<PAGE>
PROSPECTUS
JUNE 4, 1999
PSI ENERGY, INC.
OFFER TO EXCHANGE
$50,000,000 6% PUTABLE/CALLABLE NOTES DUE DECEMBER 14, 2016
PUTABLE/CALLABLE DECEMBER 14, 2001
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
FOR
ALL OUTSTANDING 6% PUTABLE/CALLABLE NOTES DUE DECEMBER 14, 2016
PUTABLE/CALLABLE DECEMBER 14, 2001
------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JULY 2, 1999, UNLESS EXTENDED.
------------------------
Terms of the Exchange Offer:
- We will exchange all outstanding notes that are validly tendered and not
withdrawn prior to the expiration of the Exchange Offer.
- You may withdraw tenders of outstanding notes at any time prior to the
expiration of the Exchange Offer.
- The exchange of notes will not be a taxable exchange for United States
federal income tax purposes.
- We will not receive any proceeds from the Exchange Offer.
- The terms of the notes to be issued are substantially identical to the
outstanding notes, except for certain transfer restrictions, registration
rights and related additional interest provisions relating to the
outstanding notes.
------------------------
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any document that we file at the Public Reference Room of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. You may also read our filings at the regional offices of the SEC
located at Citicorp, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, New York, New York 10048 or over the Internet at
the SEC's home page at http://www.sec.gov.
This prospectus constitutes part of a registration statement on Form S-4
filed with the SEC under the Securities Act of 1933 (the "Securities Act"). It
omits some of the information contained in the registration statement, and
reference is made to the registration statement for further information on PSI
Energy, Inc. and the New Notes being offered. Any statement contained in this
prospectus concerning the provisions of any document filed as an exhibit to the
registration statement or otherwise filed with the SEC is not necessarily
complete, and in each instance reference is made to the copy of the document
filed.
INCORPORATION OF DOCUMENTS BY REFERENCE
Our Annual Report on Form 10-K for the year ended December 31, 1998 and
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, filed under
the Securities and Exchange Act of 1934 (the "Exchange Act") are incorporated
into this prospectus by reference.
We also incorporate by reference any filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and before the termination of this Exchange Offer. You may request a
copy of these filings at no cost, by writing or telephoning the office of Mr.
William L. Sheafer, Vice President and Treasurer, PSI Energy, Inc., 139 East
Fourth Street, Cincinnati, Ohio 45202, telephone number (513) 421-9500.
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<PAGE>
SUMMARY
THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE FINANCIAL DATA AND
RELATED NOTES, BEFORE MAKING AN INVESTMENT DECISION. UNLESS THE CONTEXT
INDICATES OTHERWISE, THE WORDS "PSI", "WE", "OUR", "OURS", AND "US" REFER TO PSI
ENERGY, INC. AND ITS SUBSIDIARIES AND JOINT VENTURES, INCLUDING UNCONSOLIDATED
ENTITIES.
THE COMPANY
We are an electric public utility company incorporated in Indiana. We are
primarily engaged in the production, transmission, distribution, and sale of
electric energy in north central, central and southern Indiana. The area we
serve has an estimated population of 2.1 million people located in 69 of the
state's 92 counties, and includes the cities of Bloomington, Columbus, Kokomo,
Lafayette, New Albany and Terre Haute.
We are a wholly-owned subsidiary of Cinergy Corp., a registered holding
company under the Public Utility Holding Company Act of 1935.
Our principal executive offices are located at 1000 East Main Street,
Plainfield, Indiana 46168; our telephone number is (317) 839-9611.
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THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered We are offering up to $50,000,000 aggregate principal amount
of 6% Putable/Callable Notes due December 14, 2016,
Putable/Callable December 14, 2001, which have been
registered under the Securities Act ("New Notes").
The Exchange Offer We are offering to issue the New Notes in exchange for a
like principal amount of outstanding 6% Putable/Callable
Notes due December 14, 2016, Putable/Callable December 14,
2001, issued by PSI on December 14, 1998 ("Old Notes"). We
are offering to issue the New Notes to satisfy our
obligations contained in the registration rights agreement
entered into when the Old Notes were sold in transactions
pursuant to Rule 144A under the Securities Act and therefore
not registered with the SEC. For procedures for tendering,
see "The Exchange Offer."
Tenders, Expiration Date, The Exchange Offer will expire at 5:00 p.m. New York City
Withdrawal time on July 2, 1999, unless it is extended. If you decide
to exchange your Old Notes for New Notes, you must
acknowledge that you are not engaging in, and do not intend
to engage in, a distribution of the New Notes. If you decide
to tender your Old Notes under the Exchange Offer, you may
withdraw them at any time before July 2, 1999. If we decide
for any reason not to accept any Old Notes for exchange,
your Old Notes will be returned to you without expense
promptly after the Exchange Offer expires.
Federal Income Tax Your exchange of Old Notes for New Notes under the Exchange
Consequences Offer will not result in any income, gain or loss to you for
Federal income tax purposes. See "United States Federal
Income Tax Considerations."
Use of Proceeds We will not receive any proceeds from the issuance of the
New Notes under the Exchange Offer.
Exchange Agent Fifth Third Bank is the exchange agent for the Exchange
Offer.
</TABLE>
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CONSEQUENCES OF EXCHANGING NOTES PURSUANT TO THE EXCHANGE OFFER
Based on interpretations contained in no-action letters issued from the
SEC's staff to third parties, we believe that New Notes issued in exchange for
Old Notes under the Exchange Offer may be offered for resale, resold or
otherwise transferred by you without registering the New Notes under the
Securities Act or delivering a prospectus:
- so long as you are not one of our "affiliates", as defined in Rule 405 of
the Securities Act;
- so long as you acquire the New Notes in the ordinary course of your
business; and
- unless you are a broker-dealer, so long as you do not have any arrangement
with any person to participate in the distribution of the New Notes.
Unless you are a broker-dealer, you must acknowledge that:
- you are not engaged in, and do not intend to engage in, a distribution of
the New Notes; and
- you have no arrangement or understanding to participate in a distribution
of the New Notes.
If you are an affiliate of PSI, or you are engaged in, intend to engage in
or have any arrangement or understanding with respect to, the distribution of
New Notes acquired in the Exchange Offer, you should not rely on our
interpretations of the position of the SEC's staff and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
If you are a broker-dealer and receive New Notes for your own account under
the Exchange Offer:
- you must acknowledge that you will deliver a prospectus in connection with
any resale of such New Notes; and
- you may use this prospectus, as it may be amended or supplemented from
time to time, in connection with the resale of New Notes received in
exchange for Old Notes acquired by you as a result of market-making or
other trading activities.
For a period of 90 days after the expiration of the Exchange Offer, we will
make this prospectus available to any broker-dealer for use in connection with
any such resale.
You may offer or sell the New Notes in certain jurisdictions only if they
have been registered or qualified for sale there, or an exemption from
registration or qualification is available and is complied with. Subject to the
limitations specified in the registration rights agreement, we will register or
qualify the New Notes for offer or sale under the securities laws of any
jurisdictions upon your reasonable written request. Unless you request that the
sale of the New Notes be registered or qualified in a jurisdiction, we currently
do not intend to register or qualify the sale of the New Notes in any
jurisdiction. If you do not comply with the requirement described in this
paragraph, you could incur liability under the Securities Act, and we will not
indemnify you in such circumstances.
