UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address, and Telephone Number Identification No.
1-11377 CINERGY CORP. 31-1385023
(A Delaware Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 421-9500
1-1232 THE CINCINNATI GAS & ELECTRIC COMPANY 31-0240030
(An Ohio Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 421-9500
1-3543 PSI ENERGY, INC. 35-0594457
(An Indiana Corporation)
1000 East Main Street
Plainfield, Indiana 46168
(317) 839-9611
2-7793 THE UNION LIGHT, HEAT AND POWER COMPANY 31-0473080
(A Kentucky Corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
(513) 421-9500
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
This combined Form 10-Q is separately filed by Cinergy Corp., The Cincinnati Gas
& Electric Company, PSI Energy, Inc., and The Union Light, Heat and Power
Company. Information contained herein relating to any individual registrant is
filed by such registrant on its own behalf. Each registrant makes no
representation as to information relating to the other registrants.
The Union Light, Heat and Power Company meets the conditions set forth in
General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing its
company specific information with the reduced disclosure format.
As of October 31, 1998, shares of Common Stock outstanding for each registrant
were as listed:
<TABLE>
<CAPTION>
<S> <C>
Company Shares
- ------------------------------------------------------------------- ------------
Cinergy Corp., par value $.01 per share 158,584,688
The Cincinnati Gas & Electric Company, par value $8.50 per share 89,663,086
PSI Energy, Inc., without par value, stated value $.01 per share 53,913,701
The Union Light, Heat and Power Company, par value $15.00 per share 585,333
</TABLE>
<PAGE>
TABLE OF CONTENTS
Item Page
Number Number
Glossary of Terms . . . . . . . . . . . . . . . . . . . 3
PART I. FINANCIAL INFORMATION
1 Financial Statements
Cinergy Corp.
Consolidated Balance Sheets . . . . . . . . . . . . . 7
Consolidated Statements of Income (Loss). . . . . . . 9
Consolidated Statements of Changes in Common
Stock Equity. . . . . . . . . . . . . . . . . . . . 10
Consolidated Statements of Cash Flows . . . . . . . . 13
Results of Operations . . . . . . . . . . . . . . . . 14
The Cincinnati Gas & Electric Company
Consolidated Balance Sheets . . . . . . . . . . . . . 24
Consolidated Statements of Income and Comprehensive
Income. . . . . . . . . . . . . . . . . . . . . . . 26
Consolidated Statements of Cash Flows . . . . . . . . 27
Results of Operations . . . . . . . . . . . . . . . . 28
PSI Energy, Inc.
Consolidated Balance Sheets . . . . . . . . . . . . . 34
Consolidated Statements of Income and Comprehensive
Income. . . . . . . . . . . . . . . . . . . . . . . 36
Consolidated Statements of Cash Flows . . . . . . . . 37
Results of Operations . . . . . . . . . . . . . . . . 38
The Union Light, Heat and Power Company
Balance Sheets. . . . . . . . . . . . . . . . . . . . 43
Statements of Income. . . . . . . . . . . . . . . . . 45
Statements of Cash Flows. . . . . . . . . . . . . . . 46
Results of Operations . . . . . . . . . . . . . . . . 47
Notes to Financial Statements . . . . . . . . . . . . . 51
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 60
3 Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . . 67
PART II. OTHER INFORMATION
1 Legal Proceedings . . . . . . . . . . . . . . . . . . . 68
5 Other Information . . . . . . . . . . . . . . . . . . . 68
6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 68
Signatures. . . . . . . . . . . . . . . . . . . . . . . 70
<PAGE>
GLOSSARY OF TERMS
The following abbreviations or acronyms used in the text of this combined Form
10-Q are defined below:
TERM DEFINITION
1997 Form Combined 1997 Annual Report on Form 10-K filed separately by
10-K Cinergy, CG&E, PSI, and ULH&P
ADR Alternative Dispute Resolution
Apache Apache Corporation
Avon Energy Avon Energy Partners Holdings, an Unlimited Liability
Company and its wholly-owned subsidiary Avon Energy
Partners PLC, a Limited Liability Company
Bcf Billion cubic feet
Beckjord CG&E'S W. C. Beckjord Station (steam electric generating
plant)
CC&T Cinergy Capital and Trading, Inc. (a subsidiary of
Investments)
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act
CFC National Rural Utilities Cooperative Finance Corporation
CG&E The Cincinnati Gas & Electric Company (a subsidiary of
Cinergy)
CWIP Construction work in progress
Cayuga PSI's Cayuga Station
Cinergy or Cinergy Corp.
Company
Cinergy Global Cinergy Global Power, Inc., formerly Cinergy Investments
Power MPI, Inc. (a subsidiary of Cinergy Global Resources)
Cinergy Global Cinergy Global Resources, Inc. (a subsidiary of Cinergy),
Resources which holds Cinergy's international non-regulated
businesses
Committed Lines A line of credit providing short-term loans on a
committed basis
DSM Demand-side management
Destec Destec Energy, Inc.
Dynegy Dynegy, Inc.
EPA United States Environmental Protection Agency
EPRI Electric Power Research Institute
EPS Earnings per share
<PAGE>
GLOSSARY OF TERMS (Continued)
TERM DEFINITION
East Bend CG&E's East Bend Station (steam electric generating plant)
Enertech Enertech Associates, Inc., formerly Power International,
Inc. (a subsidiary of Cinergy Investments, Inc.)
Exxon Exxon Coal and Minerals Company
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
February 1995 An IURC order issued in February 1995
Order
Gibson PSI's Gibson Generating Station (steam electric generating
plant)
HB 443 Customer choice bill introduced by the House Chairman of the
Tourism, Development and Energy Committee in Kentucky
HJR 95 House Joint Resolution, which calls for an executive task
force to study electricity restructuring in Kentucky
IDEM Indiana Department of Environmental Management
IGC Indiana Gas Company, Inc., formerly Indiana Gas and Water
Company, Inc.
Investments Cinergy Investments, Inc. (a subsidiary of Cinergy), which
holds Cinergy's domestic, non-regulated businesses
IOU Investor-owned utility
ISO Independent System Operator
IT Information Technology
IURC Indiana Utility Regulatory Commission
kwh Kilowatt-hour
mcf Thousand cubic feet
MGP Manufactured gas plant
MW Megawatts
Midlands Midlands Electricity plc, a United Kingdom regional electric
company (a wholly-owned subsidiary of Avon Energy)
Moravske Moravske Teplarna a.s. (an indirect subsidiary of Cinergy
Global Power)
N/A Not applicable
NERC North American Electric Reliability Council
NIPSCO Northern Indiana Public Service Company
<PAGE>
GLOSSARY OF TERMS (Continued)
TERM DEFINITION
NOx Nitrogen Oxide
Oryx Oryx Energy Company
PRP Potentially Responsible Party
ProEnergy Producers Energy Marketing, LLC (a subsidiary of CC&T),
which is engaged in the marketing of natural gas
PSI PSI Energy, Inc. (a subsidiary of Cinergy)
PUCO Public Utilities Commission of Ohio
RUS Rural Utilities Service
SB 237 and Companion electric restructuring bills introduced into the
HB 732 Ohio legislature during 1998
SEC United States Securities and Exchange Commission
SIP State Implementation Plan
September 1996 An IURC order issued in September 1996 on PSI's retail
Order rate proceeding
Statement 130 Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income
Statement 133 Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging
Activities
UCC Office of Utility Consumer Counselor
ULH&P The Union Light, Heat and Power Company (a wholly-owned
subsidiary of CG&E)
U.S. District United States District Court for the Southern District of
Court Ohio, Western Division
Uncommitted A line of credit providing short-term loans on an
Lines uncommitted basis
WVPA Wabash Valley Power Association, Inc.
Wabash River PSI's Wabash River Station
Zimmer CG&E's William H. Zimmer Generating Station (steam electric
generating plant)
<PAGE>
CINERGY CORP.
AND SUBSIDIARY COMPANIES
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
September 30 December 31
1998 1997
(unaudited)
(dollars in thousands)
Current Assets
Cash and temporary cash investments $ 78,826 $ 53,310
Restricted deposits 1,531 2,319
Notes receivable 71 110
Accounts receivable less accumulated provision
for doubtful accounts of $20,689 at September
30, 1998, and $10,382 at December 31, 1997 832,766 413,516
Materials, supplies, and fuel - at average cost 189,300 163,156
Prepayments and other 56,368 38,171
----------- ----------
1,158,862 670,582
Utility Plant - Original Cost
In service
Electric 9,102,204 8,981,182
Gas 772,006 746,903
Common 185,896 186,078
----------- ----------
10,060,106 9,914,163
Accumulated depreciation 3,982,686 3,800,322
----------- ----------
6,077,420 6,113,841
Construction work in progress 226,362 183,262
----------- ----------
Total utility plant 6,303,782 6,297,103
Other Assets
Regulatory assets 1,033,651 1,076,851
Investments in unconsolidated subsidiaries 502,623 537,720
Other 438,699 275,897
----------- ----------
1,974,973 1,890,468
$ 9,437,617 $8,858,153
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of
these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
September 30 December 31
1998 1997
(unaudited)
(dollars in thousands)
Current Liabilities
Accounts payable $ 917,760 $ 488,716
Accrued taxes 206,361 187,033
Accrued interest 49,011 46,622
Notes payable and other short-term obligations 1,185,486 1,114,028
Long-term debt due within one year 186,000 85,000
Other 98,848 79,193
---------- ----------
2,643,466 2,000,592
Non-Current Liabilities
Long-term debt 2,210,488 2,150,902
Deferred income taxes 1,095,884 1,248,543
Unamortized investment tax credits 159,030 166,262
Accrued pension and other postretirement
benefit costs 305,269 297,142
Other 388,483 277,523
---------- ----------
4,159,154 4,140,372
Total liabilities 6,802,620 6,140,964
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 92,648 177,989
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding shares -
158,547,701 at September 30, 1998, and
157,744,658 at December 31, 1997 1,585 1,577
Paid-in capital 1,600,776 1,573,064
Retained earnings 943,647 967,420
Accumulated other comprehensive loss (3,659) (2,861)
---------- ----------
Total common stock equity 2,542,349 2,539,200
$9,437,617 $8,858,153
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
Quarter Ended Year to Date Twelve Months Ended
September 30 September 30 September 30
<S> <C> <C> <C> <C> <C> <C>
1998 1997 1998 1997 1998 1997
(in thousands, except per share amounts)
Operating Revenues
Electric $1,601,996 $1,315,165 $3,782,641 $2,923,655 $4,720,684 $3,631,890
Gas 355,945 39,941 666,136 326,964 830,318 494,936
Other 18,545 5,423 43,888 21,705 56,568 31,458
---------- ---------- ---------- ---------- ---------- ----------
1,976,486 1,360,529 4,492,665 3,272,324 5,607,570 4,158,284
Operating Expenses
Fuel and purchased and exchanged
power 1,070,753 804,397 2,318,624 1,470,701 2,760,717 1,707,996
Gas purchased 316,321 15,622 518,006 175,416 608,748 274,219
Other operation and maintenance 235,074 213,458 774,149 651,648 991,075 899,859
Depreciation and amortization 80,425 76,847 240,780 229,496 318,205 305,184
Taxes other than income taxes 69,346 67,174 208,125 204,132 270,037 265,625
---------- ---------- ---------- ---------- ---------- ----------
1,771,919 1,177,498 4,059,684 2,731,393 4,948,782 3,452,883
Operating Income 204,567 183,031 432,981 540,931 658,788 705,401
Equity in Earnings of
Unconsolidated Subsidiaries 11,421 3,782 32,992 42,462 50,922 57,445
Other Income and (Expenses) - Net (115) 6,268 (11,850) 3,634 (18,088) (8,972)
Interest 60,950 58,444 181,511 176,897 240,933 234,560
--------- ---------- ---------- ---------- ---------- ----------
Income Before Taxes 154,923 134,637 272,612 410,130 450,689 519,314
Income Taxes 44,127 48,961 77,891 148,373 142,518 183,732
Preferred Dividend Requirements
of Subsidiaries 1,365 3,142 5,152 9,617 8,104 12,856
---------- ---------- ---------- ---------- ---------- ----------
Net Income Before Extraordinary Item $ 109,431 $ 82,534 $ 189,569 $ 252,140 $ 300,067 $ 322,726
Extraordinary Item - Equity Share of
Windfall Profits Tax (Less
Applicable Income Taxes of $0) - (109,400) - (109,400) - (109,400)
---------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss) $ 109,431 $ (26,866) $ 189,569 $ 142,740 $ 300,067 $ 213,326
Average Common Shares Outstanding 158,539 157,679 158,110 157,679 158,007 157,679
Earnings Per Common Share
Net income before
extraordinary item $0.69 $ 0.53 $1.20 $1.60 $1.90 $2.04
Net income (loss) $0.69 $(0.16) $1.20 $0.91 $1.90 $1.35
Earnings Per Common Share - Assuming Dilution
Net income before
extraordinary item $0.69 $ 0.52 $1.20 $1.59 $1.90 $2.03
Net income (loss) $0.69 $(0.17) $1.20 $0.90 $1.90 $1.34
Dividends Declared Per Common Share $0.45 $ 0.45 $1.35 $1.35 $1.80 $1.80
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other Total Total
Common Paid-in Retained Comprehensive Comprehensive Common Stock
Stock Capital Earnings Loss Income (Loss) Equity
Quarter Ended September 30, 1998
Balance at July 1, 1998 $1,585 $1,599,435 $ 905,556 $(3,330) $2,503,246
Comprehensive income
Net income 109,431 $109,431 109,431
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (329) (329)
--------
Other comprehensive loss
total (329) (329)
--------
Comprehensive income total $109,102
Issuance of 12,423 shares of
common stock - net 225 225
Treasury shares purchased (1) (1,536) (1,537)
Treasury shares reissued 1 2,637 2,638
Dividends on common stock (see
page 9 for per share amounts) (71,340) (71,340)
Other 15 15
------ ---------- ---------- ------- ----------
Balance at September 30, 1998 $1,585 $1,600,776 $ 943,647 $(3,659) $2,542,349
Quarter Ended September 30, 1997
Balance at July 1, 1997 $1,577 $1,570,533 $1,021,210 $(1,973) $2,591,347
Comprehensive income
Net loss (26,866) $(26,866) (26,866)
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (514) (514)
--------
Other comprehensive loss
total (514) (514)
--------
Comprehensive loss total $(27,380)
========
Treasury shares purchased (214) (214)
Treasury shares reissued 1,614 1,614
Dividends on common stock (see
page 9 for per share amounts) (71,000) (71,000)
Other (406) 118 (288)
------ ---------- ---------- ------- ----------
Balance at September 30, 1997 $1,577 $1,571,527 $ 923,462 $(2,487) $2,494,079
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (CONTINUED)
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other Total Total
Common Paid-in Retained Comprehensive Comprehensive Common Stock
Stock Capital Earnings Loss Income Equity
Nine Months Ended September 30, 1998
Balance at January 1, 1998 $1,577 $1,573,064 $ 967,420 $(2,861) $2,539,200
Comprehensive income
Net income 189,569 $189,569 189,569
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (747) (747)
Minimum pension liability
adjustment (51) (51)
--------
Other comprehensive loss
total (798) (798)
--------
Comprehensive income total $188,771
Issuance of 803,043 shares of
common stock - net 8 27,018 27,026
Treasury shares purchased (3) (6,468) (6,471)
Treasury shares reissued 3 7,115 7,118
Dividends on common stock (see
page 9 for per share amounts) (213,340) (213,340)
Other 47 (2) 45
------ ---------- ---------- ------- ----------
Balance at September 30, 1998 $1,585 $1,600,776 $ 943,647 $(3,659) $2,542,349
Nine Months Ended September 30, 1997
Balance at January 1, 1997 $1,577 $1,590,735 $ 993,526 $(1,384) $2,584,454
Comprehensive income
Net income 142,740 $142,740 142,740
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (1,103) (1,103)
--------
Other comprehensive loss
total (1,103) (1,103)
--------
Comprehensive income total $141,637
========
Treasury shares purchased (11) (45,939) (45,950)
Treasury shares reissued 11 27,073 27,084
Dividends on common stock (see
page 9 for per share amounts) (212,910) (212,910)
Other (342) 106 (236)
------ ---------- ---------- ------- ----------
Balance at September 30, 1997 $1,577 $1,571,527 $ 923,462 $(2,487) $2,494,079
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK EQUITY (CONTINUED)
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other Total Total
Common Paid-in Retained Comprehensive Comprehensive Common Stock
Stock Capital Earnings Loss Income Equity
Twelve Months Ended September 30, 1998
Balance at October 1, 1997 $1,577 $1,571,527 $ 923,462 $(2,487) $2,494,079
Comprehensive income
Net income 300,067 $300,067 300,067
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (39) (39)
Minimum pension liability
adjustment (1,133) (1,133)
--------
Other comprehensive loss
total (1,172) (1,172)
--------
Comprehensive income total $298,895
Issuance of 868,572 shares of
common stock - net 8 29,084 29,092
Treasury shares purchased (3) (6,728) (6,731)
Treasury shares reissued 3 6,771 6,774
Dividends on common stock (see
page 9 for per share amounts) (284,296) (284,296)
Other 122 4,414 4,536
------ ---------- ---------- ------- ----------
Balance at September 30, 1998 $1,585 $1,600,776 $ 943,647 $(3,659) $2,542,349
Twelve Months Ended September 30, 1997
Balance at October 1, 1996 $1,577 $1,592,393 $ 994,113 $(1,658) $2,586,425
Comprehensive income
Net income 213,326 $213,326 213,326
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (650) (650)
Minimum pension liability
adjustment (179) (179)
--------
Other comprehensive loss
total (829) (829)
--------
Comprehensive income total $212,497
========
Treasury shares purchased (12) (48,170) (48,182)
Treasury shares reissued 12 27,674 27,686
Dividends on common stock (see
page 9 for per share amounts) (283,866) (283,866)
Costs of reacquisition of
preferred stock of subsidiary (216) (216)
Other (370) 105 (265)
------ ---------- ---------- ------- ----------
Balance at September 30, 1997 $1,577 $1,571,527 $ 923,462 $(2,487) $2,494,079
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date Twelve Months Ended
September 30 September 30
1998 1997 1998 1997
(in thousands)
Operating Activities
<S> <C> <C> <C> <C>
Net income $ 189,569 $ 142,740 $ 300,067 $ 213,326
Items providing (using) cash currently:
Depreciation and amortization 240,780 229,496 318,205 305,184
WVPA settlement 80,000 - 80,000 (80,000)
Deferred income taxes and investment tax
credits - net (79,350) 4,698 (16,410) 18,549
Equity in earnings of unconsolidated subsidiaries (32,992) (17,309) (50,922) (32,292)
Extraordinary item - equity share of windfall
profits tax - 109,400 - 109,400
Allowance for equity funds used during
construction (793) (189) (701) (208)
Regulatory assets - net 57,122 40,355 68,210 68,169
Changes in current assets and current liabilities
Restricted deposits 788 (229) 419 (230)
Accounts and notes receivable, net of
reserves on receivables sold (298,792) (180,916) (335,033) (275,404)
Materials, supplies, and fuel (20,037) 9,871 (8,091) 30,351
Accounts payable 293,435 175,165 301,566 218,405
Accrued taxes and interest 21,717 22,719 (22,416) 36,922
Other items - net 94,458 (28,229) 137,017 37,645
--------- --------- --------- ---------
Net cash provided by operating
activities 545,905 507,572 771,911 649,817
Financing Activities
Issuance of common stock 515 - 2,581 -
Issuance of long-term debt 373,041 - 473,103 150,217
Retirement of preferred stock of subsidiaries (85,292) (16,182) (85,379) (19,110)
Redemption of long-term debt (333,745) (336,312) (333,745) (365,912)
Change in short-term debt 61,642 323,128 (69,675) 243,891
Dividends on common stock (212,730) (212,910) (283,686) (283,866)
--------- --------- --------- ---------
Net cash used in financing activities (196,569) (242,276) (296,801) (274,780)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (238,364) (226,389) (340,030) (345,425)
Acquisition of businesses (net of cash acquired) (63,412) - (63,412) -
Investments in unconsolidated subsidiaries (22,044) - (51,076) -
--------- --------- --------- ----------
Net cash used in investing activities (323,820) (226,389) (454,518) (345,425)
Net increase in cash and temporary cash investments 25,516 38,907 20,592 29,612
Cash and temporary cash investments at
beginning of period 53,310 19,327 58,234 28,622
--------- --------- --------- ---------
Cash and temporary cash investments at
end of period $ 78,826 $ 58,234 $ 78,826 $ 58,234
<FN>
The accompanying notes as they relate to Cinergy Corp. are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
CINERGY CORP.
Below is information concerning the consolidated results of operations for
Cinergy for the quarter, nine months, and twelve months ended September 30,
1998. For information concerning the results of operations for each of the other
registrants for the quarter and nine months ended September 30, 1998, see the
discussion under the heading "Results of Operations" following the financial
statements of each registrant.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1998
Operating Revenues
Electric Operating Revenues
The components of electric operating revenues and the related kwh sales are
shown below:
Quarter Ended
September 30
Revenue Kwh Sales
1998 1997 1998 1997
($ and kwh in millions)
Retail $ 713 $ 671 13,013 12,099
Sales for resale 873 635 25,243 24,553
Other 16 9 N/A N/A
------ ------ ------ ------
Total $1,602 $1,315 38,256 36,652
Electric operating revenues increased $287 million (22%) for the quarter ended
September 30, 1998, from the comparable period of 1997. This increase was
primarily the result of a higher average price per kwh received on sales for
resale transactions. There was also an increase in the average price per kwh
paid for the corresponding purchases of purchased and exchanged power described
below. Also contributing to the increase were higher retail kwh sales due to the
warmer than normal weather during 1998 and growth in the average number of
residential and commercial customers.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Quarter Ended
September 30
Revenue Mcf Sales
1998 1997 1998 1997
---- ---- ---- -----
($ and mcf in millions)
Sales for resale $296 $ - 152 -
Retail 48 33 6 4
Transportation 8 6 11 12
Other 4 1 N/A N/A
---- --- --- ---
Total $356 $40 169 16
Gas operating revenues increased $316 million in the third quarter of 1998, when
compared to the same period last year, primarily due to the gas operating
revenues of ProEnergy, which was acquired in June 1998.
<PAGE>
Other Revenues
Other revenues for the quarter ended September 30, 1998, increased $13 million,
over the same period of 1997. This increase was primarily the result of
increased sales and new initiatives by certain of Cinergy's non-regulated
entities.
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Quarter Ended
September 30
1998 1997
(in millions)
Fuel $ 206 $197
Purchased and exchanged power 865 607
------ ----
Total $1,071 $804
Electric fuel costs increased $9 million (5%) for the quarter ended September
30, 1998, as compared to the same period last year.
An analysis of these fuel costs is shown below:
Quarter Ended
September 30
(in millions)
Fuel expense - September 30, 1997 $197
Increase (Decrease) due to change in:
Price of fuel (6)
Deferred fuel cost (4)
Kwh generation 19
----
Fuel expense - September 30, 1998 $206
Purchased and exchanged power expense increased $258 million (43%) for the
quarter ended September 30, 1998, when compared to the same period of 1997,
primarily reflecting an increase in the average price paid per kwh.
Gas Purchased
Gas purchased for the quarter ended September 30, 1998, increased $301 million,
when compared to the same period last year, primarily due to the gas purchased
expenses of ProEnergy, which was acquired in June 1998.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
September 30
1998 1997
(in millions)
Other operation $185 $171
Maintenance 50 42
---- ----
Total $235 $213
<PAGE>
Other operation expenses increased $14 million (8%) for the quarter ended
September 30, 1998, as compared to the same period last year, primarily due to
an increase in new initiatives by certain of Cinergy's consolidated
non-regulated businesses.
Maintenance expenses increased $8 million (19%) for the quarter ended September
30, 1998, as compared to the same period of 1997, primarily due to an increase
in production maintenance at Wabash River, Cayuga, and Gibson, and an increase
in distribution line maintenance.
Depreciation and Amortization
The components of depreciation and amortization expenses are shown below:
Quarter Ended
September 30
1998 1997
(in millions)
Depreciation $74 $73
Amortization of phase-in deferrals 5 3
Amortization of post-in-service
deferred operating expenses 1 1
--- ---
Total $80 $77
Amortization of phase-in deferrals reflects the PUCO ordered phase-in plan for
Zimmer.
Equity in Earnings of Unconsolidated Subsidiaries
For the quarter ended September 30, 1998, the equity in earnings of
unconsolidated subsidiaries increased $8 million, as compared to the same period
of last year. This increase is primarily attributable to Midlands.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $6 million for the quarter
ended September 30, 1998, from the same period of 1997, is due primarily to a
gain recorded in 1997 on the sale of a PSI investment.
Income Taxes
Income taxes decreased $5 million (10%) for the quarter ended September 30,
1998, as compared to the same period of 1997, primarily due to the recognition
by Cinergy of Foreign Tax Credits in the third quarter of 1998. Previous
projections indicated that these Foreign Tax Credits would expire unused and
therefore previous Federal tax provisions had not given benefit to these Foreign
Tax Credits. This decrease is somewhat offset by an increase in taxable income
over the prior period.
Preferred Dividend Requirements of Subsidiaries
The decrease in preferred dividend requirements of subsidiaries of $2 million
(57%) for the quarter ended September 30, 1998, as compared to the same period
of 1997, is primarily attributable to PSI's redemption of all outstanding shares
of its 7.15% Series Cumulative Preferred Stock and 7.44% Series Cumulative
Preferred Stock on September 1, 1997, and March 1, 1998, respectively.
<PAGE>
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Operating Revenues
Electric Operating Revenues
The components of electric operating revenues and the related kwh sales are
shown below:
Nine Months
Ended September 30
Revenue Kwh Sales
1998 1997 1998 1997
------ ------ ------ -------
($ and kwh in millions)
Retail $1,955 $1,843 35,898 33,934
Sales for resale 1,790 1,056 63,349 46,283
Other 38 25 N/A N/A
------ ------ ------ ------
Total $3,783 $2,924 99,247 80,217
Electric operating revenues increased $859 million (29%) for the nine months
ended September 30, 1998, from the comparable period of 1997. This increase was
primarily due to increased volumes and a higher average price per kwh received
on sales for resale transactions. There was also an increase in the average
price per kwh paid for the corresponding purchases of purchased and exchanged
power described below. Also contributing to the increase were higher retail kwh
sales due to the warmer than normal weather during 1998, growth in the average
number of residential and commercial customers, and an increase in industrial
sales primarily reflecting growth in the primary metals and miscellaneous
manufacturers sectors.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Nine Months Ended
September 30 _
Revenue Mcf Sales
1998 1997 1998 1997
($ and mcf in millions)
Sales for resale $380 $ - 195 -
Retail 248 300 37 45
Transportation 28 24 42 40
Other 10 3 N/A N/A
---- ---- --- ---
Total $666 $327 274 85
Gas operating revenues increased $339 million for the nine months ended
September 30, 1998, when compared to the same period last year. This increase is
primarily due to the gas operating revenues of ProEnergy, which was acquired in
June 1998. This increase was partially offset by a decline in retail sales due
to lower mcf volumes reflecting, in part, the milder weather during the first
quarter of 1998, and a reduction in the average number of commercial and
industrial customers. Transportation revenues increased as customers continued
the trend of purchasing gas directly from suppliers, using transportation
services provided by CG&E.
Other Revenues
Other revenues for the nine months ended September 30, 1998, increased $22
million, over the same period of 1997. This increase was primarily the result of
increased sales and new initiatives by certain of Cinergy's non-regulated
entities.
<PAGE>
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Nine Months Ended
September 30
1998 1997
(in millions)
Fuel $ 542 $ 507
Purchased and exchanged power 1,777 964
------ ------
Total $2,319 $1,471
Electric fuel costs increased $35 million (7%) for the first nine months of
1998, as compared to the same period last year.
An analysis of these fuel costs is shown below:
Nine Months Ended
September 30
(in millions)
Fuel expense - September 30, 1997 $507
Increase (Decrease) due to change in:
Price of fuel (16)
Deferred fuel cost 12
Kwh generation 39
----
Fuel expense - September 30, 1998 $542
Purchased and exchanged power expense increased $813 million (84%) for the nine
months ended September 30, 1998, when compared to the same period last year,
primarily reflecting increased purchases of non-firm power for resale to others.
Also contributing to the increase was a higher average price paid per kwh and
increased demand due to the warmer than normal weather for the comparable period
of 1997.
Gas Purchased
Gas purchased for the nine months ended September 30, 1998, increased $343
million when compared to the same period last year, primarily due to the
acquisition of ProEnergy in June 1998, and its related gas purchased expense.
Slightly offsetting this increase is a decrease in the retail volumes of gas
purchased by CG&E, due to lower demand, and a lower average cost per mcf of gas
paid by CG&E.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Nine Months Ended
September 30
1998 1997
(in millions)
Other operation $629 $508
Maintenance 145 144
---- ----
Total $774 $652
<PAGE>
Other operation expenses increased $121 million (24%) for the nine months ended
September 30, 1998, as compared to the same period last year. This increase is
primarily due to the one-time charge of $80 million recorded during the second
quarter of 1998, reflecting the implementation of a 1989 settlement of a dispute
with the WVPA (see Note 14 of the "Notes to Financial Statements" in "Part I.
Financial Information"). This increase was also the result of increased growth
and new initiatives by certain of Cinergy's consolidated non-regulated
businesses.
Depreciation and Amortization
The components of depreciation and amortization expenses are shown below:
Nine Months Ended
September 30
1998 1997
(in millions)
Depreciation $221 $216
Amortization of phase-in deferrals 17 10
Amortization of post-in-service
deferred operating expenses 3 3
---- ----
Total $241 $229
Amortization of phase-in deferrals reflects the PUCO ordered phase-in plan for
Zimmer.
Equity in Earnings of Unconsolidated Subsidiaries
For the nine months ended September 30, 1998, the equity in earnings of
unconsolidated subsidiaries decreased $9 million (22%), as compared to the same
period of last year. This decrease is primarily attributable to the decline in
the earnings of Midlands, which is due to milder weather conditions and a
penalty imposed on each electric distribution company due to the delay in
opening the electricity supply business to competition.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $15 million for the nine
months ended September 30, 1998, as compared to the same period of 1997, is due
primarily to a litigation settlement (see Note 10 of the "Notes to Financial
Statements" in "Part I. Financial Information") and a gain recorded in 1997 on
the sale of a PSI investment.
Income Taxes
Income taxes decreased $70 million (48%) for the nine months ended September 30,
1998, as compared to the same period of 1997, primarily due to a decrease in
taxable income over the prior period. Also contributing to the decrease is
Cinergy's recognition of Foreign Tax Credits in the third quarter of 1998.
Previous projections indicated that these Foreign Tax Credits would expire
unused and therefore previous Federal tax provisions had not given benefit to
these Foreign Tax Credits.
Preferred Dividend Requirements of Subsidiaries
The decrease in preferred dividend requirements of subsidiaries of $4 million
(46%)for the nine months ended September 30, 1998, as compared to the same
period of 1997, is primarily attributable to PSI's redemption of all outstanding
shares of its 7.15% Series Cumulative Preferred Stock and 7.44% Series
Cumulative Preferred Stock on September 1, 1997, and March 1, 1998,
respectively.
<PAGE>
RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1998
Operating Revenues
Electric Operating Revenues
The components of electric operating revenues and the related kwh sales are
shown below:
Twelve Months Ended
September 30
Revenue Kwh Sales
1998 1997 1998 1997
------ ------ ------- -------
($ and kwh in millions)
Retail $2,566 $2,445 47,264 44,905
Sales for resale 2,103 1,152 74,546 48,525
Other 52 35 N/A N/A
------ ------ ------- ------
Total $4,721 $3,632 121,810 93,430
Electric operating revenues increased $1.1 billion (30%) for the twelve months
ended September 30, 1998, from the comparable period of 1997. This increase was
primarily due to increased volumes and a higher average price per kwh received
on sales for resale transactions. There was also an increase in the average
price per kwh paid for the corresponding purchases of purchased and exchanged
power described below. Also contributing to the increase were higher retail kwh
sales due to the warmer than normal weather during 1998, growth in the average
number of residential and commercial customers, and an increase in industrial
sales primarily reflecting growth in the primary metals, transportation
equipment, and miscellaneous manufacturers sectors.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Twelve Months Ended
September 30
Revenue Mcf Sales
1998 1997 1998 1997
---- ---- ---- -----
($ and mcf in millions)
Sales for resale $380 $ - 195 -
Retail 402 458 61 70
Transportation 37 30 56 52
Other 11 7 N/A N/A
---- ---- --- ---
Total $830 $495 312 122
Gas operating revenues increased $335 million (68%) for the twelve months ended
September 30, 1998, when compared to the same period last year. This increase is
primarily due to the gas operating revenues of ProEnergy, which was acquired in
June 1998. This increase was partially offset by a decline in retail revenues
reflecting reduced mcf volumes due, in part, to the milder weather during the
first quarter of 1998, and a decline in the average number of commercial and
industrial customers. Transportation revenues increased as customers continued
the trend of purchasing gas directly from suppliers, using transportation
services provided by CG&E.
<PAGE>
Other Revenues
Other revenues for the twelve months ended September 30, 1998, increased $25
million (80%), over the same period of 1997. This increase was primarily the
result of increased sales and new initiatives by certain of Cinergy's
non-regulated entities.
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Twelve Months Ended
September 30
1998 1997
(in millions)
Fuel $ 728 $ 681
Purchased and exchanged power 2,033 1,027
------ ------
Total $2,761 $1,708
Electric fuel costs increased $47 million (7%) for the twelve months ended
September 30, 1998, as compared to the same period last year.
An analysis of these fuel costs is shown below:
Twelve Months Ended
September 30
(in millions)
Fuel expense - September 30, 1997 $681
Increase (Decrease) due to change in:
Price of fuel (11)
Deferred fuel cost (4)
Kwh generation 62
----
Fuel expense - September 30, 1998 $728
Purchased and exchanged power expense increased $1.1 billion (62%) for the
twelve months ended September 30, 1998, when compared to the same period of last
year, primarily reflecting increased purchases of non-firm power for resale to
others. Also contributing to the increase was a higher average price paid per
kwh and increased demand due to the warmer than normal weather for the
comparable period of 1997.
Gas Purchased
Gas purchased for the twelve months ended September 30, 1998, increased $335
million when compared to the same period last year, primarily due to the
acquisition of ProEnergy in June 1998, and its related gas purchased expense.
Slightly offsetting this increase is a decrease in the volumes of gas purchased
by CG&E, due to lower demand, and a lower average cost per mcf of gas paid by
CG&E.
