<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1998.
REGISTRATION NO. 333-49541
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NIAGARA MOHAWK POWER CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 15-0265555
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
------------------------------
300 ERIE BOULEVARD WEST
SYRACUSE, NEW YORK 13202
(315) 474-1511
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
WILLIAM F. EDWARDS
NIAGARA MOHAWK POWER CORPORATION
SENIOR VICE PRESIDENT &
CHIEF FINANCIAL OFFICER
300 ERIE BOULEVARD WEST
SYRACUSE, NEW YORK 13202
(315) 474-1511
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT E. BUCKHOLZ, JR., ESQ. DANIEL G. KELLY, JR., ESQ.
SULLIVAN & CROMWELL SIDLEY & AUSTIN
125 BROAD STREET 875 THIRD AVENUE
NEW YORK, NEW YORK 10004 NEW YORK, NEW YORK 10022
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
/ / __________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- - --------------------------------------------------------------------------------
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 17, 1998
[LOGO]
PROSPECTUS
June , 1998
$3,450,000,000
NIAGARA MOHAWK POWER CORPORATION
<TABLE>
<C> <S>
$300,000,000 % SERIES A SENIOR NOTES DUE 1999 $400,000,000 % SERIES E SENIOR NOTES DUE 2003
$450,000,000 % SERIES B SENIOR NOTES DUE 2000 $400,000,000 % SERIES F SENIOR NOTES DUE 2005
$400,000,000 % SERIES C SENIOR NOTES DUE 2001 $600,000,000 % SERIES G SENIOR NOTES DUE 2008
$400,000,000 % SERIES D SENIOR NOTES DUE 2002 $500,000,000 % SENIOR DISCOUNT NOTES DUE 2010
</TABLE>
The Series A through G Senior Notes and the Senior Discount Notes
(collectively, the "Notes") are being offered (the "Offering") by Niagara Mohawk
Power Corporation (the "Company"). Interest on the Series A, C and E Notes will
be payable semi-annually in arrears on January 1 and July 1 of each year,
commencing on January 1, 1999. Interest on the Series B, D, F and G Notes will
be payable semi-annually in arrears on April 1 and October 1 of each year,
commencing on October 1, 1998. The Series A through G Notes will be redeemable
at the option of the Company, in whole or in part, at any time, at a redemption
price equal to 100% of the principal amount thereof plus accrued interest
thereon, if any, plus the Make-Whole Premium (as defined). In addition, the
Company may, at its option, by delivering a notice of redemption at any time
during the period from April 1, 1999 through December 31, 2000 use the cash
proceeds from any sale or sales of certain assets to redeem up to $500.0 million
aggregate principal amount of the Series B through F Notes on a pro rata basis
(by series) at a redemption price equal to 100% of the principal amount thereof
plus accrued interest thereon, if any, to the date of redemption (the "Special
Redemption"). See "Description of Notes--Special Redemption."
The Senior Discount Notes will be issued in such aggregate principal amount
and bear such rate of interest as will generate gross proceeds of approximately
$ million and will be issued at a substantial discount from their principal
amount. See "Description of Notes" and "Certain United States Federal Income Tax
Considerations." The Senior Discount Notes will accrete at a rate of %,
compounded semi-annually, to an aggregate principal amount at maturity of $500.0
million by July 1, 2003. Thereafter, the Senior Discount Notes will accrue cash
interest at a rate of % per annum, payable semi-annually on January 1 and July
1 of each year, commencing January 1, 2004. The Senior Discount Notes will be
redeemable at the option of the Company, in whole or in part, at any time prior
to July 1, 2003, at a redemption price equal to 100% of the Accreted Value (as
defined) thereof plus the Make-Whole Premium, and at any time on or after July
1, 2003, at the redemption prices set forth herein, plus accrued interest, if
any, to the date of redemption. See "Description of Notes-- Optional
Redemption."
Upon the occurrence of a Change of Control Triggering Event (as defined),
the holders of the Notes will have the right to require the Company to
repurchase their Notes, in whole or in part, at a price equal to 101% of the
aggregate principal amount thereof (in the case of the Series A through G Notes)
or 101% of the Accreted Value of the Senior Discount Notes (if such repurchase
occurs prior to July 1, 2003) or 101% of the principal amount at maturity of the
Senior Discount Notes (if such repurchase occurs on or after July 1, 2003), plus
accrued interest thereon, if any, to the date of repurchase. There can be no
assurance that the Company will have sufficient funds to repurchase the Notes
following a Change of Control Triggering Event.
The Notes are senior unsecured obligations of the Company and will rank PARI
PASSU in right of payment to all existing and future senior indebtedness of the
Company ("Senior Indebtedness"). Upon completion of the Offering, the Company
will have outstanding approximately $6.8 billion of Senior Indebtedness,
consisting primarily of $2.8 billion of First Mortgage Bonds (as defined), which
are secured by a lien on substantially all of the Company's utility property,
$529.0 million of borrowings under the Credit Facility (as defined), which are
secured with First Mortgage Bonds, $20.0 million of unsecured Medium Term Notes
(as defined) and the Notes. In addition, the Company will have available up to
$275.0 million under the Credit Facility. Upon completion of the Offering, the
Company will not have any outstanding indebtedness that ranks junior in right of
payment to the Notes ("Subordinated Indebtedness"). Under the terms of the
Indenture (as defined), the Company may in the future issue additional First
Mortgage Bonds, including in connection with a refinancing of the Credit
Facility, and additional series of Notes, as well as Subordinated Indebtedness,
subject to certain exceptions. See "Description of Notes" and "Description of
Other Indebtedness."
The Company does not intend to list the Notes on any national securities
exchange. Although the Underwriters have indicated that they currently intend to
make a market in the Notes, there can be no assurance that any market for the
Notes will develop or, if any such market develops, that it would continue to
exist. Such market-making activities may be discontinued at any time.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS PRIOR TO ANY INVESTMENT IN
THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OR PRICE TO UNDERWRITING
PRINCIPAL AMOUNT THE DISCOUNTS AND
AT MATURITY PUBLIC COMMISSIONS(1)
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Series A Note............................................. $300,000,000 % %
Per Series B Note............................................. $450,000,000 % %
Per Series C Note............................................. $400,000,000 % %
Per Series D Note............................................. $400,000,000 % %
Per Series E Note............................................. $400,000,000 % %
Per Series F Note............................................. $400,000,000 % %
Per Series G Note............................................. $600,000,000 % %
Per Senior Discount Note...................................... $500,000,000 % %
Total..................................................... $ 3,450,000,000 $ $
- - -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- - --------------------------------------------------------------
PROCEEDS TO
THE
COMPANY(2)
- - --------------------------------------------------------------
<S> <C>
Per Series A Note............................................. %
Per Series B Note............................................. %
Per Series C Note............................................. %
Per Series D Note............................................. %
Per Series E Note............................................. %
Per Series F Note............................................. %
Per Series G Note............................................. %
Per Senior Discount Note...................................... %
Total..................................................... $
- - --------------------------------------------------------------
</TABLE>
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITING."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $2,087,240.
The securities are offered by the Underwriters, subject to prior sale, when,
as and if delivered to and accepted by the Underwriters, and subject to various
prior conditions. It is expected that delivery of the Notes will be made in New
York, New York against payment therefor on or about 1998, which will be the
eighth business day following the date hereof (such settlement cycle being
herein referred to as "T+8"). Purchasers of the Notes should note that trading
of the Notes on the date hereof or the next four succeeding business days may be
affected by the T+8 settlement. See "Underwriting."
DONALDSON, LUFKIN & JENRETTE
SECURITIES
CORPORATION
MERRILL LYNCH & CO.
WASSERSTEIN PERELLA SECURITIES, INC.
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
CITICORP SECURITIES, INC.
TD SECURITIES
<PAGE>
[LOGO]
THE UNDERWRITERS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE (OR INCORPORATED BY REFERENCE)
IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS ENCOURAGED TO READ THIS
PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IN THEIR ENTIRETY.
SEE "GLOSSARY OF CERTAIN ELECTRICITY, NATURAL GAS TERMS AND ACCOUNTING"
APPEARING AS APPENDIX A FOR DEFINITIONS OF CERTAIN TERMS USED IN THIS
PROSPECTUS.
THE COMPANY
Niagara Mohawk Power Corporation (the "Company") is engaged in the
generation, purchase, transmission, distribution and sale of electricity and the
purchase, distribution, sale and transportation of natural gas in New York
State. The Company provides electric service to its customers in areas of
central, northern and western New York having a total population of
approximately 3.5 million, including the cities of Buffalo, Syracuse, Albany,
Utica, Schenectady, Niagara Falls, Watertown and Troy. The Company sells,
distributes and transports natural gas in areas of central, northern and eastern
New York contained within the Company's electric service territory having a
total population of approximately 1.7 million. The Company owns or has a
significant ownership interest in seven principal fossil and nuclear electric
generating facilities and a total capacity of approximately 5,299 megawatts
("MW") of electricity.
In 1997, the Company entered into two related agreements that it believes
will significantly improve its financial outlook, namely the PowerChoice
Settlement Agreement dated October 10, 1997 (as modified by the PSC Order (as
defined), the "PowerChoice Agreement") and the Master Restructuring Agreement
dated July 9, 1997, as amended (the "MRA"). Pursuant to the PowerChoice
Agreement, the Company and the New York State Public Service Commission (the
"PSC"), which regulates utilities in the State of New York, have agreed to a
five-year rate plan and the Company has agreed to divest its fossil and hydro
generating facilities (the "Genco Divestiture"), representing 4,217 MW of
capacity and approximately $1.1 billion of net book value. The PSC issued a
written order approving the PowerChoice Agreement and the MRA on March 20, 1998
(the "PSC Order"). The Company currently intends to use the proceeds from any
Genco Divestiture to reduce indebtedness. Pursuant to the MRA, the Company and
14 independent power producers ("IPPs") have agreed to terminate, restate or
amend 27 power purchase agreements ("PPAs") between the Company and such IPPs in
exchange for cash and shares of the Company's common stock (the "Common Stock").
The closing of this Offering is contingent upon and expected to occur
concurrently with the consummation of the MRA. The closing of the MRA is
presently scheduled for June 30, 1998. The proceeds from this Offering, together
with cash on hand, will be used to fund the Company's cash obligation under the
MRA. Pursuant to the MRA, the Company will also issue approximately 42.9 million
shares of Common Stock either directly to the IPP Parties or a portion of such
42.9 million shares may be sold in a public offering and the net proceeds
thereof paid to the IPP Parties. See "Description of Other Indebtedness," "Use
of Proceeds" and "The MRA and the PowerChoice Agreement."
For the twelve months ended March 31, 1998, the Company derived
approximately 84.5% of its revenues from the sale and transmission of
electricity and 15.5% of its revenues from the sale, distribution and
transportation of natural gas. During such period, the Company had revenues,
EBITDA (earnings before interest, income taxes, depreciation and amortization
and extraordinary items), interest charges and net income of approximately $3.9
billion, $859.7 million, $272.0 million, and $100.7 million, respectively. After
giving pro forma effect to the consummation of the MRA and the Offering, and the
principal terms of the PowerChoice Agreement excluding the Genco Divestiture,
the Company would have had revenues, EBITDA, interest charges and net loss of
approximately $3.8 billion, $1.3 billion, $505.5 million, and $(27.9) million,
respectively. See "The MRA and the PowerChoice Agreement" and the "Pro Forma
Condensed Financial Statements" set forth herein.
The Company's principal executive offices are located at 300 Erie Boulevard
West, Syracuse, New York 13202, and its telephone number is (315) 474-1511.
3
<PAGE>
BACKGROUND OF TRANSACTION
The Company entered into the PPAs that are subject to the MRA because it was
required to do so under the Public Utility Regulatory Policies Act of 1978
("PURPA"), which was intended to provide incentives for businesses to create
alternative energy sources. Under PURPA, the Company was required to purchase
electricity generated by qualifying facilities of IPPs at prices that were not
expected to exceed the cost that otherwise would have been incurred by the
Company in generating its own electricity, or in purchasing it from other
sources (known as "avoided costs"). While PURPA was a federal initiative, each
state retained certain delegated authority over how PURPA would be implemented
within its borders. In its implementation of PURPA, the State of New York passed
the "Six-Cent Law," establishing 6 CENTS per kilowatt hour ("Kwh") as the floor
on avoided costs for projects less than 80 MW in size. The Six-Cent Law remained
in place until it was amended in 1992 to deny the benefit of the statute to any
future PPAs. The avoided cost determinations under PURPA were periodically
increased by the PSC during this period. PURPA and the Six-Cent Law, in
combination with other factors, attracted large numbers of IPPs to New York
State, and, in particular, to the Company's service territory, due to the area's
existing energy infrastructure and availability of cogeneration hosts. The
pricing terms of substantially all of the PPAs that the Company entered into in
compliance with PURPA and the Six-Cent Law or other New York laws were based, at
the option of the IPP, either on administratively determined avoided costs or
minimum prices, both of which have consistently been materially higher than the
wholesale market prices for electricity.
Since PURPA and the Six-Cent Law were passed, the Company has been required
to purchase electricity from IPPs in quantities in excess of its own demand and
at prices in excess of those available to the Company by internal generation or
for purchase in the wholesale market. In fact, by 1991 the Company was facing a
potential obligation to purchase power from IPPs substantially in excess of its
peak demand of 6,093 MW. As a result, the Company's competitive position and
financial performance have deteriorated and the price of electricity paid per
Kwh by its customers has risen significantly above the national average.
Accordingly, in 1991 the Company initiated a parallel strategy of negotiating
individual PPA buyouts, cancellations and renegotiations, and of pursuing
regulatory and legislative support and litigation to mitigate the Company's
obligation under the PPAs. By mid-1996, this strategy had resulted in reducing
the Company's obligations to purchase power under its PPA portfolio to
approximately 2,700 MW. Notwithstanding this reduction in capacity, over the
same time period, the payments made to the IPPs in respect of their PPAs rose
from approximately $200 million in 1990 to approximately $1.1 billion in 1997 as
independent power facilities from which the Company was obligated to purchase
electricity commenced operations. The Company estimates that absent the MRA,
payments made to the IPPs pursuant to PPAs would continue to escalate by
approximately $50 million per year until 2002.
Recognizing the competitive trends in the electric utility industry and the
impracticability of remedying the situation through a series of customer rate
increases, in mid-1996, the Company began comprehensive negotiations to
terminate, amend or restate a substantial portion of above-market PPAs in an
effort to mitigate the escalating cost of these PPAs as well as to prepare the
Company for a more competitive environment. These negotiations led to the MRA
and the PowerChoice Agreement. See "The MRA and the PowerChoice Agreement."
THE MRA
The MRA is an agreement among the Company and 14 IPPs (the "IPP Parties")
that sell electricity to the Company under 27 PPAs, representing in excess of
75% of the Company's estimated above-market power purchase obligation. The
Company expects to consummate the MRA concurrently with and as a condition to
the Offering. Upon consummation of the MRA, the 27 PPAs will be terminated,
restated or amended in exchange for an aggregate payment to the IPP Parties of
approximately $3.6 billion in cash and approximately 42.9 million shares of
Common Stock (representing approximately 23% of the Company's outstanding shares
following such issuance). The closing of the MRA is subject to approval by the
Company's common shareholders of the issuance of Common Stock to the IPP
Parties. See "The MRA and the PowerChoice Agreement."
4
<PAGE>
THE POWERCHOICE AGREEMENT
On March 20, 1998, the Company received written approval from the PSC for
the PowerChoice Agreement, which establishes a five-year rate plan and
incorporates the terms of the MRA. The key elements of the PowerChoice Agreement
include: (i) a revenue reduction (exclusive of reductions in the New York State
Gross Receipts Tax ("GRT")) of approximately $111.8 million for all customer
classes to be phased-in over three years beginning upon the consummation of the
MRA; (ii) a cap on prices to electric customers in years four and five of the
five-year term; (iii) an allowance for the Company to recover stranded costs
(including the recoverable costs associated with the MRA); (iv) the permission
to establish a regulatory asset, reflecting the recoverable costs of the MRA
which will be amortized generally over ten years (the "MRA Regulatory Asset");
(v) an agreement by the Company to divest its fossil and hydro electric
generating facilities (4,217 MW) within a defined time period and retain its
nuclear generating facilities (1,082 MW) with a commitment to explore their
divestiture at a later date; and (vi) an agreement by the Company to provide its
retail electric customers with the option to choose their supplier of
electricity by no later than December 1999. See "The MRA and the PowerChoice
Agreement."
BUSINESS STRATEGY
In New York State, where the Company's principal assets are located, the PSC
has established guidelines and goals for the development of a competitive
electricity market through the Competitive Opportunities Proceeding. The PSC's
stated goals include (i) lowering customer rates; (ii) increasing customer
choice; (iii) maintaining reliability of service; (iv) continuing environmental
and public policy programs; (v) mitigating concerns about market power; and (vi)
continuing customer protections and the obligation to serve. In addition, the
PSC has stated that electric utilities may recover stranded costs from customers
through a non-bypassable "wires" charge, known as a Competitive Transition
Charge ("CTC"), to be collected by electric distribution companies. Stranded
costs are utility costs that cannot be fully recovered from customers in rates
established in a competitive market. However, the PSC also cautioned that a
careful balancing of customer and electric utility interests and expectations is
necessary, and that the level of stranded cost recovery will ultimately depend
on the particular circumstances of each electric utility. Six of the seven
investor-owned electric utilities in New York State have had major restructuring
proposals approved, including the Company's PowerChoice Agreement.
Management believes that the MRA and the PowerChoice Agreement provide the
Company with financial stability and create an improved platform from which to
build value. The primary objective of the MRA is to convert a large and growing
off-balance sheet payment obligation that threatens the financial viability of
the Company into a fixed and manageable capital obligation. Accordingly, the
Company believes that the lower contractual obligations resulting from the MRA
will significantly improve cash flow which can be dedicated to reduce
indebtedness incurred to fund the MRA. With the PowerChoice Agreement, the
Company has established lower prices for its industrial, commercial and
residential electric customers for a period of three years and reasonable
certainty of prices for the two years thereafter. The MRA also facilitates the
creation of a competitive electricity supply market in the Company's service
territory.
In the near term, the Company believes the greatest opportunity for
improving the cash flow and financial condition of the Company will come from
focusing on the regulated electric transmission, distribution, nuclear and gas
operations. The Company will continue to emphasize operational excellence and
seek to improve margins through cost reductions. In addition, the Company
intends to pursue low risk unregulated business opportunities. Pursuant to the
PowerChoice Agreement, the Company has an opportunity to form a holding company
which, if formed, would enhance the Company's ability to explore unregulated
business opportunities to foster longer-term strategic growth. The Company is
seeking approval from its shareholders for the formation of a holding company.
The implementation of a holding company structure, if approved by the Company's
shareholders, would only occur following various regulatory approvals. Upon
formation of a holding company, the Company's obligations under the Notes would
remain with the Company and would not be transferred to the holding company.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.............. $300.0 million principal amount of % Series A Senior
Notes due 1999; $450.0 million principal amount of %
Series B Senior Notes due 2000; $400.0 million principal
amount of % Series C Senior Notes due 2001; $400.0
million principal amount of % Series D Senior Notes due
2002; $400.0 million principal amount of % Series E
Senior Notes due 2003; $400.0 million principal amount of
% Series F Senior Notes due 2005; $600.0 million
principal amount of % Series G Senior Notes due 2008;
$500.0 principal amount at maturity of % Senior Discount
Notes due 2010.
Maturity Dates.................. The Series A, C and E Notes will mature on July 1, 1999,
2001 and 2003, respectively. The Series B, D, F and G
Notes will mature on October 1, 2000, 2002, 2005 and 2008,
respectively. The Senior Discount Notes will mature on
July 1, 2010.
Interest Payment Dates.......... Interest on the Series A, C and E Notes will be payable
semi-annually in arrears on January 1 and July 1 of each
year, commencing on January 1, 1999. Interest on the
Series B, D, F and G Notes will be payable semi-annually
in arrears on April 1 and October 1 of each year,
commencing on October 1, 1998.
The Senior Discount Notes will accrete at a rate of %,
compounded semi-annually on January 1 and July 1 of each
year, commencing July 1, 1998, to an aggregate principal
amount of $500.0 million by July 1, 2003. Thereafter, the
Senior Discount Notes will accrue cash interest at a rate
of % per annum, payable semi-annually on January 1 and
July 1 of each year, commencing January 1, 2004.
Ranking......................... The Notes are senior unsecured obligations of the Company
and will rank PARI PASSU in right of payment to the Senior
Indebtedness. Upon completion of the Offering, the Company
will have outstanding approximately $6.8 billion of Senior
Indebtedness, consisting primarily of $2.8 billion of
First Mortgage Bonds, which are secured by a lien on
substantially all of the Company's utility property,
$529.0 million of borrowings under the Credit Facility,
which are secured with First Mortgage Bonds, $20.0 million
of unsecured Medium Term Notes, and the Notes. See
"Description of Other Indebtedness."
Mandatory Redemption............ The Company is not required to make mandatory redemption
or sinking fund payments with respect to the Notes prior
to maturity. Under certain circumstances, the Company is
required to make an offer to repurchase Notes. See
"Description of Notes--Proceeds of Certain Asset Sales."
Optional Redemption............. The Series A through G Notes will be redeemable at the
option of the Company, in whole or in part, at any time,
at a redemption price equal to 100% of the principal
amount thereof plus accrued interest thereon, if any, plus
the Make-Whole Premium.
The Senior Discount Notes will be redeemable at the option
of the Company, in whole or in part, at any time prior to
July 1, 2003 at a redemption price equal to 100% of the
Accreted Value thereof plus the Make-Whole Premium and at
any time on or after July 1, 2003 at the redemption prices
set forth herein, plus accrued interest
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
thereon, if any, to the date of redemption. See
"Description of Notes--Optional Redemption."
Special Redemption.............. The Company may, at its option, by delivering a notice of
redemption at any time during the period from April 1,
1999 through December 31, 2000, use the Net Proceeds from
any sale or sales of its fossil and hydro generating
facilities to redeem up to $500.0 million aggregate
principal amount of the Series B through F Notes on a pro
rata basis (by series) at a redemption price equal to 100%
of the principal amount thereof plus accrued interest
thereon, if any, to the date of redemption. See
"Description of Notes--Special Redemption."
Change of Control............... Upon the occurrence of a Change of Control Triggering
Event, the holders of the Notes will have the right to
require the Company to repurchase their Notes, in whole or
in part, at a price equal to 101% of the aggregate
principal amount thereof (in the case of the Series A
through G Notes) or 101% of the Accreted Value of the
Senior Discount Notes (if such repurchase occurs prior to
July 1, 2003) or 101% of the principal amount at maturity
of the Senior Discount Notes (if such repurchase occurs on
or after July 1, 2003), plus accrued interest thereon, if
any, to the date of repurchase. There can be no assurance
that the Company will have sufficient funds to repurchase
the Notes following a Change of Control Triggering Event.
See "Description of Notes--Change of Control."
Covenants....................... The indenture under which the Notes will be issued (the
"Indenture") will contain certain covenants that, among
other things, limit the ability of the Company to pay
dividends, incur additional indebtedness, secure certain
indebtedness without also securing the Notes, enter into
certain transactions with affiliates or consummate certain
mergers or consolidations. See "Description of Notes."
Original Issue Discount......... The Senior Discount Notes are being issued with original
issue discount for U.S. federal income tax purposes. Thus,
although cash interest will not be payable on the Senior
Discount Notes prior to January 1, 2004, holders will be
required to include amounts in gross income for U.S.
federal income tax purposes in advance of receipt of the
cash payments to which the income is attributable. See
"Certain United States Federal Income Tax Considerations--
Original Issue Discount."
</TABLE>
RECENT DEVELOPMENTS
Following discussions with the staff of the Securities and Exchange
Commission, the Company has restated its financial results for 1997. Originally,
the Company's fourth-quarter 1997 reported financials reflected a one-time,
non-cash charge of $190.0 million, or $0.85 per share related to the MRA, that
the Company determined was necessary after reviewing the PSC Order.
Subsequently, the Company has decided to reflect the non-cash charge in 1998
upon consummation of the MRA, which is presently scheduled for June 30, 1998. As
a result of such restatement, the Company will report restated 1997 earnings of
$145.9 million, or $1.01 per share, as compared to the previously reported
earnings of $22.4 million, or $0.16 per share. In addition, the Company will
report a restated fourth-quarter loss of $(1.4) million, or $(0.01) per share,
as compared to the previously reported loss of $(124.9) million or $(0.86) per
share. All financial data in this Prospectus have been presented to reflect such
restatement.
7
<PAGE>
USE OF PROCEEDS
The Company will use the net proceeds from the Offering, together with cash
on hand to make cash payments to the IPP Parties in connection with the MRA.
Pursuant to the MRA, the Company will also issue approximately 42.9 million
shares of Common Stock either directly to the IPP Parties or, subject to an
amendment to the MRA, a portion of such 42.9 million shares may be sold in a
public offering and the net proceeds thereof paid to the IPP Parties. See "Use
of Proceeds" and "The MRA and the PowerChoice Agreement."
RISK FACTORS
Prospective investors should consider carefully the risks discussed under
"Risk Factors" before deciding to invest in the Notes.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents certain historical and pro forma financial and
operating data of the Company as of the dates and for the periods indicated. The
historical financial data as of the end of and for each of the three years in
the period ended December 31, 1997 are derived from the audited consolidated
financial statements of the Company. The historical financial data as of and for
the three months ended March 31, 1997 and March 31, 1998 are derived from the
unaudited financial statements of the Company, which in the opinion of
management, contain all adjustments necessary for a fair presentation thereof.
The following data should be read in conjunction with "Pro Forma Condensed
Financial Statements," "Selected Historical Financial Data," "Management's
Discussion of Pro Forma Condensed Financial Statements" and the Consolidated
Financial Statements of the Company, including the notes thereto, appearing
elsewhere or incorporated by reference in this Prospectus. The pro forma
financial data are not necessarily indicative of the results that would be
achieved if the pro forma transactions had occurred on the dates indicated or
the results that will be achieved in the future. The results for the three
months ended March 31, 1998 are not necessarily indicative of the results that
may be achieved for the full year ending December 31, 1998.
<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31, MARCH 31,
------------------------------------------- -------------------------------- ----------
PRO FORMA PRO FORMA PRO FORMA
1995 1996 1997 1997 (1) 1997 1998 1998(1) 1998(1)
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Operating revenues....... $3,917,338 $3,990,653 $3,966,404 $3,870,904 $1,163,832 $1,098,404 $1,074,529 $3,805,476
Operating income......... 684,034 522,338 558,839 606,839 231,937 134,297 144,797 503,199
Interest charges......... 279,674 278,033 273,906 511,806 67,538 65,590 123,965 505,458
Income before federal and
foreign income taxes... 407,429 280,248 309,930 113,630 171,499 72,932 23,457 13,463
Net income (loss)........ 248,036 110,390 183,335 55,735 103,022 20,363 (11,787) (27,924)
Balance available for
common stock........... 208,440 72,109 145,938 18,338 93,623 11,140 (21,010) (65,145)
Average shares of common
stock outstanding (in
thousands)............. 144,329 144,350 144,404 187,304 144,389 144,419 187,319 187,312
Basic and diluted
earnings (loss) per
average share of common
stock.................. $ 1.44 $ 0.50 $ 1.01 $ 0.10 $ 0.65 $ 0.08 $ (0.11) $ (0.35)
OTHER OPERATING DATA:
EBITDA (2)............... $ 929,130 $ 957,549 $ 961,502 $1,426,702 358,863 $ 222,273 $ 337,073 $1,318,887
Net cash interest (3).... 260,548 244,501 226,890 446,290 56,305 54,783 108,936 440,368
Capital expenditures
(4).................... 345,804 352,049 290,757 290,757 53,552 132,354 132,354 369,559
Amortization of MRA
Regulatory Asset....... -- -- -- 378,000 -- -- 94,500 378,000
Depreciation and
amortization........... 317,831 329,827 339,641 339,641 84,222 87,950 87,950 343,369
Ratio of EBITDA to net
cash interest (5)...... 3.6x 3.9x 4.2x 3.2x 6.4x 4.1x 3.1x 3.0x
BALANCE SHEET DATA (AT END
OF PERIOD):
Net utility plant........ $7,007,853 $6,957,615 $6,868,044 $6,868,044 $6,919,730 $6,897,664 $6,897,664 $6,897,664
Regulatory assets
(including MRA
Regulatory Asset)...... 1,300,812 1,214,306 1,176,824 5,166,024 1,171,468 1,174,570 5,162,570 5,162,570
Total assets............. 9,477,869 9,427,635 9,584,141 13,412,941 9,515,010 9,707,583 13,536,383 13,536,383
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31, MARCH 31,
------------------------------------------- -------------------------------- ----------
PRO FORMA PRO FORMA PRO FORMA
1995 1996 1997 1997 (1) 1997 1998 1998(1) 1998(1)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITALIZATION (AT END OF
PERIOD):
Long-term debt, excluding
current portion........ $3,582,414 $3,477,879 $3,417,381 $6,689,381 $3,478,628 $3,418,299 $6,690,299 $6,690,299
Preferred stock,
excluding current
portion................ 536,850 526,730 516,610 516,610 526,730 516,610 516,610 516,610
Common stockholders'
equity................. 2,513,952 2,585,572 2,727,527 3,138,027 2,676,890 2,739,957 3,150,457 3,150,457
--------- --------- --------- ---------- --------- --------- ---------- ----------
Total capitalization... $6,633,216 $6,590,181 $6,661,518 $10,344,018 $6,682,248 $6,674,866 $10,357,366 $10,357,366
--------- --------- --------- ---------- --------- --------- ---------- ----------
--------- --------- --------- ---------- --------- --------- ---------- ----------
</TABLE>
- - ------------------------------
(1) Gives pro forma effect to the consummation of the MRA and the Offering, and
the principal terms of the PowerChoice Agreement excluding the Genco
Divestiture, as if such transactions had occurred on the first day of each
period presented for purposes of the unaudited Pro Forma Condensed
Statements of Income and on December 31, 1997 or March 31, 1998, as
applicable, for purposes of the unaudited Pro Forma Condensed Balance Sheet.
See the "Pro Forma Condensed Financial Statements" including the
accompanying notes.
(2) EBITDA represents earnings before interest charges, interest income, income
taxes, depreciation and amortization, amortization of nuclear fuel,
allowance for funds used during construction, MRA Regulatory Asset
amortization, non-cash regulatory deferrals and other amortizations, and
extraordinary items. EBITDA is presented to provide additional information
about the Company's ability to meet its future requirements for debt service
and capital expenditures. EBITDA should not be considered an alternative to
net income as an indicator of operating performance or an alternative to
cash flow as a measure of liquidity. See the Pro Forma Condensed Statements
of Income contained herein and the Consolidated Statements of Cash Flows
incorporated by reference in this Prospectus.
(3) Net cash interest reflects interest charges plus allowance for funds used
during construction less the non-cash impact of the net amortization of
discount on long-term debt, interest accrued on the Nuclear Waste Policy Act
disposal liability and interest accreted on the Senior Discount Notes that
is not otherwise capitalized less interest income.
(4) Capital expenditures consist of amounts for the Company's construction
program related to its transmission, distribution and generation operations
(including nuclear fuel, related allowance for funds used during
construction and capitalized overhead expenses), and the amounts incurred to
comply with the Clean Air Act and other environmental requirements.
(5) For purposes of determining the ratio of EBITDA to net cash interest, EBITDA
and net cash interest are calculated as described above in notes (2) and
(3). The ratio of EBITDA to net cash interest is presented to provide
additional information about the Company's ability to meet its future
requirements for debt service. See the Pro Forma Condensed Statements of
Income contained herein and the Consolidated Statements of Cash Flows
incorporated by reference in this Prospectus.
10
<PAGE>
RISK FACTORS
THIS PROSPECTUS CONTAINS OR INCORPORATES BY REFERENCE STATEMENTS THAT
CONSTITUTE FORWARD LOOKING INFORMATION WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. ALL STATEMENTS REGARDING THE COMPANY'S
FUTURE FINANCIAL CONDITION, RESULTS OF OPERATIONS, CASH FLOWS, FINANCING PLANS,
BUSINESS STRATEGY, PROJECTED COSTS AND CAPITAL EXPENDITURES, OPERATIONS UNDER
THE MRA AND THE POWERCHOICE AGREEMENT AND WORDS SUCH AS "ANTICIPATE,"
"ESTIMATE," "EXPECT," "PROJECT," "INTEND," AND SIMILAR EXPRESSIONS ARE INTENDED
TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS APPEAR IN THIS
PROSPECTUS UNDER THE CAPTIONS "PROSPECTUS SUMMARY," "RISK FACTORS,"
"MANAGEMENT'S DISCUSSION OF PRO FORMA CONDENSED FINANCIAL STATEMENTS" AND "THE
MRA AND THE POWERCHOICE AGREEMENT." SUCH STATEMENTS ARE SUBJECT TO CERTAIN
RISKS, UNCERTAINTIES AND ASSUMPTIONS. ALL OF THESE FORWARD-LOOKING STATEMENTS
ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY THE COMPANY'S MANAGEMENT WHICH,
ALTHOUGH BELIEVED BY THE COMPANY'S MANAGEMENT TO BE REASONABLE, ARE INHERENTLY
UNCERTAIN. INVESTORS ARE CAUTIONED THAT SUCH FORWARD LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE OR RESULTS AND INVOLVE RISKS AND UNCERTAINTIES
AND THAT ACTUAL RESULTS OR DEVELOPMENTS MAY DIFFER MATERIALLY FROM THE FORWARD
LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING THE FACTORS
DESCRIBED BELOW.
SUBSTANTIAL LEVERAGE AND LIMITED FINANCIAL FLEXIBILITY
Following consummation of the MRA and the Offering, the Company will have
substantial leverage and significant debt service obligations. As of March 31,
1998, on a pro forma basis after giving effect to the consummation of the MRA
and the Offering, the Company would have had outstanding approximately $6.8
billion of Senior Indebtedness, consisting of $2.8 billion of First Mortgage
Bonds, which are secured by a lien on substantially all of the Company's utility
property, $529.0 million of borrowings under the Credit Facility, which are
secured with First Mortgage Bonds, $20.0 million of unsecured Medium Term Notes
and the Notes. The Company also will have available additional borrowings of
$275.0 million under the Credit Facility and, under the financial covenants set
forth in the Indenture, will have the ability to incur up to an additional $
billion of indebtedness. See "Capitalization," "Summary Historical and Pro Forma
Financial Data," "The MRA and the PowerChoice Agreement," "Description of
Notes--Certain Covenants--Incurrence of Indebtedness" and "Description of Other
Indebtedness."
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including: (i) the Company's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions or other corporate purposes will be limited in the future; (ii) a
substantial portion of the Company's cash flow from operations will be dedicated
to the payment of principal and interest on its indebtedness, thereby reducing
the funds available to the Company for other purposes; and (iii) the Company's
substantial leverage may place the Company at a competitive disadvantage, hinder
its ability to adjust rapidly to changing market conditions and make it more
vulnerable in the event of a downturn in general economic conditions or its
business. As a result, any reduction in revenues or significant increase in
costs or expenditures could materially adversely affect the Company's ability to
satisfy its obligations under the Notes. See "Management's Discussion of Pro
Forma Condensed Financial Statements--Liquidity and Capital Resources,"
"Description of Other Indebtedness," and "Description of Notes."
EFFECT OF DECREASED SALES TO CUSTOMERS
Under the PowerChoice Agreement, the Company has established rates intended
to create sufficient cash flow to at least cover its operating expenses, satisfy
its fixed obligations, including the payment of principal and interest under the
Notes, and recover allowable stranded costs. The Company's rate design is based
on estimates of future electricity usage and the number of customers connected
to the Company's distribution system. The level of electric revenues can be
adversely affected by lower than projected sales to retail customers and by
customer bypass of the system. Economic conditions in the Company's service area
could result in lower sales due to the relocation of customers. Because of the
relatively high cost of the Company's electricity, customers could seek to
bypass the Company's distribution system through self-
generation or the replacement of the Company with a municipal or other utility.
While the PowerChoice
11
<PAGE>
Agreement requires the payment of an exit fee or access charge in these
circumstances (except with respect to customers who had made substantial
investment in on-site generation as of October 10, 1997), the affected customers
and competitors may challenge the Company's right to collect these fees, or the
appropriate level of these fees. There can be no assurance that the Company
would prevail in any such proceeding. If revenues are significantly lower than
those anticipated in its rate design, the Company's ability to service its
obligations under the Notes could be materially adversely affected.
REGULATORY MATTERS
Following implementation of the PowerChoice Agreement, the Company will
remain subject to extensive regulation by the PSC. While the most material
aspects of the Company's rate structure for the next five years are established
in the PowerChoice Agreement, under certain circumstances, the PSC could
initiate proceedings to reduce rates. Conversely, the PSC is likely to continue
to assess competitive consequences in considering future rate increases even in
the event that the Company experiences revenue shortfalls or increased expenses.
In addition, many aspects of the Company's operations, including its electric
transmission and distribution systems, the operation and maintenance of its
nuclear facilities, its gas distribution operations and the issuance of
securities, will continue to be subject to extensive regulation by both the
federal government and the PSC. Changes in these regulations or in their
application to the Company could adversely affect the Company's business and
financial condition. Further, uncertainty exists regarding the ultimate impact
on the Company as the electric industry is further deregulated and electricity
suppliers gain open access to the Company's retail customers.
New York laws governing the approval of the PowerChoice Agreement provide
various parties the right to appeal such approval by giving notice of their
intention to do so within four months of the date on which approval becomes
final. Such an appeal may be based on the failure of the record to show a
reasonable basis for the terms of the PowerChoice Agreement and may result in an
amendment of the record to correct such failure, in renegotiation of such terms
or in renegotiation of the PowerChoice Agreement as a whole. There can be no
assurance that, if appealed, the approval of the PowerChoice Agreement will be
upheld or that such appeal will not result in terms substantially less favorable
to the Company than those described herein. Certain parties have filed petitions
for rehearing before the PSC. Of the six petitions filed, three have been
denied. In addition, certain parties filed an action seeking to enjoin the
implementation of the PowerChoice Agreement, the MRA and the Company's
contemplated Genco Divestiture on the grounds that the PSC failed to comply with
the provisions of the New York State Environmental Quality Review Act. On April
20, 1998, the application for a temporary restraining order was denied, and on
May 22, 1998, the injunction was denied and the petition was dismissed, which
decision is appealable. The Company is unable to predict the outcome of any such
proceeding. Suspension of the PowerChoice Agreement or renegotiation of its
material terms could have a material adverse effect on the Company's results of
operations and on the cash available to service the Notes.
FEDERAL INCOME TAX IMPLICATIONS OF MRA TO THE COMPANY
The Company has requested rulings from the Internal Revenue Service to the
effect that the amount of cash and Common Stock paid to the IPP Parties who are
terminating their PPAs upon closing of the MRA will be currently deductible and
generate a substantial net operating loss ("NOL"). No assurance can be given
that favorable rulings will be issued. If favorable rulings are not received,
and the Company's claimed current deductions are challenged on audit and not
ultimately sustained, the amount of tax refunds generated from the NOL
carryback, and thus the amount of cash available to repay the Notes following
consummation of the MRA, would be reduced. While any disallowed deductions would
ultimately be allowable in future years, and would likely create, or increase
the amount of NOLs available to offset tax liabilities in future years, cash
flow would be adversely affected in the near term.
The Company's ability to utilize the NOL generated as a result of the MRA
could be substantially limited under the rules of section 382 of the Internal
Revenue Code (the "Code") if certain changes in the Company's stock ownership
were to occur following the consummation of the MRA. In general, the limitation
is triggered by a more than 50% change in stock ownership during a three-year
testing period by
12
<PAGE>
shareholders who own, directly or indirectly, 5% or more of the Common Stock.
For purposes of making the change in ownership computation, the IPP Parties who
are issued Common Stock pursuant to the MRA and the purchasers in the Offering
will likely be considered separate 5% shareholder groups, with the result that a
stock ownership change of up to 23% will be deemed to have occurred by reason of
their collective acquisition of such stock. Thus, if the IPP Parties, the
purchasers in the Offering and any other 5% shareholders experience ownership
increases totaling more than 27% during any 3-year testing period that includes
the consummation date of the MRA, the 50% statutory threshold would be breached
and the NOL limitation would apply. The rules for determining changes in stock
ownership for purposes of section 382 are extremely complicated and in many
respects uncertain. A stock ownership change could occur as a result of
circumstances that are not within the control of the Company. If a more than 50%
change in ownership were to occur, the Company's remaining usable NOL on a going
forward basis would likely be significantly lower than the NOL amount which
otherwise would be usable absent the limitation. Consequently, the Company's net
cash position could be significantly lower as a result of tax liabilities which
would otherwise be eliminated or reduced through unrestricted use of the NOL.
LIMITATIONS ON HOLDERS' CLAIMS WITH RESPECT TO SENIOR DISCOUNT NOTES
The Senior Discount Notes will be issued with a substantial original issue
discount from their principal amount at maturity. Consequently, purchasers of
the Senior Discount Notes will be required to include amounts in gross income
for federal income tax purposes in advance of receipt of the cash payments to
which the income is attributable. See "Certain United States Federal Income Tax
Considerations" for a more detailed discussion of the federal income tax
consequences to the purchasers of the Senior Discount Notes resulting from the
purchase, ownership or disposition thereof.
Under the Indenture, in the event of an acceleration of the maturity of the
Notes upon the occurrence of an Event of Default, holders of the Senior Discount
Notes may be entitled to recover only the amount which may be declared due and
payable pursuant to the Indenture, which could be less than the principal amount
at maturity of such Senior Discount Notes. See "Description of the Notes--Events
of Default and Remedies."
If a bankruptcy case is commenced by or against the Company under the United
States Bankruptcy Code, the claim of a holder with respect to the principal
amount thereof may be limited to an amount equal to the sum of (i) the issue
price of the Senior Discount Notes as set forth on the cover page hereof and
(ii) that portion of the original issue discount (as determined on the basis of
such issue price) which is not deemed to constitute "unmatured interest" for
purposes of the United States Bankruptcy Code. Accordingly, under such
circumstances, even if sufficient funds are available, holders may receive a
lesser amount than they otherwise may be entitled to under the express terms of
the Indenture. In addition, there can be no assurance that a bankruptcy court
would compute the accrual of interest by the same method as that used for the
calculation of original issue discount under federal income tax law and,
accordingly, a holder might be required to recognize gain or loss in the event
of a distribution related to such a bankruptcy case. See "Certain United States
Federal Income Tax Considerations--Disposition of Notes."
NUCLEAR FACILITY RISK
Risks of substantial liability arise from the ownership and operation of
nuclear facilities, including, among others, structural problems at a nuclear
facility, the storage, handling and disposal of radioactive materials,
limitations on the amounts and types of insurance coverages commercially
available and uncertainties with respect to the technological and financial
aspects of decommissioning nuclear facilities at the end of their useful lives.
The Company's Nine Mile Point Nuclear Unit No. 1 ("Unit 1") nuclear facility is
one of the oldest in operation, having commenced operations in 1969. In the
event of an extended outage of either Unit 1 or Unit 2 at Nine Mile Point, the
Company would be required to purchase power in the open market to replace the
power normally produced by these facilities. Such purchases would subject the
Company to the risk of increased energy prices and, depending on the length of
the outage and the level of market prices, could have a material adverse effect
on the Company's cash flow. Under the PowerChoice Agreement, the Company is not
entitled to pass along these increased costs
13
<PAGE>
to customers in the form of higher electric rates. If either facility were to
have problems with its physical condition or require significant capital
expenditure, the Company would evaluate the economic justification of continuing
to operate the facility. The prudence of the Company's decision to close a
facility is subject to review by the PSC to determine whether the Company should
be allowed to recover its incremental costs, including replacement power costs,
which would likely be an amount significant to the Company.
ENVIRONMENTAL REGULATIONS
The Company and its operations are subject to a wide range of environmental
laws and regulations relating to, among other matters, air emissions, wastewater
discharges, landfill operations and hazardous waste management. Compliance with
these laws and regulations is an increasingly important factor in the Company's
business. The Company is currently conducting a program to investigate and
restore, as necessary to meet current environmental standards, certain
properties associated with its former gas manufacturing process and other
properties which the Company has learned may be contaminated with industrial
waste, as well as investigating identified industrial waste sites as to which it
may be determined that the Company contributed. The Company has also been
advised that various federal, state or local agencies believe certain properties
require investigation and has prioritized the sites based on available
information in order to enhance the management of investigation and remediation,
if necessary. The Company is currently aware of 124 such sites with which it has
been or may be associated, including 76 which are Company-owned. With respect to
non-owned sites, the Company may be required to contribute some share of the
remedial costs. The Company has denied any responsibility in certain of these
sites and is contesting liability accordingly. Although in practice, remedial
costs are often allocated among parties, one party can, as a matter of law, be
held liable for all of the remedial costs at a site regardless of fault. The
Company has accrued a liability in the amount of $220 million for remedial costs
and the high end of the range of remedial costs is currently estimated by the
Company to be approximately $650 million, including approximately $285 million
in the unlikely event the Company is required to assume 100% responsibility at
non-owned sites. The Company believes that it is probable that environmental
compliance and remediation costs will continue to be recovered in its rates and
the Company has recorded a regulatory asset for recovery of these costs.
However, there can be no assurance that additional expenses associated with
remedial costs or compliance with proposed and future environmental laws and
regulations could not have a material adverse effect on the future operations
and financial condition of the Company.
ACCOUNTING PRINCIPLES
The Company continues to apply the accounting principles of SFAS No. 71 to
its electric transmission and distribution, nuclear and gas operations, based on
the terms of the PowerChoice Agreement. SFAS No. 71 permits a utility to defer
certain costs for future recovery which would otherwise be charged to expense
when authorized to do so by the relevant regulatory authorities. As of March 31,
1998, the Company had recorded $811.0 million of regulatory assets, net of
regulatory liabilities, associated with the electric business. The deferral of
the costs of the MRA by the PSC will cause the net regulatory assets to increase
by approximately $4.0 billion. In the event that the Company determined, either
as a result of lower than expected revenues or higher than expected costs, that
its net regulatory assets were not in fact recoverable, it could no longer apply
the principles of SFAS No. 71 and would be required to record a non-cash charge
against income in the amount of the remaining unamortized net regulatory assets.
Such a non-cash charge would not reduce the Company's capacity to make the types
of payments that are restricted under the Indenture. See "Description of
Notes--Certain Covenants--Restricted Payments."
ABSENCE OF PUBLIC MARKET
The Notes will constitute a new issue of securities with no established
trading market, and the Company does not intend to list the Notes on any
national securities exchange. The Company has been advised by the Underwriters
that they currently intend, following completion of the Offering, to make a
market in the Notes; however, they are not obligated to do so, and any
market-making may be discontinued at any time without notice. Accordingly, no
assurance can be given that any active public or other market will develop for
the Notes or as to the liquidity of the Notes. See "Underwriting."
14
<PAGE>
USE OF PROCEEDS
The proceeds of the Offering (after deducting underwriting discounts and
commissions and other estimated expenses of the Offering payable by the Company)
are expected to be approximately $ billion. All such net proceeds,
together with $ million of cash on hand, will be applied by the Company
to make payments to the IPP Parties pursuant to the MRA. Pursuant to the MRA,
the Company will also issue approximately 42.9 million shares of Common Stock
either directly to the IPP Parties or, subject to an amendment to the MRA, a
portion of such 42.9 million shares may be sold in a public offering and the net
proceeds thereof paid to the IPP Parties. See "The MRA and the PowerChoice
Agreement."
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998 on a historical basis and as adjusted to give pro forma effect to
consummation of the MRA and the Offering, and the principal terms of the
PowerChoice Agreement excluding the Genco Divestiture. This table should be read
in conjunction with "Pro Forma Condensed Financial Statements," "Summary
Historical and Pro Forma Financial Data," "Management's Discussion of Pro Forma
Condensed Financial Statements" and the Consolidated Financial Statements,
including the notes thereto, appearing elsewhere or incorporated by reference in
this Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1998
---------------------------
<S> <C> <C>
HISTORICAL PRO FORMA
<CAPTION>
(Dollars in thousands)
<S> <C> <C>
COMMON STOCKHOLDERS' EQUITY:
Common stock, par value $1.00 per share, 185,000,000 shares authorized.(1) Issued
and outstanding 144,419,351 and 187,319,351 shares, respectively................. $ 144,419 $ 187,319
Capital stock premium and expense.................................................. 1,780,978 2,272,078
Retained earnings.................................................................. 814,560 691,060
------------ -------------
2,739,957 3,150,457
------------ -------------
PREFERRED STOCK:
Preferred stock, cumulative, par value $100 per share, 3,400,000 shares authorized:
Mandatorily redeemable. Issued and outstanding 222,000 shares.................... 22,200 22,200
Non-redeemable. Issued and outstanding 2,100,000 shares.......................... 210,000 210,000
Preferred stock, cumulative, par value $25 per share, 19,600,000 shares authorized:
Mandatorily redeemable. Issued and outstanding 2,581,204 shares.................. 64,530 64,530
Non-redeemable. Issued and outstanding 9,200,000 shares.......................... 230,000 230,000
------------ -------------
Total preferred stock.......................................................... 526,730 526,730
Less--Preferred stock due within one year...................................... 10,120 10,120
------------ -------------
516,610 516,610
------------ -------------
Preference stock, par value $25 per share, 8,000,000 shares authorized. None issued
and outstanding.................................................................. -- --
LONG-TERM DEBT:
First Mortgage Bonds............................................................... 2,801,305 2,801,305
Promissory Notes................................................................... 413,760 413,760
Credit Facility.................................................................... 105,000 105,000
Senior Notes....................................................................... -- 2,950,000
Senior Discount Notes.............................................................. -- 322,000
Other long-term debt............................................................... 165,299 165,299
------------ -------------
Total long-term debt........................................................... 3,485,364 6,757,364
Less--Long-term debt due within one year....................................... 67,065 67,065
------------ -------------
3,418,299 6,690,299
------------ -------------
Total capitalization......................................................... $ 6,674,866 $ 10,357,366
------------ -------------
------------ -------------
</TABLE>
- - ------------------------
(1) The Company is seeking authorization from its shareholders at its 1998
annual meeting to increase the number of authorized shares of Common Stock.
If such approval is not received, the Company intends either to renegotiate
the terms of the MRA to increase cash and decrease the number of shares of
Common Stock to be issued to the IPP Parties, or to buy outstanding Common
Stock to be used for the MRA payments.
16
<PAGE>
PRO FORMA CONDENSED FINANCIAL STATEMENTS
INTRODUCTION
The following unaudited Pro Forma Condensed Statements of Income and
unaudited Pro Forma Condensed Balance Sheet are based on the historical
Consolidated Financial Statements of the Company incorporated by reference in
this Prospectus, as adjusted to give effect to (i) the consummation of the MRA;
(ii) the consummation of the Offering; (iii) the issuance of approximately 42.9
million shares of Common Stock to the IPP Parties; and (iv) the principal terms
of the PowerChoice Agreement, including the first year impact of a three year
rate reduction intended to reduce the Company's revenues (exclusive of
reductions in the GRT) by approximately $111.8 million by the time it is fully
phased in over three years, and the establishment of the MRA Regulatory Asset
(described in note 6 of the notes to unaudited Pro Forma Condensed Balance
Sheet) which will be amortized by the Company generally over ten years. The
unaudited Pro Forma Condensed Financial Statements do not give effect to the
Genco Divestiture and certain elements of the PowerChoice Agreement that are not
material to the financial results of the Company. The Company is unable at this
time to predict either the timing of the Genco Divestiture or the amount of
proceeds that the Company will receive. In the event that unacceptable bids are
received for any or all of the generating facilities, the Company may spin off
such assets to its shareholders. The net book value of the fossil and hydro
generating facilities at March 31, 1998 was approximately $1.1 billion. The
unaudited Pro Forma Condensed Statements of Income have been prepared to reflect
the consummation of the MRA and the Offering, and the principal terms of the
PowerChoice Agreement, excluding the Genco Divestiture, as if they had occurred
on the first day of each period presented. The unaudited Pro Forma Condensed
Balance Sheet has been prepared to reflect the consummation of the MRA and the
Offering, and the principal terms of the PowerChoice Agreement, excluding the
Genco Divestiture, as if they had occurred on March 31, 1998.
