As filed with the Securities and Exchange Commission on May 24, 2000
File No. 70-9619
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM U-1 APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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Sierra Pacific Resources Portland General Electric Company
6100 Neil Road 121 SW Salmon Street
Reno, Nevada 89511 Portland, Oregon 97204
(Name of company or companies filing this statement
and address of principal executive offices)
--------------------------------------------
Michael R. Niggli Peggy Y. Fowler
Chairman and Chief President and Chief Operating Officer
Executive Officer Portland General Electric Company
Sierra Pacific Resources 121 SW Salmon Street
6100 Neil Road Portland, Oregon 97204
Reno, Nevada 89511 (503) 464-8000
(702) 834-3600
(Name and addresses of agents for service)
--------------------------------------------
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application to:
Clifford M. (Mike) Naeve, Esq. Joanne C. Rutkowski, Esq.
Mary Margaret Farren, Esq. LeBoeuf, Lamb, Greene
W. Mason Emnett, Esq. & MacRae, L.L.P.
Paul B. Silverman, Esq. 1875 Connecticut Avenue, N.W.
William C. Weeden Washington, D.C. 20009
Skadden, Arps, Slate,
Meagher & Flom LLP Adam Wenner, Esq.
1440 New York Avenue, N.W. Vinson & Elkins L.L.P.
Washington, D.C. 20005 1455 Pennsylvania Avenue, NW
Washington, DC 20004
Table of Contents
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Page
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Item 1. Description of Proposed Transaction......................... 4
A. Description of the Parties to the Transaction............ 4
1. Sierra Pacific and its subsidiaries................ 4
a. SPPC......................................... 5
b. Nevada Power................................. 6
c. Non-Utility Subsidiaries..................... 8
2. PGE and PGH II and their subsidiaries.............. 11
a. PGE.......................................... 11
b. PGH II....................................... 13
B. Description of the Transaction........................... 14
1. Reasons for the Transaction........................ 14
2. Stock Purchase Agreement........................... 17
3. Background and Negotiations Leading to the
Transaction........................................ 18
C. Sierra Pacific Management Following the Transaction...... 21
Item 2. Fees, Commissions and Expenses.............................. 21
Item 3. Applicable Statutory Provisions............................. 21
A. Acquisition of PGE and PGH II and Retention of Certain
Businesses............................................... 22
1. Section 10(b)...................................... 23
a. Section 10(b)(1): "Interlocking Relations" or
"Concentration of Control"................... 24
b. Section 10(b)(2): Reasonableness of
Consideration and Fees....................... 26
c. Section 10(b)(3): Capital Structure and the
Public Interest.............................. 29
2. Section 10(c)...................................... 30
a. Section 10(c)(1): Lawfulness under Section 8
and Detriment to Carrying Out Section 11..... 30
i. The Transaction is lawful under
Section 8 20.......................... 30
ii. The Transaction will not be detrimental
to carrying out the provisions of
Section 11............................. 31
(a) Section 11(b)(1) - Single Integrated
Public Utility System............ 31
(i) Physical Interconnection... 37
(ii) Coordination............... 47
(iii) Single Area or Region...... 50
(iv) Localized Management,
Efficient Operation, and
Effective Regulation....... 52
Retention and Acquisition of
Non-Utility Businesses..... 53
Retention of the SPPC Gas System. 55
(b) Section 11(b)(2) - Structure and
Voting Power..................... 57
b. Section 10(c)(2)............................. 58
3. Section 10(f)...................................... 60
B Financing of the Acquisition............................. 60
1. Overview of the Financing Request.................. 61
2. Parameters for Financing Authorization............. 65
3. Description of Specific Types of Financing......... 66
a. Short-Term Debt.............................. 66
b. Long-Term Debt............................... 67
(i) Terms of Sierra Pacific Indenture...... 68
(ii) Terms of Borrowings from Banks
and Other Financial Institutions....... 70
(iii) Terms of Money Market Notes and
Similar Instruments.................... 70
c. Other Securities............................. 70
d. Interest Rate Risk Management Devices........ 71
4. Amortization of Goodwill........................... 71
5. Filing of Certificates of Notification............. 72
Item 4. Regulatory Approval......................................... 72
A. Antitrust Considerations................................. 73
B. Atomic Energy Act........................................ 73
C. Federal Power Act........................................ 73
D. Nevada PUC............................................... 74
E. Oregon PUC............................................... 74
Item 5. Procedure................................................ 74
Item 6. Exhibits and Financial Statements........................... 75
a. Exhibits................................................. 75
b. Financial statements..................................... 77
Item 7. Information as to Environmental Effects..................... 80
Sierra Pacific Resources and Portland General Electric Company hereby amend
and restate their Application/Declaration on Form U-1 in File No. 70-9619
as follows:
Introduction and Request for Commission Action
Pursuant to Sections 9(a)(2) and 10 of the Public Utility
Holding Company Act of 1935 (the "Act"), this Application requests that the
Securities and Exchange Commission (the "SEC" or "Commission") approve the
acquisition by Sierra Pacific Resources ("Sierra Pacific"), which is an
exempt intrastate holding company under the Act, of Portland General
Electric Company ("PGE") and PGH II, Inc. ("PGH II") (the "Transaction").
PGE is a wholly-owned public utility subsidiary company of Enron Corp.
("Enron"), an exempt holding company pursuant to Section 3(a)(1) of the Act
under Rule 2 thereof. PGH II, an indirect subsidiary of Enron and an
affiliate of PGE, owns several energy-related companies. Pursuant to the
Transaction, Sierra Pacific will acquire from Enron all of the issued and
outstanding common stock of PGE and PGH II, which thereby will become
wholly-owned subsidiaries of Sierra Pacific. Following the consummation of
the Transaction, Sierra Pacific will register with the Commission as a
holding company pursuant to Section 5 of the Act.
PGE is an electric utility company under the Act. Sierra
Pacific owns all of the common stock of Sierra Pacific Power Company
("SPPC"), an electric and gas company under the Act, and all of the common
stock of Nevada Power Company ("Nevada Power"), an electric utility company
under the Act. The Transaction will not impact the structure of either SPPC
or Nevada Power. SPPC and Nevada Power will continue to be wholly-owned
subsidiaries of Sierra Pacific and will become sister companies to PGE and
PGH II.
The Transaction is not subject to shareholder approval of PGE,
PGH II, Enron or Sierra Pacific. Thus, Sierra Pacific and PGE
(collectively, the "Applicants") are not required to file Form S-4 with the
Commission regarding the Transaction. The Transaction will be governed by
the terms of a Stock Purchase Agreement dated as of November 5, 1999 (the
"Stock Purchase Agreement"), by and among Sierra Pacific and Enron.
Pursuant to the Stock Purchase Agreement, Sierra Pacific will acquire from
Enron all of the issued and outstanding common stock of PGE and PGH II for
a consideration of $2.1 billion. As a result of this acquisition, PGE and
PGH II will become wholly-owned subsidiaries of Sierra Pacific.
The acquisition of PGE substantially increases and diversifies
the combined company's asset base, resulting in increased efficiency in the
delivery of services. Pursuant to state mandate, Sierra Pacific currently
is divesting all of its generation plants. Thus, the combination of PGE's
assets with Sierra Pacific's distribution and transmission assets will
result in a broader and more diverse asset base. The creation of a service
company to perform various common and shared functions among the three
operating companies also will help Sierra Pacific to achieve substantial
efficiencies through the combining of functions, economies of scale, and
the sharing of non-generation assets and facilities. The Applicants
anticipate the nominal dollar value of synergies from the Transaction to be
in excess of $40 million per year over a 10-year period.
The Transaction is designed to create a merged company that
will be able to participate more effectively in the increasingly
competitive energy marketplace. By combining with PGE, Sierra Pacific will
almost double its current customer base. In addition, PGE is experiencing
higher than national average annual population growth of approximately 3%
and, through PGE, Sierra Pacific and its shareholders will be able to
participate in this rapid growth. Moreover, while Sierra Pacific's current
customer base is predominantly gaming and mining, PGE's service territory,
which contains approximately 44% of Oregon's population and 60% of Oregon's
economic base, is very diverse. This diversity in the combined company's
customer base will enable Sierra Pacific to generate and sustain
substantially increased cash flows from more diverse sources for further
reinvestment or growth.
The Transaction is conditioned, among other things, upon
approval by the SEC, the Oregon Public Utility Commission ("Oregon PUC"),
the Federal Energy Regulatory Commission ("FERC"), and the Nuclear
Regulatory Commission ("NRC"), and on the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (as amended) (the "HSR Act").1
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1 On March 16, 2000, the Public Utilities Commission of Nevada ("Nevada
PUC") issued a Declaratory Order, attached as Exhibit D-2, concluding
that the Nevada PUC does not have jurisdiction to review the
Transaction. However, as described more fully in the concurrent
Application/Declaration requesting approval to form Sierra Pacific
Resources Services Company ("Sierra Pacific Services") (File
70-9621), the Nevada PUC has an open docket to consider a shared
services agreement proposed by Sierra Pacific which predates the
Transaction. The Services Agreement proposed in the concurrent
Application/Declaration will supplant the earlier proposed agreement
in the Nevada PUC docket.
The Applicants request expedited treatment of this application
so that, upon receipt of other regulatory approvals, Sierra Pacific and
Enron will be in a position to consummate the Transaction promptly. Based
on the anticipated receipt of these other regulatory approvals, the
Applicants request that the Commission issue an order authorizing the
Transaction by September 1, 2000. Unless otherwise indicated, all financial
information set forth herein is for the fiscal year ended December 31,
1999.
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
A. DESCRIPTION OF THE PARTIES TO THE TRANSACTION.
1. SIERRA PACIFIC AND ITS SUBSIDIARIES.
Sierra Pacific is a public utility holding company incorporated
in the State of Nevada and currently is exempt from regulation by the
Commission (except for Section 9(a)(2) thereof) pursuant to Section 3(a)(1)
of the Act by order of the Commission. Sierra Pacific Resources, Holding
Co. Act Release No. 27054 (July 26, 1999) [hereinafter Sierra Pacific].
Nevada Power and SPPC, described below, are wholly-owned operating
subsidiaries of Sierra Pacific. Sierra Pacific is headquartered in Reno,
Nevada.
The common stock of Sierra Pacific, par value $1 per share
("Sierra Pacific Common Stock"), is listed on the New York Stock Exchange
(the "NYSE"), under the symbol SRP. As of the close of business on December
31, 1999, there were 78,428,480 shares of Sierra Pacific Common Stock
issued and outstanding.
For the year ended December 31, 1999, Sierra Pacific's
operating revenues on a consolidated basis were approximately $1.3 billion,
of which $9.1 million are attributable to non-utility activities.
Consolidated assets of Sierra Pacific and its subsidiaries at December 31,
1999, were approximately $5.2 billion, of which approximately $3.8 billion
consisted of net utility plant and equipment. At December 31, 1999, Sierra
Pacific's consolidated net income was $51.7 million.
Sierra Pacific's principal executive office is located at 6100
Neil Road, Reno, Nevada 89511. At December 31, 1999, Sierra Pacific and its
subsidiaries employed 3,250 employees, of which 1,430 were employed by SPPC
and 1,677 by Nevada Power.
More detailed information concerning Sierra Pacific and its
subsidiaries is contained in Sierra Pacific's and SPPC's Annual Reports on
Form 10-K for the year ended December 31, 1999, which are incorporated
herein by reference as Exhibits G-1 and G-3, respectively.
A. SPPC
SPPC is a public utility incorporated in the State of Nevada.
SPPC provides electric service to approximately 302,000 retail customers in
northern Nevada and northeastern California. SPPC also sells electric power
at wholesale. In the Reno/Sparks area of northwestern Nevada, SPPC
distributes natural gas at retail to approximately 110,000 customers and
provides water service to about 71,000 customers.
For the year ended December 31, 1999, SPPC's utility operating
revenues on a consolidated basis were approximately $764 million, resulting
in a net income of approximately $66 million. During 1999, 83.9% of SPPC's
revenues were from retail sales of electricity, natural gas and water in
Nevada, 5.1% from retail sales of electricity in California and 9.9% from
wholesale sales of electricity and gas. SPPC's 1999 electric and gas
operating revenues, which totaled $709 million, were comprised of its
electric business ($609 million, or 86%) and its natural gas business ($100
million, or 14%). Of these 1999 electric and gas operating revenues, $644
million, or 91% were from sales in Nevada and $65 million, or 9% were from
sales in California. In addition SPPC's water business operating revenues
were $54.3 million. As of December 31, 1999, SPPC's net utility plant in
service was $1.6 billion. A map of SPPC's electric/gas service area is
attached as Exhibit E-1.
During 1999, the peak electric demand experienced by SPPC was
1470 megawatts ("MW"). SPPC served this demand, plus a reserve margin, with
a combination of the following: (i) 1,045 MW of power generated by plants
owned by SPPC, (ii) 564 MW of power purchased pursuant to long term
contracts, and (iii) additional firm and short-term power purchases. SPPC's
fuel requirements for electric generation were provided by natural gas/oil
(61.5%), coal (37.7%) and hydro (0.8%).
As of December 31, 1999, SPPC's electric transmission
facilities consisted of approximately 4,000 overhead pole line miles and 81
substations. Its electric distribution facilities consisted of
approximately 9,000 overhead pole line miles, 4,500 underground cable miles
and 178 substations.
SPPC's natural gas business consists of providing local
distribution service in the Reno/Sparks area that accounted for $100.2
million in 1999 operating revenues, or 14% of total SPPC operating
revenues. SPPC has contracted for firm winter-only and annual natural gas
supplies with Canadian and domestic suppliers to meet the firm gas
requirements of its local distribution and electric operations. The
contracts total 157,000 decatherms per day through March 1999; 93,000
decatherms per day through April 1999; 78,000 decatherms per day for May
through October 1999; and 65,000 decatherms per day for the remainder of
1999. SPPC's firm natural gas supply is supplemented with natural gas
storage services and supplies from a Northwest Pipeline Company facility
located at Jackson Prairie in southern Washington and a liquid natural gas
storage facility. For 1999, SPPC's total local gas distribution supply
requirements were 13.4 million decatherms and its electric generating fuel
requirements were 31.6 million decatherms. As of December 31, 1999, SPPC
owned and operated 1,439 miles of three-inch equivalent natural gas
distribution lines.
SPPC also serves approximately 71,000 water customers in the
Reno and Sparks areas of Nevada. SPPC's water system is closely associated
with its natural gas system, with the service areas of each system largely
overlapping. The two systems have been operated on an integrated basis
within a single division of SPPC since the late 1800s. At December 31,
1999, SPPC owned approximately $280 million in water assets, with total
water production of 24.97 billion gallons. SPPC experienced during 1999 a
peak day send-out of water of 133.1 million gallons.
SPPC is subject to regulation by the Nevada PUC and the
California Public Utilities Commission ("California PUC") with respect to
its rates for retail sales of electricity as well as terms of service,
issuance of certain securities, siting of and necessity for generation and
certain transmission facilities, accounting and other matters. The Nevada
PUC also has jurisdiction with respect to SPPC's gas and water business. In
addition, SPPC is subject to regulation by FERC under the Federal Power Act
with respect to rates for the sale of electricity for resale, the terms and
conditions for providing interstate electric transmission service, and
other matters. SPPC also is subject to applicable federal and state
environmental regulations.
B. NEVADA POWER
Sierra Pacific and Nevada Power merged on July 28, 1999, which
merger was approved by the Commission under Section 9(a)(2) on July 26,
1999. Sierra Pacific, supra. As a result of that transaction, Nevada Power
became an operating subsidiary of Sierra Pacific, as was SPPC. Nevada Power
is a public utility, incorporated in the State of Nevada, that provides
retail electric service to approximately 566,700 customers in Clark County,
Nevada, with limited service provided to the Federal Department of Energy
(U.S. Government Test Site) in Nye County, Nevada. Both Clark County and
Nye County are located in southern Nevada. Nevada Power also sells electric
power at wholesale. A map of Nevada Power's service area is attached hereto
as Exhibit E-2.
Nevada Power owns plants with generating capacity totaling
1,939 MW. Nevada Power purchases an additional 2,335 MW of generating
capacity, including (i) 235 MW of Hoover Dam power purchased pursuant to a
contract with the State of Nevada, (ii) 210 MW of power purchased pursuant
to a contract with Nevada Sun-Peak Limited Partnership, an independent
power producer, and (iii) 305 MW of power purchased pursuant to contracts
with four qualifying facilities. During 1999, the peak demand experienced
by Nevada Power was 3,993 MW. Nevada Power served this demand, plus a
reserve margin, with a combination of its owned and purchased generating
capacity and additional firm and short-term power purchases. To obtain
additional firm capacity and associated energy to meet peak needs, Nevada
Power utilizes a competitive bidding process and spot market purchases.
During 1999, 53% of the energy generated by Nevada Power's plants came from
coal-fired stations and 47% from natural gas-fired stations.
At December 31, 1999, Nevada Power owned approximately 1,753
miles of electric transmission facilities (a portion of that under shared
ownership), 142 transmission and distribution substations, and a
distribution system consisting of approximately 3,162 overhead pole line
miles and 9,852 underground cable miles.
Nevada Power is subject to regulation by the Nevada PUC with
respect to its rates for retail sales of electricity as well as terms of
service, issuance of certain securities, siting of and necessity for
generation and certain transmission facilities, and accounting and other
matters. In addition, Nevada Power is subject to regulation by FERC under
the Federal Power Act with respect to rates for the sale of electricity for
resale, the terms and conditions for providing interstate electric
transmission service, and other matters. Nevada Power is also subject to
applicable federal and state environmental regulations.
For the year ended December 31, 1999, Nevada Power's utility
operating revenues on a consolidated basis were approximately $977 million,
resulting in a net income of approximately $52 million. Consolidated assets
of Nevada Power and its subsidiaries at December 31, 1999, were
approximately $3.4 billion, of which approximately $2.4 billion consisted
of net electric plant and equipment.
Nevada Power's principal executive office is located at 6226
West Sahara Avenue, Las Vegas, Nevada, 89146. More detailed information
concerning Nevada Power is contained in Nevada Power's Annual Report on
Form 10-K for the year ended December 31, 1999, which is incorporated
herein by reference as Exhibit G-5.
C. NON-UTILITY SUBSIDIARIES
Sierra Pacific is engaged in various non-utility businesses
through the following material subsidiaries:
1. Tuscarora Gas Pipeline Company: Tuscarora Gas Pipeline Company was
formed as a wholly-owned subsidiary in 1993 for the purpose of entering
into a partnership (the Tuscarora Gas Transmission Company, or "TGTC") with
a subsidiary of TransCanada, a non-affiliated Canadian natural gas
transportation company, to develop, construct and operate a natural gas
pipeline to serve an expanding gas market in Reno, northern Nevada and
northeastern California. Sierra Pacific has an investment of approximately
$13.3 million in this subsidiary. In 1995, TGTC completed construction and
began service of its 229-mile pipeline extending from Malin, Oregon to
Reno, Nevada. At Malin, Oregon, TGTC interconnects with Pacific Gas
Transmission Company ("PGT"), a major interstate natural gas pipeline
extending from Oregon to the U.S./Canadian border. The PGT system provides
TGTC customers access to natural gas reserves in the Western Canadian
Sedimentary basin, one of the largest natural gas reserve basins in North
America. As an interstate pipeline, TGTC provides only transportation
service. During 1999, SPPC was the largest customer of TGTC, contributing
95% of TGTC's revenues of $19.3 million. Malin, Oregon began taking service
from TGTC during the later part of 1996. The Sierra Army Depot at Herlong,
California began taking service from TGTC during the later part of 1997. In
1998, TGTC began serving two new customers, the United States Gypsum
Company, located north of Empire, Nevada and HL Power Company located
northwest of Wendel, California.
2. Sierra Energy Company d/b/a e.three: Sierra Energy Company d/b/a e-
three ("e.three") is an unregulated, wholly-owned subsidiary that provides
energy-related products and services in commercial and industrial markets
both inside and outside SPPC's service territory. The products offered by
e.three include: technology and efficiency improvements to lighting,
heating, ventilation and air-conditioning equipment; installation or
retrofit of controls and power quality systems; energy performance
contracting; end-use services; and on-going energy monitoring and
verification services. e-three also recently entered into a 50% Nevada
limited liability company, e-three Custom Energy Solutions LLC, with a
subsidiary of Nevada Power for the purpose of selling and implementing
energy-related performance contracts and similar services in southern
Nevada.
3. Sierra Pacific Communications: Sierra Pacific Communications ("SPC") was
created to examine and pursue telecommunications opportunities that
leveraged existing skill sets of installing and deploying pipe and wire
infrastructure. SPC presently has fiber optic assets deployed in the cities
of Reno and Las Vegas. SPC filed an application with the Federal
Communications Commission (the "FCC") on February 18, 2000, seeking an FCC
determination of "Exempt Telecommunications Company" status under Section
34 of PUHCA. The FCC did not issue an order denying SPC's application
within sixty days of the application filing date. Pursuant to 47 C.F.R. ss.
1.5004, in such event an application is deemed granted with no further
action by the FCC.
4. Lands of Sierra, Inc.: Lands of Sierra, Inc. ("LOS") was organized in
1964 to develop and manage SPPC non-utility property in Nevada and
California. In recent years, Sierra Pacific has focused on selling the LOS
properties and the properties remaining include only vacant land in Nevada
and land leases in the Lake Tahoe region.
5. Sierra Pacific Energy Company: Sierra Pacific Energy Company ("SPEC")
was formed to market a package of technology and energy-related products
and services in Nevada. SPEC has obtained an interest in the Northwind
Aladdin LLC (a limited liability company owned by NEICO & UTT Nevada, Inc.,
an affiliate of Unicom Thermal Technologies, Inc.) to own, construct and
maintain the facility for the production and distribution of chilled water,
hot water, and emergency electric power for the Aladdin project in Las
Vegas, Nevada. For the year ended December 31, 1999, however, SPEC incurred
net losses of $3.6 million. Accordingly, except for its interest in the
Aladdin project, SPE has withdrawn its application with the PUCN to be
licensed as an Alternative Seller of Electricity and is dissolving its
retail energy marketing efforts.
Sierra Pacific also has several immaterial subsidiaries, listed
by category as follows:
1. Non-profit making subsidiaries created to assist other business
activities.
Commonsite Inc.: Commonsite Inc. is a Nevada corporation owning the
real estate occupied by Reid Gardner 4, a coal fired plant owned
jointly by Nevada Power and the California Department of Water
Resources.
NVP Capital I: NVP Capital I is a Delaware trust needed for Nevada
Power to issue QUIPS, Quarterly Income Preferred Securities.
NVP Capital II: NVP Capital II is a Delaware trust needed for Nevada
Power to issue QUIPS, Quarterly Income Preferred Securities.
2. Other Subsidiaries.
Nevada Electric Investment Company: Nevada Electric Investment
Company ("NEICO") is a Nevada corporation that, in the past, has
conducted energy-related business activities. NEICO owns two
corporations that once were involved in mining activities (Genwal
Coal Co. and Castle Valley Resources, Inc.), and another corporation
that has never conducted business (Alkan Mining Company). All three
of these corporations are listed below. NEICO was inactive for a
period of years, and in recent months, has obtained ownership
interests in three new limited liability companies involved in
various energy-related activities.
Northwind Las Vegas, L.L.C.: NEICO owns 50% of this Nevada limited
liability company. UTT Nevada. Inc., an affiliate of Unicom, owns the
other 50%. Northwind Las Vegas, L.L.C. develops opportunities for
district heating and cooling within Nevada.
Northwind Aladdin, LLC: NEICO owns 25% of this Nevada limited
liability company. UTT Nevada. Inc., an affiliate of Unicom, owns the
other 75%. Northwind Aladdin, LLC will construct, own and operate
district heating and cooling facilities at the Aladdin casino complex,
currently under construction.
e-three Custom Energy Solutions, LLC: NEICO owns 50% of this Nevada
limited liability company, and e-three, a wholly owned subsidiary of
Sierra Pacific, owns the other half. This limited liability subsidiary
recently was formed to enter into performance contracts and similar
energy-related services in southern Nevada.
3. Inactive Subsidiaries.
Sierra Water Development Company - A Nevada corporation formerly
engaged in water exploration activities in northern Nevada.
Sierra Gas Holdings Company - A Nevada corporation formerly engaged
in gas and oil exploration.
Great Basin Energy Company - A Nevada corporation, which has never
done any business, but was formed to hold real property for a
proposed power plant that was never constructed.
Genwal Coal Co. - A Nevada corporation that is inactive but kept in good
standing. Assets were sold on January 1, 1995.
Castle Valley Resources Inc. - A Nevada corporation that is inactive but
kept in good standing. Previously, it was the sales arm of Genwal Coal
Co.
Alkan Mining Company - A Nevada corporation owned entirely by NEICO
that has never conducted business but has been kept in good standing.
Nevada Power recently created several Nevada limited liability
companies that have conducted no business activities but are in good
standing. They are: Nevada Power Services, LLC; Nevada Power Choices,
LLC; Nevada Power Solutions, LLC; Las Vegas Energy, LLC; Nevada
Solutions, LLC; Power Choice, LLC; Nevada Power Energy Services, LLC;
and Nevada Choices, LLC. It is anticipated one or more of these
companies will engage in the future in competitive energy markets.
2. PGE AND PGH II AND THEIR SUBSIDIARIES.
A. PGE
PGE, a wholly-owned subsidiary of Enron, is a public utility
company incorporated in the state of Oregon. PGE provides electric service
to approximately 719,000 customers in northwestern Oregon. PGE also sells
electric power at wholesale. A map of PGE's electric service area is
attached as Exhibit E-3.
PGE owns 1,998 MW of generating capability in hydroelectric
(31%), coal-fired (32%), and gas-fired (37%) plants. During 1999, the peak
electric demand experienced by PGE was 3,544 MW, which was served by a
combination of PGE's owned generation capability and 1,085 MW of firm and
short-term power purchases. PGE's electric generation was provided by
hydroelectric (27%), natural gas (26%), and coal (47%).
At December 31, 1999, PGE's electric transmission facilities
consisted of approximately 1,426 overhead pole line miles wholly owned,
approximately 566 overhead pole line miles jointly owned, and 49
substations. Its electric distribution facilities consisted of
approximately 8,762 overhead pole line miles, 5,651 underground cable
miles, and 120 substations.
For the year ended December 31, 1999, PGE's utility operating
revenues on a consolidated basis were approximately $1.4 billion, resulting
in net income of approximately $128 million. Consolidated assets of PGE at
December 31, 1999, were approximately $3.2 billion, of which approximately
$1.9 billion consisted of net electric plant and equipment.
PGE wholly-owns the following subsidiaries:
121 SW Salmon Street Corporation - An Oregon corporation leasing PGE's
headquarters complex at the World Trade Center in Portland Oregon and
subleasing the complex to PGE. World Trade Center Northwest Corporation, a
wholly-owned subsidiary of 121 SW Salmon Street Corporation and also an
Oregon corporation, manages the World Trade Center in Portland, Oregon, and
promotes and provides services to international commerce.
Portland General Transport Corp. - An Oregon corporation formed to sell
segmented gas pipeline capacity. Portland General Transport Corp. is currently
inactive.
Salmon Springs Hospitality Group - An Oregon corporation providing
operations and catering services to PGE and, to the extent available, to
third parties in meeting facilities of the World Trade Center Building Two
complex. The assets and revenues of Salmon Springs Hospitality Group are de
minimis and, as such, the subsidiary is immaterial for purposes of the Act.
PGE is subject to regulation by the Oregon PUC with respect to
its rates for retail sales of electricity as well as terms of service,
issuance of certain securities, accounting and other matters. In addition,
PGE is subject to regulation by the FERC under the Federal Power Act with
respect to rates for the sale of electricity for resale, the terms and
conditions for providing interstate electric transmission service, and
other matters. PGE also is subject to applicable federal and state
environmental regulations.
PGE's principal executive office is located at 121 SW Salmon
Street, Portland, Oregon 97204. At December 31, 1998, PGE employed
approximately 2,728 employees.
More detailed information concerning PGE is contained in PGE's
Annual Report on Form 10-K for the year ended December 31, 1998, which is
incorporated herein by reference as Exhibit G-7.
B. PGH II
PGH II, a wholly-owned indirect subsidiary of Enron and an
affiliate of PGE, is engaged in developing several non-utility lines of
business. PGH II holds a 99% ownership interest in the following limited
liability companies:
Columbia-Pacific Distribution Services Company, LLC - An Oregon limited
liability company, currently inactive, established to provide operation and
maintenance services for utility distributions systems.
Enron Distribution Services Company, LLC - A Delaware limited liability
company, currently inactive, established to hold investments in
transmission and distribution services companies to be acquired.
Portland Energy Solutions Company, LLC - An Oregon limited liability
company established to develop opportunities in district heating and
cooling in downtown Portland, Oregon.
PGH II also wholly-owns the following subsidiaries that
currently generate no material revenue and hold de minimis assets:
Columbia-Willamette Development Company - An Oregon corporation, currently
inactive, formerly engaged in real estate development in Oregon and
Washington.
Enron MicroClimates, Inc. - An Oregon corporation organized to design, own,
and operate heating, cooling, and network infrastructure.
Portland General Distribution Company - An Oregon corporation established
to hold a 1% interest in Columbia-Pacific Distribution Services Company,
LLC, Enron Distribution Services Company, LLC, and Portland Energy
Solutions Company, LLC, each of which are described above.
Portland General Operations Company, Inc. ("PGO") - PGO, an Oregon
corporation, provides consulting services to global markets regarding
equipment and engineering design and maintenance, project management, and
alternative financing solutions for electric and telecommunications
facilities.
Tule Hub Services Company - An inactive Oregon corporation established to
engage in the business opportunity of electric trading hub transaction
information management.
B. DESCRIPTION OF THE TRANSACTION.
1. REASONS FOR THE TRANSACTION.
For the past several years prior to their merger, Sierra
Pacific and Nevada Power carefully monitored developments in the electric
and natural gas industry and especially the growth of competition in the
western region. Sierra was an active participant in the deregulation of the
California electric utility industry and both Sierra Pacific and Nevada
Power were active participants in deregulation proceedings in Nevada, which
commenced with the passage of a deregulation and restructuring law by the
Nevada legislature in 1997. Both companies adopted strategies focused on
growing and improving their distribution and transmission businesses and
providing a variety of energy-related services to small and medium sized
customers. The merger of the two companies implemented their strategies by
creating a very robust and rapidly growing distribution business with a
much broader customer base. However, both companies appreciated the
difficulties which small and medium-sized utilities would face in competing
with larger utility and energy-service companies. Both companies engaged
investment banks and other industry experts to explore strategic
alternatives and possible business combinations to advance their strategic
goals. After considering various possible combinations, the Boards of both
companies voted to merge on April 29, 1998. After the merger was
consummated on July 28, 1999, the combined company (Sierra Pacific)
continued to monitor the markets and focus on its pre-merger strategy of
growing its customer base, increasing its distribution and transmission
businesses, and increasing its scale of operations so as to improve service
and compete more effectively in rapidly deregulating utility markets.
Sierra Pacific continued to explore opportunities in the western region to
advance its corporate strategy.
In the week of August 11, 1999, Sierra Pacific learned that
Enron had engaged investment bankers to assist it in the sale of PGE and
that these bankers were soliciting interest from potential buyers,
including Sierra Pacific. Sierra Pacific's senior management then conducted
an internal preliminary review to determine whether the acquisition of PGE
would fit in with its corporate strategy of growing customer base,
expanding its distribution and transmission businesses, and enhancing its
competitive position in the region. Management concluded that an
acquisition of PGE would advance its strategy and, after presentations to
the Planning and Finance committee of the Board of Directors, engaged the
investment banking firm of Salomon Smith Barney Inc. ("Salomon Smith
Barney") and the law firm of Skadden Arps Slate Meagher & Flom ("Skadden")
to assist it in the evaluation. After submitting first and second-round
bids, Sierra Pacific was invited to negotiate a definitive stock purchase
agreement with Enron consistent with general terms and conditions and
pricing parameters previously approved and authorized by the Board of
Directors in its final bid. The Board authorized management to negotiate a
definitive agreement, which the Board formally adopted and approved on
November 5, 1999.
The Board believes that the acquisition of PGE will put the
company in a position to become one of the major and most significant
transmission and distribution companies in the western region, and that it
will substantially enhance the company's competitive position by increasing
its size, financial flexibility, and securing significant future growth
opportunity and potential, all of which will benefit Sierra Pacific, its
shareholders, and employees, including all the following:
1. Customer Growth, Expansion Potential, and Broader Customer Base
The acquisition of PGE will bring to the combined company
approximately 719,000 retail customers located in the Portland metropolitan
area. The acquisition will increase Sierra Pacific's total retail customer
base to approximately 1.8 million customers. Moreover, PGE is experiencing
higher than national average annual population growth of approximately 3%.
Through PGE, Sierra Pacific and its shareholders will be able to
participate in this rapid growth. In addition, while Sierra Pacific's
current customer base is predominantly gaming and mining, PGE's service
territory, which contains approximately 44% of Oregon's population and 60%
of Oregon's economic base, is very diverse. PGE's revenues are derived from
residential, paper, technology, industrial, and wholesale businesses. While
PGE's 20 largest customers represent approximately 22% of its total retail
revenues, these revenues are derived from approximately 10 different
industries. In addition, 41% of its retail sales are derived from
residential customers and 39% from small commercial operations. Thus, the
addition of PGE's customer base will result in significantly greater
diversity in the combined company's customer base.
2. Financial Strength and Benefits
The acquisition of PGE should substantially enhance and improve
Sierra Pacific's position in the utility market place. Its service
territories will now include three of the fastest growing regions in the
western United States. After the acquisition of PGE, the combined company's
revenues should increase to approximately $2.9 billion annually and its
customer base will increase to approximately 1.8 million. As a result, the
combined company should be able to generate and sustain substantially
increased cash flows from more diverse sources for further reinvestment or
growth. The combined company also should enjoy the benefits resulting from
greater and more sustained financial stability through its substantially
larger size. Finally, the acquisition of PGE permits Sierra Pacific to
redeploy the proceeds of its generation sales in a time frame consistent
with the realization of those proceeds and in the manner which is not only
consistent with but also substantially advances the company's strategy.
3. Operation Efficiencies
As a result of the acquisition of PGE and creation of a service
company to perform various common and shared functions among the three
operating companies, Sierra Pacific will be able to achieve substantial
efficiencies through the combination of functions, economies of scale, and
the sharing of assets and facilities. PGE's relative proximity to SPPC and
Nevada Power should enhance the combined company's ability to capture and
sustain these efficiencies. In addition, PGE's winter peaking load should
help to balance the Las Vegas summer peaking load experienced by Sierra
Pacific by smoothing out cash flows and enabling better risk management.
2. STOCK PURCHASE AGREEMENT.
Pursuant to the Stock Purchase Agreement, attached hereto as
Exhibit B-1, Sierra Pacific will acquire all of the issued and outstanding
common stock of PGE and PGH II (the "Shares"), which will thereby become
wholly-owned subsidiaries of Sierra Pacific. The proposed transaction,
which is subject to customary regulatory approvals, is expected to close in
the second half of 2000.
Under the terms of the Stock Purchase Agreement, Enron will
sell PGE and cause Portland General Holdings, Inc. to sell PGH II to Sierra
Pacific for $2.1 billion in cash, reduced by the book value of Enron's
obligations remaining as of the closing date, pursuant to the order of the
Oregon Public Utilities Commission dated June 4, 1997 approving Enron's
acquisition of PGE ("Enron's Merger Payment Obligation"). Sierra Pacific
will assume Enron's Merger Payment Obligation as of the closing date.
The proposed transaction is subject to certain customary
closing conditions, including, without limitation, (i) the absence of any
injunction, order, law or regulation preventing consummation of the sale of
the Shares, (ii) receipt by Enron and Sierra Pacific of required statutory
approvals, (iii) performance of obligations of Enron and Sierra Pacific
pursuant to the Stock Purchase Agreement and (iv) the accuracy of Enron's
and Sierra Pacific's representations and warranties. In addition, the
obligation of Sierra Pacific to purchase the Shares is subject to the
condition that since November 5, 1999, no material adverse effect on PGE
shall have occurred.