<PAGE>
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Twelve Months Ended
September 30
1998 1997
(in millions)
Other operation $809 $704
Maintenance 182 196
---- ----
Total $991 $900
Other operation expenses increased $105 million (15%) for the twelve months
ended September 30, 1998, as compared to the same period last year. This
increase is primarily due to the one-time charge of $80 million recorded during
the second quarter of 1998, reflecting the implementation of a 1989 settlement
of a dispute with the WVPA (see Note 14 of the "Notes to Financial Statements"
in "Part I. Financial Information"). This increase was also the result of
increased growth and new initiatives by certain of Cinergy's consolidated
non-regulated businesses.
Maintenance expenses decreased $14 million (7%) for the twelve months ended
September 30, 1998, as compared to the same period of 1997, primarily due to
decreased outage related expenses at PSI's and CG&E's production facilities.
Equity in Earnings of Unconsolidated Subsidiaries
For the twelve months ended September 30, 1998, the equity in earnings of
unconsolidated subsidiaries decreased $7 million (11%), as compared to the same
period of last year. This decrease is partially due to a decline in the earnings
of Midlands, which is due to milder weather conditions and a penalty imposed on
each electric distribution company due to the delay in opening the electricity
supply business to competition. The decrease also reflects losses on certain
non-utility subsidiaries.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $9 million for the twelve
months ended September 30, 1998, as compared to the same period of 1997, is due,
in part, to a litigation settlement (see Note 10 of the "Notes to Financial
Statements" in "Part I. Financial Information").
Income Taxes
Income taxes decreased $41 million (22%) for the twelve months ended September
30, 1998, as compared to the same period of 1997, primarily due to a decrease in
taxable income over the prior period. Also contributing to the decrease is
Cinergy's recognition of Foreign Tax Credits in the third quarter of 1998.
Previous projections indicated that these Foreign Tax Credits would expire
unused and therefore previous Federal tax provisions had not given benefit to
these Foreign Tax Credits.
Preferred Dividend Requirements of Subsidiaries
The decrease in preferred dividend requirements of subsidiaries of $5 million
(37%) for the twelve months ended September 30, 1998, as compared to the same
period of 1997, is primarily attributable to PSI's redemption of all outstanding
shares of its 7.15% Series Cumulative Preferred Stock and 7.44% Series
Cumulative Preferred Stock on September 1, 1997, and March 1, 1998,
respectively.
<PAGE>
THE CINCINNATI GAS &
ELECTRIC COMPANY
AND SUBSIDIARY COMPANIES
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
September 30 December 31
1998 1997
(unaudited)
(dollars in thousands)
Current Assets
Cash and temporary cash investments $ 6,321 $ 2,349
Restricted deposits 1,173 1,173
Notes receivable from affiliated companies 148,494 27,193
Accounts receivable less accumulated provision
for doubtful accounts of $14,855 at September
30, 1998, and $9,199 at December 31, 1997 336,489 193,549
Accounts receivable from affiliated companies 6,553 35,507
Materials, supplies, and fuel - at average cost 106,846 107,967
Prepayments and other 36,543 31,827
---------- ----------
642,419 399,565
Utility Plant - Original Cost
In service
Electric 4,747,890 4,700,631
Gas 772,006 746,903
Common 185,896 186,078
---------- ----------
5,705,792 5,633,612
Accumulated depreciation 2,116,313 2,008,005
---------- ----------
3,589,479 3,625,607
Construction work in progress 151,226 118,133
---------- ----------
Total utility plant 3,740,705 3,743,740
Other Assets
Regulatory assets 678,344 667,765
Other 92,517 103,368
---------- ----------
770,861 771,133
$5,153,985 $4,914,438
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C>
September 30 December 31
1998 1997
(unaudited)
(dollars in thousands)
Current Liabilities
Accounts payable $ 415,171 $ 249,538
Accounts payable to affiliated companies 19,243 10,821
Accrued taxes 168,019 149,129
Accrued interest 29,362 25,430
Notes payable and other short-term obligations 230,276 289,000
Notes payable to affiliated companies 8,747 12,253
Long-term debt due within one year 130,000 -
Other 25,780 29,950
---------- ----------
1,026,598 766,121
Non-Current Liabilities
Long-term debt 1,199,633 1,324,432
Deferred income taxes 824,741 794,396
Unamortized investment tax credits 112,328 116,966
Accrued pension and other postretirement
benefit costs 142,810 180,566
Other 186,389 100,576
---------- ----------
2,465,901 2,516,936
Total liabilities 3,492,499 3,283,057
Cumulative Preferred Stock
Not subject to mandatory redemption 20,725 20,793
Common Stock Equity
Common stock - $8.50 par value; authorized
shares - 120,000,000; outstanding shares
- 89,663,086 at September 30, 1998, and
December 31, 1997 762,136 762,136
Paid-in capital 534,672 534,649
Retained earnings 344,858 314,553
Accumulated other comprehensive loss (905) (750)
---------- ----------
Total common stock equity 1,640,761 1,610,588
$5,153,985 $4,914,438
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
Quarter Ended Year to Date
September 30 September 30
1998 1997 1998 1997
(in thousands)
Operating Revenues
<S> <C> <C> <C> <C>
Electric $827,387 $672,372 $1,960,334 $1,485,974
Gas 56,505 39,944 280,437 326,969
-------- -------- ---------- ----------
883,892 712,316 2,240,771 1,812,943
Operating Expenses
Fuel and purchased and exchanged
power 518,393 387,363 1,162,004 687,368
Gas purchased 21,539 15,601 139,784 175,395
Other operation and maintenance 96,193 96,851 302,764 307,316
Depreciation and amortization 47,267 45,028 142,877 134,696
Taxes other than income taxes 54,089 52,980 162,484 159,001
-------- -------- ---------- ----------
737,481 597,823 1,909,913 1,463,776
Operating Income 146,411 114,493 330,858 349,167
Other Income and (Expenses) - Net 511 (1,832) (2,349) (6,658)
Interest 25,072 27,633 77,034 87,627
-------- -------- ---------- ----------
Income Before Taxes 121,850 85,028 251,475 254,882
Income Taxes 43,178 32,724 88,925 96,825
-------- -------- ---------- ----------
Net Income $ 78,672 $ 52,304 $ 162,550 $ 158,057
Preferred Dividend Requirement 214 217 644 653
-------- -------- ---------- ----------
Net Income Applicable to Common
Stock $ 78,458 $ 52,087 $ 161,906 $ 157,404
Other Comprehensive Income (Loss),
Net of Tax - - (155) -
-------- -------- ---------- ----------
Comprehensive Income $ 78,458 $ 52,087 $ 161,751 $ 157,404
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE CINCINNATI GAS & ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
September 30
1998 1997
(in thousands)
Operating Activities
<S> <C> <C>
Net income $ 162,550 $ 158,057
Items providing (using) cash currently:
Depreciation and amortization 142,877 134,696
Deferred income taxes and investment tax
credits - net (11,592) 18,238
Allowance for equity funds used during
construction (770) (154)
Regulatory assets - net 23,716 15,147
Changes in current assets and current
liabilities
Restricted deposits - (2)
Accounts and notes receivable, net of
reserves on receivables sold (232,865) (42,472)
Materials, supplies, and fuel 1,121 415
Accounts payable 174,055 85,545
Accrued taxes and interest 22,822 (7,135)
Other items - net 38,295 (12,251)
--------- ---------
Net cash provided by operating
activities 320,209 350,084
Financing Activities
Retirement of preferred stock (45) (158)
Issuance of long-term debt 223,020 -
Redemption of long-term debt (220,409) (290,612)
Change in short-term debt (62,230) 178,844
Dividends on preferred stock (645) (655)
Dividends on common stock (132,245) (127,800)
--------- ---------
Net cash used in financing
activities (192,554) (240,381)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (123,683) (106,612)
Net cash used in investing
activities (123,683) (106,612)
Net increase in cash and temporary cash
investments 3,972 3,091
Cash and temporary cash investments at
beginning of period 2,349 5,120
--------- ---------
Cash and temporary cash investments at
end of period $ 6,321 $ 8,211
<FN>
The accompanying notes as they relate to The Cincinnati Gas & Electric Company
are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
THE CINCINNATI GAS & ELECTRIC COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1998
Operating Revenues
Electric Operating Revenues
The components of electric operating revenues and the related kwh sales are
shown below:
Quarter Ended
September 30
Revenue Kwh Sales
1998 1997 1998 1997
($ and kwh in millions)
Retail $397 $372 6,423 6,025
Sales for resale 425 298 12,209 13,913
Other 5 2 N/A N/A
---- ---- ------ ------
Total $827 $672 18,632 19,938
Electric operating revenues increased $155 million (23%) for the quarter ended
September 30, 1998, from the comparable period of 1997. This increase was
primarily a result of a higher average price per kwh received on sales for
resale transactions. There was also an increase in the average price per kwh
paid for the corresponding purchases of purchased and exchanged power described
below. Also contributing to the increase was higher retail kwh sales due to the
warmer than normal weather during 1998 and growth in the average number of
residential and commercial customers.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Quarter Ended
September 30
Revenue Mcf Sales
1998 1997 1998 1997
($ and mcf in millions)
Retail $48 $33 6 4
Transportation 8 6 11 12
Other 1 1 N/A N/A
--- --- --- ---
Total $57 $40 17 16
Gas operating revenues increased $17 million (41%) in the third quarter of 1998,
when compared to the same period last year, primarily attributable to the annual
true-up of estimated revenues.
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Quarter Ended
September 30
1998 1997
(in millions)
Fuel $ 93 $ 89
Purchased and exchanged power 425 298
---- ----
Total $518 $387
<PAGE>
Electric fuel costs increased $4 million (4%) for the quarter ended September
30, 1998, as compared to the same period last year.
An analysis of these fuel costs is shown below:
Quarter Ended
September 30
(in millions)
Fuel expense - September 30, 1997 $89
Increase (Decrease) due to change in:
Deferred fuel cost (2)
Kwh generation 6
Fuel expense - September 30, 1998 $93
Purchased and exchanged power expense increased $127 million for the quarter
ended September 30, 1998, when compared to the same period of last year,
primarily reflecting an increase in the average price paid per kwh.
Gas Purchased
Gas purchased for the quarter ended September 30, 1998, increased $6 million
(38%), when compared to the same period last year, primarily due to an increase
in the average cost per mcf of gas purchased.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
September 30
1998 1997
(in millions)
Other operation $73 $76
Maintenance 23 21
--- ---
Total $96 $97
Maintenance expenses increased $2 million (10%) for the quarter ended September
30, 1998, as compared to the same period of 1997, primarily due to an increase
in production maintenance at Beckjord and East Bend.
Depreciation and Amortization
The components of depreciation and amortization expenses are shown below:
Quarter Ended
September 30
1998 1997
(in millions)
Depreciation $41 $41
Amortization of phase-in deferrals 5 3
Amortization of post-in-service
deferred operating expenses 1 1
--- ---
Total $47 $45
Amortization of phase-in deferrals reflects the PUCO ordered phase-in plan for
Zimmer.
<PAGE>
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $2 million for the quarter
ended September 30, 1998, as compared to the same period of 1997, is due
primarily to an increase in interest income resulting from an increase in the
balance of short-term loans to affiliated companies through Cinergy's money pool
arrangement.
Interest
The components of interest expense are shown below:
Quarter Ended
September 30
1998 1997
(in thousands)
Interest on long-term debt $25,445 $25,973
Other interest 942 3,001
Allowance for borrowed funds used
during construction (1,315) (1,341)
------- -------
Total $25,072 $27,633
The decrease in interest expense of $3 million (9%) for the quarter ended
September 30, 1998, as compared to the same period last year, was primarily due
to a reduction in other interest expense resulting from decreases in both the
average short-term debt borrowings and the short-term debt rates.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Operating Revenues
Electric Operating Revenues
The components of electric operating revenues and the related kwh sales are
shown below:
Nine Months Ended
September 30
Revenue Kwh Sales
1998 1997 1998 1997
------ ------ ------ -------
($ and kwh in millions)
Retail $1,075 $ 994 17,357 16,575
Sales for resale 873 484 30,825 23,006
Other 12 8 N/A N/A
------ ------ ------ ------
Total $1,960 $1,486 48,182 39,581
Electric operating revenues increased $474 million (32%) for the nine months
ended September 30, 1998, from the comparable period of 1997. This increase was
primarily due to a higher average price per kwh received and increased volumes
on sales for resale transactions. There was also an increase in the average
price per kwh paid for the corresponding purchases of purchased and exchanged
power described below. Also contributing to the increase were higher retail kwh
sales due to the warmer than normal weather and growth in the average number of
residential and commercial customers.
<PAGE>
as Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Nine Months Ended
September 30
Revenue Mcf Sales
------------------- --------------------
1998 1997 1998 1997
---- ---- ---- -----
($ and mcf in millions)
Retail $248 $300 37 45
Transportation 28 24 42 40
Other 4 3 N/A N/A
---- ---- --- ---
Total $280 $327 79 85
Gas operating revenues decreased $47 million (14%) for the nine months ended
September 30, 1998, when compared to the same period last year. Decreased retail
revenues reflecting a decline in mcf sales due to the milder weather during the
first quarter of 1998 was the primary reason for this decrease. A decrease in
the average number of commercial and industrial customers also contributed to
the decline in revenues. Partially offsetting the decline was an increase in
transportation revenues, as customers continued the trend of purchasing gas
directly from suppliers, using transportation services provided by CG&E.
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Nine Months Ended
September 30
1998 1997
(in millions)
Fuel $ 258 $219
Purchased and exchanged power 904 468
------ ----
Total $1,162 $687
Electric fuel costs increased $39 million (18%) for the nine months ended
September 30, 1998, as compared to the same period last year.
An analysis of these fuel costs is shown below:
Nine Months Ended
September 30
(in millions)
Fuel expense - September 30, 1997 $219
Increase (Decrease) due to change in:
Price of fuel (1)
Deferred fuel cost 33
Kwh generation 7
----
Fuel expense - September 30, 1998 $258
Purchased and exchanged power expense increased $436 million (93%) for the nine
months ended September 30, 1998, when compared to the same period last year,
primarily reflecting a higher average price paid per kwh and increased purchases
of power for resale to others.
<PAGE>
Gas Purchased
Gas purchased for the nine months ended September 30, 1998, decreased $36
million (20%) when compared to the same period last year, reflecting a decrease
in the volumes of gas purchased, due to lower demand, and a lower average cost
per mcf of gas purchased.
Depreciation and Amortization
The components of depreciation and amortization expenses are shown below:
Nine Months Ended
September 30
1998 1997
(in millions)
Depreciation $123 $122
Amortization of phase-in deferrals 17 10
Amortization of post-in-service
deferred operating expenses 3 3
---- ----
Total $143 $135
Amortization of phase-in deferrals reflects the PUCO ordered phase-in plan for
Zimmer.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $4 million for the nine
months ended September 30, 1998, as compared to the same period of 1997, is
largely due to an increase in interest income resulting from an increase in the
balance of short-term loans to affiliated companies through Cinergy's money pool
arrangement and an adjustment recorded in 1997 related to the sale of certain
assets.
Interest
The components of interest expense are shown below:
Nine Months Ended
September 30
1998 1997
(in thousands)
Interest on long-term debt $75,913 $83,850
Other interest 5,312 7,259
Allowance for borrowed funds used
during construction (4,191) (3,482)
------- -------
Total $77,034 $87,627
The decrease in interest expense of $11 million (12%) for the nine months ended
September 30, 1998, as compared to the same period last year, was due to
decreases in both interest on long-term debt and other interest expense. The
decrease in interest expense on long-term debt was primarily due to a net
redemption of approximately $116 million of long-term debt during the period
from March 1997 through May 1998. The decrease in other interest is due to a
reduction in average short-term borrowings.
<PAGE>
PSI ENERGY, INC.
AND SUBSIDIARY COMPANY
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30 December 31
1998 1997
(unaudited)
(dollars in thousands)
Current Assets
<S> <C> <C>
Cash and temporary cash investments $ 30,488 $ 18,169
Restricted deposits 359 1,146
Notes receivable 79 110
Notes receivable from affiliated companies 8,752 21,998
Accounts receivable less accumulated provision
for doubtful accounts of $5,760 at September
30, 1998, and $1,183 at December 31, 1997 370,260 197,898
Accounts receivable from affiliated companies 302 4,516
Materials, supplies, and fuel - at average cost 74,732 55,189
Prepayments and other 13,962 4,405
---------- ----------
Total current assets 498,934 303,431
Electric Utility Plant - Original Cost
In service 4,354,315 4,280,551
Accumulated depreciation 1,866,373 1,792,317
---------- ----------
2,487,942 2,488,234
Construction work in progress 75,135 65,129
---------- ----------
Total electric utility plant 2,563,077 2,553,363
Other Assets
Regulatory assets 355,307 409,086
Other 119,713 127,945
---------- ----------
Total other assets 475,020 537,031
$3,537,031 $3,393,825
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
LIABILITIES AND SHAREHOLDER'S EQUITY
September 30 December 31
1998 1997
(unaudited)
(dollars in thousands)
Current Liabilities
<S> <C> <C>
Accounts payable $ 368,606 $ 212,833
Accounts payable to affiliated companies 20,757 40,714
Accrued taxes 68,492 69,310
Accrued interest 19,938 21,369
Notes payable and other short-term obligations 117,084 190,600
Notes payable to affiliated companies 163,897 16,435
Long-term debt due within one year 56,000 85,000
Other 2,385 2,560
---------- ----------
817,159 638,821
Non-Current Liabilities
Long-term debt 976,623 826,470
Deferred income taxes 371,490 403,535
Unamortized investment tax credits 46,702 49,296
Accrued pension and other postretirement
benefit costs 109,626 116,576
Other 164,616 176,271
---------- ----------
1,669,057 1,572,148
Total liabilities 2,486,216 2,210,969
Cumulative Preferred Stock
Not subject to mandatory redemption 71,923 157,196
Common Stock Equity
Common stock - without par value; $0.01
stated value; authorized shares - 60,000,000;
outstanding shares - 53,913,701 at September
30, 1998, and December 31, 1997 539 539
Paid-in capital 400,916 390,188
Retained earnings 578,079 636,519
Accumulated other comprehensive loss (642) (1,586)
---------- ----------
Total common stock equity 978,892 1,025,660
$3,537,031 $3,393,825
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
Quarter Ended Year to Date
September 30 September 30
1998 1997 1998 1997
(in thousands)
Operating Revenues
<S> <C> <C> <C> <C>
Electric $807,181 $650,987 $1,910,836 $1,464,380
Operating Expenses
Fuel and purchased and exchanged
power 584,415 425,228 1,242,253 810,032
Other operation and maintenance 110,051 102,742 400,431 310,291
Depreciation and amortization 32,688 31,820 97,433 94,800
Taxes other than income taxes 14,882 14,011 44,356 44,191
-------- -------- ---------- ----------
742,036 573,801 1,784,473 1,259,314
Operating Income 65,145 77,186 126,363 205,066
Other Income and (Expenses) - Net (315) 6,512 1,616 9,390
Interest 21,975 21,369 67,771 63,321
-------- -------- ---------- ----------
Income Before Taxes 42,855 62,329 60,208 151,135
Income Taxes 16,063 21,839 21,106 55,459
-------- -------- ---------- ----------
Net Income $ 26,792 $ 40,490 $ 39,102 $ 95,676
Preferred Dividend Requirement 1,151 2,925 4,509 8,964
-------- -------- ---------- ----------
Net Income Applicable to
Common Stock $ 25,641 $ 37,565 $ 34,593 $ 86,712
Other Comprehensive Income,
Net of Tax - - 944 -
-------- -------- ---------- -----------
Comprehensive Income $ 25,641 $ 37,565 $ 35,537 $ 86,712
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PSI ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
September 30
1998 1997
(in thousands)
Operating Activities
<S> <C> <C>
Net income $ 39,102 $ 95,676
Items providing (using) cash currently:
Depreciation and amortization 97,433 94,800
WVPA settlement 80,000 -
Deferred income taxes and investment tax
credits - net (44,433) (13,548)
Allowance for equity funds used during
construction (23) (35)
Regulatory assets - net 33,406 25,208
Changes in current assets and current
liabilities
Restricted deposits 787 (227)
Accounts and notes receivable, net of
reserves on receivables sold (158,099) (173,862)
Materials, supplies, and fuel (19,543) 9,456
Accounts payable 135,816 99,810
Accrued taxes and interest (2,249) 15,785
Other items - net 12,994 (7,768)
--------- ---------
Net cash provided by operating
activities 175,191 145,295
Financing Activities
Issuance of long-term debt 150,021 -
Retirement of preferred stock (85,247) (16 024)
Redemption of long-term debt (113,336) (45,700)
Change in short-term debt 73,946 125,430
Dividends on preferred stock (5,037) (9,059)
Dividends on common stock (81,800) (85,200)
--------- ---------
Net cash used in financing activities (61,453) (30,553)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (101,419) (96,423)
Net cash used in investing activities (101,419) (96,423)
Net increase in cash and temporary cash
investments 12,319 18,319
Cash and temporary cash investments at
beginning of period 18,169 2,911
--------- ---------
Cash and temporary cash investments at
end of period $ 30,488 $ 21,230
<FN>
The accompanying notes as they relate to PSI Energy, Inc. are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
PSI ENERGY, INC.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1998
Operating Revenues
The components of operating revenues and the related kwh sales are shown below:
Quarter Ended
September 30
Revenue Kwh Sales
1998 1997 1998 1997
---- ---- ------ -------
($ and kwh in millions)
Retail $315 $299 6,590 6,074
Sales for resale 481 345 13,980 13,321
Other 11 7 N/A N/A
---- ---- ------ ------
Total $807 $651 20,570 19,395
Operating revenues increased $156 million (24%) for the quarter ended September
30, 1998, from the comparable period of 1997. This increase was primarily a
result of a higher average price per kwh received and increased volumes on sales
for resale transactions. There was also an increase in the average price per kwh
paid for the corresponding purchases of purchased and exchanged power described
below. Also contributing to the increase were higher retail kwh sales due to the
warmer than normal weather during 1998 and growth in the average number of
residential and commercial customers.
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Quarter Ended
September 30
1998 1997
(in millions)
Fuel $113 $109
Purchased and exchanged power 471 316
---- ----
Total $584 $425
Fuel costs increased $4 million (4%) for the third quarter of 1998, as compared
to the same period last year.
An analysis of fuel costs is shown below:
Quarter Ended
September 30
(in millions)
Fuel expense - September 30, 1997 $109
Increase (Decrease) due to change in:
Price of fuel (6)
Deferred fuel cost (2)
Kwh generation 12
----
Fuel expense - September 30, 1998 $113
<PAGE>
Purchased and exchanged power expense increased $155 million (49%) for the
quarter ended September 30, 1998, when compared to the same period last year,
primarily reflecting an increase in the average price paid per kwh and increased
demand due to the warmer than normal weather for the third quarter of 1998.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
September 30
1998 1997
(in millions)
Other operation $ 83 $ 81
Maintenance 27 22
---- ----
Total $110 $103
Maintenance expense increased $5 million (23%) for the quarter ended September
30, 1998, as compared to the same period of 1997, primarily due to an increase
in production maintenance at Wabash River, Cayuga, and Gibson, and an increase
in distribution line maintenance.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $7 million for the quarter
ended September 30, 1998, as compared to the same period of 1997, is primarily
attributable to a gain recorded in 1997 on the sale of an investment.
Preferred Dividend Requirement
The decrease in preferred dividend requirement of $2 million (61%) for the
quarter ended September 30, 1998, as compared to the same period of 1997, is
primarily attributable to PSI's redemption of all outstanding shares of its
7.15% Series Cumulative Preferred Stock and 7.44% Series Cumulative Preferred
Stock on September 1, 1997, and March 1, 1998, respectively.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Operating Revenues
The components of operating revenues and the related kwh sales are shown below:
Nine Months Ended
September 30
Revenue Kwh Sales
1998 1997 1998 1997
------ ------ ------ -------
($ and kwh in millions)
Retail $ 880 $ 849 18,541 17,358
Sales for resale 1,003 599 35,789 24,893
Other 28 16 N/A N/A
------ ------ ------ ------
Total $1,911 $1,464 54,330 42,251
Total operating revenues increased $446 million (30%) for the nine months ended
September 30, 1998, when compared to the same period last year. This increase
was primarily due to increased volumes and a higher average price per kwh
received on sales for resale transactions. There was also an increase in the
average price per kwh paid for the corresponding purchases of purchased and
<PAGE>
exchanged power described below. Also contributing to the increase were higher
retail kwh sales due to the warmer than normal weather during 1998, and an
increase in industrial sales, primarily reflecting growth in the primary metals
and transportation equipment sectors.
Operating Expenses
Fuel and Purchased and Exchanged Power
The components of fuel and purchased and exchanged power are shown below:
Nine Months Ended
September 30
1998 1997
(in millions)
Fuel $ 284 $288
Purchased and exchanged power 958 522
------ ----
Total $1,242 $810
Fuel costs decreased $4 million (1%) for the nine months ended September 30,
1998, when compared to the same period last year.
An analysis of fuel costs is shown below:
Nine Months Ended
September 30
(in millions)
Fuel expense - September 30, 1997 $288
Increase (Decrease) due to change in:
Price of fuel (15)
Deferred fuel cost (21)
Kwh generation 32
----
Fuel expense - September 30, 1998 $284
Purchased and exchanged power expense increased $436 million (84%) for the nine
months ended September 30, 1998, when compared to the same period last year,
primarily reflecting increased purchases of non-firm power for resale to others.
Also contributing to the increase were a higher average price paid per kwh and
increased demand due to warmer than normal weather for the comparable period of
1997.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Nine Months Ended
September 30
1998 1997
(in millions)
Other operation $326 $243
Maintenance 74 67
---- ----
Total $400 $310
Other operation expenses increased $83 million (34%) for the nine months ended
September 30, 1998, as compared to the same period last year. This increase is
primarily due to the one-time charge of $80 million recorded during the second
quarter of 1998, reflecting the implementation of a 1989 settlement of a dispute
with the WVPA (see Note 14 of the "Notes to Financial Statements" in "Part I.
Financial Information").
<PAGE>
Maintenance expenses increased $7 million (10%) for the nine months ended
September 30, 1998, as compared to the same period of 1997, primarily due to an
increase in production maintenance at Wabash River, Cayuga, and Gibson, and an
increase in distribution line maintenance.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $8 million for the nine
months ended September 30, 1998, as compared to the same period of 1997, is due
primarily to a gain recorded in 1997 on the sale of an investment and DSM
carrying costs also recorded in 1997.
Interest
The components of interest expense are shown below:
Nine Months Ended
September 30
1998 1997
(in thousands)
Interest on long-term debt $60,459 $53,928
Other interest 8,976 10,630
Allowance for borrowed funds used
during construction (1,664) (1,237)
------- -------
Total $67,771 $63,321
The increase in interest expense of $4 million (7%) for the nine months ended
September 30, 1998, as compared to the same period last year, was due to an
increase of $7 million in interest on long-term debt, which was partially offset
by a decrease of $2 million in other interest expense. The increase in interest
on long-term debt was due primarily to the net issuance of approximately $303
million of long-term debt during the period from February 1997 to August 1998.
The decrease in other interest expense was primarily due to a reduction in
average short-term borrowings.
Preferred Dividend Requirement
The decrease in preferred dividend requirement of $4 million (50%) for the nine
months ended September 30, 1998, as compared to the same period of 1997, is
primarily attributable to PSI's redemption of all outstanding shares of its
7.15% Series Cumulative Preferred Stock and 7.44% Series Cumulative Preferred
Stock on September 1, 1997, and March 1, 1998, respectively.
<PAGE>
THE UNION LIGHT, HEAT
AND POWER COMPANY
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
BALANCE SHEETS
ASSETS
September 30 December 31
1998 1997
(unaudited)
(dollars in thousands)
Current Assets
<S> <C> <C>
Cash and temporary cash investments $ 2,802 $ 546
Accounts receivable less accumulated provision
for doubtful accounts of $1,015 at
September 30, 1998, and $996 at December
31, 1997 6,105 7,308
Accounts receivable from affiliated companies 10 446
Materials, supplies, and fuel - at average cost 9,674 6,094
Prepayments and other 462 385
-------- --------
Total current assets 19,053 14,779
Utility Plant - Original Cost
In service
Electric 209,763 204,111
Gas 162,354 155,167
Common 19,075 19,073
-------- --------
391,192 378,351
Accumulated depreciation 141,642 133,213
-------- --------
249,550 245,138
Construction work in progress 25,369 14,346
-------- --------
Total utility plant 274,919 259,484
Other Assets
Regulatory assets 11,063 11,065
Other 3,844 6,262
-------- --------
14,907 17,327
$308,879 $291,590
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
LIABILITIES AND SHAREHOLDER'S EQUITY
September 30 December 31
1998 1997
(unaudited)
(dollars in thousands)
Current Liabilities
<S> <C> <C>
Accounts payable $ 4,689 $ 11,097
Accounts payable to affiliated companies 19,128 19,712
Accrued taxes 1,837 6,332
Accrued interest 1,674 1,286
Notes payable to affiliated companies 39,744 23,487
Long-term debt due within one year 20,000 -
Other 4,021 4,364
-------- --------
91,093 66,278
Non-Current Liabilities
Long-term debt 34,534 44,671
Deferred income taxes 27,741 26,211
Unamortized investment tax credits 4,307 4,516
Accrued pension and other postretirement
benefit costs 11,434 14,044
Amounts due to customers - income taxes 7,760 6,566
Other 7,447 6,391
-------- --------
93,223 102,399
Total liabilities 184,316 168,677
Common Stock Equity
Common stock - $15.00 par value; authorized
shares - 1,000,000; outstanding shares -
585,333 at September 30, 1998, and
December 31, 1997 8,780 8,780
Paid-in capital 18,683 18,683
Retained earnings 97,100 95,450
-------- --------
Total common stock equity 124,563 122,913
$308,879 $291,590
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF INCOME
(unaudited)
Quarter Ended Year to Date
September 30 September 30
1998 1997 1998 1997
(in thousands)
Operating Revenues
<S> <C> <C> <C> <C>
Electric $56,368 $56,666 $144,903 $152,560
Gas 7,077 8,647 44,183 53,625
------- ------- -------- --------
63,445 65,313 189,086 206,185
Operating Expenses
Electricity purchased from parent
company for resale 41,827 44,237 110,338 113,992
Gas purchased 2,691 3,002 23,211 30,006
Other operation and maintenance 8,987 9,402 27,319 29,198
Depreciation 3,296 3,048 9,737 9,229
Taxes other than income taxes 1,024 905 3,058 3,119
------- ------- -------- --------
57,825 60,594 173,663 185,544
Operating Income 5,620 4,719 15,423 20,641
Other Income and (Expenses) - Net (175) (596) (1,051) (1,534)
Interest 1,244 1,153 3,328 3,512
------- ------- -------- --------
Income Before Taxes 4,201 2,970 11,044 15,595
Income Taxes 1,696 731 4,418 6,078
------- ------- -------- --------
Net Income $ 2,505 $ 2,239 $ 6,626 $ 9,517
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE UNION LIGHT, HEAT AND POWER COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
Year to Date
September 30
1998 1997
(in thousands)
Operating Activities
<S> <C> <C>
Net income $ 6,626 $ 9,517
Items providing (using) cash currently:
Depreciation 9,737 9,229
Deferred income taxes and investment tax
credits - net 1,763 (322)
Allowance for equity funds used during
construction (150) (33)
Regulatory assets (31) (312)
Changes in current assets and current
liabilities
Accounts and notes receivable, net of
reserves on receivables sold 3,515 7,687
Materials, supplies, and fuel (3,580) (354)
Accounts payable (6,992) (9,819)
Accrued taxes and interest (4,107) 6,504
Other items - net (330) 5,267
-------- --------
Net cash provided by operating
activities 6,451 27,364
Financing Activities
Issuance of long-term debt 20,127 -
Redemption of long-term debt (10,118) -
Change in short-term debt 16,257 (5,988)
Dividends on common stock (4,975) (4,975)
-------- --------
Net cash provided by (used in)
financing activities 21,291 (10,963)
Investing Activities
Construction expenditures (less allowance
for equity funds used during construction) (25,486) (14,808)
Net cash used in investing
activities (25,486) (14,808)
Net increase in cash and temporary cash
investments 2,256 1,593
Cash and temporary cash investments at
beginning of period 546 1,197
-------- --------
Cash and temporary cash investments at
end of period $ 2,802 $ 2,790
<FN>
The accompanying notes as they relate to The Union Light, Heat and Power Company
are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
THE UNION LIGHT, HEAT AND POWER COMPANY
RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1998
Operating Revenues
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Quarter Ended
September 30
Revenue Mcf Sales
1998 1997 1998 1997
------ ------ ----- -----
($ and mcf in thousands)
Retail $6,133 $7,837 764 934
Transportation 819 682 779 854
Other 125 128 14 25
------ ------ ----- -----
Total $7,077 $8,647 1,557 1,813
Gas operating revenues decreased $2 million (18%) in the third quarter of 1998,
when compared to the same period last year, primarily due to a decrease in mcf
volumes sold.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased decreased $2 million (5%) for the quarter ended September
30, 1998, as compared to the same period last year. This decrease reflects lower
volumes purchased from CG&E.
Gas Purchased
Gas purchased for the quarter ended September 30, 1998, decreased $.3 million
(10%), when compared to the same period last year, primarily due to a decrease
in the volumes of gas purchased, due to lower demand.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Quarter Ended
September 30
1998 1997
(in thousands)
Other operation $7,514 $7,967
Maintenance 1,473 1,435
------ -------
Total $8,987 $9,402
Other operation expenses decreased $.4 million (6%) for the quarter ended
September 30, 1998, as compared to the same period last year, primarily due to a
decrease in distribution expenses.
Depreciation
Depreciation increased $.2 million (8%) for the quarter ended September 30,
1998, as compared to the same period last year, due to additions to depreciable
plant.
<PAGE>
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $.4 million for the quarter
ended September 30, 1998, as compared to the same period of 1997, is primarily
attributable to a decrease in expenses associated with the sales of accounts
receivable and an increase in allowance for equity funds used during
construction resulting from an increase in the average balance of CWIP.
Interest
The components of interest expense are shown below:
Quarter Ended
September 30
1998 1997
(in thousands)
Interest on long-term debt $1,011 $ 881
Other interest 409 317
Allowance for borrowed funds used
during construction (176) (45)
------ ------
Total $1,244 $1,153
The increase in interest expense of $.1 million (8%) for the quarter ended
September 30, 1998, as compared to the same period last year, was due to changes
in interest on long-term debt, other interest, and allowance for borrowed funds
used during construction. The increase in interest on long-term debt was due
primarily to the net issuance of approximately $10 million of long-term debt
during April 1998. Increased short-term borrowings and a higher average balance
of CWIP contributed to the increase in other interest expense and allowance for
borrowed funds used during construction, respectively.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Operating Revenues
Electric Operating Revenues
Electric operating revenues decreased $8 million (5%) for the nine months ended
September 30, 1998, from the comparable period of 1997. This decrease primarily
reflects a revision of ULH&P's estimate of unbilled revenue which was recorded
in the second quarter of 1998, which resulted in a decrease in electric
operating revenues of $3.6 million and a corresponding decrease to operating
income and net income of $1.7 million.
