10.18) (Filed as Exhibit 5.36 to Form
S-7, File No. 2-56356)
. Coal Supply Agreement dated October 15, 1975 between Nevada Power
Company and United States Fuel Company (Filed as Exhibit 5.38 to
Form S-7, File No. 2-56356)
. Amendment dated November 19, 1976 to Coal Supply Agreement dated
October 15, 1975 between Nevada Power Company and United States
Fuel Company (Filed as Exhibit 5.30 to Form S-7, File No. 2-62105)
. Participation Agreement Reid Gardner Unit No. 4 dated July 11,
1979
108
<PAGE>
between Nevada Power Company and California Department of Water
Resources (Filed as Exhibit 5.34 to Form S-7, File No. 2-65097)
. Coal Supply Agreement dated March 1, 1980 between Nevada Power
Company and Beaver Creek Coal Company (Filed as Exhibit 5.37 to
Form S-7, File No. 2-62509)
. Coal Supply Agreement dated March 1, 1980 between Nevada Power
Company and Trail Mountain Coal Company (Filed as Exhibit 5.38 to
Form S-7, File No. 2-62509)
. Coal Supply Agreement dated December 8, 1980 between Nevada Power
Company and Plateau Mining Company (Filed as Exhibit 10.26 to Form
10-K, File No. 1-4698, Year 1981)
. Coal Supply Agreement dated August 31, 1982 between Nevada Power
Company and CO-OP Mining Company (Filed as Exhibit 10.26 to Form
10-K, File No. 1-4698, Year 1982)
. Coal Supply Agreement dated September 8, 1982 between Nevada Power
Company and Getty Mining Company (Filed as Exhibit 10.27 to Form
10-K, File No. 1-4698, Year 1982
. Coal Supply Agreement dated September 8, 1982 between Nevada Power
Company and Tower Resources, Inc. (Filed as Exhibit 10.28 to Form
10-K, File No. 1-4698, Year 1982)
. Coal Supply Agreement dated September 22, 1982 between Nevada
Power Company and Beaver Creek Coal Company (Filed as Exhibit
10.29 to Form 10-K, File No. 1-4698, Year 1982)
. Memorandum of Understanding Concerning Interconnection between
Utah Power & Light Company and Nevada Power Company dated February
2, 1984 (Filed as Exhibit 10.30 to Form 10-K, File No. 4698, Year
1983)
. Sublease Agreement between Powveg Leasing Corp., as Lessor and
Nevada Power Company as Lessee, dated January 11, 1984 for lease
of administrative headquarters (Filed as Exhibit 10.31 to Form 10-
K, File No. 1-4698, Year 1983)
. Participation Agreement between Utah Power & Light Company and
Nevada Power Company dated December 19, 1985 (Filed as Exhibit
10.32 to Form 10-K, File No. 1-4698, Year 1985)
. Sale and Purchase Agreement dated as of December 23, 1985 by and
between Nevada Power Company and CP National Corporation (Filed as
Exhibit 10.33 to Form 10-K, File No. 1-4698, Year 1985)
. Restated Coal Sales Agreement as of July 1, 1985 by and between
Nevada Power Company and Trail Mountain Coal Company (Filed as
Exhibit 10.34 to Form 10-K, File No. 1-4698, Year 1985)
. Financing Agreement dated as of February 1, 1983 between Clark
County,
109
<PAGE>
Nevada and Nevada Power Company (Filed as Exhibit 10.36 to Form
10-K, File No. 1-4698, Year 1985)
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated as of December 1, 1985 (Filed as Exhibit 10.37 to
Form 10-K, File No. 1-4698, Year 1985)
. Reimbursement Agreement dated as of December 1, 1985 between The
Fuji Bank, Limited and Nevada Power Company (Filed as Exhibit
10.38 to Form 10-K, File No. 1-4698, Year 1986)
. Contract for Sale of Electrical Energy between the State of Nevada
and Nevada Power Company, dated July 8, 1987 (Filed as Exhibit
10.39 to Form 10-K, File No. 1-4698, Year 1987)
. Power Sales Agreement between Utah Power & Light Company and
Nevada Power Company, dated August 17, 1987 (Filed as Exhibit
10.40 to Form 10-K, File No. 1-4698, Year 1987)
. Transmission Facilities Agreement between Utah Power & Light
Company and Nevada Power Company, dated August 17, 1987 (Filed as
Exhibit 10.41 to Form 10-K, File No. 1-4698, Year 1987)
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated as of November 1, 1988 (Filed as Exhibit 10.42 to
Form 10-K, File No. 1-4698, Year 1988)
. Reimbursement Agreement dated as of November 1, 1988 between the
Fuji Bank, Limited and Nevada Power Company (Filed as Exhibit
10.43 to Form 10-K, File No. 1-4698, Year 1988)
. Power Purchase Contract dated February 15, 1990 between Mission
Energy Company and Nevada Power Company (Filed as Exhibit 10.45 to
Form 10-K, File No. 1-4698, Year 1989)
. Contract for Long-Term Power Purchases from Qualifying Facilities
dated May 1, 1989 between Oxford Energy of Nevada and Nevada Power
Company (Filed as Exhibit 10.46 to Form 10-K, File No. 1-4698,
year 1989)
. Contract A for Long-Term Power Purchases from Qualifying
Facilities dated May 2, 1989 between Bonneville Nevada Corporation
and Nevada Power Company (Filed as Exhibit 10.47 to Form 10-K,
File No. 1-4698, Year 1989)
. Contract for Long-Term Power Purchases from Qualifying Facilities
dated April 10, 1989 between Magna Energy Systems, Eastern Sierra
Energy Company and Nevada Power Company (Filed as Exhibit 10.48 to
Form 10-K, File No. 1-4698, Year 1989)
. Contract B for Long-Term Power Purchases from a Qualifying
Facility dated October 27, 1989 between Bonneville Nevada
Corporation and Nevada Power Company (Filed as Exhibit 10.49 to
Form 10-K, File No. 1-4698, Year 1989)
110
<PAGE>
. Agreement for Transmission Service dated March 29, 1989 between
Overton Power District No. 5, Lincoln County Power District No. 1
and Nevada Power Company (Filed as Exhibit 10.51 to Form 10-K,
File No. 1-4698, Year 1989)
. Contract dated June 30, 1988 between United States Department of
Energy Western Area Power Administration and Nevada Power Company
(Filed as Exhibit 10.52 to Form 10-K, File No. 1-4698, Year 1989
. Power Purchase Contract dated July 5, 1990 between Mission Energy
Company and Nevada Power Company (Filed as Exhibit 10.55 to Form
10-K, File No. 1-4698, Year 1990)
. Contract B for Long-Term Power Purchases from a Qualifying
Facility dated May 24, 1990 between Bonneville Nevada Corporation
and Nevada Power Company (Filed as Exhibit 10.56 to Form 10-K,
File No. 1-4698, Year 1990)
. Amendment dated June 15, 1989 to Exhibit 10.45 (Filed as Exhibit
10.57 to Form 10-K, File No. 1-4698, Year 1990)
. Amendment dated August 23, 1989 to Exhibit 10.45 (Filed as Exhibit
10.58 to Form 10-K, File No. 1-4698, Year 1990)
. Amendment dated April 23, 1990 to Exhibit 10.45 (Filed as Exhibit
10.59 to Form 10-K, File No. 1-4698, Year 1990)
. Exhibit H dated August 13, 1990 to Exhibit 10.45 (Filed as Exhibit
10.60 to Form 10-K, File No. 1-4698, Year 1990)
. Western Systems Power Pool Agreement (Agreement) dated 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 (Filed as Exhibit 10.61 to Form 10-K, File No. 1-4698,
Year 1990)
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated June 1, 1990 (Filed as Exhibit 10.62 to Form 10-K,
File No. 1-4698, Year 1990)
. Restated Power Sales Agreement dated March 25, 1991 between
Pacificorp and Nevada Power Company (Filed as Exhibit 10.63 to
Form 10-K, File No. 1-4698, Year 1991)
. Amendment dated July 17, 1990 to Exhibit 10.54 (Filed as Exhibit
10.64 to Form 10-K, File No. 1-4698, Year 1991)
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated June 1, 1992 (Series 1992A) (Filed as Exhibit 10.65
to Form 10-K, File No. 1-4698 (Year 1992)
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated June 1, 1992 (Series 1992B) (Filed as Exhibit 10.66
to Form 10-K, File No. 1-4698, Year 1992)
111
<PAGE>
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated October 1, 1992 (Filed as Exhibit 10.67 to Form
10-K, File No. 1-4698, Year 1992)
. Power Sales Agreement dated October 19, 1992 between the
Department of Water and Power of the City of Los Angeles and
Nevada Power Company (Filed as Exhibit 10.68 to Form 10-K, File
No. 1-4698, Year 1992)
. Contract for Long-Term Power Purchases from Qualifying Facilities
dated May 27, 1992 between Las Vegas Co-generation, Inc. and
Nevada Power Company. (Filed as Exhibit 10.70 to Form 10-K, File
No. 1-4698, Year 1993)
. Settlement Agreement and Promissory Note between Mountain Coal
Company and Atlantic Richfield Company and Nevada Power Company
dated March 9, 1994 (Filed as Exhibit 10.71 to Form 10-K, File No.
1-4698, Year 1993)
. Letter of Credit and Reimbursement Agreement dated as of April 12,
1994 between Nevada Power Company and Societe Generale, Los
Angeles Branch and Amendment No. 1 thereto dated as of May 3, 1994
(Filed as Exhibit 10.72 to Form 10-K, File No. 1-4698, Year 1994)
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated October 1, 1995 (Series 1995A) (Filed as Exhibit
10.75 to Form 10-K, File No. 1-4698, Year 1995)
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated October 1, 1995 (Series 1995B) (Filed as Exhibit
10.76 to Form 10-K, File No. 1-4698, Year 1995)
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated October 1, 1995 (Series 1995C) (Filed as Exhibit
10.77 to Form 10-K, File No. 1-4698, Year 1995)
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated October 1, 1995 (Series 1995D) (Filed 10.78 to Form
10-K, File No. 1-4698, Year 1995)
. Financing Agreement between Coconino County, Arizona Pollution
Control Corporation and Nevada Power Company dated October 1, 1995
(Series 1995E) (Filed as Exhibit 10.79 to Form 10-K, File No. 1-
4698, Year 1995)
. Letter of Credit and Reimbursement Agreement dated as of October
1, 1995 among Nevada Power Company, The Banks Named Herein, and
Societe Generale, Los Angeles Branch (Filed as Exhibit 10.80 to
Form 10-K, File No. 1-4698, Year 1995)
. Letter of Credit and Reimbursement Agreement dated as of October
1, 1995 among Nevada Power Company, The Banks Named Herein, and
Barclays Bank PLC, New York Branch (Filed as Exhibit 10.81 to Form
10-K, File No. 1-4698, Year 1995)
. Financing Agreement between Coconino County, Arizona Pollution
Control
112
<PAGE>
Corporation and Nevada Power Company dated October 1, 1996 (Filed
as Exhibit 10.82 to Form 10-K, File 1-4698, Year 1996)
. Financing Agreement between Clark County, Nevada and Nevada Power
Company dated November 1, 1997 (Filed as Exhibit 10.83 to Form 10-
K, File No. 1-4698, Year 1997)
. Financing Agreement between Coconino County, Arizona Pollution
Control Corporation and Nevada Power Company dated November 1,
1997 (Filed as Exhibit 10.84 to Form 10-K, File No. 1-4698, Year
1997)
(12) Sierra Pacific Resources
. *(A) Calculation of Pre-Tax Interest Coverages for the Periods
1999, 1998, and 1997.
Nevada Power Company
. *(B) Calculation of Pre-Tax Interest Coverages for the Periods
1999, 1998, and 1997.
(21) Sierra Pacific Resources
. Nevada Power Company, a Nevada Corporation.
Sierra Pacific Power Company, a Nevada Corporation.
Lands of Sierra, Inc., a Nevada Corporation.
Sierra Energy Corporation, a Nevada Corporation.
Tuscarora Gas Pipeline Company, a Nevada Corporation.
Sierra Water Development Company, a Nevada Corporation.
Sierra Pacific Resources Capital Trust I, a Delaware business
trust
Sierra Pacific Resources Capital Trust II, a Delaware business
trust
(23) Sierra Pacific Resources
. *(A) Consent of Independent Accountants in connection with the
Sierra Pacific Resources' Registration Statements No. 333-77523
(Common Stock Investment Plan) on Form S-3, and No. 333-92651
(Employees' Stock Ownership Plan, Executive Long-Term Incentive
Plan, and Non-Employee Director Stock Plan) on Forms S-8
(27) Sierra Pacific Resources
. *(A) The Financial Data Schedule containing summary financial
information extracted from the consolidated financial statements
filed on Form 10-K for the year ended December 31, 1999.
113
<PAGE>
================================================================================
UNITED STATES 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, 1999 Commission File Number 0-508
SIERRA PACIFIC POWER COMPANY
(Exact name of registrant as specified in its charter)
NEVADA 88-0044418
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 10100 (6100 Neil Road)
Reno, Nevada 89520-0400 (89511)
(Address of principal executive office) (Zip Code)
(775) 834-4011
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: none.
Securities registered pursuant to Section 12(g) of the Act:
Preferred Stock:
---------------
(Title of Class) Class A, Series 1, $1.95 Dividend, $25 stated value
Preferred Securities:
---------------------
(Title of Class) Sierra Pacific Power Capital Trust I, $2.15 Dividend,
$25 stated value
Indicate by check mark whether 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
----
State the aggregate market value of the voting stock held by non-affiliates. As
of March 22, 2000: None
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class Outstanding at March 22, 2000: 1,000 shares
Common Stock, $3.75 par value
</TABLE>
<PAGE>
Proof of March 20, 2000
SIERRA PACIFIC POWER COMPANY
1999 ANNUAL REPORT FORM 10-K
CONTENTS
<TABLE>
<S> <C> <C>
PART I............................................................................................................. 3
ITEM 1. BUSINESS (1)...................................................................................... 3
SIERRA PACIFIC POWER COMPANY..................................................................................... 3
BUSINESS OUTLOOK AND OVERVIEW.................................................................................... 4
ITEM 2. PROPERTIES......................................................................................... 29
ITEM 3. LEGAL PROCEEDINGS.................................................................................. 29
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................ 29
PART II............................................................................................................ 30
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS................................................................................................ 30
ITEM 6. SELECTED FINANCIAL DATA............................................................................ 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.............................................................................................. 31
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......................................... 50
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................................................ 51
SIERRA PACIFIC POWER COMPANY..................................................................................... 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....................................................................... 58
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.............................................................................................. 80
PART III........................................................................................................... 80
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS................................................................... 80
ITEM 11. EXECUTIVE COMPENSATION............................................................................. 86
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..................................... 91
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................................... 92
PART IV............................................................................................................ 96
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.................................... 96
SIGNATURES....................................................................................................... 97
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS
The information in this Form 10-K includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements relate to anticipated financial performance,
management's plans and objectives for future operations, business prospects,
outcome of regulatory proceedings, market conditions and other matters. Words
such as "anticipate," "believe," "estimate," "expect," "intend," "plan" and
"objective" and other similar expressions identify those statements that are
forward-looking. These statements are based on management's beliefs and
assumptions and on information currently available to management. Actual
results could differ materially from those contemplated by the forward-looking
statements. In addition to any assumptions and other factors referred to
specifically in connection with such statements, factors that could cause
Sierra Pacific Power Company's (SPPC's) actual results to differ materially
from those contemplated in any forward-looking statement include, among
others, the following: (1) the pace and extent of the ongoing restructuring of
the electric and gas industries in Nevada and California; (2) the outcome of
regulatory and legislative proceedings and operational changes related to
industry restructuring; (3) the amount SPPC is allowed to recover from
customers for certain costs that prove to be uneconomic in the new competitive
market; (4) the outcome of ongoing and future regulatory proceedings; (5)
management's ability to integrate the operations of Nevada Power Company (NVP)
and SPPC, and to implement and realize anticipated cost savings from the
merger of SPR and NVP; (6) industrial, commercial and residential growth in
the service territory of SPPC; (7) fluctuations in electric, gas and other
commodity prices and the ability to manage such fluctuations successfully; (8)
changes in the capital markets and interest rates affecting the ability to
finance capital requirements; (9) the loss of any significant customers; (10)
the weather and other natural phenomena; and (11) changes in the business of
major customers that may result in changes in the demand for services of SPPC.
Other factors and assumptions not identified above may also have been involved
in deriving these forward-looking statements, and the failure of those other
assumptions to be realized, as well as other factors, may also cause actual
results to differ materially from those projected. SPPC assumes no obligation
to update forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting forward-looking statements.
SIERRA PACIFIC POWER COMPANY
Sierra Pacific Power Company, hereinafter known as the Company or SPPC, is
a Nevada corporation organized in 1965 as a successor to a Maine corporation
organized in 1912. The Company became a wholly owned subsidiary of Sierra
Pacific Resources (SPR) on May 31, 1984. Its mailing address is Post Office Box
10100 (6100 Neil Road), Reno, Nevada 89520-0400.
The Company has four primary, wholly owned subsidiaries: Pinon Pine Corp.
(PPC), Pinon Pine Investment Co. (PPIC), GPSF-B, and Sierra Pacific Power
Capital I (the Trust). PPC and PPIC own 25% and 75% of a 38% interest in Pinon
Pine Company, L.L.C. GPSF-B, a Delaware corporation formerly owned by General
Electric Capital Corporation and now owned by the Company, owns the remaining
62%. The LLC was formed to take advantage of federal income tax credits
associated with the alternative fuel (syngas) produced by the coal gasifier
available under (S) 29 of the Internal Revenue Code. The Trust was created to
issue trust securities in order to purchase the Company's junior subordinated
debentures .
3
<PAGE>
The Company is a public utility primarily engaged in the distribution,
transmission, generation, purchase and sale of electric energy. It provides
electricity to approximately 302,000 customers in a 50,000 square mile service
area including western, central and northeastern Nevada, including the cities of
Reno, Sparks, Carson City, Elko, and a portion of eastern California, including
the Lake Tahoe area. In 1999, electric revenue was 79.8% of total revenue.
The Company also provides natural gas service in Nevada to approximately
110,000 customers in an area of about 600 square miles in Reno/Sparks and
environs. It supplies water service in Nevada to about 70,600 customers in the
Reno/Sparks metropolitan area. In 1999, natural gas revenues were 13.1% and
water revenues were 7.1% of total revenues.
The Company used diverse resources to meet its 1999 electric energy
requirements, including gas and oil generation (28.4%), coal generation (17.4%),
and purchased power (53.8%). The Company has no ownership interest in, nor does
it operate, any nuclear generating units.
In 1999, the Company's average electric customer count grew by 2.8%; its
average natural gas customer count increased by 4.3%; and its average water
customer count increased by 4.8%. Many factors account for this growth
including population growth in the Company's service areas.
The Company had 1,430 regular employees as of December 31, 1999; this is a
1.1% decrease from 1998. The Company's current contract with the International
Brotherhood of Electrical Workers, which represents 58.0% of the workforce, was
renegotiated in 1997 and is in effect until December 31, 2000. The three-year
contract provides for a 2.75% general wage increase for most bargaining unit
employees beginning January 1, 1998, with 2.75% increases in both 1999 and 2000.
In addition, the contract provides for bargaining unit employees to participate
in the incentive compensation program. Nevada is a "right-to-work" state.
For a discussion of results of operations refer to Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Business Outlook And Overview
ELECTRIC INDUSTRY TRENDS
- ------------------------
On July 28, 1999, SPR completed its merger with NVP. More than 30 other
mergers of electric and/or gas companies were pending, announced, or completed
in 1999. Merger and acquisition activity is expected to continue into the next
decade, as companies position themselves for continued electric restructuring
throughout the United States.
The Company announced its plan to divest its generation assets in June
1998. A stipulation on the Divestiture Plan was approved by the PUCN in February
2000. This stipulation will clear the way for the Divestiture process to begin.
See Generation Divestiture for further information.
Federal and state legislation is moving the electric utility industry
toward competition. Federal and state regulators play critical roles in
establishing a competitive marketplace. Currently, 21 states have passed
restructuring bills, and 19 more states are considering legislation to
restructure their electric markets. In addition, the U.S. Congress is
considering national legislation that would implement electric restructuring
across the nation. Passage of a comprehensive federal bill is expected within
the next several years. Regulatory changes generally focus on the unbundling of
utility functions into separate products and services. The major product being
opened to competition is energy (e.g., kilowatt hours). Other services such as
meter reading and billing are also being opened to competition in some states,
including California and Nevada.. The delivery of energy (e.g., transmission and
distribution) to businesses and homes remains a utility product regulated by the
Federal Energy Regulatory Commission and state regulators.
On December 15, the FERC issued Order No. 2000, a long awaited rule on
Regional Transmission Organizations (RTO's). The implementation of Order No.
2000 is expected to have major long-term effects on the electric power markets
by promoting regionalization of the transmission grid.
4
<PAGE>
The Company is subject to California, Nevada and the FERC regulatory
jurisdiction. Federal and state regulation will continue to play an active role
in the Company's utility business. The Company's electric system demand exceeds
the import capabilities of its transmission system. Accordingly, some of the
Company's generation capacity has been identified as "must run" in order to meet
load. Tariffs governing the availability and pricing of "must run" facilities
after the divestiture of generation have been filed with the FERC. See
Generation Divestiture. The FERC will also regulate the Company's electric
transmission system. The states will continue to regulate those retail
distribution services determined to be non-competitive.
Approximately 67% of SPPC's operating revenues is related to electric sales
in Nevada. Nevada passed Assembly Bill 366 (AB366) in July 1997, as enabling
legislation to implement electric industry restructuring in Nevada. This
legislation was modified in June 1999 by Senate Bill 438 (SB438). SB438
provides for competition to be implemented in the Nevada electric utility
industry. See Electric Restructuring Activities. On February 28, 2000, the
governor of Nevada postponed the expected March 1, 2000 opening date. No new
date has been set, but competition could begin later in 2000 or possibly in
2001. SB438 allows the PUCN to authorize full recovery of costs that it
determines to be stranded as a result of restructuring, and provides criteria
for recovery of costs associated with purchase power obligations. In addition
SB438 provides the electric distribution utility will be the provider of last
resort (PLR) until alternate methods go into effect, no sooner than July 1,
2001; under rates which will be capped until March 1, 2003.
In August 1997, the PUCN opened an investigatory docket of the issues to be
considered as a result of restructuring the electric industry under AB366 and
SB438. The Company is a participant in this docket in which new regulations for
the restructured marketplace have been developed. These regulations include
standards of conduct, consumer protection, stranded costs and licensing
provisions for alternative sellers. Implementation of some of the regulations,
including unbundling of services, stranded costs and provider of last resort,
has already posed or is expected to pose financial risks to the Company. The
Company is working to mitigate these risks by changing its business strategies,
actively pursuing regulatory remedies and, if necessary, pursuing legal
remedies. See further discussion regarding restructuring activities and
potential risks in Item 7, Nevada Matters.
California accounts for approximately 6% of the Company's electric revenue.
California opened retail access in 1998. California customers may choose to
continue to take service from their incumbent utility at tariff rates, purchase
energy from marketers or contract directly with a generator. Any customers
choosing to purchase energy from marketers or generators will pay a distribution
fee for their use of the Company's transmission and distribution systems. To
date no California customers have opted for retail open access. Operating
results should not be materially impacted by these regulatory changes because of
the continued use of the Company's transmission /distribution facilities and the
Company's limited exposure in California.
For more information regarding regulatory changes affecting SPPC, see Item
7, Nevada Matters, California Matters, FERC Matters and Note 2 of the Company's
consolidated financial statements.
SIERRA PACIFIC RESOURCES AND NEVADA POWER COMPANY MERGER
- --------------------------------------------------------
As previously mentioned, the merger between SPR and NVP was finalized on
July 28, 1999 following receipt of all regulatory approvals. The PUCN gave
unanimous approval of a stipulation among the merging companies, the PUCN staff
and the Utility Consumer Advocate, regarding the merger.
5
<PAGE>
As part of the stipulation approved by the PUCN, the companies were
required to re-file the plan to divest their generating assets, and file a final
Independent System Administrator (ISA) proposal with the PUCN and the FERC. In
January 2000, the FERC approved the ISA proposal; the PUCN's decision is still
pending. See Generation Divestiture and Item 7, Nevada Matters for more
information.
6
<PAGE>
As part of the conditions for the merger SPPC was required to file a
general rate case and unbundle costs. In April 1999, Phase I of the revenue
requirement and unbundling study was filed with the PUCN. In September 1999,
the PUCN issued an interim order on revenue requirements. In October 1999,
Phase II regarding rate design was filed. Hearings were conducted in November
1999. Phase III will be filed 15 days following the PUCN decision on Phases I
and II and will include full proposed tariffs for distribution service and all
other noncompetitive services. SPPC is also required to file a general rate
case three years after the start of retail competition in the state of Nevada.
The filing would give the Company the opportunity to recover certain costs of
the merger, provided it can be demonstrated that merger savings exceed certain
merger costs. Merger costs are to be split among non-competitive and
potentially competitive services or businesses. An opportunity to recover the
non-competitive portion of the merger costs will be addressed in the rate case
that follows the start of competition in Nevada. The burden is to prove that
merger savings exceed merger costs.
GENERATION DIVESTITURE
- ----------------------
In June 1998, SPR announced a plan to divest the generation assets of its
NVP and SPPC subsidiaries. This business strategy was described in the SPR/NVP
merger applications filed with the PUCN and the FERC in July 1998.
The FERC, Department of Justice, and SEC approved the merger. The PUCN
conditionally approved the merger in December 1998, and one of the conditions
was the filing of the divestiture plan with the PUCN. The plan was filed in
April 1999, and included details about the auction process, market power
mitigation, sale of the assets in described bundles, description of the proposed
generation tariffs, description of the proposed independent system
administrator, and the description of the proposed power purchase contracts.
In June 1999, the PUCN approved a stipulation in the Merger docket with
several conditions. Some of those conditions were: re-file the divestiture plan
with the PUCN; file the generation aggregation tariffs (GAT) at the FERC; file
the proposal for the ISA at the FERC; file proposals for the buyback or purchase
power contracts; and file proposals for mitigation of the qualifying facilities
and purchase power contracts.
A revised Divestiture Plan was filed with the PUCN in October 1999. The
PUCN held a hearing on December 28, 1999 and a stipulation was offered to the
Commission for approval. Approval of the stipulation was received in February
2000.
In accordance with the approved stipulation, SPR will be offering for
sale generation assets with peak capacity of approximately 2,985 megawatts (MW)
with approximately 1,045 MW owned by SPPC and approximately 1,940 MW owned by
NVP. Potential buyers will be allowed to offer bids for different combinations
of assets or for a consolidated asset. The plants utilize either coal, natural
gas, or oil as fuel and are a mix of base load or peaking units consisting of
conventional steam turbines, combined-cycle, or combustion turbines. SPR
anticipates closing the sales of the generation assets during a period beginning
in the fourth quarter 2000 and ending in 2003.
7
<PAGE>
ELECTRIC BUSINESS
- -----------------
Business and Competitive Environment
- ------------------------------------
Transmission
The FERC issued Order 2000 in December 1999. The order requires all
investor-owned utilities in the United States who own interstate transmission to
file their plans regarding Regional Transmission Organizations (RTOs) by October
15, 2000. Utilities must file by that date, either by joining an RTO or stating
why they are not joining one. The RTOs must be operational by December 15, 2001
with congestion management in place one year later.
The FERC has required that RTOs be operated by independent entities that
are not participants in the energy market. The RTO must accommodate broad
participation by both private and public utilities, provide customer efficient
price signals and be independent of market participants (i.e., sellers of energy
to end use customers). In addition, RTO rates must eliminate pancaking
(multiple rates on a transmission path), manage congestion and internal parallel
flows, deal effectively with non-RTO transmission owning entities (not under the
FERC jurisdiction) and provide correct investment incentives. The FERC has
offered the possibility of incentive ratemaking to RTOs that meet all the
criteria for a large-scale regional entity.
The Company will explore strategic transmission options, using the
guidelines included in Order 2000. The Company's response will be filed before
the October 15, 2000 deadline. The FERC filings for the start of Nevada
restructuring and the PGE acquisition will anticipate this October 2000 RTO
filing.
Distribution
The Company's electric business contributed $609 million (78.8%) of 1999
operating revenues. Electric system peaks typically occur in the summer, while
winter peaks run nearly as high. The system has an annual load factor of
approximately 70.9%, which is higher than the industry norm of 50-55%.
Winter peak loads are due to shorter daylight hours, colder temperatures
(which affect space heating requirements) and ski resort demands (snowmaking,
hotels, lifts, etc.). Summer peak loads result from air-conditioning, cooling
equipment and irrigation pumping. The Company's peak load increased an average
of 5% annually over the past five years, reaching 1,470 MW on July 12, 1999. The
Company's total electric megawatt-hour (MWh) sales have increased an average of
7.65% annually over the past five years.
A significant part of the growth in the Company's electric sales has resulted
from growth in the residential area, mining and manufacturing industry in
northern Nevada.
SPPC's electric customers by class contributed the following toward 1999 and
1998 megawatt-hour sales:
<TABLE>
<CAPTION>
MWh Sales
1999 1998
<S> <C> <C> <C> <C>
Residential 1,998,174 19.6% 1,987,562 20.4%
Commercial and Industrial:
Mining 2,716,579 26.6% 2,648,957 27.1%
Offices/Schools/Govt. 1,128,189 11.1% 1,048,553 10.7%
Resorts & Recreation 768,750 7.5% 760,848 7.8%
Manufacturing/Warehouse 586,963 5.8% 738,972 7.6%
Wholesale 1,695,420 16.6% 1,443,652 14.6%
All Other 1,308,861 12.8% 1,134,675 11.8%
-------------- --------- ------------ --------
Total 10,202,936 100.0% 9,763,219 100.0%
</TABLE>
According to the Nevada Mining Association statistics, Nevada leads the
nation in gold production, accounting for approximately 74% of all U.S.
production and 10% of world production, ranking it the third largest gold
producer in the world behind South Africa and Australia. It is estimated that
Nevada gold production for 1999 was approximately 8.2 million ounces. A
majority of Nevada's gold mines are customers of the Company. Currently, known
gold reserves at existing mines in Nevada total approximately 87 million ounces,
the majority of the nation's known gold reserves. These reserves are sufficient
to continue production at current rates for the next decade.
During 1999, world gold prices ranged from about $253 per ounce to $326 per
ounce. Production costs continue to vary greatly at Nevada mines, along with
profitability. Industry reports indicate many Nevada gold mines have a
production cost of less than $300 per ounce, with some of the larger mines
producing within the $192 to $240 per ounce range. When compared to world
production costs, Nevada remains below the worldwide average. While Nevada's
gold mines have the lowest costs in the world, investments in exploration and
development have fallen, and may continue to fall. In addition, low gold prices
may shorten the expected mine lives of certain Nevada properties as lower grade
ore becomes uneconomic to mine.
The Company's territory also has a variety of other mineral producing
mines. Approximately 19.5 million ounces of silver were produced in 1999, worth
approximately $102 million, with over 123 million ounces of silver resources
identified in the State. Silver demand has been exceeding new supply for most
of the decade, drawing down inventories built up in the 1980's. As this
situation continues, we will see continued upward pressure on silver prices.
Other minerals produced in Nevada include copper, lithium, mercury, barite,
diatomite, gypsum, and lime, valued at over $108 million.
8
<PAGE>
The Company has seven long-term power sales agreements with major mining
customers with terms of at least five years. The final contract expires in
2005. One of these customers has provided SPPC with two years' notice of
termination. Five of these agreements have been reviewed and approved by the
PUCN as part of the Company's new tariff structure designed for major customers.
These mining agreements secure over 223 megawatts of present and future mining
load, or approximately $74 million in annual revenues, which is 12.2% of the
1999 electric operating revenues. The agreements require that customers
maintain minimum demand and load factor levels, and include termination charge
provisions to recover all of the Company's customer-specific facilities
investment. Sales to the mining sector grew at approximately the same
percentage as overall system sales (3.8%).
The resorts and recreation group is comprised of hotels, casinos, and ski
resorts. This major customer segment comprises 7.5% of the total electric
system retail MWh sales. Tourism and gaming continue to be key contributors to
the local economy. Several of the largest gaming customers are expanding their
properties to differentiate the Reno/Tahoe market by creating a more desirable
resort location. These same large gaming customers increased their 1999
electric load by 7,902 MWh (1.0%) over 1998.
Gaming has substantial potential for growth with the recent purchases and
reopening of several smaller casinos. In addition, several closed properties
have been razed and have plans for new properties to be built in their place.
The advent of increased competition in 1999, particularly "Indian gaming"
in key feeder markets and the continuing expansion in Las Vegas, has not had a
negative impact on the Northern Nevada market share and ultimately energy sales.
The passing of Proposition 5 in California, which liberalizes Indian reservation
gaming operations, had been predicted to cause a decline in Reno's gaming
revenues once implemented. Northern Nevada casinos are evaluating and
implementing competitive strategies to expand their entertainment portfolio.
The key to this strategy is packaging entertainment value, customer comfort, and
reasonable pricing, with the natural attraction of the Sierra Nevada geographic
location.
The Company's industrial and large commercial customers continue their
interest in the electric supply source options potentially available to them
under regulatory reforms currently being considered in Nevada and in place in
California. The Company continues to prepare for a more competitive environment
and has actively participated in regulatory reform deliberations in Nevada.
Upon opening the market to retail access, one of the most significant
regulations that will impact the distribution business is the requirement to be
the provider of last resort for customers who do not choose a competitive
supplier or who are unable to secure a new supplier. Due to the SB438
requirement that the provider of last resort be placed into a separate
affiliate, recent PUCN decisions regarding recovery of fuel expenses, and the
stringent proposed regulations, significant detrimental financial impacts are
expected to occur. As a result, the Company is determined to exit the provider
of last resort requirement as quickly as possible. First the Company would seek
to exit the energy supply portion of the provider of last resort. Then, if
current legislation and regulation do not change, the Company would plan to exit
other services, including metering, billing and customer service functions. See
Item 7, Nevada Matters, California Matters, and FERC Matters for further
discussion.
Over the past five years, MWh sales to wholesale customers have increased
at a rate of 39.4%. During 1999, firm and non-firm sales to wholesale customers
comprised about 14.8% of total energy sales. The wholesale market is very
competitive and sales into this market are typically made at very low margins.
This market is maturing and will become even more competitive in the future.
The Company utilizes wholesale sales to better manage fuel and purchase power
costs.
9
<PAGE>
<TABLE>
<CAPTION>
PERCENT
MWh OF TOTAL
------------ ---------
<S> <C> <C>
Firm Sales 507,640 29.9%
Non-firm Sales 123,567 7.3%
Firm Off-System Sales 1,064,213 62.8%
------------- ----------
Total 1,695,420 100.0%
============= ==========
</TABLE>
While the wholesale sales in 1999 represented 14.8% of sales they represent
only 8.6% of electric revenues.
MAJOR PROJECTS
- ---------------
The following major projects have been approved in previous resource plans
and may have been financed utilizing internally generated cash and/or the
proceeds from various forms of debt and preferred securities:
Pinon Pine Project
The Pinon Pine Project is a cooperative agreement with the U.S. Department
of Energy (DOE) for the construction of a coal-gasification power plant. Total
project costs incurred by the Company through December 31, 1999, were $170.0
million. Actual costs incurred by the Company in 1999 were $.4 million.
Alturas Intertie Project
The Alturas Intertie Project, which went into service in December 1998, is
a 345 kilovolt (kV) transmission line from Northern California to Reno. Total
project costs incurred through December 31, 1999 were $153.2 million. Actual
costs incurred in 1999 were $9.1 million. Estimated costs for 2000 are $1.0
million.
Falcon Transmission Project
The Falcon Transmission Project is a 345kV transmission line within
Northern Nevada. Total project costs incurred through December 31, 1999 were
$2.4 million. Actual costs incurred in 1999 were $2.1 million. Estimated costs
for 2000 are $4.0 million.
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.
10
<PAGE>
FINANCING PROGRAMS
- ------------------
Current estimated cash construction expenditures for 2000 are $137.7
million. The Company may utilize internally generated cash and the proceeds
from the issuance of securities to meet capital expenditure requirements through
2000. Internally generated funds provided 35% of all construction expenditures
in 1999.
On July 28, 1999, the Company put into place a $150 million 364-day
unsecured revolving credit facility that is convertible at the Company's
election into a one-year term loan. This facility replaced the Company's
previous credit facility and may be used for working capital and general
corporate purposes, including commercial paper backup.
On April 9, 1999, The Company sold the Transition Property (See California
Matters in Rate Proceedings, later) to SPPC Funding LLC, a Delaware special
purpose limited liability company whose sole member is the Company, in exchange
for the proceeds of the SPPC Funding LLC Notes, Series 1999-1 (the "Underlying
Notes"). SPPC Funding LLC then issued and sold the Underlying Notes to the
California Infrastructure and Economic Development Bank Special Purpose Trust
SPPC-1 (the "Trust") in exchange for the proceeds of the sale of the Trust's
$24.0 million 6.4% Rate Reduction Certificates, Series 1999-1 (the
"Certificates"). The Trust, which had been established by the California
Infrastructure and Economic Development Bank, issued and sold the Certificates
in a private placement pursuant to Rule 144A under the Securities Act of 1933,
as amended. The Certificates are one of a series of rate reduction certificates
that may be issued from time to time by the Trust and sold to investors upon
terms determined at the time of sale.
On July 12, 1999, $10 million of the Company's 6.86% medium-term notes
matured. On July 6, 1999, $20 million of the Company's 6.83% medium-term notes
matured.
On September 17, 1999, the Company issued $100 million of floating rate
notes ("Notes") due October 13, 2000. Interest on the Notes, payable quarterly,
commenced on December 15, 1999. The interest rate on the Notes for each
interest period to maturity is a floating rate, subject to adjustment every
three months. The quarterly rate is equal to the London Interbank Offered Rate
(LIBOR) for three-month U.S. dollar deposits plus a spread of 0.75%. The Notes
will not be entitled to any sinking fund and will be redeemable, in whole, at
the option of the Company beginning on March 15, 2000 and on the 15th day of
each month thereafter.
On November 1, 1999 the Company redeemed Preferred Stock, Series A, $2.44
Dividend (4.88%), Series B, $2.36 Dividend (4.72%) and Series C, $3.90 Dividend
(7.80%).
FACILITIES AND OPERATIONS
- -------------------------
Total System
As of December 31, 1999, the Company's electric transmission facilities
consisted of approximately 4,000 overhead pole line miles and 81 substations.
Its distribution facilities consisted of approximately 9,000 overhead pole line
miles, 4,500 underground cable miles and 178 substations.
11
<PAGE>
The Company continues to maintain a wide variety of resources in its
generation system. During 1999, the Company generated 46.2% of its total
electric energy requirements in its own plants, purchasing the remaining 53.8%
as shown below:
<TABLE>
<CAPTION>
Megawatt- Percent
Hours of Total
--------- --------
<S> <C> <C>
Company Generation
- ------------------
Gas/Oil 3,071,537 28.4%
Coal 1,879,326 17.4%
Hydro 47,277 0.4%
---------- -----
Total Generated 4,998,140 46.2%
---------- -----
Purchased Power
- ---------------
Utility Purchases:
Long-Term Firm 1,322,088 12.2%
Short-Term Firm 3,337,174 30.8%
Spot Market 297,333 2.8%
Non-Utility Purchases:
Geothermal 712,976 6.6%
Other 128,332 1.2%
Transmission & Balancing 23,939 0.2%
---------- -----
Total Purchased 5,821,842 53.8%
---------- -----
Total 10,819,982 100.0%
========== =====
</TABLE>
The Company's decision to purchase spot market energy is based on the
economics of purchasing "as-available" energy when it is less expensive than the
Company's own generation. At the time of the 1999 system peak, the Company had
purchased firm capacity under long-term contracts with other utilities and
qualifying facilities (QFs) equal to 17% of total peak hour capacity. In 1999,
most of the Company's non-utility generation came from QFs, except for 14,951
megawatt hours, which came from two small power producers.
Risk Management
Over the past several years, SPPC recognized that the management of energy
commodity (electricity, natural gas, coal, and oil) price risk was an essential
component of SPPC's efforts to manage revenues and expenses. In 1998, SPPC's
board of Directors approved a Risk Management Policy & Procedure Manual that
governed price risk management activities. With the merger of SPR and NVP, the
Board of Directors requested that management review and consolidate the Risk
Management Programs of the two utilities. SPPC and NVP engaged the services of
a leading energy risk management consulting company to review existing policies
and procedures, make any recommendations to the existing Program, and implement
the revised Program. That project led the companies to adapt revised policies
and procedures, implement new IT systems to track any commodity price exposures,
as well as focus on potential "Earnings-at-Risk" which measures the amount of
exposure that the companies have to energy prices at any point.
12
<PAGE>
Load and Resources Forecast
The electric customer growth rate was 2.8%, 2.8%, and 3.1% in 1999, 1998
and 1997, respectively. Annual electricity retail sales reached 8,412,853
megawatt-hours in 1999. Peak electric demand rose from 1,423 megawatts in 1998
to 1,470 megawatts in 1999.
The Nevada Legislature mandated retail access to alternative electric
suppliers. While the opening date of competition is not yet known, once access
begins, the Company will continue to be required to supply electricity to
customers as the "provider of the last resort". It is expected that some
customers will elect to receive their electric supply from other suppliers,
however, reasonable estimates of the number and timing of customers switching
are not yet available. The proposed "provider of last resort" regulations have
highlighted the Company's exposure to fuel price risks. Consequently, if the
proposed regulations are adopted, the Company will exit the provider of last
resort function as quickly as possible, beginning with energy supply. The
projections shown below are forecasts of the load to be provided to all of the
Company's current customers, and therefore, include demand that may actually be
met by other electric suppliers.
As part of the merger agreement with the PUCN, the Company has committed
to divest its generation facilities to enhance competition in a deregulated
environment. Current plans call for the divestiture to occur in the year 2000.
Until such time, the Company will continue to provide energy through generation
and purchase power to meet both summer and winter peak loads. The Company's
actual total system capability and peak loads for 1999, and as estimated for
summer peak demand through 2001 (assuming no curtailment of supply or load and
normal weather conditions), are indicated below:
<TABLE>
<CAPTION> Capacity at 1999 Peak Forecast Summer Peak
-----------------------------------------------------
MW % 2000 2001
-----------------------------------------------------
<S> <C> <C> <C> <C>
Company Generation:
Existing (1) 1,045 63% 1,052 0
---------------------------------------------------
Purchases:
Long/Short-Term Firm (2) (3) 492 29% 498 1,541
Interruptible Customers 2 0% 2 2
Non-Utility Generators 70 4% 70 70
---------------------------------------------------
Subtotal 564 33% 570 1,613
---------------------------------------------------
Additional Required 60 4% 82 177
Total System Capacity 1,669 100% 1,704 1,790
---------------------------------------------------
Net System Peak (4) 1,470 88% 1,499 1,581
Planning Reserve 199 12% 205 209
---------------------------------------------------
Total 1,669 100% 1,704 1,790
===================================================
Growth over previous year 2.1% 5.1%
</TABLE>
(1) Assumes divestiture is complete by peak season 2001.
(2) Value net of losses.
(3) Includes potential short-term firm purchases that are not under
contract. Values shown represent purchases within existing
transmission system limits.
13
<PAGE>
(4) The system peak shown for 1999 is the actual system peak of 1,470 MW,
which occurred on July 12, 1999.
The Company plans its system consistent with the Western System
Coordinating Council guidelines, which recommends planning reserves in excess of
required operating reserves. The "Additional Required" represents the difference
between the planning reserves and the operating reserves needed for the system.
These additional reserves will be met, if needed, by short-term purchases
through 2001.
Generation
The following is a list of the Company's generation plants including their
megawatt (MW) summer peak capacity, the type/fuel that they use to generate, and
the year(s) that the unit(s) was (were) installed:
<TABLE>
<CAPTION>
Number
of MW Year(s)
Name Type/Fuel Units Capacity Installed
- ---- --------- ------ -------- ---------
<S> <C> <C> <C> <C>
Valmy (1) Steam/Coal 2 266 1981 and 1985
Tracy Steam/Natural Gas, Residual Oil 3 244 1963, 1965, 1974
Pinon (2) Combined Cycle/Coal, Natural Gas 1 89 1996 - 1998
Clark Mtn. CT's Combustion Turbine/Natural Gas,
Diesel Oil 2 138 1994
Ft. Churchill Steam/Natural Gas, Residual Oil 2 226 1968 and 1971
Other (3) Gas Turbine/Natural Gas, Diesel Oil,
Propane, Hydro 33 82 1899 1970
-----
1,045
=====
</TABLE>
(1) SPPC is the operator and owns an undivided 50 percent interest in the Valmy
plant. Idaho Power Company (Idaho Power) owns the remainder. The
capacities shown above for the Valmy plant represent the Company's share
only. The Company owns 100 percent of all of its remaining electric
generation plants.
(2) Includes the generation capacity of the 100% SPPC-owned power island
portion of the Pinon Pine Power Project. Pinon's current summer peak
capacity is 89 MW when operating on natural gas.
(3) Four of the Company's hydro generation units are located on the Truckee
River, which runs approximately 100 miles from Lake Tahoe, through
Reno/Sparks, to Pyramid Lake. A 2 MW facility located on the Truckee River
at Farad was damaged by the January 1997 flood and was not available for
generation during the 1999 summer peak.
Purchased Power
The Company continues to manage a diverse portfolio of contracted and spot
market supplies, as well as its own generation, to minimize its net average
system operating costs. During 1999, the Company witnessed a leveling of off-
system energy prices compared to the previous year, but energy forecasts
indicate steadily increasing prices as load appears to outpace additional
supply.
14
<PAGE>
The Company is a member of the Northwest Power Pool and Western Systems
Power Pool. These pools have provided the Company further access to spot market
power in the Pacific Northwest and the Southwest. In turn, the Company's
generation facilities provide a backup source for other pool members who rely
heavily on hydroelectric systems. The Company has an agreement with PacifiCorp's
Utah division and Idaho Power in which a portion of the energy purchased by the
Company from PacifiCorp is transmitted through the Idaho Power system. The
agreement also provides added access to spot market power.
The Company purchases hydro- and thermally-produced spot market energy, by
the hour, based upon economics and system import limits. Also purchased during
peak load periods is firm energy as required to supply load and maintain
adequate operating reserve margins. As off-system energy costs increase, the
Company supplies a higher percentage of its native load utilizing its fossil
fuel generation but is still required to buy peaking energy from the market.
Also, market conditions throughout the West are in flux with regions approaching
deregulation using different methods. Each change results in different market
pricing characteristics.
Currently, the Company has contracted for a total of 165 MW of long-term
firm purchased power from the utility suppliers listed below. Several of the
Company's firm purchase power contracts contain minimum purchase obligations.
Meeting these minimums has not been a problem for the Company in the past, and
is not expected to be a problem in the future.
<TABLE>
<CAPTION>
Contract Party Contract Operation Termination Minimum
Capacity Date Date Capacity %
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Idaho Power (for Elko) 15 MW March 1994 May 31, 2000 40%
PacifiCorp 75 MW June 1989 Feb 28, 2009 70%
PacifiCorp/Utah Power (1) 75 MW May 1991 April 30, 2000 78%
</TABLE>
(1) The Company has provided notice to terminate the PacifiCorp/Utah
contract effective April 30, 2000.
According to the Public Utility Regulatory Policies Act, the Company is
obligated, under certain conditions, to purchase the generation produced by
small power producers and co-generation facilities at costs determined by the
appropriate state utility commission. Generation facilities that meet the
specifications of the regulations are known as qualifying facilities (QFs). As
of December 31, 1999, the Company had a total of 109 MW of maximum contractual
firm capacity under 15 contracts with QFs. The Company also had contracts with
three projects at fluctuating short-term avoided cost rates. All QF contracts
currently delivering power to the Company at long-term rates have been approved
by either the PUCN or the California Public Utility Commission (CPUC), and have
QF status as approved by the FERC. One long-term QF contract terminates in
2006, one terminates in 2039, and the remainder terminate between 2014 and 2022.
Energy purchased by the Company from QFs constituted 10% of the net system
requirements during 1999. These contracts continue to provide useful diversity
for the Company in meeting its peak load. All the QFs from which the Company
makes firm purchases are either geothermal (87%), hydroelectric or biomass.
15
<PAGE>
The actual QF firm capacity output under contract was 64 MW during the
summer of 1999. The actual QF output for all non-utility generator deliveries
during the summer 1999 peak was 83 MW. The table on page 13 reflects actual
performance during the 1999 summer peak period. A difference exists between the
non-utility generator figures and the table on page 13 because the 1999 figure
is actual and the remaining years are forecasts. Any capacity shortfall created
by under-performance was included in the Company's 1999 amended resource plan.
Transmission
In planning its transmission capacity, the Company considers generation and
purchased power options, as well as the requirements for providing retail and
wholesale transmission services.
The Company's existing transmission lines extend some 300 miles from the
crest of the Sierra Nevada in eastern California, northeast to the Nevada-Idaho
border at Jackpot, Nevada, and 250 miles from the Reno area south to Tonopah,
Nevada. A 230 kV transmission line connects the Company to facilities near the
Utah-Nevada state line, which in turn interconnects the Company to Utah Power
facilities. A 345 kV transmission line connects the Company to Idaho Power
facilities at the Idaho-Nevada state line. The Company also has two 120 kV
lines and one 60 kV line which interconnect with Pacific Gas and Electric (PG&E)
on the west side of the Company's system at Donner Summit, California. Two 60 kV
transmission ties allow wheeling of up to 14 MW of power from the Beowawe
Geothermal Project, which is located within the Company's service area, to
Southern California Edison. These two minor interties are available for use
during emergency conditions affecting either party.
The Company's transmission intertie system provides access to regional
energy sources.
The Falcon Project is a 185-mile 345kV line connecting the Company's Falcon
Substation to the Company's Gonder Substation. The Project improves system
import and export capabilities and enables the Company to provide transmission
service between Idaho, Utah, and the Northwest. A Right-of-Way application was
submitted to the Bureau of Land Management (BLM) on December 17, 1998, and
Electric Resource Plan approval was received from the PUCN on April 8, 1999. On
October 5, 1999, the Company received a letter from the BLM requiring the
preparation of an Environmental Impact Statement (EIS). Current activities
include completion of environmental field surveys, hiring a consultant to
prepare the EIS, and WSCC rating studies. The EIS process should continue until
July 2001, which should translate to a project in-service date in June 2003.
Annual costs for 1999 are $2.25 million, total costs as of December 31, 1999 are
$2.28 million, and the estimated net cash total cost is $98.2 million.
The Company completed construction of the Alturas Intertie transmission
line in December 1998. The Alturas Intertie was built to enhance service to
existing load, to expand service to new customers and to increase significantly
the Company's access to lower cost resources in the Pacific Northwest. This
345 kV line originates west of Alturas, California and extends 165 miles south
to Reno.
16
<PAGE>
Certain Northern California public power groups have challenged the
Company's filing with the FERC of the interconnection and operating agreements
related to the Alturas Intertie in December 1998 and January 1999. The
California groups alleged that the potential reduction in imports into
California constitutes an impairment of reliability and therefore seek to force
reductions in use of the Alturas Intertie during peak periods. These
allegations have already been rejected by the Western Systems Coordinating
Council, which determined the capacity rating of the Alturas Intertie. The
Company (supported by Bonneville Power Administration and PacifiCorp) has filed
testimony before the FERC that the Alturas Intertie does not adversely affect
reliability and that, under the FERC's Order No. 888, customers in Nevada are
entitled to compete with customers in California for transmission capacity in
the Pacific Northwest on a first-come, first-served basis. The FERC staff has
agreed with the Company's position on this matter.
One of the California groups, the Transmission Agency of Northern
California ("TANC"), also initiated proceedings in the United States District
Court for the Eastern District of California and the United States Court of
Appeals for the Ninth Circuit, in each case alleging that Bonneville's
construction of a small portion of the Alturas Intertie violated the Northwest
Power Preference Act and requesting an injunction prohibiting operation of the
Alturas Intertie. The case before the Eastern District was dismissed for lack of
jurisdiction. The case before the Ninth Circuit was dismissed for TANC's failure
to prosecute. In December 1999, TANC filed suit in the Superior Court of the
State of California, Sacramento County, seeking an injunction against operation
of the Alturas Intertie based on numerous allegations under state law, including
inverse condemnation, trespass, private nuisance, and conversion.
Fuel Availability
The Company's 1999 fuel requirements for electric generation were
provided by natural gas, coal, and oil. During 1999 natural gas remained the
fuel of choice, over oil, for generation plants other than Valmy, which is a
coal-fired plant.
The average costs of coal, gas and oil for energy generation per million
British thermal units (MMBtu) for the years 1995-1999, along with the percentage
contribution to total fuel requirements were as follows:
<TABLE>
<CAPTION>
______________________________________________________________________________
Average Consumption Cost & Percentage Contribution to Total Fuel Requirements
Gas Coal Oil
--- ---- ---
$/MMBtu Percent $/MMBtu Percent $/MMBtu Percent
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1999 $2.71 62.3 $1.46 37.3 $3.41 0.4
1998 2.12 60.7 1.56 39.0 3.96 0.3
1997 2.03 62.0 1.80 37.0 3.35 1.0
1996 2.10 61.0 1.88 37.0 3.48 2.0
1995 1.65 55.0 2.19 44.0 3.80 1.0
______________________________________________________________________________
</TABLE>
For a discussion of the change in fuel costs, see Item 7, Management Discussion
and Analysis.
The Company's long-term contract with Black Butte Coal Company (Black
Butte) for coal shipments to Valmy from the mine near Rock Springs, Wyoming,
remains in effect until June 30, 2007, or until all volume requirements under
the contract are delivered and/or canceled. Due to previous accelerated
purchases and cancellations and continuing cancellations of minimum monthly
volume obligations (described below), the Company projects it will fully satisfy
all volume requirements and that termination of the contract will occur sometime
in early to mid-2002.
17
<PAGE>
Beginning in June 1996, the Company, along with its joint-ownership partner
(Idaho Power Company), implemented an economic cancellation strategy that
essentially buys down minimum tonnage requirements under the Black Butte
contract rather than taking physical delivery of the coal. Canceling the Black
Butte tonnage creates various economic and operating benefits, primarily the
opportunity to buy lower-cost spot market coal and reduce overall fuel costs.
In June 1996, the Company and Idaho Power expended $5 million ($2.5 million
each) to cancel all minimum volume requirements for the 1996-97 contract year.
The Company agreed with Idaho Power to satisfy even more volume requirements in
the fall of 1996 and in June 1997 by matching the dollar cost of Black Butte
tonnage purchased by Idaho Power for delivery to Idaho's coal-fired Jim Bridger
plant. The Company expended $3.8 million for these matching cancellations.
Since July 1997, the Company and Idaho Power have canceled (or delivered to the
Bridger plant) minimum Black Butte volume requirements on a monthly basis.
During the third quarter 1998 and in September through November 1999, minimum
contract quantities were delivered to Idaho Power's Bridger plant, with these
deliveries credited to Valmy requirements under the Black Butte contract.
The Company's long-term coal contract with Canyon Fuel Company, LLC
(Canyon), which provides coal for Valmy from Canyon's SUFCO mine in Central
Utah, expires on June 30, 2003. This contract also contains minimum volume
requirements that the Company expects to meet each year until termination. The
current owner of the SUFCO mine is Arch Coal, Inc., which acquired ARCO Coal
(the previous owner of the Canyon Fuel properties, including SUFCO) on June 1,
1998.
During 1999, several short-term agreements for the purchase of spot market
coal were executed, with two of these agreements extending into 2001. The
source of this coal is the Uinta Basin of Utah. These spot market purchases
supplement base volume requirements under the Company's long-term coal contracts
at a cost approximately one-half that of contract coal.
The total amount of coal burned at the Valmy Power Plant during 1999 was
1.55 million tons. As of December 31, 1999, the coal inventory level was
383,053 tons, or approximately 67.0 days of consumption at 100% capacity. The
Company normally targets an average annual coal stockpile sufficient to provide
30 days' supply at full load. For 1999, however, the Company made the decision
to increase storage to approximately 60 days' supply by December 31 as part of
its Y2K contingency plans. The Company has adjusted its operations toward
reaching the normal 30 days' supply by the end of 2000.
During 1999, transportation of coal to Valmy was provided by the Union
Pacific Railroad (UP) under a 3-year agreement effective June 1, 1998. This
agreement was negotiated as a resolution to the Company's previously filed
complaint with the Surface Transportation Board alleging unreasonable rate
levels being charged by the UP.
During 1999, the Company operated the Pinon Pine facility exclusively on
natural gas. Although no coal was purchased in 1998 for synthetic gas
production in the plant's coal gasification facility, approximately 19,000 tons
were purchased in 1997 and 450 tons in 1999. This inventory has been more than
sufficient to fuel the gasifier during its limited operation during the last two
years. Total coal burned in the gasifier during 1999 was 679 tons. Petroleum
coke (used for gasifier startup) purchased in 1999 was 220 tons, with 169 tons
being burned. Due to operational problems caused by high levels of fine
particles inherent in the coal used at Pinon, about 450 tons of stoker coal,
which is a sized and harder product, was purchased in November 1999 as an
attempt to reduce the effects of filter clogging in the gasifier.
18
<PAGE>
The Company meets its needs for residual oil for generation through
purchases on the spot market. With no other mitigating factors, the Company's
residual oil inventory policy is to maintain 50,000 to 75,000 barrels at each of
its Tracy and Ft. Churchill generating plants. Based on Y2K contingency plans,
the Company increased storage at its Ft. Churchill plant to full capacity this
past summer and also increased Tracy storage to over 100,000 barrels which, in
total, will provide over 10 days' supply at full load operation. The Company
has adjusted its operations toward reaching normal inventory levels in 2000.
Storage levels were not increased to full capacity at Tracy because of favorable
natural gas availability estimates from the gas supply industry. The actual
residual oil inventory level at these two sites was 232,134 barrels as of
December 31, 1999, which is equal to 10.5 days' supply at full load operation.
Total residual oil consumption in 1999 was 37,425 barrels. No residual oil was
burned in the month of December, with natural gas supply being sufficient to
fuel both the Tracy and Ft. Churchill steam units.
NATURAL GAS BUSINESS
- --------------------
The Company's natural gas business is a local distribution company (LDC)
in the Reno/Sparks area that accounted for $100.2 million in 1999 operating
revenues or 13.1% of total Company operating revenues. Growth in the Company's
service territory continues to be strong. Residential customer growth during
1999 was 4.3%. The overall natural gas customer growth rate was 4.3% for the
year. The Company's total customer count increased 5,131 customers to 111,843
customers at the end of 1999.
Natural gas offers significant economic and environmental advantages over
other energy sources for space heating, water heating and other uses in
residential, commercial and industrial applications. Growth in all sectors is
expected to continue as new developments in the Company's distribution service
area are planned.
Contracts established during the last three years under the Company's
Value Based Service Tariff (VBST) are being successfully renewed as the old
contracts expire. During 1999, two contracts were renewed under the VBST
tariff, which is designed to enable the Company to compete with competitive
service options for its largest customers. As of December 31, 1999, the Company
had seven VBST contracts in place with customers.
The Company's natural gas LDC business is subject to competition from
other suppliers and other forms of energy available to its customers. Large
customers with fuel switching capability compare natural gas prices on an
interruptible basis to alternative energy source prices. Seven customers now
secure their own gas supplies, with the Company providing transportation service
on its distribution system.
The Company has contracted for firm winter-only and annual gas supplies
with 13 Canadian and domestic suppliers to meet the firm requirements of its LDC
and electric operations. The contracts total 157,500 decatherms per day through
March 2000 and 95,000 decatherms per day for April through October 2000.
The Company's firm natural gas supply is supplemented with natural gas
storage services and supplies from a Northwest Pipeline Co. facility located at
Jackson Prairie in southern Washington and a liquefied natural gas (LNG) storage
from a facility located near Lovelock, Nevada. The LNG facility is operated by
Paiute Pipeline Company and is used for meeting peak demand. The Jackson
Prairie and LNG facilities can contribute a total of approximately 48,000
decatherms per day of peaking supplies.
19
<PAGE>
Starting November 1, 1996, the Company entered an agreement to sell
winter seasonal peaking capacity supplies to another company over a seven-year
period. The contract provides for the payment to the Company of a monthly
reservation charge, reimbursement of pipeline capacity charges during the
winter, and a volumetric commodity charge based on the market price for natural
gas. The Company was able to enter into this agreement due to the ability of
its power plants to utilize alternative fuels and its power importation option.
Following is a summary of the transportation and approximate storage
capacity of the Company's current gas supply program. Firm transportation
capacity on the Northwest/Paiute system exists to serve primarily the LDC. Firm
transportation capacity on the PGT/Tuscarora system exists primarily to serve
the Company's electric generating plants. Storage capacity is generally used
for the peaking requirements of the LDC.
<TABLE>
<CAPTION>
Transportation Capacity
<S> <C> <C>
Northwest: 68,696 decatherms per day firm
90,000 decatherms per day interruptible
Paiute: 103,774 decatherms per day firm from November through March
61,044 decatherms per day firm from April through October
90,000 decatherms per day interruptible
NOVA: 30,000 decatherms per day firm
ANG: 30,000 decatherms per day firm
PGT: 30,000 decatherms per day firm
40,270 decatherms per day firm (winter only)
90,000 decatherms per day interruptible
Tuscarora: 106,250 decatherms per day firm
50,000 decatherms per day interruptible
Storage Capacity
Williams: 281,242 decatherms from Jackson Prairie
12,687 decatherms per day from Jackson Prairie
Paiute: 463,034 decatherms from Lovelock LNG
35,078 decatherms per day from Lovelock LNG facility
</TABLE>
The Company plans to sell its gas fired generation by the end of 2000. As
part of this sale the Company will be transferring portions of its firm pipeline
and the winter peaking supply agreement, described above, to the buyers of the
Ft. Churchill and Tracy generation bundles. The final allocation of capacity to
the buyers is still being determined but will meet the divestiture stipulation
requirement that Sierra maintain the availability and reliability of natural gas
to its local gas distribution company.
Total LDC decatherm supply requirements in 1999 and 1998 were 13.4 million
decatherms and 14.9 million decatherms, respectively. Electric generating fuel
requirements for 1999 and 1998 were 31.6 million decatherms and 35.0 million
decatherms, respectively.
As of December 31, 1999, the Company owned and operated 1,439 miles of
three-inch equivalent natural gas distribution piping.
20
<PAGE>
WATER BUSINESS
- --------------
The water distribution business contributed $54.3 million (7.1%) to the
Company's 1999 operating revenues. Water production in 1999 totaled 24.97
billion gallons. 3.99 billion gallons were produced from the Company's
groundwater wells. The remaining 20.98 billion gallons were treated through the
Company's two water treatment facilities, the Chalk Bluff Water Treatment Plant
and the Glendale Water Treatment Plant. The Company's peak day send-out of water
during 1999 was 133.1 million gallons (135.2 including the Silver Lake
acquisition described below), a 0.5% decrease over the 133.8 million gallon peak
set in 1998. The stability in peak day demand was due to mild summer
temperatures which offset additional new customer demands. Overall weather
conditions during the year produced an above average snow pack with a warm
lingering fall; thus annual production was up 11.5%.
The Company's water supplies are from both surface and groundwater sources,
with the addition of drought storage and refill provisions sufficient to
withstand prolonged drought conditions. The surface water source is the Truckee
River, which originates in Lake Tahoe and flows north and east through the
cities of Reno and Sparks to Pyramid Lake, located northeast of Reno.
The Company's groundwater comes from 25 supply wells located around the
Reno/Sparks area. Man-made contaminants, perchloroethylene, from local business
operations have been found at levels exceeding the drinking water standards in
five of these wells. All five of these wells have now been fit with treatment
equipment that allows them to be returned to operation and deliver water to the
system that meets federal standards. The Washoe County remediation district is
expected to reimburse the Company for the cleanup of this groundwater
contaminant in these five wells beginning in 2000.
Additionally, the Company has four wells which currently exceed the federal
drinking water standard for naturally occurring arsenic concentrations.
Production from three of these wells continues by blending water treated at the
Glendale Water Treatment Plant. The fourth well is out of service pending
treatment. The Company's water laboratory research staff is developing options
to assure that the Company is prepared to meet new arsenic standards. The new
Arsenic regulations will be promulgated in 2000 and the proposed regulation is
expected to require action on 17 of the 25 wells serving the Company's system.
Depending upon final rules from the EPA, the Company may incur between $70
million and $98 million by 2004 to meet the new standards.
A favorable piece of legislation, AB380, was passed in the 1999 State
legislature that resolved more than a decade of litigation over water rights and
addressed the issues of forfeiture and abandonment. The legislation creates a
special fund for the acquisition of water rights in question and clears the
future for conversion of agricultural rights to urban uses without the cloud of
forfeiture or abandonment protests.
The Company continues to pursue the Negotiated Settlement that has been
under development for several years. The Company is currently operating under a
Preliminary Settlement Agreement (PSA) and interim storage contract until
negotiations are completed and the final Truckee River Operating Agreement
(TROA) is completed. Based on comments received from the initial release, the
environmental impact statement (EIS) will be redone and resubmitted for comments
following the final TROA drafting. This is expected to occur during 2000. The
Negotiated Settlement is a complex set of agreements on Truckee River issues
involving the United States, California and Nevada governments, the Pyramid Lake
Paiute Tribe and the Company. It is expected the agreement will be finalized
this year. During 1999, many details of the TROA and language of the draft have
been solidified. Once in effect, the new agreement will allow the Company use
of federal reservoirs for drought reserve storage.
21
<PAGE>
The Company plans to rebuild the Farad dam and put the Farad Hydro plant
back into service in 2001. The Company is designing and obtaining the
appropriate permits to construct the replacement project. The dam was destroyed
during a flood in 1997. The water rights associated with the hydro facilities
are part of the Negotiated Settlement and provide for river flows to the water
division, and therefore the four Truckee River hydro plants will stay with the
Company's water business even after generation divestiture. See
Merger/Generation Divestiture discussion.
As a condition of the Negotiated Settlement, the Company's unmetered
residential water customers must be converted to metered service. A meter
retrofit program was approved by the PUCN and began in 1995. Funding for the
program is provided by business developers and administered by the Company.
Meter installation costs are significantly lower if a meter box is already in
place. Accordingly, meter boxes without meters are installed when roads and
sidewalks are replaced. Since the program's inception, 5,533 meters (14% of 1995
unmetered customers) and 10,911 boxes without meters (41% of 1995 customers
without facilities for meter installation) have been installed. During 1999,
671 meters and 3,611 boxes were installed with contributed funds. At this time,
only customers who volunteer for the program may have meters installed. Water
meters have been required in all new construction since 1986.
The Company has made application to the PUCN to transfer retail water
customers in the Double Diamond area to Washoe County and serve these and other
customers in the South Truckee Meadows as wholesale customers through the
County. This option minimizes the need for duplicate and costly facilities.
In addition, the Company was successful in acquiring the assets of the
Silver Lake Water Company and received approval by the PUCN. The Company began
operation of the two Silver Lake wells, metering, billing, and customer services
in October 1999. As a result of this acquisition, the Company increased its
customer base by approximately 1600 customers, and more importantly, avoided
costly capital expenditures.
CONSTRUCTION PROGRAM
- --------------------
Gross construction expenditures for 1999, including allowance for funds
used during construction (AFUDC) and contributions in aid of construction, were
$142.3 million and for the period 1995 through 1999 were $820.8 million.
Estimated construction expenditures for 2000 and the period 2001-2004 are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Total
2000 2001-2004 5-Year
---------------------------------------
<S> <C> <C> <C>
Electric facilities $ 98,563 $407,785 $506,348
Water facilities 24,112 131,410 155,522
Gas facilities 19,550 39,390 58,940
Common facilities 8,047 17,410 25,457
--------------------------------------
Total construction expenditures $150,272 $595,995 $746,267
======================================
AFUDC (2,220) (12,875) (15,095)
Net salvage, including cost of removal (120) (400) (520)
Net customer advances and
contributions in aid of construction (10,242) (40,620) (50,862)
--------------------------------------
Total cash requirements $137,690 $542,100 $679,790
======================================
</TABLE>
22
<PAGE>
Total construction expenditures estimated for 2000 and the 2001-2004
period, for each segment of the Company's business, consist of the following
(dollars in thousands):
<TABLE>
<CAPTION>
Total
2000 2001-2004 5-Year
----------------------------------------
<S> <C> <C> <C>
Electric Facilities:
Distribution $ 63,490 $221,055 $284,545
Generation 4,695 4,530 9,225
Transmission 12,329 154,720 167,049
Other 18,049 27,480 45,529
--------------------------------------
$ 98,563 $407,785 $506,348
--------------------------------------
Water Facilities:
Treatment and Supply $ 6,024 $ 57,200 $ 63,224
Distribution 17,720 72,910 90,630
Other 368 1,300 1,668
--------------------------------------
$ 24,112 $131,410 $155,522
--------------------------------------
Gas Facilities:
Distribution $ 18,944 $ 36,660 $ 55,604
Other 606 2,730 3,336
--------------------------------------
$ 19,550 $ 39,390 $ 58,940
--------------------------------------
Common Facilities $ 8,047 $ 17,410 $ 25,457
--------------------------------------
TOTAL $150,272 $595,995 $746,267
======================================
</TABLE>
GENERAL REGULATION
- ------------------
The Company is subject to the jurisdiction of the PUCN and the CPUC with
respect to rates, standards of service, siting of, and necessity for, generation
and certain transmission facilities, accounting, issuance of securities and
other matters with respect to electric operations. The Company submits
integrated resource plans regarding its electric, gas, and water business
operations to the PUCN for approval.
Under federal law, the Company is subject to certain jurisdictional
regulation, primarily by the FERC. The FERC has jurisdiction under the Federal
Power Act with respect to rates, service, interconnection, accounting, and other
matters in connection with the Company's sale of electricity for resale and the
transmission of energy for others. The FERC also has jurisdiction over the
natural gas pipeline companies from which the Company takes service.
As a result of regulation, many of the fundamental business decisions of
the Company, as well as the rate of return it is permitted to earn on its
utility assets, are subject to the approval of governmental agencies.
The Company is also subject to regulation by environmental authorities.
See Environment.
23
<PAGE>
Rate Proceedings
- ----------------
During 1999, 85% of the Company's revenues were from retail sales of
electricity, natural gas and water in Nevada, 5% from retail sales of
electricity in California and 10% from sales of electricity and gas for resale.
Nevada Matters
- --------------
Electric Industry Restructuring
During the 1997 session, the Nevada Legislature passed Assembly Bill 366
(AB 366). AB 366 was a comprehensive bill that introduced competition for
electric and gas retail services. Since the fall of 1997, the PUCN has been
developing regulations to implement AB 366. In the 1999 session, the legislature
passed Senate Bill 438 (SB 438) that significantly modified many provisions of
AB 366. These two pieces of legislation substantially alter the way the Company
is regulated and how it will serve its customers.
Non-price Terms and Conditions for Distribution Service
On February 2, 1999, the Company filed its non-price terms and conditions
for unbundled distribution service pursuant to the PUCN regulations. A
stipulation resolving most issues and agreeing to further filings on unresolved
issues was filed with the PUCN on April 9, 1999, and subsequently approved by
the PUCN on April 22, 1999. Settlements regarding the unresolved issues were
subsequently filed and approved by the PUCN.
Unbundling of Utility Services
On April 1, 1999, in accordance with the merger order and the
implementation of AB 366, the Company filed a revenue requirements and
unbundling study with the PUCN (the "Compliance Filing"). The Compliance
Filing included the development of an electric revenue requirement for the test
period 1998. The Compliance Filing regulation requires the revenue requirement
development to be in the form used for rate cases. In the unbundling study, the
revenue requirement was assigned and allocated to a number of service components
including generation, aggregation, transmission, distribution, metering,
billing, and customer services. On September 23, 1999, the PUCN issued an
interim order on the Company's April 1, 1999 Compliance Filing. The Order
contained the PUCN's decision on revenue requirements, return on equity,
depreciation, and the unbundling study. The Company did not utilize the order's
revenue requirement, return on equity or depreciation rates in Phase II of this
case because SP438 legally mandated that the Company use its July 1, 1999
revenue requirement in Phase II.
Pricing of Distribution Service
On October 8, 1999, the Company filed final versions of the approved non-
price terms and conditions and rates reflecting a revenue requirement in
accordance with SB 438. Hearings were held in early November. A decision is
expected in 2000.
24
<PAGE>
Earnings Sharing
On April 30, 1999 the Company filed an earnings sharing refund request,
based on 1999 earnings of $7.0 million for electric customers and $1.9 million
for gas customers. On August 19, 1999, the PUCN approved a stipulation between
the Company, Staff, and the Utilities Consumer Advocate, which resulted in a
$7.4 million and a $2.0 million refund to electric and gas customers,
respectively. Based on 1999 operating results, the Company anticipates it may
make refunds to customers. Appropriate reserves have been recorded to reflect
any anticipated refunds.
Generation Divestiture
In October 1999, the Company filed with the PUCN its request for approval
to sell its generation plants. Hearings were held in November 1999 and a
stipulation was approved in February 2000.
California Matters
- ------------------
Rate Reduction Bonds
California's electricity restructuring statute (Assembly Bill 1890, Chapter
854, California Statutes of 1996, as amended) permits California investor-owned
utilities, including the Company, to finance the recovery of a reduction in
electricity rates for residential and small commercial customers through the
issuance of rate reduction certificates. Transition costs consist of the costs
of generation-related assets and obligations that may become uneconomic as a
result of a competitive generation market, together with certain other costs
associated therewith.
In order for the Company to recover transition and associated costs, the
CPUC authorized the establishment of non-bypassable, usage-based, per kilowatt-
hour charges ("FTA Charges") to be included in the regular utility bills of
residential and small commercial consumers located in the historical service
territory of the Company in California. The right to receive payments made in
respect of the FTA Charges is referred to as Transition Property.
On April 9, 1999, the Company sold the Transition Property to SPPC Funding
LLC, a Delaware special purpose limited liability company whose sole member is
the Company, in exchange for the proceeds of the SPPC Funding LLC Notes, Series
1999-1 (the "Underlying Notes"). SPPC Funding LLC then issued and sold the
Underlying Notes to the California Infrastructure and Economic Development Bank
Special Purpose Trust SPPC-1 (the "Trust") in exchange for the proceeds of the
sale of the Trust's $24.0 million 6.4% Rate Reduction Certificates, Series 1999-
1 (the "Certificates"). The Trust, which had been established by the California
Infrastructure and Economic Development Bank, issued and sold the Certificates
in a private placement pursuant to Rule 144A under the Securities Act of 1933,
as amended. The Certificates are one of a series of rate reduction certificates
that may be issued from time to time by the Trust and sold to investors upon
terms determined at the time of sale.
On January 10, 2000, the Commission approved the Company's annual true-up
of the FTA charges effective January 1, 2000.
25
<PAGE>
Revenue Cycle Unbundling
On February 18, 1999, the CPUC approved the Company's proposed Revenue
Cycle Services Credits (RCSC) application filed February 2, 1998. The RCSC
addresses meter ownership, meter services, meter reading, and billing and
applies to customers who select their own provider of a revenue cycle service.
On April 9, 1999, the Company made a compliance tariff filing which reflects the
approved credits.
Direct Access Tariffs
On April 5, 1999, the CPUC approved the Company's compliance filing,
effective back to March 18, 1998, which proposed tariff changes to implement
direct access.
Rate Unbundling
On April 5, 1999, the CPUC approved the Company's proposed unbundled rates
effective back to June 1, 1998.
Distribution Competition
The CPUC has opened a docket item to solicit comments and proposals on
distributed generation and competition in electric distribution service. The
Company is actively participating in the on-going workshops. It is too early to
determine how this proceeding may affect the Company.
Generation Divestiture
The Company has filed with the CPUC its request for approval to sell its
generation plants. The Company filed a revised application requesting an
exemption. A decision is expected in the first half of 2000.
Distribution Performance-Based Rate-making (PBR)
On January 3, 2000, the Company filed a distribution PBR proposal to become
effective January 1, 2001 through 2003. The proposal includes rate indexing and
earnings sharing mechanisms as well as performance indicators for employee
safety, customer satisfaction and system reliability. The Company will submit a
2001 Cost of Capital filing in May 2000 and a Distribution PBR 2001 Cost of
Service filing in June 2000.
FERC Matters
- ------------
On March 30, 1999, the Company filed an application with the FERC to
increase its Open Access Transmission rates. On October 12, 1999, the Company
filed an Offer of Partial Settlement which resolved all issues but pricing to
the Mines and to the City of Fallon. A status report on the two remaining
issues was filed on January 11, 2000. On January 31, 2000, the FERC approved
the Partial Settlement.
26
<PAGE>
On March 31, 1999, the Company filed with the FERC for approval of
generation tariffs that contain the rates, terms and conditions under which the
new owners of the Company's generation would operate after divestiture. The FERC
dismissed the tariffs on November 1, 1999, apparently misinterpreting the
agreement reached with the PUCN on the tariffs. The Company filed a request for
rehearing of the FERC's November 1, 1999 order dismissing the tariff. The
rehearing request explains how the FERC erred in dismissing the tariff. On
December 17, 1999, the Commission issued an Order Granting Rehearing for Further
Consideration. A decision is expected in 2000.
On July 23, 1999, the Company and Nevada Power Company submitted a filing
to create the Mountain West Independent Scheduling Administrator. The filing is
made to request approval of certain of the tariffs and agreements with respect
to the transmission services of the Company and Nevada Power Company. On
January 27, 2000, the FERC issued an order approving with modifications the
Mountain West ISA proposal. The PUCN is continuing to review aspects of the
filing, including funding for the Mountain West ISA.
ENVIRONMENT
- -----------
General
As with other utilities, the Company is subject to federal, state, and
local regulations governing air and water quality, hazardous and solid waste,
land use, and other environmental considerations. These considerations affect
the construction and operation of electric, gas, and water utility facilities.
Nevada's Utility Environmental Protection Act requires approval of the PUCN
prior to the construction of major utility generation and transmission
facilities. The United States Environmental Protection Agency (EPA) and Nevada's
Division of Environmental Protection (NDEP) administer regulations involving air
quality; water pollution; and solid, hazardous, and toxic waste.
The Company's board of directors has a comprehensive environmental policy,
and a separate board committee on environmental compliance that oversees
corporate performance and achievements related to the environment. The Company's
corporate environmental policy emphasizes environmental stewardship.
1999 Activities
- ---------------
As part of the Generation Divestiture process, the Company conducted Phase
I and Phase II Environmental Assessments for its Ft. Churchill, Tracy and Valmy
Power Plants. The Anticipated remediation cost is $150,000.
In 1995, the Company identified one site formerly used for manufacturing
gas from oil. This site was sold in 1997 with full disclosure to the buyer.
Shortly after the sale, the buyer notified the Company of its intent to file
legal action. In July 1998, the Company entered into an agreement with the buyer
to mitigate the contamination on site to an acceptable level. In 1999, soil
contamination was remediated in full compliance with the settlement agreement
and the site case was closed by the local regulatory agency. No further action
is required at this site.
27
<PAGE>
In September 1994, Region VII of EPA notified the Company that the Company
was being named as a potentially responsible party (PRP) regarding the past
improper handling of Polychlorinated Biphenyls (PCBs) by PCB Treatment, Inc.,
located in Kansas City, Kansas, and Kansas City, Missouri (the Sites). The EPA
is requesting that the Company voluntarily pay an undefined (pro rata) share of
the ultimate clean-up costs at the Sites. A number of the largest PRP's formed a
steering committee, which is chaired by the Company. The responsibility of the
Committee is to direct clean-up activities, determine appropriate cost
allocation, and pursue actions against recalcitrant parties, if necessary. The
EPA issued an administrative order on consent requiring signatories to perform
certain investigative work at the Sites. The steering committee retained a
consultant to prepare an analysis regarding the Sites. The site evaluations
have been completed. EPA is developing an allocation formula to allocate the
remediation costs.
The Company has recorded preliminary liability for the Sites of $650,000,
of which approximately $150,000 has been spent through December 31, 1999. Once
evaluations are completed, the Company will be in a better position to estimate
and record the ultimate liabilities for the Sites.
The Company continued and initiated several actions in accordance with its
policy to be an environmental leader in principle and practice. These actions
have (1) Resulted in reduced pollutant and greenhouse gas emission rates at
power plants; (2) Demonstrated stewardship of wildlife and waterfowl habitat on
and adjacent to Company property; (3) Improved water quality conditions; and (4)
Lowered the cost of compliance with environmental regulations.
During 1999, the Company was awarded bonus sulfur dioxide emission
allowances by the EPA for its use of geothermal energy, a renewable resource.
Under the Acid Rain Rule of the Clean Air Act, bonus emission allowances are
generated to utilities that have avoided sulfur dioxide emissions by using
renewable energy to generate electricity. In 1999 the Company received 4,907
bonus allowances.
GENERAL - FRANCHISES
- --------------------
The Company has nonexclusive local franchises or revocable permits to carry
on its business in the localities in which its respective operations are
conducted in Nevada and California. The franchise and other governmental
requirements of some of the cities and counties in which the Company operates
provide for payments based on gross revenues. During 1999, the Company
collected $8.8 million in franchise or other fees based on gross revenues. It
also paid and recorded as expense $1.0 million of fees based on net profits.
<TABLE>
<CAPTION>
Franchise Type of Service Expiration Date
- --------------------------------------------------------------------------
<S> <C> <C>
Reno Electric, Gas and Water January 2006
Sparks Electric May 2006
Sparks Gas May 2007
Sparks Water April 2004
Carson City Electric February 2012
City of Elko Electric April 2017
City of South Lake Tahoe Electric April 2018
Washoe County Gas and Water May 2015
Washoe County Electric September 2015
Eureka County Electric July 2018
</TABLE>
The Company applies for renewal of franchises in a timely manner prior to
their respective expiration dates.
28
<PAGE>
GENERAL - RESEARCH AND DEVELOPMENT
- ----------------------------------
The Company participates in several utility associations, including the
Electric Power Research Institute and Gas Research Institute.
ITEM 2. PROPERTIES
The general character of the Company's principle facilities is discussed in
Item 1, Business.
Substantially all utility plant is subject to the lien of the Indenture of
Mortgage, dated December 1, 1940, and supplemental indentures thereto between
the Company and State Street Bank and Trust, as trustee, securing the Company's
outstanding first mortgage bonds.
ITEM 3. LEGAL PROCEEDINGS
The Company, through the course of its normal business operations, is
currently involved in a number of legal actions, none of which has had or, in
the opinion of management, is expected to have a significant impact on its
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
29
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company is a wholly-owned subsidiary of Sierra Pacific Resources and,
as such, its common stock is not publicly traded and no market exists for it.
Cash dividends declared by SPPC on its common stock were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1999 1998
------------------------
<S> <C> <C>
First Quarter $19,000 $19,000
Second Quarter 19,000 19,000
Third Quarter 19,000 19,000
Fourth Quarter 19,000 19,000
------- -------
Total $76,000 $76,000
======= =======
</TABLE>
After provisions for payment of dividends on all outstanding shares of
preferred stock, and subject to limitations in the Company's restated articles
of incorporation and its indentures, dividends may be paid on the common stock
out of any funds legally available for that purpose when declared by the board
of directors. As of December 31, 1999, approximately $76.0 million of retained
earnings were available for the payment of dividends on common stock under the
most restrictive of these limitations.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
(dollars in thousands)
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 763,722 $ 734,332 $ 657,540 $ 619,724 $ 597,784
========== ========== ========== ========== ==========
Operating Income $ 129,836 $ 126,194 $ 120,172 $ 107,008 $ 101,811
========== ========== ========== ========== ==========
Income Before
Preferred Dividends $ 71,726 $ 86,020 $ 83,127 $ 73,651 $ 65,983
========== ========== ========== ========== ==========
Income Applicable To Common
Stock $ 66,241 $ 80,561 $ 77,668 $ 67,351 $ 58,609
========== ========== ========== ========== ==========
Total Assets $2,096,476 $2,011,820 $1,912,242 $1,842,628 $1,729,818
========== ========== ========== ========== ==========
Long-Term Debt and
Redeemable Preferred
Securities $ 673,930 $ 654,950 $ 655,389 $ 655,787 $ 547,124
========== ========== ========== ========== ==========
Cash Dividends Paid
Per Common Share $ 76,000 $ 75,000 $ 70,000 $ 63,000 $ 54,000
========== ========== ========== ========== ==========
</TABLE>
30
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Net income before preferred dividends in 1999 was $71.7 million, a decrease
of $14.3 million compared to 1998. The Company was authorized to earn a return
on equity of 12% in its Nevada electric operations and 12% and 11.25%,
respectively, in its Nevada gas and water operations. The Company may have
earned in excess of its allowed regulated returns for its electric and gas
operations and therefore, under its currently effective rate settlement, the
Company anticipates it may make refunds to customers reflecting one half of the
excess earnings. Appropriate reserves have been recorded to reflect any
anticipated refunds. California operations were authorized to earn a return on
common equity of 11.6% in 1999. See Regulatory Matters for more discussion of
these issues.
Nevada, the Company's primary jurisdiction, uses a marginal cost method for
setting electric and gas rates by customer class. As a result, changes in sales
mix can result in variations in revenues, regardless of changes in total
consumption.
The components of gross margin are set forth (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Operating Revenues
Electric $609,197 $585,657 $540,346
Gas 100,177 99,532 70,675
Water 54,348 49,143 46,519
-------- -------- --------
Total Revenues 763,722 734,332 657,540
-------- -------- --------
Energy Costs:
Electric $294,822 $271,773 $231,473
Gas 68,125 65,430 38,135
-------- -------- --------
Total Energy Costs 362,947 337,203 269,608
-------- -------- --------
Gross Margin $400,775 $397,129 $387,932
======== ======== ========
Gross Margin by Segment
Electric $314,375 $313,884 $308,873
Gas 32,052 34,102 32,540
Water 54,348 49,143 46,519
-------- -------- --------
Total $400,775 $397,129 $387,932
======== ======== ========
</TABLE>
31
<PAGE>
The causes for significant changes in specific lines comprising the results
of operations for the years ended are provided (dollars thousands):
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------------------------------------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Electric Operating Revenues:
Residential $ 117,533 1.4% $ 169,109 3.7% $ 163,003
Commercial 188,348 5.4% 178,752 1.9% 175,386
Industrial 185,771 0.5% 184,820 4.7% 176,463
----------- ---- ----------- ----- -----------
Retail revenues 545,652 2.4% 532,681 3.5% 514,852
Other 63,545 20.0% 52,976 107.8% 25,494
----------- ---- ----------- ------ -----------
Total Revenues $ 609,197 4.0% $ 585,657 8.4% $ 540,346
=========== ===== ============ ======= ==========
Retail sales in megawatt-hours (MWH) 8,412,853 4.5% 8,047,650 3.9% 7,743,799
---------- ---- ----------- ------ -----------
Average retail revenue per MWH $ 64.86 -2.0% $ 66.19 -0.4% $ 66.49
</TABLE>
In 1999, residential, commercial and industrial electric revenues increased
due to a 3% increase in both residential and commercial customers and a 7.8%
increase in industrial customers. The increase in residential and industrial
revenues was partially offset by lower use per customer. Residential use per
customer was lower due to milder weather in 1999. Industrial use per customer
was lower primarily because of reduced production by several of the Company's
gold mining customers as a result of lower gold prices in 1999. The average
retail revenue per MWh was lower for 1999 because of higher revenues from
customers that are charged lower rates per MWh. Other electric revenues were
higher due to a $19.4 million increase in wholesale electric sales. This
increase was partially offset by a $4.3 million reclassification from operating
expense to a contra-revenue in order to reflect a refund resulting from the 1997
earnings sharing decision by the Public Utilities Commission of Nevada. Also,
the increase in 1999 revenues was partially offset by a higher provision for
customer refunds and also losses from the Company's Pinon Pine subsidiaries.
In 1998, residential and commercial revenues increased due to 2% and 3%
increases in customers, respectively. Industrial revenues were higher in 1998
because of higher use per customer, primarily in the mining industry where
several of the Company's customers expanded operations during 1998. The
increases in revenues for residential, commercial and industrial were all
partially offset by a rate reduction that went into effect March 1997. The
increase in other revenues primarily resulted from higher wholesale electric
sales and a smaller charge for customer refunds. Higher wholesale sales in
1998, $33.1 million compared to $13.3 in 1997, reflect an increased focus on
this business opportunity.
32
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Gas Operating Revenues:
Residential $ 42,888 -2.2% $ 43,833 14.1% $ 38,410
Commercial 21,259 -3.5% 22,022 12.3% 19,606
Industrial 11,252 -9.0% 12,368 6.8% 11,580
Miscellaneous 1,305 281.3% (720) -6.2% (678)
----------- ----- ----------- ------ -----------
Total retail revenue 76,704 -1.0% $ 77,503 12.5% $ 68,918
Wholesale revenue 23,473 6.6% 22,029 1153.8% 1,757
----------- ----- ----------- ------ -----------
Total Revenues $ 100,177 0.6% $ 99,532 40.8% $ 70,675
=========== ===== =========== ====== ===========
Sale (Decatherms):
Retail 13,387,819 -5.3% 14,142,782 13.3% 12,487,087
Wholesale 10,424,212 -11.2% 11,738,372 1278.6% 851,459
---------- ----- ----------- ------ -----------
Total 23,812,031 -8.0% 25,881,154 94.0% 13,338,546
=========== ====== =========== ====== ===========
Average revenues per decatherm
Retail $ 5.73 4.6% $ 5.48 -0.7% $ 5.52
Wholesale $ 2.25 19.8% $ 1.88 -8.7% $ 2.06
</TABLE>
Residential, commercial and industrial gas revenues were lower in 1999
because of lower per customer use resulting from milder weather in 1999. Lower
gas revenues in 1999 were partially offset by additional customers in all
categories. Wholesale gas revenues were higher due to several large gas sales
contracts in the first quarter of 1999.
Residential, commercial and industrial gas revenues increased in 1998
because of a 4% increase in customers and colder than normal weather during the
year. The increase in wholesale revenues reflected the Company's increased
focus on this business opportunity.
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------- ---------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Water Operating Revenues $54,348 10.6% $49,143 5.6% $46,519
======= ==== ======= === =======
</TABLE>
Water revenues increased during 1999 due to a 5% increase in total
customers and higher use per customer as a result of less precipitation in 1999.
Water revenues were higher in 1998 because of a 3% increase in customers
and an April 1998 price increase.
33
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Purchased Power $ 179,781 14.5% $ 156,970 20.2% $ 130,612
Purchased Power MWH 5,797,903 25.4% 4,623,959 20.5% 3,836,975
Average cost per MWH of
Purchased Power $ 31.01 -8.7% $ 33.95 -0.3% $ 34.04
</TABLE>
Purchased power costs were higher in 1999 primarily because the Company
fulfilled more of its total energy requirements with less expensive purchased
power and reduced its own generation. Purchased power costs were also higher
during 1999 due to increased wholesale sales. The higher costs were partially
offset by lower average unit prices for purchased power.
Purchased power costs were significantly higher in 1998 due mostly to the
costs associated with higher wholesale electric sales as discussed previously.
To a lesser extent system load growth also contributed to higher purchased power
costs.
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Fuel for Power Generation $ 115,065 0.2% $ 114,803 13.8% $ 100,861
MWHs generated 4,998,140 -9.5% 5,524,262 13.7% 4,859,203
Average fuel cost per MWH
of Generated Power $ 23.02 10.8% $ 20.78 0.1% $ 20.76
</TABLE>
Fuel for generation costs were comparable with the prior year despite a
9.5% reduction in the volume of electric generation. Higher gas prices and the
absence of Department of Energy co-funding of fuel costs at the Pinon Pine
project contributed to the higher average cost per MWh of generated power. As,
previously discussed, the Company was able to replace electricity from
generation with less expensive purchased power.
34
<PAGE>
The costs of fuel for generation increased in 1998 because of higher
generation requirements needed to meet continued customer growth and greater use
per customer.
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Gas Purchased for Resale
Retail $ 47,696 7.2% $ 44,473 21.2% $ 36,703
Wholesale 20,429 -2.5% 20,957 1371.7% 1,424
----------- ----- ----------- ------ -----------
Total $ 68,125 4.1% $ 65,430 71.6% $ 38,127
=========== ===== =========== ====== ===========
Gas Purchased for Resale (decatherms)
Retail 13,501,728 -6.6% 14,462,505 13.6% 12,727,950
Wholesale 10,424,212 -11.2% 11,738,372 1278.6% 851,459
----------- ----- ----------- ------ -----------
Total 23,925,940 -8.7% 26,200,877 92.9% 13,579,409
=========== ===== =========== ====== ===========
Average cost per decatherm
Retail $ 3.53 14.6% $ 3.08 6.9% $ 2.88
Wholesale $ 1.96 9.5% $ 1.79 7.2% $ 1.67
</TABLE>
The cost of gas purchased for retail sales increased in 1999 because of
higher unit prices. The increase in gas unti prices is attributable to increased
demand for gas in the Pacific Northwest and additional transportation fees.
Consistent with the increase in retail gas revenues from customer growth
and colder weather in 1998, retail gas purchases (decatherms) were higher in
1998. The average cost per decatherm for all purchases was also higher because
of an increase in the unit cost of firm and spot purchases.
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Allowance for other funds used
during construction $(1,341) -135.3% $ 3,797 -33.7% $ 5,723
Allowance for borrowed funds used
during construction 308 -95.2% 6,414 34.0% 4,785
------- ------ ------- ----- -------
$(1,033) -110.1% $10,211 -2.8% $10,508
-------- ------ ------- ----- -------
</TABLE>
The total allowance for funds used during construction (AFUDC) was lower in
1999 because of construction completed in June and December 1998 for the Pinon
and Alturas projects, respectively. Also, the 1999 amounts reflect an
adjustment to reverse amounts previously charged to AFUDC of $2.3 million. This
adjustment resulted from a refinement of amounts assigned to specific components
of facilities that were completed at various times and that used differing AFUDC
rates.
AFUDC was slightly lower in 1998 than 1997. The 1998 amount was lower due
to the completion of the Pinon Pine power project in June 1998.
35
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- --------------------------- ----------
Change from Change from
Amount Prior year Amount Prior year Amount
---------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Other operating expense $115,453 -0.5% $116,076 -3.8% $120,600
Maintenance expense 22,520 1.1% 22,266 -4.8% 23,387
Depreciation and amortization 77,373 11.4% 69,435 8.3% 64,117
Income taxes 36,042 -17.2% 43,550 7.8% 40,387
Interest charges on long-term debt 40,263 3.5% 38,890 -1.8% 39,609
Interest charges-other 11,615 51.7% 7,659 67.1% 4,583
</TABLE>
Other operating expense for 1999 includes a $4.5 million adjustment, which
increased expense and reduced revenue related to a rate reserve established in
1998. This was offset by other reductions. Other operating expense was lower
in 1998 due to lower costs for stock compensation, post-retirement benefits,
fuel buyouts, lower accruals for delays in the construction of Pinon, and no
flood damage costs.
Maintenance expense for 1999 was comparable to the prior year. Maintenance
expense was lower in 1998 because of additional electric plant maintenance
performed during the previous year.
Depreciation and amortization expense increased for 1999 due to the
completion of the Alturas intertie in December 1998 and the Pinon post-
gasification facilities in June 1998. Depreciation expense increased in 1998
because of the Pinon Pine facilities completed in 1998. Also, 1998 depreciation
was higher due to water division additions and other customer improvements added
to plant in service late in 1997.
Operating income taxes were less in 1999 due to lower operating income
before income taxes and a lower effective tax rate for the year. Operating
income taxes increased in 1998 due to increases in pre-tax income and the
effective tax rate. See Note 5 for more information.
Interest on long term debt was slightly higher in 1999 due to higher
average long-term debt balances over the prior year. Interest on long-term debt
was lower in 1998 because of the redemption of $5 million of 8.65% medium-term
notes on June 18, 1998. See Note 6 to the consolidated financial statements for
more information related to long-term debt.
Interest charges-other were higher for 1999 because of a Public Utilities
Commission of Nevada's decision to assess partial interest on amounts payable in
the 1997 earnings sharing case and higher average short-term borrowing in 1999.
Interest charges-other increased in 1998 because of higher short-term debt
balances utilized to partially finance the Alturas transmission project.
Liquidity and Capital Resources
Overall net cash flows decreased during 1999, as compared to 1998, due to
lower net cash flows from operating activities and to a lesser extent greater
cash used in investing activities. The decrease in cash flows from operating
and investing activities was partially offset by cash provided from financing
activities. The decrease in cash provided from operating activities was
primarily due to cash utilized for customer refunds and merger related cash
requirements. The increase in cash used for investing activities was due to the
Company's acquisition of General Electric Capital Corporation's interest in
36
<PAGE>
Pinon Pine Company L.L.C., GPSF-B. Net cash provided by financing activities
resulted from the issuance of $24 million of California rate reduction bonds in
April 1999, and $100 million floating rate notes issued on September 17, 1999.
See "Regulatory Matters" for more details regarding the California bonds.
Overall net cash flows increased slightly during 1998, as compared to 1997,
due to higher net cash flows from operating and financing activities which were
mostly offset by more cash used in investing activities. The increase in cash
flows from operating activities was mainly due to higher operating income as a
result of increased revenues from customer growth. The increase in cash used in
investing activities was primarily due to increased construction expenditures.
The increase in net cash provided by financing activities was mainly due to
increased long-term and short-term borrowings.
37
<PAGE>
CONSTRUCTION EXPENDITURES AND FINANCING
- ---------------------------------------
The table below provides cash construction expenditures and net internally
generated cash for 1997 through 1999 (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997 Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash Construction Expenditures $ 116,131 $ 39,098 $ 110,878 $ 366,107
========== ========== ========== ==========
Net cash flow from operating activities 122,329 153,191 145,455 420,975
Less common & preferred cash dividends 81,746 80,459 75,459 237,664
---------- ---------- ---------- ----------
Internally generated cash 40,583 72,732 69,996 183,311
Add equity contribution from parent 22,000 17,250 27,000 66,250
---------- ---------- ---------- ----------
Total cash available $ 62,583 $ 89,982 $ 96,996 $ 249,561
========== ========== ========== ==========
Internally generated cash as a percentage
of cash construction expenditures 35% 52% 63% 50%
Total cash available as a percentage of
cash construction expenditures 54% 64% 87% 68%
</TABLE>
SPPC's estimated cash construction expenditures for 2000 through 2004 are
$680 million. SPPC estimates that 63% of its 2000 cash expenditures of
approximately $125 million will be provided by internally generated funds, with
the remainder being provided by the issuance of long-term debt, short-term debt,
and parent contributions.
SPPC's estimated level of internally generated cash utilized for
construction of 63% anticipates that SPPC will pay all of its net income in
dividends to SPR. SPPC anticipates receiving $28 million of capital contribution
from SPR in 2000.
CAPITAL STRUCTURE
- -----------------
As of December 31, 1999 SPPC had $110 million commercial paper issued and
outstanding. SPPC's commercial paper is rated A2 and P2 by Standard and Poor's
and Moody's, respectively.
SPPC's actual capital structure at December 31, 1999, 1998, and 1997 was as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Debt (1) $ 212,339 13% $ 135,473 9% $ 75,454 6%
Long-Term Debt 625,430 39% 606,450 40% 606,889 42%
Preferred Stock 50,000 3% 73,115 5% 73,115 5%
Preferred Securities 48,500 3% 48,500 3% 48,500 3%
Common Equity 673,738 42% 661,367 43% 639,556 44%
------------------ ------------------ ------------------
TOTAL $1,610,007 100% $1,524,905 100% $1,443,514 100%
================== ================== ==================
</TABLE>
(1) Including current maturities of long-term debt and preferred stock.
38
<PAGE>
The indenture under which the SPPC's first mortgage bonds are issued,
prescribes certain coverage ratios that must be met before additional bonds may
be issued. At December 31, 1999, these coverage provisions would allow for the
issuance of approximately $511 million in additional first mortgage bonds at an
assumed interest rate of 8.0%. The indenture also limits the amount of first
mortgage bonds that SPPC may issue to 60 percent of unfunded property plus the
amount of any previously issued bonds that have since been retired. Based on
certifications to the trustee as of December 31, 1999, these indenture
provisions would have allowed for the issuance of approximately $845 million in
additional first mortgage bonds.
SPPC's secured long-term debt is rated A-, A3 by Standard & Poor's and
Moody's, respectively. SPPC's pre-tax interest coverages for 1999, 1998 and
1997 were 3.15%, 3.87% and 3.86%, respectively.
REGULATORY
- -----------
Restructuring
- -------------
Electric Restructuring Activities
In 1997, the Governor of Nevada signed into law Assembly Bill 366 (AB366)
that provided for competition to be implemented in the electric utility
industry. In 1999 the Governor signed into law Senate Bill 438 (SB438) that
amended AB 366. SB 438 contains the following major provisions:
. In addition to generation, metering and billing are declared to be
potentially competitive services.
. The start date for competition is March 1, 2000 or such other start
date determined to be in the public interest by the Governor.
. The electric distribution utility is the provider of last resort (PLR)
until alternate methods go into effect, no sooner than July 1, 2001.
PLR rates are capped until March 1, 2003 at the rates in effect as of
July 1, 1999, as adjusted for any deferred energy cases filed with the
PUCN prior to October 1, 1999.
. Allows the use of the net proceeds of generation divestiture to pay
for certain reductions in PLR revenues until March 1, 2003, arising
from the departure of customers who select new suppliers.
. Repeals deferred energy for electric utilities on October 1, 1999.
. Permits alternative sellers to submit bids to provide PLR service
after July 1, 2001, subject to a PUCN public interest finding and a
PUCN-held auction.
. Provides for the recovery of Past Costs, often referred to as stranded
costs, including specific criteria for recovery of purchase power
costs.
The PUCN has conducted a number of hearings associated with AB366 and
SB438. In February 2000 the Governor of Nevada delayed the start date of
competition indefinitely. Electric competition may begin later in 2000 or 2001.
Generally, restructuring regulations have proceeded slowly. Currently, many
important regulations, including the affiliate regulations and the PLR, are not
complete. In their present form several of the proposed regulations could have
potentially significant negative financial ramifications. These regulations and
the potential risks are described below. The Company's management is actively
working to modify these regulations. Several key Nevada restructuring issues
have also arisen in other states, been litigated, and resolved in favor of the
utility. If final regulations are not modified to remove the financial risk
exposures, The Company will likely pursue legal action to resolve these issues.
As a final option, the Company will seek an injunction to the start of
competition or to overturn portions of SB438.
39
<PAGE>
Affiliate Transaction Regulation
While SB438 allows for the use of name and logo, the affiliate regulation
has not yet been modified to reflect this change. In addition, the Company has
requested that the PUCN modify the rule related to sharing services, sharing
officers and directors, and transfer pricing. To date the PUCN has not acted on
this request. On March 30, 1999, SPPC and the Company filed with the District
Court a "Complaint and Petition for Declaratory and Injunctive Relief and for
Judicial Review" relating to the Affiliate Transaction Rules. SPPC and the
Company asked that the court find that the rules "violate plaintiff's federal
and state constitutional guarantees, are unlawful and invalid because they were
enacted in violation of the procedural and substantive provisions of the
Administrative Procedures Act, and are unlawful and invalid because they exceed
the authority of the PUCN and are unsupported by the evidence." SPPC and NVP
asked that the court order the PUCN "to cease and desist from enforcing the
regulations."
Past Costs
Past costs, commonly referred to as stranded costs in other jurisdictions,
were the subject of several hearings in 1999. AB366/ SB438 permit the recovery
of costs associated with potentially competitive services such as generation and
purchased power pursuant to specified legal criteria. In the hearings, various
topics were discussed including the characteristics that define recoverable past
costs, criteria for evaluating the effectiveness of mitigation efforts, options
for cost recovery mechanisms, and applicable tax and accounting issues.
On December 29, 1999 the PUCN adopted the past cost regulation. This
regulation requires the utility to file for past costs 45 days after the
adoption of the regulation or issuance of the final order in the compliance plan
filing. The regulation requires estimates of book values and market values as
of the opening date of competition. In addition, the Company must provide
documentation relative to criteria in the law such as mitigation efforts,
conduct relative to other states, and efforts to minimize taxes. The PUCN will
take these criteria into consideration in determining allowable past costs.
During comments related to this rule, the Company raised a number of legal
issues including treatment of purchase power agreements, ability to true up
initial estimates of past costs to actual results, and ability to recover costs
to implement restructuring. The Company has not completed an estimate of its
past costs, since such a calculation is dependent on a variety of issues related
to restructuring which are not resolved at this time. However based upon the
current regulation and the positions taken by other parties to the rulemaking,
several risk areas have been identified including:
. SB438 criteria provide latitude for the PUCN to reduce the Company's
stranded cost claim.
. Purchase power agreements are the largest category of past costs. Federal
and state laws provide protection to federally mandated power purchase
contracts. The Company believes that the PUCN regulation provides less
security to recover purchase power costs than provided by federal and state
laws.
. Because the regulation does not provide a guaranteed true up to actual
results, it is possible that stranded cost recovery could be set too low to
recover all stranded costs.
40
<PAGE>
. The stranded cost proceeding will establish the gain or loss on the
divestiture sale of generation assets; the regulation provides that any gain
on divestiture would be utilized to reduce stranded costs. Some elements of
the calculation may be controversial. In addition the regulation does not
address other claims to generation gain, such as recovery of certain revenue
shortfalls as allowed by SB438, which may arise as customers leave the PLR.
The Company is currently evaluating challenges to the regulation and will
actively pursue changes in the regulatory process or, if necessary, pursue legal
challenges in the federal and or state courts. The Company believes that based
upon the content of the regulation and the applicable law, legal challenge
relative to purchase power agreements has a strong possibility of being
successful.
Provider of Last Resort
The provider of last resort (PLR) will provide electric service to
customers who do not select an electricity provider and to customers who are not
able to obtain service from an alternative seller after the date competition
begins. SB 438 provides for the electric distribution utility (EDU) to provide
PLR services until July 1, 2001. The PUCN has conducted several workshops and
hearings on the PLR regulations. This rule is not expected to be finalized until
mid-2000. The current draft proposed regulation includes standards of conduct
relative to distribution and provider of last resort functions, which require
segregation of operating functions and constraints on sharing of common
services. As part of their comments during development of the proposed
regulation, the Company raised concerns regarding the financial impacts of the
proposed regulations that place into question the financial viability of the
PLR. For instance the current regulations restrict the PLR from relying on
distribution assets or revenues to obtain credit. Second, the current
regulations provide no financial reward potential for the significant fuel price
risks that the PLR may face during the PLR rate cap period which ends March 1,
2003. Third, the proposed standards of conduct for the EDU and PLR will increase
costs as a result of the loss of economies of scale and scope.
In addition to these impacts, the proposed regulation does not address two
important areas associated with the PLR. Regulations have yet to be developed
that fairly compensates the utility for recovery of revenue shortfalls allowed
under SB438 which arise as customers leave the PLR for new suppliers.
Regulations also do not address how the Company will be able to collect the
costs, allowed by SB438, which will be incurred to serve customers who leave the
PLR and later return.
In the ongoing rulemaking process the Company is working to address these
serious concerns and modify the PLR regulation. If the proposed regulations are
adopted in their current form, the Company will seek to transition out of the
PLR function. In addition, if necessary, the Company is prepared to pursue legal
remedies to mitigate any significant financial exposures associated with the
final PLR regulation.
41
<PAGE>
Independent Scheduling Administrator
The Company has participated in interim Independent Scheduling
Administrator (iISA) working groups which are developing iISA standards,
protocols and procedures. The PUCN has held hearings regarding entities
interested in performing the iISA function, the timeline, the functions to be
performed, the costs and how these entities will adhere to the PUCN iISA
principles. To date the Company has not agreed to provide funding for the iISA
because the PUCN has not provided a mechanism for the Company to recover costs
associated with iISA. However in February 2000 the PUCN opened an investigatory
docket to consider the funding and other transmission access issues. See FERC
Matters for further discussion.
Gas Restructuring
To comply with Nevada AB 366 for natural gas deregulation, the PUCN has
developed some new natural gas rules. In 1999, little gas restructuring activity
occurred. Two new regulations, gas licensing and gas licensing fees were
adopted by the PUCN in 1999.
Nevada Matters
- --------------
Non-price Terms and Conditions for Distribution Service
On February 1, 1999, the Company filed its non-price terms and conditions
for unbundled distribution service pursuant to the PUCN regulations. A
stipulation resolving most issues and agreeing to further filings on unresolved
issues was filed with the PUCN on April 9, 1999, and subsequently approved by
the PUCN on April 22, 1999. Settlements regarding the unresolved issues were
subsequently filed and approved by the PUCN.
Unbundling of Utility Services
On April 1, 1999, the Company filed the revenue requirements and unbundling
study portions of the Compliance Filing with the PUCN. The filing included the
development of an electric revenue requirement for the test period 1998. The
compliance filing regulation requires the revenue requirement development to be
in the form used for rate cases. In the unbundling study, the revenue
requirement was assigned and allocated to a number of service components
including generation, aggregation, transmission, distribution, metering,
billing, and customer services. On September 23, 1999, The PUCN issued an
interim order on the Company's April 1 compliance filing. The order contained
the PUCN's decision on revenue requirements, return on equity, depreciation, and
the unbundling study. The Company did not utilize the order's revenue
requirement, return on equity or depreciation rates from Phase II of the case
because SB438 legally mandated that the Company use its July 1, 1999 revenue
requirement.