The Stock Purchase Agreement contains certain covenants of the
parties pending the consummation of the Transaction. Generally, Enron must
cause PGE, PGH II and their subsidiaries to carry on their respective
businesses in the ordinary course consistent with past practice and use all
reasonable efforts to preserve intact their present business organizations
and goodwill. The Stock Purchase Agreement also contains certain
restrictions and limitations of PGE, PGH II and their subsidiaries with
respect to, among other things, dividends on and repurchases of their
capital stock, issuance of securities, amendment of charter documents,
acquisitions, dispositions, indebtedness, capital expenditures,
compensation and benefits, nuclear operations, contracts, the solicitation
of employees and accounting matters. Subject to certain exceptions, cash
dividends on PGE common stock between November 5, 1999, and the closing
date are limited to the lesser of: (i) the aggregate amount of consolidated
net income of PGE for the period from January 1, 1999, through the closing
date; (ii) an aggregate amount of $129.1 million for 1999, $142.6 million
for 2000, and $143.8 million for 2001 (regardless of when such dividends
are actually declared and paid and prorated for the year in which the
closing occurs); less, in the case of (i) and (ii), any dividends declared
and paid by PGE to Enron between January 1, 1999, and November 5, 1999.
Article V of the Stock Purchase Agreement, attached hereto as Exhibit B-1,
provides additional details regarding the conduct of business pending the
closing.
The Stock Purchase Agreement may be terminated under certain
circumstances, including by mutual consent of the parties; by either party
if (i) there is a permanent injunction order by any federal or state court
of competent jurisdiction; (ii) the closing shall not have occurred on or
before November 5, 2000 or May 5, 2001 if certain statutory approvals are
not obtained; or (iii) any of the required statutory approvals have been
denied by a final and nonappealable order, judgment or decree. Furthermore,
the Stock Purchase Agreement may be terminated by Sierra Pacific if there
is a breach or violation by Enron of any covenant, representation or
warranty which resulted in a PGE Material Adverse Effect, as defined in the
Stock Purchase Agreement, and such breach or violation is not cured by the
earlier of the closing date or within 60 days of notice to Enron. The Stock
Purchase Agreement may be terminated by Enron if there is a material breach
or violation by Sierra Pacific of any covenant, representation or warranty
and such breach or violation is not cured by the earlier of the closing
date or within 60 days of notice to Sierra Pacific. If the Stock Purchase
Agreement is terminated because of a party's breach or violation of its
covenants or its representations and warranties, then the breaching party
will pay the other party an amount in cash equal to all documented
out-of-pocket expenses and fees incurred by the non-breaching party. This
reimbursement of expenses will be in addition to any rights that the
non-breaching party may have at common law or otherwise.
3. BACKGROUND AND NEGOTIATIONS LEADING TO THE TRANSACTION.
During the week of August 11, 1999, Steve Oldham, Vice
President, Corporate Development and Strategic Planning, learned from the
investment banking firm of SG Barr Devlin, which had been engaged by Enron,
that Enron was interested in selling all of its interest in PGE for cash in
a transaction to be structured as a stock purchase. Mr. Oldham and his
staff conducted a preliminary evaluation of a potential acquisition of PGE
by Sierra Pacific and concluded that such an acquisition would complement
and advance Sierra Pacific's strategic vision, and that the timing would be
conducive to the redeployment of the proceeds of the sale of generation in
a time frame reasonably concomitant with the sale of Sierra Pacific's
generating plants. Mr. Oldham presented the opportunity to Mr. Niggli, CEO,
of Sierra Pacific, and Malyn Malquist, President and COO of Sierra Pacific.
Management then presented the opportunity to the Planning and
Finance Committee of the Board of Directors of Sierra Pacific on August 18,
1999, at which time the Committee authorized management to retain the
investment banking firm of Salomon Smith Barney to analyze the transaction.
The Committee directed management to conduct further due diligence
preparatory to submitting a non-binding first round "indication of
interest" bid.
Management, Salomon Smith Barney, and Sierra Pacific's outside
attorneys, Skadden, then conducted various evaluations and analyses and
presented their findings to the Planning and Finance Committee at a meeting
on September 10, 1999, after which the Committee authorized management to
submit a preliminary non-binding first round "indication of interest" bid.
On September 13, 1999, Sierra Pacific submitted to Enron a non-
binding "indication of interest" bid to purchase the stock of PGE.
On September 15, 1999, Sierra Pacific was informed by SG Barr
Devlin that Sierra Pacific had been selected to conduct on-site due
diligence and to submit, based on that due diligence, a second-round bid.
Management and its outside experts and advisors were invited to PGE to
participate in a presentation by senior management of PGE and to conduct
on-site due diligence preparatory to submitting a second-round bid.
On September 21, 1999, the Planning and Finance Committee,
senior management, and its outside experts and advisors, presented to the
Board of Directors of Sierra Pacific an analysis and evaluation of a
proposed acquisition of PGE, after which presentation the Board authorized
management to conduct the invited due diligence and to report the results
to the Board. On September 30, 1999, Mr. Niggli, Mr. Malquist, key members
of Sierra Pacific's senior management, and Sierra Pacific's outside experts
and advisors went to Portland to participate in a management discussion and
presentation by PGE in connection with the detailed due diligence to be
conducted immediately thereafter.
From September 30 to October 4, 1999, key members of Sierra
Pacific's senior management, various other employees, and Sierra Pacific's
outside experts and advisors, including Salomon Smith Barney, Skadden, and
Duke Engineering, conducted due diligence on all aspects of PGE, its
operations, and future prospects.
On October 8, 1999, management and the Sierra Pacific's outside
experts and advisors reported at a meeting of the Board of Directors of
Sierra Pacific on all aspects of the due diligence which had been
conducted. The Board of Directors requested that management and its experts
and advisors continue to conduct due diligence and to report to the Board
at a follow-up meeting on October 15, 1999.
On October 15, 1999, management and its outside experts and
advisors presented to the Board further conclusions resulting from
continued due diligence and updated management's valuations and risk
analyses, after which the Board of Directors requested further refinements
and analyses to be presented at a special meeting of the Board of Directors
to be convened on October 22, 1999.
On October 22, 1999, management and its outside experts and
advisors presented their findings and conclusions to the Board of Directors
on final due diligence, valuation, and risk analyses, and presented terms
and conditions of a proposed stock purchase agreement to be submitted
together with a second round bid. The Board of Directors authorized
management to submit their proposed stock purchase agreement and
second-round bid.
In late October, 1999, a representative of SG Barr Devlin
informed Steve Oldham that Sierra's senior management was invited to come
to Houston to participate in discussions and negotiations to clarify
certain aspects of its proposed definitive stock purchase agreement, and to
discuss other matters relative to a proposed transaction.
On November 1, 1999, key members of Sierra Pacific's senior
management and representatives of Salomon Smith Barney and Skadden met with
senior members of Enron's management together with Enron's outside
consultants and legal counsel to clarify aspects of a proposed stock
purchase agreement and to negotiate terms and conditions for a final
agreement. Negotiations continued until November 4, 1999, at which time
senior management of both Enron and Sierra Pacific reached consensus on
final terms and conditions and on price, subject to approval of the Boards
of Directors of both companies.
On November 5, 1999, senior management and its outside experts
and advisors presented to the Board of Directors of Sierra Pacific the
terms and conditions and price of a proposed final stock purchase
agreement, after which time the Board of Directors authorized Mr. Niggli to
execute a final stock purchase agreement on the terms and conditions
presented.
On November 5, 1999, Mr. Niggli was informed that the agreement
had been approved at a special meeting of the Board of Directors of Enron,
at which time Mr. Niggli and Mr. J. Mark Metts, Executive Vice President,
Corporate Development, of Enron, executed the stock purchase agreement.
C. SIERRA PACIFIC MANAGEMENT FOLLOWING THE TRANSACTION.
The management of Sierra Pacific after the transaction will
remain unchanged. The Sierra Pacific Board of Directors will continue to
consist of the current 14 members. The corporate headquarters of Sierra
Pacific and the principal offices of the natural gas and water business
units will remain in Reno, Nevada. The headquarters of SPPC and Nevada
Power will remain in Las Vegas, Nevada. The headquarters of PGE will remain
in Portland, Oregon. Nevada Power, SPPC, and PGE will operate on an
integrated basis as the public utility subsidiaries of Sierra Pacific.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
The fees, commissions and expenses to be paid or incurred,
directly or indirectly, by Sierra Pacific in connection with the
Transaction are estimated as follows:
HSR filing fee......................................... $ 45,000
Legal fees and expenses ................................ 5,000,000
Investment bankers' fees and expenses................... 9,200,000
Consultants and other (public relations, regulatory
support, accounting support, travel, etc.)............ 5,755,000
-----------
TOTAL (estimated) ..................................$20,000,000
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
The following sections of the Act and the Commission's rules
relate to the Transaction:
Section of the ActActivities to which the Section may be applicable
- -------------------------------------------------------------------
4,5 and rules Registration of Sierra Pacific as a holding company
thereunder following consummation of the Transaction.
6, 7 and rules Issuance of securities by Sierra Pacific following
thereunder consummation of the Transaction.
9(a), 10 and Acquisition by Sierra Pacific of common stock of PGE and
rules thereunder PGH II.
8, 11(b)(1) Retention by Sierra Pacific of the operations of the gas
and rules system of SPPC and of various non-utility businesses.
thereunder
A. ACQUISITION OF PGE AND PGH II AND RETENTION OF CERTAIN BUSINESSES
Section 9(a)(2) of the Act provides that unless the acquisition
has been approved by the Commission under Section 10, it shall be unlawful
for any person to acquire, directly or indirectly, the securities of a
public utility company, if that person will, by virtue of the acquisition,
become an affiliate of that public utility and any other public utility or
holding company. The term "affiliate" for this purpose means any person
that directly or indirectly owns, controls, or holds with power to vote,
five percent or more of the outstanding voting securities of the specified
company. Section 9(a)(2) is applicable to the Transaction because Sierra
Pacific - which already is affiliated with two public utility companies,
SPPC and Nevada Power - will acquire the securities of PGE, also a public
utility company.
As set forth more fully below, the Transaction fully complies
with all the applicable provisions of Section 10 of the Act and should be
approved by the Commission. Thus:
the Transaction will not create detrimental interlocking relations or a
detrimental concentration of control;
the consideration and fees to be paid in the Transaction are fair and
reasonable;
the Transaction will not result in an unduly complicated structure for
post-Transaction Sierra Pacific system;
the Transaction is in the public interest and in the interests of
investors and consumers;
the post-Transaction Sierra Pacific system will be a single integrated
electric utility system;
the Transaction equitably distributes voting power among the
investors in the combined company and does not unduly complicate the
structure of the holding company;
the Transaction tends toward the economical and efficient development of
an integrated electric and gas utility system; and
the Transaction will comply will all applicable state laws.
The Standards of Section 10
The statutory standards to be considered by the Commission in
evaluating the Transaction under Section 9(a)(2) are set forth in Sections
10(b), 10(c) and 10(f) of the Act.
1. SECTION 10(B).
Under Section 10(b) of the Act, the Commission must approve the
Transaction unless the Commission finds that:
(1) such acquisition will tend towards interlocking relations or
the concentration of control of public-utility companies, of a
kind or to an extent detrimental to the public interest or the
interest of investors or consumers;
(2) in case of the acquisition of securities or utility assets, the
consideration, including all fees, commissions and other
remuneration, to whomsoever paid, to be given, directly or
indirectly, in connection with the acquisition is not
reasonable or does not bear a fair relation to the sums
invested in or the earning capacity of the utility assets to be
acquired or the utility assets underlying the securities to be
acquired; or
(3) such acquisition will unduly complicate the capital structure
of the holding-company system of the applicant or will be
detrimental to the public interest or the interest of investors
or consumers or the proper functioning of such holding company
system.
A. SECTION 10(B)(1): "INTERLOCKING RELATIONS" OR
"CONCENTRATION OF CONTROL."
The Transaction will not result in detrimental interlocking
relations or concentration of control. By its nature, any merger or
acquisition results in new links between previously unrelated companies.
The Commission has recognized that such interlocking relationships are
permissible in the interest of efficiencies and economies. Northeast
Utilities, Holding Co. Act Release No. 25221 (Dec. 21, 1990), as modified,
Holding Co. Act Release No. 25273 (Mar. 15, 1991), aff'd sub nom. City of
Holyoke v. SEC, 972 F.2d 358 (D.C. Cir. 1992) [hereinafter Northeast
Utilities] ("interlocking relationships are necessary to integrate [merging
entities]"). The links that will be established as a result of the
Transaction are not the types of interlocking relationships targeted by
Section 10(b)(1), which was primarily aimed at preventing business
combinations unrelated to operating synergies. There currently are no
common directors of Sierra Pacific and PGE, but following consummation of
the Transaction there may be common directors and officers of Sierra
Pacific, SPPC, Nevada Power and PGE. Such interlocking relationships merely
would serve to integrate the merging companies, and are characteristic of
virtually every merger transaction subject to Section 9(a)(2). Thus, any
interlocking relations which do occur will be of the kind generally
approved of by the Commission and will not be detrimental to interests of
consumers, investors or the public.
The Transaction also will not result in a detrimental
concentration of control. While the size of the post-Transaction Sierra
Pacific system will be roughly double its current size, the merged company
still will be much smaller than almost all of its neighboring utilities and
holding company systems, including Southern California Edison, Pacific Gas
& Electric, PacifiCorp and Bonneville Power Administration ("BPA"), which
are among the largest utilities in the country.2 Following the Transaction,
Sierra Pacific will have total utility assets of $6.3 billion, total
utility revenues of $3.0 billion, and will serve approximately 1.6 million
electric customers, 101,000 natural gas customers and 67,000 water
customers. The post-Transaction Sierra Pacific system will be considerably
smaller than these neighboring utilities and, as a consequence, Sierra
Pacific will have no ability to dominate the region. Moreover, Sierra
Pacific already has committed to divesting all of its existing generation
assets. In any case, the Commission has approved a number of transactions
which resulted in holding companies of a much larger size.3
Section 10(b)(1) also requires the Commission to consider
possible anti-competitive effects of a proposed merger. In this case, the
Commission has concurrent jurisdiction with the Department of Justice (the
"DOJ"), Federal Trade Commission (the "FTC"), and the FERC to consider the
competitive effects of the Transaction. The Applicants have filed
Notification and Report Forms with the DOJ and the FTC, as required by the
HSR Act, which contained a description of the Transaction's effects on
competition and the applicable waiting period under the HSR Act expired
without further review. In addition, the Applicants have filed, or intend
to file shortly, for the approval of the Oregon PUC and the FERC,
the agencies having immediate jurisdiction over PGE's utility operations.
These filings will contain detailed explanations of why the Transaction
will not have any adverse competitive effect.
- -------------
2 At December 31, 1998, Pacific Gas & Electric Company had $23 billion
in utility assets and generated $8.9 billion in operating revenues
for 1998. Southern California Edison had $20.7 billion in utility
assets and generated $7.4 billion in operating revenues for 1998.
PacifiCorp had $9.1 billion in utility assets as of December 31, 1998
and $4.8 billion in operating reve nues for 1998.
3 See, e.g., TUC Holding Co., Holding Co. Act Release No. 26749 (Aug. 1,
1997) [hereinafter TUC Holding] (combination of Texas Utilities Company
and ENSERCH Corporation; combined assets at time of acquisition of
$22.6 billion and combined operating revenues of $8.7 billion, serving
approximately 3.7 million customers); Entergy Corp., Holding Co. Act
Release No. 25952 (Dec. 17, 1993) [hereinafter Entergy] (acquisition of
Gulf States Utilities; combined assets at time of acquisition of
$22.9 billion and combined revenues of $6.3 billion, serving
approximately 2.4 million customers).
Moreover, under a new Oregon law (S.B. 1149, signed into law on
July 23, 1999), PGE's retail electric service territory will be opened to
retail competition for commercial and industrial customers commencing
October 1, 2001. The service areas of Nevada Power and SPPC, including all
customer classes, will be opened to retail competition as early as March 1,
2000. See Nev. Revised Stat. ss.ss. 704.961-990 (1997). FERC already has
introduced competition into wholesale electric markets through its many
orders authorizing market-based rates for wholesale power sales and a
series of orders mandating non-discriminatory access to electric
transmission facilities. As noted above, Sierra Pacific previously has
committed to divesting its generating assets. Sierra Pacific further
commits to joining one or more regional transmission organizations
("RTOs"), in the form of a non-profit Independent System Operator ("ISO")
or a for-profit "Transco", which would operate the transmission system of
the post-Transaction Sierra Pacific system and the transmission systems of
other RTO members by the end of 2000. In light of these commitments, the
Applicants do not expect the Transaction to have any adverse competitive
effects.
The additional benefits accompanying the Transaction are
outlined above in Item 1(B)(1) and below in Item 3(A)(2)(b) and are
benefits which the Commission has weighed against any concerns about
concentration of control it has had in other transactions. See American
Electric Power Co., Holding Co. Act Release No. 20633 (July 21, 1978).
Indeed, the Commission has approved even those acquisitions "that decrease
competition when it concludes that [such] acquisitions would result in
benefits such as possible economies of scale, elimination of the
duplication of facilities and activities, sharing of production capacity
and reserves, and generally more efficient operations." Northeast, supra
(emphasis added).
For all of these reasons, the Applicants believe that the
Transaction will not result in a concentration of control which will be
detrimental to the public interest, but will offer the potential to
facilitate an actual increase in competition in regional electricity
markets.
B. SECTION 10(B)(2): REASONABLENESS OF CONSIDERATION AND
FEES.
Section 10(b)(2), as applied to the Transaction, provides that
the Commission shall approve the Transaction unless it finds that the
consideration, including all fees, paid by Sierra Pacific is not reasonable
or does not bear a fair relation to the earning capacity of the utility
assets underlying Enron's shares in PGE. In its determination as to whether
or not consideration for an acquisition meets the fair and reasonable test
of Section 10(b)(2), the Commission has considered whether the price was
decided as the result of arm's-length negotiations, American Natural Gas,
Holding Co. Act Release No. 15620 (Dec. 12, 1966), and whether each party's
Board of Directors has approved the purchase price. Consolidated National
Gas Co., Holding Co. Act Release No. 25040 (Feb. 14, 1990). The Commission
also considers the opinions of investment bankers, id., and the earnings,
dividends, and book and market value of the shares of the company to be
acquired. Northeast Utilities, Holding Co. Act Release No. 15448 (Apr. 13,
1966).
Pursuant to the Stock Purchase Agreement, Sierra Pacific will
pay Enron $2.02 billion in cash for all the issued and outstanding common
stock of PGE and PGH II and assume Enron's approximate $80 million merger
payment obligation. The consideration to be paid to Enron was the result of
arm's-length negotiations between the management and financial and legal
advisors of Sierra Pacific and Enron over a period of several months, as
detailed in Item 1(B)(3) above. The Boards of Directors of Sierra Pacific
and Enron approved the Transaction in separate meetings held on November 5,
1999.
In addition, nationally-recognized investment banking firms
retained separately by Sierra Pacific and Enron have reviewed extensive
information concerning the Transaction and conducted several valuation
methodologies. In connection with the approval of the Stock Purchase
Agreement, (i) Sierra Pacific's Board of Directors considered the opinion
of its financial advisor, Salomon Smith Barney, dated November 5, 1999, to
the effect that, as of such date, the aggregate consideration to be paid by
Sierra Pacific in the Transaction was fair, from a financial point of view,
to Sierra Pacific, and (ii) Enron's Board of Directors considered the
opinion of its financial advisors Credit Suisse First Boston Corporation
and SG Barr Devlin, to the effect that the aggregate consideration to be
received by Enron in connection with the Transaction is fair to Enron from
a financial point of view. The opinion of Salomon Smith Barney is attached
hereto as Exhibit I-1 and incorporated herein by reference.
In rendering its opinion, Salomon Smith Barney performed a
number of analyses in connection with its analysis of the aggregate
consideration, including: a comparison of certain financial, stock market,
and other publicly available data of PGE and PGH II with selected
comparable companies and selected precedent transactions; discounted cash
flow analyses of PGE and PGH II; and analysis of the potential pro forma
results of the Transaction. In preparing its opinion, the financial advisor
reviewed, among other things, both public and non-public historical and
projected financial information and forecasts related to the earnings,
assets, business, dividends, cash flow, and prospects of Sierra Pacific,
PGE, PGH II, and comparable companies.
In rendering their fairness opinions, Credit Suisse First
Boston Corporation and SG Barr Devlin each performed a number of analyses
relevant to the fairness of the Transaction consideration to Enron,
including one or more of the following: a comparison of the results of
operations of PGE with those of certain companies deemed relevant; an
analysis of the valuation of PGE and PGH II shares using various valuation
methodologies; and, a comparison of proposed financial terms of the
Transaction with those of certain utility industry business combinations
deemed relevant. In preparing their opinions, the financial advisors
conducted discussions with members of senior management of PGE and PGH II
and reviewed, among other things, both public and non-public historical and
pro forma financial information and forecasts related to the business,
earnings, capital expenditures, cash flow, assets, and prospects of PGE.
Moreover, the Applicants believe that the overall fees,
commissions, and expenses to be incurred by Sierra Pacific in connection
with the Transaction will be reasonable and fair in light of the size and
complexity of the Transaction relative to other transactions and the
anticipated benefits of the Transaction to the public, investors, and
consumers. Sierra Pacific estimates its fees and expenses to be $20
million, representing approximately 1.0% of the value of the consideration
to be paid. These fees will be consistent with percentages previously
approved by the Commission. See, e.g., Entergy, supra (fees and expenses
representing approximately 1.7% of the value of consideration paid to
shareholders of Gulf States Utilities); Northeast Utilities, supra (fees
and expenses representing approximately 2% of the value of the assets
acquired).
In light of the foregoing and considering all relevant factors,
the Applicants believe the aggregate consideration and fees to be paid are
reasonable and bear a fair relation to the earnings capacity of the utility
assets underlying the Applicants' shares. Accordingly, the consideration to
be paid by Sierra Pacific meets the standards of Section 10(b)(2).
C. SECTION 10(B)(3): CAPITAL STRUCTURE AND THE PUBLIC
INTEREST.
Section 10(b)(3) requires the Commission to determine whether
the Transaction will unduly complicate Sierra Pacific's capital structure
or would be detrimental to the public interest, the interests of investors
or consumers, or the proper functioning of Sierra Pacific's system.
Following the Transaction, Sierra Pacific will have a capital
structure which is substantially similar to capital structures which the
Commission has approved in other orders.4 After consummation of the
Transaction, Sierra Pacific will own 100 percent of the shares of PGE and
PGH II common stock, and will continue to own 100 percent of the shares of
common stock of both SPPC and Nevada Power. As described more fully in Item
3.B. below, Sierra Pacific will enter into certain financing arrangements
in the amount of approximately $2.1 billion in order to finance the
Transaction. The issuance of such debt is appropriate under Section
7(c)(2)(A) of the Act for the "purpose of effecting a merger." The
Transaction will not affect the outstanding securities of SPPC or Nevada
Power, including first mortgage bonds, junior subordinated debentures, or
classes of preferred stock. For these reasons, the Applicants believe that
the Transaction will not unduly complicate Sierra Pacific's capital
structure.
As explained in more detail in Item 3.B. below, the ratio of
consolidated common equity to total capitalization of the combined
companies will be, on an unaudited pro forma basis, 20.8 percent. However,
by June 30, 2001, Sierra will increase its consolidated common equity to
approximately 29 percent as a result of: (a) proceeds from the sale of
generating assets of Sierra Pacific and Nevada Power aggregating
approximately $1 billion, 100 percent of which will reduce debt of the
consolidated company; (b) proceeds from divestiture of non-core assets, or
some combination of common equity and divestiture of non-core assets, which
together would be approximately equivalent to the issuance of $260 million
in terms of impact on Sierra Pacific's equity ratio; (c) issuance of up to
$600 million of hybrid securities; and (d) increased retained earnings
realized from the combined operations of Sierra and PGE aggregating
approximately $80 million in 2000 and $100
- -------------
4 See, e.g., TUC Holding Co., supra; CINergy, Corp., Holding Co. Act
Release No. 26909 (Aug. 21, 1998) (authorizing the issuance of up to $400
million of unsecured debt securities); Entergy, supra. In each of these
orders, the Commission approved mergers which resulted in a holding
company acquiring 100 percent of a utility operating company's common
stock.
million in 2001. Based on present expectations, Sierra Pacific believes
that increases in retained earnings from operations will increase its
consolidated common equity to 30 percent within 24 months following the
Transaction. Moroever, as the table in Item 3.B. indicates, the common
equity ratios of the operating companies will be at least 40 percent at all
times following the Transaction. The Commission has approved common equity
to total capitalization ratios as low as 27.6 percent. Northeast Utilities,
supra.
In addition, as discussed earlier in Item 1(B)(1), the
Applicants believe that the Transaction, by achieving efficiencies and
economies, will benefit the interests of the public, consumers and
investors and will not impair the proper functioning of the holding company
system.
2. SECTION 10(C).
Section 10(c) of the Act provides that, notwithstanding the
provisions of Section 10(b), the Commission shall not approve:
(1) an acquisition of securities or utility assets, or of any other
interest, which is unlawful under the provisions of Section 8
or is detrimental to the carrying out of the provisions of
Section 11; or
(2) the acquisition of securities or utility assets of a public
utility or holding company unless the Commission finds that
such acquisition will serve the public interest by tending
towards the economical and the efficient development of an
integrated public utility system.
A. SECTION 10(C)(1): LAWFULNESS UNDER SECTION 8 AND
DETRIMENT TO CARRYING OUT SECTION 11
I. THE TRANSACTION IS LAWFUL UNDER SECTION 8
Section 8 prohibits an acquisition by a registered holding
company of an interest in an electric utility and a gas utility serving
substantially the same territory without the express approval of the state
commission where state law prohibits or requires approval of the
acquisition. As noted, the Transaction is not subject to Nevada PUC
approval, nor is the operation of a combined electric and gas system
prohibited by Nevada law. Accordingly, the Transaction does not raise any
issue under Section 8.
II. THE TRANSACTION WILL NOT BE DETRIMENTAL TO
CARRYING OUT THE PROVISIONS OF SECTION 11
Section 10(c)(1) also requires that the Transaction not be
"detrimental to the carrying out of the provisions of Section 11." First,
Section 11(b)(1) generally requires a registered holding company to limit
its operations to a "single integrated public-utility system, and to such
other businesses as are reasonably incidental, or economically necessary or
appropriate to the operations of such integrated public-utility system."
Second, Section 11(b)(2) directs the Commission "to ensure that the
corporate structure or continued existence of any company in the
holding-company system does not unduly or unnecessarily complicate the
structure, or unfairly or inequitably distribute voting power among
security holders, of such holding-company system." By its terms, however,
Section 10(c)(1) does not require that the Transaction "comply to the
letter with Section 11." Madison Gas & Electric Co. v. SEC, 168 F.3d 1337,
1343 (Mar. 16, 1999) [hereinafter Madison Gas] ("In contrast to its strict
incorporation of section 8 (proscribing approval of an acquisition "that is
unlawful" thereunder), with respect to section 11 section 10(c)(1)
prohibits approval of an acquisition only if it "is detrimental to the
carrying out of [its] provisions."). As described below, the Applicants
believe the Transaction is not detrimental to carrying out the provisions
of Section 11.
(A) SECTION 11(B)(1) - SINGLE INTEGRATED PUBLIC
UTILITY SYSTEM
Section 11(b)(1) directs the Commission generally to limit a
registered holding company "to a single integrated public-utility system."
Section 2(a)(29) of the Act provides separate definitions of the term
"integrated public-utility system" for gas and electric companies. For
electric utility companies, the term means:
a system consisting of one or more units of generating plants and/or
transmission lines and/or distributing facilities, whose utility
assets, whether owned by one or more electric utility companies, are
physically interconnected or capable of physical interconnection and
which under normal conditions may be economically operated as a
single interconnected and coordinated system confined in its
operations to a single area or region, in one or more States, not so
large as to impair (considering the state of the art and the area or
region affected) the advantages of localized management, efficient
operation, and the effectiveness of regulation . . . .
For gas utility companies, the term means:
a system consisting of one or more gas utility companies which are so
located and related that substantial economies may be effectuated by
being operated as a single coordinated system confined in its
operations to a single area or region, in one or more States, not so
large as to impair (considering the state of the art and the area or
region affected) the advantages of localized management, efficient
operation, and the effectiveness of regulation; Provided, that gas
utility companies deriving gas from a common source of supply may be
deemed to be included in a single area or region.
Further, Section 11(b)(1) permits the acquisition and retention
of more than one integrated public utility system if the requirements of
Section 11(b)(1)(A), (B) and (C) are satisfied.
Background
- ----------
Early in its administration of the Act, the Commission
construed Section 11(b)(1) to restrict significant geographic expansion by
holding company systems. This limitation was not an absolute principle, but
rather the product of specific facts and circumstances. As underlying
conditions have changed, so too has the Commission's treatment of Section
11(b)(1). Such pragmatic flexibility has characterized the Commission's
administration of the Act generally over time. In its own words, the Act
"creates a system of pervasive and continuing economic regulation that must
in some measure at least be fashioned from time to time to keep pace with
changing economic and regulatory climates."5 In recent decisions, the
Commission has cited U.S. Supreme Court and federal Courts of Appeals cases
that recognize that an agency is not required to "establish rules of
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5 Union Electric Co., Holding Co. Act Release No. 18368, n. 52 (Apr. 10,
1974), quoted in Consolidated Natural Gas Co., Holding Co. Act Release
No. 26512 (April 30, 1996) (authorizing international joint venture to
engage in energy marketing activities).
conduct to last forever,"6 but must adapt [its] rules and policies to the
demands of changing circumstances"7 and to "treat experience not as a jailer
but as a teacher."8
When considering the evolving concept of system integration
under Section 11(b)(1), it is important to bear in mind the unchanging
purpose underlying that concept. As set forth in Section 1(b)(4) of the
Act, Section 11(b)(1) was intended to address a "growth and extension of
holding companies [that] bears no relation to economy of management and
operation or the integration and coordination of related operating
properties . . . ." See also Northeast Utilities, supra at n. 13 (noting
that Section 1(b) identifies "the expansion of holding company systems
without regard to the integration and coordination of related utility
properties" as a specific abuse arising out of the holding company
structure that the Act was intended to correct); Centerior Energy Corp.,
Holding Co. Act Release No. 24073 (Apr. 29, 1986) (hereinafter Centerior).
The Commission has sometimes referred to this phenomenon as "scatteration"
and has emphasized that its elimination is a means to an end, and not an
end in itself. Thus the Commission has found that an "analysis of the Act
and a study or our function under Section 11 in light of the preamble to
the Act . . . make it clear that integration and the elimination of
scatteration is not an end in itself but rather that it is required under
the Act in order to eliminate various abuses and evils which are inherent
in scatteration." In re Central U.S. Utilities Co., et al., Holding Co. Act
Release No. 2588 (March 1, 1941). The problem to be solved through
integration was one of "unbridled and unsound expansion of utility holding
companies controlling utilities scattered from coast to coast . . . . These
systems were not based upon any rational pattern of utility system
structure, but rather were an exercise in empire building based primarily
on financial considerations and financial maneuvering." American Electric
Power Co., Inc., Holding Co. Act Release No. 20633 (July 21, 1978)
(emphasis added).
- -------------
6 Rust v. Sullivan, 500 U.S. 173 (1991) [hereinafter Rust]; American Truck
ing Assns., Inc. v. Atchison, T.&S.F.R. Co., 387 U.S. 397 (1967);
Shawmut Assn. V. SEC, 146 F.2d 791 (1st Cir. 1945) [hereinafter
Shawmut].
7 NIPSCO Industries, Inc., Holding Co. Act Release No. 26975 (Feb. 10,
1999) [hereinafter NIPSCO], citing Rust, supra at 186-87.
8 NIPSCO, supra, citing Shawmut, supra at 796-97.
The Commission's principal policy concern in connection with
system integration has been the potential disparity between purely
financial considerations and the efficient coordination of utility systems
and their operation. The solution to the problem - integration - is
necessarily an evolving concept because what constitutes a "rational
pattern of utility system structure" must change as the industry evolves.
For this reason, Section 11 is not intended to impose "rigid concepts" but
rather creates a "flexible" standard designed "to accommodate changes in
the electric utility industry." UNITIL Corp., Holding Co. Act Release No.
25524 (Apr. 24, 1992) [hereinafter UNITIL]. The point is driven home in
Section 2(a)(29)(A), which expressly directs the Commission to consider the
"state of the art" in analyzing whether a system is not to large to lose
the benefits of "localized management, efficient operation, and the
effectiveness of regulation . . . ." The same section requires the
Commission to look to "normal conditions", an inherently evolving concept,
when determining whether a system may be "economically operated as a single
coordinated system . . . ." Past decisions interpreting integration
standards in light of the "state of the art" that obtained in the past thus
do not rigidly constrain the Commission when it confronts issues of the
present. See, e.g., American Elec. Power, Holding Co. Act Release No. 20633
(July 21, 1978) [hereinafter AEP] (noting that the state of the art -
technological advances in generation and transmission, unavailable thirty
years prior - served to distinguish a prior case and justified "large
systems spanning several states").
The ongoing restructuring of the U.S. electric utility industry
has further reshaped the concept of integration. This is because from the
perspective of the past these developments could be viewed as a type of
intentional "disintegration" mandated by regulatory and statutory changes.
In implementing the transmission access requirements of the Energy Policy
Act of 1992, FERC required in its Order Nos. 8889 and 88910 that electric
- ------------
9 Promoting Wholesale Competition through Open Access Non-Discriminatory
Transmission Services by Public Utilities, Order No. 888, FERC
Stats. & Regs., Regulations Preambles,P. 31,036 (1996), order on reh'g,
FERC Stats. & Regs., Regulations Preambles,P. 31,048 (1997), order on
reh'g, 81 FERCP. 61,248 (1997), order on reh'g, 82 FERCP. 61,046
(1998).
10 Open Access Same-Time Information System (formerly Real-Time Information
Network) and Standards of Conduct, Order No. 889, FERC Stats. &
Regs., Regulations Preambles,P. 31,035 (1996), order on reh'g, III FERC
Stats. & Regs., Regulations PreamblesP. 61,253 (1997).
utilities functionally unbundle their transmission and generation
operations. At a minimum this means that utilities owning both generation
and transmission facilities must utilize transmission services under a
tariff of general applicability; must separate rates for wholesale
generation, transmission and ancillary services; and must rely on the same
electronic information network relied on by their transmission customers.
Many recent state laws further encourage this "disintegrative" tendency by
mandating competitive resource procurement and retail electric competition,
and the functional separation (and, in some states, divestiture) of
generation from transmission and distribution operations.
While these developments may appear disintegrative from the
perspective of the past, viewed from the present they represent the
emergence of market prices as the primary integrative mechanism for
electric utility systems. Rapid developments in technology and the
emergence of the power marketing and energy trading businesses have
facilitated efficient and competitive low-cost electric markets. Open
access to transmission services means that all utilities are integrated to
some degree both de facto and de jure. Indeed, in requiring open access,
federal law now prohibits the restricted forms of interconnection that
would have been considered the norm in 1935.
The new practices and procedures for integrating a
disaggregated electric utility industry are found in the practices of
Independent System Operators and in the FERC's recent rulemaking regarding
RTOs.11 Perhaps the most notable of these developments is the evolution of
RTOs, which are intended to facilitate trading regions with vastly reduced
economic constraints on transmission access and with the ability to manage
and plan for new transmission on a regional basis to help alleviate
transmission constraints, thereby providing member entities with both the
requisite physical and economic means to integrate their systems.
In light of these changes, SEC Staff has recommended that the
Commission "respond realistically to the changes in the utility industry
- -------------
11 Regional Transmission Organizations, Order No. 2000, 89 FERCP. 61,285
(Dec. 20, 1999), reprinted at 65 Fed. Reg. 810 (Jan. 6, 2000).
and interpret more flexibly each piece of the integration requirement."12
As always, the ultimate criteria in judging whether the Act's integration
requirements have been met is whether the proposed outcome "will lead to a
recurrence of the evils the Act was intended to address."13 The Applicants
submit that it is not even remotely possible that their proposed
arrangements described below could encourage or lead to the evils produced
by scatteration and that, accordingly, there is no basis to conclude that
those arrangements would not satisfy the Act's integration requirements.
Integration Standards
Before the Commission will find that a proposed merger of two
separate systems will result in an integrated public utility system, an
applicant must satisfy four statutory standards created by Section
2(a)(29)(A):
(i) the utility assets of the systems must be physically
interconnected or capable of physical interconnection;
(ii) the utility assets, under normal conditions, must be economically
operated as a single interconnected and coordinated system;
(iii) the system must be confined in its operations to a single area or
region; and
(iv) the system must not be so large as to impair (considering the
state of the art and the area or region affected) the
advantages of localized management, efficient operation, and
the effectiveness of regulation.
