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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 8, 1998
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Sierra Pacific Power Company
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(Exact name of registrant as specified in its charter)
Nevada
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(State of incorporation or organization)
0-508 88-0044418
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(Commission File Number) (I.R.S. Employer
Identification No.)
P.O. Box 10100 (6100 Neil Road), Reno, Nevada 89520-0400
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (702) 689-4011
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Item 5. Other Events.
On November 27, 1996, the Registrant filed a Registration Statement
on Form S-3 (No. 333-17041), as amended by a Pre-Effective Amendment No. 1
filed on December 18, 1996 (the "Registration Statement") in connection with
its proposed offering of $35,000,000 of Collateralized Debt Securities. The
Registration Statement was declared effective on December 20, 1997. In
connection with the proposed issuance and sale from time to time of up to
$35,000,000 aggregate principal amount of its Collateralized Medium-Term
Notes, Series D (the "Notes"), the Registrant has prepared a supplement (the
"Supplement") to the definitive prospectus contained within the Registration
Statement. The Notes will be offered from time to time by the Company to or
through Merrill Lynch, Pierce, Fenner & Smith Incorporated and A.G. Edwards &
Sons, Inc., as agents (the "Agents"). In connection with the proposed
offering and sale of the Notes, the Registrant is filing certain exhibits
listed below as part of this Form 8-K, each of which is incorporated here by
reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit A -- Form of Distribution Agreement for the issuance and
sale of the Notes.
Exhibit B -- Form of Prospectus Supplement.
Exhibit C -- Statement setting forth computation of ratio of
earnings to fixed charges.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIERRA PACIFIC POWER COMPANY
Date: December 8, 1998 By: /s/ Richard K. Atkinson
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Richard K. Atkinson
Assistant Treasurer
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EXHIBIT INDEX
Exhibit Document
A Form of Distribution Agreement for the issuance and sale of
the Notes.
B Form of Prospectus Supplement.
C Statement setting forth computation of ratio of earnings to
fixed charges.
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Exhibit 99.A
Draft 12/3/98
$35,000,000
Sierra Pacific Power Company
Collateralized Medium-Term Notes, Series D
Due 9 months or more from
Date of Issue
DISTRIBUTION AGREEMENT
December __, 1998
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281-1310
A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, MO 63103
Dear Sirs:
Sierra Pacific Power Company, a Nevada corporation (the "Company"),
proposes to issue and sell from time to time its Collateralized Medium-Term
Notes, Series D, due nine months or more from the date of issue, in an initial
aggregate principal amount of $35,000,000 (the "Notes") and agrees with each of
you (individually, an "Agent" and collectively, the "Agents") as set forth in
this Agreement.
The Notes are to be issued from time to time pursuant to an indenture,
dated as of June 1, 1992 (as heretofore supplemented and as supplemented by the
Fourth Supplemental Indenture dated as of February 1, 1997 relating to the Notes
(the "Fourth Supplemental Indenture") and as it may be further supplemented or
amended from time to time (the "Indenture")), between the Company and Bankers
Trust Company, as trustee (the "Trustee"). The Notes will be secured by one or
more first mortgage bonds (the "Mortgage Bonds") to be issued and delivered by
the Company to the Trustee. The Mortgage Bonds will be issued pursuant to an
Indenture of Mortgage, dated as of December 1, 1940, from the Company's
predecessor to The New England Trust Company (State Street Bank & Trust Company,
as successor trustee) and Leo W. Huegle (Gerald R. Wheeler, as successor
trustee), as heretofore amended and supplemented and as supplemented by a
Thirty-fifth Supplemental Indenture dated as of February 1, 1997 (said
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Indenture of Mortgage, as so amended and supplemented, and said supplemental
indenture, being hereinafter referred to as the "Mortgage Indenture" and the
"Thirty-fifth Supplemental Indenture", respectively).
The Notes shall have the maturity ranges, applicable interest rates or
interest rate formulas, issue prices, redemption and repayment provisions and
other terms set forth in the Prospectus referred to in Section l(c) hereof as it
may be amended or supplemented from time to time, including any Pricing
Supplement (as such term is defined in Section 3(a) hereof). The Notes will be
issued, and the terms thereof established, from time to time, by the Company in
accordance with the Indenture and the Procedures referred to in Section 2(f)
hereof. This Agreement shall only apply to sales of the Notes and not to sales
of any other securities or evidences of indebtedness of the Company and only on
the specific terms set forth herein.
Subject to the terms and conditions stated herein and subject to the
reservation by the Company of the right to sell its Notes directly on its own
behalf or to designate or select additional agents as set forth in Section 11
hereof, the Company hereby (i) appoints each of the Agents as the co-exclusive
agents of the Company for the purpose of soliciting or receiving offers to
purchase Notes from the Company and (ii) agrees that whenever the Company
determines to sell Notes directly to an Agent as principal it will enter into a
separate agreement (each a "Purchase Agreement"). Each such Purchase Agreement,
whether oral (and confirmed in writing, which may be by facsimile transmission)
or in writing, shall contain such information (as applicable) set forth in the
form of Purchase Agreement attached as Exhibit A to this Agreement, relating to
such sale in accordance with Section 2(e) hereof.
SECTION l. Representations and Warranties. The Company represents and
warrants to each Agent as of the date hereof, as of the Commencement Date
referred to in Section 2(g) hereof, and as of the times referred to in Sections
6(a) and 6(b) hereof (the Commencement Date and each such time being hereinafter
sometimes referred to as a "Representation Date"), as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada,
has the corporate power and authority to own or lease and operate its
properties, has the corporate power, authority and franchises to carry
on its business as now conducted and has the corporate power and
authority to carry on its business as presently proposed to be
conducted, all as described in the Prospectus hereinafter referred to;
and the Company is duly qualified and is authorized to do business and
is in good standing as a foreign corporation in each jurisdiction where
the ownership or character of its properties or the nature of its
business or activities makes such qualification necessary and where the
failure so to qualify or be in good standing would have a material
adverse effect on the condition (financial or other), net worth or
results of operations of the Company and its subsidiaries considered as
one enterprise. All of the outstanding shares of Common Stock of the
Company are validly issued and are held of record by Sierra Pacific
Resources, a Nevada corporation.
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(b) Each of the subsidiaries of the Company is a corporation,
limited liability company or business trust duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, has the corporate power and authority to own or lease and
operate its properties, has the corporate power, authority and
franchises to carry on its business as now conducted and has the
corporate power and authority to carry on its business as presently
proposed to be conducted; each of the subsidiaries of the Company is
duly qualified and is authorized to do business and is in good standing
as a foreign corporation in each jurisdiction where the failure so to
qualify or be in good standing would have a material adverse effect on
the condition (financial or other), net worth or results of operations
of the Company and its subsidiaries considered as one enterprise; all
of the outstanding shares of capital stock or ownership interests of
each subsidiary of the Company have been duly authorized and validly
issued and are fully paid and nonassessable; and all of the capital
stock or ownership interests of each such subsidiary owned by the
Company, directly or through subsidiaries, is owned free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity.
(c) A registration statement on Form S-3, including a
prospectus, relating to the Notes has been filed with the Securities
and Exchange Commission (the "Commission") and has become effective. No
order preventing or suspending the use or effectiveness of the
Prospectus (as defined below) has been issued by the Commission or is
in effect, and no proceedings for such purpose are pending before or
threatened by the Commission. Such registration statement in the form
in which it became effective, and as from time to time supplemented,
and including all exhibits thereto is referred to as the "Registration
Statement"; the prospectus relating to the Notes in the form in which
it has most recently been filed, or transmitted for filing, with the
Commission pursuant to Rule 424 under the Securities Act of 1933, as
amended (the "Act"), together with all amendments or supplements
thereto, is hereinafter referred to as the "Prospectus." Any reference
to the Act shall include the rules and regulations of the Commission
promulgated thereunder. Any reference to the Registration Statement or
Prospectus or any amendment or supplement thereto shall include all
documents incorporated by reference therein (the "Incorporated
Documents") pursuant to the applicable form under the Act. The
Registration Statement and the Prospectus comply, and will, as amended
or supplemented, if applicable, comply at all times during any
Marketing Period (as defined below), in all material respects with the
requirements of the Act and do not and will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were or are made, not
misleading, except that the foregoing does not apply to statements in
or omissions from any such documents made in reliance upon and in
conformity with written information furnished to the Company by any
Agent specifically for use therein, or as to any statement in or
omission from the Statement of Eligibility and Qualification (Form T-1)
of the Trustee under the Indenture. "Marketing Period" shall mean any
time when no suspension of solicitation of offers to purchase Notes
pursuant to Sections 2(b) and 3(c) hereof shall be in effect and at any
time when any Agent shall own
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any Notes purchased by such Agent from the Company with the intention
of reselling them for a period not to exceed ninety (90) days after the
delivery of, and payment for, such Notes or the Company has accepted an
offer to purchase Notes but the related settlement has not occurred.
(d) The Incorporated Documents complied when filed with the
Commission, comply and will comply at all times during each Marketing
Period, in all material respects with the applicable provisions of the
Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and, when read together and with the other information
in the Registration Statement or Prospectus, did not, do not and will
not contain any untrue statement of a material fact and did not, do not
and will not omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were or are made, not misleading, except
that the foregoing does not apply to statements in or omissions from
any such documents made in reliance upon and in conformity with written
information furnished to the Company by any Agent specifically for use
therein. All references to the Exchange Act or the Trust Indenture Act
shall include the rules and regulations of the Commission promulgated
thereunder. The Incorporated Documents have been and will be at all
times during each Marketing Period timely filed as required by the
Exchange Act. There are no contracts or documents of the Company or any
subsidiary of the Company which are required to be filed as exhibits to
the Registration Statement which have not been filed as required.
(e) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as
contemplated in the Prospectus, there has not been any material adverse
change in the condition (financial or other), net worth or results of
operations of the Company and the subsidiaries considered as one
enterprise.
(f) The financial statements in the Registration Statement and
the Prospectus fairly present and will fairly present at all times
during each Marketing Period the financial condition of the Company and
the results of its operations; and said financial statements (including
the related notes) have been and will be at all times during each
Marketing Period prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved (except for any changes in which the independent accountants
for the Company have concurred and which have been specifically
disclosed to the Agents).
(g) The outside auditors whose report appears in the Company's
most recent Annual Report on Form 10-K of the Company are independent
public accountants as required by the Act.
(h) Prior to each issuance and sale of Notes, the Company will
have full corporate power and lawful corporate authority to authorize,
issue and sell the Notes being
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issued and sold at that time, on the terms and conditions set forth
herein, and has taken or will take all corporate action necessary
therefor; the Company has obtained every consent, approval,
authorization or other order of any regulatory body which is required
for such authorization, issue or sale except as may be required under
the Act or state securities laws; and, when duly and validly executed,
authenticated and issued as provided in the Indenture and delivered
pursuant to this Agreement and the Indenture, the Notes will constitute
valid, legal and binding obligations of the Company enforceable against
it in accordance with their respective terms and the terms of the
Indenture and entitled to the benefits of the Indenture, except as
enforcement thereof may be limited by bankruptcy, insolvency, or other
similar laws relating to or affecting enforcement of creditors' rights
generally or by general equity principles. The Indenture conforms and
the Notes will conform in all material respects to all statements in
relation thereto contained in the Registration Statement and the
Prospectus. The Indenture has been duly authorized, executed and
delivered by the Company and constitutes a valid, legal and binding
instrument of the Company enforceable against the Company in accordance
with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, or other similar laws relating to or affecting
enforcement of creditors' rights generally or by general equity
principles. The Indenture has been duly qualified under the Trust
Indenture Act.
(i) Except as set forth in the Prospectus, the Company is not
in violation of its Articles of Incorporation or by-laws or in default
under any agreement, indenture or instrument, the effect of which
violation or default would be materially adverse to the condition
(financial or other), net worth or results of operations of the
Company. The performance by the Company of its obligations under this
Agreement and any applicable Purchase Agreement and the consummation of
the transactions contemplated herein and therein and the fulfillment of
the terms hereof and thereof and execution and delivery by the Company
of, and the compliance by the Company with, all the terms and
provisions of the Notes and the Indenture will not result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed of trust, note
agreement or other material agreement or instrument to which the
Company or any of its subsidiaries is a party, or by which they or any
of their property is bound, or the Articles of Incorporation or by-laws
of the Company or any of its subsidiaries or any order, rule or
regulation applicable to the Company or any of its subsidiaries of any
court or of any federal or state regulatory body or administrative
agency or other governmental body having jurisdiction over the Company
or any of its subsidiaries or their respective or collective property.
(j) Except as set forth in the Prospectus, there is no pending
action, suit or other proceeding to which the Company is a party or of
which any property of the Company or any of its subsidiaries is the
subject, before or by any court or other governmental body, which is
likely to result in any material adverse change in the condition
(financial or other), net worth or results of operations of the Company
and its subsidiaries considered as one enterprise; and, except as set
forth in the Prospectus, no
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such action, suit or proceeding is known by the Company to be
threatened or contemplated.
(k) The certificates delivered pursuant to Section 5(h) hereof
and all other documents delivered by the Company or its representatives
in connection with the issuance and sale of the Notes were on the dates
on which they were delivered in all material respects true and
complete.
(l) Each of this Agreement and any applicable written Purchase
Agreement has been or will be duly and validly authorized, executed and
delivered by the Company and, upon execution and delivery by the Agents
and subject to any principles of public policy limiting the right to
enforce the indemnification provisions contained herein, will be a
valid and binding agreement of the Company.
(m) Each of the Mortgage Indenture and the Thirty-fifth
Supplemental Indenture has been duly authorized, executed and delivered
by the Company and is a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
or other similar laws relating to or affecting enforcement of
creditors' rights generally or by general equity principles. The
Mortgage Indenture has been qualified under the Trust Indenture Act.
(n) The Company has good and sufficient title to all the
properties described as owned by it in, and subject to the lien of, the
Mortgage Indenture (the "Mortgage Properties"), subject only to
Permitted Liens (as defined in the Mortgage Indenture), and to minor
defects and irregularities customarily found in properties of like size
and character that do not materially impair the use of the property
affected thereby in the operation of the business of the Company; the
descriptions in the Mortgage Indenture of the Mortgage Properties are
adequate to constitute the Mortgage Indenture a lien thereon; and the
Mortgage Indenture constitutes a valid lien on the Mortgage Properties,
which include substantially all of the permanent physical properties
and franchises of the Company (other than those expressly excepted),
subject only to the exceptions enumerated above.
(o) The Mortgage Bonds deposited with the Trustee as the basis
for the issuance of the Notes have, to the extent that such Mortgage
Bonds have been designated by the Company as designated mortgage bonds
(the "Designated Mortgage Bonds"), been duly pledged to the Trustee,
and the Indenture will, upon payment for the Notes issued upon the
basis of the Designated Mortgage Bonds so deposited, constitute a valid
first lien thereupon; no registration, recording or filing of the
Indenture (or notices or financing statements in respect thereof) is
required by law to make effective and to maintain the lien on the
Designated Mortgage Bonds so deposited intended to be created by the
Indenture.
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(p) The Company has full corporate power and lawful corporate
authority to authorize, issue and pledge the Mortgage Bonds and has
taken or will take all corporate action necessary therefor; the Company
has obtained every consent, approval, authorization or other order of
any regulatory body which is required for such authorization, issue or
pledge. The Mortgage Indenture and the Mortgage Bonds conform in all
material respects to all statements in relation thereto contained in
the Registration Statement and the Prospectus.
(q) The Mortgage Bonds deposited with the Trustee and the
Designated Mortgage Bonds pledged to the Trustee as the basis for the
issuance of the Securities constitute legal, valid and binding
obligations of the Company, subject, as to enforcement, to laws
relating to or affecting generally the enforcement of creditors'
rights, including, without limitation, bankruptcy and insolvency laws,
and to general principles of equity, and will be entitled to the
security afforded by the Mortgage Indenture equally and ratably with
the securities outstanding thereunder.
(r) The Company is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended.
SECTION 2. Solicitations as Agent; Purchases as Principal.
(a) Appointment. Subject to the terms and conditions stated herein,
including, without limitation, the provisions of Section 11 hereof, the Company
hereby appoints each of the Agents as the co-exclusive agents of the Company for
the purpose of soliciting or receiving offers to purchase the Notes from the
Company by others during any Marketing Period. On the basis of the
representations and warranties contained herein, but subject to the terms and
conditions herein set forth, each Agent agrees, as a co-exclusive agent of the
Company, to use its reasonable best efforts to solicit offers to purchase the
Notes upon the terms and conditions set forth in the Prospectus. The Agents are
not authorized to appoint sub-agents or to engage the services of any other
broker or dealer in connection with the offer or sale of the Notes, except as
provided in paragraph (e) of this Section. Except as otherwise provided herein,
including, without limitation, the provisions of Section 11 hereof, so long as
this Agreement shall remain in effect with respect to any Agent, the Company
shall not, without the consent of each such Agent (which consent shall not
unreasonably be withheld), solicit or accept offers to purchase Notes otherwise
than through one of the Agents, provided, however, the Company expressly
reserves the right to sell Notes directly to investors, in which case no
commission will be payable with respect to such sale. Each Agent may also
purchase Notes from the Company as principal for purposes of resale, as more
fully described in paragraph (e) of this Section.
(b) Suspension of Solicitation. The Company reserves the right, in its
sole discretion, to suspend solicitation of offers to purchase the Notes
commencing at any time for any period of time or indefinitely. As soon as
practicable, but in any event not later than one business day after
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receipt of notice from the Company, the Agents will forthwith suspend
solicitation of offers to purchase Notes from the Company until such time as the
Company has advised the Agents that such solicitation may be resumed. For the
purpose of the foregoing sentence, "business day" shall mean any day which is
not a Saturday or Sunday and which is not a day on which (i) banking
institutions are generally authorized or obligated by law to close in the City
of New York or (ii) The New York Stock Exchange is closed for trading.
Upon receipt of notice from the Company as contemplated by Section 3(b)
hereof, each Agent shall suspend its solicitation of offers to purchase Notes
until such time as the Company shall have furnished it with an amendment or
supplement to the Registration Statement or the Prospectus, as the case may be,
contemplated by Section 3(c) and shall have advised such Agent that such
solicitation may be resumed.
(c) Agent's Commission. Upon the closing of the sale of any Notes sold
by the Company as a result of a solicitation made by or offer to purchase
received by an Agent, the Company agrees to pay such Agent a commission in
accordance with the schedule set forth in Exhibit B hereto.
(d) Solicitation of Offers. The Agents are authorized to solicit offers
to purchase the Notes only in the denominations specified in the Prospectus, at
a purchase price equal to 100% of the principal amount thereof or such other
principal amount or purchase price as shall be specified by the Company. Each
Agent shall communicate to the Company, orally or in writing, each reasonable
offer to purchase Notes received by it as an Agent. The Company shall have the
sole right to accept offers to purchase the Notes and may reject any offer in
whole or in part. Each Agent shall have the right, in its discretion reasonably
exercised, to reject any offer to purchase the Notes received by it, without
advising the Company, in whole or in part, and any such rejection shall not be
deemed a breach of its agreement contained herein.
[No Note which the Company has agreed to sell pursuant to this
Agreement shall be deemed to have been purchased and paid for, or sold by the
Company, until such Note shall have been delivered to the purchaser thereof
against payment therefor by such purchaser.]
(e) Purchases as Principal. Each sale of Notes to any Agent as
principal, for resale to one or more investors or to another broker-dealer
(acting as principal for purposes of resale), shall be made in accordance with
the terms of this Agreement and a Purchase Agreement, whether oral (and
confirmed in writing by such Agent to the Company, which may be by facsimile
transmission) or in writing, which will provide for the sale of such Notes to,
and the purchase thereof by, such Agent. A Purchase Agreement may also specify
certain provisions relating to the reoffering of such Notes by such Agent. The
commitment of any Agent to purchase Notes from the Company as principal shall be
deemed to have been made on the basis of the representations and warranties of
the Company herein contained and shall be subject to the terms and conditions
herein set forth. Each Purchase Agreement shall specify the principal amount and
terms of the Notes to be purchased by an Agent, the time and date (each such
time and date being
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referred to herein as a "Time of Delivery") and place of delivery of and payment
for such Notes and such other information (as applicable) as is set forth in
Exhibit A hereto. The Company agrees that if any Agent purchases Notes as
principal for resale such Agent shall receive such compensation, in the form of
a discount or otherwise, as shall be indicated in the applicable Purchase
Agreement or, if no compensation is indicated therein, a commission in
accordance with Exhibit B hereto. Any Agent may utilize a selling or dealer
group in connection with the resale of such Notes. In addition, any Agent may
offer the Notes it has purchased as principal to other dealers. Any Agent may
sell Notes to any dealer at a discount and, unless otherwise specified in the
applicable Pricing Supplement (as such term is defined in Section 3(a) hereof),
such discount allowed to any dealer will not be in excess of the discount to be
received by such Agent from the Company. Such Purchase Agreement shall also
specify any requirements for delivery of opinions of counsel, accountant's
letters and officers' certificates pursuant to Section 5 hereof.
The obligation of the Company to sell and deliver Notes, pursuant to
any Purchase Agreement or otherwise, shall in each case be subject to the
condition that, on any settlement date for the sale of Notes or the Time of
Delivery, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and still be in effect and no
proceedings for that purpose shall be pending before, or to the knowledge of the
Company or the Agents contemplated or threatened by, the Commission. Each date
of delivery of and payment for Notes to be purchased by an Agent pursuant to a
Purchase Agreement is referred to herein as a "Settlement Date."
(f) Administrative Procedures. Administrative procedures respecting the
sale of Notes (the "Procedures") are set forth in Exhibit C hereto and may be
amended from time to time in writing signed by each of the Agents and the
Company. Each Agent and the Company agree to perform the respective duties and
obligations specifically provided to be performed by each of them herein and in
the Procedures. The Procedures shall apply to all transactions contemplated
hereunder including sales of Notes to any Agent as principal pursuant to a
Purchase Agreement, unless otherwise set forth in such Purchase Agreement.
(g) Delivery of Documents. The documents required to be delivered by
Section 5 hereof shall be delivered at the offices of Ropes & Gray not later
than 10:00 a.m., Boston time, on the date of this Agreement or at such later
time as may be mutually agreed upon by the Company and the Agents, which in no
event shall be later than the time at which the Agents commence solicitation of
offers to purchase Notes hereunder. The date of delivery of such documents is
referred to herein as the "Commencement Date."
(h) Obligations Several. The Company acknowledges that the obligations
of the Agents under this Agreement are several and not joint.
SECTION 3. Covenants of the Company. The Company covenants and agrees
with each of the Agents, as follows:
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(a) Amendments and Supplements to Registration Statement and
Prospectus. The Company will give the Agents notice of its intention to
file any amendment to the Registration Statement or amendment or
supplement to the Prospectus (other than a supplement providing solely
for the specification of the interest rates, maturity dates, issuance
prices, redemption terms and prices, if any, and other terms of Notes
sold pursuant hereto (any such supplement being hereinafter called a
"Pricing Supplement")), whether by the filing of documents pursuant to
the Act, the Exchange Act or otherwise, and will furnish the Agents
with copies of any such amendment or supplement or other documents
proposed to be filed a reasonable time in advance of such proposed
filing.
(b) Notice to Agents of Certain Events. The Company will
notify each of the Agents immediately, and confirm in writing if
requested by the Agents in any particular instance, (i) when any
amendment or post-effective amendment to the Registration Statement has
been filed and/or becomes effective or when any supplement or amendment
to the Prospectus has been filed, (ii) of the issuance of any stop
order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary
prospectus relating to the Notes or the Prospectus or of the initiation
or threatening known by it of any proceedings for such purposes, (iii)
of the receipt of any comments from the Commission in respect of the
Registration Statement, any such preliminary prospectus or the
Prospectus, or requesting the amendment or supplementation of the
Registration Statement, any such preliminary prospectus or the
Prospectus or additional information, (iv) of any action by any
governmental authority altering, suspending or otherwise affecting any
authorization, consent, approval or waiver issued in connection with
the Notes and (v) of the commencement of any litigation or
administrative proceeding relating to the issue and sale of the Notes.