The PSC has limited the amount of the MRA Regulatory Asset that can be
recovered from customers to approximately $4.0 billion. The MRA Regulatory Asset
represents the recoverable costs of the MRA, consisting of the cash compensation
paid to the IPP Parties, the issuance of approximately 42.9 million shares of
Common Stock, and other expenses related to the MRA. The pro forma income
statements for the year ended December 31, 1997 and the three and twelve months
ended March 31, 1998 do not include an adjustment for the one-time, non-cash
write-off associated with the PSC Order that limited the amount of the MRA
Regulatory Asset that can be recovered from customers. Because the value of the
Common Stock to be paid as consideration to the IPP Parties can only be
determined at the closing of the MRA, the value of the limitation on the
recoverability of the MRA Regulatory Asset is expected to be recorded as a
charge to expense in the second quarter of 1998 upon the closing of the MRA. The
charge to expense will be determined as the difference between $8 per share and
the Company's closing Common Stock price on the date the MRA closes. Using the
Company's closing Common Stock price on March 26, 1998 of $12 7/16 per share,
multiplied by approximately 42.9 million shares, the estimated charge to expense
would be approximately $190.0 million. The ultimate amount of the charge to
expense will be based upon the Company's closing Common Stock price on the date
of the MRA closing. See "The MRA and the PowerChoice Agreement."
The unaudited Pro Forma Condensed Financial Statements and accompanying
notes should be read in conjunction with the Company's historical Consolidated
Financial Statements and the notes thereto incorporated by reference in this
Prospectus. The unaudited Pro Forma Condensed Financial Statements are presented
for informational purposes only and do not purport to represent what the
Company's financial position or results of operations would actually have been
if the consummation of the MRA and the Offering, and the principal terms of the
PowerChoice Agreement, excluding the Genco Divestiture, had occurred on the
dates set forth herein, or to project the Company's financial position or
results of operations at any future date or for any future period. However, the
unaudited Pro Forma Condensed Financial Statements contain, in the opinion of
management, all adjustments necessary for a fair presentation.
17
<PAGE>
PRO FORMA CONDENSED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
(Dollars in thousands except per share
data)
<S> <C> <C> <C>
Operating Revenues:
Electric.......................................................... $ 3,309,441 $ (56,300)(1)
(39,200)(2) $ 3,213,941
Gas............................................................... 656,963 656,963
----------- ---------------- -----------
3,966,404 (95,500) 3,870,904
----------- ---------------- -----------
Operating Expenses:
Fuel for electric generation...................................... 179,455 179,455
Electricity purchased:
IPP............................................................. 1,105,970 (807,000)(3)
203,700(3)
81,800(3) 584,470
Others.......................................................... 130,138 130,138
Gas purchased..................................................... 345,610 345,610
Other operation and maintenance................................... 835,282 835,282
Amortization of MRA Regulatory Asset.............................. -- 378,000(4) 378,000
Depreciation and amortization..................................... 339,641 339,641
Other taxes....................................................... 471,469 471,469
----------- ---------------- -----------
3,407,565 (143,500) 3,264,065
----------- ---------------- -----------
Operating income.................................................... 558,839 48,000 606,839
----------- ---------------- -----------
Other income........................................................ 24,997 (6,400)(5) 18,597
----------- ---------------- -----------
Income before interest charges...................................... 583,836 41,600 625,436
Interest charges.................................................... 273,906 16,500(6)
248,400(7)
(27,000)(7) 511,806
----------- ---------------- -----------
Income before federal and foreign income taxes...................... 309,930 (196,300) 113,630
Federal and foreign income taxes.................................... 126,595 (68,700)(8) 57,895
----------- ---------------- -----------
Net income.......................................................... 183,335 (127,600) 55,735
Dividends on preferred stock........................................ 37,397 37,397
----------- ---------------- -----------
Balance available for common stock.................................. $ 145,938 $ (127,600) $ 18,338
----------- ---------------- -----------
----------- ---------------- -----------
Average number of shares of common stock outstanding (in
thousands)........................................................ 144,404 42,900(9) 187,304
Basic and diluted earnings per average share of common stock........ $ 1.01 $ 0.10
OTHER OPERATING DATA:
EBITDA (10)....................................................... $ 961,502 $ 1,426,702
Net cash interest (11)............................................ 226,890 446,290
Ratio of EBITDA to net cash interest (12)......................... 3.2x
Ratio of earnings to fixed charges (13)........................... 1.2x
Ratio of earnings to fixed charges and preferred dividend
requirements (13)............................................... 1.1x
</TABLE>
See accompanying notes to Pro Forma Condensed Statements of Income
18
<PAGE>
PRO FORMA CONDENSED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
(Dollars in thousands except per share
data)
<S> <C> <C> <C>
Operating Revenues:
Electric........................................................ $ 863,169 $ (14,075)(1)
(9,800)(2) $ 839,294
Gas............................................................. 235,235 235,235
---------- -------------- ----------
1,098,404 (23,875) 1,074,529
---------- -------------- ----------
Operating Expenses:
Fuel for electric generation.................................... 47,198 47,198
Electricity purchased:
IPP........................................................... 299,938 (201,500)(3)
53,275(3)
19,350(3) 171,063
Others........................................................ 24,412 24,412
Gas purchased................................................... 115,452 115,452
Other operation and maintenance 262,362 262,362
Amortization of MRA Regulatory Asset 94,500(4) 94,500
Depreciation and amortization................................... 87,950 87,950
Other taxes..................................................... 126,795 126,795
---------- -------------- ----------
964,107 (34,375) 929,732
---------- -------------- ----------
Operating income.................................................. 134,297 10,500 144,797
---------- -------------- ----------
Other income...................................................... 4,225 (1,600)(5) 2,625
---------- -------------- ----------
Income before interest charges.................................... 138,522 8,900 147,422
Interest charges.................................................. 65,590 4,125(6)
61,000(7)
(6,750)(7) 123,965
---------- -------------- ----------
Income before federal and foreign income taxes.................... 72,932 (49,475) 23,457
Federal and foreign income taxes.................................. 52,569 (17,325)(8) 35,244
---------- -------------- ----------
Net income (loss)................................................. 20,363 (32,150) (11,787)
Dividends on preferred stock...................................... 9,223 9,223
---------- -------------- ----------
Balance available for common stock................................ $ 11,140 $ (32,150) $ (21,010)
---------- -------------- ----------
---------- -------------- ----------
Average number of shares of common stock outstanding (in
thousands)...................................................... 144,419 42,900(9) 187,319
Basic and diluted earnings (loss) per average share of common
stock........................................................... $ 0.08 $ (0.11)
OTHER OPERATING DATA:
EBITDA (10)..................................................... $ 222,273 $ 337,073
Net cash interest (11).......................................... 54,783 108,936
Ratio of EBITDA to net cash interest (12)....................... 3.1x
Ratio of earnings to fixed charges (13)......................... 1.2x
Ratio of earnings to fixed charges and preferred dividend
requirements (13)............................................. 1.1x
</TABLE>
See accompanying notes to Pro Forma Condensed Statements of Income
19
<PAGE>
PRO FORMA CONDENSED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED MARCH 31, 1998
-----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
(Dollars in thousands except per share
data)
<S> <C> <C> <C>
Operating Revenues:
Electric........................................................ $ 3,295,241 $ (56,300)(1)
(39,200)(2) $ 3,199,741
Gas............................................................. 605,735 605,735
------------ ------------- ------------
3,900,976 (95,500) 3,805,476
------------ ------------- ------------
Operating Expenses:
Fuel for electric generation.................................... 189,188 189,188
Electricity purchased:
IPP........................................................... 1,107,697 (806,000)(3)
213,100(3)
77,400(3) 592,197
Others........................................................ 123,958 123,958
Gas purchased................................................... 312,431 312,431
Other operation and maintenance................................. 890,979 890,979
Amortization of MRA Regulatory Asset............................ 378,000(4) 378,000
Depreciation and amortization................................... 343,369 343,369
Other taxes..................................................... 472,155 472,155
------------ ------------- ------------
3,439,777 (137,500) 3,302,277
------------ ------------- ------------
Operating income.................................................. 461,199 42,000 503,199
Other income...................................................... 22,122 (6,400)(5) 15,722
------------ ------------- ------------
Income before interest charges.................................... 483,321 35,600 518,921
Interest charges.................................................. 271,958 16,500(6)
244,000(7)
(27,000)(7) 505,458
------------ ------------- ------------
Income before federal and foreign income taxes.................... 211,363 (197,900) 13,463
Federal and foreign income taxes.................................. 110,687 (69,300)(8) 41,387
------------ ------------- ------------
Net income (loss)................................................. 100,676 (128,600) (27,924)
Dividends on preferred stock...................................... 37,221 37,221
------------ ------------- ------------
Balance available for common stock................................ $ 63,455 $ (128,600) $ (65,145)
------------ ------------- ------------
------------ ------------- ------------
Average number of shares of common stock outstanding (in
thousands)...................................................... 144,412 42,900(9) 187,312
Basic and diluted earnings (loss) per average share of common
stock........................................................... $ 0.44 $ (0.35)
OTHER OPERATING DATA:
EBITDA (10)..................................................... $ 859,687 $ 1,318,887
Net cash interest (11).......................................... 225,368 440,368
Ratio of EBITDA to net cash interest (12)....................... 3.0x
Ratio of earnings to fixed charges (13)......................... 1.0x
Ratio of earnings to fixed charges and preferred dividend
requirements (13)............................................. 1.0x
</TABLE>
See accompanying notes to Pro Forma Condensed Statements of Income
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF INCOME
The following notes set forth the explanations and assumptions used and
adjustments made in preparing the unaudited Pro Forma Condensed Statements of
Income for the year ended December 31, 1997 and for the three and twelve months
ended March 31, 1998. The unaudited Pro Forma Condensed Statements of Income
should be read in conjunction with the historical Consolidated Financial
Statements and the notes thereto incorporated by reference in this Prospectus.
The adjustments described below are based on the assumptions and preliminary
estimates described therein and are subject to change. These statements do not
purport to be indicative of the results of operations of the Company for such
period, nor are they indicative of future results. All of the following
adjustments for the year ended December 31, 1997 and for the three and twelve
months ended March 31, 1998, are pro forma to reflect the consummation of the
MRA and the Offering, and the principal terms of the PowerChoice Agreement
excluding the Genco Divestiture, as if they had occurred on the first day of
each respective period.
The pro forma income statements for the year ended December 31, 1997 and the
three and twelve months ended March 31, 1998 do not include an adjustment for
the one-time, non-cash write-off associated with the PSC Order that limited the
amount of the MRA Regulatory Asset that can be recovered from customers. Using
the Company's closing Common Stock price on March 26, 1998 of $12 7/16 per
share, multiplied by approximately 42.9 million shares, the estimated charge to
expense would be approximately $190.0 million. The ultimate amount of the charge
to expense will be based upon the Company's closing Common Stock price on the
date of the MRA closing.
The unaudited Pro Forma Statements of Income include the following pro forma
adjustments based on the assumptions described below:
(1) To reflect the first year impact on total electric revenues of the rate
reduction requirements contained in the PowerChoice Agreement, which provides
for rate reductions to be phased in over three years. These rate reductions are
intended to result in a decrease in electric revenues (exclusive of reductions
in the GRT) of approximately $111.8 million by the time they are fully phased in
over the three years, of which the first year impact for the year ended December
31, 1997, the three months ended March 31, 1998 and the twelve months ended
March 31, 1998 is estimated to be approximately $56.3 million, $14.1 million and
$56.3 million, respectively. Of the first year revenue reduction applicable to
the year ended December 31, 1997 and the twelve months ended March 31, 1998,
approximately $12.0 million relates to residential and small commercial
customers and is calculated as a price reduction of approximately 0.08 CENTS per
Kwh (or approximately 0.7%) to 1997 average prices applied against sales to
those customers of 14,475,005 Mwhs and 14,306,055 Mwhs in each period,
respectively. Approximately $13.4 million of revenue reductions relate to large
commercial and small industrial customers and are calculated as a reduction of
approximately 0.20 CENTS per Kwh (or approximately 2.0%) to 1997 average prices
applied against sales to those customers of 6,529,095 Mwhs and 6,495,852 Mwhs in
each period, respectively. The remaining $30.9 million of revenue reductions
relate to large industrial customers and are comprised of several adjustments,
including a revenue reduction of $24.9 million based on a price reduction of
approximately 0.34 CENTS per Kwh (or approximately 4.3%) to 1997 average prices
applied against sales to those customers of 7,387,140 Mwhs and 7,443,164 Mwhs in
each period, respectively, and net increases in anticipated discounts to
specific customers of $6.0 million. The pro forma adjustment for revenue
reductions for the three months ended March 31, 1998 is calculated as one
quarter of the revenue reductions for the twelve months ended March 31, 1998.
The actual rate reductions in any year will be affected by numerous factors such
as the volume of electricity sold and the timing of the rate reductions.
(2) To reflect a deferral of revenues required by the PSC Order. The amount
of the deferral is based on the difference between the assumed weighted average
interest rate of 8.5% used by the Company to prepare its PowerChoice proposal
and the estimated weighted average interest rate of 7.27% assumed for the Series
A through G Notes. The amount of the deferral for the year ended December 31,
1997, the
21
<PAGE>
three months ended March 31, 1998 and the twelve months ended March 31, 1998
would be $39.2 million, $9.8 million and $39.2 million, respectively.
(3) To reflect (i) the elimination of $807.0 million, $201.5 million and
$806.0 million of electricity purchased costs for the year ended December 31,
1997, the three months ended March 31, 1998 and the twelve months ended March
31, 1998, respectively, reflecting the termination, restatement or amendment of
the 27 PPAs pursuant to the MRA; (ii) the addition of approximately $203.7
million, $53.3 million and $213.1 million of electricity purchased costs for the
year ended December 31, 1997, the three months ended March 31, 1998 and the
twelve months ended March 31, 1998, respectively, reflecting the Company's
commitment to purchase electricity under the restated and amended contracts
entered into with certain IPP Parties as part of the MRA; and (iii) the addition
of approximately $81.8 million, $19.4 million and $77.4 million of electricity
purchased costs for the year ended December 31, 1997, the three months ended
March 31, 1998 and the twelve months ended March 31, 1998, respectively,
reflecting the estimated cost of market purchases of electricity to replace the
capacity terminated as part of the MRA. These adjustments decreased the cost of
electricity purchased from the IPPs by a net amount of $521.5 million, $128.9
million and $515.5 million for the year ended December 31, 1997, the three
months ended March 31, 1998 and the twelve months ended March 31, 1998,
respectively. The cost of electricity purchased under the restated and amended
contracts for the year ended December 31, 1997 and the twelve months ended March
31, 1998 is based on the first year prices set forth in each of such contracts
applied to purchases of 4,340,376 MW also established in the restated and
amended contracts. The estimated cost of replacement power is based on the
administratively determined SC-6 "buy-back" rate from qualifying facility
projects, as approved by the PSC, applied against 4,645,370 MW and 4,391,791 MW
of market purchases for the year ended December 31, 1997 and the twelve months
ended March 31, 1998, respectively. The weighted average buy-back rate for each
period was approximately 1.8 CENTS per Kwh. A 1.0 CENTS per Kwh change in the
buy-back rate will impact the annual cost of electricity purchased by
approximately $43.4 million. The pro forma adjustments relating to the cost of
electricity purchased under the restated and amended contracts and the cost of
replacement power for the three months ended March 31, 1998 is calculated as one
quarter of the similar adjustments for the twelve months ended March 31, 1998.
(4) To reflect the amortization of the $3.997 billion MRA Regulatory Asset
established as a result of the MRA and the PowerChoice Agreement. Pursuant to
the PowerChoice Agreement, the Company will amortize the MRA Regulatory Asset
generally over ten years. The amortization amounted to $378.0 million, $94.5
million and $378.0 million for the year ended December 31, 1997, the three
months ended March 31, 1998 and the twelve months ended March 31, 1998,
respectively. See "The MRA and the PowerChoice Agreement."
(5) To reflect interest expense, in accordance with the appropriate
regulatory treatment, of $6.4 million, $1.6 million and $6.4 million for the
year ended December 31, 1997, the three months ended March 31, 1998 and the
twelve months ended March 31, 1998, respectively, on a $157.1 million reduction
in the amount of cash compensation paid to the IPP Parties in exchange for
adjustments to the restated contracts pursuant to an amendment to the MRA dated
April 22, 1998, the amount of which is reflected in the MRA Regulatory Asset.
See "The MRA and the Power Choice Agreement."
(6) To reflect the amortization of the total debt issuance costs of
approximately $78.3 million incurred and capitalized in connection with the
Offering. The debt issuance costs will be amortized over the life of the
indebtedness represented by the Offering using the interest method and would
have amounted to $16.5 million, $4.1 million and $16.5 million for the year
ended December 31, 1997, the three months ended March 31, 1998 and the twelve
months ended March 31, 1998, respectively.
(7) To reflect additional interest charges associated with the indebtedness
represented by the Offering and borrowings that would have been drawn under the
Company's receivables facility in order to fund the Company's cash obligations
under the MRA. Interest charges on the indebtedness represented by the Series A
through G Notes were calculated assuming a weighted average interest rate of
7.27% and
22
<PAGE>
amounted to $214.4 million, $53.7 million and $214.4 million for the year ended
December 31, 1997, the three months ended March 31, 1998 and the twelve months
ended March 31, 1998, respectively. A 1/8% change in the assumed interest rate
on the Series A through G Notes would impact interest charges by $3.7 million
per year. The amount of accreted interest on the Senior Discount Notes was
calculated assuming an interest rate of 9% and amounted to $29.0 million, $7.3
million and $29.0 million for the year ended December 31, 1997, the three months
ended March 31, 1998 and the twelve months ended March 31, 1998, respectively,
of which $27.0 million, $6.7 million and $27.0 million, respectively, was
capitalized as part of the MRA Regulatory Asset for such periods. The amount of
the accreted interest that was not deferred to the MRA Regulatory Asset was $2.0
million, $0.6 million and $2.0 million, respectively, for such periods. Further,
interest charges on the additional borrowings under the receivables facility
were calculated assuming an interest rate of 7.5% and amounted to $5.0 million,
$0.0 million and $0.6 million for the year ended December 31, 1997, the three
months ended March 31, 1998 and the twelve months ended March 31, 1998,
respectively.
(8) To reflect a reduction of $68.7 million, $17.3 million and $69.3
million for the year ended December 31, 1997, the three months ended March 31,
1998 and the twelve months ended March 31, 1998, respectively, in federal and
foreign income taxes as a result of the reduction in pro forma income before
federal and foreign income taxes, calculated at the statutory federal income tax
rate of 35.0%. Pro forma income before federal and foreign income taxes is
reduced by $196.3 million, $49.5 million and $197.9 million, respectively, for
such periods as the net result of the pro forma adjustments described in notes
(1) through (7).
(9) To reflect the issuance of approximately 42.9 million shares of Common
Stock to the IPP Parties as part of the consideration paid to them under the
MRA.
(10) EBITDA represents earnings before interest charges, interest income,
income taxes, depreciation and amortization, amortization of nuclear fuel,
allowance for funds used during construction, MRA Regulatory Asset amortization,
non-cash regulatory deferrals and other amortizations and extraordinary items.
EBITDA is presented to provide additional information about the Company's
ability to meet its future requirements for debt service and capital
expenditures. EBITDA should not be considered an alternative to net income as an
indicator of operating performance or an alternative to cash flow as a measure
of liquidity. See the Pro Forma Condensed Statements of Income contained herein
and the Consolidated Statements of Cash Flows incorporated by reference in this
Prospectus.
(11) Net cash interest reflects interest charges plus allowance for funds
used during construction less the non-cash impact of the net amortization of
discount on long-term debt, interest accrued on the Nuclear Waste Act disposal
liability and interest accreted on the Senior Discount Notes that is not
otherwise capitalized less interest income.
(12) For purposes of determining the ratio of EBITDA to net cash interest,
EBITDA and net cash interest are calculated as described above in notes (10) and
(11). The ratio of EBITDA to net cash interest is presented to provide
additional information about the Company's ability to meet its future
requirements for debt service. See the Pro Forma Condensed Statements of Income
contained herein and the Consolidated Statements of Cash Flows incorporated by
reference in this Prospectus.
(13) For purposes of determining the ratio of earnings to fixed charges and
the ratio of earnings to fixed charges and preferred dividend requirements, (i)
earnings consist of income before federal and foreign income taxes plus fixed
charges; (ii) fixed charges consist of interest charges on all indebtedness,
including the portion of rental expense that is representative of the interest
factor; and (iii) preferred dividend requirements include the dividends on all
classes of preferred stock adjusted to a pre-tax basis.
23
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
AT MARCH 31, 1998
----------------------------------------------
<S> <C> <C> <C>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
<CAPTION>
(Dollars in thousands)
<S> <C> <C> <C>
Net utility plant............................................. $ 6,897,664 $ 6,897,664
------------ -------------
Other property and investments................................ 296,976 296,976
------------ -------------
Current Assets:
Cash...................................................... 436,256 $ 3,200,200(1)
(3,644,000)(2)
8,000(3) 456
Other current assets...................................... 829,872 75,000(4)
137,800(5)
(8,000)(3) 1,034,672
------------ ----------------- -------------
1,266,128 (231,000) 1,035,128
------------ ----------------- -------------
MRA Regulatory Asset.......................................... 8,700 3,988,000(6) 3,996,700
Other regulatory assets....................................... 1,165,870 1,165,870
Other assets.................................................. 72,245 71,800(7) 144,045
------------ ----------------- -------------
Total assets................................................ $ 9,707,583 $ 3,828,800 $ 13,536,383
------------ ----------------- -------------
------------ ----------------- -------------
</TABLE>
See accompanying notes to Pro Forma Condensed Balance Sheet
24
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
AT MARCH 31, 1998
---------------------------------------------
<S> <C> <C> <C>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
<CAPTION>
(Dollars in thousands)
<S> <C> <C> <C>
Capitalization:
Common stockholders' equity:
Common stock................................................. $ 144,419 $ 42,900(8) $ 187,319
Capital stock premium and expense............................ 1,780,978 491,100(8) 2,272,078
Retained earnings............................................ 814,560 (123,500)(9) 691,060
------------ ---------------- -------------
2,739,957 410,500 3,150,457
Preferred stock................................................ 516,610 516,610
Long-term debt................................................. 3,418,299 3,272,000(1) 6,690,299
------------ ---------------- -------------
Total capitalization......................................... 6,674,866 3,682,500 10,357,366
Current liabilities............................................ 613,524 613,524
Regulatory liabilities......................................... 239,880 239,880
Other liabilities.............................................. 2,179,313 75,000(4)
137,800(5)
(66,500)(9) 2,325,613
------------ ---------------- -------------
Total liabilities and stockholders' equity................... $ 9,707,583 $ 3,828,800 $ 13,536,383
------------ ---------------- -------------
------------ ---------------- -------------
</TABLE>
See accompanying notes to Pro Forma Condensed Balance Sheet
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
The following notes set forth the explanations and assumptions used and
adjustments made in preparing the unaudited Pro Forma Condensed Balance Sheet at
March 31, 1998. The unaudited Pro Forma Condensed Balance Sheet should be read
in conjunction with the historical Consolidated Financial Statements and the
notes thereto incorporated by reference in this Prospectus.
The adjustments described below are based on the assumptions and preliminary
estimates described therein and are subject to change. These statements do not
purport to be indicative of the financial position of the Company as of such
date, nor are they indicative of future results. Furthermore, this unaudited Pro
Forma Condensed Balance Sheet does not reflect anticipated changes, other than
the consummation of the MRA and the Offering, and the principal terms of the
PowerChoice Agreement excluding the Genco Divestiture, which may occur as the
result of operating activities before and after the effective date of the MRA,
the Offering, the PowerChoice Agreement and other matters. All of the following
adjustments are based on the assumption that the consummation of the MRA and the
Offering, and the principal terms of the PowerChoice Agreement excluding the
Genco Divestiture had occurred on March 31, 1998.
The unaudited Pro Forma Condensed Balance Sheet includes the following pro
forma adjustments based on the assumptions described below:
(1) To reflect the gross cash proceeds of $3.272 billion received by the
Company from the Offering, reduced for the payment of the remaining debt
issuance costs estimated by the Company to be approximately $71.8 million.
(2) To reflect the cash compensation of $3.631 billion paid to the IPP Parties
pursuant to the terms of the MRA and payment of $13.0 million in other remaining
expenses related to the MRA. Approximately $8.7 million of other expenses had
been incurred and capitalized as the MRA Regulatory Asset as of March 31, 1998.
(3) To reflect partial usage of the Company's receivables facility in light of
the liquidity requirements presented in the Pro Forma Condensed Balance Sheet.
Such adjustment is representative of the Company's normal cash management
practices.
(4) To record the reversal of $75.0 million of estimated federal income tax
payments which would not have been made as a result of the deduction of payments
made in connection with the MRA.
(5) To record a federal income tax receivable of $137.8 million, based on the
net operating loss which would have been generated and carried back two years
for income tax purposes. The net loss for income tax purposes results from the
current deduction for income tax purposes of the full amount of the
consideration, including cash and Common Stock, paid to the IPP Parties pursuant
to the MRA. See "Risk Factors--Federal Income Tax Implications of MRA to the
Company."
(6) To reflect the establishment of a $3.997 billion MRA Regulatory Asset
representing the recoverable costs of the MRA consisting of (i) the cash
compensation of $3.631 billion paid to the IPP Parties; (ii) the issuance of
approximately 42.9 million shares of Common Stock valued at an aggregate of
$344.0 million or $8.00 per share, based on the limitation on the amount of the
MRA Regulatory Asset, as set forth in the PSC Order; and (iii) other remaining
expenses of $13.0 million related to the MRA. Approximately $8.7 million of
other expenses had been incurred and capitalized as the MRA Regulatory Asset as
of March 31, 1998. The MRA Regulatory Asset was established pursuant to the
PowerChoice Agreement and will be amortized generally over ten years. See "The
MRA and the PowerChoice Agreement."
(7) To reflect the capitalization of the estimated remaining debt issuance
costs of approximately $71.8 million resulting from the Offering.
26
<PAGE>
(8) To reflect the issuance of approximately 42.9 million shares of Common
Stock to the IPP Parties pursuant to the MRA. These shares will be valued at the
price of the Common Stock on the date of the consummation of the MRA. For
purposes of developing the Pro Forma Condensed Balance Sheet, the Company used
the price of the Common Stock at the close of business on March 26, 1998, or
$12 7/16. This adjustment to common stockholders' equity will change based on
the price of the Common Stock on the date of the consummation of the MRA.
(9) To reflect the charge to earnings and related tax benefit associated with
the PSC's limitation of the amount of the MRA Regulatory Asset that can be
recovered from customers. The amount represents the product of the difference
between $8 and the closing price of the Common Stock on March 26, 1998 of
$12 7/16 multiplied by approximately 42.9 million shares. The ultimate amount of
the charge to expense will be based upon the Company's closing Common Stock
price on the date of the MRA closing.
27
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table presents certain historical financial and operating data
of the Company as of the dates and for the periods indicated. The historical
financial data as of the end of and for each of the five years in the period
ended December 31, 1997 are derived from the audited Consolidated Financial
Statements of the Company. The historical financial data as of and for the three
months ended March 31, 1997 and March 31, 1998 are derived from the unaudited
financial statements of the Company, which in the opinion of management, contain
all adjustments necessary for a fair presentation thereof.
The selected historical financial data presented below should be read in
conjunction with the Consolidated Financial Statements of the Company, including
the notes thereto, appearing elsewhere or incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Operating revenues:
Electric.............................. $3,332,464 $3,528,987 $3,335,548 $3,308,979 $3,309,441 $ 877,369 $ 863,169
Gas................................... 600,967 623,191 581,790 681,674 656,963 286,463 235,235
--------- --------- --------- --------- --------- --------- ---------
3,933,431 4,152,178 3,917,338 3,990,653 3,966,404 1,163,832 1,098,404
--------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Fuel for electric generation.......... 231,064 219,849 165,929 181,486 179,455 37,465 47,198
Electricity purchased:
IPP............................... 745,335 966,724 1,011,518 1,052,298 1,105,970 298,211 299,938
Others............................ 118,178 140,409 126,419 130,594 130,138 30,592 24,412
Gas purchased......................... 326,273 315,714 276,232 370,040 345,610 148,631 115,452
Other operation and maintenance....... 1,057,580 957,377 817,897 928,224 835,282 206,665 262,362
Employee reduction program............ -- 196,625 -- -- -- -- --
Depreciation and amortization......... 276,623 308,351 317,831 329,827 339,641 84,222 87,950
Other taxes........................... 491,363 496,922 517,478 475,846 471,469 126,109 126,795
--------- --------- --------- --------- --------- --------- ---------
3,246,416 3,601,971 3,233,304 3,468,315 3,407,565 931,895 964,107
--------- --------- --------- --------- --------- --------- ---------
Operating income......................... 687,015 550,207 684,034 522,338 558,839 231,937 134,297
Other income............................. 14,154 17,204 3,069 35,943 24,997 7,100 4,225
--------- --------- --------- --------- --------- --------- ---------
Income before interest charges........... 701,169 567,411 687,103 558,281 583,836 239,037 138,522
Interest charges......................... 282,263 278,958 279,674 278,033 273,906 67,538 65,590
--------- --------- --------- --------- --------- --------- ---------
Income before federal and foreign income
taxes.................................. 418,906 288,453 407,429 280,248 309,930 171,499 72,932
Federal and foreign income taxes......... 147,075 111,469 159,393 102,494 126,595 68,477 52,569
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary item......... 271,831 176,984 248,036 177,754 183,335 103,022 20,363
Extraordinary item....................... -- -- -- (67,364) -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................... 271,831 176,984 248,036 110,390 183,335 103,022 20,363
Dividends on preferred stock............. 31,857 33,673 39,596 38,281 37,397 9,399 9,223
--------- --------- --------- --------- --------- --------- ---------
Balance available for common stock....... $ 239,974 $ 143,311 $ 208,440 $ 72,109 $ 145,938 $ 93,623 $ 11,140
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Average number of shares of common stock
outstanding (in thousands)............. 140,417 143,621 144,329 144,350 144,404 144,389 144,419
Basic and diluted earnings per average
share of common stock before
extraordinary item..................... $ 1.71 $ 1.00 $ 1.44 $ 0.97 $ 1.01 $ 0.65 $ 0.08
Extraordinary item per average share of
common stock........................... $ -- $ -- $ -- $ (0.47) $ -- $ -- $ --
Basic and diluted earnings per average
share of common stock.................. $ 1.71 $ 1.00 $ 1.44 $ 0.50 $ 1.01 $ 0.65 $ 0.08
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
EBITDA(1).............................. $ 950,099 $1,029,865 $ 929,130 $ 957,549 $ 961,502 $ 358,863 $ 222,273
Net cash interest(2)................... 271,116 261,655 260,548 244,501 226,890 56,305 54,783
Capital expenditures(3)................ 519,612 490,124 345,804 352,049 290,757 53,552 132,354
Ratio of EBITDA to net cash
interest(4).......................... 3.5x 3.9x 3.6x 3.9x 4.2x 6.4x 4.1x
Ratio of earnings to fixed
charges(5)........................... 2.3x 1.9x 2.3x 1.6x 2.0x 3.4x 2.1x
Ratio of earnings to fixed charges and
preferred dividend requirements(5)... 2.0x 1.6x 1.9x 1.3x 1.7x 2.8x 1.4x
BALANCE SHEET DATA (AT END OF PERIOD):
Net utility plant...................... $6,877,292 $7,035,643 $7,007,853 $6,957,615 $6,868,044 $6,919,730 $6,897,664
Total assets........................... 9,471,327 9,649,816 9,477,869 9,427,635 9,584,141 9,515,010 9,707,583
Total long-term debt, including current
portion.............................. 3,474,797 3,375,845 3,647,478 3,525,963 3,484,476 3,523,412 3,485,364
Preferred stock, including current
portion.............................. 440,400 556,950 546,000 535,600 526,730 535,600 526,730
Common stockholders' equity............ 2,456,465 2,462,398 2,513,952 2,585,572 2,727,527 2,676,890 2,739,957
</TABLE>
- - ------------------------
(1) EBITDA represents earnings before interest charges, interest income, income
taxes, depreciation and amortization, amortization of nuclear fuel,
allowance for funds used during construction, non-cash regulatory deferrals
and other amortizations and extraordinary items. EBITDA is presented to
provide additional information about the Company's ability to meet its
future requirements for debt service and capital expenditures. EBITDA should
not be considered an alternative to net income as an indicator of operating
performance or an alternative to cash flow as a measure of liquidity. See
the Consolidated Statements of Cash Flows incorporated by reference in this
Prospectus.
(2) Net cash interest reflects interest charges plus allowance for funds used
during construction less the non-cash impact of the net amortization of
discount on long-term debt and interest accrued on the Nuclear Waste Policy
Act disposal liability less interest income.
(3) Capital expenditures consist of amounts for the Company's construction
program related to its transmission, distribution and generation operations
(including nuclear fuel, related allowance for funds used during
construction and capitalized overhead expenses), and the amounts incurred to
comply with the Clean Air Act and other environmental requirements.
(4) For purposes of determining the ratio of EBITDA to net cash interest, EBITDA
and net cash interest are calculated as described above in notes (1) and
(2). The ratio of EBITDA to net cash interest is presented to provide
additional information about the Company's ability to meet its future
requirements for debt service. See the Consolidated Statements of Cash Flows
incorporated by reference in this Prospectus.
(5) For purposes of determining the ratio of earnings to fixed charges and the
ratio of earnings to fixed charges and preferred dividend requirements, (i)
earnings consist of income before federal and foreign income taxes plus
fixed charges; (ii) fixed charges consist of interest charges on all
indebtedness, including the portion of rental expense that is representative
of the interest factor; and (iii) preferred dividend requirements include
the dividends on all classes of preferred stock adjusted to a pre-tax basis.
29
<PAGE>
MANAGEMENT'S DISCUSSION OF
PRO FORMA CONDENSED FINANCIAL STATEMENTS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, OTHER INFORMATION INCLUDED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, INCLUDING THE UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS AND THE NOTES THERETO. CERTAIN STATEMENTS IN THE
FOLLOWING DISCUSSION ARE FORWARD-LOOKING STATEMENTS OR DISCUSSIONS OF TRENDS
WHICH BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES THAT COULD
SIGNIFICANTLY AFFECT EXPECTED RESULTS. ACTUAL RESULTS AND TRENDS IN THE FUTURE
MAY DIFFER MATERIALLY FROM THOSE DESCRIBED HEREIN DEPENDING ON A VARIETY OF
FACTORS, INCLUDING THOSE DETAILED UNDER THE CAPTION "RISK FACTORS" AND ELSEWHERE
IN THIS PROSPECTUS.
The unaudited Pro Forma Condensed Financial Statements give effect to (i)
the consummation of the MRA; (ii) the consummation of the Offering; (iii) the
issuance of approximately 42.9 million shares of Common Stock to the IPP
Parties; and (iv) the principal terms of the PowerChoice Agreement, including
the first year impact of a three year rate reduction intended to reduce the
Company's revenues by $111.8 million (exclusive of reductions in the GRT) by the
time it is fully phased in over three years, and the establishment of the MRA
Regulatory Asset which will be amortized by the Company generally over ten
years. The unaudited Pro Forma Condensed Financial Statements do not give effect
to the Genco Divestiture or certain elements of the PowerChoice Agreement that
are not material to the financial results of the Company. The Company is unable
at this time to predict either the timing of the Genco Divestiture or the amount
of proceeds that the Company will receive. In the event that unacceptable bids
are received for any or all of the generating facilities, the Company may spin
off such assets to its shareholders. The net book value of the fossil and hydro
generating facilities at March 31, 1998 was approximately $1.1 billion.
On a pro forma basis after giving effect to the consummation of the MRA and
the Offering, and the principal terms of the PowerChoice Agreement excluding the
Genco Divestiture, the Company's revenues for the year ended December 31, 1997,
the three months ended March 31, 1998 and the twelve months ended March 31, 1998
would have declined by approximately $95.5 million, $23.9 million and $95.5
million, respectively, to $3.9 billion, $1.1 billion and $3.8 billion,
respectively. On a historical basis, the Company's revenues were $4.0 billion,
$1.1 billion and $3.9 billion, respectively, for such periods. This reduction in
revenues reflects the first year's phase-in of a three year rate reduction
intended to reduce the Company's electric revenues by $111.8 million (exclusive
of reductions in the GRT) by the time it is fully phased in over three years, as
well as a deferral of revenues required by the PSC Order representing the
difference between the assumed weighted average interest rate for the Series A
through G Notes used by the Company in preparing its PowerChoice proposal as
compared to current estimates of the same. The actual rate reductions and level
of revenues in 1998 and other years will be dependent upon numerous factors such
as the volume of electricity sold and the timing of the rate reductions.
Pursuant to the MRA, 18 PPAs representing approximately 1,100 MW of electric
generating capacity are to be terminated. Such electric generating capacity will
be replaced with purchases in the spot market for electricity at prices
significantly less than the contracted prices under such terminating PPAs. In
addition, eight PPAs representing approximately 541 MW of electric generating
capacity will be restated and amended on economic terms and conditions which the
Company believes are more favorable to it than the terms of the existing PPAs
subject to the MRA. Additionally, one PPA representing 42 MW of capacity will be
amended to reflect a shorter term (17 years) and a lower stream of fixed unit
prices. As a result, on a pro forma basis, the Company's cost of electricity
purchased from the IPPs for the year ended December 31, 1997, the three months
ended March 31, 1998 and the twelve months ended March 31, 1998 would have
declined by approximately $521.5 million, $128.9 million and $515.5 million,
respectively, to $584.5 million, $171.1 million and $592.2 million,
respectively. On a historical basis, the Company's cost of electricity purchased
from the IPPs was $1.1 billion, $300.0 million and $1.1 billion, respectively,
for such periods.
30
<PAGE>
Pursuant to the PowerChoice Agreement, the compensation paid to the IPP
Parties in the form of cash and Common Stock will be capitalized and carried on
the Company's balance sheet as the MRA Regulatory Asset. The net amount which
will be initially recorded and subsequently amortized generally over a ten year
period has been limited by the PSC to approximately $4.0 billion. On a pro forma
basis, the amortization of the MRA Regulatory Asset would have amounted to
$378.0 million, $94.5 million and $378.0 million for the year ended December 31,
1997, the three months March 31, 1998 and the twelve months ended March 31,
1998, respectively. No such amortization charge was recorded in the historical
income statements for such periods.
The Company's operating income on a pro forma basis would have increased by
$48.0 million, $10.5 million and $42.0 million to $606.8 million, $144.8 million
and $503.2 million, respectively, for the year ended December 31, 1997, the
three months ended March 31, 1998 and the twelve months ended March 31, 1998,
respectively. On a historical basis, the Company's operating income was $558.8
million, $134.3 million and $461.2 million, respectively, for such periods. This
increase reflects the net positive impact resulting from the significant
reduction in the Company's cost of electricity purchased from the IPPs which
more than offsets the decline in revenues and amortization of the MRA Regulatory
Asset.
The estimated additional interest charges and amortization of debt issuance
costs associated with the MRA Financing and usage of the Company's receivables
facility would have increased interest charges on a pro forma basis by
approximately $237.9 million, $58.4 million and $233.5 million to $511.8
million, $124.0 million and $505.5 million, respectively, for the year ended
December 31, 1997, the three months ended March 31, 1998 and the year ended
March 31, 1998. On a historical basis, the Company recorded interest charges of
$273.9 million, $65.6 million and $272.0 million, respectively, for such
periods.
The Company's net income on a pro forma basis would have declined by $127.6
million, $32.2 million and $128.6 million to a net income (loss) of $55.7
million, $(11.8) million and $(27.9) million, respectively, for the year ended
December 31, 1997, the three months ended March 31, 1998 and the twelve months
ended March 31, 1998, respectively. On a historical basis, the Company reported
net income of $183.3 million, $20.4 million and $100.7 million, respectively,
for such periods. This decline in net income reflects the above described
decrease in revenues, the amortization of the MRA Regulatory Asset and an
increase in interest charges, which more than offset the decrease in the cost of
electricity purchased from the IPPs.
As a result of the MRA, the Company would have recognized and deducted in
the current year for income tax purposes, an amount representing the total
compensation paid to the IPP Parties, including the cash and market value of the
Common Stock issued to the IPP Parties. This deduction would have created a net
operating loss which would have been carried back two years resulting in a
federal income tax refund and would have been carried forward to effectively
reduce federal income taxes paid in future years. The impact of such NOL would
have been to increase the amount of cash available to the Company until such NOL
is fully utilized.
LIQUIDITY AND CAPITAL RESOURCES
The Pro Forma Condensed Financial Statements demonstrate significant
improvement in the Company's liquidity and capital resources by comparison to
the Company's historical financial statements. Under the MRA, the Company is
able to replace long-term escalating payment obligations to the IPP Parties with
the indebtedness represented by the Offering and a portfolio of restated or
amended shorter-term PPAs with pricing and terms that are more favorable than
the existing PPAs that are subject to the MRA. On a pro forma basis, the
Company's EBITDA would increase by $465.2 million, $114.8 million and $459.2
million to $1.4 billion, $337.1 million, and $1.3 billion, respectively, for the
year ended December 31, 1997, the three months ended March 31, 1998 and the
twelve months ended March 31, 1998, respectively. On a historical basis, the
Company's EBITDA was $961.5 million, $222.3 million and $859.7 million,
respectively, for such periods. This change results primarily from a decrease in
the cost of electricity purchased from the IPPs due to the termination,
restatement or amendment of PPAs pursuant
31
<PAGE>
to the MRA. In addition, the Company would have available additional borrowings
of $275.0 million under the Credit Facility and, under the financial covenants
set forth in the Indenture, will have the ability, to incur up to an additional
$ billion of indebtedness.
The Company's principal short-term and long-term liquidity requirements are
expected to consist of the payment of interest on and retirement of the First
Mortgage Bonds and the indebtedness represented by the Offering, the payment of
dividends on and the redemption of the Company's Preferred Stock and capital
expenditures required to maintain the Company's transmission and distribution
systems. In addition, the Company is currently negotiating to extend the
expiration of its Credit Facility from June 30, 1999 to August 1, 2000. The
Company anticipates that internally generated funds will be sufficient to meet
its capital expenditure requirements, provide for the payment of interest
charges and preferred dividends and the retirement of debt and preferred stock
at maturity, and enable the Company to meet other contingencies that may occur,
such as compliance with environmental regulation.
32
<PAGE>
THE MRA AND THE POWERCHOICE AGREEMENT
OVERVIEW
On March 20, 1998, the Company received written approval from the PSC for
the PowerChoice Agreement which establishes a five-year rate plan and
incorporates the terms of the MRA. The key terms of the PowerChoice Agreement
include: (i) a revenue reduction of $111.8 million (exclusive of reductions in
the GRT) for all customer classes to be phased in over three years beginning
upon the consummation of the MRA; (ii) a mechanism to cap prices to electric
customers in years four and five of the five-year term; (iii) an allowance for
the Company to recover stranded costs (including the recoverable costs
associated with the MRA); (iv) the permission to establish the MRA Regulatory
Asset, reflecting the recoverable costs of the MRA which will be amortized
generally over ten years; (v) an agreement by the Company to divest its fossil
and hydro electric generating facilities within a defined time period and retain
its nuclear generating facilities with a commitment to explore their divestiture
at a later date; and (vi) an agreement by the Company to provide its retail
electric customers with the option to choose their supplier of electricity by no
later than December 1999.
THE MRA
The closing of the Offering is expected to occur concurrently with and is
contingent upon the closing of the MRA. Pursuant to the MRA, the Company has
reached an agreement with 14 IPPs to terminate, restate or amend 27 PPAs in
exchange for approximately $3.6 billion of cash and approximately 42.9 million
shares of Common Stock. The Common Stock to be received by the IPP Parties will
represent approximately 23% of the Company's outstanding shares following such
issuance. The cash payment to the IPP Parties will be funded from the proceeds
of the Offering together with cash on hand. The principal effects of the MRA are
to significantly reduce the Company's existing payment obligations under the
PPAs, which consisted of approximately 2,700 MW of capacity in aggregate for all
existing PPAs at March 31, 1998.
The Company expects that the MRA will result in a significant improvement in
cash flow resulting from the reduction in the payment obligation (both in
nominal dollars and PPA duration) under the existing PPAs. The savings in annual
energy payments will yield significant free cash flow that can be dedicated to
the repayment of the Notes.
Under the terms of the MRA, the Company's significant long-term and
escalating IPP payment obligations will be restructured into a more manageable
debt obligation and a portfolio of restated and amended PPAs with price and
duration terms that the Company believes are more favorable than the existing
PPAs. Under the MRA, 18 PPAs representing approximately 1,100 MW of electric
generating capacity will be terminated completely, thus allowing this capacity
to be replaced through the competitive market at market-based prices. The
Company has no continuing obligation to purchase energy from the terminating
IPPs. Also under the MRA, eight PPAs representing approximately 541 MW of
capacity will be restated on economic terms and conditions which the Company
believes are more favorable to it than the terms of the existing PPAs subject to
the MRA. The restated PPAs will have shorter terms (ten years) and will be
structured as financial swap contracts where the Company receives or makes
payments to the IPP Parties based upon the differential between the contract
price and a market reference price for electricity. The contract prices are
fixed for the first two years changing to an indexed pricing formula thereafter.
Contract quantities are fixed for the full ten year term of the contracts. The
indexed pricing structure ensures that the price paid for energy and capacity
will fluctuate relative to the underlying market cost of gas and general indices
of inflation. Until such time as a competitive energy market structure becomes
operational in the State of New York, the amended and restated contracts provide
the IPP Parties with a put option for the physical delivery of energy.
Additionally, one PPA representing 42 MW of capacity will be amended to reflect
a shorter term (17 years) and a lower stream of fixed unit prices. The Company's
33
<PAGE>
expected future commitment under the restated and amended contracts ranges from
approximately $210 million in the first year to $290 million in the tenth year.
Against the Company's forecast of market energy prices, the amended and
restated PPAs represent an expected above-market payment obligation. The Company
believes, however, that its portfolio of amended and restated PPAs could provide
it and its customers with a hedge against significant upward movement in market
prices for electricity. The portfolio of amended and restated PPAs and market
purchases contain terms that are more responsive than the existing PPAs to
competitive market price changes.
Upon consummation of the MRA, the IPP Parties are expected to own up to
approximately 42.9 million shares of the Common Stock, representing up to 23% of
the Company's voting securities. Pursuant to the MRA, any IPP Party that
receives 2% or more of the outstanding Common Stock and any designee of IPP
Parties that receives more than 4.9% of the outstanding Common Stock upon the
consummation of the MRA will, together with certain but not all affiliates
(collectively, "2% Shareholders"), enter into certain shareholder agreements
(the "Shareholders Agreements"). Pursuant to each Shareholder Agreement, the 2%
Shareholders agree that for five years from the consummation of the MRA they
will not acquire more than an additional 5% of the outstanding Common Stock
(resulting in ownership in all cases of no more than 9.9%) or take any actions
to attempt to acquire control of the Company, other than certain permitted
actions in response to unsolicited actions by third parties. The 2% Shareholders
generally vote their shares on a "pass-through" basis, in the same proportion as
all shares held by other shareholders are voted, except that they may vote in
their discretion (i) for extraordinary transactions and (ii) for directors when
there is a pending proposal to acquire the Company. The terms of the MRA have
been amended so that the Company will sell some portion of the 42.9 million
shares of Common Stock to the public and deliver the net proceeds to the IPP
Parties.
THE POWERCHOICE AGREEMENT
The PowerChoice Agreement, which was approved by the PSC on March 20, 1998,
establishes a five-year rate plan that will reduce average residential and
commercial rates by an aggregate of 3.2% over the first three years. The rate
plan will take effect within 30 days of approval by the PSC of the tariffs
implementing PowerChoice, but in no case earlier than the MRA closing. The
reduction in prices will include certain savings that will result from partial
reductions of the GRT. Industrial customers will see average reductions of 25%
relative to 1995 price levels; these decreases will include discounts currently
offered to some industrial customers through optional and flexible rate
programs. The cumulative rate reductions, exclusive of GRT savings, are
estimated to be $111.8 million, to be phased in over the first three years of
the agreement. During the term of the PowerChoice Agreement, the Company will be
permitted to defer certain costs associated primarily with environmental
remediation, nuclear decommissioning and related costs, and changes in laws,
regulations, rules and orders. The Company must also defer, during the term of
the PowerChoice Agreement, the difference between the assumed weighted average
interest rate of 8.5% used by the Company to prepare its PowerChoice proposal
and the actual weighted average interest rate for the Series A through G Notes.
In years four and five of its rate plan, the Company can request an annual
increase in prices subject to a cap of 1% of the all-in price, excluding
commodity costs (e.g., transmission, distribution, nuclear, and forecasted CTC).
In addition to the price cap, the PowerChoice Agreement provides for the
recovery of deferrals established in years one through four and cost variations
resulting from indexing provisions of the MRA financial contracts. The aggregate
of the price cap increase and recovery of deferrals is subject to an overall
limitation of inflation.
Under the terms of the PowerChoice Agreement, all of the Company's customers
will be able to choose their electricity supplier in a competitive market by
December 1999. The Company will continue to distribute electricity through its
transmission and distribution systems and would be obligated to be the so-called
provider of last resort for those customers who do not exercise their right to
choose a new electricity supplier.
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<PAGE>
The PowerChoice Agreement provides that the MRA and the contracts executed
pursuant thereto are found to be prudent. The PowerChoice Agreement further
provides that the Company shall have a reasonable opportunity to recover its
stranded costs, including those associated with the MRA and the contracts
executed thereto, through a CTC and, under certain circumstances, through exit
fees or in rates for back-up service.
The PSC has limited the amount of the MRA Regulatory Asset that can be
recovered from customers to approximately $4.0 billion. The MRA Regulatory Asset
represents the recoverable costs of the MRA, consisting of the cash compensation
paid to the IPP Parties, the issuance of approximately 42.9 million shares of
Common Stock, and other expenses related to the MRA. The ultimate amount of the
MRA Regulatory Asset may vary based on certain events related to the closing of
the MRA. Because the value of the consideration to be paid to the IPP Parties
can only be determined at the closing of the MRA, the value of the limitation on
the recoverability of the MRA Regulatory Asset is expected to be recorded as a
charge to expense in the second quarter of 1998 upon the MRA closing. The charge
to expense will be determined as the difference between $8 per share and the
Company's closing Common Stock price on the date the MRA closes. Using the
Company's Common Stock price on March 26, 1998 of $12 7/16 per share, the charge
to expense would be approximately $190.0 million.
The PowerChoice Agreement calls for the Company to divest all its fossil and
hydro generating facilities and prohibits the Company from owning non-nuclear
generating assets within the State of New York except as described below. The
Genco Divestiture is intended to be accomplished through an auction, the plan
for which was approved by the PSC in an order dated May 6, 1998. Winning bids
are expected to be selected in the fall of 1998. The Company will retain a
portion of the auction sale proceeds, above specified levels, as an incentive to
obtain maximum value in the sale. This incentive would be recovered from sale
proceeds. The Company agreed that if it does not receive an acceptable bid for
an asset, the Company will form a subsidiary to hold any such asset and then
will legally separate this subsidiary from the Company through a spin-off to
shareholders or otherwise. If a bid of zero or below is received for an asset,
the Company may keep the asset as part of its regulated business. The auction
process will serve to quantify any stranded costs associated with the Company's
fossil and hydro generating facilities. The Company will have a reasonable
opportunity to recover these costs through the CTC and, under certain
circumstances, through exit fees or in rates for back-up service. The Company
intends to use any cash proceeds from such an auction to repay indebtedness.