See, e.g., Environmental Action, Inc. v. SEC, 895 F.2d 1255, 1263 (9th Cir.
1990) (citing In re Electric Energy Inc., Holding Co. Act Release No. 13871
(Nov. 28, 1958)). In a world of vertically-integrated utility monopolies
subject to constrained transmission access, the arrangements that will
satisfy this test will vary substantially from those characteristic of a
world dominated by functional unbundling, competition, open transmission
access, and the comprehensive interconnection of utility systems. Finally,
as noted above Section 10(c)(1) does not require the Commission
- -----------
12 Division of Investment Management, The Regulation of Public-Utility
Holding Companies, June 1995 at 67 [hereinafter "1995 Report"].
13 Southern Co., Holding Co. Act Release No. 25639 (Sep. 23, 1992),
quoting Union Electric, supra.
to find that a transaction "compl[ies] to the letter with section 11", only
that it is not "detrimental" to carrying out it provisions. Madison Gas,
supra at 1343. In any event, as discussed below Applicants believe the
Transaction meets each of these standards.
(i) Physical Interconnection
The first requirement for an integrated public utility system
is that the electric generation and/or transmission and/or distribution
facilities comprising the system be "physically interconnected or capable
of physical interconnection." Sierra Pacific will satisfy this requirement
by connecting its system through the use of transmission paths over third
party systems and through participation in RTOs. The use of such paths is
now standard procedure in the industry and has received strong
encouragement by Congress in the Energy Policy Act of 1992 and FERC actions
implementing that statute.
Even prior to these recent developments, the Commission found
that parties relying on third-party lines to interconnect their systems are
"physically interconnected or capable of physical interconnection." See,
e.g., Northeast Utilities, supra; Centerior supra; UNITIL, supra; see also
Conectiv, Inc., Holding Co. Act Release No. 26832 (Feb. 25, 1998); C&T
Enterprises, Inc., Holding Co. Act Release No. 26973 (Feb. 5, 1999). These
cases firmly stand for the proposition that utilities can satisfy the
interconnection requirements of Section 2(a)(29) through use of another
party's transmission lines. For example, in Centerior, supra, the
Commission accepted a plan to interconnect two systems through third-party
transmission lines which would be available only to the extent that such
use of the lines did not impair the transmission rights of others under a
comprehensive power pool transmission agreement. The Commission accepted
Centerior's reliance on third-party lines based on a demonstration that its
use of those lines would not interfere with the rights of any other parties
and that the lines would be available to it when needed. See also Northeast
Utilities, supra (accepting applicants' interconnection through reliance on
a right to use a third-party's lines). In other cases, the Commission has
accepted participation in "tight" power pools as providing for physical
interconnection, given that such pools provide access to interconnecting
pool participants' transmission facilities. See, e.g., UNITIL, supra;
Conectiv, supra.
Sierra Pacific similarly will interconnect its post-Transaction
system through a combination of transmission paths over third-party lines.
As described below, (i) the Applicants will purchase a 50 MW long-term firm
contract transmission path connecting PGE and Nevada Power, and (ii) nearly
all of the hours of the year the Applicants and load serving entities will
be able to reserve on an open-access basis extensive firm and non-firm
transmission capacity on third party transmission paths that interconnect
PGE and SPPC, and SPPC and Nevada Power.14
With regard to open-access reservation of capacity, because of
the high availability of transmission paths connecting both PGE with SPPC
and SPPC with Nevada Power, Sierra Pacific and load serving entities will
be able to reserve firm or non-firm transmission capacity on these paths on
a short-term, as-needed basis and thereby avoid paying the high cost of
reserving the transmission capacity on a long-term basis. These cost
savings will be substantial because it is significantly more expensive to
reserve transmission capacity on a long-term (i.e., 24 hours/day, 365
days/year), firm basis than to purchase transmission capacity for only
those hours when transmission is needed. Therefore, electric consumers
served by the Sierra Pacific system will receive almost all of the benefits
of a long-term, firm transmission path at a significantly lower cost,
which, in turn, makes integration of the Applicants' system more economic.
The small amount of the time that the non-firm paths are
unavailable will not affect the ability of the Applicants and load serving
entities to meet load obligations. This is because SPPC, Nevada Power and
PGE each have access to sufficient generation capacity to serve their
entire load obligation requirements. The transmission paths that Applicants
propose to utilize to integrate the systems simply enable load serving
entities in the Applicants' control areas to engage in a process of
economic dispatch in which they substitute cheaper power from generation
resources located in an affiliated company's control area for more
expensive power generated in their own control area. The occasional
unavailability of the transmission path is potentially an economic, but not
a reliability, issue.
The following simplified schematic shows the interconnections
among various entities in the region:
- -----------
14 Due to commencement of competition in Nevada, a variety of entities
will compete and assume responsibility for providing electric service
to SPPC's and Nevada Power's current native load customers. SPPC and
Nevada Power will continue to serve those customers that do not
select a new energy service provider. Thus, both Sierra Pacific and
these new load serving entities will have the ability to purchase
transmission service on third party systems to serve their loads.
[Schematic of Transmission Paths Between PGE, SPPC, and Nevada Power]
1. PACIFIC DC INTERTIE - INTERCONNECTING PGE AND NEVADA POWER
PGE will interconnect with Nevada Power through the 500 kV
Pacific Direct Current ("DC") Intertie running from The Dalles, Oregon
through Nevada to a point near Los Angeles, California. PGE owns 100 MW of
firm rights on this line from The Dalles to the Nevada-Oregon Border
("NOB"). The Los Angeles Department of Water and Power ("LADWP") owns at
least 100 MW of firm rights on the line from NOB to the Los Angeles area.
LADWP also is interconnected with both SPPC and Nevada Power. Sierra
Pacific intends to use 50 MW of PGE's firm rights on the DC Intertie from
PGE to NOB. Sierra Pacific will purchase from LADWP 50 MW of firm rights
that will allow it to transmit firm power from NOB through LADWP's system
to Nevada Power. This firm path connecting PGE and Nevada Power is shown on
the following schematic.
[Schematic of Transmission Path Using Pacific DC Intertie]
2. ALTURAS LINE - INTERCONNECTING PGE AND SPPC
The PGE system will be interconnected with the SPPC system
using short-term transmission service from PGE's interconnection at the
Malin substation to SPPC's interconnection with Bonneville Power
Administration ("BPA") at Hilltop,California. The BPA line at Hilltop runs
to the Malin substation. The following schematic sets forth the elements of
this interconnection.
[Schematic of Transmission Path Using Alturas Line]
Two features of this path deserve further discussion. First,
certain California entities have asserted in a current proceeding at the
FERC that Sierra Pacific may not use its Alturas Line (which interconnects
with BPA at Hilltop) on a firm basis. Sierra Pacific is contesting this
assertion and believes that it will prevail.15 Second, in order to improve
the economics of this transmission path, transmission service will be
contracted for with PacifiCorp (to transmit power over the Malin
substation) and BPA (to transmit power from Malin to Hilltop) on a short-
term firm or non-firm basis. This strategy will produce substantial
savings, with very little impact on transmission capability. Sierra Pacific
has determined on the basis of publicly available data that 360 MW of
non-firm capacity has been available on the path connecting PGE to SPPC
during approximately 95% of the hours of the year, and that up to 50 MW has
been available during 98% of the hours. There is no reason to believe that
these levels of availability will be reduced significantly at any time in
the foreseeable future. This transmission path offers even greater
availability when transmitting power in the opposite direction, i.e., from
SPPC to PGE. As discussed above, electric consumers served by the Sierra
Pacific system will receive almost all of the benefits of a long-term, firm
transmission path at a significantly lower cost, which enhances the
economic dimension of the Applicants' integrated system.
3. THROUGH PACIFICORP EAST - INTERCONNECTING SPPC AND NEVADA POWER
SPPC and Nevada Power are interconnected through the PacifiCorp
East system. The Applicants will use short-term firm or non-firm
transmission on PacifiCorp East to transmit power between SPPC and Nevada
Power, both of which interconnect with PacifiCorp East. Sierra Pacific has
determined that 100 MW of non-firm transmission capacity has been available
to transmit power from SPPC to Nevada Power on this path during
approximately 96% of the hours of the year and during 97% of the hours to
transmit power from Nevada Power to SPPC.16 The following schematic shows
this path.
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15 Note that there is no dispute that power can go from Hilltop to SPPC
on a non-firm basis or that power can go from SPPC to Hilltop on a
firm basis. Therefore, even if Sierra Pacific were unsuccessful
before the FERC, sufficient transmission capacity still would be
available on a non-firm basis 95-98% of the time.
16 Moreover, in cases where the path is constrained in one direction,
typically it is fully available in the other direction.
[Schematic of Transmission Path Using PacifiCorp East]
To summarize, the PGE, SPPC and Nevada Power systems will
interconnect through a long-term, firm 50 MW contract path from PGE to
Nevada Power over the Pacific DC Intertie and the purchase of short-term
firm or non-firm transmission service over a number of transmission paths
offering high levels of availability. Specifically, (i) the transmission
path between PGE to SPPC over the Alturas Line has been available
approximately 95-98% of the time from PGE to SPPC and an even larger
percentage of the time from SPPC to PGE and (ii) the transmission path
between SPPC to Nevada Power over PacifiCorp East has been available
approximately 96% of the time from SPPC to Nevada Power and 97% of the time
from Nevada Power to SPPC.
Sierra Pacific's reliance on this combination of firm and
non-firm transmission paths is consistent with Commission precedent. As
discussed above, the Commission has found in several prior cases that
holding companies are able to integrate their systems through the use of
interconnecting third-party lines. See Northeast Utilities, supra;
Centerior, supra; UNITIL, supra; Conectiv, Inc., supra; C&T Enterprises,
Inc., supra. In several of these cases, holding companies had secured firm
contracts to use third-party lines, and in other cases holding companies
relied on participation in power pools to satisfy the physical
interconnection requirement. In such situations the Commission has focused
on the actual ability of the holding company systems to access third-party
transmission lines and has found that so long as there is an ability to use
third-party lines, those paths are sufficient to satisfy the physical
interconnection requirement. These conditions are equivalent in substance
to the arrangements being proposed by the Applicants. For example, in
Centerior, supra, the applicants proposed to interconnect through a
third-party line under multi-party transmission agreement that made the
line available so long as their use did "not materially interfere with
purposes" of the agreement, i.e., the facilitation of pool-wide transfers
of power. This conditional use represents the functional equivalent of a
non-firm right. On the basis of technical studies submitted by the
applicants, the Commission found that "under normal conditions" their
facilities could be operated as a single coordinated and interconnected
system. See also UNITIL, supra.
The Applicants similarly will use a collection of transmission
access rights representing current standard techniques for operating a
single interconnected and coordinated system economically under normal
conditions. The interconnecting transmission paths between the Sierra
Pacific operating companies will be accessible pursuant to the relevant
transmission owner's OATT on file at FERC. Under these tariffs,
transmission owners are required to provide open access to their
transmission lines to all parties requesting service. It is critical to
note that these parties include the transmission line owners themselves.
FERC's comparable service requirements mean that transmission facility
owners must offer transmission service to others under the same terms and
conditions as they supply it to themselves. So long as capacity is
available, transmission owners may not deny any party the right to use the
paths, and transmission facility owners do not have any prior claim to
access by virtue of their ownership rights when capacity is not available.
This means that each party using transmission service stands on equal
footing with every other party and will choose a mixture of firm and non-
firm service depending on its assessment of the economically most favorable
alternatives.
To elaborate further, Order No. 888 requires transmission
owners to grant to Sierra Pacific a right of access to interconnecting
transmission systems. Prior to Order No. 888, electric utilities typically
needed to construct direct interconnections or enter into long-term
bilateral contracts in order to facilitate capacity and energy transfers.
Now, as a matter of right under Order No. 888, two utilities can arrange
contractually for transmission to achieve interconnection solely by relying
on an OATT. Pursuant to an OATT, market participants have a
federally-mandated right to acquire either a firm or a non-firm path to
transfer power between utility systems. All parties, including transmission
facility owners, reserve transmission services electronically through the
owner's Open Access Same-Time Information System ("OASIS") mandated by FERC
Order No. 889. Service is reserved for a specific amount of power and for a
specific period of time, which may be as short an one hour or as long as
several years. Service can also be reserved on a firm or non-basis. In all
cases, a party will reserve service on the basis of terms and conditions
that, in its business judgment, represent the economically and
operationally preferable alternative.
Generators reserve transmission service through a transmission
providers the provider's Internet OASIS site. Each provider must post on
its OASIS all its available transmission capacity ("ATC") -- what it has
available to sell -- for both long-term and short-term reservations. A
party that determines it needs transmission service will first check the
OASIS listings to ensure sufficient ATC is available for the required time
period on each leg of the transfer. It will then place its reservation
electronically.17 The request is submitted by inputting it directly into
the OASIS site.18 The transmission provider must respond to the request
within the time period specified under the OATT -- the longer the term of
the reservation, the longer the allowed response time. Within the time
allowed, the transmission provider must either accept the reservation or
provide a reason permitted under the OATT for denying the request.19
Reserving transmission capacity is an on-going, normal, day-to-day
operation which is adjusted as circumstances warrant to ensure optimal
system operations.20
OATTs establish a hierarchy of service -- and a corresponding
variation in cost. "Firm" service is the most reliable. It is available on
a long-term (i.e., one year or more), monthly, weekly or daily basis. A
transmission provider may "cut" (i.e., refuse to initiate or curtail use of
the transmission for energy deliveries notwithstanding the firm
reservation) only when a threat to system reliability appears, i.e., in
emergency situations. All users of firm service -- including the
transmission facility owner with respect to its "native load" -- must
receive equal treatment when service is cut.
Like every other market participant, Sierra Pacific will
utilize this system to integrate and optimize its post-Transaction system.
Sierra Pacific believes that its plan to integrate its system through a
combination of long-term firm and short-term firm or non-firm transmission
paths represents a rational and appropriate response to the fundamental
changes that open access has caused in the industry. The choice to rely, in
part, on a non-firm contract path does not affect Sierra Pacific's ability
to interconnect its system physically. As described above, up to 50 MW of
non-firm transmission capacity on the Alturas path will be available to
Sierra Pacific 98% of the time, and up to 360 MW of capacity will be
available 95% of the time. Similarly, on the PacifiCorp East path at least
100 MW of capacity is available for use 96-97% of the time. Given the high
availability of these lines, electric consumers served by the Sierra
Pacific system will receive almost all of the benefits of a long-term, firm
transmission path at a fraction of the cost. The limited hours in which the
transmission lines are not available will have no impact on reliability,
given that the PGE, SPPC, and Nevada Power systems already have access to
sufficient generation capacity to serve their individual loads. The real
effect of Applicants' reliance on a combination of firm and non-firm paths
is to ensure that integration of the post-Transaction Sierra Pacific system
will be significantly more economic and flexible. Indeed, under present
standards this entire operational plan represents what Section 2(a)(29) of
the Act refers to as the "normal conditions" for the economic operation of
a single interconnected system.
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17 The transaction takes place through the Internet, which means that
the process is executed through computers integrated into a single
communica tions network linking all system participants. The party
seeking transmis sion services places a "query" on the OASIS site for
the transmission path, amount of transmission capacity, and the
transmission period desired. The OASIS software will perform a search
and produce information listing the transmission available within
those parameters.
18 Long-term reservations, i.e., those lasting one year or more, must be
made at least 60 days in advance of the start date but can be
requested and confirmed prior to the 60 day period. Short-term,
non-firm reservations can be made on shorter notice: monthly
reservations are made on 60 days notice; daily, on 48 hours notice
and hourly, by noon of the day before.
19 Other than rejections for technical non-compliance of the request
with the terms of the OATT, the transmission provider, in general,
may only reject a reservation request because of insufficient
transmission capacity to fulfill the request in the amount and for
the time period specified. Requests rejected on grounds of technical
non-compliance may be corrected and resubmitted.
20 Under the OATT, most transmission providers allow users to "rollover"
a long-term reservation, which in effect gives the user a right of
first refusal on future reservations of transmission capacity when
the long-term reserva tion expires.
Moreover, Sierra Pacific intends to enhance the interconnection
of its post-Transaction system through participation in RTO West. Sierra
Pacific has participated actively in recent discussions with other regional
utilities regarding the creation of one or more regional transmission
entities to satisfy the FERC's RTO rule. Specifically, SPPC, Nevada Power
and PGE have entered into a Memorandum of Understanding with Avista
Corporation, Montana Power and Puget Sound Energy to study the formation of
a for-profit independent transmission company ("ITC") that would acquire
and operate the transmission facilities currently owned by the
participating companies. If the Applicants determine that the creation of
the ITC is economically feasible, the ITC would join RTO West, an ISO being
formed to integrate the transmission systems of utilities operating in
eight states in the Pacific Northwest.21 Thus, the entire post-Transaction
Sierra Pacific system will be within one physically integrated RTO, which
is consistent with the requirements of Section 2(a)(29)(A).
In sum, the post-Transaction Sierra Pacific system will be
"physically interconnected" through third-party transmission owners. These
interconnections will be established on the basis of contract paths typical
of today's interconnected electric utility system. The Commission
previously has accepted applicants' reliance on contract paths and
participation in power pools to satisfy the interconnection requirements.
It is important to note in this connection that there is no specific
requirement under the Act that these contract paths be established through
firm contracts; moreover, there is no reason under the Act to require the
use of such contracts if interconnection can be achieved effectively and
more economically through non-firm contracts. Applicants believe that their
interconnection plans conform in all material respects with this precedent
and that, as a result, Sierra Pacific's post-Transaction will satisfy the
interconnection requirements of Section 2(a)(29)(A).
- ----------
21 Sierra Pacific intends to file by October 15, 2000, a request for FERC
approval of the RTO West and ITC proposals. Even if the Applicants
determine that creation of the ITC is not an economically viable option,
it is currently anticipated that SPPC, Nevada Power, and PGE will join
RTO West or whether participation in multiple RTOs in appropriate. At
this preliminary state, Sierra Pacific expects PGE would join RTO West and
that SPPC and Nevada Power would join a second RTO with utilities in the
Central Southwest. Nonetheless, it is expected that these RTOs would be
contiguous with one another, thereby permitting interconnection through
inter-RTO coordination.
(ii) Coordination
Sierra Pacific will coordinate the economic dispatch of its
post-Transaction system by coordinating load planning and power purchasing
for the Nevada Power, SPPC and PGE systems. Due to the divestiture of
Sierra Pacific's generation assets, traditional joint dispatch of the
post-Transaction system would be impossible because the SPPC and Nevada
Power systems no longer will have generation assets to dispatch.
Historically, the Commission has interpreted the requirement that
an integrated electric system be economically operated under normal
conditions as a single interconnected and coordinated system "to refer to
the physical operation of utility assets as a system in which, among other
things, the generation and/or flow of current within the system may be
centrally controlled and allocated as need or economy directs." Conectiv,
supra, citing North American Co., Holding Co. Act Release No. 3466 (Apr.
14, 1942), aff'd, 133 F.2d 148 (2d Cir. 1943), aff'd, 327 U.S. 686 (1946).
The Commission has noted that, through this standard, Congress "intended
that the utility properties be so connected and operated that there is
coordination among all parts, and that those parts bear an integral
operating relationship to one another." Id. (internal citations omitted).
The Commission's established standards in this respect strongly
reflect the essential characteristics of the vertically-integrated utility
monopolies that dominated the industry from 1935 until the recent past.
However, Section 2(a)(29)(A) in relevant part requires only that systems be
"economically operated" and "coordinated;" it does not establish specific
structural or operational requirements for utility systems. As more states
move down the path toward retail competition, with some states eliminating
vertically-integrated monopolies through significant divestiture of
generating assets (as Nevada has done), and as the growth of liquidity in
wholesale markets continues, coordination though market operations, and not
through joint dispatch, will be the primary means of achieving the
efficiency of operations formerly effected through joint dispatch. In a
competitive market, coordination of regional generation facilities and
efficiency in generation dispatch will be achieved through a combination of
competitive bidding for generation sales, which will ensure economic
dispatch, as well as through RTOs, which will coordinate generation
maintenance schedules and generation dispatch for system reliability
purposes.
Accordingly, Applicants believe that under current
circumstances the Act's coordination requirement is satisfied if utilities
are able to achieve efficiencies through such measures as coordinated power
service operations that do not necessarily involve joint dispatch in the
traditional sense; coordinated transmission through membership in RTOs;
coordinated marketing efforts, both as a buyer and seller of electricity;
the integration of administration and general services and programs; and
gas/electric convergence measures, which will lead to lower costs for gas
as a fuel for the generation of electricity. In light of the developments
that have occurred in the electric utility industry and the regulatory
framework that applies pertains to it, Applicants believe the coordination
of utilities in the current marketplace must be achieved through these
market and contractual arrangements rather than through historical joint
dispatch.
While Applicants wish to highlight current practices in the
industry, it is important to note that this is not a matter of first
impression. Nearly a decade ago, the Commission found that the coordination
requirement could be satisfied even where a system's generating units are
not jointly dispatched and even where power never flows between two parts
of the system. See Sierra Pacific Resources, Holding Co. Act Release No.
24566 (Jan. 28, 1988), aff'd by Environmental Action, Inc., supra
(approving Sierra Pacific's participation in a consortium of utilities
acquiring interests in a company that would own and operate the Thousand
Springs generating unit); Electric Energy, Inc., supra (approving the
acquisition by a consortium of utilities of interests in a company that
would own and operate a generating unit). In these cases the Commission
authorized holding companies to join a consortium of utilities to acquire
interests in companies formed solely for the purpose of operating a
generating plant. In neither case, however, did the participating holding
companies commit to joint dispatch of the plants or to coordinating the
output of the plants with the rest of their systems. Rather, the consortium
participants were to take output from the shared facilities only where it
was available and/or economical from the perspective of the individual
owner. The Commission found in both cases that the plants at issue could be
operated as part of a coordinated system within the meaning of Section
2(a)(29)(A) where the owner holding companies relied on their own market
criteria rather than dispatch procedures and protocols to utilize the
facilities in question on a joint basis.
Moreover, in applying the integration standard, the Commission
consistently has looked beyond the coordination of generation and
transmission within a system and considered the coordination of other
activities, including services and interrelated operations. See, e.g.,
General Public Utilities Corp., Holding Co. Act Release No. 13116 (Mar. 2,
1956) (integration is accomplished through central load dispatching as well
as through coordination of maintenance and construction requirements);
Middle South Utilities, Inc., Holding Co. Act Release No. 11782 (Mar. 20,
1953), petition to reopen denied, Holding Co. Act Release No. 12978 (Sep.
13, 1955), rev'd sub nom. Louisiana Public Service Commission v. SEC, 235
F.2d 167 (5th Cir. 1956), rev'd, 353 U.S. 368 (1957) (integration
accomplished through an operating committee coordinating not only central
dispatching but also of construction programs, maintenance of records and
necessary reports, and other interrelated operations); North American Co.,
Holding Co. Act Release No. 10320 (Dec. 28, 1950) (economic integration
demonstrated by exchange of power, coordination of future demand, sharing
of extensive experience regarding engineering and other operating problems,
and furnishing of financial support to company being acquired.); see also
NIPSCO, supra (functional merger of Bay States and NIPSCO gas supply
department through NIPSCO Services, "a service company subsidiary of NIPSCO
that provides financial, accounting, tax, purchasing, natural gas portfolio
management, and other administrative services to associate companies.").
Applicants will satisfy the coordination requirement in several
ways. First, Sierra Pacific can coordinate the dispatch of PGE's generation
assets with SPPC's and Nevada Power's purchases of power from wholesale
markets.22 Specifically, Sierra Pacific will coordinate the purchase from
third parties of electricity needed to meet the individual requirements of
each of its members systems, achieving economies of scale by aggregating
energy purchases. PGE, SPPC, and Nevada Power already have the ability to
reach common suppliers, purchasers, and trading hubs in various
combinations. The Contract Paths described above will contribute to
facilitating these coordinating activities.
Second, SPPC, Nevada Power, and PGE will coordinate
transmission functions, including transmission access, system operation,
planning, and system expansion functions. Transmission and substation
maintenance functions also will be integrated and SPPC, Nevada Power, and
PGE will share resources during emergencies. Until such time as SPPC,
Nevada Power, and PGE join RTOs, the combined company will operate its
transmission systems pursuant to a OATT filed with FERC, which will
establish a single "license plate" rate for transmission services that
utilize the facilities of SPPC, Nevada Power, and/or PGE. Upon joining
RTOs, Sierra Pacific will work to ensure that the relevant RTO tariffs
provide for reciprocity to prevent "pancaked" rates for use of the combined
company's system.
- ------------
22 Once divestiture is complete, SPPC and Nevada Power will rely
completely on the wholesale power market to meet their loads.
Third, Nevada Power, SPPC, and PGE will integrate many
services, including accounting and finance, human resources, information
services, external relations, legal and executive administration, customer
service, marketing and sales, and purchasing and materials management. As
described in the concurrent Application/Declaration, File No. 70-9621,
seeking authorization to form Sierra Pacific Services, a service company
for the Sierra Pacific system, Sierra Pacific will consolidate and carry
out the accounting functions of the combined company through a single
system. A single team, operating out of one or more locations will manage a
single accounting organization. Sierra Pacific will, as set forth in the
concurrent Application/Declaration, achieve additional integration of the
combined system through coordinated information system networks, customer
service, procurement, organizational structures for power purchases, energy
delivery, and customer relations, as well as additional support services.
In short, the combined company will be centrally and
efficiently planned and operated. As with other merger applications
approved by the Commission, the combined system will be capable of being
economically operated as a single interconnected and coordinated system.
(iii) Single Area or Region
As required by Section 2(a)(29)(A), the operations of the post-
Transaction Sierra Pacific system will be confined to a "single area or
region in one or more States." The Act clearly recognizes the relative
nature of this issue. While it does not define "area" and "region," the
term "single area or region" clearly does not confine a system's operations
to a small geographic area or a single state. On the contrary, the statute
specifies no specific size limitation but rather provides, as long
recognized by the Commission, that practical considerations must inform the
question of size, including the system's effect, if any, on the "advantages
of localized management, efficient operation, and the effectiveness of
regulations"23 in light of "the state of the art and the area or region
effected."
- --------
23 NIPSCO, supra (analyzing the single area or region requirement for
gas utility properties, the Commission noted that the acquisition
would not have "an adverse effect upon localized management,
efficient operation or effective operation").
Moreover, the SEC Staff have recommended that the Commission
"interpret the 'single area or region' requirement flexibly, recognizing
technological advances, consistent with the purposes and provisions of the
Act" and that the Commission place "more emphasis on whether an acquisition
will be economical" 1995 Report at 66, 69. Staff has recognized that
"recent institutional, legal and technological changes . . . have reduced
the relative importance of . . . geographical limitations by permitting
greater control, coordination and efficiencies" and "have expanded the
means for achieving the interconnection and economic operation and
coordination of utilities with non-contiguous service territories." Id. at
69. It also has recognized that the concept of "geographic integration" has
been affected by "technological advances in the ability to transmit
electric energy economically over longer distances, and other developments
in the industry, such as brokers and marketers." Id. The Commission has
confirmed its support for the Staff's Report, citing, in particular, the
Staff's recommendation that the Commission "continue to interpret the
'single area or region' requirement of [the Act] to take into account
technological advances." NIPSCO, supra; Sempra, Holding Co. Act Release No.
27095 (Oct. 25, 1999) [hereinafter Sempra].
The Applicants believe that the post-Transaction Sierra Pacific
system will satisfy the "single area or region" requirement. While the
electric service territories of the Nevada Power, SPPC and PGE systems do
not overlap, they nonetheless are in the same "area or region." The systems
of Nevada Power and SPPC are located predominantly in Nevada.24 The PGE
system is located entirely within the adjoining state of Oregon. The
distance between the PGE and SPPC systems is approximately 325 miles. Maps
showing the service territories and transmission systems of SPPC, Nevada
Power, and PGE and the surrounding region are attached hereto at Exhibits
E-1 through E-3 and E-5 through E-7, respectively. The Commission
previously has found that combining systems need not be contiguous in order
to meet the "single area or region" test. See, e.g., Conectiv, supra; cf.
New Century, supra (integration test met where entities planned to build a
300 mile transmission line to interconnect systems operating in
noncontiguous territories).
- --------
24 The service territories of Nevada Power and SPPC are separated
geographi cally by 38 miles. Located between their service
territories is federal land, including a Nevada test site and the
Nellis Air Force Base bombing range, that impedes direct physical
interconnection.
The Transaction represents a logical extension of the Sierra
Pacific's system's existing service territory in light of contemporary
circumstances. As the Commission has recognized, the concept of area or
region is not a static one and must be refashioned to take into account the
present realities of the electric industry, consistent with the provisions
of the Act. These present realities have effectively shrunk the world in
which the industry operates. Thus, more than 50 years after the
Commission's finding that the seven-state American Electric Power Company
system operates within a single area or region, American Gas & Electric
Co., Holding Co. Act Release No. 6333 (Dec. 26, 1945), the concept of a
region under Section 2(a)(29)(A) surely includes the two-state area that
comprises the post-Transaction Sierra Pacific system.
(iv) Localized Management, Efficient Operation, and Effective
Regulation
The final clause of Section 2(a)(29)(A) requires the Commission
to consider the size of the post-Transaction Sierra Pacific system
(considering the state of the art and the area or region affected) and its
effect upon localized management, efficient operation, and the
effectiveness of regulation. The size of the post-Transaction Sierra
Pacific system will not impair the advantages of localized management, the
efficient operation of the system, or the effectiveness of regulation.
Instead, the Transaction actually will increase the efficiency of
operations.
Localized Management - The Commission has found that an
acquisition does not impair the advantages of localized management where
the new holding company's "management [would be] drawn from the present
management," Centerior, supra, or where the acquired company's management
would remain substantially intact. AEP, supra. The Commission has noted
that the distance of corporate headquarters from local management was a
"less important factor in determining what is in the public interest" given
the "present-day ease of communication and transportation." AEP, supra.
The Commission also evaluates localized management in terms of whether a
merged system will be "responsive to local needs." Id.
The management of the post-Transaction Sierra Pacific system
will be drawn primarily from the existing management of Sierra Pacific and
PGE and their subsidiaries. Sierra Pacific will continue to maintain its
system headquarters in Reno, Nevada and will integrate the organizational
structures of the combined company. Changes to the management of the
combined company and its subsidiaries may be made in order to achieve the
economies associated with the Transaction, as discussed in Item 3.A.2.b.
herein. The electric utility subsidiaries will continue to operate through
the regional offices with local service personnel and line crews available
to respond to customers needs. Sierra Pacific expects the post-Transaction
system will preserve the well-established delegations of authority -
currently in place at Sierra Pacific and PGE - which permit the local,
district, and regional management teams to budget for, operate, and
maintain the electric distribution system, to procure materials and
supplies, and to schedule work forces in order to continue to provide the
high quality of service which customers of Sierra Pacific and PGE have
enjoyed in the past. Accordingly, the advantages of localized management
will not be impaired.
Efficient Operation - As discussed above in the analysis of
Section 10(b)(1), the size of the post-Transaction Sierra Pacific will not
impede efficient operation; rather, the Transaction will result in
significant economies and efficiencies as described in Item 3(A)(2)(b)
below. Operations are more efficiently performed on a centralized basis
because of economies of scale, standardized operating and maintenance
practices, and closer coordination of system-wide matters.
Effective Regulation - The Transaction will not impair the
effectiveness of regulation at either the state or the federal level. On a
state level, the Commission has found that the effectiveness of regulation
is not impaired where the same state regulators have jurisdiction both
before and after a merger. See, e.g., Conectiv, supra; General Public
Utilities Corp., Holding Co. Act Release No. 13116 (Mar. 2, 1956)
[hereinafter GPU]. The electric utility subsidiaries of Sierra Pacific will
continue to be regulated by the Nevada PUC with respect to retail rates,
service, and related matters. PGE will continue to be regulated by the
Oregon PUC with respect to retail rates, service, and related matters.
On the federal level, the post-Transaction Sierra Pacific
system will continue to be regulated by the Commission. The electric
utility subsidiaries of the combined system will continued to be regulated
by the FERC with respect to interstate electric sales for resale and
transmission services and by the NRC with respect to the operation of
nuclear facilities. The jurisdiction of other federal regulators is
similarly unaffected.
Retention and Acquisition of Non-Utility Businesses
- ---------------------------------------------------
In complying with Section 10(c)(1)'s requirement that the
Transaction not be "detrimental to the carrying out of the provisions of
Section 11," the Commission also must consider whether the retention and/or
acquisition by Sierra Pacific of the non-utility businesses of SPPC, Nevada
Power, PGE, and PGH II satisfies the requirements of Section 11(b)(1). But
see Madison Gas, supra at 1343 (Section 10(c)(1) does not require that the
Transaction "comply to the letter with Section 11."). Section 11(b)(1) of
the Act requires that a registered holding company limit its operations to
a single integrated public utility system and "such other businesses as are
reasonably incidental, or economically necessary or appropriate to the
operations of such integrated public-utility system." The Commission has
interpreted these provisions to require the existence of an operating or
functional relationship between the utility operations of the registered
holding company and its nonutility activities. 25 As demonstrated by the
adoption of Rule 58, however, the Commission increasingly has responded to
developments in the utility industry by expanding its concept of a
functional relationship.26
The retention of SPPC's existing water system conforms to the
"other businesses" standards of the Act as previously determined by the
Commission. SPPC has operated its natural gas system and its water system
on an integrated basis for over 100 years. Operating within a single
division of SPPC, the gas and water systems are closely associated, making
divestiture of the water system costly and contrary to the public interest.
Divestiture of SPPC's water system would result in substantial divestiture
costs and the loss in significant operating revenues, amounting to $49.1
million in 1998. Retention of SPPC's water system will not be detrimental
to the public interest or the interests of investors or consumers; rather,
it will be beneficial to investors, consumers, and the public at large.
See, e.g. WPL Holdings, Holding Co. Act Release Act No. 26856 (Apr. 14,
1998) (permitting retention of water system).
The retention of the non-utility interests of SPPC and of
Nevada Power, as well as the acquisition of PGH II and the non-utility
businesses of PGE, also conforms to the "other businesses" standards of the
Act. For a description of these non-utility activities, see Items
1(A)(1)(c) and 1(A)(2) above. All of these activities fall within the
definition of an energy-related company as provided in Rule 58, are
otherwise functionally related, are de minimis and should be permitted to
be retained, or are within the definition of an exempt telecommunications
company as provided in Section 34 of the Act. Accordingly, these businesses
- -----------
25 See, e.g., Michigan Consolidated Gas Co., Holding Co. Act Release No.
16763 (June 22, 1970), aff'd, 444 F.2d 913 (D.C. Cir. 1971).
26 See Exemption of Acquisition by Registered Public-Utility Holding
Companies of Securities of Non-Utility Companies Engaged in Certain
Energy-Related and Gas-Related Activities, Holding Co. Act Release
No. 26667 (Feb. 14, 1997).
will have a functional relationship with the utility operations of the
post-Transaction Sierra Pacific system and, as such, Sierra Pacific should
be permitted to retain and/or acquire the businesses.27
Retention of the SPPC Gas System
- --------------------------------
In complying with Section 10(c)(1)'s requirement that the
Transaction not be "detrimental to the carrying out of the provisions of
Section 11," the Commission also must consider whether the retention of
SPPC's gas system satisfies the requirements of Section 11(b)(1). But see
Madison Gas, supra at 1343 (Section 10(c)(1) does not require that the
Transaction "comply to the letter with Section 11."). The Commission
historically has interpreted this provision to require registered holding
companies to be comprised of either an integrated gas system or an
integrated electric system, but not both. To the extent an integrated
electric system seeks to retain a gas system, the electric system must
satisfy the "A-B-C" clauses of Section 11(b)(1). Under those provisions, a
registered holding company can own "one or more" additional integrated
systems if certain conditions are met. Specifically, the Commission must
find that (A) the additional system "cannot be operated as an independent
system without the loss of substantial economies which can be secure by the
retention of control by such holding company of such system," (B) the
additional system is located in one state or adjoining states, and (C) the
combination of systems under the control of a single holding company is not
so large ... as to impair the advantages of localized management, efficient
operation, or the effectiveness of regulation." The Applicants believe the
requirements of the "A-B-C" clauses are met and, as such, request authority
to retain the SPPC gas system.