If the Commission shall enter a stop order or any order preventing or
suspending the use of any such preliminary prospectus or the Prospectus
at any time, or shall initiate any proceedings for such purposes, the
Company will make every reasonable effort to prevent the issuance of
such order and, if issued, to obtain the lifting thereof. If the
Prospectus is amended or supplemented as a result of the filing under
the Exchange Act of any document incorporated by reference in the
Prospectus, no Agent shall be obligated to solicit offers to purchase
Notes so long as it is not reasonably satisfied with such documents.
(c) Revisions to Prospectus or Registration Statement. During
any Marketing Period, the Company will comply with all requirements
imposed upon it by the Act and the Exchange Act, as now and hereafter
amended, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Notes as contemplated by
the provisions hereof and the Prospectus; and if during any Marketing
Period any event occurs or condition exists as a result of which the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
then existing, not misleading, or if, in the opinion of the Agents (of
which opinion such Agents shall immediately notify the Company by
telephone with confirmation in writing) or in the
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opinion of the Company, during such period it is necessary to amend or
supplement the Registration Statement or the Prospectus, as then
amended or supplemented, to comply in all material respects with the
Act or the Exchange Act, the Company will immediately notify each of
the Agents by telephone (with confirmation in writing) to suspend
solicitation of offers to purchase Notes and, if so notified by the
Company, the Agents shall forthwith suspend such solicitation and cease
using the Prospectus, as then amended or supplemented. If the Company
shall decide to amend or supplement the Registration Statement or
Prospectus, as then amended or supplemented, it shall so advise the
Agents promptly by telephone (with confirmation in writing) and, at its
expense, shall prepare and cause to be filed promptly with the
Commission an amendment or supplement to the Registration Statement or
Prospectus, as then amended or supplemented, that will correct such
statement or omission or effect such compliance and will supply such
amended or supplemented Prospectus to the Agents in such quantities as
they may reasonably request. If any documents, certificates, opinions
and letters furnished to the Agents pursuant to Sections 6(b), 6(c) and
6(d) in connection with the preparation and filing of such amendment or
supplement are satisfactory in all respects to the Agents, upon the
filing with the Commission of such amendment or supplement to the
Prospectus or upon the effectiveness of an amendment to the
Registration Statement, the Agents will resume the solicitation of
offers to purchase Notes hereunder. Notwithstanding any other provision
of this Section 3(c), until the distribution of any Notes an Agent may
own as principal has been completed, if any event described above in
this paragraph (c) occurs, the Company will, at its own expense,
forthwith prepare and cause to be filed promptly with the Commission an
amendment or supplement to the Registration Statement or Prospectus, as
then amended or supplemented, satisfactory in all respects to such
Agent, will supply such amended or supplemented Prospectus to such
Agent in such quantities as it may reasonably request and shall furnish
to such Agent pursuant to Sections 6(b), 6(c) and 6(d) such documents,
certificates, opinions and letters as it may request in connection with
the preparation and filing of such amendment or supplement; provided
that should such event described above in this paragraph (c) relate
solely to activities of any Agent or Agents, then such Agent or Agents,
as the case may be, shall assume the expense of preparing and
furnishing any such amendment or supplement.
(d) Earning Statement. As soon as practicable the Company will
make generally available to its security holders and deliver to each of
the Agents an earning statement which shall satisfy the provisions of
Section 11(a) of the Act and the rules and regulations of the
Commission thereunder, including Rule 158 issued thereunder.
(e) Delivery of Signed Registration Statement and Other
Documents. The Company will deliver to each of the Agents and to
counsel for the Agents without charge as promptly as practicable a
signed copy of the Registration Statement and all amendments thereto
including all exhibits filed therewith and signed consents,
certificates and opinions of accountants and of any other persons named
in the Registration Statement as having prepared, certified or reviewed
any part thereof, and will deliver to the Agents without
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charge such number of unsigned copies of the Registration Statement,
without exhibits, and of all amendments thereto, as the Agents may
reasonably request. The Company will deliver to or upon order of the
Agents without charge as many copies of each preliminary prospectus
relating to the Notes as the Agents may reasonably request and as many
copies of the Prospectus in final form, or as thereafter amended or
supplemented, as the Agents may reasonably request.
(f) Blue Sky Qualifications. The Company will cooperate with
the Agents in connection with the qualification of the Notes for sale
under the securities laws of such jurisdictions as the Agents may
reasonably designate and the continuance of such qualifications in
effect so long as required for the distribution of the Notes, provided
that the Company shall not be required to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to
submit to any requirement which it deems unduly burdensome. The Company
will advise each of the Agents promptly of any order or communication
of any public authority addressed to the Company suspending or
threatening to suspend the qualification of the Notes for sale, or the
eligibility of the Notes for purchase by such institutions, in any
jurisdiction.
(g) Copies of Reports and Financial Statements. For the period
ending five years from the Commencement Date, the Company will deliver
to each of the Agents (i) as soon as available, a copy of each report
of the Company mailed to public security holders or filed with the
Commission and (ii) such additional information concerning the business
and financial condition of the Company as such agent may from time to
time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission).
(h) Application of Net Proceeds. The Company will apply the
net proceeds from the sale of the Notes for the purposes set forth in
the Prospectus.
(i) Suspension of Certain Obligations. The Company shall not
be required to comply with the provisions of paragraphs (c) or (g) of
this Section 3 during any Marketing Period from the time the Agents
shall have suspended solicitation of purchases of the Notes in their
capacity as agents pursuant to a request from the Company pursuant to
Section 2(b) hereof to the time the Company shall determine that
solicitation of purchases of the Notes should be resumed or shall
subsequently enter into a new Purchase Agreement with an Agent,
provided, however, that compliance with such paragraphs shall be
required for any portion of such period during which any Agent shall
hold any Notes as principal purchased pursuant to the Purchase
Agreement.
(j) Downgrading. The Company shall notify the Agents promptly
in writing of any downgrading, or its receipt of any notice of any
intended or potential downgrading or of any review for possible change
that does not indicate the direction of the possible
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change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term
is defined for purposes of Rule 436(g)(2) under the Act.
(k) During the period beginning the date of any Purchase
Agreement and continuing to and including the Settlement Date with
respect to such Purchase Agreement, the Company will not, without such
Agent's prior written consent, offer, sell, contract to sell or
otherwise dispose of any debt securities of the Company or warrants to
purchase debt securities of the Company substantially similar to such
Notes (other than (i) Notes that are to be sold pursuant to such
Purchase Agreement, (ii) Notes previously agreed to be sold by the
Company and (iii) commercial paper issued in the ordinary course of
business), except as may otherwise be provided in such Purchase
Agreement.
SECTION 4. Payment of Expenses. The Company will pay (i) the costs
incident to the authorization, issuance, sale and delivery of the Notes and any
taxes payable in connection therewith, (ii) the costs incident to the
preparation, printing and filing under the Act of the Registration Statement and
any amendments and exhibits thereto and the Prospectus and any amendments and
supplements thereto, (iii) the costs incident to the preparation, printing and
filing of any document and any amendments and exhibits thereto required to be
filed by the Company under the Exchange Act, (iv) the costs of distributing the
Registration Statement, as originally filed, and each amendment and
post-effective amendment thereof (including exhibits), any preliminary
prospectus, the Prospectus, any supplement or amendment to the Prospectus and
any documents incorporated by reference in any of the foregoing documents, (v)
the costs and expenses incident to the preparation, execution and delivery of
the Indenture and the Supplemental Indenture, (vi) the fees and disbursements of
the Trustee, any paying agent, any calculation agent, and any other agents
appointed by the Company, and their respective counsel, (vii) the costs and fees
in connection with the listing of the Notes on any securities exchange, (viii)
the cost of any filings with the National Association of Securities Dealers,
Inc., (ix) the fees and disbursements of counsel for the Company, counsel for
the Agents, counsel for the Trustee and the Company's accountants, (x) the fees
paid to rating agencies in connection with the rating of the Notes, (xi) the
fees and expenses of qualifying the Notes under the securities laws of the
several jurisdictions as provided in Section 3(f) hereof and of preparing and
printing and distributing a Blue Sky Memorandum, (xii) all advertising expenses
in connection with the offering of the Notes incurred with the consent of the
Company, (xiii) all reasonable out-of-pocket expenses incurred by the Agents in
connection with the transactions contemplated hereunder, (xiv) any expenses
incurred by the Company in connection with a "road show" presentation to
potential investors and (xv) other costs and expenses incident to the
performance of the Company's obligations under this Agreement.
SECTION 5. Conditions of Obligations of Agents. The obligation of the
Agents, as the agents of the Company, under this Agreement to solicit offers to
purchase the Notes, the obligation of any person who has agreed to purchase
Notes to make payment for and take delivery of Notes, and the obligation of any
Agent to purchase Notes pursuant to any Purchase Agreement,
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is subject to the accuracy, on each Settlement Date and in the case of an
Agent's obligation to solicit offers to purchase Notes, at the time of such
solicitation, of the representations and warranties of the Company contained
herein, to the accuracy of the statements of the Company's officers made in any
certificate furnished pursuant to the provisions hereof, to the performance by
the Company of its obligations hereunder, and to each of the following
additional terms and conditions:
(a) Registration Statement. The Registration Statement shall
have become effective under the Act and the Indenture shall have been
qualified under the Trust Indenture Act, and no stop order suspending
the effectiveness of the Registration Statement or the qualification of
the Indenture, or order preventing or suspending the use of any
Prospectus, shall have been issued and no proceeding for that purpose
shall have been initiated or, to the knowledge of the Company or the
Agents, contemplated or threatened by the Commission; any request for
additional information on the part of the Commission (to be included in
the Registration Statement or the Prospectus or otherwise) shall have
been complied with; and no amendment to the Registration Statement or
Prospectus shall have been filed to which the Agents shall have
reasonably objected, in writing, after having received notice pursuant
to Section 3(a).
(b) Regulatory Approvals. There shall be in full force and
effect appropriate orders or decrees of the Public Utilities Commission
of Nevada and the California Public Utilities Commission (or such other
regulatory bodies as may subsequently have jurisdiction) authorizing to
the extent required by law the offering, issuance and sale of the Notes
as herein provided. Any such decision, order or decree issued after the
date hereof shall contain no condition inconsistent with the provisions
hereof or reasonably unacceptable to the Agents (it being understood
and agreed that no such order or decree in effect on the date of this
Agreement contains any such unacceptable provision).
(c) Absence of Certain Changes. Subsequent to the respective
dates as of which information is given in the Registration Statement
and the Prospectus, there shall not have been any downgrading nor shall
any notice have been given of any intended or potential downgrading or
of any review for possible change that does not indicate the direction
of the possible change, in the ratings accorded the Company's debt
securities by Moody's Investors Service, Inc., Standard and Poor's
Corporation or Duff & Phelps, Inc., or, except as contemplated in the
Prospectus, any change in the capital stock, short-term debt or
long-term debt of the Company, or any adverse change or any development
involving a prospective adverse change in the condition (financial or
other), net worth or results of operations of the Company and its
subsidiaries, considered as one enterprise, which, in any such event,
in the Agents' judgment, is material and adverse and that makes it, in
the judgment of such Agents, impracticable to market the Notes on the
terms and in the manner contemplated by the Prospectus, as so amended
or supplemented, or materially impairs the investment quality of the
Notes.
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(d) Legal Matters Satisfactory to Counsel. The authorization
and issuance of the Notes, the Indenture, the Mortgage Indenture, the
Mortgage Bonds, the Registration Statement, the Prospectus and all
corporate proceedings and other legal matters incident thereto shall be
satisfactory in all respects to counsel for the Agents, and the Company
shall have furnished to counsel for the Agents such documents as they
may reasonably request to enable them to be satisfied with respect to
the matters referred to in this subparagraph and to pass upon such
matters.
(e) Opinion of Choate, Hall & Stewart. On the Commencement
Date, the Agents shall have received the opinion, addressed to the
Agents and dated the Commencement Date, of Choate, Hall & Stewart,
special counsel for the Company, in the form set forth in Exhibit D to
this Agreement.
(f) Opinion of Woodburn and Wedge. On the Commencement Date,
the Agents shall have received the opinion, addressed to the Agents and
dated the Commencement Date, of Woodburn and Wedge, counsel for the
Company in the state of Nevada, in the form set forth in Exhibit E to
this Agreement.
(g) Opinion of Orrick, Herrington & Sutcliffe LLP. On the
Commencement Date, the Agents shall have received the opinion,
addressed to the Agents and dated the Commencement Date, of Orrick,
Herrington & Sutcliffe LLP, counsel for the Company in the State of
California, in the form set forth in Exhibit F to this Agreement.
(h) Officers' Certificate. The Company shall have furnished to
the Agents on the Commencement Date a certificate, dated the
Commencement Date as though made at and as of the Commencement Date, of
its President or a Vice President and of a principal financial or
accounting officer of the Company, covering the matters set forth in
Exhibit G to this Agreement.
(i) Accountants' Letters. The Company shall have furnished to
the Agents on the Commencement Date a letter from its independent
accountants, addressed jointly to the Company and the Agents and dated
the Commencement Date, of the type described in the American Institute
of Certified Public Accountants Statement on Auditing Standards No. 72,
covering specified financial statement items and procedures set forth
in Exhibit H to this Agreement.
(j) Additional Conditions. There shall not have occurred: a
suspension or material limitation in trading in securities generally on
or by the New York Stock Exchange, the American Stock Exchange or the
over-the-counter market or the establishment of minimum prices on such
exchanges or market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction;
suspension of trading of any securities of the Company on any exchange
or in any over-the-counter market; a general moratorium on commercial
banking activities
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declared by either Federal or New York State authorities; any outbreak
or escalation of major hostilities in which the United States is
involved, any declaration of war by Congress or any other substantial
national calamity or emergency; if the effect of any such occurrence in
the judgment of the Agents makes it impracticable or inadvisable to
proceed with the solicitation of offers to purchase Notes or the
purchase of Notes from the Company as principal pursuant to the
applicable Purchase Agreement, as the case may be, on the terms and in
the manner contemplated by the Prospectus, as amended or supplemented.
(k) Opinion of Ropes & Gray. At the Commencement Date, the
Agents shall have received the opinion, addressed to the Agents and
dated the Commencement Date of Ropes & Gray, counsel for the Agents, in
form and substance satisfactory to the Agents with respect to the
incorporation of the Company, the validity of the Notes, the
Registration Statement, the Prospectus and other related matters as
they may require, and the Company shall have furnished to such counsel
such documents as the Agents may reasonably request for the purpose of
enabling them to pass upon such matters.
(l) Other Information and Documentation. Prior to the
Commencement Date, the Company shall have furnished to the Agents such
further information, certificates and documents as the Agents or
counsel for the Agents may have reasonably requested.
Ropes & Gray and Choate, Hall & Stewart, in giving their opinions
pursuant to this Section 5, may rely upon the opinion of Orrick, Herrington &
Sutcliffe LLP as to all legal conclusions affected by the laws of California,
and upon the opinion of Woodburn and Wedge as to all legal conclusions affected
by the laws of Nevada.
SECTION 6. Additional Covenants of the Company. The Company covenants
and agrees that:
(a) Acceptance of Offer Affirms Representations and
Warranties. Each acceptance by it of an offer for the purchase of Notes
shall be deemed to be an affirmation that the representations and
warranties of the Company contained in this Agreement and in any
certificate theretofore given to the Agents pursuant hereto are true
and correct at the time of such acceptance, and an undertaking that
such representations and warranties will be true and correct at the
time of delivery to the purchaser or his agent of the Notes relating to
such acceptance as though made at and as of each such time (and such
representations and warranties shall relate to the Registration
Statement and the Prospectus as amended or supplemented to each such
time).
(b) Subsequent Delivery of Officers' Certificates. The Company
agrees that during each Marketing Period, each time that the
Registration Statement or the Prospectus shall be amended or
supplemented (other than by a Pricing Supplement), each time the
Company sells Notes to an Agent as principal and the applicable
Purchase Agreement
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<PAGE>
specifies the delivery of an officers' certificate under this Section
6(b) as a condition to the purchase of Notes pursuant to such Purchase
Agreement and each time the Company files with the Commission any
document incorporated by reference into the Prospectus (other than any
Current Report on Form 8-K unless an Agent shall otherwise reasonably
request), the Company shall submit to the Agents and their counsel a
certificate of the President or Vice President or a principal financial
or accounting officer of the Company, (i) as of the date of such
amendment, supplement and Time of Delivery relating to such sale or
filing or (ii) if such amendment, supplement or filing was not filed
during a Marketing Period, as of the first day of the next succeeding
Marketing Period, representing that the statements contained in the
certificate referred to in Section 5(h) hereof which was last furnished
to the Agents are true and correct at the time of such amendment,
supplement or filing, as the case may be, as though made at and as of
such time (except that such statements shall be deemed to relate to the
Registration Statement and the Prospectus as amended and supplemented
at such time) or, in lieu of such certificate, a certificate of the
same tenor as the certificate referred to in said Section 5(h),
modified as necessary to relate to the Registration Statement and the
Prospectus as amended and supplemented to the time of delivery of such
certificate.
(c) Subsequent Delivery of Legal Opinions. The Company agrees
that during each Marketing Period, each time that the Registration
Statement or the Prospectus shall be amended or supplemented (other
than by a Pricing Supplement), each time the Company sells Notes to an
Agent as principal and the applicable Purchase Agreement specifies the
delivery of legal opinions under this Section 6(c) as a condition to
the purchase of Notes pursuant to such Purchase Agreement and each time
the Company files with the Commission any document incorporated by
reference into the Prospectus (other than any Current Report on Form
8-K unless an agent shall otherwise reasonably request), the Company
shall (i) concurrently with such amendment, supplement and Time of
Delivery relating to such sale or filing or (ii) if such amendment,
supplement or filing was not filed during a Marketing Period, on the
first day of the next succeeding Marketing Period, furnish the Agents
and their counsel with the written opinions of counsel to the Company,
addressed to the Agents and dated the date of delivery of such opinion,
in form satisfactory to the Agents, of the same tenor as the opinions
referred to in Sections 5(e), 5(f) and 5(g) hereof, respectively, but
modified, as necessary, to relate to the Registration Statement and the
Prospectus as amended or supplemented to the time of delivery of such
opinion; provided, however, that in lieu of such opinions, such counsel
may furnish the Agents and their counsel with a letter to the effect
that the Agents may rely on any prior opinion of such counsel to the
same extent as though it were dated the date of such letter authorizing
reliance (except that statements in such prior opinion shall be deemed
to relate to the Registration Statement and the Prospectus as amended
or supplemented to the time of delivery of such letters authorizing
reliance).
(d) Subsequent Delivery of Accountants' Letters. The Company
agrees that during each Marketing Period, each time that the
Registration Statement or the Prospectus
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<PAGE>
shall be amended or supplemented to include additional financial
information derived from the books and records of the Company, each
time the Company sells Notes to an Agent as principal and the
applicable Purchase Agreement specifies the delivery of letters under
this Section 6(d) as a condition to the purchase of Notes pursuant to
such Purchase Agreement and each time the Company files with the
Commission any document incorporated by reference into the Prospectus
which contains additional financial information derived from the books
and records of the Company, the Company shall cause the Company's
independent public accountants to furnish the Agents and their counsel
(i) concurrently with such amendment, supplement and Time of Delivery
relating to such sale or filing or (ii) if such amendment, supplement
or filing was not filed during a Marketing Period, on the first day of
the next succeeding Marketing Period, a letter, addressed jointly to
the Company and the Agents and dated the date of delivery of such
letter, in form and substance of the type described in the relevant
statements of auditing standards, currently American Institute of
Certified Public Accountants Statement on Auditing Standards No. 72,
and of the same tenor as the letters referred to in Section 5(i) hereof
but modified to relate to the Registration Statement and the
Prospectus, as amended and supplemented to the date of such letter,
with such changes as may be necessary to reflect changes in the
financial statements and other information derived from the accounting
records of the Company; provided, however, that if the Registration
Statement or the Prospectus is amended or supplemented solely to
include financial information as of and for a fiscal quarter, said
outside auditors may refer to their previously issued letter, shall
reaffirm all statements made in that letter and may limit the scope of
such additional letter to the unaudited consolidated financial
statements included in such amendment or supplement and certain agreed
procedures, if any, of the type described in the American Institute of
Certified Public Accountants Statement on Auditing Standards No. 72,
covering specified financial statement items and procedures set forth
in Exhibit H to this Agreement.
(e) Opinions on Settlement Date. On any Settlement Date, the
Company shall, if requested by the Agent that solicited or received the
offer to purchase any Notes being delivered on such Settlement Date,
furnish such Agent and its counsel with the written opinions of counsel
to the Company, addressed to the Agents and dated such settlement date,
in form satisfactory to the Agents, of the same tenor as the opinions
referred to in Sections 5(e), 5(f) and 5(g) hereof, respectively, but
modified, as necessary, to relate to the Prospectus relating to the
Notes to be delivered on such settlement date; provided, however, that
in lieu of such opinions, such counsel may furnish such Agent and its
counsel with a letter to the effect that such Agent may rely on any
prior opinion of such counsel to the same extent as though it were
dated such settlement date (except that statements in such prior
opinion shall be deemed to relate to the Registration Statement and the
Prospectus as amended or supplemented to the time of delivery of such
letter authorizing reliance).
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SECTION 7. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each Agent
and each person, if any, who controls such Agent within the meaning of
the Act or the Exchange Act from and against any losses, claims,
damages or liabilities and any action in respect thereof to which such
Agent or such controlling person may become subject, under the Act or
otherwise, with respect to the Notes, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made,
and will reimburse each Agent and each such controlling person for any
legal or other expenses reasonably incurred by such Agent or such
controlling person in connection with investigating or defending
against any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises
out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration
Statement, the Prospectus, or such amendment or such supplement, in
reliance upon and in conformity with written information furnished to
the Company by such Agent specifically for use in the preparation
thereof, or as to any statement in or omission from the Statement of
Eligibility and Qualification (Form T-1) of the Trustee under the
Indenture; and provided, further, that, insofar as it relates to the
Prospectus, the indemnity agreement contained in this Section 7(a)
shall not inure to the benefit of any Agent or any person who controls
such Agent on account of any losses, claims, damages or liabilities (or
actions in respect thereof) arising from the sale of Notes by such
Agent pursuant to a Purchase Agreement to any person if a copy of the
Prospectus, as amended or supplemented, shall not have been sent or
given to such person with or prior to the written confirmation of the
sale involved to the extent that the Prospectus, as amended or
supplemented, if so sent or delivered, would have cured the defect in
the Prospectus giving rise to such losses, claims, damages, liabilities
or actions in respect thereof; and provided, further, that if, at any
time after the date of filing the Prospectus or any amendment or
supplement to the Prospectus with the Commission, any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented ("Current Prospectus") would include an untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
and if the Company shall have furnished to any Agent copies of an
amended Prospectus ("Amended Prospectus") or of a supplement to be
attached to or furnished with the Current Prospectus ("Supplement"), to
which the Agent shall not have objected pursuant to Section 5(a)
hereof, for delivery in connection with offers and sales of the Notes,
the indemnity agreement contained in this Section 7(a), insofar as it
relates to the Current Prospectus,
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shall not inure to the benefit of such Agent on account of any losses,
claims, damages, liabilities or actions in respect thereof arising from
the sale of Notes by such Agent to any person subsequent to the time
such copies have been so furnished to such Agent, if a copy of the
Amended Prospectus or the Supplement, as the case may be, shall not
have been sent or given to such person with or prior to the written
confirmation of the sale involved, to the extent that the Amended
Prospectus or the Supplement, if so sent or delivered, would have cured
the defect in the Current Prospectus giving rise to such losses,
claims, damages, liabilities or actions in respect thereof. This
indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Agent agrees, severally and not jointly, to indemnify
and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement and each person, if
any, who controls the Company within the meaning of the Act or the
Exchange Act, against any losses, claims, damages or liabilities and
any action in respect thereof to which the Company or any such
director, officer or controlling person may become subject, under the
Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
the Registration Statement, the Prospectus or such amendment or such
supplement, in reliance upon and in conformity with written information
furnished to the Company by such Agent specifically for use therein,
(ii) in the case of the sale of Notes by such Agent pursuant to a
Purchase Agreement to any person, the failure of such Agent to send or
give to such person a copy of the Prospectus, as amended or
supplemented, with or prior to the written confirmation of the sale
involved to the extent that the Prospectus, as amended or supplemented,
if so sent or delivered, would have cured the defect in the Prospectus
giving rise to such losses, claims, damages, liabilities or actions, or
(iii) the failure of such Agent to send or deliver to any person an
Amended Prospectus or Supplement, with or prior to the written
confirmation of a sale pursuant to a Purchase Agreement, to which
Amended Prospectus or Supplement the Agent shall not have objected
pursuant to Section 5(a) hereof and which the Company shall have
furnished to such Agent, if any event shall have occurred as a result
of which (x) the Current Prospectus would include an untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under
which they were made when such Prospectus is delivered, not misleading
and (y) the Amended Prospectus or Supplement, as the case may be, so
sent or delivered, would have cured the defect in the Current
Prospectus giving rise to such losses, claims, damages, liabilities or
actions. This indemnity agreement will be in addition to any liability
which such Agents may otherwise have.