Pricing of Distribution Service
On October 8, 1999, the Company filed final versions of the approved non-
price terms and conditions and rates reflecting a revenue requirement thought by
the Company to be correct and in accordance with SB 438. Hearings were held in
early November. A decision is expected in 2000.
42
<PAGE>
Merger of SPR and Nevada Power Company
On April 8, 1999, SPR and NVP filed a joint application with the PUCN for
approval of their proposed merger. On January 4, 1999, the PUCN issued the
final order in the merger case. On December 31, 1998, the PUCN voted 3-0 to
approve the merger, with conditions. The conditions include, among others,
requirements to divest generation, file the divestiture plan with the PUCN for
approval, file an ISA proposal at the FERC, file a generation tariff at the
FERC, file a rate case and unbundle costs in 1999, file a subsequent rate case
three years after retail competition, and submit an application to recover
stranded costs.
Earnings Sharing
On April 30, 1999, the Company filed its second compliance filings related
to the 1997 rate stipulation The filings provide a calculation of Sierra's
electric and gas earnings in excess of a 12% return on equity (ROE). Any
earnings in excess of 12% ROE are shared 50/50 between shareholders and
customers. On August 19, 1999, the PUCN approved a stipulation between SPPC,
Staff, and the UCA that rebated $7.37 million and $1.98 million to electric and
gas customers, respectively in 1999. Based on 1999 operating results, SPPC
anticipates it may make refunds to customers. Appropriate reserves have been
recorded to reflect any anticipated refunds.
Generation Divestiture
The Company has filed with the PUCN its request for approval to sell its
generation plants on October 12, 1999. On February 18, 2000, the PUCN approved
an application to sell the generation plants of both SPPC and NVP. The revised
divestiture plan was approved unanimously by the PUCN. Under the terms of the
approved plan, both utilities will sell all of their power plants through an
auction process.
CALIFORNIA MATTERS
- ------------------
Rate Reduction Bonds
California's electricity restructuring statute (Assembly Bill 1890, Chapter
854, California Statutes of 1996, as amended), permits California investor-owned
utilities, including the Company, to finance the recovery of a reduction in
electricity rates for residential and small commercial customers through the
issuance of rate reduction certificates. Transition costs consist of the costs
of generation-related assets and obligations that may become uneconomic as a
result of a competitive generation market, together with certain other costs
associated therewith.
In order for the Company to recover transition and associated costs, the
California Public Utilities Commission (CPUC) authorized the establishment of
non-bypassable, usage-based, per kilowatt hour charges ("FTA Charges"), to be
included in the regular utility bills of residential and small commercial
consumers located in the historical service territory of the Company in
California. The right to receive payments made in respect of the FTA Charges is
referred to as Transition Property.
43
<PAGE>
On April 9, 1999, the Company sold the Transition Property to SPPC Funding
LLC, a Delaware special purpose limited liability company whose sole member is
the Company, in exchange for the proceeds of the SPPC Funding LLC Notes, Series
1999-1 (the "Underlying Notes"). SPPC Funding LLC then issued and sold the
Underlying Notes to the California Infrastructure and Economic Development Bank
Special Purpose Trust SPPC-1 (the "Trust") in exchange for the proceeds of the
sale of the Trust's $24.0 million 6.4% Rate Reduction Certificates, Series 1999-
1 (the "Certificates"). The Trust, which had been established by the California
Infrastructure and Economic Development Bank, issued and sold the Certificates
in a private placement pursuant to Rule 144A under the Securities Act of 1933,
as amended. The Certificates are one of a series of rate reduction certificates
that may be issued from time to time by the Trust and sold to investors upon
terms determined at the time of sale.
On January 10, 2000, the CPUC approved the Company's annual true-up of the
FTA charges effective January 1, 2000.
Revenue Cycle Unbundling
On February 18, 1999, the CPUC approved the Company's proposed Revenue
Cycle Services Credits (RCSC) application filed February 2, 1998. The RCSC
addresses meter ownership, meter services, meter reading, and billing and
applies to customers who select their own provider of a revenue cycle service.
On April 9, 1999, the Company made a compliance tariff filing which reflects the
approved credits.
Direct Access Tariffs
On April 5, 1999, the CPUC approved the Company's compliance filing,
effective back to March 18, 1998, which proposed tariff changes to implement
direct access.
Rate Unbundling
On April 5, 1999, the CPUC approved the Company's proposed unbundled rates
effective back to June 1, 1998.
Distribution Competition
The CPUC has opened a docket item to solicit comments and proposals on
distributed generation and competition in electric distribution service. The
Company is actively participating in the on-going workshops. It is too early to
determine how this proceeding may affect the Company.
Generation Divestiture
The Company has filed with the CPUC its request for approval to sell its
generation plants. The Company plans to file a revised application during the
first half of 2000.
44
<PAGE>
Distribution Performance-Based Rate-making (PBR)
On January 3, 2000, the Company filed a distribution PBR proposal to become
effective January 1, 2001 through 2003. The proposal includes rate indexing and
earnings sharing mechanisms as well as performance indicators for employee
safety, customer satisfaction and system reliability. The Company will submit a
2001 Cost of Capital filing in May 2000 and a Distribution PBR 2001 Cost of
Service filing in June 2000.
FERC Matters
- ------------
Regional Transmission Organizations
On May 13, 1999, the FERC issued a Notice of Proposed Rulemaking on
Regional Transmission Organizations (RTOs). the FERC proposed characteristics of
an RTO and also the requirement for utilities to form or join RTOs.
On August 23, 1999, the Company filed comments on the proposed rule along
with numerous other parties. On December 15, 1999, the FERC approved the final
rule on RTOs.
Merger
On April 14, 1999, the FERC voted to approve the merger of SPR and NVP, as
proposed. In approving the merger the FERC required the companies to divest of
their generation facilities (as proposed by the companies) and required Nevada
Power to file an update of its transmission rates (also proposed by the
companies).
On May 17th, TDPUD filed a Petition for Rehearing of the FERC's order
approving the merger. TDPUD claims the FERC violated its own policy by allowing
the merger to be consummated prior to divestiture of generation assets. The
Company and Nevada Power filed an answer to TDPUD's Petition for Rehearing in
May. On July 14, 1999, the FERC denied all aspects of TDPUD's petition.
Transmission Rate Case
On March 30, 1999, the Company filed with the FERC to increase its open
access transmission rates. The Company requested an increase of $16 million in
the annual revenue requirement for network service. The point-to-point rate
would increase from $2.80 /kW-mo. to $3.21 /kW-mo. This filing incorporates the
Alturas intertie, completed in December 1998, and the reclassification of
transmission and distribution facilities approved by the PUCN last summer.
On May 28, 1999, as expected, the FERC issued an order setting the rate
case for hearing. The proposed rates are accepted subject to refund and
suspended until November 1, 1999. On June 14, 1999, as required by the May 28
order, the Company filed additional information on the proposed transmission and
distribution (T&D) reclassification. The Company also requested that the FERC
accept the filing and approve the T&D split. On July 29, 1999 the FERC accepted
the Company's proposed T&D reclassification.
On October 12, 1999, the Company filed an Offer of Partial Settlement
which resolved all issues but pricing to the Mines and to the City of Fallon.
On November 3, the Partial Settlement was certified to the FERC. A status
report on the two remaining issues was filed on January 11, 2000. On January
31, 2000, the FERC approved the Partial Settlement.
45
<PAGE>
Generation Tariffs
On March 31, 1999, the Company filed Docket No. ER99-2332 with the FERC for
approval of generation tariffs that contain the rates, terms and conditions
under which the new owners of the Company's generation would operate after
divestiture. The tariffs permit market-based rates after the offering of
capacity under a cost-based recourse approach.
Motions to intervene and protest in the Company's generation tariffs rate
case were due on April 20, 1999. Newmont, City of Fallon, and TDPUD filed
motions to intervene and protest. Barrick (a mining company) filed a motion to
intervene with comments. Several other parties also filed interventions. The
PUCN filed motion to intervene and protest one day after the date established by
the FERC. The PUCN requested the FERC to hold the proceedings in abeyance to
allow the PUCN more time to review SPPC's divestiture plan filing.
The Company filed an Answer to the protests filed on the tariff on May 5,
1999. In response to the PUCN request, the Company requested that the FERC rule
on the Company's tariff by November 30, 1999 (rather than September 30, 1999) to
allow the PUCN more time. The Company also provided clarification in response to
other protests.
On July 20, 1999, the Company filed a motion to expedite the FERC's
consideration of the tariff. The motion requested that the FERC approve the
tariff by September 30, 1999 since the PUCN issues were resolved.
On November 1, the FERC dismissed the tariffs, apparently misinterpreting
the agreement reached with the PUCN on the tariffs. On November 22, 1999 the
Company filed a request for rehearing of the FERC's November 1 order dismissing
the tariffs. The rehearing request explains how the FERC erred in dismissing the
tariff. On December 17, 1999, the FERC issued an Order Granting Rehearing for
Further Consideration. A decision is expected in 2000.
Independent Scheduling Administrator (ISA)
On July 23, 1999, the Company and Nevada Power submitted a filing to
establish the Mountain West ISA (Docket ER97-3719). The proposal centers on the
formation of an interim ISA called Mountain West ISA, which will ensure the non-
discriminatory treatment of transmission customer in two wholesale electricity
markets; one in northern Nevada and one in southern Nevada. The formation of the
ISA is viewed as an interim step in the move to broader regional restructuring
of the electric service industry in the western United States.
Fifteen parties filed to intervene in the ISA filing. On September 17,
1999, the Company, Nevada Power and the Mountain West ISA filed answers to the
protests filed on the ISA filing. The California ISO filed an answer to the
Company's and Nevada Power's response to their protest on September 28, 1999.
On January 27, 2000, the FERC issued an order approving with modifications
the Mountain West ISA proposal. The PUCN is continuing to review aspects of the
filing, including funding for the Mountain West ISA.
YEAR 2000 ISSUES
- ----------------
46
<PAGE>
The Company uses business application software programs and relies on
computing infrastructure that includes embedded systems that have a Year 2000
(Y2K) affect on the Company. In many cases, the Company's software programs and
embedded systems used two-digit years that recognized a date using `00' as the
year 1900 rather than the year 2000. This could have resulted in the computer or
device shutting down, performing incorrect computations, or performing in an
inconsistent manner.
In 1996, the Company established its Y2K project to address Y2K issues. The
project's scope included: (1) business application systems (including, but not
limited to, customer information and billing) and financial systems (including
time reporting, payroll, general ledger, accounts payable and purchasing, and
end-user developed systems); (2) embedded systems (including equipment that
operates or controls operating facilities such as power plants, electric
transmission and distribution, water, gas, telecommunications, and information
technology systems); (3) customer, vendor, and supplier relationships; and (4)
testing and contingency planning.
Business Application Systems
The initial focus for the Y2K project team was on the business application
systems. In the fall of 1996 the Company purchased software assessment tools and
completed its inventory and code assessment for its mainframe business systems.
The Company developed and strictly adhered to a Y2K methodology that included
unit, system wide and Y2K date specific testing. As of November 1999 the Company
had completed the assessment and modification of 100% of its business systems.
The Company experienced few business systems errors due to Y2K in the first
week of 2000. The Company utilized quick action response teams and corrected all
known problems without any material impact to its customers.
Embedded Systems
The Company hired an outside engineering consultant, Network Systems
Engineering Corporation (NSEC), to assist the Company's staff in conducting a
thorough and comprehensive inventory of its embedded systems at the component
level. All systems were inventoried and assessed for Y2K date impacts. This
inventory identified over 2,500 potentially date sensitive items. The Company
and NSEC contacted all manufacturers of those components that they have
identified as critical to operations and continues to contact other
manufacturers of embedded system components to determine if their components
were Y2K ready. As of June 30, 1999, 100% of the Company's mission critical
embedded systems were Y2K ready.
Vendors and Suppliers
The Company contacted, in writing, all vendors and suppliers of products
and services that it considered critical to its operations. These contacts
included, but were not limited to, suppliers of interstate transportation
capacity for coal supplies, natural gas producers, financial institutions, and
telephone service providers. The Company met one on one with several of its
critical vendors and suppliers to assess their Y2K readiness. From these
meetings, the Company felt that these vendors and suppliers had a viable Y2K
program.
There were no major vendor or supplier problems related to Y2K. During the
first week of 2000, there were two vendor software licensing date problems and
were corrected the same day they occurred.
47
<PAGE>
Major Customers
The Company met face to face with many of its major customers to share its
progress on Y2K. Also discussed at these meetings was the customer's Y2K
readiness. There were no major customer issues related to the Y2K date
rollover.
Contingency Planning
The Company's Y2K strategies included contingency planning for both
business and embedded systems. The planning effort included critical Company
areas such as electric generation, water, gas, telecommunications, building
facilities, information technology, networks, vendors, suppliers, and operations
personnel. Quick action response teams and additional Company personnel were
available for the century rollover. Additionally, the Company's Emergency
Operations Center (EOC) was activated for the century rollover. All Company
contingency plans were completed as of September 30, 1999.
As the result of a non-eventful year 2000 rollover, it was not necessary to
invoke Company contingency plans.
As part of its normal business practice, the Company maintains plans to
follow during emergency circumstances.
Potential Risks
With respect to its internal operations, those over which the Company has
direct control, the Company believed the most significant potential risks from
Y2K problems were: (1) its ability to use electronic devices to control and
operate its generation, gas, water, telecommunication, transmission and
distribution systems, (2) its ability to render timely bills to its customers,
and (3) the ability to maintain continuous operations of its computer systems.
Based upon the smooth transition to year 2000, the Company believes the
continued probability of such failures is low. The Company is monitoring the
progress of these critical entities and contingency plans will remain in place
to address the potential failure of an external party.
Effect on Operations
The Company had no significant impacts on fourth quarter 1999 operations as
a result of Y2K problems.
The Company experienced no significant interruptions to operations or
business systems related to Y2K problems during the actual date rollover period.
The Company feels that there will be minimal risks during the year 2000 and
that any Y2K related problems will be minor and corrected immediately without
effect on operations.
Financial Implications
With 100% of mission critical components tested, the Company anticipated
and proved that the transition through critical Y2K dates had minimal impact on
the Company's Electric, Gas, and Water
48
<PAGE>
operations during year 2000 rollover period and during year 2000 and beyond.
These results are reflected in reduced costs discussed below.
The Company had estimated that its total incremental expenditures for the
Y2K effort, since it began identification of Y2K cost, would be approximately
$5.9 million. This estimate has been reduced from amounts previously reported
based on updated assessments of the project costs. Y2K costs include
assessment, remediation, testing, and contingency planning activities. Of the
total project costs $5.4 million was incurred through December 31, 1999.
Approximately $4.0 million of the expenditures are operating and
maintenance expenses, and $1.4 million are capital expenditures. The Company
anticipates that the remaining Y2K expenditures will be approximately $100,000
for the 2000 business year. Final archiving of hard copy and electronic
documentation, project review, and project shutdown will be completed in the
first quarter of 2000.
49
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has evaluated its risk related to financial instruments whose
values are subject to market sensitivity. The only such instruments are
Company issued fixed-rate and variable-rate debt, and preferred securities
obligations which were as follows as of December 31, 1998 and 1999.
Long-term debt (Dollars in Thousands):
<TABLE>
<CAPTION>
Expected Expected Maturity Weighted Average
Maturity Date Amounts Interest Rates Fair Value
- ------------------------------------------------------------------------------------------------------------------------
December 31 December 31 December 31
Fixed Rate 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1999 - $ 30,500 - 6.88%
2000 2,755 300 6.24% 9.00%
2001 19,620 17,500 5.56% 5.51%
2002 2,626 200 6.11% 9.00%
2003 20,632 18,200 5.63% 5.60%
2004 2,621 - 6.12% -
Thereafter 499,931 490,500 6.62% 6.83%
====================== =================== ======================
Total Fixed Rate $548,185 $556,900 $529,875 $592,373
Variable Rate
Due 2000 $100,000 - 6.87% -
Due 2020 80,000 80,000 *3.81% 3.55%
======================= =================== ======================
$180,000 $ 80,000 $180,000 $ 80,000
Preferred securities
(fixed rate)
Due 2036 $ 48,500 $ 48,500 8.60% - $ 48,500 $ 48,500
======================= =================== ======================
Total $776,685 $686,900 $758,375 $720,873
</TABLE>
* Weighted daily average rate for month ended December 31, 1998 and 1999
Commodity Price Risk
SPPC is exposed to commodity price risk primarily related to changes in the
market price of electricity as well as changes in fuel costs incurred to
generate electricity. Although the potential exists for market risk within these
contracts, the future costs are expected to be covered in the rate making
process. SPPC's gas local distribution company is also protected by deferred
energy accounting procedures (See Note 1 to the Financial Statements). These
risks are not expected to expose SPPC to significant market risks related to
commodity price fluctuations. As a result of the merger of SPR and NVP, the
Board of Directors of the combined company requested that management review and
consolidate the Risk Management Programs of the two utilities. SPPC and NVP
engaged the services of a leading energy risk management consulting company to
review existing policies and procedures, make any recommendations to the
existing Program, and implement the revised Program. That project led SPPC to
adopt revised policies and procedures, implement new IT systems to track any
commodity price exposures, as well as focus on potential "Earnings-at-Risk"
which measures the amount of exposure that SPPC have to energy prices at any
point in time.
50
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Independent Auditors' Report................................................................52
Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and 1998......................53
Consolidated Statements of Income for the Years Ended December 31,
1999, 1998 and 1997.............................................................54
Consolidated Statements of Common Shareholder's Equity for the
Years Ended December 31, 1999, 1998 and 1997....................................55
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997................................................56
Consolidated Statements of Capitalization as of December 31, 1999 and 1998.....57-58
Notes to Consolidated Financial Statements...............................................59-81
</TABLE>
51
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Sierra Pacific Power Company
Reno, Nevada
We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Sierra Pacific Power Company and
subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of income, common shareholder's equity, and cash flows for each of
the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Reno, Nevada
February 29, 2000
52
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
ASSETS: 1999 1998
- ------- ---- ----
<S> <C> <C>
Utility Plant, at Original Cost:
Plant in service $2,420,728 $2,348,996
Less accumulated provision for depreciation 799,099 727,624
--------- ---------
1,621,629 1,621,372
Construction work in progress 97,561 55,670
--------- ---------
1,719,190 1,677,042
--------- ---------
Other Investments 62,704 34,022
--------- ---------
Current Assets:
Cash and cash equivalents 3,011 15,197
Accounts receivable less provision for
Uncollectible accounts: 1999 - $3,649; 1998 - $3,461 113,695 114,380
Materials, supplies and fuel, at average cost 30,070 25,776
Other 3,103 2,692
------- -------
149,879 158,045
Deferred Charges:
Regulatory tax asset 65,531 65,619
Other regulatory assets 73,660 61,675
Other 25,512 15,417
------- -------
164,703 142,711
------- -------
$2,096,476 $2,011,820
========== ==========
CAPITALIZATION AND LIABILITIES:
- -------------------------------
Capitalization:
Common shareholder's equity $ 673,738 $ 661,367
Preferred stock 50,000 73,115
Preferred securities subject to mandatory redemption 48,500 48,500
Long-term debt 625,430 606,450
--------- ---------
1,397,668 1,389,432
--------- ---------
Current Liabilities:
Short-term borrowings 109,584 105,000
Current maturities of long-term debt 102,755 30,473
Accounts payable 78,491 66,032
Accrued interest 5,110 7,535
Dividends declared 19,974 20,365
Accrued salaries and benefits 8,385 12,131
Other current liabilities 10,673 27,759
------- -------
334,972 269,295
------- -------
Commitments & Contingencies (Note 13)
Deferred Credits:
Deferred federal income taxes 170,261 161,697
Deferred investment tax credits 35,980 37,944
Regulatory tax liability 37,846 38,939
Accrued retirement benefits 49,052 42,560
Customer advances for construction 40,081 34,961
Other 30,616 36,992
------- -------
363,836 353,093
------- -------
$2,096,476 $2,011,820
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
Operating Revenues:
<S> <C> <C> <C>
Electric $609,197 $585,657 $540,346
Gas 100,177 99,532 70,675
Water 54,348 49,143 46,519
-------- -------- --------
763,722 734,332 657,540
-------- -------- --------
Operating Expenses:
Operation:
Purchased power 179,781 156,970 130,612
Fuel for power generation 115,065 114,803 100,861
Gas purchased for resale 68,125 65,430 38,127
Deferral of energy costs-net - - 8
Other 115,453 116,076 120,600
Maintenance 22,520 22,266 23,387
Depreciation and amortization 77,373 69,435 64,117
Taxes:
Income taxes 36,042 43,550 40,387
Other than income 19,527 19,608 19,269
-------- -------- --------
633,886 608,138 537,368
-------- -------- --------
Operating Income 129,836 126,194 120,172
-------- -------- --------
Other Income:
Allowance for other funds used during construction (1,341) 3,797 5,723
Other (expense)/income-net (1,028) 335 810
-------- ------- -------
(2,369) 4,132 6,533
-------- ------- -------
Total Income Before Interest Charges 127,467 130,326 126,705
-------- ------- -------
Interest Charges:
Long-term debt 40,263 38,890 39,609
Other 11,615 7,659 4,583
Allowance for borrowed funds used during
construction and capitalized interest (308) (6,414) (4,785)
------- ------- -------
51,570 40,135 39,407
------- ------- -------
Income Before Dividends on Mandatorily Redeemable
Preferred Securities 75,897 90,191 87,298
Preferred dividend requirements of company-obligated
mandatorily redeemable preferred securities (4,171) (4,171) (4,171)
------- ------- -------
Income Before Preferred Dividend requirements 71,726 86,020 83,127
Preferred dividend requirements and premium paid on
redemption (5,485) (5,459) (5,459)
------- ------- -------
Income Applicable to Common Stock $ 66,241 $ 80,561 $ 77,668
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF COMMON
SHAREHOLDER'S EQUITY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
---- ---- ----
Common Stock
- ------------
<S> <C> <C> <C>
Balance at Beginning of Year
and End of Year $ 4 $ 4 $ 4
Other Paid-In Capital
- ---------------------
Balance at Beginning of Year 562,684 545,434 518,434
Additional investment by parent company 22,000 17,250 27,000
------- ------- -------
Balance at End of Year 584,684 562,684 545,434
------- ------- -------
Retained Earnings
- -----------------
Balance at Beginning of Year 98,679 94,118 88,458
Income before preferred dividends 71,726 86,020 83,127
Preferred stock dividends declared & premium on
redemption (5,355) (5,459) (5,459)
Common stock dividends declared (76,000) (76,000) (72,000)
Cost of issuing common stock
(reimbursement to parent company) - - (8)
-------- -------- --------
Balance at End of Year 89,050 98,679 94,118
-------- -------- --------
Total Common Shareholder's Equity at
End of Year $673,738 $661,367 $639,556
========= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Operating Activities:
- ------------------------------------
Income before preferred dividends $71,726 $86,020 $83,127
Non-Cash items included in income:
Depreciation and amortization 77,373 69,435 64,117
Deferred taxes and investment tax credits 5,595 (3,743) (2,772)
AFUDC and capitalized interest 1,033 (10,211) (10,508)
Deferred energy costs, merger costs and other non-cash 8,644 2,400 (2,151)
Early Retirement and severance amortization 4,194 4,177 4,551
Changes in certain assets and liabilities:
Accounts receivable 685 (13,836) (10,144)
Materials, supplies and fuel (4,294) (521) 2,331
Other current assets (411) (120) 1,376
Accounts payable 12,459 2,944 9,090
Other current liabilities (23,257) 6,844 1,543
Other - net (31,418) 9,802 4,895
-------- ------- -------
Net Cash Flows From Operating Activities 122,329 153,191 145,455
-------- ------- -------
Cash Flows From Investing Activities:
- ------------------------------------
Additions to utility plant (142,306) (183,384) (147,801)
Non-cash charges to utility plant (768) 10,587 11,553
Customer refunds for construction 5,120 (3,517) (951)
Contributions in aid of construction 21,823 37,216 26,321
--------- --------- ---------
Net cash used for utility plant (116,131) (139,098) (110,878)
Investment in subsidiaries and other non-utility property-net (28,720) (2,788) (5,254)
--------- --------- ---------
Net Cash Used in Investing Activities (144,851) (141,886) (116,132)
--------- --------- ---------
Cash Flows From Financing Activities:
- ------------------------------------
Increase in short-term borrowings 1,972 30,637 40,583
Proceeds from issuance of long-term debt 124,495 35,000 -
Retirement of long-term debt (33,270) (5,456) (15,417)
Retirement of preferred stock (23,115) - -
Additional investment by parent company 22,000 17,250 27,000
Dividends paid and premiums on preferred redemption (81,746) (80,459) (75,459)
-------- -------- --------
Net Cash Provided (Used) By Financing Activities 10,336 (3,028) (23,293)
-------- -------- --------
Net (Decrease) Increase in Cash and Cash Equivalents (12,186) 8,277 6,030
Beginning Balance in Cash and Cash Equivalents 15,197 6,920 890
-------- ------- -------
Ending Balance in Cash and Cash Equivalents $ 3,011 $ 15,197 $ 6,920
======= ======= ===========
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
Cash Paid During Year For:
Interest $54,303 $48,250 $46,824
Income taxes 28,604 45,963 41,656
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
SIERRA PACIFIC POWER COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
Common Shareholder's Equity: 1999 1998
- ---------------------------
<S> <C> <C>
Common Stock, $3.75 par value,
1,000 shares authorized, issued and outstanding $ 4 $ 4
Other paid-in capital 584,684 562,684
Retained earnings 89,050 98,679
--------- ---------
Total Common Shareholder's Equity 673,738 661,367
Cumulative Preferred Stock:
Not subject to mandatory redemption:
$50 par value:
Series A; $2.44 dividend - 4,025
Series B; $2.36 dividend - 4,100
Series C; $3.90 dividend - 14,990
$25 stated value:
Class A Series 1; $1.95 dividend 50,000 50,000
-------- ---------
Total Preferred Stock 50,000 73,115
Company-obligated mandatorily redeemable preferred securities of the Company's
subsidiary trust, Sierra Pacific Power Capital I, holding solely $50
million principal amount of 8.60% junior subordinated debentures
of the Company, due 2036 48,500 48,500
-------- ---------
Total cumulative preferred securities 98,500 121,615
-------- ---------
Long-Term Debt:
First Mortgage Bonds:
Unamortized bond premium and discount, net (795) (831)
Debt Secured by First Mortgage Bonds:
2.00%Series Z due 2004 72 93
2.00% Series O due 2011 1,374 1,497
6.35% Series FF due 2012 1,000 1,000
6.55% Series AA due 2013 39,500 39,500
6.30% Series DD due 2014 45,000 45,000
6.65% Series HH due 2017 75,000 75,000
6.65% Series BB due 2017 17,500 17,500
6.55% Series GG due 2020 20,000 20,000
6.30% Series EE due 2022 10,250 10,250
6.95% to 8.61% Series A MTN due 2022 110,000 110,000
7.10% and 7.14% Series B MTN due 2023 58,000 58,000
6.62% to 6.83% Series C MTN due 2006 50,000 50,000
5.90% Series JJ due 2023 9,800 9,800
5.90% Series KK due 2023 30,000 30,000
5.00% Series Y due 2024 3,138 3,207
6.70% Series II due 2032 21,200 21,200
5.47% Series D MTN due 2001 17,000 17,000
5.50% Series D MTN due 2003 5,000 5,000
5.59% Series D MTN due 2003 13,000 13,000
------- -------
Subtotal, excluding current portion 526,039 526,216
Variable Rate Note:
Water Facilities Note: maturing 2020 80,000 80,000
Other, excluding current portion 19,391 234
------- -------
Total Long-Term Debt 625,430 606,450
------- -------
TOTAL CAPITALIZATION $1,397,668 $1,389,432
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies for both utility and non-utility
operations are as follows:
General
Sierra Pacific Power Company (SPPC or the Company), a wholly-owned
subsidiary of Sierra Pacific Resources (SPR), is a regulated public utility
engaged principally in the generation, purchase, transmission, distribution, and
sale of electric energy. It provides electricity to approximately 302,000
customers in a 50,000 square mile territory including western, central, and
northeastern Nevada, including the cities of Reno, Sparks, Carson City and Elko,
and a portion of eastern California, including the Lake Tahoe area. SPPC also
provides water and gas service in the cities of Reno and Sparks, Nevada, and
environs. In 1995, SPPC formed two subsidiaries for the specific purpose of
forming a partnership to operate the Pinon Pine gasifier facility. These
subsidiaries are Pinon Pine Corporation and Pinon Pine Investment Company. In
February 1999, SPPC purchased GPSF-B, which owned the portion of the gasifier
facility that was not already owned by SPPC. On July 29, 1996, SPPC formed a
wholly-owned subsidiary, Sierra Pacific Power Capital I (Trust), for the purpose
of completing a public offering of trust originated preferred securities. These
subsidiaries are consolidated into the financial statements of SPPC, with all
significant intercompany transactions eliminated. Refer to Note 4 of SPPC's
consolidated financial statements for the stock issuance and Note 3 for the
Pinon Pine Power Project.
SPPC maintains its accounts for electric and gas operations in accordance
with the Uniform System of Accounts prescribed by the Federal Energy Regulatory
Commission, and for water operations, in accordance with the Uniform System of
Accounts prescribed by the National Association of Regulatory Utility
Commissioners.
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 certain assets and
liabilities. These estimates and assumptions also affect the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of certain revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Certain reclassifications have been made for comparative purposes but have
not affected previously reported net income or common shareholder's equity.
Utility Plant
In addition to direct labor and material costs, the Company also charges
the following to the cost of constructing utility plants: the cost of time spent
by administrative employees in planning and directing construction work,
property taxes, employee benefits (including such costs as pensions,
postretirement and post-employment benefits, vacations and payroll taxes), and
an allowance for funds used during construction (AFUDC).
The original cost of plant retired or otherwise disposed of and the cost of
removal less salvage is generally charged to the accumulated provision for
depreciation. The cost of current repairs and minor replacements is charged to
operating expenses when incurred. The cost of renewals and betterments is
capitalized.
58
<PAGE>
Allowance For Funds Used During Construction and Capitalized Interest
As part of the cost of constructing utility plant, the Company capitalizes
AFUDC. AFUDC represents the cost of borrowed funds and, where appropriate, the
cost of equity funds used for construction purposes in accordance with rules
prescribed by the FERC and the Public Utilities Commission of Nevada . AFUDC is
capitalized in the same manner as construction labor and material costs, with an
offsetting credit to "other income" for the portion representing the cost of
equity funds and as a reduction of interest charges for the portion representing
borrowed funds. Recognition of this item as a cost of utility plant is in
accordance with established regulatory rate-making practices. Such practices
permit the utility to earn a fair return on, and recover in rates charged for
utility services, all capital costs. This is accomplished by including such
costs in the rate base and in the provision for depreciation. The AFUDC rates
used during 1999, 1998, and 1997 were 6.09%, 7.69% and 8.30%, respectively. As
specified by the PUCN, certain projects were assigned a lower AFUDC rate due to
specific low-interest-rate financings directly associated with those projects.
Depreciation
Depreciation is calculated using the straight-line composite method over
the estimated remaining service lives of the related properties. The
depreciation provision for 1999, 1998 and 1997, as authorized by the PUCN and
stated as a percentage of the original cost of depreciable property, was
approximately 3.14%, 3.31%, and 3.16%, respectively.
Cash and Cash Equivalents
Cash is comprised of cash on hand and working funds. Cash equivalents
consist of high quality investments in money market funds. SPPC had no short-
term investments in money market funds at December 31, 1999 and $12.4 million of
short-term investments in money market funds at December 31, 1998.
Regulatory Accounting and Other Regulatory Assets
The Company's rates are currently subject to the approval of the PUCN and
are designed to recover the cost of providing generation, transmission and
distribution services. As a result, the Company qualifies for the application
of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
the Effects of Certain Types of Regulation", issued by the Financial Accounting
Standards Board (FASB). This statement recognizes that the rate actions of a
regulator can provide reasonable assurance of the existence of an asset and
requires the capitalization of incurred costs that would otherwise be charged to
expense where it is probable that future revenue will be provided to recover
these costs. SFAS No. 71 prescribes the method to be used to record the
financial transactions of a regulated entity. The criteria for applying SFAS
No. 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, and (iii) rates that are set at levels that will
recover costs can be charged to and collected from customers. SFAS No. 101,
"Regulated Enterprises-Accounting for the Discontinuation of Application of FASB
Statement No. 71," requires that an enterprise whose operations cease to meet
the qualifying criteria of SFAS No. 71, discontinue the application of that
statement by eliminating the effects of any actions of regulators that had been
previously recognized.
59
<PAGE>
In 1997, the Emerging Issues Task Force (EITF) released Issue 97-4. In
doing so, it reached a consensus that a utility subject to a deregulation plan
for its generation business should stop applying SFAS No. 71 to the generating
portion of its business no later than the date when a deregulation plan with
sufficient detail is known. EITF 97-4 also reached a consensus that regulatory
assets and liabilities that originated in a portion of the business that is
discontinuing its application of SFAS No. 71, should be evaluated on the basis
of where (that is, the portion of the business in which) the regulated cash
flows to realize and settle them will be derived. The result of the consensus
is that there is no elimination of regulatory assets which the deregulatory
legislation or rate order specifies collection of, if the regulatory assets are
recoverable through a portion of the business which remains subject to SFAS No.
71.
In conformity with SFAS No. 71, the accounting for the Company conforms to
generally accepted accounting principles as applied to regulated public
utilities and as prescribed by the agencies and commissions of the jurisdictions
in which they operate. In accordance with these principles, certain costs that
would otherwise be charged to expense or capitalized as plant costs are deferred
as regulatory assets based on expected recovery from customers in future rates.
Management's expected recovery of deferred costs is based upon specific rate-
making decisions or precedent for each item. The following other regulatory
assets were included in the consolidated balance sheets as of December 31
(dollars in thousands):
<TABLE>
<CAPTION>
DESCRIPTION 1999 1998 AMORTIZATION PERIODS
----------- ---- ---- --------------------
<S> <C> <C> <C>
Early retirement and severance offers $16,274 $20,468 Various through 2004
Loss on reacquired debt 17,140 17,918 Various through 2023
Plant assets 7,104 7,978 Various through 2031
Conservation and demand side
programs 5,551 3,787 Various through 2007
Merger transition costs 4,703 0 To be determined*
Merger severance/relocation 11,432 0 To be determined*
Other costs 11,456 11,524 Various
------- -------
Total $73,660 $61,675
======= =======
</TABLE>
* Under the terms of the merger stipulation with the PUCN, three years
after the start of retail competition in the State of Nevada, the Company is
required to file a general rate case that would give the Company the opportunity
to recover the costs of the merger. The amortization period for these costs
will be determined at the time of the general rate case filing.
Currently, the electric utility industry is predominantly regulated on a
basis designed to recover the cost of providing electric power to its retail and
wholesale customers. If cost-based regulation were to be discontinued in the
industry for any reason, including competitive pressure on the cost-based prices
of electricity, profits could be reduced, and utilities might be required to
reduce their asset balances to reflect a market basis less than cost.
Discontinuance of cost-based regulation would also require affected utilities to
write off their associated regulatory assets. Management cannot predict the
potential impact, if any, of these competitive forces on the Company's future
financial position and results of operations.
60
<PAGE>
Deferral of Energy Costs
Nevada and California statutes permit regulated utilities to, from time-to-
time, adopt deferred energy accounting procedures, which record as deferred
energy costs the difference between actual fuel expense and fuel revenues. Under
regulations adopted by the PUCN, deferred energy rates are revised at least
every 12 months to recapture the accumulated deferred balance over a future
period. The intent of these procedures is to ease the effect of fluctuations in
the cost of purchased gas, fuel and purchased power.
During 1999 SPPC did not employ deferred energy accounting procedures, but
has resumed those procedures for natural gas operations as of January 1, 2000.
Federal Income Taxes and Investment Tax Credits
SPR and its subsidiaries file a consolidated federal income tax return.
Current income taxes are allocated based on SPR's and each subsidiary's
respective taxable income or loss and investment tax credits as if each
subsidiary filed a separate return. Deferred taxes are provided on temporary
differences at the statutory income tax rate in effect as of the most recent
balance sheet date.
SPPC accounts for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes." SFAS No. 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.
For regulatory purposes, SPPC is authorized to provide for deferred taxes
on the difference between straight-line and accelerated tax depreciation on
post-1969 utility plant expansion property, deferred energy, and certain other
differences between financial reporting and taxable income, including those
added by the Tax Reform Act of 1986 (TRA). In 1981, SPPC began providing for
deferred taxes on the benefits of using the Accelerated Cost Recovery System for
all post-1980 property. In 1987, the TRA required SPPC to begin providing
deferred taxes on the benefits derived from using the Modified Accelerated Cost
Recovery System.
Investment tax credits are no longer available to SPPC. The deferred
investment tax credits are being amortized over the estimated service lives of
the related properties.
Revenues
Operating revenues include unbilled utility revenues earned (service has
been delivered, but not yet billed by the end of the accounting period). These
amounts are also included in accounts receivable.
61
<PAGE>
Recent Pronouncements of the FASB
In June 1998, the FASB issued SFAS No. 133, entitled "Accounting for
Derivative Instruments and Hedging Activities". This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position, and measure those instruments at fair value. In May 1999, members of
the FASB agreed to delay the effective date of SFAS No. 133 to fiscal years
beginning after June 15, 2000, and accordingly, the Company is required to adopt
the statement effective January 1, 2001. The Company is still assessing the
impact of SFAS No. 133 on its financial condition and results of operations.
NOTE 2. REGULATORY ACTIONS
Nevada Matters
On April 30, 1999, the Company filed its second compliance filings
related to the 1997 rate stipulation The filings provide a calculation of the
Company electric and gas earnings in excess of a 12 % return on equity (ROE).
Any earnings in excess of 12 % ROE are shared 50/50 between shareholders and
customers. On August 19, 1999, the Commission approved a stipulation between the
Company, Staff, and the UCA, which rebated in 1999 $7.34 million and $2.0
million to electric and gas customers, respectively. Based on 1999 operating
results, the Company anticipates it may make refunds to customers. Appropriate
reserves have been recorded to reflect any anticipated refunds.
California Matters
On February 18, 1999, the California Public Utility Commission (CPUC)
approved the Company's proposed Revenue Cycle Services Credits (RCSC)
application filed February 2, 1998. The RCSC addresses meter ownership, meter
services, meter reading, and billing and applies to customers who select their
provider of a revenue cycle service.
On April 9, 1999, the Company made a compliance tariff filing which
reflects the approved credits.
On April 5, 1999, the CPUC approved the Company's proposed unbundled rates
effective back to June 1, 1998.
FERC Matters
On March 30, 1999, the Company filed an application with the FERC to
increase its Open Access Transmission rates. On October 12, 1999, the Company
filed an Offer of Partial Settlement which resolved all issues with the
exception of pricing to the Mines and to the City of Fallon. On November 3, the
Partial Settlement was certified to the FERC. A status report on the two
remaining issues was filed on January 11, 2000. On January 31, 2000, the FERC
approved the Partial Settlement.
62
<PAGE>
On March 31, 1999, the Company filed an application with the FERC for
approval of generation rates, terms and conditions under which the new owners of
the Company's generation would operate after divestiture. The FERC dismissed the
application on November 1, 1999, apparently misinterpreting the agreement
reached between the Company and the PUCN. The Company filed a request for
rehearing and on December 17, 1999, the FERC issued an Order Granting Rehearing
for Further Consideration. A decision is expected in 2000.
NOTE 3. JOINTLY OWNED FACILITIES
Valmy
SPPC and Idaho Power Company each own an undivided 50% interest in the
Valmy generating station, with each company being responsible for financing its
share of capital and operating costs. SPPC is the operator of the plant for
both parties.
SPPC's share of direct operation and maintenance expenses for Valmy is
included in the accompanying consolidated statements of income.
The following schedule reflects SPPC's 50% ownership interest in jointly
owned electric utility plant at December 31, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
Electric Accumulated Construction
MW Plant Provision For Work In
Plant Capacity In Service Depreciation Progress
-------- -------- ---------- ------------ --------
<S> <C> <C> <C> <C>
Valmy #1 129 $127,022 $55,625 $ 63
Valmy #2 137 $153,902 $56,431 $554
</TABLE>
Pinon Pine
Pinon Pine Corp. and Pinon Pine Investment Co., subsidiaries of SPPC, own
25% and 75% of a 38% interest in Pinon Pine Company, L.L.C. GPSF-B, a Delaware
corporation formerly owned by General Electric Capital Corporation (GECC) and
now owned by SPPC, owns the remaining 62% as of February 1999. The LLC was
formed to take advantage of federal income tax credits associated with the
alternative fuel (syngas) produced by the coal gasifier available under (S) 29
of the Internal Revenue Code. The entire project, which includes an LLC-owned
gasifier and an SPPC-owned power island and post-gasification facility to
partially cool and clean the syngas, is referred to collectively as the Pinon
Pine Power Project.
SPPC has a funding arrangement with the Department of Energy (DOE). Under
the agreement, the DOE will provide funding towards the construction of the
project, and towards the operating and maintenance costs of the facility. The
DOE has committed $168 million of funding for Pinon construction and operation
costs. The DOE provided funding for approximately 53% of the estimated
construction cost and half of the operating and fuel expenses through December
31, 1999. Additional funding will be provided until the commitment is expended.
A dispute has arisen with the DOE regarding the historical and future funding of
natural gas costs. In February 1999, the DOE informed SPPC it will not fund the
remaining $14 million under the cooperative agreement until the dispute is
resolved. On November 2, 1999, SPPC reached final agreement with the DOE
regarding the allowability of previously incurred natural gas costs. The
agreement also redefines the cooperative agreement performance period and the
responsibilities of both parties through the remainder of the
63
<PAGE>
agreement. The period of performance is extended until January 1, 2001 or until
the facility is sold or operational control is transferred. The DOE agrees to
share past fuel costs and future natural gas costs used to fuel the gas
combustion turbine during periods when air extraction from the process is
directed to the gasifier island. Estimated construction start-up and
commissioning costs for Pinon, including the DOE's portion are approximately
$301.5 million, which includes permitting taxes, start-up commissioning,
operator training and Allowance for Funds Used During Construction. DOE funding
for construction through December 1999 is $161.4 million.
Construction began on the project in February 1995, following resource plan
approval and the receipt of all permits and other approvals. The natural gas
portion (combined cycle combustion turbine) was satisfactorily completed and
placed in service December 1, 1996. The balance of the plant was completed in
June 1998. The construction of the gasifier portion of the project overran the
fixed contract price by approximately 12% or $12.6 million. The overrun is
primarily due to redesign issues, resolving technical issues relative to start
up and other costs due to a later than anticipated completion date. To date,
SPPC has not been successful in obtaining sustained operation of the gasifier
but work continues to identify problem areas and redesign solutions which will
likely require additional capital expenditures. Due to the problems noted
above, SPPC and Foster Wheeler settled on a portion of the cost overrun and have
entered into an alternative dispute resolution.
SPPC had to satisfy certain performance requirements as part of the
construction agreement with the LLC. The initial performance warranty required
that the gasifier attain an average capacity factor of 30% during 1997,
regardless of delays in the in-service date. Since the gasifier was not in
service in 1997, the certain performance warranties required by the contract
were not met. Consequently, SPPC paid GECC $2.8 million as satisfaction of the
performance obligation.
NOTE 4. PREFERRED STOCK AND PREFERRED SECURITIES
All issues of preferred stock are superior to SPR common stock with respect
to dividend payments (which are cumulative) and liquidation rights. SPPC's
Restated Articles of Incorporation, as amended on August 19, 1992, authorize an
aggregate total of 11,780,500 shares of preferred stock at any given time.
On July 29, 1996, the Trust, a wholly-owned subsidiary of SPPC, issued
$48.5 million (1,940,000 shares) of 8.60% Trust Originated Preferred Securities
(the Preferred Securities). SPPC owns all the common securities of the Trust;
60,000 shares totaling $1.5 million (Common Securities). The Preferred
Securities and the Common Securities (the Trust Securities) represent undivided
beneficial ownership interests in the assets of the Trust. The existence of the
Trust is for the sole purpose of issuing the Trust Securities and using the
proceeds thereof to purchase from SPPC its 8.60% Junior Subordinated Debentures
due July 30, 2036, in a principal amount of $50 million. The sole asset of the
Trust is SPPC's junior subordinated debentures. SPPC's obligations provide a
full and unconditional guarantee of the Trust's obligations under the Preferred
Securities.
The Preferred Securities of Sierra Pacific Power Capital I are redeemable
only in conjunction with the redemption of the related 8.60% junior subordinated
debentures. The junior subordinated debentures will mature on July 30, 2036, and
may be redeemed, in whole or in part, at any time on or after July 30, 2001, or
at any time in certain circumstances upon the occurrence of a tax event. A tax
event occurs if an opinion has been received from tax counsel that there is more
than an insubstantial risk that: the Trust is, or will be subject to federal
income tax with respect to interest accrued or received on the junior
subordinated debentures; the Trust is, or will be subject to more than a de
minimis amount of other taxes, duties or other governmental charges; interest
payable by SPPC to the Trust on the junior subordinated debentures is not, or
will not be, deductible, in whole or in part for federal income tax purposes.
64
<PAGE>
Upon the redemption of the junior subordinated debentures, payment will
simultaneously be applied to redeem preferred securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debentures. The preferred securities are redeemable at $25 per
preferred security plus accrued dividends.
On November 1, 1999, SPPC paid $23.5 million, par value and premium, to
redeem Series A, $2.44 Dividend (4.88%), Series B, $2.36 Dividend (4.72%) and
Series C, $3.90 Dividend (7.8%).
The following table indicates the number of shares outstanding at December
31 of each year and the dollar amount thereof. The difference between total
shares authorized and the amount outstanding represents undesignated shares
authorized but not issued.
<TABLE>
<CAPTION>
Shares Issued Amount
-------------------------------------- --------------------------------------
(Dollars in thousands) 1999 1998 1997 1999 1998 1997
------------- ------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Preferred Stock
Not subject to mandatory redemption:
Series A 80,500 80,500 $ 4,025 $ 4,025
Series B 82,000 82,000 4,100 4,100
Series C 299,800 299,800 14,990 14,990
Class A Series I 2,000,000 2,000,000 2,000,000 $50,000 50,000 50,000
------------- ------------- ------------- ------------- -------------- -------------
Subtotal 2,000,000 2,462,300 2,462,300 $50,000 $ 73,115 $ 73,115
Preferred Securities
Subject to mandatory redemption:
Preferred securities of
Sierra Pacific Power
Capital I 1,940,000 1,940,000 1,940,000 48,500 48,500 48,500
---------------------------------------------- ------------------------------------------------
Total 3,940,000 4,402,300 4,202,300 $98,500 $121,615 $121,615
============================================== ================================================
</TABLE>
65
<PAGE>
NOTE 5. TAXES
<TABLE>
<CAPTION>
The following reflects the composition of taxes on income (in thousands of dollars):
1999 1998 1997
---------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Taxes estimated to be currently payable $ 29,101 $ 46,176 $ 40,574
Deferred taxes related to:
Excess of tax depreciation over book depreciation 3,574 4,100 3,997
Contributions in aid of construction and customer advances (2,701) (2,963) (3,966)
Avoided interest capitalized 69 (875) (1,578)
Repairs and maintenance 1,504 - -
Severance programs 3,774
Other-net, deferral of energy costs & costs of abandoned 1,384 (2,075) 1,010
merger
Net amortization of investment tax credit (1,981) (1,930) (1,962)
State (California) 888 925 801
----------------------------------------------------------------
Total $ 35,661 $ 43,358 $ 38,876
================================================================
As Reflected in Statement of Income:
Federal income taxes $ 35,154 $ 42,625 $ 39,586
State income taxes 888 925 801
---------------------------------------------------------------
Operating Income 36,042 43,550 40,387
Other income-net (381) (192) (1,511)
--------------------------- ----------------- --------------
Total $ 35,661 $ 43,358 $ 38,876
===============================================================
The total income tax provisions differ from amounts computed by applying
the federal statutory tax rate to income before income taxes for the following
reasons (in thousands of dollars):
<CAPTION>
1999 1998 1997
---------------------------------------------------------------
Income before preferred dividend requirements $ 71,726 $ 86,020 $ 83,127
Total income tax expense 35,661 43,358 38,876
---------------------------------------------------------------
107,387 129,378 122,003
Statutory tax rate 35% 35% 35%
---------------------------------------------------------------
Expected income tax expense 37,585 45,282 42,701
Depreciation related to difference in cost basis for tax purposes 1,408 1,383 1,591
Allowance for funds used during construction - equity 386 (1,334) (1,912)
Tax benefit from the disposition of assets (442) 63 (569)
ITC amortization (1,981) (1,930) (1,962)
California franchise taxes (net of federal benefit) 577 601 521
Other-net (1,872) (707) (1,494)
----------------------------------------------------------------
$ 35,661 $ 43,358 $ 38,876
===============================================================
Effective tax rate 33.2% 33.5% 31.9%
</TABLE>
66
<PAGE>
The net deferred federal income tax liability consists of deferred federal
income tax liabilities less related deferred federal income tax assets, as shown
(in thousands of dollars):
<TABLE>
<CAPTION>
1999 1998
------------------- --------------------
<S> <C> <C>
Deferred Federal Income Tax Liabilities:
AFUDC $ 8,894 $ 8,378
Bond redemptions 6,099 6,466
Excess of tax depreciation over book depreciation 161,903 157,906
Severance Programs 6,380 2,606
Repairs and maintenance 7,684 6,180
Tax benefits flowed through to customers 65,531 65,618
Other (510) (45)
------------------- --------------------
Total $255,981 247,109
------------------- --------------------
Deferred Federal Income Tax Assets:
Avoided interest capitalized 14,624 14,694
Employee benefit plans 3,944 3,049
Contributions in aid of construction and customer advances 36,626 33,925
Gross-ups received on contributions in aid of construction and customer advances 5,163 4,512
Unamortized investment tax credit 19,991 20,432
Other 5,372 8,800
------------------- --------------------
Total 85,720 85,412
------------------- --------------------
Deferred Federal Income Taxes $170,261 $161,697
=================== ====================
</TABLE>
The Company's balance sheets contain a net regulatory tax asset of $27.7
million at December 31, 1999 and $26.7 million at December 31, 1998. The net
regulatory asset consists of future revenue to be received from customers (a
regulatory tax asset) of $65.5 million at December 31, 1999 and $65.6 million at
December 31, 1998, due to flow through of the tax benefits of temporary
differences. Offset against these amounts are future revenues to be refunded to
customers (a regulatory tax liability), consisting of $17.9 million at December
31, 1999 and $18.5 million at December 31, 1998, due to temporary differences
for liberalized depreciation at rates in excess of current tax rates, and $20.0
million at December 31, 1999 and $20.4 million at December 31, 1998 due to
temporary differences caused by the investment tax credit. The regulatory tax
liability 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 tax liability for temporary
differences caused by the investment tax credit will be amortized ratably in the
same fashion as the deferred investment credit.
NOTE 6. LONG-TERM DEBT
Substantially all utility plant is subject to the lien of the SPPC
indenture under which the first mortgage bonds are issued.
On June 17, 1998, SPPC redeemed $5 million of 8.65% First Mortgage Bonds
before the 2002 due date.
In December 1998, SPPC issued $35 million principal amount of
collateralized Medium-Term Notes, Series D, consisting of a three year non-
callable note, due in 2001, with an interest rate of 5.47% and five year non-
callable notes, due in 2003, with interest rate ranging from 5.50% to 5.59%. For
all notes, interest is payable in semi-annual payments. The proceeds to SPPC
from the sale of the notes was used for general corporate purposes including but
not limited to: the acquisition of property; the construction, completion,
extension or improvement of facilities; or discharge or refunding of
obligations, including short-term borrowings.
67
<PAGE>
On April 9, 1999, the Company sold the right to receive payments made in
respect of Transition Property as defined by the Offering Circular dated March
30, 1999, to SPPC Funding LLC, a Delaware special purpose limited liability
company whose sole member is the Company, in exchange for the proceeds of the
SPPC Funding LLC Notes, Series 1999-1 (the Underlying Notes). SPPC Funding LLC
then issued and sold the Underlying Notes to the California Infrastructure and
Economic Development Bank Special Purpose Trust SPPC-1 (the Trust) in exchange
for the proceeds of the sale of the Trust's $24.0 million 6.4% Rate Reduction
Certificates, Series 1999-1 (the Certificates). The Trust, which had been
established by the California Infrastructure and Economic Development Bank,
issued and sold the Certificates in a private placement pursuant to Rule 144A
under the Securities Act of 1933, as amended. The Certificates are one of a
series of rate reduction certificates that may be issued from time to time by
the Trust and sold to investors upon terms determined at the time of sale.
On July 12, and July 16, 1999, respectively, $10 million of the 6.86% and
$20 million of the 6.83% of the Series C, collateralized Medium-Term Notes
matured.
On September 17, 1999, the Company issued $100,000,000 Floating Rate
Notes, due October 13, 2000. Interest on the Notes is payable quarterly
commencing on December 15, 1999. The interest rate on the Notes for each
interest period to maturity is a floating rate, subject to adjustment every
three months. The quarterly rate is equal to the London InterBank Offered Rate
for three-month U.S. dollar deposits (LIBOR) plus a spread of 0.75%. These
Notes will not be entitled to any sinking fund and will be redeemable in whole,
without premium at the option of the Company, beginning on March 15, 2000 and on
the 15th day of each month thereafter. The proceeds of this financing were used
to pay down commercial paper.
SPPC's annual amount of maturities for long-term debt is as follows
(dollars in thousands):
2000 $102,755
2001 19,620
2002 2,626
2003 20,632
2004 2,621
----------
2000-2004 148,254
Thereafter 579,931
-----------
Total $728,185
NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The December 31, 1999 carrying amount for cash and cash equivalents,
current assets, accounts receivable, accounts payable and current liabilities
approximates fair value due to the short-term nature of these instruments.
The total fair value of SPPC's long-term debt at December 31, 1999, is
estimated to be $607.1 million (excluding current portion) based on quoted
market prices for the same or similar issues or on the current rates offered to
SPPC for debt of the same remaining maturities. The total fair value (excluding
current portion) was estimated to be $641.9 million as of December 31, 1998.
NOTE 8. SHORT-TERM BORROWINGS
68
<PAGE>
In January of 1999 the Company revised its credit facilities resulting in a
$150 million 364-day bank facility, and a $50 million revolving credit facility
to support commercial paper activity.
On July 28, 1999 the Company revised its credit facilities resulting in a
$150 million 364-day credit facility to support commercial paper activity. This
facility may be used for working capital and general corporate purposes,
including commercial paper backup. This credit facility will expire on July 28,
2000.
At December 31, 1999, SPPC's short-term debt was $109.6 million comprised
entirely of commercial paper at an average interest rate of 6.54%.
The other subsidiaries of SPPC have no outstanding short-term borrowings at
this time.
NOTE 9. DIVIDENDS
The Restated Articles of Incorporation of SPPC and the indentures relating
to the various series of its First Mortgage Bonds contain restrictions as to the
payment of dividends on its common stock. Under the most restrictive of these
limitations, approximately $76 million of retained earnings were available at
December 31, 1999 for the payment of common stock cash dividends.
NOTE 10. STOCK COMPENSATION PLANS
At December 31, 1999, Sierra Pacific Resources (SPR), SPPC's parent
company, had several stock-based compensation plans, which are described below.
The Company applies Accounting Principals Board Opinion No. 25, Accounting for
Stock Issued to Employees in accounting for its stock option plans.
Accordingly, no compensation cost has been recognized for nonqualified stock
options and the employee stock purchase plan. The total compensation cost that
has been charged against income for the performance shares, dividend equivalents
and the non-employee director stock plans was $0.7 million, $0.5 million, and
$1.4 million for 1999, 1998 and 1997, respectively. The Company has adopted the
disclosure-only provisions of SFAS No. 123, Accounting for Stock Based
Compensation. Had compensation cost for SPR's nonqualified stock options and
the employee stock purchase plan been determined based on the fair value at the
grant dates for awards under those plans consistent with the provisions of SFAS
No. 123, SPPC's income applicable to common stock would have been decreased to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Income Applicable to Common
Stock 1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
As Reported $66,241 $80,561 $77,668
Pro Forma $65,408 $80,217 $77,500
</TABLE>
SPR's executive long-term incentive plan for key management employees,
which was approved by shareholders on May 16, 1994, provides for the issuance of
up to 750,000 of SPR's common shares to key employees through December 31, 2003.
The plan permits the following types of grants, separately or in combination:
nonqualified and qualified stock options, stock appreciation rights, restricted
stock, performance units, performance shares, and bonus stock. During 1999, 1998
and 1997, the Company issued only nonqualified stock options and performance
shares under the long-term incentive plan.
69
<PAGE>
Nonqualified stock options granted during 1999, 1998 and 1997 were granted
at an option price not less than market value at the date of the grant (August
1, and January 1, 1999, January 1, 1998 and January 1, 1997, respectively). The
January 1 options for 1999, 1998 and 1997 vest to the participants 33 1/3% per
year over a three year period from the grant date, and may be exercised for a
period not exceeding ten years from the date of the grant. The August 1, 1999
options vest to the participants 33 1/3% per year over a three year period
beginning January 1, 2000, and may be exercised for a period not exceeding ten
years from the date of the grant. The options may be exercised using either cash
or previously acquired shares valued at the current market price, or a
combination of both.
As a result of the merger with NVP on August 1, 1999, all shares
outstanding as of that date, for January 1, 1999 grants and prior, were
converted at a 1.44:1 ratio. The subsequent change in the exercise prices and
the outstanding shares is reflected in all numbers shown for the applicable
grants.
The fair value of each nonqualified option has been estimated on the date
of grant using the Black-Scholes option-pricing model with the following
assumptions used for grants issued in 1999, 1998, and 1997:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Dividend Expected Risk-Free
Yield Volatility Rate of Return Expected Life
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 1, 1999 4.40% 18.60% 5.08% 10 years
August 1, 1999 4.25% 17.41% 6.31% 10 years
January 1, 1998 4.71% 13.16% 5.81% 10 years
January 1, 1997 5.30% 11.42% 6.68% 10 years
</TABLE>
A summary of the status of SPR's nonqualified stock option plan as of
December 31, 1999, 1998 and 1997, and changes during those years is presented
below:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Nonqualified Stock Options Shares (1) Price Shares (1) Price Shares (1) Price
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 285,931 $22.00 187,669 $17.70 101,520 $14.40
Granted 583,016 $25.36 173,460 $24.93 114,472 $19.97
Exercised 1,286 $14.39 31,014 $16.84 14,836 $14.09
Forfeited 34,678 $22.48 44,184 $18.83 13,487 $16.09
Outstanding at end of year 832,983 $24.34 285,931 $22.00 187,669 $17.70
Options exercisable at year-end 126,844 $20.54 50,930 $16.95 29,827 $14.11
Weighted-average grant date fair
value of options:
January 1 $4.05 $4.79 $3.51
August 1 $5.11
</TABLE>
1. As a result of the merger, all options outstanding prior to August 1, 1999
were converted at a 1.44:1 ratio. The historical information has been
adjusted to account for the related increase in shares.
The following table summarizes information about nonqualified stock options
outstanding at December 31, 1999:
70
<PAGE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Number Remaining Number
Outstanding at Contractual Life Exercisable at
Grant Date Exercise Price 12/31/99 Exercise Price 12/31/99
<S> <C> <C> <C> <C> <C>
01/01/1994 $14.24 11,976 4 years $14.24 11,976
01/01/1995 $13.02 15,841 5 years $13.02 12,673
01/01/1996 $16.23 13,718 6 years $16.23 8,231
01/01/1997 $19.97 62,472 7 years $19.97 41,649
01/01/1998 $24.93 156,960 8 years $24.93 52,315
01/01/1999 $24.22 198,576 9 years $24.22 -
08/01/1999 $26.00 373,440 9.6 years $26.00 -
Weighted Average Remaining 8.7 years
Contractual Life
</TABLE>
During 1999, 1998 and 1997, SPR granted performance shares in the following
numbers and initial values, respectively: 27,765, 23,778 and 17,726 shares; and
$26.00, $24.22 and $24.93 per share. These numbers reflect a 1.44:1 conversion
as a result of the August 1, 1999 merger with Nevada Power Company. The actual
number of shares earned by each participant is dependent upon SPR achieving
certain financial goals over three-year performance periods. The value of
performance shares, if earned, will be equal to the market value of SPR's common
shares as of the end of the performance periods. SPR, at its sole discretion,
may pay earned performance shares in the form of cash or in shares, or a
combination thereof.
Simultaneous with the grant of both the nonqualified options and
performance shares above, each participant was granted dividend equivalents for
all performance share grants, and for 1996 and prior nonqualified option grants.
Each dividend equivalent entitles the participant to receive a contingent right
to be paid an amount equal to dividends declared on shares originally granted
from the date of grant through the exercise date, or, in the case of performance
shares, throughout the performance period. Additionally, in order for dividend
equivalents to be paid on the performance shares, certain financial targets must
be met. Dividend equivalents will be forfeited if options expire unexercised.
Under SPR's employee stock purchase plan, SPR is authorized to issue up to
400,162 shares of common stock to all of its employees with minimum service
requirements. Under the terms of the plan, employees can choose twice each year
to have up to 15% of their base earnings withheld to purchase SPR's common
stock. The purchase price of the stock is 90% of the market value on the
offering commencement date. Employees can withdraw from the plan at any time
prior to the exercise date. Under the plan, SPR sold 21,888, 15,282 and 17,822
shares to employees in 1999, 1998 and 1997, respectively. Proforma compensation
cost has been estimated for the employees' purchase rights on the date of grant
using the Black-Scholes option-pricing model with the following assumptions used
for 1999, 1998 and 1997, respectively.
71
<PAGE>
<TABLE>
<CAPTION>
Average Dividend Average Expected Average Risk-Free Weighted Average
Yield Volatility Interest Rate Fair Value
<S> <C> <C> <C> <C>
1999 4.31% 18.85% 5.08% $2.85
1998 4.17% 14.16% 4.96% $4.94
1997 4.87% 11.57% 5.59% $4.14
</TABLE>
SPPC and SPR share the same directors and, as a result, the directors are
compensated according to the SPR non-employee director stock plan. The plan
provides that a portion of the outside directors' annual retainer be paid in SPR
stock. Under the current plan the annual retainer for non-employee directors is
$30,000, and the minimum amount to be paid in stock is $20,000 per director.
During 1999, 1998 and 1997, SPR granted the following total shares and related
compensation to directors in SPR stock, respectively: 4,741, 6,391 and 8,208
shares; and $150,000, $233,250, and $230,833. Nevada Power directors, who were
appointed to the SPR Board of Directors after the merger, were not issued any
stock options for 1999. Stock options were granted only to the remaining SPR
directors. In 2000, all directors will be eligible for stock option grants.
The Company also paid out phantom stock shares to retiring directors in the
amount of $1,222,110.
NOTE 11. RETIREMENT PLAN AND POST RETIREMENT BENEFITS
Pension and other postretirement benefit plans
SPR has pension plans covering substantially all employees. Benefits are
based on years of service and the employee's highest compensation prior to
retirement. SPR also has a postretirement plan, which provides medical and life
insurance benefits for certain retired employees. The following table provides
a reconciliation of benefit obligations, plan assets and the funded status of
the plans. The non-qualified Supplemental Executive Retirement Plan (SERP) is
included as part of pension benefits. This reconciliation is based on a
September 30 measurement date and reflects the merger of SPR and NVP during 1999
under purchase accounting. SPPC is a member of the controlled group in the
multi-employer plans.
72
<PAGE>
<TABLE>
<CAPTION>
Other Postretirement
Pension Benefits Benefits
--------------------------------------- --------------------------------------
1999 1998 1999 1998
----------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligations
Benefit obligation, beginning of year $149,031 $119,533 $ 16,381 $ 15,496
Service cost 8,481 5,386 996 432
Interest cost 12,823 9,285 1,982 1,155
Participant contributions 0 0 255 252
Plan amendment&special termination 5,865 2,240 1,312 0
Actuarial (gains) losses 4,663 18,001 (1,694) 47
Merger of SPPC Plans 192,140 0 60,386 0
Curtailment loss (gain) (5,373) 0 386 0
Benefits paid (19,160) (5,414) (2,017) (1,001)
----------- ----------- ----------- -----------
Benefit obligation, end of year $348,470 $149,031 $ 77,987 $ 16,381
=========== =========== =========== ===========
Change in plan assets
Fair value of plan assets, beginning of year $111,160 $100,898 $ 11,139 $ 8,665
Actual return on plan assets 15,510 9,546 4,649 1,464
Company contributions 10,432 6,130 2,069 1,759
Participant contributions 0 0 255 252
Merger of SPPC Plans 208,766 0 50,593 $ -
Benefits paid (19,160) (5,414) (2,017) (1,001)
----------- ----------- ----------- -----------
Fair value of plan assets, end of year $326,708 $111,160 $ 66,688 $ 11,139
=========== =========== =========== ===========
Funded Status, end of year $(21,762) $(37,870) $(11,299) $ (5,243)
Unrecognized net actuarial (gains) losses 26,550 19,320 (8,746) (11,507)
Unrecognized prior service cost 6,375 7,784 0 0
Contributions made in 4th quarter 288 3,609 1,096 1,908
Unrecognized net transition obligation 0 0 12,217 13,561
----------- ----------- ------------ -----------
Accrued pension and postretirement
benefit obligations $ 11,451 $ (7,157) $ (6,732) $ (1,281)
=========== =========== =========== ===========
</TABLE>
The following amounts pertain to the non-qualified SERP plan covering
certain current and former employees. The projected benefit obligation and
accumulated benefit obligation for pension plans with accumulated benefit
obligations in excess of the plan assets were $18.5 million and $15.7 million,
respectively, at the end of the year and $9.7 million and $8.3 million,
respectively, at the beginning of the year.
73
<PAGE>
Amounts for pension and postretirement benefits recognized in the consolidated
balance sheets consist of the following:
<TABLE>
<CAPTION>
Other Postretirement
Pension Benefits Benefits
----------------------------------- -------------------------------
1999 1998 1999 1998
----------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Prepaid pension asset $ 26,166 $ - N/A N/A
Accrued benefit liability (14,716) (7,157) $(6,732) $(1,281)
Intangible asset 346 577 N/A N/A
Accumulated other comprehensive income 606 (2,722) N/A N/A
Additional minimum liability (952) 2,145 N/A N/A
----------- ----------- ----------- -----------
Net amount recognized 11,450 (7,157) (6,732) (1,281)
=========== =========== =========== ===========
</TABLE>
The weighted-average actuarial assumptions as of December 31 were as follows:
<TABLE>
<CAPTION>
Other Postretirement
Pension Benefits Benefits
----------------------------- ------------------------
1999 1998 1997 1999 1998 1997
----------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.50% 6.75% 7.50% 7.50% 6.50% 7.50%
Expected return on plan assets 8.50% 8.50% 8.50% 8.50% 8.50% 8.50%
Rate of compensation increase 4.50% 4.50% 4.50% NA NA NA
</TABLE>
The Company has assumed a health care cost trend rate of 6% for 1999 and
all future years.
Net periodic pension and other postretirement benefit costs include the
following components:
74
<PAGE>
<TABLE>
<CAPTION>
Pension Benefits
---------------------------------------------------------
1999 1998 1997
---------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 8,481 $ 5,386 $ 4,406
Interest cost 12,823 9,285 8,437
Expected return on assets (11,712) (7,697) (7,015)
Amortization of:
Transition asset
Prior service costs 841 780 675
Actuarial (gains) losses 976 187 86
----------- ----------- -----------
Net periodic benefit cost 11,409 7,941 6,589
Additional charges (credits):
Special termination charges 5,865
Curtailment credits (3,920)
----------- ----------- -----------
Total net benefit cost $ 13,354 $ 7,941 $ 6,589
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Other Postretirement Benefits
--------------------------------------------------------
1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 996 $ 433 $ 370
Interest cost 1,982 1,155 1,270
Expected return on assets (1,741) (770) (626)
Amortization of:
Prior service costs 0 0 0
Transition obligation 1,344 967 967
Actuarial (gains) losses (596) (505) (399)
----------- ----------- -----------
Net periodic benefit cost 1,985 1,280 1,582
Additional charges (credits):
Special termination charges 1,312 0
Curtailment loss 1,283 0
----------- ----------- -----------
Total net benefit cost $ 4,580 $ 1,280 $ 1,582
=========== =========== ===========
</TABLE>
A regulatory asset was booked to offset the net effect of special
termination benefits and curtailment costs incurred in connection with the
merger of the two companies. The portion of the net periodic benefit cost
recognized for pension benefits by SPPC during 1999 was $.9 million. The portion
for other postretirement benefits recognized by SPPC was $.9 million.
75
<PAGE>
The assumed health care cost trend rate has a significant effect on the
amounts reported. A one percentage point change in the assumed health care cost
trend rate would have had the following effects on 1999 service and interest
costs and the accumulated postretirement benefit obligation at year end:
<TABLE>
<CAPTION>
Increase Decrease
-------- --------
<S> <C> <C>
Effect on service and interest
components of net periodic cost $ 554 $ (512)
Effect on accumulated postretirement
benefit obligation $6,239 $(5,776)
</TABLE>
NOTE 12. POSTEMPLOYMENT BENEFITS
During 1999, SPPC offered a severance program to non-bargaining-unit employees
which provided for severance pay and medical benefits continuation totaling $6.4
million and $0.2 million respectively. As of December 31, 1999, as approved by
the PUCN, this cost was deferred as a regulatory asset. The order approving
the merger of SPR and NVP, by the PUCN, directed SPR to defer merger costs
(including severance and related benefits) for a three year period. The
deferral of these costs is intended to allow adequate time for the anticipated
savings from the merger to develop. At the end of the three year period, the
order instructs the Company to propose an amortization period for these costs,
and allows the Company to recover the costs to the extent that they are offset
by merger savings. At December 31, 1999, the remaining liability for unpaid
severance was $3.0 million.
NOTE 13: COMMITMENTS AND CONTINGENCIES
The Company's estimated cash construction expenditures for the year 2000
and the five-year period 2000-2004 are $137.7 million and $679.8 million,
respectively.
The Company has several long-term contracts for the purchase of electric
energy and/or capacity. These contracts expire in years ranging from 2000 to
2009. Estimated future commitments under non-cancelable agreements with initial
terms of one year or more at December 31, 1999 were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Accounted for as
Long-Term
Executory Contracts
<S> <C>
2000 $ 28,114
2001 22,787
2002 23,488
2003 24,308
2004 25,182
2005 to 2009 114,840
</TABLE>
76
<PAGE>
The Company has several long-term contracts for the purchase and
transportation of coal and gas. These contracts expire in years ranging from
2000 to 2015. Estimated future commitments under non-cancelable agreements with
initial terms of one year or more at December 31, 1999 were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
Coal and Gas Transportation
<S> <C> <C>
2000 $113,011 $ 46,091
2001 38,971 45,914
2002 17,648 44,926
2003 8,098 35,962
2004 0 32,049
2005 to 2015 0 289,619
</TABLE>
The Company has an operating lease for its corporate headquarters building.
The primary term of the lease is 25 years, ending in 2010. The current annual
rental is $5.4 million, which amount remains constant until the end of the
primary term. The lease has renewal options for an additional 50 years.
The total rental expense under all operating leases, excluding fuel
transportation contracts, was approximately $10.0 million in 1999, $7.0 million
in 1998 and $6.9 million in 1997.
Estimated future minimum cash payments, including the Company's
headquarters building, under non-cancelable operating leases with initial terms
of one year or more at December 31, 1999 were as follows (dollars in thousands):
<TABLE>
<S> <C>
2000 $10,007
2001 8,650
2002 7,399
2003 7,220
2004 7,157
2005 to 2014 75,087
</TABLE>
In September 1994, Region VII of the United States Environmental Protection
Agency (EPA) notified the Company that the Company was being named as a
potentially responsible party (PRP) regarding the past improper handling of
Polychlorinated Biphenyls (PCBs) by PCB Treatment, Inc., located in Kansas City,
Kansas, and Kansas City, Missouri (the Sites). The EPA is requesting that the
Company voluntarily pay an undefined (pro rata) share of the ultimate clean-up
costs at the Sites. A number of the largest PRP's formed a steering committee,
which is chaired by the Company. The responsibility of the Committee is to
direct clean-up activities, determine appropriate cost allocation, and pursue
actions against recalcitrant parties, if necessary. The EPA issued an
administrative order on consent requiring signatories to perform certain
investigative work at the Sites. The steering committee retained a consultant to
prepare an analysis regarding the Sites. The site evaluations have been
completed. The EPA is developing an allocation formula to allocate the
remediation costs. The Company has recorded preliminary liability for the Sites
of $650,000, of which approximately $150,000 has been spent through December 31,
1999. Once evaluations are completed, the Company will be in a better position
to estimate and record the ultimate liabilities for the Sites.
77
<PAGE>
Additionally, the Company has four wells which currently exceed the federal
drinking water standard for naturally occurring arsenic concentrations.
Production from three of these wells continues by blending water treated at the
Glendale Water Treatment Plant. The fourth well is out of service pending
treatment. The Company's water laboratory research staff is developing options
to assure that the Company is prepared to meet new arsenic standards. The new
Arsenic regulations will be promulgated in 2000 and the proposed regulation is
expected to require action on 17 of the 25 wells serving the Company's system.
Depending upon final rules from the EPA, the Company may incur between $70
million and $98 million by 2004 to meet the new standards.
As part of the Generation Divestiture process, SPPC conducted Phase I and
Phase II Environmental Assessments for its Ft. Churchill, Tracy and Valmy Power
Plants. Anticipated remediation cost is $150,000.
See Notes 1, 3, 4, 6, 8, 11, and 12 of SPPC's consolidated financial
statements for additional commitments and contingencies.
SPPC, through the course of its normal business operations, is currently
involved in a number of other legal actions, none of which has had or, in the
opinion of management, is expected to have a significant impact on its financial
position or results of operations.
NOTE 14. SEGMENT INFORMATION
The Company adopted FASB statement No. 131, Disclosure about Segments of an
Enterprise and Related Information for its annual reports as of December 31,
1998. The Company operates three business segments providing regulated
electric, natural gas and water service. Electric service is provided to
northern Nevada and the Lake Tahoe area of California. Natural gas and water
services are provided in the Reno-Sparks area of Nevada. Other segment
information includes segments below the quantitative threshold for separate
disclosure.
Information as to the operations of the different business segments is set
forth below based on the nature of products and services offered. The Company
evaluates performance based on several factors, of which the primary financial
measure is business segment operating income. The accounting policies of the
business segments are the same as those described in the summary of significant
accounting policies (Note 1). Intersegment revenues are not material.
Financial data for business segments is as follows (in thousands):
<TABLE>
<CAPTION>
Electric Gas Water Reconciling
December 31, 1999 Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Operating revenues $ 609,197 $100,177 $ 54,348 763,722
Operating income 102,460 10,243 17,133 129,836
Operating income taxes 30,986 2,884 2,172 36,042
Depreciation 64,647 5,115 7,611 77,373
Interest expense on long term debt 27,803 3,348 9,112 40,263
Assets 1,620,720 152,016 280,057 43,683 2,096,476
Capital expenditures 102,249 12,041 28,016 142,306
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
Reconciling Consolidated
December 31, 1998 Electric Gas Water Eliminations
<S> <C> <C> <C> <C> <C>
Operating revenues $ 585,657 $ 99,532 $ 49,143 $ 734,332
Operating income 103,728 10,534 11,932 126,194
Operating income taxes 34,611 5,142 3,797 43,550
Depreciation 57,180 4,810 7,445 69,435
Interest expense on long term debt 25,497 3,601 9,792 38,890
Assets 1,558,322 139,398 274,124 39,976 2,011,820
Capital expenditures 144,080 11,124 28,180 183,384
</TABLE>
<TABLE>
<CAPTION>
Consolidated
December 31, 1997 Electric Gas Water Reconciling Eliminations
<S> <C> <C> <C> <C> <C>
Operating Revenues $540,346 $70,675 $46,519 $657,540
Operating income 99,671 10,057 10,444 120,172
Operating income taxes 33,742 4,223 2,422 40,387
Depreciation 52,239 4,531 7,347 64,117
Interest expense on long 28,095 3,312 8,202 39,609
term debt
Capital expenditures 105,531 12,191 30,079 147,801
</TABLE>
The reconciliation of segment assets to the consolidated total includes the
following unallocated amounts:
<TABLE>
<CAPTION>
1999 1998
------------- --------------
<S> <C> <C>
Other property $ 2,661 $ 1,342
Cash 3,011 15,197
Current assets- other 3,103 2,692
Other regulatory assets 34,571 21,031
Deferred charges- other 337 (286)
-------------- --------------
$43,683 $39,976
============== ==============
</TABLE>
NOTE 15. QUARTERLY FINANCIAL DATA (unaudited)
(Dollars in thousands):
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1999 1999 1999 1999
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues $192,611 $179,818 $194,802 $196,491
Operating Income 35,773 29,837 32,527 31,699
Income Before Preferred
Dividend Requirements 22,471 16,892 13,815 18,548
Income Applicable to
Common Stock 21,106 15,527 12,450 17,158
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998
------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues $182,722 169,143 187,446 $195,021
Operating Income 33,138 27,308 33,626 $ 32,122
Income Before Preferred
Dividend Requirement 23,194 17,705 23,751 $ 21,370
Income Applicable to
Common Stock 21,829 16,340 22,386 $ 20,006
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
(a) Directors
The following is a listing of all the current directors of SPPC and their
ages as of December 31, 1999. There are no family relationships among them.
Directors serve three-year terms with four (or five) terms of office expiring at
each Annual Meeting, or until their successors have been elected and qualified.
Directors whose terms expire in 2000:
Edward P. Bliss, 67
Consultant to Scudder Kemper Investments Co; retired partner, Loomis,
Sayles & Company, Inc., an investment counsel firm in Boston,
Massachusetts. He is also a Director of Seaboard Petroleum, Midland,
Texas. Mr. Bliss has served as a Director of SPR since 1991, of SPPC since
1991, and was elected a Director of NVP in July 1999.
Mary Kaye Cashman, 48
Chief Executive Officer and Vice Chairman of the Board since 1995 of
Cashman Equipment Company, one of the oldest and largest Caterpillar
dealers in North America. She serves on the boards of the Nevada Test Site
Development Corporation; Mackay School of Mines Advisory Board at the
University of Nevada, Reno; Bishop Gorman High School Endowment Foundation;
and McCaw Elementary School of Mines Foundation. Ms. Cashman has served as
a Director of NVP since 1997, and was elected a Director of SPR and SPPC in
July 1999. Ms. Cashman tendered her resignation as a Director on March 8,
2000.
80
<PAGE>
Mary Lee Coleman, 62
President of Coleman Enterprises, a developer of shopping centers and
industrial parks. She is also a director of First Dental Health. Ms.
Coleman has served as a Director of NVP since 1980, and was elected a
Director of SPR and SPPC in July 1999.
Jerry E. Herbst, 61
Chief Executive Officer of Terrible Herbst, Inc., a gas station, car wash,
convenience store chain; and Herbst Supply Co., Inc., a wholesale fuel
distributor; family-owned businesses for which he has worked since 1959.
He is also a partner of the Coast Resorts (hotel and casino industry). Mr.
Herbst has served as a Director of NVP since 1990, and was elected a
Director of SPR and SPPC in July 1999.
Directors whose terms expire in 2001:
Theodore J. Day, 50
Senior Partner, Hale, Day, Gallagher Company, a real estate brokerage and
investment firm. Mr. Day has served as a Director of SPPC since 1986, of
SPR since 1987, and was elected a Director of NVP in July 1999. He is also
a Director of the W.M. Keck Foundation.
James R. Donnelley, 64
Vice Chairman of the Board, R.R. Donnelley & Sons Company, since July 1990,
and a Director of that company since 1976. Mr. Donnelley was R.R.
Donnelley and Sons' Group President, Corporate Development from June 1987
to July 1990, and Group President, Financial Printing Services Group from
January 1985 to January 1988. He is also a Director of Pacific Magazines &
Printing Limited, and Chairman of National Merit Scholarship Corporation.
Mr. Donnelley has served as a Director of SPR since 1987, of SPPC since
1992, and was elected a Director of NVP in July 1999.
John L. Goolsby, 57
Retired President and Chief Executive Officer of The Howard Hughes
Corporation, a real estate investment and land development company. Mr.
Goolsby became affiliated with The Howard Hughes Corporation in 1980 and
served as President from 1988-1998. He is also a director of America West
----------------------------------
Holdings Corporation and Tejon Ranch Company. Mr. Goolsby has served as a
-----------------------
Director of NVP since 1991, and was elected a Director of SPR and SPPC in
July 1999.
81
<PAGE>
Malyn K. Malquist, 47, President and Chief Executive Officer
Mr. Malquist was elected President, Chief Operating Officer, and a Director
of SPR, and President, Chief Executive Officer, and a Director of NVP and
SPPC upon the close of SPR's merger with NVP in July 1999. He was
previously elected President and Chief Executive Officer of SPR and SPPC in
January 1998. In February 1998, Mr. Malquist was elected to the additional
position of Chairman. Mr. Malquist continued to hold the positions of
Chairman and Chief Executive Officer until SPR's merger with NVP in July
1999. He was Senior Vice President - Distribution Services Business Group
and Principal Operations Officer from August 1996 to January 1998. He
served as Senior Vice President and Chief Financial Officer of SPR and SPPC
from April 1994, when he joined SPR, until August 1996. Prior to joining
SPR, Mr. Malquist was with San Diego Gas and Electric, where from 1978 he
held various financial positions, including Treasurer and Vice President.
John F. O'Reilly, 54
Chairman and Chief Executive Officer of the law firm of Keefer, O'Reilly,
Ferrario and Lubbers. Mr. O'Reilly is also Chairman and Chief Executive
Officer of the O'Reilly Gaming Group and is Chairman of the Nevada Test
Site Development Corporation. Mr. O'Reilly has served as a Director of NVP
since 1995, and was elected a Director of SPR and SPPC in July 1999.
Directors whose terms expire in 2002:
Krestine M. Corbin, 62
President and Chief Executive Officer of Sierra Machinery, Incorporated
since 1984 and a director of that company since 1980. She also serves on
the Federal Reserve Bank Twelfth District Head Board. Ms. Corbin has
served as a Director of SPR since 1991, of SPR since 1989, and was elected
a Director of NVP in July 1999.
Fred D. Gibson, Jr., 72
Retired Chairman, President and Chief Executive Officer, but remains as a
director, of American Pacific Corporation, a manufacturer of chemicals and
pollution abatement equipment and a real estate developer. Mr. Gibson has
been affiliated with American Pacific Corporation and its predecessor,
Pacific Engineering & Production Co., since 1956. He is also a director of
Cashman Equipment Company. Mr. Gibson has served as a Director of NVP
since 1978, and was elected a Director of SPR and SPPC in July 1999.
James L. Murphy, 70
Certified Public Accountant and retired partner of and consultant to Grant
Thornton L.L.P., an international accounting and management consulting
firm. Mr. Murphy is the owner, independent trustee and general partner of
several real estate development projects and numerous rental properties.
He is also a retired Colonel in the United States Air Force Reserve. Mr.
Murphy has served as a Director of SPPC since 1990, of SPR since 1992, and
was elected a Director of NVP in July 1999.
82
<PAGE>
Michael R. Niggli, 50, Chairman and Chief Executive Officer
Mr. Niggli was elected Chairman and Chief Executive Officer of SPR, and
Chairman of NVP and SPPC, upon the close of SPR's merger with NVP in July
1999. He joined NVP as President and Chief Operating Officer in February
1998. He was appointed by NVP's Board of Directors as Chief Executive
Officer effective February 23, 1999 and as Chairman on June 10, 1999.
Prior to joining NVP, Mr. Niggli was Senior Vice President of the Custom
Accounts Market Unit for Entergy, a New Orleans-based global energy
company. Beginning in 1988, he also served at Entergy as Senior Vice
President of Marketing and in Vice President positions for areas including
fuels, strategic planning and customer service.
Dennis E. Wheeler, 57
Chairman, President and Chief Executive Officer of Coeur d'Alene Mines
Corporation since 1986. Mr. Wheeler has served as a Director of SPR since
1990, of SPPC since 1992, and was elected a Director of NVP in July 1999.
All of the present Directors are Directors of SPR. Messrs. Malquist and Murphy
are Directors of Lands of Sierra, Inc.; Messrs. Day and Malquist are Directors
of Tuscarora Gas Pipeline Co.; Mr. Niggli is a Director of Sierra Pacific
Communications; Mr. Malquist is a Director of Sierra Water Development Company,
Sierra Gas Holdings Co., Pinon Pine Corp., and Pinon Pine Investment Co. All of
the above listed companies are affiliates of SPPC with the exception of GPSF-B,
Pinon Pine Corp., and Pinon Pine Investment Co, which are subsidiaries.
(b) Executive Officers
The following are current executive officers of the companies indicated and
their ages as of December 31, 1999. There are no family relationships among
them. Officers serve a term which extends to and expires at the annual meeting
of the Board of Directors or until a successor has been elected and qualified:
Michael R. Niggli, 50, Chairman, Board of Directors
See description under Item 10(a), "Directors," page 83
Malyn K. Malquist, 47, President and Chief Executive Officer
See description under Item 10(a), "Directors," page 82.
Steven W. Rigazio, 45, Senior Vice President, Energy Delivery
Mr. Rigazio was elected Senior Vice President, Energy Delivery, in July
1999, and holds the same position with NVP. Previously he was Vice
President, Finance and Planning, Treasurer, and Chief Financial Officer for
NVP effective October 1993. Other NVP management positions include Vice
President and Treasurer, Chief Financial Officer; Vice President, Planning;
Director of System Planning; Manager of Rates and Regulatory Affairs; and
Supervisor of Rates and Regulations. Mr. Rigazio has been with NVP since
1984.
83
<PAGE>
William E. Peterson, 52, Senior Vice President, General Counsel and Corporate
Secretary
Mr. Peterson was elected to his present position in January 1994, and holds
the same positions with the Company's parent, SPR, and with NVP. He was
previously Senior Vice President, Corporate Counsel for SPPC from July 1993
to January 1994. Prior to joining the Company in 1993, he served as General
Counsel and Resident Agent for SPR since 1992, while a partner in the
Woodburn and Wedge law firm. He was a partner in the Woodburn and Wedge
law firm since 1982.
Mark A. Ruelle, 38, Senior Vice President, Chief Financial Officer and Treasurer
Mr. Ruelle was elected to his present position March 1, 1997, and holds the
same positions with SPR and NVP. Prior to joining the Company, Mr. Ruelle
was President of Westar Energy, a subsidiary of Western Resources in 1996,
and before that, served as Vice President, Corporate Development for
Western Resources in 1995. Mr. Ruelle was with Western Resources since
1987 and served in numerous positions in regulatory affairs, treasury,
finance, corporate development, and strategy planning.
David G. Barneby, 54, Vice President, Generation
Mr. Barneby was elected Vice President, Generation, in July 1999, and holds
the same position with NVP. Previously he was elected Vice President,
Power Delivery for NVP effective October 1993. Mr. Barneby has been with
NVP since 1965, and other management positions include Vice President,
Generation; Manager, Generation Engineering and Construction; and
Superintendent and Project Manager, Reid Gardner Unit 4.
Jeffrey L. Ceccarelli, 45, Vice President, Distribution Services, New Business
Mr. Ceccarelli was elected Vice President, Distribution Services, New
Business, in July 1999, and holds the same position with NVP. He was
elected Vice President, Distribution Services in February 1998. Prior to
this, he served as Executive Director, Distribution Services. From January
1996 through January 1998, Mr. Ceccarelli was Director, Customer
Operations. A civil engineer, Mr. Ceccarelli has been with the Company
since 1972 and has held numerous management positions in operations,
customer service, design and engineering.
Gloria T. Banks Weddle, 50, Vice President, Corporate Services
Ms. Weddle was elected Vice President, Corporate Services of the Company in
July 1999, and was elected to the same position with NVP in January 1996.
Previously she was Vice President, Human Resources and Corporate Services
for NVP effective October 1993. Other NVP management positions include
Vice President, Human Resources; Director of Human Resources; and Manager
of Compensation and Benefits. Ms. Weddle has been with NVP since 1973.
Matt H. Davis, 44, Vice President, Distribution Services, Operations and
Maintenance
Mr. Davis was elected Vice President, Distribution Services, Operations and
Maintenance in July 1999, and holds the same position with NVP. Previously
he was Director, System Planning and Division Director, System Planning and
Operations for NVP. Mr. Davis has been with NVP since 1978 and has held
various positions in the distribution, transmission, power contracts, and
land services departments.
84
<PAGE>
Mary O. Simmons, 44, Controller
Ms. Simmons was elected to her current position in June 1997, and holds the
same position with SPR and NVP. Her previous positions include: Director,
Water Policy and Planning; Director, Budgets and Financial Services; and
Assistant Treasurer, Shareholder Relations for SPR. Ms. Simmons, a
certified public accountant, has been with the Company since 1985.
Douglas R. Ponn, 52, Vice President, Governmental and Regulatory Affairs
Mr. Ponn was elected Vice President, Governmental and Regulatory Affairs in
July 1999, and holds the same position with NVP. Previously he was
Executive Director, Governmental and Regulatory Affairs. Mr. Ponn has been
with the Company since 1986.
Mary Jane Reed, 53, Vice President, Human Resources
Ms. Reed was elected Vice President, Human Resources of the Company in
January 1997, and was named to the same position with NVP in July 1999.
She was previously Vice President, Human Resources Network Group for Bell
Atlantic Corporation. Ms. Reed was with Bell Atlantic from 1968 - 1996 and
in addition to the Vice President's position, served as Director of Human
Resources, Assistant to the President for Consumer Affairs, and several
other managerial positions.
Although all outstanding shares of the Company's common stock are held by SPR
and it is SPR's common stock which is traded on the New York Stock Exchange,
SPPC has four series of non-voting preferred stock still outstanding and
registered under the Securities Exchange Act of 1934 ("the Act"). As a
technical matter, the Company is thus deemed an "issuer" for purposes of the Act
whose officers are required to make filings with respect to beneficial
ownership, if any, of those non-voting preferred securities. The Company's
officers, all of whom are currently reporting pursuant to Section 16(a) of the
Act with respect to SPR's common stock, have now filed reports with respect to
the Company's preferred stock, which reports show no past or current beneficial
ownership of such preferred stock.
85
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information about the compensation of each
Chief Executive Officer that served in that position during 1999, and each of
the four most highly compensated officers for services in all capacities to SPR
and its subsidiaries.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------------------------------------------------------------------------
Awards Payout
-----------------------------------------------------------
Securities
Restricted Underlying
Name and Principal Other Annual Stock Options/ LTIP All Other
Position Year Salary ($) Bonus ($) Compensation ($) Awards ($) SARs (#) Payouts ($) Compensation ($)
(a) (b) (c) (d) (2) (e) (3) (f) (g) (4) (h) (5) (i) (6)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael R. Niggli (1) 1999 $400,000 $255,130 $ 1,183 - 123,000 $410,306 $ 8,934
Chairman and Chief 1998 $353,846 $216,000 $11,161 - - $115,399 $79,743
Executive Officer
Malyn K. Malquist (1) 1999 $352,692 $199,875 $14,337 - 298,792 - $22,021
President and Chief 1998 $292,960 $180,900 $16,486 - 61,000 $ 85,184 $15,805
Operating Officer 1997 $212,803 $ 92,198 $ 2,052 - 14,000 $101,192 $15,279
Steven W. Rigazio 1999 $262,075 $ 81,700 $60,654 - 36,260 $127,712 $ 6,811
Senior Vice President, 1998 $219,462 $ 30,750 $13,712 - - $ 29,304 $ 4,800
Energy Delivery 1997 $202,269 $ 48,750 $11,736 - - $ 36,594 $ 4,800
Mark A. Ruelle 1999 $196,654 $ 86,658 $ 7,389 - 61,292 - $ 8,565
Senior Vice President, 1998 $192,116 $ 72,843 $12,342 - 9,000 $ 50,108 $ 8,974
Chief Financial Officer 1997 $143,308 $ 65,269 $ 3,808 - 8,384 - $77,329
and Treasurer
William E. Peterson 1999 $200,000 $ 83,053 $20,727 - 80,168 - $11,974
Senior Vice President, 1998 $199,385 $ 71,503 $18,918 - 9,000 $ 85,184 $29,939
General Counsel and 1997 $207,757 $ 78,184 $17,142 - 10,000 $101,192 $29,488
Corporate Secretary
Gloria T. Banks-Weddle 1999 $185,769 $ 57,564 $41,358 - 18,220 $101,582 $ 7,371
Vice President, 1998 $177,222 $ 54,000 - - - $ 29,960 $ 4,514
Corporate Services 1997 $164,539 $ 25,500 - - - - $ 3,067
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Mr. Malquist was Chairman, President and Chief Executive Officer of Sierra
Pacific Resources until the August 1, 1999 merger, at which time Mr.
Malquist was named President and Chief Executive Officer of SPPC, and
President and Chief Operating Officer of the parent, SPR; and Mr. Niggli
was appointed Chairman of the Board of Directors and Chief Executive
Officer of the parent, SPR, and Chairman of the Board of Directors of SPPC.
2. The amounts presented for 1999, and those for SPR executives in 1998 and
1997, represent incentive pay received pursuant to SPR's "pay for
performance" team incentive plan approved by stockholders in May, 1994. The
1998 and 1997 amounts for the NVP executives represent pay received
according to the NVP Short-Term Incentive Plan.
3. For the executives listed, with the exceptions noted below, these amounts
represent Personal Time Off payouts. For Mr. Rigazio and Ms. Banks-Weddle,
the Personal Time Off payouts were $17,881 and $5,596 respectively. Also
included for these executives is the amount of those perquisites, which in
the aggregate, exceeded the lesser of $50,000 or 10% of their salary and
bonus. Due to a change in policies after the merger, the NVP executives
were either given their company vehicle, or allowed to purchase it at a
bargain price. The fair market value and the related tax gross-up, less any
amount paid by the executive, if applicable, was included as compensation
for the executives. Mr.
86
<PAGE>
Rigazio and Ms. Banks-Weddle received, as compensation for their automobiles,
$42,774 and $35,762 respectively.
4. As a result of the August 1, 1999 merger with Nevada Power Company, all SPR
nonqualifying stock options outstanding as of that date were converted at a
ratio of 1.44:1. For the pre-merger SPR executives, the 1999 option amounts
include the number of new shares issued during the year, as well as the total
number of shares that were converted for that employee. For 1998 and 1997,
the amounts are the same as those presented in prior years and do not reflect
the conversion.
5. The Long-term incentive payouts for the SPR executives, for the three-year
period January 1, 1997 to December 31, 1999, was not approved for payment by
the SPR Board of Directors; therefore, zero amounts are shown in 1999 for the
pre-merger SPR executives. Nevada Power executives received a lump sum payout
of all their performance shares as a result of the August 1, 1999 merger.
6. Amounts for All Other Compensation include the following for 1999:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Michael R. Malyn K. Steven W. Mark A. William E. Gloria T.
Description Niggli Malquist Rigazio Ruelle Peterson Banks-Weddle
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Company contributions to $6,639 $ 6,000 $6,659 $6,000 $6,000 $7,204
the 401k deferred
compensation plan
Company contributions to $14,225 $2,000 $4,126
the nonqualified deferred
compensation plan
Imputed income on group $ 528 $ 152 $ 176 $ 643 $ 166
term life insurance
premiums paid by the
Company
Insurance premiums paid for $2,294 $ 1,268 $ 389 $1,205
executive term life
policies
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Options/SAR Grants in Last Fiscal Year
The following table shows all grants of options to the named executive
officers of SPR in 1999. Pursuant to Securities and Exchange Commission (SEC)
rules, the table also shows the present value of the grant at the date of grant.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Percent of Total
Number of Securities Options/SAR's Granted
Underlying to Employees in Exercise of Base Grant Date
Name Options/SAR's Granted Fiscal Year Price ($/share) Expiration Date Present Value
(a) (1) (b) (2) (c) (3) (d) (e) (f) (4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michael R. Niggli
08/01/1999 Grant 123,000 14.77% $26.00 08/01/2009 $ 628,530
Employee Total 123,000 14.77% $ 628,530
Malyn K. Malquist
08/01/1999 Grant 87,840 10.55% $26.00 08/01/2009 $ 448,862
01/01/1999 Grant 87,840 10.55% $24.22 01/01/2009 $ 355,752
01/01/1998 Grant 87,840 10.55% $24.93 01/01/2008 $ 275,110
01/01/1997 Grant 20,160 2.42% $19.97 01/01/2007 $ 49,157
01/01/1996 Grant 5,045 0.61% $16.23 01/01/2006 $ 7,459
01/01/1995 Grant 6,092 0.73% $13.02 01/01/2005
01/01/1994 Grant 3,975 0.48% $14.24 01/01/2004
Employee Total 298,792 35.89% $1,136,340
</TABLE>
87
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Steven W. Rigazio
08/01/1999 Grant 23,300 2.80% $26.00 08/01/2009 $119,063
01/01/1999 Grant 12,960 1.56% $24.22 01/01/2009 $ 52,488
Employee Total 36,260 4.36% $171,551
Mark A. Ruelle
08/01/1999 Grant 23,300 2.80% $26.00 08/01/2009 $119,063
01/01/1999 Grant 12,960 1.56% $24.22 01/01/2009 $ 52,488
01/01/1998 Grant 12,960 1.56% $24.93 01/01/2008 $ 40,590
01/01/1997 Grant 12,072 1.45% $19.97 01/01/2007 $ 29,436
Employee Total 61,292 7.37% $241,577
William E. Peterson
08/01/1999 Grant 23,300 2.80% $26.00 08/01/2009 $119,063
01/01/1999 Grant 12,960 1.56% $24.22 01/01/2009 $ 52,488
01/01/1998 Grant 12,960 1.56% $24.93 01/01/2008 $ 40,590
01/01/1997 Grant 14,400 1.73% $19.97 01/01/2007 $ 35,112
01/01/1996 Grant 5,045 0.61% $16.23 01/01/2006 $ 7,459
01/01/1995 Grant 6,092 0.73% $13.02 01/01/2005
01/01/1994 Grant 5,411 0.65% $14.24 01/01/2004
Employee Total 80,168 9.64% $254,712
Gloria T. Banks-Weddle
08/01/1999 Grant 10,300 1.24% $26.00 08/01/2009 $ 52,633
01/01/1999 Grant 7,920 0.95% $24.22 01/01/2009 $ 32,076
Employee Total 18,220 2.19% $ 84,709
- --------------------------------------------------------------------------------
</TABLE>
1. Under the SPR executive long-term incentive plan, the 1999 grants of
nonqualifying stock options were made on January 1. One third of these
grants vest annually commencing one year after the date of the grant. An
additional grant of nonqualifying stock options was made on August 1, 1999,
following the merger with Nevada Power Company. One third of these grants
vest annually commencing January 1, 2001.
2. As a result of the August 1, 1999 merger with Nevada Power Company, all SPR
nonqualifying stock options outstanding as of that date were converted at a
ratio of 1.44:1. This resulted in the repricing of each grant and a change
in the number of outstanding shares for each employee. According to SEC
regulations, these repriced options are listed above as grants issued
during the year. The vesting periods and expiration dates of the grants
were not changed.
3. The total number of nonqualifying stock options granted to all employees in
1999 was 832,983.
4. The hypothetical grant date present values are calculated under the Black-
Scholes Model. The Black-Scholes Model is a mathematical formula used to
value options traded on stock exchanges. The assumptions used in
determining the option grant date present value listed above include the
stock's average expected volatility (17.77%), average risk free rate of
return (5.94%), average projected dividend yield (4.30%), the stock option
term (10 years), and an adjustment for risk of forfeiture during the
vesting period (3 years at 3%). No adjustment was made for non-
transferability.
88
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
The following table provides information as to the value of the options
held by the named executive officers at year end measured in terms of the
closing price of Sierra Pacific Resources common stock on December 31, 1999.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Number of Securities Underlying
Acquired on Value Unexercised Options/SARs at Value of Unexercised in-the-money
Name Exercise Realized Fiscal Year-End Options/SARs at Fiscal Year-End
(a) (b) (c) (d) (e)
-------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Niggli - - - 123,000 - -
Malyn K. Malquist - - 54,593 244,199 $36,384 $7,400
Steven W. Rigazio - - - 36,260 - -
Mark A. Ruelle - - 12,368 48,924 - -
William E. Peterson - - 27,232 52,936 $40,798 $7,400
Gloria T. Banks-Weddle - - - 18,220 - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(e) Pre-tax gain. Value of in-the-money options based on December 31, 1999
closing trading price of $17.31 less the option exercise price.
Long-Term Incentive Plans-Awards in Last Five Years
The executive long-term incentive plan (LTIP) provides for the granting of
stock options (both nonqualified and qualified), stock appreciation rights
(SARs), restricted stock performance units, performance shares and bonus stock
to participating employees as an incentive for outstanding performance.
Incentive compensation is based on the achievement of pre-established financial
goals for SPR. Goals are established for total shareholder return (TSR) compared
against the Dow Jones Utility Index and annual growth in earnings per share
(EPS).
The following table provides information as to the performance shares
granted to the named executive officers of Sierra Pacific Power Company in 1999.
Nonqualifying stock options granted to the named executives as part of the LTIP
are shown in the table "Option/SAR Grants in Last Fiscal Year."
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Estimated Future Payouts Under Non-Stock Price-
Based Plans
---------------------------------------------------
Performance or
Number of Shares, Other Period Until
Units or Other Maturation or
Name Rights Payout Threshold ($) Target ($) Maximum ($)
(a) (b) (c) (d)(1) (e)(2) (f)(3)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michael R. Niggli 6,480 3 years $78,473 $156,946 $274,655
Malyn K. Malquist 6,480 3 years $78,473 $156,946 $274,655
Steven W. Rigazio 1,872 3 years $22,670 $ 45,340 $ 79,345
Mark A. Ruelle 1,872 3 years $22,670 $ 45,340 $ 79,345
William E. Peterson 1,872 3 years $22,670 $ 45,340 $ 79,345
Gloria T. Banks-Weddle 1,152 3 years $13,951 $ 27,901 $ 48,828
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. The threshold represents the level of TSR and EPS achieved during the cycle
which represents minimum acceptable performance and which, if attained,
results in payment of 50% of the target award. Performance below the
minimum acceptable level results in no award earned.
89
<PAGE>
2. The target represents the level of TSR and EPS achieved during the cycle
which indicates outstanding performance and which, if attained, results in
payment of 100% of the target award.
3. The maximum represents the maximum payout possible under the plan and a
level of TSR and EPS indicative of exceptional performance which, if
attained, results in a payment of 175% of the target award.
All levels of awards are made with reference to the price of each
performance share at the time of the grant.
Pension Plans
The following table shows annual benefits payable on retirement at normal
retirement age 65 to elected officers under the Company's defined benefit plans
based on various levels of remuneration and years of service which may exist at
the time of retirement.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Highest Average Annual Benefits for Years of Service Indicated
Five-Years
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 60,000 $ 27,000 $ 31,500 $ 36,000 $ 36,000 $ 36,000
$120,000 $ 54,000 $ 63,000 $ 72,000 $ 72,000 $ 72,000
$180,000 $ 81,000 $ 94,500 $108,000 $108,000 $108,000
$240,000 $108,000 $126,000 $144,000 $144,000 $144,000
$300,000 $135,000 $157,500 $180,000 $180,000 $180,000
$360,000 $162,000 $189,000 $216,000 $216,000 $216,000
$420,000 $189,000 $220,500 $252,000 $252,000 $252,000
$480,000 $216,000 $252,000 $288,000 $288,000 $288,000
$540,000 $243,000 $283,500 $324,000 $324,000 $324,000
$600,000 $270,000 $315,000 $360,000 $360,000 $360,000
$660,000 $297,000 $346,500 $396,000 $396,000 $396,000
$720,000 $324,000 $378,000 $432,000 $432,000 $432,000
- ----------------------------------------------------------------------------------------
</TABLE>
The Company's noncontributory retirement plan provides retirement benefits
to eligible employees upon retirement at a specified age. Annual benefits
payable are determined by a formula based on years of service and final average
earnings consisting of base salary and incentive compensation. Remuneration for
the named executives is the amount shown under "Salary" and "Incentive Pay" in
the "Summary Compensation Table. Pension costs of the retirement plan to which
the Company contributes 100% of the funding are not and cannot be readily
allocated to individual employees and are not subject to Social Security or
other offsets.
Years of credited service for the named executives are as follows: Mr.
Niggli, 0.9; Mr. Malquist, 4.6; Mr. Rigazio, 14.5; Mr. Ruelle, 1.8; Mr.
Peterson, 12.5; and Ms. Banks-Weddle, 19.8.
A supplemental executive retirement plan (SERP) and an excess plan are also
offered to the named executive officers. The SERP is intended to ensure the
payment of a competitive level of retirement income to attract, retain and
motivate selected executives. The excess plan is intended to provide benefits
to executive officers whose pension benefits under the Company's retirement plan
are limited by law to certain maximum amounts.
90
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Voting Stock
SPR owns 100% of the voting stock of SPPC.
The table below sets forth the shares of Sierra Pacific Resources Common
Stock beneficially owned by each director, nominee for director, the Chief
Executive Officer, and the four other most highly compensated executive
officers. No director, nominee for director or executive officer owns, nor do
the directors and executive officers as a group own, in excess of one percent of
the outstanding Common Stock of SPR. Unless otherwise indicated, all persons
named in the table have sole voting and investment power with respect to the
shares shown.
<TABLE>
<CAPTION>
Common Shares
Beneficially Percent of Total Common
Owned as of Shares Outstanding as of
Name of Director or Nominee March 1, 2000 March 1, 2000
--------------------------- ----------------- ------------------------
<S> <C> <C>
Edward P. Bliss 22,988
Mary K. Cashman 9,054
Mary L. Coleman 262,656
Krestine M. Corbin 16,454
Theodore J. Day 31,429 No director or nominee
James R. Donnelley 30,129 for director owns in excess
Fred D. Gibson Jr. 7,708 of one percent
John L. Goolsby 7,965
Jerry E. Herbst 5,100
Malyn K. Malquist 158,479
James L. Murphy 18,285
Michael R. Niggli 43,867
John F. O'Reilly 4,000
Dennis E. Wheeler 13,635
-------
631,749
=======
<CAPTION>
Common Shares
Beneficially Percent of Total Common
Owned as of Shares Outstanding as of
Executive Officers March 1, 2000 March 1, 2000
------------------ ----------------- ------------------------
<S> <C> <C>
Charles A. Lenzie (1) 9,475
Michael R. Niggli (1) 43,867
Malyn K. Malquist (1) 158,479 No executive officer owns
Steven W. Rigazio 20,553 in excess of one percent
Mark A. Ruelle 35,444
William E. Peterson 55,993
Gloria T. Banks-Weddle 6,839
-------
330,650
=======
All directors and executive officers
as a group (a) (b) (c) 876,275
=======
</TABLE>
(1) Mr. Malquist was Chairman, President and Chief Executive Officer of Sierra
Pacific Resources until the August 1, 1999 merger, at which time Mr.
Malquist was named President and Chief Executive Officer of SPPC, and
President and Chief Operating Officer of the parent, SPR, and Mr.
91
<PAGE>
Niggli was appointed Chairman of the Board of Directors and Chief Executive
Officer of the parent, SPR, and Chairman of the Board of Directors of SPPC.
(a) Includes shares acquired through participation in the Employee Stock
Purchase Plan and/or the 401(k) plan.
(b) The number of shares beneficially owned includes shares which the Executive
Officers currently have the right to acquire pursuant to stock options
granted, and performance shares earned under the Executive Long-Term
Incentive Plan. Share beneficially owned pursuant to stock options granted
to Messrs. Niggli, Malquist, Rigazio, Peterson, Ruelle, Banks-Weddle, and
directors and executive officers as a group are 34,797, 151,365, 7,766,
50,668, 32,799 3,433, and 369,503 shares, respectively.
(c) Included in the shares beneficially owned by the Directors are 45,913
shares of "phantom stock" representing the actuarial value of the
Director's vested benefits in the terminated Retirement Plan for Outside
Directors. The "phantom stock" is held in an account to be paid at the
time of the Director's departure from the Board.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SPR entered into an agreement with Hale Day Gallagher Co., a real estate
brokerage and investment company, to act as broker for the sale of a property
owned by Lands of Sierra, Inc., a subsidiary of SPR. The sale of the property
resulted in Hale Day Gallagher Co. receiving a standard brokerage commission of
5% of the selling price. Mr. T.J. Day, a senior partner of Hale Day Gallagher
Co. and a Director of the Company, did not participate in any discussions or
voting to retain the firm, had no relationship with, or interest in, the
transaction, will receive no part of the commission, and no direct or indirect
benefit from the transaction.