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27 The Applicants request that, in approving Sierra Pacific's retention
of PGH II, the Commission exclude Sierra Pacific's investments in PGH
II and in other non-utility companies already owned by Sierra Pacific
from the limitation on investment in energy-related companies under
Rule 58. See New Century, supra (excluding from Rule 58 limitations
investments in non-utility businesses prior to New Century's
registration as a holding company under the Act).
(A) Loss of Economies
The Commission has interpreted Clause A to require a showing
that the "additional system could not be operated under separate ownership
without a loss of economies 'so important as to cause a serious impairment
of that system' and 'substantial in the sense that they were important to
the ability of the additional system to operate soundly.'" Ameren Corp.,
Holding Co. Act Release No. 26809 (Dec. 30, 1997) (internal citations
omitted). In its 1995 Report, however, the SEC Staff noted that, in a
competitive utility environment, any loss of economies threatens a
utility's competitive position and even a "small" loss of economies could
render a utility vulnerable to significant erosion of its competitive
position.
Historically, the Commission has measured projected loss of
economies associated with divestiture as a percentage of: (i) total utility
operating revenues; (ii) total utility expense or "operating revenue
deductions"; (iii) gross utility income; and (iv) net utility operating
income. Although the Commission has declined to draw a bright-line
numerical test under Section 11(b)(1)(A), it has indicated that cost
increases resulting in a 6.78% loss of operating revenues, a 9.72% increase
in operating revenue deductions, a 25.44% loss of gross gas income, and a
42.46% loss of net income would afford an "impressive basis for finding a
loss of substantial economies." Engineers Public Service Co., Holding Co.
Act Release No. 1,632 (Sept. 16, 1942). The loss of economies associated
with divestiture of the SPPC gas system easily satisfies these thresholds.
As set forth in the gas system retention study, attached hereto
as Exhibit H-1, Sierra Pacific would suffer approximately $16.4 million in
economic losses if required to divest the SPPC gas system. Specifically,
the projected impact on Sierra Pacific's shareholders would be a 15.8% loss
of operating revenues, a 18.7% loss of operating revenue deductions, a
100.1% loss of gross gas income, and a 149.0% loss of net income. These
ratios are well above the cost increases indicated in Engineers Public
Service, supra. The table below shows the 1998 gas operating revenues, gas
operating revenue deductions, gas gross income, and gas net income of the
SPPC gas system:
Gas Operating Gas Operating Gas Gross Gas Net
Revenues Revenue Deductions Income Income
- ------------- ------------------ --------- -------
$99,531,525 $83,854,133 $15,677,392 $10,534,969
In order to recover the lost economies and income taxes
associated with divestiture, the party acquiring the SPPC gas system would
be required to raise rates for SPPC's current gas utility customers by
approximately 16.5%. Divesting SPPC's gas system also would result in a
rate increase for SPPC's remaining electric customer of approximately $4.0
million, roughly 0.75% over current rates. Moreover, divestiture of SPPC's
gas system would cause a significant, although difficult to quantify,
amount of damages to SPPC's ability to compete in the marketplace,
resulting in further increased costs to SPPC's current customers. Given
these significant loss of economies and resulting rate increases,
Applicants respectfully submit the Commission should find the standards of
Clause A satisfied with respect to the SPPC gas system.
(B) Same State or Adjoining States
The retention of SPPC's gas system does not raise any issue under
Section 11(b)(1)(B) of the Act. The Commission has paraphrased Clause B as
follows: "All of such additional systems are located in a state in which
the single integrated public utility operates, or in states adjoining such
a state, or in a foreign country contiguous thereto." Engineers Public
Service Co., Holding Co. Act Release No. 2897 (July 23, 1941), rev'd on
other grounds, 138 F.2d 936 (D.C. Cir. 1943), vacated as moot, 332 U.S. 788
(1947). SPPC's gas system is located entirely within the state of Nevada
and, as such, the requirement that the additional system be located in one
state or adjoining states is satisfied.
(C) Localized Management, Efficient Operation, and Effective
Regulation
Finally, retention of the SPPC gas system as an additional
integrated system raises no issues under Section 11(b)(1)(C) of the Act.
SPPC's gas system already is incorporated into the Sierra Pacific system
and, after the Transaction, the management of SPPC's gas system will remain
unchanged. The operation of the SPPC gas system in no way impairs the
economic operation of SPPC's electric system and, in fact, provides
substantial benefits. Retention of the SPPC gas system also will not effect
the regulation of the post-Transaction Sierra Pacific system. SPPC's gas
operations will remain subject to regulation by the Nevada PUC and the
FERC, as well as other federal regulators.
(B) SECTION 11(B)(2) - STRUCTURE AND VOTING
POWER
Section 11(b)(2) of the Act directs the Commission "to ensure
that the corporate structure or continued existence of any company in the
holding-company system does not unduly or unnecessarily complicate the
structure, or unfairly or inequitably distribute voting power among
security holders, of such holding-company system." The Transaction is
consistent with Section 11(b)(2). The resulting capital structure is not
unduly complicated, as discussed in Item 3(A)(1)(c) above. See Sierra
Pacific Resources, Holding Co. Act Release No. 24566 (Jan. 28, 1988), aff'd
sub nom. Environmental Action, Inc., 895 F.2d 1255 (D.C. Cir. 1990)
(Commission incorporates its Section 10(b)(3) capital structure analysis
into its Section 11(b)(2) corporate structure analysis). Similarly, the
Transaction does not inequitably distribute voting power among security
holders. SPPC and Nevada Power will remain wholly-owned subsidiaries of
Sierra Pacific and will be joined by PGE and PGH II, which also will be
wholly-owned subsidiaries of Sierra Pacific. The voting power of all
relevant shareholders will remain unchanged.
Section 11(b)(2) also requires Sierra Pacific to have a simple
corporate structure. See, e.g., TUC Holding, supra at n. 20. In particular,
Section 11(b)(2) limits a registered holding company system to no more than
two tiers of holding companies and directs the Commission to evaluate the
facts and circumstances "to ensure that the corporate structure or
continued existence of any company in the holding-company system does not
unduly or unnecessarily complicate the structure ... of such
holding-company system." The Transaction satisfies these requirements.
First, only one holding company - Sierra Pacific - will exist after the
Transaction, as the combined corporate organization chart in Exhibit E-11
demonstrates. Second, the acquisition of PGE and PGH II by Sierra Pacific
will not unduly or unnecessarily complicate the structure of the Sierra
Pacific system. Rather, the consolidation of PGE and PGH II as first-tier
subsidiaries is a straightforward way to integrate the Sierra Pacific
system and does not serve to complicate the structure of the system.
B. SECTION 10(C)(2).
Section 10(c)(2) further requires that the Commission not
approve an acquisition unless "the Commission finds that such acquisition
will serve the public interest by tending towards the economical and
efficient development of an integrated public-utility system." Because the
Transaction is expected to result in substantial cost savings and
synergies, it will tend toward the economical and efficient development of
the post-Transaction Sierra Pacific system.
The Transaction will produce economies and efficiencies more
than sufficient to satisfy the requirements of Section 10(c)(2) of the Act.
Although some of the anticipated economies and efficiencies will be fully
realizable only in the longer term, they are properly considered in
determining whether the standards of Section 10(c)(2) have been met. See
AEP, supra. As the Commission has noted, while some benefits cannot be
precisely estimated, they nonetheless may be considered for purposes of
Section 10(c)(2): "specific dollar forecasts of future savings are not
necessarily required; a demonstrated potential for economies will suffice
even when these are not precisely quantifiable." Centerior, supra. In
addition, benefits realized by an acquisition need not be immediate. As the
Commission has stated, "the underlying advantages of affiliation should be
assessed on a long-term basis." WPL Holdings, Holding Co. Act Release No.
25377 (Sep. 18, 1991), citing AEP, supra ("Some of the anticipated savings
may not immediately happen .... Yet the underlying economic advantages [of
the affiliation] remain.").
The Applicants estimate the nominal dollar value of synergies from
the Transaction to be in excess of $40 million per year over a 10-year
period. These expected savings will meet or exceed the anticipated savings
in an number of recent acquisitions approved by the Commission. See, e.g.,
IE Industries, Holding Co. Act Release No. 25325 (June 3, 1991) (expected
savings of $91 million over ten years); Midwest Resources, Holding Co. Act
Release No. 25159 (Sep. 26, 1990) (estimated savings of $25 million over
five years).
The Applicants anticipate opportunities for savings as a result
of, among other things, (i) labor savings through the consolidation of
functions, the elimination of duplicative activities, and the realization
of combined productivity efficiencies, (ii) nonlabor savings through the
consolidation of overlapping or duplicative programs and expenses,
including advertising, benefits administration, insurance, information
services, facilities, vehicles, and research and development, and (iii)
non-fuel purchasing economies through the combined procurement of material
and services and through the reduction in contract services on which PGE
currently relies.
In addition to these benefits, there are other benefits which,
while presently difficult to quantify, are nonetheless substantial. First,
the combined company will be able to meet more effectively the challenges
of the increasingly competitive environment in the utility industry than
either Sierra Pacific or PGE standing along. See WPL Holdings, Inc.,
Holding Co. Act Release No. 25096 (May 25, 1990) (benefits supporting
Section 10(c)(2) finding include "[a] structure that could more effectively
address the growing national competition in the energy industry, refocus
various utility activities, facilitate selective diversification into
non-utility business . . . and provide additional flexibility for financing
. . ."). In particular, the Transaction will create the opportunity for
strategic, financial, and operational benefits for customers in the form of
lower rates over the long term and for shareholders in the form of greater
financial strength and financial flexibility. Second, the combined Sierra
Pacific system will be able to draw on a larger and more diverse
senior-level management to lead the new company forward in an increasingly
competitive environment for the delivery of energy and should be better
able to attract and retain the most qualified employees. Finally, the
combined system will be larger and more diverse than either of Sierra
Pacific or PGE as independent entities. This increased geographical
diversity will mitigate the risk of changes in economic, competitive or
climatic conditions in any given sector of the combined service territory.
3. SECTION 10(F).
To approve an acquisition, the Commission is required, under
Section 10(f), to find that the acquisition has complied with all
applicable state laws. The Transaction is conditioned expressly on receipt
of all required regulatory approvals, including that of the Oregon PUC. The
Applicants have filed an Application with the Oregon PUC, a copy of which
is attached hereto as Exhibit D-3. The Applicants do not believe the
Transaction is subject to the jurisdiction of the Nevada PUC. Accordingly,
Applicants have filed a Petition for Declaratory Relief requesting the
Nevada PUC disclaim jurisdiction over the Transaction, a copy of which is
attached hereto as Exhibit D-1. When these approvals and/or orders have
been received, the Transaction will comply with Section 10(f).
B. FINANCING OF THE ACQUISITION.
This Application/Declaration also seeks the authorization and
approval of the Commission with respect to issuances and sales of
securities to finance the Transaction. A separate Application/Declaration
will be filed in the near future to request additional financing authority
to maintain existing financing facilities after the Transaction and to meet
the capital requirements for the Sierra Pacific system after the
Transaction and the registration of Sierra Pacific as a holding company.
Specifically, in order to ensure that the Sierra Pacific may raise the cash
consideration required to consummate the Transaction, Sierra Pacific hereby
requests authorization for financing transactions for the period beginning
with the effective date of an order issued pursuant to this filing and
continuing for a period of one year from the date of such order (the
"Authorization Period").
1. OVERVIEW OF THE FINANCING REQUEST
Sierra Pacific hereby requests authorization to engage in the
financing transactions set forth herein during the Authorization Period.
The approval by the Commission of this Application/Declaration will give
Sierra Pacific the flexibility to raise the funds required to consummate
the acquisition of PGE in the most efficient and cost-effective manner.
Sierra Pacific anticipates that it will finance most of the consideration
required to consummate the Transaction through the use of short-term debt
authorized by this Application/Declaration, such as commercial paper, money
market notes and/or bank loans. Depending on interest rates at the time of
the Transaction closing, it may also be cost-effective to issue some of the
long-term debt authorized by this Application/Declaration at that time.
However, the aggregate amount of short-term and long-term debt outstanding
to finance the Transaction will not exceed $2.1 billion.
After the Transaction is consummated, Sierra Pacific plans to
pay off part of the outstanding short-term debt incurred to fund the
Transaction consideration with the proceeds of the sale of the electric
generation assets of SPPC and Nevada Power and to further reduce holding
company debt through issuance of additional common stock or the proceeds
from the divestiture of certain non-core assets. Sierra Pacific then plans
to refinance within the Authorization Period the remaining balance of this
short-term debt with one or more forms of long-term debt and hybrid
securities authorized by this Application/Declaration. All of the financing
required to raise the Transaction consideration will be effected at the
holding company level. Consequently, the authorizations sought in this
Application/Declaration relate only to Sierra Pacific. Again, a separate
Application/Declaration will be filed in the near future to address the
financing needs of the Sierra Pacific system after the Transaction.
Immediately following the acquisition of PGE, Sierra Pacific
contemplates it will have a common equity ratio of 20.8 percent as a result
of the issuance of $2.1 billion of holding company debt, assuming that none
of the sales of its Nevada generating facilities will have closed by the
time of the Transaction. However, by June 30, 2001, Sierra will increase
its consolidated common equity to approximately 29 percent as a result of:
(a) proceeds from the sale of generating assets of Sierra Pacific and
Nevada Power aggregating approximately $1 billion, 100 percent of which
will reduce debt of the consolidated company;28 (b) proceeds from
divestiture of certain non-core assets, or some combination of common
equity and divestiture of such non-core assets, which together would be
approximately equivalent to the issuance of $260 million in terms of impact
on Sierra Pacific's equity ratio; (c) issuance of up to $600 million of
hybrid securities (trust originated preferred stock);29 and (d) increased
retained earnings realized from the combined operations of Sierra and PGE
aggregating approximately $80 million in 2000 and $100 million in 2001.
Based on present expectations, Sierra Pacific believes that these actions,
in combination with increases in retained earnings from operations, will
increase its consolidated common equity to 30 percent within 24 months
following the Transaction.
Sierra Pacific's goal is to achieve a consolidated common
equity ratio of 30 percent or better as quickly as possible consistent with
balancing the needs of all stakeholders and to reduce its consolidated debt
ratio to 60% or lower and would hope to do so before two years after
consummation of the Transaction. Applicants note the Commission has
approved ratios of consolidated common equity to total capitalization
ratios as low as 27.6 percent. Northeast Utilities, supra. Applicants
believe in light of the steps to be taken by Sierra Pacific in the year
immediately following the acquisition to increase its consolidated common
equity as outlined above, it is entirely proper that Sierra Pacific be
allowed to finance such acquisition as described above.
Set forth below are summaries of the historical capital
structures of Sierra Pacific and PGE as of December 31, 1999, and the pro
forma consolidated capital structure of Sierra Pacific, PGE, and PGH II as
of the same date:
- --------
28 Of the $1 billion asset-sale proceeds, approximately $570 million
will be used to pay down acquisition debt at the holding company
level, approximately $190 million will be used to pay down debt
currently held by SPPC, and approximately $270 million will be used
to pay down debt currently held by Nevada Power.
29 These hybrid securities will be either mandatorily convertible
securities or trust originated preferred securities, depending on
market conditions. Such mandatorily convertible securities would be
either preferred stock or long-term, unsecured debt securities of
Sierra Pacific which will convert to common equity no longer than
three years following the date of issue. Such trust originated
preferred securities would be issued by a special purpose financing
subsidiary of Sierra Pacific, the common securities of which will be
owned by Sierra Pacific. The sole purpose of the special purpose
entity would be to issue the trust originated preferred securities
and lend the proceeds thereof to Sierra Pacific. Such request is
consistent with the Commission's recent order in Southern Co., Holding
Co. Act Release No. 27134 (Feb. 9, 2000). The Applicant's further
request the Commision reserve jurisdiction with respect to the terms
and condiions of such hybrid securities.
<TABLE>
<CAPTION>
Sierra Pacific Capital Structure
(dollars in thousands)
SIERRA PACIFIC (A) (B) (C) (D)
CONSOLIDATED 12/31/99 12/31/00 3/31/01 6/30/01 6/30/01 12/31/01 12/31/02
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common Equity $1,477 34.5% $1,541 20.8% $1,556 22.9% $1,571 24.5% $1,831 28.6% $1,860 28.6% $1,991 30.0%
Preferred Stock $287 4.7% $323 4.4% $323 4.7% $323 5.0% $923 14.4% $923 14.2% $923 13.9%
Total Debt $2,514 58.8% $5,543 74.8% $4,926 72.4% $4,514 70.4% $3,654 57.0% $3,719 57.2% $3,713 56.0%
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total Capitalization $4,279 100% $7,407 100% $6,805 100% $6,408 100% $6,408 100% $6,503 100% $6,627 100%
SPPC
Common Equity $674 41.8% $702 42.9% $593 42.1% $523 41.4% $523 41.4% $539 42.0% $565 42.0%
Preferred Stock $99 6.1% $99 6.0% $99 7.0% $99 7.8% $99 7.8% $99 7.7% $99 7.3%
Total Debt $898 52.0% $834 51.0% $719 50.9% $640 50.7% $640 50.7% $646 50.4% $683 50.7%
------ ----- ------ ----- ------ ----- ------ ----- ----- ----- ------ ----- ------ -----
Total Capitalization $1,610 100% $1,635 100% $1,409 100% $1,262 100% $1,262 100% $1,283 100% $1,346 100%
NEVADA POWER
Common Equity $823 37.2% $1,031 45.8% $816 43.2% $674 40.7% $674 40.7% $689 40.6% $726 40.7%
Preferred Stock $189 8.5% $195 8.7% $195 10.3% $195 11.8% $195 11.8% $195 11.5% $195 10.9%
Total Debt $1,203 54.3% $1.024 45.5% $878 46.5% $786 47.5% $786 47.5% $815 48.0% $864 48.4%
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ---- ----- ------ -----
Total Capitalization $2,215 100% $2,250 100% $1,889 100% $1,655 100% $1,655 100% $1,699 100% $1,785 100%
PGE
Common Equity $1,041 50.3% $1.041 49.9% $1,029 49.4% $1,017 48.9% $1,017 48.9% $992 48.0% $983 48.0%
Preferred Stock $30 1.4% $30 1.4% $30 1.4% $30 1.4% $30 1.4% $30 1.5% $30 1.5%
Total Debt $999 48.3% $1,017 48.7% $1,024 49.2% $1,031 49.6% $1,031 49.6% $1,045 50.5% $1,036 50.6%
------ ----- ------ ----- ------ ------ ------ ----- ------ ----- ------ ----- ------ -----
Total Capitalization $2,070 100% $2,088 100% $2,083 100% $2,078 100% $2,078 100% $2,067 100% $2,049 100%
TOTAL COMBINED COMPANY (EQUITY IS SUM OF SPPC, NEVADA POWER, AND PGE)
Common Equity $2,538 47.5% $2,774 32.1% $2,438 31.7% $2,214 31.4% $2,214 32.6% $2,220 32.4% $2,274 32.9%
Preferred Stock $287 5.4% $323 3.7% $323 4.2% $323 4.6% $923 13.6% $923 13.5% $923 13.4%
Total Debt $2,514 47.1% $5,543 64.1% $4,926 64.1% $4,514 64.0% $3,654 53.8% $3,719 54.2% $3,713 53.7%
------ ----- ------ ----- ------ ------ ------ ----- ------ ----- ------ ----- ------ -----
Total Capitalization $5,339 100% $8,641 100% $7,686 100% $7,052 100% $6,792 100% $6,823 100% $6,910 100%
</TABLE>
ASSUMPTIONS
(A) PGE Acquisition closes 12/31/00
(B) First 60% of generation assets divested
(C) Remaining 40% of generation assets divested (no common equity or trust
preferred stock issued)
(D) Combined result of: divestiture of remaining 40% of generation assets;
issuance of $260 million in common equity ($18.00/share) or
combination of asset sales and common equity; and issuance of $600
million in tax advantaged preferred stock ($18.00/share)
The financing authorizations requested herein relate to (a) (i)
external issuances by Sierra Pacific of long-term debt, short-term debt,
commercial paper and other securities for cash and (ii) the entering
into by Sierra Pacific of transactions to manage interest rate risk
("hedging transactions"); and (b) entering into credit facilities or loan
agreements with commercial or investment banks, both for purposes of direct
borrowings and to serve as back-up for commercial paper programs.
2. PARAMETERS FOR FINANCING AUTHORIZATION
Authorization is requested herein to engage in certain
financing transactions during the Authorization Period for which the
specific terms and conditions are not available at this time, without
further prior approval by the Commission. The following general terms will
be applicable where appropriate to the financing transactions requested to
be authorized hereby:
A. EFFECTIVE COST OF MONEY ON BORROWINGS
The effective cost of money on long-term debt borrowings
occurring pursuant to the authorizations granted under this
Application/Declaration will not exceed 500 basis points over the
comparable term U.S. Treasury securities, and the effective cost of money
on short-term debt borrowings pursuant to authorizations granted under this
Application/Declaration will not exceed 300 basis points over the
comparable term London Interbank Offered Rate ("LIBOR").
B. MATURITY OF DEBT
The maturity of indebtedness will not exceed 50 years.
C. ISSUANCE EXPENSES
The underwriting fees, commissions or other similar
remuneration paid in connection with the non-competitive issue, sale or
distribution of a security pursuant to this Application/Declaration will
not exceed 5 percent of the principal or total amount of the security being
issued.
D. USE OF PROCEEDS
The proceeds from the sale of securities in external financing
transactions pursuant to this Application/Declaration will be used (i) to
pay the consideration required in order to consummate the Transaction or
(ii) to refinance short-term debt originally incurred to raise all or a
portion of the Transaction consideration; or (iii) for general corporate
purposes
3. DESCRIPTION OF SPECIFIC TYPES OF FINANCING
Sierra Pacific requests authorization to obtain funds
externally through sales of short-term debt and long-term debt securities.
In addition, Sierra Pacific seeks the flexibility to enter into certain
hedging transactions to manage rate risk and authority to issue and sell
other types of securities, as described below.
A. SHORT-TERM DEBT
Sierra Pacific requests Commission authorization during the
Authorization Period to issue short-term debt securities in an amount not
to exceed $2.1 billion. This amount consists of financing for the
Transaction consideration of approximately $2.1 billion. Sierra Pacific
anticipates that most of the Transaction consideration will be funded
temporarily through the use of short-term debt. This short-term debt will
be paid off in part with the proceeds of the divestiture of SPPC's and
Nevada Power's electric generation assets, and the sale of common equity or
certain non-core assets with the balance refinanced within the
Authorization Period through long-term debt or other securities or proceeds
from the divestiture of certain non-core assets. The short-term debt will
consist of one or more of the following: bank borrowings, commercial paper,
money market notes, floating rate or variable notes (all as described
below).
Sierra Pacific currently maintains a committed line of credit
for $300 million under an unsecured revolving credit facility with Mellon
Bank, First Union National Bank and Wells Fargo, as syndication agents.
This facility may be used for working capital and general corporate
purposes, including for commercial paper backup. It is anticipated that all
or a portion of the short-term debt used to fund the Transaction will be
borrowed by Sierra Pacific, either through its existing credit facility or
through one or more new facilities to be entered into prior to the
Transaction. These amounts are included within the overall authorization
amount requested above.
Sierra Pacific also may sell commercial paper in established
domestic or European commercial paper markets to provide temporary funding
of the Transaction consideration. Such commercial paper would be sold to
dealers at the discount rate or the coupon rate per annum prevailing at the
date of issuance for commercial paper of comparable quality and maturities
sold to commercial paper dealers generally. It is expected that the dealers
acquiring commercial paper from Sierra Pacific will reoffer such paper at a
discount to corporate, institutional and, with respect to European
commercial paper, individual investors. Institutional investors are
expected to include commercial banks, insurance companies, pension funds,
investment trusts, foundations, colleges and universities and finance
companies. The commercial paper programs will be backed up by the bank
credit facilities described above.
Sierra Pacific also may incur short-term debt through the
issuance of instruments customarily referred to as "money market notes",
"floating rate notes" or "variable rate notes". This type of debt is
usually issued pursuant to a fiscal and paying agency agreement or similar
type of agreement, rather than through an indenture, and bears an interest
rate that is either (a) tied to a customary interest rate index such as
LIBOR which is adjusted on a periodic basis or (b) set by an auction
process. These notes are typically sold to qualified institutional
investors or other accredited investors pursuant to Rule 144A promulgated
under the Securities Act of 1933, as amended, although it is possible that
they may be offered in one or more of the manners described under Long-Term
Debt below. The maturity of these notes may vary from less than one year to
up to three years. Hence, they are referenced in this Application/
Declaration both under Short-Term Debt and Long-Term Debt. The specific
terms of any such notes will be determined by Sierra Pacific at the time of
issuance and will comply in all regards with the parameters on financing
authorization set forth in Item 3.B.2 above.
B. LONG-TERM DEBT
Sierra Pacific requests Commission authorization during the
Authorization Period to issue long-term debt securities in an amount not to
exceed $2.1 billion. This amount would be used to refinance short-term debt
originally incurred to finance the Transaction consideration of $2.1
billion. Such long-term debt securities would be comprised of (a) unsecured
notes, debentures, medium-term notes, or other debt securities under an
indenture (the "Sierra Pacific Indenture"), (b) instruments customarily
referred to as "money market notes", "floating rate notes" or "variable
rate notes" with maturities of greater than one year or (c) long-term loans
from commercial or investment banks pursuant to credit facilities or loan
agreements. Any long-term debt security would have such designation,
aggregate principal amount, maturity, interest rate(s) or methods of
determining the same, terms of payment of interest, redemption provisions,
sinking fund terms and other terms and conditions as Sierra Pacific may
determine at the time of issuance. The request for authorization for Sierra
Pacific to issue long-term debt securities is consistent with authorization
that the Commission has granted to other holding companies. See CINergy
Corp., supra (authorizing issuance of up to $400 million of unsecured debt
securities).
(I) TERMS OF SIERRA PACIFIC INDENTURE
Sierra Pacific has filed a universal shelf registration with
the Commission on June 8, 1999 (Registration No. 333-80149). As part of
that filing, Sierra Pacific filed a form of the Sierra Pacific Indenture,
which will permit the issuance of a wide variety of unsecured debt
securities in one or more series. On May 9, 2000, Sierra Pacific issued
$300 million under the shelf registration.30 Proceeds from this issuance
were utilized to retire the remaining balance of short-term debt incurred
to complete the merger of Sierra Pacific and Nevada Power Company. Sierra
Pacific currently anticipates no further issuance under the existing shelf
registration.31 Rather, Sierra Pacific expects to file a new universal
shelf registration with the Commission for the issuance of long-term debt
securities authorized pursuant to this Application/Declaration and may
continue to utilize the Sierra Pacific Indenture for any such issuance. The
Sierra Pacific Indenture, attached hereto as Exhibit K-1, will be qualified
under the Trust Indenture Act of 1939, as amended.
The Sierra Pacific Indenture will permit debt securities with a
number of variable terms, such as the principal amounts (including original
issue discount), interest rates (including those based on a formula or
index), redemption terms, sinking funds, currency of payment,
denominations, events of default, etc., to be included or excluded or made
applicable to a particular series of securities.
- --------
30 Unrelated to the issuance under the Indenture, Sierra Pacific also
issued $300 million of floating rate notes on April 20, 2000. From
the proceeds of this issuance, $100 million was invested in Nevada
Power to reduce debt and strengthen Nevada Power's capitalization and
$200 million was used to reduce short term debt at the holding
company level incurred to complete the merger of Sierra Pacific and
Nevada Power.
31 To the extent such issuance is made under the shelf registration,
however, the issuance would be subject to the aggregate $2.1 billion
limit on short-term and long-term debt and to the parameters of the
Commission's financ ing authorization.
These terms will be set forth either in (i) a supplemental indenture or
(ii) an officer's certificate and company order, as applicable. In theory,
any combination of the variable terms could be included in a single series
of securities which, under current practice, would be called
"notes,""debentures" or "medium-term notes." The Sierra Pacific Indenture
will also permit any series of securities to be issued either in
certificated form or in "global" form (i.e., transferable only by book-
entry on the records of a securities depository such as The Depository
Trust Company).
Other than certain provisions relating to restrictions on
liens, mergers and the sale of significant subsidiaries, the Sierra Pacific
Indenture will contain no negative covenants or restrictions. Any
additional covenants or restrictions negotiated at the time of issuance
will be included in either (i) a supplemental indenture or (ii) an
officer's certificate and company order, as applicable, establishing a
particular security. The Sierra Pacific Indenture will contain the
following event of default provisions: (i) defaults in payment of the
Sierra Pacific Indenture securities; (ii) defaults under covenants under
the Sierra Pacific Indenture, (iii) failures to comply with instruments
governing other indebtedness and certain other agreements; and (iv) certain
events of insolvency with respect to Sierra Pacific subject, as applicable,
to customary grace periods.
A copy of any new supplemental indenture under the Sierra
Pacific Indenture or an officer's certificate and company order executed
and delivered pursuant to this Authorization will be filed under cover of
the first quarterly report under Rule 24 filed after such execution and
delivery.
Sierra Pacific may sell Long-Term Debt securities covered by
this Application/Declaration in any one of the following ways: (i) through
underwriters or dealers; (ii) through agents; or (iii) directly to a
limited number of purchasers or a single purchaser, including sales made
pursuant to Rule 144A. If underwriters are used in the sale of the
securities, such securities will be acquired by the underwriters for their
own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The securities
may be offered to the public either through underwriting syndicates (which
may be represented by a managing underwriter or underwriters designated by
Sierra Pacific) or directly by one or more underwriters acting alone. The
securities may be sold directly by Sierra Pacific or through agents
designated by Sierra Pacific from time to time. If dealers are utilized in
the sale of any of the securities, Sierra Pacific will sell such securities
to the dealers as principals. Any dealer may then resell such securities to
the public at varying prices to be determined by such dealer at the time of
resale.
(II) TERMS OF BORROWINGS FROM BANKS AND OTHER
FINANCIAL INSTITUTIONS
Borrowings from commercial or investment banks and other
financial institutions will be unsecured and will rank pari passu with debt
securities issued under the Sierra Pacific Indenture and the short-term
credit facilities (as described above). Specific terms of any borrowings
will be determined by Sierra Pacific at the time of issuance and will
comply in all regards with the parameters on financing authorization set
forth in Item 3.B.2 above. A copy of any additional note or agreement
executed and delivered pursuant to this Authorization will be filed under
cover of the first quarterly report under Rule 24 filed after such
execution and delivery.
(III) TERMS OF MONEY MARKET NOTES AND SIMILAR
INSTRUMENTS
As noted above under Short-Term Debt, Sierra Pacific may issue
instruments customarily referred to as "money market notes", "floating rate
notes" or "variable rate notes". Although these notes frequently have
maturities of less than one year, they can also be issued with maturities
of up to three years. The specific terms of any such notes will be determined
by Sierra Pacific at the time of issuance and will comply in all regards
with the parameters on financing authorization set forth in Section D
above. As is the case with the short-term version of this instrument, these
notes are usually issued pursuant to a fiscal and paying agency agreement
or similar type of agreement, rather than through an indenture, and bear an
interest rate that is either (a) tied to a customary interest rate index
such as LIBOR which is adjusted on a periodic basis or (b) set through an
auction process. These notes are typically sold to qualified institutional
investors or other accredited investors pursuant to Rule 144A, although
they may also be sold in one or more of the manners described above for
other Long-Term Debt securities.
C. OTHER SECURITIES
In addition to the specific securities for which authorization
is sought herein, Sierra Pacific may also find it necessary or desirable to
minimize financing costs or to obtain new capital under then-existing
market conditions to issue and sell other types of securities from time to
time during the Authorization Period. The issuance of any such securities
would be subject to the aggregate $2.1 billion limit on short-term and
long-term debt and to the parameters on financing authorization discussed
above. Sierra Pacific will undertake to file an amendment in this
proceeding which will describe the general terms of each such securities
and the amount to be issued and to request a supplemental order of the
Commission authorizing the issuance thereof by Sierra Pacific.
D. INTEREST RATE RISK MANAGEMENT DEVICES
Sierra Pacific requests authority to enter into, perform,
purchase and sell financial instruments intended to manage the volatility
of interest rates, including but not limited to interest rate swaps, caps,
floors, collars and forward agreements or any other similar agreements.
Sierra Pacific would employ interest rate swaps as a means of prudently
managing the risk associated with any of its outstanding debt issued
pursuant to this authorization or an applicable exemption by, in effect,
synthetically (i) converting variable rate debt to fixed rate debt, (ii)
converting fixed rate debt to variable rate debt, (iii) limiting the impact
of changes in interest rates resulting from variable rate debt and (iv)
providing an option to enter into interest rate swap transactions in future
periods for planned issuances of debt securities. In no case will the
notional principal amount of any interest rate swap exceed that of the
underlying debt instrument and related interest rate exposure. Thus, Sierra
Pacific will not engage in "leveraged" or "speculative" transactions. The
underlying interest rate indices of such interest rate swaps will closely
correspond to the underlying interest rate indices of Sierra Pacific's debt
to which such interest rate swap relates. Sierra Pacific will only enter
into interest rate swap agreements with counter parties whose senior debt
ratings, as published by Standard & Poor's, A Division of The McGraw-Hill
Companies, are greater than or equal to "BBB+", or an equivalent rating
from Moody's Investors Service, Inc., Fitch IBCA, Inc. or Duff & Phelps
Credit Rating Co.
4. AMORTIZATION OF GOODWILL
Sierra Pacific expects that the Transaction will result in the
amortization of goodwill equal to the excess of consideration to be paid to
Enron over the net value of assets acquired. Sierra Pacific estimates this
goodwill to be approximately $845 million, which will be amortized at the
holding company level over a forty year period. Accordingly, Sierra Pacific
estimates a reduction in net income associated with this amortization of
approximately $21 million per year. As this merger-related accounting
adjustment will be recorded by Sierra Pacific, it will not affect the cash
flow associated with the utility subsidiaries and there will be no need to
pay dividends out of unearned surplus.
5 . FILING OF CERTIFICATES OF NOTIFICATION
It is proposed that, with respect to Sierra Pacific, the
reporting systems of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the 1933 Act be integrated with the reporting system under
the Act. This integration would eliminate duplication of filings with the
Commission that cover essentially the same subject matters, resulting in a
reduction of expense for both the Commission and Sierra Pacific. To effect
such integration, the portion of the 1933 Act and 1934 Act reports
containing or reflecting disclosures of transactions occurring pursuant to
the authorization granted in this proceeding would be incorporated by
reference into this proceeding through Rule 24 certificates of
notification. The certificates would also contain all other information
required by Rule 24, including the certification that each transaction
being reported on had been carried out in accordance with the terms and
conditions of and for the purposes represented in this
Application/Declaration. Such certificates of notification would be filed
within 60 days after the end of the last calendar quarter in which
transactions occur.
Rule 54 promulgated under the Act states that in determining
whether to approve the issue or sale of a security by a registered holding
company for purposes other than the acquisition of an exempt wholesale
generator ("EWG") or foreign utility company ("FUCO"), or other than with
respect to EWGs or FUCOs, the Commission shall not consider the effect of
the capitalization or earnings of any subsidiary which is an EWG or FUCO
upon the registered holding company system if Rules 53(a), (b) and (c) are
satisfied. Sierra Pacific does not have, and after the Transaction will not
retain, any EWGs or FUCOs. Therefore, Rules 53(a), (b) and (c) are
satisfied.
ITEM 4. REGULATORY APPROVAL.
As stated above, the Transaction is conditioned on the
Applicants' receipt of all relevant regulatory approvals. Set forth below
is a summary of the regulatory requirements affecting the Transaction. In
addition to required Commission approvals, the state utility commission of
Oregon, the FERC, and the NRC have jurisdiction over various aspects of the
Transaction.32 Further, both Sierra Pacific and Enron are required to file
notification and report forms under the HSR Act with the FTC and the DOJ
with respect to the Transaction. .
A. ANTITRUST CONSIDERATIONS
The HSR Act and the rules promulgated thereunder prohibit the
consummation of certain transactions (including the Transaction) until
certain information has been submitted to the Antitrust Division of the
Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") and
the specified HSR Act waiting period requirements have been satisfied.
After the Applicants submitted their HSR Act filings, jurisdiction to
review the Transaction was cleared to the DOJ, which subsequently closed
its investigation of the Transaction without further action and the HSR Act
waiting period expired on May 3, 2000.