The PowerChoice Agreement contemplates that the Company's nuclear plants
will remain part of the Company's regulated business. The Company has been
supportive of the creation of a statewide New York Nuclear Operating Company
that it expects would improve the efficiency of nuclear units throughout the
state. The PowerChoice Agreement stipulates that absent such a statewide
solution, the Company will file a detailed plan for analyzing other proposals
regarding its nuclear facilities, including the feasibility of an auction,
transfer and/or divestiture of such facilities, within 24 months of approval of
the PowerChoice Agreement.
The PowerChoice Agreement also allows the Company to form a holding company
at its election. The Company is seeking approval from its shareholders for the
formation of a holding company. The implementation of a holding company
structure, if approved by the Company's shareholders, would only occur following
various regulatory approvals.
35
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Notes will be issued pursuant to an Indenture to be entered into between
the Company and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee").
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The Notes are subject to all such terms, and
prospective purchasers of Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. A copy of the proposed form of Indenture has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The definitions of certain capitalized terms used in the Indenture and in
the following summary are set forth below under "--Definitions."
The Notes will be senior unsecured obligations of the Company and will rank
PARI PASSU in right of payment to all existing and future Senior Indebtedness of
the Company. Upon completion of the offering hereunder, the Company will have
outstanding approximately $6.8 billion of Senior Indebtedness, consisting
primarily of $2.8 billion of First Mortgage Bonds, which are secured by a lien
on substantially all of the Company's utility property, $529.0 million of
borrowings under the Credit Facility, which are secured with First Mortgage
Bonds, $20.0 million of unsecured Medium Term Notes and the Notes. In addition,
the Company will have available up to an additional $275.0 million under the
Credit Facility. Upon completion of the Offering, the Company will not have any
outstanding Subordinated Indebtedness. Under the Indenture, the Company may in
the future issue additional First Mortgage Bonds, including in connection with a
refinancing of the Credit Facility, and additional series of Notes, as well as
Subordinated Indebtedness, subject to certain exceptions described below.
PRINCIPAL, MATURITY AND INTEREST
The Indenture permits the Company to issue Notes in one or more series and
in an unlimited amount. Except for the Notes offered hereby, each series of
Notes will be created and established by a Supplemental Indenture which shall
specify the terms of such Notes.
SERIES A THROUGH G NOTES
Each series of Notes offered hereby will be limited in aggregate principal
amount, will mature on (i) July 1, in the case of Series A, C and E Notes, and
(ii) October 1, in the case of Series B, D, F and G Notes, of the year, and will
bear interest at the rate set forth opposite such series below:
<TABLE>
<CAPTION>
SERIES PRINCIPAL AMOUNT INTEREST RATE MATURITY
- - ---------- ---------------- ------------- -----------
<S> <C> <C> <C>
Series A $300.0 million % 1999
Series B $450.0 million % 2000
Series C $400.0 million % 2001
Series D $400.0 million % 2002
Series E $400.0 million % 2003
Series F $400.0 million % 2005
Series G $600.0 million % 2008
</TABLE>
36
<PAGE>
Interest on the Series A, C and E Notes will be payable in cash
semi-annually in arrears on January 1 and July 1 of each year, commencing on
January 1, 1999, to holders of record on the immediately preceding December 15
and June 15. Interest on the Series B, D, F and G Notes will be payable in cash
semi-annually in arrears on April 1 and October 1 of each year, commencing on
October 1, 1998, to holders of record on the immediately preceding March 15 and
September 15. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The Series A through G Notes will be issued
in denominations of $1,000 and integral multiples thereof.
SENIOR DISCOUNT NOTES
The Senior Discount Notes initially will be limited in aggregate principal
amount at maturity to $500.0 million and will mature on July 1, 2010. The Senior
Discount Notes will be issued at a substantial discount from their principal
amount at maturity in order to generate gross proceeds of $ million. Until
July 1, 2003, no interest will accrue on the Senior Discount Notes, but the
Accreted Value will increase (representing amortization of original issue
discount) between the date of original issuance and July 1, 2003, on a
semi-annual bond equivalent basis using a 360-day year comprised of twelve
30-day months, such that the Accreted Value shall be equal to the full principal
amount at maturity of the Senior Discount Notes on July 1, 2003. Thereafter,
interest on the Senior Discount Notes will accrue at the rate of % per annum
and will be payable in cash semi-annually in arrears on January 1 and July 1 of
each year, commencing on January 1, 2004. Interest on the Senior Discount Notes
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from July 1, 2003. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. The Senior Discount
Notes will be issued in denominations of $1,000 and integral multiples thereof.
MANDATORY REDEMPTION
Except as provided under "--Change of Control," the Company is not required
to make mandatory repurchase, redemption or sinking fund payments with respect
to the Notes prior to maturity. Under certain circumstances, the Company may be
required to make an offer to repurchase the Notes. See "Certain
Covenants--Proceeds of Certain Asset Sales."
OPTIONAL REDEMPTION
The Notes in Series A through G will be redeemable at the option of the
Company at any time, in whole or in part, upon not less than 30 nor more than 60
days' notice, in cash at a redemption price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, through the
applicable redemption date plus the Make-Whole Premium. The Senior Discount
Notes will be redeemable at the Company's option prior to July 1, 2003 at any
time, in whole or in part, upon not less than 30 and not more than 60 days'
notice, in cash at a redemption price equal to 100% of the Accreted Value
thereof plus the Make-Whole Premium. On or after July 1, 2003, the Company, at
its option, may redeem, in whole or in part, the Senior Discount Notes, upon not
less than 30 nor more than 60 days' notice, in cash at the respective redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest thereon through the applicable redemption date, if
redeemed during the twelve-month period beginning on July 1 of the years
indicated below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- - -------------------------------------------------------------------------------------- -----------
<S> <C>
2003.................................................................................. %
2004.................................................................................. %
2005.................................................................................. %
2006 and thereafter................................................................... 100.0 %
</TABLE>
37
<PAGE>
SPECIAL REDEMPTION
Notwithstanding the Optional Redemption provisions above, the Company may,
at its option, by delivering a notice of redemption at any time during the
period from April 1, 1999 through December 31, 2000, use the Net Proceeds from
any sale or sales of Fossil and Hydro Generating Assets to redeem up to $500.0
million aggregate principal amount of the Notes in Series B through F at a cash
redemption price equal to 100% of the principal amount thereof plus accrued
interest thereon, if any, to the date of redemption. The Company shall effect a
redemption of Notes pursuant to this provision such that, following such
redemption, the percentage of Notes in each of Series B through F that remain
outstanding (calculated for each series by dividing the aggregate principal
amount of Notes outstanding by the aggregate principal amount of Notes
originally issued) is as near to identical as reasonably practicable. Any such
redemption must occur within 120 days following the receipt by the Company of
the Net Proceeds that are being used to effect the redemption.
SELECTION AND NOTICE
If less than all the Notes in any series are to be redeemed at any time,
selection of Notes of such series for redemption will be made by the Trustee, on
a pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate; provided that no Notes in denominations of
$1,000 or less shall be redeemed in part. Notices of redemption shall be mailed
by first class mail at least 30 but not more than 60 days prior to the
redemption date to each holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on the Notes or portions thereof called for redemption.
CHANGE OF CONTROL
No earlier than 30 days nor later than 60 days after the date upon which the
Company mails a written notice to the holders of the occurrence of a Change of
Control Triggering Event, each holder of Notes will have the right to require
the Company to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of such holder's Notes pursuant to an offer by the Company
(the "Change of Control Offer") at an offer price in cash equal to (a) 101% of
the aggregate principal amount thereof in the case of the Series A through G
Notes, or (b) 101% of the Accreted Value of the Senior Discount Notes (if such
repurchase occurs prior to July 1, 2003) or (c) 101% of the principal amount at
maturity of the Senior Discount Notes (if such repurchase occurs on or after
July 1, 2003), plus accrued and unpaid interest thereon, if any, through the
date of purchase. The Company will mail or cause to be mailed notice of the
Change of Control Offer to each holder of the Notes within 30 days following any
Change of Control Triggering Event, which will (i) state that a Change of
Control Offer is being made and that all Notes tendered will be accepted for
payment and (ii) offer to repurchase the Notes during the time period and for
the purchase price referred to above pursuant to the procedures required by the
Indenture and described in such notice.
The Company's ability to pay cash to the holders of the Notes upon a
repurchase may be limited by the Company's then existing financial resources.
There can be no assurance that the Company will have sufficient funds to
repurchase the Notes following a Change of Control Triggering Event. Except as
described above with respect to a Change of Control Triggering Event, the
Indenture does not contain provisions that permit the holder of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring, including highly leveraged
transactions that could reduce the creditworthiness of the Company.
The Company will comply with the requirements of Rule 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other
securities laws and regulations thereunder to the
38
<PAGE>
extent such laws and regulations are applicable in connection with any
repurchase or redemption of the Notes as a result of a Change of Control
Triggering Event.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture will provide that, prior to the Investment Grade Date, the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, (i) declare or pay any dividend or make any cash
dividend or other distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests, including, without limitation, any
payment in connection with any merger or consolidation involving the Company
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or any portion of a dividend or distribution
by a Restricted Subsidiary of the Company that is payable to the Company or to
any Wholly-Owned Restricted Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value from any Person other than the Company or
a Wholly-Owned Restricted Subsidiary any Equity Interests of the Company, any of
its Subsidiaries or any direct or indirect parent of the Company (other than the
conversion or exchange of Equity Interests of the Company for other Equity
Interests of the Company); (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value any Subordinated
Indebtedness, except at final maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payments:
(A) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(B) except in the case of a Restricted Investment, the Company would, at the
time of such Restricted Payment, and after giving PRO FORMA effect thereto as if
such Restricted Payment had been made at the beginning of the applicable
four-quarter period, have a Fixed Charge Coverage Ratio of not less than 1.75 to
1 (calculated as described below under the caption "--Incurrence of
Indebtedness"); and
(C) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries after
the Initial Issuance Date (excluding Restricted Payments permitted by clauses
(iii), (iv), (v), (vi) or (vii) of the next succeeding paragraph), is less than
the sum of (i) $50,000,000, PLUS (ii) 25% of an amount equal to the Operating
Cash Flow of the Company for the period (taken as one accounting period) from
the day after the Initial Issuance Date through the end of the Company's most
recently ended fiscal quarter for which financial statements are available at
the time of such Restricted Payment (or, if such Operating Cash Flow for such
period is a deficit, less 100% of such deficit), PLUS (iii) 100% of the
aggregate net cash proceeds received by the Company from the issuance or sale
(other than pursuant to or in connection with the IPP Buyout) after the Initial
Issuance Date of Equity Interests of the Company or of debt securities of the
Company that have been converted into Equity Interests of the Company, PLUS (iv)
100% of the aggregate cash proceeds received by the Company from any payment in
respect of any previously made Restricted Investment (but only to the extent
that such amount is not reflected in Consolidated Net Income).
The foregoing provisions will not prohibit (i) the payment of dividends,
whether paid in kind or in cash, or the satisfaction of mandatory redemption
obligations, in respect of any Preferred Stock outstanding on the Initial
Issuance Date in accordance with the terms thereof; (ii) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture; (iii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of
the substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company; (iv) the defeasance,
redemption or repurchase of Subordinated Indebtedness with the net cash proceeds
of the substantially concurrent sale (other than to a Restricted Subsidiary of
the
39
<PAGE>
Company) of Equity Interests of the Company or from an incurrence of Permitted
Refinancing Indebtedness that consists of Subordinated Indebtedness; PROVIDED,
that the amount of any net cash proceeds that are utilized for any redemption,
repurchase, retirement or other acquisition described in clauses (iii) and (iv)
shall be excluded from clause (C) (iii) of the first paragraph of this covenant;
(v) the repurchase, redemption or other acquisition or retirement for value of
any Equity Interests of the Company or any Restricted Subsidiary of the Company
held by any member of the Company's (or any of its Restricted Subsidiaries')
management or for the purpose of providing Equity Interests for issuance under
dividend reinvestment or employee benefits plans of the Company; (vi) any
spin-off or other distribution to shareholders of the Generating Assets or the
Oswego Plant or any portion thereof or any direct or indirect interest therein;
and (vii) any dividend or other distribution of the Capital Stock of any
Unrestricted Subsidiary; PROVIDED, that in the case of each of clauses (i) and
(ii) above, no Default or Event of Default shall have occurred and be continuing
immediately after such transaction.
Not later than the date of making any Restricted Payment that relies on
clause (C) of the first paragraph of this covenant to be permitted, and so long
as the limitations contained in such clause apply, the Company shall deliver to
the Trustee an officer's certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
such covenant were computed, which calculations may be based upon the Company's
latest available financial statements.
INCURRENCE OF INDEBTEDNESS
The Indenture will provide that, prior to the Investment Grade Date, the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur"), any Indebtedness (including Acquired Debt) or issue any
Disqualified Stock; PROVIDED, HOWEVER, that the Company and any of its
Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) and
issue Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which financial statements are
available immediately preceding the date on which such Indebtedness is incurred
or Disqualified Stock is issued would have been at least 3.25 to 1, determined
on a PRO FORMA basis (including a PRO FORMA application of the net proceeds
therefrom), as if such Indebtedness had been incurred or such Disqualified Stock
had been issued at the beginning of such four-quarter period.
The foregoing provisions will not apply to (i) Permitted Refinancing
Indebtedness; (ii) the incurrence by the Company of any amount of Subordinated
Indebtedness if the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which financial statements are available
immediately preceding the date on which such Subordinated Indebtedness is
incurred would have been at least 1.75 to 1 (determined as above); (iii)
Permitted Hedging Agreements; (iv) borrowings under the Credit Facility in an
amount not to exceed $804.4 million; and (v) intercompany Indebtedness between
and among the Company and any of its Restricted Subsidiaries (except in a TIPES
Transaction); PROVIDED, HOWEVER, that (A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a Person
other than a Restricted Subsidiary and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a Restricted
Subsidiary shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the case may be.
LIENS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, secure with a
Lien on the property or assets of the Company or such Restricted Subsidiary,
Other Indebtedness or Subordinated Indebtedness without making, or causing such
Restricted Subsidiary to make, effective provision for securing the Notes (i) in
the case of a Lien securing Other Indebtedness, on an equal and ratable basis
with the Lien securing such Other Indebtedness and
40
<PAGE>
(ii) in the case of a Lien securing Subordinated Indebtedness, on a basis such
that the Lien securing the Notes is senior in priority to the Lien securing such
Subordinated Indebtedness, in each case until such time as such Other
Indebtedness or Subordinated Indebtedness is no longer secured by a Lien. Under
this covenant, the Company will be permitted to refinance or replace the full
amount of First Mortgage Bonds outstanding on the Initial Issuance Date, the
Credit Facility and the Receivables Financing, and to enter into the
Securitization Transaction, without securing the Notes.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such Restricted Subsidiary to (a)(i) pay
dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries (A) on its Capital Stock or (B) with respect to any
other interest or participation in, or measured by, its profits or (ii) pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries, (b) make
loans or advances to the Company or any of its Restricted Subsidiaries or (c)
transfer any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (i) the First Mortgage Bonds, the Credit Facility, the Receivables
Financing, the Pollution Control Obligations, the Securitization Transaction,
the Indenture and the Notes; (ii) applicable law or regulation; (iii) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired;
(iv) by reason of customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practice; (v) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (c) above in the property
so acquired; (vi) any contract for the sale of 100% of the Capital Stock of a
Restricted Subsidiary; or (vii) Permitted Refinancing Indebtedness, PROVIDED
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture will provide that so long as the Notes are outstanding the
Company may not, directly or indirectly, consolidate or merge with or into
(whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all its
assets in one or more related transactions, to another Person unless (i) the
corporation formed by such consolidation or surviving in such merger or the
Person that acquires by sale, assignment, transfer, conveyance or other
disposition, or that leases, such assets (in each such case, the "Successor
Entity), is a corporation organized and existing under the laws of the United
States, any State thereof or the District of Columbia and expressly assumes the
Company's obligations under the Indenture and the Notes; (ii) immediately before
and after such transaction no Default or Event of Default exists; and (iii) the
Successor Entity (or the Company, in the case of a consolidation or merger in
which the Company is the surviving entity) (A) has Consolidated Net Worth
immediately after the transaction (but prior to any revaluation or recalculation
of Consolidated Net Worth as of the date of the transaction relating to a
carry-over basis (if any) of the assets acquired in the transaction (as
determined in accordance with GAAP)) equal to or greater than the Consolidated
Net Worth of the Company immediately prior to the transaction and (B) will, at
the time of such transaction and after giving PRO FORMA effect thereto as if
such transaction had occurred at the beginning of the applicable four-quarter
period, have a Fixed Charge Coverage Ratio of not less than 1.75 to 1
(calculated as described above under the caption "--Incurrence of
Indebtedness);" PROVIDED, that the limitations set forth in this clause (iii)
shall not apply following the Investment Grade Date or to any merger or
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<PAGE>
consolidation of the Company with or into a Restricted Subsidiary and PROVIDED
FURTHER, that the limitations set forth above shall not apply to the sale or
disposition by the Company of its Generating Assets or the Oswego Plant.
PROCEEDS OF CERTAIN ASSET SALES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, engage in a (A) Permitted Asset Swap
unless the Company or Restricted Subsidiary receives property or assets with a
Fair Value at least equal to the Fair Value of the property or assets swapped,
(B) Sale of Assets unless (i) the Company or Restricted Subsidiary receives
consideration at least equal to the Fair Value of the assets or Equity Interests
issued or sold or otherwise disposed of and (ii) except in connection with a
sale of the Nuclear Generating Assets or the Oswego Plant, at least 75% of the
consideration received therefor by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents, PROVIDED, that if in the case of the
sale of any Fossil and Hydro Generating Assets pursuant to the PowerChoice
Agreement, the Board of Directors determines in good faith that the Company will
receive the highest price by accepting a bid with consideration consisting of
less than 75% cash or Cash Equivalents, and the PSC approves the Company's
acceptance of such bid, then the Company may accept such bid and PROVIDED,
FURTHER, that in the case of any Sale of Assets (except a Securitization
Transaction) that is consummated after the Investment Grade Date, the
requirement of clause (ii) shall not apply. Within 180 days after the receipt of
any Net Proceeds from a Securitization Transaction or a Sale of Assets
consisting of Generating Assets, or within 360 days after the receipt of any Net
Proceeds from any other Sale of Assets that is consummated prior to the
Investment Grade Date, the Company is required (a) in the case of a
Securitization Transaction, to apply the cash portion of such Net Proceeds in
accordance with the relevant statutory or regulatory requirements that govern
such transaction or, if there are no such requirements, to reduce Senior
Indebtedness, (b) in the case of a sale or other disposition of Generating
Assets or the Oswego Plant, to use not less than 85% (or 100% if the accepted
bid requires less than 75% of the purchase price to be paid in cash or Cash
Equivalents) of the cash portion of such Net Proceeds to reduce Senior
Indebtedness and (c) in the case of any other Sale of Assets that is consummated
prior to the Investment Grade Date, to use 100% of the cash portion of such Net
Proceeds for one or more of the following: (x) to reduce Senior Indebtedness,
(y) to reinvest, or enter into an agreement with respect to the reinvestment of,
such Net Proceeds in Related Assets, or (z) make an offer to all holders to
purchase outstanding Notes at an offer price in cash in an amount equal to 100%
of the principal amount thereof (in the case of the Series A through G Notes),
100% of the Accreted Value of the Senior Discount Notes (if such repurchase
occurs prior to July 1, 2003) or 100% of the principal amount at maturity of the
Senior Discount Notes (if such purchase occurs on or after July 1, 2003), plus
accrued and unpaid interest thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. If such an offer is
not fully subscribed, the Company will be free to use the remaining proceeds in
any manner permitted by the Indenture.
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make any contract, agreement,
understanding, loan, advance or Guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (a) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Company or Subsidiary with an unrelated Person and (b) the
Company delivers to the Trustee (i) with respect to any Affiliate Transaction or
any series of related Affiliate Transactions involving aggregate consideration
in excess of $10.0 million a resolution of the Board of Directors set forth in
an officer's certificate certifying that such Affiliate Transaction complies
with clause (a) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors; and
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(ii) with respect to any Affiliate Transaction or any series of related
Affiliate Transactions involving aggregate consideration in excess of $50.0
million, an opinion as to the fairness to the Company or such Subsidiary of such
Affiliate Transaction from a financial point of view issued by a nationally
recognized expert in evaluating such transactions; PROVIDED that (v) any
employment agreement entered into by the Company or any of its Subsidiaries in
the ordinary course of business, (w) commercial transactions in the ordinary
course of the utility business between or among the Company and/or its
Restricted Subsidiaries, (x) transactions permitted by the provisions of the
Indenture described above under the caption "-- Restricted Payments," (y)
agreements or transactions entered into in connection with a Securitization
Transaction or the Receivables Financing and (z) following any holding company
reorganization, transactions between the Company and its Restricted Subsidiaries
and the Company's parent that are on terms permitted by the PSC, in each case,
shall not be deemed Affiliate Transactions.
PAYMENTS FOR CONSENT
The Indenture will provide that neither the Company nor any of it its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
the Notes of any series for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or such Notes
unless such consideration is offered to be paid or agreed to be paid to all
holders of the Notes of such series that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture will provide that the Company shall file with the Trustee,
within 15 days of filing them with the Securities and Exchange Commission (the
"Commission"), copies of the current, quarterly and annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) that the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. If the Company is not subject to the requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall nevertheless file
with the Commission and the Trustee, on the date upon which it would have been
required to file with the Commission, current, quarterly and annual financial
statements, including any notes thereto (and with respect to annual reports, an
auditor's report by a firm of established national reputation, upon which the
Trustee may conclusively rely), and a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," both comparable to that which
the Company would have been required to include in such current, quarterly and
annual reports, information, documents or other reports on Forms 8-K, 10-Q and
10-K if the Company were subject to the requirements of Section 13 or 15(d) of
the Exchange Act, PROVIDED that the Company shall not be required to register
under the Exchange Act by virtue of this provision, if not otherwise required to
do so.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that the occurrence of any of the following
constitutes an Event of Default: (i) default for 60 days in the payment when due
of interest on any of the Notes; (ii) default in the payment when due of the
principal of, or premium, if any, on, the Notes; (iii) failure by the Company to
comply with the provisions described under the captions "--Restricted Payments,"
"--Incurrence of Indebtedness" or "--Merger, Consolidation, or Sale of Assets",
(iv) failure by the Company for 60 days after notice by the Trustee or to the
Company and Trustee by the holders of 25% or more in aggregate principal amount
(or principal amount at maturity, as the case may be) of Notes to comply with
any of its other agreements in the Indenture or the Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness of the Company or of any of
its Restricted Subsidiaries (or the payment of which is Guaranteed by the
Company or by any of its Restricted Subsidiaries) whether such Indebtedness or
Guarantee now exists or is created after the date of the Indenture, which
default (a) is caused by a failure to pay the principal of such Indebtedness at
the
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stated maturity of such Indebtedness after the expiration of grace periods
provided in such indebtedness (a "Payment Default") or (b) has resulted in the
acceleration of such Indebtedness prior to its stated maturity; and, in each
case the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $50.0
million or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay one or more final judgments not otherwise covered by
insurance aggregating in excess of $50.0 million not otherwise covered and
payable by insurance, which judgments are not paid, discharged or stayed for a
period of 60 days; or (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in aggregate principal amount (or principal amount at maturity,
as the case may be) of the then outstanding Notes of any series affected by an
Event of Default may declare all the Notes of such series to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the
Company, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations, the
holders of not less than a majority in principal amount (or principal amount at
maturity, as the case may be) of the then outstanding Notes of any series
affected by an Event of Default will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy available to
the Trustee. The Trustee may withhold from holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding such notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption or Change of Control provisions of the Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
The holders of not less than a majority in aggregate principal amount of the
Notes then outstanding which would be materially adversely affected by such
waiver, by notice to the Trustee may on behalf of the holders of all the Notes
so affected waive any existing Default or Event of Default and its consequences
under the Indenture, except an Event of Default in the payment of principal of,
premium, if any, or interest on the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No past, present or future director, officer, employee, incorporator or
shareholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes and the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each holder by accepting a Note waives and releases all such liability as part
of the consideration for issuance of the Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
Commission that such waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture will provide that the Company may, at its option and at any
time, elect to have its obligations discharged with respect to the outstanding
Notes of any series ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire
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indebtedness represented by, and the Indenture shall cease to be of further
effect as to, all outstanding Notes of such series, except as to (i) rights of
holders to receive payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due from the trust funds; (ii) the
Company's obligations with respect to such Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and
the maintenance of an office or agency for payment and money for security
payments held in trust; (iii) the rights, powers, trust, duties, and immunities
of the Trustee, and the Company's obligations in connection therewith; and (iv)
the Legal Defeasance provisions of the Indenture. In addition, the Company may,
at its option and at any time, elect to have its obligations released with
respect to certain covenants that are described in the Indenture or covering the
Notes of any series ("Covenant Defeasance") and thereafter any omission to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the Notes of the affected series. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the Notes
of the affected series.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes, U.S. legal tender, noncallable U.S. government
securities or a combination thereof, in such amounts as will be sufficient, in
the opinion of a firm of independent public accountants nationally recognized in
the United States, to pay the principal of, premium, if any, and interest on
such Notes on the stated date for payment thereof or on the redemption date of
such principal or installment of principal of, premium, if any, or interest on
such Notes, and the holders of Notes must have a valid, perfected, exclusive
security interest in such trust; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the United States Internal Revenue Service, a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable U.S. federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the holders of such
Notes will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such Legal Defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner, and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel reasonably acceptable to such Trustee
confirming that the Holders of such Notes will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such Covenant
Defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
Covenant Defeasance has not occurred; (iv) no Default or Event of Default shall
have occurred and be continuing on the date of such deposit or insofar as Events
of Default from bankruptcy or insolvency events are concerned, at any time in
the period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance shall not result in a breach or violation of,
or constitute a default under the Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an officers' certificate stating that the deposit
was not made by the Company with the intent of preferring the holders of such
Notes over any other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company or others;
and (vii) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that the conditions
precedent provided for in, in the case of the officers' certificate, (i) through
(vi) and, in the case of the opinion of counsel, clauses (i) (with respect to
the validity and perfection of the security interest), (ii), (iii) and (v) of
this paragraph have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented, and the Company and the Trustee may
enter into Supplemental Indentures,
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and any existing default or compliance with any provision of the Indenture or
the Notes may be waived, with the consent of the holders of not less than a
majority in principal amount (or principal amount at maturity, as the case may
be) of the then outstanding Notes (including consents obtained in connection
with a tender offer or exchange offer for Notes); PROVIDED, HOWEVER, that if
there shall be Notes of more than one series outstanding and if the proposed
action to be taken will materially adversely affect the rights of holders of
Notes of one or more of such series, then the consent (including consents
obtained in connection with a tender offer or exchange offer for Notes) only of
the holders of a majority in aggregate principal amount (or principal amount at
maturity, as the case may be) of outstanding Notes of all series so affected,
considered as one class, shall be required.
Without the consent of each holder affected an amendment or waiver may not
(with respect to any Note held by a non-consenting holder); (i) reduce the
principal amount (or principal amount at maturity, as the case may be) of Notes
whose holders must consent to an amendment, supplement or waiver; (ii) reduce
the principal or change the maturity of any Note or alter or waive the
provisions with respect to redemption with respect to any Note except as
permitted by the Indenture; (iii) reduce the rate of or change the time for
payment of interest on any Note; (iv) after the obligation has arisen for the
Company to make an offer to purchase following a Change of Control or Sale of
Assets, alter the obligation to purchase Notes in accordance with such offer to
purchase or waive any default in the performance thereof; (v) waive a Default or
Event of Default in the payment of principal of or interest on the Notes; (vi)
make any Note payable in money other than that stated in any Note; (vii) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of holders of Notes to receive payments of principal or
interest on the Notes; (viii) waive a redemption payment with respect to any
Note; or (ix) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or any Notes
and enter into Supplemental Indentures: (a) to cure any ambiguity, defect or
inconsistency; (b) to secure the Notes on an equal and ratable or senior basis
with Other Indebtedness or Subordinated Indebtedness as required by the
Indenture; (c) to establish and create one or more additional series of Notes
and to specify the terms of such series, pursuant to the Indenture; (d) to
provide that the Company shall not issue any additional Notes or to add
conditions, limitations and restrictions on the Company with respect to any
series of Notes; (e) to add additional covenants and agreements of the Company
to the Indenture, to add additional Events of Default under the Indenture or to
surrender any right or power reserved to or conferred upon the Company pursuant
to the Indenture; (f) to provide for alternative methods or forms for evidencing
and recording the ownership of Notes; (g) to evidence the succession to the
Company by a Successor Entity, or successive successions, and the assumption by
such Successor Entity of the covenants and obligations of the Company under the
Indenture; (h) to make any other change that would provide additional rights or
benefits to the holders of the Notes or that would not adversely affect the
legal rights of such holders; or (i) to comply with the requirements of the
Commission to maintain the qualification of the Indenture under the TIA.
BOOK-ENTRY SYSTEM
Upon issuance, all Notes of the same series will be represented by one or
more global securities (a "Global Security"). Each Global Security will be
deposited with, or on behalf of, the Depository Trust Company (the "Depository")
and registered in the name of a nominee of the Depository. Except under
circumstances described below, book-entry Notes will not be exchangeable for
certificated Notes and will not otherwise be issuable in definitive form.
The Depository has advised the Company that it is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934, as amended. The
Depository holds securities that its participants ("Participants") deposit with
the Depository. The Depository also facilitates the settlement among
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Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities. Direct Participants ("Direct Participants") include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations. The Depository is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers (the "NASD").
Access to the Depository's system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly.
The rules applicable to the Depository and its Participants are on file with the
Securities and Exchange Commission.
Upon the issuance of a Global Security, the Depository will credit on its
book-entry registration and transfer system its Participants' accounts with
their respective principal amounts of the Notes represented by such Global
Security. Such accounts shall be designated by the Underwriters with respect to
such Notes. Ownership of beneficial interests in a Global Security will be
limited to Participants or persons that hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depository or its nominee (with respect to interest of Participants) and
on the records of Participants (with respect to interests of persons other than
Participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and laws may impair the ability of a purchaser of an interest in a
book-entry Note to transfer such interest.
So long as the Depository or its nominee is the registered owner of such
Global Security, the Depository or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Security for all purposes under the Indenture. Except as provided below or as
the Company may otherwise agree in its sole discretion, owners of beneficial
interests in a Global Security will not be entitled to have Notes represented by
such Global Security registered in their names, will not receive or be entitled
to receive physical delivery of Notes in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Principal, premium, if any, and interest payments on Notes registered in the
name of the Depository or its nominee will be made to the Depository or its
nominee, as the case may be, as the registered owner of the Global Security
representing such Notes. None of the Company, the Trustee, any paying agent or
the registrar for such Notes will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests in such Global Security for such Notes or for maintaining, supervising
or reviewing any records relating to such beneficial interests.
The Company expects that the Depository for the Notes or its nominee, upon
receipt of any payment of principal, premium or interest, will credit
immediately Participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of the Global
Security for such Notes as shown on the records of the Depository or its
nominee. The Company also expects that payments by Participants to owners of
beneficial interest in such Global Security held through such Participants will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name" (i.e., the name of a securities broker or dealer), and will be
the responsibility of such Participants.
If the Depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by the Company within 90
days, the Company will issue Notes in definitive form in exchange for the entire
Global Security representing such Notes. In addition, the Company may at any
time and in its sole discretion determine not to have the Notes represented by
Global Securities and, in such event, will issue Notes in definitive form in
exchange for the Global Securities representing such Notes. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of Notes represented by such
Global Security equal in principal amount to such beneficial interest and to
have such Notes registered in its name. Notes so issued in definitive form
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will be issued as registered Notes in denominations that are integral multiples
of $1,000, unless otherwise specified by the Company.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest, it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Indenture provides that in case an Event of Default occurs (which is not
cured), the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any holder of Notes,
unless such holder will have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for the full definitions of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"ACCRETED VALUE" means, for each $1,000 face amount of Senior Discount Notes
as of any date of determination prior to July 1, 2003, the sum of (a) the
initial offering price of each Senior Discount Note and (b) that portion of the
excess of the principal amount of each Senior Discount Note over such initial
offering price which shall have been accreted thereon through such date, such
amount to be so accreted on a daily basis and compounded semi-annually on each
January 1 and July 1 at the rate of % per annum from the date of issuance of
the Senior Discount Notes through the date of determination.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person; and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"CAPITAL LEASE OBLIGATION" means, with respect to any Person, at the time
any determination thereof is to be made, the amount of the liability in respect
of a capital lease that would at such time be required to be capitalized on a
balance sheet of such Person in accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, shares of corporate
stock; (ii) in the case of an association or business entity, any and all
shares, interests, participation, rights or other equivalents (however
designated) of corporate stock; (iii) in the case of a partnership, partnership
interests (whether general or limited); and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distribution of assets of, the issuing Person.
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"CASH EQUIVALENTS" means (i) certain U.S. government securities having
maturities of not more than eighteen months from the date of acquisition; (ii)
certificates of deposit and eurodollar time deposits with maturities of eighteen
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding eighteen months and overnight bank deposits, in each
case with any lender party to the Credit Facility or with any U.S. commercial
bank having capital and surplus in excess of $500 million; (iii) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (i) and (ii) above entered into with any
financial institution meeting the qualifications specified in clause (ii) above;
(iv) commercial paper having either the highest or second highest rating
obtainable from Moody's or S&P and in each case maturing within six months after
the date of acquisition; (v) other corporate debt or asset backed or mortgage
backed securities rated as Investment Grade by S&P or Moody's and which mature
within eighteen months; and (vi) money market mutual funds.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all the assets of the Company and its Restricted Subsidiaries
taken as a whole; (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company; (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" or "group" (as such terms are defined in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) becomes the "beneficial owner" (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of more than 50% of the total voting power in the aggregate of all
classes of Capital Stock of the Company then outstanding normally entitled to
vote in the election of directors; or (iv) the first day on which a majority of
the members of the Board of Directors of the Company or of any Successor Entity
(as defined under the caption "Merger, Consolidation, or Sale of Assets" above)
are not Continuing Directors. For purposes of this definition, the consummation
of a transaction in which the outstanding shares of Common Stock are exchanged
for common stock of a Person that thereafter will be the sole shareholder of the
Company as part of a holding company reorganization will not be deemed to be a
Change of Control.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of a Change of
Control and a Rating Decline.
"COMMON STOCK" means the Company's common stock, $1.00 par value.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common shareholders (or equity
holders) of such Person and its consolidated Restricted Subsidiaries as of such
date; plus (ii) the respective amounts reported on such Person's balance sheet
as of such date with respect to any series of Preferred Stock that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such Preferred Stock, LESS (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the Initial Issuance Date in the book value of
any asset owned by such Person or a Restricted Subsidiary of such Person, (y)
all investments as of such date in Unrestricted Subsidiaries and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Initial Issuance Date; or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"CREDIT FACILITY" means the Company's $804.4 million credit facility dated
as of March 20, 1996 with a group of banks and Citibank, as agent, as such
agreement is amended, modified, restated, extended, renewed, replaced or
refinanced from time to time.
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"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is one year after the final maturity of the outstanding series of
Notes with the longest maturity.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"FAIR VALUE" when applied to any property means its fair value to the
Company, which may be determined without physical inspection by use of
accounting and engineering records and other data maintained by, or available
to, the Company; PROVIDED, that the Company delivers a resolution of the Board
of Directors specifying the Fair Value of the assets being sold and, in the
event of a transaction in excess of $50.0 million, the Company also delivers an
opinion of a nationally recognized expert in the valuation of the assets being
sold as to the Fair Value of the assets being sold and that the transaction is
fair to the Company.
"FIRST MORTGAGE BONDS" means the securities and other Indebtedness issued
from time to time pursuant to the Company's Mortgage Trust Indenture dated as of
October 1, 1937 and the supplemental indentures thereto.
"FIXED CHARGE COVERAGE RATIO" of the Company and its Restricted Subsidiaries
means for any period, the ratio of (i) the sum (determined from the consolidated
income statement of the Company and its Restricted Subsidiaries) of (A)
operating income or operating loss of the Company and its Restricted
Subsidiaries, taken as a whole, for such period PLUS (B) depreciation and
amortization (including amortization of goodwill and other intangibles and of
the MRA Regulatory Asset and other non-cash regulatory deferrals and
amortizations) and other non-recurring, non-cash charges of the Company and its
Restricted Subsidiaries for such period to the extent that such deprecation and
amortization and other non-recurring, non-cash charges were deducted in
computing operating income or operating loss, in each case on a consolidated
basis and determined in accordance with GAAP, PLUS (C) provision for taxes based
on income or profits of the Company and its Restricted Subsidiaries for such
period to the extent deducted in determining operating income, to (ii) the sum
of (A) the consolidated interest expense of the Company and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest payments,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to any sale and leaseback
transactions, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings (unless such
commissions, discounts and other fees and charges have been deducted in
calculating operating income), net payments (if any) pursuant to Hedging
Obligations and any interest paid by the Company or a Restricted Subsidiary
pursuant to a TIPES Transaction; PLUS (B) the consolidated interest expense of
the Company and its Restricted Subsidiaries that was capitalized during such
period; PLUS (C) any interest expense on Indebtedness of another Person that is
Guaranteed by the Company or one of its Restricted Subsidiaries or secured by a
Lien on assets of the Company or one of its Restricted Subsidiaries (whether or
not such Guarantee or Lien is called upon); PLUS (D) the quotient obtained by
dividing all cash dividend or other payments or distributions on or in respect
of any series of Preferred Stock (other than Preferred Stock issued in a TIPES
Transaction), of the Company or any of its Restricted Subsidiaries by 1 minus
the maximum statutory income tax rate then applicable to the Company (expressed
as a decimal), in each case, on a consolidated basis and in accordance with
GAAP. In the event that the Company or any of its Restricted Subsidiaries
incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues Preferred Stock subsequent to the commencement of
the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to
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the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made, then the Fixed Charge Coverage Ratio shall be calculated
giving PRO FORMA effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of Preferred Stock, as if the
same had occurred at the beginning of the applicable reference period.
"FOSSIL AND HYDRO GENERATING ASSETS" means the Generating Assets other than
the Nuclear Generating Assets.
"GAAP" means generally accepted accounting principles in use at the Initial
Issuance Date or, at the option of the Company, other generally accepted
accounting principles which are in use at the time of their determination; in
determining generally accepted accounting principles, the Company may, but shall
not be required to, conform to any accounting order, rule or regulation of any
regulatory authority having jurisdiction over the electric generating,
transmission or distribution operations of the Company.
"GENERATING ASSETS" means the Company's nuclear, fossil and hydroelectric
generation plants other than the Oswego Plant, and any related asset necessary
for the operation of any such plant and any associated license or permit.
"GRADATION" means a gradation within a Rating Category or a change to
another Rating Category, which shall include "+" and "-", in the case of S&P's
current Rating Categories (e.g., a decline from BB+ to BB would constitute a
decrease of one gradation); "1", "2" and "3", in the case of Moody's current
Rating Categories (e.g. a decline from B1 to B2 would constitute a decrease of
one gradation); or the equivalent in respect of successor Rating Categories used
by Rating Agencies other than S&P or Moody's.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including without limitation, letters of credit,
reimbursement agreements and support, "keep-well" or similar agreements in
respect thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under any interest rate, currency or commodity swap agreement,
interest rate, currency or commodity future agreement, interest rate cap or
collar agreement, interest rate, currency or commodity hedge agreement, and any
put, call other agreement or arrangement designed to protect such Person against
fluctuations in interest rates, currency exchange rates or commodity prices.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations of such Person or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations of such Person, except any such balance that constitutes an accrued
expense or trade payable, if and to the extent any of the foregoing indebtedness
(other than letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP
(provided, that any debt instrument issued by the Company or a Restricted
Subsidiary in a TIPES Transaction shall be deemed Indebtedness of the Company
regardless of its characterization on any such balance sheet), as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, any Guarantees by such Person of any indebtedness of any
other Person.
"INITIAL ISSUANCE DATE" means the date of closing of the public offering of
the Notes.
"INVESTMENT" means, with respect to any Person, any investment by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances (excluding commission, travel and similar advances to employees made in
the
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ordinary course of business) or capital contributions, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; PROVIDED, HOWEVER, that an
acquisition of assets, Equity Interests or other securities by the Company for
consideration consisting of assets or Capital Stock (other than Disqualified
Stock) shall not be deemed to be an Investment.
"INVESTMENT GRADE" means a rating of BBB- or higher by S&P (or its
equivalent under any successor rating categories of S&P) or the equivalent of
such rating category of any other Rating Agency.
"INVESTMENT GRADE DATE" means the date of delivery by the Company to the
Trustee of an officer's certificate to the effect that the Notes of the series
having the longest maturity then outstanding have been rated Investment Grade by
(i) S&P and Moody's or (ii) S&P or Moody's and at least one other Rating Agency
identified in such certificate.
"IPP BUYOUT" means the termination, restatement or amendment of certain
power purchase agreements in exchange for cash and securities (or the proceeds
of the sale by the Company of securities) pursuant to the terms of the Master
Restructuring Agreement.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or adverse claim affecting title or resulting in a charge
against real or personal property, or a security interest of any kind in respect
of such asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option, other agreement to sell
or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"MAKE WHOLE PREMIUM" with respect to any Note shall mean with respect to any
prepayment of such Note in circumstances requiring the payment of a Make Whole
Premium, an amount equal to (i) in the case of the Series A through G Notes, the
excess of (a) the aggregate present value as of the date of such prepayment of
the expected future cash flows of such Note (for the avoidance of doubt, such
amounts shall include all principal and interest payable with respect to such
Note) (exclusive of interest accrued to the date of prepayment) that, but for
such prepayment, would have been payable if such prepayment had not been made,
all determinated by discounting such amounts at a rate which is equal to the
Treasury Rate plus .50% over (b) the aggregate principal amount of the Note then
to be prepaid and (ii) in the case of the Senior Discount Notes (if such
prepayment occurs prior to July 1, 2003), the excess of (a) the present value of
the sum of all remaining interest (excluding accrued and unpaid interest, if
any), premium and principal payments that would become due on the Senior
Discount Notes if they were to remain outstanding and be redeemed on July 1,
2003, computed using a discount rate equal to the Treasury Rate plus .50% over
(b) the Accreted Value of the Senior Discount Note then to be prepaid. For
purposes of any determination of the Make Whole Premium:
"TREASURY RATE" shall mean at any time with respect to the Notes being
prepaid (a) the yield reported on page C4 of the Bloomberg Financial
Markets Service (or, if not available, any other nationally recognized
trading screen reporting on-line intraday trading in United States
government securities) at 11:00 A.M. (New York, New York time) for those
actively traded United States government securities having a maturity
(rounded to the nearest month) corresponding to the remaining Weighted
Average Life to Maturity of the Notes being prepaid or (b) in the event
that no nationally recognized trading screen reporting on-line intraday
trading in United States government securities is available, Treasury
Rate shall mean the weekly average of the yield to maturity on the United
States Treasury obligations with a constant maturity (as compiled by and
published in the most recently published issue of the United States
Federal Reserve Statistical Release designated H.15(519) or its successor
publication) most nearly equal to (by rounding to the nearest month) the
Weighted Average Life to Maturity of the Notes then being prepaid. If no
maturity exactly corresponding to such Weighted Average Life to maturity
of such Notes shall appear therein, the weekly average yield for the two
most closely corresponding published
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maturities shall be calculated pursuant to the foregoing sentence and the
Treasury Rate shall be interpolated or extrapolated, as the case may be,
from such yields on a straight-line basis (rounding, in the case of
relevant periods, to the nearest month).
"MASTER RESTRUCTURING AGREEMENT" means the Master Restructuring Agreement
dated July 9, 1997 among the Company and the independent power producer parties
thereto, as amended from time to time.
"MOODY'S" means Moody's Investor Service, Inc., or any successor to its
securities ratings business.
"MRA REGULATORY ASSET" means the item designated as such on the Company's
balance sheet, which represents amounts that the Company is permitted to collect
from customers, pursuant to the regulations of the PSC, in respect of the IPP
Buyout and the other transactions contemplated by the Master Restructuring
Agreement.
"NET PROCEEDS" means the aggregate cash proceeds received by a Person in
respect of any sale of assets, net of amounts paid to minority interests,
co-owners and lienholders, direct costs relating to such sale (including,
without limitation, legal, accounting and investment banking fees and sales
commission), taxes paid or payable which are attributable to such sale (after
taking into account any available tax credits or deductions and any tax sharing
arrangements relating to such assets), and any cash reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provide credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"NUCLEAR GENERATING ASSETS" means the Company's interest in Units 1 and 2 of
the Nine Mile Point Nuclear Generating Plant, and any related asset necessary
for the operation of such plants and any associated license or permit.
"OPERATING CASH FLOW" means, with respect to any Person for any period, the
net cash provided by operating activities of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP.
"OSWEGO PLANT" means the interest of the Company in the fossil fuel electric
generation plant located near Lake Ontario in Oswego, New York.
"OTHER INDEBTEDNESS" shall mean Senior Indebtedness incurred after the
Initial Issuance Date, except (a) Permitted Refinancing Indebtedness with
respect to First Mortgage Bonds issued and outstanding at the closing on the
Initial Issuance Date; (b) Permitted Refinancing Indebtedness with respect to
the Credit Facility; and (c) Indebtedness under the Securitization Transaction
and the Receivables Financing and any Permitted Refinancing Indebtedness with
respect thereto.
"PERMITTED ASSET SWAP" means any swap of utility property or assets (or
assets related or ancillary thereto) of the Company for other property or assets
that will be used in or in connection with the Company's utility business.
"PERMITTED HEDGING AGREEMENT" of any Person shall mean any Hedging
Obligation entered into in the ordinary course of business or pursuant to the
MRA and not for speculation or trading purposes that is designed to protect such
Person against fluctuations in interest rates or currency exchange rates or
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commodity prices with respect to Indebtedness incurred or proposed to be
incurred or assets used in the business in the ordinary course and which in the
case of agreements relating to interest rates shall have a notional amount no
greater than the payments due with respect to the Indebtedness being hedged
thereby.
"PERMITTED INVESTMENT" means (a) an Investment in the Company or in a
Restricted Subsidiary of the Company (including Investments by the Company in
the First Mortgage Bonds or the Notes to the extent otherwise permitted by this
Indenture); (b) an Investment in Cash Equivalents; (c) an Investment by the
Company or any Restricted Subsidiary in a Person, if as a result of such
Investment (i) such Person becomes a direct or indirect Restricted Subsidiary of
the Company or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company; (d) an
Investment in any Person owning or operating electric generation, transmission
or distribution facilities or gas distribution or transportation or related
systems in which the Company owns joint or undivided interests; (e) an
Investment in a Person formed as a special purpose entity in conjunction with a
Receivables Financing or Securitization Transaction; (f) an Investment received
in connection with the bankruptcy or reorganization of customers and suppliers
and in settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business; and (g) any
payment pursuant to those existing Investments of the Company, including the
nuclear decommissioning trust fund and the employee benefit plan trusts,
described in a Schedule attached to the Indenture.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to renew, extend, refinance, replace (including the
replacement at any time following their stated maturity of First Mortgage Bonds
or Notes that are repaid at maturity, or the replacement at any time following
their stated maturity of the Credit Facility or the Receivables Financing),
defease or refund, in whole or in part, other Indebtedness of the Company or any
of its Restricted Subsidiaries; PROVIDED, HOWEVER, that (i) the principal amount
of such Permitted Refinancing Indebtedness does not exceed the principal amount
of the Indebtedness so renewed, extended, refinanced, replaced, defeased or
refunded (plus the amount of accrued interest and premiums (including premium
paid on open market purchases), if any, thereon and the reasonable expenses
incurred in connection therewith); (ii) Permitted Refinancing Indebtedness that
is incurred prior to the maturity of the Indebtedness that it is renewing,
extending, refinancing, replacing, defeasing or refunding must be on terms at
least as favorable to the holders of Notes as those contained in the
documentation governing the Indebtedness being renewed, extended, refinanced,
replaced, defeased, or refunded and: (a) if such Indebtedness has a final
maturity date earlier than the final maturity date of the series of Notes with
the latest final maturity date, then such Permitted Refinancing Indebtedness
must have a final maturity date the same as or later than the final maturity
date of, and a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being renewed, extended,
refinanced, replaced, defeased or refunded, and (b) if such Indebtedness has a
final maturity date later than the final maturity date of the series of Notes
with the latest final maturity date, then such Permitted Refinancing
Indebtedness must have a final maturity date the same as or later than the final
maturity date of, and a Weighted Average Life to Maturity equal to or greater
than the maturity of, the series of Notes with the latest final maturity date;
(iii) if the Indebtedness being renewed, extended, refinanced, replaced,
defeased or refunded is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the holders of Notes as those contained in the
documentation governing the Indebtedness being refinanced, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary (or, in the case of the Receivables Financing, the special
purpose entity) that is the obligor on the Indebtedness being renewed, extended,
refinanced, replaced, defeased or refunded.
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"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"POLLUTION CONTROL OBLIGATIONS" means the Indebtedness or other obligations
(however designated) of the Company in respect of tax-exempt revenue bonds
issued by the New York State Energy Research and Development Authority.
"POWERCHOICE AGREEMENT" means the PowerChoice Settlement Agreement between
the Company and the PSC, as approved by the PSC in an Order dated March 20,
1998, as such agreement may be amended or modified from time to time.
"PREFERRED STOCK" means any Capital Stock of the Company which by its terms
has preference to Common Stock in right of dividends or other distributions or
upon liquidation or dissolution.
"PSC" means the New York State Public Service Commission, or any successor
agency or other governmental entity performing the same functions.
"RATING AGENCY" means any of S&P, Moody's, Duff & Phelps Credit Rating
Company and Fitch Investors Service, Inc., and their successors.
"RATING CATEGORIES" means (i) with respect to S&P, any of the following
categories (any of which may include a "+" or "-"): AAA, AA, A, BBB, BB, B, CCC,
CC, C and D (or equivalent successor categories); (ii) with respect to Moody's,
any of the following categories (any of which may include a "1", "2" or "3"):
Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories);
and (iii) the equivalent of any such categories of S&P or Moody's used by
another Rating Agency, if applicable.
"RATING DECLINE" means, at any time within 90 days (which period shall be
extended so long as the rating of the Notes is under publicly announced
consideration for a possible downgrade by any Rating Agency) after the date of
public notice of a Change of Control, or the intention of the Company or any
Person to effect a Change of Control, (i) the Rating of the Notes is decreased
at least one Gradation by any Rating Agency or (ii) a withdrawal of the rating
of the Notes by any Rating Agency.
"RECEIVABLES FINANCING" means the obligations of the Company pursuant to the
Trade Receivables Purchase and Sale Agreement, dated as of August 30, 1996,
among NM Receivables Corp., Corporate Receivables Corporation, Citibank, N.A.,
Citicorp North America, Inc. and the Company, as such agreement is amended or
modified from time to time.
"RELATED ASSET" means real or tangible personal property integral to the
generation, transmission or distribution of electricity or the transportation or
distribution of natural gas, and ancillary or related activities, including
other energy-related businesses.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of such Person that
is not an Unrestricted Subsidiary.