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<PAGE>
THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except that the New Notes have been registered under the Securities
Act and some transfer restrictions, registration rights and related additional
interest provisions applicable to the Old Notes do not apply to the New Notes.
<TABLE>
<S> <C>
Issuer PSI will issue the New Notes under an indenture, dated as of
November 15, 1996, as supplemented by the Fifth Supplemental
Indenture dated as of December 15, 1998, each between PSI
and Fifth Third Bank, as trustee.
New Notes $50,000,000 aggregate principal amount of 6%
Putable/Callable Notes due December 14, 2016,
Putable/Callable December 14, 2001.
Ranking The New Notes will rank PARI PASSU with all other unsecured
and unsubordinated indebtedness of PSI.
Maturity Date December 14, 2016.
Call and Put Option On December 14, 2001, the holders of the New Notes will be
entitled to receive 100% of the principal amount of the New
Notes from either (i) the exercise by the Callholder of the
Call Option or (ii) if the Callholder does not exercise the
Call Option or is not required to or fails to pay the Call
Price to the Trustee when required, the exercise by the
Trustee of the Put Option, on behalf of the holders of the
New Notes. The Trustee will exercise the Put Option without
the consent of the holders of the New Notes if the
Callholder does not exercise the Call Option or fails to or
is not required to pay the Call Price to the Trustee.
Coupon Reset Process If the Callholder elects to purchase the New Notes by
exercising the Call Option, the Calculation Agent will reset
the interest rate effective on the Coupon Reset Date. The
New Notes will be purchased by the Callholder, in whole but
not in part on the Coupon Reset Date, at 100% of the
principal amount of the New Notes, with interest to the
Coupon Reset Date payable by PSI to the holders of the New
Notes. On and after the Coupon Reset Date, the New Notes
will bear interest to the Final Maturity Date at a rate
determined by the Calculation Agent in the coupon reset
process (See "Description of New Notes--Coupon Reset
Process.")
If the Trustee is required to exercise the Put Option for
and on behalf of the holders of the New Notes, upon such
exercise, PSI will be required on the Coupon Reset Date to
repurchase the New Notes from the holders of the New Notes
at 100% of the principal amount of the New Notes plus
accrued and unpaid interest to the Coupon Reset Date.
Interest Payment Dates June 14 and December 14, commencing June 14, 1999.
Sinking Fund None.
Record Date The Business Day immediately preceding each Interest Payment
Date.
</TABLE>
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<TABLE>
<S> <C>
Optional Redemption We have the right to redeem the New Notes, in whole or in
part, from time to time and at any time, upon not less than
30 days' notice to the holders of the New Notes, at a
redemption price equal to the sum of:
(A) the greater of (i) 100% of the principal amount of the
New Notes to be redeemed or (ii) the sum of the present
values of the Remaining Scheduled Payments discounted to
the date of redemption on a semi-annual basis (assuming
a 360-day year consisting of twelve 30-day months) at
the Make Whole Treasury Rate plus 20 basis points less
the Applicable Accrued Interest Amount; and
(B) the Applicable Accrued Interest Amount.
See "Description of New Notes--Optional Redemption."
Trustee Fifth Third Bank.
Events of Default Each of the following will constitute an event of default
under the Indenture with respect to the New Notes:
- failure to pay principal of or any premium on any New Note
when due;
- failure to pay any interest on any New Note when due, if
such failure continues for a period of 30 days;
- failure to perform any other covenant of PSI in the
Indenture, if such failure continues for 90 days after
written notice has been given by the Trustee or the
holders of at least 35% in principal amount of the New
Notes, as provided in the Indenture; and
- certain events of bankruptcy, insolvency or
reorganization.
See "Description of New Notes--Events of Default."
Use of Proceeds We will not receive any proceeds from the issuance of the
New Notes.
</TABLE>
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<PAGE>
SELECTED INCOME INFORMATION
The following tables show selected financial information of PSI. This
information is derived from our historical results. See "Where You Can Find More
Information". All amounts are in thousands except the ratio of earnings to fixed
charges.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH ----------------------------------
31, 1999 1998(1) 1997 1996
-------------- ---------- ---------- ----------
(UNAUDITED)
(THOUSANDS)
<S> <C> <C> <C> <C>
Operating Revenues.................................................... $482,465 $2,403,038 $1,960,395 $1,331,962
Operating Income...................................................... 86,067 161,244 289,415 278,956
Net Income............................................................ 39,841 52,038 132,205 125,678
Preferred Dividend Requirement........................................ 1,150 5,659 11,701 12,537
-------------- ---------- ---------- ----------
Net Income Applicable to Common Stock................................. $ 38,691 $ 46,379 $ 120,504 $ 113,141
-------------- ---------- ---------- ----------
-------------- ---------- ---------- ----------
</TABLE>
- ------------------------
Notes:
(1) The period reflects charges against income relating to:
- a one-time charge of $80 million (before taxes) reflecting the
implementation of a 1989 settlement of a dispute with the Wabash Valley
Power Association, Inc. that resulted from the cancellation of the Marble
Hill nuclear power station in 1984; and
- the recording of $62 million (before taxes) of unrealized losses related
to energy marketing and trading operations.
For additional information, reference is made to PSI's Annual Report on Form
10-K for the year ended December 31, 1998, which is incorporated in this
prospectus by reference.
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CAPITALIZATION
<TABLE>
<CAPTION>
OUTSTANDING MARCH 31, 1999 OUTSTANDING DECEMBER 31, 1998
------------------------------ ------------------------------
AMOUNT AMOUNT
(IN % OF (IN % OF
THOUSANDS) CAPITALIZATION THOUSANDS) CAPITALIZATION
------------- --------------- ------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Long-term debt................................... $ 1,020,093 48.4% $ 1,025,659 49.4%
Cumulative preferred stock not subject to
mandatory redemption........................... 71,919 3.4 71,923 3.5%
Common Stock Equity.............................. 1,014,326 48.2 975,648 47.1%
------------- ----- ------------- -----
Total Capitalization......................... $ 2,106,338 100.0% $ 2,073,230 100.0%
------------- ----- ------------- -----
------------- ----- ------------- -----
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
Listed below is the ratio of earnings to fixed charges for the three months
ended March 31, 1999 and each year of the five year period ended December 31,
1998.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH 31, -----------------------------------------------------
1999 1998 1997 1996 1995 1994
- ----------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
3.78 1.78 3.31 3.35 3.55 2.52
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of pretax income from continuing operations plus fixed charges.
Fixed charges consist of:
- interest expense;
- amortized premiums, discounts and capitalized expenses related to
indebtedness; and
- an estimate of the interest within rental expense.
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USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the New Notes
offered under this prospectus. New Notes will be exchanged for Old Notes as
described in this prospectus on our receipt of Old Notes in like principal
amount. The Old Notes surrendered in exchange for the New Notes will be retired
and cancelled. Accordingly, the issuance of the New Notes will not result in any
change in our indebtedness.