B. ATOMIC ENERGY ACT
PGE owns an interest in the Trojan nuclear electric generating
station. The Trojan station ceased operations in 1993 and is currently
being decommissioned. PGE holds NRC licenses with respect to its ownership
interests in the Trojan station. Section 184 of the Atomic Energy Act
provides that no license may be transferred, assigned or in any manner
dispose of, directly or indirectly, through transfer of control of any
license to any person, unless the NRC finds that the transfer is in
accordance with the provisions of the Atomic Energy Act and gives its
consent in writing. PGE filed for such consent on January 14, 2000, a copy
of such request is attached hereto as Exhibit D-7.
C. FEDERAL POWER ACT
Section 203 of the Federal Power Act provides that no public
utility may sell or otherwise dispose of its jurisdictional facilities,
directly or indirectly merge or consolidate its facilities with those of
any other person, or acquire any security of any other public utility,
without first having obtained authorization from the FERC. Under Section
203, the FERC will approve a merger if it finds the mergers "consistent
with the public interest." FERC has stated in a Policy Statement that, in
- --------
32 The Transaction is not subject to approval of the California PUC as
SPPC's utility operations in California will not be affected by the
Transaction.
analyzing a merger under Section 203, it will evaluate the following
criteria: (i) the effect of the merger on competition in electric power
markets, utilizing an initial screening approach derived from the DOJ/FTC
Horizontal Mergers Guidelines to determine if a merger will result in an
increase in an applicant's market power; (ii) the effect of the merger on
the applicants' wholesale sales and transmission customers; and (iii) the
effect of the merger on state and federal regulation of the applicants.
Sierra Pacific and PGE jointly requested FERC approval of the Transaction
on March 3, 2000.
D. NEVADA PUC
The Applicants do not believe the Transaction is subject to the
jurisdiction of the Nevada PUC. Accordingly, Applicants filed on January 7,
2000, a Petition for Declaratory Relief requesting the Nevada PUC disclaim
jurisdiction over the Transaction. The Petition for Declaratory Relief is
attached hereto as Exhibit D-1. However, as described more fully in the
concurrent Application/Declaration requesting approval to form Sierra
Pacific Resources Services Company ("Sierra Pacific Services") (File
70-9621), the Nevada PUC has an open docket to consider a shared services
agreement proposed by Sierra Pacific which predates the Transaction. The
Services Agreement proposed in the concurrent Application/Declaration will
supplant the earlier proposed agreement in the Nevada PUC docket.
E. OREGON PUC
PGE is subject to the jurisdiction of the Oregon PUC. Pursuant
to Oregon Revised Statutes Section 757.511, Oregon PUC approval is required
for Sierra Pacific to acquire all of the common stock of PGE. The
acquisition of PGH II is not subject to Oregon PUC jurisdiction. On January
18, 2000, Sierra Pacific filed with the Oregon PUC an Application to
acquire PGE, which is attached hereto as Exhibit D-3.
Except as set forth above, no other state or federal regulatory
body has jurisdiction over the Transaction.
ITEM 5. PROCEDURE.
The Applicants respectfully request that the Commission issue
and publish not later than June 2, 2000, the requisite notice under Rule 23
with respect to the filing of this Application, such notice to specify a
date not later than June 27, 2000, by which comments may be entered and a
date not later than September 1, 2000, as a date after which an order of
the Commission granting and permitting this Application to become effective
may be entered by the Commission.
The Applicants submit that a recommended decision by a hearing
or other responsible officer of the Commission is not needed for approval
of the proposed Transaction. The Division of Investment Management may
assist in the preparation of the Commission's decision. There should be no
waiting period between the issuance of the Commission's order and the date
on which it is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
A. EXHIBITS.
A-1 Articles of Incorporation of Sierra Pacific*
A-2 By-Laws of Sierra Pacific (Exhibit (3)(A) to Form 10-K, File No.
1-8788, filed March 21, 1997, and incorporated herein by reference)*
A-3 Articles of Incorporation of PGE (Exhibit 4 to Form S-8, Registration
No. 2-85001, filed July 7, 1983, and incorporated herein by
reference)*
A-4 By-Laws of PGE (Exhibit 3 to Form 10-K, File No. 1-5532, filed March
22, 1999, and incorporated herein by reference)*
A-5 Articles of Incorporation of PGH II*
A-6 By-Laws of PGH II*
B-1 Stock Purchase Agreement (Appendix to Exhibit D-3 hereto)*
D-1 Petition for Declaratory Relief filed with the Nevada PUC*
D-2 Order of the Nevada PUC
D-3 Application to the Oregon PUC*
D-4 Order of the Oregon PUC**
D-5 Application to the FERC**
D-6 Order of the FERC**
D-7 Application to the NRC*
D-8 Order of the NRC**
E-1 Map of SPPC's service area*
E-2 Map of Nevada Power's service area*
E-3 Map of PGE's service area*
E-4 Map showing the combined service areas of SPPC, Nevada Power, and PGE*
E-5 Map showing the transmission system of SPPC (Exhibit E-1 hereto)*
E-6 Map showing the transmission system of Nevada Power (Exhibit E-2
hereto)*
E-7 Map showing the transmission system of PGE (Exhibit E-3 hereto)*
E-8 Sierra Pacific organization chart*
E-9 PGE organization chart*
E-10 PGH II organization chart*
E-11 Combined company organization chart after the Transaction*
F-1 Opinion of Counsel**
F-2 Past Tense Opinion of Counsel**
G-1 Sierra Pacific's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (File No. 1-8788, filed March 28, 2000, and
incorporated herein by reference)
G-2 Sierra Pacific's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000 (File No. 1-8788, filed May 15, 2000, and incorporated
herein by reference)
G-3 SPPC's Annual Report on Form 10-K for the fiscal year ended December
31, 1999 (File No. 0-508, filed March 28, 2000, and incorporated
herein by reference)
G-4 SPPC's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000 (File No. 0-508, filed May 15, 2000, and incorporated herein by
reference)
G-5 Nevada Power's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (File No. 2-28348, filed March 28, 2000, and
incorporated herein by reference)
G-6 Nevada Power's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000 (File No. 2-28348, filed May 15, 2000, and
incorporated herein by reference)
G-7 PGE's Annual Report on Form 10-K for the fiscal year ended December
31, 1999 (File No. 1-5532-99, filed March 3, 2000, and incorporated
herein by reference)
G-8 PGE's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000 (File No. 1-5532-99, filed May 11, 2000, and incorporated herein
by reference)
H-1 SPPC Gas System Retention Study*
I-1 Opinion of Salomon Smith Barney*
J-1 Proposed Form of Notice*
K-1 Sierra Pacific Indenture
B. FINANCIAL STATEMENTS.
FS-1 Sierra Pacific Consolidated Balance Sheet as of December 31, 1999
(previously filed with the Commission in Sierra Pacific Annual Report
on Form 10-K for the year ended December 31, 1999 (Exhibit G-1
hereto), filed March 28, 2000, File No. 1-8788, and incorporated
herein by reference)
FS-2 Sierra Pacific Consolidated Balance Sheet as of March 31, 2000
(previously filed with the Commission in Sierra Pacific Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 (Exhibit G-2
hereto), filed May 15, 2000, File No. 1-8788, and incorporated herein
by reference)
FS-3 Sierra Pacific Consolidated Statement of Income for the 12 months
ended December 31, 1999 (previously filed with the Commission in
Sierra Pacific Annual Report on Form 10-K for the year ended December
31, 1999 (Exhibit G-1 hereto), filed March 28, 2000, File No. 1-8788,
and incorporated herein by reference)
FS-4 Sierra Pacific Consolidated Statement of Income for the 3 months
ended March 31, 2000 (previously filed with the Commission in Sierra
Pacific Quarterly Report on Form 10-Q for the quarter ended March 31,
2000 (Exhibit G-2 hereto), filed May 15, 2000, File No. 1-8788, and
incorporated herein by reference)
FS-5 PGE Consolidated Balance Sheet as of December 31, 1999 (previously
filed with the Commission in PGE Annual Report on Form 10-K for the
year ended December 31, 1999 (Exhibit G-7 hereto), filed March 3,
2000, File No. 1-5532-99, and incorporated herein by reference)
FS-6 PGE Consolidated Balance Sheet as of March 31, 2000 (previously filed
with the Commission in PGE Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000 (Exhibit G-8 hereto), filed May 11,
2000, File No. 1-5532-99, and incorporated herein by reference)
FS-7 PGE Consolidated Statement of Income for the 12 months ended December
31, 1999 (previously filed with the Commission in PGE Annual Report
on Form 10-K for the year ended December 31, 1999 (Exhibit G-7
hereto), filed March 3, 2000, File No. 1-5532-99, and incorporated
herein by reference)
FS-8 PGE Consolidated Statement of Income for the 3 months ended March 31,
2000 (previously filed with the Commission in PGE Quarterly Report on
Form 10-Q for the quarter ended March 31, 2000 (Exhibit G-8 hereto),
filed May 11, 2000, File No. 1-5532-99, and incorporated herein by
reference)
FS-9 Pro Forma Combined Financial data for Sierra Pacific and PGE**
*Previously filed
**To be filed by amendment
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
The Transaction will not involve major federal action
significantly affecting the quality of the human environment as those terms
are used in Section 102(2)(C) of the National Environmental Policy Act, 42
U.S.C. Section 4321 et seq. ("NEPA"). First, no major federal action within
the meaning of NEPA is involved Second, consummation of the Transaction
will not result in changes in the operations of PGE or the subsidiaries of
Sierra Pacific that would have any significant impact on the environment.
To the Applicants' knowledge, no federal agency is preparing an
environmental impact statement with respect to this matter.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned Applicants have duly caused this
pre-effective Amendment No. 1 to their Application/Declaration on Form U-1
to be signed on their behalf by the undersigned thereunto duly authorized.
SIERRA PACIFIC RESOURCES:
By: /s/ William E. Peterson Date: 5/24/00
----------------------- -------
Name: William E. Peterson
-------------------
Title: Senior Vice President, General Counsel and Corporate Secretary
--------------------------------------------------------------
Portland General Electric Company:
By: /s/ Alvin L. Alexanderson Date: 5/24/00
------------------------- -------
Name: Alvin L. Alexanderson
---------------------
Title: Senior Vice President, General Counsel, Secretary
-------------------------------------------------
Exhibit D-2 Order of the Nevada PUC
BEFORE THE PUBLIC UTILITIES COMMISSION OF NEVADA
Docket No. 00-1011
In re Petition of SIERRA PACIFIC RESOURCES
for an Order declaring the Public UtilitiesR
Commission of Nevada does not have jurisdiction
to approve SPR's proposed acquisition of all the
stock of Portland General Electric Company and
PGH II, both of which are Oregon corporations
wholly owned by Enron Corp.
- -----------------------------------------------------
At a general session of the Public Utilities Commission of Nevada, held at
its offices on February 23, 2000.
PRESENT:
Chairman Donald L. Soderberg
Commissioner Judy M. Sheldrew
Commissioner Richard M. Mcintire
Commission Secretary Crystal Reynolds
DECLARATORY ORDER
The Public Utilities Commission of Nevada ("Commission") makes the following
findings of facts and conclusions of law:
I. PROCEDURAL HISTORY
1. On January 7, 2000, Sierra Pacific Resources ("SPR"), the holding company
for Nevada Power Company ("NPC") and Sierra Pacific Power Company
{"Sierra"), filed a Petition with the Commission requesting the Commission
issue an order declaring that: (~) NRS 704.329 does not confer the
Commission with jurisdiction to review SPR' 5 acquisition ofPortland
General Electric ("PGE") and PGH II; and (2) NPC has filily satisfied and
lulfilled its obligation in Docket No.98-7023 to agree that it would
refrain from taking any action to become a registered holding company, and
that such condition does not apply to the PGE transaction.
2. A Notice of the Petition was issued by the Commission on January 24,
2000, with comments due on or before February 16, 2000. The Regulatory
Operations Staff ("Staff') of the Commission timely filed a response to the
petition, and Enron Corp. ("Enron") and the Utility Shareholders
Association of Nevada, Inc. ("USAN") timely filed comments in support of
the petition.
3. This Petition comes under the jurisdiction of the Commission pursuant to
the Nevada Revised Statutes ("NRS") and Nevada Administrative Code ("NAC")
Chapters 703 and 704 and, in particular, NAC 703.825.
II.POSITIONS OF THE PARTIES
A. SPR
4. SPR states that its acquisition ofPGE will be accomplished through the
cash purchase by SPR from Enron of all of the issued and outstanding stock
of POE and PGH II, which are Oregon corporations currently wholly owned by
Enron. (1) According to SPR' POE is a vertically integrated electric
utility whose service territory is wholly and exclusively within the State
of Oregon, which is only regulated by the Oregon Public Utility Commission,
the Nuclear Regulatory Commission and the Federal Energy Regulatory
Commission; PGH II is an unregulated Oregon corporation which holds various
benefit plans for POE.
5. SPR believes that the POE transaction is not subject to the jurisdiction
of this Commission because POE is not currently, nor will it be following
the transaction, subject to the Commission's jurisdiction. SPR also
believes that NPC has flilfilled the condition set forth on page 131 of the
Commission's January 4, 1999, Compliance Order in Docket No.98-7023,
wherein the Commission required Sierra and NPC to "[a]gree to refrain from
taking action to become a registered holding company under the Public
Utility Holding Company Act" before the merger would be considered flilly
and finally approved. In this corlnection, SPR points to the fact that it
and NPC requested and received an exemption from the Securities Exchange
Commission ("SEC") from registering as a holding company under PUFICA in
connection with the merger transaction in Docket No.98-7023. Further, SPR
asserts that the merger condition requiring Sierra and NPC to refrain from
becoming a registered holding company applied only to the transaction in
Docket No 98-7023 and could not apply to transactions not then under
consideration by the Commission.
B. Staff
6. In its response, Staff states that while Staff believes that NRS
704.329(1) sets forth the Commission's authority to review mergers,
acquisitions, and other changes in control of public utilities, it does not
require SPR to obtain this Commission's authorization in order to acquire
POE and PGH II. According to Staff, the requirements of NRS 704.329 do not
apply to this proposed transaction since: (1) PGE is not a "public utility
doing business in this state;" (2) neither POE nor PGH II holds a
controlling interest in a public utility doing business in this state; and
(3) neither POE nor PGH II will "obtain control" of SPR or its utility
subsidiaries.
7. With respect to the issue of NPC' 5 conipliance with the Commission's
directive to "refrain from taking action to become a registered holding
company under the PUHC A," Staff recognizes that SPR's acquisition of POE
and PGH II would require that SPR become a registered holding company under
the PUHCA. However, Staff points to the Commission's concerns raised on
page 126 ofthat same order, where the Commission stated:
The Commission finds that the merger could potentially have negative
effects on its jurisdiction over the company. However, some of Mr.
Russell's concerns are as a result of a subsequent merger with a large
multi-state company. The Commission finds that if such an event were to
occur, the proper forum to address the jurisdictional problems would be in
that filing. (Emphasis added)
According to Staff, the condition precedent to the Commission's approval of
the merger of SPR with Nevada Power applies only to actions the companies
might take regarding that merger, and does not apply to SPR's proposed
acquisition of POE and POH II.
C. Enron
8. Enron asserts in its comments that PGE does not own or operate any
equipment or provide services in the state of Nevada, and because the
proposed transaction will not result in a change of control of SPR, Enron
supports SPR's petitions.
D. USAN
9. In its comments, USAN supports SPR's petition on the bases that PGE
operates exclusively within the state of Oregon, and that as a result of
the proposed transaction, SPR will not operate a public utility in the
state of Nevada. USAN further asserts that the proposed transaction does
not contemplate any change of control as to any public utility or holding
company controlling a public utility in the state of Nevada.
III.COMMISSION DISCUSSION
10. As a legislatively created agency, the Commission's powers and authority
derive from and are limited by the provisions of the enabling legislation.
The Commission may only take such actions which are required to carry into
effect those powers granted by the legislature. NRS 703.020; Public Service
Commission V. Southwest Gas, 99 Nev. 268, 274 (1983); Public Utilities
Commission v. Gas Co., 317 U.S. 456, 462(1943). Thus, if the Commission has
authority to review the transaction, it must find such authority within the
confines of the NRS. In this connection, NRS 704.329 grants the Commission
specific jurisdiction pertaining to certain transactions involving public
utilities. Specifically, NRS 704.329 (1) & (4) provide:
(1) ... no person may merge with, acquire through a subsidiary or
affiliate, or otherwise directly or indirectly obtain control of a public
utility doing business in this state or an entity that holds a controlling
interest in such a public utility without first submitting to the
Commission an application for authorization ofthe proposed transaction and
obtaining authorization from the Commission.... Any merger, acquisition or
change in control in violation of this section is not valid for any
purpose.
* * * * *
(4) The provisions of this section do not apply to the transfer of stock of
a public utility doing business in this state or to the transfer of the
stock of an entity holding a controlling interest in such a public utility,
if a transfer of not more than 25 percent of the common stock of such a
public utility or entity is proposed.
11. As Staff points out, based on the facts presented by SPR' the proposed
transaction involves the cash acquisition by SPR of PGE and PGH II.
According to SPR' PGE and PGH II are neither public utilities "doing
business in this state" nor is either "an entity which holds a controlling
interest in such a public utility." While, PGE and PGH II will come under
the control of an entity that holds a controlling interest in such a public
utility (i.e. SPR), NRS 704.329 does not confer jurisdiction upon the
Commission to review such transactions. Indeed, no person will merge with,
acquire, or obtain control of SPR it sell, a transaction over which the
Commission would have jurisdiction.
12. As to SPR's request that the Commission find that NPC has complied with
the terms of the Commission's January 4, 1999, Compliance Order to the
extent that the Commission required Sierra and NPC to "[a]gree to refrain
from taking action to become a registered holding company under the Public
Utility Holding Company Act," it appears that the Commission's directive
was limited to actions which may affect the merger contemplated in that
order. In that Compliance Order, the Commission specifically considered the
consequences of the subsequent merger of the new company with a "large
multi-state company;" evidently, the provision of the order was designed to
limit an out-of-state holding company from gaining control over a Nevada
public utility, rather than SPR subsequently gaining control over an
unregulated utility. Moreover, the Commission found that in the event of
such a merger". . . the proper forum to address the jurisdictional problems
would be in that filing;" because the proposed transaction is not
jurisdictional, there is presently no merger to address.
THEREFORE, based upon the foregoing, the Commission hereby issues its
DECLARATORY ORDER that:
1. NRS 704.329 does not confer the Commission with jurisdiction to review
SPR's acquisition of PGE and PGH II, as such transaction is described in
SPR's petition.
2. NPC has satisfied its obligation in Docket No.98-7023 to agree that it
would refrain from taking any action to become a registered holding
company, and that such condition does not apply to the PGE transaction.
3. This order is limited strictly to the facts as presented by SPR in its
petition.
4. The Commission retains jurisdictionfor the purpose of correcting any
errors which may have occurred in the drafting or issuance of this Order.
By the Commission,
DONALD L. SODERBERG, Chairman
Commissioner Sheldrew dissented
JUDY M. SHELDREW, Commissioner
RICHARD M. MCINTIRE, Commissioner
Attest: CRYSTAL REYNOLDS, Commission Secretary
Dated: 3/16/00 Carson City, Nevada
1. SPR states that it will finance the purchase of POE through a loan
obtained from Credit Suisse First Boston, which may be refinanced at a
later date through various SPR equity and/or debt issuances.
Exhibit K-1 Sierra Pacific Indenture
SIERRA PACIFIC RESOURCES
Issuer
INDENTURE
Dated as of May 1, 2000
THE BANK OF NEW YORK
Trustee
Providing for the Issuance of Debt Securities in Series
[GRAPHIC?OMITTED]
[GRAPHIC?OMITTED]
===============================================================================
CROSS-REFERENCE TABLE
TIA SECTION INDENTURE SECTION
----------- -----------------
- --------------------------- ---------------------------
310(a)(1) 7.10
- --------------------------- ---------------------------
310(a)(2) 7.10
- --------------------------- ---------------------------
310(a)(3) N.A.
- --------------------------- ---------------------------
310(a)(4) N.A.
- --------------------------- ---------------------------
310(a)(5) N.A.
- --------------------------- ---------------------------
310(b) 7.08; 7.10
- --------------------------- ---------------------------
310(c) N.A.
- --------------------------- ---------------------------
311(a) 7.11
- --------------------------- ---------------------------
311(b) 7.11
- --------------------------- ---------------------------
312(a) 2.05
- --------------------------- ---------------------------
312(b) 13.03
- --------------------------- ---------------------------
312(c) 13.03
- --------------------------- ---------------------------
313(a) 7.06
- --------------------------- ---------------------------
313(b)(1) N.A.
- --------------------------- ---------------------------
313(b)(2) 7.06
- --------------------------- ---------------------------
313(c) 7.06
- --------------------------- ---------------------------
313(d) 7.06
- --------------------------- ---------------------------
314(a) 4.04
- --------------------------- ---------------------------
314(b) N.A.
- --------------------------- ---------------------------
314(c)(1) 13.04
- --------------------------- ---------------------------
314(c)(2) 13.04
- --------------------------- ---------------------------
314(c)(3) N.A.
- --------------------------- ---------------------------
314(d) N.A.
- --------------------------- ---------------------------
314(e) 13.05
- --------------------------- ---------------------------
314(f) N.A.
- --------------------------- ---------------------------
314(a) 7.01(b)
- --------------------------- ---------------------------
315(b) 7.05
- --------------------------- ---------------------------
315(c) 7.01(a)
- --------------------------- ---------------------------
315(d) 7.01(c)
- --------------------------- ---------------------------
315(e) 6.12
- --------------------------- ---------------------------
316(a) (last sentence) 13.06
- --------------------------- ---------------------------
316(a)(1)(A) 6.09
- --------------------------- ---------------------------
316(a)(1)(B) 6.10
- --------------------------- ---------------------------
316(a)(2) N.A.
- --------------------------- ---------------------------
316(b) 6.07
- --------------------------- ---------------------------
317(a)(1) 6.04
- --------------------------- ---------------------------
317(a)(2) 6.04
- --------------------------- ---------------------------
317(b) 2.04
- --------------------------- ---------------------------
318(a) 13.01
- --------------------------- ---------------------------
N.A. means Not Applicable
Note: This cross-reference table is not part of the Indenture.
TABLE OF CONTENTS
Page
ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE 1
Section 1.01. Definitions 1
Section 1.02. Incorporation by Reference of Trust Indenture Act 6
Section 1.03. Rules of Construction 7
ARTICLE TWO THE SECURITIES 7
Section 2.01. Terms and Firm 7
Section 2.02. Execution and Authentication 11
Section 2.03. Registrar and Paying Agent 13
Section 2.04. Paying Agent to Hold Money in Trust 14
Section 2.05. Securityholder Lists 14
Section 2.06. Transfer, Registration and Exchange 14
Section 2.07. Replacement Securities 17
Section 2.08. Outstanding Securities 18
Section 2.09. Temporary Securities 18
Section 2.10. Securities in Global Form 19
Section 2.11. Cancellation 19
Section 2.12. Defaulted Interest 20
Section 2.13. Persons Deemed Owners 20
Section 2.14. CUSIP Numbees 21
ARTICLE THREE REDEMPTION 21
Section 3.01. Applicability of Article 21
Section 3.02. Notice to Trustee 21
Section 3.03. Selection of Securities to Be Redeemed 22
Section 3.04. Notice of Redemption 22
Section 3.05. Effect of Notice of Redeemption 23
Section 3.06. Deposit of Redemption Price or Securities 24
Section 3.07. Securities Redeemed in Part 24
ARTICLE FOUR COVENANTS 25
Section 4.01. Payment of Securities 25
Section 4.02. Maintenance of Office or Agent 25
Section 4.03. Money for Securities Payments to Be Held in Trust 26
Section 4.04. SEC Reports 28
Section 4.05. Statement as to Compliance 28
Section 4.06. Limitations on Liens on Stock of Restricted Subdiaries 29
Section 4.07. Limitations on Issue or Disposition of Stock of
Restricted Subsidiaries 29
Section 4.08. Additional Amount 29
Section 4.09. Waiver of Certain Covenants 30
Section 4.10. Information Regarding Original Issuue Discount 30
ARTICLE FIVE SUCCESSOR CORPORATION AND ASSUMPTION 31
Section 5.01. When Company May Merge, etc. 31
Section 5.02. Successor Corporation Substituted 31
ARTICLE SIX DEFAULTS AND REMEDIES 32
Section 6.01. Events of Default 32
Section 6.02. Collection of Indebtedness by Trustee; Trustee
May Prove Debt 34
Section 6.03. Application of Proeeds 36
Section 6.04. Suits for Enforcement 37
Section 6.05. Restoration of Rights on Abandonments of Proceedings 37
Section 6.06. Limitations on Suits by Securtyholders 37
Section 6.07. Unconditional Right of Securityholder to Institute
Certain Suits 38
Section 6.08. Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default 38
Section 6.09. Control by Holders of Securities 38
Section 6.10. Waiver of Past Defaults 39
Section 6.11. Trustee to Give Notice of Default, But May Withhold
in Certain Circumstances 40
Section 6.12. Right of Court to Require Filing of Undertaking
to Pay Costs 40
ARTICLE SEVEN TRUSTEE 41
Section 7.01. Duties of Trustee 41
Section 7.02. Rights of Trustee 43
Section 7.03. Individual Rights of Trustee 44
Section 7.04. Trustee's Disclaimer 44
Section 7.05. Notice of Defaults 44
Section 7.06. Reports by Trustee to Holders 45
Section 7.07. Compensation and Indemnity 45
Section 7.08. Replacement of Trustee 46
Section 7.09. Successor Trustee by Merger, etc. 46
Section 7.10. Eligibility; Disqualification 47
Section 7.11. Preferential Collection of Claims against Company 47
ARTICLE EIGHT DISCHARGE OF INDENTURE 47
Section 8.01. Termination of the Company's Obligations 47
Section 8.02. Termination of the Company's Obligations under Certain
Circumstances 48
Section 8.03. Application of Trust Money 50
Section 8.04. Repayment to Company 50
Section 8.05. Indemnity for Government Obligations 50
ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS 50
Section 9.01. Without Consent of Holders 50
Section 9.02. With Consent of Holders 52
Section 9.03. Compliance with Trust Indenture Act 53
Section 9.04. Revocation and Effect of Consents 53
Section 9.05. Notation on or Exchange of Securities 54
Section 9.06. Trustee to Sign Amendments, etc. 54
ARTICLE TEN REPAYMENT AT THE OPTION OF HOLDERS 55
Section 10.01. Applicability of Article 55
ARTICLE ELEVEN CONCERNING THE SECURITYHOLDERS 55
Section 11.01. Evidence of Action Taken by Securityholders 55
Section 11.02. Proof of Execution of Instruments and of
Holding of Securities 56
Section 11.03. Holders to be Treated as Owners 57
Section 11.04. Securities Owned by Company Deemed Not Outstanding 57
Section 11.05. Right of Revocation of Action Taken 58
Section 11.06. Meetings of Holders 58
Section 11.07. Call, Notice and Place of Meetings 59
Section 11.08. Persons Entitled to Vote at Meetings 59
Section 11.09. Quorum; Action 59
Section 11.10. Determination of Voting Rights; Conduct and
Adjournment of Meetings 60
Section 11.11. Counting Votes and Recording Action of Meetings 61
ARTICLE TWELVE SINKING FUNDS 61
Section 12.01. Applicability of Article 61
Section 12.02. Satisfaction of Sinking Fund Payments with Securities 62
Section 12.03. Redemption of Securities for Sinking Fund 62
ARTICLE THIRTEEN MISCELLANEOUS 63
Section 13.01. Trust Indenture Act Conrols 63
Section 13.02. Notices 63
Section 13.03. Communication by Holders with Other Holders 65
Section 13.04. Certificate and Opinion as to Conditions Precedent 65
Section 13.05. Statements Required in Certificate or Opinion 65
Section 13.06. When Treasury Securities Disregarded 66
Section 13.07. Legal Holidays 66
Section 13.08. Governing Law 66
Section 13.09. No Adverse Interpretation of Other Agreements 66
Section 13.10. Successors 66
Section 13.11. Duplicate Originals 67
Section 13.12. Securities in Foreign Currencies 67
INDENTURE dated as of May 1, 2000, between Sierra Pacific Resources,
a corporation incorporated under the laws of Nevada (the "Company"), and
The Bank of New York, a New York banking corporation, as trustee hereunder
("Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Company's
Securities issued hereunder:
RECITALS
The Company has authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness ("Securities") to be
issued in one or more series as herein provided.
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"Additional Amounts" means any additional amounts which are required
by a Security or by or pursuant to a Board Resolution, under circumstances
specified therein, to be paid by the Company in respect of certain taxes
imposed on Holders who are not United States Persons, or as otherwise
specified in the terms of a Security established pursuant to Section 2.01,
and which are owing to such Holders.
"Agent" means any Registrar, Paying Agent or co-Registrar or agent
for service of notice and demands. See Section 2.03.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have the
meanings correlative to the foregoing.
"Authorized Newspaper" means a newspaper printed in the official
language or in the English language of the country of publication and
customarily published at least once a day on each Business Day in each
calendar week and of general circulation in New York, New York or in any
other place as required in this Indenture, whether or not such newspaper is
published on Legal Holidays, or, with respect to the Securities of any
series, such other newspaper(s), as may be specified in or pursuant to the
Board Resolution of the Company or supplement to this Indenture pursuant to
which such series of Securities is issued. Whenever, under the provisions
of this Indenture or such Board Resolutions, two or more publications of a
notice or other communication are required or permitted, such publications
may be in the same or different newspapers. If, because of temporary or
permanent suspension of publication or general circulation of any newspaper
or for any other reason, it is impossible or impracticable to publish any
notices required by this Indenture or a Board Resolution in the manner
provided, then such publication in lieu thereof or such other notice as
shall be made with the approval of the Trustee shall constitute a
sufficient publication of such notice.
"Bankruptcy Law" shall have the meaning set forth in Section 7.07.
"Bearer Security" means any Security in the form established pursuant
to Section 2.01 which is payable to bearer.
"Board of Directors" means the Board of Directors of the Company or
the Executive Committee or any other committee of the Board of Directors
duly authorized to act for the Company hereunder.
"Board Resolution" means a copy of the resolutions certified by the
Secretary or an Assistant Secretary of the Company as properly adopted by
the Board of Directors of the Company and in full force and effect and
delivered to the Trustee.
"Business Day", except as may otherwise be provided in the form of
Securities of any particular series pursuant to the provisions of this
Indenture, with respect to any Place of Payment means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a Legal Holiday in that Place
of Payment.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
"Company" means the party named in the first paragraph of this
Indenture until a successor replaces it pursuant to the Indenture and
thereafter means such successor.
"Company Request" and "Company Order" mean, respectively, a written
request or order signed in the name of the Company by the Chairman of the
Board, the President, the Chief Financial Officer or the Treasurer thereof
or any other officer specifically authorized to act by the Board of
Directors of the Company as certified to the Trustee, and delivered to the
Trustee.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date hereof is located at The Bank of New
York, 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Administration, Re: Sierra Pacific Resources.
"Corporation" includes corporations, associations, companies and
business trusts.
"Coupon" means any interest coupon appertaining to a Bearer Security.
"Debt" shall have the meaning set forth in Section 4.06.
"Default" means any event which is, or after notice or passage of
time would be, an Event of Default.
"Discharged" shall have the meaning set forth in Section 8.02.
"Discount Security" means any Security which provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to Section
6.01.
"Event of Default" shall have the meaning set forth in Section 6.01.
"Government Obligations" with respect to any series of Securities
means direct noncallable obligations of the government which issued the
currency in which the Securities of that series are denominated,
noncallable obligations the payment of the principal of and interest on
which is fully guaranteed by such government, and noncallable obligations
on which the full faith and credit of such government is pledged to the
payment of the principal thereof and interest thereon, and shall also
include a depositary receipt issued by a bank or trust company as custodian
with respect to any such Government Obligation or a specific payment of
interest on or principal of any such Government Obligation held by such
custodian for the account of the holder of such depositary 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
depositary receipt from any amount received by the custodian in respect of
the Government Obligation or the specific payment of interest on or
principal of the Government Obligation evidenced by such depositary
receipt.
"Holder" or "Securityholder" means, with respect to a Registered
Security, a Person in whose name such Security is registered on the
Security Register and, with respect to a Bearer Security or any coupon, the
bearer thereof.
"Indenture" means this Indenture, as it may from time to time be
amended or supplemented and shall include the forms and terms of particular
series of Securities established as contemplated herein.
"Independent Public Accountants" means independent public accountants
or a firm of independent public accountants who may be the independent
public accountants regularly retained by the Company or who may be other
independent public accountants. Such public accountants or firm shall be
entitled to rely upon any Opinion of Counsel as to the interpretation of
any legal matters relating to the Indenture or certificates required to be
provided hereunder.
"Legal Holiday" shall have the meaning set forth in Section 13.07.
"Lien" means any mortgage, pledge, security interest or lien, or
other encumbrance of any nature whatsoever.
"Notice of Default" shall have the meaning set forth in Section 6.01.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or Secretary thereof or any other officer
specifically authorized to act by the Board of Directors of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer other than the Secretary and an Assistant Treasurer or an
Assistant Secretary of the Company.
"Opinion of Counsel" means a written opinion of legal counsel, who
(except as otherwise expressly provided in this Indenture) may be an
employee of or counsel to or for the Company, or any other legal counsel
acceptable to the Trustee.
"Outstanding", when used with respect to Securities or a series,
shall have the meaning set forth in Section 2.08.
"Paying Agent" shall have the meaning set forth in Section 2.03.
"Periodic Offering" means an offering of Securities of a series from
time to time the specific terms of which Securities, including, without
limitation, the rate or rates of interest, if any, thereon, the maturity or
maturities thereof, the original issue date or dates thereof, the
redemption provisions, if any, and any other terms specified as
contemplated by Section 2.01 with respect thereto, are to be determined by
the Company, or one or more of the Company's agents designated in an
Officers' Certificate, upon the issuance of such Securities.
"Person" means any individual, Corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Place of Payment" when used with respect to the Securities of any
series, means the place or places where the principal of and interest and
any Additional Amounts on the Securities of that series are payable as
specified as provided pursuant to Section 2.01.
"Principal" whenever used with reference to the Securities or any
Security or any portion thereof, shall be deemed to include "and premium,
if any," and, whenever used with reference to any Security which by its
terms provides (or as to which mandatory provisions of law provide) that
less than the principal amount thereof shall be due and payable upon a
declaration of the acceleration of the maturity thereof, and in the
contexts of such a declaration, of proving a claim under bankruptcy,
insolvency or similar laws, or of determining whether the holders of the
requisite aggregate principal amount of the Securities of any or all series
then Outstanding have concurred in any request, demand, authorization,
direction, notice, consent, waiver or other action by Securityholders
hereunder, shall mean the portion of such principal amount so provided to
be due and payable upon a declaration of acceleration of the maturity
thereof.
"Redemption Date" means the date fixed for redemption of any Security
to be redeemed pursuant to this Indenture.
"Redemption Price" means the principal amount of any Security to be
redeemed.
"Registered Security" means any Security registered in the Security
Register.
"Registrar" shall have the meaning set forth in Section 2.03.
"Restricted Subsidiary" means any consolidated operating subsidiary
of the Company that accounts for 10% or more of the consolidated revenues
and/or assets of the Company, including but not limited to Sierra Pacific
Power Company and Nevada Power Company, and any successor to all or a
principal part of the business or properties of any thereof, and any other
subsidiary which the Board of Directors designates as a Restricted
Subsidiary.
"SEC" means the Securities and Exchange Commission as from time to
time constituted, created under the Securities Exchange Act of 1934, as
amended, or if at any time after the execution of this instrument such
Commission is not existing and performing the duties assigned to it under
the TIA, then the body performing such duties at such time.
"Securities" means the debt securities, as amended or supplemented
from time to time pursuant to this Indenture, that are issued under this
Indenture.
"Security Register" shall have the meaning set forth in Section 2.03.
"Subsidiary" means any corporation of which at the time of
determination the Company and/or one or more Subsidiaries owns or controls
directly or indirectly more than 50% of the shares of Voting Stock.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Section
77aaa-77bbbb), as amended from time to time.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Trust Officer" means any officer within the corporate trust
department of the Trustee, including any vice president, assistant vice
president, assistant secretary, assistant treasurer, trust officer or any
other officer of the Trustee who customarily performs functions similar to
those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of
such person's knowledge of and familiarity with the particular subject and
who shall have direct responsibility for the administration of this
Indenture.