Mr. Peterson, formerly a partner with the law firm of Woodburn and Wedge,
became Senior Vice President and General Counsel for Sierra Pacific Resources in
1993. Woodburn and Wedge, which has performed legal services for Sierra Pacific
Power Company since 1920 and for Sierra Pacific Resources and all of its
subsidiaries from their inception, continues to perform legal work for the
Company. Mr. Peterson's spouse, an equity partner in the firm since 1982, has
performed work for the Company since 1976 and continues to do so from time to
time.
Susan Oldham, a former employee of SPPC specializing in water resources
law, planning and policy accepted the Company's voluntary severance offering in
December 1995. Ms. Oldham is the spouse of Steven C. Oldham, Vice President
Transmission Business Group and Strategic Development for Sierra Pacific Power
Company. Ms. Oldham, a licensed attorney in Nevada and California, has
continued to perform specialized legal services in the water resources area for
the Company on a contract basis.
In 1999, SPPC purchased all of the plant assets of the Silver Lake Water
Company. The stock is owned 50% by the Lear Family Trust and 50% by Moya Olsen
Lear. Mr. Murphy, a Director of SPPC, and Mr. Dayton, a former director of SPPC
and a director at the time of purchase, are trustees of the Lear Family Trust.
Neither Mr. Murphy nor Mr. Dayton participated in any of the Company's
discussions or deliberations to purchase the Silver Lake Water Company and
neither received any benefit, either directly or indirectly, from the
transaction.
92
<PAGE>
Change in Control Agreement
Employment Agreements
- ---------------------
Sierra Pacific Resources has entered into Employment Agreements with
Messrs. Niggli and Malquist. Messrs. Niggli and Malquist are sometimes
hereinafter individually referred to as the "Executive." The Employment
Agreements became effective on July 28, 1999, and have an initial term of three
years, which term would automatically be extended in the event of a Change in
Control (as defined in the Agreements) to the third anniversary of the Change in
Control (or the consummation of the Change in Control, if later). The extended
term is subject to further extension on the occurrence of an additional Change
in Control event.
Pursuant to the Employment Agreements, Mr. Niggli will serve as Chairman
and Chief Executive Officer of Sierra Pacific Resources, and Mr. Malquist will
serve as President and Chief Operating Officer of Sierra Pacific Resources and
Chief Executive Officer of Nevada Power Company and SPPC.
Each Executive's Employment Agreement provides that he will receive annual
base salary commensurate with his position and level of responsibility, as
determined by the Sierra Pacific Board (or compensation committee thereof), but
not less than the Executive's annual base salary as in effect immediately prior
to the Merger. Base salary may not be decreased. Each Employment Agreement
also provides that the Executive will be eligible to participate in any annual
incentive and long-term cash incentive plans applicable to executive and
management employees that are authorized by the Sierra Pacific Board (or
compensation committee thereof), with such participation, subject to achievement
of applicable performance measures, to be at annual target payout or grant
levels, respectively, of not less than a percentage of the Executive's annual
base salary equal to the corresponding target percentage of annual base salary
in effect for the Executive under the Nevada Power or Sierra Pacific plans in
which the Executive participated immediately prior to the Merger; provided,
however, that the target percentages for one Executive shall in no event be less
than the target percentages for the other Executive. The Executives also are
entitled to participate in all employee benefit plans in which senior executives
of Sierra pacific are entitled to participate, in certain fringe benefits and in
the supplemental retirement plans in which they participated immediately prior
to the Merger.
If during the term of the Employment Agreement Sierra Pacific terminates
the employment of the Executive for reasons other than cause (as defined in each
Employment Agreement), death or disability or the Executive terminates his
employment for good reason (as defined in each Employment Agreement), the
Executive will receive, in addition to all compensation earned through the date
of termination and coverage and benefits under all benefit and incentive
compensation plans to which he is entitled pursuant to the terms thereof, a
severance payment equal to three times the sum of his annual base salary and
target annual bonus. In addition, the Executive will continue to receive health
benefits (i.e., medical insurance, etc.) and life benefits on the same terms and
conditions as prior to his termination for 36 months following his termination
(the "Continuation Period").
The Executive has no duty to mitigate, but the health and life benefits
listed above will be offset by any benefits payable to the Executive during the
Continuation Period from another employer. Under the Employment Agreements,
Sierra Pacific will pay any additional amounts sufficient to hold the Executive
harmless for any excise tax that might be imposed as a result of the Executive
being subject to the federal excise tax on "excess parachute payments" or
similar taxes imposed by state or local law in connection with receiving any
compensation or benefits pursuant to his Employment Agreement or otherwise that
is considered contingent on a change in control. If the Executive dies, is
terminated due
93
<PAGE>
to permanent disability, is terminated for cause, or terminates for other than
good reason, in each case during the term of the Employment Agreement, Sierra
Pacific will pay to the Executive or the Executive's beneficiaries or estate, as
the case may be, all compensation earned through the date of termination and
benefits payable under applicable benefit and incentive compensation plans.
A Change in Control for purposes of the Employment Agreements occurs (i) if
Sierra Pacific merges or consolidates, or sells all or substantially all of its
assets, and less than 65% of the voting power of the surviving corporation is
owned by those stockholders who were stockholders of Sierra Pacific immediately
prior to such merger or sale; (ii) any person acquires 20% or more of Sierra
Pacific's voting stock; (iii) Sierra Pacific enters into an agreement or Sierra
Pacific or any person announces an intent to take action, the consummation of
which would otherwise result in a Change in Control, or the Board of Directors
of Sierra Pacific adopts a resolution to the effect that a Change in Control has
occurred; (iv) within a two-year period, a majority of the directors of Sierra
Pacific at the beginning of such period cease to be directors; or (v) the
stockholders of Sierra Pacific approve a complete liquidation or dissolution of
Sierra Pacific.
Severance Agreements
- --------------------
Nevada Power Company
On March 13, 1998, Gloria Banks Weddle, David G. Barneby, and Steven W.
Rigazio entered into employment agreements with Nevada Power Company for a
three-year term which would automatically be extended in the event of a Change
in Control to the third anniversary of the Change in Control (or the
consummation of the Change in Control, if later). The extended term is subject
to further extension on the occurrence of a further Change in Control event.
The announcement of the execution of the Merger Agreement constituted a Change
in Control under the employment agreements, and the consummation of the Mergers
constituted an additional change in control event. If during the term of the
employment agreement Nevada Power terminates the employment of an executive
officer for reasons other than cause (as defined in each employment agreement),
death or disability, or the executive officer terminates his or her employment
for good reason (as defined in each employment agreement), the executive officer
will receive, in addition to all compensation earned through the date of
termination and coverage and benefits under all benefit and incentive
compensation plans to which the executive officer is entitled pursuant to the
terms thereof, a severance payment equal to two times the sum of his or her
annual base salary and target annual bonus. In addition, the executive officer
will continue to receive health benefits (i.e., medical insurance, etc.) and
life benefits which will be offset by any benefits payable to the executive
officer during the applicable benefit continuation period from another employer.
Under the employment agreements, the executive officer will receive additional
amounts sufficient to hold the executive harmless for any excise tax that might
be imposed by state or local law in connection with receiving any compensation
or benefits pursuant to the employment agreement or otherwise that is considered
contingent on a Change in Control.
The annual incentive plans, 1993 Long-Term Incentive Plan and the
Supplemental Executive Retirement Plan of Nevada Power, contained provisions
relating to Change in Control. Under the annual incentive plans, after a Change
in Control, eligible participants, whether or not the participants are
terminated, including executive officers and participants who terminated prior
to the Change in Control by reason of normal or early retirement or death, will
have a right to an immediate cash payment of their annual awards, on a pro-rated
basis, based on annual base salary and on the assumption that established
targets at 100% achievement level for the year had been met. Under the 1993
Long-Term Incentive Plan, after a Change in Control, incentive compensation unit
awards for outstanding performance periods will be immediately paid to
participating executive officers in the
94
<PAGE>
amount of one share of Nevada Power Common Stock for each incentive compensation
unit. Under the Supplemental Executive Retirement Plan, the accrued benefit of
each executive officer participating therein will become fully vested on the
occurrence of a Change in Control. The consummation of the Mergers constituted a
"Change in Control" under all the plans described above.
Sierra Pacific Power Company
In February 1997, SPR entered into severance agreements with Jeffrey L.
Ceccarellli, Steven C. Oldham, William E. Peterson, Douglas R. Ponn, Mark A.
Ruelle, Mary O. Simmons, and Mary Jane Reed. These agreements provide that,
upon termination of the executive's employment within twenty-four months
following a change in control of SPR (as defined in the agreements) either (a)
by SPR for reasons other than cause (as defined in the agreements), death or
disability, or (b) by the executive for good reason (as defined by the
agreement, including a diminution of responsibilities, compensation, or benefits
(unless, with respect to reduction in salary or benefits, such reduction is
applicable to all senior executives of SPR and the acquirer)), the executive
will receive certain payments and benefits. These severance payments and
benefits include (i) a lump sum payment equal to three times the sum of the
executive's base salary and target bonus, (ii) a lump sum payment equal to the
present value of the benefits the executive would have received had be continued
to participate in SPR's retirement plans for an additional 3 years (or, in the
case of SPR's Supplemental Executive Retirement Plan only, the greater of three
years or the period from the date of termination until the executive's early
retirement date, as defined in such plan), and (iii) continuation of life,
disability, accident and health insurance benefits for a period of thirty-six
(36) months immediately following termination of employment. The agreements
also provide that if any compensation paid, or benefit provided, to the
executive, whether or not pursuant to the change-in-control agreements, would be
subject to the federal excise tax on "excess parachute payments," payments and
benefits provided pursuant to the agreement will be cut back to the largest
amount that would not be subject to such excise tax, if such cutback results in
a higher after-tax payment to the executive. The Board of Directors entered
into these agreements in order to attract and retain excellent management and to
encourage and reinforce continued attention to the executives' assigned duties
without distraction under circumstances arising from the possibility of a change
in control of SPR. In entering into these agreements, the Board was advised by
Towers Perrin, the national compensation and benefits consulting firm described
above, and Skadden, Arps, Slate, Meager & Flom, an independent outside law firm,
to insure that the agreements entered into were in line with existing industry
standards and provided benefits to management consistent with those standards.
95
<PAGE>
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Financial Statements:
Independent Auditors' Report................................... 52
Consolidated Balance Sheets as of
December 31, 1999 and 1998................................... 53
Consolidated Statements of Income for the Years
Ended December 31, 1999, 1998 and 1997....................... 54
Consolidated Statements of Common Shareholder's Equity
for the Years Ended December 31, 1999, 1998 and 1997......... 55
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1999, 1998and 1997.................. 56
Consolidated Statements of Capitalization as of
December 31, 1999 and 1998................................... 57
Notes to Consolidated Financial Statements..................... 58-80
2. Financial Statement Schedules:
Independent Auditors' Report................................... 98
Schedule II - Consolidated Valuation and Qualifying Accounts... 99
</TABLE>
All other schedules have been omitted because they are not required
or are not applicable, or the required information is shown in the
financial statements or notes thereto. Columns omitted from schedules
have been omitted because the information is not applicable.
3. Exhibits:
Exhibits are listed in the Exhibit Index on pages 100-107
(b) Reports on Form 8-K
None.
96
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 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.
SIERRA PACIFIC POWER COMPANY
By /S/ Malyn K. Malquist
----------------------
Malyn K. Malquist
President, Chief Operating Officer and Director
March 22, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 22nd day of March 2000.
<TABLE>
<S> <C>
/S/ Mark A. Ruelle /S/ Mary O. Simmons
-------------------------------------- --------------------------------------
Mark A. Ruelle Mary O. Simmons
Senior Vice President, Controller
Chief Financial Officer and Treasurer (Principal Accounting Officer)
(Principal Financial Officer)
/S/ Edward P. Bliss /S/ Mary Kaye Cashman
-------------------------------------- --------------------------------------
Edward P. Bliss Mary Kaye Cashman
Director Director
/S/ Mary Lee Coleman /S/ Jerry E. Herbst
-------------------------------------- --------------------------------------
Mary Lee Coleman Jerry E. Herbst
Director Director
/S/ Theodore J. Day /S/ James R. Donnelley
-------------------------------------- --------------------------------------
Theodore J. Day James R. Donnelley
Director Director
/S/ John L. Goolsby /S/ Michael R. Niggli
-------------------------------------- --------------------------------------
John L. Goolsby Michael R. Niggli
Director Chairman, Chief Executive Officer
Director
/S/ John F. O'Reilly /S/ Krestine M. Corbin
-------------------------------------- --------------------------------------
John F. O'Reilly Krestine M. Corbin
Director Director
/S/ Fred D. Gibson, Jr. /S/ James L. Murphy
-------------------------------------- --------------------------------------
Fred D. Gibson, Jr. James L. Murphy
Director Director
/S/ Dennis E. Wheeler
--------------------------------------
Dennis E. Wheeler
Director
</TABLE>
97
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Sierra Pacific Power Company
Reno, Nevada
We have audited the consolidated financial statements of Sierra Pacific Power
Company and subsidiaries (the Company") as of December 31, 1999 and 1998, and
for each of the three years in the period ended December 31, 1999, and have
issued our report thereon dated February 29, 2000; such report is included
elsewhere in this Form 10-K. Our audits also included the financial statement
schedule listed in Item 14. This consolidated financial statement schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLC
Reno, Nevada
February 29, 2000
98
<PAGE>
Schedule II - Consolidated Valuation and Qualifying Accounts
For The Years Ended December 31, 1999, 1998 and 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Provision for
Uncollectible
Accounts
-----------------
<S> <C>
Balance at January 1, 1997 $ 2,196
Provision charged to income 1,411
Amounts written off, less recoveries (1,903)
---------------
Balance at December 31, 1997 1,704
Balance at January 1, 1998 1,704
Provision charged to income 3,686
Amounts written off, less recoveries (1,929)
---------------
Balance at December 31, 1998 3,461
Balance at January 1, 1999 3,461
Provision charged to income 2,005
Amounts written off, less recoveries (1,817)
---------------
Balance at December 31, 1999 $ 3,649
===============
</TABLE>
99
<PAGE>
SIERRA PACIFIC POWER COMPANY
1999 FORM 10-K EXHIBIT INDEX
Exhibits filed with this Form 10-K are denoted with an asterisk (*). The
other listed exhibits have been previously filed with the Securities and
Exchange Commission and are incorporated herein by reference.
(3)
. Restated Articles of Incorporation of the Company dated May 19,
1987 (Exhibit (3)(A) to the 1993 Form 10-K)
. Certificate of Amendments dated August 26, 1992 to Restated
Articles of Incorporation of the Company dated May 19, 1987, in
connection with the Company's preferred stock (Exhibit 3.1 to
Form 8-K dated August 26, 1992)
. Certificate of Designation, Preferences and Rights dated August
31, 1992 to Restated Articles of Incorporation of the Company
dated May 19, 1987, in connection with the Company's Class A
Series 1 Preferred Stock (Exhibit 4.3 to Form 8-K dated August
26, 1992)
. By-laws of the Company, as amended through November 13, 1996
(Exhibit (3)(A) to Form 10-K for the year ended December 31,
1996)
. Articles of Incorporation of Pinon Pine Corp., dated December 11,
1995 (Exhibit (3)(A) to Form 10-K for the year ended December 31,
1995)
. Articles of Incorporation of Pinon Pine Investment Co., dated
December 11, 1995 (Exhibit (3)(B) to Form 10-K for the year ended
December 31, 1995)
. Agreement of Limited Liability Company of Pinon Pine Company,
L.L.C., dated December 15, 1995, between Pinon Pine Corp., Pinon
Pine Investment Co. and GPSF-B INC 1995 (Exhibit (3)(C) to Form
10-K for the year ended December 31, 1995)
. *(A) Amended and Restated Limited Liability Company Agreement of
SPPC Funding LLC dated as of April 9, 1999, in connection with
the issuance of California rate reduction bonds
(4)
. Mortgage Indentures of the Company defining the rights of the
holders of the Company's First Mortgage Bonds: Original Indenture
(Exhibit 7-A to Registration No. 2-7475); Ninth Supplemental
Indenture (Exhibit 2-M to Registration No. 2-59509); Tenth
Supplemental Indenture (Exhibit 4-K to Registration No. 2-23932);
Eleventh Supplemental Indenture (Exhibit 4-L to Registration No.
2-26552); Twelfth Supplemental Indenture (Exhibit 4-L
100
<PAGE>
to Registration No. 2-36982); Sixteenth Supplemental Indenture
(Exhibit 2-Y to Registration No. 2-53404); Nineteenth
Supplemental Indenture (Exhibit (4)(A) to the 1991 Form 10-K);
Twentieth Supplemental Indenture (Exhibit (4)(B) to the 1991 Form
10-K); Twenty-Seventh Supplemental Indenture (Exhibit (4)(A) to
the 1989 Form 10-K); Twenty-Eighth Supplemental Indenture
(Exhibit (4)(A) to the 1992 Form 10-K); Twenty-Ninth Supplemental
Indenture (Exhibit D to Form 8-K dated July 15, 1992); Thirtieth
Supplemental Indenture (Exhibit (4)(B) to the 1992 Form 10-K);
Thirty-First Supplemental Indenture (Exhibit (4)(C) to the 1992
Form 10-K); Thirty-Second Supplemental Indenture (Exhibit 4.6 to
Registration No.33-69550); Thirty-Third Supplemental Indenture
(Exhibit C to Form 8-K dated October 20, 1993); Thirty-Fourth
Supplemental Indenture (Exhibit C to Form 8-K dated March 11,
1996) Thirty-Fifth Supplemental Indenture (Exhibit C to Form 8-K
dated March 10, 1997).
. Collateral Trust Indenture dated June 1, 1992 between the Company
and Bankers Trust Company, as Trustee, relating to the Company's
medium-term note program (Exhibit B to Form 8-K dated July 15,
1992 in connection with the Company's medium-term note program);
First Supplemental Indenture dated June 1, 1992 (Exhibit C to
Form 8-K dated July 15, 1992); Second Supplemental Indenture
dated October 1, 1993 (Exhibit B to Form 8-K dated October 20,
1993); Third Supplemental Indenture dated as of February 1, 1996
(Exhibit B to Form 8-K dated March 11, 1996); and Fourth
Supplemental Indenture dated as of February 1, 1997 (Exhibit B to
Form 8-K dated March 10, 1997).
. Form of Medium-Term Global Fixed Rate Note, Series A (Exhibit E
to Form 8-K dated July 15, 1992 in connection with the Company's
medium-term note program)
. Form of Medium-Term Global Fixed Rate Note, Series B (Exhibit D
to Form 8-K dated October 25, 1993 in connection with the
Company's medium-term note program)
. Form of Medium-Term Global Fixed-Rate Note, Series C (Exhibit D
to Form 8-K dated March 11, 1996 in connection with the Company's
medium-term note program)
. Form of Medium-Term Global Fixed-Rate Note, Series D (Exhibit D
to Form 8-K dated March 10, 1997 in connection with the Company's
medium-term note program)
. *(A) Fiscal and Paying Agency Agreement dated as of September 14,
1999 between the Company and Bankers Trust Company, relating to
the Company's money market note program
101
<PAGE>
. *(B) Form of Global Floating Rate Note due October 13, 2000
. *(C) Indenture dated as of April 9, 1999 between SPPC Funding LLC
and Bankers Trust Company of California, N.A. in connection with
the issuance of California rate reduction bonds
. *(D) First Series Supplement dated as of April 9, 1999 to
Indenture between SPPC Funding LLC and Bankers Trust Company of
California, N.A. in connection with the issuance of California
rate reduction bonds
. *(E) Form of SPPC Funding LLC Notes, Series 1999-1, in connection
with the issuance of California rate reduction bonds
. Amended and Restated Declaration of Trust of Sierra Pacific Power
Capital I (the Trust) dated July 24, 1996 in connection with the
offering of the Preferred Securities of the Trust. (Exhibit 4.1
to Form 8-K dated August 2, 1996)
. Indenture between the Company and IBJ Schroder Bank and Trust
Company as Trustee dated July 1, 1996 in connection with the
offering of the Preferred Securities of the Trust. (Exhibit 4.2
to Form 8-K dated August 2, 1996)
. First Supplemental Indenture to the Indenture used in connection
with the issuance of Junior Subordinated Debentures dated July
24, 1996 in connection with the offering of the Preferred
Securities of the Trust. (Exhibit 4.3 to Form 8-K dated August 2,
1996).
. Guarantee with respect to Preferred Securities dated July 29,
1996 in connection with the offering of the Preferred Securities
of the Trust. (Exhibit 4.4 to Form 8-K dated August 2, 1996).
. Guarantee with respect to Common Securities dated July 29, 1996
in connection with the offering of the Preferred Securities of
the Trust. (Exhibit 4.5 to Form 8-K dated August 2, 1996).
(10)
. Coal Sales Agreement dated May 16, 1978 between the Company and
Coastal States Energy Company (confidential portions omitted and
filed separately with the Securities and Exchange Commission)
(Exhibit 5-GG to Registration No. 2-62476)
. Amendment No. 1 dated November 8, 1983 to Coal Sales Agreement
dated May 16, 1978 between the Company and Coastal States Energy
Company (Exhibit (10)(B) to Form 10-K for the year ended December
31, 1991)
102
<PAGE>
. Amendment No. 2 dated February 25, 1987 to Coal Sales Agreement
dated May 16, 1978 between the Company and Coastal States Energy
Company (Exhibit (10)(A) to Form 10-K for the year ended December
31, 1993)
. Amendment No. 3 dated May 8, 1992 to Coal Sales Agreement dated
May 16, 1978 between the Company and Coastal States Energy
Company (Exhibit (10)(B) to Form 10-K for the year ended December
31, 1992; confidential portions omitted and filed separately with
the Securities and Exchange Commission)
. Coal Purchase Contract dated June 19, 1986 between the Company,
Black Butte Coal Company and Idaho Power Company (Exhibit (10)(C)
to the Form 10-K for the year ended December 31, 1992)
. Settlement Agreement and Mutual Release dated May 8, 1992 between
the Company and Coastal States Energy Company (Exhibit (10)(D) to
Form 10-K for the year ended December 31, 1992; confidential
portions omitted and filed separately with the Securities and
Exchange Commission)
. Interconnection Agreement dated May 29, 1981 between the Company
and Idaho Power Company (Exhibit (10)(C) to Form 10-K for the
year ended December 31, 1991)
. Amendatory Agreement dated February 14, 1992 to Interconnection
Agreement dated May 29, 1981 between the Company and Idaho Power
Company (Exhibit (10)(D) to Form 10-K for the year ended December
31, 1991)
. Agreement dated February 23, 1989 between the Company and Idaho
Power Company for the supply of power and energy (Exhibit (10)(A)
to Form 10-K for the year ended December 31, 1988)
. Cooperative Agreement dated July 31, 1992 between the Company and
the United States Department of Energy in connection with the
Pinon Pine Integrated Coal Gasification Combined Cycle Project
(Exhibit (10)(H) to Form 10-K for the year ended December 31,
1992)
. Revised Intercompany Pool Agreement dated July 19, 1982
pertaining to the Company's membership (Exhibit (10)(E) to Form
10-K for the year ended December 31, 1991)
. Agreement dated November 7, 1986 between the Company and Western
Systems Power Pool (Exhibit (10)(C) to Form 10-K for the year
ended December 31, 1988)
103
<PAGE>
. Memorandum dated October 1, 1988 to Agreement dated November 7,
1986 between the Company and Western Systems Power Pool (Exhibit
(10)(D) to Form 10-K for the year ended December 31, 1988)
. General Transfer Agreement dated February 25, 1988 between the
Company and the United States of America Department of Energy
acting by and through the Bonneville Power Administration
(Exhibit (10)(E) to Form 10-K for the year ended December 31,
1988)
. Rail Transportation Contract dated June 30, 1986 between the
Company and Idaho Power Company as shippers and Union Pacific and
Western Pacific Railroad Companies as carriers (Exhibit (10)(C)
to Form 10-K for the year ended December 31, 1993)
. Addendum dated October 9, 1993 to Rail Transportation Contract
dated June 30, 1986 between the Company and Idaho Power Company
as shippers and Union Pacific Railroad Companies as carriers
(Exhibit (10)(D) to Form 10-K for the year ended December 31,
1993)
. Financing Agreement dated March 1, 1987 between the Company and
Humboldt County, Nevada relating to the Humboldt County, Nevada
Variable Rate Demand Pollution Control Refunding Revenue Bonds
(Sierra Pacific Power Company Project) Series 1987 (Exhibit
(10)(E) to Form 10-K for the year ended December 31, 1993)
. Financing Agreement dated March 1, 1987 between the Company and
Washoe County, Nevada relating to the Washoe County, Nevada
Variable Rate Demand Gas and Water Facilities Refunding Revenue
Bonds (Sierra Pacific Power Company Project) Series 1987 (Exhibit
(10)(F) to Form 10-K for the year ended December 31, 1993)
. Financing Agreement dated June 1, 1987 between the Company and
Washoe County, Nevada relating to the Washoe County, Nevada
Variable Rate Demand Water Facilities Revenue Bonds (Sierra
Pacific Power Company Project) Series 1987 (Exhibit (10)(G) to
Form 10-K for the year ended December 31, 1993)
. Financing Agreement dated December 1, 1987 between the Company
and Washoe County, Nevada relating to the Washoe County, Nevada
Variable Rate Demand Gas Facilities Revenue Bonds (Sierra Pacific
Power Company Project) Series 1987 (Exhibit (10)(H) to Form 10-K
for the year ended December 31, 1993)
. Financing Agreement dated September 1, 1990 between the Company
and Washoe County, Nevada relating to the Washoe County, Nevada
Gas
104
<PAGE>
Facilities Revenue Bonds (Sierra Pacific Power Company Project)
Series 1990 (Exhibit (10)(C) to Form 10-K for the year ended
December 31, 1990)
Financing Agreement dated December 1, 1990 between the Company
and Washoe County, Nevada relating to the Washoe County, Nevada
Water Facilities Revenue Bonds (Sierra Pacific Power Company
Project) Series 1990 (Exhibit (10)(E) to Form 10-K for the year
ended December 31, 1990)
. First Amendment dated August 12, 1991 to Financing Agreement
dated December 1, 1990 between the Company and Washoe County,
Nevada relating to the Washoe County, Nevada Water Facilities
Revenue Bonds (Sierra Pacific Power Company Project) Series 1990
(Exhibit (10)(J) to Form 10-K for the year ended December 31,
1991)
. Letter of Credit, Reimbursement and Security Agreement dated
December 12, 1990 between the Company and Union Bank of
Switzerland relating to the Washoe County, Nevada Water
Facilities Revenue Bonds (Sierra Pacific Power Company Project)
Series 1990 (Exhibit (10)(F) to Form 10-K for the year ended
December 31, 1990)
. Financing Agreement dated June 1, 1993 between the Company and
Washoe County, Nevada relating to the Washoe County, Nevada Water
Facilities Refunding Revenue Bonds (Sierra Pacific Power Company
Project) Series 1993A (Exhibit (10) (I) to Form 10-K for the year
ended December 31, 1993)
. Financing Agreement dated June 1, 1993 between the Company and
Washoe County, Nevada relating to the Washoe County, Nevada Gas
and Water Facilities Refunding Revenue Bonds (Sierra Pacific
Power Company Project) Series 1993B (Exhibit (10) (J) to Form 10-
K for the year ended December 31, 1993)
. *(A) Credit Agreement dated as of June 24, 1999 among the
Company, Mellon Bank, N.A., First Union Bank and Wells Fargo
Bank, N.A. relating to $150,000,000 credit facility
. *(B) Transition Property Purchase and Sale Agreement dated as of
April 9, 1999 between Sierra Pacific Power Company and SPPC
Funding LLC in connection with the issuance of California rate
reduction bonds
. *(C) Transition Property Servicing Agreement dated as of April 9,
1999 between Sierra Pacific Power Company and SPPC Funding LLC in
connection with the issuance of California rate reduction bonds
105
<PAGE>
. *(D) Administrative Services Agreement dated as of April 9, 1999
between Sierra Pacific Power Company and SPPC Funding LLC in
connection with the issuance of California rate reduction bonds
. Agreement dated May 1, 1991 between the Company and the Inter-
national Brotherhood of Electrical Workers (Exhibit (10)(K) to
Form 10-K for the year ended December 31, 1991)
. Ratified changes to the Agreement between the Company and the
International Brotherhood of Electrical Workers dated October 31,
1994 (Exhibit (10)(B) to Form 10-K for the year ended December
31, 1994)
. Agreement dated January 1, 1998 between the Company and the
International Brotherhood of Electrical Workers. (Filed as
Exhibit 10(B) to Form 10-K for the year ended December 31, 1997)
. Lease dated January 30, 1986 between the Company and Silliman
Associates Limited Partnership relating to the Company's
corporate headquarters building (Exhibit (10)(I) to Form 10-K for
the year ended December 31, 1992)
. Letter of Amendment dated May 18, 1987 to Lease dated January 30,
1986 between the Company and Silliman Associates Limited
Partnership relating to the Company's corporate headquarters
building (Exhibit (10) (K) to Form 10-K for the year ended
December 31, 1993)
. Natural gas Transportation Service Agreement, dated January 11,
1995 between the Company and Tuscarora Gas Transmission Company
(Filed with Form 10-K for the year ended December 31, 1995)
. Fixed-Price Turn-Key Construction Agreement, dated December 15,
1995 between the Company and Pinon Pine Company, L.L.C (Filed
with Form 10-K for the year ended December 31, 1995)
. Operation and Maintenance Agreement, dated December 15, 1995
between the Company and Pinon Pine Company, L.L.C. (Filed with
Form 10-K for the year ended December 31, 1995)
. Syngas Purchase Agreement, dated December 15, 1995 between the
Company and Pinon Pine Company, L.L.C. (Filed with Form 10-K for
the year ended December 31, 1995)
. The Amended and Restated Nonqualified Deferred Compensation Plan
in which any director or any executive officer of the Company may
participate. The Plan was amended and restated January 1, 1996
(Filed as Exhibit 10(B) with Form 10-K for the year ended
December 31, 1996)
106
<PAGE>
. Change in Control Agreement dated February 18, 1997 by and among
Sierra Pacific Resources and the following officers
(individually): Gerald W. Canning, Jeffrey L. Ceccarelli, Randy
G. Harris, Malyn K. Malquist, Steven C. Oldham, Victor H. Pena,
William E. Peterson, Mark A. Ruelle, Mary O. Simmons, Doug Ponn,
and Mary Jane Willier (filed as Exhibit 10(A) to Form 10-K for
the year ended December 31, 1997)
. Notice of Termination of Power Purchase from PacifiCorp under the
Interconnection Agreement of May 19, 1971 (filed as Exhibit 10(C)
to Form 10-K for the year ended December 31, 1997)
(11)
. The Company is a wholly owned subsidiary and, in accordance with
Paragraph 6 of SFAS No. 128 (Earnings Per Share), earnings per
share data have been omitted.
(12)
. *(A) Calculation of Pre-Tax Interest Coverages for the Periods
1999, 1998 and 1997.
(21)
. Subsidiaries of the Registrant:
Pinon Pine Company, a Nevada Corporation
Pinon Pine Investment Company, a Nevada Corporation
GPSF-B, a Delaware Corporation
SPPC Funding LLC, a Delaware Limited Liability Company
Sierra Pacific Power Capital Trust I (The Trust)
(27)
. *(A) The Financial Data Schedule containing summary financial
information extracted from the consolidated financial statements
filed on Form 10-K for the year ended December 31, 1999.
107
<PAGE>
EXHIBIT 3(A)
CERTIFICATE
OF
RESTATED
ARTICLES OF INCORPORATION
OF
SIERRA PACIFIC RESOURCES
SIERRA PACIFIC RESOURCES, a corporation organized under the laws of
the State of Nevada (the "Corporation"), by its President and Secretary, does
hereby certify:
(1) That by resolution of the Board of Directors of the Corporation
adopted at a regular meeting of the Board of Directors held on July 13, 1999,
the Board of Directors authorized and directed the President and Secretary of
the Corporation to execute and file this certificate to restate in a single
certificate the articles of incorporation of the Corporation, as amended to the
date of this Certificate.
(2) That the following is a correct restatement of the entire text of
the Restated Articles of Incorporation of the Corporation, as amended to the
date of this Certificate:
[this space intentionally left blank]
1
<PAGE>
RESTATED
ARTICLES OF INCORPORAITON
OF
SIERRA PACIFIC RESOURCES
(Effective Date: July 28, 1999)
History of Changes
------------------
Original Articles Filed December 12, 1983
Amended-Restated Articles on July 11, 1985 and Filed August 14, 1985
Amended-Restated Articles on May 18, 1987 and Filed October 23, 1987
Amended-Restated Articles on May 16, 1989 and Filed May 22, 1989
Amended-Restated Articles on May 21, 1990 and Filed October 5, 1990
Amended in Articles of Merger Filed on July 28, 1999
2
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
SIERRA PACIFIC RESOURCES
ARTICLE I
---------
NAME
----
The name of the corporation is SIERRA PACIFIC RESOURCES.
ARTICLE II
----------
PRINCIPAL PLACE OF BUSINESS
---------------------------
The location of the Corporation's principal office or place of
business in the State of Nevada shall be 6100 Neil Road, Sierra Plaza, P.O. Box
30150, Reno, Washoe County, Nevada 89520. The Corporation may maintain an
office or offices in such other place within or without the State of Nevada as
may be from time to time designated by the Board of Directors or by the By-Laws
of the Corporation, and the Corporation may conduct all Corporation business of
every kind and nature relative to the purposes of the Corporation, including the
holding of meetings of directors and stockholders, outside the State of Nevada
as well as in the State of Nevada.
ARTICLE III
-----------
PURPOSE
-------
The purpose for which the Corporation is organized is to transact any
or all lawful business for which corporations may be incorporated under the
Nevada Revised Statutes, Chapter 78.
3
<PAGE>
ARTICLE IV
----------
TERM OF EXISTENCE
-----------------
The Corporation shall have a perpetual existence.
ARTICLE V
---------
CAPITAL STOCK AND AMENDMENTS TO
-------------------------------
ARTICLES OF INCORPORATION
-------------------------
Authorized Capital Stock
------------------------
Section 1:
- ----------
The amount of the total authorized capital stock of the Corporation is
two hundred fifty million (250,000,000) shares of common stock of $1.00 par
value. Said shares may be issued by the Corporation from time to time for such
consideration as may be fixed from time to time by the Board of Directors.
Voting Rights
-------------
Section 2:
- ---------
The holders of common stock shall exclusively possess full voting
rights for the election of directors and for all other purposes. Each holder of
record of shares of common stock entitled to vote at any meeting of stockholders
shall, as to all matters in respect of which such stock has voting power, be
entitled, except as otherwise provided herein or in the By-Laws of the
Corporation, to one vote for each share of such stock held and owned by him, as
shown by the stock books of the Corporation, and may cast such vote in person or
by proxy.
4
<PAGE>
Preemptive Rights
-----------------
Section 3:
- ----------
No holder of any stock, or of rights or options to purchase stock of
the Corporation of any class, now or hereafter authorized, shall have any
preferential or preemptive right to purchase or subscribe for any part of any
stock of the Corporation, now or hereafter authorized or any bonds, certificates
of indebtedness, debentures, options, warrants or other securities convertible
into or evidencing the right to purchase stock of the Corporation, but any such
stock or securities convertible into or evidencing the right to purchase stock
may at any time be issued and disposed of by the Board of Directors to such
purchasers, in such manner, for such lawful consideration and upon such terms as
the Board of Directors may, in its discretion, determine without offering any
thereof on the same terms or on any terms to all or any stockholders, as such,
of the Corporation.
Scrip Certificates
------------------
Section 4:
- ---------
No certificates for fractional shares of any class of stock shall be
issued. In lieu thereof, scrip certificates or other evidences of ownership of
fractional interests in shares of the stock of the Corporation may be issued by
the Corporation representing rights to such fractional shares and exchangeable,
when accompanied by other certificates in such amount as to represent in the
aggregate one or more full shares of stock, for certificates for full shares of
stock. The holders of scrip certificates or other evidences of ownership of
fractional interests in shares of stock
5
<PAGE>
of the Corporation will not be entitled to any rights as stockholders of the
Corporation until the scrip certificates are so exchanged. Such scrip
certificates may, at the election of the Board of Directors of the Corporation,
be in bearer form, shall be non-dividend bearing, non-voting and shall have such
expiration date as the Board of Directors of the Corporation shall determine at
the time of the authorization or issuance of such scrip certificates.
Amendments of Articles of Incorporation
---------------------------------------
Section 5:
- ----------
The provisions of the Articles of Incorporation, except as expressly
otherwise herein provided or otherwise required by law, may be amended or
altered by a vote of the holders of a majority of the common stock of the
Corporation then issued, outstanding and entitled to vote.
ARTICLE VI
----------
BOARD OF DIRECTORS
------------------
The members of the governing board of the Corporation shall be known
as Directors, and the number of Directors shall be as fixed in the By-Laws and
may, from time to time, be increased or described by a two-thirds (2/3)
affirmative vote of the entire Board of Directors provided that the number shall
not be increased to more than fifteen (15). Directors need not be stockholders
of the Corporation, however, they shall be at least twenty-one (21) years of age
and at least a majority of them shall be citizens of the United States.
6
<PAGE>
The Directors of this Corporation shall be divided into three classes:
Class I, Class II and Class III. Such classes shall be as nearly equal in
number as possible. The term of office of the initial Class I Directors shall
expire at the Annual Meeting of Stockholders in 1986; the term of office of the
initial Class II Directors shall expire at the Annual Meeting of Stockholders in
1987; and the term of office of the initial Class III Directors shall expire at
the Annual Meeting of Stockholders in 1988; or in each case thereafter when
their respective successors are elected and have qualified. At each annual
election held after the initial election of Directors according to classes, the
Directors chosen to succeed those whose terms then expire, shall be identified
as being of the same class of the Directors they succeed and shall be elected
for a term expiring at the third succeeding Annual Meeting of Stockholders or in
each case thereafter when their respective successors are elected and have
qualified. If the number of Directors has changed, any increase or decrease in
Directors shall be apportioned among the classes so as to maintain all classes
as nearly equal in number as possible, but in no case shall the decrease in
number of Directors shorten the term of any incumbent Director.
A Director or Directors may be removed from office only by the vote of
stockholders representing not less than two-thirds (2/3) of the issued and
outstanding capital stock entitled to vote generally in the election of
Directors.
Vacancies occurring in the Board of Directors for any reason,
including any newly created directorships resulting from an increase in the
number of Directors shall be filled by the affirmative vote of a majority of the
remaining Directors, though less than a quorum. Each Director so chosen shall
hold office until
7
<PAGE>
the expiration of the term of Director, if any, whom he or she has been chosen
to succeed, or if none, until the expiration of the term of the class assigned
to the newly created directorship to which he or she has been elected and until
his or her successor shall be duly elected and qualified or until his or her
earlier death, resignation or removal.
Notwithstanding any other provisions of these Articles of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, these Articles of
Incorporation or the By-Laws of the Corporation), the affirmative vote of the
holders of sixty-six and two-thirds percent (66 2/3%) or more of the Common
Stock of the Corporation then issued, outstanding and entitled to vote, shall be
required to amend or repeal, or adopt any provisions inconsistent with, this
Article VI, unless two-thirds (2/3) of the entire Board of Directors approves
any such amendment, in which case, the affirmative vote of the holders of a
majority of the Common Stock of the Corporation then issued, outstanding and
entitled to vote shall be required.
ARTICLE VII
-----------
STOCK NON-ASSESSABLE
--------------------
The capital stock, after the amount of the subscription price, or par
value, has been paid in, shall not be subject to assessment to pay the debts of
the Corporation.
8
<PAGE>
ARTICLE VIII
------------
FAIR PRICE PROVISIONS
---------------------
Section 1:
- ---------
(A) In addition to any affirmative vote required by law or these
Articles of Incorporation, and except as otherwise expressly provided in
paragraph 2 of this Article VIII:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested
Stockholder (as hereinafter defined) or (b) any other corporation
(whether or not itself an Interested Stockholder) which is, or after
such merger or consolidation would be, an Affiliate (as hereinafter
defined) of an Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder of any assets of the Corporation or
any Subsidiary having an aggregate Fair Market Value (as hereinafter
defined) of $1,000,000 or more; or
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in exchange
9
<PAGE>
for cash, securities or other property (or a combination thereof)
having any aggregate Fair Market Value of $1,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
(v) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the
Corporation of any Subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any Interested
Stockholder;
shall require the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the then outstanding shares of common stock
of the Corporation authorized to be issued from time to time under Article
V of these Articles of Incorporation (the "Common Stock"). Such
affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that a lesser percentage may be specified, by law or in
any agreement with any national securities exchange or otherwise.
10
<PAGE>
(B) The term "Business Combination" as used in this Article VIII shall
mean any transaction which is referred to in any one or more of clauses (i)
through (v) of subparagraph (A) of this paragraph 1.
Section 2:
- ----------
The provisions of paragraph 1 of this Article VIII shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and any other
provision of these Articles of Incorporation, if all of the conditions specified
in either of the following subparagraphs (A) or (B) are met:
(A) The Business Combination shall have been approved by a majority of
the Continuing Directors (as hereinafter defined); provided, however, that
such approval shall only be effective if obtained at a meeting at which a
Continuing Director Quorum (as hereinafter defined) is present, or
(B) All of the following conditions have been met:
(i) The aggregate amount of (x) cash and (y) Fair Market Value as
of the date of the consummation of the Business Combination of
consideration other than cash, to be received per share by holders of
the Corporation's Common Stock in such Business Combination
transaction shall be at least equal to the highest amount determined
under sub-clauses (a), (b) and (c) below:
(a) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and
11
<PAGE>
soliciting dealers' fees) paid by the Interested Stockholders for
any share of Common Stock acquired by it (1) within the two-year
period immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date") or
(2) in the transaction in which it became an Interested
Stockholder, whichever is higher;
(b) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date is
referred to in this Article VIII as the "Determination Date"),
whichever is higher; and
(c) (if applicable) the price per share equal to the Fair
Market Value per share of Common Stock determined pursuant to
subparagraph (B)(i)(b) above, multiplied by the ratio of (1) the
highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by the
Interested Stockholder for any shares of Common Stock acquired by
it within the two-year period immediately prior to the
Announcement Date to (2) the Fair Market Value per share of
Common Stock on the first day in such two-year period in which
the Interested Stockholder acquired any shares of Common Stock.
12
<PAGE>
(ii) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination: (a) except as approved by a majority of the Continuing
Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not
cumulative) on any stock of the Corporation having preferential
dividend rights; (b) there shall have been (1) no reduction in the
annual rate of dividends paid on the Common Stock (except as necessary
to reflect any subdivision of the Common Stock), except as approved by
a majority of the Continuing Directors, and (2) an increase in such
annual rate of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization
or any similar transaction which has the effect of reducing the number
of outstanding shares of the Common Stock, unless the failure so to
increase such annual rate is approved by a majority of the Continuing
Directors; and (c) such Interested Stockholder shall not have become
the beneficial owner of any additional shares of Common Stock except
as part of the transaction which results in such Interested
Stockholder becoming an Interested Stockholder. The approval by a
majority of the Continuing Directors of an exception to the
requirements set forth in clauses (a) and (b) above shall only be
effective if obtained at a meeting at which a Continuing Director
Quorum is present.
13
<PAGE>
(iii) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder) of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(iv) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to public stockholders of the Corporation
at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is
required to be mailed pursuant to such Act or subsequent provisions).
Section 3:
- ---------
For the purpose of this Article VIII
(A) The term "person" shall mean any individual, firm, corporation, or
other entity.
(B) The term "Interested Stockholder" shall mean any person (other
than the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership, or other employee benefit plan of the Corporation or
any
14
<PAGE>
Subsidiary or any trustee or fiduciary with respect to any such plan when
acting in such capacity) who or which:
(i) is the beneficial owner (as hereinafter defined) of more than
ten percent (10%) of the Common Stock; or
(ii) is an Affiliate (as hereinafter defined) of the Corporation and
at any time within the two-year period immediately prior to the date in question
was the beneficial owner of ten percent (10%) or more of the Common Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares
of Common Stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested Stockholder,
if such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(C) A person shall be a "beneficial owner" of any Common Stock:
(i) which such persons or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has,
directly or indirectly, (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement, or understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the right to
vote pursuant to any agreement, arrangement or understanding; or
15
<PAGE>
(iii) which is beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Common Stock.
(D) For purposes of determining whether a person is an Interested
Stockholder pursuant to subparagraph (B) of this paragraph 3, the number of
shares of Common Stock deemed to be outstanding shall include shares deemed
owned through application of subparagraph (C) of this paragraph 3 but shall not
include any other shares of Common Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(E) The term "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on April 1,
1985, or amendments thereto.
(F) The term "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the
Corporation, provided, however, that for the purposes of the definition of
Interested Stockholder set forth in subparagraph (B) of this paragraph 3, the
term "Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the Corporation.
(G) The term "Continuing Director" means any member of the Board of
Directors of the Corporation (the "Board") who is unaffiliated with the
Interested
16
<PAGE>
Stockholder and was a member of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a Continuing
Director who is unaffiliated with the Interested Stockholder and is recommended
to succeed a Continuing Director by a majority of Continuing Directors, provided
that such recommendation or election shall only be effective if made at a
meeting at which a Continuing Director Quorum is present.
(H) The term "Continuing Director Quorum" means six Continuing
Directors capable of exercising the powers conferred upon them under the
provisions of the Articles of Incorporation or By-Laws of the Corporation or by
law.
(I) The term "Fair Market Value" means: (1) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc., Automated
Quotations System or any system then in use, or if no such quotations are
available, the fair market value on the date in question of such stock as
determined by the Board in good faith, and (ii) in the case of the property
other than cash or stock, the fair market value of such property on the date in
question as determined in good faith by a majority of Continuing
17
<PAGE>
Directors, provided that such determination shall only be effective if made at a
meeting at which a Continuing Director Quorum is present.
(J) In the event of any Business Combination in which the Corporation
survives, the phrase "other consideration to be received" as used in
subparagraphs (B)(i) and (ii) of paragraph 2 of this Article VIII shall include
the shares of Common Stock retained by the holders of such shares.
Section 4:
- ---------
Nothing contained in this Article VIII shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
Section 5:
- ---------
Notwithstanding any other provisions of these Articles of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, these Articles of
Incorporation or the By-Laws of the Corporation), the affirmative vote of the
holders of sixty-six and two-thirds percent (66 2/3%) or more of the shares of
Common Stock shall be required to amend or repeal, or adopt any provisions
inconsistent with this Article VIII.
18
<PAGE>
ARTICLE IX
----------
SPECIAL PROVISIONS
------------------
Section 1:
- ---------
The private property of the stockholders, directors, or officers shall
not be subject to the payment of any corporate debts to any extent whatsoever.
Section 2:
- ---------
(A) To the fullest extent that the laws of the State of Nevada, as in
effect on March 18, 1987, or as thereafter amended, permit elimination or
limitation of the liability of directors and officers, no Director, officer,
employee, fiduciary or authorized representative of the Company shall be
personally liable for monetary damages as such for any action taken, or any
failure to take any action, as a Director, officer or other representative
capacity.
(B) This Article shall not apply to any action filed prior to March
18, 1987, nor to any breach of performance or failure of performance of duty by
a Director, officer, employee, fiduciary, or authorized representative occurring
prior to March, 1987. Any amendment or repeal of this Article which has the
effect of increasing Director liability shall operate prospectively only, and
shall not affect any action taken, or any failure to act, prior to its adoption.
Section 3:
- ---------
(A) Right to Indemnification. Except as prohibited by law, every
------------------------
director and officer of the company shall be entitled as a matter of right to be
indemnified by the company against reasonable expense and any liability paid or
19
<PAGE>
incurred by such person in connection with any actual or threatened claim,
action, suit or proceeding, civil, criminal, administrative, investigative or
other, whether brought by or in the right of the company or otherwise, in which
he or she may be involved, as a party or otherwise, by reason of such person
being or having been a Director or officer of the company or by reason of the
fact that such person is or was serving at the request of the company as a
Director, officer, employee, fiduciary or other representative of the
Corporation or another corporation, partnership, joint venture, trust, employee
benefit plan or other entity (such claim, action, suit, or proceeding
hereinafter being referred to as "action"); provided, however, that no such
right of indemnification shall exist with respect to an action brought by a
director or officer against the company (other than a suit for indemnification
as provided in paragraph (B)). Such indemnification shall include the right to
have expenses incurred by such person in connection with an action paid in
advance by the company prior to final disposition of such action, subject to
such conditions as may be prescribed by law. As used herein, "expense" shall
include fees and expenses of counsel selected by such person; and "liability"
shall include amounts of judgments, excise taxes, fines and penalties, and
amounts paid in settlement.
(B) Right of Claimant to Bring Suit. If a claim under paragraph (A)
-------------------------------
of this Section is not paid in full by the company within thirty days after a
written claim has been received by the company, the claimant may at any time
thereafter bring suit against the company to recover the unpaid amount of the
claim, and, if successful in whole or in part, the claimant shall also be
entitled to be paid the expense of prosecuting such claim. It shall be a
defense to any such action that the
20
<PAGE>
conduct of the claimant was such that under Nevada law the company would be
prohibited from indemnifying the claimant for the amount claimed, but the burden
of proving such defense shall be on the company. Neither the failure of the
company (including its Board of Directors, independent legal counsel and its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because the conduct of the claimant was not such that indemnification would be
prohibited by law, nor an actual determination by the company (including the
Board of Directors, independent legal counsel, or its stockholders) that the
conduct of the claimant was such that indemnification would be prohibited by
law, shall be a defense to the action or create a presumption that the conduct
of the claimant was such that indemnification would be prohibited by law.
(C) Insurance and Funding. The Company may purchase and maintain
---------------------
insurance to protect itself and any person eligible to be indemnified hereunder
against any liability or expense asserted or incurred by such person in
connection with any action, whether or not the company would have the power to
indemnify such person against such liability or expense by law or under the
provisions of this Section 3. The company may make other financial arrangements
which include a trust fund, program of self-insurance, grant a security interest
or other lien on any assets of the corporation, establish a letter of credit,
guaranty or surety as set forth in 1987 Statutes of Nevada, Chapter 28 to ensure
the payment of such sums as may become necessary to effect indemnification as
provided herein.
21
<PAGE>
(D) Non-Exclusive; Nature and Extent of Rights. The right of
------------------------------------------
indemnification provided for herein (1) shall not be deemed exclusive of any
other rights, whether now existing or hereafter created, to which those seeking
indemnification hereunder may be entitled under any agreement, by-law or article
provision, vote of stockholders or directors or otherwise, (2) shall be deemed
to create contractual rights in favor of persons entitled to indemnification
hereunder, (3) shall continue as to persons who have ceased to have the status
pursuant to which they were entitled or were denominated as entitled to
indemnification hereunder and shall inure to the benefit of the heirs and legal
representatives of persons entitled to indemnification hereunder and (4) shall
be applicable to actions, suits or proceedings commenced after the adoption
hereof, whether arising from acts or omissions occurring before or after the
adoption hereof. The right of indemnification provided for herein may not be
amended, modified or repealed so as to limit in any way the indemnification
provided for herein with respect to any acts or omissions occurring prior to the
adoption of any such amendment or repeal.
Section 4:
- ---------
In furtherance, and not in limitation, of the powers conferred by
statute, the Board of Directors, by majority vote of those present at any called
meeting, is expressly authorized:
(A) To hold its meetings, to have one or more offices, and to keep the
books of the Corporation, except as may be otherwise specifically required by
22
<PAGE>
the laws of the State of Nevada, within or without the State of Nevada, at such
places as may be from time to time designated by it.
(B) To determine from time to time whether, and if allowed under what
conditions and regulations, the accounts and books of the Corporation (other
than the books required by law to be kept at the principal office of the
Corporation in Nevada), or any of them, shall be open to inspection of the
stockholders, and the stockholders' rights in this respect are and shall be
restricted or limited accordingly.
(C) To make, alter, amend and rescind the By-Laws of the Corporation,
to fix the amount to be reserved as working capital, to fix the times for the
declaration and payment of dividends, and to authorize and cause to be executed
mortgages and liens upon the real and personal property of the Corporation.
(D) To designate from its number an executive committee, which, to the
extent provided by the By-Laws of the Corporation or by resolution of the Board
of Directors, shall have and may exercise in the intervals between meetings of
the Board of Directors, the powers thereof which may lawfully be delegated in
respect of the management of the business and the affairs of the Corporation,
and shall have power to authorize the seal of the Corporation to be affixed to
such papers as may require it. The Board of Directors may also, in its
discretion, designate from its number a finance committee and delegate thereto
such of the powers of the Board of Directors as may be lawfully delegated, to be
exercised when the Board is not in session.
23
<PAGE>
ARTICLE X
---------
OTHER CONSTITUENCIES PROVISIONS
-------------------------------
In taking action, including (but not limited to) action which may
involve or relate to a change or potential change in the control of the
Corporation, the Board of Directors of the Corporation shall be entitled to
consider, without limitation, (1) both the long-term and the short-term
interests of the Corporation and its stockholders and (2) the effects that the
Corporation's actions may have in the short-term or in the long-term upon any of
the following: (i) the prospects for potential growth, development,
productivity, and profitability of the Corporation; (ii) the Corporation's
current employees; (iii) the Corporation's creditors; and (iv) the ability of
the Corporation to provide, as a going concern, goods, services, employment
opportunities and employment benefits and otherwise to contribute to the
communities in which it does business and to serve the public interest. Nothing
in this paragraph shall create any duties owed by any Director to any person or
entity to consider or afford any particular weight to any of the foregoing. For
purposes of this paragraph, "control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of the Corporation, whether through the ownership of voting stock, by
contract or other.
24
<PAGE>
IN WITNESS WHEREOF, the said SIERRA PACIFIC RESOURCES has caused this
Certificate to be signed by its President and its Secretary, and its corporate
seal to be hereto affixed this 28/th/ day of July, 1999.
SIERRA PACIFIC RESOURCES
By________________________________
Malyn K. Malquist, President
By________________________________
William E. Peterson, Secretary
25
<PAGE>
EXHIBIT 3(B)
CERTIFICATE
OF
RESTATED
ARTICLES OF INCORPORATION
OF
NEVADA POWER COMPANY
NEVADA POWER COMPANY, a corporation organized under the laws of the
State of Nevada (the "Corporation"), by its President and Secretary, does hereby
certify: (1) That by resolution of the Board of Directors of the Corporation
adopted at a special meeting of the Board of Directors held on July 23, 1999,
the Board of Directors authorized and directed the President and Secretary of
the Corporation to execute and file this certificate to restate in a single
certificate the articles of incorporation of the Corporation, as amended to the
date of this Certificate.
(2) That the following is a correct restatement of the entire text
of the Articles of Incorporation of the Corporation, as amended to the date of
this Certificate:
[this space intentionally left blank]
1
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
NEVADA POWER COMPANY
ARTICLE I
Name
The name of the Corporation is Nevada Power Company.
ARTICLE II
Capital
2.1 Authorized Capital Stock. The amount of the total authorized capital of
------------------------
the Corporation consists of: (i) One Thousand (1,000) shares of Common Stock
with no par value per share; and (ii) Eight Million (8,000,000) shares of
Preferred Stock of which Four Million (4,000,000) shares shall have a par value
of twenty-five dollars ($25.00) per share and Four Million (4,000,000) shares
shall have a par value of fifty dollars ($50.00) per share.
2.2. Preferred Stock. The Preferred Stock may be issued by the Corporation from
---------------
time to time in one or more series and in such amounts as may be determined by
the Board of Directors. The designations, voting rights, amounts of preference
upon distribution of assets, rates of dividends, premiums of redemption,
conversion rights and other variations, if any, the qualifications, limitations
or restrictions thereof, if any, of the Preferred Stock, and of each series
thereof, shall be such as are fixed by the Board of Directors, authority so to
do being hereby expressly granted, and as are stated and expressed in a
resolution or resolutions adopted by the Board of Directors providing for the
issue of such series of Preferred Stock (hereinafter called "Directors'
Resolution").
2.3. Common Stock. Except as otherwise required by law, the Articles of
------------
Incorporation or as otherwise provided in any Director's Resolution, all shares
of Common Stock shall be identical and the holders of Common Stock shall
exclusively possess all voting power and each share of Common Stock shall have
one vote.
2
<PAGE>
2.4. Relative Ranking of Common Stock. The Common Stock is junior to the
--------------------------------
Preferred Stock and is subject to all the powers, rights, privileges,
preferences and priorities of the Preferred Stock as herein set forth and as may
be stated in any Directors' Resolution or Resolutions.
2.5. Assessment of Shares. The capital stock of the Corporation, after
--------------------
the amount of the consideration for the issuance of shares, as determined by the
Board of Directors, has been paid, is not subject to assessment to pay the debts
of the Corporation and no stock issued as fully paid up may ever be assessed,
and the Articles of Incorporation cannot be amended in this respect.
ARTICLE III
Governing Board
3.1 Directors. The governing board of the Corporation shall be known as the
---------
Board of Directors, and its members shall be known as directors, and the number
of directors of the Corporation shall be not less than three (3) nor more than
fifteen (15). The exact number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption).
3.2. Increase or Decrease of Directors. The minimum and maximum number of
---------------------------------
Directors of the Corporation may be increased or decreased from time to time as
provided in the bylaws of the Corporation.
ARTICLE IV
Directors' and Officers' Liability
No Director or, to the extent specified from time to time by the Board of
Directors, officer of the Corporation will be liable to the Corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer,
excepting only (a) acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law, or (b) the payment of dividends in violation of
NRS 78.300. No amendment or repeal of this Article IV applies to or has any
effect on the liability or alleged liability of any Director or officer of this
3
<PAGE>
Corporation for or with respect to any acts or omissions of the Director or
officer occurring prior to the amendment or repeal, except as otherwise required
by law. In the event that Nevada law is amended to authorize the further
elimination or limitation of liability of directors or officers, then this
Article IV shall also be deemed to be so amended to provide for the elimination
or limitation of liability to the fullest extent permitted by Nevada law.
ARTICLE V
Amendments to Articles of Incorporation
The provisions of the Articles of Incorporation, except as expressly otherwise
herein provided or otherwise required by law, may be amended or altered by a
vote of the holders of a majority of the common stock of the Corporation then
issued, outstanding and entitled to vote.
IN WITNESS WHERREOF, the said NEVADA POWER COMPANY has caused this
Certificate to be signed by its President and its Secretary this 28/th/ day of
July, 1999.
NEVADA POWER COMPANY
By ________________________________
Malyn K. Malquist, President
By ________________________________
William E. Peterson, Secretary
4
<PAGE>
EXHIBIT 3(C)
AMENDED AND RESTATED
BY-LAWS
OF
NEVADA POWER COMPANY
(amended and restated: July 28, 1999)
1
<PAGE>
ARTICLE I
NAME
----
The name of the Corporation (hereinafter referred to as this Corporation)
shall be as set forth in the Articles of Incorporation or in any lawful
amendments thereto from time to time.
ARTICLE II
STOCKHOLDERS' MEETINGS
----------------------
All meetings of the stockholders shall be held at the principal office of
the Corporation in the State of Nevada unless some other place within or without
the State of Nevada is stated in the call. No stockholder action required to be
taken or which may be taken at any annual or special meeting of stockholders of
the Corporation may be taken without a meeting, and the power of stockholders to
consent in writing without a meeting to the taking of any action is specifically
denied.
ARTICLE III
ANNUAL STOCKHOLDERS' MEETINGS
-----------------------------
The Annual Meeting of the Stockholders of the Corporation shall be held at
such time and place as directed or selected by a majority of the Board of
Directors.
ARTICLE IV
SPECIAL STOCKHOLDERS' MEETINGS
------------------------------
Special meetings of the stockholders of this Corporation shall be held
whenever called in the manner required by law for the purpose as to which there
are special statutory provisions and for other purposes whenever called by the
Chairman of the Board, the President, a Vice President or by a quorum of the
Board of Directors or
2
<PAGE>
whenever the holder or holders of at least one-third part in voting power of the
capital stock entitled to vote shall make written application therefor to the
Secretary or an Assistant Secretary stating the time, place and purpose of the
meeting applied for.
ARTICLE V
NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
Notice stating the place, day and hour of all stockholders' meetings and
the purpose or purposes for which such meetings are called, shall be given by
the President or a Vice President or the Secretary or an Assistant Secretary not
less than ten (10) nor more than sixty (60) days prior to the date of the
meeting to each stockholder entitled to vote thereat by leaving such notice with
him at his residence or usual place of business, or by mailing it, postage
prepaid, addressed to such stockholder at his address as it appears upon the
books of this Corporation, and to the Chairman of the Board at the Corporation's
main office, the person giving such notice shall make affidavit in relation
thereto.
ARTICLE VI
QUORUM AT STOCKHOLDERS' MEETINGS
--------------------------------
Except as otherwise provided by law, at any meeting of the stockholders, a
majority of the voting power of the shares of capital stock issued and
outstanding and entitled to vote, represented by such stockholders of record in
person or by proxy, shall constitute a quorum, but a less interest may adjourn
any meeting sine die or adjourn any meeting from time to time and the meeting
may be held as adjourned without further notice. When a quorum is present at
any meeting, a majority of the voting power of the stock entitled to vote
represented thereat shall decide any question brought before such meeting,
unless the question is one upon which by express provision of law, or of the
3
<PAGE>
Articles of Incorporation, or of these By-Laws a larger or different vote is
required, in which case such express provision shall govern and control the
decision of such question.
ARTICLE VII
PROXY AND VOTING
----------------
Stockholders of record entitled to vote may vote at any meeting either in
person or by proxy in writing, which shall be filed with the Secretary of the
meeting before being voted. Such proxies shall entitle the holders thereof to
vote at any adjournment of such meeting, but shall not be valid after the final
adjournment thereof. No proxy shall be valid after the expiration of six (6)
months from the date of its execution unless the stockholder specifies therein
the length of time for which it is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution. Stockholders entitled to
vote shall be entitled to the voting rights as provided in the Articles of
Incorporation.
ARTICLE VIII
BOARD OF DIRECTORS
------------------
A Board of not less than three (3) nor more than fifteen (15) Directors
shall be chosen at the Annual Meeting of the Stockholders, or at any meeting
held in place thereof as hereinbefore provided. The number of Directors for
each corporate year shall be fixed by resolution or vote at the meeting when
elected, but the Stockholders, at a Special Meeting held for the purpose during
any such year, may increase or decrease (within the limits above specified) the
number of Directors as thus fixed. If the number of Directors be increased at
any such Annual or Special Meeting of Stockholders, the additional Directors may
be elected by the Stockholders at such meeting, or in the event that the
Stockholders shall fail to elect such additional Directors at such meeting, such
4
<PAGE>
additional Directors may be elected by a majority of the Directors in office at
the time of the increase. Except as otherwise provided in these By-Laws, each
Director shall serve until the next Annual Meeting of the Stockholders and until
his successor is duly elected and qualified. Directors need not be Stockholders
in the Corporation. Directors shall be of full age and at least one of them
shall be a citizen of the United States.
ARTICLE IX
POWERS OF DIRECTORS
-------------------
The Board of Directors shall have the entire management of the business of
this Corporation. In the management and control of the property, business and
affairs of this Corporation, the Board of Directors is hereby vested with all
the powers possessed by this Corporation itself, so far as this delegation of
authority is not inconsistent with the laws of the State of Nevada, with the
Articles of Incorporation or with these By-Laws. Except as otherwise provided
by law, the Board of Directors shall have power to determine what constitutes
net earnings, profits and surplus, respectively, what amount shall be reserved
for working capital and for any other purposes, and what amount shall be
declared as dividends, and such determination by the Board of Directors shall be
final and conclusive.
ARTICLE X
COMPENSATION OF DIRECTORS AND OTHERS
------------------------------------
Directors may be compensated for their services on an annual basis and/or
they may receive a fixed sum plus expenses of attendance, if any, for attendance
at each Regular or Special Meeting of the Board, such compensation or fixed sum
to be fixed from time to time by resolution of the Board of Directors, provided
that nothing herein contained shall be construed to preclude any director from
serving this Corporation in any other
5
<PAGE>
capacity and receiving compensation therefor. Members of special or standing
committees may receive like compensation for their services on an annual basis
and/or fixed sum for attendance at each committee meeting. Any compensation so
fixed and determined by the Board of Directors shall be subject to revision or
amendment by the stockholders.
ARTICLE XI
EXECUTIVE AND OTHER COMMITTEES
------------------------------
The Board of Directors may, by resolution or vote passed by a majority of
the whole Board, designate from their number an Executive Committee of not less
than three (3) nor more than a majority of the members of the whole Board as at
the time constituted, which Committee shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of this
Corporation when the Board is not in session. The Executive Committee may make
rules for the notice, holding and conduct of its meetings and keeping of the
records thereof. Such Committee shall serve until the first Directors' meeting
following the next Annual Stockholders' Meeting, and until their successors
shall be designated and shall qualify, and a majority of the members of said
Committee shall constitute a quorum for the transaction of business.
The Board of Directors shall, by resolution or vote passed by a majority of
the whole Board, designate from their members who are not employees of the
Corporation to serve on an Audit Committee of not less than three (3) nor more
than a majority of the whole Board at the time constituted, to nominate auditors
for the annual audit of the Corporation's books and records, to develop the
scope of the audit program, to discuss the results of such audits with the audit
firm, and to take any other action they may deem
6
<PAGE>
necessary or advisable in carrying out the work of the Committee. Such Committee
shall serve until their successors shall be designated and shall qualify, and a
majority of the members of the Audit Committee shall constitute a quorum for the
transaction of business.
The Board of Directors may also appoint other committees from time to time,
the number composing such committees, and the powers conferred upon the same to
be determined by resolution or vote of the Board of Directors.
7
<PAGE>
ARTICLE XII
DIRECTORS' MEETINGS
-------------------
Regular meetings of the Board of Directors shall be held at such places
within or without the State of Nevada and at such times as the Board by
resolution or vote may determine from time to time, and if so determined no
notice thereof need be given. Special meetings of the Board of Directors may be
held at any time or place within or without the State of Nevada whenever called
by the Chairman of the Board, the President, a Vice President, a Secretary, an
Assistant Secretary or two or more Directors, notice thereof being given to each
Director by the Secretary, an Assistant Secretary or officer calling the
meeting, or at any time without formal notice provided all the Directors are
present or those not present waive notice thereof. Notice of Special Meetings,
stating the time and place thereof, shall be given by mailing the same to each
Director at his residence or business address at least two days before the
meeting, unless, in case of exigency, the President or in his absence the
Secretary shall prescribe a shorter notice to be given personally or by
telephoning or telegraphing each Director at his residence or business address.
Such Special Meetings shall be held at such times and places as the notices
thereof or waiver shall specify.
Meetings of the Board of Directors may be conducted by means of a
conference telephone network or a similar communications method by which all
persons participating in the meeting can hear each other. The minutes of such
meeting shall be submitted to the Board of Directors, for approval, at a
subsequent meeting.
Unless otherwise restricted by the Articles of Incorporation or these By-
Laws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting if a
written consent
8
<PAGE>
thereto is signed by all the members of the Board of Directors or of such
committee. Such written consent shall be filed with the minutes of meetings of
the Board or Committee.
ARTICLE XIII
QUORUM AT DIRECTORS' MEETING
----------------------------
Except as otherwise provided by law, by the Articles of Incorporation, or
by these By-Laws, a majority of the members of the Board of Directors shall
constitute a quorum for the transaction of business, but a lesser number may
adjourn any meeting from time to time, and the meeting may be held as adjourned
without further notice. When a quorum is present at any meeting, a majority of
the members present thereat shall decide any question brought before such
meeting.
ARTICLE XIV
WAIVER OF NOTICE
----------------
Whenever any notice whatever of any meeting of the stockholders, Board of
Directors or any committee is required to be given by these By-Laws or the
Articles of Incorporation of this Corporation or any of the laws of the State of
Nevada, a waiver thereof in writing, signed by the person or persons entitled to
said notice whether before or after the time stated therein, shall be deemed
equivalent to such notice so required. The presence at any meeting of a person
or persons entitled to notice thereof shall be deemed a waiver of such notice as
to such person or persons.
ARTICLE XV
OFFICERS
--------
9
<PAGE>
The officers of this Corporation shall be a President, one or more Vice
Presidents, a Secretary, a Controller, and a Treasurer. The Board of Directors
at its discretion may elect a Chairman of the Board of Directors. The Chairman
of the Board of Directors, if one is to be elected, the President, the Vice
Presidents, the Secretary, the Controller, and the Treasurer shall be elected
annually by the Board of Directors after its election by the stockholders and
shall hold office until their successors are duly elected and qualified,
subject, however, to other provisions contained in these By-Laws, and a meeting
of the Directors may be held without notice for this purpose immediately after
the Annual Meeting of the Stockholders and at the same place.
ARTICLE XVI
ELIGIBILITY OF OFFICERS
-----------------------
Any two or more offices may be held by the same person except the
offices of Chairman of the Board of Directors or President and Secretary shall
not be held by the same person.
The Chairman of the Board of Directors and the President may, but need
not, be Stockholders and shall be Directors of the Corporation. The Vice
Presidents, Secretary, Treasurer and such other officers as may be elected or
appointed need not be stockholders or Directors of this Corporation.
ARTICLE XVII
ADDITIONAL OFFICERS AND AGENTS
------------------------------
The Board of Directors, at its discretion, may appoint one or more
Assistant Secretaries and one or more Assistant Treasurers and such other
officers or agents as it
10
<PAGE>
may deem advisable, and prescribe their duties. All officers and agents
appointed pursuant to this Article may hold office during the pleasure of the
Board of Directors.
ARTICLE XVIII
CHAIRMAN OF THE BOARD AND PRESIDENT
-----------------------------------
(A) Chairman of the Board: The Chairman of the Board shall preside
---------------------
at all meetings of the shareholders and the Board of Directors and shall have
such powers and perform such other duties as may be assigned to him from time to
time by the Board of Directors, including, but not limited to, the signing or
countersigning of certificates of stock, bonds, notes, contracts or other
instruments of the Corporation as authorized by the Board of Directors. He
shall be ex-officio a member of all standing committees.
(B) President: In the absence or inability of the Chairman of the
---------
Board of Directors or during any vacancy in the office thereof, the President
shall preside at all meetings of the shareholders and the Board of Directors and
shall perform such other duties as may be assigned to him from time to time by
the Board of Directors, including, but not limited to, the signing or
countersigning of certificates of stock, bonds, notes, contracts or other
instruments of the Corporation as authorized by the Board of Directors. He
shall be ex-officio a member of all standing committees.
ARTICLE XIX
VICE PRESIDENTS
---------------
Except as especially limited by resolution or vote of the Board of
Directors, any Vice President shall perform the duties and have the powers of
the President during the absence or disability of the President and shall have
power to sign all certificates of
11
<PAGE>
stock, deeds and contracts of this Corporation. He shall perform such other
duties and have such other powers as the Board of Directors shall designate from
time to time.
ARTICLE XX
SECRETARY
---------
The Secretary shall keep accurate minutes of all meetings of the Board
of Directors, the Executive Committee and the Stockholders, shall perform all
the duties commonly incident to this office, and shall perform such other duties
and have such other powers as the Board of Directors shall from time to time
designate. The Secretary shall have power, together with the Chairman of the
Board or the President or a Vice President, to sign certificates of stock of
this Corporation. In his absence, an Assistant Secretary or Secretary pro
tempore shall perform his duties.
ARTICLE XXI
TREASURER
---------
The Treasurer, subject to the order of the Board of Directors, shall
have the care and custody of the money, funds, valuable papers and documents of
this Corporation (other than his own bond which shall be in the custody of the
President) and shall have and exercise, under the supervision of the Board of
Directors, all the powers and duties commonly incident to his office, and shall
give bond in such form and with such sureties as may be required by the Board of
Directors.
He shall deposit all funds of this Corporation in such bank or banks,
trust company or trust companies or with such firm or firms doing banking
business as the Directors shall designate or approve. He may endorse for
deposit or collection all checks, notes, et cetera, payable to this Corporation
or to its order, may accept drafts on behalf of this Corporation and, together
with the Chairman of the Board or the President or a Vice
12
<PAGE>
President, may sign certificates of stock. He shall keep accurate books of
account of this Corporation's transactions which shall be the property of this
Corporation and, together with all its property of this Corporation, shall be
subject at all times to the inspection and control of the Board of Directors.
ARTICLE XXII
CONTROLLER
----------
The Controller, subject to the order of the Board of Directors, shall
be responsible for the accounting functions of the Corporation. He may be
assigned the additional responsibility of automated information systems. He
shall perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
ARTICLE XXIII
RESIGNATIONS AND REMOVALS
-------------------------
Any Director or officer of this Corporation may resign at any time by
giving written notice to the Board of Directors or to the President or to the
Secretary of this Corporation, and any member of any committee may resign by
giving written notice either as aforesaid or to the committee of which he is a
member or to the chairman thereof. Any such resignation shall take effect at
the time specified therein or, if the time be not specified, upon receipt
thereof; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
The stockholders, at any meeting called for that purpose, by vote of
not less than two-thirds of the voting power of the stock issued and outstanding
and entitled to vote, may remove from office any director or officer elected or
appointed by the Stockholders. The Board of Directors, by vote of not less than
a majority of those present
13
<PAGE>
at a duly called meeting, may remove from office any officer, agent or member or
members of any committee elected or appointed by it or by the Executive
Committee.
The Compensation and Organization Committee, at any meeting called for
that purpose, or the Chief Executive Officer, or, in his absence, the President
of the Company, may immediately suspend from his or her office and the
performance of his or her duties any officer of the Company pending a regular
meeting of Directors or any meeting of the Board of Directors called for the
purposes of removing an officer of the Corporation.
ARTICLE XXIV
VACANCIES
---------
If the office of any Director, officer or agent, one or more, becomes
vacant by reason of death, resignation, removal, disqualification or otherwise,
the Directors may, by vote of a majority of a quorum of the remaining Directors,
as constituted for the time being, choose a successor or successors who shall
hold office for the unexpired term. If there be less than a quorum of the
Directors at the time in office, said directors may, by a majority vote, choose
a successor or successors who shall hold office for the unexpired term.
Vacancies in the Board of Directors may be filled for an unexpired term by the
Stockholders at a meeting called for that purpose unless such vacancy shall have
been filled by the Directors.
ARTICLE XXV
MORTGAGING OF PROPERTY
----------------------
The Board of Directors, by vote of not less than a majority of the
board at a called meeting, may create any mortgage or other lien upon its
property and franchises to
14
<PAGE>
secure the issuance of bonds, notes and/or other obligations of this Corporation
without the consent of the Stockholders of his Corporation.
ARTICLE XXVI
CAPITAL STOCK
-------------
The amount of capital stock shall be as fixed in the Articles of
Incorporation or in any lawful amendments thereto from time to time.
ARTICLE XXVII
CERTIFICATES OF STOCK
---------------------
Every stockholder shall be entitled to a certificate or certificates
of the capital stock of this Corporation in such form as may be prescribed by
the Board of Directors, duly numbered and sealed with the corporate seal of this
Corporation and setting forth the number of shares to which each stockholder is
entitled. Such certificates shall be signed by the Chairman of the Board or the
President, or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary. The Board of Directors may also
appoint one or more Transfer Agents and/or Registrars for its capital stock of
any class or classes and may require stock certificates to be countersigned
and/or registered by one or more of such Transfer Agents and/or Registrars. If
certificates of capital stock of this Corporation are signed by a Transfer Agent
and by a Registrar, the signatures thereon of the Chairman of the Board or the
President or a Vice President and the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of this Corporation and the seal of this
Corporation thereon may be facsimiles, engraved or printed. Any provisions of
these By-Laws with reference to the signing and sealing of stock certificates
shall include, in cases above permitted, such facsimiles. In case any
15
<PAGE>
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on, any such certificate or certificates shall
cease to be such officer or officers of this Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by this Corporation, such certificate or certificates may
nevertheless be adopted by the Board of Directors of this Corporation and be
issued and delivered as though the person or persons who signed such certificate
or certificates or whose facsimile signature or signatures shall have been used
thereon had not ceased to be such officer or officers of this Corporation.
ARTICLE XXVIII
TRANSFER OF STOCK
-----------------
Shares of stock may be transferred by delivery of the certificate
accompanied either by an assignment in writing on the back of the certificate or
by a written power of attorney to sell, assign and transfer the same on the
books of this Corporation, signed by the person appearing by the certificate to
be the owner of the shares represented thereby, and shall be transferable on the
books of this Corporation upon surrender thereof so assigned or endorsed. The
person registered on the books of this Corporation as the owner of any shares of
stock shall exclusively be entitled as the owner of such shares, to receive
dividends and to vote as such owner in respect thereof. It shall be the duty of
every Stockholder to notify this Corporation of his post office address.
ARTICLE XXIX
TRANSFER BOOKS
--------------
16
<PAGE>
The transfer books of the stock of this Corporation may be closed for
such period from time to time, not exceeding forty (40) days, in anticipation of
Stockholders' meetings or the payment of dividends or the allotment of rights as
the Directors from time to time may determine, provided, however, that in lieu
of closing the transfer books as aforesaid, the Board of Directors may fix in
advance a date, not exceeding forty (40) days, as of which Stockholders shall be
entitled to vote at any meeting of the Stockholders or to receive dividends or
rights, and in such case such Stockholders and only such Stockholders as shall
be Stockholders of record as of the date so fixed shall be entitled to vote at
any such meeting and at any adjournment or adjournments thereof or to receive
dividends or rights, as the case may be, notwithstanding any transfer of any
stock on the books of this Corporation after such record date fixed as
aforesaid.
ARTICLE XXX
LOSS OF CERTIFICATES
--------------------
In case of the loss, mutilation or destruction of a certificate of
stock, a duplicate certificate may be issued upon such terms consistent with the
laws of the State of Nevada as the Directors shall prescribe.
ARTICLE XXXI
SEAL
----
The seal of this Corporation shall consist of a flat-faced circular
die with the corporate name of this Corporation, the year of its incorporation
and the words "Corporate Seal Nevada" cut or engraved thereon. Said seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
17
<PAGE>
ARTICLE XXXII
VOTING OF STOCK HELD
--------------------
Unless otherwise provided by resolution or vote of the Board of
Directors, the Chairman of the Board, the President or any Vice President, may
from time to time appoint an attorney or attorneys or agent or agents of this
Corporation, in the name on behalf of this Corporation to cast the votes which
this Corporation may be entitled to cast as a Stockholder or otherwise in any
other corporation, any of whose stock or securities may be held by this
Corporation, at meetings of the holders of the stock or other securities of such
other corporations, or to consent in writing to any action by any such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent and may execute or cause to
be executed on behalf of this Corporation and under its corporate seal, or
otherwise such written proxies, consents, waivers or other instruments as he may
deem necessary or proper in the premises; or the Chairman of the Board or the
President or any Vice President may himself attend any meeting of the holders of
stock or other securities of such other corporation and thereat vote or exercise
any or all other powers of this Corporation as the holder of such stock or other
securities of such other corporation.
The Chairman of the Board or the President or any Vice President may
appoint one or more nominees in whose name or names stock or securities acquired
by this Corporation may be taken. With the approval of the Chairman of the
Board or the President or any Vice President of the Corporation (which approval
may be evidenced by his signature as witness on the instruments hereinafter
referred to) any such nominee may execute such written proxies, consents,
waivers or other instruments as he may be entitled to execute as the record
holder of stock or other securities owned by this Corporation.
18
<PAGE>
ARTICLE XXXIII
EXECUTION OF CHECKS, DRAFTS, NOTES,
-----------------------------------
BONDS, DEBENTURES, ETC.
-----------------------
All checks, drafts, notes, bonds, debentures, or other obligations for
the payment of money shall be signed by such officer or officers, agent or
agents, as the Board of Directors shall by resolution or vote direct. The Board
of Directors may also, in its discretion, require, by resolution or vote, that
checks, drafts, notes, bonds, debentures, or other obligations for the payment
of money shall be countersigned or registered as a condition to their validity
by such officer or officers, agent or agents as shall be directed in such
resolution or vote. Checks for the total amount of any payroll and/or branch
office current expenses may be drawn in accordance with the foregoing provisions
and deposited in a special fund or funds. Checks upon such fund or funds may be
drawn by such person or persons as the Treasurer shall designate and need not be
countersigned.
ARTICLE XXXIV
FACSIMILE SIGNATURES ON BONDS AND DEBENTURES
--------------------------------------------
The signatures of any officer or officers of this Corporation
executing a corporate bond or debenture or attesting the corporate seal thereon,
or upon any interest coupons annexed to any such corporate bond or debenture,
and the corporate seal affixed to any such bond or debenture, may be facsimiles,
engraves or printed, provided that such bond or debenture is authenticated or
certified with the manual signature of an authorized officer of the corporate
trustee designated by the indenture or other agreement under which said security
is issued or of an authorized officer of an authenticating agent appointed by
such corporate trustee. In case any officer or officers who signature or
19
<PAGE>
signatures, whether manual or facsimile, shall have been used on any corporate
bond or debenture shall cease to be an officer or officers of the Corporation
for any reason before the same has been delivered by the Corporation, such bond
or debenture may nevertheless be issued and delivered as though the person or
persons who signatures were used thereon had not ceased to be such officer or
officers.
ARTICLE XXXV
SPECIAL PROVISIONS
------------------
Section 1:
- ---------
The private property of the stockholders, Directors or officers shall
not be subject to the payment of any corporate debts to any extent whatsoever.
Section 2:
- ---------
(A) To the fullest extent that the laws of the State of Nevada, as
amended from time to time, permit elimination or limitation of the liability of
directors and officers, no Director, officer, employee, fiduciary or authorized
representative of the Company shall be personally liable for monetary damages as
such for any action taken, or any failure to take any action, as a Director,
officer or other representative capacity.
(B) Any amendment or repeal of this Article which has the effect of
increasing Director liability shall operate prospectively only, and shall not
affect any action taken, or any failure to act, prior to its adoption.
Section 3:
- ---------
20
<PAGE>
(A) Right to Indemnification. Except as prohibited by law, every
------------------------
Director and officer of the Company shall be entitled as a matter of right to be
indemnified by the Company against reasonable expense and any liability paid or
incurred by such person in connection with any actual or threatened claim,
action, suit or proceeding, civil, criminal, administrative, investigative or
other, whether brought by or in the right of the Company or otherwise, in which
he or she may be involved, as a party or otherwise, by reason of such person
being or having been a Director or officer of the Company or by reason of the
fact that such person is or was serving at the request of the Company as a
Director, officer, employee, fiduciary or other representative of the
Corporation or another corporation, partnership, joint venture, trust, employee
benefit plan or other entity (such claim, action, suit or proceeding hereafter
being referred to as "action"); provided, however, that no such right of
indemnification shall exist with respect to an action brought by a Director or
officer against the Company (other than a suit for indemnification as provided
in paragraph (B)). Such indemnification shall include the right to have
expenses incurred by such person in connection with an action paid in advance by
the Company prior to final disposition of such action, subject to such
conditions as may be prescribed by law. As used herein, "expense" shall include
fees and expenses of counsel selected by such person; and "liability" shall
include amounts of judgments, excise taxes, fines and penalties, and amounts
paid in settlement.
(B) Right of Claimant to Bring Suit. If a claim under paragraph (A)
-------------------------------
of this Section is not paid in full by the Company within thirty (30) days after
a written claim has been received by the Company, the claimant may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim, and, if successful in whole or in part, the claimant shall also be
entitled to be paid the expense of prosecuting such claim.
21
<PAGE>
It shall be a defense to any such action that the conduct of the claimant was
such that under Nevada law the Company would be prohibited from indemnifying the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Company. Neither the failure of the Company (including its Board of
Directors, independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because the conduct of the claimant
was not such that indemnification would be prohibited by law, nor an actual
determination by the Company (including the Board of Directors, independent
legal counsel or its stockholders) that the conduct of the claimant was such
that indemnification would be prohibited by law, shall be a defense to the
action or create a presumption that the conduct of the claimant was such that
indemnification would be prohibited by law.
(C) Insurance and Funding. The Company may purchase and maintain
---------------------
insurance to protect itself and any person eligible to be indemnified hereunder
against any liability or expense asserted or incurred by such person in
connection with any action, whether or not the Company would have the power to
indemnify such person against such liability or expense by law or under the
provisions of this Section 3. The Company may make other financial arrangements
which include a trust fund, program of self-insurance, grant a security interest
or other lien on any assets of the corporation, establish a letter of credit,
guaranty or surety as set forth in 1987 Statutes of Nevada, Chapter 28 to ensure
the payment of such sums as may become necessary to effect indemnification as
provided herein.
(D) Non-Exclusive; Nature and Extent of Rights. The right of
------------------------------------------
indemnification provided for herein (1) shall not be deemed exclusive of any
other rights,
22
<PAGE>
whether now existing or hereafter created, to which those seeking
indemnification hereunder may be entitled under any agreement, by-law or article
provision, vote of stockholders or directors or otherwise, (2) shall be deemed
to create contractual rights in favor of persons entitled to indemnification
hereunder, (3) shall continue as to persons who have ceased to have the status
pursuant to which they were entitled or were denominated as entitled to
indemnification hereunder and shall inure to the benefit of the heirs and legal
representatives of persons entitled to indemnification hereunder, and (4) shall
be applicable to actions, suits or proceedings commenced after the adoption
hereof, whether arising from acts or omissions occurring before or after the
adoption hereof. The right of indemnification provided for herein may not be
amended, modified or repealed so as to limit in any way the indemnification
provided for herein with respect to any acts or omissions occurring prior to the
adoption of any such amendment or repeal.
Section 4:
- ---------
In furtherance, and not in limitation, of the powers conferred by
statute, the Board of Directors, by a majority vote of those present at any
called meeting, is expressly authorized:
(A) To hold its meetings, to have one or more offices and to keep the
books of the Corporation, except as may be otherwise specifically required by
the laws of the State of Nevada, within or without the State of Nevada, at such
places as may be from time to time designated by it.
(B) To determine from time to time whether, and if allowed under what
conditions and regulations, the accounts and books of the Corporation (other
than the books required by law to be kept at the principal office of the
Corporation in Nevada), or
23
<PAGE>
any of them, shall be open to inspection of the stockholders, and the
stockholders' rights in this respect are and shall be restricted or limited
accordingly.
(C) To make, alter, amend and rescind the By-Laws of the Corporation,
to fix the amount to be reserved as working capital, to fix the times for the
declaration and payment of dividends, and to authorize and cause to be executed
mortgages and liens upon the real and personal property of the Corporation.
(D) To designate from its number an executive committee, which, to the
extent provided by the By-Laws of the Corporation or by resolution of the Board
of Directors, shall have and may exercise in the intervals between meetings of
the Board of Directors, the powers thereof which may lawfully be delegated in
respect of the management of the business and the affairs of the Corporation,
and shall have power to authorize the seal of the Corporation to be affixed to
such papers as may require it. The Board of Directors may also, in its
discretion, designate from its number a finance committee and delegate thereto
such of the powers of the Board of Directors as may be lawfully delegated, to be
exercised when the Board is not in session.
ARTICLE XXXVI
AMENDMENTS
----------
These By-Laws may be amended, added to, altered or repealed in whole
or in part at any Annual or Special Meeting of the Stockholders by vote in
either case of a majority of the voting power of the capital stock issued and
outstanding and entitled to vote, provided notice of the general nature or
character of the proposed amendment, addition, alteration or repeal is given in
the notice of said meeting, or by the affirmative vote of a majority of the
Board of Directors present at a called Regular or Special Meeting of the Board
of Directors, provided notice of the general nature or character of the proposed
amendment, addition, alteration or repeal is given in the notice of said
meeting.
24
<PAGE>
EXHIBIT 4(A)
FISCAL AND PAYING AGENCY AGREEMENT
----------------------------------
THIS AGREEMENT dated as of October 12, 1999 between Nevada Power
Company, a corporation organized under the laws of the State of Nevada (the
"Company"), and Bankers Trust Company, a New York banking corporation as fiscal
and paying agent (the "Agent").
Section 1. Appointment of Agent. The Company proposes to issue from
--------------------
time to time its unsecured, unsubordinated Notes (the "Notes"). The Company
hereby appoints the Agent to act, on the terms and conditions specified herein,
as fiscal and paying agent for the Notes.
Section 2. Amount Unlimited; Execution.
---------------------------
(a) The Notes shall be issuable in series. The aggregate principal
amount of Notes which may be issued hereunder is unlimited.
(b) Each Note shall be executed on behalf of the Company by the manual
or facsimile signature of an Authorized Representative (as defined in Section 3
hereof) of the Company.
Section 3. Authorized Representatives. From time to time the Company
--------------------------
will furnish the Agent with a certificate or similar form of evidence of the
Company demonstrating the incumbency of officers authorized to execute Notes and
Authentication Orders (as defined in Section 4 hereof) on behalf of the Company
(an "Authorized Representative"). Until the Agent receives a subsequent
incumbency certificate or similar form of evidence of the Company, the Agent
shall be entitled to rely on the last such certificate or similar form of
evidence delivered to it for purposes of determining the Authorized
Representatives. Any Note bearing the manual or facsimile signature of a person
who is an Authorized Representative on the date such signature is affixed shall
bind the Company after the completion and registration thereof by the Agent,
notwithstanding that such person shall have ceased to hold office on the date
such Note is authenticated and delivered by the Agent.
Section 4. Authentication Orders; Completion, Authentication and
-----------------------------------------------------
Delivery of Notes.
-----------------
(a) The Notes shall be issued only upon receipt from the Company of an
order (an "Authentication Order") with respect to a series of Notes, which shall
be accompanied by the proposed form of the Notes of such series and, to the
extent not set forth in such proposed form of Note, shall include:
1
<PAGE>
(i) the designation of the Notes of the series (which may be
part of a series of Notes previously issued);
(ii) any limit on the aggregate principal amount of the Notes of
the series that may be authenticated and delivered hereunder
(except for Notes authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Notes of
the series);
(iii) any date or dates on which the principal of the Notes of
the series is payable;
(iv) the method by which the rate or rates at which the Notes
shall bear interest shall be determined; the date or dates from
which such interest shall be payable (each an "Interest Payment
Date") and the record dates for the determination of holders to
whom interest is payable; and the basis on which interest is to
be calculated;
(v) the place or places where the principal of and any interest
on the Notes shall be payable;
(vi) the price or prices at which, the period or periods within
which and the terms and conditions upon which Notes of the series
may be redeemed, in whole or in part;
(vii) the obligation, if any, of the Company to redeem, purchase
or repay Notes of the series pursuant to any mandatory
redemption, sinking fund or analogous provisions or at the option
of a holder thereof and the price or prices at which and the
period or periods within which and the terms and conditions upon
which Notes shall be redeemed, purchased or repaid, in whole or
in part, pursuant to such obligation;
(viii) the denominations in which Notes shall be issuable;
(ix) if other than the principal amount thereof, the portion of
the principal amount of Notes which shall be payable upon
declaration of acceleration of the maturity thereof;
(x) any restrictions on sale, resale, pledge or any other
transfer of the Notes; and
(xi) whether the Notes will be in the form of a global
security.
(b) Upon receipt of such Authentication Order with respect to the
Notes, the Agent shall prepare or cause to be prepared, the necessary Notes in
the form attached hereto as Exhibit A and, in accordance with the Authentication
---------
Order, shall:
2
<PAGE>
(i) complete each Note as to its Registered Holder and
principal amount;
(ii) record each Note in a Note Register to be maintained by the
Agent hereunder;
(iii) cause each Note to be manually authenticated by any one of
the officers or employees of the Agent duly authorized and
designated by it for such purpose; and
(iv) deliver each Note.
Section 5. Reliance on an Authentication Order. The Agent shall
-----------------------------------
incur no liability to the Company in acting hereunder on instructions which the
recipient believed in good faith to have been given by an Authorized
Representative.
Section 6. Company's Representations and Warranties. The
----------------------------------------
Authentication Order given to the Agent in accordance with Section 4 hereof
shall constitute a continuing representation and warranty to the Agent by the
Company that the issuance and delivery of the Notes which are the subject
thereof have been duly and validly authorized by the Company and that the Notes,
when completed, authenticated and delivered pursuant hereto, will constitute the
legal, valid and binding obligations of the Company.
Section 7. Payment of Note Interest; Interest Payment Dates; Record
--------------------------------------------------------
Dates. All interest payments in respect of the Notes will be made to the
- -----
Registered Holders in whose names Notes are registered at the close of business
on the record date specified in the Notes of such series (whether or not a New
York City Business Day) next preceding each Interest Payment Date (each a
"Record Date"). Notwithstanding the foregoing, if so specified in the Notes of
such series, if the original issue date or date of transfer of any Note occurs
either on an Interest Payment Date or between a Record Date and the next
succeeding Interest Payment Date, the first payment of interest on any such Note
will be made on the Interest Payment Date following the next succeeding Record
Date. Unless otherwise specified in an Authentication Order with respect to a
particular series of Notes or in the proposed form of Notes of that series, all
interest payments on the Notes will be made at the office of the Agent located
at Four Albany Street, New York, New York 10006-1515, or, at the option of the
Agent may be made by check of the Agent mailed to the Registered Holders, as
such Registered Holders appear on the Record Date in the Note Register referred
to in Section 12 hereof, or to such other address in the United States as any
Registered Holder shall designate to the Agent in writing not later than the
relevant Record Date; provided, however, that in the case of Notes held by a
-------- -------
depository or its nominee, payments of principal and interest shall be made by
wire transfer of immediately available funds to an account designated by such
depository.
Section 8. Payment of Note Principal. The Agent will pay the
-------------------------
principal amount of each Note at maturity, together with accrued interest due at
maturity (unless the maturity date is an Interest Payment Date), if any, only
upon presentation and surrender of such Note on or
3
<PAGE>
after the maturity date thereof. The Agent will forthwith cancel and destroy
each such Note. If the maturity date is an Interest Payment Date, interest will
be paid in the usual manner.
Section 9. Information Regarding Amounts Due. Promptly following
---------------------------------
each Record Date, the Agent will advise the Company of the amount of interest
due on the following Interest Payment Date. The Agent will advise the Company
by the fifteenth day prior to each payment date of the principal of and accrued
interest to be paid on Notes maturing on the next succeeding payment date.
Section 10. Availability of Funds. The Company shall assure that
---------------------
funds are available to the Agent not later than 11:00 a.m. New York City time on
each Interest Payment Date and on each maturity date of any Note, in immediately
available funds sufficient to pay all accrued interest on, and/or the principal
of any such Note, as the case may be.
Section 11. Amendments and Waivers. This Agreement and the
----------------------
provisions of Notes of one or more series issued pursuant hereto may be amended
or waived in the manner and with the effect as may be specified in the terms of
Notes of such series.
Section 12. Registration, Transfer, Exchange, Persons Deemed Owners.
-------------------------------------------------------
(a) The terms "Note Register" shall mean the definitive record in
which shall be recorded the names, addresses and taxpayer identifying numbers of
Registered Holders of the Notes, the Note numbers and original issue dates
thereof and details with respect to the transfers and exchange of Notes.
(b) The Agent shall register the transfer of any Note and/or effect
the exchange of any Note or Notes for Notes of other authorized denominations
only in accordance with the terms and conditions of such Note.
Section 13. Application of Funds; Return of Unclaimed Funds. Until
-----------------------------------------------
used or applied as herein provided and except as otherwise provided in the terms
of the Notes, all funds made available to the Agent hereunder shall be held for
the purposes for which they were received but need not be segregated from other
funds except to the extent required by law.
Section 14. Liability. Neither the Agent nor its officers or
---------
employees shall be liable for any act or omission hereunder except in the case
of gross negligence or willful misconduct. The duties and obligations of the
Agent, its officers and employees shall be determined by the express provisions
of this Agreement and they shall not be liable except for the performance of
such duties and obligations as are specifically set forth herein and no implied
covenants shall be read into this Agreement against them. The Agent may consult
with counsel and shall be fully protected in any action taken in good faith in
accordance with the advice of counsel. Neither the Agent nor its officers or
employees shall be required to ascertain whether any issuance or sale of Notes
(or any amendment or termination of this Agreement) has been duly authorized or
is in compliance with any other agreement to which the Company is a party
(whether or not the Agent is also a party of such other agreement). In acting
under this Agreement or in connection with the Notes, the Fiscal Agent is acting
solely as agent of the
4
<PAGE>
Company and shall not assume any relationship of agency of trust for or with any
Noteholder, except that all funds held by the Agent for payment of principal of
or interest on the Notes shall be held in trust by it and applied to payments or
the Notes subject to the limitations set forth herein and in the terms of the
Note.
Section 15. Indemnification. The Company agrees to indemnify and
---------------
hold harmless the Agent, its directors, officers, employees and agents from and
against any and all liabilities (including liability for penalties), losses,
claims, damages, actions, suits, judgments, demands, costs and expenses
(including reasonable legal fees and expenses) relating to or arising out of or
in connection with its or their performance under this Agreement, except to the
extent that they are caused by the gross negligence or willful misconduct of the
Agent. The foregoing indemnity includes, but is not limited to, any action
taken or omitted in good faith within the scope of this Agreement upon
telephone, telecopier or other electronically transmitted instructions, if
authorized herein, received from or believed by the Agent in good faith to have
been given by, an Authorized Representative. This indemnity shall survive the
resignation of removal of the Agent and the satisfaction or termination of this
Agreement.
Section 16. Compensation of the Agent. The Company agrees to pay the
-------------------------
compensation of the Agent at such rates as shall be agreed upon from time to
time and to reimburse the Agent for its out-of-pocket expenses (including costs
of preparation of the Notes and reasonable legal fees and expenses),
disbursements and advances incurred or made in accordance with any provisions of
this Agreement. The obligations of the Company to the Agent pursuant to this
Section shall survive the resignation or removal of the Agent and the
satisfaction or termination of the Agreement.
Section 17. Notices.
-------
(a) All communications by or on behalf of the Company relating to the
issuance, transfer, exchange or payment of Notes or interest thereon shall be
directed to the Agent at its address set forth in subsection (b)(ii) hereof (or
such other address as the Agent shall specify in writing to the Company).
(b) Notices and other communications hereunder shall except to the
extent otherwise expressly provided, be in writing and shall be addressed as
follows, or to such other addresses as the parties hereto shall specify from
time to time:
5
<PAGE>
(i) if to the Company:
Nevada Power Company
6226 W. Sahara Avenue
P.O. Box 230
Las Vegas , Nevada 89146
Attention: Director of Finance/Assistant Treasurer
(ii) if to the Agent in connection with the issuance, transfer,
exchange or payment of Notes or interest thereon:
Bankers Trust Company
Corporate Trust and Agency Services
Four Albany Street
New York, New York 10006-1515
Section 18. Resignation or Removal of Agent. The Agent may at any
-------------------------------
time resign as such agent by giving written notice to the Company of such
intention on its part, specifying the date on which its desired resignation
shall become effective; provided, however, that such date shall be not less than
-------- -------
three months after the giving of such notice by the Agent to the Company. The
Agent may be removed at any time by the filing with it of any instrument in
writing signed by a duly authorized officer of the Company and specifying such
removal and the date upon which it is intended to become effective. Such
resignation or removal shall take effect on the date of the appointment by the
Company of a successor agent and the acceptance of such appointment by such
successor Agent. In the event of resignation by the Agent, if a successor Agent
has not been appointed by the Company within three months after the giving of
notice by the Agent of its intention to resign, the Agent may, at the expense of
the Company, petition any court of competent jurisdiction for appointment of a
successor Agent.
Section 19. Benefit of Agreement. This Agreement is solely for the
--------------------
benefit of the parties hereto, their successors and assigns, and no other person
shall acquire or have any right under or by virtue hereof.
Section 20. Notes Held by the Agent. The Agent, in its individual or
-----------------------
other capacity, may become the owner or pledgee of the Notes with the same
rights it would have if it were not acting as fiscal and paying agent hereunder.
Section 21. Governing Law. This Agreement is to be delivered and
-------------
performed in, and shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of New York.
Section 22. Counterparts. This Agreement may be executed by the
------------
parties hereto in any number of counterparts, and by each of the parties hereto
in separate counterparts, each
6
<PAGE>
such counterpart, when so executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by their officers thereunto duly authorized, all as
of the date and year first above written.
NEVADA POWER COMPANY
By: _________________________________
BANKERS TRUST COMPANY
By: _________________________________
7
<PAGE>
EXHIBIT 4(B)
NOTE NO. R-1 CUSIP N0. 641423 AT 5
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO NEVADA POWER
COMPANY (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE IS A BOOK-ENTRY SECURITY AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED
1
<PAGE>
OR OTHERWISE TRANSFERRED ONLY (1) INSIDE THE U.S. TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (II) OUTSIDE THE U.S. IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.
NEVADA POWER COMPANY
FLOATING RATE NOTES
DUE OCTOBER 6, 2000 (THE "NOTES")
Nevada Power Company, a corporation duly organized and existing under the
laws of the State of Nevada (the "Company"), for value received, hereby promises
to pay to Cede & Co., as the nominee of The Depository Trust Company, or
registered assigns, the principal amount of $100,000,000 on October 6, 2000 (the
"Maturity Date"), and to pay interest as set forth below on the outstanding
principal amount hereof from time to time from October 15, 1999 or from the most
recent Interest Payment Date (as defined below) to which interest has been paid
or duly provided for, quarterly in arrears on January 15, April 15 and July 15,
2000 and on the Maturity Date (each, an "Interest Payment Date"), commencing
January 15, 2000, until the principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date shall, as provided herein, be paid to the person in
whose name this Note (or one or more predecessor Notes) is registered at the
close of business on the fifteenth calendar day preceding each Interest Payment
Date (each, a "Regular Record Date"); provided, however, that interest payable
-------- -------
on the Maturity Date shall be payable to the person to whom the principal amount
of this Note is payable. Any interest payable on any Interest Payment Date other
than the Maturity Date and not so punctually paid or duly provided for shall
forthwith cease to be payable to the person in whose name this Note is
registered at the close of business on such Regular Record Date and shall
instead be payable to the Person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on a special record
date for the payment of such interest to be fixed by the Company, notice whereof
shall be given to the registered holder of this Note (or one or more predecessor
Notes) not less than 10 days prior to such special record date. Principal of
this Note shall be payable against surrender hereof at the corporate trust
office of the Fiscal Agent or at such other office or agency of the Company as
may be designated by it for such purpose in the Borough of Manhattan, The City
of New York.
2
<PAGE>
Payment of the principal of and interest on this Note shall be made at the
corporate trust office of the Fiscal Agent or at such other office or agency of
the Company as may be designated by it for such purpose in the Borough of
Manhattan, The City of New York, in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts; provided, however, that, at the option of the Company,
-------- -------
payments of interest may be made by check mailed to the address of the person
entitled thereto as such address shall appear in the Note Register (as defined
in Section 3 hereof); and provided further, however, that in the case of Notes
-------- ------- -------
held by a depository (as defined in Section 3 hereof) or its nominee, payments
of principal and interest shall be made by wire transfer of immediately
available funds to an account designated by such depository.
If any Interest Payment Date for this Note (other than an Interest Payment
Date at the Maturity Date) would otherwise be a day that is not a Business Day
(as defined in Section 1 hereof), such Interest Payment Date shall be postponed
until the next succeeding Business Day unless such Business Day falls in the
next calendar month, in which case such Interest Payment Date shall be the next
preceding Business Day. If the Maturity Date of this Note falls on a day that is
not a Business Day, the payment of principal and interest will be made on the
next succeeding Business Day, and no interest on such payment shall accrue for
the period from and after such Maturity Date, except as otherwise expressly
provided for herein.
This Note is one of a duly authorized series of securities of the Company,
limited in aggregate principal amount of $100,000,000, issued under a Fiscal and
Paying Agency Agreement, dated as of October 12, 1999 (the "Fiscal Agency
Agreement"), duly executed and delivered by the Company to Bankers Trust
Company, as Fiscal and Paying Agent (the "Fiscal Agent"). All terms that are
used but not defined in this Note and that are defined in the Fiscal Agency
Agreement shall have the meanings set forth therein.
This Note may be redeemed at the option of the Company, in whole, beginning
on April 15, 2000, and on the 15th day of each month thereafter, at a redemption
price equal to 100% of the unpaid principal amount plus accrued and unpaid
interest on this Note to the date of redemption. Any such redemption may be made
by the Company upon not less than 15 Business Days prior notice mailed to the
holder of this Note at its registered address by first-class mail. On and after
the redemption date, interest shall cease to accrue on this Note unless the
Company defaults in the payment of any principal then due and payable.
1. Calculation of Interest. The period beginning on, and including,
October 15, 1999 and ending on, but excluding, the first Interest Payment Date
and each successive period beginning on, and including, an Interest Payment Date
and ending on, but excluding, the next succeeding Interest Payment Date is
herein called an "Interest Period". "Business Day" shall mean any day on which
commercial banks and foreign exchange markets are open for business, including
dealings in deposits in U.S. dollars in New York and London.
3
<PAGE>
The rate of interest payable from time to time in respect of this Note (the
"Rate of Interest") will be a floating rate determined by reference to LIBOR,
determined as described below, plus a margin of 0.79% per annum. All percentages
resulting from any calculation on this Note will be rounded to the nearest one
hundredth-thousandth of a percentage point, with five one millionths of a
percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting
from such calculation on the Notes will be rounded to the nearest cent (with
one-half cent being rounded upward).
(a) At approximately 11:00 a.m. (London time) on the second day on
which commercial banks are open for business (including dealings in U.S.
Dollar deposits) in London (or, for purposes of paragraph (c) (ii) below,
New York) prior to the commencement of the Interest Period for which such
rate will apply (each such day an "Interest Determination Date"), Bankers
Trust Company, or its successor in this capacity (the "Calculation Agent"),
will calculate the rate of interest (the "Rate of Interest") for such
Interest Period as, subject to the provisions described below, the rate per
annum equal to 0.79% above the rate appearing on the Dow Jones Telerate
Page 3750 (or such other page as may replace that page on the Dow Jones
Telerate Service) for three-month U.S. dollar deposits in the London inter-
bank market on such Interest Determination Date.
(b) If on any Interest Determination Date an appropriate rate cannot
be determined from the Dow Jones Telerate Service, the Rate of Interest for
the next Interest Period shall, subject to the provisions described below,
be the rate per annum that the Calculation Agent certifies to be 0.79% per
annum above the arithmetic mean of the offered quotations, as communicated
to and at the request of the Calculation Agent by not less than two major
banks in London selected by the Calculation Agent (the "Reference Banks,"
which expression shall include any successors nominated by the Calculation
Agent), to leading banks in London by the principal London offices of the
Reference Banks for three-month U.S. dollar deposits in the London inter-
bank market as at 11:00 a.m. (London time) on such Interest Determination
Date.
(c) If on any Interest Determination Date fewer than two of such
offered rates are available, the Rate of Interest for the next Interest
Period shall be whichever is the higher of:
(i) the Rate of interest in effect for the last preceding
Interest Period to which (a) or (b) above shall have applied; and
(ii) the Reserve Interest Rate. The "Reserve Interest Rate"
shall be the rate per annum which the Calculation Agent determines to
be 0.79% per annum above either (1) the arithmetic mean of the U.S.
dollar offered rates which New York City banks selected by the
Calculation Agent are or were quoting, on the
4
<PAGE>
relevant Interest Determination Date, for three-month deposits to the
Reference Banks or those of them (being at least two in number) to
which such quotations are or were, in the opinion of the Calculation
Agent, being so made, or (2) in the event that the Calculation Agent
can determine no such arithmetic mean, the arithmetic mean of the U.S.
dollar offered rates which at least two New York City banks selected
by the Calculation Agent are or were quoting on such Interest
Determination Date to leading European banks for a period of three
months; provided, however, that if the banks selected as aforesaid by
the Calculation Agent are not quoting as mentioned above, the Rate of
Interest shall be the Rate of Interest specified in (i) above.
The Calculation Agent shall, as soon as practicable after 11:00 a.m.
(London time) on each Interest Determination Date, determine the Rate of
Interest and calculate the amount of interest payable in respect of the
following Interest Period (the "Interest Amount"). The Interest Amount shall be
calculated by applying the Rate of Interest to the principal amount of each Note
outstanding at the commencement of the Interest Period, multiplying each such
amount by the actual number of days in the Interest Period concerned (which
actual number of days shall include the first day but exclude the last day of
such Interest Period) divided by 360 and rounding the resultant figure upwards
to the nearest cent (half a cent being rounded upwards). The determination of
the Rate of Interest and the Interest Amount by the Calculation Agent shall (in
the absence of willful default, bad faith or manifest error) be final and
binding on all parties.
Notwithstanding anything herein to the contrary, the interest rate on the
Notes shall in no event be higher than the maximum rate permitted by New York
law, as the same may be modified by United States law of general application.
Interest shall cease to accrue on this Note on the Maturity Date unless,
upon presentation of this Note, payment of principal is improperly withheld or
refused, in which case, interest shall continue to accrue.
2. Calculation Agent. So long as any of this Note remains outstanding,
the Company shall maintain under appointment a Calculation Agent, which shall
initially be the Fiscal Agent, to calculate the Rate of Interest payable on this
Note in respect of each Interest Period. If the Calculation Agent shall fail to
establish the Rate of Interest for any Interest Period, or if the Company shall
remove the Calculation Agent, the Company shall appoint another commercial or
investment bank to act as the Calculation Agent. The Company may change the
Calculation Agent without notice.