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DESCRIPTION OF NEW NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued under an indenture,
dated as of November 15, 1996 (the "Base Indenture"), as supplemented by a Fifth
Supplemental Indenture (the "Supplemental Indenture"), dated as of December 15,
1998 (as so supplemented, the "Indenture"), between PSI and Fifth Third Bank, as
trustee (the "Trustee"). Because this is a summary it does not contain all the
information that may be important to you. You should read the entire Indenture,
including the definitions in the Indenture of some of the terms used below. We
have filed a copy of the Base Indenture and Supplemental Indenture as exhibits
to the registration statement which includes this prospectus.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except for the removal of certain transfer restrictions,
registration rights and related additional interest provisions applicable to the
Old Notes. The New Notes will be general unsecured obligations of PSI and will
rank PARI PASSU with all of our other unsecured and unsubordinated obligations.
The Indenture permits us to incur additional indebtedness.
We will issue New Notes with an aggregate principal amount of up to
$50,000,000. The New Notes will mature on December 14, 2016 (the "Final Maturity
Date"). On December 14, 2001 (the "Coupon Reset Date"), the holders of the New
Notes will be entitled to receive 100% of the principal amount from either the
exercise by the Callholder (defined below) of the Call Option (defined below) or
the exercise by the Trustee of the Put Option (defined below) in the event the
Call Option is not exercised by the Callholder.
The New Notes will bear interest at the rate of 6% per annum from the date
of issuance to the Coupon Reset Date. If the Callholder exercises the Call
Option, the New Notes will be purchased by the Callholder in whole but not in
part on the Coupon Reset Date, at 100% of the principal amount of the New Notes,
on the terms and conditions described in this prospectus. Interest to the Coupon
Reset Date will be paid by us to the holders of the New Notes. On and after the
Coupon Reset Date, the New Notes will bear interest to the Final Maturity Date
at the rate determined by the Calculation Agent (defined below) pursuant to the
Coupon Reset Process described below. If the Callholder does not exercise the
Call Option or is not required to or fails to pay the Call Price (defined below)
to the Trustee when required, the Trustee will be required to exercise the Put
Option on behalf of the holders of the New Notes. Upon the exercise of the Put
Option, we will be required on the Coupon Reset Date to repurchase the New Notes
from the holders of the New Notes at 100% of the principal amount of the New
Notes plus accrued and unpaid interest to the Coupon Reset Date.
We will pay interest on the New Notes semi-annually on June 14 and December
14 in each year (each, an "Interest Payment Date"), beginning June 14, 1999, to
registered holders of record on the Business Day immediately preceding such
Interest Payment Date. A "Business Day" means any day other than a Saturday, a
Sunday or a day on which banking institutions in the City of New York are
authorized or obligated to close.
We will issue the New Notes only in fully registered book-entry form,
without coupons. We will issue the New Notes in denominations of $100,000 and
any integral multiple of $1,000 above that amount. We may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection with any registration of transfer or exchange of the New Notes but no
service charge will be made. The New Notes will be represented by one or more
global notes registered in the name of a nominee of DTC (defined below). The New
Notes will not be issuable in certificated form except as set out under
"Book-Entry; Delivery and Form" described below.
CALL OPTION
Under the terms of the Indenture and the New Notes, UBS AG, London Branch,
or its assignee (the "Callholder") will have the right to purchase the New Notes
in whole but not in part on the Coupon Reset
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<PAGE>
Date (the "Call Option"), at a price equal to 100% of the principal amount of
the New Notes (the "Call Price"), by giving notice to PSI and the Trustee (the
"Call Notice").
The Call Notice must be given to PSI and the Trustee contemporaneously, in
writing and no later than fifteen calendar days before the Coupon Reset Date.
If the Call Option is exercised:
- the Callholder must deliver an amount equal to the Call Price in U.S.
Dollars in immediately available funds to the Trustee for payment of the
Call Price on the Coupon Reset Date, not later than 2:00 pm New York City
time on the Business Day before the Coupon Reset Date; and
- the holders of the New Notes must deliver the New Notes to the Callholder
against payment of the Call Price on the Coupon Reset Date through the
facilities of DTC. (Section 301 of the Supplemental Indenture).
If the Callholder elects to exercise the Call Option, the obligation of the
Callholder to pay the Call Price is subject to the following conditions
precedent:
- there is no Event of Default (defined below) under the Indenture with
respect to the New Notes;
- there is no event of default under any senior indebtedness of PSI other
than the New Notes which would result in such senior indebtedness becoming
immediately due and payable under the documents relating to such senior
indebtedness;
- there is no payment default under documents relating to senior
indebtedness after giving effect to any applicable notice requirement or
grace period;
- there is no Market Disruption Event (defined below);
- at least one dealer has provided a timely Bid (defined below);
- there is no legal defeasance or covenant defeasance of the New Notes; and
- none of the New Notes have been purchased by PSI.
The holder of the New Notes will not have any rights or claims against the
Callholder as a result of the Callholder electing to purchase or not purchase
the New Notes.
PUT OPTION
If the Call Option has not been exercised, or if the Callholder is not
required or fails to deliver the Call Price to the Trustee by 2:00 pm New York
City time on the Business Day before the Coupon Reset Date, the Trustee will be
required for and on behalf of the holders of the New Notes, to exercise the
option to put the New Notes to us (the "Put Option").
Upon exercise of the Put Option:
- PSI must purchase all of the New Notes on the Coupon Reset Date at a
purchase price equal to 100% of the principal amount of the New Notes
together with accrued and unpaid interest to the Coupon Reset Date (the
"Put Redemption Price");
- PSI must deliver the Put Redemption Price to the Trustee, by no later than
12:00 noon New York City time on the Coupon Reset Date; and
- the holder of the New Notes must deliver the New Notes to PSI against
payment of the Put Redemption Price on the Coupon Reset Date through the
facilities of DTC.
The holders of the New Notes do not have a right to consent or object to the
Trustee's duty to exercise the Put Option. (Section 302 of the Supplemental
Indenture).
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COUPON RESET PROCESS
Warburg Dillon Read LLC has been appointed the "Calculation Agent" for the
New Notes under the Indenture.
If the Callholder has exercised the Call Option, PSI and the Calculation
Agent will use reasonable efforts to cause the actions contemplated below to be
completed in as timely a manner as possible, to determine the interest rate to
be paid on the New Notes from and including the Coupon Reset Date to the Final
Maturity Date (Section 303 and 304 of the Supplemental Indenture):
- We will provide the Calculation Agent with a dealer list, no later than
seven Business days before the Coupon Reset Date, containing the names and
addresses of up to five dealers, one of which will be Warburg Dillon Read
LLC, from whom the Calculation Agent will obtain Bids for the purchase of
the New Notes. A "Bid" is an irrevocable written offer given by such
dealer for the purchase of the New Notes, to be settled on the Coupon
Reset Date, and quoted as a stated yield to maturity on the New Notes (the
"Yield to Maturity").
- Within one Business Day after the Calculation Agent receives the dealer
list, the Calculation Agent will provide to each dealer on the dealer list
a copy of this prospectus, a copy of the form of the New Notes, a written
request that each dealer submit a Bid to the Calculation Agent by 12:00
noon, New York City time (the "Bid Deadline"), on the third Business Day
before the Coupon Reset Date (the "Bid Date"), and an estimate of the
purchase price, to be stated in U.S. Dollar amount, to be paid for the
Notes (the "Purchase Price").