Gas Operating Revenues
The components of gas operating revenues and the related mcf sales are shown
below:
Nine Months Ended
September 30
Revenue Mcf Sales
1998 1997 1998 1997
------- ------- ------ -------
($ and mcf in thousands)
Retail $40,586 $50,297 6,361 7,427
Transportation 2,904 2,518 2,734 2,740
Other 693 810 97 131
------- ------- ----- ------
Total $44,183 $53,625 9,192 10,298
<PAGE>
Gas operating revenues decreased $9 million (18%) for the nine months ended
September 30, 1998, when compared to the same period of last year. Decreased
volumes reflecting the milder weather during the first quarter of 1998, along
with a decrease in the price of gas sold, primarily attributed to the revenue
decrease.
Operating Expenses
Electricity Purchased from Parent Company for Resale
Electricity purchased decreased $4 million (3%) for the nine months ended
September 30, 1998, as compared to the same period last year. This decrease
reflects lower volumes purchased from CG&E.
Gas Purchased
Gas purchased for the nine months ended September 30, 1998, decreased $7 million
(23%), when compared to the same period in 1997. This decrease reflects a
decline in the average cost per mcf of gas purchased and lower volumes of gas
purchased.
Other Operation and Maintenance
The components of other operation and maintenance expenses are shown below:
Nine Months Ended
September 30
1998 1997
(in thousands)
Other operation $23,176 $24,705
Maintenance 4,143 4,493
------- --------
Total $27,319 $29,198
Other operation expenses declined $2 million (6%) for the nine months ended
September 30, 1998, as compared to the same period last year, primarily due to
decreases in distribution and administrative and general expenses.
Maintenance expenses declined $.4 million (8%) for the nine months ended
September 30, 1998, as compared to the same period last year, primarily due to a
decrease in distribution maintenance.
Depreciation
Depreciation increased $.5 million (6%) for the nine months ended September 30,
1998, as compared to the same period last year, due to additions to depreciable
plant.
Other Income and (Expenses) - Net
The change in other income and (expenses) - net of $.5 million for the nine
months ended September 30, 1998, as compared to the same period of 1997, is due
primarily to a decrease in expenses associated with the sales of accounts
receivable and an increase in allowance for equity funds used during
construction resulting from an increase in the average balance of CWIP.
<PAGE>
Interest
The components of interest expense are shown below:
Nine Months Ended
September 30
1998 1997
(in thousands)
Interest on long-term debt $2,845 $2,643
Other interest 958 951
Allowance for borrowed funds used
during construction (475) (82)
------ ------
Total $3,328 $3,512
The decrease in interest expense of $.2 million (5%) for the nine months ended
September 30, 1998, as compared to the same period last year, was due to changes
in interest on long-term debt and allowance for borrowed funds used during
construction. The increase in interest on long-term debt was due primarily to
the net issuance of approximately $10 million of long-term debt during April
1998. Allowance for borrowed funds used during construction increased primarily
as a result of an increase in the average balance of CWIP.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Cinergy, CG&E, PSI, and ULH&P
1. These Financial Statements reflect all adjustments (which include normal,
recurring adjustments and those adjustments discussed in Notes 9 and 14)
necessary in the opinion of the registrants for a fair presentation of the
interim results. These statements should be read in conjunction with the
Financial Statements and the notes thereto included in the combined 1997
Form 10-K of the registrants.
TheStatements of Income in this report have been reclassified in order to
present the operations of all non-regulated entities as a component of
operating income. Prior to this reclassification, the operations of such
entities were reflected in "Other Income and Expense - Net." Similarly,
"Income Taxes" now includes the income taxes associated with the
non-regulated entities. These changes had no effect on net income.
Additionally, the Balance Sheets have been reformatted.
Cinergy and CG&E
2. On April 7, 1998, CG&E issued and sold $100 million principal amount of its
6.40% Debentures due April 1, 2008. Proceeds from the sale were used to
repay short-term indebtedness incurred in connection with CG&E's March 1998
redemptions of $100 million principal amount of its 8 1/2% Series First
Mortgage Bonds due 2022 and $60 million principal amount of its 7 3/8%
Series First Mortgage Bonds due 2001.
3. On May 1, 1998, CG&E redeemed the entire $50 million principal amount of
its 7 3/8% Series First Mortgage Bonds due 1999, at the regular redemption
price of 100.00%. This redemption effectively eliminates the maintenance
and replacement fund provisions of CG&E's First Mortgage Bond indenture,
which provisions required CG&E to make cash payments, deposit bonds, or
pledge unfunded property additions to the trustee each year based on an
amount related to net revenues.
4. On June 15, 1998, CG&E issued and sold $100 million principal amount of
unsecured Reset Put Securities. These debentures will bear interest at a
rate of 6.35% for the first five years, and the interest rate may be reset
on June 15, 2003, and every five years thereafter to final maturity in 2038
if the callholder exercises its option on any reset date to purchase the
bonds and reset the interest rate. If the callholder does not exercise the
option on any reset date, the bonds will be redeemed by CG&E at par.
Proceeds from the sale were used to repay short-term indebtedness incurred
in connection with the redemption of CG&E's 7 3/8% First Mortgage Bonds
referred to above and for general corporate purposes.
Cinergy and PSI
5. On July 23, 1998, PSI redeemed the entire $24 million principal amount of
its 7 5/8% First Mortgage Bonds, Series Y due January 1, 2007, at the
redemption price of 102.11%, and the entire $26 million principal amount of
its 7% First Mortgage Bonds, Series S due January 1, 2002, at the
redemption price of 100.73%.
6. On August 5, 1998, PSI issued and sold $50 million principal amount of
unsecured Synthetic Putable Yield Securities. These debentures will bear
interest at a rate of 6.50% for the first seven years, and the interest
rate may be reset every seven years thereafter to final maturity in 2026 if
the callholder exercises its option on any reset date to purchase the bonds
and reset the interest rate. If the callholder does not exercise the option
on any reset date, the bonds will be redeemed by PSI at par. Proceeds from
the sale were used to repay short-term indebtedness incurred in connection
with PSI's July 1998 redemptions of the above-mentioned Series Y and Series
S First Mortgage Bonds.
<PAGE>
7. On August 12, 1998, the Indiana Development Finance Authority loaned the
proceeds from the sale of its $23 million principal amount of Environmental
Refunding Revenue Bonds, Series 1998, to PSI. The bonds, which are included
in notes payable and other short-term obligations in the consolidated
balance sheets, will bear interest initially at a daily rate, will mature
on August 1, 2028, and are backed by an irrevocable direct-pay letter of
credit through August 1, 2002. Proceeds from the sale were used to redeem
in September 1998, the $23 million 8 1/4% First Mortgage Bonds, Series QQ,
due June 15, 2013 (Pollution Control), at a redemption price of 102% plus
accrued interest.
Cinergy, CG&E, and ULH&P
8. On April 30, 1998, ULH&P issued and sold $20 million principal amount of
its 6.50% Debentures due April 30, 2008. Proceeds from the sale were used
by ULH&P to repay short-term indebtedness incurred in connection with the
redemption, on April 24, 1998, of $10 million principal amount of its 8%
Series First Mortgage Bonds, due 2003, and in connection with its
construction program. The redemption of said First Mortgage Bonds
effectively eliminates the maintenance and replacement fund provisions of
ULH&P's First Mortgage Bond indenture, which provisions required ULH&P to
make cash payments, deposit bonds, or pledge unfunded property additions to
the trustee each year based on an amount related to net revenues.
Cinergy, CG&E, and PSI
9. Cinergy's power marketing and trading function actively markets and trades
over-the-counter forward and option contracts for the purchase and sale of
electricity. The majority of these contracts are settled via physical
delivery of electricity or netted out in accordance with industry trading
standards. The Company also trades exchange-traded futures contracts.
Option premiums are deferred and included in the Consolidated Balance
Sheets and amortized to "Operating Revenues - Electric" or "Fuel and
purchased and exchanged power" in the Consolidated Statements of Income
over the term of the option contract. Cinergy values its portfolio of
contracts using the aggregate lower of cost or market method. To the extent
there are net aggregate losses in the portfolio, Cinergy reserves for such
losses. Net gains are recognized when realized. Due to the lack of
liquidity and the volatility currently experienced in the power markets,
significant assumptions must be made by the Company when estimating current
market values for purposes of the aggregate lower of cost or market
comparison. It is possible that the actual gains and losses from the
Company's power marketing and trading activities could differ substantially
from the gains and losses estimated currently.
Cinergy and its subsidiaries use derivative financial instruments to hedge
exposures to foreign currency exchange rates, lower funding costs, and
manage exposures to fluctuations in interest rates. Instruments used as
hedges must be designated as a hedge at the inception of the contract and
must be effective at reducing the risk associated with the exposure being
hedged. Accordingly, changes in market values of designated hedge
instruments must be highly correlated with changes in market values of the
underlying hedged items at inception of the hedge and over the life of the
hedge contract.
Cinergy utilizes foreign exchange forward contracts and currency swaps to
hedge certain of its net investments in foreign operations. Accordingly,
any translation gains or losses related to the foreign exchange forward
contracts or the principal exchange on the currency swap are recorded in
accumulated other comprehensive income, which is a separate component of
common stock equity. Aggregate translation losses related to these
instruments are reflected in "Current Liabilities Other" in the
Consolidated Balance Sheets.
<PAGE>
Interest rate swaps are accounted for under the accrual method.
Accordingly, gains and losses based on any interest differential between
fixed-rate and floating-rate interest amounts, calculated on agreed upon
notional principal amounts, are recognized in the Consolidated Statements
of Income as a component of interest expense as realized over the life of
the agreement.
Cinergy, CG&E, and PSI
10. As discussed in the 1997 Form 10-K, in October 1995, a suit was filed in
the U.S. District Court by three former employees of Enertech naming as
defendants Enertech, Cinergy, Investments, CG&E, PSI, James E. Rogers, and
William J. Grealis. (Mr. Rogers and/or Mr. Grealis are officers and/or
directors of the foregoing companies.) The lawsuit, which stemmed from the
termination of employment of the three former employees, alleged that they
entered into employment contracts with Enertech based on the opportunity to
participate in potential profits from future investments in energy projects
in Central and Eastern Europe. The suit alleged causes of action based
upon, among other theories, breach of contract related to the events
surrounding the termination of their employment and fraud and
misrepresentation related to the level of financial support for future
projects. The suit alleged compensatory damages of $154 million based upon
assumed future success of potential future investments and punitive damages
of three times that amount.
In April 1998, the parties reached a comprehensive settlement and all
claims were dismissed by the U.S. District Court. The obligations of the
Company arising out of the settlement are not material to its financial
condition or its results of operations.
11. As discussed in the 1997 Form 10-K, prior to the 1950s, gas was produced at
MGP sites through a process that involved the heating of coal and/or oil.
The gas produced from this process was sold for residential, commercial,
and industrial uses.
Coal tar residues, related hydrocarbons, and various metals associated with
MGP sites have been found at former MGP sites in Indiana, including at
least 21 MGP sites which PSI or its predecessors previously owned. In 1945,
PSI sold 19 of these sites to IGC, including the Shelbyville and Lafayette
sites. PSI or its predecessors acquired five of the 21 MGP sites from
NIPSCO (or its predecessors), which were among the 19 sites PSI sold to
IGC. Two other sites, located in Goshen and Warsaw, Indiana, were sold by
PSI's predecessor to NIPSCO in 1931.
PSI has received claims from IGC and NIPSCO that PSI is a PRP under the
CERCLA with respect to the 21 MGP sites, and therefore responsible for the
costs of investigating and remediating these sites. In August 1997, NIPSCO
filed suit against PSI in the United States District Court for the Northern
District of Indiana, South Bend Division, claiming, pursuant to the CERCLA,
recovery from PSI of NIPSCO's past and future costs of investigating and
remediating MGP related contamination at the Goshen MGP site. Recently,
NIPSCO increased its estimate of the cost of remediating the Goshen site to
approximately $3.8 million.
In November 1998, NIPSCO, IGC and PSI entered into a Site Participation and
Cost Sharing Agreement by which they settled allocation of CERCLA liability
for past and future costs, as between the three companies, at seven MGP
sites in Indiana, namely the sites located in Lafayette, Goshen, Warsaw,
Rochester, Frankfort, Crawfordsville, and Lebanon. Pursuant to the
agreement, NIPSCO's lawsuit against PSI, referenced above, will be
dismissed. The parties have assigned one of the parties lead responsibility
for managing any further investigation and remediation activities at each
of the sites.
<PAGE>
This agreement follows a similar agreement achieved between IGC and PSI in
August 1997, allocating CERCLA liability at 13 MGP sites with which NIPSCO
had no involvement. These two agreements, together with an agreement
between IGC and PSI entered into several years ago, relating to the
Shelbyville MGP site, conclude all CERCLA and similar claims between the
three companies relative to MGP sites. Pursuant to the agreements, the
parties are continuing to investigate and remediate the sites as
appropriate. In the case of some sites, the parties have applied to the
IDEM for inclusion of such sites in the Indiana Voluntary Remediation
Program.
PSI and IGC submitted a proposed agreed order to the IDEM in 1997 related
to the Shelbyville MGP site. On April 15, 1998, the IDEM signed the
proposed agreed order, which will result in a determination by the IDEM of
whether the activities previously undertaken at the site are sufficient to
adequately protect human health and the environment. Based upon
environmental investigations and remediation completed to date, PSI
believes that any further investigation and remediation required for the
Shelbyville site will not have a material adverse effect on its financial
condition or results of operations.
As also discussed in the 1997 Form 10-K, PSI previously placed its
insurance carriers on notice of IGC's, NIPSCO's, and the IDEM's claims
related to MGP sites. In April 1998, PSI filed suit in Hendricks County
Circuit Court against its general liability insurance carriers seeking,
among other matters, a declaratory judgment that its insurance carriers are
obligated to defend MGP claims against PSI or pay PSI's costs of defense
and to indemnify PSI for its costs of investigating, preventing,
mitigating, and remediating damage to property and paying claims associated
with MGP sites. PSI cannot predict the outcome of this litigation.
CG&E and its utility subsidiaries are aware of other sites owned or
previously owned by CG&E, its subsidiaries, or their predecessors, where
MGP activities may have occurred at some time in the past. None of these
sites is known to present a risk to the environment. CG&E and its utility
subsidiaries have undertaken preliminary site assessments to obtain more
information about some of these MGP sites.
Reserves recorded, based on information currently available, are not
material to Cinergy's financial condition or results of operations.
However, as further investigation and remediation activities are undertaken
at these sites, the potential liability for MGP sites could be material to
Cinergy's financial condition or results of operations.
Cinergy, CG&E, PSI, and ULH&P
12. Effective with the first quarter of 1998, Cinergy and its subsidiaries
adopted the provisions of Statement 130. Statement 130 establishes
standards for reporting and displaying comprehensive income and its
components in a full set of general-purpose financial statements.
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources.
During the second quarter of 1998, the FASB issued Statement 133. The new
standard requires companies to record derivative instruments, as defined in
Statement 133, as assets or liabilities, measured at fair value. The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
<PAGE>
statement, and requires that a company must formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting.
The standard is effective for fiscal years beginning after June 15, 1999,
and Cinergy expects to adopt the provisions of Statement 133 in the first
quarter of 2000.
The Company has not yet quantified the impacts of adopting Statement 133 on
its consolidated financial statements. However, Statement 133 could
increase volatility in earnings and other comprehensive income.
Cinergy
13. Presented below is a reconciliation of earnings per common share (basic
EPS) and earnings per common share assuming dilution (diluted EPS).
Income Shares Earnings
(Numerator) (Denominator) Per Share
(In thousands, except per share amounts)
Quarter ended September 30, 1998
Earnings per common share:
Net income $109,431 158,539 $ .69
Effect of dilutive securities:
Common stock options 606
Contingently issuable common
stock 104
EPS--assuming dilution:
Net income plus assumed
conversions $109,431 159,249 $ .69
Quarter ended September 30, 1997
Earnings per common share:
Net income before extraordinary
item $ 82,534 157,679 $ .53
Effect of dilutive securities:
Common stock options 885
Contingently issuable common stock 204
EPS--assuming dilution:
Net income before extraordinary
item plus assumed conversions $ 82,534 158,768 $ .52
<PAGE>
Income Shares Earnings
(Numerator) (Denominator) Per Share
(In thousands, except per share amounts)
Nine months ended September 30, 1998
Earnings per common share:
Net income $189,569 158,110 $1.20
Effect of dilutive securities:
Common stock options 694
Contingently issuable common
stock 113
EPS--assuming dilution:
Net income plus assumed
conversions $189,569 158,917 $1.20
Nine months ended September 30, 1997
Earnings per common share:
Net income before extraordinary
item $252,140 157,679 $1.60
Effect of dilutive securities:
Common stock options 931
Contingently issuable common stock 204
EPS--assuming dilution:
Net income before extraordinary
item plus assumed conversions $252,140 158,814 $1.59
Income Shares Earnings
(Numerator) (Denominator) Per Share
(In thousands, except per share amounts)
Twelve months ended September 30, 1998
Earnings per common share:
Net income $300,067 158,007 $1.90
Effect of dilutive securitie
Common stock options 757
Contingently issuable common stock 136
EPS--assuming dilution:
Net income plus assumed
conversions $300,067 158,900 $1.90
Twelve months ended September 30, 1997
Earnings per common share:
Net income before extraordinary item
and costs of reacquisition of
preferred stock of subsidiary $322,726 157,679 $2.04
Effect of dilutive securities:
Common stock options 945
Contingently issuable common stock 232
EPS--assuming dilution:
Net income before extraordinary
item plus assumed conversions $322,726 158,856 $2.03
The after-tax impact of the extraordinary item - equity share of
windfall profits tax for the three, nine, and twelve months ended
September 30, 1997, was $.69 for both basic and diluted earnings per
share.
Options to purchase shares of common stock that were excluded from the
calculation of EPS--assuming dilution because the exercise prices of
these options were greater than the average market price of the common
shares during the period are summarized below:
<PAGE>
Quarter Average
Ended Exercise
September 30 Shares Price
1998 922,600 $37.51
1997 13,600 34.35
Nine Months Average
Ended Exercise
September 30 Shares Price
1998 766,900 $37.72
1997 9,300 34.50
Twelve Months Average
Ended Exercise
September 30 Shares Price
1998 574,100 $37.72
1997 8,500 34.39
Cinergy and PSI
14. In February 1989, PSI and WVPA entered into a settlement agreement to
resolve all claims related to Marble Hill, a nuclear project canceled in
1984. Implementation of the settlement was contingent upon a number of
events, including the conclusion of WVPA's bankruptcy proceeding,
negotiation of certain terms and conditions with WVPA, the RUS, and the
CFC, and certain regulatory approvals. In December 1996, following the
resolution of issues associated with WVPA's bankruptcy proceeding, PSI, on
behalf of itself and its officers, paid $80 million on behalf of WVPA to
the RUS and the CFC. The $80 million obligation, net of insurance proceeds,
other credits, and applicable income tax effects, was charged to income in
1988. In January 1997, an order dismissing the WVPA litigation against PSI
and its officers with prejudice was entered by the United States District
Court for the Southern District of Indiana and final negotiations to
implement the settlement agreement were begun with WVPA, the RUS, and the
CFC. An agreement on all matters has been reached with the parties. As a
result, PSI recorded a liability to the RUS and the CFC. PSI will repay the
obligation to the RUS with interest over a 35-year term. A lump sum payment
was made to the CFC in 1998, in full satisfaction of PSI's obligation to
the CFC. PSI will use the net proceeds from a 35-year power sales agreement
with WVPA to fund the principal and interest on the obligation to the RUS.
Assumption of the liability (recorded as long-term debt in the Consolidated
Balance Sheet) resulted in a charge against second quarter earnings of $80
million ($50 million after tax or $.32 per share basic and diluted).
Cinergy
15. The Company's Midlands subsidiary (of which the Company owns 50%) has a 40%
ownership interest in a 586 MW power project in Pakistan (Uch project or
Uch) which was originally scheduled to begin commercial operation in late
1998. The Pakistani government-owned utility has issued a notice of intent
to terminate certain key project agreements relative to the Uch project.
The notice asserts that various forms of corruption were involved in the
original granting of the agreements to the Uch investors by a predecessor
government. The Company believes that this notice is similar to notices
received by a number of other independent power projects in Pakistan.
The Uch investors, including a subsidiary of Midlands, strongly deny the
allegations and are pursuing all available legal options to enforce their
contractual rights under the project agreements. Physical construction of
the project is substantially complete; however, commissioning, which
<PAGE>
management believes could be completed within a 60- 90 day period, has been
delayed as a result of the above situation. The Uch investors continue to
explore remedies to the situation with officials of the Pakistani
government and are working with the project's lenders to ensure their
continued support to the project.
Arising from the delay of the completion of the plant, the project turnkey
contractor has given notice of its desire to invoke dispute resolution
procedures (under the terms of the turnkey contract) in relation to a claim
for additional costs arising from the failure of the project to provide
fuel gas and interconnection facilities. Uch Power Limited denies that it
is liable for any additional costs arising from this delay and will defend
itself against the claim.
Through its 50% ownership of Midlands, the Company's current investment in
the Uch project is approximately $32 million. In addition, project lenders
could require investors to make additional capital contributions to the
project under certain conditions. The Company's share of these additional
contributions is approximately $12 million. At the present time, the
Company cannot predict the ultimate outcome of this matter.
Cinergy and PSI
16. As discussed in the 1997 Form 10-K, PSI filed a petition with the FERC for
recovery, through the fuel adjustment clause, of the wholesale
jurisdictional portion of the costs resulting from the Exxon contract
buyout. During July 1998, the FERC accepted PSI's request to recover these
buyout costs from its wholesale customers for the period August 1996
through December 2002.
17. As discussed in the 1997 Form 10-K, PSI agreed to begin pre-funding its
obligations for postretirement benefits other than pensions in connection
with the settlement which resulted in the February 1995 Order.
Implementation of pre-funding was subject to negotiations with the UCC and
approval by the IURC.
In October 1998, the IURC approved a settlement agreement between PSI and
the UCC authorizing three optional funding alternatives.
18. As discussed in the 1997 Form 10-K, PSI and Dynegy (formerly Destec)
entered into a 25-year contractual agreement for the provision of coal
gasification services in November 1995. The agreement requires PSI to pay
Dynegy a base monthly fee including certain monthly operating expenses. PSI
received authorization in the September 1996 Order for the inclusion of
these costs in retail rates. In addition, PSI received authorization to
defer, for subsequent recovery in retail rates, the base monthly fees and
expenses incurred prior to the effective date of the September 1996 Order.
Over the next five years, the base monthly fees and expenses for the coal
gasification service agreement are expected to total $201 million.
During the third quarter of 1998, PSI reached an agreement with Dynegy to
purchase the remainder of its 25-year contract for coal gasification
services for $265.7 million. The proposed purchase, which is contingent
upon regulatory approval, is expected to be completed in 1999. PSI will
investigate financing alternatives. The transaction, if approved as
proposed, is not expected to have a material impact on PSI's earnings.
Due to the competition within the natural gas market, natural gas prices
have fallen to a level that has made the current gasification services
agreement uneconomical for PSI and its customers. Under the current
proposal, the gasification service costs would be replaced by lower natural
gas costs. In nominal dollars, it is estimated that the total savings,
primarily as a result of the purchase, would be approximately $275 million
over the life of the original contract.
<PAGE>
Cinergy, CG&E, and ULH&P
19. As more fully discussed in the 1997 Form 10-K, Cinergy made a filing with
the SEC in February 1998, setting forth its rationale supporting retention
of CG&E's and ULH&P's gas operations. As part of its order approving the
merger, the SEC had previously reserved judgment over Cinergy's ownership
of CG&E's and ULH&P's gas operations, pending a determination of the amount
of increased operating costs that would result from the gas operations
being divested and operated on a stand- alone basis.
On November 2, 1998, the SEC issued an order unconditionally approving
Cinergy's retention of CG&E's and its subsidiaries', including ULH&P's, gas
businesses. The order was issued based on the SEC's finding that a
divestiture of CG&E's and its subsidiaries', including ULH&P's, gas
businesses would likely result in increased expenses and the potential loss
of competitive advantages.
Cinergy
20. On November 3, 1998, Cinergy Global Resources issued and sold $150 million
of its 6.20% Debentures due 2008. The debentures are unconditionally
guaranteed as to the payment of principal and interest by Cinergy. In
addition, payment of principal of and interest on the debentures is also
insured by a financial guaranty insurance policy. A portion of the proceeds
from the sale was used to repay approximately $115 million of short-term
indebtedness and the remainder will be used for the acquisition and
development of additional energy-related assets.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION Matters discussed in
this Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in "Part I. Financial Information" reflect and elucidate
Cinergy's corporate vision of the future and, as a part of that, outline goals
and aspirations, as well as specific projections. These goals and projections
are considered forward-looking statements and are based on management's beliefs,
as well as certain assumptions made by management. In addition to any
assumptions and other factors that are referred to specifically in connection
with these statements, other factors that could cause actual results to differ
materially from those indicated in any forward- looking statements include,
among others: factors generally affecting utility operations--such as unusual
weather conditions, unusual maintenance or repairs, or unanticipated changes in
fuel costs; increased competition in the electric and gas utility environment;
regulatory factors, including the failure to obtain anticipated regulatory
approvals; changes in accounting principles or policies; adverse economic
conditions; changing market conditions; availability or cost of capital;
employee workforce factors; costs and effects of legal and administrative
proceedings; changes in legislative requirements; and other risks. The SEC's
rules do not require forward-looking statements to be revised or updated, and
Cinergy does not intend to do so.
FINANCIAL CONDITION
Recent Developments
Cinergy
Acquisitions In June 1998, through CC&T, Cinergy acquired ProEnergy from Apache
and Oryx. ProEnergy has had and will continue to have exclusive marketing rights
to North American gas production owned or controlled by Apache and Oryx, which
represents approximately 1.1 Bcf per day of dedicated natural gas supply. These
supplies, combined with the active marketing of third party gas, are
geographically diverse and are spread through the Southwest, Rocky Mountains,
Gulf Coast, Gulf of Mexico, and Michigan. The acquisition was funded with cash
and by the issuance of 771,258 new shares of Cinergy common stock.
In June 1998, a subsidiary of Cinergy Global Power acquired Moravske, a 410 MW
district heating plant in the Czech Republic. In addition, in September 1998, a
subsidiary of Cinergy Global Power acquired a 406 MW district heating plant in
the city of Plzen, Czech Republic.
The purchase prices for these acquisitions were not material to Cinergy's
financial condition or results of operations.
Competitive Pressures
Cinergy, CG&E, PSI, and ULH&P
Federal Developments As discussed in the 1997 Form 10-K, Cinergy collaborated
with other Midwestern utility companies to form the Midwest ISO. During the
third quarter of 1998, the FERC approved the formation of the Midwest ISO.
Cinergy, CG&E, and ULH&P
State Developments As discussed in the 1997 Form 10-K, comprehensive electric
restructuring legislation was introduced in the Ohio legislature during 1998.
This legislation, SB 237 and HB 732, "companion" electric restructuring bills,
proposes to afford choice to all retail electric customers in Ohio beginning
January 1, 2000. Legislative hearings on these bills occurred in the spring and
summer. In addition, legislation to provide for securitization of transition
<PAGE>
costs through issuance of rate reduction bonds has been pending in Ohio since
1997. It is uncertain whether these pieces of legislation will be passed in Ohio
in 1998. During the third quarter of 1998, Ohio's IOUs, including CG&E, released
a draft bill that sets forth the utilities' approach to comprehensive electric
restructuring in Ohio. Under the IOUs' proposal, choice to all retail electric
customers would be introduced by January 1, 2001, rates would be frozen during a
five-year transition period, low income protections would be maintained, and a
fixed charge for certain government approved transition costs would be imposed
(and costs could be securitized if rates are not increased). Both this proposal
and SB 237/HB 732 are being studied by a legislative working group that was
convened in September 1998. It is uncertain at this time whether the IOUs'
proposal will be introduced in Ohio's General Assembly, or, if introduced,
whether it will be passed and signed into law.
As also discussed in the 1997 Form 10-K, HB 443 was introduced into the Kentucky
General Assembly in January 1998. HB 443 was not brought to a vote during the
1998 legislative session. Rather, HJR 95, which calls for the formation of an
executive task force comprised of members from the Governor's office and the
Kentucky General Assembly to further study electric restructuring, was passed by
the Kentucky General Assembly, and was signed by the Governor during April 1998.
Task force members will study electric restructuring in anticipation of the next
legislative session, which occurs in January 2000.
Regulatory Matters
Cinergy, CG&E, and ULH&P Potential Divestiture of Gas Operations See Note 19 of
the "Notes to Financial Statements" in "Part I. Financial Information."
Cinergy and PSI Coal Contract Buyout Costs See Note 16 of the "Notes to
Financial Statements" in "Part I. Financial Information."
Environmental Issues
Cinergy, CG&E, and PSI
Ambient Air Standards As discussed in the 1997 Form 10-K, during 1997, the EPA
revised the National Ambient Air Quality Standards for ozone and fine
particulate matter. The EPA has also proposed, but not finalized, new rules for
regional haze. The United States Congress, as part of the funding bill for the
Surface Transportation Act, combined the schedules for fine particulates and
regional haze implementation. The impact of the particulate standards and
regional haze rules cannot be determined at this time.
In June 1998, 13 Midwestern and Southern states and numerous industry groups
within those states, including Cinergy, filed comments in opposition to the EPA
proposed NOx rules. These 13 states and utility commentors proposed alternative
reduction strategies that would generally phase in NOx reductions by 65 percent
by 2002-2004, would determine by 2002 if additional reductions are needed, and
then implement necessary controls between 2005-2007. Commentors also generally
opposed the EPA's 22 state trading program in favor of smaller and more flexible
multi-state programs.
In September 1998, the EPA finalized its Ozone Transport Rule. It applies to 22
states in the eastern half of the United States, including the three states in
which Cinergy operates, and also proposes a model NOx trading program. This rule
recommends that states reduce utility NOx emissions by approximately 85% from
1990 levels by 2003. The affected states have until September 24, 1999, to
incorporate utility NOx reductions into their SIPs. It is anticipated that this
new rule will be heavily litigated by the affected states, industry, and other
stakeholders. Cinergy's initial estimate for compliance with the new Ozone
Transport Rule is $500-$600 million in capital expenditures between now and
2003.
<PAGE>
Air Toxics As discussed in the 1997 Form 10-K, the EPA was to announce, by April
15, 1998, its conclusions regarding the need for additional air toxics
regulations. In April 1998, the EPA announced that it would make its regulatory
determination on the need for additional air toxics regulation by November 15,
1998. If more air toxics regulations are issued, the compliance cost could be
significant. Cinergy cannot predict the outcome or effects of the EPA's
determination.
MGP Sites See Note 11 of the "Notes to Financial Statements" in "Part I.
Financial Information."
Accounting Issues
Cinergy, CG&E, PSI, and ULH&P New Accounting Standards See Note 12 of the "Notes
to Financial Statements" in "Part I. Financial Information."
Market Risk Sensitive Instruments and Positions
Cinergy, CG&E, PSI, and ULH&P
The following discussions about Cinergy's market risk sensitive instruments and
positions and risk management activities include forward-looking information and
statements that involve risks and uncertainties. The forward- looking
information and statements presented are only estimates of what may occur in the
future, assuming certain adverse market conditions, due to their dependence on
model characteristics and assumptions. As a result, actual future results may
differ materially from those presented. These disclosures are not precise
indicators of expected future losses, rather they merely present indications of
reasonably possible losses.
Cinergy, CG&E, and PSI
Energy Commodities Sensitivity The Company markets and trades over-the-counter
forward and option contracts for the purchase and sale of electricity. The
Company also trades exchange-traded futures contracts. See Note 9 of the "Notes
to Financial Statements" in "Part I. Financial Information" for the Company's
accounting policies for certain derivative instruments.
During a few days late in the second quarter, wholesale electric power markets
in the Midwest exhibited unprecedented price volatility due to several market
factors, including an extended period of unseasonably hot weather, scheduled and
unplanned generating unit outages, transmission constraints, and defaults by
certain power marketers on their supply obligations. The simultaneous
culmination of these events resulted in temporary but extreme price spikes in
the hourly and daily markets and very little trading liquidity and price
transparency in the term markets. During this period of extreme price volatility
and trading illiquidity, Cinergy's power marketing and trading function
maintained its ability to provide the physical delivery of power to fulfill its
contractual obligations. The daily value-at-risk as of September 30, 1998, was
less than 3% of Cinergy's "Income Before Taxes" for the twelve months then
ended. The value-at-risk model utilizes a 95% confidence interval and uses the
variance-covariance statistical modeling technique and historical volatilities
and correlations over the past 200 day period. The estimated market prices used
to value these transactions for value-at-risk purposes reflect the use of
established pricing models and various factors, including quotations from
exchanges and over-the-counter markets, price volatility factors, the time value
of money, and location differentials. The variables used for value-at-risk
purposes at September 30, 1998, reflect the impacts of the events which
transpired in the Midwestern electric power markets during late June 1998.
<PAGE>
Cinergy provides reserves as required for the potential unrealized losses in the
fair value of its portfolio of open forward and option contract positions and
potential unrealized losses due to nonperformance of certain counterparties
pursuant to contractual supply obligations. Due to the basic lack of liquidity,
price transparency, and extreme price volatility currently experienced in the
electric power markets, significant assumptions regarding estimated market
prices and potential counterparty credit risk must be made by the Company for
the purposes of providing appropriate reserves. It is possible that actual
realized results from the Company's power marketing and trading activities could
differ substantially from those currently estimated.
As of September 30, 1998, approximately 69% of Cinergy's power marketing and
trading activity represents commitments with 10 counterparties. The majority of
these contracts are for terms of one year or less. The temporary but extreme
price volatility and trading illiquidity exhibited in the Midwestern electric
power markets late in the second quarter resulted in a few power marketers
defaulting on contractual supply obligations and industry-wide uncertainty as to
whether others will be able to fulfill existing contractual supply obligations
for future delivery of electricity. As of September 30, 1998, Cinergy believes
it has adequately reserved for credit exposure relating to its portfolio of
existing contracts.