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(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party
in writing of the commencement thereof, but the omission so to notify
the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 7.
In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party,
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation,
unless, in the case of an indemnification obligation arising under
subparagraph (a) of this Section 7, (i) the employment of additional
counsel has been authorized in writing by the Company in connection
with defending such action, or (ii) the Company and such Agent or
controlling person are advised by such additional counsel that such
Agent or controlling person has available defenses involving a
potential conflict with the interests of the Company, in either of
which events, the fees and expenses of such additional counsel shall be
borne by the Company. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or
any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7
(whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section 7 is
unavailable (or insufficient to hold harmless an indemnified party)
under subparagraph (a) or (b) above (by reason of a failure of the
indemnified party to give a notice required by subparagraph (c) above
or for any other reason whatever) to a party that would have been an
indemnified party under subparagraph (a) or (b) above ("indemnified
party") in respect of any losses, claims, damages, liabilities or
actions referred to therein, then each party that would have been an
indemnifying party thereunder ("indemnifying party") shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages, liabilities or actions in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand
and each Agent on the other from the offering of the Notes to which
such loss, claim, damage or liability (or action in respect thereof)
relates and the relative fault of the
21
<PAGE>
Company on the one hand and each Agent on the other in connection with
the statements or omissions which resulted in such losses, claims,
damages, liabilities or actions, as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and each Agent on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total
commissions (or discounts) received by each Agent with respect to such
offering. The relative fault of the Company on the one hand and each
Agent on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or by such Agent
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Each
Agent's obligation to contribute pursuant to this Section 7 shall be
several in the proportion that the principal amount of the Notes the
sale of which by or through such Agent gave rise to such losses,
claims, damages or liabilities bears to the aggregate principal amount
of the Notes the sale of which by or through any Agent gave rise to
such losses, claims, damages or liabilities, and not joint. The Company
and the Agents agree that it would not be just and equitable if
contribution pursuant to this subparagraph (d) were determined by pro
rata allocation (even if the Agents were treated as one entity for such
purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this
subparagraph (d). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities or actions
referred to above in this subparagraph (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim (which shall be limited as provided in subparagraph (c) above if
the indemnifying party has assumed the defense of any such action in
accordance with the provisions thereof). Notwithstanding the provisions
of this Section 7, no Agent shall be required to contribute any amount
in excess of the amount by which the total price at which the Notes
that were offered and sold to the public through such Agent exceeds the
amount of any damages which such Agent has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not
exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
SECTION 8. Status of each Agent. In soliciting offers to purchase the
Notes from the Company pursuant to this Agreement (other than in respect of any
Purchase Agreement), each Agent is acting individually and not jointly and is
acting solely as agent for the Company and not as principal. Each Agent will
make reasonable efforts to assist the Company in obtaining performance by each
purchaser whose offer to purchase Notes from the Company has been solicited by
such Agent and accepted by the Company, but such Agent shall have no liability
to
22
<PAGE>
the Company in the event any such purchase is not consummated for any reason. If
the Company shall default in its obligations to deliver Notes to a purchaser
whose offer it has accepted, the Company shall (a) hold the Agents harmless
against any loss, claim or damage arising from or as a result of such default by
the Company and (b), in particular, pay to the Agents any commission to which
they would be entitled in connection with such sale.
SECTION 9. Representations and Warranties to Survive Delivery. All
representations and warranties of the Company contained in this Agreement, or
contained in certificates of officers of the Company submitted pursuant hereto,
shall remain operative and in full force and effect, regardless of the
termination or cancellation of this Agreement or any investigation made by or on
behalf of any Agent or any person controlling such Agent or by or on behalf of
the Company, and shall survive each delivery of and payment for any of the
Notes.
SECTION 10. Termination. The appointment of an Agent and the
obligations of such Agent under this Agreement may be terminated at any time
either by the Company or by such Agent upon the giving of one day's written
notice of such termination to such Agent or the Company, as the case may be. The
provisions of Sections 2(c), 3(d), 3(f), 3(g), 4, 7, 8, 9, 12, 13 and 14 hereof
shall survive any such termination.
SECTION 11. Additional Agents. The Company may appoint one or more
additional agents for the purpose of soliciting or receiving offers to purchase
the Notes from the Company by others; provided that any such additional agent
shall become a party to this Agreement prior to soliciting or receiving offers
to purchase the Notes.
SECTION 12. Notices. Except as otherwise provided herein, all notices
and other communications hereunder shall be in writing and shall be deemed to
have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Agents shall be directed to them as follows:
Merrill Lynch, Pierce, Fenner & Smith Incorporated, World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281-1310, Attention: [Scott
Primrose, Telephone No.: (212) 449-7476, Telecopy No.: (212) 449-1012]; and A.G.
Edwards & Sons, Inc., One North Jefferson Avenue, St. Louis, Missouri 63103,
Attention: [Name], Telephone No.: (314) 955-5000, Telecopy No.: (314)
[955-7387]; notices to the Company shall be directed to it as follows: 6100 Neil
Road, P.O. Box 30150, Reno, Nevada 89520, Attention: Richard K. Atkinson,
Telephone No.: (702) 834-4358, Telecopy No.: (702) 834-5462; or at such other
address as such party may designate from time to time by notice duly given in
accordance with the terms of this Section 12.
SECTION 13. Binding Effect; Benefits. This Agreement shall be binding
upon each Agent, the Company, and their respective successors. This Agreement
and the terms and provisions hereof are for the sole benefit of only those
persons, except that (a) the representations, warranties, indemnities and
agreements of the Company contained in this Agreement shall also be deemed to be
for the benefit of the person or persons, if any, who control any Agent within
the meaning of the Act or the Exchange Act, and (b) the indemnity agreement of
the Agents
23
<PAGE>
contained in Section 7 hereof shall be deemed to be for the benefit of directors
of the Company, officers of the Company who have signed the Registration
Statement and any person controlling the Company within the meaning of said Act
or the Exchange Act. Nothing in this Agreement is intended or shall be construed
to give any person, other than the persons referred to in this Section, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein. No purchaser of any of the Notes from any
Agent shall be construed as a successor or assign merely by reason of such
purchase.
SECTION 14. Governing Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of New York. This
Agreement may be executed by the
24
<PAGE>
parties on separate counterparts and the executed counterparts shall together
constitute a single instrument.
If the foregoing correctly sets forth our agreement, please indicate
your acceptance hereof in the space provided for that purpose below.
Very truly yours,
SIERRA PACIFIC POWER COMPANY
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED, as of the date first
above written:
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By:
--------------------------
Name:
Title:
A.G. EDWARDS & SONS, INC.
By:
--------------------------
Name:
Title:
<PAGE>
DRAFT 12/3/98
EXHIBIT A
Sierra Pacific Power Company
Collateralized Medium-Term Notes, Series D
Purchase Agreement
-------------
__________________, 19___
[Agent's Name]
Dear Sirs:
Sierra Pacific Power Company (the "Company") proposes, subject to the
terms and conditions stated herein and in the Distribution Agreement, dated
December __, 1998 (the "Distribution Agreement"), between the Company on the one
hand and Merrill Lynch, Pierce, Fenner & Smith Incorporated and A.G. Edwards &
Sons, Inc. (the "Agents") on the other, to issue and sell to __________________
the securities specified in the Schedule hereto (the "Purchased Securities").
Each of the provisions of the Distribution Agreement not specifically related to
the solicitation by the Agents, as agents of the Company, of offers to purchase
Securities is incorporated herein by reference in its entirety, and shall be
deemed to be part of this Purchase Agreement to the same extent as if such
provisions had been set forth in full herein. Nothing contained herein or in the
Distribution Agreement shall make any party hereto an agent of the Company or
make such party subject to the provisions therein relating to the solicitation
of offers to purchase securities from the Company, solely by virtue of its
execution of this Purchase Agreement. Each of the representations and warranties
set forth therein shall be deemed to have been made at and as of the date of
this Purchase Agreement, except that each representation and warranty in Section
1 of the Distribution Agreement which makes reference to the Prospectus shall be
deemed a representation and warranty in relation to the Prospectus as amended
and supplemented as of the date hereof to relate to the Purchased Securities.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Purchased Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Distribution Agreement incorporated herein by reference, the Company agrees to
issue and sell to [Agent(s)] and
A-1
<PAGE>
[Agent(s)] agree[s] to purchase from the Company the Purchased Securities, at
the time and place, in the principal amount and at the purchase price set forth
in the Schedule hereto.
If the foregoing is in accordance with your understanding, please sign
and return to us three counterparts hereof, and upon acceptance hereof by you
this letter and such acceptance hereof, including those provisions of the
Distribution Agreement incorporated herein by reference, shall constitute a
binding agreement between you and the Company.
SIERRA PACIFIC POWER COMPANY
By:
------------------------------
Accepted in New York, New York
as of the date hereof:
[Agent]
A-2
<PAGE>
Schedule to EXHIBIT A
Title of Purchased Securities:
Collateralized Medium-Term Notes, Series D
Aggregate Principal Amount:
$
[Price to Public:]
Purchase Price by: [Agents]
% of the principal amount of the Purchased Securities [, plus
accrued interest from to ] [and accrued amortization, if
any, from to ]
Method of and Specified Funds for Payment of Purchase Price:
[By certified or official bank check or checks, payable to the
order to the Company, in [New York Clearing House] [immediately available] funds
[By wire transfer to a bank account specified by the Company
in [next day] [immediately available] funds]
Date and Time of Delivery:
Closing Location:
[Specified Currency:]
Maturity:
Interest Rate:
%
Interest Payment Dates:
[months and dates]
A-3
<PAGE>
Documents to be Delivered:
The following documents referred to in the Distribution Agreement shall be
delivered as a condition to the Closing:
[(1) The opinion or opinions of counsel to the Agents referred to in
Section 5(k).]
[(2) The opinion of counsel to the Company referred to in Section 5 (e).]
[(3) The opinion of counsel to the Company referred to in Section 5 (f).]
[(4) The opinion of counsel to the Company referred to in Section 5 (g).]
[(5) The officers' certificate referred to in Section 5 (h).]
[(6) The accountants' letter referred to in Section 5 (i).]
Other provisions (including Syndicate Provisions, if applicable):
A-4
<PAGE>
DRAFT 12/3/98
EXHIBIT B
The Company agrees to pay each Agent a commission equal to the following
percentages of the principal amount of Notes sold to purchase solicited by such
Agent:
<TABLE>
<CAPTION>
Commission
(as a percentage of
Term principal amount)
---- ------------------
<S> <C>
From 9 months to less than one 1 year .125%
From 1 year to less than 18 months .150
From 18 months to less than 2 years .200
From 2 years to less than 3 years .250
From 3 years to less than 4 years .350
From 4 years to less than 5 years .450
From 5 years to less than 6 years .500
From 6 years to less than 7 years .550
From 7 years to less than 10 years .600
From 10 years to less than 15 years .625
From 15 years to less than 20 years .700
20 years or more .750
</TABLE>
B-1
<PAGE>
Draft 12/3/98
EXHIBIT C
ADMINISTRATIVE PROCEDURES
[Update by Parties Needed?]
The Collateralized Medium-Term Notes, Series D, due nine months or more
from their issue date (the "Notes"), are to be offered on a continuing basis by
Sierra Pacific Power Company (the "Issuer"). Merrill Lynch, Pierce, Fenner &
Smith Incorporated and A.G. Edwards & Sons, Inc., as agents, have each agreed to
use reasonable efforts to solicit offers to purchase the Notes. No Agent will be
obligated to purchase Notes for its own account. The Notes are being sold
pursuant to a Distribution Agreement, dated December __, 1998 (the "Agency
Agreement"), among the Issuer and Agents, and will be issued pursuant to an
Indenture, dated as of June 1, 1992, as supplemented (the "Indenture"), between
the Issuer and Bankers Trust Company, as trustee (the "Trustee"). The Notes will
be secured by one or more series of first mortgage bonds to be issued to and
pledged by the Issuer with the Trustee and will have been registered under the
Securities Act of 1933, as amended (the "Act"). For a description of the terms
of the Notes and the offering and sale thereof, see the sections entitled
"Description of Notes" and "Supplemental Plan of Distribution" in the Prospectus
Supplement relating to the Notes, dated December __, 1998, attached hereto and
hereinafter referred to as the "Prospectus Supplement," the section entitled
"Glossary" in the Prospectus Supplement relating to the Notes, dated February
28, 1997, attached hereto and hereinafter referred to as the "Old Prospectus
Supplement" and the sections entitled "Description of Debt Securities," "United
States Taxation" and "Plan of Distribution" in the Prospectus relating to the
Notes, dated December 20, 1996, attached hereto and hereinafter referred to as
the "Prospectus." Defined terms used herein but not defined herein shall have
the meanings assigned to them in the Distribution Agreement, the Prospectus, the
Old Prospectus Supplement or the Prospectus Supplement, as appropriate.
The Notes will be represented either by Global Notes delivered to The
Depository Trust Company ("DTC") or its nominee and recorded in the book-entry
system maintained by DTC or such nominee ("Book-Entry Notes") or by certificates
delivered to the Holders thereof or Persons designated by such Holders
("Certificated Notes"). Notes for which interest is calculated on the basis of a
fixed interest rate are referred to herein as "Fixed Rate Notes." Notes for
which interest is calculated at a rate or rates determined by reference to an
interest rate formula are referred to herein as "Floating Rate Notes."
Notes which are issued at a price lower than the principal amount
thereof and which provide that upon redemption or acceleration of the Maturity
thereof an amount less than the principal thereof shall become due and payable
are referred to herein as "Original Issue Discount Notes." For special
provisions relating to Original Issue Discount Notes and other Notes issued at a
discount for tax purposes, see the section entitled "Certain United States
Federal Income Tax Consequences - Original Issue Discount" in the Prospectus
Supplement.
C-1
<PAGE>
The Notes will be denominated in U.S. dollars and payments of principal
of and any premium and interest on the Notes will be made in U.S. dollars in the
manner indicated in the Prospectus and the Prospectus Supplement.
Notes which provide that amounts payable by the Issuer in respect of
principal of or any premium or interest on the Notes shall be determined by
reference to the value, rate or price of one or more specified indices, are
referred to herein as "Indexed Notes." Specific information pertaining to the
method for determining the principal amounts payable, a historical comparison of
the value, rate or price of the specified index, indices and the face amount of
the Indexed Note and certain additional tax considerations will be described in
the applicable Pricing Supplement.
Administrative procedures and specific terms of the offering are
explained below. Part I indicates procedures applicable to all Notes; Part II
indicates specific procedures for Certificated Notes; and Part III indicates
specific procedures for Book-Entry Notes. Administrative and record-keeping
responsibilities will be handled for the Issuer by its Finance Division. The
Issuer will advise the Agents in writing of those persons handling
administrative responsibilities with whom the Agents are to communicate
regarding offers to purchase Notes and the details of their delivery.
PART I: PROCEDURES APPLICABLE TO ALL NOTES
Issue Date
Each Note will be dated the date of its authentication. Each Note will
also bear an original issue date (the "Issue Date") which, with respect to any
such Note (or portion thereof), shall mean the date of its original issuance and
shall be specified therein. The Issue Date will remain the same for all Notes
subsequently issued upon transfer, exchange or substitution of a Note,
regardless of their dates of authentication.
Price to Public
Except as otherwise specified in a Pricing Supplement, each Note will
be issued at 100% of principal amount.
Maturities
Each Note will mature on a date, selected by the purchaser and agreed
to by the Issuer, which will be nine months or more after its Issue Date.
Interest Payments
Interest on each interest-bearing Note will be calculated and paid in
the manner described in such Note and in the Prospectus Supplement and the
applicable Pricing Supplement. Unless
C-2
<PAGE>
otherwise set forth therein, interest on Fixed Rate Notes (including interest
for partial periods) will be calculated on the basis of a 360-day year of twelve
30-day months and will not accrue on the 31st day of any month. Interest on
Floating Rate Notes, except as otherwise set forth therein, will be calculated
on the basis of actual days elapsed and a year of 360 days, except that in the
case of a Floating Rate Note for which the Base Rate is the Treasury Rate,
interest will be calculated on the basis of the actual number of days in the
year.
On the fifth Business Day immediately preceding each Interest Payment
Date, the Trustee will furnish the Issuer with the total amount of interest
payments to be made on such Interest Payment Date. The Trustee will provide
monthly, to the Issuer's Finance Division, a list of the principal and any
premium and interest to be paid on Notes maturing in the next succeeding month.
The Trustee will assume responsibility for withholding taxes on interest paid as
required by law.
Redemption/Repayment
If indicated in the applicable Pricing Supplement, the Notes of a
particular tenor will be subject to redemption in whole or in part (subject to
applicable minimum denominations), at the option of the Issuer on and after an
initial redemption date as set forth in the applicable Pricing Supplement and in
the applicable Note. The redemption price will be set forth in the applicable
Pricing Supplement and in the applicable Note.
Procedures for Establishing the Terms of the Notes
The Issuer and the Agents will discuss from time to time the rates to
be borne by the Notes that may be sold as a result of the solicitation of offers
by the Agents. Once any Agent has recorded any indication of interest in Notes
upon certain terms, and communicated with the Issuer, if the Issuer plans to
accept an offer to purchase Notes upon such terms, it will prepare a Pricing
Supplement to the Prospectus, as then amended or supplemented, reflecting the
terms of such Notes and, after approval from the Agents, will arrange to have
the Pricing Supplement filed electronically with the Securities and Exchange
Commission (the "Commission") pursuant to Rule 424(b) under the Act. The Issuer
will supply at least 10 copies of the Prospectus, as then amended or
supplemented, and bearing such Pricing Supplement, to the Agent who presented
the offer (the "Presenting Agent") and will provide one copy thereof to the
Trustee by facsimile transmission. No settlements with respect to Notes upon
such terms may occur prior to such transmitting or filing and the Agents will
not, prior to such transmitting or filing, mail confirmations to customers who
have offered to purchase Notes upon such terms. After such transmitting or
filing, sales, mailing of confirmations and settlements may occur with respect
to Notes upon such terms, subject to the provisions of "Delivery of Prospectus"
below.
If the Issuer decides to post rates and a decision has been reached to
change interest rates, the Issuer shall promptly notify each Agent. Each Agent
will forthwith suspend solicitation of purchases. At that time, the Agents will
recommend and the Issuer will establish rates to be so
C-3
<PAGE>
"posted." Following establishment of posted rates and prior to the transmitting
or filing described in the preceding paragraph, the Agents may only record
indications of interest in purchasing Notes at the posted rates. Once any Agent
has recorded any indication of interest in Notes at the posted rates and
communicated with the Issuer, if the Issuer plans to accept an offer at the
posted rates, it will prepare a Pricing Supplement reflecting such posted rates,
and after approval from the Agents, arrange to have the Pricing Supplement filed
electronically with the Commission and will supply at least 10 copies of the
Prospectus, as then amended or supplemented, and bearing such Pricing
Supplement, to the Presenting Agent. No settlements at the posted rates may
occur prior to such transmitting or filing and the agents will not, prior to
such transmitting or filing, mail confirmations to customers who have offered to
purchase Notes at the posted rates. After such transmitting or filing, sales,
mailing of confirmations and settlements may resume, subject to the provisions
of "Delivery of Prospectus," below.
Outdated Pricing Supplements, and copies of the Prospectus to which
they are attached (other than those retained for files), will be destroyed.
Suspension of Solicitation; Amendment or Supplement
As provided in the Distribution Agreement, the Issuer may instruct the
Agents to suspend solicitation of offers to purchase at any time, and upon
receipt of at least one Business Day's prior notice from the Issuer, the Agents
will each forthwith suspend solicitation until such time as the Issuer has
advised it that solicitation of offers to purchase may be resumed.
If the Agents receive the notice from the Issuer contemplated by the
second paragraph of Section 2(b) or by 3(c) of the Distribution Agreement, they
will promptly suspend solicitation and will only resume solicitation as provided
in the Distribution Agreement. If the Issuer is required, pursuant to Section
3(c) of the Distribution Agreement, to prepare an amendment or supplement, it
will promptly furnish each Agent with the proposed amendment or supplement; if
the Issuer decides to amend or supplement the Registration Statement or the
Prospectus relating to the Notes, it will promptly advise each Agent and will
furnish each Agent with the proposed amendment or supplement in accordance with
the terms of the Distribution Agreement. The Issuer will file such amendment or
supplement with the Commission, provide the Agents and the Trustee with copies
of any such amendment or supplement, confirm to the Agents that such amendment
or supplement has been filed with the Commission and advise the Agents that
solicitation may be resumed.
Any such suspension shall not affect the Issuer's obligations under the
Distribution Agreement; and in the event that at the time the Issuer suspends
solicitation of offers to purchase there shall be any offers already accepted by
the Issuer outstanding for settlement, the Issuer will have the sole
responsibility for fulfilling such obligations. The Issuer will in addition
promptly advise the Agents and the Trustee if such offers are not to be settled
and if copies of the Prospectus as in effect at the time of the suspension may
not be delivered in connection with the settlement of such offers.
C-4
<PAGE>
Acceptance and Rejection of Offers
Each Agent will promptly advise the Issuer, at its option orally or in
writing, of each reasonable offer to purchase Notes received by it, other than
those rejected by such Agent. Each Agent may, in its discretion reasonably
exercised, without notice to the Issuer, reject any offer received by it, in
whole or in part. The Issuer will have the sole right to accept offers to
purchase Notes and may reject any such offer, in whole or in part. If the Issuer
accepts or rejects an offer, in whole or in part, the Issuer will promptly so
notify the Presenting Agent.
Confirmation
For each accepted offer, the Presenting Agent will issue a confirmation
to the purchaser, with a separate confirmation to the Issuer's Finance Division,
setting forth the Purchase Information (as defined under II below with respect
to Certificated Notes and III below with respect to Book-Entry Notes) and
delivery and payment instructions; provided, however, that, in the case of the
confirmation issued to the purchaser, no confirmation shall be delivered to the
purchaser prior to the delivery of the Prospectus referred to below.
Determination of Settlement Date
The receipt of immediately available funds by the Issuer in payment for
a Note and (i) in the case of Certificated Notes, the authentication and
issuance of such Note and (ii) in the case of Book-Entry Notes, entry by the
Presenting Agent of an SDFS (defined in III below) deliver order through DTC's
Participant Terminal System to credit such Note to the account of a Participant
purchasing, or acting for the purchaser of, such Note, shall, with respect to
such Note, constitute "settlement." All offers accepted by the Issuer will be
settled on the third Business Day next succeeding the date of acceptance in
accordance with the "Details of Settlement" set forth below, unless otherwise
agreed by the purchaser and the Issuer. The settlement date shall be specified
upon receipt of an offer to purchase. Prior to 11:00 a.m., New York City time,
on the settlement date, the Issuer will instruct the Trustee to authenticate and
deliver the Notes no later than 2:15 p.m., New York City time, on that date.