- The Purchase Price is equal to the sum of the aggregate principal amount
of the New Notes and a premium (the "Notes Premium") equal to the excess,
if any, on the Coupon Reset Date of the discounted present value to the
Coupon Reset Date of a bond with a maturity of the Final Maturity Date
which has an interest rate of 5.98%, semi-annual interest payments on each
June 14 and on December 14 commencing June 14, 2002, a principal amount of
$50,000,000, which is discounted at a rate equal to the Treasury Rate,
over, $50,000,000. The term "Treasury Rate" means the per annum rate equal
to the offer side yield to maturity of the current on-the-run 10-year
United States Treasury Security appearing on Telerate page 500 at 11:00
a.m. New York time on the Bid Date (or such other date or time that may be
agreed upon by PSI and the Calculation Agent) or, if at such time or date
such rate does not appear on Telerate page 500, the rate appearing on
GovPx End-of-Day Pricing at 3:00 pm on the Bid Date.
- Immediately after receiving the Bids on the Bid Date, the Calculation
Agent will provide to us written notice stating the names of the dealers
from whom the Calculation Agent received the Bids, the Bid submitted by
each dealer and the Purchase Price. On the day that the Bids are received
by the Calculation Agent, the Calculation Agent will select the Bid with
the lowest Yield to Maturity (the "Selected Bid") from the Bids received
by the Bid Deadline subject to the following:
- there is at least one Bid which is properly received in a timely manner,
which establishes the Coupon Reset Rate (the "Coupon Reset Rate") equal
to the interest rate which would amortize the Notes Premium fully over
the remaining term of the New Notes at the Yield to Maturity indicated by
the Selected Bid; and
- if any two or more of the lowest Bids submitted are equivalent, we are
entitled, in our sole discretion, to select any of the equivalent Bids to
be the Selected Bid.
- Immediately after calculating the Coupon Reset Rate, the Calculation Agent
will provide a written notice to PSI and the Trustee confirming the Coupon
Reset Rate. After receiving the written notice, we will establish the
Coupon Reset Rate as the new interest rate on the New Notes, effective
from and including the Coupon Reset Date to, but not including, the Final
Maturity Date. We will deliver
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<PAGE>
to the Trustee on or before the Coupon Reset Date, an officer's
certificate setting out the Coupon Reset Date.
- The Callholder will sell the New Notes to the dealer who made the Selected
Bid, at the Purchase Price. This sale will be settled on the Coupon Reset
Date in immediately available funds.
TERMINATION OF CALL OPTION
The Call Option will automatically terminate, or terminate at the option of
the Callholder in certain circumstances, and the Trustee will exercise the Put
Option on behalf of the holders of the New Notes, if:
- there is an Event of Default with respect to the New Notes;
- there is an event of default under any senior indebtedness of PSI other
than the New Notes which would result in such senior indebtedness becoming
immediately due and payable under documents relating to such senior
indebtedness, or there is a payment default under documents relating to
such senior indebtedness after giving effect to any applicable notice
requirement or grace period;
- a Market Disruption Event (defined below) occurs after the Call Notice is
given;
- after the Call Notice is given, no dealer has provided a Bid in a timely
manner;
- there is a legal or covenant defeasance of the New Notes; or
- we have purchased or redeemed any New Notes.
"Market Disruption Event" means any of the following events in the
reasonable judgment of the Calculation Agent and PSI:
- there is a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or minimum prices are established
on that exchange;
- there is a general moratorium on commercial banking activities declared by
either U.S. federal or New York state authorities;
- there is a material adverse change in the existing financial, political or
economic conditions in the United States;
- there is an outbreak or escalation of major hostilities involving the
United States or a declaration of a national emergency or war by the
United States; or
- there is a material disruption of the U.S. government securities market,
U.S. corporate bond market, or U.S. federal wire system.
CALCULATION AGENT
The Calculation Agent may:
- resign at any time, the resignation to be effective ten Business Days
after a written notice of resignation is delivered to PSI and the Trustee;
- in its individual capacity, buy, sell, hold and deal in the New Notes and
may exercise any vote or join in any action to which any holder of the New
Notes may be entitled, as if it were not the Calculation Agent; and
- in its individual capacity, engage in any transaction with us as if it
were not the Calculation Agent.
If the Calculation Agent resigns, we will appoint a successor Calculation
Agent.
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OPTIONAL REDEMPTION
The New Notes will be redeemable by us, in whole but not in part, from time
to time and at any time (such redemption, an "Optional Redemption", and the date
of such redemption, the "Optional Redemption Date") at a redemption price equal
to the sum of:
- the greater of (i) 100% of the principal amount of the New Notes to be
redeemed or (ii) the sum of the present values of the Remaining Scheduled
Payments discounted to the Optional Redemption Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Make
Whole Treasury Rate plus 20 basis points, less the Applicable Accrued
Interest Amount; and
- the Applicable Accrued Interest Amount.
"Applicable Accrued Interest Amount" means, at the Optional Redemption Date,
the amount of interest accrued and unpaid from the prior interest payment date
to the Optional Redemption Date on the New Notes subject to the Optional
Redemption determined at the rate per annum shown in the title of the New Notes,
computed on the basis of a 360-day year twelve 30-day months.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity that would be
utilized, at the times of selection, and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the New Notes to be redeemed pursuant to the
Optional Redemption.
"Comparable Treasury Price" means the average of the Reference Treasury
Dealer Quotations for the Optional Redemption Date.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with us.
"Make Whole Treasury Rate" means the rate per annum equal to the semiannual
equivalent yield to maturity of the Comparable Treasury Issue, assuming a price
for the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the Comparable Treasury Price for the Optional Redemption Date.
"Reference Treasury Dealer" means a primary U.S. Government securities
dealer in New York City.
"Reference Treasury Dealer Quotations" means the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by the Reference Treasury Dealer at 5:00 p.m. New York
City time, on the third Business Day preceding a redemption date.
"Remaining Scheduled Payments" means the remaining scheduled payments of the
principal and interest of any New Note to be redeemed that would be due after
the Optional Redemption Date but for the Optional Redemption.
CONSOLIDATION, MERGER, AND SALE OF ASSETS
The Indenture does not contain any covenant that restricts our ability to
merge or consolidate with or into any other corporation, sell or convey all or
substantially all of our assets to any person, firm or corporation or otherwise
engage in restructuring transactions, provided that the successor entity assumes
due and punctual payment of principal or premium, if any, and interest on the
New Notes.
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to the New Notes:
- failure to pay principal of or any premium on any New Note when due;
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- failure to pay any interest on the New Notes when due, if continued for 30
days;
- failure to perform any other covenant of PSI in the Indenture, if
continued for 90 days after written notice has been given by the Trustee
or the holders of at least 35% in principal amount of the New Notes as
provided in the Indenture; and
- certain events of bankruptcy, insolvency or reorganization.
If an Event of Default (other than a bankruptcy, insolvency or
reorganization Event of Default) at the time outstanding occurs and is
continuing, either the Trustee or the holders of at least 35% in aggregate
principal amount of the New Notes by notice as provided in the Indenture may
declare the principal amount of the New Notes to be due and payable immediately.