Cinergy remains committed to being a long-term participant in the evolving
competitive wholesale electric power market and will continue to manage its
power marketing and trading portfolio to maximize its existing value while
creating additional value. The New York Mercantile Exchange electricity futures
contracts for delivery into Cinergy's transmission grid, which started trading
on July 10, 1998, should provide additional liquidity and greater price
transparency, as well as additional risk management capabilities in Cinergy's
core service territory and trading region. Cinergy continues to review and
enhance its current risk management practices to ensure their responsiveness to
evolving and changing market and business conditions. In addition, efforts are
ongoing to develop and enhance systems to improve the timeliness and quality of
market and credit risk information.
Cinergy
Exchange Rate Sensitivity Cinergy utilizes foreign exchange forward contracts
and currency swaps to hedge certain of its net investments in foreign
operations. See Note 9 of the "Notes to Financial Statements" in "Part I.
Financial Information" for Cinergy's accounting policies for certain derivative
instruments. Cinergy's market risks have not changed materially from the market
risks reported in the 1997 Form 10-K.
Cinergy, CG&E, PSI, and ULH&P
Interest Rate Sensitivity The Company's net exposure to changes in interest
rates primarily consists of debt instruments with floating interest rates that
are benchmarked to various market indices. To manage the Company's exposure to
fluctuations in interest rates and to lower funding costs, the Company
constantly evaluates the use of, and has entered into, interest rate swaps. See
Note 9 of the "Notes to Financial Statements" in "Part I. Financial Information"
for the Company's accounting policies for certain derivative instruments. The
Company's market risks have not changed materially from the market risks
reported in the 1997 Form 10-K.
<PAGE>
CAPITAL RESOURCES AND REQUIREMENTS
Cinergy, CG&E, PSI, and ULH&P Long-term Debt For information regarding recent
issuances and redemptions of long-term debt securities, see Notes 2, 3, 4, 5, 6,
7, 8, and 20 of the "Notes to Financial Statements" in "Part I. Financial
Information."
On October 14, 1998, PSI issued a promissory note to the RUS (recorded as
long-term debt in the consolidated balance sheet) in the amount of $86.4
million. For information concerning the WVPA settlement, see Note 14 of the
"Notes to Financial Statements" in "Part I. Financial Information." This
issuance effectively reduces PSI's remaining authority for long-term debt
issuances to $40.6 million. In October 1998, PSI filed with the IURC for state
regulatory authority for long-term debt issuances of $400 million.
CG&E's remaining state regulatory authority for long-term debt issuances expired
in June 1998. CG&E is currently in the process of filing an application with the
PUCO requesting authorization to issue additional long-term debt.
On August 21, 1998, the SEC issued an order permitting Cinergy to issue and sell
from time to time unsecured debt securities in an aggregate principal amount not
to exceed $400 million outstanding at any time.
Cinergy, CG&E, PSI, and ULH&P
Short-term Debt Obligations representing notes payable and other short-term
obligations (excluding notes payable to affiliated companies) at September 30,
1998, were as follows:
Cinergy
Established
Lines Outstanding
(in millions)
Cinergy
Committed lines
Acquisition line $ 350 $ 350
Revolving line 600 -
Commercial paper - 301
Uncommitted line 45 82*
Utility subsidiaries
Committed lines 300 -
Uncommitted lines 360 81
Pollution control notes 266 266
Non-utility subsidiaries 125 105
------ ------
Total $2,046 $1,185
CG&E
Established
Lines Outstanding
(in millions)
Committed lines $100 $ -
Uncommitted lines 190 46
Pollution control notes 184 184
---- ----
Total $474 $230
<PAGE>
PSI
Established
Lines Outstanding
(in millions)
Committed lines $200 $ -
Uncommitted lines 170 35
Pollution control notes 82 82
---- ----
Total $452 $117
* Excess over Established Line represents amount sold by dealers to other
investors.
Cinergy, CG&E, and PSI
Cinergy's committed lines are comprised of an acquisition line and a revolving
line. The established revolving line (as shown in the above table) also provides
credit support for Cinergy's commercial paper program. During July 1998, the
commercial paper program was increased to a maximum principal amount of $400
million. This increase is supported by an additional revolving line of $200
million, which was also established in July 1998. Approximately half of the
proceeds from the commercial paper sales were used to reduce the acquisition
line to the quarter-end level of $350 million. CG&E and PSI also have the
capacity to issue commercial paper that must be supported by committed lines of
the respective company. Neither CG&E nor PSI issued commercial paper during the
third quarter of 1998.
Cinergy, CG&E, PSI, and ULH&P
Cinergy's utility subsidiaries had regulatory authority to borrow up to $853
million ($453 million for CG&E and its subsidiaries, including $50 million for
ULH&P, and $400 million for PSI) as of September 30, 1998. Regulatory authority
for CG&E and PSI excludes the Pollution Control Notes, which are considered
long-term debt for regulatory purposes. In connection with this authority,
committed lines, as well as uncommitted lines, have been arranged. The
established committed lines (as shown in the above table) include $81 million
designated as backup for certain of the uncommitted lines at September 30, 1998.
Further, the committed lines are maintained by commitment fees.
Cinergy, CG&E, PSI, and ULH&P
Year 2000 The Year 2000 issue generally exists because many computer systems and
applications, including those embedded in equipment and facilities, use two
digit rather than four digit date fields to designate an applicable year. As a
result, the systems and applications may not properly recognize the year 2000 or
process data which includes it, potentially causing data miscalculations or
inaccuracies or operational malfunctions or failures, which could materially
affect Cinergy's financial condition or results of operations.
Cinergy has established a centrally-managed, company-wide initiative to
identify, evaluate, and address Year 2000 issues. Cinergy's Year 2000 efforts,
which began in the fourth quarter of 1996, are all encompassing and include its
generation, transmission, and distribution systems and related infrastructure.
Also within the scope of this initiative are operational and financial IT
systems and applications, end-user computing resources, and building systems,
such as security, elevator, and heating and cooling systems. In addition, the
project includes a review of the Year 2000 readiness efforts of Cinergy's key
suppliers and customers and other principal business partners, and, as
appropriate, the development of joint business support and continuity plans for
Year 2000 issues. Further, the scope of the Year 2000 project includes
communications with regulatory agencies and the inclusion of Year 2000 concerns
as a regular part of the due diligence process in any new business venture.
While this initiative is broad in scope, it has been structured to identify and
prioritize efforts for mission critical systems, electric and gas systems and
services, and key business partners.
<PAGE>
Under its current Year 2000 plan, Cinergy has established a target date of June
30, 1999, for the remediation and testing of its generation, transmission, and
distribution systems (gas and electric). One example of Cinergy's remediation
and testing efforts is the current operation of some of its generating units
with post Year 2000 dates. Cinergy cannot guarantee that third parties on whom
it depends for essential goods and services (those where the interruption of the
supply of such goods and services could lead to issues involving the safety of
employees, customers, or the public, the continued reliable delivery of gas
and/or electricity, the ability to comply with applicable laws or regulations,
and revenues) will convert their critical systems and processes in a timely
manner. Failure or delay by any of these third parties could significantly
disrupt business. However, to address this issue, Cinergy has established a
supplier compliance program, and is working with its key suppliers in an effort
to minimize such risks. In addition, Cinergy is coordinating its findings and
other issues with other utilities via EPRI's Year 2000 Embedded Systems Project
and with the Year 2000 Readiness Assessment Program of the NERC, acting at the
request of the U.S. Department of Energy.
In addition to the approximately $10 million in expenses incurred through
September 30, 1998, for matters historically identified as Year 2000-related,
Cinergy currently estimates that it will incur additional expenses of
approximately $3 million through the completion of the program. Cinergy's
progress to date ranges from 80% for IT systems to approximately 40% regarding
assessment of critical vendors. The timing of expenses may vary and is not
necessarily indicative of readiness efforts or progress to date. Cinergy
anticipates that a portion of its Year 2000 expenses will not be incremental
costs, but rather will represent the redeployment of existing IT resources.
Since its formation, Cinergy has incurred, and will continue to incur,
significant capital improvement costs for IT systems. These costs related to
planned system upgrades or replacements would have been required in the normal
course of business and are not being incurred sooner than originally planned as
a result of the Year 2000 issue.
Avon Energy has also undertaken activities to address Year 2000 issues. The
estimated proportionate share of Avon Energy's incremental Year 2000 costs
(costs which would not have been required in the normal course of business) that
will flow through to Cinergy's earnings as a result of such activities is not
expected to have a material impact on the financial condition or results of
operations of Cinergy.
As part of the Year 2000 initiative, Cinergy is in the process of reviewing its
existing contingency and business continuity plans to determine if any
modifications are needed in light of the Year 2000 problem. Contingency planning
to maintain and restore service in the event of natural and other disasters
(including software and hardware-related problems) has been part of Cinergy's
standard operation for many years, and Cinergy is working to leverage this
experience in the review of existing plans to address Year 2000- related
challenges. These reviews are expected to assess the potential for business
disruption in various scenarios, including the most reasonably likely worst-case
scenario, and to provide for key operational back-up, recovery, and restoration
alternatives.
The above information is based on Cinergy's current best estimates, which were
derived using numerous assumptions of future events, including the availability
and future costs of certain technological and other resources, third-party
modification actions and other factors. Given the complexity of these issues and
possible as yet unidentified risks, actual results may vary materially from
those anticipated and discussed above. Specific factors that might cause such
differences include, among others, the ability to locate and correct all
affected computer code, the timing and success of remedial efforts of
third-party suppliers, and similar uncertainties.
<PAGE>
The descriptions herein of the elements of Cinergy's Year 2000 efforts are
forward-looking statements. Of necessity, this effort is based on estimates of
assessment, remediation, testing, and contingency planning activities and dates
for perceived problems not yet identified. There can be no assurances that
actual results will not materially differ from expectations. The SEC's rules do
not require forward-looking statements to be revised or updated, and Cinergy
does not intend to do so.
Cinergy
Other Commitments Cinergy has issued performance and debt guarantees to numerous
counterparties totaling approximately $421 million.
RESULTS OF OPERATIONS
Cinergy, CG&E, PSI, and ULH&P Reference is made to "Item 1. Financial
Statements" in "Part I. Financial Information."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Cinergy, CG&E, PSI, and ULH&P Reference is made to the "Market Risk Sensitive
Instruments and Positions" section in "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations" in "Part I. Financial
Information."
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Cinergy and CG&E
Skinner Landfill Remediation
As discussed in the 1997 Form 10-K, CG&E was notified, in the first quarter of
1998, by the Allocator in a court-mandated ADR proceeding, that it had been
identified as a PRP under CERCLA with respect to the Skinner Landfill Superfund
Site, which is located approximately 15 miles north of Cincinnati, Ohio. In
March 1997, the plaintiffs from the underlying CERCLA litigation brought suit in
the U.S. District Court, against over 80 PRPs. In August 1997, the U.S. District
Court entered an order staying the litigation and requiring all parties to
engage in a non-binding, confidential ADR process. The Allocator, which has been
given authority by the U.S. District Court to identify other parties that may be
responsible for response costs, has informed CG&E that it was identified by a
site owner, operator, or worker as one that had arranged for the disposal of
waste at the landfill and has concluded that a reasonable basis exists for
CG&E's participation in the ADR process.
In early October 1998, the Allocator issued a report which concluded that CG&E
was responsible for $500 of clean-up costs related to the disposal of a small
amount of utility poles, shop waste, tree mulch and light ballast. The total
clean-up costs for the site are estimated to be $15 million. While the Allocator
has not identified a responsible party for approximately 70% of the costs, CG&E
does not expect any further allocations to substantially increase its share of
the clean-up costs.
Cinergy, CG&E, and PSI
See Notes 11 and 15 of the "Notes to Financial Statements" in "Part I.
Financial Information."
ITEM 5. OTHER INFORMATION
Cinergy and PSI
On October 28, 1998, the Company announced that Mary L. Schapiro has been
appointed to Cinergy's board, effective January 1, 1999. Ms. Schapiro will
fill the board vacancy resulting from the retirement of Van P. Smith. Mr.
Smith has served on Cinergy's board since 1994 and has served on the PSI board
since 1986.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits identified with a pound sign (#) are being filed herewith by the
registrant identified in the exhibit discussion below and are incorporated
herein by reference with respect to any other designated registrant.
Exhibits not so identified are filed herewith:
Exhibit
Designation Nature of Exhibit
Cinergy
4-A Base Indenture dated as of October 15, 1998, between Cinergy
Global Resources and The Fifth Third Bank as Trustee.
4-B First Supplemental Indenture dated as of October 15, 1998, between
Cinergy Global Resources and The Fifth Third Bank as Trustee.
<PAGE>
Cinergy, CG&E, and PSI
10-A #Second Amended and Restated Employment Agreement dated September 22,
1998, between Cinergy, Cinergy Services, Inc., CG&E, and PSI and James
E. Rogers. (Exhibit to Cinergy's September 30, 1998, Form 10- Q in File
No. 1-11377.)
Cinergy, CG&E, PSI, and ULH
27 Financial Data Schedules (included in electronic submission only)
(b) The following reports on Form 8-K were filed during the quarter and
previously reported on Form 10-Q for the quarter ended June 30, 1998.
Date of Report Item Filed
Cinergy
July 15, 1998 Item 5. Other Events
Item 7. Financial Statements and Exhibits
CG&E
July 15, 1998 Item 5. Other Events
PSI
July 15, 1998 Item 5. Other Events
<PAGE>
SIGNATURES
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
Cinergy, CG&E, PSI, and ULH&P believe that the disclosures are adequate to make
the information presented not misleading. In the opinion of Cinergy, CG&E, PSI,
and ULH&P, these statements reflect all adjustments (which include normal,
recurring adjustments and those adjustments discussed in Notes 9 and 14 of the
"Notes to Financial Statements" in "Part I. Financial Information") necessary to
reflect the results of operations for the respective periods. The unaudited
statements are subject to such adjustments as the annual audit by independent
public accountants may disclose to be necessary.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed by an
officer and the chief accounting officer on their behalf by the undersigned
thereunto duly authorized.
CINERGY CORP.
THE CINCINNATI GAS & ELECTRIC COMPANY
PSI ENERGY, INC.
THE UNION LIGHT, HEAT AND POWER COMPANY
Registrants
Date: November 12, 1998 /s/John P. Steffen
--------------------------------------
John P. Steffen
Duly Authorized Officer
and
Chief Accounting Officer
CINERGY GLOBAL RESOURCES, INC.
AND
THE FIFTH THIRD BANK, Trustee
Indenture
Dated as of October 15, 1998
<PAGE>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
Section 310(a)(1)............................................................609
(a)(2)..............................................................609
(a)(3).................................................. Not Applicable
(a)(4)...................................................Not Applicable
(b).................................................................608
...............................................................610
Section 311(a)...............................................................613
(b).................................................................613
Section 312(a)...............................................................701
...............................................................702
(b).................................................................702
(c).................................................................702
Section 313(a)...............................................................703
(b).................................................................703
(c).................................................................703
(d).................................................................703
Section 314(a)...............................................................704
(a)(4)..............................................................101
..............................................................1004
(b)......................................................Not Applicable
(c)(1)..............................................................102
(c)(2)..............................................................102
(c)(3)...................................................Not Applicable
(d)......................................................Not Applicable
(e).................................................................102
Section 315(a)...............................................................601
(b).................................................................602
(c).................................................................601
(d).................................................................601
(e).................................................................514
Section 316(a)...............................................................101
(a)(1)(A)...........................................................502
...............................................................512
(a)(1)(B)...........................................................513
(a)(2)...................................................Not Applicable
(b).................................................................508
(c).................................................................104
Section 317(a)(1)............................................................503
(a)(2)..............................................................504
(b)................................................................1003
Section 318(a)...............................................................107
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
CINERGY GLOBAL RESOURCES, INC.
Indenture
Dated as of October 15, 1998
TABLE OF CONTENTS
Parties 1
Recitals of the Company 1
ARTICLE ONE
Definitions and Other Provisions of General Application
Section 101. Definitions:............................................1
Act 1
Affiliate; control...............................................2
Authenticating Agent.............................................2
Board of Directors...............................................2
Board Resolution.................................................2
Business Day.....................................................2
Commission.......................................................2
Company..........................................................2
Company Request; Company Order...................................2
Corporate Trust Office...........................................2
Corporation......................................................2
Covenant Defeasance..............................................2
Defaulted Interest...............................................2
Defeasance.......................................................2
Depositary.......................................................2
Event of Default.................................................3
Exchange Act.....................................................3
Expiration Date..................................................3
Global Security..................................................3
Holder...........................................................3
Indenture........................................................3
interest.........................................................3
Interest Payment Date............................................3
Investment Company Act...........................................3
Junior Subordinated Securities...................................3
Maturity.........................................................3
Notice of Default................................................3
Officers' Certificate............................................3
Opinion of Counsel...............................................3
Original Issue Discount Security.................................3
Outstanding......................................................3
Paying Agent.....................................................4
Person...........................................................4
Place of Payment.................................................4
Predecessor Security.............................................5
Redemption Date..................................................5
Redemption Price.................................................5
Regular Record Date..............................................5
Responsible Officer..............................................5
Securities.......................................................5
<PAGE>
Securities Act...................................................5
Security Register; Security Registrar............................5
Senior Debt......................................................5
Special Record Date..............................................5
Stated Maturity..................................................5
Subsidiary.......................................................6
Trust Indenture Act..............................................6
Trustee..........................................................6
U.S. Government Obligation.......................................6
Vice President...................................................6
Section 102. Compliance Certificates and Opinions......................6
Section 103. Form of Documents Delivered to Trustee....................6
Section 104. Acts of Holders; Record Dates.............................7
Section 105. Notices, Etc., to Trustee and Company.....................8
Section 106. Notice to Holders; Waiver.................................9
Section 107. Conflict with Trust Indenture Act.........................9
Section 108. Effect of Headings and Table of Contents..................9
Section 109. Successors and Assigns....................................9
Section 110. Separability Clause.......................................9
Section 111. Benefits of Indenture.....................................9
Section 112. Governing Law............................................10
Section 113. Legal Holidays...........................................10
Section 114. Certain Matters Relating to Currencies...................10
Section 115. Immunity of Incorporators, Stockholders, Officers
and Directors......................................10
Section 116. Counterparts.............................................10
Section 117. Assignment to Affiliate..................................11
ARTICLE TWO
Security Forms
Section 201. Forms Generally...........................................11
Section 202. Form of Face of Security..................................11
Section 203. Form of Reverse of Security...............................14
Section 204. Form of Legend for Global Securities......................17
Section 205. Form of Trustee's Certificate of Authentication.......... 17
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series......................18
Section 302. Denominations.............................................20
Section 303. Execution, Authentication, Delivery and Dating............20
Section 304. Temporary Securities......................................21
Section 305. Registration, Registration of Transfer and Exchange.......21
Section 306. Mutilated, Destroyed, Lost and Stolen Securities..........23
Section 307. Payment of Interest; Interest Rights Preserved............23
Section 308. Persons Deemed Owners.....................................24
Section 309. Cancellation..............................................25
Section 310. Computation of Interest...................................25
Section 311. CUSIP Numbers.............................................25
<PAGE>
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture...................25
Section 402. Application of Trust Money................................26
ARTICLE FIVE
Remedies
Section 501. Events of Default.........................................26
Section 502. Acceleration of Maturity; Rescission and Annulment........27
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee..............................28
Section 504. Trustee May File Proofs of Claim..........................28
Section 505. Trustee May Enforce Claims Without Possession
of Securities.......................................29
Section 506. Application of Money Collected............................29
Section 507. Limitation on Suits.......................................29
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest................................30
Section 509. Restoration of Rights and Remedies........................30
Section 510. Rights and Remedies Cumulative............................30
Section 511. Delay or Omission Not Waiver..............................30
Section 512. Control by Holders........................................30
Section 513. Waiver of Past Defaults...................................30
Section 514. Undertaking for Costs.....................................31
Section 515. Waiver of Usury, Stay or Extension Laws...................31
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.......................31
Section 602. Notice of Defaults........................................31
Section 603. Certain Rights of Trustee.................................32
Section 604. Not Responsible for Recitals or Issuance of Securities....32
Section 605. May Hold Securities.......................................32
Section 606. Money Held in Trust.......................................33
Section 607. Compensation and Reimbursement............................33
Section 608. Conflicting Interests.....................................33
Section 609. Corporate Trustee Required; Eligibility...................33
Section 610. Resignation and Removal; Appointment of Successor.........34
Section 611. Acceptance of Appointment by Successor....................35
Section 612. Merger, Conversion, Consolidation or Succession
to Business.........................................36
Section 613. Preferential Collection of Claims Against Company.........36
Section 614. Appointment of Authenticating Agent.......................36
Section 615. Indemnification...........................................37
<PAGE>
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses
of Holders..........................................38
Section 702. Preservation of Information; Communications
to Holders..........................................38
Section 703. Reports by Trustee........................................38
Section 704. Reports by Company........................................38
ARTICLE EIGHT
Consolidation, Merger and Sale
Section 801. Consolidation and Mergers Permitted.......................39
Section 802. Rights and Duties of Successor Company....................39
Section 803. Opinion of Counsel........................................40
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders........40
Section 902. Supplemental Indentures With Consent of Holders...........41
Section 903. Execution of Supplemental Indentures......................42
Section 904. Effect of Supplemental Indentures.........................42
Section 905. Conformity with Trust Indenture Act.......................42
Section 906. Reference in Securities to Supplemental Indentures........42
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest................42
Section 1002. Maintenance of Office or Agency...........................43
Section 1003. Money for Securities Payments to Be Held in Trust.........43
Section 1004. Statement by Officers as to Default.......................44
Section 1005. Maintenance of Properties.................................44
Section 1006. Payment of Taxes and Other Claims.........................44
Section 1007. Waiver of Certain Covenants...............................44
Section 1008. Calculation of Original Issue Discount....................45
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article..................................45
Section 1102. Election to Redeem; Notice to Trustee.....................45
Section 1103. Selection by Trustee of Securities to Be Redeemed.........45
Section 1104. Notice of Redemption......................................46
Section 1105. Deposit of Redemption Price...............................46
<PAGE>
Section 1106. Securities Payable on Redemption Date.....................46
Section 1107. Securities Redeemed in Part...............................47
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article..................................47
Section 1202. Satisfaction of Sinking Fund Payments with Securities.....47
Section 1203. Redemption of Securities for Sinking Fund.................47
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Company's Option to Effect Defeasance or Covenant
Defeasance..........................................48
Section 1302. Defeasance and Discharge..................................48
Section 1303. Covenant Defeasance.......................................48
Section 1304. Conditions to Defeasance or Covenant Defeasance...........49
Section 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions.......50
Section 1306. Reinstatement.............................................51
ARTICLE FOURTEEN
Junior Subordinated Securities
Section 1401. Certain Securities Subordinate to Senior Debt.............51
Section 1402. Payment Over of Proceeds Upon Default.....................51
Section 1403. Payment Over of Proceeds Upon Dissolution, Etc............52
Section 1404. Subrogation to Rights of Holders of Senior Debt...........53
Section 1405. Trustee to Effectuate Subordination.......................53
Section 1406. Notice to Trustee.........................................53
Section 1407. Rights of Trustee as Holder of Senior Debt;
Preservation of Trustee's Rights....................54
Section 1408. No Waiver of Subordination Provisions.....................54
Testimonium...............................................................55
Signatures................................................................55
<PAGE>
INDENTURE, dated as of October 15, 1998, between Cinergy Global
Resources, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
139 East Fourth Street, Cincinnati, Ohio 45202, and The Fifth Third Bank, an
Ohio banking corporation, as Trustee (herein called the "Trustee").
Recitals of the Company
The Company has duly 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 (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
Now, Therefore, This Indenture Witnesseth:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, subject to Article
Fourteen, if applicable, for the equal and proportionate benefit of the Holders
of the Securities of each series thereof, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions. For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles;
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"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 meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
<PAGE>
"Board of Directors" means the board of directors of the Company, or
any duly authorized committee of that board, or any Person duly authorized to
act on behalf of that board.
"Board Resolution" means a copy of a resolution or resolutions
certified by the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment or in the City of New York are
authorized or obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission, from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company either by (i) its Chairman of the Board, its
Vice Chairman, its President, a Vice President, its Treasurer or its Secretary,
and delivered to the Trustee, or (ii) any Person or Persons designated in a
Board Resolution, or in a Company Order previously delivered to the Trustee
signed by any of the foregoing, and delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee for Securities
of any series at which at any particular time its corporate trust business shall
be principally administered, which office at the date of execution of this
Indenture is located at 38 Fountain Square Plaza, Cincinnati, Ohio.
"Corporation" means a corporation, association, company, limited
liability company, joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in Section 1303.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any series issuable
in whole or in part in the form of one or more Global Securities, The Depository
Trust Company or another clearing agency registered under the Exchange Act that
is designated to act as Depositary for such Securities as contemplated by
Section 301.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 104.
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 204 (or such
legend as may be specified as contemplated by Section 301 for such Securities).
"Holder" means a Person in whose name a Security is registered in the
Security Register.
<PAGE>
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of particular
series of Securities established as contemplated by Section 301.
"interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.
"Junior Subordinated Securities" shall have the meaning specified in
Section 1401.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 501(4).
"Officers' Certificate" means a certificate signed in the same manner
and by Persons as provided for in a Company Request or a Company Order, and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or counsel for the Company.
"Original Issue 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 502.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(1) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(2) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders of
such Securities; 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;
(3) Securities as to which Defeasance has been effected pursuant to
Section 1302; and
(4) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in respect
of which there shall have been presented to the Trustee proof satisfactory to it
that such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company; provided, however, that in
determining whether the Holders of the requisite principal amount of the
Outstanding Securities have given, made or taken any request, demand,
authorization, direction, notice, consent, waiver or other action hereunder as
of any date, (A)
<PAGE>
the principal amount of an Original Issue Discount Security which shall be
deemed to be Outstanding shall be the amount of the principal thereof which
would be due and payable as of such date upon acceleration of the Maturity
thereof to such date pursuant to Section 502, (B) if, as of such date, the
principal amount payable at the Stated Maturity of a Security is not
determinable, the principal amount of such Security which shall be deemed to be
Outstanding shall be the amount as specified or determined as contemplated by
Section 301, (C) the principal amount of a Security denominated in one or more
foreign currencies or currency units which shall be deemed to be Outstanding
shall be the U.S. dollar equivalent, determined as of such date in the manner
provided as contemplated by Section 301, of the principal amount of such
Security (or, in the case of a Security described in Clause (A) or (B) above, of
the amount determined as provided in such Clause), and (D) Securities owned by
the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent, waiver or other action, only Securities which the Trustee actually
knows to be 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 of such
other obligor.
"Paying Agent" means, if not the Company, then any Person authorized by
the Company to pay the principal of or any premium or interest on any Securities
on behalf of the Company.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, 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 any premium and
interest on the Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means any
vice president, any assistant vice-president, any trust officer or assistant
trust officer of the Trustee assigned to the Trustee's corporate trust
department and customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
<PAGE>
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Debt" of the Company means the principal of, premium, if any,
interest on and any other payment due pursuant to any of the following, whether
outstanding at the date of execution of this Indenture or thereafter incurred,
created or assumed: (a) all indebtedness of the Company evidenced by notes,
debentures, bonds or other securities sold by the Company for money, excluding
Junior Subordinated Securities, but including all first mortgage bonds of the
Company outstanding from time to time; (b) all indebtedness of others of the
kinds described in the preceding clause (a) assumed by or guaranteed in any
manner by the Company, including through an agreement to purchase, contingent or
otherwise; and (c) all renewals, extensions or refundings of indebtedness of the
kinds described in any of the preceding clauses (a) and (b); unless, in the case
of any particular indebtedness, renewal, extension or refunding, the instrument
creating or evidencing the same or the assumption or guarantee of the same
expressly provides that such indebtedness, renewal, extension or refunding is
not superior in right of payment to or is pari passu with the Junior
Subordinated Securities.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed, except as provided in
Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"U.S. Government Obligation" has the meaning specified in Section 1304.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
Section 102. Compliance Certificates and Opinions. Upon any application
or request by the Company to the Trustee to take any action under any provision
of this Indenture, the Company shall furnish to the Trustee such certificates
and opinions as may be required under the Trust Indenture Act. Each such
certificate or opinion shall be given in the form of an Officers' Certificate,
if to be given by an officer of the Company, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the requirements of the Trust Indenture
Act and any other requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include,
<PAGE>
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(2) a statement that, in the opinion of each such individual, 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
(3) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. Acts of Holders; Record Dates. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Indenture to be given, made or taken by Holders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
<PAGE>
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.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Company may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date; provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be canceled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities of the relevant series on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities of the relevant series in
the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to join
in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record date may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 106, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard
<PAGE>
to all or any part of the principal amount of such Security or by one or more
duly appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
Section 105. Notices, Etc., to Trustee and Company. Any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office, Attention: Corporate Trust
Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed to it
at the address of its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company.
Section 106. Notice to Holders; Waiver. Where this Indenture provides
for notice to Holders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any notice
when mailed to a Holder in the aforesaid manner shall be conclusively deemed to
have been received by such Holder whether or not actually received by such
Holder. 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 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.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with a provision of the Trust Indenture Act which
is required under such Act to be a part of and govern this Indenture, the latter
provision shall control. If any provision of this Indenture modifies or excludes
any provision of the Trust Indenture Act which may be so modified or excluded,
the latter provision shall be deemed to apply to this Indenture as so modified
or to be excluded, as the case may be.
Section 108. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience onlY
and shall not affect the construction hereof.
Section 109. Successors and Assigns. All covenants and agreements in
this Indenture by the Company shall bind its successors and assigns, whether
so expressed or not.
Section 110. Separability Clause. In case any provision in this Indenture
or in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 111. Benefits of Indenture. Nothing in this Indenture or in the
Securities, express or implied, shall give to any Person, other than the parties
hereto, their successors hereunder, the Holders, and the holders of any Senior
Debt, any benefit or any legal or equitable right, remedy or claim under this
Indenture.
<PAGE>
Section 112. Governing Law. This Indenture and the Securities shall be
governed by and construed in accordance with the law of the State of New York,
without regard to conflicts of laws principles thereof.
Section 113. Legal Holidays. In any case where any Interest Payment
Date, Redemption Date or Stated Maturity of any Security shall not be a Business
Day at any Place of Payment, then (notwithstanding any other provision of this
Indenture or of the Securities (other than a provision of any Security which
specifically states that such provision shall apply in lieu of this Section))
payment of interest or principal (and premium, if any) need not be made at such
Place of Payment on such date, but may be made on the next succeeding Business
Day at such Place of Payment with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity, and no
interest shall accrue with respect to such payment for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be, to such next succeeding Business Day.
Section 114. Certain Matters Relating to Currencies. Whenever any
action or Act is to be taken hereunder by the Holders of Securities denominated
in different currencies or currency units, then for purposes of determining the
principal amount of Securities held by such Holders, the aggregate principal
amount of the Securities denominated in a foreign currency or currency unit
shall be deemed to be that amount of Dollars that could be obtained for such
principal amount on the basis of a spot exchange rate specified to the Trustee
for such series in an Officers' Certificate for exchanging such foreign currency
or currency unit into Dollars as of the date of the taking of such action or Act
by the Holders of the requisite percentage in principal amount of the
Securities.
The Trustee shall segregate moneys, funds and accounts held by the
Trustee in one currency or currency unit from any moneys, funds or accounts held
in any other currencies or currency units, notwithstanding any provision herein
that would otherwise permit the Trustee to commingle such amounts.
Section 115. Immunity of Incorporators, Stockholders, Officers and
Directors. No recourse shall be had for the payment of the principal of (and
premium, if any), or the interest, if any, on any Securities of any series, or
for any claim based thereon, or upon any obligation, covenant or agreement of
this Indenture, against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Company or of any successor corporation,
either directly or indirectly through the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment of penalty or otherwise; it being expressly agreed
and understood that this Indenture and all the Securities of each series are
solely corporate obligations, and that no personal liability whatever shall
attach to, or is incurred by, any incorporator, stockholder, officer or
director, past, present or future, of the Company or of any successor
corporation, either directly or indirectly through the Company or any successor
corporation, because of the incurring of the indebtedness hereby authorized or
under or by reason of any of the obligations, covenants or agreements contained
in this Indenture or in any of the Securities of any series, or to be implied
herefrom or therefrom; and that all such personal liability is hereby expressly
released and waived as a condition of, and as part of the consideration for, the
execution of this Indenture and the issuance of the Securities of each series.
Section 116. Counterparts. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
Section 117. Assignment to Affiliate. The Company will have the right
at all times to assign by indenture supplemental hereto any of its rights or
obligations under the Indenture to a direct, indirect, or wholly owned Affiliate
of the Company; provided that, in the event of any such assignment, the Company
will remain liable for all such obligations.
<PAGE>
ARTICLE TWO
Security Forms
Section 201. Forms Generally. The Securities of each series shall be in
substantially the form set forth in this Article, or in such other form as shall
be established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or Depositary therefor or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution thereof. If the form of Securities of any series
is established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 303 for the
authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.
Section 202. Form of Face of Security. [Insert any legend required by the
Internal Revenue Code and the regulations thereunder.]
<PAGE>
CINERGY GLOBAL RESOURCES, INC.
......................................
No. ......... $.....................
CUSIP NO.______________________
Cinergy Global Resources, Inc., a corporation duly organized and existing
under the laws of the state of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to
.............................................., or registered assigns, the
principal sum of ...................................... Dollars on
........................................................ [if the Security is to
bear interest prior to Maturity, insert: , and to pay interest thereon from
............. or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, ................... on ............ and
............ in each year, commencing ........., at the rate of ....% per annum,
until the principal hereof is paid or made available for payment. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, which shall be the
....... or ....... (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture].
[If the Security is not to bear interest prior to Maturity, insert: The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of ....% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are due
until they are paid or made available for payment. Interest on any overdue
principal or premium shall be payable on demand. Any such interest on overdue
principal or premium which is not paid on demand shall bear interest at the rate
of ......% per annum (to the extent that the payment of such interest on
interest shall be legally enforceable), from the date of such demand until the
amount so demanded is paid or made available for payment. Interest on any
overdue interest shall be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable,
insert: any such] interest on this Security will be made at the office or agency
of the Company maintained for that purpose in ............, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts [if applicable, insert:
;provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register].
Any payment on this Security due on any day which is not a Business Day
in the City of New York need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on the
due date and no interest shall accrue for the period from and after such date.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, [if subordinated, insert: including, without
limitation, provisions subordinating the payment of the principal hereof and any
premium and interest hereon to the payment in full of all Senior Debt as defined
in the Indenture] which such further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be duly
executed.
CINERGY GLOBAL RESOURCES, INC.
By............................................