"S&P" means Standard & Poors' Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"SALE OF ASSETS" means (i) the sale, lease, conveyance or other disposition
of any assets (including, without limitation by way of a sale and leaseback) by
the Company or any Restricted Subsidiary other than sales of inventory or other
current assets in the ordinary course of business consistent with past practice;
(ii) the issue or sale by the Company or any of its Restricted Subsidiaries of
Equity Interests of any of their Restricted Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a Fair Value in excess of $25.0 million or (b) for
Net Proceeds in excess of $25.0 million; (iii) the sale or other disposition
(but not any spin-off or other distribution to the Company's
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shareholders) of the Generating Assets or the Oswego Plant; or (iv) a
Securitization Transaction. Notwithstanding the foregoing: (i) a transfer of
assets by the Company to a Wholly-Owned Restricted Subsidiary or by a
Wholly-Owned Restricted Subsidiary to the Company or to another Wholly-Owned
Restricted Subsidiary; (ii) an issuance of Equity Interests by a Wholly-Owned
Restricted Subsidiary to the Company or to another Wholly-Owned Restricted
Subsidiary; (iii) a Restricted Payment that is permitted by the Indenture; (iv)
sales of property or equipment that have become worn out, obsolete or damaged or
otherwise unsuitable for use in connection with the business of the Company or
any of its Restricted Subsidiaries; (v) transactions involving the license,
lease or sublease of any real or personal property in the ordinary course of
business; (vi) the making of any Permitted Investment; (vii) the transfer, sale
or assignment of assets to a single purpose entity in connection with the
Receivables Financing; and (viii) a Permitted Asset Swap, will not be deemed to
be a Sale of Assets.
"SECURITIZATION TRANSACTION" means a transaction in which the Company,
pursuant to authorization of the PSC, or other appropriate governmental
authorizations, transfers rights or other property to a Person formed as a
special purpose entity in conjunction with a financing based on the Company's
right to collect a non-bypassable wires or similar fee.
"SENIOR INDEBTEDNESS" means any senior Indebtedness of the Company,
including the First Mortgage Bonds, the Credit Facility, the Notes and the
Medium-Term Notes.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act of 1933, as amended, as such Regulation is in
effect on the date hereof.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
Guaranteed by the Company or its Restricted Subsidiaries) which is subordinate
to the Notes in right of payment or rights upon liquidation of the Company,
whether pursuant to the terms of the instrument creating or evidencing such
Indebtedness or otherwise.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof); and (ii) any partnership (a) the sole general partner or the managing
partner of which is such Person or a Subsidiary of such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or one
or more Subsidiaries of such Person (or any combination thereof).
"SUPPLEMENTAL INDENTURE" means any indenture duly authorized and approved by
the Company's Board of Directors and entered into between the Company and the
Trustee in accordance with the Indenture.
"TIPES TRANSACTION" means a financing transaction or transactions in which
the Company establishes a trust or other pass-through entity whose common equity
interests are owned by the Company or a Subsidiary and whose assets consist of
debt securities of the Company or any Restricted Subsidiary for the purpose of
issuing preferred interests in such trust or other entity to investors.
"UNRESTRICTED SUBSIDIARY" means (i) Opinac North America, Inc., Opinac
Energy Corporation, Plum Street Enterprises, Inc., Canadian Niagara Power
Company, Limited and any other Subsidiary that is designated by the Board of
Directors as an Unrestricted Subsidiary pursuant to a Board resolution; but only
to the extent that any such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary unless the terms of
any such agreement, contract, arrangement or understanding are no less favorable
to the Company or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company; (c) is a Person
with respect to which neither the Company
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nor any of its Restricted Subsidiaries has any direct or indirect obligation (x)
to subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not Guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors will
be evidenced to the Trustee by filing with the Trustee a certified copy of the
Board resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described under the caption "Certain
Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date by the covenant described under the caption "Certain
Covenants-Incurrence of Indebtedness", the Company shall be in default of such
covenant). The Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted by the
covenant described under the caption "Certain Covenants--Incurrence of
Indebtedness" and (ii) no Default or Event of Default would be in existence
following such designation.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, with respect to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment; by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or ownership
interests of which (other than directors' qualifying shares) shall at the time
be owned by such Person or by one or more Wholly-Owned Restricted Subsidiaries
of such Person.
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DESCRIPTION OF OTHER INDEBTEDNESS
Upon the completion of the Offering, the Company will have outstanding, in
addition to the Notes, indebtedness outstanding under the Credit Facility, its
First Mortgage Bonds, Promissory Notes and Medium Term Notes. The following is a
brief summary of the principal terms and conditions of the foregoing, all of
which will be "Senior Indebtedness" under the terms of the Indenture.
CREDIT FACILITY
The Company has a $804.4 million credit facility (the "Credit Facility")
which is secured with First Mortgage Bonds, with a bank group consisting of a
$255.0 million term loan agreement (the "Term Loan Agreement"), a $125.0 million
revolving credit agreement, and $424.4 million for letters of credit (the
"Letter of Credit"). As of March 31, 1998, the amount outstanding under the
Credit Facility was $529.4 million, consisting of $105.0 million under the Term
Loan Agreement and $424.4 million under the Letter of Credit, leaving the
Company with $275.0 million of borrowing capability under the Credit Facility.
The interest rate applicable to the Credit Facility is variable based on certain
rate options available under the Credit Facility and currently approximates
7.38% (but is capped at 15%). The Company is currently negotiating with lenders
to amend the Credit Facility to extend the expiration date from June 30, 1999 to
August 1, 2000.
FIRST MORTGAGE BONDS
At March 31, 1998, the Company had $2.8 billion aggregate principal amount
of First Mortgage Bonds in 18 different series issued pursuant to supplements to
the Company's Mortgage Trust Indenture dated as of October 1, 1937, as amended.
The First Mortgage Bonds bear interest at fixed rates ranging from 5 7/8% to
9 3/4% for different series, with a weighted average interest rate of 7.81% for
all series during 1997. The First Mortgage Bonds are secured by a lien on
substantially all gas and electric properties owned by the Company and used or
useful in the operation of the Company's properties as an integrated system,
together with all rights pertaining thereto. Substantially all after-acquired
property of such character will also become subject to such lien. The First
Mortgage Bonds mature between 1998 and 2029.
PROMISSORY NOTES
At March 31, 1998, the Company had outstanding approximately $413.8 million
Adjustable Rate Promissory Notes (the "Pollution Control Bonds") issued in seven
series with maturities ranging from July 1, 2015 to July 1, 2027. The Pollution
Control Bonds were issued to NYSERDA to secure a like amount of tax-exempt
revenue bonds issued by NYSERDA. Such securities bear interest at a daily
adjustable interest rate (with a Company option to convert to other rates,
including a fixed interest rate which would require the Company to issue First
Mortgage Bonds to secure the NYSERDA debt) which averaged 3.63% for 1997 and
were supported by bank direct pay letters of credit under the Credit Facility.
MEDIUM TERM NOTES
At March 31, 1998, the Company also had outstanding $20.0 million of
unsecured notes (the "Medium Term Notes") with maturities between 2000 and 2004
and bearing interest at rates ranging from 9.95% to 9.99% pursuant to an
indenture between the Company and IBJ Schroder Bank & Trust Company, as trustee.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary description of certain United States federal
income tax consequences of the acquisition, ownership and disposition of the
Notes, based on advice received from Bryan Cave LLP, special tax counsel to the
Company. The described consequences are based upon the provisions of the Code,
applicable Treasury regulations, rulings and other administrative
pronouncements, and judicial decisions as of the date hereof. Such authorities
may be repealed, revoked or modified, possibly with retroactive effect, so as to
result in federal income tax consequences different from those indicated. No
ruling from the Internal Revenue Service ("IRS") has been or will be sought with
respect to any of the described consequences and there can be no assurance that
the IRS would necessarily accept such consequences in the event of an audit.
This discussion applies only with respect to Notes that are held as "capital
assets" (within the meaning of section 1221 of the Code), and addresses only
initial purchasers of the Notes. This discussion does not purport to deal with
all aspects of federal income taxation that might be relevant to particular
holders in light of their particular circumstances or tax status, including
holders who are subject to special treatment under the federal income tax laws,
such as foreign holders, certain financial institutions, insurance companies,
dealers in securities or foreign currency, tax-exempt organizations or
retirement plans, persons who enter into hedging transactions in connection with
the Notes, or who hold the Notes as a hedge against currency risks or as part of
a straddle with other investments or as part of a "synthetic security" or other
integrated investment (including a conversion transaction), a constructive sale
transaction, or persons whose functional currency is not the U.S. dollar. Nor
does the discussion address the consequences or effect of any applicable state,
local or foreign tax laws, or any estate or gift tax laws.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. EACH INVESTOR IS
URGED TO CONSULT ITS OWN TAX ADVISOR TO DETERMINE THE TAX IMPACT OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES IN LIGHT OF SUCH INVESTOR'S
PARTICULAR CIRCUMSTANCES, INCLUDING ANY CONSEQUENCES UNDER THE TAX LAWS OF ANY
STATE, LOCAL, FOREIGN OR OTHER NON-FEDERAL JURISDICTION.
HOLDERS--UNITED STATES PERSONS
For purposes of this discussion, the term "holder" refers to any person who
is considered the owner of a Note for U.S. federal income tax purposes, whether
or not such person is the registered holder of the Note. Except as set forth
under the subheadings "Non-U.S. Holders" and "Backup Withholding and Information
Reporting", the described tax consequences apply to holders of Notes who are
"United States persons," including: (i) an individual who is a citizen or
resident of the United States for federal income tax purposes, (ii) a
corporation or partnership created or organized in or under the laws of the
United States or any State or the District of Columbia, (iii) an estate (other
than a foreign estate) or (iv) any trust if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust.
TREATMENT OF NOTES AS INDEBTEDNESS OF THE COMPANY
The Company intends to characterize and treat the Notes as "indebtedness"
(as opposed to a "stock" or other "equity"-type interest in the Company) for all
federal income tax purposes. Pursuant to section 385(c) of the Code, such
characterization will generally be binding upon all holders of the Notes (but
not upon the IRS).
INTEREST INCOME--SERIES A THROUGH G NOTES
In respect of the Series A through G Notes, for federal income tax purposes,
interest paid or accrued in respect thereof will be includible in holder's gross
income, as ordinary interest income, in accordance
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with its regular method of tax accounting. Although the Series A through G Notes
may be issued at a price that is less than their stated principal amount, the
discount is not expected to exceed 0.25% of the stated redemption price at
maturity multiplied by the number of whole years to maturity. Accordingly, the
amount of any original issue discount on the Notes that is attributable to the
difference between their purchase price and their stated redemption price would
be considered DE MINIMIS and thus treated as zero.
ORIGINAL ISSUE DISCOUNT--SENIOR DISCOUNT NOTES
GENERAL. The Senior Discount Notes will be issued with original issue
discount ("OID") for federal income tax purposes. A U.S. holder of a Senior
Discount Note will be required to include such OID as ordinary income
(regardless of whether such holder is a cash or accrual basis taxpayer) on a
constant yield to maturity basis in advance of the receipt of some or all of the
related cash payments, as described below, in each taxable year.
The amount of OID with respect to each Senior Discount Note will be equal to
the excess of (i) its "stated redemption price at maturity" over (ii) its issue
price. Pursuant to the Treasury Regulations issued under provisions of the Code
relating to OID (the "OID Regulations"), the "stated redemption price at
maturity" of each Note will include all payments to be made in respect thereof,
including any stated interest payments, other than payments of "qualified stated
interest." Payments of qualified stated interest are payments of interest which
are unconditionally payable in cash or property (other than debt instruments of
the issuer) at least annually at a qualifying rate, including a single fixed
rate during the entire term of the debt instrument. Since no actual cash
payments will be made in respect of the Senior Discount Notes until January 1,
2004, no interest payments on the Senior Discount Notes will constitute
"qualified stated interest."
TAXATION OF ORIGINAL ISSUE DISCOUNT. A U.S. holder of a Senior Discount
Note is required to include in gross income as interest income for federal
income tax purposes an amount equal to the sum of the "daily portions" of the
OID for each day during the taxable year that the Senior Discount Note was held.
The daily portion of OID required to be included in a holder's gross income in a
taxable year will be determined upon a constant yield to maturity basis by
allocating to each day during the taxable year on which the holder holds the
Senior Discount Note a pro-rata portion of the OID which is attributable to the
"accrual period" in which such day is included. Accrual periods with respect to
a Senior Discount Note may be of any length and may vary in length over the term
of the Senior Discount Note as long as (i) no accrual period is longer than one
year and (ii) each scheduled payment of interest or principal on the Senior
Discount Note occurs on either the final or first day of an accrual period. The
amount of the OID attributable to each "accrual period" will be the product of
(A) the "adjusted issue price" of the Senior Discount Note at the beginning of
such accrual period (i.e., the issue price of the Senior Discount Note,
generally increased by all prior accruals of OID with respect to the Senior
Discount Note and reduced by all payments made with respect to the Senior
Discount Note) and (B) the "yield to maturity" of the Senior Discount Note
(stated in a manner appropriately taking into account the length of the accrual
period). The Senior Discount Notes' yield to maturity is the discount rate,
which when applied to all payments required to be made with respect to the
Senior Discount Notes, results in a present value equal to the issue price.
Accordingly, a holder of a Senior Discount Note will be required to include OID
in gross income for federal income tax purposes in advance of the receipt of
cash in respect of such income. The amount of OID allocable to an initial short
accrual period may be computed using any reasonable method if all other accrual
periods, other than a final short accrual period, are of equal length. The
amount of OID allocable to the final accrual period at maturity of the Senior
Discount Notes is the difference between (x) the amount payable at the maturity
of the Senior Discount Note, and (y) the Senior Discount Note's adjusted issue
price as of the beginning of the final accrual period.
EFFECT OF MANDATORY AND OPTIONAL REDEMPTIONS ON OID. In the event of a
Change of Control Triggering Event, the Company will be required to offer to
redeem all of the Senior Discount Notes at the redemption price specified
elsewhere herein. See "Description of Notes--Change of Control." Under the
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OID Regulations, computation of yield and maturity of the Senior D iscount Notes
is not affected by such redemption rights and obligations if, based on all the
facts and circumstances as of the issue date, the potential occurrence of such
contingencies is remote. The Company has determined that, based on all of the
facts and circumstances that are expected to exist as of the issue date, the
possibility that a Change of Control Triggering Event or an optional redemption
by the Company will occur is remote and, as a result,
the stated payment schedule of the Senior Discount Notes will not be adjusted
for such contingencies.
The Company may redeem the Senior Discount Notes, in whole or in part, at
any time at redemption prices specified elsewhere herein. See "Description of
Notes--Optional Redemption." The OID Regulations contain rules for determining
the "maturity date" and the stated redemption price at maturity of an instrument
that may be redeemed prior to its stated maturity date at the option of the
issuer. Under the OID Regulations, solely for purposes of the accrual of OID, it
is assumed that the issuer will exercise any option to redeem a debt instrument
if such exercise will lower the yield-to-maturity of the debt instrument. The
Company anticipates that it will not be presumed to redeem the Senior Discount
Notes prior to their stated maturity under the foregoing rules because the
exercise of such option would not lower the yield-to-maturity of the Senior
Discount Notes.
REPORTING REQUIREMENTS. Each Senior Discount Note will contain a legend
stating that it was issued with OID and setting forth the issue date, the issue
price, the amount of OID and the yield to maturity. The Company will report
annually to the IRS and to each holder the amount of OID accrued with respect to
such Senior Discount Note for that year.
DEDUCTIBILITY OF ORIGINAL ISSUE DISCOUNT BY THE COMPANY
Certain issuers of "applicable high-yield discount obligations" ("AHYDOs")
are not permitted to deduct interest attributable to OID on such obligations as
it accrues. An AHYDO is a debt instrument that (i) has a maturity date that is
more than five years from the date of issue, (ii) bears a yield to maturity that
exceeds the sum of (A) the applicable federal rate (the "AFR") in effect for the
calendar month in which the obligation was issued (5.93% for instruments issued
in June, 1998), plus (B) five percent (5%), and (iii) has "significant original
issue discount." A debt instrument is deemed to be issued with "significant
original issue discount" if the aggregate amount which would be includible in
gross income of a holder with respect to such instrument for periods before the
close of any accrual period ending after the date five years after the date of
issue exceeds the sum of (i) the aggregate amount of interest required to be
paid under the instrument before the close of such accrual period and (ii) the
product of the issue price of such instrument and its yield to maturity.
If the Senior Discount Notes are determined to be AHYDOs, to the extent any
AHYDO limitations apply, the deduction of the "disqualified portion" of the OID
is permanently disallowed and the remainder of the OID is not deductible until
it is actually paid in cash or property (other than equity or debt of the
issuer).
MARKET DISCOUNT; ACQUISITION PREMIUM
If a holder acquires a Note for an amount that is less than the sum of all
payments (other than payments with respect to qualified stated interest) due
with respect to such Note at the time of acquisition, the amount of such
difference will be treated as "market discount" for federal income tax purposes,
unless such difference is less than a specified DE MINIMIS amount. Under the
market discount rules, a holder will be required to treat any principal payment
on, or any gain on the sale, exchange, retirement or other disposition of, a
Note as ordinary income to the extent that such gain does not exceed the accrued
market discount on such Note. If a holder makes a gift of a Note, accrued market
discount, if any, will be recognized as if such holder had sold such Note for a
price equal to its fair market value. In addition, the holder may be required to
defer, until the maturity of the Note or the earlier disposition of the Note in
a
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taxable transaction, the deduction of a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue on a straight-line basis
during the period from the date of acquisition to the maturity date of the Note,
unless the holder elects to accrue such market discount on a "constant yield to
maturity" basis. Such an election is irrevocable and is applicable only to the
Note with respect to which it is made. A holder of a Note may elect to include
market discount in income currently as it accrues (on either a straight-line or
constant yield to maturity basis), in which case the rules described above
regarding the deferral of interest deductions will not apply. An election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without IRS consent.
A holder who purchases a Note for an amount in excess of the sum of all
payments due with respect to such Note (other than payments with respect to
qualified stated interest) will be considered to have purchased the Note at a
"premium." Under section 171 of the Code, a holder generally may elect to
amortize the premium over the remaining term of the Note on a constant yield to
maturity basis. The amount amortized in any year will be treated as a reduction
of the holder's interest from the Note. A holder who elects to amortize such
premium must also reduce its tax basis in a Note by the amount of premium
amortized during its holding period. Bond premium on a Note held by a holder who
does not make such an election will decrease the gain or increase the loss
otherwise recognized on disposition of the Note. Under recently finalized
Treasury regulations, any premium on a Note that is not amortized pursuant to an
election under section 171 of the Code may be deductible only as a capital loss
upon the maturity of the Note. In the case of a Note that is callable by the
Company prior to maturity, the holder is required to amortize premium with
reference to the amount payable on the earlier call date if that would result in
a smaller amount of amortizable premium for the period prior to the call date.
The election to amortize premium on a constant yield to maturity basis, once
made, applies to all debt obligations held or subsequently acquired by the
electing holder on or after the first day of the first taxable year to which the
election applies (other than debt instruments the interest on which is
excludable from gross income), and may not be revoked without the consent of the
IRS.
With respect to the Senior Discount Notes, under the acquisition premium
rules of the Code and the OID Regulations, the daily portion of OID which such
holder must include in its gross income with respect to such Senior Discount
Notes for any taxable year will be reduced by an amount equal to the OID
multiplied by a fraction, the numerator of which is the amount of such
acquisition premium and the denominator of which is the OID remaining from the
date the Senior Discount Note was purchased to its maturity date.
DISPOSITION OF NOTES
Unless a nonrecognition provision of the Code applies, the sale, exchange,
retirement at maturity, redemption prior to maturity (including pursuant to an
offer, or exercise of a call option, by the Company), or other disposition of a
Note will be a taxable event for federal income tax purposes. A holder will
recognize gain or loss equal to the difference between (i) the amount of cash
plus the fair market value of any property received upon such disposition, and
(ii) the holder's adjusted tax basis in the Note. A holder's adjusted tax basis
in a Note generally will be the holder's purchase price for the Note, increased
by amounts includible in income by the holder as market discount, or OID with
respect to the Senior Discount Notes, and reduced by any amortized premium.
Except with respect to that portion of any gain equal to the amount of accrued
market discount (which will constitute ordinary income), and that portion of the
amount realized on disposition that represents accrued and unpaid interest
(which also will constitute ordinary income), such gain or loss generally will
constitute capital gain or loss and will be long-term capital gain or loss if
the Note was held by the holder for more than 12 months at the time of such
sale, exchange, redemption or other disposition. For non-corporate holders, the
excess of net long-term
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capital gains over net short-term capital losses is taxed under current law at a
maximum rate of 20 percent (20%) for capital assets held more than 18 months,
and 28 percent (28%) for capital assets held for more than 12 months but not
more than 18 months at the time of the disposition. Gain on the disposition of
capital assets held for one year or less is subject to federal income tax at
ordinary income tax rates. Certain limitations exist on the deductibility of
capital losses by both corporations and individual taxpayers.
NON-U.S. HOLDERS
The following discussion applies to any holder of a Note who is not a United
States person, as defined above. Such holders are hereafter referred to as
"Non-U.S. Holders."
Subject to the discussion of "backup" withholding below, payments of
interest by the Company or its agent (in its capacity as such) to a Non-U.S.
Holder will not be subject to U.S. federal withholding tax, provided that (i)
such holder does not actually or constructively own ten percent (10%) or more of
the total combined voting power of all classes of stock of the Company entitled
to vote; (ii) such holder is not a "controlled foreign corporation" for U.S.
federal income tax purposes (as defined in section 957 of the Code) that is
related, directly or indirectly, to the Company through stock ownership; (iii)
such interest payments are not "effectively connected" with the conduct by the
"Non-U.S. Holder" of a trade or business within the United States; and (iv) the
certification requirements of section 871(h) or 881(c) of the Code, as
applicable, are satisfied. Under the certification rules, the beneficial owner
of a Note must certify to the Company or its agent, under penalties of perjury,
that it is a Non-U.S. Holder and provide a completed IRS Form W-8 ("Certificate
of Foreign Status") (or substitute Form W-8). Recently finalized Treasury
regulations modify the certification procedures in certain respects for payments
made after December 31, 1999. A Non-U.S. Holder who does not meet all of the
above described requirements will generally be subject to U.S. federal
withholding tax at a flat rate of thirty percent (30%) (or a lower applicable
treaty rate) on payments of interest on the Notes, unless (i) such holder
otherwise qualifies for a withholding tax exemption or reduced withholding rate
under an applicable treaty, or (ii) the payments of interest by the Company or
its agent (in its capacity as such) to such holder are "effectively connected"
with the conduct by the Non-U.S. Holder of a trade or business in the United
States.
If payments of interest with respect to the Series A through G Notes, or the
accrual of OID with respect to Senior Discount Notes, are effectively connected
with the conduct by a Non-U.S. Holder of a trade or business within the United
States, such holder, even though exempt from U.S. federal withholding tax, will
be subject to U.S. federal income tax on such interest, or OID as the case may
be, and on any gain realized on the sale, exchange, retirement or other
disposition of a Note in the same manner as if it were a United States person.
In addition, pursuant to section 884(c) of the Code, if such Non-U.S. Holder is
a foreign corporation, it may be subject to a "branch profits tax" equal to
thirty percent (30%) of its effectively connected earnings and profits for that
taxable year, unless it qualifies for a lower rate under an applicable income
tax treaty.
Subject to the discussion of "backup" withholding below, any gain realized
upon the sale, exchange, retirement or other disposition of a Note by a Non-U.S.
Holder will not be subject to U.S. federal income or withholding taxes unless
(i) such gain is effectively connected with the conduct by such Non-U.S. Holder
of a trade or business within the United States (or, under an applicable tax
treaty, is attributable to a U.S. permanent establishment maintained by such
Non-U.S. Holder); (ii) in the case of an individual, such holder is present in
the United States for 183 days or more in the taxable year of the retirement or
other disposition and certain other conditions are met; or (iii) such Non-U.S.
Holder is subject to tax pursuant to the provisions of the U.S. tax law
applicable to certain U.S. expatriates or nonresident aliens.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The "backup" withholding and information reporting requirements may apply to
certain payments of principal and interest on a Note and to certain payments of
proceeds from the sale, exchange, retirement
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or other disposition of a Note. The Company, its agent, a broker or any paying
agent, as the case may be, will be required to withhold tax from any payment
that is subject to backup withholding at a rate of thirty-one percent (31%) of
such payment if the holder fails to furnish its correct taxpayer identification
number (I.E., social security number or employer identification number) and
certifies that such holder is not subject to backup withholding, or otherwise
fails to comply with applicable requirements of the backup withholding rules.
Certain holders (including, among others, all corporations) are not subject to
the backup withholding and reporting requirements.
Under current Treasury regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent thereof to
a holder of a Note who has provided the required certification under penalties
of perjury that it is a Non-U.S. Holder, or has otherwise established an
exemption under applicable rules.
In general, payments of the proceeds from the sale or other disposition of a
Note by a Non-U.S. Holder which are made to or through a foreign office of a
broker will not be subject to a U.S. information reporting or backup
withholding, provided that the broker is not a United States person, a
controlled foreign corporation for U.S. tax purposes, or a foreign person fifty
percent (50%) or more of whose gross income is effectively connected with a U.S.
trade or business over a specified period. In addition, for payments made to or
through a foreign office of a broker after December 31, 1999, recently finalized
Treasury regulations make subject to U.S. information reporting and possibly
backup withholding, brokers that are a U.S. branch of (i) a foreign bank or
insurance company or (ii) a foreign partnership controlled by U.S. persons or
engaged in a U.S. trade or business. Payments to or through the U.S. office of a
broker are subject to U.S. information reporting and backup withholding, unless
the holder or beneficial owner certifies as to its Non-U.S. Holder status or
otherwise establishes an exemption under applicable rules.
Any amounts withheld under the backup withholding rules may be claimed as a
refund or credit against such holder's U.S. federal income tax liability,
provided the required information is furnished timely to the IRS. Holders should
consult their tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") among the Company and Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill"), Wasserstein Perella Securities, Inc. ("Wasserstein"),
Salomon Brothers Inc ("Salomon"), J.P. Morgan Securities Inc. ("JP Morgan"),
Citicorp Securities, Inc. ("Citicorp") and TD Securities (USA) Inc. ("TD", and
together with DLJ, Merrill, Wasserstein, Salomon, JP Morgan and Citicorp, the
"Underwriters"), the Underwriters have agreed to purchase the Notes from the
Company in the amounts set forth opposite each such Underwriter's name in the
table below at the applicable public offering price set forth on the cover page
of this Prospectus, less underwriting discounts and commissions. All of the net
proceeds from the sale of the Notes to the Underwriters together with $
will be used by the Company to make payments to the IPP Parties pursuant to the
MRA. See "The MRA and the PowerChoice Agreement."
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OR
PRINCIPAL AMOUNT
AT
MATURITY OF
UNDERWRITER NOTES
- - ---------------------------------------------------------------------------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......................... $
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........................
Wasserstein Perella Securities, Inc.........................................
Salomon Brothers Inc........................................................
J.P. Morgan Securities Inc..................................................
Citicorp Securities, Inc....................................................
TD Securities (USA) Inc.....................................................
----------------
Total................................................................. $ 3,450,000,000
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to the approval of certain legal matters by their counsel
and to certain other conditions precedent. The Underwriting Agreement also
provides that the Company will indemnify the Underwriters and certain persons
controlling the Underwriters against certain liabilities and expenses, including
liabilities under the Securities Act of 1933, as amended (the "Securities Act"),
or will contribute to payments the Underwriters are required to make in respect
thereof. The nature of the Underwriters' obligations under the Underwriting
Agreement is such that the Underwriters are committed to purchase all of the
Notes if any of the Notes are purchased.
The Underwriters and DLJ have advised the Company that they initially
propose to offer the Notes in part directly to the public at the applicable
offering price set forth on the cover page of this Prospectus, and in part to
certain dealers at such price less a concession not in excess of % of the
principal amount (or principal amount at muturity, as the case may be) of the
Notes. The Underwriters may allow, and such dealers may reallow, a concession to
certain other dealers not in excess of % of the principal amount (or
principal amount at maturity, as the case may be) of the Notes. After the
initial public offering, the public offering price, concession and reallowance
may be changed by the Underwriters or by DLJ, as the case may be, at any time
without notice.
There is currently no public market for the Notes and the Company has no
present plan to list any of the Notes on a national securities exchange. The
Underwriters have advised the Company that the Underwriters currently intend to
make a market in the Notes, but are not obligated to do so and may discontinue
any such market making at any time without notice. Accordingly, there can be no
assurance as to the liquidity of the trading market for the Notes.
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Other than in the United States, no action has been taken by the Company or
the Underwriters that would permit a public offering of the Notes in any
jurisdiction where action for that purpose is required. The Notes offered hereby
may not be offered or sold, directly or indirectly, nor may this Prospectus or
any other offering material or advertisements in connection with the offer and
sale of the Notes be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this Prospectus
comes are advised to inform themselves about and to observe any restrictions
relating to the Offering and the distribution of this Prospectus. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the Notes offered hereby in any jurisdiction in which such an offer
or a solicitation is unlawful.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Notes.
Specifically, the Underwriters may over allot the Offering, creating a syndicate
short position. The Underwriters may bid for and purchase Notes in the open
market to cover syndicate short positions or to stabilize the price of the
Notes. These activities may stabilize or maintain the market price of the Notes
above independent market levels. The Underwriters are not required to engage in
these activities and may end any of these activities at any time.
It is expected that delivery of the Notes will be made against payment
therefor on or about the date specified in the last paragraph of the cover page
of this Prospectus, which will be the eighth business day following the date
hereof. Under Rule 15c6-1 adopted by the Commission under the Exchange Act,
trades in the secondary market generally are required to settle in three
business days, unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade the Notes on the date hereof or any
day prior to the third business day before the date of delivery of the Notes
will be required by virtue of the fact that the Notes initially will settle in
T+8, to agree to a delayed settlement cycle at the time of any such trade to
prevent a failed settlement. Purchasers of the Notes who wish to trade the Notes
on the date hereof or the next four succeeding business days should consult
their own advisors.
DLJ and Merrill have performed various investment banking services for the
Company in the past, for which they have received customary remuneration, and
may provide such services in the future. DLJ has acted as financial advisor to
the Company with respect to the MRA and has delivered an opinion to the
Company's Board of Directors with respect to certain financial matters relating
to the MRA. A significant portion of DLJ's advisory fee is contingent upon the
successful restructuring of the Company's obligations under the PPAs pursuant to
the MRA. Wasserstein has performed various financial advisory services for the
IPP Parties in the past and in connection with the transactions contemplated by
the MRA, for which they have received and will receive in the future customary
remuneration, and may provide such services in the future. Citicorp Securities,
Inc. and its affiliates provide or may provide commercial banking and/or
investment banking services to the Company and its affiliates in the ordinary
course of business.
VALIDITY OF THE NOTES
The validity of the Notes offered hereby will be passed upon for the Company
by Sullivan & Cromwell, New York, New York, counsel to the Company. Certain
legal matters will be passed upon for the Underwriters by Sidley & Austin, New
York, New York.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K for the year ended December 31, 1997, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
66
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
periodic reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, New York, New York 10048
and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such materials may be obtained from the Public Reference
Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the prescribed rates. The Commission maintains a
website (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The Common Stock of the Company is listed on the New York
Stock Exchange, 20 Broad Street, New York, New York 10005, where reports and
other information concerning the Company may be inspected.
Additional information regarding the Company and the securities offered
hereby is contained in the Registration Statement on Form S-3 and the exhibits
thereto (the "Registration Statement") filed with the Commission under the
Securities Act. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is made to the Registration Statement, which may be inspected without
charge at, and copies of which may be obtained at prescribed rates from the
Commission at, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated in this Prospectus by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1997.
2. Amendment to Annual Report on Form 10-K/A for the year ended
December 31, 1997.
3. Second Amendment to Annual Report on Form 10-K/A for the year ended
December 31, 1997.
4. Current Report on Form 8-K dated February 11, 1998.
5. Quarterly Report on Form 10-Q for the three months ended March 31,
1998.
6. Amendment to Quarterly Report on Form 10-Q/A for the three months
ended March 31, 1998.
7. Proxy Statement dated May 29, 1998 for the Company's 1998 Annual
Meeting.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the Offering
will be deemed to be incorporated by reference in this Prospectus and will be
part of this Prospectus from the date of filing of such documents. Any statement
contained in this Prospectus or in any document incorporated or deemed to be
incorporated by reference in this Prospectus will be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any subsequently filed document that also is
or is deemed to be incorporated by reference in this Prospectus modifies or
supersedes such statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus is delivered, upon the written or oral request of any
such person, a copy of any document described in this Prospectus (not including
exhibits to those documents unless such exhibits are incorporated by reference
into the information incorporated into this Prospectus). Requests for copies
should be directed to Niagara Mohawk Power Corporation, 300 Erie Boulevard West,
Syracuse, New York 13202. Attention: Leon T. Mazur, telephone number: (315)
474-1511.
67
<PAGE>
APPENDIX A
GLOSSARY OF CERTAIN ELECTRICITY, NATURAL GAS
AND ACCOUNTING TERMS
<TABLE>
<CAPTION>
TERM DEFINITION
- - ---------------- ------------------------------------------------------------------------------------------------
<S> <C>
Avoided Costs The costs an electric utility would otherwise incur to generate power if it did not purchase
electricity from another source.
Cogeneration The simultaneous production of electric energy and useful thermal energy for industrial,
commercial, heating or cooling purposes.
CTC Competitive Transition Charge
Electric The delivery of electric energy to customers on a distribution system. Electric energy is
Distribution carried at high voltages along transmission lines. For consumers needing lower voltages, it is
reduced in voltage at a substation and delivered over primary distribution lines extending
throughout the area where the electricity is distributed. For users needing lower voltage, the
voltage is reduced once again by a distribution transformer or a line transformer. At this point
it changes from primary to secondary distribution voltage.
GRT Gross Receipts Tax
GwH Gigawatt-hours: one gigawatt hour equals one billion watthours.
IPP Independent Power Producer: any person that owns or operates, in whole or in part, one or more
Independent Power Facilities.
KW Kilowatt: one thousand watts
KWh Kilowatt-hour: a unit of electrical energy equal to one kilowatt of power supplied or taken from
an electric circuit steadily for one hour.
MW Megawatt: one million watts
MWh Megawatt hour: one thousand kilowatt hours.
NYSERDA New York State Energy Research and Development Authority.
PPA Power Purchase Agreements: long-term contracts under which a utility is obligated to purchase
electricity from an IPP at specified rates.
PSC New York State Public Service Commission
PURPA Public Utility Regulatory Policies Act of 1978, as amended. One of five bills signed into law on
November 8, 1978, as the National Energy Act. It sets forth procedures and requirements
applicable to state utility commissions, electric and natural gas utilities and certain federal
regulatory agencies. A major aspect of this law is the mandatory purchase obligation from
qualifying facilities.
SFAS No. 71 Statement of Financial Accounting Standards No. 71 "Accounting for the Effects of Certain Types
of Regulation"
Six-Cent Law Section 66-c of the New York State Public Service Law, governing minimum prices to be paid under
certain PPAs
Transmission The act or process of transporting electric energy in bulk from a source or sources of supply to
other principal parts of the system or to other utility systems. Also a functional
classification relating to that portion of utility plant used for the purpose of transmitting
electric energy in bulk to other principal parts of the system or to other utility systems, or
to expenses relating to the operation and maintenance of transmission plant.
Unit 1 Nine Mile Point Nuclear Station Unit No. 1, a 613 MW nuclear generating facility 100% owned by
Niagara Mohawk and in operation since 1969.
Unit 2 Nine Mile Point Nuclear Station Unit No. 2, a 1144 MW nuclear generating facility 41% owned by
Niagara Mohawk and in operation since 1988.
</TABLE>
A-1
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE UNDERWRITERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE NOTES OFFERED
HEREBY, AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE NOTES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 11
Use of Proceeds................................. 15
Capitalization.................................. 16
Pro Forma Condensed Financial Statements........ 17
Selected Historical Financial Data.............. 28
Management's Discussion of Pro Forma Condensed
Financial Statements.......................... 30
The MRA and the PowerChoice Agreement........... 33
Description of Notes............................ 36
Description of Other Indebtedness............... 58
Certain United States Federal Income Tax
Considerations................................ 59
Underwriting.................................... 65
Validity of the Notes........................... 66
Experts......................................... 66
Available Information........................... 67
Incorporation of Certain Information by
Reference..................................... 67
Glossary of Certain Electricity, Natural Gas and
Accounting Terms.............................. A-1
</TABLE>
[LOGO]
<TABLE>
<C> <S>
$300,000,000 % SERIES A SENIOR NOTES DUE 1999
$450,000,000 % SERIES B SENIOR NOTES DUE 2000
$400,000,000 % SERIES C SENIOR NOTES DUE 2001
$400,000,000 % SERIES D SENIOR NOTES DUE 2002
$400,000,000 % SERIES E SENIOR NOTES DUE 2003
$400,000,000 % SERIES F SENIOR NOTES DUE 2005
$600,000,000 % SERIES G SENIOR NOTES DUE 2008
$500,000,000 % SENIOR DISCOUNT NOTES DUE 2010
</TABLE>
------------------------------
PROSPECTUS
------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
WASSERSTEIN PERELLA SECURITIES, INC.
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
CITICORP SECURITIES, INC.
TD SECURITIES
JUNE , 1998
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of the estimated expenses, other than
underwriting discounts and commissions, to be incurred in connection with the
distribution of the securities registered under this registration statement.
Except as indicated, all costs and expenses will be paid by the Company.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
------------
<S> <C>
SEC registration fee............................................................ $ 965,240
NASD fees and expenses.......................................................... -0-
Legal fees and expenses......................................................... 800,000
Accounting fees and expenses.................................................... 200,000
Printing and engraving fees..................................................... 45,000
Registrar and transfer agent's fees............................................. 10,000
Trustee's fees.................................................................. 37,000
Miscellaneous................................................................... 30,000
------------
Total................................................................... $ 2,087,240
------------
------------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 721 through 726 of the Business Corporation Law of the State of New
York (the "BCL") provide for indemnification of the Company's officers and
directors under certain conditions and subject to specific limitations. The BCL
permits New York corporations to supplement the statutory indemnification with
additional "non-statutory" indemnification for directors and officers meeting a
specified standard of conduct and to advance to officers and directors
litigation expenses under certain circumstances. As permitted by the BCL,
Article VI of the Company's By-Laws provides for indemnification of, and
advancement of litigation expenses incurred by, directors and officers of the
Company.
The Company has also obtained insurance providing for indemnification of
directors and officers against certain expenses and liabilities. In addition,
pursuant to a 1986 amendment to the BCL, the Company has entered into agreements
with certain of the officers and directors of the Company providing for
indemnification for the liability of officers and directors not covered by the
policy mentioned above. Such additional indemnification does not cover acts
committed in bad faith or acts which were the result of active and deliberate
dishonesty. In so far as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Furthermore, Article XIIA of the Certificate of Incorporation of the Company
limits, with certain exceptions, the personal liability of a director of the
Company to the Company or its shareholders for damages for any breach of duty in
such capacity to the fullest extent permitted by the BCL.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Index to Exhibits
<TABLE>
<S> <C>
1 Form of Underwriting Agreement.
2(a) PowerChoice Settlement Agreement (incorporated by reference from Form 8-K of the
Company dated October 10, 1997).
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
2(b) Master Restructuring Agreement by and between Niagara Mohawk Power Corporation and
Independent Power Producers (incorporated by reference to Current Report on Form
8-K of the Company dated July 9, 1997).
2(c) PSC Order dated March 20, 1998 (incorporated by reference to Annual Report on Form
10-K for year ended December 31, 1997).
4(a)(1) Mortgage Trust Indenture dated as of October 1, 1937 between NMPC (formerly CNYP)
and Marine Midland Trust Company of New York), as Trustee (incorporated by
reference to CNYP Registration No. 2-5490).
4(a)(2) Supplemental Indenture dated as of December 1, 1938, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 2-59500).
4(a)(3) Supplemental Indenture dated as of April 15, 1939, supplemental to Exhibit
4(a)(1)(incorporated by reference to NMPC Registration Statement No. 2-59500).
4(a)(4) Supplemental Indenture dated as of July 1, 1940, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-59500).
4(a)(5) Supplemental Indenture dated as of October 1, 1944, supplemental to Exhibit
4(a)(1) (incorporated by reference to CNYP Registration Statement No. 2-5490).
4(a)(6) Supplemental Indenture dated as of June 1, 1945, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-59500).
4(a)(7) Supplemental Indenture dated as of August 17, 1948, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 2-59500).
4(a)(8) Supplemental Indenture dated as of December 31, 1949, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 2-8214).
4(a)(9) Supplemental Indenture dated as of January 1, 1950, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 2-8214).
4(a)(10) Supplemental Indenture dated as of October 1, 1950, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 2-8634).
4(a)(11) Supplemental Indenture dated as of October 19, 1950, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 2-8634).
4(a)(12) Supplemental Indenture dated as of February 20, 1953, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 2-10501).
4(a)(13) Supplemental Indenture dated as of April 25, 1956, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-12443).
4(a)(14) Supplemental Indenture dated as of March 15, 1960, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-70860).
4(a)(15) Supplemental Indenture dated as of October 1, 1966, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 2-25526).
4(a)(16) Supplemental Indenture dated as of July 15, 1967, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-26918).
4(a)(17) Supplemental Indenture dated as of August 1, 1967, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-26918).
4(a)(18) Supplemental Indenture dated as of August 1, 1968, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-29575).
4(a)(19) Supplemental Indenture dated as of March 15, 1977, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-59500).
4(a)(20) Supplemental Indenture dated as of August 1, 1977, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-70860).
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
4(a)(21) Supplemental Indenture dated as of March 1, 1978, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-70860).
4(a)(22) Supplemental Indenture dated as of June 15, 1980, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 2-70860).
4(a)(23) Supplemental Indenture dated as of November 1, 1985, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 2-90568).
4(a)(24) Supplemental Indenture dated as of October 1, 1989, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 33-32475).
4(a)(25) Supplemental Indenture dated as of dated as of June 1, 1990, supplemental to
Exhibit 4(a)(1) (incorporated by reference to NMPC Registration Statement No.
33-38093).
4(a)(26) Supplemental Indenture dated as of November 1, 1990, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 33-38093).
4(a)(27) Supplemental Indenture dated as of March 1, 1991, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 33-47241).
4(a)(28) Supplemental Indenture dated as of October 1, 1991, supplemental to Exhibit
4(a)(1) (incorporated by reference to NMPC Registration Statement No. 33-47241).
4(a)(29) Supplemental Indenture dated as of April 1, 1992, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 33-47241).
4(a)(30) Supplemental Indenture dated as of June 1, 1992, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 33-59594).
4(a)(31) Supplemental Indenture dated as of July 1, 1992, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 33-59594).
4(a)(32) Supplemental Indenture dated as of August 1, 1992, supplemental to Exhibit 4(a)(1)
(incorporated by reference to NMPC Registration Statement No. 33-59594).
4(a)(33) Supplemental Indenture dated as of April 1, 1993, supplemental to Exhibit 4(a)(1)
(incorporated by reference to Quarterly Report on Form 10-Q for quarter ended
March 31, 1993).
4(a)(34) Supplemental Indenture dated as of July 1, 1993, supplemental to Exhibit 4(a)(1)
(incorporated by reference to Quarterly Report on Form 10-Q for quarter ended
September 30, 1993).
4(a)(35) Supplemental Indenture dated as of September 1, 1993, supplemental to Exhibit
4(a)(1) (incorporated by reference to Quarterly Report on Form 10-Q for quarter
ended September 30, 1993).
4(a)(36) Supplemental Indenture dated as of March 1, 1994, supplemental to Exhibit 4(a)(1)
(incorporated by reference to Annual Report on Form 10-K for year ended December
31, 1993).
4(a)(37) Supplemental Indenture dated as of July 1, 1994, supplemental to Exhibit 4(a)(1)
(incorporated by reference to Annual Report on Form 10-K for year ended December
31, 1994).
4(a)(38) Supplemental Indenture dated as of May 1, 1995, supplemental to Exhibit 4(a)(1)
(incorporated by reference to Quarterly Report on Form 10-Q for quarter ended June
30, 1995).
4(a)(39) Supplemental Indenture dated as of March 20, 1996, supplemental to Exhibit
4(a)(1).
4(a)(40) Agreement dated as of August 16, 1940, between CNYP, The Chase National Bank of
the City of New York, as Successor Trustee, and The Marine Midland Trust Company
of New York, as Trustee incorporated by reference to CNYP Registration Statement
No. 2-5490).
4(a)(41) Form of Supplemental Indenture to be dated as of June 30, 1998, supplemental to
Exhibit 4(a)(1).
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
4(b) Form of Indenture relating to the Notes.
4(c) Form of Notes.
5 Opinion of Sullivan & Cromwell.
8 Opinion of Bryan Cave LLP.**
12 Statement regarding computation of ratios.**
23(a) Consent of Independent Accountants, Price Waterhouse LLP.
23(b) Consent of Sullivan & Cromwell (included within Exhibit 5 hereto).
23(c) Consent of Bryan Cave LLP (included within Exhibit 8 hereto).**
25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of IBJ
Schroder Bank & Trust Company.**
</TABLE>
- - ------------------------
** Previously filed.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 15, Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Syracuse, State of New York, on the
16th day of June, 1998.
NIAGARA MOHAWK POWER CORPORATION
By: /s/ STEVEN W. TASKER
-----------------------------------------
Name: Steven W. Tasker
Title: Vice President-Controller and
Principal Accounting Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities indicated on June 16, 1998:
SIGNATURE TITLE DATE
- - ------------------------------ --------------------------- -------------------
/s/ WILLIAM F. EDWARDS Senior Vice President and
- - ------------------------------ Chief Financial Officer June 16, 1998
William F. Edwards
/s/ ARTHUR W. ROOS Vice President-Treasurer
- - ------------------------------ June 16, 1998
Arthur W. Roos
II-5
<PAGE>
EXHIBIT 1.1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
NIAGARA MOHAWK POWER CORPORATION
$300,000,000 __% SERIES A SENIOR NOTES DUE 1999
$450,000,000 __% SERIES B SENIOR NOTES DUE 2000
$400,000,000 __% SERIES C SENIOR NOTES DUE 2001
$400,000,000 __% SERIES D SENIOR NOTES DUE 2002
$400,000,000 __% SERIES E SENIOR NOTES DUE 2003
$400,000,000 __% SERIES F SENIOR NOTES DUE 2005
$600,000,000 __% SERIES G SENIOR NOTES DUE 2008
$500,000,000 __% SENIOR DISCOUNT NOTES DUE 2010
UNDERWRITING AGREEMENT
Dated as of June __, 1998
Donaldson, Lufkin & Jenrette
Securities Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Wasserstein Perella Securities, Inc.
Salomon Brothers Inc
J. P. Morgan Securities
Citicorp Securities, Inc.
TD Securities (USA) Inc.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
June __, 1998
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
WASSERSTEIN PERELLA SECURITIES, INC.
SALOMON BROTHERS INC
J.P. MORGAN SECURITIES
CITICORP SECURITIES, INC.
TD SECURITIES (USA) INC.
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Niagara Mohawk Power Corporation, a New York corporation (the "Company"),
proposes to issue and sell (i) $300,000,000 principal amount of its __% Series A
Senior Notes due 1999 (the "Series A Notes"), (ii) $450,000,000 principal amount
of its __% Series B Senior Notes due 2000 (the "Series B Notes"), (iii)
$400,000,000 principal amount of its __% Series C Senior Notes due 2001 (the
"Series C Notes"), (iv) $400,000,000 principal amount of its __% Series D Senior
Notes due 2002 (the "Series D Notes"), (v) $400,000,000 principal amount of its
__% Series E Senior Notes due 2003 (the "Series E Notes"), (vi) $400,000,000
principal amount of its __% Series F Senior Notes due 2005 (the "Series F
Notes"), (vii) $600,000,000 principal amount of its __% Series G Senior Notes
due 2008 (the "Series G Notes") and (viii) $500,000,000 principal amount at
maturity of its __% Senior Discount Notes due 2010 (the "Discount Notes" and
together with the Series A Notes, the Series B Notes, the Series C Notes, the
Series D Notes, the Series E Notes, the Series F Notes and the Series G
Notes, the "Notes") to Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), & Smith Incorporated ("Merrill"), Wasserstein Perella Securities,
Inc. ("Wasserstein"), Salomon Brothers Inc ("Salomon"), J.P. Morgan
Securities ("Morgan"), Citicorp Securities, Inc. ("Citicorp") and TD
Securities (USA) Inc. ("TDS" and together with DLJ, Merrill, Wasserstein,
Salomon, Morgan and Citicorp, the "Underwriters"). The Notes are to be issued
pursuant to the provisions of an Indenture dated as of June 30, 1998 (the
"Indenture") between the Company and IBJ Schroder Bank & Trust Company, as
Trustee (the "Trustee").
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-3, including a prospectus,
relating to the
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Notes. The registration statement, as amended at the time it became effective
or, if a post-effective amendment is filed with respect thereto, as amended by
such post-effective amendment at the time of its effectiveness, including, in
each case, all documents incorporated by reference therein, all financial
statements and exhibits thereto, and the information (if any) contained in a
prospectus subsequently filed with the Commission pursuant to Rule 424(b) under
the Act and deemed to be a part of the registration statement at the time of its
effectiveness pursuant to Rule 430A under the Act, is hereinafter referred to as
the "Registration Statement"; and the prospectus in the form first used to
confirm sales of the Notes, whether or not filed with the Commission pursuant to
Rule 424(b) under the Act, including all documents incorporated by reference
therein, is hereinafter referred to as the "Prospectus."
2. AGREEMENTS TO SELL AND PURCHASE. The Company agrees to issue and sell
to the Underwriters, and, on the basis of the representations and warranties
contained in this Agreement, and subject to its terms and conditions, each
Underwriter agrees, severally and not jointly, to purchase from the Company the
Notes in the respective amounts set forth opposite the name of such Underwriter
on Schedule I hereto, on the Closing Date (as defined herein), at ____% of the
principal amount thereof or, in the case of the Discount Notes, at __% of the
principal amount at maturity (the "Purchase Price").
3. TERMS OF PUBLIC OFFERING. The Underwriters have advised the Company
that the Underwriters propose (i) to make a public offering of their respective
portions of the Notes as soon after the execution and delivery of this Agreement
as in the Underwriters' judgment is advisable and (ii) initially to offer the
Notes upon the terms set forth in the Prospectus.
4. DELIVERY AND PAYMENT. The Notes shall be represented by definitive
global certificates. The Company shall deliver the Notes, with any transfer
taxes thereon duly paid by the Company, to DLJ through the facilities of The
Depository Trust Company ("DTC"), for the respective accounts of the several
Underwriters, against payment to the Company of the Purchase Price therefore by
wire transfer of Federal or other funds immediately available in New York City.
The certificates representing the Notes shall be made available for inspection
not later than 9:30 a.m., New York City time, on the business day prior to the
Closing Date (as defined below), at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of delivery and payment
for the Notes shall be 9:00 a.m., New York City time, on June __, 1998 or such
other time on the same or such other date as DLJ and the Company shall agree in
writing. The time and date of such delivery and payment are hereinafter
referred to as the "Closing Date".
The documents to be delivered on the Closing Date on behalf of the parties
hereto pursuant to Section 8 of this Agreement shall be delivered at the offices
of Sidley & Austin, 875 Third Avenue, New York, New York 10022, or such other
place as DLJ and the Company shall agree in writing, and the Notes shall be
delivered at the Designated Office, all on the Closing Date.