Delivery of Prospectus
A copy of the Prospectus as most recently amended or supplemented on
the date of delivery thereof (except as provided below) must be delivered to a
purchaser prior to or together with the earlier of the delivery of (i) the
written confirmation provided for above, and (ii) any Note purchased by such
purchaser. (For this purpose, entry of an SDFS deliver order through DTC's
Participant Terminal System to credit a Note to the account of a Participant
purchasing, or acting for the purchaser of, a Note shall be deemed to constitute
delivery of such Note.) Subject to the foregoing, it is anticipated that
delivery of the Prospectus, confirmation and Notes to the purchaser will be made
simultaneously at settlement. The Issuer shall ensure that the Presenting Agent
receives copies of the Prospectus and each amendment or supplement thereto
(including
C-5
<PAGE>
appropriate Pricing Supplements) in such quantities and within such time limits
as will enable the Presenting Agent to deliver such confirmation or Note to a
purchaser as contemplated by these procedures and in compliance with the first
sentence of this paragraph. If, since the date of acceptance of a purchaser's
offer, the Prospectus shall have been supplemented solely to reflect any sale of
Notes on terms different from those agreed to between the Issuer and such
purchaser or a change in posted rates not applicable to such purchaser, such
purchaser shall not receive the Prospectus as supplemented by such new
supplement, but shall receive the Prospectus as supplemented to reflect the
terms of the Notes being purchased by such purchaser and otherwise as most
recently amended or supplemented on the date of delivery of the Prospectus.
Authenticity of Signatures
The Issuer will cause the Trustee to furnish the Agents from time to
time with the specimen signatures of each of the Trustee's officers, employees
or agents who have been authorized by the Trustee to authenticate Notes, but no
Agent will have any obligation or liability to the Issuer or the Trustee in
respect of the authenticity of the signature of any officer, employee or agent
of the Issuer or the Trustee on any Note or the Global Note (as defined in Part
III).
Advertising Expenses
The Issuer will determine with the Agents the amount of advertising
that may be appropriate in offering the Notes. Advertising expenses will be paid
by the Issuer.
Business Day; London Market Day
"Business Day" means any day which is not a Saturday or Sunday and is
not a day on which banking institutions are generally authorized or obligated by
law or executive order to close in The City of New York and, with respect to
LIBOR notes, a London Market Day. "London Market Day" means any day on which
dealings in deposits in U.S. Dollars are transacted in the London interbank
market.
Trustee Not to Risk Funds
Nothing herein shall be deemed to require the Trustee to risk or expend
its own funds in connection with any payment made to the Issuer, the Agent, DTC
or any Noteholder, it being understood by all parties that payments made by the
Trustee to the Issuer, the Agent, DTC or any holder of a Note shall be made only
to the extent that funds are provided to the Trustee for such purpose.
C-6
<PAGE>
PART II: ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES
Form and Denominations
The Certificated Notes shall be issued only in fully registered form in
denominations of $10,000 and integral multiples of $1,000 in excess thereof.
Transfers and Exchanges
A Certificated Note may be presented for transfer or exchange at the
principal corporate trust office of the Trustee in The City of New York.
Certificated Notes will be exchangeable for other Certificated Notes of any
authorized denominations and of like tenor and in a like aggregate principal
amount, upon surrender of the Certificated Notes to be exchanged at the
corporate trust office of the Trustee. Certificated Notes will not be
exchangeable for Book-Entry Notes.
Payment at Maturity
Upon presentation of each Certificated Note at Maturity, the Trustee
(or a duly authorized Paying Agent) will pay the principal amount thereof,
together with any premium and accrued interest due at Maturity. Such payment
will be made in immediately available funds, provided, that the Certificated
Note is presented in time for the Paying Agent to make payment in such funds in
accordance with its normal procedures. The Issuer will provide the Trustee (and
any Paying Agent) with funds available for immediate use for such purpose.
Certificated Notes presented at Maturity will be canceled by the Trustee as
provided in the Indenture.
Details for Settlement
For each offer for Certificated Notes accepted by the Issuer, the
Presenting Agent shall communicate to the Issuer's Finance Division prior to
1:00 p.m., New York City time, on the Business Day preceding the settlement
date, by telephone, telex, facsimile transmission or other acceptable means, the
following information (the "Purchase Information"):
1. Exact name in which the Note or Notes are to be registered
("registered owner").
2. Exact address of registered owner and, if different, the
address for delivery, notices and payment of principal and any
premium and interest.
3. Taxpayer identification number of registered owner.
4. Principal amount of each Note in authorized denominations to
be delivered to registered owner.
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5. In the case of Fixed Rate Notes, the interest rate of each
Note; in the case of Floating Rate Notes, the interest rate
formula, the Spread or Spread Multiplier (if any), the maximum
or minimum interest rate limitation (if any), the Calculation
Agent, the Calculation Dates, the Initial Interest Rate, the
Interest Payment Dates, the Regular Record Dates, the Index
Maturity, the Interest Determination Dates and the Interest
Reset Dates, in each case, to the extent applicable with
respect to each Note.
6. Stated Maturity of each Note.
7. Redemption and/or repayment provisions, if any, of each Note,
including:
a. Initial Redemption Date;
b. Initial Redemption Price (% of par);
c. Amount (% of par) of decline and date;
d. Redemption Limitation Date.
8. Trade date of each Note.
9. Settlement date (Issue Date) of each Note.
10. Presenting Agent's commission (to be paid in the form of a
discount from the proceeds remitted to the Issuer upon
settlement).
11. Price.
12. Any additional applicable terms of each Note.
The Issue Date of, and the settlement date for, Certificated Notes will
be the same. Before accepting any offer to purchase Certificated Notes to be
settled in less than three Business Days, the Issuer shall verify that the
Trustee will have adequate time to prepare and authenticate the Notes.
Immediately after receiving the details for each offer for Certificated
Notes from the Presenting Agent, the Issuer will, after recording the details
and any necessary calculations, communicate the Purchase Information by
telephone, telex, facsimile transmission or other acceptable means, to the
Trustee. Each such instruction given by the Issuer to the Trustee shall
constitute a continuing representation and warranty by the Issuer to the Trustee
and the Agents that (i) the issuance and delivery of such Notes have been duly
and validly authorized by the issuer and (ii) such Notes, when completed,
authenticated and delivered, shall constitute the valid
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and legally binding obligation of the Issuer. The Issuer will assign to and
enter on each Note a transaction number.
The Issuer will deliver to the Trustee a Certificated Note. The Trustee
will complete such Certificated Note and will authenticate such Certificated
Note and deliver it (with the confirmation) to such Agent, and such Agent will
acknowledge receipt of the Note in writing delivered to the Trustee.
Settlement: Note Deliveries and Cash Payment
The Issuer will deliver to the Trustee at the commencement of the
program and from time to time thereafter a supply of duly executed Certificated
Notes with preprinted control numbers adequate to implement the program. Upon
the receipt of appropriate documentation and instructions from the Issuer in
accordance with the applicable Officers' Certificate and verification thereof,
the Trustee will cause the Certificated Notes to be completed and authenticated
and hold the Certificated Notes for delivery against payment.
The Trustee will deliver the Certificated Notes, in accordance with
instructions from the Issuer, to the Presenting Agent, as the Issuer's agent,
for the benefit of the purchaser only against receipt. The Presenting Agent will
acknowledge receipt of the Notes through a broker's receipt. Delivery of the
Certificated Notes by the Trustee will be made only against such acknowledgment
of receipt from the Presenting Agent. Upon the Presenting Agent's determination
that such Note has been authenticated, delivered and completed as aforesaid, the
Presenting Agent will make, or cause to be made, payment to the Issuer at such
account of the Issuer as it may specify in writing, in immediately available
funds, of an amount equal to the principal amount of such Notes, less the
applicable commission. If the Presenting Agent in any instance advances its own
funds, the Issuer shall not use any of the proceeds of such sale to acquire
securities.
The Presenting Agent, as the Issuer's agent, will deliver the Notes
(with the written confirmation provided for above) to the purchaser thereof
against payment therefor by such purchaser in immediately available funds.
Delivery of any confirmation or Note will be made in compliance with "Delivery
of Prospectus" in Part I above.
Fails
In the event that a purchaser shall fail to accept delivery of and make
payment for a Certificated Note on the settlement date, the Presenting Agent
will notify the Trustee and the Issuer, by telephone, confirmed in writing. If
such Certificated Note has been delivered to the Presenting Agent, as the
Issuer's agent, the Presenting Agent stall return such Note to the Trustee. If
funds have been advanced for the purchase of such Note, the Trustee will,
immediately upon receipt of such Note, debit the account of the Issuer for the
amount so advanced and the Trustee shall refund the payment previously made by
the Presenting Agent in
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immediately available funds. Such payments, will be made on the settlement date,
if possible, and in any event not later than the Business Day following the
settlement date. If the fail shall have occurred for any reason other than the
failure of the Presenting Agent to provide the Purchase Information to the
Issuer or to provide a confirmation to the purchaser, the Issuer will reimburse
the Presenting Agent on an equitable basis for its loss of the use of funds
during the period when the funds were credited to the account of the Issuer.
Immediately upon receipt of the Certificated Note in respect of which
the fail occurred, the Trustee will make appropriate entries in its records to
reflect the fact that the Note was never issued and the Note will be canceled
and disposed of as provided in the Indenture.
PART III: ADMINISTRATIVE PROCEDURES FOR BOOK-ENTRY NOTES
In connection with the qualification of the Book-Entry Notes for
eligibility in the book-entry system maintained by DTC, the Trustee will perform
the custodial, document control and administrative functions described below, in
accordance with its obligations under a Letter of Representations (the "Letter")
from the Issuer and the Trustee to DTC dated as of [March __, 1997] and a
Medium-Term Note Certificate Agreement between the Trustee and DTC dated as of
October 21, 1988 and its obligations as a participant in DTC, including DTC's
Same-Day Funds Settlement System ("SDFS").
Form, Denominations and Registration
All Book-Entry Notes of the same tenor and having the same Issue Date,
will be represented initially by a single note (a "Global Note") in fully
registered form without coupons. Book-Entry Notes will represent Notes
denominated in U.S. dollars. Global Notes will be issued in denominations of
$10,000 and integral multiples of $1,000 in excess thereof. Each Global Note
will be registered in the name of Cede & Co., as nominee for DTC, on the
Security Register maintained under the Indenture. The beneficial owner of a
Book-Entry Note (or one or more indirect participants in DTC designated by such
owner) will designate one or more participants in DTC (with respect to such
Notes, the "Participants") to act as agent or agents for such owner in
connection with the book-entry system maintained by DTC, and DTC will record in
book-entry form, in accordance with instructions provided by such Participants,
a credit balance with respect to such Note in the account of such Participants.
The ownership interest of such beneficial owner in such Note will be recorded
through the records of such Participants or through the separate records of such
Participants and one or more indirect participants in DTC.
CUSIP Numbers
The Issuer has arranged with the CUSIP Service Bureau of Standard &
Poor's Corporation (the "CUSIP Service Bureau") for the reservation of a series
of CUSIP numbers (including tranche numbers), such series consisting of
approximately 900 CUSIP numbers and relating to Global Notes representing
Book-Entry Notes. The Issuer has obtained from the
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CUSIP Service Bureau a written list of such reserved CUSIP numbers and has
delivered it to the Trustee and DTC. The Trustee will assign CUSIP numbers
serially to Global Notes as described below under "Details for Settlement." DTC
will notify the CUSIP Service Bureau periodically of the CUSIP numbers that the
Trustee has assigned to Global Notes. The Trustee will notify the Issuer at the
time when fewer than 100 of the reserved CUSIP numbers remain unassigned to the
Global Notes; and the Issuer will reserve an additional 900 CUSIP numbers for
assignment to Global Notes representing Book-Entry Notes. Upon obtaining such
additional CUSIP numbers, the Issuer shall deliver a list of such additional
CUSIP numbers to the Trustee and DTC.
Transfers; and Exchanges for the Purpose of Consolidation
Transfers of a Book-Entry Note will be accomplished by book entries
made by DTC and, in turn, by Participants (and, in certain cases, one or more
indirect participants in DTC) acting on behalf of beneficial transferors and
transferees of such Note.
The Trustee may upon notice to the Issuer deliver to DTC and the CUSIP
Service Bureau at any time a written notice (a copy of which shall be attached
to the Global Note resulting from such exchange) specifying (i) the CUSIP
numbers of two or more outstanding Global Notes that represent Book-Entry Notes
of the same tenor and having the same Issue Date, and for which interest (if
any) has been paid to the same date, (ii) a date occurring at least 30 days
after such written notice is delivered and at least 30 days before the next
Interest Payment Date (if any) for such Notes, on which such Global Notes shall
be exchanged for a single replacement Global Note and (iii) a new CUSIP number
to be assigned to such replacement Global Note. Upon receipt of such a notice,
DTC will send to its Participants (including the Trustee) a written
reorganization notice to the effect that such exchange will occur on such date.
Prior to the specified exchange date, the Trustee will deliver to the CUSIP
Service Bureau a written notice setting forth such exchange date and the new
CUSIP number and stating that, as of such exchange date, the CUSIP numbers of
the Global Notes to be exchanged will no longer be valid. On the specified
exchange date, the Trustee will exchange such Global Notes for a single Global
Note bearing the new CUSIP number and the CUSIP numbers of the exchanged Global
Notes will, in accordance with CUSIP Service Bureau procedures, be canceled and
not immediately reassigned.
Notice of Interest Payment Dates and Regular Record Dates
To the extent then known, on the first Business Day of March, June,
September and December of each year, the Trustee will deliver to the Issuer and
DTC a written list of Record Dates and Interest Payment Dates that will occur
with respect to Floating Rate Book-Entry Notes during the six-month period
beginning on such first Business Day.
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Payments of Principal and Interest
(a) Payments of Interest Only. Promptly after each Regular Record
Date, the Trustee will deliver to the Issuer and DTC a written notice specifying
by CUSIP number the amount of interest to be paid on each Global Note on the
following Interest Payment Date (other than an Interest Payment Date coinciding
with Maturity) and the total of such amounts. The Issuer will confirm with the
Trustee the amount payable on each Global Note on such Interest Payment Date.
DTC will confirm the amount payable on each Global Note on such Interest Payment
Date by reference to the daily or weekly bond reports published by Standard &
Poor's Corporation. The Issuer will pay to the Trustee the total amount of
interest due on such Interest Payment Date (other than at Maturity), and the
Trustee will pay such amount to DTC at times and in the manner set forth below
under "Manner of Payment."
(b) Payments at Stated Maturity. On or about the first Business Day
of each month, the Trustee will deliver to the Issuer and DTC a written list of
principal and interest to be paid on each Global Note maturing in the following
month. The Issuer, the Trustee and DTC will confirm the amounts of such
principal and interest payments with respect to each such Global Note on or
about the third Business Day preceding the Stated Maturity of such Global Note.
The Issuer will pay to the Trustee, as the paying agent, the principal amount of
such Global Note, together with interest due at such Stated Maturity. Upon
surrender of a Global Note, the Trustee will pay such amounts to DTC at the
times and in the manner set forth below under "Manner of Payment." If any Stated
Maturity of a Global Note representing Book-Entry Notes is not a Business Day,
the payment due on such day shall be made on the next succeeding Business Day
and no interest shall accrue on such payment for the period from and after such
Stated Maturity. Promptly after payment to DTC of the principal and any interest
due at the Stated Maturity of such Global Note, the Trustee will cancel such
Global Note in accordance with the terms of the Indenture.
(c) Payment upon Redemption. The Trustee will comply with the terms
of the Letter with regard to redemptions or repayments of the Book-Entry Notes.
In the case of Book-Entry Notes stated by their terms to be redeemable prior to
Stated Maturity, at least 60 calendar days before the date fixed for redemption
(the "Redemption Date"), the Issuer shall notify the Trustee of the Issuer's
election to redeem such Book-Entry Notes in whole or in part and the principal
amount of such Book-Entry Notes to be so redeemed. At least 30 calendar days but
not more than 60 calendar days prior to the Redemption Date, the Trustee shall
notify DTC of the Issuer's election to redeem such Book-Entry Notes. The Trustee
shall notify the Issuer and DTC of the CUSIP numbers of the particular
Book-Entry Notes to be redeemed either in whole or in part. The Issuer, the
Trustee and DTC will confirm the amounts of such principal and any premium and
interest payable with respect to each such Book-Entry Note on or about the third
Business Day preceding the Redemption Date of such Book-Entry Note. The Issuer
will pay the Trustee, in accordance with the terms of the Indenture, the amount
necessary to redeem each such Book- Entry Note or the applicable portion of each
such Book-Entry Note. The Trustee will pay such amount to DTC at the times and
in the manner set forth herein. Promptly after payment to DTC
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of the amount due on the Redemption Date for such Book-Entry Note, the Trustee
shall cancel any such Book-Entry Note redeemed in whole in accordance with the
Indenture. If a Global Note is to be redeemed in part, the Trustee will cancel
such Global Note and issue a Global Note which shall represent the remaining
portion of such Global Note and shall bear the CUSIP number of the canceled
Global Note.
(d) Manner of Payment. The total amount of any principal and interest
due on Global Notes on any Interest Payment Date or at Maturity shall be paid by
the Issuer to the Trustee in immediately available funds on such date. The
Issuer will make such payment on such Global Notes by wire transfer to the
Trustee. The Issuer will confirm instructions regarding payment in writing to
the Trustee. Upon receipt of funds from the Issuer, on each date of Maturity of
a Book-Entry Note or as soon as possible thereafter, the Trustee will pay by
separate wire transfer (using Fedwire message entry instructions in a form
previously specified by DTC) to an account at the Federal Reserve Bank of New
York previously specified by DTC in funds available for immediate use by DTC,
each payment of principal (together with interest thereon) due at Maturity on
Book-Entry Notes. On each interest Payment Date, the interest payment shall be
made to DTC in same day funds in accordance with existing arrangements between
the Trustee and DTC. Thereafter, on each such date, DTC will pay, in accordance
with its SDFS operating procedures then in effect, such amounts in funds
available for immediate use to the respective Participants in whose names the
Book-Entry Notes represented by such Global Notes are recorded in the book-entry
system maintained by DTC. NEITHER THE ISSUER NOR THE TRUSTEE SHALL HAVE ANY
DIRECT RESPONSIBILITY OR LIABILITY FOR THE PAYMENT BY DTC TO SUCH PARTICIPANTS
OF THE PRINCIPAL OF AND ANY PREMIUM AND INTEREST ON THE BOOK-ENTRY NOTES.
(e) Withholding Taxes. The amount of any taxes required under
applicable law to be withheld from any interest payment on a Book-Entry Note
will be determined and withheld by the Participant, indirect participant in DTC
or other person responsible for forwarding payments and material directly to the
beneficial owner of such Note.
Details for Settlement
For each offer for Book-Entry Notes accepted by the Issuer, the
Presenting Agent shall communicate to the Issuer's Finance Division prior to
11:00 a.m., New York City time, on the first Business Day after the sale date
(or on the sale date if such sale is to be settled within one Business Day), by
telephone, telex, facsimile transmission or other acceptable means, the
following information (the "Purchase Information"):
1. Exact name in which the Notes are to be registered
("registered owner").
2. Exact address of registered owner and, if different, the
address for delivery, notices and payment of principal and any
premium and interest.
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3. Taxpayer identification number of registered owner.
4. Principal amount of the Notes.
5. Stated Maturity of the Notes.
6. In the case of Fixed Rate Notes, the interest rate of the
Notes; in the case of Floating Rate Notes, the interest rate
formula, the Spread or Spread Multiplier (if any), the maximum
or minimum interest rate limitation (if any), the Calculation
Agent, the Calculation Dates, the Initial Interest Rate, the
Interest Payment Dates, the Regular Record Dates, the Index
Maturity, the Interest Determination Dates and the Interest
Reset Dates, in each case, to the extent applicable with
respect to the Notes.
7. Redemption and/or repayment provisions, if any, of the Notes,
including
a. Initial Redemption Date;
b. Initial Redemption Price (% of par);
c. Amount (% of par) of decline and date;
d. Redemption Limitation Date.
8. Trade date of the Notes.
9. Settlement date (Issue Date) of the Notes.
10. Presenting Agent's commission (to be paid in the form of a
discount from the proceeds remitted to the issuer upon
settlement).
11. Price.
12. Any additional applicable terms of the Notes.
The Issue Date of, and the settlement date for, Book-Entry Notes will
be the same. Before accepting any offer to purchase Book-Entry Notes to be
settled in less than three Business Days, the Issuer shall verify that the
Trustee will have adequate time to prepare and authenticate the Global Notes.
If the initial interest rate for a Floating Rate Book-Entry Note has
not been determined at the time that the foregoing procedure is completed, the
procedures described in the following two
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paragraphs shall be completed as soon as such rate has been determined but no
later than 12:00 Noon and 2:00 p.m., as the case may be, on the Business Day
before the settlement date.
Immediately after receiving the details for each offer for Book-Entry
Notes from the Presenting Agent and in any event no later than 12:00 Noon on the
first Business Day after the sale date (or on the sale date if such sale is to
be settled within one Business Day), the Issuer will, after recording the
details and any necessary calculations, communicate the Purchase Information by
telephone, telex, facsimile transmission or other acceptable means, to the
Trustee. Each such instruction given by the Issuer to the Trustee shall
constitute a continuing representation and warranty by the Issuer to the Trustee
and the Agents that (i) the issuance and delivery of such Notes have been duly
and validly authorized by the Issuer and (ii) such Notes, when completed,
authenticated and delivered, shall constitute the valid and legally binding
obligations of the Issuer.
Immediately after receiving the Purchase Information from the Issuer
and in any event no later than 2:00 p.m. on the First Business Day after the
sale date (or on the sale date if such sale is to be settled within one Business
Day), the Trustee will assign a CUSIP number to the Global Note representing
such Book-Entry Note and will telephone the Issuer and advise the Issuer of such
CUSIP number and, as soon thereafter as practicable, the Issuer shall notify the
Agent of such CUSIP number. The Trustee will enter a pending deposit message
through DTC's Participant Terminal System, providing the following settlement
information to DTC (which shall route such information to Standard & Poor's
Corporation) and the relevant Agent:
1. The applicable Purchase Information.
2. Initial Interest Payment Date for each Book-Entry Note, number
of days by which such date succeeds the Regular Record Date
which shall be the Regular Record Date (as defined in the
Note), and, if known, the amount of interest payable on such
Interest Payment Date per $1,000 principal amount of
Book-Entry Notes.
3. Identification as either a Fixed Rate Note or a Floating Rate
Note.
4. CUSIP number of the Global Note representing such Note.
5. Whether such Global Note will represent any other Book-Entry
Note (to the extent known at such time).
6. Interest payment periods.
7. Numbers of the participant accounts maintained by DTC on
behalf of the Trustee and the Agents.
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Standard & Poor's Corporation will use the information received in the
pending deposit message to include the amount of any interest payable and
certain other information regarding the related Global Note in the appropriate
daily or weekly bond report published by Standard & Poor's Corporation.
Settlement; Global Note Delivery and Cash Payment
The Issuer will deliver to the Trustee at the commencement of the
program and from time to time thereafter a supply of duly executed Global Notes
with preprinted control numbers adequate to implement the program. Upon the
receipt of appropriate documentation and instructions from the Issuer in
accordance with the applicable Officers' Certificate and verification thereof,
the Trustee will cause the Global Note to be completed and authenticated and
hold the Global Note for delivery against payment.