If a bankruptcy, insolvency or reorganization Event of Default with respect to
the New Notes at the time outstanding occurs, the principal amount of all the
New Notes will automatically, and without any action by the Trustee or any
holder of the New Notes, become immediately due and payable. After any
acceleration described above, but before a judgment or decree based on
acceleration, the holders of the New Notes of a majority in aggregate principal
amount of the outstanding New Notes may, under some circumstances, rescind and
annul that acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture.
For information as to waiver of defaults, see "Modification and Waiver."
If an Event of Default occurs and is continuing, the Trustee will be under
no obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders of the New Notes, unless those
holders have offered to the Trustee reasonably satisfactory indemnity, and
unless the provisions in the Indenture relating to the Trustee's duties provide
otherwise. The holders of a majority in principal amount of the outstanding New
Notes will 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 New Notes. Such right is
subject to provisions for indemnification of the Trustee.
A holder of a New Note will not have any right to institute any proceeding
relating to the Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy under the Indenture, unless:
- that holder has previously given to the Trustee written notice of a
continuing Event of Default;
- the holders of at least 35% in aggregate principal amount of the
outstanding New Notes have made written request, and those holders have
offered reasonably satisfactory indemnity, to the Trustee, to institute
the proceeding as trustee; and
- the Trustee has failed to institute the proceedings, and has not received
from the holders of a majority in aggregate principal amount of the
outstanding New Notes a direction inconsistent with the above request,
within 60 days after the notice, request and offer.
The above limitations do not apply to a suit instituted by a holder of a New
Note for the enforcement of payment of the principal of or any premium or
interest on the New Note on or after the applicable due date specified in the
New Note.
We are required to furnish to the Trustee annually a statement by some of
our officers as to whether or not we are, to our knowledge, in default in the
performance or observance of any of the terms, provisions and conditions of the
Indenture and, if so, specifying all those known defaults.
MODIFICATION AND WAIVER
The Indenture may be modified and amended by PSI and the Trustee with the
consent of the holders of not less than a majority in aggregate principal amount
of the outstanding New Notes affected by that
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modification or amendment. However, no amendment or modification may, without
the consent of the holder of each outstanding New Note affected by that
amendment or modification:
- change the stated maturity of the principal of, or any installment of
principal of or interest on, any New Note;
- reduce the principal amount of, or any premium or interest on, any New
Note;
- reduce the amount of principal of an original issue discount security or
any other New Note payable upon acceleration of the maturity of the
security or note;
- change the place or currency of payment of principal of, or any premium or
interest on, any New Note;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any New Note; or
- reduce the percentage in principal amount of outstanding New Notes, the
consent of whose holders is required to modify or amend the Indenture,
reduce the percentage in principal amount of outstanding New Notes
necessary for waiver of compliance with some provisions of the Indenture
or for waiver of some defaults or modify the provisions relating to
modification and waiver.
The Indenture may not be modified, amended or waived without the
Callholder's prior written consent, if the modification, amendment or waiver
would materially adversely affects the Callholder's interest.
The holders of not less than a majority in aggregate principal amount of the
outstanding New Notes may waive our compliance with some restrictive provisions
of the Indenture. The holders of a majority in principal amount of the
outstanding New Notes may waive any past default under the Indenture other than
a default in the payment of principal, premium, or interest and certain
covenants and provisions of the Indenture, which cannot be amended without the
consent of the holder of each outstanding New Note affected.
We will be entitled to set any day as a record day for the purpose of
determining the holders of outstanding New Notes entitled to give or take any
direction, notice, consent, waiver or other action under the Indenture, in the
manner and subject to the limitations provided in the Indenture. However, in
limited circumstances, the Trustee will be entitled to set a record date for
action by holders of New Notes. If a record date is set for any action to be
taken by those holders, that action may be taken only by persons who are holders
of outstanding New Notes on the record date. To be effective, the action must be
taken by holders of the requisite principal amount of the New Notes within a
specified period following the record date. For any particular record date, this
period will be 180 days or other shorter period as we, or the Trustee, as the
case may be, may specify, and may be shortened or lengthened (but not beyond 180
days) from time to time.
DEFEASANCE AND DISCHARGE
The Indenture provides that we will be discharged from all our obligations
with respect to the New Notes when we deposit money or U.S. government
obligations, or both, in trust for the benefit of the holders of the New Notes.
The payment of principal and interest under the terms of the U.S. government
obligations will provide money in an amount sufficient to pay the principal of
and any premium and interest on the New Notes, on the stated maturity according
to the terms of the Indenture and the New Notes. However, we will not be
discharged from obligations to:
- exchange or register the transfer of the New Notes;
- replace stolen, lost or mutilated New Notes;
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- maintain paying agencies; or
- hold moneys for payment in trust.
The defeasance and discharge described above may only occur if, among other
things, either:
- we have delivered to the Trustee an opinion of counsel, or we have
received a ruling from, or there has been published by, the United States
Internal Revenue Service, which effectively states that holders of the New
Notes will not recognize gain or loss for federal income tax purposes as a
result of a deposit, defeasance or discharge described above; or
- there has been a change in tax law effectively providing that holders of
the New Notes will not recognize gain or loss for federal income tax
purposes as a result of a deposit, defeasance or discharge described
above.
BOOK ENTRY; DELIVERY AND FORM
GLOBAL SECURITIES. The certificates representing the New Notes will be
issued in fully registered, global form without interest coupons (the "Global
New Note"). The Global New Note will be deposited with, or on behalf of, The
Depository Trust Company ("DTC"), and initially registered in the name of Cede &
Co., as nominee for DTC.
Except as described below, the Global New Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global New Notes may not be exchanged for
New Notes in certificated form except in the limited circumstances described
below. See "Exchange of Book-Entry Notes for Certificated Notes." Transfer of
beneficial interests in the Global New Notes will be subject to the applicable
rules and procedures of DTC and its direct or indirect participants, which may
change from time to time.
DEPOSITORY PROCEDURES. DTC has advised us that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry charges in accounts of its Participants. The Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and some other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interest and transfer of ownership interest of each actual purchaser
of each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised us that:
- upon deposit of the Global New Notes, DTC will credit the accounts of
Participants with portions of the principal amount of the Global New
Notes; and
- ownership of such interests in the Global New Notes will be shown on, and
the transfer of ownership of such interests will be affected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners
of beneficial interests in the Global New Notes).
The laws of some states require that some persons take physical delivery in
definitive form of securities that they own. Consequently, the ability of such
persons to transfer beneficial interests in a Global New Note may be limited to
that extent. Because DTC can act only on behalf of Participants, which in turn
act on behalf of Indirect Participants and some banks, the ability of a person
having beneficial interests in a Global New Note to pledge such interests to
persons or entities that do not participate in the
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DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests. For
certain other restrictions on the transferability of the New Notes, see
"Exchange of Book-Entry Notes for Certificated Notes." Except as described
below, owners of interests in the Global New Notes will not have New Notes
registered in their names, will not receive physical delivery of New Notes in
certificated form and will not be considered the registered owners or holders of
the New Notes under the Indenture for any purpose.