<PAGE>
Section 203. Form of Reverse of Security. This Security is one of a duly
authorized issue of securities of the Company (herein called the "Securities"),
issued and to be issued in one or more series under an Indenture, dated as of
October 15, 1998 (herein called the "Indenture", which term shall have the
meaning assigned to it in such instrument), between the Company and The Fifth
Third Bank, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), and reference is hereby made to the
Indenture for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof [if applicable, insert: , limited in aggregate principal amount
to $...........].
[If applicable, insert: The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable, insert:
(1) on ........... in any year commencing with the year ...... and ending with
the year ...... through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [if
applicable, insert: on or after .........., 19..], as a whole or in part, at the
election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [if applicable, insert: on or
before ..............., ...%, and if redeemed] during the 12-month period
beginning ............. of the years indicated,
Redemption Redemption
Year Price Year Price
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption [if applicable, insert: (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]
[If applicable, insert: The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on ............ in
any year commencing with the year .... and ending with the year .... through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and (2) at any time [if
applicable, insert: on or after ............], as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during the 12-month period
beginning ............ of the years indicated,
Redemption Price For Redemption Price For
Redemption Through Redemption Otherwise Than
Operation of the Through Operation of the
Year Sinking Fund Sinking Fund
<PAGE>
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert: Notwithstanding the foregoing, the Company may not,
prior to ............., redeem any Securities of this series as contemplated by
[if applicable, insert: Clause (2) of] the preceding paragraph as a part of, or
in anticipation of, any refunding operation by the application, directly or
indirectly, of moneys borrowed having an interest cost to the Company
(calculated in accordance with generally accepted financial practice) of less
than .....% per annum.]
[If applicable, insert: The sinking fund for this series provides for the
redemption on ............ in each year beginning with the year ....... and
ending with the year ...... of [if applicable, insert: not less than $..........
("mandatory sinking fund") and not more than] $......... aggregate principal
amount of Securities of this series. Securities of this series acquired or
redeemed by the Company otherwise than through [if applicable, insert:
mandatory] sinking fund payments may be credited against subsequent [if
applicable, insert: mandatory] sinking fund payments otherwise required to be
made [if applicable, insert: , in the inverse order in which they become due].]
[If the Security is subject to redemption of any kind, insert: In the event
of redemption of this Security in part only, a new Security or Securities of
this series and of like tenor for the unredeemed portion hereof will be issued
in the name of the Holder hereof upon the cancellation hereof.]
[If subordinated, insert: The indebtedness evidenced by the Securities of
this series is, to the extent and in the manner provided in the Indenture,
expressly subordinate and subject in right of payment to the prior payment in
full of all Senior Debt of the Company (as defined in the Indenture) whether
outstanding at the date of the Indenture or thereafter incurred, and this
Security is issued subject to
the provisions of the Indenture with respect to such subordination. Each holder
and owner of this Security, by accepting the same, agrees to and shall be bound
by such provisions and authorizes the Trustee in his behalf to take such action
as may be necessary or appropriate to effectuate the subordination so provided
and appoints the Trustee his attorney-in-fact for such purpose.]
[If applicable, insert: The Indenture contains provisions for defeasance at
any time of [the entire indebtedness of this Security] [or] [certain restrictive
covenants and Events of Default with respect to this Security] [, in each case]
upon compliance with certain conditions set forth in the Indenture.]
[If the Security is not an Original Issue Discount Security, insert: If an
Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert: If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to insert: formula for determining the
amount. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
<PAGE>
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of a majority in principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders of
all Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 35% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee indemnity reasonably satisfactory to
the Trustee, and the Trustee shall not have received from the Holders of a
majority in principal amount of Securities of this series at the time
Outstanding a direction inconsistent with such request, and shall have failed to
institute any such proceeding, for 60 days after receipt of such notice, request
and offer of indemnity. The foregoing shall not apply to any suit instituted by
the Holder of this Security for the enforcement of any payment of principal
hereof or any premium or interest hereon on or after the respective due dates
expressed herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $....... and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this 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 this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
<PAGE>
Section 204. Form of Legend for Global Securities. Unless otherwise
specified as contemplated by Section 301 for the Securities evidenced thereby,
every Global Security authenticated and delivered hereunder shall bear a legend
in substantially the following form (or such other form as a securities exchange
or Depositary may request or require):
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee thereof. This Security may not be exchanged in whole or in part for a
Security registered, and no transfer of this Security in whole or in part may be
registered, in the name of any Person other than such Depositary or a nominee
thereof, except in the limited circumstances described in the Indenture.
Section 205. Form of Trustee's Certificate of Authentication. The Trustee's
certificates of authentication shall be in substantially the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
THE FIFTH THIRD BANK,
as Trustee
By...................................................................
Authorized Signatory
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 303,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series,
(1) the title of the Securities of the series (which shall distinguish
the Securities of the series from Securities of any other series);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture (except
for Securities authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities of the series pursuant to
Section 304, 305, 306, 906 or 1107 and except for any Securities which, pursuant
to Section 303, are deemed never to have been authenticated and delivered
hereunder);
(3) the Person to whom any interest on a Security of the series shall
be payable, if other than the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest;
(4) the date or dates on which the principal of any SecuritieS of
the series is payable;
(5) the rate or rates at which any Securities of the series shall bear
interest, if any, the date or dates from which any such interest shall accrue,
the Interest Payment Dates on which any such interest shall be payable, the
manner of determination of such Interest Payment Dates and the Regular Record
Date for any such interest payable on any Interest Payment Date;
<PAGE>
(6) the right, if any, to extend the interest payment periods and the
duration of such extension;
(7) the place or places where the principal of and any premium and
interest on any Securities of the series shall be payable;
(8) the period or periods within which, the price or prices at which
and the terms and conditions upon which any Securities of the series may be
redeemed, in whole or in part, at the option of the Company and, if other than
by a Board Resolution, the manner in which any election by the Company to redeem
the Securities shall be evidenced;
(9) the obligation, if any, of the Company to redeem or purchase any
Securities of the series pursuant to any sinking fund or analogous provisions or
at the option of the Holder thereof and the period or periods within which, the
price or prices at which and the terms and conditions upon which any Securities
of the series shall be redeemed or purchased, in whole or in part, pursuant to
such obligation;
(10) the denominations in which any Securities of the series shall be
issuable;
(11) if the amount of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts shall be determined;
(12) if other than the currency of the United States of America, the
currency, currencies or currency units in which the principal of or any premium
or interest on any Securities of the series shall be payable and the manner of
determining the equivalent thereof in the currency of the United States of
America for any purpose, including for purposes of the definition of
"Outstanding" in Section 101;
(13) if the principal of or any premium or interest on any Securities
of the series is to be payable, at the election of the Company or the Holder
thereof, in one or more currencies or currency units other than that or those in
which such Securities are stated to be payable, the currency, currencies or
currency units in which the principal of or any premium or interest on such
Securities as to which such election is made shall be payable, the periods
within which and the terms and conditions upon which such election is to be made
and the amount so payable (or the manner in which such amount shall be
determined);
(14) if other than the entire principal amount thereof, the portion of
the principal amount of any Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502;
(15) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more dates
prior to the Stated Maturity, the amount which shall be deemed to be the
principal amount of such Securities as of any such date for any purpose
thereunder or hereunder, including the principal amount thereof which shall be
due and payable upon any Maturity other than the Stated Maturity or which shall
be deemed to be Outstanding as of any date prior to the Stated Maturity (or, in
any such case, the manner in which such amount deemed to be the principal amount
shall be determined);
(16) if applicable, that the Securities of the series, in whole or any
specified part, shall be defeasible pursuant to Section 1302 or Section 1303 or
both such Sections;
(17) if applicable, that any Securities of the series shall be issuable
in whole or in part in the form of one or more Global Securities and, in such
case, the respective Depositaries for such Global Securities, the form of any
legend or legends which shall be borne by any such Global Security in addition
to or in lieu of that set forth in Section 204 and any circumstances in addition
to or in lieu of those set forth in Clause (2) of the last paragraph of Section
305 in which any such
<PAGE>
Global Security may be exchanged in whole or in part for Securities registered,
and any transfer of such Global Security in whole or in part may be registered,
in the name or names of Persons other than the Depositary for such Global
Security or a nominee thereof;
(18) any addition to or change in the Events of Default which applies
to any Securities of the series and any change in the right of the Trustee or
the requisite Holders of such Securities to declare the principal amount thereof
due and payable pursuant to Section 502;
(19) any addition to or change in the covenants set forth in Article
Ten which applies to Securities of the series;
(20) the applicability of, or any addition to or change in, Article
Fourteen with respect to the Securities of a series;
(21) Notwithstanding Section 902, any other terms of the Securities of
a series, which terms may be inconsistent with or vary the provisions of this
Indenture to effectuate aspects of such series not contemplated hereby,
including (without implied limitation), rights of, and actions which may be
taken by, the issuer of (i) a financial guarantee insurance policy or (ii)
another form of credit enhancement, liquidity or both.
All Securities of any one series shall be substantially identical
except as to date and principal amount and except as may otherwise be provided
in or pursuant to the Board Resolution referred to above and (subject to Section
303) set forth, or determined in the manner provided, in the Officers'
Certificate referred to above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
Section 302. Denominations. The Securities of each series shall be
issuable only in registered form without coupons and only in such denominations
as shall be specified as contemplated by Section 301. In the absence of any such
specified denomination with respect to the Securities of any series, the
Securities of such series shall be issuable in denominations of $1,000 and any
integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Company by its Chairman of the
Board, its Vice Chairman, its President, one of its Vice Presidents, or its
Treasurer. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities.
If the form or terms of the Securities of the series have been established by
or pursuant to a Board Resolution as permitted by Sections 201 and 301, in
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and (subject to Section 601) shall be fully protected in
relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or pursuant
to Board Resolution as permitted by Section 201, that such form has been
established in conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 301, that such terms have
been established in conformity with the provisions of this Indenture; and
(3) that such Securities, when authenticated and delivered by the
Trustee and 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 bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
to general equity principles and to such other matters as such counsel shall set
forth therein.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents (with
appropriate variations to reflect such future issuance) are delivered at or
prior to the authentication upon original issuance of the first Security of such
series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 309, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
Section 304. Temporary Securities. Pending the preparation of
definitive Securities of any series, the Company may execute, and upon Company
Order the Trustee shall authenticate and deliver, temporary Securities which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Securities
in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Securities may determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount. 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 and tenor.
<PAGE>
Section 305. Registration, Registration of Transfer and Exchange. The
Company shall cause to be kept at the Corporate Trust Office of the Trustee (the
"Security Registrar") a register (the register maintained in such office and in
any other office or agency of the Company in a Place of Payment being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of a series
at the office or agency of the Company in a Place of Payment for that series,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of the same series, of any authorized denominations and of like tenor and
aggregate principal amount.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
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
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange 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 304, 906 or 1107 not involving any transfer.
If the Securities of any series (or of any series and specified tenor)
are to be redeemed in part, the Company shall not be required (A) to issue,
register the transfer of or exchange any Securities of that series (or of that
series and specified tenor, as the case may be) during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of any such Securities selected for redemption under Section 1103 and
ending at the close of business on the day of such mailing, or (B) to register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except the unredeemed portion of any Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security or
a nominee thereof and delivered to such Depositary or nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (A) such Depositary (i) has notified the Company that it is
unwilling or unable to continue as Depositary for such Global Security or (ii)
has ceased to be a clearing agency registered under the Exchange Act, (B) there
<PAGE>
shall have occurred and be continuing an Event of Default with respect to such
Global Security or (C) there shall exist such circumstances, if any, in addition
to or in lieu of the foregoing as have been specified for this purpose as
contemplated by Section 301.
(3) Subject to Clause (2) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued in
exchange for a Global Security or any portion thereof shall be registered in
such names as the Depositary for such Global Security shall direct.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Section, Section 304, 306, 906 or 1107 or
otherwise, shall be authenticated and delivered in the form of, and shall be, a
Global Security, unless such Security is registered in the name of a Person
other than the Depositary for such Global Security or a nominee thereof.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If any
mutilated Security is surrendered to the Trustee, the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a new Security
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved. Except as
otherwise provided as contemplated by Section 301 with respect to any series of
Securities, interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
<PAGE>
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security of such series
and the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be given to each Holder of
Securities of such series in the manner set forth in Section 106, not less than
10 days prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names the
Securities of such series (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be listed,
and upon such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment pursuant to this Clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners. Prior to due presentment of a
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 Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of and any premium and (subject to Section 307) any interest on such
Security and for all other purposes whatsoever, whether or not such Security 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.
<PAGE>
None of the Company, the Trustee, any Paying Agent (if not the
Company) or the Security Registrar shall have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of a Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Section 309. Cancellation. All Securities surrendered for payment,
redemption, registration of transfer or exchange or for credit against any
sinking fund payment shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Securities held by the Trustee shall be disposed of as
directed by a Company Order; provided, however, that the Trustee shall not be
required to destroy such cancelled Securities.
Section 310. Computation of Interest. Except as otherwise specified as
contemplated by Section 301 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 311. CUSIP Numbers. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee may 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 FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture. This Indenture
shall upon Company Request cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture, when
(1) either (A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Securities 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 1003) have been delivered to the Trustee
for cancellation; or (B) all such Securities not theretofore delivered to the
Trustee for cancellation (i) have become due and payable, or (ii) will become
due and payable at their Stated Maturity within one year, or (iii) are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company, and the Company, in the case of (i), (ii) or
(iii) above, has deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose, money in an amount sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore delivered
to the Trustee for cancellation, for principal and any premium and interest to
the date of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be;
<PAGE>
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has 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.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
Section 402. Application of Trust Money. Subject to the provisions of
the last paragraph of Section 1003 and to Article Fourteen, if applicable, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
Remedies
Section 501. Events of Default. "Event of Default", wherever used
herein with respect to Securities of any series, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for a
period of 30 days; or
(2) default in the payment of the principal of or any premium on any
Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as due
by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with or which has expressly been included in this Indenture solely for the
benefit of a series of Securities other than that series), and continuance of
such default or breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 35% in principal amount of the
Outstanding Securities of that series 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
(5) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable Federal or state law, or appointing a
<PAGE>
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 90 consecutive days; or
(6) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or order
for relief in respect of the Company in an involuntary case or proceeding under
any applicable Federal or state bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or state law, or
the consent by it to the filing of such petition or to the appointment of, or
taking possession of the Company or of any substantial part of its property by,
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official or the making by the Company of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by the
Company in furtherance of any such action; or
(7) any other Event of Default established pursuant to Section 301 with
respect to Securities of that series.
Section 502. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default (other than an Event of Default specified in Section 501(5) or
501(6)) with respect to Securities of any series at the time Outstanding occurs
and is continuing, then in every such case the Trustee or the Holders of not
less than 35% in principal amount of the Outstanding Securities of that series
may declare the principal amount of all the Securities of that series (or, if
any Securities of that series are Original Issue Discount Securities, such
portion of the principal amount of such Securities as may be specified by the
terms thereof) to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any such declaration
such principal amount (or specified amount) shall become immediately due and
payable. If an Event of Default specified in Section 501(5) or 501(6) with
respect to Securities of any series at the time Outstanding occurs, the
principal amount of all the Securities of that series (or, if any Securities of
that series are Original Issue Discount Securities, such portion of the
principal amount of such Securities as may be specified by the terms thereof)
shall automatically, and without any declaration or other action on the part of
the Trustee or any Holder, become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if,
(1) the Company has paid or deposited with the Trustee a sum sufficient
to pay (A) all overdue interest on all Securities of that series, (B) the
principal of (and premium, if any, on) any Securities of that series which have
become due otherwise than by such declaration of acceleration and any interest
thereon at the rate or rates prescribed therefor in such Securities, (C) all
sums paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series which
have become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
<PAGE>
Section 503. Collection of Indebtedness and Suits for Enforcement
by Trustee. The Company covenants that if
(1) default is made in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for a period of
30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and 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.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim. In case of any judicial
proceeding relative to the Company (or any other obligor upon the Securities),
its property or its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all actions
authorized under the Trust Indenture Act in order to have claims of the Holders
and the Trustee allowed in any such proceeding. In particular, the Trustee shall
be authorized to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
Section 505. Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 506. Application of Money Collected. Any money collected by the
Trustee pursuant to this Article, subject to Article Fourteen, if applicable,
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
or any premium or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
<PAGE>
First: To the payment of all amounts due the Trustee under Section 607;
and
Second: To the payment of the amounts then due and unpaid for principal
of and any premium and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal and any premium and interest, respectively
Third: The balance, if any, to the Company.
Section 507. Limitation on Suits. No Holder of any Security of any
series shall have any right to institute any proceeding, judicial or otherwise,
with respect to this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 35% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series; it being
understood and intended that no one or more of such Holders shall have any right
in any manner whatever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other of such
Holders, or to obtain or to seek to obtain priority or preference over any other
of such Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest. Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of and any premium and
(subject to Section 307) interest on such Security on the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
Section 509. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every such case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
Section 510. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in the last paragraph of Section 306, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders 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.
<PAGE>
Section 511. Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any Holder of any Securities to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
Section 512. Control by Holders. The Holders of a majority in principal
amount of the Outstanding Securities of any series 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, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults. The Holders of not less than a
majority in principal amount of the Outstanding Securities of any series may on
behalf of the Holders of all the Securities of such series waive any past
default hereunder with respect to such series and its consequences, except a
default
(1) in the payment of the principal of or any premium or interest on
any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 514. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture, or in any suit against the Trustee for
any action taken, suffered or omitted by it as Trustee, a court may require any
party litigant in such suit to file an undertaking to pay the costs of such
suit, and may assess costs against any such party litigant, in the manner and to
the extent provided in the Trust Indenture Act; provided that this Section shall
not apply to any suit instituted by the Trustee or to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of Outstanding Securities (of any series), or to any suit instituted by a
Holder for the enforcement of the payment of the principal of or any premium or
interest on any Security on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date).
Section 515. Waiver of Usury, Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, 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 covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
<PAGE>
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities. The duties and
responsibilities of the Trustee shall be as provided by the Trust Indenture Act.
Notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any 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. Whether or not therein expressly
so provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 602. Notice of Defaults. If a default occurs hereunder with
respect to Securities of any series, the Trustee shall give the Holders of
Securities of such series notice of such default as and to the extent provided
by the Trust Indenture Act, unless such default shall have been cured or waived;
provided, however, that in the case of any default of the character specified in
Section 501(4) with respect to Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
Section 603. Certain Rights of Trustee. Subject to the provisions of
Section 601:
(1) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any resolution
of the Board of Directors shall be sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(4) 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;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity reasonably satisfactory to the
Trustee against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;
(6) 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.
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
<PAGE>
Section 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
Section 605. May Hold Securities. The Trustee, any Authenticating
Agent, any Paying Agent, any Security Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal
with the Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Security Registrar or such other agent.
Section 606. Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
Section 607. Compensation and Reimbursement. The Company agrees
(1) to pay to the Trustee from time to time such compensation as shall
be agreed to in writing between the Company and the Trustee 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);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses 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 have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 607, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 501(5) or Section 501(6), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
Section 608. Conflicting Interests. If the Trustee has or shall acquire
a conflicting interest within the meaning of the Trust Indenture Act, the
Trustee shall either eliminate such interest or resign, to the extent and in the
manner provided by, and subject to the provisions of, the Trust Indenture Act
and this Indenture. To the extent permitted by such Act, the Trustee shall not
be deemed to have a conflicting interest by virtue of being a trustee under this
Indenture with respect to Securities of more than one series.
<PAGE>
Section 609. Corporate Trustee Required; Eligibility. There shall at
all times be one (and only one) Trustee hereunder with respect to the Securities
of each series, which may be Trustee hereunder for Securities of one or more
other series. Each Trustee shall be a Person that is eligible pursuant to the
Trust Indenture Act to act as such and has a combined capital and surplus of at
least $50,000,000. If any such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section and to the extent permitted by
the Trust Indenture Act, the combined capital and surplus of such Person shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee with respect to the
Securities of any series shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor. No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 611.
The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide Holder
of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
<PAGE>
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series to all Holders
of Securities of such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor. In case of the
appointment hereunder of a successor Trustee with respect to all Securities,
every such successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in the
first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
<PAGE>
Section 612. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against Company. If and
when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Securities), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the Company
(or any such other obligor). For purposes of Section 311(b) (4) and (6) of the
Trust Indenture Act, the following terms shall mean:
(a) "cash transaction" means any transaction in which full payment for
goods or securities sold is made within seven days after delivery of the goods
or securities in currency or in checks or other orders drawn upon banks or
bankers and payable upon demand; and
(b) "self-liquidating paper" means any draft, bill of exchange,
acceptance or obligation which is made, drawn, negotiated or incurred by the
Company for the purpose of financing the purchase, processing, manufacturing,
shipment, storage or sale of goods, wares or merchandise and which is secured by
documents evidencing title to, possession of, or a lien upon, the goods, wares
or merchandise or the receivables or proceeds arising from the sale of the
goods, wares or merchandise previously constituting the security, provided the
security is received by the Trustee simultaneously with the creation of the
creditor relationship with the Company arising from the making, drawing,
negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.
Section 614. Appointment of Authenticating Agent. From time to time the
Trustee may appoint one or more Authenticating Agents with respect to one or
more series of Securities, which may include the Company or any of its
Affiliates, with power to act on behalf of the Trustee to authenticate
Securities of such series issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
306, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
<PAGE>
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
THE FIFTH THIRD BANK,
as Trustee
By...................................................................
Authorized Signatory
By...................................................................
As Authenticating Agent
By...................................................................
Authorized Officer
Section 615. Indemnification. The Company agrees to indemnify the
Trustee for, and hold it harmless against, any loss, liability or expense
incurred by it, arising out of or in connection with the acceptance or
administration of this Indenture or the trusts hereunder or the performance of
its duties hereunder or under any related document, including the reasonable
costs and expenses of defending itself against or investigating any claim or
liability with respect to the Securities, except to the extent that any such
loss, liability or expense was due to its own negligence or bad faith. The
Company need not pay for any settlement made without its consent. The
obligations of the Company to the Trustee under this Section shall survive the
satisfaction and discharge of this Indenture and payment in full and/or
retirement of the Securities.
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
<PAGE>
(1) on each Regular Record Date, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders of Securities
of each series as of such Regular Record Date, and
(2) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished; provided, however, that if and so long as the Trustee shall be the
Security Registrar, no such list need be furnished.
Section 702. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders contained in the most recent list as provided
in Section 701 and the names and addresses of Holders received by the Trustee in
its capacity as Security Registrar. The Trustee may destroy any list furnished
to it as provided in Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 703. Reports by Trustee. The Trustee shall transmit to Holders
such reports concerning the Trustee and its actions under this Indenture as may
be required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant thereto. If required by Section 313(a) of the Trust Indenture
Act, the Trustee shall, within sixty days after each May 15 following the date
of this Indenture deliver to Holders a brief report, dated as of such May 15,
which complies with the provisions of such Section 313(a).
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company.
Section 704. Reports by Company. The Company shall file with the
Trustee and the Commission, and transmit to Holders, such information, documents
and other reports, and such summaries thereof, as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided pursuant to such
Act; provided that any such information, documents or reports required to be
filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
shall be filed with the Trustee within 15 days after the same is so required to
be filed with the Commission.
<PAGE>
ARTICLE EIGHT
Consolidation, Merger and Sale
Section 801. Consolidations and Mergers Permitted. Nothing contained in
this Indenture or in any of the Securities shall prevent any consolidation or
merger of the Company with or into any other corporation or corporations
(whether or not affiliated with the Company), or successive consolidations or
mergers in which the Company or its successor or successors shall be a party or
parties, or shall prevent any sale, conveyance, transfer or other disposition of
the property of the Company or its successor or successors as an entirety, or
substantially as an entirety, to any other corporation (whether or not
affiliated with the Company or its successor or successors) authorized to
acquire and operate the same; provided, however, the Company hereby covenants
and agrees that, upon any such consolidation, merger, sale, conveyance, transfer
or other disposition, the due and punctual payment of the principal of (premium,
if any) and interest on all of the Securities of all series in accordance with
the terms of each series, according to their tenor, and the due and punctual
performance and observance of all the covenants and conditions of this Indenture
with respect to each series or established with respect to such series to be
kept or performed by the Company, shall be expressly assumed, by supplemental
indenture (which shall conform to the provisions of the Trust Indenture Act as
then in effect) satisfactory in form to the Trustee executed and delivered to
the Trustee by the entity formed by such consolidation, or into which the
Company shall have been merged, or by the entity which shall have acquired such
property.
Section 802. Rights and Duties of Successor Company. In case of any
such consolidation, merger, sale, conveyance, transfer or other disposition and
upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the due and punctual payment of the principal of, premium, if any, and
interest on all of the Securities of all series outstanding and the due and
punctual performance of all of the covenants and conditions of this Indenture or
established with respect to each series of the Securities to be performed by the
Company with respect to each series, such successor corporation shall succeed to
and be substituted for the Company, with the same effect as if it had been named
herein as the party of the first part, and thereupon the predecessor corporation
shall be relieved of all obligations and covenants under this Indenture and the
Securities. Such successor corporation thereupon may cause to be signed, and may
issue either in its own name or in the name of the Company or any other
predecessor obligor on the Securities, any or all of the Securities issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor company, instead
of the Company, and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the officers
of the predecessor Company to the Trustee for authentication, and any Securities
which such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Securities so issued shall in
all respects have the same legal rank and benefit under this Indenture as
the Securities theretofore or thereafter issued in accordance with the terms of
this Indenture as though all of such Securities had been issued at the date of
the execution hereof.
Nothing contained in this Indenture or in any of the Securities shall
prevent the Company from merging into itself or acquiring by purchase or
otherwise all or any part of the property of any other corporation (whether or
not affiliated with the Company).
Section 803. Opinion of Counsel. The Trustee may receive an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale,
conveyance, transfer or other disposition, and any such assumption, comply with
the provisions of this Article.
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
<PAGE>
(1) to evidence the succession of another Person to the Company to the
assumption by any such successor of the covenants of the Company herein and in
the Securities pursuant to Article Eight or Section 117; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be for
the benefit of less than all series of Securities, stating that such covenants
are expressly being included solely for the benefit of such series) or to
surrender any right or power herein conferred upon the Company; provided,
however, that in respect of any such additional covenant, 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 an immediate enforcement upon such default or may limit the
remedies available to the Trustee upon such 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 default;
(3) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional Events of
Default are to be for the benefit of less than all series of Securities, stating
that such additional Events of Default are expressly being included solely for
the benefit of such series); or
(4) to add to or change any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the issuance of Securities
in bearer form, registrable or not registrable as to principal, and with or
without interest coupons, or to permit or facilitate the issuance of Securities
in uncertificated form; or
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that any such
addition, change or elimination (A) shall neither (i) apply to any Security of
any series created prior to the execution of such supplemental indenture and
entitled to the benefit of such provision nor (ii) modify the rights of the
Holder of any such Security with respect to such provision or (B) shall become
effective only when there is no such Security Outstanding; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Securities of one or more series and
to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by one or more successor Trustees, pursuant to the requirements of
Section 611; or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Indenture, provided that such action pursuant to this Clause (9)
shall not adversely affect the interests of the Holders of Securities of any
series in any material respect.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations which may be therein contained.
Any supplemental indenture authorized by the provisions of this Section
may be executed by the Company and the Trustee without the consent of the
holders of any of the Securities at the time outstanding, notwithstanding any of
the provisions of Section 902.
Section 902. Supplemental Indentures With Consent of Holders. With
the consent of the Holders of not less than a majority in principal amount of
<PAGE>
the Outstanding Securities of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may 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 of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of principal of or interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal of an Original Issue
Discount Security or any other Security which would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502, or
change any Place of Payment where, or the coin or currency in which, any
Security or any premium or interest thereon is payable, affect the applicability
of Article Fourteen to any Security, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity thereof (or,
in the case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1007, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby; provided,
however, that this clause shall not be deemed to require the consent of any
Holder with respect to changes in the references to "the Trustee" and
concomitant changes in this Section and Section 1007, or the deletion of this
proviso, in accordance with the requirements of Sections 611 and 901(8).
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 the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series; provided that no
such supplemental indenture shall modify any provision of this Indenture so as
to adversely affect the rights of any holder of outstanding Senior Debt to the
benefits of Article Fourteen.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but 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.
Section 904. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
<PAGE>
Section 905. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall, to the extent required by
law, conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest. The Company
covenants and agrees for the benefit of each series of Securities that it will
duly and punctually pay the principal of and any premium and interest on the
Securities of that series in accordance with the terms of the Securities and
this Indenture.
Section 1002. Maintenance of Office or Agency. The Company will
maintain in each Place of Payment for any series of Securities an office or
agency where Securities of that series 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. 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, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also 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 1003. 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 will, on or before each due date of the principal of or any
premium or interest on any of the Securities of that series, segregate and hold
in trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal and any premium and interest so becoming due until such sums shall
be paid to such Persons or otherwise disposed of as herein provided and will
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, on or before each due date of the principal of or
any premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will 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 will (1) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (2) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent for payment in
respect of the Securities of that series.
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
by Company Order 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 trusts 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.
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 any premium or
interest on any Security of any series and remaining unclaimed for 18 months
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company 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
<PAGE>
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 a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, New York, 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, any unclaimed balance of such money
then remaining will be repaid to the Company.
Section 1004. Statement by Officers as to Default. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal year of the
Company ending after the date hereof, an Officers' Certificate, stating whether
or not to the best knowledge of the signers thereof the Company is in default in
the performance and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and, if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have knowledge.
Section 1005. Maintenance of Properties. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section shall prevent the
Company from discontinuing the operation or maintenance of any of such
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business or the business of any Subsidiary.
Section 1006. Payment of Taxes and Other Claims. The Company will pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any Subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
Section 1007. Waiver of Certain Covenants. Except as otherwise
specified as contemplated by Section 301 for Securities of such series, the
Company may, with respect to the Securities of any series, omit in any
particular instance to comply with any term, provision or condition set forth in
any covenant provided pursuant to Section 301(19), 901(2) or 901(7) for the
benefit of the Holders of such series if before the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding Securities
of such series shall, by Act of such Holders, either waive such compliance in
such instance or generally waive compliance with such term, provision or
condition, but no such waiver shall extend to or affect such term, provision 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 term, provision or condition shall remain in full force
and effect.
Section 1008. Calculation of Original Issue Discount. The Company shall
file with the Trustee promptly at the end of each calendar year a written notice
specifying the amount of original issue discount (including daily rates and
accrual periods) accrued on Outstanding Securities as of the end of such year.
<PAGE>
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article. Securities of any series which
are redeemable before their Stated Maturity shall be redeemable in accordance
with their terms and (except as otherwise specified as contemplated by Section
301 for such Securities) in accordance with this Article.
Section 1102. Election to Redeem; Notice to Trustee. The election of
the Company to redeem any Securities shall be evidenced by a Board Resolution or
in another manner specified as contemplated by Section 301 for such Securities.
In case of any redemption at the election of the Company the Company shall, at
least 45 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities of such series to be
redeemed. In the case of any redemption of Securities prior to the expiration of
any restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.
Section 1103. Selection by Trustee of Securities to Be Redeemed. If
less than all the Securities of any series are to be redeemed (unless all the
Securities of such series and of a specified tenor are to be redeemed or unless
such redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities of such series not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of a portion
of the principal amount of any Security of such series, provided that the
unredeemed portion of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all the Securities of such series
are to be redeemed (unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption in accordance with the
preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
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 amount of such Securities which has been or is to be
redeemed.
Section 1104. Notice of the Redemption. Notice of redemption shall be
given by mail not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be redeemed
and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
<PAGE>
(3) if less than all the Outstanding Securities of any series
consisting of more than a single Security are to be redeemed, the identification
(and, in the case of partial redemption of any such Securities, the principal
amounts) of the particular Securities to be redeemed and, if less than all the
Outstanding Securities of any series consisting of a single Security are to be
redeemed, the principal amount of the particular Security to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(5) the place or places where each such Security is to be surrendered
for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Security designated for redemption as a whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Security.
Section 1105. Deposit of Redemption Price. On or before any Redemption
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Securities which are to be redeemed on that date.
Section 1106. Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
Section 1107. Securities Redeemed in Part. Any Security which is to be
redeemed only in part shall be surrendered at a Place of Payment therefor (with,
if the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing), and
the Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge, a new Security or Securities of
the same series and of like tenor, of any authorized denomination as requested
by such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered; provided,
however, that a Depositary need not surrender a Global Security for a partial
redemption and may be authorized to make a notation on such Global Security of
such partial redemption. In the case of a partial redemption of a Global
Security, the Depositary, and in turn, the participants in the Depositary, shall
have the responsibility to select any Securities to be redeemed by random lot.
<PAGE>
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Securities of any
series except as otherwise specified as contemplated by Section 301 for such
Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of such Securities is herein referred to as an "optional sinking fund
payment". If provided for by the terms of any Securities, the cash amount of any
sinking fund payment may be subject to reduction as provided in Section 1202.
Each sinking fund payment shall be applied to the redemption of Securities as
provided for by the terms of such Securities.
Section 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other than any
previously called for redemption) and (2) may apply as a credit Securities of a
series which have been redeemed either at the election of the Company pursuant
to the terms of such Securities or through the application of permitted optional
sinking fund payments pursuant to the terms of such Securities, in each case in
satisfaction of all or any part of any sinking fund payment with respect to any
Securities of such series required to be made pursuant to the terms of such
Securities as and to the extent provided for by the terms of such Securities;
provided that the Securities to be so credited have not been previously so
credited. The Securities to be so credited shall be received and credited for
such purpose by the Trustee at the Redemption Price, as specified in the
Securities so to be redeemed, for redemption through operation of the sinking
fund and the amount of such sinking fund payment shall be reduced accordingly.
Section 1203. Redemption of Securities for Sinking Fund. Not less than
45 days prior to each sinking fund payment date for any Securities, the Company
will deliver to the Trustee an Officers' Certificate specifying the amount of
the next ensuing sinking fund payment for such Securities pursuant to the terms
of such Securities, 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 Securities pursuant to Section 1202 and will also
deliver to the Trustee any Securities to be so delivered. Not less than 30 days
prior to 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 1103 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 1104. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
1106 and 1107.
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Company's Option to Effect Defeasance or Covenant
Defeasance. The Company may elect, at its option at any time, to have Section
1302 or Section 1303 applied to any Securities or any series of Securities, as
the case may be, designated pursuant to Section 301 as being defeasible pursuant
to such Section 1302 or 1303, in accordance with any applicable requirements
provided pursuant to Section 301 and upon compliance with the conditions set
forth below in this Article. Any such election shall be evidenced by a Board
Resolution or in another manner specified as contemplated by Section 301 for
such Securities.