Prior to 10:00 a.m. on the Settlement Date, DTC will credit such Note
to the Trustee's participant account at DTC. At or prior to 2:00 p.m. on the
Settlement Date, the Trustee will enter an SDFS deliver order through DTC's
Participant Terminal System instructing DTC to (i) debit such Note to the
Trustee's participant account and credit such Note to the Presenting Agent's
participant account and (ii) debit the Presenting Agent's settlement account and
credit the Trustee's settlement account for an amount equal to the price of such
Note less such Agent's commission (in accordance with SDFS operating procedures
in effect on the Settlement Date). The entry of such a deliver order shall
constitute a representation and warranty by the Trustee to DTC that (i) the
Global Note representing such Note has been executed, delivered and
authenticated and (ii) the Trustee is holding such Global Note pursuant to the
Medium Term Note Certificate Agreement between the Trustee and DTC.
Simultaneously with the giving of such instructions by the Trustee, the
Presenting Agent will enter an SDFS deliver order through DTC's Participant
Terminal System instructing DTC (i) to debit such Note to such Agent's
participant account and credit such Note to the Participant accounts of the
Participants with respect to such Note and (ii) to debit the settlement accounts
of such Participants and credit the settlement account of such Agent for an
amount equal to the price of such Note (in accordance with SDFS operating
procedures in effect on the settlement date).
Transfers of funds are subject to extension in accordance with any
extension of Fedwire closing deadlines and in the other events specified in the
SDFS operating procedures in effect on the settlement date.
The Trustee, upon confirming receipt of such funds, will wire transfer
the amount transferred to the Trustee, in funds available for immediate use, for
the account of Sierra Pacific Power Company, to account no. 470017880 at Bank of
America, Reno, Nevada (ABA No. 122400724).
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Fails
If settlement of a Book-Entry Note is rescheduled or canceled, the
Issuer shall notify the Trustee, and upon receipt of such notice, the Trustee
will deliver to DTC, through DTC's Participant Terminal System, a cancellation
message to such effect by no later than 2:00 p.m., New York City time, on the
Business Day immediately preceding the scheduled settlement date.
If the Trustee has not entered an SDFS deliver order with respect to a
Book-Entry Note, then upon written request (which may be evidenced by telecopy
transmission) of the Issuer, the Trustee shall deliver to DTC, through DTC's
Participant Terminal System, as soon as practicable, but no later than 2:00 p.m.
on any Business Day, a withdrawal message instructing DTC to debit such Note to
the Trustee's participant account. DTC will process the withdrawal message,
provided that the Trustee's participant account contains a principal amount of
the Global Note representing such Note that is at least equal to the principal
amount to be debited. If withdrawal messages are processed with respect to all
the Book-Entry Notes represented by a Global Note, the Trustee will mark such
Global Note "canceled" in accordance with the Indenture, and make appropriate
entries in the Trustee's records. The CUSIP number assigned to such Global Note
shall, in accordance with CUSIP Service Bureau procedures, be canceled and not
immediately reassigned. If withdrawal messages are processed with respect to one
or more, but not all, of the Book-Entry Notes represented by a Global Note, the
Trustee will exchange such Global Note for two Global Notes, one of which shall
represent such Book-Entry Note or Notes and shall be canceled immediately after
issuance and the other of which shall represent the remaining Book- Entry Notes
previously represented by the surrendered Global Note and shall bear the CUSIP
number of the surrendered Global Note.
If the purchase price for any Book-Entry Note is not timely paid to the
Participants with respect to such Note by the beneficial purchaser thereof (or a
person, including an indirect participant in DTC, acting on behalf of such
purchaser), such participants and, in turn, the Presenting Agent may enter an
SDFS deliver order through DTC's Participant Terminal System debiting such Note
to such Agent's participant account and crediting such Note free to the
participant account of the Trustee and shall notify the Trustee and the issuer
thereof. Thereafter, the Trustee (i) will immediately notify the Issuer, once
the Trustee has confirmed that such Note has been credited to its participant
account, and the Issuer shall immediately transfer by Fedwire (in immediately
available funds) to the Presenting Agent an amount equal to the price of such
Note which was previously sent by wire transfer to the account of the Issuer and
(ii) the Trustee will deliver the withdrawal message and take the related
actions described in the preceding paragraph. Such debits and credits will be
made on the Settlement Date, if possible, and in any event no later than 5:00
p.m. on the following Business Day. If the fail shall have occurred for any
reason other than failure of the Presenting Agent to provide the Purchase
Information to the Issuer or to provide a confirmation to the purchaser, the
Issuer will reimburse the Presenting Agent on an equitable basis for its loss of
the use of funds during the period when the funds were credited to the account
of the Issuer.
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Notwithstanding the foregoing, upon any failure to settle with respect
to a Book-Entry Note, DTC may take any actions in accordance with its SDFS
operating procedures then in effect. In the event of a failure to settle with
respect to one or more, but not all, of the Book- Entry Notes to have been
represented by a Global Note, the Trustee will provide for the authentication
and issuance of a Global Note representing the other Book-Entry Notes to have
been represented by such Global Note and will make appropriate entries in its
records.
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DRAFT 12/3/98
EXHIBIT D
[LETTERHEAD OF CHOATE, HALL & STEWART]
December __, 1998
Merrill Lynch & Co.
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281-1311
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281-1310
A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, MO 63103
Bankers Trust Company
4 Albany Street
4th Floor
New York, NY 10006
Re: Sierra Pacific Power Company (the "Company")
$35,000,000 of Collateralized Medium-Term Notes, Series D
Gentlemen:
This opinion is delivered to you pursuant to Section 5(e) of the
Distribution Agreement dated as of December __, 1998 (the "Distribution
Agreement") between each of you and the Company relating to the issuance and
sale from time to time of Collateralized Medium-Term Notes, Series D, in an
initial aggregate principal amount of $35,000,000 (the "Notes"). The
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December __, 1998
Page 2
Notes are to be issued pursuant to a Collateral Trust Indenture dated as of June
1, 1992 (the "Indenture") between the Company and Bankers Trust Company, as
Trustee (the "Indenture Trustee"), as supplemented by a Fourth Supplemental
Indenture dated as of February 1, 1997 between the Company and the Indenture
Trustee (the "Fourth Supplemental Indenture") and to be secured by the Company's
first mortgage bonds to be issued pursuant to an Indenture of Mortgage dated as
of December 1, 1940, from the Company's predecessor to The New England Trust
Company and Leo W. Huegle (State Street Bank and Trust Company and Gerald R.
Wheeler, respectively, by succession), as Trustees, as heretofore supplemented
and modified and assumed by the Company (collectively, the "Mortgage
Indenture"). This opinion is being delivered on the Commencement Date referred
to in the Distribution Agreement (the "Commencement Date").
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Distribution Agreement.
In connection with rendering this opinion, we have examined such
corporate records, certificates and other documents as we have considered
necessary for the purposes of this opinion, including:
(a) A certificate of recent date of the Secretary of State of
Nevada as to the corporate existence and good standing of the
Company as a Nevada corporation; and a certificate of recent
date of the Secretary of State of California as to the
qualification and good standing of the Company as a foreign
corporation in that State;
(b) The Restated Articles of Incorporation of the Company, and all
amendments thereto;
(c) The By-Laws of the Company as now in effect;
(d) Resolutions adopted by the Board of Directors of the Company
on November 13, 1996, relating to the issuance and sale of the
Notes and matters related thereto;
(e) The Indenture, the Fourth Supplemental Indenture and the
proposed form of fixed-rate note to be issued under the Fourth
Supplemental Indenture;
(f) The Mortgage Indenture, including the Thirty-fifth
Supplemental Indenture thereto dated as of February 1, 1997
(the "Thirty-fifth Supplemental Indenture");
D-2
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December __, 1998
Page 3
(g) The applications of the Company to the PUCN and the CPUC with
respect to the issuance and sale of the Notes and related
matters, and the order of the PUCN thereon dated October 19,
1995 and the order of the CPUC thereon dated August 11, 1995;
(h) The Registration Statement and all exhibits thereto, as filed
with the Commission on November 27, 1996, and as amended by a
Pre-Effective Amendment No. 1 filed with the Commission on
December 18, 1996, and declared effective by the Commission on
December 20, 1996;
(i) The documents incorporated by reference in the Prospectus (the
"Incorporated Documents");
(j) The First Mortgage Bond of the NN Series issued under the
Mortgage Indenture in connection with the Notes (the "Bond");
(k) Such other documents as are to be delivered on the
Commencement Date, including certificates of officers of the
Company.
In such examination, we have assumed the genuineness of all signatures
other than the signatures of the Company, the authenticity of all documents
submitted to us as originals, the conformity to the original documents of all
documents submitted to us as copies and the authenticity of the originals of
such latter documents. As to any facts material to our opinion, we have, when
relevant facts were not independently established, relied upon the aforesaid
records, certificates and documents.
Although we have examined the Restated Articles of Incorporation, as
amended, of the Company, we have ourselves made no independent examination as to
the organization, existence or standing of the Company, its authority to do
business in California, its titles to properties, the lien of the Mortgage
Indenture, the recording of the Mortgage Indenture and the Thirty-fifth
Supplemental Indenture and matters of Nevada and California law affecting the
enforceability of the obligations of the Company in respect of the Notes, the
Indenture, the Fourth Supplemental Indenture, the Mortgage Indenture, the
Thirty-fifth Supplemental Indenture and the Mortgage Bonds, or the jurisdiction
and approvals of State regulatory commissions or requirements of the laws of
Nevada or California with respect to action by or documents required to be filed
with State officials. We have, therefore, in connection with the opinions set
forth below, relied with your consent as to all matters governed by the laws of
the State of Nevada, upon a letter of even date herewith addressed to you by
Woodburn and Wedge, and as to all matters governed by the laws of the State of
California, upon a letter of even date herewith addressed to you by Orrick,
D-3
<PAGE>
December __, 1998
Page 4
Herrington & Sutcliffe LLP, and, as to such matters, our opinions are subject
to all of the qualifications and assumptions set forth in such letters. We
refer you to said letters for the matters covered thereby and believe that
you and we are entitled to rely thereon.
We are not passing in any way upon any computations or financial
statements, including the notes or schedules thereto, or upon any other
financial or accounting information set forth or referred to in the Registration
Statement or the Incorporated Documents, and have not reviewed the financial
records or books of account of the Company.
Prior to [_____________, 1998], we participated in conferences with
officers and other representatives of the Company and its accountants in which
the affairs of the Company and the contents of the Registration Statement and
Incorporated Documents were discussed at length. Subsequent to [_____________,
1998], we made inquiries of certain officers of the Company and representatives
of its auditors as to whether there had been any material change in the affairs
of the Company since that date and we examined, among other documents, those to
be delivered on the Commencement Date. However, there is no assurance that all
possible material facts as to the Company were disclosed at such conferences, in
response to our inquiries, or in such documents, and we have to a large extent
relied upon the statements of officers and other representatives of the Company
as to the materiality of those facts disclosed to us. Except with respect to the
descriptions specifically referred to in paragraphs (d) and (j), we are not
passing upon and do not assume any responsibility for the accuracy or
completeness of the statements contained in the Registration Statement or the
Incorporated Documents.
Based on the foregoing and, to the extent indicated above on said
opinions of other counsel for the Company, we are of the opinion that:
(a) The Company is a corporation duly organized and existing in
good standing under the laws of the State of Nevada, with
corporate power and authority to own its properties and
conduct its business as described in the Registration
Statement; and the Company is duly qualified to do business as
a foreign corporation in good standing in all other
jurisdictions in which it owns or leases substantial
properties;
(b) The Indenture and the Fourth Supplemental Indenture have been
duly authorized, executed and delivered by the Company and are
duly qualified under the Trust Indenture Act and constitute
the legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, subject
to bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability
relating to or affecting creditors' rights and to general
equity principles;
D-4
<PAGE>
December __, 1998
Page 5
(c) The creation, issuance and sale of the Notes have been duly
authorized by the Company in conformity with the Indenture,
and, when the terms of a particular Debt Security and of its
issuance and sale have been duly authorized and established by
all necessary corporate action in conformity with the
Indenture, and such Debt Security has been duly completed,
executed, authenticated and issued in accordance with the
Indenture and delivered against payment as contemplated by the
Distribution Agreement, such Debt Security will be entitled to
the benefits of the Indenture and will constitute a valid and
legally binding obligation of the Company enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer, and similar
laws of general applicability relating to or affecting
creditors' rights and to general equity principles, it being
assumed that (i) at the time of the issuance, sale and
delivery of each Debt Security the authorization of such
series will not have been modified or rescinded and there will
not have occurred any change in law affecting the validity,
legally binding character or enforceability of such Debt
Security, and (ii) for purposes of this subparagraph (c),
neither the issuance, sale and delivery of any Debt Security,
nor any of the terms of such Debt Security, nor compliance by
the Company with such terms, will violate any applicable law,
any agreement or instrument then binding upon the Company or
any restriction imposed by any court or governmental body
having jurisdiction over the Company, in each case effected
after the date hereof;
(d) The Registration Statement has become effective under the Act,
the Prospectus has been or will be transmitted by a means
reasonably calculated to result in filing with the Commission
in conformity with the provisions of Rule 424(b)(5) under the
Act and no stop order suspending the effectiveness of the
registration statement or of any part thereof has been issued
and no proceedings for that purpose have been instituted or,
to the best of our knowledge are pending or contemplated under
the Act; and the registration statement relating to the
Registered Securities, as of its effective date, and the
Registration Statement and the Prospectus, as of the
Commencement Date, complied and complies as to form in all
material respects with the requirements of the Act, the
Exchange Act, the Trust Indenture Act and the rules and
regulations under such Acts; we have no reason to believe that
such Registration Statement, as of its effective date, or the
Registration Statement, as of the Commencement Date, contained
or contains any untrue statement of a material fact or omitted
or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading or that the Prospectus, as of the Commencement
Date, contains or contained any untrue statement of a material
fact or omits or omitted to state any material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not
D-5
<PAGE>
December __, 1998
Page 6
misleading; the descriptions and statements in the
Prospectus and reviewed by us and made on our authority as
stated under the caption "Experts" are accurate and fairly
present
the information required to be shown; and we do not know of
any legal or governmental proceedings required to be described
in the Registration Statement which are not described as
required or of any contracts or documents of a character
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration
Statement which are not described and filed as required;
provided, however, that we do not express any belief as to any
information contained in the Registration Statement, the
Prospectus or the Incorporated Documents which is specified
therein to have been obtained from The Depository Trust
Company, or as to any statements contained in the Statements
of Eligibility (Form T-l) under the Trust Indenture Act of the
Trustee filed as an exhibit to the Registration Statement;
(e) The Mortgage Indenture has been duly authorized, executed and
delivered by the Company and has been qualified under the
Trust Indenture Act. The Thirty-fifth Supplemental Indenture
has been duly authorized, executed and delivered by the
Company. Each of the Mortgage Indenture and the Thirty-fifth
Supplemental Indenture is a legal, valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar
laws of general applicability relating to or affecting
creditors' rights and general equity principles;
(f) Upon the deposit of the Mortgage Bonds with the Trustee as the
basis for the issuance of the Notes, to the extent that such
Mortgage Bonds shall have been designated as Designated
Mortgage Bonds, the Mortgage Bonds shall be duly pledged to
the Trustee, and the Indenture will, upon payment for the
Notes issued upon the basis of the Designated Mortgage Bonds
so deposited, constitute a valid first lien thereupon; no
registration, recording or filing of the Indenture (or notices
or financing statements in respect thereof) is required by law
to make effective and to maintain the lien on the Designated
Mortgage Bonds so deposited intended to be created by the
Indenture;
(g) The Mortgage Bonds to be deposited with the Trustee and the
Designated Mortgage Bonds to be pledged with the Trustee as
the basis for the issuance of the Notes, have been duly
authorized and, upon the deposit and pledge thereof in the
manner contemplated by the Indenture, will be validly issued
in conformity with the Mortgage Indenture, and constitute
legal, valid and binding obligations of the Company, subject
to bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability
relating to or affecting creditors' rights and general equity
D-6
<PAGE>
December __, 1998
Page 7
principles and will be entitled to the security afforded by
the Mortgage Indenture equally and ratably with the securities
outstanding thereunder;
(h) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required
for the consummation of the transactions contemplated by the
Distribution Agreement in connection with the issuance and
sale of the Notes by the Company, except with the Commission
and except such as may be required under state securities laws
(we assume, with your permission, that with respect to each
particular Debt Security, inclusion of any alternative or
additional terms in such Debt Security that are not currently
specified in the forms of Notes examined by us would not
require the Company to obtain any regulatory consent,
authorization or approval or make any regulatory filing in
order for the Company to issue, sell and deliver such
Security), and except for filings with and the orders from the
PSCN and the CPUC authorizing the issuance and sale by the
Company of the Notes, subject to certain conditions set forth
therein, which orders have been obtained and are in full
effect;
(i) The execution, delivery and performance of the Indenture, the
Fourth Supplemental Indenture, the Thirty-fifth Supplemental
Indenture and the Distribution Agreement, the issuance of the
Mortgage Bonds, the pledge of the Designated Mortgage Bonds
and the issuance and sale of the Notes, and compliance with
the terms, conditions and provisions thereof, will not result
in a breach or violation of any of the terms, conditions and
provisions of, or constitute a default under, any statute, any
rule, regulation or order of any governmental agency or body
or any court having jurisdiction over the Company or any
subsidiary of the Company or any of their properties or any
agreement or instrument known to us to which the Company or
any such subsidiary is a party or by which the Company or any
such subsidiary is bound or to which any of the properties of
the Company or any such subsidiary is subject, or the charter
or by-laws of the Company or any such subsidiary. The Company
has full power and authority to authorize, issue and sell the
Notes as contemplated by the Distribution Agreement (it being
understood that we have assumed with respect to each
particular Debt Security that the inclusion of any alternative
or additional terms in such Debt Security that are not
currently specified in the form of Notes examined by us will
not cause the issuance, sale or delivery of such Debt
Security, the terms of such Debt Security, or the compliance
by the Company with such terms, to violate any of the orders
or laws specified in this paragraph or to result in a default
under or breach of any of the agreements specified in this
paragraph);
D-7
<PAGE>
November __, 1998
Page 8
(j) The forms of the Notes and the Mortgage Bonds conform as to
legal matters in all material respects with the statements
concerning them in the Registration Statement and Prospectus;
(k) The Distribution Agreement has been duly authorized, executed
and delivered by the Company; and
(l) The Company is not a holding company or a subsidiary of a
registered holding company within the meaning of the Public
Utility Holding Company Act of 1935.
This opinion is rendered to you solely in connection with the
consummation of the transactions contemplated by the Distribution Agreement and,
without our express written consent, may not be relied upon by you for any other
purpose or by any other person for any purpose whatsoever. This opinion is given
as of the date hereof and imposes no obligation upon us to update this opinion.
We specifically disclaim any undertaking or obligation to advise the addressees
hereof or any other party expressly permitted hereby to rely upon this opinion
of any facts or circumstances that may hereafter be brought to out attention or
any change in any laws that may hereafter occur which may alter or affect the
opinions expressed herein.
Very truly yours,
CHOATE, HALL & STEWART
D-8
<PAGE>
DRAFT 12/3/98
EXHIBIT E
[LETTERHEAD OF WOODBURN AND WEDGE]
December __, 1998
Merrill Lynch & Co.
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281-1311
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281-1310
A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, MO 63103
Bankers Trust Company
4 Albany Street
4th Floor
New York, NY 10006
Re: Sierra Pacific Power Company
$35,000,000 of Collateralized Medium-Term Notes, Series D
Ladies and Gentlemen:
As special Nevada counsel for Sierra Pacific Power Company (the
"Company"), we are furnishing this opinion to you pursuant to Section 5(f) of
the Distribution Agreement dated December __, 1998 (the "Distribution
Agreement") between the Company and each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated and A.G. Edwards & Sons, Inc. as Agents in
E-1
<PAGE>
December __, 1998
Page 2
connection with the issuance of Collateralized Medium-Term Notes, Series D,
in an initial aggregate principal amount of $35,000,000 (the "Notes"), to be
issued from time to time by the Company and secured by $35,000,000 of First
Mortgage Bonds, 9%, Series NN due 2037 to be issued by the Company. All
capitalized terms used herein without definition and defined in the
Distribution Agreement are used herein as therein defined.
In connection with rendering this opinion, we have examined the
following documents:
(a) A Certificate of Corporate Existence issued by the Secretary
of State of Nevada;
(b) The Restated Articles of Incorporation of the Company and all
amendments thereto (the "Charter");
(c) The By-laws of the Company as now in effect;
(d) Resolutions adopted by the Board of Directors of the
Company on ________ __, 1998, relating to the issuance and sale of the notes
and matters related thereto;
(e) The Indenture, including the Fourth Supplemental Indenture
and the proposed form of fixed-rate note to be issued under the Fourth
Supplemental Indenture;
(f) The Mortgage Indenture, including the Thirty-fifth
Supplemental Indenture thereto dated as of February 1, 1997 (the
"Thirty-fifth Supplemental Indenture");
(g) Fully executed counterparts or copies of the order of the
Public Service Commission of Nevada issued on October 19, 1995, Docket No.
95-6034 (the "Order");
(h) The Mortgage Bonds;
(i) The Distribution Agreement;
(j) The Registration Statement of the Company on Form S-3 as
filed with the Securities and Exchange Commission (File No. 333-17041) under
the Securities Act of 1933, as amended, including the Prospectus relating to
the Notes dated December 20, 1996, as amended (the "Prospectus"); and
(k) Such other records, instruments and agreements as we have
deemed appropriate for the purposes of this opinion.
E-2
<PAGE>
December __, 1998
Page 3
We have also examined evidence satisfactory to us relating to the
recordation and filing of the Indenture of Mortgage dated as of December 1,
1940, between the Company and The New England Trust Company (State Street Bank
and Trust Company, as successor trustee) and Leo W. Huegle (Gerald R. Wheeler,
as successor trustee), as trustees (the "1940 Indenture of Mortgage") and the
First through the Thirty-fourth supplements thereto.
In our examination, we have assumed the genuineness and authenticity of
all signatures other than the signatures of the Company; the accuracy and
authenticity of all records, instruments and agreements submitted to us as
originals; the conformity to the original documents of all documents submitted
to us as copies; the authenticity of the originals of such copies; the accuracy,
completeness and authenticity of all certificates of public officials and others
as of the date hereof; and the due execution and delivery pursuant to due
authorization thereof by, and the validity and binding effect thereof on, each
party thereto other than the Company. As to any facts material to our opinion,
we have, when relevant facts were not independently established, relied upon
certificates of the Company or its officers or of public officials.
We have not examined the Notes or the Mortgage Bonds, except specimens
thereof, and we have assumed with respect to each particular Note and Mortgage
Bond that the inclusion of any alternative or additional terms in such Note or
Mortgage Bond that are not currently specified in the form of Note or Mortgage
Bond examined by us will not cause the issuance or sale of such Note, the
issuance and delivery of such Mortgage Bond, the terms of such Note or Mortgage
Bond, or the compliance by the Company with such terms, to breach or violate any
of the terms of the Order.
As used in this opinion, the expression "to the best of our knowledge"
with reference to matters of fact means that, after an examination of the
documents made available to us by the Company and after inquiries of officers,
managers or employees of the Company, we find no reason to believe that the
opinions expressed herein are factually inaccurate; but beyond that, we have not
made an independent factual investigation for the purpose of rendering this
opinion.
We have made such examination of law as in our judgment is necessary or
appropriate for purposes of this opinion. We do not, however, purport to be
qualified to pass upon, and express no opinion as to, federal law or the laws of
any jurisdiction other than the laws of the State of Nevada (excluding therefrom
principles of conflicts of laws, securities or blue sky laws, and laws of
political subdivisions of such State).