Payments of the principal of and any premium and interest on a Global New
Note registered in the name of DTC or its nominee will be payable to DTC or its
nominee in its capacity as the registered holder under the Indenture. Under the
terms of the Indenture, PSI and the Trustee will treat the persons in whose
names the New Notes, including the Global New Notes, are registered as the
owners of the New Notes for the purpose of receiving those payments and for any
and all other purposes. Consequently, neither PSI, the Trustee nor any agent of
PSI or the Trustee has or will have any responsibility or liability for:
- any aspect of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership
interests in the Global New Notes, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in
the Global New Notes; or
- any other matter relating to the actions and practices of DTC or any of
its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment
for securities such as the New Notes, is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in principal amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of New Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or PSI. Neither PSI nor the Trustee
will be liable for any delay by DTC or any of its Participants in identifying
the beneficial owners of the New Notes, and PSI and the Trustee may conclusively
rely on and will be protected in relying on instructions from DTC or its nominee
as the registered owner of the New Notes for all purposes.
Interests in the Global New Notes will trade in DTC's same-day funds
settlement system, and secondary market trading activity in those interests will
therefore settle in immediately available funds, subject to the rules and
procedures of DTC and its participants. Transfers between Participants in DTC
will be effected according to DTC's procedures, and will be settled in same-day
funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of New Notes only at the direction of one or more Participants to whose
account with DTC interests in the Global New Notes are credited and only for
that portion of the aggregate principal amount of the New Notes as to which the
Participant or Participants has or have given that direction. However, if there
is an Event of Default, DTC reserves the right to exchange the Global New Notes
for New Notes in certificated form, and to distribute the New Notes to its
Participants.
The information in this section concerning DTC and its book-entry system has
been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy of this information. Although DTC has agreed to
the above procedures to facilitate transfers of interests in the Global New
Notes among participants in DTC, it is under no obligation to perform or to
continue to perform those procedures, and those procedures may be discontinued
at any time. Neither PSI nor the Trustee will have any responsibility for the
performance by DTC, or its respective participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NEW NOTES. If DTC is at any
time unwilling or unable to continue as depositary and a successor depositary is
not appointed by PSI within 90 days, PSI will issue
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individual, fully registered, definitive New Notes ("Definitive New Notes") in
exchange for the Global New Note or New Notes representing those Definitive New
Notes. Upon the exchange of a Global New Note for individual New Notes, the
Global New Note will be cancelled by the Trustee and the Definitive New Notes
will be registered in the names and in the authorized denominations as DTC,
according to instructions from its Participants, any Indirect Participants or
otherwise, will instruct the Trustee. The Trustee will deliver the New Notes to
the persons in whose names the New Notes are so registered and will recognize
the holders of the New Notes as noteholders.
TITLE
PSI, the Trustee, and any agent of PSI or the Trustee may treat the person
in whose name a New Note is registered as the absolute owner of the New Note
(whether or not that New Note may be overdue) for the purpose of making payment
and for all other purposes.
GOVERNING LAW
The Indenture and the New Notes will be governed by, and construed in
accordance with, the laws of the State of New York.
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THE EXCHANGE OFFER
Pursuant to a registration rights agreement among PSI and Warburg Dillon
Read LLC, we agreed to use our best efforts, at our cost, to file and cause to
become effective a registration statement for a registered offer (the "Exchange
Offer") to exchange the Old Notes for an issue of unsubordinated notes of PSI
(the "New Notes") with terms identical to the Old Notes. However, the New Notes
will not bear legends restricting the transfer of the New Notes. When the
registration statement is declared effective, we will offer the New Notes in
return for surrender of the Old Notes. The offer will remain open for not less
than 20 business days after the date the notice of the Exchange Offer is mailed
to holders of the Old Notes. For each Old Note surrendered to us, the holder of
the Old Note will receive a New Note of equal principal amount.
Interest on each New Note will accrue from the last Interest Payment Date on
which interest was paid on the Old Notes so surrendered or, if no interest has
been paid on such Old Notes, from the original date of original issue of the Old
Notes.
The registration rights agreement also provides that in the event that
applicable interpretations of the staff of the SEC do not permit us to effect
the Exchange Offer, or under some other circumstances, we will, at our cost, use
our best efforts to cause to become effective a shelf registration statement for
the resales of the Old Notes and to keep such shelf registration statement
effective until the expiration of the time period referred to in Rule 144(k)
under the Securities Act after the original date of original issue of the Old
Notes, or a shorter period that will terminate when all the Old Notes covered by
the shelf registration statement have been sold.
We will, in the case of a shelf registration, provide to each holder of the
Old Notes copies of the offering memorandum, notify each of them when the shelf
registration statement for the Old Notes has become effective and take other
actions that are required to permit resales of the Old Notes.
In the case of a shelf registration, a holder of the Old Notes that sells
its notes will generally be required to be:
- named as a selling security holder in the prospectus relating to the shelf
registration and to deliver a prospectus to purchasers;
- subject to some of the civil liability provisions under the Securities Act
applicable to sales of the notes; and
- bound by the provisions of the registration rights agreement that are
applicable to a holder of notes, including some indemnification
obligations.
The registration statement provides that the annual interest rate borne by
the Old Notes will be increased by .25% per annum until the date of filing or
effectiveness of a registration statement or a shelf registration statement, as
the case may be, if:
- the registration statement for the Exchange Offer is not filed with the
SEC on or before the date that is 120 days after the original date of the
original issue of the Old Notes;
- the registration statement for the Exchange Offer is not declared
effective on or before the date that is 180 days after the original date
of original issue of the Old Notes; or
- a shelf registration statement is not declared effective when required.
Once a registration statement is filed or a registration statement or a
shelf registration statement, as the case may be, becomes effective, the above
additional interest will cease to accrue from the filing date or the effective
date, as the case may be. However, if, after the date the additional interest
ceases to accrue, an event different from those specified above occurs,
additional interest may again commence accruing in the manner described in the
above paragraph.
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We are entitled to close the Exchange Offer 20 business days after the
commencement of the Exchange Offer provided that we have accepted all Old Notes
validly surrendered according to the terms of the Exchange Offer. Old Notes not
tendered in the Exchange Offer will bear interest at the rate in effect at the
time of issuance of the Old Notes and will be subject to all of the terms and
conditions specified in the Indenture and to the transfer restrictions in effect
at the time of issuance of the Old Notes.
This summary of the provisions of the registration rights agreement is
qualified in its entirety by reference to all the provisions of the registration
rights agreement. A copy of the registration rights agreement is available from
us upon request.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and conditions in this prospectus and the letter of
transmittal (the "Letter of Transmittal"), we will:
- accept for exchange Old Notes which are properly tendered on or before the
Expiration Date and not withdrawn as permitted below; and
- keep the Exchange Offer open for not less than 20 business days (or longer
if required by applicable law) after the date notice of the Exchange Offer
is mailed to the holders of the Old Notes.
"Expiration Date" means 5:00 p.m., New York City time, on July 2, 1999. If
the period of time for which the Exchange Offer is open is extended in our sole
discretion, the term "Expiration Date" means the latest time and date to which
the Exchange Offer is extended.