All certificates, communications, opinions, determinations, calculations,
quotations and decisions given, expressed, made or obtained for the purposes of
the provisions hereof relating to the payment and calculation of interest on
this Note by the Calculation Agent shall (in the absence of willful default, bad
faith or manifest error) be binding on the Company, the
5
<PAGE>
Calculation Agent and all of the holders and owners of beneficial interests in
this Note, and no liability shall (in the absence of willful default, bad faith
or manifest error) attach to the Calculation Agent in connection with the
exercise or non-exercise by it of its powers, duties and discretions.
3. Registration; Registration of Transfer and Exchange. The Company shall
cause to be kept at an office or agency to be maintained by the Company a
register (the register maintained in such office being herein referred to as the
"Note Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Notes and of
transfers of Notes. The Fiscal Agent is hereby appointed "Note Registrar" for
the purpose of registering Notes and transfers of Notes as herein provided. The
Company may appoint co-registrars and may change any Note Registrar or co-
registrar without notice.
Notes shall be exchangeable pursuant to this Section 3 for Notes registered
in the name of, and a transfer of a Note may be registered to, any person other
than DTC or its successor depository (DTC or such successor being referred to as
a "depository") for such Note or its nominee only if (i) such depository
notifies the Company that it is unwilling or unable to continue as depository
for such Note or if at any time such depository ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, and a
successor depository is not appointed by the Company within 90 days, (ii) there
shall have occurred and be continuing an Event of Default (as defined below)
with respect to the Notes or (iii) the Company, in its sole discretion, elects
to terminate the book-entry system. Upon the occurrence of any one or more of
the conditions specified in clauses (i), (ii) or (iii) of the preceding
sentence, such Note shall be exchanged for Notes registered in the names of, and
the transfer of such Note shall be registered to, such persons (including
persons other than the depository with respect to such Notes and its nominee) as
such depository shall direct, in each case subject to Section 5 hereof.
Subject to the restrictions on transfer and delivery set forth in this
Note, Notes may be presented for exchange or for registration of transfer (duly
endorsed or with the form of transfer endorsed thereon duly executed) at the
office of the Fiscal Agent or at the office of any other transfer agent
designated by the Company for such purpose. Such transfer or exchange shall be
effected upon the Fiscal Agent's or such other transfer agent's, as the case may
be, being satisfied with the documents of title and identity of the person
making the request. The Company may at any time designate additional transfer
agents or rescind the designation of any transfer agent or approve a change in
the office through which any transfer agent acts; provided, however, that there
-------- -------
shall at all times be a transfer agent in the Borough of Manhattan, The City of
New York.
The Notes and any certificates for Notes issued in exchange for Notes or a
beneficial interest therein will bear the third legend set forth in this Note.
The holder of a certificated Note may transfer such Note, subject to compliance
with the provisions of such legend, as provided in the preceding paragraph. Upon
the transfer, exchange or replacement of Notes bearing such legend, or upon
specific request for removal of such legend on a Note, the Company will deliver
only Notes bearing such legend, or will refuse to remove such legend, as the
case may be, unless there is delivered to the Company such satisfactory
evidence, which may include an opinion of counsel, as may reasonably be required
by the Company that neither such legend nor the restrictions on transfer set
forth therein are required to ensure compliance with the provisions of the
Securities Act.
6
<PAGE>
4. Acts by Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by the Notes or the Fiscal Agency Agreement
to be given or taken by holders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such holders in
person or by an agent duly appointed in writing; and, except as otherwise
expressly provided in the Notes or the Fiscal Agency Agreement, such action
shall become effective when such instrument or instruments are delivered to
the Fiscal Agent and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
holders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of the Notes and the Fiscal Agency Agreement and
conclusive in favor of the Fiscal Agent and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a capacity
other than his or her individual capacity, such certificate or affidavit
shall also constitute sufficient proof of his or her authority. The fact
and date of the execution of any such instrument or writing, or the
authority of the person executing the same, may also be proved in any other
manner which the Fiscal Agent deems sufficient.
(c) The Company may set any day as the record date for the purpose of
determining the holders of outstanding Notes entitled to make any request
or demand or give any authorization, direction, notice, consent or waiver
or take other action, provided or permitted by the Notes and the Fiscal
Agency Agreement to be made, given or taken by holders of the Notes.
With regard to any record date set pursuant to the immediately
preceding paragraph, the holders of outstanding Notes on such record date
(or their duly appointed agents), and only such persons, shall be entitled
to take relevant action, whether or not such holders remain holders after
such record date. With regard to any action that may be taken hereunder
only by holders of a requisite principal amount of outstanding Notes (or
their duly appointed agents) and for which a record date is set pursuant to
the immediately preceding paragraph, the Company, may at its option, set an
expiration date after which no such action purported to be taken by any
holder shall be effective unless taken on or prior to such expiration date
by holders of the requisite principal amount of outstanding Notes on such
record date (or their duly appointed agents). On or prior to any expiration
date set pursuant to this paragraph, the Company
7
<PAGE>
may, on one or more occasions at its option, extend such expiration date to
any later date. Nothing in this paragraph shall prevent any holder (or any
duly appointed agent thereof) from taking, at any time, any action contrary
to or different from, any action previously taken, or purported to have
been taken hereunder by such holder, in which event the Company may set a
record date in respect thereof pursuant to this paragraph. Notwithstanding
the foregoing, the Company shall not set a record date for, and the
provisions to this paragraph shall not apply with respect to, any action to
be taken by holders pursuant to Section 8 hereof.
Upon receipt by the Fiscal Agent of notice of any default, any
declaration of acceleration, or any rescission and annulment of any such
declaration, or of any direction in accordance with Section 8 hereof, a
record date shall automatically and without any other action by any person
be set for the purpose of determining the holders of outstanding Notes
entitled to join in such notice, declaration, or rescission and annulment,
or direction, as the case may be, which record date shall be the close of
business on the date the Fiscal Agent receives such notice, declaration,
rescission and annulment or direction, as the case may be. The holders of
outstanding Notes on such record date (or their duly appointed agent), and
only such persons, shall be entitled to join in such notice, declaration,
rescission and annulment, or direction, as the case may be, whether or not
such holders remain holders after such record date; provided that, unless
--------
such notice, declaration, rescission and annulment, or direction, as the
case may be, shall have become effective by virtue of holders of the
requisite principal amount of outstanding Notes on such record date (or
their duly appointed agents) having joined therein on or prior to the 90th
day after such record date, such notice of default, declaration, or
rescission and annulment or direction given or made by the holders, as the
case may be, shall automatically and without any action by any person be
canceled and of no further effect. Nothing in this paragraph shall prevent
a holder (or a duly appointed agent thereof) from giving, before or after
the expiration of such 90-day period, a notice of default, a declaration of
acceleration, a rescission and annulment of a declaration of acceleration
or a direction, contrary to or different from, or, after the expiration of
such period, identical to, a previously given notice, declaration,
rescission and annulment, or direction, as the case may be, that has been
canceled pursuant to the proviso to the preceding sentence, in which event
a new record date in respect thereof shall be set pursuant to this
paragraph.
(d) The ownership of the Notes shall be proved by the Note Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver, or other Act of the holder of any Note shall bind every future
holder of the same Note and the holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Fiscal
Agent or the Company in reliance thereon, whether or not notation of such
action is made upon such Note.
8
<PAGE>
5. Denominations. The Notes are issuable only in registered form without
coupons in denominations of $100,000 and integral multiples of $1,000 in excess
thereof.
6. Persons Deemed Owners. The Company, the Fiscal Agent and any agent of
the Company or the Fiscal Agent may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes whatsoever, whether or not this Note shall
be overdue, and neither the Company, the Fiscal Agent nor any such agent shall
be affected by notice to the contrary.
7. Amendments and Waivers. Without the consent of any holders of the
Notes, the Company, when authorized by a resolution duly adopted by the Board of
Directors of the Company, and the Fiscal Agent, at any time and from time to
time, may amend the terms of the Notes and enter into one or more agreements
supplemental to the Fiscal Agency Agreement, in form satisfactory to the Fiscal
Agent, for any of the following purposes:
(a) to evidence the succession of another person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Fiscal Agency Agreement; or
(b) to add to the covenants of the Company for the benefit of the
holders of the Notes; or
(e) to add any additional Events of Default; or
(d) to secure the Notes; or
(e) to evidence and provide for the acceptance of appointment Fiscal
Agent with respect to the Notes; or by a successor
(f) to amend the restrictions on transfer applicable to the on this
Note; or Notes as set forth
(g) to cure any ambiguity or to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
correct or supplement any defective provision contained herein or in the
Fiscal Agency Agreement, provided that such action pursuant to this clause
--------
(g) shall not adversely affect the interests of the holders of the Notes.
With the consent of the holders of not less than 66-2/3% in principal
amount of the outstanding Notes, by act of said holders delivered to the Company
and the Fiscal Agent, the Company, when authorized by a resolution duly adopted
by the Board of Directors of the Company, and the Fiscal Agent, at any time and
from time to time, may amend the terms of
9
<PAGE>
the Notes and enter into an agreement supplemental to the Fiscal Agency
Agreement for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the Notes, or the Fiscal Agency
Agreement as the same pertains to the Notes, or of modifying in any manner the
rights of the holders of the Notes: provided, however, that no such amendment or
-------- -------
supplemental agreement shall, without the consent of the holder of each
outstanding Note affected thereby,
(1) change the stated maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the
rate of interest thereon, or change any place of payment where, or the coin
or currency in which, any Note or interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on or
after the stated maturity thereof, or
(2) reduce the percentage in principal amount of the outstanding
Notes, the consent of whose holders is required for any such amendment or
supplemental agreement or the consent of whose holders is required for any
waiver provided for herein or in the Fiscal Agency Agreement, or
(3) modify any of the provisions of this Section or Section 9, except
to increase any such percentage or to provide that certain other provisions
of the Notes cannot be modified or waived without the consent of the holder
of each outstanding Note affected thereby.
It shall not be necessary for any act of holders under this Section 7 to
approve the particular form of any proposed amendment or supplemental agreement,
but it shall be sufficient if such act shall approve the substance thereof.
Upon the execution of any agreement supplement to the Fiscal Agency
Agreement as permitted by this Section 7, the Notes and the Fiscal Agency
Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of the Notes and the Fiscal Agency Agreement, as the
same pertains to the Notes, for all purposes; and every holder of the Notes
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
8. Defaults and Remedies. The occurrence of any of the following events
shall constitute an Event of Default with respect to the Notes:
(a) default in the payment of the principal of any of the Notes when
the same becomes due and payable; or
(b) default in the payment of any installment of interest upon any of
the Notes when the same becomes due and payable, and continuance of such
default for a period of 30 days; or
10
<PAGE>
(c) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Notes for a period of 90 days after the date on which written notice of
such failure, requiring the Company to remedy the same, shall have been
given to the Company by the Fiscal Agent by registered or certified mail or
to the Company and the Fiscal Agent by the holders of at least 25% in
aggregate principal amount of the Notes, or
(d) a decree or order by a court having jurisdiction in the premises
shall have been entered adjudging the Company bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of the
Company under the Federal Bankruptcy Code or any other similar applicable
Federal or State law, and such decree or order shall have continued
undischarged and unstayed for a period of 60 days; or a decree or order of
a court having jurisdiction in the premises for the appointment of a
receiver or liquidator or trustee or assignee in the bankruptcy or
insolvency of the Company or of its property, or for the winding up or
liquidation of its affairs, shall have been entered, and such decree or
order shall have continued undischarged and unstayed for a period of 60
days; or
(e) the Company shall institute proceedings to be adjudicated
bankrupt, or shall consent to the filing of a bankruptcy proceeding against
it, or shall file a petition or answer or consent seeking reorganization
under the Federal Bankruptcy Code or any other similar Federal or State
law, or shall consent to the filing of any such petition or shall consent
to the appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of it or of its property, or shall make an
assignment for the benefit of creditors or shall admit in writing its
inability to pay its debts generally as they become due.
If an Event of Default occurs and is continuing, the holders of at least
25% in principal amount of the Notes then outstanding may declare all the Notes
to be due and payable immediately. Holders of a majority in principal amount of
the Notes may waive an Event of Default and rescind any related declaration
except as provided in Section 9(a) hereof. The Fiscal Agent may withhold from
holders of Notes notice of any continuing Event of Default, except in respect of
a default in the payment of principal of or interest on the Notes, if it
determines that withholding such notice is in their interest.
9. Waivers.
(a) The holders of not less than a majority in principal amount of the
outstanding Notes may on behalf of the holders of the Notes waive any past
default hereunder with respect to the Notes and its consequences, except a
default
(1) in the payment of the principal of or interest on any Note,
or
11
<PAGE>
(2) In respect of a covenant or provision hereof which under
Section 7 cannot be modified or amended without the consent of the
holder of each outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of the Notes; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
(b) The Company may omit in any particular instance to comply with any
term, provision or condition set forth in the Notes or the Fiscal Agency
Agreement with respect to the Notes if before the time for such compliance
the holders of at least 66-2/3% in principal amount of the outstanding
Notes shall, by act of such holders, either waive such compliance in such
instance or generally waive compliance with such term, provision or
condition, but (i) without the consent of the holder of each Note affected
thereby, no such waiver shall extend to or affect any term, provision or
condition which under Section 7 cannot be modified or amended without the
consent of the holder of each outstanding Note affected, and (ii) no such
waiver shall extend to or affect any term, provision or condition except to
the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and any duties of the Fiscal
Agent in respect of any such term, provision or condition shall remain in
full force and effect.
10. Company May Consolidate Etc., Only on Certain Terms. The Company
covenants that it will not merge or consolidate with any other corporation or
sell or convey all or substantially all of its assets to any person, firm or
corporation, except that the Company may merge or consolidate with, or sell or
convey all or substantially all of its assets to, any other corporation,
provided that (i) either the Company shall be the continuing corporation, or the
- --------
successor corporation (if other than the Company) shall be a corporation
organized and existing under the laws of the United States of America or a State
thereof and such corporation shall expressly assume the due and punctual payment
of the principal of and interest on all the Notes, according to their tenor, and
the due and punctual performance and observance of all of the covenants and
conditions of this Note and the Fiscal Agency Agreement to be performed by the
Company, by supplemental agreement in form satisfactory to the Fiscal Agent,
executed and delivered to the Fiscal Agent by such corporation, and (ii) the
Company or such successor corporation, as the case may be, shall not,
immediately after such merger, consolidation, sale or conveyance, be in default
in the performance of any such covenant or condition.
Upon any consolidation of the Company with, or merger of the Company into,
any other person or any sale or conveyance of all or substantially all of the
assets of the Company in accordance with this Section 10, the successor person
formed by such consolidation or into which the Company is merged or to which
such sale or conveyance is made shall succeed to, and be substituted for, and
may exercise every right and power of the Company under this
12
<PAGE>
Note and the Fiscal Agency Agreement with the same effect as if such successor
person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor person shall be relieved of all obligations and
covenants under the Notes and the Fiscal Agency Agreement.
11. Unclaimed Amounts. Any money deposited with the Fiscal Agent in trust
for the payment of the principal of or interest on any Note and remaining
unclaimed for twelve months after such principal or interest has become due and
payable shall be paid to the Company upon its request; and the holder of such
Note shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Fiscal Agent with respect
to such money shall thereupon cease.
12. Mutilated, Destroyed, Lost and Stolen Notes. If any Note becomes
mutilated or defaced or is apparently destroyed, lost or stolen, the Fiscal
Agent shall, subject to the provisions of this Section 12, authenticate and
deliver a new Note in exchange and substitution for the mutilated or defaced
Note or in lieu of or in substitution for the apparently destroyed, lost or
stolen Note.
Application for the authentication and delivery of a substitute Note
pursuant to this Section 12 may be made at the office of the Fiscal Agent. If
the applicant for any substitute Note shall furnish to the Company and the
Fiscal Agent (i) in the case of any such request in case of loss or theft, such
security or indemnity as may be required by the Company and the Fiscal Agent in
their sole discretion to indemnify and defend and to save each of them and any
agent of either of them harmless, and (ii) in the case of any request for a
substitute Note in case of destruction, loss or theft, evidence to the
satisfaction of the Company and the Fiscal Agent of the apparent destruction,
loss or theft of such Note and of the ownership thereof, then, in the absence of
notice to the Company or the Fiscal Agent that such Note has been acquired by a
bona fide purchaseer, the Company shall execute and the Fiscal Agent shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a
new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a new Note, pay such Note.
Upon the issuance of any substitute Note under this Section 12, the Company
may require the payment of a sum sufficient to cover any tax assessment or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Fiscal Agent) connected
therewith.
Every new Note issued pursuant to this Section in lieu of any destroyed,
lost or stolen Note shall constitute an original additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Note
shall be at any time enforceable by anyone, and shall be
13
<PAGE>
entitled to all the benefits of the Fiscal Agency Agreement equally and
proportionately with any and all other Notes.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
13. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Fiscal Agency Agreement, or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each holder (and each beneficial owner) of a Note by accepting such
Note (or acquisition of a beneficial interest therein) waives and releases all
such liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
THIS NOTE SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
This Note shall not be valid or obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Fiscal Agent
under the Fiscal Agency Agreement.
[The remainder of this page is left blank intentionally.]
14
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be signed in
its corporate name, manually or by facsimile, by an Authorized Representative
and a facsimile of its corporate seal to be affixed hereunto or imprinted
hereon, attested by the manual or facsimile signature of its Secretary or one of
its Assistant Secretaries.
NEVADA POWER COMPANY
Attest: ____________________ By: __________________________
Name:
Title:
Dated: October 15, 1999
FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Fiscal Agency
Agreement.
BANKERS TRUST COMPANY, as
Fiscal Agent
By: __________________________
Authorized Signer
15
<PAGE>
EXHIBIT 4(C)
________________________________________________________________________________
NEVADA POWER COMPANY
(Formerly DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra Pacific
Resources and successor by merger to Nevada Power Company)
TO
BANKERS TRUST COMPANY
as Trustee
_______________________
TWENTY-SEVENTH SUPPLEMENTAL INDENTURE
_______________________
Dated as of July 1, 1999
________________________________________________________________________________
1
<PAGE>
THIS TWENTY-SEVENTH SUPPLEMENTAL INDENTURE dated as of July 1, 1999 made by
and between NEVADA POWER COMPANY (formerly DESERT Merger Sub, Inc., a wholly
owned subsidiary of Sierra Pacific Resources and successor by merger to Nevada
Power Company), a corporation duly organized and existing under the laws of the
State of Nevada (the "Company"), having its principal place of business at Las
Vegas, Nevada, party of first part, and BANKERS TRUST COMPANY (successor to
FIRST INTERSTATE BANK OF NEVADA, N.A., formerly FIRST NATIONAL BANK OF NEVADA,
RENO, NEVADA), a banking corporation duly organized and existing under and by
virtue of the banking laws of the State of New York, having its principal
corporate office at 130 Liberty Street, New York, New York (hereinafter
sometimes called the "Trustee"), party of the second part;
WHEREAS, the Company has heretofore executed and delivered to the Trustee
its Indenture of Mortgage and Deed of Trust ("Original Indenture") dated October
1, 1953, to secure the payment thereunder; and, for the purpose of amending and
supplementing and further confirming the lien of the Original Indenture, has
heretofore executed and delivered the following Supplemental Indentures and
Instrument of Further Assurance, each dated as hereinafter set forth:
Instrument Date
---------- ----
First Supplemental Indenture August 1, 1954
Instrument of Further Assurance as of April 1, 1956
Second Supplemental Indenture September 1, 1956
Third Supplemental Indenture as of May 1, 1959
Fourth Supplemental Indenture as of October 1, 1960
Fifth Supplemental Indenture as of December 1, 1961
Sixth Supplemental Indenture as of October 1, 1963
Seventh Supplemental Indenture as of August 1, 1964
Eighth Supplemental Indenture as of April 1, 1968
Ninth Supplemental Indenture as of October 1, 1969
Tenth Supplemental Indenture as of October 1, 1970
Eleventh Supplemental Indenture as of November 1, 1972
Twelfth Supplemental Indenture as of December 1, 1974
Thirteenth Supplemental Indenture as of October 1, 1976
Fourteenth Supplemental Indenture as of May 1, 1977
Fifteenth Supplemental Indenture as of September 1, 1978
Sixteenth Supplemental Indenture as of December 1, 1981
Seventeenth Supplemental Indenture as of August 1, 1982
Eighteenth Supplemental Indenture as of November 1, 1986
Nineteenth Supplemental Indenture as of October 1, 1989
Twentieth Supplemental Indenture as of May 1, 1992
Twenty-First Supplemental Indenture as of June 1, 1992
Twenty-Second Supplemental Indenture as of June 1, 1992
Twenty-Third Supplemental Indenture as of October 1, 1992
Twenty-Fourth Supplemental Indenture as of October 1, 1992
Twenty-Fifth Supplemental Indenture as of January 1, 1993
Twenty-Sixth Supplemental Indenture as of May 1, 1995
the Original Indenture, as amended and supplemented by the instruments listed
above and as to be supplemented by this Twenty-Seventh Supplemental Indenture
and as it may from time to time be
2
<PAGE>
amended or supplemented pursuant to the provisions thereof, is hereinafter
sometimes called the "Indenture";
WHEREAS, the Original Indenture, the Instrument of Further Assurance and
the Supplemental Indentures listed in the foregoing paragraph were recorded in
Offices of the County Recorders of the States of Nevada, Arizona and Utah as set
forth in Exhibit A attached hereto and incorporated herein by reference;
WHEREAS, in addition to thirteen series of Bonds heretofore issued under
the Indenture, all of which have been retired, there have heretofore been issued
under the Indenture: $15,000,000 principal amount of First Mortgage Bonds, 7
5/8% Series L Due 2002 of which $15,000,000 is now outstanding; $15,000,000
principal amount of First Mortgage Bonds, 7.80% Series T Due 2009 of which
$15,000,000 is now outstanding; $105,000,000 principal amount of First Mortgage
Bonds, 6.70% Series V Due 2022 of which $105,000,000 is now outstanding;
$39,500,000 principal amount of First Mortgage Bonds, 6.60% Series W Due 2019 of
which $39,500,000 is now outstanding; $78,000,000 principal amount of First
Mortgage Bonds, 7.20% Series X Due 2022 of which $78,000,000 is now outstanding;
$45,000,000 principal amount of First Mortgage Bonds, 6.93% Series Y Due 1999 of
which $45,000,000 is now outstanding; and $45,000,000 principal amount of First
Mortgage Bonds, 8.50% Series Z Due 2023 of which $45,000,000 is now outstanding;
and 7.06% Series AA Due 2000 of which $85,000,000 is now outstanding (each such
series of outstanding bonds being referred to herein as the "First Mortgage
Bonds");
WHEREAS, First Interstate Bank of Nevada, N. A. heretofore resigned as
Trustee under the terms of the Original Indenture, effective July 24, 1992 and
Bankers Trust Company was duly appointed by the Company as temporary Trustee on
such date by an instrument dated such date and recorded in various counties in
the States of Nevada, Arizona and Utah, and Bankers Trust Company was thereafter
duly elected by the bondholders as successor Trustee, and duly accepted such
appointments, all in accordance with the Original Indenture; and
WHEREAS, on April 29, 1998 Nevada Power Company (formerly Southern Nevada
Power Co. and referred to herein as the "Merged Company") entered into a Merger
Agreement with Sierra Pacific Resources, a Nevada utility holding company,
pursuant to which DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra
Pacific Resources, merged with the Merged Company and DESERT Merger Sub, Inc.
became the surviving corporation and changed its name to Nevada Power Company;
and
WHEREAS, Section 8.15 of the Indenture provides in part that the Merged
Company will not merge into any corporation, or permit any other corporation to
merge into it, unless:
(1) any such merger shall be upon such terms as fully preserve the
lien and security of the Indenture and all of the rights and
powers of the Trustee and the Bondholders under the Indenture;
and
(2) Upon any such merger, the successor corporation shall execute and
deliver to the Trustee a supplemental indenture in form
satisfactory to the Trustee expressly assuring the due and
punctual payment of principal, premium, if any, and interest on
all of the Bonds according to their
3
<PAGE>
tenor and effect, the due and punctual performance and observance
of all of the covenants and conditions of the Indenture to be
performed by the Merged Company and all obligations with respect
to the lien created by the granting clauses hereof or properties
hereafter acquired; and
WHEREAS, the Company, as successor by merger to the Merged Company, desires
to comply with Section 8.15 of the Indenture by entering into this Twenty-
Seventh Supplemental Indenture to assume all and to secure the performance and
observation of each and every of the covenants and conditions contained in the
Indenture, and without in any way limiting the generality or effect of the
Indenture insofar as by any provision thereof any of the properties therein or
hereinafter referred to are now subject, or are now intended to be subject to
the lien and operation thereof, but to such extent confirming such lien and
operation, to this Twenty-Seventh Supplemental Indenture and by these presents
does grant, bargain, sell, warrant, alien, remise, release, convey, assign,
transfer, mortgage, pledge, set over and confirm, unto Bankers Trust Company, as
Trustee aforesaid, and to its successors in the trust hereby created, in trust
upon the conditions, terms and provisions of the Indenture, subject to the
encumbrances and other matters permitted by the Indenture, all and singular the
following premises, properties, interests and rights, all to the same extent and
with the same force and effect as though owned by the Company at the date of
execution of the Original Indenture and described in the same detail in the
Granting Clauses of the Original Indenture, such premises, properties, interests
and rights having been generally described and referred to in the Original
Indenture, and to such ends the company hereby supplements, as below set forth,
the Granting Clauses of the Original Indenture.
WHEREAS, all conditions and requirements necessary to make this Twenty-
Seventh Supplemental Indenture a valid, binding and legal instrument have been
done, performed and fulfilled, and the execution and delivery hereof have been
in all respects duly authorized;
NOW, THEREFORE, to secure the performance and observation of each and every
of the covenants and conditions contained in the Indenture, and without in any
way limiting the generality or effect of the Indenture insofar as by any
provision thereof any of the properties therein or hereinafter referred to are
now subject, or are now intended to be subject to the lien and operation
thereof, but to such extent confirming such lien and operation to this Twenty-
Seventh Supplemental Indenture and by these presents does grant, bargain, sell,
warrant, alien, remise, release, convey, assign, transfer, mortgage, pledge, set
over and confirm, unto Bankers Trust Company, as Trustee aforesaid, and to its
successors in the trust hereby created, in trust upon the conditions, terms and
provisions of the Indenture, subject to the encumbrances and other matters
permitted by the Indenture, all and singular the following premises, properties,
interests and rights, all to the same extent and with the same force and effect
as though owned by the Company at the date of execution of the Original
Indenture and described in the same detail in the Granting Clauses of the
Original Indenture, such premises, properties, interests and rights having been
generally described and referred to in the Original Indenture, and to such ends
the Company hereby supplements, as below set forth, the Granting Clauses of the
Original Indenture:
4
<PAGE>
GRANTING CLAUSES
FIRST: All those certain parcels of land, leasehold estates and interests
in land, situate in the County of Clark, State of Nevada, and described on
Exhibit B attached hereto and incorporated herein by reference.
SECOND: All of the premises, property, franchises and rights of every kind
and description, real, personal and mixed, tangible and intangible, now owned or
hereafter acquired by the Company and wherever situate.
Together with all and singular the tenements, hereditament and
appurtenances belonging or in anywise appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders,
tolls, rents, revenues, issues, income, products and profits thereof and all the
estate, right, title, interest and claim whatsoever at law as well as in equity,
which the Company now has or may hereafter acquire in and to the aforesaid
property and franchises and every part and parcel thereof.
Excepting and excluding, however, any and all property, premises and rights
of the kinds or classes which by the terms of the Indenture are excepted and
excluded from the lien and operation thereof, and therein sometimes referred to
as "Excepted Property" (subject, however, to the Trustee's rights to possession
of Excepted Property in case of default, as set forth under "Excepted Property"
in the Original Indenture).
TO HAVE AND TO HOLD in trust with power of sale for the equal and
proportionate benefit and security of all holders of all Bonds and the interest
coupons appertaining thereto, now or hereafter issued under the Indenture, and
for the enforcement and payment of Bonds and interest thereon when payable, and
the performance of and compliance with the covenants and conditions of the
Indenture, without any preference, distinction or priority as to lien or
otherwise of any Bonds or coupons over any others thereof by reason of the
difference in the time of the actual issue, sale or negotiation thereof, or by
reason of the date of maturity thereof, or for any other reason whatsoever,
except as otherwise expressly provided in the Indenture, so that each and every
Bond shall have the same lien and so that the interest and principal of every
Bond shall, subject to the terms thereof, be equally and proportionately secured
by said lien, as if such Bond had been made, executed, delivered, sold and
negotiated simultaneously with the execution and delivery of the Original
Indenture.
The Trustee executes this Twenty-Seventh Supplemental Indenture only on the
condition that it shall have and enjoy with respect thereto all of the rights,
privileges and immunities as set forth in the Indenture.
The Company has agreed and covenanted and does hereby agree and covenant
with the Trustee and its successors and assigns, and with the respective holders
from time to time of the Bonds, or any thereof, as follows:
PART I
5
<PAGE>
ARTICLE I
ASSUMPTION OF OBLIGATIONS
(S) 1.01 The Company hereby expressly assumes the due and punctual payment
of principal, premium, if any, and interest on all of the Bonds according to
their tenor and effect, and also hereby assumes the due and punctual performance
and observance of all of the covenants and conditions of the Indenture to be
performed by the Company, and all obligations with respect to the lien created
by the granting clauses thereof on properties hereafter acquired.
(S) 1.02 The Company hereby covenants and agrees that it will take any and
all action necessary or advisable or desirable to preserve the lien and security
of the Indenture and all of the rights and powers of the Trustee and the
Bondholders thereunder.
6
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
(S) 2.01 The Company represents and warrants that, as of the date of
execution of this Twenty-Seventh Supplemental Indenture, it has good and
marketable title in fee simple to all the real properties described in the
Granting Clauses of the Original Indenture, the First Supplemental Indenture,
the Instrument of Further Assurance, the Second Supplemental Indenture, the
Third Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth
Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh
Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth
Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh
Supplemental Indenture, the Twelfth Supplemental Indenture, the Thirteenth
Supplemental Indenture, the Fourteenth Supplemental Indenture, the Fifteenth
Supplemental Indenture, the Sixteenth Supplemental Indenture, the Seventeenth
Supplemental Indenture, the Eighteenth Supplemental Indenture, the Nineteenth
Supplemental Indenture, the Twentieth Supplemental Indenture, the Twenty-First
Supplemental Indenture, the Twenty-Second Supplemental Indenture, the Twenty-
Third Supplemental Indenture, the Twenty-Fourth Supplemental Indenture, the
Twenty-Fifth Supplemental Indenture, the Twenty-Sixth Supplemental Indenture and
this Twenty-Seventh Supplemental Indenture (except any property heretofore
released from the lien of the Indenture in accordance with the terms thereof),
free and clear of any liens and encumbrances except Permitted Encumbrances and
those, if any, referred to in said Granting Clauses, and that it has good and
marketable title and is lawfully possessed of all other properties described in
said Granting Clauses (except any properties therein described as to be acquired
by the Company after the date of this Twenty-Seventh Supplemental Indenture and
except any property heretofore released from the lien of the Indenture in
accordance with the terms thereof), and the Indenture constitutes a direct and
valid first mortgage lien on all such properties, subject only to Permitted
Encumbrances and those, if any, referred to in said Granting Clauses. The
Company represents and warrants that it has and covenants that it will continue
to have, subject to the provisions of the Indenture, good right, full power and
lawful authority to grant, bargain, sell, warrant, alien, remise, release,
convey, assign, transfer, mortgage, pledge, set over and confirm to the Trustee
all properties of every kind and nature described or referred to in said
Granting Clauses (except any properties therein described as to be acquired by
the Company after the date of this Twenty-Seventh Supplemental Indenture) which
by the provisions of the Indenture are intended to be subject to the lien of the
Indenture and that it will defend the title to such property and every part
thereof to the Trustee forever, for the benefit of the holders of the Bonds,
against the claims and demands of all persons whomsoever.
PART II
MISCELLANEOUS PROVISIONS
Except insofar as herein otherwise expressly provided, all of the
definitions, provisions, terms and conditions of the Indenture shall be deemed
to be incorporated in, and made a part of, this Twenty-Seventh Supplemental
Indenture; and the Original Indenture as amended and supplemented by the First
Supplemental Indenture, the Second Supplemental Indenture, the Third
Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth
Supplemental
7
<PAGE>
Indenture, the Sixth Supplemental Indenture, the Seventh Supplemental Indenture,
the Eighth Supplemental Indenture, the Ninth Supplemental Indenture, the Tenth
Supplemental Indenture, the Eleventh Supplemental Indenture, the Twelfth
Supplemental Indenture, the Thirteenth Supplemental Indenture, the Fourteenth
Supplemental Indenture, the Fifteenth Supplemental Indenture, the Sixteenth
Supplemental Indenture, the Seventeenth Supplemental Indenture, the Eighteenth
Supplemental Indenture, the Nineteenth Supplemental Indenture, the Twentieth
Supplemental Indenture, the Twenty-First Supplemental Indenture, the Twenty-
Second Supplemental Indenture, the Twenty-Third Supplemental Indenture, Twenty-
Fourth Supplemental Indenture, the Twenty-Fifth Supplemental Indenture and the
Twenty-Sixth Supplemental Indenture is in all respects ratified and confirmed
and supplemented by this Twenty-Seventh Supplemental Indenture; and the Original
Indenture as amended and supplemented shall be read, taken and construed as one
and the same instrument; provided, however, that no provision of this Twenty-
Seventh Supplemental Indenture is intended to reinstate any provisions in the
Original Indenture which were amended and superseded by the Trust Indenture
Reform Act of 1990.
All covenants, promises, agreements, undertakings and provisions of the
Indenture which exist for the benefit of, or while or so long as Series L Bonds,
Series T Bonds, Series V Bonds, Series W Bonds, Series X Bonds, Series Y Bonds,
Series Z Bonds or Series AA Bonds are outstanding, are hereby confirmed and the
Company warrants and represents that each such covenant, promise, agreement,
undertaking and provisions shall be observed, performed and complied with by the
Company.
This Twenty-Seventh Supplemental Indenture shall be effective as of the
date first hereinabove set forth, and may be executed simultaneously or from
time to time in several counterparts, and each counterpart shall constitute an
original instrument, and it shall not be necessary in making proof of this
Twenty-Seventh Supplemental Indenture or of any counterpart thereof to produce
or account for any of the other counterparts.
8
<PAGE>
IN WITNESS WHEREOF, said Nevada Power Company has caused this Twenty-
Seventh Supplemental Indenture to be executed on its behalf by its President or
one of its Vice Presidents and its corporate seal to be hereto affixed, and the
said seal and this Twenty-Seventh Supplemental Indenture to be attested by its
Secretary or Assistant Secretary; and said Bankers Trust Company, in evidence of
its acceptance of the trust hereby created has caused this Twenty-Seventh
Supplemental Indenture to be executed on its behalf by its Chairman of the Board
and Chief Executive Officer, President or a Vice President and its corporate
seal to be hereto affixed and said seal and this Twenty-Seventh Supplemental
Indenture to be attested by its Secretary or an Assistant Secretary, all as of
the 1st day of July, 1999.
NEVADA POWER COMPANY
[S E A L]
By:
William E. Peterson
ATTEST: Senior Vice President
and General Counsel
BANKERS TRUST COMPANY, as Trustee
By:
Assistant Vice President
[S E A L]
ATTEST:
9
<PAGE>
STATE OF NEVADA )
) ss.
COUNTY OF __________)
On this ____ day of ___________, 1999, personally appeared before me, a
Notary Public in and for said County and State, __________________________ and
___________________________, known to me to be the ___________________________
and ______________________, respectively, of Nevada Power Company, one of the
corporations that executed the foregoing instrument, and upon oath did depose
that they are the officers of said corporation as above designated; that they
are acquainted with the seal of said corporation and that the seal affixed to
said instrument is the corporate seal of said corporation; that the signatures
to said instrument were made by officers of said corporation as indicated after
said signatures, and that the said corporation executed the said instrument
freely and voluntarily and for the uses and purposes therein mentioned.
________________________________________
Notary Public
On ____________, 1999, before me, ________________________, personally
appeared _______________________________ [_] personally known to me OR [_]
proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
___________________________________
Signature of Notary
[SEAL]
10
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this ____ day of __________, 1999, before me personally came
___________________, to me known, who, being by me duly sworn, did depose and
say that he resides at ______________________ ________________________; that he
is an Assistant Vice President of Bankers Trust Company, one of the corporations
described in and which executed the above instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
[Notarial seal] ________________________________________
On ____________, 1999, before me, ________________________, personally
appeared _______________________________ [ ] personally known to me OR [ ]
proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
_______________________________________
Signature of Notary
[SEAL]
11
<PAGE>
EXHIBIT A
The Original Indenture, First Supplemental Indenture, an Instrument of
Further Assurance, Second Supplemental Indenture, Third Supplemental Indenture,
Fourth Supplemental Indenture, Fifth Supplemental Indenture, Sixth Supplemental
Indenture, Seventh Supplemental Indenture, Eighth Supplemental Indenture, Ninth
Supplemental Indenture, Tenth Supplemental Indenture, Eleventh Supplemental
Indenture, Twelfth Supplemental Indenture, Thirteenth Supplemental Indenture,
Fourteenth Supplemental Indenture, Fifteenth Supplemental Indenture, Sixteenth
Supplemental Indenture, Seventeenth Supplemental Indenture, Eighteenth
Supplemental Indenture, Nineteenth Supplemental Indenture, Twentieth
Supplemental Indenture, Twenty-First Supplemental Indenture, Twenty-Second
Supplemental Indenture, Twenty-Third Supplemental Indenture, Twenty-Fourth
Supplemental Indenture, Twenty-Fifth Supplemental Indenture and Twenty-Sixth
Supplemental Indenture were recorded in Offices of the County Recorders of the
States of Nevada, Arizona and Utah as follows:
<TABLE>
<CAPTION>
NEVADA
CLARK COUNTY
RECORDED DOC. NO. RECORDS
-------- -------- ---------
<S> <C> <C> <C>
Original Indenture Nov. 6, 1953 417,677 Trust Deeds
First Supplemental Indenture Sept. 23, 1954 20,904 Official Records
Instrument of Further Assurance Apr. 19, 1956 75,779 Official Records
Second Supplemental Indenture Sept. 19, 1956 89,423 Official Records
Third Supplemental Indenture May 15, 1959 160,878 Official Records
Fourth Supplemental Indenture Oct. 28, 1960 215,907 Official Records
Fifth Supplemental Indenture Dec. 4, 1961 267,362 Official Records
Sixth Supplemental Indenture Oct. 18, 1963 391,466 Official Records
Seventh Supplemental Indenture Aug. 7, 1964 451,010 Official Records
Eighth Supplemental Indenture May 10, 1968 700,126 Official Records
Ninth Supplemental Indenture Oct. 16, 1969 791,246 Official Records
Tenth Supplemental Indenture Oct. 2, 1970 53,871 Official Records
Eleventh Supplemental Indenture Oct. 27, 1972 233,640 Official Records
Twelfth Supplemental Indenture Dec. 6, 1974 438,246 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 629,589 Official Records
Fourteenth Supplemental Indenture May 4, 1977 693,961 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 898,343 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 1,453,990 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 1,569,991 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 00622 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 00576 Official Records
Twentieth Supplemental Indenture April 30, 1992 01212 Official Records
Twenty-First Supplemental Indenture June 19, 1992 01239 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 01240 Official Records
Twenty-Third Supplemental Indenture October 26, 199 00858 Official Records
Twenty-Fourth Supplemental Indenture November 2, 199 00901 Official Records
Twenty-Fifth Supplemental Indenture January 11, 199 00710 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 00625 Official Records
</TABLE>
12
<PAGE>
NEVADA
NYE COUNTY
<TABLE>
<CAPTION>
RECORDED DOC. NO. RECORDS
-------- -------- -------
<S> <C> <C> <C>
Original Indenture Sept. 19, 1956 24,334 Trust Deeds
First Supplemental Indenture Sept. 19, 1956 24,335 Official Records
Instrument of Further Assurance Sept. 19, 1956 24,336 Official Records
Second Supplemental Indenture Sept. 19, 1956 24,337 Official Records
Third Supplemental Indenture May 15, 1959 31,466 Official Records
Fourth Supplemental Indenture Oct. 28, 1960 37,060 Official Records
Fifth Supplemental Indenture Dec. 5, 1961 39,876 Official Records
Sixth Supplemental Indenture Oct. 18, 1963 46,249 Official Records
Seventh Supplemental Indenture Aug. 7, 1964 48,660 Official Records
Eighth Supplemental Indenture May 10, 1968 05,910 Official Records
Ninth Supplemental Indenture Oct. 17, 1969 15,192 Official Records
Tenth Supplemental Indenture Oct. 5, 1970 20,294 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 35,265 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 45,632 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 55,802 Official Records
Fourteenth Supplemental Indenture May 4, 1977 58,169 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 70,767 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 54,601 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 65,354 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 171,431 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 245632 Official Records
Twentieth Supplemental Indenture April 30, 1992 307547 Official Records
Twenty-First Supplemental Indenture June 19, 1992 310469 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 310470 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 320357 Official Records
Twenty-Fourth Supplemental Indenture November 2, 1992 320802 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 324817 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 372538 Official Records
</TABLE>
13
<PAGE>
NEVADA
LINCOLN COUNTY
<TABLE>
<CAPTION>
RECORDED DOC. NO. RECORDS
-------- -------- -------
<S> <C> <C> <C>
Original Indenture Sept. 1, 1972 52,162 Official Records
First Supplemental Indenture Sept. 1, 1972 52,163 Official Records
Instrument of Further Assurance Sept. 1, 1972 52,164 Official Records
Second Supplemental Indenture Sept. 1, 1972 52,165 Official Records
Third Supplemental Indenture Sept. 1, 1972 52,166 Official Records
Fourth Supplemental Indenture Sept. 1, 1972 52,167 Official Records
Fifth Supplemental Indenture Sept. 1, 1972 52,168 Official Records
Sixth Supplemental Indenture Sept. 1, 1972 52,169 Official Records
Seventh Supplemental Indenture Sept. 1, 1972 52,170 Official Records
Eighth Supplemental Indenture Sept. 1, 1972 52,171 Official Records
Ninth Supplemental Indenture Sept. 1, 1972 52,172 Official Records
Tenth Supplemental Indenture Sept. 1, 1972 52,173 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 52,330 Official Records
Twelfth Supplemental Indenture Dec. 6, 1974 55,557 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 58,659 Official Records
Fourteenth Supplemental Indenture May 4, 1977 59,627 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 62,731 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 74,010 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 75,970 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 85,911 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 92444 Official Records
Twentieth Supplemental Indenture April 30, 1992 98382 Official Records
Twenty-First Supplemental Indenture June 19, 1992 98558 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 98559 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 99552 Official Records
Twenty-Fourth Supplemental Indenture November 2, 1992 99062 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 99782 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 103516 Official Records
</TABLE>
14
<PAGE>
ARIZONA
NAVAJO COUNTY
<TABLE>
<CAPTION>
RECORDED DOC. NO. RECORDS
-------- -------- -------
<S> <C> <C> <C>
Original Indenture Oct. 5, 1970 330/196 Official Records
First Supplemental Indenture Oct. 5, 1970 330/301 Official Records
Instrument of Further Assurance Oct. 5, 1970 330/340 Official Records
Second Supplemental Indenture Oct. 5, 1970 330/351 Official Records
Third Supplemental Indenture Oct. 5, 1970 330/422 Official Records
Fourth Supplemental Indenture Oct. 5, 1970 330/464 Official Records
Fifth Supplemental Indenture Oct. 5, 1970 330/496 Official Records
Sixth Supplemental Indenture Oct. 5, 1970 330/530 Official Records
Seventh Supplemental Indenture Oct. 5, 1970 330/567 Official Records
Eighth Supplemental Indenture Oct. 5, 1970 330/604 Official Records
Ninth Supplemental Indenture Oct. 5, 1970 330/635 Official Records
Tenth Supplemental Indenture Oct. 5, 1970 330/80 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 376/364 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 426/148 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 473/494 Official Records
Fourteenth Supplemental Indenture May 4, 1977 486/754 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 531/167 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 647/828 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 671/789 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 846/551 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 970/816 Official Records
Twentieth Supplemental Indenture April 30, 1992 1076//21 Official Records
Twenty-First Supplemental Indenture June 19, 1992 1083/537 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 1083/557 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 1103/36 Official Records
Twenty-Fourth Supplemental Indenture October 30, 1992 1104/1 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 1112/693 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 1995/7363 Official Records
</TABLE>
15
<PAGE>
ARIZONA
COCONINO COUNTY
<TABLE>
<CAPTION>
RECORDED DOC. NO. RECORDS
-------- -------- -------
<S> <C> <C> <C>
Original Indenture Oct. 1, 1970 370 Official Records
First Supplemental Indenture Oct. 1, 1970 370 Official Records
Instrument of Further Assurance Oct. 1, 1970 370 Official Records
Second Supplemental Indenture Oct. 1, 1970 370 Official Records
Third Supplemental Indenture Oct. 1, 1970 370 Official Records
Fourth Supplemental Indenture Oct. 1, 1970 370 Official Records
Fifth Supplemental Indenture Oct. 1, 1970 370 Official Records
Sixth Supplemental Indenture Oct. 1, 1970 370 Official Records
Seventh Supplemental Indenture Oct. 1, 1970 370 Official Records
Eighth Supplemental Indenture Oct. 1, 1970 370 Official Records
Ninth Supplemental Indenture Oct. 1, 1970 370 Official Records
Tenth Supplemental Indenture Oct. 5, 1970 370 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 445 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 528 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 606 Official Records
Fourteenth Supplemental Indenture May 4, 1977 628 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 697 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 862 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 896 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 1125 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 1304 Official Records
Twentieth Supplemental Indenture April 30, 1992 1471 Official Records
Twenty-First Supplemental Indenture June 19, 1992 1483 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 1483 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 1515 Official Records
Twenty-Fourth Supplemental Indenture October 30, 1992 1517 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 1535 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 1769 Official Records
</TABLE>
16
<PAGE>
ARIZONA
MOHAVE COUNTY
<TABLE>
<CAPTION>
RECORDED DOC. NO. RECORDS
---------------- -------- ----------------
<S> <C> <C> <C>
Original Indenture Aug. 28, 1972 50 Official Records
First Supplemental Indenture Aug. 28, 1972 50 Official Records
Instrument of Further Assurance Aug. 28, 1972 50 Official Records
Second Supplemental Indenture Aug. 28, 1972 50 Official Records
Third Supplemental Indenture Aug. 28, 1972 50 Official Records
Fourth Supplemental Indenture Aug. 28, 1972 50 Official Records
Fifth Supplemental Indenture Aug. 28, 1972 50 Official Records
Sixth Supplemental Indenture Aug. 28, 1972 50 Official Records
Seventh Supplemental Indenture Aug. 28, 1972 51 Official Records
Eighth Supplemental Indenture Aug. 28, 1972 51 Official Records
Ninth Supplemental Indenture Aug. 28, 1972 51 Official Records
Tenth Supplemental Indenture Aug. 28, 1972 51 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 67 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 250 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 355 Official Records
Fourteenth Supplemental Indenture May 4, 1977 390 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 489 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 765 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 865 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 1264 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 1612 Official Records
Twentieth Supplemental Indenture April 30, 1992 92-12800 Official Records
Twenty-First Supplemental Indenture June 19, 1992 92-33181 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 92-33182 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 92-58584 Official Records
Twenty-Fourth Supplemental Indenture October 30, 1992 92-59727 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 2160 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 2568 Official Records
</TABLE>
17
<PAGE>
UTAH
KANE COUNTY
<TABLE>
<CAPTION>
RECORDED DOC. NO. RECORDS
---------------- -------- ----------------
<S> <C> <C> <C>
Original Indenture Sept. 12, 1972 35 Official Records
First Supplemental Indenture Sept. 12, 1972 35 Official Records
Instrument of Further Assurance Sept. 12, 1972 35 Official Records
Second Supplemental Indenture Sept. 12, 1972 35 Official Records
Third Supplemental Indenture Sept. 12, 1972 35 Official Records
Fourth Supplemental Indenture Sept. 12, 1972 35 Official Records
Fifth Supplemental Indenture Sept. 12, 1972 35 Official Records
Sixth Supplemental Indenture Sept. 12, 1972 35 Official Records
Seventh Supplemental Indenture Sept. 12, 1972 35 Official Records
Eighth Supplemental Indenture Sept. 12, 1972 35 Official Records
Ninth Supplemental Indenture Sept. 12, 1972 35 Official Records
Tenth Supplemental Indenture Sept. 12, 1972 35 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 35 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 44 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 53 Official Records
Fourteenth Supplemental Indenture May 4, 1977 55 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 59 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 71 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 074 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 093 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 0106 Official Records
Twentieth Supplemental Indenture April 30, 1992 72900 Official Records
Twenty-First Supplemental Indenture June 19, 1992 73283 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 73284 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 74584 Official Records
Twenty-Fourth Supplemental Indenture October 30, 1992 74641 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 75203 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 83330 Official Records
</TABLE>
18
<PAGE>
UTAH
WASHINGTON COUNTY
<TABLE>
<CAPTION>
RECORDED DOC. NO. RECORDS
---------------- -------- ----------------
<S> <C> <C> <C>
Original Indenture Sept. 22, 1972 124 Official Records
First Supplemental Indenture Sept. 22, 1972 124 Official Records
Instrument of Further Assurance Sept. 22, 1972 124 Official Records
Second Supplemental Indenture Sept. 22, 1972 124 Official Records
Third Supplemental Indenture Sept. 22, 1972 124 Official Records
Fourth Supplemental Indenture Sept. 22, 1972 124 Official Records
Fifth Supplemental Indenture Sept. 22, 1972 124 Official Records
Sixth Supplemental Indenture Sept. 22, 1972 124 Official Records
Seventh Supplemental Indenture Sept. 22, 1972 124 Official Records
Eighth Supplemental Indenture Sept. 22, 1972 124 Official Records
Ninth Supplemental Indenture Sept. 22, 1972 124 Official Records
Tenth Supplemental Indenture Sept. 22, 1972 124 Official Records
Eleventh Supplemental Indenture Oct. 30, 1972 127 Official Records
Twelfth Supplemental Indenture Dec. 9, 1974 163 Official Records
Thirteenth Supplemental Indenture Oct. 19, 1976 204 Official Records
Fourteenth Supplemental Indenture May 4, 1977 218 Official Records
Fifteenth Supplemental Indenture Sept. 5, 1978 239 Official Records
Sixteenth Supplemental Indenture Dec. 4, 1981 302 Official Records
Seventeenth Supplemental Indenture Aug. 19, 1982 313 Official Records
Eighteenth Supplemental Indenture Nov. 13, 1986 431 Official Records
Nineteenth Supplemental Indenture Oct. 12, 1989 537 Official Records
Twentieth Supplemental Indenture April 30, 1992 405624 Official Records
Twenty-First Supplemental Indenture June 19, 1992 409301 Official Records
Twenty-Second Supplemental Indenture June 19, 1992 409302 Official Records
Twenty-Third Supplemental Indenture October 26, 1992 417975 Official Records
Twenty-Fourth Supplemental Indenture October 30, 1992 418495 Official Records
Twenty-Fifth Supplemental Indenture January 11, 1993 423543 Official Records
Twenty-Sixth Supplemental Indenture May 18, 1995 500264 Official Records
</TABLE>
19
<PAGE>
The foregoing document was recorded as follows:
<TABLE>
<CAPTION>
RECORDED DOC. NO. RECORDS
-------------- ---------- ----------------
<S> <C> <C> <C>
Clark County, Nevada August 5, 1999 01202 Official Records
Nye County, Nevada August 5, 1999 475120 Official Records
Lincoln County, Nevada August 5, 1999 113157 Official Records
Navajo County, Arizona August 5, 1999 1999 16074 Official Records
Coconino County, Arizona August 5, 1999 3017077 Official Records
Mohave County, Arizona August 5, 1999 99047383 Official Records
Kane County, Utah August 5, 1999 99595 Official Records
Washington County, Utah August 5, 1999 00657403 Official Records
</TABLE>
20
<PAGE>
EXHIBIT B
PROPERTY ADDITIONS
All that Real Property situate in the County of Clark, State of Nevada
bounded and described as follows:
PARCEL 1:
- --------
Government Lot Eight (8) in Section 19, Township 21 South, Range 60 East,
M.D.B. & M.
PARCEL 2:
- --------
That portion of the Northwest quarter (NW1/4) of Section 18, Township 22
South, Range 63 East, M.D. B & M described as follows:
Parcel (2) as shown by map thereof in file 76 of Parcel Maps, page 41, in
the office of the County Recorder, Clark County, Nevada.
Also known as:
A portion of Parcel F per Document No. 645527 in Book 803, Official
Records, Clark County, Nevada.
The above referred to parcel of land, situate in the County of Clark, State
of Nevada, is that portion of the Northwest Quarter (NW1/4) of Section 18,
Township 22 South, Range 63 East, M.D.M., Nevada, described as follows:
COMMENCING at the Northwest (NW) corner of said Section 18; thence North 89
(degrees) 42' 30" East, along the North line thereof, 1553.94 feet to a
point on the West right of way line of BMP Entrance Road; thence South
08(degrees) 51' 37" East, along the West line thereof, 294.54 feet to a
point hereinafter designated as POINT "A"; thence continuing South
08(degrees) 51' 37" East, along said West line, 30.00 feet to a point of
intersection of Avenue "L" and BMP Entrance Road; thence South 81(degrees)
08' 23" West, along the centerline of Avenue "L", 53.00 feet; thence North
08(degrees) 51' 37" West, 30.00 feet to the POINT OF BEGINNING; thence
continuing North 08(degrees) 51' 37" West, 270.00 feet; thence South
81(degrees) 08' 23" West, 300.00 feet; thence South 08(degrees) 51' 37"
East, 270.00 feet; thence North 81(degrees) 08' 23" East, 300 feet to the
point of beginning.
PARCEL 3:
- --------
The Northeast Quarter (NE 1/4) of the Northeast Quarter (NE 1/4) of the
Northeast Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of Section 5,
Township 20 South, Range 60 East, Mount Diablo Meridian, Nevada.
PARCEL 4:
- --------
THAT PORTION OF THE NORTH HALF (N 1/2) OF SECTION 27, TOWNSHIP 20 SOUTH,
RANGE 62 EAST, M.D.B. & M., DESCRIBED AS FOLLOWS:
21
<PAGE>
BEGINNING AT THE NORTHWEST CORNER OF SECTION 27, TOWNSHIP 20 SOUTH, RANGE
62 EAST, M.D.B. & M.; THENCE 89 53' 57" EAST, ALONG THE NORTH LINE THEREOF
A DISTANCE OF 265.40 FEET TO A POINT ON THE WEST RIGHT OF WAY LINE OF A 100
FOOT WIDE RIGHT OF WAY DEDICATED TO THE LINCOLN COUNTY POWER DISTRICT NO.
1, RECORDED JANUARY 19, 1956 AS DOCUMENT NO. 67575 OF OFFICIAL RECORDS,
CLARK COUNTY, NEVADA; THENCE SOUTH 00 03'22" EAST ALONG SAID WEST RIGHT OF
WAY LINE A DISTANCE OF 1344.03 FEET TO A POINT ON THE SOUTH LINE OF THE
NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SAID
SECTION 27; THENCE NORTH 89 46'46" WEST ALONG SAID SOUTH LINE A DISTANCE OF
267.56 FEET TO A POINT IN THE WEST LINE OF THE NORTHWEST QUARTER (NW 1/4)
OF SECTION 27; THENCE NORTH 00 02'10" WEST A DISTANCE OF 1342.53 FEET ALONG
SAID WEST LINE TO THE TRUE POINT OF BEGINNING.
EXCEPT THE INTEREST IN AND TO THE WESTERLY FORTY (40) FEET OF SAID LAND AS
CONVEYED TO CLARK COUNTY, NEVADA FOR STREET AND ROAD PURPOSES BY DEED
RECORDED JUNE 16, 1954 AS DOCUMENT NO. 12744 OF OFFICIAL RECORDS, CLARK
COUNTY, NEVADA.
ALSO EXCEPTING THEREFROM AN UNDIVIDED ONE-HALF (1/2) INTEREST IN ALL OIL
AND GAS RIGHTS IN AND UNDER SAID LAND AS RESERVED BY JOHN E. CAVANAUGH, ET
AL, IN DEED RECORDED MARCH 4, 1954 AS DOCUMENT NO. 4535 OF OFFICIAL
RECORDS, CLARK COUNTY, NEVADA RECORDS.
PARCEL 5:
- --------
The South Half (S 1/2) of the North Half (N 1/2) of the Northeast Quarter
(NE 1/4) of the Southeast Quarter (SE 1/4) of Section 31, Township 19
South, Range 61 East, M.D.M.
EXCEPTING THEREFROM the interest in and to the East Forty (40.00) feet
thereof as conveyed to the City of North Las Vegas by Deed Recorded July
17, 1987 as Document No. 00590, Official Records.
Said land also being Lot Five Hundred Sixty-three (563) of that certain
Record of Survey Recorded October 18, 1989 in File 52, Page 70 of surveys.
PARCEL 6:
- --------
That portion of the northeast Quarter (NE 1/4) of Section 2, Township 20
South, Range 61 East, M.D.M., Nevada, being the Northerly 436.56 feet of
Lot 2 per File 55 of Parcel Maps, Page 78, recorded February 25, 1988, as
Document No. 00935 in Book 880225 of Official Records, Clark County,
Nevada.
PARCEL 7:
- --------
U.S. GOVERNMENT TRACT THIRTY-EIGHT (38) in Section 20 and 21, Township 17
South, Range 64 East, M.D.B.&M.
22
<PAGE>
PARCEL 8:
- --------
THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHEAST QUARTER (NE 1/4) OF THE
SOUTHWEST QUARTER (SW 1/4) OF THE NORTHEAST QUARTER (NE 1/4) OF SECTION 25,
TOWNSHIP 22 SOUTH, RANGE 60 EAST, M.D.B. & M.
EXCEPTING AND RESERVING ALSO TO THE UNITED STATES ALL OIL, GAS, AND OTHER
MINERAL DEPOSITS IN THE LAND, TOGETHER WITH THE RIGHT TO PROSPECT FOR, MINE
AND REMOVE THE SAME ACCORDING TO THE PROVISIONS OF THE ACT OF JUNE 1, 1938,
AS RESERVED IN THE PATENT RECORDED JULY 31, 1957, IN BOOK 136, OF OFFICIAL
RECORDS, CLARK COUNTY, NEVADA RECORDS, AS DOCUMENT NO. 111808.
PARCEL 9:
- --------
All of Lot 7 of Block C, containing approximately 2561 acres, as shown on
the subdivision map of "The Crossing at Summerlin Village 8 - Unit No. 1 -
Phase 3," on file in Book 63 of Plats at Page 92, in the Office of the
County Clerk of Clark County, Nevada.
PARCEL 10:
- ---------
THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF THE
SOUTHWEST QUARTER (SW 1/4) OF THE NORTHEAST QUARTER (NE 1/4) OF SECTION 25,
TOWNSHIP 22 SOUTH, RANGE 60 EAST, M.D.B. & M.
EXCEPTING AND RESERVING ALSO TO THE UNITED STATES ALL OIL, GAS, AND OTHER
MINERAL DEPOSITS IN THE LAND, TOGETHER WITH THE RIGHT TO PROSPECT FOR, MINE
AND REMOVE THE SAME ACCORDING TO THE PROVISIONS OF THE ACT OF JUNE 1, 1938,
AS RESERVED IN THE PATENT RECORDED MAY 4, 1960, IN BOOK 242, OF OFFICIAL
RECORDS, CLARK COUNTY, NEVADA RECORDS, AS DOCUMENT NO. 196507.
PARCEL 11:
- ---------
The Southwest Quarter of the Southwest Quarter of the Southwest Quarter of
the Southwest Quarter (SW1/4 SW1/4 SW1/4 SW1/4) of Section 9, Township 20
South, Range 60 East, M.D.B.&M.
PARCEL 12:
- ---------
The West Half (W 1/2) of the Southwest Quarter (SW 1/4) of the Southwest
Quarter (SW 1/4) of the Southwest Quarter (SW 1/4) of the Southwest Quarter
(SW 1/4) of Section 9, Township 20 South, Range 60 East, M.D.B.& M.
23
<PAGE>
PARCEL 13:
- ---------
The North Half (N 1/2) of the Northeast Quarter (NE 1/4) of the Northeast
Quarter (NE 1/4 of the Northeast Quarter (NE 1/4) Section 23, Township 22
South, Range 61 East, M.D.B.&M.
PARCEL 14:
- ---------
PARCELS ONE (1), TWO (2) AND THREE (3) OF THAT CERTAIN PARCEL MAP, IN FILE
23 OF PARCEL MAPS, PAGE 72, RECORDED JANUARY 12, 1979 IN BOOK 895 OF
OFFICIAL RECORDS, CLARK COUNTY, NEVADA.
TOGETHER WITH AN EASEMENT FOR RAILROAD PURPOSES OVER A STRIP OF LAND TEN
(10.00) FEET IN WIDTH LYING EASTERLY OF, AND IMMEDIATELY ADJACENT TO, THE
FOLLOWING DESCRIBED LINE:
COMMENCING AT THE SOUTHWEST CORNER OF THE SAID SOUTHEAST QUARTER (SE 1/4)
OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 20, TOWNSHIP 21 SOUTH, RANGE
61 EAST; THENCE NORTH 0(DEGREES) 02'39" WEST ALONG THE WEST LINE OF THE
SAID SOUTHEAST QUARTER (SE 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF
SECTION 20 A DISTANCE OF 352.04 FEET TO A POINT; THENCE SOUTH 89(DEGREES)
04'49" EAST ALONG THE NORTH LINE OF THE SOUTH 352.00 FEET OF THE SAID WEST
HALF (W 1/2) OF THE SOUTHEAST QUARTER (SE 1/4) OF THE NORTHWEST QUARTER (NW
1/4) OF SECTION 20, A DISTANCE OF 324.52 FEET TO THE NORTHWEST CORNER OF
THE DAIS EAST HALF (E 1/2) OF THE SOUTH 352.00 FEET OF THE WEST HALF (W
1/2) OF THE SOUTHEAST QUARTER (SE 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF
SECTION 20, THE TRUE POINT OF BEGINNING OF SAID LINE; THENCE ALONG THE WEST
LINE OF SAID EAST HALF (E 1/2) SOUTH 0(DEGREES) 14'37" WEST 312.01 FEET;
ALSO KNOWN AS THE WESTERLY TEN (10.00) FEET OF PARCEL FOUR (4) AS SHOWN BY
MAP THEREOF ON FILE IN FILE 23 OF PARCEL MAPS, PAGE 72, IN THE OFFICE OF
THE COUNTY RECORDER OF CLARK COUNTY, NEVADA.
PARCEL 15:
- ---------
THE EAST HALF (E 1/2) OF THE NORTHEAST QUARTER (NE 1/4) OF THE NORTHWEST
QUARTER (NW 1/4) OF THE SOUTHWEST QUARTER (SW 1/4) OF SECTION 26, TOWNSHIP
19 SOUTH, RANGE 60 EAST, M.D.B.&M.
PARCEL 16:
- ---------
LOTS EIGHT (8) AND NINE (9) IN BLOCK THREE (3) OF NELLIS INDUSTRIAL PARK
UNIT NO. 1, AS SHOWN BY MAP THEREOF ON FILE IN BOOK 10 OF PLATS, PAGE 76,
IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA.
24
<PAGE>
PARCEL 17:
- ---------
THAT PORTION OF THE NORTH HALF (N 1/2) OF THE SOUTHEAST QUARTER (SE 1/4) OF
SECTION 15, TOWNSHIP 22 SOUTH, RANGE 62 EAST, M.D.M., MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
LOT FOUR (4) AS SHOWN BY MAP THEREOF ON FILE IN BOOK 84 OF PARCEL MAPS,
PAGE 31, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA.
PARCEL 18:
- ---------
The Northeast Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of the
Southeast Quarter SE1/4) of the Southwest Quarter (SW1/4) of Section 4,
Township 22 South, Range 60 East, M.D.B. & M.
EXCEPTING THEREFROM that portion lying within Tomsik Street and Warm
Springs Road as conveyed to Clark County, by Document recorded January 10,
1980 in Book 1171 of Official Records, Clark County, Nevada Records as
Document No. 1130768.
Said land is also shown as Lot 1 on that certain Certificate of Land
Division No. LD-209-79, recorded January 10, 1980 in Book 1171 of Official
Records, Clark County, Nevada Records, as Document No. 1130767.
PARCEL 19:
- ---------
The Southeast Quarter (SE1/4) of the Southwest Quarter (SW1/4) of the
Southeast Quarter (SE1/4) of the Southwest Quarter (SW1/4) of Section 4,
Township 22 South, Range 60 East, M.D.B. & M.
EXCEPTING THEREFROM that portion lying within the Tomsik Street and Warm
Springs Road as conveyed to Clark County, by Document recorded January 10,
1980 in Book 1171 of Official Records, Clark County, Nevada Records as
Document No. 1130768.
Said land is also shown as Lot 2 on that certain Certificate of Land
Division No. LD-209-79, recorded January 10, 1980 in Book 1171 of Official
Records, Clark County, Nevada Records, as Document No. 1130767.
PARCEL 20:
- ---------
THE WEST ONE-HALF (W 1/2) OF THE SOUTHWEST ONE-QUARTER (SW 1/4) OF THE
SOUTHWEST ONE QUARTER (SW 1/4) OF THE NORTHWEST ONE-QUARTER (NW 1/4) OF
SECTION 11, TOWNSHIP 22 SOUTH, RANGE 60 EAST, M.D.B. & M.
EXCEPT THEREFROM THE WESTERLY FIFTY (50) FEET AS CONVEYED TO CLARK COUNTY
BY DEED RECORDED NOVEMBER 23, 1965 IN BOOK 673 OF OFFICIAL RECORDS, AS
DOCUMENT NO. 541383, OFFICIAL RECORDS.
25
<PAGE>
PARCEL 21:
- ---------
Government Lot 35 in Section 30, Township 21 South, Range 60 East, M.D.M.,
being the West Half (W 1/2) of the Southeast Quarter (SE 1/4) of the
Southwest Quarter (SW 1/4) of the Southwest Quarter (SW 1/4) of said
Section 30.
EXCEPTING THEREFROM the South 50 feet of said land as conveyed to Clark
County for road and other public purposes by Deed recorded June 6, 1973 as
Document No. 293773 of Official Records, Clark County, Nevada.
PARCEL 22:
- ---------
That portion of the Southwest Quarter (SW 1/4) of the Southwest Quarter (SW
1/4) of Section 33, Township 21 South, Range 63 East, M.D.B. & M.,
described as follows:
Lots A-1 and B-111 as shown by map thereof in File 32 of Parcel Maps, Page
17 in the Office of the County Recorder, Clark County, Nevada.
Less and Except those portions conveyed to the City of Henderson in deeds
recorded on September 19, 1984 in Book 1993 as Document Nos. 1962934 and
1952935.
PARCEL 23:
- ---------
THE SOUTH HALF (S 1/2) OF THE NORTH HALF (N 1/2) OF THE SOUTHWEST QUARTER
(SW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 25, TOWNSHIP 19
SOUTH, RANGE 60 EAST, M.D.B. & M.
EXCEPTING THEREFROM THE WESTERLY FIFTY (50) FEET AND SOUTHERLY FIFTEEN (15)
FEET AND EASTERLY FIFTEEN (15) FEET THEREOF, TO BE USED AS A PUBLIC ROAD
AND FOR UTILITIES.
FURTHER DESCRIBED AS LOT THREE HUNDRED SEVEN (307) AS SHOWN IN THAT CERTAIN
RECORD OF SURVEY RECORDED OCTOBER 18, 1989 IN BOOK 891018 AS DOCUMENT NO.
0057 IN FILE 52 OF SURVEYS, PAGE 70.
PARCEL 24:
- ---------
East One-Half (E-1/2) of the Southeast Quarter (SE-1/4) of the Northwest
Quarter (NW-1/4) of Southeast Quarter (SE-1/4) of Section Twenty-five (25),
Township 21 South, Range 60 East M.D.B.M.
EXCEPTING THEREFROM the North Thirty feet (30.00'), the East Thirty Feet
(30.00') and the South Thirty-feet (30.00') and these certain spandrels in
the Northeast and Southeast corners as conveyed to Clark County, Nevada,
for roads and incidental purposes in a Deed recorded November 6, 1986 in
Book 861106 as Instrument No. 00494, Official Records, Clark County,
Nevada.
26
<PAGE>
PARCEL 25:
- ---------
The West Half (W-1/2) of the Southeast Quarter (SE-1/4) of the Northwest
Quarter (NW-1/4) of the Southeast Quarter (SE-1/4) of Section 25, Township
21 South, Range 60 East, M.D.B. & M.
PARCEL 26:
- ---------
THAT PORTION OF THE NORTHEAST QUARTER (NE1/4) OF THE NORTHWEST QUARTER
(NW1/4) OF THE SOUTHWEST QUARTER (SW1/4) OF SECTION 26, TOWNSHIP 19, SOUTH,
RANGE 61 EAST OF M.D.M. DESCRIBED AS:
PARCEL TWO (2) AS SHOWN BY MAP THEREOF ON FILE IN FILE 86 OF PARCEL MAPS
PAGE 72 IN THE OFFICE OF THE COUNTY RECORDER, CLARK COUNTY, NEVADA.
PARCEL 27:
- ---------
The South Half (S 1/2) of the Southwest Quarter (SW 1/4) of the Northeast
Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) of Section 26, Township
22 South, Range 61 East, M.D.B. & M.
PARCEL 28:
- ---------
The South Half (S 1/2) of the Southeast Quarter (SE 1/4) of the Northeast
Quarter (NE 1/4) of the Southwest Quarter (SW 1/4) in Section 26, Township
22 South, Range 61 East, M.D.B. & M.
PARCEL 29:
- ---------
The North Half (N 1/2) of the Northeast Quarter (NE 1/4) of the Southeast
Quarter (SE 1/4) of the Southwest Quarter (SW 1/4) of Section 26, Township
22 South, Range 61 East, M.D.B. & M.
PARCEL 30:
- ---------
The basis of bearing for this property description is the easterly line of
the Northeast Quarter (NE 1/4) of Section 15, Township 22 South, Range 62
East, M.D.M., City of Henderson, County of Clark, State of Nevada, which
bears North 00(degrees)46'25" East, as per map recorded in Book 56, Page 36
of Plats in the Office of the County Recorder of said County.
Being a portion of Lot 3, of GIBSON BUSINESS PARK III (A COMMERCIAL
SUBDIVISION) in the City of Henderson, County of Clark, State of Nevada, as
per map recorded in Book 56, Page 36 of Plats in the Office of the County
Recorder of said County, a portion of said map being amended in Book 76,
Page 51 of Plats, situated in the Northeast Quarter (NE 1/4) of Section 15,
Township 22 South, Range 62 East, M.D.M., more particularly described as
follows:
COMMENCING at the southeast corner of said Northeast Quarter (NE 1/4);
Thence along the southerly line thereof, South 89(degrees)33'34" West,
489.54 feet to the northwesterly line of that certain 60.00 foot wide
B.M.I. easement recorded June 29, 1956 in Book 99, Instrument No. 82187,
Official Records, said point also being the POINT OF BEGINNING; Thence
------------------
continuing along said southerly line, South 89(degrees)33'34", West 482.52
feet to a point on the northeasterly right-of-way line of that certain
200.00 foot wide Union Pacific Railroad right-of-way as shown per map
recorded in File 53, Page 98 of Parcel Maps; Thence along said right-of-way
line, North 74(degrees)12'35" West, 7.91 feet to a point on said line;
Thence departing said line, North 00(degrees)46'25" East, 843.85 feet;
Thence South 89(degrees)13'36" East, 929.48 feet to a point on the westerly
right-of-
27
<PAGE>
way line of Gibson Road, being 50.00 feet wide half street width as per
said Parcel Map; Thence along said right-of-way line, South
00(degrees)46'25" West, 452.86 feet to a point on the aforementioned
northwesterly line of said 60.00 foot wide B.M.I. easement; Thence along
said line, South 88(degrees)11'07" West, 475.94 feet to the POINT OF
BEGINNING.
PARCEL 31:
- ---------
THAT PORTION OF LOT 2 OF "HUGHES CHEYENNE CENTER PHASE 1" AS SHOWN BY MAP
THEREOF ON FILE IN BOOK 76, PAGE 87 OF PLATS IN THE CLARK COUNTY RECORDER'S
OFFICE, CLARK COUNTY, NEVADA, LYING WITHIN THE NORTHEAST QUARTER (NE 1/4)
OF SECTION 16, TOWNSHIP 20 SOUTH, RANGE 61 EAST, M.D.M., CITY OF NORTH LAS
VEGAS, CLARK COUNTY, NEVADA AND DESCRIBED AS FOLLOWS:
COMMENCING AT THE NORTHEAST CORNER OF SAID SECTION 16: THENCE ALONG THE
NORTH LINE OF SAID SECTION 16, SOUTH 89(degrees)33'23" WEST, 750.00 FEET TO
THE INTERSECTION WITH THE CONTROL LINE OF TRADE DRIVE (VARYING WIDTH -
PRIVATE STREET): THENCE ALONG SAID CONTROL LINE, THE FOLLOWING THREE (3)
COURSES: SOUTH 00(degrees)26'37" EAST, 281.00 FEET; THENCE CURVING TO THE
RIGHT ALONG THE ARC OF A 372.50 FOOT RADIUS CURVE, CONCAVE NORTHWESTERLY,
THROUGH A CENTRAL ANGLE OF 90(degrees)00'00", AN ARC LENGTH OF 585.12 FEET;
THENCE SOUTH 89(degrees)33'23" WEST, 920.58 FEET; THENCE SOUTH
00(degrees)26'37" EAST 27.50 FEET TO A POINT ON THE SOUTHERLY RIGHT-OF-WAY
LINE OF TRADE DRIVE SAID POINT BEING THE NORTHWEST CORNER OF THAT CERTAIN
PARCEL OF LAND DESCRIBED BY "GRANT BARGAIN AND SALE DEED" RECORDED
SEPTEMBER 30, 1997 IN BOOK 970930 OF OFFICIAL RECORDS AS INSTRUMENT NO.
02714; THENCE ALONG THE WEST LINE OF SAID PARCEL OF LAND SOUTH
00(degrees)26'37", 379.76 FEET TO THE POINT OF BEGINNING; THENCE CONTINUING
ALONG SAID WEST LINE, SOUTH 00(degrees)26'37" EAST, 244.61 FEET TO A POINT
ON THE NORTHERLY RIGHT-OF-WAY LINE OF BROOKS STREET; THENCE ALONG SAID
RIGHT-OF-WAY LINE, SOUTH 89(degrees)31'21" WEST, 598.46 FEET; THENCE
CONTINUING ALONG SAID RIGHT-OF-WAY LINE, CURVING TO THE RIGHT ALONG THE ARC
OF A 25.00 FOOT RADIUS CURVE, CONCAVE NORTHEASTERLY, THROUGH A CENTRAL
ANGEL OF 89(degrees)49'30", AN ARC LENGTH OF 39.19 FEET TO A POINT ON THE
EASTERLY RIGHT-OF-WAY LINE OF MARTIN L. KING BOULEVARD; THENCE ALONG SAID
RIGHT-OF-WAY LINE, NORTH 00(degrees)39'09" WEST, 219.68 FEET; THENCE
DEPARTING SAID RIGHT-OF-WAY LINE, NORTH 89(degrees)31'21" EAST, 624.28 FEET
TO THE POINT OF BEGINNING.
PARCEL 32:
- ---------
ALL OF PARCEL 3 AS SHOWN ON THE SUMMERLIN SOUTH PARCEL MAP #2 ON FILE IN
FILE 89 OF PLATS AT PAGE 78, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK
COUNTY, NEVADA.
PARCEL 33:
- ---------
The Northwest Quarter (NW1/4) of the Northwest Quarter (NW1/4) of Section
14, Township 20 South, Range 61 East, M.D.B.&M.
EXCEPTING THEREFROM THE FOLLOWING THOSE PORTIONS PORTIONS DESCRIBED IN DEED
TO THE CITY OF NORTH LAS VEGAS, RECORDED MAY 13,
28
<PAGE>
1977 IN BOOK 738 AS DOCUMENT NO. 697671 OF OFFICIAL RECORDS, DESCRIBED AS
FOLLOWS:
PARCEL I:
That portion of the Northwest Quarter (NW1/4) of the Northwest Quarter
(NW1/4) of Section 14, Township 20 South, Range 61 East, M.D.M., Nevada,
more particularly described as follows:
BEGINNING at the Southeast (SE) corner of said Northwest Quarter (NW1/4) of
the Northwest Quarter (NW1/4) of Section 14; thence North 89(degrees)07'48"
West along the South line thereof a distance of 14.09 feet; thence North
31(degrees)00'00" East a distance of 27.75 feet to a point on the East line
of said Northwest Quarter (NW1/4) of Section 14; thence North
89(degrees)07'48"k West along the South line thereof a distance of 14.09
feet; thence North 31(degrees)00'00" East a distance of 27.75 feet to a
point on the East line of said Northwest Quarter (NW1/4) of the Northwest
Quarter (NW1/4); thence South 0(degrees)29'01" West along said East line a
distance of 24.00 feet to the POINT OF BEGINNING.
PARCEL II:
That portion of the Northwest Quarter (NW1/4) of the Northwest Quarter
(NW1/4) of Section 14, Township 20 South, Range 61 East, M.D.M., Nevada,
more particularly described as follows:
COMMENCING at the Southeast (SE) corner of said Northwest Quarter (NW 1/4)
of the Northwest Quarter (NW 1/4) of Section 14; thence North
0(degrees)29'01" East along the East line thereof a distance of 181.54 feet
to the POINT OF BEGINNING; thence South 31(degrees)00'00" West along the
Northwesterly right-of-way line of Losee Road (80.00 feet in width) a
distance of 175.21 feet; thence North 89(degrees)07'48" West along a line
parallel to and 30.00 feet measured Northerly and at right angles from the
South line of said Northwest Quarter (NW1/4) of the Northwest Quarter
(NW1/4) said line also being the North right-of-way line of Brooks Avenue,
a distance of 25.96 feet to a point on a tangent curve concave to the
Northwest, having a radius of 25.00 feet and subtending a central angle of
59(degrees)52'12'; thence along the arc of said curve a distance of 26.12
feet to a point of tangency; thence North 31(degrees)00'00" East along a
line parallel to and 10.00 feet measured Northwesterly and at right angles
from said Losee Road right-of-way line a distance of 183.58 feet to a point
on the East line of said Northwest Quarter (NW1/4) of the Northwest Quarter
(NW1/4); thence South 0(degrees)29'01" West along said East line a distance
of 19.69 fee to the POINT OF BEGINNING.
FURTHER EXCEPTING THEREFROM THE NORTH FIFTY (50) FEET OF THE NORTHWEST
QUARTER (NW1/4) OF THE NORTHWEST QUARTER (NW1/4) OF SECTION 14, TOWNSHIP 20
SOUTH, RANGE 61 EAST, M.D.B. & M. AS DESCRIBED IN DEED TO THE CITY OF NORTH
LAS VEGAS, RECORDED MARCH 16, 1965 IN BOOK 612 AS DOCUMENT NO. 492646 OF
OFFICIAL RECORDS.
FURTHER EXCEPTING THEREFROM Those portions of the Northwest Quarter of the
Northwest Quarter of Section 14, Township 20 South, Range 61 East, M.D.B. &
M., described in Deed to the City of North Las Vegas, Recorded April 8,
1965 in Book 618 as Document No. 496957 of Official Records, more
particularly described as follows:
PARCEL 1:
COMMENCING at the Southeast Corner of the Northwest Quarter (NW1/4) of the
said Northwest Quarter (NW1/4), the true point of beginning; thence South
89(degrees)47'06" West along the
29
<PAGE>
South line of said Northwest Quarter (NW1/4) a distance westerly of 118.59
feet to a point; thence North 31(degrees)00'00" East, a distance of 234.75
feet more or less to the East line of the Northwest Quarter (NW1/4) of the
said Northwest Quarter (NW1/4); thence South 0(degrees)29'01" West along
the East line of the Northwest Quarter (NW1/4) of the Northwest Quarter
(NW1/4) a distance of 201.23 feet to the point of beginning.
PARCEL 2:
The South 30.00 feet of the Northwest Quarter (NW1/4) of the Northwest
Quarter (NW1/4), saving and excepting Parcel 1, above described.
FURTHER EXCEPTING THEREFROM The West Fifty (50) of said Northwest Quarter
(NW 1/4) of the Northwest Quarter (NW 1/4) as described in Deed to the City
of North Las Vegas, recorded September 18, 1997 in Book 970918 as Document
No. 00342 of Official Records.
PARCEL 34:
- ---------
BEING A PORTION OF THE SOUTH HALF (S 1/2) OF THE NORTHWEST QUARTER (NW 1/4)
OF SECTION 11 TOWNSHIP 22 SOUTH, RANGE 60 EAST, MOUNT DIABLO MERIDIAN,
CLARK COUNTY, NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTH SIXTEENTH CORNER OF SAID SECTION 11, COMMON TO
SECTION 10 OF SAID TOWNSHIP AND SAID RANGE, BEING THE NORTHWEST CORNER OF
THE SOUTHWEST QUARTER (SW 1/4) OF SAID NORTHWEST QUARTER (NW 1/4), MARKED
BY A NAIL AND TIN IN A 2 INCH IRON PIPE; THENCE NORTH 87(degrees)16'05"
EAST, ALONG THE NORTH LINE OF THE WEST HALF (W 1/2) OF THE NORTHWEST
QUARTER (NW 1/4) OF SAID SOUTHWEST QUARTER (SW 1/4), A DISTANCE OF 332.69
FEET TO THE EAST LINE OF SAID WEST HALF (W 1/2); THENCE SOUTH
01(degrees)17'39" WEST, DEPARTING SAID NORTH LINE, ALONG SAID EAST LINE,
400.05 FEET; THENCE SOUTH 87(degrees)16'05" WEST, DEPARTING SAID EAST LINE,
331.92 FEET TO THE WEST LINE OF SAID WEST HALF (W 1/2) THENCE NORTH
01(degrees)11'07" EAST, ALONG SAID WEST LINE, 400.00 FEET TO SAID NORTH
SIXTEENTH CORNER OF SECTION 11, SAME BEING THE POINT OF BEGINNING AS SHOWN
ON THE EXHIBIT TO ACCOMPANY LAND DESCRIPTION ATTACHED HERETO AND MADE A
PART HEREOF.
CONTAINING 3.04 ACRES, AS DETERMINED BY COMPUTER METHODS.
BASIS OF BEARINGS
NORTH 87(degrees)03'00" EAST, BEING THE BEARING OF THE SOUTH LINE OF THE
SOUTHWEST QUARTER (SW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 11,
TOWNSHIP 22 SOUTH, RANGE 60 EAST, MOUNT DIABLO MERIDIAN, CLARK COUNTY,
NEVADA, AS SHOWN ON A MAP ON FILE IN THE CLARK COUNTY RECORDERS OFFICE IN
FILE 86 OF SURVEYS, AT PAGE 38.
PARCEL 35:
- ---------
That portion of the Northwest Quarter (NW 1/4) of the Northwest Quarter (NW
1/4) of Section 27, Township 20 South, Range 62 East, M.D.B. & M., lying
within that Final Judgment in favor of Lincoln County Power District No. 1,
recorded January 19, 1956 in Book 81, as Document No. 67575, Official
Records, and being described as follows:
30
<PAGE>
BEGINNING at a point on the North line of Section 27, distant along said
North line East 265.40 Feet from the Northwest Corner of said Section 27;
Thence Southerly 1344.47 Feet to a point on the South line of the Northwest
Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) of said Section 27;
Thence East 100.00 Feet to the West boundary line of Sunrise View Estates
Unit No. 1A, as shown by map thereof on file in Book 24 of Plats, Page 21;
Thence North along said West boundary 1344.47 Feet to the North line of the
Northwest Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) of said
Section 27; Thence West along said North line a distance of 100.00 Feet to
the POINT OF BEGINNING.
EXCEPTING THEREFROM any portion lying within Owens Avenue.
PARCEL 36:
- ---------
THE SOUTH HALF (S 1/2) OF THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHEAST
QUARTER (NE 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION 9, TOWNSHIP
23 SOUTH, RANGE 61 EAST, M.D.B. & M.
31
<PAGE>
PARCEL 37:
- ---------
A portion of the Northwest Quarter (NW 1/4) of the Southeast Quarter (SE
1/4) of Section 30, Township 22 South, Range 62 East, M.D.M., Clark County
Nevada, more particularly described as follows:
Commencing at the Northeast corner of the Southeast Quarter of said Section
30;
thence North 8926'01" West along the North Line of the Southeast Quarter
(SE 1/4) a distance of 2016.98 feet;
thence South 0019'53" West along the Centerline of Annet Street a distance
of 894.07 feet to THE POINT OF BEGINNING OF THIS DESCRIPTION;
thence South 00(degrees)19'53" West, 380.00 feet;
thence North 89(degrees)31'33" West 435.00 feet;
thence North 00(degrees)19'53" East, 380.00 feet;
thence South 89(degrees)31'33" East, 435.00 feet to THE POINT OF BEGINNING
PARCEL 38:
- ---------
THE SOUTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF
THE SOUTHWEST QUARTER OF SECTION 29, TOWNSHIP 21 SOUTH, RANGE 61 EAST
M.D.M.
EXCEPTING THEREFROM THE INTEREST IN AND TO THE SOUTH FORTY (40) FEET OF
SAID LAND AS CLAIMED AND ACCEPTED BY THE BOARD OF COMMISSIONERS OF CLARK
COUNTY FOR ROAD AND INCIDENTAL PURPOSES AS DISCLOSED BY RESOLUTION RECORDED
AUGUST 7, 1956 AS DOCUMENT NO. 85856, AND AS ILLUSTRATED BY RECORD OF
SURVEY RECORDED AUGUST 7, 1956, KNOWN AS FILE 6, PAGE 35.
ALSO ACCEPTING THEREFROM THE NORTH TEN (10) FEET OF THE SOUTH FIFTY (50)
FEET AND THE WEST THIRTY (30) FEET OF THE SOUTHWEST QUARTER OF THE
SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SAID
SECTION 29, TOGETHER WITH THAT CERTAIN SPANDREL AREA IN THE SOUTHWEST
CORNER THEREOF, ALSO BEING THE NORTHEAST CORNER OF THE INTERSECTION OF
PROCYON STREET AND RUSSELL ROAD BOUNDED AS FOLLOWS: ON THE SOUTH BY THE
NORTH LINE OF SOUTH FIFTY (50) FEET; ON THE WEST BY THE EAST LINE OF THE
WEST THIRTY (30) FEET; AND ON THE NORTHEAST BY THE ARC OF A CURVE CONCAVE
NORTHEASTERLY, HAVING A RADIUS OF TWENTY-FIVE (25) FEET AND BEING TANGENT
TO THE NORTH LINE OF SAID SOUTH FIFTY (50) FEET AND TO THE EAST LINE OF
SAID WEST THIRTY (30) FEET AS CONVEYED BY THAT CERTAIN DEED RECORDED MAY
20, 1977 AS DOCUMENT NO. 699997.
PARCEL 39:
- ---------
All of Parcel 3 as shown on the Summerlin 3435 Zone Reservoir Parcel Map on
file in File 91 at Page 28 in the Office of the County Recorder of Clark
County, Nevada.
32
<PAGE>
PARCEL 40:
- ---------
All of Parcel 4 as shown on the Summerlin 3435 Zone Reservoir Parcel Map on
file in File 91 at Page 28 in the Office of the County Recorder of Clark
County, Nevada.
PARCEL 41:
- ---------
Government Lot One Hundred Ten (110) and Government Lot One Hundred Sixty-
two (162) in the Southwest Quarter (SW1/4) of the Southwest Quarter (SW1/4)
of Section 28, Township 22 south, Range 61 East, M.D.M.
EXCEPTING THEREFROM any State or County roads that may exist in said land.
PARCEL 42:
- ---------
Lots One Hundred Nine (109) and One Hundred Sixty-One (161) in Section 28,
Township 22 South, Range 61 East, M.D.M.
EXCEPTING THEREFROM any State or County Roads that may exist in said land.
PARCEL 43:
- ---------
The Northwest Quarter (NW1/4) of the Northeast Quarter (NE1/4) of the
Southwest Quarter (SW1/4) of the Southwest Quarter (SW1/4) of Section 28,
Township 22 South, Range 61 East, M.D.B.&M, being further described as
Government Lot One Hundred Eight (108)
PARCEL 44:
- ---------
THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST QUARTER (NW 1/4) OF SECTION
29, TOWNSHIP 19 SOUTH, RANGE 61, M.D.B.&M.
PARCEL 45:
- ---------
THE NORTHWEST QUARTER (NW1/4) OF THE SOUTHEAST QUARTER (SE1/4) OF THE
SOUTHWEST QUARTER (SW1/4) OF THE SOUTHWEST QUARTER (SW1/4) OF SECTION 29,
TOWNSHIP 21 SOUTH, RANGE 61 EAST, M.D.B.&M.
PARCEL 46:
- ---------
THE EAST HALF (E 1/2) OF THE NORTHWEST QUARTER (NW 1/4) OF THE NORTHWEST
QUARTER (NW 1/4) OF THE NORTHWEST (NW 1/4) OF SECTION 1, TOWNSHIP 19 SOUTH,
RANGE 59 EAST, M.D.B. & ., ALSO BEING DEPICTED AS GOVERNMENT LOT THIRTY-ONE
(31).
33
<PAGE>
EXHIBIT 4(D)
______________________________________________________________________________
NEVADA POWER COMPANY
(formerly DESERT Merger Sub, Inc., as successor to Nevada Power company)
to
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
SUPPLEMENTAL INDENTURE NO. 2
AND ASSUMPTION AGREEMENT
Dated as of June 1, 1999
$122,547,950
8.20% Junior Subordinated Deferrable Interest Debentures
Series A
______________________________________________________________________________
1
<PAGE>
NEVADA POWER COMPANY
$122,547,950
8.20% Junior Subordinated Deferrable Interest Debentures
Series A
SUPPLEMENTAL INDENTURE NO. 2
AND ASSUMPTION AGREEMENT
SUPPLEMENTAL INDENTURE No. 2 AND ASSUMPTION AGREEMENT, dated as of
July 1, 1999, between Nevada Power Company, a Nevada corporation formerly known
as Desert Merger Sub, Inc., as successor to Nevada Power Company (the
"Company"), and IBJ Whitehall Bank & Trust Company, as successor to IBJ Schroder
Bank & Trust Company, a New York banking corporation, as Trustee (the
"Trustee").
RECITALS
--------
WHEREAS, Nevada Power Company (the "Merged Company") has heretofore
executed and delivered to the Trustee a Junior Subordinated Indenture, dated as
of March 1, 1997 (the "Indenture"), providing for the issuance from time to time
of series of the Company's Securities; and
WHEREAS, in connection with the issuance of the Securities by the
Merged Company, the Merged Company also entered into the following agreements
and executed the following instruments:
(1) the Indenture;
(2) Supplemental Indenture No. 1 dated as of March 1, 1997 from
the Merged Company to the Trustee;
(3) the Securities;
(4) Amended and Restated Trust Agreement dated as of March 1,
1997, among the Merged Company, the Trustee, Delaware Trust
Capital Management, Inc. and the Administrative Trustees
named therein;
(5) Guarantee Agreement dated as of March 1, 1997 between the
Merged Company and the Trustee; and
(6) Agreement as to Expenses and Liabilities dated as of March
1, 1997 between the Merged Company and NVP Capital I, a
Delaware business trust.
Each of the foregoing agreements or instruments being referred to herein
collectively as the "Nevada Power Obligations".
2
<PAGE>
WHEREAS, on April 29, 1998, the Merged Company entered into a Merger
Agreement with Sierra Pacific Resources, a Nevada utility holding company,
pursuant to which DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra
Pacific Resources, merged with the Merged Company with DESERT Merger Sub, Inc.
being the surviving corporation which surviving corporation then changed its
name to Nevada Power Company; and
WHEREAS, Section 801 of the Indenture provides that the Merged Company
shall not merge into any other Person (as defined in the Indenture) and that no
Person shall consolidate with or merge into the Merged Company unless:
(1) the Person formed by such consolidation or into which the company
is merged shall be a corporation, partnership or trust, shall be
organized and existing under the laws of the United States of
America or any State or the District of Columbia, and shall
expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
due and punctual payment of the principal of (and premium, if any)
and interest (including any Additional Interest) on all the
Securities and the performance of every covenant of the Indenture
on the part of the Company to be performed or observed;
(2) immediately after giving effet to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or
both, would become an Event of Default, shall have happened and be
continuing;
(3) in the case of the Securities of a series issued by an NVP Trust,
such merger is permitted under the related Trust Agreement and
Nevada Power Guarantee and does not give rise to any breach or
violation of the related Trust Agreement or Nevada Power Guarantee;
and
(4) the Merged Company delivers to the Trustee an Officer's Certificate
and an Opinion of Independent Counsel each stating that such merger
and supplemental indenture complies with Section 801 of the
Indenture and that all conditions precedent therein provided for
relating to such transaction have been complied with; and the
Trustee, subject to Section 601, may rely upon such Officer's
Certificate and opinion of Independent Counsel as conclusive
evidence that such transaction complies with Section 801.
WHEREAS, Section 901(2) of the Indenture provides for the Company and the
Trustee to enter into an indenture supplemental to the Indenture to evidence the
succession of another Person to the Company, and the assumption by any such
successor of the covenants of the Company in the Indenture and in the Securities
contained; and
WHEREAS, the Company, as the surviving entity of the Merger, has determined
to enter into this Agreement for purposes of complying with said provision of
Section 801 of the Indenture in accordance with the provisions of Article IX of
the Indenture.
3
<PAGE>
ARTICLE 1
RELATION TO INDENTURE; DEFINITIONS
Section 1.1. This Supplemental Indenture No. 2 constitutes an integral
part of the Indenture.
Section 1.2. For all purposes of this Supplemental Indenture No. 2:
(1) Capitalized terms used herein without definition shall have the
meanings specified in the Indenture or in the Amended and Restated Trust
Agreement, dated as of March 1, 1997, among Nevada Power Company, as Depositor,
IBJ Schroder Bank & Trust Company, as Property Trustee, Delaware Trust Capital
Management, Inc., as Delaware Trustee, and the Administrative Trustees named
therein, as the case may be;
(2) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this Supplemental
Indenture No. 2; and
(3) The terms "herein", "hereof", "hereunder" and other words of
similar import refer to this Supplemental Indenture No. 2.
ARTICLE 2
REPRESENTATIONS AND ASSUMPTION OF OBLIGATIONS
Section 2.1. The Company hereby represents that: (a) it is a corporation
duly organized and existing under the laws of the State of Nevada; (b) there has
not been an Event of Default, and no event which, after notice or lapse of time,
or both, would become an Event of Default, and (3) the merger as described in
the recitals hereof is permitted under the Trust Agreement and the Nevada Power
Guarantee and does not give rise to any breach or violation of the related Trust
Agreement or Nevada Power Guarantee.
Section 2.2. The Company hereby expressly assumes the due punctual payment
of the principal of (and premium, if any) and interest (including any Additional
Interest) on all the Securities and the performance of every covenant of the
Indenture and all other Nevada Power Obligations.
4
<PAGE>
ARTICLE 3
Miscellaneous Provisions
Section 3.1. The Indenture, as supplemented and amended by this
Supplemental Indenture No. 2, is in all respects hereby adopted, ratified and
confirmed.
Section 3.2. This Supplemental Indenture No. 2 may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 3.3. THIS SUPPLEMENTAL INDENTURE NO. 2 AND EACH SECURITY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 2 to be duly executed, as of the day and year first written above.
NEVADA POWER COMPANY
By:
William E. Peterson
Senior Vice President
and General Counsel
Attest: _______________________
Secretary
IBJ WHITEHALL BANK & TRUST COMPANY, as
Trustee
By: ___________________________________
Name:
Title:
5
<PAGE>
EXHIBIT 4(E)
______________________________________________________________________________
NEVADA POWER COMPANY
(formerly DESERT Merger Sub, Inc., as successor to Nevada Power Company)
to
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
SUPPLEMENTAL INDENTURE NO. 1
AND ASSUMPTION AGREEMENT
Dated as of June 1, 1999
$72,164,950
7 3/4% Junior Subordinated Deferrable Interest Debentures Due 2038
______________________________________________________________________________
1
<PAGE>
SUPPLEMENTAL INDENTURE NO. 1
AND ASSUMPTION AGREEMENT
SUPPLEMENTAL INDENTURE No. 1 AND ASSUMPTION AGREEMENT, dated as of
June 1, 1999, between Nevada Power Company, a Nevada corporation formerly known
as Desert Merger Sub, Inc., as successor to Nevada Power Company (the
"Company"), and IBJ Whitehall Bank & Trust Company, as successor to IBJ Schroder
Bank & Trust Company, a New York banking corporation, as Trustee (the
"Trustee").
RECITALS
--------
WHEREAS, Nevada Power Company (the "Merged Company") has heretofore
executed and delivered to the Trustee an Indenture, dated as of October 1, 1998
(the "Indenture"), providing for the issuance from time to time of series of the
Company's Debentures; and
WHEREAS, in connection with the issuance of the Debentures by the
Merged Company, the Merged Company also entered into the following agreements
and executed the following instruments:
(1) the Indenture;
(2) the Debentures;
(3) Amended and Restated Declaration of Trust dated as of October 1,
1998, among the Merged Company, the Trustee, Delaware Trust
Capital Management, Inc., the Administrative Trustees named
therein and the holders of undivided beneficial interests in NVP
Capital III;
(4) Preferred Securities Guarantee Agreement dated as of October 1,
1998 between the Merged Company and the Trustee; and
(5) Common Securities Agreement dated as of October 1, 1998 by the
Merged Company.
Each of the foregoing agreements or instruments being referred to herein
collectively as the "Nevada Power Obligations".
WHEREAS, on April 29, 1998, the Merged Company entered into a Merger
Agreement with Sierra Pacific Resources, a Nevada utility holding company,
pursuant to which DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra
Pacific Resources, merged with the Merged Company with DESERT Merger Sub, Inc.
being the surviving corporation which surviving corporation then changed its
name to Nevada Power Company; and
2
<PAGE>
WHEREAS, Section 701 of the Indenture provides that the Merged Company
shall not merge into any other Person (as defined in the Indenture) and that no
Person shall consolidate with or merge into the Merged Company unless:
(1) the Person formed by such consolidation or into which the
Company is merged is a corporation, partnership, limited
liability company or trust, is be organized and validly
existing under the laws of the United States of America or any
State or the District of Columbia, and shall expressly assume,
by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and interest on all the
Debentures and the performance or observance of every covenant
of the Indenture on the part of the Company to be performed or
observed;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the
Company as a result of such transaction as having been incurred
by the Company at the time of such transaction, no Event of
Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have happened and
be continuing;
(3) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with this
Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
WHEREAS, Section 801(2) of the Indenture provides for the Company and the
Trustee to enter into an indenture supplemental to the Indenture to evidence the
succession of another Person to the Company, and the assumption by any such
successor of the covenants of the Company in the Indenture and in the Debentures
contained; and
WHEREAS, the Company, as the surviving entity of the merger, has determined
to enter into this Agreement for purposes of complying with said provision of
Section 801 of the Indenture in accordance with the provisions of Article Eight
of the Indenture.
ARTICLE 1
RELATION TO INDENTURE; DEFINITIONS
Section 1.1. This Supplemental Indenture No. 1 constitutes an integral
part of the Indenture.
3
<PAGE>
Section 1.2. For all purposes of this Supplemental Indenture No. 1:
(1) Capitalized terms used herein without definition shall have the
meanings specified in the Indenture;
(2) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this Supplemental
Indenture No. 1; and
(3) The terms "herein", "hereof", "hereunder" and other words of
similar import refer to this Supplemental Indenture No. 1.
ARTICLE 2
REPRESENTATIONS AND ASSUMPTION OF OBLIGATIONS
Section 2.1. The Company hereby represents that: (a) it is a corporation
duly organized and existing under the laws of the State of Nevada; and (b) there
has not been an Event of Default, and no event which, after notice or lapse of
time, or both, would become an Event of Default.
Section 2.2. The Company hereby expressly assumes the due punctual payment
of the principal of (and premium, if any) and interest (including any Additional
Interest) on all the Debentures and the performance of every covenant of the
Indenture and all other Nevada Power Obligations.
ARTICLE 3
Miscellaneous Provisions
Section 3.1. The Indenture, as supplemented and amended by this
Supplemental Indenture No. 1, is in all respects hereby adopted, ratified and
confirmed.
Section 3.2. This Supplemental Indenture No. 1 may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
4
<PAGE>
Section 3.3. THIS SUPPLEMENTAL INDENTURE NO. 1 AND EACH SECURITY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 1 to be duly executed, as of the day and year first written above.
NEVADA POWER COMPANY
By:
William E. Peterson
Senior Vice President
and General Counsel
Attest: _______________________
Secretary
IBJ WHITEHALL BANK & TRUST COMPANY, as
Trustee
By: ___________________________________
Name:
Title:
5
<PAGE>
EXHIBIT 4(F)
______________________________________________________________________________
NEVADA POWER COMPANY
(formerly DESERT Merger Sub, Inc., as successor to Nevada Power Company)
to
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
SUPPLEMENTAL INDENTURE NO. 3
AND ASSUMPTION AGREEMENT
Dated as of July 1, 1999
Relating to
$130,000,000 6.20% Senior Unsecured Notes, Series B
______________________________________________________________________________
1
<PAGE>
SUPPLEMENTAL INDENTURE NO. 3
AND ASSUMPTION AGREEMENT
SUPPLEMENTAL INDENTURE No. 3 AND ASSUMPTION AGREEMENT, dated as of
July 1, 1999, between Nevada Power Company, a Nevada corporation formerly known
as DESERT Merger Sub, Inc., as successor to Nevada Power Company (the
"Company"), and IBJ Whitehall Bank & Trust Company, as successor to IBJ Schroder
Bank & Trust Company, a New York banking corporation, as Trustee (the
"Trustee").
RECITALS
--------
WHEREAS, Nevada Power Company (the "Merged Company") has heretofore
executed and delivered to the Trustee a Senior Unsecured Note Indenture, dated
as of March 1, 1999 as amended by a Supplemental Indenture No. 1 dated as of
March 1, 1999 and as further amended by a Supplemental Indenture No. 2 dated as
of April 1, 1999 (as supplemented, the "Indenture"), pursuant to which the
Merged Company has issued its $130,000,000 principal amount 6.20% Senior
Unsecured Notes, Series B due April 15, 2004 (the "Notes"); and
WHEREAS, on April 29, 1998, the Merged Company entered into a Merger
Agreement with Sierra Pacific Resources, a Nevada utility holding company,
pursuant to which DESERT Merger Sub, Inc., a wholly owned subsidiary of Sierra
Pacific Resources, merged with the Merged Company with DESERT Merger Sub, Inc.
being the surviving corporation which surviving corporation then changed its
name to Nevada Power Company; and
WHEREAS, Section 11.01 of the Indenture provides that the Merged Company
will not merge into any other corporation unless the corporation into which the
Merged Company is merged (a) shall expressly assume, by supplemental indenture,
the due and punctual payment of the principal of and premium and interest on all
of the Notes and the performance of every covenant of the Indenture on part of
the Merged Company to be performed or observed and (b) deliver to the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that all conditions
precedent to such action, if any, provided for in the Indenture has been
satisfied; and
WHEREAS, Section 12.01(4) of the Indenture provides that a supplemental
indenture may be entered into without the consent of the Holders to evidence the
succession and the assumption by a successor of all covenants under the
Indenture;
WHEREAS, the Surviving Company has determined to enter into this Agreement
to comply with said provision of Section 11.01 and Section 12.01(4) of the
Indenture.
ARTICLE 1
RELATION TO INDENTURE; DEFINITIONS
Section 1.1. This Supplemental Indenture No. 3 constitutes an integral
part of the Indenture.
Section 1.2. For all purposes of this Supplemental Indenture No. 3:
2
<PAGE>
(1) Capitalized terms used herein without definition shall have the
meanings specified in the Indenture;
(2) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this Supplemental
Indenture No. 3; and
(3) The terms "herein", "hereof", "hereunder" and other words of
similar import refer to this Supplemental Indenture No. 3.
ARTICLE 2
REPRESENTATIONS AND ASSUMPTION OF OBLIGATIONS
Section 2.1. The Company hereby represents that: (a) it is a corporation
duly organized and existing under the laws of the State of Nevada; and (b) there
has not been an Event of Default, and no event has occurred which, after notice
or lapse of time, or both, would become an Event of Default.
Section 2.2. The Company hereby expressly assumes the due punctual payment
of the principal of and premium and interest on the Notes and the performance of
every covenant of the Indenture.
ARTICLE 3
Miscellaneous Provisions
Section 3.1. The Indenture, as supplemented and amended by this
Supplemental Indenture No. 3, is in all respects hereby adopted, ratified and
confirmed.
Section 3.2. This Supplemental Indenture No. 3 may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
3
<PAGE>
Section 3.3. THIS SUPPLEMENTAL INDENTURE NO. 3 SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 1 to be duly executed, as of the day and year first written above.
NEVADA POWER COMPANY
By: ______________________________
William E. Peterson
Senior Vice President
and General Counsel
Attest: _______________________
Secretary
IBJ WHITEHALL BANK & TRUST COMPANY, as
Trustee
By: _______________________________
Name:______________________________
Title:_____________________________
4
<PAGE>
EXHIBIT 10(A)
================================================================================
$500,000,000
CREDIT AGREEMENT
dated as of
June 24, 1999
among
SIERRA PACIFIC RESOURCES,
MELLON BANK, N.A.,
as Administrative Agent,
FIRST UNION NATIONAL BANK
and
WELLS FARGO BANK, N.A.,
as Syndication Agents,
and
the LENDERS party hereto from time to time,
Arranged By
MELLON BANK, N.A.
================================================================================
1
<PAGE>
CREDIT AGREEMENT, dated as of June 24, 1999, among SIERRA PACIFIC
RESOURCES, a Nevada corporation, MELLON BANK, N.A., as Administrative Agent,
FIRST UNION NATIONAL BANK and WELLS FARGO BANK, N.A., as Syndication Agents, the
LENDERS party hereto from time to time and MELLON BANK, N.A., as Arranger.
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower (as defined below) has requested, and Lenders
(as defined below) have agreed to make available, the credit facilities
described below upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
SECTION 1.01 Defined Terms.
-------------
As used in this Agreement, the following terms have the following
meanings:
"ABR", when used in reference to any Loan or Borrowing, refers to
---
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Acquisition" means any transaction, or any series of related
-----------
transactions, consummated after the Effective Date, by which the Borrower and/or
any of its Subsidiaries directly or indirectly (a) acquires any ongoing business
or all or substantially all of the assets of any Person engaged in any ongoing
business, whether through purchase of assets, merger or otherwise, (b) acquires
control of securities of a Person engaged in an ongoing business representing
more than 50% of the ordinary voting power for the election of directors or
other governing position if the business affairs of such Person are managed by a
board of directors or other governing body or (c) acquires control of more than
50% of the ownership interest in any partnership, joint venture, limited
liability company, business trust or other Person engaged in an ongoing business
that is not managed by a board of directors or other governing body.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Revolving
------------------
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means Mellon Bank, N.A., in its capacity as
--------------------
administrative agent for the Lenders hereunder and any successor appointed
pursuant to Section 8.10.
2
<PAGE>
"Affiliate" means, any Person that directly or indirectly Controls, or
---------
is under common Control with, or is Controlled by, another Person, provided
that, in any event, any Person that owns directly or indirectly securities
having 20% or more of the voting power for the election of directors or other
governing body of a corporation or 20% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to Control such corporation or other Person.
"AFUDC-Debt" means, for any period, the allowance for borrowed funds
----------
used during construction for such period as calculated in accordance with the
rules of the Public Utilities Commission of Nevada.
"AFUDC-Equity" means, for any period, the allowance for funds other
------------
than borrowed funds used during construction for such period as calculated in
accordance with the rules of the Public Utilities Commission of Nevada.
"Agents" means, collectively, the Administrative Agent, the Arranger
------
and the Syndication Agents.
"Alternate Base Rate" means, for any day, a rate per annum equal to
-------------------
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any Lender as of any
---------------------
date of determination, the percentage of the total Commitments as of such date
represented by such Lender's Commitments as of such date. If the Commitments
have terminated or expired, the Applicable Percentages shall be determined, as
of any date of determination, based upon the percentage of the total Loans
outstanding as of such date represented by such Lender's Loans outstanding as of
such date.