"United States" means the United States of America (including the
States and the District of Columbia), its territories and possessions and
other areas subject to its jurisdiction.
"U.S. Depository" or "Depository" means, with respect to the
Securities of any series issuable or issued in whole or in part in the form
of one or more global Securities, the Person designated as U.S. Depository
pursuant to Section 2.01, which must be a clearing agency registered under
the Securities Exchange Act of 1934, as amended, and, if so provided
pursuant to Section 2.01 with respect to the Securities of any series, any
successor to such Person. If at any time there is more than one such
Person, "U.S. Depository" shall mean, with respect to any series of
Securities, the qualifying entity which has been appointed with respect to
the Securities of that series.
"Voting Stock" means stock of a Corporation of the class or classes
having general voting power under ordinary circumstances in the election of
directors, managers or trustees of such Corporation (irrespective of
whether or not at the time stock of any other class or classes shall have
or might have voting power by reason of the happening of any contingency).
"Yield to Maturity" means the yield to maturity on a series of
Securities at the most recent redetermination of interest on such series,
and calculated in accordance with accepted financial practice.
Section 1.02. 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:
"Commission" means the SEC.
"Indenture Securities" means the Securities.
"Indenture Security Holder" means a Securityholder.
"Indenture to be Qualified" means this Indenture.
"Indenture Trustee" or "institutional trustee" means the Trustee.
"Obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule
have the meanings thereby assigned to them.
Section 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and in the plural
include the singular;
(4) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted
accounting principles; and
(5) the Article and Section headings herein and in the Table of
Contents are for convenience only and do not constitute a part of this
Indenture and shall not affect the meaning, construction or effect of this
Indenture.
ARTICLE TWO
THE SECURITIES
Section 2.01. Terms and Form.
The aggregate principal amount of Securities that may be
authenticated and delivered under this Indenture is unlimited. The
Securities may be issued in one or more series of Securities and shall bear
the title, interest, if any, at the rates and from the dates, shall mature
at the times, may be redeemable at the prices and upon the terms, shall be
denominated and payable at the place or places and in the currency or
currencies (which may be other than United States dollars), including
composite currencies, and shall contain or be subject to such other terms
as shall be approved by or pursuant to a Board Resolution of the Company,
Officers' Certificate, or in one or more supplements to this Indenture.
The Securities of each series hereunder shall be in one or more forms
approved from time to time by or pursuant to a Board Resolution of the
Company, Officers' Certificate, or in one or more supplements to this
Indenture establishing the following:
(1) the title or designation of the Securities and the series
in which such Securities shall be included (which, unless such Securities
constitute part of a series of Securities previously issued, shall
distinguish the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the
Securities of such title or the Securities of such series which may be
authenticated and delivered under this Indenture (except for Securities
authenticated and delivered upon registration or transfer of, or in
exchange for, or in lieu of, other Securities of the series pursuant to
Sections 2.06, 2.07, 2.09 or 3.07);
(3) whether Securities of the series are to be issuable as
Registered Securities, Bearer Securities (with or without coupons) or both;
any restrictions applicable to the offer, sale or delivery of Bearer
Securities and the terms upon which Bearer Securities of the series may be
exchanged for Registered Securities of the series; and whether any
Securities of the series are to be issuable initially in global form and,
if so, (i) whether beneficial owners of interests in any such global
Security may exchange such interest for Securities of such series and of
like tenor of any authorized form and denomination and the circumstances
under which any such exchanges may occur, if other than in the manner
specified in Section 2.09 and (ii) the name of the Depository or the U.S.
Depository, as the case may be, with respect to any global Security;
(4) the date as of which any Bearer Securities of the series
and any temporary global Security representing Outstanding Securities of
the series shall be dated if other than the date of original issuance of
the first Security of the series to be issued;
(5) if Securities of the series are to be issuable as Bearer
Securities, whether interest in respect of any portion of a temporary
Bearer Security in global form (representing all of the Outstanding Bearer
Securities of the series) payable in respect of any date or dates prior to
the exchange of such temporary Bearer Security for definitive Securities of
the series shall be paid to any clearing organization with respect to the
portion of such temporary Bearer Security held for its account and, in such
event, the terms and conditions (including any certification requirements)
upon which any such interest payment received by a clearing organization
will be credited to the Persons entitled to interest payable on such date
or dates;
(6) the date or dates on which the principal, and premium, if
applicable, of such Securities is payable;
(7) the rate or rates (including the rate or rates at which
overdue principal shall bear interest, if different from the rate or rates
at which such Securities shall bear interest prior to maturity and, if
applicable, the rate or rates at which overdue premium or interest shall
bear interest, if any) at which such Securities shall bear interest, if
any, or the method in which such rate or rates are determined, the date or
dates from which such interest shall accrue, the dates on which such
interest shall be payable and the record date for Holders entitled to the
interest payable on Registered Securities on any such date, whether and
under what circumstances Additional Amounts on such Securities shall be
payable and, if so, whether the Company has the option to redeem the
affected Securities rather than pay such Additional Amounts, and the basis
upon which interest shall be calculated if other than as otherwise provided
in this Indenture;
(8) the place or places, if any, in addition to or other than
The Borough of Manhattan, The City of New York, New York where the
principal of and interest on or Additional Amounts, if any, payable in
respect of such Securities shall be payable;
(9) the period or periods within which, the price or prices at
which and the terms and conditions upon which such Securities may be
redeemed, in whole or in part, at the option of the Company;
(10) the terms of any sinking fund and the obligation, if any,
of the Company to redeem or purchase such Securities pursuant to a sinking
fund, at the option of a Holder thereof or otherwise and the period or
periods within which, the price or prices at which and the terms and
conditions upon which such Securities shall be redeemed or purchased in
whole or in part, pursuant to such obligation, and any provisions for the
remarketing of such Securities;
(11) the denominations in which Registered Securities of the
series, if any, shall be issuable, and the denominations in which Bearer
Securities of the series, if any, shall be issuable, in either case if
other than as otherwise provided in this Indenture;
(12) if other than the principal amount thereof, the portion of
the principal amount of such Securities which shall be payable upon
declaration of acceleration of the maturity thereof pursuant to Section
6.01;
(13) if other than such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public
or private debts, the coin or currency, including composite currencies, in
which payment of the principal of or interest, if any, and any Additional
Amounts in respect of such Securities shall be payable and whether the
Securities of the series may be discharged other than as provided in
Article 8;
(14) if the principal of or interest, if any, and any
Additional Amounts in respect of such Securities are to be payable, at the
election of the Company or a Holder thereof, in a coin or currency,
including composite currencies, other than that in which the Securities are
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made;
(15) if the amount of payments of principal of or interest, if
any, or any Additional Amounts in respect of such Securities may be
determined with reference to an index, formula or other method based on a
coin or currency other than that in which the Securities are stated to be
payable, the manner in which such amounts shall be determined including the
purpose of determining the principal amount of such Securities deemed to be
outstanding at any time;
(16) if the Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions, then
the form and terms of such certificates, documents or conditions;
(17) the terms, if any, pursuant to which the Securities of
such series may be converted into or exchanged for shares of capital stock
or other securities of the Company or any other Person.
(18) any events of default, other than those set forth in
Section 6.01, or covenants, other than those set forth in Article 4, with
respect to Securities of such series; and
(19) any other terms of the Securities (which terms shall not
be inconsistent with the provisions of this Indenture).
If the form of the Security of any series is approved by or pursuant
to a Board Resolution of the Company, an Officers' Certificate of the
Company delivered to the Trustee shall state that all conditions precedent
relating to the authentication and delivery of such Security have been
complied with and shall be accompanied by a copy of the Board Resolution of
the Company by or pursuant to which the form of such Security has been
approved. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage. Each Security shall be dated
the date of its authentication. Each Security may contain any other terms
as are not inconsistent with the provisions of this Indenture.
All Securities of any one series and coupons appertaining to Bearer
Securities of such series, if any, shall be substantially identical except
as to denomination and the rate or rates of interest, if any, the time or
times at which the principal thereof may be payable, the date from which
interest, if any, shall accrue and except as may otherwise be provided in
or pursuant to such Board Resolution and set forth in the Officers'
Certificate hereinabove described or in any such indenture supplemental
hereto. All Securities of any one series need not be issued at the same
time and, unless otherwise provided, a series may be reopened for issuances
of additional Securities of such series or to establish additional terms of
such series of Securities.
The Securities of each series may be issued as Registered Securities
without coupons or, if provided by the terms of the instrument establishing
such series of Securities, as Bearer Securities, with or without coupons
and, in either case, may be issued initially, temporarily or permanently in
global form (as provided in Section 2.10). Unless the form of a Security
for a series provides otherwise, the Registered Securities shall be issued
in denominations of $1,000 or integral multiples thereof and Bearer
Securities shall be issuable in the denomination of $5,000.
Except as otherwise specified as contemplated by this Section 2.01
for Securities of any series, interest on the Securities of each series
shall be computed on the basis of a 360-day year of twelve 30-day months.
Section 2.02. Execution and Authentication.
An Officer of the Company shall sign the Securities and the coupons
for the Company by manual or facsimile signature. The Company's seal, if
any, may be reproduced on the Securities, but the Company's seal shall not
be required to be included on the Securities.
If an Officer whose signature is on a Security or coupon no longer
holds that office at the time the Trustee authenticates the Security, the
Security and coupon shall be valid and binding on the Company nevertheless.
The aggregate principal amount of Securities Outstanding hereunder at
any time shall be unlimited except that such Outstanding amount (exclusive
of any premium) may not exceed the amount authorized from time to time by
the Board of Directors of the Company and except as provided in Section
2.07. Upon receipt of a Company Order for the authentication and delivery
of Securities of a series, the Trustee shall authenticate and deliver for
original issue Securities of a series as to which an Officers' Certificate
of the Company or a supplemental indenture has been delivered to the
Trustee pursuant to Section 2.01.
No Security or any coupon appertaining thereto shall be valid until
the Trustee or the authenticating agent referred to below manually signs
the certificate of authentication on the Security. Each Registered Security
shall be dated the date of its authentication. Bearer Securities and any
temporary Bearer Security in global form shall be dated as specified in the
Officers' Certificate of the Company or in the supplements to this
Indenture contemplated by Section 2.01. The signature of the Trustee or the
authenticating agent referred to below shall be conclusive evidence that
the Security has been authenticated under this Indenture.
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities 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 or an
Affiliate thereof.
Except as permitted by Section 2.07, the Trustee shall not
authenticate and deliver any Bearer Security unless all appurtenant coupons
for interest then matured have been detached and canceled.
The Trustee's authentication shall be in the following form:
Dated:
Trustee's Certificate of Authentication
This is one of the Securities of the series designated herein and
referred to in the within-mentioned Indenture.
[-------------------------],
as Trustee
By
------------------------
Authorized Signatory
If the forms and terms of the Securities of the series and any
related coupons have been established in or pursuant to one or more
Officers' Certificates as permitted by Section 2.01 and 2.02, in
authenticating such Securities and accepting the additional
responsibilities under this Indenture in relating to such Securities the
Trustee shall be entitled to receive, and (subject to Section 7.01) shall
be fully protected in relying upon an Opinion of Counsel to the effect
that:
(a) the form and terms of such Securities and coupons, if any, have
been duly authorized and established pursuant to Sections 2.01 and 2.02 and
comply with this Indenture, and
(b) such Securities, when authenticated and delivered by the Trustee
and issued by the Company, and such coupons, if any, when issued by the
Company, in the manner and subject to any conditions specified in such
Opinion of Counsel, will constitute valid and legally binding obligations
of the Company, enforceable in accordance with their terms, subject to
customary exceptions, provided, however, that, with respect to Securities
of a series subject to a Periodic Offering, the Trustee shall be entitled
to receive such Opinion of Counsel only once at or prior to the time of the
first authentication of Securities of such series and that the Opinion of
Counsel above may state:
(x) that the forms of such Securities have been, and the
terms of such Securities (when established in accordance with
such procedures as may be specified from time to time in a
Company Order, all as contemplated by and in accordance with a
Board Resolution or any Officers' Certificate pursuant to
Section 2.01, as the case may be) will have been, duly
authorized by the Company and established in conformity with
the provisions of this Indenture;
(y) that such Securities, together with the coupons, if
any, appertaining thereto, when (1) executed by the Company,
(2) completed, authenticated and delivered by the Trustee in
accordance with this Indenture, and (3) issued by the Company
in the manner and subject to any conditions specified in such
Opinion of Counsel, will constitute valid and legally binding
obligations of the Company, enforceable in accordance with
their terms, subject to customary exceptions; and
(z) that all laws and requirements in respect of the
execution and delivery by the Company of such Securities have
been complied with.
(c) With respect to Securities of a series subject to a Periodic
Offering, the Trustee may conclusively rely, as to the authorization by the
Company of any of such Securities, the form and terms thereof and the
legality, validity, binding effect and enforceability thereof, upon the
Opinion of Counsel and other documents delivered pursuant to Section 2.01
and this Section, as applicable, at or prior to the time of the first
authentication of Securities of such series unless and until it has
received written notification that such opinion or other documents have
been superseded or revoked. In connection with the authentication and
delivery of Securities of a series subject to a Periodic Offering, the
Trustee shall be entitled to assume that the Company's instructions to
authenticate and deliver such Securities do not violate any rules,
regulations or orders of any governmental agency or commission having
jurisdiction over the Company.
The Trustee shall have the right to decline to authenticate and
deliver any Securities under this Section if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken or if the
Trustee in good faith shall determine that such action would expose the
Trustee to personal liability to existing Holders.
Section 2.03. Registrar and Paying Agent.
The Company shall designate a Registrar who shall maintain an office
or agency where Securities may be presented for registration of transfer
and where each series of Registered Securities may be presented for
exchange ("Registrar") and a Paying Agent who shall maintain an office or
agency where Securities and coupons may be presented for payment ("Paying
Agent") and an office or agency where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Registrar shall keep a register ("Security Register") of each series of
Registered Securities and of their transfer and exchange. The Company may
have one or more co-Registrars and one or more additional Paying Agents and
shall maintain the Registrar or a co-Registrar and a Paying Agent in each
place required by Section 4.02. The term "Paying Agent" includes any
additional paying agent. In the event that the Trustee shall not be the
Registrar, it shall have the right to examine the Security Register at all
reasonable times.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent. If the
Company fails to maintain a Registrar or Paying Agent, or the Company fails
to maintain an agent for service of notices, process and demands, or the
Company fails to give the foregoing notice, the Trustee shall act as such.
The Company initially appoints the Trustee to be the Registrar,
Paying Agent and agent for services of notices and demands.
Section 2.04. Paying Agent to Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or any interest or Additional Amounts on the
Securities, and shall notify the Trustee of any default by the Company (or
any other obligor on the Securities) in making any such payment. If the
Company or a Subsidiary acts as Paying Agent, it shall on or before each
due date of the principal of or any interest or Additional Amounts on any
Securities segregate the money and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it
to the Trustee and the Trustee may at any time during the continuance of
any payment default, upon written request to a Paying Agent, require such
Paying Agent to pay to the Trustee all sums so held in trust by such Paying
Agent. Upon doing so the Paying Agent shall have no further liability for
the money.
Section 2.05. Securityholder 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 Holders of Registered Securities. If the Trustee is not the Registrar,
the Company shall furnish to the Trustee from information in the possession
or control of the Company (a) on or before each interest payment date, as
of the relevant record date, for any series of Securities, (b) pursuant to
the form of Security for each series of non-interest bearing Securities and
(c) 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 Securityholders, provided that if the provisions of
(a) or (b) do not provide for the furnishing of such information at stated
intervals of not more than six months, at least as frequently as
semiannually, not later than May 15 and November 15 of each year.
Section 2.06. Transfer, Registration and Exchange.
When a Registered Security is presented at an office or agency
maintained for that series pursuant to Section 4.02 in proper form for
registration of transfer with a request to register a transfer, the
Registrar or co-Registrar at that office shall register the transfer as
requested.
At the option of the Securityholder, Registered Securities of any
series may be exchanged upon surrender to the Registrar or a co-Registrar
for Registered Securities of the same series of like aggregate principal
amount, stated maturity and tenor and of other authorized denominations
upon surrender at any office or agency maintained for that series pursuant
to Section 4.02.
If so provided with respect to Securities of a series, at the option
of the Holder, Bearer Securities of any such series may be exchanged for
Registered Securities of the same series containing identical terms and
provisions, of any authorized denominations and aggregate principal amount,
upon surrender of the Bearer Securities to be exchanged at any office or
agency maintained for that series pursuant to Section 4.02, with all
unmatured coupons and all matured coupons appertaining thereto in default.
If the Holder of a Bearer Security is unable to produce any such unmatured
coupon or coupons or matured coupon or coupons in default, such exchange
may be effected if the Bearer Securities are accompanied by payment in
funds acceptable to the Company and the Trustee in an amount equal to the
face amount of such missing coupon or coupons, or the surrender of such
missing coupon or coupons may be waived by the Company and the Trustee if
there is furnished to them such security or indemnity as they may require
to save each of them and any Paying Agent for that series harmless. If
thereafter the Holder of such Security shall surrender to any Paying Agent
for that series any such missing coupon in respect of which such a payment
shall have been made, such Holder shall be entitled to receive the amount
of such payment; provided, however, that except as otherwise provided in
Section 4.02, interest represented by coupons shall be payable only upon
presentation and surrender of those coupons at an office or agency located
outside the United States. Notwithstanding the foregoing, in case a Bearer
Security of any series is surrendered at any such office or agency
maintained for that series pursuant to Section 4.02 in exchange for a
Registered Security of the same series and like tenor after the close of
business at such office or agency on any record date for the payment of
interest and any Additional Amounts thereon and before the opening of
business at such office or agency on the relevant payment date therefor,
such Bearer Security shall be surrendered without the coupon relating to
such payment date or proposed date of payment, as the case may be (or if
such coupon is so surrendered with such Bearer Security, such coupon shall
be returned to the person so surrendering the Bearer Security), and
interest will not be payable on such payment date or proposed date for
payment, as the case may be, in respect of the Registered Security issued
in exchange for such Bearer Security, but will be payable only to the
Holder of such coupon when due in accordance with the provisions of this
Indenture.
Every Security presented or surrendered for registration of transfer
or exchange shall (if so required by the Company or the Registrar or
co-Registrar) be duly endorsed, or be accompanied by a written instrument
of transfer in form satisfactory to the Company and the Registrar duly
executed by the Holder thereof or his attorney duly authorized in writing.
To permit transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's or co-Registrar's
request.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 2.01, any global Security shall be exchangeable
only if (i) the Securities Depository is at any time unwilling, unable or
ineligible to continue as Securities Depository and a successor Depository
is not appointed by the Company within 90 days of the date the Company and
the Trustee is so informed in writing, (ii) the Company executes and
delivers to the Trustee a Company Order to the effect that such global
Security shall be so exchangeable, or (iii) an Event of Default has
occurred and is continuing with respect to the Securities. If the
beneficial owners of interests in a global Security are entitled to
exchange such interests for Securities of such series and of like tenor and
principal amount of any authorized form and denomination, as specified as
contemplated by Section 2.01, then without unnecessary delay but in any
event not later than the earliest date on which such interests may be so
exchanged, Company shall deliver to the Trustee definitive Securities of
that series in aggregate principal amount equal to the principal amount of
such global Security, executed by the Company. On or after the earliest
date on which such interests may be so exchanged, such global Securities
shall be surrendered from time to time by the U.S. Depository or such other
Depository as shall be specified in the Company Order with respect thereto,
and in accordance with instructions given to the Trustee and the U.S.
Depository or such Depository, as the case may be, which instructions shall
be in writing but need not be accompanied by an Officers' Certificate of
the Company or an Opinion of Counsel, as shall be specified in the Company
Order with respect thereto to the Trustee, as the Company's agent for such
purpose, to be exchanged, in whole or in part, for definitive Securities of
the same series without charge. The Trustee shall authenticate and make
available for delivery, in exchange for each portion of such surrendered
global Security, a like aggregate principal amount of definitive Securities
of the same series of authorized denominations and of like tenor as the
portion of such global Security to be exchanged which shall be in the form
of Bearer Securities or Registered Securities, or any combination thereof,
as shall be specified by the beneficial owner thereof (unless the
Securities of the series are not issuable both as Bearer Securities and as
Registered Securities, in which case the definitive Securities exchanged
for the global Security shall be issuable only in the form in which the
Securities are issuable, as specified as contemplated by Section 2.01);
provided, however, that no such exchanges may occur during a period
beginning at the opening of business 15 days before any selection of
Securities of that series to be redeemed and ending on the relevant
Redemption Date; and provided, further, that (unless otherwise specified as
contemplated by Section 2.01) no Bearer Security delivered in exchange for
a portion of a global Security shall be mailed or otherwise delivered to
any location in the United States. Promptly following any such exchange in
part, such global Security shall be returned by the Trustee to such
depository or the U.S. Depository referred to above in accordance with the
instructions of the Company referred to above. If a Registered Security is
issued in exchange for any portion of a global Security after the close of
business at the office or agency where such exchange occurs on any record
date for the payment of interest or any Additional Amounts thereon, and
before the opening of business at such office or agency on the relevant
payment date therefor, interest and any Additional Amounts in respect of
such Registered Security will not be payable on such payment date, but will
be payable on such payment date only to the Person to whom interest or any
Additional Amounts in respect of such portion of such global Security is
payable in accordance with the provisions of this Indenture.
No service charge shall be made for any registration of transfer or
exchange, or redemption of Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may
be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 2.09, 3.07 or 9.05 not
involving any transfer.
The Company and the Trustee shall not be required (a) to issue,
register the transfer of, or exchange any Securities of any series for a
period of 15 days next preceding the day of any selection of Securities of
such series to be redeemed pursuant to Section 3.03, or (b) to register the
transfer of or exchange any Securities of any series selected, called or
being called for redemption in whole or in part except, in the case of any
Registered Security to be redeemed in part, the portion thereof not so to
be redeemed or (c) to exchange any Bearer Security so selected for
redemption except, to the extent provided with respect to Securities of a
series, that such a Bearer Security may be exchanged for a Registered
Security of that series, provided that such Registered Security shall be
immediately surrendered for redemption with written instruction for payment
consistent with the provisions of this Indenture.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities endorsed thereon surrendered upon such registration of transfer
or exchange.
Section 2.07. Replacement Securities.
If the Holder of a mutilated or defaced Security or a Security with a
mutilated or defaced coupon appertaining to it surrenders such Security to
the Trustee or if the Holder of a Security presents evidence to the
satisfaction of the Company and the Trustee that the Security has been
lost, destroyed or wrongfully taken or that a coupon has been lost, stolen
or wrongfully taken and surrenders the Security to which such coupon
appertains with all appurtenant coupons not so lost, stolen or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a
replacement Security of the same series and of like tenor, with coupons
corresponding to the coupons, if any, appertaining to the surrendered
Security. In case any such mutilated, defaced, lost, destroyed or
wrongfully taken Security or coupon has or is about to become due and
payable, the Company may pay the Security or coupon instead of issuing a
new Security or coupon; provided, however, that payment of principal of and
any interest on and Additional Amounts with respect to Bearer Securities
shall, except as otherwise provided in Section 4.02, be payable only at an
office or agency located outside the United States and, unless otherwise
specified as contemplated by Section 2.01, any interest on Bearer
Securities shall be payable only upon presentation and surrender of the
coupons appertaining thereto. If required by the Trustee or the Company, an
indemnity bond must be provided which is sufficient in the judgment of the
Company and the Trustee to protect the Company and the Trustee or any Agent
from any loss which any of them may suffer if a Security is replaced. The
Company and the Trustee may charge the Holder for their fees and expenses
in replacing a Security and for payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto.
Every replacement Security of any series, with its coupons, if any,
is an additional obligation of the Company and shall be entitled to all of
the benefits of this Indenture equally and proportionately with any and all
other Securities of that series and their coupons, if any, duly issued
under this Indenture.
Section 2.08. Outstanding Securities.
Securities Outstanding at any time are all Securities authenticated
by the Trustee except for those canceled by it and those described in this
Section. A Security does not cease to be Outstanding because the Company or
one of its Affiliates holds the Security except as provided in Section
13.06.
If a Security is replaced pursuant to Section 2.07, it ceases to be
Outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds on a Redemption Date or maturity date money
sufficient to pay Securities payable on that date, then on and after that
date such Securities cease to be Outstanding and interest on them ceases to
accrue, provided that, if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made.
If the Company is deemed to be discharged from its obligations with
respect to the Securities of any series pursuant to Section 8.01 or 8.02,
the Securities of such series shall cease to be Outstanding.
In determining whether the Holders of the requisite principal amount
of Outstanding Securities of any or all series have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, the
principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding for such purposes shall be the amount of the
principal thereof that would be due and payable as of the date of such
determination upon a declaration of acceleration of the maturity thereof
pursuant to Section 6.01, as adjusted pursuant to Section 13.12 if
applicable.
Section 2.09. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities and, if Bearer Securities, temporary coupons shall be
substantially in the form of definitive Securities and, if Bearer
Securities, definitive coupons but may have variations in form that the
Company considers appropriate for temporary Securities. In the case of
Bearer Securities of any series, such temporary Securities may be in global
form representing all of the Outstanding Bearer Securities of such series.
Except in the case of temporary Securities in global form (which shall be
exchanged in accordance with the provisions thereof), without unreasonable
delay, the Company shall prepare definitive Securities (accompanied by any
unmatured coupons pertaining thereto) of like tenor as the temporary
Securities.
After the preparation of definitive Securities of a series, the
temporary Securities of such series shall be exchangeable upon request for
definitive Securities of such series containing identical terms and
provisions upon surrender of the temporary Securities of such series at an
office or agency of the Company maintained for such purpose pursuant to
Section 4.02, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Securities of any series (accompanied by any
unmatured coupons appertaining thereto), the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations of
the same series containing identical terms and provisions; provided,
however, that no definitive Bearer Security, except as provided pursuant to
Section 2.01, shall be delivered in exchange for a temporary Registered
Security; and provided, further, that a definitive Bearer Security shall be
delivered in exchange for a temporary Bearer Security only in compliance
with the conditions set forth therein. Unless otherwise specified as
contemplated by Section 2.01 with respect to a temporary global Security,
until so exchanged the temporary Securities of any series shall in all
respects be entitled to the same benefits under this Indenture as
definitive Securities of such series.
Section 2.10. Securities in Global Form.
If Securities of a series are issuable in global form, any such
Security may provide that it shall represent the aggregate amount of
Outstanding Securities from time to time endorsed thereon and may also
provide that the aggregate amount of Outstanding Securities represented
thereby may from time to time be reduced to reflect exchanges. Any
endorsement of a Security in global form to reflect the amount, or any
increase or decrease in the amount, or changes in the rights of Holders, of
Outstanding Securities represented thereby shall be made in such manner and
by such Person or Persons as shall be specified therein.
Section 2.11. Cancellation.
The Company at any time may deliver Securities or coupons to the
Trustee for cancellation. The Registrar and Paying Agent shall forward to
the Trustee any Securities surrendered to them for transfer, exchange or
payment and all coupons surrendered for payment. The Trustee shall cancel
all Securities surrendered for transfer, exchange, payment or cancellation
and all coupons surrendered for payment and return such canceled Securities
to the Company upon Company Order, provided, however, that the Trustee
shall dispose of canceled Securities in accordance with its procedures for
the disposition of canceled securities in effect as of the date of such
disposition unless the Company directs their return to the Company. The
Company may not issue new Securities to replace Securities that it has paid
or delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest or any Additional
Amounts on any series of Registered Securities, the Company shall pay the
defaulted interest and any Additional Amounts to Persons who are Holders of
Registered Securities of such series in any lawful manner. The Company may
also pay the defaulted interest to the persons who are Security holders on
a subsequent special record date in the following manner. The Company shall
fix the special record date (which shall be between 10 and 30 days before
the payment date) for the payment of such defaulted interest and any
Additional Amounts on such Securities and the payment date for such
defaulted interest. At least 15 days before the special record date, the
Company shall mail each Holder of Registered Securities, with a copy to the
Trustee, a notice that states the special record date, the payment date and
the amount of defaulted interest and any Additional Amounts to be paid,
provided the Company has made arrangements satisfactory to the Trustee for
payment of the aggregate amount to be paid on such payment date. On such
payment date the Trustee shall pay out of funds provided by the Company
such defaulted interest and any Additional Amounts. In case a Bearer
Security of any series is surrendered at the office or agency of the
Company maintained pursuant to Section 4.02 in a Place of Payment for such
series in exchange for a Registered Security of such series after the close
of business at such office or agency on any special record date and before
the opening of business at such office or agency on the related proposed
date for payment of defaulted interest and any Additional Amounts, such
Bearer Security shall be surrendered without the coupon relating to such
proposed date of payment and defaulted interest and any Additional Amounts
will not be payable on such proposed date of payment in respect of the
Registered Security issued in exchange for such Bearer Security, but will
be payable only to the Holder of such coupon on or after such payment date
in accordance with the provisions of this Indenture. The Company may pay
defaulted interest and any Additional Amounts in any other lawful manner.
Section 2.13. Persons Deemed Owners.
Prior to due presentment of a Registered Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name such Registered Security is
registered as the absolute owner of such Registered Security for the
purpose of receiving payments of principal of and (subject to Sections 2.06
and 4.01) interest on and Additional Amounts with respect to such
Registered Security and for all other purposes whatsoever, whether or not
such Registered Security shall be overdue, and neither the Company, the
Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the bearer of any Bearer Security and the bearer of any coupon as
the absolute owner of such Security or coupon for the purpose of receiving
payment thereof or on account thereof and for all other purposes
whatsoever, whether or not such Security or coupon shall be overdue, and
neither the Company, the Trustee nor any agent of the Company or the
Trustee shall be affected by notice to the contrary.
Section 2.14. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers
in notices of redemption as a convenience to Holders, provided that any
such notice may state that no representation is made as to the correctness
of such numbers either as printed on the Securities or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption
shall not be affected by any defect in or omission of such numbers.
ARTICLE THREE
REDEMPTION
Section 3.01. Applicability of Article.
This Article shall apply to the Securities of each series, if any,
that by their terms are subject to redemption at the option of the Company
or pursuant to the operation of a sinking fund or otherwise are required to
be redeemed pursuant to the terms of the Securities. If the terms of any
Security shall conflict with any provision of this Article, the terms of
such Security shall govern.
Section 3.02. Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. If the Company wants to redeem Securities
of any series in whole or in part pursuant to the terms of the Securities
of that series, the Company shall notify the Trustee of the Redemption Date
therefor and the principal amount and other terms and provisions of the
Securities to be redeemed. Each such notice shall be accompanied by an
Officers' Certificate of the Company stating that any conditions to such
redemption as provided in such Security and in this Article have been
complied with. If the Company elects to redeem less than all of the
Securities of a series with the same terms and provisions, the Company
shall notify the Trustee of such Redemption Date and of the principal
amount of such Securities to be redeemed and shall deliver to the Trustee
such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 3.03.
If Securities of any series by their terms are redeemable pursuant to
the operation of a sinking fund or pursuant to another mandatory redemption
provision of the Securities, the Company shall notify the Trustee by an
Officers' Certificate of the amount of the next sinking fund payment or
amount required to satisfy such mandatory redemption payment and the
portion of such payment which is to be satisfied by delivering and
crediting Securities of the same series pursuant to Section 3.06.
If the Company wants to reduce, pursuant to the terms of such
Securities, the principal amount of Securities to be redeemed, it shall
notify the Trustee by Officers' Certificate of the amount of the reduction
and the basis for it. If the Company wants to credit against any such
redemption Securities of the same series it has not previously delivered to
the Trustee for cancellation, it shall deliver the Securities with such
Officers' Certificate.
The Company shall give each notice and an Officers' Certificate
provided for in this Section at least 45 days before the applicable
Redemption Date (unless shorter notice is satisfactory to the Trustee or a
shorter or longer notice is required by the applicable Security).
Section 3.03. Selection of Securities to Be Redeemed.
If less than all the Securities of a series with the same terms and
provisions are to be redeemed, the Trustee shall select the Securities to
be redeemed by a method the Trustee considers fair and appropriate. The
Trustee shall make the selection from such Securities Outstanding not
previously called for redemption. The Trustee may select for redemption
portions of the principal of Registered Securities of such series that have
denominations larger than the minimum authorized denominations for
Registered Securities of that series. Securities and portions thereof the
Trustee selects shall be in amounts equal to the smallest authorized
denominations or an integral multiple thereof. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Registered Securities called for redemption.
The Trustee shall promptly notify the Company and the Registrar (if
other than itself) in writing of the Securities selected for redemption
and, in the case of any Securities selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall
relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal of such Securities which has been or
is to be redeemed.
Section 3.04. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date
(unless a shorter or longer period is specified in the Securities to be
redeemed), the Company shall give notice of such redemption to the Holders
of the Securities to be redeemed as a whole or in part, with a copy to the
Trustee, with respect to Registered Securities, by mailing a notice of such
redemption by first-class mail to each Holder of Registered Securities to
be redeemed and, with respect to Bearer Securities, by publishing in an
Authorized Newspaper notice of such redemption on two separate days.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price, including premium, if any, accrued
interest and Additional Amounts, if any;
(3) if less than all Securities of a series Outstanding are to
be redeemed, the identification (and, if any Security is to be redeemed in
part, the principal amount) of the particular Securities to be redeemed;
(4) the name or names and address or addresses of the Paying
Agent;
(5) that Securities called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price, including premium, if
any, accrued interest and Additional Amounts, if any;
(6) that interest on Securities called for redemption ceases to
accrue on and after the Redemption Date;
(7) that the redemption is pursuant to a sinking fund, if such
is the case;
(8) the Place or Places of Payment where such Securities are to
be surrendered for payment for the Redemption Price;
(9) the CUSIP number, if any, of the Securities; and
(10) such other matters as the Company shall deem desirable or
appropriate.
At the Company's request delivered to the Trustee at least 15 days
prior to the date proposed for the giving of such notice, the Trustee shall
give the notice of redemption in the Company's name and at the Company's
expense.
Section 3.05. Effect of Notice of Redemption.
Once notice of redemption is given pursuant to Section 3.04,
Securities called for redemption shall become due and payable on the
Redemption Date therefor and at the applicable Redemption Price. Any
failure to mail notice of redemption or any defect therein shall not affect
the redemption of any other Securities called for redemption. Upon
surrender to the Paying Agent for such Securities of such Securities
together with all unmatured coupons, if any, appertaining thereto, such
Securities shall be paid at the applicable Redemption Price, plus accrued
interest to the Redemption Date and any Additional Amounts payable with
respect thereto; provided, however, that any regular payment of interest
and any Additional Amounts payable with respect thereto becoming due on the
Redemption Date shall be payable, in the case of Bearer Securities, to
bearers of the coupons for such interest and Additional Amounts upon
surrender thereof and in the case of Registered Securities to the Holders
of such Securities in accordance with their terms.
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date,
such Security may be paid after deducting from the Redemption Price an
amount equal to the face amount of all such missing coupons, or the
surrender of each missing coupon or coupons may be waived by the Company
and the Trustee if there shall be furnished to them such security or
indemnity as they may require to save each of them and any Paying Agent for
such Security harmless. If thereafter the Holder of such Security shall
surrender to the Trustee or any Paying Agent for such Security any such
missing coupon in respect of which a deduction shall have been made from
the Redemption Price, such Holder shall be entitled to receive the amount
so deducted; provided, however, that interest (and any Additional Amounts)
represented by coupons shall be payable only upon presentation and
surrender of these coupons at an office or agency located outside of the
United States except as otherwise provided in Section 4.02.
Section 3.06. Deposit of Redemption Price or Securities.
By 10:00 a.m. New York City time, on or before the Redemption Date,
the Company shall deposit with the applicable Paying Agent (or if the
Company is its own Paying Agent, shall segregate and hold in trust) money
sufficient to pay the Redemption Price of and accrued interest and
Additional Amounts, if any, on all Securities to be redeemed on that date.
If any Security by its terms permits any sinking fund payment
obligation to be satisfied by delivering and crediting Securities, the
Company shall deliver such Securities to the Trustee for crediting against
such payment obligation in accordance with the terms of such Securities and
this Indenture.
Section 3.07. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part at any office
or agency maintained by the Company pursuant to Section 4.02, the Company
shall execute and Trustee shall authenticate for the Holder a new Security
of the same series equal in principal amount to the unredeemed portion of
the Security surrendered.