Based upon and subject to the foregoing, we are of the opinion that:
E-3
<PAGE>
December __, 1998
Page 4
(A) The Company is a corporation duly organized and existing
and in good standing under the laws of the State of Nevada, duly
qualified to hold property and to transact an electric, gas and water
public utility business in the State of Nevada, and with powers
adequate for the execution and delivery of Distribution Agreement, the
Indenture, the Notes, the Fourth Supplemental Indenture, the Mortgage
Bonds and the Thirty-fifth Supplemental Indenture;
(B) The Mortgage Indenture, and all supplements thereto
(including the Thirty- fifth Supplemental Indenture), has been duly
authorized, executed and delivered on behalf of the Company and
(assuming the due authorization, execution and delivery on behalf of
the other parties thereto) is enforceable in accordance with its terms
under the laws of Nevada except that the enforcement of the rights and
remedies created thereby is subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application
affecting the rights and remedies of creditors and that the
availability of the remedy of specific performance or of injunctive
relief is subject to the discretion of the court before which any
proceedings therefor may be brought and except that the provisions of
the Mortgage Indenture subjecting to the lien thereof after-acquired
property of the Company may not be effective in some cases prior to the
execution, delivery and recording of a supplemental indenture
specifically subjecting such after-acquired property to the lien of the
Mortgage Indenture.
Without limiting the generality of the foregoing
qualifications, we call your attention to certain laws of the State of
Nevada of general application affecting the rights and remedies of
creditors, including without limitation the prohibition against
unilateral right of entry in the event of default of the debtor,
limitations on the form of action necessary to enforce a debt secured
by real property, anti-deficiency judgment laws, the rights of debtors
and junior lien holders to redemption following judicial foreclosure,
and the effect of court cases that have held that certain provisions of
agreements are unenforceable where enforcement would violate the
creditor's implied covenant of good faith and fair dealing or where it
cannot be demonstrated that enforcement is reasonably necessary for the
protection of the security. In addition, we call your attention to the
fact that any purchaser at foreclosure sale or any other party other
than the Company would probably have to qualify as a public utility
under the laws of the State of Nevada and/or qualify as an assignee of
the Company under its governmental franchises, permits and licenses in
order to own or operate the properties of the Company as a public
utility.
(C) The Mortgage Bonds to be deposited with the Trustee and
the Designated Mortgage Bonds pledged with the Trustee as the basis for
the issuance of the Notes, have been duly authorized and executed by
the Company and, upon the deposit and pledge
E-4
<PAGE>
December __, 1998
Page 5
thereof in the manner contemplated by the Indenture, will constitute
legal, valid and binding obligations of the Company, subject, as to
enforcement, to laws relating to or affecting generally the enforcement
of creditors' rights, including, without limitation, bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
application affecting the rights and remedies of creditors and to
general principles of equity including the availability of the remedy
of specific performance or of injunctive relief and will be entitled to
the security afforded by the Mortgage Indenture equally and ratably
with the securities outstanding thereunder.
(D) The creation, issuance and sale of the Notes have been
duly authorized by the Company; and the Indenture and Fourth
Supplemental Indenture have been duly authorized, executed and
delivered on behalf of the Company.
(E) The Indenture, the Notes, the Fourth Supplemental
Indenture, the Mortgage Bonds and the Thirty-fifth Supplemental
Indenture will not result in a breach or violation of any of the terms,
conditions and provisions of, or constitute a default under, (i) the
Charter or the By-laws of the Company; (ii) any statute, rule or
regulation of the State of Nevada; or (iii) any order of any court or
governmental agency of the State of Nevada having jurisdiction over the
Company or any of its properties, which order is material to the
Company taken as a whole.
(F) The Order remains in full force and effect in the form
issued and no other authorization, approval or other action by, and no
notice to or filing or registration with, any governmental authority or
regulatory body of the State of Nevada is required for the due
execution, delivery and performance by the Company of the Indenture,
the Notes, the Fourth Supplemental Indenture, the Mortgage Bonds or the
Thirty-fifth Supplemental Indenture, except in accordance with the
terms of its authorizing orders.
(G) To the best of our knowledge and except as set forth in
the Prospectus, there is no pending or threatened action or proceeding
before any court, governmental agency or arbitrator against, directly
involving or affecting the Company or any of its subsidiaries which, in
any case, may materially and adversely affect the ability of the
Company to perform its obligations under the Indenture, the Notes, the
Fourth Supplemental Indenture, the Mortgage Bonds or the Thirty-fifth
Supplemental Indenture.
(H) The Mortgage Indenture and all supplements thereto
(including the Thirty- fifth Supplemental Indenture) (or appropriate
financing statements) have been duly recorded or filed in all places in
the State of Nevada where such recording or filing is
E-5
<PAGE>
December __, 1998
Page 6
necessary to perfect the lien of the Mortgage Indenture as a lien on
and security interest in both real and personal property of the Company
subjected thereto. Notwithstanding the foregoing, (i) we express no
opinion regarding the lien of the Mortgage Indenture as against
franchises, permits and other personal property, which, under Nevada
law, may not be made subject to a personal property lien, and (ii) we
express no opinion as to the perfection of the security interest in any
Personal Property in which, under the provisions
of the Nevada Uniform Commercial Code, a security interest cannot be
perfected by filing a financing statement.
(I) No taxes (as distinguished from filing and recordation
fees) are payable to the State of Nevada or any subdivision or agency
thereof in connection with the execution and delivery of the Notes, the
Mortgage Bonds or the Thirty-fifth Supplemental Indenture.
This letter is intended for your information only as to the parties to
whom it is addressed in connection with the transactions described herein and
for Choate, Hall & Stewart, counsel for the Company, and Ropes & Gray, counsel
for the Agents, and is not to be used, circulated, quoted or otherwise referred
to for any other purpose without our prior written permission.
Very truly yours,
WOODBURN AND WEDGE
By
----------------------------------
E-6
<PAGE>
Draft of 12/3/98
EXHIBIT F
[LETTERHEAD OF ORRICK, HERRINGTON & SUTCLIFFE]
Merrill Lynch & Co.
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281-1311
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281-1310
A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, MO 63103
Bankers Trust Company
4 Albany Street
4th Floor
New York, NY 10006
Re: Collateralized Medium-Term Notes, Series D, in an Initial
Aggregate Principal Amount of $35,000,000
----------------------------------------------------------
Ladies and Gentlemen:
Description of Representation
As special California counsel for Sierra Pacific Power Company (the
"Company"), we are furnishing this opinion to you pursuant to Section 5(g) of
the Distribution Agreement dated December __, 1998 (the "Distribution
Agreement") between the Company and each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated and A.G. Edwards & Sons, Inc. as agents (each, an "Agent"
and, collectively, the "Agents") in connection with the proposed issuance and
sale from time to time of Collateralized Medium-Term Notes, Series D (the
"Notes"). The Notes are to be issued pursuant to a Collateral Trust Indenture
dated as of June 1, 1992 between the Company and Bankers Trust Company, as
Trustee (the "Indenture Trustee"), as supplemented by the First Supplemental
Indenture dated as of June 1, 1992, the Second Supplemental Indenture, dated as
of October 1, 1993, the Third Supplemental Indenture, dated as of February 1,
1996, and the Fourth Supplemental Indenture, dated as of February 1, 1997, as so
supplemented, the "Indenture" and are to be secured by the Company's First
Mortgage Bonds, 9% Series NN due
<PAGE>
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
A.G. Edwards & Sons, Inc.
December __, 1998
Page 2
2037 (the "First Mortgage Bond") heretofore issued pursuant to an Indenture of
Mortgage dated as of December 1, 1940 from the Company's predecessor to The New
England Trust Company and Leo W. Huegle (State Street Bank and Trust Company and
Gerald R. Wheeler, respectively, by succession), as Trustees, as heretofore
supplemented and modified and as further supplemented by a Thirty-Fifth
Supplemental Indenture dated as of February 1, 1997 (the "Supplemental First
Mortgage Indenture" and such Indenture of Mortgage, as so supplemented and
modified, the "First Mortgage Indenture").
Materials Examined
In this regard, we have examined executed originals or copies of
executed originals of the following:
1. the First Mortgage Indenture as evidenced by a composite copy
showing modifications made through the Thirty-third
Supplemental Indenture, dated as of October 1, 1993,
represented to us by the Company to be a complete and accurate
copy of what it purports to represent; an executed counterpart
of the Thirty-Fourth Supplemental Indenture, dated as of
February 1, 1996; and an executed counterpart of the
Thirty-Fifth Supplemental Indenture, dated as of February 1,
1997;
2. the Indenture;
3. the form of the First Mortgage Bond included in the
Thirty-Fifth Supplemental Indenture;
4. a copy of Decision No. 95-08-045 issued by the California
Public Utilities Commission (the "CPUC") on August 11, 1995 in
the Company's Application No.
95-05-008 (the "Decision");
5. the certificates of certain state authorities and filing
officers;
6. the Officer's Certificate executed by an officer of the
Company (the "Officer's Certificate");
7. Financing Statement No. 9612760728, filed with the California
Secretary of State on May 3, 1996 (the "Financing Statement");
and
2
<PAGE>
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
A.G. Edwards & Sons, Inc.
December __, 1998
Page 3
8. The CPUC docket record in Application No. 95-05-008.
Based upon and subject to the foregoing, and subject to the
assumptions, limitations and qualifications set forth herein, we are of the
opinion that:
9. The Company is duly qualified and in good standing as a
foreign corporation under the laws of the State of California
and is duly qualified to hold property and to transact an
electric public utility business in the State of California.
10. The Decision remains in full force and effect in the form
issued; and, except for recordation of and filing with respect
to the First Mortgage Indenture referred to below, no other
authorization, approval or other action by, and no notice to
or filing or registration with, any governmental authority or
regulatory body of the State of California is required for the
execution, delivery and performance by the Company of the
First Mortgage Bond, the Indenture, the Supplemental First
Mortgage Indenture, or the Distribution Agreement.
11. The First Mortgage Bond, the First Mortgage Indenture and the
Supplemental First Mortgage Indenture (the "First Mortgage
Documents") are enforceable against the Company in accordance
with their respective terms.
12. The First Mortgage Bond deposited and pledged with the
Indenture Trustee as the basis for the issuance of the Notes
is enforceable against the Company in accordance with its
terms and will be entitled to the security afforded by the
First Mortgage Indenture equally and ratably with the Bonds
outstanding thereunder.
13. In order to provide constructive notice of the lien created by
the First Mortgage Indenture with respect to real property in
California, the First Mortgage Indenture must be recorded with
the County Recorder in the counties of Alpine, El Dorado,
Modoc, Mono, Nevada, Placer, Plunas and Sierra; in order to
perfect the lien of the First Mortgage Indenture with respect
to such personal property collateral in California in which a
security interest can be perfected by filing a financing
statement under the California Uniform Commercial Code
("CUCC"), the Financing Statement must be filed with the
California Secretary of State; and no other recordation or
filing in California is necessary to provide constructive
notice or perfect the lien of the First Mortgage Indenture
with respect to such property.
3
<PAGE>
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
A.G. Edwards & Sons, Inc.
December __, 1998
Page 4
14. No mortgage or transfer taxes (as distinguished from filing
and recordation fees) are payable to the State of California
or any subdivision or agency thereof in connection with the
execution and delivery of the First Mortgage Bond or the
Supplemental First Mortgage Indenture.
Certain Assumptions
Whenever a statement herein is qualified by the phrase, "to our
knowledge," it is intended to indicate that, during the course of our
representation of the Company in this transaction no information that would give
us current actual knowledge of the inaccuracy of such statement has come to the
attention of those attorneys presently in this firm who have rendered legal
services to the Company in connection with this transaction. However, we have
not undertaken any independent investigation or review to determine the accuracy
of any such statement, and any limited inquiry undertaken by us during the
preparation of this opinion letter should not be regarded as such an
investigation or review; no inference as to our knowledge of any matters bearing
on the accuracy of any such statement should be drawn from the fact of our
representation of the Company.
With your permission we have assumed the following: (a) the
authenticity of original documents and the genuineness of all signatures; (b)
the conformity to the originals of all documents submitted to us as copies; (c)
the truth and accuracy of the factual representations contained in the
agreements, records, documents, instruments and certificates we have reviewed;
(d) except as specifically covered in the opinion set forth above, the documents
were duly authorized, executed and delivered on behalf of the respective parties
thereto and, such documents are legal, valid and binding obligations of such
parties; (e) the compliance by each of the parties with any applicable
requirements to file returns and pay taxes under the California Franchise Tax
Law; (f) the absence of any evidence extrinsic to the provisions of the written
agreements between the parties that the parties intended a meaning contrary to
that expressed by those provisions; (g) the Company owns no real property in the
State of California other than in the counties listed in paragraph 5 above; (h)
except as specifically covered in the opinion set forth above, all conditions
precedent to the valid execution, delivery and performance of the First Mortgage
Indenture, the Indenture, the First Mortgage Bond and the Notes have been
satisfied; (i) the descriptions of the collateral included in the First Mortgage
Indenture and attached to the Financing Statements are adequate and sufficient;
(j) the total aggregate principal amount of issuances of debt securities and
guaranties, including the Debt Securities, to be issued by the Company pursuant
to the authority granted to the Company by the Decision will not exceed One
4
<PAGE>
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
A.G. Edwards & Sons, Inc.
December __, 1998
Page 5
Hundred Fifteen Million Dollars ($115,000,000); and (k) the Debt Securities are
being issued pursuant to the authority granted to the Company by the Decision.
Certain Limitations and Qualifications
Our opinions set forth above are subject to and limited by the
following:
(1) limitations imposed by bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium, or other laws relating to or
affecting the rights of landlords and creditors generally;
(2) rights to indemnification and contribution, which may be
limited by applicable law and equitable principles;
(3) the unenforceability under certain circumstances of provisions
imposing penalties, forfeiture, late payment charges, liquidated damages, or an
increase in interest rate upon delinquency in payment or the occurrence of any
event of default;
(4) general principles of equity, including without limitation
concepts of materiality, reasonableness, good faith and fair dealing, and the
possible unavailability of specific performance or injunctive relief, regardless
of whether such enforceability is considered in a proceeding in equity or at
law, and the effect of judicial decisions which have held that certain
provisions are unenforceable where their enforcement would be commercially
unreasonably or where default under the First Mortgage Documents is not
material;
(5) the unenforceability under certain circumstances of provisions
expressly or by implication waiving broadly or vaguely stated rights, rights to
receive notice or to be allowed to cure, reinstate or redeem in the event of
default, the benefits or statutory or constitutional provisions, unknown future
rights, defenses ro obligations or rights granted by law, where such waivers are
against public policy or prohibited by law;
(6) limitations imposed by California law and decisions on strict
enforcement of covenants in debt instruments and acceleration of maturity, if a
court concludes that enforcement would be unreasonable under the then existing
circumstances or absent a showing of damage to the lender, or impairment of
collateral or of the borrower's ability to repay;
5
<PAGE>
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
A.G. Edwards & Sons, Inc.
December __, 1998
Page 6
(7) the application of the California "one action" rule (Section
726 of the California Code of Civil Procedure (the "CCP"), the California "fair
value" and "anti-deficiency" statutes (Sections 580a-580d of the CCP), and the
procedures governing the right of redemption following a judicial foreclosure
(Sections 729.010-719.090);
(8) compliance with the substantive and procedural requirements of
California law relating to the exercise of remedies by a creditor secured by
real and/or personal property;
(9) the fact that the perfection of a security interest in
"proceeds" of collateral is governed and restricted by Section 9306 of the CUCC;
(10) possible limitations under certain circumstances on the
exercise of self-help or other summary procedures (including the appointment of
a receiver) for obtaining possession of collateral;
(11) possible limitations under certain circumstances on the
enforceability of the use of condemnation or insurance proceeds to reduce the
principal amount obligations, rather than making such proceeds available for
restoration of property securing such obligations, to the extent that the
Trustees under the First Mortgage Indenture are unable to show that their
security has been impaired;
(l2) the unenforceability under certain circumstances of provisions
to the effect that rights or remedies are not exclusive, that every right or
remedy is cumulative and may be exercised in addition to or with any other right
or remedy or the election of some particular right or remedy does not preclude
recourse to one or more other rights or remedies;
(13) in some cases, the necessity to execute, delivery, and record a
supplemental indenture specifically subjecting after-acquired property to the
lien of the First Mortgage Indenture in order to make effective the provisions
of the First Mortgage Indenture subjecting to the lien thereof after-acquired
property of the Company; and
(14) the fact that a purchaser at a foreclosure sale or any one
other than the Company probably would have to qualify under California law in
order to own and operate the property as a public utility.
We express no opinion as to (i) any collateral in which the debtor does
not have rights, or that is not adequately and sufficiently described in the
First Mortgage Indenture, (ii) any
6
<PAGE>
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
A.G. Edwards & Sons, Inc.
December __, 1998
Page 7
collateral in which a security interest cannot be perfected by the filing of a
financing statement with the California Secretary of State, (iii) the perfection
of any security interest if the name and address of each of the secured party,
the debtor, and any assignee set forth in any financing statement is not
complete and accurate, (iv) any debtor that is not located in the State of
California within the meaning of Section 9103(3), or (v) any collateral that is
of a type described in Sections 9401(1)(a) or (b) or 9102(4) or (5) of the CUCC,
or that constitutes "transition property" as referred to in Section 9104 of the
CUCC. Our opinions in paragraphs 3 and 5 above are limited to Division 9 of the
CUCC, and therefore those opinions do not address (i) laws of jurisdictions
other than California, and of California except for Division 9 of the CUCC, (ii)
collateral of a type not subject to Division 9 of the CUCC, and (iii) under
Section 9103 of the CUCC what law governs perfection of security interests
granted in the collateral covered by the opinions.
Except as specifically covered in the opinion set forth above, we
express no opinion as to the creation, priority or perfection of any lien on
real property created by the First Mortgage Indenture, or as to the title to,
ownership of, location of, description or existence or non-existence of any real
property purported to be described in the First Mortgage Indenture.
This opinion is limited to the laws of the State of California (without
reference to its choice-of-law rules).
Use of Opinion
This opinion is solely for your benefit and the benefit of your counsel
and of Choate, Hall & Stewart in connection with the transaction covered by the
first paragraph of this letter and may not be relied upon, used, circulated,
quoted, or referred to, nor may copies hereof be delivered to, any other person
without our prior written approval. We disclaim any obligation to update this
opinion letter for events occurring or coming to our attention after the date
hereof.
Very truly yours,
ORRICK, HERRINGTON & SUTCLIFFE LLP
7
<PAGE>
DRAFT 12/3/98
EXHIBIT G
OFFICER'S CERTIFICATE
Each of the undersigned, Mary O. Simmons, Controller, and William E.
Peterson, Senior Vice President, General Counsel and Corporate Secretary, of
Sierra Pacific Power Company (the "Company"), does hereby certify, to the best
of his or her knowledge, that (with terms not otherwise defined herein having
the meanings set forth in the Distribution Agreement dated December __, 1998
between the Company and each of Merrill Lynch, Pierce, Fenner & Smith
Incorporated and A.G. Edwards & Sons, Inc. (the "Distribution Agreement")):
(1) the representations and warranties of the Company in the
Distribution Agreement are true and correct;
(2) the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied
under the Distribution Agreement at or prior to the date
hereof;
(3) no stop order suspending the effectiveness of the Registration
Statement or of any part thereof has been issued and no
proceedings for that purpose have been instituted or are
contemplated by the Commission; and
(4) subsequent to the date of the most recent audited financial
statements incorporated by reference in the Prospectus,
neither the Company nor any of its subsidiaries has sustained
any material adverse change, or any development involving a
prospective material adverse change, in or affecting
particularly the capital stock or long-term debt of the
Company or any of its subsidiaries or the business, financial
position, results of operations or properties of the Company
or any of its subsidiaries other than as set forth in or
contemplated by the Prospectus or as described herein.
IN WITNESS WHEREOF, we have hereunto set our hands this ______ day of
December, 1998.
-------------------------------------
Mary O. Simmons, Controller
-------------------------------------
William E. Peterson, Senior Vice
President, Corporate Secretary and General
Counsel
<PAGE>
Draft 12/3/98
EXHIBIT H
The letter of the Company's independent accountants will state in
effect that:
(1) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and the Rules
and Regulations.
(2) In their opinion, the financial statements audited by them
and incorporated by reference in the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
Rules and Regulations.
(3) On the basis of procedures referred to in such letter,
including a reading of the latest available interim financial statements of the
Company and inquiries of officials of the Company responsible for financial and
accounting matters, nothing caused them to believe that:
(1) any material modifications should be made to the
unaudited condensed consolidated financial statements incorporated by
reference in the Prospectus for them to be in conformity with generally
accepted accounting principles;
(2) the unaudited condensed consolidated financial
statements incorporated by reference in the Prospectus do not comply as
to form in all material respects with the applicable accounting
requirements of the Securities Exchange Act of 1934 as it applies to
Form 10-Q and the related published rules and regulations;
(3) at the date of the latest available internal
balance sheet of the Company, there was any change in the capital
stock, notes payable or long-term debt or any decrease in the net
assets of the Company, or, at a subsequent specified date not more than
five days prior to the date of such letter, there was a change in the
capital stock, notes payable or long-term debt of the Company, in each
case as compared with the amount shown in the most recent balance sheet
of the Company incorporated by reference in the Prospectus, except for
(i) increases in capital stock resulting from the issuance of shares
pursuant to employee benefit plans and the Company's Common Stock
Investment Plan, (ii) decrease in long-term debt resulting from
amortization of debt premium or increases in long-term debt premium or
increases in long-term debt resulting from draw- downs of funds held in
trust, (iii) decreases in net assets resulting from the declaration of
dividends, (iv) changes or decreases which the Prospectus discloses
have occurred or may occur and (v) such other changes or decreases as
may be set forth in such letter; or
(4) at the date of the latest available internal
balance sheet of the Company, there was any decrease, as compared with
the most recent twelve-month period for which operating revenues and
net income are included or incorporated by reference in the Prospectus,
in such amounts, except in all cases for changes or decreases
<PAGE>
which the Prospectus discloses have occurred or may occur or as may be
set forth in such letter.
(4) In addition to their examination referred to in their report in
the Registration Statement and Prospectus and the procedures referred to in (3)
above, they have carried out certain other specified procedures, not
constituting an audit, with respect to the dollar amounts, percentages and other
financial information (in each case to the extent that such dollar amounts,
percentages and other financial information, either directly or by analysis or
computation, are derived from the general accounting records of the Company) as
requested by the Agents (or Agents' counsel), which appear in the Company's
annual report on Form 10-K for its most recent fiscal year and in the Company's
quarterly reports on Form 10-Q for periods completed since the end of the last
fiscal year of the Company under the caption "Business" in Item 1 and Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and have found such dollar amounts, percentages and financial
information to be in agreement with the accounting records of the Company.
2
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 20, 1996)
$35,000,000
SIERRA PACIFIC POWER COMPANY
COLLATERALIZED MEDIUM-TERM NOTES, SERIES D
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
------------------
THE COMPANY: Sierra Pacific Power Company
TERMS: We plan to offer and sell Notes with various terms, including the
following:
- - Ranking as senior indebtedness of the Company and secured by one or more first
mortgage bonds issued by the Company
- - Stated maturities of 9 months or more from date of issue
- - Redemption, if applicable, whether mandatory or at the option of the Company
- - Payments in U.S. dollars
- - Minimum denominations of $10,000 and integral multiples of $1,000 in excess
thereof
- - Book entry (through The Depository Trust Company), except in certain limited
circumstances
- - Interest payments on each February 1 and August 1
- - Interest at fixed rates, or no interest at all.
The final terms for each Note, which may be different from the terms described
in this prospectus supplement, will be specified in the applicable pricing
supplement. In the event that the Company issues or sells other Debt Securities
described in the accompanying prospectus, the amount of Notes offered hereby is
subject to reduction as a result of such sales.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON PAGE
S-2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
We may sell Notes to the Agents as principal for resale at varying or fixed
offering prices or through the Agents as agent using their reasonable efforts on
our behalf. If we sell all of the Notes, we expect to receive proceeds therefrom
of between $34,956,250 and $34,737,500, after paying the Agents' discounts and
commissions of between $43,750 and $262,500, depending on the stated maturity of
the Notes. We may also sell Notes without the assistance of the Agents (whether
acting as principal or as agent).