"Applicable Rate" means, for any day, with respect to the facility
---------------
fees payable hereunder, with respect to any Eurodollar Revolving Loan or with
respect to any usage fees payable hereunder, as the case may be, the applicable
rate per annum set forth below under the caption "Facility Fee", "Eurodollar
Spread" or "Usage Fee", as the case may be, based on the ratings by S&P and
Moody's, respectively, applicable on such day to the Index Debt:
<TABLE>
Facility Fee Eurodollar
(364-Day Spread (364-Day
Facility/3-Year Facility/3- Usage Fee
Index Debt rating: S&P/Moody's Facility) Year Facility) (*33%/*66%)
- ------------------------------ --------- -------------- ----------
<S> <C> <C> <C>
Ratings greater than A-/A3 .1500/.2000% .3500/.3000% .0250/.0750%
Ratings equal to A-/A3 .1500/.2000% .4000/.3500% .0250/.0750%
Ratings equal to BBB+/Baa1 .2000/.2500% .4250/.3750% .0250/.0750%
</TABLE>
* greater than
3
<PAGE>
<TABLE>
<S> <C> <C> <C>
Ratings equal to BBB/Baa2 .2250/.2750% .5250/.4750% .0500/.1250%
Ratings equal to BBB-/Baa3 .2500/.3000% .7500/.7000% .0500/.1250%
Ratings less than BBB-/Baa3 .3750/.4250% .8750/.8250% .1250/.2500%
</TABLE>
For purposes of the foregoing, (i) if either Moody's or S&P shall not have in
effect a rating for the Index Debt (other than by reason of the circumstances
referred to in the last sentence of this definition), then such rating agency
shall be deemed to have established a rating in its lowest rating category, (ii)
if the ratings established or deemed to have been established by Moody's and S&P
for the Index Debt shall be changed (other than as a result of a change in the
rating system of Moody's or S&P), such change shall be effective as of two
Business Days after it is first announced by the applicable rating agency and
(iii) if the rating assigned by Moody's and the rating assigned by S&P shall
differ (a) by one level (e.g., Moody's rating of A3 and S&P rating of BBB+),
then the higher rating level shall apply (i.e., A3) and (b) by more than one
level (e.g., Moody's rating of A3 and S&P rating of BBB-), then the rating level
above the lower rating level shall apply (i.e., BBB/Baa2). Each change in the
Applicable Rate shall apply during the period commencing two Business Days after
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change. If the rating system of Moody's or
S&P shall change, or if either such rating agency shall cease to be in the
business of rating corporate debt obligations, the Borrower and the Lenders
shall negotiate in good faith to amend this definition to reflect such changed
rating system or the unavailability of ratings from such rating agency and,
pending the effectiveness of any such amendment, the Applicable Rate shall be
determined by reference to the rating most recently in effect prior to such
change or cessation.
"Arranger" means Mellon Bank, N.A. in its capacity as arranger
--------
hereunder.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.12), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
"Bankruptcy Code" means Title 11 of the United States Code entitled
---------------
"Bankruptcy," as now or hereafter in effect, or any successor thereto.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States of America.
"Borrower" means Sierra Pacific Resources, a Nevada corporation.
--------
"Borrowing" means Loans of the same Type under a Facility, made,
---------
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect.
"Borrowing Request" means a request by the Borrower for a Borrowing
-----------------
made in accordance with Section 2.03.
4
<PAGE>
"Business Day" means any day that is not a Saturday, Sunday or other
------------
day on which commercial banks in Pittsburgh, Pennsylvania are authorized or
required by Law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Lease Obligations" of any Person means all obligations of
-------------------------
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP (including Statement of Financial Accounting Standards No. 13
of the Financial Accounting Standards Board), and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP (including such Statement No. 13).
"Change in Control" means (a) the acquisition of ownership, directly
-----------------
or indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof) of shares
representing more than 20% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Borrower; (b) for any period of
12 consecutive calendar months, a majority of the Board of Directors of the
Borrower shall no longer be composed of individuals (i) who were members of said
Board on the first day of such period, (ii) whose election or nomination to said
Board was approved by individuals referred to in clause (i) above constituting
at the time of such election or nomination at least a majority of said Board or
(iii) whose election or nomination to said Board was approved by individuals
referred to in clauses (i) and (ii) above constituting at the time of such
election or nomination at least a majority of said Board; (c) the failure of the
Borrower to own, legally and beneficially, 100% of the aggregate ordinary voting
power represented by the issued and outstanding capital stock of either NPC or
SPPC; or (d) any reduction in Borrower's ownership, either legal or beneficial,
of a Significant Subsidiary.
"Change in Law" means (a) the adoption of any Law after the date of
-------------
this Agreement, (b) any change in any Law or in the interpretation or
application thereof by any Governmental Authority after the date of this
Agreement or (c) compliance by any Lender (or, for purposes of Section 2.13(b),
by any lending office of such Lender or by such Lender's Parent, if any) with
any request, guideline or directive (whether or not having the force of Law) of
any Governmental Authority made or issued after the date of this Agreement.
"Class", when used in reference to any Loan or Borrowing under the
-----
364-Day Facility, refers to whether such Loan, or the Loans comprising such
Borrowing, are Revolving Loans or Term Loans.
"Code" means the Internal Revenue Code of 1986 and the regulations
----
promulgated and rulings issued thereunder. Section references to the Code are
to the Code, as in effect at the date of this Agreement and any subsequent
provisions of the Code, amendatory thereof, supplemental thereto or substituted
therefor.
5
<PAGE>
"Commitment" means, with respect to each Lender at any time, the 364-
----------
Day Commitment and/or 3-Year Commitment of such Lender, as the context may
require, in each case as of such time.
"Consolidated Earnings Available For Fixed Charges" means, for any
-------------------------------------------------
period, Consolidated Net Income Available to Common less AFUDC-Debt less AFUDC-
Equity plus Consolidated Fixed Charges, in each case for the Borrower for such
period.
"Consolidated Fixed Charges" means, for any period, the sum of (i) the
--------------------------
total consolidated cash interest paid by the Borrower and its consolidated
Subsidiaries for such period, (ii) lease payments made or accrued by the
Borrower and its consolidated Subsidiaries, on a consolidated basis, for such
period and (iii) preferred dividends paid by the Borrower and its consolidated
Subsidiaries for such period.
"Consolidated Net Income Available to Common" means, for any period,
-------------------------------------------
the consolidated net income of the Borrower and its consolidated Subsidiaries
less consolidated preferred dividends accrued by the Borrower and its
consolidated Subsidiaries, in each case for such period.
"Control" of a Person (including, with its correlative meanings,
-------
"Controlled by" and "under common Control with") means possession, directly or
indirectly, of the 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) of such Person.
"Default" means any event, act or condition which upon notice, lapse
-------
of time or both would, unless cured or waived, become an Event of Default.
"Default Interest" has the meaning assigned to such term in Section
----------------
2.11(c).
"Dollars" or "$" refers to freely transferable lawful money of the
------- -
United States of America.
"Effective Date" means the date on which the conditions specified in
--------------
Section 4.01 are satisfied (or waived in accordance with Section 9.01).
"Environmental Claims" means any and all administrative, regulatory or
--------------------
judicial actions, suits, demands, demand letters, directives, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law or any permit issued, or any approval given,
under any such Environmental Law (hereafter, "Claims"), including, without
------
limitation, (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief in connection with alleged injury or threat of
injury to health, safety or the environment due to the presence of Hazardous
Materials.
"Environmental Law" means any Federal, state, foreign or local
-----------------
statute, Law, rule, regulation, ordinance, code, guideline, written policy and
rule of common law now or
6
<PAGE>
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, employee health
and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA;
the Federal Water Pollution Control Act, 33 U.S.C. (S) 1251 et seq.; the Toxic
-- ---
Substances Control Act, 15 U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C.
-- ---
(S) 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S) 3803 et seq.; the
-- --- -- ---
Oil Pollution Act of 1990, 33 U.S.C. (S) 2701 et seq.; the Emergency Planning
-- ---
and the Community Right-to-Know Act of 1986, 42 U.S.C. (S) 11001 et seq.; the
-- ---
Hazardous Material Transportation Act, 49 U.S.C. (S) 1801 et seq. and the
-- ---
Occupational Safety and Health Act, 29 U.S.C. (S) 651 et seq.; and any state and
-- ---
local or foreign counterparts or equivalents, in each case as amended from time
to time.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
-----
the regulations promulgated and rulings issued thereunder. Section references
to ERISA are to ERISA, as in effect at the date of this Agreement, and to any
subsequent provisions of ERISA, amendatory thereof, supplemental thereto or
substituted therefor.
"ERISA Affiliate" means any corporation or trade or business that is a
---------------
member of any group of organizations described in Section 414(b) or (c) of the
Code of which the Borrower is a member.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
----------
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Section
----------------
7.01.
"Excluded Taxes" means, with respect to the Administrative Agent, any
--------------
Lender or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) income or franchise taxes imposed on
(or measured by) its net income by the United States of America, or by the
jurisdiction under the Laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which the Borrower is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under
Section 2.17(b)), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
or is attributable to such Foreign Lender's failure or inability to comply with
Section 2.15(e), except to the extent that such Foreign Lender's assignor (if
any) was entitled, at the time of assignment, to receive additional amounts from
the Borrower with respect to such withholding tax pursuant to Section 2.15(a).
"Existing Indebtedness" has the meaning assigned to such term in
---------------------
Section 3.23.
"Extension Request" has the meaning assigned to such term in Section
-----------------
2.06(f).
"Extension Request Notice" has the meaning assigned to such term in
------------------------
Section 2.06(f).
7
<PAGE>
"Extension Request Period" has the meaning assigned to such term in
------------------------
Section 2.06(f).
"Facility" means either the 364-Day Facility or the 3-Year Facility,
--------
as the context may require, and "Facilities" means the 364-Day Facility and the
----------
3-Year Facility.
"Federal Funds Effective Rate" means, for any day, the weighted
----------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Final Fee Payment Date" has the meaning assigned to such term in
----------------------
Section 2.10(a).
"Final Repayment Date" means the earliest to occur of (a) the date
--------------------
that is one year after the Term Loan Conversion Date and (b) the date on which
the Obligations under this Agreement terminate, whether by prepayment,
cancellation, acceleration or otherwise.
"Fixed Charge Coverage Ratio" means, as of the last day of a fiscal
---------------------------
quarter, the ratio of Consolidated Earnings Available For Fixed Charges to
Consolidated Fixed Charges, in each case, for the four consecutive fiscal
quarter period of the Borrower ended on such last day. For each fiscal quarter
ended on or prior to the consummation of the Mergers that is included in any
four consecutive fiscal quarter test period, notwithstanding the definitions
thereof, Consolidated Earnings Available For Fixed Charges and Consolidated
Fixed Charges for such fiscal quarter shall be calculated as if the Mergers had
been consummated prior to such fiscal quarter and accounted for by the pooling
of interests method using, for this purpose, the Borrower's and NPC's respective
reports on Form 10-Q that were filed with the Securities and Exchange Commission
(or, in the case of the fiscal quarter ended December 31, 1998, the Borrower's
and NPC's unaudited financial statements for that fiscal quarter). For each
fiscal quarter ended after the consummation of the Mergers but before October 1,
1999 that is included in any four consecutive fiscal quarter test period,
notwithstanding the definitions thereof, Consolidated Earnings Available For
Fixed Charges and Consolidated Fixed Charges for such fiscal quarter shall be
calculated as if the Mergers were to be accounted for by the pooling of
interests method using, for this purpose, the Borrower's unaudited internally
prepared financial statements and not the Borrower's reports on Form 10-Q that
were filed with the Securities and Exchange Commission.
"Foreign Lender" means any Lender that is organized under the Laws of
--------------
a jurisdiction other than the United States of America, each State thereof and
the District of Columbia.
"Foreign Pension Plan" means any plan, fund (including, without
--------------------
limitation, any superannuation fund) or other similar program established or
maintained outside the United
8
<PAGE>
States of America by the Borrower or any one or more of its Subsidiaries
primarily for the benefit of employees of the Borrower or such Subsidiaries
residing outside the United States of America, which plan, fund or other similar
program provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code.
"GAAP" means generally accepted accounting principles in the United
----
States of America applied in a consistent manner.
"Governmental Action" means any authorization, approval, order,
-------------------
decree, ruling or other action by, or notice to or filing with, any Governmental
Authority.
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, bureau, instrumentality, regulatory body,
court, tribunal, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Hazardous Materials" means (a) any petroleum or petroleum products,
-------------------
radioactive materials, asbestos in any form that is friable, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous waste," "hazardous materials," "extremely
hazardous substances," "restricted hazardous waste," "toxic substances," "toxic
pollutants," "contaminants," or "pollutants," or words of similar import, under
any applicable Environmental Law; and (c) any other chemical, material or
substance, the Release of which is prohibited, limited or regulated by any
governmental authority.
"Indebtedness" of any Person means, (a) obligations created, issued or
------------
incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business; (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective indebtedness so secured
has been assumed by such Person; (d) obligations of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person; (e) Capital Lease Obligations
of such Person; and (f) any guarantee or other arrangement by which such Person
guarantees or is otherwise liable for the Indebtedness of others; provided,
--------
however, that "Indebtedness" shall not include Secured Nonrecourse Obligations.
- -------
"Indebtedness to be Refinanced" means all Indebtedness that is listed
-----------------------------
on Schedule VII.
"Indemnified Parties" means each Agent, the Lenders, their respective
-------------------
Affiliates, and the directors, officers, employees, attorneys and agents of each
of the foregoing.
9
<PAGE>
"Indemnified Taxes" means all Taxes other than Excluded Taxes.
-----------------
"Index Debt" means the senior, unsecured, long-term indebtedness for
----------
borrowed money of the Borrower that is not guaranteed by any other Person or
subject to any credit enhancement.
"Interest Election Request" means a request by the Borrower to convert
-------------------------
or continue a Borrowing in accordance with Section 2.05.
"Interest Payment Date" means (a) with respect to any ABR Loan, each
---------------------
Quarterly Date, and (b) with respect to any Eurodollar Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and, in
the case of a Eurodollar Borrowing with an Interest Period of more than three
months' duration, each day prior to the last day of such Interest Period that
occurs at intervals of three months' duration after the first day of such
Interest Period.
"Interest Period" means, with respect to any Eurodollar Borrowing, the
---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and, thereafter
shall be the effective date of the most recent conversion or continuation of
such Borrowing.
"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 stock or other securities of any other Person or by means of a
loan, advance creating a debt, capital contribution, guaranty or other debt or
equity participation or interest in any other Person, including any partnership
---------
and joint venture interests of such Person but excluding any Wholly-Owned
---------
Subsidiary of such Person. The amount of any Investment shall be the amount
actually invested (minus any return of capital with respect to such Investment
-----
which has actually been received in cash or has been converted into cash),
without adjustment for subsequent increases or decreases in the value of such
Investment.
"Law" shall mean any law (including common law), constitution,
---
statute, treaty, convention, regulation, rule, ordinance, order, injunction,
writ, decree or award of any Governmental Authority.
"Lenders" means the Persons listed on Schedule I and any other Person
-------
that shall have become a party hereto pursuant to an Assignment and Acceptance.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
---------
Interest Period, the average of the offered rates for Dollar deposits for the
applicable Interest Period
10
<PAGE>
which appear on the Telerate Page 3750, British Bankers Association Interest
Settlement Rates, with maturities comparable to the Interest Period to be
applicable to such Eurodollar Loan, determined as of 10:00 A.M. (Pittsburgh,
Pennsylvania time) on the date which is two Business Days prior to the
commencement of such Interest Period.
"Lien" means, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.
"Loan Documents" means this Agreement, each Borrowing Request, each
--------------
Interest Election Request, each Note and the Notice of Term Loan Conversion.
"Loans" means (a) 364-Day Revolving Loans, (b) 3-Year Revolving Loans,
-----
(c) Term Loans or (d) 364-Day Revolving Loans, 3-Year Revolving Loans and Term
Loans, as the context may require.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
Property, business, operations, financial condition, prospects, liabilities or
capitalization of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of the Borrower to perform its obligations hereunder, (c) the validity
or enforceability of this Agreement, (d) the rights and remedies of the Lenders
and the Administrative Agent hereunder or (e) the timely payment of the
principal of or interest on the Loans or other amounts payable in connection
therewith.
"Mergers" means the merger of (a) LAKE Merger Sub, Inc., a wholly-
-------
owned Subsidiary of Sierra Pacific Resources, with and into Sierra Pacific
Resources and (b) NPC with and into DESERT Merger Sub, Inc., a wholly-owned
Subsidiary of Sierra Pacific Resources, in each case pursuant to the Agreement
and Plan of Merger, dated as of April 29, 1998, among NPC, Sierra Pacific
Resources, DESERT Merger Sub, Inc. and LAKE Merger Sub, Inc.
"Moody's" means Moody's Investors Service, Inc.; provided that if such
-------
corporation (or its successors and assigns) shall for any reason 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 approved
for purposes hereof by the Required Lenders and the Borrower.
"Multiemployer Plan" means a multiemployer plan defined as such in
------------------
Section 3(37) of ERISA to which contributions have been made by the Borrower or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"NPC" means Nevada Power Co., a Nevada corporation.
---
"NPC Credit Agreement" means that certain Credit Agreement of even
--------------------
date herewith among NPC, as borrower, Mellon Bank, N.A., as administrative
agent, First Union National Bank and Wells Fargo Bank, N.A., as syndication
agents, and the lenders from time to time party thereto.
11
<PAGE>
"NPC First Mortgage Bonds" means obligations issued from time to time
------------------------
under, and secured by, the NPC First Mortgage Indenture.
"NPC First Mortgage Indenture" means the Indenture of Mortgage, dated
----------------------------
as of October 1, 1953, from NPC to Bankers Trust Company (successor to First
Interstate Bank of Nevada, N.A. formerly First National Bank of Nevada, Reno
Nevada), as trustee, as modified, amended or supplemented at any time or from
time to time by supplemental indentures.
"Note" means either a 364-Day Note or a 3-Year Note, as the context
----
may require, and "Notes" means 364-Day Notes and 3-Year Notes.
-----
"Notice of Term Loan Conversion" has the meaning assigned to such term
------------------------------
in Section 2.07(a).
"Obligations" means all Indebtedness, obligations and liabilities of
-----------
the Borrower to any Lender or any Agent from time to time arising under or in
connection with or related to or evidenced by or secured by this Agreement or
any other Loan Document, and all extensions, renewals or refinancings thereof,
whether such Indebtedness, obligations or liabilities are direct or indirect,
otherwise secured or unsecured, joint or several, absolute or contingent, due or
to become due, whether for payment or performance, now existing or hereafter
arising. Without limitation of the foregoing, such Indebtedness, obligations and
liabilities shall include the principal amount of all Loans, all interest, fees,
indemnities or expenses under or in connection with this Agreement or any other
Loan Document, and all extensions, renewals and refinancings thereof, whether or
not such Loans were made in compliance with the terms and conditions of this
Agreement or in excess of the obligation of the Lenders to lend. Obligations
shall remain obligations notwithstanding any assignment or transfer or any
subsequent assignment or transfer of any of the Obligations or any interest
therein.
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or Property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Parent" means any Person that Controls a Lender.
------
"Participant" has the meaning assigned to Section 9.12(b).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Liens" has the meaning assigned to such term in Section
---------------
6.02.
"Person" means any natural person, corporation, limited liability
------
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means an employee benefit or other plan established or
----
maintained by the Borrower or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
12
<PAGE>
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by Mellon Bank, N.A. as its prime rate, the Prime Rate to
change when and as such prime rate changes. The Prime Rate is a reference rate
and does not necessarily represent the lowest or best rate actually charged to
any customer. Mellon Bank, N.A. may make commercial loans or other loans at
rates of interest at, above or below the Prime Rate.
"Principal Office" means the principal office of Mellon Bank, N.A.,
----------------
located on the date hereof at One Mellon Bank Center, Pittsburgh, Pennsylvania
15258.
"Property" means any right or interest in or to property of any kind
--------
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Purchasing Lender" has the meaning assigned to Section 9.12(c).
-----------------
"Quarterly Dates" means the last day of March, June, September and
---------------
December in each year, the first of which shall be the first such day after the
date hereof; provided that if any such day is not a Business Day, then such
Quarterly Date shall be the next succeeding Business Day (unless such succeeding
Business Day falls in a subsequent calendar month, in which event such Quarterly
Date shall be the next preceding Business Day).
"Register" has the meaning assigned to Section 9.12(d).
--------
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Release" means the disposing, discharging, injecting, spilling,
-------
pumping, leaking, leaching, dumping, emitting, escaping, emptying, pouring or
migrating, into or upon any land or water or air, or otherwise entering into the
environment.
"Reportable Event" means an event described in Section 4043(c) of
----------------
ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.22, .23, .25, .27 or .28 of PBGC Regulation Section 4043 (provided that a
failure to meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA, including, without limitation, the failure to make on or
before its due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code).
"Required Lenders" means (a) so long as any Commitments remain in
----------------
effect, Lenders having Commitments representing 51% or more of the sum of the
total Commitments at such time, or (b) if all of the Commitments have
terminated, Lenders holding 51% or more of the aggregate principal amount of the
Loans outstanding at such time.
"Responsible Officer" means the Treasurer, the Assistant Treasurer,
-------------------
the Chief Financial Officer or the Controller.
13
<PAGE>
"Revolving Credit Exposure" means, with respect to any Lender at any
-------------------------
time, either such Lender's 364-Day Revolving Credit Exposure or such Lender's 3-
Year Revolving Credit Exposure, in each case, at such time.
"Revolving Loan" means either a 364-Day Revolving Loan or a 3-Year
--------------
Revolving Loan, as the context may require, and "Revolving Loans" means 364-Day
---------------
Revolving Loans and 3-Year Revolving Loans.
"Revolving Termination Date" means (i) in the case of the 364-Day
--------------------------
Facility, the 364-Day Revolving Termination Date and (ii) in the case of the 3-
Year Facility, the 3-Year Revolving Termination Date.
"Secured Nonrecourse Obligations" means and includes (a) secured
-------------------------------
obligations of the Borrower taken on a consolidated basis where recourse of the
payee of such obligations is expressly limited to an assigned lease or loan
receivable and the Property related thereto and (b) liabilities of the Borrower
taken on a consolidated basis to manufacturers of leased equipment where such
liabilities are payable solely out of revenues derived from the leasing or sale
of such equipment.
"Securities Issuance" has the meaning assigned to such term in Section
-------------------
2.06(d).
"Shareholders' Equity" means, as of any date of determination, the
--------------------
amount which is shown as "shareholders' equity" (which shall include both common
and preferred equity) in the consolidated balance sheet of the Borrower at such
date.
"Significant Subsidiary" has the meaning given to such term in
----------------------
Regulation S-X under the Securities Act of 1934, as amended.
"SPPC" means Sierra Pacific Power Company, a Nevada corporation.
----
"SPPC Credit Agreement" means that certain Credit Agreement of even
---------------------
date herewith among SPPC, as borrower, Mellon Bank, N.A., as administrative
agent, First Union National Bank and Wells Fargo Bank, N.A., as syndication
agents, and the lenders from time to time party thereto.
"SPPC First Mortgage Bonds" means obligations issued from time to time
-------------------------
under, and secured by, the SPPC First Mortgage Indenture.
"SPPC First Mortgage Indenture" means the Indenture of Mortgage, dated
-----------------------------
as of December 1, 1940, from SPPC to State Street Bank and Trust Company
(successor to The New England Trust Company), as trustee, and Gerald R. Wheeler
(successor to Leo W. Huegle), as co-Trustee, as modified, amended or
supplemented at any time or from time to time by supplemental indentures.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw
---
Hill Companies, Inc., and its successor and assigns; provided that if such
corporation (or its successors and assigns) shall for any reason no longer
perform the functions of a securities rating
14
<PAGE>
agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency approved for purposes hereof by the Required Lenders
and the Borrower.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
----------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such statutory reserve rates without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
----------
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person has more than a 50% equity interest at
the time.
"Substitute Lender" has the meaning assigned to such term in Section
-----------------
2.06(g).
"Syndication Agents" means First Union National Bank and Wells Fargo
------------------
Bank, N.A.
"Tangible Net Worth" shall mean Shareholders' Equity exclusive of any
------------------
value attributable to licenses, patents, patent applications, copyrights,
trademarks, trade names, goodwill, experimental or organizational expense and
other like intangibles, treasury stock and unamortized debt discount and
expense.
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Term Loan" has the meaning assigned to such term in Section 2.01(b).
---------
"Term Loan Conversion Date" means the date set forth in the Notice of
-------------------------
Term Loan Conversion; provided, however, that the Term Loan Conversion Date
-------- -------
shall not be a date that occurs later than the 364-Day Revolving Termination
Date.
"364-Day Availability" means, for any Lender as of any time, the 364-
--------------------
Day Commitment of such Lender less the 364-Day Revolving Credit Exposure of such
Lender, in each case, as of such time.
15
<PAGE>
"364-Day Availability Period" means the period from and including the
---------------------------
Effective Date to but excluding the earlier of the 364-Day Revolving Termination
Date and the date on which the 364-Day Commitments terminate.
"364-Day Commitment" means, with respect to each Lender, the
------------------
commitment of such Lender to make 364-Day Revolving Loans hereunder, expressed
as an amount representing the maximum aggregate amount of such Lender's 364-Day
Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from
time to time pursuant to Section 2.06 and (b) reduced or increased from time to
time pursuant to assignments by or to such Lender pursuant to Section 9.12. The
initial amount of each Lender's 364-Day Commitment is set forth on Schedule I
under the caption "364-Day Commitments" or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its 364-Day Commitment, as
applicable. The initial aggregate amount of the Lenders' 364-Day Commitments is
$150,000,000.
"364-Day Facility" means the several agreement of the Lenders
----------------
contained in Section 2.01(a) to make 364-Day Loans.
"364-Day Note" has the meaning assigned to such term in Section
------------
2.08(f).
"364-Day Revolving Credit Exposure" means, with respect to any Lender
---------------------------------
at any time, the aggregate outstanding principal amount of such Lender's 364-Day
Revolving Loans at such time.
"364-Day Revolving Loan" has the meaning assigned to such term in
----------------------
Section 2.01(a).
"364-Day Revolving Termination Date" means the date which is 364 days
----------------------------------
after the Effective Date, as such termination date may be extended from time to
time in accordance with Section 2.06(f).
"3-Year Availability" means, for any Lender as of any time, the 3-Year
-------------------
Commitment of such Lender less the 3-Year Revolving Credit Exposure of such
Lender, in each case, as of such time.
"3-Year Availability Period" means the period from and including the
--------------------------
Effective Date to but excluding the earlier of the 3-Year Revolving Termination
Date and the date on which the 3-Year Commitments terminate.
"3-Year Commitment" means, with respect to each Lender, the commitment
-----------------
of such Lender to make 3-Year Revolving Loans hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's 3-Year Revolving
Credit Exposure hereunder, as such commitment may be (a) reduced from time to
time pursuant to Section 2.06 and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 9.12. The
initial amount of each Lender's 3-Year Commitment is set forth on Schedule I
under the caption "3-Year Commitments" or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its 3-Year Commitment, as
applicable. The initial aggregate amount of the Lenders' 3-Year Commitments is
$350,000,000.
16
<PAGE>
"3-Year Facility" means the several agreement of the Lenders contained
---------------
in Section 2.01(c) to make 3-Year Loans.
"3-Year Note" has the meaning assigned to such term in Section
-----------
2.08(f).
"3-Year Revolving Credit Exposure" means, with respect to any Lender
--------------------------------
at any time, the aggregate outstanding principal amount of such Lender's 3-Year
Revolving Loans at such time.
"3-Year Revolving Loan" has the meaning assigned to such term in
---------------------
Section 2.01(c).
"3-Year Revolving Termination Date" means the date which is the three
---------------------------------
year anniversary of the Effective Date.
"Total Credit Exposure" means, at any time, (a) if the 364-Day
---------------------
Commitments have not terminated, the sum of (i) all 364-Day Availability, (ii)
all 364-Day Revolving Credit Exposures, (iii) all 3-Year Availability and (iv)
all 3-Year Revolving Credit Exposures, (b) if the 364-Day Commitments have
terminated and Term Loans are outstanding, the sum of (i) the unpaid balance of
all Term Loans, (ii) all 3-Year Availability and (iii) all 3-Year Revolving
Credit Exposures or (c) if the 364-Day Commitments have terminated and no Term
Loans are outstanding, the sum of (i) all 3-Year Availability and (ii) all 3-
Year Revolving Credit Exposures.
"Total Indebtedness" means, as of any date of determination, the sum
------------------
of all Indebtedness of the Borrower and its consolidated Subsidiaries as of such
date.
"Type", when used in reference to any Loan or Borrowing, refers to
----
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"Unfunded Current Liability" of any Plan means the amount, if any, by
--------------------------
which the value of the accumulated plan benefits under the Plan determined on a
plan termination basis in accordance with actuarial assumptions at such time
consistent with those prescribed by the PBGC for purposes of Section 4044 of
ERISA, exceeds the fair market value of all plan assets allocable to such
liabilities under Title IV of ERISA (excluding any accrued but unpaid
contributions).
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
-----------------------
corporation 100% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person and/or one
or more Subsidiaries of such Person and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person has a 100% equity interest at the time.
"Year 2000 Compliant" has the meaning assigned to such term in Section
-------------------
3.21.
17
<PAGE>
"Year 2000 Plan" has the meaning assigned to such term in Section
--------------
3.21.
SECTION 1.02. Classification of Loans and Borrowings.
---------------------------------------
For purposes of this Agreement, Loans may be classified and referred
to by Class (e.g., a Revolving Loan or a Term Loan) or by Type (e.g., a
Eurodollar Loan or an ABR Loan) or by Class and Type (e.g., a Eurodollar
Revolving Loan). Borrowings also may be classified and referred to by Class
(e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or
by Class and Type (e.g., a "Eurodollar Revolving Borrowing").
SECTION 1.03 Terms Generally.
---------------
The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation". The word "will" shall be construed to have
the same meaning and effect as the word "shall". Unless the context requires
otherwise (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (b) any reference herein to any Person shall
be construed to include such Person's successors and assigns, (c) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof and (d) all references herein to Articles, Sections, Exhibits
and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement.
SECTION 1.04 Accounting Terms; GAAP.
----------------------
Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time.
ARTICLE II
THE CREDITS
SECTION 2.01 The Commitments.
---------------
(a) Subject to the terms and conditions set forth herein, each Lender
agrees to make loans (each such loan, a "364-Day Revolving Loan") to the
----------------------
Borrower from time to time on any Business Day during the 364-Day Availability
Period in an aggregate principal amount that will not result in (i) such
Lender's 364-Day Revolving Credit Exposure (after giving effect to such 364-Day
Revolving Loans) exceeding such Lender's 364-Day Commitment or (ii) the sum of
the 364-Day Revolving Credit Exposures of all Lenders exceeding the total 364-
Day Commitments. Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, prepay and reborrow 364-
Day Revolving Loans.
(b) Subject to the terms and conditions set forth herein, each Lender
agrees, so long as no Default or Event of Default has occurred and is
continuing, to consolidate on the
18
<PAGE>
Term Loan Conversion Date all of such Lender's 364-Day Revolving Loans that are
outstanding on the Term Loan Conversion Date (after giving effect to any payment
or prepayment of such 364-Day Revolving Loans made by the Borrower on such date)
into a single loan (each such loan, a "Term Loan") in an amount not to exceed
---------
the aggregate principal amount of such 364-Day Revolving Loans. 364-Day
Revolving Loans that are consolidated into a Term Loan shall be deemed paid.
Term Loans which are repaid or prepaid may not be reborrowed.
(c) Subject to the terms and conditions set forth herein, each Lender
agrees to make loans (each such loan, a "3-Year Revolving Loan") to the Borrower
---------------------
from time to time on any Business Day during the 3-Year Availability Period in
an aggregate principal amount that will not result in (i) such Lender's 3-Year
Revolving Credit Exposure (after giving effect to such 3-Year Revolving Loans)
exceeding such Lender's 3-Year Commitment or (ii) the sum of the 3-Year
Revolving Credit Exposures of all Lenders exceeding the total 3-Year
Commitments. Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, prepay and reborrow 3-Year
Revolving Loans.
SECTION 2.02 Loans and Borrowings.
--------------------
(a) Obligations of Lenders. Each Revolving Loan shall be made as part
----------------------
of a Borrowing consisting of Loans of the same Type under the same Facility made
by the Lenders ratably in accordance with their respective Commitments for that
Facility. Each Term Loan shall be made in accordance with the procedures set
forth in Section 2.07. The failure of any Lender to make any Loan required to be
made by it shall not relieve any other Lender of its obligations hereunder. The
Commitments of the Lenders are several and no Lender shall be responsible for
any other Lender's failure to make Loans as required.
(b) Type of Loans. Subject to Section 2.12, each Borrowing shall be
-------------
comprised entirely of ABR Loans or Eurodollar Loans. Each Lender may, at its
option, make any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement.
(c) Minimum Amounts; Limitation on Number of Borrowings. Each
---------------------------------------------------
Revolving Borrowing (whether an ABR Borrowing or a Eurodollar Borrowing) shall
be in an aggregate amount equal to $5,000,000 or a multiple of $1,000,000 in
excess thereof, provided that an ABR Borrowing may be made in an aggregate
amount that is equal to the entire unused balance of the total Commitments of a
Facility. The Borrower may thereafter, upon irrevocable notice to the
Administrative Agent in accordance with Section 2.05(b), (i) elect, as of any
Business Day, in the case of ABR Loans of a Facility, to convert any such ABR
Loans or any part thereof, in an aggregate amount equal to $5,000,000 or a
multiple of $1,000,000 in excess thereof, into Eurodollar Loans, and (ii) elect,
as of the last day of the applicable Interest Period, to continue any Eurodollar
Loans of a Facility having Interest Periods expiring on such day or any part
thereof in an aggregate amount of $5,000,000 or a multiple of $1,000,000 in
excess thereof; provided that, if at any time the aggregate amount of Eurodollar
Loans of a Facility in respect of any Borrowing is reduced by payment,
prepayment or conversion of part thereof to be less than $5,000,000, such
Eurodollar Loans shall automatically convert into ABR Loans. Borrowings of more
than one Type may be outstanding at the same time; provided that there
19
<PAGE>
shall not at any time be more than a total of (x) five Eurodollar Borrowings
outstanding under the 364-Day Facility and (y) five Eurodollar Borrowings
outstanding under the 3-Year Facility.
(d) Maximum Duration of Interest Periods. Notwithstanding any other
------------------------------------
provision of this Agreement, until the Term Loan Conversion Date shall have
occurred, the Borrower shall not be entitled to request, or to elect to convert
or continue, any Eurodollar Borrowing under the 364-Day Facility if the Interest
Period requested with respect thereto would end after the 364-Day Revolving
Termination Date. From and after the Term Loan Conversion Date (if any), the
Borrower shall not be entitled to elect to convert or continue any Borrowing if
the Interest Period requested with respect thereto would end after the Final
Repayment Date. Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Eurodollar Borrowing under the 3-Year Facility if the Interest Period
requested with respect thereto would end after the 3-Year Revolving Termination
Date.
SECTION 2.03 Requests for Revolving Borrowings.
---------------------------------
To request a Revolving Borrowing under a Facility, the Borrower shall
notify the Administrative Agent of such request by telephone (a) in the case of
a Eurodollar Revolving Borrowing, not later than 12:00 noon., Pittsburgh,
Pennsylvania time, three Business Days before the date of the proposed
Borrowing, or (b) in the case of an ABR Borrowing, not later than 12:00 noon,
Pittsburgh, Pennsylvania time, one Business Day before the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and
shall be confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Borrowing Request in the form attached hereto as Exhibit B
and signed by the Borrower. Each such telephonic and written Borrowing Request
shall specify the following information in compliance with Section 2.02:
(i) the Facility pursuant to which such Borrowing is to be
made;
(ii) the aggregate amount of the requested Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(v) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(vi) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.04.
If no election as to the Type of Revolving Borrowing is specified,
then the requested Revolving Borrowing shall be an ABR Borrowing. If no
Interest Period is specified with respect to any Eurodollar Revolving Borrowing,
then the Borrower shall be deemed to have selected an Interest Period of one
month's duration. Promptly following receipt of a Borrowing
20
<PAGE>
Request in accordance with this Section, the Administrative Agent shall advise
each Lender of the details thereof and of the amount of such Lender's Loan to be
made as part of the requested Borrowing.
SECTION 2.04 Funding of Borrowings.
---------------------
(a) Funding by Lenders. No later than 12:00 noon, Pittsburgh,
------------------
Pennsylvania time, on the date specified in each Borrowing Request, each Lender
will make available its Applicable Percentage of each Revolving Borrowing
requested to be made on such date, in Dollars and in immediately available funds
at the account of the Administrative Agent most recently designated by it for
such purpose by notice to the Lenders. The Administrative Agent will make such
Loans available to the Borrower by promptly crediting the amounts so received,
in like funds, to an account of the Borrower maintained with Mellon Bank, N.A.
at the Principal Office and designated by the Borrower in the applicable
Borrowing Request.
(b) Presumption by the Administrative Agent. Unless the
---------------------------------------
Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the
Administrative Agent such Lender's share of such Borrowing, the Administrative
Agent may assume that such Lender has made such share available on such date in
accordance with paragraph (a) of this Section and may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. In such
event, if a Lender has not in fact made its share of the applicable Borrowing
available to the Administrative Agent, then the applicable Lender and the
Borrower severally agree to pay to the Administrative Agent forthwith on demand
such corresponding amount with interest thereon, for each day from and including
the date such amount is made available to the Borrower to but excluding the date
of payment to the Administrative Agent, at (i) in the case of such Lender, the
Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest
rate applicable to the Loans of such Borrowing. If such Lender pays such amount
to the Administrative Agent, then such amount shall constitute such Lender's
Loan included in such Borrowing.
SECTION 2.05 Interest Elections.
------------------
(a) Elections by the Borrower for Borrowings. Each Borrowing
----------------------------------------
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Borrowing, shall have an initial Interest
Period as specified in such Borrowing Request. Thereafter, the Borrower may
elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods
therefor, all as provided in this Section but subject to Section 2.02. Once
Loans have been made pursuant to a Borrowing, the Borrower may elect to convert
or continue different portions of such Borrowing, in which case each such
portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing.
(b) Notice of Elections. To make an election pursuant to this
-------------------
Section, the Borrower shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section
2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting
from such election to be made on the effective date
21
<PAGE>
of such election. Each such telephonic Interest Election Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Interest Election Request in a form approved
by the Administrative Agent and signed by the Borrower.
(c) Information in Interest Election Requests. Each telephonic and
-----------------------------------------
written Interest Election Request shall specify the following information in
compliance with Section 2.02:
(i) the Borrowing and Facility to which such Interest Election
Request applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to each
resulting Borrowing (in which case the information to be specified pursuant
to clauses (iii) and (iv) of this paragraph shall be specified for each
resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing,
or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing
but does not specify an Interest Period, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration.
(d) Notice by the Administrative Agent to Lenders. Promptly following
---------------------------------------------
receipt of an Interest Election Request, the Administrative Agent shall advise
each Lender of the details thereof and of such Lender's portion of each
resulting Borrowing.
(e) Failure to Elect; Events of Default. If the Borrower fails to
-----------------------------------
deliver a timely Interest Election Request with respect to a Eurodollar
Borrowing prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such Interest
Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding
any contrary provision hereof, if an Event of Default has occurred and is
continuing and the Administrative Agent, at the request of the Required Lenders,
so notifies the Borrower, then, so long as an Event of Default is continuing (i)
no outstanding Borrowing may be converted to or continued as a Eurodollar
Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted
to an ABR Borrowing at the end of the Interest Period applicable thereto.
22
<PAGE>
SECTION 2.06 Termination, Reduction and Extension of Commitments.
---------------------------------------------------
(a) Scheduled Termination. Unless previously terminated, the 364-Day
---------------------
Commitments shall terminate on the 364-Day Revolving Termination Date. Unless
previously terminated, the 3-Year Commitments shall terminate on the 3-Year
Revolving Termination Date.
(b) Voluntary Termination or Reduction. The Borrower may at any time
----------------------------------
prior to the Revolving Termination Date of a Facility terminate, or from time to
time reduce, the Commitments under that Facility; provided that (i) each
reduction of the Commitments shall be in an amount that is $10,000,000 or a
multiple of $5,000,000 in excess thereof and (ii) the Borrower shall not
terminate or reduce the Commitments of a Facility if, after giving effect to any
concurrent prepayment of the Loans under that Facility in accordance with
Section 2.09, the sum of the total Revolving Credit Exposures under a Facility
would exceed the total Commitments of that Facility.
(c) Notice of Voluntary Termination or Reduction. The Borrower shall
--------------------------------------------
notify the Administrative Agent of any election to terminate or reduce the
Commitments under a Facility in accordance with paragraph (b) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any such notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this subsection shall be irrevocable; provided that a notice of termination
of the Commitments of a Facility delivered by the Borrower may state that such
notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied.
(d) Mandatory Reduction. So long as the Total Credit Exposure exceeds
-------------------
$300,000,000 at any time, the 3-Year Commitments shall be permanently reduced
until the Total Credit Exposure (after giving effect to any prepayment of 3-Year
Revolving Loans required by Section 2.09(c)) is less than or equal to
$300,000,000 at such time, by the net proceeds received by the Borrower at such
time from the issuance of securities (whether debt, equity or some variation or
combination thereof) of the Borrower or, if the Borrower is primarily
responsible for the payment thereof, any other Person (a "Securities Issuance").
-------------------
The Borrower shall, where possible, notify the Administrative Agent of any
Securities Issuance that will trigger a reduction of 3-Year Commitments at least
three Business Days prior to the effective date of such reduction, specifying
the expected effective date thereof. Promptly following receipt of any such
notice, the Administrative Agent shall advise the Lenders of the contents
thereof.
(e) Effect of Termination or Reduction. Any termination or reduction
----------------------------------
of the Commitments of a Facility shall be permanent. Each reduction of the
Commitments of a Facility shall be made ratably among the Lenders under that
Facility in accordance with their Applicable Percentages.
23
<PAGE>
(f) Extension of 364-Day Commitments.
--------------------------------
(i) Not earlier than the date which is 60 days (but not later
than 30 days) prior to the then existing 364-Day Revolving Termination Date (the
"Extension Request Notice Date"), the Borrower may deliver to the Administrative
- ------------------------------
Agent (which shall promptly transmit the same to each Lender) a notice (an
"Extension Request") requesting that the 364-Day Revolving Termination Date be
-----------------
extended for an additional 364 days commencing on the then existing 364-Day
Revolving Termination Date. Not earlier than the date which is 30 days (but not
later than 20 days) prior to the then existing 364-Day Revolving Termination
Date (the period from the Extension Request Notice Date to such date, the
"Extension Request Period"), each Lender (in its sole and absolute discretion
------------------------
and after conducting an internal credit review of the Borrower) shall notify the
Administrative Agent of such Lender's willingness or unwillingness to so extend
the 364-Day Revolving Termination Date. Any Lender which shall fail to so
notify the Administrative Agent within such period shall be deemed to have
declined to extend the 364-Day Revolving Termination Date. If Lenders having
364-Day Commitments totaling an amount equal to at least 51% of the aggregate
amount of the 364-Day Commitments then in effect agree to such extension by
notice to the Administrative Agent, then (A) subject to clause (iii) below, the
364-Day Revolving Termination Date shall be extended for an additional 364 days
with respect to the 364-Day Commitments of the Lenders so agreeing, and (B)
subject to Section 2.06(g) hereof, the 364-Day Commitment of each Lender not so
agreeing shall expire on the then expiring 364-Day Revolving Termination Date
and the Borrower shall pay or prepay on such day without premium or penalty all
principal of such Lender's 364-Day Revolving Loans together with accrued
interest thereon and all accrued facility and usage fees and other amounts
payable to such Lender hereunder (including, without limitation, amounts payable
pursuant to Section 2.14 hereof as a result of such payment or prepayment);
provided, however, that
- -------- -------
(x) if Lenders having 364-Day Commitments totaling an amount
equal to at least 51% of the aggregate amount of the 364-Day
Commitments then in effect do not agree as contemplated by Section
2.06(f)(i), then the 364-Day Revolving Termination Date shall not be
extended pursuant to this Section 2.06(f) and the 364-Day Commitments
of all of the Lenders shall remain in effect until the 364-Day
Revolving Termination Date except as otherwise provided in this
Agreement; and
(y) the Borrower may not request any extension of the 364-Day
Revolving Termination Date pursuant to this Section 2.06(f)(i) more
frequently than once in any calendar year.
(ii) Any 364-Day Revolving Loan by any Lender the 364-Day
Commitment of which is to terminate pursuant to Section 2.06(f)(i) hereof
that would otherwise be made or converted by such Lender as a Eurodollar
Loan having an Interest Period ending after the date such 364-Day
Commitment is to terminate shall be made or continued as an ABR Loan and
all ABR Loans of such Lender that would otherwise be converted into
Eurodollar Loans having such Interest Periods shall remain as ABR Loans.
24
<PAGE>
(iii) It shall be a condition precedent to any extension of the
364-Day Revolving Termination Date that: (a) on the date of such extension
no Default or Event of Default shall have occurred and be continuing; (b)
the representations and warranties made by the Borrower in Article III
shall be true and complete on and as of the date of such extension (or if
any such representation or warranty is expressly stated to have been made
as of a specific date, as of such specific date); and (c) except for the
Mergers, on the date of such extension there shall have been no material
adverse change in the consolidated financial condition, operations,
business or prospects taken as a whole of the Borrower and its Subsidiaries
from that set forth in its financial statements as of December 31, 1998
referred to in Section 3.06 hereof or, if the Borrower has delivered its
financial statements for any fiscal year to the Lenders and the
Administrative Agent pursuant to Section 5.01(a) hereof, as of the date of
the most recent such financial statements. Each request for an extension of
the 364-Day Revolving Termination Date pursuant to Section 2.06(f) shall
constitute a certification by the Borrower to the effect set forth in the
preceding sentence (both as of the date of such request and, unless the
Borrower notifies the Administrative Agent prior to the date of such
extension, as of the date of such extension).
(g) Substitute Lenders. In the event any Lender does not agree to any
------------------
extension by the date provided pursuant to Section 2.06(f) hereof, then, unless
a Default or an Event of Default shall have occurred and be continuing, the
Borrower may, not later than 10 days following the expiration of the Extension
Request Period, designate one or more other banks (each such bank being herein
called a "Substitute Lender"), which may include any of the Lenders, acceptable
-----------------
to the Administrative Agent (which acceptance will not be unreasonably
withheld), to assume such non-consenting Lender's 364-Day Commitment hereunder
and to purchase, on or before the date such Lender's 364-Day Revolving Loans
would otherwise be required to be paid or prepaid hereunder, the 364-Day
Revolving Loans and 364-Day Notes of such Lender and such Lender's rights
hereunder in respect thereof, without recourse to or representation or warranty
by, or expense to, such Lender. In such event, the purchase price shall be
equal to the outstanding principal amount of the 364-Day Revolving Loans and
364-Day Notes payable to such Lender plus any accrued but unpaid interest on
such Loans and Notes and accrued but unpaid facility and usage fees in respect
of such Lender's 364-Day Commitment. Upon such assumption and purchase and the
receipt by such Lender of any other amounts payable to it by the Borrower under
this Agreement, and subject to the execution and delivery to the Administrative
Agent and such Lender by the Substitute Lender of documentation reasonably
satisfactory to the Administrative Agent and such Lender pursuant to which such
Substitute Lender shall assume the obligations of such original Lender under
this Agreement in respect of its 364-Day Revolving Loans, 364-Day Notes and 364-
Day Commitment and agree to become a "Lender" hereunder (if not already a
Lender) to the extent of the Commitments, Loans and Notes assumed and purchased,
the Substitute Lender shall succeed to the rights, obligations and benefits of
such Lender hereunder in such respect (except for such rights, obligations and
benefits of the Lender as have accrued (other than principal, accrued interest
or facility and usage fees ) or are required to be performed by it on or prior
to the date of such assumption and purchase) (and such Lender shall be released
from its 364-Day Commitment except for any liability arising or relating to any
event occurring prior to the date of such assumption and purchase) and the
Substitute Lender shall be deemed to have agreed to the relevant extension of
the 364-Day Revolving Termination Date and, anything in Section 2.06(f) to the
contrary
25
<PAGE>
notwithstanding, whether such extension is effective shall be determined
accordingly; provided that following any such assumption and purchase the 364-
Day Commitment of each Substitute Lender (including any 364-Day Commitment
theretofore held by it) shall be not less than $10,000,000.
SECTION 2.07 Term Loan Conversion Option.
----------------------------
(a) In the event the Borrower desires to have all of its 364-Day
Revolving Loans consolidated into Term Loans, the Borrower shall deliver written
notice thereof (the "Notice of Term Loan Conversion") to the Administrative
------------------------------
Agent at least 10 days prior to the Term Loan Conversion Date. Once delivered,
the Notice of Term Loan Conversion shall be irrevocable.
(b) The Notice of Term Loan Conversion shall specify:
(i) the Term Loan Conversion Date, which shall be a date (A) no
sooner than 5 days after the date on which the Notice of Term Loan
Conversion is delivered to the Administrative Agent, (B) no later than the
364-Day Revolving Termination Date and (C) that is a Business Day;
(ii) the principal amount of 364-Day Revolving Loans that are to
be consolidated into Term Loans on the Term Loan Conversion Date, which
amount shall be the aggregate principal amount of all 364-Day Revolving
Loans that will be outstanding on the Term Loan Conversion Date after
giving effect to all payments or prepayments to be made prior to such date;
(iii) whether the Term Loans are to be ABR Loans or Eurodollar
Loans on the Term Loan Conversion Date; and
(iv) if the Terms Loans are to be Eurodollar Loans on the Term
Loan Conversion Date, the duration of the Interest Period applicable
thereto, provided that if the Notice of Term Loan Conversion fails to
specify the duration of the Interest Period for any Borrowing comprised of
Eurodollar Loans, such Interest Period shall be three months.
(c) The Administrative Agent will promptly notify each Lender of its
receipt of the Notice of Term Loan Conversion from the Borrower and of the
contents of such notice.
(d) If the Borrower requests that Term Loans be made available on the
Term Loan Conversion Date, each Lender shall, on the Term Loan Conversion Date,
be deemed to have made available to the Borrower its Applicable Percentage of
the Term Loans requested and the Borrower shall be deemed to have applied the
full amount of such proceeds to the repayment of the 364-Day Revolving Loans
previously made by such Lender to such Borrower.
(e) Unless all the Lenders otherwise consent, (i) the Borrower may
not deliver any Notice of Term Loan Conversion so long as any Default or Event
of Default has occurred and is continuing and (ii) no consolidation of 364-Day
Revolving Loans into Term Loans pursuant to any validly given Notice of Term
Loan Conversion shall be permitted if on the Term
26
<PAGE>
Loan Conversion Date specified a Default or an Event of Default shall have
occurred and is continuing.
SECTION 2.08 Repayment of Loans; Evidence of Debt.
------------------------------------
(a) Repayment. The Borrower hereby unconditionally promises to pay to
---------
the Administrative Agent for account of the Lenders (i) the outstanding
principal amount of the 364-Day Revolving Loans on the 364-Day Revolving
Termination Date, unless the Borrower elects to consolidate all of such 364-Day
Revolving Loans into Term Loans on or before such date; (ii) the outstanding
principal amount of all Term Loans made to the Borrower on the Final Repayment
Date and (iii) the outstanding principal amount of the 3-Year Revolving Loans on
the 3-Year Revolving Termination Date.
(b) Manner of Payment. Prior to any repayment or prepayment of any
-----------------
Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to
be paid and shall notify the Administrative Agent by telephone (confirmed by
telecopy) of such selection not later than 12:00 noon, Pittsburgh, Pennsylvania
time, three Business Days before the scheduled date of such repayment or
prepayment; provided that each repayment or prepayment of Borrowings shall be
applied to repay or prepay any outstanding ABR Borrowings before any other
Borrowings. If the Borrower fails to make a timely selection of the Borrowing or
Borrowings to be repaid or prepaid, such payment shall be applied, first, to pay
any outstanding ABR Borrowings and, second, to other Borrowings in the order of
the remaining duration of their respective Interest Periods (the Borrowing with
the shortest remaining Interest Period to be repaid first). Each payment of a
Revolving Borrowing shall be applied ratably to the Loans included in such
Borrowing.
(c) Maintenance of Loan Accounts by Lenders. Each Lender shall
---------------------------------------
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Borrower to such Lender resulting from each Loan made by
such Lender, including the amounts of principal and interest payable and paid to
such Lender from time to time hereunder.
(d) Maintenance of Loan Accounts by the Administrative Agent. The
--------------------------------------------------------
Administrative Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, the Facility pursuant to which such Loan was
made, the Class and Type thereof and the Interest Period applicable thereto,
(ii) the amount of any principal or interest due and payable or to become due
and payable from the Borrower to each Lender hereunder and (iii) the amount of
any sum received by the Administrative Agent hereunder for the account of the
Lenders and each Lender's share thereof.
(e) Effect of Entries. The entries made in the accounts maintained
------------------
pursuant to paragraph (c) and (d) of this Section shall be prima facie evidence
of the existence and amounts of the obligations recorded therein; provided that
the failure of any Lender or the Administrative Agent to maintain such accounts
or any error therein shall not in any manner affect the obligation of the
Borrower to repay the Loans in accordance with the terms of this Agreement.
(f) Notes. Any Lender may request that 364-Day Revolving Loans and
-----
Term Loan made by it be evidenced by a promissory note (each a "364-Day Note")
------------
in substantially the
27
<PAGE>
form of Exhibit C-1. In such event, the Borrower shall prepare, execute and
deliver to such Lender a 364-Day Note payable to the order of such Lender (or,
if requested by such Lender, to such Lender and its registered assigns) and in
the form of Exhibit C-1. Thereafter, the 364-Day Revolving Loans and Term Loans
evidenced by such 364-Day Note and interest thereon shall at all times
(including after assignment pursuant to Section 9.12) be represented by one or
more 364-Day Notes in such form payable to the order of the payee named therein
(or, if such 364-Day Note is a registered note, to such payee and its registered
assigns). Any Lender may request that 3-Year Revolving Loans made by it be
evidenced by a promissory note (each a "3-Year Note") in substantially the form
-----------
of Exhibit C-2. In such event, the Borrower shall prepare, execute and deliver
to such Lender a 3-Year Note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in the
form of Exhibit C-2. Thereafter, the 3-Year Revolving Loans evidenced by such 3-
Year Note and interest thereon shall at all times (including after assignment
pursuant to Section 9.12) be represented by one or more 3-Year Notes in such
form payable to the order of the payee named therein (or, if such 3-Year Note is
a registered note, to such payee and its registered assigns)
SECTION 2.09 Prepayment of Loans.
-------------------
(a) Optional Prepayments Right to Prepay Borrowings. The Borrower
-----------------------------------------------
shall have the right at any time and from time to time to prepay any Borrowing
in whole or in part, subject to the requirements of this Section.
(b) Notices, Etc. The Borrower shall notify the Administrative Agent
-------------
by telephone (confirmed by telecopy) of any optional prepayment hereunder (i) in
the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon,
Pittsburgh, Pennsylvania time, three Business Days before the date of
prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
than 12:00 noon, Pittsburgh, Pennsylvania time, one Business Day before the date
of prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid; provided that, if a notice of prepayment is given in connection with
a conditional notice of termination of the Commitments as contemplated by
Section 2.06(c), then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.06(d). Promptly following
receipt of any such notice relating to a Borrowing, the Administrative Agent
shall advise the Lenders of the contents thereof. Each partial prepayment of any
Borrowing shall be in an aggregate principal amount equal to $5,000,000 or a
multiple of $1,000,000 in excess thereof, provided that if any prepayment of
Eurodollar Loans made pursuant to a single Borrowing shall reduce the
outstanding 364-Day Revolving Loans made pursuant to such Borrowing to an amount
less than $5,000,000, such outstanding Loans shall immediately be converted into
ABR Loans. Each prepayment of a Borrowing shall be applied ratably to the Loans
included in the prepaid Borrowing. Prepayments shall be accompanied by accrued
interest to the extent required by Section 2.11 and shall be made in the manner
specified in this Section 2.09(b).
(c) Mandatory Prepayments. If at any time, the sum of the 364-Day
---------------------
Revolving Credit Exposures exceeds the sum of the 364-Day Commitments, the
Borrower shall prepay 364-Day Revolving Loans by the amount of such excess. If
at any time, the sum of the 3-Year Revolving Credit Exposures exceeds the sum of
the 3-Year Commitments, the Borrower shall prepay 3-Year Revolving Loans by the
amount of such excess. If at the time of any
28
<PAGE>
Securities Issuance the Total Credit Exposure exceeds $300,000,000, the Borrower
shall apply the net proceeds of such Securities Issuance to prepay 3-Year
Revolving Loans until such time as the Total Credit Exposure is reduced to
$300,000,000. With respect to each prepayment of Loans required by this Section
2.09(c), the Borrower may designate the Types of 3-Year Revolving Loans which
are to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing
or Borrowings pursuant to which such Eurodollar Loans were made, provided that:
(i) if any prepayment of Eurodollar Loans made pursuant to a single Borrowing
shall reduce the outstanding 3-Year Revolving Loans made pursuant to such
Borrowing to an amount less than $5,000,000, such outstanding Loans shall
immediately be converted into ABR Loans; and (ii) each prepayment of any 3-Year
Revolving Loans made pursuant to a Borrowing shall be applied pro rata among
--- ----
such Loans. In the absence of a designation by the Borrower as described in the
preceding sentence, the Administrative Agent shall, subject to the above, make
such designation in its sole discretion.
SECTION 2.10 Fees.
----
(a) Facility Fee. The Borrower shall pay the Administrative Agent for
------------
the account of each Lender a facility fee for the period from and including the
Effective Date to but excluding the later of (i) the 364-Day Revolving
Termination Date and (ii) the 3-Year Revolving Termination Date (or such earlier
date on which the total Commitments shall have been terminated) (the "Final Fee
---------
Payment Date") computed at a rate per annum equal to the Applicable Rate on each
- ------------
Lender's daily average Commitment, such fee to be paid quarterly in arrears on
each Quarterly Date and on the Final Fee Payment Date. The facility fee shall
be calculated on the basis of the actual number of days elapsed in a year of 360
days.
(b) Usage Fee. The Borrower shall pay the Administrative Agent for
---------
the account of each Lender a usage fee for each day during the period from and
including the date hereof to but excluding the Final Fee Payment Date on which
the aggregate principal amount of the then outstanding Revolving Loans exceeds
33% or 66%, as the case may be, of the total Commitments hereunder computed at a
rate per annum equal to the Applicable Rate for such percentage of usage on the
daily average aggregate principal amount of the Revolving Loans then
outstanding, such fee to be paid quarterly in arrears on each Quarterly Date and
on the Final Fee Payment Date. The usage fee shall be calculated on the basis
of the actual number of days elapsed in a year of 360 days.
(c) Payment of Fees. All fees payable hereunder shall be paid on the
---------------
dates due, in immediately available funds, to the Administrative Agent for
distribution, in the case of facility and usage fees, to the Lenders entitled
thereto.
SECTION 2.11 Interest.
--------
(a) ABR Loans. The Loans comprising each ABR Revolving Borrowing
---------
shall bear interest at a rate per annum equal to the Alternate Base Rate.
(b) Eurodollar Loans. The Loans comprising each Eurodollar Borrowing
----------------
shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the
Interest Period in effect for such Borrowing plus the Applicable Rate.
29
<PAGE>
(c) Default Interest. Notwithstanding the foregoing, if any principal
----------------
of or interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided above
or (ii) in the case of any other amount, 2% plus the rate applicable to ABR
Loans as provided in paragraph (a) of this Section.
(d) Payment of Interest. Accrued interest on each Loan shall be
-------------------
payable in arrears on each Interest Payment Date for such Loan and (i) in the
case of Revolving Loans of a Facility, upon termination of the Commitments under
that Facility and (ii) in the case of Term Loans, on the Final Repayment Date;
provided that (x) interest accrued pursuant to paragraph (c) of this Section
shall be payable on demand, (y) in the event of any repayment or prepayment of
any Loan (other than a prepayment of an ABR Revolving Loan prior to the 364-Day
Revolving Termination Date or 3-Year Revolving Terminate Date, as the case may
be), accrued interest on the principal amount repaid or prepaid shall be payable
on the date of such repayment or prepayment and (z) in the event of any
conversion of any Eurodollar Borrowing prior to the end of the current Interest
Period therefor, accrued interest on such Borrowing shall be payable on the
effective date of such conversion.
(e) Computation. All interest hereunder shall be computed on the
-----------
basis of a year of 360 days, except that interest computed by reference to the
Alternate Base Rate at times when the Alternate Base Rate is based on the Prime
Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable Alternate
Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive, absent
manifest error.
SECTION 2.12 Alternate Rate of Interest. If prior to the
--------------------------
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive, absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (or Lender) of
making or maintaining their Loans (or its Loan) included in such Borrowing for
such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing,
such Borrowing shall be made as an ABR Revolving Borrowing.
30
<PAGE>
SECTION 2.13 Increased Costs.
---------------
(a) Increased Costs Generally. If any Change in Law shall:
-------------------------
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender or its Parent (except any
such reserve requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender or its Parent or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans
made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender or its Parent of making or maintaining any Eurodollar Loan (or of
maintaining its obligation to make any such Loan) or to reduce the amount of any
sum received or receivable by such Lender hereunder (whether of principal,
interest or otherwise), then the Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender or its Parent, as
the case may be, for such additional costs incurred or reduction suffered.
(b) Capital Requirements. If any Lender determines that any Change in
--------------------
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's capital or on the capital of its Parent as a
consequence of this Agreement or the Loans made by such Lender to a level below
that which such Lender or its Parent could have achieved but for such Change in
Law (taking into consideration such Lender's policies and the policies of its
Parent with respect to capital adequacy), then from time to time the Borrower
will pay to such Lender such additional amount or amounts as will compensate
such Lender or its Parent for any such reduction suffered.
(c) Certificates from Lenders. A certificate of a Lender setting
-------------------------
forth the amount or amounts necessary to compensate such Lender or its Parent,
as the case may be, as specified in paragraph (a) or (b) of this Section shall
be delivered to the Borrower and shall be conclusive, absent manifest error.
The Borrower shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender to
-----------------
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's right to demand such compensation.
SECTION 2.14 Break Funding Payments. In the event of (a) the payment
----------------------
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of Eurodollar Loan other than on the last day of
the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Revolving Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice is permitted to be
revocable under Section 2.09(b) and is revoked in accordance herewith), or (d)
the assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.17, then, in any such event, the Borrower shall compensate each Lender
for the loss, cost and expense attributable to such event. In the case of a
Eurodollar Loan, the loss to
31
<PAGE>
any Lender attributable to any such event shall be deemed to include an amount
determined by such Lender to be equal to the excess, if any, of (i) the amount
of interest that such Lender would pay for a deposit equal to the principal
amount of such Loan for the period from the date of such payment, conversion,
failure or assignment to the last day of the then current Interest Period for
such Loan (or, in the case of a failure to borrow, convert or continue, the
duration of the Interest Period that would have resulted from such borrowing,
conversion or continuation) if the interest rate payable on such deposit were
equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount
of interest that such Lender would earn on such principal amount for such period
if such Lender were to invest such principal amount for such period at the
interest rate that would be bid by such Lender (or an Affiliate of such Lender)
for dollar deposits from other banks in the eurodollar market at the
commencement of such period. A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive, absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
SECTION 2.15 Taxes.
-----
(a) Payments Free of Taxes. Any and all payments by or on account of
----------------------
any obligation of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Arranger,
Syndication Agent or Lender (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
Law.
(b) Payment of Other Taxes by the Borrower. In addition, the Borrower
--------------------------------------
shall pay any Other Taxes to the relevant Governmental Authority in accordance
with applicable Law.
(c) Indemnification by the Borrower. The Borrower shall indemnify the
-------------------------------
Administrative Agent, the Arranger, each Syndication Agent and each Lender,
within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
paid by the Administrative Agent, Arranger, such Syndication Agent or such
Lender, as the case may be, and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender, the Arranger, a Syndication
Agent or by the Administrative Agent (on its own behalf or on behalf of a
Lender, the Arranger or a Syndication Agent) shall be conclusive, absent
manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of
---------------------
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by
32
<PAGE>
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
(e) Foreign Lenders. Any Foreign Lender that is entitled to an
----------------
exemption from or reduction of withholding tax under the Law of the jurisdiction
in which the Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable Law or reasonably requested by the Borrower, such
properly completed and executed documentation prescribed by applicable Law as
will permit such payments to be made without withholding or at a reduced rate.
SECTION 2.16 Payments Generally; Pro Rata Treatment; Sharing of Set-
------------------------------------------------------
offs.
- ----
(a) Payments by the Borrower. The Borrower shall make each payment
------------------------
required to be made by it hereunder (whether of principal, interest or fees, or
under Section 2.13, 2.14 or 2.15, or otherwise) prior to 1:00 PM, Pittsburgh,
Pennsylvania time, on the date when due, in immediately available funds, without
set-off or counterclaim. Any amounts received after such time on any such date
shall be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. All such payments shall be made to the
Administrative Agent at its Principal Office and to such account at its
Principal Office as the Administrative Agent shall specify to the Borrower,
except that payments pursuant to Sections 2.13, 2.14, 2.15 and 9.04 shall be
made directly to the Persons entitled thereto. The Administrative Agent shall
distribute any such payments received by it for account of any other Person to
the appropriate recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension. All payments hereunder shall be made in Dollars.
(b) Application of Insufficient Payments. If at any time insufficient
------------------------------------
funds are received by and available to the Administrative Agent to pay fully all
amounts of principal, interest and fees then due hereunder, such funds shall be
applied (i) first, to pay interest and fees then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of interest and fees
then due to such parties and ratably between the 364-Day Facility and 3-Year
Facility, and (ii) second, to pay principal then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal then
due to such parties and ratably between the 364-Day Facility and 3-Year
Facility.
(c) Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein: (i) each Revolving Borrowing shall be made from the Lenders, each
payment of facility and usage fees under Section 2.10 shall be made for account
of the Lenders, and each termination or reduction of the amount of the
Commitments under a Facility pursuant to Section 2.06 shall be applied to the
respective Commitments of the Lenders under the applicable Facility, pro rata
according to the amounts of their respective Commitments under such Facility;
(ii) each Borrowing under a Facility shall be allocated pro rata among the
Lenders according to the amounts of their respective Commitments (in the case of
the making of Revolving Loans) under such Facility or their respective Loans (in
the case of conversions and continuations of Loans);
33
<PAGE>
(iii) each payment or prepayment of principal of Loans by the Borrower shall be
made for account of the Lenders pro rata in accordance with the respective
unpaid principal amounts of the Loans held by them; and (iv) each payment of
interest on Loans by the Borrower shall be made for account of the Lenders pro
rata in accordance with the amounts of interest on such Loans then due and
payable to the respective Lenders.
(d) Sharing of Payments by Lenders. If any Lender shall, by
------------------------------
exercising any right of set-off or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Loans resulting in such
Lender receiving payment of a greater proportion of the aggregate amount of its
Loans and accrued interest thereon then due than the proportion received by any
other Lender, then the Lender receiving such greater proportion shall purchase
(for cash at face value) participations in the Loans of other Lenders to the
extent necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable Law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
(e) Presumptions of Payment. Unless the Administrative Agent shall
-----------------------
have received notice from the Borrower prior to the date on which any payment is
due to the Administrative Agent for account of the Lenders hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders the amount due. In
such event, if the Borrower has not in fact made such payment, then each of the
Lenders severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender with interest thereon, for each
day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the Federal Funds
Effective Rate.
(f) Certain Deductions by the Administrative Agent. If any Lender
----------------------------------------------
shall fail to make any payment required to be made by it pursuant to Section
2.04(b) or 2.16(e), then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for account of such Lender to satisfy such
Lender's obligations under such Sections until all such unsatisfied obligations
are fully paid.
34
<PAGE>
SECTION 2.17 Mitigation Obligations; Replacement of Lenders.
----------------------------------------------
(a) Designation of a Different Lending Office. If any Lender requests
-----------------------------------------
compensation under Section 2.13, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for account of any
Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts
to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation under
----------------------
Section 2.13, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for account of any Lender pursuant to
Section 2.15, or if any Lender defaults in its obligation to fund Loans
hereunder, then the Borrower may, at its sole expense and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 9.12), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (i) the
Borrower shall have received the prior consent of the Administrative Agent,
which consent shall not unreasonably be withheld, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.13 or payments required to be made pursuant to
Section 2.15, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Administrative
Agent and each Lender as follows:
SECTION 3.01 Corporate Status.
----------------
The Borrower and each Subsidiary of the Borrower is a corporation,
trust or limited liability company duly organized, validly existing and in good
standing under the Laws of its jurisdiction of organization. The Borrower and
each Subsidiary of the Borrower has the corporate power and authority to own its
Property and to transact the business in which it is engaged or presently
proposes to engage. The Borrower and each Subsidiary of the Borrower is
35
<PAGE>
duly qualified to do business as a foreign corporation, trust or limited
liability company and is in good standing in all jurisdictions in which the
ownership of its properties or the nature of its activities or both makes such
qualification necessary or advisable. Schedule II states as of the date hereof
the jurisdiction of organization of the Borrower and each Subsidiary of the
Borrower, and the jurisdictions in which the Borrower and each Subsidiary of the
Borrower is qualified to do business as a foreign corporation, trust or limited
liability company.
SECTION 3.02 Corporate Power and Authorization.
---------------------------------
The Borrower has the corporate power and authority to execute,
deliver, perform, and take all actions contemplated by, each of the Loan
Documents to which it is a party, and all such action has been duly and validly
authorized by all necessary corporate proceedings on its part. Without limiting
the foregoing, the Borrower has the corporate power and authority to borrow
pursuant to the Loan Documents to the fullest extent permitted hereby and
thereby from time to time, and has taken all necessary corporate action to
authorize such borrowings.
SECTION 3.03 Execution and Binding Effect.
----------------------------
This Agreement and each of the other Loan Documents to which the
Borrower is a party and which is required to be delivered on or before the
Effective Date pursuant to Section 4.01 has been duly and validly executed and
delivered by the Borrower. This Agreement and each such other Loan Document
constitutes, and when executed and delivered by the Borrower will constitute,
the legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, except as the enforceability hereof or
thereof may be limited by bankruptcy, insolvency or other similar laws of
general application affecting the enforcement of creditors' rights or by general
principles of equity limiting the availability of equitable remedies.
SECTION 3.04 Governmental Approvals and Filings.
----------------------------------
No Governmental Action is required for the due execution, delivery and
performance by the Borrower of this Agreement or any of the other Loan Documents
to which it is a party. All Governmental Actions required to be taken in order
the effect the Mergers have been taken.
SECTION 3.05 Absence of Conflicts.
--------------------
Neither the execution and delivery of any of the Loan Documents by the
Borrower, nor the consummation of the transactions herein or therein
contemplated by the Borrower, nor the performance of or the compliance with the
terms and conditions hereof or thereof by the Borrower, nor the consummation of
the Mergers, does or will:
(a) violate or conflict with any Law; or
(b) violate, conflict with or result in a breach of any term or
condition of, or constitute a default under, or result in (or give rise to any
-- --
right, contingent or otherwise, of any Person to cause) any termination,
cancellation, prepayment or acceleration of performance of, or result in the
--
creation or imposition of (or give rise to any obligation, contingent or
otherwise, to
36
<PAGE>
create or impose) any Lien upon any of the Property of the Borrower or any of
the Borrower pursuant to, or otherwise result in (or give rise to any right,
--
contingent or otherwise, of any Person to cause) any change in any right, power,
privilege, duty or obligation of the Borrower or any Subsidiary of the Borrower
under or in connection with,
(i) the articles of incorporation or by-laws (or other
constituent documents) of the Borrower or any Subsidiary of the Borrower;
(ii) any agreement or instrument creating, evidencing or
securing any Indebtedness to which the Borrower or any Subsidiary of the
Borrower is a party or by which any of them or any of their respective
properties (now owned or hereafter acquired) may be subject or bound; or
(iii) any other material agreement or instrument to which the
Borrower or any Subsidiary of the Borrower is a party or by which any of
them or any of their respective properties (now owned or hereafter
acquired) may be subject or bound.
SECTION 3.06 Audited Financial Statements.
----------------------------
The Borrower has heretofore furnished to each of the Agents and each
of the Lenders consolidated balance sheets of the Borrower, its consolidated
Subsidiaries and NPC as of December 31, 1996, 1997 and 1998 and the related
consolidated statements of income, retained earnings and changes in cash flows
for the fiscal years then ended, as examined and reported on by independent
certified public accountants for the Borrower, who delivered an unqualified
opinion in respect thereof. Such financial statements (including the notes
thereto) present fairly the financial condition of the Borrower and its
consolidated Subsidiaries as of the end of each such fiscal year and the results
of their operations and their retained earnings and changes in cash flows for
the fiscal years then ended, all in conformity with GAAP.
SECTION 3.07 Interim Financial Statements.
----------------------------
The Borrower has heretofore furnished to each of the Agents and each
of the Lenders an interim consolidated balance sheet of the Borrower, its
consolidated Subsidiaries and NPC as of the end of the first fiscal quarter of
the fiscal year beginning January 1, 1999, together with the related
consolidated statements of income, retained earnings and changes in cash flows
for the applicable fiscal period ending on such date. Such financial statements
(including the notes thereto) present fairly the financial condition of the
Borrower and its consolidated Subsidiaries as of the end of such fiscal quarter
and the results of their operations and their retained earnings and changes in
cash flows for the fiscal periods then ended, all in conformity with GAAP,
subject to normal and recurring year-end audit adjustments.
SECTION 3.08 Absence of Undisclosed Liabilities.
----------------------------------
Neither the Borrower nor any Subsidiary of the Borrower has any
liability or obligation of any nature whatever (whether absolute, accrued,
contingent or otherwise, whether or not due), forward or long-term commitments
or unrealized or anticipated losses from unfavorable commitments, except (a) as
disclosed in the financial statements referred to in Sections 3.06 and 3.07, and
(b) liabilities, obligations, commitments and losses incurred after
37
<PAGE>
March 31, 1999, in the ordinary course of business and consistent with past
practices.
SECTION 3.09 Absence of Material Adverse Change.
----------------------------------
Except for the Mergers, since December 31, 1998, there has been no
material adverse change in the business, operations, condition (financial or
otherwise), or prospects of the Borrower and its Subsidiaries taken as a whole.
SECTION 3.10 Accurate and Complete Disclosure.
--------------------------------
All information heretofore, contemporaneously or hereafter provided by
or on behalf of the Borrower to any Agent or any Lender pursuant to or in
connection with any Loan Document or any transaction contemplated hereby or
thereby is or will be (as the case may be) true and accurate in all material
respects on the date as of which such information is dated (or, if not dated,
when received by such Agent or such Lender) and does not or will not (as the
case may be) omit to state any material fact necessary to make such information
not misleading at such time in light of the circumstances in which it was
provided. The Borrower has disclosed to each Agent and each Lender in writing
every fact or circumstance which has, or which so far as the Borrower can
reasonably foresee is reasonably likely and is reasonably likely to have, a
Material Adverse Effect.
SECTION 3.11 Margin Regulations.
------------------
No part of the proceeds of any Loan hereunder will be used for the
purpose of buying or carrying any "margin stock", as such term is used in
Regulation U of the Board of Governors of the Federal Reserve System, as amended
from time to time, or to extend credit to others for the purpose of buying or
carrying any "margin stock". Neither the Borrower nor any Subsidiary of the
Borrower is engaged in the business of extending credit to others for the
purpose of buying or carrying "margin stock". Neither the Borrower nor any
Subsidiary of the Borrower owns any "margin stock". Neither the making of any
Loan nor any use of proceeds of any such Loan will violate or conflict with the
provisions of Regulation T, U or X of the Board, as amended from time to time.
SECTION 3.12 Litigation.
----------
There is no pending or (to the Borrower's knowledge after due inquiry)
threatened action, suit, proceeding or investigation (including any
Environmental Claim) by or before any Governmental Authority against or
affecting the Borrower or any Subsidiary of the Borrower which, if adversely
decided, individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect, except for (a) matters described in the financial
statements referred to in Section 3.06 and (b) matters set forth in Schedule
III.
SECTION 3.13 Absence of Events of Default.
----------------------------
No event has occurred and is continuing and no condition exists which
constitutes a Default or an Event of Default.
38
<PAGE>
SECTION 3.14 Absence of Other Conflicts.
--------------------------
Neither the Borrower nor any Subsidiary of the Borrower is in
violation of or conflict with, or is subject to any contingent liability on
account of any violation of or conflict with:
(a) any Law (including ERISA, the Code, any applicable occupational
health, safety or welfare Law or any applicable Environmental Law);
(b) its articles of incorporation or by-laws (or other constituent
documents); or
(c) any agreement or instrument to which it is party or by which it or
any of its properties (now owned or hereafter acquired) may be subject or
bound;
except for matters which, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
SECTION 3.15 Insurance.
---------
The Borrower and each Subsidiary of the Borrower maintains with
financially sound and reputable insurers insurance with respect to its
properties and business and against at least such liabilities, casualties and
contingencies and in at least such types and amounts as is customary in the case
of corporations engaged in the same or a similar business or having similar
properties similarly situated.
SECTION 3.16 Title to Property; No Liens.
---------------------------
The Borrower and each Subsidiary of the Borrower has good and
marketable title in fee simple to all real Property owned or purported to be
owned by it and good title to all other Property of whatever nature owned or
purported to be owned by it, including but not limited to all Property reflected
in the most recent audited balance sheet referred to in Section 3.06 or
submitted pursuant to Section 5.01(b), as the case may be (except as sold or
otherwise disposed of in the ordinary course of business after the date of such
balance sheet). Except for (i) Liens reflected in the most recent audited
balance sheet referred to in Section 3.06 or submitted pursuant to Section
5.01(b), as the case may be, (ii) Liens consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations on the
use of real Property or irregularities in title thereto which do not materially
detract from the value of, or impair the use of, such Property by the Borrower
or any Subsidiary of the Borrower in the operation of its business, (iii) Liens
for current Taxes not yet due and delinquent and (iv) Liens set forth on
Schedule IV, no Property owned by the Borrower or any Subsidiary of the Borrower
is subject to any Lien.
SECTION 3.17 Taxes.
-----
All tax and information returns required to be filed by or on behalf
of the Borrower or any Subsidiary of the Borrower have been properly prepared,
executed and filed. All Taxes upon the Borrower or any Subsidiary of the
Borrower or upon any of their respective Properties, incomes, sales or
franchises which are due and payable have been paid, other than those not yet
delinquent and payable without premium or penalty, and except for those being
diligently
39
<PAGE>
contested in good faith by appropriate proceedings, and in each case adequate
reserves and provisions for Taxes have been made on the books of the Borrower
and each Subsidiary of the Borrower. The reserves and provisions for Taxes on
the books of the Borrower and each Subsidiary of the Borrower are adequate for
all open years and for its current fiscal period. Neither the Borrower nor any
Subsidiary of the Borrower knows of any proposed additional assessment or basis
for any material assessment for additional Taxes (whether or not reserved
against).
SECTION 3.18 Borrower Not An Investment Company or a Registered
--------------------------------------------------
Public Utility Holding Company.
- ------------------------------
Neither the Borrower nor any Subsidiary of the Borrower is an
"investment company" or a company controlled by an "investment company" within
the meaning of the Investment Company Act of 1940. The Borrower is not a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935 which is subject to registration.
SECTION 3.19 Environmental Matters.
---------------------
(a) The Borrower and each of its Subsidiaries have complied with and
are in compliance with, all applicable Environmental Laws and the requirements
of any permits issued under such Environmental Laws. Except as disclosed on
Schedule V, there are no pending or threatened Environmental Claims against the
Borrower or any of its Subsidiaries (including any such claim arising out of the
ownership, lease or operation by the Borrower or any of its Subsidiaries of any
real Property no longer owned, leased or operated by the Borrower or any of its
Subsidiaries) or any real Property owned, leased or operated by the Borrower or
any of its Subsidiaries. Except as disclosed on Schedule V, there are no facts,
circumstances, conditions or occurrences with respect to the business or
operations of the Borrower or any of its Subsidiaries, or any real Property
owned, leased or operated by the Borrower or any of its Subsidiaries (including
any real Property formerly owned, leased or operated by the Borrower or any of
its Subsidiaries but no longer owned, leased or operated by the Borrower or any
of its Subsidiaries) or any Property adjoining or adjacent to any such real
Property that could be expected (i) to form the basis of an Environmental Claim
against the Borrower or any of its Subsidiaries or any real Property owned,
leased or operated by the Borrower or any of its Subsidiaries or (ii) to cause
any real Property owned, leased or operated by the Borrower or any of its
Subsidiaries to be subject to any restrictions on the ownership, occupancy or
transferability of such real Property by the Borrower or any of its Subsidiaries
under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any real Property owned, leased
or operated by the Borrower or any of its Subsidiaries where such generation,
use, treatment or storage has violated or could be expected to violate any
Environmental Law. Hazardous Materials have not at any time been Released on or
from any real Property owned, leased or operated by Borrower or any of its
Subsidiaries where such Release has violated or would be expected to violate any
applicable Environmental Law.
(c) Notwithstanding anything to the contrary in this Section, the
representations made in this Section shall not be untrue unless the effect of
all violations, claims,
40
<PAGE>
restrictions, failures and noncompliances of the types described in this Section
would reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect on the Borrower.
SECTION 3.20 ERISA.
-----
(a) Each Plan (and each related trust, insurance contract or fund) is
in substantial compliance with its terms and with all applicable Laws, including
without limitation ERISA and the Code; each Plan (and each related trust, if
any) which is intended to be qualified under Section 401(a) of the Code has
received a determination letter from the Internal Revenue Service to the effect
that it meets the requirements of Sections 401(a) and 501(a) of the Code; no
Reportable Event has occurred; no Multiemployer Plan is insolvent or in
reorganization; no Plan has an Unfunded Current Liability; no Plan which is
subject to Section 412 of the Code or Section 302 of ERISA has an accumulated
funding deficiency within the meaning of such sections of the Code or ERISA or
has applied for or received a waiver of an accumulated funding deficiency or an
extension of any amortization period within the meaning of Section 412 of the
Code or Section 303 or 304 of ERISA; all contributions required to be made with
respect to a Plan have been timely made; neither the Borrower nor any Subsidiary
of the Borrower nor any ERISA Affiliate has incurred any material liability
(including any indirect, contingent or secondary liability) to or on account of
a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or
expects to incur any such liability under any of the foregoing sections with
respect to any Plan; no condition exists which presents a material risk to the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a
liability to or on account of a Plan pursuant to the foregoing provisions of
ERISA and the Code; no proceedings have been instituted to terminate or appoint
a trustee to administer any Plan; no action, suit, proceeding, hearing, audit or
investigation with respect to the administration, operation or the investment of
assets of any Plan (other than routine claims for benefits) is pending, expected
or threatened; using actuarial assumptions and computation methods consistent
with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the
Borrower and its Subsidiaries and its ERISA Affiliates to all Multiemployer
Plans in the event of a complete withdrawal therefrom, as of the close of the
most recent fiscal year of each such Plan ended prior to the date of the most
recent Borrowing, would not have a Material Adverse Effect; each group health
plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code)
which covers or has covered employees or former employees of the Borrower, any
Subsidiary of the Borrower, or any ERISA Affiliate has at all times been
operated in compliance with the provisions of Part 6 of subtitle B of Title I of
ERISA and Section 4980B of the Code; no Lien imposed under the Code or ERISA on
the assets of the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate exists or is likely to arise on account of any Plan; and the Borrower
and its Subsidiaries may cease contributions to or terminate any Plan maintained
by any of them without incurring any material liability.
(b) Each Foreign Pension Plan, if any, has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable Laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. All contributions required to be made with respect to a Foreign
Pension Plan have been timely made. Neither the Borrower nor any of its
Subsidiaries has incurred any obligation in connection with the termination of
or withdrawal from any Foreign Pension Plan. The present value of the accrued
benefit liabilities (whether or not vested) under
41
<PAGE>
each Foreign Pension Plan, determined as of the end of the Borrower's most
recently ended Fiscal Year on the basis of actuarial assumptions, each of which
is reasonable, did not exceed the current value of the assets of such Foreign
Pension Plan allocable to such benefit liabilities.
SECTION 3.21 Year 2000 Issues.
----------------
The Borrower has (i) initiated a detailed review and assessment of all
areas within its business and operations and the business and operations of its
Subsidiaries, including those affected by suppliers and vendors, that could be
adversely impacted by the "Year 2000 Problem", i.e., the risk that computer
applications used by the Borrower, its Subsidiaries, or their suppliers and
vendors, may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31, 1999,
(ii) developed a detailed plan and timetable for addressing the Year 2000
Problem on a timely basis (the "Year 2000 Plan"), and (iii) to date, implemented
this plan in accordance with the timetable. The Borrower reasonably believes
that all computer applications, including those of its suppliers and vendors,
that are material to its business, operations or conditions (financial or
otherwise) will, on a timely basis, be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000, that is, be "Year 2000
Compliant", except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect.
SECTION 3.22 Pari Passu Status.
-----------------
The claims and rights of the Lenders against the Borrower hereunder
are not subordinated to, and rank at least pari passu with, the claims and
rights of other holders of its unsecured indebtedness except to the extent
otherwise provided by Law (including without limitation the Bankruptcy Code and
the provisions of 31 U.S.C. (S)3713).
SECTION 3.23 Indebtedness.
------------
Schedule VI contains a true and complete list of all Indebtedness of
the Borrower and its Subsidiaries that is, or will be, outstanding on the
Effective Date ("Existing Indebtedness").
---------------------
ARTICLE IV
CONDITIONS
SECTION 4.01 Effective Date.
--------------
This Agreement and the other Loan Documents shall become effective as
against the Lenders and the Agents on the first date on which all of the
following conditions shall be satisfied or waived:
(a) Agreement; Notes. The Administrative Agent shall have received an
----------------
executed counterpart of this Agreement for each Lender, duly executed by
the Borrower, and, to the extent any Lender has requested a Note pursuant
to Section 2.08(f), a Note conforming to the requirements hereof, duly
executed on behalf of the Borrower.
42
<PAGE>
(b) Corporate Proceedings. The Administrative Agent shall have
---------------------
received, with a counterpart for each Lender, certificates by the Secretary
or Assistant Secretary of the Borrower dated as of the Effective Date as to
(i) true copies of the articles of incorporation and by-laws (or other
constituent documents) of the Borrower as in effect on such date (which, in
the case of articles of incorporation or other constituent documents filed
or required to be filed with the Secretary of State or other Governmental
Authority in its jurisdiction of incorporation, shall be certified to be
true, correct and complete by such Secretary of State or other Governmental
Authority not more than 30 days before the date hereof), (ii) true copies
of all corporate action taken by the Borrower relative to this Agreement
and the other Loan Documents, and (iii) the incumbency and signatures of
the respective officers of the Borrower executing this Agreement and the
other Loan Documents to which the Borrower is a party, together with
satisfactory evidence of the incumbency of such Secretary or Assistant
Secretary. The Administrative Agent shall have received, with a copy for
each Lender, certificates from the Secretary of State of Nevada (or other
applicable Governmental Authority) dated not more than 30 days before the
Effective Date showing the good standing of the Borrower in Nevada and in
each state in which the Borrower does business.
(c) Legal Opinion of Counsel to the Borrower. The Administrative
----------------------------------------
Agent shall have received, with an executed counterpart for each Lender, an
opinion addressed to the Administrative Agent and each Lender, dated
Effective Date, of Choate, Hall & Stewart, counsel to the Borrower, as to
such matters as may be requested by the Administrative Agent and in form
and substance satisfactory to the Lenders.
(d) Financial Statements. The Administrative Agent shall have
--------------------
received for each Lender a true and correct copy of the (i) audited
consolidated financial statements, including balance sheets, income
statements and cash flow statements, for the Borrower, NPC, SPPC and their
respective consolidated Subsidiaries for the years ended December 31, 1998,
1997 and 1996, (ii) unaudited interim consolidated financial statements,
including a balance sheet, income statement and statement of cash flows,
for the Borrower, NPC, SPPC and their respective consolidated Subsidiaries
for the three month period ended March 31, 1999, and (iii) unaudited pro
forma (giving effect to the Mergers) consolidated financial statements,
including a balance sheet, income statement and statement of cash flows,
for the Borrower and its consolidated Subsidiaries for the years ended
December 31, 1998 and 1997.
(e) No Material Adverse Effect. Nothing shall have occurred (and
--------------------------
neither the Administrative Agent nor the Lenders shall have become aware of
any facts or conditions not previously known) which the Lenders shall
determine (i) has had, or could reasonably be expected to have, a Material
Adverse Effect. The Administrative Agent shall have received a certificate
of a senior financial officer of the Borrower, dated the Effective Date, to
the effect that, as of the Effective Date, there has been no Material
Adverse Effect since December 31, 1998.
(f) Mergers. The Mergers shall have been consummated prior to
-------
September 1, 1999, or such later date as the Lenders and the Administrative
Agent shall agree upon in writing, on terms satisfactory to the Lenders and
the Administrative Agent shall have
43
<PAGE>
received copies of all documentation related there, including, without
limitation, the order(s) of the Federal Energy Regulatory Commission and
the Securities and Exchange Commission approving the Mergers.
(g) Governmental Approvals. All necessary and material Governmental
----------------------
Actions (domestic and foreign) and third party approvals and/or consents in
connection with the Mergers and the transactions contemplated in this
Agreement shall have been obtained and remain in effect and all applicable
waiting periods with respect thereto shall have expired without any action
being taken by any competent authority which restrains, prevents or imposes
materially adverse conditions upon, the consummation of the Mergers or the
transactions contemplated hereby or otherwise referred to herein or
therein. The Administrative Agent shall have received documentation
reasonably acceptable to it that the Federal Energy Regulatory Commission
and the Securities and Exchange Commission have duly approved the Mergers.
(h) No Injunctions. There shall not exist any judgment, order,
--------------
injunction or other restraint issued or filed or a hearing seeking
injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon the consummation of the Mergers
or the other transactions contemplated hereby or otherwise referred to
herein.
(i) Litigation, Proceedings and Investigations. There shall be no
------------------------------------------
actions, arbitrations, suits, investigations or proceedings pending or
threatened with respect to this Agreement or the Mergers or which the
Administrative Agent shall determine could reasonably be expected to have a
Material Adverse Effect.
(j) No Violation of Existing Agreements. Neither the Borrower nor any
-----------------------------------
Subsidiary of the Borrower is in violation of any material agreement or
instrument to which it is party or by which it or any of its properties
(now owned or hereafter acquired) may be subject or bound;
(k) Refinancing.
-----------
(i) The total commitments in respect of the Indebtedness to be
Refinanced shall have been terminated, and all loans and notes with respect
thereto shall have been repaid in full, together with interest thereon, all
letters of credit issued thereunder shall have been terminated and all
other amounts (including premiums) owing pursuant to the Indebtedness to be
Refinanced shall have been repaid in full and all documents in respect of
the Indebtedness to be Refinanced and all guarantees with respect thereto
shall have been terminated (except as to indemnification provisions, which
may survive to the extent provided therein) and be of no further force and
effect.
(ii) The creditors in respect of the Indebtedness to be
Refinanced shall have terminated and released any and all security
interests and Liens on the assets owned by Borrower and its Subsidiaries.
The Administrative Agent shall have received such releases of security
interests in and Liens on the assets owned by Borrower and its Subsidiaries
as may have been requested by the Administrative Agent, which releases
44
<PAGE>
shall be in form and substance reasonably satisfactory to the
Administrative Agent. Without limiting the foregoing, there shall have
been delivered (i) proper termination statements (Form UCC-3 or the
appropriate equivalent) for filing under the UCC of each jurisdiction where
a financing statement (Form UCC-1 or the appropriate equivalent) was filed
with respect to Borrower or any of its Subsidiaries in connection with the
security interests created with respect to the Indebtedness to be
Refinanced and the documentation related thereto, (ii) termination or
reassignment of any security interest in, or Lien on, any patents,
trademarks, copyrights, or similar interests of Borrower or any of its
Subsidiaries on which filings have been made, (iii) terminations of all
mortgages, leasehold mortgages, deeds of trust and leasehold deeds of trust
created with respect to Property of Borrower or any of its Subsidiaries, in
each case to secure the obligations in respect of the Indebtedness to be
Refinanced, all of which shall be in form and substance reasonably
satisfactory to the Administrative Agent, and (iv) all collateral owned by
Borrower and its Subsidiaries in the possession of any of the creditors in
respect of the Indebtedness to be Refinanced or any collateral agent or
trustee under any related security document shall have been returned to
Borrower or its respective Subsidiary, as the case may be.
(l) Ratings. The Administrative Agent shall have received a
-------
certificate of a senior financial officer of the Borrower, dated the
Effective Date, setting forth the then current ratings of the Index Debt.
(m) Officers' Certificates. The Administrative Agent shall have
----------------------
received, with an executed counterpart for each Lender, certificates from
such officers of the Borrower as to such matters as the Administrative
Agent may request.
(n) Fees, Expenses, etc. All fees and other items required to be paid
--------------------
to the Agents and the Lenders on or before the Effective Date (including
all fees referenced in fee letters and offer letters) shall have been paid
or received.
(o) Section 4.02 Conditions.
-----------------------
(i) Each of the representations and warranties made by the
Borrower herein and in each other Loan Document shall be true and
correct in all material respects on and as of the Effective Date as if
made on and as of such date, both before and after giving effect to
the Loans requested to be made on such date.
(ii) No Default or Event of Default shall have occurred and be
continuing on the Effective Date.
(p) Additional Matters. The Administrative Agent shall have received,
------------------
with copies or executed counterparts for each Lender, such other
certificates, opinions, documents and instruments as the Administrative
Agent may have requested. All corporate and other proceedings, and all
documents, instruments and other matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be satisfactory in form and substance to the Administrative Agent.
45
<PAGE>
SECTION 4.02 Conditions to All Loans.
-----------------------
The obligation of each Lender to make, convert or continue any Loan on
the occasion of any Borrowing is subject to satisfaction of the conditions
precedent set forth in Section 4.01 and satisfaction of the following further
conditions precedent:
(a) Notice. The Borrower shall have executed and delivered to the
------
Administrative Agent a Borrowing Request or Interest Election Request for
such Borrowing in accordance with Section 2.03 or 2.05, as the case may be.
(b) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Borrower herein and in each other Loan Document
shall be true and correct in all material respects on and as of such date
as if made on and as of such date, both before and after giving effect to
the making, conversion or continuation of Loans requested to be made,
converted or continued on such date.
(c) No Defaults. No Default or Event of Default shall have occurred
-----------
and be continuing on such date or after giving effect to the making,
conversion or continuation of Loans requested to be made, converted or
continued on such date.
(d) No Violations of Law, etc. Neither the making, conversion or
-------------------------
continuation nor use of the Loans shall cause any Lender to violate or be
in conflict with any Law.
(e) No Material Adverse Change. There shall not have occurred, or be
--------------------------
threatened, any other event, act or condition which would reasonably be
expected to have a Material Adverse Effect.
Each request by the Borrower for any Loan or conversion or
continuation thereof shall constitute a representation and warranty by the
Borrower that the conditions set forth in this Section 4.02 have been satisfied
as of the date of such request. Failure of the Administrative Agent to receive
notice from the Borrower to the contrary before such Loan is made shall
constitute a further representation and warranty by the Borrower that the
conditions referred to in this Section 4.02 have been satisfied as of the date
such Loan is made.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower hereby covenants to the Administrative Agent and each Lender:
SECTION 5.01 Basic Reporting Requirements.
----------------------------
(a) Annual Audit Reports. As soon as practicable, and in any event
--------------------
within 90 days after the close of each fiscal year of the Borrower, the Borrower
shall furnish to the Administrative Agent, with a copy for each Lender,
consolidated statements of income, retained earnings and cash flows of the
Borrower and its consolidated Subsidiaries for such fiscal year and a
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
of the close of such fiscal year, and notes to each, all in reasonable detail,
setting forth in comparative form the corresponding figures for the preceding
fiscal year. Such financial statements shall be
46
<PAGE>
accompanied by an opinion of independent certified public accountants of
recognized national standing selected by the Borrower, which opinion shall not
be subject to any qualification as to scope of audit or as to any other matter
which the Required Lenders determine is adverse. Such opinion in any event shall
contain a written statement of such accountants substantially to the effect that
(i) such accountants examined such financial statements in accordance with
generally accepted auditing standards and accordingly made such tests of
accounting records and such other auditing procedures as such accountants
considered necessary in the circumstances and (ii) in the opinion of such
accountants such financial statements present fairly the financial position of
the Borrower and its consolidated Subsidiaries as of the end of such fiscal year
and the results of their operations and their retained earnings and cash flows
for such fiscal year, in conformity with GAAP.
(b) Quarterly Consolidated Reports. As soon as practicable, and in
------------------------------
any event within 45 days after the close of each of the first three fiscal
quarters of each fiscal year of the Borrower, the Borrower shall furnish to the
Administrative Agent, with a copy for each Lender, unaudited consolidated
statements of income, retained earnings and cash flows of the Borrower and its
consolidated Subsidiaries for the period from the beginning of such fiscal year
to the end of such fiscal quarter and an unaudited consolidated balance sheet of
the Borrower and its consolidated Subsidiaries as of the close of such fiscal
quarter, and notes to each, all in reasonable detail, setting forth in
comparative form the corresponding figures for the same periods or as of the
same date during the preceding fiscal year (except for the consolidated balance
sheet, which shall set forth in comparative form the corresponding balance sheet
as of the prior fiscal year end). Such financial statements shall be certified
by a Responsible Officer of the Borrower as presenting fairly the financial
position of the Borrower and its consolidated Subsidiaries as of the end of such
fiscal quarter and the results of their operations and their retained earnings
and changes in cash flows for such fiscal year, in conformity with GAAP, subject
to normal and recurring year-end audit adjustments.
(c) Quarterly Compliance Certificates. The Borrower shall deliver to
---------------------------------
the Administrative Agent, with a copy for each Lender, a Quarterly Compliance
Certificate in substantially the form set forth as Exhibit D, duly completed and
signed by a Responsible Officer of the Borrower concurrently with the delivery
of the financial statements referred to in subsections (a) and (b) of this
Section 5.01.
(d) Certain Other Reports and Information. Promptly upon their
-------------------------------------
becoming available to the Borrower, the Borrower shall deliver to the
Administrative Agent, with a copy for each Lender, a copy of (i) all regular or
special reports, registration statements and amendments to the foregoing which
the Borrower or any Subsidiary of the Borrower shall file with the Securities
and Exchange Commission (or any successor thereto) or any securities exchange,
and (ii) all reports, proxy statements, financial statements and other
information distributed by the Borrower to its stockbrokers, bondholders or the
financial community generally.
(e) Further Information. The Borrower shall promptly furnish to the
-------------------
Administrative Agent, with a copy for each Lender, such other information and in
such form as the Administrative Agent or any Lender may reasonably request from
time to time.
47
<PAGE>
(f) Notice of Certain Events. Promptly (and, in the case of clause
------------------------
(i) below, no later than two Business Days) upon becoming aware of any of the
following, the Borrower shall give the Administrative Agent notice thereof,
together with a written statement of a Responsible Officer of the Borrower
setting forth the details thereof and any action with respect thereto taken or
proposed to be taken by the Borrower:
(i) Any Default or Event of Default.
(ii) The occurrence or existence of any event or condition (including
(A) the violation or alleged violation of any Environmental Law by the
Borrower or any Subsidiary of the Borrower or the assertion of any
Environmental Claim against the Borrower or any Subsidiary of the Borrower,
(B) the commencement of any other action, suit, proceeding or investigation
by or before any Governmental Authority against or affecting the Borrower
or any Subsidiary of the Borrower, or (C) the violation, breach or default
or alleged violation, breach or default by the Borrower or any Subsidiary
of the Borrower or any other Person under any agreement or instrument
material to the business, operations, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole) which
event or condition, either individually or in the aggregate, has, or would
reasonably be expected to have, a Material Adverse Effect.
(iii) Any change in the Index Debt rating.
(g) Visitation; Verification. The Borrower shall permit such
------------------------
Persons as the Administrative Agent or any Lender may designate from time to
time to visit and inspect any of the properties of the Borrower and of any
Subsidiary, to examine their respective books and records and take copies and
extracts therefrom and to discuss their respective affairs with their respective
officers, employees and independent accountants at such times and as often as
the Administrative Agent or any Lender may reasonably request; provided,
--------
however, that the Borrower reserves the right to restrict access to any of its
generating facilities in accordance with reasonably adopted practices relating
to safety and security. The Borrower hereby authorizes such officers, employees
and independent accountants to discuss with the Administrative Agent or any
Lender the affairs of the Borrower and its Subsidiaries.
(h) ERISA. Within 30 days after the Borrower knows that any of the
-----
events or conditions specified below with respect to any Plan or Multiemployer
Plan has occurred or exists, a statement signed by a Responsible Officer of the
Borrower setting forth details respecting such event or condition and the
action, if any, that the Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by the Borrower or an ERISA Affiliate with respect to such event
or condition):
(i) any Reportable Event and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Borrower or an
ERISA Affiliate to
48
<PAGE>
terminate any Plan, in each case with respect to which there are
insufficient assets to pay benefits as they become due;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Borrower or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by
PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Borrower or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt by
the Borrower or any ERISA Affiliate of notice from a Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA or that it intends to terminate or has terminated under Section
4041A of ERISA; and
(v) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the
loss of tax-exempt status of the trust of which such Plan is a part if the
Borrower or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections.
(i) Satisfaction of Certain Reporting Requirements. Notwithstanding
----------------------------------------------
any other provision of this Section 5.01, the Borrower shall be deemed to have
satisfied its obligations pursuant to Sections 5.01(a) and (b) if and to the
extent that it shall have provided to the Administrative Agent and each Lender,
pursuant to Section 5.01(d), copies of its periodic reports (on Form 10-K or 10-
Q, as the case may be) as required to be filed with the Securities and Exchange
Commission (or any successor thereto) pursuant to the Securities and Exchange
Act of 1934, as amended (or any successor statute of similar import), for the
annual and quarterly periods described in such Sections.
(j) Delivery to Lenders. The Administrative Agent shall promptly
-------------------
deliver to each Lender each of the reports, statements, certificates or other
documents delivered to the Administrative Agent by the Borrower pursuant to this
Section 5.01.
SECTION 5.02 Insurance.
---------
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain with financially sound and reputable insurers insurance with respect to
its properties and business and against such liabilities, casualties and
contingencies and of such types and in such amounts as is customary in the case
of corporations engaged in the same or similar businesses or having similar
properties similarly situated and as is satisfactory from time to time to the
Required Lenders in their reasonable discretion.
SECTION 5.03 Payment of Taxes and Other Potential Charges and
------------------------------------------------
Priority Claims.
- ---------------
The Borrower shall, and shall cause each of its Subsidiaries to, pay
or discharge
49
<PAGE>
(a) on or prior to the date on which penalties or Liens attach
thereto, all Taxes imposed upon it or any of its properties;
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like
Persons which, if unpaid, might result in the creation of a Lien upon any
such Property; and
(c) on or prior to the date when due, all other lawful claims which,
if unpaid, might result in the creation of a Lien upon any such Property or
which, if unpaid, might give rise to a claim entitled to priority over
general creditors of the Borrower or such Subsidiary in a case under the
Bankruptcy Code;
provided, that, unless and until foreclosure, distraint, levy, sale or similar
- --------
proceedings shall have been commenced, the Borrower or such Subsidiary need not
pay or discharge any such Tax, assessment, charge or claim so long as (x) the
validity thereof is contested in good faith and by appropriate proceedings
diligently conducted, and (y) such reserves or other appropriate provisions as
may be required by GAAP shall have been made therefor.
SECTION 5.04 Preservation of Corporate Status and Franchises.
-----------------------------------------------
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain its status as a corporation, trust or limited liability company duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, and to be duly qualified to do business as a
foreign corporation, trust or limited liability company and in good standing in
all jurisdictions in which the ownership of its properties or the nature of its
business or both make such qualification necessary or advisable; provided,
--------
however, that nothing in this Section 5.04 shall prevent the withdrawal by the
- -------
Borrower or any of its Subsidiaries of its qualification as a foreign
corporation in any jurisdiction where such withdrawal could not have a Material
Adverse Effect . The Borrower shall, and shall cause each of its Subsidiaries
to, do or cause to be done, all things necessary to preserve and keep in full
force and effect its material rights, franchises, licenses and patents.
SECTION 5.05 Governmental Approvals and Filings.
----------------------------------
The Borrower shall keep and maintain in full force and effect all
Governmental Actions necessary or advisable in connection with execution and
delivery of any Loan Document, consummation of the transactions herein or
therein contemplated, performance of or compliance with the terms and conditions
hereof or thereof or to ensure the legality, validity, binding effect or
enforceability hereof or thereof.
SECTION 5.06 Maintenance of Properties.
-------------------------
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain or cause to be maintained in good repair, working order and condition
the properties now or hereafter owned, leased or otherwise possessed by it and
shall make or cause to be made all needful and proper repairs, renewals,
replacements and improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
50
<PAGE>
SECTION 5.07 Avoidance of Other Conflicts.
----------------------------
The Borrower shall not, and shall not permit any of its Subsidiaries
to, violate or conflict with, be in violation of or in conflict with, or be or
remain subject to any liability (contingent or otherwise) on account of any
violation or conflict with
(a) any Law;
(b) its articles of incorporation or by-laws; or
(c) any agreement or instrument to which it is party or by which any
of them or any of their respective Subsidiaries is a party or by which any
of them or any of their respective properties (now owned or hereafter
acquired) may be subject or bound,
except for matters which would not reasonably be expected, either individually
or in the aggregate, to have a Material Adverse Effect.
SECTION 5.08 Financial Accounting Practices.
------------------------------
The Borrower shall, and shall cause each of its Subsidiaries to, make
and keep books, records and accounts which, in reasonable detail, accurately and
fairly reflect its transactions and dispositions of its assets and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (a) transactions are executed in accordance with management's
general or specific authorization, (b) transactions are recorded as necessary
(i) to permit preparation of financial statements in conformity with GAAP and
(ii) to maintain accountability for assets, (c) access to assets is permitted
only in accordance with management's general or specific authorization and (d)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
SECTION 5.09 Use of Proceeds.
---------------
The Borrower shall apply the proceeds of all Loans hereunder only (a)
to fund a cash payment in an aggregate amount of up to $460,000,000 to be made
in connection with the Mergers and (b) for working capital and general corporate
purposes of the Borrower, including commercial paper backup. The Borrower shall
not use the proceeds of any Loans hereunder directly or indirectly for any
unlawful purpose, in any manner inconsistent with Section 3.11, or inconsistent
with any other provision of any Loan Document.
SECTION 5.10 End of Fiscal Periods.
---------------------
The Borrower shall cause (a) each of its, and each of its
Subsidiary's, fiscal years to end on December 31 and (b) each of its, and each
of its Subsidiary's, fiscal quarters to end on March 31, June 30, September 30
and December 31.
51
<PAGE>
ARTICLE VI
NEGATIVE COVENANTS
The Borrower hereby covenants to the Administrative Agent and each
Lender as follows:
SECTION 6.01 Financial Covenants.
-------------------
(a) Maximum Leverage. The Borrower shall not permit the ratio of (a)
----------------
Total Indebtedness to (b) the sum of Total Indebtedness and Shareholders'
Equity, determined as of the last day of each fiscal quarter, to exceed 0.65 to
1.
(b) Minimum Tangible Net Worth. The Borrower shall not permit
--------------------------
Tangible Net Worth to be less than $1,250,000,000 at any time.
(c) Fixed Charge Coverage Ratio. The Borrower shall not permit the
---------------------------
Fixed Charge Coverage Ratio, determined as of the last day of each fiscal
quarter for the period consisting of the four consecutive fiscal quarters ended
on such last day, to be less than 1.5 to 1.
SECTION 6.02 Liens.