On the date of this prospectus, $50,000,000 in aggregate principal amount of
the Old Notes were outstanding. The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being tendered. This prospectus, together
with the Letter of Transmittal, is first being sent on or about the date set out
on the cover page, to all holders of Old Notes, at the addresses listed in the
security register of the Old Notes maintained by the Trustee.
We expressly reserve the right:
- at any time or from time to time, to extend the period of time during
which the Exchange Offer is open, and therefore to delay acceptance of any
Old Note; and
- to amend or terminate the Exchange Offer, and not to accept for exchange
any Old Notes not accepted for exchange, if any of the conditions to the
Exchange Offer specified under "Conditions to the Exchange Offer", occurs.
We will give oral or written notice of any extension, amendment,
non-acceptance or termination to the holders of the Old Notes as promptly as
practicable. In the case of any extension, a notice must be issued by means of a
press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. We have no obligation to publish, advertise or otherwise communicate the
above, other than by issuing a release to the Dow Jones News Service. However,
in so choosing to use the Dow Jones News Service, we are not limiting the manner
in which we may otherwise legally make any public announcement.
In an exchange offer, holders of Old Notes do not have appraisal or
dissenters' rights. Old Notes which are not tendered for exchange or are
tendered but not accepted will remain outstanding and be entitled to the
benefits of the Indenture, but will not be entitled to any further registration
rights under the registration rights agreement. We intend to conduct the
Exchange Offer according to the applicable requirements of the Exchange Act and
the rules and regulations of the SEC.
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PROCEDURES FOR TENDERING OLD NOTES
The tender of Old Notes by their holders to us and the acceptance by us of
the Old Notes will constitute a binding agreement between the tendering holder
and us, upon the terms and conditions of this prospectus and the Letter of
Transmittal. Except as set out below, a holder who wishes to tender Old Notes
for exchange in the Exchange Offer, must transmit a properly completed and duly
executed Letter of Transmittal, including all other documents required by the
Letter of Transmittal, to Fifth Third Bank (the "Exchange Agent") at the address
set out below under "Exchange Agent" on or before the Expiration Date. In
addition:
- certificates for the Old Notes must be received by the Exchange Agent
along with the Letter of Transmittal;
- a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of the Old Notes, if this procedure is available, into the
Exchange Agent's account at DTC in the manner described in "Book-Entry
Transfer" below, must be received by the Exchange Agent before the
Expiration Date; or
- the holder of Old Notes must comply with the guaranteed delivery
procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS OF OLD NOTES. IF
THE DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD
NOTES SHOULD BE SENT TO PSI.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange are
tendered:
- by a registered holder of the Old Notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal; or
- for the account of an Eligible Institution.
If signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, the guarantees must be by a firm which is
a member of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. or by a commercial bank or
trust company having an office or correspondent in the United States
(collectively, "Eligible Institutions"). If Old Notes are registered in the name
of a person other than the person signing the Letter of Transmittal, the Old
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by us in our sole discretion, duly executed by the registered
holder with the signature guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
us in our sole discretion. Our determination will be final and binding. We
reserve the absolute right:
- to reject any and all tenders of any particular Old Notes not properly
tendered or to not accept any particular Old Notes which acceptance might,
in our judgment or the judgment of our counsel, be unlawful; and
- to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular Old Notes either before or after the Expiration Date,
including the right to waive the ineligibility of any holder who seeks to
tender Old Notes in the Exchange Offer.
Unless waived, any defects or irregularities in connection with the tender
of Old Notes for exchange must be cured within such reasonable period of time as
we determine. Neither PSI, the Exchange Agent nor any other person will be under
any duty to give notification of any defect or irregularity relating to any
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tender of Old Notes for exchange. None of those parties will incur any liability
for failure to give that notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, those Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Note or power of attorney is signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
or corporations or others acting in a fiduciary or representative capacity,
those persons should indicate their capacity when signing and, unless waived by
us, proper evidence satisfactory to us of their authority to so act must be
submitted.
By executing, or otherwise becoming bound by a Letter of Transmittal, each
holder of the Old Notes (other than some specified holders) will represent that:
- it is not our affiliate;
- any New Notes to be received by it were acquired in the ordinary course of
business; and
- it has no arrangement with any person to participate in the distribution
(within the meaning of the Securities Act) of the New Notes.
If the tendering holder of Old Notes is a broker-dealer that will receive New
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in any resale of such
New Notes. See "Resales of the New Notes."
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
we will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. See "Conditions to the Exchange Offer" below. For purposes of the
Exchange Offer, we will be deemed to have accepted properly tendered Old Notes
for exchange when, and if we have given oral or written notice of the acceptance
to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for those Old Notes or a timely Book-Entry
Confirmation of those Old Notes into the Exchange Agent's account at DTC
pursuant to the book-entry transfer procedures described below, a properly
completed and duly executed Letter of Transmittal and all other required
documents. If any tendered Old Notes are not accepted for any reason described
in the terms and conditions of the Exchange Offer or if certificates
representing Old Notes are submitted for a greater principal amount than the
holder desires to exchange, the unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at DTC in the
manner described in "Book-Entry Transfer" below, those non-exchanged Old Notes
will be credited to an account maintained with DTC) as promptly as practicable
after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account for the Old
Notes at DTC for purposes of the Exchange Offer promptly after the date of this
prospectus. Any financial institution that is a participant in DTC's systems may
make book-entry delivery of Old Notes by causing DTC to transfer the Old Notes
into the Exchange Agent's account in accordance with DTC's Automated Tender
Offer Program ("ATOP") procedures for transfer. However, the exchange for the
Old Notes so tendered will only be made after timely confirmation of the
book-entry transfer of Old Note into the Exchange Agent's
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account, and timely receipt by the Exchange Agent of an Agent's Message (defined
below) and any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by DTC and received
by the Exchange Agent and forming a part of a Book-Entry Confirmation, which
states that DTC has received an express acknowledgment from a Participant
tendering Old Notes that are the subject of the Book-Entry Confirmation that the
Participant has received and agrees to be bound by the terms of the Letter of
Transmittal, and that we may enforce the agreement against that Participant.
Although delivery of Old Notes may be effected through book-entry transfer into
the Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile of
the letter), properly completed and duly executed, with any required signature
guarantees and any other required documents, must in any case be delivered to
and received by the Exchange Agent at its address described under "Exchange
Agent" on or before the Expiration Date, or the guaranteed delivery procedure
described below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender the Old Notes and
the Old Notes are not immediately available, or time will not permit the
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
- the tender is made through an Eligible Institution;
- before the Expiration Date, the Exchange Agent receives from the Eligible
Institution a properly completed and duly executed Letter of Transmittal
(or a facsimile of the letter) and Notice of Guaranteed Delivery,
substantially in the form provided by us (by telegram, telex, facsimile
transmission, mail or hand delivery), describing the name and address of
the holder of Old Notes and the amount of Old Notes tendered, stating that
the tender is being made by that holder and guaranteeing that within five
NYSE trading days after the date of execution of the notice of guaranteed
delivery, the certificates of all physically tendered Old Notes, in proper
form for transfer, or a Book-Entry Confirmation, as the case may be, and
any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
- the certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within five NYSE trading days after the date of execution
of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time before the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses described below under
"Exchange Agent." Any notice of withdrawal must specify:
- the name of the person having tendered the Old Notes to be withdrawn;
- the Old Notes to be withdrawn, including the principal amount of the Old
Notes; and
- where certificates for Old Notes have been transmitted, the name in which
the Old Notes are registered, if different from that of the withdrawing
holder.