Section 1302. Defeasance and Discharge. Upon the Company's exercise of
its option (if any) to have this Section applied to any Securities or any series
<PAGE>
of Securities, as the case may be, the Company shall be deemed to have been
discharged from its obligations with respect to such Securities as provided in
this Section on and after the date the conditions set forth in Section 1304 are
satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such Securities and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), subject to the following which shall
survive until otherwise terminated or discharged hereunder: (1) the rights of
Holders of such Securities to receive, solely from the trust fund described in
Section 1304 and as more fully set forth in such Section, payments in respect of
the principal of and any premium and interest on such Securities when payments
are due, (2) the Company's obligations with respect to such Securities under
Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and (4) this Article. Subject to
compliance with this Article, the Company may exercise its option (if any) to
have this Section applied to any Securities notwithstanding the prior exercise
of its option (if any) to have Section 1303 applied to such Securities.
Section 1303. Covenant Defeasance. Upon the Company's exercise of its
option (if any) to have this Section applied to any Securities or any series of
Securities, as the case may be, (1) the Company shall be released from its
obligations under Section 801, Sections 1005 through 1006, inclusive, and any
covenants provided pursuant to Section 301(19), 901(2) or 901(7) for the benefit
of the Holders of such Securities and (2) the occurrence of any event specified
in Sections 501(4) (with respect to any of Section 801, Sections 1005 through
1006, inclusive, and any such covenants provided pursuant to Section 301(19),
901(2) or 901(7)), and 501(7) shall be deemed not to be or result in an Event of
Default in each case with respect to such Securities as provided in this Section
on and after the date the conditions set forth in Section 1304 are satisfied
(hereinafter called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that, with respect to such Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent so specified
in the case of Section 501(4)) or Article Fourteen, whether directly or
indirectly by reason of any reference elsewhere herein to any such Section or
Article or by reason of any reference in any such Section or Article to any
other provision herein or in any other document, but the remainder of this
Indenture and such Securities shall be unaffected thereby.
Section 1304. Conditions to Defeasance or Covenant Defeasance. The
following shall be the conditions to the application of Section 1302 or Section
1303 to any Securities or any series of Securities, as the case may be:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the requirements
contemplated by Section 609 and agrees to comply with the provisions of this
Article applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money in an amount, or
(C) a combination thereof, in each case sufficient, in the opinion of a firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or any such other qualifying trustee) to pay and discharge, the
principal of and any premium and interest on such Securities on the respective
Stated Maturities, in accordance with the terms of this Indenture and such
Securities. As used herein, "U.S. Government Obligation" means any security
which is (i) a direct obligation of the United States of America for the payment
of which the full faith and credit of the United States of America is pledged or
(ii) an obligation of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof. (2) In the event of an election
to have Section 1302 apply to any Securities or any series of Securities, as the
<PAGE>
case may be, the Company shall have delivered to the Trustee an Opinion of
Counsel stating that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of
this instrument, there has been a change in the applicable Federal income tax
law, in either case (A) or (B) to the effect that, and based thereon such
opinion shall confirm that, the Holders of such Securities will not recognize
gain or loss for Federal income tax purposes as a result of the deposit,
Defeasance and discharge to be effected with respect to such Securities and will
be subject to Federal income tax on the same amount, in the same manner and at
the same times as would be the case if such deposit, Defeasance and discharge
were not to occur.
(3) In the event of an election to have Section 1303 apply to any
Securities or any series of Securities, as the case may be, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of such Securities will not recognize gain or loss for Federal income
tax purposes as a result of the deposit and Covenant Defeasance to be effected
with respect to such Securities and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would be the case if
such deposit and Covenant Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an Officers'
Certificate to the effect that neither such Securities nor any other Securities
of the same series, if then listed on any securities exchange, will be delisted
as a result of such deposit.
(5) No event which is, or after notice or lapse of time or both would
become, an Event of Default with respect to such Securities or any other
Securities shall have occurred and be continuing at the time of such deposit or,
with regard to any such event specified in Sections 501(5) and (6), at any time
on or prior to the 90th day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause the Trustee
to have a conflicting interest within the meaning of the Trust Indenture Act
(assuming all Securities are in default within the meaning of such Act).
(7) Such Defeasance or Covenant Defeasance shall not result in a breach
or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which it is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in the
trust arising from such deposit constituting an investment company within the
meaning of the Investment Company Act unless such trust shall be registered
under such Act or exempt from registration thereunder.
(9) At the time of such deposit, (A) no default in the payment of any
principal of or premium or interest on any Senior Debt shall have occurred and
be continuing, (B) no event of default with respect to any Senior Debt shall
have resulted in such Senior Debt becoming, and continuing to be, due and
payable prior to the date on which it would otherwise have become due and
payable (unless payment of such Senior Debt has been made or duly provided for),
and (C) no other event of default with respect to any Senior Debt shall have
occurred and be continuing permitting (after notice or lapse of time or both)
the holders of such Senior Debt (or a trustee on behalf of such holders) to
declare such Senior Debt due and payable prior to the date on which it would
otherwise have become due and payable.
(10) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been
complied with.
Section 1305. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Miscellaneous Provisions. Subject to the provisions of the last paragraph
of Section 1003, all money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee or other qualifying trustee (solely
<PAGE>
for purposes of this Section and Section 1306, the Trustee and any such other
trustee are referred to collectively as the "Trustee") pursuant to Section 1304
in respect of any Securities shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any such Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities, of all sums due and to become due thereon in respect of
principal and any premium and interest, but money so held in trust need not be
segregated from other funds except to the extent required by law.
Money and U.S. Government Obligations so held in trust shall not be
subject to the provisions of Article Fourteen.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect the Defeasance or Covenant Defeasance, as the case may be,
with respect to such Securities.
Section 1306. Reinstatement. If the Trustee or the Paying Agent is
unable to apply any money in accordance with this Article with respect to any
Securities by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the obligations under this Indenture and such Securities from which the Company
has been discharged or released pursuant to Section 1302 or 1303 shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article with respect to such Securities, until such time as the Trustee or
Paying Agent is permitted to apply all money held in trust pursuant to Section
1305 with respect to such Securities in accordance with this Article; provided,
however, that if the Company makes any payment of principal of or any premium or
interest on any such Security following such reinstatement of its obligations,
the Company shall be subrogated to the rights (if any) of the Holders of such
Securities to receive such payment from the money so held in trust.
ARTICLE FOURTEEN
Junior Subordinated Securities
Section 1401. Certain Securities Subordinate to Senior Debt. As
provided pursuant to Section 301 or in a supplemental indenture, the Company may
issue one or more series of Securities subject to the provisions of this Article
Fourteen, and each Holder of a Security of a series so issued ("Junior
Subordinated Securities"), whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest on all
Junior Subordinated Securities issued with respect to which this Article
Fourteen applies shall, to the extent and in the manner hereinafter set forth,
be subordinate and subject in right of payment to the prior payment in full of
all Senior Debt, whether outstanding at the date of this Indenture or thereafter
incurred.
No provision of this Article Fourteen shall prevent the occurrence of
any default or Event of Default hereunder.
Section 1402. Payment Over of Proceeds Upon Default. In the event and
during the continuation of any default in the payment of principal, premium,
interest or any other payment due on any Senior Debt continuing beyond the
<PAGE>
period of grace, if any, specified in the instrument evidencing such Senior
Debt, unless and until such default shall have been cured or waived or shall
have ceased to exist, or in the event that the maturity of any Senior Debt has
been accelerated because of a default, then no payment shall be made by the
Company with respect to the principal (including redemption and sinking fund
payments) of, or premium, if any, or interest on the Junior Subordinated
Securities.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee or any holder when such payment is prohibited by the
preceding paragraph of this Section 1402, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Debt or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Debt may have been
issued, as their respective interests may appear, but only to the extent that
the holders of the Senior Debt (or their representative or representatives or a
trustee) notify the Trustee within 90 days of such payment of the amounts then
due and owing on the Senior Debt and only the amounts specified in such notice
to the Trustee shall be paid to the holders of Senior Debt.
Section 1403. Payment Over of Proceeds Upon Dissolution, Etc. Upon any
payment by the Company, or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due or to become due upon all Senior Debt shall
first be paid in full, or payment thereof provided for in money in accordance
with its terms, before any payment is made on account of the principal (and
premium, if any) or interest on the Junior Subordinated Securities; and upon any
such dissolution or winding-up or liquidation or reorganization any payment by
the Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of the Junior
Subordinated Securities or the Trustee would be entitled, except for the
provisions of this Article Fourteen, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the Holders of the Junior
Subordinated Securities or by the Trustee under this Indenture if received by
them or it, directly to the holders of Senior Debt (pro rata to such holders on
the basis of the respective amounts of Senior Debt held by such holders, as
calculated by the Company) or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Debt may have been issued, as their respective interests
may appear, to the extent necessary to pay all Senior Debt in full, in money or
money's worth, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Debt, before any payment or distribution is made to
the holders of Junior Subordinated Securities or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee or the holders of the Junior Subordinated Securities before all Senior
Debt is paid in full, or provision is made for such payment in money in
accordance with its terms, such payment or distribution shall be held in trust
for the benefit of and shall be paid over or delivered to the holders of Senior
Debt or their representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any Senior Debt
may have been issued, as their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior Debt remaining unpaid
to the extent necessary to pay all Senior Debt in full in money in accordance
with its terms, after giving effect to any concurrent payment or distribution to
or for the holders of such Senior Debt.
For purposes of this Article Fourteen, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Fourteen with
respect to the Junior Subordinated Securities to the payment of all Senior Debt
which may at the time be outstanding; provided that (i) the Senior Debt is
assumed by the new corporation, if any, resulting from any such reorganization
<PAGE>
or readjustment, and (ii) the rights of the holders of the Senior Debt are not,
without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article Eight hereof shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the proposes of this
Section 1403 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
Eight hereof. Nothing in Section 1402 or in this Section 1403 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 607.
Section 1404. Subrogation to Rights of Holders of Senior Debt. Subject
to the payment in full of all Senior Debt, the rights of the holders of the
Junior Subordinated Securities shall be subrogated to the rights of the holders
of Senior Debt to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Debt; and, for the purposes
of such subrogation, no payment or distributions to the holders of the Senior
Debt of any cash, property or securities to which the holders of the Junior
Subordinated Securities or the Trustee would be entitled except for the
provisions of this Article Fourteen, and no payment over pursuant to the
provisions of this Article Fourteen, to or for the benefit of the holders of
Senior Debt by holders of the Junior Subordinated Securities or the Trustee,
shall, as between the Company, its creditors other than holders of Senior Debt,
and the Holders of the Junior Subordinated Securities, be deemed to be a payment
by the Company to or on account of the Senior Debt. It is understood that the
provisions of this Article Fourteen are and are intended solely for the purposes
of defining the relative rights of the holders of the Junior Subordinated
Securities, on the one hand, and the holders of the Senior Debt on the other
hand.
Nothing contained in this Article Fourteen or elsewhere in this
Indenture or in the Junior Subordinated Securities is intended to or shall
impair, as between the Company, its creditors other than the holders of Senior
Debt, and the holders of the Junior Subordinated Securities, the obligation of
the Company, which is absolute and unconditional, to pay to the holders of the
Junior Subordinated Securities the principal of (and premium, if any) and
interest on the Junior Subordinated Securities as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the holders of the Junior Subordinated Securities
and creditors of the Company other than the holders of the Senior Debt, nor
shall anything herein or therein prevent the Trustee or the holder of any Junior
Subordinated Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Fourteen of the holders of Senior Debt in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article Fourteen, the Trustee, subject to the provision of Article Six,
and the Holders of the Junior Subordinated Securities shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
such dissolution, winding-up, liquidation or reorganization, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Junior Subordinated Securities, for the purposes of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior Debt and
other indebtedness of the Company, the amount hereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Fourteen.
Section 1405. Trustee to Effectuate Subordination. Each Holder of a
Junior Subordinated Security by his acceptance thereof authorizes and directs
the Trustee in his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article Fourteen and appoints
the Trustee his attorney-in-fact for any and all such purposes.
Section 1406. Notice to Trustee. The Company shall give prompt written
notice to a Responsible Officer of the Trustee of any fact known to the Company
which would prohibit the making of any payment of monies to or by the Trustee in
<PAGE>
respect of the Junior Subordinated Securities pursuant to the provisions of this
Article Fourteen. Notwithstanding the provisions of this Article Fourteen or any
other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment of monies to or by the Trustee in respect of the Junior Subordinated
Securities pursuant to the provisions of this Article Fourteen, unless and until
a Responsible Officer of the Trustee shall have received written notice thereof
at the Principal Office of the Trustee from the Company or a holder or holders
of Senior Debt or from any trustee therefor; and before the receipt of any such
written notice, the Trustee, subject to the provisions of Article Six, shall be
entitled in all respects to assume that no such facts exist; provided, however,
that if the Trustee shall not have received the notice provided for in this
Section 1406 at least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (or premium, if any) or interest on
any Junior Subordinated Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Article Six, shall be
entitled to rely on the delivery to it of a written notice by a person
representing himself to be a holder of Senior Debt (or a trustee on behalf of
such holder) to establish that such notice has been given by a holder of Senior
Debt or a trustee on behalf of any such holder or holders. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any person as a holder of Senior Debt to participate in any
payment or distribution pursuant to this Article Fourteen, the Trustee may
request such person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Debt held by such Person, the extent to which
such person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such person under this Article Fourteen,
and if such evidence is not furnished the Trustee may defer any payment to such
person pending judicial determination as to the right of such person to receive
such payment.
Section 1407. Rights of Trustee as Holder of Senior Debt; Preservation
of Trustee's Rights. The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article Fourteen in respect of any Senior Debt
at any time held by it, to the same extent as any other holder of Senior Debt,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
Nothing in this Article Fourteen shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 607.
Section 1408. No Waiver of Subordination Provisions. No right of any
present or future holder of any Senior Debt to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the holders of the Junior Subordinated
Securities, without incurring responsibility to the holders of the Junior
Subordinated Securities and without impairing or releasing the subordination
provided in this Article or the obligations hereunder of the holders of the
Junior Subordinated Securities to the holders of Senior Debt, do any one or more
of the following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Debt, or otherwise amend or
supplement in any manner Senior Debt or any instrument evidencing the same or
any agreement under which Senior Debt is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (iii) release any person liable in any manner for the
collection of Senior Debt; and (iv) exercise or refrain from exercising any
rights against the Company and any other person.
<PAGE>
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.
In Witness Whereof, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
CINERGY GLOBAL RESOURCES, INC.
By /s/ William L. Sheafer
William L. Sheafer
Vice President and Treasurer
THE FIFTH THIRD BANK, as Trustee
By /s/ Kerry R. Byrne
Kerry R. Byrne
Vice President
CINERGY GLOBAL RESOURCES, INC.
AND
THE FIFTH THIRD BANK,
Trustee
----------------
First Supplemental Indenture
Dated as of October 15, 1998
To
Indenture
Dated as of October 15, 1998
----------------
6.20% Debentures due 2008
FIRST SUPPLEMENTAL INDENTURE (herein the "Supplemental Indenture"), dated as of
October 15, 1998, between Cinergy Global Resources, Inc., a corporation duly
organized and existing under the laws of the State of Delaware (herein called
the "Company"), having its principal office at 139 East Fourth Street,
Cincinnati, Ohio 45202, and The Fifth Third Bank, an Ohio banking corporation,
as Trustee (herein called the "Trustee") under the Indenture dated as of October
15, 1998 between the Company and the Trustee (the "Indenture").
<PAGE>
Recitals of the Company
The Company has executed and delivered the Indenture to the Trustee to
provide for the issuance from time to time of its unsecured debentures, notes or
other evidences of indebtedness (the "Securities"), to be issued in one or more
series as in the Indenture provided.
Pursuant to the terms of the Indenture, the Company desires to provide
in this Supplemental Indenture for the establishment of a new series of its
Securities to be known as its 6.20% Debentures due 2008 (herein called the
"Debentures").
All things necessary to make this Supplemental Indenture a valid
agreement of the Company have been done.
Now, Therefore, This Supplemental Indenture Witnesseth:
For and in consideration of the premises and the purchase of the
Debentures by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Debentures and the Insurer (as
hereinafter defined), as follows:
ARTICLE ONE
Definitions
All words and terms defined in Article One of the Indenture shall have
the same meanings in this Supplemental Indenture, except that (or in addition
thereto) the words and terms set forth below shall have the following meanings:
"Agent" means any Security Registrar, Paying Agent or co-registrar.
"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 Debentures subject to the Optional
Redemption determined at the rate per annum shown in the title thereof, computed
on the basis of a 360-day year of twelve 30-day months.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Debenture, the rules and procedures
of the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Cedel" means Cedel Bank, societe anonyme.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity that would be
utilized, at the time 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 Debentures to be redeemed pursuant to the
Optional Redemption.
"Comparable Treasury Price" means, with respect to the Optional
Redemption Date, the average of the Reference Treasury Dealer Quotations for
such Optional Redemption Date.
"Debt Service" means the scheduled amount of interest, premium (if any)
and amortization of principal payable on the Debentures on any Interest Payment
Date.
"Definitive Debenture" means a certificated Debenture registered in the
name of the Holder thereof and issued in accordance with Article Three hereof,
in the form of Exhibit A-1 hereto except that such Debenture shall not bear the
Global Debenture Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Debenture" attached hereto.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
<PAGE>
"Events of Default" means those events specified as Events of Default
in Section 211 hereof.
"Global Debentures" means, individually and collectively, each of the
Restricted Global Debentures and the Unrestricted Global Debentures in the form
of Exhibit A hereto issued in accordance with Section 301, 303(b)(iv) or
303(d)(ii) hereof.
"Global Debenture Legend" means the legend set forth in Section
303(f)(ii) hereof, which is required to be placed on all Global Debentures
issued under this Supplemental Indenture.
"Guarantor" means Cinergy Corp.
"Guaranty Agreement" means the agreement of that name dated as of
November 3, 1998 between the Guarantor and the Trustee guaranteeing payment of
Debt Service on the Debentures.
"Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by the Trustee after consultation with the Company.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Debenture through a Participant.
"Initial Purchaser" means a purchaser of Debentures from the Company
upon the initial issuance thereof by the Company.
"Insurance Policy" means the unconditional and irrevocable policy of
financial guaranty insurance to be issued by the Insurer on November 3, 1998
guaranteeing payment of regularly scheduled principal of and interest on the
Debentures.
"Insurer" means MBIA Insurance Corporation.
"Maturity Date" means November 3, 2008.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Optional Redemption" means the right of the company to redeem
Debentures as set forth in Section 210 hereof.
"Optional Redemption Date" means the date of an Optional Redemption.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Private Placement Legend" means the legend set forth in Section
303(f)(i) hereof to be placed on all Debentures issued under this Supplemental
Indenture except where otherwise permitted by the provisions of this
Supplemental Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Reference Treasury Dealer" means a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer").
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, 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 such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
<PAGE>
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Debenture" means a Regulation S Temporary Global
Debenture or Regulation S Permanent Global Debenture, as appropriate.
"Regulation S Permanent Global Debenture" means a permanent global
Debenture in the form of Exhibit A-1 hereto bearing the Global Debenture Legend
and the Private Placement Legend, if applicable, and deposited with or on behalf
of and registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Debenture upon expiration of the Restricted Period.
"Regulation S Temporary Global Debenture" means a temporary global
Debenture in the form of Exhibit A-2 hereto bearing the Global Debenture Legend
and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Debentures
initially sold in reliance on Rule 903 of Regulation S.
"Remaining Scheduled Payments" means, with respect to any Debenture,
the remaining scheduled payments of the principal thereof to be redeemed and
interest thereon that would be due after the Optional Redemption Date but for
the Optional Redemption.
"Restricted Definitive Debenture" means a Definitive Debenture bearing
the Private Placement Legend.
"Restricted Global Debenture" means a Global Debenture bearing the
Private Placement Legend.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Debenture" means the form of the Debentures initially
sold to QIBs.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"Treasury Rate" means, with respect to the Optional Redemption Date (if
any), 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 such Optional Redemption Date.
"Unrestricted Global Debenture" means a permanent global Debenture in
the form of Exhibit A-1 attached hereto that bears the Global Debenture Legend
and that has the "Schedule of Exchanges of Interests in the Global Debenture"
attached thereto, and that is deposited with or on behalf of and registered in
the name of the Depositary, representing a series of Debentures that do not bear
the Private Placement Legend.
"Unrestricted Definitive Debenture" means one or more Definitive
Debentures that do not bear and are not required to bear the Private Placement
Legend.
"U.S. Person" means (i) any individual resident in the United States,
(ii) any partnership or corporation organized or incorporated under the laws of
<PAGE>
the United States, (iii) any estate of which an executor or administrator is a
U.S. Person (other than an estate governed by foreign law and of which at least
one executor or administrator is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets), (iv) any trust of which any
trustee is a U.S. Person (other than a trust of which at least one trustee is a
non-U.S. Person who has sole or shared investment discretion with respect to its
assets and no beneficiary of the trust (and no settler, if the trust is
revocable) is a U.S. Person), (v) any agency or branch of a foreign entity
located in the United States, (vi) any non-discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. Person, (vii) any discretionary or similar account
(other than an estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if an individual) resident in the United States (other than
such an account held for the benefit or account of a non-U.S. Person), (viii)
any partnership or corporation organized or incorporated under the laws of a
foreign jurisdiction and formed by a U.S. person principally for the purpose of
investing in securities not registered under the Securities Act (unless it is
organized or incorporated and owned, by "accredited investors" within the
meaning of Rule 501(a) under the Securities Act who are not natural persons,
estates or trusts); provided that the term "U.S. Person" shall not include (A) a
branch or agency of a U.S. Person that is located and operating outside the
United States for valid business purposes as a locally regulated branch or
agency engaged in the banking or insurance business, (B) any employee benefit
plan established and administered in accordance with the law, customary
practices and documentation of a foreign country and (C) the international
organizations set forth in Section 902(o)(7) of Regulation S under the
Securities Act and any other similar international organizations, and their
agencies, affiliates and pension plans.
ARTICLE TWO
Terms of the Debentures; Payments by the Company
Section 201. Establishment of the Debentures. There is hereby
authorized a series of Securities designated the "6.20% Debentures due 2008,"
limited in aggregate principal amount to $150,000,000. The Debentures shall
mature and the principal shall be due and payable together with all accrued and
unpaid interest thereon on November 3, 2008 and shall be issued in the form of
registered Global Securities without coupons, registered in the name of the
Depositary or its nominee. The provisions of Section 305 of the Indenture
applicable to Global Securities shall apply to the Debentures.
Section 202. Terms of the Debentures. Interest on each of the
Debentures shall be payable semiannually on May 3 and November 3 of each year,
commencing May 3, 1999 (each an "Interest Payment Date"), at the rate per annum
specified in the designation of the Debentures from November 3, 1998, or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will be paid to registered Holders of record on the
Business Day immediately preceding such Interest Payment Date (each a "Regular
Record Date"). The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months.
Any payment on the Debentures due on any day which is not a Business
Day need not be made on such day, but may be made on the next succeeding
Business Day with the same force and effect as if made on the due date and no
interest shall accrue for the period from and after such date, unless such
payment is a payment at Maturity or upon redemption, in which case interest
shall accrue thereon at the stated rate for such additional days.
Section 203. Payments by Company. All amounts due on the Debentures on
any Interest Payment Date as Debt Service shall be paid by the Company to the
Trustee three Business Days prior to such date.
Section 204. Insurance. Timely payment of principal of and interest on
the Debentures shall, at all times while any Debenture is Outstanding, be
guaranteed by the Insurance Policy.
<PAGE>
Section 205. Payments. Subject to agreements with or the rules of The
Depository Trust Company ("DTC") or any successor book-entry security system or
similar system with respect to Global Securities, principal of and any premium
and interest on the Debentures shall be payable at the office of the Paying
Agent or Paying Agents as the Company may designate for such purpose from time
to time, except that at the option of the Company payment of any interest may be
made by check mailed to the address of the Person entitled thereto as such
address appears in the Security Register. The corporate trust office of the
Trustee in the City of Cincinnati, located at 38 Fountain Square Plaza,
Cincinnati, Ohio 45263, is hereby designated as the Company's sole Paying Agent
for payments with respect to the Debentures. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that the Company shall maintain a Paying Agent in each Place of Payment
for the Debentures.
Section 206. Denominations. The Debentures shall be issued in
denominations of $1,000 or any integral multiple of $1,000.
Section 207. Legal Tender. Principal of, premium (if any) and interest
on the Debentures shall be payable in the coin or currency of the United States
of America, which, at the time of payment, is legal tender for public and
private debts.
Section 208. Defeasance. With the prior consent of the Insurer, so long
as the Insurance Policy is in effect and the Insurer is not in default of its
obligation to make payments thereunder, the Debentures shall be subject to
defeasance, at the Company's option, as provided for in Sections 1302 and 1303
of the Indenture.
Section 209. No Sinking Fund. The Debentures will not be subject to
any sinking fund.
Section 210. Optional Redemption. Subject to the terms of Article
Eleven of the Indenture, the Company shall have the right to redeem the
Debentures, in whole but not in part, from time to time and at any time upon not
less than 30 days' notice to the holders, at a redemption price equal to the sum
of (A) the greater of (i) 100% of the principal amount of the Debentures to be
redeemed or (ii) the sum of the present values of the Remaining Scheduled
Payments thereon discounted to the Optional Redemption Date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate plus 15 basis points, less the Applicable Accrued Interest Amount
plus (B) the Applicable Accrued Interest Amount.
Section 211. Events of Default. Each of the following shall constitute
an "Event of Default" with respect to the Debentures: (a) failure to pay
principal of or any premium on any Debenture when due; (b) failure to pay any
interest on any Debenture when due; (c) default in the performance, or breach,
of any covenant or warranty of the Company in the Indenture or this Supplemental
Indenture (other than a covenant or warranty included in the Indenture solely
for the benefit of a series other than the Debentures), and continuance of such
default or breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Insurer or the Holders of at least 35% of the principal
amount of the Outstanding Debentures a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a "Notice
of Default" under this Supplemental Indenture; (d) those events specified in
clauses (5) and (6) of Section 501 of the Indenture; (e) the Guaranty Agreement
shall for any reason be revoked or invalidated, or otherwise cease to be in full
force and effect, or the Guarantor, or any person on behalf of the Guarantor,
shall deny or disaffirm its obligations under the Guaranty Agreement; and (f) an
event of default shall occur and be continuing under the Guaranty Agreement.
Section 212. Collection of Indebtedness and Suits by Trustee. Paragraph
(1) of Section 503 of the Indenture is hereby amended with respect to the
Debentures to read as follows:
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable, or
<PAGE>
Section 213. Application of Money Collected. With respect to the
Debentures, any money collected by the Trustee pursuant to Article Five of the
Indenture and distributed pursuant to Section 506 thereof shall not be paid to
the Company until (i) the Insurer has been fully reimbursed for any amounts paid
pursuant to a claim on the Insurance Policy and has been paid any other amounts
to which it is entitled and (ii) the Guarantor has been fully reimbursed for any
amounts paid pursuant to the Guaranty Agreement.
ARTICLE THREE
The Debentures
Section 301. Original Issue of Debentures. Debentures in the aggregate
principal amount of $150,000,000 may, upon execution of this Supplemental
Indenture, or from time to time thereafter, be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Debentures upon a Company Order without any
further action by the Company.
Section 302. Form of the Debentures.
(a) Global Debentures. Debentures issued in global form shall be
substantially in the form of Exhibit A-1 attached hereto (including the Global
Debenture Legend thereon and the "Schedule of Exchanges of Interests in the
Global Debenture" attached thereto). Debentures issued in definitive form shall
be substantially in the form of Exhibit A-1 attached hereto (but without the
Global Debenture Legend thereon and without the "Schedule of Exchanges of
Interests in the Global Debenture" attached thereto). Each Global Debenture
shall represent such of the outstanding Debentures as shall be specified therein
and each shall provide that it shall represent the aggregate principal amount of
outstanding Debentures from time to time endorsed thereon and that the aggregate
principal amount of outstanding Debentures represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Debenture to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Debentures
represented thereby shall be made by the Trustee in accordance with instructions
given by the Holder thereof as required by Section 303 hereof.
(b) Temporary Global Debentures. Debentures offered and sold in
reliance on Regulation S shall be issued initially in the form of Exhibit A-2
attached hereto, which shall be deposited on behalf of the purchasers of the
Debentures represented thereby with the Trustee, at its Cincinnati office, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding on
behalf of Euroclear or Cedel Bank, duly executed by the Company and
authenticated by the Trustee as herein provided. The Restricted Period shall be
terminated upon the receipt by the Trustee of (i) a written certificate from the
Depositary, together with copies of certificates from Euroclear and Cedel Bank
certifying that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Debenture (except to the extent of any beneficial owners
thereof who acquired an interest therein during the Restricted Period pursuant
to another exemption from registration under the Securities Act and who will
take delivery of a beneficial ownership interest in a Rule 144A Global
Debenture, all as contemplated by Section 303 hereof), and (ii) an Officers'
Certificate from the Company. Following the termination of the Restricted
Period, beneficial interests in the Regulation S Temporary Global Debenture
shall be exchanged for beneficial interests in Regulation S Permanent Global
Debentures pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Debentures, the Trustee shall
cancel the Regulation S Temporary Global Debenture. The aggregate principal
amount of the Regulation S Temporary Global Debenture and the Regulation S
Permanent Global Debentures may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
<PAGE>
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Debenture and the
Regulation S Permanent Global Debentures that are held by Participants through
Euroclear or Cedel Bank.
(d) General. The terms and provisions contained in the Debentures shall
constitute, and are hereby expressly made, a part of this Supplemental Indenture
and the Company and the Trustee, by their execution and delivery of this
Supplemental Indenture, expressly agree to such terms and provisions and to be
bound thereby. However, to the extent any provisions of any Debenture conflicts
with the express provisions of this Supplemental Indenture, the provisions of
this Supplemental Indenture shall govern and be controlling.
Section 303. Transfer and Exchange of Debentures.
(a) Transfer and Exchange of Global Debentures. A Global Debenture may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Debentures will
be exchanged by the Company for Definitive Debentures if (i) the Company
delivers to the Trustee notice from the Depositary that it is unwilling or
unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 90 days after the date of such
notice from the Depositary or (ii) the Company in its sole discretion determines
that the Global Debentures (in whole but not in part) should be exchanged for
Definitive Debentures and delivers a written notice to such effect to the
Trustee; provided that in no event shall the Regulation S Temporary Global
Debenture be exchanged by the Company for Definitive Debentures prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Security
Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under
the Securities Act or (iii) there shall have occurred and be continuing a
default or an Event of Default and the Trustee receives a request from the
Depositary to issue Definitive Debentures. Upon the occurrence of any of the
preceding events, Definitive Debentures shall be issued in such names as the
Depositary shall instruct the Trustee. Global Debentures also may be replaced,
in whole or in part, as provided in Sections 304 and 306 of the Indenture. Every
Debenture authenticated and delivered in exchange for, or in lieu of, a Global
Debenture or any portion thereof, pursuant to this Section 303 or Sections 304
or 306 of the Indenture, shall be authenticated and delivered in the form of,
and shall be, a Global Debenture. A Global Debenture may not be exchanged for
another Debenture other than as provided in this Section 303(a), however,
beneficial interests in a Global Debenture may be transferred and exchanged as
provided in Section 303(b) or (c) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Debentures. The transfer and exchange of beneficial interests in the Global
Debentures shall be effected through the Depositary, in accordance with the
provisions of this Supplemental Indenture and the Applicable Procedures.
Beneficial interests in the Restricted Global Debentures shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. Transfers of beneficial interests in the Global
Debentures also shall require compliance with either subparagraph (i) or (ii)
below, as applicable, as well as one or more of the other following
subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global
Debenture. Beneficial interests in any Restricted Global Debenture may
be transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Debenture in
accordance with the transfer restrictions set forth in the Private
Placement Legend; provided, however, that prior to the expiration of
the Restricted Period, transfers of beneficial interests in the
Regulation S Temporary Regulation S Global Debentures may not be made
to a U.S.
<PAGE>
Person or for the account or benefit of a U.S. Person (other than an
Initial Purchaser). Beneficial interests in any Unrestricted Global
Debenture may be transferred to Persons who take delivery thereof in
the form of a beneficial interest in an Unrestricted Global Debenture.
No written orders or instructions shall be required to be delivered to
the Security Registrar to effect the transfers described in this
Section 303(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Debentures. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 303(b)(i) above,
the transferor of such beneficial interest must deliver to the Security
Registrar either (A)(1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Debenture in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B)(1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Debenture in an amount equal to the beneficial interest to
be transferred or exchanged and (2) instructions given by the
Depositary to the Security Registrar containing information regarding
the Person in whose name such Definitive Debenture shall be registered
to effect the transfer or exchange referred to in (1) above; provided
that in no event shall Definitive Debentures be issued upon the
transfer or exchange of beneficial interests in the Regulation S
Temporary Global Debenture prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Security Registrar of any
certificates required pursuant to Rule 903 under the Securities Act.
Upon satisfaction of all of the requirements for transfer or exchange
of beneficial interests in Global Debentures contained in this
Supplemental Indenture and the Debentures or otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Debenture(s) pursuant to Section 303(g) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Debenture. A beneficial interest in any Restricted Global
Debenture may be transferred to a Person who takes delivery thereof in
the form of a beneficial interest in another Restricted Global
Debenture if the transfer complies with the requirements of Section
303(b)(ii) above and the Security Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the Rule 144A Global Debenture, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global
Debenture or the Regulation S Global Debenture, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Debenture for Beneficial Interests in the
Unrestricted Global Debenture. A beneficial interest in any Restricted
Global Debenture may be exchanged by any holder thereof for a
beneficial interest in an Unrestricted Global Debenture or transferred
to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Debenture if the exchange or
transfer complies with the requirements of Section 303(b)(ii) above and
the Security Registrar receives the following:
(A) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Debenture, a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (1)(a) thereof;
or
<PAGE>
(B) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Debenture, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in (A) and (B) above, if the Security
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Security
Registrar to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to this subparagraph (iv) at
a time when an Unrestricted Global Debenture has not yet been issued,
the Company shall issue and the Trustee shall authenticate, pursuant to
Section 614 of the Indenture, one or more Unrestricted Global
Debentures in an aggregate principal amount equal to the aggregate
principal amount of beneficial interests transferred pursuant to this
subparagraph (iv).
Beneficial interests in an Unrestricted Global Debenture cannot be
exchanged for, or transferred to Persons who take delivery thereof in
the form of, a beneficial interest in a Restricted Global Debenture.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Debentures.