------------------------
MERRILL LYNCH & CO. A.G. EDWARDS & SONS, INC.
---------------
The date of this prospectus supplement is December 7, 1998.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
RISK FACTORS.......................................... S-3
WHERE YOU CAN FIND MORE INFORMATION................... S-4
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS.......................................... S-5
RECENT DEVELOPMENTS................................... S-6
RATIOS OF EARNINGS TO FIXED CHARGES................... S-8
DESCRIPTION OF NOTES.................................. S-9
CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES...................................... S-15
SUPPLEMENTAL PLAN OF DISTRIBUTIONS.................... S-18
VALIDITY OF NOTES..................................... S-19
<CAPTION>
<S> <C>
PROSPECTUS
Available Information................................. 2
Incorporation of Certain Documents by Reference....... 2
The Company........................................... 3
Application of Proceeds............................... 3
Ratio of Earnings to Fixed Charges.................... 3
Description of Debt Securities........................ 4
Description of Mortgage Bonds......................... 12
Certain United States Federal Income Tax
Consequences........................................ 14
Plan of Distribution.................................. 17
Experts............................................... 18
Additional Information................................ 18
Legal Opinions........................................ 19
</TABLE>
S-2
<PAGE>
RISK FACTORS
Your investment in the Notes will include certain risks. In consultation
with your own financial and legal advisers, you should carefully consider, among
other matters, the following discussion of risks before deciding whether an
investment in the Notes is suitable for you.
STRUCTURE RISKS
REDEMPTION
If your Notes are redeemable at our option or are otherwise subject to
mandatory redemption, we may (in the case of optional redemption) or must (in
the case of mandatory redemption) redeem such Notes at times when prevailing
interest rates may be relatively low. Accordingly, you may not be able to
reinvest the redemption proceeds in a comparable security at an effective
interest rate as high as that of the Notes.
UNCERTAIN TRADING MARKETS
We cannot assure you that a trading market for your Notes will ever develop
or be maintained. Many factors independent of our creditworthiness affect the
trading market. These factors include:
- method of calculating the principal, premium and interest in respect of
the Notes,
- time remaining to the maturity of the Notes,
- outstanding amount of the Notes,
- redemption features of the Notes, and
- level, direction and volatility of market interest rates generally.
In addition, certain Notes have a more limited trading market and experience
more price volatility because they were designed for specific investment
objectives or strategies. There may be a limited number of buyers when you
decide to sell such Notes. This may affect the price you receive for such Notes
or your ability to sell such Notes at all. You should not purchase Notes unless
you understand and know you can bear the foregoing investment risks.
CREDIT RATINGS
The credit ratings of our medium-term note program may not reflect the
potential impact of all risks related to structure and other factors on the
value of your Notes. In addition, real or anticipated changes in our credit
ratings will generally affect the market value of your Notes.
S-3
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy and information
statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
more information on the public reference rooms and their copy charges. Our SEC
filings are also available to the public from the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them, which means we can disclose information to you by referring you to those
documents. Information incorporated by reference is part of this prospectus
supplement. Later information filed with the SEC updates and supersedes this
prospectus supplement.
We incorporate by reference the documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until this offering is completed:
- Annual Report on Form 10-K of the Company for the year ended December 31,
1997.
- Quarterly Reports on Form 10-Q of the Company for the quarters ended March
31, June 30 and September 30, 1998.
These filings include important business and financial information which we
are not delivering to you. You may request a copy of those filings, other than
exhibits, at no cost, by contacting us at:
Shareholder Relations
Sierra Pacific Power Company
6100 Neil Road
P.O. Box 10100
Reno, Nevada 89520-0400
(702) 834-3616
S-4
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Prospectus Supplement, the accompanying
Prospectus, or any document incorporated by reference herein or therein,
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The forward-looking statements relate
to anticipated financial performance, management's plans and objectives for
future operations, business prospects, outcome of regulatory proceedings, market
conditions and other matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements in certain
circumstances. The following discussion is intended to identify the
forward-looking statements and certain factors that could cause future outcomes
to differ materially from those set forth in the forward-looking statements.
Forward-looking statements include the information concerning possible or
assumed future results of operations of the Company and other statements
identified by words such as "anticipate," "believe," "estimate," "expect,"
"intend," "plan" and "objective," and other similar expressions.
Investors are cautioned not to place undue reliance on such forward-looking
statements, which involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors may affect the Company's operations, markets, products, services and
prices. In addition to any assumptions and other factors referred to
specifically in connection with such forward-looking statements, factors that
could cause the Company's actual results to differ materially from those
contemplated in any forward-looking statement include, among others, the
following: (1) general economic and business conditions; (2) industry capacity;
(3) changes in technology; (4) changes in political, social and economic
conditions; (5) regulatory matters; (6) regulatory delays or conditions imposed
by regulatory bodies in approving the merger of the Company's parent, Sierra
Pacific Resources, with Nevada Power Company (the "Merger") (see "Recent
Developments--Merger of Sierra Pacific Resources and Nevada Power Company"); (7)
integration of the operations of the Company and Nevada Power Company; (8)
adverse regulatory treatment; (9) the ability of Nevada Power Company and the
Company to implement and realize anticipated cost savings from the Merger; (10)
the actual costs required to effect the Merger and to realize synergies and cost
savings; (11) the loss of any significant customers; (12) changes in business
strategy or development plans; (13) the speed and degree to which competition
enters the electric utility industry; (14) state and federal legislative and
regulatory initiatives that increase competition, affect cost and investment
recovery and have an impact on rate structures; (15) industrial, commercial and
residential growth in the service territory of the Company; (16) changes in the
capital markets affecting the ability to finance capital requirements; (17) the
weather and other natural phenomena; (18) the timing and extent of changes in
commodity prices and interest rates; (19) the impact of Year 2000 issues on the
operations of the Company; and (20) the other factors listed in the Company's
Form 10-K or in other reports previously or hereafter filed with the SEC, which
are incorporated by reference herein. Other factors and assumptions not
identified above may also have been involved in the derivation of these
forward-looking statements, and the failure of such other assumptions to be
realized, as well as other factors, may also cause actual results to differ
materially from those projected. The Company assumes no obligation to update
such forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
statements.
S-5
<PAGE>
RECENT DEVELOPMENTS
MERGER OF SIERRA PACIFIC RESOURCES AND NEVADA POWER COMPANY
On April 29, 1998, Sierra Pacific Resources ("Resources"), the parent of the
Company, announced the Merger with Nevada Power Company ("Nevada Power"), an
electric utility headquartered in Las Vegas, Nevada. Under the terms of the
Agreement and Plan of Merger, both Nevada Power and Resources will merge with
wholly-owned merger subsidiaries of Resources, with each share of Resources
Common Stock being converted into the right to receive either $37.55 in cash or
1.44 shares of Resources Common Stock, and each share of Nevada Power Common
Stock being converted into the right to receive either $26.00 in cash or 1.00
shares of Resources Common Stock. After consummation of the Merger, the Company
will remain a wholly-owned subsidiary of Resources and Nevada Power will be a
sister wholly-owned subsidiary of Resources.
The Agreement and Plan of Merger provides that, after effectiveness of the
Merger, the corporate headquarters of Resources, together with the gas and water
units of the Company, will remain in Reno, Nevada, while the principal executive
offices of Nevada Power, together with the electric business unit of the
Company, will be located in Las Vegas, Nevada. Resources' board of directors
will consist of fourteen directors, half of whom will be designated by Resources
and half of whom will be designated by Nevada Power. Malyn K. Malquist, the
current Chairman, President and Chief Executive Officer of both Resources and
the Company, will serve as President and Chief Operating Officer of Resources
and President and Chief Executive Officer of the Company and of Nevada Power.
Michael R. Niggli, Nevada Power's current President and Chief Operating Officer,
will serve as Chairman and Chief Executive Officer of Resources and Chairman of
both the Company and Nevada Power.
The Merger is subject to certain customary closing conditions, including the
receipt of required stockholder approvals of Resources and Nevada Power (which
were received on October 9, 1998) and the receipt of all necessary governmental
approvals and the making of all necessary governmental filings, including the
approval of state utility regulators in Nevada, the approval of the Federal
Energy Regulatory Commission ("FERC") under the Federal Power Act, the filing
with the Department of Justice and the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
expiration of the applicable waiting period thereunder, and the approval of the
SEC under Section 9(a)(2) of the Public Utility Holding Company Act of 1935, as
amended.
Additional information regarding the Merger is contained in Resources'
Registration Statement on Form S-4 (file number 333-62895).
NEVADA LEGISLATIVE AND REGULATORY MATTERS
The Nevada Legislature passed Assembly Bill 366 during the 1997 legislative
session. This law provides for the restructuring of the electric utility
industry in the State of Nevada. Listed below are the key issues addressed by
the law:
- Shareholders must be compensated fully for all costs determined by the
Public Utilities Commission of Nevada ("PUCN") to be recoverable costs.
- Customers may begin obtaining generation, aggregation and any other
"potentially competitive services"(i.e., a component of electrical service
which the PUCN determines to be suitable for purchase from alternative
sellers) from an alternative seller no later than December 31, 1999.
- All potentially competitive services are deemed to be competitive on
October 1, 2001.
- The vertically integrated electric utility will be designated, through an
affiliate, to provide electric service to customers unable or unwilling to
select an alternative seller.
S-6
<PAGE>
- Effective December 31, 1999, a vertically integrated electric utility may
not provide "potentially competitive services" except through an
affiliate.
- Rates charged for residential service by the vertically integrated
electric utility must not exceed the rate charged for that service on July
1, 1997, effective until two years after the date upon which the
regulations for the pricing method for that service are repealed (though
adjustments are permitted for just and reasonable cause).
- All alternative sellers must obtain a license.
Generation services were deemed to be "potentially competitive" under
Assembly Bill 366. Consequently, after December 31, 1999, the Company will no
longer be permitted to generate and sell electricity directly to its
distribution customers but instead will be required to provide such service
through an affiliate of the Company. Moreover, in connection with the Merger,
both the Company and Nevada Power have indicated that they intend to sell their
generation plant assets to one or more non-affiliated parties and to use the
proceeds from such sales to invest in new transmission and distribution assets
or used to reduce outstanding capital. Since substantially all of the Company's
utility properties are subject to the lien of the Indenture of Mortgage dated as
of December 1, 1940 (see "Description of Debt Securities-- Security; Pledge of
First Mortgage Bonds" in the Prospectus), a sale of the Company's electric
generation assets would require the release of those assets from the lien of the
Mortgage Indenture. Such a release is conditioned on compliance with a number of
requirements contained within the Mortgage Indenture. If such conditions are
satisfied and a release occurs, the Company's current electric generation assets
would cease to be collateral for the Mortgage Bonds, which are pledged as
security for the Notes. As of September 30, 1998, the approximate book value of
the Company's electric generation plant assets was $384.5 million. On that date,
the Company had (i) $572.3 million in Mortgage Bonds outstanding, (ii) $956.0
million of unfunded additional property available either for the issuance of new
Mortgage Bonds or for application to a release of property, and (iii) $263.3
million of retired Mortgage Bonds available either as a basis for issuance of
new Mortgage Bonds or for application to a release of property.
Since the passage of Assembly Bill 366, the PUCN has opened several dockets
to investigate other issues relating to restructuring, including: what services
in addition to generation will be considered to be "potentially competitive",
licensing requirements, non-price terms and conditions for distribution service,
market power, stranded costs, provider of last resort, unbundling the Company's
costs into the eight unbundled services and delineating transmission and
distribution facilities applying FERC's seven criteria outlined in its Order
888, rules for both electric and gas utilities related to sharing of corporate
services, employee transfers between affiliates, non-discriminatory treatment of
affiliates and non-affiliates, audits, sharing of name and logo and penalties
for violation of these rules and, with respect to natural gas, unbundling of gas
services, potentially competitive designation of services, licensing, and
alternative plans of regulation. Various workshops have been held and working
groups formed to explore these issues, and in some cases the PUCN has issued
proposed rules and has held formal hearings. Since no final determination has
been reached with respect to these issues, the Company cannot predict at this
time what impact they will have, either individually or cumulatively, on the
operations of the Company or on its financial performance. Further information
regarding the status of these PUCN dockets is provided in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, which is
incorporated by reference into this Prospectus Supplement.
CALIFORNIA REGULATORY MATTERS
In May 1997, the California Public Utilities Commission issued an order
implementing portions of the California restructuring bill signed into law in
September 1996. Beginning March 31, 1998, all investor-owned utilities,
including the Company, were required to offer all customers direct access. Under
the order, customers may choose to continue to take service from their incumbent
utility at tariffed rates, purchase energy from marketers or contract directly
with a generator. Further information regarding
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regulatory developments in California is provided in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998, which is
incorporated by reference into this Prospectus Supplement.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of
the Company for each of the years 1993 through 1997 and the nine months ended
September 30, 1998.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
- ----------------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
- --------- --------- --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
2.89 3.05 3.48 3.13 2.99 3.02
</TABLE>
For the purpose of computing the Company's ratios of earnings to fixed
charges, "earnings" represent the aggregate of net income, taxes on income and
fixed charges (less capitalized interest and preference security dividend
requirements of consolidated subsidiaries). The Company's earnings used in the
calculation of the ratios of earnings to fixed charges include the allowance for
funds used during construction. "Fixed charges" represent interest on short-term
and long-term debt, the interest portion on capital leases amortization of bond
premiums, discounts and expenses, one-third of rental expense on operating
leases representing that portion of rental expense deemed to be attributable to
interest, and the tax effected preference security dividend requirements of
consolidated subsidiaries.
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DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED
HEREBY (REFERRED TO IN THE ACCOMPANYING PROSPECTUS DATED DECEMBER 20, 1996, AS
THE "OFFERED SECURITIES") SUPPLEMENTS, AND TO THE EXTENT INCONSISTENT THEREWITH
REPLACES, THE DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF DEBT SECURITIES
SET FORTH IN THE ACCOMPANYING PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS
HEREBY MADE. SEE THE ACCOMPANYING PROSPECTUS FOR DEFINITIONS OF CERTAIN TERMS
USED IN THIS PROSPECTUS SUPPLEMENT. THE FOLLOWING DESCRIPTION OF NOTES WILL
APPLY TO SUCH NOTES OFFERED HEREBY, UNLESS OTHERWISE SPECIFIED IN A PRICING
SUPPLEMENT.
GENERAL
The Notes offered hereby will be issued in one or more tranches under the
Collateral Trust Indenture, dated as of June 1, 1992, as supplemented (the
"Indenture"), between the Company and Bankers Trust Company, as Trustee (the
"Trustee"). The summary contained herein of certain provisions of the Notes does
not purport to be complete and is qualified in its entirety by reference to the
provisions of the Notes and the Indenture, which has been filed as an exhibit to
the Registration Statement, of which the accompanying Prospectus is a part, to
which exhibit reference is hereby made.
The Notes constitute a single series of Debt Securities to be issued under
the Indenture referred to in the accompanying Prospectus and initially will be
limited to an aggregate initial offering price of $35,000,000 (or, if any Notes
are to be Original Issue Discount Notes, such principal amount as initially
shall result in an aggregate initial offering price equivalent to $35,000,000).
In the event that the Company issues or sells other Debt Securities described in
the Prospectus, the amount of the Notes offered hereby is subject to reduction
as a result of such sales. See "SUPPLEMENTAL PLAN OF DISTRIBUTION." For a
description of the rights attaching to different series or tranches of
Securities under the Indenture, see "DESCRIPTION OF DEBT SECURITIES" in the
Prospectus. Terms of the Notes may vary, and the terms of each Note will be
specified in the Pricing Supplement relating thereto.
Unless previously redeemed, a Note will mature nine months or more from its
date of issue, as selected by the initial purchaser and agreed to by the Company
as specified in the applicable Pricing Supplement.
The Notes will be denominated in United States dollars and payments of
principal of and premium, if any, and interest on the Notes will be made in
United States dollars.
The Notes will be issuable only in fully registered form. The authorized
denominations of Notes will be $10,000 and integral multiples of $1,000 in
excess thereof. The Notes will be represented by one or more Global Notes, as
set forth in the applicable Pricing Supplement, registered in the name of the
nominee of the Depositary. So long as the Depositary or its nominee is the
registered owner of any Global Note, the Depositary or its nominee will be
considered the sole owner or holder of the Book-Entry Note or Notes represented
by such Global Note for all purposes under the Indenture and the Book-Entry
Notes. See "Book-Entry Notes" below.
Payments of interest and principal (and premium, if any) to Beneficial
Owners (as defined below) of Book-Entry Notes are expected to be made in
accordance with the Depositary's and its participants' procedures in effect from
time to time as described below under "Book-Entry Notes."
The Notes will be sold in individual issues of Notes having such interest
rate, Stated Maturity and date of original issuance as shall be selected by the
initial purchasers and agreed to by the Company. Each Note will bear interest at
a fixed rate. See "Interest" below.
The Notes may be issued as Original Issue Discount Notes. An Original Issue
Discount Note is a Note which is issued at a price lower than the principal
amount thereof and which provides that upon redemption or acceleration of the
Maturity thereof an amount less than the principal thereof shall become
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due and payable. In the event of redemption or acceleration of the Maturity of
an Original Issue Discount Note, the amount payable to the Holder of such Note
upon such redemption or acceleration will be determined in accordance with the
terms of the Note, but will be an amount less than the amount payable at the
Stated Maturity of such Note. In addition, the Note issued at a discount may,
for United States federal income tax purposes, be considered to be issued at an
original issue discount rate, regardless of the amount payable upon redemption
or acceleration of Maturity of such Note. See "CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES--Original Issue Discount" in this Prospectus Supplement.
The applicable Pricing Supplement will indicate either that a Note cannot be
redeemed prior to its Stated Maturity or that a Note will be redeemable at the
option of the Company on or after a specified date prior to its Stated Maturity
at a specified price or prices (which may include a premium), together with
accrued interest to the date of redemption. See "Optional Redemption" below. In
addition, the applicable Pricing Supplement will indicate either that the
Company will not be obligated to redeem a Note pursuant to any sinking fund or
analogous provisions or that the Company will be so obligated. If the Company
will be so obligated, the applicable Pricing Supplement will indicate the period
or periods within which and the price or prices at which the applicable Notes
will be redeemed, in whole or in part, pursuant to such obligation and the other
detailed terms and provisions of such obligation. Upon any redemption of the
Designated Mortgage Bonds relating to any of the Notes that is required under
the Mortgage Indenture in the event that all or substantially all of the
electric properties of the Company are sold to or taken through the exercise of
the right of eminent domain or the right to purchase by any municipal or
governmental body or agency, the Company will redeem such Notes in an aggregate
principal amount equal to the amount becoming due and payable on such Designated
Mortgage Bonds, plus accrued interest.
Unless otherwise specified in the applicable Pricing Supplement, payments of
principal of and any premium and interest on any Note, other than Book-Entry
Notes, will be made in immediately available funds at the Corporate Trust Office
of Bankers Trust Company in the Borough of Manhattan, The City of New York,
PROVIDED that such Note is presented to the Paying Agent in time for the Paying
Agent to make such payments in such funds in accordance with its normal
procedures; except that at the option of the Company payment of interest (other
than interest payable at Maturity) may be made by check mailed to the address of
the Person entitled thereto as such address appears in the Security Register. If
any interest payment is to be made by wire transfer, the Trustee must receive
wire payment instructions from the Holder by the Regular Record Date for such
interest payment. With respect to payments on Book-Entry Notes, see "Book-Entry
Notes" below.
The Notes, other than Book-Entry Notes, may be presented for registration of
transfer or exchange at the Corporate Trust Office of Bankers Trust Company in
the Borough of Manhattan, The City of New York. With respect to transfers of
Book-Entry Notes and exchanges of permanent Global Notes representing Book-Entry
Notes, see "Book-Entry Notes" below.
INTEREST
Each interest-bearing Note will bear interest from and including the date of
issue or from and including the most recent Interest Payment Date with respect
to which interest on such Note has been paid or duly provided for at the fixed
rate per annum, stated therein and in the applicable Pricing Supplement, until
the principal thereof is paid or made available for payment. Interest will be
payable generally to the Person (which, in the case of a permanent Global Note
representing Book-Entry Notes, shall be the Depositary) in whose name a Note is
registered at the close of business on the Regular Record Date next preceding
each Interest Payment Date; PROVIDED, HOWEVER, that interest payable at Maturity
will be payable to the Person (which, in the case of a permanent Global Note
representing Book-Entry Notes, shall be the Depositary) to whom principal shall
be payable. The first payment of interest on any Note originally issued between
a Regular Record Date and an Interest Payment Date will be made on the second
Interest
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Payment Date following the Issue Date of such Note to the registered owner on
the Regular Record Date immediately preceding such Interest Payment Date. With
respect to payments of interest on Book-Entry Notes, see "Book-Entry Notes"
below.
Any payment required to be made in respect of a Note on a date that is not a
Market Day for such Note need not be made on such date, but may be made on the
next succeeding Market Day with the same force and effect as if made on such
date, and no additional interest shall accrue as a result of such delayed
payment. "Market Day" means any day that is not a Saturday or Sunday and that,
in The City of New York, is not a day on which banking institutions generally
are authorized or obligated by law or executive order to close.
The Mortgage Bonds will bear interest in amounts sufficient to provide for
the payment of interest on the Notes and will provide for payment of such
interest at times corresponding to the Interest Payment Dates on the Notes. The
Mortgage Bonds will also be redeemed at times and in amounts that correspond to
the required payments of principal of and any premium on the Notes. Payments on
the Notes will satisfy payment obligations on the underlying Mortgage Bonds
relating thereto. See "DESCRIPTION OF DEBT SECURITIES--Security; Pledge of
Mortgage Bonds" in the accompanying Prospectus.
Interest rates and other variable terms of the Notes are subject to change
by the Company from time to time, but no such change will affect any Note
already issued or as to which an offer to purchase has been accepted by the
Company. Interest rates offered by the Company with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount
purchased in any single transaction.
The applicable Pricing Supplement relating to a Note will designate a fixed
rate of interest per annum payable on such Note. The Interest Payment Dates with
respect to the Notes shall be February 1 and August 1 of each year and at
Maturity, and the Regular Record Dates for such Notes shall be the January 17
and July 17 next preceding such Interest Payment Dates. Unless otherwise
indicated in the applicable Pricing Supplement, interest payments for the Notes
shall include the amount of interest accrued to, but excluding, the relevant
Interest Payment Date or date of Maturity, as the case may be, and interest on
the Notes will be computed on the basis of a 360-day year of twelve 30-day
months.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor and having the same date
of issue will be represented by a single permanent Global Note. Each Global Note
representing Book-Entry Notes will be deposited with, or on behalf of, The
Depository Trust Company, as Depositary (the "Depositary"), located in the
Borough of Manhattan, The City of New York, and will be registered in the name
of the Depositary or a nominee of the Depositary. Except under the limited
circumstances described below, Book-Entry Notes represented by a Global Note
will not be exchangeable for, and will not otherwise be issuable as, Notes in
definitive form. No Global Note described above may be transferred except by the
Depositary for such Global Note to a nominee of the Depositary or by a nominee
of the Depositary to the Depositary or another nominee of the Depositary.
A Global Note representing Book-Entry Notes is exchangeable for Notes
registered in the name of a Holder other than the Depositary only if the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary or the Depositary ceases to be a clearing agency registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the Company
in its sole discretion instructs the Trustee that such Global Note shall be so
exchangeable or there shall have occurred and be continuing an Event of Default
with respect to the Notes evidenced by such Global Note. Notes issued in
exchange for a Global Note shall be registered in the name or names of such
person or persons as the Depositary shall instruct the Trustee. It is expected
that such instructions may be based upon directions received by the Depositary
from its participants with respect to ownership of beneficial interests in such
Global Note. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such
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securities in definitive form. Such laws may impair the ability to transfer
beneficial interests in such a Global Note.