If a Security in global form is surrendered upon redemption in part,
the Company shall execute, and the Trustee shall authenticate and deliver
to the U.S. Depository or other Depository for such Security in global form
as shall be specified in the Company Order to the Trustee with respect
thereto, without service charge, a new Security in global form in a
denomination equal to and in exchange for the unredeemed portion of the
principal of the Security in global form so surrendered.
ARTICLE FOUR
COVENANTS
Section 4.01. Payment of Securities.
The Company shall pay the principal of and any interest or Additional
Amounts, if any, and premium, if any, on the Securities of each series on
the dates and in the manner provided in the Securities, any coupons
appertaining thereto and this Indenture. At the Company's option, it can
pay any interest or Additional Amounts, if any, or premium, if any, on
Registered Securities of any series by mailing checks or drafts to the
Holders of such Securities at their addresses as shown in the Security
Register. Any interest due on and any Additional Amounts payable in respect
of Bearer Securities on or before their maturity, in respect of the
principal of such a Security shall be payable only upon presentation and
surrender of the several coupons for such interest installments as are
evidenced thereby as they severally mature.
The Company shall pay interest on overdue principal of any Security
at the rate borne by such Security; it shall pay interest on overdue
installments of interest or Additional Amounts, if any, or premium, if any,
at the same rate to the extent lawful.
In case a Bearer Security of any series is surrendered in exchange
for a Registered Security of such series after the close of business (at an
office or agency in a Place of Payment for such series) on any record date
established to determine the Person to whom interest or Additional Amounts
are payable on the next following interest payment date therefor and before
the opening of business (at such office or agency) on such interest payment
date, such Bearer Security shall be surrendered without the coupon relating
to such interest payment date and interest will not be payable on such
interest payment date in respect of the Registered Security issued in
exchange of such Bearer Security, but will be payable only to the Holder of
such coupon when due in accordance with the provisions of this Indenture.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series (but not
Bearer Securities, except as otherwise provided below, unless such Place of
Payment is located outside the United States) may be presented or
surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to
or upon the Company in respect of the Securities of that series and this
Indenture may be served.
If Securities of a series are issuable as Bearer Securities, the
Company shall maintain, subject to any laws or regulations applicable
thereto, an office or agency in a Place of Payment for such series which is
located outside the United States where Securities of such series and the
related coupons may be presented and surrendered for payment (including
payment of any Additional Amounts payable on Securities of such series);
provided, however, that if the Securities of such series are listed on The
International Stock Exchange of the United Kingdom and the Republic of
Ireland Limited or the Luxembourg Stock Exchange or any other stock
exchange located outside the United States and such stock exchange shall so
require, the Company will maintain a Paying Agent in London, Luxembourg or
any other city so required located outside the United States, as the case
may be, so long as the Securities of such series are listed on such
exchange. The Company will 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, except that Bearer Securities of
that series and the related coupons may be presented and surrendered for
payment (including payment of any Additional Amounts payable on Bearer
Securities of that series) at the place specified for that purpose pursuant
to Section 2.01.
Except as otherwise provided in the form of Bearer Security of any
particular series pursuant to the provisions of this Indenture, no payment
of principal or interest or Additional Amounts on Bearer Securities shall
be made at any office or agency of the Company in the United States or by
check mailed to any address in the United States or by transfer to an
account maintained with a bank located in the United States; provided,
however, payment of principal of and interest in U.S. dollars (including
Additional Amounts payable in respect thereof) on any Bearer Security may
be made at the office of the Paying Agent in the Borough of Manhattan, The
City of New York, New York, if (but only if) payment of the full amount of
such principal, interest or Additional Amounts at all offices outside the
United States maintained for that purpose by the Company in accordance with
this Indenture is illegal or effectively precluded by exchange controls or
other similar restrictions.
The Company may from time to time designate one or more other offices
or agencies where the Securities of one or more series 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 obligation to
maintain an office or agency in each Place of Payment for Securities of any
series for such purposes. The Company will 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.
Section 4.03. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it shall, on or before each due date
of the principal of, or interest or Additional Amounts on, any of the
Securities of that series, segregate and hold in trust for the benefit of
the Person entitled thereto a sum sufficient to pay the principal or
interest or Additional Amounts so becoming due until such sums shall be
paid to such Persons or otherwise disposed of as herein provided, and shall
promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, by 10:00 a.m. New York City time, on or
prior to each due date of the principal of, or interest or Additional
Amounts on, any Securities of that series, deposit with any Paying Agent a
sum sufficient to pay the principal or interest and Additional Amounts so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, interest or Additional Amounts, and (unless
such Paying Agent is the Trustee) the Company shall promptly notify the
Trustee of its action or failure so to act.
The Company shall cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section, that such Paying Agent shall:
(1) hold all sums held by it for the payment of the principal
of or interest or any Additional Amounts on Securities of that series in
trust for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any Default by the Company in
the making of any payment of principal or interest or any Additional
Amounts on the Securities of that series; and
(3) at any time during the continuance of any such Default,
upon the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon
the same terms as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Except as otherwise provided in the form of Securities of any
particular series pursuant to the provisions of this Indenture, 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 interest or any
Additional Amounts on any Security of any series and remaining unclaimed
for one year after such principal or interest has or Additional Amounts
have become due and payable shall be paid to the Company upon receipt of a
Company Order to that effect, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security or any coupon
appertaining thereto shall thereafter, as an unsecured general 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 an Authorized Newspaper in each Place of
Payment or to be mailed to Holders of Registered Securities, or both,
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
publication or mailing nor shall it be later than one year after such
principal or interest or Additional Amount has become due and payable, any
unclaimed balance of such money then remaining shall be repaid to the
Company.
Section 4.04. SEC Reports.
The Company shall file with the Trustee within 15 days after it files
them with the SEC copies of the 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) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended. The Company also shall
comply with the other provisions of TIA Section 314(a).
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
Section 4.05. Statement as to Compliance.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, commencing April 30, 2001 (no more than one
year after closing), a written statement, which need not comply with
Section 13.05 hereof, signed by a principal executive officer, principal
financial officer or principal accounting officer, stating, as to the
signer thereof, that
(1) a review of the activities of the Company during such year
and of performance under this Indenture has been made under his
supervision, and
(2) to the best of his knowledge, based on such review, (a) the
Company has fulfilled its obligations under this Indenture throughout such
year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to him and the nature and
status thereof, and (b) no event has occurred and is continuing which is,
or after notice or lapse of time or both would become, an Event of Default,
or, if such an event has occurred and is continuing, specifying each such
event known to him and the nature and status thereof.
(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within ten days after the Company obtains knowledge of the
occurrence thereof, written notice of any Default and the action which the
Company proposes to take with respect thereto.
Section 4.06. Limitations on Liens on Stock of Restricted Subsidiaries.
The Company will not, and will not permit any Restricted Subsidiary
to, issue, assume or guarantee any debt for money borrowed (hereafter in
this Section referred to as "Debt") secured by a mortgage, security
interest, pledge, lien or other encumbrance upon any shares of stock of any
Restricted Subsidiary (whether such shares of stock are now owned or
hereafter acquired) without in any such case effectively providing
concurrently with the issuance, assumption or guarantee of any such Debt
that the Securities (together with, if the Company shall so determine, any
other indebtedness of or guarantee by the Company ranking equally with the
Securities and then existing or thereafter created) shall be secured
equally and ratably with such Debt.
Section 4.07. Limitations on Issue or Disposition of Stock of Restricted
Subsidiaries.
The Company will not, and will not permit any Restricted Subsidiary
to, issue, sell, assign, transfer or otherwise dispose of, directly or
indirectly, any of the Capital Stock (other than nonvoting preferred stock)
of any Restricted Subsidiary (except to the Company or to one or more
Restricted Subsidiaries or for the purpose of qualifying directors);
provided, however, that this covenant shall not apply if:
(1) all or any part of such Capital Stock is sold, assigned,
transferred or otherwise disposed of in a transaction for consideration
which is at least equal to the fair value of such Capital Stock, as
determined by the Board of Directors (acting in good faith); or
(2) the issuance, sale, assignment, transfer or other
disposition is required to comply with the order of a court or regulatory
authority of competent jurisdiction, other than an order issued at the
request of the Company or of one of its Restricted Subsidiaries.
Section 4.08. Additional Amounts.
If any Securities of a series provide for the payment of Additional
Amounts, the Company agrees to pay to the Holder of any such Security or
any Coupon appertaining thereto Additional Amounts as provided in or
pursuant to this Indenture or such Securities, and to notify the Trustee in
writing of any such payment and the record date thereof. Whenever in this
Indenture there is mentioned, in any context, the payment of the principal
of or any premium or interest on, or in respect of, any Security of any
series or any Coupon or the net proceeds received on the sale or exchange
of any Security of any series, such mention shall be deemed to include
mention of the payment of Additional Amounts provided by the terms of such
series established hereby or pursuant hereto to the extent that, in such
context, Additional Amounts are, were or would be payable in respect
thereof pursuant to such terms, and express mention of the payment of
Additional Amounts (if applicable) in any provision hereof shall not be
construed as excluding the payment of Additional Amounts in those
provisions hereof where such express mention is not made.
Except as otherwise provided in or pursuant to this Indenture or the
Securities of the applicable series, if the Securities of a series provide
for the payment of Additional Amounts, at least 10 days prior to the first
interest payment date with respect to such series of Securities (or if the
Securities of such series shall not bear interest prior to maturity, the
first day on which a payment of principal is made), and at least 10 days
prior to each date of payment of principal or interest if there has been
any change with respect to the matters set forth in the below-mentioned
Officers' Certificate, the Company shall furnish to the Trustee and the
principal Paying Agent or Paying Agents, if other than the Trustee, an
Officers' Certificate instructing the Trustee and such Paying Agent or
Paying Agents whether such payment of principal of and premium, if any, or
interest on the Securities of such series shall be made to Holders of
Securities of such series or the Coupons appertaining thereto who are
United States Aliens without withholding for or on account of any tax,
assessment or other governmental charge described in the Securities of such
series. If any such withholding shall be required, then such Officers'
Certificate shall specify by country the amount, if any, required to be
withheld on such payments to such Holders of Securities or Coupons, and the
Company agrees to pay to the Trustee or such Paying Agent the Additional
Amounts required by the terms of such Securities. The Company covenants to
indemnify the Trustee and any Paying Agent for, and to hold them harmless
against, any loss, liability or expense reasonably incurred without
negligence or bad faith on their part arising out of or in connection with
actions taken or omitted by any of them in reliance on any Officers'
Certificate furnished pursuant to this Section.
Section 4.09. Waiver of Certain Covenants.
The Company may omit in any particular instance, to comply with any
covenant or condition set forth in Sections 4.06 or 4.07, if before or
after the time for such compliance the Holders of at least a majority in
principal amount of all Outstanding Securities, and the Holders of at least
a majority in principal amount of the Outstanding Securities of each series
to be affected, shall either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no such
waiver shall extend to or affect such covenant or condition except to the
extent so expressly waived, and, until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in respect of
any such covenant or condition shall remain in full force and effect.
Section 4.10. Information Regarding Original Issue Discount.
The Company shall provide to the Trustee on a timely basis such
information as the Trustee requires to enable the Trustee to prepare and
file any form required to be submitted by the Company with the Internal
Revenue Service and the Holders of Discount Securities relating to original
issue discount, including, without limitation, Form 1099-OID or any
successor form.
ARTICLE FIVE
SUCCESSOR CORPORATION AND ASSUMPTION
Section 5.01. When Company May Merge, etc.
The Company shall not consolidate with or merge into, or sell, lease
(for a term extending beyond the last stated maturity of the Securities
then Outstanding) or convey all or substantially all of its assets to,
another Person unless the successor or transferee Person expressly assumes
by supplemental indenture, in form satisfactory to the Trustee, all the
obligations of the Company with respect to the Securities and this
Indenture, and the Company or successor Corporation, as the case may be,
(i) shall be a Corporation organized under the laws of one of the states in
the United States and (ii) shall not, immediately after such consolidation
or merger or sale, lease or conveyance, be in default in the performance of
any covenant or condition with respect to the Securities or the Indenture.
The Company shall deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture comply with this Indenture.
Thereafter all such obligations of the predecessor corporation shall
terminate.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, lease or conveyance of
all or substantially all of the assets of the Company in accordance with
Section 5.01, the successor Corporation formed by such consolidation or
into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such
successor Corporation had been named as the Company herein.
Section 5.03. Limitation.
Nothing in this Indenture shall be deemed to prevent or restrict: (a)
any consolidation or merger after the consummation of which the Company
would be the surviving or resulting entity or any conveyance or other
transfer or lease of any part of the properties of the Company which does
not constitute the entirety, or substantially the entirety, thereof; or (b)
the approval by the Company of, or the consent by the Company to, any
consolidation or merger to which any Restricted Subsidiary (or any other
subsidiary or affiliate of the Company) may be a party or any conveyance,
transfer or lease by any Subsidiary (or any such other subsidiary or
affiliate) of any of its assets.
ARTICLE SIX
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs with respect to the Securities of any
series upon:
(a) default in the payment of any installment of interest upon or any
Additional Amounts payable in respect of any of the Securities of such
series as and when the same shall become due and payable, and continuance
of such default for a period of 30 days; or
(b) default in the payment of all or any part of the principal on any
of the Securities of such series as and when the same shall become due and
payable either at maturity, upon redemption, by declaration or otherwise
(except the failure to make payment when due and payable if such failure
results solely from nonpayment by reason of mistake, oversight or transfer
difficulties and does not continue beyond 3 Business Days after the day on
which such payment is due and payable); or
(c) default in the payment of any sinking fund installment as and
when the same shall become due and payable by the terms of the Securities
of such series (except the failure to make payment when due and payable if
such failure results solely from nonpayment by reason of mistake, oversight
or transfer difficulties and does not continue beyond 3 Business Days after
the day on which such payment is due and payable); or
(d) default in the performance, or breach, of any covenant or
warranty of the Company in respect of the Securities of such series (other
than a covenant or warranty in respect of the Securities of such series a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a
period of 60 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and Trustee by the
Holders of at least 25% in principal amount of the Outstanding Securities
(determined pursuant to Section 2.08) of all series affected thereby, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
or
(e) a court having jurisdiction in the premises entering a decree or
order for relief in respect of the Company in an involuntary case under the
Bankruptcy Law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or similar
official) of the Company or for any substantial part of its property or
ordering the winding up or liquidation of its affairs, and such decree or
order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(f) the Company commencing a voluntary case under any applicable
Bankruptcy Law now or hereafter in effect, or consent to the entry of an
order for relief in an involuntary case under any such law, or consent to
the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee or sequestrator (or similar official) of the
Company or for any substantial part of its property, or making any general
assignment for the benefit of creditors; or
(g) any other Event of Default provided in the supplemental indenture
or Board Resolutions under which such series of Securities is issued or in
the form of Security for such series.
If an Event of Default described in clause (a), (b), (c) or (d) above
(if the Event of Default under clause (d) is with respect to less than all
series of Securities then Outstanding) occurs and is continuing, then, and
in each and every such case, unless the principal of all of the Securities
of such series shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal amount
of the Securities of such series then Outstanding hereunder (each such
series voting as a separate class) by notice in writing to the Company (and
to the Trustee if given by Securityholders), may declare the entire
principal (or, if the Securities of such series are Discount Securities,
such portion of the principal amount as may be specified in the terms of
such series) of all Securities of such series and the interest accrued
thereon and Additional Amounts payable in respect thereof, if any, to be
due and payable immediately, and upon any such declaration the same shall
become immediately due and payable. If an Event of Default described in
Clause (d) (if the Event of Default under clause (d) is with respect to all
series of Securities then Outstanding), (e) or (f) occurs and is
continuing, then and in each and every such case, unless the principal of
all the Securities shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal amount
of all the Securities then Outstanding hereunder (treated as one class), by
notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the entire principal (or, if any Securities
are Discount Securities, such portion of the principal as may be specified
in the terms thereof) of all the Securities then Outstanding and interest
accrued thereon and Additional Amounts payable in respect thereof, if any,
to be due and payable immediately, and upon any such declaration the same
shall become immediately due and payable.
The foregoing provisions, however are subject to the condition that
if, at any time after the principal (or, if the Securities are Discount
Securities, such portion of the principal as may be specified in the terms
thereof) of the Securities of any series (or of all the Securities, as the
case may be) shall have been so declared due and payable, and before any
judgment or decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments
of interest upon and any Additional Amounts payable in respect of all the
Securities of such series (or of all the Securities, as the case may be)
and the principal of any and all Securities of such series (or of all the
Securities, as the case may be) which shall have become due otherwise than
by acceleration (with interest upon such principal and, to the extent that
payment of such interest is enforceable under applicable law, on overdue
installments of interest or any Additional Amounts, at the same rate as the
rate of interest or Yield to Maturity (in the case of Discount Securities)
specified in the Securities of such series (or at the respective rates of
interest or Yields to Maturity of all the securities, as the case may be,
to the date of such payment or deposit) and such amount as shall be
sufficient to cover reasonable compensation to the Trustee, its agents,
attorneys and counsel, and all other expenses and liabilities incurred, and
all advances made, by the Trustee except as a result of negligence or bad
faith, and if any and all Events of Default under the Indenture, other than
the non-payment of the principal of Securities which shall have become due
by acceleration, shall have been cured, waived or otherwise remedied as
provided herein -- then the Holders of a majority in aggregate principal
amount of all the Securities of such series, each series voting as a
separate class (or of all the Securities, as the case may be, voting as a
single class) then Outstanding, by written notice to the Company and to the
Trustee, may waive all defaults with respect to such series (or with
respect to all the Securities, as the case may be) and rescind and annul
such declaration and its consequences, but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon.
For all purposes under this Indenture, if a portion of the principal
of any Discount Securities shall have been accelerated and declared due and
payable pursuant to the provisions hereof, then, from and after such
declaration, unless such declaration has been rescinded and annulled, the
principal amount of such Discount Securities shall be deemed, for all
purposes hereunder, to be such portion of the principal thereof as shall be
due and payable as a result of such acceleration, and payment of such
portion of the principal thereof as shall be due and payable as a result of
such acceleration, together with interest, if any, thereon and all other
amounts owing thereunder, shall constitute payment in full of such Discount
Securities.
Section 6.02. Collection of Indebtedness by Trustee; Trustee May
Prove Debt.
The Company covenants that (a) in the case default shall be made in
the payment of any installment of interest on or any Additional Amounts
payable in respect of any of the Securities of any series when such
interest or Additional Amounts shall have continued for a period of 30
days or (b) in case principal shall have become due and payable, and such
default shall be made in the payment of all or any part of the principal of
any of the Securities of any series when the same shall have become due and
payable, whether upon maturity of the Securities of such series, or upon
any redemption or by declaration or otherwise -- then, upon demand of the
Trustee, the Company will pay to the Trustee for the benefit of the Holders
of the Securities of such series the whole amount that then shall have
become due and payable on all Securities of such series, and such coupons,
for principal, interest or Additional Amounts, if any, as the case may be
(with interest to the date of such payment upon the overdue installments of
interest or any Additional Amounts at the same rate as the rate of interest
or Yield to Maturity (in the case of Discount Securities) specified in the
Securities of such series); and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection
including reasonable compensation to the Trustee and each predecessor
Trustee, their respective agents, attorneys and counsel, and any expenses
and liabilities incurred, and all advances made, by the Trustee and
predecessor Trustee except as a result of its negligence or bad faith.
In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any action or
proceeding at law or in equity for the collection of the sums so due and
unpaid, and may prosecute any such action or proceedings to judgment or
final decree, and may enforce any such judgment or final decree against the
Company or other obligor upon such Securities and collect in the manner
provided by law out of the property of the Company or other obligor upon
such Securities, wherever situated, the moneys adjudged or decreed to be
payable.
In case there shall be pending proceedings relative to the Company or
any other obligor upon the Securities under Bankruptcy Law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or its property or such other obligor, or in case
of any other comparable judicial proceedings relative to the Company or
other obligor upon the Securities or any series, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of any Securities shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions
of this Section, shall be entitled and empowered, by intervention in such
proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount of
principal, interest (or, if the Securities of any series are Discount
Securities, such portion of the principal amount as may be specified in the
terms of such series) and any Additional Amounts owing and unpaid in
respect of the Securities of any series, and to file such other papers or
documents as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for reasonable compensation to the Trustee
and each predecessor Trustee, and their respective agents, attorneys and
counsel, and for reimbursement of all expenses and liabilities incurred,
and all advances made, by the Trustee and each predecessor Trustee, except
as a result of negligence or bad faith) and of the Securityholders allowed
in any judicial proceedings relative to the Company or other obligor upon
the Securities of any series, or to the creditors or property of the
Company or such other obligor,
(b) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of the Securities of any series in any election of a
trustee or a standby trustee in arrangement, reorganization, liquidation or
other bankruptcy or insolvency proceedings or person performing similar
functions in comparable proceedings, and
(c) to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute all amounts received with
respect to the claims of the Securityholders and of the Trustee on their
behalf; and any trustee, receiver, or liquidator, custodian or other
similar official is hereby authorized by each of the Securityholders to
make payments to the Trustee, and in the event that the Trustee shall
consent to the making of payments directly to the Securityholders, to pay
to the Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Trustee, each predecessor trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the trustee and each predecessor
Trustee except as a result of negligence or bad faith and all other amounts
due to the Trustee or any predecessor Trustee under this Indenture.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities of any series or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim
of any Securityholder in any such proceeding except, as aforesaid, to vote
for the election of a trustee in bankruptcy or similar person.
All rights of action and of asserting claims under this Indenture, or
under any of the Securities of any series or coupons appertaining to such
Securities, may be enforced by the Trustee without the possession of any of
the Securities of such series or coupons appertaining to such Securities or
the production thereof at any trial or other proceedings relative thereto,
and any such action or proceedings instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery or
judgment, subject to the payment of the expenses, disbursements and
compensation of the Trustee, each predecessor Trustee and their respective
agents and attorneys, shall be for the ratable benefit of the Holders of
the Securities or of coupons appertaining to such Securities in respect of
which action was taken.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which
the Trustee shall be a party) the Trustee shall be held to represent all
the Holders of the Securities or coupons appertaining to such Securities in
respect to which such action was taken, and it shall not be necessary to
make any Holders of such Securities or coupons appertaining to such
Securities parties to any such proceedings.
Section 6.03. Application of Proceeds.
Any moneys collected by the Trustee pursuant to this Article with
respect to the Securities of any series shall be applied in the following
order at the date or dates fixed by the Trustee and, in case of the
distribution of such moneys on account of principal, interest or any
Additional Amounts, upon presentation of the several Securities and coupons
appertaining to such Securities in respect of which monies have been
collected and stamping (or otherwise noting) thereof the payment, or
issuing Securities of such series in reduced principal amounts in exchange
for the presented Securities of like series if only partially paid, or upon
surrender thereof if fully paid.
FIRST: to the Trustee and any predecessor Trustee for amounts due
under Section 7.07.
SECOND: to the Holders of Securities of such series or coupons
appertaining thereto for amounts due and unpaid on the Securities and
coupons for principal, interest and Additional Amounts, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities and coupons for principal, interest and
Additional Amounts, respectively; and
THIRD: to the Person or Persons lawfully entitled thereto.
Section 6.04. Suits for Enforcement.
In case an Event of Default has occurred, has not been waived and is
continuing, the Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect
and enforce any of such rights, either at law or in equity or in bankruptcy
or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any
power granted in this Indenture or to enforce any other legal or equitable
right vested in the Trustee by this Indenture or by law.
Section 6.05. Restoration of Rights on Abandonments of Proceedings.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discounted or abandoned
for any reason, or shall have been determined adversely to the Trustee,
then and in every such case the Company and the Trustee shall be restored
respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Company, the Trustee and the
Securityholders shall continue as though no such proceedings had been
taken.
Section 6.06. Limitations on Suits by Securityholders.
No Holder of any Security of any series or of any coupon appertaining
thereto shall have any right by virtue or by availing of any provision of
this Indenture to institute any action or proceeding at law or in equity or
in bankruptcy or otherwise upon or under or with respect to this Indenture,
or for the appointment of a trustee, receiver, liquidator, custodian or
other similar official or for any other remedy hereunder, unless such
Holder previously shall have given to the Trustee written notice of a
Continuing Event of Default, as hereinbefore provided, and unless also the
Holders of not less than 25% in aggregate principal amount of the
Securities of such series then Outstanding shall have made written request
upon the Trustee to institute such action or proceedings in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to
be incurred therein or thereby and the Trustee for 60 days after its
receipt of such notice, request and offer of indemnity shall have failed to
institute any such action or proceeding and the Holders of a majority in
principal amount of the outstanding Securities [of such series] shall have
not given the Trustee a direction inconsistent with such request, it being
understood and intended, and being expressly covenanted by the taker and
Holder of every Security or coupon with every other taker and Holder and
the Trustee, that no one or more Holders of Securities of any series or
coupons appertaining to such Securities shall have any right in any manner
whatever by virtue or by availing of any provision of this Indenture to
affect, disturb or prejudice the rights of any other such Holder of
Securities or coupons appertaining to such Securities, or to obtain or seek
to obtain priority over or preference to any other such Holder or to
enforce any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all Holders of
Securities of the applicable series and coupons appertaining to such
Securities. For the protection and enforcement of the provisions of this
Section, each and every Securityholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Section 6.07. Unconditional Right of Securityholder to Institute
Certain Suits.
Notwithstanding any other provision in this Indenture and any
provision of any Security, the right of any Holder of any Security or
coupon to receive payment of the principal of, interest on and any
Additional Amounts in respect of such Security or coupon on or after the
respective due dates expressed in such Security or coupon, or to institute
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. Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default.
Except as provided in Section 6.06, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders of Securities
or coupons is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other appropriate
right or remedy.
No delay or omission of the Trustee or of any Holder of Securities or
coupons to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power
or shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and, subject to Section 6.06, every power and remedy
given by this Indenture or by law to the Trustee or to the Holders of
Securities or coupons may be exercised from time to time, and as often as
shall be deemed expedient, by the Trustee or by the Holders of Securities
or coupons.
Section 6.09. Control by Holders of Securities.
The Holders of a majority in aggregate principal amount of the
Securities of each series affected (with each series voting as a separate
class) at the time Outstanding shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee with
respect to the Securities of such series by this Indenture; provided that
such direction shall not be otherwise than in accordance with law and the
provisions of this Indenture and provided further that (subject to the
provisions of Section 6.01) the Trustee shall have the right to decline to
follow any such direction if the Trustee, being advised by counsel, shall
determine that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith by its board of directors, the
executive committee, or a trust committee of two or more directors or
responsible officers of the Trustee, which may include Trust Officers,
shall determine that the action or proceedings so directed would involve
the Trustee in personal liability or if the Trustee in good faith shall so
determine that the actions or forbearances specified in or pursuant to such
direction would be unduly prejudicial to the interests of Holders of the
Securities of all series so affected not joining in the giving of said
direction, it being understood that the Trustee shall have no duty to
ascertain whether or not such actions or forbearances are unduly
prejudicial to such Holders.
Nothing in this Indenture shall impair the right of the Trustee in
its discretion to take any action deemed proper by the Trustee and which is
not inconsistent with such direction or directions by Securityholders.
Section 6.10. Waiver of Past Defaults.
Prior to the declaration of the acceleration of the maturity of the
Securities of any series as provided in Section 6.01, the Holders of a
majority in aggregate principal amount of the Securities of such series at
the time Outstanding may on behalf of the Holders of all the securities of
such series waive any past default or Event of Default described in clause
(c) of Section 6.01 (or, in the case of an event specified in clause (d) of
Section 6.01 which relates to less than all series of Securities then
Outstanding, the Holders of a majority in aggregate principal amount of the
Securities then Outstanding affected thereby (each series voting as a
separate class) may waive any such default or Event of Default, or, in the
case of an event specified in clause (d) (if the Event of Default under
clause (d) relates to all series of Securities then Outstanding),(e) or
(f)of Section 6.01 the Holders of Securities of a majority in principal
amount of all the Securities then Outstanding (voting as one class) may
waive any such default or Event of Default), and its consequences except a
default in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of the Holder of each Security
affected. In the case of any such waiver, the Company, the Trustee and the
Holders of the Securities of such series shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
Upon any such waiver, such default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured, and not to have
occurred for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
Section 6.11. Trustee to Give Notice of Default, But May Withhold
in Certain Circumstances.
The Trustee shall, within ninety days after the occurrence of a
default with respect to the Securities of any series, give notice of all
defaults with respect to that series known to the Trustee (i) if any Bearer
Securities of that series are then Outstanding, to the Holders thereof, by
publication at least once in an Authorized Newspaper in the Place of
Payment, (ii) if any Bearer Securities of that series are then Outstanding,
to all Holders thereof who have filed their names and addresses with the
Trustee, by mailing such notice to such Holders at such addresses and (iii)
to all Holders of then Outstanding Registered Securities of that series, by
mailing such notice to such Holders at their addresses as they shall appear
in the registry books, unless in each case such defaults shall have been
cured before the mailing or publication of such notice (the term
"defaults") for the purpose of this Section being hereby defined to mean
any event or condition which is, or with notice or lapse of time or both
would become, an Event of Default); provided that, except in the case of
default in the payment of the principal of or interest or Additional
Amounts, if any, on any of the Securities of such series or in the payment
of any sinking or purchase fund installment, the Trustee shall be protected
in withholding such notice if and so long as the board of directors, the
executive committee, or a trust committee comprised of two or more
directors or trustees and/or responsible officers of the Trustee, which may
include Trust Officers, in good faith determines that the withholding of
such notice is in the interests of the Securityholders of such series.
Section 6.12. Right of Court to Require Filing of Undertaking to
Pay Costs.
All parties to this Indenture agree, and each Holder of any Security
or coupon by his acceptance thereof shall be deemed to have agreed, that
any court may in its discretion require, in any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee
for any action taken, suffered or omitted by it as Trustee, the filing by
any party litigant in such suit (other than the Trustee) of an undertaking
to pay the costs of such suit, and that such court may in its discretion
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in such suit, having due regard to the merits and good faith
of the claims or defenses made by such party litigant; but the provisions
of this Section shall not apply to any suit instituted by the Trustee, to
any suit instituted by any Securityholder or group of Securityholders of
any series holding in the aggregate more than 10% in aggregate principal
amount of the Outstanding Securities of such series, or, in the case of any
suit relating to or arising under clause (d) of Section 6.01 (if the suit
relates to Securities of more than one but less than all series), 10% in
aggregate principal amount of Securities Outstanding affected thereby, or
in the case of any suit relating to or arising under clause (d) (if the
suit under clause (d) relates to all the Securities then Outstanding), (e)
or (f) of Section 6.01, 10% in aggregate principal amount of all Securities
Outstanding, or to any suit instituted by any Securityholder for the
enforcement of the payment of the principal of or interest on any Security
on or after the due date expressed in such Security or any date fixed for
redemption.
The Holders of a majority in principal amount of the Outstanding
Securities of such series by notice to the Company and the Trustee may
rescind an acceleration and its consequences if (i) all existing Events of
Default with respect to the Securities of such series, other than the
non-payment of the principal of the Securities which have become due solely
by such declaration of acceleration, have been cured or waived, (ii) the
Company has paid or deposited with the Trustee a sum sufficient to pay the
whole amount then due and payable on such Securities and any coupons
appertaining thereto for principal and interest and Additional Amounts, if
any, with interest upon the overdue principal and, to the extent that
payment of such interest shall be legally enforceable, upon overdue
installments of interest or any Additional Amounts, at the rate or rates
borne by or provided for in such Securities, and, in addition thereto,
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, and
(iii) the rescission would not conflict with any judgment or decree. No
such rescission shall have any effect on any subsequent default or impair
any right consequent thereon.
Section 6.13 WAIVER OF STAY OR EXTENSION LAWS.
The Company (to the extent it may lawfully do so) shall not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and shall not hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SEVEN
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise its rights and powers hereunder 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 continuance of an Event of Default:
(1) The Trustee shall perform only those duties that are
specifically set forth in this Indenture and no others, and no implied
covenants of obligations shall be read into this Indenture against the
Trustee.
(2) 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. The
Trustee, however, shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture (but need
not confirm or investigate the accuracy of mathematical calculations or
other facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a responsible officer or officers of the Trustee,
which may include Trust Officers, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) 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 6.09.
(4) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability
other than for its own negligence, willful misconduct or bad faith, in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) 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) Money held by the Trustee in trust hereunder need not be
segregated except to the extent required by law. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may
agree with the Company.
(g) The Trustee shall not be liable with respect to any action taken
or omitted to be taken or with respect to exercising any trust or power
conferred upon the Trustee, under this Indenture, by it in good faith in
accordance with the direction of the Holders of a majority in principal
amount of the Outstanding Securities of any series given pursuant to
Section 6.09 of this Indenture, relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee; and
Every provision in this Indenture relating to the conduct of or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the
Trust Indenture Act.
Section 7.02. Rights of Trustee.
Except as provided in Section 7.01:
(a) The Trustee may conclusively rely on any document believed by it
to be genuine and to have been signed or presented by the proper Person or
Persons. 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 of the Company or an Opinion of Counsel. The
Trustee shall not be liable for any action it takes or omits to take in
good faith and in reliance on such Officers' Certificate or Certificates or
Opinion of Counsel.
(c) The Trustee may act through 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 which it believes to be authorized or within its
rights or powers.
(e) Any demand, request, direction or notice from the Company
mentioned herein shall, unless otherwise specifically provided, be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution.
(f) The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel, shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon.
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine, to the extent necessary and consistent with
each inquiry or investigation, the books, records and premises of the
Company, personally or by agent or attorney at the sole cost of the Company
and shall incur no liability or additional liability of any kind by reason
of such inquiry or investigation.
(h) the Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Trust Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Office of the
Trustee, and such notice references the Securities and this Indenture;
(i) the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in
each of its capacities hereunder, and to each agent, custodian and other
Person employed to act hereunder; and
(j) the Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles or
officers authorized at such time to take specified actions pursuant to this
Indenture, which Officers' Certificate may be signed by any person
authorized to sign an Officers' Certificate, including any person specified
as so authorized in any such certificate previously delivered and not
superseded.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities or coupons and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. The Trustee, however,
must comply with Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities; it shall not be accountable for the
Company's use of the Securities or the proceeds from the Securities; and it
shall not be responsible for any statement in the Securities other than its
certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default occurs and is continuing with respect to Securities and
if it is actually known to the Trustee, the Trustee shall give to each
Holder of Securities of any series to which such Default relates, in the
manner and to the extent provided in TIA Section 313(c), and otherwise as
provided in Section 13.02 of this Indenture, notice of the Default within
90 days after it occurs. Except in the case of a Default in payment of
principal of or interest or Additional Amounts, if any, on a Security of
any series, or in the payment of any sinking or purchase fund installment,
the Trustee may withhold the notice if and so long as the board of
directors of the Trustee, the executive committee or a trust committee of
directors and/or of responsible officers, which may include Trust Officers,
of the Trustee in good faith determines that withholding the notice is in
the interests of Holders of Securities of such series or the coupon
appertaining thereto.
Section 7.06. Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall mail to each Securityholder a
brief report dated as of such May 15 that complies with TIA Section 313(a).
The Trustee also shall comply with TIA Section 313(b)(2). Reports to
Holders pursuant to this Section 7.06 shall be transmitted in the manner
and to the extent provided in TIA Section 313(c).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange on which any Securities
are listed.
The Company agrees to notify the Trustee whenever the Securities of
any series become listed on any stock exchange or any delisting thereof.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to time agree
in writing for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation
of a Trustee of an express trust). The Company shall reimburse the Trustee
and any predecessor Trustee upon request for all reasonable out-of-pocket
expenses and advances incurred or made by it. Such expenses shall include
the reasonable compensation and expenses of the Trustee's agents and
counsel. The Company shall indemnify each of the Trustee and any
predecessor Trustee and their agents against any loss damage claim, expense
or liability (including legal fees and expenses) incurred by it in
connection with the acceptance and administration of the trust and the
performance of its duties hereunder, including the costs and expenses and
disbursements of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The Trustee shall notify the Company promptly of any claim
asserted against it for which it may seek indemnity; provided, however,
that the failure to give the Company any notice of any claim shall not in
any way affect the rights of the Trustee hereunder to indemnification for
such claim. The Company need not reimburse any expense or indemnify against
any loss or liability incurred by the Trustee or any predecessor Trustee to
the extent due to its own negligence, willful misconduct or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee, except that held in trust to pay
principal of or interest or Additional Amounts, if any, on the Securities.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01 (e) and (f) occurs, the expenses and
the compensation for services are intended to constitute expenses of
administration under any Bankruptcy Law. The term "Bankruptcy Law" means
Title 11, U.S. Code.