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5. AGREEMENTS OF THE COMPANY. The Company agrees with the Underwriters:
(a) If the Registration Statement has become effective and the Company,
omitting from the Prospectus certain information in reliance upon Rule 430A of
the Act, elects not to file a post-effective amendment pursuant to Rule 430A of
the Act, it will file the form of Prospectus required by Rule 424(b) of the Act,
the form and substance of which shall be reasonably satisfactory to you, within
the time period specified by Rule 430A and Rule 424(b) of the Act. The Company
will otherwise comply fully and in a timely manner with the applicable
provisions of Rule 424 and Rule 430A under the Act.
(b) To advise the Underwriters promptly and, if requested by the
Underwriters, to confirm such advice in writing, (i) if and when the Prospectus
is sent for filing pursuant to Rule 424 under the Act (including any term sheet
within the meaning of Rule 434 under the Act) and when any post-effective
amendment to the Registration Statement becomes effective, (ii) of any request
by the Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Notes for
offering or sale in any jurisdiction, or the initiation of any proceeding for
such purposes, (iv) if the Company is required to file a Rule 462(b)
Registration Statement after the effectiveness of this Agreement, when the Rule
462(b) Registration Statement has become effective and (v) of the happening of
any event during the period referred to in Section 5(e) below which makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements therein
not misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will use
its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(c) To furnish to the Underwriters, without charge, eight signed copies
of the Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to the Underwriters
such number of conformed copies of the Registration Statement as so filed and
of each amendment to it, without exhibits, as the Underwriters may reasonably
request.
(d) During the period specified in Section 5(e) below, not to file any
further amendment or supplement to the Registration Statement, and not to make
any amendment or supplement to the Prospectus of which the Underwriters shall
not previously have been advised or to which the Underwriters shall reasonably
object after being so advised; and, to prepare and file with the Commission,
promptly upon the Underwriters' reasonable request, any amendment to the
Registration Statement or amendment or supplement to the Prospectus which may be
necessary or advisable in connection with the distribution of the Notes by the
Underwriters, and to use its best efforts to cause the same to become promptly
effective.
(e) Prior to 10:00 A.M., New York City time, on the first business day
after the date of
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this Agreement and from time to time thereafter for such period as in your
reasonable judgment a prospectus is required by law to be delivered in
connection with sales of Notes by the Underwriters or a dealer, to furnish to
each Underwriter and any dealer as many copies of the Prospectus (and of any
amendment or supplement to the Prospectus) as such Underwriter or dealer may
reasonably request.
(f) If during the period specified in Section 5(e), any event shall occur
or condition shall exist as a result of which, in the opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Underwriters, it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to the
Underwriters and to any dealer as many copies thereof as any such Underwriter or
dealer may reasonably request.
(g) Prior to any public offering of the Notes, to cooperate with the
Underwriters and counsel for the Underwriters in connection with the
registration or qualification of the Notes for offer and sale by the
Underwriters and by dealers under the state securities or Blue Sky laws of such
jurisdictions within the United States as the Underwriters may reasonably
request, to continue such registration or qualification in effect so long as
required for distribution of the Notes and to file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification; PROVIDED, HOWEVER, that the Company shall not be
required in connection therewith to qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation in any
jurisdiction in which it is not now so subject.
(h) To make generally available to its security holders (within the
meaning of Rule 158 under the Act) as soon as practicable an earnings statement
covering a period of at least twelve-months after the effective date of the
Registration Statement (but in no event commencing later than 90 days after such
date) which shall satisfy the provisions of Section 11(a) of the Act (including,
at the Company's option, Rule 158 thereunder).
(i) So long as the Notes are outstanding, (i) to mail and make generally
available as soon as practicable after the end of each fiscal year to the record
holders of the Notes a financial report of the Company and its subsidiaries on a
consolidated basis, all such financial reports to include a consolidated balance
sheet, a consolidated statement of operations, a consolidated statement of cash
flows and a consolidated statement of shareholders' equity as of the end of and
for such fiscal year, together with comparable information as of the end of and
for the preceding year, certified by independent public accountants and (ii) to
mail and make generally available as soon as practicable after the end of each
quarterly period (except for the last quarterly period of each fiscal year) to
such
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holders, a consolidated balance sheet, a consolidated statement of operations
and a consolidated statement of cash flows as of the end of and for such
period, and for the period from the beginning of such fiscal year to the
close of such quarterly period, together with comparable information for the
corresponding periods of the preceding fiscal year.
(j) For three years following the date hereof, to furnish to the
Underwriters as soon as available copies of all reports or other publicly
available information of the Company mailed to its security holders or filed
with the Commission or any national securities exchange on which any class of
securities of the Company is listed and such other publicly available
information concerning the Company and its subsidiaries as the Underwriters may
reasonably request.
(k) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement becomes effective or is terminated, to pay or
cause to be paid all expenses incident to the performance of its obligations
under this Agreement, including: (i) the fees, disbursements and expenses of
the Company's counsel and the Company's accountants in connection with the
registration and delivery of the Notes under the Act and all other fees and
expenses in connection with the preparation, printing, filing and distribution
of the Registration Statement (including financial statements and exhibits), any
preliminary prospectus, the Prospectus and all amendments and supplements to any
of the foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers as provided herein, (ii) the preparation, printing
(including, without limitation, word processing and duplicating costs) and
delivery of this Agreement and the Indenture (the "Operative Documents") and all
other agreements, memoranda, correspondence and other documents printed and
delivered in connection with the offering of the Notes (including in each case
any disbursements of counsel for the Underwriters relating to such printing and
delivery), (iii) all costs and expenses related to the issuance, transfer and
delivery of the Notes to the Underwriters, including any transfer or other taxes
payable thereon, (iv) all expenses in connection with the registration or
qualification of the Notes for offer and sale under the securities or Blue Sky
laws of the several states and reasonable costs of printing or producing any
Preliminary and Supplemental Blue Sky Memoranda in connection therewith
(including the filing fees and reasonable fees and disbursements of counsel for
the Underwriters in connection with such registration or qualification and
memoranda relating thereto), (v) the filing fees and disbursements of counsel
for the Underwriters in connection with the review and clearance of the offering
of the Notes by the National Association of Securities Dealers, Inc., (vi)
furnishing such copies of the Registration Statement, the Prospectus and all
amendments and supplements thereto as may be requested for use in connection
with the offering or sale of the Notes by the Underwriters or by dealers to whom
the Notes may be sold, (vii) the cost of printing certificates representing the
Notes, (viii) all fees and expenses in connection with approval of the Notes by
the DTC for "book-entry" transfer, (ix) any fees charged by rating agencies for
the rating of the Notes, (x) the fees and expenses of the Trustee and the
Trustee's counsel in connection with the Indenture and the Notes and (xi) all
other costs and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this Section.
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(l) During the period beginning on the date hereof and continuing to and
including the Closing Date, not to offer, sell, contract to sell or otherwise
transfer or dispose of any debt securities of the Company or any warrants,
rights or options to purchase securities of the Company substantially similar
to the Notes (other than (i) the Notes and (ii) commercial paper issued in the
ordinary course of business), without the prior written consent of DLJ.
(m) To apply the net proceeds from the sale of the Notes to be sold
hereunder for the purposes set forth in the Registration Statement and the
Prospectus (and any supplements or amendments thereto).
(n) If the Registration Statement at the time of the effectiveness of this
Agreement does not cover all of the Notes, to file a Rule 462(b) Registration
Statement with the Commission registering the Notes not so covered in compliance
with Rule 462(b) by 10:00 p.m., New York City time, on the date of this
Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the effectiveness
of this Agreement); any Rule 462(b) Registration Statement filed after the
effectiveness of this Agreement will become effective no later than 10:00 p.m.,
New York City time, on the date of this Agreement; and no stop order suspending
the effectiveness of the Registration Statement is in effect, and no proceedings
for such purpose are pending before or, to the best knowledge of the Company,
threatened by the Commission.
(b)(i) The Registration Statement, when it became effective, did not
contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(ii) the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act,
(iii) if the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement and any amendments thereto, when they become effective (A) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (B) will comply in all material respects with the Act and (iv)
the Prospectus does not contain and, as amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph (b) shall not (A)
apply to statements or omissions in the Registration Statement or the
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Prospectus based upon information relating to the Underwriters furnished to
the Company in writing by the Underwriters expressly for use therein or (B)
to that part of the Registration Statement that constitutes the Statement of
Eligibility and Qualification under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), of the Trustee. The Company and the
Underwriters acknowledge for all purposes under this Agreement (including
this paragraph, Section 6(c) hereof, Section 7(a) hereof and Section 7(b)
hereof) that the statements with respect to price and discount and the last
paragraph on the cover page of the Prospectus and the second, fifth, sixth,
seventh and eighth paragraphs under the table in the section entitled
"Underwriting" in the Prospectus and the information regarding stabilization
on the inside front cover of the preliminary Prospectus and the Prospectus
(or any amendment or supplement thereto) constitute the only information
furnished to the Company by or on behalf of any Underwriter expressly for use
in the Registration Statement, the preliminary Prospectus or the Prospectus
and that the Underwriters shall not be deemed to have provided any other
information (and therefore are not responsible for any statements or
omissions) pertaining to any arrangement or agreement with respect to any
party other than the Underwriters or any party to an arrangement or agreement
with the Underwriters.
(c) The preliminary prospectus dated June 1, 1998 filed as part of
Amendment No. 1 to the registration statement complied as to form when so filed
in all material respects with the Act, and did not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in such preliminary prospectus based upon information
relating to the Underwriters furnished to the Company in writing by the
Underwriters expressly for use therein.
(d) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction of incorporation
and has the corporate power and authority to carry on its business and to own,
lease and operate its properties as described in the Prospectus, and is duly
qualified and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect").
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under, the Operative Documents and
to consummate the transactions contemplated hereby and thereby, including,
without limitation, the corporate power and authority to issue, sell and deliver
the Notes as provided herein and therein.
(f) This Agreement has been duly authorized and validly executed by the
Company and (assuming the due execution and delivery hereof by the Underwriters)
is the legally valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except
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as the enforceability thereof may be limited (i) by the effect of bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting the rights and
remedies of creditors, (ii) by the effect of general principles of equity,
whether enforcement is considered in a proceeding in equity or at law, and
the discretion of the court before which any proceeding therefor may be
brought and (iii) to the extent that rights to indemnification and
contribution thereunder may be limited by federal or state securities laws or
public policy relating thereto.
(g) The Company has duly authorized the Indenture and, when the Company
has duly executed and delivered the Indenture (assuming the due authorization,
execution and delivery thereof by the Trustee), the Indenture will be the
legally valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as the enforceability thereof may be limited
(i) by the effect of bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and (ii) by the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought.
(h) The Company has duly authorized the Notes and, when issued and
authenticated in accordance with the terms of the Indenture and delivered to and
paid for by the Underwriters in accordance with the terms hereof, the Notes will
conform in all material respects to the description thereof contained in the
Prospectus, will be entitled to the benefits of the Indenture and will be the
legally valid and binding obligations of the Company, enforceable against it in
accordance with their terms, except as the enforceability thereof may be limited
(i) by the effect of bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors and (ii) by the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought.
(i) The Indenture has been duly qualified under the Trust Indenture Act.
(j) The execution, delivery and performance of the Operative Documents,
the issuance and sale of the Notes, the compliance by the Company with all the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the charter or
by-laws of the Company or any bond, debenture, note, indenture, loan agreement,
mortgage, lease or any other evidence of indebtedness or any other agreement or
instrument filed as an exhibit to the Registration Statement, (ii) violate or
conflict with any applicable law, statute, rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property, (iii) result
in the imposition or creation of (or the obligation to create or impose) a lien,
encumbrance or security interest under any agreement or instrument filed as an
exhibit to the Registration Statement or (iv) result in the suspension,
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termination or revocation of any Authorization (as defined below) of the
Company or any of its subsidiaries or any other impairment of the rights of
the holder of any such Authorization, except in all cases as would not
reasonably be expected, either individually or in the aggregate, to have a
Material Adverse Effect.
(k) No consent, waiver, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, any court or
governmental agency, body or administrative agency is required for the
execution, delivery and performance by the Company of the Operative Documents,
the issuance and sale of the Notes, and the consummation of the transactions
contemplated hereby and thereby, except (i) such as have been obtained and made
under the Act and the TIA, and such as are expected to be obtained from the PSC
on or prior to the Closing Date, or have been obtained as described in the
Prospectus, (ii) such as are required under state securities or Blue Sky laws
and regulations, and (iii) such as to which the failure to be obtained or made
would not reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect.
(l) There is no legal or administrative proceeding, statute, rule or
regulation, contract or document concerning the Company or any of its
subsidiaries of a character required to be described in the Registration
Statement or Prospectus or to be filed as an exhibit to the Registration
Statement that is not so described or filed as required.
(m) To the Company's knowledge, each of the Company and its subsidiaries
has such permits, licenses, consents, exemptions, franchises, authorizations and
other approvals (each, an "Authorization") of, and has made all filings with and
notices to, all federal and state governmental or regulatory authorities and
self-regulatory organizations, as are necessary to conduct its business
substantially as described in the Prospectus, subject in each case to such
qualifications as may be set forth in the Prospectus, except where the failure
to have any such Authorization or to make any such filing or notice would not
reasonably be expected to have a Material Adverse Effect.
(n) Except as otherwise set forth in the Prospectus or such as are not
material to the business, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, at the Closing Date, the Company
has good and marketable title, free and clear of all liens, claims, encumbrances
and restrictions, except liens for taxes not yet due and payable, to all
property and assets described in the Registration Statement and the Prospectus
as being owned by it. At the Closing Date, all leases to which the Company is a
party will be valid and binding, no default will have occurred or be continuing
thereunder, and the Company enjoys peaceful and undisturbed possession under all
such leases to which it is a party as lessee with such exceptions as would not
reasonably be expected to have a Material Adverse Effect.
(o) Except as otherwise set forth in the Prospectus and subject to such
qualifications as may be set forth therein, neither the Company nor any of its
subsidiaries has violated any provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the rules and regulations
promulgated thereunder, which in each case would reasonably be expected to
result in
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a Material Adverse Effect. Except as otherwise set forth in the Prospectus,
to the knowledge of the Company, the Company and its subsidiaries are in
compliance with all applicable existing federal, state and foreign laws
(including statutes and the common law) and regulations relating to
protection of human health or the environment or imposing liability or
standards of conduct concerning any Hazardous Material ("Environmental
Laws"), except for such instances of noncompliance which, either singly or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. The term "Hazardous Material" means (i) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, (ii) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act, as amended, (iii) any petroleum
or petroleum product, (iv) any polychlorinated biphenyl and (v) any pollutant
or contaminant or hazardous, dangerous or toxic chemical, material, waste or
substance regulated under or within the meaning of any other Environmental
Law.
(p) There is (i) no significant unfair labor practice complaint pending
against the Company or any of its subsidiaries or, to the best knowledge of the
Company, threatened against the Company or its subsidiaries before the National
Labor Relations Board or any state or local labor relations board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against the Company or
its subsidiaries or, to the best knowledge of the Company, threatened against
them and (ii) no significant strike, labor dispute, slowdown or stoppage pending
against the Company or its subsidiaries or, to the best knowledge of the
Company, threatened against them except for such actions specified in clause (i)
or (ii) above, which, either individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
(q) Price Waterhouse LLP are independent public accountants with respect
to the Company as required by the Act.
(r) The financial statements, together with related schedules and notes
forming part of the Registration Statement and the Prospectus (and any
amendment or supplement thereto), comply as to form in all material respects
with the requirements of the Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), present fairly the financial position, results
of operations and changes in financial position of the Company on the basis
stated in the Registration Statement and the Prospectus at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and
statistical information and data set forth in the Registration Statement and
the Prospectus (and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company. The PRO FORMA
financial data included in the Registration Statement and the Prospectus have
been prepared on a basis consistent with such historical statements, except
for the PRO FORMA adjustments specified therein, and give effect to the
assumptions made on a reasonable basis and present fairly the transactions
reflected thereby as indicated in the
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Registration Statement and Prospectus and comply in all material respects
with the applicable accounting requirements of Rule 11-02 of Regulation S-X
and the PRO FORMA adjustments have been properly applied to the historical
amounts in the compilation of these statements.
(s) Since the respective dates as of which information is given in the
Prospectus, other than as set forth in the Prospectus, there has not occurred
any material adverse change or any development involving a prospective material
adverse change in the business, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole.
(t) The Company is presently exempt from the provisions of the Public
Utility Holding Company Act of 1935, as amended, that would require it to
register thereunder.
(u) There are no holders of securities of the Company who, by reason of
the execution of the Operative Documents, the issuance and sale of the Notes and
the consummation of the transactions contemplated thereby, have the right to
request or demand that the Company register under the Act, in the Registration
Statement, securities held by them who have not waived such right.
(v) Each certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters pursuant to this Agreement
shall be deemed to be a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
7. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to the Underwriters furnished in writing to the Company by or on behalf of the
Underwriters expressly for use therein; PROVIDED, HOWEVER, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter who failed to deliver a Prospectus (as then
amended or supplemented, provided by the Company to the several Underwriters in
the requisite quantity and on a timely basis to permit proper delivery on or
prior to the Closing Date) to the person asserting any losses, claims, damages
and liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
such material misstatement or omission or alleged
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material misstatement or omission was cured in such Prospectus and such
Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to each Underwriter but only with
reference to information relating to the Underwriters furnished in writing to
the Company by or on behalf of the Underwriters expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b)
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party")
in writing and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel,
as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 7(a) and 7(b), the
Underwriter shall not be required to assume the defense of such action
pursuant to this Section 7(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of such
Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties
to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party, and the indemnified party shall
have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of
the indemnified party). In any such case, the indemnifying party shall not,
in connection with any one action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by DLJ, in the
case of parties indemnified pursuant to Section 7(a), and by the Company, in
the case of parties indemnified pursuant to Section 7(b). The indemnifying
party shall not be liable for any settlement of any such action effected
without its written consent but the indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action effected with the indemnifying party's written consent. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of
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<PAGE>
judgment with respect to, any pending or threatened action in respect of
which the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does
not include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Notes or (ii) if the allocation provided by clause 7(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 7(d)(i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (after deducting
underwriting discounts and commissions but before deducting expenses) received
by the Company, and the total underwriting discounts and commissions received by
the Underwriters, bear to the total price to the public of the Notes, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault of the Company on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Notes underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise
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<PAGE>
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective
principal amount of Notes purchased by each of the Underwriters hereunder and
not joint.
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the
Underwriters to purchase the Notes under this Agreement are subject to the
satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective not later than
5:00 p.m. (and, in the case of a Registration Statement filed under Rule 462(b)
of the Act, not later than 10:00 p.m.), New York City time, on the date of this
Agreement or at such later date and time as the Underwriters may approve in
writing, and on the Closing Date no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or, to the
Company's knowledge, contemplated by the Commission.
(c) On or after the date hereof, (i) no "nationally recognized statistical
rating organization" as such term is defined for purposes of Rule 436(g)(2)
under the Act shall have publicly announced that it is considering (A) the
downgrading, suspension or withdrawal of, or any review for a possible change
that does not indicate the direction of the possible change in, any rating
assigned to the Company or any securities of the Company or (B) any change in
the outlook for any rating of the Company or any securities of the Company, and
(ii) no such rating organization shall have given notice that it has assigned
(or publicly announced that it is considering assigning) a lower rating to the
Notes than that on which the Notes were marketed.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any material adverse change or any development
involving a prospective material adverse change in the business, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, (ii) there shall not have been any change or any development involving
a prospective material adverse change in the capital stock or in the long-term
debt of the Company or any of its subsidiaries and (iii) neither the Company nor
any of its subsidiaries shall have incurred any liability or obligation, direct
or contingent, not in
-14-
<PAGE>
the ordinary course of business, which is material and adverse and makes it
impracticable to market the Notes on the terms and in the manner contemplated
in the Prospectus.
(e) The Underwriters shall have received on the Closing Date a certificate
dated the Closing Date, signed by William E. Davis and William F. Edwards, in
their capacities as the Chief Executive Officer and Chief Financial Officer of
the Company, confirming the matters set forth in Sections 8(a), 8(b), 8(d) and
8(i) and that the Company has complied with all of the agreements and satisfied
all of the conditions herein contained and required to be complied with or
satisfied by the Company on or prior to the Closing Date.
(f) The Underwriters shall have received on the Closing Date an opinion
(satisfactory to the Underwriters and counsel for the Underwriters), dated the
Closing Date, of Sullivan & Cromwell, counsel for the Company, Swidler & Berlin,
regulatory counsel for the Company, Bryan Cave LLP, special tax counsel for the
Company, and Paul Kaleta, Esq., the Company's Vice President-Law & General
Counsel, substantially in the form of Exhibits 1A, 1B, 1C and 1D hereto,
respectively.
(g) The Underwriters shall have received on the Closing Date an opinion,
dated the Closing Date, of Sidley & Austin, counsel for the Underwriters,
substantially in the form of Exhibit 2 hereto.
(h) The Underwriters shall have received a letter dated on and as of the
Closing Date, in form and substance satisfactory to the Underwriters, from Price
Waterhouse LLP, independent public accountants, with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus in the form and substance of the letter delivered
to the Underwriters by Price Waterhouse LLP on the date of this Agreement.
(i) The New York Public Service Commission (the "PSC") shall have issued a
written order or orders (the "PSC Orders") approving the Company's PowerChoice
Settlement Agreement the "PowerChoice Agreement"), including the issuance by the
Company of the Notes pursuant to the Master Restructuring Agreement dated
July 9, 1997, as amended (the "MRA"); the PSC Orders shall remain in full
force and effect; the PSC shall not have publicly indicated its intention to
modify, amend or otherwise change the PSC Orders in any material respect; no
party or entity with legal standing shall have entered a notice of appeal, or
otherwise publicly indicated it intention to appeal, the PSC Orders; no
judicial or administrative proceeding shall have been instituted that
challenges the validity of, or otherwise seeks to modify, amend, stay or
enjoin the effectiveness of, the PSC Orders if (with respect to any of the
events in this and the two immediately preceding clauses), in the reasonable
judgment of the Underwriters, such event makes it impracticable to market the
Notes on the terms and in the manner contemplated in the Prospectus; and all
conditions precedent to the effectiveness of the PowerChoice Agreement and
the MRA shall have been satisfied and the transactions contemplated by MRA
shall have closed (or shall close concurrently with the Closing hereunder).
(j) The Underwriters shall have received a counterpart, conformed as
executed, of the
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<PAGE>
Indenture which shall have been entered into by the Company and the Trustee.
(k) The Company shall not have failed on or prior to the Closing Date to
perform or comply in any material respect with any of the agreements herein
contained and required hereunder to be performed or complied with by the Company
on or prior to the Closing Date.
9. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon its execution by and of the parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Underwriters by written notice to the Company if any of the
following has occurred: (i) since the respective dates as of which information
is given in the Registration Statement and the Prospectus, any material adverse
change or development involving a prospective material adverse change in the
business, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, whether or not arising in the ordinary course of
business, which would, in the Underwriters' good faith judgment, make it
impracticable to market the Notes on the terms and in the manner contemplated in
the Prospectus, (ii) any outbreak or escalation of hostilities involving the
United States or other national or international calamity or crisis involving
the United States or change in economic conditions or in the financial markets
of the United States that, in the Underwriters' good faith judgment, is material
and adverse and would, in the Underwriters' good faith judgment, make it
impracticable to market the Notes on the terms and in the manner contemplated in
the Prospectus, (iii) the suspension or material limitation of trading in
securities or other instruments on the New York Stock Exchange or limitation on
prices for securities or other instruments generally on such exchange, or (iv)
the declaration of a banking moratorium by either federal or New York State
authorities.
If on the Closing Date any one or more of the Underwriters shall fail or
refuse to purchase the Notes which it or they have agreed to purchase hereunder
on such date and the aggregate principal amount of Notes which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the aggregate principal amount of Notes to be purchased on
such date by all Underwriters, each non-defaulting Underwriter shall be
obligated severally, in the proportion which the principal amount of Notes set
forth opposite its name in Schedule I bears to the aggregate principal amount of
Notes which all the non-defaulting Underwriters have agreed to purchase, or in
such other proportion as the Underwriters may specify, to purchase the Notes
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase on such date; PROVIDED that in no event shall the aggregate
principal amount of Notes which any Underwriter has agreed to purchase pursuant
to Section 2 hereof be increased pursuant to this Section 9 by an amount in
excess of one-ninth of such principal amount of Notes without the written
consent of such Underwriter. If on the Closing Date any Underwriter or
Underwriters shall fail or refuse to purchase Notes and the aggregate principal
amount of Notes with respect to which such default occurs is more than one-tenth
of the aggregate principal amount of Notes to be purchased on such date by all
Underwriters and arrangements satisfactory to the Underwriters and
-16-
<PAGE>
the Company for purchase of such Notes are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of
any non-defaulting Underwriter and the Company. In any such case which does
not result in termination of this Agreement, either the Underwriters or the
Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected. Any action taken under this paragraph shall
not relieve any defaulting Underwriter from liability in respect of any
default of any such Underwriter under this Agreement.
10. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to Niagara
Mohawk Power Corporation, 300 Erie Boulevard West, Syracuse, New York 13202,
Attention: General Counsel and (ii) if to the Underwriters, c/o Donaldson,
Lufkin & Jenrette Securities Corporation, 140 Broadway, New York, New York
10005, Attention: Syndicate Department, or in any case to such other address as
the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, its officers and directors and
of the Underwriters set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and payment
for the Notes, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, the officers or directors of the
Company or any person controlling the Company, (ii) acceptance of the Notes and
payment for them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of any
failure or refusal on the part of the Company to comply with any of the terms or
to fulfill any of the conditions of this Agreement, the Company agrees to
reimburse the Underwriters for all out-of-pocket expenses (including the fees
and disbursements of counsel) incurred by them. Notwithstanding any termination
of this Agreement, the Company shall be liable for all expenses which it has
agreed to pay pursuant to Section 5(k) hereof.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' directors and officers, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Notes from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York without regard to the conflict of laws provisions
thereof.
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<PAGE>
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
-18-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Underwriters.
Very truly yours,
NIAGARA MOHAWK POWER CORPORATION
By:_______________________________
Name:
Title:
Acknowledged and accepted on the
date first described herein.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_______________________________
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By:_______________________________
Name:
Title:
WASSERSTEIN PERELLA SECURITIES, INC.
By:_______________________________
Name:
Title:
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<PAGE>
SALOMON BROTHERS INC
By:_______________________________
Name:
Title:
J. P. MORGAN SECURITIES
By:_______________________________
Name:
Title:
TD SECURITIES (USA) INC.
By:_______________________________
Name:
Title:
CITICORP SECURITIES INC.
By:_______________________________
Name:
Title:
-20-
<PAGE>
SCHEDULE I
----------
Principal Amount of
Notes
Underwriters to be Purchased
- - ------------ ---------------
Donaldson, Lufkin & Jenrette Securities
Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Wasserstein Perella Securities, Inc.
Salomon Brothers Inc
J. P. Morgan Securities
Citicorp Securities, Inc.
TD Securities (USA) Inc.
--------------------
Total $3,450,000.000
<PAGE>
Exhibit 4(a)(41)
Form of 1998 Supplemental Indenture
NIAGARA MOHAWK POWER CORPORATION
to
BANKERS TRUST COMPANY, as Trustee
------------------------
Supplemental Indenture
Dated as of June 30, 1998
Providing for the exchange of instruments relating to
the following so as to evidence the extension of the due
date thereof: Bonds of the Eighty-first Series, Bonds of
the Eighty-second Series, Bonds of the Eighty-third
Series, Bonds of the Eighty-fourth Series, Bonds of the
Eighty-fifth Series and Bonds of the Eighty-sixth
Series.
<PAGE>
SUPPLEMENTAL INDENTURE dated as of June 30, 1998, made by and between
NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing
under the laws of the State of New York, having its principal place of business
(residence) at No. 300 Erie Boulevard West, Syracuse, New York (hereinafter
sometimes referred to as the "Company"), party of the first part, and BANKERS
TRUST COMPANY (successor to Marine Midland Bank, in turn, successor to Marine
Midland Bank, N.A., a national banking association and, in turn, successor to
Marine Midland Bank, a corporation duly organized and existing under the laws of
the State of New York, formerly named the Marine Midland Trust Company of New
York, Marine Midland Grace Trust Company of New York and Marine Midland Bank --
New York), a banking corporation and trust company duly organized and existing
under the laws of the State of New York, having its principal corporate trust
office at Four Albany Street, New York (hereinafter sometimes referred to as the
"Trustee"), as Trustee under the Mortgage Trust Indenture hereinafter mentioned,
party of the second part.
WHEREAS, the Company (formerly Central New York Power Corporation) has
heretofore executed and delivered to the Trustee its Mortgage Trust Indenture
dated as of October 1, 1937 (hereinafter referred to as the "Original
Indenture") and indentures supplemental thereto dated as of December 1, 1938, as
of April 15, 1939, as of July 1, 1940, as of January 1, 1942, as of October 1,
1944, as of June 1, 1945, as of August 17, 1948, as of December 31, 1949, as of
January 1, 1950, as of October 1, 1950, as of October 19, 1950, as of December
1, 1951, as of February 1, 1953, as of February 20, 1953, as of October 1, 1953,
as of August 1, 1954, as of April 25, 1956, as of May 1, 1956, as of September
1, 1957, as of June 1, 1958, as of March 15, 1960, as of April 1,1960, as of
November 1, 1961, as of December 1, 1964, as of October 1, 1966, as of July 15,
1967, as of August 1, 1967, as of August 1, 1968, as of December 1, 1969, as of
February 1, 1971, as of February 1, 1972, as of August 1, 1972, as of December
1, 1973, as of October 1, 1974, as of March 1, 1975, as of August 1, 1975, as of
March 15, 1977, as of August 1, 1977, as of December 1, 1977, as of March 1,
1978, as of December 1, 1978, as of September 1, 1979, as of October 1, 1979, as
of June 15, 1980, as of September 1, 1980, as of March 1, 1981, as of August 1,
1981, as of March 11, 1982, as of April 1, 1982, as of June 1, 1982, as of
August 1, 1982, as of November 1, 1982, as of March 1, 1983, as of May 1, 1983,
as of June 1, 1983, as of March 1, 1984, as of May 1, 1984, as of July 1, 1984,
as of October 1, 1984, as of January 1, 1985, as of February 1, 1985, as of
February 15, 1985, as of November 1, 1985, as of June 1, 1986, as of August 1,
1986, as of October 1, 1986, as of November 1, 1986, as of July 1, 1987, as of
May 1, 1988, as of February 1, 1989, as of April 1, 1989, as of October 1, 1989,
as of June 1, 1990, as of November 1, 1990, as of March 1, 1991, as of October
1, 1991, as of April 1, 1992, as of June 1, 1992, as of July 1, 1992, as of
August 1, 1992, as of April 1, 1993, as of July 1, 1993, as of September 1,
1993, as of March 1, 1994, as July 1, 1994, as of May 1, 1995 and as of March
20, 1996 (the "1996 Supplemental Indenture") (said Original Indenture, together
with all instruments stated to be supplemental thereto to which the Trustee has
heretofore been or shall hereafter be a party, including said enumerated
Supplemental Indentures and this Supplemental Indenture, being herein referred
to as the "Indenture"; capitalized terms used herein and not otherwise defined
herein are used as defined in the Indenture); and
WHEREAS, the Company has entered into a 1998 Amendment and Restatement
Agreement dated as of June 5, 1998 (the "1998 Amendment Agreement") with the
parties to the
<PAGE>
following agreements to effect certain amendments thereto (including without
limitation the extension of the maturity dates of the facilities therein) (all
of which are as defined in the 1996 Indenture): the Term Loan Agreement, the
Revolving Credit Agreement, the Morgan LC Agreement, the Toronto LC Agreement,
the CIBC LC Agreement and the Master Creditor Agreement;
WHEREAS, under the terms of the 1998 Amendment Agreement the Company and
each of (as each is defined in the 1996 Indenture) the Term Lenders, the
Revolving Lender Parties, the Morgan LC Credit Parties, the Toronto LC Credit
Parties, the CIBC LC Credit Parties, the Master Creditor Agent and the Lender
Parties have each agreed to the extension of the maturity (the "Maturities
Extension") of each of the following from June 30, 1999 until June 1, 2000 (as
each is defined in the 1996 Supplemental Indenture): the Bonds of the
Eighty-first Series, the Bonds of the Eighty-second Series, the Bonds of the
Eighty-third Series, the Bonds of the Eighty-fourth Series, the Bonds of the
Eighty-fifth Series and the Bonds of the Eighty-sixth Series (together, the "Old
Senior Finance Bonds");
WHEREAS, each of the parties to the 1998 Amendment Agreement in the third
recital above has under the provisions of the 1998 Amendment Agreement waived
any and all rights to have meetings convened of the respective holders of the
Old Senior Finance Bonds (or to receive prior notice of any such meeting) in
relation to the Maturities Extension or for the Maturities Extension to be
submitted to any approval, consent, notification, filing or voting procedures or
requirements under the Indenture or otherwise in addition to their agreement to
the Maturities Extension contained in the 1998 Amendment Agreement;
WHEREAS, each of the parties to the 1998 Amendment Agreement has signed and
collectively issued an instruction letter dated as of June 30, 1998 (the
"Instruction Letter") to the Trustee agreeing to the Maturities Extension and
instructing the Trustee to exchange instruments evidencing each of the Old
Senior Finance Bonds for certificates evidencing amended Bonds of the
Eighty-first Series, amended Bonds of the Eighty-second Series, amended Bonds of
the Eighty-third Series, amended Bonds of the Eighty-fourth Series, amended
Bonds of the Eighty-fifth Series and amended Bonds of the Eighty-sixth Series
upon presentation and delivery of certain instruments as described herein;
WHEREAS, the Company has requested the Trustee to enter into this
Supplemental Indenture to give effect to the Maturities Extension;
WHEREAS, all conditions and requirements necessary to make this
Supplemental Indenture a valid, binding and legal instrument in accordance with
its terms have been performed and fulfilled and the execution and delivery
hereof have been in all respects duly authorized;
2
<PAGE>
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE
W I T N E S S E T H:
That for and in consideration of the premises of One Dollar to the Company
duly paid by the Trustee at or before the execution and delivery of this
Supplemental Indenture and for other good and valuable consideration, the
receipt whereof is hereby acknowledged, the Company does hereby covenant and
agree with the Trustee for the benefit of the holders of the Old Senior Finance
Bonds, as follows:
PART I.
AMENDMENT AND
EXCHANGE OF INSTRUMENTS
EVIDENCING SENIOR FINANCE BONDS
SECTION 1. The stated maturity date of each Old Senior Finance Bond shall
be extended from "June 30, 1999" to "June 1, 2000" (the Old Senior Finance Bonds
as extended being the "Amended Senior Finance Bonds"). Pursuant to the
Instruction Letter all of the holders of the Old Senior Finance Bonds have
agreed to such extension.
SECTION 2. The Trustee hereby agrees to comply with the instructions given
by the signatories to the Instruction Letter in relation to the Old Senior
Finance Bonds.
SECTION 3. Upon delivery by the Company to the Trustee of certificates
representing the Amended Senior Finance Bonds (which shall be identical to the
certificates representing the Old Senior Finance Bonds except for the
substitution of "June 1, 2000" for "June 30, 1999" as the stated maturity date),
the Trustee shall authenticate the Amended Senior Finance Bonds and deliver them
to the Master Creditor Agent in exchange for the Old Senior Finance Bonds
delivered by the Master Creditor Agent to the Trustee in accordance with the
Instruction Letter. The Trustee shall cancel the surrendered Old Senior Finance
Bonds in accordance with the terms of the Indenture.
PART II
THE TRUSTEE
SECTION 1. The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental Indenture,
or for or in respect of the recitals contained herein, all of which recitals are
made by the Company solely. To the extent permitted by the provisions of Section
4 of Article Tenth of the Indenture, the Trustee shall not be answerable or
accountable for anything whatsoever in connection with this Supplemental
Indenture except for its own wilful misconduct or negligence.
3
<PAGE>
PART III
MISCELLANEOUS PROVISIONS
SECTION 1. This Supplemental Indenture shall hereafter form a part of the
Indenture; and all the terms and conditions contained in this Supplemental
Indenture as to any provision authorized to be contained herein shall be and be
deemed to be part of the terms and conditions of the Indenture for any and all
purposes. Except as expressly amended and supplemented by this Supplemental
Indenture, the Indenture is hereby ratified and confirmed in all respects.
SECTION 2. This Supplemental Indenture may be simultaneously executed in
any number of counterparts, and each of such counterparts shall for all purposes
be deemed to be an original and shall remain in full force and effect, and all
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be executed in their respective corporate names by their respective
corporate officers thereunto duly authorized, and their respective corporate
seals to be hereto attached and to be duly attested, all as of the day and year
first above written.
NIAGARA MOHAWK POWER CORPORATION
[CORPORATE SEAL] By
--------------------------------
Name:
Title:
Attest:
---------------------------
Title:
4
<PAGE>
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NIAGARA MOHAWK POWER CORPORATION
SENIOR NOTES
____________________
INDENTURE
Dated as of June 30, 1998
____________________
____________________
IBJ SCHRODER BANK & TRUST COMPANY
____________________
Trustee
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE. . . . . . . . . . . . . - 1 -
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . - 1 -
Section 1.02. Other Definitions. . . . . . . . . . . . . . . . . . - 17 -
Section 1.03. Incorporation by Reference of Trust Indenture Act. . - 18 -
ARTICLE 2
THE SENIOR NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . - 19 -
Section 2.01. Series And Terms of Senior Notes . . . . . . . . . . - 19 -
Section 2.02. Terms of Initial Series Senior Notes . . . . . . . . - 21 -
Section 2.03. Form and Dating. . . . . . . . . . . . . . . . . . . - 24 -
Section 2.04. Execution and Authentication . . . . . . . . . . . . - 24 -
Section 2.05. Registrar and Paying Agent . . . . . . . . . . . . . - 25 -
Section 2.06. Paying Agent and to Hold Money in Trust. . . . . . . - 25 -
Section 2.07. Holder Lists . . . . . . . . . . . . . . . . . . . . - 26 -
Section 2.08. Transfer and Exchange. . . . . . . . . . . . . . . . - 26 -
Section 2.09. Replacement Senior Notes . . . . . . . . . . . . . . - 27 -
Section 2.10. Outstanding Senior Notes . . . . . . . . . . . . . . - 27 -
Section 2.11. Treasury Senior Notes. . . . . . . . . . . . . . . . - 27 -
Section 2.13. Cancellation . . . . . . . . . . . . . . . . . . . . - 28 -
Section 2.14. Record Date. . . . . . . . . . . . . . . . . . . . . - 28 -
Section 2.15. Cusip Number . . . . . . . . . . . . . . . . . . . . - 28 -
ARTICLE 3.
REDEMPTION AND REPURCHASE . . . . . . . . . . . . . . . . . . . . . - 29 -
Section 3.01. Certain Senior Notes Redeemable; Notices to Trustee. - 29 -
Section 3.02. Selection of Senior Notes to Be Redeemed . . . . . . - 29 -
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . - 30 -
Section 3.04. Effect of Notice of Redemption.. . . . . . . . . . . - 31 -
Section 3.05. Deposit of Redemption Price. . . . . . . . . . . . . - 31 -
Section 3.06. Senior Notes Redeemed in Part. . . . . . . . . . . . - 31 -
Section 3.07. Optional and special Redemption of Initial Series
Senior Notes . . . . . . . . . . . . . . . . . . . . - 32 -
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . - 33 -
Section 3.09. Offer to Purchase by Application of Excess Proceeds. - 33 -
ARTICLE 4
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 35 -
Section 4.01. Payment of Senior Notes. . . . . . . . . . . . . . . - 35 -
Section 4.02. Maintenance of Office or Agency. . . . . . . . . . . - 35 -
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Section 4.03. Reports. . . . . . . . . . . . . . . . . . . . . . . - 36 -
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . . - 36 -
Section 4.05. Taxes. . . . . . . . . . . . . . . . . . . . . . . . - 37 -
Section 4.06. Stay, Extension and Usury Laws.. . . . . . . . . . . - 37 -
Section 4.07. Restricted Payments. . . . . . . . . . . . . . . . . - 38 -
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries.. . . . . . . . . . . . . . . . . . . . - 39 -
Section 4.09. Incurrence of Indebtedness . . . . . . . . . . . . . - 40 -
Section 4.10. Proceeds of Certain Asset Sales. . . . . . . . . . . - 41 -
Section 4.11. Transaction with Affiliates. . . . . . . . . . . . . - 42 -
Section 4.12. Liens. . . . . . . . . . . . . . . . . . . . . . . . - 43 -
Section 4.13. Corporate Existence. . . . . . . . . . . . . . . . . - 43 -
Section 4.14. Offer to repurchase upon change of control
triggering event . . . . . . . . . . . . . . . . . . - 43 -
Section 4.15. Payments for Consents. . . . . . . . . . . . . . . . - 45 -
ARTICLE 5
SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 45 -
Section 5.01. Merger, Consolidation, or Sale of Assets . . . . . . - 45 -
Section 5.02. Successor Corporation Substituted. . . . . . . . . . - 46 -
ARTICLE 6
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . - 46 -
Section 6.01. Events of Default. . . . . . . . . . . . . . . . . . - 46 -
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . - 48 -
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . - 49 -
Section 6.04. Waiver of past Defaults. . . . . . . . . . . . . . . - 49 -
Section 6.05. Control by Majority. . . . . . . . . . . . . . . . . - 49 -
Section 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . - 49 -
Section 6.07. Rights of Holders of Senior Notes to Receive
Payment. . . . . . . . . . . . . . . . . . . . . . . - 50 -
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . - 50 -
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . - 50 -
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . - 51 -
Section 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . - 51 -
ARTICLE 7
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 52 -
Section 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . - 52 -
Section 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . - 53 -
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . - 54 -
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . - 54 -
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . - 54 -
Section 7.06. Reports by Trustee to Holders of the Senior Notes. . - 55 -
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Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . - 55 -
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . - 56 -
Section 7.09. Successor Trustee by Merger, Etc.. . . . . . . . . . - 57 -
Section 7.10. Eligibility, Disqualification. . . . . . . . . . . . - 57 -
Section 7.11. Preferential Collection of Claims Against Company. . - 57 -
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE. . . . . . . . . . . . . . - 58 -
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance . . . . . . . . . . . . . . . . . . . . . - 58 -
Section 8.02. Legal Defeasance and discharge . . . . . . . . . . . - 58 -
Section 8.03. Covenant Defeasance. . . . . . . . . . . . . . . . . - 58 -
Section 8.04. Conditions to Legal or Covenant Defeasance . . . . . - 59 -
Section 8.05. Deposited Money and Government Senior Notes to Be
Held in Trust; Other Miscellaneous Provisions. . . . - 60 -
Section 8.06. Repayment of Company . . . . . . . . . . . . . . . . - 61 -
Section 8.07. Reinstatement. . . . . . . . . . . . . . . . . . . . - 61 -
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER. . . . . . . . . . . . . . . . . . - 62 -
Section 9.01. Without Consent of Holders of Senior Notes . . . . . - 62 -
Section 9.02. With Consent of Holders of Senior Notes. . . . . . . - 63 -
Section 9.03. Compliance with Trust Indenture Act. . . . . . . . . - 65 -
Section 9.04. Revocation and Effect of Consents. . . . . . . . . . - 65 -
Section 9.05. Notation on or Exchange of Senior Notes. . . . . . . - 66 -
Section 9.06. Trustee to Sign Amendments, Etc. . . . . . . . . . . - 66 -
Section 9.07. Effect Of Supplemental Indentures. . . . . . . . . . - 66 -
ARTICLE 10
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . - 66 -
Section 10.01. Trust Indenture Act Controls . . . . . . . . . . . . - 66 -
Section 10.02. Notices. . . . . . . . . . . . . . . . . . . . . . . - 67 -
Section 10.03. Communication by Holders of Senior Notes with
Other Holders of Senior Notes. . . . . . . . . . . . - 68 -
Section 10.04. Certificate And Opinion as to Conditions Precedent . - 68 -
Section 10.05. Statements Required in Certificate or Opinion. . . . - 68 -
Section 10.06. Rules by Trustee and Agents. . . . . . . . . . . . . - 69 -
Section 10.07. No Personal Liability of Directors, Officers,
Employees and Stockholders . . . . . . . . . . . . . - 69 -
Section 10.08. Governing Law. . . . . . . . . . . . . . . . . . . . - 69 -
Section 10.09. No Adverse Interpretation of Other Agreements. . . . - 69 -
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Section 10.10. Successors . . . . . . . . . . . . . . . . . . . . . - 69 -
Section 10.11. Severability . . . . . . . . . . . . . . . . . . . . - 69 -
Section 10.12. Counterpart Originals. . . . . . . . . . . . . . . . - 70 -
Section 10.13. Table of Contents, Headings, Etc.. . . . . . . . . . - 70 -
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INDENTURE dated as of June 30, 1998, between Niagara Mohawk Power
Corporation, a New York corporation (the "Company") and IBJ Schroder Bank &
Trust Company, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the Senior Notes
issued hereunder.
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACCRETED VALUE" means, for each $1,000 face amount of Senior
Discount Notes as of any date of determination prior to July 1, 2003, the sum
of (a) the initial offering price of each Senior Discount Note and (b) that
portion of the excess of the principal amount of each Senior Discount Note over
such initial offering price which shall have been accreted thereon through such
date, such amount to be so accreted on a daily basis and compounded
semi-annually on each January 1 and July 1 at the rate of ___% per annum from
the date of issuance of the Senior Discount Notes through the date of
determination.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified
Person including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Restricted Subsidiary of such specified Person and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"AFFILIATE" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"AGENT" means any Registrar, Paying Agent or co-registrar.
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"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"BOARD OF DIRECTORS" means the Board of Directors, if any, of the
Company or any authorized committee thereof.
"BOARD RESOLUTION" means a resolution authorized by the Board of
Directors.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a balance sheet
of such Person in accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, shares of
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) Government Securities having maturities
of not more than eighteen months from the date of acquisition; (ii)
certificates of deposit and Eurodollar time deposits with maturities of
eighteen months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding eighteen months and overnight bank deposits, in each
case with any lender party to the Credit Facility or with any U.S. commercial
bank having capital and surplus in excess of $500.0 million; (iii) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (i) and (ii) above entered into with any
financial institution meeting the qualifications specified in clause (ii)
above; (iv) commercial paper having either the highest or second highest rating
obtainable from Moody's or S&P and in each case maturing within six months
after the date of acquisition; (v) other corporate debt or asset backed or
mortgage backed securities with an Investment Grade rating from Moody's or S&P
and which mature within eighteen months; and (vi) money market mutual funds.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions,
of all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole; (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company; (iii) the consummation of any
transaction (including, without limitation any merger or consolidation) the
result of which is that any "person" or "group" (as such terms are defined in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes
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the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly, of more than 50% of the
total voting power in the aggregate of all classes of Capital Stock of the
Company then outstanding normally entitled to vote in the election of
directors; or (iv) the first day on which a majority of the members of the
Board of Directors of the Company or any Successor Entity are not Continuing
Directors; PROVIDED, HOWEVER, that the consummation of a transaction in which
the outstanding shares of Common Stock are exchanged for common stock of a
Person that thereafter will be the sole shareholder of the Company as part of
a holding company reorganization shall not be deemed a "Change of Control."
For purposes of this definition, any transfer of an equity interest of an
entity that was formed for the purpose of acquiring voting stock of the
Company will be deemed to be a transfer of such portion of such voting stock
as corresponds to the portion of the equity of such entity that has been so
transferred.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of a Change
of Control and a Rating Decline.
"COMMON STOCK" means the Company's common stock, $1.00 par value.
"COMPANY ORDER" means a written order, signed in the name of the
Company by an authorized Officer and delivered to the Trustee, for the
authentication and delivery of Senior Notes of the relevant series pursuant to
this Indenture or any Supplemental Indenture pursuant to the procedures
described herein or therein.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders (or
equity holders) of such Person and its consolidated Restricted Subsidiaries as
of such date, PLUS (ii) the respective amounts reported on such Person's
balance sheet as of such date with respect to any series of Preferred Stock
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such Preferred Stock, LESS (x) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the Initial
Issuance Date in the book value of any asset owned by such Person or a
Restricted Subsidiary of such Person, (y) all investments as of such date in
Unrestricted Subsidiaries and (z) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing determined
in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Initial Issuance Date or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
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"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of
the Trustee specified in Section 10.02 or such other address as the Trustee may
give notice to the Company.
"CREDIT FACILITY" means the Company's $804.4 million credit facility
dated as of March 20, 1996 with a group of banks and Citibank as agent, as such
agreement is amended, modified, restated, extended, renewed, replaced or
refinanced from time to time.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is one year after the final maturity of the outstanding series of
Senior Notes with the longest maturity.
"DOLLAR " or "$" means a dollar or other equivalent unit in such coin
or currency of the United States as at the time shall be legal tender for the
payment of public and private debts in the United States.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR VALUE" when applied to any property means its fair value to the
Company, which may be determined without physical inspection by use of
accounting and engineering records and other data maintained by, or available
to, the Company; PROVIDED that the Company delivers a Board Resolution
specifying the Fair Value of the assets being sold and, in the event of a
transaction in excess of $50.0 million, the Company also delivers an opinion of
a nationally recognized expert in the valuation of the assets being sold as to
the Fair Value of the assets being sold and that the transaction is fair to the
Company.
"FIRST MORTGAGE BONDS" means the securities and other Indebtedness
issued from time to time pursuant to the Company's Mortgage Trust Indenture
dated as of October 1, 1937 and the supplemental indentures thereto.
"FIXED CHARGE COVERAGE RATIO" of the Company and its Restricted
Subsidiaries means for any period, the ratio of (i) the sum (determined from
the consolidated income statement of the Company and its Restricted
Subsidiaries) of (A) operating income or operating loss of the Company
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and its Restricted Subsidiaries, taken as a whole, for such period PLUS (B)
depreciation and amortization (including amortization of goodwill and other
intangibles and of the MRA Regulatory Asset and other non-cash regulatory
deferrals and amortizations) and other non-recurring, non-cash charges of the
Company and its Restricted Subsidiaries for such period to the extent that such
deprecation and amortization and other non-recurring, non-cash charges were
deducted in computing operating income or operating loss, in each case on a
consolidated basis and determined in accordance with GAAP, PLUS (C) provision
for taxes based on income or profits of the Company and its Restricted
Subsidiaries for such period to the extent deducted in determining operating
income, to (ii) the sum of (A) the consolidated interest expense of the Company
and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to any sale and
leaseback transactions, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings
(unless such commissions, discounts and other fees and charges have been
deducted in calculating operating income), net payments (if any) pursuant to
Hedging Obligations and any interest paid by the Company or a Restricted
Subsidiary pursuant to a TIPES Transaction; PLUS (B) the consolidated interest
expense of the Company and its Restricted Subsidiaries that was capitalized
during such period; PLUS (C) any interest expense on Indebtedness of another
Person that is Guaranteed by the Company or one of its Restricted Subsidiaries
or secured by a Lien on assets of the Company or one of its Restricted
Subsidiaries (whether or not such Guarantee or Lien is called upon); PLUS (D)
the quotient obtained by dividing all cash dividend or other payments or
distributions on or in respect of any series of Preferred Stock (other than
Preferred Stock issued in a TIPES Transaction) of the Company or any of its
Restricted Subsidiaries by 1 minus the maximum statutory income tax rate then
applicable to the Company (expressed as a decimal), in each case, on a
consolidated basis and in accordance with GAAP. In the event that the Company
or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems
any Indebtedness (other than revolving credit borrowings) or issues Preferred
Stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made, then the
Fixed Charge Coverage Ratio shall be calculated giving PRO FORMA effect to such
incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of Preferred Stock, as if the same had occurred at the
beginning of the applicable reference period.