Except as provided above, owners of beneficial interests in such Global Note
will not be entitled to receive physical delivery of Notes in definitive form
and will not be considered the Holders thereof for any purpose under the
Indenture, and no Global Note representing Book-Entry Notes shall be
exchangeable, except for another Global Note of like denomination and tenor to
be registered in the name of the Depositary or its nominee. Accordingly, each
person owning a beneficial interest in such Global Note must rely on the
procedures of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a Holder under the Indenture. The Indenture provides that
the Depositary, as a Holder, may appoint agents and otherwise authorize
participants to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action which a Holder is entitled to give or
take under the Indenture. The Company understands that under existing industry
practices, in the event that the Company requests any action of Holders or an
owner of a beneficial interest in such Global Note desires to give or take any
action that a Holder is entitled to give or take under the Indenture, the
Depositary would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
The following is based solely on information furnished by the Depositary:
1. The Depositary will act as securities depositary for the Book-Entry Notes.
The Book-Entry Notes will be issued as fully-registered securities
registered in the name of Cede & Co. (the Depositary's partnership nominee).
One fully-registered Global Note will be issued for each issue of the
Book-Entry Notes, each in the aggregate principal amount of such issue, and
will be deposited with the Depositary.
2. The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
a "clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. The Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary also
facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Direct Participants of the Depositary ("Direct Participants") include
securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Securities and Exchange Commission.
3. Purchases of Book-Entry Notes under the Depositary's system must be made by
or through Direct Participants, which will receive a credit for the
Book-Entry Notes on the Depositary's records. The ownership interest of each
actual purchaser of each Book-Entry Note represented by a Global Note
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participant through which the Beneficial Owner entered
into the transaction. Transfers of ownership interests in the Book-Entry
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Notes are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in any Book-Entry Notes,
except in the event that use of the book-entry system for one or more
Book-Entry Notes is discontinued.
4. To facilitate subsequent transfers, all beneficial interests in Global Notes
deposited by Participants with the Depositary are registered in the name of
the Depositary's partnership nominee, Cede & Co. The deposit of Global Notes
with, or on behalf of, the Depositary and their registration in the name of
Cede & Co. effect no change in beneficial ownership. The Depositary has no
knowledge of the actual Beneficial Owners of Book-Entry Notes; the
Depositary's records reflect only the identity of the Direct Participants to
whose accounts such Book-Entry Notes are credited, which may or may not be
the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
6. If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Book-Entry Notes of like tenor and terms are being redeemed, the
Depositary's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
7. Neither the Depositary nor Cede & Co. will consent or vote with respect to
Book-Entry Notes. Under its usual procedures, the Depositary mails an
"Omnibus Proxy" to the Company as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Book-Entry Notes are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
8. Principal, premium, if any, and interest payments on the Book-Entry Notes
will be made to the Depositary. The Depositary's practice is to credit
Direct Participants' accounts on the applicable payment date in accordance
with their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payment on such
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such Participant and not
of the Depositary, the Trustee, the Agents or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to the Depositary is the responsibility of
the Company and (to the extent the Trustee receives funds from the Company)
the Trustee, disbursement of such payments to Direct Participants shall be
the responsibility of the Depositary, and disbursement of such payments to
the Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
9. A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Company, through its Participant, to the
Trustee, and shall effect delivery of such Book-Entry Notes by causing the
Direct Participant to transfer the Participant's interest in the Global Note
or Notes representing such Book-Entry Notes, on the Depositary's records, to
the Trustee. The requirement for physical delivery of Book-Entry Notes in
connection with a demand for repayment will be deemed satisfied when the
ownership rights in the Global Note or Notes representing such Book-Entry
Notes are transferred by Direct Participants on the Depositary's records.
10. The Depositary may discontinue providing its services as securities
depositary with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company and the Trustee. Under such circumstances,
in the event that a successor securities depositary is not obtained, Notes
in
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certificated form are required to be delivered in exchange for the
Book-Entry Notes represented by the Global Notes held by the Depository.
11. The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depositary). In
that event, Notes in certificated form will be delivered in exchange for the
Book-Entry Notes represented by the Global Notes held by the Depository.
The Depositary is aware that some computer applications, systems, and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." The Depositary has informed its Direct Participants and other members
of the financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to the timely
payment of distributions (including principal and income payments) to
securityholders, book-entry deliveries, and settlement of trades within the
Depositary, continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, the Depositary's plan includes a testing phase, which is expected
to be completed within appropriate time frames.
However, the Depositary's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as third party vendors from whom the Depositary licenses soft
and hardware, and third party vendors on whom it relies for information and the
provision of services, including telecommunication and electrical utility
services providers, among others. The Depositary has informed the Industry that
it is contacting (and will continue to contact) third party vendors from whom
the Depositary acquires services to: (i) impress upon them the importance of
such services being Year 2000 compliant; and (ii) determine the extent of their
efforts for Year 2000 remediation (and, as appropriate, testing) of their
services. In addition, the Depositary is in the process of developing such
contingency plans as it deems appropriate.
According to the Depositary, the foregoing information with respect to the
Depositary has been provided to the Industry for informational purposes only and
is not intended to serve as a representation, warranty, or contract modification
of any kind.
The information in this section concerning the Depository and the
Depository's system has been provided by sources that the Company believes to be
reliable, but neither the Company, the Trustee nor any Agent takes any
responsibility for the accuracy thereof.
The Agents are Direct Participants of the Depositary.
NONE OF THE COMPANY, THE TRUSTEE OR ANY AGENT FOR PAYMENT ON OR REGISTRATION
OF TRANSFER OR EXCHANGE OF ANY GLOBAL NOTE WILL HAVE ANY RESPONSIBILITY OR
LIABILITY FOR ANY ASPECT OF THE RECORDS OF THE DEPOSITARY RELATING TO, OR
PAYMENTS BY THE DEPOSITARY MADE ON ACCOUNT OF, BENEFICIAL INTERESTS IN SUCH
GLOBAL NOTE OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS OF THE
DEPOSITARY RELATING TO SUCH BENEFICIAL INTERESTS.
OPTIONAL REDEMPTION
If one or more Redemption Dates (or range of Redemption Dates) is specified
in the applicable Pricing Supplement, the Notes described therein will be
subject to redemption, in whole or in part, as specified in such Pricing
Supplement, on any such date (or during any such range of dates) at the option
of the Company upon not less than 30 days' nor more than 60 days' notice, at the
Redemption Price or Prices specified in the applicable Pricing Supplement,
together with unpaid interest accrued thereon to the Redemption Date; PROVIDED,
HOWEVER, that interest installments due prior to the date fixed for redemption
will be payable to the Holder of record at the close of business on the Regular
Record Date. If less than the entire principal amount of a Note is redeemed, the
principal amount of such Note that remains outstanding after such redemption
shall not be less than the minimum denomination of such Note.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
considerations that may be relevant to a holder of a Note who is subject to
United States federal income taxation on a net income basis in respect of a Note
(an "Owner"). This summary deals only with Owners who will hold Notes as capital
assets and does not address tax considerations applicable to investors that may
be subject to special tax rules, such as banks, insurance companies, or dealers
in securities, or persons who will hold Notes as a position in a "straddle" for
tax purposes.
This summary is based on laws, existing and proposed regulations,
administrative rules, and judicial decisions as of the date hereof, all of which
are subject to change. Prospective investors should consult their own tax
advisors in determining the tax consequences to them of holding Notes, including
the application to their particular situation of the federal income tax
considerations discussed below, as well as the application of state, local or
other tax laws and prospects for enactment of future tax legislation or
regulations.
PAYMENTS OF INTEREST
Payments of interest on a Note (other than a "Discount Note" as defined
below) will generally be taxable to an Owner as ordinary interest income at the
time such payments are accrued or are received, in accordance with the Owner's
method of federal income tax accounting.
ORIGINAL ISSUE DISCOUNT
A Note may be issued for an amount that is less than its stated redemption
price at Stated Maturity. The difference between a Note's stated redemption
price at Stated Maturity and its issue price will be treated as "original issue
discount" if such difference exceeds 0.25 percent of the stated redemption price
at Stated Maturity multiplied by the number of full years to maturity ("OID").
(Notes issued with OID shall be referred to as "Discount Notes.") For this
purpose, a Note's stated redemption price at Stated Maturity includes all
payments to be made other than payments of "qualified stated interest"
(generally, interest that is unconditionally payable in cash or property (other
than debt instruments of the issuer) on the outstanding principal amount at a
fixed rate or at a qualifying variable rate at least annually). Notice will be
given in the applicable Pricing Supplement thereto when the Company determines
that a particular Note will be a Discount Note.
Owners of Discount Notes should be aware that they must, in general, (i)
include any payments of qualified stated interest in income at the time such
payments are accrued or received (in accordance with the owner's regular method
of tax accounting), and (ii) include OID income in advance of the receipt of
some or all of the related cash payments. With respect to Discount Notes having
a term in excess of one year, the OID will be included in income currently as
interest as it accrues over the life of the Note under a formula based upon the
compounding of interest at a rate that provides for a constant yield to
maturity. Accrued OID must be included in income by subsequent as well as
original owners of Discount Notes. See "Premium and Market Discount" below.
In general, the amount of original issue discount included in income by the
original owner of Discount Note is the sum of the daily portions of OID with
respect to such Discount Note for each day during the taxable year (or portion
of the taxable year) on which such owner held such Discount Note. The "daily
portion" of OID on any Discount Note is determined by allocating to each day in
any accrual period a ratable portion of the OID allocable to that accrual
period. An "accrual period" may be of any length and the accrual periods may
vary in length over the term of the Discount Note, provided that each accrual
period is no longer than one year and each scheduled payment of principal or
interest occurs either on the final day of an accrual period or on the first day
of an accrual period. The amount of OID allocable to each accrual period is
generally equal to the difference between (i) the product of the Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of
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compounding at the close of each accrual period and appropriately adjusted to
take into account the length of the particular accrual period) and (ii) the
amount of any qualified stated interest payments allocable to such accrual
period. The "adjusted issue price" of Discount Note at the beginning of any
accrual period is the sum of the issue price of the Discount Note plus the
amount of OID allocable to all prior accrual periods minus the amount of any
prior payments on the Discount Note that were not qualified stated interest
payments.
In certain cases, where interest payments do not constitute qualified stated
interest under the applicable Treasury regulations, Notes that bear interest
from a non-tax standpoint may be deemed instead to bear OID for federal income
tax purposes. Treasury regulations would characterize Notes as Discount Notes
if, for example, such Notes provide for teaser rates, interest holidays, or
other interest short-falls resulting in more than a DE MINIMIS amount of OID, or
bear interest pursuant to an interest rate formula subject to a cap, floor, or
similar interest rate limitation that is reasonably expected, as of the date of
issue, to cause the interest rate for one or more accrual periods to be
significantly higher or lower (as the case may be) than the overall expected
return on the Note determined without such cap, floor or other limitation.
Accordingly, Owners, including Owners who use the cash method of accounting for
federal income tax purposes, would be required to report interest in respect of
such a Note under the method described above for Discount Notes. Holders should
consult their own tax advisors as to whether Notes will be considered to have
been issued with OID under such circumstances and as to the effect thereof on
their particular situations.
Treasury Regulations provide an election for an Owner which uses the accrual
method to treat all interest on a Discount Note as OID which accrues on a
constant yield basis. Owners and prospective investors should consult their tax
advisors regarding the availability and tax consequences of this election. The
Company will provide annual information statements to the holders of Discount
Notes and to the Internal Revenue Service regarding the amount of OID determined
to be attributable to such Discount Notes for that year. Prospective investors
are advised to consult their tax advisers with respect to the particular OID
characteristics of any Discount Note and with respect to any available elections
that could affect the Federal income tax consequences of holding Discount Notes.
SHORT-TERM NOTES
Debt Securities having a term of one year or less ("Short-Term Notes") will
be treated as having been issued with OID. Such OID is included in income
currently either on a straight-line basis or, if the Owner so elects, under the
constant-yield method used generally for OID. However, certain categories of
Owners (generally individuals or other taxpayers who use the cash method of
accounting for federal income tax purposes) are not required to include accrued
OID on Short-Term Notes in their income currently unless they elect to do so. If
such an Owner that does not elect to currently include OID in income
subsequently recognizes a gain upon the disposition of the Note, such gain may
be treated as ordinary interest income to the extent of the accrued OID.
Furthermore, such an Owner of Short-Term Notes may be required to defer
deductions for a portion of the Owner's interest expenses with respect to any
indebtedness incurred or maintained to purchase or carry such a Note. In the
case of Owners that are required to include OID on Short-Term Notes in income
currently, the amount of accrued OID included in income will be added to the
Owner's tax basis in the Note.
BASIS, SALE, EXCHANGE AND RETIREMENT
In general, an Owner's tax basis in a Note will equal the Owner's cost for
the Note, increased by any amounts includible in income by the Owner as OID or
market discount (as described below) and reduced by any amortized acquisition
premium (as described below) and any payments other than qualified stated
interest payments made on such Note. Upon the sale, exchange or retirement of a
Note, an Owner will recognize gain or loss equal to the difference between the
amount realized on the sale, exchange or retirement (less any accrued qualified
periodic interest not previously taken into account, which will be
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<PAGE>
taxable as such) and the owner's tax basis in the Note, except with respect to
certain Short-Term Notes. See "Short-Term Notes" above. Except as discussed
below with respect to market discount, gain or loss recognized by an owner on
the sale, exchange or retirement of a Note will be long-term capital gain or
loss if the owner has held the Note for more than one year at the time of
disposition. In the case of individuals, capital gains are currently taxed at a
maximum marginal federal income tax rate of 20% while ordinary income is subject
to a maximum marginal federal income tax rate of 39.6%. In the case of
corporations, the maximum marginal federal income tax rate is 35% for both
ordinary income and capital gains. The distinction between capital gain or loss
and ordinary income or loss is also relevant for purposes of limitations on the
deductibility of capital losses and for determining the allowance for charitable
deductions.
PREMIUM AND MARKET DISCOUNT
If an Owner purchases a Note for an amount that is greater than the sum of
all amounts payable on the Note after the purchase date, other than payments of
qualified stated interest, such Owner will be considered to have purchased the
Note with "amortizable bond premium" equal in amount to such excess. An Owner
may elect to amortize such premium using a constant yield method over the
remaining term of the Note and may offset interest or OID otherwise required to
be included in respect of the Note during any taxable year by the amortized
amount of such excess for the taxable year. However, if the Note may be
optionally redeemed after the Owner acquires it at a price in excess of its
stated redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some bond premium until later in the
term of the Note. Any election to amortize bond premium applies to all taxable
debt instruments acquired by the Owner on or after the first day of the first
taxable year to which such election applies and may be revoked only with the
consent of the Internal Revenue Service.
If an Owner purchases a Note or a Discount Note for an amount that is less
than, respectively, its stated redemption price at Stated Maturity or its
revised issue price (defined as the sum of the issue price of a Discount Note
and the aggregate amount of OID includible, disregarding any reduction on
account of acquisition premium, as discussed above, in the gross income of all
owners of the Discount Note), the amount of the difference generally will be
treated as "market discount" for federal income tax purposes, unless such
difference is less than a specified DE MINIMIS amount. Under the market discount
rules, an Owner will be required to treat any principal payment (or in the case
of a Discount Note, any payment that does not constitute qualified stated
interest) on, or any gain on the sale, exchange, retirement or other disposition
of, a Note as ordinary income to the extent of the lesser of (i) the amount of
such payment or realized gain or (ii) the market discount that has accrued (and
has not previously been included in income) during the period such Owner held
the Note. In addition, the Owner may be required to defer, until the maturity of
the Note or its earlier disposition in a taxable transaction, the deduction of
all or a portion of the interest expense on any indebtedness incurred or
continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the Owner
elects to accrue on a constant interest basis. An Owner of a Note may elect to
include market discount in income currently as it accrues (on either a ratable
or a constant interest basis with a corresponding increase in the Owner's tax
basis in the Note), in which case the rule described above regarding deferral of
interest deductions will not apply. This election to include currently, once
made, applies to all market discount obligations acquired on or after the first
taxable year to which the election applies and may not be revoked without the
consent of the Internal Revenue Service.
BACKUP WITHHOLDING
In general, if a holder fails to furnish a correct taxpayer identification
number or certification of exempt status, fails to report dividend and interest
income in full, or fails to certify that he has provided a correct taxpayer
identification number and that he is not subject to withholding, the Company may
S-17
<PAGE>
withhold a 31 percent federal backup withholding tax on certain amounts paid or
deemed paid (including OID) to the holder. An individual's taxpayer
identification number is his social security number. The backup withholding tax
is not an additional tax and may be credited against a holder's regular federal
income tax liability or refunded by the Internal Revenue Service where
applicable.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. seller, certifies the non-U.S. status of such
seller (and certain other conditions are met). Such a sale must also be reported
by the broker to the Internal Revenue Service, unless either (i) the broker
determines that the seller is an exempt recipient or (ii) the seller certifies
its non-U.S. status (and certain other conditions are met). Certification of the
registered owner's non-U.S. status would be made normally on an IRS Form W-8
under penalties of perjury, although in certain cases it may be possible to
submit other documentary evidence.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the Company to
or through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and A.G. Edwards & Sons, Inc. (the "Agents"). The Agents,
individually or in a syndicate, may purchase Notes, as principal, from the
Company from time to time for resale to investors and other purchasers at
varying prices relating to prevailing market prices at the time of resale as
determined by the applicable Agent or, if so specified in the applicable Pricing
Supplement, for resale at a fixed offering price. If agreed to by the Company
and an Agent, such Agent may also utilize its reasonable efforts on an agency
basis to solicit offers to purchase the Notes at 100% of the principal amount
thereof, unless otherwise specified in the applicable Pricing Supplement. The
Company will pay a commission to an Agent, ranging from .125% to .750% of the
principal amount of each Note, depending upon its stated maturity, sold through
such Agent as an agent of the Company. Commissions with respect to Notes with a
Stated Maturity in excess of 30 years that are sold through an Agent as an agent
of the Company will be negotiated between the Company and such Agent at the time
of such sale.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. An Agent may sell Notes it has purchased from the Company as
principal to certain dealers less a concession equal to all or any portion of
the discount received in connection with such purchase. Such Agent may allow,
and such dealers may reallow, a discount to certain other dealers. After the
initial offering of Notes, the offering price (in the case of Notes to be resold
on a fixed offering price basis), the concession and the reallowance may be
changed.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject offers in whole or in part (whether placed
directly with the Company or through an Agent). Each Agent will have the right,
in its discretion reasonably exercised, to reject in whole or in part any offer
to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in The City of New York on the date of settlement. See
"DESCRIPTION OF NOTES--General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. The Agents may from time to
time purchase and sell Notes in the secondary market, but the Agents are not
obligated to do so, and there can be no assurance that there will be a secondary
market for the Notes or that there will be liquidity in the secondary market if
one develops.
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<PAGE>
From time to time, the Agents may make a market in the Notes, but the Agents are
not obligated to do so and may discontinue any marketmaking activity at any
time.
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, such Agent(s) will be permitted to
engage in certain transactions that stabilize the price of Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of Notes. If the Agent creates or the Agents create, as
the case may be, a short position in Notes, i.e., if it sells or they sell Notes
in an aggregate principal amount exceeding that set forth in the applicable
Pricing Supplement, such Agent(s) may reduce that short position by purchasing
Notes in the open market. In general, purchases of Notes for the purpose of
stabilization or to reduce a short position could cause the price of Notes to be
higher than it might be in the absence of such purchases.
Neither the Company nor any of the Agents makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described in the immediately preceding paragraph may have on the price of Notes.
In addition, neither the Company nor any of the Agents makes any representation
that the Agents will engage in any such transactions or that such transactions,
once commenced, will not be discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments the Agents
may be required to make in respect thereof. The Company has agreed to reimburse
the Agents for certain other expenses.
In the ordinary course of its business, the Agents and their affiliates have
engaged and may in the future engage in investment and commercial banking
transactions with the Company and certain of its affiliates.
From time to time, the Company may issue and sell other Debt Securities
described in the accompanying Prospectus, and the amount of Notes offered hereby
is subject to reduction as a result of such sales.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Choate,
Hall & Stewart (a partnership including professional corporations), Boston,
Massachusetts, and for the Agents by Ropes & Gray, Boston, Massachusetts.
Choate, Hall & Stewart and Ropes & Gray will rely as to all matters of Nevada
law upon the opinion of Woodburn and Wedge, Reno, Nevada and as to all matters
of California law upon the opinion of Orrick, Herrington & Sutcliffe LLP, San
Francisco, California. The opinions of Choate, Hall & Stewart, Woodburn and
Wedge, Orrick, Herrington & Sutcliffe LLP and Ropes & Gray will be conditioned
upon, and subject to certain assumptions regarding, future action required to be
taken by the Company and the Trustee in connection with the issuance and sale of
any particular Note, the specific terms of Notes and other matters which may
affect the validity of Notes but which cannot be ascertained on the date of such
opinions.
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<PAGE>
Exhibit 99C
SIERRA PACIFIC POWER COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Nine Mos
1993 1994 1995 1996 1997 9/30/98
-------------------------------------- ------------------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
Income After Interest Charges ............ $57,457 $60,863 $65,983 $75,400 $87,298 $67,779
Deferral Mechanism Adjustments (net1,2) .. (409) 2 (552) (441) (483) (337)
---------- ----------- -------------- -------------- -------------- --------------
Adjusted Income .......................... 57,048 60,865 65,431 74,959 86,815 67,442
Income Taxes, Operating .................. 27,498 29,113 37,370 36,296 40,487 32,730
Income Taxes, Non-Operating .............. 301 750 (231) (1,238) (1,511) (74)
AFUDC-Capitalized Interest ............... (1,960) (1,502) (3,412) (3,924) (4,943) (5,123)
Fixed Charges ............................ 43,823 43,493 40,054 48,566 57,587 44,651
Less Pref.Dividend Gross-up ............ 0 0 0 (2,690) (6,416) (4,813)
---------- ----------- -------------- -------------- -------------- --------------
43,823 43,493 40,054 45,876 51,171 39,838
Earnings Available
for Fixed Charges .......... $126,710 $132,719 $139,212 $151,969 $172,019 $134,813
---------- ----------- -------------- -------------- -------------- --------------
---------- ----------- -------------- -------------- -------------- --------------
FIXED CHARGES
Interest on Long-Term Debt ............... $39,091 $35,193 $35,326 $38,855 $43,909 $32,347
Deferral Mechanism Adjustments (1) ....... 459 52 554 396 458 294
---------- ----------- -------------- -------------- -------------- --------------
Adjusted Interest ........................ 39,550 35,245 35,880 39,251 44,367 32,641
---------- ----------- -------------- -------------- -------------- --------------
Amortization of Debt Discount
and Expense, Less Premium .............. 1,001 1,247 1,225 1,300 1,609 1,095
---------- ----------- -------------- -------------- -------------- --------------
Other Interest Expense ................... 822 4,588 556 3,279 3,132 4,407
Deferral Mechanism Adjustments (2) ....... (50) (54) (2) 45 25 43
---------- ----------- -------------- -------------- -------------- --------------
Adjusted Interest ........................ 772 4,534 554 3,324 3,157 4,450
Preferred Dividend Gross-up 2,690 6,416 4,813
Interest Component
of all Rental Charges .................. 2,500 2,467 2,395 2,001 2,038 1,652
---------- ----------- -------------- -------------- -------------- --------------
Total Fixed Charges .......... $43,823 $43,493 $40,054 $48,566 $57,587 $44,651
---------- ----------- -------------- -------------- -------------- --------------
---------- ----------- -------------- -------------- -------------- --------------
RATIO OF EARNINGS
TO FIXED CHARGES ........... 2.89 3.05 3.48 3.13 2.99 3.02
---------- ----------- -------------- -------------- -------------- --------------
---------- ----------- -------------- -------------- -------------- --------------
</TABLE>
(1) Adjusted for the deferral portion of the variable rate interest
deferral mechanism (Bal. 427-080) (Reverse signs)
(2) Adjusted for the carrying charges on the variable rate interest
deferral mechanism (Bal. 431-080) (Reverse signs)