The provisions of this Section 7.07 shall survive termination of this
Indenture or the resignation and removal of the Trustee.
For purposes of this Section, the term "Trustee" shall include any
predecessor Trustee, provided that any Trustee hereunder shall not be
liable for the willful misconduct, negligence or bad faith of any other
Trustee hereunder.
Section 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Outstanding Securities may remove the
Trustee by so notifying the Trustee and may appoint a successor Trustee
with respect to the Securities. The Company may by or pursuant to a Board
Resolution remove the Trustee with respect to all Securities if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) 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.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As soon as possible
after that, the retiring Trustee shall, upon payment of its charges,
transfer all property held by it as Trustee to the successor Trustee, 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. A successor Trustee shall give notice of its
succession to each Holder of Securities.
If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, at the
Company's expense, the Company or the Holders of a majority in principal
amount of the Outstanding Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, 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, provided such corporation shall be
otherwise qualified and eligible under this article.
Section 7.10. Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of TIA
Section 310(a)(1). The Trustee shall have a combined capital and surplus of
at least $50,000,000 as set forth in its most recent published annual
report of condition. If any series of Securities is admitted to trading on
the New York Stock Exchange, Inc., or any successor thereto, the Trustee
shall maintain an office or agency in The Borough of Manhattan, The City of
New York, New York as long as such series of Securities shall be so
admitted. The Trustee shall comply with TIA Section 310(b).
Section 7.11. Preferential Collection of Claims against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated. For the purposes of Section 311(b) of the Trust Indenture
Act: (a) the term "cash transaction" shall have the meaning provided in
Rule 11(b)-4 under the Trust Indenture Act, and (b) the
term"self-liquidating paper" shall have the meaning provided in Rule
11(b)-6 under the Trust Indenture Act.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
Section 8.01. Termination of the Company's Obligations.
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The Company may terminate all of its obligations under the Securities
of any series and this Indenture with respect to such series if all
Securities of such series previously authenticated and delivered (other
than destroyed, lost or stolen Securities of such series which have been
replaced or paid) and all coupons appertaining thereto (other than (i)
coupons appertaining to Bearer Securities surrendered for exchange for
Registered Securities and maturing after such exchange, whose surrender is
not required or has been waived as provided in Section 2.06, (ii)
Securities and coupons which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.07, and (iii)
Securities and coupons for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as provided
in Section 4.03 or 8.04) have been delivered to the Trustee for
cancellation or if:
(1) the Securities of such series mature within one year or all
of them are to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption;
(2) the Company irrevocably deposits in trust with the Trustee
money or Government Obligations sufficient to pay principal of and any
interest and Additional Amounts on the Securities of such series to
maturity or redemption, as the case may be (other than moneys paid to the
Company or discharged from trust in accordance with Section 4.03 or 8.04);
and
(3) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
The Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07,
7.07, 7.08, and 8.03 with respect to the Securities of such series,
however, shall survive so long as any principal of, interest, if any, or
any Additional Amounts on the Securities of such series, and coupons
appertaining thereto, remains unpaid. Thereafter the Company's obligations
in Section 7.07 shall survive.
After a deposit of such moneys, and delivery of the Officers'
Certificate and Opinion of Counsel required by clause (3) above, the
Trustee upon request shall acknowledge in writing the discharge of the
Company's obligations under the Securities of such series and this
Indenture with respect to the Securities of such series except for those
surviving obligations specified above.
Section 8.02. Termination of the Company's Obligations under Certain
Circumstances.
Unless otherwise provided in a Board Resolution of the Company
delivered to the Trustee pursuant to Section 2.01 or an indenture
supplemental hereto with respect to the Securities of any series, the
Company, at its option, either (a) shall be deemed to have been Discharged
(as defined below) from its obligations with respect to the Securities of
any series, and coupons appertaining thereto, on the ninety-first day after
the applicable conditions set forth below have been satisfied or (b) shall
cease to be under any obligation to comply with any term, provision or
condition set forth in Sections 4.04, 4.05, 4.06 and 4.07 and Sections 6.01
and 6.02 as they relate to Section 6.01(d), with respect to the Securities
of any series and any coupons appertaining thereto and any other covenants
provided in the Board Resolution of the Company (except Section 7.07)
delivered to the Trustee pursuant to Section 2.01 or an indenture
supplemental hereto with respect to the Securities of such series and any
coupons appertaining thereto at any time after the applicable conditions
set forth below have been satisfied:
(1) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds in trust, specifically pledged
as security for, and dedicated solely to, the benefit of the Holders of the
Securities of such series and any coupons appertaining thereto (A) money in
an amount, or (B) Government Obligations which through the payment of
interest and principal in respect thereof in accordance with their terms
will provide, not later than one day (or, if such day is a Legal Holiday,
the first day preceding such day which is not a Legal Holiday) before the
due date of any payment, money in an amount, or (C) a combination of (A)
and (B), sufficient, in the opinion of a recognized firm of Independent
Public Accountants selected by the Company expressed in a written
certification thereof delivered to the Trustee, to pay and discharge each
installment of principal (including mandatory sinking fund payments) of,
and interest, if any, and Additional Amounts, if any, on the Outstanding
Securities of such series on the dates such installments of principal,
interest, if any, and Additional Amounts, if any, are due (taking into
account any redemption pursuant to optional sinking fund payments notice of
which redemption is provided to the Trustee at the time of the deposit
referred to in this paragraph (1));
(2) if the Securities of such series are then listed on the New
York Stock Exchange, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Company's exercise of its option
under this paragraph would not cause such Securities to be delisted;
(3) no Event of Default, or event which with the giving of
notice or lapse of time, or both, would become an Event of Default, with
respect to the Securities of such series shall have occurred and be
continuing on the date of such deposit and the Company shall have furnished
to the Trustee an Officers' Certificate to such effect; and
(4) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that Holders of the Securities of such series will
not recognize income, gain or loss for United States Federal income tax
purposes as a result of the exercise of the option under this Section 8.02
and will be subject to United States Federal income tax on the same amount
and in the same manner and at the same times as would have been the case if
such option had not been exercised, and, in the case of Securities being
Discharged, such opinion shall be accompanied by a private letter ruling to
that effect received from the United States Internal Revenue Service or a
revenue ruling pertaining to a comparable form of transaction to that
effect published by the United States Internal Revenue Service.
"Discharged" means, for purposes of this Section 8.02, that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by, and obligations under, the Securities of any series and to
have satisfied all the obligations under this Indenture relating to the
Securities of such series (and the Trustee, at the expense of the Company,
shall execute such instruments as may be requested by the Company
acknowledging the same), except (A) the rights of Holders of Securities of
such series or the coupons, if any, appertaining thereto, as the case may
be, to receive, solely from the trust fund described above, payment of the
principal of and interest, if any, and Additional Amounts, if any, on such
Securities when such payments are due; (B) the Company's obligations with
respect to such Securities under Sections 2.03, 2.04, 2.05, 2.06, 2.07,
7.07, 7.08 and 8.03; and (C) the rights, powers, duties and immunities of
the Trustee hereunder. Notwithstanding the satisfaction and discharge of
this Indenture with respect to any series of Securities, the obligations of
the Company to the Trustee and any predecessor Trustee under Section 7.07
shall survive.
Section 8.03. Application of Trust Money.
All moneys and Government Obligations deposited with the Trustee
pursuant to Sections 8.01 and 8.02 and, with respect to Government
Obligations, the principal and interest in respect thereof, with respect to
Securities of any series shall be held irrevocably in trust and applied by
it to the payment in accordance with the provisions of the Securities of
such series and this Indenture, either directly or through any Paying Agent
for the Securities of that series (including the Company if acting as its
own Paying Agent), to the Holders of the Securities of such series or the
coupons, if any, appertaining thereto, as the case may be, for the payment
or redemption of which such money has been deposited with the Trustee, of
all sums due and to become due thereon for principal, interest, if any, and
Additional Amounts, if any, but such money need not be segregated from
other funds except to the extent required by law.
Section 8.04. Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company
upon delivery of a Company Order any excess money or securities held by
them at any time under this Article Eight. Any money deposited with the
Trustee or any Paying Agent, or then held by the Company, under this
Article Eight in trust for the payment of the principal of, interest or
Additional Amounts, if any, on any Security and remaining unclaimed for two
years after such principal, interest or Additional Amounts have become due
and payable shall be paid to the Company on request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general 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.
Section 8.05. Indemnity for Government Obligations.
The Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against deposited
Government Obligations or the principal and interest received on such
Government Obligations.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders.
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The Company, when authorized by a Board Resolution, and the Trustee
may amend or supplement this Indenture or the Securities without notice to
or consent of any Securityholder:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities of one or more series any property or assets;
(b) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation
of the covenants, agreements and obligations of the Company pursuant to
Article Five;
(c) to add to the covenants of the Company such further covenants,
restrictions, conditions or provisions as its Board of Directors and the
Trustee shall consider to be for the protection of the Holders of
Securities or coupons appertaining thereto, and to make the occurrence, or
the occurrence and continuance, of a default in any such additional
covenants, restrictions, conditions or provisions an Event of Default
permitting the enforcement of all or any of the several remedies provided
in this Indenture as herein set forth; provided, that in respect of any
such additional covenant, restriction, condition or provision such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for immediate enforcement upon such
an Event of Default or may limit the remedies available to the Trustee upon
such an Event of Default or may limit the right of the Holders of a
majority in aggregate principal amount of the Securities of such series to
waive such an Event of Default.
(d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture, or to make any other provisions as the Board of
Directors may deem necessary or desirable, provided that no such action
shall adversely affect the interests of the Holders of the Securities or
coupons appertaining thereto;
(e) to establish the form or terms of Securities of any series or of
the coupons appertaining to such Securities as permitted by Section 2.01;
(f) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Securities of one or more series;
(g) to add to or change any of the provisions of this Indenture to
provide that Bearer Securities may be registrable as to principal, to
change or eliminate any restrictions (including restrictions relating to
payment in the United States) on the payment of principal of any premium or
interest on Bearer Securities, to permit Bearer Securities to be issued in
exchange for Registered Securities, to permit Bearer Securities to be
issued in exchange for Bearer Securities of other authorized denominations
or to permit the issuance of Securities in uncertificated form, provided
that any such actions shall not adversely affect the interest of the
Holders of the Securities of any series or any related coupons in any
material respect; or
(h) to add to, change or eliminate any of the provisions of this
Indenture (which addition, change or elimination may apply to one or more
series of Securities), provided that any such addition, change or
elimination shall neither (A) apply to any Security or any series created
prior to the execution of such supplemental indenture and entitled to the
benefit of such provision nor (B) modify the rights of the Holder of any
such Security with respect to such provision.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations which may be therein contained and
to accept the conveyance, transfer, assignment, mortgage or pledge of any
property thereunder, but the Trustee shall not be obligated to enter into
any such supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section may be executed without the consent of the Holders of any of the
Securities at the time Outstanding, notwithstanding any of the provisions
of Section 9.02.
Section 9.02. With Consent of Holders.
With the consent of the Holders of not less than a majority of the
principal amount of the Securities at the time Outstanding in each series
affected by such supplemental indenture (voting as one class), the Company,
when authorized by a resolution of its Board of Directors, and the Trustee
may, from time to time and at any time, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Indenture or any supplemental indenture or of modifying in any manner the
rights of the Holders of the Securities of each such series or of the
coupons appertaining to such Securities; provided, that no such
supplemental indenture shall, without the consent of each Securityholder
affected:
(1) reduce the amount of Securities whose Holders must consent
to an amendment, supplement or waiver or reduce the requirements of Section
11.09 establishing a quorum or voting or amend this Section 9.02;
(2) reduce the rate or rates of or extend the time for payment
of interest or Additional Amounts, if any, on any Security;
(3) reduce the principal of or extend the fixed maturity of
any Security;
(4) modify or effect in any manner adverse to the Holders of
Securities the terms and conditions of the obligations of the Company
hereunder;
(5) waive a default in the payment of the principal of or
interest or Additional Amounts, if any, on any Security;
(6) impair the right to institute suit for the enforcement of
any payment on or with respect to any series of Securities;
(7) change a Place of Payment; or
(8) make any Security payable in currency other than that
stated in the Security.
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely
for the benefit of one or more particular series of Securities, or which
modifies the rights of Holders of Securities of such series, or of coupons
appertaining to such Securities, with respect to such covenant or
provision, shall be deemed not to affect the rights under this Indenture of
the Holders of Securities of any other series or of the coupons
appertaining to Securities of such other series.
It shall not be necessary for the consent of the Securityholders
under this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall
approve the substance thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the
Trustee shall give a notice thereof (i) to the Holders of then Outstanding
Registered Securities of each series affected thereby, by mailing a notice
thereof by first-class mail to such Holders at their addresses as they
shall appear on the Security Register, (ii) if any Bearer Securities of a
series affected thereby are then Outstanding, to the Holders thereof who
have filed their names and addresses with the Trustee, by mailing a notice
thereof by first-class mail to such Holders at such addresses as were so
furnished to the Trustee and (iii) if any Bearer Securities of a series
affected thereby are then Outstanding, to all Holders thereof, by
publication of a notice thereof at least once in an Authorized Newspaper in
the Place of Payment, and in each case such notice shall set forth in
general terms the substance of such supplemental indenture. Any failure the
Trustee to give such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
A consent to an amendment, supplement or waiver to any other action
hereunder by a Holder of a Security of any series shall bind the Holder and
every subsequent Holder of a Security or portion of a Security of that
series that evidences the same debt as the consenting Holder's Security,
even if notation of the consent is not made on any Security. Any such
Holder or subsequent Holder, however, may revoke the consent as to his
Security or portion of a Security. Such revocation shall be effective only
if the Trustee receives the notice of revocation before the date the
amendment, supplement or waiver or other action becomes effective.
After an amendment, supplement or waiver with respect to a series of
Securities becomes effective, it shall bind every Holder of Securities of
that series.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to take any
action under this Indenture by vote or consent. If such record date is
fixed, the Company shall notify the Trustee of such date. Such record date
shall be the later of 30 days prior to the first solicitation of such
consent or vote or the date of the most recent list of Holders of the
affected Securities furnished to the Trustee pursuant to Section 2.05 prior
to such solicitation. If a record date is fixed, those persons who were
Securityholders at such record date (or their duly designated proxies), and
only those persons, shall be entitled to take such action by vote or
consent or to revoke any vote or consent previously given, whether or not
such persons continue to be Securityholders after such record date.
Section 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may request the Holder of the Security to deliver it
to the Trustee. The Trustee may then place an appropriate notation on the
Security about the changed terms and return it to the Holder.
Alternatively, if the Company so determines, the Company in exchange for
the Security shall issue and the Trustee shall authenticate a new Security
that reflects the changed terms. Failure to make the appropriate notation
or to issue a new Security shall not affect the validity of such amendment.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplement authorized
pursuant to this Article if the amendment or supplement does not adversely
affect the rights, duties, liabilities (present or potential), or
immunities of the Trustee. If it does, the Trustee may but need not sign
it. In signing such amendment or supplement, the Trustee shall be entitled
to receive and (subject to Sections 7.01 and 7.02) shall be fully protected
in relying upon an Opinion of Counsel stating that such amendment or
supplement is authorized or permitted by this Indenture.
ARTICLE TEN
REPAYMENT AT THE OPTION OF HOLDERS
Section 10.01. Applicability of Article.
Securities of any series which are repayable at the option of the
Holders thereof before their maturity shall be repaid in accordance with
the terms of the Securities of such series. The repayment of any principal
amount of Securities pursuant to such option of the Holder to require
repayment of Securities before their maturity shall not operate as a
payment, redemption or satisfaction of the indebtedness represented by such
Securities unless and until the Company, at its option, shall deliver or
surrender the same to the Trustee with a directive that such Securities be
canceled. Notwithstanding anything to the contrary contained in this
Article Ten, in connection with any repayment of Securities, the Company
may arrange for the purchase of any Securities by an agreement with one or
more investment bankers or other purchasers to purchase such Securities by
paying to the Holders of such Securities on or before the close of business
on the repayment date an amount not less than the repayment price payable
by the Company on repayment of such Securities, and the obligation of the
Company to pay the repayment price of such Securities shall be satisfied
and discharged to the extent such payment is so paid by such purchasers.
ARTICLE ELEVEN
CONCERNING THE SECURITYHOLDERS
Section 11.01. Evidence of Action Taken by Securityholders.
Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by a
specified percentage in principal amount of the Securityholders of any or
all series may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such specified percentage of
Securityholders in person or by agent duly appointed in writing. If
Securities of a series are issuable as Bearer Securities, any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders of such series
may, alternatively, be embodied in and evidenced by the record of Holders
of Securities of such series voting in favor thereof, either in person or
by proxies duly appointed in writing, at any meeting of Holders of
Securities of such series duly called and held in accordance with the
provisions of Sections 11.06 through 11.11, or a combination of such
instruments such record. Except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments or
record or both are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments and any
such record (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the Holders signing such
instrument or instruments and so voting at any such meeting. Proof of
execution of any such instrument or of a writing appointing any such agent,
or of the holding by any Person of a Security, be sufficient for any
purpose of this Indenture and (subject to Section 7.02) conclusive in favor
of the Trustee and the Company, if made in the manner provided in Section
11.02. The record of any meeting of Holders of Securities shall be proved
in the manner provided in Section 11.11.
Section 11.02. Proof of Execution of Instruments and of Holding of
Securities.
The execution of any instrument by a Securityholder or his agent or
proxy may be proved in the following manner:
(a) The fact and date of the execution by any Holder of any
instrument may be proved by the certificate of any notary public or other
officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the person executing such instruments acknowledged to
him the execution thereof, or by an affidavit of a witness to such
execution sworn to before any such notary or other such officer. Where such
execution is by or on behalf of any legal entity other than an individual,
such certificate or affidavit shall also constitute sufficient proof of the
authority of the person executing the same. The fact of the holding by any
Holder of a Bearer Security of any series, and the identifying number of
such Security and the date of his holding the same, may be proved by the
production of such Security or by a certificate executed by any trust
company, bank, banker or recognized securities dealer wherever situated
satisfactory to the Trustee, if such certificate shall be deemed by the
Trustee to be satisfactory. Each such certificate shall be dated and shall
state that on the date thereof a Security of such series bearing a
specified identifying number was deposited with or exhibited to such trust
company, bank, banker or recognized securities dealer by the person named
in such certificate. Any such certificate may be issued in respect of one
or more Bearer Securities of one or more series specified therein. The
holding by the person named in any such certificate of any Bearer Security
or Securities of any series specified therein shall be presumed to continue
for a period of one year from the date of such certificate unless at the
time of any determination of such holding (1) another certificate bearing a
later date issued in respect of the same Security or Securities shall be
produced, or (2) the Security or Securities of such series specified in
such certificate shall be produced by some other person, or (3) the
Security or Securities of such series specified in such certificate shall
have ceased to be Outstanding. Subject to Section 7.02, the fact and date
of the execution of any such instrument and the amount and numbers of
Securities of any series held by the person so executing such instrument
and the amount and numbers of any Security or Securities for such series
may also be proven in accordance with such reasonable rules and regulations
as may be prescribed by the Trustee for such series or in any other manner
which the Trustee for such series may deem sufficient.
(b) In the case of Registered Securities, the ownership of such
Securities shall be proved by the Security Register or by a certificate of
the Security Registrar.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
(d) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to an Officers' Certificate
delivered to the Trustee, fix in advance a record date for the
determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, waiver or
other Act may be given before or after such record date, but only the
Holders of record at the close of business on such record date shall be
deemed to be Holders for the purposes of determining whether Holders of the
requisite percentage of Outstanding Securities or Outstanding Securities of
a series, as the case may be, have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or
other Act, and for that purpose the Outstanding Securities or Outstanding
Securities of the series, as the case may be, shall be computed as of such
record date.
Section 11.03. Holders to be Treated as Owners.
The Company, the Trustee and any agent of the Company or the Trustee
may deem and treat the person in whose name any Security shall be
registered upon the Security Register for such series as the absolute owner
of such Security (whether or not such Security shall be overdue and
notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment of or on account of the principal of and,
subject to the provisions of this Indenture, interest on and any Additional
Amounts payable in respect of such Security and for all other purposes; and
neither the Company nor the Trustee nor any agent of the Company or the
Trustee shall be affected by any notice to the contrary. The Company, the
Trustee and any agent of the Company or the Trustee may treat the Holder of
any Bearer Security and the Holder of any coupon as the absolute owner of
such Bearer Security or coupon (whether or not such Bearer Security or
coupon shall be overdue) for the purpose of receiving payment thereof or on
account thereof and for all other purposes and neither the Company, the
Trustee, nor any agent of the Company or the Trustee shall be affected by
any notice to the contrary. All such payments so made to any such person,
or upon his order, shall be valid, and, to the extent of the sum or sums so
paid, effectual to satisfy and discharge the liability for moneys payable
upon any such Security or coupon.
None of the Company, the Trustee or any paying agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Security in global form or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Section 11.04. Securities Owned by Company Deemed Not Outstanding.
In determining whether the Holders of the requisite aggregate
principal amount of Outstanding Securities of any or all series have
concurred in any direction, consent or waiver under this Indenture,
Securities which are owned by the Company or any other obligor on the
Securities with respect to which such determination is being made or by any
Affiliate of the Company or any such obligor shall be disregarded and
deemed not to be Outstanding for the purpose of any such determination,
except that for the purpose of determining whether the Trustee shall be
protected in relying on any such direction, consent or waiver only
Securities which the Trustee actually knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor
upon the Securities or any Affiliate of the Company or any other obligor on
the Securities. In case of a dispute as to such right, the advice of
counsel shall be full protection in respect of any decision made by the
Trustee in accordance with such advice. Upon request of the Trustee, the
Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Securities, if any, known by the Company to be
owned or held by or for the account of any of the above-described persons;
and, subject to Section 7.02, the Trustee shall be entitled to accept such
Officers' Certificate as conclusive evidence of the facts therein set forth
and of the fact that all Securities not listed therein are Outstanding for
the purpose of such determination.
Section 11.05. Right of Revocation of Action Taken.
At any time prior to (but not after) the evidencing to the Trustee,
as provided in Section 11.01, of the taking of any action by the Holders of
the percentage in aggregate principal amount of the Securities of any or
all series, as the case may be, specified in this Indenture in connection
with such action, any Holder of a Security the serial number of which is
shown by the evidence to be included among the serial numbers of the
Securities the Holders of which have consented to such action may, by
filing written notice at the Corporate Trust Office and upon proof of
holding as provided in this Article, revoke such action so far as concerns
such Security. Except as aforesaid any such action taken by the Holder of
any Security shall be conclusive and binding upon such Holder and upon all
future Holders and owners of such Security and of any Securities issued in
exchange or substitution therefor or on registration of transfer thereof,
irrespective of whether or not any notation in regard thereto is made upon
any such Security. Any action taken by the Holders of the percentage in
aggregate principal amount of the Securities of any or all series, as the
case may be, specified in this Indenture in connection with such action
shall be conclusively binding upon the Company, the Trustee and the Holders
of all the Securities affected by such action.
Section 11.06. Meetings of Holders.
A meeting of Holders of Securities of any series may be called at any
time and from time to time pursuant to this Section 11.06 to make, give or
take any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be made, given or taken by
Holders of Securities of such series.
Section 11.07. Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of
Securities of any series for any purpose specified in Section 11.06, to be
held at such time and at such place in the Borough of Manhattan, The City
of New York, or in [Boston, Massachusetts] as the Trustee shall determine
or, with the approval of the Company, at any other place. Notice of every
meeting of Holders of Securities of any series, setting forth the time and
the place of such meeting and in general terms the action proposed to be
taken at such meeting, shall be given, in the manner provided in Section
13.02 not less than 21 nor more than 180 days prior to the date fixed for
the meeting.
(b) In case at any time the Company or the Holders of at least 10% in
principal amount of the Outstanding Securities of any series shall have
requested the Trustee to call a meeting of the Holders of Securities of
such series for any purpose specified in Section 11.06, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have made the first publication of the
notice of such meeting within 21 days after receipt of such request or
shall not thereafter proceed to cause the meeting to be held as provided
herein, the Company or the Holders of Securities of such series in the
amount above specified, as the case may be, may determine the time and the
place in the Borough of Manhattan, The City of New York, the City of
Boston, Massachusetts, or in such other place as shall be determined and
approved by the Company, for such meeting and may call such meeting for
such purposes by giving notice thereof as provided in Subsection (a) of
this Section.
Section 11.08. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of any series, a
Person shall be (1) a Holder of one or more Outstanding Securities of such
series, or (2) a Person appointed by an instrument in writing as proxy for
a Holder or Holders of one or more Outstanding Securities of such series by
such Holder or Holders. The only Persons who shall be entitled to be
present or to speak at any meeting of Holders of Securities or any series
shall be the Persons entitled to vote at such meeting and their counsel,
any representatives of the Trustee and its counsel and any representatives
of the Company and its counsel.
Section 11.09. Quorum; Action.
The Persons entitled to vote a majority in principal amount of the
Outstanding Securities of a series shall constitute a quorum for a meeting
of Holders of Securities of such series. In the absence of a quorum within
30 minutes of the time appointed for any such meeting, the meeting shall,
if convened at the request of Holders of Securities of such series, be
dissolved. In any other case, the meeting may be adjourned for a period
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period determined by the
chairman of the meeting prior to the adjournment of such adjourned meeting.
Notice of the reconvening of any adjourned meeting shall be given as
provided in Section 11.07(a), except that any such notice by publication
need be given only once not less than five days prior to the date on which
the meeting is scheduled to be reconvened. Notice of the reconvening of an
adjourned meeting shall state expressly the percentage, as provided above,
of the principal amount of the Outstanding Securities of such series which
shall constitute a quorum.
Any resolution presented to a meeting or adjourned meeting duly
reconvened at which a quorum is present as aforesaid may be adopted by the
affirmative vote of the Holders of a majority in principal amount of the
Outstanding Securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which this Indenture expressly
provides may be made, given or taken by the Holders of a specified
percentage, which is less than a majority, in principal amount of the
Outstanding Securities of a series may be adopted at a meeting or an
adjourned meeting duly reconvened and at which a quorum is present as
aforesaid by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Securities of that
series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the related
coupons, whether or not present or represented at the meeting.
Section 11.10. Determination of Voting Rights; Conduct and Adjournment
of Meetings.
(a) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Securities of a series in regard to proof of the
holding of Securities of such series and of the appointment of proxies and
in regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning the conduct of the
meeting as it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holdings of Securities shall be
proved in the manner specified in Section 11.02 and the appointment of any
proxy shall be provided in the manner specified in Section 11.02 or by
having the signature of the person executing the proxy witnessed or
guaranteed by any trust company, bank or banker authorized by Section 11.02
to certify to the holding of Bearer Securities. Such regulations may
provide that written instruments appointing proxies, regular on their face,
may be presumed valid and genuine without the proof specified in Section
11.02 or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Holders of Securities as provided in Section
11.07(b), in which case the Company or the Holders of Securities of the
series calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Persons entitled
to vote a majority in principal amount of the Outstanding Securities of
such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or proxy
shall be entitled to one vote for each $1,000 principal amount of the
Outstanding Securities of such series held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect to
any Security challenged as not Outstanding and ruled by the chairman of the
meeting to be not Outstanding. The chairman of the meeting shall have no
right to vote, except as a Holder of Securities of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 11.07 at which a quorum is present may be adjourned
from time to time by Persons entitled to vote a majority in principal
amount of the Outstanding Securities of such series represented at the
meeting; and the meeting may be held as so adjourned without further
notice.
Section 11.11. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed signatures of the Holders of Securities of such series or their
representatives by proxy and the principal amounts and serial numbers of
the Outstanding Securities of such series held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and
who shall make and file with the secretary of the meeting their verified
written reports in duplicate of all votes cast at the meeting. A record, at
least in duplicate, of the proceedings of each meeting of Holders of
Securities of any series shall be prepared by the secretary of the meeting
and there shall be attached to said record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of
the notice of the meeting and showing that said notice was given as
provided in Section 11.07 and, if applicable, Section 11.09. Each copy
shall be signed and verified by the affidavits of the permanent chairman
and secretary of the meeting and one such copy shall be delivered to the
Company, and another to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any
record so signed and verified shall be conclusive evidence of the matters
therein stated.
ARTICLE TWELVE
SINKING FUNDS
Section 12.01. Applicability of Article.
The provisions of this Article shall be applicable to any sinking
fund for the retirement of Securities of a series, except as otherwise
permitted or required by any form of Security of such series issued
pursuant to this Indenture.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is referred to in this Article Twelve as
a "mandatory sinking fund payment," and any payment in excess of such
minimum amount provided for by the terms of Securities of such series is
herein referred to as an "optional sinking fund payment." If provided for
by the terms of Securities of any series, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section 12.02. Each
sinking fund payment shall be applied to the redemption of Securities of
any series as provided for by the terms of Securities of such series.
Section 12.02. Satisfaction of Sinking Fund Payments with Securities.
The Company may, in satisfaction of all or any part of any sinking
fund payment with respect to the Securities of such series to be made
pursuant to the terms of such Securities as provided for by the terms of
such series (1) deliver Outstanding Securities of such series (other than
any of such Securities previously called for redemption or any of such
Securities in respect of which cash shall have been released to the
Company), together in the case of any Bearer Securities of such series with
all unmatured coupons appertaining thereto, and (2) apply as a credit
Securities of such series which have been redeemed either at the election
of the Company pursuant to the terms of such series of Securities or
through the application of permitted optional sinking fund payments
pursuant to the terms of such Securities, provided that such series of
Securities have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee at the Redemption
Price specified in such Securities for redemption through operation of the
sinking fund and the amount of such sinking fund payment shall be reduced
accordingly. If as a result of the delivery or credit of Securities of any
series in lieu of cash payments pursuant to this Section 12.02, the
principal amount of Securities of such series to be redeemed in order to
exhaust the aforesaid cash payment shall be less than $100,000, the Trustee
need not call Securities of such series for redemption, except upon Company
request, and such cash payment shall be held by the Trustee or a Paying
Agent for Securities of that series and applied to the next succeeding
sinking fund payment, provided, however, that the Trustee or such Paying
Agent shall at the request of the Company from time to time pay over and
deliver to the Company any cash payment so being held by the Trustee or
such Paying Agent upon delivery by the Company to the Trustee of Securities
purchased by the Company having an unpaid principal amount equal to the
cash payment requested to be released to the Company.
Section 12.03. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing mandatory sinking
fund payment for that series pursuant to the terms of that series, the
portion thereof, if any, which is to be satisfied by payment of cash and
the portion thereof, if any, which is to be satisfied by delivering and
crediting of Securities of that series pursuant to Section 12.02, and the
optional amount, if any, to be added in cash to the next ensuing mandatory
sinking fund payment, and will also deliver to the Trustee any Securities
to be so credited and not theretofore delivered. If such Officers'
Certificate shall specify an optional amount to be added in cash to the
next ensuing mandatory sinking fund payment, the Company shall thereupon be
obligated to pay the amount therein specified.
Not less than 30 days before each such sinking fund payment date the
Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 3.03 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 3.04. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms
and in the manner stated in Sections 3.05 and 3.06.
ARTICLE THIRTEEN
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties which are required to be included in this Indenture by the
TIA Section 310 to 317, inclusive, such duties set forth in the TIA shall
control.
Section 13.02. Notices.
Except as otherwise expressly provided herein or in the form of
Securities of any particular series pursuant to the provisions of this
Indenture, any notice or communication shall be sufficiently given if in
writing and delivered in Person, sent by facsimile (with original to follow
by first-class mail) or mailed by first-class mail, postage prepaid,
addressed as follows:
if to the Company:
Sierra Pacific Resources
P.O. Box 30150 (6100 Neil Road)
Reno, Nevada 89520-3150
Attention: Director of Finance
with a copy to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109-2891
Attention: William C. Rogers, Esq.
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Sierra Pacific Resources
The Company or the Trustee by notice to the others may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder of a Registered
Security shall be mailed to him by first class mail at his address as it
appears on the Security Register and shall be sufficiently given to him if
so mailed within the time prescribed. Failure to mail a notice or
communication to a Holder of any Registered Security or any defect in it
shall not affect its sufficiency with respect to other Securityholders. If
a notice or communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
In case, by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impossible to mail any notice as
required by this Indenture, then such method of notification as shall be
made with the approval of the Trustee shall constitute a sufficient mailing
of such notice.
Any notice required or permitted to be given to a Holder of Bearer
Securities of any series shall be deemed to be properly given if such
notice is published in an Authorized Newspaper on two separate days within
the time prescribed.
In case, by reason of the suspension of publication of any Authorized
Newspaper or Authorized Newspapers or by reason of any other cause, it
shall be impracticable to publish any notice to Holders of Bearer
Securities as provided above, then such notification to Holders of Bearer
Securities as shall be given with the approval of the Trustee shall
constitute sufficient notice to such Holders for every purpose hereunder.
Neither failure to give notice by publication to Holders of Bearer
Securities as provided above, nor any defect in any notice so published,
shall affect the sufficiency of any notice mailed to Holders of Registered
Securities as provided above.
Where this Indenture provides for notice in any manner, such notice
may be waived, in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent
of such notice. Waivers of notice by Holders of Securities shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
Any request, demand, authorization, direction, notice, consent,
election or waiver required or permitted under this Indenture shall be in
the English language, except that, if the Company so elects, any published
notice may be in an official language of the country of publication.
Section 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).
Section 13.04. 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 (except that, in the case of any request or
application as to which the furnishing of such documents is specifically
required by any provision of this Indenture relating to such particular
request or application, no additional certificate or opinion need be
furnished), the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition and the definitions relating
thereto;
(2) 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;
(3) a statement that, in the opinion of such Person, he 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 complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
Section 13.06. When Treasury Securities Disregarded.
In determining whether the Holders of the required principal amount
of Securities or a series thereof have concurred in any direction, waiver
or consent, Securities owned by the Company or any other obligor upon the
Securities or by any Affiliate of the Company or such obligor shall be
disregarded, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or
consent, only Securities which the Trustee actually knows are so owned
shall be so disregarded. Securities so owned which have been pledged in
good faith shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to
the Securities and that the pledgee is not the Company or any other obligor
upon the Securities or any Affiliate of the Company or such obligor.
Section 13.07. Legal Holidays.
A "Legal Holiday", except as otherwise provided in the form of
Security of any particular series pursuant to the provisions of this
Indenture, with respect to any Place of Payment means a Saturday, a Sunday
or a day on which banking institutions or trust companies in that Place of
Payment are not required to be open. Except as provided otherwise in the
applicable Security, if a payment date with respect to such payment is a
Legal Holiday at any Place of Payment, payment due on such Security with
respect to such Security may be made at such place on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue with respect
to such payment for the intervening period.
Section 13.08. Governing Law.
The laws of the State of New York applicable to contracts made and
performed in said state shall govern this Indenture and the Securities and
coupons, without regard to choice of law principles. Unless the form of
Security provides otherwise, all money or dollar amounts expressed herein
or in the Securities refer to United States dollars.
Section 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or a Subsidiary. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
Section 13.10. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor and assigns, whether so expressed or not. All
agreements of the Trustee in this Indenture shall bind its successor.
Section 13.11. Duplicate 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 13.12. Securities in Foreign Currencies.
Wherever this Indenture provides for any action by, or the determination of
any of the rights of, Holders of Securities of any series in which not all
of such Securities are denominated in the same currency, or any
distribution to Holders of Securities, in the absence of any provision to
the contrary in the form of Security of any particular series, any amount
in respect of any Security denominated in a currency other than United
States dollars shall be treated for any such action, determination or
distribution as that amount of United States dollars that could be obtained
for such amount on such reasonable basis of exchange and as of such date as
the Company may specify in a written notice to the Trustee, or in the
absence of such notice, as the Trustee may determine.
* * * * *
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
SIGNATURES
SIERRA PACIFIC RESOURCES, INC.
By:
------------------------------------------
Name:
Title:
Dated: as of _________________
THE BANK OF NEW YORK, as Trustee
By:
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Name:
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Title:
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Dated: as of __________________