"FOSSIL AND HYDRO GENERATING ASSETS" means the Generating Assets
other than the Nuclear Generating Assets.
"GAAP" means generally accepted accounting principles in use at the
Initial Issuance Date or, at the option of the Company, other generally
accepted accounting principles which are in use at the time of their
determination; in determining generally accepted accounting principles, the
Company may, but shall not be required to, conform to any accounting order,
rule or regulation of any
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regulatory authority having jurisdiction over the electric generating,
transmission or distribution operations of the Company.
"GENERATING ASSETS" means the Company's nuclear, fossil and
hydroelectric generation plants other than the Oswego Plant, and any related
asset necessary for the operation of any such plant and any associated license
or permit.
"GOVERNMENT SECURITIES" means securities which are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the timely payment of which is unconditionally guaranteed by the
full faith and credit of the United States of America which, in either case,
are not callable or redeemable at the option of the issuer thereof or otherwise
subject to prepayment, and shall also include a depository receipt issued by a
New York Clearing House bank or trust company as custodian with respect to any
such Government Securities or a specific payment or interest on or principal of
any such Government Securities held by such custodian for the account of the
holder of a depository receipt, PROVIDED that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to
the holder of such depository receipt or from any amount held by the custodian
in respect of the Government Securities or the specific payment of interest on
or principal of the Government Securities evidenced by such depository receipt.
"GRADATION" means a gradation within a Rating Category or a change
to another Rating Category, which shall include "+" and "-", in the case of
S&P's current Rating Categories (e.g., a decline from BB+ to BB would
constitute a decrease of one gradation); "1", "2" and "3", in the case of
Moody's current Rating Categories (e.g. a decline from B1 to B2 would
constitute a decrease of one gradation); or the equivalent in respect of
successor Rating Categories used by Rating Agencies other than S&P or Moody's.
"GUARANTEE" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit, reimbursement agreements and support, "keep well" or similar agreements
in respect thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under any interest rate, currency or commodity swap
agreement, interest rate, currency or commodity future agreement, interest rate
cap or collar agreement, interest rate, currency or commodity hedge agreement,
and any put, call or other agreement designed to protect such Person against
fluctuations in interest rates, currency exchange rates or commodity prices.
"HOLDER" means a person in whose name a Senior Note is registered.
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"INDEBTEDNESS" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations of such Person or the
balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations of such Person, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent
any of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP (provided, that any debt instrument issued
by the Company or a Restricted Subsidiary in a TIPES Transaction shall be
deemed Indebtedness of the Company regardless of its characterization on any
such balance sheet), as well as all Indebtedness of others secured by a Lien
on any asset of such Person (whether or not such indebtedness is assumed by
such Person) and, to the extent not otherwise included, any Guarantees by
such Person of any indebtedness of any other Person.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time.
"INITIAL ISSUANCE DATE" means the date of closing of the public
offering of the Initial Series Senior Notes as set forth in a Company Order.
"INITIAL SERIES SENIOR NOTES" means the Senior Discount Notes and
the Series A through G Senior Notes issued on the Initial Issuance Date.
"INVESTMENT" means, with respect to any Person, any investment by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances (excluding commission, travel and similar advances to employees made
in the ordinary course of business) or capital contributions, purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or
other securities and all other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; PROVIDED,
HOWEVER, that an acquisition of assets, Equity Interests or other securities
by the Company for consideration consisting of assets or Capital Stock (other
than Disqualified Stock) shall not be deemed to be an Investment.
"INVESTMENT GRADE" means BBB- or above, in the case of S&P (or its
equivalent under any successor rating categories of S&P), or the equivalent
in respect of the Rating Categories of any other Rating Agency.
"INVESTMENT GRADE DATE" means the date of delivery by the Company
to the Trustee of an Officers' Certificate to the effect that the Senior
Notes of the series having the longest maturity then outstanding have been
rated Investment Grade by (i) S&P and Moody's or (ii) S&P or Moody's and at
least one other Rating Agency identified in such certificate.
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<PAGE>
"IPP BUYOUT" means the termination, restatement or amendment of
certain power purchase agreements in exchange for cash and securities (or the
proceeds of the sale by the Company of securities) pursuant to the terms of
the Master Restructuring Agreement.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, encumbrance, charge, or adverse claim affecting title or resulting in
a charge against real or personal property, or a security interest of any
kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option, other
agreement to sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction).
"MAKE WHOLE PREMIUM" with respect to any Senior Note shall mean
with respect to any prepayment of such Senior Note in circumstances requiring
the payment of a Make Whole Premium, an amount equal to (i) in the case of
the Series A through G Notes the excess of (a) the aggregate present value as
of the date of such prepayment of the expected future cash flows of such
Senior Note (for the avoidance of doubt, such amounts shall include all
principal and interest payable with respect to such Senior Note) (exclusive
of interest accrued to the date of prepayment) that, but for such prepayment,
would have been payable if such prepayment had not been made, all
determinated by discounting such amounts at a rate which is equal to the
Treasury Rate plus .50% over (b) the aggregate principal amount of the Senior
Note then to be prepaid and (ii) in the case of the Senior Discount Notes (if
such prepayment occurs prior to July 1, 2003), the excess of (a) the present
value of the sum of all remaining interest (excluding accrued and unpaid
interest, if any), premium and principal payments that would become due on
the Senior Discount Notes if they were to remain outstanding and be redeemed
on July 1, 2003, computed using a discount rate equal to the Treasury Rate
plus .50% over (b) the Accreted Value of the Senior Discount Note then to be
prepaid. For purposes of any determination of the Make Whole Premium:
"TREASURY RATE" shall mean at any time with respect to the Senior
Notes being prepaid (a) the yield reported on page C4 of the Bloomberg
Financial Markets Service (or, if not available, any other nationally
recognized trading screen reporting on-line intra day trading in
United States government securities) at 11:00 A.M. (New York, New York
time) for those actively traded United States government securities
having a maturity (rounded to the nearest month) corresponding to the
remaining Weighted Average Life to Maturity of the Senior Notes being
prepaid or (b) in the event that no nationally
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<PAGE>
recognized trading screen reporting on-line intraday trading in
United States government securities is available, Treasury Rate
shall mean the weekly average of the yield to maturity on the
United States Treasury obligations with a constant maturity (as
compiled by and published in the most recently published issue of
the United States Federal Reserve Statistical Release designated
H.15(519) or its successor publication) most nearly equal to (by
rounding to the nearest month) the Weighted Average Life to
Maturity of the Senior Notes then being prepaid. If no maturity
exactly corresponding to such Weighted Average Life to maturity of
such Senior Notes shall appear therein, the weekly average yield
for the two most closely corresponding published maturities shall
be calculated pursuant to the foregoing sentence and the Treasury
Rate shall be interpolated or extrapolated, as the case may be,
from such yields on a straight-line basis (rounding, in the case of
relevant periods, to the nearest month).
"MASTER RESTRUCTURING AGREEMENT" means the Master Restructuring
Agreement dated July 9, 1997 among the Company and the independent power
producer parties thereto, as amended from time to time.
"MEDIUM-TERM NOTES" means the unsecured variable rate notes issued
pursuant to an indenture between the Company and IBJ Schroder Bank & Trust
Company, as trustee.
"MOODY'S" means Moody's Investors Service, Inc., or any successor
to its securities ratings business.
"MRA REGULATORY ASSET" means the item designated as such on the
Company's balance sheet, which represents amounts that the Company is
permitted to collect from customers, pursuant to the regulations of the PSC,
in respect of the IPP Buyout and the other transactions contemplated by the
Master Restructuring Agreement.
"NET PROCEEDS" means the aggregate cash proceeds received by a
Person in respect of any sale of assets, net of amounts paid to minority
interests, co-owners or lienholders, the direct costs relating to such sale
(including, without limitation, legal, accounting and investment banking
fees, and sales commissions), taxes paid or payable which are attributable to
such sale (after taking into account any available tax credits or deductions
and any tax sharing arrangements relating to such assets) and any cash
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provide credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender; and (ii) no default
with respect to which (including any rights that the Holders thereof may have
to take enforcement action against an
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<PAGE>
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both)
any Holder of any other Indebtedness of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity;
and (iii) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"NUCLEAR GENERATING ASSETS" means the Company's interest in Units 1
and 2 of the Nine Mile Point Nuclear Generating Plant, and any related asset
necessary for the operation of such plants and any associated license or
permit.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICERS" means the Chief Executive Officer, the President, the
Executive Vice President, the Treasurer, any Assistant Treasurer, Controller,
Secretary or any Vice President of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 10.05 hereof.
"OPERATING CASH FLOW" means, with respect to any Person for any
period, the net cash provided by operating activities of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined
in accordance with GAAP.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
1005 hereof. The counsel may be an employee of or counsel to the Company.
"OSWEGO PLANT" means the interest of the Company in the fossil fuel
electric generation plant located near Lake Ontario in Oswego, New York.
"OTHER INDEBTEDNESS" shall mean Senior Indebtedness incurred after
the Initial Issuance Date, except (a) Permitted Refinancing Indebtedness with
respect to First Mortgage Bonds in an amount equal to the aggregate amount of
First Mortgage Bonds issued and outstanding at the closing on the Initial
Issuance Date; (b) Permitted Refinancing Indebtedness with respect to the
Credit Facility; and (c) Indebtedness under the Securitization Transaction
and the Receivables Financing and any Permitted Refinancing Indebtedness with
respect thereto.
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<PAGE>
"PERMITTED ASSET SWAP" means any swap of utility property or assets
(or assets related or ancillary thereto) of the Company for other property or
assets that will be used in or in connection with the Company's utility
business.
"PERMITTED HEDGING AGREEMENT" of any Person shall mean any Hedging
Obligation entered into in the ordinary course of business or pursuant to the
Master Restructuring Agreement and not for speculation or trading purposes
that is designed to protect such Person against fluctuations in interest
rates or currency exchange rates or commodity prices with respect to
Indebtedness incurred or proposed to be incurred or assets used in the
business in the ordinary course and which in the case of agreements relating
to interest rates shall have a notional amount no greater than the payments
due with respect to the Indebtedness being hedged thereby.
"PERMITTED INVESTMENT" means (a) an Investment in the Company or in
a Restricted Subsidiary of the Company (including Investments by the Company
in the First Mortgage Bonds or Senior Notes to the extent otherwise permitted
by this Indenture); (b) an Investment in Cash Equivalents; (c) an Investment
by the Company or any Restricted Subsidiary in a Person, if as a result of
such Investment (i) such Person becomes a direct or indirect Restricted
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of
the Company; (d) an Investment in any Person owning or operating electric
generation, transmission or distribution facilities or gas distribution or
transportation or related systems in which the Company owns joint or
undivided interests; (e) an Investment in a Person formed as a special
purpose entity in conjunction with a Receivables Financing or Securitization
Transaction; (f) an Investment received in connection with the bankruptcy or
reorganization of customers and suppliers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in
the ordinary course of business; and (g) any payment pursuant to those
existing Investments of the Company, including the nuclear decommissioning
trust fund and the employee benefits plan trusts, described in Schedule 1
attached hereto.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to renew, extend, refinance, replace
(including the replacement at any time following their stated maturity of
First Mortgage Bonds or Senior Notes that are repaid at maturity, or the
replacement at any time following its stated maturity of the Credit Facility
or the Receivables Financing), defease or refund, in whole or in part, other
Indebtedness of the Company or any of its Restricted Subsidiaries; PROVIDED,
HOWEVER, that (i) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount of the Indebtedness so
renewed, extended, refinanced, replaced, defeased or refunded (plus the
amount of accrued interest and premiums (including premium paid on open
market purchases), if any, thereon and the reasonable expenses incurred in
connection therewith); (ii) Permitted Refinancing Indebtedness that is
incurred prior to the maturity of the Indebtedness that it is renewing,
extending, refinancing, replacing, defeasing or refunding must be on terms at
least as favorable to the holders of
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<PAGE>
Notes as those contained in the documentation governing the Indebtedness
being renewed, extended, refinanced, replaced, defeased or refunded and: (a)
if such Indebtedness has a final maturity date earlier than the final
maturity date of the series of Notes with the latest final maturity date,
then such Permitted Refinancing Indebtedness must have a final maturity date
the same as or later than the final maturity date of, and a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being renewed, extended, refinanced, replaced,
defeased or refunded, and (b) if such Indebtedness has a final maturity date
later than the final maturity date of the series of Notes with the latest
final maturity date, then such Permitted Refinancing Indebtedness must have a
final maturity date the same as or later than the final maturity date of, and
a Weighted Average Life to Maturity equal to or greater than the maturity of,
the series of Notes with the latest final maturity date; (iii) if the
Indebtedness being renewed, extended, refinanced, replaced, defeased or
refunded is subordinated in right of payment to the Senior Notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Senior Notes on terms at least as favorable to the holders of Senior Notes as
those contained in the documentation governing the Indebtedness being
refinanced, replaced, defeased or refunded; and (iv) such Indebtedness is
incurred either by the Company or by the Restricted Subsidiary (or, in the
case of the Receivables Financing, the special purpose entity) that is the
obligor on the Indebtedness being renewed, extended, refinanced, replaced,
defeased or refunded.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof.
"POLLUTION CONTROL OBLIGATIONS" means the Indebtedness or other
obligations (however designated) of the Company in respect of tax-exempt
revenue bonds issued by the New York State Energy Research and Development
Authority.
"POWERCHOICE AGREEMENT" means the PowerChoice Settlement Agreement
between the Company and the PSC, as approved by the PSC in an Order dated
March 20, 1998, as such agreement may be modified or amended from time to
time.
"PREFERRED STOCK" means any Capital Stock of the Company which by
its terms has preference to Common Stock in right of dividends or other
distributions upon liquidation or dissolution.
"PSC" means the New York State Public Service Commission, or any
successor agency or other governmental entity performing the same function.
"RATING AGENCY" means any of S&P, Moody's, Duff & Phelps Credit
Rating Company and Fitch Investors Service, Inc. and their successors.
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<PAGE>
"RATING CATEGORIES" means (i) with respect to S&P, any of the
following categories (any of which may include a "+" or "-"): AAA, AA, A,
BBB, BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with
respect to Moody's, any of the following categories (any of which may include
a "1", "2" or "3"): Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent
successor categories); and (iii) the equivalent of any such categories of S&P
or Moody's used by another Rating Agency, if applicable.
"RATING DECLINE" means, at any time within 90 days (which period
shall be extended so long as the rating of the Senior Notes is under publicly
announced consideration for a possible downgrade by any Rating Agency) after
the date of public notice of a Change of Control, or the intention of the
Company or any Person to effect a Change of Control, (i) the Rating of the
Senior Notes is decreased at least one Gradation by any Rating Agency or (ii)
a withdrawal of the rating of the Senior Notes by any Rating Agency.
"RECEIVABLES FINANCING" means the Obligation of the Company
pursuant to the [describe agreement], as such agreement is amended or
modified from time to time.
"RELATED ASSET" means real or tangible personal property integral
to the generation, transmission or distribution of electricity or the
transportation or distribution of natural gas, and ancillary or related
activities, including other energy-related businesses.
"REPURCHASE OFFER" means a Change of Control Offer.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of such
Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poors' Rating Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"SALE OF ASSETS" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation by way of a sale and
leaseback) by the Company or any Restricted Subsidiary other than sales of
inventory or other current assets in the ordinary course of business consistent
with past practice (provided that the sale, lease conveyance or other
disposition of all or
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<PAGE>
substantially all of the assets of the Company and its Subsidiaries taken as
a whole will be governed by Sections 4.14 and/or Section 5.01 and not Section
4.10 hereof); (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of their Restricted Subsidiaries, in
the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a Fair Value in excess of $25.0
million or (b) for Net Proceeds in excess of $25.0 million; (iii) the sale or
other disposition (but not any spin-off or other distribution to the
Company's shareholders) of the Generating Assets or the Oswego Plant; or (iv)
a Securitization Transaction. Notwithstanding the foregoing: (i) a transfer
of assets by the Company to a Wholly-Owned Restricted Subsidiary or by a
Wholly-Owned Restricted Subsidiary to the Company or to another Wholly-Owned
Restricted Subsidiary; (ii) an issuance of Equity Interests by a Wholly-Owned
Restricted Subsidiary to the Company or to another Wholly-Owned Restricted
Subsidiary; (iii) a Restricted Payment that is permitted by Section 4.07;
(iv) sales of property or equipment that have become worn out, obsolete or
damaged or otherwise unsuitable for use in connection with the business of
the Company or any of its Restricted Subsidiaries; (v) transactions involving
the license, lease or sublease of any real or personal property in the
ordinary course of business; (vi) the making of any Permitted Investment;
(vii) the transfer, sale or assignment of assets to a single purpose entity
in connection with the Receivables Financing; and (viii) a Permitted Asset
Swap, will not be deemed to be a Sale of Assets.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIZATION TRANSACTION" means a transaction in which the
Company, pursuant to authorization of the PSC, or other appropriate
governmental authorizations, transfers rights or other property to a Person
formed as a special purpose entity in conjunction with a financing based on
the Company's right to collect a non-by passable wires or similar fee.
"SENIOR INDEBTEDNESS" means any senior Indebtedness of the Company,
including the First Mortgage Bonds, the Credit Facility, the Senior Notes and
the Medium-Term Notes.
"SENIOR DISCOUNT NOTES" means the Company's ____% Senior Discount
Notes due 2010, which were issued pursuant to this Indenture on the Initial
Issuance Date.
"SENIOR NOTES" means the Company's Initial Series Senior Notes
(which include the Senior Discount Notes) and any other series of Senior
Notes issued under this Indenture or any Supplemental Indenture.
"SERIES A SENIOR NOTES" means the Company's ___% Series A Senior
Notes due 1999, which were issued pursuant to this Indenture on the Initial
Issuance Date.
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<PAGE>
"SERIES B SENIOR NOTES" means the Company's ___% Series B Senior
Notes due 2000, which were issued pursuant to this Indenture on the Initial
Issuance Date.
"SERIES C SENIOR NOTES" means the Company's ___% Series C Senior
Notes due 2001, which were issued pursuant to this Indenture on the Initial
Issuance Date.
"SERIES D SENIOR NOTES" means the Company's ___% Series D Senior
Notes due 2002, which were issued pursuant to this Indenture on the Initial
Issuance Date.
"SERIES E SENIOR NOTES" means the Company's ___% Series E Senior
Notes due 2003, which were issued pursuant to this Indenture on the Initial
Issuance Date.
"SERIES F SENIOR NOTES" means the Company's ___% Series F Senior
Notes due 2005, which were issued pursuant to this Indenture on the Initial
Issuance Date.
"SERIES G SENIOR NOTES" means the Company's ___% Series G Senior
Notes due 2008, which were issued pursuant to this Indenture on the Initial
Issuance Date.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such Regulation is in
effect on the date hereof.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company
(whether outstanding on the date hereof or hereafter created, incurred,
assumed or Guaranteed by the Company or its Restricted Subsidiaries) which is
subordinate to the Senior Notes in right of payment or rights upon
liquidation of the Company, whether pursuant to the terms of the instrument
creating or evidencing such Indebtedness or otherwise.
"SUBSIDIARY" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"SUPPLEMENTAL INDENTURE" means any indenture hereafter duly
authorized and approved by the Board of Directors and entered into between
the Company and the Trustee in accordance with this Indenture.
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<PAGE>
"TIPES TRANSACTION" means a financing transaction or transactions
in which the Company establishes a trust or other pass-through entity whose
common equity interests are owned by the Company or a Subsidiary and whose
assets consist of debt securities of the Company or any Restricted Subsidiary
for the purpose of issuing issue preferred interests in such trust or other
entity to investors.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA, except as provided in Section 9.03 hereof.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture
and thereafter means the successor serving hereunder.
"UNRESTRICTED SUBSIDIARY" means (i) Opinac North America, Inc.,
Opinac Energy Corporation, Plum Street Enterprises, Inc., Canadian Niagara
Power Company, Limited and any other Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that any such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Company; (c) is a Person with respect to which neither
the Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; and (d) has not
Guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors will be evidenced to the Trustee
by filing with the Trustee a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by
Section 4.07 of this Indenture. If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary,
it shall thereafter cease to be an Unrestricted Subsidiary and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date by Section 4.07,
the Company shall be in default of such provision). The Board of Directors
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted by Section 4.07
and (ii) no Default or Event of Default would be in existence following such
designation.
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<PAGE>
"WEIGHTED AVERAGE LIFE TO MATURITY" means, with respect to any
Indebtedness at any date, the number of years obtained by dividing (i) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by (ii)
the then outstanding principal amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly-Owned Restricted
Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Term Defined in Section
<S> <C>
"Affiliate Transaction" ................... 4.11
"Asset Sale Offer" ........................ 4.10
"Beneficial Owners" ....................... 2.02
"Case" .................................... 6.01
"Change of Control Offer" ................. 4.14
"Change of Control Payment" ............... 4.14
"Change of Control Payment Date" .......... 4.14
"Covenant Defeasance" ..................... 8.03
"Custodian" ............................... 6.01
"Event of Default" ........................ 6.01
"Incur" ................................... 4.09
"Legal Defeasance" ........................ 8.02
"Offer Amount" ............................ 3.09
"Offer Period" ............................ 3.09
"Participant" ............................. 2.02
"Paying Agent" ............................ 2.05
"Payment Default" ......................... 6.01
"Purchase Date" ........................... 3.09
"Registrar" ............................... 2.05
"Restricted Payments" ..................... 4.07
"Securities Depositary" ................... 2.02
"Successor Entity" ........................ 5.01
</TABLE>
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<PAGE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Senior Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Senior Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Senior Notes means the Company, or any successor
obligor upon the Senior Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the
TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in the
United States;
(3) references to "generally accepted accounting principles" shall
mean generally accepted accounting principles in effect in the United
States as of the time when and for the period as to which such accounting
principles are to be applied;
(4) "or" is not exclusive;
(5) words in the singular include the plural, and in the plural
include the singular;
(6) provisions apply to successive events and transactions; and
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<PAGE>
(7) the words "he," "his," and "him" refer to both the masculine and
feminine gender.
ARTICLE 2
THE SENIOR NOTES
SECTION 2.01. SERIES AND TERMS OF SENIOR NOTES.
At the option of the Company, Senior Notes may be issued under this
Indenture in one or more series and in an unlimited amount. All Senior Notes
issued under this Indenture and any sums which may be secured by this
Indenture shall be secured equally, to the same extent and with the same
priority, as the amount initially advanced on the security of this Indenture.
Except for the Initial Series Senior Notes, which are created
hereby, each series of Senior Notes shall be created and established in a
Supplemental Indenture which shall designate the title of such series of
Senior Notes, any maximum aggregate principal amount of Senior Notes of such
series which may be authenticated and delivered upon the original issuance or
issuances of such Senior Notes, and the currency or currencies, including
composite currencies, in which payment of the principal of and interest, if
any, on such Senior Notes shall be payable if other than in Dollars.
The Supplemental Indenture which creates and establishes a series of
Senior Notes, or a Company Order pursuant to such Supplemental Indenture, shall
specify the form of Senior Notes of such series (and, if applicable, any
coupons) and any and all of the terms of such Senior Notes or the method of
determining such terms, which terms may include, but are not limited to:
(i) the principal amount of such Senior Notes to be authenticated
and delivered upon their original issuance at any particular time;
(ii) the date on which such Senior Notes are to be issued, and the
date from which interest, if any, will accrue on such Senior Notes;
(iii) the rate of interest, if any, which shall be borne by such
Senior Notes and, if such interest rate is not a fixed rate, the formula
for determining such interest rate from time to time;
(iv) the interest payment dates, if any, with respect to such
Senior Notes;
(v) the record dates for the payment of interest on any interest
payment dates with respect to such Senior Notes;
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(vi) the date or dates on which principal of such Senior Notes is
payable;
(vii) the place or places where (A) the principal of and interest,
if any, on such Senior Notes shall be payable upon presentation thereof,
(B) such Senior Notes may be surrendered for registration of transfer,
(C) such Senior Notes may be surrendered for exchange, and (D) notices
and demands to or upon the Company in respect of such Senior Notes and
this Indenture may be served, if different than as provided in Section
10.02;
(viii) the means, which may include mail, for the payment of
principal of and interest, if any, on such Senior Notes;
(ix) if such Senior Notes may be established in book entry or
certificate form;
(x) the period or periods within which, the price or prices at
which and the terms and conditions upon which such Senior Notes may be
redeemed, in whole or in part, at the option of the Company;
(xi) the obligation, if any, of the Company to redeem or repurchase
such Senior Notes pursuant to any sinking, improvement, maintenance,
replacement or analogous fund or at the option of a holder thereof and
the period or periods within which, the price or prices at which and the
terms and conditions upon which such Senior Notes shall be redeemed or
repurchased, in whole or in part, pursuant to such obligation;
(xii) if the principal of or interest, if any, on such Senior Notes,
are to be payable, at the election of the Company or a Holder of such
Senior Notes, in a coin or currency other than that in which such Senior
Notes are stated to be payable, the period or periods within which, and
the terms and conditions upon which, such election may be made;
(xiii) if the principal of or interest, if any, on such Senior Notes
are to be payable, or are to be payable at the election of the Company
or a Holder of such Senior Notes, in securities or other property, the
type and amount of such securities or other property, or the method by
which such amount shall be determined, and the period or periods within
which, and the terms and conditions upon which, any election may be made;
(xiv) if the amount of payments of principal of or interest, if any,
on such Senior Notes may be determined with reference to an index or
other fact or event ascertainable outside of this Indenture, the manner
in which such amounts shall be determined;
(xv) if other than the principal amount of such Senior Notes, the
portion of such principal amount of such Senior Notes which shall be
payable upon a declaration that the principal of such Senior Notes is
due and payable immediately pursuant to Section 6.02;
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(xvi) the terms, if any, pursuant to which such Senior Notes may be
converted into or exchanged for shares of Capital Stock or other
securities of the Company or of any other Person;
(xvii) the obligations or instruments, if any, which shall be
considered to be eligible obligations in respect of such Senior Notes if
they are denominated in a composite currency or in a currency other than
Dollars;
(xviii) if a service charge will be made for the registration of
transfer or exchange of such Senior Notes the amount or terms thereof;
and
(xix) any variation in the definition of Business Day with respect
to such Senior Notes.
The Senior Notes and coupons of any one or more series may be
expressed in one or more foreign languages, if also expressed in the English
language, and the English text shall govern the construction thereof and both
or all texts shall constitute only a single obligation. The English text of
Senior Notes and the authentication certificate of the Trustee shall be in
the forms set forth in the Supplemental Indenture creating and establishing
such series of Senior Notes or in a Company Order pursuant to such
Supplemental Indenture.
With respect to Senior Notes of a series subject to a periodic
offering, the Supplemental Indenture which creates and establishes such
series or a Company Order pursuant to such Supplemental Indenture may provide
general terms or parameters for Senior Notes of such series and provide
either that the specific terms of particular Senior Notes of such series
shall be specified in a Company Order or that such terms shall be determined
by the Company or its agents in accordance with specified procedures,
acceptable to the Trustee, by which such terms are to be established (which
procedures may provide for authentication and delivery pursuant to oral or
electronic instructions from the Company or any agent or agents thereof,
which oral instructions are to be promptly confirmed electronically or in
writing).
SECTION 2.02. TERMS OF INITIAL SERIES SENIOR NOTES.
There are hereby created and established eight series of Senior
Notes to be issued pursuant to this Indenture, having the respective series
designations, maturity dates and maximum aggregate principal amounts (subject
to Section 2.07 of the Indenture) as follows:
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<TABLE>
<CAPTION>
Maximum Principal Amount
Series Designation Maturity Date or Principal Amount at Maturity
- - ------------------ ----------------- -------------------------------
<S> <C> <C>
__% Series A Senior Notes July 1, 1999 $300,000,000
__% Series B Senior Notes October 1, 2000 $450,000,000
__% Series C Senior Notes July 1, 2001 $400,000,000
__% Series D Senior Notes October 1, 2002 $400,000,000
__% Series E Senior Notes July 1, 2003 $400,000,000
__% Series F Senior Notes October 1, 2005 $400,000,000
__% Series G Senior Notes October 1, 2008 $600,000,000
__% Senior Discount Notes July 1, 2010 $500,000,000
</TABLE>
The Initial Series Senior Notes shall have the following terms:
(1) The Series A through G Senior Notes shall bear interest at the
rate per annum set forth in their respective titles, from the date of their
initial issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Interest on the Series A through G Senior
Notes will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of their initial issuance.
The interest payment dates for the Series A, C and E Senior Notes shall be
January 1 and July 1 in each year, commencing January 1, 1999. The interest
payment dates for the Series B, D, F and G Senior Notes shall be April 1 and
October 1 in each year, commencing October 1, 1998. The regular record dates
for the interest payable on any interest payment date for the Series A, C and
E Senior Notes shall be the December 15 and June 15 next preceding such
January 1 or July 1, as the case may be. The regular record dates for the
interest payable on any interest payment date for the Series B, D, F and G
Senior Notes shall be the March 15 and September 15 next preceding such April
1 or October 1, as the case may be.
(2) The Senior Discount Notes will be issued at a discount from
their principal amount at maturity. Until July 1, 2003, no interest will
accrue on the Senior Discount Notes, but the Accreted Value will increase
(representing amortization of original issue discount) between the date of
initial issuance and July 1, 2003, on a semi-annual bond equivalent basis
using a 360-day year comprised of twelve 30-day months, such that the
Accreted Value shall be equal to the full principal amount at maturity of the
Senior Discount Notes on July 1, 2003. Thereafter, interest on the Senior
Discount Notes will accrue at the rate of ___% per annum and will be payable
in cash semi-annually in arrears on January 1 and July 1, commencing on
January 1, 2004, to holders of record on the immediately preceding June 15
and December 15. Interest on the Senior Discount Notes will accrue from the
most recent to which interest has been paid or, if no interest has been paid,
from July 1, 2003. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
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(3) The Initial Series Senior Notes are subject to redemption and
repurchase by the Company in accordance with the terms of Article 3 hereof.
(4) The Initial Series Senior Notes are entitled to the
protections of the covenants contained in Articles 4 and 5 hereof and are
subject to the provisions pertaining to Events of Default contained in
Article 6 hereof.
(5) The Initial Series Senior Notes shall be issuable in fully
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000 in excess thereof. The Initial Series Senior Notes shall
be numbered RA-1, RB-1, RC-1, RD-1, RE-1, RF-1, RG-1, RDN-1 consecutively
upwards, with the second capital letter (or the second and third capital
letters in the case of the Senior Discount Notes) of such number
corresponding to the applicable series of Senior Notes.
(6) The Initial Series Senior Notes shall be dated as described in
Section 2.03 of the Indenture, except that Initial Series Senior Notes first
issued shall be dated as of the Initial Issuance Date.
(7) Payment of principal of and interest on the Initial Series
Senior Notes will be made in Dollars. Payment of principal of the Initial
Series Senior Notes will be made upon surrender thereof at the office or
agency of the Company maintained for that purpose in the City and State of
New York, and principal and interest may be paid by check mailed to the
address of the Holder as such address shall appear in the records of the
Registrar as of the applicable record date or upon written request made prior
to the applicable record date by a Holder of Initial Series Senior Notes in
an aggregate principal amount in excess of $5,000,000, payments in respect of
such Senior Notes shall be made by wire transfer; PROVIDED, FURTHER, that in
the case of redemption or repurchase the Company may designate such other
offices or agencies at which Initial Series Senior Notes subject to such
redemption or repurchase may be surrendered for payment.
(8) The Trustee and the Company may from time to time enter into,
and discontinue, an agreement with a clearing agency (the "SECURITIES
DEPOSITORY") registered under Section 17A of the Exchange Act, which is the
registered owner of all of the Senior Notes of a series, to establish
procedures with respect to the Senior Notes of such series not inconsistent
with the provisions of the Indenture; PROVIDED, HOWEVER, that any such
agreement may provide:
(i) that the Senior Notes of such series may be represented by one or
more global certificates;
(ii) that such Securities Depository is not required to present a
Senior Note of such series to the Trustee in order to receive a partial
payment of principal;
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(iii) that a legend referring to such agreement shall appear on
each Senior Note of such series so long as the Senior Notes of such series
are subject to such agreement; and
(iv) that provisions for notice to such Securities Depository which
are different from notice provisions in the Indenture, may be set forth
therein.
Neither the Company nor the Trustee will have any responsibility or
obligation to any Securities Depository, to any direct or indirect
participant (a "PARTICIPANT") in the book entry system of any Securities
Depository, or to the purchasers (the "BENEFICIAL OWNERS") of an interest in
the Senior Notes of such series from a Participant with respect to (A) the
accuracy of any records maintained by the Securities Depository or by any
Participant; (B) the payment by the Securities Depository or by any
Participant of any amount due to any Beneficial Owner in respect of the
principal amount or redemption price of, or interest on, any Senior Notes of
such series; (C) the delivery of any notice by the Securities Depository or
any Participant; (D) the selection of the Beneficial Owners to receive
payment in the event of any partial redemption of the Senior Notes of such
series; or (E) any other action taken by the Securities Depository or any
Participant.
SECTION 2.03. FORM AND DATING.
The Senior Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A through Exhibit H hereto
(which shall be a part of this Indenture) in respect of the Initial Series
Senior Notes, or as specifically provided in the Supplemental Indenture that
creates any other series of Senior Notes or in a Company Order pursuant to
such Supplemental Indenture. The Senior Notes may have notations, legends or
endorsements approved as to form by the Company and required by law, stock
exchange rules and agreements to which the Company is subject or usage. Each
Senior Note shall be dated the date of its authentication, unless otherwise
specifically provided herein or in the Supplemental Indenture that creates a
series of Senior Notes or in a Company Order pursuant to such Supplemental
Indenture. The Senior Notes shall be issuable only in denominations of
$1,000 and integral multiples thereof.
The terms and provisions contained in the Senior Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture
and of any Supplemental Indenture creating any series of Senior Notes,
expressly agree to such terms and provisions and to be bound thereby.
SECTION 2.04. EXECUTION AND AUTHENTICATION.
Two Officers of the Company shall sign the Senior Notes for the
Company by manual or facsimile signature. If an Officer of the Company whose
signature is on a Senior Note no longer holds that office at the time a
Senior Note is authenticated, the Senior Note shall nevertheless be valid.
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A Senior Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that
the Senior Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by
two Officers of the Company, authenticate Senior Notes for original issue up
to the aggregate principal amount stated in paragraph 3 of the Initial Series
Senior Notes, or as specifically provided in the Supplemental Indenture that
creates any other series of Senior Notes or in a Company Order pursuant to
such Supplemental Indenture. The aggregate principal amount of Senior Notes
outstanding at any time may not exceed such amount except as provided in
Section 2.09 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Senior Notes. An authenticating agent may
authenticate Senior Notes whenever the Trustee may do so. Each reference in
this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to deal
with the Company.
SECTION 2.05. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Senior Notes
may be presented for registration of transfer or for exchange ("REGISTRAR")
and an office or agency where Senior Notes may be presented for payment
("PAYING AGENT"). The Registrar shall keep a register of the Senior Notes
and of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent or Registrar without
prior notice to any Holder. The Company shall notify the Trustee in writing
of the name and address of any Agent not a party to this Indenture. If the
Company fail to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company may act as Paying Agent or
Registrar.
The Company initially appoints the Trustee to act as the Registrar
and Paying Agent and agent for service of notices and demands in connection
with the Senior Notes.
SECTION 2.06. PAYING AGENT AND TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee
or the Company itself to agree in writing that the Paying Agent will hold in
trust for the benefit of Holders or the Trustee all money held by the Paying
Agent for the payment of principal of, or premium, if any, on the Senior
Notes, and will notify the Trustee in writing of any default by the Company
in making any such payment. While any such default continues, the Trustee
may require a Paying Agent to pay all money held by it to the Trustee. The
Company at any time may require a Paying Agent to pay all money held
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by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if
other than the Company) shall have no further liability for the money
delivered to the Trustee. If the Company acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent
for the Senior Notes.
SECTION 2.07. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of all Holders and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
the Holders of Senior Notes, including the aggregate principal amount of
Senior Notes held by each thereof.
SECTION 2.08. TRANSFER AND EXCHANGE.
When Senior Notes are presented to the Registrar with a request to
register the transfer or to exchange them for an equal principal amount of
Senior Notes of other denominations, the Registrar shall register the
transfer or make the exchange if its requirements for such transactions are
met; PROVIDED, HOWEVER, that any Senior Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar and
the Trustee duly executed by the Holder thereof or by his attorney duly
authorized in writing. To permit registrations of transfer and exchanges,
the Company shall issue and the Trustee shall authenticate Senior Notes at
the Registrar's request, subject to such rules as the Trustee may reasonably
require.
Neither the Company nor the Registrar shall be required (i) to
issue, register the transfer of or exchange Senior Notes during a period
beginning at the opening of business on a Business Day 15 days before the day
of any selection of Senior Notes for redemption under Section 3.02 and ending
at the close of business on the day of selection, (ii) to register the
transfer of or exchange any Senior Note so selected for redemption in whole
or in part, being redeemed in part or (iii) to register the transfer or
exchange of a Senior Note between the record date and the next succeeding
interest payment date.
No service charge shall be made to any Holder of a Senior Note for
any registration of transfer or exchange (except as otherwise expressly
permitted herein), but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than such transfer tax or similar governmental charge
payable upon exchanges pursuant to Sections 2.12, 3.06, or 9.05 hereof, which
shall be paid by the Company).
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Prior to due presentment to the Trustee for registration of the
transfer of any Senior Note, the Trustee, any Agent or the Company may deem
and treat the Person in whose name any Senior Note is registered as the
absolute owner of such Senior Note for the purpose of receiving payment of
principal of, or premium, if any, on such Senior Note and for all other
purposes whatsoever, whether or not such Senior Note is overdue, and neither
the Trustee, any Agent or the Company shall be affected by notice to the
contrary.
SECTION 2.09. REPLACEMENT SENIOR NOTES.
If any mutilated Senior Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Senior Note, the Company shall issue and
the Trustee, upon the written order of the Company signed by two Officers of
the Company, shall authenticate a replacement Senior Note if the Trustee's
requirements for replacements of Senior Notes are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that
is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss
that any of them may suffer if a Senior Note is replaced. The Company may
charge for its expenses in replacing a Senior Note.
Every replacement Senior Note shall constitute a valid obligation
of the Company and shall evidence the same debt as the Senior Note for which
it is a replacement.
SECTION 2.10. OUTSTANDING SENIOR NOTES.
The Senior Notes outstanding at any time are all the Senior Notes
authenticated by the Trustee except for those canceled by it, those delivered
to it for cancellation and those described in this Section as not
outstanding. Except as set forth in Section 2.11 hereof, a Senior Note does
not cease to be outstanding because the Company or an Affiliate of the
Company holds the Senior Note.
If a Senior Note is replaced pursuant to Section 2.09 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Senior Note is held by a bona fide purchaser.
If the principal amount of any Senior Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
SECTION 2.11. TREASURY SENIOR NOTES.
In determining whether the Holders of the required principal amount
of Senior Notes have concurred in any direction, waiver or consent, Senior
Notes owned by the Company, any Subsidiary of the Company or any Affiliate of
the Company shall be considered as though not
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outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Senior Notes that a Trustee knows are so owned shall be so considered.
Notwithstanding the foregoing, Senior Notes that are to be acquired by the
Company, any Subsidiary of the Company or any Affiliate of the Company
pursuant to an exchange offer, tender offer or other agreement shall not be
deemed to be owned by the Company, a Subsidiary of the Company or an
Affiliate of the Company until legal title to such Senior Notes passes to the
Company, such Subsidiary or such Affiliate, as the case may be.
SECTION 2.12. TEMPORARY SENIOR NOTES.
Until definitive Senior Notes are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Senior Notes upon a
written order of the Company signed by two Officers. Temporary Senior Notes
shall be substantially in the form of definitive Senior Notes but may have
variations that the Company considers appropriate for temporary Senior Notes
and as shall be reasonably acceptable to the Trustee. Without unreasonable
delay, the Company shall prepare and the Trustee, upon a written order of the
Company signed by two Officers of the Company, shall authenticate definitive
Senior Notes in exchange for temporary Senior Notes. Holders of temporary
Senior Notes shall be entitled to all of the benefits of this Indenture.
SECTION 2.13. CANCELLATION.
The Company at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee
any Senior Notes surrendered to them for registration of transfer, exchange
or payment. The Trustee and no one else shall cancel all Senior Notes
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall destroy canceled Senior Notes (subject to the record
retention requirement of the Exchange Act). Certification of the destruction
of all canceled Senior Notes shall be delivered to the Company. The Company
may not issue new Senior Notes to replace Senior Notes that they have paid or
that have been delivered to the Trustee for cancellation.
SECTION 2.14. RECORD DATE.
The record date for purposes of determining the identity of Holders
of the Senior Notes entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture shall be determined as
provided for in TIA Section 316(c).
SECTION 2.15. CUSIP NUMBER.
The Company in issuing the Senior Notes may use a "CUSIP" number
and, if it does so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; PROVIDED that any such
notice may state that no representation is made as to the correctness
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or accuracy of the CUSIP number printed in the notice or on the Senior Notes
and that reliance may be placed only on the other identification numbers
printed on the Senior Notes. The Company will promptly notify the Trustee of
any change in the CUSIP number.
ARTICLE 3.
REDEMPTION AND REPURCHASE
Section 3.01. CERTAIN SENIOR NOTES REDEEMABLE; NOTICES TO TRUSTEE.
Any Outstanding Senior Notes which are, by their terms, redeemable
before maturity, at the option of the Company or pursuant to the requirements
of this Indenture (or any Supplemental Indenture which created a series of
Senior Notes), may be redeemed at such times, in such amounts and at such
prices as may be specified therein and in accordance with this Article 3.
If the Company elects to redeem any Initial Series Senior Notes
pursuant to the optional redemption provisions of Section 3.07 hereof, it
shall furnish to the Trustee, at least 45 days (unless shorter notice shall
be satisfactory to the Trustee) but not more than 60 days before a redemption
date, an Officers' Certificate setting forth (i) the clause of this Indenture
pursuant to which the redemption shall occur, (ii) the redemption date, (iii)
the principal amount of Senior Notes to be redeemed and (iv) the redemption
price. The notice periods for redemption of other series of Senior Notes, if
different from the foregoing, shall be set forth in the Supplemental
Indenture which creates and establishes such series or a Company Order
pursuant to such Supplemental Indenture.
SECTION 3.02. SELECTION OF SENIOR NOTES TO BE REDEEMED.
If less than all of the Outstanding Senior Notes are to be redeemed
at any time, the Trustee shall select the Senior Notes to be redeemed among
the Holders of the Senior Notes in compliance with the requirements of the
principal national securities exchange, if any, on which the Senior Notes are
listed or, if the Senior Notes are not so listed, on a PRO RATA basis, by lot
or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular
Senior Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date
by the Trustee from the outstanding Senior Notes not previously called for
redemption.
The Trustee shall promptly notify the Company in writing of the
Senior Notes selected for redemption and, in the case of any Senior Note
selected for partial redemption, the principal amount thereof to be redeemed.
Senior Notes and portions of Senior Notes selected shall be in amounts of
$1,000 or whole multiples of $1,000; except that if all of the Senior Notes
of a Holder are to be redeemed, the entire outstanding amount of Senior Notes
held by such Holder, even if not a multiple of $1,000, shall be redeemed.
Except as provided in the preceding sentence, provisions of this
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Indenture that apply to Senior Notes called for redemption also apply to
portions of Senior Notes called for redemption.
In the event the Issuers are required to make an offer to redeem
Senior Notes pursuant to Sections 3.09 and 4.10 hereof and the amount of the
Net Proceeds from the Sale of Assets is not evenly divisible by $1,000, the
Trustee shall promptly refund to the Company at the address set forth in
Section 10.02 hereof of any remaining Net Proceeds.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Senior Notes are to be redeemed at its registered address.
The notice shall identify the Senior Notes to be redeemed and shall
state:
i. the redemption date;
ii. the redemption price;
iii. if any Senior Note is being redeemed in part, the portion of the
principal amount of such Senior Note to be redeemed and that, after the
redemption date, upon surrender of such Senior Note, a new Senior Note or
Senior Notes in principal amount equal to the unredeemed portion shall be
issued upon cancellation of the original Senior Note;
iv. the name and address of the Paying Agent;
v. that Senior Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
vi. that, unless the Company defaults in making such redemption
payment, interest on Senior Notes called for redemption ceases to accrue on
and after the redemption date;
vii. the paragraph of the Senior Notes and/or Section of this
Indenture and/or of the Supplemental Indenture which created the series of
Senior Notes pursuant to which the Senior Notes called for redemption are
being redeemed; and
viii. that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on
the Senior Notes.
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At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense; PROVIDED,
HOWEVER, that the Company shall have delivered to the Trustee, at least 45
days prior to the redemption date, an Officers' Certificate requesting that
the Trustee give such notice and setting forth the information to be stated
in such notice as provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Senior Notes called for redemption become irrevocably due and payable
on the redemption date at the redemption price. A notice of redemption may
not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Senior Notes to be redeemed
on that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price of,
and accrued interest on, all Senior Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue
on the Senior Notes or the portions of Senior Notes called for redemption,
whether or not such Senior Notes are presented for payment. If a Senior Note
is redeemed on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Senior Note was registered at the close
of business on such record date. If any Senior Note called for redemption
shall not be so paid upon surrender for redemption because of the failure of
the Company to comply with the preceding paragraph, interest shall be paid on
the unpaid principal, from the redemption date until such principal is paid,
and to the extent lawful on any interest not paid on such unpaid principal,
in each case at the rate provided in the Senior Notes and in Section 4.01
hereof.
SECTION 3.06. SENIOR NOTES REDEEMED IN PART.
Upon surrender of a Senior Note that is redeemed in part, the
Company shall issue and, upon the Company's written request, the Trustee
shall authenticate for the Holder at the expense of the Company a new Senior
Note equal in principal amount to the unredeemed portion of the Senior Note
surrendered.
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SECTION 3.07. OPTIONAL AND SPECIAL REDEMPTION OF INITIAL SERIES SENIOR NOTES.
(a) Except as provided in subparagraphs (b), (c) and (d) below,
the Initial Series Senior Notes may not be redeemed at the option of the
Company prior to maturity.
(b) The Series A through G Senior Notes are redeemable by the
Company at any time, in whole or in part, upon not less than 30 nor more than
60 days' notice, in cash at a redemption price equal to 100% of the principal
amount thereof plus accrued and unpaid interest through the redemption date
plus the Make-Whole Premium.
(c) The Company shall have the option to redeem the Senior
Discount Notes prior to July 1, 2003 at any time, in whole or in part, upon
not less than 30 nor more than 60 days' notice, in cash at a redemption price
equal to 100% of the Accreted Value thereof plus the Make-Whole Premium. On
and after July 1, 2003, the Company shall have the option to redeem the
Senior Discount Notes, in whole or in part, upon not less than 30 nor more
than 60 days' notice, in cash at the redemption prices (expressed as
percentages of the principal amount) set forth below plus accrued and unpaid
interest thereon, if any, to the applicable redemption date, if redeemed
during the twelve-month period beginning on July 1 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 %
2004 %
2005 %
2006 and thereafter 100.0%
</TABLE>
(d) Notwithstanding the provisions of subparagraph (b) above, the
Company may, at its option, by delivering a notice of redemption at any time
during the period from April 1, 1999 through December 31, 2000, use all or a
portion of the Net Proceeds from any sale or sales of Fossil and Hydro
Generating Assets to redeem up to $500,000,000 aggregate principal amount of
the Senior Notes in Series B through F at a cash redemption price equal to
100% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, through the date of redemption. The Company shall effect a
redemption of Senior Notes pursuant to this provision such that, following
such redemption, the percentage of Senior Notes in each of Series B through F
that remain outstanding (calculated for each series by dividing the aggregate
principal amount of Senior Notes outstanding by the aggregate principal
amount of Senior Notes originally issued) is as near to identical as
reasonably practicable. Any such redemption must occur within 120 days
following the receipt by the Company of the Net Proceeds that are being used
to effect the redemption.
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(e) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15 hereof, the
Company shall not be required to make mandatory repurchase, redemption or
sinking fund payments with respect to the Initial Series Senior Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an Asset Sale Offer, it shall follow the
procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "OFFER PERIOD"). No later
than five Business Days after the termination of the Offer Period (the
"PURCHASE DATE"), the Company shall purchase the principal amount (or
principal amount at maturity, as the case may be) of Senior Notes required to
be purchased pursuant to Section 4.10 hereof (the "OFFER AMOUNT") or, if less
than the Offer Amount has been tendered, all Senior Notes tendered in
response to the Asset Sale Offer. Payment for any Senior Notes so purchased
shall be made in the same manner as interest payments are made.
The Company shall comply with any tender offer rules under the
Exchange Act which may then be applicable, including Rule 14e-1, in
connection with any offer required to be made by the Company to repurchase
the Senior Notes as a result of an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with provisions of
this Section 3.09, the Company shall comply with the applicable securities
laws or regulations and shall not be deemed to have breached its obligations
hereunder by virtue thereof.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Senior Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Senior Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders,
with a copy to the Trustee. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Senior Notes pursuant to
the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders.
The notice, which shall govern the terms of the Asset Sale Offer, shall state:
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(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Senior Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Senior Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Senior Note purchased pursuant to
an Asset Sale Offer may elect only to have all of such Senior Note
purchased and may not elect to have only a portion of such Senior Note
purchased;
(f) that Holders electing to have a Senior Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Senior Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Senior Note completed, or transfer by book-entry transfer, to the
Company, a depositary (if appointed by the Company) or a Paying Agent at
the address specified in the notice at least three days before the Purchase
Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receive,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Senior Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Senior
Note purchased;
(h) that, if the aggregate principal amount (or principal amount at
maturity, as the case may be) of Senior Notes surrendered by Holders
exceeds the Offer Amount, the Company shall select the Senior Notes to be
purchased on a PRO RATA basis (with such adjustments as may be deemed
appropriate by the Company so that only Senior Notes in denominations of
US$1,000, or integral multiples thereof, shall be purchased); and
(i) that Holders whose Senior Notes were purchased only in part shall
be issued new Senior Notes equal in principal amount to the unpurchased
portion of the Senior Notes surrendered (or transferred by book-entry
transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a PRO RATA basis to the extent necessary, the
Offer Amount of Senior Notes or portions
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thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer
Amount has been tendered, all Senior Notes tendered, and shall deliver to the
Trustee an Officers' Certificate stating that such Senior Notes or portions
thereof were accepted for payment by the Company in accordance with the terms
of this Section 3.09. The Company, the depositary or the Paying Agent, as the
case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal
to the purchase price of the Senior Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a
new Senior Note, and the Trustee, upon written request from the Company shall
authenticate and mail or deliver such new Senior Note to such Holder, in a
principal amount equal to any unpurchased portion of the Senior Note
surrendered. Any Senior Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof. No repurchase of Senior
Notes under this Section 3.09 shall be deemed to be a redemption of Senior
Notes.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SENIOR NOTES.
The Company shall pay or cause to be paid the principal of and
premium, if any, and interest on the Senior Notes on the dates and in the
manner provided in the Senior Notes. Principal, and premium, if any, shall
be considered paid on the date due if the Paying Agent, if other than the
Company, holds as of 10:00 a.m. Eastern Time on the due date money deposited
by the Company in immediately available funds and designated for and
sufficient to pay all principal, and premium, if any, then due. Such Paying
Agent shall return to the Company, no later than five Business Days following
the date of payment, any money (including accrued interest) that exceeds such
amount of principal of, premium, if any, and interest required to be paid on
the Senior Notes.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, at the rate equal to 1% per annum in excess of the then applicable
interest rate on the Senior Notes to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Senior Notes may
be surrendered for registration of transfer or for exchange and
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where notices and demands to or upon the Company in respect of the Senior
Notes and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; PROVIDED, HOWEVER, that no such designation or rescission shall
in any manner relieve the Company of its obligations to maintain an office or
agency in the Borough of Manhattan, the City of New York for such purposes.