-----
The Borrower shall not, and shall not permit any of its Subsidiaries
to, at any time create, incur, assume or suffer to exist any Lien on any of its
Property (now owned or hereafter acquired), or agree, become or remain liable
(contingently or otherwise) to do any of the foregoing, except for the following
("Permitted Liens"):
---------------
(a) Liens existing on the date hereof and securing obligations
existing on the date hereof, other than Indebtedness to be Refinanced, as
such Liens and obligations are listed on Schedule IV;
(b) Liens securing obligations of NPC issued under and pursuant to the
terms and conditions of the NPC First Mortgage Indenture;
(c) Liens securing obligations of SPPC issued under and pursuant to
the terms and conditions of the SPPC First Mortgage Indenture;
(d) Liens on NPC First Mortgage Bonds issued as collateral for
pollution control revenue bonds issued for the benefit of NPC or its
Subsidiaries (and related rights and interests) to secure obligations of
NPC or such Subsidiaries for the benefit of the holders of such bonds,
provided that such bonds are not secured by any other assets or Properties
of NPC or its Subsidiaries;
(e) Liens on SPPC First Mortgage Bonds issued as collateral for
pollution control or gas or water facility revenue bonds issued for the
benefit of SPPC or its Subsidiaries (and related rights and interests) to
secure obligations of SPPC or such Subsidiaries for the benefit of the
holders of such bonds, provided that such bonds are not secured by any
other assets or Properties of SPPC or its Subsidiaries;
52
<PAGE>
(f) Liens on SPPC First Mortgage Bonds issued as collateral for
medium-term notes issued pursuant to the Collateral Trust Indenture, dated
as of June 1, 1992, between SPPC and Bankers Trust Company, as Trustee;
(g) Liens on "transition property" arising pursuant to Section 843 of
the California Public Utility Code for the benefit of holders of rate
reduction bonds issued pursuant to a valid financing order of the
California Public Utilities Commission;
(h) Liens arising from taxes, assessments, charges or claims described
in Section 5.03 that are not yet due or that remain payable without penalty
or to the extent permitted to remain unpaid under the proviso to such
Section 5.03;
(i) Deposits or pledges of cash or securities in the ordinary course
of business to secure (i) worker's compensation, unemployment insurance or
other social security obligations, (ii) performance of bids, tenders, trade
contracts (other than for payment of money) or leases, (iii) stay, surety
or appeal bonds, or (iv) other obligations of a like nature incurred in the
ordinary course of business;
(j) Zoning restrictions, easements, minor restrictions on the use of
real Property, minor irregularities in title thereto and other minor Liens
that do not secure the payment of money or the performance of an obligation
and that do not in the aggregate materially detract from the value of an
asset to, or materially impair its use in the business of, the Borrower or
such Subsidiary; and
(k) Liens on Property securing all or part of the purchase price
thereof and Liens (whether or not assumed) existing in Property at the time
of purchase thereof, provided that: (i) such Lien is created before or
substantially simultaneously with the purchase of such Property by the
Borrower or such Subsidiary, (ii) such Lien is confined solely to the
Property so purchased, improvements thereto and proceeds thereof, (iii) the
aggregate amount secured by such Liens on any particular Property at the
time purchased by the Borrower or such Subsidiary, as the case may be,
shall not exceed the lesser of the purchase price of such Property and the
fair market value of such Property at the time of purchase thereof by the
Borrower or such Subsidiary, and (iv) the aggregate amount secured by all
Liens described in this Section 6.02(k) shall not at any time exceed
$150,000,000.
"Permitted Liens" shall in no event include any Lien imposed by, or required to
be granted pursuant to, ERISA or any Environmental Law.
SECTION 6.03 Mergers.
-------
The Borrower shall not, and shall not permit any of its Subsidiaries
to, (a) merge with or into or consolidate with any other Person, (b) liquidate,
wind-up, dissolve or divide, or (c) agree, become or remain liable (contingently
or otherwise) to do any of the foregoing, except:
(i) A Person may merge with or into or consolidate with any Subsidiary
of the Borrower, provided that (x) the surviving Person shall be a
Subsidiary of the Borrower, (y) no Default or Event of Default shall have
occurred and be continuing or shall exist at such
53
<PAGE>
time or after giving effect to such transaction and (z) the Borrower shall
deliver to the Administrative Agent (A) a certificate, in a form reasonably
satisfactory to the Administrative Agent, certifying that no Default or
Event of Default exists or will result from such merger and (B) pro forma
financial statements in support of such certification; and
(ii) A Person may merge with or into or consolidate with the Borrower,
provided that (x) the Borrower shall be the surviving Person, (y) no
Default or Event of Default shall have occurred and be continuing or shall
exist at such time or after giving effect to such transaction and (z) the
Borrower shall deliver to the Administrative Agent (A) a certificate, in a
form reasonably satisfactory to the Administrative Agent, certifying that
no Default or Event of Default exists or will result from such merger and
(B) pro forma financial statements in support of such certification.
SECTION 6.04 Dispositions of Properties.
--------------------------
The Borrower shall not, and shall not permit any of its Subsidiaries
to, sell, convey, assign, lease, sale-leaseback, transfer, abandon or otherwise
dispose of, voluntarily or involuntarily (collectively, "Dispose"), any of its
-------
Properties, or agree, become or remain liable contingently or otherwise to do
any of the foregoing, except that, so long as no Default or Event of Default
shall have occurred and be continuing or shall exist at such time or after
giving effect to such transaction, the Borrower and its Subsidiaries may Dispose
of Property (a) in transactions in the ordinary course of business, (b) that is
obsolete, (c) comprising generating assets, provided that the aggregate book
--------
value of all generating assets Disposed of pursuant to this Section 6.04(c) from
and after the date hereof shall not exceed $1,100,000,000, and (d) in
transactions other than as provided in Section 6.04 (a), (b) and (c), provided
--------
that the aggregate book value of all Property Disposed of pursuant to this
Section 6.04(d) from and after the date hereof shall not exceed $120,000,000.
SECTION 6.05 Investments and Acquisitions.
----------------------------
Prior to the making of any Investment or the consummation of any
Acquisition by the Borrower or any of its Subsidiaries, the amount or purchase
price of which, as the case may be, when aggregated with the amounts and
purchase prices of other Investments and Acquisitions made by the Borrower and
its Subsidiaries, would exceed $70,000,000 in the aggregate at any time, the
Borrower shall deliver to the Administrative Agent (i) a certificate, in a form
reasonably satisfactory to the Administrative Agent, certifying that no Default
or Event of Default exists or will result from such Acquisition and (ii) pro
forma financial statements in support of such certification.
SECTION 6.06 Dividends and Stock Repurchases.
-------------------------------
The Borrower shall not declare or pay any dividend on its capital
stock (except for dividends in the form of capital stock), or redeem or
repurchase any of its capital stock, if a Default or Event of Default shall have
occurred and be continuing or shall exist at such time or after giving effect to
such transaction.
54
<PAGE>
SECTION 6.07 Transactions with Affiliates.
----------------------------
The Borrower shall not enter into any transaction of any kind with any
Person that Controls the Borrower or is controlled by the Borrower or is under
common control with the Borrower other than (a) salary, bonus, employee stock
option and other compensation arrangements with directors or officers in the
ordinary course of business, (b) transactions that are fully disclosed to the
board of directors (or executive committee thereof) of the Borrower and
expressly authorized by a resolution of the board of directors (or executive
committee) of the Borrower which is approved by a majority of the directors (or
executive committee) not having an interest in the transaction, (c) transactions
between or among the Borrower and its Wholly-Owned Subsidiaries and (d)
transactions on overall terms at least as favorable to the Borrower as would be
the case in an arm's-length transaction between unrelated parties of equal
bargaining power.
SECTION 6.08 Equal and Ratable Lien.
----------------------
If, notwithstanding the prohibition contained in Section 6.02, the
Borrower or any of its Subsidiaries shall create, assume or permit to exist any
Lien upon any of its Property, other than those permitted by the provisions of
Section 6.02, it will make or cause to be made effective provision whereby the
Borrowings will be secured equally and ratably with any and all other
obligations thereby secured, such security to be pursuant to agreements
reasonably satisfactory to the Administrative Agent and, in any such case, the
Borrowings shall have the benefit, to the fullest extent that, and with such
priority as, the Lenders may be entitled under applicable law, of an equitable
Lien on such Property. Such violation of Section 6.02 will constitute an Event
of Default, whether or not provision is made for an equal and ratable Lien
pursuant to this Section.
SECTION 6.09 Restrictive Agreements.
-----------------------
Except as otherwise permitted under Article VI hereunder, Article VI
of the SPPC Credit Agreement and Article VI of the NPC Credit Agreement, the
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of the Borrower or any Subsidiary to create, incur or permit to exist
any Lien upon any of its Property or assets, or (b) the ability of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its capital stock or to make or repay loans or advances to the Borrower or any
other Subsidiary or to guarantee Indebtedness of the Borrower or any other
Subsidiary.
SECTION 6.10 Year 2000.
---------
At the request of any Lender, the Borrower will make available to such
Lender the Borrower's Year 2000 Plan, together with any updates or progress
reports with respect thereto. The Borrower will promptly notify the
Administrative Agent in the event the Borrower discovers or determines that any
computer application, including those of its suppliers and vendors, that is
material to its business, operations or conditions (financial or otherwise) will
not be Year 2000 Compliant on a timely basis, except to the extent that such
failure could not reasonably be expected to have a Material Adverse Effect.
55
<PAGE>
ARTICLE VII
DEFAULTS
SECTION 7.01 Events of Default.
-----------------
An "Event of Default" shall mean the occurrence or existence of one or
----------------
more of the following events or conditions (for any reason, whether voluntary,
involuntary or effected or required by Law):
(a) The Borrower shall fail to pay when due principal of any Loan.
(b) The Borrower shall fail to pay when due interest on any Loan, any
fees, indemnity or expenses, or any other amount due hereunder or under any
other Loan Document and such failure shall have continued for a period of
three business days.
(c) Any representation or warranty made or deemed made by the Borrower
in or pursuant to or in connection with any Loan Document, or any statement
made by the Borrower in any financial statement, certificate, report,
exhibit or document furnished by the Borrower to the Administrative Agent
or any Lender pursuant to or in connection with any Loan Document, shall
prove to have been false or misleading in any material respect as of the
time when made or deemed made (including by omission of material
information necessary to make such representation, warranty or statement
not misleading).
(d) The Borrower shall default in the performance or observance of any
covenant contained in Article VI or any of the covenants contained in
Sections 5.01(f)(i) or 5.09 or 5.10.
(e) The Borrower shall default in the performance or observance of any
other covenant, agreement or duty under this Agreement or any other Loan
Document and (i) in the case of a default under Section 5.01 (other than as
referred to in subsection (f)(i) thereof) such default shall have continued
for a period of ten Business Days and (ii) in the case of any other default
such default shall have continued for a period of 30 days after notice from
the Administrative Agent to the Borrower.
(f) The Borrower or any Subsidiary of the Borrower shall (i) fail to
make any payment (x) on account of any Indebtedness under the NPC Credit
Agreement or the SPPC Credit Agreement, (y) on account of any Indebtedness
aggregating $10,000,000 or more in principal amount or (z) aggregating
$10,000,000 or more on any Indebtedness, or any interest or premium
thereon, in each case, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and, in each case, such
failure shall have continued beyond any applicable grace period specified
in any agreement or instrument relating to such Indebtedness, or (ii) fail
to perform or observe any other term, covenant or condition on its part to
be performed or observed under any agreement or instrument relating to any
Indebtedness when required to be performed or observed, and such failure
shall have continued beyond any applicable grace period specified in any
agreement or instrument relating to such Indebtedness, if the effect of
such failure to perform or observe is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness, the unpaid principal
amount of which then aggregates $10,000,000.
56
<PAGE>
(g) One or more final judgments or orders for the payment of money
shall have been entered against the Borrower or any Subsidiary of the
Borrower, which judgments or orders exceed $10,000,000 in the aggregate,
and such judgments or orders shall have remained undischarged and unstayed
for a period of thirty consecutive days.
(h) One or more writs or warrants of attachment, garnishment,
execution, distraint or similar process exceeding in value the aggregate
amount of $10,000,000 shall have been issued against the Borrower or any
Subsidiary of the Borrower or any of their respective properties and shall
have remained undischarged and unstayed for a period of thirty consecutive
days.
(i) Any Governmental Action now or hereafter made by or with any
Governmental Authority in connection with any Loan Document is not obtained
or shall have ceased to be in full force and effect or shall have been
modified or amended or shall have been held to be illegal or invalid, and
the Required Lenders shall have determined (which determination shall be
conclusive provided it is reached in good faith) that the consequence of
any of the foregoing events would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(j) Any Loan Document or any material term or provision thereof shall
have ceased to be in full force and effect, or the Borrower or any
Governmental Authority with jurisdiction over the Borrower shall, or shall
purport to, terminate, repudiate, declare voidable or void or otherwise
contest, any Loan Document or any material term or provision thereof or any
obligation or liability of the Borrower thereunder.
(k) An event or condition specified in Section 5.01(h) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan or any Lien
arises pursuant to ERISA and, as a result of such event or condition or
Liens, together with all other such events or conditions or Liens, the
Borrower or any ERISA Affiliate shall incur or shall be reasonably likely
to incur a liability to a Plan, a Multiemployer Plan or PBGC or suffer an
encumbrance to exist in favor of any thereof (or any combination of the
foregoing) which would constitute a Material Adverse Effect.
(l) The Borrower or any Subsidiary of the Borrower shall have violated
any Environmental Law or become subject to any Environmental Claim and, in
either case, the Required Lenders shall have determined (which
determination shall be conclusive provided it is reached in good faith)
that such event would reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect.
(m) A proceeding shall have been instituted in respect of the Borrower
or any Subsidiary of the Borrower:
(i) seeking to have an order for relief entered in respect of
such Person, or seeking a declaration or entailing a finding that such
Person is insolvent or a similar declaration or finding, or seeking
dissolution, winding-up, charter revocation or forfeiture,
liquidation, reorganization, arrangement, adjustment, composition or
other similar relief with respect to such Person, its assets or its
debts
57
<PAGE>
under any Law relating to bankruptcy, insolvency, relief of debtors or
protection of creditors, termination of legal entities or any other
similar Law now or hereafter in effect, or
(ii) seeking appointment of a receiver, trustee, liquidator,
assignee, sequestrator or other custodian for such Person or for all
or any substantial part of its Property,
and such proceeding shall result in the entry, making or grant of any such
order for relief, declaration, finding, relief or appointment, or such
proceeding shall remain undismissed and unstayed for a period of thirty
consecutive days.
(n) The Borrower or any Subsidiary of the Borrower shall become
insolvent; shall fail to pay, become unable to pay, or state that it is or
will be unable to pay, its debts as they become due; shall voluntarily
suspend transaction of its business; shall make a general assignment for
the benefit of creditors; shall institute (or fail to controvert in a
timely and appropriate manner) a proceeding described in Section
7.01(m)(i), or (whether or not any such proceeding has been instituted)
shall consent to or acquiesce in any such order for relief, declaration,
finding or relief described therein; shall institute (or fail to controvert
in a timely and appropriate manner) a proceeding described in Section
7.01(m)(ii), or (whether or not any such proceeding has been instituted)
shall consent to or acquiesce in any such appointment or to the taking of
possession by any such custodian of all or any substantial part of its
Property; shall dissolve, wind-up, revoke or forfeit its charter (or other
constituent documents) or liquidate itself or any substantial part of its
Property; or shall take any action in furtherance of any of the foregoing.
(o) A Change in Control shall occur.
(p) NPC or SPPC shall cease to maintain a first mortgage bond rating
of at least Baa3 by Moody's and BBB- by S&P.
(q) The Borrower shall fail to maintain ongoing utility segment-
identifiable assets (exclusive of cash and marketable securities) and
operating income relating to the generation, transmission and/or
distribution of electricity, gas or water in a proportion not less than 80%
of total assets (exclusive of cash and marketable securities) and operating
income.
SECTION 7.02 Consequences of an Event of Default.
-----------------------------------
(a) If an Event of Default specified in subsections (a) through (l),
(o), (p) or (q) of Section 7.01 shall occur and, be continuing or shall exist,
then, in addition to all other rights and remedies which the Administrative
Agent or any Lender may have hereunder or under any other Loan Document, at law,
in equity or otherwise, the Lenders shall be under no further obligation to make
Loans hereunder, and the Administrative Agent may, and, upon the written request
of the Required Lenders shall, by notice to the Borrower, from time to time do
any or all of the following:
58
<PAGE>
(i) Declare the Commitments terminated, whereupon the Commitments
will terminate and any fees hereunder shall be immediately due and payable
without presentment, demand, protest or further notice of any kind, all of
which are hereby waived, and an action therefor shall immediately accrue.
(ii) Declare the unpaid principal amount of the Loans, interest
accrued thereon and all other obligations to be immediately due and payable
without presentment, demand, protest or further notice of any kind, all of
which are hereby waived, and an action therefor shall immediately accrue.
(b) If an Event of Default specified in subsection (m) or (n) of
Section 7.01 shall occur or exist, then, in addition to all other rights and
remedies which the Administrative Agent or any Lender may have hereunder or
under any other Loan Document, at law, in equity or otherwise, the Commitments
shall automatically terminate and the Lenders shall be under no further
obligation to make Loans, and the unpaid principal amount of the Loans, interest
accrued thereon and all other obligations shall become immediately due and
payable without presentment, demand, protest or notice of any kind, all of which
are hereby waived, and an action therefor shall immediately accrue.
ARTICLE VIII
THE AGENTS
SECTION 8.01 Appointment.
-----------
Each Lender hereby irrevocably appoints Mellon Bank, N.A. to act as
Administrative Agent for such Lender under this Agreement and the other Loan
Documents. Each Lender hereby irrevocably authorizes the Administrative Agent
to take such action on behalf of such Lender under the provisions of this
Agreement and the other Loan Documents, and to exercise such powers and to
perform such duties, as are expressly delegated to or required of the
Administrative Agent by the terms hereof or thereof, together with such powers
as are reasonably incidental thereto. Mellon Bank, N.A. hereby agrees to act as
Administrative Agent on behalf of the Lenders on the terms and conditions set
forth in this Agreement and the other Loan Documents, subject to its right to
resign as provided in Section 8.10. Each Lender hereby irrevocably authorizes
the Administrative Agent to execute and deliver each of the Loan Documents
executed after the date hereof and to accept delivery of such of the other Loan
Documents delivered after the date hereof as may not require execution by the
Administrative Agent (with such consents of the Lenders as required pursuant to
Section 9.01). Each Lender agrees that the rights and remedies granted to the
Administrative Agent under the Loan Documents shall be exercised exclusively by
the Administrative Agent, and that no Lender shall have any right individually
to exercise any such right or remedy, except to the extent expressly provided
herein or therein.
SECTION 8.02 General Nature of Administrative Agent's Duties.
-----------------------------------------------
Notwithstanding anything to the contrary elsewhere in this Agreement
or in any other Loan Document:
59
<PAGE>
(a) The Administrative Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the other Loan
Documents, and no implied duties or responsibilities on the part of the
Administrative Agent shall be read into this Agreement or any other Loan
Document or shall otherwise exist.
(b) The duties and responsibilities of the Administrative Agent under
this Agreement and the other Loan Documents shall be mechanical and
administrative in nature, and the Administrative Agent shall not have a
fiduciary relationship in respect of any Lender.
(c) The Administrative Agent is and shall be solely the agent of the
Lenders. The Administrative Agent does not assume, and shall not at any
time be deemed to have, any relationship of agency or trust with or for, or
any other duty or responsibility to, the Borrower or any other Person
(except only for its relationship as agent for, and its express duties and
responsibilities to, the Lenders as provided in this Agreement and the
other Loan Documents).
(d) The Administrative Agent shall be under no obligation to take any
action hereunder or under any other Loan Document if the Administrative
Agent believes in good faith that taking such action may conflict with any
Law or any provision of this Agreement or any other Loan Document, or may
require the Administrative Agent to qualify to do business in any
jurisdiction where it is not then so qualified.
SECTION 8.03 Exercise of Powers.
------------------
The Administrative Agent shall take any action of the type specified
in this Agreement or any other Loan Document as being within the Administrative
Agent's rights, powers or discretion in accordance with directions from the
Required Lenders (or, to the extent this Agreement or such Loan Document
expressly requires the direction or consent of some other Person or set of
Persons, then instead in accordance with the directions of such other Person or
set of Persons). In the absence of such directions, the Administrative Agent
shall have the authority (but under no circumstances shall be obligated), in its
sole discretion, to take any such action, except to the extent that this
Agreement or such Loan Document expressly requires the direction or consent of
the Required Lenders (or some other Person or set of Persons), in which case the
Administrative Agent shall not take such action absent such direction or
consent. Any action or inaction pursuant to such direction, discretion or
consent shall be binding on all the Lenders. The Administrative Agent shall not
have any liability to any Person as a result of (a) the Administrative Agent
acting or refraining from acting in accordance with the directions of the
Required Lenders (or other applicable Person or set of Persons), (b) the
Administrative Agent refraining from acting in the absence of instructions to
act from the Required Lenders (or other applicable Person or set of Persons),
whether or not the Administrative Agent has discretionary power to take such
action, or (c) the Administrative Agent taking discretionary action it is
authorized to take under this Section (subject, in the case of clauses (b) and
(c), to the provisions of Section 8.04(a)).
60
<PAGE>
SECTION 8.04 General Exculpatory Provisions.
------------------------------
Notwithstanding anything to the contrary elsewhere in this Agreement
or any other Loan Document:
(a) The Administrative Agent shall not be liable for any action taken
or omitted to be taken by it under or in connection with this Agreement or
any other Loan Document, unless caused by its own gross negligence or
willful misconduct.
(b) The Administrative Agent shall not be responsible for (i) the
execution, delivery, effectiveness, enforceability, genuineness, validity
or adequacy of this Agreement or any other Loan Document, (ii) any recital,
representation, warranty, document, certificate, report or statement in,
provided for in, or received under or in connection with, this Agreement or
any other Loan Document, (iii) any failure of the Borrower or any Lender to
perform any of their respective obligations under this Agreement or any
other Loan Document, or (iv) the existence, validity, enforceability,
perfection, recordation, priority, adequacy or value, now or hereafter, of
any Lien or other direct or indirect security afforded or purported to be
afforded by any of the Loan Documents or otherwise from time to time.
(c) The Administrative Agent shall not be under any obligation to
ascertain, inquire or give any notice relating to (i) the performance or
observance of any of the terms or conditions of this Agreement or any other
Loan Document on the part of the Borrower, (ii) the business, operations,
condition (financial or otherwise) or prospects of the Borrower or any
other Person, or (iii) except to the extent set forth in Section 8.05(f),
the existence of any Default or Event of Default.
(d) The Administrative Agent shall not be under any obligation, either
initially or on a continuing basis, to provide any Lender with any notices,
reports or information of any nature, whether in its possession presently
or hereafter, except for such notices, reports and other information
expressly required by this Agreement or any other Loan Document to be
furnished by the Administrative Agent to such Lender.
SECTION 8.05 Administration by the Administrative Agent.
------------------------------------------
(a) The Administrative Agent may rely upon any notice or other
communication of any nature (written or oral, including but not limited to
telephone conversations, whether or not such notice or other communication is
made in a manner permitted or required by this Agreement or any other Loan
Document) purportedly made by or on behalf of the proper party or parties, and
the Administrative Agent shall not have any duty to verify the identity or
authority of any Person giving such notice or other communication.
(b) The Administrative Agent may consult with legal counsel
(including, without limitation, in-house counsel for the Administrative Agent or
in-house or other counsel for the Borrower), independent public accountants and
any other experts selected by it from time to time, and the Administrative Agent
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts.
61
<PAGE>
(c) The Administrative Agent may conclusively rely upon the truth of
the statements and the correctness of the opinions expressed in any certificates
or opinions furnished to the Administrative Agent in accordance with the
requirements of this Agreement or any other Loan Document. Whenever the
Administrative Agent shall deem it necessary or desirable that a matter be
proved or established with respect to the Borrower or any Lender, such matter
may be established by a certificate of the Borrower or such Lender, as the case
may be, and the Administrative Agent may conclusively rely upon such certificate
(unless other evidence with respect to such matter is specifically prescribed in
this Agreement or another Loan Document).
(d) The Administrative Agent may fail or refuse to take any action
unless it shall be indemnified to its satisfaction from time to time against any
and all amounts, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature which
may be imposed on, incurred by or asserted against the Administrative Agent by
reason of taking or continuing to take any such action.
(e) The Administrative Agent may perform any of its duties under this
Agreement or any other Loan Document by or through agents or attorneys-in-fact.
The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
(f) The Administrative Agent shall not be deemed to have any knowledge
or notice of the occurrence of any Default or Event of Default unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default, and stating that
such notice is a "notice of default". If the Administrative Agent receives such
a notice, the Administrative Agent shall give prompt notice thereof to each
Lender.
SECTION 8.06 Lenders Not Relying on Administrative Agent or Other
----------------------------------------------------
Lenders.
- -------
Each Lender acknowledges as follows:
(a) Neither the Administrative Agent nor any other Lender has made any
representations or warranties to it, and no act taken hereafter by the
Administrative Agent or any other Lender shall be deemed to constitute any
representation or warranty by the Administrative Agent or such other Lender
to it.
(b) It has, independently and without reliance upon the Administrative
Agent or any other Lender, and based upon such documents and information as
it has deemed appropriate, made its own credit and legal analysis and
decision to enter into this Agreement and the other Loan Documents.
(c) It will, independently and without reliance upon the
Administrative Agent or any other Lender, and based upon such documents and
information as it shall deem appropriate at the time, make its own
decisions to take or not take action under or in connection with this
Agreement and the other Loan Documents.
62
<PAGE>
SECTION 8.07 Indemnification.
---------------
Each Lender agrees to reimburse and indemnify the Administrative Agent
and its directors, officers, employees and agents (to the extent not reimbursed
by the Borrower and without limitation of the obligations of the Borrower to do
so, in each case pursuant to the terms of this Agreement and the other Loan
Documents), based on its Applicable Percentage, from and against any and all
amounts, losses, liabilities, claims, damages, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements of any kind or nature
(including, without limitation, the fees and disbursements of counsel for the
Administrative Agent or such other Person in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
the Administrative Agent or such other Person shall be designated a party
thereto) that may at any time be imposed on, incurred by or asserted against the
Administrative Agent or such other Person as a result of, or arising out of, or
in any way related to or by reason of, this Agreement, any other Loan Document,
any transaction from time to time contemplated hereby or thereby, or any
transaction financed in whole or in part or directly or indirectly with the
proceeds of any Loan, provided that no Lender shall be liable for any portion of
--------
such amounts, losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements resulting solely
from the gross negligence or willful misconduct of the Administrative Agent or
such other Person, as finally determined by a court of competent jurisdiction.
Payments under this Section 8.07 shall be due and payable on demand, and to the
extent that any Lender fails to pay any such amount on demand, such amount shall
bear interest for each day from the date of demand until paid (before and after
judgment) at a rate per annum (calculated on the basis of a year of 360 days and
actual days elapsed) which for each day shall be equal to the Federal Funds
Effective Rate for such day.
SECTION 8.08 Administrative Agent in its Individual Capacity.
-----------------------------------------------
With respect to its Commitment and the Obligations owing to it, the
Administrative Agent shall have the same rights and powers under this Agreement
and each other Loan Document as any other Lender and may exercise the same as
though it were not the Administrative Agent, and the terms "Lenders," "holders
of Notes" and like terms shall include the Administrative Agent in its
individual capacity as such. The Administrative Agent and its affiliates may,
without liability to account, make loans to, accept deposits from, acquire debt
or equity interests in, act as trustee under indentures of, and engage in any
other business with, the Borrower and any stockholder, subsidiary or affiliate
of the Borrower, as though the Administrative Agent were not the Administrative
Agent hereunder.
SECTION 8.09 Holders of Notes.
----------------
The Administrative Agent may deem and treat the Lender which is payee
of a Note as the owner and holder of such Note for all purposes hereof unless
and until an Assignment and Acceptance with respect to the assignment or
transfer thereof shall have been filed with the Administrative Agent in
accordance with Section 9.12. Any authority, direction or consent of any Person
who at the time of giving such authority, direction or consent is shown in the
Register as being a Lender shall be conclusive and binding on each present and
subsequent holder, transferee or assignee of any Note or Notes payable to such
Lender or of any Note or Notes issued in exchange therefor.
63
<PAGE>
SECTION 8.10 Successor Administrative Agent.
------------------------------
The Administrative Agent may resign at any time by giving 10 days'
prior written notice thereof to the Lenders and the Borrower. The
Administrative Agent may be removed by the Required Lenders at any time with or
without cause by giving 10 days, prior written notice thereof to the
Administrative Agent, the other Lenders and the Borrower. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed and consented to, and shall have accepted such appointment,
within 30 days after such notice of resignation or removal, then the retiring
Administrative Agent, on behalf of the Lenders, may appoint a successor
Administrative Agent. Each successor Administrative Agent shall be a commercial
bank or trust company organized under the Laws of the United States of America
or any State thereof and having a combined capital and surplus of at least
$1,000,000,000. The appointment of any successor Administrative Agent at any
time pursuant to this Section 8.10 shall be subject to the approval of the
Borrower, provided that at such time there shall not have occurred and be
continuing any Default or Event of Default, and provided further that the
Borrower's consent to any such appointment shall not be unreasonably withheld.
Upon the acceptance by a successor Administrative Agent of its appointment as
Administrative Agent hereunder, such successor Administrative Agent shall
thereupon succeed to and become vested with all the properties, rights, powers,
privileges and duties of the former Administrative Agent without further act,
deed or conveyance. Upon the effective date of resignation or removal of a
retiring Administrative Agent, the Administrative Agent shall be discharged from
its duties under this Agreement and the other Loan Documents, but the provisions
of this Agreement shall inure to its benefit as to any actions taken or omitted
by it while it was Administrative Agent under this Agreement. If and for so
long as no successor Administrative Agent shall have been appointed, then any
notice or other communication required or permitted to be given by the
Administrative Agent shall be sufficiently given if given by the Required
Lenders, all notices or other communications required or permitted to be given
to the Administrative Agent shall be given to each Lender, and all payments to
be made to the Administrative Agent shall be made directly to the Borrower or
Lender for whose account such payment is made.
SECTION 8.11 Additional Administrative Agents.
--------------------------------
If the Administrative Agent shall from time to time deem it necessary
or advisable, for its own protection in the performance of its duties hereunder
or in the interest of the Lenders, the Administrative Agent and the Borrower
shall execute and deliver a supplemental agreement and all other instruments and
agreements necessary or advisable in the opinion of the Administrative Agent to
constitute another commercial bank or trust company, or one or more other
Persons approved by the Administrative Agent, to act as co-Administrative Agent,
with such powers of the Administrative Agent as may be provided in such
supplemental agreement, and to vest in such bank, trust company or Person, as
such co-Administrative Agent, any properties, rights, powers, privileges and
duties of the Administrative Agent under this Agreement or any other Loan
Document. The appointment of any co-Administrative Agent at any time pursuant
to this Section 8.11 shall be subject to the approval of the Borrower, provided
that at such time there shall not have occurred and be continuing any Default or
Event of Default, and provided further that the Borrower's consent to any such
appointment shall not be unreasonably withheld.
64
<PAGE>
SECTION 8.12 Calculations.
------------
The Administrative Agent shall not be liable for any calculation,
apportionment or distribution of payments made by it in good faith, in the
absence of its own gross negligence or willful misconduct. If such calculation,
apportionment or distribution is subsequently determined to have been made in
error, the sole recourse of any Lender to whom payment was due but not made
(except as provided in the preceding sentence) shall be to recover from the
other Lenders any payment in excess of the amount to which they are determined
to be entitled or, if the amount due was not paid by the Borrower, to recover
such amount from the Borrower.
SECTION 8.13 Syndication Agents.
------------------
As Syndication Agents, neither First Union National Bank nor Wells
Fargo Bank, N.A. shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Lenders as such. Without limiting the foregoing, neither First Union National
Bank nor Wells Fargo Bank, N.A. shall have any or be deemed to have any
fiduciary relationship with any Lender. Each Lender acknowledges that it has
not relied, and will not rely, on First Union National Bank or Wells Fargo Bank,
N.A. in deciding to enter into this Agreement or in not taking action hereunder
or under the Loan Documents.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Amendments and Waivers.
----------------------
Neither this Agreement nor any other Loan Document may be amended,
modified or supplemented except in accordance with the provisions of this
Section 9.01. The Administrative Agent and the Borrower may from time to time
amend, modify or supplement the provisions of this Agreement or any other Loan
Document for the purpose of amending, adding to or waiving any provision, or
changing in any manner the rights and duties of the Borrower, the Administrative
Agent or any Lender. Any such amendment, modification or supplement made by the
Borrower and the Administrative Agent in accordance with the provisions of this
Section 9.01 shall be binding upon the Borrower, each Lender and the
Administrative Agent. The Administrative Agent shall enter into such
amendments, modifications or supplements from time to time as directed by the
Required Lenders, and only as so directed, provided, that no such amendment,
--------
modification or supplement may be made which will:
(a) Increase the Commitments of any Lender over the amount thereof
then in effect, without the written consent of each Lender affected
thereby;
(b) Extend either Revolving Termination Date, without the written
consent of all the Lenders;
(c) Reduce the principal amount of or extend the time for any payment
of principal of any Loan, or reduce the rate of interest or extend the time
for payment of any interest borne by any Loan, or extend the time for
payment of or reduce the amount of any fees, or reduce or postpone the date
for payment of any other obligation, without the written consent of each
Lender affected thereby;
65
<PAGE>
(d) Change the definition of "Required Lenders" or amend this Section
9.01 or Section 9.12(a) or any other provision of this Agreement that
requires the consent of all of the Lenders to the taking or failure to take
action hereunder, without the written consent of all the Lenders; or
(e) Amend or waive any of the provisions of Article VIII, or impose
additional duties upon the Administrative Agent or otherwise adversely
affect the rights, interests or obligations of the Administrative Agent,
without the written consent of the Administrative Agent;
and provided, further, that Assignment and Acceptances may be entered into in
--------
the manner provided in Section 9.12. Any such amendment, modification or
supplement must be in writing and shall be effective only to the extent set
forth in such writing. Any Default or Event of Default waived or consented to
in any such amendment, modification or supplement shall be deemed to be cured
and not continuing to the extent and for the period set forth in such waiver or
consent, but no such waiver or consent shall extend to any other or subsequent
Default or Event of Default or impair any right consequent thereto.
SECTION 9.02 No Implied Waiver; Cumulative Remedies.
--------------------------------------
No course of dealing and no delay or failure of the Administrative
Agent or any Lender in exercising any right, power or privilege under this
Agreement or any other Loan Document shall affect any other or future exercise
thereof or the exercise of any other right, power or privilege; nor shall any
single or partial exercise of any such right, power or privilege or any
abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any other right, power or
privilege. The rights and remedies of the Administrative Agent and the Lenders
under this Agreement and any other Loan Document are cumulative and not
exclusive of any rights or remedies which the Administrative Agent or any Lender
would otherwise have hereunder or thereunder, at law, in equity or otherwise.
SECTION 9.03 Notices.
-------
(a) Except to the extent otherwise expressly permitted hereunder or
thereunder, all notices, requests, demands, directions and other communications
(collectively "notices") under this Agreement or any other Loan Document shall
-------
be in writing (including telecopied communication) and shall be sent by first-
class mail, or by nationally-recognized overnight courier, or by telecopier
(with confirmation in writing mailed first-class or sent by such an overnight
courier), or by personal delivery. All notices shall be sent to the applicable
party at the address stated on the signature pages hereof or in accordance with
the last unrevoked written direction from such party to the other parties hereto
in all cases with postage or other charges prepaid. Any such properly given
notice shall be effective on the earliest to occur of receipt, telephone
confirmation of receipt of telecopy communication, one Business Day after
delivery to a nationally-recognized overnight courier, or three Business Days
after deposit in the mail.
(b) Any Lender giving any notice to the Borrower or any other party to
a Loan Document shall simultaneously send a copy thereof to the Administrative
Agent, and the
66
<PAGE>
Administrative Agent shall promptly notify the other Lenders of the receipt by
it of any such notice.
(c) The Administrative Agent and each Lender may rely on any notice
(whether or not such notice is made in a manner permitted or required by this
Agreement or any other Loan Document) purportedly made by or on behalf of the
Borrower, and neither the Administrative Agent nor any Lender shall have any
duty to verify the identity or authority of any Person giving such notice.
SECTION 9.04 Expenses; Taxes; Indemnity.
--------------------------
(a) The Borrower agrees to pay or cause to be paid and to save the
Administrative Agent and each of the Lenders harmless against liability for the
payment of all reasonable out-of-pocket costs and expenses (including but not
limited to reasonable fees and expenses of counsel) incurred by the
Administrative Agent or any Lender from time to time arising from or relating to
(i) in the case of the Administrative Agent, the negotiation, syndication,
preparation, execution, delivery, administration and performance of this
Agreement and the other Loan Documents, (ii) in the case of the Syndication
Agents, the syndication of this Agreement and the other Loan Documents, (iii) in
the case of the Administrative Agent, any amendments, modifications,
supplements, waivers or consents to this Agreement or any other Loan Document
(whether or not ultimately entered into or granted), and (iv) in the case of the
Administrative Agent or any Lender, the enforcement or preservation of rights
under this Agreement or any other Loan Document (including but not limited to
any such costs or expenses arising from or relating to (A) collection or
enforcement of an outstanding Loan or any other amount owing hereunder or
thereunder by the Administrative Agent or such Lender, and (B) any litigation,
proceeding, dispute, work-out, restructuring or rescheduling related in any way
to this Agreement or the Loan Documents).
(b) The Borrower hereby agrees to pay all stamp, document, transfer,
recording, filing, registration, search, sales and excise fees and taxes and all
similar impositions now or hereafter determined by the Administrative Agent or
any Lender to be payable in connection with this Agreement or any other Loan
Documents or any other documents, instruments or transactions pursuant to or in
connection herewith or therewith (which determination shall be conclusive
provided it is reached in good faith), and the Borrower agrees to save the
Administrative Agent and each Lender harmless from and against any and all
present or future claims, liabilities or losses with respect to or resulting
from any omission to pay or delay in paying any such fees, taxes or impositions.
(c) The Borrower hereby agrees to reimburse and indemnify each of the
Indemnified Parties from and against any and all losses, liabilities, claims,
damages, expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnified Party in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnified Party shall be
designated a party thereto) that may at any time be imposed on, asserted against
or incurred by such Indemnified Party as a result of, or arising out of, or in
any way related to or by reason of, this Agreement or any other Loan Document,
any transaction from time to time contemplated hereby or thereby, or
67
<PAGE>
any transaction financed in whole or in part or directly or indirectly with the
proceeds of any Loan (and without in any way limiting the generality of the
foregoing, including any violation or breach of any Environmental Law or any
other Law by the Borrower or any Subsidiary of the Borrower; any Environmental
Claim arising out of the management, use, control, ownership or operation of
Property by any of such Persons, including all onsite and off-site activities
involving Hazardous Materials; or any exercise by the Administrative Agent or
any Lender of any of its rights or remedies under this Agreement or any other
Loan Document); but excluding any such losses, liabilities, claims, damages,
expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements resulting solely from the gross negligence or willful misconduct
of such Indemnified Party, as finally determined by a court of competent
jurisdiction. If and to the extent that the foregoing obligations of the
Borrower under this subsection (c), or any other indemnification obligation of
the Borrower hereunder or under any other Loan Document, are unenforceable for
any reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable Law.
SECTION 9.05 Severability.
------------
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
SECTION 9.06 Prior Understandings.
--------------------
This Agreement, the other Loan Documents and that certain letter
agreement regarding fees dated March 30, 1999 among Mellon Bank, N.A., SPPC and
the Borrower, as such agreements shall be amended from time to time, supersede
all prior and contemporaneous understandings and agreements, whether written or
oral, among the parties hereto relating to the transactions provided for herein
and therein.
SECTION 9.07 Duration; Survival.
------------------
All representations and warranties of the Borrower contained herein or
in any other Loan Document or made in connection herewith or therewith shall
survive the making, and shall not be waived by the execution and delivery, of
this Agreement or any other Loan Document, any investigation by or knowledge of
the Administrative Agent or any Lender, the making of any Loan, or any other
event or condition whatever. All covenants and agreements of the Borrower
contained herein or in any other Loan Document shall continue in full force and
effect from and after the date hereof so long as the Borrower may borrow
hereunder and until payment in full of all Obligations. Without limitation, all
obligations of the Borrower hereunder or under any other Loan Document to make
payments to or indemnify the Administrative Agent or any Lender shall survive
the payment in full of all other Obligations, termination of the Borrower's
right to borrow hereunder, and all other events and conditions whatever. In
addition, all obligations of each Lender to make payments to or indemnify the
Administrative Agent shall survive the payment in full by the Borrower of all
Obligations, termination of the Borrower's right to borrow hereunder, and all
other events or conditions whatever.
68
<PAGE>
SECTION 9.08 Counterparts.
------------
This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.
SECTION 9.09 Limitation on Payments.
----------------------
The parties hereto intend to conform to all applicable Laws in effect
from time to time limiting the maximum rate of interest that may be charged or
collected. Accordingly, notwithstanding any other provision hereof or of any
other Loan Document, the Borrower shall not be required to make any payment to
or for the account of any Lender, and each Lender shall refund any payment made
by the Borrower, to the extent that such requirement or such failure to refund
would violate or conflict with nonwaivable provisions of applicable Laws
limiting the maximum amount of interest which may be charged or collected by
such Lender.
SECTION 9.10 Set-Off.
-------
The Borrower hereby agrees that, to the fullest extent permitted by
Law, if any Obligation of the Borrower shall be due and payable (by acceleration
or otherwise), each Lender shall have the right, without notice to the Borrower,
to set-off against and to appropriate and apply to such Obligation any
indebtedness, liability or obligation of any nature owing to the Borrower by
such Lender, including but not limited to all deposits (whether time or demand,
general or special, provisionally credited or finally credited, whether or not
evidenced by a certificate of deposit) now or hereafter maintained by the
Borrower with such Lender. Such right shall be absolute and unconditional in
all circumstances and, without limitation shall exist whether or not such Lender
or any other Person shall have given notice or made a demand to the Borrower or
any other Person, whether such indebtedness, obligation or liability owed to the
Borrower is contingent, absolute, matured or unmatured (it being agreed that
such Lender may deem such indebtedness, obligation or liability to be then due
and payable at the time of such setoff), and regardless of the existence or
adequacy of any collateral, guaranty or any other security, right or remedy
available to any Lender or any other Person. The Borrower hereby agrees that,
to the fullest extent permitted by Law, any Participant and any branch,
subsidiary or affiliate of any Lender or any Participant shall have the same
rights of set-off as a Lender as provided in this Section (regardless of whether
such Participant, branch, subsidiary or affiliate would otherwise be deemed in
privity with or a direct creditor of the Borrower). The rights provided by this
Section are in addition to all other rights of set-off and banker's lien and all
other rights and remedies which any Lender (or any such Participant, branch,
subsidiary or affiliate) may otherwise have under this Agreement, any other Loan
Document, at law or in equity, or otherwise, and nothing in this Agreement or
any other Loan Document shall be deemed a waiver or prohibition of or
restriction on the rights of set-off or bankers' lien of any such Person.
SECTION 9.11 Sharing of Collections.
----------------------
The Lenders hereby agree among themselves that if any Lender shall
receive (by voluntary payment, realization upon security, set-off or from any
other source) any amount on account of the Loans, interest thereon, or any other
Obligation contemplated by this Agreement or
69
<PAGE>
the other Loan Documents to be made by the Borrower pro rata to all Lenders (or
pro rata to holders of Notes) in greater proportion than any such amount
received by any other applicable Lender, then the Lender receiving such
proportionately greater payment shall notify each other Lender and the
Administrative Agent of such receipt, and equitable adjustment will be made in
the manner stated in this Section 9.11 so that, in effect, all such excess
amounts will be shared ratably among all of the applicable Lenders. The Lender
receiving such excess amount shall purchase (which it shall be deemed to have
done simultaneously upon the receipt of such excess amount) for cash from the
other applicable Lenders a participation in the applicable Obligations owed to
such other Lenders in such amount as shall result in a ratable sharing by all
applicable Lenders of such excess amount (and to such extent the receiving
Lender shall be a Participant). If all or any portion of such excess amount is
thereafter recovered from the Lender making such purchase, such purchase shall
be rescinded and the purchase price restored to the extent of such recovery,
together with interest or other amounts, if any, required by Law to be paid by
the Lender making such purchase. The Borrower hereby consents to and confirms
the foregoing arrangements. Each Participant shall be bound by this Section as
fully as if it were a Lender hereunder.
SECTION 9.12 Successors and Assigns; Participations; Assignments.
---------------------------------------------------
(a) Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the Borrower, the Lenders, all future holders of the
Notes, the Agents and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights hereunder or interests
herein without the prior written consent of all the Lenders and the
Administrative Agent, and any purported assignment without such consent shall be
void.
(b) Participations. Any Lender may, in the ordinary course of its
--------------
commercial banking business and in accordance with applicable Law, at any time
sell participations to one or more commercial banks or other Persons (each a
"Participant") in all or a portion of its rights and obligations under this
- ------------
Agreement and the other Loan Documents (including, without limitation, all or a
portion of its Commitments and the Loans owing to it and any Note held by it);
provided, that
- --------
(i) any such Lender's obligations under this Agreement and the other
Loan Documents shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations,
(iii) the parties hereto shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations
under this Agreement and each of the other Loan Documents,
(iv) such Participant shall be bound by the provisions of Section
9.11, and
(v) no Participant (unless such Participant is an Affiliate of such
Lender, or is itself a Lender) shall be entitled to require such Lender to
take or refrain from taking action under this Agreement or under any other
Loan Document, except that such Lender may agree with such Participant that
such Lender will not, without such Participant's consent, take any action,
or consent to the taking of any action, of the type described in Section
9.01(a), (b) or (c).
70
<PAGE>
The Borrower agrees that any such Participant shall be entitled to the benefits
of Sections 2.13, 2.14, 2.15 and 9.04 with respect to its participation in the
Commitments and the Loans outstanding from time to time; provided, that no such
--------
Participant shall be entitled to receive any greater amount pursuant to such
Sections than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred to such Participant had
no such transfer occurred.
(c) Assignments. Any Lender may, in the ordinary course of its
-----------
commercial banking business and in accordance with applicable Law, at any time
assign all or a portion of its rights and obligations under this Agreement and
the other Loan Documents (including, without limitation, all or any portion of
its Commitments and Loans owing to it and any Note held by it) to any Lender,
any Affiliate of a Lender or to one or more additional commercial banks or other
Persons (each a "Purchasing Lender"); provided, that
----------------- --------
(i) any such assignment to a Purchasing Lender which is not a Lender
or an affiliate of a Lender shall be made only with the consent (which in
each case shall not be unreasonably withheld) of the Borrower (so long as
no Default or Event of Default shall have occurred and be continuing) and
the Administrative Agent;
(ii) if a Lender makes such an assignment of less than all of its
then remaining rights and obligations under this Agreement and the other
Loan Documents, such transferor Lender shall retain, after such assignment,
a minimum principal amount of $10,000,000 of the Commitments and Loans then
outstanding, and such assignment, unless made to an assignee who is a
Lender hereunder prior to such assignment, shall be in a minimum principal
amount of $10,000,000 of the Commitments and Loans then outstanding;
(iii) each such assignment shall be of a constant, and not a varying,
percentage of the 364-Day Commitment and 3-Year Commitment of the
transferor Lender and of all of the transferor Lender's rights and
obligations under this Agreement and the other Loan Documents; and
(iv) each such assignment shall be made pursuant to an Assignment and
Acceptance.
In order to effect any such assignment, the transferor Lender and the Purchasing
Lender shall execute and deliver to the Administrative Agent a duly completed
Assignment and Acceptance (including the consents required by clause (i) of the
preceding sentence) with respect to such assignment, together with any Note or
Notes subject to such assignment and a processing and recording fee of $3,500;
and, upon receipt thereof, the Administrative Agent shall accept such Assignment
and Acceptance. Upon receipt of notice from the transferor Lender that it has
received the consideration described in the Assignment and Acceptance, the
Administrative Agent shall record such acceptance in the Register. Upon such
execution, delivery, acceptance and recording, from and after the close of
business at the Administrative Agent's Office on the settlement date specified
in such Assignment and Acceptance:
(x) the Purchasing Lender shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, shall have the rights and
obligations of a Lender hereunder, and
71
<PAGE>
(y) the transferor Lender thereunder shall be released from its
obligations under this Agreement to the extent so transferred (and, in the
case of an Assignment and Acceptance covering all or the remaining portion
of a transferor Lender's rights and obligations under this Agreement, such
transferor Lender shall cease to be a party to this Agreement) from and
after the settlement date.
On or prior to the settlement date specified in an Assignment and Acceptance,
the Borrower, at its expense, shall execute and deliver to the Administrative
Agent (for delivery to the Purchasing Lender) new Notes evidencing such
Purchasing Lender's assigned Commitments or Loans and (for delivery to the
transferor Lender) replacement Notes in the principal amount of the Loans or
Commitments retained by the transferor Lender (such Notes to be in exchange for,
but not in payment of, those Notes then held by such transferor Lender). Each
such Note shall be dated the date and be substantially in the form of the
predecessor Note. The Administrative Agent shall mark the predecessor Notes
"exchanged" and deliver them to the Borrower. Accrued interest and accrued fees
shall be paid to the Purchasing Lender at the same time or times provided in the
predecessor Notes and this Agreement.
(d) Register. The Administrative Agent shall maintain at its office a
--------
copy of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Lenders and
- ---------
the Commitments of, and principal amount of the Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive absent 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 the Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Financial and Other Information. The Borrower authorizes the
-------------------------------
Administrative Agent and each Lender to disclose to any Participant or
Purchasing Lender (each, a "transferee") and any prospective transferee any and
----------
all financial and other information in such Person's possession concerning the
Borrower and its Subsidiaries and Affiliates which has been or may be delivered
to such Person by or on behalf of the Borrower in connection with this Agreement
or any other Loan Document or such Person's credit evaluation of the Borrower
and its Subsidiaries and Affiliates.
(f) Assignments to Federal Reserve Bank. Any Lender may at any time
-----------------------------------
assign all or any portion of its rights under this Agreement, including without
limitation any Loans owing to it, and any Note held by it, to a Federal Reserve
Bank. No such assignment shall relieve the transferor Lender from its
obligations hereunder.
(g) Special Purpose Funding Vehicles. Notwithstanding anything to the
--------------------------------
contrary contained herein, any Lender (a "Granting Lender") may grant to a
special purpose funding vehicle (an "SPC") the option to fund all or any part of
any Loan that such Granting Lender would otherwise be obligated to fund pursuant
to this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to fund any Loan, and (ii) if an SPC elects not to
exercise such option or otherwise fails to fund all or any part of such Loan,
the Granting Lender shall be obligated to fund such Loan pursuant to the terms
hereof. The funding of a Loan by an SPC hereunder shall utilize the Revolving
Credit Commitment of the Granting
72
<PAGE>
Lender to the same extent, and as if, such Loan were funded by such Granting
Lender. Each party hereto hereby agrees that no SPC shall be liable for any
indemnity or payment under this Agreement for which a Lender would otherwise be
liable for so long as, and to the extent, the Granting Lender provides such
indemnity or makes such payment. Notwithstanding anything to the contrary
contained in this Agreement, any SPC may disclose on a confidential basis any
non-public information relating to its funding of Loans to any rating agency,
commercial paper dealer or provider of any surety or guarantee to such SPC. This
Section may not be amended without the prior written consent of each Granting
Lender, all or any part of whose Loan is being funded by an SPC at the time of
such amendment.
SECTION 9.13 Governing Law; Submission to Jurisdiction Waiver of Jury
--------------------------------------------------------
Trial; Limitation of Liability.
- ------------------------------
(a) Governing Law. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS
-------------
(EXCEPT TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH OTHER LOAN
DOCUMENTS) SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES.
(b) Certain Waivers. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
---------------
AND UNCONDITIONALLY:
(i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON ARISING
FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN
CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED LITIGATION") MAY
------------------
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING
IN NEW YORK, NEW YORK AND SUBMITS TO THE JURISDICTION OF SUCH COURTS (AND,
TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER AGREES THAT IT WILL
NOT BRING ANY RELATED LITIGATION IN ANY OTHER FORUM, BUT NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO BRING
ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM IN WHICH THE BORROWER OR
ANY OF ITS ASSETS MAY BE LOCATED OR IN WHICH THE BORROWER MAY BE DOING
BUSINESS OR THE RIGHT OF THE BORROWER TO ASSERT ANY DEFENSE OR COUNTERCLAIM
TO ANY ACTION BROUGHT BY THE ADMINISTRATIVE AGENT OR ANY LENDER IN ANY
FORUM);
(ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING
OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES ANY
CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY RELATED
LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE
JURISDICTION OVER IT;
73
<PAGE>
(iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED
U.S. MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS FOR NOTICES DESCRIBED IN
SECTION 9.03, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN
EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT
THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER
PERMITTED BY LAW); AND
(iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION.
(c) Limitation of Liability. TO THE FULLEST EXTENT PERMITTED BY
-----------------------
LAW, NO CLAIM MAY BE MADE BY ANY PARTY TO THIS AGREEMENT AGAINST ANY OTHER PARTY
TO THIS AGREEMENT OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR
AGENT OF ANY OF THEM FOR ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM ARISING FROM OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT,
OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (WHETHER FOR
BREACH OF CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY). EACH PARTY TO THIS
AGREEMENT HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY
SUCH DAMAGES, WHETHER SUCH CLAIM PRESENTLY EXISTS OR ARISES HEREAFTER AND
WHETHER OR NOT SUCH CLAIM IS KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
74
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
Address SIERRA PACIFIC RESOURCES
- -------
Sierra Pacific Resources
6100 Neil Road
P.O. Box 30150 By____________________________
Reno, Nevada 89520 Name:
Attn: Mark Ruelle Title:
75
<PAGE>
Address MELLON BANK, N.A., as Administrative
- ------- Agent, Arranger and as a Lender
Mellon Bank
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Attn: Richard A. Matthews By_______________________________
Name: Richard A. Matthews
Title: Vice President
76
<PAGE>
Address FIRST UNION NATIONAL BANK, as
- ------- Syndication Agent and as a Lender
First Union National Bank
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0735 By_______________________________
Attn: Dana Maloney Name:
Title:
77
<PAGE>
Address WELLS FARGO BANK, N.A., as
- ------- Syndication Agent and as a Lender
Wells Fargo Bank
201 Third Street
8/th/ Floor
San Francisco, California 94103 By_______________________________
Attn: Maria Josefa Prosperi Name:
Title:
78
<PAGE>
Address BANK OF AMERICA NATIONAL TRUST
- ------- AND SAVINGS ASSOCIATION
Bank of America
300 South Fourth Street
2/nd/ Floor
Las Vegas, Nevada 89101 By_______________________________
Attn: Dolores A. Rippo Name:
Title:
79
<PAGE>
Address THE BANK OF NEW YORK
- -------
The Bank of New York
One Wall Street
New York, New York 10286 By_______________________________
Attn: Kathy D'Elena Name:
Title:
80
<PAGE>
Address THE FIRST NATIONAL BANK OF CHICAGO
- -------
The First National Bank of Chicago
One First National Plaza
Suite 0573
Chicago, Illinois By_______________________________
Attn: Mari Albanese Name:
Title:
81
<PAGE>
Address CREDIT SUISSE FIRST BOSTON
- -------
Credit Suisse First Boston
5 World Trade Center
New York, New York 10048 By_______________________________
Attn: Genaro Sarasola Name:
Title:
82
<PAGE>
Address PARIBAS
- -------
Paribas
787 7/th/ Avenue
New York, New York 10019 By____________________________
Attn: Telca Hurley Name:
Title:
By____________________________
Name:
Title:
83
<PAGE>
Address UNION BANK OF CALIFORNIA, N.A.
- -------
Union Bank of California
Energy Capital Services - LA Office
445 South Figueroa Street By_____________________________
15/th/ Floor Name:
Los Angeles, CA 90071 Title:
Attn Patricia A. Gonzales
84
<PAGE>
Address BANK OF MONTREAL
- -------
Bank of Montreal
700 Louisiana Street
Suite 4400 By_______________________________
Houston, TX 77002 Name: Cahal B. Carmody
Attn: Cahal B. Carmody Title: Director
85
<PAGE>
Address BAYERISCHE LANDESBANK
- ------- GIROZENTRALE
Bayerische Landesbank Girozentrale
560 Lexington Avenue
New York, New York 10022
Attn: Patricia Sanchez By______________________________
Name: Peter Obermann
Title: Senior Vice President
By_______________________________
Name: Sean O'Sullivan
Title: Vice President
86
<PAGE>
Address FLEET NATIONAL BANK
- -------
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110 By_______________________________
Attn: Francia Castillo, Loan Administrator Name:
Title:
87
<PAGE>
Address FIRST SECURITY BANK OF NEVADA
- -------
First Security Bank of Nevada
P.O. Box 19250
Las Vegas, Nevada 89132 By_______________________________
Attn: Cheryl Moss Name: Cheryl Moss
Title: Senior Vice President & Manager
Corporate Banking Department
88
<PAGE>
Address KBC BANK, N.V.
- -------
KBC Bank, N.V.
125 West 55/th/ Street
10/th/ Floor By______________________________
New York, New York 10019 Name:
Attn: Claire Kowalski/Charlene Cumberbatch Title:
By______________________________
Name:
Title:
89
<PAGE>
Address U.S. BANK NATIONAL ASSOCIATION
- -------
U.S. Bank National Association
Commercial Loan Servicing Department
555 S.W. Oak Street, PL-7 By______________________________
Portland, Oregon 97204 Name:
Attn: Jan Knox, Participation Specialist Title:
90
<PAGE>
I
-
Commitments
-----------
[See definitions of "Commitment" in Section 1.01]
364-Day Commitments
-------------------
LENDER COMMITMENT AMOUNT
- ------ -----------------
Mellon Bank, N.A. $ 15,937,500
First Union National Bank $ 12,187,500
Wells Fargo Bank, N.A. $ 12,187,500
Bank of America National
Trust and Savings Association $ 11,250,000
The Bank of New York $ 11,250,000
The First National Bank of Chicago $ 11,250,000
Credit Suisse First Boston $ 11,250,000
Paribas $ 11,250,000
Union Bank of California, N.A. $ 11,250,000
Bank of Montreal $ 9,375,000
Bayerische Landesbank Girozentrale $ 9,375,000
Fleet National Bank $ 9,375,000
First Security Bank of Nevada $ 4,687,500
KBC Bank, N.V. $ 4,687,500
U.S. Bank National Association $ 4,687,500
Total $150,000,000
============
91
<PAGE>
SCHEDULE I
Page 2
3-Year Commitments
------------------
LENDER COMMITMENT AMOUNT
- ------ -----------------
Mellon Bank, N.A. $ 37,187,500
First Union National Bank $ 28,437,500
Wells Fargo Bank, N.A. $ 28,437,500
Bank of America National
Trust and Savings Association $ 26,250,000
The Bank of New York $ 26,250,000
The First National Bank of Chicago $ 26,250,000
Credit Suisse First Boston $ 26,250,000
Banque Paribas $ 26,250,000
Union Bank of California, N.A. $ 26,250,000
Bank of Montreal $ 21,875,000
Bayerische Landesbank Girozentrale $ 21,875,000
Fleet National Bank $ 21,875,000
First Security Bank of Nevada $ 10,937,500
KBC Bank, N.V. $ 10,937,500
U.S. Bank National Association $ 10,937,500
Total $350,000,000
============
92
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS; CONSTRUCTION............................................................... 1
SECTION 1.01 Defined Terms............................................................. 1
SECTION 1.02. Classification of Loans and Borrowings................................... 17
SECTION 1.03 Terms Generally........................................................... 17
SECTION 1.04 Accounting Terms; GAAP.................................................... 17
ARTICLE II
THE CREDITS............................................................................. 17
SECTION 2.01 The Commitments........................................................... 17
SECTION 2.02 Loans and Borrowings...................................................... 18
SECTION 2.03 Requests for Revolving Borrowings......................................... 19
SECTION 2.04 Funding of Borrowings..................................................... 20
SECTION 2.05 Interest Elections........................................................ 20
SECTION 2.06 Termination, Reduction and Extension of Commitments....................... 22
SECTION 2.07 Term Loan Conversion Option............................................... 25
SECTION 2.08 Repayment of Loans; Evidence of Debt...................................... 26
SECTION 2.09 Prepayment of Loans....................................................... 27
SECTION 2.10 Fees...................................................................... 28
SECTION 2.11 Interest.................................................................. 28
SECTION 2.12 Alternate Rate of Interest................................................ 29
SECTION 2.13 Increased Costs........................................................... 30
SECTION 2.14 Break Funding Payments.................................................... 30
SECTION 2.15 Taxes..................................................................... 31
SECTION 2.16 Payments Generally; Pro Rata Treatment; Sharing of Set-offs............... 32
SECTION 2.17 Mitigation Obligations; Replacement of Lenders............................ 34
ARTICLE III
REPRESENTATIONS AND WARRANTIES.......................................................... 35
SECTION 3.01 Corporate Status.......................................................... 35
SECTION 3.02 Corporate Power and Authorization......................................... 35
SECTION 3.03 Execution and Binding Effect.............................................. 35
SECTION 3.04 Governmental Approvals and Filings........................................ 35
</TABLE>
93
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 3.05 Absence of Conflicts...................................................... 36
SECTION 3.06 Audited Financial Statements.............................................. 36
SECTION 3.07 Interim Financial Statements.............................................. 36
SECTION 3.08 Absence of Undisclosed Liabilities........................................ 37
SECTION 3.09 Absence of Material Adverse Effect........................................ 37
SECTION 3.10 Accurate and Complete Disclosure.......................................... 37
SECTION 3.11 Margin Regulations........................................................ 37
SECTION 3.12 Litigation................................................................ 38
SECTION 3.13 Absence of Events of Default.............................................. 38
SECTION 3.14 Absence of Other Conflicts................................................ 38
SECTION 3.15 Insurance................................................................. 38
SECTION 3.16 Title to Property; No Liens............................................... 38
SECTION 3.17 Taxes..................................................................... 39
SECTION 3.18 Borrower Not An Investment Company or a Registered Public Utility Holding
Company................................................................... 39
SECTION 3.19 Environmental Matters..................................................... 39
SECTION 3.20 ERISA..................................................................... 40
SECTION 3.21 Year 2000 Issues.......................................................... 41
SECTION 3.22 Pari Passu Status......................................................... 41
SECTION 3.23 Indebtedness.............................................................. 41
ARTICLE IV
CONDITIONS.............................................................................. 42
SECTION 4.01 Effective Date............................................................ 42
SECTION 4.02 Conditions to All Loans................................................... 45
ARTICLE V
AFFIRMATIVE COVENANTS................................................................... 46
SECTION 5.01 Basic Reporting Requirements.............................................. 46
SECTION 5.02 Insurance................................................................. 49
SECTION 5.03 Payment of Taxes and Other Potential Charges and Priority Claims.......... 49
SECTION 5.04 Preservation of Corporate Status and Franchises........................... 49
SECTION 5.05 Governmental Approvals and Filings........................................ 50
SECTION 5.06 Maintenance of Properties................................................. 50
SECTION 5.07 Avoidance of Other Conflicts.............................................. 50
SECTION 5.08 Financial Accounting Practices............................................ 50
SECTION 5.09 Use of Proceeds........................................................... 51
SECTION 5.10 End of Fiscal Periods..................................................... 51
ARTICLE VI
NEGATIVE COVENANTS...................................................................... 51
</TABLE>
94
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 6.01 Financial Covenants....................................................... 51
SECTION 6.02 Liens..................................................................... 51
SECTION 6.03 Mergers................................................................... 53
SECTION 6.04 Dispositions of Properties................................................ 53
SECTION 6.05 Investments and Acquisitions.............................................. 54
SECTION 6.06 Dividends and Stock Repurchases........................................... 54
SECTION 6.07 Transactions with Affiliates.............................................. 54
SECTION 6.08 Equal and Ratable Lien.................................................... 54
SECTION 6.09 Restrictive Agreements.................................................... 54
SECTION 6.10 Year 2000................................................................. 55
ARTICLE VII
DEFAULTS................................................................................ 55
SECTION 7.01 Events of Default......................................................... 55
SECTION 7.02 Consequences of an Event of Default....................................... 58
ARTICLE VIII
THE AGENTS.............................................................................. 58
SECTION 8.01 Appointment............................................................... 58
SECTION 8.02 General Nature of Administrative Agent's Duties........................... 59
SECTION 8.03 Exercise of Powers........................................................ 59
SECTION 8.04 General Exculpatory Provisions............................................ 60
SECTION 8.05 Administration by the Administrative Agent................................ 61
SECTION 8.06 Lenders Not Relying on Administrative Agent or Other Lenders.............. 61
SECTION 8.07 Indemnification........................................................... 62
SECTION 8.08 Administrative Agent in its Individual Capacity........................... 62
SECTION 8.09 Holders of Notes.......................................................... 63
SECTION 8.10 Successor Administrative Agent............................................ 63
SECTION 8.11 Additional Administrative Agents.......................................... 64
SECTION 8.12 Calculations.............................................................. 64
SECTION 8.13 Syndication Agents........................................................ 64
ARTICLE IX
MISCELLANEOUS........................................................................... 64
SECTION 9.01 Amendments and Waivers.................................................... 64
SECTION 9.02 No Implied Waiver; Cumulative Remedies.................................... 65
SECTION 9.03 Notices................................................................... 66
SECTION 9.04 Expenses; Taxes; Indemnity................................................ 66
SECTION 9.05 Severability.............................................................. 67
</TABLE>
95
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 9.06 Prior Understandings.......................................................... 67
SECTION 9.07 Duration; Survival............................................................ 68
SECTION 9.08 Counterparts.................................................................. 68
SECTION 9.09 Limitation on Payments........................................................ 68
SECTION 9.10 Set-Off....................................................................... 68
SECTION 9.11 Sharing of Collections........................................................ 69
SECTION 9.12 Successors and Assigns; Participations; Assignments........................... 69
SECTION 9.13 Governing Law; Submission to Jurisdiction Waiver of Jury Trial; Limitation of
Liability.................................................................................. 72
</TABLE>
96
<PAGE>
EXHIBIT 10(B)
================================================================================
$150,000,000
CREDIT AGREEMENT
dated as of
June 24, 1999
among
NEVADA POWER COMPANY,
MELLON BANK, N.A.,
as Administrative Agent,
FIRST UNION NATIONAL BANK
and
WELLS FARGO BANK, N.A.,
as Syndication Agents,
and
the LENDERS party hereto from time to time
Arranged By
MELLON BANK, N.A.
================================================================================
1
<PAGE>
CREDIT AGREEMENT, dated as of June 24, 1999, among NEVADA POWER
COMPANY, a Nevada corporation, MELLON BANK, N.A., as Administrative Agent, FIRST
UNION NATIONAL BANK and WELLS FARGO BANK, N.A., as Syndication Agents, the
LENDERS party hereto from time to time and MELLON BANK, N.A., as Arranger.
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower (as defined below) has requested, and Lenders
(as defined below) have agreed to make available, the credit facilities
described below upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
SECTION 1.01 Defined Terms.
-------------
As used in this Agreement, the following terms have the following
meanings:
"ABR", when used in reference to any Loan or Borrowing, refers to
---
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Acquisition" means any transaction, or any series of related
-----------
transactions, consummated after the Effective Date, by which the Borrower and/or
any of its Subsidiaries directly or indirectly (a) acquires any ongoing business
or all or substantially all of the assets of any Person engaged in any ongoing
business, whether through purchase of assets, merger or otherwise, (b) acquires
control of securities of a Person engaged in an ongoing business representing
more than 50% of the ordinary voting power for the election of directors or
other governing position if the business affairs of such Person are managed by a
board of directors or other governing body or (c) acquires control of more than
50% of the ownership interest in any partnership, joint venture, limited
liability company, business trust or other Person engaged in an ongoing business
that is not managed by a board of directors or other governing body.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Revolving
------------------
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means Mellon Bank, N.A., in its capacity as
--------------------
administrative agent for the Lenders hereunder and any successor appointed
pursuant to Section 8.10.
2
<PAGE>
"Affiliate" means, any Person that directly or indirectly Controls, or
---------
is under common Control with, or is Controlled by, another Person, provided
that, in any event, any Person that owns directly or indirectly securities
having 20% or more of the voting power for the election of directors or other
governing body of a corporation or 20% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to Control such corporation or other Person.
"AFUDC-Debt" means, for any period, the allowance for borrowed funds
----------
used during construction for such period as calculated in accordance with the
rules of the Public Utilities Commission of Nevada.
"AFUDC-Equity" means, for any period, the allowance for funds other
------------
than borrowed funds used during construction for such period as calculated in
accordance with the rules of the Public Utilities Commission of Nevada.
"Agents" means, collectively, the Administrative Agent, the Arranger
------
and the Syndication Agents.
"Alternate Base Rate" means, for any day, a rate per annum equal to
-------------------
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any Lender as of any
---------------------
date of determination, the percentage of the total Commitments as of such date
represented by such Lender's Commitment as of such date. If the Commitments have
terminated or expired, the Applicable Percentages shall be determined, as of any
date of determination, based upon the percentage of the total Loans outstanding
as of such date represented by such Lender's Loans outstanding as of such date.
"Applicable Rate" means, for any day, with respect to the facility
---------------
fees payable hereunder, with respect to any Eurodollar Revolving Loan or with
respect to any usage fees payable hereunder, as the case may be, the applicable
rate per annum set forth below under the caption "Facility Fee", "Eurodollar
Spread" or "Usage Fee", as the case may be, based on the ratings by S&P and
Moody's, respectively, applicable on such day to the Index Debt:
<TABLE>
<CAPTION>
Facility Eurodollar Usage Fee
Index Debt rating: S&P/Moody's Fee Spread (*33%/*66%)
- ------------------------------- --- ------ -----------
<S> <C> <C> <C>
Ratings greater than A-/A3 .1500% .3500% .0250/.0750%
Ratings equal to A-/A3 .1500% .4000% .0250/.0750%
Ratings equal to BBB+/Baa1 .2000% .4250% .0250/.0750%
Ratings equal to BBB/Baa2 .2250% .5250% .0500/.1250%
</TABLE>
___________
* greater than sign
3
<PAGE>
<TABLE>
<S> <C> <C> <C>
Ratings equal to BBB-/Baa3 .2500% .7500% .0500/.1250%
Ratings less than BBB-/Baa3 .3750% .8750% .1250/.2500%
</TABLE>
For purposes of the foregoing, (i) if either Moody's or S&P shall not have in
effect a rating for the Index Debt (other than by reason of the circumstances
referred to in the last sentence of this definition), then such rating agency
shall be deemed to have established a rating in its lowest rating category, (ii)
if the ratings established or deemed to have been established by Moody's and S&P
for the Index Debt shall be changed (other than as a result of a change in the
rating system of Moody's or S&P), such change shall be effective as of two
Business Days after it is first announced by the applicable rating agency and
(iii) if the rating assigned by Moody's and the rating assigned by S&P shall
differ (a) by one level (e.g., Moody's rating of A3 and S&P rating of BBB+),
then the higher rating level shall apply (i.e., A3) and (b) by more than one
level (e.g., Moody's rating of A3 and S&P rating of BBB-), then the rating level
above the lower rating level shall apply (i.e., BBB/Baa2). Each change in the
Applicable Rate shall apply during the period commencing two Business Days after
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change. If the rating system of Moody's or
S&P shall change, or if either such rating agency shall cease to be in the
business of rating corporate debt obligations, the Borrower and the Lenders
shall negotiate in good faith to amend this definition to reflect such changed
rating system or the unavailability of ratings from such rating agency and,
pending the effectiveness of any such amendment, the Applicable Rate shall be
determined by reference to the rating most recently in effect prior to such
change or cessation.
"Arranger" means Mellon Bank, N.A. in its capacity as arranger
--------
hereunder.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.12), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
"Availability Period" means the period from and including the
-------------------
Effective Date to but excluding the earlier of the Revolving Termination Date
and the date on which the Commitments terminate.
"Bankruptcy Code" means Title 11 of the United States Code entitled
---------------
"Bankruptcy," as now or hereafter in effect, or any successor thereto.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States of America.
"Borrower" means Nevada Power Company, a Nevada corporation.
--------
"Borrowing" means Loans of the same Type, made, converted or continued
---------
on the same date and, in the case of Eurodollar Loans, as to which a single
Interest Period is in effect.
"Borrowing Request" means a request by the Borrower for a Borrowing
-----------------
made in accordance with Section 2.03.
4
<PAGE>
"Business Day" means any day that is not a Saturday, Sunday or other
------------
day on which commercial banks in Pittsburgh, Pennsylvania are authorized or
required by Law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Lease Obligations" of any Person means all obligations of
-------------------------
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP (including Statement of Financial Accounting Standards No. 13
of the Financial Accounting Standards Board), and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP (including such Statement No. 13).
"Change in Control" means (a) the failure of Sierra Pacific Resources
-----------------
to own, legally and beneficially, 100% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Borrower; (b) the
acquisition of ownership, directly or indirectly, beneficially or of record, by
any Person or group (within the meaning of the Securities Exchange Act of 1934
and the rules of the Securities and Exchange Commission thereunder as in effect
on the date hereof) of shares representing more than 20% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock of
Sierra Pacific Resources; or (c) for any period of 12 consecutive calendar
months, a majority of the Board of Directors of Sierra Pacific Resources shall
no longer be composed of individuals (i) who were members of said Board on the
first day of such period, (ii) whose election or nomination to said Board was
approved by individuals referred to in clause (i) above constituting at the time
of such election or nomination at least a majority of said Board or (iii) whose
election or nomination to said Board was approved by individuals referred to in
clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of said Board.
"Change in Law" means (a) the adoption of any Law after the date of
-------------
this Agreement, (b) any change in any Law or in the interpretation or
application thereof by any Governmental Authority after the date of this
Agreement or (c) compliance by any Lender (or, for purposes of Section 2.13(b),
by any lending office of such Lender or by such Lender's Parent, if any) with
any request, guideline or directive (whether or not having the force of Law) of
any Governmental Authority made or issued after the date of this Agreement.
"Class", when used in reference to any Loan or Borrowing, refers to
-----
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans
or Term Loans.
"Code" means the Internal Revenue Code of 1986 and the regulations
----
promulgated and rulings issued thereunder. Section references to the Code are
to the Code, as in effect at the date of this Agreement and any subsequent
provisions of the Code, amendatory thereof, supplemental thereto or substituted
therefor.
"Commitment" means, with respect to each Lender, the commitment of
----------
such Lender to make Revolving Loans hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's Revolving Credit
Exposure hereunder, as such commitment
5
<PAGE>
may be (a) reduced from time to time pursuant to Section 2.06 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.12. The initial amount of each Lender's Commitment is set
forth on Schedule I or in the Assignment and Acceptance pursuant to which such
Lender shall have assumed its Commitment, as applicable. The initial aggregate
amount of the Lenders' Commitments is $150,000,000.
"Consolidated Earnings Available For Fixed Charges" means, for any
-------------------------------------------------
period, Consolidated Net Income Available to Common less AFUDC-Debt less AFUDC-
Equity plus Consolidated Fixed Charges, in each case for the Borrower for such
period.
"Consolidated Fixed Charges" means, for any period, the sum of (i) the
--------------------------
total consolidated cash interest paid by the Borrower and its consolidated
Subsidiaries for such period, (ii) lease payments made or accrued by the
Borrower and its consolidated Subsidiaries, on a consolidated basis, for such
period and (iii) preferred dividends paid by the Borrower and its consolidated
Subsidiaries for such period.
"Consolidated Net Income Available to Common" means, for any period,
-------------------------------------------
the consolidated net income of the Borrower and its consolidated Subsidiaries
less consolidated preferred dividends accrued by the Borrower and its
consolidated Subsidiaries, in each case for such period.
"Control" of a Person (including, with its correlative meanings,
-------
"Controlled by" and "under common Control with") means possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise) of such Person.
"Default" means any event, act or condition which upon notice, lapse
-------
of time or both would, unless cured or waived, become an Event of Default.
"Default Interest" has the meaning assigned to such term in Section
----------------
2.11(c).
"Dollars" or "$" refers to freely transferable lawful money of the
------- -
United States of America.
"Effective Date" means the date on which the conditions specified in
--------------
Section 4.01 are satisfied (or waived in accordance with Section 9.01).
"Environmental Claims" means any and all administrative, regulatory or
--------------------
judicial actions, suits, demands, demand letters, directives, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law or any permit issued, or any approval given,
under any such Environmental Law (hereafter, "Claims"), including, without
------
limitation, (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief in connection with alleged injury or threat of
injury to health, safety or the environment due to the presence of Hazardous
Materials.
6
<PAGE>
"Environmental Law" means any Federal, state, foreign or local
-----------------
statute, Law, rule, regulation, ordinance, code, guideline, written policy and
rule of common law now or hereafter in effect and in each case as amended, and
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
employee health and safety or Hazardous Materials, including, without
limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. (S)
1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq.; the
-- ---- -- ----
Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the Safe Drinking Water Act, 42
-- ----
U.S.C. (S) 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. (S) 2701 et
-- ---- --
seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42
- ----
U.S.C. (S) 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C.
-- ----
(S) 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C. (S) 651
-- ----
et seq.; and any state and local or foreign counterparts or equivalents, in each
- -- ----
case as amended from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
-----
the regulations promulgated and rulings issued thereunder. Section references
to ERISA are to ERISA, as in effect at the date of this Agreement, and to any
subsequent provisions of ERISA, amendatory thereof, supplemental thereto or
substituted therefor.
"ERISA Affiliate" means any corporation or trade or business that is a
---------------
member of any group of organizations described in Section 414(b) or (c) of the
Code of which the Borrower is a member.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
----------
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Section
----------------
7.01.
"Excluded Taxes" means, with respect to the Administrative Agent, any
--------------
Lender or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) income or franchise taxes imposed on
(or measured by) its net income by the United States of America, or by the
jurisdiction under the Laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which the Borrower is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under
Section 2.17(b)), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
or is attributable to such Foreign Lender's failure or inability to comply with
Section 2.15(e), except to the extent that such Foreign Lender's assignor (if
any) was entitled, at the time of assignment, to receive additional amounts from
the Borrower with respect to such withholding tax pursuant to Section 2.15(a).
"Existing Indebtedness" has the meaning assigned to such term in
---------------------
Section 3.23.
"Extension Request" has the meaning assigned to such term in Section
-----------------
2.06(e).
7
<PAGE>
"Extension Request Notice" has the meaning assigned to such term in
------------------------
Section 2.06(e).
"Extension Request Period" has the meaning assigned to such term in
------------------------
Section 2.06(e).
"Federal Funds Effective Rate" means, for any day, the weighted
----------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Final Repayment Date" means the earliest to occur of (a) the date
--------------------
that is one year after the Term Loan Conversion Date and (b) the date on which
the Obligations under this Agreement terminate, whether by prepayment,
cancellation, acceleration or otherwise.
"First Mortgage Bonds" means obligations issued from time to time
--------------------
under, and secured by, the First Mortgage Indenture.
"First Mortgage Indenture" means the Indenture of Mortgage, dated as
------------------------
of October 1, 1953, from the Borrower to Bankers Trust Company (successor to
First Interstate Bank of Nevada, N.A., formerly First National Bank of Nevada,
Reno, Nevada), as trustee, as modified, amended or supplemented at any time or
from time to time by supplemental indentures.
"Fixed Charge Coverage Ratio" means, as of the last day of a fiscal
---------------------------
quarter, the ratio of Consolidated Earnings Available For Fixed Charges to
Consolidated Fixed Charges, in each case, for the four consecutive fiscal
quarter period of the Borrower ended on such last day.
"Foreign Lender" means any Lender that is organized under the Laws of
--------------
a jurisdiction other than the United States of America, each State thereof and
the District of Columbia.
"Foreign Pension Plan" means any plan, fund (including, without
--------------------
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Borrower or any one or
more of its Subsidiaries primarily for the benefit of employees of the Borrower
or such Subsidiaries residing outside the United States of America, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"GAAP" means generally accepted accounting principles in the United
----
States of America applied in a consistent manner.
"Governmental Action" means any authorization, approval, order,
-------------------
decree, ruling or other action by, or notice to or filing with, any Governmental
Authority.
8
<PAGE>
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, bureau, instrumentality, regulatory body,
court, tribunal, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Hazardous Materials" means (a) any petroleum or petroleum products,
-------------------
radioactive materials, asbestos in any form that is friable, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas; (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous waste," "hazardous materials," "extremely
hazardous substances," "restricted hazardous waste," "toxic substances," "toxic
pollutants," "contaminants," or "pollutants," or words of similar import, under
any applicable Environmental Law; and (c) any other chemical, material or
substance, the Release of which is prohibited, limited or regulated by any
governmental authority.
"Indebtedness" of any Person means, (a) obligations created, issued or
------------
incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business; (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective indebtedness so secured
has been assumed by such Person; (d) obligations of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person; (e) Capital Lease Obligations
of such Person; and (f) any guarantee or other arrangement by which such Person
guarantees or is otherwise liable for the Indebtedness of others; provided,
however, that "Indebtedness" shall not include Secured Nonrecourse Obligations.
"Indebtedness to be Refinanced" means all Indebtedness listed on
-----------------------------
Schedule VII.
"Indemnified Parties" means each Agent, the Lenders, their respective
-------------------
Affiliates, and the directors, officers, employees, attorneys and agents of each
of the foregoing.
"Indemnified Taxes" means all Taxes other than Excluded Taxes.
-----------------
"Index Debt" means the senior, unsecured, long-term indebtedness for
----------
borrowed money of the Borrower that is not guaranteed by any other Person or
subject to any credit enhancement.
"Interest Election Request" means a request by the Borrower to convert
-------------------------
or continue a Borrowing in accordance with Section 2.05.
"Interest Payment Date" means (a) with respect to any ABR Loan, each
---------------------
Quarterly Date, and (b) with respect to any Eurodollar Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and, in
the case of a Eurodollar Borrowing with an Interest Period of more than three
months' duration, each day prior to the last day of such
9
<PAGE>
Interest Period that occurs at intervals of three months' duration after the
first day of such Interest Period.
"Interest Period" means, with respect to any Eurodollar Borrowing, the
---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and, thereafter
shall be the effective date of the most recent conversion or continuation of
such Borrowing.
"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 stock or other securities of any other Person or by means of a
loan, advance creating a debt, capital contribution, guaranty or other debt or
equity participation or interest in any other Person, including any partnership
---------
and joint venture interests of such Person but excluding any Wholly-Owned
---------
Subsidiary of such Person. The amount of any Investment shall be the amount
actually invested (minus any return of capital with respect to such Investment
-----
which has actually been received in cash or has been converted into cash),
without adjustment for subsequent increases or decreases in the value of such
Investment.
"Law" shall mean any law (including common law), constitution,
---
statute, treaty, convention, regulation, rule, ordinance, order, injunction,
writ, decree or award of any Governmental Authority.
"Lenders" means the Persons listed on Schedule I and any other Person
-------
that shall have become a party hereto pursuant to an Assignment and Acceptance.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
---------
Interest Period, the average of the offered rates for Dollar deposits for the
applicable Interest Period which appear on the Telerate Page 3750, British
Bankers Association Interest Settlement Rates, with maturities comparable to the
Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00
A.M. (Pittsburgh, Pennsylvania time) on the date which is two Business Days
prior to the commencement of such Interest Period.
"Lien" means, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any Property that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.
10
<PAGE>
"Loan Documents" means this Agreement, each Borrowing Request, each
--------------
Interest Election Request, each Note and the Notice of Term Loan Conversion.
"Loans" means (a) Revolving Loans, (b) Term Loans or (c) Revolving
-----
Loans and Term Loans, as the context may require.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
Property, business, operations, financial condition, prospects, liabilities or
capitalization of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of the Borrower to perform its obligations hereunder, (c) the validity
or enforceability of this Agreement, (d) the rights and remedies of the Lenders
and the Administrative Agent hereunder or (e) the timely payment of the
principal of or interest on the Loans or other amounts payable in connection
therewith.
"Mergers" means the merger of (a) LAKE Merger Sub, Inc., a wholly-
-------
owned Subsidiary of Sierra Pacific Resources, with and into Sierra Pacific
Resources and (b) the Borrower with and into DESERT Merger Sub, Inc., a wholly-
owned Subsidiary of Sierra Pacific Resources, in each case pursuant to the
Agreement and Plan of Merger, dated as of April 29, 1998, among the Borrower,
Sierra Pacific Resources, DESERT Merger Sub, Inc. and LAKE Merger Sub, Inc.
"Moody's" means Moody's Investors Service, Inc.; provided that if such
-------
corporation (or its successors and assigns) shall for any reason 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 approved
for purposes hereof by the Required Lenders and the Borrower.
"Multiemployer Plan" means a multiemployer plan defined as such in
------------------
Section 3(37) of ERISA to which contributions have been made by the Borrower or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"Note" has the meaning assigned to such term in Section 2.08(f).
----
"Notice of Term Loan Conversion" has the meaning assigned to such term
------------------------------
in Section 2.07(a).
"Obligations" means all Indebtedness, obligations and liabilities of
-----------
the Borrower to any Lender or any Agent from time to time arising under or in
connection with or related to or evidenced by or secured by this Agreement or
any other Loan Document, and all extensions, renewals or refinancings thereof,
whether such Indebtedness, obligations or liabilities are direct or indirect,
otherwise secured or unsecured, joint or several, absolute or contingent, due or
to become due, whether for payment or performance, now existing or hereafter
arising. Without limitation of the foregoing, such Indebtedness, obligations
and liabilities shall include the principal amount of all Loans, all interest,
fees, indemnities or expenses under or in connection with this Agreement or any
other Loan Document, and all extensions, renewals and refinancings thereof,
whether or not such Loans were made in compliance with the terms and conditions
of this Agreement or in excess of the obligation of the Lenders to lend.
Obligations shall remain obligations notwithstanding any assignment or transfer
or any subsequent assignment or transfer of any of the Obligations or any
interest therein.
11
<PAGE>
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or Property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Parent" means any Person that Controls a Lender.
------
"Participant" has the meaning assigned to Section 9.12(b).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Liens" has the meaning assigned to such term in Section
---------------
6.02.
"Person" means any natural person, corporation, limited liability
------
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means an employee benefit or other plan established or
----
maintained by the Borrower or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by Mellon Bank, N.A. as its prime rate, the Prime Rate to
change when and as such prime rate changes. The Prime Rate is a reference rate
and does not necessarily represent the lowest or best rate actually charged to
any customer. Mellon Bank, N.A. may make commercial loans or other loans at
rates of interest at, above or below the Prime Rate.
"Principal Office" means the principal office of Mellon Bank, N.A.,
----------------
located on the date hereof at One Mellon Bank Center, Pittsburgh, Pennsylvania
15258.
"Property" means any right or interest in or to property of any kind
--------
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Purchasing Lender" has the meaning assigned to Section 9.12(c).
-----------------
"Quarterly Dates" means the last day of March, June, September and
---------------
December in each year, the first of which shall be the first such day after the
date hereof; provided that if any such day is not a Business Day, then such
Quarterly Date shall be the next succeeding Business Day (unless such succeeding
Business Day falls in a subsequent calendar month, in which event such Quarterly
Date shall be the next preceding Business Day).
"Register" has the meaning assigned to Section 9.12(d).
--------
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
12
<PAGE>
"Release" means the disposing, discharging, injecting, spilling,
-------
pumping, leaking, leaching, dumping, emitting, escaping, emptying, pouring or
migrating, into or upon any land or water or air, or otherwise entering into the
environment.
"Reportable Event" means an event described in Section 4043(c) of
----------------
ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.22, .23, .25, .27 or .28 of PBGC Regulation Section 4043 (provided that a
failure to meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA, including, without limitation, the failure to make on or
before its due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code).
"Required Lenders" means (a) so long as the Commitments remain in
----------------
effect, Lenders having Commitments representing 51% or more of the sum of the
total Commitments at such time, or (b) if the Commitments have terminated,
Lenders holding 51% or more of the aggregate principal amount of the Loans
outstanding at such time.
"Responsible Officer" means the Treasurer, the Assistant Treasurer,
-------------------
the Chief Financial Officer or the Controller.
"Revolving Credit Exposure" means, with respect to any Lender at any
-------------------------
time, the aggregate outstanding principal amount of such Lender's Revolving
Loans at such time.
"Revolving Loan" has the meaning assigned to such term in Section
--------------
2.01(a).
"Revolving Termination Date" means December 29, 1999, provided,
--------------------------
however, that if, on or before such date, the Borrower shall have obtained all
regulatory approvals necessary to permit the Revolving Termination Date to be
extended to the date which is 364 days after the Effective Date, as such
termination date may be extended from time to time in accordance with Section
2.06(e), and shall have furnished to the Administrative Agent copies of such
approvals and a legal opinion, in form and substance satisfactory to the
Administrative Agent, that such approvals have been obtained and are in full
force and effect, then the Revolving Termination Date shall be automatically
extended to the date which is 364 days after the Effective Date, as such
termination date may be extended from time to time in accordance with Section
2.06(e).
"Secured Nonrecourse Obligations" means and includes (a) secured
-------------------------------
obligations of the Borrower taken on a consolidated basis where recourse of the
payee of such obligations is expressly limited to an assigned lease or loan
receivable and the Property related thereto and (b) liabilities of the Borrower
taken on a consolidated basis to manufacturers of leased equipment where such
liabilities are payable solely out of revenues derived from the leasing or sale
of such equipment.
"Shareholders' Equity" means, as of any date of determination, the
--------------------
amount which is shown as "shareholders' equity" (which shall include both common
and preferred equity) in the consolidated balance sheet of the Borrower at such
date.
13
<PAGE>
"SPPC" means Sierra Pacific Power Company, a Nevada corporation.
----
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw
---
Hill Companies, Inc., and its successor and assigns; provided that if such
corporation (or its successors and assigns) shall for any reason 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 approved for
purposes hereof by the Required Lenders and the Borrower.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
----------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of the Board). Such reserve percentages shall include those
imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to
constitute eurocurrency funding and to be subject to such statutory reserve
rates without benefit of or credit for proration, exemptions or offsets that may
be available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
----------
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person has more than a 50% equity interest at
the time.
"Substitute Lender" has the meaning assigned to such term in Section
-----------------
2.06(f).
"Syndication Agents" means First Union National Bank and Wells Fargo
------------------
Bank, N.A.
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Term Loan" has the meaning assigned to such term in Section 2.01(b).
---------
"Term Loan Conversion Date" means the date set forth in the Notice of
-------------------------
Term Loan Conversion; provided however, that the Term Loan Conversion Date shall
not be a date that occurs later than the Revolving Termination Date.
"Total Indebtedness" means, as of any date of determination, the sum
------------------
of all Indebtedness of the Borrower and its consolidated Subsidiaries as of such
date.
14
<PAGE>
"Type", when used in reference to any Loan or Borrowing, refers to
----
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"Unfunded Current Liability" of any Plan means the amount, if any, by
--------------------------
which the value of the accumulated plan benefits under the Plan determined on a
plan termination basis in accordance with actuarial assumptions at such time
consistent with those prescribed by the PBGC for purposes of Section 4044 of
ERISA, exceeds the fair market value of all plan assets allocable to such
liabilities under Title IV of ERISA (excluding any accrued but unpaid
contributions).
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
-----------------------
corporation 100% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person and/or one
or more Subsidiaries of such Person and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person has a 100% equity interest at the time.
"Year 2000 Compliant" has the meaning assigned to such term in Section
-------------------
3.21.
"Year 2000 Plan" has the meaning assigned to such term in Section
--------------
3.21.
SECTION 1.02. Classification of Loans and Borrowings.
---------------------------------------
For purposes of this Agreement, Loans may be classified and referred
to by Class (e.g., a Revolving Loan or a Term Loan) or by Type (e.g., a
Eurodollar Loan or an ABR Loan) or by Class and Type (e.g., a Eurodollar
Revolving Loan). Borrowings also may be classified and referred to by Class
(e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or
by Class and Type (e.g., a "Eurodollar Revolving Borrowing").
SECTION 1.03 Terms Generally.
---------------
The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation". The word "will" shall be construed to have
the same meaning and effect as the word "shall". Unless the context requires
otherwise (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (b) any reference herein to any Person shall
be construed to include such Person's successors and assigns, (c) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof and (d) all references herein to Articles, Sections, Exhibits
and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement.
15
<PAGE>
SECTION 1.04 Accounting Terms; GAAP.
----------------------
Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time.
ARTICLE II
THE CREDITS
SECTION 2.01 The Commitments.
---------------
(a) Subject to the terms and conditions set forth herein, each Lender
agrees to make loans (each such loan, a "Revolving Loan") to the Borrower from
--------------
time to time on any Business Day during the Availability Period in an aggregate
principal amount that will not result in (i) such Lender's Revolving Credit
Exposure (after giving effect to such Revolving Loans) exceeding such Lender's
Commitment or (ii) the sum of the Revolving Credit Exposures of all Lenders
exceeding the total Commitments. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrower may borrow, prepay and
reborrow Revolving Loans.
(b) Subject to the terms and conditions set forth herein, each Lender
agrees, so long as no Default or Event of Default has occurred and is
continuing, to consolidate on the Term Loan Conversion Date all of such Lender's
Revolving Loans that are outstanding on the Term Loan Conversion Date (after
giving effect to any payment or prepayment of such Loans made by the Borrower on
such date) into a single loan (each such loan, a "Term Loan") in an amount not
---------
to exceed the aggregate principal amount of such Revolving Loans. Revolving
Loans that are consolidated into a Term Loan shall be deemed paid. Term Loans
which are repaid or prepaid may not be reborrowed.
SECTION 2.02 Loans and Borrowings.
--------------------
(a) Obligations of Lenders. Each Revolving Loan shall be made as part
----------------------
of a Borrowing consisting of Loans of the same Type made by the Lenders ratably
in accordance with their respective Commitments. Each Term Loan shall be made
in accordance with the procedures set forth in Section 2.07. The failure of any
Lender to make any Loan required to be made by it shall not relieve any other
Lender of its obligations hereunder. The Commitments of the Lenders are several
and no Lender shall be responsible for any other Lender's failure to make Loans
as required.
(b) Type of Loans. Subject to Section 2.12, each Borrowing shall be
-------------
comprised entirely of ABR Loans or Eurodollar Loans. Each Lender may, at its
option, make any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement.
(c) Minimum Amounts; Limitation on Number of Borrowings. Each
---------------------------------------------------
Revolving Borrowing (whether an ABR Borrowing or a Eurodollar Borrowing) shall
be in an aggregate amount equal to $5,000,000 or a multiple of $1,000,000 in
excess thereof, provided that an ABR Borrowing may be made in an aggregate
amount that is equal to the entire unused
16
<PAGE>
balance of the total Commitments. The Borrower may thereafter, upon irrevocable
notice to the Administrative Agent in accordance with Section 2.05(b), (i)
elect, as of any Business Day, in the case of ABR Loans, to convert any such ABR
Loans or any part thereof, in an aggregate amount equal to $5,000,000 or a
multiple of $1,000,000 in excess thereof, into Eurodollar Loans, and (ii) elect,
as of the last day of the applicable Interest Period, to continue any Eurodollar
Loans having Interest Periods expiring on such day or any part thereof in an
aggregate amount of $5,000,000 or a multiple of $1,000,000 in excess thereof;
provided that, if at any time the aggregate amount of Eurodollar Loans in
respect of any Borrowing is reduced by payment, prepayment or conversion of part
thereof to be less than $5,000,000, such Eurodollar Loans shall automatically
convert into ABR Loans. Borrowings of more than one Type may be outstanding at
the same time; provided that there shall not at any time be more than a total of
five Eurodollar Borrowings outstanding.
(d) Maximum Duration of Interest Periods. Notwithstanding any other
------------------------------------
provision of this Agreement, until the Term Loan Conversion Date shall have
occurred, the Borrower shall not be entitled to request, or to elect to convert
or continue, any Eurodollar Borrowing if the Interest Period requested with
respect thereto would end after the Revolving Termination Date. From and after
the Term Loan Conversion Date (if any), the Borrower shall not be entitled to
elect to convert or continue any Borrowing if the Interest Period requested with
respect thereto would end after the Final Repayment Date.
SECTION 2.03 Requests for Revolving Borrowings.
---------------------------------
To request a Revolving Borrowing, the Borrower shall notify the
Administrative Agent of such request by telephone (a) in the case of a
Eurodollar Revolving Borrowing, not later than 12:00 noon., Pittsburgh,
Pennsylvania time, three Business Days before the date of the proposed
Borrowing, or (b) in the case of an ABR Borrowing, not later than 12:00 noon,
Pittsburgh, Pennsylvania time, one Business Day before the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and
shall be confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Borrowing Request in the form attached hereto as Exhibit B
and signed by the Borrower. Each such telephonic and written Borrowing Request
shall specify the following information in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.04.
17
<PAGE>
If no election as to the Type of Revolving Borrowing is specified,
then the requested Revolving Borrowing shall be an ABR Borrowing. If no
Interest Period is specified with respect to any Eurodollar Revolving Borrowing,
then the Borrower shall be deemed to have selected an Interest Period of one
month's duration. Promptly following receipt of a Borrowing Request in
accordance with this Section, the Administrative Agent shall advise each Lender
of the details thereof and of the amount of such Lender's Loan to be made as
part of the requested Borrowing.
SECTION 2.04 Funding of Borrowings.
---------------------
(a) Funding by Lenders. No later than 12:00 noon, Pittsburgh,
------------------
Pennsylvania time, on the date specified in each Borrowing Request, each Lender
will make available its Applicable Percentage of each Revolving Borrowing
requested to be made on such date, in Dollars and in immediately available funds
at the account of the Administrative Agent most recently designated by it for
such purpose by notice to the Lenders. The Administrative Agent will make such
Loans available to the Borrower by promptly crediting the amounts so received,
in like funds, to an account of the Borrower maintained with Mellon Bank, N.A.
at the Principal Office and designated by the Borrower in the applicable
Borrowing Request.
(b) Presumption by the Administrative Agent. Unless the
---------------------------------------
Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the
Administrative Agent such Lender's share of such Borrowing, the Administrative
Agent may assume that such Lender has made such share available on such date in
accordance with paragraph (a) of this Section and may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. In such
event, if a Lender has not in fact made its share of the applicable Borrowing
available to the Administrative Agent, then the applicable Lender and the
Borrower severally agree to pay to the Administrative Agent forthwith on demand
such corresponding amount with interest thereon, for each day from and including
the date such amount is made available to the Borrower to but excluding the date
of payment to the Administrative Agent, at (i) in the case of such Lender, the
Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest
rate applicable to the Loans of such Borrowing. If such Lender pays such amount
to the Administrative Agent, then such amount shall constitute such Lender's
Loan included in such Borrowing.
SECTION 2.05 Interest Elections.
------------------
(a) Elections by the Borrower for Borrowings. Each Borrowing
----------------------------------------
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Borrowing, shall have an initial Interest
Period as specified in such Borrowing Request. Thereafter, the Borrower may
elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods
therefor, all as provided in this Section but subject to Section 2.02. Once
Loans have been made pursuant to a Borrowing, the Borrower may elect to convert
or continue different portions of such Borrowing, in which case each such
portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing.
18
<PAGE>
(b) Notice of Elections. To make an election pursuant to this
-------------------
Section, the Borrower shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section
2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting
from such election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Interest Election Request in a form approved by the Administrative Agent and
signed by the Borrower.
(c) Information in Interest Election Requests. Each telephonic and
-----------------------------------------
written Interest Election Request shall specify the following information in
compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to each
resulting Borrowing (in which case the information to be specified pursuant
to clauses (iii) and (iv) of this paragraph shall be specified for each
resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing,
or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing
but does not specify an Interest Period, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration.
(d) Notice by the Administrative Agent to Lenders. Promptly following
---------------------------------------------
receipt of an Interest Election Request, the Administrative Agent shall advise
each Lender of the details thereof and of such Lender's portion of each
resulting Borrowing.
(e) Failure to Elect; Events of Default. If the Borrower fails to
-----------------------------------
deliver a timely Interest Election Request with respect to a Eurodollar
Borrowing prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such Interest
Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding
any contrary provision hereof, if an Event of Default has occurred and is
continuing and the Administrative Agent, at the request of the Required Lenders,
so notifies the Borrower, then, so long as an Event of Default is continuing (i)
no outstanding Borrowing may be converted to or continued as a Eurodollar
Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted
to an ABR Borrowing at the end of the Interest Period applicable thereto.
19
<PAGE>
SECTION 2.06 Termination, Reduction and Extension of Commitments.
---------------------------------------------------
(a) Scheduled Termination. Unless previously terminated, the
---------------------
Commitments shall terminate on the Revolving Termination Date.
(b) Voluntary Termination or Reduction. The Borrower may at any time
----------------------------------
prior to the Revolving Termination Date terminate, or from time to time reduce,
the Commitments; provided that (i) each reduction of the Commitments shall be in
an amount that is $10,000,000 or a multiple of $5,000,000 in excess thereof and
(ii) the Borrower shall not terminate or reduce the Commitments if, after giving
effect to any concurrent prepayment of the Loans in accordance with Section
2.09, the sum of the total Revolving Credit Exposures would exceed the total
Commitments.
(c) Notice of Voluntary Termination or Reduction. The Borrower shall
--------------------------------------------
notify the Administrative Agent of any election to terminate or reduce the
Commitments under paragraph (b) of this Section at least three Business Days
prior to the effective date of such termination or reduction, specifying such
election and the effective date thereof. Promptly following receipt of any such
notice, the Administrative Agent shall advise the Lenders of the contents
thereof. Each notice delivered by the Borrower pursuant to this Section shall be
irrevocable; provided that a notice of termination of the Commitments delivered
by the Borrower may state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be revoked by the
Borrower (by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied.
(d) Effect of Termination or Reduction. Any termination or reduction
----------------------------------
of the Commitments shall be permanent. Each reduction of the Commitments shall
be made ratably among the Lenders in accordance with their Applicable
Percentages.
(e) Extension of Commitments.
------------------------
(i) Not earlier than the date which is 60 days (but not later than
30 days) prior to the then existing Revolving Termination Date (the "Extension
---------
Request Notice Date"), the Borrower may deliver to the Administrative Agent
- -------------------
(which shall promptly transmit the same to each Lender) a notice (an "Extension
---------
Request") requesting that the Revolving Termination Date be extended for an
- -------
additional 364 days commencing on the then existing Revolving Termination Date.
Not earlier than the date which is 30 days (but not later than 20 days) prior to
the then existing Revolving Termination Date (the period from the Extension
Request Notice Date to such date, the "Extension Request Period"), each Lender
------------------------
(in its sole and absolute discretion and after conducting an internal credit
review of the Borrower) shall notify the Administrative Agent of such Lender's
willingness or unwillingness to so extend the Revolving Termination Date. Any
Lender which shall fail to so notify the Administrative Agent within such period
shall be deemed to have declined to extend the Revolving Termination Date. If
Lenders having Commitments totaling an amount equal to at least 51% of the
aggregate amount of the Commitments then in effect agree to such extension by
notice to the Administrative Agent, then (A) subject to clause (iii) below, the
Revolving Termination Date shall be extended for an additional 364 days with
respect to the Commitments of the Lenders so agreeing, and (B) subject to
Section 2.06(f) hereof, the Commitment of each Lender not so
20
<PAGE>
agreeing shall expire on the then expiring Revolving Termination Date and the
Borrower shall pay or prepay on such day without premium or penalty all
principal of such Lender's Loans together with accrued interest thereon and all
accrued facility and usage fees and other amounts payable to such Lender
hereunder (including, without limitation, amounts payable pursuant to Section
2.14 hereof as a result of such payment or prepayment); provided, however, that
(x) if Lenders having Commitments totaling an amount equal to
at least 51% of the aggregate amount of the Commitments then in effect
do not agree as contemplated by Section 2.06(e)(i), then the Revolving
Termination Date shall not be extended pursuant to this Section
2.06(e) and the Commitments of all of the Lenders shall remain in
effect until the Revolving Termination Date except as otherwise
provided in this Agreement; and
(y) the Borrower may not request any extension of the Revolving
Termination Date pursuant to this Section 2.06(e)(i) more frequently
than once in any calendar year.
(ii) Any Loan by any Lender the Commitment of which is to
terminate pursuant to Section 2.06(e)(i) hereof that would otherwise be
made or converted by such Lender as a Eurodollar Loan having an Interest
Period ending after the date such Commitment is to terminate shall be made
or continued as an ABR Loan and all ABR Loans of such Lender that would
otherwise be converted into Eurodollar Loans having such Interest Periods
shall remain as ABR Loans.
(iii) It shall be a condition precedent to any extension of the
Revolving Termination Date that: (a) on the date of such extension no
Default or Event of Default shall have occurred and be continuing; (b) the
representations and warranties made by the Borrower in Article III shall be
true and complete on and as of the date of such extension (or if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date); and (c) except for the Mergers,
on the date of such extension there shall have been no material adverse
change in the consolidated financial condition, operations, business or
prospects taken as a whole of the Borrower and its Subsidiaries from that
set forth in its financial statements as of December 31, 1998 referred to
in Section 3.06 hereof or, if the Borrower has delivered its financial
statements for any fiscal year to the Lenders and the Administrative Agent
pursuant to Section 5.01(a) hereof, as of the date of the most recent such
financial statements. Each request for an extension of the Revolving
Termination Date pursuant to Section 2.06(e) shall constitute a
certification by the Borrower to the effect set forth in the preceding
sentence (both as of the date of such request and, unless the Borrower
notifies the Administrative Agent prior to the date of such extension, as
of the date of such extension).
(f) Substitute Lenders. In the event any Lender does not agree to any
------------------
extension by the date provided pursuant to Section 2.06(e) hereof, then, unless
a Default or an Event of Default shall have occurred and be continuing, the
Borrower may, not later than 10 days following the expiration of the Extension
Request Period, designate one or more other banks (each such bank being herein
called a "Substitute Lender"), which may include any of the Lenders, acceptable
-----------------
to the Administrative Agent (which acceptance will not be unreasonably
21
<PAGE>
withheld), to assume such non-consenting Lender's Commitment hereunder and to
purchase, on or before the date such Lender's Loans would otherwise be required
to be paid or prepaid hereunder, the Loans and Notes of such Lender and such
Lender's rights hereunder in respect thereof, without recourse to or
representation or warranty by, or expense to, such Lender. In such event, the
purchase price shall be equal to the outstanding principal amount of the Loans
and Notes payable to such Lender plus any accrued but unpaid interest on such
Loans and Notes and accrued but unpaid facility and usage fees in respect of
such Lender's Commitment. Upon such assumption and purchase and the receipt by
such Lender of any other amounts payable to it by the Borrower under this
Agreement, and subject to the execution and delivery to the Administrative Agent
and such Lender by the Substitute Lender of documentation reasonably
satisfactory to the Administrative Agent and such Lender pursuant to which such
Substitute Lender shall assume the obligations of such original Lender under
this Agreement in respect of its Loans, Notes and Commitment and agree to become
a "Lender" hereunder (if not already a Lender) to the extent of the Commitments,
Loans and Notes assumed and purchased, the Substitute Lender shall succeed to
the rights, obligations and benefits of such Lender hereunder in such respect
(except for such rights, obligations and benefits of the Lender as have accrued
(other than principal, accrued interest or facility and usage fees ) or are
required to be performed by it on or prior to the date of such assumption and
purchase) (and such Lender shall be released from its Commitment except for any
liability arising or relating to any event occurring prior to the date of such
assumption and purchase) and the Substitute Lender shall be deemed to have
agreed to the relevant extension of the Revolving Termination Date and, anything
in Section 2.06(e) to the contrary notwithstanding, whether such extension is
effective shall be determined accordingly; provided that following any such
assumption and purchase the Commitments of each Substitute Lender (including any
Commitments theretofore held by it) shall be not less than $10,000,000.
SECTION 2.07 Term Loan Conversion Option.
----------------------------
(a) In the event the Borrower desires to have all of its Revolving
Loans consolidated into Term Loans, the Borrower shall deliver written notice
thereof (the "Notice of Term Loan Conversion") to the Administrative Agent at
------------------------------
least 10 days prior to the Term Loan Conversion Date. Once delivered, the
Notice of Term Loan Conversion shall be irrevocable.
(b) The Notice of Term Loan Conversion shall specify:
(i) the Term Loan Conversion Date, which shall be a date (A) no
sooner than 5 days after the date on which the Notice of Term Loan
Conversion is delivered to the Administrative Agent, (B) no later than the
Revolving Termination Date and (C) that is a Business Day;
(ii) the principal amount of Revolving Loans that are to be
consolidated into Term Loans on the Term Loan Conversion Date, which amount
shall be the aggregate principal amount of all Revolving Loans that will be
outstanding on the Term Loan Conversion Date after giving effect to all
payments or prepayments to be made prior to such date;
22
<PAGE>
(iii) whether the Term Loans are to be ABR Loans or Eurodollar
Loans on the Term Loan Conversion Date; and
(iv) if the Terms Loans are to be Eurodollar Loans on the Term
Loan Conversion Date, the duration of the Interest Period applicable
thereto, provided that if the Notice of Term Loan Conversion fails to
specify the duration of the Interest Period for any Borrowing comprised of
Eurodollar Loans, such Interest Period shall be three months.
(c) The Administrative Agent will promptly notify each Lender of its
receipt of the Notice of Term Loan Conversion from the Borrower and of the
contents of such notice.
(d) If the Borrower requests that Term Loans be made available on the
Term Loan Conversion Date, each Lender shall, on the Term Loan Conversion Date,
be deemed to have made available to the Borrower its Applicable Percentage of
the Term Loans requested and the Borrower shall be deemed to have applied the
full amount of such proceeds to the repayment of the Revolving Loans previously
made by such Lender to such Borrower.
(e) Unless all the Lenders otherwise consent, (i) the Borrower may
not deliver any Notice of Term Loan Conversion so long as any Default or Event
of Default has occurred and is continuing and (ii) no consolidation of Revolving
Loans into Term Loans pursuant to any validly given Notice of Term Loan
Conversion shall be permitted if on the Term Loan Conversion Date specified a
Default or an Event of Default shall have occurred and is continuing.
SECTION 2.08 Repayment of Loans; Evidence of Debt.