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If certificates for Old Notes have been delivered or otherwise identified to
the Exchange Agent, then, before the release of those certificates, the
withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution unless the holder is an Eligible
Institution. If Old Notes have been tendered in the manner described in
"Book-Entry Transfer" above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of that facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by us, and our determination will be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder of Old Notes without cost to such holder (or, in the
case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at DTC in the manner described in "Book-Entry Form" above, the Old Notes
will be credited to an account maintained with DTC for the Old Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be re-entered by following one of the
procedures described under "Procedures for Tendering Old Notes" above at any
time on or before the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, we are not
required to accept for exchange, or to issue New Notes in exchange for, any Old
Notes and may terminate or amend the Exchange Offer, if at any time before the
acceptance of such Old Notes for exchange or the exchange of such New Notes for
such Old Notes, the acceptance or issuance would violate applicable law or any
interpretation of the SEC's staff.
The condition in the paragraph immediately above is for our sole benefit and
may be asserted by us regardless of the circumstances giving rise to that
condition. Our failure at any time to exercise the above rights is not to be
deemed a waiver of any of those rights and each right will be deemed an ongoing
right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any Old Notes tendered, and no
New Notes will be issued in exchange for any such Old Notes, if at such time any
stop order is threatened or in effect with respect to the registration statement
of which this prospectus constitutes a part or the qualification of the
indenture under the Trust Indenture Act.
EXCHANGE AGENT
Fifth Third Bank has been appointed as the Exchange Agent for the Exchange
Offer. All executed Letters of Transmittal should be directed to the Exchange
Agent at one of the addresses described below. Questions and requests for
assistance, requests for additional copies of this prospectus or of the Letter
of
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Transmittal and requests for notices of guaranteed delivery should be directed
to the Exchange Agent, addressed as follows:
DELIVER TO:
Fifth Third Bank, Exchange Agent
BY MAIL OR BY HAND:
Fifth Third Center
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: Corporate Trust Department
BY FACSIMILE:
(513) 744-6785
CONFIRM BY TELEPHONE:
(513) 579-5314
Delivery to an address other than as described above or transmission of
instructions via facsimile other than as described above does not constitute a
valid delivery.
FEES AND EXPENSES
The principal solicitation is being made by mail. Additional solicitation
may be made by telegraph, telephone or in person by our officers, regular
employees and affiliates. We will not pay any additional compensation to any
such officers and employees who engage in soliciting tenders. We will not make
any payment to brokers, dealers, or others soliciting acceptances of the
Exchange Offer. However, we will pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses relating to those services.
The estimated cash expenses to be incurred in making the Exchange Offer will
be paid by us and are estimated in the aggregate to be $75,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes as a result of that exchange. However, holders who instruct
us to register New Notes in the name of, or request that Old Notes not tendered
or not accepted in the Exchange Offer be returned to, a person other than the
registered tendering holder, will be responsible for the payment of any
applicable transfer on the exchange.
RESALE OF THE NEW NOTES
Under existing interpretations contained in several no-action letters from
the SEC's staff to third parties, the New Notes would be freely transferable
after the Exchange Offer without further registration under the Securities Act.
However, any purchaser of Old Notes who is an "affiliate" of PSI or who intends
to participate in the Exchange Offer for the purpose of distributing the New
Notes:
- will not be able to rely on the interpretation of the SEC's staff;
- will not be able to tender its Old Note in the Exchange Offer; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act applicable to any sale or transfer of such notes unless
the sale or transfer is made under an exemption from those requirements.
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By executing, or otherwise becoming bound by, the Letter of Transmittal,
each holder of the Old Notes (other than some specified holders) will represent
that:
- it is not our "affiliate";
- any New Notes to be received by it were acquired in the ordinary course of
its business; and
- it has no arrangement with any person to participate in the distribution
(within the meaning of the Securities Act) of the New Notes.
In addition, in connection with any resales of New Notes, any participating
broker-dealer who acquired notes for its own account as a result of
market-making or other trading activities must deliver a prospectus meeting the
requirements of the Securities Act. The SEC has taken the position that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to the New Notes (other than a resale of an unsold allotment from
the original sale of the Old Notes) with the prospectus contained in the
Exchange Offer registration statement. Under the registration rights agreement,
we are required to allow participating broker-dealers and other persons, if any,
subject to similar prospectus delivery requirements to use this prospectus as it
may be amended or supplemented from time to time, in connection with the resale
of such New Notes.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not result in any United States federal income tax consequences to holders of
Old Notes. When a holder of the Old Notes exchanges an Old Note for a New Note
pursuant to the Exchange Offer, that holder will have the same adjusted basis
and holding period in the New Note as in the Old Note immediately before the
exchange.
PLAN OF DISTRIBUTION
Each participating broker-dealer pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
New Notes. This prospectus, as it may be amended or supplemented from time to
time, may be used by a participating broker-dealer in connection with resales of
New Notes received in exchange for Old Notes where the Old Notes were acquired
as a result of market-making activities or other trading activities. We have
agreed that we will make this prospectus, as amended or supplemented, available
to any participating broker-dealer for use in connection with any such resale
and participating broker-dealers will be authorized to deliver this prospectus
for a period not exceeding 90 days after the Expiration Date.
We will not receive any proceeds from any sales of the New Notes by
participating broker-dealers. New Notes received by participating broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time, in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of those methods of resale, at market prices prevailing at the time of resale,
at prices related to the prevailing market prices or at negotiated prices. Any
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
participating broker-dealer that resells the New Notes that were received by it
for its own account pursuant to the Exchange Offer. Any broker or dealer that
participates in a distribution of New Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any resale of New
Notes and any omissions or concessions received by any persons may be deemed to
be underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a participating broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
We will promptly send additional copies of this prospectus and any amendment
or supplement to this prospectus to any participating broker-dealer that
requests those documents in the Letter of Transmittal. See "The Exchange Offer."
LEGAL MATTERS
The validity of the notes in respect of which this prospectus is being
delivered will be passed on for PSI by Taft, Stettinius & Hollister LLP.
EXPERTS
The financial statements and schedule incorporated by reference in this
prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report on those financial statements and
schedule, and are incorporated by reference in this prospectus in reliance upon
the authority of that firm as experts in accounting and auditing. Reference is
made to the above report, which includes an explanatory paragraph on the change
in method of accounting for energy trading and risk management activities
effective December 31, 1998, as discussed in Note 1 to the consolidated
financial statements.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN
ANY STATE WHERE THE OFFER IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Where You Can Find More Information....................................... 2
Incorporation of Documents
by Reference............................................................ 2
Prospectus Summary........................................................ 3
Use of Proceeds........................................................... 10
Description of New Notes.................................................. 11
The Exchange Offer........................................................ 21
United States Federal Income Tax Considerations........................... 29
Plan of Distribution...................................................... 29
Legal Matters............................................................. 29
Experts................................................................... 29
</TABLE>
PSI ENERGY, INC.
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PROSPECTUS
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JUNE 4, 1999
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