(i) Beneficial Interests in Restricted Global Debentures to
Restricted Definitive Debentures. If any holder of a beneficial
interest in a Restricted Global Debenture proposes to exchange such
beneficial interest for a Restricted Definitive Debenture or to
transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Restricted Definitive Debenture, then, upon
receipt by the Security Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to exchange such beneficial
interest for a Restricted Definitive Debenture, a certificate
from such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to
the Company or any of its subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(F) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(c) thereof,
<PAGE>
the Trustee shall cause the aggregate principal amount of the
applicable Global Debenture to be reduced accordingly pursuant to
Section 303(g) hereof, and the Company shall execute and the Trustee
shall authenticate and deliver to the Person designated in the
instructions a Definitive Debenture in the appropriate principal
amount. Any Definitive Debenture issued in exchange for a beneficial
interest in a Restricted Global Debenture pursuant to this Section
303(c) shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial interest
shall instruct the Security Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Debentures to the Persons in whose names
such Debentures are so registered. Any Definitive Debenture issued in
exchange for a beneficial interest in a Restricted Global Debenture
pursuant to this Section 303(c)(i) shall bear the Private Placement
Legend and shall be subject to all restrictions on transfer contained
therein.
(ii) Restrictions on Exchanges of Regulation S Temporary Global
Securities. Notwithstanding Sections 303(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Debenture may
not be exchanged for a Definitive Debenture or transferred to a Person
who takes delivery thereof in the form of a Definitive Debenture prior
to (x) the expiration of the Restricted Period and (y) the receipt by
the Security Registrar of any certificates required pursuant to Rule
903 under the Securities Act except in the case of a transfer pursuant
to an exemption from the registration requirements of the Securities
Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Debentures to
Unrestricted Definitive Debentures. A holder of a beneficial interest
in a Restricted Global Debenture may exchange such beneficial interest
for an Unrestricted Definitive Debenture or may transfer such
beneficial interest to a Person who takes delivery thereof in the form
of an Unrestricted Definitive Debenture only if the Security Registrar
receives the following:
(A) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to exchange such beneficial
interest for a Definitive Debenture that does not bear the
Private Placement Legend, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
(1)(b) thereof; or
(B) if the holder of such beneficial interest in a
Restricted Global Debenture proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Definitive Debenture that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case if the Security Registrar so requests or if the
Applicable Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Security Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance
with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Debentures to
Unrestricted Definitive Debentures. If any holder of a beneficial
interest in an Unrestricted Global Debenture proposes to exchange such
beneficial interest for a Definitive Debenture or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Definitive Debenture, then, upon satisfaction of the conditions
set forth in Section 303(b)(ii) hereof, the Trustee shall cause the
aggregate principal amount of the applicable Global Debenture to be
reduced accordingly pursuant to Section 303(g) hereof, and the Company
shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Debenture in the
<PAGE>
appropriate principal amount. Any Definitive Debenture issued in
exchange for a beneficial interest pursuant to this Section 303(c)(iv)
shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial
interest shall instruct the Security Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Debentures to the Persons in
whose names such Debentures are so registered. Any Definitive
Debenture issued in exchange for a beneficial interest pursuant to
this Section 303(c)(iv) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Debentures for Beneficial
Interests.
(i) Restricted Definitive Debentures to Beneficial Interests in
Restricted Global Debentures. If any Holder of a Restricted Definitive
Debenture proposes to exchange such Debenture for a beneficial interest
in a Restricted Global Debenture or to transfer such Restricted
Definitive Debentures to a Person who takes delivery thereof in the
form of a beneficial interest in a Restricted Global Debenture, then,
upon receipt by the Security Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Debenture
proposes to exchange such Debenture for a beneficial interest in
a Restricted Global Debenture, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
item (2)(b) thereof;
(B) if such Definitive Debenture is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (1) thereof;
(C) if such Restricted Definitive Debenture is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Debenture is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(a)
thereof, or
(E) if such Restricted Definitive Debenture is being
transferred to the Company or any of its subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(F) if such Restricted Definitive Debenture is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cancel the Restricted Definitive Debenture, increase
or cause to be increased the aggregate principal amount of, in the case
of clause (A) above, the appropriate Restricted Global Debenture, in
the case of clause (B) above, the Rule 144A Global Debenture, and in
the case of clause (C) above, the Regulation S Global Debenture.
(ii) Restricted Definitive Debentures to Beneficial Interests in
Unrestricted Global Debentures. A Holder of a Restricted Definitive
Debenture may exchange such Debenture for a beneficial interest in an
Unrestricted Global Debenture or transfer such Restricted Definitive
Debenture to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Debenture only if the
Security Registrar receives the following:
<PAGE>
(A) If the Holder of such Definitive Debentures proposes
to exchange such Debentures for a beneficial interest in the
Unrestricted Global Debenture, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
item (1)(c) thereof; or
(B) If the Holder of such Definitive Debentures proposes
to transfer such Debentures to a Person who shall take delivery
thereof in the form of a beneficial interest in the Unrestricted
Global Debenture, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (ii), and if the
Security Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to the
Security Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 303(d)(ii), the Trustee shall cancel the Definitive Debentures
and increase or cause to be increased the aggregate principal amount of
the Unrestricted Global Debenture.
(iii) Unrestricted Definitive Debentures to Beneficial Interests
in Unrestricted Global Debentures. A Holder of an Unrestricted
Definitive Debenture may exchange such Debenture for a beneficial
interest in an Unrestricted Global Debenture or transfer such
Definitive Debentures to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Debenture at
any time. Upon receipt of a request for such an exchange or transfer,
the Trustee shall cancel the applicable Unrestricted Definitive
Debenture and increase or cause to be increased the aggregate principal
amount of one of the Unrestricted Global Debentures.
If any such exchange or transfer from a Definitive Debenture to a beneficial
interest is effected pursuant to subparagraphs (ii) or (iii) above at a time
when an Unrestricted Global Debenture has not yet been issued, the Company shall
issue and the Trustee shall authenticate, pursuant to Section 614 of the
Indenture, one or more Unrestricted Global Debentures in an aggregate principal
amount equal to the principal amount of Definitive Debentures so transferred.
(e) Transfer and Exchange of Definitive Debentures for Definitive
Debentures. Upon request by a Holder of Definitive Debentures and such Holder's
compliance with the provisions of this Section 303(e), the Security Registrar
shall register the transfer or exchange of Definitive Debentures. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Security Registrar the Definitive Debentures duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Security Registrar duly executed by such Holder or by the Holder's attorney,
duly authorized in writing. In addition, the requesting Holder shall provide any
additional certifications, documents and information, as applicable, required
pursuant to the following provisions of this Section 303(e).
(i) Restricted Definitive Debentures to Restricted Definitive
Debentures. Any Restricted Definitive Debenture may be transferred to
and registered in the name of Persons who take delivery thereof in the
form of a Restricted Definitive Debenture if the Security Registrar
receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or
Rule 904, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item
(2) thereof; and
<PAGE>
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof, if
applicable.
(ii) Restricted Definitive Debentures to Unrestricted Definitive
Debentures. Any Restricted Definitive Debenture may be exchanged by the
Holder thereof for an Unrestricted Definitive Debenture or transferred
to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Debenture if the Security Registrar receives
the following:
(A) if the Holder of such Restricted Definitive
Debentures proposes to exchange such Debentures for an
Unrestricted Definitive Debenture, a certificate from such
Holder in the form of Exhibit C hereto, including the
certifications in item (1)(d) thereof; or
(B) if the Holder of such Restricted Definitive
Debentures proposes to transfer such Debentures to a Person who
shall take delivery thereof in the form of an Unrestricted
Definitive Debenture, a certificate from such Holder in the form
of Exhibit B hereto, including the certifications in item (4)
thereof;
and in each such case set forth in this subparagraph (ii), if the
Security Registrar so requests, an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such exchange
or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Debentures to Unrestricted
Definitive Debentures. A Holder of Unrestricted Definitive Debentures
may transfer such Debentures to a Person who takes delivery thereof in
the form of an Unrestricted Definitive Debenture. Upon receipt of a
request to register such a transfer, the Security Registrar shall
register the Unrestricted Definitive Debentures pursuant to the
instructions from the Holder thereof.
(f) Legends. The following legends shall appear on the face of all
Global Debentures and Definitive Debentures issued under this Supplemental
Indenture unless specifically stated otherwise in the applicable provisions of
this Supplemental Indenture.
(i) Private Placement Legend. (A) Except as permitted by
subparagraph (B) below, each Global Debenture and each Definitive
Debenture (and all Debentures issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET
FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT HAS ACQUIRED THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
<PAGE>
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION
S UNDER THE SECURITIES ACT. THE FIRST SUPPLEMENTAL INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Debenture
or Definitive Debenture issued pursuant to subparagraphs
(b)(iv), (c)(iii), (d)(ii), (d)(iii), (e)(ii) or (e)(iii) to
this Section 303 (and all Debentures issued in exchange therefor
or substitution thereof) shall not bear the Private Placement
Legend.
(ii) Global Debenture Legend. Each Global Debenture shall bear a
legend in substantially the following form:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL,
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN."
(iii) Regulation S Temporary Global Debenture Legend. The
Regulation S Temporary Global Debenture shall bear a legend in
substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS
EXCHANGE FOR CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THE
FIRST SUPPLEMENTAL INDENTURE (AS DEFINED HEREIN). NEITHER THE
HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST
HEREON."
(g) Cancellation and/or Adjustment of Global Debentures. At such time
as all beneficial interests in a particular Global Debenture have been exchanged
for Definitive Debentures or a particular Global Debenture has been redeemed,
repurchased or canceled in whole and not in part, each such Global Debenture
shall be returned to or retained and canceled by the Trustee in accordance with
Section 309 of the Indenture. At any time prior to such cancellation, if any
beneficial interest in a Global Debenture is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Debenture or for Definitive Debentures, the principal amount of
<PAGE>
Debentures represented by such Global Debenture shall be reduced accordingly and
an endorsement shall be made on such Global Debenture by the Trustee or by the
Depositary at the direction of the Trustee to reflect such reduction; and if the
beneficial interest is being exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Debenture, such other Global Debenture shall be increased accordingly and an
endorsement shall be made on such Global Debenture by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
ARTICLE FOUR
Paying Agent and Security Registrar; Depositary
Section 401. Paying Agent and Security Registrar. The Fifth Third
Bank is hereby appointed the Paying Agent and Security Registrar for the
Debentures.
Section 402. Depositary. DTC is hereby appointed the Depositary fo
the Debentures.
ARTICLE FIVE
Insurer Provisions
Section 501. Rights of Insurer Controlling. Anything herein to the
contrary notwithstanding, if the Insurance Policy is in effect with respect to
the Debentures and the Insurer is not in default of its obligation to make
payments thereunder, the Insurer shall be deemed to be the owner of all
Debentures then Outstanding for all voting purposes (including, without
limitation, all approvals, consents, waivers, and the institution of any
action), and shall have the exclusive right to exercise or direct the exercise
of remedies on behalf of the Holders of the Debentures in accordance with the
terms hereof following an Event of Default, and the principal of all the
Debentures Outstanding may not be declared to be due and payable immediately
without the prior written consent of the Insurer. Notwithstanding the foregoing,
the Insurer may not modify in any manner the terms and provisions of Sections
201 and 202 hereof.
Section 502. Payments Under the Insurance Policy. (a) If, on the second
Business Day next preceding any date on which payment of principal of or
interest on the Debentures is due, the Trustee has not received payments from
the Company pursuant to this Supplemental Indenture or from the Guarantor
pursuant to the Guaranty Agreement, in such amounts so that sufficient moneys
are available to pay all principal and interest coming due on the Debentures on
the next succeeding Interest Payment Date or the Maturity Date, as the case may
be, the Trustee shall immediately notify the Insurer or its designee by
telephone or facsimile transmission, confirmed in writing by registered or
certified mail, of the amount of the deficiency and that the Trustee is making a
claim for that amount under the Insurance Policy.
(b) If the deficiency is made up in whole or in part prior to or on the
Interest Payment Date or Maturity Date, the Trustee shall so notify the Insurer
or its designee.
(c) In addition, if the Trustee has notice that any of the Holders have
been required to disgorge payments of principal or interest on the Debentures to
the Company or to the trustee in bankruptcy for creditors or others pursuant to
a final judgment by a court of competent jurisdiction that such payment
constitutes a voidable preference to such Holders within the meaning of any
applicable bankruptcy laws, then the Trustee shall notify the Insurer or its
designee of such fact by telephone or facsimile transmission, confirmed in
writing by registered or certified mail.
(d) The Trustee is hereby irrevocably designated, appointed, directed
and authorized to act as attorney-in-fact for Holders of the Debentures as
follows:
<PAGE>
(i) if and to the extent there is a deficiency in amounts
required to pay interest on the Debentures, the Trustee shall (A)
execute and deliver to State Street Bank and Trust Company, N.A., or
its successors under the Insurance Policy (the "Insurance Paying
Agent"), in form satisfactory to the Insurance Paying Agent, an
instrument appointing the Insurer as agent for such Holders in any
legal proceeding related to the payment of such interest and an
assignment to the Insurer of the claims for interest to which such
deficiency relates and which are paid by the Insurer, (B) receive as
designee of the respective Holders (and not as Trustee) in accordance
with the tenor of the Insurance Policy payment from the Insurance
Paying Agent with respect to the claims for interest so assigned and
(C) disburse the same to such respective Holders; and
(ii) if and to the extent of a deficiency in amounts required to
pay principal of the Debentures, the Trustee shall (A) execute and
deliver to the Insurance Paying Agent an instrument appointing the
Insurer as agent for such Holder in any legal proceeding relating to
the payment of such principal and an assignment to the Insurer of any
of the Debentures surrendered to the Insurance Paying Agent of so much
of the principal amount thereof as has not previously been paid or for
which moneys are not held by the Trustee and available for such payment
(but such assignment shall be delivered only if payment from the
Insurance Paying Agent is received), (B) receive as designee of the
respective Holders (and not as Trustee) in accordance with the tenor of
the Insurance Policy payment therefor from the Insurance Paying Agent
and (C) disburse the same to such Holders.
(e) Payments with respect to claims for interest on and principal of
the Debentures disbursed by the Trustee from proceeds of the Insurance Policy
shall not be considered to discharge the obligation of the Company with respect
to such Debentures as set forth in Article One hereof, and the Insurer shall
become the owner of such unpaid Debentures and claims for interest in accordance
with the tenor of the assignment made to it under the provisions of this
subsection or otherwise.
(f) Irrespective of whether any such assignment is executed and
delivered, the Company and the Trustee hereby agree for the benefit of the
Insurer that:
(i) they recognize that to the extent the Insurer makes
payments, directly or indirectly (as by paying through the Trustee), on
account of principal of or interest on the Debentures, the Insurer will
be subrogated to the rights of such Holders to receive the amount of
such principal and interest from the Company, with interest thereon as
provided in this Supplemental Indenture and the Debentures; and
(ii) they will accordingly pay to the Insurer the amount of such
principal and interest (including principal and interest recovered
under subparagraph (ii) of the first paragraph of the Insurance Policy,
which principal and interest shall be deemed past due and not to have
been paid), with interest thereon as provided in this Supplemental
Indenture and the Debentures, but only from the sources and in the
manner provided herein for the payment of principal of and interest on
the Debentures to Holders and will otherwise treat the Insurer as the
owner of such rights to the amount of such principal and interest.
(g) No amendment or supplement shall be made to this Supplemental
Indenture without the prior written consent of the Insurer so long as the
Insurance Policy is in effect and the Insurer is not in default of its
obligations to make payments thereunder. Copies of any amendments or supplements
made to the documents executed in connection with the issuance of the Debentures
which are consented to by the Insurer shall be sent to Moody's Investors
Service, Inc. or any successor thereto and to Standard & Poor's Ratings Service,
a division of the McGraw-Hill Companies, Inc. or any successor thereto.
(h) So long as the Insurance Policy is in effect and the Insurer is not
in default of its obligations to make payments thereunder, the Insurer shall
receive notice of the resignation or removal of the Trustee and any successor
trustee must be approved by the Insurer.
(i) So long as the Insurance Policy is in effect and the Insurer is not
in default of its obligations to make payments thereunder, the Insurer shall
receive copies of all notices required to be delivered to the Holders and, on an
annual basis, copies of the Guarantor's audited financial statements.
<PAGE>
(j) So long as the Insurance Policy is in effect and the Insurer is not
in default of its obligations to make payments thereunder, the Insurer shall be
notified (i) immediately upon the occurrence of an Event of Default or of any
event that with notice and/or with the lapse of time could become an Event of
Default, and (ii) of any redemption of the Debentures at the same time that the
Holders of the Debentures are notified. All notices, reports and certificates to
be delivered to or by the Trustee, or to a Holder of the Debentures or available
at the request of the Holders shall also be provided to the Insurer. In
addition, all opinions to be delivered to or by the Trustee, or to a Holder of
the Debentures shall also be addressed to the Insurer. All notices required to
be given to the Insurer under this Supplemental Indenture shall be in writing
and shall be sent by registered or certified mail addressed to MBIA Insurance
Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured
Portfolio Management -- PCF.
(k) Notwithstanding any other provision to the contrary herein, so long
as the Insurance Policy is in effect and the Insurer is not in default of its
obligations to make payments thereunder, the Insurer is an express third-party
beneficiary and may enforce this Supplemental Indenture as if a party hereto.
(l) Notwithstanding any other provision to the contrary herein, so long
as the Insurance Policy is in effect and the Insurer is not in default of its
obligations to make payments thereunder, any defeasance of Debentures pursuant
to Section 208 hereof requires the prior written consent of the Insurer.
(m) Prior to satisfaction and discharge of this Supplemental Indenture
and the Indenture pursuant to Article Four thereof, any amounts drawn under the
Insurance Policy shall be reimbursed to the Insurer. So long as the Insurance
Policy is in effect and the Insurer is not in default of its obligations to make
payments thereunder, any certificates or opinions to be delivered to the Trustee
pursuant to Article Four or Sections 1304 or 1305 of the Indenture shall be
delivered concurrently to the Insurer.
(n) Paragraph (1) of Section 401 of the Indenture is hereby amended
with respect to the Debentures to read as follows:
(1) either (A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 306,
(ii) Securities 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 1003) have been delivered to the Trustee for cancellation and
(iii) the Insurer has been fully reimbursed for any amounts paid
pursuant to a claim on the Insurance Policy and has been paid any other
amounts to which it is entitled; or (B) all such Securities not
theretofore delivered to the Trustee for cancellation (i) have become
due and payable, or (ii) will become due and payable at their Stated
Maturity within one year, or (iii) are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company, and the Company, in the case of (i), (ii) or
(iii) above, has deposited or caused to be deposited with the Trustee
as trust funds in trust for the purpose, money in an amount sufficient
to pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for principal
and any premium and interest to the date of such deposit (in the case
of Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
<PAGE>
ARTICLE SIX
Sundry Provisions
Section 601. Defined Terms. Except as otherwise expressly provided in
this Supplemental Indenture or in the form of Debenture or otherwise clearly
required by the context hereof or thereof, all terms used herein or in said form
of Debenture that are defined in the Indenture shall have the several meanings
respectively assigned to them thereby.
Section 602. Indenture Ratified and Confirmed. The Indenture, as
supplemented by this Supplemental Indenture, is in all respects ratified and
confirmed, and this Supplemental Indenture shall be deemed part of the Indenture
in the manner and to the extent herein and therein provided.
Section 603. Notices. All notices to be delivered to the Company
hereunder or under the Indenture and this Supplemental Indenture shall be
delivered concurrently to Cinergy Corp. at 139 East Fourth Street, Cincinnati,
Ohio 45202, Attention: Treasurer.
------------------
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.
In Witness Whereof, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
CINERGY GLOBAL RESOURCES, INC.
By /s/ William L. Sheafer
William L. Sheafer
Vice President and Treasurer
THE FIFTH THIRD BANK, as Trustee
By /s/ Kerry R. Byrne
Kerry R. Byrne
Vice President
<PAGE>
EXHIBIT A-1
------------------
(FORM OF FACE OF DEBENTURE)
No. R-1 $__________
CUSIP No.
CINERGY GLOBAL RESOURCES, INC.
6.20% DEBENTURE DUE 2008
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]1
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT HAS ACQUIRED
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
FIRST SUPPLEMENTAL INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING.
- --------
1 This should be added only if the Debenture is being issued in global form.
<PAGE>
CINERGY GLOBAL RESOURCES, INC., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the "Company",
which term includes any successor Person under the Indenture hereafter referred
to), for value received, hereby promises to pay to CEDE & CO., or registered
assigns, the principal sum of One Hundred Fifty Million and No/100 Dollars
($150,000,000) on November 3, 2008, and to pay, on May 3 and November 3 of each
year, commencing May 3, 1999 (each an "Interest Payment Date"), interest thereon
from November 3, 1998 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for at the rate of 6.20% per annum,
until the principal hereof is paid or made available for payment. The amount of
interest payable on any Interest Payment Date shall be computed on the basis of
a 360-day year of twelve 30-day months. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the Business Day immediately
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in the Indenture.
Subject to agreements with or the rules of DTC or any successor
book-entry security system or similar system with respect to Global Securities,
payment of the principal of (and premium, if any) and interest on this Security
will be made at the office or agency of the Company maintained for that purpose
in the City of Cincinnati, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
Payments of principal of (and premium, if any) and interest on this
Security have been unconditionally guaranteed pursuant to a Guaranty Agreement
between Cinergy Corp. and the Trustee, and payments of principal and interest
have further been guaranteed by MBIA Insurance Corporation pursuant to an
unconditional and irrevocable policy of financial guaranty insurance.
Any payment on this Security due on any day which is not a Business Day
need not be made on such day, but may be made on the next succeeding Business
Day with the same force and effect as if made on the due date and no interest
shall accrue for the period from and after such date, unless such payment is a
payment at maturity or upon redemption, in which case interest shall accrue
thereon at the stated rate for such additional days.
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, or a day on which banking institutions in the City of New York or the
City of Cincinnati are authorized or obligated by law or executive order to be
closed.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
<PAGE>
In Witness Whereof, the Company has caused this instrument to be duly
executed.
CINERGY GLOBAL RESOURCES, INC.
By............................................
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
THE FIFTH THIRD BANK,
as Trustee
By............................................
Authorized Signatory
<PAGE>
(FORM OF REVERSE OF DEBENTURE)
This Security is one of a duly authorized issue of securities of the Company
(herein called the "Securities"), issued and to be issued in one or more series
under an Indenture, dated as of October 15, 1998 (the "Base Indenture") between
the Company and The Fifth Third Bank, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), as supplemented
by a First Supplemental Indenture dated as of October 15, 1998 between the
Company and the Trustee (the "Supplemental Indenture" and, together with the
Base Indenture, the "Indenture"), and reference is hereby made to the Indenture
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate principal amount to $150,000,000.
Timely payment of principal of and interest on the Securities of this series
shall, at all times while any Security is Outstanding, be guaranteed by an
unconditional and irrevocable policy of financial guaranty insurance (the
"Insurance Policy") issued by MBIA Insurance Corporation (the "Insurer").
The Securities of this series will not be subject to any sinking fund.
The Securities of this series are subject to optional redemption, in whole but
not in part, from time to time and at any time (such redemption, an "Optional
Redemption", and the date thereof, the "Optional Redemption Date") upon not less
than 30 days' notice to the holders, at a redemption price equal to the sum of
(A) the greater of (i) 100% of the principal amount of the Securities of this
series to be redeemed or (ii) the sum of the present values of the Remaining
Scheduled Payments thereon discounted to the Optional Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus 15 basis points, less the Applicable Accrued Interest
Amount plus (B) 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 Securities of this series subject to the
Optional Redemption determined at the rate per annum shown in the title hereof,
computed on the basis of a 360-day year of twelve 30-day months.
"Comparable Treasury Issue" means the United States Treasury security selected
by an Independent Investment Banker as having a maturity that would be utilized,
at the time 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 Securities of this series to be redeemed pursuant to the
Optional Redemption. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to the Optional Redemption Date,
the average of the Reference Treasury Dealer Quotations for such Optional
Redemption Date.
"Reference Treasury Dealer" means a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"). "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
redemption date, 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 such Reference
Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption
date.
"Remaining Scheduled Payments" means, with respect to any Securities of this
series, the remaining scheduled payments of principal thereof to be redeemed and
interest thereon that would be due after the Optional Redemption Date but for
the Optional Redemption.
<PAGE>
"Treasury Rate" means, with respect to the Optional Redemption Date (if any),
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 such Optional Redemption Date.
The Indenture contains provisions for defeasance at any time of the entire
indebtedness of the Securities of this series or certain restrictive covenants
and Events of Default with respect to the Securities of this series upon
compliance with certain conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of a majority in principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders of
all Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder of
this Security shall not have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver or trustee or for any
other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 35% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonably satisfactory indemnity,
and the Trustee shall not have received from the Holders of a majority in
principal amount of Securities of this series at the time Outstanding a
direction inconsistent with such request, and shall have failed to institute any
such proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and any premium and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed. As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
<PAGE>
If the Insurance Policy is in effect with respect to the Securities of this
series and the Insurer is not in default of its obligation to make payments
thereunder, the Insurer shall be deemed to be the owner of all Securities of
this series then Outstanding for all voting purposes (including, without
limitation, all approvals, consents, waivers, and the institution of any
action), and shall have the exclusive right to exercise or direct the exercise
of remedies on behalf of the Holders of the Securities of this series in
accordance with the terms of the Supplemental Indenture following an Event of
Default, and the principal of all the Securities of this series Outstanding may
not be declared to be due and payable immediately without the prior written
consent of the Insurer.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this 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 this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall have
the meanings assigned to them in the Supplemental Indenture unless otherwise
indicated.
<PAGE>
STATEMENT OF INSURANCE
The MBIA Insurance Corporation (the "Insurer") has issued a policy
containing the following provisions, such policy being on file at The Fifth
Third Bank, Cincinnati, Ohio.
The Insurer, in consideration of the payment of the premium and subject
to the terms of this policy, hereby unconditionally and irrevocably guarantees
to any owner, as hereinafter defined, of the following described obligations,
the full and complete payment required to be made by or on behalf of the Issuer
to The Fifth Third Bank or its successor (the "Paying Agent") of an amount equal
to (i) the principal of (either at the stated maturity or by any advancement of
maturity pursuant to a mandatory sinking fund payment) and interest on, the
Obligations (as that term is defined below) as such payments shall become due
but shall not be so paid (except that in the event of any acceleration of the
due date of such principal by reason of mandatory or optional redemption or
acceleration resulting from default or otherwise, other than any advancement of
maturity pursuant to a mandatory sinking fund payment, the payments guaranteed
hereby shall be made in such amounts and at such times as such payments of
principal would have been due had there not been any such acceleration); and
(ii) the reimbursement of any such payment which is subsequently recovered from
any owner pursuant to a final judgment by a court of competent jurisdiction that
such payment constitutes an avoidable preference to such owner within the
meaning of any applicable bankruptcy law. The amounts referred to in clauses (i)
and (ii) of the preceding sentence shall be referred to herein collectively as
the "Insured Amounts." "Obligations" shall mean:
$150,000,000
CINERGY GLOBAL RESOURCES, INC.
6.20% DEBENTURES DUE 2008
Upon receipt of telephonic or telegraphic notice, such notice
subsequently confirmed in writing by registered or certified mail, or upon
receipt of written notice by registered or certified mail, by the Insurer from
the Paying Agent or any owner of an Obligation the payment of an Insured Amount
for which is then due, that such required payment has not been made, the Insurer
on the due date of such payment or within one business day after receipt of
notice of such nonpayment, whichever is later, will make a deposit of funds, in
an account with State Street Bank and Trust Company, N.A., in New York, New
York, or its successor, sufficient for the payment of any such Insured Amounts
which are then due. Upon presentment and surrender of such Obligations or
presentment of such other proof of ownership of the Obligations, together with
any appropriate instruments of assignment to evidence the assignment of the
Insured Amounts due on the Obligations as are paid by the Insurer, and
appropriate instruments to effect the appointment of the Insurer as agent for
such owners of the Obligations in any legal proceeding related to payment of
Insured Amounts on the Obligations, such instruments being in a form
satisfactory to State Street Bank and Trust Company, N.A., State Street Bank and
Trust Company, N.A. shall disburse to such owners or the Paying Agent payment of
the Insured Amounts due on such Obligations, less any amount held by the Paying
Agent for the payment of such Insured Amounts and legally available therefor.
This policy does not insure against loss of any prepayment premium which may at
any time be payable with respect to any Obligation.
As used herein, the term "owner" shall mean the registered owner of any
Obligation as indicated in the books maintained by the Paying Agent, the Issuer,
or any designee of the Issuer for such purpose. The term owner shall not include
the Issuer or any party whose agreement with the Issuer constitutes the
underlying security for the Obligations.
Any service of process on the Insurer may be made to the Insurer at its
offices located at 113 King Street, Armonk, New York 10504 and such service of
process shall be valid and binding.
<PAGE>
This policy is non-cancelable for any reason. The premium on this
policy is not refundable for any reason including the payment prior to maturity
of the Obligations.
MBIA INSURANCE CORPORATION
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and transfer
this Security to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint ___________________________________________________ to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the
face of this Security)
Signature Guarantee:
<PAGE>
[SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL DEBENTURE]2
[The following exchanges of a part of this Global Debenture for an
interest in another Global Debenture or for a Definitive Debenture, or exchanges
of a part of another Global Debenture or Definitive Debenture, for an interest
in this Global Debenture, have been made:
<TABLE>
<S> <C> <C> <C> <C>
Principal
Amount of Amount of Amount of this Signature of
decrease in increase in Global authorized
Principal Principal Debenture officer of Trustee
Amount of this Amount of this following such or Debenture
Date of Global Global decrease (or Custodian]
Exchange Debenture Debenture increase)
</TABLE>
- --------------------
2 This should be included only if the Debenture is issued in global form.
<PAGE>
EXHIBIT A-2
(FACE OF REGULATION S TEMPORARY GLOBAL DEBENTURE)
The form of this Debenture shall be the same as Exhibit A-1, except
that the following new paragraph shall be added immediately prior to the first
paragraph thereof:
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED SECURITIES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL SECURITY SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Cinergy Global Resources, Inc.
139 East Fourth Street
Cincinnati, Ohio 45202
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Re: 6.20% Debentures due 2008 of Cinergy Global Resources, Inc.,
a Delaware corporation
Reference is hereby made to the First Supplemental Indenture dated as
of October 15, 1998 among Cinergy Global Resources, Inc. (the "Company") and The
Fifth Third Bank, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the First Supplemental Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Debenture[s] or interest in such Debenture[s] specified in Annex A hereto, in
the principal amount of $___________ in such Debenture[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial interest
in the 144A Global Debenture or a Definitive Debenture Pursuant to Rule 144A.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Debenture is being transferred to a Person
that the Transferor reasonably believed and believes is purchasing the
beneficial interest or Definitive Debenture for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A and such Transfer is in compliance with any applicable Blue Sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the First Supplemental
Indenture, the transferred beneficial interest or Definitive Debenture will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Rule 144A Global Debenture and/or the Definitive Debenture
and in the First Supplemental Indenture and the Securities Act.
<PAGE>
2. |_| Check if Transferee will take delivery of a beneficial interest
in the Temporary Regulation S Global Debenture, the Regulation S Global
Debenture or a Definitive Debenture pursuant to Regulation S. The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a person in the United States and (x) at
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore Securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Debenture will be subject to the restrictions
on Transfer enumerated in the Private Placement Legend printed on the Regulation
S Global Debenture, the Temporary Regulation S Global Debenture and/or the
Definitive Debenture and in the First Supplemental Indenture and the Securities
Act.
3. |_| Check and complete if Transferee will take delivery of a
beneficial interest in a Definitive Debenture pursuant to any provision of the
Securities Act other than Rule 144A or Regulation S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Debentures and Restricted Definitive Debentures
and pursuant to and in accordance with the Securities Act and any applicable
Blue Sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act.
<PAGE>
4. |_| Check if Transferee will take delivery of a beneficial interest
in an Unrestricted Global Debenture or an Unrestricted Definitive Debenture.
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the First
Supplemental Indenture and any applicable Blue Sky securities laws of any state
of the United States and (ii) the restrictions on transfer contained in the
First Supplemental Indenture and the Private Placement Legend are not required
in order to maintain compliance with the Securities Act. Upon consummation of
the proposed Transfer in accordance with the terms of the First Supplemental
Indenture, the transferred beneficial interest or Definitive Debenture will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Debentures, on Restricted
Definitive Debentures and in the First Supplemental Indenture.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the First Supplemental Indenture and any applicable Blue Sky securities laws of
any state of the United States and (ii) the restrictions on transfer contained
in the First Supplemental Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the First
Supplemental Indenture, the transferred beneficial interest or Definitive
Debenture will no longer be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Debentures, on
Restricted Definitive Debentures and in the First Supplemental Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Debenture (CUSIP __________), or
(ii) |_| Regulation S Global Debenture (CUSIP __________);
or
(b) |_| a Restricted Definitive Debenture.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Debenture (CUSIP __________), or
(ii) |_| Regulation S Global Debenture (CUSIP __________),
or
(iii) |_| Unrestricted Global Debenture without
Transfer restrictions (CUSIP __________); or
(b) |_| a Restricted Definitive Debenture; or
(c) |_| an Unrestricted Definitive Debenture,
in accordance with the terms of the First Supplemental Indenture.
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Cinergy Global Resources, Inc.
139 East Fourth Street
Cincinnati, Ohio 45202
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Re: 6.20% Debentures due 2008 of Cinergy Global Resources, Inc.,
a Delaware corporation
(CUSIP: )
Reference is hereby made to the First Supplemental Indenture dated as
of October 15, 1998 among Cinergy Global Resources, Inc. (the "Company")
and The Fifth Third Bank, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the First
Supplemental Indenture.
____________________, (the "Owner") owns and proposes to exchange the
Debenture[s] or interest in such Debenture[s] specified herein, in the
principal amount of $_______________ in such Debenture[s] or interests
(the "Exchange"). In connection with the Exchange, the Owner hereby
certifies that:
1. Exchange of Restricted Definitive Debentures or Beneficial Interests in
a Restricted Global Debenture for Unrestricted Definitive Debentures or
Beneficial Interests in an Unrestricted Global Debenture
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Debenture to beneficial interest in an Unrestricted Global
Debenture. In connection with the Exchange of the Owner's beneficial
interest in a Restricted Global Debenture for a beneficial interest in
an Unrestricted Global Debenture in an equal principal amount, the Owner
hereby certifies (i) the beneficial interest is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Global Debentures and pursuant to and in accordance with the United
States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the First Supplemental
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Debenture is being acquired in
compliance with any applicable Blue Sky securities laws of any state of
the United States.
(b) |_| Check if Exchange is from beneficial interest in a Restricted
Global Debenture to Unrestricted Definitive Debenture. In connection
with the Exchange of the Owner's beneficial interest in a Restricted
Global Debenture for an Unrestricted Definitive Debenture, the Owner
hereby certifies (i) the Definitive Debenture is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Restricted Global Debentures and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the
<PAGE>
First Supplemental Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and
(iv) the Definitive Debenture is being acquired in compliance with any
applicable Blue Sky securities laws of any state of the United States.