The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with
Section 2.05.
SECTION 4.03. REPORTS.
The Company shall file with the Trustee, within 15 days of filing
them with the SEC, copies of the current, quarterly and annual reports and of
the information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) that
the Company is required to file with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act. If the Company is not subject to the requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall nevertheless file
with the SEC and the Trustee, on the date upon which it would have been
required to file with the SEC, financial statements, including any notes
thereto (and with respect to annual reports, an auditor's report by a firm of
established national reputation, upon which the Trustee may conclusively
rely), and a "Management's Discussion and Analysis of Financial Condition and
Results of Operations," both comparable to that which the Company would have
been required to include in such annual reports, information, documents or
other reports on Forms 8-K, 10-Q and 10-K if the Company were subject to the
requirements of Section 13 or 15(d) of the Exchange Act; PROVIDED, HOWEVER,
that the Company shall not be required to register under the Exchange Act by
virtue of this provision, if it were not otherwise required to do so.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review
of the activities of the Company and its Restricted Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company and its Restricted
Subsidiaries have
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kept, observed, performed and fulfilled their obligations under this
Indenture and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events
of Default of which he or she may have knowledge and what action the Company
is taking or proposes to take with respect thereto) and that to the best of
his or her knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of the Senior Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Chartered Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied
by a written statement of the Company's independent public accountants (who
shall be a firm of established national reputation) that in making the
examination necessary for certification of such financial statements, nothing
has come to their attention that would lead them to believe that the Company
have violated any of the financial provisions of Sections 4.01, 4.07, 4.09
and 4.12 or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Company shall, so long as any of the Senior Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming
aware of any Default or Event of Default, an Officers' Certificate specifying
such Default or Event of Default and what action the Company is taking or
proposes to take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Restricted
Subsidiaries to pay, prior to delinquency, all material taxes, assessments,
and governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Senior Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted
to the
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Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
Prior to the Investment Grade Date, the Company shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, (i) declare or pay any dividend or make any cash dividend or
other distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests, including, without limitation, any payment in
connection with any merger or consolidation involving the Company (other than
dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or any portion of a dividend or
distribution by a Restricted Subsidiary of the Company that is payable to the
Company or to any Wholly-Owned Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value from any Person
other than the Company or a Wholly-Owned Restricted Subsidiary any Equity
Interests of the Company, any of its Subsidiaries or any direct or indirect
parent of the Company (other than the conversion or exchange of Equity
Interests of the Company for other Equity Interests of the Company); or (iii)
make any principal payment on, or purchase, redeem, defease or otherwise
acquire or retire for value any Subordinated Indebtedness, except at final
maturity; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after
giving effect to such Restricted Payments:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) except in the case of any Restricted Investment, the Company
would, at the time of such Restricted Payment, and after giving PRO FORMA
effect thereto as if such Restricted Payment had been made at the beginning
of the applicable four-quarter period, have a Fixed Charge Coverage Ratio of
not less than 1.75 to 1 (calculated pursuant to Section 4.09 below); and
(c) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the Initial Issuance Date (excluding Restricted Payments permitted by
clauses (iii), (iv), (v), (vi) or (vii) of the next succeeding paragraph), is
less than the sum of (i) $50,000,000, PLUS (ii) 25% of an amount equal to the
Operating Cash Flow of the Company for the period (taken as one accounting
period) from the day after the Initial Issuance Date through the end of the
Company's most recently ended fiscal quarter for which financial statements
are available at the time of such Restricted Payment (or, if such Operating
Cash Flow for such period is a deficit, less 100% of such deficit), PLUS
(iii) 100% of the aggregate net cash proceeds received by the Company from
the issuance or sale (other than pursuant to or in connection with the IPP
Buyout) after the Initial Issuance Date of Equity Interests of the Company or
of debt securities of the Company that have been converted into Equity
Interests of the Company, PLUS (iv)
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100% of the aggregate cash proceeds received by the Company from any payment
in respect of any previously made Restricted Investment (but only to the
extent that such amount is not reflected in Consolidated Net Income).
The foregoing provisions shall not prohibit (i) the payment of
dividends, whether paid in kind or in cash, or the satisfaction of mandatory
redemption obligations, in respect of any Preferred Stock outstanding on the
Initial Issuance Date in accordance with the terms thereof; (ii) the payment
of any dividend within 60 days after the date of declaration thereof, if at
said date of declaration such payment would have complied with the provisions
of this Section 4.07, (iii) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of, other Equity Interests of the
Company; (iv) defeasance, redemption or repurchase of Subordinated
Indebtedness with the net cash proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of the Company) of Equity Interests of
the Company or from an incurrence of Permitted Refinancing Indebtedness that
consists of Subordinated Indebtedness, PROVIDED that the amount of any net
cash proceeds that are utilized for any redemption, repurchase, retirement or
other acquisition described in clauses (iii) and (iv) shall be excluded from
clause (c)(iii) of the first paragraph of this Section 4.07; (v) the
repurchase, redemption, or other acquisition or retirement for value of any
Equity Interests of the Company or any Restricted Subsidiary of the Company
held by any member of the Company's (or any of its Restricted Subsidiaries')
management or for the purpose of providing Equity Interests for issuance
under dividend reinvestment or employee benefits plans of the Company; (vi)
any spin-off or other distribution to shareholders of the Generating Assets
or the Oswego Plant or any portion thereof or any direct or indirect interest
therein; and (vii) any dividend or other distribution of the Capital Stock of
any Unrestricted Subsidiary, PROVIDED that in the case of each of clauses (i)
and (ii) above, no Default or Event of Default shall have occurred and be
continuing immediately after such transaction.
Not later than the date of making any Restricted Payment that
relies on clause (c) of the first paragraph of this covenant to be permitted,
and so long as the limitations contained in such clause apply, the Company
shall deliver to the Trustee an Officer's Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by such covenant were computed, which calculations may
be based upon the Company's latest available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of
any such Restricted Subsidiary to (a) (i) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (A) on its
Capital Stock or (B) with respect to any other interest or participation in,
or measured by, its profits or (ii) pay any Indebtedness
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owed to the Company or any of its Restricted Subsidiaries, (b) make loans or
advances to the Company or any of its Restricted Subsidiaries or (c) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or
by reason of (i) the First Mortgage Bonds, the Credit Facility, the
Receivables Financing, the Pollution Control Obligations, the Securitization
Transaction, the Indenture and the Senior Notes; (ii) applicable law or
regulation; (iii) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person, so acquired; (iv) by reason of
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practice; (v) purchase money
obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (c) above in the
property so acquired; (vi) any contract for the sale of 100% of the Capital
Stock of a Restricted Subsidiary; or (vii) Permitted Refinancing
Indebtedness, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive
than those contained in the agreements governing the Indebtedness being
refinanced.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS.
Prior to the Investment Grade Date, the Company shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or
indirectly create, incur, issue, assume, guaranty or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "INCUR"), any Indebtedness (including Acquired Debt) or issue
any Disqualified Stock; PROVIDED, HOWEVER, that the Company and any of its
Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) and
issue Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which financial statements
are available immediately preceding the date on which such Indebtedness is
incurred or Disqualified Stock is issued would have been at least 3.25 to 1,
determined on a PRO FORMA basis (including a PRO FORMA application of the net
proceeds therefrom), as if such Indebtedness had been incurred or such
Disqualified Stock had been issued at the beginning of such four-quarter
period.
The foregoing provisions will not apply to (i) Permitted
Refinancing Indebtedness; (ii) the incurrence by the Company of any amount of
Subordinated Indebtedness if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which financial
statements are available immediately preceding the date on which such
Subordinated Indebtedness is incurred would have been at least 1.75 to 1
(determined as in the immediately preceding paragraph); (iii) Permitted
Hedging Agreements; (iv) borrowings under the Credit Facility in an amount
not to exceed $804.4 million; and (v) intercompany Indebtedness between and
among the Company and any of its Restricted Subsidiaries (except in a TIPES
Transaction); PROVIDED, HOWEVER, that (A) any subsequent issuance or transfer
of Equity Interests that results in any such Indebtedness being held by
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a Person other than a Restricted Subsidiary and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the Company
or a Restricted Subsidiary shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted Subsidiary,
as the case may be.
SECTION 4.10. PROCEEDS OF CERTAIN ASSET SALES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in a (A) Permitted Asset Swap unless the
Company or Restricted Subsidiary receives property or assets with a Fair
Value at least equal to the Fair Value of the property or assets swapped or
(B) Sale of Assets unless (i) the Company (or the applicable Restricted
Subsidiary, as the case may be) receives consideration at the time of such
Sale of Assets at least equal to the Fair Value (evidenced by a resolution of
the Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets of Equity Interests issued or sold or otherwise
disposed of and (ii) except in connection with a sale of Fossil
and Generating Assets or the Oswego Plant, at least 75% of the consideration
received therefor by the Company or such Restricted Subsidiary is in the form
of cash or Cash Equivalents; PROVIDED that if in the case of the sale of any
Fossil and Generating Asset pursuant to the PowerChoice Agreement, the Board
of Directors determines in good faith that the Company will receive the
highest price by accepting a bid with consideration consisting of less than
75% cash or Cash Equivalents, and the PSC approves the Company's acceptance
of such bid, then the Company may accept such bid, and PROVIDED FURTHER, that
in the case of any Sale of Assets (except a Securitization Transaction) that
is consummated after the Investment Grade Date, the requirement of clause
(ii) shall not apply. For purposes of determining the Company's compliance
with the requirements of the immediately preceding sentence, the amount of
(x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Senior Notes) that are assumed by the
transferee of any such assets pursuant to a customary novation agreement or
that otherwise releases the Company or such Restricted Subsidiary from
further liability and (y) any notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash
shall be deemed to be cash for purposes of this provision (to the extent of
the cash received).
Within 180 days after the receipt of any Net Proceeds from a
Securitization Transaction or a Sale of Assets consisting of Generating
Assets, or within 360 days after the receipt of any Net Proceeds from any
other Sale of Assets that is consummated prior to the Investment Grade Date,
the Company shall (a) in the case of a Securitization Transaction, apply the
cash portion of such Net Proceeds in accordance with the relevant statutory
or regulatory requirements that govern such transaction or, if there are no
such requirements, to reduce Senior Indebtedness, (b) in the case of a sale
or other disposition of Generating Assets or the Oswego Plant, use not less
than 85% (or 100% if the accepted bid requires less than 75% of the purchase
price to be paid in cash or Cash Equivalents) of the cash portion of such Net
Proceeds to reduce Senior Indebtedness, and (c) in the case of any
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other Sale of Assets that is consummated prior to the Investment Grade Date,
use 100% of such Net Proceeds for one or more of the following: (i) to
reduce Senior Indebtedness, (ii) to reinvest, or enter into an agreement with
respect to the reinvestment of, such Net Proceeds in Related Assets, or (iii)
make an offer to all Holders of Senior Notes (an "ASSET SALE OFFER") to
purchase the maximum principal amount of Senior Notes that may be purchased
out of such Net Proceeds, at an offer price in cash in an amount equal to
100% of the principal amount thereof (in the case of the Series A through G
Notes) or 100% of the principal amount at maturity of the Senior Discount
Notes (if such purchase occurs on or after July 1, 2003) or 100% of the
Accreted Value of the Senior Discount Notes (if such repurchase occurs prior
to July 1, 2003) plus accrued and unpaid interest thereon, if any, to the
date of purchase, in accordance with the procedures set forth in this
Indenture. To the extent that the aggregate amount of Senior Notes tendered
pursuant to an Asset Sale Offer is less than the amount of such Net Proceeds,
the Company may use any remaining Net Proceeds for general corporate
purposes. If the aggregate principal amount of Senior Notes surrendered by
Holders thereof exceeds the amount of such Net Proceeds, the Trustee shall
select the Senior Notes to be purchased on a pro rata basis. Upon completion
of such offer to purchase, the amount of Net Proceeds shall be reset at zero.
Pending the final application of any such Net Proceeds, the Company may
otherwise invest such Net Proceeds in any manner that is not prohibited by
this Indenture.
SECTION 4.11. TRANSACTION WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of their properties or assets to, or purchase any property or
assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "AFFILIATE TRANSACTION"), unless (i)
such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Subsidiary than those that would have been obtained
in a comparable transaction by the Company or Subsidiary with an unrelated
Person; and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, a resolution of the Board
of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of
the Board of Directors and (b) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $50.0 million, an opinion as to the fairness to the Company or such
Subsidiary of such Affiliate Transaction from a financial point of view
issued by a nationally recognized expert in evaluating such transactions;
PROVIDED that (v) any employment agreement entered into by the Company or its
Subsidiaries in the ordinary course of business; (w) commercial transactions
in the ordinary course of the utility business between or among the Company
and/or its Restricted Subsidiaries; (x) Restricted Payments that are
permitted by Section 4.07; (y) agreements or transactions entered into in
connection with a Securitization Transaction or the Receivables Financing and
(z) following any holding company reorganization, transactions between
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the Company and its Restricted Subsidiaries and the Company's parent that are
on terms permitted by the PSC, in each case, shall not be deemed Affiliate
Transactions.
SECTION 4.12. LIENS.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, secure with a Lien on the
property or assets of the Company or such Restricted Subsidiary, Other
Indebtedness or Subordinated Indebtedness without making, or causing such
Restricted Subsidiary to make, effective provision for securing the Senior
Notes (i) in the case of a Lien securing Other Indebtedness, on an equal and
ratable basis with the Lien securing such Other Indebtedness and (ii) in the
case of a Lien securing Subordinated Indebtedness, on a basis such that the
Lien securing the Senior Notes is senior in priority to the Lien securing
such Subordinated Indebtedness, in each case until such time as such Other
Indebtedness or Subordinated Indebtedness is no longer secured by a Lien.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect
(i) its corporate existence, and the corporate, partnership or other
existence of each of its Restricted Subsidiaries, in accordance with the
respective organizational documents (as the same may be amended from time to
time) of the Company or any such Restricted Subsidiary and (ii) the rights
(charter and statutory), licenses and franchises of the Company and its
Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Restricted Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in
any material respect to the Holders of the Senior Notes.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL TRIGGERING EVENT.
(a) Upon the occurrence of a Change of Control Triggering
Event, each Holder of Senior Notes will have the right to require the Company
to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of such Holder's Senior Notes pursuant to the offer described below
(the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to (a) 101%
of the aggregate principal amount thereof in the case of the Series A through
G Senior Notes, (b) 101% of the principal amount at maturity of the Senior
Discount Notes (if such repurchase occurs on or after July 1, 2003) or (c)
101% of the Accreted Value of the Senior Discount Notes (if such repurchase
occurs prior to July 1, 2003), plus accrued and unpaid interest thereon, if
any, to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within
thirty days following any Change of Control Triggering Event, the Company
shall mail a notice to each Holder describing the transaction or transactions
that constitute
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the Change of Control Triggering Event and offering to repurchase Senior
Notes pursuant to the procedures described in this Section and described in
such notice. The notice will state: (1) that the Change of Control Offer is
being made pursuant to this Section 4.14 and that all Senior Notes tendered
will be accepted for payment; (2) the purchase price and the purchase date,
which shall be at least 30 but not more than 60 days from the date such
notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"); (3) that any Senior
Note not tendered will continue to accrue interest; (4) that, unless the
Company defaults in the payment of the Change of Control Payment, all Senior
Notes accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Payment Date; (5) that
Holders electing to have any Senior Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Senior Notes, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Senior
Notes completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the Change
of Control Payment Date; (6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business
on the second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of Senior Notes delivered for purchase, and
a statement that such Holder is withdrawing his election to have the Senior
Notes purchased; and (7) that Holders whose Senior Notes are being purchased
only in part will be issued new Senior Notes equal in principal amount (or
principal amount at maturity, as the case may be) to the unpurchased portion
of the Senior Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof. The Company
shall comply with the requirements of Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the
Senior Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall,
to the extent lawful, (1) accept for payment all Senior Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (2)
deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Senior Notes or portions thereof so tendered and
(3) deliver or cause to be delivered to the Trustee the Senior Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount (or principal amount at maturity, as the case may be) of
Senior Notes or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to each Holder of Senior Notes so tendered the
Change of Control Payment for such Senior Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Senior Note equal in principal amount (or principal amount
at maturity, as the case may be) to any unpurchased portion of the Senior
Notes surrendered, if any; PROVIDED that each such new Senior Note will be in
a principal amount of $1,000 or an integral multiple thereof. The Company
shall publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
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(c) The Company shall not be required to make a Change of
Control Offer upon a Change of Control Triggering Event if a third party
makes the Change of Control Offer in the manner, at the times and otherwise
in compliance with the requirements set forth in Sections 4.14(a) and 4.14(b)
hereof and purchases all Senior Notes validly tendered and not withdrawn
under such Change of Control Offer.
SECTION 4.15. PAYMENTS FOR CONSENTS.
Neither the Company nor any of its Subsidiaries may, directly
or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Senior Note of any series
for or as an inducement to any consent, waiver or amendment of any of the
terms or provisions of this Indenture or such Senior Notes unless such
consideration is offered to be paid or agreed to be paid to all Holders of
the Senior Notes of that series that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
So long as the Senior Notes are outstanding, the Company may
not, directly or indirectly, consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all its assets in
one or more related transactions, to another Person unless (i) the
corporation formed by such consolidation or surviving in such merger or the
Person that acquires by sale, assignment, transfer, conveyance or other
disposition, or that leases, such assets (in each such case, the "SUCCESSOR
ENTITY"), is a corporation organized and existing under the laws of the
United States, any State thereof or the District of Columbia and expressly
assumes the Company's obligations under the Indenture and the Notes; (ii)
immediately before and after such transaction no Default or Event of Default
exists; and (iii) the Successor Entity (or the Company, in the case of a
consolidation or merger in which the Company is the surviving entity) (A) has
Consolidated Net Worth immediately after the transaction (but prior to any
revaluation or recalculation of Consolidated Net Worth as of the date of the
transaction relating to a carry-over basis (if any) of the assets acquired in
the transaction (as determined in accordance with GAAP)) equal to or greater
than the Consolidated Net Worth of the Company immediately prior to the
transaction and (B) will, at the time of such transaction and after giving
PRO FORMA effect thereto as if such transaction had occurred at the beginning
of the applicable four-quarter period, have a Fixed Charge Coverage Ratio of
not less than 1.75 to 1 (calculated pursuant to Section 4.09 above); PROVIDED
that the limitations set forth in this clause (iii) shall not apply following
the Investment Grade Date or to any merger or consolidation of the Company
with or into a Restricted Subsidiary and PROVIDED FURTHER, that the
limitations set forth above shall not apply to the sale or disposition by the
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Company of the Generating Assets or the Oswego Plant (it being understood and
agreed that the acquiror or transferee of such assets shall not qualify as a
Successor Entity on the basis of having acquired all or substantially all of
the Company's assets for purposes of this Article 5).
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation, amalgamation or merger, or any sale,
assignment, transfer, lease, conveyance or other disposition of all or
substantially all of the assets of the Company in accordance with Section
5.01 hereof, the successor corporation formed by such consolidation or
amalgamation or into or with which the Company is merged or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, amalgamation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "COMPANY"
shall refer instead to the successor corporation), and may exercise every
right and power of the Company under this Indenture with the same effect as
if such successor Person had been named as the Company herein; PROVIDED,
HOWEVER, that the predecessor Company shall not be relieved from the
obligation to pay the principal of, and premium, if any, on the Senior Notes
except in the case of a transaction that meets the requirements of Section
5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an "EVENT OF DEFAULT":
(i) default by the Company for 60 days in the payment when due
of interest on the Senior Notes;
(ii) default by the Company in the payment when due of the
principal of, or premium, if any, on the Senior Notes;
(iii) failure by the Company to comply with Sections 4.07,
4.09 or 5.01 hereof;
(iv) failure by the Company for 60 days after written notice to
the Company by the Trustee, or written notice to the Company and the
Trustee by the Holders of 25% or more in an aggregate principal
amount (or principal amount at maturity, as the case may be) of the
Senior Notes, to comply with any of its agreements in the Indenture
or the Senior Notes;
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(v) default by the Company under any mortgage, indenture or
instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness of the Company or any of
its Restricted Subsidiaries (or the payment of which is guaranteed
by the Company or any of its Restricted Subsidiaries), whether
such Indebtedness or Guarantee now exists, or is created after the
date hereof, which default (a) is caused by a failure to pay the
principal of such Indebtedness at the stated maturity of such
Indebtedness after the expiration of the grace period provided in
such Indebtedness (a "PAYMENT DEFAULT") or (b) results in the
acceleration of such Indebtedness prior to its stated maturity
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $50.0 million or more;
(vi) failure by the Company or any of its Restricted
Subsidiaries to pay a final judgment or final judgments not
otherwise covered by insurance for the payment of money entered by
a court or courts of competent jurisdiction against the Company or
any of its Subsidiaries and such judgment or judgments are not
paid, discharged or stayed for a period of 60 days, PROVIDED that
the aggregate of all such undischarged judgments exceeds $50.0
million;
(vii) the Company or any of its Significant Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary Case,
(b) consents to the entry of an order for relief
against it in an involuntary Case,
(c) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) generally is not paying its debts as they become
due; or
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(a) is for relief against the Company or any of its
Significant Subsidiaries in an involuntary Case;
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(b) appoints a Custodian of the Company or any of its
Significant Subsidiaries or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries;
or
(c) orders the liquidation of the Company or any of its
Significant Subsidiary; and, in each case, the order or decree
remains unstayed and in effect for 60 consecutive days.
The term "CUSTODIAN" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law. The term "CASE"
means an application, petition, action, case or other proceeding (including
the filing of a notice of intention to file a proposal) before any court,
tribunal or other governmental authority under any applicable Bankruptcy Law
(foreign or domestic).
In the case of any Event of Default pursuant to the provisions of
this Section 6.01 occurring by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding payment of the premium that the Company would have had to pay if the
Company then had elected to redeem the Senior Notes pursuant to Sections 3.07
or 4.14 hereof, an equivalent premium shall also become and be immediately
due and payable to the extent permitted by law upon the acceleration of the
Senior Notes, anything in this Indenture or in the Senior Notes to the
contrary notwithstanding.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (vii) or (viii) of Section 6.01 hereof with respect to the Company or any
Significant Subsidiary) occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount (or principal amount at maturity, as the case
may be) of the then outstanding Senior Notes of any series affected by an Event
of Default may declare all the Senior Notes of such Series to be due and payable
immediately. Upon any such declaration, the Senior Notes shall become due and
payable immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (vii) or (viii) of Section 6.01 hereof occurs with respect
to the Company or any of its Significant Subsidiaries, all outstanding Senior
Notes shall be due and payable immediately without further action or notice.
The Holders of a majority in aggregate principal amount (or principal amount at
maturity, as the case may be) of the then outstanding Senior Notes of any series
affected by an Event of Default by written notice to the Trustee may on behalf
of all of the Holders of such series rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived. Except as provided in Section 6.01 hereof, in the event of any
such acceleration of Senior Notes, the Company will become obligated to pay the
aggregate principal amount and accrued interest (or Accreted Value on the Senior
Discount Notes if prior to July 1, 2003) of the Senior Notes immediately.
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SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, and premium,
if any, on the Senior Notes or to enforce the performance of any provision of
the Senior Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Senior Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder of a Senior
Note in exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. All remedies are cumulative to the
extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount (or principal amount at maturity, as the case may be) of the then
outstanding Senior Notes that would be materially adversely affected by such
waiver by notice to the Trustee may on behalf of the Holders of all of the
Senior Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in
the payment of interest on, or the principal of, or premium of, if any, the
Senior Notes. Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount (or principal amount at
maturity, as the case may be) of the then outstanding Senior Notes of any series
affected by an Event of Default may direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture that the
Trustee determines may be unduly prejudicial to tile rights of other Holders of
Senior Notes or that may involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Senior Note may pursue a remedy with respect to
this Indenture or the Senior Notes only if:
(a) the Holder of a Senior Note gives to the Trustee written
notice of a continuing Event of Default;
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(b) the Holders of at least 25% in principal amount (or
principal amount at maturity, as the case may be) of the then outstanding
Senior Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Senior Note or Holders of Senior Notes
offer and, if requested, provide to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount (or principal amount at maturity, as the case may be)
of the then outstanding Senior Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Senior Note may not use this Indenture to prejudice the rights
of another Holder of a Senior Note or to obtain a preference or priority over
another Holder of a Senior Note.
SECTION 6.07. RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Senior Note to receive payment of principal and
premium, if any, on the Senior Note, on or after the respective due dates
expressed in the Senior Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii)
hereof occurs and is continuing, the Trustee is authorized to recover
judgment in its own name and as trustee of an express trust against the
Company for the whole amount of principal of, and premium, if any, remaining
unpaid on the Senior Notes and interest on overdue principal and, to the
extent lawful, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Holders of the Senior Notes allowed in any judicial
proceedings relative to the Company (or
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any other obligor upon the Senior Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money
or other property payable or deliverable on any such claims and any custodian
in any such judicial proceeding is hereby authorized by each Holder to make
such payments to the Trustee, and in the event that the Trustee shall consent
to the making of such payments directly to the Holders, to pay to the Trustee
any amount due to it for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts
due the Trustee under Section 7.07 hereof. To the extent that the payment of
any such compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
7.07 hereof out of the estate in any such proceeding, shall be denied for any
reason, payment of the same shall be secured by a Lien on, and shall be paid
out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any
plan of reorganization, arrangement, adjustment or composition affecting the
Senior Notes or the rights of any Holder, or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection, including the costs of its agents and counsel;
SECOND: to Holders of Senior Notes for amounts due and unpaid
on the Senior Notes for principal, and premium, if any, ratably, without
preference or priority of any kind, according to the amounts due and payable
on the Senior Notes for principal, and premium, if any, respectively; and
THIRD: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Senior Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing
by any party, litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any
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party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section does not
apply to a suit by the Trustee, a suit by a Holder of a Senior Note pursuant
to Section 6.07 hereof, or a suit by Holders of more than 10% in principal
amount of the then outstanding Senior Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the occurrence and continuance of an Event of
Default:
(i) the Trustee need perform only those duties that are
specifically set forth in this Indenture and any Supplemental
Indenture; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
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(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee
is subject to paragraphs (a), (b), and (c) of this Section 7.01 and
the requirements of the TIA.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee
may refuse to perform any duty or exercise any right or power unless
it receives indemnity satisfactory to it against any loss, liability
or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document (and
any facts or matters stated in any document) believed by it to be
genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both.
The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such Officers' Certificate or
Opinion of Counsel. The Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon.
(c) The Trustee may act through its agents and shall not be
responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or
within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the
request or direction of the Holders unless such Holders shall have
offered to the Trustee security or indemnity reasonably satisfactory
to the Trustee against the costs, expenses and liabilities that
might be incurred by it in compliance with such request or direction.
(g) The Trustee shall not be required to expend or risk its
own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of
any
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of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against
such risk or liability is not assured to it.
(h) The Trustee shall have no duty to inquire as to the
performance of the Company's covenants in Article 4 hereof. In
addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 6.01(i) or 6.01(ii) hereof; or (ii)
any Default or Event of Default of which the Trustee shall have
received written notification or obtained actual knowledge.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Senior Notes and may otherwise deal with the Company
or any Affiliate of the Company with the same rights it would have if it were
not Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and
7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Senior Notes, it shall not be accountable
for the Company's use of the proceeds from the Senior Notes or any money paid
to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall not
be responsible for any statement or recital in this Indenture or any
statement in the Senior Notes or any other document in connection with the
sale of the Senior Notes or pursuant to this Indenture other than its
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Senior
Notes a notice of the Default or Event of Default within 90 days after it
occurs, unless such Default or Event of Default shall have been cured.
Except in the case of a Default or Event of Default in payment of principal
of, or premium, if any, or interest on any Senior Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the interests of
the Holders of the Senior Notes.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date hereof, and for so long as Senior Notes remain
outstanding, the Trustee shall mail to the Holders of the Senior Notes a
brief report dated as of such reporting date that complies with TIA Section
313(a) (but if the event described in Section 313(a) of the TIA has occurred
within twelve months preceding the reporting date, no report need be
transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c).
Commencing at the time this Indenture is qualified under the
TIA, a copy of each report at the time of its mailing to the Holders of
Senior Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Senior Notes are listed in accordance with TIA
Section 313(d). The Company shall promptly notify the Trustee when the
Senior Notes are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse
the Trustee upon request for all reasonable disbursements, advances and
expenses incurred by it or made by it in addition to the compensation for its
services, including reasonable compensation and the expenses and
disbursements of its agents and counsel. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents
and counsel, whether incurred in disputes between the parties or disputes
with third parties or otherwise.
The Company shall indemnify the Trustee against any loss,
liability or expense incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, except as
set forth in the next paragraphs, including the costs and expenses of
enforcing this Indenture against the Company (including this Section 7.07)
and defending itself against any claim (whether asserted by the Company, any
Holder or any other Person). The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Company shall not relieve the Company or any Person of any
liability or obligations hereunder. The Company shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel.
The Company need not reimburse any expense or indemnify
against any loss or liability attributed solely to the Trustee's negligence
or bad faith.
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To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a Lien prior to the Senior Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Senior Notes. Such Lien shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(vii) or (viii) hereof occurs, the
expenses and the compensation for the services (including the fees and
expenses of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.08.
The Trustee may resign and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in principal
amount of the then outstanding Senior Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Senior
Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of at least 10% in principal amount (or principal
amount at maturity, as the case may be) of the then outstanding Senior Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
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If the Trustee, after written request by any Holder of a
Senior Note who has been a Holder of a Senior Note for at least six months,
fails to comply with Section 7. 10, such Holder of a Senior Note may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Holders of the Senior Notes. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor
Trustee, subject to the Lien provided for in Section 7.07 hereof.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall
be the successor Trustee.
SECTION 7.10. ELIGIBILITY, DISQUALIFICATION.
The final paragraph of this Section shall not be operative as
a part of this Indenture until this Indenture is qualified under the TIA and
until such qualification this Indenture shall be construed as if said
paragraph were not contained herein.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States
of America or of any state thereof that is authorized under such laws to
exercise corporate trustee power, that is subject to supervision or
examination by federal or state authorities and that has a combined capital
and surplus of at least $50 million as set forth in its most recent published
annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject
to TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311 (b). A Trustee that has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all
outstanding Senior Notes of any series upon compliance with the conditions
set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding
Senior Notes of any series on the date the conditions set forth below are
satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Senior Notes of such
series, which shall thereafter be deemed to be " outstanding" only for the
purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Senior Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Senior Notes of such series to receive solely from the
trust fund described in Section 8.04 hereof, and as more fully set forth in
such Section, payments in respect of the principal of, and premium, if any,
and interest on such Senior Notes when such payments are due from the funds
held by the Trustee in the trust, (b) the Company's obligations with respect
to such Senior Notes of such series under Sections 2.06, 2.08, 2.09, 2.12 and
4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the
Trustee under this Indenture and the Company's obligations in connection
therewith and (d) the obligations of the Company under this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08,
4.09, 4.10, 4.11, 4.12, 4.14 and Article 5 hereof with respect to the
outstanding Senior Notes of any series on and after the date the conditions
set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and such
Senior Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction,
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waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it
being understood that such Senior Notes shall not be deemed outstanding for
accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Senior Notes of such series, the Company may omit
to comply with and shall have no liability in respect of any term, condition
or limitation set forth in any such covenant, whether directly or indirectly,
by reason of any reference elsewhere herein to any such covenant or by reason
of any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or
an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Senior Notes of such series
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04
hereof, Sections 6.01(iii) through 6.01(vii) hereof shall not constitute
Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Senior Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Senior Notes, cash in Dollars,
Government Securities or a combination thereof, in such amounts as will be
sufficient, in the opinion of a firm of independent public accountants,
nationally recognized in the United States, to pay the principal of,
premium, if any, and interest on the outstanding Senior Notes on the stated
date for payment thereof or on the applicable redemption date of such
Senior Notes, and the Company must specify whether the Senior Notes are
being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date hereof, there has been a change in
the applicable federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the Holders
of the outstanding Senior Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel
reasonably acceptable to the Trustee confirming
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that the Holders of the outstanding Senior Notes will not recognize
income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not
occurred;
(d) the Company shall covenant that no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the incurrence of
Indebtedness all or a portion of the proceeds of which will be used to
defease the Senior Notes pursuant to this Article Eight concurrently with
such incurrence) or insofar as Sections 6.01(vii) and (viii) hereof are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(e) the Company shall covenant that such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a
default under, any material agreement or instrument (other than this
Indenture) to which the Company or any of its Subsidiaries are parties or
by which the Company or any of its Subsidiaries are bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Senior Notes over any other creditors
of the Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company; and
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for, in the case of the Officers' Certificate, clauses
(a) through (f), and, in the case of the Opinion of Counsel, clauses (a)
(with respect to the validity and perfection of security interest), (b),
(c) and (e), have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SENIOR NOTES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"TRUSTEE") pursuant to Section 8.04 hereof in respect of the outstanding Senior
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Senior Notes and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as Paying
Agent) as the Trustee may determine, to the
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S&A DRAFT -JUNE 10, 1998
Holders of such Senior Notes of all sums due and to become due thereon in
respect of principal, premium, if any, and interest, but such money need
not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the cash or Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Senior Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held
by it as provided in Section 8.04 hereof which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the
opinion delivered under Section 8.04(a) hereof), are in excess of the amount
thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT OF COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, or
premium, if any, or interest on any Senior Note and remaining unclaimed for
two years after such principal, and premium, if any, or interest has become
due and payable shall be paid to the Company on its request or (if then held
by the Company) shall be discharged from such trust; and the Holder of such
Senior Note shall thereafter, as a secured creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent
with respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and
The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such notification or publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any Dollars or
Government Securities in accordance with Section 8.02 or 8.03 hereof, as the
case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
then the Company's obligations under this Indenture and the Senior Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02
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or 8.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company
make any payment of principal of, premium, if any, or interest on any Senior
Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Senior Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF SENIOR NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Senior Notes, and enter
into Supplemental Indentures hereto which shall thereafter form a part
hereof, without the consent of any Holder of a Senior Note, for any one or
more of the following purposes:
(a) to cure any ambiguity, defect or inconsistency herein;
(b) to secure the Senior Notes on an equal and ratable or senior
basis with Other Indebtedness or Subordinated Indebtedness, respectively, as
required by Section 4.12 hereof;
(c) to establish and create one or more series of Senior Notes (in
addition to the Initial Series Senior Notes) and to specify certain terms of
such series of Senior Notes, which terms may include, but are not limited to,
those set forth in Section 2.01, all in a manner not inconsistent with the
provisions of this Indenture;
(d) to provide that the Company shall not issue any additional
Senior Notes or to add conditions, limitations and restrictions on the
Company with respect to any series of Senior Notes under this Indenture;
(e) to add additional covenants and agreements of the Company to
this Indenture, or to add to the Events of Default specified in Section 6.01
additional Events of Default, or to surrender any right or power herein
reserved to or conferred upon the Company pursuant to this Indenture.
(f) to provide for alternative methods or forms for evidencing and
recording the ownership of Senior Notes;
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S&A DRAFT -JUNE 10, 1998
(g) to provide for the assumption of the Company's obligations to
the Holders of the Senior Notes in the case of a merger, amalgamation,
consolidation or sale of all or substantially all of the assets pursuant to
Article Five hereof;
(h) to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes or that does not adversely affect
the legal rights hereunder of any Holder of the Senior Notes;
(i) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
Supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in
the execution of any amended or Supplemental Indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee
shall not be obligated to enter into such amended or supplemental Indenture
that affects its own rights, duties or immunities under this Indenture or
otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF SENIOR NOTES.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture, and the Senior Notes, and
enter into Supplemental Indentures hereto which shall thereafter form a part
hereof, with the consent of the Holders of at least a majority in principal
amount (or principal amount at maturity, as the case may be) of the Senior
Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Senior
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default
or Event of Default (other than a Default or Event of Default in the payment
of the principal of, or interest on, the Senior Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture or the Senior Notes may be waived with
the consent of the Holders of a majority in principal amount (or principal
amount at maturity, as the case may be) of the then outstanding Senior Notes
(including consents obtained in connection with a tender offer or exchange
offer for the Senior Notes); PROVIDED, HOWEVER, that if there shall be Senior
Notes of more than one series outstanding and if the proposed action to be
taken will materially adversely affect the rights of holders of Senior Notes
of one or more of such series, then the consent (including consents obtained
in connection with a tender offer or exchange offer for Senior Notes) only of
holders of a majority in aggregate principal amount (or principal amount at
maturity, as the case may be) of outstanding Senior Notes of all series so
affected, considered as one class, shall be required.
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Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
Supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Senior Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company in the execution
of such amended or Supplemental Indenture unless such amended or Supplemental
Indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or Supplemental Indenture.
It shall not be necessary for the consent of the Holders of Senior
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Senior Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
Supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding may waive compliance in a particular instance by the Company
with any provision of this Indenture, the Senior Notes or any Supplemental
Indenture. Subject to Section 9.01(a)(i), however, without the consent of
each Holder affected, an amendment, waiver or Supplemental Indenture may not
(with respect to any Senior Notes held by a non-consenting Holder):
(a) reduce the principal amount (or principal amount at maturity,
as the case may be) of Senior Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Senior Note or alter or waive any of the provisions with respect to the
redemption of the Senior Notes except as provided above with respect to
Sections 3.09, 4.10 and 4.14 hereof;
(c) reduce the rate of or change the time for payment of interest on
any Senior Note;
(d) after the obligation has arisen for the Company to make an offer
to purchase following the occurrence of a Change of Control or Sale of
Assets, alter the obligation to purchase the Senior Notes in accordance
with such offer to purchase or waive any default in the performance
thereof;
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(e) waive a Default or Event of Default in the payment of principal
of, or interest on, the Senior Notes (except a rescission of acceleration
of the Senior Notes by the Holders of at least a majority in aggregate
principal amount (or principal amount at maturity, as the case may be) of
the then outstanding Senior Notes and a waiver of the payment default that
resulted from such acceleration);
(f) make any Senior Note payable in money other than that stated in
the Senior Notes;
(g) make any change in the provisions of this Indenture regarding
waivers of past Defaults or the rights of Holders of Senior Notes to
receive payments of principal of, or interest on, the Senior Notes;
(h) waive a redemption payment with respect to any Senior Note (other
than a payment required by Sections 4.10 or 4.14 hereof); or
(i) make any change in the foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Senior Notes
shall be set forth in an amended or Supplemental Indenture that complies with
the TIA in effect as of the date of amendment or supplement.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Senior Note is a continuing consent by the Holder of a
Senior Note and every subsequent Holder of a Senior Note or portion of a Senior
Note that evidences the same debt as the consenting Holder's Senior Note, even
if notation of the consent is not made on any Senior Note. However, any such
Holder of a Senior Note or subsequent Holder of a Senior Note may revoke the
consent as to its Senior Note if the Trustee receives written notice of
revocation before the date the waiver, Supplemental Indenture or amendment
becomes effective. An amendment, Supplemental Indenture or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Company may fix a record date for determining which Holders of
Senior Notes must consent to such Supplemental Indenture, amendment or waiver.
If the Company fixes a record date, the record date shall be fixed at (i) the
later of 30 days prior to the first solicitation of such consent or the date of
the most recent list of Holders of Senior Notes furnished to the Trustee prior
to such solicitation pursuant to Section 2.07, or (ii) such other date as the
Company shall designate.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF SENIOR NOTES.
The Trustee may place an appropriate notation about an amendment,
Supplemental Indenture or waiver on any Senior Note thereafter authenticated.
The Company in exchange for all Senior Notes may issue and the Trustee shall
authenticate new Senior Notes that reflect the amendment, Supplemental
Indenture or waiver.
Failure to make the appropriate notation or issue a new Senior Note
shall not affect the validity and effect of such amendment, Supplemental
Indenture or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or Supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. The Company may not sign an amendment or Supplemental Indenture
until its Board of Directors approves it. In executing any amended or
supplemental indenture, the Trustee shall be entitled to receive, and shall
be fully protected in relying upon, an Officer's Certificate and an Opinion
of Counsel stating that the execution of such amended or Supplemental
Indenture is authorized or permitted by this Indenture and that all
conditions precedent have been complied with.
SECTION 9.07. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any Supplemental Indenture under this Article
9 by the Trustee and the Company, this Indenture shall be and shall be deemed
to be modified and amended in accordance therewith and such Supplemental
Indenture shall be and shall be deemed to be a part of the terms and
conditions of this Indenture for all purposes; and every Holder of Senior
Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby, except to the extent that the terms of such Supplemental
Indenture relate solely to one or more particular series of Senior Notes
identified therein. In the event of any inconsistency between the Indenture
and the terms of any Supplemental Indenture, the terms of such Supplemental
Indenture shall control.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties or rights imposed by TIA Section 318(c), the imposed duties
or rights shall control.
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<PAGE>
SECTION 10.02. NOTICES.
Any notice or communication by the Company or the Trustee to the
other is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
Attention: Chief Financial Officer
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery
to the courier, if sent by overnight air courier guaranteeing next day
delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also
be so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
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<PAGE>
If the Company mails a notice or communication to Holders, they
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03. COMMUNICATION BY HOLDERS OF SENIOR NOTES WITH OTHER HOLDERS OF
SENIOR NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Senior
Notes. The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a
certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the
provisions of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
- 68 -
<PAGE>
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied, PROVIDED, HOWEVER, that with
respect to matters of fact, an Opinion of Counsel may rely upon an
Officer's Certificate or a certificate of a public official.
SECTION 10.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company, as such, shall have any liability
for any obligations of the Company under the Senior Notes or this Indenture
or for any claim based on, in respect of, or by reason of, such obligations
or their creation. Each Holder by accepting a Senior Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Notes.
SECTION 10.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE AND THE SENIOR NOTES.
SECTION 10.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of the Company or its Subsidiaries or of any other
Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 10.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Senior
Notes shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 10.11. SEVERABILITY.
In case any provision in this Indenture or in the Senior Notes
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
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<PAGE>
SECTION 10.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
- 70 -
<PAGE>
SIGNATURES
NIAGARA MOHAWK POWER CORPORATION
By:____________________________
Name:
Title:
Attest:
______________________________
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
By:_____________________________
Name:
Title:
Attest:
_______________________________
<PAGE>
EXHIBIT A
FORM OF ___% SERIES A SENIOR NOTE
AND TRUSTEE CERTIFICATION OF
AUTHENTICATION
<PAGE>
$300,000,000
__ % Series A Senior Note due 1999
No. $300,000,000
NIAGARA MOHAWK POWER CORPORATION
promises to pay to
or their registered assigns, the principal sum of ______________________
Dollars ($ ) on July 1, 1999.
Interest Payment Dates: January 1 and July 1, commencing January 1, 1999
Record Dates: December 15 and June 15
Dated: _______________ ___, 1998
NIAGARA MOHAWK POWER CORPORATION
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
This is one of the Senior Notes referred
to in the within-mentioned Indenture:
IBJ SCHRODER BANK &
TRUST COMPANY, as Trustee
By:______________________________
Authorized Signature
<PAGE>
(Back of Senior Note)
___% Series A Senior Note due 1999
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Niagara Mohawk Power Corporation, a New York corporation
(the "Company") promises to pay interest on the principal amount of this ___%
Series A Senior Note due 1999 (the "Senior Note") at the rate and in the
manner specified below.
The Company shall pay interest on the principal amount of this
Senior Note in cash at the rate per annum shown above. The Company shall pay
interest semi-annually on each January 1 and July 1, commencing January 1,
1999, or if any such day is not a Business Day (as defined in the Indenture
referred to below), on the next succeeding Business Day (each an "Interest
Payment Date").
Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months for the actual number of days elapsed. Interest
shall accrue from the most recent date to which interest has been paid or, if
no interest has been paid, from the date of the original issuance of this
Senior Note. To the extent lawful, the Company shall pay interest on overdue
principal and premium at the rate of 1 % per annum in excess of the then
applicable interest rate on this Senior Note; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful. The rates of interest
specified in the Indenture and this Senior Note are nominal rates and all
interest payments and computations are to be made without allowance or
deduction for deemed reinvestment of interest.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior
Notes to the Persons who are registered Holders of Senior Notes at the close
of business on the December 15 and June 15 next preceding the Interest
Payment Date, even if such Senior Notes are cancelled after such record date
and on or before such Interest Payment Date. The Senior Notes will be
payable as to principal, premium, if any, and interest at the office or
agency of the Company maintained for such purpose within or without the City
and State of New York, or, at the option of the Company, payment of interest
may be made by check mailed to the Holders at their addresses set forth in
the register of Holders. Such payment shall be in such payment of public and
private debts coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar or co-registrar without prior notice to any Holder. The Company
may act in any such capacity.
1
<PAGE>
4. INDENTURE. The Company issued the Senior Notes under an Indenture
dated as of June 30, 1998 (the "Indenture") between the Company and the
Trustee. The terms of the Senior Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Senior Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. The terms of the Indenture shall
govern any inconsistencies between the Indenture and the Senior Notes. The
Senior Notes are senior unsecured obligations of the Company limited to $300
million in aggregate.
5. OPTIONAL REDEMPTION.
The Senior Notes are redeemable by the Company at any time, in
whole or in part, upon not less than 30 nor more than 60 days' prior notice,
in cash at a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon through the redemption date plus the
Make-Whole Premium.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company is not required to
make mandatory repurchase, redemption or sinking fund payments with respect
to the Senior Notes.
7. CHANGE OF CONTROL OFFER AND ASSET SALE OFFER.
(a) If there is a Change of Control Triggering Event, each Holder of
Senior Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 in principal amount or an integral multiple
thereof) of each Holder's Senior Notes pursuant to the offer described in the
Indenture (a "Change of Control Offer") at an offer price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon the date of purchase. Within 30 days following any Change
of Control Triggering Event, the Company will mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
(b) Under certain circumstances, the Company, following a Sale of
Assets, may commence an offer to all Holders of Senior Notes (as "Asset Sale
Offer") to purchase Senior Notes with the cash portion of the Net Proceeds of
such Sale of Assets at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
date of purchase.
(c) In the event of either 7(a) or 7(b), Holders may elect to have all
or a portion of their Senior Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
2
<PAGE>
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture.
9. PERSONS DEEMED LEGAL OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Senior Note, the Trustee,
any Agent and the Company may deem and treat the person in whose name this
Senior Note is registered as its legal and absolute owner for the purpose of
receiving payment of principal of, premium, if any, and interest on this
Senior Note and for all other purposes whatsoever, whether or not this Senior
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered Holder of a Senior Note
may be treated as its legal owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture and the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Senior Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Senior
Notes), and, subject to Sections 6.04 and 6.07 of the Indenture, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, or interest on, the Senior Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of the Indenture or the Senior Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Senior Notes. Without the consent of any Holder of a
Senior Note, the Indenture or the Senior Notes may be amended or
supplemented, and the Company and the Trustee may enter into Supplemental
Indentures which shall thereafter form a part of the Indenture, to cure any
ambiguity, defect or inconsistency, to secure the Senior Notes under
circumstances set forth in the Indenture, to establish and create new series
of Senior Notes, to provide that the Company shall not issue any additional
series of Senior Notes, to add additional covenants and agreements of the
Company to the Indenture, to provide for alterative methods or forms for
evidencing and recording ownership of Senior Notes, to provide for the
assumption of the Company's obligations to Holders of the Senior Notes in
case of a merger, amalgamation, consolidation or sale of all or substantially
all of the Company's assets, to make any change that would provide any
additional rights or benefits to the Holders of the Senior Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder,
or to comply with the requirements of the SEC in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
11. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
60 days in the payment when due of interest on the Senior Notes; (ii) default
in payment when due of the principal of, or premium, if any, on the Senior
Notes; (iii) failure by the Company to comply with
3
<PAGE>
any of the provisions of Sections 4.07, 4.09 or 5.01 of the Indenture; (iv)
failure by either the Company for 60 days after written notice by the Trustee
or the Holders of at least 25 % or more in aggregate principal amount of the
Senior Notes to comply with its other agreements in the Indenture or the
Senior Notes involves non-payment of principal or interest or; (v) default
under certain other agreements relating to Indebtedness of the Company which
default involves non-payment of principal or interest, or results in the
acceleration of such Indebtedness prior to its stated maturity; (vi) certain
final judgments for the payment of money that remain undischarged for a
period of 60 days; and (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries. If any Event
of Default occurs and is continuing, the Trustee or the Holders of at least
25 % in principal amount of the then outstanding Senior Notes may declare all
the Senior Notes to be due and payable. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Senior Notes will become due and payable without
further action or notice. Holders may not enforce the Indenture or the
Senior Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then
outstanding Senior Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Senior Notes notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest. The Holders of a majority in
aggregate principal amount of the Senior Notes then outstanding by notice to
the Trustee may on behalf of the Holders of all of the Senior Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of principal
of, or interest on, the Senior Notes, except a payment default resulting from
an acceleration that has been rescinded. The Company is required to deliver
to the Trustee annually a statement regarding compliance with the Indenture,
and the Company is required upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or
Event of Default.
12. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
13. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company as such, shall not have any
liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
14. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
4
<PAGE>
15. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
16. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
Attention: Chief Financial Officer
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint to transfer this Senior Note on the books of the
Company. The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this
Senior Note)
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Senior Note purchased by
the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on
this Senior Note)
Tax Identification No.:_____________________
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
EXHIBIT B
FORM OF __% SERIES B SENIOR NOTE
AND TRUSTEE CERTIFICATION OF
AUTHENTICATION
<PAGE>
$450,000,000
__ % Series B Senior Note due 2000
No. $450,000,000
NIAGARA MOHAWK POWER CORPORATION
promises to pay to
or their registered assigns, the principal sum of ______________________
Dollars ($ ) on October 1, 2000.
Interest Payment Dates: April 1 and October commencing October 1, 1998
Record Dates: March 15 and September 15
Dated: ___________ __, 1998
NIAGARA MOHAWK POWER CORPORATION
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
This is one of the Senior Notes referred
to in the within-mentioned Indenture:
IBJ SCHRODER BANK &
TRUST COMPANY, as Trustee
By:______________________________
Authorized Signature
<PAGE>
(Back of Senior Note)
___% Series B Senior Note due 2000
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Niagara Mohawk Power Corporation, a New York corporation
(the "Company") promises to pay interest on the principal amount of this ___%
Series B Senior Note due 2000 (the "Senior Note") at the rate and in the
manner specified below.
The Company shall pay interest on the principal amount of this
Senior Note in cash at the rate per annum shown above. The Company shall pay
interest semi-annually on each April 1 and October 1, commencing October 1,
1998, or if any such day is not a Business Day (as defined in the Indenture
referred to below), on the next succeeding Business Day (each an "Interest
Payment Date").
Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months for the actual number of days elapsed. Interest
shall accrue from the most recent date to which interest has been paid or, if
no interest has been paid, from the date of the original issuance of this
Senior Note. To the extent lawful, the Company shall pay interest on overdue
principal and premium at the rate of 1 % per annum in excess of the then
applicable interest rate on this Senior Note; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful. The rates of interest
specified in the Indenture and this Senior Note are nominal rates and all
interest payments and computations are to be made without allowance or
deduction for deemed reinvestment of interest.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior
Notes to the Persons who are registered Holders of Senior Notes at the close
of business on the March 15 and September 15 next preceding the Interest
Payment Date, even if such Senior Notes are cancelled after such record date
and on or before such Interest Payment Date. The Senior Notes will be
payable as to principal, premium, if any, and interest at the office or
agency of the Company maintained for such purpose within or without the City
and State of New York, or, at the option of the Company, payment of interest
may be made by check mailed to the Holders at their addresses set forth in
the register of Holders. Such payment shall be in such payment of public and
private debts coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar or co-registrar without prior notice to any Holder. The Company
may act in any such capacity.