------------------------------------
(a) Repayment. The Borrower hereby unconditionally promises to pay to
---------
the Administrative Agent for account of the Lenders (i) the outstanding
principal amount of the Revolving Loans on the Revolving Termination Date,
unless the Borrower elects to consolidate all of such Revolving Loans into Term
Loans on or before such date; and (ii) the outstanding principal amount of all
Term Loans made to the Borrower on the Final Repayment Date.
(b) Manner of Payment. Prior to any repayment or prepayment of any
-----------------
Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to
be paid and shall notify the Administrative Agent by telephone (confirmed by
telecopy) of such selection not later than 12:00 noon, Pittsburgh, Pennsylvania
time, three Business Days before the scheduled date of such repayment or
prepayment; provided that each repayment or prepayment of Borrowings shall be
applied to repay or prepay any outstanding ABR Borrowings before any other
Borrowings. If the Borrower fails to make a timely selection of the Borrowing or
Borrowings to be repaid or prepaid, such payment shall be applied, first, to pay
any outstanding ABR Borrowings and, second, to other Borrowings in the order of
the remaining duration of their respective Interest Periods (the Borrowing with
the shortest remaining Interest Period to be repaid first). Each payment of a
Revolving Borrowing shall be applied ratably to the Loans included in such
Borrowing.
(c) Maintenance of Loan Accounts by Lenders. Each Lender shall
---------------------------------------
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the
23
<PAGE>
Borrower to such Lender resulting from each Loan made by such Lender, including
the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.
(d) Maintenance of Loan Accounts by the Administrative Agent. The
--------------------------------------------------------
Administrative Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, the Class and Type thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent hereunder
for the account of the Lenders and each Lender's share thereof.
(e) Effect of Entries. The entries made in the accounts maintained
------------------
pursuant to paragraph (c) and (d) of this Section shall be prima facie evidence
of the existence and amounts of the obligations recorded therein; provided that
the failure of any Lender or the Administrative Agent to maintain such accounts
or any error therein shall not in any manner affect the obligation of the
Borrower to repay the Loans in accordance with the terms of this Agreement.
(f) Notes. Any Lender may request that Loans made by it be evidenced
-----
by a promissory note (each a "Note") in substantially the form of Exhibit C. In
----
such event, the Borrower shall prepare, execute and deliver to such Lender a
Note payable to the order of such Lender (or, if requested by such Lender, to
such Lender and its registered assigns) and in the form of Exhibit C.
Thereafter, the Loans evidenced by such Note and interest thereon shall at all
times (including after assignment pursuant to Section 9.12) be represented by
one or more Notes in such form payable to the order of the payee named therein
(or, if such Note is a registered note, to such payee and its registered
assigns).
SECTION 2.09 Prepayment of Loans.
-------------------
(a) Optional Prepayments Right to Prepay Borrowings. The Borrower
-----------------------------------------------
shall have the right at any time and from time to time to prepay any Borrowing
in whole or in part, subject to the requirements of this Section.
(b) Notices, Etc. The Borrower shall notify the Administrative Agent
-------------
by telephone (confirmed by telecopy) of any optional prepayment hereunder (i) in
the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon,
Pittsburgh, Pennsylvania time, three Business Days before the date of
prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
than 12:00 noon, Pittsburgh, Pennsylvania time, one Business Day before the date
of prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid; provided that, if a notice of prepayment is given in connection with
a conditional notice of termination of the Commitments as contemplated by
Section 2.06(c), then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.06(c). Promptly following
receipt of any such notice relating to a Borrowing, the Administrative Agent
shall advise the Lenders of the contents thereof. Each partial prepayment of
any Borrowing shall be in an aggregate principal amount equal to $5,000,000 or a
multiple of $1,000,000 in excess thereof, provided that if any prepayment of
Eurodollar Loans made pursuant to a single Borrowing shall reduce the
outstanding Revolving Loans made pursuant to such Borrowing to an amount less
than $5,000,000, such outstanding Loans shall immediately be converted into ABR
Loans. Each
24
<PAGE>
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.11 and shall be made in the manner specified in
this Section 2.09(b).
SECTION 2.10 Fees.
----
(a) Facility Fee. The Borrower shall pay the Administrative Agent for
------------
the account of each Lender a facility fee for the period from and including the
Effective Date to but excluding the Revolving Termination Date (or such earlier
date on which the total Commitments shall have been terminated) computed at a
rate per annum equal to the Applicable Rate on each Lender's daily average
Commitment, such fee to be paid quarterly in arrears on each Quarterly Date and
on the Revolving Termination Date (or such earlier date on which the total
Commitments shall have been terminated). The facility fee shall be calculated
on the basis of the actual number of days elapsed in a year of 360 days.
(b) Usage Fee. The Borrower shall pay the Administrative Agent for
---------
the account of each Lender a usage fee for each day during the period from and
including the date hereof to but excluding the Revolving Termination Date (or
such earlier date on which the total Commitments shall have been terminated) on
which the aggregate principal amount of the then outstanding Revolving Loans
exceeds 33% or 66%, as the case may be, of the total Commitments hereunder
computed at a rate per annum equal to the Applicable Rate for such percentage of
usage on the daily average aggregate principal amount of the Revolving Loans
then outstanding, such fee to be paid quarterly in arrears on each Quarterly
Date and on the Revolving Termination Date (or such earlier date on which the
total Commitments shall have been terminated). The usage fee shall be
calculated on the basis of the actual number of days elapsed in a year of 360
days.
(c) Payment of Fees. All fees payable hereunder shall be paid on the
---------------
dates due, in immediately available funds, to the Administrative Agent for
distribution, in the case of facility and usage fees, to the Lenders entitled
thereto.
SECTION 2.11 Interest.
--------
(a) ABR Loans. The Loans comprising each ABR Revolving Borrowing
---------
shall bear interest at a rate per annum equal to the Alternate Base Rate.
(b) Eurodollar Loans. The Loans comprising each Eurodollar Borrowing
----------------
shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the
Interest Period in effect for such Borrowing plus the Applicable Rate.
(c) Default Interest. Notwithstanding the foregoing, if any principal
----------------
of or interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided above
or (ii) in the case of any other amount, 2% plus the rate applicable to ABR
Loans as provided in paragraph (a) of this Section.
25
<PAGE>
(d) Payment of Interest. Accrued interest on each Loan shall be
-------------------
payable in arrears on each Interest Payment Date for such Loan and (i) in the
case of Revolving Loans, upon termination of the Commitments and (ii) in the
case of Term Loans, on the Final Repayment Date; provided that (x) interest
accrued pursuant to paragraph (c) of this Section shall be payable on demand,
(y) in the event of any repayment or prepayment of any Loan (other than a
prepayment of an ABR Revolving Loan prior to the Revolving Termination Date),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment and (z) in the event of any conversion
of any Eurodollar Borrowing prior to the end of the current Interest Period
therefor, accrued interest on such Borrowing shall be payable on the effective
date of such conversion.
(e) Computation. All interest hereunder shall be computed on the
-----------
basis of a year of 360 days, except that interest computed by reference to the
Alternate Base Rate at times when the Alternate Base Rate is based on the Prime
Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable Alternate
Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive, absent
manifest error.
SECTION 2.12 Alternate Rate of Interest. If prior to the
--------------------------
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive, absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (or Lender) of
making or maintaining their Loans (or its Loan) included in such Borrowing for
such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing,
such Borrowing shall be made as an ABR Revolving Borrowing.
SECTION 2.13 Increased Costs.
---------------
(a) Increased Costs Generally. If any Change in Law shall:
-------------------------
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender or its Parent (except any
such reserve requirement reflected in the Adjusted LIBO Rate); or
26
<PAGE>
(ii) impose on any Lender or its Parent or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans
made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender or its Parent of making or maintaining any Eurodollar Loan (or of
maintaining its obligation to make any such Loan) or to reduce the amount of any
sum received or receivable by such Lender hereunder (whether of principal,
interest or otherwise), then the Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender or its Parent, as
the case may be, for such additional costs incurred or reduction suffered.
(b) Capital Requirements. If any Lender determines that any Change in
--------------------
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's capital or on the capital of its Parent as a
consequence of this Agreement or the Loans made by such Lender to a level below
that which such Lender or its Parent could have achieved but for such Change in
Law (taking into consideration such Lender's policies and the policies of its
Parent with respect to capital adequacy), then from time to time the Borrower
will pay to such Lender such additional amount or amounts as will compensate
such Lender or its Parent for any such reduction suffered.
(c) Certificates from Lenders. A certificate of a Lender setting
-------------------------
forth the amount or amounts necessary to compensate such Lender or its Parent,
as the case may be, as specified in paragraph (a) or (b) of this Section shall
be delivered to the Borrower and shall be conclusive, absent manifest error.
The Borrower shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender to
-----------------
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's right to demand such compensation.
SECTION 2.14 Break Funding Payments. In the event of (a) the payment
----------------------
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of Eurodollar Loan other than on the last day of
the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Revolving Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice is permitted to be
revocable under Section 2.09(b) and is revoked in accordance herewith), or (d)
the assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.17, then, in any such event, the Borrower shall compensate each Lender
for the loss, cost and expense attributable to such event. In the case of a
Eurodollar Loan, the loss to any Lender attributable to any such event shall be
deemed to include an amount determined by such Lender to be equal to the excess,
if any, of (i) the amount of interest that such Lender would pay for a deposit
equal to the principal amount of such Loan for the period from the date of such
payment, conversion, failure or assignment to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or continue, the duration of the Interest Period that would have resulted from
such borrowing, conversion or continuation) if the interest rate payable on such
deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii)
the amount of interest that such Lender would earn on such principal amount for
such period
27
<PAGE>
if such Lender were to invest such principal amount for such period at the
interest rate that would be bid by such Lender (or an Affiliate of such Lender)
for dollar deposits from other banks in the eurodollar market at the
commencement of such period. A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive, absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
SECTION 2.15 Taxes.
-----
(a) Payments Free of Taxes. Any and all payments by or on account of
----------------------
any obligation of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Arranger,
Syndication Agent or Lender (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
Law.
(b) Payment of Other Taxes by the Borrower. In addition, the Borrower
--------------------------------------
shall pay any Other Taxes to the relevant Governmental Authority in accordance
with applicable Law.
(c) Indemnification by the Borrower. The Borrower shall indemnify the
-------------------------------
Administrative Agent, the Arranger, each Syndication Agent and each Lender,
within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
paid by the Administrative Agent, Arranger, such Syndication Agent or such
Lender, as the case may be, and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender, the Arranger, a Syndication
Agent or by the Administrative Agent (on its own behalf or on behalf of a
Lender, the Arranger or a Syndication Agent) shall be conclusive, absent
manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of
---------------------
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.
(e) Foreign Lenders. Any Foreign Lender that is entitled to an
----------------
exemption from or reduction of withholding tax under the Law of the jurisdiction
in which the Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable Law or reasonably requested by the Borrower, such
properly
28
<PAGE>
completed and executed documentation prescribed by applicable Law as will permit
such payments to be made without withholding or at a reduced rate.
SECTION 2.16 Payments Generally; Pro Rata Treatment; Sharing of Set-
------------------------------------------------------
offs.
- ----
(a) Payments by the Borrower. The Borrower shall make each payment
------------------------
required to be made by it hereunder (whether of principal, interest or fees, or
under Section 2.13, 2.14 or 2.15, or otherwise) prior to 1:00 PM, Pittsburgh,
Pennsylvania time, on the date when due, in immediately available funds, without
set-off or counterclaim. Any amounts received after such time on any such date
shall be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. All such payments shall be made to the
Administrative Agent at its Principal Office and to such account at its
Principal Office as the Administrative Agent shall specify to the Borrower,
except that payments pursuant to Sections 2.13, 2.14, 2.15 and 9.04 shall be
made directly to the Persons entitled thereto. The Administrative Agent shall
distribute any such payments received by it for account of any other Person to
the appropriate recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension. All payments hereunder shall be made in Dollars.
(b) Application of Insufficient Payments. If at any time insufficient
------------------------------------
funds are received by and available to the Administrative Agent to pay fully all
amounts of principal, interest and fees then due hereunder, such funds shall be
applied (i) first, to pay interest and fees then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of interest and fees
then due to such parties, and (ii) second, to pay principal then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal then due to such parties.
(c) Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein: (i) each Revolving Borrowing shall be made from the Lenders, each
payment of facility and usage fees under Section 2.10 shall be made for account
of the Lenders, and each termination or reduction of the amount of the
Commitments under Section 2.06 shall be applied to the respective Commitments of
the Lenders, pro rata according to the amounts of their respective Commitments;
(ii) each Borrowing shall be allocated pro rata among the Lenders according to
the amounts of their respective Commitments (in the case of the making of
Revolving Loans) or their respective Loans (in the case of conversions and
continuations of Loans); (iii) each payment or prepayment of principal of Loans
by the Borrower shall be made for account of the Lenders pro rata in accordance
with the respective unpaid principal amounts of the Loans held by them; and (iv)
each payment of interest on Loans by the Borrower shall be made for account of
the Lenders pro rata in accordance with the amounts of interest on such Loans
then due and payable to the respective Lenders.
(d) Sharing of Payments by Lenders. If any Lender shall, by
------------------------------
exercising any right of set-off or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Loans resulting in such
Lender receiving payment of a greater proportion of the aggregate amount of its
Loans and accrued interest thereon then due than the proportion
29
<PAGE>
received by any other Lender, then the Lender receiving such greater proportion
shall purchase (for cash at face value) participations in the Loans of other
Lenders to the extent necessary so that the benefit of all such payments shall
be shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Loans; provided that (i)
if any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans to any assignee
or participant, other than to the Borrower or any Subsidiary or Affiliate
thereof (as to which the provisions of this paragraph shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable Law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
(e) Presumptions of Payment. Unless the Administrative Agent shall
-----------------------
have received notice from the Borrower prior to the date on which any payment is
due to the Administrative Agent for account of the Lenders hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders the amount due. In
such event, if the Borrower has not in fact made such payment, then each of the
Lenders severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender with interest thereon, for each
day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the Federal Funds
Effective Rate.
(f) Certain Deductions by the Administrative Agent. If any Lender
----------------------------------------------
shall fail to make any payment required to be made by it pursuant to Section
2.04(b) or 2.16(e), then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for account of such Lender to satisfy such
Lender's obligations under such Sections until all such unsatisfied obligations
are fully paid.
SECTION 2.17 Mitigation Obligations; Replacement of Lenders.
----------------------------------------------
(a) Designation of a Different Lending Office. If any Lender requests
-----------------------------------------
compensation under Section 2.13, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for account of any
Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts
to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Borrower hereby agrees to pay all
30
<PAGE>
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation under
----------------------
Section 2.13, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for account of any Lender pursuant to
Section 2.15, or if any Lender defaults in its obligation to fund Loans
hereunder, then the Borrower may, at its sole expense and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 9.12), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (i) the
Borrower shall have received the prior consent of the Administrative Agent,
which consent shall not unreasonably be withheld, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.13 or payments required to be made pursuant to
Section 2.15, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Administrative
Agent and each Lender as follows:
SECTION 3.01 Corporate Status.
----------------
The Borrower and each Subsidiary of the Borrower is a corporation,
trust or limited liability company duly organized, validly existing and in good
standing under the Laws of its jurisdiction of organization. The Borrower and
each Subsidiary of the Borrower has the corporate power and authority to own its
Property and to transact the business in which it is engaged or presently
proposes to engage. The Borrower and each Subsidiary of the Borrower is duly
qualified to do business as a foreign corporation, trust or limited liability
company and is in good standing in all jurisdictions in which the ownership of
its properties or the nature of its activities or both makes such qualification
necessary or advisable. Schedule II states as of the date hereof the
jurisdiction of organization of the Borrower and each Subsidiary of the
Borrower, and the jurisdictions in which the Borrower and each Subsidiary of the
Borrower is qualified to do business as a foreign corporation, trust or limited
liability company.
SECTION 3.02 Corporate Power and Authorization.
---------------------------------
The Borrower has the corporate power and authority to execute,
deliver, perform, and take all actions contemplated by, each of the Loan
Documents to which it is a party, and all
31
<PAGE>
such action has been duly and validly authorized by all necessary corporate
proceedings on its part. Without limiting the foregoing, the Borrower has the
corporate power and authority to borrow pursuant to the Loan Documents to the
fullest extent permitted hereby and thereby from time to time, and has taken all
necessary corporate action to authorize such borrowings.
SECTION 3.03 Execution and Binding Effect.
----------------------------
This Agreement and each of the other Loan Documents to which the
Borrower is a party and which is required to be delivered on or before the
Effective Date pursuant to Section 4.01 has been duly and validly executed and
delivered by the Borrower. This Agreement and each such other Loan Document
constitutes, and when executed and delivered by the Borrower will constitute,
the legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, except as the enforceability hereof or
thereof may be limited by bankruptcy, insolvency or other similar laws of
general application affecting the enforcement of creditors' rights or by general
principles of equity limiting the availability of equitable remedies.
SECTION 3.04 Governmental Approvals and Filings.
----------------------------------
The Public Utilities Commission of Nevada has duly and validly issued
orders authorizing the Borrower to enter into this Agreement and the other Loan
Documents to which it is a party and to take all actions contemplated hereby or
thereby or in connection herewith or therewith, and such orders remain in full
force and effect in the form issued. No other Governmental Action is required
for the due execution, delivery and performance by the Borrower of this
Agreement or any of the other Loan Documents to which it is a party. All
Governmental Actions required to be taken in order the effect the Mergers have
been taken.
SECTION 3.05 Absence of Conflicts.
--------------------
Neither the execution and delivery of any of the Loan Documents by the
Borrower, nor the consummation of the transactions herein or therein
contemplated by the Borrower, nor the performance of or the compliance with the
terms and conditions hereof or thereof by the Borrower, nor the consummation of
the Mergers, does or will:
(a) violate or conflict with any Law; or
(b) violate, conflict with or result in a breach of any term or
condition of, or constitute a default under, or result in (or give rise to any
-- --
right, contingent or otherwise, of any Person to cause) any termination,
cancellation, prepayment or acceleration of performance of, or result in the
--
creation or imposition of (or give rise to any obligation, contingent or
otherwise, to create or impose) any Lien upon any of the Property of the
Borrower or any Subsidiary of the Borrower pursuant to, or otherwise result in
--
(or give rise to any right, contingent or otherwise, of any Person to cause) any
change in any right, power, privilege, duty or obligation of the Borrower or any
Subsidiary of the Borrower under or in connection with,
(i) the articles of incorporation or by-laws (or other constituent
documents) of the Borrower or any Subsidiary of the Borrower;
32
<PAGE>
(ii) any agreement or instrument creating, evidencing or
securing any Indebtedness to which the Borrower or any Subsidiary of the
Borrower is a party or by which any of them or any of their respective
properties (now owned or hereafter acquired) may be subject or bound; or
(iii) any other material agreement or instrument to which the
Borrower or any Subsidiary of the Borrower is a party or by which any of
them or any of their respective properties (now owned or hereafter
acquired) may be subject or bound.
SECTION 3.06 Audited Financial Statements.
----------------------------
The Borrower has heretofore furnished to each of the Agents and each
of the Lenders consolidated balance sheets of the Borrower and its consolidated
Subsidiaries as of December 31, 1996, 1997 and 1998 and the related consolidated
statements of income, retained earnings and changes in cash flows for the fiscal
years then ended, as examined and reported on by independent certified public
accountants for the Borrower, who delivered an unqualified opinion in respect
thereof. Such financial statements (including the notes thereto) present fairly
the financial condition of the Borrower and its consolidated Subsidiaries as of
the end of each such fiscal year and the results of their operations and their
retained earnings and changes in cash flows for the fiscal years then ended, all
in conformity with GAAP.
SECTION 3.07 Interim Financial Statements.
----------------------------
The Borrower has heretofore furnished to each of the Agents and each
of the Lenders an interim consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as of the end of the first fiscal quarter of the
fiscal year beginning January 1, 1999, together with the related consolidated
statements of income, retained earnings and changes in cash flows for the
applicable fiscal period ending on such date. Such financial statements
(including the notes thereto) present fairly the financial condition of the
Borrower and its consolidated Subsidiaries as of the end of such fiscal quarter
and the results of their operations and their retained earnings and changes in
cash flows for the fiscal periods then ended, all in conformity with GAAP,
subject to normal and recurring year-end audit adjustments.
SECTION 3.08 Absence of Undisclosed Liabilities.
----------------------------------
Neither the Borrower nor any Subsidiary of the Borrower has any
liability or obligation of any nature whatever (whether absolute, accrued,
contingent or otherwise, whether or not due), forward or long-term commitments
or unrealized or anticipated losses from unfavorable commitments, except (a) as
disclosed in the financial statements referred to in Sections 3.06 and 3.07, and
(b) liabilities, obligations, commitments and losses incurred after March 31,
1999, in the ordinary course of business and consistent with past practices.
SECTION 3.09 Absence of Material Adverse Change.
----------------------------------
Except for the Mergers, since December 31, 1998, there has been no
material adverse change in the business, operations, condition (financial or
otherwise), or prospects of the Borrower and its Subsidiaries taken as a whole.
33
<PAGE>
SECTION 3.10 Accurate and Complete Disclosure.
--------------------------------
All information heretofore, contemporaneously or hereafter provided by
or on behalf of the Borrower to any Agent or any Lender pursuant to or in
connection with any Loan Document or any transaction contemplated hereby or
thereby is or will be (as the case may be) true and accurate in all material
respects on the date as of which such information is dated (or, if not dated,
when received by such Agent or such Lender) and does not or will not (as the
case may be) omit to state any material fact necessary to make such information
not misleading at such time in light of the circumstances in which it was
provided. The Borrower has disclosed to each Agent and each Lender in writing
every fact or circumstance which has, or which so far as the Borrower can
reasonably foresee is reasonably likely and is reasonably likely to have, a
Material Adverse Effect.
SECTION 3.11 Margin Regulations.
------------------
No part of the proceeds of any Loan hereunder will be used for the
purpose of buying or carrying any "margin stock", as such term is used in
Regulation U of the Board of Governors of the Federal Reserve System, as amended
from time to time, or to extend credit to others for the purpose of buying or
carrying any "margin stock". Neither the Borrower nor any Subsidiary of the
Borrower is engaged in the business of extending credit to others for the
purpose of buying or carrying "margin stock". Neither the Borrower nor any
Subsidiary of the Borrower owns any "margin stock". Neither the making of any
Loan nor any use of proceeds of any such Loan will violate or conflict with the
provisions of Regulation T, U or X of the Board, as amended from time to time.
SECTION 3.12 Litigation.
----------
There is no pending or (to the Borrower's knowledge after due inquiry)
threatened action, suit, proceeding or investigation (including any
Environmental Claim) by or before any Governmental Authority against or
affecting the Borrower or any Subsidiary of the Borrower which, if adversely
decided, individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect, except for (a) matters described in the financial
statements referred to in Section 3.06 and (b) matters set forth in Schedule
III.
SECTION 3.13 Absence of Events of Default.
----------------------------
No event has occurred and is continuing and no condition exists which
constitutes a Default or an Event of Default.
SECTION 3.14 Absence of Other Conflicts.
--------------------------
Neither the Borrower nor any Subsidiary of the Borrower is in
violation of or conflict with, or is subject to any contingent liability on
account of any violation of or conflict with:
(a) any Law (including ERISA, the Code, any applicable occupational
health, safety or welfare Law or any applicable Environmental Law);
34
<PAGE>
(b) its articles of incorporation or by-laws (or other constituent
documents); or
(c) any agreement or instrument to which it is party or by which it or
any of its properties (now owned or hereafter acquired) may be subject or
bound;
except for matters which, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
SECTION 3.15 Insurance.
---------
The Borrower and each Subsidiary of the Borrower maintains with
financially sound and reputable insurers insurance with respect to its
properties and business and against at least such liabilities, casualties and
contingencies and in at least such types and amounts as is customary in the case
of corporations engaged in the same or a similar business or having similar
properties similarly situated.
SECTION 3.16 Title to Property; No Liens.
---------------------------
The Borrower and each Subsidiary of the Borrower has good and
marketable title in fee simple to all real Property owned or purported to be
owned by it and good title to all other Property of whatever nature owned or
purported to be owned by it, including but not limited to all Property reflected
in the most recent audited balance sheet referred to in Section 3.06 or
submitted pursuant to Section 5.01(b), as the case may be (except as sold or
otherwise disposed of in the ordinary course of business after the date of such
balance sheet). Except for (i) Liens reflected in the most recent audited
balance sheet referred to in Section 3.06 or submitted pursuant to Section
5.01(b), as the case may be, (ii) Liens consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations on the
use of real Property or irregularities in title thereto which do not materially
detract from the value of, or impair the use of, such Property by the Borrower
or any Subsidiary of the Borrower in the operation of its business, (iii) Liens
for current Taxes not yet due and delinquent and (iv) Liens set forth on
Schedule IV, no Property owned by the Borrower or any Subsidiary of the Borrower
is subject to any Lien.
SECTION 3.17 Taxes.
-----
All tax and information returns required to be filed by or on behalf
of the Borrower or any Subsidiary of the Borrower have been properly prepared,
executed and filed. All Taxes upon the Borrower or any Subsidiary of the
Borrower or upon any of their respective Properties, incomes, sales or
franchises which are due and payable have been paid, other than those not yet
delinquent and payable without premium or penalty, and except for those being
diligently contested in good faith by appropriate proceedings, and in each case
adequate reserves and provisions for Taxes have been made on the books of the
Borrower and each Subsidiary of the Borrower. The reserves and provisions for
Taxes on the books of the Borrower and each Subsidiary of the Borrower are
adequate for all open years and for its current fiscal period. Neither the
Borrower nor any Subsidiary of the Borrower knows of any proposed additional
assessment or basis for any material assessment for additional Taxes (whether or
not reserved against).
35
<PAGE>
SECTION 3.18 Borrower Not An Investment Company.
----------------------------------
Neither the Borrower nor any Subsidiary of the Borrower is an
"investment company" or a company controlled by an "investment company" within
the meaning of the Investment Company Act of 1940.
SECTION 3.19 Environmental Matters.
---------------------
(a) The Borrower and each of its Subsidiaries have complied with and
are in compliance with, all applicable Environmental Laws and the requirements
of any permits issued under such Environmental Laws. Except as disclosed on
Schedule V, there are no pending or threatened Environmental Claims against the
Borrower or any of its Subsidiaries (including any such claim arising out of the
ownership, lease or operation by the Borrower or any of its Subsidiaries of any
real Property no longer owned, leased or operated by the Borrower or any of its
Subsidiaries) or any real Property owned, leased or operated by the Borrower or
any of its Subsidiaries. Except as disclosed on Schedule V, there are no facts,
circumstances, conditions or occurrences with respect to the business or
operations of the Borrower or any of its Subsidiaries, or any real Property
owned, leased or operated by the Borrower or any of its Subsidiaries (including
any real Property formerly owned, leased or operated by the Borrower or any of
its Subsidiaries but no longer owned, leased or operated by the Borrower or any
of its Subsidiaries) or any Property adjoining or adjacent to any such real
Property that could be expected (i) to form the basis of an Environmental Claim
against the Borrower or any of its Subsidiaries or any real Property owned,
leased or operated by the Borrower or any of its Subsidiaries or (ii) to cause
any real Property owned, leased or operated by the Borrower or any of its
Subsidiaries to be subject to any restrictions on the ownership, occupancy or
transferability of such real Property by the Borrower or any of its Subsidiaries
under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any real Property owned, leased
or operated by the Borrower or any of its Subsidiaries where such generation,
use, treatment or storage has violated or could be expected to violate any
Environmental Law. Hazardous Materials have not at any time been Released on or
from any real Property owned, leased or operated by Borrower or any of its
Subsidiaries where such Release has violated or would be expected to violate any
applicable Environmental Law.
(c) Notwithstanding anything to the contrary in this Section, the
representations made in this Section shall not be untrue unless the effect of
all violations, claims, restrictions, failures and noncompliances of the types
described in this Section would reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect on the Borrower.
SECTION 3.20 ERISA.
-----
(a) Each Plan (and each related trust, insurance contract or fund) is
in substantial compliance with its terms and with all applicable Laws, including
without limitation ERISA and the Code; each Plan (and each related trust, if
any) which is intended to be qualified under Section 401(a) of the Code has
received a determination letter from the Internal Revenue Service to the effect
that it meets the requirements of Sections 401(a) and 501(a) of the Code; no
36
<PAGE>
Reportable Event has occurred; no Multiemployer Plan is insolvent or in
reorganization; no Plan has an Unfunded Current Liability; no Plan which is
subject to Section 412 of the Code or Section 302 of ERISA has an accumulated
funding deficiency within the meaning of such sections of the Code or ERISA or
has applied for or received a waiver of an accumulated funding deficiency or an
extension of any amortization period within the meaning of Section 412 of the
Code or Section 303 or 304 of ERISA; all contributions required to be made with
respect to a Plan have been timely made; neither the Borrower nor any Subsidiary
of the Borrower nor any ERISA Affiliate has incurred any material liability
(including any indirect, contingent or secondary liability) to or on account of
a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or
expects to incur any such liability under any of the foregoing sections with
respect to any Plan; no condition exists which presents a material risk to the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a
liability to or on account of a Plan pursuant to the foregoing provisions of
ERISA and the Code; no proceedings have been instituted to terminate or appoint
a trustee to administer any Plan; no action, suit, proceeding, hearing, audit or
investigation with respect to the administration, operation or the investment of
assets of any Plan (other than routine claims for benefits) is pending, expected
or threatened; using actuarial assumptions and computation methods consistent
with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the
Borrower and its Subsidiaries and its ERISA Affiliates to all Multiemployer
Plans in the event of a complete withdrawal therefrom, as of the close of the
most recent fiscal year of each such Plan ended prior to the date of the most
recent Borrowing, would not have a Material Adverse Effect; each group health
plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code)
which covers or has covered employees or former employees of the Borrower, any
Subsidiary of the Borrower, or any ERISA Affiliate has at all times been
operated in compliance with the provisions of Part 6 of subtitle B of Title I of
ERISA and Section 4980B of the Code; no Lien imposed under the Code or ERISA on
the assets of the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate exists or is likely to arise on account of any Plan; and the Borrower
and its Subsidiaries may cease contributions to or terminate any Plan maintained
by any of them without incurring any material liability.
(b) Each Foreign Pension Plan, if any, has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable Laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. All contributions required to be made with respect to a Foreign
Pension Plan have been timely made. Neither the Borrower nor any of its
Subsidiaries has incurred any obligation in connection with the termination of
or withdrawal from any Foreign Pension Plan. The present value of the accrued
benefit liabilities (whether or not vested) under each Foreign Pension Plan,
determined as of the end of the Borrower's most recently ended Fiscal Year on
the basis of actuarial assumptions, each of which is reasonable, did not exceed
the current value of the assets of such Foreign Pension Plan allocable to such
benefit liabilities.
SECTION 3.21 Year 2000 Issues.
----------------
The Borrower has (i) initiated a detailed review and assessment of all
areas within its business and operations and the business and operations of its
Subsidiaries, including those affected by suppliers and vendors, that could be
adversely impacted by the "Year 2000 Problem", i.e., the risk that computer
applications used by the Borrower, its Subsidiaries, or their
37
<PAGE>
suppliers and vendors, may be unable to recognize and perform properly date-
sensitive functions involving certain dates prior to and any date after December
31, 1999, (ii) developed a detailed plan and timetable for addressing the Year
2000 Problem on a timely basis (the "Year 2000 Plan"), and (iii) to date,
implemented this plan in accordance with the timetable. The Borrower reasonably
believes that all computer applications, including those of its suppliers and
vendors, that are material to its business, operations or conditions (financial
or otherwise) will, on a timely basis, be able to perform properly date-
sensitive functions for all dates before and after January 1, 2000, that is, be
"Year 2000 Compliant", except to the extent that a failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.22 Pari Passu Status.
-----------------
The claims and rights of the Lenders against the Borrower hereunder
are not subordinated to, and rank at least pari passu with, the claims and
rights of other holders of its unsecured indebtedness except to the extent
otherwise provided by Law (including without limitation the Bankruptcy Code and
the provisions of 31 U.S.C. (S)3713).
SECTION 3.23 Indebtedness.
------------
Schedule VI contains a true and complete list of all Indebtedness of
the Borrower and its Subsidiaries that is, or will be, outstanding on the
Effective Date ("Existing Indebtedness").
---------------------
ARTICLE IV
CONDITIONS
SECTION 4.01 Effective Date.
--------------
This Agreement and the other Loan Documents shall become effective as
against the Lenders and the Agents on the first date on which all of the
following conditions shall be satisfied or waived:
(a) Agreement; Notes. The Administrative Agent shall have received an
----------------
executed counterpart of this Agreement for each Lender, duly executed by
the Borrower, and, to the extent any Lender has requested a Note pursuant
to Section 2.08(f), a Note conforming to the requirements hereof, duly
executed on behalf of the Borrower.
(b) Governmental Approvals and Filings. The Administrative Agent
----------------------------------
shall have received, with copies and executed counterparts for each Lender,
true and correct copies (in each case certified as to authenticity on such
date on behalf of the Borrower) of the orders entered by the Public
Utilities Commission of Nevada referred to in Section 3.04, and such orders
shall be satisfactory in form and substance to the Administrative Agent and
shall be in full force and effect.
(c) Corporate Proceedings. The Administrative Agent shall have
---------------------
received, with a counterpart for each Lender, certificates by the Secretary
or Assistant Secretary of the Borrower dated as of the Effective Date as to
(i) true copies of the articles of incorporation and by-laws (or other
constituent documents) of the Borrower as in effect on such date
38
<PAGE>
(which, in the case of articles of incorporation or other constituent
documents filed or required to be filed with the Secretary of State or
other Governmental Authority in its jurisdiction of incorporation, shall be
certified to be true, correct and complete by such Secretary of State or
other Governmental Authority not more than 30 days before the date hereof),
(ii) true copies of all corporate action taken by the Borrower relative to
this Agreement and the other Loan Documents, and (iii) the incumbency and
signatures of the respective officers of the Borrower executing this
Agreement and the other Loan Documents to which the Borrower is a party,
together with satisfactory evidence of the incumbency of such Secretary or
Assistant Secretary. The Administrative Agent shall have received, with a
copy for each Lender, certificates from the Secretary of State of Nevada
(or other applicable Governmental Authority) dated not more than 30 days
before the Effective Date showing the good standing of the Borrower in
Nevada and in each state in which the Borrower does business.
(d) Legal Opinion of Counsel to the Borrower. The Administrative
----------------------------------------
Agent shall have received, with an executed counterpart for each Lender, an
opinion addressed to the Administrative Agent and each Lender, dated the
Effective Date, of Choate, Hall & Stewart, counsel to the Borrower, as to
such matters as may be requested by the Administrative Agent and in form
and substance satisfactory to the Lenders.
(e) Financial Statements. The Administrative Agent shall have
--------------------
received for each Lender a true and correct copy of the (i) audited
consolidated financial statements, including balance sheets, income
statements and cash flow statements, for the Borrower and each of its
consolidated Subsidiaries for the years ended December 31, 1998, 1997 and
1996 and (ii) unaudited interim consolidated financial statements,
including a balance sheet, income statement and statement of cash flows,
for the Borrower and its consolidated Subsidiaries for the three month
period ended March 31, 1999.
(f) No Material Adverse Effect. Nothing shall have occurred (and
--------------------------
neither the Administrative Agent nor the Lenders shall have become aware of
any facts or conditions not previously known) which the Lenders shall
determine (i) has had, or could reasonably be expected to have, a Material
Adverse Effect. The Administrative Agent shall have received a certificate
of a senior financial officer of the Borrower, dated the Effective Date, to
the effect that, as of the Effective Date, there has been no Material
Adverse Effect since December 31, 1998.
(g) Mergers. The Mergers shall have been consummated prior to
-------
September 1, 1999, or such later date as the Lenders and the Administrative
Agent shall agree upon in writing, on terms satisfactory to the Lenders and
the Administrative Agent shall have received copies of all documentation
related there, including, without limitation, the order(s) of the Federal
Energy Regulatory Commission and the Securities and Exchange Commission
approving the Mergers .
(h) Governmental Approvals. All necessary and material Governmental
----------------------
Actions (domestic and foreign) and third party approvals and/or consents in
connection with the Mergers and the transactions contemplated in this
Agreement shall have been obtained and remain in effect and all applicable
waiting periods with respect thereto shall
39
<PAGE>
have expired without any action being taken by any competent authority
which restrains, prevents or imposes materially adverse conditions upon,
the consummation of the Mergers or the transactions contemplated hereby or
otherwise referred to herein. The Administrative Agent shall have received
documentation reasonably acceptable to it that (i) the Federal Energy
Regulatory Commission and the Securities and Exchange Commission have each
duly approved the Mergers and (ii) the Public Utilities Commission of
Nevada has duly approved the Borrowings hereunder.
(i) No Injunctions. There shall not exist any judgment, order,
--------------
injunction or other restraint issued or filed or a hearing seeking
injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon the consummation of the Mergers
or the other transactions contemplated hereby or otherwise referred to
herein.
(j) Litigation, Proceedings and Investigations. There shall be no
------------------------------------------
actions, arbitrations, suits, investigations or proceedings pending or
threatened with respect to this Agreement or the Mergers or which the
Administrative Agent shall determine could reasonably be expected to have a
Material Adverse Effect.
(k) No Violation of Existing Agreements. Neither the Borrower nor any
-----------------------------------
Subsidiary of the Borrower is in violation of any material agreement or
instrument to which it is party or by which it or any of its properties
(now owned or hereafter acquired) may be subject or bound;
(l) Refinancing.
-----------
(i) The total commitments in respect of the Indebtedness to be
Refinanced shall have been terminated, and all loans and notes with respect
thereto shall have been repaid in full, together with interest thereon, all
letters of credit issued thereunder shall have been terminated and all
other amounts (including premiums) owing pursuant to the Indebtedness to be
Refinanced shall have been repaid in full and all documents in respect of
the Indebtedness to be Refinanced and all guarantees with respect thereto
shall have been terminated (except as to indemnification provisions, which
may survive to the extent provided therein) and be of no further force and
effect.
(ii) The creditors in respect of the Indebtedness to be
Refinanced shall have terminated and released any and all security
interests and Liens on the assets owned by Borrower and its Subsidiaries.
The Administrative Agent shall have received such releases of security
interests in and Liens on the assets owned by Borrower and its Subsidiaries
as may have been requested by the Administrative Agent, which releases
shall be in form and substance reasonably satisfactory to the
Administrative Agent. Without limiting the foregoing, there shall have
been delivered (i) proper termination statements (Form UCC-3 or the
appropriate equivalent) for filing under the UCC of each jurisdiction where
a financing statement (Form UCC-1 or the appropriate equivalent) was filed
with respect to Borrower or any of its Subsidiaries in connection with the
security interests created with respect to the Indebtedness to be
Refinanced and the documentation related thereto, (ii) termination or
reassignment of any security interest in, or Lien on, any
40
<PAGE>
patents, trademarks, copyrights, or similar interests of Borrower or any of
its Subsidiaries on which filings have been made, (iii) terminations of all
mortgages, leasehold mortgages, deeds of trust and leasehold deeds of trust
created with respect to Property of Borrower or any of its Subsidiaries, in
each case to secure the obligations in respect of the Indebtedness to be
Refinanced, all of which shall be in form and substance reasonably
satisfactory to the Administrative Agent, and (iv) all collateral owned by
Borrower and its Subsidiaries in the possession of any of the creditors in
respect of the Indebtedness to be Refinanced or any collateral agent or
trustee under any related security document shall have been returned to
Borrower or its respective Subsidiary, as the case may be.
(m) Ratings. The Administrative Agent shall have received a
-------
certificate of a senior financial officer of the Borrower, dated the
Effective Date, setting forth the then current ratings of the Index Debt.
(n) Officers' Certificates. The Administrative Agent shall have
----------------------
received, with an executed counterpart for each Lender, certificates from
such officers of the Borrower as to such matters as the Administrative
Agent may request.
(o) Fees, Expenses, etc. All fees and other items required to be paid
--------------------
to the Agents and the Lenders on or before the Effective Date (including
all fees referenced in fee letters and offer letters) shall have been paid
or received.
(p) Section 4.02 Conditions.
-----------------------
(i) Each of the representations and warranties made by the
Borrower herein and in each other Loan Document shall be true and
correct in all material respects on and as of the Effective Date as if
made on and as of such date, both before and after giving effect to
the Loans requested to be made on such date.
(ii) No Default or Event of Default shall have occurred and be
continuing on the Effective Date.
(q) Additional Matters. The Administrative Agent shall have received,
------------------
with copies or executed counterparts for each Lender, such other
certificates, opinions, documents and instruments as the Administrative
Agent may have requested. All corporate and other proceedings, and all
documents, instruments and other matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be satisfactory in form and substance to the Administrative Agent.
SECTION 4.02 Conditions to All Loans.
-----------------------
The obligation of each Lender to make, convert or continue any Loan on
the occasion of any Borrowing is subject to satisfaction of the conditions
precedent set forth in Section 4.01 and satisfaction of the following further
conditions precedent:
(a) Notice. The Borrower shall have executed and delivered to the
------
Administrative Agent a Borrowing Request or an Interest Election Notice for
such Borrowing in accordance with Section 2.03 or 2.05, as the case may be.
41
<PAGE>
(b) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Borrower herein and in each other Loan Document
shall be true and correct in all material respects on and as of such date
as if made on and as of such date, both before and after giving effect to
the making, conversion or continuation of Loans requested to be made,
converted or continued on such date.
(c) No Defaults. No Default or Event of Default shall have occurred
-----------
and be continuing on such date or after giving effect to the making,
conversion or continuation of Loans requested to be made, converted or
continued on such date.
(d) No Violations of Law, etc. Neither the making, conversion or
-------------------------
continuation nor use of the Loans shall cause any Lender to violate or be
in conflict with any Law.
(e) No Material Adverse Change. There shall not have occurred, or be
--------------------------
threatened, any other event, act or condition which would reasonably be
expected to have a Material Adverse Effect.
Each request by the Borrower for any Loan or conversion or
continuation thereof shall constitute a representation and warranty by the
Borrower that the conditions set forth in this Section 4.02 have been satisfied
as of the date of such request. Failure of the Administrative Agent to receive
notice from the Borrower to the contrary before such Loan is made shall
constitute a further representation and warranty by the Borrower that the
conditions referred to in this Section 4.02 have been satisfied as of the date
such Loan is made.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower hereby covenants to the Administrative Agent and each Lender:
SECTION 5.01 Basic Reporting Requirements.
----------------------------
(a) Annual Audit Reports. As soon as practicable, and in any event
--------------------
within 90 days after the close of each fiscal year of the Borrower, the Borrower
shall furnish to the Administrative Agent, with a copy for each Lender,
consolidated statements of income, retained earnings and cash flows of the
Borrower and its consolidated Subsidiaries for such fiscal year and a
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
of the close of such fiscal year, and notes to each, all in reasonable detail,
setting forth in comparative form the corresponding figures for the preceding
fiscal year. Such financial statements shall be accompanied by an opinion of
independent certified public accountants of recognized national standing
selected by the Borrower, which opinion shall not be subject to any
qualification as to scope of audit or as to any other matter which the Required
Lenders determine is adverse. Such opinion in any event shall contain a written
statement of such accountants substantially to the effect that (i) such
accountants examined such financial statements in accordance with generally
accepted auditing standards and accordingly made such tests of accounting
records and such other auditing procedures as such accountants considered
necessary in the circumstances and (ii) in the opinion of such accountants such
financial statements present fairly the financial position of the Borrower and
its consolidated Subsidiaries as of the end of such fiscal year and the results
of their operations and their retained earnings and cash flows for such fiscal
year, in conformity with GAAP.
(b) Quarterly Consolidated Reports. As soon as practicable, and in
------------------------------
any event within 45 days after the close of each of the first three fiscal
quarters of each fiscal year of the Borrower, the Borrower shall furnish to the
Administrative Agent, with a copy for each Lender, unaudited consolidated
statements of income, retained earnings and cash flows of the Borrower and its
consolidated Subsidiaries for the period from the beginning of such fiscal year
to the end of such fiscal quarter and an unaudited consolidated balance sheet of
the Borrower and its consolidated Subsidiaries as of the close of such fiscal
quarter, and notes to each, all in reasonable detail, setting forth in
comparative form the corresponding figures for the same periods or as of the
same date during the preceding fiscal year (except for the consolidated balance
sheet, which shall set forth in comparative form the corresponding balance sheet
as of the prior fiscal year end). Such financial statements shall be certified
by a Responsible Officer of the Borrower as presenting fairly the financial
position of the Borrower and its consolidated Subsidiaries as of the end of such
fiscal quarter and the results of their
42
<PAGE>
operations and their retained earnings and changes in cash flows for such fiscal
year, in conformity with GAAP, subject to normal and recurring year-end audit
adjustments.
(c) Quarterly Compliance Certificates. The Borrower shall deliver to
---------------------------------
the Administrative Agent, with a copy for each Lender, a Quarterly Compliance
Certificate in substantially the form set forth as Exhibit D, duly completed and
signed by a Responsible Officer of the Borrower concurrently with the delivery
of the financial statements referred to in subsections (a) and (b) of this
Section 5.01.
(d) Certain Other Reports and Information. Promptly upon their
-------------------------------------
becoming available to the Borrower, the Borrower shall deliver to the
Administrative Agent, with a copy for each Lender, a copy of (i) all regular or
special reports, registration statements and amendments to the foregoing which
the Borrower or any Subsidiary of the Borrower shall file with the Securities
and Exchange Commission (or any successor thereto) or any securities exchange,
and (ii) all reports, proxy statements, financial statements and other
information distributed by the Borrower to its stockbrokers, bondholders or the
financial community generally.
(e) Further Information. The Borrower shall promptly furnish to the
-------------------
Administrative Agent, with a copy for each Lender, such other information and in
such form as the Administrative Agent or any Lender may reasonably request from
time to time.
(f) Notice of Certain Events. Promptly (and, in the case of clause
------------------------
(i) below, no later than two Business Days) upon becoming aware of any of the
following, the Borrower shall give the Administrative Agent notice thereof,
together with a written statement of a Responsible Officer of the Borrower
setting forth the details thereof and any action with respect thereto taken or
proposed to be taken by the Borrower:
(i) Any Default or Event of Default.
(ii) The occurrence or existence of any event or condition (including
(A) the violation or alleged violation of any Environmental Law by the
Borrower or any Subsidiary
43
<PAGE>
of the Borrower or the assertion of any Environmental Claim against the
Borrower or any Subsidiary of the Borrower, (B) the commencement of any
other action, suit, proceeding or investigation by or before any
Governmental Authority against or affecting the Borrower or any Subsidiary
of the Borrower, or (C) the violation, breach or default or alleged
violation, breach or default by the Borrower or any Subsidiary of the
Borrower or any other Person under any agreement or instrument material to
the business, operations, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole) which event or
condition, either individually or in the aggregate, has, or would
reasonably be expected to have, a Material Adverse Effect.
(iii) Any change in the Index Debt rating.
(g) Visitation; Verification. The Borrower shall permit such
------------------------
Persons as the Administrative Agent or any Lender may designate from time to
time to visit and inspect any of the properties of the Borrower and of any
Subsidiary, to examine their respective books and records and take copies and
extracts therefrom and to discuss their respective affairs with their respective
officers, employees and independent accountants at such times and as often as
the Administrative Agent or any Lender may reasonably request; provided,
--------
however, that the Borrower reserves the right to restrict access to any of its
generating facilities in accordance with reasonably adopted practices relating
to safety and security. The Borrower hereby authorizes such officers, employees
and independent accountants to discuss with the Administrative Agent or any
Lender the affairs of the Borrower and its Subsidiaries.
(h) ERISA. Within 30 days after the Borrower knows that any of the
-----
events or conditions specified below with respect to any Plan or Multiemployer
Plan has occurred or exists, a statement signed by a Responsible Officer of the
Borrower setting forth details respecting such event or condition and the
action, if any, that the Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by the Borrower or an ERISA Affiliate with respect to such event
or condition):
(i) any Reportable Event and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by the Borrower or an
ERISA Affiliate to terminate any Plan, in each case with respect to which
there are insufficient assets to pay benefits as they become due;
(iii) the institution by PBGC of proceedings under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Borrower or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by
PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Borrower or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser
44
<PAGE>
default) or the receipt by the Borrower or any ERISA Affiliate of notice
from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate
or has terminated under Section 4041A of ERISA; and
(v) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the
loss of tax-exempt status of the trust of which such Plan is a part if the
Borrower or an ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections.
(i) Satisfaction of Certain Reporting Requirements. Notwithstanding
----------------------------------------------
any other provision of this Section 5.01, the Borrower shall be deemed to have
satisfied its obligations pursuant to Sections 5.01(a) and (b) if and to the
extent that it shall have provided to the Administrative Agent and each Lender,
pursuant to Section 5.01(d), copies of its periodic reports (on Form 10-K or 10-
Q, as the case may be) as required to be filed with the Securities and Exchange
Commission (or any successor thereto) pursuant to the Securities and Exchange
Act of 1934, as amended (or any successor statute of similar import), for the
annual and quarterly periods described in such Sections.
(j) Delivery to Lenders. The Administrative Agent shall promptly
-------------------
deliver to each Lender each of the reports, statements, certificates or other
documents delivered to the Administrative Agent by the Borrower pursuant to this
Section 5.01.
SECTION 5.02 Insurance.
---------
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain with financially sound and reputable insurers insurance with respect to
its properties and business and against such liabilities, casualties and
contingencies and of such types and in such amounts as is customary in the case
of corporations engaged in the same or similar businesses or having similar
properties similarly situated and as is satisfactory from time to time to the
Required Lenders in their reasonable discretion.
SECTION 5.03 Payment of Taxes and Other Potential Charges and
------------------------------------------------
Priority Claims.
- ---------------
The Borrower shall, and shall cause each of its Subsidiaries to, pay
or discharge
(a) on or prior to the date on which penalties or Liens attach
thereto, all Taxes imposed upon it or any of its properties;
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like
Persons which, if unpaid, might result in the creation of a Lien upon any
such Property; and
(c) on or prior to the date when due, all other lawful claims which,
if unpaid, might result in the creation of a Lien upon any such Property or
which, if unpaid, might give rise to a claim entitled to priority over
general creditors of the Borrower or such Subsidiary in a case under the
Bankruptcy Code;
45
<PAGE>
provided, that, unless and until foreclosure, distraint, levy, sale or similar
- --------
proceedings shall have been commenced, the Borrower or such Subsidiary need not
pay or discharge any such Tax, assessment, charge or claim so long as (x) the
validity thereof is contested in good faith and by appropriate proceedings
diligently conducted, and (y) such reserves or other appropriate provisions as
may be required by GAAP shall have been made therefor.
SECTION 5.04 Preservation of Corporate Status and Franchises.
-----------------------------------------------
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain its status as a corporation, trust or limited liability company duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, and to be duly qualified to do business as a
foreign corporation, trust or limited liability company and in good standing in
all jurisdictions in which the ownership of its properties or the nature of its
business or both make such qualification necessary or advisable; provided,
--------
however, that nothing in this Section 5.04 shall prevent the withdrawal by the
- -------
Borrower or any of its Subsidiaries of its qualification as a foreign
corporation in any jurisdiction where such withdrawal could not have a Material
Adverse Effect . The Borrower shall, and shall cause each of its Subsidiaries
to, do or cause to be done, all things necessary to preserve and keep in full
force and effect its material rights, franchises, licenses and patents.
SECTION 5.05 Governmental Approvals and Filings.
----------------------------------
The Borrower shall keep and maintain in full force and effect all
Governmental Actions necessary or advisable in connection with execution and
delivery of any Loan Document, consummation of the transactions herein or
therein contemplated, performance of or compliance with the terms and conditions
hereof or thereof or to ensure the legality, validity, binding effect or
enforceability hereof or thereof.
SECTION 5.06 Maintenance of Properties.
-------------------------
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain or cause to be maintained in good repair, working order and condition
the properties now or hereafter owned, leased or otherwise possessed by it and
shall make or cause to be made all needful and proper repairs, renewals,
replacements and improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
SECTION 5.07 Avoidance of Other Conflicts.
----------------------------
The Borrower shall not, and shall not permit any of its Subsidiaries
to, violate or conflict with, be in violation of or in conflict with, or be or
remain subject to any liability (contingent or otherwise) on account of any
violation or conflict with
(a) any Law;
(b) its articles of incorporation or by-laws; or
46
<PAGE>
(c) any agreement or instrument to which it is party or by which any
of them or any of their respective Subsidiaries is a party or by which any
of them or any of their respective properties (now owned or hereafter
acquired) may be subject or bound,
except for matters which would not reasonably be expected, either individually
or in the aggregate, to have a Material Adverse Effect.
SECTION 5.08 Financial Accounting Practices.
------------------------------
The Borrower shall, and shall cause each of its Subsidiaries to, make
and keep books, records and accounts which, in reasonable detail, accurately and
fairly reflect its transactions and dispositions of its assets and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (a) transactions are executed in accordance with management's
general or specific authorization, (b) transactions are recorded as necessary
(i) to permit preparation of financial statements in conformity with GAAP and
(ii) to maintain accountability for assets, (c) access to assets is permitted
only in accordance with management's general or specific authorization and (d)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
SECTION 5.09 Use of Proceeds.
---------------
The Borrower shall apply the proceeds of all Loans hereunder only for
working capital and general corporate purposes of the Borrower, including
commercial paper backup. The Borrower shall not use the proceeds of any Loans
hereunder directly or indirectly for any unlawful purpose, in any manner
inconsistent with Section 3.11, or inconsistent with any other provision of any
Loan Document.
SECTION 5.10 End of Fiscal Periods.
---------------------
The Borrower shall cause (a) each of its, and each of its
Subsidiary's, fiscal years to end on December 31 and (b) each of its, and each
of its Subsidiary's, fiscal quarters to end on March 31, June 30, September 30
and December 31.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower hereby covenants to the Administrative Agent and each
Lender as follows:
SECTION 6.01 Financial Covenants.
-------------------
(a) Maximum Leverage. The Borrower shall not permit the ratio of (a)
----------------
Total Indebtedness to (b) the sum of Total Indebtedness and Shareholders'
Equity, determined as of the last day of each fiscal quarter, to exceed 0.65 to
1.
47
<PAGE>
(b) Fixed Charge Coverage Ratio. The Borrower shall not permit the
---------------------------
Fixed Charge Coverage Ratio, determined as of the last day of each fiscal
quarter for the period consisting of the four consecutive fiscal quarters ended
on such last day, to be less than 1.5 to 1.
SECTION 6.02 Liens.
-----
The Borrower shall not, and shall not permit any of its Subsidiaries
to, at any time create, incur, assume or suffer to exist any Lien on any of its
Property (now owned or hereafter acquired), or agree, become or remain liable
(contingently or otherwise) to do any of the foregoing, except for the following
("Permitted Liens"):
---------------
(a) Liens existing on the date hereof and securing obligations
existing on the date hereof other than Indebtedness to be Refinanced, as
such Liens and obligations are listed on Schedule IV;
(b) Liens securing obligations issued under and pursuant to the terms
and conditions of the First Mortgage Indenture;
(c) Liens on First Mortgage Bonds issued as collateral for pollution
control or gas or water facility revenue bonds issued for the benefit of
the Borrower or its Subsidiaries (and related rights and interests) to
secure obligations of the Borrower or such Subsidiaries for the benefit of
the holders of such bonds, provided that such bonds are not secured by any
other assets or Properties of the Borrower or its Subsidiaries;
(d) Liens arising from taxes, assessments, charges or claims described
in Section 5.03 that are not yet due or that remain payable without penalty
or to the extent permitted to remain unpaid under the proviso to such
Section 5.03;
(e) Deposits or pledges of cash or securities in the ordinary course
of business to secure (i) worker's compensation, unemployment insurance or
other social security obligations, (ii) performance of bids, tenders, trade
contracts (other than for payment of money) or leases, (iii) stay, surety
or appeal bonds, or (iv) other obligations of a like nature incurred in the
ordinary course of business;
(f) Zoning restrictions, easements, minor restrictions on the use of
real Property, minor irregularities in title thereto and other minor Liens
that do not secure the payment of money or the performance of an obligation
and that do not in the aggregate materially detract from the value of an
asset to, or materially impair its use in the business of, the Borrower or
such Subsidiary; and
(g) Liens on Property securing all or part of the purchase price
thereof and Liens (whether or not assumed) existing in Property at the time
of purchase thereof, provided that: (i) such Lien is created before or
substantially simultaneously with the purchase of such Property by the
Borrower or such Subsidiary, (ii) such Lien is confined solely to the
Property so purchased, improvements thereto and proceeds thereof, (iii) the
aggregate amount secured by such Liens on any particular Property at the
time purchased by the Borrower or such Subsidiary, as the case may be,
shall not exceed the lesser of the purchase price of such Property and the
fair market value of such Property at the time of
48
<PAGE>
purchase thereof by the Borrower or such Subsidiary, and (iv) the aggregate
amount secured by all Liens described in this Section 6.02(g) shall not at
any time exceed $50,000,000.
"Permitted Liens" shall in no event include any Lien imposed by, or required to
be granted pursuant to, ERISA or any Environmental Law.
SECTION 6.03 Mergers.
-------
The Borrower shall not, and shall not permit any of its Subsidiaries
to, (a) merge with or into or consolidate with any other Person, (b) liquidate,
wind-up, dissolve or divide, or (c) agree, become or remain liable (contingently
or otherwise) to do any of the foregoing, except:
(i) A Person may merge with or into or consolidate with any
Subsidiary of the Borrower, provided that (x) the surviving Person shall be
a Subsidiary of the Borrower, (y) no Default or Event of Default shall have
occurred and be continuing or shall exist at such time or after giving
effect to such transaction and (z) the Borrower shall deliver to the
Administrative Agent (A) a certificate, in a form reasonably satisfactory
to the Administrative Agent, certifying that no Default or Event of Default
exists or will result from such merger and (B) pro forma financial
statements in support of such certification; and
(ii) A Person may merge with or into or consolidate with the Borrower,
provided that (x) the Borrower shall be the surviving Person, (y) no
Default or Event of Default shall have occurred and be continuing or shall
exist at such time or after giving effect to such transaction and (z) the
Borrower shall deliver to the Administrative Agent (A) a certificate, in a
form reasonably satisfactory to the Administrative Agent, certifying that
no Default or Event of Default exists or will result from such merger and
(B) pro forma financial statements in support of such certification.
SECTION 6.04 Dispositions of Properties.
--------------------------
The Borrower shall not, and shall not permit any of its Subsidiaries
to, sell, convey, assign, lease, sale-leaseback, transfer, abandon or otherwise
dispose of, voluntarily or involuntarily (collectively, "Dispose"), any of its
-------
Properties, or agree, become or remain liable contingently or otherwise to do
any of the foregoing, except that, so long as no Default or Event of Default
shall have occurred and be continuing or shall exist at such time or after
giving effect to such transaction, the Borrower and its Subsidiaries may Dispose
of Property (a) in transactions in the ordinary course of business, (b) that is
obsolete, (c) comprising generating assets, provided that the aggregate book
--------
value of all generating assets Disposed of pursuant to this Section 6.04(c) from
and after the date hereof shall not exceed $600,000,000, and (d) in transactions
other than as provided in Section 6.04 (a), (b) and (c), provided that the
--------
aggregate book value of all Property Disposed of pursuant to this Section
6.04(d) from and after the date hereof shall not exceed $50,000,000.
SECTION 6.05 Investments and Acquisitions.
----------------------------
Prior to the making of any Investment or the consummation of any
Acquisition by the Borrower or any of its Subsidiaries, the amount or purchase
price of which, as the case may be,
49
<PAGE>
when aggregated with the amounts and purchase prices of other Investments and
Acquisitions made by the Borrower and its Subsidiaries, would exceed $10,000,000
in the aggregate at any time, the Borrower shall deliver to the Administrative
Agent (i) a certificate, in a form reasonably satisfactory to the Administrative
Agent, certifying that no Default or Event of Default exists or will result from
such Acquisition and (ii) pro forma financial statements in support of such
certification.
SECTION 6.06 Dividends and Stock Repurchases.
-------------------------------
The Borrower shall not declare or pay any dividend on its capital
stock (except for dividends in the form of capital stock), or redeem or
repurchase any of its capital stock, if a Default or Event of Default shall have
occurred and be continuing or shall exist at such time or after giving effect to
such transaction.
SECTION 6.07 Transactions with Affiliates.
----------------------------
The Borrower shall not enter into any transaction of any kind with any
Person that Controls the Borrower or is controlled by the Borrower or is under
common control with the Borrower other than (a) salary, bonus, employee stock
option and other compensation arrangements with directors or officers in the
ordinary course of business, (b) transactions that are fully disclosed to the
board of directors (or executive committee thereof) of the Borrower and
expressly authorized by a resolution of the board of directors (or executive
committee) of the Borrower which is approved by a majority of the directors (or
executive committee) not having an interest in the transaction, (c) transactions
between or among the Borrower and its Wholly-Owned Subsidiaries, (d)
transactions between the Borrower and its Subsidiaries, on the one hand, and
SPPC and its Subsidiaries, on the other hand, and (e) transactions on overall
terms at least as favorable to the Borrower as would be the case in an arm's-
length transaction between unrelated parties of equal bargaining power.
SECTION 6.08 Change of Business.
------------------
The Borrower shall not engage in any business other than the
businesses of (a) the generation or purchase of electrical power, (b) the
purchase of natural gas and (c) the acquisition of water, and in each case the
transmission and distribution thereof to industrial, commercial and residential
customers.
SECTION 6.09 Equal and Ratable Lien.
----------------------
If, notwithstanding the prohibition contained in Section 6.02, the
Borrower or any of its Subsidiaries shall create, assume or permit to exist any
Lien upon any of its Property, other than those permitted by the provisions of
Section 6.02, it will make or cause to be made effective provision whereby the
Borrowings will be secured equally and ratably with any and all other
obligations thereby secured, such security to be pursuant to agreements
reasonably satisfactory to the Administrative Agent and, in any such case, the
Borrowings shall have the benefit, to the fullest extent that, and with such
priority as, the Lenders may be entitled under applicable law, of an equitable
Lien on such Property. Such violation of Section 6.02 will constitute an Event
of Default, whether or not provision is made for an equal and ratable Lien
pursuant to this Section.
50
<PAGE>
SECTION 6.10 Restrictive Agreements.
-----------------------
Except as otherwise permitted under Article VI hereunder, the Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of the Borrower or any Subsidiary to create, incur or permit to exist
any Lien upon any of its Property or assets, or (b) the ability of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its capital stock or to make or repay loans or advances to the Borrower or any
other Subsidiary or to guarantee Indebtedness of the Borrower or any other
Subsidiary.
SECTION 6.11 Year 2000.
---------
At the request of any Lender, the Borrower will make available to such
Lender the Borrower's Year 2000 Plan, together with any updates or progress
reports with respect thereto. The Borrower will promptly notify the
Administrative Agent in the event the Borrower discovers or determines that any
computer application, including those of its suppliers and vendors, that is
material to its business, operations or conditions (financial or otherwise) will
not be Year 2000 Compliant on a timely basis, except to the extent that such
failure could not reasonably be expected to have a Material Adverse Effect.
ARTICLE VII
DEFAULTS
SECTION 7.01 Events of Default.
-----------------
An "Event of Default" shall mean the occurrence or existence of one or
----------------
more of the following events or conditions (for any reason, whether voluntary,
involuntary or effected or required by Law):
(a) The Borrower shall fail to pay when due principal of any Loan.
(b) The Borrower shall fail to pay when due interest on any Loan, any
fees, indemnity or expenses, or any other amount due hereunder or under any
other Loan Document and such failure shall have continued for a period of
three business days.
(c) Any representation or warranty made or deemed made by the Borrower
in or pursuant to or in connection with any Loan Document, or any statement
made by the Borrower in any financial statement, certificate, report,
exhibit or document furnished by the Borrower to the Administrative Agent
or any Lender pursuant to or in connection with any Loan Document, shall
prove to have been false or misleading in any material respect as of the
time when made or deemed made (including by omission of material
information necessary to make such representation, warranty or statement
not misleading).
(d) The Borrower shall default in the performance or observance of any
covenant contained in Article VI or any of the covenants contained in
Sections 5.01(f)(i) or 5.09 or 5.10.
51
<PAGE>
(e) The Borrower shall default in the performance or observance of any
other covenant, agreement or duty under this Agreement or any other Loan
Document and (i) in the case of a default under Section 5.01 (other than as
referred to in subsection (f)(i) thereof) such default shall have continued
for a period of ten Business Days and (ii) in the case of any other default
such default shall have continued for a period of 30 days after notice from
the Administrative Agent to the Borrower.
(f) The Borrower or any Subsidiary of the Borrower shall (i) fail to
make any payment (x) on account of any Indebtedness aggregating $10,000,000
or more in principal amount or (y) aggregating $10,000,000 or more, on any
Indebtedness, or any interest or premium thereon, in each case, when due
(whether by scheduled maturity, required prepayment, acceleration, demand
or otherwise), and, in each case, such failure shall have continued beyond
any applicable grace period specified in any agreement or instrument
relating to such Indebtedness, or (ii) fail to perform or observe any other
term, covenant or condition on its part to be performed or observed under
any agreement or instrument relating to any Indebtedness when required to
be performed or observed, and such failure shall have continued beyond any
applicable grace period specified in any agreement or instrument relating
to such Indebtedness, if the effect of such failure to perform or observe
is to accelerate, or to permit the acceleration of, the maturity of such
Indebtedness, the unpaid principal amount of which then aggregates
$10,000,000.
(g) One or more final judgments or orders for the payment of money
shall have been entered against the Borrower or any Subsidiary of the
Borrower, which judgments or orders exceed $10,000,000 in the aggregate,
and such judgments or orders shall have remained undischarged and unstayed
for a period of thirty consecutive days.
(h) One or more writs or warrants of attachment, garnishment,
execution, distraint or similar process exceeding in value the aggregate
amount of $10,000,000 shall have been issued against the Borrower or any
Subsidiary of the Borrower or any of their respective properties and shall
have remained undischarged and unstayed for a period of thirty consecutive
days.
(i) Any Governmental Action now or hereafter made by or with any
Governmental Authority in connection with any Loan Document is not obtained
or shall have ceased to be in full force and effect or shall have been
modified or amended or shall have been held to be illegal or invalid, and
the Required Lenders shall have determined (which determination shall be
conclusive provided it is reached in good faith) that the consequence of
any of the foregoing events would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(j) Any Loan Document or any material term or provision thereof shall
have ceased to be in full force and effect, or the Borrower or any
Governmental Authority with jurisdiction over the Borrower shall, or shall
purport to, terminate, repudiate, declare voidable or void or otherwise
contest, any Loan Document or any material term or provision thereof or any
obligation or liability of the Borrower thereunder.
52
<PAGE>
(k) An event or condition specified in Section 5.01(h) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan or any Lien
arises pursuant to ERISA and, as a result of such event or condition or
Liens, together with all other such events or conditions or Liens, the
Borrower or any ERISA Affiliate shall incur or shall be reasonably likely
to incur a liability to a Plan, a Multiemployer Plan or PBGC or suffer an
encumbrance to exist in favor of any thereof (or any combination of the
foregoing) which would constitute a Material Adverse Effect.
(l) The Borrower or any Subsidiary of the Borrower shall have violated
any Environmental Law or become subject to any Environmental Claim and, in
either case, the Required Lenders shall have determined (which
determination shall be conclusive provided it is reached in good faith)
that such event would reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect.
(m) A proceeding shall have been instituted in respect of the Borrower
or any Subsidiary of the Borrower:
(i) seeking to have an order for relief entered in respect of
such Person, or seeking a declaration or entailing a finding that such
Person is insolvent or a similar declaration or finding, or seeking
dissolution, winding-up, charter revocation or forfeiture,
liquidation, reorganization, arrangement, adjustment, composition or
other similar relief with respect to such Person, its assets or its
debts under any Law relating to bankruptcy, insolvency, relief of
debtors or protection of creditors, termination of legal entities or
any other similar Law now or hereafter in effect, or
(ii) seeking appointment of a receiver, trustee, liquidator,
assignee, sequestrator or other custodian for such Person or for all
or any substantial part of its Property,
and such proceeding shall result in the entry, making or grant of any such
order for relief, declaration, finding, relief or appointment, or such
proceeding shall remain undismissed and unstayed for a period of thirty
consecutive days.
(n) The Borrower or any Subsidiary of the Borrower shall become
insolvent; shall fail to pay, become unable to pay, or state that it is or
will be unable to pay, its debts as they become due; shall voluntarily
suspend transaction of its business; shall make a general assignment for
the benefit of creditors; shall institute (or fail to controvert in a
timely and appropriate manner) a proceeding described in Section
7.01(m)(i), or (whether or not any such proceeding has been instituted)
shall consent to or acquiesce in any such order for relief, declaration,
finding or relief described therein; shall institute (or fail to controvert
in a timely and appropriate manner) a proceeding described in Section
7.01(m)(ii), or (whether or not any such proceeding has been instituted)
shall consent to or acquiesce in any such appointment or to the taking of
possession by any such custodian of all or any substantial part of its
Property; shall dissolve, wind-up, revoke or forfeit its charter (or other
constituent documents) or liquidate itself or any substantial part of its
Property; or shall take any action in furtherance of any of the foregoing.
53
<PAGE>
(o) A Change in Control shall occur.
(p) The Borrower shall cease to maintain a first mortgage bond rating
of at least Baa3 by Moody's and BBB- by S&P.
SECTION 7.02 Consequences of an Event of Default.
-----------------------------------
(a) If an Event of Default specified in subsections (a) through (l),
(o), (p) or (q) of Section 7.01 shall occur and, be continuing or shall exist,
then, in addition to all other rights and remedies which the Administrative
Agent or any Lender may have hereunder or under any other Loan Document, at law,
in equity or otherwise, the Lenders shall be under no further obligation to make
Loans hereunder, and the Administrative Agent may, and, upon the written request
of the Required Lenders shall, by notice to the Borrower, from time to time do
any or all of the following:
(i) Declare the Commitments terminated, whereupon the Commitments
will terminate and any fees hereunder shall be immediately due and payable
without presentment, demand, protest or further notice of any kind, all of
which are hereby waived, and an action therefor shall immediately accrue.
(ii) Declare the unpaid principal amount of the Loans, interest
accrued thereon and all other obligations to be immediately due and payable
without presentment, demand, protest or further notice of any kind, all of
which are hereby waived, and an action therefor shall immediately accrue.
(b) If an Event of Default specified in subsection (m) or (n) of
Section 7.01 shall occur or exist, then, in addition to all other rights and
remedies which the Administrative Agent or any Lender may have hereunder or
under any other Loan Document, at law, in equity or otherwise, the Commitments
shall automatically terminate and the Lenders shall be under no further
obligation to make Loans, and the unpaid principal amount of the Loans, interest
accrued thereon and all other obligations shall become immediately due and
payable without presentment, demand, protest or notice of any kind, all of which
are hereby waived, and an action therefor shall immediately accrue.
ARTICLE VIII
THE AGENTS
SECTION 8.01 Appointment.
-----------
Each Lender hereby irrevocably appoints Mellon Bank, N.A. to act as
Administrative Agent for such Lender under this Agreement and the other Loan
Documents. Each Lender hereby irrevocably authorizes the Administrative Agent
to take such action on behalf of such Lender under the provisions of this
Agreement and the other Loan Documents, and to exercise such powers and to
perform such duties, as are expressly delegated to or required of the
Administrative Agent by the terms hereof or thereof, together with such powers
as are reasonably incidental thereto. Mellon Bank, N.A. hereby agrees to act as
Administrative Agent on behalf of the Lenders on the terms and conditions set
forth in this Agreement and the other Loan Documents, subject to its right to
resign as provided in Section 8.10. Each Lender hereby
54
<PAGE>
irrevocably authorizes the Administrative Agent to execute and deliver each of
the Loan Documents executed after the date hereof and to accept delivery of such
of the other Loan Documents delivered after the date hereof as may not require
execution by the Administrative Agent (with such consents of the Lenders as
required pursuant to Section 9.01). Each Lender agrees that the rights and
remedies granted to the Administrative Agent under the Loan Documents shall be
exercised exclusively by the Administrative Agent, and that no Lender shall have
any right individually to exercise any such right or remedy, except to the
extent expressly provided herein or therein.
SECTION 8.02 General Nature of Administrative Agent's Duties.
-----------------------------------------------
Notwithstanding anything to the contrary elsewhere in this Agreement
or in any other Loan Document:
(a) The Administrative Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the other Loan
Documents, and no implied duties or responsibilities on the part of the
Administrative Agent shall be read into this Agreement or any other Loan
Document or shall otherwise exist.
(b) The duties and responsibilities of the Administrative Agent under
this Agreement and the other Loan Documents shall be mechanical and
administrative in nature, and the Administrative Agent shall not have a
fiduciary relationship in respect of any Lender.
(c) The Administrative Agent is and shall be solely the agent of the
Lenders. The Administrative Agent does not assume, and shall not at any
time be deemed to have, any relationship of agency or trust with or for, or
any other duty or responsibility to, the Borrower or any other Person
(except only for its relationship as agent for, and its express duties and
responsibilities to, the Lenders as provided in this Agreement and the
other Loan Documents).
(d) The Administrative Agent shall be under no obligation to take any
action hereunder or under any other Loan Document if the Administrative
Agent believes in good faith that taking such action may conflict with any
Law or any provision of this Agreement or any other Loan Document, or may
require the Administrative Agent to qualify to do business in any
jurisdiction where it is not then so qualified.
SECTION 8.03 Exercise of Powers.
------------------
The Administrative Agent shall take any action of the type specified
in this Agreement or any other Loan Document as being within the Administrative
Agent's rights, powers or discretion in accordance with directions from the
Required Lenders (or, to the extent this Agreement or such Loan Document
expressly requires the direction or consent of some other Person or set of
Persons, then instead in accordance with the directions of such other Person or
set of Persons). In the absence of such directions, the Administrative Agent
shall have the authority (but under no circumstances shall be obligated), in its
sole discretion, to take any such action, except to the extent that this
Agreement or such Loan Document expressly requires the direction or consent of
the Required Lenders (or some other Person or set of Persons), in which case the
55
<PAGE>
Administrative Agent shall not take such action absent such direction or
consent. Any action or inaction pursuant to such direction, discretion or
consent shall be binding on all the Lenders. The Administrative Agent shall not
have any liability to any Person as a result of (a) the Administrative Agent
acting or refraining from acting in accordance with the directions of the
Required Lenders (or other applicable Person or set of Persons), (b) the
Administrative Agent refraining from acting in the absence of instructions to
act from the Required Lenders (or other applicable Person or set of Persons),
whether or not the Administrative Agent has discretionary power to take such
action, or (c) the Administrative Agent taking discretionary action it is
authorized to take under this Section (subject, in the case of clauses (b) and
(c), to the provisions of Section 8.04(a)).
SECTION 8.04 General Exculpatory Provisions.
------------------------------
Notwithstanding anything to the contrary elsewhere in this Agreement
or any other Loan Document:
(a) The Administrative Agent shall not be liable for any action taken
or omitted to be taken by it under or in connection with this Agreement or
any other Loan Document, unless caused by its own gross negligence or
willful misconduct.
(b) The Administrative Agent shall not be responsible for (i) the
execution, delivery, effectiveness, enforceability, genuineness, validity
or adequacy of this Agreement or any other Loan Document, (ii) any recital,
representation, warranty, document, certificate, report or statement in,
provided for in, or received under or in connection with, this Agreement or
any other Loan Document, (iii) any failure of the Borrower or any Lender to
perform any of their respective obligations under this Agreement or any
other Loan Document, or (iv) the existence, validity, enforceability,
perfection, recordation, priority, adequacy or value, now or hereafter, of
any Lien or other direct or indirect security afforded or purported to be
afforded by any of the Loan Documents or otherwise from time to time.
(c) The Administrative Agent shall not be under any obligation to
ascertain, inquire or give any notice relating to (i) the performance or
observance of any of the terms or conditions of this Agreement or any other
Loan Document on the part of the Borrower, (ii) the business, operations,
condition (financial or otherwise) or prospects of the Borrower or any
other Person, or (iii) except to the extent set forth in Section 8.05(f),
the existence of any Default or Event of Default.
(d) The Administrative Agent shall not be under any obligation, either
initially or on a continuing basis, to provide any Lender with any notices,
reports or information of any nature, whether in its possession presently
or hereafter, except for such notices, reports and other information
expressly required by this Agreement or any other Loan Document to be
furnished by the Administrative Agent to such Lender.
SECTION 8.05 Administration by the Administrative Agent.
------------------------------------------
(a) The Administrative Agent may rely upon any notice or other
communication of any nature (written or oral, including but not limited to
telephone conversations, whether or not such notice or other communication is
made in a manner permitted or required by
56
<PAGE>
this Agreement or any other Loan Document) purportedly made by or on behalf of
the proper party or parties, and the Administrative Agent shall not have any
duty to verify the identity or authority of any Person giving such notice or
other communication.
(b) The Administrative Agent may consult with legal counsel
(including, without limitation, in-house counsel for the Administrative Agent or
in-house or other counsel for the Borrower), independent public accountants and
any other experts selected by it from time to time, and the Administrative Agent
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts.
(c) The Administrative Agent may conclusively rely upon the truth of
the statements and the correctness of the opinions expressed in any certificates
or opinions furnished to the Administrative Agent in accordance with the
requirements of this Agreement or any other Loan Document. Whenever the
Administrative Agent shall deem it necessary or desirable that a matter be
proved or established with respect to the Borrower or any Lender, such matter
may be established by a certificate of the Borrower or such Lender, as the case
may be, and the Administrative Agent may conclusively rely upon such certificate
(unless other evidence with respect to such matter is specifically prescribed in
this Agreement or another Loan Document).
(d) The Administrative Agent may fail or refuse to take any action
unless it shall be indemnified to its satisfaction from time to time against any
and all amounts, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature which
may be imposed on, incurred by or asserted against the Administrative Agent by
reason of taking or continuing to take any such action.
(e) The Administrative Agent may perform any of its duties under this
Agreement or any other Loan Document by or through agents or attorneys-in-fact.
The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
(f) The Administrative Agent shall not be deemed to have any knowledge
or notice of the occurrence of any Default or Event of Default unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default, and stating that
such notice is a "notice of default". If the Administrative Agent receives such
a notice, the Administrative Agent shall give prompt notice thereof to each
Lender.
SECTION 8.06 Lenders Not Relying on Administrative Agent or Other
----------------------------------------------------
Lenders.
- -------
Each Lender acknowledges as follows:
(a) Neither the Administrative Agent nor any other Lender has made any
representations or warranties to it, and no act taken hereafter by the
Administrative Agent or any other Lender shall be deemed to constitute any
representation or warranty by the Administrative Agent or such other Lender
to it.
(b) It has, independently and without reliance upon the Administrative
Agent or any other Lender, and based upon such documents and information as
it has deemed
57
<PAGE>
appropriate, made its own credit and legal analysis and decision to enter
into this Agreement and the other Loan Documents.
(c) It will, independently and without reliance upon the
Administrative Agent or any other Lender, and based upon such documents and
information as it shall deem appropriate at the time, make its own
decisions to take or not take action under or in connection with this
Agreement and the other Loan Documents.
SECTION 8.07 Indemnification.
---------------
Each Lender agrees to reimburse and indemnify the Administrative Agent
and its directors, officers, employees and agents (to the extent not reimbursed
by the Borrower and without limitation of the obligations of the Borrower to do
so, in each case pursuant to the terms of this Agreement and the other Loan
Documents), based on its Applicable Percentage, from and against any and all
amounts, losses, liabilities, claims, damages, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements of any kind or nature
(including, without limitation, the fees and disbursements of counsel for the
Administrative Agent or such other Person in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
the Administrative Agent or such other Person shall be designated a party
thereto) that may at any time be imposed on, incurred by or asserted against the
Administrative Agent or such other Person as a result of, or arising out of, or
in any way related to or by reason of, this Agreement, any other Loan Document,
any transaction from time to time contemplated hereby or thereby, or any
transaction financed in whole or in part or directly or indirectly with the
proceeds of any Loan, provided that no Lender shall be liable for any portion of
--------
such amounts, losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements resulting solely
from the gross negligence or willful misconduct of the Administrative Agent or
such other Person, as finally determined by a court of competent jurisdiction.
Payments under this Section 8.07 shall be due and payable on demand, and to the
extent that any Lender fails to pay any such amount on demand, such amount shall
bear interest for each day from the date of demand until paid (before and after
judgment) at a rate per annum (calculated on the basis of a year of 360 days and
actual days elapsed) which for each day shall be equal to the Federal Funds
Effective Rate for such day.
SECTION 8.08 Administrative Agent in its Individual Capacity.
-----------------------------------------------
With respect to its Commitment and the Obligations owing to it, the
Administrative Agent shall have the same rights and powers under this Agreement
and each other Loan Document as any other Lender and may exercise the same as
though it were not the Administrative Agent, and the terms "Lenders," "holders
of Notes" and like terms shall include the Administrative Agent in its
individual capacity as such. The Administrative Agent and its affiliates may,
without liability to account, make loans to, accept deposits from, acquire debt
or equity interests in, act as trustee under indentures of, and engage in any
other business with, the Borrower and any stockholder, subsidiary or affiliate
of the Borrower, as though the Administrative Agent were not the Administrative
Agent hereunder.
58
<PAGE>
SECTION 8.09 Holders of Notes.
----------------
The Administrative Agent may deem and treat the Lender which is payee
of a Note as the owner and holder of such Note for all purposes hereof unless
and until an Assignment and Acceptance with respect to the assignment or
transfer thereof shall have been filed with the Administrative Agent in
accordance with Section 9.12. Any authority, direction or consent of any Person
who at the time of giving such authority, direction or consent is shown in the
Register as being a Lender shall be conclusive and binding on each present and
subsequent holder, transferee or assignee of any Note or Notes payable to such
Lender or of any Note or Notes issued in exchange therefor.
SECTION 8.10 Successor Administrative Agent.
------------------------------
The Administrative Agent may resign at any time by giving 10 days'
prior written notice thereof to the Lenders and the Borrower. The
Administrative Agent may be removed by the Required Lenders at any time with or
without cause by giving 10 days, prior written notice thereof to the
Administrative Agent, the other Lenders and the Borrower. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed and consented to, and shall have accepted such appointment,
within 30 days after such notice of resignation or removal, then the retiring
Administrative Agent, on behalf of the Lenders, may appoint a successor
Administrative Agent. Each successor Administrative Agent shall be a commercial
bank or trust company organized under the Laws of the United States of America
or any State thereof and having a combined capital and surplus of at least
$1,000,000,000. The appointment of any successor Administrative Agent at any
time pursuant to this Section 8.10 shall be subject to the approval of the
Borrower, provided that at such time there shall not have occurred and be
continuing any Default or Event of Default, and provided further that the
Borrower's consent to any such appointment shall not be unreasonably withheld.
Upon the acceptance by a successor Administrative Agent of its appointment as
Administrative Agent hereunder, such successor Administrative Agent shall
thereupon succeed to and become vested with all the properties, rights, powers,
privileges and duties of the former Administrative Agent without further act,
deed or conveyance. Upon the effective date of resignation or removal of a
retiring Administrative Agent, the Administrative Agent shall be discharged from
its duties under this Agreement and the other Loan Documents, but the provisions
of this Agreement shall inure to its benefit as to any actions taken or omitted
by it while it was Administrative Agent under this Agreement. If and for so
long as no successor Administrative Agent shall have been appointed, then any
notice or other communication required or permitted to be given by the
Administrative Agent shall be sufficiently given if given by the Required
Lenders, all notices or other communications required or permitted to be given
to the Administrative Agent shall be given to each Lender, and all payments to
be made to the Administrative Agent shall be made directly to the Borrower or
Lender for whose account such payment is made.
SECTION 8.11 Additional Administrative Agents.
--------------------------------
If the Administrative Agent shall from time to time deem it necessary
or advisable, for its own protection in the performance of its duties hereunder
or in the interest of the Lenders, the Administrative Agent and the Borrower
shall execute and deliver a supplemental agreement
59
<PAGE>
and all other instruments and agreements necessary or advisable in the opinion
of the Administrative Agent to constitute another commercial bank or trust
company, or one or more other Persons approved by the Administrative Agent, to
act as co-Administrative Agent, with such powers of the Administrative Agent as
may be provided in such supplemental agreement, and to vest in such bank, trust
company or Person, as such co-Administrative Agent, any properties, rights,
powers, privileges and duties of the Administrative Agent under this Agreement
or any other Loan Document. The appointment of any co-Administrative Agent at
any time pursuant to this Section 8.11 shall be subject to the approval of the
Borrower, provided that at such time there shall not have occurred and be
continuing any Default or Event of Default, and provided further that the
Borrower's consent to any such appointment shall not be unreasonably withheld.
SECTION 8.12 Calculations.
------------
The Administrative Agent shall not be liable for any calculation,
apportionment or distribution of payments made by it in good faith, in the
absence of its own gross negligence or willful misconduct. If such calculation,
apportionment or distribution is subsequently determined to have been made in
error, the sole recourse of any Lender to whom payment was due but not made
(except as provided in the preceding sentence) shall be to recover from the
other Lenders any payment in excess of the amount to which they are determined
to be entitled or, if the amount due was not paid by the Borrower, to recover
such amount from the Borrower.
SECTION 8.13 Syndication Agents.
------------------
As Syndication Agents, neither First Union National Bank nor Wells
Fargo Bank, N.A. shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Lenders as such. Without limiting the foregoing, neither First Union National
Bank nor Wells Fargo Bank, N.A. shall have any or be deemed to have any
fiduciary relationship with any Lender. Each Lender acknowledges that it has
not relied, and will not rely, on First Union National Bank or Wells Fargo Bank,
N.A. in deciding to enter into this Agreement or in not taking action hereunder
or under the Loan Documents.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Amendments and Waivers.
----------------------
Neither this Agreement nor any other Loan Document may be amended,
modified or supplemented except in accordance with the provisions of this
Section 9.01. The Administrative Agent and the Borrower may from time to time
amend, modify or supplement the provisions of this Agreement or any other Loan
Document for the purpose of amending, adding to or waiving any provision, or
changing in any manner the rights and duties of the Borrower, the Administrative
Agent or any Lender. Any such amendment, modification or supplement made by the
Borrower and the Administrative Agent in accordance with the provisions of this
Section 9.01 shall be binding upon the Borrower, each Lender and the
Administrative Agent. The Administrative Agent shall enter into such
amendments, modifications or supplements from time to time as directed by the
Required Lenders, and only as so directed, provided, that no such amendment,
--------
modification or supplement may be made which will:
60
<PAGE>
(a) Increase the Commitment of any Lender over the amount thereof
then in effect, without the written consent of each Lender affected
thereby;
(b) Extend the Revolving Termination Date, without the written consent
of all the Lenders;
(c) Reduce the principal amount of or extend the time for any payment
of principal of any Loan, or reduce the rate of interest or extend the time
for payment of any interest borne by any Loan, or extend the time for
payment of or reduce the amount of any fees, or reduce or postpone the date
for payment of any other obligation, without the written consent of each
Lender affected thereby;
(d) Change the definition of "Required Lenders" or amend this Section
9.01 or Section 9.12(a) or any other provision of this Agreement that
requires the consent of all of the Lenders to the taking or failure to take
action hereunder, without the written consent of all the Lenders; or
(e) Amend or waive any of the provisions of Article VIII, or impose
additional duties upon the Administrative Agent or otherwise adversely
affect the rights, interests or obligations of the Administrative Agent,
without the written consent of the Administrative Agent;
and provided, further, that Assignment and Acceptances may be entered into in
--------
the manner provided in Section 9.12. Any such amendment, modification or
supplement must be in writing and shall be effective only to the extent set
forth in such writing. Any Default or Event of Default waived or consented to
in any such amendment, modification or supplement shall be deemed to be cured
and not continuing to the extent and for the period set forth in such waiver or
consent, but no such waiver or consent shall extend to any other or subsequent
Default or Event of Default or impair any right consequent thereto.
SECTION 9.02 No Implied Waiver; Cumulative Remedies.
--------------------------------------
No course of dealing and no delay or failure of the Administrative
Agent or any Lender in exercising any right, power or privilege under this
Agreement or any other Loan Document shall affect any other or future exercise
thereof or the exercise of any other right, power or privilege; nor shall any
single or partial exercise of any such right, power or privilege or any
abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any other right, power or
privilege. The rights and remedies of the Administrative Agent and the Lenders
under this Agreement and any other Loan Document are cumulative and not
exclusive of any rights or remedies which the Administrative Agent or any Lender
would otherwise have hereunder or thereunder, at law, in equity or otherwise.
SECTION 9.03 Notices.
-------
(a) Except to the extent otherwise expressly permitted hereunder or
thereunder, all notices, requests, demands, directions and other communications
(collectively "notices") under this Agreement or any other Loan Document shall
-------
be in writing (including telecopied communication) and shall be sent by first-
class mail, or by nationally-recognized overnight
61
<PAGE>
courier, or by telecopier (with confirmation in writing mailed first-class or
sent by such an overnight courier), or by personal delivery. All notices shall
be sent to the applicable party at the address stated on the signature pages
hereof or in accordance with the last unrevoked written direction from such
party to the other parties hereto in all cases with postage or other charges
prepaid. Any such properly given notice shall be effective on the earliest to
occur of receipt, telephone confirmation of receipt of telecopy communication,
one Business Day after delivery to a nationally-recognized overnight courier, or
three Business Days after deposit in the mail.
(b) Any Lender giving any notice to the Borrower or any other party to
a Loan Document shall simultaneously send a copy thereof to the Administrative
Agent, and the Administrative Agent shall promptly notify the other Lenders of
the receipt by it of any such notice.
(c) The Administrative Agent and each Lender may rely on any notice
(whether or not such notice is made in a manner permitted or required by this
Agreement or any other Loan Document) purportedly made by or on behalf of the
Borrower, and neither the Administrative Agent nor any Lender shall have any
duty to verify the identity or authority of any Person giving such notice.
SECTION 9.04 Expenses; Taxes; Indemnity.
--------------------------
(a) The Borrower agrees to pay or cause to be paid and to save the
Administrative Agent and each of the Lenders harmless against liability for the
payment of all reasonable out-of-pocket costs and expenses (including but not
limited to reasonable fees and expenses of counsel) incurred by the
Administrative Agent or any Lender from time to time arising from or relating to
(i) in the case of the Administrative Agent, the negotiation, syndication,
preparation, execution, delivery, administration and performance of this
Agreement and the other Loan Documents, (ii) in the case of the Syndication
Agents, the syndication of this Agreement and the other Loan Documents, (iii) in
the case of the Administrative Agent, any amendments, modifications,
supplements, waivers or consents to this Agreement or any other Loan Document
(whether or not ultimately entered into or granted), and (iv) in the case of the
Administrative Agent or any Lender, the enforcement or preservation of rights
under this Agreement or any other Loan Document (including but not limited to
any such costs or expenses arising from or relating to (A) collection or
enforcement of an outstanding Loan or any other amount owing hereunder or
thereunder by the Administrative Agent or such Lender, and (B) any litigation,
proceeding, dispute, work-out, restructuring or rescheduling related in any way
to this Agreement or the Loan Documents).
(b) The Borrower hereby agrees to pay all stamp, document, transfer,
recording, filing, registration, search, sales and excise fees and taxes and all
similar impositions now or hereafter determined by the Administrative Agent or
any Lender to be payable in connection with this Agreement or any other Loan
Documents or any other documents, instruments or transactions pursuant to or in
connection herewith or therewith (which determination shall be conclusive
provided it is reached in good faith), and the Borrower agrees to save the
Administrative Agent and each Lender harmless from and against any and all
present or future claims, liabilities or losses with respect to or resulting
from any omission to pay or delay in paying any such fees, taxes or impositions.
62
<PAGE>
(c) The Borrower hereby agrees to reimburse and indemnify each of the
Indemnified Parties from and against any and all losses, liabilities, claims,
damages, expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnified Party in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnified Party shall be
designated a party thereto) that may at any time be imposed on, asserted against
or incurred by such Indemnified Party as a result of, or arising out of, or in
any way related to or by reason of, this Agreement or any other Loan Document,
any transaction from time to time contemplated hereby or thereby, or any
transaction financed in whole or in part or directly or indirectly with the
proceeds of any Loan (and without in any way limiting the generality of the
foregoing, including any violation or breach of any Environmental Law or any
other Law by the Borrower or any Subsidiary of the Borrower; any Environmental
Claim arising out of the management, use, control, ownership or operation of
Property by any of such Persons, including all onsite and off-site activities
involving Hazardous Materials; or any exercise by the Administrative Agent or
any Lender of any of its rights or remedies under this Agreement or any other
Loan Document); but excluding any such losses, liabilities, claims, damages,
expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements resulting solely from the gross negligence or willful misconduct
of such Indemnified Party, as finally determined by a court of competent
jurisdiction. If and to the extent that the foregoing obligations of the
Borrower under this subsection (c), or any other indemnification obligation of
the Borrower hereunder or under any other Loan Document, are unenforceable for
any reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable Law.
SECTION 9.05 Severability.
------------
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
SECTION 9.06 Prior Understandings.
--------------------
This Agreement and the other Loan Documents supersede all prior and
contemporaneous understandings and agreements, whether written or oral, among
the parties hereto relating to the transactions provided for herein and therein.
SECTION 9.07 Duration; Survival.
------------------
All representations and warranties of the Borrower contained herein or
in any other Loan Document or made in connection herewith or therewith shall
survive the making, and shall not be waived by the execution and delivery, of
this Agreement or any other Loan Document, any investigation by or knowledge of
the Administrative Agent or any Lender, the making of any Loan, or any other
event or condition whatever. All covenants and agreements of the Borrower
contained herein or in any other Loan Document shall continue in full force and
effect from and after the date hereof so long as the Borrower may borrow
hereunder and until payment in full of all
63
<PAGE>
Obligations. Without limitation, all obligations of the Borrower hereunder or
under any other Loan Document to make payments to or indemnify the
Administrative Agent or any Lender shall survive the payment in full of all
other Obligations, termination of the Borrower's right to borrow hereunder, and
all other events and conditions whatever. In addition, all obligations of each
Lender to make payments to or indemnify the Administrative Agent shall survive
the payment in full by the Borrower of all Obligations, termination of the
Borrower's right to borrow hereunder, and all other events or conditions
whatever.
SECTION 9.08 Counterparts.
------------
This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.
SECTION 9.09 Limitation on Payments.
----------------------
The parties hereto intend to conform to all applicable Laws in effect
from time to time limiting the maximum rate of interest that may be charged or
collected. Accordingly, notwithstanding any other provision hereof or of any
other Loan Document, the Borrower shall not be required to make any payment to
or for the account of any Lender, and each Lender shall refund any payment made
by the Borrower, to the extent that such requirement or such failure to refund
would violate or conflict with nonwaivable provisions of applicable Laws
limiting the maximum amount of interest which may be charged or collected by
such Lender.
SECTION 9.10 Set-Off.
-------
The Borrower hereby agrees that, to the fullest extent permitted by
Law, if any Obligation of the Borrower shall be due and payable (by acceleration
or otherwise), each Lender shall have the right, without notice to the Borrower,
to set-off against and to appropriate and apply to such Obligation any
indebtedness, liability or obligation of any nature owing to the Borrower by
such Lender, including but not limited to all deposits (whether time or demand,
general or special, provisionally credited or finally credited, whether or not
evidenced by a certificate of deposit) now or hereafter maintained by the
Borrower with such Lender. Such right shall be absolute and unconditional in
all circumstances and, without limitation shall exist whether or not such Lender
or any other Person shall have given notice or made a demand to the Borrower or
any other Person, whether such indebtedness, obligation or liability owed to the
Borrower is contingent, absolute, matured or unmatured (it being agreed that
such Lender may deem such indebtedness, obligation or liability to be then due
and payable at the time of such setoff), and regardless of the existence or
adequacy of any collateral, guaranty or any other security, right or remedy
available to any Lender or any other Person. The Borrower hereby agrees that,
to the fullest extent permitted by Law, any Participant and any branch,
subsidiary or affiliate of any Lender or any Participant shall have the same
rights of set-off as a Lender as provided in this Section (regardless of whether
such Participant, branch, subsidiary or affiliate would otherwise be deemed in
privity with or a direct creditor of the Borrower). The rights provided by this
Section are in addition to all other rights of set-off and banker's lien and all
other rights and remedies which any Lender (or any such Participant, branch,
subsidiary or affiliate) may otherwise have under this Agreement, any other Loan
Document, at law or in equity, or otherwise, and nothing in this Agreement or
any other
64
<PAGE>
Loan Document shall be deemed a waiver or prohibition of or restriction on the
rights of set-off or bankers' lien of any such Person.
SECTION 9.11 Sharing of Collections.
----------------------
The Lenders hereby agree among themselves that if any Lender shall
receive (by voluntary payment, realization upon security, set-off or from any
other source) any amount on account of the Loans, interest thereon, or any other
Obligation contemplated by this Agreement or the other Loan Documents to be made
by the Borrower pro rata to all Lenders (or pro rata to holders of Notes) in
greater proportion than any such amount received by any other applicable Lender,
then the Lender receiving such proportionately greater payment shall notify each
other Lender and the Administrative Agent of such receipt, and equitable
adjustment will be made in the manner stated in this Section 9.11 so that, in
effect, all such excess amounts will be shared ratably among all of the
applicable Lenders. The Lender receiving such excess amount shall purchase
(which it shall be deemed to have done simultaneously upon the receipt of such
excess amount) for cash from the other applicable Lenders a participation in the
applicable Obligations owed to such other Lenders in such amount as shall result
in a ratable sharing by all applicable Lenders of such excess amount (and to
such extent the receiving Lender shall be a Participant). If all or any portion
of such excess amount is thereafter recovered from the Lender making such
purchase, such purchase shall be rescinded and the purchase price restored to
the extent of such recovery, together with interest or other amounts, if any,
required by Law to be paid by the Lender making such purchase. The Borrower
hereby consents to and confirms the foregoing arrangements. Each Participant
shall be bound by this Section as fully as if it were a Lender hereunder.
SECTION 9.12 Successors and Assigns; Participations; Assignments.
---------------------------------------------------
(a) Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the Borrower, the Lenders, all future holders of the
Notes, the Agents and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights hereunder or interests
herein without the prior written consent of all the Lenders and the
Administrative Agent, and any purported assignment without such consent shall be
void.
(b) Participations. Any Lender may, in the ordinary course of its
--------------
commercial banking business and in accordance with applicable Law, at any time
sell participations to one or more commercial banks or other Persons (each a
"Participant") in all or a portion of its rights and obligations under this
- ------------
Agreement and the other Loan Documents (including, without limitation, all or a
portion of its Commitment and the Loans owing to it and any Note held by it);
provided, that
- --------
(i) any such Lender's obligations under this Agreement and the other
Loan Documents shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations,
(iii) the parties hereto shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations
under this Agreement and each of the other Loan Documents,
65
<PAGE>
(iv) such Participant shall be bound by the provisions of Section
9.11, and
(v) no Participant (unless such Participant is an Affiliate of such
Lender, or is itself a Lender) shall be entitled to require such Lender to
take or refrain from taking action under this Agreement or under any other
Loan Document, except that such Lender may agree with such Participant that
such Lender will not, without such Participant's consent, take any action,
or consent to the taking of any action, of the type described in Section
9.01(a), (b) or (c).
The Borrower agrees that any such Participant shall be entitled to the benefits
of Sections 2.13, 2.14, 2.15 and 9.04 with respect to its participation in the
Commitments and the Loans outstanding from time to time; provided, that no such
--------
Participant shall be entitled to receive any greater amount pursuant to such
Sections than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred to such Participant had
no such transfer occurred.
(c) Assignments. Any Lender may, in the ordinary course of its
-----------
commercial banking business and in accordance with applicable Law, at any time
assign all or a portion of its rights and obligations under this Agreement and
the other Loan Documents (including, without limitation, all or any portion of
its Commitment and Loans owing to it and any Note held by it) to any Lender, any
Affiliate of a Lender or to one or more additional commercial banks or other
Persons (each a "Purchasing Lender"); provided, that
----------------- --------
(i) any such assignment to a Purchasing Lender which is not a Lender
or an affiliate of a Lender shall be made only with the consent (which in
each case shall not be unreasonably withheld) of the Borrower (so long as
no Default or Event of Default shall have occurred and be continuing) and
the Administrative Agent;
(ii) if a Lender makes such an assignment of less than all of its
then remaining rights and obligations under this Agreement and the other
Loan Documents, such transferor Lender shall retain, after such assignment,
a minimum principal amount of $10,000,000 of the Commitments and Loans then
outstanding, and such assignment, unless made to an assignee who is a
Lender hereunder prior to such assignment, shall be in a minimum principal
amount of $10,000,000 of the Commitments and Loans then outstanding;
(iii) each such assignment shall be of a constant, and not a varying,
percentage of the Commitment of the transferor Lender and of all of the
transferor Lender's rights and obligations under this Agreement and the
other Loan Documents; and
(iv) each such assignment shall be made pursuant to an Assignment and
Acceptance.
In order to effect any such assignment, the transferor Lender and the Purchasing
Lender shall execute and deliver to the Administrative Agent a duly completed
Assignment and Acceptance (including the consents required by clause (i) of the
preceding sentence) with respect to such assignment, together with any Note or
Notes subject to such assignment and a processing and recording fee of $3,500;
and, upon receipt thereof, the Administrative Agent shall accept such Assignment
and Acceptance. Upon receipt of notice from the transferor Lender that it has
received the consideration described in the Assignment and Acceptance, the
Administrative Agent
66
<PAGE>
shall record such acceptance in the Register. Upon such execution, delivery,
acceptance and recording, from and after the close of business at the
Administrative Agent's Office on the settlement date specified in such
Assignment and Acceptance:
(x) the Purchasing Lender shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, shall have the rights and
obligations of a Lender hereunder, and
(y) the transferor Lender thereunder shall be released from its
obligations under this Agreement to the extent so transferred (and, in the
case of an Assignment and Acceptance covering all or the remaining portion
of a transferor Lender's rights and obligations under this Agreement, such
transferor Lender shall cease to be a party to this Agreement) from and
after the settlement date.
On or prior to the settlement date specified in an Assignment and Acceptance,
the Borrower, at its expense, shall execute and deliver to the Administrative
Agent (for delivery to the Purchasing Lender) new Notes evidencing such
Purchasing Lender's assigned Commitment or Loans and (for delivery to the
transferor Lender) replacement Notes in the principal amount of the Loans or
Commitment retained by the transferor Lender (such Notes to be in exchange for,
but not in payment of, those Notes then held by such transferor Lender). Each
such Note shall be dated the date and be substantially in the form of the
predecessor Note. The Administrative Agent shall mark the predecessor Notes
"exchanged" and deliver them to the Borrower. Accrued interest and accrued fees
shall be paid to the Purchasing Lender at the same time or times provided in the
predecessor Notes and this Agreement.
(d) Register. The Administrative Agent shall maintain at its office a
--------
copy of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Lenders and
--------
the Commitment of, and principal amount of the Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive absent 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 the Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Financial and Other Information. The Borrower authorizes the
-------------------------------
Administrative Agent and each Lender to disclose to any Participant or
Purchasing Lender (each, a "transferee") and any prospective transferee any and
----------
all financial and other information in such Person's possession concerning the
Borrower and its Subsidiaries and Affiliates which has been or may be delivered
to such Person by or on behalf of the Borrower in connection with this Agreement
or any other Loan Document or such Person's credit evaluation of the Borrower
and its Subsidiaries and Affiliates.
(f) Assignments to Federal Reserve Bank. Any Lender may at any time
-----------------------------------
assign all or any portion of its rights under this Agreement, including without
limitation any Loans owing to it, and any Note held by it, to a Federal Reserve
Bank. No such assignment shall relieve the transferor Lender from its
obligations hereunder.
67
<PAGE>
(g) Special Purpose Funding Vehicles. Notwithstanding anything to the
--------------------------------
contrary contained herein, any Lender (a "Granting Lender") may grant to a
special purpose funding vehicle (an "SPC") the option to fund all or any part of
any Loan that such Granting Lender would otherwise be obligated to fund pursuant
to this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to fund any Loan, and (ii) if an SPC elects not to
exercise such option or otherwise fails to fund all or any part of such Loan,
the Granting Lender shall be obligated to fund such Loan pursuant to the terms
hereof. The funding of a Loan by an SPC hereunder shall utilize the Revolving
Credit Commitment of the Granting Lender to the same extent, and as if, such
Loan were funded by such Granting Lender. Each party hereto hereby agrees that
no SPC shall be liable for any indemnity or payment under this Agreement for
which a Lender would otherwise be liable for so long as, and to the extent, the
Granting Lender provides such indemnity or makes such payment. Notwithstanding
anything to the contrary contained in this Agreement, any SPC may disclose on a
confidential basis any non-public information relating to its funding of Loans
to any rating agency, commercial paper dealer or provider of any surety or
guarantee to such SPC. This Section may not be amended without the prior written
consent of each Granting Lender, all or any part of whose Loan is being funded
by an SPC at the time of such amendment.
SECTION 9.13 Governing Law; Submission to Jurisdiction Waiver of Jury
--------------------------------------------------------
Trial; Limitation of Liability.
- ------------------------------
(a) Governing Law. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS
-------------
(EXCEPT TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH OTHER LOAN
DOCUMENTS) SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES.
(b) Certain Waivers. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
---------------
AND UNCONDITIONALLY:
(i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON ARISING
FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY
STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN
CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED LITIGATION") MAY
------------------
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING
IN NEW YORK, NEW YORK AND SUBMITS TO THE JURISDICTION OF SUCH COURTS (AND,
TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER AGREES THAT IT WILL
NOT BRING ANY RELATED LITIGATION IN ANY OTHER FORUM, BUT NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO BRING
ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM IN WHICH THE BORROWER OR
ANY OF ITS ASSETS MAY BE LOCATED OR IN WHICH THE BORROWER MAY BE DOING
BUSINESS OR THE RIGHT OF THE BORROWER TO ASSERT ANY DEFENSE OR COUNTERCLAIM
TO ANY ACTION BROUGHT BY THE ADMINISTRATIVE AGENT OR ANY LENDER IN ANY
FORUM);
68
<PAGE>
(ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE
LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES
ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY
RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE
JURISDICTION OVER IT;
(iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED
U.S. MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS FOR NOTICES DESCRIBED IN
SECTION 9.03, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN
EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT
THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER
PERMITTED BY LAW); AND
(iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION.
(c) Limitation of Liability. TO THE FULLEST EXTENT PERMITTED BY
-----------------------
LAW, NO CLAIM MAY BE MADE BY ANY PARTY TO THIS AGREEMENT AGAINST ANY OTHER PARTY
TO THIS AGREEMENT OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR
AGENT OF ANY OF THEM FOR ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM ARISING FROM OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT,
OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (WHETHER FOR
BREACH OF CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY). EACH PARTY TO THIS
AGREEMENT HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY
SUCH DAMAGES, WHETHER SUCH CLAIM PRESENTLY EXISTS OR ARISES HEREAFTER AND
WHETHER OR NOT SUCH CLAIM IS KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
69
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
Address NEVADA POWER COMPANY
- -------
Sierra Pacific Resources
6100 Neil Road
P.O. Box 30150 By_________________________
Reno, Nevada 89520 Name:
Attn: Mark Ruelle Title:
70
<PAGE>
Address MELLON BANK, N.A., as Administrative
- ------- Agent, Arranger and as a Lender
Mellon Bank
One Mellon Bank Center By_______________________________
Pittsburgh, Pennsylvania 15258 Name: Richard A. Matthews
Attn: Richard A. Matthews Title: Vice President
71
<PAGE>
Address FIRST UNION NATIONAL BANK, as
- ------- Syndication Agent and as a Lender
First Union National Bank
One First Union Center
301 South College Street By_______________________________
Charlotte, North Carolina 28288-0735 Name:
Attn: Dana Maloney Title:
72
<PAGE>
Address WELLS FARGO BANK, N.A., as
- ------- Syndication Agent and as a Lender
Wells Fargo Bank
201 Third Street
8/th/ Floor By_______________________________
San Francisco, California 94103 Name:
Attn: Maria Josefa Prosperi Title:
73
<PAGE>
Address BANK OF AMERICA NATIONAL TRUST
- ------- AND SAVINGS ASSOCIATION
Bank of America
300 South Fourth Street
2/nd/ Floor By_______________________________
Las Vegas, Nevada 89101 Name:
Attn: Dolores A. Rippo Title:
74
<PAGE>
Address THE BANK OF NEW YORK
- -------
The Bank of New York
One Wall Street By_______________________________
New York, New York 10286 Name:
Attn: Kathy D'Elena Title:
75
<PAGE>
Address THE FIRST NATIONAL BANK OF CHICAGO
- -------
The First National Bank of Chicago
One First National Plaza
Suite 0573
Chicago, Illinois By_______________________________
Attn: Mari Albanese Name:
Title:
76
<PAGE>
Address CREDIT SUISSE FIRST BOSTON
- -------
Credit Suisse First Boston
5 World Trade Center
New York, New York 10048 By_______________________________
Attn: Genaro Sarasola Name:
Title:
77
<PAGE>
Address PARIBAS
- -------
Paribas
787 7/th/ Avenue
New York, New York 10019 By_______________________________
Attn: Telca Hurley Name:
Title:
By_______________________________
Name:
Title:
78
<PAGE>
Address UNION BANK OF CALIFORNIA, N.A.