(c) |_| Check if Exchange is from Restricted Definitive Debenture to
beneficial interest in an Unrestricted Global Debenture. In connection
with the Owner's Exchange of a Restricted Definitive Debenture for a
beneficial interest in an Unrestricted Global Debenture, the Owner
hereby certifies (i) the beneficial interest is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to
Restricted Definitive Debentures and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
First Supplemental Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and
(iv) the beneficial interest is being acquired in compliance with any
applicable Blue Sky securities laws of any state of the United States.
(d) |_| Check if Exchange is from Restricted Definitive Debenture to
Unrestricted Definitive Debenture. In connection with the Owner's
Exchange of a Restricted Definitive Debenture for an Unrestricted
Definitive Debenture, the Owner hereby certifies (i) the Unrestricted
Definitive Debenture is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive
Debentures and pursuant to and in accordance with the Securities Act,
(iii) the restrictions on transfer contained in the First Supplemental
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Unrestricted
Definitive Debenture is being acquired in compliance with any applicable
Blue Sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Debentures or Beneficial Interests in
Restricted Global Debentures for Restricted Definitive Debentures or
Beneficial Interests in Restricted Global Debentures.
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Debenture to Restricted Definitive Debenture. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global
Debenture for a Restricted Definitive Debenture with an equal principal
amount, the Owner hereby certifies that the Restricted Definitive
Debenture is being acquired for the Owner's own account without
transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the First Supplemental Indenture, the Restricted Definitive
Debenture issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the
Restricted Definitive Debenture and in the First Supplemental Indenture
and the Securities Act.
(b) |_| Check if Exchange is from Restricted Definitive Debenture
to beneficial interest in a Restricted Global Debenture. In connection
with the Exchange of the Owner's Restricted Definitive Debenture for a
beneficial interest in the [CHECK ONE] "144A Global Debenture,"
"Regulation S Global Debenture," with an equal principal amount, the
Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer and (ii) such Exchange
has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Debentures and pursuant to and in
accordance with the Securities Act, and in compliance with any
applicable Blue Sky securities laws of any state of the United States.
Upon consummation of the proposed Exchange in accordance with the
terms of the First Supplemental Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the relevant Restricted Global
Debenture and in the First Supplemental Indenture and the Securities
Act.
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuer.
[Insert Name of Owner]
By:
Name:
Title:
SECOND
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and
entered into as of the 22nd day of September, 1998, by and among Cinergy Corp.,
a Delaware corporation ("Cinergy"), Cinergy Services, Inc., a Delaware
corporation ("Cinergy Services"), The Cincinnati Gas & Electric Company, an Ohio
corporation ("CG&E"), PSI Energy, Inc., an Indiana corporation ("PSI Energy"),
and James E. Rogers (the "Executive"). Cinergy, Cinergy Services, CG&E, and PSI
will sometimes be referred to in this Agreement collectively as the "Company."
WHEREAS, the Executive is currently serving as Vice Chairman,
President and Chief Executive Officer of the Company, and the Company desires to
secure the continued employment of the Executive in accordance herewith;
WHEREAS, PSI entered into an employment agreement with the
Executive dated May 17, 1990 (the "1990 Employment Agreement");
WHEREAS, PSI, CG&E and CINergy Corp., an Ohio corporation,
entered into an employment agreement with the Executive dated December 11, 1992
(the "1992 Employment Agreement");
WHEREAS, PSI entered into a severance agreement (the
"Severance Agreement") with the Executive as of December 11, 1992;
WHEREAS, pursuant to the Amended and Restated Agreement and
Plan of Reorganization (the "Merger Agreement"), dated as of July 2, 1993, among
PSI Resources, Inc., an Indiana corporation, PSI, CG&E, Cinergy, and CINergy
Sub, Inc., an Ohio corporation, the parties thereto agreed to merge pursuant to
the terms thereof;
WHEREAS, the parties amended the 1990 Employment Agreement and
the 1992 Employment Agreement to conform to the terms of the Merger Agreement
and entered into an Amended and Restated Employment Agreement dated as of July
2, 1993 (the "1993 Employment Agreement"), as amended by a First Amendment dated
effective as of July 2, 1993, and a Second Amendment dated effective as of March
24, 1998;
WHEREAS, the Executive is willing to commit himself to remain
in the employ of the Company on the terms and conditions herein set forth and
thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this agreement
amending, merging, and restating the 1993 Employment Agreement and the Severance
Agreement, in each case, as of the date first set forth above, setting forth the
terms and conditions for the employment relationship of the Executive with the
Company during the Employment Period (as hereinafter defined);
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NOW, THEREFORE, IN CONSIDERATION of the mutual premises,
covenants and agreements set forth below, it is hereby agreed as follows:
1. Employment and Term.
(a) The Company, and any successor thereto, agree to employ
the Executive, and the Executive agrees to remain in the employ of the Company
in accordance with the terms and provisions of this Agreement for the period set
forth below (the "Employment Period").
(b) The Employment Period of the 1993 Employment Agreement
commenced as of the consummation date (the "Effective Date") of the merger (the
"Merger") pursuant to the terms of the Merger Agreement and continued until the
third anniversary of the Effective Date; provided, however, that on each
anniversary date of the Effective Date (the "Anniversary Date"), the term of the
1993 Agreement was automatically extended for one (1) additional year because
neither the Company nor the Executive gave written notice to the other of its
intent to terminate the 1993 Employment Agreement at least fifteen (15) days
prior to any Anniversary Date. The Employment Period of the Executive shall
continue uninterrupted under this Agreement until the Anniversary Date next
following the commencement date ("Commencement Date") of this Agreement;
provided however, that on each Anniversary Date, the term of this Agreement
shall automatically be extended for one (1) additional year if, prior to such
Anniversary Date, neither the Company nor the Executive shall have given written
notice to the other of its intent to terminate this Agreement. For that portion
of the Employment Period prior to, but not including, the Commencement Date, the
1993 Employment Agreement, as amended, shall remain in full force and effect. As
of the Commencement Date, the 1993 Employment Agreement shall terminate and be
of no force and effect. The parties hereto agree that Cinergy shall be
responsible for all the premises, covenants, and agreements set forth in this
Agreement.
2. Duties and Powers of Executive.
(a) Position; Location. Until the end of the Employment
Period, the Executive shall serve as President and Chief Executive Officer of
Cinergy. During the Employment Period, the Executive shall have such authority,
duties and responsibilities as are set forth in Annex A hereto. Such titles,
authority, duties, and responsibilities may be changed from time to time only by
mutual written agreement of the parties, unless otherwise provided in Annex A
hereto. During the Employment Period, the Executive shall, without compensation
other than that herein provided, also serve and continue to serve, if and when
elected and reelected, as the Vice Chairman of the Board of Directors of Cinergy
(the "Board").
(b) From the Commencement Date until the end of the Employment
Period, the Company shall annually in connection with the annual meeting of
shareholders of Cinergy cause the Executive to be nominated as Vice Chairman of
the Board.
3. Compensation.
The Executive shall receive the following compensation for his
services hereunder to the Company:
(a) Salary. The Executive's annual base salary ("Annual Base
Salary"), payable not less often than biweekly, shall be at the annual rate of
not less than the greater of $810,000 and the amount in effect as of the day
before the Commencement Date. The Board may from time to
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time direct such upward adjustments in Annual Base Salary as the Board deems to
be necessary or desirable, including without limitation adjustments in order to
reflect increases in the cost of living.
Annual Base Salary shall not be reduced after any increase thereof. Any
increase in Annual Base Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement.
(b) Annual Incentive Plan Benefit. The Executive shall be paid
by the Company an annual benefit of up to 90% of the Executive's Annual Base
Salary, which benefit shall be determined and paid pursuant to the terms of
Cinergy's Annual Incentive Plan.
(c) Long-Term Incentive Plan. The Executive shall be a
participant in the Company's Long-Term Incentive Plan (the "LTIP") implemented
under the Company's 1996 Long-Term Incentive Compensation Plan. The LTIP
consists of two parts: a Value Creation Plan involving shares of restricted
common stock of Cinergy and options to purchase shares of common stock of
Cinergy. The Executive's annualized target award opportunity under the LTIP
shall be equal to no less than 100% of his Annual Base Salary.
(d) Stock Option. Cinergy established a stock option plan (the
"Stock Option Plan") that took effect when the Merger was consummated. The
Executive was granted options to purchase shares of common stock of Cinergy
pursuant to the terms of the Stock Option Plan and agreement in grants made
prior to the Commencement Date of this Agreement.
(e) Retirement, Incentive and Welfare Benefit Plans. During
the Employment Period and so long as the Executive is employed by the Company,
he shall be eligible to participate in all incentive, stock option, restricted
stock, performance unit, savings, retirement and welfare plans, practices,
policies and programs applicable generally to employees and/or other senior
executives of the Company, including the Annual Incentive Plan, the Performance
Shares Plan, the Executive Supplemental Life Insurance Program, the 1996
Long-Term Incentive Compensation Plan, the 401(k) Excess Plan, the Nonqualified
Deferred Incentive Compensation Plan, the Pension Plan, the Supplemental
Retirement Plan, the Excess Benefit Plan, or any successors thereto, except with
respect to any benefits under any plan, practice, policy or program to which the
Executive has waived his rights in writing; provided, however, that benefits
paid pursuant to the terms of the Annual Incentive Plan shall be determined in
accordance with (but not in addition to the benefit described in) Section 3(b)
of this Agreement. In addition, the Company shall assume and continue, the Split
Dollar Insurance Agreement, dated October 7, 1992, between the Executive and PSI
("Split Dollar Agreement"), and the Deferred Compensation Agreement, effective
as of January 1, 1992, between the Executive and PSI ("Deferred Compensation
Agreement"). Notwithstanding anything in this Agreement to the contrary, in the
event that the Company or any successor thereto shall fail to assume, shall
breach, or, at any time during their respective terms, shall terminate, modify,
amend or in any way affect, to the Executive's detriment and without the
Executive's consent, the Split Dollar Agreement or the Deferred Compensation
Agreement, then the Executive shall be entitled to: (i) in the case of the
Deferred Compensation Agreement, such amounts as are described in Section 16 of
the Deferred Compensation Agreement; and (ii) in the case of the Split Dollar
Agreement, such amounts as are described in Sections 12 of the Split Dollar
Agreement.
During the Employment Period, the Executive shall participate
in the Company's Supplemental Retirement Plan in accordance with its terms,
except that effective as of the Executive's fiftieth (50th) birthday, the
Executive shall be credited with and vested in twenty-five (25) full "Years of
Participation" (as that term is defined in the Company's Supplemental Retirement
Plan), and shall be credited with and vested in an additional two (2) Years of
Participation on each birthday thereafter for the following five (5) years
provided that he is
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employed by the Company as of each such birthday.
If the Executive retires on or after having attained age
fifty-five (55), the Executive shall be entitled to receive from the Company
total annual retirement income for his lifetime equal to the greater of (i)
sixty percent (60%) of the Executive's "Highest Average Earnings" (as such term
is defined in Cinergy's Pension Plan) or (ii) sixty percent (60%) of the
Executive's "Earnings" (as such term is defined in the Pension Plan) for the
final twelve (12) calendar months immediately prior to the Executive's effective
date of retirement. Thus, in addition to the Executive's retirement benefits
under Cinergy's Pension Plan, its Supplemental Retirement Plan, and its Excess
Benefit Plan, or any successors thereto, the Executive shall receive an annual
amount known as the "Supplemental Executive Retirement Benefit" (a non-qualified
benefit paid from the Company's general assets) that is equal to the difference
between the greater of (i) sixty percent (60%) of the Executive's "Highest
Average Earnings" (as such term is defined in Cinergy's Pension Plan) or (ii)
sixty percent (60%) of the Executive's "Earnings" (as such term is defined in
Cinergy's Pension Plan) for the final twelve (12) calendar months immediately
prior to the Executive's effective date of retirement, and the sum of the
amounts payable to the Executive under Cinergy's Pension Plan, its Supplemental
Retirement Plan, and its Excess Benefit Plan, or any successors thereto.
Upon his retirement on or after having attained age fifty-five
(55), the Executive shall be eligible for comprehensive medical and dental
insurance pursuant to the terms of Cinergy's Retirees' Medical Plan and its
Retirees' Dental Plan, or any successors thereto. However, the Executive shall
receive the full subsidy provided by the Company to retirees for purposes of
determining the amount of monthly premiums due from the Executive.
Notwithstanding anything in this Agreement to the contrary, in
the event that the Executive's employment is terminated following a Change in
Control, the Executive shall immediately be credited with and vested in
thirty-five (35) full "Years of Participation" (as that term is defined in the
Company's Supplemental Retirement Plan), and the word "fifty (50)" shall be
substituted for the word "fifty-five (55)" in each of the first sentences of the
third and fourth paragraphs of this Section 3(e).
(f) Expenses. The Company agrees to reimburse the Executive
for all expenses, including those for travel and entertainment, properly
incurred by him in the performance of his duties under this Agreement in
accordance with policies established from time to time by the Board.
(g) Fringe Benefits. During the Employment Period and so long
as the Executive is employed by the Company, he shall be entitled to the
following fringe benefits:
(i) the Company shall pay the annual dues,
assessments and other membership charges of the Executive with respect
to the Executive's membership in the clubs and associations of the
Executive's choice that are used for business purposes;
(ii) the Company shall furnish to the Executive
financial planning and tax preparation services;
(iii) the Company shall furnish an automobile to the
Executive and pay all of the related expenses for gasoline, insurance,
maintenance and repairs; and
(iv) the Company shall provide paid vacation for four
(4) weeks per year
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(or longer if permitted by Company policy). In each case of paragraphs
(i) through (iv), the Executive shall be entitled to fringe benefits on
a basis substantially equivalent to such fringe benefits provided to
the Executive in the past. In addition, the Executive shall be entitled
to receive fringe benefits in accordance with the plans, practices,
programs and policies of the Company from time to time in effect,
commensurate with his position and at least comparable to those
received by other senior executives of the Company.
4. Termination of Employment.
(a) Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
(b) By the Company for Cause. The Company may terminate the
Executive's employment during the Employment Period for Cause. For purposes of
this Agreement "Cause" shall mean the conviction of the Executive for the
commission of a felony which, at the time of such commission, has a materially
adverse effect on the Company.
(c) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:
(i) the reduction in the Executive's Annual Base Salary as
specified in Section 3(a) of this Agreement, the Executive's
Annual Incentive Plan benefit as specified in Section 3(b) of
this Agreement, or any other benefit or payment described in
Section 3 of this Agreement;
(ii) the change without his consent of the Executive's
title, authority, duties or responsibilities as specified in
Section 2(a) of this Agreement;
(iii) the Company requiring the Executive without his
consent to be based at any office or location other than the
location where the Executive is currently employed;
(iv) any breach by the Company of any other material
provision of this Agreement; or
(v) any event that constitutes a "Change in Control" as
defined in Section 4(f) of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, by the Executive for Good Reason, or by the Company after a Change in
Control during the Employment Period, shall be communicated by Notice of
Termination to the other party hereto in accordance with Section 10(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination," means a
written notice that:
(i) indicates the specific termination provision in this
Agreement relied upon;
(ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's
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employment under the provision so indicated; and
(iii) if the Date of Termination (as defined in Section
4(e)) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty
(30) days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the
Executive or the Company under this Agreement or preclude the
Executive or the Company from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights under this
Agreement.
A Notice of Termination for Cause after a Change in Control has
occurred is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of Cinergy's Board at a meeting of
Cinergy's Board that was called and held for the purpose of
considering such termination finding that, in the good faith
opinion of Cinergy's Board, the Executive was guilty of conduct
set forth in the definition of Cause, and specifying the
particulars thereof in detail.
(e) Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the
Company for Cause or after a Change in Control, or by the
Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may
be;
(ii) if the Executive's employment is terminated by the
Company other than for Cause, the date on which the Company
notifies the Executive of such termination; and
(iii) if the Executive's employment is terminated by reason
of death, the date of death.
(f) Change in Control. A "Change in Control" shall be deemed
to have occurred if any of the following events occur after the Commencement
Date:
(i) Any "person" or "group" (within the meaning of
Subsection 13(d) and Paragraph 14(d)(2) of the Securities
Exchange Act of 1934 (the "1934 Act") is or becomes the
beneficial owner (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of securities of Cinergy (not including
in the securities beneficially owned by such Person any
securities acquired directly from Cinergy or its affiliates)
representing fifty percent (50%) or more of the combined voting
power of Cinergy's then outstanding securities, excluding any
person who becomes such a beneficial owner in connection with a
transaction described in clause (1) of paragraph (ii) below; or
(ii) There is consummated a merger or consolidation of
Cinergy or any direct or indirect subsidiary of Cinergy with any
other corporation, other than (1) a merger or consolidation that
would result in the voting securities of Cinergy outstanding
immediately prior to such merger or consolidation continuing to
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represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof) at least fifty percent (50%) of the combined voting
power of the securities of Cinergy or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of Cinergy (or similar transaction)
in which no person is or becomes the beneficial owner, directly
or indirectly, of securities of Cinergy (not including in the
securities beneficially owned by such person any securities
acquired directly from Cinergy or its affiliates other than in
connection with the acquisition by Cinergy or its affiliates of a
business) representing twenty-five percent (25%) or more of the
combined voting power of Cinergy's then outstanding securities;
or
(iii) During any period of two consecutive years,
individuals who at the beginning of that period constitute the
Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
Cinergy) whose appointment or election by the Board or nomination
for election by Cinergy's shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of that period or whose appointment, election or
nomination for election was previously so approved or recommended
cease for any reason to constitute a majority of the Board; or
(iv) The shareholders of Cinergy approve a plan of complete
liquidation or dissolution of Cinergy or there is consummated an
agreement for the sale or disposition by Cinergy of all or
substantially all of Cinergy's assets, other than a sale or
disposition by Cinergy of all or substantially all of Cinergy's
assets to an entity, at least sixty percent (60%) of the combined
voting power of the voting securities of which are owned by
shareholders of Cinergy in substantially the same proportion as
their ownership of Cinergy immediately prior to such sale.
(g) Person. "Person" shall have the meaning given in Section
3(a)(9) of the 1934 Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include:
(i) The Company or any of its subsidiaries;
(ii) A trustee or other fiduciary holding securities under
an employee benefit plan of Cinergy or any of its subsidiaries;
(iii) An underwriter temporarily holding securities pursuant
to an offering of such securities; or
(iv) A corporation owned, directly or indirectly, by the
stockholders of Cinergy in substantially the same proportions as
their ownership of stock of the Company.
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5. Obligations of the Company upon Termination.
(a) Termination Other Than for Cause. During the Employment
Period, if the Company shall terminate the Executive's employment (other than in
the case of a termination for Cause), the Executive shall terminate his
employment for Good Reason, or the Executive's employment shall terminate by
reason of death (termination in any such case referred to as "Termination"):
(i) the Company shall pay to the Executive a lump sum amount
in cash equal to the sum of:
(1) the Executive's Annual Base Salary through the Date
of Termination to the extent not previously paid;
(2) an amount equal to the Annual Incentive Plan
benefit described in Section 3(b) of this Agreement for the
fiscal year that includes the Date of Termination multiplied
by a fraction the numerator of which shall be the number of
days from the beginning of such fiscal year to and including
the Date of Termination and the denominator of which shall
be three hundred and sixty-five (365);
(3) an amount equal to his vested accrued benefit under
the Company's Value Creation Plan of the Company's LTIP; and
(4) any compensation previously deferred by the
Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the
extent not previously paid.
(The amounts specified in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"). The Accrued
Obligations shall be paid to the Executive within thirty (30) days
after the Date of Termination; and
(ii) prior to the occurrence of a Change in Control, and in the
event of Termination other than by reason of the Executive's death,
then:
(1) the Company shall pay to the Executive a lump sum
amount, in cash, equal to the present value discounted using an
interest rate equal to the prime rate promulgated by CitiBank,
N.A. and in effect as of the Date of Termination (the "Prime
Rate") of the Annual Base Salary and the Annual Incentive Plan
benefit described in Section 3(b) of this Agreement payable
through the end of the Employment Period, each at the rate, and
using the same goals and factors, in effect at the time Notice of
Termination is given, paid within 30 days of the Date of
Termination;
(2) the Company shall pay to the Executive the present value
(discounted at the Prime Rate) of all benefits to which the
Executive would have been entitled had he remained in employment
with the Company until the end of the Employment Period, each,
where applicable, at the rate of the Annual Base Salary, and
using the same goals and factors, in effect at the time Notice of
Termination is given, under the Company's
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Value Creation Plan of the Company's LTIP, the Company's
Performance Shares Plan, and the Company's Executive Supplemental
Life Insurance Program, minus the present value (discounted at
the Prime Rate) of the benefits to which he is actually entitled
under the above mentioned plans and programs;
(3) the Company shall pay the value of all deferred
compensation amounts and all executive life insurance benefits
whether or not then vested or payable; and
(4) the Company shall continue medical and welfare benefits
to the Executive and/or the Executive's family at least equal to
those that would have been provided if the Executive's employment
had not been terminated (excluding benefits to which the
Executive has waived his rights in writing), such benefits to be
in accordance with the most favorable medical and welfare benefit
plans, practices, programs or policies (the "M&W Plans") of the
Company as in effect and applicable generally to other senior
executives of the Company and their families during the ninety
(90) day period immediately preceding the Date of Termination or,
if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other senior executives of the
Company (but on a prospective basis only unless and then only to
the extent, such more favorable M&W Plans are by their terms
retroactive); provided, however, that if the Executive becomes
employed with another employer and is eligible to receive medical
or other welfare benefits under another employer-provided plan,
the benefits under the M&W Plans shall be secondary to those
provided under such other plan during such applicable period of
eligibility.
(iii) from and after the occurrence of a Change in
Control and in the event of Termination other than by reason
of the Executive's death, then in lieu of any further salary
payments to the Executive for periods subsequent to the Date
of Termination and in lieu of any other benefits payable
pursuant to Section 5(a)(ii) of this Agreement:
(1) The Company shall pay to the Executive a lump sum
severance payment, in cash, equal to the greater of:
(A) the present value of all amounts and benefits that
would have been due under Sections 5(a)(ii) of this
Agreement, excluding Section 5(a)(ii)(4), and
(B) three (3) times the sum of (x) the higher of the
Executive's Annual Base Salary in effect immediately prior
to the occurrence of the event or circumstance upon which
the Notice of Termination is based or in effect immediately
prior to the Change in Control, and (y) the higher of the
amount paid to the Executive pursuant to all incentive
compensation or bonus plans or programs maintained by the
Corporation, in the year preceding that in which the Date of
Termination occurs or in the year preceding that in which
the Change in Control occurs; and
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(2) For a thirty-six (36) month period after the Date
of Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of
Termination (without giving effect to any reduction in such
benefits subsequent to a Change in Control which reduction
constitutes Good Reason), except for any benefits that were
waived by the Executive in writing. Benefits otherwise
receivable by the Executive pursuant to this Section
5(a)(iii)(2) shall be reduced to the extent comparable
benefits are actually received by or made available to the
Executive without cost during the thirty-six (36) month
period following the Executive's termination of employment
(and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
The Executive's employment shall be deemed to have been
terminated following a Change in Control of Cinergy without
Cause or by the Executive for Good Reason if, in addition to
all other applicable Terminations, the Executive's
employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered
into an agreement with Cinergy or any of its subsidiaries or
affiliates, the consummation of which will constitute a
Change in Control or if the Executive terminates his
employment for Good Reason prior to a Change in Control if
the circumstances or event which constitutes Good Reason
occurs at the direction of such Person.
(b) Termination by the Company for Cause or by the Executive
Other than for Good Reason. Subject to the provisions of Section 5(c) and
Section 6 of this Agreement, if the Executive's employment shall be terminated
for Cause during the Employment Period, or if the Executive terminates
employment during the Employment Period other than a termination for Good
Reason, the Company shall have no further obligations to the Executive under
this Agreement other than the obligation to pay to the Executive Annual Base
Salary through the Date of Termination plus the amount of any compensation
previously deferred by the Executive, in each case to the extent previously
unpaid.
(c) Split Dollar and Deferred Compensation Agreements.
Notwithstanding anything in this Agreement to the contrary, but subject to the
last sentence of the first paragraph of Section 3(e) and the second, third,
fourth, and fifth paragraphs of Section 3(e) hereof, upon the termination of the
Executive's employment for any reason, he shall be entitled to receive all
benefits provided for him or his beneficiaries under the terms of the Split
Dollar and Deferred Compensation Agreements, all vested and accrued benefits
under the terms of the Pension Plan, the Supplemental Retirement Plan, the
Excess Benefit Plan, or any successors thereto, and the Supplemental Executive
Retirement Benefit described in the third paragraph of Section 3(e), and the
post-retirement medical and dental benefits described in the fourth paragraph of
Section 3(e).
(e) Certain Tax Consequences. In the event that the Executive
becomes entitled to the payments and benefits described in this Section 5 (the
"Severance Benefits"), if any of the Severance Benefits will be subject to any
excise tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), the Company shall pay to the Executive an
additional amount (the "Gross-up Payment") such that the net amount
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retained by the Executive, after deduction of an Excise Tax on the Severance
Benefits and any federal, state, and local income and employment tax and Excise
Tax upon the payment provided for by this Section 5, shall be equal to the
Severance Benefits. For purposes of determining whether any of the Severance
Benefits will be subject to the Excise Tax and the amount of such Excise Tax;
(i) any other payments or benefits received or to be
received by the Executive in connection with a Change in Control
or the Executive's termination of employment (whether pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or
such Person) shall be treated as "parachute payments" within the
meaning of Code Section 280G(b)(2), and all "excess parachute
payments" within the meaning of Code Section 280G(b)(1) shall be
treated as subject to the Excise Tax, unless in the opinion of
tax counsel selected by the Company's independent auditors and
reasonably acceptable to the Executive such other payments or
benefits (in whole or in part) do not constitute parachute
payments, including by reason of Code Section 280G(b)(4)(A), or
such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within
the meaning of Code Section 280G(b)(4)(B) of the Code, in excess
of the "Base Amount" as defined in Code Section 280G(b)(3)
allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax:
(ii) the amount of the Severance Benefits that shall be
treated as subject to the Excise Tax shall be equal to the lesser
of:
(1) the total amount of the Severance Benefits; or
(2) the amount of excess parachute payments within the
meaning of Code Section 280G(b)(1) (after applying clause
(i) above; and
(iii) the value of any non-cash benefits or any deferred payment
or benefit shall be determined by the Company's independent auditors
in accordance with the principles of Code Section 280G(d)(3) and (4).
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the
Executive's residence on the Date of Termination, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the Excise
Tax is subsequently determined to be less than the amount taken into
account hereunder at the time of termination of the Executive's
employment, the Executive shall repay to the Company, at the time that
the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus
that portion of the Gross-Up Payment attributable to the Excise Tax
and federal, state and local income and employment tax imposed on the
Gross-Up Payment being repaid by the Executive to the extent that such
repayment results in a reduction in Excise Tax and/or a federal, state
or local income or employment tax deduction) plus interest on the
amount of such repayment at the rate provided in Code Section
1274(b)(2)(B). In the event that the Excise Tax is determined to
exceed the amount taken into account
-11-
<PAGE>
hereunder at the time of the termination of the Executive's employment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess
is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of liability for Excise Tax with respect to the Severance
Benefits.
(f) Other Fees and Expenses. The Company also shall pay to the
Executive all legal fees and expenses incurred by the Executive as a result of a
termination that entitles the Executive to the Severance Benefits (including all
such fees and expenses, if any, incurred in disputing any such termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement). Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
plan, program, policy or practice provided by the Company and for which the
Executive may qualify (except with respect to any benefit to which the Executive
has waived his rights in writing), nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement entered into after the Commencement Date with the Company. Amounts
that are vested benefits or that the Executive is otherwise entitled to receive
under any benefit, plan, policy, practice or program of, or any contract or
agreement entered into after the date hereof with, the Company at or subsequent
to the Date of Termination, shall be payable in accordance with such benefit,
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement; Mitigation.
The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action that the Company may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts (including amounts for damages for
breach) payable to the Executive under any of the provisions of this Agreement
and, except as provided in Sections 5(a)(ii)(4) and 5(a)(iii)(2) of this
Agreement, such amounts shall not be reduced whether or not the Executive
obtains other employment. If the Executive finally prevails with respect to any
dispute between the Company, the Executive or others as to the interpretation,
terms, validity or enforceability of (including any dispute about the amount of
any payment pursuant to this Agreement), the Company agrees to pay all legal
fees and expenses that the Executive may reasonably incur as a result of any
such dispute.
8. Arbitration. The parties agree that any dispute, claim, or
controversy based on common law, equity, or any federal, state, or local
statute, ordinance, or regulation (other than workers' compensation claims)
arising out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether such
dispute is arbitrable, shall be
-12-
<PAGE>
settled by arbitration. This agreement to arbitrate includes but is not limited
to all claims for any form of illegal discrimination, improper or unfair
treatment or dismissal, and all tort claims. The Executive shall still have a
right to file a discrimination charge with a federal or state agency, but the
final resolution of any discrimination claim shall be submitted to arbitration
instead of a court or jury. The arbitration proceeding shall be conducted under
the employment dispute resolution arbitration rules of the American Arbitration
Association in effect at the time a demand for arbitration under the rules is
made. The decision of the arbitrator(s), including determination of the amount
of any damages suffered, shall be exclusive, final, and binding on all parties,
their heirs, executors, administrators, successors and assigns. Each party shall
bear its own expenses in the arbitration for arbitrators' fees and attorneys'
fees, for its witnesses, and for other expenses of presenting its case. Other
arbitration costs, including administrative fees and fees for records or
transcripts, shall be borne equally by the parties.
9. Confidential Information.
The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret, confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
that shall not have been or now or hereafter have become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). During the Employment Period, the Executive shall not,
without the prior written consent of the Company or as may otherwise be required
by law or legal process, communicate or divulge any such information, knowledge
or data to anyone other than the Company and those designated by it.
10. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
defined above and any successor to its businesses and/or assets that assumes and
agrees to perform this Agreement by operation of law, or otherwise. Failure of
the Company to obtain such assumption and agreement prior to the effective date
of a succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled to under this Agreement if the
Executive were to terminate the Executive's employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.
-13-
<PAGE>
11. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a committee thereof,
shall have authority on behalf of the Company to agree to amend, modify, repeal,
waive, extend or discharge any provision of this Agreement or anything in
reference thereto.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return-receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
James E. Rogers
6 Noel Lane
Cincinnati, Ohio 45243
If to the Company:
Vice President, General Counsel and Secretary
Cinergy Corp.
221 East Fourth Street
P.O. Box 960
Cincinnati, Ohio 45201-0960
or to such other address as either party shall have furnished to the other in
writing in accordance with this Agreement. Notice and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have under this Agreement, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 4(c) of this Agreement, or the right of the Company
to terminate the Executive's employment for Cause pursuant to Section 4(b) of
this Agreement, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
(f) This instrument contains the entire agreement of the
Executive and the
-14-
<PAGE>
Company with respect to the subject matter hereof, and, subject to any
agreements evidencing the stock option grants described in Section 3(d) hereof,
all promises, representations, understandings, arrangements and prior agreements
are merged into this Agreement and superseded hereby.
IN WITNESS WHEREOF, the Executive and the Company have caused
this Agreement to be executed as of the day and year first above written.
CINERGY CORP.; CINERGY SERVICES, INC.; THE CINCINNATI GAS & ELECTRIC COMPANY;
AND PSI ENERGY, INC.
By:___/s/ Van P. Smith_________________
Name: Van P. Smith
Title: Chairman, Compensation
Committee
EXECUTIVE
______/s/ James E. Rogers_______________
James E. Rogers
-15-
<PAGE>
Annex A
DUTIES OF EXECUTIVE
Vice-Chairman
The Vice-Chairman of the Board shall be a director and shall
preside at meetings of the Board of Directors or meetings of shareholders in the
absence or inability to act of the Chairman of the Board. The Vice-Chairman
shall perform such duties as may from time-to-time be assigned to him by the
Board of Directors. The Vice-Chairman shall be a member of the Executive
Committee and the Nominating Committee.
Chief Executive Officer
The Chief Executive Officer shall be a director and shall
preside at all meetings of the shareholders, shall submit a report of the
operations of the corporation for the fiscal year to the shareholders at their
annual meeting and from time-to-time shall report to the Board of Directors all
matters within his knowledge which the interests of the corporation may require
be brought to their notice. The Chief Executive Officer shall be the chairman of
the Executive Committee and an ex officio member of all standing committees. The
President and the Internal Auditing Department will report directly to the Chief
Executive Officer.
President and Chief Operating Officer
The President shall be a director and shall be the Chief
Operating Officer of the Corporation. The President shall have general and
active management and direction of the affairs of the Corporation, shall have
supervision of all departments and of all officers of the Corporation, shall see
that the orders and resolutions of the Board of Directors and of the Executive
Committee are carried into effect, and shall have the general powers and duties
of supervision and management usually vested in the office of President of a
corporation. All corporate officers and functions except those reporting to the
Chief Executive Officer shall report directly to the President.
-17-
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,303,782
<OTHER-PROPERTY-AND-INVEST> 502,623
<TOTAL-CURRENT-ASSETS> 1,158,862
<TOTAL-DEFERRED-CHARGES> 1,033,651
<OTHER-ASSETS> 438,699
<TOTAL-ASSETS> 9,437,617
<COMMON> 1,585
<CAPITAL-SURPLUS-PAID-IN> 1,600,776
<RETAINED-EARNINGS> 939,988
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,542,349
0
92,648
<LONG-TERM-DEBT-NET> 2,210,488
<SHORT-TERM-NOTES> 1,185,486
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 186,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,220,646
<TOT-CAPITALIZATION-AND-LIAB> 9,437,617
<GROSS-OPERATING-REVENUE> 1,976,486
<INCOME-TAX-EXPENSE> 44,127
<OTHER-OPERATING-EXPENSES> 1,771,919
<TOTAL-OPERATING-EXPENSES> 1,816,046
<OPERATING-INCOME-LOSS> 160,440
<OTHER-INCOME-NET> 11,306
<INCOME-BEFORE-INTEREST-EXPEN> 171,746
<TOTAL-INTEREST-EXPENSE> 60,950
<NET-INCOME> 110,796
1,365
<EARNINGS-AVAILABLE-FOR-COMM> 109,431
<COMMON-STOCK-DIVIDENDS> 71,340
<TOTAL-INTEREST-ON-BONDS> 48,778
<CASH-FLOW-OPERATIONS> 545,905
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
</TABLE>