1
<PAGE>
4. INDENTURE. The Company issued the Senior Notes under an Indenture
dated as of June 30, 1998 (the "Indenture") between the Company and the
Trustee. The terms of the Senior Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Senior Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. The terms of the Indenture shall
govern any inconsistencies between the Indenture and the Senior Notes. The
Senior Notes are senior unsecured obligations of the Company limited to $450
million in aggregate.
5. OPTIONAL AND SPECIAL OPTIONAL REDEMPTION.
The Senior Notes are redeemable by the Company at any time, in
whole or in part, upon not less than 30 nor more than 60 days' prior notice,
in cash at a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon through the redemption date plus the
Make-Whole Premium.
Notwithstanding the foregoing, the Company may, at its option, by
delivering a notice of redemption at any time during the period from April 1,
1999 through December 31, 2000, use all or a portion of the Net Proceeds from
any sale or sales of Fossil and Hydro Generating Assets to redeem up to
$500,000,000 aggregate principal amount of the Notes in Series B through F at
a cash redemption price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of redemption, in
the manner and subject to the limitations set forth in the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company is not required to
make mandatory repurchase, redemption or sinking fund payments with respect
to the Senior Notes.
7. CHANGE OF CONTROL OFFER AND ASSET SALE OFFER.
(a) If there is a Change of Control Triggering Event, each Holder of
Senior Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 in principal amount or an integral multiple
thereof) of each Holder's Senior Notes pursuant to the offer described in the
Indenture (a "Change of Control Offer") at an offer price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon the date of purchase. Within 30 days following any Change
of Control Triggering Event, the Company will mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
2
<PAGE>
(b) Under certain circumstances, the Company, following a Sale of
Assets, may commence an offer to all Holders of Senior Notes (as "Asset Sale
Offer") to purchase Senior Notes with the cash portion of the Net Proceeds of
such Sale of Assets at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
date of purchase.
(c) In the event of either 7(a) or 7(b), Holders may elect to have all
or a portion of their Senior Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture.
9. PERSONS DEEMED LEGAL OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Senior Note, the Trustee,
any Agent and the Company may deem and treat the person in whose name this
Senior Note is registered as its legal and absolute owner for the purpose of
receiving payment of principal of, premium, if any, and interest on this
Senior Note and for all other purposes whatsoever, whether or not this Senior
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered Holder of a Senior Note
may be treated as its legal owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture and the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Senior Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Senior
Notes), and, subject to Sections 6.04 and 6.07 of the Indenture, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, or interest on, the Senior Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of the Indenture or the Senior Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Senior Notes. Without the consent of any Holder of a
Senior Note, the Indenture or the Senior Notes may be amended or
supplemented, and the Company and the Trustee may enter into Supplemental
Indentures which shall thereafter form a part of the Indenture, to cure any
ambiguity, defect or inconsistency, to secure the Senior Notes under
circumstances set forth in the Indenture, to establish and create new series
of Senior Notes, to provide that the Company shall not issue any additional
series of Senior Notes, to add additional covenants and agreements of the
Company to the Indenture, to provide for alternative methods or forms for
evidencing and
3
<PAGE>
recording ownership of Senior Notes, to provide for the assumption of the
Company's obligations to Holders of the Senior Notes in case of a merger,
amalgamation, consolidation or sale of all or substantially all of the
Company's assets, to make any change that would provide any additional rights
or benefits to the Holders of the Senior Notes or that does not adversely
affect the legal rights under the Indenture of any such Holder, or to comply
with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
11. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
60 days in the payment when due of interest on the Senior Notes; (ii) default
in payment when due of the principal of, or premium, if any, on the Senior
Notes; (iii) failure by the Company to comply with any of the provisions of
Sections 4.07, 4.09 or 5.01 of the Indenture; (iv) failure by either the
Company for 60 days after written notice by the Trustee or the Holders of at
least 25 % or more in aggregate principal amount of the Senior Notes to
comply with its other agreements in the Indenture or the Senior Notes; (v)
default under certain other agreements relating to Indebtedness of the
Company which default involves non-payment of principal or interest, or
results in the acceleration of such Indebtedness prior to its stated
maturity; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; and (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25 % in principal amount of the then outstanding
Senior Notes may declare all the Senior Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all outstanding Senior Notes
will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest. The Holders
of a majority in aggregate principal amount of the Senior Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of principal of, or interest on, the Senior Notes,
except a payment default resulting from an acceleration that has been
rescinded. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
12. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
4
<PAGE>
13. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company as such, shall not have any
liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
14. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
15. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
16. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
Attention: Chief Financial Officer
5
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint to transfer this Senior Note on the books of the
Company. The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of
this Senior Note)
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Senior Note purchased by
the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on
this Senior Note)
Tax Identification No.:_____________________
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
EXHIBIT C
FORM OF ___% SERIES C SENIOR NOTE
AND TRUSTEE CERTIFICATION OF
AUTHENTICATION
<PAGE>
$400,000,000
__ % Series C Senior Note due 2001
No. $400,000,000
NIAGARA MOHAWK POWER CORPORATION
promises to pay to
or their registered assigns, the principal sum of ______________________
Dollars ($ ) on July 1, 2001.
Interest Payment Dates: January 1 and July 1, commencing January 1, 1999
Record Dates: December 15 and June 15
Dated: __________ __, 1998
NIAGARA MOHAWK POWER CORPORATION
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
This is one of the Senior Notes referred
to in the within-mentioned Indenture:
IBJ SCHRODER BANK &
TRUST COMPANY, as Trustee
By:______________________________
Authorized Signature
<PAGE>
(Back of Senior Note)
___% Series C Senior Note due 2001
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Niagara Mohawk Power Corporation, a New York corporation
(the "Company") promises to pay interest on the principal amount of this ___%
Series C Senior Note due 2001 (the "Senior Note") at the rate and in the
manner specified below.
The Company shall pay interest on the principal amount of this
Senior Note in cash at the rate per annum shown above. The Company shall pay
interest semi-annually on each January 1 and July 1, commencing January,
1999, or if any such day is not a Business Day (as defined in the Indenture
referred to below), on the next succeeding Business Day (each an "Interest
Payment Date").
Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months for the actual number of days elapsed. Interest
shall accrue from the most recent date to which interest has been paid or, if
no interest has been paid, from the date of the original issuance of this
Senior Note. To the extent lawful, the Company shall pay interest on overdue
principal and premium at the rate of 1 % per annum in excess of the then
applicable interest rate on this Senior Note; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful. The rates of interest
specified in the Indenture and this Senior Note are nominal rates and all
interest payments and computations are to be made without allowance or
deduction for deemed reinvestment of interest.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior
Notes to the Persons who are registered Holders of Senior Notes at the close
of business on the December 15 and June 15 next preceding the Interest
Payment Date, even if such Senior Notes are cancelled after such record date
and on or before such Interest Payment Date. The Senior Notes will be
payable as to principal, premium, if any, and interest at the office or
agency of the Company maintained for such purpose within or without the City
and State of New York, or, at the option of the Company, payment of interest
may be made by check mailed to the Holders at their addresses set forth in
the register of Holders. Such payment shall be in such payment of public and
private debts coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar or co-registrar without prior notice to any Holder. The Company
may act in any such capacity.
1
<PAGE>
4. INDENTURE. The Company issued the Senior Notes under an Indenture
dated as of June 30, 1998 (the "Indenture") between the Company and the
Trustee. The terms of the Senior Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Senior Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. The terms of the Indenture shall
govern any inconsistencies between the Indenture and the Senior Notes. The
Senior Notes are senior unsecured obligations of the Company limited to $400
million in aggregate.
5. OPTIONAL AND SPECIAL OPTIONAL REDEMPTION.
The Senior Notes are redeemable by the Company at any time, in
whole or in part, upon not less than 30 nor more than 60 days' prior notice,
in cash at a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon through the redemption date plus the
Make-Whole Premium.
Notwithstanding the foregoing, the Company may, at its option, by
delivering a notice of redemption at any time during the period from April 1,
1999 through December 31, 2000, use all or a portion of the Net Proceeds from
any sale or sales of Fossil and Hydro Generating Assets to redeem up to
$500,000,000 aggregate principal amount of the Notes in Series B through F at
a cash redemption price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of redemption, in
the manner and subject to the limitations set forth in the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company is not required to
make mandatory repurchase, redemption or sinking fund payments with respect
to the Senior Notes.
7. CHANGE OF CONTROL OFFER AND ASSET SALE OFFER.
(a) If there is a Change of Control Triggering Event, each Holder of
Senior Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 in principal amount or an integral multiple
thereof) of each Holder's Senior Notes pursuant to the offer described in the
Indenture (a "Change of Control Offer") at an offer price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon the date of purchase. Within 30 days following any Change
of Control Triggering Event, the Company will mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
2
<PAGE>
(b) Under certain circumstances, the Company, following a Sale of
Assets, may commence an offer to all Holders of Senior Notes (as "Asset Sale
Offer") to purchase Senior Notes with the cash portion of the Net Proceeds of
such Sale of Assets at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
date of purchase.
(c) In the event of either 7(a) or 7(b), Holders may elect to have all
or a portion of their Senior Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Senior Notes are to be redeemed at his registered address. Senior
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Senior Notes held by a Holder
are to be redeemed. On and after the redemption date interest ceases to
accrue on Senior Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture.
10. PERSONS DEEMED LEGAL OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Senior Note, the Trustee,
any Agent and the Company may deem and treat the person in whose name this
Senior Note is registered as its legal and absolute owner for the purpose of
receiving payment of principal of, premium, if any, and interest on this
Senior Note and for all other purposes whatsoever, whether or not this Senior
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered Holder of a Senior Note
may be treated as its legal owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture and the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Senior Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Senior
Notes), and, subject to Sections 6.04 and 6.07 of the Indenture, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, or interest on, the Senior Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of the Indenture or the Senior Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding
3
<PAGE>
Senior Notes. Without the consent of any Holder of a Senior Note, the
Indenture or the Senior Notes may be amended or supplemented, and the Company
and the Trustee may enter into Supplemental Indentures which shall thereafter
form a part of the Indenture, to cure any ambiguity, defect or inconsistency,
to secure the Senior Notes under circumstances set forth in the Indenture, to
establish and create new series of Senior Notes, to provide that the Company
shall not issue any additional series of Senior Notes, to add additional
covenants and agreements of the Company to the Indenture, to provide for
alterative methods or forms for evidencing and recording ownership of Senior
Notes, to provide for the assumption of the Company's obligations to Holders
of the Senior Notes in case of a merger, amalgamation, consolidation or sale
of all or substantially all of the Company's assets, to make any change that
would provide any additional rights or benefits to the Holders of the Senior
Notes or that does not adversely affect the legal rights under the Indenture
of any such Holder, or to comply with the requirements of the SEC in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
60 days in the payment when due of interest on the Senior Notes; (ii) default
in payment when due of the principal of, or premium, if any, on the Senior
Notes; (iii) failure by the Company to comply with any of the provisions of
Sections 4.07, 4.09 or 5.01 of the Indenture; (iv) failure by either the
Company for 60 days after written notice by the Trustee or the Holders of at
least 25 % or more in aggregate principal amount of the Senior Notes to
comply with its other agreements in the Indenture or the Senior Notes; (v)
default under certain other agreements relating to Indebtedness of the
Company which default involves non-payment of principal or interest, or
results in the acceleration of such Indebtedness prior to its stated
maturity; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; and (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25 % in principal amount of the then outstanding
Senior Notes may declare all the Senior Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all outstanding Senior Notes
will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest. The Holders
of a majority in aggregate principal amount of the Senior Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of principal of, or interest on, the Senior Notes,
except a payment default resulting from an acceleration that has been
rescinded. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the
4
<PAGE>
Company is required upon becoming aware of any Default or Event of Default,
to deliver to the Trustee a statement specifying such Default or Event of
Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company as such, shall not have any
liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
15. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
Attention: Chief Financial Officer
5
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint to transfer this Senior Note on the books of the
Company. The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of
this Senior Note)
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Senior Note purchased by
the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on this
Senior Note)
Tax Identification
No.:________________________
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
EXHIBIT D
FORM OF ____% SERIES D SENIOR NOTE
AND TRUSTEE CERTIFICATION OF
AUTHENTICATION
<PAGE>
$400,000,000
__ % Series D Senior Note due 2002
No. $400,000,000
NIAGARA MOHAWK POWER CORPORATION
promises to pay to
or their registered assigns, the principal sum of ______________________
Dollars ($ ) on October 1, 2002.
Interest Payment Dates: April 1 and October 1, commencing October 1, 1998
Record Dates: March 15 and September 15
Dated: ____________ ___, 1998
NIAGARA MOHAWK POWER CORPORATION
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
This is one of the Senior Notes referred
to in the within-mentioned Indenture:
IBJ SCHRODER BANK &
TRUST COMPANY, as Trustee
By:______________________________
Authorized Signature
<PAGE>
(Back of Senior Note)
___% Series D Senior Note due 2002
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Niagara Mohawk Power Corporation, a New York corporation
(the "Company") promises to pay interest on the principal amount of this ___%
Series D Senior Note due 2002 (the "Senior Note") at the rate and in the
manner specified below.
The Company shall pay interest on the principal amount of this
Senior Note in cash at the rate per annum shown above. The Company shall pay
interest semi-annually on each April 1 and October 1, commencing October 1,
1998, or if any such day is not a Business Day (as defined in the Indenture
referred to below), on the next succeeding Business Day (each an "Interest
Payment Date").
Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months for the actual number of days elapsed. Interest
shall accrue from the most recent date to which interest has been paid or, if
no interest has been paid, from the date of the original issuance of this
Senior Note. To the extent lawful, the Company shall pay interest on overdue
principal and premium at the rate of 1 % per annum in excess of the then
applicable interest rate on this Senior Note; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful. The rates of interest
specified in the Indenture and this Senior Note are nominal rates and all
interest payments and computations are to be made without allowance or
deduction for deemed reinvestment of interest.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior
Notes to the Persons who are registered Holders of Senior Notes at the close
of business on the March 15 and September 15 next preceding the Interest
Payment Date, even if such Senior Notes are cancelled after such record date
and on or before such Interest Payment Date. The Senior Notes will be
payable as to principal, premium, if any, and interest at the office or
agency of the Company maintained for such purpose within or without the City
and State of New York, or, at the option of the Company, payment of interest
may be made by check mailed to the Holders at their addresses set forth in
the register of Holders. Such payment shall be in such payment of public and
private debts coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar or co-registrar without prior notice to any Holder. The Company
may act in any such capacity.
1
<PAGE>
4. INDENTURE. The Company issued the Senior Notes under an Indenture
dated as of June 30, 1998 (the "Indenture") between the Company and the
Trustee. The terms of the Senior Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Senior Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. The terms of the Indenture shall
govern any inconsistencies between the Indenture and the Senior Notes. The
Senior Notes are senior unsecured obligations of the Company limited to $400
million in aggregate.
5. OPTIONAL AND SPECIAL OPTIONAL REDEMPTION.
The Senior Notes are redeemable by the Company at any time, in
whole or in part, upon not less than 30 nor more than 60 days' prior notice,
in cash at a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon through the redemption date plus the
Make-Whole Premium.
Notwithstanding the foregoing, the Company may, at its option, by
delivering a notice of redemption at any time during the period from April 1,
1999 through December 31, 2000, use all or a portion of the Net Proceeds from
any sale or sales of Fossil and Hydro Generating Assets to redeem up to
$500,000,000 aggregate principal amount of the Notes in Series B through F at
a cash redemption price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of redemption, in
the manner and subject to the limitations set forth in the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company is not required to
make mandatory repurchase, redemption or sinking fund payments with respect
to the Senior Notes.
7. CHANGE OF CONTROL OFFER AND ASSET SALE OFFER.
(a) If there is a Change of Control Triggering Event, each Holder of
Senior Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 in principal amount or an integral multiple
thereof) of each Holder's Senior Notes pursuant to the offer described in the
Indenture (a "Change of Control Offer") at an offer price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon the date of purchase. Within 30 days following any Change
of Control Triggering Event, the Company will mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
2
<PAGE>
(b) Under certain circumstances, the Company, following a Sale of
Assets, may commence an offer to all Holders of Senior Notes (as "Asset Sale
Offer") to purchase Senior Notes with the cash portion of the Net Proceeds of
such Sale of Assets at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
date of purchase.
(c) In the event of either 7(a) or 7(b), Holders may elect to have all
or a portion of their Senior Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Senior Notes are to be redeemed at his registered address. Senior
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Senior Notes held by a Holder
are to be redeemed. On and after the redemption date interest ceases to
accrue on Senior Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture.
10. PERSONS DEEMED LEGAL OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Senior Note, the Trustee,
any Agent and the Company may deem and treat the person in whose name this
Senior Note is registered as its legal and absolute owner for the purpose of
receiving payment of principal of, premium, if any, and interest on this
Senior Note and for all other purposes whatsoever, whether or not this Senior
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered Holder of a Senior Note
may be treated as its legal owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture and the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Senior Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Senior
Notes), and, subject to Sections 6.04 and 6.07 of the Indenture, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, or interest on, the Senior Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of the Indenture or the Senior Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding
3
<PAGE>
Senior Notes. Without the consent of any Holder of a Senior Note, the
Indenture or the Senior Notes may be amended or supplemented, and the Company
and the Trustee may enter into Supplemental Indentures which shall thereafter
form a part of the Indenture, to cure any ambiguity, defect or inconsistency,
to secure the Senior Notes under circumstances set forth in the Indenture, to
establish and create new series of Senior Notes, to provide that the Company
shall not issue any additional series of Senior Notes, to add additional
covenants and agreements of the Company to the Indenture, to provide for
alterative methods or forms for evidencing and recording ownership of Senior
Notes, to provide for the assumption of the Company's obligations to Holders
of the Senior Notes in case of a merger, amalgamation, consolidation or sale
of all or substantially all of the Company's assets, to make any change that
would provide any additional rights or benefits to the Holders of the Senior
Notes or that does not adversely affect the legal rights under the Indenture
of any such Holder, or to comply with the requirements of the SEC in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
60 days in the payment when due of interest on the Senior Notes; (ii) default
in payment when due of the principal of, or premium, if any, on the Senior
Notes; (iii) failure by the Company to comply with any of the provisions of
Sections 4.07, 4.09 or 5.01 of the Indenture; (iv) failure by either the
Company for 60 days after written notice by the Trustee or the Holders of at
least 25 % or more in aggregate principal amount of the Senior Notes to
comply with its other agreements in the Indenture or the Senior Notes; (v)
default under certain other agreements relating to Indebtedness of the
Company which default involves non-payment of principal or interest, or
results in the acceleration of such Indebtedness prior to its stated
maturity; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; and (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25 % in principal amount of the then outstanding
Senior Notes may declare all the Senior Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all outstanding Senior Notes
will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest. The Holders
of a majority in aggregate principal amount of the Senior Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of principal of, or interest on, the Senior Notes,
except a payment default resulting from an acceleration that has been
rescinded. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the
4
<PAGE>
Company is required upon becoming aware of any Default or Event of Default,
to deliver to the Trustee a statement specifying such Default or Event of
Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company as such, shall not have any
liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
15. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
Attention: Chief Financial Officer
5
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint to transfer this Senior Note on the books of the
Company. The agent may substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this
Senior Note)
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Senior Note purchased by
the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on this
Senior Note)
Tax Identification
No.:________________________
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
EXHIBIT E
FORM OF ___% SERIES E SENIOR NOTE
AND TRUSTEE CERTIFICATION OF
AUTHENTICATION
<PAGE>
$400,000,000
__ % Series E Senior Note due 2003
No. $400,000,000
NIAGARA MOHAWK POWER CORPORATION
promises to pay to
or their registered assigns, the principal sum of ______________________
Dollars ($ ) on July 1, 2003.
Interest Payment Dates: January 1 and July 1, commencing January 1, 1999
Record Dates: December 15 and June 15
Dated: _______________ ___, 1998
NIAGARA MOHAWK POWER CORPORATION
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
This is one of the Senior Notes referred
to in the within-mentioned Indenture:
IBJ SCHRODER BANK &
TRUST COMPANY, as Trustee
By:______________________________
Authorized Signature
<PAGE>
(Back of Senior Note)
___% Series E Senior Note due 2003
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Niagara Mohawk Power Corporation, a New York corporation
(the "Company") promises to pay interest on the principal amount of this ___%
Series E Senior Note due 2003 (the "Senior Note") at the rate and in the
manner specified below.
The Company shall pay interest on the principal amount of this
Senior Note in cash at the rate per annum shown above. The Company shall pay
interest semi-annually on each January 1 and July 1, commencing January 1,
1999, or if any such day is not a Business Day (as defined in the Indenture
referred to below), on the next succeeding Business Day (each an "Interest
Payment Date").
Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months for the actual number of days elapsed. Interest
shall accrue from the most recent date to which interest has been paid or, if
no interest has been paid, from the date of the original issuance of this
Senior Note. To the extent lawful, the Company shall pay interest on overdue
principal and premium at the rate of 1% per annum in excess of the then
applicable interest rate on this Senior Note; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful. The rates of interest
specified in the Indenture and this Senior Note are nominal rates and all
interest payments and computations are to be made without allowance or
deduction for deemed reinvestment of interest.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior
Notes to the Persons who are registered Holders of Senior Notes at the close
of business on the December 15 and June 15 next preceding the Interest
Payment Date, even if such Senior Notes are cancelled after such record date
and on or before such Interest Payment Date. The Senior Notes will be
payable as to principal, premium, if any, and interest at the office or
agency of the Company maintained for such purpose within or without the City
and State of New York, or, at the option of the Company, payment of interest
may be made by check mailed to the Holders at their addresses set forth in
the register of Holders. Such payment shall be in such payment of public and
private debts coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar or co-registrar without prior notice to any Holder. The Company
may act in any such capacity.
1
<PAGE>
4. INDENTURE. The Company issued the Senior Notes under an Indenture
dated as of June 30, 1998 (the "Indenture") between the Company and the
Trustee. The terms of the Senior Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Senior Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. The terms of the Indenture shall
govern any inconsistencies between the Indenture and the Senior Notes. The
Senior Notes are senior unsecured obligations of the Company limited to $400
million in aggregate.
5. OPTIONAL AND SPECIAL OPTIONAL REDEMPTION.
The Senior Notes are redeemable by the Company at any time, in
whole or in part, upon not less than 30 nor more than 60 days' prior notice,
in cash at a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon through the redemption date plus the
Make-Whole Premium.
Notwithstanding the foregoing, the Company may, at its option, by
delivering a notice of redemption at any time during the period from April 1,
1999 through December 31, 2000, use all or a portion of the Net Proceeds from
any sale or sales of Fossil and Hydro Generating Assets to redeem up to
$500,000,000 aggregate principal amount of the Notes in Series B through F at
a cash redemption price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of redemption, in
the manner and subject to the limitations set forth in the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company is not required to
make mandatory repurchase, redemption or sinking fund payments with respect
to the Senior Notes.
7. CHANGE OF CONTROL OFFER AND ASSET SALE OFFER.
(a) If there is a Change of Control Triggering Event, each Holder of
Senior Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 in principal amount or an integral multiple
thereof) of each Holder's Senior Notes pursuant to the offer described in the
Indenture (a "Change of Control Offer") at an offer price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon the date of purchase. Within 30 days following any Change
of Control Triggering Event, the Company will mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
2
<PAGE>
(b) Under certain circumstances, the Company, following a Sale of
Assets, may commence an offer to all Holders of Senior Notes (as "Asset Sale
Offer") to purchase Senior Notes with the cash portion of the Net Proceeds of
such Sale of Assets at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
date of purchase.
(c) In the event of either 7(a) or 7(b), Holders may elect to have all
or a portion of their Senior Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture.
9. PERSONS DEEMED LEGAL OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Senior Note, the Trustee,
any Agent and the Company may deem and treat the person in whose name this
Senior Note is registered as its legal and absolute owner for the purpose of
receiving payment of principal of, premium, if any, and interest on this
Senior Note and for all other purposes whatsoever, whether or not this Senior
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered Holder of a Senior Note
may be treated as its legal owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture and the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Senior Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Senior
Notes), and, subject to Sections 6.04 and 6.07 of the Indenture, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, or interest on, the Senior Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of the Indenture or the Senior Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Senior Notes. Without the consent of any Holder of a
Senior Note, the Indenture or the Senior Notes may be amended or
supplemented, and the Company and the Trustee may enter into Supplemental
Indentures which shall thereafter form a part of the Indenture, to cure any
ambiguity, defect or inconsistency, to secure the Senior Notes under
circumstances set forth in the Indenture, to establish and create new series
of Senior Notes, to provide that the Company shall not issue any additional
series of Senior Notes, to add additional covenants and agreements of the
Company to the Indenture, to provide for alterative methods or forms for
evidencing and
3
<PAGE>
recording ownership of Senior Notes, to provide for the assumption of the
Company's obligations to Holders of the Senior Notes in case of a merger,
amalgamation, consolidation or sale of all or substantially all of the
Company's assets, to make any change that would provide any additional rights
or benefits to the Holders of the Senior Notes or that does not adversely
affect the legal rights under the Indenture of any such Holder, or to comply
with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
11. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
60 days in the payment when due of interest on the Senior Notes; (ii) default
in payment when due of the principal of, or premium, if any, on the Senior
Notes; (iii) failure by the Company to comply with any of the provisions of
Sections 4.07, 4.09 or 5.01 of the Indenture; (iv) failure by either the
Company for 60 days after written notice by the Trustee or the Holders of at
least 25 % or more in aggregate principal amount of the Senior Notes to
comply with its other agreements in the Indenture or the Senior Notes
involves non-payment of principal or interest or; (v) default under certain
other agreements relating to Indebtedness of the Company which default
involves non-payment of principal or interest, or results in the acceleration
of such Indebtedness prior to its stated maturity; (vi) certain final
judgments for the payment of money that remain undischarged for a period of
60 days; and (vii) certain events of bankruptcy or insolvency with respect to
the Company or any of its Significant Subsidiaries. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25 % in
principal amount of the then outstanding Senior Notes may declare all the
Senior Notes to be due and payable. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Senior Notes will become due and payable without
further action or notice. Holders may not enforce the Indenture or the
Senior Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then
outstanding Senior Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Senior Notes notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest. The Holders of a majority in
aggregate principal amount of the Senior Notes then outstanding by notice to
the Trustee may on behalf of the Holders of all of the Senior Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of principal
of, or interest on, the Senior Notes, except a payment default resulting from
an acceleration that has been rescinded. The Company is required to deliver
to the Trustee annually a statement regarding compliance with the Indenture,
and the Company is required upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or
Event of Default.
12. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
4
<PAGE>
13. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company as such, shall not have any
liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
14. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
15. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
16. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
Attention: Chief Financial Officer
5
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Senior Note)
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Senior Note purchased by
the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $___________
Date:
Your Signature:
(Sign exactly as your name appears on this Senior Note)
Tax Identification
No.:________________________
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
EXHIBIT F
FORM OF __% SERIES F SENIOR NOTE
AND TRUSTEE CERTIFICATION OF
AUTHENTICATION
<PAGE>
$400,000,000
__ % Series F Senior Note due 2005
No. $400,000,000
NIAGARA MOHAWK POWER CORPORATION
promises to pay to
or their registered assigns, the principal sum of ______________________ Dollars
($ ) on October 1, 2005.
Interest Payment Dates: April 1 and October 1, commencing October 1, 1998
Record Dates: March 15 and September 15
Dated: ___________ __, 1998
NIAGARA MOHAWK POWER CORPORATION
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
This is one of the Senior Notes referred
to in the within-mentioned Indenture:
IBJ SCHRODER BANK &
TRUST COMPANY, as Trustee
By:_____________________________
Authorized Signature
<PAGE>
(Back of Senior Note)
___% Series F Senior Note due 2005
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Niagara Mohawk Power Corporation, a New York corporation
(the "Company") promises to pay interest on the principal amount of this ___%
Series F Senior Note due 2005 (the "Senior Note") at the rate and in the
manner specified below.
The Company shall pay interest on the principal amount of this
Senior Note in cash at the rate per annum shown above. The Company shall pay
interest semi-annually on each April 1 and October 1, commencing October 1,
1998, or if any such day is not a Business Day (as defined in the Indenture
referred to below), on the next succeeding Business Day (each an "Interest
Payment Date").
Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months for the actual number of days elapsed. Interest
shall accrue from the most recent date to which interest has been paid or, if
no interest has been paid, from the date of the original issuance of this
Senior Note. To the extent lawful, the Company shall pay interest on overdue
principal and premium at the rate of 1 % per annum in excess of the then
applicable interest rate on this Senior Note; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful. The rates of interest
specified in the Indenture and this Senior Note are nominal rates and all
interest payments and computations are to be made without allowance or
deduction for deemed reinvestment of interest.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior
Notes to the Persons who are registered Holders of Senior Notes at the close
of business on the March 15 and September 15 next preceding the Interest
Payment Date, even if such Senior Notes are cancelled after such record date
and on or before such Interest Payment Date. The Senior Notes will be
payable as to principal, premium, if any, and interest at the office or
agency of the Company maintained for such purpose within or without the City
and State of New York, or, at the option of the Company, payment of interest
may be made by check mailed to the Holders at their addresses set forth in
the register of Holders. Such payment shall be in such payment of public and
private debts coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar or co-registrar without prior notice to any Holder. The Company
may act in any such capacity.
1
<PAGE>
4. INDENTURE. The Company issued the Senior Notes under an Indenture
dated as of June 30, 1998 (the "Indenture") between the Company and the
Trustee. The terms of the Senior Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Senior Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. The terms of the Indenture shall
govern any inconsistencies between the Indenture and the Senior Notes. The
Senior Notes are senior unsecured obligations of the Company limited to
$400 million in aggregate.
5. OPTIONAL AND SPECIAL OPTIONAL REDEMPTION.
The Senior Notes are redeemable by the Company at any time, in whole
or in part, upon not less than 30 nor more than 60 days' prior notice, in
cash at a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon through the redemption date plus the
Make-Whole Premium.
Notwithstanding the foregoing, the Company may, at its option, by
delivering a notice of redemption at any time during the period from April 1,
1999 through December 31, 2000, use all or a portion of the Net Proceeds from
any sale or sales of Fossil and Hydro Generating Assets to redeem up to
$500,000,000 aggregate principal amount of the Notes in Series B through F at
a cash redemption price equal to 100% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of redemption, in
the manner and subject to the limitations set forth in the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company is not required to
make mandatory repurchase, redemption or sinking fund payments with respect
to the Senior Notes.
7. CHANGE OF CONTROL OFFER AND ASSET SALE OFFER.
(a) If there is a Change of Control Triggering Event, each Holder of
Senior Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 in principal amount or an integral multiple
thereof) of each Holder's Senior Notes pursuant to the offer described in the
Indenture (a "Change of Control Offer") at an offer price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon the date of purchase. Within 30 days following any Change
of Control Triggering Event, the Company will mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
2
<PAGE>
(b) Under certain circumstances, the Company, following a Sale of
Assets, may commence an offer to all Holders of Senior Notes (as "Asset Sale
Offer") to purchase Senior Notes with the cash portion of the Net Proceeds of
such Sale of Assets at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
date of purchase.
(c) In the event of either 7(a) or 7(b), Holders may elect to have all
or a portion of their Senior Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture.
9. PERSONS DEEMED LEGAL OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Senior Note, the Trustee,
any Agent and the Company may deem and treat the person in whose name this
Senior Note is registered as its legal and absolute owner for the purpose of
receiving payment of principal of, premium, if any, and interest on this
Senior Note and for all other purposes whatsoever, whether or not this Senior
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered Holder of a Senior Note
may be treated as its legal owner for all purposes.
10. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture and the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Senior Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Senior
Notes), and, subject to Sections 6.04 and 6.07 of the Indenture, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, or interest on, the Senior Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of the Indenture or the Senior Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Senior Notes. Without the consent of any Holder of a
Senior Note, the Indenture or the Senior Notes may be amended or
supplemented, and the Company and the Trustee may enter into Supplemental
Indentures which shall thereafter form a part of the Indenture, to cure any
ambiguity, defect or inconsistency, to secure the Senior Notes under
circumstances set forth in the Indenture, to establish and create new series
of Senior Notes, to provide that the Company shall not issue any additional
series of Senior Notes, to add additional covenants and agreements of the
Company to the Indenture, to provide for alternative methods or forms for
evidencing and
3
<PAGE>
recording ownership of Senior Notes, to provide for the assumption of the
Company's obligations to Holders of the Senior Notes in case of a merger,
amalgamation, consolidation or sale of all or substantially all of the
Company's assets, to make any change that would provide any additional rights
or benefits to the Holders of the Senior Notes or that does not adversely
affect the legal rights under the Indenture of any such Holder, or to comply
with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
11. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
60 days in the payment when due of interest on the Senior Notes; (ii) default
in payment when due of the principal of, or premium, if any, on the Senior
Notes; (iii) failure by the Company to comply with any of the provisions of
Sections 4.07, 4.09 or 5.01 of the Indenture; (iv) failure by either the
Company for 60 days after written notice by the Trustee or the Holders of at
least 25 % or more in aggregate principal amount of the Senior Notes to
comply with its other agreements in the Indenture or the Senior Notes;
(v) default under certain other agreements relating to Indebtedness of the
Company which default involves non-payment of principal or interest, or
results in the acceleration of such Indebtedness prior to its stated
maturity; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; and (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25 % in principal amount of the then outstanding
Senior Notes may declare all the Senior Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all outstanding Senior Notes
will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest. The Holders
of a majority in aggregate principal amount of the Senior Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of principal of, or interest on, the Senior Notes,
except a payment default resulting from an acceleration that has been
rescinded. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
12. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
4
<PAGE>
13. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company as such, shall not have any
liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
14. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
15. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
16. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
Attention: Chief Financial Officer
5
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Senior Note)
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Senior Note purchased by
the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $___________
Date:
Your Signature:
(Sign exactly as your name appears on this Senior Note)
Tax Identification
No.:________________________
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the
city where the principal office of the registrar is located or by a member of
a national securities exchange.
<PAGE>
EXHIBIT G
FORM OF ___% SERIES G SENIOR NOTE
AND TRUSTEE CERTIFICATION OF
AUTHENTICATION
<PAGE>
$600,000,000
__ % Series G Senior Note due 2008
No. $600,000,000
NIAGARA MOHAWK POWER CORPORATION
promises to pay to
or their registered assigns, the principal sum of ______________________ Dollars
($ ) on October 1, 2008.
Interest Payment Dates: April 1 and October 1, commencing October 1, 1998
Record Dates: March 15 and September 15
Dated: ___________ __, 1998
NIAGARA MOHAWK POWER CORPORATION
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
This is one of the Senior Notes referred
to in the within-mentioned Indenture:
IBJ SCHRODER BANK &
TRUST COMPANY, as Trustee
By:_____________________________
Authorized Signature
<PAGE>
(Back of Senior Note)
___% Series G Senior Note due 2008
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Niagara Mohawk Power Corporation, a New York corporation
(the "Company") promises to pay interest on the principal amount of this ___%
Series G Senior Note due 2008 (the "Senior Note") at the rate and in the manner
specified below.
The Company shall pay interest on the principal amount of this Senior
Note in cash at the rate per annum shown above. The Company shall pay interest
semi-annually on each April 1 and October 1, commencing October 1, 1998, or if
any such day is not a Business Day (as defined in the Indenture referred to
below), on the next succeeding Business Day (each an "Interest Payment Date").
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months for the actual number of days elapsed. Interest shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of this Senior
Note. To the extent lawful, the Company shall pay interest on overdue principal
and premium at the rate of 1 % per annum in excess of the then applicable
interest rate on this Senior Note; it shall pay interest on overdue installments
of interest (without regard to any applicable grace periods) at the same rate to
the extent lawful. The rates of interest specified in the Indenture and this
Senior Note are nominal rates and all interest payments and computations are to
be made without allowance or deduction for deemed reinvestment of interest.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior Notes
to the Persons who are registered Holders of Senior Notes at the close of
business on the March 15 and September 15 next preceding the Interest Payment
Date, even if such Senior Notes are cancelled after such record date and on or
before such Interest Payment Date. The Senior Notes will be payable as to
principal, premium, if any, and interest at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders.
Such payment shall be in such payment of public and private debts coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar or
co-registrar without prior notice to any Holder. The Company may act in any
such capacity.
1
<PAGE>
4. INDENTURE. The Company issued the Senior Notes under an Indenture
dated as of June 30, 1998 (the "Indenture") between the Company and the
Trustee. The terms of the Senior Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act
of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Senior Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. The terms of the Indenture shall
govern any inconsistencies between the Indenture and the Senior Notes. The
Senior Notes are senior unsecured obligations of the Company limited to $600
million in aggregate.
5. OPTIONAL REDEMPTION.
The Senior Notes are redeemable by the Company at any time, in
whole or in part, upon not less than 30 nor more than 60 days' prior notice,
in cash at a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest thereon through the redemption date plus the
Make-Whole Premium.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company is not required to
make mandatory repurchase, redemption or sinking fund payments with respect
to the Senior Notes.
7. CHANGE OF CONTROL OFFER AND ASSET SALE OFFER.
(a) If there is a Change of Control Triggering Event, each Holder of
Senior Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 in principal amount or an integral multiple
thereof) of each Holder's Senior Notes pursuant to the offer described in the
Indenture (a "Change of Control Offer") at an offer price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon the date of purchase. Within 30 days following any Change
of Control Triggering Event, the Company will mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
(b) Under certain circumstances, the Company, following a Sale of
Assets, may commence an offer to all Holders of Senior Notes (as "Asset Sale
Offer") to purchase Senior Notes with the cash portion of the Net Proceeds of
such Sale of Assets at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest thereon to the
date of purchase.
(c) In the event of either 7(a) or 7(b), Holders may elect to have all
or a portion of their Senior Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
2
<PAGE>
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Senior Notes are to be redeemed at his registered address. Senior
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Senior Notes held by a Holder
are to be redeemed. On and after the redemption date interest ceases to
accrue on Senior Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture.
10. PERSONS DEEMED LEGAL OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Senior Note, the Trustee,
any Agent and the Company may deem and treat the person in whose name this
Senior Note is registered as its legal and absolute owner for the purpose of
receiving payment of principal of, premium, if any, and interest on this
Senior Note and for all other purposes whatsoever, whether or not this Senior
Note is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered Holder of a Senior Note
may be treated as its legal owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture and the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Senior Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Senior
Notes), and, subject to Sections 6.04 and 6.07 of the Indenture, any existing
Default or Event of Default (other than a Default or Event of Default in the
payment of the principal of, or interest on, the Senior Notes, except a
payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of the Indenture or the Senior Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Senior Notes. Without the consent of any Holder of a
Senior Note, the Indenture or the Senior Notes may be amended or
supplemented, and the Company and the Trustee may enter into Supplemental
Indentures which shall thereafter form a part of the Indenture, to cure any
ambiguity, defect or inconsistency, to secure the Senior Notes under
circumstances set forth in the Indenture, to establish and create new series
of Senior Notes, to provide that the Company shall not issue any additional
series of Senior Notes, to add additional covenants and agreements of the
Company to the Indenture, to provide for alterative methods or forms for
evidencing and recording ownership of Senior Notes, to provide for the
assumption of the Company's obligations to Holders of the Senior Notes in
case of a merger, amalgamation, consolidation or sale of all or substantially
all of the Company's assets, to make any change that would provide any
additional
3
<PAGE>
rights or benefits to the Holders of the Senior Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or
to comply with the requirements of the SEC in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
60 days in the payment when due of interest on the Senior Notes; (ii) default
in payment when due of the principal of, or premium, if any, on the Senior
Notes; (iii) failure by the Company to comply with any of the provisions of
Sections 4.07, 4.09 or 5.01 of the Indenture; (iv) failure by either the
Company for 60 days after written notice by the Trustee or the Holders of at
least 25 % or more in aggregate principal amount of the Senior Notes to
comply with its other agreements in the Indenture or the Senior Notes; (v)
default under certain other agreements relating to Indebtedness of the
Company which default involves non-payment of principal or interest, or
results in the acceleration of such Indebtedness prior to its stated
maturity; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; and (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25 % in principal amount of the then outstanding
Senior Notes may declare all the Senior Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all outstanding Senior Notes
will become due and payable without further action or notice. Holders may
not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest. The Holders
of a majority in aggregate principal amount of the Senior Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of principal of, or interest on, the Senior Notes,
except a payment default resulting from an acceleration that has been
rescinded. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company as such, shall not have any
liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by
4
<PAGE>
reason of, such obligations or their creation. Each Holder by accepting a
Senior Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Senior Notes.
15. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
Attention: Chief Financial Officer
5
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Senior Note)
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the city
where the principal office of the registrar is located or by a member of a
national securities exchange.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Senior Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on this Senior Note)
Tax Identification No.:________________________
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the city
where the principal office of the registrar is located or by a member of a
national securities exchange.
<PAGE>
EXHIBIT H
FORM OF ____% SENIOR DISCOUNT NOTE
AND TRUSTEE CERTIFICATION OF
AUTHENTICATION
<PAGE>
$500,000,000
__ % Senior Discount Note due 2010
No. $500,000,000
NIAGARA MOHAWK POWER CORPORATION
promises to pay to
or their registered assigns, the principal sum of ______________________ Dollars
($ ) on July 1, 2010.
Interest Payment Dates: January 1 and July 1, commencing January 1, 2004.
Record Dates: December 15 and June 15
Dated: ____________ ___, 1998
NIAGARA MOHAWK POWER CORPORATION
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
This is one of the Senior Notes referred
to in the within-mentioned Indenture:
IBJ SCHRODER BANK &
TRUST COMPANY, as Trustee
By:______________________________
Authorized Signature
<PAGE>
(Back of Senior Note)
___% Senior Discount Note due 2010
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Niagara Mohawk Power Corporation, a New York corporation
(the "Company") promises to pay interest on the principal amount of this ___%
Senior Discount Note due 2010 (the "Senior Note") at the rate and in the manner
specified below.
This Senior Discount Note was issued at a substantial discount from
its principal amount at maturity. Until July 1, 2003, no interest will accrue
on this Senior Discount Note, but the Accreted Value will increase (representing
amortization of original issue discount) between the date of initial issuance
and July 1, 2003, on a semi-annual bond equivalent basis using a 360-day year
comprised of twelve 30-day months, such that the Accreted Value shall be equal
to the full principal amount at maturity of this Senior Discount Note on July 1,
2003. Thereafter, interest on this Senior Discount Note will accrue at a rate
of ___% per annum and will be payable in cash semi-annually in arrears on
January 1 and July 1 of each year, commencing January 1, 2004, or if any such
day is not a Business Day (as defined in the Indenture referred to below), on
the next succeeding Business Day (each an "Interest Payment Date").
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months for the actual number of days elapsed. Interest shall
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from July 1, 2003. To the extent lawful, the Company
shall pay interest on overdue principal and premium at the rate of 1% per annum
in excess of the then applicable interest rate on this Senior Note; it shall pay
interest on overdue installments of interest (without regard to any applicable
grace periods) at the same rate to the extent lawful. The rates of interest
specified in the Indenture and this Senior Note are nominal rates and all
interest payments and computations are to be made without allowance or deduction
for deemed reinvestment of interest.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior Notes
to the Persons who are registered Holders of Senior Notes at the close of
business on the December 15 and June 15 next preceding the Interest Payment
Date, even if such Senior Notes are cancelled after such record date and on or
before such Interest Payment Date. The Senior Notes will be payable as to
principal, premium, if any, and interest at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders.
Such payment shall be in such payment of public
1
<PAGE>
and private debts coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar or
co-registrar without prior notice to any Holder. The Company may act in any
such capacity.
4. INDENTURE. The Company issued the Senior Notes under an Indenture
dated as of June 30, 1998 (the "Indenture") between the Company and the Trustee.
The terms of the Senior Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Senior Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The terms of the Indenture shall govern any
inconsistencies between the Indenture and the Senior Notes. The Senior Notes
are senior unsecured obligations of the Company limited to $500 million
principal amount at maturity in aggregate.
5. OPTIONAL REDEMPTION.
Prior to July 1, 2003, the Company may redeem all or any portion of
the Senior Notes, at any time upon not less than 30 nor more than 60 days'
notice, in cash at a redemption price equal to 100% of the Accreted Value
thereof plus the Make-Whole Premium. On or after July 1, 2003, the Company may
redeem all or any portion of the Senior Notes, at any time upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon, if any, to the applicable redemption date, if redeemed during
the twelve-month period beginning on July 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003 . . . . . . . . . . . . . . . . %
2004 . . . . . . . . . . . . . . . . %
2005 . . . . . . . . . . . . . . . . %
2006 and thereafter. . . . . . . . . 100.00%
</TABLE>
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company is not required to
make mandatory repurchase, redemption or sinking fund payments with respect to
the Senior Notes.
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<PAGE>
7. CHANGE OF CONTROL OFFER AND ASSET SALE OFFER.
(a) If there is a Change of Control Triggering Event, each Holder of
Senior Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 in principal amount or an integral multiple
thereof) of each Holder's Senior Notes pursuant to the offer described in the
Indenture (a "Change of Control Offer") at an offer price in cash equal to
(i) 101% of the aggregate principal amount thereof (if such repurchase
occurs on or after July 1, 2003) plus accrued and unpaid interest thereon, if
any, to the date of purchase or (ii) 101% of the Accreted Value thereof (if
such repurchase occurs prior to July 1, 2003). Within 30 days following any
Change of Control Triggering Event, the Company will mail a notice to each
Holder setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
(b) Under certain circumstances, the Company, following a Sale of
Assets, may commence an offer to all Holders of Senior Notes (as "Asset Sale
Offer") to purchase Senior Notes with the cash portion of the Net Proceeds of
such Sale of Assets at an offer price in cash in an amount equal to (a) 100%
of the principal amount thereof (if such repurchase occurs on or after July
1, 2003) plus accrued and unpaid interest thereon, if any, to the date of
purchase or (b) 100% of the Accreted Value thereof (if such repurchase occurs
prior to July 1, 2003).
(c) In the event of either 7(a) or 7(b), Holders may elect to have all
or a portion of their Senior Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Senior Notes are to be redeemed at his registered address. Senior
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Senior Notes held by a Holder
are to be redeemed. On and after the redemption date interest ceases to
accrue on Senior Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and
Senior Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the
Indenture.
10. PERSONS DEEMED LEGAL OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Senior Note, the Trustee,
any Agent and the Company may deem and treat the person in whose name this
Senior Note is registered as its legal and absolute owner for the purpose of
receiving payment of principal of, premium, if any, and interest on this
Senior
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Note and for all other purposes whatsoever, whether or not this Senior Note
is overdue, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary. The registered Holder of a Senior Note
may be treated as its legal owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture and the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount at maturity
of the then outstanding Senior Notes (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Senior Notes), and, subject to Sections 6.04 and 6.07 of the Indenture,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, or interest on, the Senior Notes,
except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of the Indenture or the Senior
Notes may be waived with the consent of the Holders of a majority in
principal amount at maturity of the then outstanding Senior Notes. Without
the consent of any Holder of a Senior Note, the Indenture or the Senior Notes
may be amended or supplemented, and the Company and the Trustee may enter
into Supplemental Indentures which shall thereafter form a part of the
Indenture, to cure any ambiguity, defect or inconsistency, to secure the
Senior Notes under circumstances set forth in the Indenture, to establish and
create new series of Senior Notes, to provide that the Company shall not
issue any additional series of Senior Notes, to add additional covenants and
agreements of the Company to the Indenture, to provide for alterative methods
or forms for evidencing and recording ownership of Senior Notes, to provide
for the assumption of the Company's obligations to Holders of the Senior
Notes in case of a merger, amalgamation, consolidation or sale of all or
substantially all of the Company's assets, to make any change that would
provide any additional rights or benefits to the Holders of the Senior Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, or to comply with the requirements of the SEC in order to
effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
60 days in the payment when due of interest on the Senior Notes; (ii) default
in payment when due of the principal of, or premium, if any, on the Senior
Notes; (iii) failure by the Company to comply with any of the provisions of
Sections 4.07, 4.09 or 5.01 of the Indenture; (iv) failure by either the
Company for 60 days after written notice by the Trustee or the Holders of at
least 25 % or more in aggregate principal amount of the Senior Notes to
comply with its other agreements in the Indenture or the Senior Notes; (v)
default under certain other agreements relating to Indebtedness of the
Company which default involves non-payment of principal or interest, or
results in the acceleration of such Indebtedness prior to its stated
maturity; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; and (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25 % in principal amount at maturity of the then
outstanding Senior Notes may declare all the Senior Notes to be due and
payable. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of
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<PAGE>
bankruptcy or insolvency, all outstanding Senior Notes will become due and
payable without further action or notice. Holders may not enforce the
Indenture or the Senior Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount at maturity
of the then outstanding Senior Notes may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of the Senior
Notes notice of any continuing Default or Event of Default (except a Default
or Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount at maturity of the Senior Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of principal of, or interest on, the Senior Notes,
except a payment default resulting from an acceleration that has been
rescinded. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company as such, shall not have any
liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
15. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Senior Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
5
<PAGE>
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
Attention: Chief Financial Officer
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<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Senior Note)
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the city
where the principal office of the registrar is located or by a member of a
national securities exchange.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Senior Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on this Senior Note)
Tax Identification No.:________________________
Signature Guarantee.*
* Your signature must be guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the City of New York or the city
where the principal office of the registrar is located or by a member of a
national securities exchange.
<PAGE>
EXHIBIT 5
June 16, 1998
Niagara Mohawk Power Corporation,
300 Erie Boulevard West,
Syracuse, NY 13202
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933
(the "Act") of $300,000,000 Series A Senior Notes, $450,000,000 Series B
Senior Notes, $400,000,000 Series C Senior Notes, $400,000,000 Series D
Senior Notes, $400,000,000 Series E Senior Notes, $400,000,000 Series F
Senior Notes, $600,000,000 Series G Senior Notes and $500,000,000 Senior
Discount Notes (together, the "Securities") of Niagara Mohawk Power
Corporation, a New York corporation (the "Company"), we, as your counsel,
have examined such corporate records, certificates and other documents, and
such questions of law, as we have considered necessary or appropriate for the
purposes of this opinion.
<PAGE>
Niagara Mohawk Power Corporation -2-
Upon the basis of such examination, we advise you that, in our opinion,
when the Registration Statement has become effective under the Act, the
Indenture relating to the Securities has been duly authorized, executed and
delivered, the terms of the Securities and of their issuance and sale have
been duly established so as not to violate any applicable law or result in a
default under or breach of any agreement or instrument binding upon the
Company and so as to comply with any requirement or restriction imposed by
any court or governmental body having jurisdiction over the Company, and the
Securities have been duly executed and authenticated in accordance with the
Indenture and issued and sold as contemplated in the Registration Statement,
the Securities will constitute valid and legally binding obligations of the
Company, subject to bankruptcy, insolvency, fradulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
In rendering the foregoing opinion, we are expressing no opinion as to
Federal or state laws relating to fradulent transfers.
<PAGE>
Niagara Mohawk Power Corporation -3-
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the state of New York and we are expressing no opinion
as to the effect of the laws of any other jurisdiction.
We have relied as to certain matters on information obtained from public
officials, officers of the Company and other sources believed by us to be
responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading
"Validity of the Notes" in the Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act.
Very truly yours,
/s/ Sullivan & Cromwell
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 (No. 333-49541) of
our report dated March 26, 1998, except Note 2 (third paragraph) and Note 15, as
to which the date is May 29, 1998, appearing on page 40 of Niagara Mohawk Power
Corporation's Annual Report on Form 10K/A for the year ended December 31, 1997.
We also consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 109 in the Niagara Mohawk Power
Corporation's Annual Report on Form 10-K. We also consent to the reference to us
under the heading "Experts" in the Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Syracuse, New York
June 17, 1998