- -------
Union Bank of California
Energy Capital Services - LA Office
445 South Figueroa Street
15/th/ Floor
Los Angeles, CA 90071 By_______________________________
Attn Patricia A. Gonzales Name:
Title:
79
<PAGE>
Address BANK OF MONTREAL
- -------
Bank of Montreal
700 Louisiana Street
Suite 4400 By_______________________________
Houston, TX 77002 Name: Cahal B. Carmody
Attn: Cahal B. Carmody Title: Director
80
<PAGE>
Address BAYERISCHE LANDESBANK GIROZENTRALE
- -------
Bayerische Landesbank Girozentrale
560 Lexington Avenue
New York, New York 10022 By_______________________________
Attn: Patricia Sanchez Name: Peter Obermann
Title: Senior Vice President
By_______________________________
Name: Sean O'Sullivan
Title: Vice President
81
<PAGE>
Address FLEET NATIONAL BANK
- -------
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110 By_______________________________
Attn: Francia Castillo, Loan Administrator Name:
Title:
82
<PAGE>
Address FIRST SECURITY BANK OF NEVADA
- -------
First Security Bank of Nevada
P.O. Box 19250
Las Vegas, Nevada 89132 By_______________________________
Attn: Cheryl Moss Name: Cheryl Moss
Title: Senior Vice President & Manager
Corporate Banking Department
83
<PAGE>
Address KBC BANK, N.V.
- -------
KBC Bank, N.V.
125 West 55/th/ Street
10/th/ Floor By_______________________________
New York, New York 10019 Name:
Attn: Claire Kowalski/Charlene Cumberbatch Title:
By_______________________________
Name:
Title:
84
<PAGE>
Address U.S. BANK NATIONAL ASSOCIATION
- -------
U.S. Bank National Association
Commercial Loan Servicing Department
555 S.W. Oak Street, PL-7 By_______________________________
Portland, Oregon 97204 Name:
Attn: Jan Knox, Participation Specialist Title:
85
<PAGE>
SCHEDULE I
Commitments
-----------
[See definitions of "Commitment" in Section 1.01]
LENDER COMMITMENT AMOUNT
- ------ -----------------
Mellon Bank, N.A. $ 15,937,500
First Union National Bank $ 12,187,500
Wells Fargo Bank, N.A. $ 12,187,500
Bank of America National
Trust and Savings Association $ 11,250,000
The Bank of New York $ 11,250,000
The First National Bank of Chicago $ 11,250,000
Credit Suisse First Boston $ 11,250,000
Paribas $ 11,250,000
Union Bank of California, N.A. $ 11,250,000
Bank of Montreal $ 9,375,000
Bayerische Landesbank Girozentrale $ 9,375,000
Fleet National Bank $ 9,375,000
First Security Bank of Nevada $ 4,687,500
KBC Bank, N.V. $ 4,687,500
U.S. Bank National Association $ 4,687,500
Total $150,000,000
============
86
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS; CONSTRUCTION................................................... 1
SECTION 1.01 Defined Terms................................................. 1
SECTION 1.02. Classification of Loans and Borrowings....................... 14
SECTION 1.03 Terms Generally............................................... 14
SECTION 1.04 Accounting Terms; GAAP........................................ 15
ARTICLE II
THE CREDITS.................................................................. 15
SECTION 2.01 The Commitments................................................ 15
SECTION 2.02 Loans and Borrowings........................................... 15
SECTION 2.03 Requests for Revolving Borrowings.............................. 16
SECTION 2.04 Funding of Borrowings.......................................... 17
SECTION 2.05 Interest Elections............................................. 18
SECTION 2.06 Termination, Reduction and Extension of Commitments............ 19
SECTION 2.07 Term Loan Conversion Option.................................... 21
SECTION 2.08 Repayment of Loans; Evidence of Debt........................... 22
SECTION 2.09 Prepayment of Loans............................................ 23
SECTION 2.10 Fees........................................................... 24
SECTION 2.11 Interest....................................................... 24
SECTION 2.12 Alternate Rate of Interest..................................... 25
SECTION 2.13 Increased Costs................................................ 26
SECTION 2.14 Break Funding Payments......................................... 26
SECTION 2.15 Taxes.......................................................... 27
SECTION 2.16 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.... 28
SECTION 2.17 Mitigation Obligations; Replacement of Lenders................. 30
ARTICLE III
REPRESENTATIONS AND WARRANTIES.............................................. 30
SECTION 3.01 Corporate Status.............................................. 31
SECTION 3.02 Corporate Power and Authorization............................. 31
SECTION 3.03 Execution and Binding Effect.................................. 31
SECTION 3.04 Governmental Approvals and Filings............................ 31
</TABLE>
87
<PAGE>
<TABLE>
<S> <C>
SECTION 3.05 Absence of Conflicts.............................................. 32
SECTION 3.06 Audited Financial Statements...................................... 32
SECTION 3.07 Interim Financial Statements...................................... 32
SECTION 3.08 Absence of Undisclosed Liabilities................................ 33
SECTION 3.09 Absence of Material Adverse Change................................ 33
SECTION 3.10 Accurate and Complete Disclosure.................................. 33
SECTION 3.11 Margin Regulations................................................ 33
SECTION 3.12 Litigation........................................................ 34
SECTION 3.13 Absence of Events of Default...................................... 34
SECTION 3.14 Absence of Other Conflicts........................................ 34
SECTION 3.15 Insurance......................................................... 34
SECTION 3.16 Title to Property; No Liens....................................... 34
SECTION 3.17 Taxes............................................................. 35
SECTION 3.18 Borrower Not An Investment Company................................ 35
SECTION 3.19 Environmental Matters............................................. 35
SECTION 3.20 ERISA............................................................. 36
SECTION 3.21 Year 2000 Issues.................................................. 37
SECTION 3.22 Pari Passu Status................................................. 37
SECTION 3.23 Indebtedness...................................................... 37
ARTICLE IV
CONDITIONS...................................................................... 38
SECTION 4.01 Effective Date.................................................... 38
SECTION 4.02 Conditions to All Loans........................................... 41
ARTICLE V
AFFIRMATIVE COVENANTS........................................................... 42
SECTION 5.01 Basic Reporting Requirements...................................... 42
SECTION 5.02 Insurance......................................................... 45
SECTION 5.03 Payment of Taxes and Other Potential Charges and Priority Claims.. 45
SECTION 5.04 Preservation of Corporate Status and Franchises................... 45
SECTION 5.05 Governmental Approvals and Filings................................ 46
SECTION 5.06 Maintenance of Properties......................................... 46
SECTION 5.07 Avoidance of Other Conflicts...................................... 46
SECTION 5.08 Financial Accounting Practices.................................... 46
SECTION 5.09 Use of Proceeds................................................... 47
SECTION 5.10 End of Fiscal Periods............................................. 47
ARTICLE VI
NEGATIVE COVENANTS.............................................................. 47
SECTION 6.01 Financial Covenants............................................... 47
</TABLE>
88
<PAGE>
<TABLE>
<S> <C>
SECTION 6.02 Liens............................................................. 47
SECTION 6.03 Mergers........................................................... 48
SECTION 6.04 Dispositions of Properties........................................ 49
SECTION 6.05 Investments and Acquisitions...................................... 49
SECTION 6.06 Dividends and Stock Repurchases................................... 49
SECTION 6.07 Transactions with Affiliates...................................... 50
SECTION 6.08 Change of Business................................................ 50
SECTION 6.09 Equal and Ratable Lien............................................ 50
SECTION 6.10 Restrictive Agreements............................................ 50
SECTION 6.11 Year 2000......................................................... 51
ARTICLE VII
DEFAULTS........................................................................ 51
SECTION 7.01 Events of Default................................................. 51
SECTION 7.02 Consequences of an Event of Default............................... 53
ARTICLE VIII
THE AGENTS...................................................................... 54
SECTION 8.01 Appointment....................................................... 54
SECTION 8.02 General Nature of Administrative Agent's Duties................... 55
SECTION 8.03 Exercise of Powers................................................ 55
SECTION 8.04 General Exculpatory Provisions.................................... 56
SECTION 8.05 Administration by the Administrative Agent........................ 56
SECTION 8.06 Lenders Not Relying on Administrative Agent or Other Lenders...... 57
SECTION 8.07 Indemnification................................................... 58
SECTION 8.08 Administrative Agent in its Individual Capacity................... 58
SECTION 8.09 Holders of Notes.................................................. 58
SECTION 8.10 Successor Administrative Agent.................................... 59
SECTION 8.11 Additional Administrative Agents.................................. 59
SECTION 8.12 Calculations...................................................... 60
SECTION 8.13 Syndication Agents................................................ 60
ARTICLE IX
MISCELLANEOUS................................................................... 60
SECTION 9.01 Amendments and Waivers............................................ 60
SECTION 9.02 No Implied Waiver; Cumulative Remedies............................ 61
SECTION 9.03 Notices........................................................... 61
SECTION 9.04 Expenses; Taxes; Indemnity........................................ 62
SECTION 9.05 Severability...................................................... 63
</TABLE>
89
<PAGE>
<TABLE>
<S> <C>
SECTION 9.06 Prior Understandings.............................................. 63
SECTION 9.07 Duration; Survival................................................ 63
SECTION 9.08 Counterparts...................................................... 64
SECTION 9.09 Limitation on Payments............................................ 64
SECTION 9.10 Set-Off........................................................... 64
SECTION 9.11 Sharing of Collections............................................ 65
SECTION 9.12 Successors and Assigns; Participations; Assignments............... 65
</TABLE>
90
<PAGE>
EXHIBIT 10(C)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of March 13,
1998, but effective as provided herein, is made and entered into by and between
Nevada Power Company, a Nevada corporation (the "Company"), and Gloria Banks
Weddle (the "Executive").
WHEREAS, the Executive has been serving as the Vice President,
Corporate Services, of the Company;
WHEREAS, the Company considers it in the best interests of its
stockholders to foster the continuous employment of certain key management
personnel;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change in Control (as defined herein)
exists;
WHEREAS, the Company wishes to assure itself of both present and
future continuation of management, including in the event of a Change in
Control; and
WHEREAS, the Company wishes to employ the Executive and the Executive
is willing to render services, both on the terms and subject to the conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, it is agreed as follows:
1. Employment.
----------
1.1 The Company hereby agrees to employ the Executive, and the Executive
hereby agrees to undertake employment with the Company, upon the terms and
conditions herein set forth.
1.2 Employment will be for a term commencing on March 12, 1998 (the
"Effective Date") and, subject to earlier expiration upon the Executive's
termination under Section 5, expiring on March 11, 2001 (the "Employment Term").
The Employment Term may be extended by mutual written agreement of the parties.
In the event a Change in Control (as defined in Section 6.2) occurs less than
three years before the end of the Employment Term, the Employment Term will be
extended for a period ending on the third anniversary of the occurrence of the
Change in Control, except that in the event the occurrence of a Change in
Control resulting from a filing of a report or proxy statement described in
Section 6.2(iv) occurs less than three years before the end of the Employment
1
<PAGE>
Term, the Employment Term will be extended for a period ending on the later of
(i) the third anniversary of the occurrence of such Change in Control, or (ii)
the earlier of (a) the day after any transaction, occurrence or event described
in such report or proxy statement (a "Transaction") is consummated, or (b) the
date it is determined by resolution of the Board of Directors of the Company
(the "Board") adopted in good faith that such Transaction will not be
consummated. (The Employment Term, as so extended under this Section 1.2, will
thereafter constitute the "Employment Term" hereunder and is subject to further
extension as provided in this Section 1.2.)
2. Positions and Duties.
--------------------
2.1 Positions and Duties. During the Employment Term, the Executive will
--------------------
serve in the position of Vice President, Corporate Services, of the Company and
will have such powers, duties, functions, responsibilities and authority as are
(I) consistent with the Executive's position; or (ii) assigned to her office in
the Company's bylaws; or (iii) reasonably assigned to her by the President and
Chief Operating Officer of the Company. The Executive will report directly to
the President and Chief Operating Officer of the Company.
2.2 Commitment. During the Employment Term, the Executive will be the
----------
Company's full-time employee and, except as may otherwise be approved in advance
in writing by the President and Chief Operating Officer of the Company, and
except during vacation periods and reasonable periods of absence due to
sickness, personal injury or other disability, the Executive will devote
substantially all of her business time and attention to the performance of her
duties to the Company. Notwithstanding the foregoing, the Executive may, (I)
subject to the approval of the Board, serve as a director of a company which is
not engaged in "Competition" (as defined in Section 9.1) with the Company, (ii)
serve as an officer, director or otherwise participate in purely educational,
welfare, social, religious and civic organizations, and (iii) manage personal
and family investments.
3. Place of Performance. In connection with her employment during the
--------------------
Employment Term, unless otherwise agreed by the Executive, the Executive will be
based at the Company's principal executive offices. The Executive will
undertake normal business travel on behalf of the Company.
4. Compensation and Related Matters.
--------------------------------
4.1 Compensation.
------------
(i) Annual Base Salary. During the Employment Term, the Company will
pay to the Executive an annual base salary ("Base Salary") (a) prior to
April 1, 1998, of not less than the Executive's annual base salary in
effect as of the Effective Date, and (b) effective on and after April `1,
1998, of not less than $180,000, which annual base salary may be increased
from time to time by the Board (or the Compensation Committee thereof) in
its sole discretion (and, as so increased, shall thereafter constitute
"Base Salary" hereunder), payable at the times and in the manner
2
<PAGE>
consistent with the Company's general policies regarding compensation of
executive employees. Base Salary may not be decreased. The Board may from
time to time authorize such additional compensation to the Executive, in
cash or in property, as the Board may determine in its sole discretion to
be appropriate.
(ii) Annual Incentive Compensation. If the Board (or the
Compensation Committee thereof) authorizes any annual cash incentive
compensation or approves any other annual management incentive program or
arrangement, the Executive will be eligible to participate in such plan,
program or arrangement under the general terms and conditions applicable to
executive and management employees. Nothing in this Section 4.1(ii) will
guarantee to the Executive any specific amount of incentive compensation,
or prevent the Board (or the Compensation Committee thereof) from
establishing performance goals and compensation targets applicable only to
the Executive.
(iii) Long-Term Incentive Compensation Plans and Programs. If the
Board (or the Compensation Committee thereof) authorizes any long-term
incentive plan or program, the Executive will be eligible to participate in
such plan or program under the general terms and conditions applicable to
executive and management employees. Nothing in this Section 4.1(iii) will
guarantee the Executive any specific amount of long-term incentive
compensation, or prevent the Board (or the Compensation Committee thereof)
from establishing performance goals and compensation targets applicable
only to the Executive.
4.2 Employee and Executive Benefits. In addition to the compensation
-------------------------------
described in Section 4.1 and subject to the following provisions of Section 4,
the Company will make available to the Executive and her eligible dependents,
subject to the terms and conditions of the applicable plans, including without
limitation the eligibility rules, participation in all Company-sponsored
employee benefit plans, including all employee retirement income and welfare
benefit policies, plans, programs or arrangements, in which senior executives of
the Company participate, including any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement or other
retirement income or welfare benefit, disability, salary continuation, and any
other deferred compensation, incentive compensation, group and/or executive
life, health, medical/hospital or other insurance (whether funded by actual
insurance or self-insured by the Company), expense reimbursement or other
employee benefit policies, plans, programs or arrangements or any equivalent
successor policies, plans, programs or arrangements that may not exist or be
adopted hereafter by the Company.
4.3 Vacation and Fringe Benefits. During the Employment Term, the
----------------------------
Executive shall be entitled to vacation in such amounts as determined under and
to be taken in accordance with the Company's normal vacation policies, and the
Executive shall be entitled to the perquisites and other fringe benefits made
available to senior executives of the Company, commensurate with her position
and level of responsibility with the Company. Without limiting the foregoing,
the Company shall provide Executive during the Employment Term with the use of
an automobile in accordance with the Company's Executive Automobile Plan, as it
may be amended from time to time.
3
<PAGE>
4.4 Expenses. The Company will promptly reimburse the Executive for all
--------
travel and other business expenses the Executive incurs in order to perform her
duties to the Company under this Agreement in a manner commensurate with the
Executive's position and level of responsibility with the Company, and in
accordance with the Company's policy regarding substantiation of expenses.
5. Termination. Notwithstanding the Employment Term specified in Section 1.2,
-----------
the termination of the Executive's employment hereunder will be governed by the
following provisions:
5.1 Death. In the event of the termination of the Executive's employment
-----
during the Employment Term by reason of the Executive's death, the Company will
pay to the Executive's beneficiaries or estate, as appropriate, promptly after
the Executive's death, (I) the unpaid Base Salary to which the Executive is
entitled, pursuant to Section 4.1, through the date of the Executive's death,
and (ii) for any accrued but unused vacation days, to the extent and in the
amounts, if any, provided under the Company's usual policies and arrangements.
This Section 5.1 will not limit the entitlement of the Executive's estate or
beneficiaries to any death or other benefits then available to the Executive
under any life insurance, stock ownership, stock options, or other benefit plan
or policy that is maintained by the Company for the Executive's benefit or in
which the Executive participated.
5.2 Disability.
----------
(i) If the Company determines in good faith that the Executive has
incurred a Disability (as defined below) during the Employment Term, the Company
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company will terminate effective on the 30/th/ calendar day after receipt of
such notice by the Executive, provided that within the 30 calendar days after
such receipt, the Executive will not have returned to full-time performance of
her duties. The Executive will continue to receive her Base Salary (less any
amounts payable to the Executive for such period under any short- or long-term
disability plan maintained by the Company) and benefits until the date of
termination. In the event of the Executive's Disability, the Company will pay
the Executive, promptly after the Executive's termination, (a) the unpaid Base
Salary to which she is entitled, pursuant to Section 4.1, through the date of
the Executive's termination (less any amounts payable to the Executive for such
period under any short- or long-term disability plan maintained by the Company),
and (b) for any accrued but unused vacation days, to the extent and in the
amounts, if any, provided under the Company's usual policies and arrangements.
This Section 5.2 will not limit the entitlement of the Executive or the
Executive's estate or beneficiaries to any disability or other benefits then
available to the Executive under any disability insurance or other benefit plan
or policy that is maintained by the Company for the Executive's benefit or in
which the Executive participated.
(ii) For purposes of this Agreement, "Disability" will mean the
Executive's incapacity due to physical or mental illness or injury substantially
to perform her
4
<PAGE>
duties on a full-time basis for six consecutive months and within 30 calendar
days after a notice of termination is thereafter given by the Company the
Executive will not have returned to the full-time performance of the Executive's
duties; provided, however, if the Executive disagrees with a determination to
terminate her because of Disability, the question of the Executive's Disability
will be subject to the certification of a qualified medical doctor agreed to by
the Company and the Executive or, in the event of the Executive's incapacity to
designate a doctor, the Executive's legal representative. In the absence of
agreement between the Company and the Executive, each party will nominate a
qualified medical doctor and the two doctors will select a third doctor, who
will make the determination as to Disability. In order to facilitate such
determination, the Executive will, as reasonably requested by the Company, (a)
make herself available for medical examinations by a doctor in accordance with
this Section 5.2(ii), and (b) grant the Company and any such doctor access to
all relevant medical information concerning her, arrange to furnish copies of
medical records to such doctor, and use her best efforts to cause her own doctor
to be available to discuss her health with such doctor.
5.3 Cause.
-----
(i) The Company may terminate the Executive's employment hereunder
for Cause (as defined below) during the Employment Term by written notice as
provided in Section 12.6. In the event of the Executive's termination for Cause,
the Company will promptly pay to the Executive (or her representative) the
unpaid Base Salary to which she is entitled, pursuant to Section 4.1, through
the date the Executive is terminated and the Executive will be entitled to no
other compensation or benefits, except as otherwise due to her under applicable
law or pursuant to any benefit plan or policy that is maintained by the Company
in which the Executive participated.
(ii) For purposes of this Agreement, "Cause" means that, prior to the
end of the Employment Term, (a) the Executive shall have committed or engaged
in:
(1) An intentional act of fraud, embezzlement or theft in
connection with the Executive's duties or in the course of the
Executive's employment with the company;
(2) An intentional breach of any of the express covenants set
forth in Sections 9.1, 9.2, or 9.3;
(3) Intentional wrongful damage to property of the Company or
any Subsidiary (as defined below);
(4) Gross negligence or gross misconduct against the Company or
another employee, or in carrying out the Executive's duties and
responsibilities;
and any such act shall have been materially harmful to the Company, or (b) the
Executive shall have engaged in intentional and repeated failure substantially
to carry out the
5
<PAGE>
Executive's duties and responsibilities (other than any such failure resulting
from the Executive's incapacity due to physical or mental illness that qualifies
as a Disability or would qualify as a Disability is such incapacity continued
for the required length of time), which failure is not or cannot be cured within
five business days after the Company has given written notice to the Executive
specifying in detail the particulars of the acts or omissions deemed to
constitute such failure. For purposes of this Agreement, no act or failure to
act on the part of the Executive shall be deemed "intentional" if it was due
primarily to an error in judgment or negligence, but shall be deemed
"intentional" only if done or omitted to be done by the Executive not in good
faith and without reasonable belief that the Executive's action or omission was
in the best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for "Cause" hereunder
unless and until there shall been delivered to the Executive a written notice
from the Company stating that it has determined that the Executive had committed
an act constituting "Cause" as herein defined and specifying the particulars
thereof in detail. Nothing herein will limit the right of the Executive or the
Executive's beneficiaries to contest the validity or propriety of any such
determination.
5.4 Termination.
-----------
(i) Involuntary Termination. The Executive's employment hereunder
may be terminated during the Employment Term by the Company for any reason other
than Death, disability, or for Cause by written notice as provided in Section
12.6. In the event of such an involuntary termination, the Executive will be
entitled to the payments and benefits provided in Section 5.5. This Section
5.4(i) and Section 5.5, however, will not limit the entitlement of the Executive
to any other benefits then available to the Executive under any benefit plan or
policy that is maintained by the Company for the Executive's benefit or in which
the Executive participated. The Executive will be treated for purposes of this
Agreement as having been involuntarily terminated by the Company for reasons
other than Death, Disability, or for Cause if the Executive terminates her
employment with the Company for any of the following reasons (each, a "Good
Reason") prior to the date of the Executive's Death, Disability, or on which the
Executive has committed or engaged in an act constituting Cause: (a) the Company
has materially breached any provision of this Agreement and within 10 calendar
days after notice thereof from the Executive, the Company fails to cure such
breach; (b) a successor or assign (whether direct or indirect, by purchase,
merger, consolidation, operation of law or otherwise) to all or substantially
all of the business and/or assets of the Company fails to assume all duties,
obligations and liabilities of the Company under the Agreement pursuant to
Section 12.2(I); (c) a reduction in the scope or value of the aggregate benefits
and incentive compensation described in Sections 4.1(iii), 4.2 and 4.3 provided
to the Executive or the termination or denial of the Executive's rights to such
benefits or incentive compensation, any of which is not remedied by the Company
with 10 calendar days after receipt by the Company of written notice from the
Executive of such reduction or termination; (d) the Board fails to appoint the
Executive as Vice President, Corporate Services, or the Executive is removed
from such position; (e) a reduction in the Executive's Base Salary or the
opportunity to earn annual incentive compensation under Section 4.1(ii) on a
basis at least as favorable to the Executive (in terms of each of the amounts of
benefits, levels of coverage and performance measures and levels
6
<PAGE>
of required performance) as the benefits payable thereunder prior to the
reduction, or the failure to pay the Executive Base Salary or incentive
compensation earned when due.
(ii) Voluntary Termination. The Executive may voluntarily terminate
the Agreement at any time by notice to the Company as provided in Section 12.6.
In the event of the Executive's voluntary termination, the Company will promptly
pay the Executive (a) the unpaid Base Salary to which the Executive is entitled,
pursuant to Section 4.1, through the date of the Executive's termination, and
(b) for any accrued but unused vacation days, to the extent and in the amounts,
if any, provided under the Company's usual policies and arrangements. This
Section 5.4(ii) will not limit the entitlement of the Executive to any other
benefits then available to the Executive under any benefit plan or policy that
is maintained by the company for the Executive's benefit or in which the
Executive participated.
5.5 Termination Payments and Benefits.
---------------------------------
(i) Form and Amount. Upon the Executive's involuntary termination
other than by reason of Death, Disability, or for Cause as provided in Section
5.4(i), the Company will promptly pay or provide to the Executive:
(a) The unpaid Base Salary to which the Executive is entitled,
pursuant to Section 4.1, through the date of the Executive's termination;
(b) For any accrued but unused vacation days, to the extent and
in the amounts, if any, provided under the Company's usual policies and
arrangements;
(c) A lump sum payment within five (5) business days after
termination in an amount equal to two times the sum of (A) the annual rate
of Base Salary (prior to any deferrals or reductions under qualified or
non-qualified plans) being paid to the Executive immediately prior to
termination (or immediately prior to any reduction therein occurring prior
to termination, if greater), plus (B) the aggregate annual bonus, incentive
or other payments of cash compensation (determined without regard to any
deferral election) to which the Executive would have been entitled in
accordance with Section 4.1(ii) under the bonus, incentive, profit-sharing,
performance, discretionary pay or similar agreement, policy, plan, program
or arrangement of the Company in which the Executive was participating for
the year in which the termination occurs (or for the year in which any
prior reduction therein occurs, if greater) based on the assumption that
target performance goals for such year would be met and such payments would
be made; and
(d) For a period of 24 months following the termination (the
"Continuation Period"), the Company will arrange to provide the Executive
with health (including medical/hospital, dental and vision) and life
benefits substantially similar to those that the Executive was receiving or
entitled to receive immediately prior to termination (or, if greater,
immediately prior to the reduction, termination, or denial described in
Section 5.4(i)(c). Benefits otherwise receivable by the Executive pursuant
to this Section 5.5(i)(d) will be reduced to the extent comparable benefits
are
7
<PAGE>
actually received by or in respect of the Executive from another employer
during the Continuation Period following the Executive's termination, and
any such benefits actually received shall be reported by the Executive or
other recipient to the Company.
(ii) Maintenance of Benefits. During the Continuation Period set
forth in Section 5.5(i)(d), the Company will use its best efforts to maintain in
full force and effect for the continued benefit of the Executive all benefits
referenced therein or will arrange to make available to the Executive benefits
substantially similar to the referenced benefits. Such benefits will be
provided to the Executive on the same terms and conditions (including employee
contributions toward the premium payments) under which the Executive was
entitled to participate immediately prior to the Executive's termination (or, if
more favorable to the Executive, immediately prior to the reduction,
termination, or denial described in Section 5.4(i)(c)). To the extent, however,
the coverage or benefits provided under Section 5.5(i)(d) results in the
Executive or any dependent or beneficiary thereof incurring additional federal,
state or local taxes that would otherwise not have been incurred in connection
with the provision of such coverage or benefits had the Executive's employment
not been terminated, the Company shall promptly pay the Executive, dependent or
beneficiary, as the case may be, on an after-tax basis, an additional payment in
an amount equal to all taxes, including interest and penalties thereon, imposed
as a result of such coverage or benefits.
(iii) Resignation. If at termination the Executive is a member of
the Board or a board of any affiliate of the Company, no benefit will be paid or
made available under Section 5.5(i)(c) or Section 5.5(i)(d) unless the Executive
first executes and delivers to the Company a resignation from membership on the
Board and from membership on the boards of all affiliates of the Company, as the
case may be, such resignation to be effective on receipt of the payment to which
the Executive is entitled under Section 5.5(i)(c).
6. Change in Control Provisions.
----------------------------
6.1 Impact of Change in Control. In the event of a "Change in Control" of
---------------------------
the Company, as defined in Section 6.2, (i) if the Executive's employment is
involuntarily terminated during the Employment Term without Cause after the
Change in Control, (a) the covenants of Sections 9.1, 9.3, and 10 will be
inapplicable to the Executive, and (b) the covenant of Section 9.2 will expire
on the third anniversary of the date of termination of the Executive's
employment, and (ii) the definition of Good Reason, as set forth in Section
5.4(i) above, will be expanded to include the following:
(a) A significant adverse change in the nature or scope of
authorities, powers, functions, responsibilities or duties attached to the
positions held by the Executive from those authorities, powers, functions,
responsibilities or duties which the Executive held immediately prior to
the Change in Control;
(b) A determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has been made in
good
8
<PAGE>
faith and in all events the Executive's determination will be presumed to
have been made in good faith unless otherwise shown by the Company by clear
and convincing evidence) that a change in circumstances has occurred
following the Change in Control, including, without limitation, a change in
the scope of the business or other activities for which the Executive was
responsible immediately prior to the Change in Control, which has rendered
the Executive substantially unable to carry out, has substantially hindered
the Executive's performance of, or has caused the Executive to suffer a
substantial reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to any of the Executive's positions
immediately prior to such Change in Control, which situation is not
remedied within 10 calendar days after written notice to the Company from
the Executive of such determination; or
(c) The relocation of the Company's principal
executive offices and the Executive's principal location of
work is then in such offices, or requirement that the
Executive have the Executive's principal location of work
changed, to any location thereof immediately preceding the
Change in Control or the requirement that the Executive
travel away from the Executive's office in the course of
discharging the Executive's responsibilities or duties
hereunder at least 20% more (in terms of aggregate days in
any calendar year or in any calendar quarter when annualized
for purposes of comparison to any prior year) than was
required of Executive in any of the three full years
immediately prior to such Change in Control without, in
either case, the Executive's prior written consent.
6.2 Definition of Change in Control. For purposes of this Agreement, a
-------------------------------
"Change in Control" will be deemed to occur if at anytime during the Employment
Term any of the following events occur:
(i) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than 65% of the combined voting power
of the then-outstanding securities or interests entitled to vote generally
in the election of directors or other controlling persons (the "Voting
Stock") of such corporation or person immediately after such transaction
are held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or substantially
all of its assets to another corporation or other legal person, and as a
result of such sale or transfer less than 65% of the combined voting power
of the then-outstanding Voting Stock of such corporation or person
immediately after such sale or transfer is held in the aggregate (directly
or through ownership of Voting Stock of the Company or Subsidiary (as
defined herein)) by the holders of the Voting Stock of the Company
immediately prior to such sale or transfer;
9
<PAGE>
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial
owner (as the term "beneficial owner" is defined under rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of
securities representing 20% or more of the combined voting power of the
then-outstanding Voting Stock of the Company;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing
in response to Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Company will occur
in the future pursuant to a then-existing contract or transaction which
when consummated would be a Change in Control determined without regard to
this Section 6.2(iv);
(v) If, during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Directors of the Company
cease for any reason to constitute at least a majority thereof; provided,
--------
however, that for purposes of this Section 6.2(v) each Director who is
-------
first elected, or first nominated for election by the Company's
stockholders, by a vote of at least two-thirds of the Directors of the
Company (or a committee thereof) then still in office who were Directors of
the Company at the beginning of any such period will be deemed to have
been a Director of the Company at the beginning of such period; or
(vi) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing provisions of Sections 6.2(iii) or 6.2(iv) above,
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" shall not be deemed to have occurred for purposes of
Sections 6.2(iii) or 6.2(iv) solely because (A) the Company, (B) an entity in
which the Company directly or indirectly beneficially owns 50% or more of the
outstanding Voting Stock (a "Subsidiary"), or (C) any Company-sponsored employee
stock ownership plan or any other employee benefit plan of the Company or any
Subsidiary either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K, or
Schedule 14A (or any successor schedule, form or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of shares of Voting
Stock, whether in excess of 20% or otherwise, or because the Company reports
that a Change in Control of the Company has occurred or will occur in the future
by reason of such beneficial ownership.
7. Certain Additional Payments by the Company.
------------------------------------------
(i) Anything in this Agreement to the contrary notwithstanding, if it is
determined (as hereafter provided) that any payment or distribution by the
Company or any of its affiliates to or for the benefit of the Executive, whether
paid or payable or distributed or distributable
10
<PAGE>
pursuant to the terms of this Agreement or otherwise pursuant to or by reason of
any other agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar right, or the
lapse or termination of any restriction on or the vesting or exercisability of
any of the foregoing (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Code (or any successor provision thereto) by reason of
being considered "contingent on a change in ownership or control" of the
Company, within the meaning of Section 280G of the Code (or any successor
provision thereto) or to any similar tax imposed by state or local law, or any
interest or penalties with respect to such tax (such tax or taxes, together with
any such interest and penalties, are hereafter collectively referred to as the
"Excise Tax"), then the Executive will be entitled to receive an additional
payment or payments (collectively, a "Gross-Up Payment") in an amount such that,
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. No Gross-Up Payment will be made
with respect to the Excise Tax, if any, attributable to (a) any incentive stock
option, as defined by Section 422 of the Code ("ISO") granted prior to the
execution of this Agreement (unless a comparable Gross-Up Payment has
theretofore been made available with respect to such option), or (b) any stock
appreciation or similar right, whether or not limited, granted in tandem with
any ISO described in clause (a).
(ii) Subject to the provisions of Section 7(vi) hereof, all
determinations required to be made under this Section 7, including whether an
Excise Tax is payable by the Executive and the amount of such Excise Tax and
whether a Gross-Up Payment is required to be paid by the Company to the
Executive and the amount of such Gross-Up Payment, will be made by a nationally
recognized firm of certified public accountants (the "Accounting Firm") selected
by the Executive in her sole discretion. The Executive will direct the
Accounting Firm to submit its determination and detailed supporting calculations
to both the Company and the Executive within 15 calendar days after the
Executive's termination, if applicable, and any other such time or times as may
be requested by the Company or the Executive. If the Accounting Firm determines
that any Excise Tax is payable by the Executive, the Company will pay the
required Gross-Up Payment to the Executive within five business days after
receipt of such determination and calculations with respect to any Payment to
the Executive. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it will, at the same time as it makes such determination,
furnish the Company and the Executive an opinion that the Executive has
substantial authority not to report any Excise Tax on the Executive's federal,
state, local income or other tax return. Any determination by the Accounting
Firm as to the amount of the Gross-Up Payment will be binding upon the Company
and the Executive. As a result of the uncertainty in the application of Section
4999 of the C ode (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the time of
any determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payment that will not have been made by the Company have been made (an
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies pursuant
to Section 7(vi) hereof and the Executive thereafter is required to make a
payment of any Excise Tax, the Executive will direct the Accounting
11
<PAGE>
Firm to determine the amount of the Underpayment that has occurred and to submit
its determination and detailed supporting calculations to both the Company and
the Executive as promptly as possible. Any such Underpayment will be promptly
paid by the Company to, or for the benefit of, the Executive within five
business days after receipt of such determination and calculations.
(iii) The Company and the Executive will each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and other cooperate with the Accounting Firm in connection with
the preparation and issuance of the determinations and calculations contemplated
by Section 7(ii) hereof.
(iv) The federal, state and local income or other tax returns filed by
the Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive will make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of the Executive's federal income tax
return as filed with the Internal Revenue Service and corresponding state and
local tax returns, if relevant, as filed with the applicable taxing authority,
and such other documents reasonably requested by the Company, evidencing such
payment. If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive will within five business days pay to the Company the amount of such
reduction.
(v) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Sections
7(ii) and (iv) hereof will be borne by the Company. If such fees and expenses
are initially paid by the Executive, the Company will reimburse the Executive
the full amount of such fees and expenses within five business days after
receipt from the Executive of a statement therefor and reasonable evidence of
her payment thereof.
(vi) The Executive will notify the Company in writing of any claim by the
Internal Revenue Service or other taxing authority that, if successful, would
require the payment by the Company of a Gross-Up Payment. Such notification
will be given as promptly as practicable but no later than 10 business days
after the Executive actually receives notice of such claim and the Executive
will further apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the extent known by
the Executive). The Executive will not pay such claim prior to the earlier of
(a) the expiration of the 30-calendar-day period following the date on which the
Executive gives such notice to the Company, and (b) the date that any payment of
amount with respect to such claim is due. If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive will:
(a) provide the Company with any written records or documents in
the Executive's possession relating to such claim reasonably requested by
the Company;
12
<PAGE>
(b) take such action in connection with contesting such claim as
the Company will reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such
claim by an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(c) cooperate with the Company in good faith in order to
effectively contest such claim; and
(d) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 7(vi), the Company will control all proceedings taken in connection
with the contest of any claim contemplated by this Section 7(vi) and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim (provided, however, that the Executive may participate therein at the
Executive's own cost and expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company will determine;
provided, however, that if the Company directs the Executive to pay the tax
claimed and sue for a refund, the Company will advance the amount of such
payment to the Executive on an interest-free basis and will indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income or
other tax, including interest or penalties with respect thereto, imposed with
respect to such advance; and provided further, however, that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
any such contested claim will be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive will be entitled
to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 7(vi) hereof, the Executive receives any refund with
respect to such claim, the Executive will (subject to the Company's complying
with the requirements of Section 7(vi) hereof) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
any taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 7(vi) hereof, a determination
is made that the Executive will not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest
13
<PAGE>
such denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance will be forgiven and will not be required to be
repaid and the amount of such advance will offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid by the Company to the Executive
pursuant to this Section 7.
8. Mitigation and Offset. The payment of severance compensation by the
---------------------
Company to the Executive in accordance with the terms of the Agreement is hereby
acknowledged by the Company to be reasonable, and the Executive is under no
obligation to mitigate damages or the amount of any payment provided for
hereunder by seeking other employment or otherwise; nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the last
sentence of Section 5.5(i)(d).
9. Competition; confidentiality; Nonsolicitation
---------------------------------------------
9.1 (i) Subject to section 6.1(i), the Executive hereby covenants and
agrees that during the employment Term and for one year following the Employment
Term and for one year following the Employment Term she will not, without the
prior written consent of the Company, engage in Competition (as defined below)
with the Company. For purposes of this Agreement, if the Executive takes any of
the following actions she will be engaged in "Competition": engaging in or
carrying on, directly or indirectly, any enterprise, whether as an advisor,
principal, agent, partner, officer, director, employee, stockholder, associate
or consultant to any person, partnership, corporation or any other business
entity, that is principally engaged in the business of the generation,
transmission, or distribution of electricity in States in which the Company or
its affiliates has significant operations; provided, however, that "Competition"
will not include (a) the mere ownership of securities in any enterprise and
exercise of rights appurtenant thereto, or (b) participation in management of
any enterprise or business operation thereof other than in connection with the
competitive operation of such enterprise.
(ii) Subject to Section 6.1(i), the Executive hereby covenants and
agrees that during the Employment Term and for three years following the
Employment Term, she will not assist a third party in preparing or making an
unsolicited bid for the Company, engaging in a proxy contest with the Company,
or engaging in any other similar activity.
9.2 During the Employment Term, the Company agrees that it will disclose
to Executive its confidential or proprietary information (as defined in this
Section 9.2) to the extent necessary for Executive to carry out the Executive's
obligations under this Agreement. Subject to Section 6.1(i), the Executive
hereby covenants and agrees that she will not, without the prior written consent
of the Company, during the Employment Term or thereafter, disclose to any person
not employed by the Company, or use in connection with engaging in Competition
with the Company, any confidential or proprietary information of the Company.
For purposes of this Agreement, the term "confidential or proprietary
information" will include all information of any nature and in any form that is
owned by the Company and that is not publicly available or generally known to
persons engaged in
14
<PAGE>
businesses similar or related to those of the Company. Confidential information
will include, without limitation, the Company's financial matters, customers,
employees, industry contracts, and all other secrets and all other information
of a confidential or proprietary nature. The foregoing obligations imposed by
this Section 9.2 will cease if such confidential or proprietary information will
have become, through no fault of the Executive, generally known to the public or
the Executive is required by law to make disclosure (after giving the Company
notice and an opportunity to contest such requirement).
9.3 Subject to Section 6.1(i), the Executive hereby covenants and agrees
that during the Employment Term and for one year thereafter the Executive will
not attempt to influence, persuade or induce, or assist any other person in so
persuading or inducing, any employee of the Company to give up, or to not
commence, employment or a business relationship with the Company.
10. Post-Termination Assistance. Subject to Section 6.1(i), the Executive
---------------------------
agrees that after the Executive's employment with the Company has terminated,
the Executive will provide, upon reasonable notice, such information and
assistance to the Company as may reasonably be requested by the Company in
connection with any litigation in which it or any of its affiliates is or may
become a party; provided, however, that the Company agrees to reimburse the
Executive for any related out-of-pocket expenses, including travel expenses.
11. Survival. The expiration or termination of the Employment Term will not
--------
impair the rights or obligations of any party hereto that accrue hereunder prior
to such expiration or termination, except to the extent specifically stated
herein. In addition to the foregoing, the Executive's covenants contained in
Sections 9.12, 9.2, 9.3, and 10, and the Company's obligations under Sections 5,
7, and 12.1 will survive the expiration or termination of employment for any
reason whatsoever.
12. Miscellaneous Provisions.
------------------------
12.1 Legal Fees and Expenses. It is the intent of the Company that the
-----------------------
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation, the initiation or defense of any litigation or other legal
actions, whether by or against the Company or any director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and
15
<PAGE>
such counsel, the Company irrevocably consents to the Executive's entering into
an attorney-client relationship with such counsel, and in that connection the
Company and the Executive agree that a confidential relationship shall exist
between the Executive and such counsel. Without respect to whether the Executive
prevails, in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by the Executive in connection
with any of the foregoing.
12.2 Successors and Binding Agreement.
--------------------------------
(i) The company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization, operation of
law or otherwise) to all or substantially all of the business or assets of
the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would be required to perform
if no such succession had taken place. This Agreement will be binding upon
and inure to the benefit of the Company and any successor to the Company,
including without limitation any persons acquiring directly or indirectly
all or substantially all of the business or assets of the Company where by
purchase, merger, consolidation, reorganization, operation of law or
otherwise (and such successor shall thereafter be deemed the "Company" for
the purposes of this Agreement), but will not otherwise be assignable,
transferable or delegable by the Company.
(ii) This Agreement will inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(iii) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 12.2(i) and 12.2(ii). Without limiting the
generality or effect of the foregoing, the Executive's right to receive
payments hereunder will not be assignable, transferable or delegable,
whether by pledge, creation of a security interest, or otherwise, other
than by a transfer by Executive's will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer
contrary to this Section 12.2(iii), the Company shall have no liability to
pay any amount so attempted to be assigned, transferred or delegated.
12.3 Governing Law. This Agreement will be governed, construed,
-------------
interpreted and enforced in accordance with the substantive laws of the State of
Nevada, without regard to conflicts of law principles.
12.4 Withholding of Taxes. The Company may withhold from any amounts
--------------------
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
16
<PAGE>
12.5 Severability. Any provision of this Agreement that is deemed invalid,
------------
illegal or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provisions of this Agreement
invalid, illegal, or unenforceable in any other jurisdiction. If any covenant
should be deemed invalid, illegal or unenforceable because its scope is
considered excessive, such covenant will be modified so that the scope of the
covenant is reduced only to the minimum extent necessary to render the modified
covenant valid, legal and enforceable.
12.6 Notices. For all purposes of this Agreement, all communications,
-------
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive offices and to the Executive at her
principal residence, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of changes
of address will be effective only upon receipt.
(i) To The Company. If to the Company, addressed to the attention
--------------
of the Secretary at 6226 West Sahara Avenue, Las Vegas, Nevada 89151.
(ii) To The Executive. If to the Executive, to her at 5200 Coral
----------------
Glow Court, Las Vegas, Nevada 89129.
12.7 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which will be deemed to be an original, but all of which together will
constitute one and the same Agreement.
12.8 Entire Agreement. The terms of this Agreement are intended by the
----------------
parties to be the final expression of their agreement with respect to the
Executive's employment by the Company and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement will constitute the complete and exclusive statement of its terms and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative or other legal proceeding to vary the terms of this Agreement.
12.9 Amendments; Waivers. This Agreement may not be modified, amended, or
-------------------
terminated except by an instrument in writing, signed by the Executive and the
Company. Failure on the part of either party to complain of any action or
omission, breach or default on the part of the other party, no matter how long
the same may continue, will never be deemed to be a waiver of any rights or
remedies hereunder, at law or in equity. The Executive or the Company may waive
compliance by the other party with any provision of this Agreement that such
other party was or is obligated to comply with or perform only through an
executed
17
<PAGE>
writing; provided, however, that such waiver will not operate as a waiver of, or
estoppel with respect to, any other or subsequent failure.
12.10 No Inconsistent Actions. The parties will not voluntarily
-----------------------
undertake or fail to undertake any action or course of action that is
inconsistent with the provisions or essential intent of this Agreement.
Furthermore, it is the intent of the parties hereto to act in a fair and
reasonable manner with respect to the interpretation and application of the
provisions of this Agreement.
12.11 Headings and Section References. The headings used in this
-------------------------------
Agreement are intended for convenience or reference only and will not in any
manner amplify, limit, modify or otherwise be used in the construction or
interpretation of any provision of this Agreement. All section references are
to sections of this Agreement, unless otherwise noted.
12.12 Interest. Without limiting the rights of the Executive at law or in
--------
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest equal
to the so-called composite "prime rate" as quoted from time to time during the
relevant period in the Northeast Edition of The Wall Street Journal. Such
-----------------------
interest will be payable as it accrues on demand. Any change in such prime rate
will be effective on and as of the date of such change.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date and year first above written, but effective as provided in Section 1.2.
Gloria Banks Weddle .
------------------------------------
Gloria Banks Weddle
NEVADA POWER COMPANY,
a Nevada corporation
Charles A. Lenzie .
------------------------------------
Charles A. Lenzie
18
<PAGE>
EXHIBIT 10(D)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of March 13,
1998, but effective as provided herein, is made and entered into by and between
Nevada Power Company, a Nevada corporation (the "Company"), and Steven W.
Rigazio (the "Executive").
WHEREAS, the Executive has been serving as the Vice President, Finance
and Planning, Treasurer and Chief Financial Officer, of the Company;
WHEREAS, the Company considers it in the best interests of its
stockholders to foster the continuous employment of certain key management
personnel;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change in Control (as defined herein)
exists;
WHEREAS, the Company wishes to assure itself of both present and
future continuation of management, including in the event of a Change in
Control; and
WHEREAS, the Company wishes to employ the Executive and the Executive
is willing to render services, both on the terms and subject to the conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, it is agreed as follows:
1. Employment.
----------
1.1 The Company hereby agrees to employ the Executive, and the Executive
hereby agrees to undertake employment with the Company, upon the terms and
conditions herein set forth.
1.2 Employment will be for a term commencing on March 12, 1998 (the
"Effective Date") and, subject to earlier expiration upon the Executive's
termination under Section 5, expiring on March 11, 2001 (the "Employment Term").
The Employment Term may be extended by mutual written agreement of the parties.
In the event a Change in Control (as defined in Section 6.2) occurs less than
three years before the end of the Employment Term, the Employment Term will be
extended for a period ending on the third anniversary of the occurrence of the
Change in Control, except that in the event the occurrence of a Change in
Control resulting from a filing of a report or proxy statement described in
Section 6.2(iv) occurs less than three years before the end of the Employment
1
<PAGE>
Term, the Employment Term will be extended for a period ending on the later of
(i) the third anniversary of the occurrence of such Change in Control, or (ii)
the earlier of (a) the day after any transaction, occurrence or event described
in such report or proxy statement (a "Transaction") is consummated, or (b) the
date it is determined by resolution of the Board of Directors of the Company
(the "Board") adopted in good faith that such Transaction will not be
consummated. (The Employment Term, as so extended under this Section 1.2, will
thereafter constitute the "Employment Term" hereunder and is subject to further
extension as provided in this Section 1.2.)
2. Positions and Duties.
--------------------
2.1 Positions and Duties. During the Employment Term, the Executive will
--------------------
serve in the position of Vice President, Finance and Planning, Treasurer and
Chief Financial Officer, of the Company and will have such powers, duties,
functions, responsibilities and authority as are (I) consistent with the
Executive's position; or (ii) assigned to his office in the Company's bylaws; or
(iii) reasonably assigned to him by the President and Chief Operating Officer of
the Company. The Executive will report directly to the President and Chief
Operating Officer of the Company.
2.2 Commitment. During the Employment Term, the Executive will be the
----------
Company's full-time employee and, except as may otherwise be approved in advance
in writing by the President and Chief Operating Officer of the Company, and
except during vacation periods and reasonable periods of absence due to
sickness, personal injury or other disability, the Executive will devote
substantially all of his business time and attention to the performance of his
duties to the Company. Notwithstanding the foregoing, the Executive may, (I)
subject to the approval of the Board, serve as a director of a company which is
not engaged in "Competition" (as defined in Section 9.1) with the Company, (ii)
serve as an officer, director or otherwise participate in purely educational,
welfare, social, religious and civic organizations, and (iii) manage personal
and family investments.
3. Place of Performance. In connection with his employment during the
--------------------
Employment Term, unless otherwise agreed by the Executive, the Executive will be
based at the Company's principal executive offices. The Executive will
undertake normal business travel on behalf of the Company.
4. Compensation and Related Matters.
--------------------------------
4.1 Compensation.
------------
(i) Annual Base Salary. During the Employment Term, the Company will
pay to the Executive an annual base salary ("Base Salary") (a) prior to
April 1, 1998, of not less than the Executive's annual base salary in
effect as of the Effective Date, and (b) effective on and after April 1,
1998, of not less than $225,000, which annual base salary may be increased
from time to time by the Board (or the Compensation Committee thereof) in
its sole discretion (and, as so increased, shall thereafter constitute
"Base Salary" hereunder), payable at the times and in the manner
2
<PAGE>
consistent with the Company's general policies regarding compensation of
executive employees. Base Salary may not be decreased. The Board may from
time to time authorize such additional compensation to the Executive, in
cash or in property, as the Board may determine in its sole discretion to
be appropriate.
(ii) Annual Incentive Compensation. If the Board (or the
Compensation Committee thereof) authorizes any annual cash incentive
compensation or approves any other annual management incentive program or
arrangement, the Executive will be eligible to participate in such plan,
program or arrangement under the general terms and conditions applicable to
executive and management employees. Nothing in this Section 4.1(ii) will
guarantee to the Executive any specific amount of incentive compensation,
or prevent the Board (or the Compensation Committee thereof) from
establishing performance goals and compensation targets applicable only to
the Executive.
(iii) Long-Term Incentive Compensation Plans and Programs. If the
Board (or the Compensation Committee thereof) authorizes any long-term
incentive plan or program, the Executive will be eligible to participate in
such plan or program under the general terms and conditions applicable to
executive and management employees. Nothing in this Section 4.1(iii) will
guarantee the Executive any specific amount of long-term incentive
compensation, or prevent the Board (or the Compensation Committee thereof)
from establishing performance goals and compensation targets applicable
only to the Executive.
4.2 Employee and Executive Benefits. In addition to the compensation
-------------------------------
described in Section 4.1 and subject to the following provisions of Section 4,
the Company will make available to the Executive and his eligible dependents,
subject to the terms and conditions of the applicable plans, including without
limitation the eligibility rules, participation in all Company-sponsored
employee benefit plans, including all employee retirement income and welfare
benefit policies, plans, programs or arrangements, in which senior executives of
the Company participate, including any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement or other
retirement income or welfare benefit, disability, salary continuation, and any
other deferred compensation, incentive compensation, group and/or executive
life, health, medical/hospital or other insurance (whether funded by actual
insurance or self-insured by the Company), expense reimbursement or other
employee benefit policies, plans, programs or arrangements or any equivalent
successor policies, plans, programs or arrangements that may not exist or be
adopted hereafter by the Company.
4.3 Vacation and Fringe Benefits. During the Employment Term, the
----------------------------
Executive shall be entitled to vacation in such amounts as determined under and
to be taken in accordance with the Company's normal vacation policies, and the
Executive shall be entitled to the perquisites and other fringe benefits made
available to senior executives of the Company, commensurate with his position
and level of responsibility with the Company. Without limiting the foregoing,
the Company shall provide Executive during the Employment Term with the use of
an automobile in accordance with the Company's Executive Automobile Plan, as it
may be amended from time to time.
3
<PAGE>
4.4 Expenses. The Company will promptly reimburse the Executive for all
--------
travel and other business expenses the Executive incurs in order to perform his
duties to the Company under this Agreement in a manner commensurate with the
Executive's position and level of responsibility with the Company, and in
accordance with the Company's policy regarding substantiation of expenses.
5. Termination. Notwithstanding the Employment Term specified in Section 1.2,
-----------
the termination of the Executive's employment hereunder will be governed by the
following provisions:
5.1 Death. In the event of the termination of the Executive's employment
-----
during the Employment Term by reason of the Executive's death, the Company will
pay to the Executive's beneficiaries or estate, as appropriate, promptly after
the Executive's death, (I) the unpaid Base Salary to which the Executive is
entitled, pursuant to Section 4.1, through the date of the Executive's death,
and (ii) for any accrued but unused vacation days, to the extent and in the
amounts, if any, provided under the Company's usual policies and arrangements.
This Section 5.1 will not limit the entitlement of the Executive's estate or
beneficiaries to any death or other benefits then available to the Executive
under any life insurance, stock ownership, stock options, or other benefit plan
or policy that is maintained by the Company for the Executive's benefit or in
which the Executive participated.
5.2 Disability.
----------
(i) If the Company determines in good faith that the Executive has
incurred a Disability (as defined below) during the Employment Term, the Company
may give the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with the
Company will terminate effective on the 30/th/ calendar day after receipt of
such notice by the Executive, provided that within the 30 calendar days after
such receipt, the Executive will not have returned to full-time performance of
his duties. The Executive will continue to receive his Base Salary (less any
amounts payable to the Executive for such period under any short- or long-term
disability plan maintained by the Company) and benefits until the date of
termination. In the event of the Executive's Disability, the Company will pay
the Executive, promptly after the Executive's termination, (a) the unpaid Base
Salary to which he is entitled, pursuant to Section 4.1, through the date of the
Executive's termination (less any amounts payable to the Executive for such
period under any short- or long-term disability plan maintained by the Company),
and (b) for any accrued but unused vacation days, to the extent and in the
amounts, if any, provided under the Company's usual policies and arrangements.
This Section 5.2 will not limit the entitlement of the Executive or the
Executive's estate or beneficiaries to any disability or other benefits then
available to the Executive under any disability insurance or other benefit plan
or policy that is maintained by the Company for the Executive's benefit or in
which the Executive participated.
(ii) For purposes of this Agreement, "Disability" will mean the
Executive's incapacity due to physical or mental illness or injury substantially
to perform his
4
<PAGE>
duties on a full-time basis for six consecutive months and within 30 calendar
days after a notice of termination is thereafter given by the Company the
Executive will not have returned to the full-time performance of the Executive's
duties; provided, however, if the Executive disagrees with a determination to
terminate him because of Disability, the question of the Executive's Disability
will be subject to the certification of a qualified medical doctor agreed to by
the Company and the Executive or, in the event of the Executive's incapacity to
designate a doctor, the Executive's legal representative. In the absence of
agreement between the Company and the Executive, each party will nominate a
qualified medical doctor and the two doctors will select a third doctor, who
will make the determination as to Disability. In order to facilitate such
determination, the Executive will, as reasonably requested by the Company, (a)
make herself available for medical examinations by a doctor in accordance with
this Section 5.2(ii), and (b) grant the Company and any such doctor access to
all relevant medical information concerning her, arrange to furnish copies of
medical records to such doctor, and use his best efforts to cause his own doctor
to be available to discuss his health with such doctor.
5.3 Cause.
-----
(i) The Company may terminate the Executive's employment hereunder
for Cause (as defined below) during the Employment Term by written notice as
provided in Section 12.6. In the event of the Executive's termination for Cause,
the Company will promptly pay to the Executive (or his representative) the
unpaid Base Salary to which he is entitled, pursuant to Section 4.1, through the
date the Executive is terminated and the Executive will be entitled to no other
compensation or benefits, except as otherwise due to him under applicable law or
pursuant to any benefit plan or policy that is maintained by the Company in
which the Executive participated.
(ii) For purposes of this Agreement, "Cause" means that, prior to
the end of the Employment Term, (a) the Executive shall have committed or
engaged in:
(1) An intentional act of fraud, embezzlement or theft in
connection with the Executive's duties or in the course of the
Executive's employment with the company;
(2) An intentional breach of any of the express covenants set
forth in Sections 9.1, 9.2, or 9.3;
(3) Intentional wrongful damage to property of the Company or
any Subsidiary (as defined below);
(4) Gross negligence or gross misconduct against the Company
or another employee, or in carrying out the Executive's duties and
responsibilities;
and any such act shall have been materially harmful to the Company, or (b) the
Executive shall have engaged in intentional and repeated failure substantially
to carry out the
5
<PAGE>
Executive's duties and responsibilities (other than any such failure resulting
from the Executive's incapacity due to physical or mental illness that qualifies
as a Disability or would qualify as a Disability is such incapacity continued
for the required length of time), which failure is not or cannot be cured within
five business days after the Company has given written notice to the Executive
specifying in detail the particulars of the acts or omissions deemed to
constitute such failure. For purposes of this Agreement, no act or failure to
act on the part of the Executive shall be deemed "intentional" if it was due
primarily to an error in judgment or negligence, but shall be deemed
"intentional" only if done or omitted to be done by the Executive not in good
faith and without reasonable belief that the Executive's action or omission was
in the best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for "Cause" hereunder
unless and until there shall been delivered to the Executive a written notice
from the Company stating that it has determined that the Executive had committed
an act constituting "Cause" as herein defined and specifying the particulars
thereof in detail. Nothing herein will limit the right of the Executive or the
Executive's beneficiaries to contest the validity or propriety of any such
determination.
5.4 Termination.
-----------
(i) Involuntary Termination. The Executive's employment hereunder
may be terminated during the Employment Term by the Company for any reason other
than Death, disability, or for Cause by written notice as provided in Section
12.6. In the event of such an involuntary termination, the Executive will be
entitled to the payments and benefits provided in Section 5.5. This Section
5.4(i) and Section 5.5, however, will not limit the entitlement of the Executive
to any other benefits then available to the Executive under any benefit plan or
policy that is maintained by the Company for the Executive's benefit or in which
the Executive participated. The Executive will be treated for purposes of this
Agreement as having been involuntarily terminated by the Company for reasons
other than Death, Disability, or for Cause if the Executive terminates his
employment with the Company for any of the following reasons (each, a "Good
Reason") prior to the date of the Executive's Death, Disability, or on which the
Executive has committed or engaged in an act constituting Cause: (a) the Company
has materially breached any provision of this Agreement and within 10 calendar
days after notice thereof from the Executive, the Company fails to cure such
breach; (b) a successor or assign (whether direct or indirect, by purchase,
merger, consolidation, operation of law or otherwise) to all or substantially
all of the business and/or assets of the Company fails to assume all duties,
obligations and liabilities of the Company under the Agreement pursuant to
Section 12.2(I); (c) a reduction in the scope or value of the aggregate benefits
and incentive compensation described in Sections 4.1(iii), 4.2 and 4.3 provided
to the Executive or the termination or denial of the Executive's rights to such
benefits or incentive compensation, any of which is not remedied by the Company
with 10 calendar days after receipt by the Company of written notice from the
Executive of such reduction or termination; (d) the Board fails to appoint the
Executive as Vice President, Corporate Services, or the Executive is removed
from such position; (e) a reduction in the Executive's Base Salary or the
opportunity to earn annual incentive compensation under Section 4.1(ii) on a
basis at least as favorable to the Executive (in terms of each of the amounts of
benefits, levels of coverage and performance measures and levels
6
<PAGE>
of required performance) as the benefits payable thereunder prior to the
reduction, or the failure to pay the Executive Base Salary or incentive
compensation earned when due.
(ii) Voluntary Termination. The Executive may voluntarily terminate
the Agreement at any time by notice to the Company as provided in Section 12.6.
In the event of the Executive's voluntary termination, the Company will promptly
pay the Executive (a) the unpaid Base Salary to which the Executive is entitled,
pursuant to Section 4.1, through the date of the Executive's termination, and
(b) for any accrued but unused vacation days, to the extent and in the amounts,
if any, provided under the Company's usual policies and arrangements. This
Section 5.4(ii) will not limit the entitlement of the Executive to any other
benefits then available to the Executive under any benefit plan or policy that
is maintained by the company for the Executive's benefit or in which the
Executive participated.
5.5 Termination Payments and Benefits.
---------------------------------
(i) Form and Amount. Upon the Executive's involuntary termination
other than by reason of Death, Disability, or for Cause as provided in Section
5.4(i), the Company will promptly pay or provide to the Executive:
(a) The unpaid Base Salary to which the Executive is entitled,
pursuant to Section 4.1, through the date of the Executive's termination;
(b) For any accrued but unused vacation days, to the extent
and in the amounts, if any, provided under the Company's usual policies and
arrangements;
(c) A lump sum payment within five (5) business days after
termination in an amount equal to two times the sum of (A) the annual rate
of Base Salary (prior to any deferrals or reductions under qualified or
non-qualified plans) being paid to the Executive immediately prior to
termination (or immediately prior to any reduction therein occurring prior
to termination, if greater), plus (B) the aggregate annual bonus, incentive
or other payments of cash compensation (determined without regard to any
deferral election) to which the Executive would have been entitled in
accordance with Section 4.1(ii) under the bonus, incentive, profit-sharing,
performance, discretionary pay or similar agreement, policy, plan, program
or arrangement of the Company in which the Executive was participating for
the year in which the termination occurs (or for the year in which any
prior reduction therein occurs, if greater) based on the assumption that
target performance goals for such year would be met and such payments would
be made; and
(d) For a period of 24 months following the termination (the
"Continuation Period"), the Company will arrange to provide the Executive
with health (including medical/hospital, dental and vision) and life
benefits substantially similar to those that the Executive was receiving or
entitled to receive immediately prior to termination (or, if greater,
immediately prior to the reduction, termination, or denial described in
Section 5.4(i)(c). Benefits otherwise receivable by the Executive pursuant
to this Section 5.5(i)(d) will be reduced to the extent comparable benefits
are
7
<PAGE>
actually received by or in respect of the Executive from another employer
during the Continuation Period following the Executive's termination, and
any such benefits actually received shall be reported by the Executive or
other recipient to the Company.
(ii) Maintenance of Benefits. During the Continuation Period set
forth in Section 5.5(i)(d), the Company will use its best efforts to maintain in
full force and effect for the continued benefit of the Executive all benefits
referenced therein or will arrange to make available to the Executive benefits
substantially similar to the referenced benefits. Such benefits will be
provided to the Executive on the same terms and conditions (including employee
contributions toward the premium payments) under which the Executive was
entitled to participate immediately prior to the Executive's termination (or, if
more favorable to the Executive, immediately prior to the reduction,
termination, or denial described in Section 5.4(i)(c)). To the extent, however,
the coverage or benefits provided under Section 5.5(i)(d) results in the
Executive or any dependent or beneficiary thereof incurring additional federal,
state or local taxes that would otherwise not have been incurred in connection
with the provision of such coverage or benefits had the Executive's employment
not been terminated, the Company shall promptly pay the Executive, dependent or
beneficiary, as the case may be, on an after-tax basis, an additional payment in
an amount equal to all taxes, including interest and penalties thereon, imposed
as a result of such coverage or benefits.
(iii) Resignation. If at termination the Executive is a member of
the Board or a board of any affiliate of the Company, no benefit will be paid or
made available under Section 5.5(i)(c) or Section 5.5(i)(d) unless the Executive
first executes and delivers to the Company a resignation from membership on the
Board and from membership on the boards of all affiliates of the Company, as the
case may be, such resignation to be effective on receipt of the payment to which
the Executive is entitled under Section 5.5(i)(c).
6. Change in Control Provisions.
----------------------------
6.1 Impact of Change in Control. In the event of a "Change in Control" of
---------------------------
the Company, as defined in Section 6.2, (i) if the Executive's employment is
involuntarily terminated during the Employment Term without Cause after the
Change in Control, (a) the covenants of Sections 9.1, 9.3, and 10 will be
inapplicable to the Executive, and (b) the covenant of Section 9.2 will expire
on the third anniversary of the date of termination of the Executive's
employment, and (ii) the definition of Good Reason, as set forth in Section
5.4(i) above, will be expanded to include the following:
(a) A significant adverse change in the nature or scope of
authorities, powers, functions, responsibilities or duties attached to the
positions held by the Executive from those authorities, powers, functions,
responsibilities or duties which the Executive held immediately prior to
the Change in Control;
(b) A determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has been made in
good
8
<PAGE>
faith and in all events the Executive's determination will be presumed to
have been made in good faith unless otherwise shown by the Company by clear
and convincing evidence) that a change in circumstances has occurred
following the Change in Control, including, without limitation, a change in
the scope of the business or other activities for which the Executive was
responsible immediately prior to the Change in Control, which has rendered
the Executive substantially unable to carry out, has substantially hindered
the Executive's performance of, or has caused the Executive to suffer a
substantial reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to any of the Executive's positions
immediately prior to such Change in Control, which situation is not
remedied within 10 calendar days after written notice to the Company from
the Executive of such determination; or
(c) The relocation of the Company's principal
executive offices and the Executive's principal location of
work is then in such offices, or requirement that the
Executive have the Executive's principal location of work
changed, to any location thereof immediately preceding the
Change in Control or the requirement that the Executive
travel away from the Executive's office in the course of
discharging the Executive's responsibilities or duties
hereunder at least 20% more (in terms of aggregate days in
any calendar year or in any calendar quarter when annualized
for purposes of comparison to any prior year) than was
required of Executive in any of the three full years
immediately prior to such Change in Control without, in
either case, the Executive's prior written consent.
6.2 Definition of Change in Control. For purposes of this Agreement, a
-------------------------------
"Change in Control" will be deemed to occur if at anytime during the Employment
Term any of the following events occur:
(i) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than 65% of the combined voting power
of the then-outstanding securities or interests entitled to vote generally
in the election of directors or other controlling persons (the "Voting
Stock") of such corporation or person immediately after such transaction
are held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or substantially
all of its assets to another corporation or other legal person, and as a
result of such sale or transfer less than 65% of the combined voting power
of the then-outstanding Voting Stock of such corporation or person
immediately after such sale or transfer is held in the aggregate (directly
or through ownership of Voting Stock of the Company or Subsidiary (as
defined herein)) by the holders of the Voting Stock of the Company
immediately prior to such sale or transfer;
9
<PAGE>
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial
owner (as the term "beneficial owner" is defined under rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of
securities representing 20% or more of the combined voting power of the
then-outstanding Voting Stock of the Company;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing
in response to Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Company will occur
in the future pursuant to a then-existing contract or transaction which
when consummated would be a Change in Control determined without regard to
this Section 6.2(iv);
(v) If, during any period of two consecutive years, individuals who
at the beginning of any such period constitute the Directors of the Company
cease for any reason to constitute at least a majority thereof; provided,
--------
however, that for purposes of this Section 6.2(v) each Director who is
-------
first elected, or first nominated for election by the Company's
stockholders, by a vote of at least two-thirds of the Directors of the
Company (or a committee thereof) then still in office who were Directors of
the Company at the beginning of any such period will be deemed to have
been a Director of the Company at the beginning of such period; or
(vi) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing provisions of Sections 6.2(iii) or 6.2(iv) above,
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" shall not be deemed to have occurred for purposes of
Sections 6.2(iii) or 6.2(iv) solely because (A) the Company, (B) an entity in
which the Company directly or indirectly beneficially owns 50% or more of the
outstanding Voting Stock (a "Subsidiary"), or (C) any Company-sponsored employee
stock ownership plan or any other employee benefit plan of the Company or any
Subsidiary either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K, or
Schedule 14A (or any successor schedule, form or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of shares of Voting
Stock, whether in excess of 20% or otherwise, or because the Company reports
that a Change in Control of the Company has occurred or will occur in the future
by reason of such beneficial ownership.
7. Certain Additional Payments by the Company.
------------------------------------------
(i) Anything in this Agreement to the contrary notwithstanding, if it is
determined (as hereafter provided) that any payment or distribution by the
Company or any of its affiliates to or for the benefit of the Executive, whether
paid or payable or distributed or distributable
10
<PAGE>
pursuant to the terms of this Agreement or otherwise pursuant to or by reason of
any other agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar right, or the
lapse or termination of any restriction on or the vesting or exercisability of
any of the foregoing (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Code (or any successor provision thereto) by reason of
being considered "contingent on a change in ownership or control" of the
Company, within the meaning of Section 280G of the Code (or any successor
provision thereto) or to any similar tax imposed by state or local law, or any
interest or penalties with respect to such tax (such tax or taxes, together with
any such interest and penalties, are hereafter collectively referred to as the
"Excise Tax"), then the Executive will be entitled to receive an additional
payment or payments (collectively, a "Gross-Up Payment") in an amount such that,
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. No Gross-Up Payment will be made
with respect to the Excise Tax, if any, attributable to (a) any incentive stock
option, as defined by Section 422 of the Code ("ISO") granted prior to the
execution of this Agreement (unless a comparable Gross-Up Payment has
theretofore been made available with respect to such option), or (b) any stock
appreciation or similar right, whether or not limited, granted in tandem with
any ISO described in clause (a).
(ii) Subject to the provisions of Section 7(vi) hereof, all determinations
required to be made under this Section 7, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a Gross-
Up Payment is required to be paid by the Company to the Executive and the amount
of such Gross-Up Payment, will be made by a nationally recognized firm of
certified public accountants (the "Accounting Firm") selected by the Executive
in his sole discretion. The Executive will direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the Company and
the Executive within 15 calendar days after the Executive's termination, if
applicable, and any other such time or times as may be requested by the Company
or the Executive. If the Accounting Firm determines that any Excise Tax is
payable by the Executive, the Company will pay the required Gross-Up Payment to
the Executive within five business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it will, at the
same time as it makes such determination, furnish the Company and the Executive
an opinion that the Executive has substantial authority not to report any Excise
Tax on the Executive's federal, state, local income or other tax return. Any
determination by the Accounting Firm as to the amount of the Gross-Up Payment
will be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the C ode (or any successor
provision thereto) and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of any determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payment that will not
have been made by the Company have been made (an "Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts or fails to pursue its remedies pursuant to Section 7(vi)
hereof and the Executive thereafter is required to make a payment of any Excise
Tax, the Executive will direct the Accounting
11
<PAGE>
Firm to determine the amount of the Underpayment that has occurred and to submit
its determination and detailed supporting calculations to both the Company and
the Executive as promptly as possible. Any such Underpayment will be promptly
paid by the Company to, or for the benefit of, the Executive within five
business days after receipt of such determination and calculations.
(iii) The Company and the Executive will each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and other cooperate with the Accounting Firm in connection with
the preparation and issuance of the determinations and calculations contemplated
by Section 7(ii) hereof.
(iv) The federal, state and local income or other tax returns filed by
the Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive will make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of the Executive's federal income tax
return as filed with the Internal Revenue Service and corresponding state and
local tax returns, if relevant, as filed with the applicable taxing authority,
and such other documents reasonably requested by the Company, evidencing such
payment. If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive will within five business days pay to the Company the amount of such
reduction.
(v) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Sections
7(ii) and (iv) hereof will be borne by the Company. If such fees and expenses
are initially paid by the Executive, the Company will reimburse the Executive
the full amount of such fees and expenses within five business days after
receipt from the Executive of a statement therefor and reasonable evidence of
his payment thereof.
(vi) The Executive will notify the Company in writing of any claim by the
Internal Revenue Service or other taxing authority that, if successful, would
require the payment by the Company of a Gross-Up Payment. Such notification
will be given as promptly as practicable but no later than 10 business days
after the Executive actually receives notice of such claim and the Executive
will further apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the extent known by
the Executive). The Executive will not pay such claim prior to the earlier of
(a) the expiration of the 30-calendar-day period following the date on which the
Executive gives such notice to the Company, and (b) the date that any payment of
amount with respect to such claim is due. If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive will:
(a) provide the Company with any written records or documents in
the Executive's possession relating to such claim reasonably requested by
the Company;
12
<PAGE>
(b) take such action in connection with contesting such claim as
the Company will reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such
claim by an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(c) cooperate with the Company in good faith in order to
effectively contest such claim; and
(d) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 7(vi), the Company will control all proceedings taken in connection
with the contest of any claim contemplated by this Section 7(vi) and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim (provided, however, that the Executive may participate therein at the
Executive's own cost and expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company will determine;
provided, however, that if the Company directs the Executive to pay the tax
claimed and sue for a refund, the Company will advance the amount of such
payment to the Executive on an interest-free basis and will indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income or
other tax, including interest or penalties with respect thereto, imposed with
respect to such advance; and provided further, however, that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
any such contested claim will be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive will be entitled
to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 7(vi) hereof, the Executive receives any
refund with respect to such claim, the Executive will (subject to the Company's
complying with the requirements of Section 7(vi) hereof) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after any taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7(vi) hereof,
a determination is made that the Executive will not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest
13
<PAGE>
such denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance will be forgiven and will not be required to be
repaid and the amount of such advance will offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid by the Company to the Executive
pursuant to this Section 7.
8. Mitigation and Offset. The payment of severance compensation by the
---------------------
Company to the Executive in accordance with the terms of the Agreement is hereby
acknowledged by the Company to be reasonable, and the Executive is under no
obligation to mitigate damages or the amount of any payment provided for
hereunder by seeking other employment or otherwise; nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the last
sentence of Section 5.5(i)(d).
9. Competition; confidentiality; Nonsolicitation
---------------------------------------------
9.1 (i) Subject to section 6.1(i), the Executive hereby covenants and
agrees that during the employment Term and for one year following the Employment
Term and for one year following the Employment Term he will not, without the
prior written consent of the Company, engage in Competition (as defined below)
with the Company. For purposes of this Agreement, if the Executive takes any of
the following actions he will be engaged in "Competition": engaging in or
carrying on, directly or indirectly, any enterprise, whether as an advisor,
principal, agent, partner, officer, director, employee, stockholder, associate
or consultant to any person, partnership, corporation or any other business
entity, that is principally engaged in the business of the generation,
transmission, or distribution of electricity in States in which the Company or
its affiliates has significant operations; provided, however, that "Competition"
will not include (a) the mere ownership of securities in any enterprise and
exercise of rights appurtenant thereto, or (b) participation in management of
any enterprise or business operation thereof other than in connection with the
competitive operation of such enterprise.
(ii) Subject to Section 6.1(i), the Executive hereby covenants and
agrees that during the Employment Term and for three years following the
Employment Term, he will not assist a third party in preparing or making an
unsolicited bid for the Company, engaging in a proxy contest with the Company,
or engaging in any other similar activity.
9.2 During the Employment Term, the Company agrees that it will disclose
to Executive its confidential or proprietary information (as defined in this
Section 9.2) to the extent necessary for Executive to carry out the Executive's
obligations under this Agreement. Subject to Section 6.1(i), the Executive
hereby covenants and agrees that he will not, without the prior written consent
of the Company, during the Employment Term or thereafter, disclose to any person
not employed by the Company, or use in connection with engaging in Competition
with the Company, any confidential or proprietary information of the Company.
For purposes of this Agreement, the term "confidential or proprietary
information" will include all information of any nature and in any form that is
owned by the Company and that is not publicly available or generally known to
persons engaged in businesses similar or
14
<PAGE>
related to those of the Company. Confidential information will include, without
limitation, the Company's financial matters, customers, employees, industry
contracts, and all other secrets and all other information of a confidential or
proprietary nature. The foregoing obligations imposed by this Section 9.2 will
cease if such confidential or proprietary information will have become, through
no fault of the Executive, generally known to the public or the Executive is
required by law to make disclosure (after giving the Company notice and an
opportunity to contest such requirement).
9.3 Subject to Section 6.1(i), the Executive hereby covenants and agrees
that during the Employment Term and for one year thereafter the Executive will
not attempt to influence, persuade or induce, or assist any other person in so
persuading or inducing, any employee of the Company to give up, or to not
commence, employment or a business relationship with the Company.
10. Post-Termination Assistance. Subject to Section 6.1(i), the Executive
---------------------------
agrees that after the Executive's employment with the Company has terminated,
the Executive will provide, upon reasonable notice, such information and
assistance to the Company as may reasonably be requested by the Company in
connection with any litigation in which it or any of its affiliates is or may
become a party; provided, however, that the Company agrees to reimburse the
Executive for any related out-of-pocket expenses, including travel expenses.
11. Survival. The expiration or termination of the Employment Term will not
--------
impair the rights or obligations of any party hereto that accrue hereunder prior
to such expiration or termination, except to the extent specifically stated
herein. In addition to the foregoing, the Executive's covenants contained in
Sections 9.12, 9.2, 9.3, and 10, and the Company's obligations under Sections 5,
7, and 12.1 will survive the expiration or termination of employment for any
reason whatsoever.
12. Miscellaneous Provisions.
------------------------
12.1 Legal Fees and Expenses. It is the intent of the Company that the
-----------------------
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation, the initiation or defense of any litigation or other legal
actions, whether by or against the Company or any director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and
15
<PAGE>
such counsel, the Company irrevocably consents to the Executive's entering into
an attorney-client relationship with such counsel, and in that connection the
Company and the Executive agree that a confidential relationship shall exist
between the Executive and such counsel. Without respect to whether the Executive
prevails, in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by the Executive in connection
with any of the foregoing.
12.2 Successors and Binding Agreement.
--------------------------------
(i) The company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization, operation of
law or otherwise) to all or substantially all of the business or assets of
the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would be required to perform
if no such succession had taken place. This Agreement will be binding upon
and inure to the benefit of the Company and any successor to the Company,
including without limitation any persons acquiring directly or indirectly
all or substantially all of the business or assets of the Company where by
purchase, merger, consolidation, reorganization, operation of law or
otherwise (and such successor shall thereafter be deemed the "Company" for
the purposes of this Agreement), but will not otherwise be assignable,
transferable or delegable by the Company.
(ii) This Agreement will inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(iii) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in Sections 12.2(i) and 12.2(ii). Without limiting the
generality or effect of the foregoing, the Executive's right to receive
payments hereunder will not be assignable, transferable or delegable,
whether by pledge, creation of a security interest, or otherwise, other
than by a transfer by Executive's will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer
contrary to this Section 12.2(iii), the Company shall have no liability to
pay any amount so attempted to be assigned, transferred or delegated.
12.3 Governing Law. This Agreement will be governed, construed,
-------------
interpreted and enforced in accordance with the substantive laws of the State of
Nevada, without regard to conflicts of law principles.
12.4 Withholding of Taxes. The Company may withhold from any amounts
--------------------
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
16
<PAGE>
12.5 Severability. Any provision of this Agreement that is deemed invalid,
------------
illegal or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provisions of this Agreement
invalid, illegal, or unenforceable in any other jurisdiction. If any covenant
should be deemed invalid, illegal or unenforceable because its scope is
considered excessive, such covenant will be modified so that the scope of the
covenant is reduced only to the minimum extent necessary to render the modified
covenant valid, legal and enforceable.
12.6 Notices. For all purposes of this Agreement, all communications,
-------
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive offices and to the Executive at his
principal residence, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of changes
of address will be effective only upon receipt.
(i) To The Company. If to the Company, addressed to the attention of
--------------
the Secretary at 6226 West Sahara Avenue, Las Vegas, Nevada 89151.
(ii) To The Executive. If to the Executive, to him at 8705 Cremona
----------------
Drive, Las Vegas, Nevada 89117.
12.7 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which will be deemed to be an original, but all of which together will
constitute one and the same Agreement.
12.8 Entire Agreement. The terms of this Agreement are intended by the
----------------
parties to be the final expression of their agreement with respect to the
Executive's employment by the Company and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement will constitute the complete and exclusive statement of its terms and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative or other legal proceeding to vary the terms of this Agreement.
12.9 Amendments; Waivers. This Agreement may not be modified, amended, or
-------------------
terminated except by an instrument in writing, signed by the Executive and the
Company. Failure on the part of either party to complain of any action or
omission, breach or default on the part of the other party, no matter how long
the same may continue, will never be deemed to be a waiver of any rights or
remedies hereunder, at law or in equity. The Executive or the Company may waive
compliance by the other party with any provision of this Agreement that such
other party was or is obligated to comply with or perform only through an
executed
17
<PAGE>
writing; provided, however, that such waiver will not operate as a waiver of, or
estoppel with respect to, any other or subsequent failure.
12.10 No Inconsistent Actions. The parties will not voluntarily
-----------------------
undertake or fail to undertake any action or course of action that is
inconsistent with the provisions or essential intent of this Agreement.
Furthermore, it is the intent of the parties hereto to act in a fair and
reasonable manner with respect to the interpretation and application of the
provisions of this Agreement.
12.11 Headings and Section References. The headings used in this
-------------------------------
Agreement are intended for convenience or reference only and will not in any
manner amplify, limit, modify or otherwise be used in the construction or
interpretation of any provision of this Agreement. All section references are
to sections of this Agreement, unless otherwise noted.
12.12 Interest. Without limiting the rights of the Executive at law or in
--------
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest equal
to the so-called composite "prime rate" as quoted from time to time during the
relevant period in the Northeast Edition of The Wall Street Journal. Such
-----------------------
interest will be payable as it accrues on demand. Any change in such prime rate
will be effective on and as of the date of such change.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written, but effective as provided in Section 1.2.
Steven W. Rigazio
--------------------------------
Steven W. Rigazio
NEVADA POWER COMPANY,
a Nevada corporation
Charles A. Lenzie
--------------------------------
Charles A. Lenzie
18
<PAGE>
EXHIBIT 10(E)
RETENTION AGREEMENT
PARTIES
The parties to this Retention Agreement ("Agreement") are Nevada Power Company
and David G. Barneby.
BASIS
-----
(a) Employee currently holds the position of Vice President, Power Delivery,
with Company.
(b) Company is currently in the process of divesting itself of all or a portion
of its generation facilities ("Divestiture").
(c) Company and Employee have executed the Original Agreement. Company is
currently in the process of merging with Sierra Pacific Resources
("Merger") which is a "change in control" as defined in the Original
Agreement. Pursuant to the terms of the Original Agreement and upon
completion of the Merger, Employee will be entitled to receive the
involuntary termination benefits contained in Section 5 of the Original
Agreement.
(d) Company and Employee desire to have Employee remain an employee of
Successor Company under the terms of this Agreement. Therefore, upon
completion of the Merger, this Agreement is intended to replace the
Original Agreement and the Original Agreement is intended to become void
and unenforceable. The benefits contained in this Agreement are in addition
to Employee's salary, bonuses, SERP, and all other benefits which Employee
is currently entitled to receive as a result of his employment at Company
and which will not be reduced in aggregate value from current levels during
the term of this Agreement.
(e) Employee may have access to Confidential Information. In addition, Employee
may develop on behalf of Company an acquaintance with Company's customers
and prospective customers. Employee will occupy a position of trust and
confidence with respect to such customers and such Confidential
Information. Employee understands that any entrusting of Confidential
Information and/or customer contacts or relationships to Employee by
Company is done in reliance on a confidential relationship arising out of
employment with Company. Employee understands that Confidential Information
and customer contracts that Employee may acquire or may have access to is
of great value to Company.
1
<PAGE>
(f) The consideration for the terms and conditions of this Agreement is
adequate and is fully set forth in this Agreement.
TERMS OF AGREEMENT
------------------
1. Defined Terms
------------------
1.1 Company means Nevada Power and any successor organization.
-------
1.2 Effective Date means the date this Agreement becomes effective. The
--------------
Effective Date shall be the date that both the Company and Employee
have signed this Agreement and the Merger has been completed.
1.3 Employee means David G. Barneby.
--------
1.4 Original Agreement means the Employment Agreement dated on or about
------------------
March 13, 1998, between Company and Employee.
1.5 Items means documents, reports, drawings, diagrams, summaries,
-----
photographs, designs, specifications, formulae, plans, samples,
models, research and development information, prototypes, tools,
equipment, proposals, marketing and sales plans, customer information,
customer lists, regulatory files, financial data, costs, pricing
information, supplier information, written, printed or graphic matter,
or other information and materials that concern Company's business and
that come into Employee's possession or about which Employee has
knowledge by reason of employment with Company.
1.6 Program means the Sierra Pacific Resources 1999 Merger Severance
-------
Program which Company is offering certain employees, including
Employee and which by reference is made a part of this Agreement.
1.7 Termination or Terminated means the termination of Employee's status
-------------------------
as an active employee of Company by either Company or Employee for any
reason. If Employee becomes eligible for benefits under the Company's
Long-Term Disability Plan prior to July 31, 2002, then Employee shall
be entitled to declare his employment terminated for purposes of this
Agreement at his option.
2. Benefits to Employee
-------------------------
2.1 Company shall pay to Employee the following amounts. The principal
amount is economically similar to the benefits to which Employee would
be entitled to receive after a voluntary termination under the
Original Agreement.
2
<PAGE>
These amounts shall be paid to Employee under the following schedule,
less withholding, assessments and authorized deductions:
<TABLE>
<CAPTION>
Payment Date Principal Interest Payment
------------ --------- -------- -------
Amount
------
<S> <C> <C> <C>
Within 15 days after the
close of the Merger 125,000 0 125,000
October 1, 1999 29,300 14,920 44,220
January 1, 2000 29,300 13,750 43,050
April 1, 2000 29,300 12,580 41,880
July 1, 2000 29,300 11,400 40,700
October 1, 2000 29,300 10,230 39,530
January 1, 2001 29,300 9,060 38,360
April 1, 2001 29,300 7,890 37,190
July 1, 2001 29,300 6,720 36,020
October 1, 2001 29,300 5,540 36,020
January 1, 2002 29,300 4,370 33,670
July 31, 2002 80,000 6,430 86,430
TOTALS 498.000 102,890 600,890
</TABLE>
If Employee's employment is Terminated, then Employee shall be paid
the remaining unpaid principal amount and interest prorated to the
date of termination within 30 days of Employee's Termination. If
Employee dies prior to July 31, 2002, then Employee's estate shall be
paid the remaining unpaid principal amount and interest prorated to
the date of death within 30 days of Employee's death.
The above payments will not be recognized as covered pay under any
employee benefit plan sponsored by the Company except for the Deferred
Compensation Program.
2.2 Employee shall be paid for any accrued but unused vacation as defined
under Company's vacation policy then in effect.
2.3 If Employee's employment is Terminated and/or if Employee retires,
then Employee shall be entitled to receive an amount which is
economically similar to the following:
2.3.1 The Program includes an enhancement to the Nevada Power Company
Retirement Plan ("Retirement Plan") ("Enhanced Lump Sum"). The
Enhanced Lump Sum is based upon the following calculations and
conditions:
(1) If Employee is under the age of 55, then Employee shall
receive the present value of an Early Retirement Benefit
commencing at age 55, calculated using the Early Retirement
3
<PAGE>
Fact (i.e., 65%) that applies to employees who retire at
age 55. If Employee is over the age of 55, then at his
actual age under the terms of the plan; and
(2) The dollar limitation in Section 5.2(c) of the Retirement
Plan will not apply, however, all other restrictions
required by federal law (e.g., Internal Revenue Code (S)415
limits and spousal waivers) will apply.
Company shall maintain a life insurance policy (either Company
owned or other policy) in an amount no less than the then
current value of the Enhanced Lump Sum and payable to a
beneficiary named by Employee. This policy shall remain in
effect so long as Employee is an active employee of Company.
2.3.2 Company shall add a total of five years to Employee's age or
years of service or a combination thereof in order to qualify
for, or improve, Employee" retiree medical benefits contained
in Company" health care plans.
Employee understands and agrees that the Retirement Plan is a
"qualified" plan and offering Employee the Enhanced Lump Sum benefit
set forth in Section 2.3.1 above may violate one or more sections of
the Internal Revenue Code and therefore, the Retirement Plan may not
be able to pay this benefit to Employee. In such case, Company and
Employee will work together to reach an agreement as to a cash payment
from general assets that produces a value comparable to the lump sum
benefit that could not be paid from the qualified plan. Such value
shall factor in the time value of tax consequences and shall be offset
by the value of the payments expected to be made from the qualified
plan.
2.4 For a period of 24 months following Termination, the Company will
arrange to provide the Employee with health (including
medical/hospital, dental and vision) and life benefits substantially
similar to those that Employee was receiving or entitled to receive
immediately prior to Termination. These benefits will be reduced to
the extent comparable benefits are actually received by or in respect
of Employee from another employer during the 24-month period, and any
such benefits actually received shall be reported by Employee or other
recipient to the Company. During the 24-month period, the Company will
use its best efforts to maintain in full force and effect for the
continued benefit of Employee all benefits referenced herein or will
arrange to make available to Employee benefits substantially similar
to the referenced benefits. Such benefits will be provided to Employee
on the same terms and conditions (including employee contributions
toward the premium payments) under which Employee was entitled to
participate immediately prior to Termination. To the extent the
coverage or benefits provided herein
4
<PAGE>
results in Employee or any dependent or beneficiary thereof incurring
additional federal, state or local taxes that would otherwise not have
been incurred in connection with the provision of such coverage of
benefits had Employee's employment not been terminated, the Company
shall promptly pay Employee, dependent or beneficiary, as the case may
be, on an after-tax basis, an additional payment, in an amount equal
to all taxes, including interest and penalties thereon, imposed as the
result of such coverage or benefits.
2.5 Anything in this Agreement to the contrary notwithstanding, if it is
determined (as hereafter provided) that any payment or distribution by
the Company or any of its affiliates to or for the benefit of
Employee, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise pursuant to or by
reason of any other agreement, policy, plan, program or arrangement,
including without limitation any stock option, stock appreciation
right or similar right, or the lapse or termination of any restriction
on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999
of the Code (or any successor provision thereto) by reason of being
considered "contingent on a change in ownership or control" of the
Company, within the meaning of Section 280G of the Code (or any
successor provision thereto) or to any similar tax imposed by state or
local law, or any interest or penalties with respect to such tax (such
tax or taxes, together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax"), then Employee
will be entitled to receive an additional payment or payments
(collectively, a "Gross-Up Payment") in an amount such that, after
payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise
Tax, imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. No Gross-Up Payment will be made with respect to the
Excise Tax, if any, attributable to (a) any incentive stock option, as
defined by Section 422 of the Code ("ISO") granted prior to the
execution of this Agreement (unless a comparable Gross-Up Payment has
theretofore been made available with respect to such option), or (b)
any stock appreciation or similar right, whether or not limited,
granted in tandem with any ISO. All determinations required to be
made under this Section, including whether an Excise Tax is payable by
the Executive and the amount of such Excise Tax and whether a Gross-Up
Payment is required to be paid by the Company to the Executive and the
amount of such Gross-Up Payment, will be made by a nationally
recognized firm of certified public accountants (the "Accounting
Firm") selected by Employee in his sole discretion. Employee will
direct the Accounting Firm to submit its determination and detailed
supporting calculations to both the Company and Employee within 15
calendar days after Termination, if applicable, and any other such
time or times as may be requested by the Company or employee. If the
Accounting Firm determines that any Excise Tax is payable by Employee,
then the
5
<PAGE>
Company will pay the required Gross-Up Payment to the Executive within
five business days after receipt of such determination and calculation
with respect to any Payment to the Executive. If the Accounting Firm
determines that no Excise Tax is payable by Employee, then it will, at
the same as it makes such determination, furnish the Company and
Employee an opinion that Employee has substantial authority not to
report any Excise Tax on Employee's federal income or other tax
return. Any determination by the Accounting Firm as to the amount of
the Gross-Up Payment will be binding upon the Company and Employee. As
a result of the uncertainty in the application of Section 4999 of the
Code (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the
time of any determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will have not been made by the
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. If the Company exhausts or
fails to pursue its remedies contained herein and Employee is required
to make a payment of any Excise Tax, then Employee will direct the
Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting
calculations to both the Company and Employee as promptly as possible.
Any such Underpayment will be promptly paid by the Company to, or for
the benefit of, Employee within five business days after receipt of
such determination and calculations. The Company and Employee will
each provide the Accounting Firm access to and copies of any books,
records and documents in the possession of the Company or Employee, as
the case may be, reasonably requested by the Accounting Firm, and
otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determinations and calculations
contemplated by this Section. The federal income or other tax returns
filed by Employee will be prepared and filed on a consistent basis
with the determination of the Accounting Firm with respect to the
Excise Tax payable by Employee. Employee will make proper payment of
the amount of any Excise Tax, and at the request of the Company,
provide to the Company true and correct copies (with any amendments)
of Employee's federal income tax return as filed with the Internal
Revenue Service and corresponding other tax returns, if relevant, as
filed with the applicable taxing authority, and such other documents
reasonably requested by the Company, evidencing such payment. If prior
to the filing of the Employee's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting
Firm determines that the amount of the Gross-Up Payment should be
reduced, Employee will within five business days pay to the Company
the amount of such reduction. The fees and expenses of the Accounting
Firm for its services in connection with the determinations and
calculations contemplated by this Section will be borne by the
Company. If such fees and expenses are initially paid by Employee,
then the Company will reimburse employee the full amount of such fees
and expenses within five business days after receipt from Employee of
a statement therefor and reasonable evidence of his payment thereof.
Employee will
6
<PAGE>
notify the Company in writing of any claim by the Internal Revenue
Service or other taxing authority that, if successful, would require
the payment by the Company of a Gross-Up Payment. Such notification
will be given as promptly as practicable but no later than 10 business
days after Employee actually receives notice of such claim and
Employee will further apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid (in each
case, to the extent know by Employee). Employee will not pay such
claim prior to the earlier of (a) the expiration of the 30-calendar-
day period following the date on which Employee gives such notice to
the Company, and (b) the date that any payment of amount with respect
to such claim is due. If the Company notifies Employee in writing
prior to the expiration of such period that it desires to contest such
claim, Employee will:
(1) Provide the Company with any written records or documents in
Employee's possession relating to such claim reasonably requested
by the Company;
(2) take such action in connection with contesting such claim as the
Company will reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claims by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(3) cooperate with the Company in good faith in order to effectively
contest such claim; and
(4) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company will bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest and will indemnify and hold harmless
Employee, on an after-tax basis, for and against any Excise Tax or
income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. The Company will control all proceedings taken in
connection with the contest on any claim contemplated by this Section,
the contest of any claim contemplated by this Section and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such claim (provided, however, that Employee may
participate therein at his own cost and expense) and may, at its
option, either direct Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Employee
agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as the Company will determine; provided,
however, that if the Company
7
<PAGE>
directs Employee to pay the tax claimed and sue for a refund, the
Company will advance the amount of such payment to Employee on an
interest-free basis and will indemnify and hold Employee harmless, on
an after-tax basis, from any Excise Tax or income or other tax,
including interest or penalties with respect thereto, imposed with
respect to such advance; and provided further, however, that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of Employee with respect to which the contested
amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of any such contested claim
will be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee will be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority. If, after the receipt
by Employee of an amount advanced by the Company pursuant to this
Section, Employee receives any refund with respect to such claim, then
Employee will (subject to the Company's complying with the
requirements of this Section) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon
after any taxes applicable thereto). If, after the receipt by Employee
of an amount advanced by the Company pursuant to this Section, a
determination is made that Employee will not be entitled to any refund
with respect to such claim and the Company does not notify Employee in
writing of its intent to contest such denial or refund prior to the
expiration of 30 calendar days after such determination, then such
advance will be forgiven and will not be required to be repaid and the
amount of such advance will offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid by the Company to Employee
pursuant to this Section.
3. Company Property
---------------------
3.1 Upon Termination, Employee shall deliver to Company all Items in
Employee's possession or under Employee's control which are owned by
Company (including all copies), and Employee shall retain no copies
thereof.
4. Confidentiality
4.1 Employee agrees that he will not, without prior written consent of the
Company, during the time of employment with Company or thereafter
disclose to any person not employed by the Company, or use in
connection with engaging in Competition with the Company, any
confidential or proprietary information of the Company. For purposes
of this Agreement, the term "confidential or proprietary information"
will include all information of any nature and in any form that is
owned by the Company and that is not publicly available or generally
known to persons engaged in businesses similar or related to those of
the Company. Confidential Information will include, without
limitation, the Company's financial matters, customers, employees,
industry contracts, and all other secrets and all other information
8
<PAGE>
of a confidential or proprietary nature. The foregoing obligations
will cease if such confidential or proprietary information will have
become, through no fault of the Executive, generally known to the
public or the Executive is required by law to make disclosure (after
giving the Company notice and an opportunity to contest such
requirement).
5. Non-Competition
5.1 Employee agrees that during the time of employment with Company and
for one year thereafter, he will not, without the prior written
consent of the company, engage in Competition (as defined below) with
the Company. For purposes of this Agreement, if the Executive takes
any of the following actions he will be engaged in "Competition":
engaging in or carrying on, directly or indirectly, any enterprise,
whether as an advisor, principal agent, partner, officer, director,
employee, stockholder, associate or consultant to any person,
partnership, corporation, or any other business entity that is
principally engaged in the business of the generation, transmission,
or distribution of electricity in states in which the Company or its
affiliates have significant operations; provided, however, that
"Competition" will not included (a) the mere ownership of securities
in any enterprise and exercise of rights appurtenant thereto, or (b)
participation in management of any enterprise or business operation
thereof other than in connection with the competitive operation of
such enterprise.
5.2 Employee agrees that during the time of employment with Company and
for three years thereafter, he will not assist a third party in
preparing or making an unsolicited bid for the Company, engage in a
proxy contest with the Company, or engage in any other similar
activity.
5.3 Employee agrees that during the time of employment with Company and
for one year thereafter, he will not attempt to influence, persuade or
induce, or assist any other person in so persuading or inducing, any
employee of the Company to give up, or to not commence, employment or
a business relationship with the Company.
5.4 Employee agrees that the restrictions set forth in paragraphs 5.1,
5.2, and 5.3 are fair and reasonable and are reasonably required for
the protection of the interests of Company. Employee agrees that
compliance with the provisions of paragraphs 5.1, 5.2 and 5.3 will not
cause Employee undue hardship nor unreasonably interfere with
Employee's ability to earn a livelihood.
6. Miscellaneous Provisions
6.1 Agreement is Confidential: Unless and until the terms of this
-------------------------
Agreement, and the amount of any payment eligible to be paid or
actually paid under this Agreement, are disclosed in writing to the
public by Company pursuant to any
9
<PAGE>
applicable legal duty to disclose such information, it shall be a
condition of eligibility to receive any payment pursuant to this
Agreement that Employee hold the terms of this Agreement and the
amount of any payment hereunder in strict confidence. Employee may
disclose such information on a confidential basis to Employee's spouse
(if any), and to any financial counselor, tax advisor or legal counsel
retained by Employee.
6.2 Post-termination Assistance: Employee agrees that after the Employee's
---------------------------
employment with the Company has terminated the Executive will provide,
upon reasonable notice, such information and assistance to the Company
as may reasonably be requested by the Company in connection with any
matter and the Company agrees to reimburse Employee for any out-of-
pocket expenses, including travel expense.
6.3 Legal Fees and Expenses: It is the intent of the Company that Employee
-----------------------
not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of
Employee's rights under this Agreement by litigation or otherwise
because the cost and expense thereof would substantially detract from
the benefits intended to be extended to the Executive hereunder.
Accordingly, if it should appear to Employee that the Company has
failed to comply with any of its obligations under this Agreement or
in the event that the Company or any other person takes or threatens
to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to
deny, or to recover from Employee the benefits provided or intended to
be provided to Employee hereunder, the Company irrevocably authorizes
the Employee to retain counsel of Employee's choice, at the expense of
the Company as hereafter provided, to advise and represent the
Executive in connection with any such interpretation, enforcement or
defense, including without limitation the initiation or defense of any
litigation or other legal action, whether by or against the Company or
any director, officer, stockholder, or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing or
prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to Employee's entering into
an attorney-client relationship with such counsel, and in that
connection the Company and the Employee agree that a confidential
relationship shall exist between Employee and such counsel. Without
respect to whether Employee prevails, in whole or in part, in
connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' and related
fees and expenses incurred by Employee in connection with any of the
foregoing.
6.4 Successors and Binding Agreement: (i) The Company will require any
--------------------------------
successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization, operation of law or otherwise) to all
or substantially all of the business or assets of the Company, by
agreement in form and substance
10
<PAGE>
satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken
place. This Agreement will be binding upon and inure to the benefit of
the Company and any successor to the Company, including without
limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by
purchase, merger, consolidation, reorganization, operation of law or
otherwise (and such successor shall thereafter be deemed the "Company"
for the purposes of this Agreement), but will not otherwise be
assignable, transferable or delegable by the Company. (ii) This
Agreement will inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees. (iii)
This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder. Without
limiting the generality or effect of the foregoing, the Executive's
right to receive payments hereunder will not be assignable,
transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive'' will
or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section, the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
6.5 Not A Restraint on the Business Discretion of Company: Nothing in this
-----------------------------------------------------
Agreement is intended to limit the discretion of Company to take any
action with regard to the Divestiture process which the Company may
consider appropriate. This Agreement is not a contract to retain
Employee in the employment of Company for any prescribed period of
time.
6.6 Waiver: The waiver by either party to this Agreement of a violation by
------
the other party shall not be construed as a wavier of any subsequent
violation.
6.7 Jurisdiction and Venue: This Agreement shall be construed and enforced
----------------------
according to the laws of the State of Nevada to the extent not
preempted by the federal laws of the United States of America. All
disputes arising out of this Agreement shall be subject to the
exclusive jurisdiction and venue of the state and federal courts
located in Clark County, Nevada.
6.8 Withholding of Taxes: The Company may withhold from any amounts
--------------------
payable under this Agreement all federal, state, city or other taxes
as the Company is required to withhold pursuant to any law or
government regulation or ruling.
6.9 Severability: Any provision of this Agreement that is deemed invalid,
------------
illegal or unenforceable in any jurisdiction will, as to that
jurisdiction be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting
11
<PAGE>
in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provisions of this Agreement invalid,
illegal, or unenforceable in any other jurisdiction. If any covenant
should be deemed invalid, illegal or unenforceable because its scope
is considered excessive, such covenant will be modified so that the
scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable.
6.10 Notices: All notices, consents, requests or approvals ("Notices"),
-------
required or permitted to be given pursuant to this Agreement, shall be
in writing and will be deemed to have been duly given when hand
delivered or dispatched by electronic facsimile transmission (with
receipt thereof confirmed), or five business days after having been
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as
Federal Express or UPC, at the following address, or to such other
address as any party may have furnished to the other in writing and in
accordance herewith, except that notices of changes of address will be
effective upon receipt. If to the Company, then addressed to the
attention of the CEO at 6226 West Sahara Avenue, Las Vegas, Nevada
89146. If to the Executive, then address to him at 6180 Madre Mesa
Dr., Las Vegas, Nevada 89108.
6.11 Entire Agreement: The terms of this Agreement are intended by the
----------------
parties to be the final expression of their agreement with respect to
the subject matter of this Agreement. The parties further intend that
this Agreement will constitute the complete and exhaustive statement
of its terms and that no extrinsic evidence whatsoever may be
introduced in any judicial, administrative or other legal proceeding
to vary the terms of this Agreement.
6.12 Amendments; Waivers: This Agreement may not be modified, amended, or
-------------------
terminated except by an instrument in writing, signed by Employee and
the Company. Failure on the part of either party to complain of any
action or omission, breach or default on the party of the other party,
no matter how long the same may continue, will never be deemed to be a
waiver of any rights or remedies hereunder, at law or in equity.
Employee or the Company may waive compliance by the other party with
any provision of this Agreement that such other party was or is
obligated to comply with or perform only through an executed writing;
provided, however, that such waiver will not operate as a waiver of,
or estoppel with respect to, any other or subsequent failure.
6.13 No Inconsistent Actions: The parties will not voluntarily undertake or
-----------------------
fail to undertake any action or course of action that is inconsistent
with the provisions or essential intent of this Agreement.
Furthermore, it is the intent of the parties hereto to act in a fair
and reasonable manner with respect to the interpretation and
application of the provisions of this Agreement.
12
<PAGE>
6.14 Headings and Section References: The headings used in this Agreement
-------------------------------
are intended for convenience or reference only and will not in any
manner amplify, limit, modify or otherwise be used in the construction
or interpretation of any provision of this Agreement. All section
references are to sections of this Agreement, unless otherwise noted.
6.15 Interest: Without limiting the rights of Employee at law or in equity,
--------
if the Company fails to make any payment or provide any benefit
required to be made or provided hereunder on a timely basis, the
Company will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime
rate" as quoted from time to time during the relevant period in the
Northeast Edition of The Wall Street Journal. Such interest will be
-----------------------
payable as it accrues on demand. Any change in such prime rate will be
effective on and as of the date of such change.
6.16 Review of Agreement: Employee acknowledges that Employee had
-------------------
sufficient opportunity to review this Agreement with an attorney or,
if Employee did not do so, it is because Employee read and understands
this Agreement and did not believe that legal advice was necessary.
Employee agrees that the restrictions contained in this Agreement are
fair and appropriate under the circumstances.
6.17 Effective Date: This Agreement shall become effective on the Effective
--------------
Date. On the Effective Date, the Original Agreement shall become void
and unenforceable.
NEVADA POWER COMPANY EMPLOYEE
By_________________________________ __________________________
Chief Executive Officer Date Signature Date
13
<PAGE>
Exhibit (12)(A) to the Sierra Pacific Resources 1999 Form 10-K
SIERRA PACIFIC RESOURCES
CALCULATION OF PRE-TAX INTEREST COVERAGES
(dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Total Income Before
Interest Charges $171,016 $151,619 $140,215
Add: Income Taxes:
Included in operating expense 26,086 42,949 43,478
Included in other income - net 1,272 2,522 1,747
Allowance for Borrowed Funds
Used During Construction 8,127 6,080 2,579
-------- -------- --------
Total Numerator $206,501 $203,170 $188,019
======== ======== ========
Interest Charges:
Long-Term Debt $ 81,731 $ 56,995 $ 50,791
Other 26,356 6,018 1,531
-------- -------- --------
Total Denominator $108,087 $ 63,013 $ 52,322
======== ======== ========
Pre-Tax Interest Coverage 1.91 3.22 3.59
======== ======== ========
</TABLE>
<PAGE>
Exhibit (12)(B) to the Sierra Pacific Resources 1999 Form 10-K
NEVADA POWER COMPANY
CALCULATION OF PRE-TAX INTEREST COVERAGES
(dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Total Income Before
Interest Charges $ 131,930 $ 151,619 $ 140,215
Less: Equity in Earnings of
Sierra Pacific Resources (13,058) - -
Add: Income Taxes:
Included in operating expense 19,943 42,949 43,478
Included in other income - net 1,272 2,522 1,747
Allowance for Borrowed Funds
Used During Construction 8,356 6,080 2,579
--------- --------- ---------
Total Numerator $ 148,443 $ 203,170 $ 188,019
========= ========= =========
Interest Charges:
Long-Term Debt $ 64,454 $ 56,995 $ 50,791
Other 8,815 6,018 1,531
--------- --------- ---------
Total Denominator $ 73,269 $ 63,013 $ 52,322
========= ========= =========
Pre-Tax Interest Coverage 2.03 3.22 3.59
========= ========= =========
</TABLE>
<PAGE>
EXHIBIT 23(A)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-92651 of Sierra Pacific Resources on Form S-8, Registration Statement No.
333-80149 of Sierra Pacific Resources on Form S-3 and Registration Statement No.
333-77523 of Sierra Pacific Resources on Form S-3 of our reports dated March 21,
2000, appearing in the Annual Report on Form 10-K of Sierra Pacific Resources
for the year ended December 31, 1999.
DELOITTE & TOUCHE LLC
Reno, Nevada
March 24, 2000
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SPR'S
FINANCIAL RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000741508
<NAME> SIERRA PACIFIC RESOURCES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,073,529
<OTHER-PROPERTY-AND-INVEST> 105,880
<TOTAL-CURRENT-ASSETS> 316,269
<TOTAL-DEFERRED-CHARGES> 752,008
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5,247,686
<COMMON> 78,414
<CAPITAL-SURPLUS-PAID-IN> 1,293,990
<RETAINED-EARNINGS> 104,725
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,477,129
0
50,000
<LONG-TERM-DEBT-NET> 1,474,203
<SHORT-TERM-NOTES> 100,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 654,979
<LONG-TERM-DEBT-CURRENT-PORT> 198,126
0
<CAPITAL-LEASE-OBLIGATIONS> 82,424
<LEASES-CURRENT> 4,583
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,206,242
<TOT-CAPITALIZATION-AND-LIAB> 5,247,686
<GROSS-OPERATING-REVENUE> 1,309,131
<INCOME-TAX-EXPENSE> 26,086
<OTHER-OPERATING-EXPENSES> 1,111,887
<TOTAL-OPERATING-EXPENSES> 1,137,973
<OPERATING-INCOME-LOSS> 171,158
<OTHER-INCOME-NET> (142)
<INCOME-BEFORE-INTEREST-EXPEN> 171,016
<TOTAL-INTEREST-EXPENSE> 99,960
<NET-INCOME> 71,056
2,396
<EARNINGS-AVAILABLE-FOR-COMM> 51,750
<COMMON-STOCK-DIVIDENDS> 73,514
<TOTAL-INTEREST-ON-BONDS> 81,731
<CASH-FLOW-OPERATIONS> 211,089
<EPS-BASIC> .83
<EPS-DILUTED> .83
</TABLE>
